OGJ Newsletter

Nov. 6, 2006
General Interest - Quick Takes

Shell platforms siege ended in Niger Delta

Nigerian villagers who took over three Royal Dutch Shell PLC oil platforms in the Niger Delta Oct. 25 agreed to end their siege and allow operations to resume.

Shell said members of the Kula community living near the Ekulama 1, Ekulama 2, and Belema oil pumping stations invaded the facilities, accusing Shell of failing to meet the terms of an agreement to provide them aid.

The villagers were persuaded to leave the facilities after intervention by the Rivers State government in charge of the area. Shell officials also confirmed that an agreement was reached with the protesters to quit the facilities.

Shell said the company planned to reopen the platforms immediately following the departure of the villagers. The spokesman said no hostages had been taken.

ExxonMobil, CNPC ink Sakhalin-1 gas preaccord

ExxonMobil Corp. has signed a preliminary agreement on principles with China National Petroleum Corp. (CNPC) for the supply of natural gas from the Russian Sakhalin-1 project.

An ExxonMobil spokesman said the agreement, which defines the obligations of both parties and the principles of price formation, calls for gas to be delivered to northeastern China, but he did not identify the quantities involved, pricing, or when deliveries would begin.

The deal resulted from a November 2004 memorandum of understanding, and the representative said the preliminary document is expected to lead to an official agreement.

Earlier, ExxonMobil said it is ready to deliver 8 billion cu m/year of gas to China.

Currently, gas is delivered in small amounts, as much as 1 billion cu m, to enterprises in Russia’s Khabarovsk territory.

Sakhalin-2 status decision due in late November

Russia’s Natural Resources Minister Yuri Trutnev said Nov. 1 that a final decision on the future of the Sakhalin-2 project likely will be made jointly with the Cabinet later in November, possibly in the third week.

Trutnev told journalists his ministry was prepared to give the project’s operator Sakhalin Energy Co. an extra week to present a plan outlining efforts to correct what he called “the ecological abuse” discovered by the government’s recent inspection of the site.

In late October, Trutnev said construction on several sections of the Sakhalin-2 onshore pipeline system had to be halted for environmental legislation violations (OGJ Online, Oct. 25, 2006).

Putin seeks EU energy demand security

Russian President Vladimir Putin has hardened doubts that he’ll ratify the Energy Charter on cooperation with Europe, which his country entered 10 years ago.

At a press conference after an informal dinner with the heads of the 25 European Union states in Lahti, Finland, Putin called for changes to parts of the charter involving access to gas and oil pipelines. He voiced concern about spot deliveries.

Putin said he wants Russia to become integral to the European gas market and advocated interdependence between his country and the EU as the only way to secure “demand security.”

Russia raised alarms in Europe about supply security last winter when it curtailed deliveries to Ukraine, a transit country for pipeline supplies to Europe, in a price dispute.

“Russia is more dependent on the EU today than the other way around,” Putin said.

On Russia’s decision to develop Shtokman gas-condensate field in the Barents Sea alone, Putin said, “Gazprom had analyzed the proposals of foreign companies and decided it was not happy with them. But it does not mean Russia rejects cooperation with foreign partners (OGJ, Oct. 16, 2006, p. 20).” He said foreign companies could be involved as “coexecutives, to solve management issues as well as technical implementation.”

FERC streamlines rules on gas from LNG

The US Federal Energy Regulatory Commission broadened its rules on natural gas projects eligible to proceed without a specific, case-by-case FERC authorization.

On Oct. 19, FERC approved a final rule expanding blanket certificate eligibility for projects at storage facilities, pipelines, and facilities to transport gas from LNG receiving terminals.

Blanket certificates are granted to companies already having FERC project approval. These certificates allow companies to improve or upgrade facilities or build new facilities without case-by-case certificate authorization.

The latest ruling raised the cost limits for blanket certificate projects to $9.6 million from $8.2 million for automatic authorizations and to $27.4 million from $22.7 million for prior-notice projects, which require FERC review.

