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Click HERE to read a PDF of the April 14 Tyler Morning Telegraph Drilling Report
Thursday, June 20, 2013
Drilling Report, April 14
The drilling report was produced with data from the Texas Railroad Commission, from March 31 to April 6. The following counties were searched: Anderson, Angelina, Camp, Cass, Cherokee, Dallas, Ellis, Freestone, Gregg, Harrison, Henderson, Houston, Kaufman, Leon, Limestone, Marion, Nacogdoches, Navarro, Panola, Rains, Robertson, Rusk, San Augustine, Shelby, Smith, Upshur, Van Zandt and Wood. For information contact Business Editor Casey Murphy at cmurphy@tylerpaper.com or 903-596-6289.
BSEE Finishes Final Offshore Workplace Safety Rule
The Bureau of Safety and Environmental Enforcement (BSEE) has completed the Safety and Environmental Management Systems (SEMS) II final rule, which enhances the original SEMS rule, or Workplace Safety Rule issued in October 2010.
SEMS II, which was made available Thursday in the Federal Register Reading Room, is the latest step in BSEE's efforts to further identify, address and manage operational safety hazards and impacts, with the goal of enhancing both human safety and environmental protection on the U.S. Outer Continental Shelf, BSEE Director Jim Watson said in a statement.
Since the Deepwater Horizon incident in April 2010, the Obama administration has implemented a number of regulatory reforms to enhance safety and environmental protection.
"Offshore oil and gas safety starts with a robust positive safety culture, and BSEE's workplace safety rules are designed to promote that culture by eliminating complacency and making sure that companies are looking at the human factors that underlie too many accidents," Watson commented. "This effort takes another important step towards protecting workers and the environment from preventable accidents."
The SEMS II final rule will take effect June 4, but does not affect an operator's first audit cycle. Except of the auditing requirements, operators have until June 4, 2014 to comply with the provisions of SEMS II. All SEMS audits must be in compliance with the SEMS II Rule by June 4, 2015.
SEMS II will supplement operators' SEMS programs with greater employee participation, empowering field level personnel with safety management decisions, and strengthening oversight by requiring audits to be conducted by accredited third-parties, Watson said.
The Workplace Safety Rule, which took effect Nov. 15, 2010, encompasses all offshore oil and gas operations in federal waters and made mandatory the previously voluntary practices in the American Petroleum Institute's Recommended Practice 75. Operators were required to implement a SEMS program by Nov. 15, 2011 and must still submit their first completed SEMS audit to BSEE by Nov. 15, 2013.
Additional safety requirements contained in SEMS II that were not covered in previous regulations include:
Developing and implementing a stop work authority that creates procedures and authorizes any and all offshore industry personnel who see an imminent risk or dangerous activity to stop workDeveloping and implementing an ultimate work authority that requires offshore industry operators to clearly define who has the ultimate work authority on a facility for operational safety and decision-making at any given timeRequiring an employee participation plan that provides an environment that promotes participation by offshore industry employees and management to eliminate or mitigate safety hazardsEstablishing guidelines for reporting unsafe working conditions that enable offshore industry personnel to report possible violations of safety, environmental regulations requirements, and threats of danger directly to BSEEEstablishing additional requirements for conducting a job safety analysisRequiring the team lead for an audit be independent and represent an accredited audit service providerBSEE is now analyzing comments received on the Draft Safety Culture Policy Statement prior to the release of the final Safety Culture Policy Statement. Released last December, the draft statement was created to provide a common definition by everyone working offshore. The policy statement outlined BSEE's approach to safety culture and was meant to inform the offshore community of BSEE's safety expectations.
Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Crude Oil Slips as Demand Outlook Weakens
U.S. crude-oil futures fell Thursday as slumping gasoline prices and forecasts for weaker global demand weighed on the oil market.
Light, sweet crude for May delivery settled $1.13, or 1.2%, lower at $93.51 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange fell $1.60 to $104.19 a barrel.
Oil declined in tandem with gasoline futures, which settled at the lowest level since January as traders continue to flee from rising domestic supplies. Reformulated gasoline blendstock, or RBOB, has fallen 8.8% in April, and settled 3.41 cents lower Thursday at $2.8310 a gallon.
