North America`s source for oil and gas news

Transcription

page ConocoPhillips’ Kevin Meyers
3 to head Russia operations
North America’s source for oil and gas news
●
COURTESY OF GLOBALSANTAFE
Drilling into the deep end
Week of October 10, 2004 • $1.50
NORTH SLOPE
BP sets record
Sets CTD world record at Niakuk; technology may allow sidetracks to 4,000 feet
By KRISTEN NELSON
COURTESY OF BP EXPLORATION (ALASKA)
Vol. 9, No. 41 • www.PetroleumNews.com
Petroleum News Editor-in-Chief
B
Pictured above is the GlobalSantaFe (GSF) Development Driller I floating nearby Singapore’s Jurong Shipyard following the mating of the
upper and lower hulls. (See story below.)
GlobalSantaFe lands contract for
‘ultra-deepwater’ Gulf rig
Contract driller GlobalSantaFe said its new-build “ultra-deepwater” semi-submersible drilling rig, GSF Development Driller I,
has been awarded a two-year contract by BHP Billiton Petroleum
(Americas) for work in the Gulf of Mexico.
The multi-well exploration and development program is
expected to begin in April 2005 and has a total contract value of
about $157 million, GlobalSantaFe said Oct. 4.
The rig’s design includes 18,000 square feet of useable deck
space and more than 7,000 metric tons of variable deck loads. The
rig’s dynamic positioning and self-contained mooring systems can
be supplemented with up to eight additional mooring lines for
increased flexibility in varying conditions, the company said.
—RAY TYSON
Canadian natural gas exports up
to all U.S. regions in June
Canadian natural gas exports to the United States showed continued signs of rebounding in June, the latest month for which the
National Energy Board has compiled figures.
The federal regulator said shipments rose 26 billion cubic feet
to 287 bcf, pushing the six-month tally to 1.77 trillion cubic feet,
up 40 bcf from the same time last year.
All regions in the United States took larger volumes in June,
with the Northeast up 18 percent to 76.3 bcf, the Midwest up 6.1
percent to 130.7 bcf, the Pacific Northwest up 10.5 percent to 28.5
bcf, California up 4.7 percent to 37.2 bcf and the Rocky Mountain
region growing five-fold to 500 million cubic feet.
The National Energy Board showed export prices averaged
US$5.48 per million British thermal units in the first half, compared with US$5.55 in the same period of 2003.
Export revenues were C$13.11 billion to the end of June,
down C$1.04 billion from a year earlier.
—GARY PARK
B R E A K I N G
P Exploration (Alaska) has recently set development drilling records on Alaska’s North
Slope with technologies targeted at oil accumulations that are smaller
and often farther from infrastructure, and with technologies
developed to aid in production
of viscous oil, which is colder
and thicker than the slope’s conventional crude, and doesn’t flow as readily.
Members of BP’s Alaska drilling group talked
with Petroleum News Sept. 28 about the company’s
development drilling program, the recent drilling
records and about the technology that is driving the
company’s program.
Gary Christman, BP’s Alaska drilling and wells
manager, said the 129-person drilling organization
●
appetite; makes C$7B bid for Noranda, probes oil sands prospects
7 Imperial packs its bags: Canada’s largest oil company moves
HQ to Calgary, adding to its leading role in Arctic gas, Alberta oil sands
8 Interest builds in Central Mackenzie: Results not out on
last winter’s well, but partners’ activities stirring interest, hoping for oil find
monitors some 2,000 wells BP has on the North
Slope and keeps eight rigs busy: five rotary rigs, two
coiled tubing drilling rigs and one rotary workover
see BP page 15
NORTHWEST TERRITORIES
Anger building in NWT
Aboriginals take issue with Deh Cho lawsuits; may counter-sue to save Mackenzie line
By GARY PARK
Petroleum News Calgary Correspondent
A
rift among aboriginal groups over the proposed Mackenzie Valley gas pipeline is turning into a chasm, with three of the four key
communities threatening to sue the hold-out
Deh Cho First Nations for impeding their economic development.
The Inuvialuit, Gwich’in and Sahtu communities in the Mackenzie Delta and Central Mackenzie
Valley regions pledged Oct. 4 to unite in fighting
for the C$5 billion project.
All three are strong backers of northern gas
development and are full members of the
Aboriginal Pipeline Group (APG), which could
gain a one-third ownership stake in the pipeline.
●
Brian Maynard, vice president of public
affairs with the Canadian Association of
Petroleum Producers, took aim at all sides
— the Deh Cho, Northwest Territories and
Canadian governments, in a mid-September
speech to a Yellowknife conference.
If necessary, they will file a counter-suit against
the Deh Cho, said Nellie Cournoyea, chief executive officer of the Inuvialuit Regional Corp. and a
former premier of the Northwest Territories.
Deh Cho lobbying for support
Her anger was fueled by reports that the Deh
see ANGER page 14
CALGARY
Minnow swims with whales
Canadian junior parlays good fortune into C$2.5 billion company, but could
look for buyer in next year rather than seek capital to develop Algerian assets
By GARY PARK
N E W S
5 China comes shopping: Eyes Canadian assets for its resource
BP Exploration (Alaska) is testing a coiled tubing drilling
tool, called a tractor, with wheels which grip the sides of
the hole to help pull coiled tubing through the formation.
I
t has no production, no revenue, keeps posting
quarterly losses and isn’t even listed in Nickle’s
Canadian Oil Register, the definitive guide to
the industry.
But it has listings on the London and Toronto
stock exchanges, it boasts market value of about
C$2.5 billion on the Toronto exchange, where its
shares have rocketed over the last five years from
under C$2 to C$16 and it plays with global giants
such as France’s Total in a tough league.
The Canadian junior has since added
other concessions, notched a series of
exploration successes that have been
tested at cumulative daily flow rates of
over 500 million cubic feet of gas and
40,000 barrels of oil.
Before you get too familiar with the name First
Calgary Petroleums you should also know that it
is contemplating auctioning itself off.
see MINNOW page 14
PETROLEUM NEWS
ON DEADLINE
●
L I B E R T Y
C O U N T Y ,
•
WEEK OF OCTOBER 10, 2004
T E X A S
Geologists bury CO2 in Texas test
UNIVERSITY OF TEXAS
2
THE ASSOCIATED PRESS
G
eologists are burying compressed
carbon dioxide beneath an old oil
field to try to determine if the sandstone layer beneath the coasts of
Texas and Louisiana would make a good
reservoir for the greenhouse gas.
If the plan works, then carbon dioxide
produced from burning fossil fuels could
be captured from smokestacks and stored
underground.
“We’re going to test every aspect of
this to determine whether it is safe,” lead
researcher Susan Hovorka, with the
University of Texas at Austin’s Bureau of
Economic Geology, said in an Oct. 5
story in the Houston Chronicle.
The task of burying 3,000 tons of compressed carbon
dioxide, almost
The task of burying
the consistency
3,000 tons of
of a liquid,
began Oct. 4 in compressed carbon
Liberty County. dioxide, almost the
The researchers
consistency of a
are using a liquid, began Oct.
modified
oil
4 in Liberty
well to pump
County.
the gas delivered by truck
from Baytown and Louisiana into sandstone deposits 5,050 feet below ground.
Hovorka said the gas will soak into the
sandstone and saltwater, like bubbles in
Coca-Cola. The team expects just 1 percent of the gas will seep into the atmosphere after 300 years.
Norway burying beneath North Sea
Norway has buried almost 70 million
tons of carbon dioxide beneath the North
Sea in the area where it has drilled for
fuels.
Scientists say storing carbon dioxide
emissions below ground could ease global warming problems.
Scientists involved in the TexasLouisiana experiment are concerned that
the shale layer atop the sandstone could
crack if there is too much pressure. There
is also a worry of a small earthquake.
But Hovorka told the newspaper that
the pressure can be closely monitored
where the gas is put into the ground.
Environmentalists say this is a plan
worth pursuing.
“If it’s something that can be done reli-
ably and safely, then this is one way to
mitigate against the impact of greenhouse
gas emissions,” said Ramon Alvarez, an
atmospheric scientist in the Texas office
of Environmental Defense.
There still is the problem of cost.
Removing carbon dioxide from fossil fuel
fumes would be expensive, as would
building the infrastructure to transport the
gas below ground, but Hovorka told the
newspaper the cost would not be exorbitant. ●
PETROLEUM NEWS
•
ON DEADLINE
ConocoPhillips has named Kevin Meyers president of its
exploration and production operations in Russia and the Caspian
Sea region. James Bowles will replace Meyers as president of
ConocoPhillips Alaska. The company said Oct. 6 that following
“a brief transition period,” Meyers will be based in Moscow and
Bowles in Anchorage.
Meyers will be responsible for “executing the company’s
strategy as it relates to ConocoPhillips’ newly created strategic
alliance and joint-venture agreement with Lukoil,” for the company’s interests in the Polar Lights Co. and the North Caspian James Bowles,
Sea Production-Sharing Consortium, which is managing the ConocoPhillips
development of the giant Kashagan field offshore Kazakhstan.
Meyers has been with ARCO, Phillips Petroleum and
ConocoPhillips, since 1980 in Texas and Alaska, and has been
head of Alaska operations under three owners of the Alaska
assets: ARCO Alaska, Phillips Petroleum and ConocoPhillips.
