OGJ Newsletter

May 16, 2005
The US Geological Survey, in an assessment released May 11, reported “significant” undiscovered oil and gas resources in the central part of Alaska’s North Slope and the adjacent state offshore area (see related story, p. 20).

General Interest - Quick Takes


USGS: Central ANS resource ‘significant’

The US Geological Survey, in an assessment released May 11, reported “significant” undiscovered oil and gas resources in the central part of Alaska’s North Slope and the adjacent state offshore area (see related story, p. 20).

USGS estimates there are 4 billion bbl of oil, 37.5 tcf of natural gas, and 478 million bbl of natural gas liquids undiscovered and technically recoverable in the area. Technically recoverable resources are the petroleum and equivalent volumes that can be recovered using current technology.

The central North Slope contains most of the commercial oil fields and virtually all of the petroleum-producing infrastructure and pipelines in northern Alaska, including the Trans-Alaska Pipeline System, USGS noted. To date, about 15 billion bbl of oil have been produced from this area, and remaining reserves include 7 billion bbl of oil and 35 tcf of gas.

USGS estimates of undiscovered oil in adjacent areas include 10.6 billion bbl of oil in the National Petroleum Reserve-Alaska (NPR-A) and 10.4 billion bbl of oil in the Arctic National Wildlife Refuge 1002 (coastal plain) area.

“Most undiscovered oil accumulations in the central North Slope assessment area are expected to be relatively small in comparison to those already discovered,” USGS said.

Most of the estimated undiscovered gas resource in the central North Slope is in the southern half of the assessment area in the foothills of the Brooks Range, USGS said. “This is about half of what has been estimated to occur in NPR-A (73 tcf of natural gas) and significantly more than has been estimated to occur in ANWR 1002 area (9 tcf of natural gas).”

The central North Slope lies between the NPR-A and ANWR and extends from the Brooks Range northward to the state-federal offshore boundary. The assessment area consists mostly of state and native lands, covering about 23,000 sq miles.

ChevronTexaco Corp. becomes Chevron Corp.

ChevronTexaco Corp., which recently announced an agreement to acquire Unocal Corp., has changed its name to Chevron Corp. (OGJ Online, Apr. 4, 2005).

The company’s pending $18 billion acquisition of Unocal is being opposed by a group of US senators who fear what they call “a dangerous level of concentration in the oil industry” (OGJ Online, Apr. 26, 2005).

ChevronTexaco was formed in 2001 with the merger of Chevron Corp. and Texaco Inc. Chevron formerly was Standard Oil Co. of California and prior to that, Pacific Coast Oil Co., which was formed in 1879 upon an oil discovery at Pico Canyon, north of Los Angeles. Chevron acquired Gulf Oil Corp. in 1984 in a $13.2 billion takeover.

Texaco evolved from The Texas Co., which originally was The Texas Fuel Co. formed in Beaumont, Tex. in 1901 with major oil discoveries in East Texas.

Chevron currently is the second-largest integrated energy company in the US and the fifth largest in the world, with subsidiaries in 180 countries. In 2004, ChevronTexaco produced more than 2.5 million b/d of oil equivalent, with two thirds of the volume occurring outside the US. The company had global refining capacity of more than 2 million b/d at yearend 2004, a marketing network of 25,700 retail outlets, and interests in 13 power-generating assets.

The company said it will retain its existing products and lubricant brands and “continue to support and expand” its global retail business through the Texaco, Chevron, and Caltex retail brands.

Strong floating production vessel orders forecast

The oil and gas industry is expected to invest $33 billion in the next 5 years to install 110 floating production and storage vessels (FPS), according to a report released by UK analysts Douglas Westwood at the Offshore Technology Conference in Houston May 2.

The report’s main author, Steve Robertson, said the company expects the value of FPS orders to total $9 billion/year over the next 3 years. The value of installations in years to follow “will be very high, reaching over $10 billion towards the end of the forecast period,” he said.

Robertson said floating production, storage, and offloading vessels would account for 70% of the new floaters over the next 5 years, with installation of 80 units forecast.

The emphasis on deepwater exploration remains a key driver, he said. “We forecast that well over 70% of the global spend will be on floaters moored in water depths of 500 m or greater.”

Strong market growth will lead to major installation activity toward the end of the decade. Annual global FPS expenditure is expected to increase to $8.9 billion in 2009 from an estimated $5.3 billion in 2005, Robertson said.

Douglas-Westwood expects installation activity off Africa to attract the largest share of total expenditure at $11.5 billion over the next 5 years. Major developments off Brazil also will boost Latin American FPS spending, forecast at $9.7 billion during 2005-09.

Report data were extracted from The World Floating Production Database, an information system that Douglas-Westwood maintains.

