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Wednesday, August 31, 2011

Musings: Marcellus Shale: The Glass Half Empty Or Only Half Full?

Reading press releases and writing news articles can lead to wildly divergent interpretations of the same information depending on the writer's knowledge of the subject.  The latest examples are the news stories about the recently revised estimate of the volume of natural gas and crude oil contained in the Marcellus formation, which underlies a large portion of the mid-Atlantic region of the country.  The latest resource assessment of this basin was posted on the web site of the United States Geological Survey (USGS), the official chronicler of the mineral resources of the country, early last week. 

The USGS determined that there is an estimated mean of 84.2 trillion cubic feet (Tcf) of natural gas and 3.38 billion barrels of natural gas liquids

The Devonian Marcellus Shale, as the USGS calls it, spreads throughout the Appalachian Basin extending from central Alabama northeastward to New York State.  The map in Exhibit 1 shows the extent of the basin that was the USGS focus in its assessment of undiscovered oil and gas deposits there in the Marcellus formation.  The USGS determined that there is an estimated mean of 84.2 trillion cubic feet (Tcf) of natural gas and 3.38 billion barrels of natural gas liquids.  This latest estimated resource potential is significantly higher than the USGS' prior estimate of 2 Tcf of gas and 0.01 billion barrels of liquids made in 2002. 

In preparing its estimate, the USGS calculates numerous scenarios but with differing levels of confidence in the numbers.  In this case, the USGS estimated that there could be as much as 144 Tcf of gas in the Marcellus, but with only a 5% level of confidence, to as little as 43 Tcf of gas with a 95% certainty.  The same was true for their natural gas liquids estimates, which ranged between a highly confident 1.55 billion barrels to a more speculative 6.2 billion barrels.

Exhibit 1.  Marcellus Shale Is A Significant Basin

To understand our point about reading press releases, a writer for the Associated Press produced an article used by many newspapers that hyped the view that the USGS now believes there is substantially more gas in the Marcellus shale than it previously believed.  That is definitely a true statement.  On the other hand, Bloomberg News titled its article on the press release "Shale reserve estimate slashed."  This is also true.  How can both be true you ask?  We explained how the first story could be true since between 2002 and 2011 the USGS did dramatically increase its estimate of undiscovered hydrocarbon reserves in the Marcellus. 

The slashing estimates article reflects the writer's knowledge (or his research) that the new USGS estimate is about 80% less than the official estimate made by the Energy Information Administration (EIA) earlier this year.  That agency published a study in July, authored by INTEK, Inc., titled "Review of Emerging Resources: U.S. Shale Gas and Shale Oil Plays."  In the report, the Marcellus shale was credited with 410 Tcf of "undeveloped technically recoverable shale gas and shale oil resources remaining in discovered shale plays as of January 1, 2009."  The study was dated December 2010, but the data and its conclusions were utilized by the EIA in the preparation of its Annual Energy Outlook 2011 (AEO2011), which is the official forecast employed by the federal government to estimate the future supply and demand of every form of energy consumed in this country. 

The new USGS estimate is about 80% less than the official estimate made by the EIA earlier this year

The AEO2011 suggests that as shale gas resource estimates have more than doubled since the AEO2010 report, gas production should grow almost fourfold and eventually account for 47% of the nation's 2035 estimated total natural gas production, which in turn will have grown by 25% over that time period.  One impact from this gas production growth is that future prices will not reach anywhere near as high a price as earlier AEO forecasts projected.  The AEO2011 report suggests gas prices in 2035, based on 2009 dollars, will average $7.07 per thousand cubic feet (Mcf), but could be as low as $5.35 because of the greater gas supply. 

In the preliminary version of AEO2011, the EIA acknowledged the risks to estimating potential resources.  They wrote that "Over the past decade, as more shale formations have gone into commercial production, the estimate of technically and economically recoverable shale gas resources has skyrocketed.  However, the increases in recoverable shale gas resources embody many assumptions that might prove to be incorrect over the long term."  We doubt many readers paid any attention to the EIA's cautionary warning. 

At the time the AEO2011 was released, the increase in the Marcellus shale resource potential was considered not only valid, but possibly conservative since there were other estimates by acknowledged students of the formation that exceeded the EIA's estimate.  The most noteworthy forecasts have been prepared by Dr. Terry Engelder at Penn State University.  His most recent estimate said there was as much as 500 Tcf of gas in the Marcellus shale, nearly 20% more than the EIA estimated and six times the new USGS estimate.

The new USGS estimate will call into question all the optimistic projections for the Marcellus.  It will force everyone to question what the USGS sees, or doesn't see, that everyone else assumes as gospel.  Moreover, the EIA has already indicated it will incorporate the USGS estimate into its figures, cutting the Marcellus resource assessment by 80% and total U.S. gas shale resources by nearly half.  Will producers who are active in the Marcellus pull back?  The reserve cut will add further ammunition to the Securities and Exchange Commission (SEC) inquiry into the disclosure of reserves made by producers active in the shale gas plays in their federal filings and their investor presentations.

It will force everyone to question what the USGS sees, or doesn't see, that everyone else assumes as gospel

Another question is what happens to some of the academic and think tank research on the impact of the gas shale revolution on the industry and the nation's energy policy.  For example, several studies have been prepared by the Baker Institute at Rice University dealing with these topics.  One involved a presentation made by Dr. Kenneth Medlock, the James A Baker, III, and Susan G. Baker Fellow in Energy and Resource Economics at the Baker Institute Energy Forum, to the Dallas Federal Reserve Bank in 2009 and how the gas shale contribution has increased since then. 

In the Dallas Fed presentation of late 2009, Dr. Medlock presented a chart on shale gas production by basin in North America through 2040.  As can be seen by examining the chart in Exhibit 2, the role of Marcellus gas production is significant as we move into the 2020 and after time frame.  Marcellus production growth is tied to its large resource potential and the assumed low-cost economics of the play. 

Exhibit 2.  Marcellus Had Significant Role In Supply

This spring, Dr. Medlock gave an updated presentation at the American Association of Petroleum Geologists (AAPG) annual meeting in Houston.  In this presentation, Dr. Medlock projected that in 2040 total shale gas production will be 5 Tcf per day greater, or over a third more, than in the 2009 forecast.  Marcellus production at the end of the forecast period (2040) is projected to reach 4 Tcf per day, or more than a third greater than in the earlier forecast.  Importantly, in a blog published on the Houston Chronicle web site in response to The New York Times investigative reports questioning shale gas estimates made by producers, Dr. Medlock highlighted that his research relied on USGS data for its projections.  That would suggest Dr. Medlock will need to revise his model's forecast. 

Exhibit 3.  The Role Of Marcellus Has Grown In Forecast

Equally important, we are starting to see industry consultants question some of the critical assumptions made by gas shale producers about the ubiquitous nature of the resource and its low cost, translating into strong profitability for the companies.  A case in point is a recent report by industry consultant Wood Mackenzie Inc.  It was clear from the report that they have become more cautious about the overall success of producers in gas shale plays largely because of the better understanding of the nature of gas shale deposits and the economics of producing them.  They see the oilfield service companies beginning to capture much of the recent improvement in producer profit margins due to technology improvements in producing gas from the plays.  The key cautionary conclusions of Wood Mackenzie are captured in the final paragraphs of its report.

"Over time, it has become apparent that the original premise that shale gas plays offered limited to no finding risk has increasingly been thrown into question.  While the hydrocarbon molecules may be present in the play, being able to produce them commercially remains a challenge.  Additionally, while the plays offer long-life potential, this will only be realized through significant ongoing capital investment.

"Only the very best shale gas plays will have a long-term future supported by operational efficiencies, which will continue to advance, coupled with a new focus on applying subsurface science and technology, and will help to identify the sweet spots and yield more long-lasting results.  The ultimate winners will be those companies that proactively screen shale gas opportunities, awaiting the coming market correction and executing on the best deals."

The reason Wood Mackenzie believes there is a "coming market correction" is its conclusion that based on full-cycle economics, the majority of gas plays are uneconomic.  In their calculation, it appears that only the Marcellus and Eagle Ford plays are safely profitable today.

Exhibit 4.  Almost All Gas Shales Are Uneconomic

As we have postulated for a long time, the existence of a huge gas shale resource is unquestioned.  What has been at issue for several years has been the economics of extracting the gas in a market that continues to be oversupplied due to strong drilling by producers driving gas prices lower.  Higher gas prices will come at some point in the future, but in our estimation it will largely be driven by producers reigning in their drilling, although likely coupled with some increase in demand.  When might we see this market change?  We guess it may start in the second half of 2012.

G. Allen Brooks works as the Managing Director at Parks Paton Hoepfl & Brown. Reprinted with permission of PPH & B.

Tuesday, August 30, 2011

Analysis: What's Happening in the Oil Market, Anyway?

