Shell: Gannet Oil Leak Under Control

- Shell: Gannet Oil Leak Under Control

Monday, August 15, 2011
Rigzone Staff
by Karen Boman

The oil leak on a flowline system that serves the Shell-operated Gannet Alpha platform in the North Sea has spilled an estimated 1,300 barrels, or 216 tonnes, a Shell spokesperson said. The spill remains under control, with the well shut in on Wednesday, Aug. 10 and work underway to completely halt any further oil leakage.

"This is a significant spill in the context of annual amounts of oil spilled in the North Sea. We care about the environment and we regret that the spill happened. We have taken it very seriously and responded promptly to it," said Glen Cayley, technical director of Shell's exploration and production activities in Europe, in a statement today.

Cayley estimates that the current rate of leaking is less than five b/d. The sheen, which also changes from day to day, is 0.5 square kilometres in size. The spill is a light crude oil with a low wax content (API-36). There is also some hydraulic fluid in present.

Cayley added, "The high winds and waves over the weekend have led to a substantial reduction in the size of the oil sheen as can be seen from the current levels on the water. We continue to expect that the oil sheen will disperse naturally due to wave action and that it will not reach the shore."

Personnel on the platform are safe and the platform continues to operate. A standby vessel, Grampian Prince, remains on station monitoring the area, with oil spill response equipment and dispersant available if required. Shell's emergency response team remains in place and is working with the relevant authorities (DECC, MCA, Marine Scotland, Scottish Government) to manage the incident and minimize its environmental impact.

"We are also in contact with RSPB and other environmental agencies. We will be sharing our latest estimates with them as well as what we know about the nature of the oil, and the monitoring of wildlife," said Cayley.

The UK Department of Energy and Climate Change (DECC) said its environmental inspectors will continue to monitor the situation and have been working closely with the company and counterparts from the Health and Safety Executive, Maritime and Coastguard Agency and Marine Scotland since the spill was reported last week.

"Although small in comparison to the Macondo, Gulf of Mexico, incident, in the context of the UK Continental Shelf the spill is substantial – but it is not anticipated that oil will reach the shore and indeed it is expected that it will be dispersed naturally.

"The UK Continental Shelf oil spill record is strong which is why it is disappointing that this spill has happened. We take any spill very seriously and we will be investigating the causes of the spill and learning any lessons from the response to it."

The Gannet field is in the Central North Sea around 112 miles (180 km) east of Aberdeen. It is operated by Shell U.K. Limited on behalf of itself and Esso Exploration and Production UK Limited.

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Kan Tan IV Under New Management

- Kan Tan IV Under New Management

Wednesday, August 03, 2011
Frigstad Offshore

Effective from June 6, 2011, Frigstad Offshore Drilling (Cyprus) Ltd has entered into a marketing and management agreement for the Kan Tan IV semisubmersible drilling unit with the rig owners, Sinopec Star Petroleum Co Ltd, a subsidiary of the Sinopec Group.

Kan Tan IV is an Enhanced Pacesetter L907 delivered by FELS in Singapore in 1983, capable of operating in up to 2,000ft of water depth and equipped with a 18-3/4 15K BOP.

Frigstad Offshore has taken over full operational and commercial management of the rig from Maersk Drilling who has managed it for 10 years. Since 2001 the rig has operated in Mexico, Trinidad & Tobago and recently Australia and New Zealand where it drilled 11 wells and performed one subsea workover for a consortium of four operators. Kan Tan IV is currently at Keppel FELS in Singapore undergoing maintenance and special periodic survey. Significant investments have been made over the last five years to refurbish and upgrade the rig with e.g. new accommodation, new deck cranes, new shale shakers and new life boats.

The Kan Tan IV is currently being marketed by Frigstad Offshore for drilling contracts.

Established in Singapore in 1989, Frigstad Offshore is an independent drilling contractor offering a complete range of rig- and project management services to the offshore drilling industry. The Frigstad Offshore group has offices in Singapore, Cyprus, Norway and Brazil. Frigstad Offshore is currently managing the construction of two advanced ultra-deepwater semisubmersible drilling rigs, one of them being the Scarabeo 9 the first drilling unit of the Frigstad D90 design.

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O&G Companies Fear Higher Royalty Payments under Obama Effort

- O&G Companies Fear Higher Royalty Payments under Obama Effort

Thursday, June 09, 2011
Dow Jones Newswires
WASHINGTON (Dow Jones Newswires)
by Tennille Tracy

Energy companies are concerned they could be forced to pay higher oil and gas royalties under a new Obama administration effort to revamp royalty calculations for energy extracted from federal lands and waters.

The Interior Department, which launched the effort last month, insists the proposed changes will simplify how oil and gas is valued and should not increase or decrease the royalty payments themselves.

