Luthi nominated to MMS director post
US Sec. of the Interior Dirk A. Kempthorne has nominated Randall Luthi, currently deputy director of the US Fish and Wildlife Service, as director of the US Minerals Management Service. He will succeed Johnnie Burton, who resigned after 5 years on May 31.
Luthi formerly served as speaker and majority leader in Wyoming’s House of Representatives, where he formulated state budgets that relied heavily on oil and gas royalties and severance taxes. He also was a senior attorney for environmental regulations in the National Oceanic and Atmospheric Administration, an attorney at DOI’s solicitor’s office, and a partner in the Thayne, Wyo., law firm of Luthi & Voyles before his FWS appointment in February. Luthi has served as a legislative member of the Energy Council, an organization of lawmakers from energy-producing states and provinces and private energy-related industries.
Two entities charged in gas price manipulation
The US Commodity Futures Trading Commission has charged hedge fund Amaranth Advisors and its former chief energy trader, Brian Hunter, with attempting to manipulate natural gas prices.
The two allegedly attempted to manipulate prices of gas futures traded on the New York Mercantile Exchange on Feb. 24 and Apr. 26, 2006, CFTC said in charges filed in the US District Court for the Southern District of New York.
The dates were the final trading days for the following months’ NYMEX gas futures contracts, CFTC said. The settlement price of each NYMEX gas contract is determined by the volume weighted average of executed trades during 2-2:30 p.m. on such “expiry days.”
Amaranth and Hunter, Calgary, allegedly acquired more than 3,000 NYMEX gas futures contracts in advance of this closing range on the expiry days, which they planned to, and for the most part did, sell during the closing range, CFTC said.
CFTC also alleged that the defendants held large short positions in financially settled gas swaps, primarily on the Intercontinental Exchange (ICE), where swap settlement prices are determined by the NYMEX gas futures settlement price. They allegedly intended to lower prices on the NYMEX gas futures contracts to favor their larger swap positions on ICE and elsewhere, CFTC said.
It also charged that Amaranth Advisors made false statements to NYMEX to cover their activities.
In September 2006, Amaranth lost more than $6 billion, or 65% of its reported assets at the end of August, after prices for gas, in which it had taken an unusually large position, plunged due to high storage levels and the absence of hurricane-related and other disruptions. The hedge fund transferred its energy portfolio to a third party, reportedly at a deep discount, when it was unable to meet margin calls and other payment demands.
Caswell nomination as BLM chief hits snag
Sen. Ken Salazar (D-Colo.) has placed a hold on James L. Caswell’s nomination to be Bureau of Land Management director after the Senate Energy and Natural Resources Committee voted to send the nomination to the floor (OGJ Online, July 23, 2007).
In a meeting with US Interior Secretary Dirk A. Kempthorne, Salazar said he would not let Caswell’s nomination move forward until he received commitments from BLM and the Department of Interior to cooperate with Colorado and communities on its Western Slope in development of public lands, to create sufficient opportunities for the state and its communities to comment on oil shale development, and to delay any issuance by BLM of leases on the Roan Plateau until Colorado has had time to consider options on drilling.
EU, Morocco sign energy cooperation declaration
The EU Commission and Morocco-an important transit country for Algeria’s natural gas supplies to Europe-have signed a joint declaration on priorities for cooperation in the energy sector. Spain and Portugal receive natural gas from Algeria via a gas line that crosses Morocco and the Mediterranean Sea.
The joint declaration, signed in Brussels on July 23, provides “a clear political framework” with three priorities for cooperation-developing a sustainable energy policy, reinforcing Morocco’s energy policy pertaining to the progressive integration of its energy market with the European Union, and enhancing security of supply.
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Exploration & Development - Quick TakesWest Texas Marfa basin well logs oil
A private Dallas area independent plans to perforate and test an exploratory well that encountered oil 35 miles south of Alpine, Tex., in the nonproducing Marfa basin.
