Oil and Gas News: 06/24/11

Friday, June 24, 2011

Oil & Gas Post - All News Report for Friday, June 24, 2011

Friday, June 24, 2011

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Commodity Corner: Oil Up, Brent Falls on IEA's Decision

- Commodity Corner: Oil Up, Brent Falls on IEA's Decision

Friday, June 24, 2011
Rigzone Staff
by Saaniya Bangee

Oil futures remained nearly flat Friday as investors weighed the IEA's decision to release an emergency supply of 60 million barrels of oil. Both NYMEX and Brent crude had seen a recent surge in prices due to Libya's civil war.

Light, sweet crude added 14 cents to settle at $91.16 a barrel. Oil prices fluctuated between $89.82 and $92.34 Friday. For the week, crude prices lost $1.85, or 2 percent.

While analysts and investors assess their position on the IEA's surprise decision, Brent prices plunged $2.14 Friday. Ending the week at $105.12 a barrel, Brent futures settled at their lowest since Feb. 18. Brent, which is used in many international blends, had rallied in the wake of the unrest in Libya.

Additionally, Europe's debt problems also pressured Brent to decline Friday. The euro dropped on uncertainty of whether Greece's parliament will approve additional bailout funds.

The intraday range for ICE Brent crude was $103.62 to $108.70 a barrel.

Meanwhile, front-month natural gas gained 3.6 cents Friday, settling at $4.23 per thousand cubic feet. Prices peaked at $4.25 and bottomed out at $4.17.

Reformulated gasoline for July delivery traded between $2.76 and $2.88 to end Friday's trading session at $2.78 a gallon.

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Democrats Want Corbett Involved in Drilling Fee Talks

- Democrats Want Corbett Involved in Drilling Fee Talks

Friday, June 24, 2011
Pittsburgh Post-Gazette
by Laura Olson

Calling on Gov. Tom Corbett to "engage" in the ongoing discussions of a drilling fee, Democratic state senators this morning offered yet another variation on how to assess the state's natural gas wells.

Rather than offering their proposal as a bill, they say they plan to offer an amendment to the budget bills that are expected to come up for a vote early next week.

"The governor has really decided not to engage on this issue, has suggested that it should not be part of this budget debate," said Sen. John Yudichak, D-Luzerne. "We believe it should be. We cannot go through another budget season with more being said and less being done."

The governor said again earlier this week that he does not want lawmakers to consider a drilling fee until his Marcellus Shale Advisory Commission issues its report on July 22. Mr. Corbett said that if a budget bill reaches him with such a fee included, he is "leaning toward" vetoing it.

The Senate Democratic proposal would reverse many of the broader changes added to Senate President Pro Tem Joe Scarnati's impact fee measure in a committee last week. The fee initially would be $17,000, changing based on the price of natural gas and a well's production level. Under the current bill, it would start at $40,000, decreasing annually for four years, and charging drillers no fee after the 10th year of production.

It also would slightly lower the amount for localities and conservation districts, boost the share for emergency responders to $2 million, and allow for a portion of the local government funding to go to areas that have no drilling but do have pipelines and other gas transportation infrastructure.

"No legislation ever gets through the state without support from all regions of the state," said Sen. Andrew Dinniman, D-Chester. "The legislation that came out of [the Senate committee] helped one region of the state, but most of the people weren't helped."

Closed-door budget negotiations are continuing among Republican leaders from both chambers and the governor's office. While it remains unclear whether a drilling fee has been part of those talks, House Republicans are likely to discuss what to do about the various fee proposals during their caucus meeting today.

Copyright (c) 2011, Pittsburgh Post-Gazette

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Fountain Quail Expands Ops into Eagle Ford Play

- Fountain Quail Expands Ops into Eagle Ford Play

Friday, June 24, 2011
Aqua-Pure Ventures Inc.

Fountain Quail, a wholly owned subsidiary of Aqua-Pure Ventures, announced it will expand operations into the Eagle Ford Shale in South Texas through a subcontracting agreement with NAC Services, LLC, an affiliate of Noise Attenuation Construction Services. Terms of the agreement were not released.

Fountain Quail will initially send two Nomad units to NAC's water purification treatment center in Kenedy, Texas, to recycle wastewater generated during the process of extracting oil and natural gas from the Eagle Ford Shale. The Company expects to employ approximately 15 workers at the new facility, which will have the capacity to recycle roughly 5,000 barrels of flowback and produced water per day. The agreement calls for an initial term of five years, with the option to renew for another five-year term.

"We have been eyeing the Eagle Ford for some time, looking for the right opportunity to expand into this emerging shale play," said Jake Halldorson, chief executive officer of Calgary-based Aqua-Pure Ventures, the premier recycler of industrial wastewater in North America. "We're pleased to have negotiated a mutually beneficial relationship with NAC, and we look forward to bringing our industry-leading recycling technologies to a region where preserving fresh water resources is paramount."

