Niko Expands its Indonesian PSCs Portfolio

Niko Resources Ltd. has been awarded two new Production Sharing Contracts (“PSCs”) in Indonesia. The Company now has interests in 20 Indonesian PSCs including 13 in its West Papua portfolio.

As shown in above, the 8,217 Km2 SE Seram offshore block is adjacent to Niko’s Seram, East Bula and Kumawa blocks and also borders a third party block where the Andalan‐1 well is currently drilling. Niko will have a 100% working interest and operate.

The 6000 Km2 Halmahera II block is adjacent to Niko’s Obi, Halmahera‐Kofiau and Kofiau blocks. Niko will have a 20% working interest.

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Barite Market Tight as China Supplies Decrease

by  Jaime Kammerzell | Rigzone Contributor

Tuesday, December 20, 2011

There is a growing shortage of barite supply, which has the oil and gas drilling industry looking for alternatives. Barite, the mineralogical name for barium sulfate, is used primarily in oil and gas drilling, but also is used as non-toxic filler, extender or weighting agent in plastics, paints and rubber, and as a shield around nuclear power plants. It also has medical uses such as blocking x-ray and gamma-ray emissions, and a pharmaceutical grade barite is used for barium milkshakes for intestinal x-rays.

To understand the barite market today, Brian O’Connell, Senior Category Manager of Mined Products, Baroid Supply Chain Group of Halliburton, explained that “the cost of barite over the past 10 years has quadrupled, in the last 5 years it has tripled, and over the past 2 years it has doubled.”

In addition to the cost increase, a decrease in quality related to metals and contaminants and a decrease in availability of 4.2 g/cu cm, which has historically been the API specification, are contributing to the current supply issues.

Most barite comes from China, which was responsible for 51 percent of the global supply in 2010. India had a 14 percent share of the barite market followed by the U.S. with 9 percent, Morocco with 7 percent and the rest of the world with 19 percent, according to the Barytes Association. Mined barite in 2010 totaled 7 million tons.

“China is the major barite source and leads the market,” O’Connell said.

China’s mining industry is undergoing a safety overhaul as many accidents and deaths in non-oil and gas related mining industries have prompted the government to enforce stricter regulations comparable to U.S. regulations. With these new regulations comes additional expense that smaller mines can’t meet. Thus, the supply burden has fallen on the larger mines.

However, in some cases, the local and regional Chinese authorities have reduced production from the larger mines.

“Up until about 2 1/2 years ago in Xiangzhou County, otherwise known as Elephant County, in Guangxi province, the Chinese were producing 1.2 million tons of barite per year. This year, the volume has fallen to 300,000-350,000 tons, which is a reduction of almost 1 million tons out of China,” O’Connell explained. “With global barite production of 7 million tons in 2010, a 1 million ton reduction is a big hit to the market.”

To add to the cost, as miners produce more and more barite, they have to dig deeper and further away from export ports. Recent weather-related problems like flooding, droughts and earthquakes not only impacted barite mining, but also transportation to these export ports.

O’Connell also points to the U.S. dollar/Chinese Yuan exchange rate, which has seen a 25 percent change since 2005, as a source of rising barite costs.

According to O’Connell, the high level of worldwide drilling activity correlates to an increase in barite demand. Peak demand and a reduction of barite coming out of China are driving the price and quality issue. “With this kind of imbalance, the scale tips in favor of sellers,” O’Connell said.

India’s barite market also is impacting the global barite market. India is the second largest producer of barite in the world. However, the country only has one major source of barite and the government owns it. The government entity that manages the mine, APMDC, holds two tenders every three years. The first tender calls for bids to mine the barite, and the lowest qualified bid wins the business. The second tender calls for bids for the barite that comes out of the mine. This goes to the highest qualified bidder.

The latest tender in 3Q 2011 resulted in a dramatic overnight price increase of more than 70 percent on a freight on board (FOB) Chennai basis.

U.S. Barite

The United States produced about 9 percent of the world production in 2010 of barite and imports much of its demand. As major world-wide buyers, Baroid and other fluid service companies typically ship in large lot sizes — 60,000 tons in one shipment — from China to the U.S. Gulf Coast. But Chinese traders are having increasing difficulties accumulating that much material at one time, O’Connell explained, and as a result, lower quality material is making its way into cargoes to fill out vessels, resulting in inconsistent material quality.

Back in 2006, a major barite producer with Nevada mining operations converted to a lower grade of barite, 4.1, to extend their U.S. reserve base and reduce their reliance on imports. According to O’Connell, Baroid immediately followed, and the other two barite producers in Nevada followed soon after.

