OGJ Newsletter

May 14, 2012
International news for oil and gas professionals


Marathon to buy private Eagle Ford producer

Marathon Oil Corp. will buy Eagle Ford shale play participant Paloma Partners II LLC, Houston, for $750 million, Paloma Partners said. The deal is effective Apr. 1, subject to closing terms and conditions, and closing is slated for third quarter.

Paloma II owns 17,000 net acres, mainly in Karnes and Live Oak counties, Tex. Net production as of Apr. 1 was 7,000 boe/d.

Paloma II is a privately held acquisition and E&P company. Main shareholders are Paloma Resources LLC, Encap Energy Capital Fund VII LP, and Macquarie Americas Corp.

MarkWest Energy to acquire Keystone Midstream

MarkWest Energy Partners LP agreed to acquire 100% of Keystone Midstream Services LLC for $512 million in a transaction expected to close during this year's second quarter.

Keystone is owned by Stonehenge Energy Resources LP and affiliates of Rex Energy Corp. and Sumitomo Corp.

Rex Energy and Sumitomo are developing the Marcellus, Upper Devonian, and Utica shales in the Pennsylvania counties of Butler and Beaver.

Keystone's assets are in Butler County and include two cryogenic gas processing plants totaling 90 MMcfd of capacity, a gas gathering system, and associated field compression.

Rex Energy and Sumitomo have dedicated an 895 square mile area to MarkWest. To date they have jointly leased 68,400 highly prospective acres in Butler County, an acreage position that continues to grow.

MarkWest will gather and process the rich gas and fractionate the NGLs under long-term fee-based agreements.

Rex Energy plans to complete 22 wells in Butler County this year and anticipates increasing its drilling activity following completion of the MarkWest NGL gathering line. MarkWest anticipates gas volumes from Keystone to grow from MMcfd now to 170 MMcfd at yearend 2013, reaching 350 MMcfd by 2016.

PanAtlantic Energy, formerly Vanco, taps Drennen

Vanco Overseas Energy Group, Houston, has changed its name to reflect its existing scope of operations and appointed a new president and chief executive to lead its deepwater exploration programs offshore Brazil, West Africa, and in the Black Sea.

William T. Drennen III, a 36-year veteran of executive management at ExxonMobil Corp., Hess Corp., and elsewhere, will head the company, now known as PanAtlantic Energy Group.

PanAtlantic said it has assembled an experienced team from the prior organization's management and technical staff that "represent a combination of significant deepwater and frontier oil and gas expertise--both as a generator of world-class exploration prospects and as a successful operator of high-potential, capital-intensive deepwater drilling activity.

"PanAtlantic continues with the tradition of solid financial strength, access to capital, and extensive financial and investment experience built on a superior geoscience and engineering technical foundation and skill set," the company added.

PanAtlantic will drill three exploratory wells in 2012-13 on its three Santos basin blocks off Brazil. In West Africa, the company has varying interests in 4.36 million gross acres in the Transform Margin region including blocks off Equatorial Guinea, Ghana, Ivory Coast, and Sierra Leone.

PanAtlantic has an interest in the Prykerchenska block, acquired under Ukraine's first production sharing agreement, and holds interests in two Black Sea blocks off Romania on trend with a recent ExxonMobil discovery.

WEA study cites lost benefits from delayed projects

Twenty-two proposed Utah and Wyoming oil and gas projects where 44,289 wells would be drilled potentially could annually support 120,905 jobs paying $8 billion in wages, generate $27.5 billion of economic activity, and produce $139 million of government revenue, a study funded by the Western Energy Alliance concluded. The projects' total economic impact over their expected 10-15 year lifespan is pegged at $383.5 billion, it said.

Most of the wells, 30,789, are proposed in National Environmental Policy Act documents that have been under review for more than 2 years, the study by SWCA Environmental Consultants noted. "Many of these were begun over 5 years ago, delaying projects for years past the usual processing times," it added.

