Oil and Gas News: 06/03/11

Friday, June 3, 2011

Oil & Gas Post - All News Report for Friday, June 03, 2011

Friday, June 03, 2011

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Commodity Corner: Oil Declines on Lackluster Jobs News

- Commodity Corner: Oil Declines on Lackluster Jobs News

Friday, June 03, 2011
Rigzone Staff
by Matthew V. Veazey

Crude oil for July delivery lost 18 cents Friday to settle at $100.22 a barrel after the U.S. Department of Labor released data suggesting that reports of an economic recovery may be premature.

According to the federal agency, the U.S. economy added 54,000 nonfarm payroll jobs in May—well below what analysts had anticipated. By comparison, the Labor Department reported last month that the U.S. workforce added 244,000 nonfarm payroll jobs in April.

The Labor Department also reported Friday that the country's official unemployment rate edged upward 0.1 percentage point in May to 9.1 percent.

Front-month crude oil peaked at $100.87 and bottomed out at $98.12 Friday. For the week, oil is down 0.4 percent.

July natural gas also ended the day lower, falling eight cents to settle at $4.71 per thousand cubic feet. The decline stems from predictions of milder temperatures in the Midwest and Northeast, lessening demand for electricity to power air conditioners in the regions.

The July contract price for gas traded from $4.715 to $4.81 Friday. Overall, natural gas is up 4.2 percent for the week.

July gasoline gained two cents to end Friday's trading at $2.99 a gallon—the intraday high. The price floor for the session was $2.92, and gasoline is down 3.2 percent for the week.

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Commissioner Seeks to Complete Rule-Making on Fracturing Bill a Year Early

- Commissioner Seeks to Complete Rule-Making on Fracturing Bill a Year Early

Friday, June 03, 2011
Rigzone Staff

Texas Railroad Commissioner (TRC) David Porter said would push the Railroad Commission (RRC) to complete the entire rule-making process requiring disclosure of chemicals used in hydraulic fracturing a year ahead of the deadline set in recent legislation.

The Texas Legislature on May 31 sent a bill to Governor Rick Perry on requiring the RRC to write disclosure rules for hazardous chemicals by July 1, 2012. The bill requires the RRC to complete rule-making for all other chemicals used in the process by July 1, 2013.

"In order for Texans to maintain confidence in the oil and gas industry, it is important for us to get this done as quickly as possible," said Porter. "Hydraulic fracturing has been an economic driver for Texas, creating hundreds of thousands of jobs and adding billions of dollars to local economies. We are currently seeing record activity in the Eagle Ford Shale due to hydraulic fracturing which is why I am creating a task force to study these very issues. We need to assure the public that hydraulic fracturing is safe and responsible – and has been for the past sixty years – and we need to do it now."

The RRC will begin the rule-making process at its next open conference this month and will hold open meetings throughout the state in coming months to garner public comment.

Porter said the agency may increase the number of members on TRC's newly formed Eagle Ford shale task force from the original plan for between 15 to 18 members due to the quality of applications. TRC is reviewing applications now and hopes to have selected all members of the voluntary task force, which will include a mix of energy industry members, local environmental groups, elected officials and landowners in the Eagle Ford shale area of South Texas, by the end of June.

TRC decided to form the Eagle Ford shale task force to head off the perception and communication problems encountered with the Barnett shale gas drilling boom hit Texas. "We're trying to be proactive, not reactive," Porter said.

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BOEMRE Improves Efficiency of Permit Review Process

- BOEMRE Improves Efficiency of Permit Review Process

Friday, June 03, 2011
BOEMRE

Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael R. Bromwich announced that the bureau is putting in place significant improvements in the oil and gas permit application process. These improvements include the publication of a permit application checklist to assist offshore oil and gas operators in submitting complete applications to drill; the implementation of completeness checks by BOEMRE personnel before significant staff time is spent reviewing the application; and the development of clear permit review priorities that will expedite agency reviews.

"We are constantly looking for ways to create a smarter, more efficient, and more transparent permit review process," said Director Bromwich. "Our goal is to make the process of submitting permit applications easier, reduce the time it takes to review permits and improve BOEMRE's communication with operators during the permit review process. We will continue to search for additional ways to improve our processes without in any way modifying or relaxing the more stringent safety and environmental rules we have implemented over the past year."

Key improvements that are being implemented include:

The publication of a "completeness" checklist for offshore oil and gas operators. This high-level checklist, which aligns with BOEMRE's review process, includes the main components that need to be submitted by operators to make a permit application complete. This checklist does not ensure approval of an application, but will clarify for operators what is needed in their submission. The development of the checklist comes after multiple meetings with operators who have requested such additional guidance.
To improve the efficiency of the review process and reduce the number of permits returned to operators because of incomplete information, BOEMRE personnel will conduct completeness checks before beginning an in-depth, substantive review of the application. Bureau personnel will focus on identifying significant omissions during the initial review so as to quickly identify applications that are not ready for full review. Deficiencies and omissions will be communicated to the operator for correction at the same time. This does not guarantee that incomplete information will not be found later in the review, but the completeness check is designed to capture the major gaps in submission criteria early in the review process.
In an effort to ensure efficiency, permits found to be complete will have a higher priority in the review process. The bureau has established priorities for reviewing permit applications as follows:

o Permits for ongoing operations, such as sidetracks or deeper exploration of an existing well;

o Applications deemed complete; and

o If staff time allows, applications that are not deemed complete, such as those missing a required containment plan or the necessary professional engineer certifications, may begin to be processed. This category also includes permit applications without an approved exploration or development plan.

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Japan to Launch Joint Oil Exploration with Top Russian Firm -Nikkei

- Japan to Launch Joint Oil Exploration with Top Russian Firm -Nikkei

Friday, June 03, 2011
Dow Jones Newswires

The Japanese government is in talks with Russia's state-owned Rosneft to jointly develop oil fields in eastern Siberia and the Far East, with exploration starting as early as this year, The Nikkei reported early Saturday.

Japan's Ministry of Economy, Trade and Industry and Russia's top petroleum company will form a working-level committee this summer to study deposits in the Magadan oil field in the Sea of Okhotsk as well as in eastern Siberia. If promising reserves are found, a new firm will be established, with a Japanese consortium holding a stake of up to 49%.

Inpex, Japan Oil, Gas and Metals National Corp., and trading houses are expected to participate.

After the March earthquake and tsunami, Russia proposed joint resource and energy development with Japan. Despite territorial disputes with Russia over islands off Hokkaido, Japan aims to strengthen bilateral economic relations and secure a steady supply of petroleum.

A geological research institute estimates that the Magadan field holds about 1.8 billion barrels of oil.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Statoil Plans to Become US Shale Operator by Early 2013 -Exec

- Statoil Plans to Become US Shale Operator by Early 2013 -Exec

Friday, June 03, 2011
Dow Jones Newswires
by Angel Gonzalez

Statoil, which built its oil and gas expertise in Norway's offshore waters, is stretching its land legs in the U.S., where it seeks to partake of the shale bounty.

