Oil and gas journal volume 109, number 5

AraSer_OGJ_110110 1

1/3/11 3:16 PM


International Petroleum News and Technology

5 NEWSLETTER
27 STATISTICS

|

www.ogj.com

Jan. 31, 2011

10 LETTERS / CALENDAR

12 JOURNALLY SPEAKING

14 EDITORIAL

29 MARKETPLACE

31 EDITOR’S PERSPECTIVE / MARKET JOURNAL

|

Volume 109.5

26 EQUIPMENT

26 ADVERTISERS’ INDEX

GENERAL INTEREST
16 BP: Nonfossil fuels
to be ‘major’ energy
sources by 2030
The global fuel mix will continue to diversify,
with increased emphasis on alternative energy
until by 2030 “for the first time nonfossil fuels
will be major sources of supply growth,” said
analysts at BP PLC.

17 Obama uses address
to renew call to repeal
oil tax exemptions
Nick Snow

US President Barack Obama urged Congress
to financially support clean energy and other
innovative technologies in his 2011 State of the
Union address. Repealing billions of dollars
in federal oil tax exemptions would be a good
place to start, he suggested.

20 API: US demand grows, but
policies may stymie production
Nick Snow

22 Natural gas, LPG to play large
roles in European fuels future

23 Salazar formally announces
BOEMRE split, advisory panel
Nick Snow

23 Heritage claims major
Iraq gas-condensate find
24

EXPLOR ATION / DEVELOPMENT BRIEFS

25 WATCHING THE WORLD
Saudi Arabia going nuclear

In the video below, ExxonMobil Corp. discusses its multi-zone stimulation
technology (MZST) and how this breakthrough research and technology is being
used in the Piceance basin. Video from ExxonMobil.

CLICK TO VIEW VIDEO

Visit our video library
www.ogj.com/index/video.html

20 EPA extends E15 waiver to
2001-06 model year cars, trucks
Nick Snow

21 WATCHING GOVERNMENT
Where wild lands are

110131OGJ_1 1

1/27/11 1:07 PM


Advancing Reservoir Performance

70%

How we cut NPT by
and added 36 wells
to an Eagle Ford operator’s drilling plan

©2010 Baker Hughes Incorporated. All Rights Reserved. 30182

An Eagle Ford operator was losing valuable time waiting for frac-water tanks to fill to required
volumes, forcing a substantial reduction in the drilling plan. The operator considered drilling five
new frac-water supply wells, at a cost of USD 1.25 million, to solve this problem.

110131OGJ_2 2

Baker Hughes had a better idea. We installed a high-volume Centrilift electric submersible pumping
(ESP) system and tripled the frac-water supply well production rate. Downtime between completions
dropped from 50 to 17 days. A second Centrilift ESP on another water-supply well quadrupled
its production rate and cut completion wait times to less than 12 days. The operator regained its
original drilling plan and scheduled to add 36 more wells per year.
To learn how we can help you produce more profits from your shale operations, contact your
Baker Hughes representative or visit us online. You’ll find that partnering with us to maximize
the value of your Eagle Ford assets is a very good idea.
www.bakerhughes.com

1/27/11 1:07 PM


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110131OGJ_4 4

1/27/11 1:07 PM


OGJ
Newsletter

Jan. 31, 2011

®

International News
for oil and gas professionals

GENERAL INTEREST Q U IC K TA K E S

Ecopetrol, Talisman acquire BP’s Colombia assets
Ecopetrol SA and Talisman Colombia acquired BP Exploration
Co. Ltd. for $1.75 billion and renamed the company Equion
Energia Ltd.
Ecopetrol owns 51% interest of Equion and Talisman owns
the remainder. Equion consists of all assets and business formerly owned by BP’s Colombia subsidiary.
John A. Manzoni, Talisman president and chief executive
officer, said, “Talisman looks to build a strong production base
in Latin America over the next 3 to 5 years. We look forward to
deepening our strategic relationship with Ecopetrol.”
Equion produces 90,000 boe/d of which it has direct ownership of 27,000 boe/d. Equion reports proved and probable
reserves of 94 million bbl.

Schlumberger: Deep water, E&P to drive earnings
Schlumberger Ltd.’s top executive expects robust world oil and
gas activity, especially deepwater exploration and development
outside the US, will drive strong 2011 earnings for his company
and for oil service providers in general.
Andrew Gould, Schlumberger chairman and chief executive
officer, recently told investors and analysts that he believes oil
prices have moved into a range that will encourage operators to
increase worldwide exploration investments.
Schlumberger reported fourth-quarter profit of $1.04 billion, or 76¢/share, compared with $795 million or 65¢/share
for the same period the previous year. Last year, Schlumberger
closed its $10.8 billion acquisition of drilling fluids provider
Smith International.
“While we do not anticipate a return to pre-Macondo activity levels in deepwater US Gulf of Mexico in 2011, we do
expect a marked increase in deepwater activity in the rest of
the world,” Gould said of the April 2010 blowout of BP PLC’s
Macondo well off Louisiana and subsequent oil spill.

Gould anticipates increased development activity and production enhancement worldwide “promise stronger growth
rates as the year unfolds.”
During a Jan. 21 conference call, Gould said it’s possible
Schlumberger’s first-quarter 2011 earnings could be lower than
fourth quarter 2010 earnings because of various factors, includ-

Oil & Gas Journal

110131OGJ_5 5

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

ing seasonality in the Russian market and North Sea weather.
For natural gas, demand recovery has been less marked.
Increased supply of both US unconventional gas and of LNG
worldwide will limit gas price increases, he said.
“Nonetheless, activity in the United States is likely to remain
strong—at least through the first half of the year—due to the
commitments necessary to retain leases, the backlog of wells
to be completed, and the contribution of natural gas liquids
to overall project economics,” Gould said. “Increased service
capacity, however, will negatively affect pricing at some stage
during the year.”
Worldwide, he said the governing factor on gas activity, particularly in the Middle East, will be the ability of many nations
to use gas as a substitute for oil to meet increased local energy
demand, thus freeing up more liquids for export.
Gould also expects that unconventional gas resources will
continue to attract interest outside the US and Canada.
“The leading activity will continue to be gas in tight, or

low permeability, reservoirs, and in coalbed methane developments,” he said. “There will be exploration activity around the
potential that shale gas offers in many other parts of the world.”

Halliburton’s profits climb on liquids-rich shale plays
Halliburton Co. said higher drilling activity in oil and natural gas shale plays boosted its fourth-quarter earnings, more
than offsetting declines in revenue from restrained international markets and suspended deepwater activity in the Gulf
of Mexico.
During a Jan. 24 conference call, Halliburton reported
fourth-quarter net income of $605 million, or 66¢/share, compared with $243 million, or 27¢/share, for the same period the
previous year.
“Our United States land operations experienced continued
improved profitability,” said David Lesar, Halliburton chairman, president, and chief executive officer. “The increase in
horizontal drilling and activity in liquids-rich plays continued
to drive service intensity.”
Meanwhile, Halliburton reported a decline in its Gulf of
Mexico revenue and income following the April 2010 blowout
of BP PLC’s deepwater Macondo well off Louisiana and the subsequent oil spill in the gulf.
“We continue to believe that prospects for a recovery in the

5

1/27/11 1:07 PM


IPE BRENT / NYMEX LIGHT SWEET CRUDE
$/bbl
98.00
96.00
94.00
92.00

90.00
88.00
86.00
84.00

US INDUSTRY SCOREBOARD — 1/31
4 wk.
average

4 wk. avg.
year ago1

Change,
%

8,962
3,727
1,438
484
4,902
19,513

8,789
3,660
1,375
471
4,503
18,798

2.0

1.8
4.6
2.8
8.9
3.8

8,795
3,592
1,467
395
4,861
19,110

8,671
3,719
1,290
432
4,575
18,687

1.4
–3.4
13.7
–8.6
6.3
2.3

Crude production
NGL production2
Crude imports

Product imports
Other supply2, 3
TOTAL SUPPLY
Refining, 1,000 b/d

5,488
2,047
8,788
2,450
2,304
21,077

5,480
2,132
8,454
2,581
1,798
20,445

0.1
–4.0
4.0
–5.1
28.1
3.1

5,376
2,057
8,951
2,700

2,222
21,306

5,450
2,082
8,718
2,671
1,659
20,580

–1.4
–1.2
2.7
1.1
33.9
3.5

Crude runs to stills
Input to crude stills
% utilization

14,745
15,180
86.3

14,055
14,225
80.7

4.9

6.7
––

14,534
14,902
84.7

14,296
14,603
82.7

1.7
2.0
––

Latest week 1/14

Jan. 19

Jan. 20

Jan. 21

Jan. 24

Motor gasoline
Distillate
Jet fuel
Residual
Other products

Jan. 25

TOTAL PRODUCT SUPPLIED

Jan. 19

Jan. 20

Jan. 21

Jan. 24

Jan. 25

Jan. 19

Jan. 20

Jan. 21

Jan. 24

Jan. 25

335,729
227,670
165,797
43,087
41,837

333,112
223,227
164,759
44,094
39,418

Change

Same week
year ago1 Change

Change,
%

Stocks, 1,000 bbl
2,617
4,443
1,038
–1,007
2,419

330,565
227,442
157,138
43,733
38,781

5,164
228

8,659
–646
3,056

Change, %

Crude
Motor gasoline
Distillate
Propane
Futures prices5 1/21

22.8
25.4
44.5
28.8

22.4
24.6
43.0
32.8

90.05
4.60

91.03
4.46

1.6
0.1

5.5
–1.5
7.9

Change, %

1.8
3.3
3.5
–12.2

23.8
25.9
42.9
25.8

–4.2
–1.9
3.7
11.6

Change

Light sweet crude ($/bbl)
Natural gas, $/MMbtu

Change

–0.98
0.14

80.07
5.61

%

9.98
–1.01

12.5
–17.9

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

Jan. 19

Jan. 20

Jan. 21

Jan. 24

Jan. 25

¢/gal
172.00

169.00
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

3,226
2,898

328

Dec. 09

Jan. 19

Jan. 20

Jan. 21

Jan. 24

Jan. 25

NYMEX GASOLINE (RBOB)1 / NY SPOT GASOLINE2
¢/gal
253.00
250.00
247.00
244.00
241.00
238.00
235.00
232.00

Previous
week1

Stock cover (days)4

PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU

137.00
135.00
133.00
131.00

Latest
week

Latest week 1/14

Crude oil
Motor gasoline
Distillate
Jet fuel-kerosine
Residual

IPE GAS OIL / NYMEX HEATING OIL
¢/gal
273.00
270.00
267.00
264.00
261.00
258.00
255.00
252.00

Change,
%

Supply, 1,000 b/d

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB
$/MMbtu
4.70
4.65
4.60
4.55
4.50
4.45

