GENERAL INTEREST — Quick Takes
API asks USFS to reject drilling ban in Virginia
The US Forest Service may be trying to make an arbitrary and unnecessary change in federal energy policies through its forest management process if it decides to prohibit horizontal drilling in the George Washington National Forest in western Virginia, the American Petroleum Institute warned on Oct. 17.
"API's concern is underscored by the fact that no ban on horizontal drilling was sought for the neighboring Jefferson National Forest (JNF), which also sits atop substantial Marcellus shale resources, by the USFS during its recent 15-year plan revision for that forest," Erik Milito, API's upstream industry operations director, said in comments submitted on the GWNF's draft environmental impact statement and draft revised land and resource management plan.
A horizontal drilling ban also would run directly counter to the Obama administration's shale gas development policy, he continued. "This in turn would frustrate efforts to reduce US reliance on foreign sources of energy and hurt efforts to reduce greenhouse gas emissions by preventing more cost-competitive, clean-burning gas from coming to markets," Milito said.
"Finally, and perhaps most critically, a ban on horizontal drilling in the GWNF would foreclose the creation of new local government revenue streams and thousands of new jobs in communities in and around the forest in the oil and gas, technology, service, transportation and related sectors," he maintained.
Milito said that he considered the approach the USFS took in developing the GWNF draft EIS and draft plan arbitrary and inconsistent because it potentially would establish a policy which has not been scientifically substantiated. He urged the US Department of Agriculture agency to reject any proposal which would prohibit horizontal drilling in the forest.
US Senate approves pipeline safety bill
The US Senate unanimously passed federal pipeline safety reauthorization on Oct. 17. Three oil and gas industry associations expressed hope that the US House, where two committees have referred bills to the floor, would follow and work with the Senate on a final bill to send to the White House for approval by yearend.
"S. 275 and the two bills passed by House committees each have commendable provisions that advance the cause of pipeline safety in a responsible manner," Andrew J. Black, president of the Association of Oil Pipelines, said on Oct. 18. "AOPL believes Congress should not pre-judge the outcome of the studies required in these bills before requiring rulemakings."
He said if federal lawmakers require the US Pipeline and Hazardous Materials Safety Administration to conduct new rulemakings, it should also require the agency to conduct those studies using the same risk assessments and cost-benefit analyses that govern most other federal pipeline safety rulemakings. "We look forward to working with both the Senate and House as they develop a final legislative product," Black said.
Interstate Natural Gas Association Pres. Donald F. Santa and American Gas Association Pres. Dave McCurdy also commended the Senate for its passage of the bill, and said they hoped a final version reaches the president's desk for approval by yearend.
Pacific Rubiales eyes Guyana with CGX investment
Pacific Rubiales Energy Corp. has agreed to purchase 58.7 million common shares of CGX Energy Inc. for an investment of $41.1 million (Can.). Both are based in Toronto.
CGX is focused on exploring for oil in the Guyana-Suriname basin, an area ranked second in the world for oil and gas prospectivity by the US Geological Survey.
The investment is being made pursuant to CGX's recently announced bought deal financing through a syndicate of underwriters led by Cormark Securities Inc. whereby CGX has agreed to issue 114.3 million common shares at 70¢/share. Pacific Rubiales, which doesn't hold a stake in CGX at present, will own 19% on completion of the offering.
Pacific Rubiales owns 100% of Meta Petroleum Corp., a Colombian oil operator that operates the Rubiales and Piriri oil blocks in the Llanos basin in association with Colombia's state Ecopetrol SA. Pacific Rubiales is focused on identifying opportunities mainly in the eastern Llanos basin, in other areas of Colombia, and in northern Peru. It has working interests in 46 blocks in Colombia, Peru, and Guatemala.
Exploration & Development — Quick Takes
DNO streamlines Kurdish oil transportation
DNO International ASA, enlarged following its acquisition of RAK Petroleum PCL earlier this year (OGJ Online, Sept. 6, 2011), is streamlining its crude oil transportation operations in the Kurdistan region of Iraq.
DNO has redirected nearly one third of its crude oil production there to sales to the domestic market. The company said the move will improve predictability and stability of its revenue stream.
The company recently signed contracts with three buyers for delivery of 675,000 bbl of oil from Tawke field on the Tawke PSC and Bastora field on the Erbil PSC at $50-55/bbl. Deliveries into the contracts are averaging 10,000 b/d. Payments are received in advance of deliveries.
Bastora crude is trucked to the Tawke facilities. DNO declared Bastora and Benenan oil fields on the Erbil license to be commercial earlier this year and will file development plans by yearend (OGJ Online, July 12, 2011).
