World of Oil

Serbia ratifies Russian energy deal

Serbia’s parliament ratified an ac-cord, signed in January in Moscow, for Russia’s Gazprom to build a pipeline in southern Serbia and an underground gas storage facility in northern Vojvdina province, and to buy the Serbian oil monopoly NIS. Gazprom offered to pay €400 million for 51% of NIS and to invest €500 million in the company. Gazprom also promised to ensure pasage via Serbia of the planned 560-mi South Stream pipeline to transport gas from Russia to southern Europe.

Al-Jurf Field to stay shut

Libya’s 45,000-bpd Al-Jurf Field will remain shut for another two months for repairs, longer than previously ex-pected. The field offshore Libya was shutin late April because of a damaged well, and production was expected to resume in a few weeks following repair work, but Shokri Ghanem, chairman of Libya’s National Oil Corporation, said the field would remain shutin for another two months.

Kazakhstan increases oil export duty

Kazakhstan will increase the oil ex-port duty in mid-October to $28.70 per bbl from $15.48 per bbl. More than 40 oil companies operating in Kazakhstan are subject to this duty, including Kaz-MunaiGas. Kazakhstan’s largest oil producer, Chevron-led Tengizchevroil, doesn’t pay the duty due to a stability clause in its contract.

BP’s Plutonio project still offline

BP’s 200,000-bpd Plutonio project, offshore Angola, remains offline after shutting down due to technical prob-lems in mid-August, and there is no date for restart. The Plutonio develop-ment consists of five fields-Plutonio, Galio, Paladio, Cromio and Cobalto-in water depths around 4,260 ft.

Khursaniyah starts up

Saudi Arabia announced in early September that production had begun at its 500,000-bpd Khursaniyah Field. “The facility is operational and producing crude,” a source at Saudi Aramco announced. The field was initially due to start up in December. The field’s startup is the largest single increase to global oil production for several years.

Court orders US government to pay companies for lease breach

Devon Energy and Anadarko Petroleum were among a group of oil and gas companies that should be reimbursed more than $1 billion for money paid to the US government for leases to explore for and develop oil and gas resources in the Outer Continental Shelf off California. The US Court of Appeals for the Federal Circuit upheld the 2006 ruling of the Court of Federal Claims that awarded over $1 billion to 11 oil and gas companies that sued the US government for its breach of nearly three dozen oil and gas leases from 1968 to 1984. Through their exploration, the companies had discovered new oil fields in federal lands offshore California. Under the terms of their contracts, the companies were given the right to explore, develop and produce oil and gas in the leased areas. However, production drilling never commenced because subsequent changes in federal law materially interfered with the companies’ efforts to develop the reserves. The court found that the laws passed by Congress to limit energy production near US coastlines violated the lease terms.

Iceland to conduct first exploratory offshore drilling

Iceland intends to begin test drilling for oil off its coast in the northeastern Atlantic Ocean now that technical know-how makes it possible to drill at extreme depths. According to Kristinn Einarsson, project coordinator for the Icelandic National Energy Authority, data has indicated that “oil or gas may be present” in the Dreki area located between Iceland and Norway’s Jan Mayen Island. “The data is geophysical; there’s no drilling hole in the area, so that makes it very difficult to make any estimates of resources,” he said. Einarsson suggested that the geological history of the area was such that “it should contain strata of a similar age as the oil-bearing strata in eastern Greenland and off the coast of Norway, where oil and gas have been found.” Water depths of 0.6-1.2 mi in the area have until now prevented exploratory drilling. “We have known since the 1990s that we have had these possibilities, but the technological know-how, both the drilling and production technology, was not up to the task at that time,” Einarsson said. Following recent technological advances made in the Gulf of Mexico and off the coast of Brazil, “there has been much progress in the area.” The Icelandic government will hold its first licensing round for oil exploration in January 2009.

US to lift offshore drilling ban

The US House of Representatives and the US Senate have decided to allow a 26-year ban on offshore drilling off the Atlantic and Pacific coasts to expire. Appropriations Committee Chairman David Obey told reporters that a provision continuing the moratorium on drilling will be dropped this year from a $600 billion stop-gap funding bill. The bill covers government spending at the current level through March 6, thus giving adequate funding for government programs through early next year. With the drilling ban removed from the bill, the offshore ban will be lifted on October 1. President Bush lifted an executive ban on offshore drilling in July. A week prior to Obey’s announcement, the House passed legislation to open waters off the Atlantic and Pacific coasts to oil and gas drilling but only 50 or more miles out to sea and only if a state agrees to energy development off its shore. Republicans called that effort a sham that would have left almost 90% of offshore reserves essentially off-limits. In addition to keeping government agencies funded through the spring, the funding bill will include $25 billion in loan guarantees for US automakers, $23-$24 billion in disaster aid for flood and hurricane recovery efforts, $2 billion for Pell grants for student loans and $5.2 billion for low-income energy assistance. Obey said he negotiated the funding bill with the White House and added that “I have every reason to believe they will accept it.” The US Interior Department estimates there are 18 billion bbl of recoverable oil beneath coastal waters now off-limits.

