OGJ Newsletter

July 18, 2011
International news for oil and gas professionals
GENERAL INTEREST Quick Takes

OPEC: Fragile global economy hinders oil demand

Members of the Organization of Petroleum Exporting Countries said a fragile global economy is likely to hold the rise in oil demand to 1.32 million b/d in 2012, about 3% lower than this year.

"World oil demand is forecast to grow by 1.36 million b/d in 2011, slightly lower than in the previous report, as the unsteady global economy has added risks to the forecast," OPEC said.

OPEC said demand for oil from its members this year is estimated at 30 million b/d, about 100,000 b/d higher than in the previous report, indicating a rise of 400,000 b/d over the previous year.

In 2012, OPEC said, the initial forecasts for world oil demand, non-OPEC supply, and OPEC NGLs indicate a demand for OPEC crude of 30.3 million b/d, an increase of 300,000 b/d over the current year.

However, these forecasts could be impacted by unforeseen events, the report said, noting that global economic recovery has been facing "challenges" across the member states of the Organization for Economic Cooperation and Development.

"US gasoline demand is expected to be back in its normal growing mode; however, it will remain a major factor affecting oil demand projections," the OPEC report said, also suggesting consumption may be increased by the "disruption in nuclear power generation in Japan."

Obama forms interagency Alaska oil, gas group

US President Barack Obama issued an executive order establishing an interagency working group to coordinate federal agencies' efforts in overseeing onshore and offshore oil and gas development in Alaska. The group will be chaired by Deputy US Interior Sec. David J. Hayes.

Addressing a Center for Strategic and International Studies seminar on Arctic oil and gas resources, Hayes said the group's formation reflects the Obama administration's recognition that safe and responsible development of US oil and gas resources requires different approaches and technologies in each geographic location.

"This is particularly true when it comes to Alaska, whose natural resources offer significant promise for energy development, while posing challenges associated with the conditions of Arctic environments," he said.

Hayes said that while agencies across the federal government have various responsibilities to protect those resources, "it's important that we speak with one voice."

He noted that the group will include deputies or comparable officials from the Departments of Agriculture, Commerce, Defense, and Energy; the Environmental Protection Agency; and the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects.

"We'll simplify decision-making processes by making sure that we're doing our part to collaborate as we evaluate permits and conduct rigorous environmental reviews," Hayes explained.

The state's congressional delegation cautiously welcomed the news. Its two US senators and single House member separately called the federal interagency working group's formation a positive step, but promised to watch its progress closely and let it know if it's falling short of its goals.

Barrett expands DJ basin Niobrara position

Bill Barrett Corp. will pay $150 million to acquire Denver-Julesburg basin properties that target Niobrara oil, bringing its Niobrara position in the basin to more than 67,000 net acres.

The properties to be acquired from an affiliate of Texas American Resources Co., Austin, are in Hereford, Colo., near the Wyoming state line and near giant Wattenberg field. A number of successful Niobrara wells have been drilled nearby.

Bill Barrett Corp. estimated that it may spend as much as $35 million on the properties in 2011 after closing, expected in the current quarter.

The properties include a preliminary estimate of 7 million bbl of oil equivalent net proved reserves, 650 boe/d net production, and 28,000 net acres of mineral leasehold, primarily on fee lands. They produce mainly from the Codell and Niobrara formations.

Bill Barrett Corp. said it has been assembling a DJ basin Niobrara oil position for 2 years. The acquisition gives it a "sizable DJ play that includes exploitation opportunity within the existing Wattenberg development area and a sizable exploration acreage position, where we intend to test the Niobrara through horizontal drilling this year."

Cairn sells Vedanta 10% of Indian unit

Cairn Energy PLC said it has completed the sale of a minority stake in subsidiary Cairn India to the mining conglomerate Vedanta Resources, which is trying to acquire a majority interest.

Cairn sold a 10% interest in Cairn India to Vedanta for $1.362 billion. Vedanta, London, last year offered to buy as much as 60% of the Indian company for $9.6 billion and earlier bought a 10.4% stake from Petronas (OGJ, Apr. 25, 2011, Newsletter).

Approval by the Indian government of Vedanta's takeover of Cairn India has been complicated by a royalty dispute. Last month the government announced conditional approval, but the companies haven't accepted the conditions (OGJ Online, July 1, 2011).

In its July 12 announcement about sale of the minority interest, Cairn Energy said sale of a further 30% stake "remains subject to the necessary consents and approvals from the government of India."

Cairn Energy now owns 52.2% of Cairn India. Vedanta holds 28.5%.

