GENERAL INTEREST — Quick Takes
API, IPAA criticize plan to raise royalty rates
US Sec. of the Interior Ken Salazar's plans to raise onshore oil and gas royalty rates by nearly 50% are a bad idea, the American Petroleum Institute and Independent Petroleum Association of America separately said on Feb. 16.
Their statements came after Energy & Environment Daily reported that Salazar told the US House Interior Appropriations Subcommittee on Feb. 15 that raising royalties for oil and gas produced from federal onshore acreage from 12.5% to 18.5% "is an appropriate fair market value rate."
The increase would fly in the face of the "all-in, all-of-the-above" energy strategy US President Barack Obama outlined in his State of the Union address, Independent Petroleum Association of America Pres. Barry Russell said.
"While oil and gas production on public lands is one of the top sources of federal revenues, providing $10 billion in bids, rents and royalty payments in recent years, the proposed 50% increase in royalty payments will further deter production and stifle much-needed investment in American's struggling economy," he warned.
Erik Milito, API's upstream and industry operations director, said that the oil and gas industry already contributes $86 million/day to the federal government in taxes and royalties.
"The oil and gas industry is one of the few bright spots in the economy, creating hundreds of thousands of jobs even when others are laying people off," he said. "The United States has some of the largest known resources of oil and gas in the world, but the administration continues to pursue policies that will slow development, reduce revenues to the government over time, destroy jobs, and undermine our energy security."
Shell unit makes offer to buy Cove Energy
A Royal Dutch Shell PLC subsidiary has offered to buy Cove Energy PLC for $1.6 billion in a move that would mark Shell's entry into Mozambique and Kenya. Cove also has holdings in Tanzania where Shell already has a presence.
The transaction remains subject to approval by Cove shareholders and by Mozambique regulators. Cove's board said it would recommend shareholders accept the offer from Shell Exploration & Production BV, also known as Shell Bidco. Both Mozambique and Kenya have potential for LNG exports. On Jan. 5, Cove announced it planned a formal sale process for the company, which has offices in London and Dublin.
Cove holds 8.5% interest in the 2.6-million-acre Offshore Area 1 off Mozambique. Anadarko Petroleum Corp. operates the Offshore Area 1 in the Rovuma basin with a 36.5% working interest (OGJ Online, Jan. 17, 2012).
Anadarko last year estimated that the deepwater Rovuma basin, which includes the Windjammer, Barqentine, Lagosta, and Camarao complex, has at least 10 tcf of recoverable gas (OGJ Online, Oct. 5, 2011).
Other partners are Mitsui E&P Mozambique Area 1 Ltd. 20%, BPRL Ventures Mozambique BV 10%, Videocon Mozambique Rovuma 1 Ltd. 10%. Mozambique's Empresa Nacional de Hidrocarbonetos EP's 15% interest is carried through the exploration phase.
Perenco to buy Vietnam assets from ConocoPhillips
A subsidiary of Perenco SA agreed to buy the Vietnam business unit of ConocoPhillips for a total of $1.29 billion in a transaction expected to close by June 30.
ConocoPhillips is selling three wholly owned subsidiaries that separately hold its 23.25% interest in Block 15-1; 36% interest in Block 15-2; and 16.3% interest in Nam Con Son Pipeline, which transports 700 MMcfd of gas from the Nam Con Son basin to southern Vietnam.
The two offshore blocks produced 32,000 boe/d in 2009, ConocoPhillips said on its web site.
"The sale of our Vietnam business unit is an important component of our $15-20 billion 2010-12 asset divestiture program," said Al Hirshberg, ConocoPhillips senior vice-president, planning and strategy.
ConocoPhillips conducted business in Vietnam for more than 15 years.
Mitsubishi to buy stake in Talisman gas assets
Mitsubishi Corp. agreed to pay Talisman Energy Inc. $280 million for a stake in nine natural gas blocks in Papua New Guinea's onshore Western Province, subject to approvals by government and joint venture partners.
