Bodman to Europe: rethink Russia’s line proposal
US Sec. of Energy Samuel Bodman has criticized Russia’s plans to construct a new pipeline from Turkmenistan to Europe, saying that Europe needs diversity of suppliers.
Speaking at a press conference during a meeting of the International Energy Agency in Paris, Bodman said the pipeline, which would pass through Kazakhstan and along the Caspian coast into Russia towards Europe, would “fly in the face of what is needed, which is diversity of supply.” He added, “The Europeans should take due note of this and adjust their response accordingly.”
On May 12, the presidents of Russia, Turkmenistan, and Kazakhstan struck a preliminary deal to restore the existing Caspian shore gas pipeline and build a new pipeline along the Caspian Coast which would circumvent Uzbekistan (see related story, p. 10). The nations met at a summit in the Turkmen Caspian port of Turkmenbashi.
According to Russian President Vladimir Putin, the upgraded and new infrastructure is expected to boost capacity by 20 billion cu m/year by 2012. However, the deal has prompted fears among European, US, and Chinese circles of losing control over future potential Central Asian gas supplies to Russia. The agreement also increases Russia’s leverage with the European Union as the EU continues to seek out other suppliers and reduce its reliance on Russian gas following strains in their relationship.
For Russia the deal signifies a major triumph over the rival 8 billion cu m/year Nabucco project, which would bring Central Asian gas across the Caspian to Europe. However, Turkmenistan President Gurbanguly Berdymukhammedov has not ruled out supplying Turkmen gas to Nabucco.
Russia, Turkmenistan, and Kazakhstan hope to sign final agreements by September for their projects and expect work to start in first half 2008. One of the key outstanding commercial issues is whether Turkmenistan can demand more money from Russia for Turkmen gas which Russia imports to meet its European export obligations and sells for a higher price.
Oman, Iran sign oil, gas cooperation agreement
Oman and Iran have signed a memorandum of understanding to jointly develop oil and gas fields, for Iran to export gas to Oman, and to establish joint petrochemical projects.
Iran and Oman also will establish a joint company to carry out oil projects, according to the MOU. The nations hope to implement their agreement within the next 4 months.
Oman’s Commerce and Industry Minister Maqbool bin Ali bin Sultan and visiting Iranian Petroleum Minister Vaziri Hamaneh signed the agreement May 15 in Oman.
Iran is expected to export 1 billion cu m/day of gas to Oman either by pipeline or as LNG, according to local Omani and Iranian reports.
Mahmoud Zirakchian Zadeh, managing director of Iranian Offshore Oil Co., was quoted as saying, “Specifying the price of export gas to Oman needs to be further scrutinized.” He said the two countries have also agreed to develop Hengam gas field, which is shared between the two Persian Gulf states.
Domestic Petroleum Council changes name
The Domestic Petroleum Council, a trade association representing large US independent producers, has been renamed American Exploration & Production Council.
Duane Radtke, the group’s chairman and also president and chief executive officer of Dominion Exploration & Production Inc., said the new name reflects activities of the 24 members. At its creation in 1975, the council represented midsized companies of any type, including refiners. Radtke said it has included only E&P companies for many years.
In addition, he said, many members have operations outside the US.
The group has adopted the abbreviation AXPC. William F. Whitsitt remains president.
IOGCC, EPA sign environmental agreement
The Interstate Oil & Gas Compact Commission and the US Environmental Protection Agency signed a memorandum of understanding to outline the two groups’ environmental regulatory oversight of oil and natural gas exploration and production activities.
The MOU was signed May 7 at the start of IOGCC’s midyear issues summit in Point Clear, Ala. It replaces and renews the MOU signed in December 2002 and renewed in March 2005. This agreement’s timeframe has been extended to 3 years from the previous 2-year expiration.
The MOU’s purpose is “to improve regulatory cooperation among the states and EPA in a manner that promotes protection of the environment in a cost-effective manner, minimizes duplication, increases efficiencies, enables the exchange of information and expertise, and increases communication,” it said.
