Ecuador's Minister of Nonrenewable Natural Resources Resigns

QUITO, Ecuador - Wilson Pastor, Ecuador's minister of nonrenewable natural resources, has tendered his resignation to President Rafael Correa and will be replaced by Pedro Merizalde as part of a cabinet reshuffle as Mr. Correa prepares for a third four-year term, senior government officials told Dow Jones Newswires on Wednesday.

The ministry is key for Ecuador's public-policy making, as it sets and supervises policy for the oil and mining sectors.

Mr. Merizalde, a 61-year-old oil engineer, is the current chief executive of the Refineria del Pacifico project, the $10 billion venture of Ecuador's state-run oil company Petroecuador, which holds a 51% stake in the refinery, and Venezuela's state-run oil firm Petroleos de Venezuela, owner of the remaining 49%.

Both Mr. Merizalde and Mr. Pastor declined to comment.

President Correa has said he plans some changes to his cabinet, as part of an effort to deepen his "citizen's revolution" during his third term, which begins on May 24.

Mr. Correa was re-elected on Feb. 17 for a four-year term.

Mr. Pastor took office as nonrenewable natural resources minister in April 2010 and played a key role to change oil contracts for private companies operating in the country, setting fees based on output, instead of granting ownership of the barrels that private companies extract.

In the last months Mr. Pastor has been promoting the 11th oil licensing round, which was launched in November.

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Shell, India's ONGC Hold Talks on Opportunities in India

LONDON - Royal Dutch Shell PLC said Thursday it has been in discussions with India's state-run Oil & Natural Gas Corp. about potential opportunities as it seeks to expand its presence in India, one of the world's fastest growing economies and where energy demand is expected to more than double over the next 25 years.

Executives at ONGC said they were in the process of agreeing a long-term alliance to jointly explore oil and gas production and were looking at both existing and new projects, but added that it was too early to say what form a potential tie-up will take.

If talks between Shell and ONGC are successful, it would mark Shell's return to exploration in India some 16 years after it sold its 50% stake in Rajasthan assets to Cairn for $7.5 million. The Rajasthan fields last year reached 175,000 barrels a day of crude oil production and Cairn aims to increase that to 300,000 b/d.

Talks between Shell and ONGC also mark increased interest on the part of big international oil companies in the country's oil and gas always sector and come as falling output from India's largest gas deposit in the Krishna-Godavari basin in the Bay of Bengal has hit supplies to the power and fertilizer sector.

The government of the energy-hungry nation is seeking to reduce dependence on oil and gas imports and is currently proposing to allow gas prices in India to be benchmarked to global rates, which would lead to an increase in prices and would benefit the companies involved in extraction.

In February, BP PLC and Reliance Industries Ltd. said they planned to jointly invest more than $5 billion over the next three to five years to boost declining gas output in the KG D6 block in the Krishna-Godavari field off India's east coast.

In 2011, BP spent $7.2 billion buying a 30% stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the producing KG D6 block. The two companies also formed a joint venture to source and market gas in India.

In India, Shell currently has a small retail presence and is involved in developing a liquefied natural gas import and regasification terminal at Kakinada in Andhra Pradesh.

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Hess 1Q Profit Doubles on Asset-Sales Gains

Hess Corp.'s first-quarter earnings more than doubled on gains from asset sales, while the oil and gas producer's revenue improved despite lower production.

Hess has been shedding assets to fund drilling and exploration efforts as it struggles with lackluster profits and a shareholder revolt. So far this year, the company has completed or agreed to sales that will bring in $3.4 billion. Earlier this month, Hess agreed to sell its stake in a Russian subsidiary to OAO Lukoil (LKOH.RS) for $1.8 billion.

Proceeds from the sales helped boosts Hess's first-quarter profits to $1.28 billion, or $3.72 per share, from $545 million, or $1.60 a share, a year earlier. Excluding those sales, the company's adjusted earnings were $1.95 a share, up 30% from a year ago and well ahead the $1.59 a share analysts had predicted. Revenue jumped 39% to $4.12 billion.

