General Interest - Quick Takes
API warns against mistakes on consolidation
The US Congress would repeat past mistakes if it tried to punish the oil and gas industry for consolidations resulting from economic pressures and regulatory requirements, the American Petroleum Institute said Mar. 14.
Mergers of the 1990s let companies benefit from economies of scale and pass the savings on to consumers, it said in a statement submitted to the Senate Judiciary Committee. API released the statement as the committee began a hearing on oil industry consolidation and its possible relationship to prices. US oil and gas companies must compete with producing nations’ national oil companies, the trade association said. Adding taxes would be counterproductive at a time when domestic energy production needs to increase.
API urged lawmakers to keep industry earnings in perspective. While the oil and gas industry made 8.2¢/dollar of revenue during the third quarter, compared with an average of 6.8¢ for all US industries, its earnings over the last 5 years have averaged 5.8¢/dollar, compared with 5.5¢/dollar of revenue for other industries.
“In attempting to meet the challenges we face, it is also important to do no harm. The worst thing Congress could do now would be to repeat the mistakes of the past by overriding the structures of the free marketplace,” API maintained.
Interior Sec. Norton to leave position
US Interior Sec. Gale A. Norton will leave her position at the end of March.
Norton, the first woman to take DOI’s helm, was sworn in on Jan. 31, 2001, and held the job longer than all but six of her predecessors. She previously was Colorado’s attorney general during 1991-99 and had worked at DOI as an associate solicitor overseeing endangered species and public lands issues for the National Park Service and Fish and Wildlife Service.
Survey tracks Brazilian oil, gas investment
Although Brazilian oil and gas operations remain dominated by state-owned Petroleo Brasileiro SA (Petrobras), which plans investments of $49.3 billion during 2006-10, a survey by the Brazilian Petroleum and Gas Institute (IBP) reveals that private companies plan to invest $17.5 billion in the same period.
According to the survey, private companies during the study period will invest $7.4 billion in exploration and production, $1.5 billion in refining and transport, $1.5 billion in natural gas, $3.9 billion in petrochemicals, and $3.2 billion in other activities, mainly gas distribution.
Petrobras during 2006-10 will invest $28 billion in exploration and production, $10.8 billion in refining and transport, $6.5 billion in natural gas, $1.9 billion in petrochemicals, and $1.9 billion in other activities.
Álvaro Teixeira, IBP’s executive secretary, pointed out that petrochemicals and gas distribution are the business sectors most open to private oil and gas investors in Brazil.
Petrobras controls practically all the pipeline grid in Brazil and owns 11 of the 13 refineries.
New Zealand mulls natural gas importation
New Zealand is considering the importation of natural gas to make up the shortfall in indigenous supplies as production from long-running mainstay Maui field in offshore Taranaki basin goes into decline.
Local gas transmission and distribution company Vector Ltd. is studying the possibility of bringing in compressed natural gas from Papua New Guinea with a fleet of tankers across the Tasman Sea.
The company has joined Papua New Guinea firm Oil Search Ltd. to investigate this potential trade. One avenue could be the shipment of CNG from Gladstone in Queensland when the Papua New Guinea-Australia pipeline has been completed.
At the same time New Zealand’s two largest gas users, Contact Energy Ltd. and Genesis Energy, are studying the feasibility of importing LNG, most likely from Australia, if local explorers cannot find sufficient new domestic reserves before the decade’s end. Both Contact and Genesis have gas-fired power stations in New Zealand and require secure generating fuel supplies beyond 2009-10. ✦
Industry Scoreboard
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Exploration & Development - Quick Takes
ExxonMobil unit to operate Cepu Block
Indonesia’s state-run PT Pertamina was to sign an agreement with ExxonMobil Indonesia on Mar. 15 for operation of the Cepu Block, according to company Pres. Ari Soemarno.
ExxonMobil’s unit Mobil Cepu Ltd. will operate the block under the supervision of a joint operation committee of ExxonMobil and Pertamina officials.
Earlier, the Indonesian government changed the board of directors at Pertamina, replacing Pres. Widya Purnama with former Marketing and Trade Director Soemarno (OGJ Online, Mar. 8, 2006).
Petrobras-PDVSA venture begins gas drilling
State-owned Petroleo Brasileiro SA (Petrobras) reported the start of drilling for natural gas in Venezuela’s Cojedes state under a joint venture with Petroleos de Venezuela SA.
A Saxon Energy Services Inc. rig rated to 15,000 ft is drilling the well at La Blanca near the town of Romulo Gallegos.
Petrobras and PDVSA are drilling the well under an agreement concluded last year to cooperate in three exploration and production projects in Venezuela, including the offshore Mariscal Sucre gas project, a project in the Orinoco Belt, and this project of drilling in five old oil fields-Adas, La Paz, Lido, Limon, and Nieblas.
