GENERAL INTEREST — Quick Takes
API tries to increase advocacy with 'Energy Nation'
The American Petroleum Institute announced its second major campaign in as many days as it introduced Energy Nation, an advocacy program "to give the millions of members of America's oil and gas industry an easy tool to make our voices heard in Washington, DC," it said in a widely distributed Jan. 5 e-mail. The effort followed the introduction of API's "Vote 4 Energy" campaign to mobilize public support for political candidates favoring increased domestic energy production at the association's annual State of American Energy luncheon a day earlier.
"Every day, policymakers across the country debate issues that directly affect our industry, our jobs and our country's energy and economic security," Gerardio Ura, Energy Nation's general membership director, said in the e-mail message. "Therefore it is vital that decision-makers hear from us—the people who work every day to deliver safe, reliable, and affordable energy across the country."
It was not clear how Energy Nation would fit with other oil and gas associations' already extensive advocacy programs, such as the Independent Petroleum Association of America's Political Toolkit and Friday Fact Checks. OGJ has learned, however, that staff officials in these associations received an e-mail on Jan. 5 from API Pres. Jack N. Gerard about "Vote 4 Energy" encouraging them to join and support that campaign.
Energy Nation's web site includes a "Vote Energy in 2012" prompt for users to register to vote and to find their polling stations in line with "Vote 4 Energy". It also encourages those who join to sign a pledge supporting "a common-sense approach to energy in America"; to encourage coworkers, friends, and family members to join; and to attend upcoming industry events.
In addition to oil and gas industry employees, membership is open to retirees and those working for contractors and suppliers. "Together, we can fight the misperceptions and criticisms that get in the way of the work we do," Ura said in his e-mail.
Pennsylvania DEP fines Talisman for incident
The Pennsylvania Department of Environmental Protection fined Talisman Energy USA Inc. $51,478 for a January 2011 gas well-control incident during hydraulic fracturing in Ward Township, Tioga County.
"Equipment failure during fracing on Jan. 17 caused about 21,000 gal of hydraulic fracturing fluid and sand to be released for about 3 hr," DEP North-central Regional Director Nels Taber said.
Fluid discharged from the wellhead under high pressure. Vacuum trucks recovered the fluid on the well pad. No streams, wetlands, or private drinking water wells were touched by the spill.
Regulators said the incident was caused by a needle valve that had failed and could not be shut off. To regain control of the well, the hydraulic valve above the master valve was remotely closed. Fluid was allowed to flow back through the production test separator. A new pipe connector called a hammer union was also installed and closed.
Inspectors confirmed Talisman repaired a torn liner, replaced failed equipment, and removed contaminated soil beneath the liner within days of the incident.
Shell to buy Ivanhoe's stake in Zitong
Shell China Exploration & Production Co. Ltd. agreed to buy Ivanhoe Energy Inc.'s stake in a production-sharing contract for Zitong block in China's Sichuan basin for $160 million.
Ivanhoe's interest in the tight natural gas play is held by wholly owned subsidiary Sunwing Zitong Energy (OGJ Online, Jan. 17, 2011).
Shell China E&P signed a binding memorandum of understanding with Sunwing, and the transaction remains subject to government approvals. Closing is expected by yearend.
Ivanhoe said it decided to sell its Zitong assets to concentrate on its core business of international exploration, development, and its proprietary heavy-to-light (HTL) oil upgrading process. Sunwing has been active in China for more than 10 years.
Following closing, Shell will assume a $20 million performance bond that Ivanhoe was required to post as part of an agreement with the China National Petroleum Corp.
Ivanhoe Pres. and Chief Operating Officer David Dyck said, "We will focus our resources on our oil projects in Canada, Ecuador, Mongolia, and the Dagang project in China, as well as the commercialization of our proprietary HTL upgrading process."
Sunwing discovered gas at two wells on Zitong block, where it owns a 90% stake. Mitsubishi Gas Chemical Co. Inc. owns the remainder.
