OGJ Newsletter

Aug. 29, 2011
International News for oil and gas professionals

GENERAL INTERESTQuick Takes

PHMSA seeks comments on possible pipeline rules

The US Pipeline and Hazardous Materials Safety Administration (PHMSA) is seeking information on whether to propose new natural gas pipeline safety requirements, the US Department of Transportation agency announced. Comments will be accepted for 60 days, PHMSA said on Aug. 24.

It said its advanced notice of possible rulemaking will ask whether certain regulatory exemptions for pipelines constructed before 1970 should be eliminated, and whether pipeline integrity management requirements should be strengthened and broadened.

PHMSA is seeking public comments on 14 specific areas related to pipeline integrity management and system integrity. These include whether to propose requirements reducing the operating pressure for some pre-1970 pipelines that previously were exempt from other requirements, it indicated.

Other matters being considered include revising valve requirements for new and existing pipelines, possibly strengthening corrosion control requirements for steel pipelines, and determining whether new regulations governing the safety of gathering lines and underground gas storage facilities are needed, the agency said.

PHMSA issued the notice in response to US Secretary of Transportation Ray LaHood’s call to action on a range of pipeline safety issues.

Encana to divest Barnett shale properties

Encana Corp.’s US subsidiary will divest its Fort Worth basin Barnett shale producing and midstream assets by early 2012.

The assets have strong potential for future development, the company said. They produced 125 MMcfd of gas equivalent and include processing and pipeline facilities on 52,000 net acres in the basin. The company has begun to position itself to take more advantage of higher-value liquids plays (OGJ Online, June 2, 2011).

Encana said the Barnett shale, which it entered through a corporate acquisition in 2004, provided the company with foundational knowledge it has applied across its newer US and Canadian resource plays. The knowledge will continue to provide the company with operating expertise, said Jeff Wojahn, executive vice-president of Encana and president of its US division.

“Alongside developing this strong asset, over the years we built a suite of high-growth, early-life resource plays in the Midcontinent, led by about 295,000 net acres of land in the Haynesville shale play, where our production is now more than 500 MMcfed. In East Texas, our production is about 250 MMcfed and our 240,000 net acres hold strong growth potential. Our Midcontinent resource play teams and operations, based in Dallas, will continue to be a leading contributor to Encana’s long-term growth strategy,” Wojahn said.

A sale of Encana’s North Texas assets would be subject to receiving an acceptable bid, the approval of the companies’ boards, and normal closing conditions and regulatory approvals.

Encana is divesting assets and expects to bring in a net $1-2 billion in 2011. The company and several parties are engaged in a competitive process to divest of midstream and producing assets in the US and Canada that no longer fit with its development plans. Encana also is in talks with potential partners looking to make third-party investments aimed at accelerating the value recognition of the enormous resource potential on Encana’s undeveloped lands.

Encana has about 7 million net acres of undeveloped land in North America that holds a 30-year supply of gas at the 2010 production rate based on an independent assessment.

Vitol increases stake in Sterling Resources

Vitol Holding BV, Rotterdam, said its Vitol Energy (Bermuda) Ltd. unit acquired 17.8 million shares or 8% of the common stock of Sterling Resources Ltd., Calgary.

As a result of the transaction, Vitol controls 22.9 million common shares or 10.3% of Sterling common shares. Vitol said it acquired the stake for investment purposes.

Sterling Resources has exploration and production interests in the UK and Netherlands North Sea, Cleveland basin, Paris and Aquitaine basins of France, and Romania.

The Vitol Group, founded in 1966, is a major energy trading firm that owns more than 100,000 b/d in refining assets and has exploration and production interests in Ghana, Cameroon, Philippines, Kazakhstan, Russia, and Azerbaijan.