4.40
4.35

YTD avg.
year ago1

Product supplied, 1,000 b/d

WTI CUSHING / BRENT SPOT
$/bbl
99.00
97.00
95.00
93.00
91.00
89.00
87.00
85.00

YTD
average1

Jan. 10

Feb. 10

Mar. 10

Apr. 10

May 10 Jun. 10

Jul. 10

Aug. 10

Sept. 10

Oct. 10

Nov. 10

Dec. 10

Note: Monthly average count

BAKER HUGHES RIG COUNT: US / CANADA
1,800

1,713

1,600
1,400

1, 282

1,200
1,000
800
600

621

495

400
Jan. 19

1Reformulated

Jan. 20

Jan. 21

Jan. 24

gasoline blendstock for oxygen blending
2Nonoxygenated regular unleaded

6

110131OGJ_6 6

Jan. 25

200

11/13/09 11/27/09

11/6/09

11/20/09

12/11/09

12/4/09

12/25/09

12/18/09

1/8/10

1/1/10

10/29/10 11/12/10

1/15/10

1/2210

11/26/10 12/10/10

11/19/10

12/3/10

12/24/10

12/17/10

1/7/11

12/31/10

1/21/11

1/14/11

Note: End of week average count

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:07 PM


Gulf of Mexico will remain uncertain through the first half of
2011 and perhaps the full year,” Lesar said. “However, I believe
it is prudent to maintain all of our infrastructure and most of
our headcount in anticipation of a rebound in the gulf.”
Halliburton’s gulf strategy could result in continuing losses
there until the rig count recovers, Lesar noted. For 2011, he
expects US and Canadian operators will continue investing in
unconventional oil and gas.
“Development of these resources requires expansive well
programs resulting in longer-term contracting arrangements
for some services,” he said. “We continue to expect that we can
improve prices in select basins where the demand for our integrated services is robust.”
For instance, one customer plans to increase the length of
its laterals in the south Texas Eagle Ford play to 10,000 ft compared with 6,000-ft laterals that it is currently drilling, Lesar

said.
Halliburton reported improved results in Norway, West Africa, Iraq, and Algeria, Lesar said. He expects activity increases
to continue in those markets despite a traditional first-quarter
decline for international earnings.
“We continue to win significant additional awards in Iraq,”
he said. Halliburton plans to double the number of workers it
has in Iraq to 1,200 this year.
“The improving oil consumption demand levels combined
with the industry’s declining spare capacity provides a more
favorable outlook for oil services and technologies in 2011 and
beyond,” he said. Halliburton plans to invest in technology and
to expand its manufacturing capacities as a result.

EXPLORATION & DEVELOPMENT Q U IC K TA K E S
Cairn soldifies position off West Greenland
Cairn Energy PLC, which plans to drill as many as four exploratory wells off western Greenland in 2011, will maintain 10-12
potential well locations in a variety of operating environments
and geological settings for as long as possible.
The company will pick which prospects to drill in May 2011.
Cairn continues to evaluate the results of its 2010 three-well
exploratory drilling campaign on the Sigguk Block in the Disko
Bay area. The wells found biogenic and thermogenic gas and oil
but not significant target reservoir rocks. Geochemical evaluation has now identified three oil types.
The Alpha-1S1 exploratory well has been suspended to allow possible reentry to sidetrack or deepen. The T8-1 and T4-1
exploratory wells have been plugged and abandoned.
The company has secured the dynamically positioned Leiv
Eiriksson semisubmersible and the Ocean Rig Corcovado drillship for the 2011 drilling season.
Cairn plans to shoot 3D seismic off Greenland this year,
subject to approvals. Two 3D seismic survey vessels are expected to be contracted to acquire as many as five 3D surveys in
different areas.

The company shot more than 15,000 km of 2D seismic on

Oil & Gas Journal | Jan. 31, 2011

110131OGJ_7 7

the Eqqua, Ingoraq, Napariaq, Pitu, Sigguk, and offshore south
Greenland blocks in 2010, bringing its total 2D seismic data
base in Greenland to more than 30,000 km.
Cairn now holds 102,000 sq km off Greenland, equivalent
to 15 quadrants in the UK North Sea.
The government has confirmed Cairn as operator of the Atammik and Lady Franklin blocks, and Cairn has acquired the
47.5% interest held by Encana Corp. The entitlement interests
are Cairn operator with 87.5% and Greenland’s Nunaoil 12.5%.
The blocks are usually free of sea ice year-round.
Cairn was awarded the Ingoraq, Napariaq, and Pitu blocks
in the December 2010 Baffin Bay bid round. Shell, Statoil, GDF,
Conoco-Phillips, and Maersk also won blocks in the round (see
map, OGJ, Jan. 3, 2011, p. 71).

Total adds discoveries off Congo (Brazzaville)
Total SA notched two more oil discoveries on its Moho-Bilondo
license off Congo (Brazzaville), boosting its confidence that a
second development hub is emerging as a direct extension of
the producing first phase in the southern part of the license.
The Bilondo Marine 2 and 3 wells, in 800 m of water in the
central part of the license 70 km off the coast, follow the successful Moho Nord Marine 1 and 2 exploratory wells drilled in
2007.
Bilondo Marine 2 and 3 went to 1,800 m in the Tertiary
series and flowed successfully at undisclosed rates. They cut 77

m and 44 m, respectively, of gross reservoir, and neither well
encountered water.
This first phase, brought on stream in 2008, was the first ultradeepwater field developed in Congo (Brazzaville). That field
is making 90,000 b/d from 13 subsea wells tied into a floating production unit. The oil is shipped to the onshore Djeno
terminal.
Total E&P Congo is operator with 53.5% interest in the license. Chevron Overseas Congo Ltd. has 31.5%, and Soc. Nationale des Petroles du Congo has 15%.

Brazil Santos post-salt light oil find gauged
Petroleo Brazileiro SA (Petrobras) and Karoon Gas Australia
Ltd. found 38° gravity oil and associated gas in the Tertiary
post-salt section at the Maruja-1 exploratory well on the BM-S41 concession in the Santos basin off Brazil.
Karoon said Petrobras achieved an equipment-constrained
flow rate of 6,142 stb/d through a 5/8-in. choke during the
clean-up flow period. In the 24-hr main flow period, the highporosity Oligocene sandstone reservoir stabilized at 4,675 stb/d
of oil and 800 Mcfd of gas on a 1∕2-in. choke with 1,050 psia
flowing wellhead pressure.
Test interval at the well is 2,201.5-2,210 m. Total depth is 3,789
m. The wellsite is 16 km southeast of the Petrobras Tiro and Sidon
discoveries, which are on extended well test in similar geology.
Petrobras operates the block with an 80% stake, while Karoon holds a 20% stake subject to approval by Brazil’s Agencia
Nacional do Petroleo.

7

1/27/11 1:07 PM


Analyst IHS Global Insight said Petrobras earlier indicated it
hopes the new find can form part of a new production pole in
the southwestern Santos basin along with the Caravela, Cavalo

Marinho, Coral, Tiro, and Sidon discoveries.
Petrobras announced the Maruja find last November when it
said it discovered light oil in sandstone reservoirs in an exploratory well in Block S-M-1352 of the BM-S-41 concession (OGJ
Online, Nov. 16, 2010).

DRILLING & PRODUCTION Q U IC K TA K E S
CNOOC orders Liuhua 4-1 subsea equipment
China National Offshore Oil Corp. (CNOOC) placed an $85
million order with FMC Technologies Inc. for the manufacture
and supply of subsea production equipment for the Liuhua 4-1
oil field development in the South China Sea.
Liuhua 4-1 field lies in 850-1,000 ft of water about 130 miles
from Hong Kong and 150 miles from Shenzhen. FMC expects
equipment deliveries to commence in this year’s fourth quarter.
Intecsea, a unit of WorleyParsons Group, described the Liuhua 4-1 development as having eight subsea trees clustered
around a central manifold and an 11-km pipe-in-pipe flowline
tying back to the existing Liuhua 11-1 field, which has a Sedco
700 submersible production unit and a floating production,
storage, and offloading vessel.
Both the Liuhua 11-1 and the Liuhua 4-1 have low reservoir
pressure and require downhole electric submersible pumps for
artificial lift. Each Liuhua 4-1 well will have dual ESPs, with
one pump in standby mode. Switching from one pump to the
other will be done remotely. Three 5 kv power cables will supply power to the ESPs.
Intecsea said Liuhua will have a permanently moored drilling rig available to service the wells Control, monitoring, and
chemical injection will be via a 14-km umbilical. The control
system is electrohydraulic.
First oil from the field is expected in 2012, according to Intecsea.

Chevron to expedite Platong Gas II project in Thailand

To meet Thailand’s rapidly growing demand for natural gas,
Chevron Corp. hopes to begin production at the $3.1-billion
Platong Gas II project in the Gulf of Thailand later this year.
“With gas demand in Thailand growing by 13% in 2010, we
are working to accelerate Platong II’s progress towards first gas,”
said Jim Blackwell, president, Chevron Asia Pacific Exploration
& Production Co.
“The need to accelerate is very much understood,” said Joe
Geagea, managing director of Chevron Asia South, who joined
Blackwell and other officials at a “sail away” ceremony for Platong II’s central processing platform.
“This is something that is very much needed for the economy,” said Geagea, adding, “We’re getting close to putting this on
a big barge and…getting it online as soon as we can.”
Built by McDermott International, the platform will increase

8

110131OGJ_8 8

Thailand’s gas production more than 10% from its current 2.89
bcfd.
Analyst IHS Global Insight noted Chevron in March 2008
approved the launch of construction for the Platong II project,
which it said would be completed by this year’s first quarter.
Last April Chevron announced the project was 49% complete, but its launch date had been revised to 2012.
“The cause of the project schedule revision is unclear but
could potentially have been caused by uncertainties about
Thailand’s gas demand in the immediate aftermath of the financial crisis,” IHS Global Insight said.
Meanwhile, Chevron last month said its gas sales to PTTEP
PCL for 2010 were 20% higher than contracted as solid economic growth generated stronger demand, particularly from
the electricity and industrial sectors.

Chevron Thailand Exploration Pres. Pairoj Kaweeyanun
said PTT last year took average gas delivery of 1.5 bscfd from
Chevron, compared with 1.24 bscfd stated in its contract.
Kaweeyanun said Thailand’s gas demand will likely rise
12% to 4.5 bcfd this year, and 3-5% next year.
Chevron is operator of Platong Gas II with a 69.8% stake
while Mitsui Oil Exploration Co. Ltd. holds 27.4% and PTTEP
has 2.8%.

