GENERAL INTEREST — Quick Takes
US Senate panel defers vote on sharing revenue
Dissension over revenue sharing with states kept the US Senate Energy and Natural Resources Committee on July 21 from voting on a bill to reform federal management of resources on the US Outer Continental Shelf. The committee lost its quorum soon after two of its members, Mary L. Landrieu (D-La.) and Lisa Murkowski (R-Alas.), the committee's ranking minority member, introduced their revenue sharing amendment, and the vote was postponed.
Several committee members spoke in favor of the amendment, Murkowski said afterward. She said she planned to work with them in the days ahead to refine the amendment's language to include funding for renewable energy projects at the state level, and to reschedule the markup soon so that S. 917, the Outer Continental Shelf Reform Act, and the amendment could be voted on.
"Those who understand the importance of inviting coastal states to be partners in our efforts to increase the nation's energy security are not going to let this issue go away," Murkowski said. "It is in our best interest to have American workers producing American energy, and revenue sharing will help us reach that goal."
The Landrieu-Murkowski revenue sharing amendment would allow coastal states to retain a portion of the revenues generated by energy production in federal waters, beginning in 2019. It would apply to all forms of energy production, from oil and gas to wind and hydrokinetic. Murkowski's new language would create a coastal state clean energy fund with 12.5% of the overall federal revenue from offshore production.
Meanwhile, the committee passed S. 916, the Oil and Gas Facilitation Act, by voice vote. The bill would extend a federal permit processing improvement pilot program through 2020, authorize coproduction of geothermal energy on oil and gas leases, mandate a comprehensive inventory of OCS resources, establish an Alaska OCS permit processing coordination office, and phase-out deepwater royalty relief.
Aramco, Dow announce JV chemicals project
Saudi Aramco and Dow Chemical Co. reported the approval of the formation of a joint venture to build and operate a world-scale, fully integrated chemicals complex at Jubail Industrial City in Saudi Arabia.
Aramco Chief Executive Officer Khaled Al Falih said the venture with Dow would "enable significant development in the country's conversion industry, thereby supporting Saudi Arabia's ambition to be a magnet for downstream manufacturing investments that add significant value to the kingdom's hydrocarbon resources."
The companies said authorization for the JV, to be called Sadara Chemical Co., comes after an extensive project feasibility study and front-end engineering and design effort that began in 2007.
Sadara, an Arabic word meaning "in the lead," should have annual sales of $10 billion within a decade of opening and create thousands of jobs, the companies said.
Comprised of 26 manufacturing units building on Aramco's project management and execution expertise, and utilizing many of Dow's technologies, the complex will be one of the world's largest integrated chemical facilities, and the largest ever built in one single phase.
The complex will possess flexible cracking capabilities and will produce more than 3 million tonnes/year of chemical products and performance plastics.
Construction will begin immediately and the first production units will come on line in second-half 2015, with all units expected to be up and running in 2016.
Total investment for the project, including third-party investments, will be $20 billion. Sadara will become an equal venture between Aramco and Dow after an initial public offering. Sadara will have responsibility for product marketing within a local zone of eight countries. Dow will market and sell on behalf of Sadara to all countries outside of the Middle East.
Hilcorp to acquire Chevron's Cook Inlet assets
Hilcorp Alaska LLC, Houston, will acquire Cook Inlet assets from Chevron Corp.'s Union Oil Co. of California unit for an undisclosed sum.
Closing is expected by yearend. Chevron had put the assets on the block in October 2010.
The assets are producing 3,900 b/d of oil and 85 MMcfd of gas net to Unocal. Reserves weren't revealed.
The assets include Unocal contracts and interests in Granite Point, Middle Ground Shoal, Trading Bay, and MacArthur River fields, interests in 10 offshore platforms, interests in onshore gas fields including the Ninilchik and Beluga River units, and two gas storage facilities.
