Improve UK North Sea safety standards, BP told
The UK Health and Safety Executive (HSE) has ordered BP PLC to carry out a major audit of its safety practices for operations at its platforms in the UK North Sea, raising fresh fears about the company’s safety culture.
HSE in March served BP with an improvement notice that required it to improve its operations and show that it is meeting health and safety regulations after a series of safety concerns on the Schiehallion floating production and storage facility, 150 miles west of Shetland. Within the past year, BP received 14 safety standards notices, and it has complied with 10 of them.
UK unions for oil and gas workers were unsurprised at the news, stressing that they have been campaigning for an improved safety culture in the UK North Sea for some time and that investment is needed to maintain oil and gas infrastructure, particularly as energy prices currently are so high.
HSE said over the past year it has served 51 improvement notices and nine prohibition notices on various platforms and other companies in the UK sector of the North Sea.
The HSE notices for BP, however, come amid a company-wide review of its operations following harsh criticisms of its safety practices in the Baker report published earlier this year, which examined the Texas City, Tex., refinery fire that killed 15 people in March 2005. Last year BP also was forced to close in oil production from its Alaska Prudhoe Bay field because of pipeline corrosion.
BP has appointed independent expert Duane Wilson, a retired ConocoPhillips vice-president for refining and marketing, to lead its safety improvements in wake of the Baker report.
Tony Hayward, BP’s new chief executive, who took over the company earlier this month, is expected to make safety an important part of his agenda in the early part of his tenure.
MMS Director Johnnie Burton to retire
US Minerals Management Service Director Johnnie Burton announced that she will retire at the end of May.
Burton, who became MMS director in March 2002, told Department of the Interior Sec. Dirk A. Kempthorne in her May 7 resignation letter that the job “has been the most rewarding, and often the most challenging, of my career.”
Her successor has not been named. Burton will be the second US DOI agency chief involved with federal oil and gas resource management to leave in the last year.
US Bureau of Land Management Director Kathleen Clarke resigned on Dec. 28, 2006, to rejoin her family in Utah.
Burton’s primary accomplishment as MMS director was completion of a 5-year federal Outer Continental Shelf leasing plan from July 1, 2007, through June 30, 2012, that includes new acreage in the eastern Gulf of Mexico, in the Bristol Bay area off Alaska’s coast, and in the Atlantic Ocean off southeastern Virginia.
She also presided over 16 OCS sales and initiated royalty compliance program reforms to make it more effective and eliminate delays.
Burton was criticized when it was discovered that federal Gulf of Mexico deepwater leases issued by MMS in 1998 and 1999 did not contain price thresholds on their royalty exemptions.
Pointing out to angry members of Congress that the omissions took place during the Clinton administration, Burton ordered MMS to approach leaseholders and ask them to voluntarily negotiate new terms. Several leaseholders have done this, and talks with others are continuing.
Attacks on Nigeria oil workers continue
Some 12 foreign oil workers have been abducted in Nigeria in several separate overnight attacks, according to local government and company officials. The latest attacks followed one on May 1 in which armed militants killed one man and took six others hostage.
The most recent attacks, for which no group has claimed responsibility, include an unemployed Dutch oil worker kidnapped from a bar in the southern town of Warri, three South Korean executives and eight Filipino workers seized from a Daewoo construction site in Rivers state after a gunfight, and five people taken from Eni’s Mystras floating production, storage, and offloading vessel.
On May 2, Chevron Corp. shut down 15,000 b/d of oil production in Nigeria after a Nigerian sailor was killed and six foreign oil workers kidnapped by members of the militant group Movement for the Emancipation of the Niger Delta. The militants attacked Chevron’s Oloibiri FPSO off southern Bayelsa State on May 1 (OGJ Online, May 2, 2007).
Japan to greatly increase products exports
Japan will increase exports of petroleum products by as much as 50% this year due to a decline-for the fourth year running-in domestic demand for fuel oil. The demand drop was caused by the increased use of natural gas by industry, as well as sales of hybrid-electric cars and other low-consumption products.
