General Interest —Quick Takes
Norway eyes $2 trillion oil industry expenditure
Norway hopes to tap into $2 trillion of the oil industry's expenditure over 2009-13, according to a report published by Douglas- Westwood.
The study, which focused on 19 target countries and 26 key onshore and offshore market areas, was commissioned by Norwegian oil and gas partners INTSOK. The organization works with Norwegian companies throughout the petroleum chain to do business abroad promoting the nation's experience, technology, and expertise.
The report found that increasingly oil and gas will be produced from deepwater provinces—opening a buoyant market over the coming decades. Other drivers underpinning the huge rise in expenditures include rising energy demand from the developing countries, growth in oil prices, and tightness in global energy supplies.
John Westwood, chairman of Douglas-Westwood, said, "The current economic environment has hit activity levels hard, however, by 2011 it is forecast that overall expenditure will have recovered and beyond this the majority of the selected market sectors are expected to exhibit growth through 2013."
He added: "Within the offshore target markets, expenditure is expected to grow from $163 billion in 2009 to $222 billion in 2013 and onshore markets from $170 billion to $229 billion."
"Over the next 5 years, we forecast that the total expenditure within the onshore and offshore INTSOK target markets will total nearly $2 trillion, compared to about $1.4 trillion over the previous period," said Westwood.
Indonesia pegs oil, gas spending at $5 billion
Indonesia's domestic firms will increasingly benefit from expenditures of oil and gas contractors this year due to "aggressive efforts" by the government, according to a senior official.
R. Priyono, chairman of the country's upstream oil and gas regulating agency BPMigas, said domestic firms might be able to absorb as much as 50 trillion rupiah ($5 billion) from the annual spending of oil and gas contractors now estimated at 110-150 trillion rupiah/year.
"We don't set high targets as we have just begun intensifying the use of local content in the industry," said Priyono. "We will be very happy with the 50 trillion rupiah if it can be realized."
Priyono acknowledged 50 trillion rupiah is not an optimal figure but said it is significantly higher than in previous years when most contractors spent only 20% of their annual outlay through local firms.
In an effort to raise the figure to 55% by the end of 2010 and to 91% by 2025, Priyono and Industry Minister Fahmi Idris signed an agreement Aug. 21 aimed at increasing the use of locally made heavy equipment, machines, ships, and offshore rigs for the country's oil and gas industry.
"We expect to follow up the agreement with more concrete actions," Priyono said, without providing details.
Seadrill looking into Timor Sea oil spill
Seadrill Ltd. reported that it is working closely with the National Offshore Petroleum Safety Authority to investigate an Aug. 21 oil spill involving the Montara platform complex off West Australia in the Timor Sea.
Seadrill's West Atlas jack up drilling rig is operating under contract to PTTEP of Thailand. PTTEP owns and operates the Montara platform complex. An oil leak developed on a well adjacent to where the West Atlas was working, Seadrill said.
All personnel on the West Atlas were safely evacuated, Seadrill said. The cause of the leak is yet unknown. The Australian Maritime Safety Authority sent planes to spray chemical dispersants on the water to help break up the resulting oil slick.
Seadrill said it is making another jack up, the West Triton, available to PTTEP to drill a relief well. Seadrill also sent an accident investigation team to Australia.
Once the leaking well is under control, Seadrill said its crews will reboard the West Atlas and assess any damage.
Industry Scoreboard
Exploration & Development — Quick Takes
BP's Tiber one of industry's deepest wells
BP PLC has reported a giant Gulf of Mexico Lower Tertiary deepwater discovery that is also one of the world's deepest wells.
Named Tiber, the well went to a total depth of 35,055 ft on Keathley Canyon Block 102 and found oil in multiple Lower Tertiary (Paleogene) reservoirs, BP said.
The company said Tiber, after appraisal to determine its size, should be larger than the 3 billion boe that BP expects to recover from its 2006 Kaskida discovery 45 miles to the southeast.