On Wednesday, the U.S. Energy Information Administration said U.S. gasoline stockpiles rose 1.7 million barrels last week. Imports to the U.S. East Coast rose 64% from the week earlier period to the highest levels since August, and stockpiles in this high-demand region are now 5.4% above the five-year average level for this time of year.
"You've got flat U.S. demand and growing production," said Andy Lebow, an oil broker at Jefferies Bache in New York. "The market's reached this moment, it's a moment of clarity" about high supplies, he said.
Oil futures have fallen for most of 2013, and after peaking in March U.S. gasoline prices have also tumbled. Refineries that shut down earlier this year for scheduled maintenance periods have started to ramp up operations, churning out more fuel despite tepid demand from drivers.
Weak gasoline demand is helping to lower prices at the pump. National average retail regular gasoline prices fell to $3.564 a gallon Thursday, according to the daily AAA Fuel Gauge Report. Prices are down from $3.703 a gallon a month ago.
Still, dimmer prospects for fuel use aren't confined to the U.S. The International Energy Agency, which represents a group of the world's largest oil-consuming countries, cut its forecast for 2013 oil-demand growth by 25,000 barrels a day to 90.6 million barrels a day due to falling fuel use in industrialized countries, particularly in Europe.
The IEA's revised outlook follows similar reports this week from the Organization of the Petroleum Exporting Countries and the Energy Information Administration. Both groups cut their forecasts for world oil-demand growth this year.
A weaker outlook on fuel usage this year, coupled with surging U.S. production and an improving supply outlook in other regions, is keeping a lid on global oil prices.
May heating oil settled 4.88 cents lower Thursday at $2.8991 a gallon.
Copyright (c) 2013 Dow Jones & Company, Inc.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Singapore's Temasek Sets Up LNG Investment Firm Pavilion Energy
SINGAPORE - Singaporean state-investment firm Temasek Holdings Pte. Ltd. has set up an investment unit focused on liquefied natural gas, to increase its exposure to the energy sector.
Pavilion Energy Pte. Ltd. will invest globally across the LNG value chain, such as in LNG trading and exploration, as well as storage, processing and shipping, the unit said in a statement Friday.
"As [Asia's] economies continue to transform and urbanise, the demand for clean energy, especially liquefied natural gas, is expected to increase," Pavilion said.
The unit will operate in North America, Europe, Asia, Africa and Australia, and may make joint investments with its parent. It has been incorporated with 1 billion Singapore dollars (US$806 million) in initial capital and should be operational by September.
Pavilion named as chief executive Seah Moon Ming, Temasek's senior managing director for special projects. Mohd. Hassan Marican--former president and CEO of Malaysia's Petroliam Nasional Bhd., or Petronas--will chair the board of directors.
Singapore is developing its LNG infrastructure to become a natural gas trading hub.
The Southeast Asian city-state is building its first LNG import and storage terminal, which will begin commercial operations in the second quarter. The terminal will also reduce Singapore's reliance on imports from Indonesia and Malaysia.
Copyright (c) 2013 Dow Jones & Company, Inc.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Odfjell Drilling Wins Mariner Contract
The UK's Odfjell Drilling has been awarded a $245-million contract to provide drilling services on the Mariner platform, Statoil announced Wednesday.
Aberdeen-based Odfjell will perform drilling services, maintenance of the drilling facility and drill pipe logistics for the Mariner field development, with options also on the Bressay field development, Statoil said. The contract duration is four years from November 2016 and will include three two-year options.
The Mariner platform is currently under construction. Odfjell Drilling will provide engineering and commissioning services to Statoil under the construction and start-up phase of the field development.
Morten Ruud, vice president Western Europe for Statoil Development and Production International, commented in a statement:
"Mariner is the largest new offshore development in the UK in more than a decade. Over its lifetime the project will generate jobs and substantial ripple effects for UK and the Aberdeen region. This contract award is an example of that."
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Fitch: Struggle with Oil Production Drives Lukoil M&A
Lukoil's acquisition of a small Russian oil producer is out of step with recent merger and acquisitions (M&A) activity, and indicates that it may be struggling to sustain domestic oil output, according to Fitch Ratings. The ratings agency said that Lukoil's ability to reverse declining output and stabilize crude production in Russia is a critical rating factor.
