January 2012

News & Resources

World of Oil and Gas

Statoil granted exploration licenses offshore Canada and Indonesia

Vol. 233 No. 1

WORLD OF OIL AND GAS

NELL LUKOSAVICH, SENIOR EDITOR

EXPLORATION

India to award exploration blocks by March

India expects to award the oil and gas exploration blocks it auctioned last year to successful bidders by March 2012, a senior oil ministry official said. The South Asian nation received bids for 33 of 34 exploration blocks auctioned in its ninth bidding round in March 2011. The auctions covered eight deepwater blocks, seven shallow-water blocks off both the eastern and western coasts, and 19 onshore blocks in the states of Gujarat, Rajasthan, Tripura and Assam.

**Jackup Kolskaya sinks off Russia, 14 saved, 53 dead**

ArktikMorNefteGazRazvedka (AMNGR) jackup Kolskaya sank with 67 people onboard on December 18 in the Sea of Okhotsk off the coast of Sakhalin Island while being towed in stormy and icy conditions. The two ships that had been towing the rig from Kamchatka to Sakhalin found 14 survivors, two of which were immediately flown to a nearby hospital to treat non-life-threatening injuries. The Russian Ministry of Transport said water flowed into the structure after pipes were damaged by the tow lines. Prior to sinking, the rig was capable of drilling wells to a total depth of 25,000 ft while operating in up to 325 ft of water.

CNOOC to start drilling first oil well offshore Cambodia

China National Offshore Oil Corporation (CNOOC) will start drilling the first well in Block F, offshore Cambodia’s Preah Sihanouk province in January 2012. The government of Cambodia awarded the block, which is one of six offshore blocks the nation awarded for companies to explore. It covers a total area of over 2,700 sq mi. The well is expected to cost $20 million to drill.

TGS signs letter of award for 3D vessel

TGS has signed a letter of award with Dolphin Geophysical to charter the 12-streamer newbuild seismic vessel, M/V Polar Duchess, for 3D, multi-client projects in Europe during the 2012 summer season. The charter is expected to begin during the first half of April and will last for approximately six months.

UNCONVENTIONALS

U.S. shale gas poses new challenge to Shtokman

A shale gas revolution in the U.S. poses new challenges to the development of Russia’s giant Shtokman gas field in the Barents Sea, an executive at Norway’s Statoil announced. The Shtokman project, which is 51%-owned by Russian state gas firm Gazprom, with Statoil and France’s Total as minority shareholders, has been delayed on several occasions due to high costs and uncertainty in global energy markets. “We are seeing a challenging gas market in Europe, the main reason being the shale gas revolution in the U.S.,” said Jan Helge Skogen, head of Statoil in Russia. “This has had a tremendous effect on the gas and LNG industry globally. Shtokman, from the beginning, required heavy and very large investment. This has become even more challenging over the recent year.” Gas from the field, which is located 400 mi north of Murmansk, will be both piped to European consumers and shipped on tankers to global markets as LNG.

Rosneft, PDVSA partner in heavy oil JV

Rosneft and PDVSA signed a tentative memorandum of understanding to set up a joint venture to develop heavy crude oil reserves in Venezuela as part of the Carabobo-2 project. Rosneft will hold a 40% stake in the planned joint venture with the remaining 60% to be owned by PDVSA subsidiary CVP. The Carabobo-2 project comprises the Carabobo-2 North and Carabobo-4 West blocks. They are situated in the Orinoco heavy oil belt and have a combined acreage of 132 sq mi. The blocks are estimated to hold 40 billion bbl of oil in place. Crude oil production is expected to peak at over 400,000 bopd.

Royale awarded Alaska oil shale acreage

Royale announced that it was selected by the State of Alaska as a winning bidder on acreage in the North Slope area-wide lease sale. The position secures a liquids-rich shale known to have sourced Prudhoe Bay and Kuparuk River oil fields. The primary targets of this acquisition are the Shublik, Kingak and HRZ shale formations at depths ranging between 7,000 and 10,000 ft.

Devon obtains approval for third Jackfish oil sands project

Devon Energy Corp. announced that it has received regulatory approval from the Alberta Energy Resources Conservation Board and Alberta Environment and Water to move forward with the company’s third oil sands project in Canada. Construction of the 100% Devon-owned Jackfish 3 project will begin in January with startup targeted for late 2014. Jackfish 3 will utilize a recovery method known as Steam Assisted Gravity Drainage (SAGD), the same method currently employed at the company’s two previously completed Jackfish projects. Once fully operational, Jackfish 3 is expected to produce an average of 35,000 bopd before royalties.

