OGJ Newsletter

null

null

null

Total signs exploration agreements with Syria

Total SA has signed three oil and gas agreements with Syria that will strengthen the group’s long-term presence in the country, according to Chief Executive Christophe de Margerie.

The three agreements “pave the way for increased cooperation between Total and Syria and bolster our operations in partnership with the national oil companies of this country,” De Margerie said, while accompanying French President Nicolas Sarkozy on a trip to Syria (OGJ Online, Sept. 2, 2008).

The first agreement renews the Deir Ezzor oil license, wholly owned by Total and jointly operated by Total and the state-owned Syrian Petroleum Co (SPC) via the Deir Ezzor Petroleum Co. joint venture.

Total said the license for Deir Ezzor was extended for 10 years to 2021, and that the extension will enable the French firm to prolong and optimize production from the Jafra, Qahar, and Atalla fields.

Discussions between the two sides began in early April over the earlier agreement, signed in 1988, which allowed Total to produce some 30,000 b/d of oil at Deir Ezzor.

The second agreement covers enhancing output from the Tabiyeh gas and condensate field to increase gas deliveries to the domestic market from the Deir Ezzor plant. This agreement will help Total develop its activities in Syria’s gas industry.

The third agreement came in the form of a memorandum of understanding with SPC and the state-owned Syrian Gas Co. to establish a strategic partnership that “will allow the development of common projects between Total and those companies.”

GDF Suez acquires stake in Azerbaijan license

GDF Suez has taken a foothold in Azerbaijan by acquiring a 15% stake in the offshore exploration-production license D-222 in the Caspian Sea, owned 65% by Lukoil Overseas and 20% by the national Azeri company SOCAR. It contains the Yalama prospect due to be drilled early 2009.

Lukoil and SOCAR signed the exploration, development, and production-sharing contract for Block D-222 July 3, 1997. The exploration period will extend until late 2011. If successful it will help GDF Suez increase its hydrocarbon reserves by some 35 million boe, which is in line with the group’s medium term strategy of increasing its proved and probable reserves to 1,500 million boe from 670 million boe.

GDF Suez also reveals that it will soon take a foothold on the E&P scene in Indonesia as well as in the US to further its asset exchange with ENI within the Distrigaz sale.

Hess makes gas find with Nimblefoot off Australia

Hess Corp. reported that its Nimblefoot-1 exploration well on Australia’s Northwest Shelf found 28 m of net natural gas pay.

Nimblefoot-1 is the third of four initial exploration wells being drilled on the WA-390-P permit by Hess this year. Previous wells—Glencoe-1 and Briseis-1—were announced as discoveries on June 10 and July 20, respectively.

Nimblefoot-1 was drilled in 1,115 m of water by Transocean Inc.’s Jack Bates semisubmersible drilling rig. Following the completion of the Nimblefoot-1 well, the rig will move 27 km southeast to drill the Warrior prospect.

Hess holds 100% interest in the 780,000-acre WA-390-P permit.

Chevron to start Makassar Strait gas development

Indonesia has approved a plan by Chevron Indonesia Co. to develop natural gas reserves in five offshore fields in Makassar Strait, including Gendalo, Maha, Gandang, Gehem, and Ranggas.

“The government has approved the POD [plan of development], and the company may now start operations,” said Evita H. Legowo, director general for oil and gas at the ministry for energy and mineral resources.

Gendalo, Maha, and Gendang fields form part of the Ganal Block concession operated by Chevron Ganal Ltd., while Ranggas and Gehem fields are on the Rapak Block operated by contractor Chevron Rapak Ltd.

According to a statement released by the ministry, Chevron is required to file a report with the ministry’s directorate general of oil and gas on progress once every 6 months.

The ministry also said Chevron is required to file any changes it might undertake in its development scenario, back-up plans, production levels, or investment costs.

“This will be the country’s first deep-sea drilling project,” said Edy Hermantoro, upstream director at the ministry, who added that parts of the fields lay in concession areas operated separately by Chevron and Eni SPA.

