GENERAL INTEREST — Quick Takes
Houston oilman George P. Mitchell dead at 94
George P. Mitchell, oil businessman and philanthropist, died July 26 at the age of 94, according to a statement from the Mitchell family.
Mitchell, born in Galveston, Tex., was a petroleum engineer with geology training from Texas A&M University and founder of Mitchell Energy & Development Corp. He long believed that natural gas could be extracted from shale—well before anyone else ever thought it possible.
Mitchell, known as the pioneer of hydraulic fracturing and drilling technologies that created the shale gas revolution, was honored with Gas Technology Institute's Lifetime Achievement Award in 2010.
Mitchell is well-known in Houston and beyond for his various philanthropic endeavors. He developed the master-planned community in The Woodlands, Tex., north of Houston, as well as the popular event venue, Cynthia Woods Mitchell Pavillion, which was named after his wife, who passed away in 2009.
Republicans ask about EPA fracing investigations
The US House Energy and Commerce Committee's Republican leaders asked US Environmental Protection Agency Administrator Gina McCarthy how site-specific water quality investigations in Pennsylvania, Wyoming, and Texas are shaping its continuing hydraulic fracturing study.
The agency announced last month that it was withdrawing from its 4-year study of well-water contamination in Pavillion, Wyo., the lawmakers said in a July 30 letter to McCarthy. This withdrawal followed similar retreats in Parker County, Tex., and Dimock, Pa., they noted in an accompanying statement.
"In all three cases, EPA asserted its jurisdiction to investigate alleged water contamination only to later abandon the investigation and let the states take control," the committee Republicans said.
They said they want to better understand EPA's decisions "to insert itself and then later close these inquiries, how these cases are informing the broader hydraulic fracturing study, and the current status of the comprehensive study."
The letter from committee Chairman Fred Upton (Mich.), Chairman Emeritus Joe Barton (Tex.), Vice-Chairman Marsha Blackburn (Tenn.), and the chairmen of three of the committee's subcommittees requested answers to 13 questions by Aug. 13.
EIA: NGL prices down since early 2012
Daily spot prices for natural gas liquids, including ethane, propane, normal butane, isobutane, and natural gasoline, have moderated since early 2012, according to US Energy Information Administration. The moderation in NGL prices was attributed to "a combination of ample supply, flat or moderating demand, export constraints, and domestic infrastructure constraints," EIA said.
Ethane prices averaged 27¢/gal in this year's first half, down more than 45% from the first 6 months of 2012. Net ethane production was down 9% through April vs. the same period in 2012, due to low ethane prices and the corresponding "ethane rejection" phenomenon in gas processing. The US does not currently export any ethane.
Propane spot prices have been relatively flat since July 2012, averaging at about 89¢/gal for second-half 2012 as well as this year's first half. Propane exports, primarily going to Latin America, are up 42% in this year's first 4 months vs. the same period last year. The increase in exports mitigated the downward price effect bought by production, which was up 8% through April this year vs. the first four months of 2012.
Normal butane and isobutene spot prices were down 22% and 23%, respectively, in this year's first half compared with first-half 2012, due to lower-than-usual gasoline demand. Production levels of both products were up 9% and 12%, respectively, for this year's first 4 months compared with the same period in 2012.
Natural gasoline prices averaged $2.14/gal in this year's first half, down 8% from $2.34/gal in the same period last year. Production is up 8% so far compared with first-half 2012.
CNPC completes buy of stake off Mozambique
China National Petroleum Corp. has completed its purchase from Eni SPA of a 20% indirect participation in Area 4 offshore Mozambique, where the Italian company is considering development of its Mamba Complex natural gas discoveries (OGJ Online, Mar. 14, 2013).
CNPC acquired the interest through the purchase for $4.21 billion of a 28.57% stake in Eni East Africa, which held a 70% interest in Area 4 before the deal.
Eni remains the indirect owner of the 50% participation in Area 4 owned by Eni East Africa. Other interests in the block are Empresa Nacional de Hidrocarbonetos de Mozambique, Kogas, and Galp Energia, 10% each.
Eni estimates gas in place at the Mamba Complex at 75 tcf (OGJ Online, Feb. 26, 2013). Under the purchase agreement, CNPC and Eni also will jointly study the Rongchang shale gas in the Sichuan basin of China.
Canadian Natural Resources to buy Barrick Energy
Canadian Natural Resources Ltd. agreed to acquire Barrick Energy Inc., a subsidiary of Barrick Gold Corp., to acquire BEI's assets and light oil production in Alberta, including certain lands at Nipisi, for a total price of $223 million (Can).