Albanian gas-condensate field to be developed
Albania’s Ministry of Economy, Trade, and Energy formally approved development of Delvina gas-condensate field in southern Albania.
The approval allows Stream Oil & Gas Ltd., Calgary, to
enhance production and sell petroleum products under state
Albpetrol’s existing license for 25 years with 5-year extension
increments.
Delvina, near the border with Greece and 100 miles south of
Tirana, was discovered in 1987.
Two wells yield a combined 700 Mcfd of gas and 47 bbl/
MMcf of 62.5° gravity condensate from fractured CretaceousPaleogene carbonates at 2,800-3,500 m. A pipeline connects
the field to a refinery in the Tirana area.
Stream’s 2011 plan includes reworking the two existing
wells and preparing to drill a horizontal well. Management is
preparing to evaluate NGL potential upside, future horizontal
well plans, and NGL development.

PROCESSING Q U IC K TA K E S
Hovensa plans partial shutdown of St. Croix refinery
Hovensa LLC reported plans to shut down certain processing
units on the west side of its 500,000-b/cd refinery at St. Croix,
US Virgin Islands. The shutdown will reduce the facility’s crude

distillation capacity to 350,000 b/cd, with no impact on the capacity of its coker or fluid catalytic cracking unit, the company
said.
The reconfiguration will be completed in this year’s first
quarter, Hovensa said.

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:07 PM


The company also is in the process of determining its workforce needs going forward, it said. In the interim, the company reported, it “has placed an immediate hold on filling most
open positions and cancelled the 2011 turnarounds previously
scheduled for west side units that will be shut down.”
Hovensa Interim Chief Operating Officer John W. George
said, “Simplifying our operation by eliminating some older,
smaller process units is expected to result in improved efficiency, reliability, and competitiveness. This is an important step
toward improving our performance at a time when Hovensa
and the refining industry are facing difficult economic conditions.”
Hovensa is jointly owned by Hess Corp. and Petroleos de
Venezuela SA (PDVSA).

Bulgarian refinery to add hydrocracking units
Burgasnefteproekt EOOD, OAO Lukoil’s engineering subsidiary, has let a contract to Technip, Paris, for the first phase
of a heavy residue hydrocracking complex to be built at the
115,240-b/cd refinery in Burgas, Bulgaria, along the Black Sea.
The lump sum services contract is worth 70 million euros. It
covers detailed engineering and procurement services for a 2.5
million ton/year residue hydrocracker based on Axens H-Oil
process, as well as amine, sour water stripper, and hydrogen
production units.

Technip’s operating center in Rome will execute the contract. Completion is set for May 2013. The group successfully
completed the front-end engineering design contract for the
project. Burgas is Bulgaria’s only refinery.

TRANSPORTATION Q U IC K TA K E S
TransCanada proceeds with Cushing-to-GC oil line
TransCanada Corp. will proceed with its Cushing Marketlink
crude pipeline project, having received sufficient market support in the project’s open season. Cushing Marketlink will have
capacity to move 150,000 b/d from Cushing, Okla., to the US
Gulf Coast. TransCanada expects the project to be in service
first-quarter 2013, subject to regulatory approval.
TransCanada concluded its open season for the Bakken
Marketlink Project to deliver US-sourced crude from Baker,
Mont., to Cushing, Okla., earlier this month (OGJ Online, Jan.
21, 2011). Both Bakken Marketlink and Cushing Marketlink
will use pipeline facilities forming part of TransCanada’s Keystone XL system. Combined the two projects will transport up
to 250,000 b/d of US crude oil production to the Gulf Coast.

Copano to build Eagle Ford NGL pipeline
Copano Energy LLC entered into a long-term fractionation and
product sales agreement with Formosa Hydrocarbons Co. Inc.
and, to facilitate deliveries of mixed NGLs to Formosa, also
formed a 50-50 joint venture with a subsidiary of Energy Transfer Partners to construct, own, and operate a 12-in. OD NGL
pipeline (Liberty Pipeline).

Oil & Gas Journal | Jan. 31, 2011

110131OGJ_9 9

Liberty Pipeline will extend about 83 miles, from Copano’s

Houston central gas processing complex in Colorado County,
Tex., first to Formosa’s leased NGL product storage facility in
Matagorda County, Tex., and then to Formosa’s petrochemical
facility in Calhoun County, Tex.
The agreement provides Copano with up to 37,500 b/d firm
fractionation services beginning first-quarter 2013 for a term of
15 years. The agreement also provides that Formosa will purchase the resulting NGL products and make product storage
available to Copano for operational reliability.
Following completion of Liberty Pipeline, expected by summer of this year, and until additional facility improvements at
Formosa are complete, Copano will have access to a minimum
of 5,000 b/d of existing Formosa fractionation capacity, as well
as additional capacity on a “space available” basis.
Liberty Pipeline will have initial capacity of 75,000 b/d,
committed to Copano and Energy Transfer (50% each) under
firm agreements. Copano and Energy Transfer will together
invest about $52 million for the pipeline and related facilities.
Copano said the agreements would increase its total Eagle
Ford NGL handling capacity to more than 80,000 b/d.
Eagle Ford Gathering LLC (EFG), a joint venture of Kinder
Morgan Energy Partners LP and Copano, earlier announced
plans to construct 85 miles of 24-in. and 30-in. OD pipeline to
move natural gas produced in the Eagle Ford shale by SM Energy Co. from La Salle, Dimmit, and Webb counties in Texas to
the Freer compressor station in Duval County, Tex., for transport on KMEP’s Laredo-to-Katy (LK) pipeline. The LK line will
in turn transport gas to Copano’s Houston Central complex.
Chesapeake Energy reached 10-year agreements in December 2010 with Enterprise Products Partners LP providing
Chesapeake with gas transportation, processing, and NGL processing and fractionation services for its Eagle Ford production.

Ireland approves Corrib gas line’s onshore segment
Ireland’s planning authority, An Bord Pleanala (ABP), has
granted permission for construction of the 9-km, 20-in. OD

onshore segment of the Corrib gas pipeline. In its detailed determination, ABP stated the pipeline “would help safeguard the
energy security of the state, would benefit the western region
of Ireland, would not seriously injure the amenities of the area,
would not be prejudicial to public health or safety, and would
not be likely to have significant effects on the environment.”
Partners in the Corrib gas project, Shell E&P Ireland Ltd.,
operator, 45.5%; Statoil Exploration, 36%; and Vermillion Energy Trust, 18.5%, say that at peak production, Corrib will supply as much as 60% of Ireland’s gas needs.
Corrib, with 1 tcf of gas in place, expects production to peak
at 300 MMcfd for 2-4 years before a 20%/year decline ensues
(OGJ Online, June 25, 2009).
Allseas’ Solitaire laid the 83-km, 20-in. OD offshore section of the pipeline from Corrib at 355 m water depth, through
Broadhaven Bay, to landfall at Glengad, County Mayo, in summer 2009.

9

1/27/11 1:07 PM


2011-2012
EVENTEVENT
CALENDAR
2011-2012
CALENDAR
Denotes new listing or , ictechnologyconference. NAPE Expo, Houston,
website: www.topsidesev- org/. 7-9.
(972) 993-9090, (972)
a change in previously
ent.com/index.html. 1-3.
993-9191 (fax), e-mail:
published information.

,
ARC World Industry
website: www.napeexpo.
Global LNG Forum, Bar- Forum, Orlando, (781)
celona, +421 257 272
471-1000, e-mail: info@ com. 16-18.
JANUARY 2011
112, +421 255 644 490, arcweb.com, website:
e-mail; beata.kyblova@ www.arcweb.com/
EPNanoNet Forum on
Tight Oil Shale Plays
World Congress, Denver, jacobfleming.com, web- Events/ARC-Orlando-Fo- Advanced Materials for
(866) 921-7782, 1 (800) site: www.jacobfleming. rum-2011/Pages/default. E&P, Houston, +44 (0)
com. 2-3.
aspx. 7-10.
1483 598000, e-mail:
714-1359 (fax), e-mail:
dawn.dukes@otmnet.
louise@american-busiInternational Gas Analysis com, website: www.deaness-conferences.com, East African Petroleum
Symposium & Exhibition, europe.com. 17-18.
website: www.worldoils. Conference & Exhibition
(EAPCE),
Kampala,
Rotterdam, +31 (0) 15
com. Jan. 30-Feb. 1.
+256 414 320714, +256 2 690 147, +31 (0) 15
Laurance Reid Gas
414 320437 (fax),
2 690 190 (fax), e-mail: Conditioning ConferAnnual Gas Arabia
e-mail: eapce11@

, website:
ence, Norman, Okla.,
Summit, Abu Dhabi, +44
petroleum.go.ug. website: www.gas2011.org. 9-11. (405) 325-2248, (405)
207 067 18 00, e-mail:
www.petroleumaf325-7164 (fax), e-mail:
/en/eventdetail. SPE Project and Facilities , website:
change.co.uk, website:
php?Eventld=522. 2-4. Challenges Conference www.engr.outreach.
www. www.theenergyou.edu. 20-23.
at METS, Doha, +971
exchange.co.uk/3/13/
IPAA OGIS Florida, Hol- 4 390 3540, +971 4
articles/135.php. Jan.
lywood, Fla., (202) 857- 366 4648 (fax), e-mail: IP Week, London, +44
30-Feb. 2.
4722, (202) 857-4799
, web- 0 20 7467 7116, e-mail:
(fax), website: www.ipaa. site: www.spe.org. 13-16. ,
Offshore Production
org/meetings/index.php.
website: www.energyinst.
Technology Summit,
3-4.
org.uk. 21-23.
Pipeline Pigging &
London, +44 (0)20
Integrity Management
7202 7690, +44 (0)207 UT Energy Forum,
Conference, Houston,

Nitrogen+Syngas Inter202 7600 (fax), e-mail: Austin, e-mail: info@
(713) 521-5929, (713)
national Conference &
nathan.robinson@
UTEneravForum.com,
521-9255 (fax), e-mail: Exhibition, Dusseldorf,
wtgevents.com, website: website: www.utenergy- , website: +44 (0) 20 7903 2438,
www.offshore-summit.
forum.com. 3-4.
www.clarion.org. 14-17. +44 (0) 20 7903 2432
com. Jan. 31-Feb. 1.
(fax), e-mail: ,
NACE Northern Area
Unconventional Oil &
SPE Middle East Uncon- Western Conference,
website: www.crugroup.
Gas Europe, Prague, 1
ventional Gas Conference Regina, Sask., (281)
(888) 299-8016, 1 (888) com. 21-24.
and Exhibition, Muscat, 228-6200, (281)
299-8057 (fax), e-mail:
+971 4 390 3540, +971 228-6300 (fax), e-mail: registration@pennwell.
SUBSEA Tieback
4 366 4648 (fax), e-mail: ,
com, website: www.
Forum & Exhibition, San
, web- website: www.events.
unconventionaloilandgas- Antonio, (918) 831-9160,
site: www.spe.org. Jan.
nace.org/sarwebsites/

europe.com/index.html. (918) 831-9161 (fax),
31-Feb. 2.
NorthernAreaWestern/
15-16.
e-mail: registration@penconference11/index.
nwell.com, website: www.
asp. 6-8.
Russia Offshore Annual subseatiebackforum.
Conference & Exhibition, com. 22-24.
FEBRUARY 2011
Pipeline Coating InterMoscow, +44 207 067
national Conference,
1800, +44 207 430
SPE European ConferIADC Health Safety
Environment and Training Vienna, +44(0)117 924 0552 (fax), e-mail: wra@ ence on Health Safety
theenergyexchange.
and Environment in Oil
Conference & Exhibition, 9442, +44(0)117 989
2128 (fax), e-mail: info@ co.uk, website: www.
and Gas Exploration,
Houston, (713) 292amiplastics.com, website: theenergyexchange.
Vienna, +44 (0)1224
1945, (713) 292-1946
co.uk/3/13/articles/179. 318088, website: www.
(fax), e-mail: info@iadc. www.2.amiplastics.
php. 15-17.
spe-uk.org. 22-24.
org, website: www.iadc. com/Events/Even.
code=C369&sec=1222.
org/conferences. 1-2.

