GENERAL INTEREST — Quick Takes
Chevron reacts to 'adverse judgment' in court
Chevron Corp. has taken exception to what it called an "adverse judgment" from the Provincial Court of Justice of Sucumbios in Lago Agrio, Ecuador, in an environmental lawsuit involving Texaco Petroleum Co.
"The Ecuadorian court's judgment is illegitimate and unenforceable," Chevron said, adding that is the product of "fraud" and "contrary to the legitimate scientific evidence."
Chevron said it will appeal this decision in Ecuador. In making its statement, Chevron said it plans to see that "the perpetrators of this fraud are held accountable for their misconduct."
Chevron said both US and international tribunals already have taken steps to bar enforcement of the Ecuadorian ruling, and that the judgment is enforceable in any court that observes the rule of law.
On Feb. 9, an international panel of arbitrators presiding in the Permanent Court of Arbitration in The Hague took action in the case.
The panel ordered Ecuador to "take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment" against Chevron in the Lago Agrio case pending further order or award from the international tribunal.
On Feb. 8, Judge Lewis Kaplan of the Southern District of New York issued a temporary restraining order barring the RICO (Racketeer Influenced and Corrupt Organizations) defendants "from receiving benefit from, directly or indirectly, any action, or proceeding for recognition or enforcement of any judgment entered against Chevron in Ecuador."
Kaplan's order also precludes "prejudgment seizure or attachment of assets based on any such judgment."
Total to sell stake in CEPSA
Total SA will sell its share of Spanish oil company Cia. Espanola de Petroleos SA (CEPSA) to IPIC, a wholly owned unit of Emirate of Abu Dhabi.
Total is implementing its goal, said the company, of reducing its exposure to European refining. The sale is for all of its nearly 49% stake in CEPSA, Spain's second largest oil company with refining capacity of 528,000 b/d, a network of about 1,750 service stations in Spain and Portugal, and hydrocarbons production of about 55,000 b/d. Previously, IPIC owned slightly more than 47% of CEPSA.
Total's announcement said the sale will occur as part of a public takeover bid for all share capital of CEPSA that IPIC has filed with the Spanish securities commission CNMV. IPIC will offer €28/share of CEPSA and a dividend of €0.50/share paid to existing shareholders. Total will receive about €3.7 billion.
Chevron Corp. agreed to sell its Spanish fuels, finished lubricants, and aviation business to CEPSA (OGJ Online, Feb. 7, 2011).
Despite the rulings, activist groups Rainforest Action Network and Amazon Watch hailed the decision against Chevron.
"As of today, Chevron's guilt for extensive oil contamination in the Amazon rainforest is official," the two groups said. "It is time Chevron takes responsibility for these environmental and public health damages, which they have fought for the past 18 years."
Bakken success turns private firms into targets
Smaller private operators with some of the best acreage and wells in the Bakken/Three Forks shale play in North Dakota are "nearly certain to attract interest from potential suitors," concluded a study by IHS Herold.
In a study of 1,450 horizontal wells completed in either formation in Mountrail, McKenzie, Williams, and Dunn counties since 2006, IHS Herold found that a number of private companies ranked well with public operators in delivering median first-month production despite having much smaller well counts. The study compared the median wells' average production in its first, second, and third months on line.
Merger and acquisition values for undeveloped acreage in the play continue to set new highs, the study concluded. Well performance, it noted, is generally strong but varies considerably.
IHS Herold said it expects the trend of acquisitions of private properties to continue because most of the prospective acreage is leased and few alternatives exist to establish or meaningfully expand a company's presence in the play. Size is the primary driver of an acquisition, since a small leaseholding "can't move the needle for a big, publicly traded company."
The company plans to study other plays of interest.
Exploration & Development — Quick Takes
Rosneft, ExxonMobil to develop Black Sea resources
ExxonMobil Corp. and Russia's state-owned OAO Rosneft have reached an agreement concerning joint development of oil and gas resources in the Black Sea, to include an initial focus on oil exploration and production in the Tuapse Trough in the Russian Black Sea basin.
"ExxonMobil technologies will effectively complement Rosneft's experience and resources," said Russia's deputy prime minister Igor Sechin, who added, "Development of this area will become the springboard for full-scale Black Sea basin development."
ExxonMobil Chairman and Chief Executive Officer Rex W. Tillerson welcomed the opportunity, saying, "ExxonMobil will bring its technology, project execution capabilities, and innovation to compliment Rosneft's strengths and experience in the region."
Tillerson added, "We will build on the successful relationship we have with Rosneft through the Sakhalin-1 project to help meet energy needs in Russia and the wider Black Sea area."
