OGJ Newsletter

April 4, 2005
A leveling of index statistics from previous roller-coaster patterns is expected in the industry, according to an economist who prepares the Texas PetroIndex for the Texas Alliance of Energy Producers, Wichita Falls.

General Interest—Quick Takes

PetroIndex economist notes data leveling

A leveling of index statistics from previous roller-coaster patterns is expected in the industry, according to an economist who prepares the Texas PetroIndex for the Texas Alliance of Energy Producers, Wichita Falls.

Karr Ingham, president of Economic Reporting, Amarillo, said oil and natural gas prices are hovering at higher levels for longer periods than they did 10 years ago. But he stopped short of forecasting an end to cycles. The index is a monthly composite of more than 20 Texas oil and gas production and exploration indicators, based at 100 in January 1995. For December 2004, the index was 165. It climbed to 167.4 in January. Ingham forecasts the index will reach 182 by December.

The number of gas well completions spiked between yearend 2003 and yearend 2004. Statistics showed 875 gas well completions during December 2004, compared with 474 for the same period a year earlier and 287 in December 1995.

Russia raises oil export tax to record level

The Russian government plans to increase its oil export duty to a record $102.60/tonne starting Apr. 1. The duty has been $83/tonne since Feb. 1.

During December 2004 and January, the duty was $101/tonne, the previous highest level.

Russia's oil export duty is reconsidered every 2 months.

Ghana blaze shuts down Tema refinery

Oil facilities were damaged at Ghana's Port of Tema Mar. 25 when a Greek fishing vessel caught fire, killing 13 crew members and destroying a pipeline linked to the nation's sole refinery.

Ghana's Energy Minister Mike Ocquaye ordered the state-owned Tema Oil Refinery (TOR) closed to prevent further losses after the fire damaged the crude oil pipeline carrying imports to the facility, about 20 km east of the port. Officials at the 45,000 b/d refinery, which processes all of Ghana's imported crude, announced that fuel deliveries could continue for several weeks despite the destruction of the fuel pipeline. According to the US Energy Information Administration, TOR primarily processes Bonny Light/Brass River crudes from Nigeria. EIA said Ghana consumed about 40,490 b/d of oil products in 2002.

Speaking to Radio Ghana over the weekend, Managing Director K.K. Sarpong said that sufficient refined products are in stock to meet the country's needs for about 3 weeks while the oil pipeline is undergoing repair. He gave no indication, however, of the amount of time needed for the repairs.

While the refinery also has crude oil in store for continued processing, Sarpong acknowledged that absent repairs, no new supplies of crude oil can be discharged from tankers through the damaged pipeline to the refinery.

The fire was reported to have started when sparks from a welder on the MV Polaris ignited oil floating on the water's surface. The oil reportedly was from the refinery's pipeline, which is said to have been leaking for more than a week.

The fire burned for 10 hr before being brought under control. In addition to the refinery, the blaze damaged the Volta River Authority pumping house and several other vital facilities.

Ukraine to upgrade production, gas transport

Naftohaz Ukrayiny, the state oil and gas company of Ukraine, expects to receive the first $350 million installment in early April of a $2 billion loan from Deutsche Bank for modernizing its oil and gas production and gas transportation.

Oleksiy Ivchenko, appointed chairman of Naftohaz Ukrayiny in early March, told Ukraine's Zerkalo Nedeli newspaper the 5-year loan can be extended to 7-9 years and has a provisional interest rate of 8%/year. He said the company will use the initial installments to modernize production and later installments for the gas transport system.

Ivchenko, however, acknowledged the need for additional participants in the transport consortium of Naftohaz Ukrainy and Russia's OAO Gazprom. The bilateral arrangement "absolutely fails to take account of the interests of the gas purchasers," he said, adding that the consortium should include a transit agent and that Germany's Ruhrgaz AG has been invited to join the scheme.

Promising to sustain relations with Gazprom and Russia, Ivchenko said he would consider supplies from other producers, adding, "Why do we have to be tied exclusively to one gas supplier?"

Job Corps program trains roustabouts

An industry-government training program for entry-level oil field workers will graduate its first class soon in Carville, La.

