China to Develop Uzbek Oil Field

China National Petroleum Corporation (CNPC) plans to develop Minbulak oil field in Uzbek region of Namangan, investing $212 million in geological exploration of hydrocarbons next year, CA-News reported with reference to Uzbek government.

As the source noted, "the company has announced a tender for drilling, during the exploration in the license area promising horizons for the development were identified. By the end of 2014 the construction and pilot operation may begin."

In October 2011, CNPC and National oil and gas company Uzbekneftegaz signed an agreement on the basic principles of cooperation on joint development of Minbulak.Under the agreement, the Chinese company will invest $212 million with access to the full capacity of 200 thousand tons of oil per year. The operator of the project is Chinese-Uzbek joint venture Minbulakneft, established in 2008, the source added. Deposit Minbulak was opened in 1992. According to Uzbekneftegaz' data, the recoverable reserves totaled 2 million tons.

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South Sudan Orders Resumption of Crude-Oil Production

LONDON - The government of South Sudan has ordered the resumption of crude-oil production, days after the country and its neighbor, Sudan, came to an agreement over their disputed border.

In an official document, South Sudan's minister of petroleum and mining, Stephen Dhieu Dau, said, "Foreign oil companies and pipeline operators operating in the [Republic of South Sudan] are hereby ordered and instructed...to recommence and re-establish the production of crude oil."

South Sudan ceded from Sudan in July 2011, taking with it most of the region's oil fields. This week's deal will unlock some 350,000 barrels a day that have been shut-in since January 2012 amid a bitter spat with Sudan over oil transit fees and contested oil-rich regions along the poorly marked 1,120-mile border.

A top official in South Sudan's national oil company told Dow Jones on Wednesday that oil exports were expected to reach the international market by May.

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Brazil's QGEP: Oil Royalties Dispute Unlikely to Delay Concession Auctions

RIO DE JANEIRO - Brazilian oil-and-natural gas company QGEP Participacoes said Thursday that an ongoing dispute over the distribution of oil royalties was unlikely to delay a much-anticipated auction of oil and natural-gas-exploration concessions.

The threat of lawsuits by major oil-producing states Rio de Janeiro, Espirito Santo and Sao Paulo to fight the equal distribution of royalties from existing and future oil production between Brazil's 27 states does "raise the risk" of a delay, QGEP Chief Executive Lincoln Guardado said Thursday during a conference call with analysts. The risk, however, has been diminished by recent signs that nonproducing states are willing to negotiate a deal to avoid a protracted fight in the courts.

The deal would reverse changes implemented last week when Brazil's Congress voted to overturn a presidential veto of key portions of new oil-royalties legislation, equally distributing royalties from existing and future oil production between the country's 27 states. Rio, Espirito Santo and Sao Paulo, however, plan to fight the changes by filing lawsuits with Brazil's Supreme Court.

Oil companies are eagerly awaiting Brazil's 11th-round auction of oil and natural-gas-exploration concessions, which is set for May 14-15. The last auction in Brazil was held in December 2008, and oil companies have said they are running out of areas to explore. Given the government's desire to promote the bidding round, even if there is a delay because of a legal tussle the auction, "should still be held in the first half of 2013," Mr. Guardado said.

QGEP has nearly one billion Brazilian reais ($510 million) in cash, giving the company "significant financial flexibility to participate in the auction," Mr. Guardado added.

Not only is QGEP looking toward the auction to improve its portfolio, but the company is also interested in seeing what assets state-run energy giant Petroleo Brasileiro, or Petrobras, makes available in its divestment plan. Petrobras previously said that it would sell off about $15 billion in assets, including some holdings in Brazil.

QGEP, the oil-and-natural-gas exploration arm of local industrial conglomerate Queiroz Galvao, also said it was interested in selling down its 100% stake in the BM-J-2 exploration block. While reducing the company's level of risk "makes business sense," Mr. Guardado said that the Brazilian market is "oversupplied" with opportunities to buy into offshore exploration blocks.

QGEP still doesn't have a timeline for when the company and its partners in the BM-S-8 block will release a volume estimate for the much-anticipated Carcara subsalt discovery, Mr. Guardado said. "We need more data to make an announcement on a range of volumes," he said. The executive, however, said that some estimates of recoverable reserves at about one billion barrels of crude oil and in-place oil volumes of about five billion barrels may be in the range of possibilities.

The estimates were "potential" numbers, but that other estimates also existed and needed to be further evaluated via a well-stem test that is set for the second half of 2013.

Carcara contains an oil column of more than 400 meters, one of the largest discovered in the subsalt region off Brazil's coast where billions of barrels of oil have been discovered under a layer of salt.

Late Wednesday, QGEP said that it recorded a net profit of BRL47.3 million in the fourth quarter of 2012, nearly doubling net profits in the same period the year before. Net profit jumped on higher natural-gas production from the company's Manati field and strong demand for the fuel in Brazil, QGEP said.

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SandRidge Agrees to Either Fire CEO or Give TPG-Axon Control of Board

SandRidge Energy Inc. agreed to fire its chief executive or give control of its board to an activist shareholder, settling a closely watched proxy battle amid an outbreak of investor unrest in the oil patch.

SandRidge, an oil-and-gas producer with a stock-market value of about $3 billion, immediately appointed four directors to its board who were nominated by hedge fund TPG-Axon Capital Management LP, which owns 7.3% of its shares.

The company, which is based in Oklahoma City, Okla., said Wednesday that it would review its strategy, costs and certain transactions with entities controlled by relatives of Tom Ward, its chairman and chief executive. The company also cut directors' annual pay to $250,000 from $375,000.

