OGJ Newsletter

June 11, 2012
International news for oil and gas professionals


BP considers bid for its stake in TNK-BP

BP PLC, saying it was responding to "unsolicited indications of interest regarding the potential acquisition of its shareholding in TNK-BP," has told its partners in the Russian venture "of its intention to pursue a potential sale."

It didn't identify the potential buyers.

BP's 50-50 partner, Alfa Access Renova (AAR), acknowledged the notice and said in a statement, "It has become apparent that the parity ownership structure has become inoperable given fundamental differences over strategy and governance between AAR and BP."

BP's announcement followed shortly after the resignation, effective in late June, of TNK-BP Chief Executive Officer Mikhail Fridman, one of the AAR principals (OGJ Online, May 30, 2012).

BP was to have selected a successor for Fridman in 2013 under a management structure established last year (OGJ Online, Oct. 24, 2011). Fridman became CEO after TNK-BP's first chief executive, Bob Dudley, now the BP chief executive, was forced to leave Russia in 2008.

Bill to form CSG committee passes Australia step

Legislation to establish a $200 million (Aus.) funded independent coal seam gas and coal mining expert committee has passed the lower house of the Australian Parliament.

The legislation allows for a more rigorous scientific assessment of CSG and large coal mining proposals. Federal Environment Minister Tony Burke says the committee would assess how proposals would affect underground water resources and rivers. He adds that there is community concern about the impact of CSG and coal mining developments.

An interim committee was set up in January this year pending formal establishment provided in the legislation. It will provide scientific advice and oversee research on the effects on water resources.

"Upon request the committee would provide evidence to inform regulatory decisions made by governments," Burke said.

This will include advice on options for increasing the quality and accessibility of knowledge available of the impacts to water resources, such as the collection of data.

The committee's work will be supported by a national partnership agreement with relevant State and Territory governments. To date, South Australia, New South Wales, and Queensland have signed the agreement and negotiations continue with Victoria and the Northern Territory.

The legislation will now move to the Federal parliament's Upper House, the Senate.

Lukoil gets Statoil's West Qurna 2 oil field stake

Statoil has transferred its 18.75% interest in West Qurna 2 oil field in Iraq to Lukoil of Russia, the operator. It didn't disclose terms.

Lukoil recently began drilling production wells and building the central processing facility at the field, where it plans to produce 500,000 b/d by 2013-14 (OGJ Online, Apr. 26, 2012).

Peter Mellbye, Statoil executive vice-president for development and production, international, said "We are happy with the cooperation with Lukoil and the Iraqi authorities" but said Statoil had "decided to pursue other projects and opportunities."

Lukoil now holds 75% interest in the contract to develop West Qurna 2, which holds reserves estimated at 14 billion bbl. State-owned North Oil Co. holds 25%.

Chesapeake to change four independent directors

Oklahoma City independent Chesapeake Energy Corp. outlined plans to appoint four new independent directors to replace four existing independent directors who will resign. In addition, a fifth existing independent director is retiring on June 8.

Three of the new directors will be proposed by Southeastern Asset Management, which owns 13.6% of Chesapeake's stock, and the fourth independent director will be Carl C. Icahn or a person who he chooses to designate. Icahn owns 7.6% of Chesapeake's stock. Chesapeake plans to announce an independent nonexecutive chairman by June 22. At that point, Aubrey K. McClendon will relinquish his role as chairman and continue as chief executive officer and a director.

The reconstituted board will approve the nonexecutive chairman. The size of the board will remain at nine directors.

Exploration & DevelopmentQuick Takes

ONGC has KG gas, Cambay oil discoveries

India's Oil & Natural Gas Corp. Ltd. has reported a new field gas discovery in the Krishna-Godavari basin onshore and a new pool oil discovery in the Cambay basin onshore.

In the K-G basin, the Bantumilli South-1 well was drilled to a depth of 4,232.3 m and tested at 3.5 MMcfd of gas, natural, from the Lower Cretaceous Nandigama arenaceous unit at 4,221-32 m. The company said the well extended the prospectivity of the Nandigama, which has already proved productive in the nearby Malleswaram-Nandigama area.

ONGC said the discovery well is 22 km west of Narsapur and 20 km east of Bantumilli town in the West Godavari district of Andhra Pradesh state.

Meanwhile, the company confirmed the presence of oil in the Middle Eocene Kalol formation at 1,598-1,604 m in the Vadtal-5 new pool discovery well on the CB-ONN-2004/2 block in Gujarat. Total depth is 3,615 m. The well, previously designated as a discovery in the Middle Eocene Chhatral formation in May, is 14 km west of Anand town.

