INTERNATIONAL FOCUS

Marshall DeLuca
Houston

• Petrobras' nine world water depth production records [16,362 bytes].

Petrobras opens the lead in deepwater derby

Petrobras is determined not to let the opening of Brazil's petroleum sector overshadow its dominance as one of the leading deepwater players in the industry. The company has further enforced this with yet another feat of world record proportions. In what was once termed the "deepwater derby", the race between Petrobras and Shell for advancing technology in world record water depths, Petrobras has set the ninth world water depth record.

The company broke its own record for oil production - 5,607 ft for Marlim Sul - by 472 ft. The company has brought the Roncador Field in the Campos Basin off Brazil onstream in 6,079 ft water depth in a little over two years since discovery (October 1996). The producing well, 1-RJS-436A, has stabilized production at 20,000 b/d of 31° API oil being produced to the Seillean FPSO, which has a production and processing capacity of 20,000 b/d of oil and storage capacity of 306,000 bbl.

The development system includes the Seillean on full dynamic positioning installed directly above the well, and a christmas tree and riser specifically designed for the deepwater operating conditions as well as re-utilization in another location. In addition to the water depth record, the development also set records for the deepest FPSO host unit (6,079 ft), and the shortest period from host unit chartering to first oil (10 months).

Roncador is believed to hold 2.7 billion bbl of reserves, and produce 180,000 b/d of oil until 2001. Geologists expect these numbers to increase as more exploratory work is done. This will include the drilling of 21 additional wells for which the company plans to invest R$2 billion. Petrobras plans to use this first development and the data gathered on the productivity of the reservoir as a base for the further development of the field.

On the exploration side, Petrobras signed its first agreement with international companies for exploration in the Campos Basin. The company signed an agreement with Amerada Hess, British-Borneo, and Odebrecht of Brazil for the exploration and production of oil in Block BC-8 in the Campos Basin and Block BS-2 in the Santos Basin.

The work program for Block BC-8 will include an investment of $31 million for a 1,700 sq km 3D seismic campaign and the drilling of one to three wells. For Block BS-2, the companies will invest $41 million and perform a 2,300 sq km 3D seismic survey and the drilling of one to four wells.

India opens NELP bidding round

India has finally opened its long-awaited first licensing round under its New Exploration Licensing Policy (NELP). Forty-eight blocks are on offer - 10 onshore and 38 offshore - and 12 are in deepwater. Over 67% of these areas have been previously unexplored.

The NELP offers the most attractive fiscal and contract terms ever offered in the country for international operators. T.S. Vijayaraghavan, Secretary of the Ministry of Petroleum & Natural Gas, said in a promotional forum in Houston that these terms were made in such a way to expedite the bids and sign the contracts before the end of the year.

The attractiveness of the NELP comes from its stress on creating a level playing field between indigenous and international companies. Specifically, the award of licenses is made through an open international competitive bidding system in which national oil companies will compete for licenses at par with private companies. It also allows for 100% foreign participation with no signature bonus, upfront payment, company registration requirement, or import duties. Further incentives include an income tax holiday for seven years from initial production and a biddable cost recovery limit up to 100%.

For the deepwater, companies will be charged half the royalty rate for the first seven years from production. One extra year will be provided in the first exploration phase of the contract. Royalty rates are 12.5% of international market value for crude for onshore prospects. Offshore areas will be given a 10% royalty for oil and gas, and 5% for deepwater areas - for the first seven years of production. The bidding round will close on May 18.

India hopes that this round will help facilitate the country's fast-growing energy demand. The country's demand for petroleum products is growing at a rate of 7%, of which only 37% is met by local supply. Dr. A.R. Sihag, Director for the Ministry of Petroleum & Natural Gas, said, "It is projected that if the present growth trend continues, then contribution from indigenous production may fall below 25% in the next decade."

The opening of this round was delayed for some time due to conflicts between the Ministry of Petroleum and Ministry of Finance over the terms of the NELP. Many believe that even with the lucrative terms, the delay may have hampered India's chances of attracting the bids needed to meet their demand. However, Dr. Sihag said that the ministry sent out bid documents to 50 companies and 30 responded in great detail.

GLOBAL E&P BRIEFS

Africa: The Foxtrot Consortium, led by operator Apache, has tested 40.6 MMcf/d of gas, 600 b/d of condensate, and an open flow potential of 350 MMcf/d of gas from its first production well on the Foxtrot gas field off Côte d'Ivoire. The well, Foxtrot A-1, is expected to begin initial production in the first quarter at 30 MMcf/d of gas, which is planned to escalate to 50 MMcf/d of gas in 2001. A second well is currently being drilled. The Foxtrot Field has 660 Bcf of proved reserves and is the country's largest gas field. Apache holds a 24% interest with partners SECI (24%), ENERCI (12%), and state-owned Petroci (40%).

Canadian Occidental has received final approval of the acquisition of 20% interest in OPL 222, and OPL 223 offshore Nigeria from Elf. The blocks cover 700,000 acres in water depths between 460-3,500 ft. A discovery well has been drilled on the 222 lease which encountered an aggregate flow of 13,900 b/d of oil from two intervals. The acquisition also included three onshore blocks. Elf is the operator of the blocks with 20% interest remaining and partners: Chevron and Esso each holding 30%.