Shell stops oil leak in North Sea flowline

Royal Dutch Shell PLC said divers closed a relief valve, stopping a small oil leak seeping from a subsea well flowline to its Gannet Alpha platform in the UK North Sea. The leak started on Aug. 10, prompting Shell to isolate and depressurize the flowline. No oil has been released since Aug. 19, said Shell, which is continuously monitoring the site to ensure the valve closure was fully successful. A surveillance flight on Aug. 20 found no oil on the surface.

Shell and UK environmental authorities previously said they expected the oil will be naturally dispersed through wave action (OGJ Online, Aug. 15, 2011).

An estimated 1,300 bbl of oil spilled into the North Sea, Shell said earlier. Weather and waves are breaking up oil sheen on the surface that once measured 31 km by 4.3 km. The Marine Coastguard’s Aug. 20 estimate was the sheen covers 6.7 sq km.

Response plans include putting 36 concrete mats on the depressurized flowline to secure it to the seabed.

Exploration & DevelopmentQuick Takes

Gullfaks license gets third oil discovery

Statoil and Petoro revealed a modest but commercial discovery southwest of Gullfaks South field, the third discovery on the Gullfaks license in 2011.

The 34/10-52 A exploratory well and a sidetrack located 3 million to 9.5 million bbl of oil equivalent recoverable in 136 m of water. Tieback to Gullfaks facilities will expedite development, Statoil said.

The wells were intended to prove oil in Middle Jurassic reservoir rocks of the Brent Group and whether communication exists with the producing structures in Gullfaks South field, Statoil said.

Oil and gas-bearing intervals were observed in the upper part of the Brent Group along both well paths, and a column 120 m thick with good reservoir quality was proven. No hydrocarbons were found in the lower Brent Group.

The wells have not been formation tested, but data were collected and cores taken to determine the hydrocarbon system and contacts.

The two other discoveries made this year on the Gullfaks license are Rutil and Opal. PL 050 licensees are Statoil operator with 70% and Petoro 30%.

The 34/10-52 A exploratory well went to 3,440 m true vertical depth subsea in the Middle Jurassic Drake formation. The 34/10-52 B sidetrack went to 3,580 m TVD in the Drake formation.

West of Shetlands Fulla well is oil discovery

Faroe Petroleum PLC and Canadian Overseas Petroleum Ltd. (COPL) encountered oil at the Fulla exploratory well in the UK West of Shetlands region.

The 206/5a-3 well, 31 km northeast of the BP PLC-operated Clair field platform on the Atlantic margin of the UK North Sea, encountered a 133-ft gross oil column that includes an estimated 45-ft net oil column with porosity estimated to average 21% in the gross reservoir. Detailed analysis is being run on oil samples. The Fulla well spudded July 6 and was drilled to 7,711 ft total depth in 407 ft of water. It targeted oil in Clair and Whiting reservoir sands.

The two companies will discuss development options that include the Freya discovery made in 1980 on adjoining Block 206/10a. Faroe Petroleum and COPL own 50-50 equity interests in both blocks.

COPL said Fulla is the first of six exploration wells the company plans to initially drill in the UK offshore. The Esperanza and Bluebell prospects are to be drilled this autumn.

New Zealand Energy gauges Taranaki oil find

New Zealand Energy Corp., Vancouver, BC, has gauged a light oil discovery at the Copper Moki-1 well on the northern part of the 92,466-acre Eltham permit in New Zealand’s Taranaki basin and is applying for a mining permit to establish long-term production.

NZEC has 100% interest in the well, which flowed 41.8° gravity oil at a consistent 1,100 b/d with 855 Mcfd of gas from the Miocene Mount Messenger formation over a 48-hr period.

The company has run pressure recorders for an extended build-up and will place the well on extended production test to determine reservoir size and flow conditions. The well is near production facilities. NZEC completed Copper Moki-1 in three sands over an interval of 12.2 m in the Mount Messenger, a thick sequence of turbidite sandstones at 1,800 m. The company also perforated and tested a portion of the shallower Urenui formation. Early results showed potential for oil and gas production, but the Urenui zone is suspended for the near term to focus on the Mount Messenger pay.

