OGJ Newsletter

June 24, 2013
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

Illinois governor signs hydraulic fracturing regulation

Illinois Gov. Pat Quinn has signed into law regulation for high-volume hydraulic fracturing, the governor's office said in a news release.

Companies will be required to disclose chemicals used in fracturing and to test water before and after drilling. The new regulation includes strong provisions to protect water quality, assure transparency, and promote public involvement, Quinn said in a June 17 statement after he signed the bill into law.

One of the legislation's sponsors, Sen. Michael Frerichs (D-Champaign) said fracturing already has started on a limited basis in Illinois. The state's Department of Natural Resources plans to hire more engineers, inspectors, attorneys, and others to implement the new regulation.

"The environmental community looks forward to working with the governor and agencies to make sure that this bill is strongly enforced," said Jan Walling, executive director of the Illinois Environmental Council.

Total obtains stake in Bokhtar PSC in Tajikistan

Total E&P Tajikistan BV has finished acquiring a 33.33% stake in the Bokhtar production-sharing contract in Tajikistan from Kulob Petroleum Ltd., a subsidiary of Tethys Petroleum Ltd., and held jointly with CNPC Central Asia BV, a subsidiary of China National Petroleum Corp.

Total E&P Tajikistan and CNPC Central Asia each will hold 33.33% interest in the PSC, while Kulob Petroleum will retain a 33.33% stake.

Tethys Petroleum noted that the Amu-Darya basin in neighboring Uzbekistan and Turkmenistan contains some of the world's largest gas and gas-condensate fields and that the same reservoirs have yet to be drilled in the basin's Afghan-Tajik extension in southwestern Tajikistan.

This Tajikistan government approved the transaction. The Bokhtar PSC covers 36,000 sq km at the northern end of the prolific Afghan-Tajik basin. The PSC area is 300 km from China (OGJ Online, Dec. 21, 2012).

Operations will be conducted through an operating company, Bokhtar Operating Co. BV. BOC plans a large seismic survey, and tentatively expects to make a decision on a first exploration well by yearend 2014.

Natural Resource Partners to buy stake in Bakken

Natural Resource Partners LP, Houston, agreed to acquire an 11% working interest in producing assets in the Bakken and Three Forks formations in North Dakota and Montana from Abraxas Petroleum Corp. for $35.3 million, marking NRP's entry into the Bakken formation.

The transaction cover 13,500 net acres with 120 producing wells and 22 wells in various stages of development, said NRP, a master limited partnership. Closing is expected during the third quarter.

NRP also expects to invest $8.1 million this year on wells obtained through this transaction. That is in addition to the $35.3 million payment.

Abraxas, San Antonio, said it plans to pay down debt and concentrate spending on its core operated assets in the Bakken and the South Texas Eagle Ford shale.

Surge Energy to buy tight oil assets from Cenovus

Surge Energy Inc. agreed to buy a tight oil asset in southern Saskatchewan from Cenovus Energy Inc. of Calgary for $240 million, with closing expected by mid-July, subject to normal closing conditions.

The agreement involves what Cenovus calls the Shaunavon asset, which involves 54 sections of land and currently produces 3,600 b/d. Previously, Cenovus said it was looking for buyers for its Bakken and Shaunavon assets. The Bakken assets remain unsold.

Last year, Cenovus said its oil production in Alberta increased 14% to more than 29,000 b/d as the company continued to focus on developing new tight oil plays on its existing lands in southern Alberta. Average oil production from the Lower Shaunavon and Bakken tight oil plays more than tripled compared with the same period last year to about 6,200 b/d due to a successful drilling program, although production continues to be affected by delays in facility construction (OGJ Online, July 25, 2012).

Exploration & DevelopmentQuick Takes

Statoil makes second Flemish Pass basin oil find

Statoil has made the company's second discovery of light, high-quality oil in the Flemish Pass basin offshore Newfoundland but said it cannot yet judge the find's resource potential.