Exploration & DevelopmentQuick Takes

Iraq Kurdistan's Tawke field a larger oil giant

Consulting engineers have estimated a midrange of 636 million bbl of recoverable oil at Tawke field in the northern part of Iraqi Kurdistan.

Field operator DNO International ASA said the estimate is more than double and yearend 2010 estimate of 306 million bbl and far exceeds company expectations of even a few months ago. The new figure certainly was not envisaged when the company made the Tawke discovery in 2006, DNO said.

Recent performance has proven the field's exceptional reservoir quality, the company added.

Tawke's original oil in place is estimated at 1.748 billion bbl, and the estimated recovery factor of 36.4% is based on the 2011 production profile and updated geological reservoir models. Tawke production averages 70,000 b/d.

Meanwhile, DNO estimated midrange recoverable resources of 100 million bbl for Bastora and 36 million bbl for Benenan, its oil discoveries on the Erbil license. The resources are based on estimated combined OOIP of 950 million bbl and recovery factors of 18% for Bastora and 9% for Benenan. DNO declared the fields commercial on June 25 and plans to file development plans by yearend.

In its report to the Ministry of Natural Resources, DNO International estimated that its three operated Kurdistan licenses have a gross potential of 3.05 billion bbl in place in known, undrilled geological horizons.

Lundin hits Barents gas find with oil potential

Lundin Petroleum AB has drilled a gas discovery with potential for a deeper oil leg in the southwestern Barents Sea off Norway 25 km north of Snohvit field.

The 7120/2-3S well, first exploratory well on PL438, went to 2,600 m below sea level on the Skalle prospect and identified an initial gross contingent resource of 88-280 bcf. Its primary target was to prove hydrocarbons in Cretaceous and Jurassic. It found gas in three zones and was comprehensively logged and cored.

The oil leg potential exists in the Lower Cretaceous reservoir, and upside is possible in Skalle substructures and other prospects on the license, said Lundin Petroleum, which will analyze well results to determine an appraisal program.

Lundin Petroleum said it remains confident regarding the oil prospectivity of its Barents Sea acreage.

The Transocean Leader rig that drilled Skalle will move to PL265 in the Greater Luno area in the North Sea off Norway to drill the Aldous Major South exploratory well 16/2-8. Statoil ASA is the operator of PL265 and Lundin Petroleum has a 10% interest.

Trinidad and Tobago to offer more deepwater blocks

Trinidad and Tobago has announced that before yearend it will be putting certain deepwater blocks out for bids. Helena Innis King, director of the twin-island nation's resource management, told a seminar in Port of Spain that this latest bid round will take place in September.

Innis King's statement comes even before an announcement has been made on the winners of the blocks from the last deepwater bid round, which attracted five bids on three blocks.

She explained that the delay in block awards had to do with scheduling problems and that the Ministry of Energy and Energy Affairs was waiting on the Cabinet to approve its recommendations for the blocks.

BP PLC bid on two of the three blocks, a consortium of BHP Billiton and Repsol YPF SA bid on two blocks, and a consortium of BHP, Total SA, and Repsol YFP bid on one block as did Niko Resources Ltd.

Innis King said, "Like most cabinets, this one does not have a lot of people with a background in the energy sector, so decisions relating to energy are usually sent to the subcommittee of the Cabinet and then a recommendation is made to the wider Cabinet. Thus far this committee has not met because of scheduling problems."

Innis King said two Cabinet-appointed committees perform the evaluations.

The Caribbean island said it will again call for nominations of deepwater blocks. There are 36 blocks from which nominations can be made and companies will be required to submit a letter to the minister identifying the blocks nominated.

Each company may nominate up to five blocks and all nominations will be treated as confidential. The final determination of blocks, to be offered in another bid round, will be made by Ministry of Energy and Energy Affairs and there are no obligations on the part of either party arising from the nominations.

Drilling & ProductionQuick Takes

ConocoPhillips stops oil flow from Bohai Bay platforms

China's State Oceanic Administration (SOA) requested Conoco-

Phillips China Inc., operator of Penglai 19-3 oil field in Bohai Bay, to suspend production from Penglai Platforms B and C until the risk of another oil spill is eliminated, CNOOC Ltd. reported.

"Operations aren't permitted to resume until oil spill risks are fully eliminated," SOA said in a statement following two incidents from the field last month. Under a production-sharing contract with ConocoPhillips, CNOOC holds 51% interest.

The shutin is expected to result in a temporary reduction of 17,000 b/d net after royalties to ConocoPhillips, the company said. CNOOC said its net production from the two platforms before the shutin was 22,000 b/d.

