World of Oil and Gas

Vol. 233 No. 10

WORLD OF OIL AND GAS

NELL LUKOSAVICH, SENIOR EDITOR

EXPLORATION

Lukoil seismic survey underway at Black Sea blocks

A 3D seismic acquisition survey, carried out by Lukoil Overseas, is underway on the East Rapsodia and Trident Blocks in the Romanian sector of the Black Sea. Seismic operations are being carried out by geophysical services provider CGGVeritas, after it won the respective tenders, and will be completed in November 2012. The survey’s planned scope will be up to 772 sq mi. This project marks the first time that Lukoil has begun upstream operations in a European Union member-country.

Anadarko sees 150-million-bbl potential in New Zealand

Anadarko Petroleum believes that its three New Zealand exploration blocks could hold up to 150 million bbl of crude oil or trillions of cubic feet of natural gas, a company executive said. “There’s significant interest in New Zealand—otherwise we wouldn’t be here,” John Gordon, Anadarko’s exploration manager for the Asia-Pacific region, told The Wall Street Journal in an interview. Anadarko has been exploring for oil in New Zealand since 2008. It holds permits for a block in the Taranaki basin off the west coast of North Island and for two blocks off the east coast of South Island. It expects to begin drilling in late 2013 or early 2014.

Marathon Oil announces entry into Ethiopia

Marathon Oil Corp. announced that its subsidiary Marathon Ethiopia Limited B.V. has entered into a sale and purchase agreement with Agriterra Limited to acquire their 20% working interest in the South Omo concession in Ethiopia. The companies expect to close the transaction, subject to completion of the necessary Ethiopian government approvals, before the end of the year. Tullow Oil is the operator of the South Omo concession with a 50% working interest, and Africa Oil holds the remaining 30%working interest. The concession has an area of about 29,465 gross sq km. An exploration well is anticipated to spud in South Omo in the fourth quarter of 2012.

Shell limits plans offshore Alaska

In mid-September, during Shell’s final tests of the first-ever Arctic Containment System, the containment dome aboard the Arctic Challenger barge was damaged. The time required to repair the dome and gain its regulatory acceptance, along with steps Shell had to take to protect local whaling operations and ensure safety of operations from ice floe movement, led the firm to revise its 2012–2013 exploration program offshore Alaska. This year, Shell will “forgo drilling into hydrocarbon zones,” but it will “begin as many wells, known as ‘top holes,’ as time remaining in this season allows.” The top portions of the wells drilled in the weeks ahead “will be safely capped and temporarily abandoned” until 2013, when drilling will hopefully resume.

Talisman to withdraw from exploring Peru

Talisman has decided to stop exploration in northern Peru and withdraw its business activities from the Andean nation. Talisman has been exploring in Peru since 2004. It operates Blocks 64 and 103, and also has interests in Blocks 123 and 129. Despite success in finding light oil in the region, the company has been unable to build a material resource position in Peru.

UNCONVENTIONALS

Shell Canada to proceed with Alberta carbon capture project

Royal Dutch Shell Canadian unit said it will proceed with the proposed Quest carbon capture and storage project, the first such commercial-scale project to tackle carbon emissions in the Alberta oil sands. Shell said the project will be built on behalf of the Athabasca Oil Sands Project joint-venture owners, which also include Chevron Canada Ltd. and Marathon Oil Canada Corp. Shell Canada owns 60% of the joint venture, with the two partners each holding 20%.

UK shale could create 35,000 jobs

A new report from the Institute of Directors (IoD) concludes that exploiting Britain’s shale gas reserves could create 35,000 jobs and help to meet carbon emissions targets. IoD is the UK’s oldest, continuous organization for “professional leaders.” Britain’s onshore shale gas reserves are estimated at 5.3 Tcf (as of 2010), but the British Geological Survey is expected to revise that number higher. Assuming that the UK is only half as successful as the U.S. in producing shale gas, the report says that not only would jobs be created, but the country could meet at least 10% of its gas demand for the next 103 years from shale.

Total signs agreement with Kogas for LNG from Sabine Pass

Total said it signed an agreement with Kogas for the purchase of 0.7 mtpa of LNG from the Sabine Pass terminal in Louisiana. The LNG will be lifted following the startup of the terminal’s liquefaction train 3, which is scheduled for commissioning in 2017. This agreement follows on from the recent acquisition by Kogas of an interest in the GLNG project in Australia and the execution of a sale and purchase agreement between Total and Kogas for 2 mtpa of LNG. Total will also cooperate to further expand liquefaction capabilities adjacent to the LNG terminal.

