General Interest - Quick Takes
IFP chief highlights energy geopolitics
The role of geopolitics has “made a significant comeback on the oil and gas scene,” said Institut Français du Pétrole Pres. Olivier Appert at a press conference in Paris before IFP’s annual Panorama.
Recent events in Russia, Iran, Venezuela, and even Bolivia, where leaders are exerting political influence over oil and gas supply, have made international consumers uneasy, Appert noted.
Acknowledging European tension over Russian gas supply following the price crisis with Ukraine and explosions of a pipeline to Georgia, Appert said state-owned Gazprom is trying to raise prices of still-undervalued sales to Russia’s former Soviet satellites.
“Hydrocarbons are Russia’s remaining arm to hoist it back to its former great power status,” he said. “But this policy should not be turned against the European Union, which is its largest client. At this stage, Russia needs Europe, which accounts for 80% of Gazprom’s revenues, as much as Europe needs its gas. If it plays the geopolitical game too often, it could, in the long run, lose the EU market to LNG or perhaps to nuclear.”
Appert said Russia hopes to get closer to the US and Asian markets. But it now needs European buyers, from which it receives its highest prices under long-term contracts linked to the price of oil.
CNOOC chairman sees steady Chinese oil demand
China’s oil demand will remain fairly stable because of energy efficiency technology and growing LNG imports, according to China National Offshore Oil Corp. Chairman and Chief Executive Officer Fu Chengyu.
“Future demand on oil-especially on imports-will not be very much higher than today,” Fu told the Cambridge Energy Research Associates annual energy conference on Feb. 7.
Fu pointed to forecasts that China’s oil demand would be higher in 2005 than it was in 2004. “Actually, it was not,” Fu said without offering demand figures.
His comment reinforced Chinese news reports that the country’s oil demand dropped in 2005. The reports cite the National Development and Reform Commission as saying China consumed 318 million tonnes of oil in 2005, which was 1.08 million tonnes less than in 2004.
“We are going to spend a lot more on providing efficiency,” Fu said.
In some applications, imported gas will replace oil. China’s first LNG import terminal is expected to be in operation during the first half, Fu said.
The $846 million terminal at Shenzhen will import more than 3 million tonnes/year of LNG from Australia (OGJ Online, Nov. 22, 2002).
“We are linking China into multinational LNG agreements,” Fu said, adding that China expects to import “30 million tonnes each year” of LNG.
CNOOC plans to increase its oil production at a rate of 15%/year and its gas production at 14%/year, Fu said.
“We aim to be a participant in the global marketplace.... China’s goal is not to overturn the world order but to reinforce it and even profit from it,” he said. “We are bonded together with most of the oil men in this room.”
Fu said CNOOC is the same as other oil companies in its goals of finding and developing oil and gas reserves, training skilled workers, and protecting stockholders’ interests.
Speaking with reporters after his speech, Fu did not directly answer questions about whether CNOOC will seek acquisitions in the US. Last year, CNOOC bid and then withdrew its offer for Unocal Corp. (OGJ, Aug. 8, 2005, p. 29).
“Overseas, we will expand and seek good commercial deals in various regions,” he said. “We will expand prudently but optimistically.”
Total summoned to trial for Erika spill
Total SA has been summoned to a French court of summary jurisdiction to be tried for “marine pollution” and “complicity in endangering the life of others” in connection with the Dec. 12, 1999, shipwreck of the Erika tanker and heavy fuel oil spill off the Brittany coast.
Paris Judge Dominique de Talancé indicted the company and all parties involved in the wreck and spill, which polluted 400 km of coastline, in 2001 (OGJ, Nov. 19, 2001, Newsletter).
Total is blamed for having contravened “its own vetting rules” covering condition of the tanker, which broke in two in heavy weather.
Total told OGJ that the accusations are factually and legally unfounded and pointed to strict tanker policies it adopted after the “catastrophe, which strongly marked it.”
FERC warns of cost hike from Alaskan gas line delay
Further delay of the proposed Alaska gas pipeline to the Lower 48 could hurt project economics, the US Federal Energy Regulatory Commission said in a Feb. 1 report to Congress.
