June 13, 2005
General Interest - Quick Takes

US, Canada gas reserves replacements up

Record gas drilling is boosting reserves additions and allowing more than full reserves replacement in the US Lower 48 and Canada, says Ziff Energy Group in a report released June 1. The report summarizes Ziff’s analysis of gas reserves replacement by the drillbit in 2004 and does not include acquisitions or divestments.

The analysis indicates that there was an “overall replacement of 115% of annual production” in the Lower 48, which had some small positive revisions, and of 108% in Canada-the first year since 2000 that companies have achieved 100% replacement by the drillbit in Canada, Ziff reported.

“Minor negative revisions reduced the Canadian replacement rate,” Ziff said.

The increases raised the proved gas reserves life to 10.7 years in the Lower 48. In Canada, proved gas reserves life decreased to 7.8 years.

The top 30 companies in the Lower 48 increased collective production by 8%, and the Canadian top 30 increased production by 1%, according to the report.

South Korea urges IMO security increase in Malacca Strait

South Korea’s President Roh Moo-hyun urged the United Nations International Maritime Organization (IMO) to increase security for South Korean oil tankers passing through the Malacca Strait in Southeast Asia.

The narrow, 960-km strait, bordered by Malaysia, Singapore, and Indonesia, is one of the world’s busiest shipping lanes and a particularly strong magnet for attacks by pirates or terrorists. About 50,000 ships/year use the strait while carrying a third of the world’s traded goods and half its oil supplies.

According to IMO, any serious disruption to the flow of maritime traffic through this channel would do widespread harm, presenting ships with a detour of about 1,000 km, raising freight rates, and lifting costs of goods and commodities.

Last November, IMO said it would convene a high-level conference to consider ways of enhancing safety, security, and environmental protection in the Straits of Malacca and Singapore.

Japan, China boundary dispute lingers

Japan has rejected a proposal by China for joint development of gas fields in the East China Sea, but both sides have agreed to further talks on their disputed maritime boundary in an effort to reduce tensions.

In a meeting held May 31-June 1 in Beijing, China also rejected Japan’s request to halt its projects and to hand over data from the disputed gas fields.

The two sides agreed to launch a working group to discuss ways to demarcate the countries’ exclusive economic zones in the East China Sea. They also agreed to meet again as soon as possible in Tokyo to continue discussions.

In April, Japanese Prime Minister Junichiro Koizumi called for dialogue between Japan and China to help settle their growing disagreement over oil and gas drilling rights in the disputed waters (OGJ, May 2, 2005, p. 40).

Pakistan to claim compensation for spill

Pakistan will claim compensation of $2 billion from the last owners of the Tasman Spirit oil tanker, which ran aground off Karachi July 27, 2003, and spilled 31,000 tonnes of crude oil (OGJ Online, Aug. 14, 2003).

Ministers and officials at a recent symposium in Karachi said Islamabad had grounds for the claim. The symposium was organized by the Pakistan Environmental Protection Agency, United Nations Development Program, National Institute of Oceanography, and Sindh Environmental Protection Agency.

The Tasman Spirit, owned at the time by Palambros, was carrying about 67,500 tonnes of Iranian crude when it ran aground near the approach channel of the Karachi harbor. Half of the oil it spilled was estimated to have sunk to the seabed.

The spill contaminated about 2,062 sq km of marine area, exposed as many as 300,000 people to airborne toxics, damaged offshore habitat, and heavily polluted 786 hectares of mangrove forest.

Weatherford to acquire Precision Drilling units

Weatherford International Ltd. plans to acquire two segments of Precision Drilling Corp., Calgary, in a $2.28 billion cash and stock deal.

Weatherford agreed to pay $900 million in cash and 26 million common shares for Precision’s energy services and international contract drilling units. Closing, subject to US and Canadian regulatory approvals, is expected during the third quarter.

The contract drilling division in the transaction operates 48 land rigs, many in the Middle East and North Africa.

Precision is keeping its Canadian contract drilling business.

Suncor to buy Valero’s Colorado refinery

A Suncor Energy Inc. unit plans to acquire a 28,000 b/cd refinery from Valero Energy Corp., San Antonio, and integrate the facility with its adjacent 60,000 b/cd refinery in Commerce City, Colo.

Suncor Energy (USA) agreed to buy Colorado Refining, an indirect wholly owned Valero subsidiary, for $30 million plus working capital and associated oil and product inventory.

Colorado Refining’s principal assets are the Commerce City refinery and a Grand Junction, Colo., products terminal. The purchase is not subject to regulatory approval, Suncor said.

