World of Oil and Gas

Shell’s floating LNG project underway

Royal Dutch Shell has given the green light to the Prelude Floating Liquefied Natural Gas (FLNG) Project in Australia, which will be the first of its kind. Moored 200 km from the Australia coast, the FLNG facility will produce gas from offshore fields and liquefy it onboard by cooling. Constructed in a Korean shipyard, it will be the world’s largest floating offshore facility. From bow to stern, the Prelude FLNG will be 488 m long, longer than four soccer fields.  When fully equipped and with its storage tanks full, it will weigh around 600,000 tonnes (metric tons)—roughly six times as much as the largest aircraft carrier. Some 260,000 tonnes of that weight will consist of steel.
 
“Our innovative FLNG technology will allow us to develop offshore gas fields that otherwise would be too costly to develop,” said Malcolm Brinded, Shell’s Executive Director, Upstream International. “Our decision to go ahead with this project is a true breakthrough for the LNG industry, giving it a significant boost to help meet the world’s growing demand for the cleanest-burning fossil fuel.”

The facility has been designed to withstand a Category 5 hurricane. Oceangoing LNG carriers will offload liquefied gas, chilled to –162°C and reduced in volume by 600 times, along with other products, directly from the facility. Previously, the liquefaction of offshore gas has always involved piping gas to a land-based plant. First production of Prelude LNG is expected by 2017, some 10 years after the gas was first discovered. The FLNG will tap around 3 Tcf of gas equivalent. Some 110,000 boepd of expected production from Prelude should underpin at least 5.3 million tonnes per year of liquids, consisting of 3.6 million tonnes of LNG, 1.3 million tonnes of condensate and 0.4 million tonnes per year of liquefied petroleum gas. The FLNG facility will stay permanently moored at the Prelude field for 25 years, and in later development phases should produce from other fields in the area where Shell has an interest.

IEA says oil prices could threaten global recovery

The governing board of the International Energy Agency, at its regular quarterly meeting, said that there are growing signs that the rise in oil prices since September 2010 is affecting the economic recovery by widening global imbalances, reducing household and business income, and placing upward pressure on inflation and interest rates. As global demand for oil increases seasonally from May to August, the board sees an urgent need for additional supplies of crude to refiners to prevent a further tightening of the market. Additional increases in prices risk derailing the global economic recovery and are neither in the interest of producing nor of consuming countries, the board said. Oil-importing developing countries are most likely to be seriously affected by high oil prices, undermining their economies and social stability. The governing board urged producers to help avoid the negative global economic consequences which a sharp market tightening could cause.

GOM exploration plans approved

The US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) announced the approval of an initial exploration plan (EP), submitted by BHP Billiton, Inc., for activities in the deepwater Gulf of Mexico. The EP was completed in accordance with new safety and environmental standards implemented since the Deepwater Horizon explosion and oil spill, and is the first deepwater Initial EP approved to include the completion of a thorough site-specific environmental assessment (SEA). BHP Billiton’s plan includes one proposed deepwater exploration well in about 4,468 ft of water 124 miles offshore Louisiana. BOEMRE prepared the SEA to examine BHP Billiton’s proposed exploration activities in accordance with the National Environmental Policy Act (NEPA) and the implementation of departmental and bureau regulations. The SEA included new scientific information that had not been previously available for consideration or analysis. Based on its review, BOEMRE found no evidence that the proposed action would significantly affect the quality of the environment, and that an environmental impact statement (EIS) was not required.

Chevron has resumed deepwater drilling in the US Gulf of Mexico after receiving a drilling permit from BOEMRE. The permit marks the restart of the drilling campaigns with Maersk Oil as a partner. The Buckskin appraisal well is located in the Keathley Canyon in Block 785, offshore Louisiana, at 6,540 ft of water depth. It is being drilled 8 km from the discovery well that encountered oil in 2008 with drillship Discoverer Deep Seas. Drilling began in May, and the planned total depth is 29,400 ft. Drilling will last some 136 days. Chevron is operator of Buckskin, holding a 55% interest with Maersk Oil (20%), Repsol (12.5%) and Samson (12.5%) as co-owners.

Cairn resumes drilling offshore Greenland

Following up on its three-well drilling operations in 2010, Cairn’s exploration campaign will continue in 2011 with the drilling of up to four more exploration wells. The government of Greenland approved the location of seven exploration drill sites, which allows some flexibility in program planning and possible options for followup appraisal wells in the event of a discovery. Drilling commenced despite interference from Greenpeace environmental activists, who briefly disrupted operations by scaling the semisubmersible Leiv Eiriksson and suspending themselves underneath the rig in an arctic survival pod, before being arrested and removed by authorities. The activists say that the only way to prevent a Macondo-type blowout in the region is to stop all drilling in the Arctic.
 
