General Interest Quick Takes
Chavez further expands PDVSA’s role in economy
Venezuelan President Hugo Chavez, as part of a wider set of reforms for his country, has decreed changes to the statutes of state-owned Petroleos de Venezuela SA (PDVSA).
According to a copy of the Official Gazette, Chavez has given PDVSA the responsibility of “participating in ventures intended for the sustained, organic, and integral development of the country, including agricultural [and] industrial activities.”
The changes, which purportedly aim at integrating the oil and gas industry more closely with other sectors of the national economy, also free members of the PDVSA board to actively participate in political activities—subject to Chavez’s approval.
The new decree is in line with similar efforts by Chavez last year to expand the role of the state oil company. At the time, PDVSA created a series of units that included a construction company and an agricultural business unit, among others.
The decree is part of 26 new laws approved by Chavez on July 31, when the 18-month decree powers bestowed on him by Congress were set to expire. The powers enabled Chavez to issue decrees without any input from the legislature.
Brazilian platform worker union cancels strike
The Sindipetro-NF union, which represents oil and gas platform workers in Brazil, has decided to cancel a strike against state-owned Petroleo Brasileiro SA (Petrobras) originally planned to begin on Aug. 5 (OGJ Online, Aug. 4, 2008).
Workers originally called for the strike in an effort to win payment from Petrobras for the time they spend traveling from their platforms. The workers, who work 14 days on platforms and then have 21 days off, wanted Petrobras to count the 15th day—spent in transit—as a working day.
The union agreed to call off its planned strike after Petrobras offered to count the 15th day as half-time and also make it retroactive to 2005.
A 5-day strike by the platform workers over the same demand caused Petrobras to lose some 63,000 b/d of production in the Campos basin in mid-July. It is the second time in a week that Petrobras has been able to avert potentially disruptive labor actions by its workers.
Earlier, the Federacion Unica de Petroleros called off its nationwide strike—planned for Aug. 5—after Petrobras agreed to meet the demands of the workers for increased profit-sharing. In an effort to avert the nationwide strike, Petrobras agreed to raise the amount of profit shared with workers to 15% from 13%. It also agreed to improve its distribution of profits, which for the most part were given largely to managers and high-level executives.
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Exploration & Development Quick TakesPetrobras finds oil with Iara well off Brazil
A consortium comprised of Brazil’s state-owned Petroleo Brasileiro SA (Petrobras), BG Group, and Galp Energia has made an oil discovery on Block BM-S-11 in the presalt layers of the Santos basin off Brazil.
The 1-BRSA-618-RJS discovery well, informally know as Iara, was drilled 230 km off Rio de Janeiro in 2,230 m of water.
Petrobras said the discovery was proved by “a light oil sampling collected via a cable test carried out in reservoirs at a depth of 5,600 m.” The well, which yielded oil of 30° gravity, is still being drilled in search of deeper prospects.
Petrobras, operator, holds a 65% stake in the consortium, while BG holds 25% and Galp 10%.
BG makes oil find in Norwegian North Sea
BG Norge AS has reported finding oil in exploration well 34/3-1 S in the Norwegian North Sea.
The Norwegian Petroleum Directorate (NPD) said the well was drilled on production license 373 S and reached a total vertical depth of 4,057 m below sea level. Oil was discovered in a Jurassic reservoir, and the well was completed in the Triassic.
The well is northeast of StatoilHydro’s Snorre field. “A comprehensive data acquisition program has been carried out. The resource potential will now be evaluated with a sidetrack,” the NPD added.
Dolphin AS’s Bredford Dolphin semisubmersible rig drilled the well in water 410 m deep. Production license 373 S was awarded in the 2005 Awards in Predefined Areas licensing round.
The well will be permanently plugged and abandoned once the sidetrack is completed. The rig will then move to PL 338 and drill appraisal well 16/1-8 for Lundin Petroleum.
