GENERAL INTEREST — Quick Takes
Republicans seek economic geologist as USGS chief
US Sen. Lisa Murkowski (R-Alas.), the Energy and Commerce Committee's ranking minority member, and 12 other Republican senators asked US President Barack Obama to nominate an economic geologist as the US Geological Survey's new director.
Marcia K. McNutt's resignation, which she announced on Jan. 11, was effective Feb. 15. Deputy Director Suzette Kimball became acting director.
Benefits of restoring an economic emphasis to geologic surveying at the US Department of the Interior agency would be significant, Murkowski and the other Republican senators maintained.
"We believe that an individual with such a background could most effectively balance the additional activities that USGS has taken on over the years with those contemplated by its Organic Act, which provides for 'the classification of the public lands and examination of the geological structure, mineral resources and products of the national domain,'" they said in their Feb. 15 letter to Obama.
"Knowing how many mineral resources we have—and where they are located—can inform decisions about their development and help to attract investment for the same," the senators wrote. "An economic geologist is most likely to recognize these benefits, pursue them, and provide appropriate leadership as USGS director."
Sens. LaMar Alexander (Tenn.), John A. Barrasso (Wyo.), Jon Cornyn (Tex.), Michael B. Enzi (Wyo.), Orrin G. Hatch (Utah), Dean Heller (Nev.), John Hoeven (ND), Mike Lee (Utah), Rob Portman (Ohio), James E. Risch (Ida.), David Vitter (La.), and Roger F. Wicker (Miss.) signed the letter in addition to Murkowski.
Rosneft seeks Asian partners for Arctic projects
OAO Rosneft Pres. and Chairman Igor Sechin met with oil company executives in China and Japan to discuss establishing partnerships in Russian offshore Arctic projects and possibly future LNG projects.
On Feb. 20, Sechin met with Marubeni Corp. and Itochu Corp., both Japanese trading companies. He also met with Inpex Corp., a Japanese international oil and gas company involved in 71 projects in 27 countries, and Japan Petroleum Exploration Co. Ltd. (Japex), involved in projects in Japan and abroad.
Japex, Itochu, Marubeni, and Inpex are among numerous Japanese companies holding interest in Sakhalin Oil Development Co. Ltd., which represents Japan in the Sakhalin 1 consortium.
In China, Sechin met with executives of China National Petroleum Corp., China Petroleum & Chemical Corp. (Sinopec), and CNOOC Ltd. to discuss developing Russia's Arctic shelf.
Russia is estimated to hold more than half of the total Arctic resources, Ernst & Young said in a recent report entitled "Arctic Oil and Gas" (OGJ Online Feb. 12, 2012).
Sechin also discussed LNG export possibilities during his Asia trip. Currently, Gazprom is the only company that can export Russian gas, but the Russian Ministry of Energy reportedly might halt that monopoly to help Russian companies expand into new markets.
Earlier this month, ExxonMobil Corp. and Rosneft agreed to expand a 2011 strategic cooperation agreement to include more Russian Arctic exploratory acreage, possible Rosneft participation in ExxonMobil's Point Thomson gas-condensate field in Alaska, and a potential Russian Arctic LNG project (OGJ Online, Feb. 13, 2012).
In another partnership, Rosneft signed contracts advancing its strategic cooperation agreement with Norway's Statoil to cover projects in Russia (OGJ Online, June 22, 2012).
Eni SPA of Italy and Rosneft last year signed a strategic cooperation agreement covering exploration of licenses in the Barents and Black Seas offshore Russia (OGJ Online, Apr. 25, 2012).
PetroChina buys interest in ConocoPhillps permits
PetroChina has signed an agreement with ConocoPhillips to take working interests in two permits in which ConocoPhillips is a participant in Western Australia: one offshore and one onshore. A parallel agreement is for the two companies to establish a joint study agreement (JSA) for unconventional resource development in China's Sichuan basin.
The first Australian deal involves PetroChina in a 20% farm-in to ConocoPhillips' interest in the Greater Poseidon gas fields in the Browse basin while the second involves a 29% farm-in to the Goldwyer shale gas exploration project in the onshore Canning basin.
ConocoPhillips is operator of the Browse permits WA-314-P and 315-P—held jointly with Melbourne-based Karoon Gas Australia—which contain the Poseidon, Kronos, and Boreas gas discoveries. These have an estimated contingent resource of 7 tcf of gas on a P50 basis.
The group is currently evaluating the region with further drilling at Zephyros-1 to be followed by Proteus-1. Another two wells are planned in the program, but have yet to be named.
The Goldwyer project is an evaluation of Perth-based New Standard Energy Ltd.'s shale gas acreage covering 37,000 sq km where ConocoPhillips has committed $109.5 million to earn as much as 75% in the play by funding four phases in the exploration program.
