OGJ Newsletter

Jan. 28, 2013
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

Comment sought on 4,250-well Wyoming gas project

The US Bureau of Land Management is seeking comment on a proposed Wyoming natural gas development involving up to 4,250 wells on 265,000 acres in Fremont, Natrona and Sweetwater counties. It also wants comments on possibly amending the 2007 Casper Resource Management Plan, which could be required for the project, it added, BLM's Lander field office said on Jan. 17.

The US Department of the Interior agency plans to initiate an environmental impact statement for the development, which Encana Oil & Gas (USA) Inc. and Burlington Resources Oil & Gas Co. LP have proposed. BLM administers 169,500 acres of the land that would be involved, and the southern portion of a proposed pipeline would cross federal land in Sweetwater County, it said.

It also has scheduled public meetings on the project, issues to be addressed in the EIS, and the possible amendment of the Casper RMP on Feb. 12 in Casper, Feb. 13 in Lander, and Feb. 14 in Riverton. Comments will be accepted through Mar. 7, BLM said.

The companies also propose to construct gas processing facilities and a new pipeline to transport natural gas and natural gas liquids to market pipelines near Wamsutter, Wyo., about 100 miles south of the project area.

Bellatrix, South Korean firm form JV in Alberta

Bellatrix Exploration Ltd., Calgary, signed a $300 million (Can.) joint venture agreement with a company based in Seoul, South Korea, to jointly develop Bellatrix's undeveloped Cardium holdings in west-central Alberta. The name of the South Korean firm was not disclosed.

Terms call for the partner to pay $150 million to the JV, which plans to drill 83 Cardium wells.

This is not the first time South Korean companies have invested in Canadian oil and gas. Last year, TransCanada Corp. formed a partnership with Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd. to construct a $4 billion pipeline line from northeastern British Columbia to a LNG terminal at Kitimat. Korea National Oil Corp. in late 2009 bought Harvest Energy Trust for $1.7 billion.

Finalization of the Bellatrix JV, subject to certain closing conditions, is expected by Apr. 30. The effective date is Apr. 1, and the partner may elect to invest in Cardium wells already drilled earlier this year.

The partner will earn 33% of Bellatrix's working interest in the Cardium wells until recovery of its investment plus an 8% return on investment. After payout, expected within 7 years, the partner's share reverts to 20% working interest.

Bellatrix will be required to guarantee return of the partner's capital investment of up to $30 million if payout is not achieved within 7 years.

As a result of the JV, Bellatrix boosted its net capital expenditure plan for 2013 to $230-240 million compared with a previously announced $180 million budget.

Bellatrix anticipates a 2013 exit rate of 30,000-31,000 boe/d. On Dec. 14, 2012, Bellatrix acquired an additional 11 gross and net sections of highly prospective Cardium and Notikewin-Falher assets in the Ferrier area of west central Alberta. This acquisition is expected to yield 37 net drilling locations in the Cardium, 9 net locations in the Notikewin-Falher, and 66 net locations in the Duvernay formation.

Bellatrix continues to focus on its core Cardium and Notikewin-Falher assets.

On Dec. 31, 2012, Bellatrix had 206,638 net undeveloped acres and had identified more than 1,700 net opportunities with estimated capital requirements of $8.17 billion based on current costs. The firm believes inventory would take more than 40 years to develop based upon its current cash flow.

Rosneft reports hikes in oil, gas reserves

Rosneft's reserves of crude oil increased by 2% last year and of natural gas by 33% under Securities and Exchange Commission assessment methods, the company reported on the basis of an audit by DeGolyer & MacNaughton.

The Russian company attributed the large gas increase to its formation last year of a joint venture with the Itera Group (OGJ Online, Aug. 6, 2012).

Under the SEC's life-of-field classification, the company's proved reserves as of Dec. 31, 2012, totaled 14.592 billion bbl of oil and 26.599 tcf of gas.

Under Petroleum Resources Management System classification, Rosneft has proved reserves of 18.328 billion bbl of oil and 35.016 tcf of gas, probable reserves of 9.845 billion bbl and 13.125 tcf, and possible reserves of 8.878 billion bbl and 9.256 tcf.

Eni, PetroVietnam sign upstream agreement

Eni SPA and PetroVietnam have signed a memorandum of understanding covering exploration and production business opportunities in Vietnam and elsewhere.

Eni said the agreement will enable it to acquire new blocks in Vietnam, where it now operates three offshore blocks in which it acquired 50% interests last year (OGJ Online, June 25, 2012).

Eni will offer PetroVietnam the opportunity to acquire shares in international blocks and areas where it holds interests.

