This month ... Pemex puts accent on deepwater reserves
  from: Offshore Engineer
  Friday, October 01, 2004

MEXICO IS PROCLAIMING THAT based on new exploration efforts it could hold the world's third largest oil reserves. Luis Ramirez Corzo, state oil company Pemex's director of exploration, is reported in Mexican newspaper El Universal as saying three years of exploration efforts have determined the country holds undiscovered reserves in the range of 54 billion barrels.

While Corzo called this estimate 'conservative', if true it would put the nation's total reserves at 102 billion barrels, just behind Saudi Arabia and Iraq in the world rankings and beyond the reserves of UAE, Kuwait and Iran. And, he added, if these reserves are brought online, Mexico's oil production could increase from the present level of 4 million b/d to 7 million b/d putting it near the levels of Saudi Arabia (7.5 million b/d) or Russia (7.4 million b/d).

Corzo added a note of caution, however. 'That is the good news; the bad news is that given the complexity to access deposits, the technology required and the volume of investment needed, we can't go alone on this,' he said.

According to the exploration campaign, which cost the company around $4.55 billion, the majority of these reserves, some 45 billion barrels, were located in the Gulf of Mexico, and a considerable amount of that in deepwater.

Earlier this year Corzo had identified the deepwater as the next stage of reserves development for the country, claiming that four-fifths of Mexico's unexplored offshore acreage lies in the deepwater. He said at the time that the company's future is 'virtually tied' to deepwater exploration and was actively seeking alliances with foreign firms with the expertise and the capital to do the work.

These alliances are expected to take a form similar to the multiple service contracts used to attract foreign investment in developing Mexico's gas reserves where Pemex owns the production but partners receive an 'attractive incentive'. Under Mexican law foreigners are not allowed ownership of the country's oil and gas reserves. Although Pemex is reportedly attempting to seek approval from congress for the deepwater alliances, the government has thus far been strongly opposed to any further foreign involvement in Mexico's industry. Marshall DeLuca

Magnolia on its marks:
First oil is due by year-end from the ConocoPhillips Magnolia field in US Gulf Garden Banks 784. Magnolia's extended tension leg platform is set in 4760ft of water, establishing a new benchmark for TLPs, and has capacity to process 50,000b/d of oil, 150mmcf/d of gas and 20,000b/d of water from eight dry trees. Samsung and Gulf Marine Fabricators built the ETLP hull and topsides, designed by ABB Lummus Global and Alliance Engineering respectively.

Kick-off on Kikeh
MURPHY HAS BEEN GIVEN THE green light to proceed with Malaysia's first deepwater development. The company has received project approval from Petronas for its Kikeh development on Block K offshore Sabah in 4400ft of water.

The development plan envisages start-up of the field in 2007, with production peaking at 120,000b/d within two years and that rate being maintained for six years. The project, which allows room for future expansion, has an approximate price tag of $1.4 billion and assumes a recoverable reserve base of over 400 million barrels.

Murphy, presently out for bid on the production system, declined to comment on its preferred development mode so as not to create bias in the market. But TLP, spar and semi designs are all expected to figure in the bidding, with Murphy set to announce a winner by year-end.

Shell settles in reserves fiasco
THE ROYAL/DUTCH SHELL GROUP moved to draw a line under its highly publicised reserves recategorisation debacle with the announcement last month that it had reached final settlements with the UK Financial Services Authority and the US Securities & Exchange Commission.

Shell settled without admitting or denying the findings and conclusions in FSA's final notice and the SEC's cease and desist orders, paying penalties of $17 million and $120 million, respectively, and agreeing to spend a further $5 million to put in place a 'comprehensive internal compliance programme'.

'Shell has worked hard over the past months to improve its systems and controls and implement other remedial measures to prevent any recurrence of these unfortunate events,' stated Jeroen van der Veer, chairman of Shell's committee of managing directors.

'The conclusion of the FSA's and SEC's investigations represents another significant step in putting the reserves issues behind us and continuing our efforts to regain and maintain the confidence and trust of our investors, partners, customers and employees,' he added.