Helge Eide, DNO president and managing director, said, "We are very pleased to have been given the green light by the authorities to commence cash sales to the local market and at a price twice last year's levels. At current rates, DNO's local sales bring another $15 million in payments to the company on a monthly basis which allows our operations to be self funding across our portfolio."
The company expects to continue its domestic sales, though future volumes and prices will be contingent on market conditions. Exports meanwhile have declined due to continuing technical glitches in the northern Iraq pipeline system and now average 25,000 b/d.
Meanwhile, DNO said the first test on the Summail-1 exploration well on the Dohuk license has been completed and the lowermost Triassic zone was found to be water bearing. This is the first of several tests to be undertaken in the well over the coming weeks.
North extension of Aldous Major South confirmed
A group led by Statoil ASA has confirmed a northern extension of the Aldous Major South structure in the North Sea off Norway.
The 16/2-10 appraisal well proved a 50-55 m oil column in Jurassic sandstone, further confirming Statoil's preliminary figure of 400-800 million bbl of oil equivalent recoverable on the structure in PL 265. Statoil is to update the estimate after it analyzes the well data.
The 16/2-10 well is 4.2 km north of the 16-2/8 discovery well on the Utsira high. It is the sixth exploratory well in the license. Statoil is operator of PL 265 with 40% interest. Partners are Petoro AS 30%, Det norske oljeselskap ASA 20%, and Lundin Norway AS 10%.
The Aldous Major South discovery is an extension of the Avaldsnes discovery made by Lundin Petroleum AB in PL 501.
Lundin Petroleum has updated its gross contingent resource estimate for the Avaldsnes discovery to be 800 million bbl to 1.8 billion bbl of recoverable oil. The Avaldsnes-Aldous Major South discovery is therefore estimated to contain gross contingent resources of 1.2-2.6 billion bbl of recoverable oil.
Lundin Petroleum is the operator of PL 501 with 40% interest, Statoil has 40%, and Maersk Oil Norway AS has 20%.
Danish North Sea Miocene oil discovery indicated
PA Resources AB, Stockholm, has sampled light, sweet 34-35° gravity oil in shallow Miocene sandstone at the Lille John prospect in License 12/06 in the North Sea off Denmark and plans to sidetrack the well to a chalk target.
The Miocene stratigraphic level has not generally been explored in Denmark, PA Resources noted.
The well encountered 5 m of hydrocarbon pay in a 25-m Miocene sandstone-shale interval 900 m below mean sea level. Gas-oil ratio is 350 scf/bbl. No water was detected.
The Lille John well is 17 km south of Gorm field and 8 km from PA Resources' gas-condensate discovery at the Broder Tuck prospect in July.
The Lille John well was drilled for the primary chalk target and as a result was not optimally located at Miocene sandstone level, being just outside of the main part of the seismic anomaly and close to the mapped limit of the Miocene sandstones, PA Resources said.
The well encountered modest reservoir development as expected at this location marginal to the seismic anomaly but has confirmed the anomaly to represent oil-bearing sandstone, with an apparent column height in excess of 300 m.
The Lille John well was unable to penetrate the main chalk target or the underlying Middle Jurassic secondary target due to an unexpected pore pressure regime and extensive fracturing at chalk level. The well is now being sidetracked to a revised location with the aim to try again to penetrate the chalk target and establish its fluid content and reservoir development.
Drilling & Production — Quick Takes
API reports jump in 3Q oil well completions
US oil drilling in this year's third quarter climbed 16% from a year earlier, the American Petroleum Institute said in its latest quarterly well completion report.
The report estimates that 10,574 wells were completed in the third quarter, including 6,379 oil wells, 3,188 natural gas wells, and 1,007 dry holes.
A year ago API reported that an estimated 4,434 gas wells were completed in 2010's third quarter, 28% more than during the comparable 2009 period (OGJ Online, Oct. 26, 2010).
Estimated footage was 77,123,000 ft drilled in the recent quarter, a 6% increase from third quarter 2010.
An estimated 31,620 wells have been completed to date in 2011. API also reported increases in oil well completions for the 2011 first and second quarters.
Wintershall starts gas production from Wingate
Production of natural gas started from the Wintershall Noordzee BV-operated Wingate project on Block 44/24b in the UK North Sea.
Wintershall expects an initial production of 1.5 million cu m/day of gas from Wingate and a production of 3 million cu m/day after completing a second well. Reservoir depth is at 3,700 m.
The company drilled the field's discovery well in 2008 and constructed the platform at the Dordrecht dockyards in Ridderkerk, Netherlands.
Wintershall remotely controls the platform from Den Helder, Netherlands.
The platform is fully self-sufficient with produced gas powering a minipower turbine for generating electricity.
The Wingate platform is about 1,200 sq m in size. The platform topsides weigh about 950 tons and are on an 850 ton, 45-m tall four-leg jacket. Overall platform height is 70 m.