The package also includes interests in Cook Inlet Pipe Line Co. and Kenai Kachemak Pipeline LLC. Chevron will retain its nonoperated joint venture interests on the Alaska North Slope and its 1.36% interest in the Trans-Alaska Pipeline System.
Hilcorp, founded in 1989, is one of the largest private US independent exploration and production companies. It employs more than 700 people working nine operating areas including the Gulf Coast, Gulf of Mexico, and Rocky Mountains. The company participates in conventional and resource plays.
Exploration & Development — Quick Takes
Madalena tests oil in Vaca Muerta shale
Madalena Ventures Inc., Calgary, tested 40 b/d of 32° gravity oil from untreated Lower Cretaceous Vaca Muerta shale at the CAS X-1 well on the southern part of the 405 sq km Coiron Amargo block in Argentina's Neuquen basin.
Further testing of the well, including a large hydraulic frac program, is expected to be completed in this year's third quarter. If successful, Madalena could try to accelerate testing its other wells on the block using additional frac capacity being brought into the basin as well as proceed with preparations for a large, multiwell drilling program in 2011-12 specifically for Vaca Muerta shale oil.
Meanwhile, the CAN X-4 exploratory well on Coiron Amargo tested as much as 650 b/d of 39° gravity oil and 780 Mcfd of gas at 700-900 psi wellhead pressure on 4 to 8-mm chokes from the conventional Sierras Blancas formation. TD is 11,027 ft.
Both oil and gas shows were evident during the drilling of the Vaca Muerta and Sierras Blancas formations at CAN X-4. The Vaca Muerta shale interval is 456 ft thick. In the northern and southern parts of the block, Madalena has drilled into the Vaca Muerta formation five vertical wells, each of which appears similar on electric logs and have had indications of hydrocarbons.
YPF SA of Argentina earlier this year announced the delineation of a technically recoverable resource of as much as 150 million bbl of oil equivalent in the Vaca Muerta shale about 10 km west of the Coiron Amargo block. The shale appears to be gas prone along the broad western margin of the basin farther west of Coiron Amargo.
Dwayne Warkentin, Madalena president and chief executive officer, said, "The flow of oil from the Vaca Muerta shale in the CAS X-1 well prior to any fracture stimulation combined with the fracture stimulated results from the Vaca Muerta shale formation in the nearby Loma La Lata block provide the company with an excellent resource base in combination with the conventional Sierras Blancas oil play on the Coiron Amargo Block."
On the Cortadera Block, the CorS x-1 exploratory well is drilling at 9,760 ft targeting the Quintuco, Mulichinco, Vaca Muerta shale, and Tordillo formations. It is expected to reach TD of 14,100 ft in early August.
On the Curamhuele block, Madalena is finalizing plans to test several Lower Cretaceous Avile sands and the Lower Cretaceous Lower Troncoso formation encountered by the Yapai X-1001 drilled in June.
Based on electric logs, the well encountered 23 ft of potential gross hydrocarbon column in the Lower Troncoso at 4,640 ft measured depth, 4,394 ft true vertical depth. As programmed the well also encountered multiple stacked Avile formations at 6,800 ft MD, 6,530 ft TVD, to 10,620 ft MD, 10,360 ft TVD. Testing is to start in August.
Hess, Petroceltic to explore blocks in Iraq
A partnership of Hess Corp. and Petroceltic International PLC signed production sharing contracts with the Kurdistan Regional Government for the Dinarta and Shakrok exploration blocks northeast of Erbil, Iraq.
Each PSC has an initial 3-year exploration period in which the joint venture plans to shoot 2D seismic and drill at least one exploratory well. Hess is operator and has 64% participating interest and 80% paying interest. Petroceltic has 16% participating interest and 20% paying interest, and the KRG has a 20% carried interest in each block.
Dinarta is a highly prospective undrilled block in a proven but largely unexplored area. The 1,319 sq km block lies along trend from the Shaikan, Atrush, and Swara Tika oil discoveries.
