OGJ Newsletter

April 23, 2012
International news for oil and gas professionals


ExxonMobil-Rosneft partnership advances

ExxonMobil Corp. and Rosneft have signed agreements under a broad upstream partnership they formed last year that support exploration off Russia and the acquisition by Rosneft subsidiaries of interests in the Gulf of Mexico and unconventional resources in the US and Canada (OGJ Online, Aug. 30, 2011).

The new agreements:

• Form joint ventures to manage an exploration program in the Kara and Black Seas and set terms of investments by the partners. In a statement, the companies estimated the "initial cost of preliminary exploration" at more than $3.2 billion.

• Provide for the acquisition by Neftegaz Holding America Ltd., an independent indirect subsidiary of Rosneft, of a 30% equity interest in ExxonMobil's share of a tight oil prospect in the Delaware basin of West Texas called La Escalera Ranch.

• Give Neftegaz Holding America the right to acquire 30% interest in 20 blocks held by ExxonMobil in the western Gulf of Mexico.

• Provide independent Rosneft subsidiary RN Cardium Oil Inc. 30% of ExxonMobil's share of the Harmattan acreage in the Cretaceous Cardium tight oil play of western Alberta. "The execution of that project may become a source for the development of technologies for unconventional reservoirs in Russia," the statement said.

ExxonMobil Chairman and Chief Executive Officer Rex Tillerson and Rosneft Pres. Eduard Khudainatov said they were encouraged to proceed by moves of the Russian government to reform taxation of the oil industry.

The companies said they began exploration of the Tuapse license block in the Black Sea off Russia last September. A seismic program there is 70% complete. Drilling of the first exploratory well is planned for 2014-15.

Seismic and environmental programs of the East Prinovozemelsky blocks in the Kara Sea remain under planning. Drilling of an exploration well is possible in 2014.

House Dems seek new DOI Alaska pollution rules

Four Democratic leaders from two key US House committees and subcommittees asked US Interior Sec. Ken Salazar to issue new regulations controlling air pollution from oil drilling off Alaska's north coast. Authority to do so was transferred from the US Environmental Protection Agency to Interior under the Fiscal 2012 Consolidated Appropriations Act, they noted.

Ranking Minority Members Henry A. Waxman (Calif.), of the Energy and Commerce Committee; Bobby L. Rush (Ill.), of that committee's Energy and Power Subcommittee; Edward J. Markey (Mass.), of the Natural Resources Committee; and Rush D. Holt (NJ), also recommended specific measures they said would match the level of protection EPA previously offered under the Clean Air Act.

The four Democrats urged Salazar, in an Apr. 11 letter, to require all major drilling operations off Alaska's Arctic coast to meet specific air pollution requirements, instead of simply requiring each drilling permit applicant to estimate its projected emissions levels.

They said they also want DOI to require offshore drilling operations to account for emissions from support vessels, and to measure air-quality impacts at the pollution's source instead of onshore. Interior also should provide adequate public comment opportunities on a drilling applicant's air-pollution analysis; and ensure permitting regulations fully consider the Arctic's unique characteristics and vulnerabilities, they recommended.

"Shifting oversight from one branch of the federal government to another should not result in more air pollution and fewer protections for the Alaskan people and Native Alaskans in particular," the Congressmen said in their letter.

"We therefore urge you to promulgate regulations to implement your new authority…to ensure that DOI provides Native Alaskans and the Arctic environment with a level of protection commensurate to what EPA has provided under the Clean Air Act," they said.

Chesapeake Oilfield Services files IPO statement

Chesapeake Energy Corp. announced its service affiliate, Chesapeake Oilfield Services, has filed a registration statement with the US Securities and Exchange Commission outlining plans for a proposed initial public offering.

The IPO statement has yet to become effective, said the Oklahoma City independent, which is in the process of divesting assets for anticipated proceeds of $8-10 billion.

The company has vertically integrated its operations and owns substantial marketing, midstream, and services businesses directly and indirectly through its subsidiaries Chesapeake Energy Marketing Inc., Chesapeake Midstream Development LP, and its affiliate Chesapeake Midstream Partners LP.

Chesapeake owns positions in the Barnett, Haynesville, Bossier, Marcellus, and Pearsall natural gas shale plays and in the Eagle Ford, Utica, Granite Wash, Cleveland, Tonkawa, Mississippi Lime, Bone Spring, Avalon, Wolfcamp, Wolfberry, and Niobrara unconventional liquids plays.

