Production Outages Hit Santos Revenues

SYDNEY - Australia's Santos Ltd. Friday reported a 5% fall in first-quarter revenue after production was hampered by outages including planned maintenance work on a floating oil production vessel offshore Western Australia state. 

Revenue for the three months through March of 713 million Australian dollars (US$733.7 million) compared to A$754 million a year earlier. 

Total oil and gas production slipped 2% to 12.1 million barrels of oil equivalent after the Mutineer-Exeter floating production, storage and offloading vessel was docked for maintenance. The work contributed to a 19% fall in oil production during the quarter. 

Santos said revenue was also hurt by lower third-party natural gas sales. Third party gas is sourced from rival producers then sold to customers by Santos. The fall could partly be pinned on trouble at supplier Nexus Energy Ltd.'s Longtom project offshore Victoria state, which has been plagued by technical glitches. 

Santos achieved an average price for its natural gas of A$5.43 per gigajoule over the quarter, which it said was a record. Australian east coast natural gas prices are being driven higher ahead of a spike in demand expected from three giant gas-export projects in Queensland state due to go live from 2015. 

Adelaide-based Santos said the US$18.5 billion GLNG liquefied natural gas project is more than 50% complete and remains on track to ship its first cargo in 2015. The US$19 billion PNG LNG project in Papua New Guinea, operated by ExxonMobil Corp. and which counts Santos as a minority shareholder, if over 80% complete. 

Santos maintained its annual output guidance of 53 million to 57 million barrels of oil equivalent.

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Nymex Crude Rises, Bouncing Off Recent 2013 Low

U.S. crude futures posted modest gains Friday following sharp declines early this week as traders paused to gauge whether weak demand will keep prices moving lower.

Light, sweet crude for May delivery settled higher by 28 cents, or 0.3%, at $88.01 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange for June delivery settled 52 cents higher at $99.65 a barrel.

Oil prices fell 3.6% this week, and are down nearly 10% in April amid high domestic crude-oil supplies and a broader investor retreat from commodities markets. With futures trading near 2013 lows, some investors say a brief rebound is likely even if further declines are ahead.

"Traders are looking for a reason for why this thing might bounce back," said Pete Donovan, an oil broker at Vantage Trading in New York.

Earlier Friday, crude futures rose after Venezuela's oil minister Rafael Ramirez said the Organization of the Petroleum Exporting Countries was discussing holding a special meeting after Brent crude fell below $100 a barrel. But prices pared gains when three OPEC officials said the group isn't taking formal steps to gather, making such an event unlikely before a scheduled conference at the end of next month.

Venezuela officials have made frequent calls to hold an oil-price "floor" of $100 a barrel.

Meanwhile, many analysts and investors have grown concerned in recent weeks about weak fuel demand, particularly with the approach of the summer driving season in the U.S.

Last week, the U.S. Energy Information Administration predicted spring-summer demand for gasoline will fall to a 12-year low of 8.877 million barrels a day.

The slump also coincides with a broader turn from commodities markets. Traders have fled from gold, silver, copper and several energy markets in recent weeks. In addition to weaker demand for oil in the U.S., many commodity investors are concerned that slowing growth in China will also limit demand for raw materials.

"Commodities may face a slow growth environment for the next few quarters," said Barclays analysts in a research report Friday.

Mark Waggoner, head of Excel Futures, said any rebound in oil will be brief.

"The market may try and bump up a little bit, but that's it. It's going down," he said, though he added that market activity on Friday was muted, possibly because people were following the search for a suspect in the Boston Marathon bombing. "Most of the people are just talking about Boston."

Front-month May reformulated gasoline blendstock, or RBOB, settled 1.69 cents higher at $2.7724 a gallon. May heating oil settled 0.85 cent higher at $2.7876 a gallon.

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Europa Achieves Farm-In Deal for Irish Licenses

UK and Ireland-focused Europa Oil & Gas reported Thursday that it has agreed a farm-in deal with a subsidiary of independent oil firm Kosmos Energy for its two licensing options in the South Porcupine Basin offshore Ireland.

