World of Oil and Gas

Vol. 233 No. 11

WORLD OF OIL AND GAS

NELL LUKOSAVICH, SENIOR EDITOR

EXPLORATION

Colombia auctions leases, aims to boost reserves

Colombia auctioned off the rights for operators to explore new, promising oil leases as it seeks to boost crude oil reserves. Oil has become Colombia’s dominant export, counting for than half of its foreign revenue. In the first round bidding for 115 available oil blocks, the government received offers on 49 of them from 37 different oil companies, including ExxonMobil and Ecopetrol, said oil licensing agency ANH. The 49 bids received were just shy of ANH’s goal of securing 50 bids, but it said it will re-open bidding. This auction, the first such event in two years in Colombia, is expected to secure about $2.6 billion of new investment in oil exploration during the next four years.

Cnooc loses Uganda prospect after failing to strike oil

Uganda has taken back control of a prospective oil area licensed to China’s Cnooc Ltd., UK-listed Tullow Oil and Total SA after initial drilling failed to yield any crude, the government said in a statement. The Kanywataba oil prospect will now be re-auctioned in the country’s next auction of oil rights.

Ecuador to call oil licensing round for 13 Amazon blocks

Ecuador said it will call a licensing round at the end of November for bids for oil exploration and production contracts for 13 blocks in the southeastern Amazon jungle, near the border with Peru. The Andean country expects bids to total between $1 billion and $1.2 billion for these blocks. Additionally, state-run oil company Petroamazonas plans to negotiate directly with foreign, state-owned companies to develop three other blocks in the area. In November, Petroamazonas will take over the E&P unit of state-owned firm Petroecuador. Ecuadoran Minister of Nonrenewable Natural Resources Wilson Pastor said that interested companies will have a six-month period, until May 30, 2013, to prepare their offers. The tender will be called under the current contract regime, which means oil companies that win tenders will be paid a production fee, while the government will own 100% of the oil produced. Pastor said the government expects to sign contracts for the round by the end of September 2013.

PTTEP joins East Natuna gas exploration in Indonesia

Thai state company PTTEP will take a 15% stake in a consortium that is developing Indonesia’s massive East Natuna gas block, Indonesian state-owned producer PT Pertamina said. Pertamina spokesman Ali Mundaki said PTTEP’s stake would replace that of Petronas, which pulled out of a Pertamina-led consortium to develop the offshore block earlier this year. Mundakir said Pertamina has signed a new partnership agreement with PTTEP, leaving Pertamina with a 35% stake, Exxon Mobil with 35% and Total with 15%.

UNCONVENTIONALS

Exxon deal for Celtic Exploration gains Canadian shale positions

Exxon is once again indulging its appetite for so-called unconventional energy plays in North America, this time agreeing to fork over $2.86 billion for Calgary-based Celtic Exploration. Exxon gets 545,000 undeveloped, mostly natural gas acres in the Montney shale and another 104,000 acres in the Duvernay shale. These two formations straddle the British Columbia/Alberta border. Exxon’s Celtic deal is its biggest acquisition since XTO Energy, which it bought in 2010 for $31 billion.

Polish PGNiG’s LMG upstream project goes onstream

Polish natural gas utility PGNiG said it has completed construction of its Lubiatow Miedzychod Grotow oil and gas investment, which is expected to double Poland’s domestic crude production. PGNiG’s LMG project, with a $543-million price tag, includes 14 oil and gas production wells, and pipeline infrastructure in the area. PGNiG expects its annual production of crude to double to about 1.0 MMt, due to this investment.

Arrow Energy CEO says Queensland LNG invest decision due 2013

Shell and PetroChina are on course to approve construction of a multi-billion-dollar gas export project in eastern Australia next year, shrugging off fears that cost pressures or a supply glut will delay the venture. “Momentum on the LNG project is really very strong,” said Andrew Faulkner, chief executive of Arrow Energy, which Shell and PetroChina acquired in a $3.53-billion transaction in 2010. Arrow Energy’s plans involve the initial construction of two processing units at Gladstone in Queensland state, capable of producing a combined 8 million metric tons of LNG, annually, for export.

PRODUCTION

Shell to develop Fram field in UK Central North Sea

Shell said it will develop Fram oil and gas field in the UK Central North Sea with an FPSO scheme, following final approval from the Department of Energy and Climate Change. Shell-operated Fram is a joint venture between Shell (32% and operator) and Esso (68%). Fram field is expected to produce an average 35,000 boed. Shell is working to achieve first production within the next three years. Fram is expected to add around 2% to our oil and gas production.

