GENERAL INTEREST — Quick Takes
ExxonMobil, Rosneft sign Arctic, Black Sea deal
ExxonMobil Corp. and Russia's Rosneft have agreed to undertake joint exploration and development of hydrocarbon resources in Russia, the US, and elsewhere, as well as commence technology and expertise sharing activities.
The partnership replaces a similar but differently structured alliance BP tried to forge with Rosneft. That effort collapsed earlier this year when BP's partners in the TNK-BP venture objected (OGJ Online, May 18, 2011).
Rex Tillerson, ExxonMobil chairman and chief executive officer, said the large-scale partnership agreement would "open new horizons for cooperation between ExxonMobil and Rosneft both in Russia and abroad."
Tillerson said ExxonMobil had been encouraged by the Russian government's pledge to reform oil taxation and to improve investment conditions for international and Russian oil companies.
The agreement, signed by Rosneft Pres. Eduard Khudainatov and ExxonMobil Development Co. Pres. Neil Duffin, includes $3.2 billion to be spent funding exploration of East Prinovozemelskiy Blocks 1, 2, and 3 in the Kara Sea and the Tuapse license block in the Black Sea.
The East Prinovozemelskiy license blocks have a total area of 126,000 sq km in 50-150 m of water. Tuapse block in the Black Sea has a total area of 11,200 sq km in 1,000-2,000 m of water. Rosneft equity interest in both joint ventures will be 66.7%, while ExxonMobil will hold 33.3%.
The agreement also provides Rosneft with an opportunity to gain equity interest in a number of ExxonMobil's exploration opportunities in North America, including deepwater Gulf of Mexico and tight oil fields in Texas, as well as additional opportunities in other countries.
The two firms have also agreed to conduct a joint study of developing tight oil resources in western Siberia.
The companies will create an Arctic Research & Design Center for Offshore Developments in St. Petersburg to be staffed by Rosneft and ExxonMobil employees.
The center will use proprietary ExxonMobil and Rosneft technology and will develop new technology to support the joint Arctic projects, including drilling, production and ice-class drilling platforms, as well as other Rosneft projects.
Rosneft and ExxonMobil also said they will implement a program of staff exchanges of technical and management employees intended to help strengthen the relationships between the companies.
BP, RIL complete deal for blocks off India
BP PLC has completed its acquisition of a 30% interest in 21 oil and gas production sharing contracts operated by Reliance Industries Ltd. off India.
BP will pay RIL $7.2 billion subject to completion adjustments for the acquisition, approved by the Indian government in July (OGJ Online, July 22, 2011). Performance payments of a further $1.8 billion are contingent on exploration success and development of discoveries.
BP and RIL will form a 50-50 joint venture for sourcing and marketing of gas in India and to speed development of logistical systems. Blocks in the deal cover 220,000 sq km and lie in 400-3,000 m and more of water.
Included is the deepwater KG-D6 block off eastern India, where RIL is developing a world-class gas discovery but has come under pressure from the government to drill more wells because of production shortfalls against rates specified in work plans (OGJ Online, Aug. 4, 2011). Production from the block now is about 1.7 bcfd.
RIL remains operator of all the blocks.
The acquisition by BP of interests in two other RIL blocks remains under discussion between RIL and the government.
Venoco CEO makes offer to buy all common stock
The chief executive officer and chairman of Venoco Inc., who also is the majority shareholder of the Denver-based company, made a nonbinding proposal to acquire all of Venoco common stock in a transaction worth $770 million. Venoco operates primarily in California.
Venoco's board plans to form a special committee of independent directors to consider the proposal.
Timothy M. Marquez, Venoco chief executive officer, said the acquisition, if approved, would be in the form of a merger via an acquisition vehicle that he would form, and he expects the company's existing senior management team would remain. He already owns 50.3% of the company. Marquez will not be part of Venoco's special committee to consider the proposal to take the company private.
Exploration & Development — Quick Takes
ExxonMobil takes Argentina shale farmout
ExxonMobil Exploration Argentina SRL and a unit of Americas Petrogas Inc., Calgary, will explore and possibly exploit the Canadian company's 163,500-acre Los Toldos blocks in the western Neuquen basin of Argentina for oil and gas in shales.
Americas Petrogas said the four blocks along the Chihuidos high are "in a favorable location relative to other recent discoveries of shale oil and shale gas in the Vaca Muerta formation." The company is operator and expects to spud the first well in the fourth quarter of 2011. Potential secondary targets are conventional and other unconventional formations.
ExxonMobil has committed to fund $53.9 million during the exploration phase and a further $22.4 million if the parties proceed to the exploitation phase. Both amounts include taxes. The focus is on the Los Toldos 1 and 2 blocks.
ExxonMobil will earn a 45% interest, Americas Petrogas will retaining 45%, the government entity, Gas y Petroleo del Neuquen, will maintaining 10%. ExxonMobil will provide technical assistance.
