Oil and gas journal volume 109, issue 1

JAN. 3, 2011 | USD 10

International Petroleum News and Technology | www.ogjonline.com

US POLITICAL

OUTLOOK
FORECAST &

REVIEW

US UNCONVENTIONALS:
PRICE FACTORS
PLAQUEMINES
SHALLOW GAS
PIPELINE COST
EQUATIONS

EU REFINERS
SQUEEZED

110103ogj_C1 C1

12/22/10 1:50 PM


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The Emerson logo is a trademark and a service mark of Emerson Electric Co. ©2010 Emerson Electric Company

110103ogj_C2 C2

12/22/10 1:50 PM


CONTENTS
Jan. 3, 2011 Volume 109.1

SPECIAL REPORT
US POLITICAL OUTLOOK

24

37

Beyond Macondo:
Industry faces range of
issues in 2011
Nick Snow

24

47

SPECIAL REPORT
FORECAST & REVIEW

GENERAL INTEREST
Beyond Macondo: Industry
faces range of issues in 2011
Nick Snow

EPA assumes GHG authority
in eight states as carbon
regulation begins

32

Nick Snow

29

Mixed outlook seen in ’11
for N. American refiners

IHS Herold outlines 2011
outlook for oil services,
drillers

34

24

CSB chief to Bromwich:
Macondo well blowout
preventer examination
compromised

WATCHING THE WORLD
Baghdad’s Brave New World

Paula Dittrick

Texas leads North Dakota
in 2009 oil reserves hike

29

34

Iraq promotes al-Shahristani;
appoints Luaibi as oil
minister

Total, Suncor sign $1.75
billion Canada oil sands deal

Eric Watkins

35

Nick Snow

26
FWS clarifies polar bear
designation; Alaska ponders
suit

WATCHING GOVERNMENT
The 2010 ‘Watchies’

28

37
Modest drilling gains
await US, Canada in 2011

30
Chevron: No scientific basis
for $113-billion Ecuador
claim

Trinidad and Tobago awards
four shallow-water blocks
Curtis Williams

36

Eric Watkins

31

47

Eric Watkins

EXPLORATION/
DEVELOPMENT BRIEFS

36

COVER
Suncor Energy Inc.’s refinery in Commerce City, Colo., has a capacity
of 90,000 b/d. Total US operable refining capacity was slightly down in
2010 but input to crude stills was up 2.9%. See p. 37 for more information on US refinery runs, supply and demand, pricing, and production in the 2011 Forecast & Review special report. Photo courtesy of
Suncor Energy.

110103ogj_1 1

Marilyn Radler, Laura Bell

Alan Petzet

Nick Snow

26

US, worldwide energy
demand growth rates to
slow in 2011

REGULAR FEATURES
NEWSLETTER 6

CALENDAR 16
JOURNALLY SPEAKING 20
EDITORIAL 22
EQUIP./SOFTWARE/LITERATURE 126
SERVICES/SUPPLIERS 127
STATISTICS 129
MARKETPLACE 132
ADVERTISERS’ INDEX 135
EDITOR’S PERSPECTIVE/
MARKET JOURNAL 136

12/29/10 11:12 AM


We didn’t invent
the compressor.

We’re perfecting it.
Ariel Corporation
35 Blackjack Road
Mount Vernon, OH 43050
www.arielcorp.com

110103ogj_2 2

12/22/10 9:28 AM


EXPLORATION
& DEVELOPMENT

DRILLING
& PRODUCTION

PROCESSING

TRANSPORTATION

SOUTHEAST
LOUISIANA SHALLOW
GAS—2 (Conclusion):
Louisiana lagniappe:
Case study from Grand
Bay gas prospects

Price scenarios may alter
gas-to-oil strategy for US
unconventionals

National lab uses OGJ
data to develop cost
equations

Ruud Weijermars

EU REFINING—1:
Needs to meet distillate
demand, export gasoline
squeeze refiners

74

90

Andy Clifford, Elizabeth Goodman

50

Downhole tests show
benefits of distributed
acoustic sensing

Greenland awards seven
licenses in Baffin Bay

Mathieu Molenaar, David Hill,
Vianney Koelman

DCS advanced control
improves Chinese
ethylene cracker
operation

71

82

Photo from BP PLC

90

Daryl Brown, Jim Cabe,
Tyson Stout

108

Honggang Wang, Zhenlei Wang,
Hua Mei, Feng Qian, Zhiwu Tang

Approach allows for
robust, flexible valve
protection
Jaime Farinas, Gary Nunez

112

96

New USGS report
confirms big Caspian
stakes
Eric Watkins

72

CLOSED-LOOP
CIRCULATING—2:
Manual pressure
management enhances
safety, efficiency

GUIDE TO WORLD
CRUDES: Updated
Cusiana assay reveals
lighter crude oil

David Pavel, Brian Grayson

104

86

Nelson-Farrar monthly
cost indexes

ASSET INTEGRITY—1:
New model predicts
internal corrosion
likelihood
Fengmei Song, John McFarland,
Barron Bichon, Luc Huyse,
Fraser King, Laurie Perry,
Mark Piazza

116

105

NELSON-FARRAR
QUARTERLY

COSTIMATING: Refinery
fuel indexes since 2007
show unsteady track
Gary Farrar

106

50

110103ogj_3 3

112

12/29/10 11:45 AM


PennWell, Houston office
1455 West Loop South, Suite 400, Houston, TX 77027
Telephone 713.621.9720 / Fax 713.963.6285
Web site www.ogj.com

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Editor
Chief Editor-Exploration
Chief Technology Editor-LNG/Gas Processing
Production Editor
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Publisher
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Alan Petzet,
Warren R. True,
Guntis Moritis,
Christopher E. Smith,
Marilyn Radler,
Steven Poruban,
Sam Fletcher,
Paula Dittrick,
Leena Koottungal,
Jim Klingele,

Paul Westervelt,
Roy Markum,

PennWell, Tulsa office

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PO Box 1260, Tulsa, OK 74101
Telephone 918.835.3161 / Fax 918.832.9290
Presentation/Equipment Editor
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Washington

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Tel 310.595.5657
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PennWell Corporate Headquarters
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110103ogj_4 4

Chairman
President/Chief Executive Officer

P.C. Lauinger, 1900-1988
Frank T. Lauinger
Robert F. Biolchini

Member Audit Bureau of Circulations & American Business Media
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12/29/10 11:12 AM


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12/16/10 10:37 AM


OGJ
Newsletter

Jan. 3, 2011

International News
for oil and gas professionals

GENERAL INTEREST Q U IC K TA K E S
US court denies NPRA-API challenge of RFS changes
The federal appeals court for the District of Columbia rejected
the National Petrochemical & Refiners Association’s and American Petroleum Institute’s petition to set aside changes the US
Environmental Protection Agency made in the federal renewable fuels standard.
NPRA and API argued the changes violated 2009 and 2010
biomass-based diesel fuel requirements, were impermissibly
retroactive, and did not comply with statutory lead time and
compliance provisions for renewable fuels established by the

2005 Energy Policy Act and expanded by the 2007 Energy Independence and Security Act.
“EPA had clear albeit implicit authority under EISA to apply both the 2009 and 2010 volume requirements in the 2010
calendar year in order to achieve the statutory purpose,” Judge
Judith W. Rogers wrote in her Dec. 21 opinion. “The structure
of EISA demonstrates that Congress anticipated the possibility
of some retroactive impacts in the first year of the expanded
renewable fuel program.”
NPRA President Charles T. Drevna expressed disappointment and concern over the ruling. “The legal petition before
the court did not seek to challenge or call into question the important role biofuels play in our nation’s transportation policy,”
he said. “Rather, the issue is one of fundamental fairness in
EPA’s rulemaking process. This retroactive regulation by a federal agency establishes a deeply troubling and potentially farreaching precedent.”
“This is a disappointing decision. Setting requirements to
blend certain biofuels for the previous year is a legally questionable retroactive action,” said Patrick Kelly, a senior policy
advisor in API’s downstream fuels issues group.
API supports a realistic and workable RFS and its members are committed to meeting the regulatory requirements,
he continued. “This decision significantly complicates compliance and may set a dangerous precedent allowing retroactive
requirements for past compliance periods,” Kelly said.

