OGJ Newsletter

April 16, 2007
General Interest - Quick Takes

Japan offers loan to rebuild Iraq’s infrastructure

The Japanese government has agreed to lend Iraq some ¥102.8 billion ($862 million), with just over half of it earmarked for reconstruction of Iraq’s oil pipelines, refineries, and export terminal facilities.

Japan’s Ministry of Foreign Affairs said ¥50 billion would be used to upgrade Iraq’s oil export facilities, while another ¥2 billion will enable refurbishment of a refinery in Basra on the Persian Gulf.

The ministry released a statement that Iraq boasts the world’s third-largest crude oil reserves and that it is important for Japan to build a long-term strategic partnership with Iraq.

In February, Japan imported 290,973 kl of crude oil from Iraq out of total worldwide imports of 18.7 million kl.

The ministry said another ¥32.6 billion in loans will go toward rebuilding Iraq’s power sector, and some ¥18 billion, for the repair and redevelopment of a fertilizer plant.

The loans are repayable over a 40-year term, with a 10-year grace period.

DOE rejects bids to supply oil to SPR

The US Department of Energy rejected initial bids to supply the Strategic Petroleum Reserve with as much as 4 million additional bbl of oil. DOE’s fossil energy office said the bids were too high. A second solicitation will occur in mid-April, it indicated on Apr. 4.

The solicitation was the first of a series to replace 11 million bbl sold from the reserve in fall 2005 after Hurricane Katrina damaged supply lines. The purchases would be the first for the SPR since 1994 and will be financed with the $584 million of proceeds from the emergency sale, DOE said.

It said the SPR, which has a 727 million bbl capacity, currently has 689 million bbl of inventory. DOE said it plans to stagger solicitations over several months to minimize market impacts and hopes to achieve a moderate fill rate of 100,000 b/d.

MMS makes proposal to resolve pipeline disputes

The US Minerals Management Service proposed regulations Apr. 6 to establish processes for resolving offshore oil and gas pipeline access disputes.

The proposed regulations are designed to establish a way for shippers of oil and gas from federal leases on the Outer Continental Shelf to notify MMS if they believe they have been denied open and nondiscriminatory access to pipelines on the OCS, the agency said in a notice published in the Federal Register.

The rules also would provide MMS with tools to assure that pipeline companies provide open and nondiscriminatory access to their systems, it added.

MMS noted that the OCS Lands Act mandates that pipelines provide such access to both owner and nonowner shippers. It said the proposed rules would implement complaint procedures and alternative measures for shippers who allege they have been denied such access. It said it would accept comments on the proposal through June 5 and on its reporting burden by May 7.

UK gasoline sales up in ’06 after long slide

Gasoline sales in the UK reversed a 10-year slide last year, reports the Energy Institute, London.

In line with a well-established European pattern, diesel sales increased by much more than gasoline.

UK gasoline sales climbed in 2006 by 572,000 tonnes, or 3.1%, the Energy Institute reported in its UK Retail Marketing survey. Gasoline sales had fallen each year since 1997. Diesel sales last year grew by 1.6 million tonnes, or 8.4%.

Total motor-fuel sales increased by 5.8% to a record 40.5 million tonnes in 2006 as registered UK vehicles grew by 0.6% to an all-time high of 33.1 million.

While product sales grew, the number of retail outlets in the UK and Northern Ireland fell to 9,382, the lowest since the 1920s. That number was 382 below the end-2005 total.

The Energy Institute study reported increases in the numbers of retail sites owned by supermarkets and small retailers and decreases in oil-company, main-retailer, and other unbranded sites.

Here are last year’s changes in retail outlets by the leading UK oil-company marketers: BP down 20 to 1,212, Texaco down 13 to 1,041, Esso down 46 to 910, Total down 1 to 909, and Shell down 34 to 872.

Industry Scoreboard
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Exploration & Development - Quick Takes

Marathon makes oil discovery in deepwater GOM

Marathon Oil Corp. has made a deepwater discovery on Green Canyon Block 244 (OCS-G 11043) in 2,900 ft of water in the Gulf of Mexico about 137 miles south-southwest of Venice, La.

