GENERAL INTEREST — Quick Takes
Colorado governor advocates more cooperation
Colorado Gov. John Hickenlooper (D) called for cooperation instead of confrontation between states and the federal government in improving regulations covering unconventional oil and gas development. "Regulation should be appropriate," he told the US Senate Energy and Natural Resources Committee. "States are the ideal laboratory. We steal [ideas] from each other every day."
States historically have developed the best regulations, and collaborate frequently through the National Governors Association and the Interstate Oil and Gas Compact Commission, Hickenlooper said during the Feb. 12 committee hearing on US gas opportunities.
The US Environmental Protection Agency and its administrator, Lisa P. Jackson, have been very helpful, he said.
"We should have our full regulatory approach together by the end of this year, measuring emissions around these large fields, encouraging producers to use fewer trucks and reduce dust, and run more rigs on gas than on diesel fuel," the governor said.
Hickenlooper said he and Oklahoma Gov. Mary Fallin (R) began to promote using gas to fuel more state vehicles more than 1 year ago.
"What started with Oklahoma and Colorado now has expanded to 22 states representing every region of the country," Hickenlooper said.
He expects "eventual federal regulations modeled after a group of states, not in addition to what states already do."
Hickenlooper said he already talked with [US Interior Secretary] Ken Salazar about standardizing the drilling application form for federal and state lands.
Natural Resources Defense Council President Frances A. Beineke questioned whether states had the necessary qualifications to adequately protect residents during a gas development boom.
"There's a huge gap between the information the public has, and what's happening in their communities," she said.
Hickenlooper acknowledged that as technology continues to improve, exploration and production have arrived on the doorsteps of communities that haven't previously dealt with it.
"These are industrial processes that are getting close to our homes and schools," Hickenlooper said. "We need to ensure that there isn't unnecessary flaring, that operations are safe, and that our water supplies are protected."
Nexen-CNOOC deal receives US approval
Nexen Inc. received approval from the Committee on Foreign Investment in the United States regarding its CNOOC Ltd.'s $15.1 billion acquisition of Nexen.
All requisite approvals have been received now for the transaction to proceed to close, Nexen said. That includes approvals from Canada, the UK, the European Union, and China (OGJ Online, July 30, 2012).
Closing is expected the week of Feb. 25, Nexen said. Nexen's assets in the UK, US, and other countries will continue to be managed from its regional offices, and CNOOC will retain the current management and employees in those operations.
Previously, CNOOC said it is committed to Nexen's assets in the UK and will maintain its operations in the US Gulf of Mexico and offshore Nigeria.
In response to what he called the potential transfer of US royalty-free drilling to CNOOC as part of the deal, Rep. Edward J. Markey (D-Mass.) said he will introduce legislation giving the US Interior Department new authority to block "a loophole preventing the approval of similar lease transfers in the future."
"Chinese government-owned oil corporations should not be allowed to drill for American oil in the Gulf of Mexico without paying a dime in royalties to US taxpayers," Markey said. "The Interior Department should have the authority to review all possible transfers of oil and gas leases on public lands so that we can prevent massive wealth transfers from US taxpayers to foreign governments."
Gulfport Energy acquiring more Utica shale acreage
Gulfport Energy Corp. signed a definitive agreement to buy 22,000 net acres in the Utica shale in Eastern Ohio from Windsor Ohio LLC, an affiliate of Wexford Capital LP, for $220 million, increasing Gulfport's leasehold interests in the Utica shale to 137,000 gross (128,000 net) acres.
This acquisition excludes Windsor Ohio's interest in 14 existing wells and 16 proposed future wells and certain acreage surrounding these wells. The proposed transaction, which is expected to close by Feb. 28, will increase Gulfport's working interest in the acreage to 93.8%.
Last year, Gulfport acquired 37,000 net acres in the Utica shale from Windsor Ohio LLC (OGJ Online, Dec. 18, 2012).
Calculating production from the pending acquisition, Gulfport estimates its 2013 net production will be 21,370-22,192 boe/d. Gulfport will continue to serve as operator of its acreage in the Utica shale.
Exploration & Development — Quick Takes
Jubilant spuds wildcat near Tripura gas discovery
Jubilant Energy NV, Amsterdam, has spudded the North Atharamura-1 vertical well on the Tripura block in India as a follow-up to its 2012 Matabari-1 indicated gas discovery and to explore deeper formations.
North Atharamura-1 is projected to 4,000 m to explore the hydrocarbon potential of suprathrust Middle Bhuban and Lower Bhuban sands and subthrust Lower Bhuban, Renji, and Jenam sands. It is the first exploratory well on the block to targets deeper than the Middle Bhuban on the Atharamura anticline.