Some of the objectives outlined in the agreement include renewing a joint taskforce that will:
- Improve communication between EPA and the states.
- Foster environmental protection based on each group’s missions, responsibilities, and authorities.
- Form subgroups to address concurrent jurisdiction between EPA and the states.
“In some instances the states and EPA have concurrent jurisdiction relating to a host of oil and gas regulatory efforts,” the MOU said. “In other instances, the states and EPA have independent authorities that may be complementary when effectively coordinated.”
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Exploration & Development - Quick TakesPetrobras finds gas with Espirito Santo basin well
Petroleo Brasileiro SA (Petrobras) has reached 130-m thick gas-saturated sandstone reservoirs at 3,378 m with its 6-ESS-168 well in Camarupim offshore field in the Espirito Santo basin.
The well, which was drilled in the Espirito Santo Sea in the BM-ES-5 exploratory concession, is being drilled nearly 37 km off Espirito Santo in 763 m of water.
Petrobras, with a 65% stake, operates the block in partnership with El Paso Corp., which holds the remaining 35%.
These preliminary results confirm that Camarupim field extends to the north; commercial viability of the field was declared in late 2006 (OGJ Online, Dec. 29, 2006). The field was discovered with the 4-ESS-164A well, which detected 112 m of gas-containing reservoirs.
Talisman unit hits pay with three wells in Alaska
Talisman Energy Inc. subsidiary FEX LP has completed a three-well drilling program in the northwest planning area of the National Petroleum Reserve-Alaska.
The well sites, about 60 miles southeast of Barrow, were drilled using Doyon-Akita Arctic Wolf and Nabors Industries Ltd. 14E drilling rigs.
All three wells-Aklaqyaaq-1, Amaguq-2, and Aklaq-6-encountered hydrocarbon-bearing sandstones in several formations, based on log analysis and strong gas and oil shows, including oil staining and free oil in the drilling mud in one of the wells.
One well was plugged and abandoned and the other two were suspended.
The abandoned well is believed to be “subcommercial given current infrastructure,” Talisman said, adding that recently acquired high-fold seismic will assist in analyzing this well.
The two suspended wells encountered more than 225 ft of net hydrocarbon-bearing sandstones. Plans are to evaluate these wells during the next drilling season when longer-term test equipment is mobilized to the field area.
The initial estimate of contingent resources present in these formations is 300-400 million bbl net to Talisman. Additionally, there is significant follow-up potential on many similar structures on Talisman’s acreage if commercial productivity is proved, the company said.
FEX holds 60-80% working interest in all the wells and Petro-Canada (Alaska) Inc. holds the remaining interests.
India’s KG D6 block has 18th discovery
Reliance Industries Ltd., Mumbai, reported the 18th hydrocarbon discovery on the D6 block in the Krishna-Godavari basin off India.
KG-D6-R1 cut two Mio-Pliocene zones confirmed as gas-bearing from logs and modular dynamic testing. Designated Dhirubhai-34, it opens new areas in deeper stratigraphic levels on the block.
The well, drilled to TD 4,860 m, is in 2,010 m of water and is the deepest-water well on the block. Block interest holders are Reliance 90% and Niko Resources Inc., Calgary, 10%.
Esso Australia farms into Bonaparte Gulf permit
Esso Australia has farmed into Bonaparte Gulf permit WA-318-P off northern Australia. The permit is wholly owned by Drillsearch Energy Ltd. of Sydney.
The permit contains the prospective ready-to-drill Marina prospect, a four-way dip closed anticline about 40 km west of Eni SPA’s Blacktip gas-condensate field, now under development.
Esso has agreed to pay 85% of the costs of drilling Marina-1 in exchange for a 65% working interest and operatorship of the permit. Drillsearch will pay 15% of the well costs and retain 35% interest in the permit.