VNG gains acreage in Norway
Verbundnetz (VNG) Gas AG has agreed to buy shares of three production licenses off central Norway that are held and operated by Norway’s DNO AS.
The deal requires Norwegian authority approval before it becomes effective starting from Jan. 1.
VNG Norge will acquire a 30% interest each in Fongen (PL 380) and Struten (PL 383). An exploration well is expected to be drilled on each license in 2009. VNG has agreed to carry 30% of DNO’s drilling cost related to the two wells.
DNO also has sold a 20% interest in the Litjormen prospect (PL 447) to VNG, reducing its ownership from 50% to 30%. DNO has acquired 3D seismic for PL 447, which was awarded in June 2007, but has not yet made any firm decisions about exploratory drilling.
Gas production begins at Tunisia’s Chergui field
Petrofac Energy Developments began natural gas and condensate production Aug. 8 from Chergui field on Kerkennah Island in Tunisia. The $100 million development produced first commercial gas from two wells.
The central production facility can process 20 MMscfd of gas. Tunisian state gas and electricity company, Societe Tunisienne de L’Electricite et du Gaz (STEG) is buying the output, which is delivered via a 57 km pipeline to shore where it ties into STEG facilities at Ain Turkia near Sfax on its main pipeline to Tunis.
Production plateau rates of 20 MMscfd are expected for at least 4 years.
“Future potential gas development opportunities may extend the production plateau and the ultimate life of the field,” said Petrofac. It operates the field and holds a 45% interest. Its development partner, Tunisian state oil company Entreprise Tunisienne D’Activities Petrolieres holds the remaining 55%.
Drilling & Production Quick TakesExxonMobil brings Kizomba C on production
ExxonMobil Corp. has begun oil production from Saxi and Batuque fields, which are part of the Kizomba C development project on Block 15 off Angola.
Production from the two fields, along with Mondo, which started production in January, is expected to reach 200,000 b/d later this year. Output from Block 15 will be 700,000 b/d when Saxi and Batuque fields reach peak production, ExxonMobil said.
Oil is produced via two floating production, storage, and offloading vessels and 36 subsea wells. It is the largest subsea development operated by ExxonMobil worldwide.
The twin Kizomba C FPSOs are the fourth and fifth production centers on Block 15, following Kizomba (2003), Kizomba A (2004), and Kizomba B (2005).
It is estimated that Kizomba C will produce 600 million bbl of oil over its lifespan.
StatoilHydro, a partner in the development, described Angola as a key building block for its international production growth. So far its nine producing fields contribute more than 200,000 b/d of equity production. It holds a 13.33% stake in Block 15.
Block 15 is operated by ExxonMobil, holding a 40% stake. Angola’s state-owned Sonangol is concessionaire.
Turkey’s Thrace basin gas to flow in 2009
A group led by Incremental Petroleum Ltd., Perth, plans to start gas production in mid-2009 from the Edirne license in the Thrace basin northwest of Istanbul.
Turkish authorities granted the group a wholesale license that allows gas sales to the national grid, and the group awarded contracts for the design and engineering of a gas processing plant and pipeline.
Uhde Shedden of Australia won the gas plant contract, and Boral of Turkey will design and route the pipeline. Uhde designed the plant for Zorlu, formerly Amity, field 70 km from Edirne.
The joint venture of Incremental, operator with 55% interest, Otto Energy Ltd., Perth, 35%, and Petrako Energy 10%, has made six new field gas discoveries on the license since 2004.
The joint venture will be Turkey’s first to produce and sell onshore gas into the Botas gas distribution network. It will be able to sell gas anywhere in the country at the best price it can negotiate. The current Botas price is about $14.70/Mcf.
Incremental is also involved in an oil and gas exploration project on 30,000 acres in the Tuz Golu basin south of Ankara.
