GENERAL INTEREST — Quick Takes
Panel formed to review EPAs fracing research
A panel of 31 experts has been formed to review the US Environmental Protection Agency's hydraulic fracturing research, EPA's independent Scientific Advisory Board reported Mar. 25.
It said the group will be asked to specifically seek input from applied scientific practitioners to get fresh information on emerging science and technology in what SAB considers a rapidly changing industry.
The panel is comprised of 5 current employees of companies and consulting firms; 2 government employees; and 21 academics and university professors (including some previously employed in the oil and gas industry), according to SAB.
It said the group would review a draft report that EPA expects to complete in 2014 on any potential health and environmental impacts of fracing on drinking water resources. It also will be asked to provide scientific feedback on EPA's research leading up to the peer review, the SAB said.
EPA announced its intention to conduct the study in response to a request from Congress in March 2010. The panel will hold a public meeting May 7-8 at which members will comment on EPA's 2012 progress report on the study. Members of the public also will be invited to provide comments, SAB said.
Wyden asks EPA about RIN price fluctuations
US Senate Energy and Natural Resources Committee Chairman Ronald L. Wyden (D-Ore.) asked the Environmental Protection Agency for data to explain unprecedented volatility in the market for Renewable Identification Numbers (RIN). RINs are designed to help refiners meet alternative fuel volume requirements under the federal Renewable Fuels Standard.
"Given that ethanol is an increasingly important factor in the cost and supply of motor fuel in the US, it is critical that the committee have a better understanding of the causes and effects of RIN market volatility and developments," Wyden said in a Mar. 22 letter to EPA Acting Administrator Robert Perciasepe.
Wyden asked EPA to provide data concerning RINs market volatility and irregular trading, and deficits and surpluses in RINs carried over from the previous year, as well as US production and consumption of biofuels as part of preparation for a hearing on gasoline prices later this spring.
Refiners are required to blend 13.8 billion gal of ethanol into the US gasoline supply this year, Wyden said. Prices for conventional RINs rose from 7¢/gal at the beginning of January to $1.10/gal during the first week of March, he noted.
His request came 2 days after the American Petroleum Institute and Republican Sens. David Vitter (La.) and Lisa Murkowski (R-Alas.) separately asked EPA to address RIN costs, which have jumped 1,400% since the beginning of 2012 (OGJ Online, Mar. 21, 2013).
Sinopec Corp., parent form $3 billion joint venture
China Petroleum & Chemical Corp. (Sinopec Corp.) agreed to form a joint venture with parent company China Petrochemical Corp. (Sinopec Group) to be called Sinopec International Petroleum E&P Hongkong Overseas Ltd.
The JV will acquire $3 billion worth of overseas oil and gas assets held by Sinopec Group to improve Sinopec Corp.'s profitability and to increase its international footprint. Sinopec Corp. is China's largest refiner.
Eni, Enel plan work on electric mobility
Eni SPA and Enel, Italy's largest electric power firm, have signed a letter of intent covering cooperation on electric mobility.
The companies want to identify within about 6 months "the best solutions for charging electric vehicles at Eni stations" and to establish electric-mobility trial areas by the end of 2013.
The trials will involve installation of fast-recharge points using Enel technology for electric vehicles at service stations run by the oil company.
The charge points can power a vehicle using direct and alternating current in 20-30 min, according to a press statement.
Exploration & Development — Quick Takes
Chevron has gulf Lower Tertiary oil find
A group led by Chevron Corp made an oil find at its Coronado prospect in the deepwater US Gulf of Mexico Lower Tertiary Trend. The company's No. 1 well on Walker Ridge Block 98 encountered more than 400 ft of net pay. Chevron drilled Coronado to 31,866 ft in 6,127 ft of water 190 miles off Louisiana.
Chevron said it is still evaluating well results and that more work is needed to evaluate extent of the resource. Interests in the prospect are Chevron 40%, ConocoPhillips 35%, a unit of Anadarko Petroleum Corp. 15%, and Venari Offshore LLC 10%.
