Sunday, February 17, 2013

Crude-Oil Futures End Higher; Brent Spread to US Benchmark at 1-Month High

Crude-oil futures prices rose Friday amid continued hefty gains in U.S. equities price. Global benchmark Brent crude oil hit a 20-week high while worries over logistical problems at a key pipeline capped the rise in U.S. prices.

Brent's premium to the U.S. benchmark price on the New York Mercantile Exchange blew out by $1 a barrel, to $19.06 a barrel, the most since Jan. 3, after operators of the Seaway Pipeline said the key conduit may not be free from potential operational restraints until work on a new section of pipeline is completed near the start of the fourth quarter.

Seaway, the pipeline outlet for growing crude oil supplies from the Midwest to the key Gulf Coast refining hub, last month more than doubled operational capacity to 400,000 barrels a day last month. Anticipation that the higher flows to the Gulf from Cushing, Okla.--the delivery point of the Nymex contract--had driven U.S. crude prices higher, on the notion they would gain market share at the expense of costlier imports, priced against the value of internationally traded Brent.

While the spread did narrow briefly in January to its weakest level since July, at under $16 a barrel, news last week that operating problems cut the flow on the line to just 175,000 barrels a day, pushed it back out, with Brent galloping higher, at the expense of the U.S. benchmark.

U.S. crude also is held back by widespread seasonal refinery maintenance that is reducing near-term demand. Crude's modest support, analysts said, comes from carryover strength in petroleum products, which are climbing to their highest levels since early in the fourth quarter on anticipation that lower refinery output will tighten product inventories.

Seaway is "not doing what the market thought it would do originally," said Gene McGillian, analyst and broker at Tradition Energy, referring to the widening of the price spread between the benchmarks. Goldman Sachs said on Jan. 22, before the operational snag at Seaway, that it expected Brent's premium to the U.S. benchmark to erode steadily to $6 a barrel by the end of 2013.

Traders said Brent, which is exported globally, also is reflecting increased market tensions over recent unrest in Algeria and the Middle East.

Nymex light, sweet crude oil for March delivery settled 26 cents higher, at $97.77 a barrel, after trading in a range of $96.51 to $98.15 a barrel.

ICE March North Sea Brent settled 1.1%, or $1.21 a barrel, higher at $116.76 a barrel, the most since Sept. 13.

U.S. crude gained 2%, or $1.89 a barrel in the latest week, while Brent jumped 3.1%, or $3.48 a barrel.

Traders said the evolving issue regarding Seaway will be a major focus of the market in coming days, but there is concern that prices have become overvalued.

Matt Smith, commodity analyst at Schneider Electric in Louisville, Ky., said "the underlying fundamentals don't justify" U.S. crude oil futures approaching $100 a barrel.

"It was only a few weeks ago we were worried about OECD oil demand being weak," he said, referring to the major industrialized nations that comprise the Organization for Economic Cooperation and Development. "Now, we're swept up in the euphoria over equities."

Mr. McGillian at Tradition Energy said the "bulls still in charge, but we're reaching the point where we need to see new signs of strong demand" to justify gains.

Rising heating oil and gasoline prices also gained support from higher Brent prices, as their values are tied to the crude oil that is widely used by refiners on the Gulf Coast and the East Coast.

Front-month reformulated gasoline prices climbed in 11 of the past 12 sessions and in seven of the past eight weeks. March gasoline settled at $3.0536 a gallon, up 2.19 cents on the day and the highest level since Sept. 28.

March heating oil settled 4.19 cents higher, at $3.1606 a gallon, the highest price since Oct. 18.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Ops to Boost Causeway Production for February Finish

Canada's Antrim Energy issued an update on its UK North Sea activities Friday in which it reported that an operation to boost production at the Causeway field is expected to be completed this month. Meanwhile, the company also reported that it is to opt out of the Fionn field development in the south east area of the UK North Sea.

Antrim said that rig operations are currently underway to complete the water injector for the Valiant-operated Causeway field in Block 211/23d of license P1383, in which Antrim has a 35.5-percent interest. The operations are on the previously-drilled well 211/23d-18.

The company said that the startup of both the water injector and the electrical submersible pumps are scheduled for the second half of 2013, following the completion of topside modifications on the TAQA Bratani-operated North Cormorant Production Platform. Currently, the Causeway field is producing approximately 4,500 barrels of oil per day.

