General Interest—Quick Takes
Arbitration move called 'forum shopping'
Lawyers for Ecuadorian plaintiffs in an environmental lawsuit against Chevron Corp. have dismissed the company's filing of an international arbitration claim as "forum shopping" (OGJ Online, Sept. 24, 2009).
Steven Dozinger, a New York lawyer representing the Amazon communities suing Chevron, made the statement while calling the company's move "one of Chevron's last cards to avoid paying for a half-century of environmental contamination in Ecuador's Amazon."
The lawsuit started in 1993, targeting Texaco Petroleum (Texpet), a member of a consortium that had produced oil under a concession that ended in 1992. State-owned Petroecuador replaced Texpet as operator in 1990.
Chevron, which took over Texpet's parent Texaco Inc. in 2001, says it is being held accountable for environmental damaged caused by Petroecuador. It says Texpet spent $40 million on environmental clean-up and received a release of liability from the Ecuadorian government before leaving the country.
It further alleges corruption of the Ecuadorian judicial system. The lawsuit will be decided in a court in the small town of Lago Agrio.
Damage claims, based on estimates by a court appointee, exceed $27 billion.
Dozinger, a law school friend of and fund-raiser for US President Barack Obama, said Chevron's filing for international arbitration will not affect the legal case.
He listed legal decisions against Chevron, saying they "help explain the company's timing in filing the arbitration claim."
And he said outcome of the arbitration move won't affect plans to seize Chevron's assets if the company loses the lawsuit.
"This could end up being one of the biggest forced asset seizures in history, and it could have a significant disruptive impact on the company's operations," he said.
Bill seeks disclosure of foreign payments
Five US senators have introduced a bill which would require companies with stock traded on US exchanges to report payments to foreign governments for oil, gas, and mineral extraction in their regular Securities and Exchange Commission filings.
The measure is designed to prevent governments in countries rich with natural resources from hiding payments they receive from energy and mineral producers to finance corrupt activities, the lawmakers said.
"History shows that oil and gas reserves and minerals can be a bane, not a blessing, for poor countries, leading to corruption, wasteful spending, military adventurism, and instability," said Richard P. Lugar (R-Ind.), ranking minority member of the Senate Foreign Relations Committee and the bill's primary sponsor.
"Too often, oil money intended for a nation's poor lines the pockets of the rich or is squandered on showcase projects instead of productive investments," he continued.
Sens. Benjamin L. Cardin (D-Md.), Russell J. Feingold (D-Wis.), Charles E. Schumer (D-NY), and Roger F. Wicker (R-Miss.) cosponsored the measure.
Comments on 5-year OCS plan surpass 530,000
The number of public comments on the US Minerals Management Service's evolving 5-year Outer Continental Shelf plan has surpassed 530,000, MMS Director S. Elizabeth Birnbaum said on Sept. 25.
The US Department of the Interior agency received the comments after Interior Secretary Ken Salazar added 6 months on Feb. 10 to obtain additional input on a draft proposed plan that his predecessor, Dirk A. Kempthorne, launched in late summer 2008.
MMS had counted more than 350,000 submissions after the extended comment period expired on Sept. 21, Birnbaum said (OGJ Online, Sept. 24, 2009). The total passed 530,000 after the agency reviewed more submissions, including several which had been mailed at the last minute, she indicated.
She said it will probably take several weeks to review and analyze the comments. After that time, the agency will initiate environmental analysis and public scoping opportunities on the draft proposed plan, Birnbaum said.
Industry Scoreboard
Exploration & Development — Quick Takes
Montana's Elm Coulee to top 200 million bbl
Elm Coulee field, Montana's primary Bakken shale oil producing field discovered in 2000, is a giant that is expected to recover more than 200 million bbl.
The field has more than 600 wells that produce primarily from the middle Bakken, Stephen Sonnenberg and Aris Pramudito of the Colorado School of Mines wrote in the American Association of Petroleum Geologists Bulletin.