The Premium Wilcraft jack up rig has been contracted to drill the well in September.
The permit contains a strong lead called Balzac to the northeast of Marina that is a salt-related feature similar to the nearby Santos Ltd.-held Tern and Petrel gas fields to the east.
A 3D survey of 100 sq km will be run over the prospect to firm up a drilling prospect.
The ExxonMobil farm-in marks the company’s first return to northern Australian waters after pulling out of the Timor Sea in the late 1980s.
Hydro, Anadarko to develop Peregrino oil field
Hydro ASA and Anadarko Petroleum Corp. have received permission from the Agencia Nacional do Petroleo for plans to develop Peregrino oil field, which lies in 100 m of water about 85 km off Brazil.
Under a $2.5 billion investment plan, the field will be developed with a floating production, storage, and offloading vessel, two drilling platforms, 30 production wells, and seven water-injection wells. The partners are drilling a delineation well in the southwest extension of the field and expect to produce 100,000 b/d of oil by 2010 (OGJ Online, Apr. 2, 2007).
Maersk Contractors will lease and operate the FPSO, and Kiewit Offshore Services Ltd. will supply the drilling platforms. An agreement also has been reached with Subsea 7 for the engineering, procurement, construction, and installation of the pipelines connecting the platforms to the ship, Hydro said.
Hydro said this will be its first Brazilian project.
Hydro and Anadarko each hold a 50% share in the project. Hydro is the operator during the project planning phase, and Anadarko will assume operatorship during the project execution and operation.
Drilling & Production - Quick TakesAl-Naimi: Saudi Arabia to increase gas production
Saudi Arabia’s Oil Minister Ali bin Ibrahim Al-Naimi said his country plans to increase its natural gas production in order to meet demand growth from domestic industries.
“We are planning to add in the next 10 years 100 tcf to our current reserves of gas,” Al-Naimi said in Riyadh at a conference on Saudi economic development. He said the gas expansion would be an integral part of the country’s National Project to Develop Industrial Areas.
“Our future gas production and development plans will meet current and future need for gas in the kingdom...now we are entering a new period of developing petrochemical industries and gas exploitation which will have a big impact on the economy,” Al-Naimi said.
Domestic gas sales are expected to rise by 40% through 2012 from the current level of around 7 bcfd, Al-Naimi said, adding that demand growth would come from industries producing such commodities as cars, construction materials, household appliances, and metals.
To produce the additional gas, Al-Naimi said his country plans to drill 186 gas exploration wells and 332 gas development wells by 2012-the same year that production of gas will start at the offshore Karan gas field which, he said, is expected to support domestic gas sales of 770 MMcfd.
Chevron to start production from Thai gulf block
A group of companies led by Chevron Offshore (Thailand) Ltd. will start oil production from Block G4/43 in the northern Gulf of Thailand by yearend. The block is 125 miles south of Bangkok.
Production of an initial 6,000-8,000 b/d of oil will come from Lanta field, one of the two oil and gas-bearing structures found in the 9,686-sq-km tract, which lies in less than 250 ft of water off Prachuab Khiri Khan province.
The Lanta No. 1 exploration well and the Lanta No. 2 appraisal well were drilled 3 years ago (OGJ Online, July 22, 2004). Since the concession was awarded in July 2003, six exploration wells have been drilled in the Lanta and Similan structures.
The group is preparing to drill a development well as part of the Lanta development plan, which was approved by the Thai Energy Ministry, according to Thailand’s PTT Exploration & Production PLC, a partner.
PTTEP has exercised its right to raise its stake in Block G4/43 to 21.375% from 15% following the declaration of commerciality of Lanta. As a result, Chevron’s share in the block was reduced to 51% from 60%, Mitsui Oil Exploration Co.’s holding drops to 21.25% from 25%, and Bangkok-based Palang Sophon Two Ltd. holds the remaining 6.375%.
