Venezuela, Maracaibo Basin: Wells and Pumps

by Aaron Rachovich (Rachowitz), may He rest in peace

 Click to enlarge

These pictures were taken by my late Dad, Aaron Rachovich (Rachowitz), during my Parents' trip to Venezuela, Colombia and Trinidad & Tobago in 1999. Numerous offshore oil wells and pumps located in Lake Maracaibo, are seen in the remote background. In addition, please see a picture of onshore pump jack in the Maracaibo Basin, also taken by my Dad.

Floating Production, Storage Orders Set Record Pace

by OGJ editors, OGJ, Houston, Aug 3, 2011
A record pace in the number of floating production and storage orders was noted in a recent study by International Maritime Associates [IMA] Inc., Washington DC. [Please see remarks below -- D.R.]

The study found that the industry has placed a record 14 orders for floating units since March. Currently 256 floating systems are in service or available worldwide, according to the study.

Of these, 62% are floating production, storage, offloading (FPSO) vessels; 17% are production semisubmersibles; 9% are tension leg platforms; 7% are production spars; and the remaining 5% are production barges and floating storage and regasification units (FSRUs).

Eleven of the 256 units are not on a field and are available for reuse.

The 14 orders since March include the world’s first floating LNG vessel. The $3 billion Prelude FLNG [please see remarks and image below -- D.R.] is the most expensive floating production unit ordered to date, the study noted.

Among the other orders, 9 are FPSOs (1 purpose-built unit, 6 units converted from trading tanker hulls, and 2 modification redeployments), 2 production spars, and 2 purpose-built FSRUs. The 14 construction contracts for these units exceed $11 billion, the study said.

Current order backlog includes 53 production floaters, a net increase of 6 units since March. This extends the buildup in backlog that began in second-half 2009, the study noted.

Of the 53 units, 28 have purpose built hulls and 25 have converted tanker hulls. Also 20 are orders from leasing operators, while 33 are orders from field operators.

The study identified 196 projects in the bidding, design, or planning stage that potentially will require floating production or storage. These projects are declared discoveries or planned developments where floating production or storage is an option.

Brazil has the most with 50 potential floater projects in the planning cycle. Next in line is Southeast Asia with 37, followed by West Africa with 36, Northern Europe with 22, Gulf of Mexico with 17, and Australia with 11.

Of the 196 planned projects, 53 are in the bidding or final design stage. Major hardware contracts for these 53 projects are likely to be let within the next 12-18 months, the study noted.

Another 143 floater projects are in the planning or study phase, and major hardware contracts for these are likely to be let in 2013-18, according to the study. [Full story]

(IMA has been producing detailed market reports on floating production for the past 15 years. The reports focus on equipment requirements for floating production projects. They are designed for use in business planning by companies servicing this sector. Three reports are issued during the year -- in March, July and November. For the July 2011 Floating Production Systems Report and for previous reports, please see IMA, here. Floating liquefied natural gas/FLNG is a revolutionary technology that will allow Shell to access offshore gas fields that would otherwise be too costly or difficult to develop. Shell took final investment decision on the Prelude FLNG Project on May 20, 2011. It will start building a FLNG facility to produce and export LNG off the coast of Australia at the site of the gas field. Moored far out to sea, some 200 kilometers from the nearest land in Australia, the FLNG facility will produce gas from offshore fields, and liquefy it onboard by cooling for export at sea. The Prelude FLNG facility will be the largest floating offshore facility in the world. It will be built at Samsung Heavy Industries’ Geoje Island shipyards in South Korea---please see "Prelude FLNG - An Overview," and "Shell Decides to Move Forward with Groundbreaking Floating LNG." and "Samsung Says Shell Prelude FLNG Vessel To Cost $3 Billion," as well as my tweets on Twitter dated on May 20 and June 23, 2011, here. Separately, please see my post "BOEMRE Approves First FPSO Use in the U.S. Gulf of Mexico." -- D.R.)
                               Graphic of Shell's Prelude FLNG

                                                                    Source: Shell, here

Manifa to Yield 500,000 b/d by 2013 and 900,000 b/d by 2014 -- Aramco

by David Rachovich

                                Source: Saudi Aramco via OffshoreEnergyToday.com Feb 23, 2011

                                                       Source: Saudi Aramco website 

                [Click on map to enlarge]

                                                                             Source: Saudi Aramco via EIA, here.

"Significant progress was achieved in 2010 on Manifa, the giant Arabian Gulf offshore field under development [emphasis mine and please see map and images above -- D.R.]," Saudi Aramco said in its 2010 annual review, published on Monday (June 6).

"Project elements completed during the year included all drilling islands, as well as the main and lateral causeways. Construction of the Manifa Central Processing complex has begun, with the main spine and process area pipe rack completed. The Manifa development will accommodate a Central Processing Facility with gas-oil separation, wet crude handling, crude stabilization, gas gathering and compression, produced water disposal, water injection and other related facilities. Field development includes 41 km [25 mi] of causeways and 3 km [1.9 mi] of bridges to support 27 [man-made] drilling islands for the shallow water wells, and 13 offshore platforms for deeper water producing and water injection wells. Onshore facilities include 15 drill sites, a Central Oil and Gas Processing Facility, water supply wells and injection facilities, and multiple gathering, water injection, and product transportation pipelines," it added.

"Manifa is designed to produce in staged increments --- 500,000 [barrels per day] bpd of Arabian Heavy crude oil by 2013 and 900,000 bpd by 2014," the report said. And output "will be used as feedstock for planned refineries in the Kingdom [i.e., for two new deep-conversion refineries at Jubail and Yanbu -- D.R.]."

The Manifa Drilling Team set a new record in December 2010 when it finished drilling the longest well in Saudi Arabia to a total depth of 32,136 ft (± 9.8 km) and completed a horizontal power water injector across the Lower Ratawi reservoir. Calgary Precision Drilling rig did the work on the Manifa well. The same drilling team set an earlier record while working on the 30,850 ft (+9.4 km) Manifa well.

