World of Oil

Egypt reveals $3 billion drilling plans for 2010

Egypt’s minister of petroleum, Sameh Fahmy, said the North African state plans to drill 520 exploratory and development wells for oil and 36 for natural gas in 2010. The drilling costs for the oil wells will be about $2 billion, with the gas wells costing $1 billion due to their location in the Nile Delta and the Mediterranean. The Egyptian General Petroleum Corporation awarded the concessions where the drilling will take place. Egypt has also said that no export contracts for gas will be signed for the foreseeable future due to rising domestic demand.

Woodside seeks new buyer as $41 billion LNG deal expires

Australian gas provider Woodside Petroleum is seeking other Asian buyers as a proposed $41 billion deal to sell liquefied natural gas (LNG) to PetroChina has expired. The deal, signed in 2007, involved Woodside exporting 2–3 million tonnes of LNG a year from the Browse project in Western Australia to China. No final agreement was reached before the expiration date.  Analysts said that the deal’s lapse was unsurprising, as there were a number of questions surrounding it, including where to put the processing plant and whether the initial start date of 2013 was feasible or not.

Smith International unit takes over Petrobras job

A unit of Smith International has taken over a three-year contract with Brazil’s Petrobras with possible revenue between $80 million and $100 million. Smith will operate the Petrobras contract through its PathFinder Energy Services unit at its new facility in Macae, Brazil. PathFinder will also buy all related directional drilling assets from San Antonio International do Brasil. San Antonio International had previously been the lead contractor through which Path-Finder had taken on contracts in that country, Smith officials said in a press release.

US surpasses Russia as world’s largest gas producer

The US, with its big gas shale resources, has surpassed Russia as the world’s leading gas producer, according to the US Department of Energy’s Energy Information Administration. EIA said US gas production for 2009 probably rose 3.7% to 22.04 Tcf, or 60.4 Bcfd, its highest level of the decade. Russia’s output fell 12% to 20.55 Tcf, or 56.3 Bcfd, last year, the Russian energy ministry said this week.  The US growth trend may indicate that Gazprom will not be able to break into the US market as it had planned, Mikhail Korchemkin, head of the consulting firm East European Gas Analysis, said in a Bloomberg report. Gazprom had set a target to take as much as 10% of the US market by 2020 through LNG sales from Arctic plays, according to a company executive. In the US, by contrast, lower gas prices last year than in 2008 encouraged the power sector to absorb the booming output from newly developed gas shale deposits. The surprising boost that shale gas has given US output has closed the world’s biggest energy consumer to some imports and “created a huge oversupply of LNG in Europe,” Korchemkin said. Russia, which has the world’s largest reserves and a quarter of Europe’s market, led the world in output from 1986 to 1996 and again in 1999. Despite the decline in output, Moscow signed deals with China last year for $25 billion of loans to help with oil and gas development, and also started exporting LNG last year from Sakhalin Island, off its Pacific coast, mainly to Japan and South Korea.

Niko Resources acquires Black Gold Energy

Niko Resources has announced its acquisition of Black Gold Energy in a deal worth $295 million. The transaction will be funded through three-year convertible debentures held by a subsidiary of Temasek Holdings, giving the Singapore sovereign wealth fund the opportunity to become a substantial Niko shareholder in the future. Niko will now operate eight blocks in the Indonesian archipelago, and be a partner in 12, with a net acreage position of 18,924 sq mi. These new interests bring sizeable exploration commitments—a total of eight wells over the next three years, in addition to extensive 2D and 3D seismic programs. Black Gold is a US-based exploration firm predominantly focused on the Indonesian upstream, and Niko will acquire its interests in 11 frontier exploration blocks spread across the seas off Sulawesi, Maluku and West Papua, totaling over 22,008 sq mi in gross acreage. The completion of the deal is subject to approval from the government of Indonesia.

Chesapeake, Total announce $2.25 billion Barnett JV

Chesapeake Energy Corporation has announced the execution of an agreement for a $2.25 billion joint venture with Total E&P USA Inc., a wholly owned subsidiary of Total S.A., whereby Total will acquire a 25% interest in Chesapeake’s upstream Barnett Shale assets. Total will pay $800 million in cash at closing and will pay an additional $1.45 billion by funding 60% of Chesapeake’s share of drilling and completion expenditures until the $1.45 billion obligation has been funded, which Chesapeake expects to occur by year-end 2012. Closing of the transaction, which is subject to regulatory approval, is anticipated by the end of January 2010. The assets subject to the Chesapeake-Total joint venture include approximately 270,000 net acres of leasehold in the Core and Tier 1 areas of the Barnett, approximately 700 MMcf of natural gas equivalent per day of current net production and approximately 3.0 Tcf of natural gas equivalent of proved reserves. The duo is also in talks about partnering to develop the Eagle Ford Shale in South Texas. Chesapeake plans to continue acquiring leasehold in the Barnett, and Total will acquire its 25% share of the new acreage on promoted terms until Dec. 31, 2015, according to the framework of the joint venture.

