OGJ Newsletter

Nov. 22, 2010
International News for Oil and Gas professionals
GENERAL INTERESTQuick TakesSurvey sees optimism in UK offshore industry

The business confidence of UK offshore independent oil and gas producers increased in the third quarter, while that of contractors fell, according to a survey.

Confidence of major-company producers, says the trade group Oil & Gas UK, which conducts the survey, didn't change between the second and third quarters of 2010. In general, the industry's outlook remains positive, in contrast with last year's third quarter, when it was neutral.

OGUK measures business confidence of the offshore industry with a 100-point index in which 50 is neutral and numbers above reflect a more positive outlook than those below. It calculates the index from a survey of nine questions about economic indicators.

Overall UK offshore industry confidence fell in the third quarter to 57 on the index from 62 in the second quarter. The confidence index for independent producers increased to 61 from 58 and for majors remained at 58.

Confidence of service firms, which OGUK calls supply-chain companies, fell to 55 from 61 between the second and third quarters.

Indexes in the third quarter of 2009 were independent producers 67, major producers 57, and supply-chain companies 50. The weighted average overall industry index in last year's third quarter was 50.

Questions in the survey address business confidence and optimism, business activity and levels, business revenue and sales, investment, operating and running costs, manpower and day rates, research and development spending, employment, and training.

Dioxins from spill control burns below danger point

Dioxin levels following 411 controlled burns of crude oil spilled from the Macondo well did not reach a point where they posed threats to spill recovery workers or Gulf Coast residents, the US Environmental Protection Agency said on Nov. 12.

The agency released two peer-reviewed studies covering all but one of the burns, which resulted in the combustion of an estimated 222,000-313,000 bbl of spilled crude. EPA sampled emissions at the source of the controlled burns with US Coast Guard assistance to identify potential exposures to potentially cancer-causing chemicals that can be formed during crude combustion or burning. It tried to determine potential risks from inhalation to workers in the fires' vicinity and to the general population and risks to those eating fish caught in the area.

EPA said the first report's sampling effort found that while dioxins were created from burning oil on the gulf's surface, the levels were similar to those from forest fires and residential wood stoves.

It said that the second report, which was cowritten with National Oceanic and Atmospheric Administration scientists, determined that the increased cancer risk emitted from the controlled burns was less than one in 1 million, the level at which EPA believes they are a concern.

"Had the spill of oil continued, the results of these measurements would have been used by the Unified Command to determine if burning should continue," EPA said. "However, the well was capped on July 15 and the last in-situ burn occurred on July 19. Consequently, these results are most useful to inform and improve the agency's response to respond to future oil spills."

Williams to buy Bakken-Three Forks stake

Williams Cos. Inc., Tulsa, will pay undisclosed private owners $925 million to acquire 85,800 net acres in North Dakota that it estimates represent 185 million boe net potential recovery from the Middle Bakken and Upper Three Forks formations.

The purchase will diversify the company's exploration and production interests into light, sweet crude oil production. By 2013, 25% of the company's E&P revenue streams are expected to be generated by oil production, up from 7% in 2010.

The properties produce 3,300 b/d net from 24 wells. Three rigs are running on the acreage, which is entirely on the Fort Berthold Indian Reservation and in the "best geologic portion of the strongest onshore oil play in the US," Williams said. The purchase is to close by the end of 2010.

Williams expects to invest $60 million in 2010 and $200-300 million in 2011 to develop the properties, double the rig count by 2012, and hike production to more than 20,000 b/d by the end of 2012.

Williams has also accumulated 100,000 net acres in Pennsylvania's Marcellus shale play in the last 18 months.

The company said it will "build new relationships in North Dakota and with the Three Affiliated Tribes—the Mandan, Hidatsa, and Arikara—who call the area around these properties home."Before the closing of this transaction, EPPP owns, among other assets, 51% in SLNG, which owns the Elba Island LNG storage and regasification terminal near Savannah, Ga.; 51% in Elba Express; and 45% in SNG. Both Elba Express and SNG are interstate pipeline systems serving the US Southeast.