Discovered in 1957, Manifa field is in shallow waters southeast of Tanajib, about 200 km (124 mi) northwest of Dhahran. The oil production started when the C reservoir came on stream in 1964, and the B reservoir was brought on production in 1974. Manifa produced heavy crude oil with about 27° API gravity. The field was shut in during January 1984, due to low demand with less than 1% of the reserves produced (Saudi Aramco Journal of Technology, Summer 2009).

Development strategy of Manifa, the world's fifth-largest oil field, is based on optimum use of onshore drilling. Instead of developing Manifa completely from offshore platforms, it is developed from 27 offshore man-made drilling islands connected by a causeway, in addition to onshore drill sites and offshore platforms. Extended-reach wells such as the two mentioned above are required for optimum field coverage. "Manifa field is located in shallow and environmentally sensitive waters, necessitating maximizing drilling from onshore sites while minimizing offshore platforms," the report argued. Actually, the state-of-the art extended reach drilling (ERD) technology reduces the high capital and operating costs of large offshore structures (jackup rigs or shallow water rigs, with legs that reach the bottom of the sea floor) and at the same time minimizes the environmental impact in this sensitive near-shore area.

"The Kingdom's longer-term concern is over whether it needs to increase oil production capacity to meet likely future demand. The Saudi view on oil markets has altered sharply from where it was a year ago, when a battered global economy was still limping out of recession. Riyadh thinks medium- to long-term oil demand growth may be higher than it had previously anticipated, driven by China, India and also Middle East itself, and discussions are now taking place on whether the Kingdom should raise oil output capacity beyond its current 12.5 million b/d," Petroleum Intelligence Weekly (PIW) said in its article "Saudis Consider Need to Raise Output Capacity." "Now, while no decisions have yet been made and while work is unlikely to start this year, expansions at Shaybah, Manifa and Khurais are back on the table," it maintained. "Aramco has already decided to bring forward the 10 billion- 14 billion bbl Manifa project, and could now expand its capacity from 900,000 b/d to 1.2 million b/d," the article said.

During the May 2010 Offshore Technology Conference, Zuhair Al-Hussain, Aramco vice-president, drilling and workovers, said production from Manifa will start in mid-2013 but will not ramp up quickly to the original target of 900,000 b/d of Arab heavy crude (Oil & Gas Journal via my post).

Saudi Aramco Annual Review 2010 is available for download on the Saudi Aramco website at: http://www.saudiaramco.com/content/www/en/home.html#news%257C%252Fen%252Fhome%252Fnews%252Fpublications-and-reports%252Fcorporate-reports0%252FAnnualreview.baseajax.html

(Update 1: Saudi Oil Minister Ali al-Naimi, chairman of the board of directors at Saudi Aramco toured oil and natural gas installations in the country on October 16, 2012, as part of a review of the country's long-term energy prospects. During the tour with the Board members, HE Naimi launched the Manifa Field’s reservoir water injection operations in preparation for first phase production of Arabian Heavy crude oil at an initial capacity of 500,000 barrels per day (bpd) in the first half of 2013, and which will gradually increase to 900,000 bpd by 2014. The crude oil from Manifa will feed local refineries that are currently under construction, namely the 400,000 b/d SATORP refinery in the easterm Saudi Arabian city of Jubail with France’s Total, and the 400,000 b/d YASREF in Yanbu' on the Red Sea, the joint venture with Sinopec of China (Aramco has said the new Yanbu refinery, which joins two existing refineries at Yanbu, will produce 90,000 b/d of gasoline, 263,000 b/d of ultralow sulfur diesel, and 6,300 tonnes/day (tpd) of petcoke as well as 1,200 tpd of sulfur--see OGJ Online, Dec 3, 2012), and the upcoming Jazan refinery, which has received Board approval for financing, and the project’s contracts are expected to be awarded in the coming weeks---please see Saudi Aramco website/Latest news, Dhahran, Oct 16, 2012 Update 2: Saudi Aramco has let a contract to Houston-based KBR for front-end engineering and design of an integrated gasification combined-cycle power plant in conjunction with a 400,000 bpd refinery under development at Jazan Economic City, Saudi Arabia, according to OGJ Online, Oct. 22, 2012. The IGCC plant, which KBR says will be the world’s largest such facility, will gasify vacuum residue to supply electricity to the refinery and make 2.4 Gw available to Jazan and the surrounding region---please OGJ Online, Nov 13, 2012. Update 3: Production has begun from the first phase of development of Manifa oil field offshore Saudi Arabia and is expected to reach 500,000 bpd by July [2013]. The start-up was 3 months ahead of schedule, according to Saudi Aramco---please see "Manifa oil flow starts offshore Saudi Arabia," OGJ Online, April 15, 2013 -- D.R.)

BOEMRE Approves First FPSO Use in Gulf of Mexico

by Nick Snow, OGJ, Mar 17, 2011
The US Bureau of Ocean Energy Management, Regulation, and Enforcement [the former Minerals Management Service] approved Petrobras America Inc.’s application to use a floating production, storage, and offloading vessel to produce oil and gas from its Cascade-Chinook project in the Gulf of Mexico. This will be the first time that FPSO technology has been used in the [U.S.] gulf, the US Department of the Interior agency said on Mar. 17.

The BW Pioneer FPSO [please see image below -- D.R.] will receive production through dual flow lines, which connect it to two free-standing hybrid risers for each field, also a new technology for the gulf, Petrobras America said.

BOEMRE said it approved the project’s production safety system permit and supplemental deepwater operating plan following extensive consultations with the producer.

The FPSO will have a production capacity of 80,000 b/d of oil and 16 MMcfd of natural gas, with production expected to begin soon, it indicated.

The project is in the gulf’s Walker Ridge area in 8,200 ft of water [2,500 meters] about 165 miles [266 kilometers] off Louisiana. [Full story]

                                                  Source: Petrobras via MARINE LOG.com here

(Also, the FPSO has an oil storage capacity of 500,000 barrels. Natural gas processed by the BW Pioneer will be transported to shore by pipeline, while crude oil will be offloaded to shuttle tankers for transportation. In the event of a hurricane or tropical storm, the facility is designed to disconnect from the turret-buoy and move off location until the storm has passed. FPSOs are widely used in offshore Brazil and West Africa---e.g., please see its use in Ghana, here. The FPSO vessel to be used in the project is owned and operated by Oslo-based BW Offshore. The company already operates another FPSO ship in the Mexican side of the Gulf, among many others around the globe. -- D.R.)

