OGJ Newsletter

Sept. 6, 2010


CFTC fines ConAgra for false oil-price maneuver

The US Commodity Future Trading Commission fined ConAgra Trade Group $12 million for allegedly causing a false oil price to be reported in the New York Mercantile Exchange's crude futures contract 2 years ago.

The fine was part of an order that CFTC issued Aug. 16 as it filed and simultaneously settled charges against ConAgra, which agreed to improve its compliance and ethics program by adding an independent member to its board, forming a compliance committee, and providing enhanced compliance training.

The commission said ConAgra was the first to purchase NYMEX crude futures on Jan. 2, 2008, at the then-historic price of $100/bbl. This caused a non-bona fide price to be reported when crude was trading about 40¢ lower on NYMEX's electronic market, the order indicated.

The order said one of the group's traders told ConAgra's floor broker that morning that the trader was going to be a "madman" if crude prices came within 25¢ of $100. Shortly after the trade was executed, another NYMEX floor trade complained to officials at the exchange that he was holding an offer to sell crude at the better price of $99.90/bbl, which had been violated. NYMEX's floor committee then took the $100 print down from the exchange's price register, CFTC said.

ConAgra then instructed its floor broker to buy all the contracts then being offered at $99.90 to—in the words of one ConAgra trader—"keep the $100 print up," CFTC said in its order.

The commission noted that after getting the then-historic price, a ConAgra trader bragged about it to other traders. He allegedly said that ConAgra instructed its floor broker as long as 3 months earlier that it wanted to get the $100 print, and "we weren't gonna let that one get away from us."

The trader also allegedly bragged in an e-mail: "Some people collect art prints. We collect price prints."

CFTC acknowledged NYMEX's cooperation in the investigation.

Direct Energy to buy gas assets in Alberta

Direct Energy, a North American gas and electricity retailer, has agreed to acquire producing natural gas interests in the Wildcat Hills area 35 km northwest of Calgary, Alta., from Suncor Energy for $375 million (Can.).

Involved are production of about 80 MMcfd of gas equivalent and reserves of 241 bcf of gas equivalent. The assets include 97 producing wells, associated infrastructure, and 42,000 net acres of undeveloped land.

Direct Energy parent Centrica PLC said the acreage holds potential for development of unconventional resources. The buyer said potential also exists to increase recovery from currently producing reservoirs.

Suncor said the sale is part of a plan to divest noncore assets. Including the new deal, the company has sold or agreed to sell assets worth $2.8 billion.

ConocoPhillips, OU to study biocorrosion

The University of Oklahoma, with start-up funding from ConocoPhillips, is creating a research function on biocorrosion and fuel biodeterioration in the oil and gas industry.

The Biocorrosion Center, part of the university's Institute for Energy and Environment, will allow OU researchers to work with ConocoPhillips specialists "to develop new technologies to manage biocorrosion in the nation's pipelines, storage facilities, separators, tankers, and refineries," according to a press statement from the institute.

Other oil companies and organizations will be invited to support the activities.

Gary Jenneman, corrosion management supervisor at ConocoPhillips, said other corrosion centers exist. But there are "few that specifically focus on the role of microorganisms in corrosion processes and none that have as much expertise in the study of anaerobic microorganisms," he said.

Exploration & DevelopmentQuick Takes

Trinidad and Tobago offers 11 blocks in bid round

Trinidad and Tobago announced the offering of 11 deepwater blocks for bid in its 2010 licensing round.

The twin-island nation's Energy Minister Carolyn Seepersad-Bachan said the blocks lie in 400-2,000 m of water. The bid round will be open on Sept. 8.

Seepersad-Bachan said 9 of the 11 blocks are believed to be oil-prone, while the remaining 2 are thought to contain gas.

The energy minister noted that the companies will be entering into frontier territory since there has never been exploration on these blocks before, but she said studies had shown that the blocks could contain oil fields as large as 1.6 billion bbl and gas fields in excess of 6.5 tcf.

Trinidad and Tobago recently announced a new taxation regime for the deepwater blocks that would reduce the government's take under the new production-sharing contracts from 83% to 71% with the petroleum profit tax being reduced to 35% (OGJ Online, Aug. 18, 2010).

Seepersad-Bachan said the decision to offer 11 deep water blocks was based on firm interests expressed by many of the world's largest oil and gas companies. She also noted, however, that the government was not committed to any of these expression of interest since it is a competitive bid round.

She said the companies with the best bids will win the blocks and that the government had set up a clear transparent score card for the award of the potentially lucrative blocks.

The energy minister promised swift decision-making and that the negotiation process will not be long and drawn out as has occurred in the past.

BP advances Andrew area development off UK

BP PLC is proceeding with its Andrew Area Development project in the central UK North Sea.

