OGJ Newsletter

Sept. 10, 2012
International news for oil and gas professionals


Shell okays Quest CCS project in Alberta

Shell Canada Ltd. has approved construction of the first commercial carbon capture and storage (CCS) project in the Canadian oil sands producing region (OGJ Online, July 12, 2012).

The Quest facility will capture more than 1 million tonnes/year of carbon dioxide produced at the Scotford Upgrader near Edmonton, Alta., and transport it through an 80-km pipeline to a site to the north.

The CO2 will be injected through at least three and as many as eight wells into Basal Cambrian sandstone. The storage layer occurs at about 2,300 m below multiple strata of impermeable shale and salt. The project will lower direct emissions of the Scotford Upgrader by as much as 35%.

Shell said it has received all necessary federal and provincial permits and has begun construction.

The project is a venture of the Athabasca Oil Sands Project, which owns the upgrader. Shell operates the joint venture with a 60% interest with partners Chevron Canada Ltd. and Marathon Oil Corp., which have 20% interests each.

The Alberta government is investing $745 million in the Quest project from a $2 billion fund designed to support CCS development. The Canadian government is investing $120 million through its Clean Energy Fund.

Shell sells stake in onshore Nigeria lease

Shell Petroleum Development Co. of Nigeria has completed the assignment of its 30% interest in Oil Mining Lease (OML) 40 in Nigeria's Niger Delta to Elcrest Exploration & Production Nigeria Ltd.

Total cash proceeds were $102 million.

Elcrest is a joint venture of Starcrest Nigeria and Eland Oil & Gas PLC.

Shell said the transaction was part of its refocusing of onshore interests in Nigeria and in line with a government program of developing Nigerian companies in the exploration and production business.

Riverstone to invest in midstream start-up

Private equity firm Riverstone Holdings and Kaiser Midstream, owned by George B. Kaiser, agreed to provide financial backing of up to $500 million in equity commitments for a midstream start-up company, Sage Midstream LLC, to pursue natural gas liquids business opportunities in liquids-rich plays.

Organizers said Sage plans to pursue development and acquisition opportunities involving midstream assets and services in US and Canada.

Sage is based in Houston, and its president is Greg Bowles. Bowles previously was executive vice-president of Lone Star NGL, a joint venture between Energy Transfer Partners LP and Regency Energy Partners LP.

Kaiser Midstream Pres. John Boone said, "The demand for NGL midstream services will continue to grow as North American oil and gas producers continue to expand their development of natural gas liquids."

Riverstone has over $22 billion of equity capital raised across seven investment funds and coinvestments. It has investments in US, Canada, Latin America, Europe and Asia.

Kaiser Midstream is affiliated with Kaiser-Francis Oil Co. in Tulsa.

Miller acquires PDC Energy's Tennessee assets

Miller Energy Resources Inc., Knoxville, has acquired the Tennessee assets of PDC Energy Inc., primarily increasing the company's working interest in many of its existing wells.

Miller plans to begin working over many of the oil wells. The acquisition boosted the company's oil production 10%, and further increases are sought by reworking, drilling new wells, other acquisitions, and consolidating existing properties, the company said.

With the PDC acquisition, Miller completed a 3-year project of targeted acquisitions in the Appalachian basin in eastern East Tennessee that began in June 2009 when it acquired the assets of Ky-Tenn Oil Inc., East Tennessee Consultants Inc., and East Tennessee Consultants II LLC. Miller acquired the assets and companies in order to exploit the vast potential of the oil-bearing Mississippi lime and Chattanooga shale.

Miller now has interests in more than 180 producing oil wells and 180 producing gas wells.

Repsol trims product prices to ease VAT bite

Repsol cut prices of gasoline and diesel at its Spanish service stations to ease the effects of a value-added tax (VAT) hike that took effect Sept. 1. Facing deteriorating fiscal conditions, the Spanish government raised the general VAT rate to 21% from 18%.

Resol said its action would trim the new burden on buyers of its products to 1.90 euro cents/l. from 3.80 euro cents/l.

"The measure allows Repsol to help its customers and share in the efforts needed to overcome the current economic crisis," the company said in a press statement.

Exploration & DevelopmentQuick Takes

Gazprom: Shtokman project on indefinite hold

Gazprom has further darkened hope for the ambitious development of Shtokman gas-condensate field in the Barents Sea by turning a 3-year delay into an indefinite postponement (OGJ Online, Feb. 8, 2010).

