Iraqi Oil Production to Rise to 4.5M Barrels per Day by 2015

DUBAI - Iraq's crude oil production is expected to rise to 4.5 million barrels a day by the end of next year, a senior Iraqi oil official said Monday.

Thamir Ghadhban, the Iraqi prime minister's top energy advisor, said in a conference in Dubai that Iraq is considering three scenarios for increasing crude oil production that will be debated in Parliament next month.

Of these, the "medium scenario" would raise Iraq's production to 9 million barrels a day by the end of 2020 from around 3.3 million barrels a day at present, while the "high scenario" would boost production to 13 million barrels per day.

"If we choose to go for medium or high scenarios, by the end of 2014, Iraq's production will be in excess of 4.5 million barrels a day," he said.

This medium scenario is seen as the most realistic, according to oil officials from Iraq, which is a member of the Organization of the Petroleum Exporting Countries.

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Total Reports Unplanned Outage at Scottish Gas Terminal

Total E&P UK tweeted early Tuesday that it has suffered an unplanned outage at its St Fergus gas terminal north of Aberdeen, Scotland. The firm's Twitter account reported that the outage means that it is losing the equivalent of five million cubic meters (177 million cubic feet) of gas per day.

The St Fergus gas terminal is a set of four gas processing plants that receive approximately 20 percent of the UK's gas from several gas fields in the North Sea.

The news comes just two weeks after Total restarted production at its Elgin/Franklin platform after it had been out of action for almost a year following a major gas leak there on March 25, 2012.

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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CB&I Selected for Ichthys Gig

CB&I announced it has been awarded a contract valued in excess of $80 million by JKC Australia LNG Pty Ltd. The scope of work includes the engineering, procurement, construction and pre-commissioning for non-cryogenic storage tanks for the Ichthys project LNG facilities in Darwin, Northern Territory, Australia.

"We are pleased to continue our relationship with JKC on this project," said Luke Scorsone, executive vice president and Group president of Fabrication Services. "This award builds on CB&I's involvement in many of the major LNG and other oil and gas projects in this region, and we are well positioned to support the infrastructure development needs of these important projects."

Project completion is scheduled for 2015.

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ENI Curbs Activities in Nigeria Due to Oil Theft

ROME - Italian energy company ENI SpA said on Saturday it has suspended its activities in Bayelsa state in southern Nigeria due to frequent thefts from pipelines.

"The decision was taken due to an intensification of bunkering activities, or sabotage of the pipelines," the company said in a statement.

ENI said it completely suspended all onshore activity at the Swamp Area site in Bayelsa during the night between Thursday and Friday.

The company said the theft of oil from the pipelines "had reached levels that were no longer sustainable recently both from the point of view of safety for people and for the damage caused to the environment by these activities."

The Italian oil major was producing between 35,000 and 40,000 barrels of oil equivalent per day at the site and the theft and losses due to sabotage had reached up to 60% of production.

Nigeria is Africa's biggest crude oil producer and most of the government's revenue is based on the sector. The populations of the Niger Delta, however, live mostly in poverty and the area is very polluted.

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Hess Cites Potential Governance Issues in Dissident Holder's Plan

Hess Corp. (HES) again urged shareholders to support its slate of board candidates as the exploration-and-production company continued its criticism of dissident investor Elliot Management Corp.'s efforts to elect five board members and directly pay them bonuses based on how Hess shares perform.

In a letter to shareholders Tuesday, Chairman and Chief Executive John Hess outlined support for Hess's multiyear plan to transform into a pure-play exploration and production company as well as the company's board nominees. The letter provided a list of quotes from Wall Street analysts in recent weeks and also touted the company nominees' qualifications in the key areas such as restructurings and alternative shale drilling.

In the letter to shareholders, Mr. Hess stated, "We find the prospect of Paul Singer, a shareholder, potentially paying directors millions of dollars in contingency fees for pre-determined outcomes to be highly troublesome from a governance perspective, and have concerns about the Singer directors' ability to act as fiduciaries on behalf of all Hess shareholders."

Elliott, a hedge-fund manager that controls 4.4% of Hess' shares, wants to split Hess into two companies in a bid to boost the stock, which has lost 47% of its value since peaking in 2008.

Hess reiterated that Elliott's plan to pay bonuses to its board nominees--in addition to the regular compensation they would receive as directors from Hess-- means they wouldn't be truly independent from the hedge-fund manager, a claim Elliott has disputed.

The outcome of the contest is being closely watched in the energy industry amid a rise in shareholder activism that has forced changes in recent months at natural-gas producers Chesapeake Energy Corp. (CHK) and SandRidge Energy Inc. (SD). The meeting is set for May 16.

Hess shares closed Monday at $70.44 and were inactive in recent premarket trading.

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Centrica Inks Agreement for Sabine Pass LNG

Centrica plc has entered into an agreement with Cheniere Energy Partners, L.P, to purchase 91,250,000 mmbtu (89 billion cubic feet) of annual liquefied natural gas (LNG) volumes for export from the Sabine Pass liquefaction plant in Louisiana in the United States. This amounts to approximately 1.75 million metric tonnes per annum (mmtpa), and is the equivalent of the annual gas demand of around 1.8 million UK homes. The contract is for an initial 20 year period, with the option for a 10 year extension, and the target date for first commercial delivery is September 2018.

Under the terms of the agreement, Centrica will purchase LNG on a ‘Free on Board’ (FOB) basis, giving it destination rights for the cargoes, for a purchase price indexed to the Henry Hub natural gas price plus a fixed component. Centrica will export gas from the fifth LNG train at Sabine Pass, on which preliminary engineering work has already begun. The contract is subject to a number of conditions precedent, including Cheniere receiving the necessary regulatory approvals, securing finance, making a final investment decision and issuing a notice to proceed with the fifth LNG train.

