World of Oil

Ecopetrol teams up with Reliance in Colombian deepwater venture

Reliance Exploration and Production DMC (REP), a wholly owned subsidiary of Reliance Industries Limited, and Colombian NOC Ecopetrol signed farm-out agreements for the Borojo North Block 42 and Borojo South Block 43 in Colombia, subject to approval by the Colombian upstream regulator. Ecopetrol has acquired a 20% stake in the blocks while REP will retain the balance and operatorship. The two deepwater blocks cover an area of about 8,000 sq km in water depths ranging from 60 to 1,500 m. REP has completed acquisition and processing of about 3,000 km of 2D seismic and is in the process of commencing multi-beam bathymetry studies covering both blocks.

CNOOC to drill first deepwater wells in South China Sea

CNOOC announced it is set to drill one or more wells in 1500–1800 m of water in the South China Sea. These are the company’s first deepwater wells in this area. Xie Yuhong, general manager of CNOOC’s Zhanjiang unit, said he expects oil and gas output from the western South China Sea to be 44.07 million boe this year, up 13% from 38.97 million boe in 2008. CNOOC booked 2.52 billion boe of oil reserves in 2008, of which 960 million boe are in the South China Sea, according to the company’s 2008 annual report.

Det Norske conducts wellhead removal from ship

Det Norske announced the completion of the world’s first wellhead removal from a vessel, instead of a rig, on the Norwegian Continental Shelf. In addition to the completion of the wellhead removal, the company also set a world record by removing the wellhead in 886 ft of water depth. The previous record was at 462 ft. After trouble freeing the 95⁄8-in. casing, the well was secured in accordance with regulations and abandoned Oct. 3. Norse Cutting & Abandonment Norway AS (NCA) participated in cutting and retrieving the wellhead to the vessel. There were zero safety incidents throughout the entire operation.

MMS approves Shell’s test drilling offshore Alaska

The US Mineral Management Services (MMS) has conditionally approved plans by Shell Oil Co. to drill three exploratory wells next year in the Chukchi Sea, offshore Alaska’s northwest coast. Interior Secretary Ken Salazar announced the decision, saying that a key component of reducing US dependence on foreign oil is the environmentally responsible exploration and development of renewable and conventional resources. Environmental groups bitterly oppose the drilling plans. They say there has not been enough work to assess environmental risks in what they call a sensitive marine ecosystem already stressed by climate change. Some groups also say petroleum companies have not demonstrated an ability to clean up a spill in broken ice conditions, especially in the waters off northern Alaska, where a cleanup during much of the year would be hampered by low light, dangerous seas and little available infrastructure such as ports, response vessels and airports. “MMS’s approval of Shell’s drilling plan before it addresses these underlying legal questions puts the cart before the horse,” said David Dickson of the Alaska Wilderness League. He said the approval may prejudice the agency’s reconsideration of Bush-era decisions to open the areas to oil and gas drilling without first gathering scientific information and putting a science-based management plan in place. Shell officials called the MMS conditional approval a positive step, but noted that the company is still waiting for an air discharge permit from the Environmental Protection Agency.

Venezuela offers first licensing bid round in a decade

In what will be the country’s first bid round in a decade, Venezuela will offer minority stakes in joint ventures with state oil company Petroleos de Venezuela (PDVSA) to develop seven oil blocks tied to three upgraders in the Carabobo section of the Orinoco heavy oil belt. Venezuela’s energy ministry presented more attractive terms to interested companies at a private meeting in December. Caracas had postponed the round, as the government had failed to forge an agreement with the firms over bidding conditions earlier this year. Companies will have up to four years to build the upgraders, which will together produce 1.2 million bpd. Sources say the revised terms will allow companies a higher rate of return. In a key concession, the government will allow companies to pay bonuses of $500 million to $1 billion in three installments, rather than put up the full amount in cash from the start. Despite this, private companies will be required to finance PDVSA’s 60% share of the project costs in addition to their own 40%. Still, analysts expect bids from most of the companies that have expressed interest in participating. These include Japanese and Indian consortiums, China’s CNPC, Total and Chevron. The bid round is slated for late January.

Tepco to buy LNG in Australia’s biggest-ever export sale

Chevron signed two heads of agreement with Tokyo Electric Power Company (Tepco) under which Japan’s largest utility would buy a total of 4.1 million tonnes/year of LNG and take an equity stake in the development of the US major’s Wheatstone project in Western Australia. The deal has been hailed as Australia’s biggest-ever export sale and is one of Tepco’s largest long-term LNG offtake arrangements, equivalent to more than 20% of its annual consumption. Tepco serves 28 million customers and is one of the world’s largest LNG importers, taking in 20 million tonnes in 2008.

ExxonMobil to invest $150 billion over next five years 

A senior official from Exxon Mobil Corp. said that the company plans to invest between $25 and $30 billion annually for the next five years on energy projects. Speaking at the International Petroleum Technology Conference, Rich Kruger, president of ExxonMobil Production Company, said that his company had planned for price fluctuations in the energy industry and underlined his company’s spending plans. Kruger also called for greater energy efficiency and said that, through the use of better technology, 100 million bpd could be saved by 2030.