Dinarta has a number of identified surface structures, the largest of which, the Chinara anticline, is 25 km along strike from the Swara Tika-1 well, reported to be testing a significant new discovery. The other structures also have large potential surface closure areas with multiple reservoir targets believed likely to be present in Jurassic and Triassic.
Shakrok is an undrilled block in a proven but largely unexplored area. It covers 418 sq km along trend from Taq Taq oil field and the Bina Bawi oil discovery. The block itself contains large surface anticlines with multiple reservoir Jurassic and Triassic targets likely to be present.
Petroceltic said its total financial commitment during the first license period is expected to be $72 million, the majority of which will be incurred in the next 6 months. The amount includes all signature and capacity building bonuses payable to the KRG under the terms of the PSCs.
Harvest adds Dentale oil at presalt find off Gabon
Harvest Natural Resources Inc., Houston, has discovered a second oil accumulation at its Gamba presalt oil discovery off Gabon. Log evaluation, pressure data, and a fluid sample indicate the discovery of 35 ft of oil pay in the Middle Dentale secondary objective at the Dussafu Ruche Marin-1 well on the Dussafu Marin PSC.
Harvest operates the block with 66.667% interest. The well went to 11,355 ft true vertical depth subsea in 380 ft of water.
Harvest has appraised the Gamba discovery by drilling a sidetrack ¾-mile southwest to test the lateral extent and structural elevation of the Gamba reservoir. The sidetrack was drilled to a TD in the Upper Dentale of 11,562 ft, 9,428 ft TVD ss, and found 19 ft of oil pay in the Gamba reservoir.
Harvest will now sidetrack the DRM-1 well to the northwest of the original DRM-1 wellbore to further appraise the extent and structural elevation of the Gamba and the commerciality of the Ruche discovery.
Drilling & Production — Quick Takes
Saudis start Karan gas flow in gulf
Saudi Aramco began flowing natural gas last month from Karan field in the Persian Gulf via subsea pipeline to the Khursaniyah gas treatment plant onshore in Saudi Arabia.
The project constitutes Saudi Aramco's first offshore nonassociated gas field project (OGJ, June 6, 2011, p. 88).
Saudi Aramco discovered Karan in April 2006 in gulf waters 160 km north of Dhahran. The field has five production platform complexes connected to a main tie-in platform, installed with associated electrical power, communication, and state-of-the-art remote monitoring and control facilities for safe and reliable operations from onshore. Detailed design work began in March 2009.
The field was discovered when the Karan-6 well drilled into Khuff formations, finding gas in carbonate reservoirs laid down 200-300 million years ago in the Permian and Triassic periods. At as thick as 1,000 ft, Karan's is the thickest Khuff reservoir section ever encountered in Saudi Arabia. The Khuff formation at Karan lies at 10,500-13,700 ft in 40-60 m of water.
Shipped via a 110-km subsea pipeline, Karan gas is treated at Khursaniyah through a number of trains that include facilities for gas sweetening, acid-gas enrichment, gas dehydration, and supplementary propane refrigeration. The onshore facilities also include a cogeneration plant, a sulfur recovery unit with storage tank, substations, and a transmission pipeline linked to the kingdom's Master Gas System (MGS).
Karan, designed to produce 1.8 bscfd of raw dry gas by 2013 to support the MGS, will be produced from 21 wells distributed over five offshore wellhead platforms.
Five wells producing 120 MMscfd/well have been commissioned so far. Early production is targeted for peak summer demand, with an average production of more than 400 MMscfd, Saudi Aramco said. Drilling is under way on 14 more wells on three other platforms, and only four wells are left to be drilled. The wells will be completed, tied in, and put on stream by June 2012 at 1.5 bscfd.
The remaining two wells and platform will be ready in April 2013, bringing the field to full capacity.
Whiting to buy power plant CO2 for EOR
For enhancing oil recovery, Whiting Petroleum Corp. signed a 15-year agreement to buy carbon dioxide from a planned Permian basin coal-fueled power plant at Penwell, Tex., near Odessa.