Lukoil spent nearly $7.3 billion on M&A between 2009 and 2012, and it acquired large stakes in a number of upstream and downstream assets abroad, but only $452 million of that was spent on Russian upstream acquisitions, Fitch pointed out.
"This week's deal clearly bucks the recent trend. Lukoil will pay $2.05 billion to acquire Samara-Nafta, an oil-producer based in the Volga-Urals region with 2.5 million tons of annual oil production," Fitch said.
Unlike Rosneft and TNK-BP, Lukoil has posted declines in Russian oil production every year since 2010. By 2012, its total oil production from Russian fields had fallen by 7.7 million tons, or 8 percent, from 2009.
"We therefore consider this latest acquisition as a sign that Lukoil is willing to engage in costly acquisitions to halt the fall in oil production," Fitch said.
The company has sufficient rating headroom to finance this all-cash transaction with borrowed funds only, if needed, Fitch highlighted, adding that an aggressive acquisition program or other spending could lead to negative rating action.
"On the other hand, stabilization of crude production in Russia, and the completion of key upstream projects while maintaining solid credit metrics, would be positive for the rating," Fitch said.
At the end of 2012, Lukoil had $2.9 billion in cash and cash equivalents; its gross total debt was $6.6 billion.
"Lukoil's falling production in Russia results mainly from the depletion of the company's brownfields in Western Siberia and lower than-expected production potential of the Yuzhno Khylchuyu field in Timan-Pechora. The company managed to slow the decline in crude production in Russia to one percent in 2012 from five percent in 2011 through enhanced recovery techniques in Western Siberia (mainly horizontal drilling and hydraulic fracturing) and the development of new upstream assets in the Ural and Volga regions," Fitch said.
Lukoil's exploration and production capex in Russia increased from $3.9 billion in 2010 to $7 billion in 2012, and Fitch estimates it may average $8 billion per annum over the next three years.
Fitch also highlighted that Lukoil is considering large-scale investments in unconventional oil production from the Bezhenov Shale, Russia's colossal shale deposit in Western Siberia, which is estimated to contain up to two trillion barrels of oil. Production costs for the shale deposit are estimated at several times that of conventional oil, so oil producers would need new tax breaks from the Russian government to make production economic.
"We estimate that the contribution from Samara-Nafta to Lukoil's total output will be fairly small – equivalent to around three percent of the 83.8 million tons it produced in Russia in 2012, excluding its share in production of equity affiliates," Fitch said.
LUKOIL's total hydrocarbon output in 2012 reached 2.17 million barrels of oil equivalent per day (MMboepd), second only to Rosneft's 2.43 MMboepd.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Rosetta Resources Raises 2013 Capital Expenditure Guidance
Rosetta Resources Inc. raised its 2013 capital guidance to $840 million to $900 million, from $640 million to $700 million.
The 2013 capital program is based on a five to six-rig program in South Texas and a Delaware Basin program with three rigs increasing to six rigs during the year.
Rosetta said about $600 million will be spent for development activities primarily located in the liquids-rich window of the Eagle Ford shale in South Texas, including about $55 million allocated to facilities projects. About $175 million will be allocated to operated and non-operated development activity in the oil-rich Delaware Basin, including about $7 million for facilities projects.
Last month Rosetta agreed to buy all of Comstock Resources Inc.'s oil and gas properties in the Reeves and Gaines counties of West Texas for $768 million, giving Rosetta exposure to the Permian Basin and a complement to its Eagle Ford properties.
On Monday, the company noted the guidance range now includes about $25 million of capitalized interest related to the pending acquisition. The remainder of the capital plan includes allocations for new ventures activity and other corporate capital.
Copyright (c) 2013 Dow Jones & Company, Inc.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Vietnam to Push Ahead With Offshore Field Exploration Despite China Claims
HANOI - State-owned Vietnam Oil and Gas Group, or Petrovietnam, plans to keep buying foreign oil-and-gas assets and hopes to be producing close to 100,000 barrels a day of oil overseas by 2020, four times the volume expected this year, the company's chief executive said.