Hands across the Barents Sea
STATOIL, GAZPROM AND ROSNEFT last month put their pens to a memorandum of understanding that sets out terms of a six-month cooperation between the Norwegian and Russian oil and gas companies on LNG projects in the Barents Sea.

Under the MoU, the trio will jointly study the first phase of the Russian Barents Sea Shtokmanovskoye gas-condensate field including LNG plant construction, along with the Russian companies' participation in the Statoil-operated Snøhvit LNG project in the Norwegian Barents Sea. Gazprom and Rosneft will also be granted use of Statoil's 'regasification capacities' in North America as part of the deal.

'The memorandum signed today opens a new page in our cooperation with Statoil,' said Gazprom chairman Alexey Miller. 'We have giant gas reserves offshore Barents Sea and Statoil has LNG production and transportation experience and market access to the North American market, which is strategically important for us. By joining forces for studying these promising projects we will be able to achieve good results.'

Rosneft president Sergey Bogdanchikov added: 'We consider this beginning of close cooperation with Statoil in the Barents Sea as an important step forward for a commercial development of the giant oil and gas reserves in this region.'

'Greater transparency' for UK midstream
A RETOOLED CODE OF PRACTICE ON access to UK upstream oil and gas infrastructure that aims to tear down a central impediment to the development of new fields offshore Britain was launched last month by government-industry task force Pilot and energy minister Mike O'Brien.

Some 50 North Sea operators have put their names to the new code as part of longgestating plans to improve pipeline access for independent oil companies and the many small-to-midsize start-ups that are entering the UK continental shelf to work on fields too marginal to support standalone production facilities.

Pilot chair O'Brien, who took up his post as energy minister in a September New Labour cabinet reshuffle, commended the industry for agreeing the new measures which should help to open up access to UK oil and gas infrastructure for third party users.

'The 2003 Treasury, DTI [Department of Trade & Industry] and oil industry consultation group on exploration identified the lack of transparent access to upstream oil and gas infrastructure as an area of real concern to explorers and developers,' he stated. 'They agreed key improvements aimed at unlocking future oil and gas volumes from the UKCS.'

O'Brien suggested that the midstream deal 'demonstrated again that the government and Industry co-operation at the heart of Pilot can tackle the most difficult issues and deliver practical solutions.'

A key feature of the code is the undertaking that parties will automatically involve the Secretary of State in negotiations if a deal between the infrastructure provider and a potential user is not reached within six months.

Technical data relating to pipeline operations as well as the main commercial terms and conditions of agreements between infrastructure owners and third parties will be posted on the web, tied into the Deal portal (www.ukdeal.co.uk).

The code will be maintained and its take-up reviewed by the UK Offshore Operators Association. Alan Booth, managing director of EnCana UK and president of the UKOOA Council said: 'The consultation group saw access to infrastructure as key to unlocking future oil and gas volumes from the UKCS. The new code recognises the need for greater transparency in infrastructure access and pipeline business dealings.'

Paul Blakeley, vice president of Talisman Energy UK added: 'We have to dismantle previous norms of commercial behaviour and this product could help effect that change.' Darius Snieckus

Kashagan barge bounty
AKER KVAERNER HAS SIGNED A LETTER OF INTENT FOR A major fabrication contract for the giant Kashagan field in the Kazakhstan sector of the north Caspian Sea. The field, operated by Agip, is thought to be the largest offshore oilfield in the world, with reserves of some 12-15 billion barrels recoverable and 40 billion barrels in place. Agip is developing the field in three main phases over the period to 2020 with total investment estimated at around $30 billion.

The letter of intent relates to the first phase of the project and covers fabrication, outfitting and testing of seven barge modules, including three oil separation barges, two gas dehydration and glycol regeneration barges, one emergency power generation and utilities barge and one fire fighting/sea water barge. Each will be 95m long, 16m wide and 5.5m high.

After delivery, they will be installed on preinstalled piles and hooked-up in waters 4-6m deep. The facilities will be designed to handle flows with pressures up to 790 bar with 16-18% hydrogen sulphide content. As the region is subject to severe ice conditions during the winter months, the facilities will also be designed to withstand ice build-up on the sea surface.