Nippon Oil Corp. will try to double its petroleum exports to 2.35 million kl, as well as increase contract production for a major Chinese oil firm by 20% to 2.2 million kl. That will give Nippon overall exports of 4.55 million kl, a 50% increase. Cosmo Oil Co. plans to raise its exports by 40% to 1.44 million kl/year, largely by selling jet fuel and diesel in the US market.
Meanwhile, Taiyo Oil Co. and other midsize oil distributors reportedly will upgrade or create export facilities to step up their overseas shipments. Taiyo will upgrade the ship-loading pumps at its port facilities, while Mitsui Oil & Gas Co. will set up facilities to begin shipping jet fuel by June.
Last December, Taiyo, which refines petroleum products from light crude, announced plans to spend ¥50 billion to install cracking equipment for heavy oil at its Ehime Prefecture refinery (OGJ Online, Dec. 4, 2006).
In January Nippon and South Korean refiner SK Corp. said they would form a 10-year capital and business alliance under which each firm will spend ¥12 billion to purchase an initial 1% stake in the other (OGJ Online, Jan. 23, 2007).
Industry Scoreboard
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Exploration & Development - Quick TakesPremier rig to work over, drill Anoa field wells
Premier Oil PLC, after plugging and abandoning its Gajah Sumatera-1 exploration well on Natuna Sea Block A in Indonesia, is moving the Seadrill-5 rig to Anoa field to carry out a workover on an existing well. It will then drill a development well to exploit oil discovered last year in Anoa’s Central Lobe.
Last September, the company drilled an appraisal well into a new fault block on Anoa field and found a 67 ft column with an overlying 80 ft gas column that it said could greatly increase oil production.
Premier Chief Executive Simon Lockett said, “The Seadrill-5 now moves on to development activity to support existing gas sales contracts into Singapore and to exploit the oil discovered in 2006 in the Central Lobe of Anoa.”
The abandoned Gajah Sumatera-1 exploration well drilled a structure adjacent to Gajah Puteri field, reaching a TD of 2,387 m. It had “some gas shows,” Premier said, but no significant hydrocarbons.
OGDC finds gas, condensate in Pakistan
Oil & Gas Development Co. Ltd. (OGDC) has found gas and condensate in its exploratory well Kunnar West No. 1A in the Kunnar mining lease area in Pakistan.
The well reached a TD of 4,065 m targeting two zones of Massive Sands of the Cretaceous Lower Goru formation. The first tested 11.02 MMcfd of gas and 170 b/d of 44° gravity condensate through a 32/64-in. choke.
The well is 577 m west of Kunnar West Well No. 1.
“The potential of additional Zone-2 (Massive Sand) of Lower Goru formation in the well will be tested shortly,” OGDC said.
Putumayo well gauges natural oil flows
Gran Tierra Energy Inc., Calgary, gauged natural oil flows on tests of the Cretaceous Lower and Middle Caballos formations at its Juanambu-1 exploration well on the Guayuyaco Block in the Putumayo basin of southern Colombia.
Four more zones were to be tested, including shallower Cretaceous Villeta T sand, the well’s primary objective.
The Caballos tests yielded stabilized flows of 32° gravity oil with constant wellhead flowing pressure. Further details were to be released on completion of the remaining tests. Most wells in the basin require pumping.
Working interests are Gran Tierra 50% and Solana Resources Ltd. 50%. State Ecopetrol has a 30% back-in right, which would reduce the companies’ respective interests to 35% each.
BowLeven respuds D-1 wildcat off Cameroon
BowLeven PLC, Edinburgh, has respudded its D-1 exploration well on Block MLHP 5 off Cameroon because of mechanical and well-control problems at the first location.
The well is to reach 10,000 ft TD in 8 weeks to target Upper Miocene channelized turbidite sands that could be similar to hydrocarbon-bearing formations found by Noble Energy 10 km downdip in the 0-1 Belinda discovery in Equatorial Guinea (OGJ Online, July 7, 2006).