The Droshky-1 well (previously named Troika Deep) was drilled to a TD of 21,190 ft and encountered high-quality oil-bearing reservoirs. The well logged about 250 ft of net oil pay, with thickness similar to that encountered by the 1994 Troika discovery well at the same location, according to an analyst note. Troika has estimated recoverable reserves of 220 million boe, the analyst said, adding that conservative estimates of recoverable reserves at Droshky are placed at 100-150 million boe.

Development of the discovery is possible through the Troika Unit infrastructure about 2 miles from the Droshky well.

Preparation has begun for drilling of two sidetrack wells, which are expected to take 30 days each. Marathon has the drilling rig under contract until the end of the sidetrack program, after which engineering development studies will follow, the company said.

Marathon holds a 100% interest in the Droshky-1 well and a 50% interest in the Troika Unit.

Final flow rates given for Alapli well off Turkey

Toreador Resources Corp. and its partners reported that final test results from the Alapli-1 exploration well yielded a commingled flow rate of 7 MMcfd of gas from just outside the South Akcakos subbasin in the Black Sea off Turkey.

Toreador’s joint venture partners are Turkish national oil firm TPAO and Stratic Energy Corp. (OGJ Newsletter, Mar. 19, 2007).

On final test, the Alapli-1 well’s flow came from 15 m of perforations. The three zones were 1,068-1,242 m TVD in the Eocene-age Kusuri formation. The final test was a commingled flow from all three zones through a 32/64-in. choke with a flowing pressure of 1,080 psi. Dallas-basded Toreador has a 36.75% interest in the well, while TPAO has 51% interest and Stratic has the remaining 12.25%.

Southern Tanzania gas project growing

Artumas Group Inc., Calgary, expects its Msimbati-1X exploration well to become the second hydrocarbon discovery in the Mnazi Bay concession, Rovuma basin, in southern Tanzania.

The well, 2.5 km southeast of the Mnazi Bay-3 well site, went to TD 6,570 ft and penetrated the primary objective Middle Miocene sands (Msimbati Prospect) at 4,800 ft. These sands represent a high-amplitude fairway separate from Mnazi Bay gas field.

At 6,000 ft, the well encountered the classic Miocene/Oligocene sandstone formations of Mnazi Bay gas field, which the MB-2 and MB-3 wells appraised. Drillstem test results are expected in mid-April. The field was discovered in 1982 and began delivering gas in January through a 27-km pipeline to the 12-Mw Mtwara electric power station (OGJ Online, Sept. 27, 2006).

Artumas approved 60 line-km of 2D seismic surveys that will focus on highgrading a deeper exploration prospect for an Eocene/Cretaceous oil test on the Mwambo Prospect. The company expects to drill a well in the third quarter.

Dominion acquires block off Tanzania

Dominion Petroleum Ltd. has signed a production-sharing agreement with Tanzanian government agency Tanzanian Petroleum Development Corp. (TDPC) for an exploration block off eastern Tanzania.

Block 7 covers 8,500 sq km on the continental slope and lies in 100-3,000 m of water in the Indian Ocean.

Dominion plans to spend at least $8.75 million during the initial 4-year exploration period-$1 million on geological and geophysical surveys, $4 million on acquiring more than 4,000 km of 2D seismic data, and $3.75 million on acquiring more than 500 sq km of 3D seismic.

Initial data analysis previously acquired by Dominion suggests there are encouraging prospects in the shallower part of Block 7 at drillable depth. The company is required to drill a well before the second 4-year term.

Previously, Dominion entered into three PSAs with TDPC covering more than 10 million acres in the onshore Mandawa, Kisingire, Lukuliro, and Selous licenses and was scheduled to drill four wells (OGJ, July 10, 2006, Newsletter).

EnCana lets FEED contract for Deep Panuke field

EnCana Corp. let a front-end engineering and development contract to Intec Engineering and IMV Projects Atlantic for the subsea and pipeline design for EnCana’s Deep Panuke dry gas development off Nova Scotia.