Fountain Quail has developed and refined its patented, industry-leading technology for recycling flowback and produced water over the past seven years in North Texas' Barnett Shale. During that time, the Company has recycled more than 14 million barrels of shale gas wastewater that would otherwise have been injected into disposal wells and permanently removed from the hydrological cycle. The company's technology is also currently being utilized in the Marcellus Shale.

"We contracted with Fountain Quail because they provide the most advanced, cost-effective recycling technology in the industry," said Mando Gutierrez of Noise Attenuation Construction (NAC), LLC of Weatherford, TX. "The need for their services in the Eagle Ford is already great, and expected to grow exponentially over the months ahead."

In addition to recycling wastewater into distilled or treated water for re-use in hydraulic fracturing operations, Fountain Quail and NAC will sell the concentrated brine and other byproducts of the recycling process.

Aqua-Pure is currently evaluating opportunities to expand into additional shale plays across North America later this year.

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Spectrum Creates New CFO, COO Positions, Strengthens Management

- Spectrum Creates New CFO, COO Positions, Strengthens Management

Friday, June 24, 2011
Spectrum Geo Inc.

As part of the company's ongoing strategic growth plan Spectrum has announced considerable strengthening of the Executive Management Team with the appointment of a new Chief Financial Officer (CFO) and the creation of a Chief Operating Officer (COO) position.

Henning Olset has been appointed as the new CFO of Spectrum ASA with effect from May 1, 2011. Based in Oslo, Henning possesses more than 10 years of executive financial management experience. In his previous assignment Henning joined Staples in 2006 with the acquisition of Andvord Tybring-Gjedde ASA, where he was CFO. He was instrumental in the process of restructuring the company and in his period as head of finance, the Nordic business became one of the most profitable parts of the Staples organization.

Jan Schoolmeesters has been appointed COO of Spectrum. Jan possesses substantial experience in the seismic industry with both a technical, operational and commercial background. His latest position was with PGS as President of Asia Pacific. Jan will be based in Oslo and will start in his new position as soon as possible.

The current CFO, Rhys Edwards will from the same date take the position as Group Commercial Director. Rhys will be based in Woking, UK. In this new role Rhys will be responsible for ensuring a consistent and commercial strategy for the group, supporting the Divisional EVP's on commercial matters and undertaking additional strategic projects.

"We are pleased to welcome two well-regarded individuals to Spectrum's executive management team. They bring a wealth of relevant experience and a deep understanding of the inherent challenges to a rapidly growing organisation," said Rune Eng, Spectrum's Chief Executive Officer. "I would also like to use this opportunity to express both my and the Board of Directors' appreciation to Rhys for his service as our Chief Financial Officer over the last 3 years."

Besides these significant additions to the executive line-up, Spectrum has also expanded its UK Multi-Client team with the recruitment of two well-known names in the seismic industry. Jim Martin and Alan Tidey have both joined the company from senior positions at CGGVeritas. They take on the roles of Vice President of Business Development and Sales Manager respectively. Jim and Alan bring with them over 50 years of relevant industry experience.

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Epsilon Names CFO

- Epsilon Names CFO

Friday, June 24, 2011
Epsilon Energy Ltd.

Epsilon announced the appointment of Kar Yong as interim Chief Financial Officer for the Company. Mr. Yong will be assuming the CFO responsibilities from Mr. Arandjelovic while the board of directors continues its search for a permanent CFO. Mr. Yong has been a Chartered Accountant over 35 years, working as an external auditor and in financial analysis of a number of private and public companies, including 25 years with Ultramar.

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Statoil Signs LOI for New Sandsli Building

- Statoil Signs LOI for New Sandsli Building

Friday, June 24, 2011
Statoil

Statoil has signed a letter of intent with Skanska for the construction of the new office building at Sandsli in Bergen.

The work on the office building and adjacent infrastructure will start in early August, with completion scheduled for the first half of 2014.

"Our goal is to establish a joint workplace where we ensure optimal cooperation and knowledge sharing, so that our core activities are well equipped to further develop Statoil in the region. The new building will encompass all aspects of our business, and we can hardly wait until it is finished," said Jannicke Nilsson, Statoil's location manager in Bergen.

Around 60% of Statoil's activities on the Norwegian continental shelf are operated from Bergen, in addition to a significant amount of research work.

New Sandsli

When the project is complete in 2014, Sandsliveien will have a whole new look. In addition to the office building, the project will include construction of a new shared reception area and canteen, a new parking garage, new exercise facilities and a new outdoor area. A total of 55,000 square metres of new area will be built during the next three years.

"This is an important milestone for Statoil, and we look forward to working with Skanska on this project. For us, HSE and high-quality work will top the agenda," said Statoil's asset owner in Global Business Services, Svein Harald Storli.