Chevron noted that its Jack/St. Malo and Big Foot projects are due to go on production in 2014. It is appraising its Buckskin and Moccasin discoveries in the Lower Tertiary Trend.
Campos basin Itaipu discovery tests at 5,600 b/d
A BP PLC-led group has reported drillstem test rates as high as 5,600 b/d of oil from the Itaipu-1A presalt discovery well in the Campos basin offshore Brazil.
The rate was achieved on a 32⁄64-in. choke for 32 hr from a limited perforated interval, and results from pressure build-up after the main flow period indicated good reservoir connectivity, BP said. The company set long-term pressure monitoring gauges in the wellbore before suspending operations.
Neil Piggott, BP vice-president for exploration Brazil, said, "This is a good result for the Itaipu project, indicating that commercially viable flow rates can be achieved from this presalt carbonate reservoir."
The deepwater Itaipu-1A well is on Block BM-C-32 about 125 km off Brazil. Devon Energy Corp. drilled the well in 2009, and BP purchased Devon's interests in Brazil in 2011.
The Itaipu-2 appraisal well was drilled in 2011. A second appraisal well location, Itaipu-3, has been agreed with the Brazilian National Petroleum Agency to be spudded later this year.
BP is operator of BM-C-32 with a 40% equity, Anadarko Petroleum Corp. has 33.3%, and Maersk Energia Ltda. Has 26.7%.
North Sea oil find could rate tie-up with Ravn
Two sidetracks confirmed the presence of oil-bearing sandstone of Late Jurassic age at Wintershall Noordzee BV's Hibonite exploratory well in the Danish North Sea 337 km north of Den Helder, Netherlands. The 5504/1-3 well on the 5/06 license 278 km west of Esbjerg, Denmark, and 7 km north of the 1986 Ravn discovery found reservoir with a preliminary resource estimate of as much as 100 million bbl of oil in place in Heno sandstones, and same formation as on the Ravn structure (OGJ Online, Dec. 18, 2009).
The well went to a true vertical depth of 4,431 m below sea level in 52 m of water and produced oil and gas on a production test. Then the two sidetracks were drilled.
Wintershall will evaluate the commercial viability of Hibonite, which it said might lend itself to cluster development with the Ravn discovery.
Wintershall has no production in the Danish North Sea, where it operates the 4/06a, 4/06b, and 5/06 licenses with 35%, 80%, and 35% interests, respectively.
The company will plug and abandon Hibonite and move the Noble George Sauvageau jack up to the neighboring 4/06a block to drill the operated Spurv-1 exploratory well. Wintershall Noordzee will also operate the Spurv-1 well.
Wintershall operates Hibonite with 35% interest. Bayerngas Petroleum Denmark AS has 30%, Nordsofonden 20%, and EWE Vertrieb GMBH 15%.
CNOOC starting oil production at Beibu Gulf fields
China National Offshore Oil Corp. has started production from two development wells on the Weizhou 6-12 wellhead platform in the former Block 22/12 area in Beibu Gulf offshore China and plans to ultimately have 10 wells producing.
The A5H and A2 wells are on production. The HYSY 931 jack up will drill the A8, A9, and A10 development wells and will also equip the A6 and A7 wells, drilled in late 2012, for production, said Roc Oil (China) Co., Sydney.
By comparison, the original development plan called for drilling five total wells from the platform. The jack up is expected to move to the WZ 12-8 West wellhead platform for the final phase of development drilling in the third quarter.
Roc Oil took a farmout on Block 22/12 in 2002 and drilled oil discoveries in 2002 and 2006. Proved and probable reserves are 24 million bbl. Oil will be produced to shore via CNOOC's Weizhou 12-1 field platform a few kilometers to the west.