Exploration & Development — Quick Takes
San Joaquin Paloma deep test flows gas-condensate
Australian explorers appear to have a gas-condensate discovery after having tested the first two of eight potential hydrocarbon pay zones in California's San Joaquin basin.
Neon Energy Ltd., Perth, and Solimar Energy Ltd., Melbourne, ran two production tests on the Fruitvale shale and Lower Stevens sandstone at the Paloma Deep Sidetrack-2 wellbore. The well went to a total depth of 13,320 ft, 310 ft into the Fruitvale shale on the west side of giant Paloma oil and gas field in Kern County (OGJ Online, Nov. 30, 2011).
On the two production tests run to date, hydrocarbons flowed to surface unassisted at maximum rates of 1.9 MMcfd of gas and 226 b/d of condensate, but downhole operational issues have prevented the companies from determining which interval delivered the hydrocarbons, Solimar said.
Debris obstructed and hindered the flow of hydrocarbons and prevented stabilized rates of production from being achieved. Encouraged, the companies have rigged up a coiled tubing workover unit to clean up the wellbore before resuming tests of the Lower Stevens.
Neon previously said the potential pay intervals to be production-tested in this well or future wells include the Paloma sands, Middle Stevens, Round Mountain, Lower Stevens, Fruitvale shale, Western Flank, Antelope shale, Lower Antelope shale, and Tulare sands. It said it encountered a column of more than 200 ft of continuous potential oil pay with a high reservoir net to gross ratio in the Lower Stevens.
Neon is operator with 75% working interest in the project. Solimar is participating with a 25% working interest and is paying a promoted share of the dry hole and completion-testing costs up to an agreed cost cap.
Green River basin Niobrara activity yielding oil
Encouraging reports of Niobrara oil production are emerging from the eastern Green River basin, west and northwest of where EOG Resources Inc. had its initial success in Colorado's North Park basin.
Entek Energy Ltd., Perth, in late December 2011 said it planned to acquire 28,000 gross acres, 19,000 net acres in the basin that would bring its total holding to 110,000 gross acres, 91,000 net acres.
Before the acquisition, Entek Energy held 55% working interest and Emerald Oil & Gas NL, Perth, held 45% in a Niobrara acreage position that lies along the Colorado-Wyoming state line. Numerous other public and private operators hold large positions in the general area in both states.
Emerald Oil & Gas noted that Quicksilver Resources Inc., Fort Worth, revealed sustained Niobrara production rates of more than 500 b/d of oil from a horizontal well and 100 b/d from single-zone completions in several vertical wells in Colorado within 25 miles south of Emerald's acreage.
Emerald Oil & Gas said, "The directors of Emerald consider the Quicksilver production results to be significant for EMR, as they indicate that a frac treatment design, effective in the Green River Basin Niobrara shale oil play, has now been demonstrated and this provides clear evidence of the production potential that could be expected from wells on EMR acreage."
Emerald Oil & Gas describes the Green River basin as having target Niobrara oil pay sections in four benches totaling 1,100 ft thick, several times thicker than those in the Denver-Julesburg basin. Fractured intrusives have also been encountered in the area. It said its acreage is also prospective for coalbed methane and conventional oil and gas.
Ordovician light oil flows at Amadeus reentry
Central Petroleum Ltd., Perth, reported a maximum sustained flow rate of 300 b/d of 40° gravity light, sweet crude oil on a 24⁄64-in. choke in the western Amadeus basin of Australia.
The flow, with a low water cut, came from a 230-m lateral in tight Ordovician Lower Stairway sandstone at 2,543 m true vertical depth at the Surprise-1 reentry. The well is on Northern Territory Block EPA-115 about 190 km west of Mereenie oil and gas field. Central reported no evidence of hydrogen sulfide.
The company is still recovering drilling fluid from the horizontal section and plans further well clean-up and extended production tests.
Central will suspend the well as soon as it cleans up and, subject to government approvals, will fast-track additional storage to allow for an EPT to begin.
