OGJ Newsletter

June 27, 2005
Vela International Marine Ltd. cut emissions of volatile organic compounds (VOCs) by nearly one-half during tanker loading of crude oil in tests of a system that increases vent pressure and recombines escaped gases with the cargo.

General Interest - Quick Takes

System cuts VOC emissions in tanker loading

Vela International Marine Ltd. cut emissions of volatile organic compounds (VOCs) by nearly one-half during tanker loading of crude oil in tests of a system that increases vent pressure and recombines escaped gases with the cargo.

Vela, a subsidiary of Saudi Aramco, and Venturie AS on June 11 tested a system that raised vent pressure, usually atmospheric, to 1,200 mm water gauge, the normal discharge pressure, while the Gemini Star very large crude carrier loaded Arabian Light crude at the Ju’aymah terminal in Saudi Arabia.

The system gathered vapors escaping the cargo surface in the ship’s inert gas system and reinjected them into the cargo liquid with a Venturie absorption unit.

The system operated with loading rates as high as 80,000 bbl/hr, cutting VOC emissions by as much as 47%, Vela said. VOCs react in sunlight to form ozone smog.

Williams to pay fine in disclosure dispute

The US Federal Energy Regulatory Commission has approved a settlement in which Williams Cos. Inc. agreed to pay a $3.6 million civil fine in a dispute with FERC staff involving disclosure of nonpublic gas-storage information.

Williams also agreed to refund $4 million to customers of its affiliate Transcontinental Gas Pipe Line Corp. The FERC investigation covered internal and external discussions of nonpublic inventory levels from August 2001 through June 2002.

Williams noted that the settlement includes a compliance plan in addition to one it implemented in 2003 (OGJ Online, Mar. 18, 2003).

IGCC plant with CO2 sequestration studied

An integrated gasification combined cycle (IGCC) project with carbon dioxide sequestration is under study in Australia.

Stanwell Corp., owned by the Queensland government, named Shell Gas & Power the preferred coal gasification technology provider for the project. It would be the world’s first IGCC power generation plant to geosequester nearly all the produced CO2.

Stanwell and Shell have begun a study for the plant, which would produce synthesis gas from pulverized coal for conversion into a hydrogen-rich fuel for power turbines.

Shell, which first applied its coal gasification process in the Netherlands, has since used its technology in China, where 12 licenses have been sold over the past 2 years.

The Australian project has entered the feasibility study phase. Shell will assist with the preparation of the technical input for the plant. The study is to be completed in October.

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Exploration & Development - Quick Takes

Venezuela gas find boosts Chevron LNG plans
ChevronTexaco Global Technology Services has made a significant natural gas discovery off Venezuela that it says advances its plan to evaluate Venezuela¿s first LNG project.
The Macuira 1X exploration well - Chevron's first on Plataforma Deltana Block 3 -encountered six gas intervals with total gross thickness of 140 m. It tested 51 MMscfd with restriction from two of the intervals, reported parent Chevron Corp.
Macuira 1X, which lies in 116 m of water 121 km off northeastern Venezuela, is on trend with and 24 km southeast of Loran gas field on adjacent Block 2, where the company drilled successful exploration wells in 2004 (OGJ Online, Dec. 13, 2004). Macuira 1X confirms that the prolific Columbus gas basin extends farther into Venezuelan waters and provides additional follow-up potential on the block, said Chevron.
"Plataforma Deltana appears to now have the resources needed for a detailed evaluation of Venezuela's first LNG train," said Ali Moshiri, president of Chevron Latin America Upstream. "With final endorsement of the evaluation program, this will provide the blueprint for Chevron to proceed aggressively with Petroleos de Venezuela SA (PDVSA) and its partners in the region to make Venezuela's Plataforma Deltana LNG a reality by the end of this decade."
Chevron owns 100% of and operates Block 3. PDVSA has an option to back into the block for as much as 35% upon declaration of commerciality.