Plans call for drilling one well in each of the Atammik and Lady Franklin blocks offshore to the west of the capital Nuuk, Greenland, and one well in each of the Napariaq and Eqqua blocks in the southern Baffin Bay west Disko area. The drilling campaign will test prospects with different structural styles and play types and is targeting a potential of 3.2 billion bbl of oil equivalent at target subsurface depths between 2,500 and 4,750 m. In each case the principal target is oil, but evidence of both oil and gas has been found regionally. In view of the frontier nature of the exploration and paucity of offset well information, the individual prospects are estimated to have chances of success ranging from around 10% to 20%. The wells will be drilled in water depths ranging between 288 m and 1,530 m. The company also plans to acquire up to three 3D seismic surveys totaling 4,500 sq km, one in the north of Baffin Bay, one in the south of Greenland and one other location to be decided based on operational results.

Calderon seeks Pemex modernization

Mexican President Felipe Calderon plans to introduce legislation to Mexico’s Congress this fall that would restructure Pemex in a way similar to Brazil’s Petrobras or Norway’s Statoil, according to Bloomberg. President Calderon also reportedly said he would consider selling shares in Pemex as part of a broader plan to stem declining production. Pemex has been offering performance-based contracts to foreign companies to gain access to new expertise and technologies. The company plans to invest about $23 billion this year to increase production, which dropped to 2.576 million bpd in 2010.

Petronas buys into Canadian shale

Malaysian NOC Petronas has formed an agreement with Progress Energy to create a partnership to develop a portion of Progress’ Montney shale assets in northeast British Columbia. Progress will sell 50% of its working interest in its Altares, Kahta and Lily properties to Petronas for $1.1 billion. Petronas will pay 25% of the total in cash at closing and then will pay 75% of Progress’ share of future capital expenditures in the joint venture over the next five years. Progress will be operator of the North Montney joint venture. In addition, Petronas and Progress will establish an LNG export joint venture to be 80% and 20% owned, respectively.

Rowan places $1.12 billion drillship order

Hyundai Heavy said it received an order to build two drillships for drilling contractor Rowan Companies Inc. The contract also includes an option exercisable by Rowan to order an additional same class drillship. The vessels, measuring 229 m in length and 36 m wide, are rated for operations in waters to 12,000 ft. They are scheduled to be delivered by the second half of 2013. The drillships will be equipped with a thruster canister, a housing for the thruster, which helps keep the ship in position during drilling. Ships with a canister do not need to be drydocked for maintenance, as the thruster can be lifted onto the ship when work needs to be carried out.

BOEMRE, NOAA to collaborate on offshore energy, environmental issues

The US Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) and the National Oceanic and Atmospheric Administration (NOAA) have signed a memorandum of understanding (MOU) to increase their coordination and collaboration and ensure environmentally sound offshore energy development. The MOU, which follows recommendations from the National Commission on the Deepwater Horizon Oil Spill and Offshore Drilling, specifies that the agencies will ensure effective and timely communication of agency priorities and upcoming activities, identify and undertake critical environmental studies and analyses, collaborate on scientific, environmental and technical issues related to offshore development and increase coordination on decisions related to OCS activities, including research and scientific priorities. BOEMRE and NOAA agreed to meet regularly to develop potential ways to align regulatory and decision-making processes, identify the best available science to support future regulatory decisions and increase collaboration on oil spill response issues.

Shale oil and gas is having a transformative effect on the world’s energy, according to the 9th Annual Energy Survey conducted by the KPMG Global Energy Institute.

In the current survey, which polled 550 financial executives from global energy companies, 32% think US crude oil prices will peak between $121 and $130 per barrel this year, while one-third of executives see even higher prices.

“While we have seen some very recent declines due to selloffs, these variations reflect persistent instability, and our survey findings confirm that we may have not seen peak levels on crude. Energy leaders tell us continued volatility will be driven by underlying issues such as regulation, geopolitical concerns and supply disruptions, as well as escalating energy demand,” said John Kunasek, Executive Director for the KPMG Global Energy Institute.  “But the good news is that energy executives tell us they are significantly increasing investment in a range of alternative energy sources and see shale factoring strongly in meeting the world’s future energy needs.”

Some 35% of the executives surveyed said their company would increase R&D investment in alternative energy projects in 2011, up from 15% in KPMG’s 2010 survey. Shale gas/oil (44%) was most frequently cited by executives as the alternative energy source to receive the greatest investment, with solar (31%), wind (25 percent), clean coal technologies (17%), biodiesel (10%), and chemically stored electricity such as batteries and fuel cells (8%) as alternative energy sources that would also see increased R&D investment. Despite the amount of attention the measures received, 68% of executives surveyed said that the regulatory restrictions resulting from the Gulf of Mexico blowout have had no impact on their companies’ offshore exploration and production efforts.