The FEED work will result in bid packages for the subsea and pipeline engineering, procurement, and construction contracts and will support project sanction, expected by yearend.

Deep Panuke is to recover 390-890 bcf of sales gas, with a mean estimate of 630 bcf, at the rate of 300 MMcfd. The field would produce for 8 to 17½ years.

EnCana earlier proposed two pipeline options to handle the gas: One is an offshore connection to the Sable Offshore Energy Project pipeline, operating since the end of 1999. The other is a separate 176-km subsea pipeline adjacent to the SOEP line with a linkup onshore near Goldboro, NS. Either would deliver to the Maritimes & Northeast Pipeline (OGJ Online, Nov. 17, 2006).

Drilling & Production - Quick Takes

AWE expects production from Tui field at midyear

Australian Worldwide Exploration Ltd. Group, Sydney, is expecting the “Umuroa” floating production, storage, and offloading vessel to reach its Tui area oil development off New Zealand in mid-April. The field is on Taranaki basin permit PMP 38158 about 50 km offshore (OGJ Online, May 8, 2006).

The FPSO sailed from Singapore earlier this month.

AWE, which became project operator after acquiring New Zealand Overseas Petroleum Ltd. in early 2006, said it anticipates starting production June 30. Peak production is expected to be about 50,000 b/d.

AWE holds a 42.5% interest in Tui field. Japanese company Mitsui has 35%, New Zealand Oil & Gas subsidiary Stewart Petroleum holds 12.5%, and Pan Pacific Petroleum NL of Sydney has 10%.

Repsol YPF to use two Dalma rigs in Algeria

Repsol YPF SA has let a $23.24 million contract to Dalma Energy for two deep-drilling land rigs to be used in Algeria.

Repsol YPF operates a group that last year reported several gas discoveries in the Reggane basin of Algeria’s Sahara Desert (OGJ Online, May 18, 2006).

Dalma, a wholly owned subsidiary of Aabar Petroleum Investments Co. PJSC, Abu Dhabi, owns 22 rigs, all under contract in the Middle East, North Africa, India, and Southeast Asia.

The 2,000-hp rigs under contract to Repsol YPF were built in China at a cost of $22 million each.

BPTT Cassia complex due metering system

BP Trinidad & Tobago LLC (BPTT) let a contract to Woods Hole Group Inc., East Falmouth, Mass., to design, build, and install a meteorological and oceanographic measurement system on BPTT’s Cassia oil and gas production complex off eastern Trinidad and Tobago.

Woods Hole will provide systems design, integration, installation, and real-time data display along with monthly data monitoring and archiving during the 24-month project.

Measurement of the predominant and spurious currents and waves and their impact in this environment is important for the continued safe and efficient operation of BPTT’s production platforms off Trinidad and Tobago’s east coast, Woods Hole said.

The BPTT Cassia Metocean system will consist of two Nortek AWAC acoustic Doppler current profilers-arranged to generate a continuous profile of currents through the 90 m water column and measure wave height and direction at the installed location-and several wind, barometric pressure, and temperature-relative humidity sensors.

The systems will be integrated into the Woods Hole integrated real-time system, which will acquire and store all raw data and display the processed data on the Cassia production complex for operational use in real time through a web-based data server application. It will enable BPTT and BP’s affiliate offices in Houston to view the real-time processed data through any BP web-enabled access port.

Deck lift record set in Gulf of Mexico

Saipem SPA’s 7000 semisubmersible crane and pipelaying dynamically positioned vessel set a deck lift record of 10,473 tons in the Gulf of Mexico when it installed on Mar. 9 the Petróleos Mexicanos PB-KU-A2 production platform integrated deck in Ka-Maloob-Zaap field. The deck was installed on the jacket in less than 3 hr with rig-up performed offshore due to no feasibility of any prerigging in yard. The Saipem 7000 held the previous lift record in the gulf of 9,927 tons after installing the PB-KU-S deck on Dec. 14, 2006. Photo from Saipem.

