World of Oil and Gas

Canada opens deepwater bidding offshore Nova Scotia

Vol. 232 No. 7

WORLD OF OIL AND GAS

HENRY TERRELL, NEWS EDITOR

EXPLORATION

Canada opens deepwater bidding offshore Nova Scotia

Experienced deepwater operators will have the chance to win exploration rights on eight deepwater blocks offshore Nova Scotia, Canada, following a call for bids issued by the Canada-Nova Scotia Offshore Petroleum Board in late June. The board said the parcels are located in a largely unexplored area, and that an analysis by the nonprofit Offshore Energy Technical Research Association suggests significant oil potential due to many large, undrilled structural traps. Some of the areas being auctioned were nominated by the industry. Bids are due by Jan. 10, 2011, and will only be accepted from companies that have drilled exploration wells in water depths greater than 800 m (2,600 ft) within the past 10 years. Exploration licenses will be awarded to the successful bidders subject to federal and provincial ministerial approval. Detailed geoscientific assessments and regulatory information associated with the parcels are available on the board’s website.
The board is preparing a strategic environmental assessment (SEA) for the auctioned areas to identify any environmental issues that a successful bidder will need to address when before any exploration activity can begin. The SEA will include two public comment periods: one on the scope of the assessment and the other on the draft SEA report.

ConocoPhillips to explore deepwater Bay of Bengal

ConocoPhillips has signed a production-sharing contract with the government of Bangladesh and national oil company Petrobangla covering two blocks in the deepwater area of the Bay of Bengal. The Houston-based major holds a 100% working interest in the contract.

BG doubles Santos basin net potential offshore Brazil

Based on wells drilled and production brought online in the last year, BG Group upgraded the total resource estimate for its interests in the presalt Santos basin, offshore Brazil, to a net 6 billion boe, with a net upside potential of 8 billion boe. The mean resource estimate, of which existing discoveries account for 96%, doubles the company’s previous best estimate of 3 billion boe in February 2010. BG is working with Petrobras, Repsol YPF and Galp Energia on the assets.

Statoil farms into GOM Kakuna prospect

Statoil has acquired a 72.5% stake in Nexen’s Kakuna prospect, located about 180 mi southwest of New Orleans in the deepwater Gulf of Mexico. Nexen operates the permit with the remaining 72.5% interest. A federal exploratory unit for Kakuna has been approved by the US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). The exploratory unit encompasses Green Canyon blocks 416, 460, 504, 505, 548 and 549. BOEMRE has determined that the exploration plan for Kakuna is complete and is currently reviewing the application for drilling the well.

Apache buys into exploration block offshore Kenya

US independent Apache has agreed to take a 50% interest and operatorship of a production-sharing contract offshore Kenya from Australia’s Origin Energy. In exchange, Apache will pay Origin $13.2 million and part of Origin’s costs for an initial exploration well. The contract is located on block L8 in the Lamu basin.

Canadian firm begins heavy oil exploration in Colombia

A Calgary, Alberta-based oil company that operates fields in South America has begun exploration drilling onshore Colombia. Canacol Energy has operates the Tamarin and Cedrela E&P contracts in the country’s Caguan-Putumayo basin with a 100% working interest. The contract areas represent about 388,000 acres.

Cairn continues exploring offshore Greenland

Edinburgh, UK-based Cairn Energy has commenced drilling on two wells offshore western Greenland. Operations have begun at the AT-7 well in the Atammik block, about 100 mi offshore Nuuk, Greenland’s capital, and at the LF-7 well in the Lady Franklin block, about 190 mi offshore Nuuk. Ocean Rig’s Leiv Eiriksson, a fifth-generation semisubmersible, and Corcovado, a sixth-generation drillship, are carrying out Cairn’s drilling program offshore Greenland this summer.

PRODUCTION

Shell to develop Cardamom project in GOM

Shell will move forward with further development drilling and install subsea equipment at its Cardamom oil and gas field in the deepwater Gulf of Mexico, as a result of a multi-billion-dollar investment decision announced in June. Discovered in 2010 using advanced seismic technology, Cardamom is expected to produce 50,000 boepd at peak production and more than 140 million boe over its lifetime. Production from the 100% Shell-owned project will flow through the Auger platform.