Talks continue for Cepu block output start date
ExxonMobil Corp. and Indonesia’s state-owned PT Pertamina are involved in discussions with government authorities aimed at resolving their differences and advancing the start of oil production from Indonesia’s Cepu block.
Peter J. Coleman, president and general manager of ExxonMobil Oil Indonesia Inc., said the two firms are seeking a way to meet the government’s request to begin oil production at the block by yearend 2008, about 2 years ahead of schedule.
Coleman said the two sides are in discussions with BPMigas, the country’s upstream oil and gas regulatory agency, as well as Lemigas, the government’s oil and gas research and development center, in order to meet the government’s target.
Indonesia wants to increase the country’s oil production by 30% to 1.3 million b/d by 2009 from the current 1 million b/d. To meet that goal, the government has urged the Cepu partners to speed up operations.
Coleman, who said he understands the aim of boosting production, also suggested that the government should assess if earlier production is economically viable given the technical and social problems now facing the two companies.
In January, ExxonMobil officially advised Indonesia of its desire for a 10-month delay for oil production from Cepu in Central Java from its initial target of first quarter 2009 (OGJ Online, Jan. 30, 2007).
Indonesian officials had said earlier that month that Cepu block in the border area of Central and East Java would start producing oil in first-quarter 2009, one quarter later than originally scheduled (OGJ Online, Jan 4, 2007).
Processing - Quick TakesExxonMobil to pay for California air violations
ExxonMobil Corp. agreed to pay $250,000 in penalties to the South Coast Air Quality Management District (AQMD) for excess emissions on Mar. 22 from its 130,000 b/d Torrance, Calif., refinery, AQMD confirmed May 10.
AQMD is the air pollution control agency for Orange County, Calif., and the urban portions of Los Angeles, Riverside, and San Bernardino counties.
A failure in a sulfur-recovery unit prompted shutdowns of other refining equipment and the release of nitrogen oxides, carbon dioxide, and other substances, ExxonMobil said.
Also related to the Mar. 22 incident, ExxonMobil agreed to spend up to $2 million for a supplemental environmental project to cut CO2 emissions, volatile organic compounds, and other pollutants from the Torrance refinery, AQMD said.
The major agreed to pay an additional $150,000 penalty for 23 notices of violations issued by AQMD that were unrelated to the Mar. 22 incident.
Fatal blaze shuts ExxonMobil unit off Singapore
ExxonMobil Corp. has shut down a crude distillation unit after two workers were killed and two others injured in a fire at its 309,000 b/d Pulau Ayer Chawan off the southwestern coast of Singapore.
ExxonMobil said the fire has been extinguished, and the Singapore Civil Defense Force was investigating the cause of the blaze. Meanwhile, ExxonMobil said the 115,000 b/d unit would not resume production “until it is safe to do so.”
A company spokesperson couldn’t provide an estimate on how long the unit would be out of action, but said the refinery’s second 185,000 b/d unit continues to operate.
Industry observers said the decision to restart the damaged unit will likely be left to Singapore’s Ministry of Manpower, which undertakes its own investigation when there are fatalities involved.
They also said any extended closure, required by authorities investigating the deaths, would affect the gasoline market, as regional supplies are tight.
Total Canada plans bitumen upgrader
Total E&P Canada Ltd. plans to begin detailed engineering in 2008 for a bitumen upgrader to be installed near Edmonton. Cost of the project was not divulged.
The company filed a public disclosure document May 7 with Alberta regulators. After all approvals are in hand, the upgrader will be constructed in two phases: Phase I is designed to produce 130,000 b/d of light, sweet synthetic crude that could come on stream as early as 2013-14, and Phase II would increase total bitumen processing capacity to over 200,000 b/d.
“Constructing the project in two separate phases will allow Total to match upgrading capacity with upstream bitumen production,” said Michel Borrell, president of Total E&P Canada. “Early in the next decade the proposed Joslyn North mine project should be up and running in the Athabasca oil sands area.” The Joslyn North mine project, currently under review by regulators, is expected to produce 100,000 b/d of bitumen. Future development could increase production to about 200,000 b/d.