Like many international oil and gas companies, Norway's Statoil has poured billions into joint ventures with some of the North American independents that in the last decade figured out how to profitably unlock the oil and gas trapped in shale, bankrolling their drilling while hoping to learn some of their techniques. But peering over its partners' shoulders is not enough: Statoil plans to run its own U.S. shale operation in South Texas's Eagle Ford Shale by early 2013, said the company's executive vice president for North America, Bill Maloney.

"We have aspirations and definite plans to become an operator in the onshore ourselves," he told Dow Jones Newswires in a recent interview at Statoil's North American headquarters in Houston. The company last October struck a $1.3 billion joint venture deal with Talisman in the Eagle Ford, which allows it the option to become operator.

"We are working towards that," Maloney said.

Statoil has been in the shale business since 2008, when it acquired 32.5% of a joint venture with Chesapeake in the Marcellus Shale, a big natural gas-rich rock formation in the Northeastern U.S. for $3.4 billion. Maloney said he sees some expansion in the Marcellus, but added that Statoil is really interested in growing its presence in the Eagle Ford, which is richer in oil.

High oil prices have turned the Eagle Ford into one of the hottest drilling basins in the world. On Wednesday, Marathon said it bought $3.5 billion in acreage from a company partially owned by private equity firm Kohlberg Kravis Roberts & Co., in one of the largest deals seen in the region.

Statoil is also interested in investment opportunities in other shales around the U.S., Maloney said.

Statoil's shale forays underscore the newfound promise found in the U.S. oil patch, once thought tapped out of its energy riches. It is now seen by large international oil companies as a key area for growth, as high oil prices have enabled many developing oil-rich countries to erect barriers to foreign investment.

Statoil helped make Norway the third-largest energy exporter, after Russia and Saudi Arabia, but the company's investments now extend all over the planet, from Algeria to Canada to Venezuela.

Its expansion in North America was gradual; throughout the years company made several large acquisitions in Canada and the U.S., including sizable deepwater acreage in the U.S. Gulf of Mexico, a position in Albertan oil sands, and the 2008 Chesapeake deal. By the time Maloney assumed the helm of a newly created North America unit in January, Statoil's assets in the continent had reached a critical mass.

Statoil had no employees in Houston in 2003, Maloney said. Now the company occupies nine floors in a high-rise near Houston's energy corridor--three floors more than last year--where nearly 400 employees work.

"We saw opportunities; we went after them," Maloney said. "Then, lo and behold, we built something here of size that we needed to separate out."

Copyright (c) 2011 Dow Jones & Company, Inc.

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Aux Sable Affiliate Adds Key Assets in Bakken Area

- Aux Sable Affiliate Adds Key Assets in Bakken Area

Friday, June 03, 2011
Aux Sable Liquid Products L.P.

Aux Sable Liquid Products Enbridge, Veresen and Williams Partners announced that Sable, an affiliate of Aux Sable, has executed an agreement with a wholly owned subsidiary of EOG to purchase and operate the Stanley Condensate Recovery Plant and the Prairie Rose Pipeline. The Prairie Rose Pipeline connects the Stanley Plant to the Alliance Pipeline, which delivers high energy dense phase gas to Aux Sable's Channahon, Illinois Plant for processing. The purchase agreement calls for the US $185 million transaction to close in July 2011.

The Stanley Plant commenced operation in February 2010 and will have a capacity of 80 MMcf per day when a current expansion is completed in June 2011. The plant removes the heavier hydrocarbon compounds while leaving the majority of the natural gas liquids in the rich gas delivered into the Prairie Rose Pipeline.

Bakken Shale

The 12-inch diameter, 83-mile Prairie Rose Pipeline also commenced operation in February 2010 and gathers gas from the Stanley Plant and other sources for delivery into the Alliance Pipeline system at Bantry, North Dakota. The pipeline has an estimated capacity of 110 MMcf per day and can be easily expanded to meet additional demand.

"This acquisition represents a significant step forward in the pursuit of our strategic growth objectives in the Bakken area, as it provides key infrastructure assets that will lead to increased deliveries of liquids-rich natural gas to our Channahon facilities," said W.J. (Bill) McAdam, President and Chief Executive Officer of Aux Sable. "With this acquisition, Aux Sable will be able to directly engage in and expand its role as a provider of value-added gathering and processing of natural gas and natural gas liquids from the Bakken play."

"As the largest crude oil producer in the North Dakota Bakken, EOG constructed these facilities when there was little infrastructure in the basin. We believe the time is right to sell these assets to an organization that specializes in gathering and processing, allowing us to focus on our core exploration and production activities in the region. We are pleased that Aux Sable recognized the value of both the Stanley Plant and the Prairie Rose Pipeline and are confident that under their management these facilities will benefit all operators in this part of North Dakota," said Ray L. Ingle, President of EOG's Pecan Pipeline (North Dakota), Inc. subsidiary.

Each of Aux Sable and Sable NGL is owned by Enbridge Inc. (42.7% equity interest), Veresen Inc. (42.7% equity interest) and Williams Partners (14.6% equity interest). Enbridge Inc. and Veresen Inc. each own a 50% interest in the Alliance Pipeline.

"We are pleased with this investment in that it bolsters our already strong position in the Bakken, one of the most prolific energy plays in North America," said Al Monaco, President, Gas Pipelines, Green Energy and International, Enbridge Inc. "The Pecan natural gas infrastructure increases the accessibility of the Alliance gas pipeline to Bakken-area producers and draws additional liquids-rich gas to the Aux Sable NGL fractionation plant near Chicago. The investment complements Enbridge's existing Bakken liquids pipeline systems in North Dakota and Saskatchewan. We look forward to working with producers to maximize the value of their resources in this region."

"This transaction demonstrates Veresen's commitment to execute on our strategic plans by expanding our services and presence in liquids-rich resource plays," said Stephen White, President and CEO of Veresen Inc. "The Pecan assets allow us to leverage our existing infrastructure investments, including Aux Sable and Alliance, and enhance our capacity to provide high-value services both to producers and end users."

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Strategic O&G Boosts 1Q11 Production by 150%

- Strategic O&G Boosts 1Q11 Production by 150%

Friday, June 03, 2011
Strategic O&G Ltd.