Angola, Africa’s second-largest oil producer, has continued to expand both reserves and production from its prolific offshore fields.  Total subsidiary TEPA Ltd, along with the Angolan NOC Sonangol, have reported discovering hydrocarbons in the northeastern area of the deep offshore block 17/06. Drilled in a water depth of 445 m, the Canna-1 well discovered hydrocarbons in a reservoir of Miocene age and produced more than 5,000 bpd of 33°API oil  during a production test. Sonangol is the concessionaire of the Block, while TEPA is the operator with a 30% stake. Deep offshore Block 17, operated by Total with a 40% interest, is that company’s principal asset in Angola.

New Zealand’s TAG Oil Ltd. reported that the Sidewinder-4 exploration well has been confirmed as a light oil and gas discovery. Along with the three previous Sidewinder discoveries, it is TAG Oil’s fifth exploration success in the Taranaki Basin in the past six months. Taranaki is New Zealand’s most explored and commercially successful basin with 400 exploration wells drilled to date. The results from the Sidewinder-4 well indicate that the targeted oil-and-gas-charged Mt. Messenger formation sandstones extend significantly to the east of the Sidewinder-1 discovery well. As the company noted in an earlier release, the Sidewinder-3 discovery well suggested that the Mt. Messenger Formation sandstones extend significantly south of the original Sidewinder-1 discovery as well. The interpreted total hydrocarbon column at Sidewinder now exceeds 60 m (196 ft), with no water column evident in any of the Sidewinder wells. Together, the four Sidewinder wells drilled to date indicate that the size and scope of the discovery area is much larger than originally anticipated. TAG is now preparing to begin flow testing of the Sidewinder-2, 3 and 4 wells in a few weeks.

In Bolivia, Total E&P Bolivie (TEPBo) has encountered gas and condensate on the Aquio block in the Andean foothills. This well confirms the northern extension of the Incahuasi structure, discovered in 2004 by the exploration well ICS-X1 in the adjacent Ipati block. Tests over a limited section of the formation have produced gas and condensate at initial rates of over 500,000 cm per day and 500 bpd, respectively. Hydrocarbons discovered in the Aquio and Ipati blocks are contained in fractured sandstones reservoirs of Devonian age. TEPBo is the operator of the Aquio and Ipati blocks with an 80% participating interest, in association with Tecpetrol de Bolivia (20%).

Colombian NOC Ecopetrol announced the discovery of crude oil in the Mito-1 exploratory well in the municipality of Puerto Gaitan, Meta province. The exploratory well (A-3) comprises part of the exploration campaign in the Cano Sur block in the Llanos Orientales, where the presence of hydrocarbons had already been reported  with the wells Mago 1 and Draco-1. Ecopetrol is the operator and 100% owner of all the rights of the contract. The Mito-1 is in the eastern sector of the Cano Sur, contiguous to the Quifa field. The well was drilled vertically to a depth of 3,310 ft and completed with an artificial lift system using a progressive cavity pump. Production tests have indicated crude oil of 13.5°API, with an average production of 200 bpd.

In the Kurdistan region of Iraq, Austria-based OMV Exploration & Production has announced drilling success in its Bina Bawi block. Exploration well Bina Bawi-3 reportedly encountered hydrocarbons in one of the primary reservoir targets. The well is still being drilled, and further investigation is planned in the course of the well operations, including evaluation of deeper potential targets. OMVs exploration and production head Jaap Huijskes said the discovery is of good quality oil and it was flowing to surface following a drawdown test. OMV has direct stakes in five blocks in the Kurdistan region, three as operator.

In the Norwegian North Sea, Statoil and its partners, Det norske oljeselskap ASA and Svenska Petroleum Exploration AS, announced a discovery at Oseberg field in the Krafla prospect. The well is located in Block 30/11 around 26 kilometers south of the Oseberg South field. Based on preliminary calculations the size of the discovery is between 12.5 and 56.5 million bbl of recoverable oil equivalent. Drilled by the Ocean Vanguard rig, the well proved a column of around 200 m in good quality reservoir rock. When the Krafla well is completed, the semisubmersible will begin drilling the planned sidetrack well on Krafla West, which is west of the new discovery. Licensees are operator Statoil (50%), Det Norske Oljeselskap ASA (25%) and Svenska Petroleum Exploration AS (25%).

Offshore Ghana, Kosmos Energy announced that the Banda-1 exploration well has discovered oil on the West Cape Three Points block. The results of drilling, wireline logs and reservoir fluid samples show the Banda-1 penetrated net oil-bearing pay of 3 m. Oil samples recovered from the Cenomanian-age reservoir indicate oil of about 40°API gravity. The semisubmersible Atwood Hunter drilled the well in a 921-m water depth to a total depth of 4,580 m. The Banda-1 discovery opens a new play not previously encountered on the Three Points block or adjacent deepwater Tano block. The Paradise-1 exploration well, recently drilled by Hess Corp. 32 km southwest of the Banda-1 , successfully penetrated a hydrocarbon-bearing reservoir of equivalent age.

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