World of Oil and Gas

DISCOVERIES

Vol. 233 No. 6

WORLD OF OIL AND GAS

NELL LUKOSAVICH, SENIOR EDITOR

EXPLORATION

Four new firms awarded blocks offshore Uruguay

Uruguay’s state-owned petroleum company, ANCAP, received 19 offers for offshore oil E&P on 8 of the 15 offered blocks in Round II. Of the 11 oil companies initially qualified for the bidding process, nine submitted bids. The eight blocks cover more than 50% of the total offered area, and they will be explored by the four new players in the Uruguayan offshore: British companies BP and BG, French company Total, and Irish firm Tullow Oil. After assessment of the proposals and approval by the Uruguayan government, ANCAP will sign the contracts with the winning companies in September 2012.

Cairn joins Marathon in Cyprus exploration bid

Cairn Energy said it has teamed up with Houston-based Marathon Oil Corp. to jointly bid for oil and gas exploration rights in Cyprus, where large offshore discoveries of natural gas have reignited international tensions over the divided island. Cairn and JV partner Marathon submitted bids on May 11, with a decision by the Cyprus Ministry of Commerce, Industry and Tourism expected later this year. Recent discoveries of gas deposits in the waters off Cyprus and Israel have aroused interest in the eastern Mediterranean from the world’s leading energy firms, including Italian giant Eni and French major Total. However, the prospect of hydrocarbon wealth has also served to enflame a long-standing dispute between the internationally recognized Republic of Cyprus and the Turkish-controlled Republic of Northern Cyprus.

TGS begins two multi-client 2D surveys in northwestern Europe

TGS has commenced the Europe 2012 summer season with two multi-client 2D surveys in cooperation with Fugro—North Sea Renaissance 2012 (NSR12) and Norwegian Barents Sea 2012 (NBR12). The NSR12 survey is an 8,200-km, regional infill West of Shetland. The NBR 12 survey is a 12,000-km, regional infill in the Barents Sea. The NSR12 survey is being acquired by the M/V Akademik Shatskyi and will be processed by TGS. The NBR12 survey is being acquired by the M/V Osprey Explorer and will be processed by both TGS and Fugro. Data will be available to clients during first-quarter 2013.

Bangladesh says new oil reserves worth $5.5 billion

Bangladesh has discovered oil in two old gas fields in the country’s northeastern region with an extractable reserve worth $5.5 billion, the chairman of state-owned Petrobangla said. Hussain Monsur said the two finds at Kailashtila and Sylhet contain proven reserves of 137 million bbl of low-sulphur crude oil, of which 55 million bbl can be lifted commercially. Low sulphur, or “sweet” crude oil is highly sought after and is more easily processed into gasoline than high sulphur crude. State fuel importer Bangladesh Petroleum, known as Bapex, a subsidiary of Petrobangla, made the accidental finding last week while analyzing 3D seismic surveys conducted last year in an effort to determine the size of remaining gas reserves in the two fields, which were discovered in 1962 and 1955.

UNCONVENTIONALS

Australian natural gas resources total 390 Tcf

Australia’s drive to overtake Qatar as the world’s biggest exporter of LNG is being underpinned by a resource of around 390 Tcf of natural gas, which could double in size if exploration for shale gas is successful, Minister for Energy and Resources Martin Ferguson said. More than $175 billion is being invested in new LNG projects in Australia, to capitalize on fast-growing demand for cleaner-burning fuels in Asian economies, such as China, as they look for alternatives to burning coal for power. Companies, including Beach Energy Ltd. and AWE Ltd., plan or have started drilling campaigns to search for shale gas, including in the Cooper basin.

Shell, partners proceeding with Kitimat export facility

Shell, Korea Gas Corporation (KOGAS), Mitsubishi Corp. and PetroChina announced that they are developing a proposed LNG export facility in Western Canada, near Kitimat, British Columbia. This project will help make more of Canada’s abundant supplies of natural gas available to global markets, including Asia. The project includes the design, construction and operation of a gas liquefaction plant, and facilities for the storage and export of LNG, including marine offloading facilities and shipping. LNG Canada will initially have two LNG processing units, or “trains,” each with the capacity to produce 6 million tonnes of LNG annually, with an option to expand the project in the future. Shell holds a 40% interest in the LNG Canada project, with KOGAS, Mitsubishi and PetroChina each holding a 20% interest.

Chevron and Tohoku sign agreement for Wheatstone LNG

Chevron Corp. announced that its Australian subsidiaries have signed a non-binding agreement with Tohoku Electric Power Company Inc. for delivery of LNG from the Chevron-operated Wheatstone natural gas project in Australia. Under the agreement, Chevron, together with Apache Energy and Kuwait Foreign Petroleum Exploration Company, is expected to deliver up to 1 MMt per annum of LNG to Tohoku for up to 20 years.