Outstanding projects delayed for more than 3 years in the 2 states represent 22,835 proposed wells, or about 1,631 wells/year, the study said. "Federal government delays to these projects are preventing the creation of 64,805 jobs, $4.3 billion in wages, and $14.9 billion in economic impact every year," it said.

"Government delays during the environmental analysis phase are preventing significant job creation and economic activity," said Kathleen Sgamma, WEA's vice president of government and public affairs.

The Denver-based regional association of independent producers' members know first-hand how difficult it is to operate on public lands, Sgamma observed. "Federal policies discourage domestic oil and natural gas production, and put the West at a disadvantage compared to other regions of the country without a preponderance of public lands," Sgamma said.

Exploration & DevelopmentQuick Takes

Pliocene gas gauged at Mnazi Bay, Tanzania

Maurel & Prom, Paris, has plugged the Ziwani-1 wildcat on the Mnazi Bay concession onshore Tanzania after it tested natural gas from a Pliocene limestone, said partner Wentworth Resources Ltd., Dar es Salaam.

Drilled to 2,671 m, Ziwani-1 drillstem tested at an unstable 7.2 MMscfd of gas with as much as 973 psi wellhead pressure on a 36/64-in. choke from a clean limestone at 1,106-09 m with 17% porosity and 78% hydrocarbon saturation. The zone has not been previously encountered on the block, and test data analysis indicate potential resource volumes to be noncommercial.

The well also penetrated several Oligocene-Eocene sandstone intervals, but logs indicate them to be water-bearing.

The rig will move to work over and perform extended well tests on the MB-2, MB-3, and MS-1X wells in Mnazi Bay gas field. Then the group will use it to drill a second exploratory well on the concession (OGJ Online, Feb. 3, 2012).

CGX group sees petroleum system offshore Guyana

CGX Energy Inc., Toronto, found water-bearing sandstones with hydrocarbon shows in the Eagle-1 wildcat on its wholly owned Corentyne Petroleum Prospecting License off Guyana. Eagle-1 went to 4,328 m TD in Upper Cretaceous (Maastrichtian) in an 8½-in. hole with synthetic oil-base drilling fluid.

During drilling it encountered oil and gas shows through the objective Eocene and Maastrichtian geologic zones and in the yet to be confirmed Oligocene zone indicating an active petroleum system where generated hydrocarbons have migrated through the pre-Miocene section drilled by the well.

Wireline logs provided encouraging results with high resistivities correlating with sandstones that had encountered oil shows, but further open hole logs were necessary to determine the nature of the fluids in those zones. Hence, combinable magnetic resonance and modular formation dynamics logs were run and both identified the presence of good quality sandstone reservoirs that proved to be water-bearing.

Further analyses are needed to verify the geological age of the drilled section and the chemical composition of the recovered fluids, CGX said. Weather and mechanical issues added 30 days to the initial 60-day drilling time, pushing the estimated well cost to $71 million from $55 million.

CGX said the well gathered valuable information that will assist it in determining the next well to be drilled on the Corentyne PPL and for other future targets. The firm's geosciences team interpreting the recently shot 3D seismic identified other prospects and established that the updip termination of the Eagle Deep Turonian prospect is shallower than first thought.

Meanwhile the Repsol Exploracion SA-operated Jaguar-1 well on the Georgetown PPL is drilling as planned toward a total depth of 6,500 m to test the Turonian. Spudded Feb. 9, its projected drilling time is 180 days. Partners are CGX, YPF Guyana Ltd., and Tullow Oil PLC.

Noble halts Leviathan deepening in gas formation

The Leviathan-1 well has become the Levant basin's deepest known penetration at a total depth of 21,400 ft, where Noble Energy Inc. halted drilling due to high pressure and mechanical limits of the wellbore design.