Upon closing, Talisman will own an average 40% interest and Mitsubishi will hold an average 20% interest in the nine licenses. The two companies say they will work jointly toward potentially exporting 3 million tonnes/year of LNG.
The transaction includes the PPL 235 license, which Talisman obtained when it acquired Rift Oil PLC (OGJ Online, July 24, 2009).
Talisman said it plans a four-well drilling program on PPLs 235 and 261 during 2012. The PPL 235 license contains the Puk Puk, Douglas, and Langia discoveries that contain an estimated 2.4 tcf of gas in place.
Exploration & Development — Quick Takes
Heidelberg confirmed, Anadarko eyes development
An appraisal well near the 2009 Heidelberg discovery in the deepwater Gulf of Mexico has confirmed the initial resource estimate of more than 200 million bbl of oil, said Anadarko Petroleum Corp.
Heldelberg-2 went to 31,030 ft in 5,000 ft of water 1.5 miles south and 550 ft structurally updip from the discovery well on Green Canyon Block 903. It encountered 250 net ft of oil pay in high-quality Miocene sands.
Log and pressure data from the appraisal and discovery wells indicate excellent quality, continuous, and pressure-connected reservoirs with the same high-quality oil. The discovery well encountered more than 200 net ft of oil pay.
Anadarko will sidetrack the appraisal well to evaluate the downdip extent of the field and will initiate prefront-end engineering and design work to prepare for sanctioning a development project.
Anadarko operates the block with a 44.25% working interest. Coowners are Apache Deepwater LLC and Eni SPA 12.5% each, Statoil ASA 12%, and ExxonMobil Corp. and Cobalt International Energy LP 9.375% each.
Liberia gets Turonian, Albian oil discovery
African Petroleum Corp. Ltd. said the Narina-1 well on its wholly owned LB-09 block offshore Liberia found 69 ft of net oil pay in the Turonian and 36 ft in the Albian.
The zones contain good-quality oil of 37° gravity and 44° gravity, respectively, and the company plans an active exploratory and appraisal program in Liberia this year.
Hydrocarbon shows were encountered over a 170-m interval in the Turonian, and no oil-water contact was found.
This discovery confirms the prospectivity of both of these highly successful West African exploration plays on African Petroleum's Blocks LB-08 and LB-09 that total 7,135 sq km.
Oil was found in good-quality reservoirs in a Turonian submarine fan system extending across a prospective area of 250 sq km. In addition, excellent quality oil was found in the Albian sands near a very large Albian submarine fan prospect.
In the shallower Campanian, Santonian, and Coniacian horizons, 709 ft of water-bearing net reservoir sands were encountered. While hydrocarbons were not expected due to absence of a prospect trap, the confirmation of good quality thick reservoir sands greatly reduces the risk in a number of large prospects covering more than 500 sq km at these levels which are known to be oil bearing in the region.
In the deeper Cenomanian and Albian, 300 m of source rocks were encountered that will be incorporated into the regional geological model to high grade the prospect portfolio as well as the surrounding open acreage.
The Maersk Deliverer semisubmersible drilled Narina-1 to a total depth of 15,912 ft in 3,750 ft of water.
African Petroleum said the well "identified a potentially large accumulation of light good quality oil at the Turonian level, as well as excellent quality oil in the Albian." It also found thick reservoir sands in shallower zones and thick source rocks that together with the discoveries in the Turonian and Albian has transformed the prospectivity of the blocks and the surrounding open acreage.
Romanian Black Sea gets deepwater gas find
A deepwater wildcat in the western Black Sea off Romania has discovered an accumulation initially pegged at 1.5-3 tcf of gas whose commerciality isn't assured, press reports said.
The Domino-1 well is on the Neptun block held by ExxonMobil Exploration & Production Romania Ltd. and OMV Petrom SA, the 51% subsidiary of Austria's OMV AG.
