World of Oil

PetroChina’s Dina-2 Field comes online

PetroChina announced that its Dina-2 Field has begun production. With proved geological natural gas reserves of 6.2 Tcf, Dina-2 will serve as a new gas source for PetroChina’s West-to-East pipeline. Dina-2 Field in the Tarim Basin is expected to annually produce 176 Bcf of gas. Taking Dina-2 into account, the Tarim Basin will be able to annually produce 706 Bcf of gas.

Tullow gets go-ahead for Jubilee from Ghana

Ghana’s Minister of Energy formally approved Tullow’s Jubilee Field Phase 1 Development Plan. Jubilee Field will be developed via  FPSO and will deliver a plateau oil rate of 120,000 bopd, water injection capacity of 230,000 bwpd and gas export and injection capacity of up to 160 MMcfd. The field will deliver first oil in the second half of 2010. It is esti-mated that Phase 1 development will produce in excess of the planned 300 million bbl of oil.

Jordan approves Shell exploration deal

Jordan’s Parliament approved an agreement with Shell to explore oil from the country’s vast oil shale resources. Shell is expected to spend around $500 million on exploration, assessment and designs on the project, Jordan’s Energy Minister Khaldoun Qutishat told Parliament. Some $150 million will be paid to the Jordanian government before the contracting company begins investing in the project, he added. Shell is expected to invest billions in the project over 20 years.

Exxon to invest $600 million in algae research

Exxon Mobil will invest $600 million over the next five to six years to develop biofuel from algae. Exxon announced on July 14 that it was forming a research and development alliance with Synthetic Genomics Inc., a privately held company that focuses on gene-based research. The project, which will cost billions to fully develop, is in its initial stages, so commercially viable biofuel made from algae is many years away. As one of its first steps, Exxon and SGI plan to build a research facility in San Diego.

Nigerian militants declare ceasefire after round of attacks

Nigeria’s most prominent militant group said it would observe a 60-day ceasefire after the release of rebel leader Henry Okah. The Movement for the Emancipation of the Niger Delta (MEND) said it was halting its attacks, which have crippled Africa’s largest oil and gas industry, to allow for government peace talks. In previous weeks, following President Umaru Yar’Adua’s amnesty offer, Nigerian militants had increased attacks in the Niger Delta and had threatened to intensify their campaign of sabotage even further. MEND’s July 5 attack on Shell’s oil wellhead in the Cawthorne Channel follows its June 29 attack on two well clusters in Shell’s Estuary Field. Shell said that the latest raids—which had largely focused on the western Niger Delta—had slashed output from its onshore facilities to 140,000 bpd, around half its production level earlier this year. MEND also blew up Chevron’s Okan manifold, hours after it attacked an oil wellhead operated by Shell. “The strategic Okan manifold, which controls about 80% of Chevron Nigeria Limited offshore crude oil to its BOP crude loading platform, was blown up at about 2045 hours on Sunday,” MEND said in an emailed statement. Chevron, Shell and Italian energy company Agip have shut around 273,000 bpd of oil production in Nigeria since MEND launched its latest string of attacks in May.  The production decreases caused by the militant attacks have caused Angola to overtake Nigeria as Africa’s top producer. Nigerian output plummeted from 2.4 million bpd just before the attacks began four years ago and has averaged around 1.83 million bpd over the last year. Last month Angola pumped 1.82 million bpd compared to 1.73 million bpd from Nigeria.

BP and CNPC win Iraqi Rumaila Field development

BP and China National Petroleum Corp. won a contract for the development of Iraq’s Rumaila Field, the first of eight giant Iraqi oil and gas development projects. The eight projects involve six active oil fields, including those in Rumaila and Kirkuk, and two undeveloped gas fields. Iraq is offering contracts to foreign companies for the first time in around 40 years since its energy industry was nationalized. Besides BP and CNPC, the companies selected to participate in the auction include ExxonMobil as well as Japan’s Nippon Oil, Japan Petroleum Exploration Co., Inpex and Mitsubishi. The BP-led group won the contract for Rumaila after improving on its offer. The Iraqi government set a requirement that bidders charge no more than $2 a barrel to produce crude from the field after recovering costs, lower than the prices BP and Exxon initially bid. Rumaila, which now produces 956,000 bopd, is the largest field on offer and the first awarded. The BP group initially proposed to boost Rumaila’s output to a plateau of 2.85 million bopd at an average cost of $3.99 a barrel.

PVM loses $10 million in unauthorized oil trading

PVM Oil Futures Ltd., a unit of PVM Oil Associates Ltd.—the world’s largest broker of over-the-counter oil derivatives—lost just under $10 million from unauthorized trading on June 30. “As a result of a series of unauthorized trades, substantial volumes of futures contracts were held by PVM,” Robin Bieber, director of PVM Oil Futures Ltd., said. “When this was discovered the positions were closed in an orderly fashion.”  On June 30, an unusually high volume of Brent futures traded between 3:00 and 3:20 a.m., London time, on InterContinental Exchange’s ICE Futures Europe exchange. More than 16 million bbl of Brent crude oil traded in just over an hour, unprecedented for a market that typically trades less than 1 million bbl before Europe opens. The unauthorized trades are widely believed to have caused global crude oil prices to spike to their highest level in more than eight months. London Brent crude rose as high as $73.50 a barrel before reversing sharply. PVM said it was conducting a full investigation and that it had informed the UK Financial Services Authority (FSA) and the InterContinental Exchange. In May, the FSA banned a former Morgan Stanley trader who built up a hefty unauthorized oil futures position after drinking at lunchtime, before hiding the deals overnight.