Shares rose 2.8% Wednesday morning to $70.11.

Hess has been battling criticism from dissident investor Elliott Management Corp., which has aimed to elect five board members and directly pay them bonuses based on how Hess shares perform. The hedge fund, which controls 4.4% of Hess's shares, also wants to split Hess into two companies in a bid to boost the stock's performance.

Both Hess and Elliott have put forward slates of board nominees. Shareholders will vote at the company's annual meeting next month.

In the Bakken, which Hess has said will drive growth as it transforms itself into a pure exploration and production company, the company reported production grew by 55% from a year ago to 65,000 barrels of oil equivalent per day, even as costs per well fell 36%. Elliott Management has criticized Hess for cost overruns in the Bakken.

Hess said during a conference call following its earnings report that it expects Bakken production to average between 64,000 and 70,000 barrels of oil equivalent a day through the rest of the year.

Hess announced earlier this year that it planned to focus exclusively on upstream work, divesting its terminal, retail energy marketing and trading operations as well as closing its last remaining refinery in Port Reading, N.J.

During a conference call, Hess Chief Executive John Hess said the company now has a "focused, liquids-rich portfolio that is lower risk," and does not plan to sell more assets.

Elliott has called for Hess to separate its high growth Bakken assets from costly international assets, but Hess has said that idea won't be good for shareholders.

Mr. Hess said during the call that the asset portfolio as is will generate returns for investors.

Earnings at Hess's exploration and production business doubled to $1.29 billion, due primarily to gains on asset sales. Average daily production decreased 2% to 389,000 barrels of oil equivalent as asset sales and lower production from the Valhall Field in Norway partially offset increased production from the Bakken oil-shale play.

The marketing and refining segment's results are now booked as discontinued operations. Marketing and refining earnings--which comprise retail, energy-marketing, refining, and energy-trading results--rose to $100 million from $12 million a year ago.

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Anadarko Successfully Tests Sigsbee Escarpment with Phobos Well

Anadarko Petroleum Corp. encountered approximately 250 net feet of oil pay in Lower Tertiary-aged reservoirs with the Phobos-1 well in the Gulf of Mexico.

The Phobos discovery marks Anadarko's third significant deepwater success in 2013, and is the first well in the previously untested Sigsbee Escarpment area of the Gulf of Mexico.

Drilled by Maersk Developer (UDW semisub) to a total depth of 28,675 feet in approximately 8,500 feet of water, Phobos is located in Sigsbee Escarpment Block 39 approximately 11 miles south of Anadarko's Lucius discovery, which is under development.

Phobos successfully tested a significant four-way structure in the Lower Tertiary.

"Phobos' close proximity to our Lucius project is expected to further enhance the economics of this potential future development," said Bob Daniels, senior vice president of international and deepwater exploration at Anadarko, in a statement.

Anadarko is operator of Phobos with a 30-percent working interest. Plains Exploration & Production Company owns a 50-percent working interest and ExxonMobil Corporation holds a 20-percent working interest.

Despite the challenges of exploration in the Lower Tertiary play, including deep well depths, high pressure, high temperature conditions and dense sub-surface salt, recent discoveries in the Lower Tertiary play in the Gulf of Mexico have helped confirm the potential for the deepwater Gulf play.

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Crude Oil Futures Settle at Two-Week Highs on Supply Concerns

Crude-oil futures prices settled at two-week highs Thursday on concerns over tightening supplies, while U.S. gasoline demand heats up ahead of the peak spring-summer driving season.

Traders said weakness in the dollar, rising equities prices and news that U.S. weekly claims for jobless benefits fell to the lowest level in nearly five years added to buying interest.

"There are a bunch of things going on. There does seem to be some risk-on buying in the last couple of days," said Andy Lebow, senior vice president for energy futures at Jefferies Bache. Mr. Lebow and others said oil-market investors are sensing that oil demand in the U.S. will be stronger in the near term than elsewhere and are favoring the U.S. benchmark futures contract over internationally traded North Sea Brent crude.