It will develop the Kinnoull oil reservoir with three subsea horizontal wells tied back to the Andrew oil field platform, about 230 miles northeast of Aberdeen, and extend development of a Lower Cretaceous gas-condensate reservoir below Andrew.

Kinnoull field lies in 103 m of water on UK Continental Shelf Block 16/23 about 25 km northeast of the steel-jacket Andrew platform. Its three wells will produce into a subsea manifold tied back to Andrew via a 28-km pipeline.

The manifold will have a fourth slot for possible future production, and BP says a fifth well might be drilled.

The operator let a contract to Wood Group for topside engineering and production management services for the project.

The Andrew drilling, production, and accommodation platform lies in 170 m of water on Blocks 16/27a and 16/28. Production from Andrew field began in 1996 and is now in decline. The platform also handles output from the Cyrus and Farragon subsea satellites.

BP will add facilities to the platform for processing of fluids from Kinnoull, an existing well and possible future wells drilled into the Lower Cretaceous reservoir beneath the platform, and from the future subsea development of Arundel field between Kinnoull and Andrew.

BP estimates Kinnoull holds 90 million stb of 46.2º gravity oil in a Paleocene turbidite reservoir encountered at about 2,495 m TVD subsea.

It expects total hydrocarbon liquids production from the three-well Kinnoull development to begin at 4,801 cu m/day (cmd) in 2012, to peak at 5,644 cmd the following year, and to cease by 2020. Kinnoull gas production will peak in 2013 at 767,000 cmd.

BP projects hydrocarbon liquids production from a two-well Lower Cretaceous development at Andrew to begin this year at 31 cmd, to peak at 183 cmd in 2014 and to continue producing through 2025. Lower Cretaceous gas production will peak in 2015 at 1.152 million cmd.

Kinnoull interests are BP, operator, 77%, Eni UK Ltd. 17%, and Petro Summit Investment UK Ltd. 6%.

BP holds a 63% interest in the Andrew Hub, including the Lower Cretaceous. Partners there are Eni SPA 16%, Nippon Oil Exploration Ltd. 11%, and Talisman Energy Inc. 10%.

GEP to drill Iraq wildcat near Shaikan find

ShaMaran Petroleum Corp., Vancouver, BC, acquired 33.5% of the shares of General Exploration Partners Inc., a subsidiary of Aspect Energy International LLC.

Consideration is $24.1 million cash, 12.5 million shares of ShaMaran, and a future obligation to contribute the next $15.9 million required to fund GEP's operations. All except the share consideration are to be added to a GEP cost pool to be repaid to ShaMaran BV from future oil production.

GEP owns 80% of contractor rights and obligations in the production sharing contract on the Atrush block in Iraq's Kurdistan region, and the Kurdistan Regional Government owns 20%.

Atrush is north of and adjacent to Shaikan discovery announced by Gulf Keystone Petroleum Ltd. in January. The 2D seismic data over Atrush indicate that the structure is similar to the Shaikan structure.

Shaikan has multiple stacked oil reservoirs in the Cretaceous, Jurassic, and Triassic sections (OGJ Online, Aug. 11, 2010). Estimated potential resource is reported as a mean of 4.2 billion bbl of oil. Atrush is also adjacent to and on trend with the recent Bijeel oil discovery to the east, operated by Kalegran Ltd.

The Atrush-1 exploration well location has been approved, and the well is expected to spud in September. Projected to 3,100 m, it is prognosed to encounter the same reservoir sections as Shaikan and will also test the structural extension of the Shaikan discovery into the Atrush block as indicated from 2D seismic.

Of the ten expected target reservoirs in Atrush-1, nine were confirmed to be oil-bearing in Shaikan while the Lower Kurrachine encountered high-pressure gas. Upside potential lies in the shallower Cretaceous Qamchuga formation and the deeper Permian section, not reached in Shaikan, which is also indicated by seismic data to have closure in Atrush.

Drilling & Production Quick Takes

North Africa gets first shale gas frac job

The first hydraulic fracturing operation in a shale gas reservoir in North Africa took place earlier this year in El Franig field in west-central Tunisia in the Ghadames basin, said Cygam Energy Inc., Calgary.

Perenco, Paris, pumped 45 tonnes of ceramic sand into the Lower Ordovician Hamra quartzite at 4,000 m in Well No. 1 in El Franig field. The job opened an estimated 500-ft fracture. Perenco said initial well test results confirmed the potential to double gas production to 10 MMscfd, with possible further increases once the well cleaned up.

Later, another frac job was carried out at Well No. 5 in a shale formation of Silurian age, presumably the Tannezuft, in which 600 cu m of water charged with thin sand were pumped into the source rock formation at 3,950 m, generating a dense complex of microfractures.

Cygam Energy operates the Sud Tozeur permit and has finished detailed seismic interpretation in the eastern part of the permit just north of El Franig field. Seismic has indicated the presence of one structure with conventional and unconventional Silurian and Ordovician potential just north of the field and several other structures on the permit.

