OGJ Newsletter

March 6, 2006
Saudi security forces Feb. 27 killed five men suspected of involvement in a Feb. 24 terrorist attack on the Abqaiq oil processing plant, the Interior Ministry said (OGJ Online, Feb. 24, 2006).

General Interest - Quick Takes

Saudi forces kill suspects in Abqaiq attack

Saudi security forces Feb. 27 killed five men suspected of involvement in a Feb. 24 terrorist attack on the Abqaiq oil processing plant, the Interior Ministry said (OGJ Online, Feb. 24, 2006).

Officials said the suspects were traced to a building in Riyadh, where a shoot-out took place, after their cars appeared in a surveillance video at the oil facility.

The officials said another suspect was arrested elsewhere in the capital, while separate reports said a seventh suspect was arrested while attempting to enter Iraq.

Saudi authorities haven’t disclosed full details of the attack on Abqaiq or the number of people they suspect were involved in it.

In the attack, the two suicide bombers driving explosives-packed cars reportedly traded fire with police at a checkpoint before a gate in the first of three fences around the complex.

One bomber drove into the closed gate and exploded his bomb, blowing a hole in the fence. The second bomber then drove through the hole before police opened fire and detonated his car.

The Interior Ministry Feb. 26 said the two suicide bombers killed in the attack were on a list of the Saudi government’s most-wanted extremists.

FERC extends hurricane-recovery measures

The US Federal Energy Regulatory Commission has extended its suspension of blanket-certificate rules to help Gulf Coast gas facilities recover from Hurricanes Katrina and Rita.

It extended the deadline by 4 months-to Feb. 28, 2007-to complete construction of projects under the order, issued on Nov. 18, 2005.

Lifting the restrictions for an extended period is designed to allow facilities that can’t be put in service by the beginning of the 2006-07 heating season to be completed during the season, the commission said.

The order’s original Oct. 31 deadline was intended to coincide with the beginning of the heating season. Citing US Minerals Management Service estimates that 400 MMcfd of gas production in the gulf is expected to still be offline when the 2006 hurricane season starts, the commission decided to extend the order.

FERC originally waived certain requirements and increased the cost caps for projects constructed under automatic-authorization, blanket-certification provisions to $16 million from $8 million, and under prior-notice provisions to $50 million from $22 million.

In the same order, the commission also temporarily expanded the definition of eligible facilities to include mainline facilities, extension of a mainline, and temporary compression that raises a mainline’s capacity.

EI, API to work on measurement standards

The Energy Institute and American Petroleum Institute have signed a memorandum of understanding (MOU) to work together on petroleum measurement standards. The organizations developed the MOU at the Mar. 7-11, 2005, API meeting in Phoenix, Ariz.

To date, the organizations have completed one joint standard concerning measurements in marine transportation.

Currently, they are developing an implementation guide for their joint activities. API’s David Miller expects the draft version of the guide to be ready in the next few months.

Memo signed for Turkmen gas sales to Pakistan

Turkmenistan has agreed to supply 3.2 bcfd of natural gas to Pakistan over 30 years via the proposed $3.3 billion Turkmenistan-Afghanistan-Pakistan (TAP) pipeline (OGJ Online, Apr. 18, 2005).

Turkmenistan’s Minister for Oil and Gas Gurbanmurat Atayev, Pakistan’s Minister for Petroleum and Natural Resources Amanullah Khan Jadoon, and Afghanistan’s Minister for Mines and Industries Mir Mohammad Siddique signed the gas supply memorandum of understanding Feb. 15 following a 2-day steering committee meeting in Ashgabat, Turkmenistan. The Asian Development Bank presented a feasibility report.

India, which attended as an observer and earlier had been invited to join the project, expressed its willingness to participate in TAP (OGJ Online, Mar. 28, 2003). The ministers agreed to implement the project as early as possible and plan to meet again in April following a meeting of technical experts.

Pakistan will face a gas shortfall in 4 years and is working to import LNG and pipeline gas from Turkmenistan, Iran, and Qatar to meet energy demand linked to unprecedented economic growth.

