General Interest - Quick Takes
OPEC officials note demand security concern
Oil exporters worry as much about demand security as consuming nations do about security of supply.
Representatives of the Organization of Petroleum Exporting Countries made that concern clear at the Seventh International Oil Summit in Paris earlier this month.
OPEC Sec. Gen. Edmund M. Daukoru, Nigeria’s petroleum minister, warned of the potentially destabilizing risks of investing too much or too little in production capacity.
“This is why we have been calling for a ‘road map’ for oil demand, to reflect the need for security of demand as a legitimate concern for producers,” he said. “Security of supply and security of demand must go hand in hand. They are the two faces of the energy security coin.”
Mohammed Barkindo, acting for the OPEC secretary-general, said the group’s long-term strategy projects a difference of more than 12 million b/d between the highest and lowest forecasts for global oil demand in 2020.
Ecuador passes ‘extraordinary profit’ tax
Ecuador’s Congress has passed the controversial 60% tax on “extraordinary profits” of foreign oil companies.
Ecuador’s Minister of Economy Diego Borja Cornejo said the tax would help make up for revenue the government should have received from oil production in 2003 and 2005. He said the new law would generate as much as $500 million in state revenue.
“This is not a violation of any law or the Constitution,” Borja said. “Profit margins for foreign companies have been very large, and a tenet in the law that favors the state will result in greater economic equality between foreign companies and the state.”
The law becomes effective upon ratification by President Alfredo Palacio.
MMS offshore RIK gas sale breaks record
The US Minerals Management Service sold a record amount of royalty-in-kind (RIK) natural gas from federal offshore leases in a recent sale.
The sale, which the Department of the Interior agency concluded in mid-March, calls for delivery of about 118 bcf of RIK gas to 14 offshore pipeline systems originating in the Gulf of Mexico.
Customers began taking delivery Apr. 1 over periods of 7-12 months.
Winning bidders included Atlanta Gas Light Co., Virginia Power Co., ConocoPhillips, National Energy & Trade LP, Louis Dreyfus Corp., Shell Trading Co., Chevron USA, Williams Power, and Total SA.
The sale represented a record not only in terms of the amount of gas sold but also in the number of bids received and the number of companies that made offers, according to MMS Director Johnnie Burton.
Twenty-one companies submitted 127 offers for the 14 packages in the latest sale, she said. MMS will deliver 509,800 MMbtu/day, up from the previous record of 485,400 MMbtu/day in an RIK sale a year earlier.
Combined with packages from last year’s sale, recovering production from the 2005 hurricanes, and volumes from a recent Wyoming RIK sale, MMS said it was delivering more than 700,000 MMbtu/day of RIK gas as of Apr. 1.
Analyst forecasts decline in tanker rates
Tanker rates had a robust first quarter but are expected to decline in 2007-08 because the worldwide tanker fleet will grow faster than analysts had originally assumed, said Simmons & Co. International.
In the short term, tanker rate support will come from Nigerian crude oil supply disruptions and from changing fuel specifications in the US, analyst Ruairidh Stewart said in a Mar. 24 report.
“It is our view that outages in Nigeria bode well for relative strength in VLCC [very large crude carrier] rates as Middle East tonnage replaces West African volumes (primarily a Suezmax trade),” Stewart said.
Stewart said China’s entry into the tanker-building market will reduce asset prices through 2007-08. He expects a decline of 15%/year for 2 years.
“An unsustainably high level of ordering activity in the tanker market” happened during the first quarter, he said, forecasting that tanker orders will slow “as existing yards grow wary at emerging Chinese capacity.” ✦
Exploration & Development - Quick Takes
Development set for sensitive Ecuadoran area
Petroecuador’s production unit Petroproduccion reported plans to develop Panacocha oil field in the Amazonas province before yearend.
Petroproduccion, Panacocha’s operator, said the field is thought to contain 42.5 million bbl of recoverable oil and to be capable of producing 6,000-9,000 b/d. Vice-Pres. Jaime Crow estimated development will cost $100 million and said it may be done in partnership with one or more state-controlled companies.