Giant Petroleum Inc., Las Colinas, Tex., set production casing near permitted depth of 6,000 ft at its Giant-Lykes DPW-1C well after logs and cuttings indicated the presence of oil in an undisclosed formation.
Giant’s wellsite is in Brewster County. It’s east of a Union Oil Co. of California well drilled to about 8,500 ft in Presidio County in the early 1980s that tested oil to surface and was deemed noncommercial (see map, OGJ, Jan. 20, 1992, p. 59). Giant owns interests in 6,000 acres in the two counties and options on more, said Chris Plunkett, president.
Plunkett declined to identify the “hybrid” formation but said it is neither a shale nor a pure limestone or sandstone. It is regional in extent and similar to formations that produce in frontal Marathon-Ouachita fields to the east in Pecos County, he said.
He held most downhole information confidential for now but said the well was not drillstem-tested, and the oil has not been analyzed. Giant ran a complete log suite, including dipmeter and imaging logs, he said.
Plunkett reported difficult drilling in which the hole was lost twice due to swelling shales and lost circulation before a larger rig was brought in. Runoff from unseasonal rains in the desert area washed out the location road repeatedly, he added.
The well, originally programmed to test deeper shale gas, is near larger acreage positions held by Continental Resources Corp., Enid., Okla., and TXCO Resources Inc., San Antonio (see map, OGJ, Apr. 10, 2006, p. 33).
Giant’s wellsite is southeast of a small field in Presidio County 14 miles southeast of Marfa that produced a small amount of oil from about 3,800 ft in the late 1990s (see map, OGJ, Nov. 10, 1997, p. 87).
Gulfsands to speed work on Khubert East find
Gulfsands Petroleum PLC said it intends to move rapidly to assess its Khurbert East discovery after it achieved a successful open-hole drillstem test of the first appraisal well on Block 26 in northeastern Syria.
The strong flow rate achieved on test from the Khurbet East-2 (KHE-2) well plus the geologic and reservoir data gained from the KHE-1 discovery and KHE-2 wells indicate that the Khurbet East discovery should be economic in the context of low development costs, proximity to production infrastructure, and a favorable production-sharing contract in the block, Gulfsands said.
The company also plans to shoot a 3D seismic survey over Khurbet East starting in September to identify future drilling locations and facilitate a strategy for early development and production.
The KHE-2 appraisal well encountered the Massive formation at 1,931 m. A drillstem test of the top 10 m of the fractured reservoir, flowed oil to surface at a maximum rate of 1,085 b/d during nitrogen lift of the well.
During the test period following the nitrogen lift, the average flow rate was 710 b/d of oil increasing to a final rate of 820 b/d.
Preliminary test assessment indicates excellent formation permeability and artificial lift potential. All wells in the Massive formation on Block 26 go onto artificial lift relatively soon after initial production, Gulfsands said.
The early assessment also suggests that 26° gravity oil is virtually identical to oil produced in Souedieh field, 12 km to the northeast.
PDVSA, Cupet to explore off Cuba
Petroleos de Venezuela SA said it will explore off Cuba with Cupet, the Cuban national oil company.
PDVSA said the project with Cupet involves six blocks covering 10,000 sq km, targeting light crude oil.
It said the companies will shoot 4,400 km of 2D seismic survey in deep water and 530 km in shallow water.
The announcement follows reports that Cuba is producing nearly 50% of the oil and gas it consumes (OGJ Online, July 26, 2007).
Thailand receives bids for 21 exploration blocks
Thailand’s Department of Mineral Fuels (DMF) received responses from 28 international firms seeking 21 blocks in the country’s 20th petroleum concession licensing round. In the first monthly submission round that closed on July 16, DMS offered 14 onshore blocks and 7 tracts in the Gulf of Thailand.
DMF Director General Krairit Nilkuha said the “overwhelming” interest in the round from petroleum exploration companies was primarily due to high oil prices.