The original D-1 location was 37 km from a power plant at Limbe, which is proposed as a hub for gas exports to Equatorial Guinea and its LNG plant under construction on Bioko Island (OGJ Online, Feb. 19, 2007).
BowLeven has a 100% interest in Cameroon’s Etinde permit area, which holds three shallow-water blocks: MLHP 5, MLHP 6, and MLHP 7. They cover 2,300 sq km in the Rio del Rey and Douala basins.
Centrica awarded stake in Block 2AB off Trinidad
Centrica PLC, parent of British Gas, said the Trinidad and Tobago Energy Ministry has awarded it a share of an offshore license as part of its bid in the Trinidad and Tobago onshore and shallow water bid rounds.
Centrica will have a 32.5% interest in offshore Block 2AB near the Trinidad and Tobago coast and existing LNG export facilities.
Centrica will partner with Tullow Oil PLC, operator and holder of a 32.5% stake in the license, and with state-owned Petrotrin 35%.
Trinidad and Tobago is one of the largest exporters of LNG in the Atlantic Basin, currently accounting for about 80% of LNG imported into the US, said Centrica.
PNG offshore licensing round draws one bid
Just one application has been received for the much-heralded offshore Papua New Guinea licensing round (OGJ Online, Sept. 22, 2006).
The apparent interest from 15 groups that bought bid packages last year for blocks in the Gulf of Papua, Papuan Plateau, Moresby Trough, and parts of the Coral Sea seems to have evaporated.
PNG authorities said they will process the lone application and reserve the other blocks for competitive application and appropriate work program bids at any time.
Drilling & Production - Quick TakesTalisman appraisal well off Vietnam successful
Talisman (Vietnam 15-2/01) Ltd. has drilled a sidetrack appraisal well into its Hai Su Trang (HST) discovery made earlier this year on Block 15-2/01 in the Cuu Long basin off eastern Vietnam.
The sidetrack penetrated the HST structure about 1.1 km northeast of the original discovery location. It was drilled to a TMD of 3,342 m and encountered 51 m of net oil pay at a structural elevation similar to that of the discovery well.
Downhole well logging and sampling confirmed the presence and quality of the same oil-bearing zones tested in the original HST discovery well. As a result, Talisman and its partner, PetroVietnam Exploration & Production Co., anticipate moving quickly to full field development.
Talisman Pres. and Chief Executive Jim Buckee said the HST appraisal well also encountered new zones structurally higher in the section.
Thang Long Joint Operating Co. (TLJOC), a special purpose company established for conducting all operations on Block 15-2/01, plans to begin drilling three new exploration wells in third quarter to evaluate a very exciting basement structure. The company also expects to drill on two more of the many Miocene-Oligocene clastic prospects that are on trend with the HST discovery. Additional exploration drilling is anticipated beyond 2007, Talisman said.
TLJOC is preparing a reserves assessment report for a joint area project development plan. Talisman said discussions will be ongoing with the operators of the Te Giac Trang (TGT) discovery on adjacent Block 16-1. Talisman recently completed a successful sidetrack into the TGT Block 16-1 structure to determine how much it extends into Block 15-2/01 (OGJ Online, Jan. 18, 2007).
Statoil shuts in Kvitebjørn gas, condensate
Statoil ASA is shutting in gas and condensate production from Kvitebjørn field in the Norwegian North Sea because of low pressure in the reservoir during the company’s complex drilling program.
A Statoil spokesman told OGJ the company had produced the field at about 50% of its 190,000 boe/d capacity since late December.
“The operation’s complexity and adaptation of necessary new technology has led to an extension of the drilling program and resulted in further pressure fall in the reservoir,” Statoil said.
Statoil plans to restart production during the fourth quarter.
Statoil is operator of the license with 43.55% interest; other partners are Petoro AS 30%, Norsk Hydro AS 15%, Royal Dutch Shell PLC 6.45%, and Total SA 5%.