Exploration & DevelopmentQuick Takes

Petrobras discovers presalt oil north of Lula field

Petroleo Brasileiro SA (Petrobras) said an exploratory well north of Lula field in the Santos basin off Brazil has found good-quality oil in presalt carbonate reservoirs at 5,660 m based on wireline sampling. The 1-RJS-689A (1-BRSA-925A RJS) well, also known as Dolomita Sul, is in 1,747 m of water on the BM-S-42 block 177 km south of Rio de Janeiro State. Petrobras is the block's sole concessionaire.

Petrobras said the discovery "pushes the potential of the presalt region beyond the initial expectations" and that the well is still drilling toward other objectives.

Horn sees petroleum system in Somalia wildcat

Horn Petroleum Corp., Vancouver, BC, said its still-drilling Shabeel wildcat in Puntland, Somalia, has confirmed the presence of an active petroleum system in the Dharoor Valley.

Horn, operator, said the Shabeel well is at 2,703 m where 95⁄8-in. casing is set. It has been drilled through primarily tight limestones and shales of Lower Tertiary to Upper Cretaceous age and encountered a 355-m section of Upper Cretaceous sands and shales of the Tisje/Jesomma formations at 1,660 m.

The sands in the interval exhibited oil and gas shows, and petrophysical analysis of downhole electrical logs indicates a potential pay zone 12-20 m thick in the section, the company said. Attempts to sample formation fluids using a wireline formation tester were not successful, and thus the zone will require cased-hole testing to confirm whether it is oil bearing.

At a depth of 2,015 m a thick section of tight limestones and shales was encountered extending to the present depth of 2,703 m that is believed to correspond to the Upper Cretaceous Gumburo formation.

Horn and partners plan to drill ahead to the originally planned 3,800 m to evaluate the primary and secondary reservoir targets in the Lower Cretaceous and Jurassic intervals equivalent to the main productive section seen in analogous fields in Yemen's Masila and Shabwa basins.

A testing program including the zones of interest seen to date and any deeper potential pay zones identified will be agreed with partners at that time. Upon completion of this well, Horn will move the rig to the Shabeel North location which is nearly built.

Horn is operator with 60% interest in the Dharoor and Nugaal blocks in a Jurassic rift basin in Puntland, Somalia. Perth independents Range Resources Ltd. and Red Emperor Resources NL each have 20%.

DNO to test at least five zones at Kurdistan well

DNO International ASA, Oslo, will flow-test at least five zones at Peshkabir-1, the company's deepest well yet on the Tawke license in the Kurdistan region of Iraq.

Oil shows were observed across three potentially productive intervals. Full and sidewall cores suggest a continuous hydrodynamic column in the Cretaceous interval, and the additional shows in the Jurassic and Triassic intervals are the first the company has encountered at lower depths on the Tawke license.

The Peshkabir-1 well was designed to probe a large undrilled feature west of producing Tawke field (see map, OGJ, Feb. 6, 2012, p. 50). Spudded in September 2011, it reached total depth of 4,092 m.

Meanwhile, DNO reworked the Tawke-15 well, drilled and completed in the Cretaceous in 2011 but shut in due to low productivity. The post-workover test rate is 7,000 b/d of oil, and DNO has connected the well to existing pipeline and processing facilities. Tawke-14 is drilling below 1,800 m on the field's northern flank and is another of the planned 2012 wells designed to confirm and delineate the potential of the Cretaceous in an untested upstructure location. Tawke-14 is expected to reach a total depth of 2,665 m in the second quarter of 2012.

Bijan Mossavar-Rahmani, DNO's executive chairman, said, "We continue on track to establish 100,000 barrels per day of deliverability from the Tawke license before yearend, and we remain confident that in time we will be in a position to place more and more of this oil in both regional and international markets."

DNO is operator of Tawke field with a 55% working interest. Genel Energy has 25% and the Kurdistan Regional Government 20%.

Wintershall finds North Sea light oil off Norway

Wintershall Norge AS said it discovered light oil at a wildcat on its Skarfjell prospect in PL 418 in the North Sea offshore Norway.

The 35/9-7 well penetrated good quality Upper Jurassic reservoir sands initially judged to contain 60-160 million bbl of recoverable oil. Wintershall said further drilling is needed to confirm commercial viability and possible further upside. It said Skarfjell can serve as focal point for nearby discoveries.

Skarfjell is in 368 m of water 17 km southwest of Gjoa field and lies between the Grosbeak discovery to the south and the Titan discovery to the north. The primary exploration target of well 35/9-7 was to prove hydrocarbons in Upper Jurassic reservoir rocks.

The Skarfjell well was drilled to 2,976 m true vertical depth below sea level and terminated in the Middle Jurassic Brent Group Rannoch formation. The well was not tested due to limitation in the rig slot length, but extensive reservoir and fluid sampling give valuable data on the new discovery. The well will now be permanently plugged and abandoned.

The Songa Delta rig that drilled the 35/9-7 well will be transferred to Suncor to drill the 33/6-3S well.