At Mariscal Sucre, the companies are committed to the creation of a joint venture for the estimated $2.2 billion development of four gas fields-Dragon, Mejillones, Patao, and Rio Caribe. Previously, PDVSA had said it would be developing the Mejillones and Rio Caribe fields, but these are now included in the project with Petrobras.
In addition to the Mariscal Sucre project, Petrobras is to appraise and certify reserves in Orinoco’s Carabobo heavy oil field in preparation for development. Production is expected to be about 150,000 b/d of oil.
Anadarko wins exploration rights off Mozambique
Anadarko Petroleum Corp. has won exploration and production rights for Offshore Area 1 in the under-explored Rovuma basin in northeast Mozambique.The 2.64 million-acre block includes 90,000 onshore acres and stretches offshore, 35 miles east in as much as 6,000 ft of water. The block borders Tanzania to the north and extends southward about 100 miles. Awarding of the block is expected by midyear, subject to finalization and signing of the exploration and production concession. This is Mozambique’s second licensing round.
Well confirms potential of block off Vietnam
Thailand’s PTT Exploration & Production PLC (PTTEP) reported that an appraisal well has confirmed the potential of production-sharing Block 16-1 off southern Vietnam.
The first drillstem test conducted in well TGT-2X, which was spudded Jan. 18 and drilled to 3,436 m TD, flowed oil at the rate of 3,300 b/d with 880 Mcfd of natural gas. Two more zones are being tested.
The 3,350 sq km tract, southeast of Vung Tau, is operated by Hoang Long Joint Operating Co., a consortium of Petrovietnam Exploration & Production Co., 41%; PTTEP Hoang-Long Co. and Soco Vietnam, 28.5% each; and OPECO Vietnam Ltd. 2%.
Five exploration wells drilled on the block have found three oil and gas fields: Ngna O, Voi Trang, and Voi Vang.
The fifth exploration well, TGT-1X, flowed 8,566 b/d of crude and 4.86 MMcfd of gas.
New field study due in Kurdish area of Iraq
The government of the Autonomous Region of Kurdistan, Iraq, has entered into a second memorandum of understanding (MOU) with K Petroleum Co. (KPC) for integrated reservoir field studies in northeastern Iraq, reported Heritage Oil Corp.
Heritage and Kurdish firm Eagle Group are equal joint venture partners of Heritage Erbil Oil Ltd., the parent company of KPC.
The MOUs cover a combined 1,300 sq km. More than 100 prospects have been identified (OGJ Online, Sept. 29, 2005). Preliminary negotiations to convert both MOUs into production-sharing agreements have begun and are expected to be completed in the next 3 months.
Field work in the first MOU area began in January. The planned 120-day field program includes magnetic and gravity studies and geological work.
KPC plans to start studies in the second MOU area shortly. The work includes regional studies, geological field mapping, magnetic and gravity surveys, and satellite data interpretation. ✦
Drilling & Production - Quick Takes
IEA reclassifies Venezuelan heavy crude
The International Energy Agency has reclassified Venezuelan extra-heavy oil in its reports of worldwide oil production. Since 2002, IEA has included Venezuela’s 17°-32°-gravity synthetic crude, which is upgraded from 8°-9°-gravity Faja crude produced in the Orinoco Belt, in its category for Organization of Petroleum Exporting Countries NGL and nonconventional oil.
Beginning in its March Monthly Oil Market Report, IEA includes Venezuelan heavy crude in its “OPEC crude” category. The change shifts about 600,000 b/d of production into a category deemed subject to Venezuela’s OPEC quota. Venezuelan synthetic crude comes from four upgraders operated by joint ventures involving state-owned Petroleos de Venezuela SA and private partners. Under the new method, IEA will report as production the heavy oil feedstock charged to upgraders and not synthetic crude output, which runs about 10% below feedstock charge.
In the old method, IEA put the synthetic crude in the OPEC NGL and unconventional category and treated heavy oil not upgraded as conventional crude. The change slightly increases total Venezuelan oil production.
Venezuela includes about 34 billion bbl of Faha extra-heavy crude in its reserves estimate of 78 billion bbl.
About 160,000 b/d of Orimulsion, a mixture of heavy oil, water, and a surfactant sold as a boiler fuel in competition with coal, will continue to be counted as OPEC NGL and unconventional oil.
Imperial Energy begins Tomsk oil production
Imperial Energy Corp. PLC, London, has begun production “at rates in line with expectations” from wells Snezhnaya 135 and Dvoinoye 2 on Block 77 in the Tomsk region of western Siberia. Tomsk’s main reservoir is in the deep Jurassic.
Snezhnaya 137, the second of four appraisal-production wells in this field and a deviation from Snezhnaya 135, also has been drilled and cased, with wire line logging showing 17 m of net oil pay, Imperial said. Snezhnaya 138 also was spudded Dec. 11.
