World of Oil

Saudi Aramco cancels Dammam project

Saudi Aramco cancelled plans for a $1.2 billion upgrade for its Dammam Field. The company is attempting to renegotiate cheaper deals for contracts of some of its largest projects signed at the height of the commodities price boom. Aramco’s Manifa agreement with Saipem subsidiary Snamprogetti is under review, along with a refinery project at Jubail with Total. Norway’s StatoilHydro also recently cancelled a $4 billion bitumen upgrader project in Canada, citing prohibitive construction costs and an uncertain oil price outlook.

Hurricanes destroy 60 platforms

According to a US Minerals Man-agement Service report, hurricanes Gustav and Ike destroyed 60 oil and natural gas production platforms in the US Gulf of Mexico (GOM). The destroyed platforms accounted for 13,657 bpd, or 1.05%, and 96.5 MMcfd, or 1.3%, of production in US-regulated regions of the GOM. As of the Dec. 16 report, 31 platforms suffered extensive damage that may take up to six months to repair while 93 platforms sustained moderate damage that may take between one and three months to repair. Also, 45 platforms are still evacuated and 183,861 bpd of oil and 1.46 Bcfd of natural gas remain shut in.

Russian oil exports fall

In November, Russian oil exports via pipeline fell by 12% from 4.21 million bpd to 3.7 million bpd, their lowest level in 2008 to date. Russian producers said exports were decreased because of falling oil prices and the government’s failure to lower export duties sufficiently. Producers then called on the government to further lower the export duty for December from previously announced cuts, but Prime Minister Vladimir Putin signed a decree cutting export duties only to previously announced levels, to $25 per bbl from $37 per bbl.

Blind Faith starts up

Chevron has started crude oil pro-duction from Blind Faith Field in the deepwater Gulf of Mexico. First oil was achieved on Nov. 11. Daily production is expected to ramp up to about 65,000 bopd and 55 MMcfgd over the next three months.

Chevron wins legal battle over Parabe

After a month-long trial in the US District Court in San Francisco, Chevron was cleared in a lawsuit brought by a group of Nigerians. The group accused the company of colluding with the Nigerian military in the late 1990s to break up a protest over the company’s practices in the oil-rich Niger Delta. Nigerian Larry Bowoto and an indigenous rights group known as the Concerned Ilaje Citizens brought the suit under the Alien Tort Claims Act, which allows foreigners to sue over human rights abuses committed in their countries by or on behalf of US organizations. The suit centered on a protest in 1998 in which about 100 people occupied Chevron’s Parabe platform for three days, protesting against environmental damage and demanding compensation and jobs. Two protestors were killed when Nigerian forces landed on the platform. During testimony, Chevron attorneys argued that it was the company’s right to protect its employees and call on local authorities, and that the protesters had taken several employees hostage. Lawyers for the plaintiffs countered that the demonstration on the oil platform was peaceful and that Nigerian troops used excessive force. The oil company said it neither gave the order to use excessive force to the Nigerian soldiers, nor had authority to command Nigerian forces.

Brazil approves new natural gas regulations

Brazil’s lower house approved new regulations for the country’s natural gas sector aimed at lowering local energy costs and boosting supplies. The bill will establish new rules for exploration, processing, transport and sales of gas, including regulation of gas pipeline construction and operation. The legislation established concession rules and fees for construction of new pipelines for third-party users and producers. The bill also opens greater private access to state-run oil company Petrobras’ gas pipelines. Under the agreement, all large producers and importers who consume their own gas will be allowed to build their own pipelines if distribution companies are not able to supply all their needs. The bill also establishes a class of “free consumers” who are allowed to buy gas from any seller in the country or build their own storage and transportation facilities. The legislation is now awaiting Brazilian President Luiz Inacio Lula da Silva’s signature.

UK North Sea exploration licenses awarded

The UK Department of Energy and Climate Change has launched the 25th offshore oil and gas licensing round, offering 171 new licenses to 100 companies, a record offering. Eni was awarded two production licenses. These two awards, both operated by Total, represent potential extensions of Eni’s development area focused on its Laggan and Tormore gas condensate discoveries. In the West of Shetlands area, Eni, holding a 22.5% interest, and its partners in the Tormore discovery - Total, 47.5% interest; Dong, 20%; and Chevron, 10% - have been awarded part of the adjacent Block 205/4. Further north, Eni will have a 22% interest in Blocks 214/17, 214/21b and 214/22 with partners Total (56%) and DONG (22%). Total also gained a 75% interest in Block 29/3b in the Central Graben area of the North Sea, where it has a firm well commitment to drill the high-temperature, high-pressure Corfe Prospect.

