OGJ Newsletter

General Interest — Quick Takes

IEA slashes worldwide oil demand forecast

The International Energy Agency in its April oil market report revised down by 1 million b/d its outlook for 2009 worldwide oil demand.

IEA cited a reassessment of global economic assumptions and much lower-than-expected first quarter demand data as the drivers of this revision. IEA went on to say it believes that economic and oil demand recovery will be deferred to 2010. With the expectation that global GDP will contract 1.4% this year, the agency now forecasts that worldwide oil demand will average 83.4 million b/d, which is 2.4 million b/d below 2008 demand.

In its previous monthly oil market reports, Paris-based IEA expected that global GDP would grow modestly in 2009 and that oil demand would recover in the second half of the year.

The bulk of the latest forecast cut for this year’s oil demand is for the first quarter. IEA revised lower its estimate of first quarter 2009 demand by 700,000 b/d. Demand for middle distillates suffered despite spells of colder northern hemisphere weather, and industrial activity indicators remain universally weak, IEA said.

Forecast oil demand in countries of the Organization for Economic Cooperation and Development has been adjusted down for 2009 on the basis of much lower economic assumptions. IEA reports that OECD countries are set to face an unusually severe recession, with overall GDP contracting 3.9%.

Consequently, the agency now forecasts 2009 OECD oil demand at 45.2 million b/d, down 2.4 million b/d from last year and 760,000 b/d lower than previously estimated.

Meanwhile, IEA also cut its forecast for non-OECD oil demand, as economies in emerging countries are now expected to grow just 1.9% this year. Non-OECD oil demand will average 38.3 million b/d in 2009, almost 230,000 b/d lower than previously expected. Although small, this will be the first contraction in non-OECD demand since 1994, IEA said.

EPA cleared to issue climate endangerment finding

The White House has cleared the way for the US Environmental Protection Agency to issue an endangerment finding that greenhouse gases pose a danger to public health and welfare.

EPA officials said there is no timetable for when the endangerment finding might be issued. The US Supreme Court on Apr. 2, 2007, ordered EPA to determine whether carbon dioxide emissions from vehicles threaten public health and welfare (OGJ, Apr. 9, 2007, p. 33).

Under the administration of US President Barack H. Obama, the EPA moved forward on an endangerment announcement. Such an official announcement would enable the regulation of GHGs under the Clean Air Act.

EPA submitted its proposed finding in March to the White House Office of Management and Budget as part of the normal interagency review process.

“OMB has concluded their review, and we will determine what further action to take,” EPA spokeswoman Adora Andy said in an Apr. 15 e-mail to OGJ.

The OMB clearance falls short of the White House’s directing EPA to proceed with the regulatory process.

Meanwhile, a subcommittee of the House Energy and Commerce Committee expects next week to discuss proposed energy and climate legislation entitled the 2009 American Clean Energy and Security Act.

The Obama administration has suggested it would like to have Congress deal with climate change regulation through a cap-and-trade system.

Separately, the Center for Biological Diversity filed a petition with the federal government to protect US waters from ocean acidification, which results from oceans absorbing CO₂. The EPA on Apr. 15 said it will review whether those emissions should be regulated under the Clean Water Act.

OCS oil, gas support Louisiana jobs

About 154,000 high-paying manufacturing jobs in Louisiana depend on access to oil and natural gas on the US Outer Continental Shelf, federal officials were told at the second of four public hearings on Apr. 8.

Louisiana industries use oil and gas not only as energy but also as feedstocks for a wide variety of petrochemicals, testified Virginia Sawyer, vice-president of the Louisiana Association of Business and Industry, at the US Department of the Interior’s hearing on a draft proposed 5-year OCS plan in New Orleans.

While Louisiana accounts for 13% of the total energy exported from oil and gas-producing states, industries use almost 77% of the gas consumed in the state, she said.

“Almost 58% of petroleum produced in Louisiana is consumed by the state’s industrial sector, which employs 154,000 Louisianans, who have an average annual wage of $52,000. This average manufacturing wage is 40% higher than Louisiana’s statewide average wage,” said Sawyer, who also testified on behalf of the National Association of Manufacturers.