The well, in 930 m of water 170 km east-northeast of Constanta, cut 70.7 m of net gas pay. It is Romania's first deepwater well. The reports did not give the total depth or depth of the pay interval.
The two companies plan to shoot 3D seismic this year, OMV said. Production, if warranted, would likely not begin until the end of the decade at a cost of several billion dollars, it added.
Schuepbach adds onshore acreage in Uruguay
Schuepbach Energy LLC, Dallas, will shoot 2D seismic surveys and drill research wells in two areas of Uruguay under production sharing contracts signed Feb. 10 with state-owned ANCAP.
The work, under a 3-year exploratory period, is estimated to cost $10 million, according to ANCAP.
In two voluntary subsequent periods, Schuepbach could drill two exploratory wells each before returning half the acreage to ANPAC.
On contract area covers 10,000 sq km in Tacuarembo, Paysandu, and Durazmo provinces. The other covers 4,000 sq km in Salto Province.
Contract terms are 30 years, extendible by 10 years, with 25 years for development and production.
On its web site, Schuepbach says it has been active in Uruguay since 2009 with licenses totaling 2.4 million acres.
Drilling & Production — Quick Takes
Connacher delays oil sands expansion
Connacher Oil & Gas Ltd., Calgary, which last month disclosed a strategic review following key management changes, has delayed the planned expansion of its Alberta oil sands production project and named an interim chief executive officer (OGJ Online, Jan. 20, 2012).
The company operates two 10,000 b/d steam-assisted gravity drainage production projects in its 37,120-acre Great Divide Project Area south of Fort McMurray, Alta.
It earlier planned to expand production capacity by 24,000 b/d, with output starting in 2013 (OGJ Online, June 23, 2010).
In a Feb. 21 statement, Connacher said the expansion would occur in two stages with 12,000 b/d capacity each, coming online in 2014 and 2016.
In the statement, the company said Peter D. Sametz, formerly president and chief operating officer, has been appointed interim chief executive officer.
Two Connacher directors began overseeing operations in mid-January (OGJ Online, Jan. 13, 2012).
In addition to the oil sands interests, Connacher owns a 9,500 b/d heavy oil refinery in Great Falls, Mont., and holds interests in conventional oil and gas properties in central Alberta.
Chevron to drill relief well offshore Nigeria
Chevron Nigeria Ltd. said a contractor started drilling a relief well to seal the Funiwa 1A natural gas well, which caught on fire Jan. 16 about 6 miles offshore Nigeria in 40 ft of water.
Transocean Ltd. is using its GSF Baltic jack up rig to drill the relief well. Nigerian authorities approved the relief well as part of a response plan to enable cementing and abandonment of the Funiwa 1W well.
Last month, fire started aboard the shallow-water jack up KS Endeavor operated by FODE Drilling Nigeria Ltd.
Two crew members were killed, and 152 others were safely evacuated. The accident's cause remains under investigation, Chevron Nigeria said, adding that no oil has been spilled.
CNRL applies for Kirby oil sands expansion
Canadian Natural Resources Ltd. has filed regulatory applications for expansion of its Kirby in situ oil sands project in the southern Athabasca region of Alberta.
CNRL has begun construction of the initial Kirby project, which includes four well pads and the possible addition of eight pads over 15 years along with a facility able to process 40,000 b/d of bitumen. Alberta's Energy Resources Conservation Board and other agencies have approved production of as much as 45,000 b/d.
Also approved is a project to develop and produce 10,000 b/d of bitumen in the Kirby area that CNRL acquired from Enerplus Resources Fund.
Under the new application, that project is to be combined with with other expansions to push CNRL's total production capacity in the Kirby area to as much as 140,000 b/d through steam-assisted gravity drainage and possibly cyclic steam simulation.