The company encountered oil while drilling its Harpoon prospect in 1,100 m of water on EL 1112 about 500 km northeast of St. John's, Newf., and 10 km southeast of the 2012 Mizzen oil discovery that Statoil estimated to hold 100-200 million bbl of oil (OGJ Online, June 21, 2012).

Erik Finnstrom, Statoil senior vice-president for exploration North America, said, "We anticipate there will be further appraisal drilling to mature this discovery in the future. We will continue to build this area as a core exploration region for Statoil."

As part of its 2013 three-well exploratory program off Newfoundland, Statoil is currently drilling its Federation prospect in the Jeanne d'Arc basin. The company will then return to the Flemish Pass basin to drill the Bay du Nord prospect southwest of the Harpoon and Mizzen discoveries (see map, OGJ Feb. 14, 2005, p. 34).

Statoil is operator of Harpoon with a 65% interest, and Husky Energy has 35%.

Statoil extends Sverdrup, finds basement prospect tight

Statoil ASA has gauged good oil rates on the west side of Johan Sverdrup field in the North Sea offshore Norway but said the latest appraisal wellbore also "reduces the possibility for upside potential in the basement section in the Johan Sverdrup area."

The Statoil group on PL265 drilled the main 16/2-17S wellbore to appraise western Sverdrup and the 16/2-17B sidetrack to test potential in the Cliffhanger South area west of the field's current outline.

The well's purpose was to investigate reservoir thickness and properties close to the main bounding fault that marks the western limit of the Johan Sverdrup discovery.

The 16/2-17S wellbore found a gross 82-m oil column in Jurassic sandstones of which 39 m were of excellent quality. The well demonstrated exceptional flow properties in the upper part of the reservoir.

Partner Lundin Petroleum AB said the lower 43 m of oil column consists of interbedded shales and high-quality sandstone layers. An oil-water contact was established similar to neighboring wells. Both intervals were production-tested with rates of 5,900 b/d and 1,500 b/d, respectively. Both tests indicate large lateral reservoir extent, and the intervals are in pressure communication.

The 16/2-17B sidetrack, drilled 800 m west of the main wellbore, did not encounter Jurassic reservoir, and Cliffhanger South is therefore classified dry, Statoil said. Ciffhanger South was defined as a separate target in PL 265, and the outcome of the sidetrack does not have impact on volume estimates for Johan Sverdrup.

Gro G. Haatvedt, Statoil senior vice-president exploration Norway, said, "Statoil still sees potential in the Cliffhanger North area based on seismic data and our geological models, and will test it with a dedicated well later this summer."

The 16/2-17B sidetrack also tested a secondary target in the granitic basement of the Utsira high (see map, OGJ, Apr. 4, 2011, p. 50). Core from this section contained oil shows but were confirmed to be nonproducible, Statoil said.

Johan Sverdrup field is in PL501, PL265, and PL502 on the Norwegian Continental Shelf. Statoil is operator of PL265 with 40% interest, Petoro AS has 30%, Det Norske Oljeselskap ASA 20%, and Lundin Norway AS 10%.

Beach drills four successful Cooper basin wells

Beach Energy Ltd., Adelaide, has cased and suspended as future oil producers four wells in the Cooper basin in South Australia's Western Flank region. The wells are in permit PEL 91.

The exploration wells Kalladeina-2, Sceale-1, and Congony-1 encountered gross oil columns with thicknesses of 8 m, 6 m, and 6 m, respectively. These columns are within the Jurassic-age McKinlay/Namur formation reservoirs.

All three were drill-stem tested. Kalladeina flowed at 986 bo/d, Sceale at 830 bo/d, and Congony at 41 bo/d.

Meanwhile, a tenth well drilled in Bauer oil field struck an 11-m oil column.

Beach believes the four wells could add 1 million bbl of oil to its portfolio.

The company attributes much of this recent success to the acquisition of 3D seismic in the region that had doubled the company's success rate to 50%.