Petrobras Announces Third LNG Terminal

by OGJ editors, OGJ, Mar 2, 2011
Petroleo Brasileiro SA (Petrobras) reported it will install a third offshore LNG terminal.

The Bahia regasification terminal (TRBA), with capacity to regasify 14 million cu m/day (cmd), will supply natural gas to the state of Bahia, the heaviest consumer of gas among the northeastern Brazilian states.

TRBA will be installed in the Bay of All Saints and interconnect with a pipeline network at two sites: one in the Bahia network, at Candeias, and the other at kilometer 910 on the Cacimbas-Catu pipeline, a section of the Southeast-Northeast Gas Pipeline started up in March 2010.

As part of Brazil’s Growth Acceleration Program, Petrobras said, work will begin in March 2012 with completion scheduled for August 2013 under an investment of nearly $425 million.

Currently, Brazil has LNG terminals at Pecem (State of Ceara) with a regasification capacity of 7 million cmd, and in the Guanabara Bay (State of Rio de Janeiro) with capacity of 14 million cmd. When the TRBA terminal comes online in September 2013, Brazil’s total regasification capacity will reach 35 million cmd, overtaking the gas imports via pipeline from Bolivia (31 million cmd).

At the Pecem and Guanabara Bay terminals, tankers moor at a two-berth pier and LNG is transferred over cryogenic arms from supply vessel to regasification vessel. At the TRBA terminal, LNG will be transferred directly between vessels using side-by-side docking, which means that the regasification vessel will dock at a single-berth, island-type pier, said the company.

With direct connection to the supply vessel, LNG will be transferred over short hoses or loading arms to the regasification vessel, which will convert LNG back into a vapor [i.e., gaseous state].

Gas will then be injected into the pipeline network through a 28-in. pipeline that is 49 km long including a 15-km subsea section.

Petrobras noted that currently only two [sic] other LNG terminals in the world use this configuration [i.e., side-by-side -- D.R.]: Bahia Blanca in Argentina and the UAE’s Dubai terminal. [Full story]

(Brazil imported 298 Bcf of natural gas in 2009, a 24 percent drop from 2008. The decline in Brazilian overall natural gas demand, coupled with policy choices aimed at reducing imports, led to this decline. The country currently receives imports by pipeline from Bolivia and liquefied natural gas (LNG) imports from Trinidad and Tobago and Nigeria. Import growth in the future is expected to be met more with LNG than with conventional pipeline imports. Brazil imports natural gas from Bolivia via the Gasbol pipeline, which links Santa Cruz, Bolivia to Porto Alegre, Brazil, via Sao Paulo. The 2,000-mile Gasbol has a maximum capacity of 1.1 Bcf per day (Bcf/d). In early 2009, Brazil announced that it would reduce imports from Bolivia from 1.1 Bcf/d to 0.7 Bcf/d. According to ANP, Brazilian imports of Bolivian gas have since declined by 27 percent. However, Bolivia still accounted for 96 percent of Brazil’s total natural gas imports. The Pecem---please see image below---received its first LNG cargo from Trinidad and Tobago in July 2008, while the Guanabara Bay terminal came online in May 2009. According to ANP, Brazil received 15 Bcf of natural gas in the form of LNG in 2009, mostly from Trinidad and Tobago---please see U.S. EIA, Brazil Country Analysis Brief, Jan 2011, here. For the Petrobras's standing in the company rankings---PIW's and others---please see my blog stand-alone page "Companies" > Petrobras, here. -- D.R.)

Source: LNGpedia.com here Description: The Floating Storage and Regasification Unit---FSRU---vessel, the Golar Spirit, is reportedly the world's first methane vessel to have been converted to perform LNG regasification on board. The regasification capacity of the Golar Spirit is seven million cubic meters (cbm) per day, and its storage capacity is 129,000 cbm of LNG, equivalent to 77 million cbm of natural gas.

Saudi Arabia's Longest Well Drilled in Manifa

OffshoreEnergyToday.com Feb 23, 2011
The Manifa Drilling Team set a new record in December when it finished drilling the longest well in Saudi Arabia to a total depth of 32,136 ft (± 9.8 km) and completed a horizontal power water injector across the Lower Ratawi reservoir.

A [Canada's] Precision Drilling rig did the work on the Manifa well, [...]. The same drilling team set an earlier record while working on the 30,850 ft (+9.4 km) Manifa well.

Discovered in 1957, Manifa field is in shallow waters southeast of Tanajib, about 200 km northwest of Dhahran [please see map of oil and gas fields in Saudi Arabia, here -- D.R].

The [Saudi Aramco's] development strategy of Manifa is based on optimum use of onshore drilling. Instead of developing Manifa completely from offshore platforms, it is developed from 27 drilling islands connected by a 47-km long causeway, in addition to 16 onshore drill sites and 13 [offfshore] platforms. [Please see image below -- D.R.]

                                          Source: OffshoreEnergyToday.com

Extended-reach wells, such as the two mentioned above are required for optimum field coverage. Read more

(During the May 2010 Offshore Technology Conference, Zuhair Al-Hussain, Aramco vice-president, drilling and workovers, said production from Manifa will start in mid-2013 but will not ramp up quickly to the original target of 900,000 b/d of Arab heavy oil (OGJ, May 10, 2010, p. 19). Also, please see my updated post on Manifa -- "Manifa to Yield 500,000 b/d by 2013 and 900,000 b/d by 2014 -- Aramco," here. Houston-based Parker Drilling, operator of the Yastreb Rig for Exxon Neftegas Limited, set world record for extended-reach drilling: Sakhalin's Odoptu OP-11 well reached a total measured depth of 40,502 feet (12,345 meters or 7.67 miles)---please see my post here. -- D.R.)

