General Interest— Quick Takes
Anadarko outlines gulf drilling plans
Anadarko Petroleum Corp. and other oil companies are evaluating their drilling programs given a 6-month moratorium on deepwater drilling in the Gulf of Mexico following safety concerns after the runaway Macondo well and resulting oil spill.
The US government's moratorium idles 33 drilling rigs under contract to major oil companies and independents.
Sec. of the Interior Ken Salazar ordered a moratorium on drilling of new deepwater wells. Meanwhile, operators of permitted deepwater wells now being drilled are to halt drilling at the first safe stopping point and secure the well, he said.
Cobalt International Energy Inc. invoked a force majeure provision under its drilling contract with Diamond Offshore Co. for the Ocean Monarch drilling rig to drill an exploratory well on Garden Banks Block 959 (OGJ Online, June 2, 2010).
Anadarko said it might reallocate some of its 2010 drilling budget from the gulf to other areas although it provided no specifics. The independent invoked a force majeure clause in three deepwater rig contracts.
Based upon directives from the US Minerals Management Service, Anadarko plans to utilize its one remaining contracted rig in the gulf for completion and workover activities during the moratorium.
"We share everyone's desire to ensure the safety of deepwater drilling activity," said Jim Hackett, Anadarko chairman and chief executive officer. Anadarko's sales-volumes guidance remains 230-234 million boe for the full year and 57-60 million boe for the second quarter, the company said. Capital spending for the full year still is expected at about $5.3-5.6 billion.
Anadarko ceased all gulf drilling in accordance with DOI's announcement on May 27. Before that, Anadarko was conducting the following operated appraisal and completion activities:
• Lucius (Keathley Canyon Block 875)—The second of three appraisal wells encountered more than 650 net ft of oil pay in three of the primary targets. Drilling was suspended about 2,000 ft from TD with one additional target yet to test. Anadarko has 50% interest. Partners are Plains Exploration & Production, 33.33%, and Mariner Energy Inc., 16.67%.
• Callisto (Mississippi Canyon Block 875)—Anadarko completed the discovery and expects to tie the well back to the Independence Hub natural gas platform. The well is expected to begin production later this year at 40 MMcfd. Anadarko has 100% interest.
• Heidelberg (Green Canyon Block 903)—Anadarko had planned to redrill the Heidelberg appraisal well, but it had not been spudded before the initial moratorium. Anadarko moved the rig to Red Hawk for plugging and abandoning activities.
Halliburton rethinks strategy given drilling ban
Halliburton Co. executives said they might move workers and equipment in response to the 6-month moratorium on deepwater drilling in the Gulf of Mexico.
In a June 2 conference call with analysts, Halliburton executives did not say how many workers might be moved out of the gulf region in light of President Barack Obama's 6-month moratorium on drilling in more than 500 ft of water in the gulf.
Separately, representatives for service rivals Baker Hughes Inc. and Schlumberger Ltd. also said they are considering moving people and equipment to international markets given the temporary gulf moratorium on deepwater drilling.
Halliburton executives said much of their business strategy depends upon the wishes of their customers.
"We shouldn't consider the next 6 months to be a completely dead period," said Tim Probert, Halliburton's chief health, safety, and environment officer.
Probert sees potential for deepwater completions and workovers to continue during the moratorium. Meanwhile, Halliburton might move some of its drilling workers to the Eastern Hemisphere.
Probert noted, "It's not quite as easy as it sounds to move rigs," because customers wanting to do this have to get partners to agree. From a contract standpoint, contractors report that most drilling contracts provide clauses enabling rigs to be moved.
The gulf region accounted for 13% of Halliburton's North American revenue during the first quarter, said Mark McCollum, Halliburton's chief financial officer. Over the last few years, that share has consistently been in the range of 12-16%, he said.
"In the Gulf of Mexico, 65% of our current business is deepwater," McCollum said.
Probert said if the moratorium lifts on Nov. 30 as currently scheduled, he expects gulf deepwater activity would immediately increase, although he expects that it could take 12-24 months for industry to return to 50% of its previous activity level.
