General Interest - Quick Takes
Executives in KPMG survey see more mergers
Nearly one third of oil and natural gas executives in a survey by KPMG LLP expect a high level of merger and acquisition activity in the next 12 months.
Of 384 financial executives polled during March and April, 28% said they expected their companies would be involved in major mergers or acquisitions during the next year.
“When almost 3 in 10 energy executives expect their firms to be involved in a major merger or acquisition, it provides a strong sense of the pressures this industry is facing,” said William Kimble, national sector leader for KPMG’s energy and chemicals practice.
He said the survey indicated that reserves replacement “is causing much anxiety and upheaval within energy companies.”
Survey results showed that 83% of respondents listed declining reserves as a serious concern, and 58% viewed the volatility of oil and gas prices as negative. When asked about the most significant financial issue, 49% cited cost of materials, supplies, and equipment; 20% said general economic conditions; 7% said rising interest rates; and 7% said labor costs.
Texas RRC simplifies oil, gas permitting
The Texas Railroad Commission has streamlined its process for filing applications for oil and gas well drilling permits in or offshore Texas.
Applicants or their representatives can apply for permits through an online system that provides access to permit data and images over the internet. Operators also can file expedited permits online and use credit cards to pay the permit fee.
Operators filing online will receive approval notification more quickly electronically than those filing through the mail, the commission reported.
Mailed or walked-in paper drilling applications will be scanned and processed electronically.
MTBE cleanup cost recovery hinges on bill
The credit quality of US water utilities, such as Suez SA unit United Water Inc., could be hurt if energy legislation addressing methyl tertiary butyl ether (MTBE) is passed in its current form, said Standard & Poor’s Ratings Services in a recent report.
Many water utilities, facing MTBE cleanup costs that could total $29 billion, have joined together in lawsuits against MTBE makers, including ExxonMobil Corp., Amerada Hess Corp., and Sunoco Logistics Partners LP, Philadelphia.
“However, the version of the energy bill recently approved by the US House of Representatives contains a safe-harbor provision, which protects MTBE makers by retroactively nullifying all MTBE defective product liability lawsuits filed since September 2003, including United Water’s,” said S&P’s credit analyst Plana Lee.
S&P’s expects the utilities to recover MTBE cleanup costs either through litigation or through rates. “Nevertheless, this remains unchartered territory,” said Lee. Even if recovery is granted by regulators, she said, the process could bring about regulatory lag and necessitate increased borrowing in the interim, “potentially harming water utility credit quality.”
Oil, gas tax hike becomes law in Bolivia
In a move May 17 that surprised much of his country, Bolivian President Carlos Mesa accepted a bill sharply increasing taxes on foreign oil and gas companies.
Mesa let pass the deadline for his action on legislation adding 32% tax to an 18% royalty and requiring oil and gas firms to sign new contracts with the Bolivian government (OGJ Online, May 2, 2005). The bill returned to the Bolivian Congress and became law.
Sasol, Petronas JV moves toward approval
South Africa’s Competition Commission recommended approval of a liquid fuels joint venture, to be called Uhambo Oil Ltd., between South African Sasol Ltd. and Malaysia’s state oil company Petronas.
The commission recommended to the Competition Tribunal that the JV be allowed with certain conditions. The JV, announced last year, awaits approval from the tribunal (OGJ Online, Nov. 4, 2004).
If approved, the JV would combine Sasol’s liquid fuels business and Engen Ltd. The value of the proposed merger was not disclosed. Petronas owns 80% interest in Engen, a refiner and marketer based in Cape Town, South Africa.
Terms call for Sasol and Petronas to each have 37.5% interest in Uhambo. Black Economic Empowerment (BEE) partners will hold a combined 25% interest in the new company. BEE participation will include Worldwide African Investment Holdings, which owns 20% of Engen.