The project under construction is scheduled to come on stream in 2013, and the expansion project is to start production in 2016. CNRL, operator with 100% interest, estimates Kirby proved and probable reserves at 457 million bbl.
PROCESSING — Quick Takes
Another Williston diesel refinery studied
Another refinery designed to produce diesel from Bakken crude oil is in prospect in the Williston basin.
A subsidiary of MDU Resources Group Inc., Bismarck, ND, and an affiliate of Calumet Specialty Products Partners LP, Indianapolis, have signed a nonbinding letter of intent to study feasibility of building and operating a 20,000 b/d refinery in southwestern North Dakota. Diesel produced by the facility would be sold in the region of the booming Bakken oil play.
Earlier in February, Dakota Oil Processing LLC, Williston, ND, was reported to be seeking financing for a similar project (OGJ Online, Feb. 8, 2012).
Signatories of the new study are WBI Holdings Inc., an MDU Resources wholly owned subsidiary, and Calumet Refining LLC, owned by owners of the general partners of Calumet Specialty Products.
MDU Resources said site selection, permitting, crude oil procurement, marketing, and engineering studies have begun.
Devon to expand Woodford shale gas plant
Devon Gas Services LP, Norman, Okla., has awarded a construction contract to KBR, Houston, to expand Devon's 200-MMcfd gas processing plant in Canadian County, Okla.
KBR will provide preconstruction services and installation to expand the cryogenic gas plant in the Woodford shale by 150 MMcfd, which Devon said will start up in second-quarter 2013.
The Devon expansion promises yet more liquids moving to Mont Belvieu on the Texas Gulf Coast.
Earlier this month, Energy Transfer Partners LP and Regency Energy Partners LP, both of Dallas, announced that their joint venture Lone Star NGL LLC will build a second 100,000-b/d fractionator at Mont Belvieu (OGJ Online, Feb. 16, 2012).
That announcement said the second fractionator is to handle increasing barrels from the partnership's Woodford shale, Eagle Ford shale, and Permian basin infrastructure, including Lone Star's 570-mile West Texas Gateway NGL pipeline. That pipeline and the first 100,000-b/d fractionator at Mont Belvieu are to be completed in first-quarter 2013. The second fractionator announced yesterday will be in service in first-quarter 2014.
Freeport Liquefaction project gets FEED contract
Freeport LNG Expansion LP and a joint venture of Zachry Industrial Inc. and CB&I Inc. have agreed to a front-end engineering and design contract for the Freeport Liquefaction Project near Freeport, Tex.
The Zachry-CB&I venture will engineer and design three natural gas liquefaction trains of 4.4 tonnes/year each and related pretreatment to be built near the existing Freeport LNG regasification terminal. That terminal is owned and operated by Freeport LNG parent Freeport LNG Development LP.
Within the three-train design, the joint venture will develop a fixed-price, fixed-schedule proposal for both a one-train initial development and a two-train initial development. This approach will allow Freeport LNG to choose the optimum size of the initial phase of the project "based upon customer demand and financing considerations," according to the announcement.
In addition, design of the three-train project will allow for the "efficient expansion of additional liquefaction train(s) and pretreatment" after the initial development has begun, it said.
Zachry was part of the consortium that designed and built the Freeport LNG regasification terminal. In 2010, CB&I completed turnkey design, engineering, and construction of a similarly sized LNG liquefaction train near Lima, Peru. That project, said the announcement, "used technologies and design requirements similar to those anticipated" for Freeport liquefaction. In addition, CB&I recently completed design, engineering, and construction of ExxonMobil's Golden Pass LNG terminal near Sabine Pass, Tex.
TRANSPORTATION — Quick Takes
Williams to build Marcellus shale gas line
Williams Partners LP has entered into a joint venture with Cabot Oil & Gas Corp. to build the 120-mile Constitution Pipeline, connecting Williams Partners' natural gas gathering system in Susquehanna County, Pa., to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, NY. Constitution will transport at least 500 MMcfd of Cabot's Marcellus shale production, but will be expandable to meet growing demand for takeaway capacity in northeast Pennsylvania.
