General Interest— Quick Takes
BOE plans meetings on deepwater drilling
The US Bureau of Ocean Energy Management, Regulation, and Enforcement (BOE) will hold eight public meetings in seven coastal states during August and September to discuss deepwater drilling safety reforms, blowout containment, and spill response, the federal agency's director announced.
BOE Director Michael R. Bromwich said the meetings will solicit information from oil and gas industry experts as well as state and local governments, environmental organizations, experts from academia, and the general public.
"We will engage the public and experts on these issues to determine what additional measures are needed so that deepwater drilling can proceed in a manner that is safe for crews, the environment, and coastal communities," he said on July 19. "It's important that we hear from those who have been directly affected by the BP oil spill, as well as from other stakeholders, including the conservation community and the oil and gas industry itself."
Bromwich's announcement came a week after US Interior Sec. Ken Salazar imposed a second deepwater drilling moratorium based on technology and drilling configurations instead of water depth. A federal district judge in New Orleans overturned Salazar's first order, which the secretary issued following BP's well blowout and resulting oil spill. The new suspensions are scheduled to expire on Nov. 30 or earlier if Salazar decides operations can resume safely.
"We need to know that [companies in] the industry got the message, and that they are quickly taking steps to ensure deepwater drilling operations are safe," said Bromwich. "They also have to demonstrate to us that they can contain a catastrophic blowout similar to BP oil spill as well as respond appropriately in the event of another oil spill."
He said the meetings will present experts discussing issues on panels and provide audience members opportunities to comment. Members of the general public also will get a chance to submit comments online and by mail, Bromwich said.
Although specific dates and locations have not been finalized, he said that meetings will occur during August in New Orleans and Lafayette, La.; Mobile, Ala.; Pensacola, Fla.; Santa Barbara, Calif.; and Anchorage; Alas., and in early September in Biloxi, Miss., and Houston.
API: 2Q rise in drilling followed 1Q drop
US oil and gas drilling reversed course and rose 38% year-to-year in the second quarter following a 22% decline in 2010's first three months, the American Petroleum Institute reported.
Well completions climbed from 2009's second quarter to an estimated 10,358 oil wells, natural gas wells, and dry holes, API said July 13 in its latest quarterly well completion report. Total estimated footage reached 58.373 million ft, 16% more than a year earlier.
"As expectations for crude oil and natural gas demand have become more bullish, drilling activity has started to reverse its steep decline from the last five quarters," said Hazem Arafa, director of API's statistics department. "In 2010's second quarter, the estimated number of exploratory oil and gas wells drilled jumped 35% from 2009's second quarter."
API said while gas has been the primary drilling target in the US for most of this decade, the pace of oil well completions has recently grown. During the second quarter, US oil well completions surged 59% year-to-year to 4,847. Gas well completions totaled 4,396, 22% more than in 2009's second quarter, it indicated.
Concho will hike activity on Marbob assets
Concho Resources Inc. will acquire the oil and gas assets of Marbob Energy Corp. for $1.65 billion cash and Concho securities. Both are Midland, Tex., firms.
Concho Resources said the acquisition has been one of its highest priorities for the last 3 years, will double its Yeso drilling inventory, and will give it a combined position of more than 100,000 net acres in the emerging Bone Spring play. It said it will increase the activity level and rig count on the acquired properties.
Marbob is a private exploration and production company that operates in the Permian basin of Southeast New Mexico.
The acquisition includes 76 million boe reserves, 58% oil and 63% proved developed, 166 million boe of estimated unproved recoverable hydrocarbons, and 2,300 identified drilling locations, 350 of them proved undeveloped, including 1,300 in the Yeso and 1,000 in the Bone Spring.
First quarter 2010 net production averaged 14,000 boe/d.
Marbob is running five rigs, including one drilling Yeso wells on the Southeast New Mexico shelf and four in the Bone Spring play. Concho Resources will retain Marbob's experienced technical and operational staff.