Iraq and Kurdistan back and forth on export agreement

In late November, Iraqi Oil Minister Hussein Shahristani and officials from Iraq’s Kurdistan region agreed to link two Kurdish oilfields, Tawke and Taq Taq, to the main northern export pipeline to the Turkish port of Ceyhan. Exports of 100,000 bpd are expected to begin from Tawke Field, where Norwegian DNO has a concession, at the beginning of next year, Kurdistan Natural Resources Minister Ashti Hawrami said. Tawke is expected to be connected by the end of this year, and Taq Taq is due to be linked to the pipeline three to four months later. Combined exports should reach 250,000 bpd by the end of next year. Since the agreement, Shahristani has said that when Kurdish contracts are amended to the extent that they became acceptable “and recognized by the government of Iraq, then the oil could be exported.”

Sakhalin-2 begins year-round exports

With the commissioning of a new pipeline system, Sakhalin-2 in Russia’s far east began year-round exports after a protracted delay. The Sakhalin-2 project could previously only load exports in the summer months, as the port would freeze in winter. “Year-round oil production has become possible due to the commissioning of the TransSakhalin oil and gas pipeline system,” Sakhalin Energy said in a press release. Gazprom holds a 50% stake, plus one share, in Sakhalin Energy; Shell, 27.5%; Japan’s Mitsui, 12.5%; and Mitsubishi, 10%. Until this year, Sakhalin-2 had produced about 60,000 bpd for only six months a year, but production could ramp up to 150,000 bpd-155,000 bpd once it reaches full capacity. Year-round crude exports were deferred from last year to this year due to delays in pipeline commissioning.

Obama drops windfall profits tax proposal

After promising to enact a windfall profits tax on US oil companies during the US presidential election, in part to help finance a $1,000 emergency energy rebate for American families, President-elect Barack Obama quietly withdrew the tax proposal, citing current low oil prices as mitigating any windfall profits. Many energy experts warned that imposing a windfall profits tax would discourage energy companies from drilling for oil in the US, which would exacerbate US reliance on foreign suppliers. More offshore oil and gas exploration may also take place under Obama’s administration. Retired Marine Corps General James Jones, a supporter of offshore drilling, was appointed as his national security advisor. Jones is chief executive of the US Chamber of Commerce’s Institute for 21st Century Energy - a group that advocates for increased offshore drilling, clean coal technology and nuclear power. Jones has stressed that the US needs to make better use of domestic resources on and offshore.

Obama drops windfall profits tax proposal

After promising to enact a windfall profits tax on US oil companies during the US presidential election, in part to help finance a $1,000 emergency energy rebate for American families, President-elect Barack Obama quietly withdrew the tax proposal, citing current low oil prices as mitigating any windfall profits. Many energy experts warned that imposing a windfall profits tax would discourage energy companies from drilling for oil in the US, which would exacerbate US reliance on foreign suppliers. More offshore oil and gas exploration may also take place under Obama’s administration. Retired Marine Corps General James Jones, a supporter of offshore drilling, was appointed as his national security advisor. Jones is chief executive of the US Chamber of Commerce’s Institute for 21st Century Energy - a group that advocates for increased offshore drilling, clean coal technology and nuclear power. Jones has stressed that the US needs to make better use of domestic resources on and offshore.

Saudi oil tanker hijacked by pirates

On Nov. 15, Somali pirates seized the Saudi-owned oil tanker Sirius Star. The ship was taken southeast of the coast of Kenya - the farthest out to sea Somali pirates have struck. The attack also made Sirius Star the largest vessel ever to be hijacked. The ship was carrying a full load of 2 million bbl of crude oil and was headed for the US via the Cape of Good Hope. As of Dec. 5, the 25-member crew was reported to be safe. The pirates initially demanded a $25 million ransom, but have reduced the amount to $15 million.