“Over the next 5 years, we expect just seven operators to account for 46% of the installations and almost 65% of the capex forecast worldwide for the 2005-09 period,” said database editor Georgie MacFarlan. Petrobras, with 17 installations, is forecast to be the biggest spender, followed closely by Royal Dutch/Shell, ExxonMobil Corp., BP PLC, and Total SA, he added.

Gas exporters meet to consider ‘fair price’

Natural gas-exporting countries have pledged to share information and to work together to establish fair prices for gas, according to Trinidad and Tobago’s Energy Minister Eric Williams.

Speaking at a Gas Exporting Countries Forum ministerial meeting in Trinidad and Tobago, Williams said that, while gas-exporting countries want a fair price for their product, GECF’s aim is not to set prices through production targets, like those used by the Organization of Petroleum Exporting Countries.

“I don’t foresee that at this time,” Williams said. “The market is big enough for everyone. I don’t see the need for producing countries to compete against each other.” Williams added that GECF will hold talks with importing countries to establish a fair gas price. The Caribbean island nation has assumed the GECF presidency.

At the meeting, forum members also agreed to develop a gas supply-demand model and set up a liaison office in Qatar. Algeria will lead the effort to produce the model.

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Exploration & Development : Quick Takes

Leads abound from south, east Falklands seismic

Falkland Oil & Gas Ltd., London, said it gained encouragement from 9,450 line-km of 2D seismic data it acquired in the South and East Falkland basins.

Preliminary interpretation led to identification of 130 leads and a wide range of play types compared with 8 leads last fall prior to the survey. Some of the leads cover 300-500 sq km.

The survey turned up numerous direct hydrocarbon indicators including gas chimneys, amplitudes, and possibly gas hydrates that point to the presence of working petroleum systems that greatly exceeded the company’s expectations.

The company plans to conduct further work to define 20 drillable prospects by mid-2006 and targets first drilling in 2007.

Major shareholders of Falkland Oil & Gas are Falkland Islands Holdings PLC 18%, Global Petroleum 16%, and RAB Capital PLC 31%. Falkland Oil & Gas holds 100% interest in 50,000 sq km and 33,700 sq km in a joint venture with Hardman Resources NL, Perth.

ExxonMobil, Apache expand Alberta farmout

ExxonMobil Corp. and Apache Corp. agreed to expand their farmout exploration and development activities in Alberta, building on a program announced last year (OGJ Online, May 24, 2004).

ExxonMobil Canada Energy will farm out its interests in 650,000 undeveloped acres to Apache Canada Ltd. It farmed out more than 370,000 acres to Apache in 2004.

Under the new agreement, Apache will have access to 1,234 sections. In addition, Apache will test horizons in 140,000 acres of the property conveyed in 2004.

Under the new agreement, Apache will operate 145 new wells drilled to shallow and deep zones over 36 months.

PTTEP acquires block south of Tehran

Thailand’s state-controlled PTT Exploration & Production PLC (PTTEP) secured a 25-year license from National Iranian Oil Co. for the Saveh Block, which covers 13,500 sq km south of Tehran.

Saveh is PTTEP’s second license in the Middle East. It earlier discovered oil and natural gas on Omani Block 44 (OGJ Online, Apr. 26, 2005).

Thai Energy Minister Viset Choopiban expects that PTTEP’s Iranian presence could help pave the way for entry into former Soviet Union countries such as Kazakhstan, Turkmenistan, and Uzbekistan.

PTTEP executives also are interested in Jordan’s upcoming licensing round, particularly the Harns Block. In addition, they are considering Jordan’s oil shale properties.

Currently, PTTEP’s activities focus on Thailand, Malaysia, Myanmar, and Viet Nam. Last month, the company, in a joint venture with Resourceful Petroleum Ltd. of Malaysia, acquired a 40% interest in Cambodia’s 6,551 sq km offshore Block B.

DTI approves Wood field development

Paladin Resources PLC subsidiary Paladin Expro Ltd., London, and Marubeni Corp. subsidiary Energy North Sea Ltd. received approval to develop Wood oil field in the UK North Sea.

The UK Department of Trade and Industry approved the development plan for the field, which is near the Montrose, Arbroath, and Arkwright (MonArb) complex.

The estimated field development cost is £80 million. Amoco UK made the discovery in Jurassic Fulmar sandstone in 1996.

The field will produce through a single horizontal well tied back to the Montrose platform 9.5 km away. A compression module also will be installed on the Montrose platform to compress Wood field associated gas.

Plans call for associated gas from the MonArb complex, which currently is flared, eventually to be compressed and sold. Wood field production is expected to start in late 2006.

Operator Paladin Expro has a 58.97% interest in Wood field, and Energy North Sea, 41.03%.

The partners have a similar development at Brechin oil field in the same area (OGJ Online, Dec. 29, 2004).

Egypt extends BP Suez Gulf concessions

Egypt and BP Egypt have signed extensions of two Gulf of Suez concessions in effect since the 1960s.