NOIA asks MMS to issue guidance after recissions
The National Ocean Industries Association sent a letter on June 7 to acting US Minerals Management Service Director Robert V. Abbey urging him to issue guidance in the wake of MMS's recent recissions of offshore drilling permit applications.
Recission of permits in less than 500 ft of water appears to signal a halt to drilling in shallow as well as deep water, causing extensive confusion in offshore industries, NOIA Pres. Randall B. Luthi said in the letter.
Luthi cited industry estimates that for each exploratory well idled in depths greater than 500 ft for 6 months under President Barack Obama's order, up to 1,400 jobs are at risk and lost wages could reach $10 million/month/rig and up to $330 million/month for all 33 deepwater drilling platforms.
"Add to this the canceled leases in the western gulf, Virginia, and Alaska, and the potential for long-term job loss, economic hardship, increased dependence on foreign oil, and decreased energy security, and the negative impacts become national, not just regional," said Luthi, who was MMS director from July 2007 to January 2009.
He asked Abbey to consider issuing guidance, possibly as a notice to lessees, outlining additional safety measures that US Interior Sec. Ken Salazar said will be needed so the agency can proceed with drilling permit applications or proposed exploration plans. "Such guidance should be timely, measurable, and achievable," Luthi said.
It could include identifying and prescribing the use of best practices regarding fluid displacement, casing and cementing, casing installation procedures, and testing of cement and well integrity that are in use now, he suggested.
"Increased inspections and verifications of response plans are certainly steps that would allow drilling to resume in the very near future," said Luthi. "You might also consider the establishment of a small panel of industry and government safety and well experts that could rapidly review and approve plans."
Luthi said if Abbey considers issuing a rulemaking, NOIA encourages him to provide immediate interim guidance which would allow exploration and production during the rulemaking process.
"It is certainly a time for extreme caution and enhanced awareness of safety and well integrity, and those in the business are most keenly aware that drilling is not a matter to be taken lightly," Luthi said, adding, "However, it is not a time for a lengthy and < ban or suspension on all drilling."
Exploration & Development— Quick Takes
Kosmos appraises Mahogany East off Ghana
Kosmos Energy LLC., Dallas, said its Mahogany-5 appraisal well on the West Cape Three Points block off Ghana continued the successful appraisal of Jubilee-age reservoirs.
Drilling, wireline logs, and reservoir fluid samples show the well penetrated 75 ft of net hydrocarbon-bearing oil pay in good-quality sandstone reservoirs over a 167-ft gross interval. Reservoir fluid samples indicate 28-32° gravity oil, and pressure data confirm communication with the Mahogany-4 well.
"We are confident the results of our appraisal program will lead to the submittal of a plan to the Ghanaian government for the development and production of this area," Kosmos said.
The well is in the Mahogany East area just east of the Jubilee Field Unit. The Mahogany-5, 3, 4, and 2 wells complete the company's planned appraisal of the east area.
Kosmos, operator of the West Cape Three Points Block with 30.875% interest, will continue geoscience and engineering studies and advanced preliminary development planning activities for the Mahogany East Area. It also continues geoscience and engineering studies of its Odum oil discovery.
Mahogany-5 went to 13,085 ft in 3,770 ft of water 38 miles offshore and 4½ miles southeast of the Mahogany-1 discovery well for Jubilee field.
After drilling for another operator, the rig will resume work for Kosmos in the fourth quarter of 2010 for a 9-month exploration and appraisal drilling program on the West Cape Three Points Block.
Other block interests are Anadarko Petroleum Corp. 30.875%, Tullow Oil PLC 22.896%, EO Group 3.5%, and Sabre Oil & Gas 1.854%. Ghana National Petroleum Co. has a 10% carried interest.
Firms amass Avalon, Bone Spring oil acreage
Unconventional oil plays are drawing numerous companies to amass acreage positions in the Delaware basin in New Mexico and West Texas.
Attracting exploration are the Permian Bone Spring tight limestones and sandstones and overlying Permian Avalon shale in Lea and Eddy counties generally between and south of Carlsbad and Hobbs, NM, and south into Reeves and Loving counties, Tex.