Williams will own 75% of the Constitution system and, through its affiliates, will provide construction, operation, and maintenance services. Cabot will own the remaining 25%. Williams expects to start the application process with the US Federal Energy Regulatory Commission soon and is holding an open season to gauge additional interest in the line.
Williams also completed its acquisition of the Laser Northeast Gathering System and other midstream businesses from Delphi Midstream Partners LLC. The original acquisition along with additional pipeline construction was funded with $329 million in cash and about 7.5 million Williams Partners units (OGJ Online, Dec. 28, 2011).
Williams described these two projects as key steps in its strategy to create the Susquehanna Supply Hub, a major natural gas supply hub in northeastern Pennsylvania. Williams expects the hub to deliver more than 3 bcfd of Marcellus shale natural gas into four major interstate gas pipeline systems by 2015.
Williams Partners' gathering system in northeastern Pennsylvania currently covers three counties and has a capacity of 750 MMcfd. With the recent start-up of the Springville pipeline, it is now connected to three major interstate gas pipeline systems—Williams Partners' Transco system, Tennessee Gas Pipeline, and Millennium Pipeline. Cabot's Marcellus production had been constrained at 400-420 MMcfd prior to the Springville line's commissioning (OGJ Online, May 25, 2011).
Williams Partners and Cabot reached a 25-year gathering agreement covering 138,000 gross acres in the northeast Pennsylvania area of the Marcellus shale in November 2010.
SemGroup, Chesapeake to build Oklahoma pipeline
SemGroup Corp., Gavilon Group LLC unit Gavilon Midstream Energy LLC, and a unit of Chesapeake Energy Corp. plan to form a joint venture to build a 210-mile pipeline in western and north-central Oklahoma. The line will transport oil to a 1 million bbl storage facility in Cushing. The companies described the project as meeting growing midstream requirements resulting from drilling activity in western Oklahoma and the Mississippi Lime play.
The pipeline will consist of two laterals, one starting near Alva in Woods County, Okla., and the other near Arnett in Ellis County, Okla. The laterals will intersect near Cleo Springs in Major County, Okla., where the pipeline will increase in diameter and continue east to storage at Cushing.
The line will have an initial capacity of 140,000 b/d, expandable to 180,000 b/d through additional horsepower. SemGroup will design, build, and operate the pipeline; Chesapeake is the project's anchor shipper; and Gavilon will perform risk management and clear the shipped crude in the Cushing market.
The companies plan to begin building the pipeline in July for an in-service date of third-quarter 2013.
SemGroup unit SemCrude LP last year contracted to build 1.95 million bbl of additional crude oil storage at its Cushing terminal to service expanded flows from the Denver-Julesburg basin on its White Cliffs Pipeline (OGJ Online, Apr. 4, 2011).
Magellan extends Crane-to-Houston line open season
Magellan Midstream Partners LP extended the binding open season to solicit commitments from shippers to transport oil from Crane, Tex., to the partnership's East Houston terminal for further delivery to Houston and Texas City-area refineries through Magellan's system. Binding commitments for the Crane-to-Houston oil line are now due Mar. 1.
The partnership is reversing and converting its line from Crane to Houston for oil service. Initial capacity will be 135,000 b/d, expandable to 225,000 b/d if warranted by committed capacity. Magellan expects the reversed line to enter service early 2013, pending approvals.
Magellan is also considering building a line segment or using existing third-party infrastructure to move oil from Midland, Tex., to Crane for delivery to Houston and has been soliciting binding commitments to assess interest. The Midland-to-Houston open season also ends on Mar. 1.
An open season was held on this project in summer 2010 and on Sept 1, 2011, the partnership reported it would proceed with the conversion and reversal of the system's Crane-to-Houston segment.
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