OGJ Newsletter

Dec. 11, 2006
General Interest - Quick Takes

WoodMac: Output boost forecast for Venezuela

Production from Venezuela’s marginal fields will surge within 3 years, predicts Wood Mackenzie Ltd., Edinburgh.

That conclusion came in a report entitled “Venezuela’s new empresas mixtas set to boost output.” Venezuela formed new joint venture companies (empresas mixtas, or mixed companies) with international oil companies after renegotiating contracts under which the companies were working (OGJ, Apr. 25, 2005, p. 48).

The mixed companies operate the assets, and state company Petroleos de Venezuela SA (PDVSA) takes a majority stake in each, typically 60% or larger.

After 2 years of reduced investment and production declines during “the painful process of rewriting the marginal-field contracts,” a production boost is in prospect, WoodMac said.

“By 2009, oil production from the former marginal fields could have risen by 125,000 b/d or more, a 34% increase on today’s levels,” said Matthew Shaw, WoodMac Latin America senior analyst.

He noted these figures exclude production from seven marginal fields that were relinquished to PDVSA by participants choosing not to convert their contracts.

“In some cases, the return on investment arising from the contract conversion will actually increase-especially for the second-round marginal fields which had particularly tough fiscal terms-but the drop in working interest has seriously reduced the net present value of the assets for the third parties,” Shaw said. “The overall decrease in their portfolio value is approximately $2.5 billion, a 43% drop.”

The report also predicted long-term potential for many fields.

“The new contracts have extended the previous license terms by as much as 14 years, which should allow previously untapped oil reserves to be exploited, for instance by implementing water injection,” Shaw said.

US House passes bill on produced-water use

The US government would study expanded uses for water produced with oil and gas under legislation passed Dec. 5 by the House of Representatives (OGJ, Oct. 16, 2006, p. 30).

HR 5110 would direct the US Interior secretary to identify obstacles to using produced water. It also would authorize funding for three pilot plants in Colorado, California, and Arizona or Nevada to demonstrate ways produced water can be made suitable for other uses.

The bill moves to the Senate, which would have to pass it before adjourning for the year. If the Senate doesn’t act, the bill will be reintroduced early in 2007, according to a spokesman for its sponsor, Rep. Mark Udall (D-Colo.).

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Exploration & Development - Quick Takes

Iran plans Azadegan tenders, Pars Phases 6-8

Tender documents for Iran’s Azadegan development were expected to be ready by Dec. 15, said Gholamhoseyn Nowzari, National Iranian Oil Co. (NIOC) managing director, at an NIOC seminar in Tehran last month.

In October, Japan’s Inpex Corp. agreed to reduce to 10% its concession in Iran’s Azadegan oil field from the current 75%, with the outstanding 65% stake to be transferred to NIOC (OGJ Online, Oct. 6, 2006).

Nozari also announced that NIOC expects to finish the preparation of a directive on modifications to buy-back deals by next week.

Meanwhile, Nowzari said, NIOC held discussions Oct. 31 with Total SA concerning a project to develop South Pars gas field and the Pars LNG project.

Nowzari expressed hope that South Pars Phases 6-8 would be commissioned by Mar. 20, 2007, the end of the current Iranian year.

Petrobras, Ecopetrol plan joint projects

The national oil companies of Brazil and Colombia plan jointly to explore the Tucano Block in Bahia, Brazil, and to expand production in Tibu oil field in Colombia.

Brazil’s Petroleo Brasileiro SA (Petrobras) will sign an agreement with Colombia’s Ecopetrol to further develop Tibu, 500 km north of Bogota near the Venezuelan border. The Ecopetrol-operated field began production in 1944, reached its production peak in 1955 at 26,000 b/d of 32-50° gravity oil, and has produced a total of 247 million bbl. It has 129 active wells.

Petrobras will manage the advanced development program and fund 55% of it. The program is designed to extend production by as much as 100 million bbl. Production is expected to increase to more than 15,000 b/d from 1,800 b/d, and Petrobras will retain 40% of the field’s total production.

The 2½-year Phase I will begin in January. Petrobras will invest $40 million for studies to determine the field’s potential and for technology.