The report noted that prices of the types of steel to be used in the pipeline have nearly doubled since the project cost was estimated at $20 billion.
“If negotiations are not concluded soon, there is a chance that there will be insufficient time to conduct the required studies and field surveys in 2006,” FERC said.
Two of three Alaska North Slope producers involved in the project, ExxonMobil Corp. and BP PLC, are negotiating fiscal terms with Alaska. ConocoPhillips reached an agreement with the state last year (OGJ, Nov. 7, 2005, Newsletter).
BP and ExxonMobil told OGJ that a clear, durable fiscal contract with Alaska is critical to the project. “Without such an agreement, the risks associated with this massive project would be too great to attract necessary financing,” BP said. “Hence, we continue to study cost-reduction opportunities, including the use of high-strength steel, automated welding, and other technologies.”
ExxonMobil said: “This is a very complex arrangement involving the state taking an ownership position. It is important to get the right contract that will allow this massive project to progress successfully. The negotiations are well advanced on this complex agreement.”
BP added that the pipeline project requires “thoughtful, prudent planning.” It said, “It is widely recognized that schedule-driven or deadline-driven megaprojects often result in massive cost overruns. This would not be in the interest of Alaska, consumers, or the industry.”
ConocoPhillips declined to comment on the FERC report.
The proposed gas pipeline would extend more than 3,000 miles through western Canada to the US Midwest and carry 4 bcfd of gas from the ANS.
In the 2005 Military Construction Appropriations Act, Congress provided an expedited regulatory review process for a pipeline to bring about 35 tcf of stranded ANS gas to market.
The 35 tcf is the latest US Geological Survey estimate of gas reserves in the central North Slope. USGS estimates 37 tcf of undiscovered gas in the same area. All would be accessible to the proposed pipeline route (OGJ, Aug. 22, 2005, p. 20). ✦
Industry Scoreboard
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Exploration & Development - Quick Takes
Chevron wins block off northwest Australia
Chevron Corp. subsidiary Chevron Australia Pty. Ltd. and partners have received exploration rights to Block W05-16 in the Carnarvon basin off northwest Australia.
The W05-16 permit covers 1,020 sq miles. The Carnarvon basin includes the North West Shelf and Greater Gorgon area. The new acreage is adjacent to the gas fields of the Gorgon project.
The 3-year work program for the permit area includes geotechnical studies, 1,500 miles of 2D seismic data reprocessing, a 695 sq mile 3D seismic survey, and the drilling of two exploration wells. Seismic work will begin this year. There is potential for another 3-year work program, Chevron said.
Chevron will operate the block and hold a 50% interest. Shell Development Australia and ExxonMobil Corp. each will hold a 25% interest.
Techno Petroleum wins Pakistan license
The Pakistani government has granted a petroleum exploration license to Techno Petroleum (Pvt.) Ltd. (TPPL) for Block No. 2770.3 (Islamgarh) in the Bahawalpur and Rahim Yar Khan districts of Punjab province in Zone-III. The block covers 230 sq km.
TPPL plans to invest $3.7 million in geological and geophysical studies, a 150-line-km 2D seismic survey, and an exploratory well during the first phase of the initial 3-year period.
TPPL is a new local exploration and production company. It also holds a 10% working interest in the Yasin Block.
Delta, Armstrong to pursue Utah thrust play
Denver firms Delta Petroleum Corp. and Armstrong Resources LLC will begin exploratory drilling in the Central Utah thrust belt in the second quarter.
Delta plans to acquire a 65% working interest in 88,000 acres held by Armstrong in the Hingeline play, established in 2004 with the discovery of Covenant field (see map, OGJ, Jan. 17, 2005, p. 42).
Covenant field, the Hingeline’s first commercial discovery, is widely considered to be capable of yielding 1 billion bbl of oil, Delta said.
Delta said, “Thrust belt discoveries such as this tend to occur in a trend with other productive structures. Delta’s new land position is on trend with Covenant and is believed to contain numerous undrilled four-way closures, which appear to be the same size or larger than the Covenant field.”