Strategic O&G announced its financial results for the three months ended March 31, 2011. The three month period ended March 31, 2011 is the first interim period for which the Corporation has prepared its financial statements under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

Highlights

A net loss of $4,891,000 was recorded in the period.
Spent $11.9 million on the capital expenditure program in the first quarter, primarily at Steen River and Maxhamish.
Steen River winter program was successfully implemented and included:
- Repair of the crude oil pipeline at Steen River (Marlowe North) by late January, 2011
- Completion of a $3.2 million 3-D and 2-D seismic program at Marlowe North
- Completion of a 6 well workover and optimization program at Marlowe North and Marlowe West
- Drilled, completed and tied in two successful Keg River oil wells at Marlowe North (8-22 and 10-22)
- Completed an all year access road to core areas of Marlowe North
Committed to a drilling rig from Akita Drilling Ltd. from August, 2011 to April, 2012 for use primarily at the Steen River area
Acquired an additional 38 sections (24,320 acres) of 100% working interest land in the North Marlowe area of Steen River at the June 1, 2011 Alberta land sale. These lands were acquired for an average price of $250 per hectare and are contiguous to Strategic's current Steen River landholdings.
Completed an all season road and well pads with its partner at Maxhamish. The all season infrastructure will facilitate drilling, completion and production operations through most of the year
March exit production was 1,150 boe/d as a result of the successful workover program in the Steen River area
Line of credit was recently increased from $5.0 million to $21.0 million, reflecting the increased reserve base from the Steen River acquisition and the subsequent workover and drilling program.

Overview of Performance

Summary

As previously disclosed, on December 22, 2010, Strategic closed an arms-length acquisition of all of the issued and outstanding shares of Steen River Oil & Gas Ltd. ("Steen River"), a private oil and gas exploration and production company.

At the time of acquisition, production was approximately 250 boe/d with additional production shut-in as a result of a pipeline break. In late January, 2011 the pipeline was repaired and 400 boe/d of production was brought back on-stream. Total production from this field at that time was approximately 650 boe/d, of which greater than 2/3 is light oil.

In the first quarter of 2011, Strategic completed 2 Keg River wells, a 3D seismic program and an all weather road into the North Marlow area of Steen River. Based on the preliminary results from the workover program, Strategic exited March with production of approximately 1,150 boe/d.

At Maxhamish, the 2011 development program is proceeding. The all weather road and well pad is nearing completion. The all season infrastructure will facilitate drilling, completion and production operations through most of the year. Drilling operations are expected to commence in the near future with completion of up to 4 multi-frac horizontal wells by the fourth quarter.

2011 first quarter results

The three months ended March 31, 2011 showed an increase in volumes over the comparable period of 2010. Average daily sales volumes increased by 151% to 790 boe/d in 2011 versus 315 boe/d in 2010. Revenues also increased by 186% to $4,613,896 for 2011 versus $1,689,641 in 2010. The increase was the result of the 150% increase in production and 9% increase in product prices realized in the first quarter of 2011 over same period in 2010. The Corporation received an average price of $64.85 per boe versus $59.44 in 2010 which is an increase of 9%.

For the three months ended March 31, 2011 average daily production was 790 boe/d versus 317 boe/d for the fourth quarter of 2010. Revenues for the first quarter of 2011 were $4,613,896 versus $1,639,920 in the fourth quarter of 2010. The increase in production and revenues is the result of a full two months of production included from the Steen River acquisition following resumption of pipeline access in the current quarter and oil prices improving over the quarter. The Corporation received an average price of $64.85 per boe in the first quarter of 2011 versus $56.21 per boe in the fourth quarter of 2010, a 15% increase.

For the three months ended March 31, 2011, the Corporation had a net loss of $4,891,099 or $0.04 per share basic and diluted as compared to a net loss of $1,225,601 of $0.02 per share for the three months ended March 31, 2010. The loss in 2011 arises from the stock-based compensation expense of $2,657,400 as a result of the issuance of stock options in the quarter and increased operating expenses. Negative funds from operations for the three months ended March 31, 2011 was $1,294,800 as compared to a funds from operations of $37,861 for the three months ended March 31, 2010.

Outlook for 2011

Strategic spent over $11.9 million on its capital program in the first quarter of 2011, primarily at Maxhamish and Steen River

Maxhamish

At Maxhamish, the 2011 development program is proceeding.

This includes:

completion of a year-round access road in early June to improve access to the area;
licensing and construction of drilling pads that can accommodate up to 8 wells per pad;
drilling up to 4 wells by the fourth quarter of 2011, with completions to follow;
building infrastructure where necessary, including battery, pipelines, etc.; and
assessment of future drilling program.

Steen River, northwest Alberta

At Steen River, where the Corporation has a 100% working interest and operates the field, Strategic has moved forward aggressively to develop the property. This included shooting a $3.2 million 3-D and 2-D seismic program, workovers/optimizations on 6 wells, building a year round road into certain core areas of the property and drilling two Keg River oil wells. The seismic program is currently being interpreted, and combined with the regional geological study currently being performed will help determine future drilling locations for late summer or early fall drilling.

Strategic has signed an agreement with Akita Drilling Ltd. to secure a drilling rig from August 2011 to April 2012. Over the next 12 months Strategic plans to drill up to 10 wells in Steen River.

Production has increased steadily from December 31, 2010 with March production of approximately 1,150 boe/d due to the repair of the pipeline, workovers and optimization at Steen River. An additional production increase is anticipated in the second quarter from the drilling of two successful Keg River wells at Steen River.

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El Paso Closes Revolving Credit Facilities

- El Paso Closes Revolving Credit Facilities

Friday, June 03, 2011
El Paso Corp.

El Paso Corp. has amended and restated its revolving credit facility and renewed the El Paso Exploration & Production Company (EPEP) revolving credit facility, both of which were set to mature in 2012.

Changes to the El Paso Corporation facility include the extension of maturity to 2016, the reduction of available commitments from $1.5 billion to $1.25 billion, and credit terms which now include more flexibility on collateral support and El Paso Corporation's general partnership interest in EPB as collateral. The EP facility also now provides for an elimination of collateral support upon the loans achieving investment grade status. There were no material changes to the covenant and collateral package supporting the $1.0 billion borrowing base facility for EPEP.

The EP facility was financed through a syndication of 23 financial institutions. J.P. Morgan Securities LLC and Citigroup Global Markets Inc. acted as coordinators for the EP Facility. The EPEP facility was financed through a syndication of 31 financial institutions. BNP Paribas Securities Corp. and Scotia Capital acted as coordinators for the EPEP facility.

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ATP Declares Quarterly Dividend

- ATP Declares Quarterly Dividend

Friday, June 03, 2011
ATP O&G Corp.

ATP has declared a quarterly cash dividend on its 8.0% Cumulative Convertible Perpetual Preferred Stock. The dividend rate is $1.99 per share and is payable on July 1, 2011 to shareholders of record at the close of business on June 15, 2011.

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Rex Appoints Interim CEO

- Rex Appoints Interim CEO

Friday, June 03, 2011
Rex Energy Corp.

