OGJ Newsletter

Sept. 13, 2010


Scientists find no dead zones from gulf spill

Dissolved oxygen levels in the deepwater Gulf of Mexico dropped by about 20% from their long-term average in the area of the oil spill from the Macondo well, but federal and independent scientists found no evidence of any deepwater dead zones.

A dead zone is an area of very low dissolved oxygen that cannot support most life. Dissolved oxygen levels were measured within 60 miles of the wellhead in 3,300-4,300 ft of water. Some researchers had suggested application of chemical dispersants at the wellhead could cause low dissolved oxygen levels.

Scientists attributed the lower dissolved oxygen levels to microbes using oxygen to consume the oil from the spill. Agencies involved were the National Oceanic and Atmospheric Administration, the US Environmental Protection Agency, and the Office of Science and Technology Policy.

Dead zones are common in the near-shore waters of the western and northern gulf during June through August. Dead zones, also known as hypoxic areas, are defined in marine waters as areas in which dissolved oxygen concentrations are below 2 mg/l. The lowest dissolved oxygen measured was 3.5 mg/l., a NOAA news release said.

"While we saw a decrease in oxygen, we are not seeing a continued downward trend over time," said Steve Murawski, NOAA's chief scientist for fisheries. "None of the dissolved oxygen readings have approached the levels associated with a dead zone and as the oil continues to diffuse and degrade, hypoxia becomes less of a threat."

He said the mixing of the Macondo-area water with other gulf water helped prevent the creation of hypoxia areas.

The report was based upon 419 locations sampled on multiple expeditions by nine ships during a 3-month period. The Joint Analysis Group report does not specifically address the question of the rate of biodegradation of oil, which cannot be determined looking only at dissolved oxygen data, Murawski said.

Talisman buys stakes in two Aussie firms

Talisman Energy Inc., Calgary, increased its exploration holdings in Papua New Guinea by purchasing the stakes of two Australian companies—Cue Energy Resources Ltd. and Mosaic Oil Ltd.—in onshore retention lease PRL8 in the foreland region.

Cue sold its 10.72% interest to Talisman for $5.14 million (US) while this week Mosaic revealed it received $11 million (Aus.) for its 28.57% stake.

PRL8 contains the undeveloped Kimu gas field.

In addition to the initial cash payment, Mosaic will receive a contingent cash payment of either 10¢/GJ for any 2P reserve increases to Dec. 31, 2012, or a firm and fixed amount of $2.7 million (Aus.) cash at any time before the proposed Kimu appraisal well is drilled.

Talisman's contract with Mosaic specifies that Talisman will, at no cost to Mosaic, drill an appraisal well and undertake corresponding reserves certification work to determine the contingent reserves payment before yearend 2012.

Mosaic's sale marks its exit from Papua New Guinea. Cue, however, still holds interests in the producing Southeast Gobe oil field, as well as an interest in PPL 190, which contains the Cobra, Bilip, and Iehi gas discoveries; and an interest in the Barikewa gas field in retention lease PRL 9.

Talisman now has an interest in 13 exploration-retention leases in Papua New Guinea.

Dana agrees to buy UK North Sea interests

Dana Petroleum PLC, Aberdeen, agreed to buy oil and gas interests off the UK from Petro-Canada UK Ltd. for $372 million, subject to adjustments.

The sale is part of a divestment program of Suncor Energy Inc., of which Petro-Canada is a wholly owned subsidiary.

The interests are in 12 production and exploration licenses in the North Sea, with average production this year of about 16,000 boe/d net to Suncor.

The interests are in the Triton oil producing area in the central North Sea, including Petro-Canada's 33.11% stake in the Triton floating production, storage, and offloading vessel operated by Hess; the Scott-Telford producing area in the Outer Moray Firth area; and the Inner Moray Firth exploration area.

Dana estimates it will acquire 33.5 million boe proved and probable reserves in the deal.

Separately, Dana is resisting a cash takeover bid begun last month by Korea National Oil Corp. (OGJ, Aug. 30, 2010, Newsletter).

Exploration & Development — Quick Takes

Chevron to explore blocks off Liberia

Chevron Corp. will begin a 3-year exploratory program in the fourth quarter of three deepwater blocks off Liberia.

Blocks LB-11, LB-12, and LB-14 are 12-110 miles south of Monrovia and cover a combined 3,700 sq miles.

"These licenses are on trend with new deepwater Cretaceous discoveries in the region," said Ali Moshiri, president of Chevron Africa & Latin America Exploration & Production.

The Liberian government has approved acquisition by Chevron of 70% interests in the concessions. Chevron will be operator. The company didn't elaborate on exploratory plans.

Devonian shows more gas in Parnaiba well

The OGX Maranhao joint venture reported gas indications in two more Devonian intervals at an exploratory well in Brazil's onshore Parnaiba basin.

