OPEC cuts oil output by 1.5 million b/d
The Organization of Petroleum Exporting Countries announced a 1.5 million b/d reduction to its oil output targets. The cuts, effective Nov. 1, would put total OPEC production at 27.308 million b/d from the 11 member countries that are bound by quotas.
The organization cited declining oil demand resulting from the financial crisis and slowing global economy as the reason behind the cut, maintaining that the market has been oversupplied with crude for some time.
OPEC noted that the recent dramatic oil price collapse may jeopardize existing oil projects and lead to the cancellation or delay of others, possibly resulting in a medium-term supply shortage.
Iraq and outgoing OPEC member Indonesia were not assigned a new production ceiling. The largest cut was assigned to Saudi Arabia, which agreed to reduce output by 466,000 b/d.
The Centre for Global Energy Studies, London, calculates that Saudi Arabia’s new quota will be 8.477 million b/d, based on figures released after OPEC’s November 2007 meeting. In order to comply with the new quotas, Saudi Arabia will be required to cut its actual production by more than 1 million b/d from an estimated September 2008 level of almost 9.5 million b/d, according to CGES.
Iran will have to cut its actual output by 300,000 b/d from its September level, Kuwait by 200,000 b/d, and the UAE, Algeria, and Libya each by more than 100,000 b/d. Only Angola and Nigeria were producing less than their new quota levels of output in September, CGES said.
CGES believes that OPEC’s desire to push oil prices upwards from their current $60-70/bbl level stands in sharp contrast to what the organization was saying just a year ago. In a press release in October 2007, Sec. Gen. Abdalla Salem El-Badri said OPEC was concerned with the escalation in oil prices that pushed the OPEC reference basket to $80/bbl from $70/bbl over the previous month and a half. The press release went on to say that the rising oil prices were largely being driven by market speculators.
“The implication then was that oil prices at $70-80/bbl were not a reflection of market fundamentals and were unhealthily high. Twelve months on and this same level of oil prices must be protected as a floor price, despite the much weaker outlook for the global economy and fears of a global recession,” CGES said.
Congress asked to address energy production
Two senior Republicans on the US House Oversight and Government Reform Committee issued a report Oct. 28 calling for an approach that addresses all facets of US energy production.
The report also affirms that US energy security and global environmental challenges cannot be effectively addressed separately, according to Thomas M. Davis III (Va.), the full committee’s ranking minority member, and Darrel E. Issa (Calif.), ranking minority member of the committee’s Domestic Policy Subcommittee.
“We no longer can ignore the fact that energy policy is intertwined with security policy. We can’t keep pumping money into the economies of countries dedicated to opposing our interests. For that matter, we can’t keep sending billions of dollars overseas every year when we have the means, the technology and the raw materials to alleviate much of our dependence on foreign energy right here at home,” Davis said.
“We cannot address the root of many national security concerns, economic troubles or environmental threats without an effective energy strategy. These issues have all become deeply intertwined. An effective energy policy cannot address just the cost of energy today,” Issa added.
The report by the committee’s minority staff also said an energy and environmental policy “that fails to account for competitiveness concerns will cause the US manufacturing base to shift more American jobs overseas and could actually increase carbon emissions. Any meaningful international agreement to reduce carbon emissions must include the developing world since it is an essential part of the problem and the solution.”
Pertamina, GMI suspects barred from travel
Indonesia’s National Police, following recent allegations of corruption in the purchase of imported oil, have announced an immediate travel ban on four members of state-owned PT Pertamina and a director of PT Gold Manor International (GMI).
The five are under investigation after allegations that they profited from the procurement of Zatapi crude oil last year in violation of the country’s anticorruption law, according to National Police spokesman Insp. Gen. Abubakar Nataprawira.
“They also have been named as suspects in this case, but we have yet to arrest them,” said Abubakar, who declined to name the suspects. “We will determine their further status after we complete our investigations,” he said.