Americas Petrogas has five other blocks in the Neuquen basin's western shale corridor, including the Huacalera block south of the Los Toldos blocks and on which a recently drilled and cased well intersected 1,742 ft of Vaca Muerta shale.
In published reports, the US Energy Information Administration has cited a risked, recoverable resource of 240 tcf of gas for the Vaca Muerta shale in the basin (OGJ Online, Apr. 18, 2011).
Americas Petrogas said the Jurassic-early Cretaceous Vaca Muerta, one of two principal source rocks in the basin, covers 8,500 sq miles at 5,500-14,000 ft and in places is as thick as 2,000 ft with characteristics believed similar to those of the Eagle Ford, Haynesville, and Horn River basin shales in North America.
Danish North Sea gas-condensate find expanded
A group led by PA Resources AB, Stockholm, reported encountering more hydrocarbons at the sidetrack of the July 2011 Broder Tuck discovery in License 12/06 in the North Sea off Denmark.
The sidetrack confirmed additional hydrocarbon column while sample analyses from the initial exploratory well have indicated a higher than expected condensate content.
The initial Broder Tuck 5504/20-4 well, 10 km south of Gorm field, found hydrocarbon pay in the primary Middle Jurassic target. A 680-m sidetrack encountered Middle Jurassic sandstone containing hydrocarbons, albeit less well developed than in the initial wellbore.
The 2011 drilling program has therefore established a gross hydrocarbon column of at least 360 m from the crest of the structure down to the base of the Middle Jurassic sandstone in this sidetrack.
Sample analyses has confirmed the hydrocarbons discovered at the initial well to be a high quality gas with condensate of approximately 44° gravity at 80-90 bbl/MMscf.
After plugging Broder Tuck, the Ensco 70 rig will move to drill the Lille John exploratory well about 8 km south.
OMV group has southern Norwegian Sea gas find
A group led by OMV (Norge) AS discovered a 40-m gross natural gas column in the Jurassic Rogn and Garn formations at its Chamonix prospect in PL 471 in the southern Norwegian Sea off Norway.
The 6407/5-2S exploratory well went to 3,359 ft true vertical depth in 230 m of water. The well objectives were to prove hydrocarbons in the Chamonix prospect, a stratigraphic trap in the Upper Cretaceous Lysing formation and in Cortina, a secondary target in the Jurassic. The Lysing sands were found to be tight.
The well was not formation tested, but extensive data acquisition including coring and sampling have been carried out to enable a detailed evaluation as next step. The well will be plugged and abandoned.
OMV operates PL 471 with 50% interest. Noreco ASA AS has 30% and Sagex Petroleum ASA, now a member of Valiant Petroleum PLC, has 20%.
The well is the first off Norway for OMV (Norge), which has interests in nine Barents Sea licenses, two Norwegian Sea licenses, and one North Sea license. It operates seven of the licenses.
Ryder Scott: Trinidad's proved gas reserves decline
Trinidad and Tobago's proved natural gas reserves have fallen for yet another year, according to Houston-based consultant Ryder Scott.
Larry McHalffey, the firm's senior petroleum engineer, told a news conference in Port of Spain recently that the Caribbean twin-island nation's proved reserves declined to 13.46 tcf at yearend 2010 from 14.42 tcf in 2009. However, probable and possible reserves remain fairly stable at respective levels of 7.64 tcf and nearly 6 tcf.
McHalffey said the consultant audited the inventories and geological concepts of BP Trinidad & Tobago (BPTT), British Gas, BHP Billiton, Chevron Corp., EOG Resources, Centrica, Petrotrin, Repsol, and other open areas to reach its findings. McHalffey blamed the reduction in proved reserves on the lack of replacement through additional drilling.
He said the time will come when the operators will realize that they need more proved reserves to fulfill their contracted obligations.
Trinidad and Tobago's newly appointed Energy Minister Kevin Ramnarine noted that while there was no exploration drilling for gas in 2010, he expected by mid-2012 that exploration wells would be drilled on Blocks NCMA(2), NCMA(4), NCMA(3) and 4(b).
"It should be noted that the audit did not take these blocks into consideration, however technical work undertaken by the ministry indicate that the blocks may contain in excess of 5 tcf of gas and the ministry's estimates are conservative compared to those of the companies awarded the blocks," Ramnarine said.
He also expected large gas finds on deepwater Blocks 23(a) and TTDA 14, which have recently been awarded to BPTT. These two blocks are estimated to have 4.7-8.2 tcf of unrisked gas resources based on the ministry's estimates.
Trinidad and Tobago has conducted annual gas audits since 2000 but has announced that starting next year, it will conduct these audits ever 3 years.