Better infrastructure

The infrastructure in the area will also be upgraded with measures including a walkway between Sandslihaugen and Sandsliveien, as well as a new roundabout and entrance to Sandsliveien. Skanska was also awarded these activities under a separate contract.

"We are confident that the employees will like the changes slated for Sandsli, and we plan to keep them up-to-date throughout the project. A dedicated user project has also been established to ensure that the new office building will accommodate the needs of the organisation," said Storli.

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Q1 GDP Growth Revised up to 1.9%

- Q1 GDP Growth Revised up to 1.9%

Jun 24, 2011

The Bureau of Economic Analysis revised real gross domestic product growth up to an annual rate of 1.9% for the first quarter of 2011 today, in the agency's 3rd estimate.

Economists had been expecting first quarter growth to be revised up to 2.0%. As of now, the consensus expects Q2 growth to accelerate slightly to 2.3%.

The estimate released today is based on more complete source data than was available last month for the second estimate, in which growth was estimated at 1.8%.

The revision was due primarily to a downward revision to imports and a larger inventory buildup than was first recorded.

Core inflation was revised higher, to 1.6% in the quarter, from the 1.4% estimate released last month.

Corporate profits increased $48.7 billion in the first quarter, outpacing the $38.2 billion increase in the fourth quarter of 2010.

The Q1 growth reflected positive contributions from personal consumption expenditures, private inventory investment, exports, and nonresidential fixed investment, that was offset by negative contributions from federal government spending and state and local government spending.

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Rolling Strikes to Begin At BHP Billiton Mine Tonight

- Rolling Strikes to Begin At BHP Billiton Mine Tonight

Jun 24, 2011

Rolling strikes will begin hitting BHP Billiton Ltd (NYSE:BHP) late Friday, beginning in its Blackwater coking coal mine in northeastern Australia, which it co-owns with Mitsubishi Corp.

The strikes are then planned move on to six other mines over the weekend and into next week, a union official said.

The strikes are being conducted by the Construction, Forestry, Mining and Energy Union, which is one of three unions representing more than 3,000 workers involved in contract talks with the BHP-Mitsubishi Alliance.

Earlier this month a series of six-hour strikers was conducted by workers at six mines in Queensland. The workers are demanding equal pay for contract workers and employees and a say by union reps in recruitment, among other things.

BHP Billiton has a potential upside of 22.5% based on a current price of $88.38 and an average consensus analyst price target of $108.3.

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TNK-BP to Invest $1.8B in Ukraine Shale Gas by 2017-18

- TNK-BP to Invest $1.8B in Ukraine Shale Gas by 2017-18

Friday, June 24, 2011
Dow Jones Newswires
MOSCOW
by Jacob Gronholt-Pedersen

BP's Russian joint venture TNK-BP Ltd. plans to invest $1.8 billion in unconventional gas projects in Ukraine over the next six to seven years, the company's vice president for gas and power supply Mikhail Slobodin said.

Investing $1.8 billion into six Ukrainian shale deposits until 2017 or 2018 will allow TNK-BP to produce up to 3 billion cubic meters of gas a year, with initial production lower than that, Slobodin told Dow Jones Newswires.

Unconventional gas sources such as shale gas, which has shaken up the U.S. gas market in the past two years, have caught the interest of major players on the European market. U.S. oil major Chevron has recently acquired shale gas acreage in Poland and Romania.

"Even though they had success with shale gas in the United States, it doesn't mean we will have the same success in Ukraine or Poland," Slobodin said. "No-one really knows."

Ukraine's eastern Donetsk region may hold considerable shale deposits, an unconventional source of natural gas produced by a method known as hydraulic fracturing.

TNK-BP, a joint venture between U.K. oil major BP and a group of Soviet-born billionaire investors, is targeting six licenses containing unconventional tight gas in Ukraine.

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

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Long-Term Outlook for Gas Remains Bullish

- Long-Term Outlook for Gas Remains Bullish

Friday, June 24, 2011
Rigzone Staff
by Karen Boman

Despite the shift by producers towards oil-focused drilling away from natural gas, the long-term outlook for U.S. natural gas demand remains bullish as U.S. nuclear power and coal plants are retired and gas-fired electricity use rises over the next few years, said Pearce Hammond, director of institutional research at Simmons & Co. International, at Platts' sixth annual Oil & Gas Shale Developer conference in Houston this week.

The anticipated retirement of nuclear power plants could potentially add 1 Bcf/d of gas demand by 2020, and the expected retirement through 2020 of 50-60 gigawatts of U.S. coal generation assets could add 4 Bcf/d of additional U.S. gas demand. LNG exports from the U.S. could add an additional 2 Bcf/d of U.S. gas demand, Hammond said.
Increased future use of natural gas vehicles in the U.S. could also create additional 1 Bcf/d of demand for U.S. gas, and gradual growth in industrial demand could add another 2 Bcf/d.