Intertanko: World Oil Shipping Routes 'Under Threat' from Piracy

by Eric Watkins, OGJ, Feb 11, 2011
Piracy in the Indian Ocean is rapidly getting out of control and is threatening to disrupt flows of oil to markets in the US and around the world, according to an oil shipping industry association.

“The piracy situation is now spinning out of control into the entire Indian Ocean right to the top of the Arabian Sea over 1,000 miles from the coast of Somalia,” said Joe Angelo, managing director of the International Association of Independent Tanker Owners (Intertanko).

“If piracy in the Indian Ocean is left unabated, it will strangle these crucial shipping lanes with the potential to severely disrupt oil flows to the US and to the rest of the world,” Angelo said.

Angelo’s remarks came after pirates off the coast of Somalia captured a Greek-flagged supertanker carrying nearly 300,000 tons of crude oil to the Gulf of Mexico, the second successful attack against an oil tanker by sea bandits in as many days.

The Irene SL [see image below -- D.R.] was sailing 360 km east of Oman carrying 266,000 tons of crude and a crew of 7 Greeks, 17 Filipinos, and 1 Georgian when it was attacked, officials said. The value of the oil on board was estimated at $150 million.

Intertanko underlined the potential gravity of the hijacking, saying that that the Irene SL’s cargo of Kuwaiti crude represents nearly 20% of total US daily oil imports. This one cargo is 12% of all oil coming out of the Middle East Gulf each day, and 5% of total daily world seaborne oil supply.

“The hijacking by pirates of 2 million bbl of Kuwaiti crude oil destined for the US in a large Greek tanker in the middle of the main sea lanes coming from the Middle East Gulf marks a significant shift in the impact of the piracy crisis in the Indian Ocean,” Intertanko said.

That view was shared by John Drake, a senior risk consultant for London-based security firm AKE, who said the situation is only going to worsen, largely due to the payment of ransoms.

“With rising ransoms, pirates are able to hire more men, bribe more officials and wait longer periods to negotiate,” Drake said.

The Irene SL is the second oil tanker to be attacked in that region in 2 days. On Feb. 8, Somali pirates firing small arms and rocket-propelled grenades hijacked the Savina Caylyn, an Italian-flagged Aframax crude tanker transiting the Indian Ocean to Malaysia from Sudan with 80,000 tonnes of oil.

After that attack, Adm. Giampaolo Di Paola, chairman of NATO's Military Committee, said piracy “is spreading across the entire Indian Ocean, a fundamental crossroads for world traffic.” [Full story]

(Nevertheless, it should be noted that Kuwait does not rank among the major oil suppliers to the U.S.---see my post here. Crude supplies from Kuwait amounted to some 200,000 barrels a day in the month in 2010. -- D.R.)
                                              VLCC MV Irene SL

Source: EU NAVFOR Somalia, here. Description: Builder: Hyunday Heavy Ind, Ulsan, South Korea, 319,247 DWT 

Sakhalin-1 Project Drills World's Longest Extended-Reach Well

Scandinavian Oil-Gas Magazine, Jan 31, 2011
Exxon Mobil Corporation says that its subsidiary, Exxon Neftegas Limited, has successfully drilled the world's longest extended-reach well at the Odoptu field, offshore far east Russia. Exxon Neftegas is the operator of the Sakhalin-1 Project on behalf of an international consortium that includes affiliates of the Russian state company Rosneft RN-Astra and Sakhalinmorneftegas-Shelf; the Japanese corporation SODECO; and the Indian state oil company ONGC Videsh Ltd.

The Odoptu OP-11 well reached a total measured depth of 40,502 feet (12,345 meters or 7.67 miles) to set a world record for extended-reach drilling (ERD). The Odoptu OP-11 also set a world record with a horizontal reach of 37,648 feet (11,475 meters or 7.13 miles). Exxon Neftegas completed the record-setting well in only 60 days using ExxonMobil's Fast Drill Process and Integrated Hole Quality technology to maximize performance in every foot of hole drilled at OP-11.

Odoptu, one of three Sakhalin-1 Project fields, is situated 5 to 7 miles (8 to 11 kilometers) offshore northeast Sakhalin Island. [See map below -- D.R.]. The ERD process enables onshore drilling beneath the seafloor to the offshore oil and gas reservoirs to successfully operate in a safe and environmentally responsible manner in one of the most challenging sub-arctic environments in the world. [...]

Since the first Sakhalin-1 well was drilled in 2003, six of the world's 10 record-setting ERD wells have been drilled at the project. The specially designed Yastreb rig [see photo 1 below] has been used throughout, setting multiple industry records for measured depth, rate of penetration and directional drilling.

Since startup, the Sakhalin-1 project has produced approximately 300 million barrels (39 million tons) of oil for export to world markets. It also has been a key supplier of approximately 235 billion cubic feet (6.8 billion cubic meters) of associated natural gas to customers in Khabarovsk Krai, in far eastern Russia, to heat homes and meet growing energy needs. The project will continue to help meet future natural gas demand in this region.

Sakhalin-1 includes the Chayvo, Odoptu, and Arkutun Dagi oil and gas fields located off the northeast coast of Sakhalin Island in the Russian Far East. [See map and photo 2 below -- D.R.]. Potential recoverable resources are 2.3 billion barrels (307 million tons) of oil and 17.1 trillion cubic feet (485 billion cubic meters) of natural gas. Read more
                                      Map: Sakhalin-1

Source: Rigzone Description: Oil from the Chayvo deposit started to run through a pipeline to the De-Kastri terminal in Russia's Khabarovsk Krai in September 2006. An export terminal at De-Kastri began shipments to Japan and South Korea in October 2006. The Sakhalin-1 gas is supplied to local consumers via a pipeline owned by Daltransgaz. Drilling at the Odoptu oil and gas field began in May 2009, and commercial production began in September 2010. The product goes to the Chayvo processing facility and then to the De-Kastri for export. The Arkutun-Dagi field is yet to be developed, but first oil is expected in 2014; it will also go to De-Kastri via Chayvo. -- D.R.

