General Interest — Quick Takes
Chevron announces $21.6 billion capital budget
Chevron Corp. announced a $21.6 billion capital and exploratory spending program for 2010, down 5% from projected 2009 spending.
Included in the 2010 budget are $1.6 billion of expenditures by affiliates, which do not require cash outlays by Chevron's consolidated companies. Dave O'Reilly, chairman and chief executive officer, said 80% of the 2010 spending program is for upstream exploration and production projects worldwide. Another 16% is earmarked for the company's downstream businesses that manufacture, transport, and sell gasoline, diesel fuel, and other refined products.
"Much of our 2010 spending continues to be on large, multiyear projects consistent with our upstream growth strategies and on improving operating efficiency and reliability," O'Reilly said.
A total $17.3 billion is budgeted for upstream operations including $4.1 billion US and the rest international. Downstream will total $3.4 billion, including $1.6 billion US and $1.8 billion international. Chemicals, technology, power generation, and other corporate activities are budgeted at $900 million.
Major capital projects include development of the Gorgon natural gas project in Western Australia and opportunities in the deepwater US Gulf of Mexico, offshore western Africa, and the Gulf of Thailand. Funding is also planned for focused appraisal in core hydrocarbon basins.
Downstream outlays will include projects in the company's refineries in Mississippi and California. The company's 50%-owned GS Caltex affiliate also is to continue upgrading of its Yeosu refining complex in South Korea. In support of projects to commercialize the company's large natural gas resource base, downstream expenditures will be made in 2010 on gas-to-liquids manufacturing facilities.
Hess sets spending at $3.9 billion for 2010
Hess Corp. has budgeted $3.9 billion in capital and exploratory spending for 2010, $700 million more than it budgeted for 2009.
In 2010 it plans to spend $2.4 billion for production, $600 million for development, and $850 million for exploration.
Key targets of the production expending include the Bakken shale in North Dakota, where Hess plans to increase its rig count to eight from three and to expand facilities; drilling at the Okume complex off Equatorial Guinea; and drilling in deepwater Shenzi oil and gas field in the Gulf of Mexico, Beryl oil field off the UK, and Valhall oil field off Norway.
Development spending mentioned by Hess includes Valhall redevelopment, work on the oil rim of Ujung Pahgkah gas field off Indonesia, and Pony oil field in the Gulf of Mexico.
Hess plans to fund five exploratory wells on Permit WA-390-P and eight on Permit WA-404-P on the North West Shelf off Australia and one exploratory well on BM-S-22 in the Santos basin off Brazil. Other exploratory spending will include projects in the deepwater Gulf of Mexico, Ghana, and Indonesia.
Husky Energy unveils $3.1 billion budget for 2010
Husky Energy Inc., Calgary, has set a capital budget of $3.1 billion for 2010, up 20% from 2009 and focused on areas with the highest potential returns, particularly Western Canada heavy oil and oil sands, Eastern Canada offshore developments, and Southeast Asia developments.
"The company is poised to take advantage of the forecast economic cycle and to pursue business growth," said John C.S. Lau, president and chief executive officer.
Capital investments allocated in 2010 will enable Husky to position its medium and long-term growth while maintaining Canadian upstream production, officials said. The increase in annual oil production is expected to offset the reduction in natural gas production due to low gas prices. Husky is ready to increase gas tie-ins and production if commodity prices strengthen.
Meanwhile, the North Amethyst subsea tie-back work is complete, and drilling of development wells will be a major focus in 2010. Production from North Amethyst is expected in the first quarter and will ramp up during the year as new wells are tied-in.
Engineering and construction contracts will be placed to advance the Liwan gas project on Block 29/26 in the South China Sea, with project sanction expected in early 2010. The West Hercules deepwater rig will drill 6-8 exploration, delineation, and development wells during 2010. The recently discovered LiuHua gas field will be developed in conjunction with Liwan gas field, realizing synergies by sharing development facilities.