Suncor, which operates an oil sands facility in northern Alberta, said the transaction wouldn’t affect crude suppliers providing feedstock to the Valero refinery.

Industry Scoreboard
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Exploration & Development - Quick Takes

Bidding brisk in India’s NELP-V round

The Indian government received 69 bids from 48 companies for 20 blocks under the fifth round of the New Exploration Licensing Policy (NELP-V), exceeding its expectations.

Bidders included 27 non-Indian companies.

The Petroleum Ministry said it would announce awards by July 31 and hopes to have contracts signed by the end of September.

First Calgary taps oil and gas in Algeria

First Calgary Petroleums Ltd. (FCP), Calgary, has cased as a potential oil and gas well the ZCHW-1 on Rhourde Yacoub Block 406a in Algeria.

ZCHW-1, drilled 9.6 km southwest of the FCP-Sonatrach ZCH-1 discovery, encountered 28 m of net hydrocarbon pay over several formations in the Carboniferous and Upper Devonian.

It confirms the southwest extension of a structural trend larger than 125 sq km on Block 406a. The 3D seismic data and drilling results indicate a large prospective area in this trend.

Testing of the ZCHW-1 well will be delayed to coincide with other completions and testing operations. FCP plans to drill later this month RTN-1, about 5.3 km north of ZCH-1, targeting a separate structure.

PetroChina, Shell plan Changbei development

PetroChina Co. Ltd. and Shell China Exploration & Production Co. Ltd. have signed letters of intent (LOI) to develop Changbei natural gas field in Shaanxi Province and the Inner Mongolia Autonomous Region in China.

The joint venture will invest $600 million to construct central processing facilities, interfield pipelines, and the drilling of about 50 horizontal and multilateral wells over 10 years.

Operator Shell signed LOI for directional drilling, drilling fluids and drilling rigs and associated services contracts covering drilling of 30 wells over 6 years and for the engineering, procurement, and construction of a central gas processing facility.

Changbei field is expected to begin deliveries of 1.5 billion cu m/year of gas by 2007 and as much as 3 billion cu m/year by 2008.

PetroChina’s second Shaan-Jing gas pipeline to Beijing is under construction and scheduled to go online by midyear.

Oman awards Circle Oil Block 49 E&P rights

Oman signed an oil and gas exploration and production agreement June 6 with Ireland’s Circle Oil PLC to explore in southwestern Oman on the 15,439 sq km Block 49 in Dhofar Province.

Under the agreement, a $22 million work program, which includes review of existing data and aerogravity and 2D seismic surveying, has been set for the first 36-month period. A well may also be drilled during this time.

Further drilling and seismic surveying will be carried out during two additional 18-month periods.

Pakistan awards petroleum exploration licenses

Pakistan has granted two petroleum exploration licenses to Pakistani independent Petroleum Exploration (Pvt.) Ltd. (PEL): No. 352/PAK/2005 over the 2,425.96 sq km New Larkana district in Sindh Province and No. 326/PAK/2005 over the 724.42 sq km Karsal area in Punjab Province.

PEL has committed $5 million to an exploration program that will include drilling three wells and acquiring 160 km of seismic.

Total lets subsea systems contract for Akpo

Total SA has let a $415 million contract to the Cameron division of Cooper Cameron Corp. for subsea production systems, supplemental installation, and support services for Akpo, Total’s 44-well development project off Nigeria (OGJ, May 9, 2005, Newsletter).

Cameron will provide subsea systems engineering and project management, subsea christmas trees, production and intervention control systems, manifolds, flowline connection systems, installation support, and associated spares for Total Upstream Nigeria Ltd.

Delivery and installation is scheduled for late 2006 through 2008.

Statoil spuds Tulipan wildcat off Norway

Statoil ASA has spudded the first exploration well in its Tulipan prospect on Block 6302/6 in the Norwegian Sea. The field is west of Hydro’s giant Ormen Lange gas and condensate field.

Ocean Rig AS’s Eirik Raude semisubmersible is drilling the wildcat in 1,250 m of water to 3,000 m TMD beneath the seabed. Drilling is expected to take 2-3 months.

Statoil plans to drill two other exploration wells on the Norwegian continental shelf during 2005.

Statoil stops drilling well off Venezuela

Statoil ASA has suspended drilling of the Ballena 1-X well on Block 4 in the Plataforma Deltana area off Venezuela for safety reasons.

Statoil said the technical standard of Transocean Inc.’s Sovereign Explorer semisubmersible failed to meet Statoil’s requirements for safe drilling in high-pressure reservoirs despite 6 weeks of extensive repairs.