Uhambo will own the 150,000 b/cd Engen Petroleum Ltd. refinery at Durban, Sasol’s share in the 87,547 b/cd National Petroleum Refiners of South Africa Pty. Ltd. refinery at Sasolburg, and about 1,600 service stations in South Africa as well as liquid fuel operations in 14 sub-Saharan countries.
Australia, Timor Leste reach agreement
Australia and Timor Leste (East Timor) have reached an accord over petroleum production sharing in the controversial Timor Sea boundary demarcation issue between the two countries.
Australia has offered Timor Leste a 50% share of the royalties from the proposed development of Woodside Petroleum Group’s Greater Sunrise gas-condensate field. It originally offered 18%.
In return, Australia has asked Timor Leste to postpone any final settlement of the maritime boundary between the countries for 50 years.
The deal, yet to be ratified and signed by the Timor Leste and Australian parliaments, will give Timor Leste a gain of $2-5 billion (Aus.) over the original arrangement.
Australia insists that the maritime boundary be at the edge of the country’s continental shelf, while the East Timorese argue for a median line between the nations.
The new agreement means this debate has been suspended until 2050, more than enough time to develop and produce all the known reserves within the controversial region.
Australia will urge Woodside and its partners to reactivate the Greater Sunrise development, which was mothballed in early January. The most likely development plan will be to pipe Greater Sunrise gas ashore at Darwin to be treated with gas from Conoco- Phillips’s Bayu-Undan field. ✦
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Exploration & Development - Quick Takes
CNPC to develop oil and gas in Uzbekistan
Chinese National Petroleum Co. plans to invest $600 million in oil and gas development in Uzbekistan, according to a senior manager of state-owned Uzbekneftegaz.
Shavkat Majidov told a news conference in Tashkent that the project would involve a 50-50 joint venture between CNPC and Uzbekneftegaz, with authorized capital of $96 million, to extract “liquid hydrocarbons” from hard-to-reach deposits.
Slave Point gas discoveries fuel Northeast BC
Anadarko Petroleum Corp., Houston, and Purcell Energy Ltd., Calgary, plan more drilling next winter in Northeast British Columbia where they started production from three Devonian Slave Point gas discoveries drilled in the first quarter.
The b-39-L, b-14-L, and d-87-C discovery wells flowed a combined 17 MMcfd of gas starting in April at Tenaka, BC, 50 km south of Fort Nelson.
Purcell, with an average 36% interest in 50,000 acres, plans to drill as many as 6 wells out of 12 identified targets next winter at Tenaka, west across the Alaska highway from Anadarko’s Adsett Slave Point gas field. Adjacent discoveries have produced 4-6 MMcfd since December 2000 and recovered about 15 bcf of gas.
Anadarko also reentered and sidetracked a well originally drilled in 2002 in the Adsett area, deepened to 8,400 ft, and tested 2.5 MMcfd of gas. Production was expected to start in May.
The Tenaka area, accessible only in winter because the Prophet River lacks a bridge, was relatively quiet in 2001 when Anadarko acquired Adsett from Berkley Petroleum Corp. Busy land activity is expected during May-July to the north, west, and south, Purcell said. Purcell acquired its first acreage in February 2001 and 320 sq km of 3D seismic data the past 2 years.
Tenaka gas is processed through Adsett facilities. Anadarko has applied to build a bridge, but approvals are unlikely until late 2006, Purcell said.
Purcell will seek partners to explore its 140,000 net undeveloped acres in British Columbia, acquiring seismic on several blocks in winter 2006 and drilling in 2007.
ENI tests oil, gas in Tunisian wildcat
ENI Tunisia BV has discovered oil and gas in the Nour-1 exploration well on the Adam concession in southern Tunisia, reported Paladin Resources PLC, which holds a 7% interest in the concession.
The well, spudded Mar. 14, encountered 48 m of net oil and condensate pay and 10 m of net gas pay in the Acacus and Tannezuft formations over a 300 m gross interval at 3,200-3,500 m.