Sud Tozeur covers 1.08 million acres near the border with Algeria. Cygam's 100% working interest in Sud Tozeur will be reduced to 89%, including 7.7% free carried interest, once an existing joint venture partner earns an interest in the permit by fulfilling a drilling obligation.

Shell starts commercial-scale field demo

Shell Canada Energy has commenced its commercial-scale atmospheric fines drying field demonstration for managing tailings from its Muskeg River bitumen mine in the Athabasca area of northern Alberta.

Shell describes atmospheric fines drying as involving the use of a large barge to collect mature fine tailings (MFT) from its tailings pond and then transferring the MFT to a drying area. In the process, it adds flocculants to help bring the fine clay particles in the MFT together before placing the fines on a sloped surface to help speed the release of water from the clay. The released water runs down the sloped surface to a collection area. The company can reuse the collected water in its operations. It dries the remaining deposits further to meet strength and reclamation requirements.

Shell received approval from Alberta's Energy Resources Conservation Board for the atmospheric fines drying project on Aug. 6. The company expects the demonstration project to deposit a total of about 250,000 tonnes of fines. Its tailings pond at the Muskeg River mine has an area of about 14 sq km.

"We have been very active in tailings research since we began our operations and believe atmospheric fines drying technology could result in a fine tailings deposit, which releases water and gains strength in weeks rather than decades," said John Abbott, executive vice-president for Shell's heavy oil business.

"The issue is not whether we, as an industry, can reclaim tailings," continued Abbott, "the issue is whether we can do it better and do it faster."

Shell is working with others in the industry and with research institutes to advance this and other technologies so that it can meet ERCB's Directive-074.

Shell said that it "will openly share the outcome of this demonstration project with industry players, academia, regulators and others interested in working on tailings solutions."

The Muskeg River mine and Scotford upgrader are part of the Athabasca Oil Sands Project (AOSP) that currently has a 155,000 b/d bitumen production capacity. Shell Canada Energy is the operator and 60% owner of AOSP. Its partners are Chevron Canada Ltd. 20% and Marathon Oil Sands LP 20%.

Oil flow rising from Hengam field off Iran

Production of light oil is approaching 10,000 b/d from an oil field newly on stream in the Strait of Hormuz between Iran and Oman, according to Masoud Mirkazemi, Iran's oil minister.

Other reports put current production at 7,000 b/d from the Hengam field, developed under an agreement reached in 2007 between the Omani and Iranian governments to cooperate on a variety of energy projects (OGJ, May 12, 2007, Newsletter).

About 80% of the 24 km-by-12 km Hengam structure lies in Iranian waters. The field, 40 km south of Qeshm Island and 70 km off the main Iranian coast, began test production in May at the rate of 4,000 b/d of 43.5º gravity oil.

Mirkazemi said Hengam production will reach 16,000 b/d by October, according to the official Shana news agency. The field eventually will produce 30,000 b/d, he said.

The field is being developed in two phases with two platforms. Oil moves through a new pipeline for processing and on to Bandar Abbas.


JV to fund Bangladeshi refinery expansion

A Saudi investment group has joined a Bangladeshi industrial conglomerate to invest nearly $1 billion in an expansion of Bangladesh's only refinery.

The Marasel Co. of Saudi Arabia and Beximco of Bangladesh have set up a JV to fund a tripling of capacity of the 33,000 b/d Eastern Refinery Ltd. facility at the port of Chittagong, according to press reports.

Bangladesh Petroleum Corp. has solicited expressions of interest in the project, which would include installation of a single-point mooring and pipeline. The refinery fills about 40% of the country's demand for oil products.

In addition to crude and vacuum distillation capacity, the refinery has these processing capacities, 10,000 b/d visbreaking, 1,800 b/d catalytic reforming, 1,200 b/d mild cat hydrocracking for distillate upgrading, and 2,000 b/d cat hydrotreating for reformer feed (OGJ, Dec. 21, 2009, p. 46).

Frontier Oil restarts Cheyenne crude unit

Frontier Oil Corp. has restarted the crude unit at its 52,000-b/d refinery at Cheyenne, Wyo., after a fire-related shutdown.

The fire occurred early July 28 and was extinguished within 1 hr. There were no injuries (OGJ Online, Aug. 5, 2010).

The refinery's naphtha reformer and diesel hydrotreater were restarted along with the crude unit after an accelerated maintenance program.

Shell, Cosan eye Brazilian ethanol venture

Shell International Petroleum Co. and Cosan SA, Piracicaba, Brazil, have signed binding agreements to form a $12 billion joint venture for production and sale of ethanol and electric power from sugar cane.