7-9.
IPAA International
Pipe Line Contractors
Forum, Houston, (202) Association Convention,
Topsides Conference &
Arctic Technology
857-4722, (202) 857Maui, (214) 969-2700,
Exhibition, Galveston,
Conference, Houston,
4799 (fax), website:
e-mail: ,
(918) 831-9160, (918)
(888)
945-2274,
ext.
www.ipaa.org.
16.
website: www.plca.org.
831-9161 (fax), e-mail:
617, website: www.arct22-26.

10

110131OGJ_10 10

Shale Gas Asia Conference, New Delhi, 1 (800)
721-3915, 1 (800) 7141359 (fax), e-mail: info@
american-business-conferences.com, website:
www.shale-gas-asia.com.
23-24.

SPE/IADC Drilling Conference, Amsterdam, +44
20 7299 3300. +44 20
7299 3309 (fax), e-mail:
, website:
www.spe.org. 1-3.

Annual Petcoke Conference, San Diego,
(832) 351-7827, (832)
351-7887 (fax), e-mail:
,
website: www.petcokes.
com. 25-26.

Libya International Petro
& Energy Fair, Tripoli,
00971 4 2988144,
00971 4 2987886 (fax),
e-mail: , website: www.
orangefairs.com. 7-10.

Corrosion UAE Conference, Abu Dhabi, 00 971
50 264 1202, e-mail:
, website:
www. www.theenergyexchange.co.uk/3/13/
articles/157.php. Feb.
27-Mar. 1.

API Spring Committee
on Petroleum Measurement Standards Meeting,

Dallas, (202) 682 8000,
(202) 682-8222 (fax),
website: www.api.gor.
7-10.

APPEX/AAPG Property &
Prospect Expo, London,
AOG Australasian Oil &
+44 (0) 207 434 13
Gas Exhibition & Confer- 99, e-mail: Europe@
ence, Perth, +61 3 9261 aapg.org. website: www.
4500, +61 3 9261 4545 europetro.com. 1-3.
(fax), e-mail: , website: Turkmenistan Asia Oil &
www.aogexpo.com.au.
Gas Summit, Singapore,
23-25.
+44 (0) 20 7328 8899,
+44 (0) 20 7624 9030
GPA Europe Conference, (fax), e-mail: info@
Amsterdam, +44 (0)
summittradeevents.com,
1252 625542, website: website: www.summitwww.gpaeurope.com/
tradeevents.com/Holdevents/event/16. 23-25. ingA2011.php. 3-4.

MARCH 2011
NPRA Security Conference & Exhibition,
Houston, (202) 4570480, (202) 457-0486
(fax), e-mail: info@npra.
org, website: www.npra.
org. 1-2.

Annual Arctic Gas
Symposium, Calgary,
Alta., (877) 927-7936,
(877) 927-1563 (fax),
website: www.arcticgassymposium.com/index.
html. 1-2.

CERA Week, Houston,
(713) 840-8282, (713)
599-9111 (fax), e-mail:
, website:
www.cera.com. 7-11.
Renewable Energy World
Conference & Expo
North America, Tampa,
(918) 831-9160, (918)
831-9161 (fax), e-mail:
registration@pennwell.
com, website: www.
renewableenergyworldevents.com. 8-10.
European Fuels Conference Annual Meeting,
Paris, +44 (0)207 430
9513, +44 (0)207 430
9513 (fax), e-mail:
e.huiban@theenergyex-

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:08 PM

2011-2012 EVENT CALENDAR
change.co.uk, website:
www.wraconferences.
com/2/4/articles/205.
php. 8-11.

775-5177 (fax), website:
www.aiche.org/conferences/springmeeting/
index.aspx. 13-17.

DEA(e) Technical Oil &
Gas Conference on Well
Control, Bad Bentheim,
+44 (0) 1483 598000,
e-mail: dawn.dukes@
otmnet.com, website:
www.dea-europe.com.
10-11.

Offshore West Africa
Conference & Exhibition,
Accra, Ghana, (918) 8319160, (918) 831-9161
(fax), e-mail: ,
website: www.offshorewestafrica.com. 15-17.

NACE Corrosion Conference & Expo, Houston,
(800) 797-6223, (281)
228-6329 (fax), website:
www.events.nace.org/

conferences/c2011/index.asp. 13-17.

World Heavy Oil Congress, Edmonton, Alta.,
(888) 799-2545, (403)
245-8649 (fax), website:
www.worldheavyoilcongress.com. 15-17.

AIChE Spring Meeting
& Global Congress on
Process Safety, Chicago,
(800) 242-4363, (203)

TUROGE Turkish
International Oil & Gas
Conference & Showcase,
Ankara, +44 (0) 20 7596
5000, +44 (0) 20 7596

5111 (fax), e-mail: enmail: ,
, e-mail: www.gastech.
website: www.turoge.
co.uk. 21-24.
com. 16-17.
GASTECH International
NPRA Annual Meeting, Conference & Exhibition,
San Antonio, (202) 457- Amsterdam, +44 (0)
0480, (202) 457-0486 1737 855000, +44 (0)
(fax), e-mail: info@npra. 1737 855482 (fax), eorg, website: www.npra. mail: ,
org. 20-22.
e-mail: www.gastech.

co.uk. 21-24.
MEOS/SPE’s Middle East
Oil & Gas Conference & IADC Drilling HSE Asia
Exhibition, Manama, +44 Pacific Conference &
(0)20 7840 2139, +44
Exhibition, Singapore,
(0)20 7840 2119 (fax), e- (713) 292-1945, (713)
mail: meos@oesallworld. 292-1946 (fax), e-mail:
com, website: www.
, website:
meos2011.com. 20-23. www.iadc.org/conferences. 23-24.
GPA Europe at GasTech
Conference & Exhibition, OMC Offshore MediterAmsterdam, +44 (0)
ranean Conference,
1737 855000, +44 (0) Ravenna, +39 0544
1737 855482 (fax), e219418, e-mail: confer-

, website:
Middle East Downstream
www.omc.it/2011. 23-25. Week Annual Meeting,
Abu Dhabi, +44 (0) 1242
529 090, +44 (0) 1242
SPE Production and
529 060 (fax), e-mail:
Operations Sympowra@theenergyexchange.
sium, Oklahoma City,
(800) 456-9393, (972) co.uk, website: www.
952-9435 (fax), e-mail: wraconference.com.
, website: 27-30.
www.spe.org. 27-29.

ACS National Meeting
NPRA International Pet- & Exposition, Anaheim,
rochemical Conference, Calif., (202) 872-4600,
San Antonio, (202) 457- e-mail: ,
0480, (202) 457-0486 website: www.acs.org.
(fax), e-mail: info@npra. 27-31.
org, website: www.npra.
org. 27-29.
Purvin & Gertz International LPG Seminar, The
Woodlands-Houston,
Howard Weil Annual
Energy Conference, New (713) 331-4000, (713)
236-8490 (fax), e-mail:
Orleans, (504) 582info@purvingertz.
2500, website: www.
howardweil.com/energy- com, website: www.
conference.aspx. 27-30. purvingertz.com. 28-31.

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Sheraton New Delhi Hotel, India

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JOURNALLY SPEAKING

Training gets real
Training in the oil and gas industry can consist of

several types: hands-on, lectures, and even multimedia. It’s important for training strategies to evolve as
each generation enters an industry’s workforce. The
newest generation always seems to be motivated by
the most-advanced of technologies.
In a virtual environment, simulation training
brings clarity and uniformity where trainees are
able to experience realistic scenarios while remaining safe. Simulation training is interactive
and engaging, making it easier for trainees to retain information and apply what they have learned
to real life scenarios.
Simply “being trained” is no longer enough.
Employees must be able to demonstrate that they
can apply their knowledge and skills to the standards required. With various test scenarios presented in simulation training, trainers and trainLEENA KOOTTUNGAL
ees are able to assess the user’s real-time task
Survey Editor/
News Writer
performance. Personnel also will be able to understand the entire work process flow as well as their
colleagues’ roles and responsibilities.

Downstream simulation
Earlier this month, UOP LLC launched new training simulators for its “unionfining” and fluid catalytic cracking processes, intended to improve operational excellence and profitability at refineries.
The simulators allow process engineers and operators to develop troubleshooting skills and gain
experience in a safe, repeatable, and controlled
environment.
Unlike other training simulators, UOP embeds
proprietary reactor models, operating philosophy,
and engineering expertise directly into the training simulator software. The simulators include
realistic exercises that mimic real-life operations
and allow the operator to experience upset conditions typically only experienced over a lifetime.
UOP provides a comprehensive operator training solution with web-based training for process
fundamentals, followed by hands-on practice of

skills using the UOP training simulator.