Husky holds a significant land position in Western Canada. The company's capital program is focused on growth of the upstream production through the use and application of enhanced oil recovery technology. In 2010, Husky plans to increase capital spending by over 65% to $1.2 billion focused on its heavy oil properties, EOR projects, and unconventional gas holdings.
Significant progress on the Sunrise Oil Sands Project has been made, officials said. A review of the project achieved material reductions in capital costs and improved project efficiencies. Front-end engineering and design work will be completed in the first quarter, targeting first production in 2014.
Midstream, Husky will spend $170 million largely on plant maintenance, pipelines, infrastructure, and related operations. The Lloydminster upgrader is planned to have a 45-day maintenance turnaround in the third quarter.
Capital expenditure for downstream is forecast at $465 million, focusing on engineering and maintenance work at the Lima refinery and the BP-Husky refinery in Ohio. Continuous improvement and maintenance work are planned for the Canadian ethanol, refining, and retail facilities in view of acquisition of downstream assets.
Exploration & Development — Quick Takes
Shell, CNPC groups win Iraqi oil deals
The Iraqi oil ministry awarded service contracts for development of giant Majnoon and Halfaya oil fields in the first of 2 days of bidding by 45 companies.
Royal Dutch Shell PLC and Petronas won the contract for Majnoon field in southern Iraq.
The combine—Shell 60% and Petronas 40%—bid plateau production of 1.8 million b/d of oil and a fee of $1.39/bbl of increased production. The field now produces about 45,000 b/d.
The Iraqi government retains 25% participating interests in all licenses.
In 2003, former Iraqi Oil Minister Issam Al-Chalabi estimated original oil in place for Majnoon at 38 billion bbl and original reserves at 12 billion bbl (OGJ, Mar. 24, 2003, p. 42). The field is north of Basra near the Iranian border.
The contract for Halfaya field, between Majnoon and the city of Amara, went to a consortium led by China National Petroleum Corp. bidding plateau production of 535,000 b/d and a fee of $1.40/bbl. Current production is 3,000 b/d.
Combine interests are CNPC 50% and Total SA and Petronas, 25% each.
For Halfaya, Al-Chalabi estimated original oil in place of 16 billion bbl and original reserves of 4.6 billion bbl.
Six fields drew no bids during the first day, possibly due to insecurity or proximity to residential areas.
Fifteen fields were open for bidding.
New Brunswick Frederick Brook well is discovery
Corridor Resources Inc., Halifax, NS, pronounced its Green Road well in New Brunswick, Canada, as a new field discovery after it tested gas from two shaly intervals.
The Green Road G-41 well, 4 km north of Elgin, NB, stabilized at 430 Mscfd of gas at 147 psi final flowing wellhead pressure after an 83-hr flow period from a black shale at 2,000-2,050 m.
Final stabilized rate from a silty, sandy shale interval at 1,850-1,900 m was 3 MMscfd at a final flowing wellhead pressure of 699 psi. That zone produced 42.4 MMscf of gas in 184-hr at a peak rate of 11.7 MMscfd.
Both zones had been fractured with propane at the vertical well (OGJ Online, Nov. 25, 2009).
The Green Road well has been shut in as a future producer, awaiting further exploration and development in the area and a potential pipeline connection to Corridor's McCully gas plant located 20 km west.
Apache Canada Ltd. signed a farmout and option agreement with Corridor Resources to pursue gas in Frederick Brook shale in southern New Brunswick (OGJ Online, Dec. 8, 2009).
Chevron-led group makes gas find off W. Australia
A group led by Chevron Australia has made another natural gas find in its exploration permit WA-374-P off Western Australia.
The company reported that its Satyr-1 wildcat, drilled in 1,070 m of water, intersected 130 m of net gas pay.
The discovery, which is yet to be tested, follows that of the group's Achilles-1 find in October in the same permit that intersected a 100-m net gas pay zone in the Triassic-age Mungaroo sandstone reservoir target.