PL 418 interests are Wintershall 35%, Agora Oil & Gas AS and Bayerngas Norge AS each 20%, Edison International Norway 15%, and RWE Dea Norge AS 10%. Wintershall noted that it has more than 40 licenses on the Norwegian Continental Shelf, more than 20 of them operated.

Drilling & ProductionQuick Takes

Statoil launches new rig type for increased recovery

Statoil let a contract to Aker Solutions to hire a category B drilling rig, a new type of rig, which is designed to increase recovery from the company's operating fields on the Norwegian continental shelf (NCS).

Statoil has developed the new type of rig and well-control system in cooperation with the supplier industry. The category B rig, which falls between light intervention vessels (category A) and conventional rigs (category C), has been specially adapted to carry out well intervention and drilling operations in existing subsea wells, Statoil said.

The category B rig design concept. Illustration from Statoil.

The new rig, with associated integrated services, is expected to reduce operating costs for well intervention by as much as 40%, Statoil reported.

The rig's design, which provides the option for a number of different types of well interventions using wireline and coiled tubing operations, is based on Aker Solutions' own studies with a background in Statoil specifications. The rig type is designed for year-round well service in Statoil-operated activities.

"This type of rig is also designed to carry out sidetrack drilling from production tubing (through tubing drilling) in a manner that allows simultaneous production from both the new sidetrack and existing production tubing," Statoil said, adding, "The well services are conducted through existing subsea Christmas trees."

Statoil said, "The key to maintaining the current production level on the NCS is increased recovery from existing fields, along with the development of new fields. Increasing drilling activity on mature fields is important in order to achieve the NCS's full potential."

Currently, Statoil operates about 500 subsea wells. Statoil and licensees will enter into an 8-year contract with options for three times 2 years for the category B service. The estimated value of the contract is $1.9 billion.

The rig will be in service during 2015.

ROV video confirms Gulf of Mexico oil seep

The US Bureau of Safety and Environmental Enforcement (BSEE) said video from a remotely operated vehicle survey confirmed the source of an oil seep sighted in the Gulf of Mexico last week is from a natural seabed seep as previously suspected.

"A modest amount of oil is being released," BSEE said on Apr. 16. Industry reports natural seeps are common in the gulf.

Royal Dutch Shell PLC provided the video for the investigation of a light sheen spotted off Louisiana on Apr. 11. At one point, the sheen was estimated to be about 10 miles long although it has largely dissipated.

Nexen advances Long Lake oil sands project

Nexen Inc. has begun steaming on the 12th pad at its Long Lake oil sands project in the southern Athabasca region of Alberta, which it is developing with steam-assisted gravity drainage integrated with a 60,000 b/d upgrader (OGJ Online, Nov. 28, 2011).

Production from the first 11 pads is 34,500 b/d from 90 wells.

Nexen expects to drill a total of 18 wells on the 12th and 13th pads, from which it expects peak flow of 11,000-17,000 b/d. It anticipates production start on the 12th pad this summer and the start of steaming on the 13th pad at midyear, with production beginning there before yearend.

The company also has secured regulatory approvals to develop the 14th and 15th pads, where it projects drilling of 11 wells and peak production of 4,000-7,000 b/d, and the Kinosis 1A area, where it expects to drill 29 wells and achieve peak output of 15,000-25,000 b/d.

The Long Lake upgrader gasifies asphaltines from produced bitumen into synthesis gas, which is used as a fuel and source of hydrogen for a hydrocracker.

Nexen operates the Long Lake and Kinosis 1A areas with a 65% working interest. CNOOC Ltd. holds the remaining interest.

Oselvar starts up in North Sea off Norway

A group led by DONG E&P Norge has started production at Oselvar field in the southern North Sea offshore Norway.

Oil and gas flowing from the Oselvar subsea template transit a 23-km flow line to BP-operated Ula field. Two horizontal wells are producing, and a third horizontal well is being drilled and is to be completed in mid-2012.

Gas is reinjected, and oil is shipped via Ekofisk to Teesside. Peak production is estimated at 16,500-20,000 b/d of oil equivalent at capacity from 53 million boe of reserves, 50% oil. Production is expected to continue for about 20 years.


Eni limiting operation of Gela refinery

Eni SPA, citing poor refining margins in Europe, is limiting operation of its 105,000-b/cd Gela refinery on the southern coast of Sicily. For 12 months, the refinery will process domestic crude oil but not foreign crudes or residues. Normal operations are to resume in April 2013.

Eni didn't specify the effect of its move on capacity utilization. It said 500 workers would be affected.

