GENERAL INTEREST — Quick Takes
Chevron announces $32.7 billion budget for 2012
Chevron Corp. announced a $32.7 billion capital and exploratory budget for 2012 compared with an estimated $28 billion capex investment for 2011.
The 2012 budget includes anticipated upstream spending of $28.5 billion. US investments are expected to total nearly $9 billion, with substantial outlays in the Gulf of Texas Coast region, California, US Midcontinent, and Pennsylvania.
John Watson, Chevron chairman and chief executive officer, said the 2012 spending program covers numerous multiyear projects currently in the construction phase, including Australian LNG projects and multiple deepwater developments.
"By 2017, we expect our net crude oil and natural gas production to grow about 20% to 3.3 million b/d," Watson said.
The estimated 2011 capital and exploratory expenditure total excluded the $3.2 billion Chevron paid for Atlas Energy Inc., an acquisition announced in late 2010. Chevron also assumed $1.1 billion in debt in that transaction.
Marathon targets most of budget for Eagle Ford
Marathon Oil Corp. announced a $4.8 billion capital expenditure budget for 2012, of which 65% is targeted to liquids-rich US assets including the South Texas Eagle Ford shale.
Clarence P. Cazalot Jr., Marathon Oil chairman, president, and chief executive officer, expects liquids-rich US plays will provide most of the firm's anticipated production growth during 2010-16.
The company plans to spend $900 million on its base exploration and production assets, which include operations in the Gulf of Mexico, Norway, US conventional oil and gas plays, Equatorial Guinea, the UK, and Libya.
Marathon Oil plans to drill 250-300 net wells (500-530 gross) during 2012.
Some $2.7 billion is allocated for the Eagle Ford shale, North Dakota's Bakken formation, the Anadarko Woodford shale in Oklahoma, and the emerging Niobrara shale formation within the DJ basin of southeast Wyoming and northern Colorado.
The company's plans for the Eagle Ford include ramping up to 17 rigs, drilling 155-170 net wells (200-210 gross). Marathon Oil also plans to add two more hydraulic fracturing crews, bringing the total to four by midyear 2012.
Marathon plans to drill 55-70 net wells (165-175 gross) in the Bakken, 25-35 net wells (75-80 gross) in the Anadarko Woodford, and 15-25 net wells (60-65 gross) in the Niobrara.
Earlier this year, Marathon Oil completed the spinoff of its downstream business, Marathon Petroleum Corp., making Marathon Oil an independent upstream company based in Houston. Marathon Petroleum became an independent refiner based in Findlay, Ohio (OGJ Online, July 1, 2011).
Encana refutes US EPA Pavillion groundwater report
Encana Oil & Gas (USA) Inc. refuted the US Environmental Protection Agency's preliminary conclusions in its draft report that ground water in the aquifer near Pavillion, Wyo., contains compounds EPA believes are "likely associated with gas production practices, including hydraulic fracturing."
Encana said it was disappointed EPA released the draft report before subjecting it to qualified, third-party, scientific verification.
EPA said analysis of samples taken from deep monitoring wells indicates detection of synthetic chemical like glycols and alcohols consistent with fracing (OGJ Online, Dec. 9, 2011).
"This precipitous action runs counter to the cooperative approach that Encana and other state, federal, and local participants in the Pavillion Working Group took in working alongside the EPA in its investigation for more than 3 years," Encana said in a Dec. 12 news release from its Denver office.
Eric Marsh, Encana's executive vice-president, natural gas economy and senior vice-president, USA division, said safe, responsible gas development is vital. "Hydraulic fracturing is an important, necessary, and safe part of natural gas development," Marsh said. Encana's news release said EPA's approach, data, and analysis contains numerous discrepancies.
"The EPA's reported results of all four phases of its domestic water well tests do not exceed federal or state drinking water quality standards for any constituent related to oil and gas development," Encana said.