While the U.S. has lost ground to Asia in terms of industrial base, the U.S. has the demographic advantage versus China, whose population is aging and growth limited by the nation's one child policy. Manufacturing costs also have begun rising in China, along with wage rates, and the availability of cheap energy resources at home has prompted some companies to bring manufacturing operations back to the U.S.

U.S. gas demand for 2011 is estimated at 67 Bcf/d, up from 66 Bcf/d in 2010, but less than U.S. supply estimate of 68.4 Bcf/d. Still, the supply overhang estimate is less than previous estimates, thanks in part to cold weather earlier this year which boosted gas demand for heat generation, Hammond said.

Given high oil prices, the Eagle Ford oil shale play in South Texas and the Permian Basin in West Texas and eastern New Mexico remain hot spots for drilling activity. However, activity in the Marcellus shale gas play continues to hold up despite the capital flow shift from gas into liquids.

Unconventional natural gas, particularly shale gas, will make an important contribution to future U.S. energy supply and carbon dioxide emission-reduction efforts, according to The Future of Natural Gas, the fourth in a series of MIT multidisciplinary reports examining various energy sources and their role in meeting future demand.

Demand for natural gas, which burns cleanly and efficiently with very few non-carbon emissions, will likely grow in the U.S. and worldwide for use in power generation, industrial, commercial and residential sectors due to its abundant availability, utility and low cost compared to other energy resources. Gas can play a major role in reducing greenhouse gas reduction, and "play a critical role as a bridge to a low-carbon future," according to the MIT report, which was released earlier this month.

The ample domestic supply of gas has stimulated interest in its use in transportation, driven by the oil-gas price spread and opportunity to lessen oil dependence in favor of domestically supplied fuel, including natural gas-derived liquid fuels with modest changes in vehicle and/or infrastructure requirements and reduce carbon dioxide emissions in direct of gas.

Compressed natural gas (CNG) offers a significant opportunity in U.S. heavy-duty vehicles used for short-range operation, such as buses and garbage trucks, where payback times are around three years or less and infrastructure issues do not impede development. However, for lighter passenger vehicles, even at 2010 oil-gas price differentials, high incremental costs of CNG vehicles lead to long pay back times for the average driver.

Payback periods could be reduced significantly if the cost of conversion from gas to CNG could be reduced to levels experienced in other parts of the world such as Europe.

The current supply outlook for gas will contribute to greater competitiveness of U.S. manufacturing, while the use of more efficient technologies could offset demand increases and provide cost-effective compliance with emerging environmental requirements.

The growing global interest in developing shale gas resources presents the U.S. energy industry with an opportunity to only build up a supply chain of exports for rigs and equipment, and an opportunity to support international allies, Melanie Kenderdine, executive director of the MIT Energy Initiative, told conference attendees. Providing aid in developing shale gas resources in southern South America can help counterbalance against the Chavez regime in Venezuela or help stabilize economies and governments in Africa and the Middle East.

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Clough Wins Construction Work at AU Macedon Proj.

- Clough Wins Construction Work at AU Macedon Proj.

Friday, June 24, 2011
Clough Ltd.

Clough announced the award of a circa A$45 million contract to the STREICHER-Clough Joint Venture (SCJV) for pipeline construction work on the Macedon Project.

SCJV is a 50/50% joint venture between Clough and Germany's pipeline engineering and construction specialists, STREICHER Group.

The scope of work includes horizontal directional drilling, construction of an onshore wet gas pipeline and sales gas pipeline and umbilical installation. Work is due to commence in June 2011 with completion anticipated in May 2012.

"We are delighted to be working on this important Western Australian project," said Clough's CEO John Smith.

"We will utilize resources and expertise from our Clough Seam Gas division and partner STREICHER to deliver the best possible project outcomes."

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Madagascar Oil Resolves Dispute over Tsimiroro Block; Updates Ops

- Madagascar Oil Resolves Dispute over Tsimiroro Block; Updates Ops

Friday, June 24, 2011
Madagascar Oil Ltd.

Madagascar Oil announced that the dispute with the Government of Madagascar in connection with the Tsimiroro Block has now been resolved. The Company also highlighted certain key operational highlights prior to its Full Year Results due to be announced on June 30, 2011.

