World of Oil and Gas

Sri Lanka’s External Affairs Minister GL Peiris announced that the country is in talks with Gazprom Managing Director Valery Gulev regarding an exploration venture in the Mannar basin. “Peiris discussed with the visiting delegation issues connected with Russian cooperation in such fields as oil exploration in the Mannar basin and the Cauvery basin, the procurement of liquid natural gas, and technical expertise in respect of refineries,” said the ministry. The Mannar basin lies south of the Cauvery basin, west of Sri Lanka, and is believed to hold more than 1 billion bbl. Cairn Energy began its three-well campaign in the Mannar basin earlier this year marking the first time drilling has taken place in the country in 25 years.

Vol. 232 No. 9

WORLD OF OIL AND GAS

NELL LUKOSAVICH, SENIOR EDITOR

EXPLORATION

Gazprom in talks to explore Sri Lanka

Russian companies partner up to explore Turkmen block

Russian companies Itera and Zarubehzneft have signed a production sharing agreement to explore for oil and natural gas in Block 21 off the coast of Turkmenistan in the Caspian Sea. Zarubezhneft, with a 51% stake in the project, will be the operator, while Itera will hold the remaining 49% interest. The block may hold recoverable oil reserves of 1.73 billion bbl and 3.5 Tcf of natural gas. The companies plan to invest up to $6 billion in the project. The region has seen recent success when earlier this year a ConocoPhillips-led consortium drilled its first exploration well in Turkmenistan’s N block in the Caspian Sea and discovered evidence of hydrocarbons.

WesternGeco begins 3D survey in Barents Sea

In preparation for the upcoming 22nd Norwegian licensing round, WesternGeco has begun acquisition of the Bjørnøya Phase I “Ice Bear” 3D multiclient survey in the West Loppa area of the Barents Sea. Following previous surveys in the area, the Ice Bear survey will extend the existing WesternGeco West Loppa datasets to the north and west. The survey will consist of approximately 965 sq mi of 3D seismic data, acquired using 10 x 4.35-mi streamers. The fast-track data will be available in November of this year, in time for nominations for the forthcominglicensing round.

San Leon’s Liesa completes seismic survey in Poland shale

San Leon Energy’s Polish subsidiary Liesa has completed its 65-sq-mi 3D seismic acquisition program in the Southern Permian basin of Poland. The survey over the Nowa Sol license was acquired by Hungry’s Acoustic Geophysical Services, marking the first time a survey has been completed in Poland by a foreign contractor. The survey was designed to image the unconventional oil and gas potential of the proven Permian sediments in the Nowa Sol area, as well as look at the deeper potential of the Carboniferous source rocks. After final processing results have been interpreted by the company, a two- to three-well drilling campaign will begin by the end of 2011.

UNCONVENTIONAL

PGNiG to begin flow testing at Polish well

Poland’s PGNiG has completed drilling at the Niebieszczany-1 well as part of the Siekierki tight gas project, with flow testing expected to commence shortly. The well is the first of a three-well program in the project. PGNiG, the operator, and the Bieszczady partner group have decided to end drilling at 13,842 ft due to high reservoir pressure, though nearly 200 ft of oil-producing rock from an earlier drill-stem test will now be put on a flow test. The company earlier discovered 346 Bcf of natural gas in a nearby Siekierki tight gas well.

Halliburton fracs first horizontal shale gas well in Argentina

Halliburton has recently finished the first horizontal, multistage hydraulic fracture shale gas completion in Argentina’s Neuquén basin for Apache Corp. Because of the specific complexities found in the Los Molles shale formation, the fracturing process involved placing 10 hydraulic fracture stages in the horizontal section at a depth of over 14,435 ft. The project marks the successful completion of South America’s first horizontal well, in addition to being the deepest shale gas well on the continent.

New Cook Inlet investments could prevent gas shortages

A study by the Alaska Division of Oil and Gas showed that if producers drill eight new production wells per year in the four largest gas fields in the Cook Inlet basin, the fields will produce sufficient gas to meet the current 90 MMcfd demand in the region at a cost of $10 million to $20 million per well with an additional investment of $100 million in compression. The study indicates that gas producers would have to invest up to $2 billion towards gas drilling in south-central Alaska to help meet projected shortages. The study did not include new gas found though exploration, such as a recent 10-Bcf gas discovery made by Buccaneer Energy, on the Kenai Peninsula.