Apache makes El Diyur oil find in Egypt

An oil discovery by the Apache Corp. El Diyur-2X well, drilled to 8,424 ft TD in Jurassic on the El Diyur concession in Egypt's Western Desert, is commercial, a concession partner reported. The El Diyur-2X had oil and gas shows from seven zones of the Cretaceous Abu Roash and Bahariya formations, according to IPR Red Sea Ltd., Dallas. Apache operates the concession, in which Sipetrol International SA of Chile also holds an interest.
Apache logged 262 ft of net oil pay in the well. On a drillstem test, the well flowed more than 1,000 b/d of 26¢ª gravity oil from 10 ft of perforations in the Bahariya sand, lowest of the indicated pay zones. The zone was hydraulically fractured.
Egypt¡¯s oil ministry is reviewing the proposed development plan, and the consortium expects first oil production by July.
The group plans to drill the El Diyur-4X and -3X wells within the next 2 months.

OVL, GAIL to explore off Azerbaijan

ONGC Videsh Ltd. (OVL) and GAIL (India) Ltd. plan to enter separate memorandums of understanding with the State Oil Co. of Azerbaijan Republic (Socar) for joint oil and gas exploration in the Caspian Sea. GAIL also hopes to acquire a stake in the Shah Deniz gas-condensate development project off Azerbaijan.
And OVL is interested in a 5% equity stake in the Azeri-Chirag-Gunashli complex of offshore oil fields.
Azerbaijani officials said it would be difficult to accommodate a new company in either of the two producing projects but cited possibilities for cooperation in other projects.
¿We have discussed cooperation with Socar in as many as eight areas, including the gas monetization project for the Shah Deniz gas project,¿ GAIL said.

IEOC, partners awarded block in Egypt
IEOC Exploration BV and partners RWE DEA of Germany and INA Industrija Nafte dd Zagreb of Croatia have been awarded the East Kalabsha block in Egypt's North Western Desert. The block was offered in Egyptian General Petroleum Corp.¿' 2003 bidding round. East Kalabsha covers about 2,115 sq km. During the initial exploration period, the block partners are committed to drilling at least three wells, acquiring 2D seismic data, and spending a minimum of $8 million.
IEOC, operator, holds a 50% stake, while partners RWE and INA Industrija Nafte hold 25% each.

Development due for small oil field off UK

Venture Production (North Sea Developments) Ltd., Aberdeen, has signed a letter of intent with Sevan Marine ASA, Tananger, Norway, for use of the cylinder-shaped floating production unit SSP 300 (Sevan stabilized platform) for development of Chestnut oil field in the central UK North Sea.
The field is on Block 22/2a about 13 km south-southeast of Chevron Corp.'s Alba oil field. With reserves of 7-15 million bbl of oil, Chestnut will be one of the smallest stand-alone field developments in the North Sea. The reservoir is the Eocene Nauchlan sand at 6,900 ft. The field has been appraised by six wells.
The SSP 300, which will operate in 120 m of water, will have a process plant capacity of 30,000 b/d of oil and an oil storage capacity of 300,000 bbl and will contain a 20,000-b/d water injection plant. It will be installed in Chestnut field in first half 2007. Plateau production is expected to be 10,000 b/d of oil. A water injection well will be drilled as part of the development.
Venture is operator, and partners are Atlantic Petroleum UK Ltd. of the Faroe Islands and Bow Valley Petroleum (UK) Ltd., a subsidiary of Bow Valley Energy Ltd., Calgary. ✦

Drilling & Production Quick Takes

Upgrader planned for Sawn Lake heavy oil

Surge Global Energy Inc., San Diego, and technology development company Genoil Inc., Calgary, Alta., signed a letter of intent to jointly build a 10,000 b/d heavy-oil upgrader for Surge’s Sawn Lake heavy oil development in the Western Canadian Sedimentary Basin of Alberta.

The unit, based on Genoil’s hydroconversion upgrader technology, will convert heavy oil (about 9˚ gravity) into light oil (about 34˚ gravity).

The partners will first conduct a feasibility study analyzing the raw Sawn Lake crude and establishing parameters for the unit’s construction.