Antrim also reported that the projected costs associated with the development of the smaller Fionn field, which is adjacent to the Causeway field, have "risen to the extent that the project no longer meets Antrim's economic criteria". Consequently, Antrim has elected to opt out of the Fionn field development, although under agreements it will retain a 35.5-percent interest in the remainder of P201 Block 211/22a.

Meanwhile, Antrim confirmed that production resumed Jan. 20 at the Cormorant East field after the precautionary shutdown of the TAQA Bratani-operated Cormorant Alpha platform and the Brent Pipeline System in mid-January. Antrim reported that production at the field is temporarily shut in so that well integrity and reservoir potential can be assessed. The field is initially being produced under primary depletion via a single production well that is tied directly to, and accessible from, the North Cormorant Platform.

Antrim also confirmed that a draft field development plan for its Fyne field, located in Block 21/28a in license P077 and where it has a 100-percent interest, was submitted to the UK Department of Energy and Climate Change on January 14 and that it expects to get approval for this by April.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Sound Oil May Accelerate Laura Field Development

Italy-focused Sound Oil announced Friday that its Laura field development in the Gulf of Taranto may be accelerated after the firm began discussions with the Italian Ministry of Economic Development about the project.

Laura is a 30 billion standard cubic feet discovery, previously discovered by ENI in 1980. Sound said that it is talking to the Ministry of Economic Development about applying directly for a production concession – rather than a permit to drill an appraisal well – in order to accelerate production from Laura by at least a year.

Sound also reported that it recently received a farm-in offer for its Badile exploration prospect from what it described as a "high quality" potential partner. The Badile prospect, onshore Italy in the Po Valley, is estimated to hold resources some 23 million barrels of oil.

The firm's 21 billion cubic feet Nervesa gas discovery in northern Italy is currently undergoing operations to prepare the site ahead of production. These operations will continue until February 12, when written permission from the authorities will be needed to proceed to complete the site.

Meanwhile, Sound is also continuing to revamp field facilities at its Rapagnano field in the Marche region of Italy. These facilities are now expected to be successfully commissioned by the end of February, with first gas following shortly afterward.

Sound added that it has completed a full review of its asset portfolio and expects to put in place a structure divestment process for a package of non-core assets.

"The company is making good progress on its core strategic objectives, including potentially accelerating production from the Laura discovery," Sound CEO James Parsons commented in a statement.

"Whilst Italian approval processes are causing operations at Nervesa and Rapagnano to progress slower than we would have liked, both are moving forward and our focus remains on delivering a successful well and commercial first gas for our shareholders."

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Earnings Rise, Oil Production Declines for ExxonMobil

Earnings Rise, Oil Production Declines for ExxonMobil

ExxonMobil recorded higher fourth quarter and full year 2012 earnings, but saw its upstream earnings and oil production decline as it ramped up 2012 capital and exploration expenditures to a record level.

The Irving, Texas-based oil major recorded fourth quarter 2012 earnings of more than $9.9 billion, up 6 percent from the fourth quarter of 2011, and full year 2012 earnings of $44.9 billion, up 9 percent from 2011, and record earnings per share of $9.70.

The company spent a record $39.8 billion on expenditures as it pursues opportunities to find and produce new supplies of oil and natural gas to meet global energy demand.

"Energy is fundamental to economic growth and improved living standards," said Chairman Rex W. Tillerson in a statement Friday. "ExxonMobil's strong financial performance enables continued investment in new energy supplies, which creates jobs and supports economic expansion."

While ExxonMobil's fourth quarter earnings were up, the company's upstream earnings for fourth quarter 2012 were approximately $7.7 billion, down approximately $1.1 billion from fourth quarter 2011. Fourth quarter earnings were impacted by lower liquids realizations partially offset by improved natural gas realizations, production volume and mix and lower gains from asset sales.

U.S. upstream earnings for fourth quarter 2012 rose $420 million from fourth quarter 2011 to $1.6 billion, while non-upstream earnings declined approximately $1.5 billion from the previous year to $6.1 billion.

Fourth quarter downstream earnings were approximately $1.8 billion, up $1.3 billion from the same quarter a year ago, on stronger refining margins. U.S. downstream earnings rose $667 million to $697 million, while non-U.S. downstream earnings rose $676 million to approximately $1.1 billion.

