World of oil and gas

PRODUCTION

Shell begins output from Mars B platform in deepwater Gulf

Shell has begun producing from the Mars B development through Olympus, the company’s seventh, and largest, floating deepwater platform in the Gulf of Mexico. Combined future production from Olympus, and the original Mars platform, is expected to deliver an estimated resource base of 1 billion boe. In addition to the Olympus drilling and production platform, the Shell Mars B development (Shell 71.5% operator, BP 28.5%) includes subsea wells at West Boreas and South Deimos fields, export pipelines, and a shallow-water platform, at West Delta 143, near the Louisiana coast. Using the Olympus platform drilling rig and a floating drill rig, additional development drilling will enable ramp up to an estimated peak of 100,000 boed in 2016. Mars field produced an average 60,000 boed-plus in 2013. Also in the Gulf, progress on the 50,000-boed Cardamom project continues toward a 2014 production date, and work is underway on the 50,000-boed, deepwater Stones development.

Baker Hughes to fund development of Polish gas field

San Leon Energy has signed a letter of intent with Baker Hughes Poland to jointly develop the Siekierki Gas field in Poland. The companies plan to start gas production from four existing wells—Trzek-1, Trzek-2ZH and Trzek-3H, on the Siekierki structure, and the nearby Krzesinki-1 well. Under the proposed agreement, Baker Hughes will provide all funding necessary to recomplete the wells, and bring them into production. Subject to finalization of funding, the latter’s contribution may be in the form of cash, in-kind oilfield services, or a combination of both. Baker Hughes services will be provided at their standard prices, and based upon a master service agreement. In return for fully funding the startup of production, Baker Hughes will receive a to-be-agreed portion of the profits generated from production, until its investment has been recovered fully.

Total starts production from Itaú Phase 2

Total has started Phase 2 production from its Itaú gas and condensate field in Block XX (Tarija Oeste) of Bolivia’s Andean Cordillera foothills. Building on the first phase of Itaú, which commenced production in February 2011, Phase 2 triples production capacity to 5 MMcmgd (35,000 boed). The entire gas production of Itaú’s two phases, 1 and 2, will be processed in a dedicated new unit on the same site as the facilities for neighboring San Alberto field. As with Phase 1 production, Phase 2 output will be exported, mainly to Argentina. The participation of Total E&P Bolivie represents 41%, in partnership with Petrobras (30%, operator), BG Bolivia (25%) and YPFB Chaco (4%).

Exxon Mobil has begun natural gas production at Damar field, off the east coast of Peninsular Malaysia. Subsidiary Exxon Mobil Exploration and Production Malaysia Inc. has a 50% interest in the project. Damar has a projected capacity of 200 MMcfgd. Exxon Mobil, with JV partner Petronas Carigali, has planned 16 development wells for the platform. Damar was developed under a gas production-sharing contract between Exxon Mobil, Petronas Carigali and Petronas. Exxon Mobil operates Damar, and Petronas Carigali holds a 50% interest. The start-up follows the previously announced Telok gas development in Malaysia, which began production in March 2013.

GOVERNMENT/REGULATORY 

Shell has halted plans to drill in the Alaskan Arctic for a second year, after a U.S. appeals court ruling that asserts the U.S. had illegally opened the area to exploration. The operator spent roughly $5 billion, over seven years, preparing for exploration in the Beaufort and Chukchi seas. On Jan. 22, a federal appeals court ruled that opening almost 30 million acres to oil and gas exploration violated existing law. In 2012, Shell attempted to explore the state’s northern coast for oil. Soon after, one of its rigs ran aground in heavy surf, and subsequent issues plagued the firm.

Greece plans to open a bidding round for oil and gas exploration permits in the Ionian Sea, off the country’s west coast and south of the island of Crete, in second-half 2014. A June target has been set for the publishing of a bidding invitation in the Official Journal of the European Union. It will include round terms and details, as well as required supporting documents, and a map of the blocks offered. Greece remains in the middle of a six-year recession that has seen its economy shrink by one-fifth. Seismic surveys in the proposed exploration areas indicate geological structures resembling those
in Italy and Albania.

In hopes of reigniting foreign investment in its domestic shale industry, Poland has nixed plans for a state-run fund to hold stakes in hydrocarbon licenses, following the exits of Marathon Oil and Exxon Mobil in recent years. Well counts in Poland fell 50% in 2013, as concerns remained over the potential rights that such a fund would have in exploration projects. The country, home to Europe’s largest unconventional gas resources, has doled out roughly 100 licenses to foreign participants. The country expects its first commercial shale gas well this year.

Tullow Oil, Total and CNOOC, in agreement with the Ugandan government, have signed a deal on an oil refinery and pipeline, hoping to kick-start crude output. Outlined in the deals are plans to initially use oil for power generation, before the construction of a refinery (expected to be ready in 2017) and an export pipeline. Oil was first discovered in Uganda in 2006, and commercial output is expected to start in 2015 or 2016, following logistical and economic feasibility delays. The country has an estimated 3.5 billion bbl of oil, with foreign operators hoping to access Uganda’s Lake Albert fields. Uganda ranks fourth in terms of sub-Saharan Africa’s largest oil reserves.