The deal will see Kosmos acquire an 85-percent interest, and operatorship, of both the LO 11/7 and LO 11/8 licensing options in return for which Kosmos will fully fund the costs of a 3D seismic program on each license and pay 85 percent of the costs incurred by Europa to date.

In addition, if the companies agree to begin an exploration drilling phase on one or both of the blocks, Kosmos will also incur 100-percent of the costs of the first exploration well on each block. The first exploration wells on LO 11/7 and LO 11/8 have investment caps of $90 million and $110 million respectively. Europa said that costs in excess of this investment cap would see Kosmos fund just 85 percent of the additional amount, with Europa funding 15 percent.

Europa CEO Hugh Mackay commented in a statement:

"We are very pleased to have secured a respected leading independent such as Kosmos as a farm-in partner and operator for our Irish Licences. Kosmos are a highly experienced operator in frontier basins and pioneered the Cretaceous stratigraphic play that has resulted in significant exploration success in the Atlantic margin basins. We look forward to working with Kosmos and their involvement is a highly significant first step towards realising the potential value of our exciting prospects in a new hydrocarbon play located in an essentially undrilled basin offshore Ireland."

Mackay also noted that, with the Eirik Raude rig now in Irish waters and ready to drill Exxon's Dunquin well, "an exciting new chapter in the exploration of Ireland is starting and we are delighted to be part of it".

Oil sector analysts responded positively to the Europa/Kosmos deal. London-based finnCap commented that it was "a major milestone" for Europa. "Importantly, the deal not only provides funding, it also brings in a technically credible and experienced operator that helps validate the plays identified," a finnCap research noted stated Thursday.

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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Lebanon Picks 46 Firms for Gas Exploration Bids

BEIRUT - A group of 46 firms have qualified to bid on a first round of licenses to explore Lebanese offshore gas fields, with 12 qualified to bid as operators, the energy minister said on Thursday.

"This is a new step forward towards the entry of Lebanon into the world of oil," Gebrane Bassil said during a press conference to announce the qualifiers.

The bidding round is scheduled to begin on May 2.

Of the 52 companies that entered the pre-qualification process, 12 qualified as potential operators, and another 34 as potential non-operators able to participate indirectly in the exploitation of Lebanon's offshore gas reserves.

The 12 include U.S. firms Anadarko Petroleum Corp., Chevron Corp. and Exxon Mobil Corp., Europe's Total SA, Repsol SA, Royal Dutch Shell PLC, Maersk Sealand, Statoil ASA and Eni SpA; Brazil's Petrobras, Malaysia's Petronas Carigili and Japan's Inpex Corp.

The bidding will be open until Nov. 4, Bassil said, adding that tender specifications had been finalized but needed to be approved by the cabinet.

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Anadarko Finds New Gas in Mozambique's Rovuma Basin

Super independent Anadarko Petroleum Corporation reported Thursday that it has discovered a new natural gas accumulation within Offshore Area 1 of the Rovuma Basin, offshore Mozambique. The Orca-1 discovery well encountered approximately 190 net feet of natural gas pay in a Paleocene fan system.

Meanwhile, Anadarko also reported that it found non-commercial oil shows in reservoir-quality sands at its Kubwa well in the L-07 Block, offshore Kenya.

"Discovering another large, distinct and separate natural gas accumulation in the Offshore Area 1 continues our outstanding exploration success offshore Mozambique," Anadarko Senior Vice President for Worldwide Exploration Bob Daniels said in a statement.

"We are designing an initial two-well appraisal program to define the areal extent of the Orca field, which will commence immediately after drilling our Linguado and Espadarte exploration wells. Orca is a single large Paleocene column, and its proximity to shore provides additional options and flexibility for potential future development."

Anadarko is the operator of Offshore Area 1 with a 36.5-percent working interest.

On the oil shows discovery at the Kubwa well, Daniels said the firm was very encouraged and that mud log and well-site evaluation of core data indicates the presence of working petroleum system.