Petroproduccion has budgeted $31.3 million for construction of the initial installations at Panacocha, including an access road, loading dock, and 30-km oil pipeline.
The field is in an environmentally sensitive area at the headwaters of the Amazon River. It is the home to jaguars, ocelots, nine species of monkeys, and 500 species of birds. It harbors a network of waterways including the spectacular Panacocha Lagoon, habitat of the endangered Amazon River dolphin. There has been little oil exploration and no development in the area.
BHP Billiton gets two blocks off Colombia
BHP Billiton Ltd. has signed contracts with Colombia’s Agencia Nacional de Hidrocarburos (ANH) for exploration and production rights to two blocks in the Caribbean.
The Fuerte Norte and Fuerte Sur blocks each covers 1.2 million acres in 50-2,700 m of water. BHP Billiton will operate and hold a 75% interest in each block. State-owned Ecopetrol holds the remaining 25% interests.
The contracts are an addition to a technical evaluation agreement (TEA) awarded in 2005 whereby BHP Billiton assessed exploration and development opportunities on 3.75 million acres off Colombia. The TEA was converted into an exploration license.
MMS issues notice for OCS Sale 200
The US Minerals Management Service has issued a proposed notice for Western Gulf of Mexico Outer Continental Shelf Lease Sale 200, scheduled for Aug. 16.
Sale 200 offers 3,787 blocks covering 20.4 million acres 9-210 miles off Texas and Louisiana in 4-3,425 m of water. MMS estimates the proposed sale could result in the production of 136-262 million bbl of oil and 0.81-1.44 tcf of natural gas.
The proposed sale includes provisions for shallow-water, deep gas royalty relief for leases in less than 400 m of water, incentives for ultradeep wells specified in the Energy Policy Act of 2005, and an early deadline for electronic fund transfer of bonus and rental payments.
Japex donates seismic equipment to Iraq
Japan Petroleum Exploration Co. (Japex) is donating $15-20 million worth of seismic survey equipment to Iraq under a technical cooperation agreement originally made in 2005 and renewed last month for a year.
Iraqi Oil Ministry Undersecretary Ahmad al-Shammaa said the equipment, which is en route to Iraq, is intended to help the government update seismic data from several oil fields last studied in the 1970s and 80s.
The agreement calls for joint studies of development of an oil field near Baghdad, evaluation of an oil field and adjacent unexplored prospects in northeastern Iraq, and evaluation of exploration potential of Paleozoic reservoirs on a block in the Western Desert of Iraq and of deeper formations in the south.
Gulfsands plans to spud Syrian well by May
Gulfsands Petroleum PLC, Houston, plans to spud the Souedieh North well in late April or early May on Block 26 in Syria.
A vertical well will be drilled to 7,216 ft TD with the primary objective being Cretaceous aged reservoirs. Gulfsands operates Block 26 and holds 50% interest (OGJ, Feb. 20, 2006, p. 36).
Gulfsands took assignment of a drilling rig under contract with another operator. Crosco Integrated Drilling & Well Services Co. Ltd. of Croatia owns and operates the rig.
Petrobras to pick Mexilhao platform builder
Petroleo Brasileiro SA (Petrobras) plans in April to select a contractor to build a production platform for giant Mexilhao gas-condensate field on Block BS-400 in the Santos basin off Brazil.
Petrobras estimates that the field, discovered in 2003 in 1,591 ft of water, holds 2.54 tcf of natural gas and will cost $1.9 billion to develop (OGJ, Nov. 28, 2005, Newsletter). Petrobras plans for platform construction to start in the second half of this year and for production to start as early as 2009.
Plans call for the Mexilhao platform to produce 15 million cu m/day of gas and 3,200 cu m/day of condensate.
Apache farms in to Gippsland basin permit
Apache Energy Australia, Perth, has farmed in to offshore Gippsland basin permit Vic/P45 held by Moby Oil & Gas Ltd. and Exoil Ltd., both of Melbourne.
The permit lies southeast of ExxonMobil Corp.-BHP Billiton’s Kingfish oil field-the largest ever found in Australia. Moby and Exoil have delineated three new leads in Vic/P45, which they have named Errol, Neptune, and Trident.