Both finds are south of Io-Jansz field and west of Gorgon field and are expected to provide additional gas supplies to underpin the $43 billion (Aus.) Gorgon domestic gas and LNG project.
Satyr-1 was drilled with the Ensco 7500 semisubmersible rig. It is part of a 10-well campaign being carried out by the group in Australia this year.
Chevron has a 50% interest in the permit, which lies 160 km northwest of Onslow in the Greater Gorgon Area. ExxonMobil Corp. and Royal Dutch Shell PLC each have 25%.
Drilling & Production— Quick Takes
Range sees 200 MMcfd from Marcellus by 2010
Range Resources Corp., Fort Worth, one of the top operators in the Devonian Marcellus shale gas play, said it expects to end 2010 at a net 180-200 MMcfd of gas equivalent from the formation and believes drilling so far has derisked 390,000 acres in southwestern Pennsylvania.
The operator also said its net production has reached a net 100 MMcfd of gas equivalent from the formation and forecast that to rise to 360-400 MMcfd of gas equivalent by yearend 2011. The current output figure is a fourfold increase since late 2008.
Range is ending 2009 with 11 horizontal and vertical rigs working compared with 4 rigs last January. The count will climb to 24 rigs by the end of 2011. Production rates are rising and costs are falling, the company said.
The company also said it has drilled two horizontal wells in Lycoming County, northeastern Pennsylvania, one of which is in completion.
Range also is testing other shale formations above and below the Marcellus.
John Pinkerton, chairman and chief executive officer, said, "All of us at Range are proud to have pioneered the Marcellus shale and believe it is a shining example of the private sector working together with public agencies to create a long-lasting stimulus. Importantly, clean-burning natural gas produced in the US can reduce our dependence on foreign oil, create jobs, strengthen our economy and dramatically reduce carbon emissions."
Statoil tests liner drilling off Norway
Statoil ASA recently completed a test of steerable drilling liner (SDL) technology from the Brage platform and expects that after a planned test from one of the Statfjord platforms in January, the technology will be ready for use in other fields. It previously had tested extensively the technology on land.
The technology involves drilling with an attached liner directly on the steerable drillstring to simplify operations in unstable formations and thereby save time and cost, Statoil said.
The technology eliminates the need to stop drilling while pulling a drillstring from a well to allow for the running and setting of a liner to prevent borehole collapse.
Statoil said it developed the technology in-house in collaboration with equipment supplier Baker Hughes Inc. to overcome challenges in drilling zones with lower pressure and difficult shale-coal layers, as well as formations with varying flow and pressure regimes.
The Brage platform is an integrated accommodation, processing, and drilling facility on a steel jacket set in 140 m of water. Production to the platform started in 1993 from wells drilled in Blocks 30/6, 31/4, and 31/7 off Norway.
Statfjord field, on Norway's Blocks 33/12 and 33/9 and on the UK's Block 211/25, produces to three integrated facilities on concrete gravity base structures. Water depth in the area is 150 m. First production from Statfjord started in 1979.
Oyo field production starts off Nigeria
Oyo oil field has started production from two subsea wells in 400 m of water about 75 km off Nigeria.
Italy's Eni SPA, whose affiliate Nigerian Agip Exploration Ltd. holds a 40% interest in the production-sharing contract and is the operator, said initial production capacity is 25,000 b/d.
The field produces through the Armada Perdana floating production, storage, and offloading vessel, which has treatment capacity of 40,000 b/d of liquids plus gas treatment and reinjection facilities. The FPSO can store as much as 1 million bbl of crude.
Associated gas is to be reinjected into the reservoir by a third well. The development plan also includes a water-injection well.
Other interests in the field are Allied Energy PLC 57.5% and CAMAC Energy Holdings Ltd. 2.5%.
CAMAC last month signed an agreement to sell its Oyo interest to Pacific Asia Petroleum Inc. in exchange for 62.74% of the common shares of Pacific Asia and $38.84 million cash.
