World of Oil and Gas

BOEMRE approves more deepwater Gulf projects

The US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) has approved an eighth deepwater drilling permit that complies with the new safety standards implemented in the wake of the Deepwater Horizon explosion and oil spill. The permit is for a sidetrack on Eni’s SS001 well in Mississippi Canyon block 460. The well lies in 2,823 ft of water some 57 mi southeast of Venice, Louisiana. BOEMRE said that Eni had satisfied all requirements, including demonstrating the capacity to contain a subsea blowout. “This is the eighth deepwater well permitted to drill since Feb. 17, when industry demonstrated that it had the capacity to handle subsea blowouts and spills,” BOEMRE Director Michael R. Bromwich said in a statement. “The progress in permitting deepwater drilling is directly related to industry’s ability to meet and satisfy the enhanced safety requirements associated with deepwater drilling, including the capability to contain a deepwater loss of well control and blowout.” A few days earlier, the agency had granted a permit to Shell to drill a new well in Garden Banks block 427, in water depths of 2,721 ft.

Greece, Azerbaijan sign gas deal

Bypassing Turkish intermediaries, the Azerbaijan state oil company Socar and the Greek company Depa have signed a deal on direct gas supplies. Azerbaijan, a potential key gas supplier to the Nabucco pipeline project, has made it a policy to diversify gas sales in order to avoid dependence on any one intermediary such as Turkey or Russia. Azerbaijan officials said in February they planned to sell 25 Bcf of gas directly to Greece, which had been buying the same amount from Turkey since the end of 2008 as part of a re-export plan. Azerbaijan’s natural gas output rose by 11.2% in 2010 to 925 Bcf from 833 Bcf in 2009. It expects to produce 990 Bcf of gas this year, including 320 Bcf from Shah Deniz field, which has estimated reserves of 42 Tcf of gas.

BG Group finds gas in third well offshore Tanzania

BG Group announced its third Tanzanian gas discovery with the Chaza-1 well in block 1, about 18 km offshore southern Tanzania in a water depth of about 950 m. The discovery is some 200 km south of the company’s previously announced Pweza and Chewa discoveries. The three successful wells drilled so far by the joint venture of BG Group (60%) and operator Ophir Energy (40%) form part of an initial work program planned for blocks 1, 3 and 4 offshore Tanzania. The initial work program also includes the acquisition of at least 4,000 sq km of 3D seismic data.

Shell JV announces large oil discovery off Brunei

Brunei Shell Petroleum (BSP) announced a significant new oil discovery in the coastal waters of the Southeast Asian sultanate. The discovery, named Geronggong, is situated about 100 km offshore in water depths of about 1,000 m, the deepest water yielding an oil find in Brunei to date. The well was drilled with deepwater drilling rig Noble Phoenix. The drillship had recently undergone refurbishment and recertification on its thrusters, riser and BOP systems in order to comply with Shell’s health, safety and environmental criteria for deepwater drilling.

Oil and gas industry to lose 5,000 skilled workers within three years

Schlumberger Business Consulting (SBC) released its 2010 Oil & Gas HR Benchmark study, which predicts that changes in the global upstream industry will lead to the loss of 5,000 experienced oil and gas specialists, or “petrotechnical professionals” (PTPs), by 2014. The study finds that “a big crew change is currently underway in the oil and gas industry” as the generation of geoscientists and petroleum engineers hired before the recruitment cuts of the mid-1980s approaches retirement. This attrition will cause the industry to lose experienced personnel, and higher graduate recruitment targets are too late to reverse this trend. The survey also shows that demand for graduates is recovering more than expected and that recruitment targets for PTPs in 2011 are 15% higher than levels planned in 2009. National oil companies, independents and majors all have plans to increase recruitment efforts, though the number of graduates in geosciences and petroleum engineering will remain in tight. The survey also says that Asia and Russia account for 72% of graduates in geosciences and 79% of petroleum engineering graduates, more than 30% of them from China.

Alberta government to renege on oil sands leases

The government of Alberta is planning to set aside 7,700 sq mi of land in the province’s oil sands region for conservation, which will cause the cancellation of 10 leases. The names of companies that will be affected were not revealed. A government spokesman also said the canceled leases will only affect projects that are in development—there are no plans to curtail existing production—and that companies will be compensated for their costs. The move in the Lower Athabasca region is part of a new regional development plan for the Western Canadian province. The government announced it would establish new environmental standards for areas affected by oil sands development, including benchmarks for water pollution.
 
Canada is the largest exporter of crude oil to the US, and oil sands from Alberta have been a rapidly growing part of the equation. Over 54,000 sq mi of land beneath Alberta’s forests hold deposits of bitumen-rich sand and clay, generically referred to as oil sands. The industry has received heavy criticism from environmental organizations because of impacts on the land surface and air.

Major oil discovery in the Barents Sea

Statoil, with partners Eni and Petoro, is calling its recent  discovery on the Skrugard prospect one of the most significant finds on the Norwegian shelf in the past decade. Statoil and partners are concluding drilling operations on the Skrugard prospect, which is located about 100 km north of Snøhvit gas field in the Barents Sea. The well, drilled with the Polar Pioneer, encountered a proven gas column of 33 m and an oil column of 90 m. The oil is described as easily producible. Estimated size of the discovery is between 150 million and 250 million boe recoverable. Statoil estimates that further opportunities in the license may yield another 250 million bbl. “This opens a new oil province that can provide additional resource growth,” said Tim Dodson, executive vice president for exploration in Statoil, in a statement. He emphasized that it is too early to be very specific about the total potential of the area, but did characterize the Skrugard find as the most important exploration event on the Norwegian shelf in the last 10 years. The Skrugard prospect was Statoil’s first priority in the 20th licensing round on the shelf, which was awarded in April 2009. Over the course of the spring, the Norwegian government will allocate acreage in the 21st licensing round, during which acreage near Skrugard is expected to be assigned.