Abubakar said the State Development Finance Comptroller is calculating the total amount of financial loss to the Indonesian state.
Singapore-based oil importer GMI won a Pertamina-sponsored tender to supply 600,000 bbl of Zatapi crude oil to Indonesia last December and began shipping it to a Pertamina refinery in Cilacap, Central Java, in February, 2008.
Legislators of House Commission VII overseeing energy and mineral resources later revealed that Gold Manor’s tender bid was incomplete since it did not include a detailed breakdown of the contents of Zatapi oil.
The Attorney General’s Office began investigating the case on Mar. 2. Last month, police named four Pertamina staff members, including a vice-president and a former director, as suspects in the case.
Pertamina Pres. Director Ari Soemarno denied any irregularities in the Zatapi imports, saying they did not cause any losses.
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Exploration & Development Quick TakesSolana gauges oil in Colombia’s Llanos basin
Solana Resources Ltd., Calgary, reported an average flow of 5,645 b/d of 41° gravity oil from the Tertiary Carbonera formation at a discovery in eastern Colombia’s Llanos basin.
Los Aceites-1, on the 16,640-acre Guachiria Block, has permeabilities in excess of 3 darcies, and the flow rate was achieved with less than a 15% drawdown, “indicative of significant incremental flow potential,” the company said. Carbonera was perforated at 6,874-84 ft. TD is 7,108 ft measured depth.
The company gauged the flow through a 98/64-in. choke with 75 psi tubinghead pressure. The well produced only 4 bbl of water in 48 hr.
In anticipation of pending government approval of an extended test, Solana plans to build centralized permanent facilities at the nearby Primavera-1 location, site of the company’s other 2008 discovery on the block. Oil will be trucked in the short term.
The company, which is remapping the area as a result of the exceptional flow rate, said one more well may be required in the field.
Santos suspends Henry-2 DW1 gas well off Victoria
Santos is completing and suspending as a gas producer its Henry-2 DW1 sidetrack well on the Vic/P44 permit in the Otway basin off western Victoria.
The well encountered good gas shows, and logs recorded excellent reservoir quality. The well will now be tested and suspended pending production.
Henry-2 was the final well semisubmersible Ocean Patriot drilled in Santos’ development program to tie in Henry gas field to Casino.
The forthcoming development will include a 17 km subsea pipeline and control umbilical to be installed from existing Casino facilities to Henry and nearby Netherby discovery plus an additional 5 km of line extending to the East Pecten location.
First gas production from the project is expected by June 2009, with flow rates expected to be 120 terajoules/day for the combined Henry and Casino production.
Virginia Huron shale gets horizontal wells
Range Resources Corp., Fort Worth, completed drilling its fifth horizontal well to Devonian Huron shale in Nora field in southwestern Virginia.
The company, which says Huron produces gas from 107 vertical wells in the field, estimated the formation’s net reserve potential at Nora from horizontal drilling to 8-1.5 tcf.
The four horizontal Huron shale wells averaged initial production of 1.1 MMcfd, averaged $1.7 million/well, and continue to produce in line with expectations, the company said. The company noted that the Huron is thicker and higher pressured at Nora than in Kentucky.
Range Resources plans to drill five more Huron shale wells and two horizontal Berea wells by the end of 2008.
British Columbian gas may offset conventional decline
Further development of shale and tight natural gas prospects in Northeast British Columbia may be able to offset an expected 7% decline in conventional Canadian gas production by 2010, said that country’s National Energy Board.
The price of gas would need to climb back to $8-9 (Can.)/gigajoule for operators to maintain or accelerate current drilling levels, and board said. Producers indicated great enthusiasm for the resource potential on the deeper, less-developed western side of the Western Canada Sedimentary Basin, it noted.
The board in its 2008-10 deliverability report considered reference, low, and high-investment cases, all of which take into account the development of shale and tight gas prospects in the Horn River and Montney plays.