Israel utility signs to buy Tamar field gas
Dalia Power Energies, a private power company in Israel, has signed a letter of intent to buy natural gas from the Noble Energy Inc. group's Tamar gas field in the Mediterranean off Israel.
Dalia Power has a license to build a gas-fired power plant in Israel with operations planned to begin 2013.
Noble Energy and its partners will deliver 200 bcf to Dalia Power under a 17-year supply agreement in exchange for at least $1 billion in total revenue. Sales volumes may be hiked to 700 bcf depending upon the final size of the power plant and extent of operations.
The Noble Energy group is continuing discussions with other customers regarding the supply of natural gas from Tamar and plans to begin sales in 2012.
Noble Energy operates Tamar, in the Matan license off Israel, with a 36% working interest (see map, OGJ, Feb. 2, 2009, p. 39). The discovery well exposed a resource of 5 tcf of gas in formations above 16,000 ft in 5,500 ft of water 55 miles off Haifa.
Other interest owners are Isramco Negev 2 with 28.75%, Delek Drilling 15.625%, Avner Oil Exploration 15.625%, and Dor Gas Exploration 4%. ✦
Processing— Quick Takes
Husky agrees to acquire Suncor outlets
Husky Energy Inc., Calgary, entered an agreement with Suncor Energy Inc. and Suncor Energy Products Inc. to purchase 98 retail gasoline outlets in the competitive Southern Ontario market, subject to approval by the Canadian Commissioner of Competition.
Suncor agreed with the commissioner to divest the retail outlets in July as part of its merger with Petro-Canada. Successful completion of the deal would increase to 571 Husky's total network of Canadian retail outlets, establishing its position as one of the leading gas retailers in the country. Terms of the acquisition were not revealed.
"These facilities are in proximity to our US refining assets, and the downstream integration grows our presence in the highly urbanized and densely populated Ontario market from 30 stations to 128," said John C.S. Lau, Husky Energy's president and chief executive. It also strengthens the company's position as one of Canada's largest fully integrated energy companies.
Husky operates a heavy oil upgrader and asphalt refinery in Saskatchewan and Alberta, a refinery in Prince George, BC, and US-based refineries in Toledo and Lima, Ohio. It also is Western Canada's largest producer of ethanol.
Decision due for Total's Dunkirk refinery
The future is in question for Total SA's 137,000 b/d Dunkirk refinery, also called the Flanders refinery, in northern France.
Shut down since mid-September because of a product surplus in France, the refinery was to have been reopened 3 months later when its inventories had been drawn down if the market strengthened, Total spokesman Michael Crochet-Voure told OGJ.
With French refining capacity still underutilized, the refinery has now come under review. A decision must be made before a planned turnaround in March. Total's options are to sell, shut down, transform, or mothball the refinery.
Crochet-Voure said no decision has been made. The facility's 370 workers are still on the site.
Caltex Australia to close lube plant at Kurnell
Citing global refinery margins "remaining under pressure" in this year's second half from depressed demand and "expected growth in global surplus refinery capacity," Caltex Australia announced Dec. 9 it will close its 3,300 b/d lube plant at Kurnell in Sydney.
The closing is part of a "major cost efficiency drive" in which the company will recognize "significant items totaling approximately $170 million (before tax)." The company expects a savings of $93 million (Aus) "for asset impairment and redundancies relating to the planned closure."
The plant, said the company, is not "viable" because it manufactures "outmoded lubricant products and faces declining feedstock sources." The announcement did not set a date for the closure, citing "further detailed work to be done."
Transportation — Quick Takes
Turkmenistan-China gas line to be commissioned
Turkmen President Gurbanguly Berdimuhamedow said his country plans to commission the newly constructed Turkmenistan-China natural gas pipeline on Dec. 14 to coincide with a state visit by Chinese President Hu Jintao.
Berdimuhamedow said the line will supply China with 40 billion cu m/year of gas for 30 years.
