World of Oil and Gas

Anadarko makes postsalt discovery offshore Brazil

	Vol. 231 No. 12
HENRY TERRELL, CONTRIBUTING NEWS EDITOR

Anadarko makes postsalt discovery offshore Brazil

Anadarko Petroleum Corp., operator of Block BM-C-29 offshore Brazil, reported that its Itauna-1 well discovered a significant hydrocarbon column in the postsalt region below 15,000 ft. The well, owned 50/50 with Colombian state oil firm Ecopetrol, is in the Campos Basin, and will be drilled farther to about 18,000 ft to explore objectives in the presalt section.

Russia to adopt new classification system

Russia’s Natural Resources Ministry will adopt a new reserves classification system in 2012 to align with the Society of Petroleum Engineers’ petroleum resources management system. The ministry reports that Russia’s current system overestimates the size of reserves that can be developed. Under the current system, estimated recoverable gas reserves exceed the equivalent reserves under international standards by over 25%, and overcalculate oil reserves by about the same amount.

Apache well off Australia flows gas, condensate

Apache Corp.’s Spar-2 appraisal well offshore Western Australia tested 58 MMcfd of gas and 950 bpd of condensate. An earlier discovery at nearby Halyard Field is expected to come online at 50 MMcfd gross in the second half of 2011, with Spar Field production following in the second half of 2012. Spar-2 was completed over a 130-ft interval at the top of the Barrow Group Formation.

Israel’s Tamar Field partners suspend work

Development work on Israel’s Tamar gas field has been suspended due to uncertainty surrounding the country’s petroleum tax structure. The dispute between an exploration consortium and the government stems from a report by a special committee appointed by Finance Minister Yuval Steinitz. The report recommends the levying of a special progressive tax on oil and gas profits and the abolition of certain tax allowances. The proposal would raise the level of taxation over the life of a project to 66% from the current 30%.

Petrobras fails to reach agreement with Ecuador

Brazilian state energy company Petrobras was unable to reach an agreement with Ecuador’s government on converting its production-sharing agreement (PSA) in that country into a service contract. Instead, the energy giant will seek compensation for turning its assets over to the state. Petrobras has stakes in Ecuador’s onshore Block 18 and in Palo Azul Field, producing about 19,500 bpd. Three other companies, Noble subsidiary EDC, China National Petroleum Corp. and Canada Grande, will also give up their concessions. Ecuador’s government said that it had reached agreements with five foreign oil companies to convert their contracts into service contracts, giving President Rafael Correa’s administration more control over the country’s oil assets. Petrobras CEO Jose Sergio Gabrielli said the decision was purely economic, and the company’s relationship with Ecuador was not harmed.

US oil stockpiles fall rapidly as demand picks up

Petroleum stockpiles in the US are falling at their fastest rate in over a decade, according to Goldman Sachs, and consequently the oil glut that has suppressed prices is rapidly disappearing. The US is on target to increase demand by 340,000 bpd in 2010, and may do the same in 2011. At 1.1 billion bbl, US oil stocks are still above 2008 levels, but the enormous oil surplus that developed during the global economic crisis is quickly being consumed. In the US, total crude and oil product stocks have fallen by 38 million bbl since August, while global oil inventories have fallen 76 million bbl. This could create more upward pressure on prices globally. China’s demand growth, responding to government policies designed to cool the overheating Chinese economy, may slow from 800,000 bpd in 2010 down to 300,000 bpd in 2011.

Chevron ventures into Marcellus Shale

In a deal valued at $4.3 billion, Chevron has agreed to acquire independent Atlas Energy for $3.2 billion in cash and $1.1 billion in assumed debt. The acquisition will provide Chevron with an attractive natural gas resource position located primarily in southwestern Pennsylvania’s Marcellus Shale, and makes it the last Western major to make a move into the US shale gas market. The deal would include Atlas Energy’s estimated 9 Tcf of natural gas resource, 850 Bcf of proved natural gas reserves and about 80 MMcfd of natural gas production. The assets in the Appalachian Basin consist of 486,000 net acres of Marcellus Shale and 623,000 net acres of Utica Shale. Assets in Michigan include Antrim producing assets and 100,000 net acres of Collingwood/Utica Shale. Chevron is also acquiring a 49% interest in a joint venture that owns over 1,000 miles of intrastate and natural gas gathering lines servicing the Marcellus region.