Canada's Petrodorado to buy Loon Energy
Petrodorado Energy Ltd. signed a nonbinding letter agreement to acquire Loon Energy Corp. subject to entering a definitive agreement. Both are Calgary firms.
Petrodorado would issue 19.2 million shares to Loon shareholders under the proposed transaction plus performance shares equal to a value of $1.5 million on completion of 300 sq km of 3D seismic and $1.5 million upon spud of the initial well on Block 127 in Peru owned by Loon.
Further details concerning the proposed transaction are to be revealed if and when a definitive agreement is reached.
Petrodorado is engaged in exploration and development in Colombia, Peru, and Paraguay. It holds three low-risk blocks with oil discoveries and six potential high-impact blocks. Its 49.5% interest in Colombia's Buganviles block in Colombia would rise to 69.5% if it acquires Loon.
Loon is involved in exploration and development in Colombia and Peru. Besides the 20% working interest in the Buganviles block in Colombia it has a 20% working interest in Block 127 in Peru's Maranon basin.
Exploration & Development— Quick Takes
Parex nurses Colombia Llanos oil discovery
Parex Resources Inc., Calgary, has a multipay oil discovery in Colombia's Llanos basin that it has been unable to precisely evaluate because of mechanical difficulties.
Kona-1 on Block LLA-16, in which Parex has 50% working interest, went to 13,250 ft and encountered hydrocarbon shows in the Upper C7, Mirador, and Gacheta formations at 11,090-13,000 ft. Well logs indicate 35 ft of potential net pay in Upper C7 and 47 ft in Mirador.
Due to wellbore deviation required to drill through multiple horizons, Kona-1 could only be cased to 12,765 ft, above the top of Gacheta. C7 is to be tested in later wells. Cement bond logs indicated no cement across the pay zone, and therefore the 47 ft of prospective oil pay was not isolated from the 280 ft of underlying wet reservoirs.
Parex perforated 11,552-560 ft at the top of Mirador to determine oil gravity and reservoir quality while preparing for a remedial cement treatment. The well flowed naturally at a rate of up to 500 b/d of 35° gravity oil and 750 b/d of water.
Bottomhole pressure measurements during the test indicated a reservoir pressure of 4,750 psi and measured bottomhole flowing pressure of 4,550 psi, indicating a 5% drawdown. Testing was terminated after 14 hr as water cut had stabilized at 60% of total fluid rates.
Internal analysis of the well test indicated that with successful cement remediation, Kona-1 could flow as much as 2,500 b/d of oil or pump as much as 3,500 b/d from Mirador. Parex will install a pump.
The rig is being skidded to drill the Kona-2 exploration prospect from the same pad. It will drill through the C7 and Mirador formations to the deeper Gacheta and Une formations 600 m subsurface from Kona-1 to add structural and reservoir information.
After drilling Kona-2, the rig is expected to move to the Goroka exploration prospect on Block LLA-16.
Parex is contracting a service rig for August to move onto the Kona location and is evaluating proposals to add a second rig for drilling on blocks LLA-16 and LLA-20 in 2010. It expects to defer a Block LLA-29 exploration well into 2011 with the addition of the Kona-2 well into the 2010 program.
Parex commissioned a study to evaluate the construction a 7-km oil pipeline from the Kona location to a terminal on the main paved all-season road.
Colombia's National Hydrocarbons Agency notified Parex that it was deemed to be the successful bidder for Block LLA-57 in the Llanos basin. The block covers 104,532 acres just north of Parex-operated Block LLA-20. Parex has identified several leads in the southern half of Block LLA-57 along trend to the two drillsites being built on Block LLA-20.
Granting of LLA-57 brings Parex's Llanos basin acreage to 595,000 acres.
Nexen expands Northeast BC holding
Nexen Inc., Calgary, said it has more than doubled its land position in Northeast British Columbia, where it drilled eight wells in the Horn River basin in the first quarter of 2010.
The company plans to start production by yearend and to be flowing 50 MMcfd of gas in early 2011.