Elm Coulee has produced 78.4 million bbl of 42° gravity oil and 55.7 bcf of gas through December 2008. Oil in place is estimated at 5 million bbl/sq mile.
The Bakken total interval, consisting of an upper shale, middle silty dolostone, and lower siltstone, is 10-50 ft thick with 8-14 ft of vertical pay, and the field covers 450 sq miles in Richland County.
Initial production is 200-1,900 b/d at horizontal wells and generally less than 100 b/d at vertical wells. Formation depth is 8,500-10,500 ft.
"The Elm Coulee field illustrates that the Bakken petroleum system has enormous potential for future oil discoveries in the Williston basin," the authors wrote.
Bakken oil production predated Elm Coulee at Antelope field in 1953 and Elkhorn Ranch field in 1961, both in North Dakota. Elkhorn Ranch field had the play's first horizontal well, in the upper Bakken in 1987.
BLM seeks views on Tumbleweed II gas project
The US Bureau of Land Management will open a public comment period on Sept. 30 on an environmental analysis of the proposed Tumbleweed II natural gas project in eastern Utah, BLM's Vernal, Utah, field office announced.
It said that the project area contains 7,655 acres 32 miles south of Ouray, Utah, about 45 acres of which would be disturbed by the proposed development.
The applicant, Denver-based Stewart Petroleum Corp., plans to construct six well pads, drill eight gas wells, and construct 4.2 miles of new or upgraded road and 12.3 miles of pipelines, according to the BLM field office.
It said that it will accept comments on the EA, which it will post online, through Oct. 16.
Kuwait Energy due IFC aid for Egypt, Yemen
Kuwait Energy Co. has secured $50 million from the International Finance Corp. for exploration and development in Egypt and Yemen and support of its environmental and social management activities.
In Egypt, KEC has interests in three onshore producing assets (Area A in the Gulf of Suez and the East Ras Qattara and Burg el Arab concessions, both in the Western Desert), one development asset (Abu Sennan in the Western Desert), and an early exploration asset (Block 6 in Southern Egypt).
In Yemen, KEC has one producing asset (Block 43, onshore, Central Yemen) and interests in six exploration assets, all onshore in Central Yemen with the exception of Block 15 (off Al Mukalla in the Gulf of Aden). Block 43 is expected to cease production shortly.
The company recently announced oil discoveries at Shukheir Northwest in Area A along the Gulf of Suez coast and Shahd Southeast and Rana Southeast in the East Ras Qattara south of Alexandria. It plans to drill five exploration wells and five development wells before yearend.
In August, the company reported a new oil field, Al Zahraa, in East Ras Qattara. It was KEC's fourth discovery in the country, producing 2,615 b/d of oil, and is operated by Sipetrol. KEC has a 49.5% working interest.
According to the company's second quarter results, it was producing an average of 1,120 boe/d of oil in Yemen.
The IFC and Kuwait Energy have drafted a detailed environmental and social action plan for Egypt and Yemen. "The environmental and social management plan will be implemented over the next year in a series of gradual steps starting this month, September 2009," an IFC spokesman told OGJ.
The bank will also assist with a potential listing on an international stock exchange in 2010 by carrying out an in-depth corporate governance assessment of Kuwait Energy.
Established in Kuwait in August 2005, Kuwait Energy is an independent petroleum company with operations across the Middle East, North Africa, Eastern Europe, and Pakistan.
Drilling & Production — Quick Takes
Cabot ordered to cease Marcellus fracs
State regulators ordered Cabot Oil & Gas Corp., Houston, to cease hydraulic fracturing in northeastern Pennsylvania in connection with surface spills.
After three spills in one week, the Pennsylvania Department of Environmental Protection ordered Cabot to develop within 14 days an updated and accurate Pollution Prevention and Contingency Plan and Control and Disposal Plan for all permitted well pad sites in Susquehanna County.