Also, an agreement with the South Australian Cooper joint venture has enabled Beach to pump more crude through the trunkline to Moomba processing facilities. Beach now sends 10,000 bo/d from its Western Flank fields through the line.

GeoPark has Guadalupe oil find on Llanos 34 block

A group led by GeoPark Holdings Ltd. has spudded an appraisal well after discovering a fourth oil field on the Llanos 34 block in Colombia and said it has identified several more prospects on the block.

GeoPark has placed on production the Tarotaro-1 discovery well on the block, on which it is operator with 45% working interest.

The well produced 2,239 b/d of 15.5° gravity oil with 0.6% water cut on an electric submersible pump with 250 psi wellhead pressure on a 14.3-mm choke from the Guadalupe formation at 2,955 m. Total depth is 3,175 m. GeoPark will monitor production to determine stabilized rates and reservoir extent.

GeoPark, which has spudded Tarotaro-2, previously discovered Max, Tua, and Potrillo oil fields since the company's entry into Colombia in early 2012. It is in the midst of a 15-20-well drilling program.

Drilling & ProductionQuick Takes

FPSO en route to Papa Terra heavy oil field

The P-63 floating production, storage, and offloading vessel left the Quip/Honorio Bicalho shipyard in Rio Grande, Brazil, after the modules were integrated, and the platform was commissioned, Petroleo Brasileiro SA (Petrobras) said.

The FPSO—en route to Papa Terra heavy oil field 68 miles off Rio de Janeiro in 3,940 ft of water—was converted from the BW Nisa tanker at Cosco shipyard in China. Petrobras operates Papa Terra field, which has 14-17° gravity oil in the Campos basin (OGJ Online, Feb. 8, 2010).

Petrobras believes the P-63 FPSO will help increase oil production to reach the company's overall production target of 2.75 million b/d by 2017.

With a capacity to process 140,000 b/d of oil and compress 1 million cu m/day of gas, the unit is going to the Papa Terra field in the postsalt Campos basin. Papa Terra is operated by Petrobras with a 62.5% interest. Chevron Overseas of Brazil Ltd. holds 37.5%.

The unit arrived in Brazil in January for its final construction stages.

Norway awards offshore production licenses

The Norwegian Ministry of Petroleum and Energy has decided to award 20 production licenses in the Barents Sea and four in the Norwegian Sea in its 22nd licensing round (OGJ Online, May 1, 2012).

Twenty-nine companies will receive offers for participating interests. Fourteen companies will be offered operatorships.

Two of the licenses are extensions to existing production licenses.

All but one of the awarded licenses are north of the Arctic Circle. The licenses have varying work obligations.

The ministry offered three operatorships to Statoil Petroleum AS and Eni Norge AS; two each to Det norske oljeselskap ASA, E.ON E&P Norge AS, GDF Suez E&P Norge AS, OMV (Norge) AS, Repsol Exploration Norge AS, and Total E&P Norge AS; and one each to AS Norske Shell, Centrica Resources (Norge) AS, ConocoPhillips Skandinavia AS, Edison International Norway Branch, Lundin Norway AS, and RWE Dea Norge AS.

Shale gas exploration deal with Chevron pending

A tentative agreement has been reached between Ukraine officials and Chevron Corp. regarding exploration for shale natural gas in Oleska field in western Ukraine, Energy Minister Eduard Stavytsky told reporters in Kiev on June 13.

Stavytsky said local officials have yet to approve the agreement as required by Ukrainian law.

Earlier this year, Ukraine signed a production-sharing agreement with Royal Dutch Shell PLC for shale gas exploration in Yuzivske field (OGJ Online, Jan. 25, 2013).

The unconventional exploration agreements are part of the Ukrainian government's effort to reduce dependence on Russian gas. Ukraine has taken measures to liberalize its domestic gas business and seeks large-scale upstream investments.

