Daily Archives: November 4, 2011
By Rob Almeida On November 4, 2011
It’s about a two and a half hour helicopter flight from Louisiana to get to this lonely patch of ocean far out in the Gulf of Mexico, but the Geoscientists at Statoil said that’s where the oil would be. They called the spot Logan and was located at block 969 in Walker Ridge.
Looking at a chart of the Gulf of Mexico, that’s way the heck out there.
For the past 6 months, the Discoverer Americas, a 6th-generation drillship owned by Transocean, has been sitting out there, precisely on station in around 7800 feet of seawater… slowly turning a drill string dangling far beneath the ship.
This rig is one of the newest in Transocean’s fleet, and her dual activity derrick and highly experienced personnel made her certainly one of the most capable. Built at DSME in Okpo, Korea, her Commissioning Manager, a former US Marine officer and Citadel grad, did an impeccable job in making sure she was ready to go to work as soon as the time came to leave the shipyard back in 2009.
Over the past two years, she covered a lot of ground crossing the Indian Ocean, South Atlantic, and then the Gulf of Mexico before starting on her first well in Mississippi Canyon at a well site called Krakatoa.
It was a heck of a well to start with, and at times her name seemed to be a good fit. After many months on the ocean, while enduring a frigid winter on the Gulf, and countless drilling challenges, the Deepwater Horizon exploded, bringing Gulf of Mexico drilling operations to a screeching halt.
Discoverer Americas off Durban, South Africa, Image (c) Robert Almeida
A few months later, Statoil decided it was time to cram as much gear on board as possible and point the Americas’ bow east, and head back across the Atlantic. Next stop Egypt.
Drilling operations began in a pretty straightforward manner, not many issues. It was deep water, but a relatively shallow well. Or so they thought.
Thousands upon thousands of feet down they drilled, but still nothing. No signs of hydrocarbons, but soon the question of what to do next was once again answered for them.
Egypt erupted in a revolution, ending all possible support from shore. Cairo-based personnel from Statoil and Transocean left town as fast as they could, and soon thereafter, the Discoverer Americas pulled their riser and followed suit, back across the Atlantic Ocean to the Gulf of Mexico.
This was her forth major ocean crossing in 3 years, and she had yet to hit paydirt. Logan had been on the plans ever since she arrived in the Gulf of Mexico a year earlier, and now was the time to earn their paycheck, and hopefully give Statoil the return on investment they were looking for.
This past April, the Logan well was “spud-in” with 36-in casing, officially starting the top section of what would end up being an enormous steel and concrete structure extending miles down below the sea floor of the Gulf of Mexico. Over the next few months as they drilled through dozens of different sediment layers such as shale, sand, and thousands of feet of salt while carefully shoring up the well from the internal pressures of the earth with strings of steel pipe.
The geologists on board carefully analyzed the drill cuttings entrapped in mud that was returning back to the surface. They were looking for the dead remnants of ancient organisms deposited long ago. Finding the right type of organism would be a clue that hydrocarbon-rich sands were close by.
After 6 months of drilling, with their drill string extended nearly 5 miles into the earth, they found what they were looking for. Their polycrystalline, diamond-studded drill bit had finally cut through a formation that was saturated with oil. It was the Americas’ and Statoil’s first find in nearly two years of drilling. Very little public information about how much oil was found and its properties is available however outside of the inner circles at Statoil.
Even Transocean has no idea how much, or exactly what was found, but at the end of the day, none of that matters.
As an offshore drilling contractor, they safely executed an incredibly complex drilling program in waters over a mile and a half deep, allowing their client to gain incredibly detailed and valuable information about the geology present in the Gulf of Mexico.
Next up for the Discoverer Americas is a few month drilling contract for Anadarko at the Heidelberg Prospect in Green Canyon. Sitting below 5,000 feet of seawater, this well will reach over 30,000 feet below the wave tops to an area that has already proven to hold a significant amount of high quality oil-bearing sands.