The department required Cabot to perform an engineering study of all equipment and work practices associated with hydraulic fracturing at all wellsites in the county within 21 days. The study must include a detailed evaluation and explanation of the causes of the three spills and establish corrective measures.
Cabot is required to implement within 21 days recommendations and requirements contained in DEP's approved Pollution Prevention and Contingency Plan, the Control and Disposal Plan, and the engineering study.
The company also must place the approved Pollution Prevention and Contingency Plan and Control and Disposal Plan in a conspicuous location at each permitted wellsite and provide a copy to each contractor and subcontractor working at any wellsite. Contractors and subcontractors cannot begin work at any wellsite until they receive the two plans.
Cabot is cooperating with the agency, said Dan O. Dinges, chairman, president, and chief executive officer.
"The only acceptable practice for Cabot is to be in full compliance with all environmental and regulatory policy; therefore, we are working cooperatively with the regulators," Dinges said.
Cabot, which said its drilling and production operations aren't affected, said its Marcellus production reached a high of 52 MMcfd at the end of last week. The company is drilling seven wells.
"Contributing to the increase was our most recent horizontal completion which experienced a 24-hr initial production rate greater than 10 MMcfd and a 30-day average rate of 10.8 MMcfd," said Dinges. The well is making 11.1 MMcfd.
The combination of this well, other primarily vertical completions, and initial production streams from two horizontal wells that are cleaning up led to the 52 MMcfd rate.
From the first seven horizontal wells that have been producing for varying time frames, two have produced more than 1 bcf, and combined those two wells have a 90-day production average of 6 MMcfd.
Separately, DEP issued a notice of violation to Cabot for the third spill at the Heitsman well in Dimock Township that occurred Sept. 22. The violations noted are nearly the same as in DEP's Sept. 22 notice of violation issued to Cabot for the other two spills.
E.On installs Babbage gas platform
E.On Ruhrgas AG is installing its first operated gas production platform in the UK southern North Sea, which is expected to process gas from Babbage field in April 2010.
The Babbage platform took 10 months to complete; the field is 80 km off the coast of the UK in 42 m of water. It will produce 2 million cu m/day of gas. The field is expected to produce more than 5 billion cu m of gas. The total investment in the development of the Babbage field will amount to more than €300 million.
E.On and partners plan to drill five wells in the field in two phases until 2011. The Babbage reservoir lies about 3,200 m below the seabed. The gas will be transported to West Sole and onward to the Dimlington terminal at Humberside (OGJ Online, Oct. 10, 2008).
Babbage interests are E.On 47%, Dana Petroleum PLC 40%, and Centrica Resources 13%.
Pemex lets contract for southern Mexico
Petroleos Mexicanos has let a $11.2 million contract to Wood Group Pressure Control (WGPC), part of John Wood Group PLC, to provide 125 wellheads and christmas trees for onshore oil and gas fields in southern Mexico.
The wellheads will be manufactured in WGPC's Monterrey, Mexico, facility. The wellheads will be installed in five fields: Comalcalco, Reforma, Cardenas, Delta de Tonala, and Ciudad Pemex. The wellheads will be supported by WGPC's Villahermosa and Poza Rica service centers.
StatoilHydro lets contract for Gullfaks A upgrade
StatoilHydro has awarded Aker Solutions a 50 million kroner front-end engineering design (FEED) study for upgrading the Gullfaks A drilling facilities.
The scope of the work for the study includes new equipment to increase drilling capacity and modification of existing installations offshore. The study will consider the possibility to upgrade the drilling capacity to reach 10 km, including heavy lifting to install a new derrick. The FEED also will include improvement of environment, health, and safety upgrading for the equipment.
Work under the contract starts immediately and the FEED will be completed in April 2010.
Santos-led JV lets contract for gas field
The Santos-led joint venture has awarded engineering and construction company Subsea 7 an $80 million contract to install a subsea pipeline for the Casino-Henry gas field development in the Otway basin off western Victoria.