Rex announced that Lance Shaner, currently chairman of the board of Rex Energy, has been appointed interim president and chief executive officer to replace Dan Churay, who is leaving the company. The company's board has commenced a search for a new CEO with an energy industry operational background, including both external and internal candidates. Patrick McKinney, executive vice president and chief operating officer, and Tom Stabley, executive vice president and chief financial officer, will continue in their roles under their existing employment agreements supporting Mr. Shaner while the board conducts the search.

Mr. Shaner commented, "The board of directors and I would like to thank Dan for his years of service on the board as past chairman of the compensation committee and his many contributions to the company during his tenure as CEO, especially in the areas of strategy, governance, talent management and the disposition of litigation against the company. We are looking forward to finding a new CEO with exploration and production experience at the conclusion of our search."

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White Marlin E&P Adds Executives to Management Team

- White Marlin E&P Adds Executives to Management Team

Friday, June 03, 2011
White Marlin E&P LLC

White Marlin E&P announced the addition of two seasoned oil and gas executives to their management team. Robert (Don) Gray joins the company as Vice President of Land and Louis Romero as Vice President of Exploration. Each executive has over 30 years experience in their respective fields.

Mr. Gray joined White Marlin from Houston based Radiant Oil & Gas where he served as Vice President of Land and Land Manager. Prior to Radiant, Mr. Gray was Land Manager for Americo Energy Resources and Petro-Guard Operating Company. He has also been an Assistant Vice President for Bank One (now JP Morgan Chase), and Manager of the Oil & Gas Division at Capital Financial Group. Additionally, Mr. Gray was president and one of the founders of Sandstone Exploration, Inc., and he has acted as a land management consultant to numerous oil and gas exploration and production companies. He began his career as a Staff Landman with Hunt Oil Company in 1980 after attending the University of Texas in Austin where he majored in Government, accompanied by a minor in Petroleum Land Management. Mr. Gray is a member of the American Association of Professional Landmen and the Houston Association of Landmen.

Mr. Romero is a highly qualified professional geologist with over 30 years of domestic and international oil and gas experience. His background includes prospect generation, screening, and company operations and management for hydrocarbon exploration in many of the basins of North America and internationally in the Far East, South America and Africa. Some of his career accomplishments include significant oil and gas discoveries in the US Gulf Coast as an independent and company affiliated geologist. Louis has led the development of reserve additions totaling over 55 million barrels of oil resulting in $2.7 billion of economic impact. Louis has previously worked with Devon Energy, Ocean Energy (formerly Flores and Rucks), Sandefer Oil and Gas, Crown Central Petroleum, Transco Exploration, and as an independent producer. Louis is a member of AAPG, Houston Geological Society, and the Lafayette Geological Society.

Terry Clark, President and CEO of White Marlin E&P, offered that, "We are proud to have these consummate professionals join our executive leadership. Don Gray and Louis Romero both bring extensive knowledge and experience that will further strengthen our ability to acquire, develop, and operate new properties. Their respective management skills compliment our already strong team, and I am confident that their contributions will accelerate the growth of our business."

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Peregrino Success Escalates Statoil Status Offshore Brazil

- Peregrino Success Escalates Statoil Status Offshore Brazil

Friday, June 03, 2011
Rigzone Staff
by Jaime Kammerzell

Peregrino Success Escalates Statoil Status off Brazil

The Peregrino field is 85 mi off Rio de Janeiro

Statoil started production from its Peregrino field offshore Brazil in early April. The Peregrino field is 85 km offshore Brazil from Rio de Janeiro in the Campos basin in about 100 m of water.

Back in 1994 when the field was discovered, Statoil wasn't even a shareholder in the BMC-7 and BMC-47 licenses, which were known as the Chinook field.

Original shareholders were Anadarko Petroleum Corp. with a 50% stake and EnCana Corp. with the remaining 50% stake. Statoil (formerly Hydro) purchased its 50% operating stake in the field from EnCana for $350 million in August 2006.

"The acquisition of Peregrino makes (Statoil) Hydro a major player on the Brazilian continental shelf. We have now established an excellent platform for further growth in an area with large oil and gas resources," Tore Torvund, Norsk Hydro executive vice president, said in November 2006.

StatoilHydro took control of the entire Peregrino field in December 2008 when it bought out Anadarko's stake. The agreement included Anadarko's 25% stake in the Kaskida discovery in the US Gulf of Mexico. The combined purchase price was $1.8 billion, plus a maximum pre-tax value of $300 million related to the Peregrino field to be earned by 2020, conditional on future oil prices above pre-defined threshold levels.

Statoil then agreed sell a 40% share in the Peregrino field to Sinochem Group, China's biggest chemicals trader, for $3 billion. The partners also entered into a Memorandum of Understanding (MoU) that underlined the wish of the two companies to jointly investigate further opportunities in Brazil and elsewhere.

At the time of the announcement, Statoils's CEO Helge Lund said, "The MoU is the beginning of a long term relationship between our two companies having similar international growth ambitions. I believe that we have supplementary skills and areas of expertise, strengthening both our opportunities globally by cooperation."

Lund continued, "In addition, we look forward to partner with Sinochem Group in the further development and operations of the large Peregrino field. Both companies see many opportunities for value creation through increased recovery and exploration for additional resources in the decades to come.

Field Development

Phase One of Statoil's field development plan included two drilling and wellhead platforms and a large floating production, storage and offload unit (FPSO). "The plan call(ed) for a total of 30 horizontal production wells to be drilled, together with seven water injection wells," said Statoil's Peregrino production director Johan Kr. Mikkelsen.

Peregrino Success Escalates Statoil Status off Brazil

In drawing up the field development plan, Statoil relied on its competence and experience gained while developing similar fields on the Norwegian continental shelf and drilling horizontal wells to increase recoverable reserves.

Hydro chartered AP Moeller – Maersk A/S (Maersk) to build the FPSO in February 2007. The FPSO was scheduled for installation in early 2010 in anticipation of start up later that year; however first production was delayed several months. The partners also entered into an agreement to rent two drilling platforms, which Kiewit Offshore Services Ltd. of Ingleside, TX, built for the Peregrino field.

In March 2007, Hydro submitted the Declaration of Commerciality for the Peregrino oil field to the Agencia Nacional do Petroleo (ANP) in Rio de Janeiro. The ANP approved the Plan of Development (POD) in mid-May that year.

More contracts quickly followed. The partners awarded Subsea 7 a $115 million contract for engineering, procurement, fabrication, and installation of six steel pipelines, 12 flexible risers, four power cables and two mid-water arches to support the cables. Subsea 7 installed the pipelines in Q1 2009. And Wellstream was tapped to supply twelve 11.5 in. ID flexible risers to connect subsea pipelines to two wellhead platforms and an FPSO in 125 m of water. Prysmian Cables & Systems supplied 20 km of Dynamic subsea power and communication umbilicals.

In November 2007, StatoilHydro along with Anadarko won two blocks in the National Agency of Petroleum's ninth bidding round. Blocks CM529 and CM 530 are in 100 m of water adjacent to the Peregrino field. The partners hoped to expand the Peregrino field into these blocks in the future.