Gas production in the US has increased by 8%, and the global economic situation could reduce demand, the NEB noted.
Unconventional gas spurs EnCana’s output
EnCana Corp. said its companywide natural gas production was up 8% to 3.9 bcfd in the quarter ended Sept. 30 on a gain of 16% in its North American unconventional gas plays.
East Texas output averaged 340 MMcfd, up 135% from the same quarter a year ago, due to new wells coming on production and a 2007 acquisition that doubled EnCana’s interest in the Jurassic Deep Bossier play.
EnCana’s US gas production was up 24% on drilling and operational success in the Fort Worth and Piceance basins and Jonah field in Wyoming.
In Canada, coalbed methane, Cutbank Ridge, and Bighorn increased production by 23%, partly offset by natural declines from conventional properties, resulting in an overall 16% gain in the Canadian Foothills division.
EnCana added 25,000 net acres in North Louisiana in the quarter, bringing its Haynesville shale position to 400,000 net acres of land plus 63,000 net acres of mineral rights. EnCana and its partner Shell Exploration & Production Co. have an industry-leading land position in the area, where they are running six rigs and will target drilling and completion of the first well in the mid-Bossier shale in the fourth quarter.
EnCana holds more than 700,000 acres in the Montney play in Northeast British Columbia and northwestern Alberta, and EnCana and Apache Corp. have completed seven wells this year in the Horn River basin shale play. One of the most recent wells averaged almost 8 MMcfd in the first 30 days.
Bahrain launches bid round for gas exploration
Bahrain has launched a bidding round for exploration of its onshore natural gas fields, said oil minister Abdul-Hussain Ali Mirza, who also is chairman of the country’s national oil and gas authority.
Mirza said 25 international companies expressed interest in bidding and that the open bidding process will end in second quarter 2009.
Bahrain, through development of gas fields as deep as 6,096 m subsea, aims to meet rising domestic demand.
In 2007, according to Mirza, Bahrain consumed 1.3 billion cu m of gas and its consumption is expected to rise to more than 2 billion cu m in the long term.
Drilling & Production Quick TakesPetrobras awards Technip offshore flexible pipelay
Petroleo Brasilerio SA (Petrobras) has awarded a contract to Technip SA for the charter of the Normand Progress vessel for 2 years. The contract includes engineering and support services and an additional 2 year option.
The vessel specializes in flexible pipeline installation. The $100 million-plus contract is a daily rate contract focusing on the installation and retrieval of flexible pipelines off Brazil in water reaching 2,000 m.
“Scheduled to be mobilized by yearend 2008, the vessel will be fitted with flexible pipelay equipment, including a 125-ton vertical lay system,” Technip said.
Solstad owns the vessel, and Technip will operate it under a frame agreement.
The contract follows the charter contract for a new Brazilian pipelay vessel that Petrobras awarded to Technip earlier this year.
Horizon sees PNG condensate project
The Stanley gas-condensate reservoir on PRL 4 in western Papua New Guinea could support a large condensate stripping-gas recycling development, but an investment decision won’t be made until the Stanley-2 appraisal well is drilled, said Horizon Oil Ltd., Sydney.
Consulting engineers concluded that the Stanley Cretaceous Toro reservoir, discovered in 1999, could produce 140 MMcfd of gas from two wells, yielding more than 4,000 b/d of condensate and 40 tonnes/day of LPG. The project could recover more than 8 million bbl of condensate in 10 years and support a 4-in., 40-km flow line to the Kiunga river port for shipment to customers.
A stripping plant could start up in 2010 if Stanley-2 were drilled in 2009. The well is needed because continuity and connectivity of the productive gas sand is not assessed as high based on seismic mapping, pressure buildup during the production test, and the presence of the target sandstone in surrounding wells, Horizon Oil said.
The gas would be reinjected until a power generation market develops in 5 years or so in PNG’s western province and across the border in West Papua, Indonesia. That market could account for the entire Stanley gas resource, estimated independently at 260 bcf proved and probable.