Ecopetrol will work in partnership with Petrobras in the exploration of the 170 sq km Tucano 156 Block in Bahia. The block, in the Tucano Sul basin, 90 km from the Bahia coast, was purchased at a recent National Petroleum Agency auction.

Ecopetrol, with a 30% share, will be the project’s operator, and Petrobras holds 70%.

Murphy temporarily abandons Gulf of Mexico well

Murphy Oil Corp. has temporarily plugged and abandoned its Thunder Ridge exploration well on Mississippi Canyon Block 737 in the Gulf of Mexico.

The primary objectives found wet sands, with a secondary shallower objective encountering a small oil accumulation. The exploration well and subsequent sidetrack were drilled in over 6,100 ft of water.

Postdrilling analysis will continue to determine if the resource found can be commercially viable as a tieback to another facility. Thunder Ridge lies close to the company’s recently sanctioned Thunder Hawk development, which will include a stand-alone semisubmersible floating production unit that is scheduled for installation in late 2008 to accommodate the expected start of oil production in 2009.

Murphy owns a 37.5% working interest in the field and serves as operator. Partners are Dominion Exploration & Production Inc. 25%, Hydro Gulf of Mexico LLC 25%, and Marubeni Corp. subsidiary Marubeni Offshore Production (USA) Inc. 12.5%.

Talisman strikes oil off Trinidad and Tobago

Talisman Energy Inc. and its partners made an oil discovery with the Ruby-1 exploration well on Block 3(a) 30 miles off the northeast coast of Trinidad and Tobago. On test Ruby-1 produced 5,000 b/d of oil through a 7/8-in. choke from a limited interval within the pay section.

The well, which was drilled to TD 5,750 ft, found 1,200 ft of hydrocarbon-bearing sands, including more than 800 ft of net pay. Talisman said its Kingbird-1, an exploration well drilled prior to Ruby-1, found 80 ft of gross hydrocarbon pay and was abandoned without testing pending further technical studies.

Wholly owned subsidiary Talisman (Trinidad Block 3a) Ltd. holds 25.5% working interest in Block 3(a). Partners BHP Billiton (operator) and Anadarko Petroleum Corp. each hold 25.5% interest. Petrotrin has 15% interest and Total SA holds 8.5% interest.

Dana reports oil discovery off Mauritania

Dana Petroleum PLC reported an oil discovery in Cretaceous sandstones in its Aigrette-1 well on Block 7 off Mauritania (see map, OGJ, Oct. 23, 2006, p. 38).

The well was drilled to TD 5,152 m in 1,358 m of water. Dana ran wireline logs, took pressure measurements, sampled fluids, and cut sidewall cores.

“Downhole pressure measurements and fluid samples confirmed a 20-m oil column was present in good quality Cretaceous age reservoir sands,” the company said.

The well was originally planned for TD 4,900 m. Dana said the deepened section encountered “significant further sands” that didn’t contain oil.

Dana discovered gas in the Pelican-1 well on the same block in 2003.

“The extensive acreage of Block 7, coupled with the discovery of both oil and gas within the first two wells and the presence in Aigrette of deeper sands than those found in Pelican, all provides considerable encouragement for future drilling in this underexplored region of northern Mauritania,” said Tom Cross, Dana’s chief executive officer.

Dana, operator, and its partners work under a production-sharing contract on the block, which covers 10,090 sq km.

Interests are Dana 36%, Gaz de France 27.85%, Hardman Resources Ltd. 16.2%, Woodside Energy Ltd. 15%, and Roc Oil Co. Ltd. 4.95%.

Drilling & Production - Quick Takes

Hess begins Phu Horm gas flow in Thailand

Amerada Hess (Thailand) Ltd. has begun production from Phu Horm gas field on Block E5N in Udon Thani Province of northeastern Thailand, reported Salamander Energy PLC.

Phu Horm’s gas reserves are estimated at 550 bcf plus condensate capable of yielding 500 b/d of production (OGJ, Aug. 1, 2005, Newsletter).