Highlights

Tsimiroro (Block 3104):
- Uncertainty over the status of the Tsimiroro PSC has ended and validity of the PSC has been acknowledged by the Government of Madagascar
- The 2011-2012 work program and budget have been approved
- The right for MOIL to exercise its option for a two year extension to the PSC in August 2012 has been acknowledged, allowing certainty in extending the contract term to August 2014
- OMNIS has acknowledged a delay due to the force majeure event that would be addressed at the end of the contract term if necessary
- Significant operational progress was made in 2010, including 18 successful wells out of 24 new wells drilled and the completion of 430km of Electrical Resitivity Tomography
- Activity for the installation of the Tsimiroro steam flood pilot facility will be ramped up immediately to progress to a start date expected in 3Q 2012
- Netherland, Sewell & Associates Inc. is currently revising the 965 million barrels Contingent Original Oil-in-Place estimate to take into account the updated data acquired in 2010. The updated report is expected in July 2011
Bemolanga (Block 3102):
- The 2010 drilling program at Bemolanga completed 86 core wells and continued to support the estimate that the MOIL share of the gross mine resources is 470 million barrels Contingent Petroleum-initially-in-Place
- Mining project postponed as current economics do not justify proceeding with this project at the present time.
- Shift in work program focus to pursuit of conventional hydrocarbon potential on the Bemolanga block
- MOIL and partner Total granted one year extension of the current PSC exploration phase, with provision for further two years
- The amount of MOIL's carried interest reduced to $80MM from $100MM (gross) in revised JOA with $10 million remaining
Exploration (Blocks 3105, 3106, 3107):
- Discussions with the Government of Madagascar regarding the approval of the 2011-2012 work programs for exploration blocks and resolution of outstanding issues on these blocks are set to continue early July 2011
- GORE micro-seepage survey collected across 880km²on the Exploration Blocks is currently under detailed analysis and will lead to further analysis of at least three drilling leads
Corporate / Financial
- Trading in Madagascar Oil's shares to resume 27 June 2011
- MOIL has $59 million cash on hand to deliver the approved work plan designed to increase resources and prove commerciality of the Tsimiroro asset through a steam flood pilot, and for the additional work required to develop drillable prospects on the three Exploration Blocks

Commenting on the announcement, Laurie Hunter, Chief Executive Officer, said, "We are pleased to have resolved the issues that have led to the suspension in trading of our shares. The last six months have highlighted risks associated with operating in frontier petroleum provinces, but we believe that our recent constructive dialogue with the Government of Madagascar has served to reaffirm our historical compliance under our contracts, the amount of work that we have already completed to date, and our clear and well funded plans for future development to bring online the country's first commercial oil production."

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Hallin Marine Lands Repair Gig Offshore Angola

- Hallin Marine Lands Repair Gig Offshore Angola

Friday, June 24, 2011
Superior Energy Services

Hallin Marine announced the award of its latest subsea pipeline repair project off the African west coast. Working on behalf of a major oil company, Hallin is providing overall project management and engineering, the subsea operations vessel (SOV) Ullswater, repair equipment plus a saturation diving team, to support the urgent repair of a 20 inch water injection pipeline offshore Malongo, Angola. The contract was awarded following successful projects previously completed by Hallin in offshore Angola.

Mike Arnold, Managing Director of Hallin West commented, "This is a typical project for our West Africa project team and shows the effectiveness of our specialist-designed SOV Ullswater for this type of project. The vessel is strategically placed for work in West Africa as part of our ongoing commitment to the region."

A recent addition to the Hallin fleet, Ullswater is an ultra-modern SOV incorporating an integral 15-man saturation diving system. With a length of 78 meters and a 20.4 meter beam, the vessel incorporates DP2 dynamic positioning and can accommodate up to 120 personnel.

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BP Gets Two-for-One Deal off Norway

- BP Gets Two-for-One Deal off Norway

Friday, June 24, 2011
Rigzone Staff
by Jaime Kammerzell

BP is combining two separate fields to develop its Skarv and Idun project in the northern Norwegian Sea. The project, which is due to come online in 3Q 2011, is being developed in 350 to 450 m (1,148 to 1,476 ft) of water, between the Norne and Heidrun fields in Production Licenses 212, 262, and 159. The fields contain hydrocarbons at three reservoir levels. BP and its partners estimate total recoverable reserves to be 16.8 MMcm of oil and condensate and 48.3 Bcm of rich gas.

BP serves as the operator with 24% interest, along with partners Statoil with 36%, E.On Ruhrgas Norge AS with 28%, and PGNiG Norway AS with 12%.

BP Gets Two-for-One Deal off Norway

Skarv

Amoco, shortly before merging with BP, made an impressive hydrocarbon find in the Donnatello field on Dec. 24, 1997. The Donnatello field, which would later be renamed Skarv, is in 250 to 450 m of water on Norwegian Blocks 6507/5, 6507/6, 6507/3 and 6507/2.

The Maersk Jutlander semisubmersible drilled the well on behalf of Amoco to 4,224 m TD in the early Jurassic formation. Following the discovery, Amoco suspended the well. In 2002, BP contracted the West Alpha semisubmersible to drill the Skarv 6507/5-5 appraisal well, which reached 3,950 m TD and confirmed the 1997 find.

BP Gets Two-for-One Deal off Norway

West Alpha

The field's recoverable resources are made up of 80% gas and 20% liquids. Oil will be produced using pressure support from gas injection, and gas will be produced by depletion.

