Brazilian Production Hits 2M Barrels Per Day

RIO DE JANEIRO – Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, said late Monday that domestic oil output rose for a third consecutive month in December, though it still fell short of its production target for last year.

Petrobras said that domestic crude oil output rose 3.2% to 2.03 million barrels per day from 1.97 million barrels a day in November. Output from overseas operations averaged 145,158 barrels per day in December, up from 119,300 barrels in November.

Petrobras ended the year with average domestic crude oil production of 1.98 million barrels a day, short of its target of 2.02 million barrels a day despite an upward swing in production in the fourth quarter.

Domestic crude oil production was squeezed throughout 2012 by maintenance shutdowns to overhaul aging offshore platforms and falling recovery rates at mature fields.

Petrobras Chief Executive Maria das Gracas Foster said in the company's earnings release, also released late Monday, the company would probably repeat 2012's crude oil output this year. Additional offshore platform shutdowns for maintenance will limit production in the first half of 2013, Ms. Foster said.

The company, however, expects production to increase in the second half of the year. Petrobras expects six new platforms to start production in 2013, helping build momentum "for the significant increase in production forecast for 2014," Ms. Foster said. The first platform, Cidade de Sao Paulo, started pilot production from the Sapinhoa field in January, Petrobras said.

In December, Petrobras said that increased output from the Cidade de Anchieta floating platform helped boost crude oil production. The platform was installed at the Whales Park subsalt field, one of the deep-water areas where oil was found trapped under a thick layer of salt below the ocean floor, in November.

Efforts to raise recovery rates in the mature Campos Basin offshore region also generated a "positive effect" on output, Petrobras said.

Domestic natural gas output, meanwhile, rose 4.5% month-on-month in December to 64.9 million cubic meters per day, Petrobras said.

Total crude oil and natural gas production was 2.68 million barrels of oil equivalent, or BOE, in December, up from 2.575 million BOE in November, Petrobras said. For the full year, Petrobras averaged crude oil and natural gas production of 2.59 million BOE per day.

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Statoil Issued with Safety Order over Heimdal Leak

Norway's Petroleum Safety Authority has issued Statoil with an order to implement a number of measures on its Heimdal field platform after the PSA conducted its own investigation into a gas leak on the HMP1 platform in May 2012.

Describing the leak, which occurred in connection with the testing of two emergency shutdown valves, as "among the most serious gas discharges on the Norwegian shelf in several years", the PSA said it has ordered Statoil to:

Identify the causes why the improvement measures implemented in Statoil did not have the necessary effect on Heimdal.Ensure that the improvement measures have the necessary effect on Heimdal and present a plan for the work that is necessary to achieve this.Confirm that there are no similar conditions that indicate an inadequate effect of the aforementioned measures on Statoil's other facilities.

The deadline to comply with the order is March 1 2013, said the PSA.

Statoil itself acknowledged the leak was "serious" in October, when it announced it had submitted an internal investigation report to the PSA. According to the company, the leak lasted for four minutes and emitted around 3,500 kilograms of gas.

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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Key Petroleum Strikes Oil in the Onshore Canning Basin

Key Petroleum revealed Monday that it has encountered oil shows across a 141 foot interval at its Cyrene-1 exploration well in the onshore Canning Basin, Western Australia.

The oil shows were observed in the lower Grant and Goldwyer Formations from 3,002 feet to 3,143 feet, and are indicative of an active source rock believed to have unconventional oil or gas potential. Interbedded limestones were observed in the cuttings of the Goldwyer Formation.

DCA, which is drilling the well with Rig 7, has conducted a wiper trip and is completing testing of blowout preventers prior to running in the hole with the core barrel to begin coring a 177 foot section of the Goldwyer Formation shale that is believed to exhibit the best total organic content.

The top Goldwyer Formation intersected at 3,012 feet, the same depth encountered at the Hedonia-1 well.

"Hedonia-1, located on an anticlinal feature, lost circulation of its drilling fluids upon drilling into the top the Ordovician-aged Willara limestones. This severe lost circulation indicates high permeability in the reservoir where a significant gas show was recorded," Key said in a statement on its website.

Key noted that the Ordovician-aged Willara limestones is "an exciting reservoir"; a formation that was never properly tested. The testing program on Hedonia-1 well was terminated prematurely due to weather.

