Month in Petroleum: February 2010
THE first signs of collaboration in the coal seam gas-to-liquefied natural gas sector and the start-up of the Van Gogh oil field were two of the major events in February this year.
APLNG to sell gas to BG
While it is too early to say, the Australia Pacific LNG joint venture’s move to sell gas to BG’s Queensland Curtis LNG could mark the first of several moves to improve efficiency for the CSG-to-LNG projects or secure early commercialisation of CSG reserves.
Under the deal, APLNG, which is held equally by Origin Energy and ConocoPhillips, agreed to sell BG about 190 petajoules of gas from ATP 648P and ATP 620P during an initial ramp-up period of about two years.
This will be reduced to about 25PJ per annum from ATP 648P over the balance of the initial 20-year contract. BG also holds two options to extend the contract by five years each.
Origin said the start of gas sales would coincide with the start of commercial production at QCLNG in 2014 and brought forward monetisation of its gas reserves.
Consolidation of the CSG-LNG projects has been often suggested as being inevitable given the proximity of the projects led by Santos, Arrow Energy, Origin Energy and BG to each other, though till now, concrete news about discussions or actual deals have been non-existent.
QCLNG will be an 8.5 million tonne per annum development while APLNG remains the largest planned CSG-LNG project with expected capacity of 14-16MMtpa.
LNG dreaming with Santos
While both APLNG and BG are working together, albeit in a limited way, Santos has big dreams for its Gladstone LNG project with chief executive officer David Knox presenting his vision of a complex rivalling the North West Shelf.
Knox said Santos’s ultimate goal at Gladstone was to build a 20MMtpa LNG hub which would draw gas from Queensland, South Australia and New South Wales.
The project is currently planned as a single train project capable of producing 3.6MMtpa of LNG with CSG produced by Santos as feedstock.
Santos also remains bullish about GLNG and has all but ruled out any plans to work with its rivals, with Knox saying in early February any consolidation was increasingly unlikely and difficult.
“I’ve said the opportunity for consolidation was really until the end of last year and that has passed,” he said.
Arrow snaps up Fisherman’s Landing
Arrow Energy has for the second time in as many months made itself a far more active participant in the LNG processing game with its acquisition of the Fisherman’s Landing project from Liquefied Natural Gas Ltd.
Under the agreement, which supersedes the older heads of agreement for Arrow’s acquisition of the first LNG train at the project, Arrow will pay LNG Ltd an up-front payment of $51 million and make further payments as project milestones are reached.
This includes $24 million at final investment decision; an additional $US5 million licensing fee for the use of OSMR at FID; $A24 million when the plant produces 1MMtpa LNG; and $63.5 million when the plant reaches 3MMtpa LNG production capacity through a second train.
Arrow will also pay LNG Ltd a minimum royalty of 0.7% calculated on the oil price differential above $US60 per barrel for the first train, while a higher royalty of 0.9% will be payable if capital expenditure for the project is materially lower than current estimates of $A2.1-2.2 billion.
The company also noted while it will assess the previously announced March 31, 2010 FID date, first LNG production remained on track for late 2012.
Meanwhile, Arrow has revived plans to spin off at least part of its international arm, Arrow International, to help free up cash needed to fund its increased requirements for Fisherman’s Landing.
The company said it might carry out a partial initial public offering of up to 20% of Arrow International in the first half of the 2010-11 financial year, reducing its stake to 70%.
Woodside warns on strike risk
Over in the west, Woodside Petroleum has warned that while its Pluto LNG project remains on track to produce LNG in early 2011 despite the strikes over accommodation, more strikes could put its timetable at risk.
In a company presentation, Woodside said its timetable was subject to a “productive industrial relations environment” though it added it had a risk management plan in place to “ensure LNG delivery obligations are covered”.
Early in the month, Woodside settled a dispute with workers who were striking over the introduction of motelling, under which workers would no longer have a permanent room to live in but would change rooms at the start of each roster.
