Smaller companies to dominate Shale, Pemex unit Director says

Smaller companies will probably dominate development of Mexico’s shale gas deposits as Pemex focuses on shallow water and onshore projects, according to the independent director of one of the state owned company’s units.

Pemex, will probably focus on businesses with higher margins to maximize profits, leaving room for smaller companies in shale, Mario Gabriel Budebo, a director of Pemex Gas and Basic Petrochemicals, said to Bloomberg Mexico Economic summit.

“It’s not the large companies that have the agility and the cost structure to exploit shale gas,” said Budebo,a former deputy energy minister. “It’s an area for new players.”

Emilio Lozoya, Pemex’s CEO, on March 3 invited the world to explore for shale deposits in its recently opened energy sector.The crude production monopoly the company has held since 1938 ended on December 20,2013.Pemex aims to attract as much as $1 trillion in energy investment during the next decade to exploit the biggest proven oil reserves in Latin America after Venezuela and Brazil,he said.

A “big chunk” of investment in the sector may come from Asia, said Kent F. Moors, executive chair of the Global Energy Symposium.Finance Minister Luis Videgaray said in an interview that Mexico’s government is working with China to have the world’s second largest economy increase its investment across industries.

Videgaray helped shepherd the laws last year that opened the nation’s state-controlled oil industry to private drillers.

Victor Herrera, Latin American managing director at Standard & Poor’s, said in a December 20,2013 interview that pipeline and shale gas investment could come “very quickly.” Shale and natural gas are the “low-hanging fruit” of the energy reform and may be explored as soon as the second half of this year by foreign companies, according to Herrera.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Technip awarded significant Brunei contract by Total

Technip has been awarded a significant contract by Total E&P Borneo B.V., covering engineering, procurement, supply, construction and commissioning (EPSCC). This project aims at the modification of the onshore facilities as well as the construction of a new onshore pipeline, in order to transport Maharaja Lela & Jamalulalam South (MLJS) gas to the Brunei Liquefied Natural Gas (BLNG) plant.

The onshore modification work includes de-bottlenecking of the processing plant to enable the handling of up to 5 million cubic meters per day (annual average) from the greater MLJ field, and associated assistance in start-up and performance test.

Technip’s operating center in Kuala Lumpur, Malaysia, will execute the contract with support from the office of the Group based in Brunei. The project is scheduled for completion in the second half of 2015.

Lim Kwee Keong, senior V.P. of Technip in Asia Pacific, stated, “Following the front-end engineering design that we have completed in 2012, Technip was keen on undertaking the EPSCC contract. Vital for the brownfield tie-in of the MLJS project, our familiarity with the onshore facilities has made the difference and gave us leverage in this much sought-after development.”

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Anadarko plans to drill up to 25 deepwater wells in 2014

Anadarko Petroleum is planning to drill up to 25 deepwater wells in 2014, the company’s chairman, president and CEO has said. The comment came as the company revealed its 2014 capital expectations and guidance.

“We expect this capital plan to enable us to increase year-over-year ' same-store' sales volumes by 6 to 7 percent. Driving this year-over-year growth is an expected increase in our oil production of approximately 40,000 barrels per day,” said Al Walker.

"During 2014, Anadarko expects to drill up to 25 high-potential deepwater exploration/appraisal wells. Additionally, we plan to continue accelerating value through active portfolio management and monetizations, as demonstrated by the recently announced divestiture of our non-operated assets in Bohai Bay, China, and the closing of our sale of a 10-percent working interest in Mozambique' s Offshore Area 1 to OVL."

Total 2014 capital investments are expected to be $8.1 to $8.5 billion, excluding capital investments associated with Western Gas Partners, LP, a separate publicly-traded entity controlled by Anadarko and included in its consolidated financial statements.

