World of Oil

Bulgarian Parliament ratifies South Stream

In late July, the Bulgarian Parliament ratified an agreement between Bulgaria and Russia on the building of the South Stream pipeline. Bulgaria’s interests are fully defended because the company that will develop and operate the pipeline on its territory will be with 50% participating interest of Bulgaria and 50% participating interest of Russia. South Stream will transport Russian natural gas to Italy. The pipeline is to extend under the Black Sea, from Russia’s southern port of Novorossiysk to Bulgaria, and then onward to Austria and Italy. Russia’s Energy Ministry recently announced a preliminary cost assessment of the project at $20 billion, up from the initial assessment of about $10 billion.

Nigerian pipeline not fixed

Repairs to Shell’s damaged oil pipeline in Nigeria have been slow, a Shell spokesman said. Shell’s Nembe Creek line, located in the Niger Delta, was sabotaged in late July, and repairs have been struggling to make significant progress. “Repair work is not progressing as much as we want due to some security concerns. No real progress,” a Shell spokesman said. Shell said about 40,000 bpd of its production had been shut in. State-run Nigerian National Petroleum Corp. said the total outage volume of Bonny Light was 175,000 bpd. Nigerian Oil Minister Odein Aju-mogobia had said earlier in August that all the pipelines damaged from the late-July attacks were fixed and some production had restarted, but Shell reiterated that the pipeline repair work has not been completed.

Alaska approves TransCanada bid

TransCanada received Alaskan legislative approval to build and operate a pipeline to ship natural gas from Alaska’s North Slope to a network feeding US and Canadian domestic markets. The Alaska Senate voted 14-5 to award a state license to Tran-sCanada, ratifying an earlier vote by the state House. TransCanada plans to build a 1,700-mi line that would send about 4 Bcf of natural gas per day from a new natural gas treatment plant at Prudhoe Bay on Alaska’s North Slope to an existing pipeline hub in Alberta, Canada. Integration of the pipeline with TransCanada’s Alberta system will provide access to markets across the US. The application includes a provision for expansions up to 5.9 Bcfgd through the addition of compressor stations in Alaska and Canada. The TransCanada plan has been promoted as the best way to unlock the North Slope’s vast natural gas resources, which have been languishing mostly in operating oil fields without any means of transport to a commercial market. The license pledges state endorsement of the TransCanada plan, plus a funding match of up to $500 million to get the company’s application through the Federal Energy Regulatory Commission. The next steps will be to start field work and discussions with the producers that would ship the natural gas in the pipeline, said Tony Palmer, TransCanada’s vice president for Alaska gas development. TransCanada estimates that the project will cost $26 billion. Under TransCanada’s plan, the pipeline would start shipping natural gas in 2018. BP and Conoco have a separate plan for a similar gas pipeline that was not vying for a state license. Field work on BP and Conoco’s project started this summer.

Russian trio sign Venezuelan Orinoco deals

Russian producers TNK-BP, Lukoil and gas giant Gazprom signed new energy deals with Venezuela for three blocks in the Orinoco heavy oil belt. TNK-BP announced that Rafael D. Ramirez Carreno, minister for Energy and Oil of the Republic of Venezuela and president of the state oil company PDVSA, and German Khan, executive director of TNK-BP, signed a joint study agreement for Ayacucho-2 Block of the Ayacucho area. TNK-BP and PDVSA will set up a steering committee to manage activities of a joint working group. The working group will carry out the research and design activity necessary for the project evaluation and implementation. Also, Carreno and Vagit Alekperov, president of Lukoil, signed a joint study agreement on Junin-3 Block. A joint study will be performed to evaluate the project pertaining to production of extra heavy oil, its further refining and exporting. Expenses for the study will be shared by the parties on an equal basis. The agreement will be effective for two years with a possibility of extension. Gazprom subsidiary Gazprom Latin America B.V., signed an agreement jointly with PDVSA to complete geological modeling, evaluation and assessment of Ayacucho-3 Block’s reserves before the end of 2008 to be subsequently certified by an independent auditor. A decision was also adopted to launch the preparation of an investment feasibility study for the development of the heavy oil field located in this area.

Iraq resumes oil exploration after 20-year hiatus

Iraq resumed oil exploration in early August after two decades of sanctions and war. “The equipment will be turned on to start the first oil exploration for 20 years, at a ceremony which will be attended by the oil minister and senior officials,” Oil Ministry spokesman Asim Jihad said. Jihad added that Iraq’s oil reserves are more than double the officially confirmed figure, which is 115 billion bbl, adding that the lack of exploration work throughout the past 20 years has played a role in the matter. Jihad said the ministry would deploy three exploration teams of geophysicists, geologists and engineers trained abroad in the latest techniques. “These three teams are part of a group the oil ministry formed to renew exploration activity in order to change the unconfirmed reserves to confirmed ones,” he said. The first team will carry out seismic tests on Gharraf Field using up-to-date technology supplied by international companies. Jihad added that Iraq had only used about a fifth of the country’s 500 possible oil-producing sites and the country needs to explore more to confirm potential reserves.