Shtokman Development AG, a partnership of the Russian company, Total, and Statoil, had cited "changes in the market situation and particularly in the LNG market" when it announced a delay in the deepwater arctic project in 2010.

In the new move, Vsevolod Cherepanov, head of Gazprom's production department, said the partners had concluded that "financing is too high to be able to do it for the time being."

The Shtokman project involved subsea completions and a floating production vessel in more than 1,000 ft of water near the edge of winter sea ice, two dual-phase pipelines to Murmansk, and onshore gas treatment and liquefaction plants. The field is estimated to hold 3.9 trillion cu m of natural gas in place.

The project's capital structure and strategy have taken several swerves. Gazprom initially sought bids from potential foreign partners but in 2006 said it would develop the field alone and target LNG sales in Europe (OGJ Online, Oct. 10, 2006). It later said it saw Shtokman LNG as a way to enter the US market and eventually reopened the project to international partners (OGJ, Dec. 7, 2010).

Later, a surge in supplies of natural gas in North America from unconventional resources slashed the US need for LNG and increased competition in the European LNG market.

Georgina basin well results encourage PetroFrontier

PetroFrontier Corp., Calgary, reported encouraging oil and gas indications at three horizontal wells in Australia's southern Georgina basin as the company launched a share offering to fund the rest of its 2012 exploration program in the basin with Statoil Australia Oil & Gas AS (OGJ Online, June 20, 2012).

PetroFrontier's third horizontal well, Owen-3H in Northern Territory EP 104, reached total depth of 2,153 m measured depth including a 966-m horizontal section. The company set a multistage open hole completion string in preparation for a completion attempt targeting the Middle Cambrian Lower Arthur Creek "hot shale" and Thortonia carbonate.

While drilling the Owen-3H lateral, the company observed numerous positive hydrocarbon indicators including oil staining, milky yellow fluorescing cut, strong gas recordings of C1 to C5, petroliferous odor, and oil in the mud at the shaker.

As previously reported, PetroFrontier retrieved 32.5 m of core from the Owen-3 inclined wellbore that bled oil upon recovery and had extensive fluorescence throughout. Wireline logs indicated more than 25 m true vertical thickness of hydrocarbon-bearing formations.

PetroFrontier's three wells are MacIntyre-2H, Baldwin 2H, and Owen-3H. Completion is under way at MacIntyre-2H in EP 127 but is not finished.

San Leon has Zechstein oil find in Poland

San Leon Energy PLC said it made an oil discovery in Zechstein Main dolomite in southwestern Poland and is equipping it for near-term production on an electric submersible pump.

The Lelechow-SL1 well went to 1,167 m on the 100% owned Nowa Sol concession, and core and wireline logs indicate the dolomite to be highly fractured and oil-bearing. Oil was recovered when the well was cleaned out.

San Leon is preparing to move the rig to spud the Czaslaw-SL1 well, second on the Nowa Sol concession, which will also test the Main dolomite.

Ecopetrol gauges Middle Magdalena oil discovery

Ecopetrol has gauged an oil discovery in Santander Province in Colombia's Middle Magdalena basin.

The Aullador-1 well, drilled under Ecopetrol's 100% owned Playon E&P Agreement, flowed 300 b/d of 24° gravity oil, natural, with 0.1% basic sediment and water. The wellsite is 27 km from the Sabana de Torres municipality and about 40 km northwest of Bucaramanga.

Ecopetrol said it plans extended tests to define the discovery's potential. Total depth is 11,393 ft.

Drilling & ProductionQuick Takes

EPA to issue compliance order for Chukchi Sea

The US Environmental Protection Agency announced plans to issue Shell Offshore Co. a compliance order setting air pollution limits for 1 year for emissions from Shell's planned Chukchi Sea drilling.

The order stipulates that Shell not exceed air emissions limits under the federal Clean Air Act until the agency completes a full review of the company's application to revise the permit, EPA said.

Overall emissions from the Discoverer drillship are expected to be lower this drilling season under the compliance order than the original permit allowed.

The new order does not waive any of Shell's permit requirements or any air standards, EPA said. Any proposed revisions to the permit will be subject to full public review and comment, it noted.

The Aug. 31 action came one day after the US Bureau of Safety and Environmental Enforcement approved certain limited activities in non-oil bearing zones by Shell on its federal Chukchi Sea leases off Alaska's coast.

The Alaska Wilderness League expressed disappointment in EPA's announcement.

"It is yet another sign from the Obama administration that it is putting the whims of a corporate giant over the future of one of our nation's most valued national treasures," said Cindy Shogan, executive director of the Alaska Wilderness League.

