GENERAL INTEREST — Quick Takes
EPA's Jackson to step down after SOTU address
US Environmental Protection Agency Administrator Lisa P. Jackson announced that she will step down shortly after US President Barack Obama's State of the Union address later this month. Jackson noted that when Obama nominated her to lead EPA in December 2008, "I spoke about the need to address climate change, but also said: ‘There is much more on the agenda: air pollution, toxic chemicals and children's health issues, redevelopment and waste-site cleanup issues, and justice for the communities who bear disproportionate risk.'"
When Obama addressed EPA employees in early 2012, she continued, he told them, "You help make sure the air we breathe, the water we drink, the food we eat are safe. You help protect the environment not just for our children but their children. And you keep us moving toward energy independence…. We have made historic progress on all these fronts."
Jackson's statement, issued Dec. 27, 2012, concluded, "So I will leave EPA confident the ship is sailing in the right direction, and ready in my own life for new challenges, time with my family, and new opportunities to make a difference."
She leaves a mixed legacy at the federal environmental regulator. Oil and gas producers questioned methods in the agency's attempts to limit carbon dioxide emissions. Refiners, automakers, and engine manufacturers criticized its effort to raise the amount of ethanol allowed in gasoline without fully addressing possible adverse equipment impacts.
Environmental organizations, meanwhile, applauded her actions. "In her 4 years as EPA administrator, [Jackson] has been a steadfast advocate for clean air, clean water, a stable climate, and public health—often in the face of very vocal and forceful detractors," Sierra Club Executive Director Michael Brune said.
NOLA judge gives final okay to BP Macondo settlement
US District Judge Carl Barbier in New Orleans gave final approval to BP PLC's settlement in a class action lawsuit with a number of businesses and individuals regarding the April 2010 deepwater Macondo well oil spill in the Gulf of Mexico.
BP estimates it will pay $7.8 billion to resolve economic and medical claims from more than 100,000 businesses and individuals although the settlement has no cap. BP could wind up paying more or less than that amount.
Barbier released a final 125-page ruling late Dec. 21 after giving his preliminary approval earlier in 2012. He noted that he found none of the objections filed "have shown the settlement to be anything other than fair, reasonable, and adequate."
BP responded that it considers the settlements to be in the best interests of many.
"We believe the settlement, which avoids years of lengthy litigation, is good for the people, businesses and communities of the gulf and is in the best interests of BP's stakeholders," a BP spokesman said.
BP operated the Macondo well. A blowout triggered a fire and explosion that killed 11 workers on Transocean Ltd.'s Deepwater Horizon semisubmersible drilling rig and resulted in a massive oil spill.
Barbier noted much litigation remains pending, including environmental damages with the US government under the Clean Water Act.
GAO: Oil, gas provide bulk of federal mineral revenue
Crude oil, natural gas, and natural gas liquids provided the vast majority of federal mineral leasing revenue in fiscal 2011 and 2012, the Government Accountability Office reported.
Oil, gas, and NGLs produced $10.1 billion—largely from royalties—of the $11.3 billion received from federal mineral leases in 2010 and $11.4 billion received in 2011, it said in a report that it publicly released on Dec. 12.
GAO said its analysts used data compiled by the US Department of the Interior's Office of Natural Resources Revenue. It showed that the government collected $5.4 billion of royalties from 739 million bbl of crude produced from federal onshore, offshore, and Indian tribal leases in the 12 months ended Sept. 30, 2010, and $6.6 billion from 645.6 million bbl of production in the same period a year later.
Federal gas royalties totaled $2.8 billion on more than 5.4 bcf of production in 2010 and $2.4 billion on nearly 4.9 bcf produced in 2011, according GAO. It said royalties from NGL production from federal leases totaled $400 million on 4.8 billion gal in 2010 and $600 million on 4.7 billion gal in 2011.
EQT to sell Pa. gas utility for $720 million
EQT Corp., Pittsburgh, will sell its Equitable Gas Co. LLC natural gas distribution business to Peoples Natural Gas, which has agreed to enter into long-term contracts for gas transmission, supply, and storage with EQT.
EQT will receive cash proceeds of $720 million, subject to adjustments, and select midstream assets and commercial arrangements that are expected to generate at least $40 million/year in earnings before interest, taxes, depreciation, and amortization. The agreements will secure supply of Marcellus gas of 35 bcf/year to Peoples.
Required regulatory approvals are expected to be received by the end of 2013.
EQT's two remaining core businesses are a capital-intensive, rapidly growing production business and a midstream business. EQT said the proposed transaction provides capital to accelerate the monetization of its reserves beyond 2013 and also adds to its Marcellus midstream assets.