Kaskida, with more than 800 ft of net pay on Keathley Canyon 292, is under appraisal through 2010. The Kaskida unit covers 51,840 acres on nine blocks. The Kaskida discovery well went to 32,500 ft in 5,860 ft of water. Kaskida interests are BP 73.33% and Devon Energy Corp. 26.67%.
Andy Inglis, chief executive, BP Exploration & Production, said, "These material discoveries together with our industry leading acreage position support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade."
BP is the gulf's largest oil and gas producer with net production of more than 400,000 boe/d. It is working on nine Gulf of Mexico projects: Atlantis Phase 2, Tubular Bells, Kodiak, Freedom, Kaskida, Isabela, Santa Cruz, Mad Dog tiebacks, and Great White.
Tiber is nearly 300 miles east-southeast of Corpus Christi, Tex., in 4,132 ft of water. It is also 35 miles southeast of the Gunnison field complex in the Garden Banks area.
BP operates Tiber with 62% interest. Brazil's Petroleo Brasileiro SA has 20%, and ConocoPhillips has 18%.
Large gas resource seen in Quebec's Utica shale
Consulting engineers estimated a prospective resource of 4.28 tcf of natural gas in place in the Ordovician Utica shale in the deep fairway of Quebec's St. Lawrence Lowlands.
The estimate of 150 bcf/sq mile is 66% higher than earlier industry figures, said Questerre Energy Corp., Calgary. The range of the resource is 2.2-8 tcf.
The estimates relate only to company lands that have geology validated by successful wells, Questerre said.
"The evaluation is focused on the acreage between the two main geological features, the Yamaska growth fault and Logan's Line, where Questerre holds approximately 833,000 gross acres in the deep fairway," the company said.
The assessment does not include the shallower Ordovician Lorraine interval but did include results from the recently completed, Talisman Energy Inc.-operated Edouard-1 exploratory well (OGJ Online, Aug. 31, 2009).
NAPE: Frac regulation Washington's ‘worst threat'
A move to regulate hydraulic fracturing federally is the "biggest threat our industry has ever seen in Washington," Bruce Vincent, vice-chairman of the Independent Petroleum Association of America, said Aug. 26.
Joel Noyes, IPAA director of government relations and industry affairs, expressed a low expectation for passage of most of the Obama administrations frenzied agenda, much of which contains negative provisions for oil and gas producers.
The atmosphere in Washington is one of "almost chaos," said Noyes, and the environment is very partisan. The agenda is so congested because of the Democratic desire to push contentious legislation through before the 2010 election year, he said.
Ninety percent of wells are hydraulically fractured, some dozens of times, Vincent told the Summer NAPE E&P Forum in Houston. In the 60 years that the industry has been fracturing wells under state regulation, no case of fresh water contamination by the procedure has been documented, he said (OGJ Online, July 2, 2009).
Greater frac regulation is coming, predicted William Coates, president, Schlumberger Oilfield Services North America. The question is whether the industry can manage enough input that final rules are formed in a cooperative manner, he said.
Drilling & Production —Quick Takes
NAPE: Rockies gas output just starting to decline
Rocky Mountain operators are just now seeing natural gas production begin to decline, almost a year after they began idling drilling rigs as prices at the wellhead plummeted.
Prices may fall even farther, however, because the volume of gas in underground storage is above the average of the last few years and Colorado figures show production was still growing in this year's first and second quarters, said Alan Harrison, vice-president, Denver region/Piceance basin, Williams Exploration & Production Co., Tulsa.
The Colorado rig count peaked at 140 in the second half of 2008 and fell to a low of about 40 in recent weeks, Harrison noted at the Summer NAPE E&P Forum in Houston. Williams, lead operator in the Piceance basin in Garfield County, Colo., is running 8 rigs, down from 28.
Various operators have shut-in at least 300-350 wells in each of the Barnett, Piceance, and Fayetteville plays, said Bob Fryklund, vice-president, IHS-Cambridge Energy Research Associates.
Harrison predicted that the rate of decline will steepen fairly rapidly but didn't estimate a time frame.
