General Interest— Quick Takes
EIA, IEA sharpen views of lost gulf output
Estimates of oil production declines resulting from the moratorium on deepwater drilling in the US, imposed in response to the Apr. 20 blowout of the Macondo well and consequent spill in the Gulf of Mexico, are beginning to come into focus.
In its July Short Term Energy Outlook, the US Energy Information Administration estimated production declines resulting from the moratorium at 31,000 b/d in the fourth quarter this year and 82,000 b/d in all of 2011. It says the deficit will start at about 10,000 b/d in September and reach 100,000 b/d by December.
Those estimates represent increases from EIA's numbers a month earlier of 26,000 b/d in the fourth quarter and 70,000 b/d in 2011.
EIA forecasts US crude production of 5.37 million b/d this year, down 26,000 b/d from 2009. It sees an increase in total liquids supply—including crude, condensate, gas plant liquids, biofuels, other liquids, and refinery processing gains—to 9.35 million b/d this year from 9.05 million b/d last year.
The International Energy Agency's July Oil Market Report, meanwhile, said delays to new projects in the gulf "have already shaved 30,000 b/d off both 2010 and 2011 US crude production."
Both agencies emphasized the uncertainty of forecasting production while regulatory steps and responses remain unclear.
IEA said it wouldn't cut its US production forecast further "until more clarity prevails" over regulations and duration of the moratorium.
"But extended project delays, if they occur, could reduce our 2015 projection for US gulf production by 100,000-300,000 b/d," IEA said.
IEA projects an increase in US production of crude, condensate, NGL, and oil from nonconventional sources this year to 8.24 million b/d from 8.07 million b/d in 2009.
Firms to pay penalties in Nigerian bribe case
Snamprogetti Netherlands BV and Technip SA have agreed to pay $240 million criminal penalties each in a Foreign Corrupt Practices Act (FCPA) case involving bribes to officials in the construction of an LNG plant on Bonny Island, Nigeria. For each firm, the US Department of Justice filed a deferred prosecution agreement and a criminal information in the US District Court for the Southern District of Texas.
The information against Technip charges one count of conspiracy and one count of violating the FCPA. The information against Snamprogetti charges one count of conspiracy and one count of aiding and abetting violations of the FCPA.
The department agreed to defer prosecution for 2 years and will dismiss the criminal information if the firms and their owners and former owners meet compliance obligations and cooperate in other investigations.
In connection with the same case, Snamprogetti and Technip reached settlements with the US Securities and Exchange Commission for FCPA violations. The agreements include disgorgements of profits, $125 million for Snamprogetti and its former owner ENI, and $97 million for Technip.
The companies, along with Kellogg Brown & Root Inc. and a Japanese engineering and construction firm, were in a joint venture that received engineering, procurement, and construction contracts from Nigeria LNG Ltd. during 1994-2004.
According to court documents, they authorized the payment of bribes through intermediaries.
In February 2009, Kellogg Brown & Root LLC and its former parent, Halliburton Co., entered guilty pleas and agreed to pay a $402 million criminal fine to settle charges related to the case (OGJ Online, Feb. 16, 2009). Former KBR Chief Executive Albert Stanley pleaded guilty in September 2008 to conspiring to violate the FCPA.
The US is seeking extradition from the UK of two individuals charged in the case, agent Jeffrey Tesler and Wojciech Chodan, whom the Justice Department describes as a former salesperson and consultant of a UK subsidiary of KBR.
Continental Resources increases capital budget
Continental Resources Inc. increased its capital expenditure budget to $1.3 billion from $850 million to accelerate its drilling program and to increase its acreage positions in US shale plays, the company said July 9. Continental is based in Enid, Okla.
Harold Hamm, Continental chairman and chief executive officer, said the company plans to increase its holdings in oil-rich and liquids-rich shale plays, focusing on the Bakken of North Dakota and Montana, the Anadarko Woodford shale in western Oklahoma, and the Niobrara shale in Colorado and Wyoming.