More than 80 percent of Anadarko' s 2014 U.S. onshore capital investments will be allocated toward oil and liquids-rich opportunities. The company expects to increase its total U.S. onshore year-over-year same-store sales volumes by more than 10 percent to more than 625,000 boe per day for full-year 2014, including an approximate 50,000 barrels-per-day increase in liquids volumes. Much of this growth is expected to be driven by the company' s Wattenberg Horizontal program in Colorado, its Eagle Ford shale development in South Texas, and other liquids-rich growth plays, including the Wolfcamp shale in West Texas and the East Texas/North Louisiana area.

The Wattenberg Horizontal program generates the strongest returns in Anadarko' s U.S. onshore portfolio and is expected to achieve significant growth in 2014. The company plans to operate approximately 13 rigs in the Wattenberg field during the year and drill more than 360 wells.

Anadarko also is accelerating its operated activity in the Wolfcamp oil play where it has evaluated about 20 percent of its approximate 600,000-gross-acre position. The company has already identified more than 1,000 drilling locations in this de-risked area of the Wolfcamp, with significant additional upside as it evaluates the remaining acreage and potential stacked-pay intervals. In 2014, the company expects to operate eight to 10 rigs, with plans to drill more than 80 wells.

In the Gulf of Mexico, Anadarko is on schedule to achieve first oil from its 80,000 barrels-of-oil-per-day Lucius development late in the second half of 2014. The company' s Heidelberg development also remains on track, with spar construction more than 75-percent complete and first oil expected in 2016.

Anadarko' s 2014 deepwater Gulf of Mexico exploration/appraisal program is focused on building upon the tremendous success achieved in the Shenandoah basin in 2013, which is emerging as one of the largest oil accumulations ever discovered in the Gulf. Appraisal activity at the Coronado, Yucatan and Shenandoah discoveries in the Shenandoah basin highlights the company' s six-to-eight-well Gulf program in 2014.

In 2014, Anadarko expects to realize a full-year' s benefit of oil production from the El Merk project in Algeria. El Merk, which recently achieved net production of more than 30,000 barrels per day, is expected to contribute to at least a 30-percent year-over-year increase in sales volumes from Algeria during 2014.

In Ghana, Anadarko and its partners have awarded major contracts and are advancing development of the TEN complex, which is expected to achieve first oil in 2016. In Mozambique, the company' s 2013 appraisal and exploration activities increased its estimated recoverable natural gas resources to a range of 45 to 70-plus Tcf in Offshore Area 1, up from the previous range of 35 to 65-plus Tcf. The company' s 2014 program in Mozambique is focused on advancing the development toward first LNG cargoes in 2018.

The company' s international exploration/appraisal program includes 15 to 18 planned deepwater wells, primarily in East and West Africa.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Fracing saved U.S. industry, forum hears

U.S. natural gas production, the quantity of natural gas resources and the advanced technologies of the industry were the focus of presentations delivered by three experts in the oil and gas industry at the BoyarMiller Breakfast Forum titled “Perspectives on the Energy Industry.”

There are a number of far-reaching benefits to growth in U.S. natural gas production, as cited by panelists David Pursell, Managing Director of Tudor, Pickering, Holt & Co.; Thomas Bates, board member of several oil and gas companies and adjunct profession of energy macroeconomics at Texas Christian University; and Paul DeWeese, CEO of Southwest Oilfield Products.

“First and foremost, hydraulic fracturing saved the U.S. industrial sector,” said Pursell of Tudor, Pickering, Holt & Co. “Without fracturing, we would not have the natural gas that benefits a number of industries. Remember that cheap natural gas makes electricity prices low - and that electricity powers so many industries like steel, paper and manufacturing.”

Pursell pointed out that the U.S. is experiencing sustainable onshore production growth of natural gas at a time when gas-directed rig counts are declining. “It’s about the Marcellus, Utica and Eagle Ford regions being very prolific and productive for significant growth through the end of the decade. LNG exports will start to come into the equation by 2017, and we think that by 2020 there will be over three Bcf a day of LNG exports.”

According to Pursell, the challenge is crude oil because of a tight global market. Outside the U.S. there is no oil production growth, so Pursell labeled what is happening in the U.S. as “miraculous.”