Mr. Ward's prospects of retaining his job appeared to dim. SandRidge said it would decide whether to fire him by the end of June; if he remains, three incumbent directors would resign and TPG-Axon would get another seat on the board, giving the hedge fund, which has repeatedly called for Mr. Ward's ouster, majority representation.

"We believe these actions open a new chapter for SandRidge," its lead independent director, Jeffrey Serota, said in a statement.

A SandRidge spokesman said Mr. Ward had no comment.

In what SandRidge said was a separate development, Matthew Grubb, its president and chief operating officer, said he would resign.

The company's shares jumped sharply late Wednesday afternoon, but ended 4 p.m. EDT trading on the New York Stock Exchange little changed at $5.85, up two cents.

Dinakar Singh, TPG-Axon's founder, said, "We all believe that SandRidge has tremendous asset value, and we expect that the company will relentlessly focus on growing and realizing that value through a particular focus on execution and efficiency."

"Score one for the activists," said Mark Hanson, a Morningstar Inc. analyst.

TPG-Axon and another large shareholder, Mount Kellett Capital Management LP, have questioned SandRidge's transactions with entities controlled by Mr. Ward and his family. SandRidge said Wednesday that a board review of the transactions hadn't found any improper conduct by Mr. Ward, but that it would examine the issue further with the help of a law firm.

The proxy battle is the latest case of a shareholder shaking up the board of an energy-industry company, as activists demand better stock performance and more-generous dividends from laggards. In January, Chesapeake Energy Corp. Chief Executive Aubrey McClendon agreed to step down by April after the company's biggest shareholders took control of the board.

Hess Corp. is tussling with hedge fund Elliott Management Corp., which is opposing the company-backed directors who are up for election with its own slate.

Investor Carl Icahn, who agitated for change at Chesapeake, is now demanding that offshore driller Transocean Ltd. increase its dividend to $4 a share, up from the $2.24 the company plans to pay.

TPG-Axon took aim at SandRidge in November, pointing to poor stock performance and rich executive pay. It also demanded the ouster of Mr. Ward, who founded the company in 2006 after leaving Chesapeake, which he co-founded with Mr. McClendon in 1989.

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Technip Buys Ingenium

French oilfield services firm Technip announced Wednesday that it has bought Norwegian offshore engineering company Ingenium.

Ingenium designs and develops mechanical and electro-hydraulic tools and equipment for the offshore oil and gas sector, as well as providing engineering services for marine operations, such as the installation of pipes and cables.

With more than 20 engineers employed within its subsea business, Ingenium last year completed the umbilical lay spread on the North Sea Giant for the Goliat project.

Technip Norway Managing Director Odd Strømsnes commented in a company statement:

"Ingenium brings a team with solid experience and engineering capabilities that reinforces Technip's presence in one of the group's key markets. Technip has a long history of working on projects with Ingenium, we are thrilled that they will be joining the group and complementing our competencies to accompany us in taking it further."

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Brazil's OGX Declares Three Offshore Oil Fields Commercial

RIO DE JANEIRO - Brazilian independent oil producer OGX Petroleo e Gas Participacoes SA, part of billionaire businessman Eike Batista's industrial empire, said late Wednesday that it had declared three offshore oil fields commercially viable for development.

The commercial declarations mean that OGX will move forward with development of the fields, which could add a much-needed boost to the company's crude-oil production after disappointing results at the Tubarao Azul field. Investors have punished OGX's shares recently amid concerns that the company will be unable to generate sufficient returns.

OGX said two fields in the previously named Pipeline accumulation will be renamed Tubarao Tigre and Tubarao Gato, while the Fuji-Illimani discover will be renamed Tubarao Areia. Evaluation plans were also submitted to local regulators to further explore the Tulum, Viedma and Vesuvio discoveries in the Campos Basin and the Curitiba Belem and Natal discoveries in the Santos Basin.

The submissions were required after exploration periods for OGX's concessions expired on Tuesday.

While commercial declarations are generally seen as positive developments for oil companies in Brazil, OGX's decision to report "in place" oil volumes for the three fields of between 521 million barrels of oil equivalent, or BOE, and 1.34 billion BOE is raising questions.

In-place oil volumes aren't the same as recoverable volumes, or the amount of oil that a company can be expected to recover from a reservoir, noted Credit Suisse in a research report. "We ask ourselves why announce 'in situ' ['in place'] when industry practice is to announce recoverable volumes, something which OGX itself did for its other two fields," Credit Suisse said.

OGX didn't provide the market with the "certainty" about the company that it needs, Credit Suisse said. A month-on-month decline in crude oil output in February caused market analysts to issue a series of downgrades on the company's shares this week, many of them equivalent to a sell rating with price targets at about $1.

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Eni Confirms 20% Sale of Mozambique Area 4 for $4.2B

Italian major Eni confirmed Thursday that it has sold a 20-percent share of its Area 4 license block in Mozambique to China National Petroleum Corporation (CNPC), as rumored in a news report last Friday. The company also announced that it has reached an agreement with CNPC for cooperation on the development of the Rongchang shale gas block in the Sichuan Basin, onshore China.

Eni said that Petrochina CEO Zhou Jiping and Eni CEO Paulo Scaroni met in Beijing to sign the Area 4 deal. (Petrochina is controlled by CNPC.)

The agreed price for CNPC's stake in Area 4 was $4.2 billion. Eni will retain a 50-percent interest in the license.

Eni pointed out that CNPC's entrance into the license is "strategically important for the project thanks to the worldwide relevance of the new partner in the upstream and downstream sectors".

ENI and CNPC also signed a joint study agreement to work together on the development of the Rongchang shale gas block, which covers around 760 square miles in the Sichuan Basin. The area, which is closely located to the important consumer markets in China, has already been de-risked by research activities and production tests carried out in nearby blocks, said Eni.

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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