GENERAL INTEREST — Quick Takes
Devon sells ACG stake to BP for $2 billion
Devon Energy Corp. has completed the sale to BP PLC of its 5.6% interest in ACG (Azeri-Chirag-Gunashli) oil field off Azerbaijan for $2 billion. Devon's share of production was about 17,000 b/d of oil.
The company acquired a 4.8% interest in the ACG production-sharing agreement through a 1999 merger of PennZenergy Co. It added a 0.8% share in early 2001.
Devon has been divesting international and Gulf of Mexico holdings to concentrate on North American unconventional oil and gas resources. John Richels, Devon president and CEO, said pretax proceeds from divestitures so far total about $6.7 billion. He said the divestiture program would be complete about yearend with the sale of Devon's assets in Brazil.
Devon Energy's 5.63% stake will be split between BP 3.29% and partners exercising preferential rights related to the transaction: Chevron 0.99%, Inpex 0.96%, and Itochu 0.38%.
ACG interests after the transaction are BP, operator, 37.43%; Chevron 11.27%; Inpex 10.96%; AzACG (a subsidiary of state-owned SOCAR) 10%; Statoil 8.56%; ExxonMobil 8%; TPAO 6.75%; Itochu 4.3%; and Hess 2.72%.
BP, OSHA settle 270 citations at Texas City
BP Products North America Inc. agreed to pay $50.6 million in a settlement with the US Occupational Safety and Health Administration to resolve 270 of 709 citations issued to BP at its 455,790-b/d refinery in Texas City, Tex.
In citations issued in October 2009, OSHA alleges BP failed to fulfill an agreement following a Mar. 23, 2005, refinery explosion and fire that killed 15 people and injured 170 others.
BP contested the citations, maintaining the refinery undertook extensive actions to enhance worker safety since 2005 in full conformance with the 2005 agreement.
In addition to the $50.6 million, BP agreed to spend $500 million during 2010-16 in a program designed to implement process safety practices and address potential hazards identified through engineering reviews.
The US Chemical Safety and Hazard Investigation Board issued a series of recommendations during a 2-year period. The recommendations were made to BP, the American Petroleum Institute, OSHA, and others (OGJ, Sept. 8, 2008, p. 20).
In settlement announced Aug. 12, BP and OSHA established a schedule for refinery activities that are to be verified by independent experts and OSHA.
The $500 million is in addition to the more than $1 billion that BP spent on safety and infrastructure improvements at the Texas City refinery during 2005-09.
Kosmos: Ghana deal with ExxonMobil ends
Kosmos Energy LLC said a share-purchase agreement with ExxonMobil Corp. related to acquisition of its Ghana business has been terminated.
Kosmos, a private company based in Dallas, is operator of the West Cape Three Points Block off Ghana, where production will start soon from deepwater Jubilee oil field. The field extends into the Deep Water Tano Block operated by Tullow Oil PLC, London. Tullow is the field operator.
ExxonMobil was reported last year to have agreed to buy a stake in Jubilee field from Kosmos in a $4 billion deal (OGJ, Oct. 19, 2009, Newsletter). Kosmos announced termination of an agreement without elaborating.
In the announcement, Kosmos said the first phase of Jubilee development is on schedule, with production set to begin in the fourth quarter this year and to stabilize at 120,000 b/d in the first half of 2011.
Exploration & Development — Quick Takes
Brazil's frontier Parnaiba basin gets gas find
Brazil's OGX Petroleo e Gas has identified a potential resource of 15 tcf of natural gas on seven blocks in northeastern Brazil's underexplored Parnaiba basin.
The 1-OGX-16-MA well, on the PN-T-68 block in central Maranhao state 260 km southwest of Sao Luis, flowed gas on test from a 10-m section at the top of Devonian at 1,654 m. OGX reported a 15-m flare and a wellhead pressure of 1,900 psi during the test. Drilling was to continue to 3,450 m.
