INDUSTRY BRIEFS

July 6, 1998
EuroGas Inc.

Coalbed methane

EuroGas Inc. and Makyivs'ke Girs'ke Tovarytstvo, a privately held Ukrainian company, formed a 50-50 joint venture-Eurodongas-to explore and develop coalbed methane gas (CBM) in the Donez coal basin in eastern Ukraine. Eurodongas plans to drill three wells to 1,000 m in the license area. EuroGas will fund all capital expenditures and receive a 70% revenue interest until its capital costs are repaid, after which its interest will revert to 50%. The second agreement, reached with state-owned Zahidukrgeologia, covers License 770 in the Lviv-Volyn coal basin of southwestern Ukraine. The agreement calls for EuroGas to drill three CBM gas wells to depths of 400-500 m. Drilling is to commence in August.

Two ARCO units
and China United Coalbed Methane Corp. (Cucmc) signed production-sharing contracts authorizing ARCO to evaluate commercial potential of three coalbed methane prospects in China's Shaanxi Province. The concessions cover 1,930 sq miles in the Hedong coal basin about 370 miles southwest of Beijing and are called Sanjiao, Sanjiao Bei, and Shilou. ARCO China Inc. and ARCO Ordos CBM Ltd. plan to begin an appraisal program this summer. Development would proceed if appraisal efforts are successful, with start-up possible by 2003. Gross development costs of the Phase 1 appraisal program are expected to total $52 million.

Gas marketing

Apache Corp. and Oryx Energy Co. formed an alliance with Cinergy Corp., Cincinnati, following the latter's purchase of Producers Energy Marketing LLC (ProEnergy) from Apache and Oryx. Under the terms of the alliance, Cinergy will continue to market the two companies' North American gas production for 10 years with an option to terminate the agreement after 6 years. Cinergy is paying $42.5 million, subject to adjustments, for ProEnergy. Apache will take its 57% stake primarily in shares of Cinergy's common stock. Oryx will gain about $18 million for its share.

Drilling-production

Amoco Corp. agreed to develop several gas fields in the In Amenas area of southern Algeria with state-owned oil and gas company Sonatrach. Amoco and Sonatrach will drill additional wells in the fields, build the pipeline infrastructure, and install a 700 MMcfd gas processing plant. Amoco plans a $900 million investment over the life of the project, with initial gas production expected in 2002.

Ranger Oil Ltd.,
Calgary, reported start-up of oil production from Kiame field on Block 4 off Angola at a rate of 7,000 b/d. Kiame field proven reserves are estimated at 8.5 million bbl. The field was developed with two horizontal subsea wells tied back to a floating production, storage, and offloading (FPSO) vessel, the Petroleo Nautipa. Total development costs are $44 million (Canadian), and operating costs are estimated at $5/bbl. The FPSO is capable of processing 30,000 b/d of production with storage capacity in excess of 1 million bbl. Ranger operates Block 4 under a production-sharing agreement with Angola's state oil company Sonangol. Ranger is operator with 100% participation in Kiame field.

Burlington Resources Inc.
signed a 3-year contract for Ensco International Inc.'s 7500 design dynamically positioned semisubmersible rig for drilling in the Gulf of Mexico. The new rig will earn $181-187 million during the contract period and will be capable of working in 5,000 ft of water. Burlington has an option to have the rig's water depth capability increased to 7,500 ft. Ensco expects to complete construction of the rig in 2 years.

Pennzoil Venezuela Corp. SA
was to begin operating B2X-68/79 and B2X-70/80 blocks in Venezuela on July 1. Pennzoil and partners acquired the blocks in Venezuela's third marginal fields bidding round in 1997. The blocks are in eastern Lake Maracaibo and cover 10,000 acres each. Reserves in the two fields are estimated at 100-200 million bbl of light, sweet crude. Total investment in the blocks over the 20-year contract is estimated at $550 million. Operator Pennzoil 54% said B2X-68/79 block will initially produce 1,524 b/d from 28 wells. Block partners include Nimir Petroleum Co. Ltd. 18%, Ehcopek Petroleo SA 9%, Cartera de Inversiones Petroleras II CA 9%, and Petroleo y Gas Inversiones CA 10%. For B2X-70/80 block, operator Pennzoil 45% and partners PanCanadian Petroleum Ltd. 45% and Petroleo y Gas 10% plan to initially produce 3,296 b/d of oil from 50 wells.