PRODUCTION

Total confirms end to North Sea gas leak

France’s Total said the operation to end a natural gas leak at a North Sea platform was successful, ending a crisis that some feared could have ended in a catastrophe. On May 15, Total started pumping heavy mud into the field to stop a leak that had started in late March. The company said the gas stopped escaping from the platform 12 hr later. The company said it will now return workers to the Elgin complex and work to totally seal the well. The leak was discovered March 25 and forced Total to power down the platform, remove workers and start operations to end the leak. Total said it estimates that the incident, so far, has cost it just under $2 million a day.

Statoil upgrades Brazil pre-salt finds to 1.24 billion bbl

Statoil and its partners have substantially upgraded estimates for the Brazilian Campos basin pre-salt oil and gas discoveries, to 1.24 billion boe, and the Norwegian oil giant said this also increased its optimism for geologically similar acreage in Angola. Statoil said the companies had updated their estimates of Brazilian discoveries Seat, Gavea and Pao de Azucar, to 700 million bbl of oil and 3 Tcf of natural gas (which is equal to 540 MMboe) after previously estimating the discoveries as “high impact,” defined as more than 250 MMboe, or a share of 100 million bbl for Statoil, alone. Pre-salt, a geological formation off the African and Brazilian coasts, is expected to contain huge amounts of oil and gas that could contribute billions of new barrels to global reserves and help Statoil increase its daily international production to 1.1 million bbl by 2020, from about 600,000 bbl currently.

BUSINESS

Asia gears up for Orinoco race

Venezuela has seen a string of Asian investors commit large expenditures in the hope of securing crude oil supplies from its prolific Orinoco belt. In addition to $32 billion in loans from China, South Korea has notably granted $11.14 billion in funding, while Japan has agreed to lend $1 billion. As greater future volumes from the Orinoco belt are committed for export, Asian countries will be much fiercer in attempting to outbid each other for access to these volumes, which will be a boost for the cash-strapped Venezuelan economy.

Chesapeake to delay Eagle Ford oil field deal

Chesapeake Energy Corp. said that it would delay a $1-billion oil deal in the Eagle Ford oil shale in Texas, but that major asset sales in the Permian and Mississippi Lime basins remained on track to close in the third quarter. Chief Executive Aubrey McClendon said that language the company included in a quarterly filing, warning of a delay in asset sales, led many to worry that the Permian and Mississippi Lime sales “were somehow in jeopardy.” But the language was referring to a Volumetric Production Payment deal in the Eagle Ford, in which the company would have sold some of the field’s production in advance to investors, McClendon said.

Petrobras to announce asset sales in second-half 2012

Brazil’s Petrobras is moving forward with its previously announced $13.6-billion divestment plan and should announce some sales in the second half of this year, Chief Financial Officer Almir Barbassa told Reuters in an interview. Petrobras is in the process of selling off non-core assets, most of them overseas, to raise cash needed to fund the company’s massive $225-billion investment program, which is focused on developing recently discovered oil fields off the coast of Brazil. The discoveries, some of the world’s largest finds in three decades, potentially hold billions of barrels of crude.

REGULATORY AFFAIRS

Repsol seeks class-action suit against Argentina in NY court

Spanish oil firm Repsol YPF has filed a lawsuit against Argentina in a court in New York, after the country nationalized the company’s local unit. In the suit, which Repsol is pursuing in the name of other YPF shareholders as a class, the firm claims, among other things, that Argentina failed to comply with YPF bylaws, because it didn’t offer to buy all of YPF’s outstanding Class D shares as it acquired a controlling stake in the company. Repsol
is seeking compensatory damages. The suit comes after Repsol initiated other proceedings related to the expropriation of 51% of YPF, Argentina’s leading oil-and-gas company, leaving Repsol with 6.4%. Earlier, the oil company said it had notified Argentina that it is contesting the government’s compliance with an investment protection agreement.

BP lifts force majeure on Libyan exploration

BP has lifted force majeure with respect to its Libyan Exploration and Production Sharing Agreement (EPSA) with National Oil Corporation (NOC), effective May 15, 2012. Discussions between NOC and BP have agreed on how the impact of force majeure will be mitigated in BP’s existing contract terms. BP is one of the last oil companies to return to Libya after being forced to interrupt oil exploration plans by the civil war in the north African country last year.

India puts $1.2 billion penalty on Reliance for missing output target

The Indian government has asked Reliance Industries Ltd. to pay a $1.2-billion penalty, assessed for a fall in gas production, and for drilling fewer wells than planned in the country’s KG-D6 Block, the Economic Times reported. It cited an oil ministry notice as saying that the drilling shortfall violates production sharing contracts. Reliance Industries executives weren’t immediately available for comment. Reliance owns a 60% interest in KG-D6.