Exploration & Development — Quick Takes
Gulfsands to develop Khurbet East Butmah oil
Syrian General Petroleum Co. has granted Gulfsands Petroleum PLC permission for commercial development of the Khurbet East Triassic Butmah formation in Syria 12 miles southwest of Souedieh oil field.
The timing of development and production will depend on withdrawal of relevant European Union sanctions, Gulfsands noted.
Oil and gas volumes can be recovered within a newly designated development license area over 25 years, with a 10-year extension option. The designated area covers the same land area as that previously granted in 2008 for the development of the Khurbet East Cretaceous Massive and Triassic Kurrachine dolomite formations (OGJ Online, June 7, 2007).
Gross recoverable volumes from the Butmah are estimated at a median of 8.8 million bbl of 34° gravity oil and 62 bcf of casinghead gas at 2,850 m.
Gulfsands is operator with 50% working interest, and Emerald Energy PLC, a subsidiary of Sinochem Resources UK Ltd., has 50%.
Nutrient injection eyed in Wyoming CBM well field
The US Bureau of Land Management is seeking public comments on Patriot Energy Resources LLC's proposed Rough Draw Project 13 miles north of Gillette, Wyo., the agency's Buffalo, Wyo., field office announced on Dec. 7.
It said that BLM is preparing an environmental assessment for injection of nutrients and produced water into federal coal seams to stimulate methane gas generation in the Powder River basin.
The project would use 283 existing wells within an 18,000-acre area that already has several coalbed methane wells, BLM said. The area also includes fee and state surface ownership, with federal, fee, and state mixed mineral ownership, it indicated.
Patriot is a Gillette-based subsidiary of Luca Technologies Inc., Golden, Colo., which wants to determine the effects of its biogenic gas generation process on the coal resource in a mature CBM field producing from multiple publicly owned coals, according to the proposed project's development plan.
Comments will be accepted on the field office's scoping notice and Patriot's application and supporting documentation until Jan. 3, 2012, BLM said.
Vanco group finds oil offshore eastern Ivory Coast
A group led by Vanco Cote d'Ivoire Ltd. has a deepwater light oil discovery on Block CI-401 off eastern Ivory Coast.
Independance-1X, the group's second exploratory well on the block, went to 4,132 m in 1,689 m of water 58 miles south-southeast of Abidjan. It penetrated the targeted objective and found a series of good-quality sandstones containing light oil.
Full analysis of well results, including wireline logs, reservoir pressures, and fluid samples, confirms that the well penetrated 26 ft of hydrocarbon pay in a good-quality Turonian-aged sand package. Hydrocarbon samples indicate 40° gravity. The well will be temporarily abandoned.
Independance-1X is the group's second exploratory well on the 152,948-acre block that lies in water 950-2,100 m deep. The well is one of the deepest-water exploratory wells drilled to date in the eastern offshore Ivoirian basin.
Drilling is in progress on one more deepwater exploratory well on the block, Albacore-1X, 21 miles east of Independance-1X on a similar large Turonian deepwater slope channel stratigraphic trap.
Vanco is block operator with 28.34% participating interest. Lukoil Overseas Cote d'Ivoire Ltd. has 56.66%, and Ivory Coast's state Petroci has a 5% participating interest and 10% carried interest.
Drilling & Production — Quick Takes
BLM seeks comments on proposed Rough Draw
The US Bureau of Land Management is seeking public comments on Patriot Energy Resources LLC's proposed Rough Draw Project 13 miles north of Gillette, Wyo., the agency's Buffalo, Wyo., field office announced on Dec. 7. It said BLM is preparing an environmental assessment for injection of nutrients and produced water into federal coal seams to stimulate methane gas generation.
The project would use 283 existing wells within an 18,000-acre area that already has several CBM wells, BLM said. This also includes fee and state surface ownership, with federal, fee, and state mixed mineral ownership, it indicated.