The eastern Mediterranean well offshore Israel did not reach its primary objective, but it encountered a gas-bearing zone at 21,000 ft and returned valuable geologic and engineering data about the basin, Noble Energy said. The gas composition was heavier than the gas discovered in the well's shallower intervals and suggests a thermogenic source, the company added.

At 21,400 ft, still higher pressure was encountered, indicating the possibility of an overlying seal. The rig will remain to flow-test the previously discovered gas sands. The company did not provide pressure data.

Susan M. Cunningham, Noble Energy's senior vice-president of exploration and business innovation, said, "Although the well did not reach the planned objective, we are encouraged by the possibility of an active thermogenic petroleum system at greater depths within this basin. We will integrate the data from the Leviathan deep well into our model to update our analysis and design a drilling plan specifically to test the deep oil concept.

"Part of the plan will be to secure a rig with the capabilities necessary to reach the target objective. Based on the information received to date, we continue to believe there is potential for significant oil resources in this prospect and the basin."

Noble Energy operates Leviathan in the Rachel and Amit licenses off Israel with a 39.66% working interest. Delek Drilling and Avner Oil Exploration have 22.67% each, and Ratio Oil Exploration has 15%.

Drilling & ProductionQuick Takes

Saudi Aramco studies injection-water ‘tuning'

Saudi Aramco is experimenting with chemistry-optimized injection water for boosting oil recovery from carbonate reservoirs. The Advanced Research Center of the state-owned company's Exploration and Petroleum Engineering Center has completed field tests demonstrating the potential for boosting recovery from the kingdom's carbonate reservoirs by adjusting the ionic composition of injected seawater.

Aramco said research has shown that "tuning" properties such as ionic composition, salinity, and interfacial tension can increase oil recovery beyond what's possible with regular seawater in waterfloods.

Aramco said the research center plans a field-scale demonstration of the technology, which it calls SmartWater. The first phase will involve several single-well tests.

Chevron's dual gradient drillship arrives in gulf

Chevron Corp. said the Pacific Santa Ana, a deepwater drillship built with the capacity to perform dual gradient drilling (DGD), has arrived in the Gulf of Mexico to work for Chevron under a 5-year contract with a subsidiary of Pacific Drilling SA.

Conventional deepwater drilling uses a single drilling fluid weight in the borehole, but DGD uses two weights of drilling fluid: one above the seabed and another below.

The two weights allow drillers to more closely match the pressures presented by nature and effectively eliminates water depth as a consideration in well design, Chevron said. DGD also allows drillers to more quickly detect and react to downhole pressure changes, enhancing deepwater drilling safety.

"Pacific Santa Ana will enable us to demonstrate dual gradient drilling, which has the potential to change the way deepwater wells are drilled," said George Kirkland, Chevron vice-chairman. "This new process builds on our record of technology leadership in deepwater."

The Pacific Santa Ana is Chevron's fifth drillship in the deepwater gulf. It is equipped with a DGD riser, a mud lift pump handling system, six mud pumps (three for drilling fluid; three for seawater), extensive fluid-management system enhancements, and more than 72,000 ft of DGD-related cables.

Topsides pact let for renamed Luno field

Lundin Norway AS signed a letter of intent with Kvaerner Stord AS serving as an engineering, procurement, and construction contract covering topside installations for a steel platform on Edvard Grieg field, previously called Luno, off Norway.

Edvard Grieg oil and gas field, which lies in 110 m of water on PL338 in the Norwegian North Sea, encompasses the Luno and Tellus discoveries (OGJ Online, Jan. 19, 2012).

Kvaerner will use units of Aker Solutions as subcontractors for some of the work, which covers the deck frame, utility module, process module, and living quarters.

Lundin expects production to begin in 2015 and reach 90,000 b/d of oil and 1.5 million standard cu m/day of natural gas. The platform will be designed to handle more than 130,000 b/d of oil and 4 million standard cu m/day of gas in anticipation of the start of output from nearby Draupne field operated by DNO ASA.