Surge is the lead operator of and holds a 40% working interest in the Sawn Lake field, which is estimated to hold 820 million bbl of heavy oil in place.

The companies plan to build a gathering system from each wellsite to a central collection system adjacent to the upgrader. From there, oil will move through an existing high-pressure, 8-in. oil sales pipeline to Edmonton, Alta.

Genoil will have the unit built for Surge at cost, with no site license or royalty, the companies said. Net revenue for the upgrader will be determined by the market price for the upgraded crude less the market price for the heavy oil and the operating costs associated with the unit.

After Surge has recovered its capital costs from the net revenue stream, Genoil will be entitled to 30% of net revenue for the life of the project.

Jack ups allowed seasonally on Grand Banks

Jack ups are now allowed to drill on the Grand Banks off Newfoundland and Labrador at certain times of the year, said the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).

The decision was based on C-NLOPB’s study of the abilities of new jack ups to withstand weather and water conditions of the Grand Banks and to meet guidelines established by the board. Another consideration was a historical review by C-CORE, a global research and development firm, of 44 years of ice patterns to determine whether an ice-free season exists.

The studies revealed that using a jack up on a seasonal basis on the Grand Banks is feasible. C-NLOPB said increased exploration is probable now that operators have another drilling option.

Later this year, Husky Energy Inc., Calgary, will use the Rowan Gorilla VI jack up for drilling in the South Whale basin. It will be the first use of a jack up for exploratory drilling on the Grand Banks.

Jack ups have been used off the province’s west coast in the mid-1990s and off Nova Scotia for a number of years.

C-NLOPB began to assess the seasonal use of jack ups on the Grand Banks after a seminar it sponsored last year on ice and oil.

Stone starts dual horizontal Williston well

Stone Energy Corp., Lafayette, La., has placed on production its Bonnie 1-5H well, a dual horizontal well completed in two open-hole laterals in the Mississippian Bakken formation in Richland County, Mont.

The Williston basin well encountered the Bakken at 10,370 ft. Stone drilled each horizontal lateral to 15,000 ft TMD. Average gross production is 890 b/d of oil equivalent.

Stone has a 50% working interest and 41.7% net revenue interest in the well and serves as operator. Nance Petroleum Corp., a subsidiary of St. Mary Land & Exploration Co. of Denver, is the other interest holder.

Stone’s second well, the Charles Nevin 1-12H, recently had reached 10,355 ft with the first of two Bakken laterals to be commenced in June, the company said.

This year, Stone expects to drill about 22 gross wells in the Williston basin.

Statoil resumes oil flow from Lufeng field

Statoil ASA resumed production from Lufeng oil field off China in the South China Sea.

The field, idle for 11 months and originally scheduled to be shut in permanently in February 2004, resumed flow June 9. During the idle period, Statoil, operator, drilled sidetracks in three of the five production wells.

Due to pressure build-up in the reservoir, the field is producing more than 50,000 bo/d through the Munin floating production, storage, and offloading vessel. Output is expected to stabilize at 10,000-20,000 b/d and last until 2008.

Statoil expects to boost Lufeng’s recovery factor to almost 40% from 32%. The field has yielded more than 37 million bbl since it came on stream in December 1997, 12 million bbl more than originally expected.

Statoil has a 75% interest in the field; China National Offshore Oil Corp. holds 25%.

Empire signs agreement for Rough Range oil

Empire Oil & Gas NL, Perth, signed a 5-year crude supply agreement with BP PLC’s Kwinana, Western Australia, refinery for oil due on stream from historic Rough Range oil field.

The agreement calls for Empire to sell up to 1,000 b/d of waxy crude to the 158,500 b/d Kwinana facility, transported in the company’s fleet of heated trucks from the field near Exmouth. Additional crude will be included if brought into production, officials said.

Pipes and two 800 bbl storage tanks will be insulated and heated to keep the waxy crude above its pour point temperature of 38° C.

Empire believes Rough Range field has the potential to produce as much as 2 million bbl of oil.

