AraSer_OGJ_110110 1/3/11 3:16 PM International Petroleum News and Technology NEWSLETTER 27 STATISTICS | www.ogj.com Jan 31, 2011 10 LETTERS / CALENDAR 12 JOURNALLY SPEAKING 14 EDITORIAL 29 MARKETPLACE 31 EDITOR’S PERSPECTIVE / MARKET JOURNAL | Volume 109.5 26 EQUIPMENT 26 ADVERTISERS’ INDEX GENERAL INTEREST 16 BP: Nonfossil fuels to be ‘major’ energy sources by 2030 The global fuel mix will continue to diversify, with increased emphasis on alternative energy until by 2030 “for the first time nonfossil fuels will be major sources of supply growth,” said analysts at BP PLC 17 Obama uses address to renew call to repeal oil tax exemptions Nick Snow US President Barack Obama urged Congress to financially support clean energy and other innovative technologies in his 2011 State of the Union address Repealing billions of dollars in federal oil tax exemptions would be a good place to start, he suggested 20 API: US demand grows, but policies may stymie production Nick Snow 22 Natural gas, LPG to play large roles in European fuels future 23 Salazar formally announces BOEMRE split, advisory panel Nick Snow 23 Heritage claims major Iraq gas-condensate find 24 EXPLOR ATION / DEVELOPMENT BRIEFS 25 WATCHING THE WORLD Saudi Arabia going nuclear In the video below, ExxonMobil Corp discusses its multi-zone stimulation technology (MZST) and how this breakthrough research and technology is being used in the Piceance basin Video from ExxonMobil CLICK TO VIEW VIDEO Visit our video library www.ogj.com/index/video.html 20 EPA extends E15 waiver to 2001-06 model year cars, trucks Nick Snow 21 WATCHING GOVERNMENT Where wild lands are 110131OGJ_1 1/27/11 1:07 PM Advancing Reservoir Performance 70% How we cut NPT by and added 36 wells to an Eagle Ford operator’s drilling plan ©2010 Baker Hughes Incorporated All Rights Reserved 30182 An Eagle Ford operator was losing valuable time waiting for frac-water tanks to fill to required volumes, forcing a substantial reduction in the drilling plan The operator considered drilling five new frac-water supply wells, at a cost of USD 1.25 million, to solve this problem 110131OGJ_2 Baker Hughes had a better idea We installed a high-volume Centrilift electric submersible pumping (ESP) system and tripled the frac-water supply well production rate Downtime between completions dropped from 50 to 17 days A second Centrilift ESP on another water-supply well quadrupled its production rate and cut completion wait times to less than 12 days The operator regained its original drilling plan and scheduled to add 36 more wells per year To learn how we can help you produce more profits from your shale operations, contact your Baker Hughes representative or visit us online You’ll find that partnering with us to maximize the value of your Eagle Ford assets is a very good idea www.bakerhughes.com 1/27/11 1:07 PM ADVERTISING SALES Houston U.S Sales Manager, Marlene Breedlove; Tel: (713) 9636293, E-mail: marleneb@pennwell.com Regional Sales Manager, Mike 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Roger Kingswell, Tarragon Road, Maidstone, ME16 0UR, United Kingdom; Tel 44.1622.721.222; Fax: 44.1622.721.333; Email: rogerk@pennwell.com France / Belgium / Spain / Portugal / Southern Switzerland / Monaco Daniel Bernard, allee des Herons, 78400 Chatou, France; Tel: 33(0)1.3071.1119, Fax: 33(0)1.3071.1119; E-mail: danielb@pennwell.com Germany / Austria / Northern Switzerland / Eastern Europe / Russia / Former Soviet Union Sicking Industrial Marketing, Kurt-Schumacher-Str 16, 59872, Freienohl, Germany Tel: 49(0)2903.3385.70, Fax: 49(0)2903.3385.82; E-mail: wilhelms@pennwell com; www.sicking.de Andreas Sicking Japan e.x.press sales division, ICS Convention Design Inc 6F, Chiyoda Bldg., 1-5-18 Sarugakucho, Chiyoda-ku, Tokyo 101-8449, Japan, Tel: +81.3.3219.3641, Fax: 81.3.3219.3628; Kimie Takemura, Email: takemurakimie@ics-inc.co.jp; Manami Konishi, E-mail: konishimanami@ics-inc.co.jp; Masaki Mori, E-mail: masaki mori@ics-inc.co.jp Brazil Grupo Expetro/Smartpetro, Att: Jean-Paul Prates 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Jan 31, 2011 ® International News for oil and gas professionals GENERAL INTEREST Q U IC K TA K E S Ecopetrol, Talisman acquire BP’s Colombia assets Ecopetrol SA and Talisman Colombia acquired BP Exploration Co Ltd for $1.75 billion and renamed the company Equion Energia Ltd Ecopetrol owns 51% interest of Equion and Talisman owns the remainder Equion consists of all assets and business formerly owned by BP’s Colombia subsidiary John A Manzoni, Talisman president and chief executive officer, said, “Talisman looks to build a strong production base in Latin America over the next to years We look forward to deepening our strategic relationship with Ecopetrol.” Equion produces 90,000 boe/d of which it has direct ownership of 27,000 boe/d Equion reports proved and probable reserves of 94 million bbl Schlumberger: Deep water, E&P to drive earnings Schlumberger Ltd.’s top executive expects robust world oil and gas activity, especially deepwater exploration and development outside the US, will drive strong 2011 earnings for his company and for oil service providers in general Andrew Gould, Schlumberger chairman and chief executive officer, recently told investors and analysts that he believes oil prices have moved into a range that will encourage operators to increase worldwide exploration investments Schlumberger reported fourth-quarter profit of $1.04 billion, or 76¢/share, compared with $795 million or 65¢/share for the same period the previous year Last year, Schlumberger closed its $10.8 billion acquisition of drilling fluids provider Smith International “While we not anticipate a return to pre-Macondo activity levels in deepwater US Gulf of Mexico in 2011, we expect a marked increase in deepwater activity in the rest of the world,” Gould said of the April 2010 blowout of BP PLC’s Macondo well off Louisiana and subsequent oil spill Gould anticipates increased development activity and production enhancement worldwide “promise stronger growth rates as the year unfolds.” During a Jan 21 conference call, Gould said it’s possible Schlumberger’s first-quarter 2011 earnings could be lower than fourth quarter 2010 earnings because of various factors, includ- Oil & Gas Journal 110131OGJ_5 For up-to-the-minute news, visit www.ogjonline.com ing seasonality in the Russian market and North Sea weather For natural gas, demand recovery has been less marked Increased supply of both US unconventional gas and of LNG worldwide will limit gas price increases, he said “Nonetheless, activity in the United States is likely to remain strong—at least through the first half of the year—due to the commitments necessary to retain leases, the backlog of wells to be completed, and the contribution of natural gas liquids to overall project economics,” Gould said “Increased service capacity, however, will negatively affect pricing at some stage during the year.” Worldwide, he said the governing factor on gas activity, particularly in the Middle East, will be the ability of many nations to use gas as a substitute for oil to meet increased local energy demand, thus freeing up more liquids for export Gould also expects that unconventional gas resources will continue to attract interest outside the US and Canada “The leading activity will continue to be gas in tight, or low permeability, reservoirs, and in coalbed methane developments,” he said “There will be exploration activity around the potential that shale gas offers in many other parts of the world.” Halliburton’s profits climb on liquids-rich shale plays Halliburton Co said higher drilling activity in oil and natural gas shale plays boosted its fourth-quarter earnings, more than offsetting declines in revenue from restrained international markets and suspended deepwater activity in the Gulf of Mexico During a Jan 24 conference call, Halliburton reported fourth-quarter net income of $605 million, or 66¢/share, compared with $243 million, or 27¢/share, for the same period the previous year “Our United States land operations experienced continued improved profitability,” said David Lesar, Halliburton chairman, president, and chief executive officer “The increase in horizontal drilling and activity in liquids-rich plays continued to drive service intensity.” Meanwhile, Halliburton reported a decline in its Gulf of Mexico revenue and income following the April 2010 blowout of BP PLC’s deepwater Macondo well off Louisiana and the subsequent oil spill in the gulf “We continue to believe that prospects for a recovery in the 1/27/11 1:07 PM IPE BRENT / NYMEX LIGHT SWEET CRUDE $/bbl 98.00 96.00 94.00 92.00 90.00 88.00 86.00 84.00 US INDUSTRY SCOREBOARD — 1/31 wk average wk avg year ago1 Change, % 8,962 3,727 1,438 484 4,902 19,513 8,789 3,660 1,375 471 4,503 18,798 2.0 1.8 4.6 2.8 8.9 3.8 8,795 3,592 1,467 395 4,861 19,110 8,671 3,719 1,290 432 4,575 18,687 1.4 –3.4 13.7 –8.6 6.3 2.3 Crude production NGL production2 Crude imports Product imports Other supply2, TOTAL SUPPLY Refining, 1,000 b/d 5,488 2,047 8,788 2,450 2,304 21,077 5,480 2,132 8,454 2,581 1,798 20,445 0.1 –4.0 4.0 –5.1 28.1 3.1 5,376 2,057 8,951 2,700 2,222 21,306 5,450 2,082 8,718 2,671 1,659 20,580 –1.4 –1.2 2.7 1.1 33.9 3.5 Crude runs to stills Input to crude stills % utilization 14,745 15,180 86.3 14,055 14,225 80.7 4.9 6.7 –– 14,534 14,902 84.7 14,296 14,603 82.7 1.7 2.0 –– Latest week 1/14 Jan 19 Jan 20 Jan 21 Jan 24 Motor gasoline Distillate Jet fuel Residual Other products Jan 25 TOTAL PRODUCT SUPPLIED Jan 19 Jan 20 Jan 21 Jan 24 Jan 25 Jan 19 Jan 20 Jan 21 Jan 24 Jan 25 335,729 227,670 165,797 43,087 41,837 333,112 223,227 164,759 44,094 39,418 Change Same week year ago1 Change Change, % Stocks, 1,000 bbl 2,617 4,443 1,038 –1,007 2,419 330,565 227,442 157,138 43,733 38,781 5,164 228 8,659 –646 3,056 Change, % Crude Motor gasoline Distillate Propane Futures prices5 1/21 22.8 25.4 44.5 28.8 22.4 24.6 43.0 32.8 90.05 4.60 91.03 4.46 1.6 0.1 5.5 –1.5 7.9 Change, % 1.8 3.3 3.5 –12.2 23.8 25.9 42.9 25.8 –4.2 –1.9 3.7 11.6 Change Light sweet crude ($/bbl) Natural gas, $/MMbtu Change –0.98 0.14 80.07 5.61 % 9.98 –1.01 12.5 –17.9 Based on revised figures 2OGJ estimates 3Includes other liquids, refinery processing gain, and unaccounted for crude oil 4Stocks divided by average daily product supplied for the prior weeks 5Weekly average of daily closing futures prices Source: Energy Information Administration, Wall Street Journal Jan 19 Jan 20 Jan 21 Jan 24 Jan 25 ¢/gal 172.00 169.00 166.00 BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE 3,900 3,600 3,300 3,000 2,700 2,400 2,100 1,800 1,500 300 3,226 2,898 328 Dec 09 Jan 19 Jan 20 Jan 21 Jan 24 Jan 25 NYMEX GASOLINE (RBOB)1 / NY SPOT GASOLINE2 ¢/gal 253.00 250.00 247.00 244.00 241.00 238.00 235.00 232.00 Previous week1 Stock cover (days)4 PROPANE - MT BELVIEU / BUTANE - MT BELVIEU 137.00 135.00 133.00 131.00 Latest week Latest week 1/14 Crude oil Motor gasoline Distillate Jet fuel-kerosine Residual IPE GAS OIL / NYMEX HEATING OIL ¢/gal 273.00 270.00 267.00 264.00 261.00 258.00 255.00 252.00 Change, % Supply, 1,000 b/d NYMEX NATURAL GAS / SPOT GAS - HENRY HUB $/MMbtu 4.70 4.65 4.60 4.55 4.50 4.45 4.40 4.35 YTD avg year ago1 Product supplied, 1,000 b/d WTI CUSHING / BRENT SPOT $/bbl 99.00 97.00 95.00 93.00 91.00 89.00 87.00 85.00 YTD average1 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sept 10 Oct 10 Nov 10 Dec 10 Note: Monthly average count BAKER HUGHES RIG COUNT: US / CANADA 1,800 1,713 1,600 1,400 1, 282 1,200 1,000 800 600 621 495 400 Jan 19 1Reformulated Jan 20 Jan 21 Jan 24 gasoline blendstock for oxygen blending 2Nonoxygenated regular unleaded 110131OGJ_6 Jan 25 200 11/13/09 11/27/09 11/6/09 11/20/09 12/11/09 12/4/09 12/25/09 12/18/09 1/8/10 1/1/10 10/29/10 11/12/10 1/15/10 1/2210 11/26/10 12/10/10 11/19/10 12/3/10 12/24/10 12/17/10 1/7/11 12/31/10 1/21/11 1/14/11 Note: End of week average count Oil & Gas Journal | Jan 31, 2011 1/27/11 1:07 PM Gulf of Mexico will remain uncertain through the first half of 2011 and perhaps the full year,” Lesar said “However, I believe it is prudent to maintain all of our infrastructure and most of our headcount in anticipation of a rebound in the gulf.” Halliburton’s gulf strategy could result in continuing losses there until the rig count recovers, Lesar noted For 2011, he expects US and Canadian operators will continue investing in unconventional oil and gas “Development of these resources requires expansive well programs resulting