Drilling & Production — Quick Takes
Buccaneer jack up to drill in Cook Inlet in mid-2012
Alaska's Cook Inlet may soon have two jack up rigs, the first drilling units to have operated there in many years. Buccaneer Energy Ltd., Sydney, will acquire a cantilever jack up to be winterized to drill in Cook Inlet off Alaska in the 2012 season.
Meanwhile, Escopeta Oil & Gas Co., Houston, was awaiting final approval to clean out conductor pipe and spud an exploratory well on the Kitchen Lights Unit in Upper Cook Inlet using the Spartan 151 jack up.
Buccaneer will buy the GSF Adriatic XI unit, capable of drilling in as much as 300 ft of water, from Transocean Offshore Resources Ltd. for $68.5 million. After closing set for October, the rig will be transported to an Asian shipyard.
Built in 1982, the rig was upgraded in 2004 and has been cold-stacked in Malaysia since September 2009. Two inspections deemed it to be in good condition. It is equipped with 10,000 and 15,000 psi blowout preventers and will also be capable of working in the Chukchi and Beaufort seas.
The Adriatic XI's first well will be on Buccaneer's 100% owned Southern Cross project in 50 ft of water in Cook Inlet (OGJ Online, May 10, 2011). It will offset several wells on company leasehold that tested oil and gas and were never produced.
Southern Cross is within 5 miles of four oil and gas fields with combined cumulative production of 1.1 billion bbl of oil and more than 550 bcf of gas.
Kenai Offshore Ventures LLC will operate the rig for Buccaneer. KOV is owned 50% by Buccaneer and 50% by Ezion Holdings Ltd., Singapore.
KOV estimated $86.5 million to acquire, modify, and mobilize the rig to Cook Inlet. Funding sources are KOV $6.85 million, Alaska Industrial Development and Export Authority $24-30 million, and a $50-56 million senior debt facility that is in final documentation.
Total starts Pazflor output off Angola
Total SA has started production from giant deepwater Pazflor field off Angola, saying it expects output to reach full capacity of 220,000 b/d of crude oil "over the coming months."
Lying in 600-1,200 m of water on Block 17 about 150 km off Luanda, the field has proved and probable reserves of 590 million bbl.
Pazflor has what Total describes as the most complex gathering network ever built in Angola, including 180 km of lines tying in 49 subsea wells, 10,000 tonnes of subsea equipment, and a floating, production, storage, and offloading vessel.
The FPSO is, Total says, the world's largest at 325 m by 62 m and weighing more than 120,000 tonnes. Held in position by 16 subsea mooring connectors, it can store as much as 1.9 million bbl of crude oil. Associated gas is reinjected.
The field produces two "very different grades" of crude from four reservoirs. Three of the reservoirs, all Miocene, yield heavy, viscous oil accounting for two thirds of the reserves. After gas separation on the seabed, the viscous fluids are moved to the surface with pumps designed and tested specifically for Pazflor.
BPTT starts gas flow from Serrette off Trinidad
Natural gas production has started from Serrette field off Trinidad and Tobago, reported BP Trinidad & Tobago (BPTT), the field's operator. Serrette lies in 280 ft of water off southeastern Trinidad.
Production from Serrette, a normally unmanned installation, is tied into BPTT's Cassia B hub via a 26-in., 32-mile pipeline. The platform is expected to average 400 MMscfd of gas and associated condensate from five wells.
This facility's production will supply the domestic market and Atlantic LNG's liquefaction plant for export as LNG to international markets, such as the US and Europe.
BPTT holds a 100% interest in Serrette field. The company operates in 904,000 acres off eastern Trinidad. It has 13 offshore platforms and 2 onshore processing facilities and produces an average of 450,000 boe/d.
Petrobras lets contract for world's largest FSRU
Petroleo Brasileiro SA (Petrobras) has awarded Excelerate Energy, Houston, a 15-year time charter for which Excelerate will provide an advanced floating storage and regasification unit (FSRU) to be named by Petrobras VT3.
Capable of storing 173,400 cu m, the vessel will be the industry's largest so far. It will deliver 20 million cu m/day of natural gas to southeastern Brazil.
In addition, from July 2013 until the arrival of the VT3 newbuilding, Petrobras's Guanabara Bay LNG terminal will use Excelerate's Exquisite FSRU with an increased regasification plant, expanding the terminal's delivery capacity to 20 million cu m/d from 14 million cu m/day.
The VT3 newbuilding design is based on Excelerate's existing fleet and Petrobras requirements, said the announcement. Capable of operating as both an FSRU and a fully tradable LNG carrier, the vessel is to enter service in May 2014.
Excelerate Energy selected Daewoo Shipbuilding and Marine Engineering to build the new vessel. This is the same South Korean shipyard that built its previous eight FSRUs.
