GENERAL INTEREST — Quick Takes
Iran approves Revolutionary Guard as oil minister
Iran's parliament has approved the appointment of Revolutionary Guards Brig. Gen. Rostam Qasemi as minister of oil, marking a major victory for hardliners in asserting control over the country's most important revenue sector.
Qasemi, approved by a vote of 216 to 22 with 7 abstentions, told lawmakers before the vote that he has "never been interested in politics since I started working." He said he does not consider the oil ministry a place for political affairs.
"Hundreds of construction projects have been carried out by Khatam headquarters," said Qasemi, who heads Khatam al-Anbiya, already the most powerful economic wing of the Revolutionary Guards.
"We improved the quality of projects to an international standard," Qasemi told lawmakers. "We were able to replace Shell and Total after they sanctioned us."
Qasemi replaces Masoud Mirkazemi, who was fired in mid-May when Iran's President Mahmoud Ahmadinejad sought to combine the oil ministry with the energy ministry, an idea that was eventually rejected by parliament.
Qasemi also won out over Mohammad Aliabadi, who was appointed caretaker oil minister by Ahmadinejad just in time to attend the June 8 meeting of the Organization of the Petroleum Exporting Countries.
Judge dismisses Sierra Club's oil sands lawsuit
A federal district court dismissed a lawsuit by the Sierra Club and other environmental organizations aimed at preventing the US Department of Defense from buying fuels made from Canadian bitumen and heavy oil.
The judge said plaintiffs had legal standing as injured parties based on the effects of climate change but ruled they didn't show harm from pipeline movements or refining of crude from Canadian oil sands or from DOD purchases of related products.
The groups said in their complaint that the Defense Logistics Agency violated Section 526 of the 2007 Energy Independence and Security Act, which bars federal agencies from buying fuels with greenhouse gas life cycle impacts greater than those of conventional fuels.
Industry associations applauded the decision.
Calling it "the right result for America's economy and energy security," the American Petroleum Institute said, "Ultimately, the plaintiffs want to shut off secure supplies of energy, not just to the military but to all Americans."
National Petrochemical and Refiners Association Pres. Charles T. Drevna said the decision strengthens US economic and national security by securing DOD's ability to benefit from a reliable US neighbor's energy supply. "Oil from Canadian oil sands is being used in an environmentally sound manner by America's fuel and petrochemical manufacturers to create vital products, jobs for American workers, and a stronger economy," he said.
The US Chamber of Commerce, which intervened in the case in September with API and NPRA, also supported the decision. "This case simply does not belong in our courts," said Robin Conrad, executive vice-president of the National Chamber Litigation Center, the group's public policy law firm. Conrad called the lawsuit "another effort to regulate greenhouse gas emissions through litigation rather than legislation."
Karen A. Harbert, president of the chamber's Institute for 21st Century Energy, called the ruling a victory for US industries that produce, process, transport, or rely on oil derived from Canadian oil sands and for consumers. "At this time of high energy prices and economic hardships, the last thing we should do is restrict the use of a stable, reliable fuel source which would harm our energy security and cost us jobs," she said.
A Sierra Club official told OGJ the organization was disappointed with the ruling, although it was a procedural loss.
Kate Colarulli, deputy director of the group's Beyond Oil campaign, said that while bills have been introduced in Congress to repeal EISA Section 526, DOD has argued against the proposals. "Even though the judge ruled against us, this is a law both DOD and the Sierra Club feel is important to our national and environmental security," Colarulli said.
India's gas use could displace 160,000 b/d of naphtha
India's natural gas use has grown sharply due to a surge in domestic production and stands to displace naphtha demand by about a third, according to analysts.
Boston-based consultant ESAI said that a 50% increase in gas production in India has boosted the country's gas consumption. While there are impediments to supply growth, over the next 5 years increased access to gas will allow consumption to rise to a projected 85 billion cu m/year by 2015. ESAI projects that India's annual gas production will grow to 65 bcm by 2015 from 30 bcm of net output in 2001. Current net output including gas flaring is 50 bcm/year, ESAI estimated.
As the use of gas increases, ESAI expects it to displace about 100,000 b/d of naphtha demand in India, a high energy demand-growth country with barriers to consumption growth.
ESAI said that for supply and consumption to expand more rapidly, India needs to shift to market pricing to encourage domestic output, extend pipeline infrastructure to the southern part of the sub-continent, and build more LNG terminals. Progress is being made in all three areas, but it is unrealistic to expect annual demand to increase to more than 85 bcm by 2015, the consultancy said.
"The threat to naphtha consumption is in the fertilizer and power industries," according to ESAI's Vivek Mathur, head of petrochemical-market coverage for ESAI.