Cyrene-1 is being drilled through a 443 foot section within Goldwyer Formation shales to assess its potential as for unconventional hydrocarbons, before drilling through the conventional Willara Formation that is estimated to host 5 million barrels of oil.

The well has a planned total depth of 3,478 feet.

The Goldwyer shale contains some 764 trillion cubic feet (tcf) of risked gas in place and 229 tcf of risked recoverable gas, the largest estimate for any basin in Australia, according an April 2011 report by the U.S. Energy Information Administration on world shale gas resources.

Quintella has reported on the upstream and downstream oil and petrochemicals markets from 2004. Email Quintella at quintella.koh@rigzone.com.

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Cabot Oil Agrees to Disclose Procedures for Fracking Fluids

New York State Comptroller Thomas P. DiNapoli said Cabot Oil & Gas Corp. has agreed to publicly disclose its policy and procedures for handling toxic substances in its hydraulic-fracturing fluids.

Oil companies have increasingly used hydraulic fracturing, or "fracking," to explore for oil and gas in shale rock formations. But environmentalists have said the technique--which blasts the rock with sand, chemicals and water--can contaminate groundwater.

Mr. DiNapoli said Tuesday he has withdrawn a shareholder proposal that called for a report on the use of these substances in Cabot's shale-energy operations.

Representatives for Cabot weren't immediately available for comment.

Mr. DiNapoli, as trustee of the $150.1 billion New York State Common Retirement Fund, has filed several resolutions over the past three years with oil and natural-gas companies concerning their disclosure of chemicals used in the hydraulic-fracturing process and reducing potential hazards associated with fracking.

The comptroller's office has also reached agreements with Hess Corp., Range Resources Corp. and SM Energy Co. under which the companies will disclose their hydraulic-fracturing activities.

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CEO: Petrobras Not Feeling Heat from Ratings Agencies

RIO DE JANEIRO - Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, doesn't feel any pressure from credit-ratings agencies to reduce debt levels after ending 2012 with the company's lowest net profit since 2004, Chief Executive Maria das Gracas Foster said Tuesday.

Petrobras reported a 2012 net profit of 21.2 billion Brazilian reais ($10.65 billion), as heavy fuel imports and a 17% decline in the Brazilian real versus the U.S. dollar undercut earnings, officials said. Petrobras is "always" working to bring domestic fuel prices in line with international levels to reverse losses in the company's refining division that have pressured finances, Ms. Foster said during a conference call with analysts.

Analysts expressed concern about the increase in Petrobras's ratio of net debt to Ebitda, or earnings before interest, taxes, depreciation and amortization. Net debt rose to 2.77 times Ebitda at the end of 2012, up from 1.6 times at the end of 2011.

Petrobras is in the midst of a "difficult" period because "production is not growing, but we are investing strongly," Chief Financial Officer Almir Barbassa said. "We are going to reverse this situation in adequate time."

Credit-ratings agencies take a "long-term" view of the company, with an eye toward the number of new oil fields that will start production from the second half of 2013 and into 2014, Mr. Barbassa said. Petrobras's crude-oil output is expected to rise dramatically in 2014 as some of the large, subsalt oil fields, where billions of barrels of crude were discovered trapped under a thick layer of salt, come onstream.

"That's the way we intend to bring our leverage back to a sustainable situation in the near future," Mr. Barbassa said.

Petrobras should raise some cash in the second half of 2013, when the company expects to complete the sale of some assets from the nearly $15 billion divestment plan announced last year, Ms. Foster said. Data rooms for the sale of some assets in Brazil and the Gulf of Mexico should be open by the end of April, added Jose Formigli, the company's director of exploration and production.

But Ms. Foster warned that Petrobras is unlikely to see any increase in production in the first quarter of 2013. The executive also said Petrobras expected costs for dry and noncommercial wells will total BRL6 billion in 2013.

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FMC Technologies, Sulzer Pumps Ink Deal for Subsea Industry

Sulzer Pumps Ltd. and FMC Technologies, Inc. have signed a long-term and exclusive collaboration agreement, which addresses the supply of pumps for subsea applications and the further development of pumping technology of Sulzer Pumps, reported FMC in a press release.

