OGJ Newsletter

Oct. 31, 2011
International News for oil and gas professionals


IOCs to invest $100 billion to upgrade Iraqi oil fields

ExxonMobil Corp, BP PLC, and Eni SPA will invest $100 billion to upgrade three of Iraq's oil fields, according to a senior government advisor.

"We have $100 billion for the three fields," said Thamer Ghadhban, senior energy advisor to Iraq's Prime Minister Nousi Al-Maliki, referring to the West Qurna Phase 1, Rumaila, and Zubair fields.

Ghadhban said half the investment would be spent to upgrade West Qurna Phase 1, now under development by ExxonMobil, and that the other half would be spent by BP and Eni on their Rumaila and Zubair fields.

Ghadhban said most of the financing is for West Qurna because Rumaila and Zubair fields were "well advanced in terms of development, such as number of wells, oil field facilities, other infrastructure, while West Qurna Phase 1 needs more."

The three fields are currently producing 2 million b/d, about two thirds of Iraq's current output of 2.9 million b/d. But they are expected to reach 6.8 million b/d or more in 2017 under existing contracts.

Meanwhile, Ghadhban said Iraq has agreed with the IOCs to construct an oil field water injection plant designed to produce 10 million b/d of water to be injected in six major oil fields in southern Iraq.

"The two [sides] have advanced toward reaching agreement and we have passed the heads of agreement into the [front-end engineering and design] phase," Ghadhban said.

Earlier this year, the consortia developing Iraq's southern oil fields disagreed with the oil ministry over estimated water injection needs, which had doubled on previous estimates.

Eni signs antibribery research agreement

Eni SPA has signed a research agreement on antibribery programs with the International Scientific and Professional Advisory Council of the United Nations Crime Prevention and Criminal Justice Program (ISPAC).

Eni said research on "anticorruption and the private sector—the role of corporate antibribery programs" will be conducted by experts from its legal department and five academic institutions coordinated by ISPAC.

Results will be offered to "the scientific community, the private sector, and international institutions," Eni said.

The project will be conducted under the aegis of the United Nations Office on Drugs and Crime.

BSEE aims to clarify offshore safety requirements

The US Bureau of Safety and Environmental Enforcement (BSEE) issued a notice to offshore lessees that consolidates guidance and information to help operators meet requirements under the previously issued Safety and Environmental Management Systems (SEMS) rule. Operators must implement a SEMS program by Nov. 15, BSEE noted on Oct 24.

BSEE's predecessor agency, the US Bureau of Ocean Energy Management, Regulation, and Enforcement, issued the offshore workplace safety rule in October 2010 following the Macondo deepwater well incident and oil spill. BSEE said the requirements apply to all US Outer Continental Shelf oil and gas operations and the facilities now under the agency's jurisdiction, including drilling; production; construction; well workover, completion, and servicing; and pipeline activities.

It said the notice contains no new requirements, but collects and consolidates guidance that has emerged from workshops and discussions with industry and other interest groups in the past year. In the interest of maximizing transparency, the notice also addresses issues relating to how BSEE will implement its SEMS compliance program, and describes the anticipated interactions between BSEE personnel and the operator community, the agency said.

Exploration & DevelopmentQuick Takes

Eni finds Rovuma gas giant off northern Mozambique

An Eni group has drilled a giant gas discovery at the first well in Area 4 off northern Mozambique that the company said is the largest operated find in its history.

Eni said the Mamba South-1 discovery well encountered 212 m of continuous gas pay in high-quality Oligocene sands and that the well "can lead to at least 15 tcf of gas in place in the Mamba South area where the potential of the Tertiary play that exists in Area 4 will be further assessed under the present drilling."

Eni didn't give the discovery well's present depth but said drilling will continue to 5,000 m in 1,585 m of water 40 km off Cabo Delgado. After drilling and testing, the rig will move to drill the second commitment well, Mamba North-1.

"The outstanding volume of natural gas discovered will lead to a large scale gas development with a combination of both export to regional and international markets through LNG and supply to the domestic market. This will support the industrial and economic growth of the country," Eni said.

Eni is operator of Offshore Area 4 with a 70% participating interest. Holding 10% each are Galp Energia, Korea Gas Corp., and Mozambique's state ENH. The state firm is carried through the exploration phase.

Alaska to offer additional acres in December lease sale

Alaska will include a significant amount of previously leased acreage in its North Slope oil and gas lease sale in December, the state's Department of Natural Resources (DNR) announced on Oct. 25. Another 200,000 acres will be available in the vicinity of Point Thomson and in the Beaufort Sea because of lease expirations and other administrative actions, it said.