Oil and gas companies are not so sure. They say changes could create an unfair calculation that leads to higher royalty payments, which would dampen the industry's profits and hurt smaller producers particularly hard.

"It makes us nervous when we hear of the government trying to simplify things," said Kathleen Sgamma, director of government affairs for the Western Energy Alliance, a group representing oil and gas producers in western U.S. states.

This debate comes as the energy industry has battled the Obama administration on other matters, such as a bid to eliminate billions of dollars of tax incentives for oil and gas companies.

The new royalty formula also comes as the Obama administration looks for ways to trim the widening deficit. Generating nearly $9 billion in reported revenue last year, oil and gas royalties represent one of the largest sources of non-tax revenue for the federal government.

The Interior Department is also considering, through a separate effort, an increase to onshore production royalty rates, now at 12.5%. The royalty rate for offshore production is 18.75%.

Government watchdogs have said the Interior Department's royalty program fails to collect the government's fair share of revenue from the industry. Earlier this year, the Government Accountability Office identified the program as being at a "high risk" of fraud, waste, abuse or mismanagement.

When calculating royalty rates, the Interior Department can often rely on the sale price between the buyer and seller to determine the value of the oil or gas. But in many cases--such as when affiliated companies sell to each another--the Interior Department questions whether this sale price reflects the true market value and conducts its own review. This creates a burden for government officials and leads to disputes with the industry.

Hoping to simplify the process, the Interior Department is considering a process where it relies on standardized prices to calculate royalty payments. These could be published prices from trade publications or prices at which the products are traded on exchanges.

But the industry is concerned standardized prices could lead the Interior Department to assign a higher value to oil and gas than what producers receive from a sale. And that would lead to bigger payments to the federal government.

Such a system could hurt smaller producers particularly hard because they often receive less money for their production than large multinational companies, said L. Poe Leggette, partner-in-charge at Fulbright & Jaworski's Denver office.

Interior Department spokesman Patrick Etchart said they welcome the industry's comments. Interior wants a system "that provides fair certainty to us that we get paid the proper amount," he said.

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

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Under New Rules, Chevron Ramps Up Activities in US Gulf

- Under New Rules, Chevron Ramps Up Activities in US Gulf

Thursday, June 02, 2011
Dow Jones Newswires
by Isabel Ordonez

Within the maze of gray tanks, pipes and machinery that make up this gigantic oil platform rising from the sea is a small red rectangle about the size of a wine bottle, with a rapidly clicking numeric panel. Rick Bullock, who runs Chevron's deep-water production operations, calls it "the cash register."

The instrument counts every barrel of oil the Tahiti platform, located 190 miles south of New Orleans, pulls from miles beneath the sea floor. During a visit last Friday, the meter showed the field was producing oil at the tune of about 109,000 barrels a day. With oil prices hovering at $100 per barrel, that's about $10 million a day flowing into the coffers of Chevron, which owns 58% of the field, and its partners Total and Statoil.

Making sure the money keeps rolling out of Tahiti is crucial for Chevron, at a time when oil prices are high and the company has ambitious growth projections to meet. The company aims to grow worldwide output this year by 1% to 2.79 million barrels of oil equivalent per day and to 3.3 million barrels of oil equivalent by 2017, or 19% more than it produced last year. That's a prodigious ramp up, especially as it navigates an array of new regulations that have slowed drilling in the U.S. Gulf of Mexico, one of its main theaters of operation. The regulations came in the wake of last year's massive oil spill, which also resulted in a nine-month-long drilling suspension.

Now Chevron, the second-largest U.S. oil company after ExxonMobil, has to cram more work into less time to meet its expectations even as its engineers try to grasp the new rules, a scramble that underscores how oil and gas producers in the Gulf's deep water are adapting to a new legal environment.

The San Ramon, Calif., oil giant is so concerned about the sluggish pace that it is considering contracting more drilling ships than it originally intended in order to meet its 2013 deadlines for the Tahiti expansion and the 2014 start up of two massive ultra deep-water fields, Big Foot and Jack/St. Malo, located 35 and 140 miles south of Tahiti, respectively.

"It's probably a fact that we are going to have to bring additional drill ships into the Gulf of Mexico to be able to meet that schedule," Warner Williams, Chevron's vice president for the Gulf of Mexico Business Unit, said in an phone interview. Williams didn't specify how many more rigs the company could add. Chevron currently has three rigs doing development and exploratory drilling in the Gulf.

With the arrival of hurricane season, which started Wednesday and lasts through November, Chevron and other companies face even more pressure as the presence of a storm could result in lengthy evacuations and lost work days.

Chevron was among the first oil companies to receive government approval to drill back in the Gulf's deep water, including here, where the Transocean's Discovery Clear Leader drillship can be seen floating a few miles from the platform, doing work that will allow the field to increase production to 150,000 barrels a day in 2013. But the company still has 10 development and exploration plans and approximately 15 drilling permit applications pending approval elsewhere in the Gulf.