Implied demand for gasoline--the most widely used petroleum product in the world's biggest oil consumer--climbed to its highest level since November last week, U.S. government data showed. Gasoline stockpiles logged their biggest drop in a year, breathing new life into futures contracts that fell to a four-month low in recent days.

"People have been so down on demand. Whether it's a fluke, or seasonal, it doesn't really matter. There is a perception that demand is getting better," said Phil Flynn, analyst at Price Futures.

The EIA has forecast that gasoline demand will be slightly down this spring-summer from a year-earlier and drop to a 12-year low. But the near-term strength is spilling over into crude oil prices, on expectations that refiners will use more to turn out more refined products.

Light, sweet crude oil for June delivery on the New York Mercantile Exchange climbed 2.4%, or $2.21 a barrel, to $93.64 a barrel, the highest price since April 10. The rise followed a 2.5% gain on Wednesday that was the biggest rise for the year.

June Brent crude oil on the InterContinental Exchange rose 1.68 a barrel, or 1.7%, to $103.41 a barrel, a two-week high. The gain was the biggest since Dec. 26.

Brent's premium to the U.S. benchmark was $9.77 a barrel at the settlement, the smallest since Jan. 3, 2012. The spread topped $23 a barrel as recently as early February, but surging U.S. oil output, now at a 21-year high above 7.3 million barrels a day has cut deeply into U.S. crude imports, shrinking Brent's value to the U.S. benchmark.

New technologies such as hydraulic fracturing and horizontal drilling have unlocked vast oil reserve trapped in shale, pushing U.S. output higher by 20% this year and by 1.2 million barrels a day from a year ago. Imports have dropped by as much as domestic output has risen, as crude supplies make their way to the Gulf Coast refining hub, eliminating the need for foreign barrels which compete with Brent.

Brent found support Thursday from a Reuters report quoting industry sources saying that work on a gas pipeline will cut crude oil output from the seven-field Norwegian Ekofisk complex for three weeks this June. Ekofisk produces around 170,000 barrels a day of crude.

Buoyant gasoline future found further strength from a fire at a unit of a Louisiana refinery that makes octane enhancers for gasoline.

The fire, at a reformer unit at Alon USA Energy Inc.'s 83,000-barrels-a-day Krotz Springs, La., was quickly extinguished, the company said. But the impact on operations at the plant isn't yet clear.

Nymex May reformulated gasoline futures posted their biggest gain since March, rising 6.44 cents, or 2.3%, to settle at $2.8118 a gallon, a two-week high.

Heating oil for May delivery rose for a sixth straight session, settling 6.04 cents, or 2.1% higher, at $2.9017 a gallon. The rise was the biggest since Nov. 19, 2012, and put prices at a two-week high. The heating oil contract trades as a proxy for ultra-low sulfur diesel fuel, which fuels trucks and trains.

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Ice Gas: A Step Closer to Commercial Production

The news in early March that a Japanese company had finally successfully extracted natural gas from methane hydrate deposits under the seabed offshore Japan was hailed as a breakthrough for the energy industry around the world. There are large deposits of methane hydrate, or "ice gas", in several locations around the planet which means, if successfully exploited, they could bring to many regions around the world the low gas prices currently seen in North America as a result of the shale gas boom.

Japan Oil, Gas and Metals National Corporation (JOGMEC) reported March 12 that it successfully extracted natural gas from methane hydrate deposits from around 1,000 feet under the seabed offshore Japan.

Methane hydrate is a compound in which a large amount of methane is trapped within a crystal structure made up of water, so forming a solid that is similar to ice in its composition (although it looks like slush). For methane hydrate deposits to form the right conditions in terms of pressures and temperatures are required. These conditions are normally found in four kinds of environment:

Sediment and sedimentary rock under Arctic permafrostSedimentary deposits along continental marginsDeepwater sediments of seas and lakes (e.g. the fresh water Lake Baijal, Siberia)Beneath Antarctic ice

There are some 40 trillion cubic feet of methane held in methane hydrate deposits under the sea in the eastern Nankai Trough, off the southern coast of the Japanese island of Honshu, according to JOGMEC. This is equivalent to around 11 years of the amount of liquefied natural gas that is currently imported into Japan.