Among bidders are Chevron Corp., Hess Corp., Total SA, BG Group, Mitsui Oil Exploration, PTT Exploration & Production PLC, Harrods Natural Resources, NuCoastal, Pearl Oil, and Adani Welspun Exploration Ltd.
DMF expects to name the preferred bidders over the next 2 months.
Companies will have until May 22, 2008, to submit bids for another 56 onshore blocks, covering a combined area of 211,687 sq km in scattered regions of the country, and nine blocks totaling 23,919 sq km offshore (OGJ Online, May 31, 2007).
Drilling & Production - Quick TakesProduction starts from Independence Hub
Atwater Valley Producers Group reported that production has begun from the Independence Hub platform, which is moored in 8,000 ft of water on Mississippi Canyon Block 920, 123 miles southeast of Biloxi, Miss., in the Gulf of Mexico.
Gas production through the hub began July 19 from the Atlas-1 well in Atlas field on Lloyd Ridge Block 50. Atlas-1 is the first of 15 subsea wells in 10 anchor fields: Atlas, Atlas NW, Jubilee, Merganser, San Jacinto, Spiderman, Vortex, Mondo NW, Cheyenne, and Q.
Production from Atlas-1 is expected to ramp up to about 50 MMcfd soon. Most of the additional 14 wells, which on test demonstrated flow rates above 50 MMcfd, will be brought on stream one at a time during the remainder of this year. Production is expected to rise toward the hub’s capacity of 1 bcfd of gas by yearend.
When operating at full capacity, the hub will process volumes of gas representing an increase of more than 10% in supplies from the gulf.
Independence Hub is thought to be the deepest production platform and largest offshore gas processing facility in the world (OGJ, Nov. 27, 2006, p. 43). It consists of a 105-ft, deep-draft, semisubmersible platform with a two-level production deck.
The platform is operated by Anadarko Petroleum Corp. and is owned 80% by Enterprise Products Partners LP and 20% by Helix Energy Solutions Group Inc. Anadarko has reserved about 61% of the capacity on the hub, Eni SPA 20%, Norsk Hydro AS 12.5%, and Devon Energy Corp. 6.5%.
Oil flow starts from Polvo field off Brazil
Devon Energy Corp. (operator with 60% interest) and SK Energy (40%) have started production from Polvo oil field off Brazil, estimated to have 50 million bbl of reserves (OGJ, Feb. 19, 2007, p. 34).
The field lies in 300 ft of water on Block BM-C-8 in the Campos basin off Rio de Janeiro. Gross production is expected to peak by yearend 2008 at 50,000 b/d of crude oil.
Production facilities include a fixed production and drilling platform connected to a floating production, storage, and offloading vessel (FPSO). First sales are expected to begin this October when the first shipment of oil will be offloaded from the FPSO.
Systems repairs curtail Petrotrin oil output
Trinidad and Tobago’s state oil company Petroleum Co. of Trinidad and Tobago Ltd. (Petrotrin) has reduced its crude oil production by nearly 15,000 b/d due to safety concerns.
Average oil production has been cut to 47,000 b/d, down from 62,000 b/d. Petrotrin’s head of operations Wayne Bertrand said the company shut down some offshore production following an explosion in late May when a 12-in. pipeline on Trinmar Platform 21 ruptured in Soldado field, killing one and injuring two pipeline workers.
Petrotrin said it has had little success rerouting production through other facilities. Major problems with offshore facilities have resulted in Petrotrin’s shutting down five platforms.
The company’s 165,000-b/d Pointe-a-Pierre refinery also needs upgrading, and the company last week floated a $750 million issue to raise capital for the improvements. It has engaged Shell Global Solutions for 5 years to optimize the refinery and develop greater efficiencies in its existing plants. The gasoline optimization program will add five new plants that will enable the refinery to produce higher quality diesel and gasoline.
Petrotrin said natural gas production has not been affected. The company continues to produce 144 MMcfd of gas.