                             Photo 1: Yastreb Land Rig
                                             

Source: offshore-technology.com Description: The Chayvo Yastreb land rig, above, launched in June 2002, was engineered and constructed especially for Sakhalin-1 (Houston-based Parking Drilling Co designed and constructed the "Yastreb"). It is designed to drill extended reach wells to offshore targets from land-based locations. State-of-the-art extended reach drilling (ERD) technology reduced the high capital and operating costs of large offshore structures and at the same time minimized the environmental impact in this sensitive near-shore area. Drilling at Chayvo was completed with a total of 20 ERD wells drilled, setting records in depth, horizontal reach and drilling speed. The Yastreb rig was dismantled, modified and transported to Odoptu field where it has been in operation since the startup of drilling in May 2009. -- D.R.

             Photo 2: Sakhalin-1 - Orlan Offshore Rig (Chayvo)

                                                 Source: Rosneft website

(Sakhalin-1 is the first large-scale shelf development project in Russia being implemented under a production sharing agreement---concluded in 1996. Project participation: Exxon holds an operating 30% stake in the project, Japan's Sodeco holds 30%, with Rosneft---via its affiliates RN-Astra, 8.5%, and Sakhalinmorneftegas-Shelf, 11.5%---and India's ONGC holding 20% each. For cooperation between Rosneft and ExxonMobil, see also my post here. For the longest extended-reach well, i.e. ERD, in Saudi Arabia -- Manifa field, please see my posts here and here. -- D.R.)

World Watch: [Oil/Gas Markets and Egypt]

by Jim Washer, EI
Geopolitics is making a comeback in oil markets. WikiLeaks revelations in December about Arab support for a US nuclear strike against Iran gave a modest boost to crude oil futures, and now civil unrest in Egypt has provided the impetus to push prices above $100/bbl for the first time since September 2008. Egypt is a significant oil and gas producer, but is more important as an energy transit point -- together, the Suez Canal and the Sumed [Suez-Mediterranean] pipeline handle around 2.8 million b/d of crude and products as well as 7% of the world’s LNG trade. [See remarks below -- D.R.]. While Egypt is therefore an important chokepoint, energy markets are in unusually good shape to cope with any disruption. Oil prices may have revisited $100/bbl, but there is plenty of slack in global energy infrastructure -- Opec is sitting on some 6 million b/d of spare upstream capacity, and commercial and strategic inventories remain ample. [Full story]

(Closure of the Suez Canal and the Sumed Pipeline---see map, sorry for the blurriness and the proportion, and photo below---would divert tankers around the southern tip of Africa, the Cape of Good Hope, adding 6,000 miles---or 9,656 kilometers---to transit, according to the Energy Information Administration--EIA, increasing both costs and shipping time. According to a report released by the International Energy Agency (IEA), shipping around Africa would add 15 days of transit to Europe and 8-10 days to the United States. On the other hand, energy analysts believe the real risk is not a closure of the desert conduits---the Suez Canal and the Sumed Pipeline---but that the unrest gripping Cairo will spread to neighboring nations or other Arab countries. Barclays Capital Research report---accessed via Platts, here---noted that around 14% of the world's LNG trade transits the Suez Canal each day with the vast majority of cargoes originating in the Middle East and heading towards Atlantic Basin markets. Also, Egypt exported around 2 Bcf/d of gas in 2009, the majority [some 70%] in LNG form, accounting for around 3.2% of global LNG supply. "In the event of a disruption of LNG exports from Egypt, the greatest implications for gas markets would be for Spain," Barclays Capital said, adding that global LNG markets were well supplied with "ample" production capacity available to meet any potential Egyptian shortfall. The report also noted that Egypt exports gas via the Arab Gas Pipeline, or AGP, and its El Arish-Ashkelon branch, which has the capacity to carry about 1 Bcf/d to Israel, Lebanon, Jordan and Syria. "Most Egyptian [oil] drilling activity has been halted as a result of the political instability, as several international E&P companies have announced staff evacuations," Barclays said. "Gas production, however, has not been affected so far, and there have been no reports of force majeure on LNG deliveries. Egypt's sea ports are officially open, although staff shortages and an absence of customs officials at the Alexandria and Damietta ports are reported to cause traffic disruptions." Egypt has two LNG plants at Idku and Damietta and operations have so far not been affected despite the evacuation of foreign staff. Gas flow to Israel has also not been interrupted. Israel received an estimated 2.1 billion cubic meters, i.e. bcm, in pipeline gas from Egypt in 2010, up from 1.7 bcm a year earlier. -- D.R.)

                                             Source: Oil Capital Ltd. via EIA

                                    Photo: Suez Canal

Source: National Geographic. Description: A tanker carrying liquefied natural gas (LNG) passes through Egypt's Suez Canal in 2007.

Enoc Opens Middle East's First Green Service Station

AMEinfo.com Jan 5, 2011
[Dubai's] Emirates National Oil Company (Enoc) has launched the first 'green service station' in the Middle East at the Emirates Hills neighbourhood in Dubai. [See image below -- D.R.] Underscoring the commitment of the company to the sustainable development initiatives of the UAE, the new eco-friendly service station has a range of unique features all aimed at reducing the ecological footprint of the users.

Among the innovative green initiatives at the station are advanced technological devices to contain petrol fumes released at the pump, and a variety of other state-of-the-art systems, including solar-powered lighting [i.e. solar panels], a 'waterless' car-washing system, new waste segregation systems, and design upgrades to reduce noise pollution. ...

The station generates half of its energy requirements from renewable sources. The site uses Solar Powered Pole and LED lights, with a long life span of up to 50,000 hours and low voltage safe against electrical fire hazards. These lamps do not need to be replaced for up to 12 years. ...

Sustainable water features have also been installed to cut water consumption by a quarter. The new service station recycles car-wash water and also provides customers the option to use a waterless car wash system, which cleans car without using a single drop of water.

The waterless car wash concept saves water and prevents detergents from polluting the environment with its new 'No-Wet' technique, an all-in-one eco-friendly car wash liquid. Made from all natural ingredients, the product does not contain petroleum distillates, silicone, abrasives, harmful chemicals or detergents that pollute water. ...