ExxonMobil's full year 2012 earnings included $9.9 billion of divestment and restructuring gains, mainly from restricting of its Japan-based operations, with $6.5 billion. But the company's upstream earnings for 2012 of $29.8 billion were down $4.5 billion from 2011 due to a number of factors, including lower liquids realizations, production volume and mix effects, higher operating expenses, lower asset sale gains, unfavorable tax items and negative foreign exchange effects.

ExxonMobil saw its full year 2012 upstream earnings decline by $4.5 billion from 2011 to approximately $29.9 billion. The company recorded U.S. upstream operation earnings of $3.9 billion, down approximately $1.2 billion from 2011, and earnings outside the U.S. of $25.9 billion, down $3.3 billion.

The company's U.S. and international downstream businesses recorded higher earnings due to stronger refining-driven margins and the $5.3 billion gain associated with ExxonMobil's restructuring in Japan and other divestment gains. Downstream earnings grew approximately $8.7 billion from 2011 to $13.2 billion in 2012, with U.S. downstream earnings of approximately $3.5 billion, up $1.3 billion from 2011, and non-U.S. downstream earnings of $9.6 billion, up $7.4 billion from 2011.

Excluding entitlement volumes, OPEC quota effects and divestments, ExxonMobil's fourth quarter 2012 production declined by 2.1 percent from fourth quarter 2011. Fourth quarter gas production was down 2.8 percent, excluding entitlement volumes and divestments, as field decline was partially offset by higher demand and lower downtime.

The company's 2012 full year oil and gas production was also down by 1.7 percent and 1.9 percent respectively.

Despite lower oil production, ExxonMobil noted that its participated in three major liquids project start-ups in West Africa last year with capacity of 350,000 gross barrels of oil per day.

The company also announced early January that it would move forward with the Hebron oil field development projects offshore eastern Canada. ExxonMobil will spend as estimated $14 billion on the project, which will involve constructing a gravity-based structure to recover more than 700 million barrels of oil.

ExxonMobil also started operations at one of the world's largest ethylene steam crackers, the centerpiece of the company's multi-billion dollar expansion at its Singapore petrochemical complex. The expansion will add 2.6 million tonnes per year of new finished product capacity.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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Plexus Brings New Engineering Approach to Wellhead Technology

Plexus Brings New Engineering Approach to Wellhead Technology

UK-based Plexus Ocean Systems Ltd., a division of Plexus Holdings plc, is utilizing a patented technology that the company believes will improve wellhead design to prevent or minimize the impact of blowouts such as the April 2010 Macondo incident in the Gulf of Mexico and the 2009 Montara blowout offshore Australia.

The company's POS-GRIP technology, invented by the company's CEO and founder Ben Van Bilderbeek employs a method of elastically deflecting an outer wellhead body onto an inner casing or tubing hanger and locking them in place to support tubular weight and activate seals. In surface wellhead applications, the system is powered by reusable hydraulic devices, which are fitted temporarily to flanges on the outside of the wellhead.

Plexus Brings New Engineering Approach to Wellhead TechnologyAn example of a POS-GRIP Rotary Surface Wellhead

Van Bilderbeek said he sees friction-grip technology as the best available and safest (BAST) method of engineering for wellheads for all applications, including:

Exploration wellheadsProduction wellheadsTie-back wellheadsDeepwater dry tree wellheadsSurface blowout preventer (BOP) wellhead systemsWorkover wellheadsGeothermal wellheadsFracking technologyCO2 storage wellheads

POS-GRIP technology has been used for 12 years in the North Sea, particularly for high-pressure, high-temperature (HP/HT) wells, Van Bilderbeek told Rigzone.

The technology was initially introduced in the North Sea through an adjustable rental wellhead system for jackup drilling operations; later, POS-GRIP technology was developed for use in specialized HP/HT wellhead systems.

Plexus hopes to replicate the success of its HP/HT technology in the larger international production wellhead and subsea arenas as company officials see many applications in unconventional fields.

The company has had discussions with a number of companies to license POS-GRIP technology, and would like to enter the U.S. market with a partner, or potentially sell certain applications that don't fit perfectly with Plexus' business strategy.

"We ourselves are not interested in operating in the U.S. due to the risk factors that apply in U.S. waters," said Van Bilderbeek. There are lots of targets around the world with less risk."