“It is unbelievable for anybody to think five years ago that the U.S. would be the only place in the non-OPEC world, particularly onshore, where oil production is growing,” said Pursell. “And that is what’s happening. We’ve gone from three MMbopd to over six MMbopd of onshore production; all of that growth is light sweet crude. The challenge is: what are we going to do with all this crude? We can’t export it. So we’re going to refine it but we don’t have the ability to refine all of it. So that’s going to create some pricing pressure on light sweet crude.”

Pursell summed his presentation stating that the winners of this situation are the refiners, and that means more growth for the Gulf Coast area.

“The economic impact of the U.S. shale plays is anywhere from $500 to $700 billion annually, depending on which economist you ask,” said Bates. “The last estimate I saw was that shale production contributed 3.5% to the U.S. gross domestic product. Without it, there would be negative growth in the United States.”

In addition to the benefit of low-priced natural gas to the electric power market, there is a $90 billion benefit to the residential, commercial and industrial markets. Bates said that MIT and the National Petroleum Council published a study in September 2011 that suggests the natural gas resource in the U.S. may provide a 100- to 150-year supply of natural gas in this country if it can be converted to reserves.

“So all of this gas is available to us at a cost that is 75% below the cost of imported crude oil that we deliver to our doorstep every day,” said Bates. “The International Energy Agency in its 2013 World Energy Outlook Report states that we have a structural, long-term competitive advantage in gas and electricity. In 2035, gas and electricity in the U.S. will cost half of what they cost in Europe or Asia. There is a long-term, structural competitive advantage that accrues to our economy because of natural gas. Even better news: it’s environmentally friendly!”

Bates gave his perspectives on oil production, which peaked in 1970 and then declined until 2008 when the shale developments transformed the industry. “Total oil production in this country went from five MMbopd to eight MMbopd at the end of last year. That is a 60% increase in only six years,” said Bates.

“Even better, our import bill keeps going down because of increased domestic production and decreased consumption. Oil prices were higher so we consumed less. Overall, imports went from 13 MMbopd to 7 MMbopd over a five or six year period of time,” said Bates.     

Bates addressed the demand for an increased workforce in this thriving industry, stating estimates that the oil and gas business is going to create almost four million new jobs, more than any other industry.

DeWeese described a renaissance in technology to sustain the needs of the oil and gas industry and said that companies that don’t keep up with the technology curve will struggle. “There is a real shift in drilling technology because there are fewer rigs, drilling more feet and discovering more oil and gas,” said DeWeese. “Drilling contractors are doing a great job with advances in pad drilling, walking rigs and the ability to drill faster and be more efficient.”

While DeWeese cited some positive trends in offshore drilling activity, he is cautious about whether it will continue because the economics of oil and gas shale are more favorable.

From a manufacturer’s perspective, DeWeese added that competition from U.S.-based companies manufacturing products in China puts pressure on his company, and others, to stay competitive.

“Just six years ago it was more cumbersome to get Chinese-made products on rigs or well-service equipment into Louisiana or Texas. That has changed and there is greater acceptance of those products from China and other low-cost countries like India and Romania at a time when U.S. overhead costs are increasing for materials, labor, healthcare and more,” said DeWeese.

He said positive market trends include strong activity for North American drilling contractors, and increased activity in the Middle East and Asia that will continue in the near term. “The offshore market is strong right now and we expect that will decrease over time,” said DeWeese.

Additional trends to watch, according to DeWeese, include the oversupply situation for U.S. fracturing which is resulting in increased pricing pressure and the changes in Mexico with energy reform that will allow investors from outside the country to partner with PEMEX. Also, he said U.S. manufacturers could be negatively impacted by the struggles in Venezuela, Argentina, North Africa and Russia.

The biggest challenge for industry is a lot closer to home, said DeWeese. He reinforced earlier themes about the need for talent in the industry. “The availability of people is a real struggle. So many people are retiring and we are not seeing the influx of younger workers. Every company has open positions right now and it is a big challenge for us.”