Without elaborating, Edy said the POD in the area will “integrate and involve both companies.”

Tullow finds Uganda’s shallowest oil to date

Tullow Oil PLC said its Kigogole-1 exploration well, the fifth successive discovery in 5 months in Uganda’s Butiaba region along Lake Victoria, found light, sweet, movable oil in reservoirs just below 400 m.

This is the shallowest section in which oil has been encountered in Uganda, the company said.

The well on Block 2 about 1.5 km from the crest of the structure went to TD 616 m and encountered two oil zones with a net pay of 10 m (see map, OGJ, Feb. 11, 2008, p. 36).

Kigogle-1, about 10 km northeast of the Kasamene-1 discovery, is the third test on the Victoria Nile delta play in the Lake Albert Rift basin. Well results have confirmed the presence of good quality reservoir and seals in this area and upgraded several adjacent prospects that will be tested during the 2009 Butiaba drilling campaign, Tullow Oil said.

The company suspended Kigogole-1 as a potential future production well. The rig is to move to drill three exploration wells on Block 1, the first of which is on the Warthog prospect adjacent to Kasamene-1.

Aramco begins Khursaniyah field production

Saudi Aramco, which earlier had to delay a planned start-up, has begun production from its Khursaniyah oil field, according to company officials. Production volumes could eventually ramp up to as much as 500,000 b/d.

“The facility is operational and producing crude,” a Saudi Aramco official told Saudi Arabia’s Arab News. “Its production rates are dependent on our company’s monthly production targets for each facility,” the source said.

Khursaniyah production, scheduled to begin in December 2007, was delayed due to global material shortages suffered in the construction of its associated gas processing plant.

The new production, which will be welcomed by markets, is part of the Saudi government’s larger initiative to boost the country’s oil and gas output.

Saudi Arabia, reported to be investing some $90 billion of its oil revenue to further develop production capacity, hopes to increase oil production capacity to 12.5 million b/d and double its refining capacity to 6 million b/d by 2009.

According to analyst Global Insight, “The final confirmation that Khursaniyah now is on stream, together with the general easing in what was until recently a very tight oil market, is now likely to further soothe fears of temporary shortages.”

Norwegian authorities look at CCS in Troll field

The Norwegian Petroleum Directorate (NPD) and Gassnova SF, Norway’s state company that handles carbon capture and storage (CCS), have commissioned a seismic survey to see if Troll field in the North Sea can accommodate carbon dioxide from the industrial plants at Mongstad and Karsto.

The 3D seismic survey will focus on whether the Johansen formation at Troll can permanently store large volumes of CO2 and where the CO2 injection wells should be drilled. The Johansen formation is 2,500 m below the Troll oil and gas reservoirs and is south of the Troll area.

StatoilHydro will shoot the survey later in September using the Ramform Challenger vessel. Processing and interpretation of the 3D seismic data will probably be completed early in 2009.

Odd Magne Mathiassen, NPD research coordinator, said: “Finding the optimal placement of injection wells is important to ensure that the carbon dioxide can be stored and that it will remain in the reservoir in the future.”

This investigation builds upon two other studies carried out for CO2 where NPD assessed storage sites connected to the Utsira formation in the Sleipner area.

US drilling activity falls from 23-year high

US drilling activity dropped from a 23-year high, down by 18 rotary rigs this week with 2,013 still working, said Baker Hughes Inc. That compares with a rig count of 1,814 during the same period a year ago.

Land operations accounted for the bulk of the decline, down by 19 rigs to 1,919 drilling. Activity in inland waters declined by 1 rig to 22. Offshore drilling increased, however, up 2 to 67 rigs in the Gulf of Mexico and 72 in US waters overall.

Of the rigs working this week, 416 were drilling for oil, the same number as the previous week. However, drilling for natural gas dropped by 20 rigs to 1,586 this week. There were 11 rigs unclassified. Directional drilling increased by 3 rigs to 391. Horizontal drilling was down 2 to 624.