Some of the operators have taken to the lease play in an effort to shift gas-heavy portfolios towards liquids-prone plays.
Several large companies alluded to the plays in first quarter 2010 conference calls. Chesapeake Energy Corp., Oklahoma City, said it had drilled eight Avalon wells and 11 Bone Spring wells on 120,000 net acres in the two states.
Devon Energy Corp., Oklahoma City, said it holds several hundred thousand acres overall in the Delaware basin and continues to lease. And Anadarko Petroleum Corp., Houston, said it controls 170,000 net acres and was running four rigs in the Bone Spring play. Anadarko said one completion flowed at a maximum rate close to 1,200 b/d.
Concho Resources Inc., Midland, Tex., said June 8 it plans its first horizontal drilling in Avalon and Second and Third Bone Spring in this year's second half. Officials hedged questions about play specifics but said the company has an acreage position it is trying to enlarge.
Bruce Hart described the overall Bone Spring formation as being as thick as 3,500 ft at 8,000-10,000 ft in New Mexico, where 113 fields had been designated in the formation by 1995 (see map, OGJ, July 28, 1997, p. 85).
AED Oil confirms Brunei find
AED Oil Ltd., Melbourne, has confirmed the presence of hydrocarbons in its Lukut-1 wildcat well, which was drilled on onshore Block L in Brunei.
The company said that in-hole gas measurements made during wireline logging have confirmed the find across a number of intervals. Analysis of the results continues.
The well had an original target depth of 2,150 m, but was deepened to 2,230 m to assess a zone of interest between 2,130-210 m.
Lukut-1 also intersected other unpredicted zones of interest at the new total depth and these are now being evaluated with a view to deepening the well further still.
The well was planned as an evaluation of shallow-water delta front sands in the very prospective Belait formation. It is the first onshore well to be drilled in Brunei in more than 24 years.
AED has a second location, called Lempuyang-1, on the same block, which is planned as an immediate follow-up.
AED has a 50% interest and operatorship in Block L, which lies 20 km from the billion-barrel Seria oil and gas field. The recently discovered Bubut gas field is on an adjoining block.
Drilling & Production— Quick Takes
Ban on drilling cuts rig count in half
US drilling activity dropped in the week ended June 4 for the first time in 6 weeks, down 29 rotary rigs to 1,506 still working, Baker Hughes Inc. reported. That compares with 887 rigs running during the comparable week in 2009.
The offshore accounted for the bulk of the loss due to the federal moratorium against drilling in more than 500 ft of water or deeper following the Macondo blowout in the Gulf of Mexico. As a result, the rig count in federal waters dropped by 24 with 24 units still working. That includes the loss of 23 rigs in the gulf, with 23 still drilling.
Of the US rigs still working, 947 were drilling for natural gas, 20 fewer than the previous week. The number drilling for oil declined by 10 to 545. There were 14 rotary rigs unclassified. Horizontal drilling increased by 3 rigs to 798. Directional drilling was unchanged at 226 rigs.
Louisiana suffered the biggest loss, of course, down 22 rigs to 191 still working. Texas lost 10 rigs to 646. Wyoming has 34 rigs drilling, 4 fewer than the previous week. Oklahoma dropped 3 to 113. Colorado and Alaska were down 2 rigs each to 52 and 7, respectively. Pennsylvania, New Mexico, and Arkansas were unchanged with respective counts of 81, 67, and 40. California's count was up by 1 rig to 34. West Virginia increased by 3 to 22. North Dakota registered the biggest gain, up 8 to 113.
Shell completes AOSP turnaround
Shell Canada Ltd. said it has completed the maintenance turnaround of the Muskeg River mine and Scotford upgrader in Alberta.
The mine is 75 km north of Fort McMurray and the upgrader is next to Shell's Scotford refinery in Fort Saskatchewan. Capacity of the mine is 155,000 b/d of bitumen.
The mine and upgrader started operations in 2003 and are part of the Athabasca Oil Sands Project (AOSP).