Terms call for CNR to pay $173 million and a $50 million royalty, Barrick of Toronto said.
Separately, Barrick also plans to sell some assets to Venturion Oil Ltd. for $59 million and to Whitecap Resources Inc. for about $174 million, the mining company said.
The current production, before royalties, from the working interests acquired by CNR, is 4,200 b/d of light crude oil and natural gas liquids along with 4.4 MMcfd of natural gas. The transaction includes properties in Worsley, Puskwa, Sturgeon Lake, Retlaw, and Red Earth.
Barrick also is selling 92,160 net acres of unproved land at Nipisi to CNR. An independent engineering report estimates that acreage contains 38.6 million of contingent resource (based on technology under development), the companies said.
CNR Pres. Steve Laut said, "This acquisition further strengthens Canadian Natural's light oil asset and production base in key operating areas and contributes to the light oil balance in the company's diversified portfolio."
Exploration & Development — Quick Takes
Alberta cancels leases near Fort McMurray
To make room for urban sprawl stimulated by oil sands development, the government of Alberta is cancelling 32 oil sands leases held by 10 companies around crowded Fort McMurray.
"The city, surrounded by crown land, needs a larger urban land base to accommodate new residential, commercial, and light industrial growth," explains a backgrounder issued by Alberta Energy.
The province has allocated more than 55,000 acres in an area known as the Urban Development Subregion (UDS) for sale to the Regional Municipality of Wood Buffalo, allowing Fort McMurray to grow to the east, south, and west.
The UDS covers more than twice the current area of the city. The government expects it to meet growth needs for more than 25 years. Holders of the canceled leases will be compensated, Alberta Energy said.
Companies holding the affected leases are Value Creation Inc., Alberta Oil Sands Inc., Cenovus Energy Inc., Cavalier Land Ltd., E-T Energy Ltd., Grizzly Oil Sands ULC, Koch Oil Sands Operating ULC, Laricina Energy Ltd., Scott Land & Lease Ltd., and Suncor Energy Inc.
BG-Ophir hit gas discovery offshore Tanzania
BG Group and Ophir Energy PLC reported a ninth gas discovery in Tanzania at the Mkizi-1 well on offshore Block 1.
The well encountered gas pay in three reservoir intervals in a stacked channel complex of Tertiary age. Net pay totaled 33 m, and reservoir quality was high with all three intervals exhibiting excellent porosities and permeabilities.
Estimates of the mean recoverable resource from the discovery are in line with Ophir's predrill expectations of 600 bcf.
Mkizi-1 is in 1,301 m of water between the pair's Mzia and Jodari discoveries on Block 1. BG Group is operator with 60% interest and Ophir has 40% of blocks 1, 3, and 4.
The Deepsea Metro I drillship will drill two appraisal wells, including a drillstem test, at the Pweza discovery on Block 4. This will be the first DST of the series of Block 4 discoveries, following on from the successful tests in Block 1 on Mzia and Jodari.
Ophir Energy said, "Appraisal of Pweza will look to further underpin volumes in Block 4 which were upgraded with the recent success of the Ngisi drilling program, while the DST is the final stage in firming up the commerciality of the resource across the Chewa-Pweza-Ngisi hub."
CNOOC adds two Bohai oil, gas discoveries
CNOOC Ltd. said it found oil and gas at the Bozhong 8-4 well and oil at the Kenli 10-4 discovery wells in Bohai Gulf.
Bozhong 8-4, in the west slope of the Bozhong sag with an average 28 m of water, went to 1,962 m and encountered oil pay zones and gas reservoir with a total thickness of about 50 m and 11 m, respectively. The company tested the well at 660 b/d of oil.
Kenli 10-4 is in 15 m of water in the south slope of Laizhou Bay sag. Drilled to 2,395 m, it encountered oil pay zones with a total thickness of about 45 m. During the test period, the oil production of the well was around 2,800 b/d.
UK North Sea Lacewing gas find under evaluation
A group led by ConocoPhillips will conduct postwell evaluations to ascertain whether its Lacewing gas discovery on Block 23/22b in the UK Central North Sea can be rendered commercial.
The 23/22b-6Z exploratory well, which targeted the Lacewing prospect on the eastern margins of the UK Central North Sea, reached a total depth of 14,370 ft measured depth and encountered a gas column thicker than 100 ft.
The well achieved its predrill objectives by evaluating the Triassic interval which contained reservoir quality sands. The well is being plugged and abandoned as a hydrocarbon discovery.
ConocoPhillips is operator with 47.3% interest, BG Group 32.5%, and Premier Oil PLC has 20.2%.