The summer of 2011 could not have a much more dramatic close as a major hurricane hurled up toward the U.S. East Coast on the heels of a rare earthquake, the U.S. summer driving season closes with the Labor Day holiday, and Libyan rebels appear to be taking over Tripoli.

How will major refineries and pipelines along the East Coast be affected by the hurricane? How will holiday driving plans proceed, amid what OPEC is terming the gathering "dark clouds of recession?" How long will take to see the effects of the Libyan situation play out on the oil market? And when it does, will the roughly 1.2 million barrels per day (mbpd) of oil that Gaddafi's Libya typically produced be welcomed back, by rebounding economies thirsty anew for more? Or, will it be almost like a "white elephant," in American vernacular, that is, almost excess in a recessionary market?

The answers: Nobody really knows, of course.

But what is evident, looking back over the summer, is that nobody who usually "calls" the market has done so with much confidence for months. On a day-to-day basis, prices have recently just eased up or down, depending upon the news of that day. While that in itself isn't unusual, the activity of late has been relatively static, with price moves fluctuating within a few dollars per day, and sometimes dancing around a dime or so of the previous day's price.

The U.S. Energy Information Administration (EIA), for instance, noted that West Texas Intermediate (WTI) had risen only by $2.92 per barrel from a week earlier on Friday Aug. 26 – with a major hurricane approaching – and was up $12.78 from a year earlier. This increase over last year came despite large drops during the summer driving season, which mostly came in small day-to-day increments. WTI crude oil spot prices fell from an average of $110 per barrel in April to $97 per barrel in July, EIA noted. During the first week of August, world crude oil prices fell by about $10 per barrel, reflecting market concerns about world economic and oil demand growth, the agency said.

Market Remains Tight

Despite the woebegone worries about the world slipping into recession again, with corresponding demand cutbacks, the thing to bear in mind is that demand is still growing. It's just that OPEC, the International Energy Agency (IEA), EIA and other leading analysts are cutting back the pace of demand growth to reflect lagging economic performance, along with debt woes in both Europe and the U.S.

"We are still expected to remain near record levels of demand," said John Feldman, chief economist of the American Petroleum Institute, in an interview with Rigzone. "It's still a limited supply market. Libya resuming production should be helpful." He observed that Libya's internal strife took a "relatively small proportion" (about 1.2 mbpd) off the market, but had "disproportionate" effects. This was one reason why the IEA eventually called for member nations, including the U.S., to contribute to the market from emergency stockpiles.

For once, OPEC could not just turn up the oil taps after the organization had a rift in June. Specifically, Saudi Arabia, Kuwait and the United Arab Emirates voted to increase output as early summer demand kept roaring – and Libya's contribution, disproportionately felt, perhaps – stayed off the market. The other OPEC members, meanwhile, voted against hiking production. Because even the Middle East couldn't bring on sought-after light oil production right away, IEA member nations contributed some 60 million barrels to the supply equation.

"It made sense," Feldman continued, "That [Middle East and other] producers would have sold their light, sweet crude varieties first."

Looking ahead, EIA said that it "still expects oil markets to tighten as growing liquid fuels demand in emerging economies continues to outpace supply growth with continuing upward pressure on oil prices." EIA forecasts that WTI spot prices, which averaged $79 per barrel in 2010, will average $96 per barrel in 2011 and $101 per barrel in 2012.




Saturday, August 27, 2011

Oil, gas international News update

BP: �No fresh Macondo leaks�There is currently �no release of oil� from BP�s ill-fated and abandoned Macondo well in the Gulf of Mexico, the UK supermajor insists. Neither have leaks been discovered at the relief well near the site of the well in the Gulf of Mexico which suffered a disastrous blowout in April last year, the company said. BP was pressed into inspecting the well on Thursday after numerous recent reports of oil sheens spotted on the sea surface in close proximity to the well where the Deepwater Horizon exploded last year. In particular the Mobile Press-Register on Wednesday released photographs and video footage of what it claimed were spots of oil, found to be sweet Louisiana crude, near the site, Oil samples taken Tuesday by reporters at the site of BP�s doomed Macondo well are a close match with the chemical composition of crude collected from last summer�s Deepwater Horizon spill, the scientist who conducted the tests;

Maersk Oil has taken a strategic shareholding that could give it an entry ticket into Kurdistan. The Danish oil company, a subsidiary of the AP Moller-Maersk maritime group, acquired the 20% stake in HKN Energy, the sole asset of which is a licence in the Iraqi autonomous region. Maersk said the acquisition �is a step into the prolific but underdeveloped area of Kurdistan in oil output terms� as the company explores opportunities in the region.

Disasters at a coal mine in West Virginia and aboard an oil rig operated by BP in the Gulf of Mexico again made mining one of the most dangerous American jobs in 2010, a report Friday said. The Bureau of Labor Statistics said that in private mining, a category that includes oil and gas extraction, fatal work injuries rose 74 percent to 172 in 2010 from 99 a year earlier, Reuters reported. Fatality rates for mining rose to 19.9 in 2010 from 12.4 in 2009 per 100,000 full-time equivalent workers. The Deepwater Horizon oil rig off the Gulf coast, licensed to BP, exploded and killed 11 workers last April and caused the largest offshore spill in US history. Also last April, an explosion at the Upper Big Branch coal mine in West Virginia owned by Massey Energy Co killed 29 miners.

Energy companies on Friday activated emergency plans as the densely populated US East Coast braced for blackouts from Hurricane Irene that could affect millions, reports said. Although the East Coast does not have major offshore oil and gas production like the hurricane-prone Gulf Coast, its huge power and pipeline networks, nuclear plants and refineries mean the energy stakes are high as Irene bears in on North Carolina, Reuters reported. Oil refineries in the US North-east scaled back operations and pipeline operators warned of potential delays for fuel distribution.

Transocean launches takeover bidOffshore drilling contractor Transocean has launched its takeover of Norway�s Aker Drilling after receiving clearance from the Oslo Stock Exchange. Transocean announced an offer earlier this month to buy all the outstanding shares in Aker Drilling for Nkr7.9 billion ($1.5 billion), or Nkr26.50 per share, and also take on outstanding debt of $800 million. Following clearance from the Norwgian bourse, Transocean said the offer had been made on the same terms as previously announced except that it had now been made on an unconditional basis and with settlement guaranteed by a financial institution

RIO DE JANEIRO � Police say four gunmen intercepted a van and a microbus carrying seven U.S. citizens, one Canadian and 10 Brazilians working for a company that provides services to Brazil�s state-run oil company Petrobras. A police spokeswoman said the two vehicles were stopped Thursday morning in Rio as they were heading to the airport. She spoke on condition of anonymity because she is not authorized to discuss the matter with the news media.

Aker Solutions has landed an award for two drilling equipment packages for a pair of so-called Category D semi-submersible rigs being built for Songa Offshore at a South Korean yard, confirming an earlier Upstream report. The Norwegian engineering contractor could also be in line for further spoils if Songa decides to exercise options for two more units. The value of the drilling package deal was not disclosed. Songa currently has two of the well intervention rigs under construction at Daewoo Shipbuilding & Marine Engineering at a cost of $565 million apiece.

Seadrill The biggest market rout in two years is squeezing credit for oil rig owners, Seadrill's chief executive said in a report shortly before the company's second-quarter earnings release. �It�s exactly the same as what happened during the financial crisis after Lehman Brothers� bankruptcy," chief executive Alf Thorkildsen told Bloomberg. �The financial uncertainty has resulted in fewer new build orders. The eye of the needle has narrowed� for acquisitions, he said. A four-week slump in global equities wiped out more than $8 trillion in stock values amid renewed signs of weakness in the world economy, Europe�s inability to stem its sovereign debt crisis and a downgrade of US debt. Crude oil prices dropped about 14% in the period, while banks have curbed lending, adding to concern that producers may cut exploration budgets

Two dead in Indonesia oilfield riots Two people have been killed and more injured as riots forced the shut-in of an oilfield in Indonesia run by Pertamina and a partner. One oilfield worker was reportedly injured and others along with security personnel were kidnapped as molotov cocktails were thrown in the attacks on Tiaka island in Central Sulawesi which began on Saturday. Around 30 protesters initially set upon the oilfield on Saturday night in wooden boats, forcing ground crew to be evacuated and the facility closed, national regulator BPMigas wrote in an initial statement on the issue.

More than $5 billion has been doled out by a BP-established fund to compensate victims of last year�s deadly Deepwater Horizon oil spill, according to data released this week. The money has gone to 204,715 claimants and represents more than a quarter of the $20 billion BP placed in escrow for those affected by the spill. Independent administrator Ken Feinberg had been met with blistering criticism up and down the Gulf Coast as residents accused him of failing to pay out the claims in a timely way. The bulk of the payouts went to Louisiana, Florida, Alabama and Mississippi. A total of 260,843 individuals received $1.97 billion

Singapore-listed Interra Resources has commenced drilling the YNG-3240 infill development well in the Yenangyaung oilfield in Burma. The well will be drilled to a total depth of 1500 feet with the aim to produce oil from the L900FT through 1400FT reservoirs which Interra said were not being drained efficiently by surrounding wells. It added there were currently five wells in the same fault block producing from one or more of the targeted horizons. Interra holds a 60% interest in the improved petroleum recovery contract of the Yenangyaung field and also owns 60% of Goldpetrol which is the operator of the field.

