World of Oil

CNOOC plans $44 billion investment

China National Offshore Oil Corp. (CNOOC) said it will invest more than $44 billion in China’s southern Guangdong Province over the next five years. CNOOC chairman Fu Chengyu said the investment would go mainly toward South China Sea exploration, petrochemical projects in the city of Huizhou and a natural gas pipeline. CNOOC also announced last month that it planned overall investments of $16.5 billion in 2009.

Japan and Venezuela sign agreement

Japan and Venezuela agreed to an energy pact that opens the way for Japanese companies to tap oil reserves in Venezuela’s Orinoco Delta area. Under the agreement, the nations will jointly develop projects ranging from oil exploration to refinery and petrochemical plant expansion. The agreement comes as Venezuela plans to invest $79 billion in the Orinoco Delta region to develop part of reserves estimated at 316 billion bbl. Venezuela wants foreign companies to invest in three Orinoco projects to produce a combined 1.2 million bopd. The Energy Ministry aims to more than triple oil output in the area to 3 million bpd by 2020 from 800,000 bpd now.

Tullow gets Uganda go-ahead

Uganda’s environmental authority has approved an early production scheme by Tullow Oil, removing a legal hurdle for development in the Albertine Basin. The company said finds in Angola were large enough to justify export-led development, with resources of some 600 million bbl. Tullow Oil and Heritage Oil hold 50% equity each in Blocks 1 and 3A while Tullow owns Block 2 outright.

CNOOC starts Bozhong

China National Offshore Oil Corp. (CNOOC) brought Bozhong Field onstream ahead of schedule, with initial output coming in at 4,000 bopd from four wells. Bozhong Field, which lies in the south of Bohai Bay, is the largest of China’s offshore developments due onstream this year. Output from the field is expected to ramp up to an average 25,000 bpd by 2011.

Brunei and Malaysia settle territorial disagreement 

In mid-March, Brunei and Malaysia signed an agreement to resolve a maritime border dispute that has halted oil exploration off Borneo Island for the past six years. Both countries agreed to collaborate in the exploration and exploitation of contested oil blocks, as well as on maritime and land boundary demarcation. “The solution of the issues ensures certainty with regard to sovereign rights and jurisdiction on the continental shelf and the Exclusive Economic Zone of both countries,” said Malaysia’s Foreign Minister Rais Yatim. “At the same time, the overlapping maritime claims between the two countries are also resolved.” The disagreement halted deepwater exploration in the area that began in 2003 when Malaysia and Brunei awarded production-sharing contracts to four overlapping deepwater exploration blocks in the South China Sea. The four blocks are near a 440 million-bbl discovery made the year before.

US lease sale receives $703 million for GOM tracts 

The Central GOM Lease Sale 208 received $703 million in high bids. The sale attracted 70 companies that submitted 476 bids on 348 tracts offshore Louisiana, Mississippi and Alabama. The total of all bids received was $933 million. Block 721 received the highest bid of $65.6 million, submitted by Shell Gulf of Mexico. Shell also had the highest number of bids overall, 39 totaling $153.6 million. BP had the second-highest overall total of 27 bids totaling $77 million. Marathon Oil and Repsol E&P USA Inc. placed the next-highest single bid on Block 578 at $46.5 million. Marathon had 16 high bids overall totaling $62 million, and Repsol had 20 high bids totaling $48.5 million.

Saipem signs $1.8 billion Algeria deal 

Algerian energy group Sonatrach and Canadian partner First Calgary Petroleum signed an energy infrastructure deal worth $1.85 billion with Italy’s Saipem. Sonatrach said in a statement that under the deal, Saipem will build facilities to produce and process gas and oil from Algeria’s Ledjemet Field. The agreement also involves the construction of pipelines to transport natural gas, liquefied petroleum gas and condensate from Ledjmet to Gassi-Touil.