The potential for generating electricity from renewable and alternative sources does not mean federal policy should focus on it at the expense of oil and gas, she continued.

“While tens of thousands of jobs may be created by the development of alternative energy sources, hundreds of thousands of jobs in Louisiana and along the Gulf Coast will be negatively affected if OCS oil and gas production is not aggressively continued. Orderly development of energy should be as fuel-neutral as possible,” Sawyer said.

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Petrobras, Repsol YPF claim Piracuca find ‘viable’

Brazil’s Petroleo Brasilerio SA (Petrobras) and partner Repsol YPF SA said a light oil and natural gas find in Piracuca field off Brazil is commercially viable.

The partners said the find was made in reservoirs in the presalt layer on Block BM-S-7 in the Santos basin.

The companies presented a declaration of commercial viability to Brazil’s energy regulatory agency, ANP, based on the “intense exploratory activity” the companies have carried out on the block, Petrobras said.

“With the new field, it will be possible to increase the potential for light oil and gas production in shallow waters,” Petrobras said. Earlier, the Brazilian firm estimated that the field contained nearly 550 million boe.

Petrobras and Repsol YPF originally announced their discovery in January, saying that the find was made in214 m of water and a total depth of 3,970 m, above the region’s subsalt layer.

“This discovery is of great importance because of the potential production of gas in shallow waters in the southern Santos basin,” said Petrobras, operator of the block with a 63% stake. Repsol YPF holds the remaining 37%.

StatoilHydro acquires interest in DeSoto Canyon

BHP Billiton has granted a 40% interest to StatoilHydro in 50 frontier blocks in the DeSoto Canyon area of the Gulf of Mexico.

The DeSoto Canyon area lies east of Independence Hub in 1,000 m of water. StatoilHydro hopes to secure early access to new plays.

StatoilHydro conducted a similar early-access deal with ExxonMobil Corp. in 2005 in the Walker Ridge area of the gulf, according to Tony Dore, StatoilHydro vice-president of exploration for North America.

StatoilHydro and BHP Billiton bid successfully on 14 additional blocks within this same trend at the Central Gulf Lease Sale 208 held in New Orleans last month (OGJ Online, Mar. 18, 2009). Together, the two companies were the apparent high bidder on all blocks.

The partners are awaiting final approval from the US Minerals Management Service for the leases on those blocks.

Israel’s Dalit discovery given 500 bcf

A group led by Noble Energy Inc., Houston, reported a flow of 33 MMcfd of natural gas from its Dalit deepwater discovery in the Mediterranean off Israel and said the well appears capable of achieving 200 MMcfd.

Noble estimated Dalit’s gross mean resource at 500 bcf of gas from log and test results. The well is on the Michal license.

The 33-MMcfd flow, limited by test equipment capacity, came from 43 ft of the previously reported 110 ft of identified net pay.

Noble said the well improves confidence in its geological model for the region, and that it will begin shooting 3D seismic in the next few months to supplement that understanding of the basin and various leads on its acreage.

The rig will return to the Tamar discovery on the Matan license to drill an appraisal well. Tamar’s estimated gross mean resource potential is 5 tcf (OGJ Online, Feb. 10, 2009).

Noble operates both licenses and holds 36% working interest. Other interest owners are Isramco Negev 2 with 28.75%, Delek Drilling 15.625%, Avner Oil Exploration 15.625%, and Dor Gas Exploration 4%.

Ziff: US unconventional gas share to leap

Ziff Energy Group forecasts unconventional gas production will supply 53% of US gas needs by 2020, up from 30% in 2000.

Ziff Energy’s Shale Gas Outlook to 2020 says shale gas production in 2008 was more than 5 bcfd (8% of North American gas production), with 70% coming from the Barnett shale in the Fort Worth basin of Texas.

In the future, the report sees increased gas coming from the Barnett, Fayetteville, and Woodford shales as well as many other plays such as the Haynesville, Marcellus, Horn River, Utica, and Gothic.

The report expects in 2020 that North America will produce 87 bcfd compared with 70 bcfd in 2000.