Bowles is rejoining the company after retiring from Phillips
Petroleum in 2002 with 28 years of service. He held drilling and
production assignments for Phillips, was vice president of the
company’s gas gathering and processing subsidiary, deputy
managing director of the Norway division, and president of
Phillips’ Americas division, which included the company’s Kevin Meyers,
ConocoPhillips
Alaska operations prior to the ARCO Alaska acquisition.
Bowles has a bachelor’s degree in mechanical engineering
from the University of Arkansas and completed the Kellogg School of Management’s
JUDY PATRICK
HOUSTON
ConocoPhillips’ Meyers to head Russia
operations, Bowles takes over in Alaska
see CHANGES page 4
Issue Index
EXPLORATION & PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
FINANCE & ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
NATURAL GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
ON DEADLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
North America’s source for oil and gas news
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3
4
PETROLEUM NEWS
ON DEADLINE
CANADA
Canadian government lands windfall
from sale of Petro-Canada shares
Selling its shares in Petro-Canada raked in a net C$2.6 billion for the Canadian
government, C$600 million more than projected when the sale plans were
announced in the federal budget last March, said Finance Minister Ralph Goodale.
The 49.4 million shares were actually unloaded for C$64.50 each, raising close
to C$3.2 billion, but the book value and administrative costs reduced the final take.
The government will allocate C$1 billion to develop new environmental technologies to reduce greenhouse gas emissions, with the balance going to a variety
of other programs.
Goodale rejected any immediate prospect of the government selling its 8.5 percent stake in the Hibernia oil field offshore Newfoundland.
With Hibernia pumping more than 200,000 barrels per day, that holding is estimated to be worth about C$700 million.
—GARY PARK
SAKHALIN
BP, Rosneft announce ‘significant’ oil
find at Sakhalin-5; 6B barrels estimated
A joint venture between Britain’s BP and Russia’s state-owned Rosneft oil company announced Oct. 6 the discovery of “significant” reserves of oil and gas at the first
exploration well drilled under the Sakhalin-5 project in Russia’s Far East.
The companies said that Elvary Neftegaz, the joint venture that drilled the well at the
Pela Lache prospect to the northeast of Sakhalin island, had “encountered significant
volumes of oil and gas in a number of high quality sandstone reservoirs.”
The find was a “positive first step toward opening a new area for exploration and
subsequent development offshore northern Sakhalin,” the companies said in a statement. The well is the northernmost of all the Sakhalin projects and is located in the
deepest waters.
Sakhalin-5 is expected to hold reserves of 6 billion barrels of oil and 450 billion
cubic meters of natural gas, according to Dow Jones NewsWires.
BP and Rosneft signed an agreement on sharing development costs in July. BP will
cover the estimated US$140 million (euro114 million) of exploration costs, the agency
reported.
—THE ASSOCIATED PRESS
●
N I K I S K I ,
•
A L A S K A
Unocal gas production
shorting Agrium
THE ASSOCIATED PRESS
U
nocal Corp. is doing what it can to
supply Agrium’s Nikiski plant with
natural gas, but it is unclear it can produce enough from dedicated wells to
satisfy an agreement reached earlier this
year, a company spokeswoman said.
“Unocal is in full-out production from
the dedicated gas fields,” said Roxanne
Sinz. “We are delivering that product to
Agrium.” Sinz said the wells dedicated to
fulfilling the Agrium contract are tapping
“very old fields” incapable of the level of
production necessary.
Sinz said the exact amount delivered
from each of Unocal’s dedicated properties
varies monthly. The gas is produced by
roughly 25 active, producing wells.
Agrium Corp. officials announced Oct. 4
that Unocal had informed the company it
would be unable to supply the quantities of
gas required under the July 2004 arbitration
agreement.
The arbitration panel had determined that
Unocal had failed to deliver the gas it promised when the two companies signed a gas
purchase and sale agreement in 2000, trans-
ferring ownership of the Nikiski plant from
Unocal to Agrium.
At that time, Agrium President and CEO
Mike Wilson had said the company was
pleased the panel had found the contract
obligated Unocal to supply gas “substantially in excess” of the volumes proposed.
The panel required Unocal to supply 48.7
billion cubic feet of gas during the current
contract year, a figure Wilson said should
allow the plant to operate at 92 percent of
capacity through June 30, 2005, and at 70
percent of capacity the following contract
year without additional gas purchased from
third parties.
The inability of Unocal to meet that obligation means Agrium will be unable to operate at near full capacity as planned, said
Agrium spokeswoman Lisa Parker.
If Unocal finds new gas sources that
exceed the needs of its other customers, it
would look to market that gas. Again, however, Unocal would not be required to divert
that gas to meet its Agrium shortfall.
Agrium would be free to consider a new
contract with Unocal for that new gas, however, Sinz said. ●
HOUSTON
Deaton named CEO of Baker Hughes
Chad Deaton, 51, will replace Mike Wiley as chairman and chief executive officer
of oilfield services company Baker Hughes effective Oct. 25, the company said Oct. 4.
The appointment concludes the company’s search for a new chief executive, which
began in April after Wiley, a former president of ARCO Alaska, announced his intention to retire.Deaton has been chief executive officer and president of Hanover
Compressor in Houston since 2002. Previously, he served as the executive vice president of Schlumberger Oilfield Services.
Deaton has been in the oilfield services for more than 27 years. He earned a
Bachelor of Science degree in geology from the University of Wyoming in 1976.
—RAY TYSON
BALA CYNWYD, PA.
Maverick takes Barnett acreage
Maverick Oil and Gas has completed the previously announced acquisition of
ConocoPhillips acreage in the Barnett Shale natural gas play of East Texas, Maverick
said Oct. 4. The total acreage position acquired by Maverick has been calculated at
about 12,300 acres, of which 10,400 acres will be owned 50 percent by Maverick and
50 percent by Devon Energy, the largest player in the Barnett Shale. The remaining
1,943 acres will be owned 100 percent by Maverick.
Maverick said it expects to spud the first well on its Barnett Shale acreage within the
next 45 days. Proceeds of a private placement currently being undertaken by Maverick
will be used to finance the acquisition and Maverick’s share of drilling expenses, the
company said. Maverick said about 75 wells would be drilled on the property which
could generate 225 billion cubic feet of total gas reserves to the project, 131 bcf of
which would be net to Maverick.
—RAY TYSON
continued from page 3
CHANGES
Advanced Executive Program in 1999.
As president, ConocoPhillips Alaska,
Bowles will have responsibility for all of
the company’s operations in the state.
ConocoPhillips has a major ownership
position in Prudhoe Bay and Kuparuk, and
operates Kuparuk and Alpine. The company also has interests in Southcentral
Alaska.
ConocoPhillips said Meyers and
Bowles will report to Bill Berry, executive
vice president, Exploration & Production.
finance&economy
www.PetroleumNews.com
WESTERN CANADA
Western Canada field operating
costs up 20 percent in 2003
Operating costs in Western Canada’s oil fields climbed 20 percent
in 2003 to C$8.30 per barrel, while gas operating costs rose by onethird to 73 cents per thousand cubic feet, according to the 11th annual study by Calgary-based Ziff Energy Group.
The increase was attributed to record levels of activity and the
need for more energy to operate mature fields, along with higher
steel prices.
Ziff based its findings on data from 14 of its clients, who operate
more than 200 oil and gas fields in Western Canada.
The company said in a news release that because income trusts
tend to buy older, higher-cost properties from larger companies operating costs can be 10-15 percent higher for gas and 5 percent for oil.
“The trusts generally increase the operating efficiency, but many
of the properties are still higher cost as they are in depletion and harvest operation,” said Chief Executive Officer Paul Ziff.
—GARY PARK
HOUSTON
Marathon lowers production
forecast on heels of Hurricane Ivan
Marathon Oil said that because of disruptions caused by
Hurricane Ivan and other factors the company now expects to have
averaged about 304,000 barrels of oil equivalent per day during the
2004 third quarter, down from
previous guidance of 337,000
In the Gulf of Mexico, the
bpd.
The company said Oct. 4 that
Petronius production
later than anticipated ramp up of facility has been shut-in due
liquids production in Equatorial
to weather-related damage
Guinea and other unplanned
from Ivan. Prior to the
downtime during the quarter
hurricane,
Petronius was
contributed to the shortfall.
producing
approximately
In the Gulf of Mexico, the
Petronius production facility has
25,000 barrels of oil
been shut-in due to weatherequivalent per day.
related damage from Ivan. Prior
to the hurricane, Petronius was
producing approximately 25,000 barrels of oil equivalent per day.
“A timeline for resumption of production is difficult to predict as
a full assessment is not yet complete,” Marathon said, adding that an
update on estimated 2004 fourth-quarter and full year production
would be provided during the company’s quarterly earnings call on
Oct. 26.
Marathon said the company recently completed its previously
announced effort to solicit offers for its wholly owned subsidiary
Pennaco Energy in the Powder River basin of Wyoming and
Montana. While the company received offers for Pennaco, none of
them were sufficient to warrant a sale of these assets, Marathon said.
—RAY TYSON
●
PETROLEUM NEWS
5
C A N A D A
Stirring up bad memories
With election on horizon and energy revenues sky-high, Klein plays on federal
cash-grab fears, but Canadian government accuses premier of scare tactics
By GARY PARK
I
t is the ultimate bogeyman that periodically gets
dragged out by the Alberta government, often
close to election time.