Pakistan refinery output drops as issues rise

Pakistan refineries reduced gasoline production this month following drastic changes in the pricing formula, the availability of enough stocks, and a slight drop in consumption.

According to Pakistan Oil Companies Advisory Committee (OCAC), National Refinery Ltd. reduced production to 9,000-10,000 tonnes/month from 12,000-13,000 tonnes, and Pakistan Refinery Ltd. (PRL) has cut its monthly production to 7,500 tonnes from 10,000 tonnes. Attock Refinery Ltd. is reported to have slashed production to 21,000-22,000 tonnes from 27,000 tonnes, followed by Bosicor Refinery to 4,000 tonnes from 6,000-7000 tonnes.

OCAC sources, however, ruled out any immediate impact on consumers after falling production because petrol stocks are well above the consumption level. Its impact may be felt in the future, however, they added.

PRL general manager, commercial and corporate affairs, Aftab Husain said the new pricing formula for petrol has some anomalies that need to be rectified.

UOP raises refining, petrochemical catalyst prices

UOP LLC reported it will increase prices for all of its catalysts used in refining and petrochemical production.

Increases of as much as 15% affect its Platforming, Penex, Unicracking, and Merox refining catalysts as well as its Parex, Isomar, Tatoray, Pacol, Oleflex, Q-Max, and EBOne petrochemical catalysts.

UOP said it is raising prices due to “the continued high cost of energy, packaging, and rising raw material prices.” Price increases vary by the type of product.

Idemitsu ups product exports as local demand sags

Idemitsu Kosan Co., faced with declining domestic demand in its Asian markets, has signed an initial contract with Petroleos Mexicanos subsidiary PMI Trading Ltd. to supply it with 200,000 kl/year of gas oil.

Because of decreasing domestic demand in Japan and reduced demand from China, Idemitsu said it planned to refine 7.5 million kl of crude during October-December, down 1.2 million kl from the year earlier period.

Most of the reduction will come from planned maintenance on Idemitsu’s 120,000 b/d Tokuyama refinery while its other three refineries will operate at lower rates to keep inventories at proper levels. Altogether, the four refineries produce some 640,000 b/d of oil products.

Idemitsu’s lower production reflects a recent 10% decline in the company’s domestic gasoline sales, in addition to reduced demand for other products, such as diesel for trucks and buses, and kerosine.

While Japan’s reduced demand is due largely to environmental factors, sales in China also have fallen because of a downturn in the US economy, which has been a major international consumer of goods produced by Chinese factories.

As a result of Idemitsu’s reduced sales into Asian markets, company officials said it plans to increase oil products exports to Latin America generally and Mexico in particular.

“There is certain demand for gas oil from resources-producing countries in Central and South America” such as Mexico and Chile, said Takashi Tsukioka, an Idemitsu supply director.

Besides its gas oil contract with PMI Trading, Idemitsu also plans to export gasoline to Mexico and now is in talks with the Mexican government over specifications. “We are telling them that Japanese specifications are fine (for Mexico),” said Idemitsu sales director Seiji Fukunaga.

For its part, Mexico has increased its imports of oil products as the Pemex refinery system produced 1.5 million b/d of gasoline, diesel, and other fuels in January-July of this year, while imports of gasoline averaged 342,500 b/d, up 17.6% over January-July 2007.

Pemex said the total volume of petroleum product imports in January-July of this year rose to 555,100 b/d, on average, or 22.2% greater than such purchases during the January-July 2007 period, at a total cost of $14.08 billion (OGJ Newsletter, Sept. 1, 2008).

Indonesia, Inpex discuss LNG terminal construction

Indonesia is conducting talks with Inpex Holdings Inc. aimed at having the Japanese firm construct the world’s first offshore LNG terminal as part of its development of the Masela offshore gas field in the Timor Sea near the maritime border with Australia.

Indonesian officials, who are making construction of the terminal a condition for the development project, said development could begin as early as November, assuming that a final agreement is reached.