POS-GRIP technology presents a number of advantages over existing spool-type and mandrel hanger wellhead technologies, depending on the application, including:

Installation of hangers through the BOPShorter time for installationRigid assemblyMultiple metal seals over a large contact areas, for a corrosion resistant designIntegral seal design to minimize the number of leak pathsSingle component hangers

The technology also offers superior reliability, reduced life cycle cost and is tolerant to a contaminated environment.

The company's roster of customers includes: Apache Corp., BHP Billiton Ltd., BP Plc, ConocoPhillips Company, Maersk Oil, Lundin Petroleum AB, Newfield Exploration Company, Talisman Energy Inc., Statoil, Royal Dutch Shell Plc, Total S.A. and Wintershall Holding GmbH.

"Recent well control incidents around the world have highlighted the need for robust, high performance, subsea wellheads in oil and gas operations, particularly in extreme and hostile environments," said Van Bilderbeek in a June 19, 2012 statement.

"Specific functionality is required such as instant casing hanger lockdown, the ability to monitor sustained casing pressure and then enable remedial action and bleed off capability."

Plexus Brings New Engineering Approach to Wellhead TechnologyAn example of how the POS-GRIP mechanism works

The company has designed wellheads to be the strong link in the well system, Van Bilderbeek noted in a presentation for U.S. government officials in December 2012, and is pursuing a policy of preventing blowouts "by design". Achieving the goal of wellheads as the strong link includes matching wellhead standards to those for casing and tubing couplings, Van Bilderbeek noted.

To prevent blowouts, the company argues that the industry needs to eliminate the practice of lifting BOPs from the wellhead to set casing. Wellheads must be designed to be permanent safe platforms for well control devices, while maintaining dual barriers across the well bore and annular spaces adhered to at all times.

Additionally wellhead designs where possible should rely on rigid metal sealing for integrity beyond field life, and such standards should apply to all applications, rather than just for HP/HT wells.

Van Bilderbeek pointed out that current wellhead qualification test procedures are component based, whereas emerging standards require specific qualification tests treating seals as part of a system. Currently, standards for casing and tubing couplings are far more stringent than for wellheads.

Most blowouts occur when the BOPs are away from the wellhead, as American Petroleum Institute (API) spool type systems require removal of the BOPs to set casing.

One justification for continuing the century old habit of lifting BOPs is that this method eliminates to need to space out casing, avoiding the extra work of measuring pipe into ground.

"Further excuses include the need to tension casing, which is negated by the fact that this can be done with through BOP technology," Van Bilderbeek noted.

There is no longer any justification for ever designing wellheads that require the lifting of BOPs to be set casing, as without a BOP in place a well is left under the sole protection of single barriers for an extended period of time.

The Montara Commission of Inquiry Report links the design of pressure containing corrosion caps to the Montara incident, adding that removing abandonment caps from the well before a riser with a well control device on top is re-established clearly breaks the dual barrier rule, Van Bilderbeek noted.

The United States' forerunner agency to the Bureau of Ocean Energy Management and Bureau of Safety and Environmental Enforcement (BSEE), the U.S. Minerals Management Services had recognized the risk of lifting BOPs; they proposed a solution to improve cementing techniques, as seen in an incident that occurred in April 1997 at East Cameron Block 328. On that day, a serious blowout and fire occurred on Platform A. The U.S. Department of the Interior (DOI) concluded the probable cause of the incident was formation gas migrating through the cement between the 9-5/8-inch casing and the 13-3/8-inch casing.

DOI officials also concluded there was not enough wait-on-cement time prior to nippling down the BOP. A possible contributing cause was that, since the well had been drilled horizontal, the casing may not have been properly centralized, resulting in a non-uniform cement job.

Plexus' solution would be to require that the BOPs be left in place by using thru-BOP wellhead technology, which is available from all major suppliers. This allows an operator to control a well-kick during casing installation procedures.

Van Bilderbeek believes the industry would benefit from a wider acceptance of the simple and obvious BAST rule -- never lift BOPs unless absolutely necessary.

When a POS-GRIP wellhead is activated, multiple metal seals interact over a long interface between the wellhead bore and casing hanger. Conventional annular seal are no longer required, and movement between parts is eliminated for integrity beyond field life. Qualification has taken place under simulated and extended field life testing conditions, Plexus officials noted.

In subsea wellhead applications, the technical solutions available to lock and seal casing and tubing annuli have been problematic. As a direct consequence, the industry has adopted a procedure of installing lock-down sleeves to fix casing hangers in the well bore at the end of the drilling program.