Western GOM lease sale attracts $487 million in high bids

The Western Gulf of Mexico Oil and Gas Lease Sale 207 attracted over $487 million in high bids, with the sum of all bids received totaling over $607 million. The sale was conducted by the US Minerals Management Service and had 53 companies submitting 423 bids on 319 tracts covering over 1.8 million acres offshore Texas. About 17% of the tracts receiving bids are in ultra-deep water-more than 5,250 ft. The deepest tract bid was also the highest single bid for a block on Alaminos Canyon, Block 783, in 9,767 ft of water, submitted by Statoil Gulf of Mexico LLC for $61 million. Chevron USA Inc. placed the second- and third-highest single bids on the Garden Banks Block 973 and the Garden Banks Block 972 for $52 million and $34.6 million, respectively.

Baghdad cancels technical service no-bid oil deals

Iraqi Oil Minister Hussain Shahristani confirmed in early September that Baghdad has canceled plans to sign technical service agreements with a number of international oil companies. Iraq had wanted the six contracts-to be signed in June and implemented within a year-to increase oil output by 100,000 bpd. “The remaining time was too short because the full deal development contracts should come into effect by mid next year,” Shahristani said. “The remaining nine months was too short for technical support contracts to be effective.” Shell in partnership with BHP Billiton, ExxonMobil, and Chevron with Total were among the companies that had been in negotiations with Iraq for the technical service agreements.

Saudi Cabinet extends Chevron’s 550,000 bopd concession

Chevron will continue to operate in the neutral zone shared between Saudi Arabia and Kuwait after the extension of its concession was approved by Saudi Arabia’s cabinet. “The cabinet decided to approve the extension and amendment of the agreement between Saudi Arabia and Chevron Saudi Arabia at the partitioned zone,” the official Saudi news agency reported. Chevron has been negotiating an extension of the concession with the kingdom’s authorities beyond its expiration in 2009. The 60-year concession was awarded in 1949 to US-based Getty Oil Co., which was taken over by Texaco in 1984, the oil major that later merged with Chevron. Chevron is currently working on a steamflood project that is aimed at boosting output of heavy crude from the onshore area of the zone, which presently produces an estimated 550,000 bopd between Kuwait and Saudi Arabia.

Perdido arrives in ultra-deepwater GOM

In mid-August, the Shell-operated Perdido Regional Development Spar arrived in the ultra-deepwater Gulf of Mexico; it is being secured to the seafloor in about 8,000 ft of water. Perdido will be the deepest oil development in the world, the deepest drilling and production platform in the world and have the deepest subsea well in the world. Perdido will be a fully functional oil and gas platform with a drilling rig and direct vertical access wells, full oil and gas processing and remote subsea wells. The facility is designed to produce 100,000 bopd and 200 MMcfgd. The production from these fields will be transported via new and existing pipelines to US refineries. The Perdido Spar will bring in production from three fields: Great White, Silvertip and Tobago. These fields are located in 10 Outer Continental Shelf blocks in Alaminos Canyon. This development will provide the first GOM commercial production from a Paleogene reservoir. First production from Perdido is expected around late 2009.

Peru auctions off 17 new oil and gas blocks

Peru’s government auctioned off 17 new oil and gas blocks as part of its push to explore for new hydrocarbon resources on and offshore. PetroPeru SA, Peru’s state oil company, won six concessions-four offshore and two onshore-forming ventures with Argentina’s Pluspetrol SA, India’s Reliance Industries Ltd. and China’s National Petroleum Company. PetroPeru will return to hydrocarbon exploration after nearly twenty years. PetroPeru has also formed a consortium with Norway’s Discover Petroleum to explore four offshore blocks and one in Peru’s jungle. The government originally offered 22 oil and gas lots, but received bids on only 17. PetroPeru is also evaluating one-on-one deals with some companies for the remaining lots.

Brazil turns down OPEC invitation

Edson Labao, the Brazilian energy minister, said his country has rejected an invitation to join OPEC. “I received the ambassador of Iran, and he invited Brazil to become part of OPEC,” Labao said. Brazil declined the offer, explaining that the country plans to refine crude from recently discovered deepwater reserves to become a major exporter of refined products rather than crude.

Gazprom, Total invest $4.5 billion in Bolivia

Bolivia said that Russia’s Gazprom and France’s Total have committed to invest $4.5 billion in a natural gas project that aims to produce up to 882 MMcf per day. The two companies signed an agreement with Bolivia’s state energy company, YPFB. “We are pleased to announce a crucial signal for the energy sector today, with this alliance between Gazprom, Total and YPFB,” YPFB President Santos Ramirez said in televised remarks, without giving details on the project’s time frame, according to a Reuters report.