Pakistan last October hired an adviser to assess LNG imports.

“We are moving very fast in this regard,” said Jadoon. He said the countries are not prepared to remain in the discussion phase much longer on these projects.

Industry Scoreboard

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Exploration & Development - Quick Takes

Belize has first commercial oil discovery

Belize is poised to become an oil producing country after 50 years of unfruitful exploration.

Belize Natural Energy Ltd. and CHX LLC, private Denver independents, have completed two wells each capable of producing 500 b/d of 38° gravity sweet crude, press reports said. The companies plan more drilling and want to acquire 3D seismic data.

The Usher-1 and 2 wells are near Spanish Lookout about 55 miles west-southwest of Belize City. The town is northwest of the capital, Belmopan, and close to the border with Guatemala.

The companies have shipped one bargeload of oil to a Gulf Coast refinery, sold some oil locally, and made first royalty and tax payments in late 2005, the reports said.

The well sites are 125 miles east of Xan field, Guatemala’s largest oil field, in the Peten basin. Xan produces 17° gravity oil from Cretaceous Coban at 7,600 ft.

Italian finds boost Aussie firm’s reserves

An independent geological report has increased proved natural gas reserves held in northern Italy by Po Valley Energy Ltd., Perth, Australia, to 36.6 bcf from 25.3 bcf.

The review by Italian consultant Ecopetrol takes into consideration results from Po Valley’s 2005 exploration program, including the recently drilled Sillaro field near Bologna and Vitalba field near Milan. Ecopetrol found that the total proved and probable reserves remained at 104.6 bcf and proved, probable, and possible reserves at 130.4 bcf.

Po Valley is developing Sillaro, Vitalba, and nearby Santa Maddelana fields, planning to start production by yearend or early next year. The gas will enter to the Italian pipeline grid through existing infrastructure. A fourth field, Bezzecca (formerly Pandino), southeast of Milan, is to be drilled late this year.

Po Valley has 100% interest in Sillaro, Vitalba, and Bezzecca fields, and 50% interest in Santa Maddelana field. The fields, initially found and produced by Eni SPA, are being reexamined by the Po Valley team, which is targeting the Pliocene and Miocene reservoirs in the light of new technology and an increasingly favorable economic climate for gas development in Europe.

Eni unit gets Pakistani exploration licenses

Pakistan has granted four petroleum exploration licenses to Eni Pakistan Ltd. for the Mithi (2470-3), Rajar (2470-2), Thar (2569-2), and Umarkot (2469-8) blocks in the Tarparkar, Umerkot, and Sanghar districts of Sindh Province. Eni will invest about $32.4 million during the initial 3-year license period. It will conduct geological and geophysical studies, shoot a 2D seismic survey, and drill two exploratory wells.

India offers 55 blocks in sixth NELP round

India has put up 55 oil and gas and 10 coalbed methane blocks for bidding under the sixth round of New Exploration Licensing Policy (OGJ, Nov. 21, 2005, Newsletter).

Bidding for the blocks-24 in deep water, 6 in shallow water, and 25 onshore-opened on Feb. 28 and closes Sept. 15.

Devon signs PSC for block off China

Devon Energy Corp. has signed a production-sharing contract with China National Offshore Oil Corp. (CNOOC) for Block 11/34 in the South Yellow Sea off eastern China.

The block covers 4,200 sq miles in 50-125 ft of water, 60 miles from Quingdao and 250 miles northeast of Shanghai.

Devon will operate the block with a 100% working interest, subject to government approvals. CNOOC has the option to back in for as much as a 51% working interest if there’s a commercial discovery. Devon will conduct a seismic survey and drill exploratory wells during the exploration period.

Indonesia to open bidding on 27 blocks

Indonesia will open bidding on 27 oil and gas blocks in South Sumatra, Papua, Sulawesi, and East Java, according to a government official.

Iin Arifin Takhyan, the oil and gas director general at the Mines and Energy Ministry, said the ministry this month will open 17 blocks via direct bidding and offer 10 blocks under regular bidding procedures. Under the direct-offer scheme, blocks are put forward for tender by bidders, who may then be awarded the blocks if no other investor expresses interest. If there are other bids, the government will pick the most attractive bid. In a regular tender, the government invites all companies to submit bids on designated blocks at the same time.