The barge hulls will be fabricated at the Aker Tulcea and Braila Yards on the Black Sea in Romania. Six of the hulls will be towed to Aker Kvaerner's Egersund yard in Norway for topsides outfitting and testing, while one will be towed to Astrakhan Korabel Yard in Astrakhan, for completion. Once completed, they will all be transported via the Volga and Don rivers to the Caspian Sea for delivery in 2006 and 2007. First oil is expected in early 2008.

An Aker Kvaerner spokesman told OE that the company sees this as a major triumph for its Egersund yard, in being able to compete successfully with several potential fabrication yards en route between the Black Sea and Norway. Terry Knott

Home team rules Brazil's sixth round
JUST 154 OF THE 913 BLOCKS ON offer in Brazil's recent sixth annual auction of oil and gas exploration rights drew accepted bids. Still, the Brazilian National Petroleum Agency (ANP) said the US$215 million produced by the sale was the most for any to date.

State-run Petrobras won about two-thirds, 102, of those blocks and participated as a non-controlling shareholder in five others. A Petrobras spokesman said the results would assure the company's control of the Santos and Espirito Santo basins and its position as the areas' largest producer for years to come. The company said it expects to invest about R$1.5billion in the new purchases, with the ANP declaring that all concessions should attract about R$2billion.

Industry observers of this and past auctions say that many otherwise competitive bidders stayed away from the proceedings because of fears sparked by a last-minute legal challenge to concession owners' rights to hold and export Brazilian oil and gas. The challenge, struck down by a Brazilian court, did little to allay investors' fears when a Supreme Court justice ruled the matter could be settled by a plenary at a later date.

Companies who did participate in the sale, notably Kerr- McGee, Epic Gas of El Paso, Repsol YPF and Shell, all did so at a level much reduced from previous rounds.

A positive sign could be seen, however, in the amount of interest show by smaller companies, among them firsttime participant Banco Arbi which walked off with rights to 12 blocks. With the major operators deterred by the high number of mature oil fields with declining production, rules that lowered the minimum bid were put in place this time to encourage smaller companies.

The Brazilian energy ministry has yet to confirm a seventh round, but ANP has said it has already begun preparations for next year's auction. Rick von Flatern

UK to streamline LNG import rules
THE UK DEPARTMENT OF TRADE & Industry has laid out plans aimed at streamlining the import of gas into Britain via liquefied natural gas facilities (LNG) by exempting new entrants into the supply market from the need for a gas transporters licence.

'An exemption order for operators of LNG import facilities on the lines proposed would remove a potential barrier to entry to Great Britain's gas supply market,' said the DTI. 'In so doing it would facilitate competition in terms of price by increasing diversity of sources, with benefits for security of supply.'

With the UK set to become dependent on imported gas after 2006, the exemption order - which is 'deregulatory and would ease the regulatory and administrative burdens that LNG import facilities face' - is seen is seen as important in meeting rising demand.

The DTI plan aims to 'help increase competition and benefit the security of UK energy supplies.

Ormen Lange dishes up more deals
NORSK HYDRO, OPERATOR OF THE giant Ormen Lange gas development offshore Norway, has decided on two key contracts for the new onshore processing terminal sited at Nyhamna on the island of Gossen off Norway's north west coast.

Aker Kvaerner is to be awarded the main installation job for the new plant, valued at NKr4.3 billion, making it the company's third large contract for the Ormen Lange project. The first contract, covering front end and detailed engineering, procurement and construction management support and worth NKr1 billion, was awarded to the company in March 2003. In July 2004, Aker Kvaerner won its second contract for engineering, procurement and construction of the import and export area of the plant, valued at NKr2 billion.

'Ormen Lange has become an extremely important project for Aker Kvaerner,' said Simen Lieungh, Aker Kvaerner's executive vice president for field development Europe.

Aker Stord will carry out the main installation contract, Aker Elektro will perform all electrical installation and automatisation work on the onshore plant, while Aker Kvaerner Engineering & Technology will carry out engineering and procurement work.

Construction for the central area of the plant will start in December, while facilities installation will start in May 2005, targeting mechanical completion by February 2007. Peak manning is expected to be 2200 persons in 2006.