The indicated discovery is on one of seven blocks that total 21,000 sq km held by OGX Maranhao, a combine of OGX and MPX Energia SA 70% and Petra Energia SA 30%.
MPX estimated that results of the OGX-16 well and seismic data imply a potential resource of 15 tcf on the seven blocks, on which the companies have mapped 20 prospects, five of which are in the same trend as OGX-16.
Encouraged by the results, the companies increased the number of exploratory wells to be drilled to 15 from 7 and plan to expand 2D and 3D seismic surveying in the area in an exploration program worth 600-700 million reais.
The proposed MPX Parnaiba power generation complex, a partnership between MPX 70% and PETRA Energia 30%, consists of gas-fired plants that are expected to provide up to 1,863 Mw of power. The complex, to be fueled by gas produced on the blocks, has already been granted a preliminary license.
Woodside, Chevron add to finds off W. Australia
Woodside Energy Ltd. and Chevron Corp. have announced their second separate gas finds in as many weeks on the North West Shelf off Western Australia.
Woodside followed a recent announcement of its Exmouth Plateau discovery at Alaric-1 in WA-434-P (OGJ Online, Aug. 16, 2010) with a find at Larsen Deep-1 in WA-404-P. Chevron, meanwhile, added to its Brederode-1 gas find in WA-364-P (OGJ Online, Aug. 13, 2010) with its Acme-1 gas find in WA-205-P.
Larsen Deep-1 has intersected a 50-m gross gas column over several zones in the Triassic age reservoir target and is currently drilling ahead at 4,914 m towards a planned TD of 5,030 m.
The well, being drilled by the Ocean America semisubmersible rig, is in the permit immediately north of the giant Jansz gas field, which is being developed by a joint venture of Chevron, ExxonMobil Corp., and Royal Dutch Shell PLC as part of the Gorgon LNG project on Barrow Island.
Wireline logging to obtain pressure data and gas samples will await the completion of drilling.
However the result is good news for Woodside as the find is just 9 km from the company's existing discoveries at Martell-1, Noblige-1, and Larsen-1 in the same permit.
Woodside is anxious to prove up sufficient gas reserves to serve as feedstock for its planned Trains 2 and 3 for the Pluto LNG project.
Chevron's Acme-1 find, drilled by the Ensco 7500 semisubmersible rig, is in the permit immediately west of the company's Gorgon gas field in the same permit as its recent Clio gas find.
Acme is Chevron's ninth discovery off Western Australia in the last 12 months. The company says the discovery will underpin potential expansion opportunities at its proposed Wheatstone LNG hub.
Wheatstone is currently planned as an initial two-train, 10 million tonne/year LNG project, but the company has sufficient land at Ashburton North south of Onslow for a five-train project with a total capacity of 25 million tpy of LNG. A final investment decision on Wheatstone is expected next year.
Montana Heath shale oil potential due tests
Montana issued drilling permits to several operators to explore for oil in fractured Mississippian Heath shale in the Central Montana Trough.
The area of interest for horizontal drilling is in Garfield, Petroleum, Fergus, Musselshell, and Rosebud counties.
Several wells should be drilled during the rest of 2010, Brad Boyce, executive vice-president, exploration, of private Denver independent Cirque Resources LP, told a session sponsored by IHS Inc. leading up to the Summer North American Prospect Expo in Houston.
The Cox Ranch shale member of the Heath formation sourced oil found in the Pennsylvanian Tyler sandstone, a large oil-producing formation in Montana, Boyce noted. He said EOG Resources Inc. drilled a vertical well 18 months ago in the southern part of the area of interest, was discouraged by the Heath's lack of maturity, and has not pursued the play.
Boyce said Cox Ranch contains extremely high total organic carbon and should be more mature in the area's northern part.
Voyager Oil & Gas Inc., Billings, Mont., recently said it controls 33,500 net acres in a joint venture targeting Heath shale in Musselshell, Petroleum, Garfield, and Fergus counties (OGJ, July 5, 2010, Newsletter).