Idun

Statoil discovered the Idun gas field in 1999. Idun is in PL 159, blocks 6507/3-3 in 350 to 450 m of water. The Byford Dolphin semisubmersible drilled the well to 3,830 m and found gas in the Jurassic sandstones. Statoil confirmed the gas discovery with two appraisal wells drilled at 6507/3-3Q and 6507/3-3B to 4,275 m. Statoil then plugged and abandoned the appraisal wells on March 25, 1999.

Field Development Plan

It took nearly 10 years for BP to submit a field development plan to jointly develop the fields. In June 2007, BP proposed a $5 billion plan for development and operation of the Skarv and Idun oil and gas fields to Norwegian authorities. The fields contain hydrocarbons at three reservoir levels with a combined estimate of 106 MMbbl, and 48 Bcm (170 Bcf) of natural gas.

According to the development plan, BP plans for oil production capacity to be 85,000 b/d and gas output at 15 MMscm/d. BP also said that it has identified additional resources in the area, which can be linked back to the Skarv/Idun production facilities at a later date.

BP's concept studies concluded that the best development solution was an FPSO [floating production, storage and offloading] vessel with subsea equipment tie backs. According to the operator, power from shore was considered, but at that time it was not technically feasible in combination with an FPSO.

Thus, BP and its partners are developing the fields with the Skarv FPSO, 16 subsea wells, and an 80 km (50 mile) gas export pipeline connected to the Aasgard Transport System. Shuttle tankers will collect oil from the 875,000 bbl vessel every 10 days.

BP Gets Two-for-One Deal off Norway

Skarv FPSO

FPSO

The Skarv FPSO is the biggest vessel ever built for deployment on the Norwegian Continental Shelf.

BP contracted Aker Solutions in November 2005 to perform the project's front-end engineering design (FEED) and detail engineering, procurement, and construction management assistance (EPcma). Aker Solutions also carried out the design (FEED) of the hull, based on its Tentech 975 design, and living quarters.

Samsung Heavy Industry in South Korea carried out the fabrication and installation of the hull and topside.

"Skarv is located at a water depth of 370 m. This is a typical place of operation for an FPSO," said Arne Bjørlo, project director for the Skarv project. "Such vessels are also well suited to a combined oil and gas field, like this one. An FPSO provides the necessary deck space for gas processing facilities, while at the same time allowing for storage of oil."

According to Aker Solutions, the Skarv development includes a number of innovations on previous concepts. "The modules used on the topside are bigger than usual, stretching across the entire width of the deck. This gives us a more effective building process, because each module can be finished separately with a lot less hook-up on assembly," says Bjørlo.

In March 2011, Fairmount Marine tugs, Fairmount Sherpa and Fairmount Summit, delivered the Skarv FPSO to the port in Stord, Norway. The trip took 92 days to tow the FPSO 15,300 nautical miles from Samsung Heavy shipyard in Okpo, South Korea. The Skarv FPSO was installed in April 2011 and the risers and templates will be connected in July 2011.

BP's Skarv FPSO on tow to Norway

The Fairmount Summit tugged the Skarv FPSO from the Samsung Heavy shipyard in Okpo, South Korea, to the port of Stord, Norway.

The FPSO has a production capacity of 85 MMb/d and 670 MMcf/d (19 MMcm/d) and is 292 m long, 50.6 m wide and has a towing draught of 12.2 m with a deadweight of 128.000 tons. According to Pat McHugh, Skarv project director, the hull's structure and turret, along with the 15 mooring lines anchored to the seabed, were designed to resist three combined eventualities: a total loss of FPSO power, loss of use of positioning thrusters, and 100-year storm conditions, when the hull is not in its optimal position with respect to the prevailing weather conditions.

Contracts

BP began awarding contracts for the project even before it submitted a development plan in June 2007. In March 2006, BP awarded Kongsberg Maritime a contract for the integrated control systems for safety and automation to the FPSO. The initial contract required Kongsberg to conduct a FEED study with BP and Aker Kvaerner looking at the safety and automation systems. The results were part of the materials submitted for final approval by the Norwegian authorities in early 2007.

That same month, BP signed a letter of intent with Offshore Rig Services ASA for use of the OffRig Pioneer semisubmersible to drill on the Skarv/Idun fields. The contract was subject to approval of the PDO, and was valued between $250 and $500 million, depending on the length of the program, extensions, and options.

BP also awarded Bluewater a FEED study for the Turret Mooring System on the FPSO in 2006. Once the project was approved, Bluewater was awarded an engineering, procurement, and construction (EPC) contract for the Turret Mooring System.