BP’s Merged Concession Agreement was extended by 20 years and its South Gharib concession by 10 years. The two areas, which currently produce more than 100,000 b/d of oil equivalent, represent about 80% of BP’s total oil business in Egypt.

BP said the extension agreements will prolong the lives of existing oil fields, maximize the recovery of remaining reserves, and allow future exploration.

BP’s original agreement terms have been modified to commit BP to invest at least $615 million over 7 years in new exploration and development and in upgrading existing infrastructure in the gulf.

Operations are conducted by Gulf of Suez Petroleum Co., a 50-50 joint venture of BP and Egyptian General Petroleum Corp.

Since 1967 the operators have invested more than $9 billion in the two areas, producing 4.7 billion bbl of oil, more than one third of the country’s total oil production. Recent discoveries include Saqqara field in mid-2003 and Edfu field in 2001.

Drilling & Production - Quick Takes

Lukoil starts gas flow at Nakhodkinskoye field

OAO Lukoil started gas production from Nakhodkinskoye field in northern Tyumen’s Yamal-Nenets Autonomous District.

Nakhodkinskoye is in the Bolshekhetskaya basin across Tazovskaya Bay east of Yamburg. Lukoil gave the field’s reserves as 8.8 tcf of gas and 65 million bbl of condensate.

Lukoil has completed 22 of 31 production wells drilled to a formation of Cenomanian age and finished a complex gas treatment unit, electric power generating system, and hard drilling and waste disposal site.

OAO Gazprom will buy the gas at a metering point near the Yamburg compressor station at the end of a 117.5 km pipeline from the field.

The pipeline crosses a new 22 km bridge over the bay. The field is to produce 388 MMcf of gas in 2005-06 and reach capacity of 350 bcf/year in 2007.

Lukoil plans to commission other fields in the basin in 2007-11, bringing peak production to 880 bcf/year of gas and 15 million bbl of condensate in 2012. Total project cost is estimated at 150 billion rubles, including the 12.2 billion spent at Nakhodkinskoye through Jan. 1, 2005.

East Texas Bossier gas play growing to southwest

Burlington Resources Inc., Houston, said it is producing more than 120 MMcfd of gas from 10 wells and plans a large 2005 drilling program in the Savell field area near the southwestern end of the East Texas Jurassic Bossier sand gas trend.

The company’s net volume is 70 MMcfd in the field, in Robertson County 30 miles north of Bryan, where it has acquired more than 90,000 net acres.

Two Lower Bossier wells, Smith 1 and Cole 2, had initial flow rates of 31 MMcfd each. Burlington Resources said it is testing a geopressured concept in the area, where Marathon Oil Corp. and others drilled early wells in 1996-97 (see map, OGJ, Mar. 3, 1997, p. 23).

Wells have so far produced 5-30 MMcfd from Upper and Lower Bossier, with depths at the deepest wells flirting with 20,000 ft.

The company plans to add a fifth rig in June or July, as its 2005 plan is for 8 exploration and 13 development wells and a total investment of $120 million. The initial wells are on 640-acre units, and Burlington is evaluating infill potential.

The company completed a 16-in. pipeline and central processing unit in March.

Rig contract signed for two Sumatra wells

Serica Energy Corp., Toronto, has signed a contract with Indonesian agent PT Lins Petrotama Energi for the use of Northern Offshore Ltd.’s Galaxy Driller semisubmersible for a two-well drilling program off North Sumatra. The $5.7 million contract includes drilling and ancillary services.

The Galaxy Driller will spud the first well, Kambuna-2, on the Glagah Kambuna technical assistance contract (TAC) to appraise Kambuna natural gas-condensate field, discovered by Bow Valley Energy Ltd. in 1986. Kambuna-2 will be drilled to 8,200 ft TD.

Galaxy Driller semisubmersible. Photo courtesy of owner Northern Offshore Ltd.
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The field’s Kambuna-1 discovery well flowed gas at 13.9 MMscfd and condensate at 950 b/d from an open-hole test over a 100-ft interval in the Belumai sandstone, Serica said. The TAC, in which Serica holds a 69.4% interest, is off North Sumatra, 45 km north of Medan.

Serica recently concluded an agreement with PT Gunakarsa Glagah Kambuna Energi and Indonesia’s national oil company Pertamina to extend the rehabilitation period of the TAC to Dec. 16. The TAC expiration date remains unchanged at Dec. 16, 2016.

In the second project, Galaxy Driller will drill exploration well Togar-1 on the Serica-operated Asahan offshore production-sharing contract. The PSC surrounds the Glagah Kambuna TAC on three sides.

Togar-1, to be drilled to 6,300 ft TD, will investigate a series of possible hydrocarbon-bearing sands in the Baong sandstone formation.