Exploration & DevelopmentQuick TakesPerla appraises as gas-condensate supergiant

An appraisal well in the Gulf of Venezuela has led Eni SPA and Repsol YPF to hike the estimate of gas in place in Perla gas-condensate field to more than 14 tcf.

Perla-3, in 70 m of water on the Cardon IV block, cut 675 ft of net pay in a carbonate sequence with the same hydraulic regime as the 2009 Perla-1 discovery well, cementing Perla as Venezuela's largest gas discovery.

Perla-3 flowed 68 MMscfd of gas and 1,350 b/d of condensate on a production test. The 730 ft of bottomhole cores confirmed excellent reservoir characteristics, Eni said.

Eni, Repsol, and Petroleos de Venezuela SA have begun weighing options for fast-track development with early production of 300 MMscfd for start-up in mid-2013. This phase could involve using the wells already drilled by installing light offshore platforms linked by pipeline to an onshore central processing facility. The discovery well is 50 km west of the Paria Peninsula coast (see map, OGJ, Sept. 28, 2009, p. 38).

Cardon IV SA plans to continue the drilling campaign with another well, Perla-4, which will follow Perla-3 to target potential reserves in the untested northern part of the structure.

Cardon IV is licensed and operated by a joint operating company named Cardon IV SA that is 50% owned by Eni and 50% by Repsol. PDVSA owns a 35% back-in right to be exercised in the development phase. At that time Eni and Repsol will each hold a 32.5% interest in the project, which will then be jointly operated by the three companies.

Brazil's Parnaiba has new Devonian shale find

OGX Petroleo e Gas Participacoes SA, Rio de Janeiro, said gas flow from a Devonian shale discovery 12½ km from its first find in northeastern Brazil's Parnaiba onshore basin supported a 20-m gas flare on drillstem test.

The flow came at the 1-OGX-22-MA well at the Fazenda Sao Jose prospect on the PN-T-68 block 260 km southwest of Sao Luis. Well operator and 70% interest holder in the block is OGX Maranhao, held 66.6% by OGX and 33.3% by MPX Energia SA. Petra Energia SA has the other 30%.

After drilling the first 10 m of the Upper Devonian section with good gas shows, at a depth of 1,520 m, a drillstem test resulted in 1,950 psi wellhead pressure with the 20-m flare, OGX said. Drilling continued towards other targets and a projected total depth of 3,200 m.

The indicated find is on a structure separate from the first discovery, OGX Maranhao's 1-OGX-16-MA on the California prospect (OGJ Online, Sept. 2, 2010).

Newfield to buy in Marcellus, defer gulf drilling

Newfield Exploration Co. will buy Marcellus shale development assets in Bradford County, Pa., from EOG Resources Inc. for $405 million. Newfield estimated that the 50,000 net acres contain 1.5 to 2 tcf of gas equivalent net unrisked recovery potential. Newfield plans to spend $100 million in 2011 and will run two operated rigs to hold the acreage by production.

Newfield said it will defer exploratory drilling in the deepwater Gulf of Mexico in 2011, allowing for the reallocation of $70 million to its Appalachian development program. It said net production in 2011 from the acquired Marcellus properties is expected to exceed that associated with the nonstrategic assets planned for divestment next year.

Output on the leases being acquired is 7 MMcfd of gas from five wells. The purchase also includes 11 uncompleted wells and doubles the company's Marcellus acreage holding.

Closing is likely by the end of 2010, by which time 10 more wells will have been drilled. EOG Resources is in a transition to liquids plays and has been selling natural gas assets (OGJ Online, Nov. 5, 2010). Current gathering capacity is 25 MMcfd with capability to expand to 95 MMcfd in early 2011. Newfield estimated that more than 400 gross operated well locations exist on the acreage.