The drillsite is 6.7 km southwest and updip from the Ambasa North exploratory well.
Matabari-1, projected to 4,070 m measured depth, was terminated with 19.7 ppg mud and plugged at 3,287 m MD due to well control issues. Jubilant identified three gas-bearing sand intervals of interest a combined 20 m thick on mud log and petrophysical interpretations in the Middle Bhuban formation.
Sand-1 is the firm zone proposed in the interval 2,571.5-78 m, Sand-2 in the interval 2,393-98 m, and Sand-3 at 2,326-30 m and 2,332.5-37 m. Calculated absolute open flow based on a minidrillstem test in Sand 1 is 4.2 MMscfd.
Jubilant Oil & Gas Pvt. Ltd. is block operator with 20% participating interest, and GAIL India Ltd. has 80%.
Gran Tierra finds oil at Maranon basin
Gran Tierra Energy Inc., Calgary, is designing a test program to measure whether it has a commercial discovery at its Bretana Norte 95-2-1XD exploratory well in Peru's Maranon basin, which appears to have confirmed a 1974 heavy oil find on Block 95.
Bretana Norte encountered oil shows at the top of the target Vivian reservoir, and the company recovered oil-saturated core over 90% of the oil column and in the underlying water column.
Log interpretations and MDT fluid and pressure sampling indicate the presence of an oil-bearing reservoir in the Vivian sandstone beginning at 9,408 ft measured depth, 8,851 ft true vertical depth, with an approximate gross oil column thickness of 99 ft and 53 ft of net pay thickness.
The well encountered the oil column 48 ft higher than at the 1974 Bretana-1 discovery well 4 km away. Bretana-1 tested 18° gravity oil at rates of 807 b/d on natural flow and was never placed on production (OGJ Online, Dec. 14, 2012).
Meanwhile, on the Chaza block in the Putumayo basin in Colombia, Gran Tierra said its Moqueta-8 appraisal well tested on a hydraulic jet pump at rates of 651 b/d of 28.2° gravity oil with 0.4% water cut on a 57-hr test of Caballos perforations at 5,361-5,538 ft, 925 b/d of 27° gravity oil at 0.4% water cut on a 16.4-hr test of the T sandstone at 5,153-5,256 ft, and 24 b/d of 16.3° gravity oil with a 0.4% water cut in 24 hr from the U sandstone at 4,866-4,911 ft.
Gran Tierra is completing Moqueta-8 as a production well and drilling the Moqueta-9 appraisal well in the northern part of Moqueta field.
Cequence tests Alberta horizontal wet gas find
Cequence Energy Ltd., Calgary, has gauged wet gas at its first Dunvegan horizontal gas well in the Simonette-Resthaven area southeast of Grande Prairie, Alta.
The Cequence-operated 10-02-061-02w6 well was drilled to 4,443 m measured total depth including 1,791 m of horizontal section in Dunvegan in which 16 forty-tonne fracs were successfully placed using a frac port system.
The well flowed on clean-up for 53 hr at a final rate of 16.4 MMcfd plus liquids with 2,380 psi flowing casing pressure. It is producing at a facilities-restricted 8.0 MMcfd at 2,770 psi FCP. The 10-02 well is the second of three farm-in commitment wells, and Cequence will retain a 65% working interest in nine sections of prospective land at Resthaven.
Cequence management believes the test validates as many as 12 (7.8 net) locations for liquids-rich gas in the Dunvegan. Completed well costs, estimated at $8.5 million for the 10-02 well, are expected to decrease as the pool is developed.
Cequence noted that the Dunvegan success adds to the already extensive Montney, Wilrich, and Falher resource opportunities identified on its 220-section Simonette land base.
Drilling & Production — Quick Takes
Shell to move Noble Discoverer to Asia
Royal Dutch Shell PLC plans to move its Noble Discoverer drillship and the Kulluk conical drilling unit, centerpieces of Shell's Alaska Arctic drilling, to Asia for additional inspections and repairs.
The Kulluk, which has remained anchored off of Kodiak Island since its grounding late last year, is to be towed to the international Port of Dutch Harbor pending a tow plan approval. From Dutch Harbor, the conical drilling unit will be dry-towed to a shipyard in Asia. The shipyard was not specified.
The Discoverer's operator, Noble Corp., will dry-tow the Discoverer from Seward to South Korea.
It was not immediately known when the rigs will leave Alaska or when they might be able to resume drilling off Alaska.
The Kulluk was driven aground by violent weather on the southeast shoreline of the uninhabited Sitkalidak Island on Dec. 31, 2012, while under tow to Seattle. The incident resulted in no significant injuries and no environmental impact. After weather delays, the drilling unit was towed Jan. 7 to a safe harbor about 30 miles from where it ran aground (OGJ Online, Jan. 7, 2013).
