World of Oil and Gas

Marathon begins drilling offshore Norway

	Vol. 233 No. 2
HENRY TERRELL, CONTRIBUTING NEWS EDITOR

Marathon begins drilling offshore Norway

Marathon Petroleum Norge has begun drilling an exploration well on the Earb South prospect in the Norwegian North Sea. The prospect is located 15 km west of Balder Field and 35 km south of the Heimdal facilities. The well will target sandstones within the Draupne Formation (Brae Formation equivalent) and the Hugin Formation. Marathon’s partner Lundin Petroleum estimates the Earb South prospect to contain gross unrisked prospective gas and condensate resources of 81 million boe.

Ecuador judge orders Chevron to pay $8 billion

A court in Ecuador has ordered Chevron to pay $8 billion in an environmental lawsuit, a ruling that the US oil company rejected as “illegitimate.” The highly controversial case has triggered related legal action in US courts and international arbitration and is being monitored by the oil industry for precedents that could lead to other large claims. The lawsuit had originally demanded $27 billion.

Maersk, OGX discover oil offshore Brazil

Maersk Oil Brasil and partner OGX reported finding oil in the ongoing Carambola-B exploration well. The well is located in the BM-C-37 license in the Campos Basin in 130-m water depth, some 80 km off the coast of Rio de Janeiro state. Maersk Oil is the operator with a 50% share of the block. Hydrocarbons were encountered in the objective Albian carbonates with an estimated 17 m of potential net pay. Further work will be performed to assess productivity.

Burkley shale analysis shows 331 Bcf in place

Mainland Resources announced positive results from the first 1,000 ft of the Bossier/Haynesville section between 19,980 and 21,040 ft in its Burkley Phillips-1 well in Jefferson County, Mississippi. A shale gas analysis recently completed by Schlumberger shows 181 Bcf of gas in place within this 1,000-ft section.

Eagle Ford Shale generated $2.9 billion in revenue in 2010

In less than three years of development, the Eagle Ford Shale already accounts for over 6% of the gross regional product for the 24 counties in South Texas that it encompasses, according to a study by the Center for Community and Business Research at the University of Texas’ San Antonio Institute for Economic Development. The study reveals that in 2010 alone, the shale play generated close to $2.9 billion in revenue, supporting about 12,600 full-time jobs and providing nearly $47.6 million in local government revenue. The benefits are projected to grow significantly over the next 10 years. By 2020, the study predicts that close to 5,000 new wells will be drilled in the Eagle Ford, which may be conservative. The Eagle Ford produces abundant supplies of natural gas, as well as condensate, oil and natural gas liquids, and margins are more favorable than in many other shale plays.

Partnership launches interim well containment system

The Marine Well Containment Company announced the completion and availability of an initial system that will provide rapid containment response capabilities in the event of a well control incident in the deepwater Gulf of Mexico. The initial response system includes a subsea capping stack with the ability to shut in oil flow or to flow the oil via flexible pipes and risers to surface vessels. The system also includes subsea dispersant-injection equipment, manifolds and capture vessels to provide surface processing and storage. The company consulted with BOEMRE to ensure that the system was designed to meet government requirements. ExxonMobil, in partnership with Chevron, ConocoPhillips and Shell, continues to lead the development of additional system components to expand the initial capabilities, with completion of the expanded system set for 2012.

Report urges US policy change as Cuba plans GOM drilling

With Cuba and partners preparing to drill for oil in the Gulf of Mexico, the US embargo prohibits American companies from participating, denies Cuba access to US equipment for drilling and environmental protection, and leaves the US government unable to plan adequately for a potential spill. These findings are contained in a report by the Center for Democracy in the Americas (CDA). The report, titled “As Cuba plans to drill in the Gulf of Mexico, US policy poses needless risks to our national interest,” recommends several major changes in US policy, including direct government-to-government discussions with Cuba on energy and environmental issues, information sharing and legislation allowing US firms to participate in oil and gas exploration and crisis planning. “We cannot stop Cuba from drilling,” a CDA spokesman said in a press release, “and the risks of inaction are far too great.”