Newfield entered the Appalachian basin in 2009 via an operated 50-50 joint venture with Hess Corp. on 70,000 gross acres in Wayne County, Pa. The partnership has drilled three exploratory wells in Wayne County.

Gazprom gets stake in blocks off North Cuba

JSC Gazprom Neft will acquire a 30% stake from Malaysia's state Petronas in four Gulf of Mexico blocks off Cuba's western coast. Blocks 44, 45, 50, and 51 lie 100-200 miles west of Havana and slightly farther southwest of Key West, Fla. (see map, OGJ, Dec. 11, 2000, p. 42). The agreement is subject to approval by Cuban authorities.

Gazprom said, "The possibility to work on the shelf of Cuba was initially considered by Gazprom Neft's board of directors in early October 2010, when the board acknowledged a positive long-term outlook to the company's activity in this region."

Cuba's government signed the production-sharing agreement covering the four Cuban foreland basin shelf blocks with Petronas in 2007. Petronas holds the remaining 70% interest.

The PSA provides for geological exploration on the blocks with the possibility of oil production until 2037 and gas production until 2042. Petronas has shot 2D seismic on the blocks and expects to spud the first exploratory well in 2011.Before the closing of this transaction, EPPP owns 51% in SLNG, which owns the Elba Island LNG storage and regasification terminal near Savannah, Ga.; 51% in Elba Express; and 45% in SNG. Elba Express and SNG are interstate pipeline systems.

Drilling & ProductionQuick TakesStatoil speeds up development of Smorbukk North-East

Statoil has advanced the production start for Smorbukk North-East to December 2011 from its early planned 2013 start up.

The company will develop the field as a satellite to the Asgard B semisubmersible gas and condensate processing facility in the Norwegian Sea. The company estimates that Smorbukk North-East contains about 16 million boe and will require about 1 billion kroner to develop.

Statoil notes that the early start-up was possible because it will convert an existing exploration well to a producing well and will use modified subsea well equipment originally built for the Sigrid field and owned by the license. Also modifications will be small on Asgard B because Smorbukk North-East will connect to an existing template, the company said.

Asgard is a hub on the Halten Bank. Water depth in the area is 240-300 m. Partners in Smorbukk North-East are operator Statoil 34.57%, Petoro AS 35.69%, Eni Norge AS 14.82%, ExxonMobil Exploration & Production Norway AS 7.24%, and Total E&P Norge AS 7.68%.

Statoil halts drilling on Gullfaks

Statoil halted drilling on Nov. 10 already under way in its Gullfaks field in the North Sea to enable an additional review of its routines for planning and conducting drilling operations, the company said.

The need for a review was a result of the incident on May 19 while drilling Well C-06 on the Gullfaks C platform.

On Oct. 29 Statoil provided the Petroleum Safety Authority of Norway (Ptil) a report on its internal investigation after the incident (OGJ Online, Nov. 5, 2010) and since then has been discussing with Ptil the report's contents.

Geir Slora, Statoil's senior vice-president of drilling and wells, said, "We wish to double-check that the ongoing drilling and well operations are in accordance with Statoil's procedures and the short-term measures that were identified in our internal investigation after the C-06 incident."

Statoil said that production is continuing normally from Gullfaks and associated satellite fields.

PostRock to refine Kansas frac treatments

A recapitalized PostRock Energy Corp., Oklahoma City, plans to convert to more customized frac treatments on its Southeast Kansas coalbed methane properties.

The company is also attempting to sell most of its Marcellus shale assets in West Virginia. It plans to disclose its 2011 drilling program in January.

Production is steady at 54 MMcfd of gas equivalent. The company drilled and completed 27 wells and returned 42 to production in the Cherokee basin in the quarter ended Sept. 30, bringing year-to-date totals to 141 and 232, respectively.

