World of Oil

Shah Field work awarded to ConocoPhillips

ConocoPhillips won the estimated $10 billion job to develop sour gas reserves at Shah Field, off the United Arab Emirates. “ConocoPhillips is the winner of the project,” a source at state-run Abu Dhabi National Oil Company (ADNOC), told Reuters. ConocoPhillips is expected to take a 40% stake in the project, while ADNOC would hold the rest.

Kazakhstan warns investors

Kazakhstan Prime Minister Karim Masimov announced that the Kazakh state could seize oil fields and mineral deposits from private investors. “If contractual obligations for the developments of mineral resource deposits are not respected, the contracts will be cancelled and the deposits will be returned to the state,” Masimov announced at a government meeting following a series of high-profile business disputes involving top foreign energy majors.

BP to cut 5,000 jobs

Tony Hayward, chief executive of BP, has confirmed that the company will slash about 5,000 jobs worldwide. BP will cut around 1,500 jobs in both its US and UK operations, with the rest of the losses spread out across its global operations. Most of the cuts are aimed at desk jobs but around 10% of the cuts will be in company exploration and production operations.

MMS offers bonus credits for relinquishing leases

The MMS is proposing to amend its regulations to provide a credit to lessees who relinquish certain eligible leases in the Gulf of Mexico. The amendments will also define the eligible leases and establish how those credits may be used. “We are confident that these amendments to the regulations will allow for an efficient exchange of the leases for credit and help to promote the oil and gas operators’ continued development of energy production in the Gulf of Mexico,” said MMS Director Randall Luthi. The proposed rule would give a credit equal to the bonus bid originally paid plus subsequent rental payments to lessees who relinquish leases within the specified areas.

MMS Chukchi Sea lease sale breaks records

The US Department of the Interior Minerals Management Service (MMS) held the Federal Chukchi Sea Outer Continental Shelf Sale 193 on Feb. 6-the first Chukchi Sea sale since 1991. The MMS received 667 bids for the sale, a record for the area. Companies submitted bids totaling almost $3.4 billion, with high bids of more than $2.6 billion. The highest bid received for a single exploration block was $105 million submitted by Shell, who also offered $2.1 billion in total high bids for 275 tracts. The second-highest spender in the sale, ConocoPhillips, put up $506 million in high bids on 98 tracts. Repsol put up $14.5 million in high bids on 93 tracts. While StatoilHydro and Eni put up $14 million and $9 million, respectively, in high bids on 16 and 18 tracts, 14 of which were joint ventures. The sale area is located offshore Alaska from north of Point Barrow to northwest of Cape Lisburne and contains more than 29 million acres. It is situated 25 to 50 mi offshore in water depths from 95 to 9,800 ft.

World drilling record broken by ExxonMobil’s Sakhalin-1 project

The project team at Sakhalin-1, operated by Exxon Neftegas Limited, drilled the Z-12 well-located in the Chayvo Field-to a record measured depth of 38,322 ft. This exceeds the prior world record set in 2007 by Exxon Neftegas Limited’s Z-11 well at the Sakhalin-1 project by 1,306 ft. The well was drilled from land, using the world’s most powerful land-based rig and employing extended-reach technology to a target area in the oil reservoir located under the ocean about 7 mi from shore. “This drilling success has contributed to other Sakhalin-1 project achievements, including the commencement of production five years after the project was declared commercial and 200 marine tanker shipments in the first year of export operations,” said Morris Foster, president of ExxonMobil Production Company. “Employing extended-reach technology to drill onshore beneath the seafloor to offshore oil and gas deposits eliminates the need for additional offshore structures, pipelines and associated activities.” Project partner Rosneft also announced that Sakhalin-1 will cut production in 2008 by more than 25%. “Peak production of 225,000 bpd, which we saw last year, has passed,” said Lev Brodsky, head of Sakhalin projects at Rosneft. Brodsky said production was expected to fall by about 63,000 bpd this year.

Petrobras calls data theft industrial espionage

Brazilian state-run Petrobras announced that four laptops and two RAM memory chips containing “important information” of oil and gas field work of the country’s offshore play have been stolen. “There was a theft of equipment that contained important information for the company,” said a Petrobras spokesman. The company did not specify the nature of the data, but said that it has copies of the stolen data. The data equipment was being transported by Haliburton when it was stolen. Petrobras would not comment on reports that the computers contained secret information on the company’s oil and gas reserves in the highly prolific, sub-salt cluster hosting the Tupi Field but did disclose that the data came from a drillship in the Santos Basin, where Tupi is located. The subsalt cluster has received strong interest from the oil industry after Petrobras announced, in late 2007, that the field had recoverable reserves between 5 and 8 billion barrels of light crude in the Tupi Field and in-place reserves of up to 20 billion barrels. BG Group, who has a 25% interest in the Tupi discovery, also revealed on Feb. 7 that the total hydrocarbons in place had been increased, and that they now estimate that the discovery contains between 12 and 30 or more billion barrels of oil equivalent.

