World of Oil

Iran, China sign South Pars deal

Iran signed a $5 billion contract with China National Petroleum Corp. (CNPC) to develop Phase 11 of South Pars Field. Following Total’s nine-year delay to implement the development project, Iran’s contract with CNPC was signed by the managing director of the National Iranian Oil Company (NIOC), Seifollah Jashnsaz, and the managing director of CNPC. Citing Jashnsaz in a statement on its website, NIOC said the project will produce 70.6 Bcf of natural gas and 70,000 bbl of gas condensate per day.

Russian gas output falls

Russia’s natural gas production declined sharply in May as the country cut output in response to plunging demand in Europe and at home. Natural gas production at Russia’s Gazprom reached new 10-year lows to just 34.6 Bcfgd, down 14% from April and 34% from May last year. However, oil production in May stood at 9.84 million bpd, unchanged from April this year and up 1% year-on-year.

Sinopec buys Addax

Addax Petroleum accepted a $7.22 billion cash takeover offer, excluding debt, from state-controlled Chinese petroleum and chemicals giant Sinopec International Petroleum Exploration and Production Corp. The deal is a major strategic step forward for Sinopec, giving it control of operations of Taq Taq Field in the Iraqi Kurdistan region and highly prospective exploration acreage offshore Nigeria and Gabon. Addax’s board of directors recommended shareholders accept the offer and senior executives have entered a lockup agreement to sell their 38% holding in the company to Sinopec. The deal is still subject to approval from the Chinese government.

ExxonMobil signs on with TransCanada pipeline

ExxonMobil announced that it will team with Canadian pipe giant TransCanada to finance and build a $26 billion natural gas pipeline linking Alaska to the Lower 48.  ExxonMobil will be involved in the planning, design and possibly construction of the pipeline. The company has not announced the size of its stake or its planned investment in the project. “We will be involved in the engineering and design and if it goes forward we will be involved in the construction as well,” ExxonMobil boss Rex Tillerson said. ExxonMobil has the largest gas reserves on the North Slope and recently began operations to develop the Point Thomson gas field, which is expected to come onstream in 2014. TransCanada won state support for its pipeline proposal and a promise of a $500 million subsidy last year, beating out the rival proposal from area producers ConocoPhillips and BP. The ConocoPhillips-BP project, known as Denali, unsuccessfully courted Exxon to join.

FMC awarded contracts for Peregrino and Jubilee

FMC Technologies was awarded a contract from StatoilHydro for the manufacture and installation of surface wellheads and surface production trees for the Peregrino project. The contract is valued at approximately $30 million. Located in 400 ft of water offshore Brazil in the Campos Basin, Peregrino is a heavy oil development that will be completed in three phases and include approximately 60 wells. FMC also received a $210 million contract to support the Jubilee Integrated Project Team (IPT)—consisting of Kosmos Energy (technical operator), Anadarko Petroleum and Tullow Oil & Gas (unit operator)—with the design and manufacture of subsea production systems for use in the Jubilee deepwater development. The Jubilee development is located in 4,000–5,100 ft of water offshore Ghana. FMC’s scope of supply will include 19 enhanced horizontal subsea trees, five production manifolds, three injection manifolds and a pair of riser bases in associated control systems for the project.

Indonesia receives $17 million investment contracts

Indonesia received investment contracts worth $17 million from oil and gas contractors following the settlement of the government’s 2009 work program and budget in the country’s oil business. “The value could be more or less. We are optimistic that they will implement their investment commitments since most of them are prominent large contractors,” said Abdul Mun’im, deputy director of oil and gas at Indonesia’s upstream oil and gas regulator, BP Migas. Mun’im said that the investment commitment figure was far above the government’s $14 million target initially set for this year. Mun’im said that the contracts are dominated by Chevron Pacific Indonesia, Total E&P Indonesie, ConocoPhilips and Inpex. There are 142 oil and gas exploration firms and 67 oil and gas production firms operating in Indonesia, he added.

PNG landowners agree to multi-billion gas deal

Landowners across the sites where the ExxonMobil-led Liquefied Natural Gas (LNG) project will be built in Papua New Guinea have signed a crucial multi-billion- dollar benefit sharing agreement.  After five weeks of talks with up to 1,000 resource owners, relevant provincial governments and PNG’s national government agreed to a $7.43 billion deal over the 30-year life span of the LNG project. The agreement secured landowners and provincial governments 7% equity in the project. PNG’s national government has 19.4% equity in the project, which ExxonMobil estimates will double the country’s gross domestic product through taxes and gas sales. Part of the agreement includes the PNG government committing to infrastructure and socio-economic developments in the provinces and specific license areas. A highway will be built from the PNG’s south to the north, parallel to the pipeline that will pump gas from the highlands region to the coast for shipping and then processing in Port Moresby. The $12.5 billion project plans to commence gas production by 2014.