Sasol to buy stake in Montney shale gas
Sasol Ltd. agreed to buy a 50% stake in Talisman Energy Inc.’s
Montney shale gas play in the Farrell Creek project in north-

6

110103ogj_6 6

For up-to-the-minute news,
visit www.ogjonline.com

eastern British Columbia for $1.05 billion (Can.), and the two

companies plan a Farrell Creek area partnership that Talisman
will operate.
Talisman Pres. and Chief Operating Officer John A. Manzoni
said Sasol’s expertise will help Talisman decide whether to build
a gas-to-liquids plant in western Canada. Terms of the transaction call for an economic feasibility study regarding a GTL plant.
“This could provide a strategic alternative to traditional
North American pipeline or liquefied natural gas marketing,”
Talisman said. Sasol uses its Fischer-Tropsch technology to
transform natural gas into gasoline and diesel in South Africa
and Qatar.
“The outlook for GTL could be very positive if North American natural gas prices continue to decouple from oil prices,”
Talisman said.
Closing, subject to regulatory approval, is expected during
the first half of 2011.
The 51.6 acre site holds an estimated 9.6 tcf, said Sasol,
which agreed to pay $260 million upon closing and carry 75%
of Talisman’s future capital commitments in Farrell Creek up to
$790 million total.
Farrell Creek production is expected to reach 40-60 MMcfed
by yearend. Previously, Talisman expanded its Farrell Creek
processing facilities to 120 MMcfd.
Talisman and Sasol also agreed to collaborate on certain
other western Canadian natural gas opportunities.

EXCO buying Marcellus assets from Chief
EXCO Resources Inc. will acquire Marcellus shale interests
from Chief Oil & Gas LLC and related parties for $459.4 million, subject to price adjustments at closing. Both companies
are based in Dallas.
The deal includes properties with gross production of 40
MMcfd of gas (16 MMcfd net) from 15 wells, 11 wells awaiting

completion, and more than 50,000 net acres in northeastern
Pennsylvania, primarily Lycoming and Sullivan counties.
BG Group, a partner of EXCO in an Appalachian basin joint
venture, has the right to buy 50% of the acquisition.
Big Chief recently said that its Marcellus basin production
had reached 100 MMcfd of gas equivalent from 42 wells and
that it expected output to reach 115 MMcfd by yearend (OGJ
Online, Nov. 10, 2010).

Oil & Gas Journal

12/29/10 12:18 PM


CLEAN INNOVATION

Announcing the world’s
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ingredients sourced
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How ingredients sourced exclusively from food industry
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The world asked for cleaner fracturing chemistry and Halliburton
delivered it. The new CleanStim™ formulation provides an extra
margin of safety to people, animals and the environment. Laboratory
testing indicates that it also produces higher retained conductivity than
conventional fracturing fluids under many conditions. The CleanStim
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satisfy the world’s appetite for natural gas. See if it’s right for you.
Learn more at Halliburton.com/cleanstim.

Solving challenges.™
© 2011 Halliburton. All rights reserved.

110103ogj_7 7

12/28/10 3:21 PM


IPE BRENT / NYMEX LIGHT SWEET CRUDE
$/bbl
94.00
93.00
92.00
91.00
90.00
89.00
88.00
87.00

US INDUSTRY SCOREBOARD — 1/3
4 wk.
average

Latest week 12/17

Dec. 22

Dec. 23

Dec. 24 1 Dec. 27

Motor gasoline
Distillate
Jet fuel
Residual
Other products

Dec. 22

Dec. 23

1.8
3.2
–3.5
2.4
12.7
4.1

9,104
3,770
1,409
488
4,481
19,252

9,062
3,615

1,404
536
4,242
18,859

0.5
4.3
0.4
–9.0
5.6
2.1

Crude production
NGL production2
Crude imports
Product imports
Other supply2, 3
TOTAL SUPPLY
Refining, 1,000 b/d

5,585
2,029
8,483
2,522
2,032
20,651

5,537
2,062
8,004

2,680
1,693
19,976

0.9
–1.6
6.0
–5.9
20.0
3.4

5,496
2,028
9,132
2,569
1,885
21,110

5,315
2,048
9,134
2,755
1,737
20,989

3.4
–1.0
0.0
–6.8
8.5

0.6

Crude runs to stills
Input to crude stills
% utilization

14,729
15,208
86.5

14,057
14,352
81.1

4.8
6.0
––

14,590
15,025
85.3

14,336
14,639
82.8

1.8
2.6
––

Latest week 12/17

Latest
week

Previous
week1

340,685
217,173
160,716
43,921
40,907

346,018
214,773
161,305
43,763
39,774

–5,333
2,400
–589
158
1,133

Stock cover (days)4
Dec. 22

Dec. 23

Dec. 24 1 Dec. 27

Dec. 28 1

Same week
year ago1 Change

Change

Change,
%

Stocks, 1,000 bbl
Crude oil
Motor gasoline
Distillate
Jet fuel–kerosine
Residual

327,546
216,330
161,336
40,991
37,041

13,139
843
–620
2,930

3,866

Change, %

Crude
Motor gasoline
Distillate
Propane
Futures prices5 12/24
Light sweet crude ($/bbl)
Natural gas, $/MMbtu

23.1
23.7
42.4
42.0

23.8
23.7
43.3
50.4

90.16
4.13

88.25
4.20

4.0
0.4

–0.4
7.1
10.4

Change, %

–2.9
0.0
–2.1
–16.7

23.7
24.1
44.0
36.1

–2.5
–1.7
–3.6
16.3

Change

Change

1.91
–0.07

71.77
5.57

%

18.39
–1.44

25.6
–25.8

1

Based on revised figures. 2OGJ estimates. 3Includes other liquids, refinery processing gain, and unaccounted for crude oil. 4Stocks
divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices.
Source: Energy Information Administration, Wall Street Journal

Dec. 22

Dec. 23

Dec. 24 1 Dec. 27

Dec. 28 1

PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU
¢/gal
174.00
170.00
166.00

BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE

3,900
3,600
3,300
3,000
2,700
2,400
2,100
1,800
1,500
300
0

3,233
2,891

342

Nov. 09

Dec. 22

Dec. 23

Dec. 24 1 Dec. 27

Dec. 28 1

NYMEX GASOLINE (RBOB)2 / NY SPOT GASOLINE3
¢/gal
246.00

244.00
242.00
240.00
238.00
236.00
234.00
232.00

Change,
%

8,991
3,670
1,464
497
4,283
18,905

Dec. 24 1 Dec. 27 1 Dec. 28 1

IPE GAS OIL / NYMEX HEATING OIL

134.00
133.00
132.00
131.00

YTD avg.
year ago1

Supply, 1,000 b/d

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB

¢/gal
254.00
250.00
246.00
242.00
238.00
234.00
230.00
226.00

YTD
average1

9,150
3,788
1,413
509
4,828
19,688

Dec. 28 1

WTI CUSHING / BRENT SPOT

$/MMbtu
4.15

4.10
4.05
4.00
3.95
3.90
3.85
3.80

Change,
%

Product supplied, 1,000 b/d

TOTAL PRODUCT SUPPLIED

$/bbl
95.00
94.00
93.00
92.00
91.00
90.00
89.00
88.00

4 wk. avg.
year ago1

Dec. 09

Jan. 10

Feb. 10

Mar. 10

Apr. 10

May 10 Jun. 10

Jul. 10

Aug. 10

Sept. 10

Oct. 10

Nov. 10

Note: Monthly average count

BAKER HUGHES RIG COUNT: US / CANADA
1,714

1,800
1,600
1,400

1,178

1,200
1,000
800
400

311

268

200
Dec. 22

1Not

Dec. 23

2Reformulated

Dec. 24 1 Dec. 27

Dec. 28 1

available.
gasoline blendstock for oxygen blending
3Nonoxygenated regular unleaded

8

110103ogj_8 8

0

10/16/09 10/30/09 11/13/09 11/27/09

10/9/09 10/23/09

11/6/09

11/20/09

12/11/09

12/4/09

12/25/09 10/15/10 10/29/10

12/18/09

10/8/10

10/22/10

11/12/10

11/5/10

11/26/10 12/10/10 12/24/10

11/19/10

12/3/10

12/17/10

Note: End of week average count

Oil & Gas Journal | Jan. 3, 2011

12/29/10 12:18 PM


110103ogj_9 9

12/16/10 10:37 AM


Range Resources responds to EPA
Range Resources Corp.’s activities have not had any impact on
the water aquifer in southern Parker County, Tex., the company said in a news release regarding the US Environmental
Protection Agency’s expressed concerns about possible natural
gas migration.
EPA officials have noted methane contamination of two water wells in southwest Parker County. The Texas Railroad Commission scheduled a Jan. 10 hearing on the issue.
Range said it has been working with the Texas Railroad
Commission staff, engineers, and field inspectors for several
months and has conducted extensive testing of both Rangeoperated gas wells and the water wells of concern.
“We’ve provided those findings to the landowner, the Railroad Commission and the EPA,” Range said. “Range’s wells are
completed in the Barnett shale formation, which is over a mile
below the water zone. The investigation has revealed that methane in the water aquifer existed long before our activity and
likely is naturally occurring migration from several shallow gas

zones immediately below the water aquifer.”
Range said it remains committed to working with regulators and residents to determine the cause and to assist with
any remediation the Texas Railroad Commission determines is
warranted. Range also will offer to provide drinking water to
residents in the area while the investigation continues.
The company said it is working with the Railroad Commission to perform soil gas surveys that may lead to additional
environmental investigation activities and to assist with monitoring gas concentrations.

EXPLORATION & DEVELOPMENT Q U IC K TA K E S
Statoil awarded four licenses off Newfoundland
The Canada-Newfoundland and Labrador Offshore Petroleum
Board has awarded Statoil interests in four new licenses off
eastern Canada.
The board awarded a Significant Discovery Licenses in an
extension area of Statoil’s Mizzen discovery in the Flemish Pass
basin to Statoil as operator with 65% interest and Husky Energy
Inc. 35%.
The board awarded two exploration licenses in the Flemish
Pass basin/Central Ridge area 500 km off Newfoundland. One
near the Mizzen license went to Statoil and Husky at the same
interests as the SDL extension license. The other license, in the
northern part of the basin, went to Statoil 75% and operator
and Repsol E&P Canada Ltd. 25%.
The fourth license, in the Jeanne d’Arc basin 250 km off
Newfoundland, went to Husky Energy operator with 50% interest and Statoil 50%.
Statoil is partner in the ongoing drilling of the Suncor Energy operated Ballicatters M-96Z exploratory well in the Jeanne
d’Arc basin. Statoil plans to drill one well on its Mizzen discovery and another on its Fiddlehead license in the Jeanne d’Arc
basin in 2011-12.

10

110103ogj_10 10

Statoil is a partner in Terra Nova and Hibernia producing
fields and in the pending Hibernia Southern Extension and Hebron field developments.

Mitsubishi commits to Canning basin 2011 program
Japan’s Mitsubishi Corp. has exercised an option to participate
in Buru Energy Ltd.’s 2011 exploration program in the Canning
basin of Western Australia.
Mitsubishi joined Perth-based Buru earlier this year by committing to spend $22.4 million (Aus.) to fund 80% of the 2010
work program (OGJ Online, June 15, 2010). It had until Nov. 30
to decide whether to take the partnership further.
Under the extended deal, Mitsubishi has committed to fund
$40 million (Aus.) of a planned $50 million (Aus.) exploration
program in the Canning region next year and up to $50 million
(Aus.) of Buru’s development costs for any major oil and gas
development infrastructure.
The 2010 program has seen a successful appraisal of the Yulleroo gas discovery and lent credence to Buru’s broader vision
of a Canning Superbasin as a significant supplier of energy.
The 2011 program is still subject to review, but is likely to
include appraisal of the Pictor oil and gas discovery in permit
EP431, two more wells in the Yulleroo exploration province
as direct appraisals of Yulleroo-2 or wildcats on the Yulleroo
trend. There will also be two wells in the Acacia field exploration area targeting oil prospects and a well to evaluate one of
Buru’s unconventional play types in the region.
As well as earning an equal interest to Buru in the majority
of Buru’s permits, the new deal also gives Mitsubishi the right
to earn an interest in the unconventional program by carrying
out a further $40 million (Aus.) of unconventional exploration

costs in 2012.
In addition, Mitsubishi has the right to acquire a 50% interest in Buru’s production permits in exchange for another cash
payment priced by an independent expert and based on proved
and probable reserves.
Buru will continue as operator in all its permits, but Mitsubishi will lead any LNG commercialization plans.