According to China's vice-foreign minister Wang Guangya, the pipeline will transport 30 billion cu m of gas more than 1,800 km from Turkmenistan via neighboring Uzbekistan and Kazakhstan to China's Xinjiang Uyghur Autonomous Region.
"Such a project is a model of mutually beneficial cooperation between the four states, and displays our desire to bolster economic cooperation and realize common development," Wang said.
"The construction started in July 2008 and one of the two lines of the project will be completed in mid-December this year," said Wang ahead of Hu's Central Asia visit, which will begin in Kazakhstan on Dec. 12, followed by his stay in Turkmenistan on Dec. 13-14.
Earlier this month, Russian Prime Minister Vladimir Putin said the new Turkmen-Chinese gas line would not endanger energy cooperation between his country and China.
"We are aware of the Chinese gas needs and have close contact with our Chinese colleagues. We also offer to expand cooperation with them. We do not think that the prospective gas pipeline from Turkmenistan to China will damage our plans," the Russian leader said (OGJ Online, Dec. 7, 2009).
Export pipeline routes considered for Uganda
Uganda's government, concerned by delays over a proposed oil export pipeline through neighboring Kenya, is considering construction of an oil pipeline to Tanzania's Port of Dar es Salaam.
However, Ben Twado, Uganda's commissioner for petroleum supplies, said it is still too early to discuss the matter in detail.
The Ugandan and Kenyan governments have been negotiating extending and upgrading the pipeline that transports oil northward in Kenya from the Port of Mombassa to Eldoret. Uganda wants to reverse the flow of the Mombassa-Eldoret line so crude can be transported southward, but Kenya is said to oppose redesigning the pipeline.
Tamoil East Africa, a unit of the Libyan state-owned oil company Tamoil Holdings, was contracted last year to extend the pipeline 351 km from Eldoret to Kampala. However, work on the proposed extension—due to begin in April and last 15 months—has not yet started.
BMI analysts said Tullow Oil PLC and Heritage Oil PLC favor construction of a new oil export pipeline to Mombasa and have discussed possible funding with financial investors.
Eni SPA, which may acquire a share in the licenses from Heritage Oil, proposed constructing a 100,000 b/d refinery in Uganda that would be connected to a new export pipeline to Mombasa. "This would allow the government to maximize its revenues by keeping all of the refining operations domestically, while letting producers sell most of Lake Albert's oil internationally at market prices," BMI said.
Eni's purchase of a 50% interest in Uganda's Blocks 1 and 3A from Heritage Oil for $1.5 billion is expected to be completed in the first quarter. Eni said the blocks in the Lake Albert basin have resources for more than 1 billion boe and that 700 million bbl have already been discovered (OGJ Online, Nov. 24, 2009).
"We're hoping that within 2 years they should be able to start production," Ugnada's energy minister Hilary Onek told Reuters. Uganda wants to build a refinery with 100,000-200,000 b/d capacity to process the crude.
"Our policy is to refine domestically all oil produced in Uganda. However, depending really on the production, some excess of crude oil may be exported," Onek said.
Nippon to lease domestic oil tanks to ADNOC
Nippon Oil Corp. has reached a final agreement with Abu Dhabi National Oil Co. (ADNOC) for the UAE firm to store oil in an effort to bolster Japan's national reserves.
Under the agreement, ADNOC will store 3.9 million bbl of crude for 3 years starting this month at a reserve base in Kagoshima Prefecture in southern Japan.
The basic agreement, which will allow storage equal to a day's consumption for Japan, initially was announced in June and is expected to help improve the Asian nation's energy security.
At the time, Japan's Ministry of Economy, Trade, and Industry said the agreement also would give Japan a preferential right to purchase the stored oil reserves there in times of emergency.
The scheme will also allow Abu Dhabi to sell its oil in other East Asian countries, such as South Korea and Taiwan, by using the Japanese base as a distribution terminal. According to METI, Abu Dhabi supplies nearly 40% of Japan's oil imports.
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