"We currently have a total of 26 operated rigs, with 18 of those drilling rigs in the Bakken," Hamm said. "We plan to increase the number in the Bakken by yearend. We are operating three rigs in the Anadarko Woodford, and we continue to see encouraging results there, as well. We plan to increase our Anadarko rig count by yearend also."
Continental has 806,576 net acres leased in the Bakken and 233,321 net acres in the Anadarko Woodford. Continental has 59,071 net acres leased in the Niobrara and plans to spud its first well in the play by yearend.
Exploration & Development— Quick Takes
Chevron makes gas find off Western Australia
Chevron Australia has encountered 75 m of net natural gas pay in its latest well drilled off Western Australia. The Sappho-1 well was drilled in the WA-392-P permit about 140 km northwest of the coastal town of Onslow and about 50 km west of Gorgon field.
The discovery comes shortly after the company announced a successful appraisal of its Clio gas discovery in adjoining WA-205-P permit with Clio-3 (OGJ Online, July 6, 2010).
Chevron says the discovery will aid its long-term plans to establish a significant LNG business supplying Australia and the Asia-Pacific region. Chevron has 50% of WA-392-P, while Royal Dutch Shell PLC and ExxonMobil Corp. each hold 25%.
Eni reports oil strike on block off Angola
Eni SPA says a discovery in the northeast area of Block 15/06 off Angola confirms potential for a second productive hub on the block. The Cabaca Southeast-1 well, drilled in 470 m of water 100 km from the coast, reached its multitarget objective in deep Miocene strata and cut 450 m of gross oil pay, Eni said.
"The well has produced results beyond initial expectations and confirms the potential for a second productive hub in the northeast area of the block," a company statement said.
Eni has made four discoveries in the western part of the block, which it plans to develop with subsea completions and a turret-moored floating production, storage, and offloading vessel.
It estimates production start-up in 2012 with peak production of 90,000 boe/d from reserves of 160 million boe. The discovery names are Cinguvu, Sangos, N'Zanza, and N'Goma (OGJ, Apr. 12, 2010, Newsletter).
Eni said the eastern hub anchored by the latest discovery, development of which can make use of engineering studies conducted for the west hub, would double production from Block 15/06.
Angola's state-owned Sonangol EP is the concessionaire for Block 15/06. Block interests are Eni, operator, 35%; SSI Fifteen Ltd. 20%; Sonangol Pesquisa e Producao SA and Total, 15% each; and Falcon Oil Holding Angola SA, Petrobras International (Braspetro) BV, and Statoil Angola Block 15/06 AS, 5% each.
Falklands Springhill prospect abandoned
BHP Billiton Petroleum and Falkland Oil & Gas Ltd. encountered no reservoired hydrocarbons and will plug Toroa F61/5-1, first exploratory well in the East Falkland basin in the South Atlantic.
Projected to 2,700 m on the PL15 license, the well reached a total depth of 2,476 m in about 600 m of water and was logged. It was to have evaluated the Cretaceous Springhill sandstone play that produces hydrocarbons far west in the Magallanes basin of Argentina and Chile.
FOGL drilled the well 100 miles south of Stanley at the site of a seismic amplitude anomaly and a positive controlled source electromagnetic response. It had also encountered oil shows in the site survey core over the prospect. The company will fully evaluate the well data.
The company has also identified the Lutra, Endeavour, Thulla, Inflexible, and other prospects in deeper water east of the islands.
Drilling & Production— Quick Takes
Diamond Offshore to move semis from gulf
Diamond Offshore Drilling Inc. has reported that it will move two deepwater semisubmersible drilling rigs from the Gulf of Mexico in response to the federal moratorium on work in more than 500 ft of water. Court challenges to the moratorium have been successful and are under appeal. Deepwater drilling in the gulf remains suspended.
Diamond Offshore's Ocean Endeavor semi will move to Egypt under contract to Burullus Gas Co., a joint venture of BG Group, Petronas, and Egyptian General Petroleum Corp. Burullus holds the West Delta Deep Marine concession.