Meanwhile, Norsk Hydro has awarded Vetco Aibel, formerly ABB Offshore Systems, the NKr550 million condensate export system area contract for Ormen Lange. The scope of work includes outfitting of the condensate product storage cavern, construction and outfitting of the product jetty, installation of the metering station, handling of volatile organic compounds from condensate tankers and erection of a substation.

'The project will be executed from Billingstad in the engineering phase with all prefabrication being managed and undertaken at our facilities in Haugesund and Kristiansund,' said Rasmus Sunde, president and CEO of Vetco Aibel. 'We will work in close co-operation with AF Gruppen as our civil engineering partner.'

Western Gulf bidding 'best for six years'
THE US MINERALS MANAGEMENT Service has called recent Gulf of Mexico lease sale 192 'the best Western Gulf sale in six years'. The agency said the sale generated 421 bids on 351 of the 3907 blocks offered offshore Louisiana and Texas, the best outcome since 1998's Western Gulf sale 171 when 402 blocks attracted 486 bids.

Some 54 companies participated in the recent sale with 45 of those placing bids totaling $197,394,164 and $171,387,285 in high bids.

The shallow water deep gas area of the shelf continued to be the hot commodity with 135 of the sale's favored blocks located in 200m of water or less and also receiving the highest bid of $6,775,400 (from Houston Exploration for High Island Area, East Addition, South Extension, block A270).

Interest in the deep and ultradeepwater was high too, with bids for 37 blocks in the 400- 799m water depth range, 101 in 800-1599m of water and 55 in 1600m-plus.

ChevronTexaco, Devon and EnCana combined to win the bidding for the deepest block: Keathly Canyon 1009 in 2824m of water.

The participating companies were led by Amerada Hess, with 58 high bids, followed by BP with 48, Petrobras with 37 and Devon with 27.

'This vibrant sale is certainly a step in the right direction in boosting domestic energy production,' said MMS director Johnnie Burton. 'The Gulf of Mexico OCS is a critical source of energy for the US, and its contribution is projected to grow significantly as more deepwater projects come online.' Marshall DeLuca

Angolan pair added to African project slate
TWO MORE MAJOR WEST AFRICAN offshore developments, Rosa off Angola and the much-delayed Agbami off Nigeria, have been given the go-ahead.

Total reported that Angolan state oil company Sonangol has given its blessing to initiate development of Block 17's Rosa field in water depths of 1300m to 1500m some 15km away from Girassol. Rosa, to be developed with 25 subsea wells - 14 producers and 11 injectors - will be the second field tied back to the Girassol FPSO following Jasmim late last year and will require modifications to the vessel to raise its production capacity to 250,000b/d. First oil from Rosa is anticipated for the first half of 2007.

Meanwhile, partner Statoil has given its go-ahead for the development of Nigeria's Agbami field, unitized between blocks 216 and 217 in 1500m of water . Statoil, which has an 18.85% stake in the ChevronTexacooperated field, said the project would produce 250,000b/d of oil when brought onstream in the first quarter of 2008, with plateau expected to be reached within six months of start-up and last for at least three years. Reserves are estimated at 710 million barrels.

According to Statoil, the Agbami development's FPSO will be almost identical to that of Girassol and hooked up to a subsea production system with gas re-injected to the reservoir. Bidding opened for the various project pieces earlier this year, with awards thought to be imminent as OE went to press.

Agbami's progress has been hindered in recent years by problems between the partner companies and the government. Texaco, who discovered the field in 1999, had originally pegged it to hold as much as one billion barrels of oil and be in production this year.

Ivan the not-so-terrible
UNLIKE RESIDENTS OF US Gulf coast communities who will be rebuilding for months where hurricane Ivan struck land in mid-September, the Gulf of Mexico oil and gas industry was expected to emerge relatively unscathed.

One indicator of how well the industry weathered the level five hurricane winds and seas may be inferred from the fact that while more than 72% of the Gulf 's oil and gas production remained shut in two days after the storm's passing, the US Department of the Interior's Minerals Management Service (MMS) was reporting that only 28% of the Gulf 's 764 manned platforms remained evacuated in contrast to about 72% a day earlier.