in longer-term contracting arrangements for some services,” he said “We continue to expect that we can improve prices in select basins where the demand for our integrated services is robust.” For instance, one customer plans to increase the length of its laterals in the south Texas Eagle Ford play to 10,000 ft compared with 6,000-ft laterals that it is currently drilling, Lesar said Halliburton reported improved results in Norway, West Africa, Iraq, and Algeria, Lesar said He expects activity increases to continue in those markets despite a traditional first-quarter decline for international earnings “We continue to win significant additional awards in Iraq,” he said Halliburton plans to double the number of workers it has in Iraq to 1,200 this year “The improving oil consumption demand levels combined with the industry’s declining spare capacity provides a more favorable outlook for oil services and technologies in 2011 and beyond,” he said Halliburton plans to invest in technology and to expand its manufacturing capacities as a result EXPLORATION & DEVELOPMENT Q U IC K TA K E S Cairn soldifies position off West Greenland Cairn Energy PLC, which plans to drill as many as four exploratory wells off western Greenland in 2011, will maintain 10-12 potential well locations in a variety of operating environments and geological settings for as long as possible The company will pick which prospects to drill in May 2011 Cairn continues to evaluate the results of its 2010 three-well exploratory drilling campaign on the Sigguk Block in the Disko Bay area The wells found biogenic and thermogenic gas and oil but not significant target reservoir rocks Geochemical evaluation has now identified three oil types The Alpha-1S1 exploratory well has been suspended to allow possible reentry to sidetrack or deepen The T8-1 and T4-1 exploratory wells have been plugged and abandoned The company has secured the dynamically positioned Leiv Eiriksson semisubmersible and the Ocean Rig Corcovado drillship for the 2011 drilling season Cairn plans to shoot 3D seismic off Greenland this year, subject to approvals Two 3D seismic survey vessels are expected to be contracted to acquire as many as five 3D surveys in different areas The company shot more than 15,000 km of 2D seismic on Oil & Gas Journal | Jan 31, 2011 110131OGJ_7 the Eqqua, Ingoraq, Napariaq, Pitu, Sigguk, and offshore south Greenland blocks in 2010, bringing its total 2D seismic data base in Greenland to more than 30,000 km Cairn now holds 102,000 sq km off Greenland, equivalent to 15 quadrants in the UK North Sea The government has confirmed Cairn as operator of the Atammik and Lady Franklin blocks, and Cairn has acquired the 47.5% interest held by Encana Corp The entitlement interests are Cairn operator with 87.5% and Greenland’s Nunaoil 12.5% The blocks are usually free of sea ice year-round Cairn was awarded the Ingoraq, Napariaq, and Pitu blocks in the December 2010 Baffin Bay bid round Shell, Statoil, GDF, Conoco-Phillips, and Maersk also won blocks in the round (see map, OGJ, Jan 3, 2011, p 71) Total adds discoveries off Congo (Brazzaville) Total SA notched two more oil discoveries on its Moho-Bilondo license off Congo (Brazzaville), boosting its confidence that a second development hub is emerging as a direct extension of the producing first phase in the southern part of the license The Bilondo Marine and wells, in 800 m of water in the central part of the license 70 km off the coast, follow the successful Moho Nord Marine and exploratory wells drilled in 2007 Bilondo Marine and went to 1,800 m in the Tertiary series and flowed successfully at undisclosed rates They cut 77 m and 44 m, respectively, of gross reservoir, and neither well encountered water This first phase, brought on stream in 2008, was the first ultradeepwater field developed in Congo (Brazzaville) That field is making 90,000 b/d from 13 subsea wells tied into a floating production unit The oil is shipped to the onshore Djeno terminal Total E&P Congo is operator with 53.5% interest in the license Chevron Overseas Congo Ltd has 31.5%, and Soc Nationale des Petroles du Congo has 15% Brazil Santos post-salt light oil find gauged Petroleo Brazileiro SA (Petrobras) and Karoon Gas Australia Ltd found 38° gravity oil and associated gas in the Tertiary post-salt section at the Maruja-1 exploratory well on the BM-S41 concession in the Santos basin off Brazil Karoon said Petrobras achieved an equipment-constrained flow rate of 6,142 stb/d through a 5/8-in choke during the clean-up flow period In the 24-hr main flow period, the highporosity Oligocene sandstone reservoir stabilized at 4,675 stb/d of oil and 800 Mcfd of gas on a 1∕2-in choke with 1,050 psia flowing wellhead pressure Test interval at the well is 2,201.5-2,210 m Total depth is 3,789 m The wellsite is 16 km southeast of the Petrobras Tiro and Sidon discoveries, which are on extended well test in similar geology Petrobras operates the block with an 80% stake, while Karoon holds a 20% stake subject to approval by Brazil’s Agencia Nacional Petroleo 1/27/11 1:07 PM Analyst IHS Global Insight said Petrobras earlier indicated it hopes the new find can form part of a new production pole in the southwestern Santos basin along with the Caravela, Cavalo Marinho, Coral, Tiro, and Sidon discoveries Petrobras announced the Maruja find last November when it said it discovered light oil in sandstone reservoirs in an exploratory well in Block S-M-1352 of the BM-S-41 concession (OGJ Online, Nov 16, 2010) DRILLING & PRODUCTION Q U IC K TA K E S CNOOC orders Liuhua 4-1 subsea equipment China National Offshore Oil Corp (CNOOC) placed an $85 million order with FMC Technologies Inc for the manufacture and supply of subsea production equipment for the Liuhua 4-1 oil field development in the South China Sea Liuhua 4-1 field lies in 850-1,000 ft of water about 130 miles from Hong Kong and 150 miles from Shenzhen FMC expects equipment deliveries to commence in this year’s fourth quarter Intecsea, a unit of WorleyParsons Group, described the Liuhua 4-1 development as having eight subsea trees clustered around a central manifold and an 11-km pipe-in-pipe flowline tying back to the existing Liuhua 11-1 field, which has a Sedco 700 submersible production unit and a floating production, storage, and offloading vessel Both the Liuhua 11-1 and the Liuhua 4-1 have low reservoir pressure and require downhole electric submersible pumps for artificial lift Each Liuhua 4-1 well will have dual ESPs, with one pump in standby mode Switching from one pump to the other will be done remotely Three kv power cables will supply power to the ESPs Intecsea said Liuhua will have a permanently moored drilling rig available to service the wells Control, monitoring, and chemical injection will be via a 14-km umbilical The control system is electrohydraulic First oil from the field is expected in 2012, according to Intecsea Chevron to expedite Platong Gas II project in Thailand To meet Thailand’s rapidly growing demand for natural gas, Chevron Corp hopes to begin production at the $3.1-billion Platong Gas II project in the Gulf of Thailand later this year “With gas demand in Thailand growing by 13% in 2010, we are working to accelerate Platong II’s progress towards first gas,” said Jim Blackwell, president, Chevron Asia Pacific Exploration & Production Co “The need to accelerate is very much understood,” said Joe Geagea, managing director of Chevron Asia South, who joined Blackwell and other officials at a “sail away” ceremony for Platong II’s central processing platform “This is something that is very much needed for the economy,” said Geagea, adding, “We’re getting close to putting this on a big barge and…getting it online as soon as we can.” Built by McDermott International, the platform will increase 110131OGJ_8 Thailand’s gas production more than 10% from its current 2.89 bcfd Analyst IHS Global Insight noted Chevron in March 2008 approved the launch of construction for the Platong II project, which it said would be completed by this year’s first quarter Last April Chevron announced the project was 49% complete, but its launch date had been revised to 2012 “The cause of the project schedule revision is unclear but could potentially have been caused by uncertainties about Thailand’s gas demand in the immediate aftermath of the financial crisis,” IHS Global Insight said Meanwhile, Chevron last month said its gas sales to PTTEP PCL for 2010 were 20% higher than contracted as solid economic growth generated stronger demand, particularly from the electricity and industrial sectors Chevron Thailand Exploration Pres Pairoj Kaweeyanun said PTT last year took average gas delivery of 1.5 bscfd from Chevron, compared with 1.24 bscfd stated in its contract Kaweeyanun said Thailand’s gas demand will likely rise 12% to 4.5 bcfd this year, and 3-5% next year Chevron is operator of Platong Gas II with a 69.8% stake while Mitsui Oil Exploration Co Ltd holds 27.4% and PTTEP has 2.8% Albanian gas-condensate field to be developed Albania’s Ministry of Economy, Trade, and Energy formally approved development of Delvina gas-condensate field in southern Albania The approval allows Stream Oil & Gas Ltd., Calgary, to enhance production and sell petroleum products under state Albpetrol’s existing license for 25 years with 5-year extension increments Delvina, near the border with Greece and 100 miles south of Tirana, was discovered in 1987 Two wells yield a combined 700 Mcfd of gas and 47 bbl/ MMcf of 62.5° gravity condensate from fractured CretaceousPaleogene carbonates at 2,800-3,500 m A pipeline connects the field to a refinery in the Tirana area Stream’s 2011 plan includes reworking the two existing wells and preparing to drill a horizontal well Management is preparing to evaluate NGL potential upside, future horizontal well plans, and NGL development PROCESSING Q U IC K TA K E S Hovensa plans partial shutdown of St Croix refinery Hovensa LLC reported plans to shut down certain processing units on the west side of its 500,000-b/cd refinery at St Croix, US Virgin Islands The shutdown will reduce the facility’s crude distillation capacity to 350,000 b/cd, with no impact on the capacity of its coker or fluid catalytic cracking unit, the company said The reconfiguration will be completed in this year’s first quarter, Hovensa said Oil & Gas Journal | Jan 31, 2011 1/27/11 1:07 PM The company also is in the process of determining its workforce needs going forward, it said In the interim, the company reported, it “has placed an immediate hold on filling most open positions and cancelled the 2011 turnarounds previously scheduled for west side units that will be shut down.” Hovensa Interim Chief Operating Officer John W George said, “Simplifying our operation by eliminating some older, smaller process units is expected to result in improved efficiency, reliability, and competitiveness This is an important step toward improving our performance at a time when Hovensa and the refining industry are facing difficult economic conditions.” Hovensa is jointly owned by Hess Corp and Petroleos de Venezuela SA (PDVSA) Bulgarian refinery to add hydrocracking units Burgasnefteproekt EOOD, OAO Lukoil’s engineering subsidiary, has let a contract to Technip, Paris, for the first phase of a heavy residue hydrocracking complex to be built at the 115,240-b/cd refinery in Burgas, Bulgaria, along the Black Sea The lump sum services contract is worth 70 million euros It covers detailed engineering and procurement services for a 2.5 million ton/year residue hydrocracker based on Axens H-Oil process, as well as amine, sour water stripper, and hydrogen production units Technip’s operating center in Rome will execute the contract Completion is set for May 2013 The group successfully completed the front-end engineering design contract for the project Burgas is Bulgaria’s only refinery TRANSPORTATION Q U IC K TA K E S TransCanada proceeds with Cushing-to-GC oil line TransCanada Corp will proceed with its Cushing Marketlink crude pipeline project, having received sufficient market support in the project’s open season Cushing Marketlink will have capacity to move 150,000 b/d from Cushing, Okla., to the US Gulf Coast TransCanada expects the project to be in service first-quarter 2013, subject to regulatory approval TransCanada concluded its open season for the Bakken Marketlink Project to deliver US-sourced crude from Baker, Mont., to Cushing, Okla., earlier this month (OGJ Online, Jan 