OGJ Newsletter

April 9, 2012
International news for oil and gas professionals


BLM issues draft EIS, integrated plan for NPR-A

The US Bureau of Land Management issued a draft environmental impact statement (EIS) and integrated activity plan for the National Petroleum Reserve-Alaska (NPR-A) on Mar. 29.

It will consider possible future oil and gas leasing, restrictions on oil and gas activities and other BLM-authorized land uses, possible expansion of special use areas, and nominations for rivers to be included in the National Wild and Scenic Rivers System, BLM's Alaska state office said.

Public comments will be accepted through June 1, and public meetings will be held in several Alaska communities, it indicated. "The remarkable resources in the NPR-A call for a sound plan, which fully considers the input of local communities and Alaska Natives, and enables the nation to harness these domestic energy supplies with the right safeguards in place," said Bud Cribley, BLM's Alaska state director. "We need the public's input to ensure the best management plan is put in place for this area."

He noted that this is the first draft plan which considers the entire NPR-A, including BLM-managed acreage in its southwestern portion which was not included previously. The draft plan presents four alternatives, ranging from offering the entire reserve for oil and gas leasing with appropriate protections to taking no action and continuing current management approaches.

"From key oil and gas reserves, to the Teshekpuk and Western Arctic caribou herds, to the world-class breeding and nesting ground for numerous species of waterfowl, the NPR-A contains resources that must be considered and balanced in a way that will best meet the present and future needs of our nation, Alaska, and the local residents who depend on these lands for their subsistence way of life," Cribley said.

Cairn to acquire Agora in $450 million deal

Cairn Energy PLC, Edinburgh, agreed to acquire Agora Oil & Gas AS, a private Stavanger, Norway-based company with nonoperated assets in the North Sea, in a cash and stock deal valued at $450 million.

Closing of the transaction remains subject to UK and Norwegian regulatory approvals.

Currently, RIT Capital Partners PLC and Jacob Rothschild's family own most of Agora.

Agora plans to drill up to nine wells this year. Cairn said the acquisition provides it with near-term, lower-risk exploration, development, and producing properties.

KKR to acquire Barnett shale, Arkoma basin assets

Kohlberg Kravis Roberts & Co. LP (KKR) agreed to acquire certain Barnett shale and Arkoma basin assets from WPX Energy for $306 million.

The transaction, expected to close during the second quarter, is being made through KKR Natural Resources, KKR's partnership with Premier Natural Resources (PNR) to pursue investments in North American oil and gas properties. The transaction is KKR Natural Resources' third acquisition in the Barnett shale. The Barnett shale properties currently produce 67 MMcfd net.

KKR has invested in energy sector for more than 20 years. PNR was formed out of the acquisition and exploitation business plan implemented by Vintage Petroleum Inc.

Exploration & DevelopmentQuick Takes

Anadarko group wraps up appraisal off Mozambique

The Anadarko Petroleum Corp. partnership has completed the drilling portion of its appraisal program offshore Mozambique, where the four-discovery gas field in Offshore Area 1 has been named "Prosperidade" (prosperity) by Mozambique middle school children.

The last appraisal well, Barquentine-4, cut 525 net ft of natural gas pay, becoming the partnership's ninth successful well in the complex in the Rovuma basin.

Prosperidade, estimated to hold 17 to 30 tcf or more of recoverable gas, includes the Windjammer, Barquentine, Lagosta, and Camarao discoveries and five subsequent appraisal wells.

The partnership will mobilize the drillship to the northern part of the block to begin testing more high-potential exploration prospects that may expand the resource even further and provide tieback opportunities for future LNG hub facilities (see maps, OGJ, Apr. 2, 2012, p. 72).

The drillship will top-set the Atum prospect and then begin drilling the Golfinho prospect. The partnership's second drillship operating in the area is continuing to carry out an extensive testing program in the complex.

Anadarko is operator of the 2.6-million-acre Offshore Area 1 with a 36.5% working interest. Mitsui E&P Mozambique Area 1 Ltd. has 20%, BPRL Ventures Mozambique BV 10%, Videocon Mozambique Rovuma 1 Ltd. 10%, and Cove Energy Mozambique Rovuma Offshore Ltd. 8.5%. Mozambique's ENH has 15% iinterest is carried through the exploration phase.

AGA estimates gas reserves reached 300 tcf in 2011

US natural gas reserves reached record levels in 2011 as producers found and produced more gas than was consumed, the American Gas Association said. Quantities estimated to exist as a result of drilling and completing wells reached 300 tcf, AGA said in its preliminary findings.