US court cancels Shell’s Beaufort Sea permit

The US 9th Circuit Court of Appeals cancelled Shell’s permit to drill for oil at Sivulliq Field in the Beaufort Sea, citing failure by the US Minerals Management Service (MMS) to conduct a thorough environmental review. The court ruled that the MMS failed to adequately consider the risk of oil spills, disruptions to the traditional hunting lifestyle of Inupiat Eskimos and the disturbance of migrating whales before granting Shell a permit to drill. The ruling follows a temporary order, issued last year, halting Shell’s drilling at Sivulliq.

Rosneft, KNOC sign preliminary Kamchatka agreement

Russia’s Rosneft and South Korea’s KNOC signed a memorandum of understanding to explore West Kamchatka Field offshore Russia. Rosneft will hold 60% of Kamchatka and South Korea the remaining 40%. The report placed the exploration and development cost at about $24 billion. KNOC was removed from Kamchatka earlier this year after Moscow refused to approve an extension on the exploration license.

Iran, Turkey sign gas deal

Iran signed a memorandum of understanding with Turkey for the development of two phases of its South Pars gas field. “This is about the development of phases 23 and 24 of South Pars gas field with joint investment of Iran and Turkey, and 50% of gas produced from these fields will be sold to Turkey,” Oil Minister Gholamhossein Nozari said. Nozari said a second part of the deal covered transferring gas to Turkey from Iran, and a third element covered transferring 1.2 Tcf of gas a year on to Europe.

World’s deepest subsea completion 

Shell has set a world water depth record in completing a subsea well 9,356 ft below the water’s surface in Silvertip Field at the Perdido development project in the Gulf of Mexico. As an oil well, the Perdido record is 35% deeper than the previous oil well record of 6,950 ft, also set by Shell at Fourier Field. At Perdido, Shell intends to drill an even deeper well at Tobago Field to 9,627 ft, which will surpass the present world record at Silvertip. Shell operates the Perdido development on behalf of partners Chevron and BP. The Perdido development will ultimately drill 35 wells in Great White, Tobago and Silvertip Fields located in Alaminos Canyon. Moored in about 8,000 ft of water, the drilling and production facility will be the deepest in the world. First production from Perdido is expected around the end of the decade, with the facility capable of handling 130,000 boepd.

Uruguay opens bids for offshore basins

Uruguay’s energy ministry and ANCAP, the country’s NOC, have launched an offshore licensing round for exploration and exploitation of gas and oil. The 11 blocks on offer lie in the Punta del Este, Oriental Del Plata and Pelotas Basins, covering areas ranging from 1,500 sq mi to 3,000 sq mi in water depths from 150 to 5,000 ft. The first tender for exploration will take place next June.

Norway approves Wintershall’s Revus offer

Wintershall, a unit of chemicals group BASF, was cleared by Norway’s oil and energy ministry for its $740 million offer for Norwegian oil company Revus Energy. Wintershall also received clearance from the British Department of Energy and Climate Change regarding UK oil and gas exploration and production licenses held by Revus and its subsidiaries. Revus has about 60 UK and Norwegian licenses, including stakes in four producing fields - Broom, Murchison, Veslefrikk and Brage - and a number of potential commercial discoveries.

Unrest costs Nigeria 397,697 bpd

Unrest in the Niger Delta is costing Nigeria 397,697 bpd of lost production, the Department of Petroleum Resources said. Some 113 oil fields are shut in due to security and operational issues. Oil pipelines, facilities and personnel in the Niger Delta have been targets of militant attacks over the past three years, which have cut Nigeria’s oil output by almost a quarter. Total production now stands at about 2 million bpd, down from 2.6 million bpd in 2006.

StatoilHydro signs deal with Anadarko for Peregrino Field

StatoilHydro became the sole owner of Peregrino heavy oil field offshore Brazil after closing a deal to acquire the remaining 50% stake from Anadarko. Brazil’s Agencia Nacional de Petroleo (ANP), the governmental agency responsible for regulating oil and gas operations, has officially approved the deal, granting StatoilHydro 100% ownership of this asset, and therefore operatorship. StatoilHydro’s portfolio in Brazil also includes seven other exploration licenses in the Santos, Campos, Jequitinhonha, Espírito Santo and Camamu Basins. Peregrino Field is located 53 mi off the coast of Rio de Janeiro, in the southwestern part of the Campos Basin, in waters up to 328 ft deep.

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