Though the increase in gas will have the greatest impact on coal use, it also will compete with petroleum-based fuels in these two markets. In the past two years there has already been a decline in naphtha use for auxiliary power generation, and ESAI estimates that 15% of India's nitrogenous fertilizer production is from naphtha.
Mathur said that the government is strongly encouraging the complete switch from naphtha to gas in the production of fertilizer, and his analysis indicates that gas will displace roughly 75,000-80,000 b/d of naphtha for this use.
Exploration & Development — Quick Takes
Marathon announces Earb South find in Norway
Marathon Oil Norge AS discovered three hydrocarbon-bearing Jurassic sandstone sequences with poor reservoir quality at the 25/10-11 wildcat on the Earb South prospect in PL505 in the North Sea off Norway.
The uppermost oil-bearing interval comprised a 6-8 m thick sand sequence immediately below the Draupne shale. Hydrocarbons were also sampled from an underlying 285 m thick Upper Jurassic sequence. A 150 m thick interval from this sequence was production tested and flowed oil and gas to surface but the flow was not sustainable.
Hydrocarbons were also encountered in a 20-30 m thick Middle/Upper Jurassic sequence above TD of 4,534 m in Jurassic. Extensive data acquisition was performed and will form the basis for further evaluation of the area's prospectivity.
The well was drilled about 8 km southwest of the small 25/7-2 discovery and 40 km south of Heimdal field.
Lundin Petroleum AB, Stockholm, which has 30% interest in the license, said the tested reservoir is tight and further work is needed to discern whether the discovery can be commercialized. Marathon is operator with 35% interest, VNG Norway AS has 20%, and Maersk Oil Norway AS has 15%.
LLOG wraps up gulf deepwater developments
LLOG Exploration Co. LLC, Covington, La., is wrapping up a multiwell Gulf of Mexico exploration and development program that has allowed it to run one deepwater rig continuously since the Macondo incident, and it has won approval of its first plan of exploration since Macondo.
The Mandy development in 2,465 ft of water on Mississippi Canyon Block 199 will consist of three wells tied back to the Matterhorn TLP production system in Mississippi Canyon 243. The wells have been drilled, completed, and flow tested in the Pliocene, and Matterhorn modification is under way. Mandy is expected to produce at an initial 15,000 b/d of oil and 12 MMcfd of gas starting in the fourth quarter of 2011.
Gross recovery at Mandy is expected to be 10-30 million boe. LLOG has a 50% working interest in two of the wells, with Apache Deepwater LLC owning the other 50%, and LLOG has 100% working interest in the third well. LLOG is operator of the Mandy development.
The Anduin Pliocene discovery in 2,365 ft of water on Mississippi Canyon 754 has been placed on production as a single-well subsea tieback to the Innovator FPS in Mississippi Canyon 711. LLOG's working interest is 25%.
The Condor Pleistocene Hyal B discovery in 2,949 ft of water on Green Canyon 448 was placed on production in June as a single-well subsea tieback to the Marquette facility in Green Canyon 52. The well has been flowing at a gross 3,000 b/d and 4 MMcfd. LLOG has a 25% working interest.
LLOG's Goose Pliocene development in Mississippi Canyon 751 will be a single-well subsea tieback to LLOG's production manifold at Mississippi Canyon 707. LLOG just finished completing the well as a smart selective in two zones. The 12,800-ft zone flow tested 5,300 b/d and 12 MMcfd. The 12,600-ft zone flow tested 2,700 b/d and 16 MMcfd.
Projected start-up for Goose is the first quarter of 2012. LLOG's working interest is 100%.
LLOG has received approval of the exploration plan for the Son of Bluto II prospect in Mississippi Canyon 387 and 431, which will return the company to its primary focus of exploration.
Lundin submits Brynhild development plan
A unit of Lundin Petroleum AB submitted a development and operation plan for the Brynhild oil field (formerly called Nemo) to the Norwegian Ministry of Petroleum and Energy.
The Brynhild field, discovered in 1992, is in about 80 m of water on the Norwegian North Sea production license 148, Block 7/7, adjacent to the Norwegian-UK border.
Lundin expects first production in late 2013.
The plan includes three wells and pipelines-umbilical tied back to the existing Shell operated Pierce field floating production, storage, and offloading vessel in the UK North Sea.
Lundin estimates that Brynhild holds 22 million bbl of proved and probable reserves and forecasts a peak production of about 12,000 b/d.
Operator Lundin Norway AS has a 50% working interest. Partners are Talisman Energy Norge AS 30% and Noreco ASA 20%.
Drilling & Production — Quick Takes
Statoil installs Gudrun jacket in North Sea
Statoil has installed the 7,400 tonne, 16 well-slot steel jacket for the Gudrun development in the Norwegian North Sea.