Apache will earn 66.67% interest in the block by meeting 100% of the costs of the first two wells, although it has an option to withdraw from the second well. In that case Apache would return the whole 66.67% to Moby and Exoil.
If a discovery is made in the first well, Apache may still opt out of the second but have the right to retain its 66.67% in the discovery location. It will still have to reconvey its interest in the remainder of the permit.
The farmin deal also makes Apache operator. Moby and Exoil will retain 16.67% each.
This is the second move by Apache into the Gippsland offshore area. Two years ago the company farmed in to nearby acreage held by Nexus Energy Ltd., Melbourne.
However, Apache’s major presence in the country is still in the Carnarvon basin of Western Australia, where it operates the Harriet group of oil and gas fields and the production facilities on nearby Varanus Island. ✦
Industry Scoreboard
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Drilling & Production - Quick Takes
Petrol starts coalbed methane flow in Kansas
Petrol Oil & Gas Inc., Las Vegas, has begun production of about 300 Mcfd of gas in the first phase of its Coal Creek coalbed methane (CBM) project in Southeast Kansas (OGJ, Dec. 20, 2004, p. 38).
The gas comes from 24 of 100 wells planned in the Burlington area in Coffey County. Petrol began the $10 million drilling and development project in early November 2005.
After dewatering, gas is flowing into the Enbridge interstate pipeline. The Coal Creek CBM project includes about 92,000 gross acres overlying the Cherokee group of coal seams. The project is divided into the Burlington, Waverly, and Lebo areas.
The Burlington area, the first to begin production, is on 15,000 gross acres. In addition to the producing wells, it includes two saltwater disposal wells, 5-6 miles of gas gathering lines, and gas treatment infrastructure.
Work also is under way on the 40,000 gross-acre Waverly area. Petrol holds a 100% working interest and an average 80% net revenue interest in Coal Creek.
The Coal Creek development plan is based on drilling and completing 540 wells over 2-3 years. The coal-rich Western Interior basin reaches from eastern Kansas into western Missouri.
ATP starts Tors development gas production
ATP Oil & Gas Corp., Houston, has begun gas production at an undisclosed rate from the Tors development in Kilmar field on UK North Sea Block 43/22.
ATP operates the Southern Gas basin block and holds an 85% interest.
Production is from a multilevel well drilled to 11,025 ft TVD. The well, in 180 ft of water, is the first of at least four scheduled in the first phase of the Tors development.
When fully developed, Tors will produce 50-75 MMcfd net to ATP. Tors has 73 bcf of gas equivalent net proved reserves and 42 bcf of net probable reserves.
Welding bans delay Barnett gas well hookups
Welding bans in North Texas retarded the connection of Fort Worth basin Mississippian Barnett shale gas wells for a time in Johnson and Parker counties, said Devon Energy Corp., Oklahoma City.
The counties adopted the welding bans and other fire-control measures in response to a regional drought and lifted them after recent rains. The bans delayed pipeline construction.
Devon said it had 24 wells awaiting pipeline completion on Mar. 31. The company said the bans reduced its first quarter Barnett shale production by an estimated 3 bcf. ✦
Processing - Quick Takes
Ruhr Oel orders ethylene cracking furnaces
Ruhr Oel GMBH hired Linde AG for the turnkey installation of five cracking furnaces for an ethylene plant at the company’s Gelsenkirchen-Scholven site in Germany. The total order value is €130 million.
Ruhr Oel is a joint venture of BP PLC and Petroleos de Venezuela SA. The new furances will replace 17 furnaces that no longer comply with environmental requirements for nitric oxide, dust emissions, and energy efficiency.
The new furnaces, each with capacity of 100,000 tonnes/year of ethylene, will be able to process heavy hydrocarbons to naphtha and gaseous feedstocks. In September 2007, during a routine plant shutdown, the old furnaces will be dismantled and the new ones installed.
ONGC awards order for NGL plant at Dahej
India’s Oil & Natural Gas Corp. has awarded Toyo Engineering Corp. a ¥20 billion order for the construction of an NGL extraction plant at Dahej in Gujarat state.