The venture, formation of which remains subject to regulatory approval, would be able to produce more than 2 billion l./year of ethanol, cogenerate electricity from bagasse, and distribute industrial and transportation fuels through a combined distribution and retail network in Brazil.

It also would explore opportunities to produce and sell ethanol and sugar globally. Cosan would contribute to the joint venture 60 million tonnes/year of sugar cane crushing capacity at 23 mills, ethanol production capacity of more than 2 billion l./year, 10 existing cogeneration plants, downstream assets including 1,730 retail sites plus supply and distribution properties, ethanol logistics assets, net debt of $2.5 billion, and additional debt from the Brazilian Development Bank.

Shell would contribute $1.6 billion in cash; Brazilian downstream assets including 2,740 branded retail sites, supply and distribution properties, and an aviation fuel business that includes assets recently acquired from Cosan; its 50% interest in Iogen Energy, a developer of cellulosic ethanol; and its 14.7% interest in Codexis, a provider of biocatalysts.

Petrobras joins cellulosic ethanol project

Petrobras America has entered a joint development agreement with KL Energy Corp., Rapid City, SD, to develop technology for producing ethanol from sugarcane bagasse.

Petrobras will provide $11 million to adapt a KL Energy demonstration facility in Upton, Wyo., to the use of bagasse with an enhancement of technology now testing ethanol production from waste wood. The companies agreed to jointly work toward an industrial-scale bagasse-based cellulosic ethanol plant at a Petrobras Group sugarcane mill in Brazil.

KL Energy calls its Upton demonstration plant one of the first of its kind to produce cellulose-based ethanol and biolignin from wood waste. The facility uses a proprietary "thermomechanical pretreatment and enzymatic hydrolysis process."


Enbridge, Suncor partner on oil sands line

Enbridge Inc. announced Aug. 26 it entered into an agreement with Suncor Energy Inc. to build a 95-km, 30-in. OD crude oil pipeline, the Wood Buffalo Pipeline, connecting the Enbridge Athabasca Terminal, adjacent to Suncor's oil sands plant, to the Cheecham Terminal, which is the origin point of Enbridge's Waupisoo Pipeline.

The 380-km Waupisoo line delivers as much as 345,000 b/d of oil from several oil sands projects via the Cheecham Terminal to the Edmonton main line hub. Enbridge announced in June shipper commitments backing plans to expand the line to 600,000 b/d by second-half 2013 (OGJ Online, June 28, 2010).

The Wood Buffalo line will parallel Enbridge's existing Athabasca Pipeline between the Athabasca and Cheecham terminals. Suncor's existing commitments on the Athabasca Pipeline will remain in place. Pending regulatory approval, the new line will enter service by mid-2013.

Enbridge has spent $1.6 billion on its Regional Oil Sands System over the past year, saying the new facilities are intended to meet the future needs of the Imperial Oil-ExxonMobil Kearl project and the recently added Statoil Leismer project.

Iroquois launches opens season for WTC project

Iroquois Gas Transmission System LP began a binding open season Aug. 30 for its Wright Transfer Compressor (WTC) project, which would add as much as 15,400 hp of transfer compression at Iroquois' existing interconnection with Tennessee Gas Pipeline's 200 Line in Wright, NY.

The company says WTC would address increased shipper interest in making its Wright interconnect bidirectional in light of increases of both Marcellus shale production and LNG imports shipped on Tennessee. WTC would compress up to 375 MMcfd from Tennessee into Iroquois at Iroquois' rate zone boundary, according to the company, allowing WTC shippers to supply both Zone 1 and Zone 2 markets on Iroquois. Iroquois expects the project to enter service third-quarter 2012.

Results from the open season will determine the final design and scope of the project. Iroquois will accept bids through Oct. 15.

The Iroquois pipeline extends 416 miles from the US-Canadian border at Waddington, NY, through Connecticut to South Commack, Long Island, NY, and Hunts Point, Bronx, NY.

PNG LNG project venture signs design contract

The 50-50 engineering joint venture of Clough Australia, Perth, and BAM International, the Netherlands, has been awarded a letter of intent to proceed with the design and construction of the LNG and condensate offloading jetty proposed for ExxonMobil group's PNG LNG project in Papua New Guinea.

The subcontract has been awarded by the Chiyoda JGC joint venture and is valued at $287 million (Aus.). The award comes after a 9-month tender process.

Clough-BAM will construct the jetty adjacent to the planned LNG manufacturing plant, which is to be about 20 km northwest of the nation's capital Port Moresby. There will be a 500-strong workforce employed for the jetty construction which is described as a 2.4 km-long trestle and substation design plus a loading platform and a single berth.

Engineering, procurement, and planning for the project has already begun under a separate $10 million advanced work order made in early August. It is Clough's third contract for the ExxonMobil-operated $15 billion, two-train 6.6 million tonne/year PNG LNG project with is expected on stream in 2014.

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