Congrats to Transocean and the crew of the Discoverer Americas for a job well done.
- Statoil and Transocean pull out of Egypt
- Transocean to Buy Norwegian Firm Aker Drilling
- Transocean CEO on new contracts, speculative shipbuilding, and the Deepwater Horizon [WEBCAST BREAKDOWN]
- Gulf of Mexico: Vector Lands Cascade Chinook Field Job (mb50.wordpress.com)
- Hess to spend $2.3 billion to develop Gulf of Mexico oil field (mb50.wordpress.com)
- USA: Statoil Signs Energy Partneship Agreement with UT (mb50.wordpress.com)
ALICE — For a city that always has lived and died by the oil field, life is good right now.
Flush with cash generated from sales and hotel occupancy taxes — all bringing in money associated with the oil and gas boom — the town is planning something most South Texas cities couldn’t contemplate even a few years ago: paying for a new event center without dipping into reserves and without taking on debt.
In the past two fiscal years, Alice set aside more than $4 million in seed money for the project, envisioned as a multipurpose convention center and natatorium. It has committed $70,000 to an assessment to determine the type and scale of facilities the community wants.
This phase included a town hall meeting Tuesday night, dominated by the community’s swimmers, including swim team coaches and student athletes lamenting the practice time lost on hourlong bus rides to and from Corpus Christi, site of the nearest pool that serves their training needs
Years from now, Alice swimmers may not draw a connection between the convenience of a modern, hometown pool and the heavy oil field trucks that lumber to and from town with loads of sand, water and drilling equipment. But to project planners and city leaders, that connection is everything.
Alice sits just south of the Eagle Ford Shale, a 400-mile long underground rock formation in Central and South Texas unleashing ancient stores of natural gas and crude oil with new technology called hydraulic fracturing. In the past two years, oil field service companies have expanded their Alice facilities, brought hundreds of jobs and filled up every hotel room in Alice, prompting more to to be built.
“If Eagle Ford Shale was not in play to the level it is, there would still be a need (for a multipurpose center), but it would not be as big,” City Manager Ray De Los Santos said. “There would still be funding available, but it would not be as much.”
For the fiscal year ending Sept. 30, Alice budgeted $650,000 a month in sales tax revenue. Only one month came in under $1 million, giving the city a $6 million surplus.
The event center project was being considered even before the Eagle Ford boom started in earnest in 2009. But the facility almost surely will be larger than what was initially imagined because the city can afford it, and because it anticipates the demand will be there to support it for years to come.
Oil boom and bust cycles notoriously are unpredictable and, at least in the past, short-lived on the boom end. But with Eagle Ford, analysts are expecting a ramp-up in production to last as long as 10 years, with production remaining steady at least another decade.
“This has changed the model for communities in South Texas because they have a long-term horizon where they can plan for capital improvements,” said John Michael, project engineer for Naismith Engineering. Naismith is conducting the needs assessment in Alice and has contracts with governments throughout the region.
Michael said there has been a dearth of new swimming pools in South Texas in the past 30 to 40 years because the last bust cycle drained the financial resources of communities and they never fully recovered.
De Los Santos said Alice isn’t taking Eagle Ford longevity for granted. Other South Texas cities have struggled with keeping convention centers and similar venues afloat. Last fiscal year, the American Bank Center convention center and Selena Auditorium in Corpus Christi posted a $1.3 million loss. And in Aransas Pass, the convention center has become a political football as officials try to figure out how to make it profitable.
It’s unclear how much the Alice multipurpose center would cost, where it will be built or exactly what it will entail. Project planners want to spend more time gathering input before making decisions.
The $70,000 study includes market analysis, financial projections, economic impact analysis, and aquatic and convention center complex conceptual analysis, De Los Santos said.
The general vision is a campuslike setting with meeting facilities, room for a privately-developed hotel, walking trails in a parklike area, and, of course, the pool.
Swim team coaches, members and athletes told the planners Tuesday that the city, with only one six-lane municipal pool that’s at least 30 years old, sorely needs a facility ready for competition, for family relaxation and for general health in a community suffering high obesity rates.