Argentina, Boliva sign natural gas accord

Argentine President Nestor Kirchner and Bolivia President Evo Morales on Oct. 19 signed a natural gas accord calling for $1 billion worth of investments to increase the flow of Bolivian gas into Argentina.

The 20-year accord signed in Santa Cruz, Bolivia, calls for Argentina to receive 27.7 million cu m/day of Bolivian gas by 2010.

Argentina already held contracts to import 7.7 million cu m/day, although current shipments average 4.5 million cu m/day, said Bolivia’s state-owned Yacimientos Petroliferos Fiscales Bolivianos.

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Exploration & Development - Quick Takes

Spar planned for Perdido fields in deep gulf

Shell Offshore Inc. and partners will install a production spar in what Shell says will be a world record water depth to develop three oil fields along the Perdido fold belt in the Gulf of Mexico.

It will moor the regional direct-vertical-access spar in 8,000 ft of water to handle production from Great White, Tobago, and Silvertip fields in the Alaminos Canyon area (see map, OGJ, Sept. 25, 2006, p. 36). Production from other fields in the region can be tied in as processing capacity becomes available.

The spar will be able to handle production of 100,000 b/d of oil and 200 MMscfd of gas, expected to begin “at the turn of the decade,” according to Shell. It will have subsea lifting or boosting to move produced fluids from the seafloor to topsides.

The common processing hub, on Alaminos Canyon Block 857 near the Great White discovery, will have a drilling and completion rig and will gather, process, and transport production from wet trees as far away as 30 miles. Pipelines from the facility will connect to undisclosed locations in Texas.

The area has water depths of 7,500-10,000 ft and a rugged seabed. Marvin Odum, Shell executive vice-president, EP Americas, said the project will initiate production from the gulf’s Lower Tertiary play.

Shell will operate the hub, called Perdido Regional Host, with a 35% interest. Other interests are Chevron Corp., 37.5%, and BP PLC, 27.5%.

Shell also operates the fields identified for development, none of which have had production tests. The reservoirs have temperatures of 150-200º F. and pressures of 5,000-9,000 psi. They produce oil of 20-40º gravity.

Shell has drilled five wells in Great White field, discovered in 2002 by a well that reached 14,405 ft TVD in 8,009 ft of water. The most recent Great White well was spudded in March 2004.

Shell holds 33.34% interest in Great White, which is on Alaminos Canyon Blocks 812, 813, 814, 857, 900, and 901. Chevron and BP hold 33.33% each.

Tobago field lies in 9,600 ft of water on Alaminos Canyon 859. Unocal Corp. discovered it in 2004 with a well that reached 18,510 ft TD (OGJ, May 10, 2004, Newsletter). A sidetrack reached 18,425 ft. Tobago interests are Shell 32.5%, Chevron 57.5%, and Nexen 10%.

Chevron made the Silvertip discovery on Alaminos Canyon Block 815 with the AC 815 No. 1 well, drilled to 14,778 ft TD in 9,200 ft of water in August 2004. Chevron holds 60% and Shell, 40%.

Aramco lets FEED contract for Manifa field

Saudi Aramco has let a front-end engineering and design (FEED) and project management services contract to two units of Foster Wheeler Ltd. for development of offshore Manifa oil and gas field. The field will produce 900,000 b/d of Arab Heavy crude (OGJ, Oct. 16, 2006, Newsletter).

Foster Wheeler Energy Ltd. and Foster Wheeler Arabia Ltd. will conduct FEED for the onshore central processing facility and the expansion of gas facilities at Khursaniyah; detailed design support; purchasing assistance for long-lead items; coordination of the FEED development work performed by subcontractors for other elements of the program, including the offshore facilities; and development of the bid package for the invitation to bid for engineering, procurement, and construction of the onshore facilities.

Completion of the FEED is expected in third quarter 2007. Further details of the contract were not disclosed.

The Manifa Arabian Heavy Crude project includes development of giant offshore Manifa field, construction of gas-oil separation plants and crude stabilization units and separators, as well as the expansion of the Khursaniyah Gas Plant to process the associated sour gas. The project is scheduled for completion in mid-2011.

