GENERAL INTEREST — Quick Takes
Canadian government plans to raise liability cap
The Canadian government plans to increase the liability cap for companies operating in Atlantic Canada's offshore to $1 billion, up from the current $30 million, under proposed legislation slated to be introduced later this year, Natural Resources Minister Joe Oliver said.
Speaking in Halifax last month, Oliver also announced that the anticipated legislation will call for the liability cap in the Arctic to be increased to $1 billion from the current $40 million.
Oliver said Canada wants to align its accountability regime with current international standards in case of an offshore oil spill.
Forest Oil looking to sell Texas Panhandle assets
Forest Oil Corp. of Denver said it is looking to sell its Texas Panhandle oil and gas assets in order to better concentrate on oil projects in the South Texas Eagle Ford shale.
After receiving unsolicited proposals from parties interested in the Texas Panhandle assets, Forest's board hired J.P. Morgan Securities LLC to assist in marketing efforts.
Patrick R. McDonald, Forest Oil president and chief executive officer, said the sale of the Texas Panhandle assets, if completed, would help the company accelerate development of its South Texas projects and reduce debt.
So far Forest Oil has focused its Eagle Ford drilling in Gonzales County, Tex.
Forest plans to operate up to two rigs in the shale during 2013 and believes that it can hold a core development position of 40,000 net acres over the next several years.
In addition, Forest Oil has 111,000 net acres in East Texas which is largely held by production.
BSEE confirms well sealed with temporary plug
The US Bureau of Safety and Environmental Enforcement confirmed Energy Resource Technology LLC (ERT) temporarily sealed Well No. 2 using a temporary set bridge plug.
The tool isolated the lower part of the well. More work is needed to permanently plug and abandon the well.
BSEE has overseen ERT's work since the loss of well control on Ship Shoal Block 225 Platform B Well No. 2 (OGJ Online, July 10, 2010).
The well, which was flowing natural gas, is 74 miles southwest of Port Fourchon, La. The platform lies in 146 ft of water.
A BSEE overflight on July 13 confirmed that no sheen was present. The well had been flowing gas, which was stopped July 11 by pumping drilling fluids into the well.
Exploration & Development — Quick Takes
Apache's Bianchi wildcat finds gas off W. Australia
Apache Energy has made a natural gas discovery with its Bianchi-1 wildcat, which was drilled in retention lease WA-49-R offshore Western Australia.
The find is within a separate fault block down-dip and 6 km northeast of the company's April 2011 Zola-1 gas discovery and about 11 km north of the earlier Antelope find.
Wireline logging and pressure testing confirmed 112 m net gas pay in Bianchi-1 in the Triassic-age Mungaroo formation.
The well lies in 240 m of water.
Bianchi adds to the prospectivity of other leads in the lease as well as the adjoining Santos Ltd.-operated exploration permit WA-290-P.
Apache has 30.25% of both permits, Santos has 24.75%, OMV Australia has 20%, JX Nippon 15%, and Tap Oil of Australia 10%.
BP to acquire deepwater stakes offshore Brazil
BP PLC has agreed with Petroleo Brasileiro SA (Petrobras) to farm in to five deepwater exploration and production concessions operated by the Brazilian company in the Potiguar basin.
Subject to regulatory approvals, BP Energy do Brasil Ltda. will acquire 30% interests in blocks POT-M-663 and POT-M-760 (contract BM-POT-16) and 40% interests in blocks POT-M-665, POT-M-853, and POT-M-855 (contract BM-POT-17).
The blocks are 40-110 km offshore Rio Grande do Norte and Ceara states in 50-2,100 m of water.
Interests in the BM-POT-16 blocks will be Petrobras and BP, 30% each, and Petrogal Brasil SA and IBV, 20% each.
BM-POT-17 interests will be Petrobras and BP, 40% each, and Petrogal Brasil, 20%.
The contracts were awarded in Brazil's seventh round in 2005.
CNOOC, BP sign PSC in South China Sea
China's CNOOC Group has signed a production-sharing contract with BP PLC to jointly explore and develop deepwater Block 54/11 in Pearl River Mouth basin in eastern South China Sea.
Block 54/11 covers 4,586 sq km in water ranging 370 m to 2,300 m deep.
The PSC calls for BP to pay all expenses during the exploration period. Other financial terms were not immediately available.