PROCESSING — Quick Takes
EPA orders Hovensa to improve release prevention plans
Hovensa LLC has received orders from the US Environmental Protection Agency to improve its programs and plans that help prevent chemical releases and provide quick responses when they occur. EPA issued the order on Aug. 25 after finding that the US Virgin Island refiner violated federal Clean Air Act provisions related to the development of risk management programs and submission of risk management plans (OGJ Online, Feb. 17, 2011).
EPA said it discovered the violations during a January inspection of Hovensa's 500,000-b/d refinery at St. Croix, and found the Hess Corp. subsidiary's existing risk management plan inadequate.
The agency said violations at the plant included failures to maintain equipment, to take steps to identify problems before they occur, to provide training to employees for controlling hazards during operations, and to ensure that proper operating procedures are being followed. The order includes a schedule for Hovensa to address these and other violations, according to EPA.
Karsto development project gains engineering contract
Acting as main engineering, procurement, and construction contractor for Statoil's Karsto Development Project 2013, Aibel AS, Stavanger, let a contract to a Foster Wheeler AG subsidiary for detailed design engineering services. The Karsto project covers crude oil and natural gas processing plants at Karsto and Kollsnes in Norway.
Foster Wheeler's scope of work includes detailed design engineering services for modifications at the Karsto plant to enable it to process light oil from Gudrun offshore oil field and condensate from Sleipner field (OGJ Online, July 15, 2011). The scope of work also covers upgrading eight compressors, three at Karsto and five at Kollsnes.
Two additional scopes of work are included as options under the KDP 2013 contract: a boiler upgrade project and hydrogen sulfide removal at Karsto. This work has yet to be released, said the announcement, and depends on Statoil choosing to exercise the options. Statoil is acting on behalf of Gassco, which operates the Karsto and Kollnes terminals, owned by the Gassled joint venture, with Statoil as the technical service provider.
TRANSPORTATION — Quick Takes
Epsilon to build Marcellus shale gas gathering system
Epsilon Energy Ltd. and its Marcellus shale partners, Chesapeake Energy Corp. and Statoil USA Onshore Properties Inc., plan to construct a 400-MMcfd natural gas gathering system to service both the three-party farmout area they share as well as additional producers.
The three companies signed an interim agreement for gas gathering systems in the Marcellus shale governing both current and future gathering systems for the project, in which Epsilon holds a 35% interest. Chesapeake and Statoil hold the remaining 65%.
Epsilon also sold Chesapeake and Statoil an additional 15% interest in the partnership's existing gathering system, beyond the 50% agreed to in its initial farmout of its Marcellus interests, to better align its remaining interests with its overall involvement in the project. Epsilon built the existing gathering system in 2009 and will receive $6.5 million from this sale (OGJ Online, Feb. 26, 2009).
Chesapeake Energy completed its farmout from Epsilon, covering 11,500 net acres in Susquehanna County, Pa., in February 2010 (OGJ Online, Feb. 4, 2010).
Tankers attacked off Oman, Eritrea
Oil tankers continue to be the target of choice for pirates in Middle Eastern waters, with mass attacks now taking place in the Red Sea.
A chemical oil tanker thwarted a hijack attempt by pirates near the Omani port of Salalah on Aug 22, just a day after a tanker and crew were taken from inside the port in front of the coast guard. The International Maritime Bureau said pirates in a skiff chased and fired upon the tanker, making several attempts to board the vessel before finally aborting their attack following evasive action taken by the tanker.
On Aug. 21, pirates succeeded in seizing the empty MV Fairchem Bogey chemical oil tanker from its anchorage at the port in the mouth of the Gulf of Aden, Mumbai-based Anglo Eastern Ship Management said.
"We can now confirm that the Fairchem Bogey is now in Somali waters," the tanker manager said. "The Master has been in contact with us, reconfirming safety of the crew. We are still waiting to make first contact with the hijackers."
Anglo-Eastern said Oman's Coast Guard approached the vessel after it was seized from its anchorage in the port, but drew back when the pirates threatened to harm the crew.
The Bogey had armed guards aboard on Aug. 18 as it sailed through the Gulf of Aden on its way to unload at the Saudi port of Al Jubail. But the ship was unprotected when taken on Aug 21 after dropping off the security team.
Meanwhile, the IMB said pirates in the Red Sea have adopted the practice of attacking ships in large groups, following an attack that occurred 22 nautical miles northeast of Assab, Eritrea, in the Red Sea.
Seven high-speed boats approached a bulk carrier under way. Two of the boats, with 3-5 armed pirates in each boat, approached the ship at high speed.
The attack was very similar to one mounted on Aug. 7, also off Eritrea. During that incident, 12 skiffs with 5-8 armed pirates each approached a bulk carrier under way.
"Even underestimating the number of pirates in [the] attack to just 21, it would still seem to confirm that pirate gangs have adopted a new tactic of mass attacks in the waters surrounding Eritrea," said David Rider of Neptune Maritime Security.