A fair number of wells completed in this year's first two quarters didn't achieve peak production rate as expected. Detailed engineering studies of the underperformance indicate that the "historical approach to zonal fracture treatments is too standardized, and not as transferrable across the basin as we once believed," PostRock said last week.

"On future development projects, custom fracture treatments tailored to zone and region will be employed to maximize the effectiveness of each completion stage," the company said.

PostRock owns and operates more than 2,800 wells and nearly 2,200 miles of gas gathering lines in the basin in Kansas and Oklahoma (OGJ, Nov. 1, 2010, p. 62). It also owns a 1,100 miles of interstate gas pipelines serving parts of Oklahoma, Kansas, and Missouri.

PROCESSINGQuick TakesNeste starts renewable diesel plant in Singapore

Neste Oil Corp. said it has launched operations at its new 800,000 tonne/year renewable diesel plant in Singapore, a €550 million facility described as the world's largest.

"We are very proud of the new plant and the NExBTL technology behind it," Neste Pres. and Chief Executive Officer Matti Lievonen said of the facility, which uses the firm's proprietary technology to convert bio-based inputs into a fuel that closely resembles fossil diesel in chemical composition.

Neste's NExBTL renewable diesel is said to be compatible with all diesel engines and existing fuel distribution systems. The Neste Oil fuel allows for a 40-80% reduction in greenhouse-gas emissions in comparison with fossil diesel, and its main markets are in Europe and North America.

In Singapore, Neste will produce its biodiesel from 100% renewable materials such as animal fat along with Malaysian and Indonesian palm oil.

Earlier this year, one executive said Neste would try to use 10-20% animal fats as feedstock, depending on availability, but that the primary feedstock would be palm oil. If no animal fat is available, the plant would need 1 million tpy of palm oil.

In its third-quarter report, Neste said the Singapore NExBTL plant will be ramped up "in steps to full capacity and there will be a time lag before output reaches the sales channel due to logistical reasons." The report did not specify the reasons.

However, the Neste report did express concern over legislation in the "[European Union] and other key markets," which could slow down development of the fuel. "The implementation of biofuel legislation in the EU and other key markets may influence the speed at which the demand for these fuels develop," the report said.

"Risks also include any problems or delays in completing the company's NExBTL renewable diesel investments or failure to capture the anticipated benefit from these investments," the report said. Neste's Singapore plant is similar in size to another facility the firm is constructing in Rotterdam, which is due to be commissioned in first-half 2011.

Unit adds plant, steps up Granite Wash drilling

Unit Corp., Tulsa, is in final stages of completing a 50 MMcfd turboexpander gas processing plant in the northeastern Texas Panhandle, where it is stepping up horizontal drilling in the Granite Wash oil and gas play. The new plant, in Canadian, Tex., will bring processing capacity at the company's Hemphill facility to 100 MMcfd.

Unit expects to complete six Granite Wash horizontal wells in the fourth quarter compared with one each in the first and second quarters and three in the third quarter. It added a fourth rig in mid-September. The company will run three to four rigs in the play in 2011 and bring on line two to three wells/month.

Of the three third quarter Granite Wash B completions, Webb A-4H is making 691 b/d of oil, 4.1 MMcfd of gas, and 449 b/d of natural gas liquids with 1,200 psi flowing casing pressure, and Webb 3H despite an apparent downhole restriction had a peak rate of 165 b/d of oil, 2.2 MMcfd of gas, and 240 b/d of NGL. Unit holds 83% working interest in both.

Temple A-1H peaked at 182 b/d of oil, 960 MMcfd of gas, and 105 b/d of NGL from a shorter 2,000-ft lateral and has a higher water cut due to communication during the frac treatment with a wet sand below the pay sand. Unit installed a submersible pump. Unit fracture treated two horizontal Granite Wash "A" wells in late October and secured frac dates in November and December for the wells being drilled.

Unusually wet weather, especially in the Granite Wash play area, and delays in securing frac services and connecting wells hampered the first quarter drilling and completion pace.