Delta will pay Armstrong $24 million in cash and 673,000 shares of common stock. Armstrong retains 35% working interest. Delta will operate most of the acreage and will pay drilling costs for the first three wells.
Murphy’s deepwater Sabah licenses updated
Petronas has awarded Murphy Sabah Oil Co. Ltd. a deepwater license for Block P off Sabah, Malaysia, and an extension to the exploration term of a portion of Block K.
Murphy, operator, has a 60% working interest in Blocks K and P, while Petronas E&P subsidiary Petronas Carigali Sdn. Bhd. holds 40%.
The Block K extension and the new Block P were created from part of the acreage known as Block K originally awarded to Murphy and partner Petronas Carigali in 1999, which had come to the end of its 7-year exploration period.
Blocks K and P comprise about 4,111 sq km and 4,246 sq km, respectively, and lie in 3,000-9,000 ft of water. The Block K extension was granted for 5 years, while Block P carries a 7-year exploration term.
Under the agreement, the partners will acquire and process 500 sq km of 3D seismic data and drill four wildcat wells on Block P.
Claiborne P. Deming, Murphy Oil Corp. president and chief executive, said Block P lies on trend 110 km to the northeast of Block K. He said the extension of part of Block K centers on the company’s Kikeh complex on the block’s southern corner, where production is to begin in the second half of 2007 (OGJ, July 11, 2005, Newsletter).
Fifteen blocks draw bids in Thai round
Eleven companies submitted applications for exploration rights to 15 blocks-8 onshore and 7 offshore-in Thailand’s 19th bidding round. The round offered 82 blocks.
Among the companies, Occidental Petroleum Corp. bid on 2,280 sq km Block G6/48 in the central Gulf of Thailand, where several gas fields are on production, according to the Thai Department of Mineral Fuels.
And Adani Port Infrastructure Ltd. India, submitted an application for onshore Blocks L25/48, which covers 3,962 sq km in the central plains, and 3,975 sq km Block L39/48 in the northeast. ✦
Drilling & Production - Quick Takes
US drilling activity hits 20-year high
US drilling activity hit the highest level in 20 years with 1,513 rotary rigs working the week ended Feb. 3. That’s 26 more than the previous week and up from 1,248 at that time last year, said Baker Hughes Inc.
It’s the highest weekly rig count reported since Jan. 31, 1986, when 1,594 rigs were drilling in the US.
Land operations accounted for all of the week’s gain, up by 26 units with 1,421 rigs drilling. The number of offshore rigs working in the Gulf of Mexico was down by 1 to 68. However, the number was unchanged at 72 in US waters overall. Inland waters activity was unchanged with 20 rigs working.
Fort Hills plans Alberta oil sands upgrader
Fort Hills Energy Corp. plans to build an oil sands upgrading facility on 1,800 hectares in Sturgeon County, 40 km northeast of Edmonton, Alta.
The upgrader will process bitumen from the Fort Hills oil sands mine, 90 km north of Fort McMurray. The mine has received approval for production of as much as 190,000 b/d of bitumen from a resource estimated at 2.8 billion bbl.
Fort Hills Energy will seek regulatory approval for the upgrader late this year or early in 2007.
It plans to start up the project late in the decade and to report a preliminary cost estimate late this year.
Fort Hills Energy Partnership comprises Petro-Canada (operator) with a 55% working interest; UTS Energy Corp., Calgary, 30%; and Teck Cominco, Vancouver, BC, 15%.
Cairn taps Mustang for Mangala work in India
A unit of Cairn Energy PLC, UK, has let a multimillion dollar contract to Mustang Engineering, a subsidiary of John Wood Group PLC, for front-end engineering design verification, detail engineering, procurement, and construction management services for the 150,000 b/d Mangala production facility to be located in the Rajasthan Desert in western India (see map, OGJ, Jan. 23, 2006, p. 35).
The facility will include water treatment and injection, gas production, power generation, fluid gathering and treatment, and crude oil export.
The project’s flow assurance work will be provided by Multiphase Solutions Inc., another Wood Group company. Mustang was to sign an agreement with L&T Valdel in Bangalore, India, for detailed engineering support.