In the Piceance valley area, Williams has driven costs down to a low of $1.6 million/8,000-ft well by drilling as many as 22 wells/pad, pumping frac jobs from 2 miles away from the rig, and drilling, completing, and producing gas simultaneously from the same pad, Harrison said.
It also built a 3,200-ft tunnel and a road with drillsites along switchbacks to access 60 otherwise undrillable locations in the highlands part of the basin.
Cairn India starts oil production at Rajasthan
Cairn India Ltd. started oil production at its Mangala field in Rajasthan state in part of the larger complex of Mangala, Bhagyam, and Aishwariya (MBA) fields.
Representing the largest of 25 discoveries made by the firm in the Barmer basin on Block RJ-ON-90/1, Mangala's initial output of 30,000 b/d will increase to 130,000 b/d by first-half 2010, with production rising to a peak of 175,000 b/d over the next 2 years.
According to Cairn, the MBA fields hold nearly 1 billion bbl of oil recoverable, including proved plus probable gross reserves and resources of 685 million boe with a further 300 million boe—or more—with enhanced oil recovery potential.
The firm said initial volumes of oil will be produced through the first processing train with a capacity of 30,000 b/d. Production will continue to increase until all four processing trains, with a total capacity of 205,000 b/d, are built and installed by 2011.
Cairn said it is building a 670-km heated and insulated oil pipeline from the Mangala processing terminal to the Gujarat coast. The first phase is targeted for completion by yearend.
The 24-in. export line will extend from Barmer in Rajasthan to a coastal location in Gujarat, via Viramgam. It will have an 8-in. gas line running most of its length, starting from the Raageshwari gas field on Rajasthan block.
Cairn said a minimum of 32 intermediate power feeding and heating stations will be built along the length of the oil pipeline, aimed at helping to maintain the required temperature within the pipeline.
Until the pipeline is complete, oil will be transported by heated trucks from the MPT to the Gujarat coast.
Cairn India operates and has a 70% stake in RJ-ON-90/1 block in Rajasthan, while India's Oil & Natural Gas Corp. holds 30%.
PetroChina enters oil sands joint venture
Athabasca Oil Sands Corp. (AOSC) has entered a series of joint venture agreements with PetroChina International Investment Co. Ltd.
PIIC agreed to pay $1.9 billion (Can.) to acquire 60% working interest in AOSC's MacKay River and Dover oil sands projects in northeastern Alberta. The agreements provide certain financing arrangements for AOSC.
As JV partners, AOSC and PIIC plan to use in situ methods to develop the oil sands projects.
AOSC filed applications for approval of two pilot projects within the project areas with Alberta's Energy Resources Conservation Board and intends to file a regulatory application for the first 35,000 b/d phase of the MacKay River commercial project at yearend.
Processing — Quick Takes
Mideast petrochemical complex doubles capacity
Expansion of the petrochemicals complex at Shaiba, Kuwait, about 25 miles south of Kuwait City, was completed earlier this summer, according to its engineering contractor Flour Corp., Irving, Tex. The project spanned 5 years.
Fluor began work on Olefins II in July 2004 by providing overall management consultancy and front-end engineering and design for utilities and infrastructure. Olefins II doubles capacity of the existing complex that has operated there since 1998 (OGJ, Sept. 15, 1997, p. 36).
In addition to overall management consultancy and FEED, Fluor handled FEED and engineering, procurement, and construction management for seawater cooling towers, polyethylene expansion, expansion of existing utilities and infrastructure, and new utilities and infrastructure shared with aromatics.
Olefins II also included Fluor oversight of engineering and construction of:
- An 850,000-tonne/year ethane cracker.
- A 600,000-tpy ethylene glycol unit.
- A 450,000-tpy ethyl benzene/styrene monomer unit.
- A debottleneck expansion of an additional 225,000 tpy of polyethylene capacity at the existing complex.
In 1998, Fluor completed the original complex at Shaiba. In 2005, after completion of FEED work for Olefins II, Fluor was chosen to expand the plant and build a new facility alongside the existing one while integrating the two facilities into a single complex (OGJ Online, Nov. 12, 2004).