ConocoPhillips said seepage on the seabed was observed June 4 along a natural fault near Platform B. In a second incident, oil and gas bubbles were observed on the surface June 17 near Platform C, 2 miles from the Platform B seep. The bubbles were seen during drilling from the platform.

"The majority of seepage has been stopped" from Platform B, ConocoPhillips said. "A containment device was designed and constructed and put in place as a precaution should the seep occur from the main source again."

Trace amounts of oil continue to seep intermittently near the original seep, occasionally causing minor surface sheens, ConocoPhillips said. Workers deployed booms to contain and collect oil.

A cementing procedure stopped the release near Platform C within 48 hr, and the well was stabilized, plugged and abandoned, ConocoPhillips said. Crews deployed absorbent boom, and cleanup operations continue.

ConocoPhillips estimated the aggregate amount of fluid spilled from the two incidents at 1,500-2,000 bbl of oil and oil-based drilling fluids. The company is working with independent experts to validate the estimate.

During these incidents, no oil sheen reached the shoreline, and there were no injuries to personnel, ConocoPhillips said.

Transocean evacuates semi off Ghana

Transocean Ltd. evacuated 108 workers by helicopter from its Marianas semisubmersible after the rig took on water July 6 while working off Ghana for Eni SPA.

The Marianas semi, which was moored, was stable on July 7, according to Transocean spokesman Guy Cantwell. Efforts were under way to disconnect the rig so that it could be towed to sheltered water where it could be inspected for damage.

"It could take a week or more" before the rig can be inspected, Cantwell said, adding that the cause of the incident was still under investigation. He said water was being removed from some of the rig's compartments, but he would have no other details until the rig had been inspected.

"No injuries have occurred," Cantwell said, confirming that 20 or fewer workers remained on the rig. The Marianas is capable of drilling in 7,000 ft of water to depths of 25,000 ft.

Separately in a research note, FBR Capital Markets analyst Robert MacKenzie said, "We understand the Transocean Marianas rig developed a crack in one of the pontoons while it was hoisting anchors."

Transocean moved the Marianas from the Gulf of Mexico during the US deepwater drilling moratorium following the April 2010 Macondo well blowout, resulting in a fire and explosion that killed 11 people on Transocean's Deepwater Horizon semi. BP operated the Macondo well. The Deepwater Horizon eventually sank, and a massive oil spill resulted.

Eni issued no immediate comment on the Marianas. Earlier this year, Eni said the Sankofa 2 appraisal well confirmed potential of the Sankofa oil and gas discovery to become the first development of nonassociated gas off Ghana (OGJ Online, Apr. 12, 2011).

Drilled in 864 m of water about 55 km off Ghana, the Sankofa confirmed 35 m of net gas and condensate pay in Cretaceous sands, Eni said. The Sankofa wells are on a block adjacent and to the east of the West Cape Three Points block.

Kosmos Energy Ltd. of Dallas said the Marianas incident likely will delay Kosmos from drilling the Cedrela well in the West Cape Three Points block. Kosmos issued a July 7 statement saying it delivered a force majeure notice to the government of Ghana and Ghana National Petroleum Corp. The Marianas was scheduled to arrive July 10 for drilling, Kosmos said.

Although Transocean declined to discuss what might have happened, Kosmos said the Marianas "was rendered temporarily inoperable following a reported anchor-handling incident."

Senators launch national EOR initiative

North Dakota's two US senators kicked off the National Enhanced Oil Recovery Initiative, which they described as a comprehensive effort to increase US oil production while sequestering carbon dioxide, at a July 12 press conference with oil industry executives, state officials, and technical experts.

Kent Conrad, a Democrat who chairs the Senate Budget Committee, and John Hoeven, a Republican serving his first term after 10 years as North Dakota's governor, noted that the state already has one of the world's only commercial-scale carbon sequestration operations, and has become the nation's fourth-largest oil producer.

Conrad said the US has tens of billions of barrels of oil left in existing oil fields. The US Department of Energy estimates that standard recovery techniques may leave 60-80% of the original oil in place, he said. More use of carbon dioxide for EOR could double oil recovery efficiency, Conrad suggested.

"EOR techniques could help our nation produce an additional 3 million b/d, representing one third of current US petroleum imports," added Hoeven, who is a member of the Energy and Natural Resources Committee.

They said the 30-member group, which is being facilitated by the Great Plains Institute and the Pew Center on Global Climate Change, will develop recommendations for federal and state policymakers by early 2012.