Participants in the Mangala field project are Cairn Energy with 70% interest and India’s Oil & Natural Gas Corp. Ltd. with 30%.
Toreador due production in France
Toreador Resources Corp., Dallas, reported progress on exploration and production programs in France’s Paris basin.
The company’s 100% owned, multizone Charmottes-111H horizontal well on test produced 800 b/d of 36º gravity oil through a 1⁄2-in. choke for 6 days with no associated water. The well was drilled through fractured Jurassic Dogger limestone.
The well is to be connected to a nearby pipeline in 2 months. Until then, because of local requirements, the well will produce only during daylight hours, with production sold to a refinery 10 km away.
Elsewhere in France, the La Tonnelle-1 well on the Nemours permit southeast of Paris has been producing 50 b/d of oil during tests (see map, OGJ, Apr. 26, 2004, p. 47). Toreador holds 50% interest in the well, which is operated by Stockholm-based Lundin Petroleum AB.
La Tonnelle-1 was drilled to 2,390 m and encountered 4.6 m of net oil pay in the Triassic Chaunoy formation (OGJ Online, Nov. 9, 2005).
IB Daiwa tests S. Louisiana gas discovery
IB Daiwa Corp., Tokyo, tested gas and condensate at strong rates in the Kami discovery by its recently acquired Lodore Resources Inc. subsidiary in South Louisiana.
The well, in the Big Mouth Bayou prospect on the Louisiana Gulf Coast, flowed on test at rates exceeding 7 MMcfd of gas and 154 b/d of condensate with no water from perforations at 13,323-384 ft MD through 27⁄8-in. tubing and a 10⁄64-in. choke. Flowing tubing pressure was 8,036 psi. Shut-in tubing pressure prior to flow was 8,389 psi.
The company is revising facilities design to accommodate a condensate rate “much higher than had been anticipated.”
IB Daiwa expects production to start in 2-3 months at 10 MMcfd of gas and 200 b/d of oil once the well is connected to a gas pipeline 2 km away.
PDO lets contract for work on Omani fields
Petroleum Development Oman (PDO) has let a contract to PT MedcoEnergi Internasional Tbk., Jakarta, for a program to develop a cluster of 18 small oil fields in the Nimr-Karim area of southern Oman.
MedcoEnergi will submit a work program for the fields covering exploratory appraisal, subsurface studies, well engineering, facilities construction, operations, and maintenance.
In 2005, the contract area contributed about 3% to PDO’s total production. Officials said it currently produces 18,000 b/d of crude oil.
PDO owners are the Omani government 60%, Royal Dutch Shell PLC 34%, Total SA 4%, and Participations & Explorations (Partex) 2%. ✦
Processing - Quick Takes
Wyoming gas processing capacity hike planned
Enterprise Products Partners LP plans to expand gas processing capacity near Jonah and Pinedale fields in Wyoming.
It plans to buy TEPPCO Partners LP’s ownership interest in the Pioneer silica gel gas processing plant in Opal along with all of Jonah Gas Gathering Co.’s rights to process Jonah and Pinedale gas.
The transaction remains subject to regulatory approvals. Upon closing, Enterprise plans to expand the 275 MMcfd Pioneer plant to 550 MMcfd. The expansion is expected to become operational in mid-2006.
Enterprise also plans to build a 650 MMcfd cryogenic gas processing plant next to the Pioneer silica gel plant.
When operating at full capacity, the cryogenic plant would have the flexibility to switch from a conditioning mode to full recovery with the ability to recover 2,500-30,000 b/d of NGLs. This facility is expected to begin operating by the end of third-quarter 2007.
Suncor slows refinery for oil sands work
Suncor Energy (USA) Inc. has reduced throughput at its 92,000 b/cd Commerce City, Colo., refinery for maintenance to complete a project allowing it to increase processing of crude oil from its Canadian oil sands operations.