Australian independent Beach Energy confirmed discoveries had been made in the first two exploration wells drilled on the Abu Sennan concession in Egypt�s Western Desert. The GPZZ-4 was the first well drilled in the planned six well program and Beach said hydrocarbon shows were observed in the lower and upper Bahariya formations, and the Abu Roash �G� member while drilling. It added a testing program was currently being carried out over those formations. Hydrocarbon shows were also encountered in the second well to be drilled, Al Ahmadi-1, in the Kharita formation, the lower Bahariya Formation, the Abu Roash �G� member and the Abu Roash �E� member.

Shell has had to declare force majeure on some oil exports from Nigeria after a rash of sabotage attacks caused a series of shut-ins this week.mThe drastic measure on exports of Bonny Light crude looks set to be in place until the start of November, according to a brief statement from the Anglo-Dutch supermajor on Tuesday. The move follows the revelation that a trunkline in Bayelsa state suffered six leaks totalling around 400 barrels of oil from sabotage attacks this month while a nearby delivery line was also hit with three cuts, forcing a production shut down on both facilities.

Brazil is unlikely to hold its 11th oil bidding round until early 2012, Mines and Energy Minister Edison Lobao said on Tuesday, according to a report. Brazil had hoped to hold the round later this year but President Dilma Rousseff is still reviewing the exploration and production blocks that are expected to be put up for auction, Reuters reported. Lobao said that the auction could occur in January or February of next year but that none of the highly sought after concession blocks in the subsalt area off Brazil's southeastern coast will be included in the new auction

Keppel Fels has agreed to give Luxembourg-based Discovery Offshore more time before it needs to decide whether or not to exercise its first rig construction option with the Singaporean company. Discovery awarded Keppel a $416 million contract earlier this year for two harsh environment jack-up rigs which carried an option for a further two rigs. Discovery said Keppel had agreed to push the exercise date on the first rig construction option back two months to late October. If Discovery elects to exercise the first option the rig would be scheduled for delivery during the third quarter of 2014. The option for the second rig must also still be exercised by October

Italian oil company Eni led the charge back into Libya on Monday as rebels hailing the end of Muammar Gaddafi's rule warned Russian and Chinese firms that they may lose out on lucrative oil contracts for failing to support the rebellion, a report said. Gaddafi's fall will reopen the doors to Africa's largest oil reserves and give new players such as Qatar's national oil company and trading house Vitol the chance to compete with established European and US oil majors, Reuters reported. "We don't have a problem with Western countries like the Italians, French and UK companies. But we may have some political issues with Russia, China and Brazil," Abdeljalil Mayouf, information manager at Libyan rebel oil firm AGOCO, told the news wire

Malaysia�s state-run Petronas is embarking on a 15 billion ringgit ($5 billion) project to develop gas reserves from a cluster of fields in the North Malay basin, off Peninsular Malaysia. Petronas said the project involved nine fields in Blocks PM301 and PM302 and in the Bergading contract area, about 300 kilometres off the coast. The project will also see the company, along with its production sharing contract partners, develop a 200 kilometre pipeline to transport gas from the fields to Kerteh, Terengganu. �Petronas and its PSC partners are undertaking the project on an accelerated basis, with the first delivery of 100 million standard cubic feet of gas per day expected by early 2013, ramping up to 250 MMcfd by 2015,� Petronas said in a statement

China has urged Libya to protect its investments and said their oil trade benefited both countries after a Libyan rebel official warned that Chinese oil companies could lose out after the ousting of Muammar Gaddafi."China's investment in Libya, especially its oil investment, is one aspect of mutual economic cooperation between China and Libya, and this cooperation is in the mutual interest of both the people of China and Libya," the deputy head of the Chinese Ministry of Commerce trade department, Wen Zhongliang, told a news conference. Wen was answering a question about an official at the Libyan rebel oil company, AGOCO, who said on Monday that Russian and Chinese companies could lose out on oil contracts for failing to support the rebellion against long-time leader Gaddafi, Reuters reported

Bolivia�s state-owned oil company will team up with Petrovietnam to evaluate the natural gas potential in certain Bolivian fields, the Latin American nation said last week. Officials with YPFB said 19 August in a news release that they met with Vietnamese counterparts and agreed to a yearlong agreement for Petrovietnam to look for gas in the Isipote, Yoai and Algarrobilla regions. Once the study is complete, the two companies will consider negotiations for service work, YPFB said. �With this study and its results, we are sure that we will count on the presence of a new business in Bolivia,� YPFB president Carlos Villegas said.

The US Coast Guard is examining fresh images taken by a photographer purportedly showing an oil sheen on Gulf of Mexico waters at the site of last year�s Macondo oil spill. UK supermajor BP, the operator responsible for the worst-ever oil spill in the US Gulf, has earlier issued a denial that the capped Macondo well is leaking again following a number of reports of sheens in the area. However, the issue has resurfaced after photos taken on a flyover of the US Gulf on 19 August by non-profit watchdog Wings of Care were posted on the Internet, apparently showing an oily substance on the water in Mississippi Canyon block 252

Petrobras has still not managed to locate an operated helicopter and its four occupants which ditched into the sea off Macae on Friday. The search for the helicopter, which was returning from the P-65 rig on the Enchova field in the Campos Basin, resumed on Saturday morning after being suspended overnight. There were two crew members and two passengers onboard the craft which is believed to have made an emergency landing in the sea some 100 kilometres off Brazil�s south-east coast on Friday afternoon.

There has been no further oil leak from a flowline valve which was shut at Shell�s Gannet Alpha platform in the North Sea on Friday, the company reported. Close monitoring of the valve is, however, to continue over the weekend to make sure that there is no further leak, the Anglo-Dutch supermajor wrote in a statement on Saturday. Shell said on Friday that it had managed to shut down the valve on a flowline attached to the platform. A leak was first spotted around the facility on 10 August with some 1300 barrels of oil spilled. Thursday saw the company begin to place concrete mats, known as rock mattresses, on the flowline in an attempt to pin it down to the seabed

A purchase agreement concerning North Dakota oil and gas properties fell apart Thursday �due to unresolved issues,� a statement from Magnum Hunter Resources said on Friday. As outlined, the $57 million cash-and-stock deal would have transferred a 48% working interest in Williston basin properties from Kenmare, North Dakota-based Eagle Operating to a subsidiary of the Houston-based Magnum Hunter, the latter company claims. Staff who answered the phone at Eagle Operating said no one from the company was immediately available to comment.

BP's problems in the high-stakes Russian oil market mounted Friday with news that a Siberian court had set a hearing into a $3 billion claim by a local shareholder against the British energy giant, a Friday report said. The long-anticipated announcement came in the wake of this year's failed bid by BP to strike an unprecedented share swap and joint Arctic oil exploration agreement with the Russian state-held giant Rosneft, AFP reported. The May setback forced BP to reassess its growth strategy and jeopardized the health of TNK-BP -- the lucrative joint venture it created in Russia with a group of local tycoons in 2003.

Thousands of opponents of a $7 billion pipeline that would boost US dependence on Canadian oil sands plan to get arrested in protests over the next two weeks that they hope will help persuade the Obama administration to kill the project, a report Friday said.The State Department is set to issue a final environmental impact report this month on the Keystone XL pipeline project that would bring oil sands petroleum from Alberta to Texas refineries, Reuters reported. The department hopes to make a final decision on the TransCanada Corp line by the end of the year

Swedish explorer Lundin Petroleum has kicked off drilling of an exploration well at its Batu Hitam prospect off the east coast of Peninsular Malaysia. The Batu Hitam-1 probe, being drilled by Seadrill jack-up Offshore Courageous, will test the hydrocarbon potential of a large basement high structure in Lundin-operated block PM308A. It will be drilled to a planned total depth of 2450 metres and is expected to take about 40 days to complete.

Chinese oil services newcomer SinoTech Energy is being held to account by the Nasdaq bourse after its shares were suspended over what it terms �blatantly self-interested� and �mercenary� allegations leveled at it by a website. The minnow plans to �cooperate fully� with the New York exchange after allegations made by short seller www.alfredlittle.com that it employed the services of shell companies and its �oil drilling technology is questionable, mispriced and uncompetitive� sent its shares crashing on Wednesday.