Exploration & DevelopmentQuick Takes

Oil found in new pools at Thailand L53 well

Pan Orient Energy Corp., Calgary, said a well in an undrilled fault block in L53 D East field in Thailand has found the first good quality oil pay of significant thickness in five sandstone intervals.

The L53-DC1 appraisal well, drilled to 1,661 m measured depth, 934 m true vertical depth, highlights the potential of these sands as primary reservoir targets in adjacent undrilled fault compartments, the company said. It is the first of a planned five-well program on the L53 concession.

L53-DC1 encountered 55 m true vertical thickness of net oil pay in six sandstone reservoir intervals based on the interpretation of a full suite of open hole wireline logs, mud log data recorded while drilling, and offsetting well data.

The well encountered oil pay in the A4, A3, A2, and A1 sandstone zones and two shallower sandstone intervals above A1. All oil bearing sands appear to be oil charged throughout, with no evidence of any oil water contact in any sand. This is the first good quality oil pay of significant thickness encountered in the A3, A2, A1, and shallower sandstone zones.

The company is running casing and plans to perforate the A4 sandstone and place the well on production in 3-4 days.

It will then skid the rig to the adjacent cellar and drill L53-DC2, twin to L53-DC1, planned to encounter the A3, A2, and A2 sands structurally higher than in L53-DC1. L53-DC2 is projected to 1,300 m TVD, or 376 m deeper than L53-DC1, to test deeper sandstone targets also located in this untested fault compartment.

Seneca hooking up Lycoming Marcellus completions

Seneca Resources Corp., Williamsville, NY, expects to have 15 wells Marcellus shale wells producing into the Trout Run Gathering System in Lycoming County, Pa., by the end of January, including six wells on which it reported completion Jan. 22, said its parent National Fuel Gas Co.

The six wells, on a single pad, had 24-hr peak production rates averaging 17.8 MMcfd, five of which represent the highest peak production rates of any wells operated by Seneca in the Marcellus. The wells have treatable lateral lengths of 4,292 to 5,101 ft and were completed with 14 to 18 frac stages per well.

Three wells had peak production rates above 20 MMcfd, and all six reached a combined 24-hr peak production rate of 107 MMcfd. The wells represent some of the most productive ever drilled in the Marcellus by any operator, Seneca said.

Seneca is running two drilling rigs Lycoming County and does not have the production infrastructure constraints that face many other Marcellus operators.

Sixteen other wells on the DCNR 100 tract will be completed this fiscal year and 25 more in fiscal 2014, the company said.

Unconventional work eyed in San Joaquin basin

Neon Energy Ltd., Perth, said it has begun discussions with prospective partners and service providers that could contribute expertise and funding toward an unconventional development of the Lower Stevens B zone in tandem with the Lower Antelope shale in Paloma field in California's southern San Joaquin basin.

Having tested the Paloma Deep-1 and 2 wells, the company will postpone testing of secondary targets in the shallow Paloma sand to avoid compromising the company's ability to reenter the wells to collect further data from the deeper zones.

Neon Energy holds an 85% working interest in 2,847 acres in Paloma field, and Solimar Energy Ltd., Melbourne, has 15%. Paloma field is 7 miles long and 3 miles wide and essentially abandoned. The Lower Stevens produces 80 b/d of oil in the southeastern part, and the Upper Antelope shale is being produced by a single well in the eastern part, Neon Energy said.

The company noted that the Paloma Deep-1 and 2 wells confirmed hydrocarbon pay in as many as eight reservoirs and confirmed potential for commercial development of unconventional resources in the Lower Antelope shale, Fruitvale shale, and Lower Stevens B sand.

Neon Energy said the Paloma discoveries represent a resource likely on the order of 200-300 million bbl of oil equivalent in various members of the Miocene Monterey formation.

An unconventional development would involve high angle or horizontal wells and hydraulic fracturing and other stimulation methods, the company said.

Drilling & ProductionQuick Takes

Sunshine Oilsands advancing SAGD projects

Sunshine Oilsands Ltd., Calgary, has approved a budget for 2013 that includes the drilling of 16 well-pairs at its West Ells project and preliminary work at its Thickwood and Legend Lake areas, all in the Athabasca oil sands region of Alberta and targeted for development with steam-assisted gravity drainage.

The company approved a $430 million budget, of which 75% will be allocated to West Ells, 16% to Thickwood and Legend, and 9% for other purposes. Of the total, $390 million will be capital expenditure.

Sunshine received regulatory approval for an initial 10,000-b/d development at West Ells in January 2012 and began construction last October. It plans two development stages of 5,000 b/d each.

The company believes the 9,856-hectare area has production potential exceeding 100,000 b/d from the Cretaceous Wabiskaw formation.