The company also expects to bring its Snezhnaya 133 well on production by the end of March, and during April it will bring all four new wells in Snezhnaya field on stream, increasing Block 77 production to 1,500-2,000 b/d of oil in May.
Imperial also plans this month to begin production testing of its Festivalnaya 252 well in Aikagalskaya field on Block 69 in the Tomsk area (OGJ Online, Jan. 18, 2006).
The company said it is targeting production of 20,000 b/d of oil by yearend 2008. Plans include having 18 Snezhnaya field wells producing by early 2008, along with production from Aikagalskaya and at least one other field.
Oil currently is being sold to Russian domestic markets “at net back prices at least as good as those for export.”
Extensive appraisal drilling, exploration, and an additional seismic program are continuing in Imperial’s fields and certain prospects, and the company said it is expediting plans for pipelines, but gave no details at this time.
Imperial said it is investing $9 million in fractionation equipment, all-terrain tracked transport vehicles, and two sets of production rig generators, giving it the flexibility to operate more effectively year-round. Imperial says it has an asset base of 250 million bbl of proved and potential oil reserves.
Two deepwater gulf fields start gas flow
Dominion Exploration & Production Inc. has brought gas production on line from Rigel field on Mississippi Canyon Block 296 and Seventeen Hands field on Mississippi Canyon Block 299, both about 120 miles southeast of New Orleans.
Rigel field lies in 5,200 ft of water and Seventeen Hands field in 5,800 ft. Both are subsea developments tied back to Chevron Corp.’s Viosca Knoll 900 platform, which underwent repairs due to damage from the 2005 hurricanes.
The fields’ development system is designed to handle a combined production rate of 160 MMcfd of gas.
Dominion operates both fields and owns 53% of Rigel and 38% of Seventeen Hands.
GlobalSantaFe gets 7-year deal for new rig
GlobalSantaFe Corp. has signed a $1 billion draft deal for a new ultradeepwater semisubmersible drilling rig.
The newbuild rig, to be named the GSF Development Driller III, is for delivery in early 2009 and will be under a 7-year contract until 2016. GlobalSantaFe has selected Keppel FELS Ltd. to build the rig at its Singapore shipyard. The estimated construction cost is $590 million, including shipyard costs, owner-furnished equipment, project management costs, and general contingencies.
Contract let for fourth Karachaganak train
Petrofac Ltd., Woking, UK, has secured an engineering services contract for a fourth train of the processing complex at Karachaganak gas and condensate field in Kazakhstan.
The stabilization and sweetening train will be a like-kind copy of the existing trains but will incorporate process optimization, Petrofac said. Train 4 will increase the facility’s capacity by 50,000 b/d.
The contract, which covers front-end engineering and design, including tie-ins and early works construction planning, has options to cover the detailed engineering, procurement, construction management, and commissioning support. Petrofac will work with Karachaganak Petroleum Operating BV and its partners in the multimillion-dollar development. Petrofac will do the contract work with NIPI Caspian Engineering & Research, an affiliate of the Kazakh Institute of Oil and Gas. ✦
Processing - Quick Takes
UFIP chief sees diesel challenges for France
France needs increased diesel output from existing refineries more than it needs new refineries, according to Jean-Louis Schilansky, delegate general of the trade group Union Française des Industries Pétrolières (UFIP) at the group’s annual press conference.
Current refinery production is equivalent to total products demand, and motor fuels demand has declined because of high oil prices and a crackdown on speeding, said Schilansky, whose group comprises Total SA, Esso SAF, Shell France, BP PLC, Ineos (which acquired BP’s Lavéra refinery), and Agip SPA. The government’s view is that more refineries are needed. Refinery investment in France focuses on output of diesel oil, Schilansky said. Diesel demand has doubled since 1990, reaching 31 million tonnes in 2004, when imports totaled 11 million tonnes. Over the same period, gasoline demand has fallen by about half to 16 million tonnes, of which 4 million tonnes was exported in 2004.
Assuming a 2%/year increase of merchandise road transport, an increase in the diesel-fueled share of the vehicle market to 70%, and improvements in vehicle fuel efficiency, UFIP projects that by 2010 refiners will need to produce 6 million tonnes/year more diesel than they do now. Some supply will come from biodiesel required by the government. Imports of diesel will remain at 11-12 million tonnes/year. Refiners are increasing their capacity to run sour crude as production of sweet crude from the North Sea declines, although the crude slate is expected to remain about half sweet, half sour. Beginning in 2009, European Union requirements for low-sulfur heating oil will force French refiners to increase imports of the product. Although growing volumes of low-sulfur diesel and heating oil will be available in trade, French refiners will face competition from buyers from the US and the rest of Europe.