Woodside delays estimate for first Pluto LNG cargo

Based on weather delays and slower than expected progress on the commissioning of its onshore gas plant, Woodside has revised the schedule for its Pluto LNG project, with the first cargo now estimated for March 2012. The Australian E&P firm also raised the expected 100% cost of the project by A$900 million, to a total of A$14.9 billion, including arrangements with customers affected by the delay.

Oil sands project hits 1 million-bbl milestone

Statoil’s Leismer steam-assisted gravity drainage (SAGD) demonstration project in the oil sands of northern Alberta, Canada, achieved a production milestone of 1 million bbl of oil in June. First oil at the project was achieved in January, and production is expected to ramp up to its rated capacity of 18,800 bpd within 24 months of startup. Leismer is one of four oil sands leases in Alberta’s Athabasca region that make up the Norwegian major’s Kai Kos Deh Seh project. The others are Corner, Hangingstone and Thornberry.

BUSINESS

Encana, Petrochina call off $5.4 billion shale venture

Encana and PetroChina have ended negotiations for a proposed joint venture concerning Encana’s Cutbank Ridge business assets after the parties were unable to agree on key elements of the transaction. In April, Encana announced plans to seek investors in two joint ventures on its assets outside Cutbank Ridge in northeast British Columbia, one on undeveloped Horn River shale lands and one in the company’s Greater Sierra resource play. Discussions are underway on these potential transactions as well as a potential divestiture of producing assets in the northern portion of Greater Sierra.

Saipem wins drilling contracts worth $600 million

Saipem has been awarded new offshore and onshore drilling contracts worth $600 million. Its parent company, Eni, has extended the charter of the Saipem 10000 drillship for 24 months starting in August 2012. In addition, Saipem has signed a contract with Abu Dhabi’s National Drilling Company to extend the charter of the jackup Perro Negro 2 for 12 months, starting in the second quarter of 2011, for drilling activities offshore the United Arab Emirates. In onshore drilling, Saipem has signed new contracts for 15 rigs in Saudi Arabia, South America and Kazakhstan, nine rigs in Peru and Colombia, and two rigs in Kazakhstan.

REGULATORY AFFAIRS

NPD grants Volve field drilling permit to Statoil

The Norwegian Petroleum Directorate (NPD) has granted Statoil Petroleum AS a drilling permit for well 16/7-10, which will be drilled by the semisubmersible Ocean Vanguard following completion of wildcat well 30/11-8 A for Statoil. The area in the license comprises the southwestern section of block 16/4. The well will be drilled about 10 km northeast of the Volve field in the central section of the North Sea.

Final ruling on Blind Faith platform

The final ruling has been delivered in the proceedings between subsidiaries of Aker Solutions and Chevron concerning delivery of the Blind Faith platform. The arbitration proceedings concerned compensation for various changes to the work and associated acceleration work and warranty claims. The platform was installed in the Gulf of Mexico and started production in 2008. The net negative cash effect is estimated at $10 million. The financial effects will be divided between subsidiaries of Aker Solutions and Kvaerner, with 25% to Aker Solutions and 75% to Kvaerner.

Weatherford settles Macondo claims, reaches indemnity agreement with BP

Weatherford International announced that its US subsidiary has reached agreement with BP to settle any claims that relating to the Deepwater Horizon incident and the subsequent oil spill. Under the settlement, BP will indemnify Weatherford for current and future compensatory claims resulting from the incident and the impacts from that event. BP will also indemnify Weatherford for environmental, pollution, personal, business, property
and economic loss claims. The two companies have agreed to work with each other to improve the safety of offshore drilling.

IEA introduces 60 million bbl of oil to market

International Energy Agency (IEA) Executive Director Nobuo Tanaka has announced that the 28 IEA member countries will be releasing 60 million bbl of oil in the coming month in response to the ongoing disruption of oil supplies from Libya. The normal seasonal increase in refiner demand is expected for this summer will exacerbate the shortfall. In deciding to take this collective action, IEA member countries agreed to make 2 million bbl of oil per day available from their emergency stocks over an initial period of 30 days. The IEA estimates that the unrest in Libya had removed 132 million bbl of light, sweet crude oil from the market by the end of May. Although there are huge uncertainties, analysts generally agree that Libyan supplies will largely remain off the market for the rest of 2011. The IEA action has resulted in a short-term drop in oil prices. However, within 30 days, the IEA Governing Board will reassess the oil market, review the impact of the coordinated action and decide on possible future steps.