These devices, which are time consuming and can cost between an estimated $2 million and $5 million to install, are used because of the problems associated with using remotely activated lock-ring devices in the contaminated environment of a subsea well.

To be functional, a lockdown sleeve needs to be set with downward load on the casing hangers. The length of the weight string of pipe hanging from below a lockdown sleeve can dictate the setting depth for the cement plug, depending on the chosen installation sequence, van Bilderbeek noted.

If mud is replaced with seawater prior to setting of the cement plug, its setting depth can contribute to under-balancing of the well, which suggests that the use of a lockdown sleeve to secure casing hangers in a subsea wellhead, because conventional lockdown devices are problematic, can lead to well control incidents.

"Conversely, on surface wellhead applications, all casing hangers are individually locked down as soon as casing is cemented, and this is done for good reason," Van Bilderbeek noted, and the same logic and safety disciplines should apply subsea for the protection of personnel and the environment.

Van Bilderbeek noted that DOI's May 2010 report advising that all casing hangers should be instantly locked down following cementing is correct.

Van Bilderbeek, who met with U.S. government officials in early December 2012 as part of a teaching mission on technology available for wellhead design, and to highlight the conflict which comes into play when a technology is both BAST and proprietary, notes that no justification exists for ever leaving casing hangers unlocked in a subsea wellhead at any time during drilling or production.

Van Bilderbeek commented that Shell has issued revised qualification guidelines which require that the lockdown capacity for subsea casing hangers during drilling is proven to a level equivalent to the requirement for production casing hangers in the field, Van Bilderbeek noted.

Plexus Brings New Engineering Approach to Wellhead TechnologyA POS-GRIP HG Platform Wellhead System

In October 2010, a joint industry project (JIP) was formed by Plexus to focus on development of a new class of subsea wellhead system, the POS-GRIP HGSS subsea wellhead, with particular focus on addressing systemic deficiencies of current technology. The JIP's primary target is to design a wellhead system in which all casing hangers can achieve rigid lockdown following cementing, while remaining releasable if it becomes necessary to recover casing.

The JIP's member rosters now include ENI, Oil States Industries, Maersk Oil subsidiary Maersk Oil North Sea UK, Shell Plc subsidiary Shell International Exploration and Production, Wintershall Holdings GmbH subsidiary Wintershall Noordzee, Total S.A., and Tullow Oil Plc. The project is expected to take between 18 and 24 months from the February 2012 launch date at a cost of approximately $2.3 million to $3.1 million (GBP 1.5 million to GBP 2 million). Any intellectual property created through the JIP will be owned by Plexus.

Key features that Plexus hopes to incorporate into its new POS-GRIP HGSS subsea wellhead design include:

18-3/4-inch full bore system, rated to 15,000 per square inch (psi) and 350 degrees FahrenheitAbility to upgrade to 20,000 psi, 450 degrees Fahrenheit4 million pounds of "instant" casing hanger lockdown capacityAvoidance of acknowledged problems associated with using lock down ringsAnnulus monitoring and bleed-off capability to address sustained casing pressure situations, with diagnostic and remedial capabilityAbility to open and reseal the casing annulus to enable remedial cement job proceduresRigid metal annular seal technology qualified to match the standards for premium casing couplingsMeeting the API 17/D/ISO 13628-4 requirements, recently provided operator requirements, and Plexus Life Cycle Testing

The wellhead standards utilized by the Plexus JIP will be more stringent than those proposed by API for similar technology, Van Bilderbeek commented.

The Plexus wellhead standard will be pitched to match the standards required of premium casing and tubing couplings. Van Bilderbeek noted that this is not the approach that API currently takes by allowing a single sample test, and unlimited number of attempts.

The Plexus JIP also requires make and break testing, test to failure, simulate field conditions, and test under loading, Van Bilderbeek noted.

BSEE has identified the need for development work on 20,000 psi extreme HP/HT subsea drilling equipment and well design. However, Van Bilderbeek pointed out that a recent BSEE report fails to address systemic shortcomings of conventional 15,000 psi and below applications, focusing only on work to be done in the 20,000 psi and above category.

The BSEE has reported that additional developments and qualified work will be required before 20,000 psi systems are commercially available for subsea applications. For 20,000 psi drilling equipment, the current direction is the development of custom products. Wellhead systems with working pressures in excess of 15,000 psi are under development and not expected to be ready for use for a number of years.