Vertical wells have had initial producing rates of 200 b/d of oil or more from Tyler/Heath at less than 4,000 ft in several dozen fields in the basin.
Apache to develop Halyard gas field
Apache Energy is planning to develop its Halyard gas field in permit WA-13-L off Western Australia via the existing East Spar subsea manifold.
The proposed design allows for additional production wells to be tied into the Halyard subsea systems if there is new exploration success in the surrounding area.
The Halyard facilities will be capable of producing 160 MMcfd of gas via East Spar and subsea pipeline to Apache's production facilities on Varanus Island and then on to the mainland gas grid.
Halyard gas will be sent to East Spar through a 16-km flexible flowline. Well control will be via a 28-km umbilical from the nearby John Brookes field production platform.
Apache has slated this year's fourth quarter for Phase 1 of the development. This will comprise laying of the East Spar pipeline end manifold along with associated spool and hardware plus the umbilical J-tube and subsea clamps for the J-tube on John Brookes.
The 2-week installation will require saturation diving from a dynamically positioned dive support vessel, but exact timing is reliant on securing a suitable vessel.
Phase 2 is scheduled for first-quarter 2011 and will be done from an installation support vessel over a period of 3 weeks. This work will include installation of the flexible flowline, umbilical, Halyard pipeline end manifold, subsea distribution unit and tie-in spools on the seabed as well as modifications to the John Brookes platform.
Halyard field was discovered in 2008 when it tested 68 MMcfd of gas along with 936 b/d of associated condensate from a 91-m net pay zone in the Cretaceous-age Halyard sandstone (OGJ Online, Apr. 9, 2008).
Drilling & Production — Quick Takes
Rig counts surge in US, Texas
US drilling activity jumped by 35 units to 1,640 rotary rigs working the week ended Aug. 13, up from 968 in the comparable period a year ago, Baker Hughes Inc. reported.
As usual, the bulk of the increase was in land operations with a hike of 32 rotary rigs to 1,608 drilling. Inland waters activity was unchanged with 12 rigs working. Offshore drilling increased by 3 units to 20 now working, all in the Gulf of Mexico. Among the active rigs, 992 were drilling for natural gas, an increase of 9 this week. There were 639 drilling for oil, up 25. There were 12 rigs unclassified. Directional drilling increased by 1 rig to 222. Horizontal drilling increased by 7 to 885.
Texas had the biggest surge among the major producing states, up by 29 units to 720 drilling. The next largest increase was in Pennsylvania, up 4 to 90. Louisiana and Colorado added 1 rig each for respective totals of 184 and 65. Rig counts were unchanged in New Mexico at 66; Wyoming, 44; Arkansas, 40; and West Virginia, 24. North Dakota, Oklahoma, and Alaska were down 1 rig each to 132, 126, and 5, respectively. California dropped 2 rigs with 35 still working.
Poland gets first shale fracturing operation
Poland's first shale hydraulic fracturing operation has been carried out at the Markowola-1 exploratory well operated by Polish Oil & Gas Co. near Kozienice in Lublin Province.
PGNiG awarded the frac job to Halliburton, which has been providing services in Poland for more than 15 years, to determine whether the well will be capable of producing natural gas in commercial volumes.
PROCESSING — Quick Takes
Floods force closure of Pakistani refinery
Devastating floods in Pakistan have forced Pak-Arab Refinery Ltd. to shut its 100,000-b/d Multan refinery 560 miles northeast of Karachi, according to press reports.
The refinery, Pakistan's largest, sustained no damage, but flooded roads have disrupted access to it.
Monsoon rains have produced the heaviest flooding in Pakistan's 63-year history as a nation, resulting in more than 1,600 deaths and displacing millions of Pakistanis.
Flooding also has disrupted production and processing of natural gas in parts of the country.