Group to develop Boyla oil field offshore Norway

A group led by Marathon Oil Norge AS has submitted a plan to the Norwegian government for development of Boyla oil field, a 2009 discovery formerly called Marihone, on Block 24/9 in the North Sea.

Lundin Petroleum AB, a partner, said development will involve drilling of two production wells completed subsea and tied back to the floating production, storage, and offloading vessel on Alvheim oil field 28 km to the north. A water-injection well also will be drilled.

Boyla crude oil will be commingled with Alvheim oil and carried ashore in shuttle tankers.

Production is expected to start in 2014.

Water depth at Boyla is 120 m. Production will come from Paleocene Hermod sandstone at a depth of about 2,100 m, holding reserves estimated at 23 million boe. Lundin estimated total investment of the development at $867 million.

Boyla interests are Marathon, operator, 65%, ConocoPhillips Skandinavia 20%, and Lundin Norway AS 15%.

Santos basin Carcara oil discovery confirmed

A group led by Petroleo Brasileiro SA (Petrobras) has confirmed the continuity of an ultradeepwater oil discovery on the BM-S-8 block in the Santos basin presalt area offshore Brazil.

Petrobras said the 4-SPS-86B (4-BRSA-971-SPS) well testing the Carcara prospect has been drilled to 5,926 m and that the company recovered samples of 32° gravity oil from reservoirs as deep as 5,910 m, confirming the continuity of the discovery reported on Mar. 20.

The well has proved a continuous oil column of 171 m so far in reservoirs of excellent quality and is still in the oil zone. It is being deepened to determine the lower limit of the reservoirs and the total thickness of the zones of interest. The well is 232 km off Sao Paulo state in 2,027 m of water.

Petrobras is the operator with 66% interest in partnership with Petrogal Brasil 14%, Barra Energia do Brasil Petroleo e Gas Ltda. 10%, and Queiroz Galvao Exploracao e Producao SA 10%.

Drilling & ProductionQuick Takes

IADC to enhance guidelines for rig personnel

The International Association of Drilling Contractors (IADC) announced an industry project to develop enhanced competency guidelines for rig personnel by expanding IADC's existing knowledge, skills, and abilities (KSA) templates.

The competency project will cover virtually all rig positions. The first phase will focus on safety-critical rig jobs having well-control responsibilities.

The main objective is to provide tools for confirming proficiency of the current drilling work force, developing competence levels for new workers, and helping to ensure industry-accepted levels of competency exist when recruiting.

"IADC is the global leader in developing competency and training programs for the drilling industry," said IADC Chairman Dan Rabun, who also is Ensco PLC chairman, president, and chief operating officer.

"This ambitious expansion of IADC's KSAs represents a step change for safety and competency."

In addition to generic rig positions, the new project will cover enhanced KSAs for highly specialized occupations such as subsea engineers.

The KSAs can also form the building blocks of future IADC accreditation and certification programs, said IADC, which runs accreditation programs for training programs conducted by oil companies, drilling contractors, firms, and independent training institutions.

The IADC KSA templates were originally released in 2000 and represented the basic skills and knowledge necessary for competence for 12 rig positions. In addition to job-specific KSAs, the IADC training committee also developed a general KSA focused on health, safety, and environmental issues.

IADC signed a contract with Petrofac Training Services to assist the project.

Buru brings Canning basin oil on stream

Buru Energy Ltd., Perth, stared producing oil from the Canning basin onshore Western Australia. The company put its Ungani-1 sidetrack wildcat on extended production test beginning with test rates in excess of 2,000 b/d.

Eric Streitberg, Buru executive director, points out that Ungani is the first new production from the Canning basin since the 1980s. What's more, the discovery of Ungani in October 2011 came exactly 10 years after the last major oil discovery in the State at Hovea field in the North Perth basin, a well in which Streitberg also was involved through his former company, ARC Energy. The plans for Ungani are to produce the well at varying rates to enable estimates to be made of longer-term sustainable flow rates and reservoir productivity as well as to establish flowing parameters through the extended production test facilities.

The plant has a maximum design capacity of 1,000 b/d, but the flow will be kept to an average of 4,000 b/d to meet the requirements of data gathering. There are also limitations imposed by the transport system which involves trucking the oil more than 2,000 km to the BP PLC refinery in Kwinana south of Perth. The oil will be refined for domestic consumption.

The extended test will run for 6 months. The data collected will be used to optimize the design of full field development.