Terms of the Shell PSC call for Shell to hand over 31-60% of the produced gas to Ukraine (see map, OGJ, June 3, 2013, p. 60).

The PSC was signed at the World Economic Forum in Davos, Switzerland. Shell received exploration rights for Yuzivske gas last year (OGJ Online, Sept. 7, 2012).

PROCESSINGQuick Takes

Tesoro to sell interests in Hawaiian refiner

Tesoro Corp., San Antonio, will sell its interest in Tesoro Hawaii LLC to a subsidiary of Par Petroleum Corp. Tesoro Hawaii operates the 94,000-b/d Kapolei refinery along with retail stations and associated assets. Par Petroleum will operate the refinery and its marketing assets.

Tesoro said the sales price is $75 million, plus the market value of net working capital, which it expects to be about $225-275 million. The company expects to complete the sale in this year's third quarter.

Earlier this month, Tesoro closed on its purchase of BP PLC's 266,000-b/d Carson refinery near Los Angeles (OGJ Online, June 3, 2013; May 17, 2013), paying slightly more than $1 billion for refining and marketing assets and $1.35 billion for inventory and other working capital.

XTO starts western Pennsylvania NGL recovery

ExxonMobil Corp. unit XTO Energy Inc. has placed its natural gas liquids recovery plant in Butler County, Pa., into service. The 125-MMcfd Butler plant is XTO's first in the Appalachia region, sits on 340 acres, and includes 40 miles of connecting pipeline. Two gas compressor stations feed the Butler plant.

In July 2012, MarkWest Energy Partners LP executed a long-term, fee-based agreement with XTO to extend MarkWest's NGL gathering pipeline in northwestern Pennsylvania to XTO's Butler County plant. MarkWest previously announced an extension of its Marcellus NGL gathering pipeline north from its Houston, Pa., NGL fractionation and marketing complex to the Bluestone processing complex, also in Butler County, which MarkWest acquired in June 2012. The July agreement further extended the NGL gathering pipeline from Bluestone to the XTO plant.

XTO says it has drilled 50 wells in Butler County over the past 4 years, covering more than 46,000 net acres.

The company last year signed an anchor producer agreement to supply natural gas to NiSource Gas Transmission & Storage Midstream Services' Big Pine Gathering System in western Pennsylvania. Big Pine interconnects with Columbia Gas Transmission, Texas Eastern, and Dominion (OGJ Online, Apr. 5, 2012).

EPP, Western Gas form JV to own fractionators

Enterprise Products Partners LP, Houston, has formed a partnership with Western Gas Partners LP, Houston, to own NGL fractionation Trains 7 and 8, currently under construction at EPP's complex in Mont Belvieu, Tex., east of Houston (OGJ Online, Mar. 26, 2012).

Western Gas, an affiliate of Anadarko Petroleum Corp., has acquired a 25% ownership in the joint venture, and EPP retains the remaining 75% interest.

Trains 7 and 8, to have design capacity to fractionate about 170,000 b/d of NGLs, will begin commercial operations in this year's fourth quarter.

TRANSPORTATIONQuick Takes

Chevron confirms first cargo from Angola LNG

Cabinda Gulf Oil Co. Ltd., a unit of Chevron Corp., confirmed that initial production of LNG has been shipped from the Angola LNG project, one of the largest energy projects in Africa.

The $10 billion project will collect and transport natural gas from offshore Angola to an onshore liquefaction plant on the coast near the Congo River.

The project has the capacity to produce 5.2 million tonnes/year of LNG, 63,000 b/d of natural gas liquids for export, and 125 MMcfd of natural gas for domestic consumption.

Angola LNG plans to use associated natural gas produced from existing crude oil operations operated by Chevron and other partners as well as new nonassociated gas from other offshore fields.

The first cargo was sold to Angola's state-owned Sonangol and is currently being shipped to Brazil by the SS Sonangol Sambizanga, one of seven 160,000 sq m LNG vessels that are under long-term charter to the project.