Upstream simulations
Kea Studios, a simulation training developer based
in Miri, Malaysia, launched PetroSims, a simulation training environment geared for the oil and
gas industry, at Getenergy 2010 (Global Education

12

110131OGJ_12 12

and Training for Energy) in Kuala Lumpur. The first
simulation training module showcased was the Offshore Orientation (Safety Briefing), which enabled
trainees to explore and familiarize themselves with
the platform environment and safety procedures.
Trainees learned about various types of personal protective equipment (PPE) by equipping their
virtual selves. The competency of the trainee was
assessed and evaluated through the actions and
responses made when faced with test scenarios.
They experienced many realistic—but virtual—scenarios such as firefighting, “man overboard,” platform abandonment, and hazard identification.
Separately, KCA Deutag this month teamed up
with Robert Gordon University to provide drilling
and rig training from the university’s new Energy
Centre at its Garthdee campus in Aberdeen. The
company will relocate its DART simulator (Drilling and Advanced Rig Training) facility from the
company’s offices to a new complex within the Energy Centre, expected to open in 2013.
DART is the only system of its kind offering
real-time drilling simulation and downhole modeling. There are currently DART facilities in Aberdeen, Russia, Sakhalin, Azerbaijan, Libya, and
Dubai.
The facility in Aberdeen provides a full-scale

reproduction of an offshore platform or land rig,
complete with state-of-the-art touch screen consoles for both driller and assistant driller. Threedimensional graphics of the rig’s drill floor and
automated or remotely controlled equipment are
projected onto a 60-ft wide cinema screen at the
front of the drilling control room cabin.
As the driller operates the rig-floor equipment,
the simulation depicts realistic and dynamic
graphics and sounds to simulate what the driller
would see and hear on an actual rig.
The recent Macondo well blowout and oil spill
in the Gulf of Mexico has highlighted the potential
for drilling operations to suffer the worst-possible
consequences when things go wrong.
The DART team identified an opportunity
for the simulator to help ensure that the people
working with blowout prevention equipment have
a high level of formal training with written and
practical assessments to verify competency.

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:08 PM


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EDITORIAL

The spill report—3
A core message of the report to US President Barack
Obama on the Macondo tragedy of 2010 is the need
for the oil and gas producing industry to improve
its safety culture. This is strong medicine. Most operators and service companies probably bristled at
that finding of the National Commission on the BP
Deepwater Horizon Oil Spill and Offshore Drilling. Most consider themselves supremely diligent
about safety. Many of them probably believe the fatal blowout and subsequent spill couldn’t have happened to them. Maybe they’re right. But before the
Macondo accident, BP, too, considered itself committed to the highest safety standards.
After publication of the commission’s report,
the offshore industry stands accused of safety
lapses that the authors describe repeatedly as “systemic.” To that accusation, whatever its validity,
the industry must respond systemically. Without
such a response, the safety of offshore work will
remain subject to public doubt. And that doubt,
inflamed by extremists opposed to all oil and gas

work, will impede leasing and permitting.

Systemic initiative
The report suggests a systemic initiative that deserves serious attention from the industry. It is the
creation of a self-policing function to supplement
governmental regulation. The nuclear industry offers a model with its Institute of Nuclear Power Operations (INPO), set up as a nonprofit organization
after the partial meltdown in 1979 of the radioactive core of a unit at the Three Mile Island generating facility in Pennsylvania.
INPO regularly inspects nuclear sites and reports individual plant assessments to the companies involved and at a conference of utility chief
executives, where all plants receive grades. INPO
inspection teams usually have about 20 members—some of them full-time inspectors employed
by INPO and others on loan from the industry.
Inspections last 5-6 weeks. INPO inspectors visit
each of 66 nuclear sites, including 104 reactors
operated by 26 utilities, every 24 months.
Obviously, much about the INPO model doesn’t
apply to offshore drilling and production. As the
report notes, the upstream oil and gas industry is
more fragmented than the nuclear industry. Its
operations are more mobile and transitory. Drill-

14

110131OGJ_14 14

ing and production technologies also are more diverse; there can be more than one right way to
drill and complete a well. Furthermore, collective
action by oil and gas executives raises antitrust
concerns that don’t as intensely bedevil regulated
utilities. And operators and service companies legitimately would worry about exposure of proprietary information.
Still, the oil and gas industry should find the

concept of a self-policing safety mechanism,
adapted to its special characteristics, intriguing.
The presidential commission notes similarities between the oil-and-gas and nuclear industries that
the former industry should find persuasive.
One similarity is self-interest following a blow
to public confidence. “As the Deepwater Horizon
disaster made unambiguously clear,” the report
says, “the entire industry’s reputation and perhaps
its viability ultimately turn on its lowest-performing members.” Another similarity is the need to secure governmental approval—and therefore public acceptance—for work. A third parallel is the
potential for industry self-policing to supplement
regulation. The report calls for regulatory improvement but says regulators “are unlikely ever
to possess technical expertise truly commensurate
with that of private industry.”

Constructive suggestions
As argued earlier in this series of editorials, the
commission report overreaches in some areas, including its tendency to condemn an entire industry
on the basis of a single disaster, to advocate new
layers of environmental regulation that would limit
activity without enhancing safety, and generally to
assume that more regulation means better regulation.
Overall, however, the commission is right to
call for change. And it offers constructive suggestions—among them a shift in the regulatory
approach toward the European “safety-cases”
model, as described here last week, and adoption by the industry of some form of collaborative inspection. Self-policing would not only help
restore public confidence in offshore drilling and
production but also, if structured properly, improve practice in the most important dimension
of industry work.

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:08 PM


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GENERAL INTEREST

BP: Nonfossil fuels to be
‘major’ energy sources by 2030
The global fuel mix will continue to diversify, with increased
emphasis on alternative energy by 2030 “for the first time
nonfossil fuels will be major sources of supply growth,” said
analysts at BP PLC.
World energy growth over the next 20 years likely will
be dominated by the emerging economies of China, India,
Russia, and Brazil while energy efficiency improvements accelerate, they said in the recently published “BP Energy Outlook 2030.”
The BP report’s base case indicates primary energy use

growing nearly 40% in the next 2 decades, with 93% of the
growth coming from countries outside the Organization of
Economic Cooperation and Development. Non-OECD countries are expected to increase rapidly their share of overall
energy demand from just over half at present to two-thirds.
BP Energy Outlook said the combination of increased diversification of energy sources and nonfossil fuels (nuclear,
hydro, and renewables) are expected for the first time to be
the biggest source of growth. Solar, wind, geothermal, and
biofuels energy are expected to increase to 18% of total energy growth from 5%.
For 60 years, BP produced historical data in the BP Statistical Review of World Energy, but this is its first energy
outlook. In launching the new publication, BP Chief Executive Bob Dudley said, “The issues covered in this document
are huge ones—the effort to provide energy to fuel the global
economy, sustainably, in an era of unprecedented growth. I
believe one of our responsibilities is to share the information
we have to inform the debate on energy and now on climate
change.”
He said, “What producers, governments, and consumers
all want is secure, affordable, and sustainable energy. But on
a global scale, this remains an aspiration. And to meet that
aspiration over the next 2 decades, we need smart, marketoriented policies to deliver the energy we need in a manageable way—without inhibiting economic development or
jeopardizing improvements in living standards [for] billions
of people worldwide.”
The outlook’s base case scenario “is a projection, not a
proposition,” said Dudley. It is “what we believe is most likely to happen on the basis of the evidence. For example, we
are not as optimistic as others about progress in reducing

16

110131OGJ_16 16

carbon emissions. But that doesn’t mean we oppose such

progress,” he said.

Highlights, energy intensity
The base case study projects world energy demand growth
will average 1.7%/year to 2030, “decelerating slightly” beyond 2020. Non-OECD energy consumption is expected to
be 68% higher by 2030, with growth averaging 2.6%/year.
That would account for 93% of global energy growth by that
period. In contrast, BP analysts project an average energy
demand growth of just 0.3%/year among OECD members
to 2030; from 2020 OECD energy consumption per capita is
expected to decline 0.2%/year.
The OECD decline will slow transportation growth, they
said. “The region’s total demand for oil and other liquids
peaked in 2005 and will be back at roughly the level of 1990
by 2030,” officials said. Toward the end of the 20 years, coal
demand in China will no longer be on the rise, and that country is projected to become the world’s largest oil consumer.
Because of energy efficiency gains and a long-term
structural shift towards less energy intensive activities, the
amount of energy consumed per unit of income as measured
by gross domestic product is falling at an accelerating rate,
said Christof Ruhl, group chief economist and vice-president of BP. This applies to “almost all of the key countries
and regions” to 2030, he said.
Still, global liquids demand is expected to reach 102.4 million b/d over the next 20 years, a net growth of 16.5 million
b/d generated “exclusively” from the emerging economies outside the OECD, BP reported. “Non-OECD Asia will account
for nearly two thirds of non-OECD consumption growth over
the next 20 years and more than three quarters of the net
global increase, rising by nearly 13 million b/d,” Ruhl said.
The largest increment of new supply in response to that demand will come from OPEC with increased production of conventional crude in Saudi Arabia and Iraq and from NGL production that is not subject to OPEC quotas. A “modest” rise in
Non-OPEC liquids production is expected, “driven by a large
increase in biofuels” and smaller increments from Canadian oil

sands, deepwater Brazil, and the former Soviet states that will
offset continued declines in mature provinces, BP projected.
In the long run, the company expects a decline in market

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:08 PM


share for oil while natural gas will steadily gain share. According to BP’s Energy Outlook, coal’s recent gains in market
share because of rapid industrialization in China and India
will be reversed by 2030, “with all three fossil fuels converging on market shares around 27%.” In 1990-2010 fossil fuels
contributed 83% of the growth in energy markets, but that
will likely drop to 64% of the growth by 2030. Renewables
(excluding hydro) and biofuels together will supply 18% of
the growth in energy to 2030, the report said.
Ruhl said, “Energy used to generate power remains the
fastest growing sector, accounting for 53% of the growth in
primary energy consumption 1990-2010 and projected to
account for 57% of the growth to 2030.”
Meanwhile, the role of transport fuel is weakening. “Over
the past 20 years, transport sector energy demand grew at
about the same rate as total energy demand, but over the
next 20 years it will grow much less rapidly than total energy,” said Ruhl.
Declines in OECD oil demand will be “primarily outside
the transport sector, where it is relatively easier to displace
oil by gas and renewables,” he said. After 2015, OECD transport demand is expected to fall as technology and policy
drive improved engine efficiency.
Biofuels production is expected to increase to 6.7 million
b/d by 2030 from 1.8 million b/d in 2010 and to contribute 125% of net non-OPEC supply growth over the next 20

years, according to BP’s calculations. Continued policy sup-

port, high oil prices, and continued technological innovations will contribute to that rapid expansion, the company
said. The US and Brazil will continue to dominate biofuel
production, but their combined production is expected to
decline to 68% of total output by 2030 from 76% in 2010 as
Asia-Pacific output begins to rise.
Energy Outlook 2030 assumes continued policy action
to address both climate change and energy security. BP has
developed an alternative ‘policy case’ to explore implications
of a significant increase in the level of political commitment
that translates into a tightening of policy.
“The key focus of the policy case is to reduce dependence
on carbon intensive fuels. This can be achieved through a
wide range of policy instruments, including various ways of
putting a price on carbon,” said Ruhl.
In BP’s policy case, global emissions are expected to peak
just after 2020 but will still be 20% above 2005 levels. “The
emissions path is still expected to be well above the International Energy Agency’s 450 Scenario 1, indicating how much
more effort will be required after 2030 to put the world onto
a ‘safe’ path,” said Ruhl.
The reduction of emissions in the policy case would be
achieved through a combination of more rapid efficiency
gains, fuel switching—from gas to coal and from fossil fuels to nuclear, hydro, and renewable—and introduction of
carbon capture and storage for both coal and gas power
plants. OGJ

Obama uses address to renew call to repeal oil tax exemptions
Nick Snow
Washington Editor

US President Barack Obama urged Congress to financially
support clean energy and other innovative technologies in
his 2011 State of the Union address. Repealing billions of

dollars in federal oil tax exemptions would be a good place
to start, he suggested.
“We’ve begun to reinvent our energy policy,” the president said in his nationally televised address to the 112th
Congress on Jan. 25. “We’re not just handing out money.
We’re issuing a challenge. We’re telling scientists that if they

US President Barack Obama
urged Congress to financially
support clean energy and
other innovative technologies
in his 2011 State of the Union
address on Jan. 25. Repealing
billions of dollars in federal
oil tax exemptions would be
a good place to start, he suggested. White House photo by
Pete Sousa.

