World of Oil

StatoilHydro restarts Kristin production

Norway’s StatoilHydro has restarted production at the Kristin gas field after a two-week shutdown to replace faulty lifeboats on the platform. The company had shut in the Norwegian Sea field in early January. Output ahead of the shut-in had been around 353 MMcf of gas per day and 63,000 bbl of conden-sate per day. The field, which came onstream in November 2005, has total production capacity of more than 636 MMcfgd and about 126,000 bpd.

Nigeria cancels South Korean exploration deal

Nigeria canceled exploration rights to two offshore fields awarded to a South Korean consortium, led by state-run Korea National Oil (KNOC), in 2005. The consortium paid $92 million in cash and offered a letter of credit to pay an additional $231 million to cover its 60% interest in oil blocks OPL321 and OPL323. KNOC said it was considering legal moves to reclaim its rights. South Korean interests hold a 30% stake in the project. The remaining stakes are split: 30% to a British company and 10% to a Nigerian firm.

CNPC, Iran sign deal on Azadegan Field

China National Petroleum Corp. (CNPC) signed an agreement to de-velop Iran’s north Azadegan Field. The field is to be developed in two phases. Under the first phase lasting 48 months, crude output capacity would reach 75,000 bpd. The contract is reported to have been signed under new buy-back terms. Under buy-backs, companies hand over operations of fields to the National Iranian Oil Company after development and then receive payment from oil or gas production for a few years to cover their investment. According to initial estimates, in-place oil was put at 6 billion barrels.

Iraq exports average 1.85 million bpd in 2008

Iraq’s crude oil exports averaged 1.85 million bpd in 2008, up 13.5% from 2007 exports, said Falah Alamri, head of the country’s State Oil Marketing Organization. Iraq’s revenues from crude oil sales reached around $60 billion, up 33.6% from 2007.

 Halliburton to pay $559 million in bribery investigation 

US oilfield services company Halliburton will pay a $559 million fine to end an investigation of its former KBR unit, if the US government approves the settlement. It is the largest penalty against a US company for charges of bribery under federal law. Halliburton said it was awaiting final approval from the Department of Justice and the Securities and Exchange Commission (SEC) to settle claims that KBR violated anti-bribery laws by paying kickbacks to Nigerian officials. Under the settlement, Halliburton would pay $382 million to the US Department of Justice and $177 million to the SEC in “disgorgement.” Halliburton is being charged under the Foreign Corrupt Practices Act. Under the FCPA, it is illegal for US companies or their agents to use bribes to win foreign business. In April 2007, oilfield services company Baker Hughes reached a $44.1 million settlement with US officials related to a bribery probe of its operations in Nigeria, Angola and Kazakhstan. In December, German engineering conglomerate Siemens paid $800 million to US officials to settle claims that it violated the FCPA. The US government’s probe of Halliburton related to construction and expansion of a gas liquefaction facility at Bonny Island in Rivers State, Nigeria, and other projects dating back as much as 20 years. In July, Halliburton said it had “reason to believe” payments may have been made to Nigerian officials by agents of its TSKJ consortium, which built the Bonny Island facility. The TSKJ consortium includes France’s Technip, Italy’s Snamprogetti and Japan’s JGC Corp. Albert Stanley, a former KBR chief executive officer, pleaded guilty in September to charges stemming from a scheme to pay $180 million in bribes to Nigerian government officials for work on the Bonny Island LNG plant. As part of the settlement, Halliburton said it would not be required to have a monitor, but the company would have to retain an independent consultant to assess its compliance with anti-bribery laws.