Shortly thereafter, StatoilHydro announced that the Peregrino reserves estimates increased to 300 to 600 MMbbl, double that of the original estimates. Statoil planned to use produced water injection and rock compaction, which would yield a recovery factor of 20% compared to the original estimate of 9%. The operator planned for 23 extra well slots for the potential use of multilateral wells that would further increase the recovery factor from the reservoir.
In the first half of 2008, Statoil awarded several more key contracts. J Ray McDermott engineered, procured, and constructed 6,500 metric tons of topside modules for the Peregrino FPSO. Fabrication and construction started in Q3 2008 and was completed in Q4 2009.

Deepwater Specialists Inc. (DSI) provided commissioning activities in the US for the two drilling and wellhead platforms. DSI coordinated and managed the commissioning activities for the interfaces with the drilling modules installed on the platforms.

Each platform comprises an eight-legged jacket structure; foundation piles; well slot conductors; deck structure, equipment and systems; and wellhead decks, including cranes. Commissioning of the platform decks, which were designed by Mustang Engineering, and the living quarters were performed at fabrication yards in South Texas.

The Heerema Hermod heavy lift vessel installed the two wellhead platforms in March 2010. The two jacket substructures for platform A and B were installed in 2009.

Peregrino Success Escalates Statoil Status off Brazil

Hermod installed the two wellhead platforms.

In addition, ClampOn equipped the subsea production manifolds in 8,200 ft of water with their subsea sand and pig detectors. And BW Offshore delivered and installed the completed submerged turret production (STP) buoy, including swivel stack, and mooring system. First Subsea provided 10 Ballgrab ball and taper connectors, which were attached around the side of the buoy ahead of tow out in December 2009, thus simplifying buoy lifting and tow out operations. Once in buoy was in position, the male Ballgrabs and mooring lines were connected subsea with assistance by ROV, with no need for divers.

The offshore construction vessel Boa Deep C installed the FPSO's mooring systems in early 2010.

Keppel then delivered the converted Maersk Peregrino in Q3 2010. Keppel converted the Maersk FPSO according to stringent requirements to handle heavy crude and operate in the challenging environment off Brazil.

Nils S. Andersen, Group CEO of Maersk, said, "Tailoring the FPSO to meet the requirements of the Peregrino field (was) a complex undertaking. We (chose) Keppel Shipyard for this massive project due to the skills and competencies of the Keppel yards."

Work on Maersk Peregrino involved the marine conversion of a newbuild VLCC (Very Large Crude Carrier); the installation and integration of the topside modules; the assembly, installation and integration of the APL internal turret; the fabrication and installation of the flare tower, process piperack and helideck; and the upgrading of the accommodation quarters.

The Maersk Peregrino has a storage capacity of 1.6 MMbbl, and processes 100,000 b/d.

Peregrino Success Escalates Statoil Status off Brazil

Maersk Peregrino

Statoil started production at the Peregrino field in early April 2011. Production is expected to ramp up to 100,000 boe/d. The discovery made Statoil an important long-term operator and partner in Brazil's growing oil and gas industry.

"With the Peregrino field in full operation Statoil will be the second-largest operator in Brazil, and it offers us an excellent opportunity for future growth in the country. The Peregrino field is a legacy asset and will contribute significantly to both Statoil and Brazil's oil production for many years to come," said Helge Lund, president and CEO of Statoil.

Less than two weeks later, Statoil announced that it had found a new oil find adjacent to the Peregrino field. An exploration well drilled by the Blackford Dolphin in 120 m of water in the Peregrino South structure a few kilometers south of Peregrino encountered oil in sandstones of the Carapebus geological formation. A significant gross oil column of 130 m was proven in the well and further work was performed to confirm the volumes.

"The results confirm the significant potential in the Peregrino area and underline the beliefs we have had in the upside," said Tim Dodson, executive vice president for Exploration in Statoil.

"The results will indeed be implemented into our plans for further development of the field," said Kjetil Hove, head of Statoil's Brazil activities and vice president in the company's Development and Production International business area.

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OMV Makes Oil Discovery in Iraqi Bina Bawi Block

- OMV Makes Oil Discovery in Iraqi Bina Bawi Block

Friday, June 03, 2011
OMV

OMV reported drilling success at its operated Bina Bawi block in the Kurdistan Region of Iraq. OMV is currently drilling an exploration well (Bina Bawi 3) and encountered hydrocarbons in one of the primary reservoir targets. The well is still being drilled and further investigations are planned in the course of the well operations including evaluation of deeper potential targets. OMV will inform about the full potential as soon as more information is available.

Jaap Huijskes, OMV Executive Board member and responsible for Exploration and Production stated, "We are very pleased to announce this discovery of oil. It seems good quality oil and it was flowing to surface following a drawdown test. We are now going to continue drilling but I am confident that the final results will be promising."

OMV has direct stakes in five blocks in the Kurdistan Region of Iraq, of which in three as operator. Operated blocks are Bina Bawi (36%), Shorish (100%) and Mala Omar (100%).

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Breitling Concludes Ops at Duval County Well

- Breitling Concludes Ops at Duval County Well

Friday, June 03, 2011
Breitling O&G Corp.

Breitling announced that the Breitling-Diego Garcia #1 in Duval County, Texas is being completed as a possible oil and gas producer after reaching a total vertical depth of 6,250 feet.

The well was subsequently logged by Baker Hughes and based on analysis by Breitling's engineers and geologists as well as Baker Hughes' analysis of the Diego Garcia #1 logs. Chris Faulkner, CEO of Breitling Oil and Gas, said, "We had some good shows through the Pettus and Yegua and the well logs confirmed that."

Baker Hughes Logging Company indicated that the most favorable zones for hydrocarbon production were a Pettus Oil Sand at 5446', gas and oil in an upper Yegua Sand at 5636', and Yegua gas sands at 5703' and 5960'. Laboratory analysis of side wall cores and Formation Testing data confirmed the presence of oil and gas in these formations.

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Samson O&G Updates Ops in ND, Wyoming

- Samson O&G Updates Ops in ND, Wyoming

Friday, June 03, 2011
Samson O&G Ltd.

Samson O&G updated its operations at the North Stockyard field in North Dakota and the Hawks Springs Project in Wyoming.

NORTH STOCKYARD FIELD NORTH DAKOTA

Everett #1-15H (31% Working Interest)

The 4 1/2 inch production liner has successfully been run to a measured depth of 17,350 feet in the Everett #1-15H well. This liner will enable a 20-stage fracture stimulation to be undertaken in late August or early September.

The Everett #1-15H well is located in Township 154N, Range 99W, Section 15 in Williams County, North Dakota. The Everett #1-15H well is Samson’s sixth Bakken well in the North Stockyard Field.