PRODUCTION

Petrobras sets deepwater production world record at Chinook

Petrobras has started production at Chinook oil and gas field in the ultra-deep waters of the Gulf of Mexico, the company said. Petrobras drilled and completed the Chinook well in a reservoir in the Lower Tertiary, nearly 5 miles deep in the Gulf of Mexico. The BW Pioneer FPSO is moored 155 mi off the coast of Louisiana and in waters 8,202 ft deep, a world-record water depth for oil production, according to Petrobras. A subsidiary of Total owns a third of the vessel, which is capable of producing 80,000 bopd and 17.7 MMcfgd.

Shell to meet Iraq oil field target

Royal Dutch Shell said its Majnoon oil field in Iraq is still likely to meet a key production target by the end of this year, despite a series of setbacks that have hampered its development. Shell said the preliminary mechanical work needed before 175,000 bopd can be produced at the super-giant field should be completed by the end of 2012, even though efforts had been stymied by “unexpected mine clearance work, occasional delays in customs and [the] impact of recent weather conditions.” The 175,000-bopd level, required for the Anglo-Dutch company to start recovering costs under its deal with the Iraqi oil ministry, is a critical milestone in Shell’s plans to develop the field. Because Majnoon’s existing pipelines aren’t big enough to deal with the anticipated increase in output, Shell has had to concentrate its efforts on the necessary upgrades needed before output at the targeted amount can begin. Shell said plans for a wider development of Majnoon, including rehabilitation of the field, could only go ahead after it reached its 175,000-bopd target.

BUSINESS

GE inks record $1.1-billion contract with Petrobras

GE and Petrobras have signed the world’s largest subsea wellhead production contract, worth nearly $1.1 billion, as GE looks to boost development of Brazil’s oil and gas sector. The contract, which builds upon an existing partnership between the two companies, includes the delivery of about 380 subsea wellhead systems and installation tools needed in oil well drilling and completion. More than 75% of the parts will be made in Brazil. Petrobras plans to install the subsea wellhead systems in oil and gas fields in Brazil. The equipment will be produced at the GE plant in Jandira, where the company has invested $30 million to expand production capacity.

Chesapeake sells Permian basin and other assets for $6.9 billion

Chesapeake Energy has unveiled a slew of asset sales, including most of its Permian basin properties and all of its midstream assets, for about $6.9 billion in cash as the natural gas producer continues its push to offset debt and raise money to help it focus on more-profitable oil. Chesapeake said it will use a part of the proceeds from the asset sales—which are net of expenses—to repay $4 billion in term loans during the fourth quarter. The company, the second-largest natural gas producer in the U.S. after ExxonMobil, has been selling properties in oil and gas fields, reporting in August that its second-quarter earnings rose 91%, as it benefited from asset sales that brought more than half-a-billion dollars to its bottom line. Chesapeake said it will sell the Permian assets to three companies for total net proceeds of about $3.3 billion. The Permian basin assets being sold produced about 21,000 bpd of liquids and 90 MMcfgd during the second quarter, which is around 5.7% of Chesapeake’s production during the quarter.

REGULATORY AFFAIRS

BOEM announces 38 million-acre lease sale in the Central GOM

Secretary of the Interior Ken Salazar and Bureau of Ocean Energy Management (BOEM) Director Tommy P. Beaudreau announced that BOEM will offer 38 million acres in the Central Gulf of Mexico for oil and gas exploration and development. This sale will build on two major Gulf of Mexico lease sales in the last year – a 21 million acre sale held last December and a 39 million acre sale held in June. Proposed Lease Sale 227, scheduled to take place in New Orleans on March 20, 2013, will offer all unleased areas in the Central Gulf of Mexico Planning Area, offshore Louisiana, Mississippi, and Alabama and could lead to the production of up to nearly a billion bbl of oil and nearly 4 Tcf of natural gas. This will be the second sale under the Administration’s new Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017 and the first of five annual Central Gulf lease sales.

Barents Sea incident probed

Norway’s oil safety agency opened an investigation into a recent scare in the Barents Sea involving an Eni drilling rig, saying the incident was likely caused by the wrong use of equipment. The Scarabeo 8 rig heeled 5.7° after seawater entered a ballast tank on Sept. 4, forcing the crew of 140 to prepare for evacuation. In the end, evacuation was not necessary, the company said. The safety authority said the rig was designed to stand 17° listing, or 21° if the rig was undamaged, according to the agency. Scarabeo 8 was on a mission to drill a 2.2 km well about 165 km northwest of Norway’s mainland.