Participating interests in the development are CNOOC 51%, Horizon Oil (Beibu) Ltd. and Horizon Oil (Nanhai) LLC 26.95%, Roc Oil (China) 19.6%, and Oil Australia Pty. Ltd. (Majuko Corp.) 2.45%.
May River oil sands development expected
Gulfport Energy Corp., Oklahoma City, expects delineation drilling in the May River area of northern Alberta by Grizzly Oil Sands ULC to lead to filing of applications for thermal recovery of bitumen.
Gulfport holds about 25% of Grizzly, a private company based in Calgary.
Grizzly acquired the 46,720-acre May River property from Petrobank Energy & Resources Ltd. early last year (OGJ Online, Feb. 1, 2012).
Gulfport said Grizzly has completed 25 of 28 wells planned in an expanded delineation program.
It said by the end of the 2012-13 winter program the property will have been explored enough to support filing of regulatory applications for development via steam-assisted gravity drainage with initial production capacity of 12,000 b/d.
Drilling & Production — Quick Takes
Cairn, ONGC start up Aishwariya oil field
Cairn India Ltd. and state-owned Oil & Natural Gas Corp. have started oil production from the third field at their Mangala-Bhagyam-Aishwariya (MBA) complex in Rajasthan, India, and commenced natural gas sales from the block.
The government of Rajasthan and state-run Hindustan Petroleum Corp. Ltd. recently signed a memorandum of understanding to develop a refinery and petrochemical complex at nearby Barmer (OGJ Online, Mar. 14, 2013). Since then, HCPL has stated a planned refinery capacity of 9 million tonnes/year.
The new production start is at Aishwariya field, for which a production rate of 10,000 b/d of oil has been approved. The MBA complex is producing about 175,000 b/d.
Gas sales from the block began at the rate of 5 MMscfd.
The block has been producing about 30 MMscfd from Raageshwari Deep Gas field and in association with oil from Mangala and Bhagyam fields. Until sales began, the gas was used to meet requirements of the Mangala processing terminal and the 590-km heated pipeline that carries crude from the fields to Salaya.
Cairn, with 70% interest, and ONGC, 30%, are the operating committee for Block RJ-ON-901.
Stjerne field starts flow offshore Norway
Production has begun from Stjerne oil and gas field, a subsea development tied back to Oseberg South platform 13 km northeast in the North Sea off Norway (OGJ Online, Sept. 16, 2011).
Statoil, the operator, estimates Stjerne reserves at 49.2 million boe, of which 24.1 million boe is natural gas. Gas from the field will be injected into the Oseberg Omega North reservoir to increase recovery by an estimated 4.4 million boe.
Total production from the development, Statoil says, will be 7,800 boe/d. Water depth at Oseberg South is about 100 m.
Stjerne output began from the first of two production wells to be drilled from a four-slot seabed template. Two water-injection wells also are planned.
Statoil holds a 49.3% interest. Other interests are Petoro 33.6%, Total E&P Norge 14.7%, and ConocoPhillips Skandinavia 2.4%.
Suncor cancels Voyageur upgrader, buys Total's stake
Suncor Energy Inc., Calgary, has scrapped plans for the Voyageur upgrader project at Fort McMurray, Alta., and has acquired partner Total E&P Canada Ltd.'s interest for $515 million.
The company said the decision "is the result of a joint strategic and economic review launched by Suncor and its joint venture partner Total E&P Canada in late 2012."
Suncor Energy in February 2013 took a $1.487 billion net after-tax impairment against fourth quarter 2012 earnings. That charge resulted in a fourth quarter loss of $562 million, compared to a $2.65 billion profit in the fourth quarter of 2011.
After the writedown, the carrying value of net assets related to its Voyageur interest as of Dec. 31 was about $345 million (OGJ Online, Feb. 7, 2013).
On Wednesday the company said that as a result of not proceeding it also expects to incur charges to first quarter 2013 net income and cash flow from operations of $140 million and $180 million, respectively.