NZEC said it has identified 30 onshore and offshore structural and stratigraphic leads on Eltham of which eight are considered key prospects slated for drilling in the short to medium term. The four main target zones are the Moki, Mount Messenger, Urenui, and Kiore turbidites.

Kosmos group discovers more oil off Ghana

Operating groups led by Kosmos Energy Ltd., Dallas, and Tullow Oil PLC have tested the Akasa-1 discovery on the West Cape Three Points block off Ghana and gauged gas-condensate at the Tweneboa-4 appraisal well on the Deepwater Tano block.

The Akasa-1 exploratory well cut 108 net ft of primarily high-quality, oil-bearing pay in four main Turonian-aged sand packages similar to those found in the Jubilee and Mahogany East areas. Samples recovered from the Akasa-1 well indicate oil of 38° gravity. The well, which went to 12,850 ft in 3,800 ft of water, will be preserved for future use. After successful appraisal, the group expects Akasa and previous discoveries at Teak to potentially anchor another development on the block.

West Cape Three Points interests are Kosmos and Anadarko Petroleum Corp. 30.875% each, Tullow 26.396%, Sabre Oil & Gas Holdings 1.854%, and Ghana National Petroleum Corp. 10% carried.

Meanwhile, Tweneboa-4 sustained 3,500 b/d of condensate and 30 MMcfd of gas on a drillstem test. Previously, Tweneboa-2 flowed 6,500 b/d of oil and 4.8 MMcfd on a drillstem test. Data from the tests are being used to optimize development plans for the Tweneboa-Enyenra complex. The partnership has mobilized the drillship north to drill an updip appraisal well at Enyenra-3A.

Deepwater Tano interests are Tullow 49.95%, Anadarko and Kosmos 18% each, Sabre 4.05%, and GNPC 10% carried.

Drilling & ProductionQuick Takes

CNRL resumes synthetic crude sales from Horizon

Canadian Natural Resources Ltd. (CNRL) has resumed the sale of synthetic crude oil from its Horizon oil sands operation in Northern Alberta.

Production at Horizon restarted on Aug. 16. The operation had been shut down because of a Jan. 6 fire in the coker unit (OGJ Online, Feb. 15, 2011). During the past 4 days production has averaged 75,000 b/d of synthetic crude and CNRL expects to ramp up to a 110,000 b/d full production capacity next week.

The company commenced first pipeline deliveries on Aug. 18.

ATP adds Mirage well at Telemark hub

ATP Oil & Gas Corp., Houston, has brought on production a third well at its Telemark hub in the deepwater Gulf of Mexico.

Drilled to 12,000 ft by the ATP Titan vessel and cased before the Macondo spill, the Mississippi Canyon 941 A-2 well in Mirage field is flowing at the expected rate of more than 7,000 b/d of oil equivalent. When drilled, it encountered four Miocene sands that are 500 ft structurally higher than the same sands in the MC 941 A-1 well.

The A-2 well is completed at 17,600 ft measured depth in the C and D sands. All permits to drill the fourth well, MC 942 No. 2, have been approved with production projected later this year. Company-wide production now exceeds 31,000 boe/d.

ATP operates Telemark in 4,000 ft of water with a 100% working interest and holds a 100% ownership in ATP Titan LLC which owns the ATP Titan floating drilling and production vessel and associated pipelines and infrastructure.

Te Giac Trang oil, gas field starts up

Hoang Long Joint Operating Co. has placed Te Giac Trang field H1 area on production in the Cuu Long basin off Vietnam.

Crude oil moves through a subsea pipeline to the Armada TGT 1 floating production, storage, and offloading vessel with 55,000 b/d nameplate capacity. It is to be exported to regional refineries. Gas will be shipped via pipeline to Bach Ho facilities for processing and transport to shore in existing lines.