Van Bilderbeek reported that the HGSS wellhead technology design work is underway, based on qualified hanger designs used on 20,000 psi surface drilling operations in the North Sea.

Testing on the HGSS JIP to adapt POS-GRIP technology for subsea applications is well advanced, and a POS-GRIP HP/HT tie-back connector designed to allow operators to pre-drill HP/HT production wells is now available.

Plexus believes POS-GRIP's potential in its HP/HT tieback application is one of the most far reaching developments in many years. According to Plexus, HP/HT and ultra high-pressure/high-temperature (XHP/XHT) wells could be safely tied back at a future date, negating the disposable nature of these wells.

Potential savings for the operator is the entire cost of the well, which Plexus estimates is between $75 million to $450 million per HP/HT well, and the well can begin to generate revenues at a much earlier date. HP/HT wells in a proven field could be pre-drilled and abandoned ready for completion while the platform was being designed and construction.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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Chevron 4Q Net Up 41% on Asset-Exchange Gain, Higher Production

Chevron 4Q Net Up 41% on Asset-Exchange Gain, Higher Production

Chevron Corp.'s fourth-quarter earnings rose 41% as increased production helped drive a double-digit rise in upstream earnings.

Chevron earlier this month said its fourth-quarter profit would be "notably higher" than the previous quarter's as a $1.4 billion gain from an upstream asset exchange in Australia and West Texas oil field acquisitions would contribute to increased oil and gas production. But the company also warned it would pay up to $400 million in potential accruals related to income taxes, pension settlements and environmental matters during the quarter.

Chevron, the second-largest U.S. oil company by market value after Exxon Mobil Corp., also said Thursday it will consolidate its supply and trading functions into a single group within its gas and midstream business, effective June 1. The downstream organization currently oversees the company's trading operations for crude oil and refined products, while the company's gas and midstream business was responsible for Chevron's natural gas and liquefied natural gas trading operations.

Chevron reported a profit of $7.25 billion, or $3.70 a share, up from $5.12 billion, or $2.58 a share, a year earlier. Revenue rose 1% to $60.55 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of $3.03 a share on revenue of $68.64 billion.

Operating margin improved to 19.8% from 16.6%.

Exploration-and-production earnings rose 20% to $6.86 billion as total oil-equivalent production increased 1.1% to 2.67 million barrels per day.

The refining, marketing and chemical operations, known as the downstream segment, swung to a profit of $925 million from a year-earlier loss of $61 million.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Ops to Boost Causeway Production for February Finish

Canada's Antrim Energy issued an update on its UK North Sea activities Friday in which it reported that an operation to boost production at the Causeway field is expected to be completed this month. Meanwhile, the company also reported that it is to opt out of the Fionn field development in the south east area of the UK North Sea.

Antrim said that rig operations are currently underway to complete the water injector for the Valiant-operated Causeway field in Block 211/23d of license P1383, in which Antrim has a 35.5-percent interest. The operations are on the previously-drilled well 211/23d-18.

The company said that the startup of both the water injector and the electrical submersible pumps are scheduled for the second half of 2013, following the completion of topside modifications on the TAQA Bratani-operated North Cormorant Production Platform. Currently, the Causeway field is producing approximately 4,500 barrels of oil per day.

Antrim also reported that the projected costs associated with the development of the smaller Fionn field, which is adjacent to the Causeway field, have "risen to the extent that the project no longer meets Antrim's economic criteria". Consequently, Antrim has elected to opt out of the Fionn field development, although under agreements it will retain a 35.5-percent interest in the remainder of P201 Block 211/22a.

Meanwhile, Antrim confirmed that production resumed Jan. 20 at the Cormorant East field after the precautionary shutdown of the TAQA Bratani-operated Cormorant Alpha platform and the Brent Pipeline System in mid-January. Antrim reported that production at the field is temporarily shut in so that well integrity and reservoir potential can be assessed. The field is initially being produced under primary depletion via a single production well that is tied directly to, and accessible from, the North Cormorant Platform.

Antrim also confirmed that a draft field development plan for its Fyne field, located in Block 21/28a in license P077 and where it has a 100-percent interest, was submitted to the UK Department of Energy and Climate Change on January 14 and that it expects to get approval for this by April.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Incremental Oil and Gas Starts Sidetrack Operations, Spuds New Well

Incremental Oil and Gas disclosed Friday that it has started on sidetracking operations at the Patti 32-29 well. The company noted that the Capstar 311 rig began operations on Jan.17.