Drilling time for the eight wells averaged less than 25 days, down 35% from the company's previous program even though the 2010 wells penetrated 80% more hole in horizontal laterals in the productive reservoir. Stimulation is under way and is to average 18 fracs/well.
Nexen said, "Based on what we know today, this play is expected to earn a 10% rate of return with gas prices at (US) $4/Mcf."
Success at a land sale in June hiked the company's holding to more than 300,000 acres from 128,000 before the sale, making it one of the largest shale gas players in the area. Nexen previously held 90,000 acres at Dilly Creek, estimated to contain 3-6 tcf of recoverable contingent resource, and 38,000 acres at Cordova.
The newly acquired lands "contain plays that are similar to those on our Horn River lands," Nexen said.
Energen to write off deep Conasauga leasehold
Energen Corp., Birmingham, Ala., will write off $10 million in unproved capitalized leasehold associated with its deep Conasauga shale acreage in Alabama in the second quarter of 2010 as being uneconomic given the outlook for natural gas prices.
The company made the call after analyzing flow rates from completions performed in 2010 in the Marchant 22-16-1 well in Bibb County, Ala. (see map, OGJ, Dec. 15, 2008, p. 31).
After three acid etchings and two carbon dioxide stimulations in five zones that span some 4,000 ft at 7,500-11,500 ft, Energen established flows of 300-400 Mcfd at 120-180 psi pressures.
It noted that the Conasauga shale in Alabama is a mushwad formation and very tight compositionally, with limited permeability and porosity. Chesapeake Energy Corp. originally drilled and completed the Marchant well in conjunction with Energen.
Later this month, Energen plans to complete a thick, uphole interval in the Marchant well. This nondeformed Conasauga interval at 3,000-4,000 ft has low structural dip rates and a higher shale content than the deeper intervals. The company will also complete the Westervelt 19-2-1 well in Tuscaloosa County, Ala., in the next few as it works to determine the economic viability of the Chattanooga shale.
Energen's remaining capitalized, unproved leasehold associated with its Chattanooga shale and the shallow Conasauga shale is $14.4 million after-tax ($23.2 million pre-tax).
South Africa Karoo shale gas hunt growing
South Africa awarded a 12-month technical cooperation permit to three companies to study data on shale gas in the Karoo basin in central South Africa.
The recipients are Sasol Petroleum International Pty. Ltd, Statoil ASA, and Chesapeake Energy Corp. The permit covers 27.1 million acres, mainly in the Free State with smaller tracts in the Eastern Cape and KwaZulu-Natal.
The permit conveys the exclusive right to study shale prospectivity without surface activity or drilling. The awardees will study existing geological information and analyze cores obtained by Soekor Inc. in a search for shale oil in the 1970s-80s.
Falcon Oil & Gas Ltd., Denver, has a similar 1-year permit to study 7.5 million acres, and Royal Dutch Shell PLC has a permit on 185,000 acres covering much of the southern half of the country (OGJ Online, Nov. 2, 2009).
Drilling & Production— Quick Takes
Marathon starts Droshky oil flow in gulf
Oil production has started from Droshky field on Green Canyon Block 244 in the Gulf of Mexico 160 miles southwest of New Orleans, said Marathon Oil Corp., operator with 100% working interest.
Droshky's initial development stage is expected to produce 35 million boe of the estimated 60 million boe net resource at a final development cost was less than $900 million. Marathon had booked 26 million boe of proved reserves at the end of 2009.
Future expansion of the project and ultimate recovery depends largely on well performance, Marathon said.
Droshky, an early 2007 discovery, is expected to produce 45,000 b/d of oil and 30 MMcfd of gas at its peak (OGJ, Apr. 16, 2007, Newsletter).
The field, in 3,000 ft of water, produces through four subsea development wells tied back through dual, 18-mile flowlines to the Bullwinkle platform.
Egypt Nile Delta gas fields to be developed
BP PLC and RWE Dea plan the $9 billion development of gas fields on the North Alexandria and West Mediterranean Deep concessions in Egypt's Nile Delta offshore.