Patriot is a Gillette-based subsidiary of Golden, Colo.-based Luca Technologies Inc., which wants to determine the effects of its biogenic gas generation process on the coal resource in a mature CBM field producing from multiple publicly owned coals, according to the proposed project's development plan.
Comments will be accepted on the field office's scoping notice and Patriot's application and supporting documentation until Jan. 3, 2012, BLM said.
Victoria nears completion of Logbaba field
Victoria Oil & Gas PLC said production facilities for Logbaba gas and condensate field near Douala, Cameroon, are mechanically complete and precommissioning is substantially finished. The company expects first gas sales by yearend.
Victoria also has completed a 5 km, 400 mm, 250 mm, and 63 mm diameter pipeline from the production facilities to the first customer hub at the Magzi Industrial Estate.
The company anticipates steadily building gas sales to about 20 customers after completion of a 34-km pipeline network by yearend 2012.
The pipeline network will have a 60 MMscfd capacity.
Victoria plans to sell 8 MMscfd by yearend 2012, rising to 44 MMscfd by yearend 2014.
A June 2011 Victoria investor presentation said the gas price is fixed at $16/MMbtu for 5 years, in a 20-year exclusive contract.
The production facilities will separate and stabilize the condensate before it is trucked 60 km to the Sonara refinery at Limbe. Victoria expects to sell 160 b/d of condensate by yearend 2012, rising to 880 b/d of condensate by yearend 2014.
The company estimates that the field contains proven and probable reserves of 212 bcf of gas and 4.2 million bbl of condensate.
In the 1950s, four exploration wells delineated the field but at that time there was no gas market in Cameroon.
Victoria drilled two successful development wells in 2009-10 at a cost of $53 million and encountered more than 600 ft of gross sandstone pay. On test, one well at depths between 7,005-8,500 flowed 11-56 MMscfd of gas and 210-1,000 b/d of condensate at wellhead pressures of 2,750-4,552 psi. The other well flowed up to 22 MMscfd of gas at a 3,078 psi wellhead pressure.
Victoria holds a 95% interest in the field and is the operator.
Petrobras lets power generation contracts
Petroleo Brasileiro SA (Petrobras) let a $651 million contract for gas-turbine power generation packages to Rolls-Royce. The work will be in support of Petrobras' production off Brazil, the supplier said.
Rolls-Royce will supply 32 RB211 gas-turbine power generation packages, including waste-heat recovery units, to meet the power-generation requirements of eight separate floating production, storage, and offloading vessels. The FPSOs, used to process hydrocarbons and store oil, will operate in Lula (formerly Tupi) and Guara fields in the presalt area of the Santos basin off Brazil.
The new packages will be delivered in groups of four, said the vendor, with the first units scheduled for delivery in first-quarter 2013. Four gas-turbine generating sets will be installed on each of the eight FPSOs. Rolls-Royce will also provide Petrobras with long-term services, technical support, and training.
In February, Rolls-Royce announced plans to build a new $100-million gas turbine assembly and test plant in Santa Cruz, state of Rio de Janeiro, which is to become operational in first-quarter 2013. Equipment from these contract awards will be among the first units to be assembled and tested at the new plant.
The manufacturer said the latest contract award increases the number of RB211-powered industrial gas-turbine units installed in Brazil over the last 10 years to 62. The combined total amount of energy generated by these units equals 1.8 Gw of electric power, the company said.
PROCESSING — Quick Takes
Kentucky's Somerset refinery changes hands
Continental Refining Co., Somerset, Ky., said it has purchased the inactive Somerset refinery and plans to resume processing crude by early summer 2012.
The company said it will reactivate the 5,500 b/d plant on 93 acres from its current warm idle status. Longer term, it plans to install a hydrotreater to reduce sulfur content of its diesel products by 2014.
"A proven turnaround management team will work to remedy past mismanagement while maximizing the significant discount to market value that helped to make this purchase compelling," Continental Refining said in promising to retain all 40 current job positions.