"The Kubwa well tested multiple play concepts and provided useful data regarding the prospectivity of our six-million-acre position offshore Kenya. The rig will now mobilize south to drill the Kiboko well," Daniels added.

Anadarko also operates the L-07 Block and has a 50-percent working interest in it.

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Technip Wins Brazilian FPSO Contract

French oilfield services firm Technip announced Wednesday that it and partner Techint have been awarded a "substantial contract" by PNBV (a Petrobras subsidiary) to support the construction of the P-76 floating production, storage and offloading (FPSO) unit. Tasks include the topside construction and integration of the unit, as well as providing commissioning and start-up assistance.

Technip said its operating center in Rio de Janeiro will perform the project management, engineering and procurement for the contract. Fabrication, integration and commissioning of 24,000 tons of modules will be performed in Techint's yard in the south of Brazil. The project is scheduled to be completed by mid-2017.

José Jorge Araújo, Technip's senior vice president for onshore Latin America and offshore Brazil, commented in a statement:

"We are delighted to have the opportunity to keep working with Petrobras. This contract strengthens furthermore our presence in the burgeoning Brazilian offshore pre-salt market, where our leading-edge position enables us to meet its high standards and requirements. 

"We fully expect that our partnership with Techint will be a key to the success of the P-76 FPSO. Moreover, this project will contribute to the local economy as it will require approximately 70 percent of Brazilian local content."

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Shtokman Gas Field Decision 3 Years Away

MOSCOW - Formulating a new technical concept for developing the Shtokman natural gas field in Russia's Arctic will take at least three years, Russia's deputy energy minister said Thursday, according to the Interfax news agency. 

"For the technical concept, the project will need more than three years," Kirrill Molodtsov is quoted as saying. 

Last year, Russia's state-run gas company OAO Gazprom shelved attempts to develop the gas field, which is estimated to hold almost 4 trillion cubic meters of natural gas, as technical studies indicated the project wasn't financially viable. 

Gazprom teamed up with French oil company Total SA and Norwegian oil company Statoil ASA to develop the field, with Gazprom holding 51% of the partnership, Total 25% and Statoil 24%. 

Launched in the 1990s, Shtokman has been repeatedly delayed because of disagreements between the partners over investment terms and because of the extreme Arctic weather. The project has also become less attractive because the boom in the shale gas industry in the U.S. has disrupted the natural gas market, bringing prices down.

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Senate Energy Committee Approves Obama Energy Secretary Pick

WASHINGTON - President Barack Obama's pick for Energy Department secretary won a near-unanimous endorsement from the Senate Energy Committee Thursday, paving the way for his expected confirmation by the full Senate.

The committee voted in favor of Ernest Moniz, a nuclear physicist from the Massachusetts Institute of Technology, who sailed through a confirmation hearing earlier this month.

The only senator voting against the nomination was Tim Scott, Republican of South Carolina, who had pressed Mr. Moniz during that earlier hearing about the department's decision to re-evaluate a nuclear fuel processing program in South Carolina.

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NPD Grants Statoil Drilling Permit

The Norwegian Petroleum Directorate (NPD) has granted Statoil Petroleum AS a drilling permit for wellbore 7220/5-2, cf. Section 8 of the Resource Management Regulations.

Well 7220/5-2 will be drilled from the drilling facility West Hercules (UDW semisub) at position 72 degrees 33' 40.29" north and 20 degrees 23' 54.84" east.

The drilling program for well 7220/5-2 relates to drilling of a wildcat well in production licence 532. Statoil Petroleum AS is the operator with an ownership interest of 50 percent. The other licensees are Eni Norge AS with 30 percent and Petoro AS with 20 percent.

The production licence consists of blocks 7219/9, 7220/4, 7220/5, 7220/7 and 7220/8. The production license was awarded in the 20th licensing round in 2009.

Wildcat well 7220/5-2 is the fourth exploration well in production licence 532.

The permit is contingent upon the operator securing all other permits and consents required by other authorities before commencing drilling activities.

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