Total hires Angolan drilling rig
Total E&P Angola has let a 2-year drilling contract worth $452 million to Diamond Offshore Drilling Inc. for its fourth-generation semisubmersible rig, Ocean Valiant, in Angola.
“The companies could change the contract into either a 2¿ year or a 3 year agreement at the option of the operator at day rates that could earn maximum total revenue, excluding mobilization fees, totaling between $552 million and $646 million,” Diamond Offshore said.
Ocean Valiant can operate in water up to 5,000 ft and can drill up to 30,000 ft. Total has interests in deepwater Blocks 14 and 17, and ultradeepwater Block 32.
Processing Quick TakesHess denies St. Lucia refinery claim
Hess Corp., amid a decision to cut the company’s capital expenditure program for next year, said it has no plans to build a $5 billion refinery on the Caribbean island of St. Lucia.
“While we have the option to build the refinery in St. Lucia, we have no current plans to do so,” Hess Chairman and Chief Executive John B. Hess told analysts during a conference call.
Hess’s statement came just days after a member of the St. Lucia government said the New York-based firm, which operates a transshipment facility on the island, was likely to build the refinery.
“Quite a substantial amount of money has been committed to the feasibility studies, and the studies undertaken so far conclude that there will be no problems putting in the refinery,” said Guy Joseph, St. Lucia’s communications and works minister (OGJ Online, Oct. 28, 2008).
Earlier, Hess said it will reduce its 2009 capital expenditures budget due to the uncertain economic environment. The company did not detail the amount of the budget, saying it would provide more details in January.
Pakistan cuts duties on products to Afghanistan
Pakistan has cut by almost 50% its fixed regulatory duty on diesel and kerosine exports to Afghanistan, effective immediately.
Under the prescribed formula, price differential claims have come down owing to a sharp fall in product prices in the international market, paving the way for a substantial cut in export regulatory duties for Afghanistan. Pakistan last month had imposed the duty on diesel and kerosine exports to Afghanistan because Afghanistan was subsidizing Kabul consumers.
Total exports of petroleum products to Afghanistan stood at more than $300 million during the last fiscal year (2007-08).
Microrefineries boost Iraq’s domestic output
Iraq’s 20,000 b/d al-Diwaniya refinery–one of several so-called microrefining projects now under way–will be inaugurated within the next couple of weeks, according to an official statement.
“The project comprises two units: the first one is 100% complete, while work on the second is 50% complete,” Iraq’s national information center said, adding that each unit has a capacity of 10,000 b/d.
Analyst Global Insight said Iraq has launched several microrefining projects since 2006 due to the amount of time it would take before the country’s larger refineries could be repaired and readied for nationwide production and distribution.
Currently, Iraq’s three main refineries–Dora, Shuaiba, and Beiji–are running at half or less of the 597,500 b/d of installed capacity they had before the US-led invasion in March 2003.
As a result, according to Global Insight, “the microrefineries provide their respective areas with significant respite from shortages and an opportunity to restart a local economic recovery.”
Underlining that view, the Iraqi government in August approved an $81 million contract to upgrade the Samawah refinery in southern Iraq. According to unconfirmed reports, the Samawah contract was awarded to Colorado Industrial Construction Services Co.
The Samawah refinery, which lies 370 km southeast of Baghdad, was originally built in 1977 with a 30,000 b/d capacity. During the 1991 Gulf War, the plant suffered 90% damage.
The facility was used for storage until 2001, when the oil ministry partially rehabilitated it. But the refinery was looted following the 2003 invasion and was left idle until 2005, when one 10,000 b/d unit was rehabilitated.
A second 10,000 b/d unit was repaired and began production in 2006. At some point, according to local sources, a third unit is to be removed from the Dora refinery in Baghdad and added to the Samawah facility.
