UPSTREAM NEWS
ND efforts to reduce flaring
"About one-third of the natural gas North Dakota has produced in recent years has been flared rather than sold to customers or consumed on-site...In an effort to reduce the amount of natural gas flared, North Dakota's Industrial Commission (NDIC) established targets that decrease the amount of flared gas over the next several years. The first target of 26% flared is set for fourth-quarter 2014, with continued decreases in flaring reaching 10% by 2020. North Dakota recently reported that it was close to achieving the 26% reduction target for natural gas flaring, as the percentage in August was 28% flared, or 375 MMcf/d out of a total production of 1,340 MMcf/d." - EIA
LLOG makes deepwater Gulf of Mexico discovery
Covington, LA-based LLOG Exploration and its partner, Ridgewood Energy, drilled a successful exploration test at the Mississippi Canyon 79 "Otis" prospect in deepwater Gulf of Mexico. The initial exploratory well encountered more than 70 feet of net hydrocarbons, and a subsequent appraisal sidetrack confirmed the discovery. The Miocene target is apparently a high-condensate yield gas reservoir in a high-quality reservoir sand.
LLOG, with a 70% working interest in the field, has begun evaluating regional hosts, including its recently-installed Delta House floating production system (FPS), regarding subsea development options for the discovery. Delta House FPS, installed by LLOG Bluewater (a joint venture between LLOG Exploration and Blackstone Energy Partners and its affiliates), is located in Mississippi Canyon 254, 130 miles southeast of New Orleans in 4,500 feet of water.
LLOG's Delta House is one of a handful of projects poised to help increase oil production in the Gulf of Mexico in 2015/2016. The FPS is designed for peak capacity of 100,000 bbls/d and 240 MMcf/d. First production from the facility is expected in the first half of 2015.
Canada's Boundary Dam is world's first large-scale power station to trap CO2
The world's first large-scale power station equipped with carbon capture and storage (CCS) technology launched in Canada in September, prompting the International Energy Agency (IEA) to call attention to the "historic milestone along the road to a low-carbon energy future."
The 110MW retrofit of SaskPower's Boundary Dam coal-fired power plant in Saskatchewan, Canada will trap around 1 million tonnes of carbon dioxide (CO2) per year. The captured CO2 will be injected into nearby oilfields to enhance oil recovery. The plant began capturing CO2 in September. IEA executive director Maria van der Hoeven said the launch represents "a momentous point" in the history of the development of CCS, the family of technologies and techniques that enable the capture of CO2 from fuel combustion or industrial processes, its transport via ships or pipelines, and its storage underground. The IEA believes CCS will have to play a central role in an ambitious, climate-friendly future energy scenario, accounting for one-sixth of required emissions reductions by 2050. IEA analysis has shown that without significant deployment of CCS, more than two-thirds of current proven fossil-fuel reserves cannot be commercialized before 2050 if the increase in global temperatures is to remain below 2 degrees Celsius.
Several CCS projects are under construction or in advanced stages of planning. Early 2015 should see the start of operations for another large power-CCS project in Kemper County, Mississippi. Further projects are currently under construction elsewhere in the US and Canada plus Saudi Arabia and Australia.
Chevron, KUFPEC partner to appraise, develop Duvernay
Chevron Canada Ltd. has agreed to sell a 30% interest in its Duvernay shale play to Kuwait Foreign Petroleum Exploration Company's wholly-owned subsidiary, KUFPEC Canada Inc., for $1.5 billion. The tprice includes cash paid at closing and a carry of a portion of Chevron Canada's share of the JV's future capital costs. The agreement creates a partnership for appraisal and development of liquids-rich shale resources in approximately 330,000 net acres in the Kaybob area of the Duvernay.
Post closing, Chevron Canada will hold a 70% interest in the JV Duvernay acreage and will remain the operator. The transaction is expected to close in November 2014.
Chevron Canada has drilled 16 wells since beginning its exploration program, with initial well production rates of up to 7.5 MMcf of natural gas and 1,300 barrels of condensate per day.