The sellers of the CO2 are Summit Power Group LLC and Blue Strategies LLC. Summit expects to start construction of the plant by yearend and commence operations in late 2014 or early 2015.
Whiting plans to purchase 80 MMcfd of compressed CO2 during the first 5 years of the plant's operation, which is about 60% of the CO2 that the plant will capture. After 5 years, Whiting will gradually buy less CO2 although it has an option to extend purchases.
In the Permian basin fields, each 6 Mcf of CO2 injected can recover about 1 bbl of oil, according to the companies selling the CO2.
Summit said its Texas Clean Energy Project (TCEP) will be a first-of-its-kind, integrated gasification combined cycle (IGCC) 400 Mw power-polygen plant. It is designed to capture 90% of the CO2, 99% of the sulfur, more than 95% of the mercury, and eliminate more than 90% nitrogen oxides produced by the process.
The plant received a final air quality permit last December.
Summit and Blue Strategies partnered in October 2009 to market TCEP's 2.5 million tons/year of CO2 to oil producers in the West Texas Permian basin.
The agreement with Whiting is the first of several CO2 off-take agreements with TCEP that the companies expect to sign.
TCEP received a $450 million award in 2010 from the US Department of Energy's clean coal power initiative.
Whiting operates CO2-EOR floods in Postle field, Texas County, Okla. and in North Ward Estes field, Ward and Winkler Counties, Tex.
CNOOC restarts Bozhong 28-2 South production
CNOOC Ltd. restarted production from the Bozhong 28-2 South (BZ 28-2S) oil fields in Bohai Bay off China.
CNOOC suspended operations in April because rough weather caused a malfunction with the single-point mooring of the Haiyanshiyou 102 floating, production, storage, and offloading vessel. The FPSO also receives production from BZ 28-2 SN, BZ 34-1N, and BZ 29-4 oil fields.
CNOOC said the production capacity has recovered to the level before the incident, reaching about 39,000 bo/d.
Production started from BZ 28-2S in 2009 (OGJ Online, Mar. 19, 2009). The field, discovered in 2006, lies in 21 m of water. CNOOC operates the fields with a 100% interest.
PROCESSING — Quick Takes
Murphy agrees to sell Wisconsin refinery
As part of a strategy announced last year to exit the refining business, Murphy Oil Corp. has entered an agreement to sell its 33,250-b/cd refinery at Superior, Wisc., to Calumet Specialty Products Partners, Indianapolis.
The sales price is $214 million plus the value of hydrocarbon inventory, subject to adjustments. On June 30, the inventory value was $260 million.
In addition to the Superior facility, Murphy hopes to sell its 125,000-b/cd refinery at Meraux, La., and its 106,000-b/cd refinery at Milford Haven, Wales. The company, based in El Dorado, Ark., also plans to sell its UK retail system (OGJ, Aug. 2, 2010, Newsletter). It will concentrate on exploration and production and US retailing.
Products of Calumet Specialty Products, which has six plants in Northwest Louisiana, Pennsylvania, Texas, and Illinois, include naphthenic and paraffinic oils, aliphatic solvents, white mineral oils, petroleum waxes, petrolatum, and hydrocarbon gels. Calumet officials said acquisition of the Superior refinery will boost the company's total throughput capacity by 50% to about 135,000 b/d.
Canadian company to restart Polish refinery
A new Canadian company has acquired and plans to restart a small refinery in southern Poland under a strategy that includes the possible gasification of heavy feedstock and production of synthetic fuels. Hudson Oil Corp. Ltd., Toronto, reports production capacity of the Glimar refinery at 3,500 b/d of mainly lubricant base oils and gasoline. The original refinery on the site at Gorlice, Poland, was built in 1883 to distill oil mined in the Galicia region. It was dismantled during World War II and rebuilt in 1949.