Central is also assessing the unconventional shale oil and gas potential of drilling samples taken from the Horn Valley siltstone, where the presence of hydrocarbons and elevated organic material in sections of this formation was previously noted (OGJ, Oct. 4, 2010, p. 48).
Central said it is determining its next exploratory moves, pursuing a TSX Ventures Exchange listing, and discussing farmouts with major companies.
Drilling & Production — Quick Takes
BNK Petroleum continues Polish drilling program
BNK Petroleum Inc. plans to start drilling its first well on the Trzebielino concession in Poland by Feb. 29 and then upon completion of the Trzebielino well, the rig is scheduled to move to the first Bytow drillsite, the Camarillo, Calif., company said in an operational update Jan. 8.
BNK subsidiary Indiana Investments Sp. z o.o. holds 100% interest in the Trzebielino and Bytow licenses.
BNK expects the Trzebielino and Bytow wells will encounter richer, thicker organic shales than its Saponis Lebork S-1 well encountered.
Technical evaluation indicates that the Ordovician on the Trzebielino and Bytow concessions was deposited in a deeper basin environment than previously drilled wells, BNK said, adding that it plans to restimulate and test the Lebork S-1 well when temperatures warm (OGJ Online, July 29, 2011).
BNK holds 195,000 net acres in the Baltic basin through Saponis Investments Sp. z o.o. and another 880,000 adjacent net acres through Indiana Investments.
Diamond Offshore to build semi with existing hull
A Diamond Offshore Drilling Inc. subsidiary signed a contract with Keppel AmFELS shipyard in Brownsville, Tex., to build a moored semisubmersible drilling rig using an existing hull.
Total cost is expected to be $300 million. Delivery is scheduled for third-quarter 2013.
Diamond Offshore Pres. and CEO Larry Dickerson said the Ocean Onyx will be built from a Diamond Offshore cold-stacked unit, which operated as the Ocean Voyager.
Dickerson expects the Ocean Onyx can be placed into service in half the time and at half the cost of a newbuild semi.
The Ocean Onyx will be designed to operate in 6,000 ft of water. It will have a variable deck load of 5,000 long tons, a five-ram blowout preventer, and housing for 140 people.
BSSE, USCG complete review of Cuba-bound offshore rig
A review by the US Bureau of Safety and Environmental Enforcement and the US Coast Guard of a mobile offshore drilling unit bound for Cuban waters found the vessel generally complies with existing international and US standards, the two US agencies jointly announced.
BSEE and USCG said the review of Saipem SPA's Scarabeo 9 ultradeepwater 6th generation semisubmersible drilling rig was completed on Jan. 9 off Trinidad and Tobago at the invitation of its operator, Repsol YPF SA, which has agreed to abide by those standards. The agencies emphasized that they have no legal or regulatory authority, and their review did not confer any form of certification on endorsement under US or international law.
The agencies reviewed the vessel's construction, drilling equipment, and safety systems including lifesaving and fire-fighting equipment, emergency generators, dynamic positioning systems, machinery spaces, and blowout preventer in anticipation of Scarabeo 9's scheduled work off Cuba in the coming months. They said in anticipation of increased oil and gas drilling in the Caribbean Basin and Gulf of Mexico, the US is participating in multilateral discussions with the Bahamas, Cuba, Jamaica, and Mexico on a broad range of issues including, drilling safety, ocean modeling, and oil spill preparedness and response that are providing valuable information on each country's plans and capabilities that will improve bilateral and regional cooperation should a major pollution incident occur.
Marubeni buys 35% stake in Eagle Ford shale project
Marubeni Corp. subsidiary Marubeni Eagle Ford Ltd. agreed to buy a 35% stake in the Eagle Ford shale oil and gas play from Dallas-based Hunt Oil Co.
"We strongly believe that the shale oil and gas play will be spreading all over the world," Marubeni said, adding that it would expand by acquiring quality shale oil and gas assets in the US and elsewhere.