Russia and Ukraine remove middle man

Gazprom boss Alexi Miller announced that all business between the two nations will now be carried out by the pair’s state-run energy companies. Miller said that Gazprom and Ukraine’s Naftohaz Ukrainy will set up two 50:50 ventures to import gas to Ukraine and sell it inside the country, thus removing Gazprom-imposed gas traders RosUkrEnergo and UkrGasEnergo.

Venezuela stops oil supply to ExxonMobil 

On Feb. 12, PDVSA announced it had suspended commercial relations and cut the supply of crude and petroleum products to ExxonMobil. In the previous week, ExxonMobil won injunctions from a number of courts which temporarily froze up to $12 billion of Venezuela’s overseas oil assets, causing PDVSA to move its export payment accounts to UBS bank in Switzerland. “Faced with the legal-economic harassment started by ExxonMobil against PDVSA and as an act of reciprocity, PDVSA has decided to suspend commercial relations,” said PDVSA in a statement. PDVSA added that it would respect existing contracts governing shared investments with ExxonMobil, but reserved the right to break contracts whose terms so allowed. ExxonMobil spokeswoman Margaret Ross responded that the company would take steps to ensure supply. “It is our long-standing practice to take appropriate steps to meet our customers’ needs,” said Ross.

Iranian Oil Bourse begins trading

The Iranian oil exchange opened operations on Feb. 17. The Iranian Oil Bourse (IOB) will trade petroleum, petrochemicals and gas in various non-dollar currencies, primarily the Iranian rial. All other major oil markets trade barrels of oil in US dollars. The IOB is located on the Iranian island of Kish, a Free Trade Zone. Iran, the second-largest OPEC producer, was originally expected to start its own oil-trading market in 2005, but has encountered many hurdles along the way, the last of which was the severed underwater internet cables ,which created an internet outage throughout the Middle East. This outage was a problem since, unlike other bourses, the IOB relies on a peer-to-peer trading model using the internet.

France asks IMF to consider windfall tax

France has asked the International Monetary Fund (IMF) to examine the viability of a windfall tax on oil profits to aid countries lacking energy resources. Christine Lagarde, French Economy Minister, announced plans for the study after being asked if the French government was considering levying a windfall tax on Total’s profits, which hit $17.7 billion in 2007. “If we go in that direction it has to be at global level. We can’t penalize just Total to the benefit of other big oil groups who would not be subject to this constraint,” Lagarde said. She added that French President Nicolas Sarkozy had asked the IMF to look into the issue “so that one can reflect on a global level on a sort of tax that would allow countries with the least energy to benefit from this exceptional profit.”

Sixth Nabucco pipeline partner named

RWE AG was named as the sixth partner in the $7.4 billion Nabucco gas pipeline project on Feb. 5. Germany’s RWE AG will provide financing and various technical support for the pipeline and joins Austria’s OMV AG, Hungary’s MOL, Romania’s Transgaz, Bulgargaz of Bulgaria and Turkey’s Botas in the project. Construction for the proposed 2,051-mi pipeline is scheduled to begin in 2009, with the pipeline expected to become operational in 2013. The pipeline will transport gas from the Middle East and Central Asia through Turkey and European Union members Bulgaria, Romania and Hungary before ending in Austria.

Iranian oil output reaches 4.184 million bpd

On Feb. 6, Iranian Oil Minister Gholamhossein Nozari said Iran’s oil output reached a record 4.184 million bpd, the highest since the 1979 Islamic revolution. “We reached a record of oil output since the Islamic revolution with production of 4.184 billion bpd of oil,” said Nozari. “It is planned to increase oil production to 4.2 million bpd by the end of the current Iranian year (Mar. 19),” he added. Although Iran has long-term plans to increase oil output, decreased pressure in oil wells has prevented the nation from increasing production to its target of 5 million bpd. Azadagan Field, a key part of the country’s plans to gradually boost output capacity, came onstream Feb. 18. Azadagan is Iran’s largest oil field-in-place reserves have been estimated to be in the range of 26 to 33 billion barrels. “It is estimated that the seven wells of the oil field (will) produce 25,000 barrels of oil per day,” said Seifollah Jashnsaz, managing director of the National Iranian South Oil Company.

OMV to continue with Iraqi exploration

Austrian oil and gas company OMV AG intends to start oil exploration in northern Iraq this year despite delivery sanctions imposed by the oil ministry in Baghdad. On Jan. 1, the oil ministry in Baghdad agreed to halt exports of crude to OMV and a South Korean company, in a protest against what the ministry calls illegal delivery contracts with the Kurdish regional government.