BTC pipe repair underway

Repairs have started in Turkey on the fire-damaged Baku-Tbilisi-Ceyhan (BTC) oil pipeline, but it was unclear as of mid-August when the line would reopen, said a source from Turkish pipeline company Botas. “Digging has begun to assess whether there has been damage to the valve on the pipeline, which is very important in determining when the pipeline will be reopened,” said the senior-level source at Botas. “We are working to determine the extent of the damage on the line; it is still impossible to say when repairs will be complete.” Based on the method chosen for the pipeline repair, the process could take two weeks or longer. The $4 billion BTC pipeline can pump up to 1 million bpd from fields in the Azeri sector of the Caspian Sea to Ceyhan on the Turkish Mediterranean coast. BP has a 30.1% stake in BTC, while Azeri state oil company Socar holds 25%. Other shareholders include Chevron, ConocoPhillips, StatoilHydro, Eni and Total. Kurdish separatists claimed responsibility for the explosion.

UAE maintenance to reduce oil output

The United Arab Emirates (UAE) will reduce oil output by 150,000 to 200,000 bpd for 40 days in October and November for maintenance, an official at state-owned Abu Dhabi National Oil Company (Adnoc) said. The shutdown will cut the nation’s oil output by up to 7.5%. The offshore Lower Zakum and Umm Shaif Fields would be partially shut down, the official added. Lower Zakum typically pumps around 280,000 bpd, while Umm Shaif produces around 200,000 bpd. Work at a gas facility on Das Island will force the shutdown, the source said. Adnoc unit Adgas plans to shut one of three processing facilities on Das that produces liquefied natural gas. It was unclear how much LNG and natural gas liquids output would be affected by the shutdown. Das receives gas produced at the offshore oil fields, and the only way the UAE could continue producing oil at full tilt while the maintenance takes place would be to burn the gas. But the UAE has a strict no-flaring policy, so it will limit oil output to reduce the associated flow of gas, the official said.

Exxon, BHP invest $1.1B for Turrum Field development

ExxonMobil Australia and partner BHP Billiton have approved an expenditure of $1.1 billion for the development of Turrum Field, a significant hydrocarbon resource in the Gippsland Basin, offshore Victoria. Turrum is part of the Gippsland Basin Joint Venture in which BHP Billiton and ExxonMobil subsidiary Esso Australia Resources Pty Ltd. each have a 50% interest. The development follows the recent announcement of $1 billion in funding to develop natural gas from Kipper Field, also in the Bass Strait. “Turrum Field holds approximately 1 trillion cubic feet of gas and 110 million barrels of oil and gas liquids-that’s enough energy to power a city of a million people for 20 years,” said Mark Nolan, ExxonMobil Australia chairman. “Bass Strait has a strong long-term future. We estimate that there is still around 7 trillion cubic feet of gas still to be produced, and we’re confident that means we have over 30 years of gas remaining.”

Russia ends continental shelf auctions

Russian President Dmitry Medvedev signed amendments in the national law on the continental shelf. The amendments enable the government to allocate strategic oil and gas deposits on the shelf without auctions. “This is a thoroughly thought-out decision aimed at enhancing the efficiency of exploration and production,” Medvedev said. The law limits foreign participation in developing Russia’s largest oil and gas reserves. The law, approved by Russia’s parliament in early July, gives the right to develop Russia’s offshore reserves to companies with five years’ experience in the area and in which the state owns at least a 50% stake, leaving only minor roles in hydrocarbon projects for foreign investors and independent producers. The new law will give state-controlled Gazprom and Rosneft significant powers over offshore oil and gas fields on the Russian shelf. “The continental shelf is our national asset, and this is a special law, setting out special procedures,” Medvedev said. Medvedev placed Deputy Prime Minister Igor Sechin, head of Rosneft’s board of directors, in charge of offshore hydrocarbon development.

Danish, Canadian Arctic claims strengthened

New research from Canada indicates the Arctic underground is connected to both Greenland and Canada, strengthening the countries’ claims to the area. Researchers from Canada say they have evidence to support the existence of a physical link between the Arctic seabed and both Canada and Greenland. Canada’s Natural Resource Ministry has created a new territorial map of the Arctic region based on the discovery of the underwater link-specifically, the Lomonosov Ridge. The new information can be used by Denmark to lay a claim to an area of up to 77,220 sq. mi in the Arctic Ocean, far beyond the 200 nautical miles of water surrounding Greenland dictated by international law. The Arctic-bordering nations are required to send their territorial appeals in the region to the United Nations’ Division for Ocean Affairs and the Law of the Sea before 2013.