EPP starts up Eagle Ford gas plant

Enterprise Products Partners LP, Houston, started up the first train at its new cryogenic natural gas processing plant at Yoakum, Lavaca County, Tex., 125 miles north of Corpus Christi.

The plant has design capacity of 300 MMcfd of gas and can extract about 37,000 b/d of NGLs.

During start-up, it will process existing Eagle Ford production in a reduced recovery mode to enable testing of the plant and supporting facilities and allow adjustments to plant operations. Incoming gas volumes and recovery percentages will continue to increase throughout May, EPP said, with full production from the plant expected by June 1.

Before start-up, EPP had been using capacity at gas processing plants owned by third parties. Most of those volumes will now be diverted and processed at Yoakum.

A 65-mile, 36-in. OD residue-gas pipeline linking Yoakum to EPP's leased gas storage at Wilson, Tex., was completed last month. In addition, the company has built 169 miles of 20-in. and 24-in. OD pipeline for delivering mixed NGLs extracted at Yoakum to EPP's fractionation and storage at Mont Belvieu, Tex., just east of Houston.

EPP expects record propane exports in 2012

EPP said it expects record propane exports this year from its terminal on the Houston Ship Channel. For April, the company exported a record 3.9 million bbl.

EPP is expanding its NGL refrigeration terminal to increase propane export capacity by as much as 3.5 million bbl/month. This will bring total export capacity of the NGL refrigeration terminal to 7.5 million bbl/month of propane.

The company said the expansion is ahead of schedule and it expects it to be completed in this year's fourth quarter.

In addition and in response to current increased demand for propane from international markets, Enterprise has also begun debottlenecking the terminal further to increase propane export capacity by up to a 100,000 bbl/month. This modification will be completed by June 30.

EPP, said Executive Vice-Pres. and Chief Operating Officer A.J. Teague, continues to see "very strong demand for propane exports" and has sold out baseload space for 2012 and 2013, "with some contracts extending through 2017."

Mongstad carbon dioxide test center opens

The Technology Center Mongstad, built to test technologies for capturing CO2 from post-combustion gases, has been inaugurated near Bergan, Norway (OGJ Online, Nov. 10, 2011).

A joint venture of the Norwegian government's Gassnova, Statoil, Sasol, and Shell, the center has an amine plant built by Aker Solutions and a chilled ammonia plant built by Alstom.

The demo plants will be fed flue gas from a combined heat and power plant and off-gas from a catalytic cracker at Statoil's 203,000 b/d Mongstad refinery (OGJ, May 23, 2011, p. 14).


HLF urges approval of Keystone XL pipeline

The Hispanic Leadership Fund (HLF), an organization that advocates limited government and free markets, joined US oil and gas industry leaders in urging US President Barack Obama to approve the Keystone XL crude oil pipeline. HLF Pres. Mario H. Lopez's announcement came as a joint US congressional committee began discussing whether to keep a provision approving the project in the new surface transportation bill.

"At a time when our country is hurting economically, the Hispanic unemployment rate has been hovering about 1 point above the national average," he said during a May 8 teleconference he and American Petroleum Institute Executive Vice-Pres. Marty Durbin held with reporters. "Our members recognize that, even in states where the pipeline doesn't run through, a significant number of jobs will be created," Lopez said.

Lopez said Keystone XL would create jobs even in states outside the pipeline's route, and expressed hope that the project would not become a victim of Obama administration political gamesmanship. "We know the pipeline has the support of state and local leaders from across the country, and are disappointed in the current administration's holding it up, apparently for political reasons," he said, adding, "The president can approve the Keystone XL pipeline and demonstrate to all Americans, including Latinos, that he's committed to creating jobs."

Durbin acknowledged the White House has indicated that it does not want a Keystone XL approval provision in the transportation bill, but added that the House inserted it anyway and it enjoys strong bipartisan support in the Senate.