Chevron Nigeria Ltd.
and partner Nigerian National Petroleum Corp. reported first oil from Dibi oil field in the western Niger Delta. The field is on the OML-49 concession, which lies about 125 miles southeast of Lagos. Operator Chevron 40% said installation of full production facilities for Dibi will be completed in 1999, and the field will be developed with horizontal wells. NNPC holds a 60% interest in the concession.

BHP Petroleum Ltd.
reported first oil from Elang/Kakatua fields in the Timor Gap Zone of Cooperation between Australia and Indonesia. Three production wells were completed and a fourth is in progress. Production is estimated at 33,000 b/d.

Woodside Petroleum Ltd.
confirmed a 25-year old oil discovery on the North West Shelf off Australia. Woodside reported the Egret No. 2 well cut a 40 m column of oil-bearing sands. An appraisal well is planned on the prospect.

Gas hydrates

Australian Geological Survey Organization (AGSO) reported a large gas hydrates resource beneath the Tasman Sea between Australia and New Caledonia. Seismic analysis indicated deposits on the eastern edge of the Lord Howe rise 800 km northeast of Lord Howe Island. AGSO acknowledged that the hydrates are beneath several kilometers of water, and recovery will entail engineering problems that may take a decade to solve.

Refining

Petroplus International Inc., Rotterdam, is negotiating with Chevron UK Ltd. to purchase its Gulf Oil Refining Ltd. unit, with an option to buy the refinery process units and equipment associated with the 115,000 b/d refinery near Milford Haven, Wales. Chevron shut down the refinery in December 1997 as part of its strategy to withdraw from the U.K. downstream oil business (see related story, p. 35). The oil refinery complex has deepwater access and is connected to the U.K.'s Main Line pipeline system. It has 1,600,000 cu m of storage capacity and a cogeneration unit with capacity of 20 MW. Chevron and Gulf Oil Refining will continue to seek buyers for the process units.

Nippon Petroleum Refining Co.
let contract to UOP, Des Plaines, Ill., to improve profitability of the company's 385,000 b/d refinery in Negishi, Japan. UOP will conduct surveys of process operations, utility usage, and equipment reliability.

Petrochemicals

Occidental Petroleum Corp. and Geon Co. signed a nonbinding letter of intent to combine their polyvinyl chloride (PVC) businesses in a joint venture owned 76% by Oxy unit OxyChem and 24% by Geon. The companies expect the alliance to cut costs by $80 million/year. The joint venture will have annual capacity of 4.2 billion lb of PVC, 4.8 billion lb of vinyl chloride monomer (VCM), and 920,000 tons of chlorine. The JV will assume $185 million in lease obligations associated with expansion and improvements to Geon's LaPorte, Tex., VCM plant, and Geon will receive $110 million in cash and/or other assets. Completion of the transaction is expected by Jan. 30, 1999.

Broken Hill Pty. Ltd.
and Incitec Ltd. agreed to undertake a $15 million (Australian) feasibility study for a fertilizer plant near Geelong, Vict. The plant would be jointly owned by the firms, and natural gas feed would be supplied from the undeveloped Minerva gas field in the offshore Otway basin. The plant would produce 455,000 metric tons/year of ammonia, which could be converted to 735,000 tons/year of urea. The study will take 12-18 months to complete. If approved, the plant could be in production sometime in 2002.

ARCO Chemical Technology LP
agreed to license its Superflex technology to M.W. Kellogg Technology Co., a unit of M.W. Kellogg Co., for enhancing propylene production from low-value olefins plant and refinery streams. ARCO's patented process uses a fluid-bed reactor employing a catalyst to crack streams such as mixed C4 and C5 hydrocarbons, coker gasoline, and light FCC gasoline.

BP Chemicals Ltd.
is studying options to expand ethyl acetate production capacity in Europe. BP produces 145,000 metric tons/year at Hull, U.K., and 55,000 tons/year under an agreement with Enichem SpA to use its Porto Marghera plant in Italy. The agreement with Enichem expires in 2000 but is renewable. The study is due to be completed by yearend and is expected to lead to a new plant in the U.K. BP envisions using its proprietary Cativa process, which produces ethyl acetate from ethylene and acetic acid, in the new plant. BP produces 860,000 tons/year of ethylene at Grangemouth, with capacity to be expanded to more than 1 million tons/year, and 670,000 tons/year of acetic acid at Hull. This would be the first application for the Cativa process. BP said global ethyl acetate demand is growing by 4-5%/year.