The JSA deal is specifically targeting unconventional resource reserves in the Neijiang-Dazu block in the Sichuan basin, which has an area of about 500,000 acres. If the study finds the resource is technically feasible and commercially viable to extract, the two companies will move forward to a development phase under a production-sharing contract that would be agreed upon during the study period.
Both agreements still require respective government and partner approvals.
Exploration & Development — Quick Takes
McMoRan books South Louisiana subsalt reserves
McMoRan Exploration Co., New Orleans, booked 12.9 bcf of gas equivalent of net proved reserves as the first reserves to be booked in the South Louisiana ultradeep subsalt trend.
Consulting engineers engaged for McMoRan's sole account estimated proved, probable, and possible oil and gas reserves of 546.7 bcfe gross, 141.7 bcfe net to McMoRan, at the Lineham Creek exploratory well operated by Chevron USA Inc. onshore in Cameron Parish, La.
The reserves McMoRan booked are associated with interim results from the sands encountered above 24,000 ft. The well is drilling below 27,600 ft to evaluate the deeper primary objectives and has a proposed total depth of 29,000 ft. Development plans will be determined following completion of drilling and evaluation of the deeper objectives.
James R. Moffett, McMoRan co-chairman, chief executive officer, and president, said, "These are the first of what we hope will be sizable reserves from the subsalt, ultradeep trend onshore and in the shallow waters of the Gulf of Mexico.
"Indications of hydrocarbons shallower than 24,000 ft have positive implications for additional targets on trend within our portfolio. We look forward to results from ongoing drilling activities on the Lineham Creek structure and from the onshore Lomond North exploratory prospect currently being drilled."
Chevron has a 50% interest in Lineham Creek, and McMoRan has 36%. Energy XXI (Bermuda) Ltd. has 9%, and W.A. "Tex" Moncrief Jr. has 5%.
Piceance Niobrara/Mancos horizontal work growing
Fourteen horizontal wells have been drilled in the Cretaceous Mancos shale in the Piceance basin in northwestern Colorado, said Dejour Energy Inc., Denver.
Encouraging production results from these wells "indicate that the Piceance basin recoveries, including the Niobrara/Mancos, offer the potential to at least double the net reserves available here, with improved economics," Dejour said.
A Lower Mancos horizontal well in Garfield County completed by WPX Energy Inc., Tulsa, at the end of 2012 averaged 12 MMcfd in its first 30 days on production, Dejour noted (OGJ Online, Jan. 23, 2013).
Dejour has more than 7,500 net acres of land prospective for Niobrara/Mancos contingent resources in the basin, and the WPX horizontal discovery lies between Dejour's Kokopelli and Roan Creek leaseholds.
Meanwhile, Dejour is preparing to complete four wells and drill and case three more in the Williams Fork member of Cretaceous Mesaverde at Kokopelli with a rig under contract to spud around Mar. 22.
At the company's South Rangely project, the discovery well is on line producing at the contract sales rate of 250 Mcfd. Plans include a review of expansion alternatives with a view to initiate the drilling of a horizontal well by mid-2014.
Basinal indications seen on Tanzanian onshore PSAs
Aerogravity and magnetic surveys conducted in 2012 have confirmed the presence of sedimentary basins on the Kilosa-Kilombero PSA and the possibility of sedimentary basins on the Pangani PSA onshore coastal Tanzania, said Otto Energy Ltd., Perth.
Otto Energy and its partner Swala Oil & Gas (Tanzania) Ltd. as operator have committed to year two in both PSAs and will shoot as much as 500 line-km of 2D seismic. Seismic results will be available by the end of 2013 when they will decide whether to drill.
Otto Energy applauded "the likely presence of Tertiary rift basins with a geological setting that may be similar to the recent Tullow Oil discoveries in Kenya's Lokichar basin."
On the 17,675 sq km Kilosa-Kilombero PSA, more than 14,000 line-km of airborne surveys completed in October 2012 confirmed the presence of three basins totaling 2,000 sq km.
Kilosa and Kidatu, the northern two basins, contain an estimated 6,000-7,000 m of sediment, some of which is likely to be of Karoo age, and potential exists for several thousand meters of Neogene fill. The southern Kilombero basin is believed predominantly Neogene in age and also exhibited anomalous stressed vegetation identified as being potentially caused by hydrocarbon seeps.
A minimum of 300 line-km and geochemical samples will be acquired in 2013.
On the 17,156 sq km Pangani PSA in and around the Same district in northern Tanzania, more than 8,000 line-km of airborne surveys suggest the presence of two sedimentary basins of about 2,000 sq km each.
Initial depth modeling from the gravity and magnetic data indicates the basins may contain several thousand meters of Neogene sediments. At least 200 line-km of 2D seismic and geochemical samples will be acquired this year.