Americas:
Three pipeline companies have formed a group aimed at delivering gas from the Hoover and Diana prospects in the Gulf of Mexico. ANR Pipeline, Leviathan Gas Pipeline Partners, and Natural Gas Pipeline Company of America have formed the East Breaks Gathering Company. Under an agreement with Exxon and BP, who are developing the prospects, the group will own and operate facilities to deliver gas from the fields to the interstate natural gas pipeline system. The group will spend about $90 million on the construction of an 85-mile pipeline from the production facility on Alaminos Canyon Block 25 to the existing High Island Offshore System at High Island Block A-573.

Statoil and partners Phillips, Dopas, and Nunaoil, have decided to postpone drilling on the Fylla license off western Greenland until the summer of 2000. The decision was based on a lack of a suitable drilling unit for the area. The West Navion drillship was planned for the program, but has experienced heavy delays and is currently being outfitted. The vessel was due for operation in the fourth quarter of last year. The partners attempted unsuccessfully to find an alternative vessel. Fylla is the first award granted off Greenland since the 1970s. The license covers 9,487 sq km and is located in water depths up to 1,200 meters.

Partners in the Genesis project in the Gulf of Mexico have celebrated first oil. Genesis is located in 2,600 ft of water on Green Canyon Blocks 205, 160, and 161. Production is expected at 30,000 b/d of oil and over 20 MMcf/d of gas during this year, with a steady increase to peak production levels of 55,000 b/d of oil and 72 MMcf/d of gas by 2000. Production is being handled by the Genesis Spar platform, which has the unique capability of handling both production and drilling. Partners in the project are Chevron (56.67%), Exxon (38.38%), and PetroFina (4.95%).

Operator Chevron and joint partner BHP have made an oil discovery on the Typhoon deepwater prospect in Green Canyon Block 237 in the Gulf of Mexico. The Green Canyon 237 #1well was suspended after penetrating 310 net ft of pay in several zones. The well is the second well drilled on the field. The first well, Green Canyon 236 #1 encountered 130 net ft of pay in a separate structure. A third well, GC 237 #2 is currently drilling and two to three appraisal wells have been planned for this year.

Asia-Pacific:
Sabah Shell and Petronas Carigali are taking a wait-and-see attitude toward the development of a large gas field off Sabah in east Malaysia. The companies have discovered the Kanunsu East gas field in Block G located to the north of the Kebabangan gas field with a well that indicates commercial reserves. However, the companies are evaluating potential changes in market demand before a development plan is created.

Petronas, the state oil company of Malaysia has entered into three production sharing contracts with Murphy Oil for blocks off Sabah and Sarawak. According to the contracts, Murphy will get an 85% interest in Blocks SK309 and SK311, which have a combined area of 9,800 sq km. The company will also receive an 80% stake in Block K in the 16,700 sq km deepwater offshore Sabah block, Petronas' largest block. Murphy will operate the blocks and will perform new 2D and 3D seismic and the reprocessing of existing seismic on the blocks. Murphy will also drill two wells each in Block SK309 and SK311 and one well in Block K.

Indian state oil company Oil and Natural Gas Corporation (ONGC) has decided to invest about $470.6 million in an enhanced oil recovery program for the Bombay High Field offshore Maharshtra. The first phase of the plan will allow ONGC to increase recovery potential from 26% to 35-40% by the year 2015, resulting in a production increase of 2 million tons per year. The second phase of the plan is aimed at raising recovery to 50%. The plan is being developed in collaboration with consultants Gaffney Cline & Associates.

Mobil and Phillips have been awarded a production sharing license for the Athena gas-condensate discovery in the Carnarvon Basin offshore Australia. The license is called WA-17L and each company will hold a 50% interest. The Athena Field lies in exploration permit WA-248-P and has been confirmed as an extension of the Perseus Field. The companies are currently discussing development plans.

Europe:
The UK Department of Trade and Industry has given its consent for Texaco and partner Korea Captain to expand the Captain oil field in UK Block 13/22a. the expansion will include an increase in production from 60,000 b/d of oil to 85,000 b/d by developing Area B in the eastern portion of the field. The companies have contracted Kv?rner to design, fabricate, and install a bridge-linked platform for the project. A development drilling program will begin in the summer of 2000 with first oil expected later that year.

Enterprise has brought the Pierce Field in UK North Sea Blocks 23/22a and 23/27 onstream. The field began producing at an initial rate of 20,000 b/d of oil to the Berge Hugin FPSO. The company expects production to expand to 45,000 b/d early this year. Reserves in the field are estimated at 84 million bbl of oil and 202 Bcf of gas. Enterprise operates the field with a 73.99% interest with partners Agip (3.7%), MOC Exploration (3.75%), Ranger Oil (15.6%), and Petrobras (2.925%).

Following the close of Ireland's South Porcupine Frontier Licensing Round in December, the only two bidders, Elf and Agip, are still awaiting the results. The round included acreage primarily in the South Porcupine Basin, the location of the Connemara prospect. Connemara was discovered in 1979 and flowed 5,589 b/d of oil in 1,200 ft of water. Elf is reported to currently be in discussions with the government over the proposed work program of its bidded area.

The Asgard A production vessel has arrived on location on Statoil's Åsgard Field in the Norwegian Sea. The vessel is currently undergoing hookup and should be onstream by the spring.

Copyright 1999 Oil & Gas Journal. All Rights Reserved.