Gross production, initially from two wells, will be about 60 MMcfd, increasing to an expected rate exceeding 100 MMcfd plus condensate. Additional wells will be brought into production in 2007, and deliveries are expected to increase to as much as 108 MMcfd.

Hess owns a 35% interest in the field and is operator. Other partners are Apico LLC 35%, PTT Exploration & Production PLC (PTTEP) 20%, and ExxonMobil Exploration & Production Khorat Inc. 10%. Salamander owns 27.2% of Apico.

A gas sales agreement with PTT Public Co. Ltd. calls for more than 500 bcf of gas from the field to be supplied to a power station at Nam Phong over 15 years.

Hydro awards contract for Brage platform

Norsk Hydro has awarded Norwegian petroleum services company Aker Kvaerner a 150 million kroner contract for the upgrade of Hydro’s reinjection water system on the Brage oil and gas platform in the Norwegian North Sea. The scope of the contract includes engineering, procurement, and constructional installation and should be completed by yearend 2008.

Design and procurement will begin immediately, Aker Kvaerner said, and prefabrication will start in April 2007. The offshore installation work will take place during 2007-08.

The upgrade will give Hydro zero emissions of produced water and as much as 1.2 million bbl of extra oil from Brage plaform, Hydro said.

Brage is a mature oil field that produces 20,000 b/d of oil.

US drilling activity on the rise

US drilling activity increased by 20 rotary rigs to 1,717 working during the week ended Dec. 1, up from 1,460 in the same period a year ago, said officials at Baker Hughes Inc.

The gain primarily was in land operations, up by 21 units to 1,608 drilling. Offshore drilling increased by 1 rig to 82 in the Gulf of Mexico and 86 in US waters as a whole. Those increases were partially offset by the loss of 2 rigs to 23 drilling inland waters.

Texas registered the biggest weekly increase among the major producing states, up by 4 rigs to 771 working. Oklahoma gained 2 units to 183. Alaska increased by 1 to 7. Colorado and California were unchanged at 87 and 36, respectively. New Mexico and Wyoming lost 4 rigs each, down to 97 and 90, respectively. Louisiana was down by 2 units to 193.

Processing - Quick Takes

Total starts up Gonfreville hydrocracker

Total SA has brought on stream a €550 million distillate hydrocracker at its 330,000-b/d Gonfreville refinery in Normandy, France.

The unit will yield 200,000 tonnes/year (tpy) of jet fuel, 400,000 tpy of naphtha for petrochemicals, 500,000 tpy of high-grade base products for lube oils, and 1.3 million tpy of diesel oil. It will raise the refinery’s diesel output capacity to 5.3 million tpy.

The hydrocracker is part of the expansion and modernization of Total’s 12 European refineries, spending on which this year will total about €1 billion.

Motiva lets Port Arthur refinery expansion EPC

Motiva Enterprises LLC, Houston, plans to move forward with the final design and engineering phase of a proposed 325,000 b/d expansion of its 285,000 b/cd refinery in Port Arthur, Tex.

It has selected Bechtel Jacobs Joint Venture as the engineering, procurement, and construction contractor, and it recently secured the operating air permit from the Texas Commission on Environmental Quality.

The company will use advanced technology in all new system installations and will replace existing systems to lower emissions from refinery operations on a per-barrel basis.

Motiva and Dresser-Rand Co. have been in negotiations on contracts for Dresser-Rand to supply compression equipment and start-up services. The planned project would make the refinery the largest in the US, with throughput capacity of 600,000 b/d (OGJ Online, June 19, 2006).

Motiva could make a final investment decision by around midyear 2007. Construction is scheduled to start next year, subject to final approvals, and new production capacity is expected to come online in 2010 (OGJ Online, May 8, 2006).

Borouge lets ethylene contract for UAE plant

Borouge, a joint venture between Abu Dhabi National Oil Co. (ADNOC) and European plastics provider Borealis, let a $1.3 billion, lump-sum turnkey contract to Linde Group and Consolidated Contractors Co. for construction of an ethylene cracker in the UAE.

The steam cracker, having an ethylene capacity of 1.5 million tonnes/year, is planned as an expansion of a petrochemical complex in Ruwais, Abu Dhahi. The cracker will use ethane feedstock, producing polyethylene and polypropylene for export.

