GENERAL INTEREST — Quick Takes
Outlook remains 'fragile' in UK upstream industry
The outlook of the UK upstream oil and gas industry remained fragile in this year's second quarter, increasing modestly to 54 points from 51, according to Oil & Gas UK's latest business confidence index.
"Across the operator community, confidence increased slightly from 46 to 48 points but this score still represents a negative outlook," said Ken Cruickshank, OGUK's supply chain manager.
OGUK's index measures a number of economic indicators, including changes in business confidence, activity levels, business revenue, investment, and employment.
The index gauges overall industry confidence on a 100-point scale, with a higher rating (above 50) indicating a more positive outlook and a lower rating (below 50) representing a more negative viewpoint.
"Contractors are slightly more confident, with their outlook rising from 54 in the first quarter to 56 in the second," said Cruickshank, adding that confidence took a hit at the end of the first quarter by the unexpected tax increase announced in the UK government's 2011 budget.
"While it appears that some companies may feel reassured by the Treasury's willingness to engage on ways to mitigate the negative impact of the tax increase on investment, the confidence of many independent operators in particular continued to decline in the second quarter," Cruickshank said.
The second quarter index illustrates that contractors are generally more positive regarding future investment and activity than operators, Cruickshank said.
"Twenty-seven per cent of contractors responding to the survey claim that activity levels are stable and that they expect that trend to continue, compared with just 18% of operators," Cruickshank said.
While still in negative territory overall, the operators' 2-point increase in confidence was driven by the majors whose index rose to 52 from 39.
In contrast, the independent operators registered a decline to 47 from 48.
The contractors' confidence recovered somewhat from its 7-point decline in this year's first quarter with a 2-point increase in the second quarter, attributed to a rise among drilling and well services contractors and facilities providers.
The OGUK Index, which started in January 2009, is circulated to both operators and contractors in order to gain an understanding of confidence levels throughout the whole oil and gas industry.
Lawmaker blocks DOI selection until leases extended
US Sen. David Vitter (R-La.) announced that he would block Rebecca Wodder's nomination to be Assistant US Interior Secretary for Fish and Wildlife and Parks unless the US Department of the Interior extends hundreds of Gulf of Mexico leases due to expire this year.
Vitter said oil and gas exploration in the gulf has fallen dramatically since Interior Sec. Ken Salazar imposed a temporary deepwater drilling moratorium following the Macondo well blowout and subsequent crude oil spill in 2010.
"In 2011 alone, more than 300 offshore leases in the Gulf of Mexico are due to expire," the federal lawmaker said on Aug. 3. "If these leases are allowed to expire, they will revert to the federal government, killing jobs and cutting off potential revenue from exploration and production."
US President Barack Obama said in a recent weekly radio address that the administration was taking steps to extend the leases.
"I intend to hold the administration to that," said Vitter, adding that the hold which he placed on Wodder's nomination would stay in place until DOI extended the leases for a year.
Transocean offers to acquire Aker Drilling
Transcean Ltd. offered to acquire Aker Drilling for $1.43 billion and Aker Drilling's board unanimously recommended that its shareholders accept the offer.
If successful, the acquisition of Aker Drilling would contribute $1.05 billion in a contract backlog to Transocean. The offer hinges upon Transocean receiving the approval of at least two thirds of the voting shares of Aker Drilling stockholders.
Barclays Capital analyst James C. West called the pending transaction "positive" for Tranoscean. He expects Transocean will continue pursuing acquisitions to help replace older assets. The transaction also strengthens Transocean's position in the North Sea, he said.
Transocean Services AS, a subsidiary of the drilling contractor, made the offer for the Norwegian Aker Drilling, which spun off from Aker Solutions earlier this year. Transocean has drilled wells off Norway since the early 1970s.
Aker Drilling operates two harsh-environment, ultradeepwater semisubmersible rigs currently on long-term contract to Statoil and Det Norske in Norway. In 2013, Aker Drilling is scheduled to take delivery of two drillships being built in South Korea.
Transocean has 14 ultradeepwater floaters working in the North Sea with 12 of those under contract, said West, who added that total utilization for the industry's 41 floaters in the North Sea is 93%.
"We expect activity will remain high, supported by increased spending program from European independents and Statoil," West said.
ZaZa Energy, Toreador discuss merger details
The pending merger of Toreador Resources Corp. and ZaZa Energy LLC will result in a combined company operating in the South Texas Eagle Ford play and the Paris basin in France.