Oil & Gas Journal | Jan. 31, 2011

110131OGJ_17 17

17

1/27/11 1:08 PM

GENERAL INTEREST
assemble the best minds in their fields, and focus on the
hardest problems in clean energy, we’ll fund the Apollo projects of our time.”
Obama said, “With more research and incentives, we can
break our dependence on oil and become the first country to
have a million electric vehicles on the road by 2015. We need
to get behind this innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars
we give to oil companies. I don’t know if you’ve noticed, but
they’re doing just fine on their own. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.”
Oil and gas industry groups quickly criticized the idea.
“The American people spoke loud and clear in the last election and directed the president and new Congress to focus
on one main issue—job creation,” American Petroleum Institute Pres. Jack N. Gerard said. “It’s unfortunate that the
administration seems poised to stifle what remains one of
America’s strongest job-creating industries.”
Republicans who chair the two key US House committees
for energy issues also weren’t impressed. “Innovation is not
measured in federal dollars spent or government mandates
imposed. Energy independence is not achieved through government dependence,” said Energy and Commerce Committee Chairman Fred Upton (Mich.).

‘Preferred industries’
Upton said, “Congress spent tens of billions of dollars on the
federal government’s favored energy sources in the stimulus,
yet America remains dependent on hostile foreign nations to
power our lives. We know the answer is not to hypersubsidize preferred industries or force consumers and job creators
to purchase energy they cannot afford. That is not how the
free market works.”
Natural Resources Committee Chairman Doc Hastings
(Wash.) noted in a separate statement: “Today, American
families are facing the harsh realities of rising gas prices,

higher electricity costs, and near double-digit unemployment. Instead of addressing these issues head-on, the administration has spent the past 2 years blocking access to
America’s resources that create jobs and produce more energy. These policies have only succeeded in driving American jobs overseas, threatening our economic recovery and
making us more dependent on hostile foreign nations for
our energy needs.”
Obama set the stage for his suggestion by saying the
country has reached a point similar to when the Soviet
Union launched history’s first artificial satellite into space
on Oct. 4, 1957. “This is our generation’s Sputnik moment,”
he declared. “Two years ago, I said that we needed to reach
a level of research and development we haven’t seen since
the height of the Space Race. And in a few weeks, I will be
sending a budget to Congress that helps us meet that goal.
We’ll invest in biomedical research, information technology,
and especially clean-energy technology, an investment that

18

110131OGJ_18 18

will strengthen our security, protect our planet, and create
countless new jobs for our people,” the president said.
He said the US free enterprise system drives innovation. “But because it’s not always profitable for companies
to invest in basic research, throughout our history, our government has provided cutting-edge scientists and inventors with the support that they need,” he said. “That’s what
planted the seeds for the internet. That’s what helped make
possible things like computer chips and [global positioning
systems]. Just think of all the good jobs, from manufacturing
to retail, that have come from these breakthroughs.”

‘A new goal’
Obama also said clean-energy breakthroughs only are possible if businesses recognize that there will be markets for

the technologies. “So tonight, I challenge you to join me in
setting a new goal: By 2035, 80% of America’s electricity will
come from clean energy sources,” he told House and Senate
members. “Some folks want wind and solar. Others want
nuclear, clean coal, and natural gas. To meet this goal, we
will need them all—and I urge Democrats and Republicans
to work together to make it happen.”
He also urged federal lawmakers to knock down barriers to innovation, education, and infrastructure investments which would make America a better place to do
business and create jobs. “For example, over the years, a
parade of lobbyists has rigged the tax code to benefit particular companies and industries,” he said. “Those with accountants or lawyers to work the system can end up paying
no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and
it has to change.”
He said, “So tonight, I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level
the playing field. And use the savings to lower the corporate
tax rate for the first time in 25 years—without adding to our
deficit. It can be done.”
Gerard said Obama’s address was a missed opportunity. “The president focused on job growth through federal
spending, but was silent on one of the best ways to create
jobs: Allow more energy development,” he said, adding,
“Natural gas and renewables are important components of
our energy mix, but we will need our nation’s vast oil resources for decades to come.”
Gerard called the US oil and gas industry “a key driver
of new jobs and economic prosperity.” He said, “Producing more oil and gas at home, which most Americans want,
could create hundreds of thousands of jobs, reduce our deficit by billions of dollars, and enhance our energy security.
Even better, the government wouldn’t have to invest a single
taxpayer dollar: Just give industry a green light to invest its
own money.”

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:08 PM


GENERAL INTEREST

Right and wrong
National Petrochemical & Refiners Association Pres.
Charles T. Drevna said on Jan. 26 that Obama was right
to set job creation and economic growth as top priorities,
but wrong to advocate policies that would have exactly the
opposite effect.
“If his attack demonizing the petroleum industry succeeds, it will destroy jobs instead of creating them, raise
costs for consumers instead of lowering them, and require
billions in taxpayer dollars to fund unending subsidies for
untested technologies unable to survive on their own,” Drevna warned. “It makes no sense to destroy existing jobs held
by hard-working Americans today in hopes of creating new
jobs that may never materialize tomorrow. We need to grow
our economy and increase the number of jobs, not simply try
to shift jobs from one sector to another.”
Independent Petroleum Association of America Chairman Bruce H. Vincent said on Jan. 26 that Obama was
“absolutely right” about free enterprise driving innovation.
“Sadly, though, the president—rather than working to further bipartisan policies that encourage the responsible development of America’s abundant, job-creating oil and natural
gas reserves—renewed his misguided call to levy massive
amounts of job-crushing tax increases on the backs of independent energy producers, who are overwhelmingly small
business owners,” he continued. “Billions of dollars in new
taxes on the American oil and gas industry, despite what the
president asserts, will fundamentally undercut our nation’s
long-term energy security objectives, and will put into jeopardy tens of thousands of good-paying jobs and thousands
of small businesses.”
Vincent, who also is president of Swift Energy Co. in

Houston, noted that independent producers invest 150% of
their cash flows toward hiring employees and contractors,
buying and maintaining equipment, drilling wells, and acquiring assets. The federal tax code has addressed ordinary
and necessary expenditures associated with oil and gas development for decades and provided a stable framework to
encourage common sense investments, he said.
“The president’s massive tax hike proposal—which was
soundly rejected by Democrats and Republicans on Capitol
Hill last Congress—would cripple our industry’s ability to
compete, leaving struggling American consumers more vulnerable to unstable energy prices at the pump and in their
homes, and deepening our nation’s dependence on often unfriendly region’s of the world to fuel our economy, which
would further worsen our balance of trade,” said Vincent.

‘A basic disconnect’
He said that while US upstream independents primarily
produce gas, they also recover crude oil, creating what he
termed “a basic disconnect.” Raising taxes for oil production
also would undercut gas, which Obama included among his
clean energy alternatives, and cost tens of thousands of jobs,

Oil & Gas Journal | Jan. 31, 2011

110131OGJ_19 19

Vincent said. “Not only would this move devastate small
oil and gas producers, but the damaging effects will ripple
through the entire US economy—hitting the oil and gas service and supply companies, as well as the entire manufacturing base due to an increase in energy and feedstock costs,
consequences that damage America’s ability to compete in
the world economy,” he said.
The Denver-based Western Energy Alliance took a more
positive view as it emphasized Obama’s pledge to reduce

barriers to growth and investment along with his recent executive order for government agencies to review redundant
and excessive regulations. The two moves “give hope to an
industry that, over the past 2 years, has been shackled with
redundant and unnecessary regulations that make developing American energy even more expensive and costly,” said
Marc W. Smith, executive director of what formerly was the
Independent Petroleum Association of Mountain States.
Smith said IPAMS has documented $3.9 billion of investment and up to 16,000 jobs that were diverted from the West
during 2010 because of red tape at the US Department of Interior. Smith suggested that a federal government-wide review of
agencies include recent US Environmental Protection Agency
regulatory expansions; redundant DOI regulations that add
three layers of regulations to oil and gas exploration on US nonpark, nonwilderness public lands; and proposals to duplicate
and usurp state regulations which already work.
Other groups also criticized Obama’s energy proposals.
“We see the president’s message as an inaccurate reflection
of our current energy needs and the impact these resources
have on our jobs and the economy,” said David Holt, president of the Consumer Energy Alliance in Houston. “Americans need more affordable and accessible renewable energy,
but not at the expense of those resources we rely on every
day, and certainly not at the rate of billions of dollars in tax
increases. Along with more solar power and other renewables, we should also expand access to all sources of energy—everything from offshore oil and gas to more affordable
nuclear development.”
“The president continues to talk about how America
needs to become more competitive. But his administration’s
plans do nothing but hurt our ability to compete,” said Institute for Energy Research Pres. Thomas J. Pyle. “We don’t
have a competitiveness problem, an innovation problem,
or a resource availability problem; we have a government
problem…. We have vast resources offshore, but 97% of our
ocean energy lands are not least for oil and gas production.
We have enough oil shale to free us from any imports, but
his administration stopped development. If the president
and his government will just get out of the way, our energy

problems might not be solved, but it’d certainly be an improvement.” OGJ

19

1/27/11 1:08 PM


GENERAL INTEREST

API: US demand grows, but
policies may stymie production
Nick Snow
Washington Editor

Stronger US petroleum deliveries for all of 2010 as well as
December reflected a growing US economic recovery, the
American Petroleum Institute said. But its chief economist
warned that Obama administration policies could restrict
growth of US crude oil production to help meet higher US
demand in the future.
“We continue to try to improve production, but there are
challenges going forward,” John C. Felmy said in a Jan. 21
teleconference. “There was the Gulf of Mexico moratorium,
and now there’s what is called the ‘permitorium.’ We’ve seen
permits retracted and not moved forward onshore, which is
disappointing because we have some bright prospects, particularly in North Dakota’s Bakken formation. We’ve also
seen onshore natural gas prospects threatened by potential
regulatory change, particularly involving hydraulic fracturing. We should have a good thorough discussion of what we
can do to increase our production instead.”
US oil production rose by 1.3% in December to an average 5.52 million b/d from 5.45 million b/d a year earlier, according to API. Full-year production averaged 5.49 million

b/d in 2010 compared with 5.36 million b/d in 2009. Production continued to grow year-to-year during December in
the Lower-48 to an average 4.87 million b/d, 1.4% more than
a year earlier, as it declined in Alaska to about 652,000 b/d,
lower than December 2009’s 655,000 b/d average.
“There’s a vast amount of oil to be produced in this country,” Felmy told reporters. “In the next 2 years, we could start
moving forward and get ready for the following 10 years. We
can move forward by approving permits, opening up exploration, and taking other positive steps. We have in excess of
116 billion bbl of oil in the United States. We have a lot of
opportunities.”
Proper government policies could lead to substantial US
oil development, which would produce jobs, generate revenue for the government, and improve the US economy as
well as its crude supply situation, Felmy said. “The administration’s policies so far have been focused on renewables,
and most of that has involved electricity. Crude oil markets
are a worldwide phenomenon, and the US should be concentrating on producing more of its own resources,” he said.