Schilansky called for a more neutral tax system, which now favors diesel over gasoline.
Large biodiesel plant planned in Indiana
Louis Dreyfus Agriculture Industries LLC plans to build a 250,000 gpd biodiesel plant near Claypool in northeastern Indiana. The plant will be built in two phases. The first phase will include a 50-million bushel/year soybean processing plant, and the second phase includes a biodiesel production facility. The plant will use Indiana soybeans. Indiana has two other biodiesel plants and six ethanol plants under construction.
BPCL to commission Bina refinery by 2009
India’s state-run Bharat Petroleum Corp. Ltd. (BPCL) plans to commission a 120,000 b/d refinery at Bina in Madhya Pradesh by yearend 2009. The project will cost $2.33 billion.
The refiner had earlier said it was planning an initial public offering of equity for the facility in about 2 years.
“We are losing 2 rupees/l. on petrol, 3 rupees/l. on diesel, 12 rupees/l. on kerosine, and 171 rupees/14 kg cylinder of liquefied petroleum gas due to the government subsidies on these products,” said BPCL Chairman and Managing Director Ashok Sinha. One rupee is worth slightly more than 2¢.
“Our revenue losses on the sale of all fuels are likely to be around 40 billion rupees this fiscal [year]. In fact, crude prices have firmed up over the last few days, further adding to our losses,” Sinha said. BPCL also plans to invest 15 billion rupees during fiscal 2006-07 to expand its retail network, LPG capacity, and Mumbai-Delhi product pipeline. ✦
Transportation - Quick Takes
Bodman urges Kazakhstan to join BTC project
US Energy Sec. Samuel W. Bodman has urged Kazakhstan to speed up talks on joining the Baku-Tbilisi-Ceyhan crude oil pipeline project.
In Astana, Bodman said he discussed with Kazakh officials “the desire of the United States to see negotiations concluded between Kazakhstan and Azerbaijan to transport Kazakh oil through the BTC pipeline.”
Last year, Kazakhstan and Azerbaijan were reported to have prepared a framework agreement for Kazakhstan to join the BTC pipeline project (OGJ Online, Oct. 4, 2005). The governments have yet to sign a final version of the document.
South Korea keeps LNG shipbuilding lead
South Korean shipbuilders led the global market in construction of LNG carriers in 2005, according to the Korea Shipbuilders’ Association.
It said South Korean companies won 79% of market share, with orders for 33 LNG carriers from a worldwide total of 42 carriers. That marks the third consecutive year that South Korean yards have led the global LNG market, after winning 73% market share in 2004 and 80% in 2003.
The association projected that South Korea’s shipbuilding industry will continue to control more than 70% of the market this year. It said the world’s top three shipbuilders-Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co., and Samsung Heavy Industries Co.-would win orders for about 40 LNG carriers in 2006.
Vietsovpetro lets contract for Vietnam gas line
Vietnam-Russia oil and gas joint venture company Vietsovpetro has let a contract to McDermott International Inc., a subsidiary of J. Ray McDermott SA, to install a 298-km, 18-in. natural gas pipeline as part of the Gas Power Fertilizer Coordination Project (OGJ, Oct. 24, 2005, Newsletter). Vietnam state-owned PetroVietnam operates GPFC.
J. Ray will perform construction engineering, partial procurement, and pipeline installation, including installation of a riser using its Asia Pacific-based marine vessels.
The firm said the PM3-Ca Mau gas pipeline will originate at the Bunga Raya B platform on Block PM3 in the Commercial Arrangement Area of the Gulf of Thailand and extend to a landfall station in Ca Mau province, Vietnam.
Falcon expands proposed MoBay hub capacity
Falcon Gas Storage Co. Inc., Houston, is gauging shipper interest in 15 bcf of additional working gas capacity at its proposed Mobay Storage Hub in Mobile County, Ala., due to strong demand for capacity in the project’s first phase.
The expanded first-phase scope of the project would bring the total working gas capacity to 27 bcf.
Essent, ConocoPhillips move on LNG terminal
ConocoPhillips and Dutch energy firm Essent Energie BV, Arnhem, have begun seeking permits for an LNG terminal in the Netherlands after a study found the project feasible (OGJ Online, June 24, 2005).
The receiving and regasification terminal, to be built at Eemshaven, in Eemsmond, North Groningen, will include storage facilities and a jetty.
The companies last year executed a land option agreement with owner of the 100-acre site, Groningen Seaports, which agreed to deepen the channel in the (Wester) Eems to accommodate LNG ships.
The Ministry of Transport, Public Works, and Water Management and Groningen Seaports will perform any dredging needed in the environmentally sensitive Waddenzee region.
The companies have submitted an environmental impact assessment to the province of Groningen and are continuing detailed studies of the terminal, which is expected to be operational by 2010. ✦