Falkland log results disappoint Desire
Desire Petroleum PLC plans to drill the 100% interest Dawn/
Jacinta prospect in the North Falkland basin as the company
expressed “extreme disappointment” at log results from the
14/15-2 Rachel North well that it had proclaimed as an oil discovery.
Desire will plug and abandon Rachel North as an oil show
well. It summarized the latest log results as follows:
• Preliminary results from interpretation of initial log data
indicated that the well had encountered a 349-m gross interval
of sands and shales with hydrocarbons, of which 57 m was net
pay in multiple zones. However, sampling of the main sand has
shown that the hydrocarbons are residual and that the mobile
fluid is water.
• Analysis of the formation water recovered by sampling

Oil & Gas Journal | Jan. 3, 2011

12/29/10 12:18 PM


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110103ogj_11 11

12/16/10 10:36 AM


indicates much lower salinity than anticipated, and when this
value is incorporated into a revised log interpretation it is confirmed that the sands are water-bearing. The salinity impacts
the resistivity of the formation water that is used to calculate
the saturation of hydrocarbons in sands.
• Using industry standard procedures, the initial interpretation was based on a calculated value from a clear water sand
only 55 m above the target sand of the same stratigraphic age
and depositional setting. This calculated value was consistent
with measurements from other wells in the basin. Unexpectedly, the actual resistivity value in the sample taken from the
main sand turned out to be markedly different, and that sand is
now interpreted to be water-bearing.
• Formation pressures and sampling confirm the presence
of good reservoir quality in the upper sands. A deeper target is
still interpreted to be oil-bearing, but the interval is thin and
reservoir quality is poor.
The wells Desire drilled in the Rachel area have identified
five fan systems of varying areal extent and reservoir properties. Good reservoir development has been recorded in a number of the fans. Some of the sands are of a similar age to the

sands in Rockhopper Exploration’s Sea Lion discovery.
All fans will be remapped incorporating data from the wells
to identify areas where better quality reservoir can be expected
and stratigraphic traps developed. As these fans can only be
mapped on 3D seismic, final mapping will await the new 3D
survey, to start shortly.
The Dawn/Jacinta prospect in Tranche I is independent of
Rachel. Targets are sands at a number of levels. The well will
explore the prospectivity on the southern margin of the basin
immediately updip from the main oil source rock (see map,
OGJ, Nov. 1, 2010, p. 61).
After Dawn/Jacinta, Desire is likely to drill another well at
a location to be decided. The forward drilling schedule is still
to be finalized.

POL encounters oil and gas in Makori well
Pakistan Oilfields Ltd. (POL) encountered both oil and gas in
its exploratory Makori East-1 well in Tal Block.
The upper 50 m of the drilled section in the Lockhart formation produced 3,209 b/d of 37° gravity oil and 10.7 MMcfd gas
during an open-hole DST at 32∕64 -in. fixed choke size at flowing
wellhead pressure of 3,179 psi, POL executives said.
Drilling will continue to test deeper prospective horizons,
the company said. It is expected to reach the planned total
depth within 3 months. MOL Pakistan is operator. POL’s working interest is 25%.
The initial test was more encouraging with oil and gas flows
at 3,209 b/d and the gas flow at 10.7 MMcfd. The well would
increase POL’s oil production to 5,800 b/d, the highest level
since December 2007.
The Makori East-1 well was spudded Aug. 30 with a target
depth of 4,169 m in Tal block in the North-West Frontier Province. Other joint venture partners include Oil & Gas Develop-

12

110103ogj_12 12

ment Corp (OGDC) and Pakistan Petroleum Ltd. (PPL) both
having 27.7% stakes.

DRILLING & PRODUCTION Q U IC K TA K E S
Guara extended well test starts off Brazil
Petroleo Brasileiro SA (Petrobras) on Dec. 25 started the Guara
area extended well test from the presalt layers of Block BM-S-9
in the Santos basin, 300 km off Brazil’s Sao Paulo state.
The company expects the test on Well SPS-55 to last 5
months and produce a 30° gravity oil at 14,000 b/d to Dynamic
Producer, a dynamically positioned floating, drilling, production, storage, and offloading vessel.
Petrobras estimates that the Guara area contains 1.1-2 billion boe of recoverable oil and gas.
Following the test, the company will start a pilot project that
will connect Guara wells to the Cidade de Sao Paulo floating
production, storage, and offloading vessel. It expects production from the pilot to start by 2013 at 120,000 bo/d and 5 million cu m/day of gas.
Petrobras is the operator and holds a 45% interest in Block
BM-S-9. Its partners are the BG Group 30% and Repsol-YPF
SA 25%.

Contract awarded for Ekofisk platform
ConocoPhillips has conditionally awarded a contract for the
topsides module of the Ekofisk 2/4 Z production platform in
the Norwegian North Sea.
Subject to approvals by license partners and the Norwegian
government, Aker Solutions will perform engineering, procurement, and construction.

Ekofisk production this year is expected to average 176,000
b/d of oil with gas totaling 1.72 billion standard cu m and gas
liquids totaling 230,000 tonnes.
The field, in 70-75 m of water, has produced since 1971 from
Paleocene and Late Cretaceous Ekofisk and Tor chalk at 2,9003,250 m below sea level. It has been on waterflood since 1987.
Another new installation, the Ekofisk VB template for water
injection wells, is planned.

Indonesia approves Abadi development plan
Indonesia has approved the Inpex development plan for its
Abadi natural gas field on Masela block in the northern Arafura Sea. The field was discovered in 2000. Six appraisal wells
prompted Inpex and partners to report estimated reserves of
more than 10 tcf in the field.
Inpex and joint venture partner PT Energi Mega Persada will
move into the front-end engineering and design phase of the
project. The plan calls for a floating LNG facility capable of producing 2.5 million tonnes/year of LNG, which is considerably
less than the original concept of 4.5 million tpy.
Inpex said the project size was reduced to benefit from the
technical references available from other similar-sized FLNG
projects. Inpex holds 90% of the Masela block.

Oil & Gas Journal | Jan. 3, 2011

12/29/10 12:18 PM


110103ogj_13 13

12/16/10 10:36 AM

PROCESSING Q U IC K TA K E S

TRANSPORTATION Q U IC K TA K E S

Turkmen gas project starts second phase

Chevron, Shell let contract for JSM export line

State-owned Turkmengas has begun the $3.4 million second
phase of its South Yoloten project, according to international oil
and gas service company Petrofac, London. Petrofac will perform the engineering, procurement, and commissioning on the
project. The work follows completion of the first phase.
When complete, South Yoloten field, which lies about 250
miles southeast of the Turkmen capital of Ashgabat, will export
20 billion cu m/year. Under the 32-month second phase of the
lump-sum contract, Petrofac will provide a 10 bcm/year gas
processing plant along with infrastructure and pipelines for the
entire 20-bcm/year development.
Feed gas from the field contains up to 6% hydrogen sulfide,
said the Petrofac announcement, and development will include
gas treatment and sulfur handling, along with well pad, gathering, infrastructure and utilities, condensate processing, storage,
and export.

Amberjack Pipeline Co. LLC, a partnership between Chevron
Pipe Line Co. and Shell Pipeline Co. LP, let a contract to Saipem
for the Walker Ridge export pipeline, which will transport
crude from the offshore Jack and St. Malo (JSM) fields about
280 miles south of New Orleans.
Scope of work includes transportation and installation of a

24-in. OD oil export pipeline, extending 136 miles from a maximum water depth of 7,000 ft and connecting the JSM floating production unit to a Shell-owned and operated platform on
Green Canyon Block 19 (OGJ Online, Dec. 15, 2010).
Marine activities will be performed by the newbuild pipelay
vessel Castorone starting first-quarter 2013.
The contract is the first award for Castorone, which currently under construction. The 1,083-ft dynamically positioned
vessel is designed to lay pipes up to 60-in OD.