Under the agreement, the two firms contemplate a joint operating company to conduct exploration and production in the Tuapse Trough, an 11,200-sq-km deepwater area along the Black Sea coast of the Krasnodar region.
The agreement enables the two firms to consider additional opportunities to expand Black Sea energy sector cooperation, including additional exploration and production.
The two sides may also cooperate on oil sales to Rosneft's Tuapsinsky refinery and other Black Sea markets, development of regional transportation infrastructure, and deepwater technology research and development.
Analyst IHS Global Insight said that for ExxonMobil, "the Rosneft agreement marks a greater commitment to Russia as well as the Black Sea, where the company also has secured acreage and a commitment to explore offshore Turkey and Romania."
ExxonMobil Exploration & Production Turkey BV plans to explore off Turkey this year with Deepwater Champion, a Transocean Ltd. drillship.
The Hyundai Heavy Industries shipyard in Ulsan, South Korea, is building the ship, expected to drill in the Turkish Black Sea during the first half 2011 (OGJ Online, Mar. 19, 2010).
ExxonMobil is the second company in weeks to sign a major offshore oil exploration agreement with Rosneft.
Previously, BP PLC and Rosneft agreed to explore and develop the EPNZ 1, 2, and 3 blocks in the underexplored South Kara Sea basin in relatively shallow water on the Russian Arctic continental shelf (OGJ Online, Jan. 24, 2010).
Chevron drills appraisal well in Orthus field
Chevron Australia made a second natural gas discovery at its previous Orthus find in retention lease WA-24-R about 100 km northwest of Barrow Island.
The appraisal well was drilled to a total depth of 4,297 m and intersected 74 m of net gas pay. Of this, 31 m was encountered in a deeper, previously unexplored target horizon in the Orthus field.
This is the tenth discovery for Chevron off Australia in the last 18 months and again it helps underpin potential expansion for the $42 billion (Aus.) Gorgon-Jansz LNG project.
Chevron holds 50% of WA-25-R with ExxonMobil Corp. holding 25%, Royal Dutch Shell PLC 12.5%, and BHP Billiton 12.5%.
The Gorgon-Jansz project currently stands at three trains each with capacity of 5 million tonnes/year. The plant has been designed with enough space to fit a total of five trains.
Trinidad gets rare onshore light oil discovery
Parex Resources Inc., Calgary, and partner Primera Energy Resources Ltd. have reported an onshore discovery Primera calls the first onshore light oil discovery in Trinidad in 50 years.
Snowcap-1, the second exploratory well drilled on the Cory Moruga block in south-central Trinidad, stabilized over 6 days on a three-point test at 578 b/d of 37° gravity oil and 4.6 MMcfd of gas from the primary objective Miocene Herrera formation at 4,597-4,603 ft. Tubinghead pressure at the end of the test was 600 psi.
The well tested at rates as high as 1,450 b/d and 6.2 MMcfd. The zone produced no water.
Deeper secondary targets, namely the Eocene and footwall Herrera zones, produced little or no hydrocarbons in commercial quantities (OGJ Online, Dec. 14, 2010). TD is 8,600 ft.
Appraisal drilling is required to determine the hanging wall Herrera reservoir areal extent, oil leg, gas cap structural positions, and potential hydrocarbon height.
Meanwhile, Parex Resources (Trinidad) is mobilizing a drilling rig back to the pair's first well, Firecrown-1. Based on open hole wireline logs, mud logs, and cuttings samples, this well encountered hydrocarbon-bearing sandstones with oil shows at 6,600-7,200 ft and 8,150-8,275 ft in the Herrera. Drilling was suspended due to wellbore integrity problems.
The well will be deepened to the commitment depth of 10,500 ft to investigate deeper prospective horizons, following which all potentially productive zones will be tested including the Herrera.
Primera Energy said it has several additional "high impact," seismically identified prospects on the block and is seeking regulatory approval for further exploratory drilling.
The company is arranging for a drilling rig to resume drilling on its WD-4 block. The first well, PS 131 RD, will go to 5,600 ft and target the Lower Forest formation.
Drilling & Production — Quick TakesContinental: Bakken's giant scope underappreciated
The Bakken play in the Williston basin could become the world's largest discovery in the last 30-40 years, a senior manager at Continental Resources Inc. said Feb. 16.
Ultimate recovery from the overall play is now estimated at 24 billion bbl of oil, compared with US reserves of nearly 20 billion bbl, he told the NAPE Expo in Houston.
The 24 billion bbl figure is five times the US Geological Survey's 2008 estimate and compares with the 151 million bbl the survey put forth as recently as the mid-1990s, said Jack Stark, Continental senior vice-president, exploration (OGJ, Apr. 21, 2008, p. 37).