Christina Lake Phase D oil output starts

Cenovus Energy Inc., Calgary, reported the start of bitumen flow from Phase D of the Christina Lake in situ oil sands project it shares in a 50-50 venture with ConocoPhillips in Alberta.

The company began Phase D steam injection in the steam-assisted gravity drainage project in the second quarter (OGJ Online, July 25, 2012). Production, which began in July, is to reach 40,000 b/d in 6-9 months, taking total Christina Lake capacity to 98,000 b/d.

Cenovus expects production to start from Phase E, now about 55%, complete, in the first quarter of 2013. Ultimate Christina Lake production capacity is to be 300,000 b/d.

Total due stake in block offshore Myanmar

Total has agreed to acquire a 40% interest in the production sharing contract for Block M-11 in the Martaban basin offshore Myanmar from PTT Exploration & Production PLC of Thailand.

PTTEP will remain operator of the block, which covers 5,373 sq km with water depths of 200-2,300 m. Block M-11 adjoins to the south Block M9, where PTTEP is developing its Zawtika natural gas discovery (OGJ Online, Aug. 15, 2007).

The exploration phase of the M-11 contract calls for the drilling of a well by the third quarter of 2013.

The blocks are between Yadana and Yetagun gas fields in the Andaman Sea.

BLM awards Colorado oil shale RD&D leases

The US Bureau of Land Management approved two oil shale research, development, and demonstration (RD&D) leases in Colorado to ExxonMobil Exploration Co. and Natural Soda Holdings Inc.

The leases are in Rio Blanco County 35 miles southwest of Meeker.

Two adjacent 160-acre tracts were awarded to test in-situ technologies that heat solid oil shale to convert it into recoverable petroleum, said an Aug. 30 announcement from BLM's White River field office.

BLM said each lease was for a 10-year term, and includes a 5-year extension provision. Each lease also allows for an additional 480 acres to be converted to a 20-year commercial lease once the lessee completes its work, passes additional reviews, and meets all requirements, BLM said.

BLM said that National Soda Holdings mines sodium bicarbonate by injecting hot water underground to dissolve the baking soda in a solution that it brings to the surface. Its research proposal calls for using this solution mining technique to remove sodium bicarbonate found with the oil shale, and then injecting a heater into the ground to unlock the liquid petroleum from the shale.

ExxonMobil proposed fracturing horizontally drilled wells, filling the fractures with an electrically conductive material, and using electricity in the fractures to heat the oil shale into recoverable liquid petroleum, the US Department of the Interior agency continued.

The proposals stemmed from a November 2009 call for nominations, which followed an initial round of nominations in 2007 under which 6 RD&D leases were issued, BLM said.

Shell considering shale gas exploration in Turkey

Royal Dutch Shell PLC is assessing opportunities for shale natural gas exploration and production in the Black Sea area with Turkish state-owned oil firm TPAO, said Shell Chief Executive Officer Peter Voser.

Voser spoke during a Sept. 4 news conference in Ankara with Turkey Energy Minister Taner Yildiz. Voser also planned to meet with Turkish Prime Minister Tayyip Erdogan.

TPAO signed an accord with Shell in November 2011 regarding exploration and production in the Mediterranean and southeastern Turkey. That agreement included plans for shale gas exploration near the southeastern city of Diyarbakir.

Yildiz said Shell recently started exploration at Saribugday-1 well. Previously, TPAO said it would take a 70% share of production near Diyarbakir with Shell taking the test.


Idle Aruba refinery to become terminal

Valero Energy Corp. will convert its idle 235,000-b/d refinery at Aruba into a products terminal.

Valero Refining Co.-Aruba NV suspended refining operations in March, citing poor refining economics (OGJ Online, Mar. 19, 2012). Until now, it had maintained the facility for possible restart.

It has warned refinery employees about reduced staffing.

Another Caribbean refinery, the 350,000 b/d facility operated by the Hovensa LLC joint venture of Hess Corp. and Petroleo de Venezuela SA at St. Croix, VI, was closed and converted into a terminal earlier this year (OGJ Online, Jan. 18, 2012).

Contract awarded for MEG plant in Qatar

Shell Global Solutions International BV let a contract to a subsidiary of Foster Wheeler's Global Engineering & Construction Group to develop the basic engineering package for a monoethylene glycol plant at Ras Laffan, Qatar (OGJ Online, Dec. 21, 2010).

The 1.5 million tonne/year, two-train plant will be part of a complex under development by a joint venture of Qatar Petroleum and Shell. It will use Shell's proprietary OMEGA process.