A partnership of the US Department of Labor, Carville Job Corps Academy, American Petroleum Institute, and several oil and gas companies is training students to work as offshore roustabouts. Seventeen students will graduate in late March or early April as the first oil field workers taught under the Job Corps program. Training, conducted at a Shell Oil Co. training facility, covers offshore rig and platform operations, transportation, emergency response, oil pipe operations, safety and first aid, CPR, and water survival.

Industry Scoreboard

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Exploration & Development—Quick Takes

MMS issues notice for OCS Sale 196

The US Minerals Management Service has issued a proposed notice for Western Gulf of Mexico Outer Continental Shelf Lease Sale 196 scheduled Aug. 17.

Sale 196 offers 3,754 blocks covering 20.3 million acres 5-357 km off Texas and Louisiana in 8-3,100 m of water. MMS estimates the proposed sale could result in production of 136-262 million bbl of oil and 0.81-1.44 tcf of natural gas.

The proposed sale includes provisions for an increase in base rental rates (as well as minimum royalty) to $6.25/acre or fraction for blocks in less than 200 m of water and $9.50/acre or fraction for blocks in 200 m or deeper water.

Certifications regarding debarment, suspension, and other responsibility matters are no longer required to be filed with MMS to qualify to bid at an OCS lease sale. However, compliance requirements for debarment and suspension (nonprocurement) will be prescribed in an addendum included in each lease resulting from this sale.

The minimum bonus bid amount is $25/acre or fraction for blocks in less than 400 m water and $37.50/acre or fraction for blocks in 400 m or deeper water.

Melrose to explore Rhone Mediterranean acreage

Melrose Resources PLC, London, will seek partners to explore the 25,000-sq-km Rhone Maritime exploration permit in the Mediterranean off southeastern France.

Melrose took a farmout from TGS-Nopec Geophysical Co., Naersnes, Norway, which acquired 4,305 line-km of seismic data in 2001 that Melrose said "demonstrated significant potential." For transferring its 100% interest, TGS-Nopec will recover its costs and retain a net profits interest in the permit.

Two 5-year exploration periods are available after the first 3-year exploration term expires in November. The prospective area lies in an average of 2,000 m of water. Two wells were drilled on the shelf in the 1970s.

Melrose and TGS-Nopec will acquire more 2D and 3D seismic data aimed at delineating already-identified structures in a postsalt play capable of trapping more than 10 tcf of gas. Large structures also are identified in a deeper presalt play believed to be more oil-prone, Melrose said.

"The combination of large structures and hydrocarbon indicators in both plays is very promising," Melrose said.

FMC to supply gulf hub field equipment

Anadarko Petroleum Corp. has awarded FMC Technologies Inc., Houston, a $25 million contract to supply 10 subsea trees and associated equipment for Anadarko wells that will be connected to the Independence Hub platform in the deepwater eastern Gulf of Mexico.

The $665 million Independence Hub deep-draft, semisubmersible platform will be installed in 8,000 ft of water to serve as a gathering hub for eight deepwater natural gas fields (OGJ Online, Nov. 10, 2004).

Anadarko will operate the hub platform and six fields in the Atwater Valley, DeSoto Canyon, and Lloyd Ridge areas.

Equipment deliveries, scheduled to begin this year, will be completed over a multiyear period.

Independence Hub LLC is an affiliate of Enterprise Products Partners LP, Houston, and the Atwater Valley Producers Group, which includes Anadarko; Dominion Exploration & Production Inc., Richmond, Va.; Spinnaker Exploration Co., Houston; and Kerr-McGee Oil & Gas Corp. and Devon Energy Corp., both of Oklahoma City.

Sudan okays Thar Jath field development

Sudanese government officials signed a contract with the Sudanese White Nile Petroleum Co. authorizing development of Thar Jath oil field on Block 5A (see map, OGJ, Oct. 27, 2003, p. 46).

Sudanese White Nile Petroleum plans to drill 45 wells, aiming for initial production of 80,000 b/d.

Sudan's Minister of Energy and Mining Awad Ahmad al-Jaz said Thar Jath development includes a 176-km pipeline to an existing 1,504-km crude oil pipeline from the Unity-Heglig group of fields to Port Sudan on the Red Sea (see map, OGJ, Dec. 7, 1992, p. 46).