BP already has minority stakes in two deepwater blocks in the South China Sea, both in the exploration stage. BP's existing deepwater interests are in Blocks 43/11 and 42/05.
CNOOC has the right to participate in up to 51% working interest in any commercial discoveries in the block. CNOOC will act as the operator.
Cedar Point field gets further drilling
Linc Energy Ltd., Brisbane, has completed a well in Cedar Point field in Galveston Bay 28 miles southeast of Houston and is drilling and completing two more wells.
The completed well has an initial production rate of 400 b/d of oil and 3.6 MMcfd of gas from an undisclosed formation.
Linc Energy has identified 10 locations in the field from recently reprocessed 3D seismic.
Historical average cumulative production in Cedar Point field has been 600,000 bbl/well of oil equivalent.
Linc Energy anticipates that the Cedar Point reservoirs will be capable of sustaining excellent production rates over several years in contrast to higher declines at Barbers Hill field due to the ten-fold increase in the size of each completed reservoir.
The 10 identified drilling and recompletion locations have a combined mean reserve potential of more than 4.1 million bbl, Linc Energy said. The company will continue to evaluate the Cedar Point data as well as similar data in adjacent Atkinson Island field.
Linc Energy also said its team has identified some exciting subsalt opportunities on its large Gulf Coast acreage position and that it will provide an update in coming months.
Cedar Point field, in 2-3 m of water in the heart of the Miocene, Frio, and Vicksburg oil trends, has been producing for more than 75 years. The field consists of a deep-seated salt dome underlying prolific oil and gas reservoirs.
Discovered in 1938 by the Standard Oil Co. of Texas, Cedar Point has produced more than 20 million bbl of oil and 28 bcf of gas.
The Frio Deep-Seated Salt Dome trend has the second highest estimated ultimate recovery of the 32 most prolific plays in Texas, Linc Energy said.
Drilling & Production — Quick Takes
Study notes cost hike in deepwater gulf
The average unit operating cost of oil and gas production in the deepwater Gulf of Mexico increased by about 45% during 2010-12 but, at less than $5/boe, still provided "highly attractive" oil netbacks, according to a study by Ziff Energy Group.
The cost increase resulted from a combination of operating-cost spending increases and, to a lesser extent, production declines, said the ninth edition of Ziff Energy's Gulf Of Mexico Deepwater Improving Field Performance.
The study evaluated 24 deepwater producing assets owned by six operators, which collectively account for 736,000 boe/d of deepwater gulf production and $887 million in operating expense. It reported average operating costs of $3.37/boe in 2010, $4.97/boe in 2011, and $4.83/boe in 2012.
The study found "a surprisingly wide range of uptime performance," Ziff Energy said. "The value of the unplanned deferment ($1.7 billion) was 1.9 times the total [operating expenditure] ($0.9 billion) of the assets" in 2012, it said.
The study evaluated production deferments from planned losses, unplanned facility failures, unplanned well failures, unplanned reservoir and other problems, weather, midstream and market factors, and other external causes.
"Weather was a big factor in 2012," it said.
Shell's Olympus TPL departs for gulf
Shell to shut in Auger TLP, complete tie-in
Shell Offshore Inc. reported it will temporarily halt operations at its Auger tension-leg platform (TLP) in the deepwater Gulf of Mexico to complete tie-in work to the Cardamom oil and gas field subsea development. The TLP is expected to restart in the fourth quarter.
Shell took a multibillion dollar investment decision to develop Cardamom field near its Auger TLP in mid-2011 (OGJ Online, June 9, 2011).
Cardamom, which lies in more than 2,720 ft of water on Garden Banks Block 427 about 225 miles southwest of New Orleans, is expected to produced 50,000 boe/d at peak output and recover an eventual 140 million boe from a reservoir deeper than 25,000 ft true vertical depth. Shell holds 100% interest in Cardamom.
The completed subsea system will include five well expandable manifolds, a dual 8-in. flowline, and eight well umbilicals.
Retrofit modifications to the Auger TLP will include additional subsea receiving equipment, upgrade of an existing process train, and weight mitigation. These upgrades are expected to increase the liquid handling, cooling, and production capacities of the host facility, Shell said.
Shell said the Cardamom discovery resulted through the use of "advanced seismic imaging and extended-reach drilling" and that since the discovery, "further advancements in seismic have allowed Shell to see beyond a subsurface salt layer to estimate Cardamom's full resource potential."