The latest shows are 800 m below the previously announced interval, which drillstem tested gas at an unreported rate from a 10-m section at the top of Devonian at 1,654 m. OGX reported a 15-m flare and a wellhead pressure of 1,900 psi during the test (OGJ Online, Aug. 17, 2010).

The 1-OGX-16-MA well on the PN-T-68 block 260 km southwest of Sao Luis intersected fractured shales of the Pimenteiras formation with up to 909 total gas units and a column of 23 m. Just below that interval, sandstone reservoirs of the Itaim formation indicated 370 gas units in a 25-m column.

The well, on the California prospect, is projected to 3,450 m.

OGX Maranhao, an entity formed by OGX SA with 66.6% interest and MPX Energia SA with 33.3%, is the operator and holds a 70% stake in the block. Petra Energia SA holds the remaining 30%.

Petronas makes oil, gas find off Vietnam

Malaysia's Petronas Carigali Overseas Bhd. made an oil and natural gas discovery with its Ham Rong-2X well in the Ham Rong oil field off northern Vietnam, according to local media reports.

Commercial output was estimated at 6,300 b/d and 8 MMscfd of gas on Block 106 of the Song Hong basin, about 75 km south of Haiphong, Vietnam's official news agency said, citing the Tuoi Tre newspaper. Analyst IHS Global Insight said the Ham Rong 2X well is likely to be an appraisal well on Block 106. The well followed the drilling of the Do-Son 1X wildcat, which was plugged and abandoned in mid-November 2009 having also encountered oil and gas shows.

"The discoveries at Ham Rong-2X will further support the company's exploration plans in Block 106, despite the complexities of exploring the area, due to seismic imaging difficulties and complex reservoir architecture," IHS Global Insight said.

Petronas is operator of the block with a 50% stake. The remaining 50% is divided among Singapore's SPC, PetroVietnam Exploration & Production, and ATI Petroleum.

Southern Trinidad and Tobago finds indicated

Parex Resources Inc., Calgary, leads a group that has drilled a second indicated discovery on the Moruga block in southern Trinidad and Tobago.

Snowcap-1 has been cased to total measured depth of 8,600 ft. Based on open hole wireline, mud logs, and cutting samples, the well encountered potential hydrocarbon-bearing sandstones with oil and gas shows over a 300-ft gross interval.

The potential hydrocarbon-bearing sandstones occurred in several secondary Eocene zones at gross measured depths of 7,940-8,035 ft, 8,090-8,135 ft, and 8,340-8,445 ft, respectively. In the primary objective Miocene Herrera zone, the well encountered several potential hydrocarbon-bearing sandstones at measured depths of 4,580-4,610 ft, 4,650-60 ft, and 4,680-4,700 ft, respectively.

Multizone test equipment is at the site of the first well, Firecrown-1, awaiting regulatory approvals prior to commencement of the testing exercise. Firecrown-1 encountered hydrocarbon-bearing sandstones with oil shows in the secondary Herrera zone at 6,600 ft to 7,220 ft measured depth and in the primary Herrera zone at 8,150-8,275 ft.

An estimate of net pay is expected to be published once all testing is completed in a satisfactory manner.

Drilling & Production — Quick Takes

Marathon ramps up Droshky production

Marathon Oil Corp. has ramped up production to about 45,000 boe/day net from the subsea completed Droshky development in the deepwater Gulf of Mexico.

Production from Droshky started on July 15 and the field's current net production is about 39,000 b/d of liquid hydrocarbons and 39 MMcfd of gas.

Droshky consists of four subsea completed wells on Green Canyon Block 244 about 160 miles southwest of New Orleans. The wells are in 3,000 ft of water and are tied back with two parallel 18-mile flowlines to Shell Exploration & Production Co.'s Bullwinkle platform.

Marathon noted that three of the four wells currently produce at better-than-projected levels, while equipment problems have delayed production from the fourth well. The company plans to reenter the fourth well in first-quarter 2011 to make necessary repairs. The repairs will add about $25 million to the development costs, which Marathon previously said were less than $900 million (OGJ, July 26, 2010, Newsletter).

Marathon now expects Droshky to produce at about a net 45,000 boe/d peak rate, down from the original 50,000 boe/d estimate. Marathon holds a 100% working interest in Droshky.

Rowan to move two gulf rigs to Middle East

Rowan Cos. Inc. said two of its jack up drilling rigs are expected to leave the Gulf of Mexico late this year for work in the Middle East under contract with Saudi Aramco. The plans were outlined in a recent document filed with the US Securities and Exchange Commission.

Rowan Cos. Inc.'s Bob Palmer independent leg cantilever jack up.

The Bob Palmer independent leg cantilever jack up worked in the gulf under contract with Houston independent Apache Corp. until Apache declared force majeure, Rowan said in an earlier SEC report (OGJ Online, July 29, 2010).