Increased overseas oil production, which Petrovietnam says could be sold internationally or brought home for refining, will help Vietnam cope with rising energy demand, as a territorial dispute with China casts a shadow over its own promising offshore prospects.
Vietnam and its international partners will keep working to develop offshore oil-and-gas reserves within its maritime border, Petrovietnam President and CEO Do Van Hau told The Wall Street Journal.
"Recently, although there have been some Chinese claims about the sovereignty of Vietnam's territorial waters in the West Sea, there have still been many investors--domestic and foreign petroleum companies--continuing their research and cooperation and signing contracts to conduct petroleum activities in Vietnam's waters," he said.
The country's oil output has been largely stagnant around 300,000 barrels a day in recent years, and the government is eager to increase output of hydrocarbons to help fuel an economy that has grown by an average of 7% over the past decade. Natural gas output in 2013 is forecast at 9.2 billion cubic meters, down from 9.3 billion in 2012.
Petrovietnam's earnings and taxes account for between 20% and 30% of the national budget.
"So far we have not made commercial discoveries [in disputed areas], but if there are commercial discoveries--and I am optimistic that we will have them--then we will start developing them if they are within our continental shelf," he said, referring to the maritime territory within 200 nautical miles of Vietnam's coast.
Nine months ago, the government in Hanoi protested strongly after China National Offshore Oil Corp. invited bids for a new batch of oil exploration blocks, including some that are within the 200-mile limit that Vietnam claims as its exclusive economic zone, basing its case on the United Nations' Law of the Sea.
At the time, Petrovietnam urged China to cancel bidding for the areas it identified as being in Vietnamese waters, calling on foreign firms not to participate and noting that Oil & Natural Gas Corp., Gazprom OAO and Exxon Mobil Corp. have been operating under licenses issued by Vietnam in some of those areas for many years.
China's increasingly assertive claims of sovereignty over most of the South China Sea have pitted it against Vietnam, the Philippines, Malaysia and Brunei, with this resulting in military standoffs and claims that Chinese vessels have cut the cables of ships conducting seismic surveys for hydrocarbons.
Any perception that foreign companies with exploration blocks offshore Vietnam are withdrawing or not meeting their commitments due to disputes with China is incorrect, Mr. Hau said, adding that Exxon Mobil, Gazprom and Talisman Energy Inc. are among companies that are active in prospecting offshore.
Gazprom has 49% stakes in two offshore gas blocks, where commercial production is due to start in June, he said.
In March, Petrovietnam said it would continue to invite foreign partners to join its exploration projects, including those in the Red River Delta in northern Vietnam and deep-sea areas.
Large amounts of gas lie under the seabed offshore Vietnam, Mr. Hau said, noting that Exxon Mobil had made Vietnam's biggest gas find to date off the country's central coast.
In October 2011 Exxon Mobil announced it had discovered oil and gas offshore Da Nang in central Vietnam, in an area known as Block 119, which isn't in disputed waters, but it didn't say whether commercial quantities had been found.
Mr. Hau said Wednesday that the U.S. oil major is still evaluating the find, and production could potentially start in five to seven years.
To help meet its rising energy needs, Vietnam will in coming months invite bids for its first liquefied natural gas import terminal, which will have a capacity of 1.0 million tons a year, and it is also trying to finalize an agreement with Chevron. Corp for a project that will cost more than $4.3 billion--to develop gas fields offshore southern Vietnam.
Petrovietnam and Chevron didn't meet an end-2012 target to agree on gas prices for the offshore Block B project, and talks on this continue, Mr. Hau said. That project involves building offshore pipelines and floating storage facilities, then piping up to 490 million cubic feet of gas daily ashore for use mostly in electricity generation at power stations that are yet to be constructed.
"Chevron continues to work with Petrovietnam to resolve commercial issues to enable a final investment decision," a Chevron spokesman said.
Vietnam's foreign energy investments are focused mostly on Russia, Latin America and Africa. Initial production from a 50-50 joint venture offshore Peru is due to start by the end of the year, with an eventual target of 60,000 barrels a day, Mr. Hau said.
In Cuba, Petrovietnam is assessing results of seismic surveys it has done at an offshore block after having drilled two dry wells at an onshore concession, which it subsequently abandoned, he said.