Australia announces new licensing round

The Australian Minister for Resources and Energy, Martin Ferguson, has announced the release of 31 new offshore petroleum exploration areas and two special areas in Commonwealth waters. The 2009 release areas lie across five basins off the Northern Territory, Western Australian, South Australian and Victorian coastlines. The release also includes two special release areas that are known to hold hydrocarbons. These special areas lie over the Turtle and Barnett discoveries off Western Australia and the Northern Territory. Six of the 2009 release areas have been selected as Designated Frontier Areas. These include three large deepwater areas in the northern Exmouth Plateau, which contains the Jansz and Scarborough gas fields. The other three areas lie in the central Great Australian Bight off South Australia, the “truly new frontier with no nearby permits currently held,” Minister Ferguson said. Bids for 18 of the new areas and the two special release areas will close on Dec. 3, 2009, with bids for the remaining 13 areas closing on April 29, 2010.

Shell settles Nigeria suit

A civil lawsuit against Shell over the executions of protesters in Nigeria in the 1990s has been settled for $15.5 million. The settlement comes as the more than decade-long dispute was due to go to trial in US district court in Manhattan under the Alien Tort Claims Act, said Paul Hoffman, a lawyer for the plaintiffs. The lawsuit accused Shell of human rights abuses, including violations connected with the 1995 hangings of prominent activist Ken Saro-Wiwa and eight other protesters by Nigeria’s then-military government. A massive oil spill in Ogoniland in 1970 inspired Mr. Saro-Wiwa, founder of the Movement for the Survival of the Ogoni People, to launch a campaign two decades later against Shell’s Nigerian onshore unit. The campaign led to the abandoning of oil production in Ogoniland in 1993. Plaintiffs said $5 million of the settlement amount would go into a trust fund for the Ogoni people and the balance would go for lawyer’s fees and to the 10 plaintiffs who brought the case. Shell has always denied that it played any role in the execution of Saro-Wiwa by the military government. In a statement, Malcolm Brinded, head of the company’s exploration and production unit, said, “Shell has always maintained the allegations were false. While we were prepared to go to court to clear our name, we believe the right way forward is to focus on the future for Ogoni people, which is important for peace and stability in the region.”

EU to align stockpile rules with IEA

Europe is close to revising 40-year-old rules on emergency oil reserves to cushion countries against unexpected crises, aligning it with the International Energy Agency (IEA) system. European Union member states have called for tough new measures to bolster energy security after the EU inadvertently drifted into heavy dependence on Russian energy supplies over the last few decades. Total oil stocks must equal at least 90 days of average imports or 61 days of average consumption, the draft document showed.  The draft upholds the status quo of significant industry stockholding, which is the most economical method.

Petroleum Society of Canada and SPE merge

The boards of the Petroleum Society of Canada and the Society of Petroleum Engineers (SPE) have approved a merger agreement that will create a new Canadian organization, SPE Canada, to serve the combined membership of approximately 4,500 in Canada. On June 12, the two societies signed the agreement, with the legal closing expected to take place by early August. SPE Canada will focus on enhancing benefits for members and supporting the Canadian E&P business and technology. SPE gains about 1,000 members in Canada through the merger and additional Canadian technical resources, including the Petroleum Society’s Journal of Canadian Petroleum Technology, the TechBank database of technical papers, continuing education program and several key Canadian conferences. The Petroleum Society’s office in Calgary will become the SPE Canada office, continuing support of services to Canadian members and publication of the group’s journal. SPE has three current sections in the Canada Region: Calgary, Edmonton and Atlantic. Two new sections are pending SPE board approval: South Saskatchewan and Lloydminster.

GE receives Petrobras contract

GE Oil & Gas was awarded a three-year frame agreement valued at more than $250 million to supply 250 VetcoGray subsea wellhead systems to Petrobras. In terms of number of wellheads, this is the largest contract awarded to date in the industry. The wellheads will be manufactured in the GE Oil & Gas Jandira plant in the state of Sao Paulo, Brazil, with the first unit due for delivery in July 2009. Under the agreement, GE Oil & Gas will provide several sizes of wellheads, including its VetcoGray MS-700 (the industry’s first all-metal sealing subsea wellhead system) and VetcoGray MS-800 Fullbore models.

Nuayyim and Khurais Fields start up

Saudi Arabia began production from its 100,000-bpd Nuayyim Field in late May. Nuayyim is one of three oilfield projects due for completion by the end of June to take Saudi total production capacity to 12.5 million bpd. The largest of the three projects is the giant 1.2 million-bpd Khurais Field, which Aramco says is the biggest ever single increment to global production, which began production in early June. Khurais Field will also produce 315 MMcfd of sour gas and 70,000 bpd of natural gas liquids to be processed at the Shedgum and Yanbu gas plants. The third project is the 250,000-bpd Shaybah expansion, which would take capacity at that oil field to 750,000 bpd. Initial production at Nuayyim was delayed from the original schedule of December 2008, in part due to glitches in supplies of equipment for a plant to separate gas from oil.

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