JOGMEC has been working at the Daini Atsumi Knoll, off the coasts of the Atsumi and Shima Peninsula since February 2012. After acquiring pressurized core samples last summer, the company began an experimental flow test in March this year, successfully yielding gas from the methane hydrate deposits.

In order to achieve extraction, JOGMEC used specialized equipment to drill into and depressurize the methane hydrate causing the gas to separate. The gas was then piped to the surface.

JOGMEC hopes its experimental test will help it better understand dissociation behavior of methane hydrate under the seabed and the impact to the surrounding environment. A second offshore test is planned ahead of commercial production that could be achieved later this decade. However, a lot will depend upon whether the costs of extraction can be brought down to low enough levels to make commercial production viable.

While the Japanese government says that it is now planning a three-year study into how much ice gas it has within its territorial waters in the Japan Sea, a number of other countries have also been looking to exploit methane hydrate resources.

For example, last August, the U.S. Department of Energy (DOE) announced funding for 13 research projects across 11 U.S. states to help develop methane hydrate deposits as an energy source. At the time, U.S. Energy Secretary Dr. Steven Chu commented that although research on methane hydrates is still at an early stage, these research efforts could one day yield the same kind of benefits achieved by the shale gas boom after the country invested in researching shale gas in the 1970s and 80s.

Meanwhile, China is also investing millions of dollars into the study of methane hydrates.

The energy content of methane occurring in hydrate form is immense and could exceed the combined energy content of all other known fossil fuels (one cubic foot of methane hydrate contains approximately 160 cubic feet of natural gas), according to the U.S. DOE. But there is still the question of how big future production volumes could be. This is what the current project by JOGMEC should go some way towards determining, as will certain projects that the DOE is funding.

One of the projects that the DOE is helping to fund is being carried out Georgia Tech Research Corporation. This organization was granted $626,000 for a project that aims to understand the behavior of gas hydrates hosted in fine-grained sediments such as clay or silt, including how to evaluate extraction methods that could be used to produce gas from such sediments.

The U.S. government's strong research interest in methane hydrates is not surprising given that the U.S. Geological Survey (USGS) has identified several accumulations of methane hydrates offshore United States and Central America. Meanwhile, in the North Slope of Alaska the USGS estimates a mean resource of some 85 trillion cubic feet of natural gas held within methane hydrate deposits.

As well as offshore Japan and the Russian Far East, accumulations of methane hydrates have also been discovered in the Black Sea and off the coast of West Africa. But there are plenty of other locations around the world where methane hydrates are thought likely to occur.

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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Seven Winners in UK Safety Awards

The UK Oil and Gas Industry Safety Awards saw seven awards given out to energy sector firms and professionals this year.

The awards ceremony, held in Aberdeen Wednesday,  saw the first-ever Award for Workforce Engagement go to the Brent Delta Decommissioning Team in recognition of its actively embracing worker engagement on safety matters as it embarked on the decommissioning of Royal Dutch Shell's Brent complex in the North Sea.

Petrofac's Control of Work Team won the Ideas in Safety prize, while Stork Technical Services and Banff and Buchan College shared the Award for Innovation in Safety.

Several individuals who work in the oil and gas sector also won prizes recognizing their achievements in health and safety. Kent Lanier, rig manager at Rowan Drilling UK, won the Award for Safety Leadership. Marc Brankin, a scaffold chargehand on the Brent Decommissioning Project, won the Award for Most Promising Individual.

Scott MacDonald, offshore electrician with Archer, won the Award for Preventative Safety Action. And Nicky Elphinstone, a steward with Aramark, won the Award for Safety Representative of the Year.

Oil & Gas UK Health and Safety Director Robert Paterson commented in a statement:

"The UK Oil and Gas Industry Safety Awards has once again brought to the fore an inspirational group of people and organisations. The winners, and indeed everyone nominated, are actively doing great work to keep the safety of our people at the forefront of our industry.