Steve Williams, president and CEO, said, "Since 2010, market conditions have changed significantly, challenging the economics of the Voyageur upgrader project. That's why we undertook a thorough review of the project to determine whether it met our criteria for long-term, profitable growth.
"This decision is in line with our commitment to capital discipline and our stated plan to allocate capital with priority given to developing higher-return growth projects and accelerating the return of cash to shareholders through dividends and share buybacks," Williams said.
The Voyageur upgrader was to handle bitumen from the planned Fort Hills oil sands mine operated by Suncor and Joslyn mine operated by Total E&P Canada. It is to be able to process 296,000 b/d of bitumen and yield 218,000 b/d of synthetic crude oil. The companies formed a JV in 2010 to share interests in the mines and upgrader and to develop the Fort Hills and Voyageur projects in parallel (OGJ Online, Dec. 20, 2010).
China approves shale gas PSC for Shell
The Chinese government approved a production-sharing contract for Royal Dutch Shell PLC and China National Petroleum Corp. (CNPC) to develop China's shale gas reserves, Shell Chief Executive Peter Voser said in Beijing Mar. 26.
The approval finalizes a deal that Shell China Exploration & Production Co. Ltd. and CNPC announced last year to jointly explore, develop, and produce shale gas from Fushun-Yongchuan block in the Sichuan basin (OGJ Online, Mar. 26, 2012).
The CNPC-Shell shale gas PSC covers 3,500 sq km.
Voser said Shell plans "a significant drilling season in 2013 and in 2014." Separately, Chinese officials said the country's goal is to produce 6.5 billion cu m/year of shale gas by 2015.
UK group expands relief-well plan guidelines
The Well Life Cycle Practices Forum, a UK group formed in response to the Macondo tragedy in the Gulf of Mexico in 2010, has published a second edition of its guidelines for relief-well planning for work on the UK continental shelf (OGJ Online, July 31, 2012).
The guidelines apply to plans for relief wells that operators must include with the Oil Pollution Emergency Plan that must be submitted to the Department of Energy and Climate Change for any offshore installation involved in oil and gas exploration and production.
The second edition includes guidance for an expanded range of relief wells, including subsea wells.
PROCESSING — Quick Takes
Egyptian derivatives plant gets water treatment plant
Egyptian Ethylene & Derivatives Co. (Ethydco), Cairo, has let a contract for water treatment at its petroleum derivatives plant in Alexandria to Aquatech, Canonsburg, Pa. A unit of Egyptian Holding Co. for Petrochemical, Ethydco produces ethylene and other petroleum derivatives at the Alexandria site.
The new treatment plant will include what the Aquatech says will be the first integrated zero liquid discharge plant in Egypt. The technology is a microfiltration system: a High Efficiency Reverse Osmosis system, followed by Fractional Electrodeionization and brine concentrator, and finally a crystallizer and sludge treatment system, said the vendor.
Aquatech Senior Vice-Pres. Karl Michael Millauer said feedwater to the plant will be a mix of treated effluent and water from the Nile River canal, which has inconsistent water chemistry throughout the year.
The water-treatment plant will treat wastewater from the derivatives plant and cooling tower blowdown to yield cooling tower makeup water, boiler feed water, and achieve zero liquid discharge. The plant will be in operation by early or mid-2014.
North Dakota diesel refinery work starts
Construction has begun of the 20,000-b/d Dakota Prairie Refinery west of Dickinson, ND, which will yield mainly diesel from Bakken crude oil (OGJ Online, Feb. 7, 2013).
Developers MDU Resources Group and Calumet Specialty Products Partners LP selected Westcon as general contractor and Ventech Engineering as primary equipment and technology provider.
The developers, each with a 50% interest, estimate the construction cost at $300 million.
TRANSPORTATION — Quick Takes
PHMSA issues CAO to Chevron for products leak
The US Pipeline and Hazardous Materials Safety Administration issued a corrective action order on Mar. 22 outlining steps Chevron Pipe Line Co. must take in response to a leak 4 days earlier in its products pipeline near Willard, Utah.