PRODUCTION

Libyan pre-war production to resume in 2015

U.S. oil giant ConocoPhillips has restarted operations in Libya and hopes to restore its pre-war production level of 350,000 bopd in just over a year, though it may take several years before it reaches its target of 700,000 bopd in the North African nation. Conoco partners in Libya with fellow U.S. firms Hess and Marathon Oil in a joint venture called Waha Oil Co., which is the largest oil producer in Libya involving foreign partners.

BHP Billiton’s Petrohawk boosts daily production 46%

Average oil and natural gas production at BHP Billiton’s newly-acquired Petrohawk Energy rose 46% in the first nine months of the year to 940 MMcfd. Petrohawk said it was involved in drilling 353 wells during the period, of which all but one were successful, and it is on track to exceed its 2011 capital budget of $2.85 billion. BHP completed the $12.1 billion acquisition of Petrohawk in August, its second venture into the U.S. shale industry after it bought Chesapeake Energy’s Fayetteville holdings for $4.75 billion in February.

FMC Technologies wins Who Dat contract

FMC Technologies has signed an agreement with LLOG Exploration Company for the design, manufacture and supply of subsea production systems to support its Who Dat project in the U.S. Gulf of Mexico. FMC’s scope of supply for this $40 million contract includes seven subsea production trees and control systems. The equipment will be supplied from the company’s operations in Houston with deliveries expected to begin in 2012.

BUSINESS

Statoil, partners invest $538 million in Visund North

Norway’s Statoil said that, with its partners, it will invest $538 million in the Visund North field. The North Sea field contains estimated recoverable reserves of 29 MMboe, which consist mainly of oil. The investment decision also reopens part of the acreage where production was stopped in 2006. A standard two-well seabed template will be used. FMC will produce the template, which will be installed in the summer of 2012. Production at Visund North is scheduled to start in autumn of 2013. Norwegian state-owned Petoro, French company Total SA and U.S. firm ConocoPhillips are also partners in PL 120, where the field is located.

Petrobras CEO: Deepwater oil drilling costs increasing

The cost of drilling oil wells in deep water is increasing in all parts of the world because demand for technical services is higher than the capacity of the industry, Petrobras CEO Jose Gabrielli de Azevedo said. He also said that in the first quarter of 2012, Brazil will make the final decision on whether to use floating vessels to liquefy natural gas from offshore oil fields, or rather to connect the fields to the mainland with more conventional gas pipelines.

Sinopec, Devon partner in $2.2 billion shale deal

China’s Sinopec announced it will invest $2.2 billion for a third of U.S. oil and natural gas producer Devon Energy’s interest in five developing fields as part of a long-term partnership. Devon previously stated that it was seeking a joint-venture partner to help shoulder the costs of drilling in unconventional basins, where wells require expensive hydraulic fracturing to produce oil and gas. Sinopec is investing in 1.2 million acres in Devon’s positions in the Tuscaloosa marine shale in Alabama and Mississippi, the Niobrara in Colorado, the Mississippian, the Utica shale in Ohio and the Michigan basin. Through 2012, the companies expect to drill approximatley 125 wells in the five different plays.

Shell, Eni purchase huge oil field offshore Nigeria

Royal Dutch Shell and Italy’s Eni have bought the rights to a potentially prolific deepwater oil field in OPL 245 offshore Nigeria, ending a long-running dispute over who would take control of the block from a company with ties to former dictator Sani Abacha. According to local media reports, the oil majors had offered $1.3 billion for the field, which experts believe could hold as much as 9 billion bbl of crude. The deal also brings an end to a protracted legal spat between Shell and the block’s erstwhile owner, Malabu Oil and Gas, a local firm controlled by former minister of petroleum resources Chief Dan Etete. Shell had initially agreed to partner with Malabu amid a drive to boost local investment in the oil and gas sector, but the deal collapsed and the two parties became embroiled in lawsuits.

REGULATORY AFFAIRS

EPA finds fracing contamination at Encana site in Wyoming

Groundwater in Pavillion, Wyoming, was found contaminated with chemicals used in fracing to extract natural gas, the U.S. Environmental Protection Agency (EPA) said in a draft report. The groundwater tested is close to a gas field owned by Encana Corp. “The samples were consistent with chemicals identified in earlier EPA results released in 2010 and are generally below established health and safety standards,” the agency said. The EPA said it began testing three years ago after requests from residents of Pavillion. Encana has been funding the provision of alternate water supplies to the sparsely populated area since 2010, based on earlier data.