Enoc's environmentally-friendly engine oils PROTEC Green for gasoline engines and VULCAN Green for diesel engines will be available. Both are designed to ensure longer life span for vehicles and lower levels of greenhouse gas emissions.

The green Very Low Sulfur Diesel (VLSD) will also be available at the service station. This innovative diesel contains 10 times less sulfur than the standard one, which means a cleaner engine for cars and a cleaner environment.

Other key environmentally-friendly products include Hiclone fuel-saving devices. When installed on the vehicle, Hiclone improves fuel economy and engine efficiency while helping decrease air and noise pollution. Hiclone can decrease carbon footprint by 60%, as it reduces incomplete combustion and harmful emissions. It can also enhance the towing efficiency, reduce fuel consumption by 20%, and add 10% to the car's power. Moreover, the uniform movement of the pistons minimizes engine noise and prevents abnormal abrasion. Read Full

(See a related video at http://www.ameinfo.com/252979.html -- D.R.)

Credit: Megan Hirons Mahon/Gulf News, here. Description: The brand new Enoc green service station in the Meadows. It recovers released vapour from petrol pumps and storage tanks and condenses it back to fuel.

U.S. to Ease Requirements on Some Deepwater Projects

by Ayesha Rascoe, Reuters, Washington, Jan 3, 2011 Mon 8:11 PM EST

Credit: Reuters/Lee Celano. Description: Unused oil rigs sit in the Gulf of Mexico near Port Fourchon, Louisiana August 11, 2010.

The Obama administration on Monday eased new environmental barriers to some oil and gas deepwater projects, but companies will still have to meet stringent regulations before drilling resumes.

Oil companies and Republican lawmakers have complained that regulations imposed after the BP oil spill have brought Gulf of Mexico drilling to a standstill.

The [Interior] department's decision to waive some environmental requirements comes as Noble Corp announced that Marathon Oil Co canceled a four-year, $752 million contract for a deepwater rig in the Gulf due to lack of drilling permits.

The policy will impact 13 companies with projects that were already underway when the department imposed its ban on deepwater drilling. Companies will be able to forego additional environmental reviews depending on new calculations of the worst-case flow rate estimates for their wells.

While removing one potential obstacle for these companies, it does not automatically mean drilling will begin immediately.

Affected companies such as Chevron and Royal Dutch Shell, which were drilling wells when the department imposed its moratorium, must still meet new offshore drilling regulations before restarting their projects.

"We are taking into account the special circumstances of those companies whose operations were interrupted by the moratorium and ensuring that they are able to resume previously approved activities," said Michael Bromwich, head of [the Department of the] Interior's Bureau of Ocean Energy Management, [Regulation and Enforcement (BOEMRE)].

Since lifting its ban in October ... , the department has yet to approve any new deepwater exploration drilling permits.

Shell characterized the government's move as a good first step, but said more action is needed "to improve the timeliness and efficiency of the permitting process," according to a statement from the oil company.

Republicans, who will control the House of Representatives in the new Congress, vow to press the Obama administration on the slow permitting process. More

(For the Gulf of Mexico oil spill, see also my post, here -- D.R.)

US Ethanol Production Hit All-Time High in October: EIA Data

Platts, Dec 31, 2010
US monthly production of fuel ethanol reached an all-time high in October, figures released Thursday by the US Energy Information Administration show.

In October, US producers manufactured 27,410,000 barrels of fuel ethanol, up from 26,061,000 in September. The previous record was set in August, at 26,963,000 barrels, according to EIA's data.

The agency's data also showed stocks declined in October, to 17,295,000 barrels, from 17,408,000 barrels at end-September.

The US imported no fuel ethanol in October, EIA's report showed.

Industry analyst Andy Lipow calculated the percentage of ethanol in the US gasoline pool at 9.5% for October by converting the October ethanol production figure to 884,200 b/d, using US Department of Agriculture data to put exports at 26,800 b/d, and factoring in the stock draw.

Using EIA figures, Lipow calculated the overall October demand in the US for fuel ethanol to be 861,000 b/d. EIA put gasoline demand for October at 9,086,000 b/d, resulting in his 9.5% of the gasoline pool figure.

The January-to-October figures show average fuel ethanol production of 851,300 b/d, imports of ... , consumption of 825,700 b/d, and gasoline consumption of 9,054,000 b/d. This put ethanol at 9.1% of the US gasoline pool, according to Lipow.

The percentage of ethanol in the total pool of gasoline is significant in that a typical gallon of ethanol-blended gasoline has 10% ethanol in it; the 9.5% figure shows that ethanol has nearly saturated the US market.

The US Renewable Fuel Standard will push the required use of ethanol in coming years to well over the 10% of the gasoline pool. To that end, the Environmental Protection Agency has changed regulations to allow up to 15% blends in newer US vehicles. Automakers and gasoline sellers have criticized that move, citing insufficient testing of the new fuel in engines.

(Ethanol is a renewable fuel made from various plant materials, which collectively are called "biomass." In the United States it is most commonly produced from corn and used in gasoline at volume fractions of 10 percent or less, creating a fuel called E10 or "gasohol." Low-level blends, up to E10 (10% ethanol, 90% gasoline), are classified as "substantially similar" to gasoline by the U.S. Environmental Protection Agency (EPA), meaning they can be used legally in any gasoline-powered vehicle. On October 13, 2010, the EPA partially granted Growth Energy's waiver request application submitted under section 211(f)(4) of the Clean Air Act. This partial waiver will allow fuel and fuel additive manufacturers to introduce into commerce gasoline that contains greater than 10 volume percent (vol%) ethanol and up to 15 vol% ethanol (E15) for use only in model year (MY) 2007 and newer light-duty vehicles (i.e., cars, light-duty trucks and medium-duty passenger vehicles) once certain other conditions are fulfilled. -- See here . E10 has also been mandated in the state of Florida by Dec 31, 2010. -- See Ethanol Blend Mandate, here. It is important to emphasize that ethanol is increasingly available in E85 (i.e. 85% ethanol, 15% gasoline) -- see photos below, an alternative fuel that can be used in flexible fuel vehicles. Studies have estimated that ethanol and other biofuels could replace 30% or more of U.S. gasoline demand by 2030. -- See here.
                                                  Biofuels pumps

                                           Source: www.fueleconomy.gov here   

Source: http://news.tennesseeanytime.org/ here. Description: Green Island Grants support retail E85 and B20 pumps like these at a station along I-65 in Goodlettesville, just north of Nashville.  