Commission cites improper cement design on Macondo

The National Oil Spill Commission’s final report on the Macondo well blowout details a series of engineering and management mistakes that led to the disaster. The report maintains that BP was aware of problems with Halliburton personnel and work product years before. In 2007, a consulting firm issued a quality control report warning BP that Halliburton’s lab technicians “do not have a lot of experience evaluating data” and that BP needed to improve communication with Halliburton “to avoid unnecessary delays or errors in the slurry design testing.” The report also concludes that BOP failures were not the root cause of the blowout. The rig crew activated the BOP only moments before the blowout began, by which time hydrocarbons had already passed into the riser. Had the BOP functioned flawlessly, the report says, the rig still would have exploded. Also according to the report, a BP engineering reorganization in early 2010 resulted in delays and distractions for the team drilling the well and had an impact on decision making in the weeks leading up to the incident, during which virtually all of the decisions increasing the risk of a blowout were made.

GE to acquire division of John Wood Group for $2.8 billion

GE Oil & Gas announced that it has entered into an agreement to acquire the Well Support division of John Wood Group PLC for about $2.8 billion. The transaction is expected to close later in 2011. With 3,800 employees, more than 20 manufacturing sites and multiple service centers worldwide, Wood Group’s Well Support division is comprised of three business platforms: ESP (electric submersible pumps), Pressure Control (surface wellhead and flow control systems) and Logging Services (wireline logging). In 2010, the Well Support division recorded revenues of $947 million and estimated earnings before interest, taxes, depreciation and amortization (EBITDA) of $166 million, which reflected growth of 16% and 55% respectively over 2009. The division, which generated 13% average annual revenue growth over the past decade, is expected by GE to generate $1.1 billion in revenue and about $200 million of EBITDA in 2011. In addition, with synergies from GE Energy, GE believes the business is well-positioned for significant top- and bottom-line growth going forward.

Bureau Veritas to open deepwater development center

The certification group Bureau Veritas has signed a technical cooperation deal with COPPE/UFRJ, the ocean engineering department of the Federal Univesity of Rio de Janeiro in Brazil, to set up a joint development center. The move follows successful cooperation agreements with 19 universities in China, Russia, Korea, Singapore, Malaysia, Vietnam, Australia, Taiwan and France and is intended to speed the development of tools and technical requirements that will be needed to facilitate Brazil’s expansion into deepwater oil and gas exploitation. Created in 1828, Bureau Veritas has about 48,000 employees in 1,000 offices and 330 laboratories located in 140 countries.

Toreador, Hess present case for shale exploration in France

Toreador Energy France and its partner, Hess Oil France SAS, along with other energy industry companies, met with France’s Ministry of Environment and Ministry of Energy to discuss shale oil and gas development in France. The government had instructed its general councils on Industry, Energy and Technology and on Environment and Sustainable Development to undertake a joint study to determine the economic, social and environmental impact of shale energy development. The ministers provided Toreador and Hess an opportunity to present the material positive benefits that tight rock oil development in the Paris Basin could have in France. The partners made the points that there have already been more than 2,000 oil wells drilled in the Paris Basin. Toreador is a longstanding French operator and has produced over 5 million bbl of oil in 17 years. Also, the partners argued that the concept of hydraulic fracturing in the Paris Basin is not new, and the technology itself has 50 years of data and experience supporting its safe application in oil fields around the world.