Contango completes Swimmy prospect GOM well

Contango has drilled a successful exploratory well at its Swimmy prospect in Gulf of Mexico Vermilion block 170. The well is estimated to hold proved reserves of 48 Bcf of natural gas and 1.2 million bbl of condensate. Production is expected to begin in fall 2011 at about 15 MMcfd equivalent of gas. Estimated net costs to acquire, drill, complete and bring this well to full production are about $26.5 million.

The Haynesville shale in Louisiana has surpassed the Barnett shale in Texas as the nation’s highest-producing shale gas play, according to reported pipeline flows. Natural gas production from the Louisiana section of the Haynesville overtook the Barnett’s volumes in early to mid-February, even after the Barnett’s recovery from the winter’s well freeze-offs. The Barnett shale has been the country’s leading shale gas producer during the past decade. Several factors contributed to the Haynesville’s favorable positioning. Natural gas drilling continues to increase sharply in the newer Haynesville play while flattening somewhat in the more mature Barnett play. As gas drilling in the Barnett slows and natural gas prices remain relatively low, operators are shifting their attention to the more oil-rich areas of the play, reducing the emphasis on gas.

Experience gained from early horizontal drilling programs in the Barnett has helped the Haynesville operators ramp up natural gas production far more rapidly. Based on the reported pipeline flows, it took nearly a decade of shale-focused drilling to reach 5 Bcfd at the Barnett, while that threshold was reached at the Haynesville in less than three years, and with far fewer wells.

A report prepared by US Det Norske Veritas (DNV) Columbus, the contractor that performed the examination of the blowout preventer on the Macondo well, has been made available to the public. According to the report, “The primary cause of failure was identified as the blind shear rams (BSRs) failing to close completely and seal the well due to a portion of drill pipe becoming trapped between the ram blocks. The position of the drill pipe between the upper annular and the upper variable bore rams (VBRs) led to buckling and bowing of the drill pipe within the wellbore. Once buckling occurred, the BSRs would not have been able to completely close and seal the well. The buckling most likely occurred on loss of well control.” The BSRs were unable to move the entire drill pipe cross-section into the shearing surfaces of the blades, and during the shearing process, the pipe was deformed outside the shearing blade surfaces.

The report recommended that the industry should examine: the conditions that could arise from loss of well control and the effects those conditions would have on the state of any tubulars in the wellbore; the ability of the shear rams to cut through tubulars completely, regardless of their position in the wellbore; the potential effects that well control activities such as closing of the annulars or closing of the VBRs could have on the BOP stack; periodic testing and verification of the BOP’s backup control systems; and the conditions and equipment necessary for remotely operated vehicles to perform various functions at a performance level equivalent to the primary control systems.

ExxonMobil, with the South Oil Co. of Iraq and co-venturers Shell and Oil Exploration Co. of Iraq, announced a major production milestone in the redevelopment of West Qurna I oil field in southern Iraq. Initial field production of 244,000 bpd has increased to 285,000 bpd, exceeding the 10% production increase target established under the technical services contract. Under the terms of the contract, day-to-day production operations have transferred to the West Qurna I field operating division, which is staffed by personnel from the South Oil Co. and ExxonMobil. The day-to-day operations include drilling new wells, working over existing wells, and debottlenecking and optimizing facilities. More than 1,600 Iraqis are employed in West Qurna I field operations.

Anadarko makes new discovery offshore Ghana

Anadarko announced a deepwater discovery at the Teak-2 prospect, in the West Cape Three Points block offshore Ghana. Teak-2 encountered some 90 net ft of high-quality oil, condensate and natural gas pay in stacked Campanian and Turonian reservoirs. The well was drilled to a TD of 11,185 ft in water depths of about 2,900 ft. It is about 5,900 ft southwest and fault-separated from Teak-1, and about 2 mi northeast of the Mahogany-2 well. After shutting in Teak-2 for future use, the partnership plans to mobilize the rig to drill the Banda prospect, also located in the West Cape Three Points block.

Analysts predict new round of consolidation offshore

The cycle of new rig construction that began at the end of 2010 continues to pick up steam, according to a report from Barclays Capital. Also, for those companies that have avoided ordering new rigs, the tightening capacity of many shipyards suggests that consolidation becomes their only option for growth. “We believe another round of rig company consolidation is highly likely,” the report states. “In addition, some of the major rig operators are likely to divest older assets in the near-term.”

Since Barclay’s January update, some 19 jackups and 16 floating rigs have been ordered, bringing the total number of units ordered since the beginning of the cycle to 37 shallow-water rigs and 28 floaters. Several companies have also secured options to build an additional 26 jackups and 15 floaters, the majority of which will probably be exercised within the next year. Shipyard slots at established yards are filling up quickly.

Rig construction costs are also trending higher, due primarily to rising steel prices and price increases for rig equipment. Limited near-term shipyard availability and rising construction costs could mean that several new offshore rig companies will become attractive candidates for acquisition, along with some smaller traditional drillers.

French shale ban extended

French Prime Minister Francois Fillon extended a moratorium on research and drilling for shale oil and gas until mid-June, pending reports commissioned by the government to establish drilling’s impact on the environment. France has large oil and gas shale reserves and potential reserves, but the projects have sparked controversy due to the possible environmental impact of horizontal drilling and fracturing techniques. In a letter sent to various ministries, Fillon asked that a ban on shale drilling research and work be extended until at least June 15, when the reports are due to be published. The ban had been due to end on April 15. According to geologists, the Paris basin has many similarities to the Bakken formation in the US, which holds 4 billion bbl of recoverable oil, according to government figures.

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