As part of the transaction, EQT will receive 200 miles of regulated transmission pipelines and four storage reservoirs that have a combined 15.1 bcf of working gas capacity. The pipelines and storage fields are strategically located across multiple counties in Pennsylvania and connect to EQT's existing transmission assets.
Peoples Natural Gas is a subsidiary of SteelRiver Infrastructure Fund of North America. SteelRiver Infrastructure Fund acquired Peoples Natural Gas from Dominion Resources in 2010. In 2011, the company purchased Peoples TWP, formerly T.W. Phillips Gas & Oil Co. Peoples Natural Gas and its sister company, Peoples TWP, serve 420,000 homes and businesses in 18 western Pennsylvania counties.
Exploration & Development — Quick Takes
McMoRan to reperforate Davy Jones gulf shelf well
McMoRan Exploration Co., New Orleans, will reperforate its Davy Jones-1 well on the Gulf of Mexico shelf offshore Louisiana with electric wireline through-tubing guns after having limited success in unblocking the original perforations using a propellant stimulation gun.
Meanwhile, McMoRan will set production liner at the Blackbeard West-2 ultradeep exploratory well on Ship Shoal Block 188. Total depth is 25,584 ft.
The firm identified three potential hydrocarbon-bearing Miocene sand sections between 20,800 ft and 24,000 ft from log and core data. An initial completion attempt is expected on 50 net ft of laminated sands in the Middle Miocene at about 24,000 ft.
The well also penetrated 80 net ft of potential low-resistivity pay at 22,400 ft and an approximate 75-ft gross section at 20,900 ft. Pressure and temperature data indicate that conventional equipment and technology could be used on a completion try at this depth.
McMoRan said operator Chevron USA Inc. drilled the Lineham Creek exploratory well onshore in Cameron Parish, La., to 25,250 ft, set liner, and is preparing to drill ahead to a proposed 29,000 ft to evaluate Eocene and Paleocene objectives. As previously reported, the well found what appear on logs to be hydrocarbon-bearing porous sands above 24,000 ft.
McMoRan's Lomond North ultradeep prospect in the Highlander area in St. Martin Parish 65 miles north of Davy Jones is drilling below 12,900 ft. The well is projected to 30,000 ft and targets Eocene, Paleocene, and Cretaceous objectives below the salt weld.
Chevron finds more gas off Western Australia
Chevron Australia has made two more significant gas discoveries offshore Western Australia.
The Pinhoe-1 wildcat in permit WA-383-P about 200 km north of Exmouth has encountered 60 m of net gas pay in the Barrow and Mungaroo Sand reservoirs. Water depth in the region is 929 m. In addition, the Arnhem-1 wildcat in permit WA-364-P about 290 km north of Exmouth discovered 45.5 m of net gas pay in the upper Mungaroo Sands. Water depth here is 1,208 m.
The two discoveries are significant because they are further out from other discoveries in the Greater Gorgon and Wheatstone development regions in the Carnarvon basin. Consequently they provide development potential across a much broader province. Chevron's discovery total since mid-2009 now moves up to 19.
Chevron is operator of both permits with 50% interest in each. Royal Dutch Shell PLC holds the other 50% interests.
PetroSeychelles looks toward 2013 open bid round
The Seychelles islands in the Indian Ocean offshore East Africa have undertaken an exercise to modernize petroleum legislation and revise the fiscal regime and is preparing for an open acreage bid round in 2013.
With numerous discoveries offshore East Africa in recent months, the international oil and gas industry has shown renewed interest in Seychelles, said Eddy Belle, chief executive officer of PetroSeychelles Ltd.
Afren PLC is shooting a large 3D seismic program in the islands, and WHL Energy Ltd., Perth, plans to participate in the 2013 bid round, Belle said. WHL Energy has completed a major, state of the art, integrated interpretation of the petroleum potential of the Seychelles, the first in the history of this frontier exploration province.
Meanwhile, PetroSeychelles and the Seychelles government have ratified the previously reported amendments to the petroleum agreement with WHL Energy.
The new work program calls mainly for the drilling of a single exploratory well, shooting 2D seismic, and completing seismic interpretation to mature the location for drilling in late 2013. The previous agreement provided for two wells by July 31, 2013, but the work program has been extended until Jan. 31, 2014.
The new plan is to shoot a further 2,000 km of 2D seismic, reprocess 2,000 km of existing 2D seismic, and undertake geophysical and environmental studies.
WHL will retain a 17,345 sq km contiguous shelf acreage position and relinquish the noncore Farquahar, Platte, Coetivy, and Fortune Banks outlier acreage. Further relinquishment is not required until 6 months after completing the first well.