In preliminary tests during well cleanup, the Nour-1 flowed at rates of 2,800 b/d of oil and 15.6 MMscfd of natural gas. Production tests are scheduled, after which the well will be tied back to existing facilities 13 km away. Field production is expected to start by midyear.
Companies farm in to BHP’s Jacala-1 wildcat
Interest is rising in the Jacala-1 wildcat to be drilled later this year in the deepwater Exmouth Plateau region off Western Australia. BHP Billiton (North West Shelf) Pty. Ltd. is the operator, holding a 55% share after two companies farmed in to the project.
The most recent player, Roc Oil Ltd., Sydney, will earn a 20% interest in the WA-351-P permit by paying up to $4 million (Aus.) toward the cost of the well. Earlier this month, Tap Oil NL of Perth farmed in for a 25% interest.
The Jacala structure has been recognized since the early 1980s when a flurry of Exmouth Plateau exploration took place by a number of companies, including subsidiaries of what are now ExxonMobil Corp. and ConocoPhillips. The only significant find was Esso-BHP’s Scarborough gas field, which currently is the subject of development debate between ExxonMobil and BHP.
Jacala was left on the shelf partly because of the overall lack of oil indications during the early Exmouth Plateau programs. BHP now believes it can trace an oil migration path to the structure, which lies on the west flank of the subbasin.
BHP expects to recover 500 million bbl of oil from Jacala. The feature has been mapped with an aerial extent of 300 sq km and 110 m of vertical closure.
BHP said Jacala is a simple but robust structure at the base of the Muderong shale, a well-known regional seal. The Atwood Oceanics Atwood Eagle semisubmersible will drill Jacala-1 in September or October. Well costs are estimated at $8 million (US).
Extension developing at Colombia’s Orito oil field
A Canadian operator will drill 2-3 more wells this year to exploit a sizable southwestern extension of Orito oil field in the Putumayo basin.
Petrobank Energy and Resources Ltd., Calgary, and its Petrominerales Colombia Ltd. subsidiary said high fluid flows from the field’s main producing zone at the Orito-116 well give it the highest productivity index of any well in the field. TD is 8,150 ft. The well flowed 1,250 b/d of fluid, 80% water, at stable flowing pressure of 1,530 psi, indicating an 8% drawdown. A large electric submersible pump designed to lift 5,000-7,000 b/d is to replace the jet pump in June.
The next well is to spud in September after completion of a 3D seismic survey.
Meanwhile, Petrominerales soon plans to become one of Colombia’s largest exploration landholders after it signs four new exploration agreements. One of the blocks offset Orito field.
Discovered in 1963, Orito had 1.1 billion bbl of original oil in place. About 21% of that has been produced since 1968. ✦
Drilling & Production - Quick Takes
US drilling declines for fourth straight week
US drilling activity for the week ended May 13 fell for the fourth consecutive week, down by 16 to 1,308 rotary rigs working, Baker Hughes Inc. said.
There were declines in all categories, with land drilling down by 11 to 1,196 rotary rigs drilling. Inland waters activity was down by 4 rigs to 24 still working. Offshore drilling was down by 1 unit to 85 in the Gulf of Mexico and 88 in US waters as a whole.
In Canada, however, drilling activity jumped by 61 rotary rigs to 255 drilling, up from 167 a year ago. ✦
Processing - Quick Takes
Gasco lets contract for Ruwais NGL train
Abu Dhabi Gas Industries Ltd. (Gasco) let a project management consultancy contract to Foster Wheeler International Corp. to oversee engineering, procurement, construction, and commissioning of Gasco’s third natural gas liquids (NGL) train at Ruwais, Abu Dhabi.
The work is one of three Gasco projects in a suite of five integrated developments being undertaken on behalf of Abu Dhabi National Oil Co. (OGJ Online, June 19, 2002). Abu Dhabi Co. for Onshore Oil Operations is undertaking gas gathering and reinjection, and Abu Dhabi Refining Co. (Takreer) is handling condensate storage and shipping. The other projects are a new gas plant at Asab (AGD-II) and the Onshore Gas Development project (OGD-III facilities) at Habshan field.