Oil prices rise, the
province piles up staggering
budget surpluses, investment
pours in, taxes get cut, the rich
become the super-rich … and
the rest of Canada looks on
enviously as Alberta tries to
figure out what to do with the
gusher.
The latest round of booming Premier Ralph Klein
petroleum revenues has positioned the government of Premier Ralph Klein to wipe
out the province’s remaining debt in 2005 and fuel
even more growth, with in-migration topping 72,000
in 2003-04.
With Klein gearing up for an election, widely
●
expected in late November, what better time to scare
the voters and what better device than to stir memories of the National Energy Program.
The reviled NEP was imposed without warning in
1980 by the federal government of Prime Minister
Pierre Trudeau at a time when Alberta was reveling in
its first oil and gas windfall that allowed it to create
what is now a C$12 billion trust fund “for future generations.”
The NEP capped oil prices at artificially low levels, along with offering incentives to Canadian-owned
companies to explore Arctic and offshore regions.
U.S.-controlled firms fled across the border, thousands of jobs were lost, homes were sold for $1 in a
wave of foreclosures, suicides were blamed on the
desperate mood and the federal Liberals have never
again elected a Member of Parliament from Calgary.
Program cost provinces billions
Until the NEP was dismantled within 10 years of
see MEMORIES page 6
C A N A D A
China comes shopping
Eyes Canadian assets to satisfy its resource appetite; makes C$7 billion bid
for Noranda; country said to be contender for Encino’s Ecuador stake
By GARY PARK
C
hina has landed squarely on Canada’s doorstep
in its search for natural resources to feed the
world’s fastest-growing economy.
China Minerals, an arm of the government,
launched exclusive talks in September to buy all of
Noranda for C$7 billion, while state-controlled
Sinopec is exploring the potential of either a joint-venture or outright ownership of an oil sands project in
Alberta and Petro-China is reportedly among those
eyeing EnCana’s troublesome holdings in Ecuador.
Howard Balloch, a former Canadian ambassador
to China, describes China as a “very hungry dragon
(whose) demand for copper and nickel and oil have
long outpaced domestic supply.”
He said China will never again be self-sufficient in
base metals and hydrocarbons.
For example, Bank Credit Analyst reported recently that domestic crude oil production edged up by only
1 percent between 1998 and 2003, while consumption
rose 8 percent, forcing China to import more than 1.75
million barrels a day of oil and resulting in liquefied
natural gas deals with Australia, Indonesia and Iran.
Sales to China an issue
But as China has fanned out around the globe to
secure its own supply sources, the prospect of its 53
state-owned enterprises embarking on a takeover
spree has triggered a debate over the issue of selling
assets through market systems to a government with a
dubious human rights’ record.
In Canada, the immediate focus is on the prospect
of Minmetals acquiring Noranda, the mining and
smelting giant that controls Falconbridge, the world’s
see CHINA page 6
6
PETROLEUM NEWS
FINANCE & ECONOMY
IRVING, TEXAS
Magnum Hunter boosts capital
spending by $20 million
•
NEW YORK
Oil prices pressure stocks
Rapidly growing independent Magnum Hunter Resources has increased its capital
budget for fiscal year 2004 by $20 million from $200 million to $220 million, the company said Oct. 5. Seventy-five percent of
the $20 million increase is earmarked for Seventy-five percent of the $20
Gulf of Mexico drilling activities on lease million increase is earmarked for
blocks acquired from the federal governGulf of Mexico drilling activities
ment over the last four years.
on
lease blocks acquired from the
“Magnum Hunter and its industry partners have continued to increase their federal government over the last
four years.
drilling efforts in the GOM this year in an
effort to take full advantage of the continuing higher commodity price environment,” the company said.
Magnum Hunter said its 2004 capital budget will be financed entirely from the company’s record high levels of cash flows from operating activities, adding that it plans to
use available cash beyond what is required to finance the drilling program to reduce
debt. For the current fiscal year, the company said it now plans to spend $125 million
in the Gulf of Mexico, $37 million in southeast New Mexico, $28 million in West
Texas, $14 million in the Midcontinent and $16 million onshore Gulf Coast.
“Commodity prices received during 2004 from our daily production mix have
exceeded all previous estimates,” said Richard Frazier, Magnum Hunter’s chief operating officer. The company currently produces about 250 million cubic feet of gas
equivalent per day, he said.
Oil prices climbed close to $51 per barrel and kept stocks mixed Oct. 5 as investors
worried that rising energy costs would dampen a widely expected fourth quarter rally.
Wall Street was uneasy but not panicky as a barrel of light crude was quoted at a
record high $50.80, up 89 cents, on the New York Mercantile Exchange. As rising energy prices raised concerns about consumer spending and corporate profits, investors
decided it was time to collects profits after the market’s substantial gains in four of the
last five sessions.
“We’re now talking about higher energy prices through the winter months, and
futures for December and January have moved up quite dramatically,” said Chris
Wolfe, global head of equities for J.P. Morgan Private Bank. “What that suggests is that
maybe this is a longer break on the economy’s growth than we’ve been anticipating.”
Adding to investors’ worries was a disappointing report from the Institute for
Supply Management, which said its service sector index fell to 56.7 in September from
58.2 in August. The reading was lower than the 59 expected by Wall Street. A figure
over 50 represents expansion in the service sector, but the latest number represented a
slowdown in growth.
At midday Oct. 5, the Dow Jones industrial average fell 21.38, or 0.2 percent, to
10,195.16. Broader stock indicators were narrowly higher. The Standard & Poor’s 500
index was up 0.50, or 0.04 percent, at 1,135.67, and the Nasdaq composite index gained
3.32, or 0.2 percent, to 1,955.72.
As oil prices climbed, investors were concerned that the economic “soft patch” that
plagued Wall Street this summer might continue through the fourth quarter and that the
market’s usual year-end rally might be muted, especially if oil prices remain in the $50
per barrel range.
—RAY TYSON
—THE ASSOCIATED PRESS
CHINA
third-largest zinc and ninth-largest copper
producer.
Terence Corcoran, a columnist in the
Financial Post, asked whether Canada “will
just sit idly by while Canadian assets are
essentially taken over by the government of
China?”
While conceding that it may not be possible under Canadian or international law to
scuttle the Noranda deal, he said: “There is
too much going on to justify the silence on
the part of Canadians.”
Toronto Globe and Mail columnist Eric
Reguly countered that: “You can’t say economic freedom is good for the world, but not
for China.”
Whatever the arguments, Noranda would
be China’s largest takeover of a foreign
company, although Chinese companies have
recently invested US$12 billion in overseas
assets. On the oil and gas front, state-owned
oil trader Sinochem wrapped up a deal Oct.
1 to buy South Korean refiner Inchon for
US$549 million.
State oil firms have spent US$5 billion
over the past 10 years rounding up oil and
gas fields to support flagging production and
satisfy China’s thirst as the second-largest
oil consumer after the United States.
Oil sands also of interest
While the attention has been on the
Minmetals-Noranda negotiations, state-controlled Sinopec has stepped up its interests in
the oil sands after sending delegations to
Alberta over the last three months to “examine the potential,” according to Alberta
Premier Ralph Klein, who promoted the oil
sands during a Beijing visit in June.
He said Sinopec is interested in shipping
synthetic crude through a proposed
Enbridge pipeline from northern Alberta to a
British Columbia deepwater port for shipment to China.
Enbridge has held meetings with uniden-
MEMORIES
its introduction, the cost to Alberta’s treasury
in lost revenues and taxes was calculated in
the billions, some say upwards of C$60 billion and as high as C$97 billion for the producing provinces of Alberta, British
Columbia and Saskatchewan.
The provincial government accumulated
a C$23 billion debt trying to maintain services during a bust.
“You always have to keep the memory in
mind,” Klein said Sept. 29.
“I never want to see that again. We have
the constitutional authority to protect our
resources and keep the profits.”
Warming to his theme, he warned the
federal government: “Keep your hands off
anything that you aren’t entitled to. We don’t
want to see a raid on our treasury. We don’t
want to see another NEP.”
Alberta Members of Parliament — the
bulk of whom represent the opposition
Conservative party in Parliament — have
scrambled on Klein’s wagon.
Jason Kenney, the Conservatives’
finance spokesman, noted that Prime
Minister Paul Martin has called for “fundamental changes” to the federal formula of
redistributing income from the richest
provinces to the poorest ones.
tified Chinese parties this year as it pursues
Asian markets for the 400,000 barrels per
day it expects to start delivering on the
Gateway pipeline by late 2009.
Sinopec could also be a candidate to take
an equity position in new oil sands projects
by either UTS Energy, which is targeting a
50,000 bpd start-up of its Fort Hills operation in 2009, or Synenco, whose Northern
Lights project is scheduled to come on
stream at 50,000 bpd in 2009.
Now PetroChina is rumored to be snooping around EnCana’s assets in Ecuador,
which produce 78,000 bpd and carry a price
tag of C$1.5 billion, although the front-runner has been identified by Reuters news
agency as India’s state-run ONGC Videsh,
the buyer last year of Talisman Energy’s oil
assets in Sudan.
Subir Raha, chairman of ONGC, has
conceded there are other rivals for the trouble-plagued Ecuador properties, although
EnCana has avoided getting drawn into the
guessing game. ●
“When the feds talk about increasing
equalization payments, you’re talking about
one thing: taking money from Alberta and
Ontario,” Kenney said.
Federal leaders have scoffed at the fearmongering.