After more than 10 years of declining oil output, Norway hopes to attract operators willing to compete with Statoil, as the producer has faced canceled contracts and key project delays. According to Norwegian officials, the country is looking to garner activity from a wider sampling of large companies that have the technology, and financial backing, to develop resources there. In 2013, Statoil saw delays on two flagship projects, Johan Castberg and Johan Sverdrup, citing cost increases and tax hikes as the cause. The latter field is said to be Norway’s biggest oil discovery since 1974. Statoil also recently canceled a planned pipeline to the Kristin producing gas field.

EXPLORATION

Cuadrilla Resources has proposed locations for two new exploration sites in the Fylde, a coastal plain in western Lancashire, as part of its work to understand the region’s full shale gas resources potential. The company intends to apply for planning permission to drill, hydraulically fracture and test the flow of gas from up to four exploration wells on each of the sites. Separate applications will also be made to install two seismic arrays that would be used to monitor the hydraulic fracturing process. Independent planning and environmental consultancy, Arup, will prepare an Environmental Impact Assessment (EIA) for each of the new exploration sites. As part of Cuadrilla’s site review, the company has decided not to apply for permission to carry out hydraulic fracturing at its Grange Hill location. The existing well will be used as the base for a seismic monitor.

QGEP Participações has concluded drilling and testing of the first horizontal well (7-ATL-2HP-RJS) in the Atlanta field early production system (EPS). In Block BS-4, Atlanta is a post-salt oil field, 185 km off the coast of Rio de Janeiro, in the Santos basin, at a water depth of approximately 1,500 m. The well was drilled to a horizontal section length of 750 m, and a diameter of 9.5 in., encountering an average porosity of 38%. The well’s horizontal portion was then cased with screens, and packed with gravel.

Lukoil has finished an evaluation and independent audit of its oil and gas reserves, as they stood on Dec. 31. The audit results by Miller and Lents, a U.S. firm, suggest that Lukoil’s proved hydrocarbon reserves, as of Dec. 31, came to 17.4 billion boe, including 13.5 billion bbl of oil and 23.6 Tcf of gas. Proved reserves increased, and added 822 million boe. The company’s category 3C contingent resources totaled 12.2 billion boe, as of Dec. 31.

Québec, Maurel & Prom to invest $100 million to complete exploration on Anticosti Island

Pétrolia has, in accordance with its business plan, signed a letter of intent to create a strategic partnership, to complete a significant exploration work program on Anticosti Island. The government of Québec, through its affiliate, Ressources Québec, and Établissements Maurel et Prom (Maurel & Prom), have agreed to form a partnership with Pétrolia and Corridor Resources, to complete the exploration work on Anticosti Island. Ressources Québec and Maurel & Prom have, together, agreed to contribute up to $100 million to finance the proposed exploration program. The first phase of the program is expected to begin during the summer of 2014.

ACQUISITIONS & EXPANSIONS 

DISCOVERIES

Pacific Rubiales has announced well test results from the Los Angeles-1X well, in Block 131. The block is in Peru’s onshore Ucayali basin. The company gained its interest in this, and other, blocks through the Petrominerales acquisition, completed in late-2013. Pacific Rubiales, through a wholly-owned subsidiary, holds a 30% working interest in Block 131. The company, in joint operations with operator CEPSA Peru, has now carried out the third phase of exploration on the block. Los Angeles 1X was spudded in mid-September, and reached a TD of 12,409 ft in late-November.

BUSINESS

Gazprom Neft and Schlumberger have signed a supplement to their framework agreement on technology cooperation, made in 2011, for more efficient development of hard-to-extract shale oil reserves, mainly from Bazhenov deposits in Western Siberia. The companies will cooperate on Gazprom’s plans for development of the Bazhenov-Abalaksky group, in Krasnoleninskoye field’s Palyanovskaya area, and, later, on other projects for the development of non-conventional oil reserves in the Khanty-Mansi Autonomous District.

Woodside and the Leviathan JV participants have agreed to convert a previous in-principle agreement, for the potential acquisition of an interest in Leviathan field, into a non-binding memorandum of understanding (MOU). The MOU provides a framework to negotiate, in good faith, the acquisition of a 25% participating interest in the 349/Rachel and 350/Amit petroleum licenses. Leviathan field is contained within the licenses, and, based on information provided by operator Noble Energy, holds an estimated 18.9 Tcf of natural gas, and 34.1 MMbbl of condensate.

Apache is selling its energy assets in Argentina, to state-owned YPF, for $800 million in cash. The assets to be sold include estimated reserves of 540 Bcf of natural gas equivalent, with an average output of 256 MMcfgd. Apache is in the process of focusing its portfolio on “repeatable and profitable, long-term growth in areas where the company has industry-leading positions.” The company said that it has recently raised $7 billion from asset sales, and has shed holdings in Egypt and the Gulf of Mexico.