Premier said it recognized the high-risk nature of the prospect and managed its capital exposure to this opportunity by farming down prior to drilling in return for a partial carry on the well.
Drilling & Production — Quick Takes
US drilling activity continues to rise
According to Barclay's Drilling Permit Monthly July 2013, onshore drilling permits for the US 30 states that Barclays monitors increased 4% in June, following a 2.7% increase in May and a 7.9% decrease in April. Utah, Texas, and Kansas saw the largest changes in permit activity, with gains of 121 permits, 83 permits, and 68 permits, respectively.
"The gradual increase in permit activity will lead to a continued rise in drilling activity, with an acceleration likely in [this year's second half]," Barclays said.
In June, the US Bureau of Ocean Energy Management issued 37 permits for floating rigs in the US Gulf of Mexico, compared with 36 permits announced in May and 45 permits in April. Of the 37 offshore permits issued in June, 20 permits were for exploration and 17 were for development.
Exploration locations in the gulf, including both shallow and deep water, stand at 35, up from 33 at yearend 2012 and up from 28 at the comparable period last year, according to IHS-Petrodata.
"The continued strong permitting environment in the US Gulf of Mexico suggests a continued improvement in the deepwater rig count, especially in light of recent, very successful discovery announcements in the lower tertiary. We expect this to persist in the coming months," Barclays said.
A total of 41 shallow-water permits (3 for new wells) in the US Gulf of Mexico were issued in June, down from 49 in May (10 for new wells) and up from 37 in April (4 for new wells).
Gas output builds in Pennsylvania-West Virginia
Southern Pennsylvania and adjacent West Virginia counties have sustained a notable increase in natural gas production since early 2012, said the US Energy Information Administration.
Operators have increasingly shifted their attention to more liquids-rich shale gas in the wet gas regions of the two states, but production from dry gas areas in this part of the Appalachian basin has benefited from the addition of pipelines and gas processing plants, improving takeaway capacity from the gas fields, EIA noted.
From July to September 2012, three projects expanded production capacity by nearly 1 bcfd.
Equitrans placed its Sunrise project into full service in July 2012 with capacity to transport 310 MMcfd from Wetzel County, WV, to Greene County, Pa., and providing access to five separate interconnections serving Mid-Atlantic consumers.
Dominion Transmission initiated service in September 2012 from the four new compressor stations and 110 miles of new pipeline built for its Appalachian Gateway project, providing capacity of 470 MMcfd of gas from producing areas in both states to an interconnect with the Texas Eastern Transmission pipeline.
Equitrans placed in service its newly built 200 MMcfd Blacksville compressor station in Monongalia County, W.Va., in the same month.
Gas production in West Virginia and southern Pennsylvania has risen as these expansions provided increased access to markets, EIA said. Production in West Virginia averaged 2.34 bcfd through mid-July 2013, compared with 1.55 bcfd through mid-July 2012, a 51% increase. Production in the nearby dry regions of southern Pennsylvania doubled during the period to 1.73 bcfd from 0.86 bcfd.
Further growth in West Virginia is expected as Texas Eastern announced plans to build a 390 MMcfd pipeline lateral to its mainline from Dominion's 200 MMcfd Natrium processing plant in West Virginia by yearend 2014. Planned processing plant expansions through the end of 2013 could also add greatly to the state's processing capacity, which totaled 850 MMcfd in 2012, EIA added.
RIL, ONGC eye facilities-sharing off India
Privately owned Reliance Industries Ltd. and state-owned Oil & Natural Gas Corp. have signed a memorandum of understanding to explore sharing by ONGC of RIL's production facilities offshore eastern India.
The area includes RIL's deepwater KG-D6 fields, where first-quarter production totals were 500,000 bbl of crude oil, down 41% from the year-earlier quarter; 60,000 bbl of condensate, down 58%; and 49.2 bcf of natural gas, down 53%.
RIL attributes the production declines to geologic complexity, natural declines, and higher-than-expected water encroachment. It reported another KG-D6 discovery, which it calls D55, earlier this year (OGJ Online, May 24, 2013).
ONGC has blocks in the area. In an announcement about the MOU with RIL it said deep water "constitutes a major component" of its plans to make "substantial investment over a period of the next 5 years" in exploration and development.
PROCESSING — Quick Takes
Foster Wheeler gets Vietnam complex work
Nghi Son Refinery & Petrochemical LLC has let a project management and consultancy services contract to a Foster Wheeler subsidiary for its 200,000-b/d refinery and petrochemical complex in Thanh Hoa Province, Vietnam (OGJ Online, June 7, 2013).
