UPSTREAM NEWS

ExxonMobil to start production at record number of new projects

Exxon Mobil Corp. expects to start production at a record 10 major projects in 2014, adding new capacity of approximately 300,000 net oil equivalent barrels per day and contributing to profitable production growth, Rex W. Tillerson, chairman and CEO, said in a press release.

"These projects exemplify our focus on maintaining a diversified portfolio and highlight our ability to grow profitable volumes," Tillerson said at the company's annual investment analyst meeting at the New York Stock Exchange.

"We are adding new volumes that improve our profitability mix with higher liquids and liquids linked natural gas volumes. We're also driving increased unit profitability through better fiscal terms and reducing low-margin barrel production."

ExxonMobil's capital spending will decline to $39.8 billion this year from a peak of $42.5 billion in 2013, Tillerson said. Excluding potential acquisitions, capital expenditures are expected to average less than $37 billion per year from 2015 to 2017.

"We have financial flexibility to pursue potential strategic opportunities and maintain a disciplined and selective approach to capital that ensures any new investment will contribute to robust cash flow growth," Tillerson said.

A liquefied natural gas project in Papua New Guinea and the largest offshore oil and gas platform in Russia are among significant projects scheduled for startup this year. Others include a heavy oil expansion project in Canada and deepwater projects in the Gulf of Mexico.

ExxonMobil anticipates additional project startups in the next few years in several countries, including Australia, Indonesia, Canada, Nigeria and the United States. All of these projects are expected to add about 1 million net oil equivalent barrels per day by 2017. In North America, ExxonMobil's near-term production outlook is made up of high-margin, low-risk liquids growth.

The company is pursuing more than 120 high-quality projects to develop about 24 billion oil equivalent barrels of oil and natural gas.

Midstream investments in North America will expand ExxonMobil's logistics capabilities to transport crude oil and finished products.

During the meeting, ExxonMobil reviewed its 2013 performance and outlined future plans. Highlights include:

For the 20th-consecutive year, ExxonMobil replaced more than 100% of production. In 2013, the company added proved oil and gas reserves totaling 1.6 billion oil-equivalent barrels, including a 153% replacement ratio for crude oil and other liquids. At yearend 2013, proved reserves totaled 25.2 billion oil equivalent barrels, comprised of 53% liquids and 47% natural gas.
·ExxonMobil continues to outpace competitors in return on average capital employed at 17.2% in 2013, about three-and-a-half percentage points higher than its nearest competitor.
Liquids production is expected to grow 2% in 2014 and 4% annually from 2015 to 2017, representing the majority of ExxonMobil's total production increase.
Liquids and liquids linked natural gas are projected to account for 69% of the company's total production by 2017, improving the profitability mix of the portfolio.
ExxonMobil is pursuing investment opportunities to expand its chemical business and serve major growth markets. These projects build on integration with the upstream and downstream operations and employ proprietary technologies to increase high-value product sales.

Petrobras confirms deepwater discovery in Potiguar Basin

Petrobras announces that it has completed drilling wildcat well 1-BRSA-1205-RNS (1-RNS-158), located in deep-waters of the Potiguar Basin. The results confirm the discovery of intermediate oil (24º API), as previously announced to the market on December 17, 2013.

The well, informally referred to as Pitu, is located at a water depth of 1,731 meters, 55 km off the coast of the state of Rio Grande do Norte.

The well reached the total depth of 5,353 meters and detected a hydrocarbon column of 188 meters. A formation test was carried out, which confirmed the reservoir's satisfactory permeability and porosity.

Based on the results obtained, the consortium will proceed with the exploratory activities, with the aim of proposing a Discovery Evaluation Plan to Brazil's National Petroleum, Natural Gas and Biofuels Agency (ANP).

Petrobras is the operator of concession BM-POT-17, with an 80% interest, in partnership with Petrogal Brasil S.A., which holds 20%.

As a result of the on-going farm-out process and after obtaining the necessary approval from Brazilian authorities, BP Energy do Brasil Ltda will join as a concessionaire and the interests of the consortium members in BM-POT-17 will be as follows: Petrobras - 40% (operator), BP Energy do Brasil Ltda - 40% and Petrogal Brasil S.A - 20%.

Shell hits oil at Limbayong Field offshore Sabah

Malaysia's national oil and gas company Petroliam Nasional Berhad (Petronas) and Royal Dutch Shell plc made an oil discovery offshore Sabah, Malaysia.The discovery was made via the Limbayong-2 well during the appraisal of the Limbayong gas field by Shell.