For the 5,888-hectare Thickwood region, which is 90 km from Fort McMurray and 40 km from West Ells, Sunshine has applied for an initial development project with production yielding 10,000 b/d of bitumen. It says production in the area can exceed 50,000 b/d.

Legend Lake, covering 65,024 hectares, is 115 km from Fort McMurray and 15 km from West Ells and also has production potential exceeding 50 exceeding 50,000 b/d, according to Sunshine. The company has applied for a 10,000-b/d first phase.

West Qurna-2 field output target lowered

Lukoil and two state oil companies have lowered the contractual target for crude oil output from West Qurna-2 oil field in Iraq by one-third.

Under a supplement agreement to the production service contract accounting for Lukoil's acquisition of the interest formerly held by Statoil, the production target falls to 1.2 million b/d from 1.8 million b/d (OGJ Online, June 1, 2012).

Also adjusted were the target production-level maintenance period to 19.5 years from 13 years and the contract period to 25 years from 20 years.

Lukoil signed the supplemental agreement with North Oil Co., which holds 25% interest in the contract, and South Oil Co.

The acquisition of Statoil's 18.75% stake increases Lukoil's interest to 75%.

Petrocarabobo heavy oil well starts flow

Production of extra heavy crude oil began late in December from the first well operated by the Petrocarabobo joint venture in the Orinoco oil belt of Venezuela.

The initial flow rate was modest, according to joint venture partners, in the first well of a project expected eventually to yield 400,000 b/d of 8º gravity crude oil. A planned upgrader will yield oil of 16º gravity.

In the first phase of development, production is to reach 30,000 b/d. A second phase will push output to 90,000 b/d.

Petroleo de Venezuela SA holds a 60% interest in the venture. Other interests are Repsol, Oil & Natural Gas Corp. of India, and Petronas, 11% each, and Oil India Ltd. and Indian Oil Corp. Ltd., 3.5% each.

PROCESSINGQuick Takes

Nuevo starts up West Texas processing

Nuevo Midstream LLC, Houston, has completed Phase 2 expansion of its Ramsey natural gas gathering, processing, and treating in the Delaware basin near Orla, Tex., Reeves County, about 65 miles west of Odessa.

Nuevo's new cryogenic processing plant, Ramsey 2, can process 100 MMcfd, bringing processing capacity at the Ramsey site to 110 MMcfd.

Drilling projections from existing and potential customers, strong performance of wells in the basin, and additional acreage dedications have prompted Nuevo to plan a third cryogenic plant, the company said. The plant is being built by Cameron to use Randall Gas's NGL technology.

Nuevo expects to bring Ramsey 3 online in early 2014, raising total cryogenic processing capacity there to 310 MMcfd.

In addition to the processing expansion, Nuevo has increased amine treating capacity at the Ramsey plant to 625 gpm and will make add more treating capacity within the year.

In addition to the natural gas produced from the shallow Delaware sands, Nuevo also processes natural gas produced from five other distinct resource pays in the Delaware basin, the company said.

As producers in the Ramsey area continue to define the extent of each play and as drilling programs evolve, Nuevo said, it will explore a fourth expansion to the Ramsey site, which could add 200 MMcfd in capacity as early as 2015.

In connection with expansion of Ramsey gas processing, Nuevo has completed several natural gas-gathering projects that bring its Ramsey gathering system to 210 miles of high and low-pressure lines. The company has also completed a second interconnect to the El Paso Natural Gas pipeline system.

The company further announced that it will offer gathering to crude oil producers in the Delaware basin. Nuevo is planning to build out a crude gathering system that will complement the company's expanding gas gathering and will provide deliveries into several longhaul crude pipelines.

Nuevo said its expansion into crude gathering will provide gas producers an alternative to trucking crude from tank batteries to injection points. It expects to begin construction on the first phase of its crude system in the second quarter with this system coming online in the third quarter.

Oneok to expand Williston basin gas processing

Oneok Partners LP plans to build a 100-MMcfd natural gas processing plant, Garden Creek III, and related infrastructure in eastern McKenzie County, ND, in the Williston basin.

The company also will build a 95-mile NGL pipeline between existing fractionation systems at Hutchinson, Kan., and Medford, Okla., and modify the Hutchinson site to accommodate lighter, unfractionated NGLs produced in the Williston basin.

Oneok expects the Garden Creek III gas processing plant, including expansions and upgrades to existing gathering systems and compression, to enter service in first-quarter 2015. Oneok will build Garden Creek III near its Garden Creek I gas processing plant and the announced 100-MMcfd Garden Creek II gas processing plant, which is expected to be in service in third-quarter 2014 (OGJ Online, July 27, 2012). The Garden Creek III project will cost $325-360 million.