Shell said the turnaround, which started in March, included replacing more than 250 valves at the upgrader, as well as replacing the surge-feed conveyor belt and installing new feed wells for the primary separation cells at the mine.
In addition, the shutdown allowed for the commissioning of a new 457-km, 42-in. Corridor pipeline between the mine and upgrader ahead of the start-up of AOSP's 100,000 b/d expansion project, scheduled to be fully online in early 2011.
AOSP owners are Shell Canada Energy 60%, Chevron Canada Ltd. 20%, and Marathon Oil Sands LP 20%.
PetroChina plans multistage fracs for Changqing
PetroChina Co. Ltd. plans to use multistage fracturing to produce the tight gas sands in its Changqing field in the Ordos basin, according to Baker Hughes Inc.
Baker Hughes said that it will supply PetroChina with 77 Frac-Point multistage openhole frac-completion systems for the horizontal wells in the field, similar to the systems successfully used last year in Sulige gas field, also in the Ordos basin.
Baker Hughes characterizes Changqing as having low permeability, low pressure, and low-yield sands that require multistage fracs to effectively produce. The company notes that it will provide Frac-Point systems for three fourths of PetroChina's 102-well horizontal drilling program.
The Frac-Point system uses short-radius, openhole packers, and frac sleeves to isolate intervals of a horizontal section and pinpoint frac placement.
The one-trip system allows the frac treatment for each section to be pumped on the same day, eliminating the expense of mobilizing and demobilizing pumping equipment, according to Baker Hughes.
The company notes the system improves overall production by providing greater control of the fracs along the entire length of the horizontal lateral.
China's Peoples Daily online reported that 2009 production from Changqing had reached 30.06 million tonnes by Dec. 19, making the field China's second largest oil-gas field after Daqing oil field.
CNOOC resumes production from Bohai Bay
CNOOC Ltd. has resumed production from Bohai Bay BZ25-1/BZ25-1 South oil field. The company had suspended production in November 2009 because of damage to the facilities caused by strong winds.
CNOOC said the field produced about 27,000 bo/d prior to the incident.
BZ25-1/BZ25-1S field, jointly developed by CNOOC and Chevron Corp., is in the southeast part of Bohai Bay about 150 km southeast of Tanggu.
Chevron notes that this field's unitization agreement was the first-ever between CNOOC and a foreign partner.
Texaco Inc., which merged into Chevron Corp. in 2001, signed the petroleum contract for Block 11/19 in Bohai Bay in April 1992 and discovered the BZ25-1 field with the Bozhong 25-1-8 discovery well, drilled in 57 ft of water to a TD of 7,134 ft in 2000 (OGJ, July 24, 2000, Newsletter).
The well cut 115 ft of net pay in Tertiary Minghuazhenat sands at 5,500-700 ft.
Following an appraisal program, the field was redesignated BZ25-1S and found to straddle the boundary between Block 11/19 and the self-financed area of CNOOC.
Operator CNOOC holds 83.8% interest in the field. Chevron holds the remaining 16.2%.
Processing — Quick Takes
Valero preparing to restart Aruba refinery
Valero Energy Corp. is moving toward restarting the 235,000-b/d refinery in Aruba that it idled in July 2009 because of poor economics.
The company said it will begin a 90-day turnaround in the next few weeks "with the aim of potentially restarting the refinery later this year unless economic conditions deteriorate."
Workers have remained on the payroll since the refinery suspended operations and while Valero considered options for the facility. "Those considerations will continue, but economic conditions have improved to the point where restarting and operating the refinery is possible," the company said. It said a recent tax settlement agreement with the Aruba government provided it "visibility" about future taxes that it needed for a decision.
Contract let in Mangalore refinery expansion
Mangalore Refinery & Petrochemicals Ltd. (MRPL) has let a contract to Technip, Paris, for work associated with an expansion of its refinery in Mangalore, India.
Technip will provide design, engineering, supply, and installation of fired heaters for crude distillation, vacuum distillation, delayed coking, and petrochemical fluid catalytic cracking units.