The appraisal well encountered 446 feet of oil bearing sands, and there are plans to conduct more appraisal work on the discovery to determine its recoverable volume. The drilling of the Limbayong-2 appraisal well was carried out by the consortium of Shell Malaysia (35%), ConocoPhillips (35%) and Petronas Carigali Sdn Bhd (30%)

Salamander Energy makes Indonesian gas discovery

Salamander Energy has successfully tested gas from the Upper Berai reservoir from the West Kerendan-1 exploration well in Indonesia. The well reached total depth and will be potentially completed as a future producing well following completion of the testing program.

Following wireline logging, pressure and sampling programs, Salamander can confirm that gas has been encountered in four zones: Middle Miocene sandstones, Oligocene Upper Berai and Lower Berai formation carbonates and the Eocene Tanjung formation sandstones.

A full suite of wireline logs and pressure surveys has been acquired which has confirmed that the Upper Berai in the WK-1 location is gas-bearing, with approximately 119 m of net pay being penetrated in a gross column of up to 421 m. Pressure sampling has confirmed that the majority of this gas column has the same pressure regime as the Kerendan field, some 10 km east of the WK-1 location and shares the same gas-water contact. The Upper Berai also contains a second separate, deeper gas column with a separate gas-water contact inferred from pressure data to be some 84 m deeper than the Kerendan field at a depth of 2,940 m TVDSS.

A cased hole drill stem test ("DST") has successfully flowed gas at a maximum rate of 18.6 mmcfgpd and 181 bcpd from a 70 m interval in the deeper Upper Berai zone. A further DST will be performed across a 200 m gross section to establish production rates in the upper interval and the overall productivity of the entire Upper Berai section.

Within the upper gas column, the West Kerendan discovery has been independently certified by Salamander's reserves auditor to contain recoverable gas in the range 133 Bcf – 682 Bcf with a mid-case assessment of 313 Bcf. This is in addition to the certified resource of 280 Bcf in the Salamander-operated Kerendan field currently under development. Above and beyond these resources, management estimate an additional 50 Bcf of recoverable gas to be available from the lower gas column, which has been successfully tested.

The company will hold discussions with Indonesian authorities to include the West Kerendan discovery in the Kerendan field plan of development. This enlarged field development would then form the source of incremental gas sales to the gas-fired power plant that is currently being constructed adjacent to the Kerendan field.

Saipem awarded offshore contracts

Saipem has won new engineering and construction (E&C) offshore contracts in Indonesia and in the Republic of Congo, for a total amount of approximately $520 million.

In Indonesia, Eni has awarded a consortium led by Saipem the EPCI contract for a newbuild barge floating production unit (FPU) for the Jangkrik Complex Project development.

The consortium is formed by Hyundai Heavy Industries Ltd (HHI) and the joint venture between Saipem, Tripatra Engineers & Constructors, and Chiyoda. The total contract value for the project is $1.1 billion.

The newbuild spread-moored FPU will have a treating capacity of 450 MMscfd of gas plus condensates, and the scope of work includes engineering, procurement, fabrication of the FPU, and the installation of a mooring system, as well as hook-up, commissioning, and assistance to the startup.

BRIEFS

Chevron Granted Acreage Offshore Myanmar

Unocal Myanmar Offshore Co. Ltd., the Myanmar subsidiary of Chevron Corp. has been granted exploration rights in a block located offshore Myanmar, in the Rakhine basin.

Block A5, which spans more than 2.6 million acres, is located approximately 125 miles northwest of Yangon. Unocal Myanmar Offshore will be the operator of the block with a 99% interest. Royal Marine Engineering, a Myanmar-based company, will hold the remaining interest in the block.

Tight oil production pushes US crude supply to over 10% of world total

US tight oil production averaged 3.22 MMbbl/d in 4Q13, according to US EIA estimates. The level was enough to push overall crude oil production in the US to an average of 7.84 MMbbl/d, more than 10% of total world production, up from 9% in 4Q12. The US and Canada are the only major producers of tight oil in the world.

In February 2014, 63% of US tight oil production came from two basins: the Eagle Ford in South Texas (1.21 MMbbl/d, or 36% of total US tight oil production), and the Bakken Shale in North Dakota and Montana (0.94 MMbbl/d, or 28% of total US tight oil production).

Tight oil production in the US represents 91% of all North American tight oil production, with the remaining 9% coming from Canada.