Damage reported to the MMS included five drilling units set adrift, all located and in apparent good shape with one listing about 3°. Four fixed platforms are missing and presumed sunk and one fixed platform is leaning. One platform rig is missing from the spar on which it was working and another was seen leaning over the edge of another spar.

Three pipeline leaks were reported including one that resulted in a fire that burned itself out. The MMS reports damage assessment continues, including subsea where more impact may be found. There were no reports of any injuries, fatalities or significant pollution.

GTL barge for Aje?
HEADS OF AGREEMENT HAVE BEEN signed by Syntroleum and Nigerian operator YFP to further delineate and potentially develop the Aje field in OML 113 offshore Nigeria.

Although the field contains potentially commercial volumes of oil, condensate and natural gas liquids, the large natural gas volumes present require a viable development solution. Syntroleum believes its gasto- liquids technology and GTL barge concept may provide the answer.

The company is working the field under an agreement with Sovereign Oil & Gas. They are obligated to drill one appraisal well in the field under the OML 113 agreement.

Trees grow
Aberdeen independent Venture Production has paid $50 million to acquire stakes in five UK continental shelf blocks from Marubeni Oil & Gas, including equity interests in the Ventureoperated Birch, Larch and Sycamore oil producing fields, known as the 'Trees' developments, along with a portfolio of undeveloped discoveries and exploration prospects in the central and northern North Sea. Venture will pay Marubeni an overriding royalty on two undrilled exploration prospects, Ash and Cedar located, in the event of successful commercial development of either.

Jack in deep
A new strike has been made in the deepwater Walker Ridge area of the Gulf of Mexico. ChevronTexaco has reported the Jack #1 well located in 6956ft of water on block 759 encountered more than 350ft of net pay oil sands on its way to a total depth of 29,000ft. Further appraisal drilling is planned to determine the extent of the discovery.

Indonesian appraisals
Dana Petroleum has successfully completed two appraisal wells on the Ujung Pangkah field offshore East Java, Indonesia. Both the Ujung Pangkah North and West wells, drilled using the jack-up drilling rig Ocean Sovereign, encountered gas overlying oil in the Kujung limestone formation at a depth of 4800ft below sea level. The northern well, which entered an oil column with a thickness of 77ft underlying a gas column spanning 78ft, tested at a stabilised flow rate of 2300b/d, with a separate test of the gas zone achieving 14.4mmcf/d. The western well, which encountered a similar section of oil bearing limestone underlying a larger 117ft gas column, tested at 2100b/d while the gas zone achieved 31.4mmcf/d.

Noble pursuit
Noble Energy has increased its holdings offshore Equatorial Guinea by acquiring an interest in a production sharing contract for block 'I' off Bioko Island. Under the terms of the deal, Noble will serve as the technical operator of the block with a 40% interest while the Atlas Group will hold a 60% interest and be the administrative operator. The block covers 806km2 in water depths over 500m and is adjacent to Noble's other Equatorial Guinea PSC holding - block 'O'. Noble will begin work on the block by processing a recently acquired 3D seismic shoot.

Crimson pales
A wildcat near Marathon's 2002 Annapolis deepwater discovery off Nova Scotia has been plugged and abandoned after not encountering commercial quantities of hydrocarbons. The company reported the Crimson F-81 well was drilled on the Annapolis block in 6861ft of water to a depth of 21,903ft. The operator and its partners are reported to be analyzing data from the well to help determine the next steps for Annapolis.

Off the shelf
Anadarko Petroleum has entered into purchase and sale agreements for the divestiture of its Gulf of Mexico shelf properties through two transactions totaling $1.3 billion. Anadarko has agreed to sell an overriding royalty interest to Morgan Stanley Capital Group, with the shelf properties going to Apache. The package represents some 98.6 million boe of proved reserves and daily production of 46,000 boe. Anadarko's GoM shelf properties include 78 fields and 112 platforms. Upon completion of the announced sales, Anadarko will be left operating only the deepwater Marco Polo facility at Green Canyon block 608. OE

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