MRPL in February said it was expanding the nameplate capacity of the refinery, which has two hydrocrackers and two continuous catalytic reformers, to 236,000 b/d from 194,000 b/d. It said it had been operating the facility at 115-130% of capacity for 4 years.
Technip described its work as part of a third phase of expansion that would push crude capacity to 300,000 b/d. It estimated the value of its contract at €25 million.
MRPL is a subsidiary of Oil & Natural Gas Corp. Ltd., which owns 71.62% of the company.
Borouge lets Ruwais polymer unit contracts
Borouge, a joint venture of Abu Dhabi National Oil Co. and Borealis, Vienna, has let three major contracts in the expansion of its petrochemicals complex at Ruwais, Abu Dhabi.
The expansion will boost total polyolefins capacity of the complex to 4.5 million tonnes/year by the end of 2013. Linde Group has a contract for construction of a 1.5-million tpy ethane cracker, which will join a cracker of similar size and another with capacity of 600,000 tpy already in place (OGJ, July 6, 2009, Newsletter).
In the latest awards, Borouge let two engineering, procurement, and construction contracts to a JV of Technimont of Italy and Samsung Engineering of South Korea.
One of the contracts, worth $1.255 billion, covers two enhanced polyethylene and two enhanced polypropylene units based on Borealis's Borstar technology. The PE units will add 1.08 million tpy of capacity, and the PP units, 960,000 tpy. The other contract, worth $400 million, is for a 350,000-tpy low-density PE unit.
A third EPC contract, worth $935 million, went to Hyundai Engineering & Construction for utilities and offsite facilities.
Transportation — Quick Takes
EPP curtails N. Texas gas flows after rupture
Enterprise Products Partners LP has initiated service curtailments of roughly 250 MMcfd of natural gas following the June 7 rupture of its partially owned North Texas gas pipeline in rural Johnson County about 15 miles south of Godley, Tex.
EPP isolated the damaged section of pipe to stop the flow of gas and take it out of service, curtailing shipments until repairs can be completed.
EPP expects repairs to take 3-4 days following conclusion of the investigation into the incident. EPP did not have an estimate as to how long the investigation might last, but did say that they do not expect a prolonged outage as a result of the rupture.
The US National Transportation Safety Board and Texas Railroad Commission are investigating the incident. TRC investigators were on site June 7, with NTSB officials on site June 8, EPP said.
Initial reports say the rupture was caused by the pipeline being struck by a contractor working for a local electric utility. The Johnson County sheriff's department has confirmed one fatality as a result of the blast.
The North Texas line is a 36-in. OD, 395-mile segment of line extending from the Waha Hub in West Texas to the Carthage Hub in East Texas. The pipeline can transport about 800 MMcfd of gas.
Enterprise owns a 50% interest in and operates this segment of the North Texas line.
FERC approves Denali Alaska open season
The US Federal Energy Regulatory Commission approved June 7 open season plans for the proposed Denali natural gas pipeline project in Alaska.
Denali partners BP PLC and ConocoPhillips filed the plan with FERC on Apr. 7. Denali plans to start its open season July 6, and let it and a simultaneous open season overseen by Canada's National Energy Board run for at least 90 days (OGJ Online, Apr. 8, 2010).
Denali comprises a gas treatment plant on the Alaska North Slope, transmission lines from Prudhoe Bay and Point Thomson fields to the treatment plant, and a mainline crossing Alaska into Canada and terminating at Blueberry Hill, Alta. En route offtake points are also included in the plan.
The 48-in. OD mainline will ship 4.5 bcfd with 15 compressor stations, 6 in Alaska. The pipeline will extend 730 miles through Alaska and 1,020 miles through Canada before interconnecting at its terminus with pipelines to transport the gas to end markets.
TransCanada Alaska Co.'s competing Alaska Pipeline Project began its open seasons in Alaska and Canada on Apr. 30. Potential shippers have until July 30 to assess the project's open season offerings, which include an option to ship gas from the ANS to Valdez for conversion to LNG in a facility to be built by others and delivery to North American and international markets (OGJ Online, Apr. 30, 2010).
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