Ultra-deep water discovery in Espírito Santo Basin
Petrobras has confirmed the extension an accumulation of hydrocarbons in the ultra-deep waters of the Espirito Santo Basin post-salt deposits. Extension well 3-BRSA-1253D-ESS (ANP nomenclature) / 3-ESS-219D (Petrobras nomenclature), known as Pudim, was drilled at a water depth of 1,886 meters to confirm the discovery.
The well is located in the Brigadeiro Discovery Evaluation Plan (PAD) area, 121 km off the coast of Vitória (Espírito Santo).
Log data analysis, fluid samples, and cable tests from reservoirs some 3,550 meters deep have confirmed the presence of good quality oil, according to the company.
Petrobras is the operator (65%) of the consortium exploring the Brigadeiro Discovery Evaluation Plan area, in partnership with Shell Brasil Petróleo Ltda (20%) and Inpex Petróleo Santos Ltda (15%). The consortium will continue operations, drilling to the planned depth of 4,500 meters.
Statoil, partners discover gas in Pingvin
Operator Statoil, together with PL713 partners, has made a gas discovery in the Pingvin prospect in the Barents Sea. The discovery well 7319/12-1, drilled by the drilling rig Transocean Spitsbergen, proved a 15-meter gas column in the well path. Statoil estimates the volumes in Pingvin to be in the range of 30-120 million barrels of recoverable oil equivalent. The discovery is currently assessed as non-commercial.
"Pingvin is the first well drilled in PL713 - a large frontier area northwest of Johan Castberg... For a discovery in this area to be commercially viable it needs to be an oil accumulation of a significant size. A gas discovery does not have commercial value at present," noted Dan Tuppen, vice president exploration Barents Sea and Norwegian Sea for Statoil.
"On the positive side, it is encouraging that the first well drilled in this unexplored area has proven hydrocarbons in sandstones. This indicates that we have both a reservoir and a working hydrocarbon system in the area, and creates a good basis for further subsurface work in the license," he continued.
Exploration well 7319/12-1 is located in PL713 about 65 kilometers northwest of the Johan Castberg discovery. Statoil is operator with a 40% interest with partners RN Nordic Oil AS (20%), North Energy ASA (20%) and Edison International Norway Branch (20%).
WoodMac: Details about Mexico's Round One
On September 26, 2014, Mexico's regulators provided further details about Round One. The announcement clarified certain issues surrounding company qualification, fiscal terms, and the availability of technical data.
Round One will comprise of five mini-rounds, defined by the different opportunity types. Both joint venture and standalone opportunities will be offered simultaneously.
Updated Round One timeline
Qualification criteria will be established for the different opportunities on offer. For example, in the Perdido JVs, Pemex is seeking companies with experience operating within the US side of the Gulf of Mexico. Pemex and the regulators will agree the qualification criteria for the JVs. In the case of standalone opportunities, the regulators alone will set the criteria.
Companies interested in deepwater operatorship will be required to fulfil all technical, financial and operational requirements on their own. In comparison, consortia in other types of opportunities besides deepwater, can fulfil those requirements across all their members.
Fiscal terms
PSCs and licenses will be the fiscal regimes most likely used in Round One. We expect licenses to be used for deepwater areas, although a final decision has not been reached. The contracts will most likely include a five year exploration phase and a 25 year development phase. Signature bonuses will be modest and will not be a bidding variable. They will only be used to determine the financial solvency of interested companies.
Comprehensive technical data to be available
Comprehensive data sets will be made available in Round One data rooms, possibly including processed seismic data. Both virtual and physical data rooms will be offered, enabling greater flexibility for companies to fully assess the data.
Falling oil price impact on regional banks
After recovering from the lows seen in 2009, oil prices have decreased more than 20% since last June. Sterne Agee analyst, Terry McEvoy, commented on the impact of falling oil prices on regional banks. "A majority of energy loans made by the regional banks are to upstream operations and are predominantly reserve-based. These loans are collateralized against specific proven oil and gas reserves and are based on the underlying cash flows of the project. Reserve-based lending has proven more stable over time. The servicing side of energy lending (drilling contractors, suppliers, pipeline services, etc.) has historically had a higher degree of credit losses and volatility."