The company said the site has 107,000 bbl of storage capacity for crude oil and refined products and 15 tanker transports. Somerset Refinery Inc. formerly operated the plant.
Energy Information Administration data show that 7,200 b/d of crude oil is produced within 100 miles of the plant plus 45,000 b/d in neighboring oil producing states. Continental Refining said the plant will be capable of receiving crude oil by truck, rail, pipeline, and barge.
Continental Refinery CEO Demetrios Haseotos said, "We provide a dramatic decrease in transportation costs along with favorable crude rates and faster payments to producers. At the same time we are keeping and adding 40 jobs in Somerset plus spending $10 million in upgrades over the next 3 years."
Encana to sell Cutbank Ridge gas plants
Encana Corp. agreed to sell two natural gas processing plants and associated pipelines in the Cutbank Ridge area of western Canada to Veresen Inc., Calgary, for $920 billion (Can.).
For Encana, the deal ends a 2011 divestiture program in a strategy to focus on oil and gas production in the US and Canada (OGJ Online, Nov. 3, 2011).
Veresen, a partner in the Alliance dense-phase gas pipeline between Canada and US Midwest and related gas plants, will acquire gas processing plants with combined capacity of 516 MMcfd in Hythe, Alta., and Steeprock, BC, and 370 km of gathering pipeline.
The deal includes a long-term gathering and processing fee agreement covering Encana's Cutbank Ridge gas production.
Among other deals announced or closed this year, Encana has sold its Fort Lupton gas plant in Colorado, other midstream assets in the Piceance basin area of Colorado, the Cabin ngas plant in British Columbia, and producing properties in North Texas.
Essar commissions Vadinar isomerization unit
Essar Oil Ltd. has commissioned a large C5-C6 isomerization unit at its 300,000-b/d Vadinar refinery under expansion and upgrade in Gujarat, India (OGJ Online, Oct. 24, 2011).
The unit, part of an expansion that will push the refinery's crude capacity to 375,000 b/d, has a capacity of 700 million tonnes/year. It achieved naphtha feed cut 32 days after the introduction of hydrogen.
The unit uses the Penex-DIH process licensed by UOP LLC. It's the first Vadinar expansion unit to be fully commissioned.
The refinery is scheduled to be operating at the expanded capacity in the first quarter of 2012. Optimization will further boost capacity to 405,000 b/d by September 2012, Essar says.
Contract let for Uzbek gas-to-liquids plant
Uzbekistan GTL LLC has extended an existing services contract of Technip for front-end engineering design of a gas-to-liquids plant 40 km south of Qarshi in Uzbekistan.
This plant will be based on Sasol's GTL technology and be able to produce up to 1.4 million tonnes/year, a capacity similar to the Oryx GTL plant in Qatar, also implemented by Technip. The Uzbekistan plant will have the following product slate: GTL diesel, kerosene, naphtha, and LPG.
This award follows the successful execution by Technip of the first-phase contract related to the detailed feasibility study (OGJ, Mar. 15, 2010, Newsletter). The FEED activities will be executed by Technip's operating center in Rome with the support of the group's center in Kuala Lumpur.
TRANSPORTATION — Quick Takes
US LNG exports to have little effect on Europe
LNG exports from the US—if and when they happen—based on surplus natural gas from shale development will have little if any effect on the European gas supply scene. That's according to E.On Energy Trading Chairman Klaus Schafer in comments to Oil & Gas Journal made on the final day of the 20th World Petroleum Congress in Doha.
The immediate effect of shale gas development in the US, said, Schafer, was to divert LNG shipments away from the new and growing import capacity there. That effect has been absorbed by the markets, he said.
Shale gas development in the US has certainly been a "game-changer," he said in both private remarks and those in his speech to the congress. But in Europe, he said the effect will be less drastic and develop more slowly.