Total E&P Canada Ltd. is operator of the Joslyn lease 65 km northwest of Fort McMurray in the Athabasca oil sands region. Joslyn, in which Total has an 84% stake, is expected to produce 2 billion bbl of bitumen over 30 years. Steam-assisted gravity drainage (SAGD) commercial production on the site began in fourth-quarter 2006 and will plateau at 10,000 b/d by 2008.
Total E&P Canada also has a 50% stake, in partnership with ConocoPhillips, in the 544 sq km Surmont project 60 km southeast of Fort McMurray. SAGD commercial production is expected to begin this year, with plateau reaching 27,000 b/d of bitumen. Initial evaluations set the development potential of the site upwards of 200,000.
Transportation - Quick TakesKazakhstan, Russia join in oil pipeline projects
Kazakhstan’s president Nursultan Nazarbayev said his country will join with Russia in two pipeline projects aimed at nearly doubling the amount of oil shipped westward from the Central Asian nation to international markets.
“I discussed in detail with President [Vladimir] Putin the question of increasing the capacity of the Caspian Pipeline Consortium from 23 million [tonnes/year] to 40 million tonnes/year,” said Nazarbayev, referring to the existing 1,500-km pipeline that extends from Kazakhstan’s Tengiz oil field to Russia’s Black Sea port of Novorossiysk.
“The extra 17 million tonnes[/year] may go to Burgas-Alexandroupolis pipeline,” Nazarbayez said, referring to a planned 280-km route backed and shared by Russia (51%), Greece (24.5%), and Bulgaria (24.5%) that will carry crude from Bulgaria’s Black Sea port of Burgas to the Greek port of Alexandroupolis on the Aegean.
An agreement on the Burgas-Alexandroupolis line was signed by the three partner countries in Athens on Mar. 15, and the Russian government approved a draft law on May 10 that would govern the agreement to be sent to the Russian parliament for ratification. The line will initially carry 35 million tonnes/year, rising eventually to 50 million tonnes/year.
Under the agreement signed in Athens, Russia’s 51% stake will be owned by a consortium comprised of OAO Transneft 33.4%, along with Rosneft 33.3%, and GazpromNeft 33.3%. Transneft also will hold the operating rights of the line, which will receive oil at Burgas carried by tankers from the Russian ports of Novorossiysk and Tuapse as well as from the Ukrainian ports of Odessa and Pyvdenny, both outlets for Russian oil.
The Burgas-Alexandroupolis line has been touted as an alternative to ships traversing the busy Bosporus Straits, something that Turkey has expressed concern over for years.
In April, however, Turkish authorities launched construction of a rival 700-km oil pipeline linking its Black Sea port of Samsun to its Mediterranean port of Ceyhan in the south. As with the Burgas-Alexandropolis line, the new Turkish project is being touted as a new energy route and one that bypasses the busy Bosporus.
Kinder Morgan to expand Texas pipeline
Kinder Morgan Energy Partners LP plans to build a $72 million natural gas pipeline to bring supplies from East Texas to Houston and Beaumont.
The proposed 58-mile, 24-in. pipeline will have multiple interconnections and will link the Kinder Morgan Tejas system in Houston County to the Kinder Morgan Texas system in Polk County near Goodrich, Tex.
The line will have an initial capacity of 225 MMcfd using existing horsepower and will be expandable to 400 MMcfd with additional horsepower.
Firm transportation for most of the initial capacity has been secured via a long-term binding agreement with CenterPoint Energy Services Inc.
Texas Intrastate Pipeline Group Pres. Tom Martin said the amount of drilling occurring along KMP’s system in East Texas, including initial testing of the deep Bossier play in Houston and surrounding counties, were primary factors in deciding to add the pipeline, which will more than double capacity on Kinder Morgan’s Tejas intrastate pipeline system.