Buru plans to conduct further appraisal and development drilling at Ungani later this year following the perusal of data from a 3D seismic survey over the field. This will be critical in accurately determining the field's reserves.

The company has lodged an application for a production license and begun native title negotiations.

Alberta okays Narrows Lake SAGD project

Cenovus Energy Inc. has received approval from the Alberta government to produce bitumen at the Narrows Lake project in northern Alberta, where it plans to use steam-assisted gravity drainage and demonstrate the solvent-aided process (SAP).

Gross production capacity is expected to be 130,000 b/d, developed in three phases. Work on the first phase, with capacity of 45,000 b/d, is expected to begin in the fall, Cenovus said.

The company and 50-50 partner ConocoPhillips still must approve the work.

Cenovus, the operator, plans initially to demonstrate SAP, in which a solvent is injected with steam, on 25% of the Narrow Lakes wells and eventually to phase in the application across the entire operation.

It would be the first use of SAP with butane on a commercial scale, Cenovus said. The company expects SAP to improve the steam-oil ratio (SOR) and oil production rate by as much as 30% from values achieved by SAGD alone and total oil recovery by as much as 15%.

With full addition of SAP, it says, the SOR might be as low as 1.6.

Narrows Lake is near Conklin, Alta., just north of the Christina Lake project where the Cenovus-ConocoPhillips combine is producing 58,000 b/d with SAGD. The companies have another SAGD project in Alberta, Foster Creek, producing about 120,000 b/d. Both projects are being expanded.

Viking group may tap three Philippine oil finds

Viking Energy Holdings 2 Ltd., private London operator, will head a group that plans to bring into production Yakal, Tindalo, and Nido-1X1 oil discoveries on SC 54A in the Philippines offshore northwest Palawan Island.

Subject to negotiating and signing a formal agreement, Viking will drill one well in each area. The first field would be brought into production by the second quarter of 2013, subject to approvals from third parties and the Philippines Department of Energy and the availability of rig and production facilities.

The other participants in SC 54A plan to collectively assign a 60% equity interest in the block in return for Viking assuming operatorship and carrying them in three oil field developments up until first production. Viking will finance all required capital outlay associated with bringing the fields into production.

The final investment amount will be agreed between Viking and the participants on selection of the most appropriate technical and commercial solution. Viking will receive a preferential proportion of the net cash flow generated until it has recovered its capital expenditure.

Viking anticipates bringing the Yakal and Tindalo discoveries into production first, followed by Nido-1X1 later.

Viking would use cost-effective production and storage facilities comprising a mobile offshore production unit and an FSO/storage tanker moored to a CALM buoy to commercialize the fields. Viking and the participants will collaborate with Offshore Production Solutions and Thome Oil & Gas on the project.

OPS will provide offshore production facilities under bareboat charter arrangements on competitive market terms to be agreed, and TOG will provide operation and maintenance services for the offshore production facilities under an operation and maintenance agreement on competitive market terms to be agreed.

Participating interests in SC 54A relating to the memorandum with present and post farmout interests are Nido Petroleum Philippines Pty. Ltd. 42.4% and 16.96%, Kairiki Energy's Yilgarn Petroleum Philippines Pty. Ltd. 30.10% and 12.04%, TG World BVI Corp. 12.5% and 5%, Trafigura Ventures III BV 15% and 6%, and Viking Energy zero and 60%.


Gunvor Group to acquire Ingolstadt refinery

Gunvor Group Ltd., Nicosia, Cyprus, signed a purchase agreement to acquire the assets of Petroplus's Ingolstadt refinery and related German marketing activities.

The acquisition is subject to customary closing conditions and regulatory clearance from competition authorities. The closing of the transaction is expected in this year's third quarter.

Gunvor intends to restart operations as soon as possible, following the refinery's closure in early February as a result of Petroplus's financial situation. The Ingolstadt refinery is one of the best performing European refineries, with a strong regional footprint in one of Germany's most prosperous regions, Bavaria. It has a processing capacity of about 100,000 b/d.

Petroplus reported at yearend 2011 it would start the temporary shutdown of three of its other refineries in Europe after lenders froze a $1 billion credit facility (OGJ Online, Dec. 30, 2011).

Motiva completes Port Arthur expansion

Motiva Enterprises LLC, Houston, reported the completion of the 325,000-b/d expansion at its refinery in Port Arthur, Tex.

Nameplate capacity now is 600,000 b/d, making it the largest US refinery. The project took 5 years to complete (OGJ, July 25, 2011, p. 24).

The expanded refinery can process a wide variety of crudes, ranging from relatively light to heavy. It also has the flexibility to switch between primarily producing gasoline and diesel to adapt to varying market conditions, the company said.