Brazil Supreme Court allows Transocean drilling other than Frade field

Petrobras has announced that the Supreme Court of Justice has partially suspended the injunction that ordered the shutdown of the activities of Transocean Brasil Ltda. This suspension by the Supreme Court of Justice, which is in response to an action filed by Brazil’s National Petroleum Agency (ANP), allows for “Transocean to continue its activities in Brazil, in locations other than Frade field”, according to the Petrobras News Agency.

DISCOVERIES

Eni reports 300–400-Bcf gas discovery in Pakistan

Eni has made a significant gas discovery onshore Pakistan, in the Badhra Area B exploration concession, in the Khirtar Fold Belt region, 350 km north of Karachi. The Badhra B North-1 exploratory well, which led to the discovery, was drilled at a TD of 2,450 m and encountered over 54 m of net gas pay in two thick Cretaceous sandstones of the Mughal Kot formation. During the production test, the well flowed high-quality gas from the two reservoirs, at 25 MMcfd and 35 MMcfd, respectively. The discovery size is estimated at between 300 Bcf and 400 Bcf of gas-in-place. Eni has been present in Pakistan since 2000 and is the largest producer in the country, with an average equity production at 54,800 boed in 2011. Badhra B is operated by Eni, along with partners Kufpec Pakistan, Oil and Gas Development Co., and Premier Oil.

Chevron makes fifteenth gas discovery off Australia

Chevron Corp. announced further drilling success by its Australian subsidiary in the Greater Gorgon Area of the Carnarvon basin, a premier hydrocarbon play. The Satyr-2 discovery well confirmed about 128 ft of net gas pay. The well is in the WA-374-P permit area, 75 mi northwest of Barrow Island off the Western Australian coast. The well was drilled in 3,570 ft of water to a TD of 12,454 ft. Satyr-2 is Chevron’s fifteenth discovery in Australia since mid-2009.

Lundin makes third gas find offshore Malaysia

Lundin Petroleum has completed the Berangan-1 well in the SB303 Block, offshore Sabah, Malaysia, as a gas discovery. Berangan-1 is a vertical well drilled to a depth of 1,709 m in a roughly 70-m water depth. The well penetrated a gross gas column of over 165 m in the targeted mid-Miocene-aged sands, 10 km to the southeast of the Tarap gas discovery made by Lundin in 2011, and 15 km to the south of the Cempulut gas find also made in 2011. An extensive data acquisition program was completed, including fluid samples and a pressure profile indicating a single, continuous gas column is present and defining the probable gas-water contact. Further work will follow to estimate recoverable resource ranges. Following Berangan-1, the West Courageous rig will move to offshore peninsular Malaysia, to execute a three-well exploration campaign, commencing with the Merawan Batu-1 well in the PM308B Block.

Ecopetrol reports U.S. deepwater Gulf discovery

Ecopetrol S.A. has announced the results of the Parmer prospect in the deepwater Gulf of Mexico, which is on Green Canyon 867, at a depth of 18,900 ft. Several pressure readings and the collection of several fluid samples from Miocene sands indicate a column of around 240 ft of net condensate-rich gas pay and about 40 ft of net oil pay. In the coming months, Ecopetrol and its partners will reprocess 3D seismic data and determine a comprehensive delimitation and development plan according to these results. The Parmer discovery is Ecopetrol´s second deepwater discovery in the Gulf of Mexico.

Eni makes oil discovery in Ghana’s OCTP Block

The Vitol Group and Eni Ghana Exploration and Production Limited, operator of the Offshore Cape Three Points (“OCTP”) Block in Ghana, have announced a potentially significant oil discovery on the block. The discovery well, which was drilled some 50 km offshore in 825 m of water, reached a TD of 3,650 m and encountered a 76-m gross oil-bearing interval in Cenomanian sandstones. During production testing, the well flowed 30°API oil at a facilities-constrained rate of 5,000 bpd. The oil discovered is not connected to the gas and condensate discovered in either Sankofa or Gye Nyame. The OCTP joint venture is now planning an immediate appraisal program to delineate the oil discovery and assess its commercial viability. Eni is also working on plans to commercialize the block’s gas reserves on the domestic market, in accordance with a shareholders’ agreement with Ghana’s Ministry of Energy. The country’s oil revenue rose 4% percent to $326.6 million in the first half of 2012, with output averaging 62,985 bpd, according to a Bank of Ghana report issued in August. Output should rise above 90,000 bpd by late 2012.

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