"We expect interest in these areas and hope that exploration will soon follow," observed Bill Barron, director of the department's oil and gas division. He said the upcoming Beaufort Sea, ANS, and North Slope Foothills sale would encompass about 14.7 million acres in the northern part of the state. Bids will be received on Dec. 5 and opened on Dec. 7, Barron said.

The lease sale will make available eight tracts formerly part of the Point Thomson unit and 22 tracts that were previously deferred due to their proximity to the unit, according to DNR. These 30 tracts increase the available acreage by 72,000 acres, it said.

Forty-five tracts, which previously were included in the proposed Greater Bullen Unit west of Point Thomson, also will be available and will increase the available acreage by 106,540 acres, it continued. Five leases from the previously proposed Donkel Oil & Gas Unit in the Beaufort Sea, north of the Arctic National Wildlife Refuge, have expired, making an additional 14,403 acres available for the December sale, DNR said.

Green River shale oil in place put at 1.45 trillion bbl

About 1.45 trillion bbl of shale oil is estimated to be in place in the Eocene Green River formation in the Green River and Washakie basins in southwestern Wyoming, the US Geological Survey said.

The shale oil resource is present in the Tipton shale member, Wilkins Peak member, and LaClede bed of the Laney member of the Green River formation.

About 133 billion bbl of the resource is in strata that contain more than 15 gal/ton of rock, of which 72 billion bbl are under federal mineral ownership, USGS said.

Five zones due appraisal at Iraq's Pulkhana oil field

ShaMaran Petroleum Corp., Vancouver, BC, reported completing a reentry well that it expects to become the first well for tie-in to the Pulkhana early production facility planned for start-up in 2012 in Iraq Kurdistan.

Pulkhana-8 averaged 2,650 b/d of 31.6° gravity oil from the Upper Cretaceous Shiranish formation. Rates of as much as 3,530 b/d were recorded during the test.

The well continued to clean up during the test and produced an average of 24.6% muddy water which is believed to be drilling fluids and lost circulation material associated with the initial drilling of the well in 2006. To facilitate clean-up, the company is drilling 50 m of additional reservoir section.

Results from the reentry and from the Pulkhana-9 well have indicated that the Pulkhana structure could have as many as five oil-bearing reservoirs. Oil has been tested from the proven Euphrates and Shiranish formations, and the Jaddala, Upper Dhiban, and the Balambo are pending further evaluation as the appraisal program continues.

ShaMaran will sidetrack PLK-9 and barefoot test the Shiranish and Balambo intervals. The next appraisal well, Pulkhana-10, will appraise the Euphrates and Jaddala reservoirs. ShaMaran operates the Pulkhana block with 60% interest.

Drilling & ProductionQuick Takes

Gas production starts from Platong II off Thailand

Chevron Corp.'s Thai unit reported start of production from the $3.1 billion Platong II Gas project in the Gulf of Thailand. The Chevron unit reported earlier this year that it had hoped to start production before yearend (OGJ Online, Jan. 21, 2011).

The Platong II project is expected to ramp up production to 330 MMcfd of gas, which will feed growing Thai demand for energy, increasing the country's production by more than 10% from its current 2.89 bcfd, and boosting Chevron's net gas production from the Gulf of Thailand by more than 20%. The project also is expected to produce 18,000 b/d of NGL.

Platong II, which is one of southeast Asia's largest offshore structures, is in shallow water 120 miles from Thailand's southern coast.

Chevron is operator of Platong II with a 69.9% stake; partners are Mitsui Oil Exploration Co. Ltd., 27.4%, and PTT Exploration & Production PCL, 2.7%.

Hess proceeds with Tubular Bells development in gulf

Hess Corp. plans to proceed with the $2.3 billion Tubular Bells deepwater oil and gas project in the Gulf of Mexico. Discovered in 2003, Tubular Bells lies in 4,300-4,600 ft of water, 135 miles southeast of New Orleans on Mississippi Canyon Block 726.

The company's plan initially calls for three subsea production wells and two water injection wells from two subsea drill centers tied back to Williams Partners owned Gulfstar floating production spar (FPS).

Hess expects drilling to begin in 2012 and initial production to start in 2014, subject to receiving government permits.

The company estimates that the field will have a peak production of 40,000-45,000 boe/d. The field holds more than 120 million boe of reserves, according to Hess.

Williams Partners LP signed multiple agreements with Hess and Chevron USA Corp. to provide production handling, export pipeline, oil and gas gathering, and gas processing services for Tubular Bells.

Williams Partners expects the Gulfstar FPS also to serve as a central host facility for other deepwater prospects in the area. It will design, construct, and install the FPS, which will have a capacity to handle 60,000 bo/d and 200 MMcfd of gas as well as to provide seawater injection services.

The FPS has a traditional three-level topsides mated to a classic spar hull.