The Baroid mine in Dunphy, NV

The 4.2 and 4.1 barite grades from U.S. sources have basically the same types of impurities. All four of the Nevada producers sold the lower grade product prior to API approval with general customer acceptance. At the same time that this grade was being used in the field, the four major fluid service companies encouraged API to add the lower grade to the approved products list, which has been done.

“We are trying to get operators to stop using material that has a higher density than what they really need. As an industry, we’ve been pretty successful,” O’Connell explained.

O’Connell indicated that the trend toward 4.1 barite is spreading globally and is helping to reduce pressure on miners to dig deeper for of 4.2 barite.

Regardless, the current supply is so tight, fluid service companies are considering alternative materials or even lighter weight barite than 4.1.

“We’ve looked at hematite and calcium carbonate, but each has characteristics not suitable for weighting of mud like barite, which is why we are looking into lighter barite instead of alternatives,” O’Connell said.

Source – RIGZONE

Singapore: Dyna-Mac Receives LOIs from Leading FPSO Operators

Dyna-Mac Holdings Ltd. , a provider of detailed engineering, procurement and construction services (“EPC”) to the offshore oil and gas, marine construction and other industries, has secured orders worth a provisional sum of S$115 million, boosting its order book to a provisional value of S$190 million as at to date.

The Group has signed Letters of Intent (“LOIs”) with leading operators of floating production, storage and offloading vessels (“FPSOs”), including Modec, Bumi Armada Berhad and SBM Offshore, for the fabrication of nine topside modules, nine piperacks and one turret. These offshore structures are for FPSO OSX 3, FPSO D1 and FPSO Quad 204 and the projects are expected to be completed progressively by the end of 2013.

UK, India, Brazil

According to the vessel’s owner, OSX 3 Leasing B.V.,FPSO OSX 3 will be deployed within the Campos Basin, offshore Brazil, on the Waikiki field upon completion.

Bumi Armada’s FPSO D1 will be chartered to India’s State-owned Oil and Natural Gas Corporation Limited (ONGC) and deployed in the D1 field, 200km off the west coast of Mumbai, India.

FPSO Quad 204 will be deployed in the UK North Sea and its turret design is a large internal mounted system with a bogie wheel bearing arrangement, which will moor the FPSO in harsh environmental conditions. The Quad 204 turret has a total weight of 10,000 tonnes and is provided with arrangements for connecting 20 mooring lines and up to 28 flexible risers and umbilicals. The turret topside structures consist of 5 decks and a gantry accommodating the process piping, manifolding, equipment and swivel stack for handling a total fluid throughput of 320,000 barrels per day.

Mr Desmond Lim Tze Jong the Group’s Executive Chairman and CEO, said: “We have been in talks for these projects, amongst others, for some time and we are very pleased to have finally sealed these projects, which boosts our current order book to S$190 million. Our tender book remains healthy and we are confident about our growth outlook given that current market dynamics continue to encourage higher spending on exploration and production of oil. Our optimism is also supported by Dyna-Mac’s strong track record and reliable reputation as a FPSO / FSO topside module specialist among our customers, many with whom we have entrenched working relationships.”

115 million Singapore dollars = 88.27814 million U.S. dollars

190 million Singapore dollars = 145.85084 million U.S. dollars

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BOEM: Conditional Approval for Shell’s Chukchi Sea Exploration Plan (USA)

The Bureau of Ocean Energy Management (BOEM) on Friday, October 16, issued conditional approval of Shell Gulf of Mexico, Inc.’s revised Exploration Plan under leases in the Chukchi Sea Planning Area. In its Exploration Plan, Shell proposes drilling up to six exploration wells in Alaska’s Chukchi Sea beginning in the 2012 drilling season.

This decision follows the bureau’s completion of a site-specific Environmental Assessment that examined the potential environmental effects of the plan. The conditions of approval require Shell to comply with a range of important safety and environmental protection measures.

BOEM’s conditional approval does not authorize Shell to commence exploratory drilling in the Chukchi Sea. Shell must satisfy the conditions of BOEM’s approval, as well as obtain approvals from the Bureau of Safety and Environmental Enforcement (BSEE) regarding its Oil Spill Response Plan and well-specific applications for permit to drill.

“Our scientists and subject matter experts have carefully scrutinized Shell’s proposed activities,” said BOEM Director Tommy P. Beaudreau. “We will continue to work closely with agencies across the federal government to ensure that Shell complies with the conditions we have imposed on its Exploration Plan and all other applicable safety, environmental protection and emergency response standards.”