Iraq issues Halfaya tender

Iraq issued a tender for international oil companies to build a 50,000-bpd production facility at the untapped Halfaya oil field. Halfaya’s reserves are estimated at about 5 billion bbl. A statement posted on state Maysan Oil Company’s website invited bidders to build the facility and install dehydration and desalination units for processing the crude. The tender closes on Mar. 25. Halfaya is among the fields that were offered to foreign oil firms in a second bidding round announced by Iraq last year. Iraq’s Oil Ministry and British firm Mesopotamia Petroleum Company signed a joint venture in February, and the first drilling activity will be in the southern Bazargan, Fakka and Halfaya Fields. Halfaya has an estimated production capacity of 250,000 bpd, according to Iraq’s Oil Ministry. The new Halfaya tender, which would build facilities to process the crude at the field before it is piped offsite, is part of Iraq’s plan to accelerate steps to boost its production.

Texas intrastate pipeline extension completed

Enterprise Products Partners and Duncan Energy Partners completed construction on the 174-mi Sherman Extension of the Enterprise Texas Intrastate natural gas pipeline system, which extends through the heart of the Barnett Shale play in North Texas. Current throughput on the Sherman Extension is about 360 MMcfgd and is expected to reach about 950 MMcfgd in April 2009. The Sherman Extension adds about 1.1 Bcfd of incremental takeaway capacity from the region, while providing producers in the Barnett Shale and as far away as the Waha area of West Texas with greater flexibility to reach the most attractive markets.

Iraq asks Total, Chevron consortium to bid on Nahr Bin Umar  

Iraq invited Total and Chevron to jointly bid against StatoilHydro for a contract to develop its 6 billion-bbl Nahr Bin Umar Field. “The Total and Chevron consortium are favored to win this contract because they have together studied a group of Iraqi oil fields, including Nahr Bin Umar,” a senior official in the Iraqi oil ministry said. The official added that two other fields in that study were Majnoon and West Qurna Phase I, both of which were among fields offered up in two bidding rounds that Oil Minister Hussain al-Shahristani announced last year. The Nahr Bin Umar contract has nothing to do with those rounds, the official said, adding that the ministry was waiting to receive the firms’ offers. Nahr Bin Umar Field, in Iraq’s southern oil hub of Basra, produces 50,000 bopd, despite its proven reserves of at least 6 billion bbl. The ministry says it has the capacity to produce 10 times as much.

Repsol pays $88.9 million to Ecuador 

Repsol made its first payment of $88.9 million in windfall taxes to Ecuador, out of the $445 million owed by the company, after settling a tax dispute with the country in February. The country’s Mining and Oil Ministry said in a press release that a second payment of $53.4 million will be made by the company in September 2009 and the remainder will be paid by September 2013. Ecuador’s government and Repsol signed a one-year transitory participation contract in March that is scheduled to change to a service contract in one year. The company agreed to pay the taxes in exchange for the government reducing the windfall tax to 70% from 99%. The deal also allows Repsol to extend its operations in the country to 2018. The earlier agreement would have expired in 2012. Repsol operates Ecuador’s Block 16 as well as Bogui Capiron Field, and has a service-provider contract for Tivacuno Field. Under current participation-sharing contracts, the government receives a percentage of profits from oil production. Under the new service-provider contracts, companies will be paid a production fee and reimbursed for investment costs, although all of the recovered crude oil will belong to the state.

Aramco completes Khurais drilling

In mid-March, Saudi Aramco completed drilling at Khurais Field as Saudi Arabia pushes ahead with its plan to increase crude capacity to 12.5 million bpd by the end of this year. Khurais will add 1.2 million bpd to the kingdom’s capacity, which currently stands at about 11.3 million bpd. The $10 billion project is one of the largest ever single additions to global oil production capacity and the largest integrated oilfield project taken on by Aramco to date. “The drilling was slated to take three years, but improvements in operations and engineering mean the job was done in February, 10 months ahead of schedule,” Aramco said in a statement. The field will give Saudi Arabia about 4.5 million bpd of spare capacity.