The company shut down the refinery’s west plant and sour crude unit and will restart them in a staggered sequence. Some units will be idle for as many as 42 days. The refinery’s east plant will continue to refine about 34,000 b/d of oil. During the shutdown, Suncor will make connections for commissioning and start-up of a $390 million project that began in August 2003 to enable the refinery to process 10,000-15,000 b/d of oil sands sour crude, broaden the slate of bitumen-based crude oils it can process, and meet new sulfur limits for highway diesel fuel.
Tunisia to review bids for Skhira refinery
Tunisia plans by June 30 to announce a list of prequalified bidders to build a 120,000 b/d refinery in the southern coastal city of Skhira. Interested investors have until Mar. 31 to submit offers.
Ameur Bechir, in charge of the refinery tender operation, said government officials plan in mid-2007 to select a contractor to build, own, and manage the refinery for at least 30 years. Construction tentatively is scheduled to begin in December 2007.
Tunisia has a hydroskimming facility at Bizerte with nameplate distillation capacity of 34,000 b/d. Snamprogetti SPA built the Bizerte refinery in 1962-63. Société Tunisienne des Industries de Raffinage operates it. ✦
Transportation - Quick Takes
El Paso starts up Elba Island LNG expansion
El Paso Corp. has placed in service expanded capacity at its Elba Island LNG receiving terminal near Savannah, Ga.
It spent $157 million to add 3.3 bcf equivalent of storage capacity and 540 MMcfd of peak sendout capacity to the facility, bringing totals to 7.3 bcf of storage and more than 1.2 bcfd of sendout capacity.
El Paso also added docking facilities that can accommodate two LNG vessels simultaneously in a new slip.
BG LNG Services holds the original capacity under long-term contract. Shell NA LNG LLC holds the expansion capacity.
El Paso has begun regulatory work on another expansion project, which would double the facility’s size by 2010. It also is laying two pipelines to carry gas from the terminal-Cypress, to start service next year, and Elba Express, to start up in 2010.
The company expects capital costs for the expansions and pipelines to total nearly $1.3 billion.
BG to buy LNG from Nigeria’s Brass LNG
BG Group PLC subsidiary BG Gas Marketing Ltd. (BGGM) signed a memorandum of understanding to buy 2 million tonnes/year of LNG from Nigeria’s Brass LNG for 20 years.
BG expects deliveries to start during 2010 to Lake Charles, La., and Elba Island, Ga. The liquefaction plant is to be built near Nigeria’s Brass oil export terminal (OGJ, Jan. 23, 2006, p. 56).
BGGM retained the right to divert cargoes to other destinations, including facilities under development in Milford Haven, UK, and Brindisi, Italy.
Petronas, AGL plan 1,200 km pipeline in Queensland
The Queensland government has announced plans to build a $1 billion (Aus.) gas pipeline from Townsville on the northeast coast to Ballera in the southwest corner of the state as an extension of the proposed Papua New Guinea-to-Australia pipeline project (see map, OGJ, Sept. 11, 2000, p. 76).
The 1,200 km link is being proposed by the joint venture of Australian Gas Light Co. and Petronas, which are building and will own the PNG-Townsville section. The system will bring Papua New Guinea gas to markets in south eastern Australia, as Ballera is linked to Moomba, and Moomba has lines to Sydney and Adelaide. Ballera also has pipelines extending north to the Gulf of Carpentaria and east to Brisbane. An environmental impact assessment is being prepared for the Townsville-Ballera line. AGL-Petronas is endeavoring to get all development approvals before yearend so construction can begin by mid-2007.
EPC contract let for Calhoun LNG project
Gulf Coast LNG Partners LP, Houston, has signed a memorandum of understanding with Tractebel Gas Engineering GMBH for a full-service, lump-sum turnkey contract for detailed engineering, procurement, and construction of the proposed Calhoun LNG Regasification Terminal at Port Lavaca-Point Comfort in Calhoun County, Tex.
Tractebel will work with GCLP through a detailed, open-book engineering design process. The facility will have vaporization and liquid separation capacity of 1 bcfd (OGJ, Mar. 28, 2005, Newsletter). Pending regulatory approvals, full operation of the terminal is scheduled for late 2009 to early 2010. ✦