Statoil swaps production licenses with Wintershall in $1.45-billion deal

Statoil has agreed to a $1.45-billion deal with Wintershall to swap production licenses on the Norwegian Continental Shelf, and also to cooperate on increasing oil recovery. As part of the deal, Statoil will leave its 32.7% stake and operatorship of Brage field to Wintershall. Statoil will also reduce its stake to 15% from 20% in the GDF Suez-operated Gjoa license and to 30% from 54% in the Statoil-operated Vega license. Statoil will also acquire a 15% stake in the Edvard Grieg license near the giant Johan Sverdrup field on the Utsira High in the North Sea from Wintershall. Wintershall’s stake in the field will be 15% after the transaction.

BP confirms deal on Caspian field production

BP has reached an agreement with the State Oil Company of Azerbaijan Republic on how to stabilize production in the Azeri-Chirag-Guneshli field in the Caspian Sea. “We are clear on the priorities and the actions that we will take to further intensify our performance, including drilling, and to maximize production with a continued focus on safety,” said Bob Fryar, BP’s executive vice president of production. Earlier, SOCAR President Rovnag Abdullayev said the two sides had reached a deal that is expected to result in the production of 33 million tons of oil from the field in 2013 and 35 million tons in 2014.

BUSINESS

Rosneft to acquire AAR and BP shares to gain TNK-BP control

Oil giant Rosneft has agreed heads of terms to acquire the AAR consortium’s 50% stake in TNK-BP for $28 billion in cash, the company said in a statement. Rosneft also confirmed it had agreed to buy BP’s 50% stake in TNK-BP for $17.1 billion and 12.8% of Rosneft’s shares. Rosneft said the deal to buy out AAR, a group of Soviet-born billionaires, is subject to the negotiation of definitive agreements. The acquisitions will make Rosneft the largest publicly traded oil producer in the world, with over 4 MMbpd of crude output.

Tamar partners sign $3.5 billion deal to provide gas to private company

Partners in Israel’s offshore Tamar natural gas field said that they have signed a take-or-pay deal worth $3.5 billion to provide gas for 16 years to private power company Dorad Energy. The deal calls for providing 11.2 Bcm of natural gas, although Dorad may buy less, depending on its needs, according to a statement from Avner Oil Exploration Ltd. Partnership, one of the Tamar partners. Tamar field, which contains about 8.4 Tcf of natural gas, is scheduled to begin production next year. Its partners have already signed other supply deals, including one worth $20 billion with the state-run electric company.

Saipem wins contracts worth $1.1 billion

Saipem has been awarded offshore engineering and construction contracts worth a total of $1.1 billion. The company said it was given a contract by Petrobras for the Sapinhoa Norte and Cernambi Sul projects in the development of the pre-salt risers in the Santos basin. The company also received contracts from Total in Angola and Lukoil in the Caspian Sea.

Statoil to shed U.S. gas wells

Statoil is selling some of the onshore natural gas and oil wells it acquired when it bought Brigham Exploration in October 2011, the Norwegian oil company said. Statoil will be shedding about 180 natural gas wells at a time when prices for the fuel remain unprofitable for most producers. Natural gas prices fell to a decade low in April because of recent advances in drilling technology that yielded a steep increase in supply. Statoil will divest about 230 oil and gas wells in the Anadarko basin in Oklahoma and along the Gulf Coast in Louisiana and Texas, said Ola Morten Aanestad, Statoil’s vice president of communications. About 80% of the wells produce natural gas, Aanestad said.

REGULATORY AFFAIRS

Italian government ready to back Eni in gas renegotiations

The Italian government is ready to support the country’s biggest energy company, state-controlled Eni, to renegotiate the price of its long-term natural gas supply contracts, Industry Minister Corrado Passera said, as it seeks to lower energy costs. Western European energy companies have pushed to renegotiate existing long-term gas supply deals to reduce the price link to high oil prices, as these have made them unprofitable in recent years. At the start of October, Industry Ministry Undersecretary Claudio De Vincenti said the government wanted to push for imported gas prices to be linked to spot prices, rather than today’s indexation to oil, adding that the switch wasn’t expected to be immediate.

Ecuador will fight to not pay Occidental in dispute

Ecuadoran President Rafael Correa said that his government will fight against paying Occidental compensation that was ordered by an international tribunal for canceling a contract in 2006. Ecuador canceled the operating contract in May 2006, alleging that the company broke its terms by transferring a 40% stake to Encana without obtaining approval from the country’s energy ministry.