The clean-up effort following spills from two ConocoPhillips-operated platforms on an oilfield off China will be completed by the end of August, the US supermajor has vowed. The promise came the day after the company revealed it had restarted production at some platforms in Bohai Bay after they were ordered shut by Chinese officials following the separate spill incidents which began in June. Platform B on the Penglai 19-3 oilfield continues to seep about one litre of oil per day, although this is immediately captured. The platform first suffered a leak on 4 June

Libyan rebels reportedly could resume output at two oilfields with total capacity of about 250,000 barrels per day in about three weeks after security has been assured. "Our fields are under maintenance and we're still waiting for security," Abdeljalil Mayouf, information manager at Libya's Arabian Gulf Oil Company, which is operating the Sarir and Mesla fields, told Reuters. "When the security is okay we will start. Perhaps two or three weeks after the improvement in security. In three weeks maybe," he said.

The West Australian government has determined appeals against the Environmental Protection Authority�s (EPA) report on Chevron�s Wheatstone liquefied natural gas project in the north-west of the state. In a statement on Friday Environment Minister Bill Marmion said in determining the appeals he considered the need for �world�s best practice standards� and as a result approved 24 conditions to limit environmental impacts. �These strict conditions will protect marine fauna, including whales, turtles and dugongs, require A$13million (US$13.5 million) in environmental offsets, and require the company to offset reservoir greenhouse gases which may be up to 2.6 million tonnes each year,� he said.

France�s Technip has received a letter of intentFrance�s Technip has received a letter of intent from US independent Anadarko Petroleum for the engineering construction and transport of a truss spar hull for the Lucius field development in the Gulf of Mexico. The letter of intent will allow Technip to begin preliminary work on the project, including ordering long-lead items for the 23,000 tonne hull prior to the planned sanction date of December this year. Technip said the Lucius spar would have a capacity of more than 80,000 barrels of oil and 450 million cubic feet of gas per day

Baker Hughes Introduces Advanced Reservoir Characterization TechnologyServices gather formation pressures and fluid samples in HP/HT environments HOUSTON, TEXAS � Aug. 16, 2011 � Baker Hughes (NYSE:BHI) has introduced the next generation of its Reservoir Characterization eXplorer� (RCX�) and In-situ Fluids eXplorer� (IFX�) formation testing services.Used jointly, these services accurately characterize fluid properties in real time�eliminating the need for extensive and time-consuming analyses. Combined with other formation evaluation techniques, they provide critical information about a reservoir�s commercial viability.

Floating production specialist Floatec plans to launch a series of model tests of its dry-tree semi-submersible concept at the Lab Oceano wave basin facility in Brazil. The tests, which will involve Floatec�s proprietary extendable draft semi-submersible (EDS) and its deep draft semisub, would represent the first attempt to apply dry-tree technology to the challenges of the pre-salt province. Companies are eagerly positioning themselves for what is certain to be a lucrative new round of tenders for floating production units to develop the pre-salt. Bid documents for those tenders are expected to emerge in early September, Floatec�s wave basin tests will be carried out beginning in September at Lab Oceano�s laboratory, a part of the research and development arm of the Federal University of Rio de Janeiro, the company said in a release.Houston-based Floatec is a 50:50 joint venture between McDermott and Keppel Fels

YPFB-Andina indicated it is ahead of schedule in drilling the closely-watched Sararenda X1 wildcat well in the Guairuy field in Bolivia�s sparsely populated Chaco region. The La Paz-based, state-owned company said the well � which is expected to test deep objectives in the Huamampampa Formation below 4800 meters � in July was drilling below 3500 meters, according to the company on 11 August. Repsol of Spain holds 49% in YPFB-Andina. The venture began spinning the drilling bit at the Sararenda-X1 in December after it received the Petrex-owned PTX-5918 rig to drill the well.

Onshore-drilling giant Nabors Industries is planning to issue a sale of 10-year unsecured notes and intends to use the proceeds for general corporate purposes, including repayment of debt. Nabors, the world's largest land-drilling contractor, hopes to raise $700 million in the debt sale, according to a Dow Jones report citing a person familiar with the deal. A Nabors spokesman was unable to confirm the size of the sale but said more details would be available later on Tuesday

A recent run of exploration success for Det Norske Oljeselskap failed to reverse red numbers in the second quarter and the company is now rationalizing its operations. The Norwegian player was basking in glory on Tuesday as its share price on the Oslo bourse leaped more than 26% after it was revealed that reserves at the Aldous Major South discovery, in which it has a 20% stake, are much greater than expected. The North Sea find is now believed to hold between 400 million and 800 million barrels � double the original estimate � while the combined Aldous-Avaldsnes area could hold up to 1.2 billion barrels, according to operator Statoil.

Ghana National Petroleum Corporation (GNPC) has signed a memorandum of understanding with Saudi Arabia�s PetroSaudi International, to jointly explore, develop and produce oil and gas and related services in Ghana. Ghana, Africa's newest crude producer, began pumping oil last December from its Jubilee oilfield, operated by UK energy company Tullow Oil."GNPC and PetroSaudi will explore joint ventures in oil and gas exploration, development and production; oilfield services and infrastructure," Reuters quoted GNPC as sayingwithout giving further details. The head of GNPC told Reuters details of how the two companies would work together had yet to be worked out

Houston-based drilling contractor Atwood Oceanics has secured a rig contract with Chevron Australia. The six-month contract for the semi-submersible Atwood Eagle will yield a dayrate of about $370,000 and is expected to extend to July 2012

Statoil may have hit "one of the ten largest oil finds ever on the Norwegian Continental Shelf" as it ups its estimate from recent discoveries. There could be as many as 1.2 billion barrels of recoverable oil equivalent between the Aldous and Avaldsnes discoveries with more appraisal wells planned for next year on the former, the Norwegian oil giant wrote on Tuesday. Communication between the two discoveries has now been confirmed which has led to a higher degree of optimism over the finds at Statoil. "In combination these discoveries may represent an oil structure of between 500 million and 1.2 billion barrels of recoverable oil equivalent," Statoil wrote.

The Vietnamese government has given approval for state oil group Petrovietnam to produce between 23 million and 34 million tonnes of oil and gas a year by 2015, from around 23 million tonnes this year, a report said Monday. Petrovietnam will step up exploration and production to increase the country's recoverable reserves of oil to 35 million-45 million tonnes a year under its 2011-2015 development plan, Reuters reported the government saying in a statement. The goal shows a significant boost from the group's targets for this year, with crude oil production to reach 15 million tonnes, unchanged from 2010, and natural gas output of 8.5 billion cubic metres

The offshore construction division of Singapore-based Emas has been awarded a contract to carry out offshore installation services for US supermajor Chevron in the Gulf of Thailand.The contract will see Emas AMC install a number of wellhead platforms and associated pipelines over a three year period, with an option for an additional two years. Emas said the award took the offshore construction division�s order book for the year to over $600 million. �The total subsea order book for Emas AMC is now past the halfway mark and is closer to our short-term target of $1 billion for the segment,� Emas managing director Lionel Lee said.

Australian independent Santos has commenced drilling on the Sampdoria-1 exploration well on the Wompi Block in ATP 752P, Queensland. The well will be drilled to a total depth of 1835 metres and target sands in the basal Birkhead formation and Hutton sandstone with secondary targets in the McKinlay member and Namur formation. Sampdoria-1 lies about four kilometres to the north-east of the producing Genoa oilfield which is situated on the neighbouring PL 68 permit.

Chinese maritime authorities are considering demanding more than 100 million yuan ($15.6 million) in compensation from CNOOC Ltd and ConocoPhillips following a spill at their jointly-owned Bohai Bay oilfield, according to reports. Citing unnamed sources, the Economic Information Daily said government officials were working on plans to deal with the ongoing spill at the Penglai 19-3 oilfield, Reuters reported. Operator ConocoPhillips China said on Friday that as many as 2500 barrels of oil and mud had leaked from the oilfield in the Bohai Bay, off the coast of northern China.

Australia-listed Entek Energy has brought its Galveston Area A133 (GA A133) gas discovery on stream in the Gulf of Mexico. Entek said the development of the discovery had been completed and it was now flowing gas at a restricted rate of 9.5 million cubic feet per day. The GA 133 discovery was made late last year and Entek said the block was estimated to hold gross reserves of about 10 billion cubic feet.

Forces loyal to Libyan leader Muammar Gaddafi have fired a scud missile towards the coastal oil town of Brega, the first firing since the uprising against his rule began six months ago, according to reports. The missile was fired on Sunday morning local time from a location about 80 kilometres east of Gaddafi�s hometown of Sirte, but it landed in the desert and injured no-one, a US defence official told Reuters. It was unclear what Gaddafi might have been targeting, the official said, without speculating about the motives behind a missile launch that came in the wake of recent rebel gains that have increased pressure on the Libyan leader

A joint venture between a trio of Australian companies is looking to either sell or farm-out their Duvernay shale and Rock Creek petroleum rights in Alberta, Canada. TranServ Energy, Mako Energy and Kilgore Oil & Gas said Tuesday they had engaged Macquarie Capital as advisor for the potential farm-out or sale. TranServ said last month rising prices for Canadian acreage could prompt it to sell is Duvernay shale rights. It said prices had hit a record high of over $5000 per hectare, compared to an average of $200 per hectare it had paid in the past.