To those who say “Beware of another
NEP,” Finance Minister Ralph Goodale
replied: “We’ve been there, done that … and
didn’t like it, and we sure are not going
back.”
Natural Resources Minister John Efford
said “my hands are not in (Klein’s) pot.”
Deputy Prime Minister Anne McLellan,
who represents an Edmonton constituency
in the House of Commons, in a pointed barb
at Klein said: “I think it’s most unfortunate
that people practice what I call the politics of
fear and misrepresentation,” adding her government will not “interfere with Alberta’s
ability to exploit its resources for the benefit
of its people.”
Pierre Alvarez, president of the Canadian
Association of Petroleum Producers, doubted the federal government would put the
industry’s success at risk, although it is wary
of unintended consequences of public policy.
He noted that C$3 billion in energy sector corporate taxes went into the federal
treasury last year and is likely to approach
C$4 billion this year. ●
PETROLEUM NEWS
●
•
C A L G A R Y
Imperial packs its bags
Canada’s oldest, largest oil company moves HQ to Calgary,
adding weight to its leading role in Arctic gas, Alberta oil sands
By GARY PARK
nies with operations in Canada, Imperial
has shifted its focus from the conventionPetroleum News Calgary Correspondent
al light crude sector to the oil sands.
mperial Oil, Canada’s largest and oldThrough its Cold Lake operations in
est oil company, has made it official: northeastern Alberta it has embarked on a
Calgary is indeed the industry’s capi- multi-billion dollar development that
tal.
should achieve output of 180,000 barrels
In deciding to move its head office per day by 2010.
from Toronto, Imperial (owned 69.6 perIn addition, it has a 25 percent stake in
cent by ExxonMobil) became the last the Syncrude Canada consortium that
petroleum company of
could yield a net
any size to make
140,000 bpd under curExactly how many will
Calgary its home base,
make the trek westward is rent expansion plans.
ending a low, slow drift
Meanwhile, Imperial
not clear, although
to Western Canada over
is putting the pieces
preliminary estimates put
the past two decades by
together for a massive
the number at 500 of the
companies such as
undertaking at its Kearl
Suncor
Energy, 1,500 in the Toronto office. Lake property, 40 miles
TransCanada and Shell
north
of
Fort
Canada.
McMurray.
In the process, Imperial is giving a
In a joint venture with its sister compastrong vote of confidence to two of ny, ExxonMobil Canada, Imperial has
Canada’s three energy frontiers — the indicated it will submit a regulatory appliArctic and the Alberta oil sands — leav- cation in 2005 for a possible C$8 billion
ing a question mark hanging over the East venture that could produce 200,000 bpd
Coast.
over 70 years, starting in mid-2009.
The universal response among analysts and observers was mostly one of Company also heads
surprise that Imperial had taken so long to Mackenzie consortium
join the industry clan in Calgary.
While weighing that mega-project,
Alberta Premier Ralph Klein described Imperial also heads up the Mackenzie
the migration as “gratifying,” then deliv- consortium that is poised to file applicaered a mild rebuke: “They should have tions to open up Canada’s Arctic gas
done it years ago.”
resources.
“While we have strategic assets locatIt controls about 3 trillion cubic feet of
ed across Canada, many of our major ini- the proved 5.8 tcf of reserves held by the
tiatives are located in Western Canada Mackenzie partners that are the basis of a
and the North,” Imperial Chairman and proposed C$5 billion project.
Chief Executive Officer Tim Hearn said
As fast as the Arctic and oil sands are
in a letter to the company’s 6,300 occupying Imperial’s horizon, the East
employees.
Coast is fading.
“This move will enable us to strengthThe company owns 9 percent of the
en our focus on these key priorities.”
Sable gas field offshore Nova Scotia,
I
Company has extensive
oil sands holdings
Topping that list are extensive holdings
in the oil sands and heavy oil plays and a
lead role in the Mackenzie Gas Project.
From its beginnings in 1880, when 16
southwestern Ontario refineries pooled
their assets, Imperial made the landmark
oil discovery at Leduc near Edmonton in
1947 that set in motion the modern-day
Canadian industry and gave Imperial the
springboard to its current position of
strength, including 20 percent of Canada’s
net proved reserves, with one of every
seven barrels of oil being pumped from
Imperial fields.
In 1970, it also notched Canada’s first
Arctic oil find at Atkinson Point on the
Beaufort Sea.
Like its peers in the fully integrated
sector and the major U.S.-based compa-
North America’s
source for oil
and gas news
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907.522.9469
where reserves and production are in
decline, but is taking a time-out from
exploration.
In mid-2003 it made a grand entry,
with plans to sink a deepwater well, but
only three months later Imperial and its
partner Talisman Energy announced a dry
hole.
Now Talisman Chief Executive Officer
Jim Buckee has proclaimed a “wait and
see” approach by the joint venture until
someone else finds gas in the area.
That bleak outlook makes consolidation of Imperial’s corporate departments
in Calgary even more logical, closing the
geographical gap between the decisionmakers and the key upstream activities.
Exactly how many will make the trek
westward is not clear, although preliminary estimates put the number at 500 of
the 1,500 in the Toronto office.●
7
FINANCE & ECONOMY
HOUSTON
Apache, ExxonMobil close $347M
U.S., Canadian property deals
Big independent Apache has closed an array of previously announced U.S. and
Canadian property deals with ExxonMobil, Apache said Oct. 5, adding that its
participation includes an outlay of about $347 million in cash payments to the
major.
The agreements provide for transIn Alberta, Apache said it signed a
fers and joint ventures/partnerships
farm-in agreement covering
across a broad range of prospective
ExxonMobil Canada Energy’s
and mature properties in the Permian
interest in more than 380,000
basin of West Texas and New
Mexico, Western Canada, onshore
gross acres of undeveloped
Louisiana and the Gulf of Mexico’s properties in mature areas. Apache
outer continental shelf.
said it would drill at least 250
In Alberta, Apache said it signed a
wells over an initial two-year
farm-in
agreement
covering
period
with an opportunity for
ExxonMobil Canada Energy’s interadditional
drilling.
est in more than 380,000 gross acres
of undeveloped properties in mature
areas. Apache said it would drill at
least 250 wells over an initial two-year period with an opportunity for additional
drilling.
In West Texas and New Mexico, the companies have formed a partnership
under which Apache will participate in 23 mature producing oil and gas fields
with production net to Apache of about 9,150 barrels of oil equivalent per day.
ExxonMobil retains an interest in the production and a 50 percent working interest in all exploration acreage in depths below the currently producing intervals.
Onshore Louisiana and on Gulf of Mexico shelf acreage, Apache and
ExxonMobil will jointly explore for deep gas on about 800,000 gross acres of
Apache properties for an initial period of five years, with provisions for extension.
Apache will continue to operate the shallower prospects, while ExxonMobil will
operate the deeper prospects.
—RAY TYSON
exploration&production
8
PETROLEUM NEWS
NORTH AMERICA
Canada picks up 24 rigs, U.S.
gains four in weekly survey
The number of rotary drilling rigs operating in North America
during the week ending Oct. 1 stood at 1,558, an increase of 28 rigs
from the previous week and an increase of 71 rigs compared to the
same period last year, according to rig monitor Baker Hughes.
Canada gained 24 rigs from the prior week for a total of 315.
However, that represented a decrease of 81 rigs compared to the
year-ago period.
The number of rigs operating in the United States increased by a
net four vs. the previous week for a total of 1,243, up 152 compared
to the same weekly period last year. Compared to the previous week,
U.S. offshore areas picked up 11 rigs for a total of 98, while the number of active land rigs dropped by seven to 1,127. Inland waters
remained unchanged with 18 rigs.
Of the total number of rigs operating in the United States during
the recent week, 1,081 were drilling for natural gas and 161 for oil,
while one was being used for miscellaneous purposes. Of the total,
792 were vertical wells, 331 directional wells, and 120 horizontal
wells.
Among the leading producing states, Texas gained six rigs during
the recent week for a total of 526. Louisiana picked up three rigs for
a total of 166. Oklahoma’s rig count increased by two to 162, while
Alaska’s increased by one to 12 and California’s increased by one to
24. Wyoming lost six rigs for a total of 81.
—RAY TYSON
KENAI PENINSULA
Marathon applies to expand
pad surface at Kenai gas field
Marathon Oil Co. has applied to fill a former reserve pit at the
Kenai gas field with gravel to provide more pad surface for up to
two gas wells. The company told the U.S. Army Corps of Engineers
that the additional gravel pad surface would also be used for remedial well work.
The former reserve pit at Pad 14-6 was constructed by Unocal
in 1981. The Corps said the Alaska Department of Environmental
Conservation determined in 1985 that the pit had not been permitted in accordance with solid waste management regulations.
Removal of the drilling waste was begun in 1993 and completed in
1994. The former reserve pit has been inactive since.
Marathon is proposing to lay 7,484 cubic yards of gravel in 1.45
acres of wetlands. The Corps said the reserve pit and current production pad “were constructed within a large wetland complex”
south of Kenai, on land owned by the Salamatof Native Association
Inc.
The reserve pit and existing production pad 14-6 authorized by
the Corps in 1981 included 74,000 cubic yards of gravel material
on 5.5 acres of wetlands for a 260-foot by 400-foot drill pad, a 240see MARATHON page 9
●
N O R T H W E S T
T E R R I T O R I E S
Interest builds in Central
Mackenzie Valley
Results not out on well drilled last
winter, but activities of partners
stirring interest in oil potential
By GARY PARK
W
ith news still awaited on the results of a
Central Mackenzie Valley well drilled
last winter, one of the small partners is
stirring interest in the region by raising
further exploration funds.