Jubilee field partners lease FPSO from MODEC
Tullow Ghana Ltd., operator of Jubilee oil field off Ghana, has signed a 7-year lease agreement in which Tokyo-based Mitsui Ocean Development & Engineering Co. Ltd. (MODEC) will provide and operate the floating production, storage, and offloading vessel for Jubilee field. The contract includes 13 1-year options, with the FPSO designed to remain in the field for as long as 20 years.
Jubilee, one of the largest oil fields discovered off West Africa in the past 10 years, is estimated with 90% probability to hold 170 million bbl of recoverable oil. However its suggested upside could be as much as 1.8 billion bbl of oil, Tullow reported following recent drillstem tests in two oil-bearing zones from the field’s Mahogony-2 appraisal well (OGJ Online, July 16, 2008).
The tests indicate that a Jubilee production well should produce more than 20,000 b/d of 36-39° gravity oil, Tullow said. Initial field production is expected in 2010.
MODEC will install the FPSO in 1,100 m of water as part of the first phase of Jubilee’s development plant. The FPSO will have the capacity to process more than 120,000 b/d of oil and to inject more than 230,000 b/d of water and 160 MMscfd of gas.
In addition to Tullow, Jubilee field partners include Kosmos Energy Ghana, Anadarko Petroleum Corp., EO Group, Sabre Oil & Gas, and Ghana National Petroleum Corp.
Northern Offshore to acquire Arctic semi rigs
Northern Offshore Ltd. has entered into agreements with affiliates of Transocean Inc. to acquire for $750 million the semisubmersible drilling rigs GSF Arctic II and GSF Arctic IV, currently operating in the UK North Sea under contract to Royal Dutch Shell PLC.
The transactions will complete Transocean’s previously reported divestitures to the Office of Fair Trading in the UK related to Transocean’s merger with GlobalSantaFe Corp. in November 2007. As part of the approval process, Northern Offshore will operate the rigs in the UK North Sea for at least 3 years from closing.
The rigs are both third-generation Friede & Goldman Enhanced Pacesetter design and can operate in water as deep as 1,200 ft for the GSF Arctic II and 1,500 ft for the GSF Arctic IV. Both rigs can drill to depths of 25,000 ft. The GSF Arctic II is contracted through late 2008 at rates exceeding $400,000/day. The GSF Arctic IV is contracted until September 2010.
The sale of the GSF Arctic IV is expected to close late in the third quarter and the GSF Arctic II in the fourth quarter following completion of its existing contract commitment.
Under the agreement, subsidiaries of Northern Offshore will own the rigs. Northern Offshore Ltd.’s current fleet consists of one floating production facility and five drilling units—a drillship, a semisubmersible, and three jack up rigs.
Processing Quick TakesPlacid Refining installs FCC reactor
Placid Refining Co. installed a 230-ton fluid catalytic cracking reactor at its Port Allen, La., refinery, marking a major milestone in the company’s $300 million expansion.
Both project construction and turnaround maintenance are progressing on schedule, said refinery manager Joey Hagmann. “We anticipate restarting the improved refinery near the end of August,” he said.
Placid supplies 35-40% of the gasoline consumed in the Baton Rouge, La., area. When the full expansion is completed in 2010, the refinery’s current production of about 1 million gpd of gasoline will increase to about 1.5 million gpd, and diesel production will increase to nearly 1 million gpd from about 750,000 gpd.
Valero breaks ground on Port Arthur expansion
Valero Energy Corp. broke ground Aug. 13 on a $2.4 billion expansion project at its 325,000-b/d refinery in Port Arthur, Tex.
The project, which includes the construction of a 50,000-b/d hydrocracker and 45,000-b/d coker, will increase the refinery’s crude distillation capacity to 415,000 b/d.
“The Port Arthur expansion project emphasizes ultralow-sulfur diesel production, reflecting the significant projected growth in demand for diesel both in the US and around the world,” said Bill Klesse, Valero chairman and chief executive officer, in a press release earlier this year.
The expansion is the company’s largest-ever capital investment project. Valero expects the hydrocracker project to finish in fourth-quarter 2010 and the coker project to finish in second-quarter 2011.