Close to 2 billion bbl of the 24 billion will come from the underlying Three Forks, which Continental helped prove to be a separate reservoir, Stark noted (OGJ Online, July 10, 2008).
The increases resulted as technology evolved over a 20-year span from marginal or uneconomic vertical wells to open hole stimulations in single, dual, and trilaterals to liners with staged fracs that are resulting in 50% rates of return today, Stark said. Industry also began drilling into the Middle Bakken dolomite, which is more porous and permeable than the upper and lower Bakken shale source rocks.
Production exceeds 400,000 b/d including Montana and North Dakota, Stark estimated, and smaller volumes are being produced in Canada. So recovery of that volume of oil will take years.
Industry has completed 2,750 horizontal wells since 2000. It is running 165 rigs that likely will drill 1,800 more wells in 2011, and production could reach as much as 1 million b/d within a few years, Stark said. The Bakken is continuous under nearly 15,000 sq miles.
The play's numerous operators are drilling 18,000-21,000-ft wellbores that include 9,500-ft laterals and applying 18-30 frac stages/well, said Stark.
In general, higher initial potential producing rates indicate higher estimated ultimate recoveries, but the correlation isn't 1:1 "due to overriding geological factors," he said. Operators seem to reach a point of diminishing returns between 18 and 24 frac stages and are still seeking the ideal number of stages, he said.
Plans for new Alberta upgrader move forward
Canadian Natural Resources Ltd. (CNRL) and North West Upgrading Inc. (NWU) have decided to move forward with detailed engineering for the construction and operation of a $4 billion (Can.) bitumen upgrader near Redwater, Alta.
In addition, the companies have an agreement with Alberta to process the province's royalty-in-kind bitumen. CNRL also has agreed to provide 12,500 b/d of bitumen to Phase 1 of the facility.
Provided the project is sanctioned following detailed engineering, CNRL said Phase 1 will process 50,000 b/d of bitumen to finished products. Also the companies may add two additional identical 50,000 b/d phases for processing bitumen at a future date.
NWU noted that an ultralow-sulfur diesel will comprise nearly half of the facility's output, with the remainder to include products also in high demand, such as diluents, naphtha, and natural gas liquids.
NWU said the project is the only one of its kind in the world to combine gasification technology with carbon dioxide management. The facility will capture 1.2 million tonnes of CO2/phase, which will be sold to Enhance Energy Inc.'s Alberta Carbon Trunk Line for use in enhanced oil recovery before being sequestered.
Alberta has awarded a portion of its carbon capture and storage fund to a joint application submitted by NWU and Enhance Energy Inc. The partnership will deduct its share of this fund from the processing fee the province will pay for refining its barrels.
Chevron upbeat about restart of deepwater drilling
Industry and federal drilling regulators appear to be nearing the end of the process to enable the Bureau of Ocean Energy Management, Regulation, and Enforcement to restart issuing deepwater drilling permits for the Gulf of Mexico, a Chevron Corp. executive said Feb. 9.
Gary Luquette, president of Chevron North America Exploration & Production, said he believes Chevron is "days away" from complying with all BOEMRE requirements issued since the April 2010 blowout of the deepwater Macondo well off Louisiana. BP PLC operated Macondo.
The main factor delaying the permitting process has been that BOEMRE is waiting for industry to demonstrate its well control and subsea containment capabilities to prevent future oil spills in case of more blown-out deepwater wells. A massive oil spill followed the Macondo blowout.
"We are very close to the end to getting all questions answered and to the point where we are going to get that certainty," that industry could quickly intervene if needed, Luquette said. During questioning after his speech to a Credit Suisse Energy Summit in Vail, he forecast that BOEMRE could resume issuing permits for deepwater drilling well before yearend.
Chevron is a member of the Marine Well Containment Co., a consortium of oil companies led by ExxonMobil Corp. to develop systems that can be quickly deployed in case of another deepwater well blowout.
Separately in comments from Washington, DC, BOEMRE Director Michael Bromwich told reporters that he met with executives from major oil companies on Feb. 8 to discuss their spill prevention and containment efforts. Bromwich said he expects permitting for deepwater projects to resume before midyear.
"I think they are making progress, and they answered some of the questions we had, and we will continue to work with them," Bromwich said of the oil companies.
Luquette said the restart of deepwater drilling also will hinge upon BOEMRE's ability to issue new permits once industry has demonstrated its well control and subsea containment capabilities.
PROCESSING — Quick TakesEquatorial Guinea plans modular refinery
The government of Equatorial Guinea has let contract to KBR for early work on a modular 20,000-b/d, low complexity refinery at Mbini in the country's Rio Muni enclave.
KBR will perform a conceptual study and associated project management services.