Plateau production is 55,000 b/d and 30 MMcfd. The field was discovered in August 2005 and its development approved in September 2009.

HLJOC operates the field on behalf of SOCO International PLC, PetroVietnam, and PTT Exploration & Production PCL.

HLJOC is still drilling production wells in the H4 area of TGT Field and fabricating platform topsides in preparation for its start-up in August 2012.

PROCESSINGQuick Takes

Southern Union to build NGL pipeline

Southern Union Co., Houston, will spend $235 million to build the Red Bluff project, a 200-MMcfd gas processing plant and associated gathering, compression, and treating facilities, through its midstream unit, Southern Union Gas Services (SUGS).

The project is part of ongoing midstream expansion in response to anticipated production from the Avalon shale, said the company’s announcement. The new facilities will enable SUGS to handle production from existing and future development in the Avalon, Bone Spring, and Wolfcamp plays of West Texas and southeast New Mexico.

As part of the project, SUGS will build about 60 miles of pipeline to deliver up to 20,000 b/d of NGLs into Lone Star NGL’s planned Permian-to-Mt. Belvieu pipeline expansion, under a 15-year firm agreement (OGJ Online, June 24, 2011). Southern Union expects the project to be completed in mid-2013.

Southern Union owns and operates more than 20,000 miles of gathering and transportation pipelines as well as an LNG import terminal at Lake Charles, La.

Laffan lets contract for refinery expansion

Laffan Refinery Co. Ltd. let a lump-sum, front-end engineering and design (FEED) contract of an undisclosed sum to Technip SA for the Laffan refinery’s Phase 2 expansion.

The planned expansion would double the refinery’s current throughput capacity to 292,000 b/sd. The facility will be fully operational by first-quarter 2016.

The expansion will allow Qatar to meet domestic demand for naphtha, diesel, LPG, and jet fuel while becoming a net exporter of diesel and other refined products, instead of an importer, Qatargas Chief Executive Officer Khalid bin Khalifa Al Thani said in a statement. Qatar is seeking to boost exports of refined products such as diesel to southeast Asia and Europe.

Qatargas, which operates the Laffan refinery, said FEED contract work is slated to be completed by first-quarter 2012. The engineering, procurement, and construction contract, meanwhile, is expected to be awarded by third-quarter 2012.

Completion of Paradip refinery due in 2013

Construction is under way but expected to be finished later than earlier predicted on the 300,000-b/d refinery to be operated by state-owned Indian Oil Corp. at Paradip, Orissa, on India’s eastern coast.

According to Minister of State for Petroleum & Natural Gas Shri R.P.N. Singh, IOC expects the project to be completed by the first quarter of 2013. Last year, IOC said it expected commissioning to take place in March 2012 (OGJ, Nov. 29, 2010, Newsletter). In response to a question from the Lok Sabha, the lower house of India’s Parliament, Singh reported progress toward completion at 60.6% as of the end of July.

TRANSPORTATIONQuick Takes

Beach, Senex reach pipeline agreement

Beach Energy Ltd. signed an agreement with Senex Energy Ltd. to tie in the South Australian Growler oil field (Beach 40%) to Lycium field. It also agreed with Senex to construct a trunkline from Lycium to the Moomba facility. The tie-in of this section, however, remains subject to approval from the South Australian Cooper Basin joint venture (Santos Ltd., 67%, Beach, 20%, and Origin Ltd., 13%).

Beach expects the pipeline from Growler to be constructed in two main sections. The first section, directly from Growler field to Lycium field, will consist of a 6-in. OD flowline with an initial capacity of about 8,000 b/d. The equity interests for this section will be Beach 40% and Senex 60%.

Pending approval from the SACB JV, an 8-in. OD, 15,000 b/d main trunkline will service the whole of Beach’s operated and nonoperated Western Flank acreage and extend between Lycium and the Moomba facility. The equity interests for this section will be Beach 60% and Senex 40%.