Higher demand
Product deliveries, which API uses to measure demand,
were up 1.2% year-to-year to an average 19.47 million b/d in
December, its latest statistics showed. Their 19.2 million b/d
average for all of 2010 was 2.3% higher than 2009’s full-year
average, API’s figures indicated.

20

110131OGJ_20 20

Both gasoline and diesel fuel deliveries were higher for
2010 over 2009, gasoline by 0.6% to 9.05 million b/d and
distillates by 4.8% to 3.81 million b/d, according to API.
Also, US refiners set a record for annual gasoline production

at an average 9.11 million b/d, it said.
“The robust distillate numbers suggest the nation’s industrial sector continues to rebound,” Felmy said. “They were
up both month-over-month and year-over-year. While consumer demand for gasoline was weak during this winter holiday season, higher prices and bad weather might have kept
people off the roads,” he said.
Felmy continued, “The other side of that is overall retail sales were up, led by a big 12% increase in e-commerce
sales. People were doing more shopping online, and that, in
turn, spurred more truck shipping and an increase in deliveries of ultralow-sulfur diesel—a subset of total distillates
and the kind of fuel the on-road trucks use—by more than
16% this December over last.”
API said December’s oil and product imports, at 10.61
million b/d, were down from November but slightly up from
December 2009’s 10.52 million b/d, driven by increases in
crude imports. Crude imports at 8.82 million b/d were 8.1%
higher year-to-year while total product imports, at 1.79 million b/d, were 24.3% lower.
US crude stocks totaling 332.2 million bbl at the end of
December had steep yet seasonal declines, down by 6.5%
from Nov. 30 but up by 2.2% from Dec. 31, 2009. They also
were at their highest level since the end of December 1994.
Inventories of all products declined in December from their
levels at the end of November, with motor gasoline stocks
falling 1.3% while distillate stocks were 0.4% lower, API
said. OGJ

EPA extends E15 waiver to
2001-06 model year cars, trucks
Nick Snow
Washington Editor

The US Environmental Protection Agency extended a waiver
allowing higher ethanol concentrations in fuel for 2007 and

later model year cars and trucks to 2001-06 model year vehicles. But it added that no waiver will be granted for fuels
with up to 15% ethanol for use in any motorcycles, heavyduty vehicles or nonroad engines because current test results do not support it.
EPA Administrator Lisa P. Jackson said she made the decision after reviewing thorough tests by the US Department
of Energy and other available data on E15 effects on emissions from the older cars and light trucks. “Whenever sound
science and the law support steps to allow more home-

Oil & Gas Journal | Jan. 31, 2011

1/27/11 1:08 PM


WATCHING GOVERNMENT
grown fuels in America’s vehicles, this
administration takes those steps,” she
said.
The American Petroleum Institute
and National Petrochemical & Refiners Association separately criticized
EPA’s action extending the waiver it approved on Oct. 13 for 2007 and newer
model year cars and light trucks. Ethanol advocacy organizations applauded
the latest move, but said that EPA still
needed to go further.
“An interim report by the auto and
oil industries released just this week
has revealed potential performance
problems that require further testing before E15 can be deemed safe to
use in vehicles,” said Bob Greco, API’s
downstream operations director. “EPA
is choosing to ignore the potential red
flags in its headlong rush to extend a
premature waiver.”

Wrong in three ways
NPRA Pres. Charles T. Drevna said
EPA has acted without adequate scientific evidence. “Widespread use of 15%
ethanol in gasoline could cause engine
failures that could leave consumers
stranded, injured or worse, and hit
consumers with costly engine repairs.
It’s the wrong decision, at the wrong
time, made for the wrong reason,” he
maintained.
But Growth Energy, the ethanol advocacy group that originally sought a
waiver in 2009 to increase allowable
ethanol motor fuel limits to 15% from
10%, said in a Jan. 21 statement that a
full move to E15 creates a bigger market for American ethanol that could
help create as many as 136,000 new
jobs in the US and eliminate as much
as 8 million tonnes/year of greenhouse
gas emissions from the air—the equivalent of taking 1.35 million vehicles off
the road.
Tom Buis, Growth Energy’s chief
executive, said with engine and emissions testing now completed on 200110 model year cars and trucks and
showing no issues with using E15 as a
fuel, EPA should extended its approval
to even older vehicles to further reduce

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NICK

SNOW

Washington Editor | Blog at www.ogj.com

Where wild lands are
Jan. 18 was not just any Tuesday in
Washington. It was the day the US Department of the Interior tried to shed
light on Interior Sec. Ken Salazar’s
Dec. 22 order directing the Bureau of
Land Management to “maintain wilderness inventories on a regular and
continuing basis for public lands under its jurisdiction.”
Coincidentally, it also was the day
when The Wilderness Society (TWS)
outlined its public lands priorities
for 2011. William H. Meadows, the
group’s president, acknowledged in a
statement that there has been confusion recently about this.
“We have long been advocates for
multiple uses of our public lands and
want to ensure that the government
continues to manage these special
places in a way that is consistent with
the needs and wants of local communities,” he said.
TWS intends to work with those
communities to help them understand
how fishing, grazing, hunting, hiking, biking, and many other activities
bring dollars to local business owners, Meadows said. “But this is about

more than jobs and the economy,” he
asserted. “This is about protecting our
natural heritage and the laws that have
been established to ensure that [DOI]
manages our lands in ways that benefit
a myriad of interests.”
Rocky Mountain governors feel differently. Idaho’s C.L. (Butch) Otter and
Wyoming’s Matt Mead, both Republicans, separately wrote Salazar expressing concern over Secretarial Order 3310.

Mead noted in his Jan. 18 letter
that the order was issued just before
Christmas holiday, when his and other
governors’ offices were in transition.
“Though you will seek feedback from
state BLM offices prior to issuing final
agency guidance, the opportunity for
public input on the policy itself was
never afforded,” he told Salazar.

De facto wilderness
Kent Holsinger, a Denver attorney who
specializes in land, wildlife, and water law, said on Jan. 17 that the order
could create de facto wilderness areas,
which can only be authorized by Congress under Sections 2 and 3 of the
1964 Wilderness Act.
“Action under this order could render debate over wilderness bills in
Congress meaningless,” he warned.
“Instead, BLM could manage huge areas as wilderness without any action
by Congress.”
House Natural Resources Committee leaders also weighed in on the

order. Chairman Doc Hastings (RWash.) condemned it, while Ranking
Minority Member Edward J. Markey
(D-Mass.) hailed it for reversing policies from George W. Bush’s administration which he called an “8-year
campaign to subjugate all other uses of
public land—recreation, water quality,
habitat, ranching—to rampant energy
development.”
Salazar’s order at least has spawned
a new federal abbreviation: LWCs, or
“lands with wilderness characteristics.” What they actually are will be
subject to further debate.

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GENERAL INTEREST
US dependence on foreign crude oil. “Increased use of ethanol will strengthen our energy security, create US jobs, and
improve the environment by displacing conventional gasoline with a low-carbon fuel,” he said.
Renewable Fuels Association Pres. Bob Dineen noted that
while EPA’s announcement will increase the time frame in
which the waiver will cover most vehicles on US highways,
labeling issues and misfueling issues still need to be addressed. He said RFA has suggested changes in EPA’s proposed label for E15, and is continuing to work with gasoline
retailers to get Congress to pass legislation addressing misfueling concerns.

Addressing issues
As with any new fuel, additional testing and some regulatory issues relating to the fuel’s properties must be addressed
before widespread E15 use can occur, Dineen said. RFA is
working to address those issues and accelerate E15’s commercial use, he indicated.

API’s Greco said vehicle and service station equipment
testing has revealed potential safety and performance problems that require further testing before E15 can be deemed
safe. For example, he noted, recent DOE infrastructure testing of new and used retail gasoline station equipment resulted in more than half of the equipment failing, showing
that there are serious issues with using any equipment not
specifically certified for E15.
“Today’s decision is even shakier than the original decision because comprehensive vehicle testing of E15 by automakers and the oil industry is not yet complete,” Greco said.
“Furthermore, EPA bypassed formal notice-and-comment
procedures in making this decision. It simply placed DOE’s
test data in the docket and made their decision less than
a month later without reopening the comment period. EPA
is putting more American consumers at risk by approving
the use of E15 without knowing the consequences it could
have.”
“We urge President Obama to reverse EPA’s decision,”
said NPRA’s Drevna. “Unless the use of a 15% ethanol blend
in gasoline is shown to be safe for all engines as a result
of thorough, objective, and independent scientific testing,”
Drevna said, “it should not be approved for any engines.”
He said, “We will continue pursuing our lawsuit against
EPA on this issue to protect consumers and ensure the safety
of the gasoline they rely on.” OGJ