An estimated 600 bbl of diesel fuel leaked when the Chevron Corp. subsidiary's 760-mile No. 1 oil line from its refinery just north of Salt Lake City to Spokane, Wash., ruptured in marshland near Willard Bay on Mar. 18, the US Department of Transportation agency said.
CPL immediately shut the line in, mobilized vacuum trucks, and deployed booms, the CAO noted. The failure's cause has not been determined, but a preliminary investigation points to a longitudinal seam failure, the order said.
It said CPL will not be allowed to restart the line until it has submitted a plan to the regional director at PHMSA's Lakewood, Colo., office that includes a hydrostatic testing plan, adequate patrolling, and a comprehensive review of the affected segment.
Once the restart plan is approved, CPL must complete the hydrostatic testing within 30 days of the scheduled restart date, the order said. The restart plan also must include documentation that all mandated actions have been completed and a management of change plan to assure that all modifications are incorporated into the pipeline's ongoing operations and maintenance procedures, it indicated.
CPL agreed to sell CPL's Northwest Products System, which includes this pipeline, to Tesoro Logistics LP on Dec. 11, PHMSA noted. The sale was scheduled to be completed during 2013's first quarter, but had not been when the failure occurred, making CPL the respondent, the federal regulatory agency said.
PHMSA proposes ExxonMobil pay $1.7 million fine
The US Pipeline and Hazardous Materials Safety Administration proposed ExxonMobil Pipeline Co. (EMP) pay a $1.7 million fine because of a July 2011 failure of its Silvertip crude oil pipeline across the Yellowstone River near Laurel, Mont.
Based on its investigation of the incident, which released 1,509 bbl of crude from the 12-in., 69-mile pipeline from Elk basin, Wyo., to ExxonMobil's Billings, Mont., refinery, PHMSA alleged that the ExxonMobil Corp. subsidiary did not adequately address known risks heavily flowing rivers and streams posed to its pipeline network.
In its notice of probable violation, PHMSA said EMP should have considered impacts from excessive river scour and erosion, and implemented measures which would have mitigated a spill into a waterway.
It also alleged that EMP did not establish written procedures for its staff to promptly act to protect the Silvertip pipeline from floods and other natural disasters, and to minimize the volume of oil released from any section of the pipeline.
In addition to the proposed fine, PHMSA issued a proposed compliance order, directing EMP to implement ongoing training for supervisory and control room personnel on emergency response procedures, including reacting to abnormal conditions involving the natural environment surrounding their pipelines and the proper operation of remote control valves.
Immediately after the pipeline's failure, PHMSA issued EMP a corrective action order requiring the operator to take measures to ensure the pipeline, which had been shut down, could be safely restarted.
These included replacing and reburying the pipeline beneath the Yellowstone River, evaluating the pipeline for any existing or potential damage in all areas where it intersected with waterways, and revising its operation and emergency response procedures. EMP completed all of the CAO's required actions by August 2012, PHMSA said.
Gazprom, MND to build Czech gas storage
Gazprom of Russia and MND Group of the Czech Republic have agreed to build an underground natural gas storage facility in Damborice, South Moravia.
With working gas capacity totaling 448 million cu m, the facility will be one of the largest facilities of its kind in the Czech Republic. The companies agreed to invest $128 million in equal shares of the project.
Gassco lets contract for Emden gas terminal
Norway's Gassco let an engineering, procurement, and construction contract to Linde Engineering Dresden GMBH for a replacement natural gas terminal in Emden, Germany.
The facility, construction of which is to begin in autumn this year, is due on stream at yearend 2015.
It will replace the Norsea Gas Terminal, which has the capacity to handle 32 million cu m/day of gas delivered by the 443-km Norpipe pipeline from Ekofisk and surrounding fields in the Norwegian North Sea.
The Norsea terminal began operations in 1977. Gassco operates it for the Gassled consortium. The Linde contract is worth about €260 million.