RWE Dea said the project is to begin production in 2014. The company's share of reserves is more than 50 billion cu m.
The concessions include the Raven fields in the high pressure-high temperature regime on the West Mediterranean Deep concession. Most of the funds will be spent on the North Alexandria concession.
Production is to plateau starting in 2015 at more than 3 bcm/year. The first-phase production period is to last 20 years. Development of further gas potential, including already discovered gas volumes on the concessions, will take place in a second phase.
RWE Dea holds 13 onshore and offshore concessions that cover 13,300 sq km in Egypt.
Maersk, QP note milestone at Al Shaheen field
Maersk Oil and Qatar Petroleum produced the 1 billionth bbl of oil from Al Shaheen field along the Qatar arch in the Persian Gulf off Qatar.
Maersk said it has increased field output steadily and that the field is still producing at its 2009 average of 300,000 b/d, one third of Qatar's oil output. The companies did not release an estimate of remaining reserves.
Maersk signed the exploration and production-sharing agreement on 3,500 sq km Block 5 in mid-1992 and started oil production from Al Shaheen field in 1994. The agreement applied to all formations above the Permian Khuff limestone.
Al Shaheen field, declared commercial in October 1994, underlies part of northern North field, a supergiant gas-condensate accumulation. Many judged Al Shaheen's tight reservoir to be uneconomic, but output reached 60,000 b/d from 10 wells in 1997. The field has been developed largely with horizontal wells.
Maersk signed another EPSA in 2004 for the Block 5 Extension Area, applicable to the reservoirs in Block 5, covering 139 sq km north of Block 5.
The most recent $6 billion field development phase, agreed in December 2005, included the installation of 15 platforms, 163 production and water injection wells, and 140,000 tonnes of new facilities. It has been completed ahead of the prescribed schedule.
During the comprehensive installation work, Maersk managed a production uptime of better than 99% without compromising safety. Gas is reinjected and moved by pipeline for processing in QP's onshore plants.
Liquids rates high in Panhandle Granite Wash
Linn Energy LLC, Houston, said it has completed what may be the highest rate well reported in the Texas Panhandle Granite Wash trend.
The Black 50-1H, which Linn operates with 63% working interest, tested at a 24-hr rate of 27 MMcfd of gas and 3,190 b/d of condensate at 2,150 psi flowing surface pressure. The gas analyzes 1,316 btu/mcf and when processed should yield 3,530 b/d of natural gas liquids, the company said.
Including estimated NGL recovery and processing shrinkage, the Stiles Ranch field well's overall rate is 60.2 MMcfd of gas equivalent.
Linn Energy said the well considerably exceeded expectations. The liquids content of more than 6,700 b/d represents more than 65% of the production stream. Payout could occur in as little as 2 months.
The company has a large concentrated acreage position in the area on which it is drilling horizontal Granite Wash wells.
Processing — Quick Takes
Agreement signed for Karsto FEED services
Statoil, on behalf of Gassco AS, has signed a framework agreement with Foster Wheeler AG for front-end engineering design (FEED) services for upgrade of the Karsto gas processing plant in Norway.
The plant is being modified to enable it to process light oil and condensate coming onto production in the Norwegian North Sea (OGJ, July 5, 2010, p. 18).
The framework agreement covers a series of FEED projects. Foster Wheeler has received the first FEED call-off contract for modifications that will enable the Karsto plant to process light oil from Gudrun oil and gas field, about 55 km north of Sleipner oil field.
Norwegian authorities recently approved Gudrun development (OGJ, June 28, 2010, Newsletter). Statoil is the Gudrun operator.
Transportation — Quick Takes
Pascagoula project gets FERC approval
Williams Partners LP and Florida Gas Transmission announced July 21 approval from the US Federal Energy Regulatory Commission of a proposal to connect the existing Transco and FGT natural gas pipeline systems with the new Gulf LNG Clean Energy import terminal under development near Pascagoula, Miss.