PRODUCTION

Rosneft’s cumulative oil output at Vankor field hits 25 million tons

Russia’s Rosneft reached a milestone by reaching cumulative output of 25 million tons of oil at its Vankor field, which currently produces 315,000 bopd. This year, Vankorneft, a subsidiary of Rosneft, is planning to produce 15 million tons of oil, two million tons more than in 2010. The increase will come from the launch of new wells and field infrastructure.

Petrobras platform P-56 begins production at Marlim Sul

Petrobras’ semisubmersible platform P-56 has commenced production at the Marlim Sul field in the Campos basin. The company expects Marlim Sul, which has recoverable reserves of about 540 MMboe, to be producing about 300,000 to 310,000 boepd by the end of the year. P-56 will be connected to 21 wells, 10 of which will be producers and 11 are water injectors.

Total’s Pazflor comes on stream in Angola

Total has brought the Pazflor field in Block 17 off Angola on stream ahead of schedule. The Pazflor field, which lies in water depths down to 3,930 ft, has estimated proved and probable reserves of 590 MMbbl of oil. The field will gradually ramp up to its full production capacity of 220,000 bpd over the coming months. Pazflor comprises a subsea gathering network of 112 mi of lines tying in 49 subsea wells, 11,000 tons of subsea equipment, including for subsea gas/liquid separation, and a floating production, storage and offloading vessel.

BUSINESS

Transocean to buy Aker Drilling for $1.4 billion

Transocean announced an all-cash voluntary offer for 100% of the shares of Aker Drilling, which operates two harsh environment, ultra-deepwater, sixth-generation semisubmersible rigs currently on long-term contract to Statoil and Det Norske in Norway. In 2013, Aker is expected to take delivery of two sixth-generation drillships under construction at the DSME shipyard in South Korea.

Utica shale worth $15-20 billion to Chesapeake

Chesapeake CEO Aubrey McClendon said the company believes its acreage above the Utica shale formation in eastern Ohio is worth between $15 billion and $20 billion. Chesapeake currently has leased 1.25 million acres in the formation, located 1,800 ft to 6,000 ft below the Marcellus formation. McClendon said Chesapeake, which is drilling into the Utica with five rigs, plans to add three more rigs by the end of the year and have as many as 40 rigs in the areas by the end of 2014.

Noble, Consol partner in $3.4 billion Marcellus JV

Noble Energy entered into a joint venture to develop Consol’s Marcellus shale properties in southwest Pennsylvania and northwest West Virginia. Under the deal, Noble will purchase a 50% interest in 663,350 net undeveloped acres for $1.07 billion. Noble will also pay $2.13 billion in the form of a one-third carried drilling interest of Consol’s working obligations as the acreage is developed. In addition, Noble will pay $160 million at closing for Consol’s existing Marcellus Shale, which have producing reserves, 89 Bcf of which is net to Noble. Finally, Noble will pay $59 million to acquire a 50% interest in Marcellus gathering assets.

REGULATORY AFFAIRS

BOEMRE announces Western GOM oil and gas lease sale

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) announced that it will hold an oil and natural gas lease sale for acreage in the Gulf of Mexico on December 14, 2011 in New Orleansv the first such sale since the Deepwater Horizon explosion and oil spill last year. The proposed Western Gulf of Mexico Lease Sale 218 will include all 3,900 available unleased blocks in the Western Gulf Planning Area offshore Texas—encompassing an area of about 20.6 million acres. BOEMRE estimates the proposed lease sale could result in the production of 222 to 423 million bbl of oil and 1.49 to 2.65 Tcf of natural gas.

Reliance-BP deal approved by Indian government

Reliance Industries has received approval from the Government of India for a deal with BP that will result in the largest foreign investment in the country’s domestic hydrocarbon sector. BP will take 30% stake in 21 oil and gas production sharing contracts (PSCs) that Reliance operates in India, including the producing KG D6 block. BP will pay Reliance approximately $7.2 billion for the interests in the 21 PSCs. Additional payments of up to $1.8 billion could be paid based on exploration success that results in development of commercial discoveries. The two companies will also form a 50:50 joint venture for the sourcing and marketing of gas in India, which will accelerate the creation of infastructure for receiving, transporting and marketing natural gas.

Shell receives tentative approval for Arctic drilling

The US Department of the Interior (DOI) has given conditional approval to Shell for its exploratory drilling program in the Arctic. The exploration permit covers an overall program that would drill four wells over two years in the Beaufort Sea, north of the coastal plain of the Arctic National Wildlife Refuge. Shell has spent nearly $4 billion over the last five years to gain approval for the drilling project. Aside from conditional approval, Shell still has to secure a number of DOI permits to begin the project. Shell is also seeking authorization to drill in the Chukchi Sea at roughly the same time as the company plans to drill in the Beaufort Sea.