Dana Gas starts output from Egyptian discoveries

Dana Gas, Sharjah, announced earlier this month it had started production from its recent Al Basant gas-condensate discovery on the West Manzala concession in Egypt’s Nile Delta.

The company also began producing from its El Wastani East-2 sidetrack well, Dana Gas Egypt’s first highly deviated, horizontal well in Egypt.

Dana drilled the Al Basant-1 well in October 2008 and tested it at 23.5 MMscfd and 1,027 b/d of condensate. The Al Basant-2 appraisal well was subsequently drilled, completed, and tested in December 2008. It yielded additional gas in a new zone that tested at 10.5 MMscfd gas and 150 b/d of condensate.

A third well in the field is to reach estimated target production of 45 MMscfd before yearend. Dana said that Al Basant field gas reserves are estimated to exceed 123 bcf.

The Al Basant discovery was developed on fast track, said the company, with two 17-km pipelines, one 6 in. OD and 12 in., to transport Al Basant production to the El Wastani integrated gas plant.

The plant has design capacity of 160 MMscfd and 7,500 b/d of condensate and LPG, but is currently operating at 153 MMscfd gas and 5,400 b/d.

Dana said the new gas production from Al Basant will “allow testing the plant beyond its full design capacity and identifying components that require modification, or upgrading.” It will also maximize throughput, while targeting production levels of 170 MMscfd.

The company said the El Wastani East-2 sidetrack well was drilled and completed in March in the East El Wastani development lease in the Nile Delta region. Gas production from EWE-2 started on Mar. 30, said the company, initially at 4.5 MMscfd gas, which will increase “after the well has been cleaned up.” EWE-2 production is being processed in the company’s El Wastani plant.

Ahmed Al-Arbeed, Dana Gas upstream executive director, said the company will continue its efforts to develop and produce the remaining three discoveries: Salma, Azhar, and Sondos (Haggag) in 2009-10.

In its announcement, the company claimed it is the Middle East’s “first and largest regional private sector natural gas company.”

RAK buys Heritage’s interest in West Bukha

RAK Petroleum PCL has purchased a 10% interest in Block 8 in the Strait of Hormuz off Oman from a subsidiary of Heritage Oil Ltd. of the UK, bringing RAK’s interest to 50%.

RAK operates Block 8, where it brought West Bukha field on production in February 2009 at 10,000 b/d of 42° gravity oil and 30 MMcfd of associated gas from two wells. The wells are on a six-slot, unmanned platform in 90 m of water 25 km off the Musandam Peninsula.

Discovered in 1976, West Bukha was believed to be a gas-condensate field and was abandoned as noncommercial.

Appraisal drilling by RAK Petroleum in 2006-08, including an extended horizontal section, demonstrated oil potential in the Mishriff-Maudud and Thamama reservoirs, said Bijan Mossavar-Rahmani, RAK Petroleum managing director and chairman of the executive committee.

A 12-in. multiphase flow line connects West Bukha to the nearby Bukha field production platform. Bukha field, also on Block 8, was developed in 1994 and can flow 10-15 MMcfd of nonassociated gas.

Output from both fields moves through a 16-in., 33-km multiphase flow line to shore for processing at the Khor Khwair plant in Ras Al Khaimah. Oil and condensate are slated for export, while gas is delivered to industrial and commercial users in Ras Al Khaimah.

LG International Corp., Seoul, holds the other 50% interest in Block 8.

RAK Petroleum, registered in Ras Al Khaiman’s free trade zone, operates nine blocks in Oman and the UAE, of which six are in the exploration phase and two are undergoing appraisal for possible redevelopment.

Holly to buy, upgrade refinery in Tulsa

Holly Refining & Marketing has agreed to buy and plans to add diesel desulfurization capacity at Sunoco’s 85,000-b/cd refinery in Tulsa.

The companies have signed a definitive agreement with a purchase price of $65 million. Closing of the deal is set for June 1.

Sunoco had announced last November that it was canceling plans to upgrade the refinery and that it would seek a buyer or operate the facility as a terminal. According to Oil & Gas Journal’s 2008 Worldwide Refining Report, the refinery has 8,500 b/cd of delayed coking capacity, 17,500 b/cd of catalytic reforming capacity, and 24,000 b/cd of catalytic hydrotreating capacity for reformer feeds.