BP, SOCAR to explore untapped Caspian acreage

BP and the State Oil Company of the Republic of Azerbaijan (SOCAR) have signed a Memorandum of Understanding (MOU) to jointly explore and develop the Shafag and Asiman structures in Azerbaijan’s sector of the Caspian Sea. As part of the government’s plan to ensure that all of Azerbaijan’s offshore waters are fully exploited, this MOU gives BP the exclusive right to negotiate a production sharing agreement to explore and develop the block, which lies some 78 mi southeast of Baku. The block covers an area of some 425 sq mi and has never been explored before. It is located in a deepwater section of about 2,000–2,600 ft with reservoir depth of about 23,000 ft.

Iraq begins production at Nassiriyah Field

Iraq began crude oil production at Nassiriya Field for the first time in late June. Fayadh al-Naama, head of the South Oil Co. (SOC), said production from Nassiriyah Field is expected to hit 50,000 bpd in a year. Production came online after SOC managed to rehabilitate five wells and connected them to a degassing station, Naama said. Nassiriyah, which accounts for some 4.3 billion bbl, was discovered in 1975 and remained undeveloped for more than three decades due to war, lack of cash and economic sanctions. The field, whose production capacity could reach 300,000 bpd if it is properly developed, is currently subject to direct negotiations between the Iraqi oil ministry and three oil companies: Italy’s Eni, Japan’s Nippon Oil and Spain’s Repsol. Naama also said production from the giant Nahr Bin Umar oil field increased to 45,000 bpd from the previous 25,000 bpd. Total along with Chevron and StatoilHydro are negotiating with the ministry for a contract to develop Nahr Bin Umar, which has proved reserves of 6.6 billion bbl.

ConocoPhillips, ADNOC partner for Shah gas project

ConocoPhillips and Abu Dhabi National Oil Company (ADNOC) signed the Shah Gas Field Joint Venture and Field Entry agreements to develop the Shah gas field in Abu Dhabi. ADNOC owns 60% interest and ConocoPhillips owns the remaining 40% interest in the project. This large-scale project involves the development of sour natural gas and condensate reservoirs within the Shah gas field, located onshore approximately 112 mi southwest of Abu Dhabi. The project requires the construction of facilities including gas gathering systems, gas processing trains and product pipelines designed to process and transport 1 Bcf per day of gas, associated liquids and sulfur. Due to the sour nature of the natural gas in Shah Field, extensive risk assessment studies have been conducted. During the front-end engineering and design stages, great attention was given to the selection of state-of-the-art health, safety and environmental systems. The project will include one of the largest sulfur removal plants in the world and will also include a sulfur processing and exporting facility, which will be located in Ruwais Industrial City, UAE. To date, six of 10 major Engineering, Procurement and Construction (EPC) bid packages have been released for tender to pre-qualified contractors spanning the globe; remaining EPC bid packages will be released later this year.

Iran finds sizeable gas reserves off Hormozgan coasts

Huge natural gas deposits have been discovered in Hormozgan province, off the Persian Gulf coast, with a probable output tantamount to ten phases of the South Pars gas field. National Iranian Offshore Oil Company managing director Mahmud Zirakchainzadeh told the Shana Oil and Energy Information Network that tapping the fields may boost Iran’s daily natural gas production capacity by 10 Bcf, turning Hormozgan into the country’s second gas hub. He went on to say that huge investments have been made for the development of Hormozgan offshore gas fields and that the related contracts will come into force in the current year. He referred to Abuzar oil field located in Kharg Island in the Persian Gulf, saying recent studies show that the field’s in situ reserve should be 1 billion bbl more than the previously estimated figure of 3 billion bbl. Zirakchainzadeh said, “Abuzar is Iran’s largest oil field in the Persian Gulf region.” Currently 30% of the field’s crude deposit is recoverable, but the underway gas lift plan would raise the amount to 43% by March 2010.

Chevron starts up Mafumeira Norte

Chevron announced today that its subsidiary Cabinda Gulf Oil Company Limited (CGOC) and its partners commenced crude oil production ahead of schedule from the Mafumeira Norte project offshore Angola. Located in 160 ft of water about 15 mi off the Angolan coastline, the Mafumeira Norte project is the first phase of development of Mafumeira Field, located in Area A of Block 0. The project is being commercialized through 14 wells to the existing Kungulo water injection platform and is expected to reach maximum total production of 30,000 bpd of crude oil and 30 MMcfd of natural gas in 2011. “Production from Mafumeira Norte is an exciting milestone for Chevron and its partners in terms of bringing new energy supplies onto the world market and providing benefits to Angola,” said Ali Moshiri, president of Chevron Africa and Latin America Exploration and Production. Chevron, through CGOC, has a 39.2% interest and is the operator of the Block 0 contractor group, which also comprises Sonangol P&P (41%), Total (10%) and Eni (9.8%).

Pemex readies Corindon gas block  bids

PetrÓleos Mexicanos will receive bids in September for the Coridon natural gas project in northern Mexico. After companies submit bids, it will take Pemex around four months to pick a winner for the 15-year contract to develop the gas block. “Given that the licensing round takes four months, we expect bidding to conclude in February 2010,” said Pemex. In June, Pemex exploration and production chief Carlos Morales announced that the company will offer a total of three new blocks in the Burgos Basin under the service model. Each block is expected to produce 50–100 MMcfd of natural gas. The Burgos Basin produces 22% of Mexico’s natural gas. Pemex is making an effort to attract investment from foreign oil companies to boost production. Pemex and the Energy Ministry are currently drafting incentive-based oil service contracts that were authorized under a 2008 energy reform. Mexico’s nationalistic oil legislation blocks private ownership of oil and natural gas. As a consequence, Pemex must hire companies to work for a fee, instead of teaming up under joint-venture projects where each partner shares in the profits from oil sales.

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