International Frontier Resources said Oct. 5 it
will issue 2.3 million units at C$1.35 per unit,
plus an option to sell an additional 230,000 units,
with proceeds going to its Northwest Territories
exploration.
The hope is for the first major oil find in
almost 85 years since Imperial Oil discovered
the Norman Wells field, which had 660 million
●
The B-44 partners heightened speculation in
June when they bid C$24.8 million for
224,000 acres 75 miles south of Norman
Wells, while Paramount Resources, PetroCanada, BP Canada Energy and Chevron
Canada Resources were involved in picking
up four other exploration licenses for a
combined C$100 million.
barrels of original oil in place and is still pumping.
Norman Wells crude is shipped to northern
Alberta on an Enbridge pipeline that has capacity of 34,000 barrels per day that could be
expanded to 50,000 bpd, but is currently carrying
only 23,000 bpd.
Calgary-based International Frontier is a 5
percent partner in the Wilma Summit Creek B-44
well that was drilled to a total depth of almost
see MACKENZIE page 9
A L A S K A
North Slope production
averages 885,142 bpd
Alpine sets one-day production record as capacity expansion work kicks in
By KRISTEN NELSON
laska North Slope production returned to normal in mid-September, after planned and
unplanned maintenance and construction activities kept production below normal at various
fields for varying amounts of time beginning in midJuly.
North Slope production for September averaged
885,142 barrels per day, up 22.5 percent from the
August average of 722,559 bpd, but well below daily
volume in the second half of the month, which
reached 984,730 bpd on Sept. 23.
The Alaska Department of Revenue noted produc-
A
tion stayed below 900,000 bpd through mid-month.
Alpine hits production record
Production at all North Slope fields was up from
August, with the largest increase at Alpine, which
was down for maintenance and the first phase of
facility expansion work from mid-July through midAugust.
The field’s capacity has been in the 100,000105,000 bpd range, and was expected to grow by
5,000 bpd from this summer’s work, which increased
produced water handling capacity. Capacity at Alpine
will increase to 140,000 bpd after facility expansion
work is completed next summer.
see PRODUCTION page 9
PETROLEUM NEWS
•
MACKENZIE
10,000 feet in late March, logged and
drill stem tested.
International Frontier and Pacific
Rodera, two minor partners in the
Northrock Resources-operated well,
have since seen their share prices rise on
speculation of a find.
Geologists theorize oil find possible
Two geologists told a Canadian
PRODUCTION
Alpine production averaged 109,430
bpd in September, up 150 percent from an
August average of only 43,817 bpd.
Revenue said the ConocoPhillips Alaska
operated field set a record Sept. 27 at
117,250 bpd, a peak since production began
in November 2000. Alpine had what
Revenue called a “plant upset” on Sept. 1819 during routine testing; full production
resumed Sept. 20.
Production at BP-operated Endicott was
up 90 percent in September over August,
averaging 17,241 bpd, compared to 9,067
bpd in August, when a summer maintenance shutdown had the field down Aug.
14-28.
Northstar, also BP operated, had a compressor failure in August and was up 54 percent in September, averaging 76,291 bpd
compared to 49,600 bpd for August.
Prudhoe September average up
Production at Prudhoe Bay (including
western satellites Midnight Sun, Aurora,
Polaris, Borealis and Orion) averaged
391,430 bpd in September, up 11.5 percent
from an August average of 350,955 bpd, but
MARATHON
foot by 346-foot pad for a dehydration
building, compressor building, office and
shop building; and a 100-foot by 400-foot
reserve pit, “to expand the existing commercial drilling and gas production site.”
While this application is for space to
allow for drilling of two new wells,
Marathon told the Corps that it will need to
drill up to four new wells to recover
remaining gas in the field.
The Kenai is Cook Inlet’s largest gas
field. It was discovered by Unocal in 1959
and production began in 1961. The field is
now owned and operated by Marathon,
which holds 100 percent working interest.
In its 2003 annual report the Alaska
Division of Oil and Gas said the Kenai gas
field produced 2.22 trillion cubic feet of
gas through 2002 and is expected to produce an additional 141.4 billion cubic feet
EXPLORATION & PRODUCTION
Society of Petroleum Geologists’ conference in June that an oil discovery is
possible, based on geologic interpretations, the level of activity and the
absence of a gas pipeline.
The B-44 partners heightened speculation in June when they bid C$24.8
million for 224,000 acres 75 miles south
of Norman Wells, while Paramount
Resources, Petro-Canada, BP Canada
Energy and Chevron Canada Resources
were involved in picking up four other
exploration licenses for a combined
C$100 million.
still below a July average of 397,464 bpd.
Prudhoe had a scheduled maintenance shutdown in August and field operator BP had
difficulty getting the field back online. In
the second half of September, Prudhoe production was as high as 451,813 bpd.
The ConocoPhillips Alaska-operated
Kuparuk River unit (production includes
West Sak, Tabasco, Tarn, Meltwater and
Palm) averaged 192,227 bpd in September,
up 9.28 percent from 175,907 bpd in
August.
Lisburne, a BP-operated field which
includes production from Point McIntyre
and Niakuk, averaged 45,944 bpd in
September, up 8.2 percent from an August
average of 42,448 bpd.
BP-operated Milne Point, which
includes Schrader Bluff production, averaged 52,579 bpd in September, up 3.6 percent from an August average of 50,765 bpd.
The North Slope temperature at Pump
Station No. 1 averaged 34.6 degrees
Fahrenheit in September, compared to a
three-year average for the month of 38
degrees F, and an August average of 47.8
degrees F.
Cook Inlet production averaged 25,624
bpd, up 8.8 percent from an August average
of 23,550 bpd. ●
from 2003 through 2014, when production
is estimated to end. The division said it
assumes production level at the same rate
as 2001 through 2006, after which production will decline, with an estimated decline
rate of 11.6 percent after 2007. Production
is from the Sterling, Beluga and Tyonek
formations. The field produced almost 20
billion cubic feet in 2001, and more than 22
bcf in 2002.
—KRISTEN NELSON
Adding to the momentum, Husky
Energy has listed the Central Mackenzie
as a focus area for its upstream operations.
In a September report to shareholders
International Frontier said it will pay 5
percent of the gross well costs of about
C$18 million to drill Big Bear K-71,
testing a new structure about 3 miles
from the B-44 well.
It said the decision to preserve title to
the land was necessary before information is released on B-44.
International Frontier also said a pre-
9
liminary estimate puts the cost of completing B-44 at C$16 million to provide
extended production flow rates for one
or more prospective reservoirs. The testing program is scheduled to start in
January and last 80 days.
The company said this winter’s
drilling and completion program “will
be a major undertaking,” including construction of a 50-mile access road.
It cautioned that the timetable for B44 testing and drilling K-71 will be tight
because of uncertainty over the duration
of the winter freeze-up. ●
government
10
PETROLEUM NEWS
●
FAIRBANKS, ALASKA
Governor calls on university to
assist with resource development
Think-tank urges Canadian governments to give greater priority to opening
new oil and gas supply sources; study warns forecasts ‘overestimate’ production
By GARY PARK
CANADA
Canada promotes Arctic
sovereignty claims
The Canadian government of Prime Minister Paul Martin has
promised what it describes as the first, comprehensive strategy for
Canada’s North that includes protecting sovereignty.
Announcing the initiative in a speech to open a new session of
Parliament Oct. 6, the government said the “strategy will foster sustainable economic and
human development; protect the
northern environment and
Canada’s sovereignty and security; and promote cooperation
with the international circumpolar community.”
That cooperation is under stress with Russia and Denmark now
vying with Canada to lay claim to the North Pole and whatever natural resources may lie beneath it.
A key to claiming ownership of the North Pole region lies in the
United Nations Convention on the Law of the Sea, a 1986 accord
that allows coastal countries to control an economic zone extending
220 miles from their coastlines.
Of the countries surrounding the North Pole, Russia, Canada and
Norway have signed the document and Denmark has promised to
see SOVEREIGNTY page 12
C A N A D A
Trouble on the horizon
JUDY PATRICK
At a cabinet briefing on the University of Alaska Fairbanks campus on Oct. 6, Alaska Gov. Frank Murkowski urged the University
of Alaska to use its research expertise to assist the state with resource
development initiatives.
“I am asking you to prioritize your
research to meet the needs of our state. Tailor
your research to help create jobs for
Alaskans,” Murkowski said. “The state needs
UAF to be a source of expertise to stand up to
those who would lock Alaska away from
responsible development.”
The governor made his comments at the
opening of a meeting between his cabinet and
university officials. He urged the university Alaska Gov. Frank
and the state to explore further partnerships Murkowski
for the benefit of Alaskans.
“As President Hamilton reminds us, the university is a tremendous economic engine. University research should supply a solid
scientific foundation for the state to establish responsible development policies that can sustain attacks from environmental extremists,” he said.
rctic natural gas, Alberta oil sands, liquefied
natural gas terminals and offshore exploration
should dominate government agendas if
Canada is to head off a looming petroleum
supply crunch, says an economic think-tank.
The C.D. Howe Institute, in a 32-page report entitled the Approaching Global Energy Crunch, warns
that worldwide oil price projections “overestimate
the prospects for increased production and underestimate the political and economic risks of delivering
output to world markets.”