Motiva Enterprises is a refining and marketing joint venture owned by affiliates of Royal Dutch Shell PLC and Saudi Aramco.

Sasol starts up Mozambique gas plant expansion

Sasol Petroleum International, the upstream subsidiary of Sasol Ltd., has started up its 63 million gigajoule/year (158 MMscfd) expansion at the Temane, Mozambique, gas processing plant. Capacity now is 458 MMscfd.

Sasol's partners in the plant are Companhia Mocambicana de Hidrocarbonetos SA, representing the Mozambican government, and the International Finance Corp. of the World Bank, Washington, DC.

The gas plant began full-scale production of 300 MMcfd in 2004 and is connected to the South African market via a 865-km crossborder pipeline. From the added 158 MMcfd, the Mozambican market was allocated about 68 MMscfd to meet increased local demand, while another 68 MMscfd was allocated to the South African market. The remaining 22.5 MMscfd represents the royalty gas allocated to the Mozambican government.

With an investment of $220 million, the expansion came in under budget, the company said.


Williams to hold Marcellus-to-Alabama open season

Williams Partners LP is holding a nonbinding open season to expand its Transco interstate natural gas pipeline, providing incremental firm transportation capacity to markets in northern Georgia and Alabama by 2016. The Dalton Expansion Project would ship up to 600 MMcfd from interconnections accessing Marcellus gas production at its Zone 6 Station 210 pooling point.

Penn Virginia Resource Partners last month announced a build out of its Marcellus gas gathering infrastructure, including tie-ins to Transco (OGJ Online, May 23, 2012). Royal Dutch Shell PLC, Southwestern Energy, Range Resources Inc., and Inflection Energy are among the producers contracted to ship on Penn Virginia's gathering system.

UGI Energy Services Inc. also plans to extend its Marcellus gathering system to tie-in to Transco (OGJ Online, Oct. 21, 2011). UGI owns 14.7 bcf of underground gas storage in north-central Pennsylvania.

Final capacity, scope, and cost of the Dalton Expansion will be determined by results of the open season, which closes June 28.

KMEP to reverse Cochin Pipeline

Kinder Morgan Energy Partners LP (KMEP) has completed a successful binding open season for its Cochin Reversal project, allowing the company to offer service to move light condensate from Kankakee County, Ill., to existing terminal facilities near Fort Saskatchewan, Alta. KMEP received more than 100,000 b/d of binding commitments for a minimum 10-year term.

The roughly $225 million project involves KMEP modifying the western leg of its Cochin Pipeline to connect to Explorer Pipeline Co.'s pipeline in Kankakee County and to reverse the product flow to move condensate northwest to Fort Saskatchewan. Condensate will be sourced from the both the Eagle Ford shale and US Gulf Coast, KMEP said.

Cochin is a 1,900-mile, 12-in. OD multiproduct pipeline operating between Fort Saskatchewan, Alta., and Windsor, Ont. It currently moves propane and ethane-propane mix to the US Midwest and eastern Canadian petrochemical and fuel customers. Explorer Pipeline is a nearly 1,900-mile common carrier pipeline system moving refined petroleum products, feedstock, and diluent from the Gulf Coast throughout the Midwest.

Light condensate shipments could begin as early as July 1, 2014, pending regulatory approvals. KMEP has yet to determine the nature of future eastbound service from Illinois to Windsor, Ont. (OGJ Online, Apr. 23, 2012).

Petronas makes FID for liquefaction off Sarawak

A second project to build floating natural gas liquefaction has received approval, as Malaysia's Petronas reported a final investment decision (FID) for a 1.2 million tonne/year project for off Bintulu, Sarawak.

The plans, announced at the World Gas Conference in Kuala Lumpur, target 2015 for commissioning. Initial supplies for the vessel are planned from Kinawit field.

Almost simultaneously, Petronas Floating LNG 1 (Labuan) Ltd., a unit of Petronas, awarded Daewoo Shipbuilding & Marine Engineering (DSME) Co. Ltd., a Technip-Daewoo consortium, a services contract for engineering, procurement, construction, installation, and commissioning for the 300 m long, 60 m wide floating liquefaction structure.

In a press release, Technip said its portion of the contract consists of project management services and lump sum for engineering.

Detailed design of the topsides will be executed by Technip's operating centers in Kuala Lumpur and Paris. Engineering of the hull and building the vessel will take place at Daewoo's shipyard in Okpo, South Korea.

This contract follows the successful completion of the front-end engineering design phase awarded to TDC in December 2010.

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