The transaction, which remains subject to regulatory approvals and approval by Toreador shareholders, is scheduled to close during the fourth quarter.
The companies announced the merger Aug. 9, and executives discussed it during an oil and gas investors conference in Denver Aug. 15.
Based on the Aug. 9 Toreador stock price, the implied market capitalization for the combined company is $294 million.
ZaZa, a privately owned Houston company, will hold 75% of the combined company, ZaZa Energy Corp. Craig McKenzie, Toreador president and chief executive officer, will hold those positions in ZaZa Energy Corp., based in Houston.
ZaZa holds 123,000 gross acres in the Eagle Ford where it plans to drill 280 wells by 2013. In the Eagle Ford-Woodbine area, leasing is under way to expand 70,000 gross acres to more than 100,000 gross acres within 12 months.
Toreador holds 780,000 gross acres in the Paris basin.
Exploration & Development — Quick Takes
SandRidge accelerates Mississippian plays
Atinum Partners Co. Ltd., Seoul, will acquire a 13.2% nonoperated working interest in 860,000 acres held by SandRidge Energy Inc., Oklahoma City, in the Mississippian horizontal oil play in northern Oklahoma and southern Kansas for $500 million.
Atinum will pay $250 million cash at closing and the rest as a drilling carry obligation to pay 13.2% of SandRidge's share of drilling and completion costs up to $250 million, expected to occur over 3 years.
SandRidge said it is the Midcontinent Mississippian play's most active operator with 16 rigs operating and 111 horizontal wells drilled. The company expects to average 24 rigs in the play in 2012.
SandRidge also identified and established an acreage position in a new area that is similar in size, characteristics, and cost to the now-proven Mississippian play. It didn't identify the area geographically.
The company hiked its 2011 capital budget to $1.8 billion, up $500 million, and expects to spend a similar sum in 2012 as it seeks to establish a self-funding capital program by 2014. The new budget reflects acreage acquisitions and drilling in the Midcontinent and Permian basins, where SandRidge operated a combined 32 rigs in early August.
SandRidge has drilled 111 of industry's 250 horizontal wells in the Mississippian oil play, a shallow carbonate hydrocarbon system that spans 150 miles. SandRidge grew its production to 8,400 b/d of oil equivalent from 770 boe/d in the 2010 second quarter.
The company plans to have drilled 172 horizontal wells in 2011 and has identified more than 4,000 drilling locations on the nearly 900,000 net acres it has under lease.
SandRidge has established a 200,000 net acre position in another Mississippian play that is a shallow hydrocarbon system in a thick, porous, carbonate section. The Mississippian is 250-700 ft thick "with enhanced porosity development just beneath the pre-Pennsylvanian unconformity. The geological setting is an extensive regional stratigraphic trap within a hydrocarbon system that has a long history of Mississippian production from thousands of vertical wells."
The joint venture with Atinum covers all of SandRidge's original Mississippian play area other than wells and acreage in the associated spacing units spudded prior to the effective date and wells and acreage associated with SandRidge Mississippian Trust I. The deal is expected to close in the fourth quarter.
Falklands recovery seen at 325-434 million bbl
The Sea Lion main complex in the North Falkland basin could yield ultimate recovery of 325-434 million bbl of oil, said Rockhopper Exploration PLC.
Fast-track interpretation of 3D seismic indicates the extent of the main complex at 90 sq km and that it could contain a midcase 1.086 billion bbl of oil in place within a range of 608 million bbl in the low case to 1.279 billion bbl in the high case.
Four other prospects, Lower Fan B15, Casper, Kermit, and Chatham, could contain potential oil in place of a further 433 million bbl as a midcase, said Rockhopper, which said final interpretation of the 3D data should be complete by yearend.
The 325-434 million bbl potentially recoverable from the main complex equates to 30-40% recovery factors and "could be achievable using industry standard production techniques including water injection, artificial lift, deviated or horizontal wells and-or other enhanced oil recovery techniques," Rockhopper said.
The fast-track processing of 3D data from the southern parts of the PL032 and PL033 licenses, combined with data from the 14/10-2, 14/10-3, 14/10-4, 14/10-5, and 14/10-6 wells, "indicates that the SLMC comprises two fan lobes sourced from the same main feeder channel just to the east of the 14/20-5 and 14/10-2 wells," the company said.
"The two lobes, represented as sand packages within the wells, are identified as SL20 and SL10" and are in pressure communication.