Sudanese White Nile Petroleum is a consortium of Malaysian state oil firm Petronas 68%, India's state-run Oil & Natural Gas Corp. 24%, and Sudan's state oil company Sudapet 7%.

Murphy reports dry holes and strike

Murphy Oil Corp. reported an oil discovery off Malaysia and two dry holes on nonanalogous structures near an earlier discovery off Congo (former Zaire).

Off Sarawak, Malaysia, Murphy's Rompin-1 exploration well on Block SK 311, drilled to 6,021 ft TD in 164 ft of water, encountered oil and gas in multiple horizons.

The Rompin discovery will be appraised later this year, when other nearby oil prospects are drilled. Murphy is the operator and is evaluating development options for the area.

Murphy has an 85% working interest in adjoining Blocks SK 311 and SK 309, on which West Patricia and Congkak fields produce oil. Petronas has a 15% interest.

The dry holes, Saphir Marine-1 and Onyx Marine-1 on the Mer Profonde Sud Block, tested prospects on the same fairway as the company's Azurite Marine-1 discovery but on different types of structure.

The Azurite Marine-1 encountered 160 ft of net oil pay with no associated water in multiple Lower Miocene reservoirs.

Murphy said it has a number of prospects to drill that appear analogous to Azurite. It plans to appraise the discovery later this year and to explore further.

Murphy operates the block, which covers more than 800,000 acres, with an 85% working interest. The Congolese national oil company, Societe Nationale Petroles du Congo, holds the remaining 15%.

Drilling & Production—Quick Takes

US drilling at 19-year high

US drilling activity hit a 19-year high the week ended Mar. 24 with 1,331 rotary rigs working, Baker Hughes Inc. reported.

That is 11 more than the previous week and the highest weekly total since late February 1986, when 1,376 rigs were drilling. The latest count is up from 1,150 a year ago.

Land drilling led the increase, up by 12 rigs to 1,208 working. Drilling in inland waters increased by 2 to 28. However, offshore drilling was down by 3 rigs to 95, including a loss of 2 to 91 in the Gulf of Mexico. With progression of the seasonal thaw, Canada's rig count was down by 13 to 316, compared with 320 rigs working at this time a year ago.

Petronius flow resumes off Louisiana

ChevronTexaco's Petronius platform is back on line after 42,000 b/d of crude oil and 65 MMcfd of gas production was shut in due to severe damage from Hurricane Ivan in September. The platform, 130 miles southeast of New Orleans, is producing about 75% of its prehurricane output. The storm damaged the rig crew quarters, production equipment, and deck structures.

ChevronTexaco is operator of Petronius, holding a 50% interest. Marathon Oil Corp. holds the other 50%.

Kuwait lets major maintenance contract

Kuwait Oil Co. has let a $125 million maintenance contract to Petrofac, an international oil services company, to deliver full maintenance services on the north and west areas of Kuwait.

This is the first performance-based, full-maintenance services contract in Kuwait to be awarded to an international contractor.

The 5-year contract, executed through Petrofac Facilities Management, covers the maintenance of 16 facilities: mainly oil-gathering centers, gas booster stations, gas steam and water-injection plants, water-gathering and pumping stations, gas and crude oil pipelines, and wellheads.

Kuwaiti contractor Kharafi National will provide Petrofac with exclusive in-country support.

Processing—Quick Takes

Texas City refinery remains in production

BP PLC's refinery at Texas City, Tex., remains in production after an explosion and fire damaged an isomerization unit Mar. 23, killing 15 and injuring more than 100.

The unit at which the fire occurred was not in operation at the time of the accident, said company spokesman Hugh Depland. It had been shut down for maintenance turnaround, he said, and was in the process of being brought back online at the time of the accident. The fire was extinguished in about 2 hr.

Although the damaged unit is shut down, Depland said it would not significantly affect production at the refinery.

"We have other units on the site producing the same product," he explained.

The investigation into the cause of the blast is continuing.

Total Normandy refinery gets hydrocracker

Total SA is investing ¤500 million to add a distillate hydro- cracker with capacity of about 48,000 b/d and a steam methane reformer to its 343,000 b/cd Normandy refinery at Gonfreville l'Orcher, near Le Havre, France.