"We understand it's a political question that's being considered now, which is why we wanted to add our voice to it. We certainly would welcome Congress's going on record again in support of it," Durbin said, adding, "But the president doesn't need Congress's approval to act…. This is still the biggest shovel-ready project on the horizon. Keystone XL is as good-to-go as it gets."

PHMSA issues pipeline operating advisory

The US Pipeline and Hazardous Materials Safety Administration issued an advisory bulletin to pipeline owners and operators to verify records relating to their pipelines' maximum operating and allowable operating pressures. The bulletin informs operators of anticipated changes in annual reporting requirements of both maximum allowable operating pressures (MAOP) and maximum operating pressure (MOP), the US Department of Transportation agency said.

It said the changes deal with requirements for operators to document confirmation of MAOP, reporting of total mileage and mileage with adequate records, what PHMSA considers an adequate record, and when reports must be submitted.

The 2011 Pipeline Safety Reauthorization Act, which US President Barack Obama signed on Jan. 3, requires gas pipeline owners and operators to verify their records accurately reflect MAOP on their lines within Class 3 and Class 4 locations and in Class 1 and Class 2 locations in high-consequence areas, PHMSA said in a May 7 Federal Register notice. Starting in 2013, it intends to require operators to verify records in these locations via the Gas Transmission and Gathering Systems Annual Report, it said.

It noted that the National Transportation Safety Board, in its Aug. 20, 2011, report of its investigation into the Sept. 9, 2010, explosion and fire of Pacific Gas & Electric Co.'s gas pipeline rupture and fire in San Bruno, Calif., recommended that the federal pipeline safety law's grandfather clause be deleted and that all gas pipelines built before 1970 be subjected to a hydrostatic test which incorporated a spike test. PHMSA said it would address the recommendation in a future rulemaking.

Woodside starts Pluto LNG production

Woodside Petroleum Ltd.'s $15 billion (Aus.) Pluto facilities on the Burrup Peninsula have started LNG production in the lead-up to the first sales cargo, although no date for the shipment has been announced. Kansai Electric and Tokyo Gas are foundation customers for Pluto.

Meanwhile, Woodside plans to drill additional exploration wells off Western Australia to prove up gas reserves needed for the Pluto expansion. The company will drill three wells this year in the Carnarvon basin and on the Exmouth Plateau.

One of these, Banambu Deep-1, will be spudded in permit WA-389-P in the next few weeks. The Banambu Deep prospect was delineated following a comprehensive review of 3D seismic data, 1,440 sq km of which was acquired and processed in 2012 and added to existing 3D data in the permit. The structure is west of the Rankin Trend and on trend with Pluto and Chevron's Wheatstone fields. The well will be drilled to a total depth of 4,800 m using Diamond Offshore Drilling Inc.'s Ocean America semisubmersible rig.

BHP Billiton has farmed into WA-389-P and will take as much as a 40% stake in return for funding up to 100% of the Banambu Deep well. Woodside will reduce to a 25% interest, but retain the operatorship. The remaining 35% interest is held by Melbourne-based Cue Energy Resources Ltd.

Banambu Deep-1 will be followed by Anake-1 in WA-269-P to the northeast of Pluto field.

Crosstex boosts Louisiana crude transloading terminal

Crosstex Energy LP is increasing capacity to transload crude oil from rail cars to both barges and pipelines at its Riverside fractionation facility in southern Louisiana to roughly 14,500 b/d from about 4,500 b/d. Crosstex expects to complete work on the Phase II expansion project at Riverside first-quarter 2013. A long-term supply agreement fully underwrites the expansion.

The Phase II development will include storage tanks, upgraded pipeline connections, and improved Mississippi River barge delivery capabilities.

The Phase I modification of the Riverside facility, which allowed transloading crude as well as natural gas liquids from rail to barge, entered service in January.

Crosstex estimates the expansion project's cost at $16 million. Crosstex also is building its 130-mile, Cajun-Sibon NGL pipeline extension, which it hopes to put in service first-half 2013 (OGJ Online, Feb. 8, 2012).

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