Shell invites tenders for CSG-LNG project
Sipchem announces EPC for new plant
Saudi International Petrochemical Co. (Sipchem) announced
earlier this month that affiliate International Polymers Co. has
awarded the engineering design, procurement, and construction work for an ethylene vinyl acetate (EVA) plant to G.S. Engineering & Construction Corp., South Korea.
The 200,000-tonne/year plant will produce EVA and lowdensity polyethylene at the industrial complex in Jubail Industrial City. The plant is to start operation in second-quarter 2013
and cost an estimated 3 billion Saudi riyals ($800 million).
The Saudi Ministry of Petroleum and Minerals said the announcement has allocated the main ethane feedstock for the
project to be cracked and treated to ethylene by one SABIC
company and vinyl acetate monomer, as secondary feedstock,
to be supplied by International Vinyl Co., a Sipchem affiliate.
International Polymers was founded in 2009 with Sipchem
owning 75% and Hanwha Chemicals–Korea owning 25%.

A joint venture of Royal Dutch Shell PLC and Petrochina has invited tenders for the front-end engineering and design (FEED)
phase of its proposed CSG-LNG project at Curtis Island near
Gladstone in Queensland.
Invitations to tender were sent to four Australian and international consortia. The successful group will be responsible for
carrying out FEED for the LNG plant. A decision on who will
construct the plant is to be made at a later date.
Shell and Petrochina completed a $3.4 billion (Aus.) takeover of Arrow Energy Ltd. earlier this year to secure CSG reserves for the planned four-train, 16 million tonne/year capacity plant on Curtis Island.
Stage 1 includes construction of two trains of 4 million
tonnes/year each. A final investment decision is scheduled for

2012, leading to the project being brought on stream in 2017.
Tenders for the FEED phase close in February.

Australian officials support James Price Point LNG
Marcellus play to get gas plant
Magnum Hunter Resources Corp., Houston, announced earlier
this month that it will build a 200-MMcfd cryogenic natural
gas processing plant to serve production moved on its Eureka
Hunter pipeline in northwestern West Virginia. A company
spokesman declined to pinpoint the plant’s planned location.
Installation and hook-up of the plant will begin once it is
delivered in October 2011. The spokesman also declined to disclose the construction cost or what construction contracting
company is in charge of engineering and construction.
Gary C. Evans, Magnum Hunter chairman and chief executive officer, noted that natural gas produced from its 50,000 net
acres in the Marcellus shale in northwestern West Virginia and
Ohio is “highly liquids rich,” 1,200-1,400 btu.
He said the company intends to drill at least “horizontal
Marcellus shale wells in fiscal year 2011.”

14

110103ogj_14 14

The Western Australian Department of State Development submitted a draft report recommending approval of the planned
LNG-natural gas hub at James Price Point 60 km north of
Broome on the Kimberley coast.
The draft report covers 3 years of scientific investigations,
studies, and consultations into developing a multiuser LNG
hub on the site.
The document points out that a single LNG hub would minimize the environmental footprint of LNG gas processing in the

Kimberley with a single shipping channel and port.
A supplementary document addressing marine waste discharge, oil spill modeling, marine benthic primary producer
habitat and coastal processes is to be released early in 2011
when the studies into these issues are complete.

Oil & Gas Journal | Jan. 3, 2011

12/29/10 12:18 PM


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©2010 Industrial Rubber, Inc. (PEN1017/0810)

110103ogj_15 15

12/28/10 3:22 PM


2010-2011
EVENTEVENT
CALENDAR
2010-2011
CALENDAR
Denotes new listing or e-mail: conferences@
europetro.com, website:
a change in previously
www.europetro.com/
published information.
index.php?option=com_
event<emid=240.
24-26.
JANUARY 2011
GEO India Conference
& Exhibition, New Delhi,
+44 (0)20 7840 2139,
+44 (0)20 7840 2119
(fax), e-mail: geo@
oesallworld.com, website:
www.geo-india.com.
12-14.
Gas Transport & Storage

Summit, Berlin, +44
(0)20 7202 7690, +44
(0)20 7202 7600 (fax),
e-mail: richard.jones@
wtgevents.com, website:
www.gtsevent.com.
19-20.
ME TECH 2011, Dubai,
+44 20 7357 8394, +44
20 7357 8395 (fax),

16

110103ogj_16 16

European Gas Conference, Vienna, +44 207
067 1800, +44 207
430 0552 (fax), e-mail:
, website:
/>articles/214.php 25-27.

20 7357 8394, +44
20 7357 8395 (fax),
e-mail: conferences@
europetro.com, website:
www.europetro.com/
index.php?option=com_
event<emid=244.
27-28.

SPE Project and Facilities
Challenges Conference
at METS, Doha, +971
4 390 3540, +971 4
366 4648 (fax), e-mail:
Global LNG Forum, Bar- , webcelona, +421 257 272 site: www.spe.org. 13-16.
API Inspection Summit
11, +421 255 644 490,
& Expo, Galveston, Tex.,
e-mail; beata.kyblova@ Pipeline Pigging &
(202) 682 8000, (202)
jacobfleming.com, web- Integrity Management
Annual Gas Arabia
682-8222 (fax), website: API/AGA Joint Committee
Summit, Abu Dhabi, +44 site: www.jacobfleming. Conference, Houston,
www.api.org. 24-27.
on Oil and Gas Pipeline
207 067 18 00, e-mail: com. 2-3.
(713) 521-5929, (713)
Welding Practices, Fort
c.pallen@theenergyex521-9255 (fax), e-mail:
Worth,
Tex.,
(202)
682
API Exploration and ProEast African Petroleum
change.co.uk,
website:
, website:
duction Winter Standards 8000, (202) 682-8222

Conference & Exhibiwww. www.theenergywww.clarion.org. 14-17.
(fax),
website:
www.api.
Meeting, Fort Worth,
tion (EAPCE), Kampala,
exchange.co.uk/3/13/
org. 26-28.
Tex., (202) 682-8000,
+256 414 320714, _256 World Heavy Oil Conarticles/135.php. Jan.
(202) 682-8222 (fax),
414 320437 (fax),
30-Feb.
2.
gress, Edmonton, Alta.,
website: www.api.org.
Pipe Tech Americas
e-mail: eapce11@
(888) 799-2545, (403)
24-28.
Summit, Houston, (416)
petroleum.go.ug. website: 245-8649 (fax), website:
Offshore Production
214-1144, e-mail: lauwww.petroleumafwww.worldheavyoilconShale Gas Symposium, rence.allen@wtgevents. Technology Summit,
rica.com/en/eventdetail.
London, +44 (0)20
gress.com. 15-17.
com, website: www.
Calgary, Alta., (877)
php?Eventld=522. 2-4.

pipetechamericas.com/ 7202 7690, +44 (0)207
927-7936, (877) 927program. 27-28.
202 7600 (fax), e-mail:
1563 (fax), website:
Russia Offshore Annual
NACE Northern Area
www.canadianinstitute.
nathan.robinson@
Conference & Exhibition,
Western Conference,
com/energy_resources/ Russian & CIS Executive wtgevents.com, website:
Moscow, +44 207 067
Regina, Sask., (281)
ShaleGas.htm. 25-26.
Summit, Dubai, +44
www.offshore-summit.
1800, +44 207 430
228-6200, (281)
com. Jan. 31-Feb. 1.
0552 (fax), e-mail: wra@
228-6300 (fax), e-mail:
theenergyexchange.
,
SPE Middle East Uncon- website: www.events.
co.uk, website: www.
ventional Gas Conference nace.org/sarwebsites/
theenergyexchange.
and Exhibition, Muscat, NorthernAreaWestern/
co.uk/3/13/articles/179.
+971 4 390 3540, +971 conference11/index.