Separately, Diamond Offshore will suspend a gulf contract and signed a multiwell international commitment with a subsidiary of Murphy Exploration & Production Co. to move the Ocean Confidence semi to Congo (Brazzaville).
The Ocean Endeavor had been working under a contract in effect since July 2007 with Devon Energy Corp., which declared force majeure.
Devon argued that the moratorium, imposed by the Department of the Interior May 30 in response to the Apr. 20 explosion on the Transocean Deepwater Horizon semi and consequent spill, prevented it from drilling in the gulf. Other operators have declared force majeure on gulf drilling contracts with Diamond Offshore and other drilling contractors.
"With new contracting severely restricted in the Gulf of Mexico as a result of the uncertainties surrounding the offshore drilling moratorium, we are actively seeking international opportunities to keep our rigs fully employed," Diamond Offshore Pres. and Chief Executive Officer Larry Dickerson said in a prepared statement.
"The new contract for the Endeavor will help us preserve backlog and will allow the previous operator of the rig to satisfy its contractual obligations, which extended until June 30, 2011," he said. "We greatly regret the loss of US jobs that will result from this rig relocation."
Devon will pay a $31 million early-termination fee. Dickerson estimated that the new contract and termination fee would generate combined maximum total revenue of $100 million.
UBS Investment Research said the dayrate would decline to $225,000/day from $267,000/day with Devon. With the termination fee, however, the realized dayrate will be $285,000/day, the firm said.
Meanwhile, the Ocean Confidence semi departed the gulf and is expected to arrive off Africa within about 60 days. Larry Dickerson, Diamond Offshore president and chief executive officer, said, "As the uncertainty about continued deepwater drilling in the [gulf] persists, we must consider alternatives that allow our deepwater assets to remain employed."
The contract suspended with Murphy was restructured into a 1-year commitment in the gulf that is expected to recommence when Murphy is satisfied that it can obtain the necessary permits and can meet any new regulatory requirements, Dickerson said.
The new international contract is a three-well commitment, plus an option for additional work, and includes an obligation for the customer to mobilize the rig to and from Congo. The remaining 1-year gulf commitment and new international commitment are expected to generate combined maximum total revenue of about $234 million.
BPZ lifts Peru fields toward commerciality
BPZ Resources Inc., Houston, reported continuing efforts to move Corvina field off northwestern Peru to commercial production by Nov. 30, and Albacora field to commerciality later in 2011.
BPZ has spudded the CX11-23D well, the last well to be drilled from the CX-11 platform. Meanwhile, it completed the CX11-22D updip appraisal well to simultaneously produce oil and reinject formation water, but the well hasn't achieved a consistent production rate.
The 22D well has 75 ft of net oil pay, 70 ft of prospective oil pay in lower zones, and 75 ft of net gas pay above the oil zones. The well tested at 300 b/d of oil with high gas rates due to gas coming from one of the shallower intervals opened to help define the gas-oil contact.
BPZ plans to rework 22D to isolate the gas sand once 23D has been drilled and the field enters commercial production. In the meantime it will produce 22D intermittently to manage the gas volume. After 23D is drilled, BPZ will install gas and water reinjection equipment.
Corvina and Albacora fields produced a combined 4,050 b/d in the 2010 second quarter, less than in the first quarter, because six Corvina wells were shut in pending the outcome of the company's extended well test permit applications and issues with the 22D well.
Corvina 17D and 22D are the only Corvina wells on production. Albacora field's A-14XD averaged 1,510 b/d in the second quarter and 1,438 b/d in June, but BPZ shut it in July 12 because it reached its initial 6-month production test limit. A-17D, now drilling, is to be complete this quarter, followed by the drilling of A-18D later this year.
BPZ, which has sold Albacora oil to the local refinery under fixed and spot contracts, has used chemicals and other processes to break the emulsion and reduce the crude's salt content. The company is commissioning desalting equipment on the Albacora platform.
