World of Oil

China loans Kazakhstan $5 billion for oil

China extended a $5 billion loan to Kazakhstan to expand oil cooperation between the two countries. China National Petroleum Corp. announced the loan to Kazakhstan’s state-run KazMunaiGas National Co. during a visit by Kazakh President Nursultan Nazarbayev to China. Part of the $5 billion loan is an agreement for $3.3 billion for Kazakh oil company Mangistaumunaigas, which the two firms plan to jointly take over. In return, China wants to obtain oil deliveries from Kazakhstan.

Weatherford, Iraqi deal

Weatherford has signed a $224.4 million contract to drill 20 wells in Iraq’s southern Bazargan Field, said Ali Maarij, head of the state-run Maysan Oil Company. Maarij added that the project could boost production there by up to 30,000 bpd. The field currently produces about 100,000 bpd.

OTC turnout holds strong

Attendance at the 2009 Offshore Technology Conference (OTC) reached 66,820 despite a global economic re-cession and initial concerns about swine flu. Energy professionals from more than 120 countries met at the world’s largest offshore resources industry event, held May 4–7 at Reliant Park in Houston, Texas. Attendance was a little less than in 2008, but exceeded expectations. The 2009 exhibition space was the second largest in OTC’s 40-year history, with more than 557,000 sq ft of exhibition area filled to capacity by 2,500 companies from 38 countries.

Norway’s Antarctic claim

Norway submitted a claim on the Antarctic continental shelf—and any potential hydrocarbon riches it holds—to the United Nations’ Commission on the Limits of the Continental Shelf (CLCS). The Norwegian claim covers a section of the shelf off Bouvet Island and Dronning Maud Land. Norway Foreign Affairs Minister Jonas Gahr Store said that Oslo’s claim will enable the CLCS to determine the boundary between Norwegian territory and the deep ocean floor. May 13 is the deadline to submit claims on the Antarctic shelf. Norway’s submission follows a claim made in April by Argentina to the CLCS covering 656,000 sq mi of South Atlantic seabed. In 2007, the UK laid claim to 385,000 sq mi of Antarctic seabed.

Iraq will export oil from Kurdish fields

Iraqi Oil Ministry spokesman Asim Jihad said the ministry will begin exporting oil from fields in semi-autonomous Kurdistan once Kurdish fields have been connected to the national export pipelines. The Iraqi Oil Ministry will start exporting crude extracted from some oil fields in Kurdistan, but it is unclear when the exports will begin. The Kurdish government had previously announced that oil exports from its Tawke Field would begin in June, saying they would start at an initial rate of 60,000 bpd. It also said that 40,000 bpd of exports from another field, Taq Taq, would begin, traveling by truck and through an Iraq-Turkey export pipeline. It said oil exports would be sold by Iraq’s national State Oil Marketing Organization.

Petrobras turns on Tupi taps 

On May 1, Petrobras began production in the pre-salt layer of the Santos Basin by means of the Extended Well Test (EWT) in Block BM-S-11, operated by Petrobras (65%) in partnership with BG Group (25%) and Galp-Energia (10%). The Tupi EWT began production via Well 1-RJS-646, at a depth of 7,020 ft. The well was connected to FPSO BW Cidade de Sao Vicente, which has a production capacity of 30,000 bopd; however, Petrobras’ Chief Financial Officer Almir Guilherme Barbassa said the company is unlikely to produce more than 14,000 bpd due to limits on the amount of gas they may flare. The purpose of the test, which will last 15 months, is to collect technical information for the development of the pre-salt reservoirs, such as: the behavior of the reservoirs in long-term production; fluid movement or draining during production; underwater offloading; and studies to define the best geometry for the final wells, which may be vertical, horizontal and/or deviated. The FPSO installed for the EWT will be connected to two wells, testing Well 1-RJS 646 in the first nine months and the second, Well 9-RJS 660, in the remaining six months. After the EWT is completed, the Tupi Pilot Project will start up, with a capacity to produce and process 100,000 bopd and 141.25 MMcfgd. The first definitive module for the development of the area may be an extension of the pilot project.

Utah counties and operators sue US Interior Department

Three companies and three Utah counties are suing the US Interior Department, alleging that Secretary Ken Salazar broke the law in setting aside 77 oil and gas lease parcels. The two lawsuits, filed in US district court in Salt Lake City, argue that federal mining law required the Bureau of Land Management (BLM) to proceed with issuing the leases to winning bidders after a Dec. 19 auction. The plaintiffs—Utah’s Uintah, Carbon and Duchesne counties and Impact Energy Resources, Peak Royalty and gas player Questar—claim that BLM had to issue the leases within 60 days of the auction. The sale was halted when several conservation groups successfully argued that BLM did not properly follow environmental law when setting up the sale of 77 parcels on 103,000 acres of public land near Arches and Canyonlands national parks, Dinosaur National Monument and Nine Mile Canyon. The auction fell into disarray when University of Utah student Tim DeChristopher won 14 bids with no intention of paying for them as a protest against drilling policies. After the auction, BLM Deputy Director Kent Hoffman allowed any of the bidders to withdraw, if they wished, with no penalty. On Jan. 17, a federal judge issued a temporary restraining order against the auction, finding fault with BLM’s air-quality and historic-preservation analyses. BLM subsequently returned the legitimate bidders’ money. On Feb. 4, Salazar announced he would shelve the 77 disputed leases pending “a fresh look” at the adequacy of BLM’s environmental reviews.