Argentina suspends auction for offshore blocks

Argentina’s national oil company Enarsa announced plans to suspend an auction for oil exploration rights of 32 offshore blocks. While the auction was scheduled to begin in July, Enarsa said it will resume the auction process once it has evaluated the market. Argentina’s oil production has fallen 18% between 2003 and 2010 to about 213.85 million bbl while proven oil reserves fell 11% to 2.47 billion bbl during that period. Petrobras and YPF have already signed agreements with Enarsa to explore offshore the country.

DISCOVERIES

North Sea discovery may be Norway’s largest in 30 years

Statoil and its partners announced a large North Sea oil find—which may contain recoverable volumes of 200–400 million boe—that the producer says may substantially stem Norway’s decades-long decline in oil production. According to Statoil, the new discovery at the Aldous Major South prospect, 140 km west of Stavanger, is likely connected to the recent oil find by Sweden’s Lundin Petroleum at the nearby Avaldsnes prospect. The company said the two discoveries represent the largest find on the Norwegian continental shelf in 30 years, containing between 500 million and 1.2 billion boe. The discovery marks an important milestone for Statoil, which—like Norway itself—has seen a steady decline in production estimates in recent years. After completing the Aldous discovery, the Transocean Leader semisubmersible will start drilling the Aldous Major North well, which also has a considerable volume potential. Statoil is the operator and has a 40% interest. The other partners are Petoro (30%), Det Norske (20%) and Lundin (10%).

Apache adds two to finds to Faghur basin portfolio in Egypt

Apache reported two new discoveries in the Faghur basin of Egypt’s Western Desert, which tested at combined flowrates of 11,000 bopd and 7 MMcfd. The latest discoveries were developed through evaluation of 3D seismic surveys acquired over the southwestern part of the Khalda Offset concession and the southern part of the West Kalabsha concession. So far this year, Apache has drilled 11 exploration wells, resulting in nine new field discoveries, in the Faghur basin. Drilling is continuing on two exploration wells, and seven additional exploration wells are slated to reach total depth in the area before the end of 2011.

Two oil and gas discoveries confirmed onshore New Zealand

Strong test results confirmed two oil and gas discoveries by New Zealand’s Tag Oil in the Taranaki basin onshore the country’s North Island. One of the wells, Sidewinder-2, encountered light oil-bearings sands in the Mt. Messenger formation that the company says are widespread in the area and will be a primary target for future exploration wells. The Mt. Messenger sands and additional productive zones in the shallow Urenui formation were encountered below the main Sidewinder gas zone, which tested at stabilized rates of 8.8 MMcfd. The other discovery well, Cheal-C1, intercepted oil- and gas-bearing sands in the Mt. Messenger formation, producing substantial volumes of light oil during swab testing along with clean, dry gas at rates of 1.5–3 MMcfd.

PetroNeft makes its largest Russian discovery to date

Less than two months after cutting its target production for first-quarter 2012 nearly in half and also reducing a 2013 target, Dublin, Ireland-based PetroNeft announced a new Russian oil discovery that could greatly improve that forecast. The company’s No. 372 well made what it calls its largest single discovery to date, at a new oil field at the Sibkrayevskaya prospect in Russia’s Tomsk Oblast region. The region is a primary focus of PetroNeft’s exploration activities, which has discovered five previous fields in addition to Sibkrayevskaya in License 61. The discovery well encountered 41 ft of net oil pay, exceeding pre-drill estimates. Current indications place the field’s ultimate recoverable reserves significantly above the 44 million-bbl pre-drill target defined for the prospect.

Lundin is 2 for 2 in Malaysian drilling campaign

Lundin Petroleum made a second gas discovery on the SB303 block offshore Sabah, Malaysian Borneo. Cempulut-1, Ludin’s second well in a five-well exploration campaign, intersected a large Late Miocene carbonate reef with excellent reservoir properties, according to the company. The Offshore Courageous jackup, which drilled the well in a water depth of about 250 ft, will now move to the BatuHitam prospect in block PM308A to drill a third well. Lundin holds a 75% interest in SB303, with Malaysia’s NOC Petronas holding the remainder.

Gas find confirms high potential offshore Indonesia

Italy’s Eni has discovered gas in an exploration well offshore Indonesia in the Jangkrik Northeast structure, stating that the find “further confirms the high potential of the area.” The well, drilled to 11,920 ft in 1,500 ft of water, produced high-quality gas at a tubing-constrained rate of 30.6 MMcfd. Eni is the operator of the well, with a 55% interest; GDF Suez holds the remaining 45%.

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