E10 and other blends would help reduce foreign oil demand and greenhouse gas emissions. B20, shown in the photos above, is a mixture of 20 percent biodiesel and 80 percent petroleum diesel and can be used in almost all diesel engines without modifications. Biodiesel is a clean, renewable fuel produced from vegetable oils, such as soybeans, or animal fats. B20 is the most common biodiesel blend in the United States. Using B20 provides substantial benefits but avoids many of the cold-weather performance and material compatibility concerns associated with B100. -- D.R.)

U.S. Looks to Japan for EV Quick-Charge Plug

by Chuck Squatriglia, Wired (blog Autopia), Dec 30, 2010

 Photo: The i-MiEV charging at the nation’s first public DC quick charger, which opened earlier this year in Vacaville, California. /Mitsubishi

One major hurdle to the widespread adoption of electric vehicles is the time needed to recharge them. So-called quick chargers that do the job in about 30 minutes address that problem, but one major obstacle to the widespread adoption of quick chargers is the lack of a standardized plug.

That may soon change.

Earlier this year the Japanese embraced a standard plug they call CHAdeMO. Now it appears the United States may follow suit. According to a report in Yomiuri Shimbun, the United States (presumably through the Department of Energy) will install 310 CHAdeMO-equipped quick-chargers in Arizona, California, Texas, Tennessee, Oregon and Washington.

Those markets happen to be where the Nissan Leaf and Chevrolet Volt are currently available.

As Yomiuri Shimbun notes, widespread adoption of CHAdeMO by the United States and Japan almost certainly would make it the world standard for 440-volt DC charging. The Nissan Leaf already features a CHAdeMO-ready socket — it’s the larger one in the photo above. This is the first large-scale use of the standard outside of Japan, and speaks to the foresight of the Japanese automakers in rallying around a standard.

CHAdeMO, adopted by Toyota, Nissan, Mitsubishi and Subaru and 154 other Japanese companies, is a riff on charge de move, or, roughly, “charge for moving.” It’s also a pun on the Japanese phrase “O cha demo ikaga desuka,” which means, “Let’s have a tea while charging.” Full

(For EVs see also Deutsche Bank's research note, in my blog, here. -- D.R.)

Petrobras to Miss 2010 Brazil Oil Output Goal by 4.6%

by Peter Millard, Bloomberg, Dec 30, 2010
Petroleo Brasileiro SA, Brazil’s state-controlled oil company, will miss its 2010 domestic production target by 4.6 percent even after reaching record daily output earlier this week.

Petrobras, as the Rio de Janeiro-based company is known, produced an average 2 million barrels of oil a day in Brazil this year, below a 2.1 million-barrel target, according to a regulatory filing today. Daily output reached a record 2.26 million barrels on Dec. 27, Petrobras said. [Oil and liquids but not including natural gas production in barrels of oil equivalent per day, i.e. boed. -- D.R.]  

"2010 was a disappointment," Marco Saravelle, an equity analyst at Coinvalores in Sao Paulo, said today in telephone interview. "They need to set targets that they can meet."

Output fell in October to the lowest level since July, 2009, after Petrobras shut several offshore platforms for maintenance. The company has boosted output since November after starting several wells in the offshore Campos Basin. [Above -- full, see also map in this blog, here]

(Even falling below target, Petrobras has had a good performance in 2010. Petrobras performs various activities overseas too, and maintains a steady international operation. It is present in Angola, Argentina, Bolivia, Nigeria, etc. In late 2009, ultra-deepwater drillship Petrobras 10000--see image below, for instance, has started work in Angola. Petrobras monthly average in Brazil for December will be approximately 2.12 million barrels a day, 4.4% higher than the production achieved in November 2010, which was 2.03 million barrels a day -- see Scandinavian Oil-Gas Magazine, here. If the natural gas production is figured in, Petrobras’ total production in Brazil, in November, in barrels of oil equivalent per day--boed, reaches 2,378,674. This is 4.2% more than the daily average reached in October 2010 [2,283,689 barrels], and 3% more than its total average, i.e. including oil and gas, in November 2009. Considering the fields in Brazil and abroad, Petrobras' total oil and natural gas production averaged 2,620,347 boed in November 2010, compared with 2,534,274 boed in October 2010 -- see Scandinavian Oil-Gas Magazine, here. Brazil’s oil output, including foreign output, rose to a record 2.089 million barrels a day in November 2010, from 1.986 million barrels a day in November 2009, namely a 5.2% rise. Petrobras has been ranked fourth in the Platts Top 250 Global Energy Companies Rankings 2010, reflecting the 2009 financial performance, behind ExxonMobil, BP and Gazprom Oao---please see my post, here. Also, Petrobras retained its spot as the No. 15, in the 2011 Petroleum Intelligence Weekly's/PIW's ranking for 2009---please see my blog stand-alone page "Companies" > Petrobras, here. -- D.R.)             

Source: Shipspotting.com. Specifications: 6th generation deepwater; builder - Samsung; design - Samsung 10000 Double Hull. Description: Petrobras 10000 in the yard in Geoje, South Korea.

Happy New Year 2011!

Here's wishing all my readers all the Best and a Happy New Year. See You in the New Year 2011.

An oil rig near Takoradi Port in Ghana, about 40 miles (65 km) from Jubilee field, which has just begun producing oil. [See also my post, here -- D.R.] Like many in Ghana, port officials hope to share in an economic boom from new oil, but challenges are ahead. Photograph by Max Milligan via National Geographic, here

Noble Energy Announces Significant Discovery at Leviathan Offshore Israel

CNNMoney.com December 29, 2010
Noble Energy, Inc. (NYSE: NBL) announced today a significant natural gas discovery at the Leviathan exploration prospect offshore Israel. Drilled in the Rachel license, the well encountered a minimum of 220 feet (67 meters) of net natural gas pay in several subsalt Miocene intervals. [See photo below -- D.R.] Apparent reservoir quality is very good, and the intervals discovered are geologically similar to those intersected at Tamar.