Iceland closes first licensing round in Dreki

On May 15, Iceland’s National Energy Authority (NEA) closed the First Licensing Round for the northern Dreki area. The NEA received two applications for exploration and production licenses. In addition, the NEA received one application for a prospecting license in the Dreki area. An open-door policy is, however, maintained for prospecting licenses, meaning that the Dreki area is a difficult and expensive long-term exploration project for the future licensees, but with the potential for high reward.

Chevron begins production at Tahiti Field

On May 5, Chevron began production at its Tahiti Field, the deepest producing field in the Gulf of Mexico. Daily production is expected to ramp up to about 125,000 bopd and 70 MMcfgd before the end of the year. Tahiti Field was discovered in 2002 and is estimated to contain recoverable reserves of 400 to 500 million boe. Tahiti is located at Green Canyon Blocks 596, 597, 640 and 641, about 190 mi south of New Orleans, in 4,100 ft of water. Primary pay sands are Lower to Middle Miocene from 23,000 to 28,000 ft and lie below a salt canopy ranging from 8,000 to 15,000 ft thick. The deepest producing well has an MD of more than 26,700 ft, a GOM record. Production is from two subsea drill centers tied back to a floating production facility supported by a truss spar. Chevron is the operator of Tahiti and holds a 58% working interest; StatoilHydro holds 25% and Total holds 17%.

Norway awards 21 new production licenses

Norway’s Ministry of Petroleum and Energy awarded new production licenses in the 20th Licensing Round on the Norwegian Shelf. Thirty-four companies received offers to participate in a total of 79 blocks—28 in the Barents Sea and 51 in the Norwegian Sea. The areas furthest to the west and north awarded in the Barents Sea are located in exploration provinces that have not been explored. Several of the blocks are located in deep water in the Voring Basin. This round includes blocks farther northwest than any previously offered, in an area that has been marked by significant volcanic activity. There will be challenges associated with mapping the prospective levels in this area because a thick layer of lava covers the levels below.

Colombia plans bid round  

Armando Zamora, head of the Columbian national hydrocarbons agency, announced that the nation will auction 96 blocks for exploration next year. The nation will offer blocks in areas where some government-backed exploration has taken place and others in under-explored areas, including the Pacific Coast and the Caribbean Sea. About 10 of the blocks expected to be offered are in waters claimed by Nicaragua. However, Colombian officials are confident Bogota’s claim to sovereignty over the waters has been strengthened by a 2007 ruling by the World Court upholding the validity of a 1928 treaty regarding the San Andreas islands in the offshore area.

PDVSA seizes Tidewater vessels

Venezuelan PDVSA seized 11 Tidewater vessels and an onshore base in the Lake Maracaibo area as part of a recent round of expropriations. Venezuela took control of assets and equipment from oilfield service companies operating in the country after the nation approved legislation on May 7 allowing the nationalization of a group of oil service companies. The law puts the state in charge of companies providing a range of services, including gas and water reinjection and marine transport in Lake Maracaibo, and gives PDVSA the right to take over companies involved in those operations. The law will let the government expropriate companies and compensate companies with bonds instead of cash, order preliminary takeovers of service company assets while courts settle disputes and possibly annul existing contracts. PDVSA offered Tidewater around $2.8 million in compensation for the seized assets. Venezuela also seized two of Williams’ assets—El Furrial and PIGAP II.  Also on May 5, PDVSA produced from an offshore gas well “for the first time,” an event that President Hugo Chavez hailed as a “historic act.” Operations began at the Cruz de Mayo well, located in Dragon Field. Exploration at Cruz de Mayo began last year in June, “with a maximum rate of 70 MMcfgd expected.” PDVSA added that the gas fields could “produce up to 1.2 Bcfgd, and approximately 20,000 boepd.”

ConocoPhillips subsidiaries sued for taxes

On May 14, Louisiana’s Terrebonne Parish Tax Assessor’s Office filed suit in federal court in New Orleans, alleging that Burlington Resources and LL&E, both subsidiaries of ConocoPhillips, defrauded the local government of at least $7 million in property taxes, not including interest and penalties. Terrebonne Tax Assessor Gene Bonvillain said the companies “took advantage of a self-reporting system to avoid paying [their] fair share of taxes.” After discovering discrepancies in the companies’ tax records, Bonvillain commissioned a study of the 1,546 wells and production properties in Terrebonne. The study found that Burlington and LL&E filed incorrect information about the depreciated value of some wells, falsely reported the status of other wells and failed to report the existence of properties.

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