BP has 11th oil strike on Angola Block 31

BP Exploration (Angola) PLC and state-owned Sonangol have discovered oil for the 11th time in ultradeepwater Block 31 off Angola.

The GlobalSantaFe Corp. Jack Ryan drillship drilled the Titania well in 2,152 m of water 23 km northwest of the Hebe oil discovery, announced in the fourth quarter of 2005.

Titania reached a TD of 5,339 m below sea level, penetrating Oligo-Miocene sands. It’s Block 31’s second subsalt discovery.

Titania flowed on test at the rate of 2,045 b/d through a 20/64-in. choke.

A BP spokesman told OGJ that a front-end engineering and design contract might be let by yearend for development of Block 31’s first four discoveries, which are in the northeast part. “We don’t know when production would begin,” he added.

The other seven discoveries, including Titania, are in the southeast part of the block. BP is considering development options.

Block 31 covers 5,349 sq km and lies in 1,500-2,500 m of water.

BP is the operator with a 26.67% interest. Other interests are Sonangol 20%, Esso Exploration & Production Angola (Block 31) Ltd. 25%, Statoil Angola AS 13.33%, Marathon International Petroleum Angola Block 31 Ltd. 10%, and TEPA (Block 31) Ltd., a subsidiary of Total SA, 5%.

RWE Dea makes oil find in Libya

Germany’s RWE Dea AG made an oil discovery with its A1-NC 193 well drilled in Libya’s Sirte basin 500 km southeast of Tripoli.

The well, drilled to 4,214 ft with the Arab Drilling & Workover Co. Adwoc Rig 2, intersected the Paleocene Dahra formation and, on test, flowed 35º gravity oil at 410 b/d through a 32/64-in. choke.

The A1-NC-193 well is the first in a 10-well minimum drilling campaign in six RWE Dea licenses-NC 193, 194, 195, 196, 197, and 198. The drilling program, which will use as many as three drilling rigs, follows a comprehensive seismic acquisition campaign in which 3,200 line-km of 2D and 2,400 sq km of 3D data were acquired in the identified licenses.

The rig is being moved to drill the next location-B1-NC 193.

Energen, Chesapeake eye Alabama gas shales

Energen Corp., Birmingham, Ala., sold to Chesapeake Energy Corp., Oklahoma City, a 50% interest in its lease position in various shale plays in Alabama for cash and a carried drilling interest.

The two companies also agreed to form an area of mutual interest to focus on the further exploration and development of the shale plays throughout Alabama.

Energen Resources received $75 million cash from Chesapeake for half interest in Energen’s existing 200,000 net acre shale lease position. Chesapeake will pay the first $15 million of Energen’s share of drilling costs.

The companies will partner 50-50 on new lease acquisitions, development, and operations in the AMI for at least the next 10 years.

Energen said it is Alabama’s largest producer of onshore gas, has extensive knowledge of coalbed methane and other tight formations, and has extensive geological expertise in the state.

Chesapeake said the deal “accomplishes our goal of building a significant leasehold position in every major shale play east of the Rockies.”

The Oklahoma City company owns 4.25 million net acres of prospective shale leasehold onshore in the US, which it believes is industry’s largest shale leasehold position.

Barnett shale play to grow in Arlington

Two Fort Worth independent operators reached agreement with the city council of Arlington, Tex., on lease terms covering acreage under Lake Arlington and other tracts in the vicinity.

The agreement with Quicksilver Resources Inc. and private Marshall R. Young Oil Co. call for the city to receive a 27.7% royalty and $11,777/acre bonus payment.

The lease covers 1,442.6 net acres of city-owned minerals under Lake Arlington, which overlies 2,250 surface acres in Tarrant County between Fort Worth and Arlington.

When added to acreage the companies previously acquired, Quicksilver and Young will hold 4,800 net acres at 75% average net revenue interest and $5,400/acre average bonus. The acreage could provide as many as 75 development locations that Quicksilver said enhance its plans “for increasing natural gas production and reserves from the Barnett shale in the Fort Worth basin.”