 Adnoc gives out $3.4 billion in upgrade jobs 

Abu Dhabi National Oil Company (Adnoc) handed out deals worth $3.4 billion covering the development of Sahil, Shah and Ahav Fields. Sharjah-based Petrofac won a $2.3 billion contract for the development of the onshore Asab Field. Under the 44-month lump-sum contract, Petrofac will provide engineering, procurement and construction services to upgrade Asab’s production capacity. Petrofac’s work will include upgrades to boost the field’s processing capacity to handle more output from Sahil, Shah and other southeast fields and to upgrade the associated utilities and water-handling facilities. Meanwhile Adnoc’s onshore unit, Adco, awarded a $1.2 billion contract to Spain’s Tecnicas Reunidas and a partner. Adco signed a lump-sum engineering, procurement and construction contract with Tecnicas Reunidas to develop Sahil and Shah Fields. The three fields make up what is known as the SAS development plan, to add 60,000 bpd to Adco’s capacity of about 1.4 million bpd.

 Ecuador cancels previous oil contracts 

Ecuador will cancel its oil contracts with companies in France and Italy due to low oil prices, Mining and Oil Minister Derlis Palacios announced. He said current oil prices made it difficult for his country to benefit while it was paying high production costs to France’s Perenco and Italy’s Agip.

 World’s first drilling FPSO leaves shipyard

The world’s first Floating Drilling, Production, Storage and Offloading vessel (FDPSO) has left the Keppel Shipyard in Singapore. It will head for the Republic of Congo, where it will be deployed at Murphy West Africa Ltd.’s deepwater Azurite development in the Mer Profonde Sud Block. This is the first FPSO-type vessel with drilling capabilities. The vessel is equipped with a modular drilling package that can be removed and reused elsewhere when the production wells have been drilled. It has a storage capacity of 1.4 million bbl of oil and a process capacity of 60,000 bfpd/40,000 bopd, and will be spread-moored at a water depth of 4,500 ft.

 Kazakhstan buys BP’s CPC stake

Kazakhstan bought BP’s stake in a holding company that owns 1.75% of the Caspian Pipeline Consortium (CPC) for $250 million. “We have agreed to buy BP’s stake in Kazakhstan Pipeline Ventures,” KazMunaiGaz boss Kairgeldy Kabyldin said. The CPC pipeline pumps up to 750,000 bpd to Russia for re-export to the Mediterranean. Russia and Kazakhstan own 31% and 19%, respectively, of the consortium, with the rest privately held by Chevron, Lukoil, Shell, ExxonMobil, Eni and Rosneft.

Iceland holds first offshore licensing round 

On Jan. 22, the National Energy Authority of Iceland held the first offshore licensing round for hydrocarbon exploration and production in the country. The licenses are in the Dreki area in the Atlantic Ocean, northeast of Iceland on the Jan Mayen Ridge, between Iceland and the island of Jan Mayen. In 3,280 - 6,562-ft water depths, the area up for bid covers more than 10.5 million acres. Individual applications for licenses may cover one or more of the blocks or parts of blocks, up to a maximum of 309 sq mi. A maximum of five licenses are up for offer. Applicants are also encouraged to nominate a secondary area in case an area of first choice overlaps with other applications. The licensing terms include an initial 12-yr exploration permit, with a potential 4-yr extension; once a field has been discovered and appraised, production licenses are available for 30 yr.

Kazakhstan increases gas transit price 

Kazakhstan increased transit fees for Turkmen and Uzbek gas being piped to Russia by 21%, Energy Minister Sauat Mynbayev said. KazMunaiGaz and Gazprom signed a deal in late December to raise the fee to $1.70 from $1.40 per 35,000 cu ft per 62 mi beginning in January. Mynbayev also urged the government to cut the recently introduced mineral extraction tax on the oil industry. The current tax rate had been calculated on the basis of a price of $60 per barrel. “Now, when the price is below $40 per barrel, it has become apparent that the mineral extraction tax rate should be revised downwards,” Mynbayev said.

China begins Iraqi oil work

 China National Petroleum Corp. (CNPC) began work on a $3 billion oil project in Iraq. A CNPC delegation formally opened the al-Ahdab oilfield project in Iraq’s eastern province of Wasit in early January. The Chinese will operate the field under a service contract that was initially negotiated under Saddam Hussein but that was renegotiated last year by the new Iraqi government, which obtained more advantageous terms. The field should produce about 120,000 bpd.