The town has a nonprofit swim group of more than 100 participants in the summer, and its school swim teams regularly compete at the state level.
Alice High School‘s senior class president, Horacio Rangel, said he rides two hours on the bus every day to keep up his swim training, but the bus isn’t the best environment for homework. He recently dropped to No. 22 in academic ranking in his senior class.
“I’d be top 20,” he said, “if I had more time to study.”
French oil and natural gas major Total is close to signing a firm long-term sales agreement with Cheniere Energy to lift 3.5 million tonnes per annum (mtpa) of LNG from its Sabine Pass liquefaction project, according to sources close to the deal.
The structure of the deal is understood to be virtually identical to Cheniere’s 20-year sales and purchase agreement signed with BG Group last week, the first firm offtake deal signed by the project. Under that agreement BG will pay the US developer a fixed take-or-pay fee of $2.25/MMBtu to cover the procurement, liquefaction and loading costs at the Sabine Pass plus an interruptible 115% of US Henry Hub natural gas futures fetching fee paid to Cheniere to provide free on board (FOB) cargoes.
Total is also understood to be taking the commercial export agreement one step further by assuming an ownership stake in Cheniere’s Sabine Pass Liquefaction company. Specific terms of the equity stake were undisclosed.
Bringing an equity partner into the project has been seen as crucial for Cheniere if it is to secure its financial future and reduce its $3.14bn debt, which includes $2.2bn specifically related Sabine Pass.
While credit rating agency Standard & Poors (S&P) called Cheniere’s deal with BG a “significant milestone” in its efforts to generate future cash flows, it has reaffirmed its CCC+ junk-status rating with a negative outlook.
“Assuming its current liquidity does not materially improve, Cheniere will not be able to make its 2012 maturity payments,” S&P said in a report released on Monday.
“The company must generate significantly more liquidity to avoid further credit deterioration or default. We believe its options include further asset sales and terminal use agreements (TUAs), incremental LNG marketing activity, equity offerings, and debt restructuring.”
Closing in on sales threshold
A firm 3.5mtpa sales commitment from Total would bring Cheniere to the 7mtpa threshold, a figure that chief executive Charif Souki told ICIS Heren last week was the target for moving forward with the first phase of the liquefaction project.
Phase One at Sabine Pass is planned for two liquefaction trains of 4.5mtpa capacity each, with Cheniere indicating that it will retain and market the remaining 2mtpa.
Cheniere and Total both declined to comment when contacted to confirm the deal.
Total is already an import capacity holder at Sabine Pass where it has 1 billion cubic feet/day – 0.2 million cubic metres/day – of regasification capacity as part of 20-year terminal utilization agreement.
The agreement with Cheniere follows Total’s declaration last week that the company has been studying the possibility of exporting US gas but provided no additional details.
“With this increase in its stake, Siemens is strengthening its activities in ocean power generation. We will actively shape the commercialization process of innovative marine current power plants,” said Michael Axmann, CFO of the newly founded Solar & Hydro Division within Siemens’ Energy Sector.
Marine Current Turbines (MCT) has evolved from a pioneer to a technology leader in horizontal axis marine current turbines and now has 25 employees. In February 2010 Siemens acquired a minor stake in the Bristol-based company and thus entered the marine tidal current market. Financial details of today’s announcement are not disclosed.
Ocean power is emerging with strong growth rates driven by global CO2 reduction commitments. Until 2020, experts anticipate double-digit growth rates for the ocean power market. Based on further estimates the global potential for power generation using tidal power plants is 800 terrawatt-hours (TWh) per annum. For comparison, that is equivalent to between three and four percent of power consumption worldwide.
Dr Andrew Tyler, CEO of MCT said: “Through the expansion of the partnership with Siemens, we have further strengthened our position in the tidal energy market. We have the increased backing of a major industrial player which is essential to support the commercialization of our proven technology. We are about to approach investors to secure funding for our first two tidal array projects, and Siemens’ increased investment as well as UK Government support should give investors the confidence that we have the necessary backing to deliver these crucial projects and the ones to follow.”