Quicksilver will operate the lease and own 75% working interest. The city adopted a gas drilling and production ordinance on Dec. 20, 2005.

Drilling & Production - Quick Takes

Contractors work to stem mud flow in East Java

Santos Ltd. reported that Boots & Coots International Well Control Inc. has started drilling a relief well near the Banjar Panji 1 gas well in Sidoarjo, East Java.

Mud began flowing on May 29 about 200 m from the Banjar Panji 1 well, drilled to 2,833 m. The mud continues to flow at an estimated 100,000 cu m/day.

The mud flow, which involves hydrogen sulfide, has inundated at least eight villages, displaced thousands of villagers, ruined crops, and cut off roads.

Banjar Panji 1 targets Miocene Kujung formation reefal carbonates on the eastern margin of Wunut gas field, which produces from Pleistocene volcaniclastic sand.

The underground blowout occurred at about 2,700 m, just above a high-pressure water zone. A total of 1,000 acres reportedly was under several meters of mud.

A group of international contractors, including Boots & Coots, spudded a relief well about 500 m south-southwest of the Banjar Panji. A second relief well is planned from the north-northwest.

Santos refuses to discuss the possible cause of the well’s blowout because of an investigation being conducted by BPMigas, Indonesia’s oil and gas regulator.

Well operator Lapindo Brantas Inc. initially blamed the mud flow on an earthquake in central Java, but the National Disaster Study Centre reported the earthquake barely affected east Java.

Lapindo estimates the total costs for drilling relief wells and mud management to be $180 million, which “includes assumptions and may require further adjustment when estimates relating to the cost of long-term mud disposal options, proposed cost of infrastructure relocation, and costs relating to unrealized third-party claims are known,” Lapindo said in a statement.

“With the [mud] flow continuing, the complexity of the event, and the dynamic nature of the ongoing work, it is not possible to accurately estimate a total rectification cost at this time,” the company said.

Lapindo has 50% interest in the Brantas production-sharing contract. Partners are PT Medco E&P Brantas, with 32% interest, and Santos Brantas Pty. Ltd., 18% interest.

Statoil begins production via new subsea template

Statoil ASA on Oct. 18 began production from one of the two wells tied in to the subsea K Template recently installed in Norne oil field in the Norwegian Sea.

The four-slot seabed K template is a typical subsea satellite development tied in to existing infrastructure (OGJ, July 18, 2005, p. 42).

Terje Overvik, executive vice-president for exploration and production Norway, said production from the new subsea template will prolong the field’s life and help Statoil achieve its production target of 1 million boe/d until 2015 from the Norwegian continental shelf.

With the 750 million kroner investment in the Norne improved recovery project, which includes installation of the K template and the drilling and completion of two wells, Statoil expects to recover 10 million bbl of oil.

Production from the other well, which is to be commissioned by Transocean Inc.’s Transocean Arctic semisubmersible drilling rig, is expected to begin at the end of the same month.

The field’s development solution allows for the drilling of yet two more wells from the K template.

Processing - Quick Takes

Lurgi building 31 biodiesel plants worldwide

Lurgi AG reports that it currently is engineering and building 31 biodiesel plants with total capacity of more than 4.2 million tonnes/year.

The company, a global leader in biodiesel plant construction, received orders for seven plants during the third quarter.

Those plants, in Argentina, Malaysia, France, and Indonesia, will have individual capacities of 100,000-250,000 tonnes/year. Their feedstocks will be rapeseed, soybean, and palm oil, depending on location.

Chevron, UC Davis team up in biofuels research

Chevron Technology Ventures LLC plans to provide as much as $25 million to scientists and engineers at the University of California, Davis, to develop technology for converting cellulosic biomass into transportation fuels.

The 5-year program, which calls for research in biochemical and thermochemical conversion, seeks to develop commercially viable processes for the production of transportation fuels from forest and agricultural residues, municipal solid waste, and other renewable resources, said parent company Chevron Corp. The joint research effort will coordinate with the California Biomass Collaborative (CBC) to focus on California’s renewable feedstocks such as rice straw, an agricultural waste.

