What's new in production

Mar. 2002 Vol. 223 No. 3  What's New in Production

Perry A. Fischer,  Engineering Editor

New old ultra-clean fuel. Alkylate, which has been around for decades, is an ideal form of gasoline because it has high octane and contains virtually no regulated components, such as sulfur, benzene, etc. Unfortunately, current technology for producing alkylate is based on hydrofluoric or sulfuric acid, which are hazardous chemicals that generate hazardous waste. Refiners have long sought a way out of the clean fuels / hazardous waste dilemma.

Last summer, ABB, Akzo Nobel and Fortum Oil and Gas announced the development of a breakthrough technology to make alkylate using a proprietary, benign, solid catalyst. In addition to the solid catalyst, the new process, called AlkyClean, employs a new reactor design and an innovative processing strategy. ABB and partners are scheduled to have a demonstration unit up and running at Fortum’s facilities in Porvoo, Finland, by the time this column is published.

GOM deepwater pipelines onstream. A unit of Williams began receiving oil and gas into recently completed deepwater pipelines in the western Gulf of Mexico. Production is coming from Nansen field in the East Breaks area, located about 150 mi south of Houston in 3,700 ft of water. First deliveries of oil and gas began at the end of January. The time from signing the service agreements with producers in late 2000 and bringing production online was less than 18 months. The new pipelines have a capacity of transporting up to 80,000 bopd and up to 360 MMcfgd. Production will continue to ramp up as new Nansen field wells are tied in during the first and second quarter.

The system is also designed to serve a neighboring development in Boomvang field. Production from Boomvang is expected to begin flowing into the new pipes in May. The project is backed by dedicated production from deepwater producers Kerr-McGee, Ocean Energy and Enterprise Oil. It can also accommodate production from other prospects that may be developed in the East Breaks area. Williams’ $200-million East Breaks project comprises a 56-mi oil-gathering system, a 114-mi gas-gathering system, a new 300 MMcfgd gas-processing plant in Markham, Texas, and a shallow-water platform at Galveston Block A244.

Peru’s Camisea LNG Project. A Hunt Oil Co. subsidiary has signed an agreement with Kellogg Brown & Root, a division of Halliburton Co., to conduct a Front End Engineering Design (FEED) study for the Camisea LNG Export Project. This FEED study is the first step toward development of an LNG export facility located on the Pacific coast of Peru.

The $8.5-million engineering study will be completed in about eight months. It will provide the foundation for construction of an LNG liquefaction facility and marine terminal on the Peruvian coast south of the capital of Lima.

Peru’s Camisea gas fields – with an estimated 13 Tcf in reserves – will supply gas for the project. Field development and construction of a pipeline and related facilities are currently underway and are expected to be completed in 2004.

The design study will consider a one-train liquefaction plant with a total production capacity of at least four million metric tons per year, which is the production equivalent of 545 million cubic feet of gas per day. The Houston-based firm will also study and engineer plans for a dehydration facility, an acid-gas removal facility and other necessary infrastructure required for safe and efficient operations at the LNG export facility. Concurrent with the FEED contract, but in a separate agreement, additional studies will be conducted that will result in an environmental impact assessment for the Camisea LNG export project.

Smaller Alaskan pipeline proposed. Foothills Pipe Lines Ltd. has proposed a smaller, roughly half-price natural gas pipeline that it hopes will win approval from Alaska’s three major gas producers. The new plan outlines an $8-billion pipeline that will transport 2.5 Bcfd through 42- or 48-in. dia. pipe from the North Slope. The route runs south through the Alaskan interior and along the Alaska Highway through Canada to the Lower 48. Foothills holds U.S. and Canadian regulatory permits dating from 1977 to build the highway line.

According to an article in Northern Gas Pipelines, producers have estimated a 3,500-mi pipeline with a 4-Bcfd capacity along the same route would cost $17.2 billion. Three months ago, Foothills estimated the combined cost of building two standalone pipelines, along the Alaska Highway and from Canada’s Mackenzie Delta, at $12.8 billion. The advantage of the smaller pipeline is that it would enable investors to begin the engineering phase of the project, while allowing time for a trend in Lower 48 gas supply and demand to develop.

The real Enron story. What follows is my paraphrasing of an old Texas business tale. It’s quite funny – if you’re not one of Enron’s victims.

A businessman buys two cows from a farmer. He sells three of them to his publicly listed company, using letters of credit opened by his brother-in-law at the local bank. He then executes a debt / equity swap with an associated general offer so that he gets all four cows back, with a tax exemption for five cows. The milk rights and offspring potential of the six cows are transferred – via an intermediary – to a Cayman Island company secretly owned by his company’s CFO, who sells the rights to all seven cows back to his listed company. The annual report says the company owns eight cows, with an option on one more.

A bean counter from a bond-rating agency scrutinizes the details of the transactions and discovers that, of the original two bovines, one is a homosexual bull with gonorrhea and the other had a radical mastectomy, which severely limits their offspring and milk production potential. He promptly downgrades the company’s debt rating to "junk" status, which causes a collapse of various derivative contracts on the eight cows. A last-minute deal to sell the cattle to another farmer is thwarted by failure to disclose the condition of the original two cows, and the company is forced into bankruptcy.

Comments? Write: fischerp@gulfpub.com