The work includes installation of a 22-km pipeline that will connect the subsea production tress at the Henry-2 and nearby Netherby fields. Subsea 7 also will install four rigid spool pieces and a 22-km electrohydraulic umbilical cable from Casino-4 to the Pecten East field.
The project management and engineering work will begin immediately in Subsea 7's Singapore office. Offshore onsite operations will begin at yearend when the Seven Navica pipelay and construction vessel arrives.
The Rockwater 2 diving support vessel, which recently worked on BHP Billiton's Stybarrow oil field development off Western Australia, also will be in attendance for the Santos contract.
The Casino-Henry field complex lies in 56-72 m of water about 30 km south of Port Campbell on the Victorian coast.
Casino has been on stream for a number of years via pipeline to an onshore gas processing plant near Port Campbell.
Henry, discovered in 2005, is about 18 km off Victoria in 65 m of water. Reserves are estimated to be 150 PJ of dry gas.
Netherby-1 lies 4 km north of Henry and was found in July 2008.
Santos has a 50% interest and operatorship. Australian Worldwide Exploration and Mitsui E&P Australia have 25% each.
UT assessing carbon storage in Gulf of Mexico
The University of Texas at Austin will use $6 million in federal and state grants to identify possible carbon sequestration sites on state-owned property under the Gulf of Mexico.
The US Department of Energy issued a $4.8 million grant as part of the American Recovery and Reinvestment Act of 2009. The Texas General Land Office issued a $1.2 million grant to assess the potential for an offshore carbon repository.
Tip Meckel, a research associate at the Bureau of Economic Geology, a research unit at the UT Jackson School of Geosciences, said Texas state lands in the gulf already are one of the most geologically studied areas worldwide.
Texas state ownership extends 12 nautical miles offshore compared to 3 miles for all other states except Florida.
ION Geophysical, a company that acquires and processes seismic data for the oil and gas industry, donated UT researchers access to extensive regional seismic datasets.
Formosa Plastics and its subsidiary, Neumin Production Co., have provided researchers with a 3D seismic survey valued at $3.3 million.
After developing a regional picture of potential storage areas, researchers will identify a select number of sites for intense study where they will collect new site-specific data and drill core samples.
Researchers will compile a detailed geological site characterization of specific reservoirs that might be used to store industrial carbon dioxide emissions.
Besides UT, research partners include Sandia Technologies LLC, Los Alamos National Laboratory, and the Environmental Defense Fund (EDF).
EDF will assess environmental risks and collaborate with international organizations planning or already conducting offshore carbon storage.
Processing — Quick Takes
Aramco lets contracts for Shaybah NGL program
Saudi Aramco has awarded KBR a contract for an undisclosed sum for the front-end engineering and design (FEED) and project management services (PMS) for its Shaybah natural gas liquids program at Shaybah field in Saudi Arabia.
KBR will provide FEED and PMS to develop the process design, layout, develop equipment and material specifications, prepare bid packages and develop an estimate for the construction for several projects related to the Shaybah NGL program facilities.
KBR also will assist Aramco in managing and directing the work related to other Shaybah program projects, which are "designed to help meet the rising domestic demand for gas and feedstocks for petrochemical projects," Aramco said.
Work on the project is expected to begin in October.
Tesoro reports fire knocked out at refinery
A fire that erupted early Sept. 28 in the coking unit of Tesoro Corp.'s 100,000-b/cd Wilmington, Calif., refinery, has been extinguished, the San Antonio-based company reported.
No injuries have been reported, Tesoro said, adding that the cause of this incident is under investigation and the amount of damage to the affected unit is unknown at this time. "Other units at the refinery are currently operating but at reduced rates," the company said. Tesoro acquired the refinery from Shell Oil Products US in early 2007 (OGJ Online, Jan. 29, 2007).