Offshore drilling contractor Transocean has launched a Nkr7.9 billion ($1.4 billion) bid for Norway�s Aker Drilling. Transocean has offered to buy all the outstanding shares in Aker Drilling for Nkr26.50 per share, which representes a 62% premium over Aker Drilling�s 30 day average price of Nkr16.39 per share. Transocean said Aker Drilling�s board of directors had unanimously recommended shareholders accept the offer. It added it had inked an irrevocable agreement with Aker Capital on Sunday to purchase 41% of the outstanding shares in Aker Drilling.

The subsea oil leak close to Shell�s Gannet Alpha platform has slowed further as new indications of the size of the spill emerged despite no official confirmation. Shell is understood to be estimating the amount of oil now on the surface of the sea as being between 12 and 120 barrels, down from earlier estimates of between 200 and 1000 barrels. However, this is after some natural dispersion and there remains no exact confirmation of the amount that has leaked into the sea. An inspection carried out on Saturday night by a remotely operated vehicle (ROV) showed the leak rate had reduced, the Anglo-Dutch supermajor reported on Sunday afternoon

UK-based Centrica has spudded the first of three wells in its Butch prospect in licences PL405 and 405BS in the Norwegian North Sea. The prospect, awarded to Faroe Petroleum in 2006, is seven kilometres east of the Ula field and 10 kilometres north east of the Tambar field. Drilling of the exploration well, which will use the Maersk Guardian drilling rig, is expected to be completed in the fourth quarter of 2011. Centrica holds a 40% operating stake in the prospect, while Faroe holds 15%. The remaining stakes are held by Suncor (30%) and Spring Energy Norway (15%). Faroe chief executive Graham Stewart said the prospect was an exciting opportunity to test a good prospect in the formation

London-listed Max Petroleum has kicked off drilling at another appraisal well at a Kazakh reservoir previously described as �excellent quality�. The Kazakhstan-focused outfit spudded the UTS-3 well on the Uytas prospect in Block A, it announced on Monday. Total depth on the well, which is targeting Cretaceous and Jurassic reservoirs, is expected to hit around 800 metres. Max has only recently logged indications of 12 metres of net oil pay in the Cretaceous section in its UTS-2 confirmation well. Significant oil shows were recorded continuously from 36 to 150 meters, which appear to confirm the oil column seen in the original UTS-1 discovery well

UK services player Hunting has agreed to buy US-based Dearborn Precision Tubular Products for $85 million. Hunting said the purchase of the US company, which provides specialist precision machining services, would be funded from its existing cash and bank borrowing facilities. It added it expected the acquisition to to be earnings enhancing in the first full financial year before acquisition costs and normal acquisition adjustments such as fair value adjustments and the amortisation of intangible assets.

US oilfield services giant National Oilwell Varco (NOV) has signed a $1.5 billion contract to provide drilling equipment packages for seven drillships to shipyard company Estaleiro Atlantico Sul,The packages will include drilling riser and pressure control equipment, NOV said in its announcement. NOV chief executive Pete Miller said deepwater discoveries in Brazil had made the nation a significant offshore market for the company. �We are investing heavily in Brazil to manufacture more of the products and technologies National Oilwell Varco provides to our oil and gas customers, and to service the rapidly growing installed base of NOV drilling equipment in the region,� he said


Australian independent Beach Energy has made a new field oil discovery in PEL 92 in the Western Flank of South Australia�s onshore Cooper basin. The Elliston-1 well encountered an oil column with net pay of three metres in the Namur sandstone section of the well. It added the reservoir appeared to be of high quality with the potential to deliver strong flow rates. Based on its preliminary volumetric assessment Beach estimated the discovery to hold about 100,000 barrels of recoverable oil

The UK oil and gas industry has successfully tested its ability to deploy a well capping device in the waters west of Shetland. As part of the industry's commitment to further strengthen the UK's emergency response capabilities, the Oil Spill Prevention and Response Advisory Group (OSPRAG) has undertaken a number of initiatives to improve well engineering and oil spill response capability, including the development of a well capping device for use in UK waters to seal-off an uncontrolled subsea oil well in the unlikely event of a major well control incident.

Oklahoma Pipe line boom arrest An Oklahoma man was arrested and charged on Friday with trying to destroy a natural gas pipeline with a homemade bomb, the FBI said. The Oklahoma City division of the FBI said on Friday that Daniel Wells Herriman, 40, of Konawa, Oklahoma, called Seminole County 911 emergency response on Wednesday and said he had made the device at his home, Reuters reported. He said that he put it under the above-ground pipeline on Sunday in a remote area near Okemah, about 75 miles (120 kilometres) east of Oklahoma City and set the timer

Shell is battling to contain a subsea oil leak close to the Gannet Alpha platform in the UK North Sea. The Anglo-Dutch supermajor confirmed this afternoon it was managing an oil leak in a flowline that serves the platform. There is as yet no formal confirmation of the size and scale of the spill. Shell said a light sheen was noticed in the area on Wednesday.

Excitement as Well results boost BP's hopes There is early excitement within supermajor BP about a potential development phase at a prolific oilfield on the UK Atlantic Margin after an appraisal well completed last week delivered promising results.

Petrobras chief executive Jose Sergio Gabrielli said the company will likely be fined by the Brazilian government because it cannot prove that it met rules requiring some use of locally produced equipment, a report Friday said. Prior to the seventh round of oil concessions, held in 2005, Petrobras had no way to document what portion of the oil-exploration equipment it used was produced in Brazil, the head of the state-controlled oil company said in an interview on the Globo television network, Dow Jones reported. "Petrobras will be fined because we didn't have a system in place to prove" the national content, he said.

Iranian gas flow to Turkey has been halted due to an explosion on the pipeline in Turkey overnight, a Turkish Energy Ministry official said Friday. "Repairs have been started on the Turkey-Iran pipeline. The repairs and restarting of gas flows will take one week," the official told Reuters. He said Turkey was buying additional gas from Azerbaijan and Russia to cover the shortfall caused by the explosion, which according to state-run Anatolian news agency occurred in the eastern Turkish province of Agri. Iran is Turkey's second-biggest supplier of natural gas after Russia, sending 10 billion cubic meters of gas each year. Turkey uses gas to fire half of its power plants

Singapore-based supply vessel player Swiber Holdings said Friday it has landed three new contracts worth $82 million.Swiber did not give specific contract details but said the projects were for Southeast Asian oil companies and include pipeline installation work, mobilisation of marine vessels, equipment, and personnel. All three projects will start straight away with completion targeted for the second quarter of next year. To date, Swiber has secured new contracts totalling $377 million this year.

China�s export-import bank has loaned $60 million to the drilling plan of Bolivia�s national oil company, a report said this week. The investment, reported by the La Razon newspaper of La Paz, will bolster the programme of YPFB, which told the paper earlier this year it plans an �aggressive� drilling plan that includes 15 exploratory wells and 26 for development

Friday, August 26, 2011

ONGC Chairman: Plan To Bid Aggressively for Overseas Blocks

Oil & Natural Gas Corp. (ONGC) plans to aggressively bid for oil and gas assets overseas in upcoming auctions as part of its strategy to more than double oil production abroad to 20 million tons a year by 2020, the chairman of India's flagship explorer said.

ONGC plans to work with other Indian state-run oil and gas companies through its overseas investment arm ONGC Videsh Ltd., or OVL, to bid for assets overseas, A.K. Hazarika told Dow Jones Newswires in an interview late Wednesday.

"Ours is an import-dependent country and we need energy," Hazarika said. "Although, all the companies can go out and bid, we shouldn't be competing against each other. So we will form joint ventures."

India's state-run companies have lagged behind those from bigger Asian rival China in acquiring energy assets overseas.

OVL's last big acquisition was Russia-focused Imperial Energy in January 2009, which it bought for $2.12 billion.

The federal government is now considering creating a sovereign fund focused on resource asset acquisition overseas to seek energy sources for the world's second-fastest growing major economy.

OVL has been shortlisted to bid in Iraq's forthcoming auction round, Hazarika said, adding his company will form a consortium for bidding.

Iraq is offering 12 exploration blocks in its fourth licensing round, which will take place in January.

He said OVL will also be interested in forthcoming auctions in Brazil and Oman.

Early next year, Brazil is expected to hold the 11th bid round for exploration and production blocks in onshore and offshore basins.

OVL has stakes in one producing block and half a dozen exploratory blocks in Brazil.

Oman is expected to offer about five oil and gas blocks in a new exploration licensing round.