ExxonMobil, Transocean in talks for $1 billion Arctic rig

Exxon Mobil Corp. is reportedly in talks with Transocean to construct a drilling rig capable of operating in extreme Arctic conditions for as much as $1 billion, according to Reuters. Citing an unnamed source familiar with the matter, Reuters reported that ExxonMobil may deploy the rig offshore Greenland, Iceland or Alaska at a day rate close to record-level contracts in the $650,000 range, such as those signed for ultra-deepwater rigs by Seadrill and Transocean near the peak of the market in 2008. Transocean chief Bob Long had said in September that his company could announce a new Arctic-class rig with a contract by the end of 2009. Only speculations pointing to ExxonMobil as the operator behind the contract have emerged out of major media outlets. With plenty of oil majors still betting on deepwater drilling so long as higher oil prices justify the means, the largely untapped Arctic is becoming an attractive offshore drilling frontier. Exxon has long been interested in the Arctic and has increased its acreage in the Beaufort Sea. The company is in different stages of planning and assessment in areas offshore West Greenland, eastern Canada and Newfoundland. 

Sonatrach officials suspended, jailed on corruption charges

Mohamed Meziane, who has been the CEO of Sonatrach since 2003, has been suspended from his position and placed under judicial control after the discovery of contract irregularities at the state-owned Algerian energy company. Meziane has been instructed to stay in Algeria until an investigation into the allegations has been completed. Abdelhafid Feghouli, vice president for the oil and gas company’s downstream division, has been named interim CEO. Also placed under judicial control is Chawki Rahal, Sonatrach’s vice president for marketing.  Boumediene Belkacem, vice president of Sonatrach’s upstream division, and Benamar Zenasni, vice president for transport and pipelines, have been jailed. Reports have stated that a total of 10 senior Sonatrach officials are under investigation related to corruption charges that stem from the discovery of a number of contract awards that contain irregularities. Sonatrach, the largest company in Algeria and 11th largest oil consortium in the world, employs 120,000 people and produces 30% of Algeria’s gross national product.

Petrohawk Energy doubles proved reserves

Petrohawk Energy Corporation announced that its estimated proved oil and gas reserves at the end of 2009 were 2.75 Tcf equivalent, representing an increase of more than 1.5 Tcf equivalent over the company’s reserves at year-end 2008, pro forma for the sale of the company’s Permian Basin properties in October 2009. About 1.96 Tcf equivalent of Petrohawk’s proved reserves were added through the drillbit in 2009. About 1.5 Tcf equivalent were added in the Haynesville Shale with 176 wells drilled (73 operated and 103 non-operated), 294 Bcfe in the Eagle Ford Shale with 26 wells drilled (24 operated and two non-operated), 178 Bcfe in the Fayetteville Shale with 362 wells drilled (35 operated and 327 non-operated), and 18 Bcfe with 62 wells drilled in other areas. Proved reserves are 33% proved developed, compared to 56% proved developed associated with year-end 2008 reserves.

Nigeria to hold onshore, offshore licensing rounds

Nigeria plans to hold a licensing round for both onshore and offshore fields this year, according to a senior official. Emmanuel Egbogah, a special energy advisor to Nigerian President Umaru Yar’Adua, told the Financial Times that the licensing round would offer blocks collectively containing around 2 billion bbl of reserves. Details of the number of leases to go on the auction block and which areas may be included in the tender are yet to be revealed. Shell was the first to outline its intentions, stating that it is planning to sell $5 billion worth of its onshore assets in the country. So far, the major has sold its 30% interest in licenses 4, 38 and 41 to a consortium of Nigerian and foreign companies. Combined, the disposed licenses cover a total area of about 1,023 sq mi in the western Niger Delta.

BP drops bid for Jubilee Field

BP has decided to withdraw out of bidding for Kosmos Energy’s stake in Ghana’s offshore Jubilee Field, according to reports. Sources say that talks between BP and Ghana National Petroleum Corporation (GNPC) over a joint offer for Kosmos’ Ghanaian assets broke down in recent weeks. BP’s withdrawal may pave the way for ExxonMobil’s planned buy of Kosmos’ Jubilee stake for at least $4 billion, Bloomberg reported. With potential resources of 1.8 billion bbl, Jubilee has attracted attention from Chinese producers, as well as BP, as Ghana prepares to become one of Africa’s newest oil exporters this year. The West African nation expects to pump 500,000 bopd by 2014. Dallas-based Kosmos, backed by Blackstone Group and Warburg Pincus, said Oct. 12 that it agreed to sell its Ghana assets, including a 23.49% stake in Jubilee, to ExxonMobil. State-owned GNPC has threatened to block the sale, asserting its “absolute” approval rights and saying it may buy the stake itself and then bring in partners.

Tullow faces Uganda eviction over wildlife endangerment

Uganda’s state wildlife body has accused workers contracted by Tullow Oil’s Ugandan unit of killing endangered animals and wants its exploration camps on the Kabwoya Wildlife Reserve evicted, according to reports. More than half of the block operated by Tullow is located in the park. Tullow contract workers were implicated in the killing of an endangered male reedbuck, an unidentified spokeswoman for the Uganda Wildlife Authority told the Dow Jones Newswires service.  Police arrested six workers, who have since appeared in court and are on remand in the Hoima prison, police officials said.

No bidders for Mariscal Sucre gas project

Venezuela’s Mariscal Sucre project, which has estimated reserves of 14.7 Tcf of gas, received zero bids after the government invited companies to make offers Jan. 11. Earlier in January, Caracas incentivized the terms it was offering companies to help develop the project, but in the end nobody came forward, according to Reuters. Last year, state-owned PDVSA invited a group of companies from Japan, Norway, Russia and Italy to consider taking part in the project. Spain’s Repsol had also shown interest, but did not make an offer. 

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