Umuroa FPSO on site off New Zealand
The floating production, storage, and offloading vessel for the $245 million Tui oil development has arrived on location on the PMP 38158 permit 50 km off Taranaki on New Zealand’s North Island.
The Umuroa FPSO, owned by Prosafe of Norway, is being leased for an initial 5 years to the Tui joint venture, operated by Australian Worldwide Exploration Ltd. of Sydney. The group has an option to retain the vessel for a further 5 years.
Umuroa is capable of handling up to 120,000 b/d of fluids, including 50,000 b/d of oil from the Tui project. It has a storage capacity of 730,000 bbl.
Oil is expected on stream at the end of June from Tui, Amokura, and Pateke accumulations. Flow will be via four subsea wellheads and flowlines connected to the FPSO.
Permit interest holders are AWE 42.5%, New Zealand Oil & Gas Ltd. 12.5%, Mitsui E&P New Zealand 35%, and Pan Pacific Petroleum Ltd. of Sydney 10%.
Processing - Quick TakesHusky to buy Valero’s Lima, Ohio, refinery
Husky Energy Inc. has agreed to buy a 165,000 b/d refinery in Lima, Ohio, from Valero Energy Corp.
Husky Pres. and Chief Executive Officer John C. S. Lau said the company would integrate the refinery with “future growth of heavy crude oil and oil sands production.”
The company produces more than 100,000 b/d of heavy oil in the Lloydminster region of Alberta and Saskatchewan and last year started production from the Tucker oil sands project in the Cold Lake area. Tucker output is to reach 30,000 b/d.
Husky operates a 28,000-b/d asphalt refinery in the Lloydminster area that also produces distillate used in a heavy-oil upgrader and condensate blended with heavy oil production. It also operates a 12,000-b/d light oil refinery in Prince George, BC, and ethanol plants in Minnedosa, Man., and Lloydminster.
For the Lima refinery it will pay $1.9 billion plus net working capital estimated at $200 million.
According to Oil & Gas Journal’s latest Worldwide Report, the refinery’s processing capacities include delayed coking 20,700 b/cd, fluid catalytic cracking 36,000 b/d, catalytic reforming 49,500 b/d, and catalytic hydrocracking 23,400 b/cd (OGJ, Dec. 18, 2006, p. 56).
GS Caltex sees 2010 start for Oman refinery
GS Caltex Corp. in 2010 will begin operating the 120,000 b/d refinery it has completed for state-owned Sohar Refinery Co. (SRC) in Oman.
GS Caltex-a 50-50 joint venture of South Korea’s GS Holdings and Chevron Corp.-will operate the plant and transfer technical knowledge on refining for a royalty of $50 million from SRC.
Located in Sohar, a port city 240 km northwest of Muscat, the refinery has a 75,000 b/d residual fluid catalytic cracker. It will supply naphtha and propylene to a large petrochemical complex under construction nearby (OGJ, June 6, 2005, Newsletter).
Indian Oil to participate in Iraq oil projects
Iraq has invited India’s largest refiner, Indian Oil Corp. (IOC), to establish refineries in war-torn Iraq and to participate in other downstream projects.
Indian Petroleum Minister Murli Deora and Iraqi Oil Minister Hussain Al-Shahristani met recently to exchange views on a host of such mutually beneficial projects.
Discussions revolved around the participation of two Indian state-owned enterprises in Iraq’s oil and gas sector-refiner IOC in downstream projects, and explorer-producer ONGC Videsh Ltd. (OVL) in Iraq’s upstream sector. OVL and Reliance Industries both have expressed interest in entering Iraq’s oil exploration sector.
OVL, Reliance, and Algeria’s Sonatrach had been in talks with the Saddam Hussein regime before United Nations’ forces assumed control over Iraq in 2000. The talks were interrupted by UN sanctions after 2000.
Iraq has proved oil reserves of 112 billion bbl, which makes it the world’s second largest oil nation behind Saudi Arabia.