"ONGC will look into the properties and take a call based on due diligence," Hazarika said.

He said OVL, which produced 9.43 million tons of oil and oil equivalent gas in the year ended March 31, has invested INR560 billion ($12 billion) so far in overseas assets.

"Money is not a constraint for us as OVL can easily borrow from the market," Hazarika said. He didn't give details about the company's overseas investment plans.

He said OVL also expects to resume exploratory activities in Libya and explore more investment opportunities once normalcy returns in the African country.

OVL declared force majeure and suspended operations in February in an offshore exploration block in Libya, citing political unrest.

Oil companies active in Libya before the civil war began gearing up for the challenge of resuming operations in the country Monday as rebel forces moved closer to taking over Tripoli.

Thursday, August 25, 2011

France Working at UN to Unblock Rebel Access to Libya

France is working with other countries at the United Nations to unblock access for Libya's rebel-led Transitional National Council (TNC) to the country's resources, the French foreign ministry confirmed Wednesday.

The United Nations in a resolution in March blacklisted five Libyan companies, including the National Oil Corporation, as part of a series sanctions against Moamer Gaddafi's regime.

Traders have since been wary of buying Libyan oil.

Libya's rebels have been campaigning to have the oil sanctions lifted.

Ahead of a meeting between French President Nicolas Sarkozy and rebel leader Mahmoud Jibril in Paris, a foreign ministry spokesman said France considered the TNC should be able to "dispose of the financial resources that have been frozen by the UN Security Council sanctions resolutions."

"We are currently working towards that goal in New York, in close concertation with our partners," the spokesman said.

France, along with several other countries, recognize the TNC as a legitimate representative of the Libyan people.

Copyright 2011 dpa Deutsche Presse-Agentur GmbH

Tuesday, August 23, 2011

O&G Companies Monitoring Libya As Rebels Roll into Tripoli

Oil and gas companies with operations in Libya are monitoring the country's political situation as rebels have taken control of most of Tripoli. A number of companies shut down operations and pulled workers from Libya earlier this year following the uprising against Moammar Qadhafi and resulting civil war.

German oil and gas operator Wintershall said in a statement, "We are monitoring the situation very closely. Our care is continually directed towards our Libyan staff, especially in Tripolis. We hope that the violent conflicts will end soon."

"For safety reasons Wintershall shut down and safely sealed off oil production operations in the desert at the end of February. No oil has been produced there since. Our international employees have been flown out of the country. The local staff who have remained in Libya are looking after the production facilities in the desert."

"At the moment it is too early to predict when, how and under what conditions the production in Libya might begin again. Starting up production could be done within several weeks under standard technical conditions. This of course depends on the state of the export infrastructure as well as a stable security situation in the country."

A spokesperson with Austria-based OMV said the company is monitoring the situation closely, but cannot confirm when its production of 33,000 BOE/d will resume.

When conditions allow, BP intends to resume plans to drill its first exploration well in Libya. The company originally planned to begin drilling in February of this year, but was forced to suspend operations due to the political situation in Libya.

The key question is how the Benghai-based National Transitional Council (NTC) will govern Libya, Barclays Capital noted in a report today, seeing potential for a major political and security power vacuum remaining elevated. "Gaddafi has ruled Libya with an iron grip for over 40 years, and there are very few functioning institutions able to immediately step in and run the country in his absence," Barclays said. NTC's victory was facilitated by a substantial NATO airpower, and it could be very difficult for it to govern Libya without international assistance.

The rebels themselves also remain a mystery, with the NTC including several former members of the Gaddafi government, leading to concerns that it may not mark a clean break with the old order. These concerns, and the recent assassination of the rebel military commander Abdul Fatah Younis, suspected as a double agent, points to significant disunity in the rebel ranks. In turn, international oil companies will likely be reluctant to restart operations in a volatile security and political environment, Barclays noted.

The first task of a new Libyan government will be to repair damages caused to the oilfields and other oil installations by a lack of investment funds, imported spare parts and equipment, and insufficient maintenance. The second task will be to negotiate with foreign oil companies the terms of production-sharing agreements for investments and operations in new and old oilfields, Barclays said, and in some cases, to re-negotiate deals already signed by the current Libyan government, which will be more complicated than the market expects.

"In conclusion, the problems of Libya will not necessarily be solved by the departure of Gaddafi; indeed, that might just be the start of some long-lived difficulties," Barclays said. "A sudden wave of market bearishness, in the expectation of a swift return of production and then a further wave of extra production, is a view likely to be given up gradually as the new reality proves to be far more complicated."

Monday, August 22, 2011

A Snapshot of Brazil

Brazilian offshore drilling activities are faring much better than worldwide operations. Total average utilization for Brazil's mobile offshore drilling fleet is 94 percent, which compares quite favorably to the global average of 80 percent. Similarly, average dayrates are much higher in Brazil than compared to the rest of the world. Currently, rigs (i.e. drillships, jackups, and semisubs combined) are garnering rates in the high-$310s while global average dayrates are in the mid-$230s.

The favorable disparity for both operating efficiency and dayrates is due largely to fleet mix. Most of the rigs operating off the coast of Brazil are exploring for oil in deeper waters. Hence, very little drilling in the region is accomplished using jackups; which typically command the lowest dayrates in the industry.

Brazil's semisub fleet utilization (a regional fleet of 52 competitively marketed rigs) is 98 percent, quite high by industry standards. Its drillship fleet, while much smaller at 17 marketed rigs, will continue to grow as newbuild equipment is delivered into the region. The jackup fleet is the smallest of the mix with just three competitive rigs on lease in the region. All three are currently under contract. Given the vast quantity of Brazil's discoveries, demand for offshore rigs shows only signs of growing as the country looks to further tap its ample reserves.

Recent News From the Region

  • Pacific Drilling announced that its ultra-deepwater drillship the Pacific Mistral has been awarded a three-year contract by PetrĂ³leo Brasileiro S.A. (Petrobras) for operations in Brazil. The contract is expected to commence in the fourth quarter of 2011. Estimated maximum contract revenues, including mobilization and client requested modifications, are approximately $536 million.
  • Rockhopper recently completed interpretation of its fast track new seismic data in PL032 and PL033. Seismic data shows that the Sea Lion Main Complex ("SLMC") will extend to the south and a new high case area extends over 90km2. Also, two new fan prospects were identified within the new seismic data, Casper and Kermit. Following completion of drilling operations on well 14/10-6, Rockhopper is committed to drill three further wells using the Ocean Guardian.
  • Petrobras has commenced production from the P-56 platform at the Marlim Sul field in the Campos Basin. The unit began production through well 7-MLS-163HPRJS and will potentially generate around 16,000 bopd. The P-56 platform, installed in a water depth of 5,479 feet (1,670 meters), is designed to handle up to 100 Mcf/d when it reaches maximum capacity. This is expected to take place in the first quarter of 2012.
  • The Sevan Brasil, which is under construction at Cosco Shipyard in China, is on schedule to be delivered during the first quarter of 2012. Upon delivery, the rig will set sail for Brazil to begin its six-year contract with Petrobras.

Sunday, August 21, 2011

OIL & GAS UPDATES

Petrobras has still not managed to locate an operated helicopter and its four occupants which ditched into the sea off Macae on Friday. The search for the helicopter, which was returning from the P-65 rig on the Enchova field in the Campos Basin, resumed on Saturday morning after being suspended overnight. There were two crew members and two passengers onboard the craft which is believed to have made an emergency landing in the sea some 100 kilometres off Brazil�s south-east coast on Friday afternoon.

There has been no further oil leak from a flowline valve which was shut at Shell�s Gannet Alpha platform in the North Sea on Friday, the company reported. Close monitoring of the valve is, however, to continue over the weekend to make sure that there is no further leak, the Anglo-Dutch supermajor wrote in a statement on Saturday. Shell said on Friday that it had managed to shut down the valve on a flowline attached to the platform. A leak was first spotted around the facility on 10 August with some 1300 barrels of oil spilled. Thursday saw the company begin to place concrete mats, known as rock mattresses, on the flowline in an attempt to pin it down to the seabed

A purchase agreement concerning North Dakota oil and gas properties fell apart Thursday �due to unresolved issues,� a statement from Magnum Hunter Resources said on Friday. As outlined, the $57 million cash-and-stock deal would have transferred a 48% working interest in Williston basin properties from Kenmare, North Dakota-based Eagle Operating to a subsidiary of the Houston-based Magnum Hunter, the latter company claims. Staff who answered the phone at Eagle Operating said no one from the company was immediately available to comment.

BP's problems in the high-stakes Russian oil market mounted Friday with news that a Siberian court had set a hearing into a $3 billion claim by a local shareholder against the British energy giant, a Friday report said. The long-anticipated announcement came in the wake of this year's failed bid by BP to strike an unprecedented share swap and joint Arctic oil exploration agreement with the Russian state-held giant Rosneft, AFP reported. The May setback forced BP to reassess its growth strategy and jeopardized the health of TNK-BP -- the lucrative joint venture it created in Russia with a group of local tycoons in 2003.