ConocoPhillips acquires a 50% stake in Keystone pipeline

TransCanada Corp. and ConocoPhillips announced that ConocoPhillips acquired a 50% ownership interest in the Keystone oil pipeline. A previously signed memorandum of understanding committed ConocoPhillips to ship crude oil on the pipeline and gave it the right to acquire up to 50% ownership interest. “The Keystone pipeline will play a significant role in integrating ConocoPhillips’ upstream and downstream assets and ensure market access for growing Canadian production,” said ConocoPhillips chairman and CEO Jim Mulva. Affiliates of the TransCanada Corp. will be responsible for constructing and operating the 2,148-mi Keystone pipeline, which will be capable of delivering 590,000 bpd of crude oil from Hardisty, Alberta to US markets at Wood River and Patoka, Illinois, and to Cushing, Oklahoma. Start up is expected in late 2009 with Keystone being capable of delivering 435,000 bpd to Wood River and Patoka, Illinois, and it will be expanded to 590,000 bpd and extended to Cushing, Oklahoma in late 2010.

Nigeria approves new gas policy

Nigeria has adopted a new policy requiring gas producers to direct a portion of their output to the domestic market rather than exporting it. “All oil and gas developers in the country are to allocate a specified amount of gas from their reserves and annual production to the domestic market,” said a presidential statement. The new policy, which became effective immediately, stipulates that producers “must realign their gas development portfolios” to ensure gas resources are supplied to “strategic domestic sectors.” The new policy also states that gas will be supplied at the lowest commercially sustainable prices to the domestic electricity producing sector.

Venezuela, Total and Statoil mixed company 

Sincor’s extra-heavy oil development operations in the Orinoco Belt were transferred to PetroCedeno on Jan. 10. Documents between Total, PDVSA and the Venezuelan Ministry of Energy and Mines were finalized on Feb. 8, which set out the new contractual terms and conditions governing PetroCedeno. Under the final agreements, Total, which previously held a 47% interest in Sincor, will have a 30.33% interest in PetroCedeno alongside PDVSA with a 60% interest and Statoil with 9.67%. Total expects to receive $834 million in crude oil shipments from Sincor to compensate for its 16.67% decrease in interest of the new company. Total also signed two joint study agreements with PDVSA concerning the Junin 10 Block in the Orinoco Belt. The agreements call for appraising the block’s extra-heavy crude oil reserves and examining a project to produce extra-heavy oil.

StatoilHydro and EGL go 50:50 on TAP

StatoilHydro and EGL Group have established a 50:50 joint venture to develop, build and operate the Trans Adriatic Pipeline (TAP). The 323-mi pipeline will bring natural gas from the Caspian Sea to Europe via Greece and Albania across the Adriatic Sea to Italy’s southern Puglia region and then extend into Western Europe. The pipeline will carry about 353 Bcfy, with the option to expand to 706 Bcf. EGL started the project and estimates the pipeline will cost about $2.17 billion. StatoilHydro said the project is subject to a final investment decision planned for the second half of next year. “We are pleased to join EGL in the effort of offering a new outlet for gas transported from Asia to Europe. Our joining of the TAP project should be viewed as a move to offer an attractive market outlet for the Shah Deniz gas to the European market,” said StatoilHydro executive Rune Bjornson. Shah Deniz Field lies in the Azerbaijan sector of the Caspian Sea-StatoilHydro has a 25% stake in the field. Development of natural gas storage facilities and a liquefied natural gas terminal in Albania are also included in the TAP project. Tap is expected to be operational in 2011 at the earliest.

Russia reinvests in Iraqi oil 

On Feb. 11, Iraqi Foreign Minister Hoshiyar Zebari met with Russian Finance Minister Alexei Kudrin. During the meeting, Russia agreed to dismiss a $12.9 billion debt and a separate deal was signed that paves the way for $4 billion in investments from Russian companies. Kudrin named Lukoil as one of the top investors for the new deal. The company hopes to revive its $3.7 billion deal to develop the West Qurna oil field-one of Iraq’s largest oil deposits. “We will now be waiting for permission from the government of Iraq to start working on the field,” said Lukoil Vice President Leonid Fedun. The company said it would be ready to begin work on West Qurna within three to five years after receiving permission from the Iraqi government. Lukoil estimates that the field would produce around 600,000 bpd.

IOC, OIL and Sonatrach partner

Indian Oil Corporation Ltd (IOC) and Oil India Ltd (OIL) have partnered with Algerian national oil company Sonatrach for production of oil in a Libyan onshore block. Sonatrach will have a 50% interest in the project, while the two Indian companies will each have a 25% interest.

China’s gas production increased in 2007

China’s natural gas production increased by 23.1% in 2007 to 2.45 Tcf from 2.07 Tcf in 2006, reported the China Petroleum and Chemical Industry Association (CPCIA). The expansion of the natural gas infrastructure, including pipelines, reflected rapid increases in production and consumption, the CPCIA said. China’s first pipeline went into commercial operation in 2004. China plans to begin building a second east-west gas pipeline this year. The new pipeline is scheduled to begin operation in 2010 and will have an annual transport capacity of 1.06 Tcf. The pipeline will mainly move natural gas from Central Asia to the Pearl and Yangtze River Deltas-the country’s two most developed regions. Construction on another pipeline to link the Puguang Gas Field-one of the country’s largest-with the Yangtze River Delta started last August.

Comments? Write: editorial@worldoil.com