Progress in developing heavy-oil reserves in Venezuela is proceeding slowly, he said, adding that the project won't meet a target of reaching output of 50,000 barrels a day by next year, although oil has flowed from some of its pilot wells.
Petrovietnam has spent more than $1 billion on overseas investments, "and we will keep on spending," he said.
Combined output from domestic and international fields this year will be around 16 million tons, or 321,000 barrels a day, with most of the expected foreign output--totaling between 25,000 and 28,000 barrels a day--coming from a joint venture in Russia, Mr. Hau said.
Plans to expand Vietnam's still-small refining sector could advance as soon as May, when a final investment decision on the country's second refinery is expected, he said.
Japanese refiner Idemitsu Kosan Co. and Kuwait Petroleum International each hold a 35.1% stake in the planned $9 billion 200,000-barrel-a-day refinery to be built 180 kilometers south of Hanoi. Petrovietnam and Mitsui Chemicals Inc. own 25.1% and 4.7%, respectively. KPI is a unit of state-owned Kuwait Petroleum Corp.
Vietnam has started work to assess shale-gas opportunities in the country after surveys showed that its reserves of coal bed methane aren't commercial, he said. It is too early to provide any forecast on shale gas, he added.
Petrovietnam has an exploration and production contract with Mitra Energy for shale oil and gas in the Red River Delta region and has signed a joint research agreement with ENI SpA to evaluate the overall potential of shale oil and gas onshore Vietnam, Mr. Hau said.
Vu Trong Khanh and Nguyen Anh Thu contributed to this article.
Copyright (c) 2013 Dow Jones & Company, Inc.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Pacific Rubiales Sees 55% Increase in Prospective Resources
Pacific Rubiales Energy Corp. announced Monday the results of an independent resource assessment for certain of the Company's exploration blocks in Colombia, Peru, Brazil, Guyana, Guatemala and Papua New Guinea (PNG). The 2012 resource assessment was prepared by Petrotech Engineering Ltd. with an effective date of September 30, 2012.
The 2012 Resource Report shows that the best case estimate of total gross Prospective Resources attributed to the Company has grown to 4.3 billion barrels of oil equivalent (Bboe) from 2.8 Bboe in 2011, and the best case estimate of total gross Contingent Resources has grown to 168 MMboe from just 4 MMboe booked in 2011.
"We look at the 2012 Resource Report as a clear demonstration of the Company's strategy to increase its resources using strategic acquisitions of exploration opportunities in selected countries where we see a balance of above- and below-ground risk. Resources drive future reserves which in turn represent the future production of the Company," Jose Francisco Arata, president of the Company, commented.
Highlights on the best case estimates of total gross Prospective Resources and total best case Contingent Resources (see the heading below entitled "Resources" for further information) from the 2012 Resource Report include:
4,291 MMboe of total gross Prospective Resources (prospects plus leads), an increase of 55 percent from 2,774 MMboe in 2011.The total gross Prospective Resources are contained in 123 opportunities (74 prospects and 49 leads) on 40 assessed blocks in six countries.The total gross Prospective Resources are estimated to include 3,520 MMbbl of oil and natural gas liquids (82%), and 4.5 Tcf (772 MMboe) of natural gas (18%).1,302 MMboe of the total gross Prospective Resources are in prospects (30%), an increase of 226 percent from 399 MMboe in 2011, largely reflecting new exploration blocks acquired in 2012 and successful exploration drilling.2,989 MMboe of the total gross Prospective Resources are in leads (70%), a 26 percent increase from 2,375 MMboe in 2011, largely reflecting new exploration blocks acquired in 2012 and new leads defined on seismic surveys.46 percent of the total gross Prospective Resources are in Colombia, 41% in Peru, 9% in Brazil, 3% in Guyana, and the remainder are in Guatemala and Papua New Guinea .168 MMboe of total gross Contingent Resources, up substantially from 4 MMboe in 2011, mainly due to acquisitions and advancement from Prospective Resources through successful exploration drilling.Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.BSEE Finishes Final Offshore Workplace Safety Rule
The Bureau of Safety and Environmental Enforcement (BSEE) has completed the Safety and Environmental Management Systems (SEMS) II final rule, which enhances the original SEMS rule, or Workplace Safety Rule issued in October 2010.