Contracts have been awarded to Fluor Corp. for the hydrocracker project (OGJ Online, Aug. 7, 2008) and Technip for two processing units—a saturate gas recovery unit and an amine treating unit—and offsites work associated with the refinery expansion.
PCSP awards China chemical project
PetroChina Sichuan Petrochemical Co. Ltd. (PCSP) has selected the Unipol polypropylene (PP) process technology from Dow Technology Licensing for its new 450,000 tonnes/year PP facility at Chengdu, capital city of Southwest China’s Sichuan province.
Aker Process BV, a wholly owned subsidiary of Aker Solutions ASA, Oslo, will carry out process design and technical advisory services.
When completed and on stream in 2010, the PCSP facility will be one of the largest single-train PP facilities in China, a part of PCSP’s 800,000-tpy ethylene complex at Chengdu, the largest in Southwest China.
With this facility and others under construction at Fushun in Liaoning province and at QinZhou in GuangXi province, PCSP will have nearly 1 million tonnes of PP capacity available using the Unipol PP technology. Aker Solutions was awarded the contracts for basic engineering design and technical advisory services for each of the three plants.
The PCSP license agreement includes production capability for a broad range of PP resins, including homopolymers, random copolymers, and impact copolymers for various grades of plastics, Dow said.
When this plant and others currently in the execution stage enter service, Unipol PP technology will be used to produce nearly 11 million tpy of PP, which will represent more than 16% of total global capacity.
Valero lets $1.2 billion in expansion contracts
Valero Energy Corp. has awarded two contracts valued at a total $1.2 billion to Fluor Corp. for upgrades to its refineries at St. Charles, La., and Port Arthur, Tex.
Fluor will provide engineering, procurement, construction, and construction management services for Valero’s unified hydrocracker expansion program. The installation of two hydrocracker units will enable the production of ultralow-sulfur diesel transportation fuels at the refineries.
Fluor will perform the expansion work from its Calgary, Houston, and New Delhi offices.
Flint Hills plans desulfurization unit
Flint Hills Resources LP, Wichita, Kan., plans to add a diesel desulfurization unit and a sulfur recovery unit to its 56-year-old West Plant, part of the company’s 300,000 b/d Corpus Christi, Tex., refinery complex.
The sulfur recovery unit will enable the refinery to process additional feedstocks, including heavier and sour crudes, the company said.
Construction on the $250 million project likely will begin this fall and is expected to take 18 months to complete, the company said.
Flint Hills’s Corpus Christi complex is among the nation’s lowest-emitting refineries. Latest data indicate air emissions of commonly regulated substances of 0.09 lb/bbl of oil refining capacity. The industry average is 0.19 lb/bbl of refining capacity.
The West Plant, which included a petrochemicals production operation, was purchased from Sun Oil Co. in 1981 and later combined with the adjacent Gulf States refinery, purchased a year later. In 1994, the $250 million midplant refining complex was completed with a capacity to process 150,000 b/d of crude oil. Kerr-McGee Corp.’s Southwestern Refinery on Nueces Bay Blvd. (now known as the East Plant) was acquired in 1995, and the complexes are operated as one refining and chemicals complex because of the addition of a state-of-the-art Central Control Center and pipelines connecting both facilities.
In 2001, the company began producing low-sulfur gasoline following a $32 million project. In 2002, the company spent an additional $145 million on projects that further increased the amounts of low-sulfur fuels produced and marketed.
Since 2002 Flint Hills has completed capital expansions and acquisitions worth more than $3 billion.
BP outlines cellulosic ethanol plans
BP PLC announced plans to invest $90 million in Verenium Corp. to accelerate the development and commercialization of cellulosic ethanol.
Verenium of Cambridge, Mass., will receive the investment from BP over the next 18 months for rights to current and future technology held within the partnership.
BP Biofuels North America said Verenium already has demonstrated an advanced technology for cellulosic ethanol production. Verenium recently opened a demonstration plant in Jennings, La.