On start-up in mid-2008, the plant will extract liquids for use as petrochemical feedstock from LNG from Petronet LNG Ltd.’s nearby 5 million tonne/year terminal.
The contract, awarded jointly with Toyo Engineering India Ltd., covers design and construction as well as materials and equipment procurement.
In January, Petronet awarded a ¥30 billion contract to a joint venture of Toyo Engineering Corp., Ishikawajima-Harima Heavy Industries Co., Itochu Corp., and Mitsui & Co. to double capacity of the Dahej LNG terminal (OGJ, Jan. 16, 2006, Newsletter).
Topsoe wins hydrogen plant deal in S. Korea
SK Corp. has awarded Haldor Topsoe AS, Lyngby, Denmark, a contract for a 110 MMscfd hydrogen plant at its 817,000 b/cd refinery at Ulsan, South Korea. The hydrogen plant will be part of a new resid hydrodesulfurization unit able to use multiple feedstocks.
The project will involve application of Topsoe’s steam reformer technology.
SK Corp. also recently awarded a contract to Shaw Stone & Webster for basic design, procurement, and project management and installation of a 60,000 b/sd FCC unit at the refinery (OGJ Online, Mar. 30, 2006).
Indonesia plans four biodiesel pilot plants
The Indonesian government plans to build four pilot biodiesel plants in 2006, aiming to use them as models to promote alternative energy.
The plants will be constructed in Kalimantan and Sumatra by yearend at a combined cost of about $33 million. They will produce 6,000 tonnes/year of biodiesel from crude palm oil and castor oil.
The plants will be near existing oil palm plantations and planned castor-oil plantations. The agricultural ministry also is in discussions with 14 other regions with a view to establishing new plantations to provide raw materials for more biodiesel plants.
The new and projected facilities are part of government efforts to reduce the country’s dependency on oil from 60% of the total energy mix to 30% by 2025. Alternative energy sources, such as biodiesel, are expected to account for around 10% of the total, with the remainder made up by coal and natural gas.
KNPC prequalifies firms for refinery work
Kuwait National Petroleum Co. has prequalified 11 companies for construction of a 600,000 b/d refinery 100 km south of Kuwait City in the Al-Zour area.
The companies include Technip, Foster Wheeler Italiana, GS Engineering & Construction Corp., SK Engineering & Construction Co., Hyundai Engineering & Construction Co., Stone & Webster International Inc., and Petrofac International Ltd.
KNPC has divided the project into four major contracts, with construction due for completion by early 2010. Two contracts are for manufacturing units in the refinery, one for utilities and services, and another for storage tanks and a pier.
Kuwait has three refineries-at Al-Ahmadi, Mina Abdullah, and Shuaiba-with combined capacity of about 915,000 b/d.
KNPC plans to upgrade Al-Ahmadi and Mina Abdullah by early 2011, but it plans to close Shuaiba once Al-Zour and the upgrades are completed, giving the country a total refining capacity of around 1.4 million b/d. ✦
Transportation - Quick Takes
Bolivian pipeline damage cuts gas to Brazil
Flooding and landslides from rains in Bolivia have damaged an 800 m section of a condensate pipeline in Bolivia and created gas-supply problems in Brazil.
The pipeline damage forced restriction of gas output from San Antonio and Margarita fields and lowered throughput of the Bolivia-Brazil natural gas pipeline to 19 million cu m/day from 26 million cu m/day, according to Petroleo Brasileiro SA (Petrobras). The state company holds major interests in and operates parts of the damaged condensate pipeline and the integrated gas production and transportation system.
Brazil’s energy ministry reduced gas deliveries to electric power generators and local distribution companies. The rationing is affecting the 11 refineries Petrobras owns.
Pipeline repairs have been delayed by Bolivian protests, which have blocked roads used by pipeline repair crews, Petrobras said. Protesters want higher royalties for the Chaco region in the south of Bolivia where the largest gas producing fields are located.