21, 2011) Both Bakken Marketlink and Cushing Marketlink will use pipeline facilities forming part of TransCanada’s Keystone XL system Combined the two projects will transport up to 250,000 b/d of US crude oil production to the Gulf Coast Copano to build Eagle Ford NGL pipeline Copano Energy LLC entered into a long-term fractionation and product sales agreement with Formosa Hydrocarbons Co Inc and, to facilitate deliveries of mixed NGLs to Formosa, also formed a 50-50 joint venture with a subsidiary of Energy Transfer Partners to construct, own, and operate a 12-in OD NGL pipeline (Liberty Pipeline) Oil & Gas Journal | Jan 31, 2011 110131OGJ_9 Liberty Pipeline will extend about 83 miles, from Copano’s Houston central gas processing complex in Colorado County, Tex., first to Formosa’s leased NGL product storage facility in Matagorda County, Tex., and then to Formosa’s petrochemical facility in Calhoun County, Tex The agreement provides Copano with up to 37,500 b/d firm fractionation services beginning first-quarter 2013 for a term of 15 years The agreement also provides that Formosa will purchase the resulting NGL products and make product storage available to Copano for operational reliability Following completion of Liberty Pipeline, expected by summer of this year, and until additional facility improvements at Formosa are complete, Copano will have access to a minimum of 5,000 b/d of existing Formosa fractionation capacity, as well as additional capacity on a “space available” basis Liberty Pipeline will have initial capacity of 75,000 b/d, committed to Copano and Energy Transfer (50% each) under firm agreements Copano and Energy Transfer will together invest about $52 million for the pipeline and related facilities Copano said the agreements would increase its total Eagle Ford NGL handling capacity to more than 80,000 b/d Eagle Ford Gathering LLC (EFG), a joint venture of Kinder Morgan Energy Partners LP and Copano, earlier announced plans to construct 85 miles of 24-in and 30-in OD pipeline to move natural gas produced in the Eagle Ford shale by SM Energy Co from La Salle, Dimmit, and Webb counties in Texas to the Freer compressor station in Duval County, Tex., for transport on KMEP’s Laredo-to-Katy (LK) pipeline The LK line will in turn transport gas to Copano’s Houston Central complex Chesapeake Energy reached 10-year agreements in December 2010 with Enterprise Products Partners LP providing Chesapeake with gas transportation, processing, and NGL processing and fractionation services for its Eagle Ford production Ireland approves Corrib gas line’s onshore segment Ireland’s planning authority, An Bord Pleanala (ABP), has granted permission for construction of the 9-km, 20-in OD onshore segment of the Corrib gas pipeline In its detailed determination, ABP stated the pipeline “would help safeguard the energy security of the state, would benefit the western region of Ireland, would not seriously injure the amenities of the area, would not be prejudicial to public health or safety, and would not be likely to have significant effects on the environment.” Partners in the Corrib gas project, Shell E&P Ireland Ltd., operator, 45.5%; Statoil Exploration, 36%; and Vermillion Energy Trust, 18.5%, say that at peak production, Corrib will supply as much as 60% of Ireland’s gas needs Corrib, with tcf of gas in place, expects production to peak at 300 MMcfd for 2-4 years before a 20%/year decline ensues (OGJ Online, June 25, 2009) Allseas’ Solitaire laid the 83-km, 20-in OD offshore section of the pipeline from Corrib at 355 m water depth, through Broadhaven Bay, to landfall at Glengad, County Mayo, in summer 2009 1/27/11 1:07 PM share for oil while natural gas will steadily gain share According to BP’s Energy Outlook, coal’s recent gains in market share because of rapid industrialization in China and India will be reversed by 2030, “with all three fossil fuels converging on market shares around 27%.” In 1990-2010 fossil fuels contributed 83% of the growth in energy markets, but that will likely drop to 64% of the growth by 2030 Renewables (excluding hydro) and biofuels together will supply 18% of the growth in energy to 2030, the report said Ruhl said, “Energy used to generate power remains the fastest growing sector, accounting for 53% of the growth in primary energy consumption 1990-2010 and projected to account for 57% of the growth to 2030.” Meanwhile, the role of transport fuel is weakening “Over the past 20 years, transport sector energy demand grew at about the same rate as total energy demand, but over the next 20 years it will grow much less rapidly than total energy,” said Ruhl Declines in OECD oil demand will be “primarily outside the transport sector, where it is relatively easier to displace oil by gas and renewables,” he said After 2015, OECD transport demand is expected to fall as technology and policy drive improved engine efficiency Biofuels production is expected to increase to 6.7 million b/d by 2030 from 1.8 million b/d in 2010 and to contribute 125% of net non-OPEC supply growth over the next 20 years, according to BP’s calculations Continued policy sup- port, high oil prices, and continued technological innovations will contribute to that rapid expansion, the company said The US and Brazil will continue to dominate biofuel production, but their combined production is expected to decline to 68% of total output by 2030 from 76% in 2010 as Asia-Pacific output begins to rise Energy Outlook 2030 assumes continued policy action to address both climate change and energy security BP has developed an alternative ‘policy case’ to explore implications of a significant increase in the level of political commitment that translates into a tightening of policy “The key focus of the policy case is to reduce dependence on carbon intensive fuels This can be achieved through a wide range of policy instruments, including various ways of putting a price on carbon,” said Ruhl In BP’s policy case, global emissions are expected to peak just after 2020 but will still be 20% above 2005 levels “The emissions path is still expected to be well above the International Energy Agency’s 450 Scenario 1, indicating how much more effort will be required after 2030 to put the world onto a ‘safe’ path,” said Ruhl The reduction of emissions in the policy case would be achieved through a combination of more rapid efficiency gains, fuel switching—from gas to coal and from fossil fuels to nuclear, hydro, and renewable—and introduction of carbon capture and storage for both coal and gas power plants OGJ Obama uses address to renew call to repeal oil tax exemptions Nick Snow Washington Editor US President Barack Obama urged Congress to financially support clean energy and other innovative technologies in his 2011 State of the Union address Repealing billions of dollars in federal oil tax exemptions would be a good place to start, he suggested “We’ve begun to reinvent our energy policy,” the president said in his nationally televised address to the 112th Congress on Jan 25 “We’re not just handing out money We’re issuing a challenge We’re telling scientists that if they US President Barack Obama urged Congress to financially support clean energy and other innovative technologies in his 2011 State of the Union address on Jan 25 Repealing billions of dollars in federal oil tax exemptions would be a good place to start, he suggested White House photo by Pete Sousa Oil & Gas Journal | Jan 31, 2011 110131OGJ_17 17 17 1/27/11 1:08 PM GENERAL INTEREST assemble the best minds in their fields, and focus on the hardest problems in clean energy, we’ll fund the Apollo projects of our time.” Obama said, “With more research and incentives, we can break our dependence on oil and become the first country to have a million electric vehicles on the road by 2015 We need to get behind this innovation And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we give to oil companies I don’t know if you’ve noticed, but they’re doing just fine on their own So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.” Oil and gas industry groups quickly criticized the idea “The American people spoke loud and clear in the last election and directed the president and new Congress to focus on one main issue—job creation,” American Petroleum Institute Pres Jack N Gerard said “It’s unfortunate that the administration seems poised to stifle what remains one of America’s strongest job-creating industries.” Republicans who chair the two key US House committees for energy issues also weren’t impressed “Innovation is not measured in federal dollars spent or government mandates imposed Energy independence is not achieved through government dependence,” said Energy and Commerce Committee Chairman Fred Upton (Mich.) ‘Preferred industries’ Upton said, “Congress spent tens of billions of dollars on the federal government’s favored energy sources in the stimulus, yet America remains dependent on hostile foreign nations to power our lives We know the answer is not to hypersubsidize preferred industries or force consumers and job creators to purchase energy they cannot afford That is not how the free market works.” Natural Resources Committee Chairman Doc Hastings (Wash.) noted in a separate statement: “Today, American families are facing the harsh realities of rising gas prices, higher electricity costs, and near double-digit unemployment Instead of addressing these issues head-on, the administration has spent the past years blocking access to America’s resources that create jobs and produce more energy These policies have only succeeded in driving American jobs overseas, threatening our economic recovery and making us more dependent on hostile foreign nations for our energy needs.” Obama set the stage for his suggestion by saying the country has reached a point similar to when the Soviet Union launched history’s first artificial satellite into space on Oct 4, 1957 “This is our generation’s Sputnik moment,” he declared “Two years ago, I said that we needed to reach a level of research and development we haven’t seen since the height of the Space Race And in a few weeks, I will be sending a budget to Congress that helps us meet that goal We’ll invest in biomedical research, information technology, and especially clean-energy technology, an investment that 18 110131OGJ_18 18 will strengthen our security, protect our planet, and create countless new jobs for our people,” the president said He said the US free enterprise system drives innovation “But because it’s not always profitable for companies to invest in basic research, throughout our history, our government has provided cutting-edge scientists and inventors with the support that they need,” he said “That’s what planted the seeds for the internet That’s what helped make possible things like computer chips and [global positioning systems] Just think of all the good jobs, from manufacturing to retail, that have come from these breakthroughs.” ‘A new goal’ Obama also said clean-energy breakthroughs only are possible if businesses recognize that there will be markets for the technologies “So tonight, I challenge you to join me in setting a new goal: By 2035, 80% of America’s electricity will come from clean energy sources,” he told House and Senate members “Some folks want wind and solar Others want nuclear, clean coal, and natural gas To meet this goal, we will need them all—and I urge Democrats and Republicans to work together to make it happen.” He also urged federal lawmakers to knock down barriers to innovation, education, and infrastructure investments which would make America a better place to business and create jobs “For example, over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries,” he said “Those with accountants or lawyers to work the system can end up paying no taxes at all But all the rest are hit with one of the highest corporate tax rates in the world It makes no sense, and it has to change.” He said, “So tonight, I’m asking Democrats and Republicans to simplify the system Get rid of the loopholes Level the playing field And use the savings to lower the corporate tax rate for the first time in 25 years—without adding to our deficit It can be done.” Gerard said Obama’s address was a missed opportunity “The president focused on job growth through federal spending, but was silent on one of the best ways to create jobs: Allow more energy development,” he said, adding, “Natural gas and renewables are important components of our energy mix, but