Drilling & Production — Quick Takes
RIL, BP offer $5 billion to hike KG D6 gas output
Reliance Industries Ltd. and BP PLC have told the Indian government they plan to invest $5 billion over 3-5 years to boost production from disappointing deepwater fields on the KG-D6 block off the country's eastern coast.
RIL has been under pressure from the Indian Ministry of Petroleum and Natural Gas to drill more wells on the block, production from which has fallen below projections made in the production sharing contract. The operator blames the underperformance on reservoir complications.
Last year the government hit RIL with a $1 billion fine, in response to which the company sought arbitration (OGJ Online, Nov. 30, 2012).
The proposed projects, which require government approval, involve developing 4 tcf of discovered gas on the block. Importing that volume of gas would cost more than $50 billion, the companies said.
BP acquired its interest in the KG-D6 block in a $7.2 billion deal with RIL in 2011 covering 30% interests in production sharing contracts covering 23 blocks offshore India (OGJ Online, Feb. 21, 2011). RIL and BP also formed a 50-50 joint venture, India Gas Solutions Pvt. Ltd., to source and market gas in the country.
Until BP's entry, Reliance held 90% interest in D6 and Niko Resources Ltd., Calgary, had 10%.
By the end of 2012, fields in the KG D6 block had produced 2 tcf of gas and 22 million bbl of oil.
BP Group Chief Executive Bob Dudley and RIL Chairman and Managing Director Mukesh Ambani reported their investment plan for the KG-D6 block to Veerappa Moily, the petroleum minister.
RIL and BP said implementing the plan will require deployment of advanced skills, processes, and technologies through the combined partnership to produce gas from more than 1,500 m of water. The gas will come from developing existing but unproduced discoveries and from further exploring the block (OGJ Online, Feb. 15, 2013).
A joint press release by BP and RIL said Moily agreed to expedite approvals related to the project.
According to the release, the production-enhancement effort will include:
• Compression and water-handling to boost production starting in 2014.
• Development of R-series and satellite fields, which with other projects will add production beginning in 2017.
• Drilling of a prospect to test a possible hydrocarbon accumulation below currently producing strata.
• Possible development of KG-D6 infrastructure as a hub for the east coast of India.
Water-depth record set at well off India
Transocean Ltd. and Oil & Natural Gas Corp. have claimed a world water-depth record at a well offshore eastern India for drilling by a marine rig.
Transocean's Dhirubhai Deepwater KG1 drillship spudded the ONGC NA7-1 exploratory well on Block KG-DWN-2004/1 on Jan. 23 in 10,385 ft of water. Since then the contractor has attached the blowout preventer to the wellhead to accommodate drilling to projected total depth of 5,625 m.
Transocean held the prior water-depth record of 10,194 ft for a well it drilled off eastern India in 2011 for Reliance Industries Ltd. with its Dhirubhai Deepwater KG 2 drillship.
Sinjhoro gas field starts up in Pakistan
State-owned Oil & Gas Development Co. of Pakistan and partners have started production from Sinjhoro natural gas field about 65 km northeast of Hyderabad City, Pakistan (OGJ Online, Sept. 4, 2009).
The field is producing 12 MMcfd of gas and 1,100 b/d of condensate, according to the Ministry of Petroleum and Natural Resources.
A partner, Ocean Pakistan Ltd. (OPL) of Islamabad, said a second phase of development will include start-up of a gas treatment plant and push production to 30 MMcfd of gas and 3,500 b/d of condensate. OPL said the license yielded 10 discoveries out of 17 exploratory wells drilled.
OGDC operates the field with a 62.5% interest. OPL holds 15%, and Government Holdings Pvt. Ltd. holds 22.5%.
PROCESSING — Quick Takes
Utica processing, fractionation near completion
Major cryogenic processing and NGL fractionation will come on stream in eastern Ohio late in the second quarter or early in the third quarter to handle Utica shale natural gas and liquids, with another plant planned for 2014.
M3 Midstream LLC (Momentum), Houston, is building the two plants at an estimated cost of $900 million and will operate both.
Under construction near Kensington in southern Columbiana County, Ohio, is a 600-MMcfd cryogenic plant. Near Scio, south of Kensington in northern Harrison County, Momentum is building a 90,000-b/d fractionator (OGJ, May 7, 2012, p. 88). The plants will be connected with 60 miles of 12-in. gas pipeline and 24-in. NGL pipeline.
Momentum Executive Vice-Pres. George Francisco told OGJ the Kensington plant will operate three trains of 200 MMcfd each. The 5.5-gal/Mcf feed gas will have limited carbon dioxide, and he expects 90% ethane recovery and 96+% of the heavier NGLs once the plant is fully operating.
Kensington's NGL output will match the 90,000 b/d fractionator being installed in two 45,000-b/d units. Production for these plants will come from Chesapeake Energy Corp., Total E&P USA, and EV Energy Partners LP.