"The two packages together comprise the SLMC and are interpreted to comprise of mass flow turbidite sand sequences prograding from the sand input point to the east and extending beyond the southern boundary of licenses PL032 into license PL004, where Rockhopper has a nonoperated 7.5% working interest." Desire Petroleum PLC operates PL003 and PL004.
The interpretation also enabled Rockhopper to identify two new feeders into the basin and map the Casper and Kermit prospects, both with similar fan systems fed from the east and with seismic character similar to the SLMC. Casper is stratigraphically shallower and Kermit deeper than the SLMC.
Following Well 14/10-6, Rockhopper believes that the B15 sand, which forms part of the lower fan complex, is also in communication with the SLMC. The company is committed to drill three further wells and is discussing drilling more wells under an assignment agreement.
Progress has industry's largest Montney holding
Progress Energy Resources Corp., Calgary, which plans to close a Montney joint venture with Malaysia's state Petronas in this year's third quarter, said it has built industry's largest Montney position at 900,000 net acres is Northeast British Columbia and Northwest Alberta.
Besides the Montney upstream effort, the joint venture includes a downstream LNG export element (OGJ Online, June 20, 2011). In the upstream portion, Petronas will acquire 50% of Progress' working interest in the Altares, Lily, and Kahta properties for $1.07 billion (Can.).
Progress' Montney holding spans 560 km, and its primary focus remains in the Northeast BC foothills, where it holds 700,000 net acres of largely contiguous Montney rights. Progress continues to pursue the goal set in November 2010 of doubling its production base in 5 years by developing multiple 50 MMcfd development pods.
Progress is directing 75% of its $350 million in 2011 capital spending towards the Montney. Drilling plans will focus on Progress' core development pods the rest of the year, including 17 horizontal and two vertical wells.
At the Town South pod, the company's most developed pod to date, Progress has 100% working interest and has drilled 16 horizontal wells since the third quarter of 2010.
At Kobes, where Progress has 30%, one nonoperated horizontal well was drilled in the quarter ended June 30 and will be completed in the third quarter. Progress operates the northern part of Kobes, and the well was drilled in the nonoperated southern area. The Kobes pod has proven to have among the strongest initial production rates in the entire Montney fairway.
At the Nig exploration block, Progress 50% interest, more than 25 km east of Town, a nonoperated Montney well was drilled in the June 30 quarter that flowed up tubing at 4.2 MMcfd and is shut-in for pressure buildup. Liquids production is expected to be 25 bbl/MMcf.
Progress said the focus of the capital program the rest of the year will be the continued advancement of the highly economic Montney pod developments at Town South, Town North, Gundy, and Kobes. Activity on the North Montney joint venture lands at Altares, Lily, and Kahta will begin on closing of the Petronas partnership.
North Montney gas is sweet, attracts a $2.1 million/well deep drilling royalty credit, and yields 20 bbl/MMcf of natural gas liquids.
Drilling & Production — Quick Takes
Asgard subsea gas compression plan submitted
The partners in the Asgard licenses have submitted to Norway's minister for petroleum and energy a 15 billion kroner plan for development and operation (PDO) of subsea gas compression to maintain production from Mikkel and Midgard fields, about 200 km off Norway.
Operator Statoil expects the subsea compression to increase recovery from Mikkel and Midgard by about 28.7 billion cu m of gas and 21.9 million bbl of condensate. Water depth in the area is 240-310 m.
Because of a pressure decline in the fields, the plan calls for installing seabed compressors near the wellheads to increase pressure for piping the wellstreams 40-50 km in a common line to the Asgard B semisubmersible production platform.
The plan includes the installation of one subsea template with two compressors, coolers, separators, and pumps. A submarine cable will provide power.
The work will also include modifications on the Asgard B platform and the Asgard A floating production, storage, and offloading vessel.
Statoil expects the work to be completed in first-quarter of 2015.
Statoil has already let a 650 million kroner contract to Aker Solutions for topsides modification work (OGJ Online, June 20, 2011) and a 3.4 billion kroner contract also to Aker Solutions for a full-scale subsea compression system (OGJ Online, Dec. 1, 2010).
Asgard licensees include Statoil 34.57%, Petoro AS 35.69%, Eni Norge AS 14.82%, Total E&P Norge AS 7.68%, and ExxonMobil Exploration & Production Norway AS 7.24%.