php. 15-17.
4 366 4648 (fax), e-mail: asp. 6-8.
, webWorld Heavy Oil Consite: www.spe.org. Jan.
gress, Edmonton, Alta.,
Arctic Technology
31-Feb. 2.
(888) 799-2545, (403)
Conference, Houston,
245-8649 (fax), website:
(888) 945-2274, ext.
www.worldheavyoilcon617,
website:
www.arctFEBRUARY 2011
ictechnologyconference. gress.com. 15-17.
org/. 7-9.
IADC Health Safety
IPAA International
Environment and Training
Forum, Houston, (202)
Conference & Exhibition, Pipeline Coating Inter857-4722, (202) 857national
Conference,
Houston, (713) 2924799 (fax), website:
Vienna,
+44(0)117
924
1945, (713) 292-1946
www.ipaa.org. 16.
9442, +44(0)117 989
(fax), e-mail: info@iadc.
2128 (fax), e-mail: info@

org, website: www.iadc.
amiplastics.com, website: NAPE Expo, Houston,
org/conferences. 1-2.
www.2.amiplastics.
(972) 993-9090, (972)
com/Events/Even.
993-9191 (fax), e-mail:
Topsides Conference &
code=C369&sec=1222. ,
Exhabition, Galveston,
7-9.
website: www.napeexpo.
Texas, (918) 831-9160,
com. 16-18.
(918) 831-9161 (fax), eInternational Gas Analysis
mail: wendyl@pennwell.
Symposium & Exhibition, Laurance Reid Gas
com, website: www.
Rotterdam, +31 (0) 15
Conditioning Confertopsidesevent.com/index. 2 690 147, +31 (0) 15
ence, Norman, Okla.,
html. 1-3.
2 690 190 (fax), e-mail: (405) 325-2248, (405)
, website:
325-7164 (fax), e-mail:
Global LNG Forum,
www.gas2011.org. 9-11. , website:
Barcelona, +421 257
www.engr.outreach.
272 112, +421 255

ou.edu. 20-23.

644 490, e-mail; beata.
kyblova@jacobfleming.
com, website: www.
jacobfleming.com. 2-3.

Oil & Gas Journal | Jan. 3, 2011

12/22/10 9:28 AM


IP Week, London, +44
0 20 7467 7116, e-mail:
,
website: www.energyinst.
org.uk. 21-23.
Nitrogen+Syngas International Conference &
Exhibition, Dusseldorf,
+44 (0) 20 7903 2438,
+44 (0) 20 7903 2432
(fax), e-mail: ,
website: www.crugroup.
com. 21-24.

Corrosion UAE Conference, Abu Dhabi, 00 971
50 264 1202, e-mail:
, website:
www.theenergyexchange.
co.uk/3/13/articles/157.

php. Feb. 27-Mar. 1.

MARCH 2011

NPRA Security Conference & Exhibition,
Houston, (202) 4570480, (202) 457-0486
(fax), e-mail: info@npra.
SUBSEA Tieback
org, website: www.npra.
Forum & Exhibition, San
org. 1-2.
Antonio, (918) 831-9160,
(918) 831-9161 (fax),
e-mail: registration@pen- Annual Arctic Gas
nwell.com, website: www. Symposium, Calgary,
Alta., (877) 927-7936,
subseatiebackforum.
(877) 927-1563 (fax),
com. 22-24.
website: www.arcticgassymposium.com/index.
SPE European Conferhtml. 1-2.
ence on Health Safety
and Environment in Oil
and Gas Exploration,
SPE/IADC Drilling ConferVienna, +44 (0)1224
ence, Amsterdam, +44
318088, website: www. 20 7299 3300. +44 20
spe-uk.org. 22-24.
7299 3309 (fax), e-mail:
, website:

Pipe Line Contractors
www.spe.org. 1-3.
Association Convention,
Maui, (214) 969-2700,
APPEX/AAPG Property &
e-mail: ,
Prospect Expo, London,
website: www.plca.org.
+44 (0) 207 434 13
22-26.
99, e-mail: Europe@
aapg.org. website: www.
GPA Europe Conference,
europetro.com. 1-3.
Amsterdam, +44 (0)
1252 625542, website:
Turkmenistan Asia Oil &
www.gpaeurope.com/
events/event/16. 23-25. Gas Summit, Singapore,
+44 (0) 20 7328 8899,
+44 (0) 20 7624 9030
Annual Petcoke Con(fax), e-mail: info@
ference, San Diego,
summittradeevents.com,
(832) 351-7827, (832)
website: www.summit351-7887 (fax), e-mail:
tradeevents.com/,
website: www.petcokes. ingA2011.php. 3-4.
com. 25-26.
API Spring Committee

on Petroleum MeasureMiddle East Downstream
ment Standards Meeting,
Week Annual Meeting,
Dallas, (202) 682 8000,
Abu Dhabi, +44 (0)
1242 529 090, +44 (0) (202) 682-8222 (fax),
1242 529 060 (fax), e- website: www.api.
mail: wra@theenergyex- org.7-10.

change.co.uk, website:
www.wraconference.
com. 27-30.

CERA Week, Houston,
(713) 840-8282, (713)
599-9111 (fax), e-mail:

Oil & Gas Journal | Jan. 3, 2011

110103ogj_17 17

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17

12/22/10 9:28 AM


2010-2011 EVENT CALENDAR
, website: 228-6329 (fax), website:
www.events.nace.org/
www.cera.com. 7-11.
conferences/c2011/inRenewable Energy World dex.asp. 13-17.
Conference & Expo
North America, Tampa, Offshore West Africa
(918) 831-9160, (918) Conference & Exhibition,
831-9161 (fax), e-mail: Accra, Ghana, (918)
registration@pennwell. 831-9160, (918) 8319161 (fax), e-mail:
com, website: www.
renewableenergyworld- registration@pennwell.
com, website: www.
events.com. 8-10.
offshorewestafrica.com.
15-17.
AIChE Spring Meeting
& Global Congress on
Process Safety, Chicago, TUROGE Turkish Inter(800) 242-4363, (203) national Oil & Gas Con775-5177 (fax), website: ference & Showcase,
Ankara, +44 (0) 20
www.aiche.org/confer7596 5000, +44 (0) 20
ences/springmeeting/

7596 5111 (fax), e-mail:
index.aspx. 13-17.
enquiry@ite-exhibition.
NACE Corrosion Confer- com, website: www.
ence & Expo, Houston, turoge.com. 16-17.
(800) 797-6223, (281)

NPRA Annual Meeting,
San Antonio, (202) 4570480, (202) 457-0486
(fax), e-mail: info@npra.
org, website: www.npra.
org. 20-22.

GPA Europe at GasTech
Conference & Exhibition,
Amsterdam, +44 (0)
1737 855000, +44 (0)
1737 855482 (fax), email: ,
e-mail: www.gastech.
MEOS/SPE’s Middle East co.uk. 21-24.
Oil & Gas Conference &
Exhibition, Manama, +44 IADC Drilling HSE Asia
(0)20 7840 2139, +44
Pacific Conference &
(0)20 7840 2119 (fax), e- Exhibition, Singapore,
mail: meos@oesallworld. (713) 292-1945, (713)
com, website: www.
292-1946 (fax), e-mail:
meos2011.com. 20-23. , website:
www.iadc.org/conferGASTECH International ences. 23-24.