West Australian Petroleum Pty. Ltd. discovered the field in 1953. A number of companies have since tried to prove up Rough Range without success. Empire says high oil prices and advanced technology made the project viable.

Suspension off Venezuela slows unitization

A decision by Statoil ASA to suspend drilling on Block 4 off Venezuela will slow moves to unitize the block with BP Trinidad & Tobago LLC-Repsol YPF SA Block 5B, according to Shelagh de Osuna, ambassador and the head of Trinidad and Tobago’s negotiating team.

Statoil suspended drilling of the Ballena 1-X well on Block 4 in the Plataforma Deltana area offVenezuela, saying technical standard of Transocean Inc.’s Sovereign Explorer semisubmersible failed to meet its requirements for safe drilling in high-pressure reservoirs (OGJ, June 13, 2005, Newsletter).

Venezuela and Trinidad and Tobago have been negotiating the unitization of three blocks along their border. It is believed that the blocks have combined reserves of 15-20 tcf of gas, 12 tcf of which is already proved.

Transocean receives two drillship contracts

Transocean Inc., Houston, has received contracts for two of its dynamically positioned drillships.

Anadarko Petroleum Corp. let a 2-year contract for use of the Deepwater Millennium drillship in the Gulf of Mexico. The contract, which replaces an earlier 6-month agreement from Anadarko that included unexercised options, could generate as much as $209 million in revenue, Transocean said.

Seperately, a Shell subsidiary let a contract covering Transocean’s Deepwater Expedition drillship for a 90-day, three-well program plus a 30-day option well in the Mediterranean Sea off Egypt. The drilling is to begin in November. Transocean said that deal could generate $22 million in revenue.

BLM sets conditions for US oil shale work

The US Bureau of Land Management (BLM) announced terms and conditions for oil shale research, development, and demonstration (RD&D) on federal land.

BLM said its aim is “to promote commercially viable and environmentally sound oil shale technology” in the US, which holds more than half of the world’s oil shale resources-the equivalent of 2.6 trillion bbl of oil.

“Developing oil shale can help us increase domestic oil production while reducing our dependence on foreign energy supplies,” said Tom Lonnie, BLM’s assistant director for minerals, realty, and resource protection.

Oil shale underlies 16,000 sq miles of Colorado, Utah, and Wyoming, 72% of it federal land. Lonnie said US companies “are requesting the opportunity to access public lands to test these new technologies, and the BLM is taking action to facilitate this access.”

BLM called on interested parties to nominate public lands for oil shale RD&D activities by Sept. 9.

Processing - Quick Takes

Chevron to expand Pascagoula refinery’s FCCU

Chevron Global Refining plans to expand the fluid catalytic cracking unit (FCCU) at its 325,000-b/d refinery at Pascagoula, Miss.

The project will increase capacity of the 63,000-b/d FCCU by 25% and raise the refinery’s overall gasoline production by 500,000 gal/day.

Construction of the $150 million FCC project is to start in July and be complete in late 2006.

Group to finance coker at Chilean refinery

A consortium led by Chile’s Empresa Nacional del Petroleo (Enap) agreed to finance, build, and operate a 20,000 b/d delayed coker at the 94,350 b/cd Aconcagua refinery at Concon, Chile (OGJ, Nov. 5, 2001, Newsletter).

The $430 million project will be financed by a $410 million, 15-year syndicated bank loan. Enap and its partners, Germany’s Ferrostaal and Spanish firms Foster Wheeler Iberia and Técnicas Reunidas, will provide the remaining $20.4 million.

Construction will start this year. Operations are to begin in the first half of 2008.

Enap and its refining unit Enap Refínerias will have a combined 49% stake in the special-purpose company Energía Concón, and Ferrostaal, Foster Wheeler, and Técnicas will each hold 17%.

Oman Refining Co. to expand capacity

Oman Refining Co. LLC (ORC) plans a $320 million project to expand capacity of its refinery at Mina Al Fahal to 106,000 b/d from 85,000 b/d, the Times of Oman reported June 15.