TLP installed at Neptune field
SBM Atlantia Inc. has installed the world’s fifth SeaStar tension leg platform (TLP) in BHP Billiton Ltd.’s Neptune field on Green Canyon Block 613 in 4,200 ft of water in the Gulf of Mexico. The 5,900-ton TLP hull will be equipped to produce up to 50,000 b/d of oil and 50 MMscfd of gas from an initial seven subsea wells. The TLP, fabricated at the Signal International shipyard on the Texas coast, was installed June 5 prior to Heerema Thialf heavy lift vessel setting the topsides processing facility atop the hull in a single, 5,500-ton lift on June 22. The topsides were constructed at the Gulf Island Fabrication shipyard in Houma, La. With the main installation portion of the project complete, final hookup and commissioning activities are now under way ahead of production start-up, anticipated by yearend. BHP Billiton is operator of Neptune field, and its partners include Marathon Oil Corp. 30%, Woodside Energy (USA) Inc. 20%, and Repsol YPF subsidiary Maxus (US) Exploration 15%. Photo from SBM Atlantia.
Processing - Quick TakesPlacid Refining to upgrade Port Allen refinery
Placid Refining Co. LLC has begun a $200 million upgrade of its 55,000 b/cd refinery in Port Allen, La. The upgrade will increase the facility’s gasoline production by 30% to about 1.3 million gal/day while reducing total air emissions by about 50%.
The upgrade is being implemented in two phases.
Phase one, which started in June, involves construction of a 18,000 b/d gasoline desulfurization unit, a flue-gas scrubber for the facility’s fluid catalytic cracker to reduce emissions of sulfur, and other infrastructure improvements. This work is scheduled for completion in second quarter 2008.
Phase two, which will begin in the third quarter, includes the upgrade and expansion of the FCC to 24,500 b/d from 20,000 b/d, allowing expansion by similar capacity of the alkylation unit. Placid also will expand the Rose deasphalting unit to 11,000 b/d from 7,000 b/d to convert heavier oils into gasoline and diesel. The majority of the construction for the second phase is scheduled for third quarter 2008, during a 30-day turnaround.
Placid currently supplies 35-40% of the gasoline consumed in the Baton Rouge, La., area. The company said it is considering expansion of the refinery to 80,000 b/d later this decade.
Gujarat refinery to get diesel hydrotreater
Indian Oil Corp. Ltd. has let a contract to Jacobs Engineering Group Inc. for a 44,000 b/d diesel hydrotreating unit at its 185,100 b/cd refinery in Gujarat, India.
The contract covers engineering, procurement, and construction management services.
The $200 million project, based on Axens technology, is scheduled to be completed in 3 years. It will enable the refinery to produce diesel meeting European Union sulfur standards.
Williams to extract ethane from Alberta oil sands
Nova Chemicals Corp., Pittsburgh, has signed a letter of intent with Williams Cos., Tulsa, to evaluate a process for extracting ethane from Alberta oil sands off-gas streams. Nova Chemicals would be the exclusive, long-term customer for the ethane, which would be delivered to its Joffre, Alta., chemical plant via the Joffre feedstock pipeline.
Williams retained its olefins fractionator and a portion of the storage and distribution assets at its Redwater complex 64 km northeast of Edmonton, when it sold the gas liquids fractionation, storage, and distribution facilities in late 2003 to Provident Energy Trust. Williams will modify and own the oil sands off-gas liquids fractionation plant where it will extract the ethane. The company currently produces propylene from the off-gas liquids stream at Redwater.
The project is expected to begin operating in stages as early as 2010.
Transportation - Quick TakesEPNG fined $15.5 million; pipeline rehab ordered
The Justice Department and the US Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) has fined El Paso Natural Gas Co. (EPNG) $15.5 million and mandated comprehensive rehabilitation of its entire 10,000 mile pipeline system.
The action stems from an investigation of the August 2000 explosion on EPNG’s pipeline system in Carlsbad, NM, that killed 12 people (OGJ Online, Feb. 12, 2003).