DOI postpones lease sales, freezes drilling in Eastern Gulf

US Interior Secretary Ken Salazar and Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael Bromwich announced Dec. 1 that lease sales in the Western and Central Gulf of Mexico will be postponed until at least the end of 2011, pending results of environmental impact studies. They also confirmed that the Eastern Gulf of Mexico is not proposed for leasing in either the current program or the 2012–2017 program. The White House announced plans in March to open large stretches of the Eastern Gulf and parts of US coastal waters to oil and natural gas drilling, but that proposal was scrapped in the wake of the Macondo well disaster. Instead, the agency, after conducting further studies, will focus on developing the regions in the Western and Central Gulf of Mexico that have active leases. Only 29 million of 43 million acres leased in the Gulf are currently being developed. Secretary Salazar said that development in the Mid- and South Atlantic regions would be limited and that any future lease sales would “proceed with the utmost caution.” Also, no further lease sales in the Chukchi and Beaufort Seas offshore Alaska will be held under the 2007–2012 program, though BOEMRE indicated it will continue to honor existing leases in the Arctic.

Tests begin on Macondo blowout preventer

After a weeks-long standoff between the US Department of the Interior and the Chemical Safety and Hazard Investigation Board (CSB), engineers have begun testing the blowout preventer retrieved from the Macondo well. The CSB had insisted on conducting independent tests at the Michoud, Louisiana, facility where the BOP is being examined by DNV Columbus, a firm hired by the Interior Department. A compromise ensured that the board would be able to send an expert of its own choosing as a representative, as will the BOP’s manufacturer Cameron International, rig owner Transocean, BP, the Justice Department and plaintiffs in a class-action lawsuit.

Young producer raises profile with GOM acquisition

Houston-based Energy XXI will double its size and become the shallow-water Gulf of Mexico’s third-biggest producer with its acquisition of nine GOM fields from ExxonMobil. The independent company, founded in 2005, agreed to purchase the oil and gas leases for $1.01 billion. The interests produce about 20,000 boepd—53% of which is oil—from leases totaling 130,853 net acres. They contain proved and probable reserves of 66 million boe, about 61% of which is crude. All nine fields lie in water depths of 470 ft or less. When the transaction is complete, Energy XXI will hold a total of 158.1 million boe of reserves and will see it production increase 77% to 46,000 boepd, of which 63% will be crude.

Schlumberger to pull out of Iran after contracts expire

The world’s largest oilfield service company became the latest to announce a planned withdrawal of operations from Iran, bowing to international pressure because of that country’s nuclear program. Schlumberger told the US State Department in early November that it will pull out of Iran once its current contracts expire, which will occur in 2013. Schlumberger is headquartered in Houston, but is registered in the Caribbean island nation of CuraÇao, and has thereby avoided US sanctions in the past prohibit Americans from doing business with Irans’ oil sector. The recent introduction by the European Union of sanctions against the sale of oilfield technology to Iran has increased pressure on the company. The US first imposed sanctions on Iran in the 1990s.

Thailand’s PTTEP buys large stake in Canadian oil sands

PTT Exploration and Production has agreed to purchase a 40% stake in Statoil’s Kai Kos Dehseh oil sands project in Canada for $2.28 billion. The Norwegian company will continue as operator of the project, which is located in Athabasca, Alberta, and will also retain 60% ownership. Statoil took over the project when it acquired North American Oil Sands Corp. in 2007. Kai Kos Dehseh is a significant deposit, covering 257,200 acres and holding about 4.3 billion bbl of recoverable bitumen. The first phase of development of Kai Kos Dehseh uses steam-assisted gravity drainage, and first production is expected in the first quarter of 2011 at an initial rate of 10,000 bpd.