Indian Oil completes refinery expansion

Indian Oil Corp. has commissioned the expansion of its Panipat refinery in Haryana, India, to 300,000 b/d from 240,000 b/d.

The state-owned company said its project included capacity revamps of crude and vacuum distillation units, a once-through hydrocracker, and delayed coker and installation of second-stage reactors in a diesel hydrotreater.

The company operates eight refineries in India with total capacity of 1.29 million b/d.

TRANSPORTATIONQuick TakesKoch proposes Eagle Ford crude oil pipeline

Koch Pipeline Co. LP proposed a new 16-in. OD pipeline to connect Eagle Ford shale crude oil producers in the Karnes County, Tex., area to Corpus Christi. The line will have an initial capacity of 120,000 b/d with expansion possible to more than 200,000 b/d.

The company expects to complete the project, which will include pump and truck receipt stations and tanks, in fourth-quarter 2012. A new station, likely near Helena, Tex., will connect into Koch Pipeline's existing system in Pettus, Tex., and Refugio, Tex.

Koch Pipeline expects corporate approval for the expansion to its South Texas crude oil system by yearend. Koch Pipeline has already completed or is in the process of completing several projects that will add more than 140,000 b/d to the system by end-2011, all moving more Texas crude to Corpus Christi, the company said. Transported crude would be run at sister-company Flint Hills Resources' Corpus Christi refinery and marketed from its Ingleside waterborne terminal.

The company said it will next evaluate a large-diameter trunk line to connect Pettus infrastructure and continue into western Eagle Ford counties of Live Oak, McMullen, LaSalle, and Dimmit. In August, in conjunction with Arrowhead Pipeline LP, Koch Pipeline announced an agreement and joint tariff to add 50,000 b/d of crude and condensate capacity during 2011 from the western counties of the Eagle Ford trend.

Koch Pipeline is already building a line to expand delivery capability to Flint Hills Resources' Ingleside waterborne terminal. In addition, Koch Pipeline leased 30,000 bbl of capacity from NuStar Logistics on a line from Pettus to Corpus Christi (OGJ Online, Oct. 19, 2010).

Plains All American to acquire Bakken assets

Plains All American Pipeline LP has entered into a definitive agreement with Nexen Holdings USA Inc. to purchase entities that hold crude oil gathering and transportation assets that primarily service Bakken area producers.

Total consideration is estimated at $210 million, including $170 million for the business and physical assets and $40 million for about 400,000 bbl of inventory and other working capital adjustments. Subject to regulatory approval, the transaction is scheduled to close by yearend.

The assets are located mainly in northwestern North Dakota and northeastern Montana and include a lease gathering business that currently handles 55,000 b/d of oil, the Robinson Lake pipeline, a regulated 20-mile, 8-in. pipeline that currently handles 18,000 b/d of oil, eight truck terminals, and various other contractual rights.

El Paso Pipeline to hike stakes in LNG terminal

El Paso Pipeline Partners LP, Houston, will buy the remaining 49% interest it currently does not own in Southern LNG Co. LLC and El Paso Elba Express Co. LLC and an additional 15% interest in Southern Natural Gas Co. from parent El Paso Corp., the companies reported.

Following the $1.33 billion transaction, EPPP will own 100% of SLNG and Elba Express and 60% of SNG. The acquisition will close by the end of this month.

EPPP is a Delaware limited partnership formed by El Paso Corp. to own and operate gas transportation pipelines and storage. El Paso Corp. currently owns a 52% limited partnership interest and 2% general partner interest in the partnership.

Before the closing of this transaction, EPPP owns, among other assets, 51% in SLNG, which owns the Elba Island LNG storage and regasification terminal near Savannah, Ga.; 51% in Elba Express; and 45% in SNG. Both Elba Express and SNG are interstate pipeline systems serving the US Southeast.

More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com