The company offered a compromise for workers employed before December to relocate to another camp called Searipple in return for not having to adhere to the motelling system.
Meanwhile, Woodside chief executive officer Don Voelte said the company was aiming to be in a position to make a final investment decision on Train 2 by the end of year and Train 3 by the end of 2011.
Van Gogh starts pumping oil
On the oil front, Apache Energy and Inpex brought their Van Gogh heavy oil development in the Exmouth Basin offshore Western Australia into production several months later than originally planned.
Van Gogh was originally scheduled to start producing in May 2009, but a fire aboard the Ningaloo Vision floating, production, storage and offtake vessel while it was at Singapore’s Keppel Shipyard in May damaged the instrument technical rooms that house the panels for process control, well control, uninterruptible power and emergency shutdown systems.
A further delay was caused by technical problems on one of the topside packages.
Apache said the field – its first oil development using an FPSO vessel – was expected to contribute to its growth this year.
Ningaloo Vision, formerly known as the MT Kudam, is capable of processing 150,000 barrels of liquids per day, including 63,000bpd of oil, and storing 540,000bbl of oil.
Apache owns a 52.5% stake in the field while Inpex owns the remaining 47.5%.
Hess resumes Carnarvon drilling program
Exploration activity in the Carnarvon Basin continues with US major Hess Corporation moving to resume its 16-well program in WA-390-P with the Glenloth-1 exploration well.
Glenloth-1, which will be drilled by the Jack Bates semi-submersible drilling rig, is the first of five remaining commitment wells Hess plans to drill in the first half of this year.
Hess has so far drilled 11 out of 16 commitment wells in WA-390-P, making nine discoveries.
The company is evaluating drilling additional appraisal wells in the permit once the 16-well program is complete and is in discussions with Chevron, Shell and Woodside about liquefaction options. It will have a clear picture of future development options for the field by the end of 2010.
Poseidon-2 results mixed
While Hess is poised to continue its – from all appearances – successful exploration program, ConocoPhillips and Karoon Gas will have to live with the decidedly mixed and potentially negative results from the Poseidon-2 well in the Browse Basin.
Attempts to test the shallower Montara Formation reservoir were inconclusive, leading Karoon to say it was unlikely that communication to the reservoir was established during the perforation process, though data from the well suggested there was moveable gas in the reservoir.
Meanwhile, testing of the Plover B Formation resulted in a flow of 850,000 cubic feet of gas per day, due in part to completion brine in the well severely restricting gas flow to surface.
While Karoon was quick to defend its predrill estimates of 7 trillion cubic feet of gas at Poseidon, the results proved disappointing to investors hoping for a major find which could firm up the resource and potentially expand it.
The partners have since spudded the Kronos-1 exploration well which is aimed at evaluating and testing the Plover Formation reservoirs; will collect reservoir properties data and reservoir fluid compositional data; and then define production rates for possible future production wells.
InterOil upgrades Elk-Antelope resource
Over in Papua New Guinea, InterOil proved to be more fortunate with its gas reserves with recent exploration success leading GLJ Petroleum Consultants to estimate the company could have 8tcf of contingent recoverable gas resources at its Elk-Antelope field.
The evaluation also estimates initial recoverable condensate at 156.5 million barrels as at December 31, 2009.
This is equal to a 141% increase from 631MMbbl of oil equivalent, consisting of 3.4tcf of gas and 59.3MMbbl of condensate, at the end of 2008 to 1.52 billion barrels of oil equivalent.
GLJ added its analysis of data provided to date indicated that no significant oil leg existed in the result, with test results indicating a minor, largely immobile oil saturation at the bottom of the gas column.
The company has flowed record-breaking amounts of gas during testing, with the Antelope-2 well producing at rates of 705 million cubic feet of gas and 11,200 barrels of condensate per day during testing late last year.
Thursday, 4 March 2010
PNN
PNN