Transportation - Quick TakesSinotrans to store, ship oil for Sinochem
China’s Sinotrans Group Corp. said it will begin providing global oil shipping and logistics services to Sinochem Corp.
Under an agreement signed Apr. 18, Sinotrans said it will provide Sinochem with oil transportation by sea, air, rail, and road as well as storage services, all aimed at increasing efficiency and lowering costs.
The Sinotrans statement, which did not stipulate the amounts the firm will transport, follows an Apr. 17 oil products shipping contract between China National Petroleum Corp. and Nanjing Oil Shipping Group, a subsidiary of China Chang Jiang National Shipping Group.
Under that contract, Nanjing will transport 600,000 tonnes of oil products in 2007, using 30,000-40,000 dwt tankers. Nanjing currently has nine product tankers and will increase its capacity through a further 24 vessels to be constructed by 2010.
The transport agreements are consistent with Chinese government policy, which promotes use of domestic shipping firms to curb foreign currency outlays and to assume a tighter grip of the country’s energy supply chain.
CNOOC-ConocoPhillips FPSO hull complete
China National Offshore Oil Co. Ltd. (CNOOC) has completed the hull of the country’s largest floating production, storage, and offloading unit.
The FPSO, called Offshore Oil 117, is a joint venture of CNOOC and ConocoPhillips China Inc. It can store 2 million bbl of crude and can process more than 190,000 b/d.
The finished hull will be shipped to Singapore from Shanghai for completion of the unit’s topsides before being deployed by the end of 2008 to the Penglai 19-3 project in China’s Bohai Sea.
The second phase of Penglai 19-3 is expected to go into production at yearend 2008 and produce 180,000 boe/d of oil.
JBIC loan enables ADNOC oil expansions
A $1 billion loan offered by the Japan Bank for International Cooperation to Abu Dhabi National Oil Co. is designed to secure stable supplies of crude oil to Japan while enabling ADNOC to expand existing fields, develop new ones, and improve production and oil transportation capabilities.
The loan-70% from JBIC and 30% from Japanese commercial banks-is being offered on condition that Abu Dhabi ensures steady exports of its crude oil to Japan.
ADNOC, along with repaying the loan, is expected to sign a long-term deal to export crude oil to Japanese oil companies over a 10-year period.
Four Japanese companies, including Japan Oil Development Co., are currently operating off Abu Dhabi, and the UAE is home to nearly half of the oil fields that Japanese companies are developing independently.
To ensure the security of its oil exports, Abu Dhabi is planning a 360-km pipeline that will bypass the Strait of Hormuz by carrying more than 1 million b/d of crude oil from production areas inside the Persian Gulf to the East coast port of Fujairah.
The UAE accounts for about 25% of Japan’s total crude oil imports, about 95% of that coming from Abu Dhabi. The UAE also exports about 90% of its LNG production to Japan, according to the US Energy Information Administration.
Kalimantan-Java pipelay must start by July
The Indonesian government, reiterating an earlier warning, said it will revoke the special right granted to PT Bakrie & Brothers to build a 1,200-km natural gas pipeline from East Kalimantan to Central Java unless the company starts construction in July.
Energy and Mineral Resources Minister Purnomo Yusgiantoro said Bakrie, after winning the tender in July 2006, had been given 1 year to start work on the 15-trillion-rupiah ($1.65 million) project. He said Bakrie must have signed contracts with gas producers in East Kalimantan and consumers in Java by July 2007.
In March Tubagus Haryono, head of upstream oil and gas regulatory body BP Migas, also had warned that the right, which Bakrie won in last year’s tender, would be reviewed if the company fails to start construction by July.
At the time, however, Bakrie Finance Director Yuanita Rohali said the company was awaiting publication of a government report on the country’s gas balance, and the company had decided not to go ahead with the venture without a guaranteed supply of gas. Many industry officials earlier had cast doubts about the feasibility of the project due to declining gas reserves in East Kalimantan.