The Japanese trading house said the Texas project, which covers 52,000 acres of oil and gas leases, plans to drill several hundred wells sequentially over 5-10 years.
Marubeni and Hunt also agreed to jointly acquire additional acreage in the Eagle Ford shale oil and gas area.
Marubeni is the most recent oversea firm to buy US shale asset stakes, following purchases by China Petrochemical Corp. (Sinopec) and Total SA.
Recently, Sinopec paid Devon Energy Corp. $2.2 billion to purchase a one-third stake in five US shale oil and gas fields, while Total paid $2.3 billion for a minority stake in Chesapeake Energy Corp.'s Ohio shale discovery.
PROCESSING — Quick Takes
Tesoro plans to sell refinery in Hawaii
Tesoro Corp. plans to sell its 93,700-b/cd hydrocracking Kapolei refinery, the largest of two refineries in Hawaii, along with its Hawaiian retail operations and logistical assets.
The company bought the refinery, about 20 miles west of Honolulu, for $275 million from BHP Petroleum Americas Refining Inc. in 1998 (OGJ, Mar. 30, 1998, p. 29). Its Hawaiian operations include 32 retail stations.
In a statement, Tesoro Pres. and Chief Executive Officer Greg Goff said, "Our business in Hawaii does not align with our strategic focus on the Midcontinent and West Coast."
According to Oil & Gas Journal's 2011 Worldwide Refining Survey, the Kapolei refinery's processing capacities include 17,600 b/cd of high-pressure distillate hydrocracking, 11,500 b/cd of visbreaking, 12,800 b/cd of semiregenerative catalytic reforming, and 12,800 b/d of catalytic hydrotreating for pretreatment of cat reformer feeds.
Chevron Corp. operates Hawaii's other refinery, a 54,000 b/cd facility also at Kapolei.
Contract let for Rhineland refinery links
Shell Deutschland Oil GMBH let a contract to Jacobs Engineering Group Inc. for infrastructure work supporting integration of the 327,000 b/d Rhineland refinery near Cologne, Germany (OGJ Online, Aug. 4, 2009).
The complex encompasses the former 162,000 b/d Godorf and 140,000 b/d Wesseling refineries, which are 2.36 miles apart on opposite sides of the Rhine River. Shell began reporting them as a single facility in 2005 (OGJ, Dec. 19, 2005, p. 60).
An early phase of integration involved modification of hydrogen and desulfurization units to allow Wesseling to desulfurize gas oil from Godorf.
The Jacobs contract covers project management and engineering, procurement, and construction management services for piping tie-ins, instrumentation, steel structures, pump stations, and other infrastructure components within the refining sites. The work will support connections to two tunnels beneath the Rhine under development by a specialist contractor.
Amine regeneration unit starts at Vadinar
Essar Oil Ltd. has commissioned a large amine regeneration unit in the first phase of expansion of its 300,000 b/d Vadinar refinery in Gujarat, India, after commissioning a pentane-hexane isomerization unit last month (OGJ Online, Dec. 12, 2011).
The company expects initial expansion of distillation capacity to 375,000 b/d to be complete in March.
Optimization will further increase capacity to 405,000 b/d by September, when the refinery will be able to handle 87% extra-heavy crudes.
UOP designed the new amine regeneration unit, which has a design capacity of 160,000 b/d. The unit supports diesel and vacuum gas oil hydrotreaters.
North Dakota natural gas plant starts up
Oneok Partners LP, Tulsa, reported that its 100-MMcfd Garden Creek natural gas processing plant in eastern McKenzie County, ND, is receiving production from the Bakken shale.
Oneok Partners previously announced plans to invest $1.5-1.8 billion for projects in the Bakken shale during 2012-14 in its gas gathering and processing and NGL businesses. In addition to the Garden Creek plant, these investments include construction of the 500-mile Bakken pipeline and two additional 100-MMcfd gas processing plants: Stateline I and Stateline II in western Williams County, ND.