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Processing - Quick Takes

China refinery due delayed coker heaters

CNOOC Oil & Petrochemicals Co. Ltd. (COPC) has let a thermal design, engineering, procurement, and material supply contract to Foster Wheeler USA Corp. for two delayed coker heaters for a four-drum delayed coking unit to be installed at COPC’s newly constructed 250,000 b/d refinery in Huizhou, Guangdong Province, China.

The delayed coker heaters will use Foster Wheeler’s Terrace-Wall design.

Foster Wheeler previously was awarded the process design package contract for the delayed coking unit, which will be based on the company’s Selective Yield Delayed Coking (SYDEC) process. Foster Wheeler said the delayed coker heaters are an integral component of the SYDEC process technology.

The new $2.64 billion refinery will process crude oil from CNOOC’s Penglai field in Bohai Bay (OGJ Online, Sept. 8, 2005).

China plans three petrochemical plants at Daqing

Authorities in Daqing, China, near the projected terminus of Russia’s East Siberia Pacific Ocean oil pipeline, are planning several large-scale petrochemicals developments.

According to China’s National Development and Reform Commission, projects being designed include a 1.2 million-tonne/year ethylene plant, a 450,000-tpy propylene facility, and a 1 million-tpy fertilizer plant.

The plans were announced even as oil output from Daqing field, operated by a PetroChina Co. unit, has been declining in the past several years, dropping by 3.4% in 2006 to 43.41 million tonnes.

Despite the downturn, Chinese authorities expect the pipeline to make up the domestic production shortfall by delivering as much as 30,000 tpy of crude from Russia’s East Siberian fields.

According to Russian state media, quoting Chinese official sources, preparations by China National Petroleum Corp. (CNPC) for the construction of a branch of the ESPO line are well under way.

“We’re confident that the branch will be built, and we’re conducting active preparations for this,” a CNPC management source told Interfax-China, adding that CNPC has begun cooperation with Russia’s Transneft for construction of the line.

JV to provide management at Suncor plant

Suncor Energy Inc. has let a 5-year, $1 billion (Can.) contract to Flint Transfield Services Ltd. for asset management services at its oil sands operations in Fort McMurray, Alta., and its 70,000 b/cd refinery in Sarnia, Ont.

The contract scope includes maintenance shutdown and turnaround services for Suncor’s Fort McMurray oil sands and Firebag in situ facilities and the Sarnia refinery; contract maintenance services to the oil sands extraction, upgrading, and Firebag facilities and the Sarnia refinery; and overall site maintenance services at the oil sands operations.

The long-term contract also covers additional services such as engineering and construction for “select sustaining capital projects,” Flint said.

FT Services has begun mobilizing resources and will continue to ramp up service delivery capacity over the next 6 months. The company is expected to assume delivery of maintenance services in Fort McMurray in the third quarter and in Sarnia late in the fourth quarter or early first quarter 2008.

FT Services is a 50-50 joint venture of Flint Energy Services Ltd. and Transfield Services of Australia. Other companies participating with FT Services in providing services under the contract are Calgary-based Colt Engineering Corp. and ThyssenKrupp Safway Inc.

Brazil to import palm oil to meet mandate

Brazil plans to step up its purchase of palm oil from Malaysia in order to meet a government mandate for a 2% biodiesel (B2) content in diesel starting Jan. 1, 2008.

To comply with the mandate, Brazilian refiners must blend some 800,000 tonnes of biodiesel into 38 million tonnes of diesel fuel by yearend. But Brazil currently is producing less than 300,000 tonnes/year of soyaoil-based biodiesel, a shortfall of 500,000 tonnes, said Eduardo Pessoa de Carvalho, chief executive officer of Brazil’s Meridian Trading Ltd.

Because Malaysian palm oil’s price is lower, Brazil likely will buy more of it as feedstock to blend with its soyaoil-based biodiesel, Carvalho said.

In 2006, Brazil bought 33,222 tonnes of Malaysian palm oil, more than twice the 14,620 tonnes purchased in 2005.