Blind Faith subsea engineering under way

Subsea engineering is under way for high-pressure, high-temperature Blind Faith oil and gas field in deep water of the Gulf of Mexico, reports INTEC Engineering.

Under contract with operator Chevron Corp., INTEC is supporting subsea engineering, procurement, and project management services during the manufacturing, construction, and installation phases of development. The project involves subsea wells in 7,000 ft of water and a semisubmersible production facility. The field lies on Mississippi Canyon blocks 695 and 696.

Subsea equipment is being designed to handle pressures up to 15,000 psi and temperatures as high as 300° F., INTEC said.

Production is to start in first-quarter 2008 through three wells at rates of 30,000 b/d of oil and 30 MMcfd of gas (OGJ, Oct. 17, 2005, Newsletter). The subsea system is designed for two additional wells. The production facility, with expandable capacities of 45,000 b/d and 45 MMcfd, is configured to accept additional tie-backs (OGJ, Jan. 23, 2006, Newsletter).

Production will flow from individual trees into a four-slot subsea manifold and from there through dual, 7-in. nominal diameter, 4.5-mile production flowlines to the semi. The system design accommodates gas lift.

Drilling & Production - Quick Takes

Chevron drilling deals include new drillship

Chevron Corp. has awarded Transocean Inc., Houston, three multiyear deepwater drilling contracts totaling $1.7 billion, one of which will require construction of a drillship to be dedicated to Chevron use for 5 years.

The contract for the newbuild, which according to Chevron will include “the most advanced drilling capabilities in the offshore drilling industry,” will begin in second quarter 2009.

Daewoo Shipbuilding & Marine Engineering Yard Co. Ltd., Okpo, South Korea, will build the $650 million, dynamically positioned, double-hull drillship, to be named Discoverer Clear Leader. It will contain two drilling systems in a single derrick-allowing for parallel drilling operations-and will have a larger, stronger, more efficient top drive than conventional rigs have so wells can be drilled to 40,000 ft TD in water as deep as 12,000 ft, Chevron said.

The drillship, which will be an enhanced version of Transocean’s three Enterprise-class drillships, also will have a variable deckload of more than 20,000 tons and an expanded high-pressure mud-pump system, expanded completions capabilities, and other features needed for deep drilling (photo, schematics, OGJ, Dec. 18, 2000, p. 32). Construction will take 30 months. Chevron will take delivery in the Gulf of Mexico. Chevron exercised a final 1-year option on Transocean’s Discoverer Deep Seas deepwater drillship, which is expected to commence in January 2008, and awarded a 212-year contract extension, expected to start in January 2009.

Chevron also extended its contract for Transocean’s Cajun Express semisubmersible. The 2.5-year extension is expected to begin in July 2007, following the rig’s current contract assignment with Chevron in the Gulf of Mexico.

Chinguetti field on stream off Mauritania

Woodside Energy Ltd.’s Chinguetti oil field off Mauritania has started production.

Hook-up, testing, and commissioning of the 275,000-tonne Berge Helene floating production, storage, and offloading vessel are complete, and oil production is rising toward an expected peak of 75,000 b/d.

The FPSO is moored in 800 m of water 90 km southwest of the Mauritanian capital Nouakchott. It has a storage capacity of 1.6 million bbl. The Chinguetti development cost $720 million, 20% over the original estimate. It comprises six production wells, five water injectors, and one gas injector.

Field reserves are estimated at 120 million bbl.

A dispute between the Woodside joint venture and the new Mauritanian government over changes to four other Woodside-operated production-sharing contracts remains unresolved. The dispute does not affect Chinguetti. Revenue shares from nearby discoveries Tiof, Tevet, and Banda are being disputed.

Woodside has not responded to the government’s concerns. If the parties cannot reach agreement in the next 3 months, the matter will be put before the International Chamber of Commerce in Paris.