The Bakken pipeline is to be completed by first-half 2013; Stateline I and Stateline II plants are to be completed by third-quarter 2012 and first-half 2013, respectively.
Costar Midstream to acquire East Texas assets
Costar Midstream LLC, Dallas, has acquired over 500 miles of natural gas gathering pipelines, three cryogenic gas processing plants, and associated compression and treating assets in East Texas in a four-county area near Longview.
The assets represent 75 MMcfd of gas processing capacity, 8,000 b/d of NGL fractionation capacity, 20,000 hp of compression, and 30 MMcfd of gas treating capacity. The systems provide midstream services to producers of conventional and unconventional gas sources, and allow treating of off spec NGL and condensate production.
Costar is a portfolio company of Energy Spectrum Capital and was formed in April 2011 to acquire and develop midstream energy structure infrastructure.
TRANSPORTATION — Quick Takes
EPP NGL shippers double MAPL expansion commitments
Enterprise Products Partners LP shippers that executed 10-year, firm NGL transportation agreements in May 2011 on its Mid-America Pipeline Rocky Mountain expansion project exercised options increasing total commitments by roughly 115% to 82,500 b/d. Original commitments totaled 38,500 b/d.
The expansion will loop the existing system with 263 miles of 16-in. OD pipeline, as well as modifying pump stations. Capacity will be filled by new gas processing plants being constructed in the Uinta, Piceance, and Greater Green River basins.
EPP described the expansion as complementing its Texas Express Pipeline joint-venture with Enbridge and Anadarko Petroleum Corp. to build a 580-mile NGL pipeline from Skellytown, Tex., to Mont Belvieu, Tex. (OGJ Online, Sept. 6, 2011).
The US Federal Energy Regulatory Commission approved the MAPL expansion in August 2011. EPP expects to place it in service third-quarter 2014.
MAPL's committed shipper transportation rate to Mont Belvieu, subject to annual escalation, is 15.1¢/gal.
Alaska governor, majors' executives discuss ANS gas
Alaska Gov. Sean Parnell met with chief executives from BP PLC, ConocoPhillips, and ExxonMobil Corp. in Anchorage to discuss commercializing the Alaska North Slope's gas reserves. Parnell requested the Jan. 5 meeting after calling on the three major ANS gas reserve holders' to work together on developing an LNG export project aimed at Asia's growing markets.
"We had a productive discussion about how to get alignment between the companies and grow Alaska's economy through oil and gas development," Parnell said following the 2-hr meeting with BP's Bob Dudley, ConocoPhillips's James Mulva, and ExxonMobil's Rex Tillerson.
The executives briefed the governor on work their companies had done since his request, Parnell stated. The meeting's agenda also included an update on ExxonMobil's Point Thomson gas project and a discussion of the state's goal of bringing oil production back to 1 million b/d.
Parnell and other state officials have noted that declining crude production is pushing the Trans-Alaska Pipeline System from Prudhoe Bay to Valdez toward its minimum effective operating level. Alaska produced 17.539 million bbl, or an average 565,774 b/d, of crude during October 2011, according to the US Energy Information Administration.
Parnaiba Devonian shale gas output authorized
Brazil's secretary of state for the environment and natural resources of Maranhao issued a preliminary license for the development of production and transport of gas in Gaviao Real and Gaviao Azul fields in northeastern Brazil's Parnaíba basin.
The license confirms the environmental viability of the venture, which will produce and process natural gas for the MPX Thermoelectric Power Plants in the region.
Gas production should start in the second half of 2012 and could eventually reach as much as 212 MMcfd, said operator OGX Petroleo e Gas Participacoes SA, Rio de Janeiro.
The detailed design and acquisition of equipment for the gas treatment unit being built in the region are moving ahead. The processing to remove the liquid from the gas produced, and to filter and heat the gas will take place in the GTU.
The production of gas from the two fields will be capable of doubling onshore production of natural gas in Brazil, OGX said (OGJ Online, Nov. 17, 2010).
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