Transportation —Quick Takes
AIPN publishes model form for LNG sales
Publication of a new model form master LNG sale and purchase agreement by the nonprofit Association of International Petroleum Negotiators aims at creation of a secondary market for LNG that will "facilitate trading and arbitrage of LNG cargoes."
The agreement form helps the industry establish a "uniform short-term and spot sales agreement,…thereby reducing transaction time, cost, and uncertainty," said the announcement.
Publication concludes an effort to "create a model contract that balances the interests of sellers and buyers, is geographically neutral, and contains all of the provisions that most parties will require" in a master LNG sale and purchase agreement. It includes alternatives and options as well as guidance notes for users.
The move caps 3 years of effort by AIPN's drafting committee that consisted of more than 150 industry representatives, including members from many of the major LNG sellers, buyers, transporters, and traders worldwide, according to the announcement of the association's board of directors. The committee, cochaired by Steven Miles of Baker Botts LLP, Houston, and Harry W. Sullivan Jr., ConocoPhillips, Houston, held more than 15 meetings and five workshops in seven countries on five continents.
According to the association, this form is the latest in a "series of hydrocarbon-related model contracts" it has published to "facilitate the negotiation of energy transactions around the globe."
Founded in 1981, AIPN has 2,600 members in more than 80 countries, representing international oil and gas companies, governments, law firms, multilateral organizations, and academic institutions.
LNG power contract let to Tag Pacific
Tag Pacific Ltd., Sydney, through its subsidiary MPower, has been awarded a $32 million (Aus.) power contract for the Gorgon-Jansz LNG gas development on Barrow Island off Western Australia. The initial 2-year contract is for the design, manufacture, and commissioning of a 28-Mw electric power generation plant to be used for the construction and commissioning phase of the megaproject. TAG says it is possible the Gorgon joint venture will increase the scope of the contract, bumping the value up to $40 million (Aus.). The contract is a critical component in the Gorgon-Jansz construction phase and will require complex engineering to meet the environmental challenges of the project.
The $43 billion (Aus.) Gorgon-Jansz development on Barrow consists of a three-train LNG plant producing a total of 15 million tonnes/year of LNG as well as a 300-TJ/day domestic gas plant.
First LNG is due in 2014 and domestic gas by the end of 2015.
Pemex lets contract for Chicontepec pipeline
Petroleos Mexicanos (Pemex) awarded a $12.4 million contract to Insituform Technologies Inc.'s Mexican joint venture United Pipeline de Mexico de CV (UPM) for construction, replacement, and rehabilitation of about 40 km of pipelines in Mexico's Chicontepec oil region. Insituform subsidiaries Corrpro Cos. Inc. and Bayou Co. Inc. will provide cathodic protection and field joint coating services for the project.
Insituform expects work on this project to begin in November and to take about 16 months to complete. UPM will oversee new construction, including corrosion protection services, and rehabilitation of more than 24 km of pipeline using Insituform's proprietary Tite Liner polyethylene lining system. The new and rehabilitated pipelines will transfer Chicontepec oil from wellheads to production facilities. Insituform acquired Bayou and Corrpro in February and March, respectively.
Analysts previously reported Mexico's Energy Minister Georgina Kessel saying the country would have to reevaluate its strategy for Chicontepec given production shortfalls. Reports indicated Chicontepec would produce 60,000 b/d of oil by yearend against a previous forecast of 72,000 b/d (OGJ Online, Sept. 8, 2009).
Correction In the Sept. 21 special report, OGJ150, reserves and production for Plains Exploration & Production Co. were incorrectly stated. The following are corrections with their respective new rankings in parentheses: Liquids production-20.294 million bbl (No. 14 worldwide and No. 10 US), Natural gas production-79.254 bcf (No. 29 worldwide and No. 28 US), Liquids reserves–177.707 million bbl (No. 16 worldwide and No. 16 US), Natural gas reserves–686.357 bcf (No. 37 worldwide and No. 36 US). |
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