General Interest INDUSTRY BRIEFS

LNG

Phillips Petroleum Co. will report about $565 million of added income in first quarter 1996 as a result of a favorable resolution of a U.S. federal tax case involving its Kenai, Alas., liquefied natural gas export complex. Phillips will receive about $375 million from the Internal Revenue Service in cash refunds the next few years, with the first $200 million expected within 60 days. It also will benefit from a lower effective tax rate on Kenai LNG and lower net interest charges on tax liabilities from prior years. IRS dropped the case after court rulings found more than 50% of LNG sales from Kenai in 1975-78 went to a foreign source, as Phillips claimed.

Courts

Mitchell Energy & Development Corp., The Woodlands, Tex., plans to appeal a Texas jury's award-if it stands-of $4 million actual and $200 million exemplary damages to eight families in Wise County, Tex., who claimed the company's gas wells in the area contaminated their water wells with hydrogen sulfide. Mitchell said the wells have always produced sweet gas. The company notes the families' suit is one of 26 filed against it shortly before a new tort reform law took effect last September.

Gas processing

Westcoast Energy Inc., Vancouver, B.C., shelved plans for a $400 million (Canadian) Grizzly Valley gas processing plant and pipeline expansion in Northeast British Columbia, citing regulatory disputes and changing market conditions.

CMS Gas Transmission & Storage Co., the international pipeline unit of CMS Energy Corp., Dearborn, Mich., acquired a 50% interest in Nitrotec Corp., a privately held New York company that provides gas processing services. Nitrotec specializes in advanced carbon based adsorption gas separation technologies. CMS became a partner with Nitrotec in 1994, investing in its gas gathering and processing projects in Colorado, Kansas, and Texas. This year, Nitrotec plans to build a number of gas processing plants it will own and operate using its processing technology.

Drilling-production

European Commission approved a $3.5 billion venture of BP Exploration Operating Co. Ltd. and Algeria's Sonatrach to develop gas fields and conduct exploration in the In Salah area of Algeria (OGJ, Dec. 25, 1995, p. 26). The program's 2 year first phase calls for a $100 million exploration and appraisal program involving acquisition of 2D and 3D seismic data and drilling of nine wells in an area where seven significant gas fields were found in the 1950s.

Total claims a Western Hemisphere record for extended reach drilling off Tierra del Fuego, Argentina. The well, drilled from North Hidra platform to tap South Ara field 6,300 m away, attained an extended reach section of 7,000 m after drilling to 1,700 m true vertical depth. The well is producing 5,000 b/d of oil, one of the biggest flow rates in Argentina. The milestone means Total will be able to undertake other Hidra area satellite developments. Another extended reach well is planned from Central Hidra platform to tap South Hidra field.

Krym Texas Nafta, a unit of Epic Energy Inc., Vancouver, B.C., expects in March to begin selling oil from Crimea's Aktash field at an after transport net price of $18/bbl to Ukraine's Lviv pilot refinery, which specializes in lube oil production. Epic, through Krym Texas Nafta, is drilling or testing four Aktash wells under a production sharing contract covering an 11,000 sq mile area.

BP Exploration Operating Co. Ltd. won U.K. Department of Trade & Industry approval to develop South Magnus field in northern North Sea Block 211/12a. Plans call for drilling an extended reach well tied back to BP's Magnus platform on the same block. A water injection well will be drilled about 3 months after production starts, slated for May. Field life is placed at 10 years. South Magnus reserves are estimated at 20 million bbl of oil and 26 bcf of associated gas.

Elf Exploration U.K. plc let contract to Kvaerner H&G Offshore Ltd., London, for front end engineering and design of its U.K. North Sea Elgin and Franklin field development. The two gas/condensate fields are to be developed with two platforms-one for production, utilities, and quarters and the other for wellheads. Elf hopes for government approval to develop the fields in late 1996 and intends to place them on stream in 2000. Estimated combined reserves are 620 million bbl of oil equivalent.