"Angola LNG is entering the market at an exciting time. The world LNG market is expected to remain tight over the coming years, with very limited new LNG capacity coming on stream," commented Artur Pereira, chief executive officer, Angola LNG marketing.

A large number of master LNG sale and purchase agreements have been executed with energy companies worldwide. Further agreements are being negotiated.

Cabinda holds a 36.4% interest in the joint venture, while Angola's Sonangol holds a 22.8% interest. Other partners include subsidiaries of Total SA, BP PLC, and Eni SPA, each with a 13.6% interest.

Koch to hold Bakken-to-Illinois pipeline open season

Koch Pipeline Co. LP is holding the first phase of an open season for its 250,000-b/d Dakota Express Pipeline to transport Bakken crude oil from western North Dakota to Hartford and Patoka, Ill. Koch also intends to explore a connection at Patoka to the Eastern Gulf Crude Access Pipeline, which would be capable of delivering Bakken crude to eastern US Gulf Coast refineries. Dakota Express Pipeline would enter service in 2016.

Dakota Express would include new construction while also using Koch's existing Wood River Pipeline and Hartford terminal. Wood River has historically transported crude oil south-to-north from Hartford to the Saint Paul, Minn. area. Koch has completed an engineering viability study on reversing its flow for use as part of the Dakota Express Pipeline system.

The nonbinding first phase of the open season will begin July 1 and last 45 days. If sufficient shipper interest is received in the first phase, Koch may proceed to the second phase, during which binding commitments would be sought. The project is subject to management approval and receipt of necessary permits.

Enbridge Inc. and Energy Transfer announced a joint development to move 420,000-660,000 b/d of crude by pipeline from Patoka 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. The conversion would create the first pipeline transportation option for moving crude to the eastern Gulf Coast from the US Midwest (OGJ Online, Feb. 20, 2013).

Hoover starts Delaware basin midstream units

Hoover Energy Partners LP, Houston, and an affiliate, Pecos River Pipeline I LP, reported start-up of a compressor station, gas pipeline, and separation plant and plans to build a fractionation plant in the Delaware basin of Texas.

The companies started up the Balmorhea Compressor Station, Bullrush Pipeline, and Essex Station in Reeves County. Hoover's gathering system now has suction pressure of 30 psig, lower than had been available in the area before the start-ups.

The three new compressors have capacity of more than 15 MMcfd, expandable to 70 MMcfd. The 15-mile, 8-in. Bullrush pipeline connects with the Regency high-pressure system.

The Balmorhea and Essex facilities recover condensate for trucking to local markets.

Hoover Energy Texas LP, meanwhile, has entered a contract with Zephyr Gas Services for construction of a 10 MMcfd Joule-Thompson liquids extraction plant. The Commanche plant will be on 30 acres near Hoover's existing Gomez treatment plant in Pecos County.

Hoover plans to covert as much as 110 miles of its 550 miles of lean-gas pipeline in its Gomez gathering system to rich-gas service.

Hoover Pres. and Chief Operating Officer Randy Hoover said success of the Commanche plant could lead to construction of a Pecos County cryogenic facility, possibly operational early in 2015.

Two pipeline crude leaks reported in Canada

The National Energy Board of Canada responded to pipeline releases of crude oil in Ontario on June 11 and in British Columbia on June 13.

The earlier release occurred between the Imperial Oil Terminal and Marcus Oil Terminal in Sarnia. NEB didn't immediately determine the size of the spill but said it posed no immediate safety concern.

The spill occurred along a right-of-way containing pipelines owned by Plains Midstream Canada, Imperial Oil, and Enbridge Pipelines Inc. All the pipelines were shut down.

The British Columbia release occurred on the Trans Mountain Pipeline southwest of Merritt. NEB said it hadn't determined the size of the release, but news reports put the size at about 12 bbl.

The pipeline, owned by Kinder Morgan, was shut down.