It said these “misleading forecasts seriously
underestimate the future price of oil and natural gas.”
“The implications of a declining Canadian capacity to export oil and gas to the United States are serious for the Canadian balance of payments and for the
Canadian dollar,” said study author Bob MacIntosh.
“This is a major reason to press forward with oil
sands and northern gas development.”
In the latest export figures, Statistics Canada
A
●
reported September 30 that Canada’s trade surplus
with the United States for crude oil, refined oil and
other products, natural gas, coal and electricity was
C$53 billion in 2003 up from C$42.7 billion in 2002.
A “high priority” on the government policy list
should be to “facilitate the job of the private sector in
the exploration for natural gas in the Mackenzie
Valley and the Arctic and the financing of pipelines,”
the institute said.
Aboriginal agreements needed
The immediate need for the Canadian government
is to settle unresolved aboriginal agreements in the
Northwest Territories, particularly the lawsuits filed
by the Deh Cho First Nations that threaten to act as a
drag on pipeline approvals.
In the same category, the C.D. Howe Institute is
concerned that tax problems created by the Alberta
government present obstacles for oil sands development.
Alberta and Suncor Energy are currently
see TROUBLE page 12
I N T E R N A T I O N A L
Initiative to share global remote
sensing data gains momentum
By ALAN BAILEY
Petroleum News Staff Writer
A
n international initiative to standardize and
share vast quantities of data from publicdomain Earth observations has been gaining
momentum, Brigadier General Jack Kelly,
deputy undersecretary for oceans and atmosphere
for the National Oceanic and Atmospheric
Administration, told Petroleum News recently.
Data to be shared include many types of government-sponsored remote sensing, including satellite
imagery and weather observations. The energy
industries will be among the beneficiaries of the
initiative, Kelly said.
The global data-sharing idea emerged from the
World Summit for Sustainable Development, a
“Current efforts to observe and understand
the Earth system must progress from the
separate observations of today to
coordinated, timely, quality, sustained global
information ... as a basis for sound decisions
and actions.” —Brigadier General Jack Kelly, deputy
undersecretary for oceans and atmosphere for NOAA
meeting of major world figures about two years
ago in Johannesburg, Kelly said. Then in the 2003
G8 Summit in Evian world leaders, including
President Bush, endorsed the recommendations of
the Johannesburg summit. That endorsement led to
a summit in Washington, D.C., to determine how
see INITIATIVE page 12
natural gas
PETROLEUM NEWS
Denver-based independent Galaxy Energy has closed on its
acquisition of 4,400 net acres of coalbed methane properties in
Campbell and Converse counties in Wyoming, Galaxy said Oct. 4.
The company had announced the execution of a letter of agreement in July 2004. The properties are in the well-developed eastern
portion of the Powder River Basin and include the West Recluse and
Glasgow projects with target coalbed formations at depths of 500 to
800 feet. Both projects are in areas where there is existing infrastructure.
The Alaska Oil and Gas Conservation Commission said Oct.
4 that it is waiving a requirement for valves and gauges on tubing and all well annuli in the Beaver Creek, Kenai and Sterling
gas fields on the Kenai Peninsula in Southcentral Alaska.
The commission said a field inspection found that a number
of wellheads in the Marathon Oil Co.-operated gas fields were
not equipped with valves and gauges on all well annuli, and
were thus not in compliance with the commission’s regulations.
Marathon applied for waivers in August.
The commission said in its findings that these gas fields are
mature and reservoir pressures have declined substantially since
production began, with current well pressures low relative to
other Alaska fields, ranging from a minimum surface pressure
of approximately 100 pounds per square inch to a maximum of
approximately 1,000 psi at the Kenai gas field. The range for the
Beaver Creek field is 800 psi to 1,500 psi. The commission did
not list well pressures for Sterling.
The commission concluded that low pressure on the inner
annulus “means that there is little risk of over pressuring the
outer annulus,” and said the well tubulars “are of sufficient burst
pressure rating to contain the full range of reasonably anticipated well pressures.” It also noted that the wellheads of many of
these wells were installed in cellars below ground level, “making access to the outer annulus difficult and somewhat hazardous.”
The commission did say that where appropriate, as part of
future well workovers, it “may require Marathon to retrofit” the
wells with valves and gauges.
—PETROLEUM NEWS
S L O P E
Oil vs. gas production
a balancing act
Alaska Oil and Gas Conservation Commission will have a role to play in gas
development in ensuring that neither oil nor gas is wasted on the North Slope
By KRISTEN NELSON
—RAY TYSON
KENAI PENINSULA
AOGCC waves valve, gauge
requirement for old gas wells
N O R T H
A
laska Oil and Gas Conservation Commission
Chairman John Norman says the agency is
looking at proposals to develop North Slope
natural gas and is “starting to revisit the commission’s orders on allowable production from
Prudhoe Bay.” The largest oil field in North America,
Prudhoe Bay is expected to be a major source of natural gas for the proposed
pipeline from Alaska’s North
Slope to Canada and the lower
48 states.
Typically the oil in a reservoir is produced first, he told
Petroleum News in a midSeptember interview: “You use
the gas to pressure that reservoir” and then produce the gas
last. If you take out gas too John Norman,
Oil and Gas
soon, “you risk leaving oil in Alaska
Conservation
the ground.”
Commission
But the reverse is also true:
“If you delay gas sales too long you don’t recover as
much gas.” That could happen if gas sales are delayed
so long that the facilities are past their useful life, are
no longer economic to operate and the field is shut
down before all of the recoverable gas is produced.
And if you never produce any gas at all, then you’ve
left most of the gas in the ground.
The conservation angle
Norman said the commission has a role to play in
the optimum timing of gas development based on its
charge to prevent waste.
It looks at the whole hydrocarbon issue, viewed as
barrels of oil equivalent, with 6,000 cubic feet of gas
equivalent to one barrel of oil. “Everyone else is prop-
FORREST CRANE
DENVER
Galaxy completes acquisition
of CBM properties in Wyoming
●
11
erly focused on lots of other things, the creation of
jobs and the profit…,” he said.
The commission does not want to “interfere with
the planning, but it’s important that we get involved
early on,” he said, so that before plans for gas development get “set in stone” the conservation issue has
been adequately addressed.
To make sure the issue has been adequately
addressed the commission needs something from the
companies. It isn’t staffed to do the work of the companies, and could also spend a lot of time studying
plans that aren’t efficient. The commission’s role,
Norman said, is to rule on proposals that the companies present.
“But what we’re hoping to encourage the companies to do — and everyone else — is to keep us up to
speed as much as you can so that we can monitor this
instead of playing hide the ball and then three years
from now just suddenly dropping this big study and
saying here it is and you’ve got 30 days to rule on it.”
Goal to see hydrocarbon recovery optimized
The commission’s role in gas development is limited, Norman said, “but it’s important.”
What the commission would like to see is the
“project done in a way that optimizes total hydrocarbon recovery and that doesn’t weight it toward the oil
or gas.” There will be tradeoffs, he said, “depending
on how it’s done and so it’s important to get that balance right.”
He said he doesn’t expect the commission to hold
a project up. But it does have a role to play, and is “one
base that has to be covered along with a number of
others.”
The commission doesn’t represent the interests of
any oil company, Norman said, but has a mandate “to
assure Alaskans now, and those that may be here in
the future, that waste is not going to occur within this
project.” ●
12
PETROLEUM NEWS
THE REST OF THE STORY
TROUBLE
immersed in a legal dispute over the royalty classification of the latest expansion to
the Suncor operation.
Suncor has filed a C$250 million suit
against the province, arguing that its
Firebag project is merely an extension of its
main oil sands facility and entitled to pay
only 1 percent gross revenue royalty until
the C$500 million investment is recovered.
Alberta insists Firebag is a new project and
must pay up to 25 percent of net revenues.
That squabbling is seen as a deterrent to
oil sands investors, at a time when the C.D.
Howe Institute believes governments
should be trying to attract partners, notably
the Chinese, to build on Canada’s technical
expertise in developing the oil sands.
The institute also urges decision-makers
to look for ways to bridge the gap between
future gas demand and supply.
“This will involve developing facilities
for importing LNG from Russia, Qatar and
elsewhere,” wrote MacIntosh.
“Governments should facilitate the private sector in finding suitable sites which
are relatively secure, both for Canadian
imports and as a staging point for U.S.
imports.”
MacIntosh expressed concern about the
impact on Canada of a decline in future oil
and gas production. ●
SOVEREIGNTY
ratify before the end of 2004.
The United States has refused to participate in the accord.
Helge Sander, Denmark’s minister of
science and technology, said Oct. 3 that
whoever controls the North Pole could
have access to a bonanza of oil and gas
resources.
Although the Canadian government
has yet to spell out the details of the
northern initiative, it has spent considerable energy over recent years on building
•
circumpolar ties.
In addition the Canadian Armed
Forces held exercises during the summer
in the North in a bid to underline
Canadian claims to sovereignty over the
High Arctic.
The strategy got only a lukewarm
response from one Northwest Territories
aboriginal leader.
Jose Kusugak, president of the Inuit
Tapiriit Kanatami, said the government’s
emphasis on sovereignty and economic
development of the Arctic should be balanced with equal concern for social programs, such as housing and employment.
—GARY PARK
to get the data sharing initiative under
way.