Operator Statoil said it is seeking another rig and will resume operations as soon as possible.

Statoil is committed to drilling at least three exploratory wells in 4 years on the block, which it received in February 2003 (OGJ Online, Jan. 04, 2005).

South Avouma well noncommercial

Vaalco Energy Inc., Houston, operator of Etame Marin permit off Gabon, reached TD on the South Avouma satellite EAVSM-1 exploration well, without finding commercial hydrocarbons, reported partner PanOcean Energy Corp. Ltd.

The rig next will drill the Etame ET-6H development well to increase production at the main Etame field.

Separately, the Etame consortium issued a letter of intent to Gulf Island Fabricators of Houma, La., to build the platform for Avouma field. Construction will begin shortly.

Onshore, PanOcean is drilling TST-3, the second Tsiengui development well and is testing and commissioning its Tsiengui-to-Obangue pipeline system.

Early production facilities are being completed at Tsiengui, and PanOcean expects to submit a full field development plan to the government shortly. The company is finalizing its 26 km onshore export pipeline route.

Drilling & Production - Quick Takes

US drilling hits new high for the year

US drilling activity increased the week ended June 4 to the highest level this year with 1,353 rotary rigs working, up by 22 from the previous week and from 1,168 in the same period last year, said Baker Hughes Inc.

It also is the highest weekly total since late February 1986, when 1,376 rigs were drilling. The previous high this year was 1,348 rigs working during the week ended Apr. 15.

Most of the latest increase was on land, with 1,231 rotary rigs working, 18 more than the previous week.

Offshore drilling also increased by 4 units to 98 in US waters, including an increase of 3 to 94 in the Gulf of Mexico. Activity in inland waters was unchanged, with 24 rotary rigs at work.

Drilling in Canada increased by104 rotary rigs to 375 working. That is up from 256 during the same period a year ago.

Stratic’s Akkaya-1 tests gas off Turkey

Stratic Energy Corp., Toreador Resources Corp., and Turkish Petroleum Corp. (TPAO) tested natural gas in the Akkaya-1 delineation well in shallow waters of the western Black Sea 5 miles off Turkey.

Well logs indicated gas in zones between 853 m and 1,136 m. An 11 m section of a gross interval between 1,050.5 m and 1,135.5 m tested at a sustained rate of 7.6 MMcfd of gas through a 36/64-in. choke at a flowing wellhead pressure of 913 psi. Final shut-in pressure was 1,395 psi.

Other productive intervals are present at 853-927 m. Stratic plans to perforate and produce an additional 36 m of gas-bearing sands uphole after the deeper zones are depleted.

Akkaya-1, in the South Akcakoca subbasin, is producing from the Eocene Kusuri formation. The well reached TD of 1,275 m and will be suspended as development continues.

The group was moving the Prometheus jack up to drill an offset to the Ayazli-1 discovery well.

Processing - Quick Takes

Firm lets contract for Al Jubail complex

Project Management & Development Co. Ltd. (PMDC) of Saudi Arabia let a contract to Fluor Corp. for front-end engineering, design, and project management consultancy services for a $3.5 billion petrochemicals complex in Al Jubail.

The complex will include a 1.35 million tonne/year (tpy) ethane-butane cracker, a 950,000 tpy polyethylene plant, a 600,000 tpy polypropylene plant, a 530,000 tpy ethylene oxide unit, and a 300,000 tpy Bisphenol-A plant with phenol and cumene units.

Additional derivative facilities will be installed for methylamines, ethanolamine, ethoxylates, butane-1, and benzene extraction.

Fluor has begun work on the project. Site work, to start later this year, is scheduled for completion in 2008.

Chinese refinery due desulfurization unit

Sinopec Corp. unit Sinopec Beijing Yanshan Co. will install a 30,000 b/d desulfurization unit at its 162,000 b/cd refinery in Yanshan, Beijing.

The unit will use ConocoPhillips’s proprietary S Zorb sulfur removal technology, which will minimize octane pool losses and hydrogen consumption.

The unit will process full-range naphtha from an FCC unit.

Sabic lets contract for AR-RAZI expansion

Saudi Basic Industries Corp. (Sabic) affiliate Saudi Methanol Co. (AR-RAZI) has awarded the engineering and construction contract for its world-scale AR-RAZI 5 methanol plant in Jubail Industrial City to Japan’s Mitsubishi Heavy Industries. The 1.7 million tonne/year plant is scheduled to go on stream in first quarter 2008.