The project, scheduled to start in early December, is expected to be on stream by 2010. Borouge called the contract its first step in a major expansion project that will ultimately triple the company’s production capacity.

Taiyo Oil upgrading to refine heavy oil

Japan’s Taiyo Oil Co., which refines petroleum products from light crude, plans to spend ¥50 billion to install cracking equipment for heavy oil at its Ehime Prefecture refinery.

The firm wants to produce more gasoline and petrochemical products to fulfill expected demand growth. The company’s total output of petrochemicals is expected to reach 1 million tonnes/year, while heavy oil production will decline by 1.2 million kl.

The new equipment, to go on stream in 2010, will increase Taiyo’s production of raw materials for gasoline by 600,000 kl, kerosine and light oil by 300,000 kl, propylene by 100,000 kl, and benzene and xylene by a combined 50,000 kl.

Taiyo also will set up a 43,000-kw power generator to burn gases from production of petrochemicals and other products. The company plans to sell surplus electricity wholesale to power retailers and others.

Statoil lets Kollsnes gas plant upgrade contract

Statoil ASA, on behalf of state-owned Gassco AS, has let an engineering, installation, construction, and commissioning contract to Vetco Aibel for a gas compressor and a condensate train at the Kollsnes gas processing plant near Bergen, Norway.

The contract, valued at 790 million kroner, extends through the second half of 2008.

Building a compressor and simultaneously improving condensate capacity will ensure efficient project execution and reduce the scope of work, Statoil said. In addition, installing a new condensate train eliminates the need for an extended shutdown when the heat exchangers on the existing train need replacement in 2008.

Arnulf Østensen, vice-president for technical operation at Gassco, said the project lays the basis for future capacity expansions.

The Gassco-operated Kollsnes plant processes gas from Troll, Kvitebjørn, and Visund fields and transmits it through four pipeline systems to continental Europe. These installations, capable of handling 143 million standard cu m/day of gas, are owned by Gassled and operated by Gassco, with Statoil as the technical service provider.

Saudi Kayan lets petrochemical complex contract

Saudi Kayan, a joint venture of Saudi Basic Industries Corp. and Al-Kayan, has awarded Flour Corp. an engineering, procurement, and construction management services contract for the utilities and offsite (U&O) facilities of the joint venture’s 4 million tonne/year petrochemical complex to be built in Al-Jubail, Saudi Arabia.

“This project will utilize 17 licensed technologies and will produce both specialty amine derivatives and polycarbonates for the first time in Saudi Arabia,” said Jeff Faulk, Fluor’s group president for energy and chemicals.

Once completed, the $2.2 billion complex will include a 2 million tonne/year ethane-butane cracker, including benzene extraction facilities; a 700,000-tonne/year polyethylene plant; a 350,000 -tonne/year polypropylene plant; and a 530,000-tonne/year ethylene glycol unit. Also, an integrated phenolics plant, including cumene, phenol, and Bisphenol-A units, will produce feedstock for a 260,000-tonne/year, high-value polycarbonates plant. Additional amine derivative facilities will be installed for the production of methylamines, ethanolamines, ethoxylates, and choline chloride.

Saudi Kayan said agreements with Saudi Aramco are complete for the supply of ethane and butane feedstock, and permits have been received from the Royal Commission for the commercial use of land and water.

Engineering on the U&O facilities, which Faulk said were the “heart of the complex,” began in July and will continue through 2008. Construction is slated to begin in February 2007, and completion is targeted for December 2009.

Fluor also provided front-end engineering and design and project management consultancy services for the complex.

Contracts let for French biodiesel plants

Diester Industrie has let turnkey contracts to Technip for two biodiesel plants in France.

The plants, one in the Bassens port zone near Bordeaux and the other doubling the size of the Grand-Couronne plant near Rouen, will use the Axens process.

Capacities each will be 250,000 tonnes/year. The units are to start production at the end of 2007.

In addition to the existing plant near Rouen, Technip has built biodiesel plants for Diester at Sete and Compiegne and is building one for the company at Montoir-de-Bretagne.