Since these summits the initiative has
grown to include 53 countries, the
European Commission and 29 international
organizations, Kelly said.
“What we’re hoping is that the effort
here-to-for has convinced people that this is
an effort whose time has come and judging
by the number of countries who are continually growing to it I would think that we
have done that,” Kelly said.
An intergovernmental team called the
Group on Earth Observations is formulating
a 10-year implementation plan. The United
States has taken a leading role in the initiative by forming its own team, called the
Interagency Working Group on Earth
Observations. The U.S. team involves 15
government agencies.
prehensive availability and analysis of global data people expect to see benefits such as
major improvements to weather forecasting, better environmental monitoring and
more efficient use of natural resources.
“There was agreement that we are not
aiming to do this just to develop technology
but there has to be some societal benefit,”
Kelly said.
Both the international and U.S. teams
have compiled lists of potential benefit
areas — lists that include energy management and monitoring.
“What it means is to get to the energy
industry better information about what is
going on in the environment,” Kelly said.
He expects industry to be able to use the
information for activities such as monitoring the climate, monitoring air quality and
tracking oil slicks.
There’s also the potential for the wider
availability of satellite remote-sensing data
of the earth’s surface — data of the type that
comes from the U.S. Landsat satellite.
A global view
Progress to date
“The thrust of all of this is that the only
way we can really understand how the
Earth and the atmosphere and the oceans
interact is through global cooperation and
information sharing,” Kelly said.
Trying to use the current mish-mash of
data from different countries is like trying to
assemble a jigsaw puzzle where many of
the pieces are missing and few of the pieces
interlock correctly. In fact a document from
the Group on Earth Observations cites
numerous shortcomings with the current
situation: problems include lack of data
integration and interoperability; gaps in
data coverage; problems with the observation systems; lack of systems to convert
data into useful information; and lack of
access to data, especially in the developing
world.
“Current efforts to observe and understand the Earth system must progress from
the separate observations of today to coordinated, timely, quality, sustained global
information ... as a basis for sound decisions
and actions,” Kelly said.
Kelly sees broad international agreement on the principles of data sharing and
data standards to be major achievements of
the initiative so far. The teams working on
the initiative have also moved ahead with
developing detailed plans: the Group on
Earth Observation will present its 10-year
implementation plan to an international
Earth Observation Summit in February of
next year.
Although achieving agreements on the
details of data standards, for example, may
pose some daunting challenges, Kelly feels
that a general willingness to succeed will
prevail.
“In my experience, while standards are
hard to do, if people can see a value coming
from having them they will join in,” Kelly
said.
Kelly anticipates that senior policy makers in the countries involved in the initiative
will really push for success. And the
involvement of several U.N. organizations
that use the Earth observation systems will
help drive the need for practical solutions
for sharing data.
“Generally if there’s a will to succeed it
will succeed”, Kelly said. “It’s not a science challenge — it’s a want-to-do challenge.” ●
INITIATIVE
Social and economic benefits
The objectives of the data-sharing initiative revolve around achieving social and
economic benefits. By enabling the com-
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Aeromap
Aeromed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
AES Lynx Enterprises
Agrium
Air Liquide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Air Logistics of Alaska
Alaska Airlines Cargo
Alaska Anvil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Alaska Coverall. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Alaska Dreams
Alaska Interstate Construction
Alaska Marine Lines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Alaska Massage & Body Works
Alaska Railroad Corp.
Alaska Steel
Alaska Telecom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Alaska Tent & Tarp
Alaska Terminals
Alaska Textiles
Alaska USA Mortgage Company . . . . . . . . . . . . . . . . . . . . . . . 5
Alaska West Express . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Alliance, The
Alpine-Meadow
American Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Anchorage Hilton
Arctic Controls
Arctic Fire & Safety
Arctic Foundations
Arctic Slope Telephone Assoc. Co-op
Arctic Structures
ArrowHealth
ASRC Energy Services
Engineering & Technology
Operations & Maintenance
ASRC Energy Service
Pipeline Power & Communications
Avalon Development
B-F
Badger Productions
Baker Hughes
Brooks Range Supply
Capital Office Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Carlile Transportation Services
Carolina Mat
CH2M Hill
Chiulista Camp Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CN Aquatrain
Colville
Conam Construction
ConocoPhillips Alaska
Coremongers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Craig Taylor Equipment
Crowley Alaska
Cruz Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dowland - Bach Corp.
Doyon Drilling
Doyon LTD
Doyon Universal Services
Dynamic Capital Management
Engineered Fire and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ENSR Alaska
Epoch Well Services
Era Aviation
Evergreen Helicopters of Alaska
Fairweather Companies, The
FMC Energy Systems
Friends of Pets
Frontier Flying Service
F.S. Air
G-M
Golder Associates
Great Northern Engineering
Great Northwest
Hanover Canada
Hawk Consultants
H.C. Price
Horizon Well Logging, Inc.
Hunter 3D
Industrial Project Services
Inspirations
Jackovich Industrial
& Construction Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ADVERTISER
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Judy Patrick Photography
Kakivik Asset Management
Kenai Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Kenworth Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Kuukpik Arctic Catering
Kuukpik/Veritas
Kuukpik - LCMF
Lounsbury & Associates
Lynden Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lynden Air Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lynden Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lynden International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lynden Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lynden Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Mapmakers of Alaska
Marathon Oil
Marketing Solutions
Mayflower Catering
MEDC International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
MI Swaco
Michael Baker Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Millennium Hotel
MWH
MRO Sales
N-P
Nabors Alaska Drilling
Nabors Industries
NANA/Colt Engineering
Natco Canada
Nature Conservancy, The
NEI Fluid Technology
NIED LLC
Nordic Calista
North Slope Telecom
Northern Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Northern Transportation Co.
Northwestern Arctic Air
Offshore Divers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Oilfield Improvements
Oilfield Transport
Pacific Rim Institute
of Safety and Management (PRISM)
Panalpina
PDC/Harris Group
Peak Oilfield Service Co.
Penco
Perkins Coie
Petroleum Equipment & Services
Petrotechnical Resources of Alaska . . . . . . . . . . . . . . . . . . . . . 8
PGS Onshore
Precision Power
Prudhoe Bay Shop & Storage
Business Spotlight
By PAULA EASLEY
Ross Robinson, project manager
H.C. Price Company
H.C. Price Co. has specialized in
oil and gas pipeline work, process
facility construction for the petroleum industry and power plant construction for 83 years, and for 30 in
Alaska. The company is known for its
commitment to superior project management. Its experienced field personnel are dedicated to managing
quality projects and achieving ontime completions while reflecting
utmost concerns for safety and the
environment.
Ross Robinson joined Price 22
years ago after having worked on
the trans-Alaska pipeline and the
Northwest Alaskan Gas Pipeline
Project. He insists his project management skills not be measured by
progress on his new home, now
under construction. At current rates,
Ross expects completion by 2027.
Ross and wife Andul have two sons,
Alex and Gregory.
Q-Z
QUADCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Ranes & Shine Welding
Renew Air Taxi
Salt + Light Creative
Schlumberger
Security Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Seekins Ford
Smith Consulting Services
Span-Alaska Consolidator
Spenard Builders Supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
STEELFAB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Storm Chasers Marine Services
Taiga Ventures
Thrifty Car Rental
TOTE
Totem Equipment & Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Travco Industrial Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
UBS Financial Services Inc.
Udelhoven Oilfield Systems Services
Umiat Commercial
Unique Machine
Unitech of Alaska
Univar USA
U.S. Bearings and Drives
Usibelli Coal Mine
VECO
Weaver Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Worksafe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Well Safe
XTO Energy
All of the companies listed above advertise on a regular basis
with Petroleum News
13
FORREST CRANE
•
FORREST CRANE
PETROLEUM NEWS
Thomas M. Daniel, managing partner
Perkins Coie, LLP
Perkins Coie is the Northwest’s
largest law firm, with offices in
Anchorage, Seattle (home base),
Bellevue, Portland, San Francisco,
Menlo Park, Los Angeles, Phoenix,
Denver, Washington, D.C., Hong Kong
and Beijing. From its Alaska office
since 1977, it has represented communities and local and national
clients in litigation, labor and employment, construction, environmental,
and business transactions.
Tom graduated from Vanderbilt
Law School and practiced law in
Tennessee before joining the firm in
Alaska. He loves the field of law and
represents management in labor and
employment law and litigation. Tom
and wife Carol Daniel, general counsel for AFN, support the Anchorage
Concert Association, Boy Scouts and
United Way. They enjoy camping, hiking, skiing and travel.
14
PETROLEUM NEWS
MINNOW
Speaking to a Peters & Co. energy conference in Toronto in September, First
Calgary President and Chief Executive
Officer Richard Anderson confirmed that
outright sale is an option, although he
doubts a decision will be made before this
time next year.
By then First Calgary’s sole natural gas
assets in Algeria will need decisions and
big money to enter the marketing and
transportation phase.
Rather than grapple with the challenge
of raising capital to develop the holdings,
including 2.83 trillion cubic feet of proved
and probable reserves, and get in over its
head in negotiating either pipeline contracts to Europe or liquefied natural gas
shipments to North America, First Calgary
may choose to reap its rewards and move
on to other pastures.
Algerian entry defied the odds
Just gaining entry to Algeria defied the
odds in the first place.
It was the crowning moment for
Anderson in more than 25 years of nurturing oil industry minnows in North
America, then selling his creations.