03/18/2014

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Chesapeake, Encana plead not guilty in Michigan lease case

Chesapeake Energy Corp. and the U.S. unit of Encana Corp., rivals in developing American oil and gas resources, pleaded not guilty to conspiring to avoid competing for leases in Michigan. Company representatives entered the pleas Wednesday before a state court judge in Cheboygan, Michigan.

Michigan Attorney General Bill Schuette said March 5 that the companies violated state antitrust laws by agreeing in which counties each would bid before a May 2010 auction for exploration rights. Each company faces a charge of conspiring to restrain trade, punishable by a fine of as much as $1 million, and an attempted-conspiracy count that carries a $1,000 penalty.

Chesapeake, which spent $400 million on exploration of Michigan’s Collingwood shale formation, has since withdrawn from the state. Calgary-based Encana has invested $230 million in Michigan in the past five years, Doug Hock, a company spokesman, said today.

Schuette said the alleged agreement may have been a key factor in the decline of lease prices from $1,510 an acre at the May 2010 sale to less than $40 an acre five months later. The companies cite results of internal investigations in 2012 in maintaining they didn’t violate Michigan law.

“When all of the evidence is viewed by the courts, we believe the conclusion will be clear that Encana did not breach any antitrust laws,” Hock said in an emailed statement confirming the company’s plea. “Written evidence received from third parties since the completion of the board investigation clearly shows that Encana and Chesapeake remained fiercely competitive the entire time the two companies were active in purchasing leases in the state of Michigan.”

Gordon Pennoyer, a spokesman for Chesapeake, said today the state’s action has no merit and that the Oklahoma City-based Company also pleaded not guilty.

Judge Maria Barton at the state court in Cheboygan, on the northern edge of Michigan’s lower peninsula, scheduled a May 5 hearing where the companies can challenge whether prosecutors had probable cause to bring the charges.

The internal investigations of Michigan bidding practices were prompted by a 2012 Reuters report citing emails among executives from both companies, including then-Chesapeake CEO Aubrey McClendon and an Encana vice president.

In one exchange, McClendon said his company needed to “smoke a peace pipe” with Encana to avoid a bidding war, Reuters said, without saying where it obtained the emails.

Schuette cited the Reuters investigation in announcing the charges.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Midland-based Mexco Energy to drill Wolfcamp formation

Mexco Energy has announced plans to drill certain oil and gas properties in the Permian basin. The company will participate as a working interest owner in a joint venture for seven horizontal wells developing the Wolfcamp formation on a 1,125-acre property in Reagan County.

These wells are to be drilled during 2014 using horizontal drilling and multistage fracture stimulation. Mexco Energy' s estimated costs in this development for its approximately 0.57% working interest (0.49% net revenue interest) are $350,000.

The Wolfcamp formation in this area is approximately 1,700 ft thick section consisting of interbedded organic shales and carbonates. The Wolfcamp formation in this area includes two reservoir units, the "A" and "B" benches that have both been successfully developed with horizontal wells.

Typically, offset drilling units have been developed with 1.5-mi laterals at 1,300-ft well spacing in each bench. The completion programs for the proposed wells are designed with 50 fracture stages at a total measured depth of 15,000 ft, including the horizontal portion.

In this area, Mexco has various interests in six horizontal wells and 276 vertical wells in adjacent Reagan and Upton Counties. Mexco' s net revenue interests in these wells range from .013% to 1.558% where there is potential for further horizontal development.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

U.S. Water appoints Jon Amdursky to media relations team

U.S. Water Services, Inc., a producer of integrated solutions for water treatment, has named Jon Amdursky to its marketing team, focusing on media relations.

Amdursky comes to U.S. Water from BWA Water Additives, where he held similar responsibilities. He served previously as global director of marketing communications for Chemtura Corporation, and, prior to that, managed marketing communications for ISP, Bayer and Dow Chemical.

Amdursky is a graduate of Princeton University, and the Woodrow Wilson School of Public and International Affairs. He also attended the MBA program at Rochester Institute of Technology.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.