Gudrun field, discovered with a well (15/3-1 S) drilled in 1974-75 lies in 110 m of water about 55 km north of Sleipner (OGJ Online, June 23, 2011).
Jacket installation began on July 24 and was completed on Aug. 2. The Saipem 7000 crane ship lifted the jacket into place.
Drilling is scheduled to start in the fourth quarter, and Gudrun is expected to come on stream in 2014, Statoil said.
Operator Statoil holds 75% interest in the field with GDF Suez E&P Norge AS holding 25%.
Floating production orders set record pace
A record pace in the number of floating production and storage orders was noted in a recent study by International Maritime Associates Inc., Washington DC.
The study found that the industry has placed a record 14 orders for floating units since March. Currently 256 floating systems are in service or available worldwide, according to the study.
Of these, 62% are floating production, storage, offloading (FPSO) vessels; 17% are production semisubmersibles; 9% are tension leg platforms; 7% are production spars; and the remaining 5% are production barges and floating storage and regasification units (FSRUs).
Eleven of the 256 units are not on a field and are available for reuse.
The 14 orders since March include the world's first floating LNG vessel. The $3 billion Prelude FLNG is the most expensive floating production unit ordered to date, the study noted.
Among the other orders, 9 are FPSOs (1 purpose-built unit, 6 units converted from trading tanker hulls, and 2 modification redeployments), 2 production spars, and 2 purpose-built FSRUs. The 14 construction contracts for these units exceed $11 billion, the study said.
Current order backlog includes 53 production floaters, a net increase of 6 units since March. This extends the buildup in backlog that began in second-half 2009, the study noted.
Of the 53 units, 28 have purpose built hulls and 25 have converted tanker hulls. Also 20 are orders from leasing operators, while 33 are orders from field operators.
The study identified 196 projects in the bidding, design, or planning stage that potentially will require floating production or storage. These projects are declared discoveries or planned developments where floating production or storage is an option.
Brazil has the most with 50 potential floater projects in the planning cycle. Next in line is Southeast Asia with 37, followed by West Africa with 36, Northern Europe with 22, Gulf of Mexico with 17, and Australia with 11.
Of the 196 planned projects, 53 are in the bidding or final design stage. Major hardware contracts for these 53 projects are likely to be let within the next 12-18 months, the study noted.
Another 143 floater projects are in the planning or study phase, and major hardware contracts for these are likely to be let in 2013-18, according to the study.
BLM seeks comments on Colorado project
The US Bureau of Land Management is seeking public comments on Dejour Energy (USA) Corp.'s proposed natural gas project in northwestern Colorado.
BLM said the Denver-based subsidiary of Dejour Energy Inc. of Vancouver, BC, proposes drilling up to 68 new wells over 5 years from four new well pads on federal leases 3 miles south of Newcastle, Colo., later this year.
Activity would include construction of up to 1 mile of new access roads and 1.5 miles of gas and water pipelines, BLM said. Three of the proposed pads would be on state-owned land and one on BLM-owned land.
BLM is asking for comments in preparation for an environment assessment of the project's multi-year development plan. It will accept the comments through Aug. 28 at its Colorado River Valley field office in Silt, Colo.
PROCESSING — Quick Takes
Karbala Refinery plans refinery south of Baghdad
Iraq's ministry of oil, in an effort to boost the country's refining capacity, has signed an agreement with Karbala Refinery Corp. Ltd. for the construction of a 200,000 b/d refinery in the Karbala region.
"Karbala Refinery will be located 100 km south of Baghdad on a 6 sq km plot of land, and will be the most advanced state-of-the-art refinery with almost [a] full conversion rate and with an estimated cost of $6.5 billion," said KRC Chief Executive Officer Dean Michael.
Analyst Catherine Hunter of IHS Global Insight said the project will be aimed at meeting Iraq's domestic demand for gasoline and diesel. Numerous regional refining schemes are geared "towards both the transportation sector and, unfortunately, electricity, with gas shortfalls buoying demand for oil products in this sphere."
The Karbala project is part of Iraq's longer-term plan to construct four new refineries in an effort to add 750,000 b/d of refining capacity. The other three new refineries are to be at Nassiriya, Maysan, and Kirkuk.
Meanwhile, the US Trade & Development Agency announced its support for the continued modernization of Iraq's oil and gas sector with a $502,798 grant to the South Refineries Co for a study on the rehabilitation of Basra refinery.
The study will assess the current condition of the refinery and outline the necessary engineering, equipment supply, and construction efforts required to modernize its operation.
USTDA said the rehabilitation "will allow the country to realize greater economic benefit from its oil reserves, while supporting the Iraq Ministry of Oil's goal to reach a capacity of 12 million b/d production by 2020."