SEMS II, which was made available Thursday in the Federal Register Reading Room, is the latest step in BSEE's efforts to further identify, address and manage operational safety hazards and impacts, with the goal of enhancing both human safety and environmental protection on the U.S. Outer Continental Shelf, BSEE Director Jim Watson said in a statement.
Since the Deepwater Horizon incident in April 2010, the Obama administration has implemented a number of regulatory reforms to enhance safety and environmental protection.
"Offshore oil and gas safety starts with a robust positive safety culture, and BSEE's workplace safety rules are designed to promote that culture by eliminating complacency and making sure that companies are looking at the human factors that underlie too many accidents," Watson commented. "This effort takes another important step towards protecting workers and the environment from preventable accidents."
The SEMS II final rule will take effect June 4, but does not affect an operator's first audit cycle. Except of the auditing requirements, operators have until June 4, 2014 to comply with the provisions of SEMS II. All SEMS audits must be in compliance with the SEMS II Rule by June 4, 2015.
SEMS II will supplement operators' SEMS programs with greater employee participation, empowering field level personnel with safety management decisions, and strengthening oversight by requiring audits to be conducted by accredited third-parties, Watson said.
The Workplace Safety Rule, which took effect Nov. 15, 2010, encompasses all offshore oil and gas operations in federal waters and made mandatory the previously voluntary practices in the American Petroleum Institute's Recommended Practice 75. Operators were required to implement a SEMS program by Nov. 15, 2011 and must still submit their first completed SEMS audit to BSEE by Nov. 15, 2013.
Additional safety requirements contained in SEMS II that were not covered in previous regulations include:
Developing and implementing a stop work authority that creates procedures and authorizes any and all offshore industry personnel who see an imminent risk or dangerous activity to stop workDeveloping and implementing an ultimate work authority that requires offshore industry operators to clearly define who has the ultimate work authority on a facility for operational safety and decision-making at any given timeRequiring an employee participation plan that provides an environment that promotes participation by offshore industry employees and management to eliminate or mitigate safety hazardsEstablishing guidelines for reporting unsafe working conditions that enable offshore industry personnel to report possible violations of safety, environmental regulations requirements, and threats of danger directly to BSEEEstablishing additional requirements for conducting a job safety analysisRequiring the team lead for an audit be independent and represent an accredited audit service providerBSEE is now analyzing comments received on the Draft Safety Culture Policy Statement prior to the release of the final Safety Culture Policy Statement. Released last December, the draft statement was created to provide a common definition by everyone working offshore. The policy statement outlined BSEE's approach to safety culture and was meant to inform the offshore community of BSEE's safety expectations.
Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Fitch: Struggle with Oil Production Drives Lukoil M&A
Lukoil's acquisition of a small Russian oil producer is out of step with recent merger and acquisitions (M&A) activity, and indicates that it may be struggling to sustain domestic oil output, according to Fitch Ratings. The ratings agency said that Lukoil's ability to reverse declining output and stabilize crude production in Russia is a critical rating factor.
Lukoil spent nearly $7.3 billion on M&A between 2009 and 2012, and it acquired large stakes in a number of upstream and downstream assets abroad, but only $452 million of that was spent on Russian upstream acquisitions, Fitch pointed out.
"This week's deal clearly bucks the recent trend. Lukoil will pay $2.05 billion to acquire Samara-Nafta, an oil-producer based in the Volga-Urals region with 2.5 million tons of annual oil production," Fitch said.
Unlike Rosneft and TNK-BP, Lukoil has posted declines in Russian oil production every year since 2010. By 2012, its total oil production from Russian fields had fallen by 7.7 million tons, or 8 percent, from 2009.
"We therefore consider this latest acquisition as a sign that Lukoil is willing to engage in costly acquisitions to halt the fall in oil production," Fitch said.
The company has sufficient rating headroom to finance this all-cash transaction with borrowed funds only, if needed, Fitch highlighted, adding that an aggressive acquisition program or other spending could lead to negative rating action.