Idle for 13 days during July, the Bob Palmer now works in the gulf for Energy XXI Bermuda Ltd. at a day rate in the low $110,000 range, Rowan said. Aramco's 3-year contract for the Bob Palmer, starting second-quarter 2011, has a day rate in the mid-$270,000 range, Rowan said.

The Ralph Coffman 240-C class jack up is on contract in the gulf until November at a day rate in the low $180,000 range, Rowan said, adding Aramco has a 3-year contract for the Ralph Coffman with a day rate in the low-$220,000 range.

Currently, the Ralph Coffman is working on South Timbalier Block 144 on McMoRan Oil & Gas LLC's Blackbeard East prospect.

Rowan has nine jack up rigs in the gulf subject to new safety regulations and information requirements applicable to shallow-water drilling operations. These changes, outlined in Notices to Lessees from the Bureau of Ocean Energy Management, Regulation, and Enforcement, follow the Deepwater Horizon accident and oil spill from the Macondo well.

An Apr. 20 blowout of the Macondo well, operated by BP PLC and drilled by Transocean Ltd.'s Deepwater Horizon semisubmersible on Mississippi Canyon Block 252, resulted in an explosion and fire that killed 11 people on the Deepwater Horizon.

Ensco retrieves Ensco 69 from Venezuela

Ensco PLC reported that it retrieved Ensco 69, an independent-leg slot jack up, from Venezuela and moved the rig to Trinidad and Tobago. Previously, Ensco terminated its contract for the rig with Petrosucre, a unit of Venezuela's Petroleos de Venezuela SA.

The drilling contractor reclassified its jack up as discontinued operations last year after terminating its contract with Petrosucre for nonpayment issues in June 2009.

Petrosucre continued to operate Ensco 69 without Ensco's consent, Ensco said in an Aug. 25 release. PDVSA said in a news release last year that Ensco 69 was the only Ensco rig operating in Venezuela. It worked in the Gulf of Paria.

"Ensco continues to pursue related insurance claims, which the insurers have disputed," the company said in a brief statement announcing it had regained possession of the jack up. "Ensco personnel recently were granted access to Ensco 69." No other details were provided.

SAGD wells testing high-temperature ESPs

The Christina Lake in situ oil sands project operated by Cenovus Energy in northeastern Alberta is testing what Baker Hughes Inc. calls the world's first "ultra-temperature" electrical submersible pumping systems in steam-assisted gravity drainage wells.

Since Apr. 15, Baker Hughes has installed nine of its Centrilift XP systems in Cenovus' Christina Lake wells as well as elsewhere in other operators' SAGD wells. The ESPs can operate at fluid temperatures up to 250º C.

Baker Hughes said Cenovus is "among the first to deploy the new technology." Cenovus operates Christina Lake, as well as the Foster Lake SAGD project in Alberta, in a 50-50 joint venture with ConocoPhillips.

Higher steaming temperatures are expected to increase production rates by providing a larger steam chamber than otherwise would be achievable and lowering oil viscosity.

Cenovus reports gross production from 15 Christina Lake wells in the Cenovus-ConocoPhillips area, 120 miles south of Fort McMurray, at 18,000 b/d. It plans to increase production in two further phases of 40,000 b/d each.

BHP brings Ravensworth oil field on stream

BHP Billiton has brought its Ravensworth oil field on stream off Western Australia.

The field, which lies on licence WA-43-L, has been developed in conjunction with the company's Pyrenees field in adjacent permit WA-42-L.

Pyrenees came on stream in March. Ravensworth is a separate development with its own wells and gathering system, although the oil produced is processed for offtake via the Pyrenees Venture floating production, storage, and offloading vessel.

Ravensworth field, which was discovered in 2003, lies in 210 m of water and straddles the WA-43-L and WA-42-L licence areas.

The total Pyrenees area development through the FPSO is capable of producing as much as 96,000 b/d of oil and reinjecting gas into the reservoir at the rate of 60 MMcfd.

BHP is operator of both licences. It has 39.999% of WA-43-L. Partners are Inpex 28.5% and Apache Energy 31.501%.

BHP has 71.43% of WA-42-L. Apache Energy holds the remaining interest.

Contract let for Kuwaiti water injection

Kuwait Oil Co. has let a contract valued at $430 million to Petrofac for water-injection work in two northern Kuwaiti oil fields.

The project will mix effluent water and seawater for injection into 69 wells in Sabriyah and Raudhatain oil fields. KOC said it's part of an effort to raise oil production in northern Kuwait by 1 million b/d by 2015.

The work includes installation of a central injection pumping facility and modifications to three existing gathering centers and a seawater treatment plant. Completion is expected in 36 months.