A hole was milled in the casing of the existing Patti well - which had produced over 300 barrels of oil while drilling the initial well, but was never completed commercially - and a horizontal well drilled through the productive Pierre Formation to a total measured depth of 4,367 feet. The horizontal section of the well was over 1,000 feet long.

Separately, the company spudded the Aurora 24-21 well on Jan. 28. The deviated well is designed to target a seismically defined anomoly.

"Excellent shows with free oil to surface were encountered below 2,910 feet. The current operation is finishing the running of a casing to the total depth of 3,260 feet," Incremental Oil and Gas said.

The company plans to complete both of the wells with a cheaper workover rig.

"The nature of naturally fractured reservoirs means that it is not possible to predict the productivity of the wells until they are brought onto production in the coming weeks. Production rates will only be reported once flow rates are stabilized," Incremental Oil and Gas said.

Incremental Oil and Gas added that the Capstar rig will be placed on standby for about a week amid construction for the locations of the third and fourth well of the company's drilling campaign, which is taking place in its wholly owned Florence oilfield in Colorado.

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Crude-Oil Futures End Higher; Brent Spread to US Benchmark at 1-Month High

Crude-oil futures prices rose Friday amid continued hefty gains in U.S. equities price. Global benchmark Brent crude oil hit a 20-week high while worries over logistical problems at a key pipeline capped the rise in U.S. prices.

Brent's premium to the U.S. benchmark price on the New York Mercantile Exchange blew out by $1 a barrel, to $19.06 a barrel, the most since Jan. 3, after operators of the Seaway Pipeline said the key conduit may not be free from potential operational restraints until work on a new section of pipeline is completed near the start of the fourth quarter.

Seaway, the pipeline outlet for growing crude oil supplies from the Midwest to the key Gulf Coast refining hub, last month more than doubled operational capacity to 400,000 barrels a day last month. Anticipation that the higher flows to the Gulf from Cushing, Okla.--the delivery point of the Nymex contract--had driven U.S. crude prices higher, on the notion they would gain market share at the expense of costlier imports, priced against the value of internationally traded Brent.

While the spread did narrow briefly in January to its weakest level since July, at under $16 a barrel, news last week that operating problems cut the flow on the line to just 175,000 barrels a day, pushed it back out, with Brent galloping higher, at the expense of the U.S. benchmark.

U.S. crude also is held back by widespread seasonal refinery maintenance that is reducing near-term demand. Crude's modest support, analysts said, comes from carryover strength in petroleum products, which are climbing to their highest levels since early in the fourth quarter on anticipation that lower refinery output will tighten product inventories.

Seaway is "not doing what the market thought it would do originally," said Gene McGillian, analyst and broker at Tradition Energy, referring to the widening of the price spread between the benchmarks. Goldman Sachs said on Jan. 22, before the operational snag at Seaway, that it expected Brent's premium to the U.S. benchmark to erode steadily to $6 a barrel by the end of 2013.

Traders said Brent, which is exported globally, also is reflecting increased market tensions over recent unrest in Algeria and the Middle East.

Nymex light, sweet crude oil for March delivery settled 26 cents higher, at $97.77 a barrel, after trading in a range of $96.51 to $98.15 a barrel.

ICE March North Sea Brent settled 1.1%, or $1.21 a barrel, higher at $116.76 a barrel, the most since Sept. 13.

U.S. crude gained 2%, or $1.89 a barrel in the latest week, while Brent jumped 3.1%, or $3.48 a barrel.

Traders said the evolving issue regarding Seaway will be a major focus of the market in coming days, but there is concern that prices have become overvalued.

Matt Smith, commodity analyst at Schneider Electric in Louisville, Ky., said "the underlying fundamentals don't justify" U.S. crude oil futures approaching $100 a barrel.

"It was only a few weeks ago we were worried about OECD oil demand being weak," he said, referring to the major industrialized nations that comprise the Organization for Economic Cooperation and Development. "Now, we're swept up in the euphoria over equities."

Mr. McGillian at Tradition Energy said the "bulls still in charge, but we're reaching the point where we need to see new signs of strong demand" to justify gains.