Thousands of opponents of a $7 billion pipeline that would boost US dependence on Canadian oil sands plan to get arrested in protests over the next two weeks that they hope will help persuade the Obama administration to kill the project, a report Friday said.The State Department is set to issue a final environmental impact report this month on the Keystone XL pipeline project that would bring oil sands petroleum from Alberta to Texas refineries, Reuters reported. The department hopes to make a final decision on the TransCanada Corp line by the end of the year

Swedish explorer Lundin Petroleum has kicked off drilling of an exploration well at its Batu Hitam prospect off the east coast of Peninsular Malaysia. The Batu Hitam-1 probe, being drilled by Seadrill jack-up Offshore Courageous, will test the hydrocarbon potential of a large basement high structure in Lundin-operated block PM308A. It will be drilled to a planned total depth of 2450 metres and is expected to take about 40 days to complete.

Chinese oil services newcomer SinoTech Energy is being held to account by the Nasdaq bourse after its shares were suspended over what it terms �blatantly self-interested� and �mercenary� allegations leveled at it by a website. The minnow plans to �cooperate fully� with the New York exchange after allegations made by short seller www.alfredlittle.com that it employed the services of shell companies and its �oil drilling technology is questionable, mispriced and uncompetitive� sent its shares crashing on Wednesday.

The clean-up effort following spills from two ConocoPhillips-operated platforms on an oilfield off China will be completed by the end of August, the US supermajor has vowed. The promise came the day after the company revealed it had restarted production at some platforms in Bohai Bay after they were ordered shut by Chinese officials following the separate spill incidents which began in June. Platform B on the Penglai 19-3 oilfield continues to seep about one litre of oil per day, although this is immediately captured. The platform first suffered a leak on 4 June

Libyan rebels reportedly could resume output at two oilfields with total capacity of about 250,000 barrels per day in about three weeks after security has been assured. "Our fields are under maintenance and we're still waiting for security," Abdeljalil Mayouf, information manager at Libya's Arabian Gulf Oil Company, which is operating the Sarir and Mesla fields, told Reuters. "When the security is okay we will start. Perhaps two or three weeks after the improvement in security. In three weeks maybe," he said.

The West Australian government has determined appeals against the Environmental Protection Authority�s (EPA) report on Chevron�s Wheatstone liquefied natural gas project in the north-west of the state. In a statement on Friday Environment Minister Bill Marmion said in determining the appeals he considered the need for �world�s best practice standards� and as a result approved 24 conditions to limit environmental impacts. �These strict conditions will protect marine fauna, including whales, turtles and dugongs, require A$13million (US$13.5 million) in environmental offsets, and require the company to offset reservoir greenhouse gases which may be up to 2.6 million tonnes each year,� he said.

France�s Technip has received a letter of intentFrance�s Technip has received a letter of intent from US independent Anadarko Petroleum for the engineering construction and transport of a truss spar hull for the Lucius field development in the Gulf of Mexico. The letter of intent will allow Technip to begin preliminary work on the project, including ordering long-lead items for the 23,000 tonne hull prior to the planned sanction date of December this year. Technip said the Lucius spar would have a capacity of more than 80,000 barrels of oil and 450 million cubic feet of gas per day

Baker Hughes Introduces Advanced Reservoir Characterization TechnologyServices gather formation pressures and fluid samples in HP/HT environments HOUSTON, TEXAS � Aug. 16, 2011 � Baker Hughes (NYSE:BHI) has introduced the next generation of its Reservoir Characterization eXplorer� (RCX�) and In-situ Fluids eXplorer� (IFX�) formation testing services.Used jointly, these services accurately characterize fluid properties in real time�eliminating the need for extensive and time-consuming analyses. Combined with other formation evaluation techniques, they provide critical information about a reservoir�s commercial viability.

Floating production specialist Floatec plans to launch a series of model tests of its dry-tree semi-submersible concept at the Lab Oceano wave basin facility in Brazil. The tests, which will involve Floatec�s proprietary extendable draft semi-submersible (EDS) and its deep draft semisub, would represent the first attempt to apply dry-tree technology to the challenges of the pre-salt province. Companies are eagerly positioning themselves for what is certain to be a lucrative new round of tenders for floating production units to develop the pre-salt. Bid documents for those tenders are expected to emerge in early September, Floatec�s wave basin tests will be carried out beginning in September at Lab Oceano�s laboratory, a part of the research and development arm of the Federal University of Rio de Janeiro, the company said in a release.Houston-based Floatec is a 50:50 joint venture between McDermott and Keppel Fels

YPFB-Andina indicated it is ahead of schedule in drilling the closely-watched Sararenda X1 wildcat well in the Guairuy field in Bolivia�s sparsely populated Chaco region. The La Paz-based, state-owned company said the well � which is expected to test deep objectives in the Huamampampa Formation below 4800 meters � in July was drilling below 3500 meters, according to the company on 11 August. Repsol of Spain holds 49% in YPFB-Andina. The venture began spinning the drilling bit at the Sararenda-X1 in December after it received the Petrex-owned PTX-5918 rig to drill the well.

Onshore-drilling giant Nabors Industries is planning to issue a sale of 10-year unsecured notes and intends to use the proceeds for general corporate purposes, including repayment of debt. Nabors, the world's largest land-drilling contractor, hopes to raise $700 million in the debt sale, according to a Dow Jones report citing a person familiar with the deal. A Nabors spokesman was unable to confirm the size of the sale but said more details would be available later on Tuesday

A recent run of exploration success for Det Norske Oljeselskap failed to reverse red numbers in the second quarter and the company is now rationalizing its operations. The Norwegian player was basking in glory on Tuesday as its share price on the Oslo bourse leaped more than 26% after it was revealed that reserves at the Aldous Major South discovery, in which it has a 20% stake, are much greater than expected. The North Sea find is now believed to hold between 400 million and 800 million barrels � double the original estimate � while the combined Aldous-Avaldsnes area could hold up to 1.2 billion barrels, according to operator Statoil.

Ghana National Petroleum Corporation (GNPC) has signed a memorandum of understanding with Saudi Arabia�s PetroSaudi International, to jointly explore, develop and produce oil and gas and related services in Ghana. Ghana, Africa's newest crude producer, began pumping oil last December from its Jubilee oilfield, operated by UK energy company Tullow Oil."GNPC and PetroSaudi will explore joint ventures in oil and gas exploration, development and production; oilfield services and infrastructure," Reuters quoted GNPC as sayingwithout giving further details. The head of GNPC told Reuters details of how the two companies would work together had yet to be worked out

Houston-based drilling contractor Atwood Oceanics has secured a rig contract with Chevron Australia. The six-month contract for the semi-submersible Atwood Eagle will yield a dayrate of about $370,000 and is expected to extend to July 2012

Statoil may have hit "one of the ten largest oil finds ever on the Norwegian Continental Shelf" as it ups its estimate from recent discoveries. There could be as many as 1.2 billion barrels of recoverable oil equivalent between the Aldous and Avaldsnes discoveries with more appraisal wells planned for next year on the former, the Norwegian oil giant wrote on Tuesday. Communication between the two discoveries has now been confirmed which has led to a higher degree of optimism over the finds at Statoil. "In combination these discoveries may represent an oil structure of between 500 million and 1.2 billion barrels of recoverable oil equivalent," Statoil wrote.

The Vietnamese government has given approval for state oil group Petrovietnam to produce between 23 million and 34 million tonnes of oil and gas a year by 2015, from around 23 million tonnes this year, a report said Monday. Petrovietnam will step up exploration and production to increase the country's recoverable reserves of oil to 35 million-45 million tonnes a year under its 2011-2015 development plan, Reuters reported the government saying in a statement. The goal shows a significant boost from the group's targets for this year, with crude oil production to reach 15 million tonnes, unchanged from 2010, and natural gas output of 8.5 billion cubic metres

The offshore construction division of Singapore-based Emas has been awarded a contract to carry out offshore installation services for US supermajor Chevron in the Gulf of Thailand.The contract will see Emas AMC install a number of wellhead platforms and associated pipelines over a three year period, with an option for an additional two years. Emas said the award took the offshore construction division�s order book for the year to over $600 million. �The total subsea order book for Emas AMC is now past the halfway mark and is closer to our short-term target of $1 billion for the segment,� Emas managing director Lionel Lee said.

Australian independent Santos has commenced drilling on the Sampdoria-1 exploration well on the Wompi Block in ATP 752P, Queensland. The well will be drilled to a total depth of 1835 metres and target sands in the basal Birkhead formation and Hutton sandstone with secondary targets in the McKinlay member and Namur formation. Sampdoria-1 lies about four kilometres to the north-east of the producing Genoa oilfield which is situated on the neighbouring PL 68 permit.