Transportation Quick TakesTengizchevroil to start oil shipments on BTC line
BP Azerbaijan, partially confirming earlier reports, announced that the Chevron Corp.-led Tengizchevroil consortium plans to start oil shipments this month via the BP-run Baku-Tbilisi-Ceyhan (BTC) pipeline.
“We expect to start pumping some volumes of Tengizchevroil’s crude via the [BTC] pipeline in the second half of October,” said company spokesman Tamam Bayatly. She did not say how much oil was expected to be delivered.
Earlier this week, BP PLC announced plans to begin shipping oil from Kazakhstan’s Tengiz oil field via the 1,770-km BTC pipeline beginning later this month (OGJ Online, Oct. 9, 2008).
BP said the oil would be transported by barge from Kazakhstan to Azerbaijan and then loaded into the pipeline, with exports from Ceyhan expected to begin in mid-November.
Late last month, Tengizchevroil was reported to have made an agreement to ship up to 2 million tonnes/year of oil–possibly rising to 5 million tonnes/year–by barge across the Caspian Sea to Azerbaijan and onward by rail across Georgia to export terminals on the Black Sea (OGJ Online, Sept. 25, 2008).
Tengizchevroil has been struggling with its joint venture partners to double the capacity of the CPC pipeline export route to 60 million tonnes/year to accommodate rising output in the Central Asian country. The pipeline runs from Kazakhstan to Russia’s Black Sea port of Novorossiisk.
In September, Chevron said its Tengizchevroil affiliate had completed a major expansion at Tengiz field in Kazakhstan that will raise oil production capacity to 540,000 b/d, up 35% over the 400,000 b/d achieved earlier this year in the firm’s first expansion phase.
Costs rise for Snohvit LNG project
StatoilHydro has increased the estimate of its investment costs for the first phase of the Snohvit LNG project in the Barents Sea by 3 billion kroner because of problems associated with delivering the full 4.3 million tonnes/year of LNG capacity at the onshore liquefaction plant.
On Oct. 16, the company presented a revised budget to Norwegian authorities and stressed that Snohvit was a technically challenging project that had exceeded the September 2005 estimate of 48.1 billion kroner in nominal terms. “Snohvit is still a highly profitable and attractive project,” it said.
Snovhit started production last September but has struggled to regularly deliver at full capacity. Since the scheduled shutdown this summer Snohvit has maintained stable production at about 80% of its planned capacity. During a scheduled shutdown in October, it said, “A number of measures will be implemented to improve the regularity of the plant, including the replacement of seawater coolers and measures to limit the emission of nitrogen oxide and carbon dioxide,” StatoilHydro said (OGJ Online, Oct. 4, 2008).
StatoilHydro will investigate different solutions to reconfigure the plant and to ensure stable and safe operations. These options could cost 2.5-5.5 billion kroner, depending on the option chosen.
StatoilHydro said it would make a final decision in 2009 after it carries out further analysis of the plant’s performance.
The company has shut down production from the field for 30 days to replace two heat exchangers that contributed to the problems in reaching the plant’s full capacity, a company spokesman told OGJ (OGJ Online, Oct. 15, 2008).
CGT, MarkWest report Appalachian expansion
NiSource Inc. unit Columbia Gas Transmission Corp. and MarkWest Energy Partners LP intend to jointly expand natural gas gathering and processing services to support increased production volumes in the Appalachian basin of central West Virginia.
The two companies also are discussing plans with several gas producers to provide new gathering and processing services near Columbia’s Cobb aggregation system in Kanawha, Jackson, and Roane counties, W.Va.
The expansion of services includes MarkWest’s previously announced expansion of its Cobb gas processing plant, increasing total capacity to about 70 MMcfd from the current 25 MMcfd by mid-2009. NGLs recovered at Cobb will continue to be fractionated at MarkWest’s Siloam fractionation, marketing, and storage complex in South Shore, Ky., currently in the final stages of its own expansion.