Iran goes forward with Reshadat 

The Iranian oil ministry’s official website announced that the nation installed the first leg of a new rig in its offshore Reshadat Field. Development of Reshadat Field, which currently produces more than 5,000 bopd, will result in a production increase to 80,000 bopd, said Ali Khouei, head of the Reshadat oilfield development.

ExxonMobil to invest $450 million in Indonesia

ExxonMobil is set to spend $450 million on exploration work at two blocks in Indonesia’s West Sulawesi province. The two blocks, Mandar in Polewali Mandar regency and Surumana in Dongala regency, are predicted to have total reserves of 1 billion boe, ExxonMobil spokeswoman Deva Rahman said. Some of the cash will be spent on rig hire, which will cost up to $70 million, she said. Drilling work will start in December.

GDF Suez buys into Lukoil Azeri project

France’s GDF Suez bought a 10% stake in an offshore exploration project in Azerbaijan’s sector of the Caspian Sea from Russian oil company Lukoil. The deal has been approved by the project’s other shareholder, Azeri national oil company SOCAR. The project, known as D-222, has had one drilled well in 2005, which found no commercial reserves of hydrocarbons. Lukoil had been considering pulling out of the project, but decided to go ahead and drill a second well in November of this year.

Newfoundland gives go-ahead for Hebron

Newfoundland and Labrador Premier Danny Williams says he’s given the final go-ahead to a long-delayed agreement with a consortium of oil companies to proceed with the $4.7 billion Hebron offshore oil project. Last August, the two sides signed an agreement-in-principle, which gave the province a 4.9% equity stake in the project. The deal came after a lengthy feud between Williams and the oil companies over the province’s share. The major players in the project are ExxonMobil Oil Canada, Chevron Canada Resources, Petro-Canada and Norsk Hydro. The wells are expected to pump about 200,000 bopd over the next 25 years.

First all-electric subsea system onstream

The successful startup of the K5 field project, developed by Total E&P, in the North Sea marks the world’s first all-electric subsea production system. The project includes a three-well combined template/manifold installed in 131 ft of water controlled from an existing platform 11 mi away. Production is piped back to an unmanned platform 6 mi away. The initial installation encompasses two template/manifold-mounted trees with the option for two additional trees in the future, one of which would be a satellite tree. The system uses Cameron’s proprietary technology that uses DC power, full redundancy throughout and offers feedback during operation, including instantaneous feedback on valve and choke operation and the ability to track operational characteristics throughout the life of the system. The all-electric technology replaces conventional hydraulic technology.

49 GOM platforms destroyed by Ike

The US Minerals Management Service (MMS) reported that 49 of the 3,800 offshore oil and gas production platforms in the Gulf of Mexico were destroyed by Hurricane Ike. Initial estimates are that the destroyed production platforms produce a total of 13,000 bpd and 84 MMcfgd. The department also said five gas transmission pipeline systems sustained damage, although the extent of damage is not yet known. Two drilling rigs were also reported drifting but have been secured by tugs.

Kazakhstan drafts new tax on minerals

According to a draft law, Kazakhstan has proposed to set mineral extraction tax rates for oil producers at 5-18% of crude’s market value in 2009, with higher rates applied to larger producers. The nation plans to introduce a new tax code starting next year that would shift much of the tax burden onto the oil and mining sectors through a new mineral extraction levy. It has also drafted a law that provides for gradual change of different tax rates, including the mineral extraction tax, in 2009 and 2010, before rates set by the tax code itself take effect in 2011. A portion of that law sets the mineral extraction tax for oil at 5-18% of the commodity market value depending on a company’s annual output. The highest rate applies to companies producing more than 80 million bbl a year. Kazakhstan is offering a major exemption for companies working under production sharing agreements. The government has said earlier that the mineral extraction tax would replace royalty payments.

Shell to sign $4 billion gas deal with Iraq

Royal Dutch Shell agreed to a joint gas venture with Iraq worth up to $4 billion, the Iraqi oil ministry announced in early September. The deal, which will see the gas extracted from Iraqi fields being sold in Iraq and abroad, will be signed next month, ministry spokesman Assem Jihad said. Iraq’s cabinet agreed to the contract, which gives the state-owned Southern Oil Company a 51% interest and Shell 49% in the venture. In August, China became the first foreign group to reach an agreement with Iraq in a $3 billion deal that revived a 1997 contract granting the China National Petroleum Corporation (CNPC) rights to develop Al-Ahdab Field in central Iraq. Iraq toughened its terms in renegotiating the CNPC deal, changing the contract to a set-fee service deal from the 1997 production sharing agreement.

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