Shell said the Cardamom well set records 3 years ago, for subsurface length and depth. Shell drilled the Cardamom well from the Auger TLP; the well has a measured depth of 31,634 ft and a horizontal reach of more than 15,000 ft.
John Hollowell, executive vice-president for deep water, Shell Upstream Americas, said, "Cardamom is a great example of using existing infrastructure to increase oil and gas production in a less capital intensive way."
Chevron, YPF sign agreement for Vaca Muerta shale
A subsidiary of Chevron Corp. signed an agreement with affiliates of Argentina's YPF SA that will move forward shale oil and gas resource development from the Vaca Muerta formation in Argentina's Neuquen province.
It's the first time a major oil company has made a significant investment in Argentina since President Cristina Fernandez de Kirchner expropriated YPF SA. Chevron is believed to have negotiated for about 7 months on the agreement.
The Chevron-YPF agreement calls for $1.24 billion in spending during the first phase of development in the Loma La Lata Norte and Loma Campana areas.
YPF was a state-run company until it was privatized in 1999. Argentina's government renationalized YPF by expropriating 51% of it from Repsol YPF SA, which helds 57% of the company (OGJ Online, Apr. 26, 2012).
Kirchner has said YPF underinvested in exploration and production, forcing Argentina to become a net energy importer in 2011 as a result of declining oil and gas production.
YPF wants to again become an oil and gas exporter, and it has said the development of Vaca Muerta could help reach that goal.
The Chevron-YPF pilot program will include the drilling of 100 wells in a 5,000-acre tract, part of a 96,000-acre concession, Chevron reported.
Currently, Loma La Lata field is producing more than 10,000 boe/d. Chevron Argentina produces an average of 21,000 b/d of oil and 4 MMcfd of natural gas in the Neuquen basin, where it holds operated interests ranging 18.8-100%.
Oxy advances field development offshore Qatar
Occidental Petroleum of Qatar Ltd. and Qatar Petroleum (QP) have signed an agreement on the Phase 5 field development plan (FDP) for the Idd El Shargi North Dome (ISND) field offshore Qatar.
The ISND Phase 5 FDP work, which has already begun, will continue to sustain oil production levels at 100,000 b/d through the next 6 years. The development activities are expected to constitute an aggregate investment of more than $3 billion, Oxy Qatar reported.
The Phase 5 FDP will entail the drilling more than 200 production, water injection, and water source wells, as well as the installation of associated facilities required to support the additional wells. Added facilities will include minimum facilities platforms, wellhead jackets, fluid processing equipment, and pipeline debottlenecking and water source projects.
In addition, pilot studies to support produced water reinjection and enhanced oil recovery projects will be implemented, Oxy Qatar said.
The ISND Phase 5 FDP includes specific activities identified from upgraded reservoir simulation models to implement and improve water-flooding practices in all oil-producing reservoirs.
The ISND Phase 5 FDP has been prepared in close cooperation between Oxy Qatar and QP as part of the continued development of ISND under the development and production-sharing agreement between the Qatari government and Oxy Qatar, which was entered into in July 1994.
Oxy Qatar, under separate contractual arrangements, also operates the Idd El Shargi South Dome field and the Al Rayyan field on Block 12, and is a partner in Dolphin Energy.
Oxy Qatar is a wholly owned subsidiary of Occidental Petroleum Corp.
Argentina Tierra del Fuego multiyear drilling nears
A group led by operator Roch SA plans a multiwall, multiyear drilling program on the Las Violetas exploitation concession in southern Argentina's Tierra del Fuego Province.
The partners are reviewing rig options and negotiating to obtain and import a drilling rig to Tierra del Fuego to begin work in the fourth quarter, said Calgary-based Crown Point Energy Inc., which owns a 25.78% interest in the Las Violetas block.
An initial eight-well is part of a larger campaign to exploit the predominantly gas-charged Cretaceous Springhill sandstones on several concessions, Las Violetas in particular.
The initial eight-well phase on Las Violetas is a low-risk development program. Drilling and casing time including rig up and rig down is expected to be 20 days/well, and completion and tie-in will take a further 30 days. The drillsites are fully defined with 3D seismic and are either infill locations or low-risk pool stepouts.
The partners also have identified a number of high reward exploration and exploitation locations on Las Violetas, and if any future drilling activities at these locations is successful, it could further add to the present drilling inventory.