Callon Petroleum Co., Natchez, Miss., this year plans to boost gas production from Chandeleur Sound field, 65 miles southeast of New Orleans in the Gulf of Mexico. Callon paid Amerada Hess Corp. $9 million for a 66.7% interest in the field and assumed operatorship Feb. 1. It then sold a 22.2% interest to William G. Helis Interest, New Orleans. Callon plans to hike production from 5.5 MMcfd of gas with a recompletion and development drilling program in the field, which has a platform rated to 30 MMcfd.

Hunt Petroleum Corp., Dallas, agreed to buy Columbia Gas Development Corp. (CGD), Houston, from Columbia Gas System Inc. for $200 million cash plus an override in certain oil and gas leases. CGD has more than 195 bcf equivalent of proved oil and natural gas reserves in the Gulf of Mexico and onshore U.S.

Refining

Morocco will float a 25% interest in the country's largest refinery on the Casablanca exchange Mar. 4-12. The 129,000 b/d Samir refinery at Mohammedia is valued at $570 million. The government also plans to sell as much as 55% of the refinery shares to a strategic investor.

U.S. Commerce Department's Foreign Trade Zones Board received an application to grant subzone status for Exxon Corp.'s 424,000 b/d Baton Rouge, La., refinery. This would exempt the refinery from customs duty payments on foreign products used in its exports.

New Brunswick Court of Appeal refused to hear a challenge by Irving Oil Ltd. to public hearings examining its strikebound refinery at Saint John, N.B. The court rejected a request by Irving to set a date for a constitutional challenge on whether the refinery manager can be forced to testify. He had ignored a subpoena to testify at the hearings, which are aimed at ending the 21 month strike.

Pipelines

Interconnector (U.K.) Ltd. yielded to local opposition to its plan to build a gas pipeline terminal on a new site alongside Bacton terminal at Norfolk, U.K., and now plans to build within the existing terminal's perimeter (OGJ, Nov. 6, 1995, Newsletter). Construction is to begin this fall, with commissioning due 2 years later. The $600 million, 240 km, 40 in. pipeline is intended to export 700 bcf/year of gas to continental Europe and later could be used to import 315 bcf/year of gas from the continent as Britain's reserves run out.

Phillips Petroleum Co. and partners agreed to use Poseidon offshore pipeline, under construction in the Gulf of Mexico, to transport oil to shore from Mahogany subsalt field on Ship Shoal South Addition Blocks 349 and 359. Poseidon's first phase is to start up this month (OGJ, Feb. 26, p. 30).

U.S. Transportation Department's Research and Special Programs Administration (RSPA) will continue 50% random drug testing for the pipeline industry in 1996. RSPA said data collected in 1994, the first year random tests were made, showed positive drug test results at a rate of 0.8%. RSPA also issued guidelines for random drug testing.

Canada's National Energy Board (NEB) approved an incentive tariff plan by TransCanada PipeLines Ltd., Calgary, to share cost benefits with customers. An incentive agreement with producers will share cost recovery and revenue gains. The plan is expected to cut gas transportation tariffs.

NEB scheduled a June 3 hearing in Calgary on a requested 120,000 b/d system expansion by Interprovincial Pipeline Inc., Edmonton. The project is intended to boost deliveries to export markets in the Chicago area. The $140 million (Canadian) expansion would involve addition or replacement of 96 miles of pipeline, additional pumping capacity, and other modifications to the system. Project completion is set for second half 1998.

Colombia's second largest oil export pipeline was damaged by a bomb blast attributed to National Liberation Army rebels, according to local press reports, causing a large spill in the northwestern province of Antioquia. The rebels allegedly blew up sections of the pipeline twice before in 1996 in an effort to discourage investment by foreign companies in Colombia's oil industry.

Mojave Pipeline Co., Bakersfield, Calif., canceled its proposed 475 MMcfd northwest expansion project after an open season ended Feb. 23 found insufficient support among potential shippers (OGJ, Jan. 15, p. 26). The Federal Energy Regulatory Commission in December 1995 had approved Mojave's plan to add compression and lay pipeline loops and a 300 mile extension of its system to the Sacramento and East Bay areas of California.