Francisco confirmed that Momentum plans a third, 200-MMcfd cryogenic gas plant near Leesville in southwestern Carroll Country but declined to name an estimated cost. Liquids from the Leesville plant will flow via a 24-in. line to the new fractionator in Harrison County, to which will be added a third 45,000-b/d unit.
The company will begin construction there in this year's third quarter and aim for start-up in second-quarter 2014.
MarkWest Utica EMG to transport Rex Energy gas
MarkWest Utica EMG LLC, a joint venture of MarkWest Energy Partners LP and Energy & Minerals Group, will provide Rex Energy Corp. with natural gas gathering, processing, fractionation, and marketing services in the Utica shale.
The JV expects to begin gathering and processing Rex's liquid-rich gas production in June. MarkWest Utica EMG is building an extensive gathering system, two large-scale processing complexes, and a C2+ fractionation and marketing complex and expects them to enter service early 2014.
Fractionation also will be connected by an NGL pipeline to MarkWest's Marcellus shale NGL infrastructure, including its Houston, Pa., complex. The companies say the new project will give them the largest processing and fractionation capacity in the Utica shale.
Rex Energy holds 4,100 net acres in its Warrior South prospect. The company has drilled and completed three wells in Warrior South. These wells have been shut-in since completion and will enter sales service once the related infrastructure is in place. Rex Energy plans to drill and complete four additional Warrior South wells in 2013.
MarkWest Utica EMG began operations at its Cadiz refrigeration plant late last year, serving Gulfport Energy Corp. Utica production (OGJ Online, Dec. 3, 2012).
Lukoil adding hydrocracker at Volgograd
Lukoil has let a contract to Tecnicas Reunidas of Spain covering a vacuum gas oil deep conversion complex at its 11 million tonne/year (tpy) Volgograd refinery in Russia.
The project will include what Lukoil calls one of the world's largest VGO light hydrocracker units with a capacity of 3.5 million tpy as well as a combined sulfur unit and hydrogen production facilities.
The contract, worth more than $1.4 billion, covers detailed engineering, supply of materials and equipment, construction, and support of start-up operations. Work is to be complete by the end of 2015.
The project will boost the refinery's output of Euro-5 diesel by 1.8 million tpy.
TRANSPORTATION — Quick Takes
Alaska gas pipeline partners meet concept deadline
The four companies planning to build a natural gas pipeline from Alaska's North Slope to a port on the state's southern coast for liquefaction and export have met a critical deadline, Gov. Sean Parnell (R) announced on Feb. 15.
BP PLC, ConocoPhillips, ExxonMobil Corp., and TransCanada Corp. submitted a letter stating the proposed project's concept selection phase was completed, he said.
In his 2013 State of the State address on Jan. 16, Parnell called on the companies to unite behind a concept for an all-Alaska project and provide details to Alaskans.
He asked that the details include the size of the pipe, the daily gas volume, the location of a gas treatment plant, the number of compressor stations, the size and scope of a liquefaction plant and LNG storage facilities, and the number of off-take points for Alaska communities to obtain gas for local use.
"This represents historic progress," Parnell said, adding, "Never before has a gas pipeline project been so specifically aligned and described in detail by the companies that have the capacity to build, fill, and operate it."
Ensuring that Alaska's gas goes to the state's residents first was a critical concept selection component, he added.
Trunkline gas line segment to be converted to crude
Enbridge Inc. and Energy Transfer will jointly develop a project to move 420,000-660,000 b/d of crude oil by pipeline from Patoka, Ill., to St. James, La., and the eastern Gulf Coast refining market by converting certain segments of Trunkline Gas Co. LLC's system to liquids service. Trunkline is a subsidiary of Energy Transfer Partners LP and Energy Transfer Equity LP.
The converted 30-in. OD crude line would enter service by 2015, pending US Federal Energy Regulatory Commission approval of Trunkline's July 2012 request to abandon certain designated segments of line from natural gas transmission service. Crude slate and the level of subscriptions received in a pending open season will determine the pipeline's capacity.
Once completed, the project will span more than 700 miles, including a new lateral from near Boyce, La., to St. James. The St. James hub will provide access to refineries in the eastern Gulf Coast, as well as dock access for water-borne shipments. Enbridge and Energy Transfer would each own 50% of venture.
Crude oil reaches the Patoka hub from both western Canada production and from the Bakken play in North Dakota through a variety of existing pipelines. Enbridge's Southern Access Extension pipeline will also deliver 300,000 b/d to Patoka starting in early 2015 (OGJ Online, Dec. 14, 2012).
Energy Transfer describes the eastern Gulf Coast as a highly attractive market for Canadian and Bakken crude, but not currently accessible by pipeline. The conversion would create the first pipeline transportation option for moving oil to the eastern Gulf Coast from the US Midwest.