Earl #1-13H (32% Working Interest)

As previously advised, during the frac plug drill out operations, in the Earl well, the drill string parted and left a string of tubing and a drilling assembly in the well bore. Fishing operations have now been completed with the entire remaining bottom hole assembly recovered. While preparations were being undertaken to drill out the remaining frac plugs, Williams County roads near the drill site were temporarily closed due to the recent heavy rainfall and flooding, restricting the movement of materials. Accordingly the well was shut in and secured. The road closure is expected to delay operations by approximately 1 week.

The Earl #1-13H well is located in Township 154N, Range 99W, Section 13 in Williams County, North Dakota.

HAWKS SPRINGS PROJECT WYOMING

Samson has received two well proposals from Chesapeake. The wells proposed to be drilled by Chesapeake are located on the southern boundary of the Hawks Springs project, and are expected to be drilled consecutively in September and October of this year. Samson has until July 12 to elect to participate and will use this time to evaluate the proposals and make a decision. The wells are:

State 24-63 14-1H (SSN working interest 12.5%)
State 24-63 10-1H (SSN working interest 25%)

These wells have been proposed as 4,290 feet horizontals that will be fracture stimulated.

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Nitro Recompletes Plummer Wells

- Nitro Recompletes Plummer Wells

Friday, June 03, 2011
Nitro Petroleum Inc.

Nitro announced that the recompletion of the Plummer 1 & 2 wells were successful. The wells are currently producing approximately 7 to 8BOBD. We are estimating this will add approximately $10,000 per month cash flow to the company. This is a 400% increase in cash flow. Jim Borem, President and CEO of Nitro Petroleum Incorporated, feels that with the wells currently producing at this rate that this should increase the company's cash flow by approximately $10,000.00 per month.

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Petsec Enters Sale, Purchase Agreement with Horizon

- Petsec Enters Sale, Purchase Agreement with Horizon

Friday, June 03, 2011
Petsec Energy Ltd.

Petsec Energy has agreed to sell 100% of the company's wholly owned subsidiary, Petsec Petroleum LLC, which holds Petsec Energy's entire interest (25% working interest) in Block 22/12, Beibu Gulf, China.

Petsec Energy has entered into a Sale and Purchase Agreement with Horizon for a A $38 million cash payment, plus options with a 3 year term and exercise price of 37 cents/share over 15 million Horizon Oil.

The sale –which is expected to be completed during June 2011 –follows previous advice from Petsec Energy that it had decided to put the China interests on the market and to use sale proceeds to fund a significant expansion of the Company's USA petroleum operations.

Petsec's Chairman, Mr. Terry Fern, said the sale of the China interests, combined with Petsec's existing Gulf of Mexico gas production, would provide funds to launch the Company into a new era of growth in the USA.

"Our Board took the view that the required funding of US $37 million to develop the Company's 12.25% interest in the 6.12/12.8W oil fields, in Block 22/12, would deliver better and earlier returns if applied to shale oil operations in the USA," Mr. Fern said.

"As well as our strategy of moving into areas where the shale source rocks are liquid rich, Petsec is also making the structured transition to greater focus on oil exploration generally –in particular since there is currently an oversupply of natural gas in the USA and a relatively low price as a consequence," he said.

"This includes our previously stated move away from the exploration and production of smaller, natural gas targets, which at current US natural gas prices are marginally economic. Instead, we have set a minimum prospect target of greater than 20 billion cubic feet of gas equivalent (Bcfe) and with concentration on those prospects that are likely to have higher hydrocarbon liquids content and hold associated oil."

Petsec, which last week announced that it was debt free after eliminating US $100 million of debt during the past three years, plans to accelerate its move into the shale oil business as well as transitioning its traditional Gulf of Mexico oil and gas exploration and production focus to the Gulf Coast and onshore Louisiana and Texas.

Last year the Company participated in the Marathon gas/condensate discovery onshore Louisiana with a well drilled to 18,800 feet. The follow-up Marathon No 2 well is currently drilling ahead at 17,300 feet, with a target total depth of 21,000 feet.

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Explosion at Chevron Plant in Wales Kills 4; Investigations Launched

- Explosion at Chevron Plant in Wales Kills 4; Investigations Launched

Jun 3, 2011

Chevron Corp (NYSE:CVX) launched an investigation today into an explosion that occurred Thursday evening at its Pembroke refinery in southwestern Wales that killed 4 people and seriously injured another.

A Chevron spokeswoman said in a statement read out at the plant, "We have immediately launched our own investigation which will run in tandem with the HSE's (Britain's Health and Safety Executive regulator) own investigation. One storage tank is out of action and another is damaged but other than that the plant remains fully operational. However, given the circumstances, non-essential work has been suspended today."

Police said a fire had broken out after an explosion in a storage tank during maintenance. Ad adjacent storage tank was also damaged.

Gwyn Thomas, Chief Superintendent of the Dyfed Powys police department said, "Paramedics have confirmed that four people lost their lives as a result of the incident. Officers are now in the processes of informing the next of kin and will support the families throughout this difficult time."

The explosion was in a non-core part of the plant, meaning the plant will continue to operate, and most workers are working today, Friday.

Chevron has a potential upside of 23% based on a current price of $100.31 and an average consensus analyst price target of $123.4.

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Tesla Motors Announces Pricing of Follow-On Offering of 5.3 Million Shares

- Tesla Motors Announces Pricing of Follow-On Offering of 5.3 Million Shares

Jun 3, 2011

Tesla Motors, Inc. (NASDAQ:TSLA) announced today it has priced and fully allocated its follow-on offering of 5.3 million shares of common stock at $28.76 per share, the closing price of the stock on June 2, 2011.

The company has granted the underwriters a 30-day option to purchase up to an additional 795,000 shares at the offering price.

Tesla offered all 5.3 million shares. Two additional private placements are occurring concurrently with the offering.

Tesla's CEO, Elon Musk, is purchasing 1.416 million shares of common stock directly from the company at the offering price, and Blackstar Investco LLC, an affiliate of Daimler AG, is purchasing up to 637,475 shares directly from the company, also at the public offering price.

Goldman Sachs acted as the sole underwriter for the follow-on public offering.

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GT Solar International Announced It Received An Order Worth $460.4 Million

- GT Solar International Announced It Received An Order Worth $460.4 Million

Jun 3, 2011

GT Solar International (NASDAQ:SOLR) announced it received an order for its advanced sapphire crystallization furnaces totaling $460.4 million from a new market entrant.

Tom Gutierrez, GT Solar's president and CEO said, "Our customer is a well established, diversified manufacturing company located in China who is new to the LED industry. We are pleased that they have selected our advanced sapphire growth technology for their new sapphire production facility. The market acceptance of our sapphire growth technology has been remarkable and it speaks to the confidence our customers have shown in our ability to help them build successful businesses that leverage our crystalline growth expertise and our global equipment installation and support resources."