Petrobras platform hull en route to Brazil

Petroleo Brasileiro SA (Petrobras) said its P-52 semisubmersible platform’s hull has departed Singapore’s Keppel Fels yard en route to Brazilian waters.

The $895 million hull, a major conversion by Keppel Fels, is expected to arrive at the end of March. It will be moved into the Brasfels shipyard in Rio de Janeiro state to be mated with its topsides.

The 180,000 b/d P-52 platform will be installed in Roncador field in the deepwater Campos basin next year.

Meanwhile, the 180,000 b/d, P-54 floating production, storage, and offloading vessel also is to arrive in Brazil in March. Construction cost $1.03 billion.

The P-54 FPSO hull will be mated with its topsides later this year. It will handle Roncador production.

Petrobras seeks bids on deepwater rigs

Petroleo Brasileiro SA (Petrobras) announced two competitive rounds for deepwater drilling rig contracts.

The company said proposals could include delivery in 2009. Petrobras took the step because of a global shortage of rigs.

It is interested in a rig able to drill in 3,000 m of water and available by March 2009 and a rig able to drill in 2,400 m of water available by June 2009. The rigs must have dynamic positioning. The contract terms will be 5 years.

The 3,000 m rig will drill under contract to Petrobras America, a Petrobras subsidiary operating in the US, for 4 years in the Gulf of Mexico and for a fifth year for Petrobras off Brazil.

The 2,400 m rig will work off Brazil.

Saudi Aramco lets contracts for land rigs

Saudi Aramco has let four drilling contracts to Al-Rushaid Parker Drilling LLC, a new 50-50 joint venture of Parker Drilling Co., Houston, and Abdullah Rasheed Al-Rushaid Co. for Drilling Oil & Gas Ltd.

Each contract is for 3 years with an option to extend for 1 year.

Al-Rushaid Parker will use new rigs for the drilling. The first rig is scheduled to arrive in Saudi Arabia in the third quarter, the others in the fourth quarter. The venture has obtained asset-based financing for a major portion of the acquisition costs of the rigs. The remaining acquisition costs, estimated at $20 million, will be funded equally with capital contributions by the partners.

The Saudi partner is a subsidiary of Al-Rushaid Investment Co.

Processing - Quick Takes

Total’s Dunkirk refinery set to restart

Total SA’s 160,000 b/d Dunkirk refinery, which was shut down Feb. 10 due to a small fire in an electric station, was partially restarted this month and became fully operational Mar. 4-5 (OGJ Online, Feb. 10, 2006).

Total was able to supply all its customers through its five other refineries, a spokeswoman told OGJ.

Pertamina lifts LPG imports to allay shortage

Indonesia’s state-owned Pertamina will import 9,000 tonnes of LPG from Singapore to prevent a shortage.

The imports reportedly will be earlier and larger than previously announced, as operations at the 125,000 b/d Balongan refinery in Indramayu, West Java, have been suspended for maintenance.

Pertamina spokesman M. Harun said refinery operations halted Feb. 15 and would resume Mar. 5.

The Balongan refinery, which can produce 1,200 tonnes/day of LPG, has been closed for repairs several times in the past 2 years.

In October 2005 the country’s LPG production was reported to have declined by 20% due to problems in refineries in Balikpapan and Cilacap.

Pertamina planned to import 5,000-6,000 tonnes of LPG from Singapore, Malaysia, and Thailand in January and hoped to produce LPG at maximum rates at Balongan.

Pakistan’s Bosicor to upgrade Hub refinery

Bosicor Refinery Ltd., Karachi, has signed a contract with Born Heaters Canada ULC for a 35,000 b/d crude distillation unit-fired furnace heater for its 18,000 b/d refinery at Hub in Balochistan Province, Pakistan.

The unit is part of a revamp that will increase the refinery’s capacity to 30,000 b/d.

Transportation - Quick Takes

Design starts on Russian oil line to Pacific

Design work on Russia’s proposed Eastern Siberia-Pacific Ocean (ESPO) oil pipeline is proceeding according to schedule, even though the duration of the related environmental study has been extended, Industry and Energy Minister Viktor Khristenko said Feb. 21.

