Upstream News

BHP Billiton PLC is putting together a $49.14 billion offer to take over Woodside Petroleum Ltd., according to reports on Sunday, April 10, in Australian newspapers and broadcast outlets. As a first step BHP, the world's largest mining company, is buying Royal Dutch Shell's 24% stake in Woodside, Australia's second-largest oil and gas producer, in a deal that would give Shell the giant Sunrise natural-gas field in the Timor Sea, off the northern coast of Australia, according to reports. Takeover talks between BHP and Woodside have intensified in recent weeks, according to those reports.

A new oil find has been made by Statoil immediately adjacent the Peregrino field in the Campos Basin offshore Brazil.

An exploration well drilled in the Peregrino South structure a few kilometers south of Peregrino has encountered oil in sandstones of the Carapebus geological formation.

A significant gross oil column of 130 meters has been proven in the well and further work will be performed to confirm the volumes.

The drilling operation is still ongoing to penetrate deeper reservoir units and explore additional upside potential below the main reservoir unit.

"The results confirm the significant potential in the Peregrino area and underline the beliefs we have had in the upside," says Tim Dodson, executive vice president for Exploration in Statoil.

"The results will indeed be implemented into our plans for further development of the field," says Kjetil Hove, head of Statoil's Brazil activities and vice president in the company's Development and Production International business area.

Following the completion of the Peregrino South well, one additional appraisal well in the Peregrino Southwest structure will be drilled to conclude the overall size of the new development.

Oil production from the Peregrino has begun and Statoil expects production to gradually ramp up to roughly 100,000 barrels of oil equivalent per day.

The initial development of the field is estimated to contain 300 to 600 recoverable million barrels of oil equivalents, and the new discovery will add additional volumes going forward.

Drilling of the well is being carried out by the Blackford Dolphin rig at a water depth of 120 meters.

Operated by Statoil, the Peregrino field is 85 kilometers off the Brazilian coast from Rio de Janeiro. In May 2010 Statoil sold a 40% stake of the Peregrino field to the Sinochem Group for US$3.07 billion. Brazilian and Chinese authorities approved the transaction and the deal was closed April 14.

On March 30, nearly a year after the April 20, 2010 explosion that sunk the Deepwater Horizon drilling platform 40 miles off the coast of Louisiana, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) approved a deepwater drilling permit for a new well that was described in Shell Offshore Inc.'s recently approved Exploration Plan.

According to BOEMRE, the proposed well was also considered in the Site-Specific Environmental Assessment (SEA) completed as part of the plan review. In order to receive the permit approval, Shell complied with rigorous new safety standards implemented in the wake of the Deepwater Horizon explosion and resulting oil spill. This includes satisfying the requirement to demonstrate the capacity to contain a subsea blowout. The approved permit is a permit to drill a new well for Shell's Well #DC001 in Garden Banks Block 427 in 2,721 foot water depth, approximately 137 miles off the Louisiana coastline, south of Lafayette.

"Today's permit approval represents a culmination of a broad and comprehensive review process involving an exploration plan, a site-specific environmental assessment, and the application for the drilling permit - all of which complied with our rigorous safety and environmental standards," said BOEMRE Director Michael R. Bromwich. "The completion of this process further demonstrates that we are proceeding as quickly as our resources allow to properly regulate offshore oil and gas operations in the most safe and environmentally-responsible manner."

All offshore wells are identified in either an exploration or development plan, which require approval prior to drilling permits being issued. Shell's supplemental Exploration Plan, which includes Well #DC001, was approved March 21. As part of the plan's review process, BOEMRE prepared a SEA to examine Shell's proposed exploration activities in accordance with the National Environmental Policy Act and the implementation of departmental and bureau regulations.

As part of the permit approval process, the bureau reviewed Shell's containment capability available for the specific well proposed in the permit application. Shell has contracted with the Marine Well Containment Company to use its capping stack to stop the flow of oil should a well control event occur. The capabilities of the capping stack meet the requirements that are specific to the characteristics of the proposed well.

The permit adds to the number of permits that have been approved since new safety regulations have been put in place.

—Don Stowers

Anadarko Petroleum Corp. has made a deepwater discovery at the Teak-2 prospect, located in the West Cape Three Points Block offshore Ghana. The Teak-2 exploration well encountered approximately 90 net feet of high-quality oil, condensate and natural gas pay in stacked Campanian- and Turonian-age reservoirs.

"The Teak-2 discovery is another confirmation of our geologic model that adds to the substantial resource potential of the area and extends the success of our multi-well exploration program on the West Cape Three Points Block," said Bob Daniels, Anadarko senior vice president, Worldwide Exploration. "We are very pleased with the results encountered in this discovery, which will be further evaluated with future appraisal activity. We continue to work with our partners and the Republic of Ghana to advance our exploration and appraisal programs, as well as the increasing number of development opportunities in both the West Cape Three Points Block and adjacent Deepwater Tano License."