we will need our nation’s vast oil resources for decades to come.” Gerard called the US oil and gas industry “a key driver of new jobs and economic prosperity.” He said, “Producing more oil and gas at home, which most Americans want, could create hundreds of thousands of jobs, reduce our deficit by billions of dollars, and enhance our energy security Even better, the government wouldn’t have to invest a single taxpayer dollar: Just give industry a green light to invest its own money.” Oil & Gas Journal | Jan 31, 2011 1/27/11 1:08 PM GENERAL INTEREST Right and wrong National Petrochemical & Refiners Association Pres Charles T Drevna said on Jan 26 that Obama was right to set job creation and economic growth as top priorities, but wrong to advocate policies that would have exactly the opposite effect “If his attack demonizing the petroleum industry succeeds, it will destroy jobs instead of creating them, raise costs for consumers instead of lowering them, and require billions in taxpayer dollars to fund unending subsidies for untested technologies unable to survive on their own,” Drevna warned “It makes no sense to destroy existing jobs held by hard-working Americans today in hopes of creating new jobs that may never materialize tomorrow We need to grow our economy and increase the number of jobs, not simply try to shift jobs from one sector to another.” Independent Petroleum Association of America Chairman Bruce H Vincent said on Jan 26 that Obama was “absolutely right” about free enterprise driving innovation “Sadly, though, the president—rather than working to further bipartisan policies that encourage the responsible development of America’s abundant, job-creating oil and natural gas reserves—renewed his misguided call to levy massive amounts of job-crushing tax increases on the backs of independent energy producers, who are overwhelmingly small business owners,” he continued “Billions of dollars in new taxes on the American oil and gas industry, despite what the president asserts, will fundamentally undercut our nation’s long-term energy security objectives, and will put into jeopardy tens of thousands of good-paying jobs and thousands of small businesses.” Vincent, who also is president of Swift Energy Co in Houston, noted that independent producers invest 150% of their cash flows toward hiring employees and contractors, buying and maintaining equipment, drilling wells, and acquiring assets The federal tax code has addressed ordinary and necessary expenditures associated with oil and gas development for decades and provided a stable framework to encourage common sense investments, he said “The president’s massive tax hike proposal—which was soundly rejected by Democrats and Republicans on Capitol Hill last Congress—would cripple our industry’s ability to compete, leaving struggling American consumers more vulnerable to unstable energy prices at the pump and in their homes, and deepening our nation’s dependence on often unfriendly region’s of the world to fuel our economy, which would further worsen our balance of trade,” said Vincent ‘A basic disconnect’ He said that while US upstream independents primarily produce gas, they also recover crude oil, creating what he termed “a basic disconnect.” Raising taxes for oil production also would undercut gas, which Obama included among his clean energy alternatives, and cost tens of thousands of jobs, Oil & Gas Journal | Jan 31, 2011 110131OGJ_19 19 Vincent said “Not only would this move devastate small oil and gas producers, but the damaging effects will ripple through the entire US economy—hitting the oil and gas service and supply companies, as well as the entire manufacturing base due to an increase in energy and feedstock costs, consequences that damage America’s ability to compete in the world economy,” he said The Denver-based Western Energy Alliance took a more positive view as it emphasized Obama’s pledge to reduce barriers to growth and investment along with his recent executive order for government agencies to review redundant and excessive regulations The two moves “give hope to an industry that, over the past years, has been shackled with redundant and unnecessary regulations that make developing American energy even more expensive and costly,” said Marc W Smith, executive director of what formerly was the Independent Petroleum Association of Mountain States Smith said IPAMS has documented $3.9 billion of investment and up to 16,000 jobs that were diverted from the West during 2010 because of red tape at the US Department of Interior Smith suggested that a federal government-wide review of agencies include recent US Environmental Protection Agency regulatory expansions; redundant DOI regulations that add three layers of regulations to oil and gas exploration on US nonpark, nonwilderness public lands; and proposals to duplicate and usurp state regulations which already work Other groups also criticized Obama’s energy proposals “We see the president’s message as an inaccurate reflection of our current energy needs and the impact these resources have on our jobs and the economy,” said David Holt, president of the Consumer Energy Alliance in Houston “Americans need more affordable and accessible renewable energy, but not at the expense of those resources we rely on every day, and certainly not at the rate of billions of dollars in tax increases Along with more solar power and other renewables, we should also expand access to all sources of energy—everything from offshore oil and gas to more affordable nuclear development.” “The president continues to talk about how America needs to become more competitive But his administration’s plans nothing but hurt our ability to compete,” said Institute for Energy Research Pres Thomas J Pyle “We don’t have a competitiveness problem, an innovation problem, or a resource availability problem; we have a government problem… We have vast resources offshore, but 97% of our ocean energy lands are not least for oil and gas production We have enough oil shale to free us from any imports, but his administration stopped development If the president and his government will just get out of the way, our energy problems might not be solved, but it’d certainly be an improvement.” OGJ 19 1/27/11 1:08 PM GENERAL INTEREST API: US demand grows, but policies may stymie production Nick Snow Washington Editor Stronger US petroleum deliveries for all of 2010 as well as December reflected a growing US economic recovery, the American Petroleum Institute said But its chief economist warned that Obama administration policies could restrict growth of US crude oil production to help meet higher US demand in the future “We continue to try to improve production, but there are challenges going forward,” John C Felmy said in a Jan 21 teleconference “There was the Gulf of Mexico moratorium, and now there’s what is called the ‘permitorium.’ We’ve seen permits retracted and not moved forward onshore, which is disappointing because we have some bright prospects, particularly in North Dakota’s Bakken formation We’ve also seen onshore natural gas prospects threatened by potential regulatory change, particularly involving hydraulic fracturing We should have a good thorough discussion of what we can to increase our production instead.” US oil production rose by 1.3% in December to an average 5.52 million b/d from 5.45 million b/d a year earlier, according to API Full-year production averaged 5.49 million b/d in 2010 compared with 5.36 million b/d in 2009 Production continued to grow year-to-year during December in the Lower-48 to an average 4.87 million b/d, 1.4% more than a year earlier, as it declined in Alaska to about 652,000 b/d, lower than December 2009’s 655,000 b/d average “There’s a vast amount of oil to be produced in this country,” Felmy told reporters “In the next years, we could start moving forward and get ready for the following 10 years We can move forward by approving permits, opening up exploration, and taking other positive steps We have in excess of 116 billion bbl of oil in the United States We have a lot of opportunities.” Proper government policies could lead to substantial US oil development, which would produce jobs, generate revenue for the government, and improve the US economy as well as its crude supply situation, Felmy said “The administration’s policies so far have been focused on renewables, and most of that has involved electricity Crude oil markets are a worldwide phenomenon, and the US should be concentrating on producing more of its own resources,” he said Higher demand Product deliveries, which API uses to measure demand, were up 1.2% year-to-year to an average 19.47 million b/d in December, its latest statistics showed Their 19.2 million b/d average for all of 2010 was 2.3% higher than 2009’s full-year average, API’s figures indicated 20 110131OGJ_20 20 Both gasoline and diesel fuel deliveries were higher for 2010 over 2009, gasoline by 0.6% to 9.05 million b/d and distillates by 4.8% to 3.81 million b/d, according to API Also, US refiners set a record for annual gasoline production at an average 9.11 million b/d, it said “The robust distillate numbers suggest the nation’s industrial sector continues to rebound,” Felmy said “They were up both month-over-month and year-over-year While consumer demand for gasoline was weak during this winter holiday season, higher prices and bad weather might have kept people off the roads,” he said Felmy continued, “The other side of that is overall retail sales were up, led by a big 12% increase in e-commerce sales People were doing more shopping online, and that, in turn, spurred more truck shipping and an increase in deliveries of ultralow-sulfur diesel—a subset of total distillates and the kind of fuel the on-road trucks use—by more than 16% this December over last.” API said December’s oil and product imports, at 10.61 million b/d, were down from November but slightly up from December 2009’s 10.52 million b/d, driven by increases in crude imports Crude imports at 8.82 million b/d were 8.1% higher year-to-year while total product imports, at 1.79 million b/d, were 24.3% lower US crude stocks totaling 332.2 million bbl at the end of December had steep yet seasonal declines, down by 6.5% from Nov 30 but up by 2.2% from Dec 31, 2009 They also were at their highest level since the end of December 1994 Inventories of all products declined in December from their levels at the end of November, with motor gasoline stocks falling 1.3% while distillate stocks were 0.4% lower, API said OGJ EPA extends E15 waiver to 2001-06 model year cars, trucks Nick Snow Washington Editor The US Environmental Protection Agency extended a waiver allowing higher ethanol concentrations in fuel for 2007 and later model year cars and trucks to 2001-06 model year vehicles But it added that no waiver will be granted for fuels with up to 15% ethanol for use in any motorcycles, heavyduty vehicles or nonroad engines because current test results not support it EPA Administrator Lisa P Jackson said she made the decision after reviewing thorough tests by the US Department of Energy and other available data on E15 effects on emissions from the older cars and light trucks “Whenever sound science and the law support steps to allow more home- Oil & Gas Journal | Jan 31, 2011 1/27/11 1:08 PM WATCHING GOVERNMENT grown fuels in America’s vehicles, this administration takes those steps,” she said The American Petroleum Institute and National Petrochemical & Refiners Association separately criticized EPA’s action extending the waiver it approved on Oct 13 for 2007 and newer model year cars and light trucks Ethanol advocacy organizations applauded the latest move, but said that EPA still needed to go further “An interim report by the auto and oil industries released just this week has revealed potential performance problems that require further testing before E15 can be deemed safe to use in vehicles,” said Bob Greco, API’s downstream operations director “EPA is choosing to ignore the potential red flags in its headlong rush to extend a premature waiver.” Wrong in three ways NPRA Pres Charles T Drevna said EPA has acted without adequate scientific evidence “Widespread use of 15% ethanol in gasoline could cause engine failures that could leave consumers stranded, injured or worse, and hit consumers with costly engine repairs It’s the wrong decision, at the wrong time, made for the wrong reason,” he maintained But Growth Energy, the ethanol advocacy