BP and Verenium formed a special purpose entity (SPE) equally owned by the two. The SPE will serve as the licensing entity for cellulosic ethanol production.
Beyond the initial phase of this alliance, the companies expect to later form a joint venture. While the JV primarily will focus on US plants, the SPE technologies might be licensable to third-party commercial projects.
Transportation Quick TakesFERC approves Midcontinent Express pipeline
Midcontinent Express Pipeline, a joint venture of Kinder Morgan Energy Partners LP and Energy Transfer Partners LP, received final US Federal Energy Regulatory Commission approval to construct its $1.27 billion Midcontinent Express gas pipeline (OGJ, Feb. 18, 2008, Newsletter).
The 506-mile interstate system will deliver as much as 1.5 bcfd of gas to customers in the southern and eastern US through 30-in., 36-in., and 42-in. gas transmission pipeline in Oklahoma, northeastern Texas, northern Louisiana, central Mississippi, and Alabama. The system also will include a 4.1-mile lateral in Louisiana and other related facilities, including 111,420 hp of compression at four new compressor stations and one booster station.
The pipeline is scheduled to be in service by early March 2009, the companies reported. FERC also approved a certificate authorizing Enogex Inc. to lease as much as 272,000 bcfd of capacity on its Oklahoma intrastate system to Midcontinent Express—a move that had been contested by several other companies but which FERC found not to be unduly discriminatory.
Mitsubishi drops California LNG plan, eyes Alaska
Mitsubishi Corp. subsidiary Sound Energy Solutions, faced with challenges in Southern California but eyeing new opportunities in Alaska, has abandoned plans to construct a regasification terminal at Long Beach, Calif.
The trading house, partnered by ConocoPhillips in the project, had planned to invest about ¥50 billion to build moorages for LNG carriers, regasification facilities, and storage tanks at the Port of Long Beach. But the project met with opposition from local residents fearful that the terminal could be a terrorist target or suffer an explosion. As a result of intense lobbying, the California state government decided to freeze approval screening for the terminal. Mitsubishi filed a lawsuit in response, but lost the case in April and chose not to appeal. It then decided to drop its plans after withdrawing its application with the federal government in early June.
In its filing with the US Federal Energy Regulatory Commission, Sound Energy Solutions said it was forced to withdraw its proposal after Long Beach harbor commissioners ended an environmental review on the project. Since then, Mitsubishi signed an agreement with the Alaska Gasline Port Authority (AGPA) to develop an LNG project in southern Alaska aimed at shipping Alaska North Slope gas to the Lower 48.
Under terms of the agreement announced June 20, Mitsubishi will work with the port authority in developing a spur pipeline to a gas liquefaction plant and export facility at Valdez, following the existing trans-Alaska oil pipeline from a point east of Fairbanks near Delta Junction (OGJ, Feb. 25, 2008, p. 32).
According to reports, Mitsubishi’s interest lies in the liquefaction, transport, and marketing of LNG to Asia and possibly the US West Coast in conjunction with Sempra LNG, a subsidiary of Sempra Energy, San Diego.
In July, AGPA announced that Sempra LNG, which has regasification facilities just below the US-Mexico border, also had joined the Alaska project. AGPA noted in particular that Sempra LNG’s Energia Costa Azul facility “is the only LNG receipt terminal on the West Coast of North America.”
Bengal plans 55,000 b/d pipeline expansion
Bengal Pipeline Co. LLC, a joint venture of Shell Pipeline Co. LP and Colonial Pipeline, plans to add a pumping station near Garyville, La., to expand throughput capacity by 55,000 b/d of its products pipeline between Garyville and Baton Rouge, La.
The expanded portion is expected to be in service by early 2010, bringing Bengal’s overall capacity to 305,000 b/d.
The Bengal pipeline system connects several refineries in southern Louisiana to the Plantation and Colonial pipeline systems.