Tanzania set to pass oil and gas law as reserves rise

The Tanzanian government is expected to pass long-awaited oil and gas legislation to regulate its fast-growing energy sector, as companies continue to strike large offshore and onshore gas discoveries in the East African nation. The oil and gas legislation was to be among the top priorities, when parliament reconvened from recess in late October. The law will be presented in parliament, and the target is to have it in place before the end of November.

DISCOVERIES

Petrobras extension well at Jupiter confirms gas/condensate discovery

Petrobras announced that preliminary drilling results of well 3-BRSA-967A-RJS, known as Jupiter Nordeste, 7.5 km from the Jupiter area’s discovery well, in the Santos basin, confirm the presence of natural gas and condensate, as well as the presence of a continuous reservoir between the two wells. The new well, which is still being drilled, has reached 5,438 m. It is in ultra-deep waters of Block BM-S-24, at a water depth of 2,161 m, and 275 km off the coast of Rio de Janeiro. So far, well 3-BRSA-967A-RJS has detected an oil column of 176 m in rocks of excellent permeability and porosity. Drilling of the well will continue targeting deeper objectives. Petrobras (80%) operates in partnership with Petrogal Brasil (20%).

Kuwait Energy strikes oil in Egypt

Kuwait Energy announced a new oil find at its Ahmad-2 well, in the Area A license of the Gulf of Suez, Egypt, adjacent to Shukheir North West field. Kuwait Energy is operator of the Area A license under a service agreement with Egypt’s General Petroleum Company (GPC). The Ahmad-2 well encountered oil in the Rudeis formation for the first time in the Shukheir North West field and Ahmad area, and initial tests showed a production flowrate of 1,300 bopd. This is the fifth exploration success in the Area A concession, and the 19th discovery in Egypt for Kuwait Energy since 2008.

Lundin announces small North Sea oil discovery

Lundin Petroleum Norway, operator of production license 519, has concluded the drilling of wildcat well 6201/11- 3 in the northern part of the North Sea. The well was drilled about 65 km northwest of Snorre field. The primary exploration target for the well was to prove petroleum in reservoir rock from the Upper Cretaceous (the Shetland group) and in the Upper Jurassic or Lower Triassic. The secondary exploration target was to prove petroleum in reservoir rocks from the Late Palaeocene (the Lista formation). Comprehensive data acquisition and sampling have been carried out. Two formation tests (Mini DST) have been completed in the Shetland group, showing limited flow properties. This is the first exploration well in production license 519. The license was awarded in the 20th licensing round of 2009.

Addax discovers new oil, gas reserves off Cameroon

Addax Petroleum, a wholly owned CNPC subsidiary, said it has discovered new oil and gas reserves offshore Bakassi, in southwestern Cameroon. Although work on the well was temporarily suspended last September, more tests will be conducted to determine the discovery’s extent and commercial viability. Cameroon state firm SNH partners with Addax Petroleum in several oil blocks in the oil-rich Rio del Rey basin, which overlies the Bakassi Peninsula.

Western Zagros confirms oil at Kurdamir-2

Western Zagros Resources Ltd. has completed its testing program in the deepest of the three stacked reservoirs drilled by the Kurdamir-2 exploration well in the Kurdistan Region of Iraq. The testing confirmed an oil discovery in low-permeability fractured limestones of the Cretaceous-age, Shiranish formation, adding to the previously announced major oil discovery in the Oligocene reservoir. The Shiranish reservoir exhibited non-commercial flowrates in this location. The combined, audited, unrisked mean estimate for all three reservoirs on the Kurdamir prospect is 1.609 billion bbl of prospective oil resources as of May 31, 2012, 11% of which (181 million bbl), is attributed to the Cretaceous. The companycompany now expects this number for the Cretaceous to be revised downward now expects this number for the Cretaceous to be revised downward, although it is not expected to materially change the estimate of prospective resources for the entire Kurdamir prospect.

New Saudi gas field discovered in Red Sea

Saudi Aramco has discovered a new gas field 26 km northwest of the port of Daba in the Red Sea, the kingdom’s oil minister, Ali al-Naimi, said. Gas flowed at a rate of 10 MMcfd, when a test was performed to a depth of 17,700 ft. Saudi Aramco will continue to evaluate the gas find in this well, and more wells will be drilled to evaluate the field’s size, he added. The firm’s gas production averaged 9.9 Bcfd in 2011, up from 9.4 Bcfd in 2010, while gas reserves rose to 282.6 Tcf from 279 Tcf.

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