Discussion are said to be complicated by the fact that Indonesia, Japan’s main supplier of LNG, is taking a hard line.

Inpex, which holds a 100% stake in the block, had hoped to lay a pipeline from the field to the northern coast of Australia and then use an LNG terminal there to export the gas.

However, Indonesia’s Ministry of Energy and Mineral Resources instead proposed construction of the offshore terminal due to what it claims are the difficulties involved in laying pipe through a deep trench.

The proposed offshore LNG terminal would produce some 4-5 million tonnes a year and would begin operations in 2015 or later, according to the ministry. It added that the cost of building the proposed offshore terminal would reach $14 billion—about twice as much as a landside terminal in Australia.

The Japanese firm, which believes construction of an offshore terminal would be both difficult and costly, said negotiations are under way and that that nothing final has been decided.

Shell approved to gather associated gas in Basra

The Iraqi government has approved Royal Dutch Shell’s Iraq Gas Master Plan, paving the way for the firm to invest some $3-4 billion to gather 500-600 MMcfd of associated natural gas in the southern part of the country.

“The Council of Ministers, in an exceptional session, decided to approve an agreement of principles with Shell to invest in the natural gas adjoining oil drilling in Basra,” the government said.

Shell will establish a joint-venture company with Iraq’s state-owned South Oil Co. (SOC) to execute the gathering, treatment, and monetization operation. SOC will hold a 51% majority stake, while Shell will hold 49%.

The agreement enables rapid development of Iraq’s associated gas resources, most of which are being burned off. While Iraq’s domestic power industry will use most of the gas; other volumes could be exported as LNG via a floating liquefaction facility off Basra.

According to analyst Global Insight, Shell’s involvement in the south could place it in a favorable position for similar associated gas production deals in Iraq’s Kirkuk area and perhaps Missan province.

The analyst said the agreement holds “vast potential for Shell and Iraq alike,” to move away from wasteful flaring of gas—which the country has no infrastructure or know-how to monetize—to a lucrative opportunity to supply domestic markets and earn export revenues.

Origin, ConocoPhillips partner in CSG-LNG project

Sydney-based Origin Energy Ltd. has shunned British suitor BG Group by selecting US major ConocoPhillips as operating partner in its four-train coal seam methane (CSG) and LNG project proposed for Gladstone in Queensland.

The move means that Origin has hooked up with a major LNG player with operational, marketing, and technological expertise but no interest in Origin’s domestic gas and electricity business and hence an unlikely candidate for a takeover move against Origin.

The deal, announced Sept. 7, specifies that ConocoPhillips will pay as much as $9.6 billion (Aus.) for a 50% share in the CSG-LNG joint venture. This values Origin’s 3P CSM reserves at $1.88/gigajoule.

Origin will act as the upstream coal seam gas supplier to the project while ConocoPhillips will be the downstream LNG operator. The 50:50 joint venture formed by the two companies will market the LNG, probably to Asian markets.

The deal involves an upfront payment by ConocoPhillips of $6 billion plus an additional $1.15 billion to carry Origin’s share of the costs to final investment decision for an initial 2-train project—a decision expected by yearend 2010. There also will be four additional payments of $525 million when each of the four LNG trains is approved.

The first two trains each will have a capacity of 3.5 million tonnes/year of LNG and are scheduled to come on stream in 2014.

A full four-train development will need a total of about 24 tcf of gas over a 30-year period. That translates into about 20,500 wells needed to supply the LNG development and Origin’s existing supply agreements for the domestic market which will be part of the joint venture.

The project also will involve a major increase in gas gathering, centralized gas processing, and compression station infrastructure in and surrounding Origin’s coal seam methane fields in Queensland.

Origin put the new joint venture in place as part of its strategy to ward off the hostile takeover offer of $13.83 billion from UK BG Group.

The transaction is conditional on approval of the Australian Foreign Investment Review Board and any other approvals needed because of the BG offer, which is still on the table.