GT Solar International has a potential upside of 22.5% based on a current price of $12.02 and an average consensus analyst price target of $14.72.

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U.S. Employment Rose Far Less than Expected

- U.S. Employment Rose Far Less than Expected

Jun 3, 2011

Reuters reported that the US employment climbed less than expected in May to record its weakest reading since September. The unemployment rate increased 9.1 percent as cost of energy prices are higher and the impact of the Japan earthquake and tsunami bogged down the economy.
In a poll conducted by Reuters, economists had expected payrolls to increase 150,000 and private hiring to improve. The government even adjusted employment figures for March and April to confirm that 39,000 fewer jobs were created than previously estimated.

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Witnesses Say Gulf Drilling Ban Was A Harsh Blow

- Witnesses Say Gulf Drilling Ban Was A Harsh Blow

Friday, June 03, 2011
Houston Chronicle
by Jennifer A. Dlouhy

The Obama administration's reactions to last year's BP oil spill did more damage than the crude itself, Mississippi Gov. Haley Barbour and Gulf Coast employers told a House committee Thursday.

Barbour said little oil reached Mississippi's shores, but the administration's May 2010 decision to impose a five-month ban on most deep-water drilling has left a lasting impact.

The moratorium "not only cost jobs in all the Gulf states, it hurt the economy nationally by reducing domestic oil production," Barbour told the House Oversight and Government Reform Committee.

Barbour, a Republican who recently ruled out a presidential bid, added that the government is still moving too slowly in approving deep-water projects.

"This will have a lasting impact on an already out-of-balance oil trade deficit," Barbour said. "Great jobs are being lost."

But Obama's top offshore drilling regulator -- Michael Bromwich, head of the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement -- testified that the post-spill priority was boosting the safety of oil and gas operations near U.S. coasts.

The ocean energy bureau has approved 55 permits for shallow-water wells since new safety rules were imposed last June.

The agency also has permitted 15 deep-water drilling projects for which applicants were required to prove they could contain oil if an underwater well blew out as BP's Macondo well did.

After the resulting explosion on April 20, 2010, killed 11 Deepwater Horizon drilling rig workers and unleashed a 5-million-barrel oil spill, the administration overhauled the government's oversight of offshore drilling to eliminate possible conflicts of interest.

Rep. Darrell Issa, R-Calif., said those bureaucratic changes and a subsequent slowdown in the permitting of offshore drilling projects exacerbated economic damage from the spill.

"Much of the suffering and loss from the spill was made worse by poor decisions of administration officials," said Issa, the panel chairman. "When the administration did act, its major accomplishment was a hasty bureaucratic reorganization" and an offshore drilling shutdown that has caused "a paralyzing loss of jobs."

Cory Kief, president of Larose, La.-based Offshore Towing, said his tugboat company -- once hired to tow dozens of shallow-water rigs monthly -- has been hit hard by the drilling decline.

"We understand that precious lives were lost, and that an environmental disaster that was some 60 years in the making should not be ignored," Kief said. "However, there was a governmental agency that had a hand to play in this along with the others."

But Bromwich, the ocean energy bureau director, said that even if it takes more time for oil companies to satisfy new safety rules and for regulators to verify their compliance, that's better than the alternative.

"Our new regulations to strengthen drilling safety and protect the environment have required operators to work to make sure they drill safely, and our drilling engineers have to work to ensure compliance with the expanded set of requirements," Bromwich said. "That takes more time than the process that existed previously, when the rules were inadequate and some of our reviews were insufficiently exacting."

"This may be frustrating to some in the industry, but the additional rules and heightened scrutiny are completely appropriate and in the best interest of the nation."

The presidential commission that investigated the Deepwater Horizon disaster found that oil companies lost control of Gulf wells 79 times from 1996 to 2009, Bromwich noted.

"That's 79 near-misses -- 79 almost-Deepwater Horizons," Bromwich said.

It's impossible to reduce risk to zero, he said, "but we have to work constructively to try to manage those risks in a balanced way so we don't impose inappropriately high costs on industry and yet we do raise the bar on safety."

Bromwich added that he "would not have been comfortable" relaunching deep-water drilling after the spill without first strengthening offshore safety rules.

But Barbour argued that the government overreacted -- especially given a history of more than 31,000 oil wells drilled in the Gulf without devastating spills.

Barbour likened the deep-water drilling ban and subsequent safety regulations to outlawing left turns "because they're a little more dangerous."

U.S. economic needs and the urgency of domestic energy production outweigh the risk, Barbour said.

"The risk of one in 31,000 is worth taking when you're talking about something that is so important to the economy of the United States of America," he said.

Copyright (c) 2011, Houston Chronicle

The Gulf of Mexico Oil Spill
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Chevron Strengthens Portfolio Offshore AU with Arrival of Semisub Osprey

- Chevron Strengthens Portfolio Offshore AU with Arrival of Semisub Osprey

Friday, June 03, 2011
Chevron Corp.

The Atwood Osprey, Chevron's newly contracted ultra-deepwater semisubmersible drilling rig, has arrived in the waters off northwest Australia. Constructed in the Jurong Shipyard in Singapore, the rig will commence operations drilling and complete a queue of development wells as part of the Gorgon Project. The development drilling program scheduled for 2011 and 2012 represents the most significant investments Chevron has made in development drilling offshore Western Australia.

Chevron Australia managing director Roy Krzywosinski said Western Australia is pivotal to the company's strategy of building an internationally competitive gas business in the Asia-Pacific region. He said the company expects the Atwood Osprey to play a key role in strengthening Chevron's growing exploration, appraisal and development portfolio for at least the next three years.

"Chevron continues to make significant investments in developing Australia's natural gas resources," Krzywosinski said. "The arrival of this newly contracted rig represents our ongoing long-term commitment to grow our natural gas business in Western Australia."
Safety First

To ensure a safe startup and a strong safety culture is in place, the Australasia business unit's (ABU) drilling and completions team held three engagements with the Atwood Osprey crew to ensure Atwood's safety management system and those of our business partners were fully aligned with Chevron's expectations for operational excellence.

ABU Drilling and Completions manager Kent Springer said that through these engagements he was confident that Atwood Oceanics and its crew would achieve their vision statement of "always exceeding your expectations" and continue their commitment to safety, personal health, environmental stewardship, efficiency and reliability.

"Both Chevron and Atwood have systems in place to make the rigs as safe as possible. However, these systems are ineffective without the commitment of all our personnel, both rig- and office-based, adhering to them," Springer said. "Therefore, having members of the ABU management team—including Roy Krzywosinski—come along and tell the crew that they have their personal backing to use stop-work authority if they see an unsafe risk or behavior is a powerful message."