The third train at Ruwais will process NGL transported via a new pipeline from OGD-III and AGD-II, supplemented by a new liquefied petroleum gas (LPG) stream from the adjacent Takreer refinery. The project is scheduled for completion by the end of first quarter 2008.
The NGL will be processed in a 24,400 tonne/day fractionation and treatment train to produce ethane, liquefied propane and butane, and pentane and heavier hydrocarbons. The project includes four 83,600 cu m LPG storage tanks, one 76,000 cu m pentane storage tank, and a two-berth extension to the export jetty.
Natref refinery due desulfurization unit
Sasol Ltd. and Total SA will invest 600 million rand ($96 million) to add a diesel desulfurization reactor to their jointly owned 107,000 b/d Natref refinery in Sasolsburg, South Africa.
The unit will enable the refinery to produce diesel with sulfur content of 500 ppm.
Qatar, ExxonMobil plan petrochemical plant
Qatar Petroleum and ExxonMobil Corp. have signed an initial deal to build a $2 billion petrochemical plant in Ras Laffan Industrial City, Qatar News Agency said.
The companies are expected to sign a letter of intent in July and a final contract in 2006.
The proposed facility will produce 1.6 million tonnes/year of ethylene products in 2011, the news agency said. It will use ethane from natural gas produced from Qatar’s supergiant North field and will supply Asia and Europe. ✦
Transportation - Quick Takes
Trans-Saharan pipeline study awarded
Nigerian National Petroleum Corp. and Algeria’s Sonatrach let a contract to a joint venture of Penspen Ltd. of the UK and IPA Energy Consulting Ltd., Edinburgh, to study the feasibility of a Trans-Saharan natural gas pipeline.
The world-class pipeline would deliver gas from Nigeria and Algeria to a terminal on the Mediterranean Sea in Algeria and to consumers along the pipeline route.
In a 9-month project, the contractors will perform market, economic, and financial analyses, determine pipeline infrastructure requirements and project cost estimates, establish gas supply sources, assess policy issues and institutional framework relating to the project, assess environmental issues, and perform a pipeline route survey, project risk analysis, and regional benefit study.
The pipeline is being proposed under the Organization of African Unity’s New Partnership for Africa’s Development (Nepad) initiative. A coalition of Algeria, Egypt, Nigeria, Senegal, and South Africa designed Nepad to address challenges facing Africa and to establish a strategic framework for African renewal.
Centrica to operate Gassco UK gas terminal
Gassco AS, Norway’s state-owned gas company, let a contract to Britain’s Centrica Energy PLC to operate a planned natural gas receiving terminal at Easington in the UK. Centrica operates its own Easington gas terminal.
The new terminal, planned to be operational in mid-2006, originally will receive gas from Norwegian fields via a new pipeline from the Sleipner platform in the North Sea. That line, to be laid this summer, also is planned to be operational in 2006. It is the southern leg of the planned 1,160 km Langeled pipeline system, which ultimately will deliver gas to Easington from giant Ormen Lange gas and condensate field off Norway (OGJ Online, May 7, 2004). The first section of the Langeled pipeline system will deliver gas from Ormen Lange field to a condensate separation plant at Nyhamna in central Norway. After condensate removal, gas will flow through the northern leg to the Sleipner riser platform where it will enter the southern leg to Easington.
The northern leg from Nyhamna will be laid in 2006, becoming operational in 2007 when Ormen Lang is planned to come on stream. When completed, the Langeled pipeline system will have a capacity of 25 billion cu m/year of gas.
Norsk Hydro ASA is responsible for development of Ormen Lange field and of the pipeline, which another consortium partner, Statoil ASA, is installing (OGJ Online, Nov. 24, 2004). AS Norske Shell will become production operator when the field begins producing 2.5 bcfd in October 2007. Gassco will assume responsibility for pipeline operations and deliveries.