The partnership's expects its previously announced Stateline II gas processing plant to be in service later this quarter. The combined natural gas processing capacities of the Garden Creek II and III plants, and Stateline II, will bring Oneok's Williston basin total to 590 MMcfd, including its Garden Creek, Stateline I, and Grasslands plants.

Oneok also will invest $140 million to build a 95-mile NGL pipeline connecting its NGL fractionation and storage in Hutchinson, Kan., to similar facilities in Medford, Okla. These investments include modification of the Hutchinson fractionator and are expected to enter service in first-quarter 2015.

TRANSPORTATIONQuick Takes

GAIL commissions Dabhol LNG terminal

GAIL (India) Ltd., Mumbai, earlier this month commissioned the 5-million tonne/year Dabhol LNG terminal at Ratnagiri, Maharashtra, about 210 miles south of Mumbai.

The terminal will send out natural gas to the southern and western states of Maharashtra, Goa, Karnataka, and Tamil Nadu, reported GAIL. In the immediate future, it said sendout from the terminal will meet demand in Maharashtra through GAIL's Dabhol-Panvel pipeline connected to Maharashtra regional pipeline network.

The terminal is operated by RGPPL, a joint venture of GAIL and NTPC Ltd., India's largest power company.

The company also said it was in an advanced stage of commissioning the nearly 870-mile Dhabol-Bengaluru pipeline.

GAIL Chairman and Managing Director Shri BC Tripathi also said the new terminal would expand over 2-3 years first to 7.5 million tpy of capacity, then to 10 million tpy.

Commissioning of the Dabhol terminal along with GAIL's cross-country gas pipeline network will integrate the entire gas market of India from Bhatinda-Nangal in North to Kochi in the south, spanning a gas grid of more than 2,100 miles. Gazprom Marketing & Trading Singapore supplied the commissioning cargo aboard the 138,000-cu m LNG Pioneer.

Dahej and Hazira are currently the only operating LNG terminals in India.

TAP completes ESIA, concludes shareholder agreement

Trans Adriatic Pipeline (TAP) on Jan. 21 submitted its environmental and social impact assessment (ESIA) for the Albanian section of the proposed natural gas pipeline to Albania's national licensing center.

The ESIA, conducted in consultation with local governments along TAP's route, assesses the pipeline's potential effects on the environment, cultural heritage, and socioeconomic development and proposes measures to avoid, reduce, or mitigate negative effects.

TAP will transport gas from the Caspian region via Greece and Albania across the Adriatic Sea to southern Italy and further to Western Europe.

The Albanian section will start at Bilisht Qender in the Korca region at the Albanian-Greek border and extend to the coast north of Fier. Total length of TAP's onshore section in Albania will be 209 km, about 60 km offshore in the Albanian section of the Adriatic Sea.

TAP will accept public comments on the ESIA through Apr. 30. TAP expects to receive approval of the ESIA and respective environmental permits from the Albanian government in the next few months.

The pipeline and its shareholders—Axpo, Statoil, and E.On—also concluded a shareholder agreement with three members of the Shah Deniz consortium: State Oil Co. of the Azerbaijan Republic (SOCAR), BP PLC, and Total SA. The agreement would take effect once SOCAR, BP, and Total decide to exercise their options to join the TAP joint venture, taking a combined stake of up to 50% in TAP AG.

TAP is part the broader southern gas corridor, which along with some combination of the Trans Anatolian Pipeline (TANAP), the South Caucasus Pipeline (SCP), and Nabucco West (OGJ Online, June 28, 2012), will transport Shah Deniz Stage 2 gas from Baku, Azerbaijan, to the European Union.

The Shah Deniz consortium expects to make a final decision on the preferred European gas transportation route by midyear.

CNPC to build Jiangsu-to-Shanghai gas pipeline

China National Petroleum Corp. (CNPC) has signed a cooperation framework agreement with Shenergy Group and Yangkou Port Co. Ltd. to build the Rudong-Haimen-Chongming natural gas pipeline.

The 89.5-km pipeline will deliver 2.4 billion cu m/year from Jiangsu province to Chongming Island in Shanghai.

The line will serve as the third major source of gas for Shanghai after the first and second West-East Gas Pipelines. It will also transport regasified LNG from terminals at Rudong when needed.

PetroChina commissioned its 3.5-million tonne/year Rudong terminal in 2011, beginning with a cargo in May from QatarGas and completing the process in November. PetroChina's first LNG terminal in China, Rudong is expected to be supplied mainly from Australia's Gorgon project, scheduled to start producing in 2014 (OGJ, Apr. 2, 2012, p. 122).

CNPC, Shenergy, and Yangkou Port will jointly build and operate the pipeline and expect it to enter service in 2014.