Glimar now has a fractional (atmospheric-vacuum) distillation column unit and a hydrocracking complex installed in 2000 by Lurgi GMBH with units, including isocracking, licensed by Chevron Lummus Global. The facility also has zeoforming units, installed by Lurgi in 1997 under a license from the Novosibirsk Scientific Engineering ZEOSIT Center in Russia, for production of motor fuel.
Hudson said it is studying the use of Glimar's hydroprocessing units to produce liquid fuels via modified Fischer-Tropsch technology from coal, natural gas, or municipal waste
TRANSPORTATION — Quick Takes
Crosstex expands Eunice NGL fractionation
Crosstex Energy LP is completing engineering studies, pipeline routing, and environmental permitting for an expansion of its Eunice NGL fractionation facilities and extension of its Cajun-Sibon NGL pipeline.
A 130-mile, 12-in. OD line will connect the Eunice fractionation facilities to Mont Belvieu supply pipelines, extending Crosstex's 440-mile Cajun-Sibon NGL pipeline, and will have an initial capacity of 70,000 b/d of raw-make NGLs. Crosstex will expand the Eunice NGL fractionation facilities to 55,000 b/d from 15,000 b/d, increasing its interconnected fractionation capacity in Louisiana to about 97,000 b/d.
Construction of the NGL pipeline will begin in second-quarter 2012 and Crosstex expects the facilities to enter service first-quarter 2013. Crosstex estimates project costs at $180-220 million.
Crosstex has entered into a long-term ethane sales agreement with Williams Olefins LLC, a subsidiary of Williams Cos. The ethane will flow into Williams' ethane pipeline system in Louisiana. Crosstex will feed its expansion from both its own Texas gas plants and supplies from other companies. The company is negotiating additional long-term commitments for the system expansion.
Crosstex says the project will improve the reliability and diversity of NGL supply to the Louisiana petrochemical and refinery markets. The company reached agreement with Apache Corp. to jointly develop a gas processing plant in the Permian basin in West Texas (OGJ Online, July 12, 2011). Permian supplies are among those Crosstex expects to transport through its new pipeline.
Chevron signs first LNG contract for Wheatstone
Chevron Australia has signed a binding sales and purchase agreement with Tokyo Electric Power Co. (Tepco) for delivery of as much as 3.1 million tonnes/year of LNG from Chevron's Wheatstone development off Western Australia.
Chevron, together with partners Apache Energy and Kufpec, will make the deliveries over 20 years.
Chevron also is in discussions with Tepco to purchase an equity share in the Wheatstone project fields as well as a share in Chevron's stake in the downstream processing plant and facilities. The front-end engineering and design phase of the Wheatstone project is nearing completion and is on track for Chevron to make a final investment decision on the development by yearend.
The onshore plant site is earmarked as Ashburton North about 12 km west of Onslow on the Western Australian coast. The project will begin with two LNG trains with a total capacity of 8.9 million tpy of LNG. There will also be a domestic gas plant with sales gas feeding into the Western Australian grid.
Qatargas signs 20-year LNG deal with Malaysia
Qatargas has signed an agreement to supply Petronas LNG Ltd. of Malaysia with 1.5 million tonnes/year (tpy) of LNG for at least 20 years starting in 2013.
The deal marks the first time Qatargas signed a heads of agreement for the supply of LNG to the southeast Asian market, according to Qatargas Chief Executive Officer Khalid Bin Khalifa Al Thani.
"We are very pleased with this achievement as it represents the first long-term agreement for supplying LNG to one of the world's fastest-growing LNG markets," Al Thani said.
Gas from the Qatargas 2 joint venture will be delivered to Malaysia's' first regasification terminal, now under construction on the west coast of Peninsular Malaysia. The facility will be operational by mid-2012.
Last month, Qatargas announced the signing of an HOA for the long term supply of LNG to Energia Argentina Sociedad Anonima (Enarsa). Under the HOA, Qatargas will deliver 5 million tpy of LNG to Enarsa at the Southern Cone LNG Hub in Argentina for 20 years beginning in 2014.
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