EPNG will spend at least $86 million for widespread, comprehensive modifications of its natural gas pipeline system to resolve alleged corrosion-control violations.
The complaint, filed concurrently with the settlement agreement, alleges that EPNG failed to employ personnel qualified in corrosion-control methods, failed to investigate and mitigate internal corrosion in two of its gas pipelines, and failed to suitably monitor those pipelines to determine the effectiveness of steps taken to minimize internal corrosion.
Magellan expands Texas pipeline, terminal
Magellan Midstream Partners LP plans to invest $65 million to expand its products facilities in Texas.
The partnership intends to loop the existing 12-in. pipeline between its Galena Park origins and its East Houston terminal with a 16-in. line, to build 250,000 bbl of storage at its East Houston terminal, and to add a pump station north of Houston.
These projects will increase the partnership’s ability to handle petroleum products originating from the Houston area for delivery throughout Texas, adding 200,000 b/d of incremental pipeline capabilities to the East Houston terminal and 65,000 b/d of incremental pipeline capabilities to Dallas and other Texas areas. The terminal is an origination point for the partnership’s 8,500-mile products pipeline system.
The additions, expected to be operational in second-half 2008, will provide flexibility for future pipeline capacity increases.
The partnership also is expanding the storage and loading capabilities at its terminals in Dallas. This enhancement includes construction of 80,000 bbl of storage and expansion of the existing truck rack at its Dallas terminal to accommodate increased throughput of at least 10,000 b/d. In addition, the partnership plans to increase pipeline capacity, construct 100,000 bbl of storage at its Aledo terminal, and build a new truck rack at its Frost facility.
Based on current project plans, the terminal expansions should provide phased-in incremental capacity and be fully operational in second-quarter 2008.
Kinder Morgan line ruptures; cleanup under way
Canada’s National Energy Board is leading the response of a Kinder Morgan Canada oil pipeline spill that occurred July 24 in Burnaby, BC.
Several other federal, regional, and local agencies also are responding to the spill, along with Kinder Morgan, which has enacted its emergency response plan.
Early assessments indicate the amount of oil spilled is 1,400 bbl, a company spokeswoman said.
The 24-in. pipeline, which connects the Burnaby tank farm with the Westridge marine terminal, was ruptured by a third-party construction crew.
The pipeline is part of Kinder Morgan’s existing Trans Mountain system that transports oil between Edmonton, Alta., and Burnaby.
Sonatrach seeks mediation over LNG plant
Sonatrach has filed for legal mediation with a Paris arbitration court over its dispute with Spain’s Gas Natural and Repsol-YPF involving a delayed LNG plant, according to media reports.
The Spanish newspaper Cinco Dias said the dispute involves the €1.6 billion Gassi Touil project and reluctance of the Spanish firms to develop a 4 million tonne/year liquefaction plant by 2011 as part of a deal signed in late 2004 to explore, extract, and market LNG in western Algeria (OGJ, Aug. 9, 2004, Newsletter). The paper noted increased construction costs.
On July 26, Spain and Algeria reached a compromise when Madrid lifted restrictions on the amount of gas Sonatrach can sell in the country, while Sonatrach promised not to sell more than 2 billion cu m/year.
Previously, Madrid had ruled that Sonatrach could sell a maximum of 1 billion cu m/year directly in Spain, a ruling Sonatrach contested.
The Algerian firm had just increased its participation in Medgaz, the consortium laying an 8 bcm/year pipeline under the Mediterranean between Algeria and Spain.
Medgaz interests are Sonatrach, 36%; Cepsa and Ibedrola, 20% each; and Endesa and Gaz de France, 12% each.
The Medgaz pipeline, including 210 km subsea, will link the Hassi R’Mel-Beni Saf gas pipeline operated by Sonatrach in Algeria with the Almería-Albacete gas pipeline belonging to Enagas in Spain. It is to begin operation in 2009.