group that originally sought a waiver in 2009 to increase allowable ethanol motor fuel limits to 15% from 10%, said in a Jan 21 statement that a full move to E15 creates a bigger market for American ethanol that could help create as many as 136,000 new jobs in the US and eliminate as much as million tonnes/year of greenhouse gas emissions from the air—the equivalent of taking 1.35 million vehicles off the road Tom Buis, Growth Energy’s chief executive, said with engine and emissions testing now completed on 200110 model year cars and trucks and showing no issues with using E15 as a fuel, EPA should extended its approval to even older vehicles to further reduce Oil & Gas Journal | Jan 31, 2011 110131OGJ_21 21 NICK SNOW Washington Editor | Blog at www.ogj.com Where wild lands are Jan 18 was not just any Tuesday in Washington It was the day the US Department of the Interior tried to shed light on Interior Sec Ken Salazar’s Dec 22 order directing the Bureau of Land Management to “maintain wilderness inventories on a regular and continuing basis for public lands under its jurisdiction.” Coincidentally, it also was the day when The Wilderness Society (TWS) outlined its public lands priorities for 2011 William H Meadows, the group’s president, acknowledged in a statement that there has been confusion recently about this “We have long been advocates for multiple uses of our public lands and want to ensure that the government continues to manage these special places in a way that is consistent with the needs and wants of local communities,” he said TWS intends to work with those communities to help them understand how fishing, grazing, hunting, hiking, biking, and many other activities bring dollars to local business owners, Meadows said “But this is about more than jobs and the economy,” he asserted “This is about protecting our natural heritage and the laws that have been established to ensure that [DOI] manages our lands in ways that benefit a myriad of interests.” Rocky Mountain governors feel differently Idaho’s C.L (Butch) Otter and Wyoming’s Matt Mead, both Republicans, separately wrote Salazar expressing concern over Secretarial Order 3310 Mead noted in his Jan 18 letter that the order was issued just before Christmas holiday, when his and other governors’ offices were in transition “Though you will seek feedback from state BLM offices prior to issuing final agency guidance, the opportunity for public input on the policy itself was never afforded,” he told Salazar De facto wilderness Kent Holsinger, a Denver attorney who specializes in land, wildlife, and water law, said on Jan 17 that the order could create de facto wilderness areas, which can only be authorized by Congress under Sections and of the 1964 Wilderness Act “Action under this order could render debate over wilderness bills in Congress meaningless,” he warned “Instead, BLM could manage huge areas as wilderness without any action by Congress.” House Natural Resources Committee leaders also weighed in on the order Chairman Doc Hastings (RWash.) condemned it, while Ranking Minority Member Edward J Markey (D-Mass.) hailed it for reversing policies from George W Bush’s administration which he called an “8-year campaign to subjugate all other uses of public land—recreation, water quality, habitat, ranching—to rampant energy development.” Salazar’s order at least has spawned a new federal abbreviation: LWCs, or “lands with wilderness characteristics.” What they actually are will be subject to further debate 21 1/27/11 1:08 PM GENERAL INTEREST US dependence on foreign crude oil “Increased use of ethanol will strengthen our energy security, create US jobs, and improve the environment by displacing conventional gasoline with a low-carbon fuel,” he said Renewable Fuels Association Pres Bob Dineen noted that while EPA’s announcement will increase the time frame in which the waiver will cover most vehicles on US highways, labeling issues and misfueling issues still need to be addressed He said RFA has suggested changes in EPA’s proposed label for E15, and is continuing to work with gasoline retailers to get Congress to pass legislation addressing misfueling concerns Addressing issues As with any new fuel, additional testing and some regulatory issues relating to the fuel’s properties must be addressed before widespread E15 use can occur, Dineen said RFA is working to address those issues and accelerate E15’s commercial use, he indicated API’s Greco said vehicle and service station equipment testing has revealed potential safety and performance problems that require further testing before E15 can be deemed safe For example, he noted, recent DOE infrastructure testing of new and used retail gasoline station equipment resulted in more than half of the equipment failing, showing that there are serious issues with using any equipment not specifically certified for E15 “Today’s decision is even shakier than the original decision because comprehensive vehicle testing of E15 by automakers and the oil industry is not yet complete,” Greco said “Furthermore, EPA bypassed formal notice-and-comment procedures in making this decision It simply placed DOE’s test data in the docket and made their decision less than a month later without reopening the comment period EPA is putting more American consumers at risk by approving the use of E15 without knowing the consequences it could have.” “We urge President Obama to reverse EPA’s decision,” said NPRA’s Drevna “Unless the use of a 15% ethanol blend in gasoline is shown to be safe for all engines as a result of thorough, objective, and independent scientific testing,” Drevna said, “it should not be approved for any engines.” He said, “We will continue pursuing our lawsuit against EPA on this issue to protect consumers and ensure the safety of the gasoline they rely on.” OGJ Natural gas, LPG to play large roles in European fuels future key bridging and supplementary roles, according to a report presented Jan 25 to the European Commission by its stakeholder expert group on future transport fuels Alternative fuels, said the report, have the potential gradually to replace fossil energy sources and make transportation sustainable by 2050 The EU will need an oil-free and largely CO2-free energy supply for transport by 2050 due to the need to reduce its impact on the environment and to concerns about the security of energy supply, said the commission’s announcement The EU’s expert group has for the first time developed a comprehensive approach covering the entire transportation sector Expected demand from all transport modes could be met through a combination of: • Electricity (batteries or hydrogen/fuel cells) • Biofuels as main options • Synthetic fuels (increasingly from renewable resources) as a bridging option • Methane (natural gas and biomethane) as complementary fuel • LPG as supplement The commission is currently revising existing policies; today’s report will feed into the “initiative on clean transport systems,” to be launched later this year, said the announcement “The initiative intends to develop a consistent long-term strategy for fully meeting the energy demands of the transport sector from alternative and sustainable sources by 2050,” it said According to the expert-group report, alternate fuels are the “ultimate solution to decarbonize transport,” by gradually substituting fossil energy sources Technical and economic viability, efficient use of primary energy sources, and market acceptance, however, will be decisive for a competitive acquisition of market share by the different fuels and vehicle technologies, it said No single candidate for fuel substitution currently exists Fuel demand and greenhouse gas challenges will most likely require the use of a mix of fuels that can be produced from a large variety of primary energy sources The commission’s announcement also said there is “broad agreement” that all sustainable fuels will be needed fully to meet the expected demand Different modes of transport require different options of alternative fuels Fuels with higher energy density are more suited to longer-distance operations, such as road-freight transport, maritime transport, and aviation Compatibility of new fuels with current technologies and infrastructure or the need for disruptive system changes “should be taken into account as important factors, determining in particular the economics of the different options,” the report said OGJ In the European efforts to move to fossil-free, carbon dioxide-free transportation fuels, natural gas and LPG will play 22 110131OGJ_22 22 Oil & Gas Journal | Jan 31, 2011 1/27/11 1:08 PM GENERAL INTEREST Salazar formally announces BOEMRE split, advisory panel Nick Snow Washington Editor US Interior Sec Ken Salazar formally announced the division of the Bureau of Offshore Energy Management, Regulation and Enforcement into two separate agencies, pledging to not let this interfere with existing operations He also announced the formation of a scientific advisory board for the two new agencies Salazar told reporters at a press conference he and BOEMRE Director Michael R Bromwich hope to complete division of what remains of the former US Minerals Management Service by Oct into a new Bureau of Ocean Energy Management (BOEM) and Bureau of Safety and Environmental Enforcement (BSSE) The idea will be to maintain a structure that continues to meet short-term requirements while reconfiguring BOEMRE to meet long-term needs, he emphasized “Operations must not be brought to a stand-still,” Salazar declared Bromwich, who also participated in the briefing, said he continues to meet daily with oil and gas producers and industry leaders to bring them up to speed on regulations imposed following the Macondo well accident and subsequent massive crude oil spill “I would be very surprised if new deepwater drilling permits aren’t issued by the third quarter,” he said Former Sandia National Laboratory Director Tom Hunter will lead the new Offshore Energy Safety Advisory Committee, Salazar said The group will be a permanent advisory board through which the nation’s leading scientific, engineering, and technical experts will provide ideas to improve offshore oil and gas drilling safety, he indicated Committee’s makeup The safety advisory committee, which replaces the offshore safety institute he has proposed, will include oil and gas industry representatives as well as participants from environmental and other non-government organizations, according to the secretary “I don’t want things to be done under the cloak of darkness, including technology,” he said “The one lesson we learned as we responded to the Macondo well blowout and spill was that while technology to drill in deeper water developed very quickly, other important technologies did not.” He specifically mentioned the Macondo well’s blowout preventer, which he said did not have the kind of instrumentation to prevent or minimize leaks from a blowout “That is the kind of technical information we will require,” Salazar said He said that he is considering recommendations from US Oil & Gas Journal | Jan 31, 2011 110131OGJ_23 23 President Obama’s oil spill investigation commission, including one that BSSE’s director have enforcement authority similar to the Federal Bureau of Investigation Salazar said he is studying that idea, but added that he wants BOEMRE to move forward in a way that makes organizational sense He also said he is considering the commission’s recommendation to have the oil and gas industry form its own agency to promote operating safety that would be similar to the nuclear power industry’s Institute of Nuclear Power Operations But he and Bromwich emphasized such an entity, if it were formed in addition to the American Petroleum Institute’s existing standards and practices committees, would not be an acceptable substitute to more aggressive safety and environmental enforcement by BSSE Asked if he might consider a similar division at the US Bureau of Land Management if it works at BOEMRE, Salazar was noncommittal but said he already has asked BLM Director Robert V Abbey to look at how that DOI agency collects revenue “It’s important to protect the environment It’s also important to make sure that the American public gets its fair share of revenue from these resources,” the secretary said OGJ Heritage claims major Iraq gas-condensate find Heritage Oil PLC has discovered as much as 12.3 tcf of gas on the Miran West structure in Iraqi Kurdistan and is evaluating