The complex is owned by a joint venture of Dow Chemical Co., Kuwait's Petrochemical Industries Co., Bubyan Petrochemical, and Qurain Petrochemical Industries.
Shell restarts Utorogu gas plant
Shell Petroleum Development Co. has restarted its 300-MMscfd capacity gas plant in Utorogu in western Niger Delta after the vandalized Escravos-Lagos Pipeline (ELP) was repaired by the Nigerian Gas Co.
The explosions on ELP happened in early August. ELP transports gas from the western delta to Lagos for electric power generation and industrial use. It also disrupted power supplies at the Egbin power station in Lagos and elsewhere, meaning that 1,000 Mw was lost on the national grid.
According to local reports, militant group Urhobo Revolutionary Army admitted responsibility for the sabotage in protest against the lack of development in their communities.
The incident has threatened to topple the fragile amnesty brokered between the Nigerian government and militant groups, including the prolific Movement for Emancipation of the Niger Delta (MEND). This was meant to stop sabotages on oil and gas facilities and enhance oil production. But the initiative is controversial within MEND with several high-profile figures agreeing to it and other members determined to continue with their campaign after the 60 days expires on Oct. 4.
An SPDC spokesman told OGJ that the plant would be slowly ramped up to full capacity. He said, "Utorogu was shut temporarily as a precautionary measure following damage to the ELP, and was restarted on Aug. 19 when repairs were completed."
The plant is operated by SPDC on behalf of joint venture in which Shell owns 30%, Nigerian National Petroleum Corp. 55%, Total SA 10%, and Eni SPA 5%.
Shell is yet to complete repairs at its Soku facility in Rivers State, which was closed last year following attacks and bunkering of condensate (OGJ Online, Dec. 12, 2008). It supplies about 40% of the feed gas for the Nigeria LNG plant on Bonny Island.
Soku was briefly restarted for 4 days in April, but was shut again after condensate theft occurred again.
Costs spiral for Brazil-Venezuela refinery project
Brazil's Petroleo Brasileiro SA (Petrobras), already under fire from legislators, said the estimated cost of the joint-venture Abreu e Lima refinery project tentatively stands at $12 billion, or nearly three times more than the original estimate of $4.05 billion.
"It's important to clarify that the total investments are under evaluation and will be subject to approval by the executive board after a technical and economic feasibility study," Petrobras said.
The Brazilian firm said the original estimate of $4.05 billion came in 2006 during the conceptual project preparation phase, when the expected capacity of the plant was 200,000 b/d of oil. At that time, it said the cost of building a refinery was estimated at about $20,000/bbl of capacity.
Petrobras said the cost rose to $12 billion with the finalization of the basic plans for the project and the decision to increase its refining capacity by 15% to 230,000 b/d. It said the upward cost estimate fits with current construction costs for a refinery, which have risen to $50,000/bbl of capacity.
Petrobras said in addition to the increase in construction costs, the budget for the refinery was affected by the depreciation of the dollar relative to the Brazilian real.
The Petrobras statement came after complaints by opposition members of a legislative committee, which is investigating alleged irregularities at the mixed capital firm.
The legislators based their complaints on an investigation by the office of Brazil's controller-general, which allegedly has found irregularities and over-invoicing and overpricing by companies hired to build the refinery.
The Abreu e Lima refinery is under construction in Brazil's northeastern Pernambuco state by Petrobras in association with Venezuela's state-own Petroleos de Venezuela SA (PDVSA). Site work at the refinery project, which started last year, is near completion, the company added.
Earlier this month, Petrobras and PDVSA reached an agreement in principle on the final details of the joint venture, and the accord is expected to be signed in September, during bilateral trade talks between presidents of the two countries (OGJ Online, Aug. 6, 2009).