The Teak-2 well was drilled to a total depth of 11,185 feet in water depths of approximately 2,900 feet. The well is approximately 5,900 feet southwest and fault separated from Teak-1, and approximately two miles northeast of the Mahogany-2 well. After preserving the well at Teak-2 for future use, the partnership plans to mobilize the rig to drill the Banda prospect, also located in the West Cape Three Points Block.

Anadarko owns a 30.875% working interest in the West Cape Three Points Block, which is operated by Kosmos Energy (30.875% working interest). Other co-owners in the block include Tullow Oil plc (22.896% working interest), the E.O. Group (3.5% working interest), Sabre Oil & Gas Holdings Ltd. (1.854% working interest) and the Ghana National Petroleum Corp. (10% carried interest).

Apache Corp. reported that its subsidiary's Zola-1 discovery in license WA-290-P, offshore Western Australia, logged 410 feet of net pay in three Triassic Mungaroo sands over a depth range of 13,450-15,100 feet below sea level. Logging tools and formation pressure tests confirmed at least two separate natural gas columns with excellent reservoir characteristics.

Zola-1 is located in the Carnarvon Basin 60 miles north-northwest of Onslow, Western Australia, in water depths of 930 feet. The discovery is on trend with the Gorgon gas field 16 miles to the north and near both existing and developing gas infrastructure.

"Zola is a very encouraging result for Apache," said Thomas M. Maher, Apache's region vice president and managing director in Australia. "Although it is too early to speculate on reserve size, the quality and thickness of the reservoir is better than we expected. After we finish operations on the Zola-1 well, Apache will begin discussing the way forward — including appraisal drilling and development options — with our partners."

A new seismic survey covering the Zola structure is planned later in 2011.

Apache Northwest Pty Ltd., a subsidiary of Apache Corp., owns a 30.25% interest and operates permit WA-290-P, which comprises approximately 119,000 acres. Other partners in the joint venture are Santos (24.75%), OMV (20%), Nippon (15%) and Tap Oil (10%).

Apache acquired its interest in WA-290-P as part of seven transactions completed in 2010 that increased the company's gross acreage in Australia by more than 40%. Zola is the first well drilled on the acquired acreage.

Tethys Oil AB reported that work on well SE-7 on Block 4 onshore the Sultanate of Oman has been completed. The well encountered several intervals of heavy oil, but no flows were established. The rig has moved to Block 3 to drill the Farha South-7 well.

SE-7 successfully reached a total depth of 1,890 meters, where the main target was to test the presence of oil in the Khufai section in the southern part of the Saiwan East structure. The well identified a more than 90 meter thick column of intermittent heavy oil saturation in the upper parts of the Khufai. A limited test program was run, using a wireline MDT tool, but no flows were established. As expected heavy oil was also encountered in the shallower Buah, Miqrat and Amin formations. SE-7 has been temporarily suspended for possible testing and further study.

The rig has been moved to drill the Farha South-7 well (FS-7) on Block 3, an appraisal well designed to test for the presence of oil in the Lower Al Bashir section nearby the Farha South-3 well, in the Farha South field. The drill site is located 425 meters southwest of FS-3, drilled in early 2009.

Tethys has a 30% interest in Blocks 3 and 4. Partners are Mitsui E&P Middle East BV with 20% and the operator CC Energy Development S.A.L. (Oman branch) holding the remaining 50%.

On March 28, ExxonMobil Iraq Ltd., together with the South Oil Company of Iraq and co-venturers Shell West Qurna BV and Oil Exploration Company of Iraq, announced a major production milestone in the redevelopment of the West Qurna I oil field in Southern Iraq.

Initial field production of 244,000 barrels per day has now increased to 285,000 barrels per day, which exceeds the 10% improved production target established under the technical services contract.

"ExxonMobil is an industry leader in the timely and cost effective execution of complex long-term projects and we are committed to working with the South Oil Company to help fulfill Iraq's strategic energy development plans," said James Adams, vice president of ExxonMobil Iraq Ltd.

Day-to-day production operations have transferred to the West Qurna I field operating division, which is staffed by personnel from the South Oil Co. and ExxonMobil. The day-to-day operations include drilling new wells, working over existing wells, and debottlenecking and optimizing facilities.

Exxon Mobil Iraq Ltd. (60% interest) serves as the lead contractor. The Oil Exploration Company of Iraq holds a 25% interest, and Shell West Qurna BV, a Royal Dutch Shell affiliate, holds a 15% interest.

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