Natural gas, LPG to play large
roles in European fuels future

key bridging and supplementary roles, according to a report
presented Jan. 25 to the European Commission by its stakeholder expert group on future transport fuels.
Alternative fuels, said the report, have the potential gradually to replace fossil energy sources and make transportation sustainable by 2050. The EU will need an oil-free and
largely CO2-free energy supply for transport by 2050 due
to the need to reduce its impact on the environment and to

concerns about the security of energy supply, said the commission’s announcement.
The EU’s expert group has for the first time developed a
comprehensive approach covering the entire transportation
sector. Expected demand from all transport modes could be
met through a combination of:
• Electricity (batteries or hydrogen/fuel cells).
• Biofuels as main options.
• Synthetic fuels (increasingly from renewable resources)
as a bridging option.
• Methane (natural gas and biomethane) as complementary fuel.
• LPG as supplement.
The commission is currently revising existing policies;
today’s report will feed into the “initiative on clean transport
systems,” to be launched later this year, said the announcement.
“The initiative intends to develop a consistent long-term
strategy for fully meeting the energy demands of the transport sector from alternative and sustainable sources by
2050,” it said.
According to the expert-group report, alternate fuels are
the “ultimate solution to decarbonize transport,” by gradually substituting fossil energy sources. Technical and economic viability, efficient use of primary energy sources, and
market acceptance, however, will be decisive for a competitive acquisition of market share by the different fuels and
vehicle technologies, it said.
No single candidate for fuel substitution currently exists.
Fuel demand and greenhouse gas challenges will most likely
require the use of a mix of fuels that can be produced from a
large variety of primary energy sources.
The commission’s announcement also said there is “broad
agreement” that all sustainable fuels will be needed fully to
meet the expected demand.
Different modes of transport require different options of
alternative fuels. Fuels with higher energy density are more

suited to longer-distance operations, such as road-freight
transport, maritime transport, and aviation.
Compatibility of new fuels with current technologies and
infrastructure or the need for disruptive system changes
“should be taken into account as important factors, determining in particular the economics of the different options,”
the report said. OGJ

In the European efforts to move to fossil-free, carbon dioxide-free transportation fuels, natural gas and LPG will play

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GENERAL INTEREST

Salazar formally announces
BOEMRE split, advisory panel
Nick Snow
Washington Editor

US Interior Sec. Ken Salazar formally announced the division of the Bureau of Offshore Energy Management, Regulation and Enforcement into two separate agencies, pledging
to not let this interfere with existing operations. He also announced the formation of a scientific advisory board for the
two new agencies.
Salazar told reporters at a press conference he and BOEMRE Director Michael R. Bromwich hope to complete division of what remains of the former US Minerals Management
Service by Oct. 1 into a new Bureau of Ocean Energy Management (BOEM) and Bureau of Safety and Environmental

Enforcement (BSSE).
The idea will be to maintain a structure that continues to
meet short-term requirements while reconfiguring BOEMRE
to meet long-term needs, he emphasized. “Operations must
not be brought to a stand-still,” Salazar declared.
Bromwich, who also participated in the briefing, said he
continues to meet daily with oil and gas producers and industry leaders to bring them up to speed on regulations imposed following the Macondo well accident and subsequent
massive crude oil spill. “I would be very surprised if new
deepwater drilling permits aren’t issued by the third quarter,” he said.
Former Sandia National Laboratory Director Tom Hunter
will lead the new Offshore Energy Safety Advisory Committee, Salazar said. The group will be a permanent advisory
board through which the nation’s leading scientific, engineering, and technical experts will provide ideas to improve
offshore oil and gas drilling safety, he indicated.

Committee’s makeup
The safety advisory committee, which replaces the offshore
safety institute he has proposed, will include oil and gas industry representatives as well as participants from environmental and other non-government organizations, according
to the secretary. “I don’t want things to be done under the
cloak of darkness, including technology,” he said. “The one
lesson we learned as we responded to the Macondo well
blowout and spill was that while technology to drill in deeper water developed very quickly, other important technologies did not.”
He specifically mentioned the Macondo well’s blowout
preventer, which he said did not have the kind of instrumentation to prevent or minimize leaks from a blowout. “That is
the kind of technical information we will require,” Salazar
said.
He said that he is considering recommendations from US

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110131OGJ_23 23

President Obama’s oil spill investigation commission, including one that BSSE’s director have enforcement authority
similar to the Federal Bureau of Investigation. Salazar said
he is studying that idea, but added that he wants BOEMRE
to move forward in a way that makes organizational sense.
He also said he is considering the commission’s recommendation to have the oil and gas industry form its own
agency to promote operating safety that would be similar to
the nuclear power industry’s Institute of Nuclear Power Operations. But he and Bromwich emphasized such an entity,
if it were formed in addition to the American Petroleum Institute’s existing standards and practices committees, would
not be an acceptable substitute to more aggressive safety and
environmental enforcement by BSSE.
Asked if he might consider a similar division at the US
Bureau of Land Management if it works at BOEMRE, Salazar
was noncommittal but said he already has asked BLM Director Robert V. Abbey to look at how that DOI agency collects revenue. “It’s important to protect the environment. It’s
also important to make sure that the American public gets
its fair share of revenue from these resources,” the secretary
said. OGJ

Heritage claims major
Iraq gas-condensate find
Heritage Oil PLC has discovered as much as 12.3 tcf of gas
on the Miran West structure in Iraqi Kurdistan and is evaluating development options under which production could
start into European markets as early as 2015 using planned
regional infrastructure.
Heritage, placing the value to the company at $2.7 billion,
described Miran as the sixth largest gas field discovered in
Iraq and the largest gas field to be discovered in the country
for more than 30 years.
Heritage noted that the Miran West-2 well was initially designed as an appraisal well for the Cretaceous section
and was modified later to assess the exploration potential of

deeper formations. Drilled to a total depth of 4,426 m, it confirmed three additional pay zones in Lower Cretaceous and
Jurassic formations in addition to the pay zone identified in
the Upper Cretaceous in the Miran West-1 well.
Well results also established that Miran contains two hydrocarbon systems, with oil in the shallower Upper Cretaceous section and wet gas-condensate in the Lower Cretaceous and Jurassic formations.
Heritage said, “This has resulted in the previously anticipated prospective oil resources in the Lower Cretaceous,
identified on the basis of oil shows in the Miran West-1 well,
being proven to be wet gas-condensate” (OGJ Online, Nov.
19, 2010).

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GENERAL INTEREST
Management estimated that the Miran West structure has
6.8 to 9.1 tcf of gas in place at 90% to 50% probability plus
42-71 million bbl of condensate and 53-75 million bbl of oil.
There is a 10% chance of 12.3 tcf of gas in place.
Heritage summarized the test results:
• Jurassic at 3,465-3,533 m measured depth flowed 26
MMscfd of gas and 70 b/d of 52.2° gravity condensate on a
40/64-in. choke.
• Jurassic at 3,327-3,410 m flowed 25.5 MMscfd of gas
and 67 b/d of 54.3° gravity condensate on a 40/64-in. choke.
• Jurassic at 2,992-3,115 m flowed 26.7 MMscfd of gas
and 432 b/d of 60.9° gravity condensate on a 40/64-in.
choke.
• Lower Cretaceous at 2,117.5-2,220 m flowed 200 Mcfd
of wet gas.

• Upper Cretaceous at 714-1,000 m tested a trace of oil
on pump.
Surface equipment capacity constrained the test rates.
Test data indicate that individual test intervals could produce at rates of 40 MMscfd with the well capable of delivering at a rate of more than 100 MMscfd when placed on production, Heritage said.
The proven hydrocarbons in the Upper Cretaceous can
be accessed commercially on the structure as demonstrated
by the 8,000-10,000 b/d potential of the Miran West-1 well,
Heritage added. Drilling techniques will maximize the benefit from the fracture networks to achieve optimal production rates.
Extensive coring and wireline log analysis at Miran West2 indicated the presence of matrix porosity in the Cretaceous and Jurassic formations. Management estimated that
Heritage has discovered mean risked contingent and prospective resources in Miran West and Miran East of 744 million bbl of oil equivalent based on a 75% working interest.
Results of drilling and early indications from 3D seismic
indicate pervasive fracture networks across the Miran structures. Heritage plans to drill the Miran West-3 high-angle
appraisal well in the second quarter of 2011. It will source
a second rig by autumn of 2011 to continue Miran West appraisal and later to begin exploratory drilling at Miran East.
Heritage will expand the 550 sq km 3D seismic survey
that is under way by a further 180 sq km. The expansion is
aimed at the southern flanks of the Jurassic and Cretaceous
structures.
Miran’s location in Kurdistan makes it ideally placed to
gain access to secure and profitable European gas markets,
Heritage said. In the last 2 years Austria’s OMV, Hungary’s
MOL, and Germany’s RWE have signed agreements with
Kurdistan to create a route to market for Kurdistan gas reserves.
Heritage said it is considering development options that
could include either bringing gas into Turkey and-or into
Europe via the Nabucco pipeline. OGJ

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110131OGJ_24 24

EXPLOR ATION / DEVELOPMENT BRIEFS

Iraq
A group led by New Age (African Global Energy) Ltd. has
completed shooting 250 line-km of 2D seismic on the Khalakan block east of Taq Taq oil field in Iraqi Kurdistan.
Initial rudimentary processing and interpretation indicates several surface and subsurface structures that are of
immediate interest, said Range Energy Resources Inc., Vancouver, BC, which has an indirect 24.95% working interest
in the block.
In addition to the seismic, Range independently commissioned a field geological survey over the structures by Iraqi
geologists familiar with the area’s structural complexities.
The additional surface geological and structural data obtained from the field will greatly aid seismic program interpretation, Range Energy said.

Tunisia
Sonde Resources Corp., Calgary, reported “robust test results” from an appraisal well on the Tunisian side of the 7th
of November block in the Gulf of Gabes off Tunisia and Libya. Zarat North-1, in which Sonde owns 100% working interest alongside the Tunisian-Libyan Joint Oil combine, went
to 9,728 ft vertically and cut 240 net ft of pay in the Eocene
El Gueria limestone. Sonde set casing to TD and ran three
production tests through 2-1/4-in. tubing from 42 ft above
the water contact to 177 ft above the water contact.
All three tests flowed substantial quantities of gas-condensate, with Test 2 sustaining 8 MMcfd of gas and 750 b/d
of condensate. Condensate rates peaked at 1,100 b/d, and
gas rates were 8-11.5 MMcfd. All tests produced water at
200-350 b/d of drilling fluids and formation water, with water decreasing and oil increasing throughout the tests. Sonde
is assessing test data to determine key reservoir characteristics including porosity, permeability, water saturation, and
gas composition.
Located 1.25 miles northeast of the Marathon Zarat-1
discovery and 1.9 miles northeast of the Zarat-2 appraisal,
Zarat North-1 encountered gas-oil and oil-water contacts at
the same structural elevation as the Marathon wells, confirming a significant extension to the previously proven accumulation.

Sonde said the results suggest that an economically viable, near-term development may be possible. By comparison with the Zarat North results, the Marathon Zarat-1 well
flowed 5.3 MMcfd and 457 b/d on a first test and 15.1 MMcfd
and 1,181 b/d on a second test.
Sonde said hydrocarbon column thickness was about
twice that originally estimated for the Zarat North location.
Sonde will temporarily abandon the well for reentry and review the use of horizontal wells to develop the field.

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