A 20-km pipeline will transport the gas to the GDF Suez D15-A platform, in the Dutch North Sea. From there, the gas will go 300 km to near Uithuizen, Netherlands.
Wintershall said it now controls 20 platforms from its remote control center in Den Helder. Eighteen are offshore Netherlands, one is in the German North Sea, and Wingate is in the UK North Sea.
"This type of remote operation has allowed a reduction in the number of transport and supply flights normally needed to the platforms by a third." Wintershall said. It also added "The center also plays a key role in the successful commercial production of smaller reserves in the southern section of the North Sea."
Noble Energy encounters snags in drilling Cyprus
Noble Energy Inc. has reportedly encountered difficulties with water pockets and gas seepage in its drilling of its Cyprus A prospect offshore Cyprus.
The problems and potential risks could delay by a month the drilling of the first stage of Noble's Aphrodite well, according to a report by Israel's Globes business daily.
The paper said Noble encountered a problem in Cypriot waters that is already well known from its drilling offshore Israel: pockets of water that could penetrate the shaft.
The Houston firm faced similar problems when drilling on Israel's Leviathan-2 well was brought to a halt by water seepage into the drilling shaft due to faulty walling of the shaft (OGJ Online, Apr. 1, 2011).
The problems mean that the Homer Ferrington rig will be unable to complete Noble's Noa gas field or drill the firm's Myra and Sarah licenses offshore Israel. The Cypriot drilling had been scheduled for completion in 90-120 days.
Analyst Catherine Hunter of IHS Global Insight said a longer drilling timeline will also have "some consequences" in terms of prolonging current tensions in the region around border delineation.
"An increased Turkish-Israeli military presence has been the consequence of this to date, alongside Northern Cypriot border delineation and seismic work, all of which raise the risks of outright—albeit likely contained—clashes as activities continue," Hunter said.
According to preliminary reports by Noble Energy, Block 12 holds about 10 tcf, slightly more than its Tamar discovery at 9.25 tcf but smaller than the Leviathan discovery at 16 tcf.
Meanwhile, based on indications so far, Cyprus's Commerce Minister Praxoulla Antoniadou said preparations are under way for a second licensing round, with plans set to be finalized by yearend.
PROCESSING — Quick Takes
EPP starts up NGL fractionator at Mont Belvieu
Enterprise Products Partners LP reported the start up of operations at a fifth NGL fractionator at its Mont Belvieu, Tex., complex, east of Houston. Initial volumes exceed the unit's 75,000 b/d nameplate capacity, EPP said.
The new unit increases total nameplate capacity at EPP's Mont Belvieu site to 380,000 b/d. Under long-term contracts, the unit provides fractionation for increasing NGL production from US shale plays, including Texas' Eagle Ford and those in the Rocky Mountains and Midcontinent.
A.J. Teague, executive vice-president and chief operating officer for EPP's general partner, explained that rising US NGL production from shale plays has "created a cost advantage" for US petrochemical producers that favor "domestic NGLs over imported crude oil-based derivatives."
US petrochemical producers, he said, have responded by increasing demand for NGLs, particularly ethane, which reached as much as 1 million b/d during this year's third quarter. With petrochemical companies announcing more conversions, expansions, and new construction that will consume additional ethane and gas producers announcing more discoveries of shale plays with NGL-rich reserves, Enterprise has begun building a sixth fractionator at Mont Belvieu, also with 75,000-b/d nameplate capacity, said Teague.
Upon its completion, total nameplate capacity of Enterprise's Mont Belvieu NGL fractionation complex will increase to more than 450,000 b/d. Enterprise anticipates the sixth fractionator starting up in early 2013, when it will be fully contracted.
The additional capacity provided by the fifth and sixth fractionators, said the company's announcement, will allow Enterprise to process mixed NGLs at Mont Belvieu that are currently being diverted to Louisiana, as well as incremental volumes from the partnership's new Yoakum gas processing plant in Lavaca County, Tex. It is to begin operations in mid-2012.
Based on industry announcements, company research, and other reports, said the company, conversions and expansions of existing petrochemical plants could result in 135,000 b/d of new ethane demand. In addition, construction of new ethylene crackers could generate another 330,000 b/d of ethane demand.
EPP's assets include 50,000 miles of onshore and offshore pipelines; 192 million bbl of storage capacity for NGLs, refined products, and crude oil; and 27 bcf of gas storage capacity.
Kazakh gas plant starts up
Zhaikmunai LP, a UK-based independent active in Chinarevskoye field in northwestern Kazakhstan, reported that Trains 1 and 2 of its natural gas treatment plant in the region have begun operations.