Chinese maritime authorities are considering demanding more than 100 million yuan ($15.6 million) in compensation from CNOOC Ltd and ConocoPhillips following a spill at their jointly-owned Bohai Bay oilfield, according to reports. Citing unnamed sources, the Economic Information Daily said government officials were working on plans to deal with the ongoing spill at the Penglai 19-3 oilfield, Reuters reported. Operator ConocoPhillips China said on Friday that as many as 2500 barrels of oil and mud had leaked from the oilfield in the Bohai Bay, off the coast of northern China.

Australia-listed Entek Energy has brought its Galveston Area A133 (GA A133) gas discovery on stream in the Gulf of Mexico. Entek said the development of the discovery had been completed and it was now flowing gas at a restricted rate of 9.5 million cubic feet per day. The GA 133 discovery was made late last year and Entek said the block was estimated to hold gross reserves of about 10 billion cubic feet.

Forces loyal to Libyan leader Muammar Gaddafi have fired a scud missile towards the coastal oil town of Brega, the first firing since the uprising against his rule began six months ago, according to reports. The missile was fired on Sunday morning local time from a location about 80 kilometres east of Gaddafi�s hometown of Sirte, but it landed in the desert and injured no-one, a US defence official told Reuters. It was unclear what Gaddafi might have been targeting, the official said, without speculating about the motives behind a missile launch that came in the wake of recent rebel gains that have increased pressure on the Libyan leader

A joint venture between a trio of Australian companies is looking to either sell or farm-out their Duvernay shale and Rock Creek petroleum rights in Alberta, Canada. TranServ Energy, Mako Energy and Kilgore Oil & Gas said Tuesday they had engaged Macquarie Capital as advisor for the potential farm-out or sale. TranServ said last month rising prices for Canadian acreage could prompt it to sell is Duvernay shale rights. It said prices had hit a record high of over $5000 per hectare, compared to an average of $200 per hectare it had paid in the past.

Offshore drilling contractor Transocean has launched a Nkr7.9 billion ($1.4 billion) bid for Norway�s Aker Drilling. Transocean has offered to buy all the outstanding shares in Aker Drilling for Nkr26.50 per share, which representes a 62% premium over Aker Drilling�s 30 day average price of Nkr16.39 per share. Transocean said Aker Drilling�s board of directors had unanimously recommended shareholders accept the offer. It added it had inked an irrevocable agreement with Aker Capital on Sunday to purchase 41% of the outstanding shares in Aker Drilling.

The subsea oil leak close to Shell�s Gannet Alpha platform has slowed further as new indications of the size of the spill emerged despite no official confirmation. Shell is understood to be estimating the amount of oil now on the surface of the sea as being between 12 and 120 barrels, down from earlier estimates of between 200 and 1000 barrels. However, this is after some natural dispersion and there remains no exact confirmation of the amount that has leaked into the sea. An inspection carried out on Saturday night by a remotely operated vehicle (ROV) showed the leak rate had reduced, the Anglo-Dutch supermajor reported on Sunday afternoon

UK-based Centrica has spudded the first of three wells in its Butch prospect in licences PL405 and 405BS in the Norwegian North Sea. The prospect, awarded to Faroe Petroleum in 2006, is seven kilometres east of the Ula field and 10 kilometres north east of the Tambar field. Drilling of the exploration well, which will use the Maersk Guardian drilling rig, is expected to be completed in the fourth quarter of 2011. Centrica holds a 40% operating stake in the prospect, while Faroe holds 15%. The remaining stakes are held by Suncor (30%) and Spring Energy Norway (15%). Faroe chief executive Graham Stewart said the prospect was an exciting opportunity to test a good prospect in the formation

London-listed Max Petroleum has kicked off drilling at another appraisal well at a Kazakh reservoir previously described as �excellent quality�. The Kazakhstan-focused outfit spudded the UTS-3 well on the Uytas prospect in Block A, it announced on Monday. Total depth on the well, which is targeting Cretaceous and Jurassic reservoirs, is expected to hit around 800 metres. Max has only recently logged indications of 12 metres of net oil pay in the Cretaceous section in its UTS-2 confirmation well. Significant oil shows were recorded continuously from 36 to 150 meters, which appear to confirm the oil column seen in the original UTS-1 discovery well

UK services player Hunting has agreed to buy US-based Dearborn Precision Tubular Products for $85 million. Hunting said the purchase of the US company, which provides specialist precision machining services, would be funded from its existing cash and bank borrowing facilities. It added it expected the acquisition to to be earnings enhancing in the first full financial year before acquisition costs and normal acquisition adjustments such as fair value adjustments and the amortisation of intangible assets.

US oilfield services giant National Oilwell Varco (NOV) has signed a $1.5 billion contract to provide drilling equipment packages for seven drillships to shipyard company Estaleiro Atlantico Sul,The packages will include drilling riser and pressure control equipment, NOV said in its announcement. NOV chief executive Pete Miller said deepwater discoveries in Brazil had made the nation a significant offshore market for the company. �We are investing heavily in Brazil to manufacture more of the products and technologies National Oilwell Varco provides to our oil and gas customers, and to service the rapidly growing installed base of NOV drilling equipment in the region,� he said


Australian independent Beach Energy has made a new field oil discovery in PEL 92 in the Western Flank of South Australia�s onshore Cooper basin. The Elliston-1 well encountered an oil column with net pay of three metres in the Namur sandstone section of the well. It added the reservoir appeared to be of high quality with the potential to deliver strong flow rates. Based on its preliminary volumetric assessment Beach estimated the discovery to hold about 100,000 barrels of recoverable oil

The UK oil and gas industry has successfully tested its ability to deploy a well capping device in the waters west of Shetland. As part of the industry's commitment to further strengthen the UK's emergency response capabilities, the Oil Spill Prevention and Response Advisory Group (OSPRAG) has undertaken a number of initiatives to improve well engineering and oil spill response capability, including the development of a well capping device for use in UK waters to seal-off an uncontrolled subsea oil well in the unlikely event of a major well control incident.

Oklahoma Pipe line boom arrest An Oklahoma man was arrested and charged on Friday with trying to destroy a natural gas pipeline with a homemade bomb, the FBI said. The Oklahoma City division of the FBI said on Friday that Daniel Wells Herriman, 40, of Konawa, Oklahoma, called Seminole County 911 emergency response on Wednesday and said he had made the device at his home, Reuters reported. He said that he put it under the above-ground pipeline on Sunday in a remote area near Okemah, about 75 miles (120 kilometres) east of Oklahoma City and set the timer

Shell is battling to contain a subsea oil leak close to the Gannet Alpha platform in the UK North Sea. The Anglo-Dutch supermajor confirmed this afternoon it was managing an oil leak in a flowline that serves the platform. There is as yet no formal confirmation of the size and scale of the spill. Shell said a light sheen was noticed in the area on Wednesday.

Excitement as Well results boost BP's hopes There is early excitement within supermajor BP about a potential development phase at a prolific oilfield on the UK Atlantic Margin after an appraisal well completed last week delivered promising results.

Petrobras chief executive Jose Sergio Gabrielli said the company will likely be fined by the Brazilian government because it cannot prove that it met rules requiring some use of locally produced equipment, a report Friday said. Prior to the seventh round of oil concessions, held in 2005, Petrobras had no way to document what portion of the oil-exploration equipment it used was produced in Brazil, the head of the state-controlled oil company said in an interview on the Globo television network, Dow Jones reported. "Petrobras will be fined because we didn't have a system in place to prove" the national content, he said.

Iranian gas flow to Turkey has been halted due to an explosion on the pipeline in Turkey overnight, a Turkish Energy Ministry official said Friday. "Repairs have been started on the Turkey-Iran pipeline. The repairs and restarting of gas flows will take one week," the official told Reuters. He said Turkey was buying additional gas from Azerbaijan and Russia to cover the shortfall caused by the explosion, which according to state-run Anatolian news agency occurred in the eastern Turkish province of Agri. Iran is Turkey's second-biggest supplier of natural gas after Russia, sending 10 billion cubic meters of gas each year. Turkey uses gas to fire half of its power plants

Singapore-based supply vessel player Swiber Holdings said Friday it has landed three new contracts worth $82 million.Swiber did not give specific contract details but said the projects were for Southeast Asian oil companies and include pipeline installation work, mobilisation of marine vessels, equipment, and personnel. All three projects will start straight away with completion targeted for the second quarter of next year. To date, Swiber has secured new contracts totalling $377 million this year.

China�s export-import bank has loaned $60 million to the drilling plan of Bolivia�s national oil company, a report said this week. The investment, reported by the La Razon newspaper of La Paz, will bolster the programme of YPFB, which told the paper earlier this year it plans an �aggressive� drilling plan that includes 15 exploratory wells and 26 for development

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