UPSTREAM NEWS
Utica production
Total natural gas production in the Utica Region, which includes production from the Utica and Point Pleasant formations as well as legacy production from conventional reservoirs, has increased from 155 million cubic feet per day (MMcf/d) in January 2012 to an estimated 1.5 billion cubic feet per day (bcf/d) in October 2014. - EIA
S&P: Onshore drillers may fare better than offshore in near-term
The industry outlook for the contract drilling industry will be mixed over the next couple of years, with the onshore sector faring better than offshore drillers, according to a recent report by Standard & Poor's Ratings Services. The report explores the recent-but expected-influx of offshore contracted rigs, which has led to decreasing day rates across most rig classes.
The report also explores the industry's recent heightened capital spending, debt financing, and the impact that several new contracted and uncontracted rigs will have on the offshore sector's financial measures. In fact, Standard & Poor's has recently changed the outlooks on three offshore drilling companies to negative.
"Companies with strong balance sheets and younger fleets should be able to absorb any weakness in the offshore market over the next few years; however, companies with higher debt leverage and/or older fleets could face some rating pressure if markets materially weaken from current levels," said Standard & Poor's credit analyst Paul Harvey. "On the other hand, our rating outlook for most land-based drillers remains stable, partly because we believe robust Western Texas Intermediate crude oil prices will continue to drive demand for oil-directed rigs," said Harvey.
The overall state of the global economy, in general, and the US economy, in particular, affects the operating environments of all participants in the oil and gas industry. Standard & Poor's expects continued strong drilling activity based on robust crude oil prices and day rates that might weaken but won't collapse. In any event, Standard & Poor's expects that day rates and utilization levels will likely begin to recover in 2017.
Powder River Basin revival
The Powder River Basin, well known for its abundant coal supply, is experiencing a turnaround in oil production. Production has rebounded from a low of 38,000 barrels per day (bbl/d) in 2009 to 78,000 bbl/d during first-quarter 2014. Although US oil production growth is occurring primarily in the Bakken, Eagle Ford, and Permian Basins, the Powder River Basin is among other regions of the country that have also benefitted from the application of horizontal drilling and hydraulic fracturing.
The increase in Powder River Basin oil production is largely attributable to production growth in the Turner, Parkman, and Niobrara-Codell formations, which collectively increased from 4,700 bbl/d in 2009 to 36,300 bbl/d in first-quarter 2014, increasing their share of total Powder River Basin oil production from 12% to 46%. Three other formations-the Shannon, Sussex, and Frontier-also rose from 2009 to 2014, although to a lesser extent, rising from 8,900 bbl/d in 2009 to 17,000 bbl/d in first-quarter 2014, maintaining their share of total Powder River Basin oil production at around 23%.
The Powder River Basin encompasses more than 43,000 square miles and is located primarily in northeast Wyoming and southeast Montana, along with small areas of South Dakota and Nebraska. The recent resurgence is occurring predominantly in the Wyoming portion of the basin, which is also the main source of the Basin's historical oil production. Since January 2009, more than 590 oil wells have been drilled and completed in the six select formations within the Powder River Basin, with this activity centered in Wyoming's Converse and Campbell counties.
In the past, oil production came from the higher-permeability portions of Wyoming's Turner, Parkman, Shannon, Sussex, and Frontier formations. With the application of horizontal drilling and hydraulic fracturing, larger portions of these formations have become profitable for commercial oil production. In contrast, the Niobrara-Codell formation was not a significant oil producer in the Powder River Basin before 2009, and oil production from this formation is entirely reliant on the application of current petroleum technology.
Swala awarded Block 44 in Zambia
East Africa-focused Swala Energy Ltd. reports that its 93%-owned subsidiary, Swala Energy (Zambia) Ltd., has been formally awarded hydrocarbon exploration rights over Block 44 in the Republic of Zambia. The award of Block 44 has now been granted following ministerial consent from the Ministry of Energy in Zambia.
Block 44 lies in the southern part of the country and covers an area of 2,316 square miles on the margins of the Karoo-aged Kariba Basin. During the first contract year, Swala intends to reprocess and reinterpret the legacy seismic data as part of its work program. Under the provisions of the award, Swala may withdraw after each of the first two years of the contract should the work conducted not confirm the basin's prospectivity.
ENI makes discovery offshore Angola, another in Ecuador
Italy's ENI has made two recent oil discoveries. The first, offshore Angola, and the second in Ecuador.