Any production increases likely will qualify for improved gas pricing under the New Gas Incentive Program announced by the Argentine government in January. Crown Point has applied for participation in the program, and the Argentine government has extended the negotiation period until Aug. 15.
The Roch-led group has received all necessary governmental approvals for 10-year extensions of the Las Violetas, Rio Cullen, and Angostura exploitation concessions.
Las Violetas carries a $46.9 million, 18-well minimum concession life total development investment commitment, a $5 million, 60-month minimum total exploration investment commitment.
Rio Cullen and Angostura commitments are $3.3 million and $3.8 million, respectively, which in both cases include seismic and drilling, to be expended over 24 months.
PROCESSING — Quick Takes
Capacity at operable US refineries increases
As of Jan. 1, the 143 operable refineries in the US had a total crude distillation capacity of 17.8 million b/cd, up 2.9% from a year ago, according to data from the US Energy Information Administration.
The increase in capacity is attributable mostly to Motiva Enterprises' expansion of its Port Arthur, Tex., refinery and the restart of the Trainer, Pa., refinery, which was formerly owned by Phillips 66 and is now owned by Delta Airlines subsidiary Monroe Energy.
Motiva's Port Arthur facility, owned 50:50 by Royal Dutch Shell PLC and a unit of Saudi Aramco, is the largest refinery in the US with 600,250 b/d crude distillation capacity. According to Oil & Gas Journal's annual refining survey, it is one of the ten largest refineries worldwide by crude distillation capacity.
Atlas to build more gas processing in West Texas
Atlas Pipeline Partners LP, Pittsburgh, Pa., will build a 200-MMcfd cryogenic processing plant in West Texas to handle rapidly increasing Permian basin production. The Edward plant will have initial capacity of 100 MMcfd, and Atlas expects it to be in service in second-half 2014.
The company noted that, as production increases behind its system, additional compression and refrigeration equipment will increase the plant's capacity to 200 MMcfd and come into service "as needed."
Completion of the full plant will increase Atlas' processing capacity on its WestTX system to 655 MMcfd from 455 MMcfd, expanding beyond the 200-MMcfd Driver plant addition that was brought into service in April.
Atlas projects the cost for the Edward plant at $100-120 million for both phases with most of the plant's capital expenditures in 2013-14. Additional future capital expenditures will be for expected compression and well connection costs as needed.
Atlas Pipeline's partner on the WestTX system, Pioneer Natural Resources Inc., which owns a 27.2% interest in the plant, will "participate in the project's costs and cash flows and will anchor the production growth behind the expansion," complemented by third-party producer customers.
Earlier this year, Atlas agreed to buy Eagle Ford shale gas gathering and processing company Teak Midstream LLC. Assets included Teak's 200-MMcfd Silver Oak I cryogenic processing plant, 265 miles of 20-24-in. OD high-pressure rich gas gathering lines with 750 MMcfd, and a second 200-MMcfd cryogenic processing plant Silver Oak II, expected to begin operating in first-quarter 2014.
At the time, Atlas said it expected further expansion of the acquired Eagle Ford assets beyond 2014, including the potential to add a third 200 MMcfd processing plant and additional gathering pipelines (OGJ Online, Apr. 17, 2013).
In 2012, Atlas acquired Cardinal Midstream LLC, active in the Woodford Arkoma basin (OGJ Online, Dec. 5, 2012).
UK's biggest bioethanol plant starts up
A joint venture of BP PLC, DuPont, and AB Sugar has started up an ethanol plant at Hull, UK, that it calls the country's "biggest bioethanol producer and largest single-source supplier of animal feed."
At full capacity, the £350-million Vivergo facility, using animal feed-grade wheat as feedstock, will produce 420 million l./year of ethanol for blending into gasoline and 500,000 tonnes/year of animal feed.
Total taps KBR for Antwerp deasphalting unit
Total will use KBR's proprietary ROSE solvent deasphalting technology in its upgrade of the 338,000-b/d refinery at Antwerp, Belgium (OGJ Online, May 23, 2013).
The ROSE unit, due on stream in early 2016, will split 48,000 b/sd of residue from a mix of crude oils into deasphalted oil and asphaltene.
The deasphalted oil will feed a new mild hycrocracking unit. The aslphaltene will be blended into fuel oil.