Transportation — Quick Takes
Energy Transfer completes gas line projects
Energy Transfer Partners LP (ETP) has completed construction of the 160-mile Texas Independence Pipeline (TIP), which increases its gas takeaway capacity in Texas by an incremental 1.1 bcfd. ETP also completed the Rulison expansion project in Colorado.
The 42-in. OD TIP system will transport gas from Waha, the Bossier sands, and Barnett shale in east and north central Texas to southeast Texas. Originating just west of Maypearl, Tex., and ending near Henderson, Tex., the TIP system connects ETP's existing Central and North Texas infrastructure to its East Texas pipeline network. With the addition of compression, the project can be expanded to transport gas volumes in excess of 1.75 bcfd.
Completion of the TIP system follows the Aug. 1 start of operations on the Midcontinent Express Pipeline (MEP), between Delhi, La., and Butler, Ala. ETP is a partner in MEP with Kinder Morgan Energy Partners LP (OGJ, Aug. 10, 2009, Newsletter).
The Rulison expansion project includes the 10-mile, 24-in. OD Rulison pipeline and the Holmes Mesa compressor station in Garfield County, Colo.
These projects are designed to increase the capacity of ETP's South Parachute-Rifle pipeline system. The project will also create an outlet for producers to access the Meeker processing plant at the White River hub.
The Rulison line will initially add more than 70 MMcfd of capacity, with the ability to expand to more than 200 MMcfd. The Holmes Mesa compressor station has more than 9,000 hp of compression.
Tesoro starts flow through Panama pipeline
Tesoro Corp. announced shipment of the first barrels of oil through the reversed 81-mile Petroterminal de Panama Trans-Panamanian Pipeline from the Atlantic side of the isthmus to the Pacific. The reversal establishes a new conduit for the flow of oil from the Atlantic Basin to the Pacific and will enable Tesoro to source a broader range of crude oils to supply its Pacific Rim refining system, Tesoro said.
The first oil shipped through the pipeline was Castilla blend crude sourced from Colombia, which Tesoro will process at its refineries in California.
Very large crude carriers with 2 million bbl of capacity will be able to transport West African and other crudes to the port of Chiriqui Grande, Bocas del Toro, on the Caribbean for the journey across the isthmus of Panama.
Crude will be piped to the port of Charco Azul on the Pacific Coast where it will be received by tankers and shipped to US West Coast refineries.
BP Products North America signed an agreement with PTP to ship oil to its US West Coast refineries through the reversed Trans-Panama Pipeline in May 2008 (OGJ Online, May 28, 2008).
UK's Dragon LNG begins operations
The UK's 4.4 million-tonne/year Dragon LNG terminal at Milford Haven, South Wales, has recently completed commissioning and begun commercial operations (OGJ Online, July 2, 2009).
Commissioning formally began on July 14 with arrival of BG Group LNG's the 145,000-cu m carrier Methane Lydon Volney. BG Group holds a 50% interest in the terminal with Petronas (30%) and 4Gas (20%).
BG Group (50%) and Petronas (50%) also have agreements governing capacity rights for a 20-year term, allowing them each 2.2 million tpy of throughput.
Licenses push Gorgon LNG towards reality
Chevron Corp.'s Gorgon project, including a planned three-train, 15 million-tonne/year LNG plant, took another step to realization Sept. 1 when Australia's resources and energy minister and Western Australia's state petroleum minister revealed they had offered to the Gorgon partnership five production licenses to cover Io-Jansz and Gorgon gas fields that will back stop the project.
Partners for the $42 billion project are Chevron 50%, ExxonMobil Corp. 25%, and Royal Dutch Shell PLC 25%.
The offshore gas fields that are the subject of the licenses will be developed via subsea wells and two pipelines bringing gas to Barrow Island where three LNG trains will each produce 5 million tpy.
There will also be a 300-terajoule/day domestic gas plant feeding into a pipeline to the mainland and a carbon dioxide sequestration plant that can store in deep formations beneath the island the high levels of CO2 from Gorgon fields (OGJ, July 20, 2009, p. 10).
Reports have been circulating for some weeks that Chevron expects to make a final investment decision soon.