The Pascagoula project, being jointly developed by Transco and FGT, will consist of about 15.54 miles of 26-in. OD pipeline in portions of Mobile County, Ala. (4.59 miles), and Jackson County, Miss. (10.95 miles). The $59 million project will have the capacity to transport roughly 810,000 MMbtu/day of gas by its in-service date of Autumn 2011. The companies expect to begin construction in April 2011.
The Gulf LNG Clean Energy import terminal is also scheduled to enter service in Autumn 2011.
The $1.1 billion terminal will feature two full-containment storage tanks with combined capacity of 6.6 bcf and have a 1.3 bcfd base send-out capacity. Capacity is fully contracted under two 20-year firm service agreements.
Gulf LNG, a joint venture of El Paso, Crest, and Sonangol, is adjacent to the Bayou Casotte Ship Channel in the Port of Pascagoula.
CNG eyed to move Turkmen gas to Azerbaijan
Eni SPA Chief Executive Officer Paolo Scaroni met in Baku on July 20 with Azerbaijan President Ilham Alieyev to discuss the use of compressed natural gas (CNG) technology to move gas from Turkmenistan.
An Eni press statement said CNG would be shipped across the Caspian for delivery to a land pipeline in Azerbaijan.
It said Scaroni has discussed the project in recent months with representatives of the Russian, US, and European Union governments.
In Baku, the Eni executive also discussed participation by his company in upstream projects in Azerbaijan.
Spectra to buy Bobcat Gas Storage
Spectra Energy Corp. reported July 15 a definitive agreement to purchase the Bobcat Gas Storage assets and development project from Haddington Energy Partners III LP and GE Energy Financial Services for $540 million. In addition to the purchase price, Spectra expects to invest $400-450 million to fully develop the facility by the end of 2015.
Once fully operational, the high-deliverability salt dome storage caverns in Point Barre in St. Landry parish in southeastern Louisiana will have a total working gas storage capacity of 46 bcf. Full development of Bobcat will brings Spectra's total North American storage capacity to about 340 bcf, the company said.
The first phase (Cavern 1) of Bobcat Gas Storage entered service Nov. 1, 2008, with Cavern 2 following Oct. 31, 2009. Bobcat expects it working gas capacity as of summer 2010, after full build-out of both caverns, to total 19 bcf. Bobcat interconnects with five interstate natural gas pipelines, including Spectra's Texas Eastern Transmission line. Other pipelines the facility interconnects with are Florida Gas Transmission, Transco, Gulf South, and ANR. The facility is near the Gillis and Eunice aggregation points and 45 miles north of Henry Hub, La.
Completion of the transaction is pending regulatory and other approvals, with Spectra expecting it to close before yearend.
Chevron signs Kogas for Wheatstone project
Chevron Australia has signed up Korea Gas Corp. as a foundation customer for its proposed Wheatstone LNG project off Western Australia.
A heads of agreement has been drawn up under which Kogas will buy 1.5 million tonnes/year of LNG from the development for up to 20 years.
Kogas will take 75% of this supply from Chevron's share and the remaining 25% from other Wheatstone hub participants—at this stage Apache Energy and Kufpec Australia.
Kogas will also take as much as a 5% stake in the Wheatstone project itself. This will include the field licenses, the onshore LNG plant, and the domestic gas processing facilities.
Chevron says the deal with the South Korean energy major provides further momentum to the Wheatstone project, which involves development of Wheatstone field as well as taking gas from Apache Energy-Kupec's nearby Julimar and Brunello gas fields.
Apache and Kufpec, which hold 65% and 35% of Julima and Brunello respectively, signed a deal with Chevron in October 2009 to supply gas to Wheatstone while taking up to 16.25% and 8.75% equity stakes in the Wheatstone facilities.
This stake will now be reduced with Kogas's participation.
A final investment decision on Wheatstone is expected next year upon completion of current front-end engineering and design studies. The initial project will be two LNG processing trains capable of producing 8.6 million tpy and located at Ashburton North near Onslow on the Western Australian coast.
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