Oil sands projects delayed due to financial slowdown

 Many projects have been delayed as a result of the global financial slowdown and the steep drop in energy prices. Canada’s oil sands projects have been among the hardest hit. Announcement of the delays began in late October, with Nexen and Opti Canada saying they would delay the second phase of the Long Lake oil sands project to 2009. Suncor, Petro-Canada and StatoilHydro have all announced cancelations of upgraders at some of their oil sands projects. Suncor Energy announced that it would delay an upgrader for its Voyageur oil sands expansion by one year to 2013. The expansion would increase production from Suncor’s operations near Fort McMurray, Alberta, to 550,000 bpd from 350,000 bpd. The $10 billion Fort Hills bitumen upgrader, north of Edmonton, was delayed indefinitely by Petro-Canada. StatoilHydro cancelled plans for a $13.2 billion upgrader for its oil sands projects. Shell announced that it was delaying an investment decision on a second expansion of the Athabasca oil sands project and also withdrew a request for regulatory approval for its 100,000-bpd Carmon Creek thermal oil sands project. Canadian Natural Resources slowed spending on the second phase of its 2009 Horizon oil sands project after first-phase costs increased 42% over estimated costs. Connacher Oil and Gas suspended construction of its second thermal oil sands development, the $285 million Alger project, and slowed bitumen production at its Great Divide thermal oil sands project to 5,000 bpd from 9,000 bpd.

 SEC finalizes oil and gas reserve reporting rules

The US Securities and Exchange Commission (SEC) announced on its website that it has unanimously approved revisions to modernize its oil and gas company reporting requirements to help investors evaluate the value of their investments in these companies. The new disclosure requirements approved by the commission include provisions that permit the use of new technologies to determine proved reserves, if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes. The new requirements also will allow companies to disclose their probable and possible reserves to investors. Current rules limit disclosure to only proved reserves. The new disclosure requirements also require companies to report the independence and qualifications of a reserves preparer or auditor; file reports when a third party is relied upon to prepare reserves estimates or conduct a reserves audit; and report oil and gas reserves using an average price based upon the prior 12-month period rather than year-end prices. The use of the average price will maximize the comparability of reserves estimates among companies and mitigate the distortion of the estimates that arises when using a single pricing date.

 Schlumberger wins patent battle against EMGS

Schlumberger won the first round of a patent battle with Norway’s Electromagnetic Geoservices (EMGS). Schlumberger brought the case against EMGS in September 2008. On Jan. 19, the High Court in London revoked three of EMGS’s patents covering Controlled Source ElectroMagnetic (CSEM) surveying, granted by the European and UK Patent Offices. The patents in question covered the general use of CSEM for direct detection of hydrocarbons, the direct detection of hydrocarbons by CSEM using certain 3D geometries and combining CSEM and seismic for direct detection of hydrocarbons. Schlumberger claimed that the ideas that the patents sought to protect were already well-known and in the public domain.

 Algeria signs $272 million in exploration deals 

Four energy companies have signed deals with Algeria worth a total of $272 million to explore for oil and gas after winning permits under the north African country’s seventh exploration and production licensing round. Eni was awarded a license to explore in the area of Kerza while E.ON AG’s Ruhrgas won the Rhourde Yacoub area. Gazprom will explore the El Assel area of the Berkine Basin, and Britain’s BG Group won Guern El Guessa. Detailing the contracts, Djilali Takherist, head of the commission handling the tender, said BG would invest $100 million to drill seven wells, while Eni was due to spend $69 million for eight wells. E.ON will drill two wells for an investment of $48 million, and Gazprom three wells for $55 million. The round was the first to be held under a 2006 law that gives Algerian state energy conglomerate Sonatrach a mandatory minimum 51% share in every oil and gas exploration contract awarded to foreign companies.

Xinjiang becomes China’s second-largest oil-producing region

China’s western Xinjiang Uygur region became the country’s second-largest oil production base in 2008 with an output of 550,000 bpd, up by 21,000 bpd from 2007. Xinjiang overtook Shangdong Province, the previous second-largest producer. China expects output in Xinjiang to hit 575,000 bpd in 2009.