Statoil proves Lavani, finds Cretaceous gas off Tanzania
Statoil ASA said its Lavani-2 well offshore southern Tanzania penetrated a Cretaceous gas reservoir that is the third discovery on Block 2 and confirmed the Paleogene gas reservoir found at Lavani-1.
The Ocean Rig Poseidon drillship took Lavani-2 to a total depth of 5,270 m in 2,580 m of water 5 km southeast of the Lavani-1 discovery well, 20 km south of the Zafarani-1 discovery well, and less than 100 km north of Tanzania's marine boundary with Mozambique. The next well will appraise Zafarani.
Statoil operates the license on Block 2 on behalf of Tanzania Petroleum Development Corp. and has a 65% working interest. ExxonMobil Exploration & Production Tanzania Ltd. has 35%.
Statoil and ExxonMobil will announce updated total volumes on Block 2 next year. An increase in the block's upside potential is expected following further evaluation of the well, Statoil said.
Drilling & Production — Quick Takes
EPA issues update on fracing study research projects
The US Environmental Protection Agency released an update on 18 research projects connected to its study of hydraulic fracturing's possible impacts on drinking water supplies. It also released details of its research approach and next steps on the projects and analyses.
The Dec. 21 update followed EPA's November release of the study's final plan. It continues to solicit comments from the oil and gas industry and other stakeholders, and expects to release a draft report of the study's results in 2014.
EPA also announced that its Science Advisory Board is forming a panel of independent experts to review the study. It said the SAB will provide an opportunity for the public to offer comments for consideration by the individual panel members.
Statoil to invest in Mariner heavy oil field
Statoil said it plans to invest more than $7 billion in developing the Mariner heavy oil field in the UK North Sea, and Mariner production is expected to come on stream in 2017 pending final government approval of field development plans.
The field, discovered in 1981, is expected to produce for 30 years, with average production of around 55,000 b/d during a plateau expected during 2017-20.
Mariner has two shallow reservoirs, the Maureen formation and the Heimdal sandstones of the Lista formation. Both formations yield heavy oil of 12-14° gravity. The field, some 150 km east of the Shetland Isles, has nearly 2 billion bbl of oil in place and expected reserves of more than 250 million bbl.
Statoil said the heavy oil project will require pioneering technology to address the field's complexities. Mariner will be developed with a production, drilling, and quarters platform based on a steel jacket, 50 active well slots, and a floating storage unit.
Statoil entered the license as operator in 2007 and holds 65.11% interest. Partners are JX Nippon Exploration and Production (UK) Ltd. with 28.89% and Alba Resources Ltd. with 6%.
The project will provide 200 jobs in Aberdeen and 500 offshore. Statoil said the project was "positively impacted" by the UK's expansion of the Ring Fence Expenditure Supplement and will provide "substantial tax income for the UK."
ConocoPhillips, Sinopec to study shale gas in China
Sinopec Exploration Southern Co. said it signed an agreement with ConocoPhillips for joint research regarding shale gas exploration, development, and production in Qijiang, Sichuan basin.
"This cooperation will be of great significance to the general evaluation on the exploration potential of the marine Paleozoic shale gas in the southeast Sichuan area and will help improve Sinopec's technology in the exploration and development of shale gas," Sinopec said in a statement on its web site.
Financial details were not disclosed. ConocoPhillips confirmed it agreed to a joint unconventional oil and gas development study with Sinopec. No other details were given.
"ConocoPhillips remains interested in becoming involved in unconventional oil and gas developments in China," a company spokesman in Houston told OGJ.
The US Energy Information Administration estimates China has 145 trillion cu m of recoverable shale-gas resources in Sichuan and Tarim basins.
China National Petroleum Corp. (CNPC) and Shell China Exploration & Production Co. Ltd. signed a production-sharing contract for shale gas exploration, development, and production on the Fushun-Yongchuan block in China's Sichuan basin (OGJ Online, Mar. 20, 2012).
Shale gas exploration and exploitation in China is still at an early stage although China is vigorously promoting shale gas development (OGJ, Mar. 5, 2012, p. 60).
Shell and CNPC also work together on tight gas projects in China. The CNPC-Shell shale gas PSC, subject to government approval, covers 3,500 sq km.
PROCESSING — Quick Takes
ExxonMobil starts Singapore ethylene steam cracker
ExxonMobil Corp. reported the startup operations of one of the world's largest ethylene steam crackers, which is the centerpiece of the company's multibillion dollar expansion project at its Singapore petrochemical complex.
The expansion, which is being powered by a 220-Mw cogeneration plant, adds 2.6 million tonnes/year of finished product capacity, doubling the company's product capacity at Singapore. The expansion includes two polyethylene plants, a polypropylene plant, a metallocene elastomers unit, an oxo-alcohol unit, and an aromatics expansion, all of which are completed and starting operations. Ethylene production is expected to start in the next few months, the company said.