After the Norwegian Authorities approved BP's development plan, the operator awarded VetcoGray a contract to supply subsea production system for the Skarv/Idun field. The $265 million contract includes engineering, construction and testing of 17 wellheads and tree systems and five subsea templates with integrated manifolds, as well as work-over, tie-in, and control systems. VetcoGray also supplied five years of service for the installation, with the option to renew the contract every five years.

In March 2008, VetcoGray then awarded ClampOn a contact for the supply of ClampOn DSP-06 Subsea Particle Monitors and ClampOn DSP Pig Subsea Detectors.

In 4Q 2007, BP awarded Subsea 7 two contracts -- flowline installation and general subsea construction works -- valued at $125 million and $140 million, respectively.

Subsea 7 engineered, fabricated and installed 42 km of single flowlines, which consist of 35 km 12" x 10" diameter clad production flowlines and 7 km 10 inch diameter carbon steel gas injection flowlines. Subsea 7 attached a Direct Electrical Heating (DEH) cable to the 13 km Idun flowline, which is a part of the 35 km production flowlines.

The general construction contract included survey activities, installation of subsea structures, control umbilicals, tie-in and pre-commissioning of all flowlines, risers, control umbilicals, and the gas export pipeline. Subsea 7 also took care of the tie-in spools and protection systems. The Seven Seas vessel carried out most of the work over the course of 300 days.
In December 2007, BP contracted SBM Offshore for the turnkey supply of an internal turret. SBM says the bogie-wheel type design turret is the world's largest turret in terms of mooring loads.

BP awarded the direct electrical heating (DEH) system for the Skarv subsea production pipeline in February 2009 to Nexans, which supplied all cables and dedicated subsea equipment for the DEH system. Nexans installed a 12 in. diameter production pipeline from one of the production wells at the field to the FPSO at Skarv. The distance between the well and vessel was about 13 km. At low production and shut down, a DEH-system will be used to prevent blockage of the pipe.

In 4Q 2009, BP started drilling 11 production wells using the Borgland Dolphin. The contract was extended in June 2010 to continue drilling through late April 2011. BP then arranged for the Polar Pioneer to continue drilling production wells on the Skarv field from April 2011 to May 2013.

BP Gets Two-for-One Deal off Norway

Borgland Dolphin

BP Gets Two-for-One Deal off Norway

Transocean's Polar Pioneer

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Mediterranean O&G Farms-Out Malta Stake

- Mediterranean O&G Farms-Out Malta Stake

Friday, June 24, 2011
Mediterranean O&G plc

Mediterranean O&G announced that Phoenicia Energy, a wholly owned subsidiary of MOG, has entered into an Execution Agreement with Dominion to farm-out a 75% operated working interest in the production sharing contract for Blocks 4, 5, 6 and 7 of Area 4 Offshore Malta, pursuant to a draft farm-in agreement. Completion of the Maltese Acquisition is conditional upon (i) receipt of required Maltese government approvals and (ii) completion of the placing of shares by Dominion, announced on 24 June, 2011 ("Dominion Placing").

Under the Execution Agreement, Dominion will pay a deposit of US $225,000 to PEL, which is non-refundable in the event that the Dominion Placing does not complete, or Dominion is otherwise unable to enter into the farm-in agreement. Should the Maltese government approvals not be received, the deposit is refundable in its entirety.

The Maltese PSC is situated to the north of Libya, covering an area of 5,715 km2 in Maltese waters. It includes both the Cretaceous rift potential of the Melita-Median Graben and the confirmed Eocene carbonate play of North Africa. A competent person's report on Area 4, completed by RPS Energy and prepared for MOG in March 2006, identified a number of prospects within the area. Of particular interest is the Tarxien prospect, a lower Eocene carbonate build up. Using Libyan oil field analogues, RPS estimated the prospect to have a gross recoverable un-risked P50 prospective oil resource of 115mmbbl with an 18% chance of success.

Under the Maltese PSC, MOG currently holds a 90% operated working interest through its subsidiary PEL, with Leni Gas & Oil Investments Limited holding the remaining 10% of working interest. Following the completion of the Maltese Acquisition and the subsequent farm-in agreement, Dominion will hold a 75% operated working interest in the Maltese PSC. Under the terms of the farm-in agreement, Dominion will meet certain exploration costs up to a cap of US $1,260,000, on behalf of MOG in relation to its remaining 15% working interest. Dominion will also compensate MOG for a total amount of US $900,000 in certain historic costs, through the US $225,000 deposit mentioned above and a closing sum of US $675,000 under the farm-in agreement.

The work obligations of the current period of the Maltese PSC comprise the acquisition of 1,000km2 of 3D seismic data and the drilling of one exploration well. The results of the seismic survey will enable the JV partners to define and evaluate the Tarxien prospect and other identified opportunities within Area 4, prior to any drilling decision. The long-offset 3D will also allow for a clearer analysis of the pre-tertiary rift-fill below the Eocene carbonates and potential Cretaceous targets.