PROCESSING — Quick Takes

Petronas to buy BP's Malaysian ethylene, PE assets

Petronas agreed to buy BP PLC's Malaysian ethylene and polyethylene production for $363 million in a transaction expected to close by yearend, subject to certain conditions.

"The agreement concerns BP's 15% interest in Ethylene Malaysia Sdn. Bhd. and 60% interest in Polyethylene Malaysia Sdn. Bhd., both of which are operated by Petronas," BP said in a Sept. 1 news release.

Both production plants are at Kertih on the eastern coast of Malaysia. BP said the transaction will not affect its other businesses in Malaysia.

BP is in the process of divesting various assets to help generate cash to meet financial obligations likely to arise from the Gulf of Mexico oil spill, BP Chairman Carl-Henric Svanberg has said (OGJ Online, July 22, 2010).

Previously, BP agreed to sell its wholly owned BP Exploration Co. (Colombia) Ltd. for $1.9 billion to a consortium of Talisman Energy Inc. and Colombia's Ecopetrol SA. Subject to regulatory and other approvals, the sale is expected to be completed by yearend.

Delayed coker due at Assam, India, refinery

IOT Infrastructure & Energy Services Ltd. let an engineering services contract to Jacobs Engineering Group Inc. for a delayed coker unit at Indian Oil Corp. Ltd.'s 20,000-b/d Guwahati refinery in Assam, India.

IOT, formerly Indian Oiltanking, is handling the project, with overall value estimated at $60 million, on an engineering, procurement, and construction basis for IOCL. It is a joint venture of IOCL and Oiltanking GMBH.

Processing capacity for the new unit wasn't disclosed.

IOCL adding hydrotreater at Haldia refinery

Indian Oil Corp. Ltd. has chosen Axens technology for a 1.4 million tonne/year coker gas-oil hydrotreating unit at its Haldia refinery in West Bengal, India.

The new unit will process light coker gas oil, heavy coker gas oil, and coker naphtha. It also will be able to process straight-run gas oil and straight-run vacuum gas oil.

The refinery's crude capacity has reached 7.5 million tonnes/year, Axens said.


TransCanada launches open season for Cushing

TransCanada Corp. launched a binding open season to obtain firm commitments from interested parties for its Cushing Marketlink Project, providing crude oil transportation from Cushing, Okla., to the US Gulf Coast.

The project would involve construction of $70 million of facilities at Cushing and use facilities making up part of TransCanada's proposed Keystone XL to deliver crude to near existing terminals in Nederland, Tex.

Following completion of the open season, which expires Nov. 10, TransCanada intends to proceed with the necessary regulatory applications for approvals to construct and operate the required facilities and provide transportation services, placing Cushing Marketlink in service first-quarter 2013.

In August TransCanada withdrew its request to the US Pipeline and Hazardous Materials Safety Administration for a special permit that would have allowed Keystone XL to operate at a slightly higher pressure than allowed under US regulations for oil pipelines (OGJ Online, Aug. 6, 2010).

Pending receipt of necessary permits, TransCanada expects to begin construction on Keystone XL in 2011.

When completed, Keystone XL will increase commercial capacity of the Keystone Pipeline System to 1.1 million b/d from 590,000 b/d.

Contract let for Abu Dhabi pipelines

Abu Dhabi Oil Refining Co. (Takreer) let a $623 million contract to GS Engineering & Construction Corp. for a pipeline project that will connect Abu Dhabi's two refineries with various terminals in the emirate.

The engineering, procurement, construction, and commissioning contract will cover pipelines with a total length of 955 km and diameters of 10-28 in. Technip handled front-end engineering design, and Tebodin is handling project management.

Takreer operates a 150,000 b/d refinery at Umm Al-Nar and a refinery at Ruwais where capacity is being doubled to 817,000 b/d.

Fos Cavaou LNG terminal at full capacity

The Fos Cavaou LNG terminal on France's Mediterranean coast has been authorized to operate at its full 8.25 billion cu m/year capacity, up from the 20% allowed since April when a restriction was placed on the facility.

Owned by Societe du Terminal Methanier Fos Cavaou (STMFC)—a joint venture of GDF Suez 71.99% and Total SA 28.10%—the terminal is operated and maintained by GDF Suez affiliate Elengy. Elengy also operates two other GDF Suez LNG terminals in France: Montoir-de-Bretagne on the Atlantic and Fos Tonkin, near Fos Cavaou.

PNG LNG awards compressor contracts

PNG LNG, the Papua-New Guinea-based LNG project to be operated by a unit of ExxonMobil Corp., has awarded equipment and long-term service contracts to GE Oil & Gas.

The Florence, Italy-based manufacturer will provide PGT25+G4 gas turbines and centrifugal compressors for two LNG trains at the Hides gas conditioning plant.

The service contract covers maintenance of 13 turbo-compressor trains.

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