Pak-Arab Refinery is a joint venture between the Pakistani government and Abu Dhabi.
Vietnam plans to expand Dung Quat refinery
The Vietnamese government has approved plans to raise capacity of the 148,000-b/sd Dung Quat refinery to 200,000 b/d.
Viet Nam News, published by the official Vietnam News Agency, said Deputy Prime Minister Hoang Trung Hai ratified the plan after agreement from the ministries of planning and investment, industry and trade, and construction and finance.
The refinery, Vietnam's only such facility, went on stream in February 2009. State-owned Petrovietnam, through Binh Son Refining & Petrochemical Co. Ltd., took over operation of the refinery from main contractor Technip last May.
Viet Nam News said the government has authorized Petrovietnam to sell interests in the refinery.
"Petrovietnam is considering selling off 49% of the refinery's total stake to foreign firms after the plant becomes fully operation and stable," the publication said.
Nguyen Hoai Giang, director general of Binh Son Refining & Petrochemical, said he couldn't discuss financing of the expansion because plans remained incomplete.
Rex Energy obtains permit for Pa. gas plant
Rex Energy Corp., State College, Pa., has received an air permit for its 40-MMcfd Sarsen cryogenic gas processing plant in Butler County from Pennsylvania's Department of Environmental Protection.
The skid-mounted plant is to be relocated from Texas, Rex Energy told OGJ, and assembled by Keystone Midstream Services LLC, a joint venture Rex Energy formed in late 2009 with Stonehenge Energy Resources LP to construct and operate all midstream assets in Butler County. Keystone Midstream is investing up to $25 million to build gathering and processing in the county.
With this permit, according to Rex Energy's announcement, Keystone Midstream has begun final work on the plant and expects to begin operating it in October. At that time, said Rex Energy, the plant will process 20 MMcfd because that is the current limit of compression at the site. By yearend, however, another 20 MMcfd of compression will have been installed to allow Keystone Midstream to run the Sarsen plant at capacity.
Ownership of Keystone Midstream consists of 40% by Rex Energy and 60% by Stonehenge Energy. Rex Energy has had a small gathering system in place to serve five wells it had drilled by yearend 2009, one horizontal and four vertical.
It had also installed a 5-MMcfd refrigeration plant on site to demonstrate the flow the wells and prove their value to the company's midstream partners, according to a Rex Energy spokesperson. Since the beginning of 2010, Rex has drilled four more horizontal wells.
Gas from the production carries a 1.8-gal/Mcf liquids content consisting of ethane, propane, and butanes. An ethane tower planned for the site will separate a stream to be injected, up to an 1,100-btu limit, into the product-gas stream to market.
Enbridge has contracted to take the remaining separated liquids to Chicago.
Coal-to-olefins unit starting up in China
China Shenhua Coal to Liquid & Chemical Co. Ltd. has started the gasification unit at a large coal-to-olefins demonstration project in Baotou, Inner Mongolia.
At capacity in the fourth quarter this year, the project will produce 1.8 million tonnes/year of methanol for conversion into olefins, ultimately yielding about 600,000 tpy of polyethylene and polypropylene.
The gasification unit uses advanced technology provided by GE, which calls Baotou one of the largest coal-to-olefins projects in the world. The process converts coal into synthesis gas, which the Baotou project uses for methanol production.
The project has five gasifiers and two spare units.
Jason Crew, GE Power & Water director of gasification projects—Asia, said the Shenhua facility is one of three large coal-to-olefins demonstration projects funded by the Chinese government and the first to start up.
TRANSPORTATION — Quick Takes
Pluto LNG investment decision unlikely this year
Woodside Petroleum Ltd. virtually admitted its Pluto LNG expansion project will not reach a final investment decision this year as originally stated.
In the company's half-year report, Woodside said the final investment decision on Pluto LNG Trains 2 and 3 remain contingent on securing sufficient feedstock gas either through its own exploration or through third party supplies. The report then added, "Work will continue into 2011 to achieve the investment case for Pluto expansion."