Beach will build and operate both pipelines, with the total cost of $40 million to be shared between Beach and Senex.

These pipelines will provide Beach with access to Growler field during floods. The trunkline also will allow increased production from Beach’s PEL 91 and PEL 92 acreage.

A six-well approved exploration program for PEL 104 and PEL 111 is expected to start in October, when flood waters are forecast to recede. The Department of Primary Industries and Resources of South Australia also has granted a 12-month extension to the tenure of the Beach-operated Western Flank PEL’s 91 and 92, acknowledging that flooding has delayed exploration in the area.

Beach expects to commission the pipelines in June 2012.

Russia approves Total for Yamal LNG project

Russia’s Federal Antimonopoly Service said it has approved the intention of Total SA unit Total Razvedka Razrabotka Yamal to join the shareholding structure of the Yamal LNG project.

“We are satisfied with our interaction with Total Razvedka Razrabotka Yamal when considering this application, which ensured timely accomplishment of all procedures necessary for this major transaction to take shape,” said FAS Deputy Head Andrei Tsyganov. In March, Total Chairman Christophe de Margerie and Novatek Chairman Leonid Mikhelson signed two agreements to develop cooperation between their companies.

Under the agreements, Total will become the main international partner on the Yamal LNG project holding a 20% share, while Novatek will hold a 51% interest.

The firms also agreed that Total will take a 12.08% stake in Novatek with the intent of both parties to increase the share to 15% within 12 months and to 19.4% within 36 months.

The Yamal LNG project will develop the South Tambey field in the Arctic area of the Yamal peninsula.

The reserves of the field are estimated at 44 tcf of gas, allowing production of more than 15 million tonnes/year of LNG.

Total said it will have access to proved and probable reserves of 800 million boe within the license duration and to a plateau production in the next decade of 90,000 boe/d.

Novatek expects to build the Yamal LNG project in three phases: the first is to be completed in late 2016, while construction of the second and third is to take place in 2013-17 and 2014-18 (OGJ Online, July 22, 2011).

North Slope, Nenana exploration plans aired

Two companies are launching efforts to liquefy Alaska North Slope natural gas and truck it to the state’s interior while a Native regional corporation plans to press gas exploration in the nonproducing Nenana basin west of Fairbanks.

Golden Valley Electric Association, Fairbanks, and Flint Hills Resources Alaska, Wichita, Kan., have begun engineering a liquefaction facility for the North Slope. The companies will exclusively negotiate agreements to build and operate the facility, which would enable LNG to be trucked to the interior by 2014.

GVEA would use the gas to power its newest turbine at the North Pole power plant near Fairbanks, and Flint Hills would consume the gas at its North Pole refinery near Fairbanks, backing out crude oil it now burns. Gas would be delivered to each company at cost.

Meanwhile, Doyon Ltd. will shoot 120 line-miles of 2D seismic in the northern Nenana basin before drilling its second wildcat on an extensive land holding about 60 miles west of Fairbanks. Doyon holds 483,000 acres of general state lands and 9,500 acres of Alaska Mental Health Trust Authority lands.

Doyon’s first well, drilled in mid-2009 in the southern part of the basin, was geologically encouraging but noncommercial.

The state has been pursuing plans to lay a 24-in., 500 MMcfd pipeline to bring North Slope gas south, and such a conduit would traverse the Nenana basin.

GVEA, which supports a gas pipeline to Fairbanks, said trucking LNG would reduce its dependence on higher-priced oil and deliver that cost relief sooner than other proposed projects.

Flint Hills said the LNG project would partly eliminate the competitive disadvantage for its refinery and that the cleaner fuel would be environmentally better for Fairbanks and Interior Alaska. Flint Hills said it sees “additional opportunities such as propane production and LNG diesel production to provide more competitive clean fuel for Alaska’s trucking and transportation industry.”

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