Neste plans second biodiesel plant at Porvoo

Neste Oil plans to build a second 170,000-tonne/year biodiesel plant at its 200,000 b/cd refinery in Porvoo, Finland.

Estimated to cost €100 million, the plant will produce biodiesel from animal fats and oil. Production is scheduled for about late 2008.

The first biodiesel plant under construction is scheduled to start up around mid-2007 (OGJ, Nov. 7, 2005, Newsletter).

The plants will use Neste’s proprietary process to convert biological triglycerides into a synthetic biodiesel-NExBTL-a nonoxygenate hydrocarbon biodiesel compatible with the existing vehicle fleet, the company said. The company also has biodiesel projects under way in France and Austria.

Transportation - Quick Takes

Mississippi LNG terminal’s EIS approved

Construction of a proposed LNG terminal near Pascagoula, Miss., would have minimal environmental impact, the US Federal Energy Regulatory Commission’s staff said in a final environmental impact statement.

Impacts would be most significant during construction of the Gulf LNG Clean Energy Project, which also would include a new pipeline to ship as much as 1.5 bcfd of gas out to three interconnection points, FERC said.

Gulf Energy LLC, which is building the terminal, sought FERC’s approval to build a berth and unloading facilities capable of accommodating one LNG tanker, LNG transfer systems, two 160,000-cu m LNG storage tanks, 10 high-pressure submerged combustion vaporizers, vapor handling systems, hazard detection and response equipment, and ancillary buildings, utilities, and service facilities.

Gulf LNG Pipeline LLC separately requested FERC approval for a 5-mile, 36-in. gas sendout pipeline and associated support facilities, including three interconnects and meter stations, one pig launcher, and one pig receiver.

Dutch-UK Balgzand-Bacton gas line starts

The new Balgzand-Bacton pipeline has begun commercial delivery of natural gas from the Netherlands to the UK.

The 235-km, 36-in. pipeline works at a pressure of 135 atm. Around 230 km of the pipeline is offshore under the North Sea. It will have a capacity of 15 billion cu m (bcm)/year when a remotely operated electrical compressor station enters service in January in Anna Paulowna, Noord Holland.

“In the Netherlands the pipeline was pulled through the dunes using a horizontal directional drilling technique to cause less damage to the environment,” a BBL spokesman told OGJ.

The spokesman said BBL has received “a lot of interest” in an open season for pipeline capacity, which it will offer monthly.

BBL is a joint venture of E.ON Ruhrgas, Fluxys, and NV Nederlandse Gasunie.

The Balgzand-Bacton pipeline is the third major gas transport project serving the UK to start up this winter. The 600-km southern leg of the 1,200-km Langeled pipeline from Norway delivered first gas to the UK in October (OGJ, Oct. 23, 2006, p. 34). And an expansion of the Interconnector pipeline between the Netherlands and the UK came on stream the same month, increasing capacity by 7 bcm/year to 23.5 bcm/year.

The UK is expecting new LNG supplies to be delivered to Teesside via the Excelerate project early in 2007. The South Hook LNG and Dragon LNG terminals in south Wales are expected to become operational by late 2007.

Falcon Gas Storage to build Barnett shale pipeline

Falcon Gas Storage Co. Inc. plans to build a 63-mile, 24-in. gas pipeline to serve its expanded 16 bcf working capacity Worsham-Steed gas storage facility in the western Barnett shale gas play near Fort Worth. Pipeline capacity is expected to be 450 MMcfd, and commercial operation is scheduled to begin Sept. 1, 2007.

Falcon’s Worsham-Steed pipeline will extend southward from the Worsham-Steed facility through Jack, Parker, and Hood counties in Texas. It will interconnect with two existing 36-in. gas transmission pipelines: the North Texas Pipeline, jointly owned by Enterprise Products Partners and Energy Transfer Partners, and the Atmos Energy Corp. Line X pipeline.

In addition to an existing interconnection with Energy Transfer’s Old Ocean pipeline at Worsham-Steed, the new pipeline will connect to Devon Energy Corp.’s Acacia pipeline, Atmos’s Line WA, and Enterprise’s recently announced Sherman extension pipeline.