$37 billion Gorgon gas project begins 

The Gorgon natural gas project in Australia, worth an estimated $37 billion, has broken ground. The project is a joint venture between Chevron, Shell and ExxonMobil. Barrow Island will be home to three LNG processing trains, a domestic gas facility, LNG loading facilities and a carbon injection plant when works are completed. The LNG facility will create about 10,000 jobs during the peak construction phase with more than 3,500 direct and indirect jobs sustained throughout the life of the project. The greater Gorgon area’s projected natural gas resources are equivalent to 6.7 billion bbl of oil. The project’s scope includes a three-train, 15 million-tonne/year LNG facility and a domestic gas plant. The project underwent an environmental assessment that culminated with “some of the most stringent conditions imposed on a major project anywhere in the world,” Chevron said in a statement. Gorgon will have the world’s largest carbon dioxide injection system, aimed at cutting CO2 emissions by 40%. The current estimated cost of $37 billion covers the first phase of development, and the first gas is planned for 2014. The Gorgon project is operated by Chevron, who own 50% of the joint venture, with ExxonMobil and Shell each owning 25%.

Cause of leaking BP pipeline: ice plugs

Extensive ice plugs, including one about 1,500 ft long, are suspected of causing the leak in the BP pipeline that spilled 46,000 gallons of oily material onto the Alaskan tundra. An X-ray analysis launched by BP showed the ice buildup within the line, the Alaska Department of Environmental Conservation said in a statement. The leak in the 18-in. pipeline was discovered in late November. The pipeline had been taken off service weeks earlier because of suspected ice plugs and was not in operation. It was still pressurized and carrying material when the leak was found, which delayed inspections. The spill of crude oil, mixed with natural gas and water, flowed out of the leak and sprayed an estimated 8,400 sq ft of snow-covered tundra near the giant Prudhoe Field, according to state environmental officials and representatives from BP. The leak presents potential legal problems for BP, which remains under three-year probation as part of a 2007 federal criminal settlement concerning a major pipeline spill at Prudhoe Bay in 2006.

ExxonMobil to buy XTO Energy for $41 billion

Exxon Mobil Corp. is set to buy XTO Energy in a $41 billion deal, including $31 in stock and about $10 billion in XTO debt. ExxonMobil will issue 0.7098 shares for each XTO share in the deal, which is still subject to XTO stockholder approval and regulatory clearance. The purchase increases ExxonMobil’s stake in North America’s unconventional resources play. XTO’s resource base is the equivalent of 45 Tcf of gas and includes shale gas, tight gas, coal bed methane and shale oil. The deal, which is expected to close in the second quarter of 2010, would be Exxon’s biggest since it purchased Mobil Corp. in 1999, and the eighth-largest ever in the energy and power sector. After completion of the purchase, ExxonMobil plans to set up a new upstream organization to manage the global development and production of unconventional resources based in XTO’s current offices in Fort Worth, Texas.

Shell tops 1 million barrels from ultradeep Brazil fields

Shell Oil Co. announced that production at the Parque das Conchas fields (120 km off the coast of Brazil) has exceeded 1 million bbl. Despite tough operating conditions amid ultradeep water and constant swell, a series of technology firsts unlocked major new resources beneath water nearly 2 km deep. Remote-controlled submarines operating in massive pressures on the ice-cold sea floor installed the equipment needed to produce the oil from deep beneath the seabed. A vast network of wells and pipelines connect reservoirs scattered up to 20 km apart. In a double technical first, oil and gas are separated on the seabed before powerful electric pumps push the oil upward from the low-pressure reservoirs to a specially converted production vessel on the surface that stores it for shipping to shore. The kilometers-long umbilical cables stretching out from the vessel carry continuous power and chemicals to the production machinery far below. This system is vital in preventing frozen solids from forming in the oil.

West Atlas rig totaled after recent fire

Seadrill’s insurers have totaled the West Atlas jackup drilling rig after the unit was engulfed in a fire at the Montara wellhead platform, offshore northwest Australia, in November. Seadrill, which has started assessing the damage to the jackup’s superstructure and drilling package, is responsible for removing the crippled unit from the field. West Atlas was working for PTTEP Australasia when it was engulfed in a fire after a leak on an adjacent well, which resulted in the evacuation of all personnel. After the evacuation, the drilling unit was deployed to drill a relief well to stop the original leak, Seadrill reported.

Putin: $8 billion of proceeds from sale of Yukos already spent

Russian Prime Minister Vladimir Putin said in early December that proceeds from the sale of the assets of now-defunct Russian oil major Yukos were used in 2006 to maintain municipal housing, the utilities sector and apartment blocks. The announcement came after Yukos shareholders, who were seeking compensation after the breakup of the company, won in arbitration earlier this week. Putin said about $8.2 billion (at the current ruble/dollar rate) of the proceeds of bankruptcy auctions of what was once Russia’s biggest oil producer were invested into a Housing and Public Utility Fund. “As many as 10 million people, whose houses and apartments have been renovated, have seen the results of the fund,” he said during his annual TV and radio phone-in. Putin also said that 150,000 people were able to move to new houses from “shabby” buildings as a result. The former owners of Yukos won a court ruling in early December that cleared the way for a claim of up to $100 billion against the Russian government over the way it broke up Yukos. The government demanded billions of dollars in tax from Yukos in 2003 in a move that led to the company’s bankruptcy and the jailing of Yukos’ two top owners.

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