The company added a softener by noting its concerns about competition for construction resources from other LNG projects had not materialized. This, together with the delay in drilling its planned 20-well program, provides extra time to further its exploration efforts.
So far just half the exploration wells have been drilled. Six have encountered gas. However, early results have not provided the support needed for the Pluto expansion. Nor has third party gas materialized.
Of the two most recent discoveries, the best (Alaric-1 in permit WA 434-P on the Exmouth Plateau) is in more than 1,000 m of water and 500 km off Western Australia.
Work on Pluto Train 1 remains on schedule with a target on stream date for the end of February. The first LNG shipment from the Burrup Peninsula plant is expected a month later.
Both onshore and offshore sectors of Pluto Train 1 project are moving into the commissioning phase, and this will continue for the remainder of this year.
Gate terminal gets first long-term contract
Denmark's DONG Energy AS and Spain's Iberdrola have signed a supply agreement for Iberdrola to deliver 35.3 bcf/year of natural gas as LNG to DONG at the Gate LNG terminal at Rotterdam. The 10-year agreement includes an option for a 5-year extension and follows the signing of commercial terms earlier this year.
This is the first LNG contract signed by DONG, said the company's announcement, and the first long-term contract for supply of LNG into the Dutch market. Deliveries will begin in late 2011 after the Gate terminal opens earlier in the year.
Vopak NV and Gasunie are majority owners in the terminal, holding equal shares of 80% of the terminal. DONG holds 5% equity ownership in the terminal and 3 billion cu m/year of its import capacity. Other equity owners at 5% each are Essent, OMV Gas International, and E.On Ruhrgas.
DONG and three other companies—EconGas OMV, Essent, and E.On Ruhrgas—hold equal capacity rights to the terminal's full capacity of 12 billion cu m/year. Six Austrian natural gas suppliers—Begas, EVN, Linz AG, OO Ferngas AG, OMV Gas International, and Wien Energie—comprise EconGas OMV.
Gate LNG terminal is under construction on about 86 acres in the northern part of the Maasvlakte in the port of Rotterdam and will operate under a 50-year lease, according to owners' web sites. LNG will be stored in three, full-containment, double-walled, 180,000-cu m tanks.
Engineering, procurement, and construction contractor is a consortium of Techint, Sener, Entrepose, and Vinci; estimated construction cost is €800 million (about $996 billion).
Ecopetrol signs Mustang to double capacity
Ecopetrol SA awarded Wood Group's Mustang a 2-year master service agreement to increase Colombia's oil and gas transmission capacity while also improving its safety.
Initial efforts will focus on doubling transportation capacity for Colombian crude to refineries and terminals in country. Mustang will provide hydraulic system modeling, project management, procurement, environmental permitting, geospatial information systems, survey, drafting, and construction management-inspection support.
Following work on Colombia's oil pipelines, Mustang will focus on developing infrastructure to support Colombia's petrochemical operations and on enhancing the country's pipeline leak detection capabilities. Mustang is also providing conceptual engineering services to Ecopetrol for its downstream petrochemical operations.
The agreement includes an optional 2-year extension.
Mustang previously assisted Ecopetrol in developing value improving practices programs implemented on numerous projects in Colombia. Ecopetrol moved 576,200 b/d of oil on its pipelines in 2009 while running at roughly 60% of capacity.
Ecopetrol recently expanded both its oil reserves and pipeline assets through acquisition of 51% of BP Exploration Co. (Colombia) Ltd. Its partner in the acquisition is Talisman Energy Inc.
That transaction's assets include five producing fields in four association contracts, four pipeline interests, two offshore exploration blocks, and the Cusiana gas processing facility. (OGJ Online, Aug. 3, 2010). The pipelines acquired totaled 1,600 km of crude line, including BP's 24.8% interest in Oleoducto Central SA (Ocensa), and 400 km of gas line.
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