"Natural gas is currently at a price disadvantage to coal in Europe," he said. Couple that with the likely demand-depressing effects of the ongoing financial crisis and the slow recovery from the 2007-08 global financial collapse, Europe is unlikely to attract much US-produced LNG, no matter how much or how little liquefaction eventually gets built there.
Plains to convert Oklahoma LPG line to oil service
Plains All American Pipeline LP is converting an existing Oklahoma liquefied petroleum gas pipeline to crude oil service. The pipeline, which extends from Medford, Okla., to PAA's oil terminal in Cushing, will provide initial throughput of 12,000 b/d of oil by January 2012 and will be expanded to 25,000 b/d by July 2012.
The converted line will serve the Mississippian Lime formation in northern Oklahoma and southern Kansas.
PAA announced plans to expand crude takeaway capacity from its Bone Spring play in the Delaware basin of West Texas earlier this year (OGJ Online, June 17, 2011).
The company also agreed earlier this month to acquire BP PLC's Canadian NGL and LPG business (OGJ Online, Dec. 5, 2011).
TexStar launches open season for Eagle Ford line
TexStar Midstream Services has launched a binding open season for its TexStar Crude Oil Pipeline LP, transporting Eagle Ford shale crude oil and condensate from various points in Frio, LaSalle, McMullen, and Live Oak counties, Tex., to NuStar's North Beach Terminal in Corpus Christi.
TexStar is building and will operate a 110-mile, 12- and 8-in. OD pipeline capable of moving 100,000 b/d to Oakville, Tex., where TexStar plans to lease a portion of NuStar Logistics LP's 16-in. OD pipeline for transit to the terminal (OGJ Online, Apr. 19, 2011). NuStar will also build truck-loading facilities along the pipeline, with storage as necessary.
The North Beach Terminal has roughly 2 million bbl of storage and will be capable of loading ocean going barges and ships. NuStar is also adding about 1 million bbl of new tankage.
TexStar expects the system to enter service by third-quarter 2012, pending sufficient commercial interest and regulatory approvals. NuStar also reached agreement with Velocity Midstream Partners earlier this year for transport of Velocity's Eagle Ford production to North Beach Terminal (OGJ Online, June 27, 2011).
GAIL India signs 20-year LNG deal with Cheniere
GAIL (India) Ltd. signed a 20-year sales and purchase agreement (SPA) with Sabine Pass Liquefaction LLC, a unit of Cheniere Energy Partners, for the supply of 3.5 million tonnes/year of LNG.
"The SPA with Cheniere will help GAIL to ensure long-term gas supply for the growing demand in the Indian market," said GAIL Chairman and Managing Director B.C. Tripathi, who added that his firm seeks more US shale gas assets.
Under the SPA, GAIL said it will pay Sabine "as per contractual provisions on a Henry Hub basis after transfer of custody on fob. LNG will be loaded onto GAIL's vessels."
The SPA has a term of 20 years starting from the date of first commercial delivery, and a 10-year extension option. LNG deliveries are to occur upon commencement of operations of train four in 2017, but bridging supplies of LNG will start from Sabine's train two in 2016. Last month, Gas Natural Fenosa entered into a deal with Cheniere Energy to buy 3.5 million tpy of LNG the company's Sabine Pass facility by 2016, paying Cheniere $454 million a year for use of the terminal.
In October, Cheniere signed a 20-year agreement to supply BG Group with LNG from US shale gas, aiming to export 3.5 million tpy of LNG from the Sabine Pass terminal, at a cost of 115% the US price plus $2.15/MMbtu.
The Sabine Pass LNG terminal project is being developed by Sabine Liquefaction and would include up to four liquefaction trains capable of producing up to 18 million tpy of LNG.
Cheniere Partners owns 100% of the Sabine Pass LNG receiving terminal on the Sabine Pass Channel in western Cameron Parish, La. The Sabine Pass terminal has regasification and sendout capacity of 4 bcfd and storage capacity of 16.9 bcf of gas equivalent.
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