Chile to invest $300 million for exploration

Officials in Chile say the nation will invest $300 million over the next three years to explore for oil and gas in its southernmost region of Magellan. Nelson Muñoz, exploration manager for the state-run National Petroleum Company, says the figure is about half of the company’s total investments planned for the three-year period. Last year the nation awarded oil and gas exploration and production rights to several foreign companies that will invest at least $267 million each in the Magellan region.

Egypt to launch international tender

Egypt’s Ministry of Petroleum announced its intention to conduct an international tender that will increase offshore drilling in the Mediterranean Sea. The ministry announced that it intends to bring 14 new exploratory projects at seven different sites onstream by the end of the year. These areas’ gas reserves represent 81% of the country’s confirmed gas reserves, said a report by the Egyptian Natural Gas Holding Company. These projects will add a daily output of more than 1 Bcf of gas and 1,300 bbl of petroleum condensates, and total reserves of 5.8 Tcf of gas and 2 million bbl of condensates.

Nigeria leaves Bakassi peninsula

Nigeria relinquished control of the oil-rich Bakassi peninsula to its neighbor Cameroon. “We are saddled with the painful but important task of completing the implementation of the International Court of Justice’s (ICJ) judgment by handing the Bakassi peninsula to Cameroon,” said Nigeria’s Justice Minister Michael Aondoakaa at the formal signing ceremony. The two African countries, which nearly went to war over Bakassi on several occasions, have agreed to work together to explore for oil in the region, which could help boost Cameroon’s declining production of around 90,000 bpd. “The Nigerian-Cameroon relationship will develop very well because of the handing over,” said Kieran Prendergast, a member of the United Nations delegation at the event. The Nigerian government agreed to transfer Bakassi two years ago pursuant to a 2002 ICJ order, but violence, political disputes and legal skirmishes had delayed it. Nigeria and Cameroon fought over Bakassi in 1994 when Cameroon first took its case to the ICJ, and again in 1996. The ICJ awarded Bakassi to Cameroon in a 2002 ruling, based largely on a 1913 treaty between former colonial powers Britain and Germany.

Iran to tender projects for investment

Iran intends to open some of its oil and gas fields to foreign investment to help boost output to 5.3 million bpd by 2015. The National Iranian Oil Company (NIOC) will present 15 industry project packages to the global financial markets for investment, by holding national and international tenders, an oil ministry official said. “[Iran] has made new discoveries in the past two, three years,” said Seifollah Jashnsaz, managing director of the NIOC. “Many oil and gas fields are in line for development.” Ten of the 15 packages will involve oil and gas projects, a number of which will be offered to domestic and foreign markets next month, Jashnsaz said. Foreign companies have shown interest in these projects he said, adding, “European and Asian companies have made repeated inquiries about being involved with oil industry projects.”

Ecuador, Petrobras reach agreement

The Ecuadorian government and Petrobras have reached a deal that will allow the company to maintain its contracts in Ecuador, Mining and Oil Minister Galo Chiriboga announced. “We have reached an agreement that is good for both the state and the company,” Chiriboga said. The agreement was reached after meetings between Ecuadorean government officials, including President Rafael Correa, and high-level Petrobras officials. Details of the new contract would be worked out by a negotiating team made up of officials from both Petrobras and state-owned Petroecuador. Under the current participation contracts, the state receives a percentage of profits from oil production. Under the new service provider contracts, companies would be paid a production fee and reimbursed for investment costs, although all of the recovered crude oil will belong to the state. The contract will be for Block 18 and Palo Azul Field, which together produce some 32,000 bopd.

Louisiana has strong petroleum lease sale

The Louisiana Mineral Board collected $93.8 million at its August sale of petroleum lease rights to government-owned land, with almost all of the money coming from operators trying to develop a potentially huge natural gas find. Department of Natural Resources Secretary Scott Angelle noted that the sale was the second largest in history for the state, exceeded only by a $157.7 million sale in May 1980. Officials said $92.2 million came from leases granted within the Haynesville Shale in northwestern Louisiana. Researchers say it could eventually produce 29 to 39 Tcf of natural gas, making it one of the largest US gas finds ever. The leases covered 4,070 acres. Since the sale involved almost all state-owned land and water bottoms, the lease sale total will go to the state, along with 90% of future royalty payments. The other 10% will go to the parishes where the leases are located once production begins.

Ecuador, Venezuela set up JV for Sacha

Ecuador and Venezuela will sign a 25-year contract to form a joint venture company to increase the output of Sacha Field to 70,000 bpd from 40,000, said Ecuador’s state oil company, Petroecuador. Petroecuador will hold 70% of the new company’s shares, while Venezuela’s state oil giant PDVSA will hold 30% according to Petroecuador. Sacha Field, located in Ecuador’s Amazonian jungle, has oil reserves of 480 million bbl.

Comments? Write: editorial@worldoil.com