According to OGJ's Worldwide Refining Report, the refinery's processing capacities included 45,000 b/d of delayed coking, 35,000 b/d of fluid catalytic cracking, and 13,850 b/d of cyclic catalytic reforming (OGJ, Dec. 5, 2011, p. 30).

Trader invests in Indian refining project

Commodity trader Trafigura Pte. Ltd., Singapore, has agreed to invest as much as $130 million to earn an interest as high as 24% in the 120,000 b/d Cuddalore refinery under construction by Nagarjuna Oil Corp. Ltd. in Tamil Nadu, India (OGJ, Dec. 6, 2010, p. 50).

Trafigura said commercial operations are to begin during the first half of 2013. Downstream units of the refinery, 180 km south of Chennai on the Bay of Bengal, will include a fluid catalytic cracker and delayed coker. Other investors in the project are Nagarjuna Fertilizers & Chemicals Ltd., Tata Petrodyne, Uhde GMBH, TIDCO, and CPCPL.

Jacobs handling BP Rotterdam FCCU work

BP Raffinaderij Rotterdam BV has let a contract to Jacobs Engineering Group for work related to a major shutdown of the fluid catalytic cracker at its 400,000-b/d Rotterdam refinery.

The contract is for engineering and procurement services and engineering assistance during construction, commissioning, and start-up in the replacement of the FCCU's end-of-life power recovery train and regenerator ballistic separator and cyclones.


West Coast LNG export plans get Canadian okay

Canada's federal government has approved a 20-year license to BC LNG Export Cooperative to export LNG from Kitimat, BC. This action follows a similar approval by Canada's National Energy Board in February (OGJ Online, Feb. 3, 2012).

The export plant will be built on the west bank of the Douglas Channel in the District of Kitimat. BC LNG intends to ship as much as 1.8 million tonnes/year, mainly to Asia.

BC LNG is owned by LNG Partners LLC and HN DC LNG LP, each with a 50% interest. According to the Ministry of Natural Resources announcement, natural gas would move to the Douglas Channel site via the existing Pacific Northern Gas Pipeline and possibly on the proposed Pacific Trail Pipeline.

The ministry said the proposed plant is undergoing an environmental assessment in accordance with the Canadian Environmental Assessment Act. The plant's first phase targets operation by late 2013 or early 2014 and would represent the first LNG exports from Canada.

EPP, Anadarko, DCP to build DJ basin-Texas pipeline

Enterprise Products Partners LP, Anadarko Petroleum Corp., and DCP Midstream LLC plan to build a natural gas liquids pipeline from the Denver-Julesburg basin in Weld County, Colo., to Skellytown, Tex., roughly 435 miles. The Front Range Pipeline will interconnect to the Mid-America Pipeline system and the recently announced Texas Express Pipeline (OGJ Online, Mar. 6, 2012).

EPP expects Front Range to transport 150,000 b/d of NGL, expandable to 230,000 b/d depending on shipper interest. Enterprise will build and operate the pipeline and expects it to enter service during this year's fourth quarter.

Anadarko described the project as allowing it to capture the highest wellhead netbacks on expected growth in its Wattenberg play, also noting Western Gas Partners LP's plans to build the Lancaster gas plant in the DJ basin. Western Gas expects the Lancaster plant to enter service first-quarter 2014, supported by a throughput agreement with Anadarko.

DCP also remarked on plant development in the DJ basin in expressing the need to develop open-access transportation to the Mont Belvieu, Tex., fractionation complex.

Each company will hold a one-third interest in Front Range. A binding open season for the project ends May 14.

KMEP advances Trans Mountain pipeline expansion

Kinder Morgan Energy Partners LP will proceed with plans to expand its Trans Mountain pipeline system, which extends from Edmonton to Canada's west coast, following receipt of 660,000 b/d of binding 20-year commercial commitments from existing and new shippers during a recently concluded open season. The proposed expansion will increase capacity on Trans Mountain to 850,000 b/d from 300,000 b/d.

Work will include twinning the pipeline within existing right-of-way when possible, adding new pump stations, increasing storage at existing facilities, and expanding the Westridge Marine Terminal. Trans Mountain currently includes 2.5 million bbl of storage in Edmonton; 650,000 bbl of storage at the Sumas pump station and terminal in Abbotsford, BC; and 1.6 million bbl at its endpoint Burnaby Terminal. Westridge, supplied from Burnaby, is in Vancouver, BC, has 290,000 bbl of storage divided between three tanks, and can accommodate ships up to 120,000 dwt and barges.

KMEP will now discuss the project with communities along the pipeline route and other interested parties and complete required studies before filing applications with Canada's National Energy Board in 2014. Pending approval, KMEP plans to begin construction in 2016 for an in-service date of 2017.

KMEP will file a commercial tolling application for the expansion with the NEB this summer.

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