Tankers

Norway's Den norske stats oljeselskap AS ordered a 125,000 dwt shuttle tanker from the Bilbao yard of Astilleros Espanoles SA, Madrid. The ship, scheduled for delivery in January 1998, will join Statoil's fleet of 16 tankers used to offload crude oil from fields off Norway and U.K. The ship will be built to Stat- oil's multipurpose shuttle tanker design. This uses the company's submerged turret loading system, which would allow conversion for use as a production vessel (OGJ, Oct. 25, 1993, p. 34).

U.S. Coast Guard scheduled a Mar. 19 hearing in Washington on its proposed rule relating to structural measures for tankers larger than 5,000 dwt that do not have double hulls. The Coast Guard also extended the period in which written comments may be filed.

Petrochemicals

Rayong Olefins Co. chose ABB Lummus Global Inc. olefins technology for a naphtha based ethylene unit to be built at Mab Ta Phud, Thailand. Toyo Engineering Corp. and Mitsui & Co. Ltd. will construct the plant, which will produce 600,000 metric tons/year of polymer grade ethylene and 300,000 tons/year of polymer grade propylene using Lummus' SRT VI pyrolysis technology. Lummus companies also will supply decoking, olefins recovery, and hydrogenation technologies for the plant, in addition to furnace components and an advanced control system.

Phillips Petroleum Co. granted a polypropylene import license to Solvay SA, Brussels, giving it the right to export to the U.S. polypropylene homopolymer and random and block copolymers, as well as finished products.

Union Carbide Corp. started up a 300 million lb/year butanol plant at its Taft, La., petrochemical complex. It also confirmed Taft as the site of a second 300 million lb/year butanol unit, which is slated for start up in 1998 and will boost Carbide's butanol capacity to 1.2 billion lb/year (OGJ, Aug. 21, 1995, p. 33).

SPR

U.S. Department of Energy approved the sale of 1.45 million bbl of crude oil from the Weeks Island, La., Strategic Petroleum Reserve to Phibro Energy U.S.A. Inc., Houston, for $26.05 million. The sale involves six batches of 29.1 gravity sour crude to be drawn down in March. Prices range from $18.46/bbl for the first batch to $17.66/bbl for the last. Weeks Island is being closed because of a fracture in the salt formation above the oil storage chambers. Congress approved the sale of 7 million bbl of oil from Weeks Island to raise funds for the closure (OGJ, Feb. 5, p. 36).

Exploration

Agip SpA and 50-50 partner Amoco Corp. found more gas and condensate in the Mediterranean Sea off Egypt. Their 1 Temsah Northwest, 70 km northwest of Port Said, flowed 42 MMcfd of gas and 1,950 b/d of condensate. Total depth of the wildcat is 3,700 m.

Enterprise Oil plc found gas with its 53/5b-5 well in the U.K.'s southern North Sea. The Britannia jack up drilled the well to 9,500 ft, encountering gas in the target Rotliegendes sandstone. The well flowed at a stabilized rate of 12.6 MMcfd of gas through a 1/2 in. choke. Well data are being evaluated to confirm commerciality and establish development options. The strike lies 6 km southeast of Davy field, which is tied back to the Indefatigable complex.

Exports-imports

Polish Oil & Gas Co., reopened talks with U.K. and Norwegian North Sea gas producers over supplies for 15 years. The state company estimates Polish gas demand at about 945 bcf in 2010, up from 364 bcf in 1995, broken out as 129.5 bcf from domestic sources and 234.5 bcf from Russia. Supplies in 2010 are likely to break out as 161 bcf each domestic and Russian, 455 bcf under an agreement to be signed with Russia's Gazprom next month, 35-70 bcf as liquefied natural gas through Baltic ports, and 52.5-157.5 bcf from western sources.

Belgium's Distrigaz SA agreed to buy an additional 35 bcf of gas from Norway's giant Troll field, due on stream in April, to provide fuel for start-up of two gas fired power plants under construction in Belgium. Troll operator Stat- oil said the contract calls for 24.5 bcf to be delivered this year and the balance in 1997. The purchase supplements Distrigaz's existing Troll gas contract, which runs for 20 years beginning Oct. 1.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.