Sabic said a single production line would use oxygen as a burning medium to achieve a high production capacity and significantly cut construction and operation costs.

With an existing capacity of 3 million tonnes/year, AR-RAZI is the largest single methanol production complex in the world, Sabic said. It will have total capacity of 5 million tonnes/year upon completion of this project.

Sabic and a Japanese consortium led by Mitsubishi are 50-50 owners of AR-RAZI.

Transportation - Quick Takes

Repsol YPF SA to join Camisea, Peru LNG projects

Repsol YPF SA signed an agreement with Hunt Oil Co. to participate as a third partner in the Peru LNG SRL and Camisea natural gas projects in Peru. South Korea refiner SK Corp. is the other partner (OGJ Online, June 7, 2004).

The agreement also would enable Repsol YPF to assume an interest in Transportadora de Gas del Peru SA (TGP), which will deliver natrural gas through a 700 km trans-Andean pipeline from Camisea fields to Lima and liquids through a 575 km export line.

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Peru LNG’s planned 4.4 million tonne/year gas liquefaction facility at Pampa Melchorita on the coast of Peru is expected to be operational in 2009.

Camisea fields in central Peru, which contain about 13 tcf of gas with associated liquids, will feed Peru LNG.

Mitsui, Marubeni join EGLNG venture

Japan’s Mitsui & Co. and Marubeni Corp. will join Marathon Oil Corp. to produce LNG in Equatorial Guinea.

The project involves construction of a $1.4 billion LNG liquefaction plant on Bioko Island at Punta Europa (OGJ Online, June 23, 2004).

Under agreements just signed, Marathon will retain 60% of Equatorial Guinea LNG Holdings Ltd. (EGLNG), the company it established to manage the project with state-run oil company GEPetrol, which will retain 25%. Mitsui and Marubeni will acquire stakes of 8.5% and 6.5%, respectively, by investing a combined total of 10 billion yen.

Bechtel Corp. has begun construction of the plant, which is scheduled to begin deliveries of 3.4 million tonnes/year of LNG in late 2007 to a BG Group PLC subsidiary. Deliveries will be made primarily to BG’s Lake Charles, La., LNG import terminal.

Natural gas will come from Alba field, currently under development by Marathon, Noble Energy Inc. subsidiary Samedan of North Africa Inc., and GEPetrol.

Austria’s Haidach gas field due storage role

Rohöl AG (RAG), Wingas GMBH, and Gazexport have signed a contract valued at €250 million to use Haidach natural gas field in Austria for gas storage.

RAG will design, build, and operate the facility, which will store a maximum 2.4 billion cu m of gas. Operations will begin in 2007.

The Haidach gas storage facility will be connected, via an 800-mm pipeline, to a German-Austrian gas terminal in Burghausen.

Irving Oil, Repsol YPF form Canaport LNG

Irving Oil Ltd., Saint John, NB, and Repsol YPF have finalized agreements to form Canaport LNG, which will construct, own, and operate an LNG receiving terminal at Saint John. (OGJ Online, Sept. 24, 2004).

Irving operates a deepwater petroleum terminal, Irving Canaport, at the LNG terminal site 65 miles from the US border. The LNG terminal, scheduled for completion in 2008, will have three 160,000 cu m LNG tanks and throughput capacity of 1 bcfd.

Repsol will provide the LNG. Irving Oil will handle gas marketing in Atlantic Canada, and Repsol YPF will handle gas marketing elsewhere in Canada and in the US.

The partners plan to request proposals for engineering, procurement, and construction contracts in July.

Iran taps Daewoo for VLCC contracts

South Korea’s Daewoo Shipbuilding & Marine Engineering Co. (DSME) received a $384 million order from the Iranian government to build three very large crude carriers (VLCC).

Daewoo will construct the 318,000-ton VLCCs for Iran’s state-owned National Iranian Tanker Co. (NITC), with delivery scheduled for October 2009.

In early May, NITC said it would award contracts amounting to $1 billion to South Korea-based Hyundai, DSME, and Samho Heavy Industries Co.

In February, NITC issued a tender to shipyards for the construction of five 1-million-bbl Suezmax tankers and five 2-million-bbl VLCCs.

Altogether, NITC has announced plans to order 35 vessels to be built by 2010, including 20 chemical tankers and 10 LNG carriers.


BP Exploration (Alaska) Inc. drilled its first pentalateral well on Alaska’s North Slope in Polaris field, not Orion field, in the western Prudhoe Bay area (OGJ Online, Apr. 26, 2005).