development options under which production could start into European markets as early as 2015 using planned regional infrastructure Heritage, placing the value to the company at $2.7 billion, described Miran as the sixth largest gas field discovered in Iraq and the largest gas field to be discovered in the country for more than 30 years Heritage noted that the Miran West-2 well was initially designed as an appraisal well for the Cretaceous section and was modified later to assess the exploration potential of deeper formations Drilled to a total depth of 4,426 m, it confirmed three additional pay zones in Lower Cretaceous and Jurassic formations in addition to the pay zone identified in the Upper Cretaceous in the Miran West-1 well Well results also established that Miran contains two hydrocarbon systems, with oil in the shallower Upper Cretaceous section and wet gas-condensate in the Lower Cretaceous and Jurassic formations Heritage said, “This has resulted in the previously anticipated prospective oil resources in the Lower Cretaceous, identified on the basis of oil shows in the Miran West-1 well, being proven to be wet gas-condensate” (OGJ Online, Nov 19, 2010) 23 1/27/11 1:08 PM GENERAL INTEREST Management estimated that the Miran West structure has 6.8 to 9.1 tcf of gas in place at 90% to 50% probability plus 42-71 million bbl of condensate and 53-75 million bbl of oil There is a 10% chance of 12.3 tcf of gas in place Heritage summarized the test results: • Jurassic at 3,465-3,533 m measured depth flowed 26 MMscfd of gas and 70 b/d of 52.2° gravity condensate on a 40/64-in choke • Jurassic at 3,327-3,410 m flowed 25.5 MMscfd of gas and 67 b/d of 54.3° gravity condensate on a 40/64-in choke • Jurassic at 2,992-3,115 m flowed 26.7 MMscfd of gas and 432 b/d of 60.9° gravity condensate on a 40/64-in choke • Lower Cretaceous at 2,117.5-2,220 m flowed 200 Mcfd of wet gas • Upper Cretaceous at 714-1,000 m tested a trace of oil on pump Surface equipment capacity constrained the test rates Test data indicate that individual test intervals could produce at rates of 40 MMscfd with the well capable of delivering at a rate of more than 100 MMscfd when placed on production, Heritage said The proven hydrocarbons in the Upper Cretaceous can be accessed commercially on the structure as demonstrated by the 8,000-10,000 b/d potential of the Miran West-1 well, Heritage added Drilling techniques will maximize the benefit from the fracture networks to achieve optimal production rates Extensive coring and wireline log analysis at Miran West2 indicated the presence of matrix porosity in the Cretaceous and Jurassic formations Management estimated that Heritage has discovered mean risked contingent and prospective resources in Miran West and Miran East of 744 million bbl of oil equivalent based on a 75% working interest Results of drilling and early indications from 3D seismic indicate pervasive fracture networks across the Miran structures Heritage plans to drill the Miran West-3 high-angle appraisal well in the second quarter of 2011 It will source a second rig by autumn of 2011 to continue Miran West appraisal and later to begin exploratory drilling at Miran East Heritage will expand the 550 sq km 3D seismic survey that is under way by a further 180 sq km The expansion is aimed at the southern flanks of the Jurassic and Cretaceous structures Miran’s location in Kurdistan makes it ideally placed to gain access to secure and profitable European gas markets, Heritage said In the last years Austria’s OMV, Hungary’s MOL, and Germany’s RWE have signed agreements with Kurdistan to create a route to market for Kurdistan gas reserves Heritage said it is considering development options that could include either bringing gas into Turkey and-or into Europe via the Nabucco pipeline OGJ 24 110131OGJ_24 24 EXPLOR ATION / DEVELOPMENT BRIEFS Iraq A group led by New Age (African Global Energy) Ltd has completed shooting 250 line-km of 2D seismic on the Khalakan block east of Taq Taq oil field in Iraqi Kurdistan Initial rudimentary processing and interpretation indicates several surface and subsurface structures that are of immediate interest, said Range Energy Resources Inc., Vancouver, BC, which has an indirect 24.95% working interest in the block In addition to the seismic, Range independently commissioned a field geological survey over the structures by Iraqi geologists familiar with the area’s structural complexities The additional surface geological and structural data obtained from the field will greatly aid seismic program interpretation, Range Energy said Tunisia Sonde Resources Corp., Calgary, reported “robust test results” from an appraisal well on the Tunisian side of the 7th of November block in the Gulf of Gabes off Tunisia and Libya Zarat North-1, in which Sonde owns 100% working interest alongside the Tunisian-Libyan Joint Oil combine, went to 9,728 ft vertically and cut 240 net ft of pay in the Eocene El Gueria limestone Sonde set casing to TD and ran three production tests through 2-1/4-in tubing from 42 ft above the water contact to 177 ft above the water contact All three tests flowed substantial quantities of gas-condensate, with Test sustaining MMcfd of gas and 750 b/d of condensate Condensate rates peaked at 1,100 b/d, and gas rates were 8-11.5 MMcfd All tests produced water at 200-350 b/d of drilling fluids and formation water, with water decreasing and oil increasing throughout the tests Sonde is assessing test data to determine key reservoir characteristics including porosity, permeability, water saturation, and gas composition Located 1.25 miles northeast of the Marathon Zarat-1 discovery and 1.9 miles northeast of the Zarat-2 appraisal, Zarat North-1 encountered gas-oil and oil-water contacts at the same structural elevation as the Marathon wells, confirming a significant extension to the previously proven accumulation Sonde said the results suggest that an economically viable, near-term development may be possible By comparison with the Zarat North results, the Marathon Zarat-1 well flowed 5.3 MMcfd and 457 b/d on a first test and 15.1 MMcfd and 1,181 b/d on a second test Sonde said hydrocarbon column thickness was about twice that originally estimated for the Zarat North location Sonde will temporarily abandon the well for reentry and review the use of horizontal wells to develop the field Oil & Gas Journal | Jan 31, 2011 1/27/11 1:08 PM WATCHING THE WORLD Management is reviewing recoverable reserve scenarios, development options, and cost estimates for development of Zarat field and will investigate unitization options with PA Resources, Stockholm, which holds a portion of the field immediately south of the 7th of November block Sonde Resources is also studying development financing and monetization options, including selling interests to one or more potential partners Turkey Valeura Energy Inc., Calgary, is drilling at 1,670 ft at the Altinakar-1 wildcat on License 2674 in southeastern Turkey’s Karakilise area targeting light oil in the Ordovician Bedinan sandstone at 8,200 ft Valeura defined the 1.9 sq km tilted fault block prospect on 2D seismic it shot in the fourth quarter of 2010 The company is funding 100% of the $4.0 million turnkey cost of drilling as part of the Phase I earning program under the previously announced farm-in agreement with Aladdin Middle East Ltd and Guney Yildizi Petrol Uretim Sondaj, Muteahhitlik ve Ticaret AS If Altinakar-1 succeeds, regulatory approval likely could be secured for a 3-year extension to the license term that would enable further evaluation of more than 10 undrilled prospects and leads identified in the Bedinan formation from the new 2D seismic ERIC WATKINS Oil Diplomacy Editor | Blog at www.ogj.com Saudi Arabia going nuclear The international oil and gas industry experienced a correction of perception in Saudi Arabia last week when delegates at a conference heard that the kingdom is going nuclear “We have started to take the required steps to utilize several energy sources locally, in particular solar and nuclear energy,” said Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali I Al-Naimi That may have come as a surprise from the country that leads the world’s oil reserves But it’s not the first time Al-Naimi has indicated the kingdom’s determination to explore alternative energy Last November, in a speech delivered at Singapore International Energy Week, Al-Naimi underscored Saudi Arabia’s commitment to “researching, commercializing, and manufacturing promising sources”—including nuclear energy Energy diversity Yemen A group led by Oil Search Ltd., Sydney, gauged oil at a rate of 145 b/d on a drillstem test of the Al Meashar-2 well on Block in Yemen’s Shabwah basin The company used a jet pump to test the basement target interval and then shut in the well for further buildup tests It will then be suspended The well was drilled from the existing pad of the early 2010 Al Meashar-1 discovery well using managed pressure drilling to minimize damage from drilling fluids in the reservoir OGJ Oil & Gas Journal | Jan 31, 2011 110131OGJ_25 25 “This energy diversity is reflected in the newly established King Abdullah City of Atomic and Renewable Energy, a cooperative program for the investigation of those sources,” Al-Naimi said in Singapore Don’t imagine that the Saudis are running out of oil, something else that Al-Naimi cleared up, when he reminded the Singapore conference that his country has massive proved reserves “As the world’s leading supplier of oil with 264 billion bbl of proved oil reserves, at current production levels the kingdom could continue to supply crude oil for another 80 years, even if we never found another barrel,” he said “In fact, even though we produced 62 billion bbl of oil between 1990 and 2009, our reserves have not decreased Through new discoveries and improved recoveries, we are adding as much oil as we are producing every year,” Al-Naimi said Still, there are other realities to be considered, including increased domestic demand for oil—a point that Saudi energy officials have recently underlined Rising domestic demand “The total domestic energy demand is expected to rise from about 3.4 million boe/d in 2009 to 8.3 million boe/d in 2028, or a growth of 250%,” Saudi Aramco Pres and Chief Executive Khalid A Al-Falih said last April At that rate, he said, “the oil availability for exports is likely to decline to less than million b/d by 2028, a fall of million b/d while the global demand for our oil will continue to rise.” In short, rising domestic demand alone “will ultimately limit the export capacity of the kingdom, and of development,” said Hashem Yamani, director of the King Abdullah City for Atomic and Renewable Energy “That is why we are determined to transform a country dependent solely on oil to different sources of energy— nuclear and renewable,” Yamani said last week, adding that Saudi Arabia could produce renewable energy within 8-10 years and nuclear energy by 2020 25 1/27/11 1:08 PM EQUIPMENT | SOFTWARE | LITERATURE NEW PIPE INSPECTION TOOL Here’s the new patent pending spiral magnetic flux leakage (SMFL) inspection tool, the latest addition to a range of magnetic flux leakage inspection tools. The tool makes it possible to detect long, narrow defects in a pipe body and in long seam welds Transverse field inspection (TFI) tools are designed to detect general corrosion, as well as long and narrow metal loss features The high resolution tool offers a number of features For example, while TFI technology relies upon two magnetizers, the SMFL tool requires only one As a result, the SMFL tool can be paired with MFL technology without having to extend the length of the tool to accom- modate it The ability to pair tools means that multiple data sets are generated in a single run The maker uses these data sets by overlaying them, which helps enhance characterization of anomalies that are revealed during an inspection run For example, recently the performed separate runs with each system in a 16in pipe with a 0.250 in WT While the axial MFL tool did not detect an external axial gouge, data generated by the SMFL tool revealed an external gouge measuring in long by 0.25-in wide by 40% deep With a sampling frequency of up to 750/sec, the SMFL tool has an operating pressure range of 300-2,000 psi (21137.8 bar) and an in-line temperature range of 14-131° F (–10° to +55° C.) It has a minimum bend radius of 1.5D and can travel at up to 8.3 fps ALARM MANAGEMENT SOFTWARE EXPANDED