Iraqi auction attracts few bids

The Iraqi Oil Ministry has awarded only one exploration block in its fourth bidding round, as tough contract terms discouraged many companies from participating. Four of the six blocks failed to attract bids from any of the 39 international companies that paid participation fees.

DISCOVERIES

Lundin strikes again at Johan Sverdrup

Lundin Petroleum announced that the 16/2-11A sidetrack of appraisal well 16/2-11, in Johan Sverdrup field on the Norwegian Continental Shelf, has confirmed good quality in the Upper and Middle Jurassic reservoir. The well was drilled approximately 2,500 ft northeast of the 16/2-11 appraisal. The sidetrack well encountered a gross reservoir column of approximately 167 ft, of which 115 ft were above the oil/water contact. A comprehensive coring and logging program has been performed, which confirmed the good reservoir properties in the appraisal well. Lundin Norway is operator of PL501 with 40% interest. Partners are Statoil (40%) and Maersk Oil (20%).

Aztec finds five pay zones at Texas well

Aztec Oil & Gas has successfully drilled and completed the Welder A38 well in San Patricio County, Texas. This is the company’s third successful well in the area. The well was originally logged and completed in September 2011 with five productive pay zones calculated by log, cores and formation tests. Aztec delays announcing production results on some larger wells to give time for scientific confirmation of results.

BG Group makes fifth consecutive Tanzania gas discovery

BG Group announced its fifth consecutive Tanzania gas find in the Mzia-1 exploration well, in Block 1, offshore southern Tanzania. Mzia-1 is BG Group’s first discovery within the deeper Cretaceous section and opens an extensive new play fairway within the group’s offshore acreage in Blocks 1, 3 and 4, to complement the now-proven Tertiary fairway. Preliminary evaluation of the results indicates 55 m of natural gas pay in good-quality sands. Prior to drilling Mzia-1, BG Group had estimated mean total gross recoverable resources approaching 7 Tcf of gas from the four previous discoveries drilled in Tanzania.

Afren strikes oil at Ebok well

Afren announced that the Ebok North fault block exploration well, offshore southeastern Nigeria, has encountered 370 ft of net oil pay in excellent-quality reservoir sands. The exploration well was spudded by Afren and Oriental Energy Resources, and reached a TVD (and MD) of 4,320 ft, drilled by Transocean’s GSF Adriatic lX jackup.

New find upgrades offshore Mozambique estimates to 47-52 Tcf

Eni announced a new giant gas discovery in Area 4, offshore Mozambique, at the Coral 1 exploration prospect. The results for this well, drilled in the southern part of Area 4, indicate between 7 and 10 Tcf of gas-in-place, exclusively located in Area 4. With these new results, Eni estimates that the resources in Area 4 range between 15 and 20 Tcf of gas-in-place, and between 47 and 52 Tcf of gas-in-place in the Mamba complex. Coral 1 is 65 km (40 mi) off the Capo Delgado coast in a water depth of 2,261 m (7,418 ft) and reaches a TD of 4,869 m (15,974 ft). Eni plans to drill at least another five wells to fully establish the upside potential of Area 4.

Tullow strikes more pay at Kenya well

Tullow Oil announced that the Ngamia-1 exploration well onshore Kenya in Block 10BB has now been drilled to an intermediate depth of 4,970 ft, and the total net oil pay encountered so far has increased to in excess of 328 ft across multiple reservoir zones. Oil samples with an API greater than 30° have been recovered to surface from the newly drilled section, with similar properties to the light waxy crude encountered in the upper reservoir zone. The Ngamia structure is the first prospect to be tested as part of a multi-well drilling campaign in Kenya and Ethiopia. Many leads and prospects similar to Ngamia have been identified and, following this discovery, the outlook for further success has significantly improved. Tullow has proposed to the government an increase in 2D seismic acquisition and the sourcing of an additional rig to increase drilling activities.

Eni discovers oil in Egyptian Western Desert

Eni has made a significant oil discovery at the Emry Deep exploration prospect, in the Meleiha Concession, in the Western Desert of Egypt, 290 km (180 mi) southwest of Alexandria. The Emry Deep 1X well led to the discovery of oil and was drilled to a TD of 3,628 m. The well encountered over 250 ft of net pay in multiple good-quality sandstones of the Lower Cretaceous “Alam El Bueib” formation. During production tests, the well flowed 3,500 bpd of high-quality oil (41° API) and 1 MMcfd of associated gas. The discovery is now estimated to range between 150 million and 250 million bbl of oil-in-place and will require further appraisal drilling. The well is part of Eni’s strategy to refocus exploration activities in Egypt by targeting deeper plays.

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