In December 2012, Noble said it was working to fix deficiencies and maintenance issues raised by the US Coast Guard during an inspection of the drillship following a drilling season offshore Alaska (OGJ Online, Dec. 27, 2012).
The US Environmental Protection Agency said the Kulluk and the Noble Discoverer drillship violated numerous conditions of air-quality permits while drilling off Alaska last year (OGJ Online, Jan. 11, 2012).
Statoil to plug, abandon wells in Heimdal field
Statoil ASA signed a $115 million contract with Archer to plug and abandon 12 gas wells of Heimdal field in the Norwegian North Sea.
Statoil expects operations to begin in second-half 2014. The contract will last 34 months and includes four extension options of 3 months each.
Archer plans to use the modular rig Archer Topaz to complete this project. This is Archer's second modular rig, but marks the first time Archer has used a modular rig in the North Sea.
The rig-hoisting system is rack and pinion driven, which is a new design for the North Sea, Archer said.
Statoil operates Heimdal field. Partners are Total, Centrica, and Petoro.
BP awards design studies to Maersk Drilling
BP PLC and Maersk Drilling agreed to develop conceptual engineering designs for next-generation offshore drilling rigs as part of BP's Project 20K, an initiative to develop what BP calls "next-generation systems…to help unlock the next frontier of deepwater oil and gas resources."
BP and Maersk will collaborate on concepts for deepwater drilling rigs that can operate in high-pressure, high-temperature reservoirs up to 20,000 psi and 350° F. BP said current equipment has a technical limit of 15,000 psi and 250° F.
A jointly staffed engineering team will be based in Houston, with support from Maersk's headquarters in Copenhagen. The team will do the engineering studies required to select the optimal design of the 20K drilling rigs, riser, and blowout prevention equipment.
Project 20K focuses on technologies for well design and completions; drilling rigs, risers, and blowout preventers; subsea production systems; and well-intervention and containment.
The goal is to be able to explore and produce oil and gas currently beyond the reach of current technology. Last year, BP let contracts to KBR and FMC Technologies under Project 20K (OGJ Newsletter, Nov. 19, 2012).
PROCESSING — Quick Takes
Howard Energy Partners to build cryo plant
Howard Midstream Energy Partners LLC, San Antonio, will build a 200-MMcfd cryogenic natural gas processing plant in Webb County, Tex., and already has begun building an import and export railroad hub for oil field services and products, including condensate and NGLs.
Both facilities will serve operators primarily in the Olmos, Escondido, and Eagle Ford shale plays in South Texas. Total cost of the projects will reach about $100 million, said the company.
The new Reveille gas plant and associated pipelines will tie into the Cuervo Creek gathering pipeline that Howard Energy bought in March 2012 (OGJ Online, Mar. 15, 2012).
Plant construction will begin in April with start-up anticipated in January 2014. The plant will handle multiple rich natural gas formations including the Olmos, Escondido, and Eagle Ford.
Howard Energy said it has signed long-term gathering and processing contracts with Escondido Resources II, Midland, Tex., and Laredo Energy, Laredo, Tex., that support construction of the Reveille plant. These agreements add to Howard Energy's "guaranteed minimum throughput of fee-based commitments" to its system, said the company, bringing the total to more than 350 bcf.
The railroad hub in Live Oak County will sit on about 260 acres in the Eagle Ford near US Highway 281 south of Three Rivers, Tex. It will access the Union Pacific Railroad running from San Antonio to Corpus Christi, as well as numerous pipelines in the area that will transport oil and condensate.
The Live Oak Rail hub will be a major South Texas industrial hub, said the company, capable of handling manifest and unit trains moving multiple types of cargo, including crude oil, condensate, NGLs, water, pipe, and sand used in the hydraulic fracturing. Howard Energy began construction of the rail hub last month and said it expects it to accommodate manifest trains in May of this year.
Mike Howard, chairman and CEO of Howard Energy Partners, said the company operates about 500 miles of pipeline in the western Eagle Ford.
North Dakota refinery to process Bakken crude
Engineering and plant design are in final stages for a diesel refinery in southwestern North Dakota that will process 20,000 b/d of Bakken crude oil.
Construction could begin this spring on a 318-acre site west of Dickinson in Stark County, ND, said coventurers MDU Resources Group Inc., Bismarck, ND, and Calumet Specialty Products Partners LP, Indianapolis. It would take as long as 20 months to build the facility.
The plant, to be known as Dakota Prairie Refining LLC, will employ about 100 people and has received support from the state and from North Dakota Gov. Jack Dalrymple, the two proponents said. MDU Resources Group said a strong market exists for the plant's output.