The refinery will continue to operate throughout the construction, which is scheduled for completion in mid-2006.

The hydrocracker will convert heavy fractions into very low-sulfur distillates, enabling the refinery to produce high-quality bases for lubricants and specialty fluids and to reduce its output of heavy fuel oil (see photo, p. 36). French engineering firm Technip is overseeing construction of the two units, and Sofresid SA, Montigny le Bretonneux, France, is providing oversight for pipe works and reservoirs.

Belarus refinery to add gasoline units

The 323,000 b/cd Mozyr Oil Refinery of Belarus picked Axens SA, Paris, to supply a 22,000 b/d gasoline desulfurization unit and a 6,000 b/d recycle C5/C6 isomerization unit.

Mozyr Oil Refinery exports 80% of its products to Europe.

UOP processes due in Valero hydrocrackers

Valero Energy Corp. will use UOP LLC hydroprocessing technologies in integrated hydrocracking and hydrotreating units to be installed at its St. Charles, La., and Houston refineries.

At the 190,000 b/d St. Charles refinery, the new 57,000 b/d unit will produce ultralow-sulfur diesel (ULSD) and treated FCC feed. The 50,000 b/d unit at Valero's 90,000 b/d Houston refinery will produce ULSD. Engineering and design are under way. Commission is due in 2006.

The units will use UOP's Unicracking technology for upgrading light cycle oil to ULSD and naphtha, Distillate Unionfining for upgrading coker diesel to ULSD, and VGO Unionfining for upgrading heavy coker gas oil as FCC feed.

The St. Charles unit will also include FCC feed pretreatment.

Shell, KPI to seek downstream investments

Royal Dutch/Shell Group and Kuwait Petroleum International Ltd. (KPI) have signed a memorandum of understanding to pursue downstream investments worldwide.

Shell, which has been involved in joint studies in Kuwait's upstream activities since the mid-1990s, and KPI will focus on opportunities in areas with strong fundamentals such as high growth in product demand.

Transportation—Quick Takes

Northern Australian gas line advances

Australian Pipeline Trust (APT) of Sidney and ANZ Infrastructure Services (ANZIS) have been awarded preferred bidder status to construct, own, and operate the proposed Trans-Territory natural gas pipeline linking Woodside Energy Ltd. Group's Blacktip field in the Bonaparte Gulf to Gove on the northeastern tip of Arnhem Land in Australia's Northern Territory.

The APT-ANZIS group has brought in the Spie Capag/Lucas joint venture as construction partner.

The 940-km line will bring gas to the Alcan Gove Pty. Ltd. alumina refinery at Gove.

Alcan signed a sales agreement with the Woodside group in November 2004 to purchase a total of 760 bcf of Blacktip gas at about 41.8 bcf/year for up to 20 years. Alcan plans a major expansion of its Gove operations and is operator of the land pipeline sector of the Blacktip project.

Blacktip field, in permit WA-279-P some 250 km southwest of Darwin, will be developed via a remotely operated wellhead platform. Gas will be brought ashore via a 110-km pipeline to an onshore gas plant on the shores of the Bonaparte Gulf near Wadeye in Northern Territory. The land pipeline will then traverse east to Gove.

The field has an estimated 1 tcf of recoverable gas reserves. First production is scheduled for late 2007. Woodside is field operator with 53.85% interest, while Italian company Eni Australia BV has the remaining 46.15%.

BTC pipeline to start up in September

Exports of crude oil via the Baku-Tbilisi-Ceyhan (BTC) pipeline will begin in September, according to key state officials connected with the project.

Gokhan Cologlu, director general of the Turkish section, announced the September date to an oil and gas conference in Ankara on Mar. 29, confirming remarks made Mar. 23 by Natik Aliyev, president of State Oil Co. of the Azerbaijani Republic.

"We are trying to stay on a schedule whereby the first tanker will sail from the [Turkish] port of Ceyhan in September," Aliyev said.

Explaining that there had been delays due to a harsh winter this year, he said: "We are doing everything possible to stay on schedule and not to be late. In Georgia all that remains is to cross the Kura River, but I think that by April we will finish everything."