Shell acquired its leases in the Chukchi Sea in 2008 under Lease Sale 193, which BOEM recently reaffirmed after completing a Supplemental Environmental Impact Statement. All of these leases are subject to a series of stipulated requirements to mitigate operational and environmental risks, and the conditions for approval of Shell’s Exploration Plan build on and expand those requirements.

Among the conditions of approval is a measure designed to mitigate the risk of an end-of-season oil spill by requiring Shell to leave sufficient time to implement cap and containment operations as well as significant clean-up before the onset of sea ice, in the event of a loss of well control. Given current technology and weather forecasting capabilities, Shell must cease drilling into zones capable of flowing liquid hydrocarbons 38 days before the first-date of ice encroachment over the drill site. Based on a 5-year analysis of historic weather patterns, BOEM anticipates November 1 as the earliest anticipated date of ice encroachment. The 38-day period would also provide a window for the drilling of a relief well, should one be required.

Shell must also obtain necessary permits from other agencies — the Environmental Protection Agency, the U.S. Fish & Wildlife Service, and the National Marine Fisheries Service.

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Brazil: Deep Sea Supply Takes Delivery of New PSV

Deep Sea Supply, an international operator of offshore supply vessels has taken delivery of the newbuilding platform supply vessel (PSV), Sea Brazil, from STX OSV in Brazil.

A naming/launching ceremony was held on November 15 in STX OSV shipyard in Niteroi, Brazil.

The vessel is of STX 09 CD design, 87,9 meters long with ability to accommodate a crew of 26.

To see the vessel launching ceremony please follow the enclosed link.

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BP Gains Access to 5 More Deepwater Blocks Off Angola

BP’s involvement with Angola goes back to the mid 1970s. During the 1990s, BP made very substantial investments in Angola’s offshore oil, and it is now an important part of the company’s upstream portfolio. The UK based oil giant today confirmed that it has gained access to five more deepwater exploration and production blocks offshore Angola.

These give BP a leading position in Angola, with interests in nine blocks accounting for a total acreage of 32,650 square kilometres (km2).

In a ceremony today in Luanda, in the presence of state oil company Sonangol’s president Manuel Vincente and BP group chief executive Bob Dudley, the production sharing agreements were signed for four new blocks covering 19,400 km2 in the Kwanza and Benguela basins.

Separately, BP has recently taken a 40% stake in the 4,840 km2 Block 26 in the Benguela basin, by agreeing a farm-in deal with Brazilian national oil company, Petrobras, which operates the block.

“In October, we told the markets we would build on our strengths in exploration and in the deepwater to provide future growth for BP. This new access builds on the major presence we have developed in Angola over the past 10 years, investing a total of $21 billion in the business. We plan to double our global spend on exploration and this huge new acreage gives us more great opportunities. We look forward to working with Sonangol in the Kwanza and Benguela basins,” said Bob Dudley. “The last 14 months have been our most successful for a decade in gaining new access for exploration – with 69 new exploration licences in 11 countries.”

BP was awarded operatorship of Blocks 19 and 24 with 50% interest, and additional non-operating interests in Blocks 20 (20%) and 25 (15%). With Block 26, the five new blocks cover a total area of 24,000 km2 in water depths from 200 to 2500 metres, and increase BP’s total Angolan acreage by 275%.

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USA: Pacific Santa Ana Drillship Hits the Water

Pacific Drilling S.A. has taken delivery of its newest drillship, the Pacific Santa Ana. The drillship features the most advanced drilling technology in the offshore drilling industry, including dual load path capability and dual gradient drilling upgrades.

The “PACIFIC SANTA ANA” is an upgraded Dual Activity Samsung 12000 design dynamically-positioned drillship capable of operating in moderate environments and water depths up to 3,657 m (12,000 ft) using 18¾” BOP and 21” OD FT-DGD drilling riser and equipped for single and/or Dual Gradient Drilling (DGD)

The Vessel is expected to commence operations in the U.S. Gulf of Mexico in Spring 2012 under a 5 year contract with a Chevron subsidiary

Pacific Drilling CEO, Chris Beckett, stated, “We are very proud to announce the delivery of the Pacific Santa Ana. This drillship incorporates the newest advances in offshore drilling technology and is the first ultra-deepwater rig equipped for dual gradient drilling, an innovation that is expected to provide significant benefits in drilling safety and efficiency. The delivery of the Pacific Santa Ana, the fourth rig in our fleet, completes the first phase of Pacific Drilling’s growth strategy to become the industry’s preferred ultra-deepwater drilling contractor.”

The company currently operates four recently delivered drillships and has two additional drillships on order at Samsung to be delivered in 2013.

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