BP settles with Cameron over Deepwater Horizon suit

BP announced that it has reached agreement with Cameron International Corporation, the designer and manufacturer of the Deepwater Horizon blowout preventer, to settle all claims between the companies related to the Deepwater Horizon accident and spill. BP and Cameron have concluded that the settlement is in their mutual best interests, and the agreement is not an admission of liability by either party. Under the settlement agreement, Cameron will pay BP $250 million. BP will immediately apply the payment to the $20 billion trust it established to meet individual, business and government claims, as well as the cost of the natural resource damages.

DISCOVERIES

ONGC makes two new oil finds

India’s Oil and Natural Gas Corporation (ONGC) declared two new discoveries. One is in the North Kadi area of Gujarat’s Mehsana district, which is the company’s major production center, and the other is in the Panna area, 25 mi from its bread-and-butter Mumbai offshore field. Testing of the Panna well has opened up the eastern part of B-127 area for further exploration and delineation. This pushes the total number of recent discoveries to 15.

PetroChina, Shell JV finds shale gas in Sichuan

PetroChina and Shell have discovered shale gas in China’s Sichuan province. Gas exploration work in the Fushun-Yongchuan block is still ongoing and Shell will complete drilling activities by year-end. The joint venture between PetroChina and Shell drilled its first evaluation well in December of 2010, about 13 months after signing an agreement to develop shale gas resources in the area. China is estimated to have as much as 1,275 Tcf of shale gas reserves, according to the U.S. Energy Information Administration.

Vanco discovers oil offshore Cote d’Ivoire

Vanco, together with Lukoil and PETROCI Holding, announced a discovery in Block CI-401 offshore Côte d’Ivoire. The Independance-1X exploration well drilled on Block CI-401 has penetrated the targeted objective and found a series of good-quality sandstones containing light oil. The well was drilled in a water depth of 5,541 ft, approximately 58 mi south-southeast of Abidjan, and represents one of the deepest water exploration wells drilled to date in the eastern offshore Ivorian basin. The well was drilled using drillship Ocean Rig Olympia, a dynamically positioned, sixth generation deepwater rig.

Centrica finds oil at its Butch prospect in Norway

Centrica’s early appraisal results at its Butch exploration well in the northern North Sea indicate a presence of light oil in the reservoir, with 30 to 60 MMboe for the main Butch segment, in which it has a 40% operating interest. Further data collection is now underway, and the drilling of a second sidetrack well has commenced on the Butch southwest compartment, where Centrica is targeting additional volumes.

Multiple pay zones discovered in San Joaquin basin well

Neon Energy Limited announced the discovery of multiple hydrocarbon-bearing zones at the Paloma Deep prospect in the San Joaquin basin, onshore California. The well reached a total depth of 13,320 ft and is presently being prepared for production testing. Analysis of wireline logging data confirms the presence of hydrocarbons in eight zones, which, in aggregate, represent approximately 1,000 ft of potential hydrocarbon pay, including three unconventional oil shale zones.

Anadarko sees higher-than-expected pay at GOM well

Anadarko announced that an exploration well in the deepwater Gulf of Mexico found higher-than-expected amounts of natural gas. The company’s Cheyenne East well saw 50 ft of high-quality gas pay, which is higher than past estimates. Cheyenne East was Anadarko’s first well to receive a drilling permit after the government imposed a drilling moratorium last year after the Deepwater Horizon spill. The well is expected to start production this year.

Chevron makes 12th gas find off Western Australia

Chevron Corp. announced a natural gas discovery by its Australian subsidiary in the Exmouth Plateau area of the Carnarvon basin, offshore Western Australia. The Vos-1 well encountered 453 ft of net gas pay and represents Chevron’s 12th offshore discovery in Australia since mid-2009. Located in the WA-439-P permit area 185 mi from Exmouth on the Western Australian coast, the well was drilled in 4,869 ft of water to a depth of 12,461 ft.

Coastal finds largest pay zone to date at Bua Ban

Coastal Energy Company announced that its Bua Ban North B-09 well offshore Thailand encountered oil across five Miocene zones, making it the largest pay zone encountered to date in the field. The well was drilled as an appraisal well between the southernmost Bua Ban North B-04 well and the Bua Ban North A-09 well. The well was drilled to a TVD of 5,200 ft, where pay was encountered in the M75 zone for the first time, which represents a new productive zone for the field. Coastal plans to drill further appraisal wells to continue testing the 63 million bbl of prospective resources.

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