The country produces about 322,000 b/d of crude oil and has no refining capacity. The new refinery will be designed to meet local fuel needs.
Indian Oil dedicates Panipat naphtha cracker
Indian government officials on Feb. 15 dedicated a large naphtha cracker at state-owned Indian Oil Corp.'s 300,000-b/d Panipat refinery and petrochemical complex in Haryana north of New Delhi.
The cracker, which went on stream last year, receives feedstock from Panipat and IOC's 300,000-b/d refinery in Koyali, Gujarat, and 175,000-b/d refinery in Mathura, near Panipat.
The unit has design production capacity of 800,000 tonnes/year (tpy) of ethylene. It also will produce 600,000 tpy of propylene. Downstream units and their capacities include polypropylene 600,000 tpy, high-density polyethylene 300,000 tpy, linear low-density polyethylene 350,000 tpy (swing unit with HDPE), and monoethylene glycol 325,000 tpy.
TRANSPORTATION — Quick TakesVantage applies to NEB for North Dakota-Alberta line
Vantage Pipeline Canada Inc. applied to Canada's National Energy Board (NEB) for a certificate to construct and operate the Vantage Pipeline Project. The proposed line would carry 45,000 b/d liquid ethane from a processing plant near Tioga, ND, through Saskatchewan to a gathering system near Empress, Alta.
The Canadian portion of the 700-km Vantage system would consist of 580 km of pipeline and related facilities, of which 574 km would be in Saskatchewan and 4½ km in Alberta. Roughly 525 km of the proposed pipeline is along or adjacent to existing pipeline and road right-of-way.
The 11-in. OD pipeline's capacity would be expandable to 60,000 b/d if warranted by production expansion in the Williston basin. Pending regulatory approvals, Vantage expects construction to begin first-half 2012 and be completed late-2012.
Nova Chemicals in July 2010 signed a memorandum of understanding with Hess Corp. and Mistral Energy Inc. to purchase and transport ethane production from Hess' Tioga gas plant in North Dakota via a proposed pipeline to Alberta. Nova will purchase 100% of the ethane produced at the Tioga gas plant under a long-term arrangement for use at its Joffre petrochemical complex (OGJ Online, Oct. 22, 2010).
Repsol inks agreement to send LNG to South Korea
Repsol YPF SA signed a 15-month agreement to supply the natural gas equivalent of 1.9 billion cu m in LNG (about 1.7 million tonnes) to South Korea's state-owned Korea Gas Corp.
The deal is Repsol YPF's first LNG sale into the Far East, the company reported. Repsol YPF will ship the LNG from the Peru LNG plant, to which the company has sole off-take rights (OGJ Online, June 15, 2010).
It also holds supply contracts into Europe and North and South America. Repsol YPF currently also ships LNG from Trinidad and Tobago to the US and Europe. Last year, the company shipped 9 billion cu m of gas equivalent; with the start-up of Peru LNG, it expects to increase volumes by at least 50% in 2011.
Repsol YPF has exclusive marketing rights to LNG production from Peru LNG, the company said. Two thirds of the plant's production is dedicated for the Manzanillo terminal on Mexico's Pacific Coast, which is to start up in this year's fourth quarter.
Cheniere signs another LNG sales agreement
Sabine Pass Liquefaction LLC, a unit of Cheniere Energy Partners LP, Houston, has signed memoranda of understanding to sell two units of a Dominican Republic power generator up to 600,000 tonnes/year (tpy) of LNG.
The two companies are Empresa Generadora de Electricidad Haina SA (EGE Haina) and Cia. de Electricidad de San Pedro de Macoris (CESPM), both of which are managed by Basic Energy.
Under the agreements, Basic and Sabine will negotiate definitive sales and purchase agreements under which Basic will purchase LNG for receipt at a designated receiving terminal, delivered ex-ship. The agreements would be subject to certain conditions, said the announcement, including receipt by each party of requisite internal approvals and Sabine's receipt of regulatory approvals and making a final investment decision to construct liquefaction adjacent its Sabine Pass LNG terminal in western Cameron Parish, La., on the Sabine Pass Channel. The terminal has sendout capacity of 4 bcfd and storage capacity of 16.9 bcf of gas equivalent.
As currently contemplated, says Cheniere, liquefaction at Sabine Pass would be designed and permitted for up to four modular LNG trains, each with peak processing capacity of up to 700 MMcfd of gas and an average liquefaction processing capacity of about 3.5 million tpy.
The initial project phase is to include two modular trains and capacity to process about 1.2 bcfd of pipeline-quality natural gas. The company intends to conclude contracts for at least 500 MMcfd/train of natural gas liquefaction capacity.
Export could begin as early as 2015, said the company, assuming timely regulatory approvals and a final investment decision.
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