Sam Laidlaw, chief executive of Centrica, said, "In an increasingly global gas market, this landmark agreement represents a significant step forward in our strategy, enabling Centrica to strengthen its position along the gas value chain and helping to ensure the UK’s future energy security. We are therefore very pleased to have signed this agreement and look forward to working with Cheniere."

UK Prime Minister David Cameron said, "I warmly welcome this commercial agreement between Centrica and Cheniere. Future gas supplies from the US will help diversify our energy mix and provide British consumers with a new long-term, secure and affordable source of fuel."

UK Secretary of State for Energy and Climate Change Ed Davey said, "Security of UK energy supply lies in diversity so I am pleased that Centrica has announced today that it has secured a long-term North American liquefied natural gas export contract with Cheniere Energy Partners. The UK already receives gas from a range of countries and we can now add the US to Norway, the Netherlands and Qatar as sources of supply."

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STATS Group in BP Pipeline Isolation Operation

Scottish oilfield services firm STATS Group reported Monday on a pipeline isolation operation it has completed for BP in the North Sea.

The firm said it has isolated a 24-inch oil export line on BP's Marnock ETAP spur line in the central North Sea in order to allow the replacement of a 16-inch valve.

STATS said that it deployed its 24-inch Remote Tecno Plug to isolate a pressure of 60 Bar, providing safe working conditions to allow valve replacement activities.

Steven Byers, STATS Group's isolation services managers, commented in a statement:

"The project was a success and enabled BP to complete maintenance works which were reliant on the plug providing an isolation. The client was happy with our flexible approach and willingness to interact to achieve the best outcome possible during a time critical window."

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BP: Commercial Flow Rates at Itaipu-1, Offshore Brazil

LONDON - BP PLC Monday said it has completed a flow test at its Itaipu-1A well offshore Brazil, one of the world's most promising oil and gas frontiers, that indicates commercially viable flow rates from the pre-salt reservoir.

BP said the test achieved flow rates of up to 5,600 barrels of oil a day for 32 hours from the well, which is located in the deep-water sector of the Campos Basin, 125 kilometers offshore Brazil.

"This is a good result for the Itaipu project, indicating that commercially viable flow rates can be achieved from this pre-salt carbonate reservoir," said BP vice president for exploration Brazil Neil Piggott.

Geologists believe the oil and gas exploration areas off Brazil's northeastern coast may hold similar reserves to those found in west Africa. Bountiful hydrocarbon discoveries in the last decade have led to a near 70% rise in the South American country's proven oil and gas reserves. Much of that success has been achieved by tapping reservoirs contained beneath an ultra-deep layer of salt that lies thousands of meters below the seabed.

The Itaipu-1A pre-salt well was drilled in 2009 by Devon. BP purchased Devon's interests in Brazil in 2011.

The Itaipu-2 appraisal well was drilled in 2011. A second appraisal well location, Itaipu-3, has been agreed with the Brazilian National Petroleum Agency, and will be the next operation at the Itaipu field later this year.

BP is the operator of the block with 40% equity. Anadarko Petroleum Corp. (APC) holds a 33.3% stake in the block and Maersk Energia Ltda. has a 26.7% share.

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US Crude Futures Rise Versus Oil Traded Overseas

U.S. crude-oil futures prices rose Monday as investors continued to wager domestic oil prices will increase compared to oil traded overseas.

The discount for U.S.-traded West Texas Intermediate crude-oil versus Europe's Brent crude futures shrunk to $13.36 a barrel, the narrowest price spread since July, as U.S. futures settled at a one-month high.

Analysts and traders said the agreement reached early Monday between Cyprus and its international lenders removed a hurdle standing in the path of both oil markets. But throughout Monday's session, traders extended a recent rally in U.S. crude on hopes that a decline in oil stockpiles in the middle of the U.S. will continue.

"Growing capacity of both rail and pipelines is starting to drain Cushing," said Andy Lebow, a broker at Jefferies Bache in New York, referring to Cushing, Okla., a key oil-transit hub. The latest gain in WTI, he said, "is a Cushing trade."

Light, sweet crude for May delivery settled $1.10, or 1.2%, higher at $94.81 a barrel on the New York Mercantile Exchange, the highest settlement since Feb. 19.

Brent crude on the ICE futures exchange traded 51 cents higher at $108.17 a barrel.

Last week, the U.S. Energy Information Administration said stockpiles in Cushing fell by 300,000 barrels to 49 million barrels in the week ended March 15, the lowest level since Dec. 14.

Cushing is the delivery point for Nymex crude-oil futures, so any changes in oil inventories there can have an outsized influence on futures prices.

In January, stockpiles in Cushing rose to a record 51.9 million barrels after the Seaway Pipeline from Cushing to the Gulf Coast was forced to reduce capacity. The Brent-WTI price spread widened to more than $23 in response.

Analysts at JBC Energy said Monday it's possible the discount could shrink to nearly $11 as more investors pile into the wager. But it's unlikely to hold at that level because U.S. oil shipments by rail become unprofitable when the discount hits $15, JBC said.

Meanwhile, after U.S. prices held relatively flat over the past two weeks amid concerns about Europe's debt crisis, oil traders are now focusing on improving economic data and signs of rising oil demand that they say could help boost prices.

"The bailout has created some positive sentiment in the market," said Gene McGillian, a broker at Tradition Energy, referring to the agreement forged early Monday between Cyrpus and its creditors. He said an improving economic outlook suggest prices could see further gains.

"The factors that drove us to $98 are emerging again," he said.

Front-month April reformulated gasoline blendstock, or RBOB, settled 0.01 cent higher at $3.0626 a gallon. April heating oil settled 0.71 cent lower at $2.8772 a gallon.

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