"This 'on-the-shelf' inventory is the foundation, along with growing national resource estimates, that may point to as much as a 100-year gas supply in America," AGA Pres. Dave McCurdy said on Apr. 4. "This abundance is helping to reduce prices and increase stability for our customers and also ensuring that that natural gas is America's domestic, clean foundation fuel for now and into the future."

The combination of reserves information and resource assessments places that future supply at 2,100 tcf or greater, according to AGA. This represents about 100 years' of supply at current gas production rates of 22-23 tcf/year, it said.

AGA said the previous US reserves record of 293 tcf was reached in 1967. During 2010 and 2011, it added, an estimated more than 100% of total US annual production was replaced with new reserve additions and revisions of previous estimates. New discoveries tied to investment in onshore drilling opportunities in the Lower 48, specifically shale gas, have been a significant factor in recent reserves growth, it said.

The association, which represents local distribution companies, said that its estimates use figures for the 30 largest US gas reserves holders for its preliminary estimates. The US Energy Information Administration has not published 2011 oil, gas, and natural gas liquids figures, AGA said.

Satellite mission seeks gravity data renaissance

GETECH, Leeds, UK, has begun an industry-funded research study to enhance the resolution of satellite-derived gravity data used in the search for hydrocarbon-bearing structures under the world's oceans and seas.

The 9-month R&D study will determine how and to what degree the advanced ocean measurements from the three-cycle polar geodetic mission (2011-13) of the CryoSat-2 satellite, with data provided by the European Space Agency, can improve the accuracy, resolution, and reliability of satellite-derived gravity. The oil industry is using such gravity data routinely to explore the world's continental margins.

The success of the R&D study will pave the way for a global study by GETECH, starting in early 2013, to map all the world's continental margins to 500 km from shore. This global study will include data from the NASA Jason-1 oceanographic satellite, subject to it going into geodetic mission mode in 2013.

One year of data from CryoSat-2 will provide on the order of 50% additional data on top of that available from previous satellite missions. The near-polar orbit will generate tracks with different orientations that will infill existing data coverage. GETECH believes that its specialized processing methodology will be particularly suitable for extracting high resolution gravity data from this combined data set. In addition, CryoSat-2 is acquiring data with a new synthetic aperture radar system that promises improved accuracy over some key areas of the world.

The R&D study will refine the methodologies and algorithms used previously on the GeoSat and ERS-1 data to handle the two altimeter data types being collected by CryoSat-2. Four test areas have been agreed in the Caspian Sea, Barents Sea, north Brazil margin, and north Colombia/Venezuela margin to check on the resolution of the data by comparison with high-quality terrestrial shipborne data.

Derek Fairhead, president and founder of GETECH, said: "We have been gratified by the interest expressed in this study. The petroleum exploration industry, both oil companies and marine seismic contractors, has for a long time valued gravity information, especially for the structural evaluation of blocks ahead of licensing round bids and the planning of large multiclient seismic survey targets. This new study should open the way to making gravity data of exceptional resolution available on a global basis at an extremely attractive price compared with any other method."

TAG sees blanket Urenui oil at Cheal, New Zealand

TAG Oil Ltd., Vancouver, BC, said it plans to place on production, in this year's second half, three wells that have confirmed a commercial discovery of oil in the Urenui formation at 1,400 m on the 100% owned Cheal permit in the Taranaki basin of New Zealand.

The Cheal-B6, A9, and A10 wells individually are capable of initially producing 200 b/d of light oil with associated gas from high-quality reservoir sands, the company said. The wells are to be placed on sustained production after artificial lift capabilities are upgraded in the next 3 months.

Permit-wide 3D seismic interpretation, including data from preexisting wells that all intersected Urenui pay, indicates that the formation has been deposited as a blanket sand and is prospective for oil across the 7,500-acre PMP 38146 permit.

TAG Oil said it will integrate the Urenui oil play into its overall development and exploration strategy, which will also include the Mount Messenger formation and the deeper liquids-rich Kapuni formation gas.

Drilling & ProductionQuick Takes

KRG halting oil exports for Baghdad's nonpayment

The Kurdistan Regional Government ordered a halt Apr. 1 to crude oil produced in Kurdistan that was destined for export through Turkey because the KRG said Iraq's federal government in Baghdad has ceased payments.

The KRG Ministry of Natural Resources in Erbil said, "After consultation with the producing companies, the ministry has reluctantly decided to halt exports until further notice. There have been no payments for 10 months, nor any indication from federal authorities that payments are forthcoming," the MNR said.

The KRG said it has received no payment since May 2011. Iraq has reported production of 2.3 million b/d in March, of which about 75% is exported.