This partnership will meet the needs of FMC Technologies and the subsea exploration and production industry. Both companies aim to further leverage their collaboration on technology focusing on pumps from Sulzer Pumps, and subsea systems and advanced permanent magnet motor technology from FMC, reported the company.

"The signing of this long-term and exclusive collaboration agreement is a natural progression of the long-standing cooperation already in place between Sulzer Pumps and FMC Technologies," said Tore Halverson, senior vice president of Subsea Technologies, in a statement.

"We look forward to providing the subsea market and customers with best-in-class pumping technology for many years to come," added Kim Jackson, divisional president of Sulzer Pumps.

Sulzer, an establishment dating back to 1834, and FMC have developed, built and qualified a new, high-speed helicon-axial multiphase subsea boosting unit based on Sulzer Pumps' topside pump designs. The pump is driven by a permanent magnet motor that provides higher speeds, power and efficiency compared to conventional induction motors.

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FMC Technologies, Sulzer Pumps Ink Deal for Subsea Industry

Sulzer Pumps Ltd. and FMC Technologies, Inc. have signed a long-term and exclusive collaboration agreement, which addresses the supply of pumps for subsea applications and the further development of pumping technology of Sulzer Pumps, reported FMC in a press release.

This partnership will meet the needs of FMC Technologies and the subsea exploration and production industry. Both companies aim to further leverage their collaboration on technology focusing on pumps from Sulzer Pumps, and subsea systems and advanced permanent magnet motor technology from FMC, reported the company.

"The signing of this long-term and exclusive collaboration agreement is a natural progression of the long-standing cooperation already in place between Sulzer Pumps and FMC Technologies," said Tore Halverson, senior vice president of Subsea Technologies, in a statement.

"We look forward to providing the subsea market and customers with best-in-class pumping technology for many years to come," added Kim Jackson, divisional president of Sulzer Pumps.

Sulzer, an establishment dating back to 1834, and FMC have developed, built and qualified a new, high-speed helicon-axial multiphase subsea boosting unit based on Sulzer Pumps' topside pump designs. The pump is driven by a permanent magnet motor that provides higher speeds, power and efficiency compared to conventional induction motors.

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BG Group to Miss 1 MMboepd Target

BG Group warned Tuesday that previous guidance given by the company that it would produce in excess of one million barrels of oil equivalent per day (boepd) in 2015 will not now be achieved.

BG Group indicated that the continuing uncertainty about the timing for the resumption of production at the Total-operated Elgin/Franklin field was partially to blame for the revision of its guidance. BG Group had already warned in October that its production was being held back by the shutdown of Elgin/Franklin, where a major gas leak occurred in March last year. The firm's production for 2012 of 658,000 boepd was in line with the revised guidance it gave in its 3Q 2012 results.

BG Group also pointed out that production during the first half of 2013 will be slightly down on 1H 2012 and even lower during 3Q 2013, when the firm performs most of its maintenance program. However, the firm added that it expects production growth to be strong during 4Q 2013 thanks to the planned ramp up of two FPSO vessels in Brazil and significant volumes from its Jasmine and Margarita fields.

The company also saw first production achieved from the 120,000 bopd FPSO vessel on the Sapinhoá field, operated by Petrobras, in January.

For 2013 as a whole, BG Group expects to produce at a rate of between 630,000 boepd and 660,000 boepd.

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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Eni Australia Commits to Drill Offshore Blackwood-2 Well

MEO Australia revealed Monday that Eni Australia has agreed to proceed with the drilling of the Blackwood-2 exploration well to evaluate the gas potential of the Blackwood area.

Discovered in early 2008, the Blackwood-1 well encountered a 161 foot (49 meter) gross gas column. Initial gas analysis confirmed that the gas is relatively dry and contains carbon dioxide levels in the 25 percent to 30 percent range; the gas is deemed to be suitable for methanol production.

Immediately following the discovery, MEO bought new seismic data over part of the structure. Eni completed the Bathurst 3D seismic survey covering the Blackwood East structure, acquiring 766 square kilometers of 3D data.

MEO has a 50 percent participating interest in Blackwood-2, which will be fully funded by Eni including production testing. Eni has 18 months from the date of election to drill Blackwood-2. 