The Atwood Osprey can accommodate as many as 200 people, is 426 feet (130 m) tall and 377 feet (115 m) long. When moored, it will be capable of drilling as far as 31,988 feet (9,753 m). With its own mooring equipment, it can operate in water as deep as 5,905 feet (1,800 m), or 8,202 feet (2,500 m) with pre-laid mooring.

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Sterling Reaches TD at Cladhan Appraisal Well

- Sterling Reaches TD at Cladhan Appraisal Well

Friday, June 03, 2011
Sterling Resources Ltd.
by SubseaIQ

Sterling announced the completion of drilling of the 210/30a-4X well on Block 210/30a in the United Kingdom North Sea. This is the fourth well (third side-track) drilled in the current four well campaign to further appraise the extent of the Cladhan reservoir.

The 210/30a-4X well was drilled in the most southern limit of the northern core area in a potentially separate channel, utilizing the Transocean Prospect rig. The objectives of the 210/30a-4X sidetrack well were to core the full reservoir section approximately one kilometer south and approximately 60 feet updip of the oil bearing 210/30a-4 well, and evaluate the southern fringe of the northern core area.

The 210/30a-4X well was drilled to a total measured depth (MD) of 10,614 feet encountering 171 feet gross, 105 feet net (vertical thickness) of high quality Upper Jurassic sands. Almost 180 feet of core was successfully recovered across the full reservoir section.

Petrophysical analysis of the interval showed five feet of oil-bearing sand at the top of the interval with an Oil-Down-To at 10,177 feet True Vertical Depth Subsea (TVDSS). An oil sample was obtained from the interval. A further 100 feet of water-bearing sand was encountered below thin shale which separates the top and bottom sands. A clear contact has not been observed although the top and bottom sands appear to be in pressure communication. The presence of a known Oil-Down-To bodes well for updip oil in other channels with the same pressure regime.

Generally, reservoir quality is very good with porosities up to 25 percent, substantiated by measurements obtained while taking fluid samples. These pressure measurements also confirm that the interval is over-pressured on trend with the 210/30a-4Y well, but some 900 psi lower than the discovery area. The implication of this information is that the southern fringe of the northern channel area is in communication with the central channel, being distinct from the main reservoir in the northern channel area. The well will be suspended for possible re-use as a future development well at this location or elsewhere after a sidetrack. With the completion of this four well drilling campaign, RPS Energy will start a review of the Cladhan resources with the intent of publishing an update report within a few weeks.

"Notwithstanding the presence of predominantly wet sands at this depth in this separate channel compartment, we are encouraged by the presence of oil in the top sand and by reservoir quality at this location. Further updip prospectivity is certainly promising," remarked John Rapach, Sterling's Chief Operating Officer. "We have proved that our current seismic model can adequately predict sand thickness but reservoir quality definition is now paramount for further appraisal and development drilling. Our next planned subsurface activity is to complete full reprocessing and interpretation of the existing seismic dataset incorporating all of the log, core, fluid and pressure results obtained during this current drilling campaign. Consequently, the next drilling campaign will probably commence in early 2012," noted Mr. Rapach.

"Our development planning is concentrating on either a subsea tie-back or FPSO development of the main northern core area with further definition of reserves and resources during our next drilling campaign. We are commencing pipeline route and environmental survey work within the next few weeks," added Mr. Rapach.

Mike Azancot, Sterling's Chief Executive Officer, commenting on these results noted, "The current exploration and appraisal drilling campaign on Cladhan has been successful in increasing the height of the oil column by 798 feet to 1228 feet in total. The extent of the development of the northern core area is now better defined with this increase in oil column. The fan area in the east of the field remains prospective as the results from the 210/30a-4Z well drilled in this campaign are not conclusive due to its proximity to a major fault. Our plan towards development with options for increased resource exploitation after further drilling is now underway with a target for first oil in 2014."

Sterling holds a 39.9% interest in license P1064 which contains Cladhan, and is the operator. The partners are Wintershall (UK North Sea) Ltd. with 33.5 percent, Encore Petroleum Ltd with 16.6 percent and Dyas UK Ltd with 10.0 percent.

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Jakarta Aims to Attract Energy Firms

- Jakarta Aims to Attract Energy Firms

Friday, June 03, 2011
Knight Ridder/Tribune Business News
by Lynn Lee, The Straits Times, Singapore / Asia News

As more people and more vehicles push up demand for energy in Indonesia, the government is under pressure to crank up the output of crude oil and gas.

But first it will have to win over investors -- including foreign firms with deep pockets -- to explore new sites.

These investors complain of a lack of reliable data on oil and gas reserves, frequent changes to laws, and conflicting legal interpretations between the central and local governments as barriers to investment.

All that makes their 15 percent share of the profit split with the government unattractive, they say.

Major players in Indonesia include Chevron from the United States and French oil giant Total. Indonesia's state-owned firm Pertamina accounts for around 15 percent of crude oil production, and owns the eight refineries supplying petrol to the domestic market.

Energy analyst Kuturbi, who like many Indonesians goes by one name, said current oil prices of around US $100 per barrel should be an incentive for companies to take part in oil exploration.

"But since there is low interest, this signals that something is wrong with how the government is managing investment in oil exploration," said Dr. Kuturbi, who is from the Centre for Petroleum and Energy Economics Studies in Jakarta.

Last year, only 21 exploration contracts between investors and the government were signed, compared to 34 in 2008. Two weeks ago, the government offered 20 oil and gas blocks in the first round of tenders this year, and said it would consider giving investors a bigger cut of profits and more favorable tax rates if they explored less accessible sites, such as those in eastern Indonesia.

The director-general of oil and gas at the Energy and Minerals Ministry, Ms Evita Legowo, said the ministry would try to find money for more detailed geological studies.

"We will try for this in the 2012 fiscal year. We haven't got the budget for it now... and some investors are waiting to see if we amend the oil and gas law before they decide whether or not to invest," she said earlier this week.

Mr. Kuturbi pointed out that around 70 percent of exploration contracts signed between 2002 and 2008 experienced delays in starting work, further depressing oil production. Oil and gas regulator BP Migas said these were due to problems with land acquisition to drill wells and poor project management.

Crude oil production -- at around 1.5 million barrels per day in the 1990s -- has in the past few years dropped to between 900,000 and 960,000 barrels per day, below the government's target of around 970,000 barrels. Gas production has been going up but Indonesia exports gas to countries such as Singapore, keeping only half of its output for domestic use by the state electricity company and industries.

The government also aims to raise renewable energy -- such as geothermal and biomass sources -- to 17 per cent of Indonesia's energy mix by 2025.

Energy analyst Pri Agung Rakhmanto, from the Jakarta-based Reforminer Institute, said the government would have to go back to the drawing board and ensure there was a decent investment climate for energy.

"It cannot just be business as usual," he said. "Otherwise, we will not be able to meet our own energy needs in future."

Copyright (c) 2011, The Straits Times, Singapore / Asia News Network

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