The refinery, construction of which is to begin soon, will process Kuwaiti crude oil. Foster Wheeler's Global Engineering and Construction Group will manage and administer the engineering, procurement, and construction contractor consortium through completion of performance testing.
The complex is to begin commercial operation in 2017.
The project is a joint venture of Vietnam Oil & Gas Group, Idemitsu Kosan Co. Ltd., Kuwait Petroleum Europe BV, and Mitsui Chemicals Inc.
Commercial cellulosic ethanol output starts
INEOS Bio said it is producing cellulosic ethanol at commercial scale at a plant in Vero Beach, Fla., and will make its first shipment in August.
The plant has capacity to produce 8 million gal/year of ethanol equivalent with a process that converts biomass into syngas for fermentation into ethanol with naturally occurring bacteria.
Refiners and other fuel suppliers must sell ethanol and other fuels made from cellulose at rates set by law and adjusted yearly by the Environmental Protection Agency.
At the beginning of 2013, EPA identified the INEOS Bio plant as one of two US facilities likely to start commercial production of cellulosic biofuels this year.
The other facility, operated by KiOR Inc. at Columbus, Miss., also is in start-up. It uses a process similar to fluid catalytic cracking to convert biomass into "biocrude" that is upgraded into gasoline, diesel, and jet fuel. Capacity is about 11 million gal/year.
Dow Chemical lets contract for ethane plant
Dow Chemical Co. has let a contract to a subsidiary of Foster Wheeler's Global Engineering & Construction Group for the engineering, procurement, and construction of its LA-3 Crack More Ethane project at its petrochemical plant in Plaquemine Parrish, La.
The objective of the project is to improve plant ethane flexibility to take advantage of low-cost feedstock. Scope will include brownfield additions and retrofit modifications to the plant, Dow Chemical said.
The contract value was not disclosed nor were dates of project start-up or completion.
TRANSPORTATION — Quick Takes
Angola LNG delivers first cargo
Angola LNG has delivered its first cargo to Petroleo Brasileiro SA's floating regasification terminal in Guanabara Bay, Rio de Janeiro. The cargo left Soyo in June aboard the 160,000-cu m SS Sonangol Sambizanga.
At full production, the $10 billion export plant will be able to ship more than 70 cargoes/year, supplying 5.2 million tonnes/year of LNG, in addition to propane, butane, and condensate, Angola LNG said.
Several master LNG sale and purchase agreements have been executed with energy companies across the world. More agreements are being negotiated.
Angola LNG is a partnership of Angola's state company Sonangol 22.8%, Chevron Corp. 36.4%, BP PLC 13.6%, Eni SPA 13.6%, and Total SA 13.6%. It will gather and processes gas to produce LNG and natural gas liquids over an expected life of at least 30 years.
Working gas storage capacity up 2% in 2012
Working natural gas storage capacity increased by 2% in the Lower 48 states between November 2011 and November 2012, according to the US Energy Information Administration's Underground Working Natural Gas Storage Capacity.
Most of the largest year-over-year increases occurred in existing salt domes in the producing region, particularly Mississippi and Louisiana.
Four new storage sites went into operation during the year, three in the West region and one in the producing region.
According to EIA's compilation of planned storage projects, another 71 bcf of design capacity could be added in 2013 from projects currently under construction.
This rough estimate includes 34 bcf in the producing salt and 37 bcf in the West region. There were no reports of 2013 capacity to be added in the East. EIA said that readily available volumes of Marcellus shale gas might have influenced the lack of planned East-region growth.
EIA uses two measures of storage capacity and both increased by similar amounts:
• Demonstrated maximum working gas volume increased 1.8% to 4,265 bcf.
• Working gas design capacity increased 2% to 4,575 bcf.
Demonstrated maximum working gas volume differs from design capacity in that it is an operational measure and not an engineering measure.
Maximum demonstrated working gas volume measures the highest level of working gas reported at each storage facility over the previous 5 years, and provides a practical measure of full storage.
BLM seeks comments on right-of-way EA in Moab
The US Bureau of Land Management's Moab, Utah, field office is seeking public comments on an environmental assessment (EA) for the proposed Dead Horse natural gas lateral pipeline project.
The 24-mile line would transport gas now being flared in the Big Flat area to a processing facility near the Big Hills road, it said in a July 26 notice.
It said Fidelity Oil & Gas would construct the pipeline, which would parallel Utah State Highway 313 and the Dubinky Well Road.
The draft EA analyzes potential environmental impacts from constructing the gas lateral pipeline, the notice indicated. Comments will be accepted through Aug. 26, it said.
The document is accessible online through the Utah BLM's Environmental Notification Board by typing Dead Horse in the Project Name portion of the advanced search field, the notice said.