MCT plans to present two Project Investment Prospectuses to the market within the next month for its 8 megawatts (MW) Kyle Rhea project in Scotland and its 10 MW Anglesey Skerries project in Wales. For both projects, applications for leases from The Crown Estate have already been approved. The UK Government’s recent ROCs Banding announcement (October 20) will support these projects with 5 ROCs per megawatt hour proposed for tidal energy.
In addition, MCT is planning to deploy a tidal system into the FORCE facility in Canada’s Bay of Fundy and has an approval for a lease from The Crown Estate to deploy a 100 MW tidal farm off Brough Ness, on the southern most tip of the Orkney Islands in Scotland.
MCT has already successfully implemented its first commercial scale demonstrator project SeaGen in Northern Ireland’s Strangford Lough. Since November 2008, SeaGen’s two axial turbines, with a combined capacity of 1.2MW, have been feeding power into the grid to supply the equivalent of around 1500 homes. SeaGen has to date generated over 2.7GWh of electricity to the grid, the largest amount of electricity in the whole of the ocean power sector.
Marine current turbines generate electricity by utilizing tidal current flows. The SeaGen turbine is fixed on a structure and is driven by the flow of the tides with a key advantage that the generated power is precisely predictable in the tidal cycle. This technology effectively is similar to that of a wind turbine with the rotor blades driven not by wind power but by tidal currents. Water has an energy density of more than 800 times that of wind. Twin rotors rotate with the movement of the tidal flow and pitch through 180 degrees to optimally track tidal current direction and speed.
Marine current turbines are part of Siemens’ Environmental Portfolio. In fiscal 2010, revenue from the Portfolio totaled about EUR28 billion, making Siemens the world’s largest supplier of ecofriendly technologies. In the same period, Siemens’ products and solutions enabled customers to reduce their carbon dioxide (CO2) emissions by 270 million tons, an amount equal to the total annual CO2 emissions of Hong Kong, London, New York, Tokyo, Delhi and Singapore.
- UK: Rolls-Royce Hits 100MWh Milestone with Tidal Technology (mb50.wordpress.com)
- Wave and tidal power almost ready for mass consumption, says Alex Salmond (guardian.co.uk)
- More funding for wave and tidal (bbc.co.uk)
“It will cost a little more than expected for environmental reasons… We had originally said $30 billion,” Total Chief Executive Christophe de Margerie told Reuters on the sidelines of a G20 meeting of business leaders in southern France.
The project, developed by Total and Japan’s Inpex , *aims to build offshore facilities to produce natural gas and condensate, and an undersea pipeline stretching 885 km to a liquefaction plant in Australia’s northern city of Darwin.
It is expected to produce 8.4 million tonnes of liquefied natural gas, liquefied petroleum gas and condensate each year.
The project was initially estimated to cost $20 billion but de Margerie said that the company had in recent months been citing the figure of $30 billion in road shows.
Total currently owns 24 percent of the project, a stake the French company would be keen to increase, de Margerie said.
“We would like to have more than that,” he said, giving no details on whether Inpex, which holds the remaining 76 percent of Ichthys, would agree to let Total raise its stake.
The strict environmental conditions imposed by the Australian government to develop the project explain the upward revision in the project’s cost, de Margerie said.
De Margerie said he expected a final investment decision (FID) to be made by year-end, with a view to start production in four years.
He did not comment on the outcome of reported meetings by bankers in Tokyo and Sydney that were aimed at putting together the financing needed for the development.
“In Ichthys like for every big project we have been in, the FID will be made before the financing is in place,” de Margerie said.
LNG project developers typically seek and sign long-term deals to sell their gas before they begin construction. Inpex said earlier this year it had secured buyers to cover the whole annual output of 8.4 million tonnes from the Ichthys project.
Reporting By Marie Maitre (Reuters)