“I have no reason to say that we will go beyond the deadline set for the first stage of construction,” he said. Last June, Khristenko said that the first section of the pipeline would be laid in 2008 and that two oil companies-Surgutneftegaz and OAO Yukos-would provide the crude oil to fill it (OGJ Online, June 8, 2005).

Russian Prime Minster Mikhail Fradkov signed a resolution on Dec. 31, 2004, to build the ESPO pipeline with a total capacity of as much as 80 million tonnes/year of crude, along with the use of railway capacity.

The first stage of the project calls for construction of a 2,400-km oil pipeline from Taishet in Eastern Siberia to Skovorodino near the Chinese border and of a rail oil terminal at the Perevoznaya Bay at a cost of $7.9 billion. The second phase, depending on the development of Eastern Siberian oil fields, involves construction of the further link between Skovorodino and Perevoznaya on Russia’s Pacific Coast.

China looks to import as much as 30 million tonnes/year of crude if a pipeline spur is built from Skovordino to Daqing, while supplies along the Skovorodino-Perevoznaya route would come to 50 million tonnes/year, with exports mostly aimed at Japan.

Transneft has completed a feasibility study of the project, and Rostekhnadzor, Russia’s federal environmental and technological regulator, was to confirm the environmental study for the first stage of the project by Jan. 25.

Rostekhnadzor extended the deadline for the expert commission for 30 days after most experts rejected the study, saying the route proposed by Transneft extended just 800 m from Lake Baikal. Moreover, Russia’s Natural Resources Ministry wants the terminus moved from Perevoznaya to Nakhodka (OGJ, Feb. 20, 2006, Newsletter).

Meanwhile, Transneft said several key players along the proposed route continue to insist on branches from the pipeline.

Khabarovsk Territory Gov. Viktor Ishayev wants to include the construction of branch lines to refineries in Khabarovsk and Komsomolsk-on-Amur, saying they would help avoid the dependence on railroads for oil shipments and would triple output.

Pertamina looks abroad for supplemental LNG

Indonesia’s state-run PT Pertamina may have to order 14 shipments of LNG from foreign suppliers this year to satisfy contracts for supplies from its plant in Bontang, East Kalimantan.

Pertamina Pres. Widya Purnama told legislators that the firm expects to cancel a commitment for 60 LNG shipments out of the 374 scheduled for export from Bontang this year due to falling gas reserves.

All but 14 of the 60 cancelled shipments have been agreed to by buyers in Japan, South Korea, and Taiwan, he said, adding that the country may face legal action if supplies are not shipped.

He said the company is facing “difficulty” in sourcing the shipments.

Expansion planned for Australian gas line

Industrial growth in Western Australia has prompted an increase in the size of the proposed Stage 5 expansion of the Dampier-Bunbury natural gas trunkline to handle an additional 375 TJ/day of natural gas to come online in 2007-09.

This will require the laying of 1,150 km of pipeline alongside the existing pipe at an estimated cost of $1.5 billion (Aus.).

When combined with the current $433 million (Aus.) for the Stage 4 expansion of 200 km of looping line to supply an extra 100 TJ/day, the Stage 5 proposal will virtually duplicate 90% of the trunkline route.

The Stage 5 expansion will provide a base for future electricity generation, industrial growth, and domestic gas supply in Western Australia.

Dampier Bunbury Pipeline Co. hopes to secure approvals from the Western Australian Economic Regulation Authority as well as to finalize renegotiated customer contracts in time for a final board commitment to the funding of the Stage 5 expansion by midyear.

Joint venture to develop Russian LNG project

Repsol YPF SA plans to form a joint venture with Tambeineftegaz and Anadarko Petroleum Corp. to conduct an integrated LNG project in Russia’s Yamal Peninsula.

The project, which includes development of South Tambey gas field and construction of an LNG plant, will permit the transport of LNG to Repsol YPF’s Canaport facility for regasification and eventual sale to the US East Coast.

Irving Oil Ltd. and Repsol YPF entered into definitive agreements in June 2005 to develop a LNG import and regasification terminal in Saint John, NB (OGJ Online, June 7, 2005).