Proposed budget includes $358 million for BOEMRE reform

President Barack Obama announced his request for $358.4 million to fund BOEMRE in fiscal year 2012, a budget designed to implement organizational and regulatory reforms in the wake of the Macondo well blowout. This represents a 50% increase over the 2010 enacted level, after adjusting for funding transferred to the Department of the Interior as part of the reorganization of the former Minerals Management Service. The additional resources requested would be used to complete the reorganization of BOEMRE, including separating the offshore resource management and enforcement programs; hiring new oil and gas inspectors, engineers and scientists; and conducting detailed engineering reviews of offshore drilling and production safety systems. Funding increases would be partially offset by $65 million in inspection fees charged to industry.

First post-moratorium deepwater drilling permit approved

Noble Energy has received an approved permit to resume drilling at the Santiago prospect in the deepwater Gulf of Mexico. Well operations were suspended in June as a result of the Obama administration’s deepwater drilling moratorium. Santiago is a Middle Miocene prospect on Mississippi Canyon Block 519. Noble Energy is the operator with a 23.25% working interest. Located in 6,500 ft of water, the Santiago exploration well had been previously drilled to a depth of 13,585 ft at the time of the moratorium. Drilling operations are expected to resume in late March, targeting total drilling depth of about 19,000 ft. Results are expected by the end of May 2011. The semisubmersible Ensco 8501, which performed completion operations on the Santa Cruz and Isabela discoveries at the Galapagos project during the second half of 2010, will carry out drilling at Santiago.

ExxonMobil, Naftogaz partner to explore Ukraine shale

Ukraine’s state-run energy company Naftogaz and oil major ExxonMobil have signed a memorandum of cooperation to explore for shale gas deposits in Ukraine, Naftogaz reported. ExxonMobil would also help Ukraine explore for and develop coalbed methane deposits. Russia’s third largest oil company, TNK-BP, reported in January that it plans to start a shale gas exploration project in Ukraine in the first half of this year. In October, TNK-BP and the Ukrainian government signed an agreement wherein the company would explore for shale gas in Ukraine’s eastern Donetsk region. Ukraine, largely dependent on imports of Russian gas, has indicated it wants to increase domestic gas production and also find alternative suppliers. Ukraine also plans to open its first liquefied natural gas terminal in the Black Sea region in 2015, with a capacity of about 180 Bcf. Ukraine imports about 60% of its domestic gas needs from Russia, but has repeatedly said the price is too high for Ukrainian goods to compete on world markets.

PA governor rescinds drilling ban in state forests

Pennsylvania Gov. Tom Corbett has lifted a policy imposed by his predecessor, Gov. Ed Rendell, placing a virtual moratorium on new leasing for natural gas drilling in state forests. The original policy, which into effect in October, required any operators who wanted to drill on public lands to obtain an assessment of environmental impacts from the state Department of Conservation and National Resources (DCNR) before applying for a permit with the Department of Environmental Protection (DEP). Because an earlier DCNR study had concluded that leasing could not occur without damaging the ecological integrity and wild nature of the state forests, the ruling was effectively a moratorium on new drilling on state land. The new order removes the DCNR from the permiting process. A DEP spokesman said, “This [previous ruling], which was not subject to advanced public comment or review, is being rescinded as unnecessary and redundant of existing practice.”

Charter creates foundation for energy dialog

Members of the International Energy Forum (IEF) have signed an energy charter in Riyadh, Saudi Arabia, to encourage stability in crude oil markets following weeks of political turmoil in the Middle East. According to IEF Secretary-General Noe van Hulst, the charter is intended to encourage “a focused cooperation between the IEF, IEA, OPEC and other organizations [which] signals a new and promising era of international energy governance.” EIF delegates met in Riyadh to discuss ways to stabilize the global energy markets. The charter, signed by 87 ministers and top IEF delegates, creates a framework for informal, open and continuing global energy dialog between energy producers and energy consumers. The secretary-general added that transparency was essential to the future of world energy security. “It is this kind of dialog that helps foster greater mutual understanding between producing and consuming countries on energy policy issues and, where possible, narrows the differences in views and helps build trust in policy intentions,” he stated. He also said ample reserve oil stocks were on hand to deal with any supply disruptions.

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