Rising heating oil and gasoline prices also gained support from higher Brent prices, as their values are tied to the crude oil that is widely used by refiners on the Gulf Coast and the East Coast.

Front-month reformulated gasoline prices climbed in 11 of the past 12 sessions and in seven of the past eight weeks. March gasoline settled at $3.0536 a gallon, up 2.19 cents on the day and the highest level since Sept. 28.

March heating oil settled 4.19 cents higher, at $3.1606 a gallon, the highest price since Oct. 18.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Officials: 32 Killed in Pemex Headquarters Blast

Officials: 25 Killed in Pemex Headquarters Blast

MEXICO CITY - Rescue workers dug through rubble Friday trying to find survivors from an explosion that tore through the headquarters of Mexican state oil company Petroleos Mexicanos on Thursday, killing at least 32.

Pemex, one of the world's biggest oil companies, said it did not know the cause of the blast but Mexican and international experts are investigating.

"I want to emphasize the complexity of the investigation. We can't explain something like this in a few hours," said Pemex Chief Executive Emilio Lozoya.

Mexican officials privately said there was no early indication of sabotage in the blast, which sent a giant fireball into the sky and partially destroyed an administrative building next to the oil firm's landmark skyscraper, which has 48 floors and towers over the city's central skyline.

Mexicans were shocked by the blast given that it took place at the headquarters of the country's biggest company, a symbol of Mexican nationalism. It also comes just months before President Enrique Pena Nieto is expected to propose changes that could end the company's monopoly on oil exploration, allowing private firms to partner with the state firm for the first time.

Analysts discounted the likelihood that the blast was an attack.

"Instead, the explosion is a reflection of Pemex's aging infrastructure and lacking safety protocols," Alejandro Schtulmann, an analyst with political consultancy Empra, wrote in a note to clients.

Pemex's headquarters lies in a dense neighborhood surrounded by hundreds of illegal street businesses, some of them owned by Pemex personnel, Mr. Schtulmann said. "Like most informal businesses in Mexico, many of these street shops rely on illegal connections to the local power grids as well as water and gas lines," he said.

Twenty of those killed were women who worked in the building in administrative jobs like payroll, Pemex officials said. Some 52 other people remained hospitalized Friday due to the explosion, which the company said hadn't affected its oil operations.

It was unclear how many people might still be trapped in a basement part of the building, which was partially collapsed. Hours after the blast, officials said there might be about 30 people left in the rubble, but then said that number couldn't be confirmed. The four floors most affected by the explosion normally had about 200 to 250 people working on them.

If investigations confirm an industrial accident, it will be an embarrassing blow to the firm. Just two hours before the blast at Pemex headquarters, the company touted its security record at a conference titled "First Congress for Security, Health and Environmental Protection" in the city of Merida in eastern Mexico.

"Operations Director Carlos Murrieta pointed out that we have reduced the occurrence of accidents in recent years," Pemex said on its Twitter page, adding that its accident rate was below international standards for similar companies.

Pemex has fairly rosy numbers in terms of onsite industrial accidents, but most of the people who have died over a number of decades in Pemex accidents have been contract workers or others killed by fuel leaks and gas explosions, and those victims are not counted as workers for the purposes of reporting industrial accident rates, said George Baker, who runs a Houston-based energy consulting firm.

In September of last year, a massive explosion at a Pemex natural-gas plant near the northern border city of Reynosa killed 30 workers and caused critical shortages of the fuel, causing the state-run electricity company Comision Federal de Electricidad to switch to more expensive fuels in order to free up some natural gas for industry.

Just before Christmas in 2010, a crude-oil pipeline ruptured near the central Mexican town of San Martin Texmelucan, killing 30 people and damaging dozens of homes.

"This latest blast shows the results of a systematic lack of oversight in contracts at Pemex that the company relies on for everything, including industrial security," said Alberto Islas, a security expert in Mexico City.

Mexico's lower house of Congress said this week it would put together a working group of lawmakers to investigate corruption within Pemex and the company's safety record.

Mexico's oil output has fallen to about 2.6 million barrels a day from a peak of 3.4 million in 2004, and experts say Mexico could cease to be a major oil exporter within the next six years.

Pemex was created in 1938 after Mexico nationalized its oil industry, a key moment in Mexican nationalism.

"This tells you that Pemex needs to change," said Mr. Islas.

Copyright (c) 2012 Dow Jones & Company, Inc.

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