Conference & Exhibition,
Amsterdam, +44 (0)
OMC Offshore Mediter1737 855000, +44 (0) ranean Conference,
1737 855482 (fax), eRavenna, +39 0544
mail: , 219418, e-mail: confere-mail: www.gastech.
, website:
co.uk. 21-24.
www.omc.it/2011.
23-25.

SPE Production and
Operations Symposium, Oklahoma City,
(800) 456-9393, (972)
952-9435 (fax), e-mail:
, website:
www.spe.org. 27-29.
NPRA International Petrochemical Conference,
San Antonio, (202) 4570480, (202) 457-0486
(fax), e-mail: info@npra.
org, website: www.npra.
org. 27-29.
Howard Weil Annual
Energy Conference, New
Orleans, (504) 5822500, website: www.
howardweil.com/energyconference.aspx. 27-31.
SPE European Well
Abandonment Seminar,

Aberdeen, +44 (0)
1224 49495051, e-mail:

,
website: www.spe-uk.
org. 29.
GIOGIE Georgian International Oil & Gas Energy
and Infrastructure Conference, Tbilisi, +44 207
596 5135, +44 207 596
5106 (fax), e-mail: ilyas.
idigov@ite-exhibitions.
com, website: www.giogie.com/2011/. 29-30.

Offshore Asia Conference & Exhibition, Singapore, (918) 831-9160,
(918) 831-9161 (fax),
e-mail: registration@
pennwell.com, website:
www.offshoreasiaevent.
com. 29-31.

Captains of Enterprise–Give your global
energy perspective a whole new perspective.
Our 2011 program.
Register early. Space is limited.
February 21-25, 2011.
SMU
James M. Collins Center
Dallas, Texas
Visit www.exed.cox.smu.edu/global
or call 214.768.7676. In association
with Maguire Energy Institute.

Global Enterprise Leadership in the Energy Industry.

Introducing a new, high-powered five-day program designed to give
you a global vision, and the skills to achieve it. With researched-based
content and fresh thinking from industry thought leaders, you’ll learn
the latest approaches in strategy development, financial management,
leadership, risk management and communication. All of which, along
with an expanded network of peers, will better enable you to lead and
succeed in a rapidly changing future.

Southern Methodist University will not discriminate in any employment practice, education program, or educational activity on the basis of race, color, religion,
national origin, sex, age, disability, or veteran status. SMU’s commitment to equal opportunity includes nondiscrimination on the basis of sexual orientation.

18

110103ogj_18 18

Oil & Gas Journal | Jan. 3, 2011

12/22/10 9:28 AM


2010-2011 EVENT CALENDAR
SEG Shale Gas Forum,
Chengdu, Sichuan,
(918) 497-5500, (918)
497-5557 (fax), website:
www.seg.org. 30-31.

(800) 456-9393, (972) 4 8873584 (fax), e-mail:
952-9435 (fax), e-mail: , website:
, website: www.gtui.org. 10-15.

www.spe.org. 5-6.
The Project Forum, MosSPE/IADC Managed
cow, +44 (0) 20 7357
APRIL 2011
Pressure Drilling & Un- 8394, +44 (0) 20 7357
GPA Annual Convention, derbalanced Operations 8395 (fax), e-mail: ,
San Antonio, (918) 493- Conference, Denver,
(800) 456-9393, (972)
3872, (918) 493-3875
952-9435 (fax), e-mail:
(fax), e-mail: pmirkin@
gpaglobal.org, website:
, website:
www.GPAglobal.org. 3-6. www.spe.org. 5-6.

Middle East Downstream
Week Annual Meeting,
Abu Dhabi, +44 1242
529 090, +44 1242
529 060 (fax), e-mail:
, website:
www.wraconferences.
com/2/4/articles/105.
php. 3-6.
Hannover Messe
Pipeline Technology
Conference, Hannover,
+49 511 90992 22, +49
511 90992 69 (fax), email: ,
website: www.pipelineconference.com. 4-5.

ShaleCon Conference,
Montreal, Q.C., (800)
882-8684, e-mail: info@
iapc.com, website: www.
shalecon.com/Event.
aspx?id=388398. 4-7.
Hannover Messe International Trade Show,
Hannover, +49 511 89
0, +49 511 89 32626
(fax), website: www.
hannovermesse.de/
homepage_e. 4-8.
OilTech Atyrau Regional
Petroleum Technology
Conference, Atyrau, +44
(0) 20 7596 5000, +44
(0) 20 7596 5111 (fax),
e-mail: , website:
www.oiltech-atyrau.com/
home.html. 5-6.
SPE/ICoTA CoiledTubing & Well Intervention
Conference & Exhibition,
The Woodlands, Texas,

Pipe Line Contractors
Association of Canada
Annual Convention,
Maui, (905) 847-9383,
(905) 847-7824 (fax),
e-mail: placa@pipeline.

ca, website: www.
pipeline.ca/convention.
html. 11-15.

Atyrau North Caspian
Regional Oil, Gas and
Infrastructure Exhibition, Atyrau, +44 (0) 20
7596 5000, +44 (0) 20
7596 5111 (fax), e-mail:
enquiry@ite-exhibition.
com, website: www.
atyrauoilgas.com2011/.
5-7.
AAPG Annual Convention
& Exhibition, Houston,
(918) 560-2679, (918)
560-2684 (fax), website:
www.aapg.org. 10-13.
APPEA. Conference and
Exhibition, Perth, +61
(7) 3802 2208, +61 (7)
3802 2209, website:
www.appeaconferences.
com.au. 10-13.
GITA’s Geospatial
Infrastructure Solutions
Conference, Grapevine,
Texas, (303) 337-0513,
(303) 337-1001 (fax)
website: www.gita.org/

events/futconf.asp.
10-14.
SAGEEP Information
Exchange for New-Surface Geophysics Forum,
Charleston, (918) 4975500, (918) 497-5557
(fax), website: www.seg.
org. 10-14.
Gas Turbine Users
International Annual Conference (GTUI), Dubai,
+971 4 8047883, +971

Oil & Gas Journal | Jan. 3, 2011

110103ogj_19 19

website: www.europetro. Process Safety Management of Chem/
com. 11-12.
Petrochem & Refineries
Conference, Houston,
IPAA OGIS-New York,
(312) 540-300, ext.
NewYorkCity, (202) 8576625, e-mail: Miche4722, (202) 857-4799 lew@marcusevansch.
(fax), website: www.ipaa. com, website: www.
org. 11-13.
marcusevansch.com/
OGJPSM. 11-13.

19

12/22/10 9:28 AM

JOURNALLY SPEAKING

2011: E&P spending on the rise

STEVEN PORUBAN
Senior Editor

With worldwide capital spending budgets of exploration and production companies expected to rise
11% in 2011 to $490 billion from $442 billion—according to the 402 oil and gas firms surveyed by
Barclays Capital—this year will undoubtedly be an
exciting one on which to report.
Barclays most recent research note on the topic,
“The Original Oil Services & Drilling Monthly:
December 2010,” released Dec. 23, 2010, stated
that the strongest gains in capital spending yearon-year are expected outside North America.
Here, spending is expected to rise by 12% to $363
billion vs. $324 billion in 2010.
“The largest part of the increase is due to higher
capital spending from the supermajors (up 17%)
and select national oil companies,” Barclays analysts said, adding, “This is a change from recent
years where the NOCs drove spending growth.”
Among the selected NOCs expected to show
the largest increases internationally are Mexico’s
Petroleos Mexicanos, Brazil’s Petroleo Brasileiro
SA, India’s Oil & Natural Gas Corp., Indonesia’s
Pertamina, Malaysia’s Petronas, Kuwait’s Kuwait
Oil Co., Libya’s National Oil Corp., and Algeria’s
Sonatrach.