Meanwhile, China National Petroleum Corp. has started crude oil production from the Al Ahdab oil field in central Iraq.
Iraqi oil officials said output is running at a rate of 40,000 b/d and was expected to reach 60,000 b/d within days.
By yearend, Al Ahdab field, which has reserves of 1 billion bbl, is expected to produce 120,000 b/d, rising to 160,000 b/d by the end of 2012, officials said.
Essar completes purchase of UK refinery
Essar Energy PLC, Mumbai, has completed its purchase from Royal Dutch Shell of the Stanlow refinery near Ellesmere Port in Northwest England (OGJ Online, Mar. 29, 2011).
Essar reported nameplate capacity of the refinery at 296,000 b/d. It paid $175 million, less adjustments for costs, on completion of the deal and will pay a similar amount plus interest in 1 year. It also paid Shell $916 million for inventories.
The buyer described the purchase as a way to gain direct access to the UK products market and expand options for exports of fuels from its 300,000-b/d Vadinar refinery in Gujarat on India's west coast.
Expansion projects will boost Vadinar capacity to 375,000 b/d by yearend and to 405,000 b/d by September 2012.
Essar Energy also owns 50% of the 80,000-b/d Kenya Petroleum Refineries Ltd. refinery in Mombasa.
TRANSPORTATION — Quick Takes
ConocoPhillips-Origin FID on CSG-LNG project
ConocoPhillips and partner Origin Energy Ltd. made a final investment decision on Phase 1 of their proposed 2-train coalseam gas-LNG project in Queensland.
The $14 billion first phase gives the go-ahead for the development of a 4.5 million tonne/year LNG train along with infrastructure sufficient to support this and a second train in the future.
The full 2-train project will have capacity of 9 million tpy and cost $20 billion.
Origin MD Grant King said FID for the first phase provided an economically attractive project and allowed all the synergies of a 2-train project to be captured once further offtake agreements are finalized.
The LNG plant to be built on Curtis Island near Gladstone will be fed with gas from several coal seam gas fields in the Surat and Bowen basins.
Proved and probable gas reserves dedicated to the development now stand at 11,775 petajoules.
Known as Australia Pacific LNG (APLNG), the project's first train is underpinned with a binding 4.3 million tpy offtake deal with China's Sinopec. Sinopec also becomes a 15% stakeholder in the project for a consideration of $1.5 billion (Aus.). ConocoPhillips and Origin will each retain a 42.5% interest.
The JV now is in advanced discussions with other potential customers regarding offtake agreements to establish the second train.
First production from Train 1 is scheduled for 2015. Pending negotiations, it is hoped Train 2 will be online in early 2016.
Fixed price engineering, procurement, and construction contracts for the LNG facility have been awarded to Bechtel while a joint venture of McConnell Dowell Constructors and Consolidated Contractors Australia will enter a fixed-price pipeline construction contract. Nippon Steel will supply steel pipe through Metal One Corp.
Tepco may back out of Wheatstone LNG project
Tokyo Electric Power Co. (Tepco) said it may have to back out of a plan to purchase a stake in one of Chevron Corp.'s Wheatstone natural gas projects, on the same day they sealed a major gas supply deal.
Tepco signed sales and purchase agreements to buy LNG from the Wheatstone project, but the Japanese firm did not finalize another part of the deal to buy 11.25% of Wheatstone's LNG processing facility and 15% of its related gas fields.
"We are hoping to buy these stakes, but we are not sure if we can, given the worsening of our financial position," said Yukio Kani, Tepco's Fuel Department general manager.
Tepco's finances have been hard-hit since the March 11 earthquake and tsunami that crippled its Fukushima Daiichi nuclear complex. In May it reported an annual loss equivalent to $15 billion.
Chevron, along with partners Apache Corp. and Kuwait Foreign Petroleum Exploration Co., will meanwhile export 3.1 million metric tons of LNG annually for up to 20 years to Tepco from Wheatstone starting in 2017.
Financial terms of Chevron's agreement with Tepco were not disclosed.
ExxonMobil orders two Alaska tankers
ExxonMobil Corp.'s US marine affiliate SeaRiver Maritime Inc. signed a letter of intent with Aker Philadelphia Shipyard for construction of two US-flagged crude oil tankers in partnership with Samsung Heavy Industries.
The vessels will be used to transport Alaska North Slope crude oil from Prince William Sound to the US West Coast.
Project planning work is under way with construction of the 115,000 dwt double-hull tankers expected to begin by mid-2012.
SeaRiver will take delivery of the 730,000 bbl-capacity vessels in 2014. They will replace two existing double-hull tankers.
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