The company made an oil discovery in Block 15/06 in the Ochigufu exploration prospect offshore Angola. With its Ochigufu 1 NFW well, ENI has made its 10th commercial oil discovery in the block. The recent discovery is estimated to contain 300 million barrels of oil in place.
The Ochigufu 1 NFW well, noted by the company to be "brought into production in record time," is located approximately 150 kilometers off the coast and 9.8 kilometers from the Ngoma FPSO (West Hub). The well was drilled by the Ocean Rig Poseidon Drilling Unit in waters 1,337 meters deep and reached a total depth of 4,470 meters.
Ochigufu 1 NFW was directionally and proved a net oil pay of 47 meters (34° API) contained in the Lower Miocene and Oligocene sandstones with "very good petrophysical properties," said the company. The data acquired indicate a production capacity equal to more than 5,000 barrels of oil per day, ENI continued.
Studies are underway in order to evaluate an early tie-in to the Ngoma FPSO, already in location in the West Hub and designed to handle 100,000 barrels of oil production per day.
Eni serves as operator of the Block with a 35% stake. JV partners are Sonangol (30% stake), SSI Fifteen Ltd. (25% stake), Falcon Oil Holding Angola SA (5% stake), and Statoil Angola Block 15/06 (5% stake).
ENI has been present in Angola since 1980 with a daily production in 2013 of about 90,000 barrels of oil equivalent per day. In Block 15/06 the two oil development projects West hub and East Hub have already been sanctioned. The production start up of the West Hub project, through FPSO Ngoma, is expected by the end of 2014.
In Ecuador, the company has made what it calls a "significant" oil discovery at the Oglan-2 exploration well located in Block 10, approximately 260 kilometers southeast of Quito. Early estimates suggest that the Oglan discovery potentially contains about 300 million barrels of oil in place.
The well, drilled to a total depth of 6,450 feet, encountered a 236 foot net crude oil column (16° API). During a production test, constrained by surface facilities, the well flowed at 1,100 barrels of oil per day. The data acquired in Oglan well indicate a production capacity per well up to 2,000 barrels of oil per day.
Eni will immediately begin the studies for the commercial exploitation of the Oglan discovery, located just 7 kilometers from the processing facilities of the Villano Field, also inside Block 10, which currently produces approximately 12,500 bpd, entirely Eni equity. Eni, through its affiliate Agip Oil Ecuador, has operated Block 10 since February 2000.
The Oglan discovery is the outcome of Eni's new exploration campaign, which the company is undertaking as part of its strategy to develop Block 10 under the new service contract signed with the Ecuadorian government in 2010.
Genie Signs exploration Agreement for Shale Exploration in Mongolia
Genie Oil Shale Mongolia LLC (GOSM), a subsidiary of Genie Energy Ltd., has signed a prospecting agreement with the Petroleum Authority of Mongolia (PAM). The new exploration block covers 9,652 square miles in Central Mongolia southeast of the Mongolian capital, Ulaanbaatar. The agreement, the first to be signed under recently passed legislation, also provides a framework under which the company can request a commercial production agreement once a specific suitable resource and location are identified.
Yuval Bartov, chief geologist of Genie Oil and Gas, said, "Our analysis of the available geological evidence suggests that this license area may contain world class deposits of thick and rich oil shale well-suited for our in-situ extraction technology."
Together with its previously signed exploration agreement, GOSM now has exclusive rights to explore for oil shale in approximately 23,166 square miles in Mongolia.
"We are pleased that Mongolia and Genie Energy will be working together to establish oil shale reserves and explore for and exploit the resource. The recently passed Petroleum Law created a favorable environment for investment in conventional and unconventional petroleum sectors, increasing competition and encouraging sustainable long term activity," said D. Gankhuyag, the Mongolian minister of Mining.
In 2013, Genie and the PAM entered into an exclusive, 5-year oil shale development agreement to explore and evaluate the commercial potential of oil shale resources on a separate 13,308 square mile area in Central Mongolia.
Marcellus production
"Natural gas production in the Marcellus region exceeded 15 billion cubic feet per day (bcf/d) through July, the first time ever recorded, according to EIA's latest Drilling Productivity Report…Production in the Marcellus Region surpassed winter demand for natural gas in Pennsylvania and West Virginia several years ago and is now on track to be enough to equal the demand in those states plus New York, New Jersey, Delaware, Maryland, and Virginia combined."-EIA's Today in Energy