Steve Pryor, president, ExxonMobil Chemical Co., said, "This is among the most technically advanced and competitive manufacturing sites in Singapore and the Asia Pacific region."
"The new cogeneration plant allows for the efficient generation of electricity to run pumps, compressors and other equipment, while at the same time producing additional steam needed in the production processes," the company said, adding, "Cogeneration is significantly more efficient than traditional methods of producing steam and power separately, resulting in lower operating costs and reduced greenhouse gas emissions."
The expansion will increase the chemical plant workforce by 50%, bringing to 1,800 the total employment at ExxonMobil's Singapore integrated refining and chemical complex.
Dominion, Caiman to form midstream JV in Utica
Dominion and Caiman Energy II LLC are forming a $1.5 billion joint venture to provide midstream services to natural gas producers operating in the Utica shale in Ohio and portions of Pennsylvania. The companies expect to close on the joint venture by Dec. 31.
The joint venture, Blue Racer Midstream, LLC, will be a 50-50 partnership of Dominion and Caiman, with Dominion contributing midstream assets and Caiman contributing private equity capital. Midstream services offered will include gathering, processing, fractionation, and natural gas liquids transportation and marketing.
Dominion facilities to be contributed to the joint venture include both gathering and processing assets. Dominion East Ohio's existing rich gas gathering network will be contributed along with other portions of its gathering system as more lines are converted to rich gas gathering operations.
With investment, the joint venture's gathering pipeline system could be expanded to transport at least 2 bcfd.
Also included are Dominion's Natrium Extraction Plant and related facilities, currently under construction in Marshall County, W.Va., and a Dominion Transmission pipeline connecting Natrium to the Dominion East Ohio gathering system.
TRANSPORTATION — Quick Takes
ConocoPhillips agrees to fines for Alaska spills
ConocoPhillips Alaska Inc. has signed a consent agreement with the US Environmental Protection Agency stemming from a December 2007 spill near the ConocoPhillips Kuparuk topping plant on Alaska's North Slope. As part of the agreement, the company paid a $45,000 penalty.
Under terms of a separate settlement with Alaska's Department of Environmental Conservation, ConocoPhillips also agreed to recover and restore the 0.32-acre spill area and pay penalties and costs totaling $267,000 for the 2007 spill and a 2006 spill at the same site.
EPA enforcement documents said a failure in a 24-in. OD flow line discharged about 102 bbl of mixed water and crude oil in December 2007 into the nearby frozen arctic tundra.
Company and contract responders built a 300-yard long ice road after the spill to improve site access and also built snow berms to create secondary containment to help contain the spill, EPA said. The 2006 spill released 500 gal of crude-contaminated water.
ConocoPhillips' Kuparuk topping plant runs a 15,000 b/d atmospheric distillation column, producing heating oil from pipeline crude supplied by Central Processing Facility No. 1.
Anadarko, Eni advance Mozambique LNG project
Anadarko Petroleum Corp. signed a heads of agreement (HOA) with Eni SPA aimed at coordinating the two firms' activities in connection with the Mozambique LNG project.
The HOA establishes principles for the coordinated development of the common gas reservoirs spanning Mozambique's Offshore Area 1 (operated by Anadarko) and Offshore Area 4 (operated by Eni).
The project design allows the two operators to conduct separate, yet coordinated, offshore development while jointly constructing onshore liquefaction facilities in northern Mozambique's Cabo Delgado province, Anadarko indicated.
"We expect the HOA to lead to a unitization agreement to further facilitate the efficient development of the common resources, as well as the independent reservoirs on both blocks, enabling enhanced economies of scale through shared infrastructure and facilities," said Anadarko CEO Al Walker.
The two producers and Mozambique's government expect the project's first LNG cargoes will ship in 2018, he added.
Multiple front-end engineering and design contracts for the project also have been signed, Anadarko said.
Cooper basin western flank pipelines on stream
Oil has started to flow through pipelines linking fields held by Beach Energy and its partners to the Moomba processing facility in South Australia.
The new pipelines will take pressure off the previous trucking arrangements that were subject to disruption by flooding. Beach and its partners will now be able to maintain continuity of supply regardless of weather conditions.
Beach says the links between Growler and Lycium, Callawonga and Lycium, and Lycium and Moomba have been completed and oil is now flowing to Moomba.
The Callawonga-to-Tantanna flowline has been operating for 4 years and was linked to Lycium in October. A Bauer-to-Lycium line is under construction and should be completed during this year's first quarter with first flow expected in the second quarter. The Lycium-to-Moomba line is expected to transport more than 20,000 bo/d.