The Blackwood discovery is located in permit NT/P68 offshore Australia in 200 feet (61 meters) of water. Eni Australia is the operator of the permit. 

Quintella has reported on the upstream and downstream oil and petrochemicals markets from 2004. Email Quintella at quintella.koh@rigzone.com.

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Ithaca Completes Cook Field Acquisition

North Sea-focused Ithaca Energy announced Tuesday that it has completed the acquisition of an additional 12.885 percent of the Cook field via the purchase of the UK-owned subsidiary of U.S. firm Nobel Energy. Ithaca now holds 41.345 percent of the field.

The completion marks the closure of part of a deal arranged by Ithaca in October to buy two subsidiaries from Noble for $38.5 million. The firms also agreed that Ithaca would gain Noble’s 14-percent interest in the MacCulloch field.

Ithaca expects both acquisitions to increase its net proven and probable reserves by 3.4 million barrels of oil equivalent.

The Cook oil field, operated by Shell, lies in Block 21/20a in the central North Sea. The field has been developed as a single well subsea tie-back to the Shell-operated Anasuria floating production, storage and offloading vessel (FPSO). This serves as a host processing facility to several nearby fields, with oil exported from the FPSO via shuttle tankers and gas via pipeline to shore.

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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Gulf of Mexico Fines Hit BP Profit

LONDON - BP PLC posted Tuesday a 72% drop in profit for the fourth quarter as its oil and gas production continued to fall and it agreed to pay billions of dollars in fines to the U.S. government, a performance that analysts said showed the company is still struggling to recover from the Deepwater Horizon oil spill.

The results, which come as the company faces the start of a trial on Feb. 25 that will determine whether it faces billions of dollars more in civil penalties for the spill, underscore how BP's promised turnaround from the disaster in the Gulf of Mexico almost three years ago is proving elusive.

BP Chief Executive Bob Dudley said the company passed many milestones in 2012, including selling assets and starting up new projects, which have laid a solid foundation for growth.

"We will continue to see the impact of this reshaping work in our reporting results in 2013. By 2014, I expect the underlying financial momentum to be strongly evident," Mr. Dudley said. "I don't regard our results as a setback."

BP said it started up five major new oil and gas projects last year and expects to bring four more--in Angola, Australia, the Gulf of Mexico and Azerbaijan--into production by the end of this year. A further six major projects are expected to start up through 2014.

However, the company's total oil and gas production fell by 7% to 2.29 million barrels of oil equivalent a day in 2012 and is expected to fall again in 2013, mainly as a result of the sale of oil-producing assets to cover the cost of the Gulf spill.

Despite being allowed to resume drilling in the Gulf of Mexico and continuing to operate around 700 offshore licenses, BP has been unable to reverse the steady decline in its oil production in the U.S., which has fallen by 40% since the disaster.

Excluding one-off gains and losses from asset sales or fines, BP's profit was above expectations, but its operating performance was still bumping along the bottom, analysts said.

"It's all a bit messy because it's beaten at the bottom line, but the operational results are quite mixed, with upstream not looking that impressive," and are unlikely to improve much until 2014, said Investec analyst Stuart Joyner.

The London-based oil and gas company said its replacement cost profit, a figure that excludes gains or losses in the value of inventories and is therefore equivalent to the net profit figure reported by U.S. oil companies, was $2.14 billion in the three months ended Dec. 31, compared with $7.61 billion in the fourth quarter of 2011.

Profit was reduced by a pretax charge of $4.13 billion related to the oil spill in the Gulf of Mexico, $3.85 billion of which is for the settlement of all federal criminal charges related to the disaster, BP said. This was partially offset by $3.31 billion of proceeds from the sale of oil and gas production assets during the quarter.

The drop in profit was particularly sharp compared with a year ago because BP's earnings in the fourth quarter of 2011 were boosted by a gain of $4.1 billion from oil-spill liability settlements with Anadarko Petroleum Company and Cameron International Corp.

BP has so far taken pretax charges totaling $42.2 billion for the Gulf of Mexico oil spill.

Fourth-quarter earnings were also reduced by the sale of BP's interest in major Russian oil producer TNK-BP Ltd. to OAO Rosneft, which was agreed on Oct. 22. The venture contributed $575 million in replacement-cost profit before interest and tax, versus $987 million a year ago.

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