From sanctioning the project to completion, Williams Partners expects to deliver the FPS in 30 months.

Williams Partners said the FPS will be the first spar-based floating production system with major components to be built entirely on the Gulf Coast.

It will fabricate the hull at Aransas Pass, Tex. and the topsides in Houma, La. Hess is the operator of Tubular Bells and holds a 57.14% interest in the field with the remaining 42.86% interest held by Chevron USA Inc.

Cairn India eyes Rajasthan production lift

Cairn India Ltd., soon to be controlled by Vedanta Resources, London, says production from its complex of fields in Rajasthan, India, can reach 175,000 b/d of oil by next April after beginning this year at 125,000 b/d (OGJ Online, Jan. 27, 2010).

Cairn Energy PLC of Edinburgh, Scotland, which owns 52.11% of Cairn India, said the production boost will come from Bhagyam field, set to come onstream in the fourth quarter this year if the government of India approves.

All production now is from Managala field. After processing, the oil flows through a 366-mile heated and insulated pipeline to Salaya, Gujarat (OGJ, May 20, 2010).

Cairn Energy said development has begun of a third field, Aishwariya, which it expects to begin flowing next year with approval of the government and state-owned Oil & Natural Gas Corp. (ONGC), which holds a 30% interest in the block. In August, Cairn India began polymer injection for enhanced oil recovery in Mangala.

Cairn Energy expects production from the three fields to reach 240,000 b/d.

The company said completion of a sale to Vedanta of 40% of Cairn India "is expected shortly" following issuance by ONGC in late September of a "no objection certificate." Vedanta last year offered to buy as much as 60% of Cairn India for $9.6 billion in an offer complicated by a royalty dispute involving ONGC (OGJ Online, July 12, 2011).

ANS hydrates R&D to test for extended duration

Research on recovering natural gas from methane hydrates on Alaska's North Slope will enter a new phase as the US Department of Energy, Japan's Oil, Gas & Minerals National Corp., and ConocoPhillips prepare to continue their tests. The new series will last about 100 consecutive days from January to March 2012 and examine extended duration conditions and results, DOE's Fossil Energy Office announced on Oct. 24.

It said the tests will use the Ignik Sikumi well that ConocoPhillips and FEO's National Energy Technology Laboratory installed earlier this year as a borehole with full instruments. Ignik Sikumi is Inupiak for "fire in the ice."

Tests will include the initial field trial of a technology that involves injecting carbon dioxide into methane hydrate-bearing sandstone formations, resulting in the swapping of CO2 molecules for methane molecules in the solid-water hydrate lattice, the release of methane gas, and the permanent storage of CO2 in the formation, FEO said. This field experiment will be an extension of earlier successful tests of the technology that ConocoPhillips and their research partners conducted in a laboratory setting, it indicated.

FEO said once the exchange tests are completed, the team will conduct a 1-month evaluation of an alternative methane production method called depressurization.

This process involves pumping fluids out of the borehole to reduce pressure in the well, which results in dissociation of methane hydrate into methane gas and liquid water, it said. The method was successfully demonstrated during a 1-week test conducted by Japan and Canada in northwestern Canada in 2008, FEO noted.


Lawmaker seeks study of E15 ethanol gasoline blend

US Rep. F. James Sensenbrunner (R-Wis.) introduced a bill on Oct. 14 that would make the US Environmental Protection Agency seek independent scientific analysis of the effects of a 15% ethanol (E15) gasoline blend. Sensenbrunner, who is vice-chairman of the House Science and Technology Committee, said the additional study is necessary because EPA relied on a single, narrow US DOE study in its decision to proceed.

"This test was limited in scope and ignored a plethora of evidence—albeit inconvenient evidence for EPA—that shows E15 gasoline has a negative effect on engines," the lawmaker said. "I introduced this legislation to ensure a decision of this magnitude will be vetted by independent scientific research, rather than political expediency."

He said HR3199 would make EPA seek independent, scientific analysis of E15's effects on vehicles and engines, including an evaluation of short and long-term environmental, safety, and performance effects on onroad and offroad vehicle engines.

Sensenbrunner noted that when he asked 14 automakers about E15's effects on their products, the manufacturers responded that the higher blend would void warranties, damage engines, and lower fuel efficiency. Congressional testimony indicated that EPA has not adequately acted to prevent misfueling, even though E15 has been proven dangerous when used in boats, lawnmowers and other offroad engines, he added.

Vadinar refinery-expansion shutdown ends

Essar Energy PLC has completed a 35-day shutdown of its 300,000-b/d Vadinar refinery in Gujarat, India, related to an upgrade and expansion project that it expects to be mechanically complete by yearend (OGJ Online, Mar. 28, 2011).