"On the other hand, stabilization of crude production in Russia, and the completion of key upstream projects while maintaining solid credit metrics, would be positive for the rating," Fitch said.
At the end of 2012, Lukoil had $2.9 billion in cash and cash equivalents; its gross total debt was $6.6 billion.
"Lukoil's falling production in Russia results mainly from the depletion of the company's brownfields in Western Siberia and lower than-expected production potential of the Yuzhno Khylchuyu field in Timan-Pechora. The company managed to slow the decline in crude production in Russia to one percent in 2012 from five percent in 2011 through enhanced recovery techniques in Western Siberia (mainly horizontal drilling and hydraulic fracturing) and the development of new upstream assets in the Ural and Volga regions," Fitch said.
Lukoil's exploration and production capex in Russia increased from $3.9 billion in 2010 to $7 billion in 2012, and Fitch estimates it may average $8 billion per annum over the next three years.
Fitch also highlighted that Lukoil is considering large-scale investments in unconventional oil production from the Bezhenov Shale, Russia's colossal shale deposit in Western Siberia, which is estimated to contain up to two trillion barrels of oil. Production costs for the shale deposit are estimated at several times that of conventional oil, so oil producers would need new tax breaks from the Russian government to make production economic.
"We estimate that the contribution from Samara-Nafta to Lukoil's total output will be fairly small – equivalent to around three percent of the 83.8 million tons it produced in Russia in 2012, excluding its share in production of equity affiliates," Fitch said.
LUKOIL's total hydrocarbon output in 2012 reached 2.17 million barrels of oil equivalent per day (MMboepd), second only to Rosneft's 2.43 MMboepd.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.OMV Starts Production at Bina Bawi-3 in Kurdistan
Austria's OMV announced Thursday that it has carried out an extended well test on its Bina Bawi-3 well Kurdistan region of Iraq, so beginning production at the well at a rate of 5,000 barrels of oil equivalent per day (boepd).
The partners in the field have also submitted a Declaration of Commerciality for the field to the Ministry of Natural Resources of the Kurdistan Regional Government.
OMV said that the initial 5,000 boepd capacity from Bina Bawi has the potential to be expanded to 10,000 boepd as future wells become available. A further extensive testing program is planned for the Bina Bawi-4 and Bina Bawi-5 wells during the course of the second quarter.
Jaap Huijskes, OMV Executive Board Member responsible for exploration and production, commented in a statement:
"We are very pleased with this result. The progress of the development of Bina Bawi as well as the Declaration of Commerciality are important milestones to further expand our business in this region.
"In accordance with our partners, Genel and KRG, we will continue our work to fully appraise the potential of this promising field. OMV sees the Kurdistan Region of Iraq as an important area for growth and the progress on the Bina Bawi field underlines our ability to execute our strategy."
The Bina Bawi field, located east of the Kurdistan city of Erbil, is operated by OMV, which holds a 36-percent stake. OMV's partners include Genel, which has a 44-percent stake, and the Kurdistan Regional Government, which has 20 percent.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Industry’s new leaf?
Maybe the oil and gas lobby’s latest efforts should strike hope in the hearts of Coloradans. Are they turning over a new leaf and willing to balance energy development with conservation interests? Maybe … maybe not.
From Colorado Oil and Gas Association Director Tisha Shuller’s “charm offensive” to Western Energy Alliance President Tim Wigely’s “poll for the people,” oil and gas lobbyists are in high gear trying to stop a public relations mess that industry themselves created.
Clearly the effort is garnering them good press like Shuller reinventing herself as the environmentalist or Mr. Wigley taking a tired poll they rehash nearly every year and parading it as proof they want to know what Coloradans think.
Mr. Wigley makes broad claims about the support for energy development using his national poll, but he fails to take a look at what people believe in his own backyard. If industry really wants to know what Coloradans think, they don’t have too far to go far to find out. They want the health of their communities, our air, and our national parks on equal ground with energy development.
A recent poll of westerners by Hart Research Associates found that nearly two-thirds of voters (65 percent) believe that “permanently protecting and conserving public lands for future generations is very important to them personally” while less than a third (30 percent) feel that “making sure oil and gas resources on public lands are available for development” is important.