Galaxy Driller, a second-generation Mariner-design semi built in South Korea in 1977, currently is in Singapore undergoing an extensive refit and upgrade. The first well is expected to be spudded in June.

Total boosts stake in Surmont oil sands

Total SA has purchased an additional 6.5% interest in the Surmont leases of the Athabasca oil sands area, 60 km southeast of Fort McMurray, Alta.

The transaction increases Total’s stake in the Surmont leases to 50%.

The Surmont oil sands project, which uses steam-assisted gravity drainage, is to start Phase I production in 2006. Production is expected to reach 27,000 b/d of bitumen.

Alberta authorities have approved Phase II, which involves expanding plateau production to 100,000 b/d by 2012.

Processing - Quick Takes

Saudi Aramco reports status of megaprojects

Saudi Aramco is making progress on three megaprojects in Saudi Arabia: the Rabigh Integrated Refinery and Petrochemical Complex, an export refinery, and a refining and petrochemical project at Ras Tanura and Ju’aymah. Isam A. Al-Bayat, Saudi Aramco vice-president for new business development, reported on the projects May 9 at a conference in Dammam.

The Rabigh project, which began May 2004, is scheduled to come on stream in the third quarter of 2008. Saudi Aramco and Sumitomo Chemical of Japan are converting the 400,000 b/d Rabigh refinery into an integrated refinery and petrochemical complex (OGJ Online, May 11, 2004).

For the proposed export refinery, with 400,000 b/d of capacity at an undetermined site, Saudi Aramco has approached international capital markets to assess investor interest, Al-Bayat said. The facility would cost $4-5 billion.

Saudi Aramco also is considering the addition of petrochemicals capacity based on feedstocks from the Ras Tanura refinery and Ju’aymah industrial area.

The Ras Tanura complex includes a 325,000 b/d hydrocracking refinery and a 200,000 b/d condensate splitter. Petrochemical facilities under consideration for the integration project include a large ethane-naphtha cracker, an aromatics recovery complex, and complementary downstream derivative units to produce secondary petrochemicals.

The estimated project cost is $6 billion, Al-Bayat said. He said Saudi Aramco is beginning an “unprecedented era” of capital expansion, with expenditures on materials and equipment in excess of $20 billion and on services of more than $23 billion through 2010.

Transportation - Quick Takes

Second combined regas tanker delivered

The second of three first-generation combined LNG regasification-tanker vessels was delivered to owner GKFF Ltd. on May 4, said Jon Cook, vice-president for Excelerate Energy LLC, Houston.

The Excellence vessel joins sister vessel Excelsior, owned by Exmar NV, Antwerp.

Excelerate Energy simultaneously took the vessel under long-term charter for delivery of LNG to its new Gulf Gateway Energy Bridge deepwater port, an LNG terminal moored on Block 603, West Cameron Area, South Addition, 116 miles off Louisiana in the Gulf of Mexico (OGJ, Apr. 18, 2005, Newsletter). Daewoo Shipbuilding & Marine Engineering Co. Ltd., South Korea, built both vessels. Each is a 138,000-cu m combined LNG tanker and regasification vessel that will tie up to the new submerged turret buoy and send vaporized LNG into an existing pipeline infrastructure for eventual delivery ashore.

A third innovative vessel, Excelerate, is scheduled for delivery by DSME to combined ownership of Exmar and Excelerate Energy in October 2006.

Sunoco to expand Texas pipeline system

Sunoco Logistics Partners LP, Philadelphia, has signed an agreement with Mobil Pipe Line Co. to purchase a 187-mile, 16-in. crude oil pipeline system between Corsicana and Wichita Falls, Tex. The deal includes a 2.9 million bbl oil storage facility at Corsicana.

The pipeline, which will have a 125,000 b/d capacity, will become part of the company’s Texas oil pipeline system and its Nederland, Tex., terminal system. Sunoco will receive crude at Nederland for movement through the Nederland-to-Wortham section of the West Texas Gulf Pipe Line. It will lay an $18 million, 20-mile pipeline from Corsicana to Wortham.

JV signs contract for China gas pipeline

The Hangzhou Gas (Group) Co. Ltd. (HGG), Shell (China) Ltd., Shell China BV, and Hong Kong & China Gas Co. Ltd. (Towngas) have signed a joint venture contract to build, operate, and manage a high-pressure natural gas pipeline system in Hangzhou, China.

Work began last year on the 117-km pipeline and two city-gate stations, estimated to cost $91 million. Currently, 18 km of pipeline and one city-gate station are complete. The city-gate station and 9 km of the completed pipeline are in operation, supplying 150,000 cu m/day of gas to users in Hangzhou.

The project, expected to be complete in 2008, will operate at its 600 million cu m/year capacity in 2010.

HGG will own a 51% share in the JV, while the Shell companies will own 39% and Towngas, 10%.