"The importance of celebrating these great achievers cannot be understated. This year the safety awards have been the biggest and best yet with a record number of entries and a record number of people attending the ceremony itself."

Les Linklater, a team leader for Step Change in Safety, which helped to organize the awards with Oil & Gas UK, added:

"“The safety awards are growing every year and this year we expanded the awards to include a new category which recognises effective workforce engagement, while we continue to tap into the workforce’s creativity with the Ideas in Safety Prize."

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Total Confirms Output Targets, Sees Further Growth After 2017

SHETLAND, Scotland - French company Total SA still expects its oil and gas output to grow 3% on average on an annual basis between 2011 and 2015, and then sees accelerated growth after 2017 as new projects come on stream, the head of the exploration and production division Yves-Louis Darricarrere said, ahead of the group's release of its first-quarter earnings later this week.

By 2017, the group expects to have increased its production capacity potential to 3 million barrels of oil equivalent per day, from currently around 2.3 mboe/d, Mr. Darricarrere said during a press presentation there Monday.

The group is strongly competing with peers to find more oil and gas as energy demand keeps growing in emerging markets and while most conventional hydrocarbon reservoirs around the world are believed now to be depleting. Total has engaged in a strategic change and has become more aggressive in terms of exploration, allowing it to recently make substantial discoveries, notably in risky areas also called "frontier basins," such as the rough seas of West Shetlands and the Barents Sea, at the most northern tip of Europe.

Total even sees its output growth accelerating after 2017, as "already 90% of the 2017 potential is either in production or in development," Mr. Darricarrere said.

"We're seeing the results of our revitalized exploration strategy. Accepting to take more risks and looking for larger projects are our new focuses," Mr. Darricarrere said, adding the group's potential resources has doubled in the last three years to six billion barrels of oil equivalent.

In the North Sea alone, the group plans to invest as much as $20 billion over the five coming years, he said.

The strategy has allowed Total's production decline rate to remain steady, at around 3%, he said.

"We're able to control the decline, but this is because attention has been brought to existing fields and all our projects must be on time... Any delay of a project is a destruction of growth," he added.

Total has currently 15 projects under development, four of which are located in the North Sea and the Barents Sea. Mr. Darricarrere said "these projects, for the time being, are on time" and should add around 175,000 boe/d to Total's production.

The group will release its first-quarter earnings on Friday at 0600 GMT. Analysts polled by Dow Jones Newswires expect Total's first-quarter output to have dropped 2.1% from a year earlier to 2.323 mboe/d from 2.372 mboe/d.

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Exxon Spuds Dunquin Well Offshore Ireland

Irish explorer Providence Resources reported Tuesday that drilling has begun on the 44/23-1 well at the Dunquin exploration prospect in Frontier Licence 3/04 (FEL 3/04) off the west coast of Ireland.

Providence said that the operator, ExxonMobil, is expected to take several months to complete drilling operations using the Eirik Raude (DW semisub) rig.

Providence Chief Executive Tony O'Reilly commented in a company statement:

"We are pleased to confirm that drilling operations on the Dunquin exploration well have now commenced. This is a landmark well given that it is the first to be drilled in the central part of the deep-water southern Porcupine Basin and is designed to test a new and potentially material Lower Cretaceous carbonate exploration play concept. The 44/23-1 well is the second of six wells being drilled as part of Providence's Irish concerted multi-basin, multi-well drilling programme which kicked off in November 2011 with the Barryroe appraisal well."

The Dunquin target is a large gas prospects that is estimated to contain some 1.7 billion barrels of oil equivalent. Providence will be hoping that Exxon can replicate its own success in the Celtic Sea off the south coast of Ireland, where Providence's Barryroe discovery was recently estimated to contain recoverable resources of 346 million barrels of oil equivalent.

Exxon has a 27.5-percent interest in FEL 3/04. Its partners include: Eni, with 27.5 percent; Repsol, with 25 percent; Providence, with 16 percent; and Sosina Exploration, with four percent.

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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