Just this week, a delegation from the North Fork Valley traveled to Washington, DC calling for balance. The group included a winery owner, local official, and agricultural representative. After officials like Colorado BLM Dir. Helen Hankins and industry failed to listen to the community, they took matters into their own hand and drafted a citizen proposal which allows for responsible energy development while protecting the booming agri-tourism economy of the North Fork.
This isn’t the first time that there have been questions about Dir. Hankins continually listening to the oil and gas industry instead of local communities and conservation interests. Industry proposals to drill near Mesa Verde National Park and place a drill rig near the visitor center of Dinosaur National Monument have faced severe backlash.
Yesterday, Boulder County Councilors decided to put a three-year oil and gas fracking ban on the ballot to give its residents an opportunity to speak and industry to listen. It’s no wonder so many local communities along the Front Range are proposing hard-lines like that after industry failed to “listen” to Coloradans and instead sided with Gov. John Hickenlooper to kill numerous bills which would have protected our water, our air, and our health.
Ms. Shuller and Mr. Wigley have one thing right. A rational conversation about oil and gas drilling is long overdue. We must put our communities, our air, and our national parks on equal ground with energy development.
It’s time for the oil and gas lobby to turn over that leaf.
BP Finds Gas Condensate at North Uist
Faroe Petroleum reported Friday that the 213/25c-1V exploration well, at the North Uist exploration prospect west of Shetland, has found gas condensate.
The well was targeting several reservoir objectives, the most significant of which was the North Uist prospect. It reached a total vertical depth of approximately 15,400 feet and encountered gas condensate in sandstone reservoirs in the target section.
Faroe said that an extensive data set was collected, including wireline logs, pressure data and side-wall cores. A full formation and volume evaluation is now underway.
The company added that preliminary results indicate varying reservoir quality and cautioned that the commercial potential has yet to be evaluated. Traces of hydrocarbons were also found in the shallower Cardhu prospect.
The 213/25c-1V exploration well is located near to Chevron’s Rosebank oil discovery, which is also on the Corona Ridge, west of the Shetland Islands.
The drilling operation was carried out by BP using the Stena Carron drillship. The well will now be plugged and abandoned.
Faroe Chief Executive Graham Stewart commented in a statement:
"After a long period of drilling activity on this wild-cat exploration well, we are pleased to have made a discovery in the North Uist exploration well, although we had however hoped for better quality reservoir. The result proves another working hydrocarbon system in the frontier west of Shetlands which is good news for further prospectivity in these UK waters.
"The partnership will now undertake extensive analysis of the considerable volumes of data and samples collected from the well operations before deciding on the next steps."
London-based investment bank Westhouse Securities commented: "The wording of the press release in our view suggests that the prospect does not appear to be a commercial success (at least not at present)."
Oil sector analysts had a mixed response to the news.
Analysts at FoxDavies were more upbeat. "That this well is currently still under review is promising, and the fact that this is a frontier area must also be borne in mind as, regardless of whether North Uist is a success of not… the data will be integrated into the existing seismic and help refine the understanding of the geology."
After a disappointing drilling campaign last year, capped by the plugging and abandoning of its Rodriguez South well in the Norwegian Sea, Faroe is participating in five exploration wells that will be drilled during the remainder of 2013.
Faroe holds a 6.25-percent stake in North Uist.
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.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.Coast Guard: Shell Pipeline Spills Oil Into Houston Area Bayou
An estimated 50 barrels of oil spilled from a pipeline operated by a subsidiary of Royal Dutch Shell PLC into a waterway outside Houston, according to the U.S. Coast Guard.
Shell clean-up crews were working to clear the crude out of Vince Bayou, a waterway that connects to the Houston Ship Channel, which leads into the Gulf of Mexico, said Coast Guard Petty Officer Steven Lehman. The spill was contained but the total amount of oil was still being verified, Officer Lehman said.
"That's a very early estimate--things can change," Officer Lehman said.
On April 3, about 700 barrels were found to have leaked from the West Colombia pipeline because of an unknown cause, with up to 60 of those barrels emerging in the bayou, Shell spokeswoman Kim Windon said. The pipeline had been shut down and isolated on March 29 after alarms alerted the company that oil may have leaked from the line.
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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
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