Source: T.D Williamson Inc., 5727 S Lewis, Suite 300, Tulsa, OK 74105-7144 Source: Exele Information Systems Inc., 445 W Commercial St., East Rochester, NY 14445 The TopView software suite has been expanded via release of TopView SQL, which allows users to query almost any relational database as a source of “monitored data” for TopView It’s designed to expand the ability of companies to monitor not just their process and automation data, but also new data stores such as inventory and shipping systems, web sites, and financial databases TopView SQL allows users to easily monitor, alarm, and send notification (e-mail, SMS, TAP, Text-to-speech, Voice) for data within database query results performed against databases , spreadsheets, and files This approach leverages TopView’s features to work with data in SQLServer, Oracle, Access, PIOLEDB, and others ADVERTISERS INDEX Your Source for Energy News, Research, and Insight COMPANY NAME PAGE American Business Conferences 11 www.american-business-conferences.com ARAMCO We’re In Great Company… Digital Cover www.aramcoservices.com Baker Hughes www.bakerhughes.com PennEnergy.com was created by PennWell to serve as the broadest and most complete source of energy-related news, research, and insight Including content from all PennWell energyrelated brands, PennEnergy.com delivers news, financial data, research materials, books, equipment, and service information all in one easy-tonavigate website Offshore Asia 2011 15 www.offshoreasiaevent.com Oil & Gas Maintenance Technology North America 13 www.OGMTNA.com PennEnergy A FEW OF OUR PENNWELL FRIENDS: ® 26 www.PennEnergy.com PennEnergy JOBS 30 www.PennEnergyJOBS.com PennEnergy Research 29 www.PennEnergyResearch.com UTILITY PRODUCTS conference & exposition Unconventional Oil & Gas International www.unconventionaloilandgas.com Make PennEnergy a part of your day and know what is happening in the world of energy 26 110131OGJ_26 26 PennEnergy.com P E This index is provided as a service The publisher does not assume any liability for errors or omission Oil & Gas Journal | Jan 31, 2011 1/27/11 1:08 PM STATISTICS IMPORTS OF CRUDE AND PRODUCTS — Districts 1-4 — — District — ———— Total US ———— 1-14 1-7 1-14 1-7 1-14 1-7 *1-15 2011 2011 2011 2011 2011 2011 2010 ––––––––––––––––––––––––— 1,000 b/d ––––––––––––––––––––––––— Total motor gasoline Mo gas blending comp Distillate Residual Jet fuel-kerosine Propane-propylene Other 697 632 241 486 31 97 344 864 780 368 334 26 100 25 25 73 32 (25) 68 7 94 53 (42) 73 722 657 241 559 63 72 412 871 787 368 428 79 58 78 730 508 272 413 108 228 356 Total products 2,528 2,477 198 192 2,726 2,669 2,615 Total crude 8,080 7,741 920 1,156 9,000 8,897 8,540 Total imports 10,608 10,218 1,118 1,348 11,726 11,566 11,155 *Revised Source: US Energy Information Administration Data available in OGJ Online Research Center PURVIN & GERTZ LNG NETBACKS—JAN 21, 2011 –––––––––––––––––––––––––––– Liquefaction plant –––––––––––––––––––––––––––––––– Algeria Malaysia Nigeria Austr NW Shelf Qatar Trinidad –––––––––––––––––––––––––––––––– $/MMbtu –––––––––––––––––––––––––––––––––––– Receiving terminal Barcelona Everett Isle of Grain Lake Charles Sodegaura Zeebrugge 8.46 4.60 7.58 1.88 6.18 7.62 6.19 2.48 5.23 0.00 8.30 5.43 7.55 4.21 6.88 1.65 6.41 6.90 6.09 2.58 5.13 0.20 7.99 5.31 6.82 3.02 5.85 0.41 7.20 6.01 7.47 4.90 6.91 2.49 5.43 6.97 Additional analysis of market trends is available through OGJ Online, Oil & Gas Journal’s electronic information source, at http://www.ogj.com OGJ CRACK SPREAD *1-21-11 *1-22-10 Change Change, ———–—$/bbl ——–—— % SPOT PRICES Product value Brent crude Crack spread 106.46 98.71 7.75 FUTURES MARKET PRICES One month Product value 106.43 Light sweet crude 90.05 Crack spread 16.37 Six month Product value 109.40 Light sweet crude 94.64 Crack spread 14.76 84.13 74.31 9.82 22.33 24.40 -2.07 26.5 32.8 -21.1 84.32 22.11 26.2 76.82 7.50 13.23 8.87 17.2 118.3 88.30 21.10 23.9 79.41 8.89 15.23 5.87 19.2 66.0 *Average for week ending Source: Oil & Gas Journal Data available in OGJ Online Research Center Definitions, see OGJ Apr 9, 2007, p 57 Source: Purvin & Gertz Inc Data available in OGJ Online Research Center CRUDE AND PRODUCT STOCKS —–– Motor gasoline —–– Blending Jet fuel, ————— Fuel oils ————— PropaneCrude oil Total comp.1 kerosine Distillate Residual propylene ———————————————————————————— 1,000 bbl ————————————————————————— District PADD PADD PADD PADD PADD 11,163 98,864 160,476 16,094 49,132 55,452 51,598 79,959 7,208 33,453 46,017 27,501 56,094 2,243 28,995 9,174 8,083 14,708 658 10,463 61,632 31,951 52,767 3,826 15,621 14,522 1,400 21,208 192 4,516 3,703 20,074 20,693 1,316 –– Jan 14, 2011 Jan 7, 2011 Jan 15, 20102 335,729 333,112 330,565 227,670 223,227 227,442 160,850 156,109 143,273 43,086 44,096 43,733 165,797 164,759 157,138 41,838 39,417 38,781 45,786 50,550 41,138 Includes PADD 2Revised Source: US Energy Information Administration Data available in OGJ Online Research Center REFINERY REPORT—JAN 14, 2011 REFINERY –––––– OPERATIONS –––––– Gross Crude oil inputs inputs ––––––– 1,000 b/d –––––––– District –––––––––––––––––––––––––––– REFINERY OUTPUT ––––––––––––––––––––––––––– Total motor Jet fuel, ––––––– Fuel oils –––––––– Propanegasoline kerosine Distillate Residual propylene –––––––––––––––––––––––––––––––– 1,000 b/d ––––––––––––––––––––––––––––––– PADD PADD PADD PADD PADD 927 3,362 7,420 512 2,374 951 3,310 7,357 508 2,211 2,654 2,221 2,114 317 1,486 64 214 639 20 376 327 948 2,444 161 473 55 36 281 122 43 249 723 61 –– Jan 14, 2011 Jan 7, 2011 Jan 15, 20102 14,595 15,208 13,859 14,337 14,728 13,824 8,792 8,665 8,565 1,313 1,468 1,374 4,353 4,463 3,483 503 498 586 1,076 1,113 956 17,594 Operable capacity 83.0% utilization rate Includes PADD Revised Source: US Energy Information Administration Data available in OGJ Online Research Center Oil & Gas Journal | Jan 31, 2011 110131OGJ_27 27 27 1/27/11 1:09 PM STATISTICS OGJ GASOLINE PRICES BAKER HUGHES RIG COUNT Price Pump Pump ex tax price* price 1-19-11 1-19-11 1-20-10 ————— ¢/gal ————— (Approx prices for self-service unleaded gasoline) Atlanta 263.3 302.5 Baltimore 264.8 306.7 Boston 259.1 301.0 Buffalo 250.2 313.4 Miami 262.8 315.2 Newark 274.7 307.6 New York 261.5 324.7 Norfolk 262.3 300.2 Philadelphia 254.2 304.9 Pittsburgh 265.0 315.7 Wash., DC 274.3 316.2 PAD I avg 262.9 309.8 268.1 272.0 269.1 282.0 286.1 264.5 282.1 262.0 277.1 275.0 278.1 274.2 Chicago Cleveland Des Moines Detroit Indianapolis Kansas City Louisville Memphis Milwaukee Minn.-St Paul Oklahoma City Omaha St Louis Tulsa Wichita PAD II avg 280.8 255.1 265.4 262.6 261.7 256.7 260.7 251.7 255.1 263.0 252.5 254.7 262.1 254.4 352.1 265.9 338.8 301.5 305.8 316.8 314.8 292.4 301.6 291.5 306.4 308.6 287.9 301.1 297.8 289.8 395.5 310.0 303.8 292.1 268.1 295.1 284.8 262.0 274.1 260.1 284.1 268.3 242.2 266.2 254.1 240.2 253.1 269.9 Albuquerque Birmingham Dallas-Fort Worth Houston Little Rock New Orleans San Antonio PAD III avg 255.2 257.1 253.0 252.0 252.8 255.6 259.0 255.0 292.4 296.4 291.4 290.4 293.0 294.0 297.4 293.6 263.4 264.4 260.4 262.4 257.4 269.3 266.3 263.4 Cheyenne Denver Salt Lake City PAD IV avg 250.1 249.7 249.7 249.8 282.5 290.1 292.6 288.4 253.7 277.1 259.4 263.4 Los Angeles Phoenix Portland San Diego San Francisco Seattle PAD V avg Week’s avg Dec avg Nov avg 2011 to date 2010 to date 262.2 266.8 266.9 265.6 284.4 275.5 270.2 262.8 249.1 240.2 261.5 225.1 329.6 304.2 310.3 333.0 351.8 331.4 326.7 308.1 294.4 285.5 306.8 269.9 301.6 280.2 293.5 304.2 306.3 298.0 297.3 273.4 259.2 263.6 –– –– * Includes state and federal motor fuel taxes and state sales tax Local governments may impose additional taxes Source: Oil & Gas Journal Data available in OGJ Online Research Center REFINED PRODUCT PRICES 1-14-11 ¢/gal 1-14-11 ¢/gal Spot market product prices Motor gasoline No Distillate (Conventional-regular) Low sulfur diesel fuel New York Harbor 250.40 New York Harbor Gulf Coast 243.70 Gulf Coast Los Angeles Motor gasoline Kerosine jet fuel (RBOB-regular) New York Harbor 239.70 Gulf Coast 267.50 266.00 264.50 266.30 Propane No heating oil New York Harbor 263.70 Mt Belvieu 135.80 OGJ PRODUCTION REPORT 1-21-11 1-22-10 Alabama Alaska Arkansas California Land Offshore Colorado Florida Illinois Indiana Kansas Kentucky Louisiana N Land S Inland waters S Land Offshore Maryland Michigan Mississippi Montana Nebraska New Mexico New York North Dakota Ohio Oklahoma Pennsylvania South Dakota Texas Offshore Inland waters Dist Dist Dist Dist Dist Dist Dist 7B Dist 7C Dist Dist 8A Dist Dist 10 Utah West Virginia Wyoming Others—NV-5 38 41 41 62 1 27 169 117 14 15 23 0 8 73 155 168 98 741 65 50 40 46 75 56 58 208 23 36 73 25 20 46 39 24 23 46 0 20 195 130 14 13 38 0 10 52 72 105 64 528 20 17 36 47 72 62 52 114 22 34 40 23 26 37 Total US Total Canada 1,713 621 1,282 495 Grand total US Oil rigs US Gas rigs Total US offshore Total US cum avg YTD 2,334 798 906 27 1,704 1,777 437 833 42 1,235 (Crude oil and lease condensate) Alabama 17 Alaska 620 California 613 Colorado 72 Florida Illinois 25 Kansas 104 Louisiana 1,507 Michigan 13 Mississippi 62 Montana 67 New Mexico 170 North Dakota 329 Oklahoma 185 Texas 1,435 Utah 61 Wyoming 139 All others 66 Total 5,487 OGJ estimate 2Revised Source: Oil & Gas Journal Data available in OGJ Online Research Center *Current major refiner’s posted prices except North Slope lags months 40° gravity crude unless differing gravity is shown Source: Oil & Gas Journal Data available in OGJ Online Research Center WORLD CRUDE PRICES $/bbl1 0-2,500 2,501-5,000 5,001-7,500 7,501-10,000 10,001-12,500 12,501-15,000 15,001-17,500 17,501-20,000 20,001-over Total 152 55 139 319 359 282 153 155 65 1,679 3.2 47.2 22.3 2.5 13.3 3.5 –– –– –– 7.6 INLAND LAND OFFSHORE 12 1,650 17 1-22-10 Rig Percent count footage* 87 51 143 255 252 188 185 74 34 1,269 16 1,211 42 *Rigs employed under footage contracts Definitions, see OGJ Sept 18, 2006, p 42 2.2 72.5 27.2 6.2 9.9 2.6 –– –– –– 9.7 1-14-11 United Kingdom-Brent 38° Russia-Urals 32° Saudi Light 34° Dubai Fateh 32° Algeria Saharan 44° Nigeria-Bonny Light 37° Indonesia-Minas 34° Venezuela-Tia Juana Light 31° Mexico-Isthmus 33° OPEC basket Total OPEC2 Total non-OPEC2 Total world2 US imports3 SMITH RIG COUNT 1-21-11 Percent footage* 1-21-11 $/bbl* 79.13 93.25 83.55 91.95 80.36 85.00 80.50 85.50 85.50 78.50 77.50 84.75 74.25 Alaska-North Slope 27° South Louisiana Sweet California-Midway Sunset 13° Lost Hills 30° Wyoming Sweet East Texas Sweet West Texas Sour 34° West Texas Intermediate Oklahoma Sweet Texas Upper Gulf Coast Michigan Sour Kansas Common North Dakota Sweet Source: Baker Hughes Inc Data available in OGJ Online Research Center Rig count 18 643 617 76 22 103 1,528 18 66 63 169 237 177 1,411 59 138 73 5,421 US CRUDE PRICES Rotary rigs from spudding in to total depth Definitions, see OGJ Sept 18, 2006, p 42 Proposed depth, ft 1-21-11 1-22-10 –—— 1,000 b/d —–— 98.11 94.98 94.07 92.14 96.93 97.77 98.93 90.75 90.64 94.33 93.73 91.09 92.60 87.77 - - Estimated contract prices 2Average price (FOB) weighted by estimated export volume 3Average price (FOB) weighted by estimated import volume Source: DOE Weekly Petroleum Status Report Data available in OGJ Online Research Center US NATURAL GAS STORAGE1 1-14-11 Producing region Consuming region east Consuming region west Total US Total US2 1-7-11 1-14-10 –——––—— bcf —––——– 968 1,059 824 1,384 1,510 1,420 364 390 399 2,716 2,959 2,643 Change, Oct 10 Oct 09 % 3,847 3,810 Change, % 17.5 –2.5 –8.8 2.8 1.0 Source: DOE Weekly Petroleum Status Report Data available in OGJ Online Research Center 28 110131OGJ_28 28 Source: Smith International Inc Data available in OGJ Online Research Center Working gas 2At end of period Source: Energy Information Administration Data available in OGJ Online Research Center Oil & Gas Journal | Jan 31, 2011 1/27/11 1:10 PM MARKETPLACE DEADLINE for MARKETPLACE ADVERTISING is 10 A.M Tuesday preceding date of publication Address advertising inquiries to MARKETPLACE SALES, 1-800-331-4463 ext 6301, 918-832-9301, fax 918-832-9201, email: glendah@pennwell.com • DISPLAY MARKETPLACE: $390 per column inch, one issue 10% discount three or more CONSECUTIVE issues No extra charge for blind box in care Subject to agency commission No 2% cash discount EMPLOYMENT Smith International, Inc in Houston, Texas seeks Engineer III who will be responsible for planning, organizing, and executing design development projects resulting in the definition of new products and improvements to existing drilling products This