He said oil will start to flow in the Azerbaijani section in May and from Georgia in July. "We will complete all mechanical work on the Turkish section" on June 30, Aliyev said.

Production began in January from Central Azeri field off Baku, part of the giant Azeri-Chirag-Gunashli complex that will supply much of the oil carried by the BTC pipeline (OGJ Online, Feb. 15, 2005).

Main Pass LNG hub could access eight lines

McMoRan Exploration Co. subsidiary Freeport-McMoRan Energy LLC, New Orleans, said its proposed deepwater LNG receiving terminal at its Main Pass Energy Hub (MPEH) ultimately could access eight pipelines and have 3 bcfd takeaway capacity.

The company expects authorization this year from the US Coast Guard regarding its application to develop a $440 million LNG terminal at MPEH, 37 miles east of Venice, La. (OGJ Online, Mar. 1, 2004).

The 1 bcfd LNG port would be accompanied by on-site storage in the 2 mile diameter subsea salt caverns to be leached at the site, enabling the proposed LNG facility to have an aggregate deliverability of 2.5 bcfd, including deliveries from storage. Designs include 28 bcf of cavern storage availability.

MPEH is on Main Pass Block 299 in 210 ft of water and near shipping channels. Existing platforms and infrastructure at the site, designed to withstand a 200-year storm event, will be used to house the LNG vaporization and surface storage facilities. Pending timely approvals, facilities could be operational by late 2007, McMoRan said.

Oman, Japan Bank sign LNG carriers deal

Oman has signed an agreement with the Japan Bank for International Cooperation (JBIC) and Mizuho United Bank for $240 million to finance its interests in two 145,000 cu m LNG carriers.

The LNG carrier Nizwa will enter service in December, according to Ahmed bin Abdul-Nabi Macki, Oman's National Economy Minister, who signed the agreement.

Macki, also deputy chairman of the Financial Affairs and Energy Resources Council and chairman of Oman Maritime Transport Co., said OMTC owns 60% of the Nizwa, while Itochu Co. and Mitsui OSK own a combined 40%. The LNG carrier Ibri will enter service by mid-2006, Macki said.

OMTC has plans for six LNG carriers, two of which—the Muscat and the Sohar—have already entered service.

Oman is adding a third train, with capacity of 3.7 million tonnes/year, to its liquefaction plant at Sur, bringing total capacity of the facility to 10.3 million tonnes/year (OGJ, June 30, 2003, p. 68).

Tahiti oil pipeline due in Gulf of Mexico

Amberjack Pipeline Co. LLC has agreed to install 52 miles of pipeline at least 22 in. in diameter for oil from the Tahiti prospect in the Gulf of Mexico.

Amberjack will build, own, and operate the pipeline, which will stretch from the Tahiti facility on Green Canyon Block 641 to a Shell platform on Green Canyon Block 19, where it will connect to the existing Amberjack pipeline system and other pipeline infrastructure.

The pipeline will be completed in 2007. The new system will have a capacity of 200,000 b/d.

The Tahiti prospect covers Green Canyon Blocks 596, 597, 640, and 641 and is owned by Chevron USA Inc., EnCana Gulf of Mexico LLC, and Shell Gulf of Mexico Inc.

Amberjack is owned by Shell Pipeline Co. LP and Chevron Pipe Line Co.

ALNG's Train 4 to start ahead of schedule

Atlantic LNG Co. of Trinidad and Tobago (ALNG) said that Train 4 in Trinidad & Tobago will be commissioned by yearend—3 months ahead of schedule.

The project's partners said they have been able to make up for time lost during a strike.

ALNG partner British Gas PLC said, "The original target for the start-up of Atlantic Train 4 was the first quarter of 2006. Improved performance during construction has now moved this date forward to the end of 2005."

Through its three trains, ALNG accounts for 77% of all LNG imported by the US. Train 4 has design capacities of 5.2 million tonnes/year of LNG and 12,000 b/d of natural gas liquids. When commissioned, it will be the world's largest LNG train in operation.

The Train 4 project includes a 700 m jetty and a 160,000 cu m storage tank. It also involves a cross-island gas pipeline from Trinidad and Tobago's east coast to the South Western Peninsula and the ALNG site.