Leviathan-1, located in approximately 5,400 feet (1,645 meters) of water, is about 80 miles (130 kilometers) offshore of Haifa and 29 miles (47 kilometers) southwest of the Tamar discovery. The results from the well confirm the pre-drill estimated resource range, with a gross mean for Leviathan of 16 trillion cubic feet (450 billion cubic meters). The Leviathan field is estimated to cover approximately 125 square miles (325 square kilometers) and, as a result of its size, will require two or more appraisal wells to further define total gas resources.

Charles D. Davidson, Noble Energy's Chairman and CEO, said, "Leviathan is the latest major discovery for Noble Energy and is easily the largest exploration discovery in our history. In the past two years, we and our partners have made three significant natural gas discoveries in the Levantine basin. ..."

David L. Stover, the Company's President and COO, added, "Our exploration program continues to deliver outstanding results. This discovery has the potential to position Israel as a natural gas exporting nation. For nearly a year now, we have had a team evaluating market possibilities, which includes various pipeline and LNG options. It's our belief that the natural gas resources at Leviathan are sufficient to support one or more of the options being studied. We are excited to be leading the exploration and development in this new basin and look forward to determining the best development option."

Drilling at Leviathan-1 will continue to a planned total depth of 23,600 feet (7,200 meters) to evaluate two additional intervals. Current well depth is 16,960 feet (5,170 meters). Results from the deeper tests, which have a low chance of success, are expected over the next couple of months. The Company's second contracted rig will arrive in the Eastern Mediterranean in early 2011 to spud a Leviathan appraisal well located 8 miles (13 kilometers) northeast of the discovery well.

Noble Energy operates Leviathan, offshore Israel, with a 39.66 percent working interest. Other interest owners are Delek Drilling and Avner Oil Exploration with 22.67 percent each and Ratio Oil Exploration with the remaining 15 percent. The Company also operates Tamar in the Matan license and Dalit in the Michal licenses with 36 percent working interests.

Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The Company has core operations onshore in the U.S., primarily in the DJ Basin, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa. Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL. Further information is available at www.nobleenergyinc.com.

Read Full

(16 trillion cubic feet [tcf] = c. 453 billion cubic meters [bcm]. Leviathan is almost double the size of the Tamar field off Israel's Mediterranean coast discovered in 2009 by Noble and its partners. Tamar is estimated to hold 8.4 tcf of natural gas. See also map below. Israel's proved gas reserves are estimated to be 7 tcf, up some 6 tcf from the previous year, due to the discovery of Tamar field in the Levant basin in the eastern Mediterranean, according to the latest Oil & Gas Journal's annual survey of proved reserves---Dec. 6, 2010. Houston-based Noble Energy ranks 74th among the world's top 100 oil companies, according to the latest PIW rankings.--See here. While Israel celebrates its anticipated emergence as a fuel-producing nation, record offshore gas discoveries are creating an unwanted side effect for the export-reliant country. Bank of Israel Governor Stanley Fischer is among the leaders and economists expressing concern that the finds may lead to a stronger currency, making the country’s goods more expensive abroad---please see "Israel Risks `Dutch Disease' as Gas Finds Help Strengthen Shekel," Bloomberg, Nov 2, 2010. -- D.R.)
                                                     
                                     Map: Israel's Gas Bonanza

Source: Noble via The Wall Street Journal (WSJ), December 30, 2010 ("Big Gas Find Sparks a Frenzy in Israel," by Charles Levinson and Guy Chazan) 

       Leviathan Rig (Transocean's Semi-Sub Sedco Express)

Source: Albatross via Ynet, December 29, 2010 ("Leviathan Gas Well Estimated at $45B," by Tani Goldstein, here.) 

Gulf of Mexico Oil Leak: US Sues BP over Oil Disaster

by BBC News, US & Canada, December 16, 2010 01:39 GMT

The US is suing BP and eight other firms for allegedly violating federal safety regulations in connection with the Gulf of Mexico oil spill.

The lawsuit asks that they be held liable without limitation for all clean-up and damage costs.

The Deepwater Horizon drilling rig explosion in April killed 11 workers and spilled millions of barrels of oil over several months.

The oil leak was described as the worst environmental disaster in US history.

   The Deepwater Horizon rig explosion led to what was described as the worst environmental catastrophe in US history

The lawsuit charges the companies under the US Clean Water Act and Oil Pollution Act.

US Attorney General Eric Holder said the complaint alleged that "violations of safety and operational regulations" caused the 20 April explosion.

The companies named in the lawsuit are BP Exploration and Production Inc, Anadarko Exploration & Production LP, Anadarko Petroleum Corporation, MOEX Offshore 2007 LLC, Triton Asset Leasing GMBH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc, Transocean Deepwater Inc and insurer QBE Underwriting Ltd/Lloyd's Syndicate 1036.

The key accusations are:

• Failing to take necessary precautions to keep the Macondo well under control in the period leading up to the 20 April explosion
• Failing to use the best available and safest drilling technology to monitor the well's conditions
• Failing to maintain continuous surveillance
• Failing to use and maintain equipment and material that were available and necessary to ensure the safety and protection of personnel, equipment, natural resources and the environment

"We intend to prove that these defendants are responsible for government removal costs, economic losses and environmental damages without limitation," Mr Holder said. ...

Before the White House's announcement on Wednesday, more than 300 lawsuits had been filed related to the spill and consolidated in federal courts in New Orleans.

People working in the fishing and tourism industries, as well as the owners of restaurants and various properties along the Gulf of Mexico, were among those involved in the suits.

The latest news on the BP oil spill follows the federal government's decision not to open new areas of the coast along the eastern Gulf and Atlantic to drilling.

Eleven workers on the Deepwater Horizon drilling rig were killed by the explosion on 20 April, and hundreds of miles of coast were polluted before the leaking well was closed off in July. Read Full