In addition to fuels, the refinery produces 8,500 b/cd of lubes and 350 tons/day of coke. It yields about 40% diesel and jet fuel.

Holly Corp. Chairman and Chief Executive Officer Matt Clifton said the buyer will install a diesel desulfurization unit by 2011 at an expected cost of $150 million.

Holly operates the 85,000-b/cd Navajo refinery in Artesia, NM, and a 26,400-b/cd refinery in Woods Cross, Utah.

Sunoco’s other refinery locations and capacities are Philadelphia, 330,000 b/cd; Marcus Hook, Pa., 175,000 b/cd; Eagle Point, NJ, 150,000 b/cd; and Toledo, Ohio, 140,000 b/cd.

Qatar’s Laffan refinery to open in July

The start-up of the 146,000 b/d Laffan condensate refinery in Ras Laffan City, Qatar, is scheduled for July.

Faisal Al Suwaidi, chief executive officer of Qatargas Operating Co. Ltd. (Qatargas), told OGJ that the refinery is 99% complete. “We still have a few things to do,” he said. “Commissioning activities have already started. It is the largest single condensate refinery in the world.” Products will be used internally and exported.

The project has cost $800 million, instead of the $668.7 million originally expected in 2005, and was expected to start by the third quarter of 2008. The delay occurred because of a shortage of skilled labor and materials following the construction boom of the industry over the last 3-4 years. The capacity of the condensate refinery will be doubled by 2014.

Qatargas and its partners, including ExxonMobil Corp. and Total SA, have built process units including utility systems, distillation units, naphtha and kerosine hydrotreaters, a hydrogen unit, and a saturated gas plant producing hydrotreated naphtha, hydrotreated kerosine, gas oil, and LPG for export.

A consortium of GS Engineering & Construction Corp. and Daewoo Engineering & Construction Co. hold the engineering, procurement, and construction contract. Technip SA handled front-end engineering and design.

Qatargas will operate the refinery and provide feedstock for it along with RasGas, a joint venture between Qatar Petroleum and ExxonMobil, and Al-Khaleej Gas.

The shareholders are Qatar Petroleum with 51%; ExxonMobil, Total, Cosmo, and Idemitsu, 10% each; and Mitsui and Marubeni, 4.5% each.

Shell suffers fire on Trans-Niger oil pipeline

Nigerian firefighters have extinguished a blaze that shut in flow stations feeding into the Trans-Niger oil pipeline, said Royal Dutch Shell PLC.

Shell declined to give the volume of oil that was shut in or a timetable for restarting production. Nigerian reports have estimated that 120,000-170,000 b/d was cut off.

The cause of the fire is still being investigated. The incident happened on Apr. 12 at the Bomu manifold in Ogoniland, in the Niger Delta.

Shell has called force majeure on the Bonny Light and Forcados facilities in Nigeria following attacks by militants.

US DOC quashes Broadwater LNG terminal plans

In an Apr. 13 decision with implications for natural gas supply to the US Northeast, the US Department of Commerce denied an appeal by sponsors of the planned Broadwater offshore LNG terminal in a dispute with New York state.

The decision stated Broadwater had failed to meet its burden of proof that the project “furthers the national interest” to the extent that it “outweighs the...adverse coastal effects.”

Sponsors of the project, TransCanada Corp. and Shell Gas & Power, were appealing a decision by New York almost exactly 1 year ago that the project was “not consistent with six policies under New York’s coastal zone management plan (OGJ, Apr. 28, 2008, p. 26).”

DOC’s decision agreed with the state, going to state the “record does not establish that the project is necessary in the interest of national security.”

The project had already received approval from the US Federal Energy Regulatory Commission (OGJ, Jan. 21, 2008, p. 44).

The Broadwater project sought to build and installed the world’s first permanently moored floating LNG terminal, a 1,200-ft floating storage and regasification unit (FSRU). It was to have been moored near the middle of Long Island Sound about 9 miles from New York and 10 miles from Connecticut.

Vaporized LNG would flow through a 22-mile pipeline to shore, connecting there with the Iroquois pipeline and moving on to be distributed to consumers in Long Island, New York City, and Connecticut.