The plant treats condensate from Zhaikmunai-operated wells and associated gas from the company's oil-treatment unit, producing stabilized condensate, LPG, and dry gas. Each train of the gas treatment plant can process 850 million cu m/year.
Over recent weeks, the company said, production capacity of crude oil and gas plant products reached "higher range values." The company expects to "gain in consistency as final production flow adjustments are being made."
Production ramp-up with a goal of the gas plant reaching design production will continue over the coming weeks, the company said. Zhaikmunai's principal producing asset is Chinarevskoye field. Zhaikmunai LLP, a wholly owned subsidiary of Zhaikmunai, holds a 100% interest in and operates the production-sharing agreement for Chinarevskoye field.
Catalytic olefins technology contract let
Shaanxi Yanchang Petroleum Yanan Energy & Chemical Co. Ltd. will use proprietary Advanced Catalytic Olefins (ACO) technology developed by KBR and SK Innovation at a plant to be built in Shaanxi Province, China.
The ACO converter will have capacity of about 200,000 tonnes/year of ethylene and propylene.
KBR said the license and process design contract represents the first licensing of the technology, which catalytically cracks naphtha and other straight-run feeds with olefin yields exceeding those of traditional steam cracking.
SK Innovation, formerly SK Energy, last year started up an ACO demonstration plant at its chemical complex in Ulsan, South Korea.
TRANSPORTATION — Quick Takes
Iraq's SOC lets contract for Sea Line project
Iraq's South Oil Co. (SOC) let a $518 million contract for part of Iraq's Crude Oil Export Facility Reconstruction Project, also known as the Sea Line Project, to Leighton Holdings Ltd. unit Leighton Offshore. The project includes two offshore platforms, a 75-km, 48-in. OD oil pipeline, and a single-point mooring system (SPM). The project will connect oil storage facilities to the offshore export terminal in Fao, Basrah, southern Iraq.
SOC also let an additional SPM contract worth $79.85 million to Leighton Offshore, the scope of which includes an additional SPM, 3.5 km of 48-in. OD pipeline, pig launcher installation, conversion of spare SPM buoy to operational status, and replacement of spare buoy.
Both contracts are in addition to the $799 million Phase 1 Iraq Crude Oil Export Expansion Project (ICOEEP) work Leighton is currently completing. ICOEEP includes installation of 120 km of pipeline (two parallel 48-in., OD 50 km lines—10 onshore, 40 offshore—and 20 km of infield lines) as well as three SPMs (OGJ Online, Oct. 25, 2010).
The new SPM project will parallel Phase 1 work and is slated for completion by early 2012. ICOEEP aims to expand Iraq's offshore loading facilities to enable export capability of 4.5 million b/d.
EPP to sell Mississippi gas storage to Boardwalk
Enterprise Products Partners LP will sell its Mississippi natural gas storage facilities to Boardwalk HP Storage Co. LLC for $550 million. The Mississippi facilities have about 29 bcf total storage capacity.
EPP described the facilities as a standalone asset and the sale as consistent with its drive toward asset integration. The company said proceeds of the sale would be used to fund ongoing construction projects.
Projects recently announced by EPP include the Wrangler crude oil pipeline between Cushing, Okla., and the Texas Gulf Coast refining complex (OGJ Online, Sept. 29, 2011) and the Texas Express NGL pipeline between Skellytown, Tex., and fractionation and storage facilities in Mont Belvieu, Tex. (OGJ Online, Sept. 6, 2011). EPP is also expanding its Mont Belvieu fractionation facilities, with completion expected in early 2013.
Kitimat project gets LNG export license
Canada's National Energy Board has issued a 20-year license to KM LNG Operating General Partnership to export LNG from Kitimat, BC, to Asia-Pacific markets. The license authorizes KM LNG to export a maximum quantity of 10 million tonnes/year, equivalent to 468 bcf/year, or 9,360 bcf over 20 years.
Western Canada Sedimentary Basin producers will supply the gas, which would reach Kitimat via the Pacific Trail Pipeline. It would be liquefied at a terminal to be built at Bish Cove, near Kitimat. Terminal and pipeline construction and operation will require provincial regulatory decisions, NEB noted.
This is the first application for an LNG export license that NEB has considered since deregulation of the natural gas market in 1985. The board said it had satisfied itself that the quantity of gas to be exported does not exceed the amount required to meet foreseeable Canadian demand.
The exported LNG will open new markets for Canadian gas production, and ongoing development of shale gas resources will ultimately further increase the availability of natural gas for Canadians, the board reasoned.
The board considered environmental and related socioeconomic effects of KM LNG's application. These effects included matters related to marine shipping and the proposed LNG terminal and Pacific Trail Pipeline. The board also acknowledged the potential economic benefits associated with KM LNG's project.
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