Iraq's national government considers illegal the 40 or so contracts that the KRG has signed with international oil companies and has dissuaded several companies from signing with the KRG. The national government, which exports crude via the Persian Gulf, indicated that the KRG is allocated more revenue in the federal budget than the region accounts for in oil sales.

The MNR added, "We hope that this is a temporary measure and that those in the federal government responsible for nonpayment will quickly realize that their failure to adhere to their agreements is not in the interests of the Iraqi people."

The MNR said it will make every effort to increase exports above the 175,000 b/d target included in the 2012 Iraq budget "once this unfortunate nonpayment situation has been satisfactorily resolved." In the meantime, it plans to divert production "to the local market for processing and refining to generate an alternative source of cash flow for the producing companies."

DNO International ASA, Oslo, confirmed MNR's request that it halt delivery of that portion of crude oil produced from Tawke field that was destined for the Iraqi national pipeline system.

DNO said all other Tawke crude oil and refined product deliveries and field operations remain unaffected. The company's exploration and development operations on the Peshkabir-1, Tawke-14, Tawke-15, and Tawke-1A wells continue as before and as per plan.

BP hires Ensco DS-6 drillship

BP PLC signed a contract for Ensco PLC's DS-6 ultradeepwater drillship for 5 years at $522,000/day, plus cost adjustments.

Terms include options for two 1-year extensions at a negotiated rate.

Ensco said the newbuild DS-6 was in Singapore undergoing BP-requested modifications, including enhanced voluntary drilling standards.

The DS-6, equipped with dynamic positioning, has six-ram, 15,000-psi blowout preventers and accommodations for 200 crew members. It can be modified to operate in 12,000 ft of water.

The drillship recently was delivered from Samsung Heavy Industries' shipyard in South Korea. Based on current estimates, the DS-6 is scheduled to start work late this year.

Marulk field starts flow offshore Norway

Production has begun from Marulk natural gas and condensate field offshore Norway (OGJ Online, Aug. 10, 2010).

Eni, the operator with a 20% interest, said production will reach 20,000 boed from reserves of 74.7 million boe in Cretaceous Lysing and Lange sandstones at about 2,800 m. The field is in 370 m of water 80 km from the coast.

Development is via two production wells completed subsea and tied back to the floating production, storage, and offloading vessel on Norne oil field about 25 km northeast.

Other interests are Statoil 50% and DONG E&P Norge 30%.

BG Norge starts oil output from Gaupe field

BG Norge AS has started oil production from Gaupe field in the southern North Sea offshore Norway.

Gaupe, in PL 292 on the UK-Norway median line 225 km off Norway, is expected to peak at 6,000 b/d of oil equivalent from 31 million boe gross recoverable. It is producing via subsea tieback to Armada production facilities in the UK Central North Sea.

BG Norge is Gaupe operator with 60% working interest, and Lundin Norway AS has 40%.

Cabot restores some Marcellus gas output after fire

Cabot Oil & Gas Corp. has restored some natural gas production following a Mar. 29 fire at the Lathrop compressor station in Pennsylvania's Marcellus shale play.

The Houston independent currently is producing 200 MMcfd, which is 55% of the volume going through Lathrop before the fire. Production was restarted Mar. 20 by temporarily bypassing the compression station.

Cabot and Williams Partners LP are investigating cause of the fire and the resulting damage. The fire quickly extinguished itself, and no injuries were reported.


Essar Energy completes Vadinar refinery expansion

Essar Oil Ltd. has completed the $1.81 billion expansion of its Vadinar refinery in India with the successful commissioning of the 7.5 million tonne/year delayed coker unit, the final unit to be completed.

In December, it commissioned a large C5-C6 isomerization unit (OGJ Online, Dec. 12, 2011). Vadinar, in Gujarat state, is now India's second-largest single-location refinery, with an annual capacity of 375,000 b/d from 300,000 b/d.

The capacity expansion and complexity enhancement gives the refinery the capability to process a much greater proportion of lower cost heavy and ultra-heavy crudes. The company has already entered into long-term sourcing contracts with global crude suppliers, including several Latin American national oil companies.

The refinery expansion project was implemented using Essar Group's in-house capabilities. The construction and overall project management was handled by Essar Projects. The DCU, which is among the world's largest units of its type, is a key addition to Vadinar because of its ability to convert bottom-of-the-barrel vacuum residue into gas oil, gasoline, and vacuum gas oil.

New units include a 3.9 million tpy fluidized catalytic cracking unit, 0.7 million tpy isomerization unit, 4 million tpy diesel hydrotreater, 6.5 million tpy vacuum gas oil hydrotreater, and 675 tonne/day sulfur recovery unit. An optimization project is also under way at the Vadinar refinery that will further increase the capacity to 405,000 b/d by September.