Pipelines

Williams Cos., Amoco Oil Co., and Enterprise Products Operating LP signed a letter of intent to form Wilprise Pipeline Co. LLC, a joint venture that plans to build a 30-mile, 12-in., 100,000 b/d pipeline that will deliver natural gas liquids from Kenner, La., to storage facilities in Sorrento, La. Kenner is the terminus of Tri-States pipeline, another project involving Williams, Amoco, and Enterprise. Wilprise will be part of a larger NGL transportation, fractionation, and storage system along the Gulf Coast, the companies said. Williams agreed to construct and operate the Wilprise pipeline. Construction is to begin in the fourth quarter and be completed by February 1999.

U.S. Transportation Department's
Research and Special Programs Administration scheduled public workshops to brief the industry, states, and public on a national pipeline mapping system. The workshops will be held July 14-15 in Houston, Sept. 1-2 in Chicago, Sept. 23-24 in San Francisco, and Oct. 28-29 in Washington, D.C.

Exploration

Union Texas Pakistan Inc., Occidental Petroleum (Pakistan) Inc., and Pakistan's state-owned Oil & Gas Development Co. Ltd.(OGDC) reported that the Dabhi North No. 1 wildcat on test flowed 2,640 b/d through a 48/64-in. choke with flowing tubing pressure of 240 psi from the lower Goru formation at 5,988-6,158 ft. The well is in Sindh province in southeastern Pakistan about 125 miles northeast of Karachi. Interest holders are Union Texas and Oxy 30% each, and OGDC 40%.

Pioneer Natural Resources Co.,
Dallas, signed an exploration and production-sharing agreement with Soekor Exploration & Production Pty. Ltd. for Block 9, which covers 3.5 million acres off South Africa in the Bredasdorp basin (OGJ, Feb. 23, 1998, p. 41). Pioneer will earn a 49% interest and operate two sub-blocks totaling 3 million acres that include the southern and western portions of Block 9. Also, Pioneer will earn 20-40% interest in eight sub-blocks totaling 500,000 acres for joint drilling of one well in each of those sub-blocks. Pioneer expects to participate in five to six wells to be drilled by Soekor within several sub-blocks in 1998. Pioneer plans to drill one or more exploration tests within the areas it operates in 1999.

Westech Energy Corp. and Enerco New Zealand Ltd. reported their Awatera No. 1 well in the East Coast basin of New Zealand's North Island flowed 3.1 MMcfd of gas from pay at 1,954-2,021 m. The partners increased the number of wells in their drilling program to six from four, including five wildcats and a Kauhauroa appraisal well. The discovery follows the partner's previous Kauhauroa No. 1 well (OGJ, May 18, 1998, p. 78) and confirms the development potential of the Hawke's Bay region. A 3D seismic survey over Hawke's Bay and the Wairarapa area is planned this summer. The group wants to confirm structures on its PEP 38325, 32326, and 38333 permits.

Oman
signed a production-sharing agreement with Amoco Oman Gas BV for Blocks 15 and 44 covering 2,555 sq km in northern Oman. Operator Amoco 100% will explore for additional gas reserves on the blocks with production targeted for markets in Sohar, in northern Oman. Remaining volumes will supply the northern U.A.E.

Nigeria's government
approved transfer of Nigerian company South Atlantic Petroleum's 40% interest in Block OPL 246 to France's Total 24% and Braspetro, a unit of Brazil's national oil company, 16%. Total is operator of the 500 sq km block that lies 120 km south of the Niger delta in 1,200-1,800 m water depths. A seismic survey and a wildcat well are scheduled for 1999.

Companies

TransCanada PipeLines Ltd., Calgary, took a position in the European midstream gas market with the purchase of Occidental Netherlands Inc., a unit of Occidental Petroleum Corp., for $275 million plus future contingent payments based upon price and reservoir performance for the next 8 years. Occidental Netherlands owns interests in eight gas-producing licenses in the Dutch North Sea and a 38.6% interest in Noordgastransport BV, which owns the gas pipeline system that serves the area. At yearend 1997, these licenses had net proved and probable reserves of 191 bcf of natural gas. Current net production is 90 MMcfd. The transaction is to be completed by mid-July.

Enova Corp.
and Pacific Enterprises Inc., California utility holding companies, completed their $6.2 billion merger creating Sempra Energy, a new San Diego-based energy services holding company (OGJ, Apr. 6, 1998, p. 45). The integration of the operations of Pacific Enterprises and Enova was to be complete by July 1. Principal utility subsidiaries Southern California Gas and San Diego Gas & Electric-which will remain based in Los Angeles and San Diego, respectively-will continue to operate as independent utilities.

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