ORC signed a syndicated-term loan facility agreement for $140 million to partially finance the project. ORC said it hoped to complete the expansion by yearend 2006 or early 2007.

ORC also plans to lay a 266-km crude oil pipeline from Mina Al Fahal to Sohar to provide feedstock for the 116,000 b/d Sohar Refinery under construction and due on stream next year.

Transportation - Quick Takes

TransCanada to lay gas pipeline in Mexico

TransCanada Corp., Calgary, announced plans to invest $181 million to build, own, and operate a 36-in., 125-km gas pipeline from Pemex Gas facilities near Naranjos, Veracruz, in east-central Mexico to a power plant near Tamazunchale, San Luis Potosi.

State-owned public utility Comisión Federal de Electricidad awarded TransCanada a 26-year gas transportation contract.

TransCanada expects to put the pipeline in service by Dec. 1, 2006.

Initial pipeline capacity will be 170 MMcfd. Under the contract, the capacity will be increased to 430 MMcfd to meet needs of two planned power plants near Tamazunchale. That expansion is to begin in 2009.

OMV to add compression to TAG pipeline

OMV Gas GMBH, a subsidiary of Austria’s OMV AG, plans to add a compressor station in 2008 on the 380-km Trans Austria Gasleitung (TAG) natural gas pipeline extending from the Slovakian-Austrian border near the Baumgarten hub in Lower Austria to the Austrian-Italian border near Arnoldstein.

The TAG pipeline, which delivers Russian gas to Italy, Austria, Croatia, and Slovenia, has capacity of 37 billion cu m/year. Capacity will rise in 2007 to 41 billion cu m/year when the third stage of the TAG Loop II extension-currently under construction-is completed and to 44.2 billion cu m/year upon completion of the additional compressor station.

Preparatory engineering is under way on the compression facilities, and OMV plans to begin construction this fall.

Contract let for Langeled precommissioning

Statoil AS has let a $22 million contract to the Pipeline and Process Services Department of Halliburton AS for precommissioning of the 42-44 in., 1,200 km Langeled pipeline system linking Ormen Lange gas and condensate field off Norway with the UK (OGJ, May 23, 2005, Newsletter).

Precommissioning is scheduled for 2006 and 2007. Engineering design work is starting this year. The project consists of pigging, hydrostatic testing, dewatering, and drying the pipeline.

Statoil is installing the three-stage pipeline for Norsk Hydro ASA, operator of Ormen Lange development.

Plains All American plans St. James storage

Plains All American Pipeline LP, Houston, plans to build a crude oil terminal with 2.9 million bbl of storage capacity at St. James, La. The $70 million facility is expected to be operational in first quarter 2007. A 100-acre site initially will accommodate seven storage tanks, each having a capacity of 170,000-560,000 bbl of oil. Like the company’s Cushing, Okla., terminal, the St. James facility will include a manifold and header system to facilitate receipts from and deliveries to connecting pipelines at their maximum operating capacities. Plains said the terminal will be expandable.

Enterprise Products to expand NGL system

Enterprise Products Partners LP is expanding its natural gas liquids transportation system in the Permian basin and Midcontinent regions. The company has entered a definitive agreement to buy underground storage facilities and four propane terminals from Ferrellgas LP for $144 million.

The storage facilities, in Kansas, Arizona, and Utah, have total capacity of 6.1 million bbl, about 70% of which is leased to third parties under fee-based contracts.

Enterprise plans to invest $7 million to lay a private 30-mile pipeline to connect the largest of the storage facilities, in Hutchinson, Kan., with the large NGL storage complex at Conway, Kan., and the company’s Mid-America Pipeline system hub. The Mid-America system serves the Rocky Mountains, Permian basin, and US Midwest.

The propane terminals in the Ferrellgas transaction are in Minnesota and North Carolina. Ferrellgas has agreed to maintain storage levels at specified levels and terminal throughput for 5 years.


Vintage Petroleum Inc., Tulsa, in 2003 reduced its proved reserves by 21.8 million boe, or 4.1% of its proved reserves base (see table, OGJ, June 20, 2005, p. 21).