PROCESSINGQuick Takes

Crosstex, Apache to develop Permian gas plant

Crosstex Energy LP and Crosstex Energy Inc., Dallas, announced a joint investment with Apache Corp., Houston, of $85 million in a new natural gas processing plant in the Permian basin in West Texas.

Initial phase of the project will provide interim and long-term processing, compression, and residue gas takeaway for Apache's Deadwood development in Glasscock County. Crosstex and Apache will fund the project equally as well as hold equal working interest.

Initially, Crosstex and Apache will install a 20-MMcfd refrigeration plant as interim gas processing and handling that is to be operating by this year's fourth quarter. A 50-MMcfd cryogenic gas processing will be operating by second-quarter 2012. Crosstex will manage construction and serve as operator.

In addition, Crosstex will purchase, upgrade, and refurbish the abandoned Patriot fractionator in Midland County initially to serve as a rail terminal for Apache raw-make NGL. Crosstex will move NGL via rail to fractionation and sales at its Eunice, La., plant. Product will be delivered to the Mesquite terminal via existing NGL pipelines or by trucks.

Crosstex will invest $12 million in the project, which is to be completed and operating in the fourth quarter. The Crosstex announcement said the plant will provide NGL takeaway for "the constrained Permian infrastructure" until a long-term pipeline becomes available.

Crosstex operates about 3,300 miles of pipeline, 9 processing plants, and 3 fractionators.

Argentine refinery to upgrade coker heater

Repsol-YPF SA has awarded an engineering, procurement, and construction contract to Foster Wheeler AG for a delayed coker heater for the delayed coking unit at the company's Complejo Industrial La Plata facility in Argentina.

Terms of the agreement were not disclosed. Oil & Gas Journal figures for the refinery at La Platta as of Jan. 1 show an charge capacity of 189,000 b/cd with a coking capacity of 25,133 b/cd.

The fired heater will use Foster Wheeler's selective yield delayed coking technology. The delayed coker heater is to be completed by June 2012. The coking technology is a flexible thermal conversion process used by refiners to upgrade heavy residue feed and process it into transport fuels and coke products for fuel and metallurgical markets, says Foster Wheeler.

The process can be designed to maximize clean liquid yields while minimizing fuel coke yields, or to achieve other objectives, such as to minimize heavy gas oil yields or to produce specific grades of coke for industrial use.

TRANSPORTATIONQuick Takes

ExxonMobil starts plan for Silvertip line replacement

ExxonMobil Pipeline Co. has begun preliminary work toward replacing the damaged segments of its 69-mile, 12-in. OD Silvertip crude pipeline, which ruptured July 1 and leaked 750-1,000 bbl of oil into the Yellowstone River in Montana.

Work includes discussions on permitting requirements, right-of-ways, drilling equipment, contracting, and pipeline fabrication and transport.

US Environmental Protection Agency-led cleanup activities continue in the meantime, with ExxonMobil reporting almost 700 people, more than 43,000 ft of boom, and about 260,000 absorbent pads as dedicated to the task.

Flooding on the Yellowstone has complicated cleanup efforts, but ExxonMobil says it has 46 boats available for deployment on the river once conditions permit.

EPA air quality monitoring has confirmed no airborne danger to public health, with continued monitoring of municipal water systems also so far clean.

The cause of Silvertip's failure remains under investigation, though the Yellowstone's flooding is thought to be a contributing factor.

The US Pipeline and Hazardous Materials Safety Administration ordered ExxonMobil to rebury the pipeline beneath the river bed to protect it from external damage and conduct a risk assessment on the line wherever it crosses a waterway. The company will also have to submit a restart plan before Silvertip can resume operations (OGJ Online, July 7, 2011).

Lithuania lets contract for floating LNG terminal

Lithuania state oil company Klaipedos Nafta AB has awarded Fluor Corp. a contract to provide engineering and business support for a floating LNG import terminal at Klaipeda, Lithuania. Fluor booked the undisclosed contract value in this year's second quarter.

Under the contract, Fluor will provide engineering, technical, risk management, safety, and environmental advisory services. It will prepare the technical development plan and assist in selecting technologies, as well as developing a business plan for the terminal, the company said.

Floating or dock-based LNG regasification technologies are currently in use in the US, Brazil, Argentina, UK, Kuwait, and Abu Dhabi. Fluor's announcement did not specify which technologies were being considered. Italy's Adriatic LNG operates from a gravity-based platform off Porto Levante.

Fluor said it has previous experience in Lithuania as the engineering, procurement, and construction contractor for the Butinge oil terminal Mazeikui Nafta in Butinge in 1999. Klaipedos Nafta operates an oil terminal in the city of Klaipeda, on the Baltic Sea.

More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com