includes providing design support to the field through analyzing and diagnosing product related issues, understanding applications and practices, and developing bit designs from concept to production Masters degree in Mechanical Engineering plus one year experience or alternatively Bachelors degree in Mechanical Engineering plus five years experience Mail resume to: S.Gillen, HR, Smith International, Inc., 1310 Rankin Road, Houston, TX 77073 Must put job code RCPDCEngIIIRB on resume EMPLOYMENT WANTED • UNDISPLAYED MARKETPLACE: $4.00 per word per issue 10% discount for three or more CONSECUTIVE issues $80.00 minimum charge per insertion Charge for blind box service is $60.00 No agency commission, no 2% cash discount Centered/Bold heading, $12.00 extra • COMPANY LOGO: Available with undisplayed ad for $85.00 Logo will be centered above copy with a maximum height of 3/8 inch • NO SPECIAL POSITION AVAILABLE IN MARKETPLACE SECTION • PAYMENT MUST ACCOMPANY ORDER FOR MARKETPLACE AD E MPL OY ME NT Afren USA, Inc seeks a Reservoir Engineering Manager to work in The Woodlands to coordinate and direct engineering projects, including developing petroleum reservoir models for oil and gas field development purposes Qualified applicants should submit a resume to Michael Cochran at 10001 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Contact: Glenda Harp +1-918-832-9301 or 1-800-331-4463, ext 6301 Fax: +1-918-831-9776 Oil & Gas Journal | Jan 31, 2011 110131OGJ_29 29 DIRECTORIES: Upstream & downstream online directories SURVEYS: Data in spreadsheet format for refining, construction, gas processing, and more STATISTICS: Over 150 tables in spreadsheet format for immediate download For more information or to order Visit: www.PennEnergyResearch.com Email: orcinfo@pennwell.com 29 1/27/11 1:10 PM Got jobs? We’ve got people PennEnergy JOBS is the key to attracting the energy industry professionals you need to hire to meet your business goals Our process puts your recruitment message in front of the industry’s best talent whether it’s online, in print, or at an event This approach offers you the flexibility to create custom recruitment advertising campaigns best suited to meet your budget and objectives | Learn More | Visit: www.PennEnergyJOBS.com Call: 1-800-738-0134 110131OGJ_30 30 1/27/11 1:11 PM From the Subscribers Only area of www.ogj.com THE EDITOR’S PERSPECTIVE MARKET JOURNAL Gas-hungry Dubai importing LNG, eyes role as hub US should reduce distillate stocks by Bob Tippee, Editor The romance between Dubai and natural gas gained intensity last year when the go-go emirate became the Persian Gulf’s second importer of LNG Even before it became a glitzy tourist destination with a construction boom that hit heavy weather in the financial collapse of 200708, Dubai had outsize gas needs In an early diversification move, the government built one of the world’s largest aluminum smelters, which began operation in January 1980 The complex craves electricity, most fueled by gas Now, says a report by Siamak Adibi of FACTS Global Energy, the emirate meets its gas demand of about 1.5 bscfd with pipeline imports from Qater, Abu Dhabi, and Sharjah It’s also importing LNG via a floating storage and regasification vessel with peak capacity of 400 MMscfd at Jebel Ali The gulf’s other LNG importer is Kuwait, which uses a floating system to handle summertime demand peaks Dubai produces gas offshore but reinjects it into oil fields well into decline The only gas available for domestic use comes from Margham gas field, which soon will revert to storage Dubai’s imports from Sharjah come via a 93-km pipeline from offshore Mubarak gas field Imports through a land pipeline from Sharjah’s onshore fields are now negligible The financial crisis rocked Dubai but only slowed development and associated growth in the need for power: to an expected average of 8-10%/year through 2015 from 12%/year in 2005-09 Despite governmental flirtations with coal and solar power, gas will remain the main energy source Adibi expects Dubai to become a gas hub, importing LNG and exporting gas through existing pipelines to northern emirates “Dubai also sees itself as setting up a potential market price for LNG through its spot purchases and perhaps at a later time float a paper contract for gas on the Dubai Mercantile Exchange,” the analyst says For a little oil producer with boundless ambitions, this should prove no more challenging than, say, building professional-quality golf courses in the Middle Eastern desert ONLINE JAN 21, 2011 | bobt@ogjonline.com Oil & Gas Journal | Jan 31, 2011 110131OGJ_31 31 by Sam Fletcher, Senior Writer The US needs to “export more distillates or cut refinery production” before Gulf Coast stocks become “difficult to manage,” said Olivier Jakob at Petromatrix, Zug, Switzerland US distillate inventories are at multiyear highs and still increasing, up million bbl to 165.8 million bbl in the week ended Jan 14 Gulf Coast refineries ran at high levels in December “But capacity utilization is starting to come off after a rapid build of product stocks,” Jakob said Meanwhile, in the weeks ended Jan 14, the latest data available at presstime, implied US demand for gasoline, distillates, and jet fuel was 2.2% higher than a year ago, but 5.9% lower than in 2008 and 1.4% lower than in 2009, Jakob reported Among petroleum products, “the light-heavy spread has widened dramatically as reflected in the gas oil premium to fuel oil, propelled by colder-than-normal weather across the northern hemisphere,” said Adam Sieminski, chief energy economist, Deutsche Bank AG, Washington, DC “We had predicted this based on the expectation of a structural widening of the spread in line with forecasts for global economic growth this year that would boost demand for gasoil at the expense of fuel oil.” Still he said Jan 21, “Heating oil returns have increased 1.4% over the past week and 4.3% year to date to be the best performer of the Deutsche Bank Liquid Commodity Index,” Sieminski said With prospects for cooler than normal temperatures for the rest of the winter, he said, “We expect prices to remain firm In contrast, crude oil has posted a negative 1.1% return last week as the forward curve remains in contango.” December data for Germany showed the impact of snow disruptions, with gasoline sales down 8% “Diesel was, however, still above last year (up 2.1%) and heating oil sales in Germany were pretty strong in December (up 33% from a year ago),” said Jakob “For the year, German sales of heating oil were 4.3% higher than in 2009, diesel was higher by 3.7%, and gasoline was down 2.6%,” he reported In France, diesel sales increased 2.1% last year, while gasoline was down 6.2% Gasoline sales in Italy were down 5.9% for 2010, with diesel down just 0.5%, he said Swap dealers Jakob pointed out structural changes last quarter in financial flows into West Texas Intermediate “where swap dealers (mostly commodity Wall Street banks) were using the oil rally to reduce their long exposure to WTI,” a fact confirmed by some banks in their quarterly reports At the time, swap dealers were “mostly all in agreement” that benchmark crude should be trading above $100/bbl on the New York Mercantile Exchange But over the course of the market rally, they have gone “from being the main long in the market to being fully neutral,” Jakob said “Swap dealers have been able to unwind some of their WTI length into hedge funds during the fourth quarter and with hedge funds now holding record length in WTI, the question remains: to whom can the hedge funds unwind their WTI length if the swap dealers for whatever reasons strongly believe that crude should be at $100 / bbl but not want to hold length into it?” According to Jakob, large speculators face a choice of rolling their record length in WTI at 1.65% monthly cost (20% annualized) or move their investments to North Sea Brent crude to avoid the WTI contango rolling cost Although he advocated moving from WTI to Brent in 2010, Jakob said, “To move now with Brent at a $7/bbl premium to WTI does not come without risk.” He said, “While we see a lot of reasons why Brent should be at a premium to WTI, with lower European cash differentials and European refineries moving into maintenance season, we still not see the inputs from the cash markets validating that the Brent futures premium to WTI should be as wide as $7/bbl.” ONLINE JAN 24, 2011 | samf@ogjonline.com 31 1/27/11 1:11 PM [...]... 0-2 ,50 0 2 ,50 1 -5, 000 5, 001-7 ,50 0 7 ,50 1-10,000 10,001-12 ,50 0 12 ,50 1- 15, 000 15, 001-17 ,50 0 17 ,50 1-20,000 20,001-over Total 152 55 139 319 359 282 153 155 65 1,679 3.2 47.2 22.3 2 .5 13.3 3 .5 –– –– –– 7.6 INLAND LAND OFFSHORE 12 1, 650 17 1-22-10 Rig Percent count footage* 87 51 143 255 252 188 1 85 74 34 1,269 16 1,211 42 *Rigs employed under footage contracts Definitions, see OGJ Sept 18, 2006, p 42 2.2 72 .5. .. 49,132 55 , 452 51 ,59 8 79, 959 7,208 33, 453 46,017 27 ,50 1 56 ,094 2,243 28,9 95 9,174 8,083 14,708 658 10,463 61,632 31, 951 52 ,767 3,826 15, 621 14 ,52 2 1,400 21,208 192 4 ,51 6 3,703 20,074 20,693 1 1,316 –– Jan 14, 2011 Jan 7, 2011 Jan 15, 20102 3 35, 729 333,112 330 ,56 5 227,670 223,227 227,442 160, 850 156 ,109 143,273 43,086 44,096 43,733 1 65, 797 164, 759 157 ,138 41,838 39,417 38,781 45, 786 50 ,55 0 41,138... 255 .1 2 65. 4 262.6 261.7 256 .7 260.7 251 .7 255 .1 263.0 252 .5 254 .7 262.1 254 .4 352 .1 2 65. 9 338.8 301 .5 3 05. 8 316.8 314.8 292.4 301.6 291 .5 306.4 308.6 287.9 301.1 297.8 289.8 3 95. 5 310.0 303.8 292.1 268.1 2 95. 1 284.8 262.0 274.1 260.1 284.1 268.3 242.2 266.2 254 .1 240.2 253 .1 269.9 Albuquerque Birmingham Dallas-Fort Worth Houston Little Rock New Orleans San Antonio PAD III avg 255 .2... PADD 3 PADD 4 PADD 5 927 3,362 7,420 51 2 2,374 951 3,310 7, 357 50 8 2,211 2, 654 2,221 2,114 317 1,486 64 214 639 20 376 327 948 2,444 161 473 55 36 281 9 122 43 249 723 1 61 –– Jan 14, 2011 Jan 7, 2011 Jan 15, 20102 14 ,59 5 15, 208 13, 859 14,337 14,728 13,824 8,792 8,6 65 8 ,56 5 1,313 1,468 1,374 4, 353 4,463 3,483 50 3 498 58 6 1,076 1,113 956 17 ,59 4 Operable capacity 1 83.0%... Dist 5 Dist 6 Dist 7B Dist 7C Dist 8 Dist 8A Dist 9 Dist 10 Utah West Virginia Wyoming Others—NV -5 7 3 38 41 41 0 62 2 1 1 27 5 169 117 14 15 23 0 0 8 8 1 73 0 155 9 168 98 0 741 4 1 65 50 40 46 75 56 6 58 208 23 36 73 25 20 46 5 2 7 39 24 23 1 46 0 0 3 20 8 1 95 130 14 13 38 0 0 10 4 1 52 3 72 7 1 05 64 0 52 8 3 0 20 17 36 47 72 62 9 52 ... tcf of gas in place at 90% to 50 % probability plus 42-71 million bbl of condensate and 53 - 75 million bbl of oil There is a 10% chance of 12.3 tcf of gas in place Heritage summarized the test results: • Jurassic at 3,4 65- 3 ,53 3 m measured depth flowed 26 MMscfd of gas and 70 b/d of 52 .2° gravity condensate on a 40/64-in choke • Jurassic at 3,327-3,410 m flowed 25. 5 MMscfd of gas and 67 b/d of 54 .3° gravity... date 2010 to date 262.2 266.8 266.9 2 65. 6 284.4 2 75. 5 270.2 262.8 249.1 240.2 261 .5 2 25. 1 329.6 304.2 310.3 333.0 351 .8 331.4 326.7 308.1 294.4 2 85. 5 306.8 269.9 301.6 280.2 293 .5 304.2 306.3 298.0 297.3 273.4 259 .2 263.6 –– –– * Includes state and federal motor fuel taxes and state sales tax Local governments may impose additional taxes Source: Oil & Gas Journal Data available in OGJ Online Research... Barcelona Everett Isle of Grain Lake Charles Sodegaura Zeebrugge 8.46 4.60 7 .58 1.88 6.18 7.62 6.19 2.48 5. 23 0.00 8.30 5. 43 7 .55 4.21 6.88 1. 65 6.41 6.90 6.09 2 .58 5. 13 0.20 7.99 5. 31 6.82 3.02 5. 85 0.41 7.20 6.01 7.47 4.90 6.91 2.49 5. 43 6.97 Additional analysis of market trends is available through OGJ Online, Oil & Gas Journal s electronic information source, at http://www.ogj.com OGJ CRACK SPREAD... Rock New Orleans San Antonio PAD III avg 255 .2 257 .1 253 .0 252 .0 252 .8 255 .6 259 .0 255 .0 292.4 296.4 291.4 290.4 293.0 294.0 297.4 293.6 263.4 264.4 260.4 262.4 257 .4 269.3 266.3 263.4 Cheyenne Denver Salt Lake City PAD IV avg 250 .1 249.7 249.7 249.8 282 .5 290.1 292.6 288.4 253 .7 277.1 259 .4 263.4 Los Angeles Phoenix Portland San Diego San Francisco Seattle PAD V... 20 759 6 50 00, +44 (0) 20 759 6 51 11 (fax), e-mail: enmail: info@gastech.co.uk, quiry@ite-exhibition.com, e-mail: www.gastech website: www.turoge co.uk 21-24 com 16-17 GASTECH International NPRA Annual Meeting, Conference & Exhibition, San Antonio, (202) 457 - Amsterdam, +44 (0) 0480, (202) 457 -0486 1737 855 000, +44 (0) (fax), e-mail: info@npra 1737 855 482 (fax), eorg, website: www.npra mail: info@gastech.co.uk,