It also proposes a demonstration facility to test the commercial readiness of the technologies.

Research will focus on four areas:

  • Understanding existing California biofuel feedstock characteristics.
  • Developing additional feedstocks optimized for such features as drought tolerance, minimal land requirements, harvesting technology.
  • Production of cellulosic biofuels.
  • Design and construction of a demonstration facility for biochemical and thermochemical production processes.

Chevron taps Praxair for large hydrogen plant

Chevron Products Co. has completed an agreement with Praxair Inc. for a hydrogen plant at its 240,000-b/d Richmond, Calif., refinery that the technology provider says will be the largest it has ever built.

Praxair, Danbury, Conn., will use reformer technology and engineering and construction services of Lurgi AG for the two-train, 260-MMcfd complex.

Lurgi has engineered and built more than 25 hydrogen plants worldwide and more than 100 steam reforming units for the production of hydrogen, carbon monoxide, or synthesis gas.

The Richmond hydrogen plant is due on stream in 2008. Praxair will operate the facility. It will build a pipeline network to connect the plant with the Chevron refinery and other refineries in northern California.

Transportation - Quick Takes

Mexico’s Altamira LNG terminal starts up

The Altamira LNG regasification terminal near Tampico, Mexico, began commercial operations late last month, reports Total SA, a 25% stakeholder in the two companies involved in the project.

Terminal de LNG de Altamira, which owns and operates the terminal, is a joint venture of Shell 50%, Mitsui 25%, and Total 25% (OGJ Online, Aug. 28, 2006).

Gas del Litoral, the marketing arm for the project owned 75% by Shell and 25% by Total, has signed a 15-year contract with Mexican electric utility Comisión Federal de Electricidad to supply 5 billion cu m/year of gas from the terminal.

Dana Gas group plans Karachi LNG terminal

A consortium of Dana Gas, Single Buoy Moorings (SBM), and Granada Group has signed a memorandum of understanding to develop a 3.5 million tonne/year LNG terminal in Pakistan at Karachi’s Port Qasim.

Dana Gas is a regional gas company based in Sharjah. It has plans to develop a network of LNG terminals, mainly in the Middle East and North Africa, and “to tap the LNG value chain, including LNG trading activities.” The company said the consortium is holding talks with major LNG producers, which it did not name.

Dana Gas has signed a cooperation agreement with SBM under which Dana would focus on LNG marketing and SBM on the supply and operation of LNG floating storage and regasification terminals.

“The newly formed alliance will initially target LNG terminal projects in Pakistan, Lebanon and Kuwait,” Dana said.

Dana Gas started business in July 2005 as “a regional, private-sector natural gas resource enterprise,” affiliated with Crescent Petroleum of Sharjah.

Its Sajaa Gas PLC unit (SajGas) operates a 600 MMscfd gas treatment plant completed in November 2005 in the Sajaa area of Sharjah.

Another unit, United Gas Transmissions Co. Ltd. (UGTC), will operate a gas receiving platform connected to Crescent facilities in offshore Mubarak gas field and an 80-km, 30-in. gas pipeline from the receiving platform to SajGas facilities onshore for sweetening. The platform and pipeline are under construction.

UGTC plans a pipeline to transport sweet gas in Sharjah and has an agreement to build, own, and operate a common-user gas pipeline from Sajaa to the Sharjah Hamriya Free Zone.

ETNG starts service via new pipeline lateral

East Tennessee Natural Gas LLC (ETNG), a unit of Duke Energy Gas Transmission, has placed into service its 32-mile Jewell Ridge pipeline, which will transport up to 235 MMcfd of natural gas from the Appalachian basin to the US Southeast.

The 20-in. lateral, from a compressor station northwest of Richlands, Va., connects the western Virginia operations of CNX Gas Co. LLC via the existing Cardinal States Gathering System in Tazewell County, to ETNG’s mainline near Marion in Smyth County. It also will interconnect with the Williams Cos. Inc. Transco interstate pipeline at Cascade Creek, NC.