Afghanistan to hold first-ever bidding round

The Ministry of Mines for Afghanistan announced that the country will hold the first-ever Afghan hydrocarbon bidding round for exploration and production-sharing contracts. The round includes three large onshore blocks—Jangalikalan, Juma-Bashikurd and Kashkari—in the northwest of the country. Juma-Bashikurd Block covers 718 sq mi and holds two gas fields—Juma and Bashikurd—with recoverable reserves topping 1.17 Tcf. The Jangalikalan Block covers 772 sq mi and contains one gas field with estimated recoverable reserves of 671 Bcf. Kashkari Block covers 665 sq mi and contains three oil fields—Kashkari, Angoat and Aqdarya—with recoverable reserves of 64.4 million bbl.

China hands out $25 billion in oil loans to Russian firms

In mid-February, China Development Bank (CDB) agreed to loan $25 billion to Russian state companies Rosneft and Transneft. The Russian oil company and pipeline operator drew 20-year loans from CDB. Additionally, Rosneft and Transneft signed a 20-year oil export contract with China National Petroleum Corp. (CNPC) under which the Russian companies will deliver 118.5 million bbl of crude annually starting from 2011. China also signed a deal with Brazil. Under the agreements, Brazil will provide China with up to 160,000 bopd. Also, Petrobras, Sinopec and CDB signed a memorandum committing the parties to create a formula under which the bank will underwrite Brazil’s efforts to exploit its new oil finds with a loan of $10 billion.

EnCana requests oil sands expansion

EnCana and ConocoPhillips are asking regulators to approve a 120,000-bpd, three-phase expansion of the Christina Lake oil sands project, according to documents filed with Alberta Environment. This would raise total production at Christina Lake to 218,000 bpd. EnCana and its partner are looking for environmental clearance for plans to expand the Christina Lake site in Alberta’s northeast, one of the projects included in a joint venture the two companies formed in 2007.

India to hold additional licensing round

Indian Oil Secretary R. S. Pandey announced the country will offer 75 additional oil and gas blocks when it launches the next round of auctions in April under the country’s New Exploration Licensing Policy. Around the same time, the government will also invite bids for coalbed methane from 10 blocks. Last year, it awarded 44 blocks to bidders in the seventh round of auctions under the policy. India is aiming for coverage of 80% of its sedimentary basin by 2012.

Somaliland to hold first licensing round

The Somaliland Ministry of Water and Mineral Resources announced that the country’s first bid round for hydrocarbon concessions opened in February. The bid round will include eight blocks comprised of more than 34,604 sq mi of onshore and offshore areas. “The previous drilling has proven the existence of hydrocarbons and the reservoir-class rock formations,” said Qasim Sh. Yusuf Ibrahim, the Minister of Water and Mineral Resources. The geology off the coast of Somaliland is analogous to the oil-producing basins in nearby Yemen. Additional indicators of hydrocarbon reserve potential are naturally occurring oil and gas seeps at Dagah Shabel, and most historical wells in the area contain multiple zones with shows of oil and/or gas.

Argentina, Chile make Antarctic claim

Ten Chilean and Argentine lawmakers gathered in the Antarctic to stake territorial rights after the UK laid claim to a large area of ocean bottom off the frozen continent. The countries aim “to strengthen our nation’s legal position in the Antarctic Territory … and to support all the legal instruments of the Antarctic Treaty System, including the Antarctic-Environmental Protocol,” Chile’s Chamber of Deputies said. Chile and Argentina’s claims are in response to a UK bid submitted to the UN for sovereignty over more than 386,102 sq mi of seabed off Antarctica. A UN decision on the UK’s bid is expected this May.

South Korea OKs $3.55 billion Iraq deal

South Korea has agreed to provide Iraq with $3.55 billion worth of infrastructure in return for rights to the fields in southern Basra. South Korea would build infrastructure such as power plants and generators, the country’s Energy Ministry said in a statement. The initial agreement came during a meeting between South Korean President Lee Myung-bak and his Iraqi counterpart, Jalal Talabani, in Seoul. “We regard the new agreement as evidence that tensions between South Korea and Iraq due to Korea National Oil Corp.’s involvement in the Kurdish oil development business have eased,” the ministry said. State-run KNOC recently entered a $2.1 billion investment in Kurdish oil fields alone after several consortium members dropped out due to political instability.

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