Venture proposes California LNG terminal
ConocoPhillips has signed a joint development agreement with Mitsubishi Corp. subsidiary Sound Energy Solutions (SES) to build an LNG import terminal in Long Beach, Calif.
The proposed terminal would have capacity of 5 million tonnes/year and supply the Ports of Long Beach and Los Angeles.
ConocoPhillips and SES will form SES Terminal LLC, an equally owned joint venture that is expected to complete the proposed terminal in 2009.
Dampier-Bunbury pipeline expansion planned
The Dampier-Bunbury natural gas pipeline linking North West Shelf fields off Western Australia to the southeastern region of the state is to undergo a capacity expansion.
The pipeline owners-Diversified Utility & Energy Trusts (owned by Macquarie Bank in Sydney), Alinta Ltd. of Perth, and the Western Australian subsidiary of Alcoa Inc.-will increase the capacity by more than 93 MMcfd with the addition of eight compressor units and more than 200 km of loop.
The cost of the project is estimated at $430 million (Aus.).
Alinta Network Services of Perth, which will manage the project, expects the pipeline to be completed in 2007.
Repsol YPF, Gas Natural to form LNG venture
Repsol YPF and Grupo Gas Natural SDG, both of Spain, have signed an agreement to participate jointly in integrated LNG projects that include exploration, production, liquefaction, transportation, and marketing of natural gas. Repsol will serve as operator in upstream and liquefaction projects, where it will hold a 60% interest.
LNG marketing and transportation ventures will be held 50-50 by the companies, and regasification rights will apply to the new JV. Gas Natural will operate developed regasification facilities. In this JV, the position of chairman will be rotated, and Gas Natural will name the chief executive officer.
The JV will be the third largest LNG company in the world in terms of sales volume, behind Korea Gas Corp. and Tokyo Electric Power Co. Inc. The JV will market LNG from integrated projects developed by both companies and will assure its supply to Gas Natural’s retail markets.
The JV will transport LNG via a fleet of 12 ships.
PTT to buy joint development area gas
Thailand’s PTT PLC received approval from the Thai Cabinet to purchase natural gas from three blocks in the Malaysia-Thailand Joint Development Area (MTJDA) in the South China Sea.
The Cabinet endorsed the draft agreement, which calls for production-sharing contractor Carigali-PTTEPI Operating Co. Sdn. Bhd. (CPOC) to supply 135-270 MMcfd of gas to PTT from tracts B-17, C-19, and B-17-01 over 20 years, starting in 2008.
The draft stipulates that CPOC-a 50-50 partnership of Thailand’s PTT Exploration & Production PLC and Malaysian state oil firm Petronas-deliver the gas in two stages, said Thai officials.
Phase I will begin with 135 MMcfd on July 1, 2008, and continue for 6 months before ramping up to 270 MMcfd for the following 10 years and stabilizing at 250 MMcfd until the 16th contract year. Stage II development could see deliveries of 200 MMcfd during 2010-12. Under the first contract involving MTJDA, gas production of about 200 MMcfd began earlier this year from Cakerawala field on Block A-18. It is flowing initially to Malaysia through a 366-km pipeline across southern Thailand (OGJ Online, Mar 14, 2005).
Qatargas JVs sign liquefaction technology contracts
Air Products & Chemicals Inc. signed two agreements to supply its AP-X liquefaction process technology and key equipment to the proposed Qatargas III Joint Venture (Qatar Petroleum and ConocoPhillips) for Train 6, and to the Qatargas IV Joint Venture (QP and Royal Dutch/Shell Group) for Train 7, both in Ras Laffan, Qatar.
The AP-X LNG process trains each will have 7.8 million tonnes/year capacity. The feed gas will come from Qatar’s supergiant North Field (OGJ Online, Mar. 1, 2005).
Trains 6 and 7 are scheduled on-stream in 2009 and 2010, respectively. ✦