DISCOVERIES

There has been a recent surge of post-moratorium exploration activity in the Gulf of Mexico, led by ExxonMobil’s announcement of three major deepwater discoveries, in which Petrobras has a 50% working interest. Discovery announcements have also been made this month by McMoRan and Entek.

ExxonMobil confirms major discoveries in Gulf of Mexico

ExxonMobil announced two major oil discoveries and a gas discovery in the deepwater Gulf of Mexico after drilling the company’s first post-moratorium deepwater exploration well with the semisubmersible Maersk Developer. The KC919-3 wildcat well confirmed the presence of a second oil accumulation in the Keathley Canyon block 919. The well encountered more than 475 ft of net oil pay and a minor amount of gas in predominantly Pliocene high-quality sandstone reservoirs. The well, which is continuing to drill deeper, is located 250 mi southwest of New Orleans in about 7,000 ft of water. ExxonMobil estimates the recoverable resource to be more than 700 million boe combined in its Keathley Canyon blocks.

Shoal Point discovers oil in Green Point shales

Shoal Point has received the preliminary results of a petrophysical analysis from NuTech Energy Alliance for the 3K-39 well in the Green Point Shales in the near offshore Newfoundland, which has confirmed a thick section of producible unconventional light oil. Significant hydrocarbon shows were encountered over a gross interval between the surface casing shoe at 400 m measured depth and current drilled depth of 1,745 m. The analysis of the 3K-39 logs reflects NuTech’s previous analyses of unconventional potential in the Green Point shales from the Shoal Point 2K-39 and Long Point M16 wells. This analysis will be updated once studies on core collected in the well are complete.

Petrobras makes new discovery in Espirito Santo basin

Petrobras has announced the discovery of a hydrocarbon accumulation in the Cretaceous reservoirs of the Espirito Santo basin offshore Brazil. Well 1-BRSA-926D-ESS, informally known as Brigadeiro, found hydrocarbons in reservoirs located at a depth of about 13,780 ft, with vertical porous thickness of nearly 410 ft. Brigadeiro is located in the BM-ES-23 concession area, Block ES-M-525, about 71 mi off the coast of Espirito Santo in a water depth of 6,234 ft. Petrobras operates the block (65% interest) along with Shell (20%) and Inpex Petroleo Santos (15%).

Total makes gas discovery in Barents Sea

Det norske has made a gas discovery in the Norvarg prospect in the Barents Sea license 535, operated by Total E&P Norge. Exploration well 7225/3-1 has not been completed. Preliminary well data indicate gas at three different levels, a significant part of it in the Kobbe formation. It is too early to conclude on flowrate characteristics and potential commerciality; hence the partnership has decided to perform a production test to gather information about reservoir production properties. The test is planned to be carried out after the well has been drilled to total depth at about 4100 m. Drilling operations are expected to continue for several weeks. Due to the production test, it is expected that the well will take longer time to complete than previously anticipated.

Coastal hits pay off Thailand

Coastal announced that the Bua Ban North B-06 well was drilled to a total depth of 6,800 ft TVD and encountered 69 ft of net pay with 28% porosity in the Miocene interval. MDT pressure analysis confirms that the well is in communication with the B-02 and B-04 wells and oil samples recovered have an API gravity of 36°. The B-06 also encountered 17 ft of net pay with 22% porosity in the Eocene in the western upthrown fault block, which has also been referred to as the Bua Ban North Terrace. This is the highest porosity Eocene payzone that has been encountered in the basin, according to Coastal.

Statoil discovers gas in North Sea

Statoil has found additional gas in wildcat well 34/10-53 A in the Norwegian sector of the North Sea. The well is a sidetrack from well 34/10-53 S, which found gas/condensate earlier this year. Statoil discovered gas in a 558-ft column in the upper part of the Brent group. A formation test was not performed, but Statoil collected data and samples. Preliminary estimates put the size of the discovery at between 0.4 and 1.2 MMcmd of recoverable oil equivalents. Drilled by the Deepsea Atlantic semisubmersible, well 34/10-53 A reached a vertical depth of 12,989 ft.

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