Petrobras plans gas-based petrochem complex

Petroleo Brasileiro SA (Petrobras) let a contract to a unit of Foster Wheeler AG's Global Engineering & Construction Group for work on a large, grassroots petrochemical complex in southeastern Brazil.

Fed by natural gas, the complex, in Linhares, Espirito Santo, will be designed to produce more than 1 million tonnes/year of ammonia and urea fertilizers, methanol, acetic acid, formic acid, and melamine.

The Foster Wheeler unit will provide basic engineering design, front-end engineering design, and technical assistance and training during the engineering, procurement, and construction phase through completion and performance testing of the complex.


FERC delays Alaska pipeline environmental study

The Federal Energy Regulatory Commission said it will not move forward on its environmental examination of a proposed natural gas pipeline from Alaska's North Slope until the project's sponsors decide whether to build it in Alberta as originally planned or to a liquefaction and export terminal on the state's southern central coast.

The sponsor, TC Alaska, terminated its open season for the proposed pipeline on May 3 because it was unable to conclude transportation agreements, FERC said on Aug. 29 in its report to Congress about the project.

TC Alaska notified the commission on May 12 that interim work on the Alberta option would be curtailed, but asked that the pre-filing docket be kept open while the sponsor decides what to do.

In addition, TC Alaska indicated that it was working with North Slope producers to explore possibly developing a liquefied natural gas export terminal at an undetermined location in South Central Alaska which would include a pipeline from the North Slope, FERC said.

The sponsor estimated that it would file an application for such a project in October 2014, the federal energy transmission regulator noted.

ERCB approves Enbridge Alberta pipeline

Canada's Energy Resources Conservation Board approved Enbridge Inc.'s applications to build and operate two pump stations and a pipeline transporting diluted bitumen from the Athabasca oil sands to Sherwood Park, Alta.

The pipeline's proposed 385-km route generally parallels several existing pipelines. It will have an initial capacity of 400,000 b/d diluted bitumen containing no hydrogen sulfide.

A number of parties objected to the applications, but after Enbridge altered the pipeline's proposed route, several landowners withdrew their objections.

Only one objection remained at the beginning of the hearing, from a party whose land had been included on the originally proposed route.

Especially favorable conditions could see production of bitumen from the Canadian oil sands peak at 6.8 million b/d in 2038, according to a study earlier this year by the Canadian Energy Research Institute.

The reference-case scenario of the same study had regional pipeline capacity able to handle all major oil sands regions except Athabasca beyond 2030, with Athabasca output exceeding pipeline capacity by 2015.

Pipeline to transport shale gas to US Midwest

DTE Energy, Enbridge Inc., and Spectra Energy Corp. signed a Memorandum of Understanding to jointly develop the NEXUS Gas Transmission (NGT) system, a project to move Ohio Utica shale gas to markets in the US Midwest and Ontario.

The proposed NGT project will originate in northeastern Ohio, include 250 miles of large-diameter pipe, and be capable of transporting 1 bcfd.

The line will follow utility corridors and reach an interconnect in Michigan. From Michigan, the existing Vector Pipeline system will move the gas to Ontario.

Upon completion of the project, Spectra Energy will own 20% of Vector Pipeline LP, a joint venture between DTE Energy and Enbridge.

An open season for the project is planned for fourth quarter. Depending on commitments and finalization of details, the pipeline could start operating as early as November 2015, the companies said.

EPP launches open season for ATEX pipeline

Enterprise Products Partners LP (EPP) has started a binding open commitment period to determine additional shipper demand for capacity on its Appalachia-to-Texas (ATEX Express) pipeline.

The 1,230-mile system will deliver ethane production from the Marcellus-Utica shale areas of Pennsylvania, West Virginia, and Ohio to Mont Belvieu, Tex.

The company says it already has enough shipper interest to proceed with development of ATEX Express, but is receiving sufficient subsequent interest to offer additional 15-year binding transportation agreements. The open commitment period closes Sept. 27.

ATEX Express will transport up to 190,000 b/d. The system's first leg would involve construction of about 595 miles of new gas pipeline extending to Cape Girardeau, Mo., closely paralleling an existing Enterprise pipeline. At Cape Girardeau, Enterprise will reverse a 16-in. OD pipeline and place it into ethane service.

Enterprise expects ATEX Express to begin commercial operations first-quarter 2014, increasing to full capacity by 2018. Chesapeake Energy Corp. signed a long-term contract as anchor shipper on ATEX Express in November 2011.