"The pace of the permitting process has been slow. It's clear we are not where we need to be," Williams said. "We would like the process to go a little bit faster." The federal government says it is approving permits as fast as it deems safe.

Energy consultancy Wood Mackenzie said the drilling suspension, along with a new, more time consuming permitting process, will result in the loss this year of about 375,000 barrels of oil a day--or 20% of previously estimated production levels.

"Nobody really knows when things in the Gulf are going to be back to what we called a new equilibrium," said Mohammad Rahman, Wood Mackenzie's analyst for the Gulf of Mexico. "Our previous assumption was it will be some time in 2012, but now it could be 2013 when we see a more stable, consistent level in permitting process."

The main reason for the slowdown in the permitting process is that the Department of Interior's Bureau of Ocean Energy Management, Regulations and Enforcement--the federal agency on charge of offshore operations--doesn't have enough regulators to handle the backlog of projects, Rahman said.

The bureau, which was created after the oil spill, is still in the midst of a reorganization, Rahman said.

Melissa Schwartz, a spokeswoman for the agency, said the government "is working as expeditiously as is safely possible to approve exploration plans and permits."

It began approving permits in February, when two oil deep-water oil spill containment systems were deemed operationally ready by the authorities.

Tahiti, discovered in 2002, is one of the largest fields in the Gulf, with 400 million to 500 million barrels of oil equivalent in recoverable resources. Oil production, which began two years ago, accounts for about 64% of Chevron's total output in the Gulf.

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

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Kuwait eyes LNG project Down Under

Kuwait eyes LNG project Down Under

Apr 7, 2011
Tamsin Carlisl

KUWAIT CITY // The Kuwait Foreign Petroleum Exploration Company (Kufpec) expects D-Day in August for a final investment decision on its participation in a A$20 billion (Dh75.83bn) Australian liquefied natural gas (LNG) project.

Development of the Wheatstone LNG project off the coast of north-west Australia is slated to start next year, Ali al Shammari, the deputy managing director of Kufpec, told a conference in the Kuwaiti capital.

Kufpec, which is the Kuwaiti government's overseas oil and gas investment arm, has joined forces with the US oil and gas producer Apache to explore and develop gas prospects including the Julimar and Brunello fields off the north-west coast of Australia. The Kufpec-Apache partnership's licences are for areas close to the Wheatstone gasfield, operated by the US oil major Chevron, and the Gorgon and Pluto fields, where two other large LNG projects are under development.

Kuwait, which started importing LNG in 2009, is expected to do so until it boosts production from its own gasfields.
Kimimasa Mayama / Bloomberg News

"We selected Australia as an exploration focus due to stable fiscal terms and high geological potential," Mr al Shammari said.

In October 2009, Kufpec and Apache signed an agreement with Chevron to supply gas to Wheatstone LNG in return for equity stakes in the project. Kufpec now holds a 7 per cent interest in the project, after the South Korean utility Kogas also signed up as an equity partner.

"Wheatstone is a potential game-changer for Apache, unlocking 2.1 trillion cubic feet of gas reserves at two of Apache's largest discoveries and generating steady production for 15 years at prices pegged to world oil markets," G Steven Farris, the chairman and chief executive of Apache, said at the 2009 signing ceremony.

On completion, the planned LNG plant at Ashburton North, in the state of Western Australia, will have an annual production capacity of 15 million tonnes of the super-chilled fuel. The first phase of the project, already under development, will export up to 8.9 million tonnes per year of LNG to Asian customers including Kogas, and the Japanese utilities Tokyo Electric Power and Kyushu Electric Power.

The power companies have already signed long-term gas purchase contracts with the Wheatstone partners. Exports are expected to commence in 2014.

Japanese plans to import gas from Wheatstone are unlikely to be affected by the recent earthquake disaster and nuclear crisis in the country. Analysts expect Japan to require substantial additional LNG imports to compensate for potential nuclear plant closures and slower nuclear development.

Natural gas is an important part of Kufpec's development portfolio.
The company is also involved in a Singapore project that exports gas to industrial users in South East Asia and a Chinese project supplying gas for domestic power generation. It has interests in producing gasfields in Pakistan and expects soon to bring a new Indonesian field into production and to sanction the development of a Malaysian field with 1 trillion cubic feet of reserves, a company official said yesterday.


The overseas gas projects are part of a Kuwaiti government plan to increase the emirate's access to global gas supplies and to broaden its oil and gas industry technical expertise.
"We are looking at an area in which we can transfer technology. LNG is an area where we were lacking," Mr al Shammari said.

Kuwait started importing gas in 2009. The LNG imports are expected to continue until the emirate completes complex projects to boost production from deep gasfields in the north of the country.