ADCO lets contract for Bida Al Qemzan oil field
Abu Dhabi Co. for Onshore Oil Operations (ADCO) awarded Foster Wheeler AG's global engineering and construction group a project management consultancy (PMC) contract for the development of Bida Al Qemzan oil field in the UAE.
Foster Wheeler will manage, on behalf of ADCO, the engineering, procurement, and construction phase of the Bida Al Qemzan development and will assist ADCO with the selection and awarding of engineering, procurement, and construction (EPC) contracts. The project aims to add 20,000 b/d of production capacity to the field by the end of third-quarter 2012.
ADCO earlier this year let PMC contracts to Foster Wheeler for expansion of Bab field and development of Qushahwira field. ADCO also let an EPC contract to National Petroleum Construction Co. for work that will result in production of 30,000 b/d of oil in part of Qusahwira field and 80,000 b/d in part of Northeast Bab field (OGJ Online, Mar. 24, 2010).
Petrobras orders FPSO power, compressor sets
A subsidiary of Petroleo Brasileiro SA (Petrobras), Petrobras Netherlands BV, placed a $160 million order with GE Oil & Gas for power generation and compression packages for the P-58 and P-62 floating production, storage, and offloading vessels planned for installation off Brazil.
Petrobras has slated installation of FPSO P-58 for the Parque das Baleias North complex of fields in the Campos basin off Espirito Santo state and FPSO P-62 for Roncador field in the Campos basin off Rio de Janeiro state. Combined, the FPSOs have a design for handling 360,000 bo/d and should come online in 2013. Both FPSOs will be converted from existing very large crude carriers.
GE's packages include eight 31.1 Mw PGT25+ gas turbine generator sets and 12 motocompressor trains (either low or high pressure) for the two vessels. The compressors have up to a 200 bar discharge pressure for natural gas export or gas lift.
In addition, GE will contribute relevant local content participation by supplying electric generators and electric motors for both projects from the Brazilian market. The company also will provide technical advice for on site installation and startup and training to support both installations.
GE will manufacture the equipment in Florence, Italy, with full-load string and performance tests conducted at its production site.
Processing — Quick Takes
Bharat Oman starting up Indian refinery
Bharat Oman Refineries Ltd. (BORL) is starting up a 120,000-b/d grassroots refinery in Central India.
The company started the crude unit at Bina, Madhya Pradesh, on June 29 then shut it down within a few days to tie in the vacuum distillation unit.
It expected to restart the crude unit in synchronization with the vacuum unit before shutting down again to start up gasoline production units later this month.
The refinery has a 20,000-b/d naphtha hydrotreater and a 10,000-b/d continuous catalytic reformer. It last will start up a hydrocracker in late July or August.
BOPL expects full commissioning by the end of September.
The refinery receives crude via a 935-km, 24-in. pipeline linking Bina with Vanidar, Gujarat, which was commissioned in June.
Mandates add pressure on Japanese refiners
New mandates for upgrading capacity might accelerate a restructuring of the Japanese refining industry, says the International Energy Agency.
Beset by rapidly falling domestic demand for oil products and growing competition from China and elsewhere in Asia, Japanese refiners are struggling with excess distillation capacity (OGJ, June 21, 2010, p. 54).
But of 1.1 million b/d of capacity cuts announced last year, less than 400,000 b/d has been assigned to specific facilities and can be considered firm, IEA says in its July Oil Market Report.
But that might change following a regulation introduced July 5 by the Japanese government. By March 2014, Japanese refineries must increase their heavy-crude upgrading capacity to 13% of distillation capacity from the current 10%. Refiners must submit plans for increasing their upgrading ratios by Oct. 31.
"Refiners not willing to invest in expensive upgrading units in the current weak-margin environment could instead reduce crude distillation capacity, speeding up industry consolidation in progress," IEA said.
Ecopetrol taps Mustang for polymer study
State-owned Ecopetrol of Colombia has let a contract to Mustang for conceptual engineering and technology evaluation to optimize polymer production at a planned petrochemical complex.