The company had planned to shut down the refinery earlier this year but delayed the work in March at the request of key customers concerned about product supplies disrupted by Middle Eastern unrest and the Mar. 11 earthquake and tsunami in Japan (OGJ Online, Apr. 8, 2011). It then waited until the monsoon season ended in September.

The $1.85-billion expansion will boost capacity to 375,000 b/d and increase complexity. During the shutdown, Essar completed tie-ins of new units and revamp of the crude distillation, fluid catalytic cracking, and sulfur recovery units. It also conducted routine maintenance and inspection work.

New units include hydrotreating for vacuum gas oil and diesel, delayed coking, and isomerization. It expects new and upgraded units to be ramped up and stabilized by the end of March 2012.

Essar said work is proceeding to further boost capacity of the Vadinar refinery to 405,000 b/d in a $380 million project that will convert a redundant visbreaker into a second crude distillation unit and optimization of capacities of supporting equipment (OGJ Online, Nov. 10, 2010).

That work is due for completion by September 2012.

Targa to build Barnett shale gas processing plant

Targa Resources Partners LP, Houston, has ordered a 200 MMcfd cryogenic natural gas processing plant for its North Texas System to meet increasing gas production from liquids-rich areas of the Barnett shale. Targa expects the processing plant, sited in Wise County, Tex., to begin operations mid-2013, subject to regulatory approvals.

Targa's previously announced 100,000 b/d expansion of its majority-owned Cedar Bayou Fractionator at Mont Belvieu, Tex., (CBF Train 4) is on schedule for first-quarter 2013 completion. Targa reports CBF Train 4 as substantially contracted with long-term, use-or-pay, firm-capacity fractionation agreements and is evaluating an additional 100,000 b/d fractionation expansion (CBF Train 5), based on announced NGL pipeline expansions to Mont Belvieu expected to be completed in 2013.

The company has entered into agreements to acquire the necessary land for CBF Train 5 and has begun engineering design, permitting activities, and discussions with potential customers regarding term fractionation agreements.


BG, Cheniere sign first US LNG purchase agreement

The first sale and purchase agreement for LNG produced from the US Gulf Coast has been signed by BG Group and Sabine Pass Liquefaction LLC, a unit of Cheniere Energy Partners LP.

The fully termed agreement calls for purchase of 3.5 million tonnes/year of LNG over 20 years from the Sabine Pass LNG terminal in Cameron Parrish, La. The BG announcement said LNG exports are to begin as early as 2015.

Construction of liquefaction at Sabine Pass is to begin in 2012, with Phase 1 to consist of two trains capable of producing up to 9 million tpy of LNG. BG is not an investor in the proposed liquefaction, it said.

BG continues to pursue an expansion at its Lake Charles, La., LNG terminal to provide natural gas liquefaction. The company said authorization has been received from the US Department of Energy to export as much as 730 bcf/year of gas (about 15 million tpy) from Lake Charles to countries that have a free-trade agreement with the US.

DOE currently is reviewing an application to export natural gas from the Lake Charles LNG terminal to countries that do not have a free-trade agreement with the US, said BG.

Nebraska governor calls legislative session on lines

Nebraska Gov. Dave Heineman (R) said he would call the state's unicameral legislature into special session starting Nov. 1 to determine if siting legislation can be crafted for pipeline routing across the state. The special session's purpose would be to find a legal and constitutional solution for siting oil pipelines within Nebraska, Heineman said on Oct. 24.

Heineman made his move as the US Department of State continued to consider TransCanada Corp.'s cross-border permit application for its proposed Keystone XL crude oil pipeline, which would cross the state. The system would expand the company's capacity to ship crude recovered from oil sands to refineries in the US Midcontinent and along the Gulf Coast. It also would provide a route for Bakken shale crude in North Dakota to reach markets downstream.

Heineman and other Nebraska politicians have raised questions about possible adverse impacts on the Ogallala Aquifer, the state's primary underground freshwater source, in the event of a major leak from Keystone XL. US Rep. Lee Terry (R) is not among them, since he was the main sponsor of a bill the House approved on July 26 establishing a Nov. 1 deadline for DOS to reach a decision on TransCanada's application. The bill awaits US Senate action.

"The key decision for current pipeline discussions is the permitting decision that will be made by the Obama administration, which is why I have urged President Obama and Secretary of State [Hillary R.] Clinton to deny the permit," Heineman said.


A recent Journally Speaking replicated an error in Ryder Scott's September-November 2011 quarterly newsletter (OGJ, Oct. 24, 2011, p. 14).The corrected sentence is: "A more complicated method involves plotting an inverse of flow rate vs. the square root of time," which should eliminate the last words: "multiplied by time."

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