The first exploration period runs until January 2013 and there is a minimum spend requirement of US $5 million. The Company anticipates that the 3D seismic survey will cost between approximately US $8 million and US $10 million gross to undertake, which will satisfy the minimum spend requirement.

Michael Bonte Friedheim, the Company's CEO, stated, "Following agreement with the Government of Malta to extend the exploration phase for all blocks of Area 4, for 18 months, we are very pleased to have concluded the terms for a farm out with Dominion.

While this remains conditional, the farm out agreement allows us to be practically free-carried for the completion of a 1,000 sq km long-offset 3D seismic survey, as well as receive a significant reimbursement of back costs. Dominion has extensive experience in frontier exploration activities and we are glad to have them as a partner.

We are hopeful that the seismic survey will identify further prospects in the area and make the drilling of an exploration well attractive."

Oil & Gas Post

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Samson O&G Acquires Additional Acreage in Bakken Play

- Samson O&G Acquires Additional Acreage in Bakken Play

Friday, June 24, 2011
Samson O&G Ltd.

Samson O&G has agreed to acquire up to 90,000 net acres of oil and gas leases in the Fort Peck Indian Reservation in, Roosevelt County, Montana, from Fort Peck Energy Company LLC (FPEC) for an undisclosed price.

Samson's new Roosevelt Project is being acquired in three tranches:

Tranche 1 is a 20,000 acre block to be acquired immediately upon closing that includes a two well drilling obligation. Tranche 2 is an option to acquire an additional 20,000 acres upon the completion of the initial two wells in Tranche 1. Tranche 3 is a 50,000 acre area covered by an Area of Mutual Interest where Samson and FPEC have agreed to jointly acquire additional leases.

Samson plans to fund its acquisition costs and the drilling of the initial two appraisal wells from its existing cash resources. While Samson's ultimate ownership interest in the three Tranches will vary, depending on FPEC's future decisions whether to back in to an interest in the acquired acreage, Samson will hold at least a 66.66% working interest (53.34% net revenue interest) in all of the acquired acreage.

The Roosevelt Project is located in a technically attractive, but largely undrilled part of the Williston Basin. After exhaustive study, Samson's technical staff has concluded that the area is part of the Bakken continuous oil accumulation with adequate porosity and oil saturation for commercial production. Samson is not alone in reaching such a conclusion as the acreage block is surrounded by leases held by other well-known energy industry participants.

The initial two well drilling program will be initiated as soon as practicable, with a target spud date of September 1st for the first well. Drilling of the second well would be expected immediately following the completion of the first well. Both wells are planned to be drilled as 4,500 foot laterals in the middle Bakken formation and then fracture stimulated using a multi stage, external casing packer completion technique.

Samson has contracted with Halliburton's Consulting and Project Management business line to provide well construction planning, and drilling and completion supervision for the initial two wells. This agreement builds on the existing relationship with Halliburton developed through Samson's Hawk Springs project and brings the considerable expertise of the largest service provider of fracture stimulation completions to Samson's new Roosevelt Project.

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Rocksource Sells U.S. Assets

- Rocksource Sells U.S. Assets

Friday, June 24, 2011
Rocksource ASA

Rocksource announced that its US subsidiaries have sold the U.S. onshore producing fields to a Texas-based oil and gas company. The transaction also terminates potential arbitration proceedings from the former owners of the US subsidiary Sandhawk Energy LLC, as described in Rocksource's Annual Report for 2010.

The US onshore assets, which in Rocksource's 1Q 2011 financial report were recorded as "assets classified as held for sale" in the consolidated statements of financial position, consist of gas producing fields in San Jacinto and Polk Counties, Texas and are owned through Rocksource's subsidiaries Rocksource Energy Corporation (REC) and Sandhawk Energy LLC (SHK). The fields are on a natural decline and have earlier been classified as non-core by Rocksource. The sale of these assets is in line with the Company's strategy to focus on drilling high potential, EM positive, exploration wells.

The US onshore assets were important in the build-up phase of Rocksource, providing cash flow to assist the Company growing its core business. Due to declining production coupled with a significant drop in US gas prices, the US assets have become increasingly marginal to Rocksource. The net proceeds from the sale are approximately USD 3.5 million and the sale will only have a marginal effect in the profit and loss statement.

Rocksource has a NOK 200 million bond maturing in May 2012 which has security in the U.S. onshore and other assets. The net proceeds from the sale will be used to make a partial early redemption of the bond.

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Sound Oil's Marciano Ops to Recommence Soon

- Sound Oil's Marciano Ops to Recommence Soon

Friday, June 24, 2011
Sound Oil plc

Sound Oil announced that operations on Marciano-1ST well is expected to recommence on June 25. Contractors and necessary equipment are currently being mobilized to the well site to undertake testing operations. The test program is expected to take a minimum of 4 days.

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