In 1997 he retrieved First Calgary,
which was founded in 1940, but was sitting on the shelf, with no employees and
no assets.
Through a chance meeting, Anderson
secured a contract from Sonatrach,
Algeria’s national oil company, to conduct
an 18-month study of Algeria’s littleexplored Berkine basin, an anchor of
Algeria’s hydrocarbon riches which are
estimated at 9.2 billion barrels of oil and
160 trillion cubic feet of gas.
That gave First Calgary the foothold to
snag an exploration block in 2000 and
start drilling, with the financial backing of
former Russian oil minister Yuri
Shafranik, who Anderson told the
Financial Post is “all above board.”
The Canadian junior has since added
other concessions, notched a series of
exploration successes that have been testcontinued from page 1
ANGER
Cho have been lobbying the three communities to support lawsuits filed in
September in the Supreme Court of the
Northwest Territories and the Federal
Court of Canada to halt the current environmental review process.
Cournoyea said the Deh Cho do not
appear to have a clear idea what they
want, but are prepared to “choke” off
hopes of economic development in the
more northerly communities — a strategy she described as an “insult.”
The Deh Cho have demanded the right
to appoint two of seven members on the
joint environmental panel.
Leaders of the three communities
expressed their feelings Oct. 1 in Inuvik
at a meeting with Deh Cho Grand Chief
Herb Norwegian.
“These three groups feel offended that
no consideration was taken by the Deh
Cho as to how (the Deh Cho lawsuits) are
going to affect us,” Cournoyea said.
Threat seen to development
opportunity
In late September, Fred Carmichael,
chairman of the Aboriginal Pipeline
Group, said the Deh Cho action could
deny Northwest Territories residents the
self-sufficiency they deserve.
He expressed frustration that
Norwegian was prepared to remove that
opportunity “without even talking to us
or consulting with us.”
Carmichael accused Norwegian of
being influenced by his “southern advisors,” to which the Deh Cho chief replied
that he takes advice only if it advances
his community’s objectives.
“You’re not going to push this group
•
ed at cumulative daily flow rates of over
500 million cubic feet of gas and 40,000
barrels of oil.
Development could cost US$1.2 billion
But back in June Anderson told shareholders at the company’s annual meeting
that it might cost US$1.2 billion to develop the Algerian reserves and tie them into
a pipeline.
“I can backstop (an C$11-$12 stock
price) with the reserves assigned to us” by
Dallas-based
reservoir
engineers
DeGolyer and MacNaughton, he said.
To keep the ball rolling, Anderson said
in September that First Calgary is negotiating with two investment banks to
acquire US$75 million in unsecured debt
to cover its capital needs for the first half
of 2005, indicating a deal is imminent.
To date, it has raised C$214 million in
equity financings over the past three years
to fund its exploration program.
In addition, the company is in talks
with two Japanese financiers to spend
C$1.3 billion taking its southeastern
Algerian properties to the commercial
stage. ●
of people around and try to corner us in a
teepee, not on our home land,”
Norwegian said.
Norwegian has said a pipeline will not
be allowed to cross Deh Cho territory,
which covers the lower 40 percent of the
route, until the Deh Cho have a settlement of their land claim and are equal
partners in the pipeline decision-making
process.
Meanwhile,
the
Canadian
Environmental Assessment Agency and
the Mackenzie Valley Environmental
Impact Review Board, the agencies conducting the pipeline review, have extended a deadline for participant funding.
They initially offered up to
C$380,000 in the expectation that the
Mackenzie Gas Project consortium
would file its main applications before
the end of summer.
Filings could come in October
Although there have been indications
that filings could be made in October,
there has been no confirmation from
Imperial Oil, the lead partner.
The two agencies say applications for
funding will now be received up to 21
days after the environmental impact
statement is submitted by the proponents.
Brian Maynard, vice president of public affairs with the Canadian Association
of Petroleum Producers, took aim at all
sides — the Deh Cho, Northwest
Territories and Canadian governments, in
a mid-September speech to a
Yellowknife conference.
He said the Mackenzie project “is a
once in a lifetime offer … let’s be reasonable and get on with it. No one is benefiting at all today.”
He said the Deh Cho don’t understand
the issues, the federal government doesn’t know the North and the Northwest
Territories doesn’t understand the industry.
Maynard said the Northwest
Territories still face excessive environmental regulation at a time when the
industry is much more advanced than it
was 20 years ago in recognizing environmental issues.
He said politicians rather than regulators should take greater control of oil and
gas development.
“What we want are reasonable standards intended to address legitimate concerns to protect the environment and
people,” Maynard said. ●
PETROLEUM NEWS
•
15
BP
rig.
“Within the BP portfolio we’re the third
most active drilling and wells organization
worldwide,” Christman said, behind
Argentina and the Lower 48. BP expects to
see that level of activity continue, with capital spending in Alaska expected to be “pretty steady over the next five years,” after
which the company hopes to see drilling at
its Beaufort Sea Liberty prospect, and gas
development.
In addition to being a “good, steady
piece of very important work for BP,” North
Slope development drilling has also been “a
technology incubator” for the corporation
over the years, Christman said. New technologies have been developed on the North
Slope, and continue to be refined, he said,
noting in particular coiled tubing drilling,
and the use of multi-lateral drilling to access
viscous oil, with recoverable reserves (with
current technology) of 1.6 billion barrels.
He said coiled tubing drilling was “taken
from an idea and germinated … into a technology that’s a key part of our portfolio.”
Technology developed in Alaska is
exported to other operations, but also helps
Alaska. “We continue to show year-on-year
performance improvements through the
effective use of new technologies, as well as
the techniques that we employ in the
drilling and completion of our wells,”
Christman said.
“So our capital efficiency, despite the
fact that we’re going after smaller and
smaller accumulations of oil, tends to be flat
or improving on an annual basis, so performance improvement has been on, and
remains on, a good trend for continuation.”
The measures BP uses to compare
Alaska’s operation to the company’s other
business units include: number of days to
drill 10,000 feet; reserves added per million
dollars of investment; capital employed per
thousand barrels of oil a day; number of
days to complete a well; and number of
days to put a well on production after it has
been completed.
Coiled tubing drilling plays major role
Coiled tubing drilling plays a major role
in BP’s efforts to produce its North Slope
fields “as efficiently as possible and get the
most oil out of those mature fields,” said BP
senior coiled tubing drilling engineer Mark
O. Johnson.
BP set a coiled tubing drilling record at
the Niakuk field last March: “We drilled to
17,500 feet, which was a world record with
coil,” he said.
Coiled tubing was first used for drilling
in Alaska in 1993-94, and the technology,
used to reposition the bottomhole of a well
where the original well has petered out, has
been developed over those 10 years.
A 15,000-foot tube is put on a reel and
snaked into an existing well “with a bit and
a motor on the bottom of it” and used to
sidetrack out of an existing well bore to a
new bottomhole location, Johnson said. The
sidetracks are usually horizontal, and are in
the 2,000 to 2,500 foot range.
Coiled tubing drilling costs less than
rotary drilling, Johnson said, and allows
drillers to get “to trapped pockets of oil at a
lower cost than alternative methods.”
Downhole tractor trials
BP is trying to improve on coiled tubing
drilling technology so that it can drill
longer horizontal sections with coil, perhaps up to 4,000 feet Johnson said, and is
testing a downhole tractor that will help
pull the drilling bottomhole assembly.
A bottomhole assembly, some 100 feet
in length, is the drilling end of the coiled
tubing and includes the bit, a motor and
other tools (see illustration of Baker Inteq
bottomhole assembly).
A bottomhole assembly has a motor
behind the bit that turns the bit by pumping
fluids through it, “but you have to have
weight” behind the bit, Johnson said, and
the limitation of coiled tubing drilling is
that you can’t push that hard on the
15,000-foot coiled tubing, “it’s kind of like
pushing a noodle.”
If you can’t push, you can pull, and BP
is testing a tool called a tractor, designed to
pull the coil at the end, with the goal of
extending the length of horizontal sidetracks that can be drilled to as much as
4,000 feet.
The tractor is added to the bottomhole
assembly just behind the motor. The tractor is about 22 feet long (see illustration)
and about three inches in diameter, and has
arms that extend wheels out to grab onto
the hole that has been drilled, pulling the
coiled tubing along.
The tractor has “been tested now in two
wells with encouraging results, but it’s def-
initely in the testing phase,” Johnson said.
BP doesn’t know yet if this will work,
“and this is what we have to do with coiled
tubing drilling all the time: we come up
with an idea and we test it. If it works, we
run with it. If it doesn’t, then we go on to
something else.”
Leading edge for BP
Alaska represents the leading edge at
BP in using coiled tubing drilling “on a
regular basis and improving it,” Johnson
said. BP has drilled more than 50 sidetracks a year with coiled tubing drilling,
and has two rigs in continuous operation,
he said.
The majority of the coiled tubing
drilling sidetracks are at Prudhoe Bay, but
one of the rigs is currently working in the
Kuparuk River unit, and the company has
also done coiled tubing drilling at
Endicott, Milne Point, Lisburne, Point
McIntyre and Niakuk.
BP’s Alaska coiled tubing drilling experience is also being shared around the
world, Johnson said, with a recent successful gas drilling project at the Sajaa field in
Sharjah in the United Arab Emirates.
“Technology developed here is being
used there by BP and very successfully,
and they’re feeding back ideas to us that
we’re using and they’re helping our program.” ●
16
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