MDU Resources Group said its participation in the joint venture will be through its wholly owned subsidiary, WBI Energy Inc. The plant will employ its own plant manager and management team that will report to a governing board composed of representatives of WBI Energy and Calumet.
Westcon is general contractor, and Ventech Engineering will be the primary equipment and technology provider.
MDU Resources' construction businesses, Knife River Corp. and MDU Construction Services Group, are among potential subcontractors. Other MDU Resources' companies involved in the project include Fidelity Exploration & Production Co., which will produce some of the refinery's crude oil, WBI Energy, which will supply natural gas, and Montana-Dakota Utilities, which will provide electricity.
TRANSPORTATION — Quick Takes
Crude oil accounts for rail shipment increase
Crude oil and petroleum products accounted for the biggest increase in railcar loadings among commodities in 2012, the US Energy Information Administration reported, while coal had the largest decline.
About 90% of the crude oil and petroleum products in the US typically are transported by pipeline.
But increasing amounts of crude are being moved by rail from unconventional oil and gas areas, such as the Bakken formation, which do not have adequate pipeline infrastructure to transport the oil to refineries.
Last year, the amount of crude oil and petroleum products delivered by rail increased 46% over 2011, or almost 171,000 carloads, according to the Association of American Railroads (AAR).
Crude oil accounted for an estimated 38% of the combined deliveries in the oil and petroleum products category during 2012, up from 3% in 2009. The trade group says that crude oil was responsible for nearly all of the growth last year in carloadings in this category.
Phillips 66 agreed last month to a 5-year contract with Global Partners LP for shipment of Bakken crude to Phillips 66 Bayway refinery in New Jersey (OGJ Online, Jan. 9, 2013).
The commodity with the biggest decline in railcar loadings during 2012 was coal, which was down about 726,000 carloads, or nearly 11%, to just over 6 million carloads. But coal remained by far the dominant category of carload shipments, accounting for 41% of total carloads, compared to a 4% share for all petroleum and petroleum products combined.
More than 70% of the coal burned by power plants for electricity generation is delivered by rail. These deliveries fell in 2012 because of lower demand from power plant operators, who turned to more price-competitive natural gas as a generating fuel.
Coal accounted for 37.2% of US electricity generation through November 2012, based on the latest data from EIA's Electric Power Monthly, down from 42.5% during the same 11-month period in 2011. Electricity generation from natural gas increased from 24.6% to 30.8% over the same time.
BP signs contract with Freeport LNG Expansion
BP PLC signed a 20-year liquefaction tolling agreement with Freeport LNG Expansion LP covering 4.4 million tonnes/year, which would be the production capacity of a second train at Freeport LNG's proposed liquefaction and LNG terminal at Quintana near Freeport, Tex.
Michael S. Smith, Freeport LNG chief executive officer, said his company already has contracts signed last year with Osaska Gas Co. Ltd. and Chubu Electric Power Co. for another 4.4 million tpy total.
"With the first two liquefaction trains of the project fully contracted, we intend to approach the financing markets imminently so that we can begin construction on the initial two-train facility as soon as we receive FERC approval," Smith said.
The project awaits construction authorization from the US Federal Energy Regulatory Commission and authorization from the US Department of Energy to export LNG to non-Free Trade Agreement countries.
DOE is expected to review Freeport LNG's non-FTA export application after a comment period on an LNG export study ends Feb. 25.
Freeport LNG Expansion is a subsidiary of Freeport LNG Development LP.
Statoil to develop Skrugard using floater
Statoil and its partners have chosen a development concept for Skrugard field in the Barents Sea, featuring a floating production unit and a 280-km crude oil export pipeline. The companies will build an onshore oil terminal in Veidnes, Norway.
Skrugard, discovered in April 2011, will share infrastructure with the January 2012 Havis discovery, with both set to be tied to a semi-submersible FPU through a subsea production system in about 380 m of water. Storage at Veidnes will take place in two mountain caverns tied back to a berth for export via tanker. Statoil estimates 50-100 tankers/year will call on the terminal.
Statoil expects Skrugard to come on stream in 2018, with combined production between it and Havis totaling almost 200,000 boe/d. Statoil reports 400-600 million bbl of proven recoverable oil in the combined development.
The company holds a 50% operating share in Skrugard, with partners ENI (30%) and Petoro (20%). Skrugard is 7 km from Havis in Barents Sea blocks 7219/9 and 7220/4,5,7, about 100 km north of Snøhvit, 150 km from Goliat, and nearly 240 km from Melkøya.
Statoil plans to drill nine new Barents Sea prospects in 2013-2014, starting in the Skrugard area, where four new prospects will be drilled (OGJ Online, May 10, 2012).