Transportation - Quick Takes

Arrow to supply gas for Queensland LNG plant

Coal seam methane company Arrow Energy NL, Brisbane, has signed an agreement to supply gas from its Daandine CSM field in southeast Queensland to use as feedstock for a proposed mini-LNG plant. The plant will be built on land Arrow owns at Daandine.

The agreement, signed with Liquegas Energy, a part of the Norwegian oil technology services company AGR Group, is for the supply of an initial 1.86 bcf/year of gas for 15 years beginning in first half 2009.

Both companies want to finalize a gas sales agreement within the next month.

The LNG produced will be marketed in southern Queensland and northern New South Wales, mostly for LPG replacement fuel and as diesel for long-haul trucking.

Crosstex starts up north Louisiana gas line

Crosstex Energy LP, Dallas, started up its $90 million natural gas pipeline expansion across three parishes in northern Louisiana Apr. 1.

The 72-mile line-63 miles of 24-in. and 9 miles of 16-in. pipeline-will add initial capacity of 200 MMcfd of gas to Crosstex’s 2,000-mile Louisiana Intrastate Gas pipeline system. That capacity is fully subscribed, the company said, but Crosstex has an option to increase capacity to 240 MMcfd.

The pipeline will provide an outlet for the region’s higher production, for which takeaway capacity had become insufficient, Crosstex said.

Oneok JV plans another NGL pipeline

Overland Pass Pipeline Co. LLC, a Tulsa-based joint venture of Oneok Partners LP and Williams Cos., plans to build a 150-mile NGL pipeline lateral to connect with the previously announced 750-mile Overland Pass Pipeline in a move to handle growing volumes in the Piceance basin in northwestern Colorado.

The $120 million lateral will have a capacity to transport as much as 100,000 b/d of raw NGLs from the Piceance basin to the 110,000 b/d Overland Pass Pipeline, which will extend from Opal, Wyo., to the Midcontinent NGL hub in Conway, Kan. Additional pump facilities would increase Overland Pass Pipeline capacity to 150,000 b/d (OGJ Online, May 5, 2006).

Under long-term NGL transportation and fractionation agreements that are being finalized, Williams will dedicate its NGL production from an existing plant and its newly announced Willow Creek, Colo., natural gas processing plant to the Overland Pass Pipeline via the proposed 150-mile pipeline extension.

Construction on the 14-in. lateral pipeline is expected to begin around mid-2008 with start-up scheduled for early 2009. Upon completion, the lateral will transport volumes from an existing Williams’ plant. Volumes from Williams’ recently announced Willow Creek plant are expected to be transported in third quarter 2009.

Along with construction expenditures of $433 million for the Overland Pass Pipeline, Oneok Partners is spending an additional $216 million to expand and upgrade its existing NGL fractionation capabilities and the capacity of its NGL distribution pipelines.

Oneok Partners is managing the construction of the Overland Pass project and will be operator of the pipeline. Construction of the Overland Pass Pipeline is expected to begin this fall with start-up expected in early 2008.

Williams, under a previously announced long-term shipping agreement will dedicate its NGL production, currently estimated at about 60,000 b/d, from two Wyoming gas processing plants to Overland Pass Pipeline. Both projects require various state and federal regulatory approvals prior to construction.

West-east gas line build to start late 2008

China National Petroleum Corp. (CNPC) will begin construction of a 6,500-km west-east natural gas pipeline from Xinjiang to Guangdong in August or September 2008, according to Xue Zhenkui, director of the China Petroleum Pipeline Scientific Research Institute in the official Shanghai Securities News. The pipeline, to carry 30 billion cu m/year of gas, is scheduled to complete in 2010.

Pipelaying will begin in Xinjiang where it will parallel China’s first West-East gas pipeline to Gansu. The original 4,000 km line-from Xinjiang’s Tarim basin to Shanghai-went commercial in 2004. Officials said branch lines eventually would be built to connect the two west-east pipelines and gas fields, forming a gas network to cover the country. They said the network also would link to a gas line from Kazakhstan to China.

First phase of the 10 billion cu m/year China-Kazakhstan cross-border project will be completed in 2009, officials said, while the balance of the project will be finished in 2012, increasing capacity to 40 billion cu m.