Alaska North Slope may yield 2 billion bbl of viscous crude

BP President John Minge said that 2 billion bbl of new viscous crude oil reserves can be developed on Alaska’s North Slope. Viscous crude is lower-grade oil that is heavier than the light conventional oil currently being produced and lighter than the heavy oil deposits that have not been developed in the state but are prolific in neighboring Canada. At present, ConocoPhillips produces limited quantities of viscous oil from Kuparuk River Field in the Schrader Bluff Formation, and BP produces some from Milne Point Field in the West Sak Formation. Minge said that with achievable advancements in technology, production can be greatly increased. “We will need lower drilling and completion cost to access more barrels, and also improvements in the cost and efficiency of surface facilities for lower grades and solids-laden crudes,” Minge said.

BP to sell interests in Argentine venture for $7 billion

As part of a global divestiture plan aimed at recovering its financial strength in the wake of the Macondo well disaster, BP has agreed to sell its interests in Pan American Energy to its joint venture partner Bridas Corp. The Argentina-based venture—owned 60% by BP and 40% by Bridas—produces oil and gas in the southern cone of South America and is Argentina’s second-largest producer. As of December 2009, proved reserves attributable to BP’s interest in Pan American were 917 million boe, and net production was about 143,000 boepd. The sale is part of BP’s plan, announced in July 2010, to divest up to $30 billion in assets by the end of 2011. Bridas will pay $7.06 in cash per BP share in a transaction that is expected to close in 2011. Prior to the Bridas deal, BP already had sales agreements in place totaling some $14 billion. “Today’s agreement further demonstrates both the high quality and attractiveness of the assets throughout BP’s global portfolio and the company’s ability to meet our significant financial commitments arising from the Gulf of Mexico tragedy,” BP CEO Robert Dudley said in a statement.

Iran: 34-billion-bbl oil layer found in Persian Gulf

The Iranian oil ministry announced on its website Nov. 20 that the country’s Pars Oil and Gas Co. had discovered an oil layer with an estimated 34 billion bbl of oil in place beneath the Ferdowsi gas field in the Persian Gulf. If accurate, this would make it one of the biggest oil layers in the country. An appraisal well is reportedly being drilled to evaluate the layer. The oil ministry also said that more oil has been discovered in the South Pars oil layer, but did not provide details. The offshore South Pars Field has the world’s largest concentration of non-associated gas. The find could give another big boost to Iran’s recoverable oil reserves, which the oil ministry had already revised upward in October to 150.31 billion bbl, 12.3 billion bbl more than the previous estimate. Most analysts believe that Iran is producing oil at or close to capacity and will require considerable investment to offset production declines in its older fields.

Initial report on blowout cites lack of discipline

According to a preliminary report issued in November by the National Academy of Engineering (NAE), missed warning signals and a pattern of “operational breakdowns” aboard the Deepwater Horizon contributed to the Macondo well blowout and subsequent explosion. It may not be possible to establish exactly which mechanisms caused the disaster, the report says, but the NAE committee believes it has identified a number of key factors and decisions that contributed to the blowout. One primary cause was the decision to continue plugging operations at the Macondo site despite several tests indicating that the cement put in place after the installation of a long-string production casing was not an effective barrier to prevent gases from entering the well. Also, accepting the test results as satisfactory without review by adequately trained engineers suggests a lack of discipline and clearly defined responsibilities. In addition, the report says, there were clear failures in well monitoring; available data showed hydrocarbons entering the well undetected for almost an hour before the first explosion.

Marathon enters Eagle Ford Shale play

Marathon Oil Corp. in late November became the latest major oil company to stake a position in the emerging Eagle Ford Shale, completing an agreement with Denali Oil & Gas for acreage in the South Texas play in Wilson and Atascosa Counties. Under terms of the agreement, Marathon will pay the Houston-based explorer $10 million and drill and complete four wells to earn about 17,000 net acres. Marathon also has the option to purchase Denali’s remaining 58,000 net acres in the two counties. If this option is executed, the full 75,000 net acres—including initial payment, carried well interest and lease extensions—will cost about $2,800 per acre, or a total $209 million. “This new entry reinforces a key element of our upstream strategy of targeting unconventional, primarily liquids-rich resource plays providing low-risk, scalable growth.” Dave Roberts, Marathon’s upstream executive vice president, said in a statement.

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