LNG storage capacity on the FSRU was to equal 8 bcf; maximum sendout was to have been 1 bcfd.

Explosion cuts Russian gas to Eastern Europe

Supplies of Russian natural gas to southeastern Europe are now under control, European Union gas experts said, after Russian gas supply fell by 40% last week when the Ananiev-Tiraspol-Ismail trunkline in Moldova’s Transdniestr region was damaged in an Apr. 1 explosion.

According to reports, the blast created a crater measuring more than 110 sq m and damaged the 1,200 mm diameter pipeline, which was buried 2 m underground. The cause of the accident is unknown. To compensate for the curtailed supplies, gas was transmitted through parallel pipelines. “Volumes of gas supplies to Romania, Bulgaria, Macedonia, and Greece will remain the same through the Balkan corridor,” Gazprom said.

Gazprom also increased gas deliveries through the Blue Stream pipeline to compensate for the reduction of supply to Turkey.

Bulgaria used gas from its Chiren underground gas storage to prevent disruption of service to its consumers, and the former Yugoslav Republic of Macedonia’s reduced supply was compensated by its use of gas in the transport system.

“Romanian authorities indicated that their country was not affected by the accident,” said the Gas Coordination Group.

Yemen LNG to start deliveries this summer

Yemen LNG will lift its first cargo in midyear, with operations starting by the summer, according to Yves-Louis Darricarrere, president of exploration and production at Total SA, a shareholder in the project.

The $4 billion Yemen LNG project is several months behind schedule due to technical problems and shortage of labor.

With a capacity of 6.7 million tonnes/year from two trains, it will provide cargoes to Asia Pacific and Atlantic Basin markets for its primary customers in North America and South Korea and potentially will add new customers in the future as the second train will start operations during the third quarter. Current capacity is sold out.

The company has chartered the 294.6 m Seri Balqis vessel for the lifespan of the project. It was built at the Mitsubishi shipyard in Nagasaki, Japan. Yemen LNG has completed hydrotesting both tanks, the company said.

Another three ships, Seri Balhaf, Maersk Arwa, and Maersk Marib, which have the latest maritime technology and can withstand the elements of the high seas, also are dedicated to this project.

Seri Balqis can carry 154,600 cu m of LNG and will transport the LNG to the North American market and its long term buyer Total Gas & Power. Other buyers are Suez and Kogas.

Feedstock gas for the liquefaction plant will come from Block 18 in the Marib area. It will be delivered via a new 320-km, 38-in. main pipeline to the liquefaction facilities in Balhaf (OGJ Online, Oct. 10, 2005). A spur line will extend to transport domestic gas to the Ma’bar area in central Yemen. Gas started flowing to the site on Nov. 19, 2008, for power generation initially, then for plant commissioning, and start-up. The site will also have two 140,000-cu m LNG storage tanks, and desalination, waste water, and steam generation plants.

This is the country’s largest industrial investment, from which the government expects to earn $30-50 billion over the next 20-25 years. The liquefaction plant at Balhaf is on the Shabwah coast 200 km southwest of Mukalla and 400 km east of Aden.

Shareholders are Total with 39.62%, Hunt with 17.22%, Yemen Gas Co. 16.73%, SK Corp. 9.55%, Kogas 6%, Hyundai 5.88%, and the General Authority of Social Security and Pensions 5%

Enbridge tests Haynesville pipeline market

Enbridge Inc. will conduct a nonbinding open season from Apr. 13 to May 15 testing shipper interest in moving Haynesville shale natural gas from Carthage, Tex., to Washington parish in southeastern Louisiana.

The proposed LaCrosse Pipeline would extend 300 miles of 42-in. and 32-in. OD pipe from Enbridge’s Carthage Hub to an interconnection with Sonat Pipeline, interconnecting with at least five interstate pipeline en route. LaCrosse could include as many as 12 pipeline interconnections, depending on shipper interest.

Enbridge expects to complete LaCrosse in late 2011 or early 2012 and is exploring the possibility of extending the line to Florida Gas Transmission’s Station 10 near Wiggins, Miss.