Mustang, part of the Wood Group, will study ways to generate revenue from production of polyethylene and aromatics from ethane, LPG, and naphtha produced at Ecopetrol's 205,000-b/d Barrancabermeja and 75,000-b/d Cartagena refineries and the Cusiana gas fields.
The grassroots petrochemical complex will be located at Cusiana in the southern part of the country or Cartagena on the northern coast.
Transportation — Quick Takes
Orca plans Tanzanian gas line expansion
Orca Exploration Group reported the creation of EastCoast Transmission & Marketing as its new infrastructure division in Tanzania. ECTM will initially focus on expanding the onshore pipeline transporting Songo Songo field gas to Dar es Salaam.
Expansion would involve twinning the existing 207-km pipeline from Somanga Funga, where the marine pipeline from the offshore Songo Songo gas field makes landfall, to its terminus at Dar es Salaam. Orca has undertaken preliminary engineering studies for the project and envisions future extension of the pipeline along the coast: north to Mombasa and south to Mtwara near the border with Mozambique and the 756 sq km Mnazi Bay gas discovery, operated by Maurel & Prom, Paris.
Capacity of the current pipeline carrying Songo Songo gas to Dar es Salaam is 90 MMcfd. Pipeline owner Songas Ltd. plans to expand throughput to a peak of 140 MMcfd by January 2013. Orca's planned expansion would be required shortly afterwards.
Orca intends to drill its Songo Songo West prospect in 2011, while ExxonMobil Exploration & Production Tanzania Ltd. agreed in March to take a 35% interest in deepwater Block 2 off Tanzania from operator Statoil Tanzania AS. A 3D seismic survey of the block was completed in February (OGJ Online, Mar. 31, 2010).
Maurel & Prom and Cove Energy PLC agreed to shoot 600 sq km of 3D seismic and drill two appraisal wells on the Mnazi Bay discovery in 2011 (OGJ Online, Sept. 18. 2009).
Inpex to raise capital for Ichthys LNG project
Japanese company Inpex plans to raise as much as $7.5 billion (Aus.) through a global share offering to finance its planned 8.4 million tonne/year Ichthys LNG project off Western Australia and in Darwin.
The company will issue 1.2 million shares to raise the funds and will issue a further 84,000 shares if demand is strong.
The offer price will be set between July 26-28.
Inpex expects to spend ¥4 trillion during 2010-17 on three overseas projects: Ichthys LNG, Abadi LNG in the Timor Sea off Indonesia, and Kashagan oil field in Kazakhstan.
For the $22.7 billion (Aus.) Ichthys development, a final investment is expected during fourth-quarter 2011.
The development plan includes a floating processing platform capable of stripping 100,000 b/d of condensate from the gas stream and sending the dry gas through an 850-km subsea pipeline to an onshore LNG plant at Blaydin Point in Darwin.
The plant will initially comprise two trains capable of producing 8.4 million tpy of LNG as well as 1.6 million tpy of LPG. It will come on stream in 2015.
Eagle Ford Gathering to build shale gas line
Eagle Ford Gathering LLC, a joint venture of Kinder Morgan Energy Partners LP and Copano Energy LLC, will construct 85 miles of 24-in. and 30-in. OD pipeline to move natural gas produced in the Eagle Ford shale by SM Energy Co. from La Salle, Dimmit, and Webb counties in Texas to the Freer compressor station in Duval County, Tex., for transport on KMEP's Laredo-to-Katy (LK) pipeline. The LK line will in turn transport gas to Copano's Houston Central gas processing plant. EFG expects the new line to enter service during summer 2011.
SM Energy signed a long-term gas services agreement with EFG to gather, transport, and process as much as 200 MMcfd of its Eagle Ford gas production over a 10-year term. SM Energy's transport agreement is fee-based and will not require the company to invest any upfront capital in the line. EPP announced expansions to its gas and NGL pipeline systems serving the Eagle Ford shale in late-June, with most of the work expected to be completed by early 2012 (OGJ Online, July 1, 2010).
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com