Mikkel licensees are Statoil 43.97%, ExxonMobil E&P Norway 33.48%, Eni Norge 14.9%, and Total E&P Norge 7.65%.
Murphy orders more subsea systems for Kikeh
Murphy Sabah Oil Co. Ltd. let a contract to Aker Solutions for subsea production equipment for the Kikeh expansion project off Sabah in East Malaysia.
The contract's scope includes the delivery of subsea trees, control modules distribution system, and manifolds for installation in 1,350 m of water.
Aker Solutions plans to deliver the items from its subsea manufacturing center in Port Klang, Malaysia.
Production from the expansion project is expected to start in 2013, according to Aker Solutions.
Kikeh production started in August 2007 to a spar platform connected to a floating production, storage, and offloading vessel.
PROCESSING — Quick Takes
Expansion planned for Djibouti refinery
A financial company based in Abu Dhabi has acquired a 75% interest in a 40,000-b/d refinery in Djibouti and plans to expand capacity to 100,000 b/d.
The buyer, Al Brooge Securities Co., said the expansion will occur "in the next stage."
The firm said the refinery yields 23% naphtha, 23% gas oil, 22% kerosine, 18% bitumen, and 2% LPG. The facility supplies Djibouti, Sudan, and Ethiopia.
"Plans are in place to expand into other African markets such as Kenya and Uganda," Al Brooge said in a press statement.
Contract let for Sohar deasphalting unit
State-owned Orpic of Oman will use the UOP/Foster Wheeler Solvent Deasphalting (SDA) process at its 116,000 b/sd refinery in Sohar, which is being expanded to a capacity of 187,000 b/sd (OGJ, Mar. 14, 2011, Newsletter).
The new SDA unit will be able to convert 50,000 b/d of heavy crude into low-contaminant deasphalted oil, which can be converted into light products. The Sohar refinery processes a blend of Oman Export Blend crude and long residue from the 106,000 Mina Al-Fahal refinery near Muscat.
Orpic was formed in June through the integration of Oman Refineries & Petrochemicals Co. LLC, Aromatics LLC, and Oman Polypropylene LLC. It's owned by the government and state-owned Oman Oil Co. SAOC.
TRANSPORTATION — Quick Takes
Dutch court orders delay in Bergermeer project
Abu Dhabi National Energy Co. said work on its natural gas storage project at Bergermeer in the Netherlands has been suspended due to a court order filed over environmental fears.
"It is still too early to say but, based on the current information, we will not have full operations in 2014," said a TAQA spokesman, who said the firm must halt the drilling additional wells needed to make the facility operational.
"Cushion gas injection was not part of the injunction proceedings and will continue as per plan," the spokesman noted, saying that the expectation is that "all cushion gas will be injected as per plan before Apr. 1, 2014."
The existing site in the Bergermeer area, which was formerly used to extract the gas from the reservoir, already has nine wells. TAQA plans to reuse six of the existing wells, in addition to drilling 14 more to a depth of 2,500 m.
However, the court of the Dutch Council of State ordered the suspension of the additional construction work at the project after environmentalists and local residents expressed concerns that the process of injecting gas would cause tremors in the area.
TAQA obtained permits for the gas storage project in May, but after hearing the opposition views the Dutch court decided to suspend what it called all "irreversible" preparatory work until a final verdict is rendered following the 6-month period of appeal.
TAQA took the court's ruling in stride, saying, "There is still strong support for the project and we are confident in receiving a positive final verdict."
Once operational, Bergermeer Gas Storage will be capable of storing 9 billion cu m of gas. According to TAQA, more than 4 billion cu m of the total capacity will be used as working volume by companies that want to store gas at the facility.
Terminal delivered at HPCL refinery
Hindustan Petroleum Corp. Ltd. (HPCL) has taken delivery of a fully automated black oil terminal at its 166,000-b/d Visakhapatnam refinery on India's eastern coast.
HPCL is moving the refinery's terminals to make room for processing units to produce low-sulfur fuels meeting Euro 4 standards.
The new black oil terminal has capacity for 94,000 cu m of products, including bitumen, furnace oil, low sulfur heavy stock, light diesel, jute batching oil, and high-flash high-sulfur diesel.
Mott MacDonald, London, called the facility "India's largest fully automated terminal exclusively for black oil products." The firm handled design, engineering, procurement, and project and construction management.
HPCL also is adding a light-oil and LPG terminals on the new site. In February it commissioned a single-point mooring able to offload very large crude carriers.
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