Producer agreement underpins gas plant expansion

MarkWest Energy Partners LP, Denver, announced last month it had concluded long-term gathering and processing agreements with Anadarko Petroleum Corp. to support a 120-MMcfd expansion of MarkWest's Carthage East cryogenic processing plant in Panola County in East Texas.

The plant's expansion had been announced on Feb. 29 during MarkWest's fourth-quarter 2011 earnings conference call. Company spokesman Matthew Herzog told OGJ the expansion to 400 MMcfd targets start-up early next year.

MarkWest will provide gathering and processing to Anadarko's liquids-rich development within Panola County. In addition, the Carthage East expansion will add 140 MMcfd to MarkWest's gathering capacity in East Texas and expand residue-gas outlet capacities by 60 MMcfd, said the company announcement in March.

Chevron Phillips to build 1-hexene plant

Chevron Phillips Chemical Co. LP will build the world's largest on-purpose 1-hexene plant at its Cedar Bayou Chemical Complex in Baytown, Tex., using proprietary technology.

The plant will be able to produce 250,000 tonnes/year of comonomer-grade 1-hexene from ethylene for use in the production of polyethylene.

Chevron Phillips said it has reached agreements with S&B Engineers & Constructors Ltd. for engineering and construction of the plant, which is to start up in first-quarter 2014.

Chevron Phillips recently announced plans to expand capacity of its Sweeny NGL fractionator at Old Ocean, Tex., by 19% based on growing availability of gas liquids produced from shale plays in the region (OGJ Online, Mar. 26, 2012).

The company is studying the feasibility of building a 1.5 million tpy ethane cracker at Cedar Bayou and two related polyethylene plants with capacities of 500,000 tpy each at Cedar Bayou or Sweeny (OGJ Online, Mar. 29, 2011).

In December it said Shaw Energy & Chemicals is designing the ethane cracker.


Oneok to build Bakken natural gas gathering system

Oneok Partners LP plans to build a 270-mile natural gas gathering system and related infrastructure in Divide County, ND. The system, expected to be completed second-half 2013, will gather and deliver gas from producers in the Bakken shale to the partnership's previously announced 100-MMcfd Stateline II gas processing facility in western Williams County, ND.

Oneok is expanding its Bakken shale activities, investing $1.5-1.8 billion between 2011 and 2014 in its gas gathering and processing and NGL businesses in the region with the $140-160 million it expects to spend on the Divide County system coming in addition to these expansions.

Previously announced projects include the 500-mile NGL Bakken Pipeline and three 100-MMcfd gas processing facilities: the Garden Creek plant, Stateline I plant, and Stateline II plant. Garden Creek entered service December 2011. Oneok expects Stateline II to enter service first-half 2013.

The company said completion of the Divide County gas gathering system will allow it to fill all four of its gas processing plants in the Bakken shale and Three Forks regions.

Oneok secured long-term supply commitments from producers structured with percent-of-proceeds and fee-based components for the new gathering system.

ETP lets contract for Red River gas pipeline

Energy Transfer Partners LP (ETP) has let a contract to a unit of Willbros Group Inc.'s oil and gas segment for the construction of a portion of its Red River Gathering Pipeline. The scope of work includes construction of 97 miles of 30-in. OD pipeline from Ardmore, Okla., to Denton, Tex. Construction will begin this month.

Red River, which also includes 10 miles of 24-in. OD line, starts in Carter County, Okla., and will have an initial capacity of 450 MMcfd, with anticipated capacity expansion to beyond 550 MMcfd. ETP expects the pipeline to enter service in the fourth quarter.

ETP last year entered into a long-term, fee-based agreement with XTO Energy, a subsidiary of ExxonMobil Corp., to provide natural gas gathering, processing, and transportation services from both the Woodford and Barnett shale regions. The Red River pipeline is part of this project, with ETP also building a new 200 MMcfd cryogenic processing plant at its existing Godley processing facility in Johnson County, Tex.

Petronas lets contract for Malaysian LNG terminal

Petronas unit Petronas Gas Bhd. let a front-end engineering and design services contract for an LNG regasification terminal in Malaysia to Fluor Corp. The terminal will supply gas to an adjacent 300-Mw, combined-cycle electric power plant in the town of Lahad Datu, Sabah. The contract's value was undisclosed.

Fluor said it will be using local subcontractors and suppliers for various facets of the project.

The engineering firm was previously part of a joint venture that provided Petronas with preliminary engineering services for an LNG liquefaction plant at the existing facility in Bintulu, Malaysia.

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