Duke Energy to expand Texas Eastern system
Duke Energy Gas Transmission plans to expand capacity of its Texas Eastern Transmission system from Lebanon, Ohio, to New Jersey as much as up to 150,000 dekatherms/day.
Plus it said it is studying the potential for hub-based services at Lebanon. The expansion includes adding 10 miles of pipeline at two locations in Ohio, 21 miles of pipeline at three locations in Pennsylvania, and 30,000 hp of compression at two locations in Pennsylvania, subject to final approval from the US Federal Energy Regulatory Commission.
The project will provide phased-in capacity for PSEG Power LLC and New Jersey Natural Gas, which have signed binding long-term transportation commitments.
The project’s initial in-service date is scheduled for late 2007.
AIOC lets contract for more ACG pipelay
Azerbaijan International Operating Co. has let a contract to McDermott Caspian Contractors Inc. (MCCI), a subsidiary of J. Ray McDermott SA, for further pipeline installation in third-phase development of Azeri, Chirag, and deepwater Gunashli fields off Azerbaijan (see map, OGJ, Oct. 18, 2004, p. 39).
MCCI said the existing second-phase contract for offshore pipelay in West and East Azeri fields awarded by AIOC has been extended to include engineering, procurement, fabrication, installation, and precommissioning of two oil export pipelines and one gas line, as well as previously installed pipelines.
The first and second-phase oil and gas pipelines extend 187 km from Azeri field to landfall at Sangachal.
RMPS begins Wyoming-Utah pipeline expansion
Rocky Mountain Pipeline System LLC is proceeding with the $77 million expansion of its crude oil pipeline system from the terminus of Frontier Pipeline near Evanston, Wyo., to the Salt Lake City, Utah, refining complex, reported parent company Pacific Energy Partners LP.
The 91-mile, 16-in. pipeline will parallel and use the common rights-of-way of the company’s existing U-Crude pipeline. The new pipeline will be able to transport multiple grades of crude oil in segregated batches, including Canadian heavy crude and synthetic crude. It will be built in two phases. The first phase, expected to cost $32 million, is scheduled to begin immediately and be completed in the fourth quarter, adding 12,000 b/d of capacity. The second phase is planned for completion in October 2007. Total capacity of the completed pipeline will be 95,000 b/d.
Esperanza studies LNG terminal off California
Esperanza Energy LLC, formed in March by Tidelands Oil & Gas Corp., San Antonio, is evaluating feasibility of a deepwater LNG terminal at an undetermined site as far as 12 miles off California.
The proposal joins a list of LNG projects proposed for California and northern Mexico, not all of which will be built:
• Sempra LNG began construction in March on the Energia Costa Azul terminal in Baja California, Mex. Sempra says the facility is on schedule to be operational by early 2008 (OGJ Online, Oct. 26, 2005).
• Woodside Natural Gas Inc. is seeking permits for its OceanWay Secure Energy project 28 miles off Los Angeles. The project will involve an underwater buoy that would connect to specially designed vessels, which would offload regasified LNG into a subsea pipeline (OGJ Online, Mar. 20, 2005).
• Australia’s BHP Billiton Ltd. has applied for permits for the $550 million Cabrillo Port floating LNG project 21.5 miles off Ventura County (OGJ, Nov. 17, 2003, p. 39). It would involve a permanently moored floating, storage, and regasification unit (800 MMcfd), traditional LNG storage tanks, and a subsea, 30-in. pipeline to shore near Oxnard, Calif.
• Houston-based Crystal Energy LLC’s Clearwater Port project would use the existing Grace oil platform 11 miles. off Ventura County as the site of an LNG terminal (OGJ Online, Nov. 3, 2003).
• Chevron Corp. is looking at sites for LNG import terminals in northern and southern California and planning a terminal 8 miles off Tijuana, adjacent the Coronado Islands (OGJ, June 14, 2004, pp. 22, 26).
• ConocoPhillips and Mitsubishi Corp. subsidiary Sound Energy Solutions last year formed SES Terminal LLC to jointly build an LNG import terminal at Long Beach, Calif., by 2009 (OGJ Online, May 18, 2005). ✦