US E&P spending
E&P spending in the US, meanwhile, is expected to
rise by 8.1% to $93.6 billion from $86.6 billion in
2010, Barclays analysts said. “The vast majority of
the incremental spending,” they said, “is expected
to be directed towards conventional oil plays, liquid-rich reservoirs, and oil shales.”
They said, “Traditional dry gas drilling (particularly outside of shales) is expected to decline. We
believe the natural gas rig count could decrease
by as many as 150 rigs in the first half of 2011,
although this is expected to be mostly offset by
an increase in the oil-directed rig count over the
course of the year.” Of the 210 companies surveyed
with spending in the US, the largest increases in
2011 are expected from companies that spend less
than $50 million, the analysts said, which is up
63% year-on-year.

20

110103ogj_20 20

“However, these companies (107 in total) only
represent 2% of total 2011 estimated spending,”
they said, adding, “As company size grows larger
the magnitude of the increase lessens.”
The firms spending more than $1 billion have
indicated a 5.2% increase in spending in 2011.
“These 28 companies represent roughly 71% of
2011 forecast US E&P spending,” they said.

Among the larger firms that Barclays analysts estimate will have “significant” E&P budget increases
in the US in 2011 vs. 2010 are ConocoPhillips, up
60%; Hess Corp., up 43%; Pioneer Natural Resources Co., up 26%; EOG Resources Inc., up 21%;
Noble Energy Inc., up 13%; Plains Exploration &
Production Co., up 11%; and Petrohawk Energy
Corp., up 7%. All of these firms are expected to
spend $1 billion or more in 2011.
Conversely, large firms that are expected to reduce their 2011 US capital spending budgets include Encana Corp., down 21%; Southwestern Energy Co., down 12%; Devon Energy Corp., down
10%; Williams Cos. Inc., down 8%; and Range Resources Corp., down 6%.

Canadian E&P spending
Canadian E&P spending in 2011 is expected to
increase only modestly from 2010 levels, Barclays
analysts said. In 2011 Canadian E&P capex is slated to rise by 4.8% to $32.6 billion in 2011 from
$31.1 billion in 2010, according the 126 companies
surveyed.
“We believe this is primarily due to lower natural gas prices and reduced vertical, dry-gas drilling, offset by increased drilling related extraction
of hydrocarbons from oil sands and shales,” they
said.
In contrast to previous years, the analysts
said they expect the US dollar/Canadian dollar
exchange rate to have only a “minimal impact,”
roughly 1%, on next year’s spending increase.
“As is the case in the US, the smallest of the
companies are planning the largest increases,” they
said.

Oil & Gas Journal | Jan. 3, 2011

12/29/10 11:13 AM

Global Energy and
Mediterranean
Opportunities
Ravenna
March 23-25, 2011
www.omc.it
Established by
OMC is organised in Association with

Supporting Industry Associations

$6620,1(5$5,$

Under the Hign Patronage of

Italian Prime
Minister

Ministry of Economic
Development

Conference Organiser



110103ogj_21 21

Ministry of Environmental

Protection

Province
of Ravenna

Exhibition Organiser

Municipality
of Ravenna

www.omc.it



12/22/10 9:28 AM


EDITORIAL

An unchanged agenda
US President Barack Obama feinted toward the political center as 2010 ended, but no one in the oil
and gas industry should be fooled. This president
remains dangerously resistant to the development
and use of hydrocarbon energy. His administration
won’t be discouraged by the harsh message voters
delivered to it in congressional elections last November.
In December, Obama acted as though ready to
move away from the leftist agenda voters rebuked
in November. When he signed last-minute legislation to extend Bush-era tax cuts for all taxpayers,
he disappointed his liberal supporters, who wanted to exclude taxpayers with incomes above certain thresholds. On the basis of this compromise,

he received media credit for having redressed the
excesses of his first 2 years in office. He then parlayed the goodwill into two legislative victories
dear to liberals: repeal of the “don’t ask, don’t tell”
policy on homosexuality in the military services
and ratification of an arms-reduction treaty with
Russia.

Swift recovery
The president now is said to have reclaimed political ground lost with November’s rout of Democrats
from Congress. If real, this swift recovery should
worry the oil and gas industry. Aggressive moves by
two key agencies in his administration, made in the
news lull just before the Christmas holiday, show
Obama has no intention of moderating his activism.
On Dec. 23, the Department of the Interior
opened a new mechanism for preventing economic activity on federal land. It authorized the
Bureau of Land Management to manage onshore
acreage not designated by Congress as wilderness,
off-limits to development, as “wild lands” to preserve “wilderness values.” The move provides for
the withdrawal of public land from economic use
by fiat.
Interior Sec. Ken Salazar said this power grab reverses a policy established in 2003, in a settlement
between Interior and Utah, that blocked expansion
of wilderness acreage. That land area is slightly
larger than California, about 5% of the total US.
There surely remains land not designated wilderness that should be. Ultimately, though, how much

22

110103ogj_22 22

land needs to be rendered untouchable? How much
land can the US afford to treat this way? To these
questions the environmentalist agenda answers,
“As much as possible, whatever the cost.” Through
Interior, the Obama administration has acceded
once again to extremist demands.
On the same day Interior acted on wild lands,
the Environmental Protection Agency advanced its
legally questionable program to control energy decisions by regulating emissions of greenhouse gases (GHGs) under the Clean Air Act. It announced
a plan for proposing next year GHG standards to
take effect in 2012 for fossil-energy power plants
and refineries. The move followed its November
decision to impose permitting requirements based
on GHG emissions from large industrial sources
on Jan. 2.
With the latest proposal, EPA acted under
settlement agreements in lawsuits filed by states
and environmental groups. It thus sidestepped
normal regulatory procedures, under which the
regulated industries could have commented on
technical feasibility and other concerns. This maneuver made a mockery of its plans for “listening
sessions” preceding the setting of standards.

Not listening
EPA apparently hasn’t been listening to public expressions of reluctance to incur higher energy costs
for doubtful global-warming remedies. Those expressions take form in the Senate’s failure to pass
cap-and-trade legislation and in the November repudiation of Obama’s state-centered policy push.
The agency also didn’t listen to an important energy
state’s protests when it took over GHG permitting

for refineries and power plants in Texas, deciding
unilaterally that a flexible permitting program was
deficient.
The Obama administration is not chastened
by the setback its political party sustained in November. It is pushing ahead an aggressive environmental and energy program that lacks support
outside the far-left wing of its political base and
that can only hurt the economy, notwithstanding
incessant prattle about mythical “clean-energy”
jobs. Republicans now hold oversight reins that
were out of hand before November. They need to
jerk them soon and hard.

Oil & Gas Journal | Jan. 3, 2011

12/29/10 11:13 AM