March 2011

Report: Blowout Preventer Failed Because of Off-Center Drill Pipe *Updated*  


( - March 23, 2011) 

BP Logo

   A piece of drill pipe wedged between key components of the blowout preventer used at BP's doomed Macondo well kept the emergency equipment from blocking surging oil and gas - and stopping the Gulf spill last year - according to a forensic examination of the device. The conclusions were outlined in a 551-page report released today and written by the forensic examination firm that has spent months putting the 60-foot-tall, 300-ton equipment through a battery of tests to find out why it failed April 20.

     According to the firm, Det Norske Veritas, the failure was rooted in the inability of powerful blind shear rams on the device to slash through slightly off-center drill pipe and seal closed. Because the portion of drill pipe located between the shearing blades of those rams had buckled and moved off-center, it was outside the space where the rams were designed to slash through obstacles. "As the blind shear rams closed, a portion of the drill pipe cross section became trapped between the ram block faces, preventing the blocks from fully closing and sealing," DNV reported.

The company elaborates:


     As the blind shear rams were closed, the drill pipe was positioned such that the outside corner of the upper blind shear ram blade contacted the drill pipe slightly off center of the drill pipe cross section. A portion of the pipe cross section was outside of the intended blind shear ram shearing surfaces and would not have sheared as intended. As the blind shear rams closed, a portion of the drill pipe cross section became trapped between the ram block faces, preventing the blocks from fully closing and sealing."

     The company found that the physical problem would have occurred regardless of how the blowout preventer was activated - whether by an automatic "deadman's switch" or using hydraulic signals sent from workers on the  Deepwater Horizon rig that exploded and sank after the blowout. The drill pipe probably shifted and buckled as soon as well control was lost, DNV found.

     The report released today is likely to feed calls for a redesign of blowout  preventers, including proposals for redundant pipe-cutting components and more powerful rams. On Capitol Hill, lawmakers have advanced legislation that would require an additional blind shear ram that could sever pipe and seal an open well hole even if debris blocked other rams from functioning.

     The federal Bureau of Ocean Energy Management, Regulation and Enforcement separately imposed new mandates on blowout preventers, including independent third-party verification that the blind shear rams are capable of cutting any drill pipe in a well hole under the highest anticipated surface pressure.

     Rep. Ed Markey, D-Mass., the top Democrat on the House Natural Resources Committee, said the report casts doubt on whether blowout preventers can ever be counted on as a last line of defense against runaway wells. "Now we know there could also be systemic design issues with blowout preventers that could cause them to be ineffective, even when deployed as intended," Markey said. "It isn't clear from this report that blowout preventers can actually prevent major blowouts once they've started. We cannot turn a blind eye to the fact that the blind shear rams did not seem to work." Markey called on the Interior Department to immediately launch a top-to-bottom inspection of the design and effectiveness of blowout preventers used in U.S. waters.

     Invented nearly 90 years ago, blowout preventers are giant stacks of valves installed on top of land and sea wells to help maintain control during unexpected pressure changes. The BOPs play their most vital role in emergencies, when metal shear rams are designed to slash through the drill pipe and casing, and a so-called blind shear ram is supposed to slam shut and seal off the open hole.

     The blowout preventer at the Macondo well was manufactured by Cameron International and carried on Transocean's Deepwater Horizon drilling rig. A spokesman for Cameron noted that "the BOP was designed and tested to industry standards and customer specifications," and said the company continued "to work with the industry to ensure safe operations."

     Officials for BP, which leased the Deepwater Horizon drilling rig from Transocean, said the oil company was still reviewing the report. "We . . . agree with the report's recommendation that additional testing should be completed to provide a more comprehensive view of why the BOP failed," the company said in a statement. "We support efforts by regulators and the industry to make BOPs more reliable and effective."

     BP has asked a federal court to let the company put the equipment through more tests, but Cameron insists that any additional examination should be done by a neutral auditor. Officials with the Chemical Safety Board, which witnessed the BOP examination, also pushed for further testing.

     DNV began testing the device at a NASA facility in New Orleans in mid-November, at the direction of the Coast Guard and Bureau of Ocean Energy Management, Regulation and Enforcement, which are jointly investigating the Deepwater Horizon disaster. The Coast Guard and ocean energy bureau will examine the blowout preventer testing results during hearings the week of April 4 in New Orleans.

     All of the companies with a stake in the BOP testing - including BP, Cameron and Transocean - were on site for the examination, but they were barred from manipulating the device. Representatives from the Chemical Safety Board, the Justice Department and the plaintiffs in a spill class action lawsuit also were on hand for the testing.

Asset Sale Expanding for ConocoPhillips 

( - March 23, 2011) 


ConocoPhillips logo


     Conoco Phillips will sell up to $10 billion in additional assets over the next two years, significantly upping a previous target, as it steers more money to capital projects and stock buybacks, CEO James Mulva told analysts Wednesday. The Houston oil giant did not specify which assets could go on the block but said they will be "non-core" to the business and should fetch between $5 billion and $10 billion.  


     The word comes after ConocoPhillips announced plans in late 2009 for $10 billion in asset sales by the end of 2011, along with spending cuts and other steps, to help pay down big acquisition-related debts and improve shareholder value. That program was the start of a shift in strategy for the nation's third-largest oil company that Mulva called "shrinking to grow." The idea was to focus less on size and more on returns, partly by reducing its exposu re to the volatile oil refining business.  


     Investors have responded by boosting ConocoPhillips' stock price nearly 50 percent over the past year. On Wednesday, company shares rose another $1.32 to close at $78.54 in New York Stock Exchange trading. "They're moving in the right direction," said Phil Weiss, an analyst with Argus Research who praised ConocoPhillips' belt-tightening moves and growth strategy. "But they still do have a ways to go till they get there."  


     Last year, ConocoPhillips netted $7 billion in proceeds from selling its 9 percent stake in Syncrude, a joint venture to develop oil sands in Canada, as well as its 50 percent ownership in the Flying J truck stop chain and oil and natural gas properties in North America. With the expanded program, the goal now is to sell between $12 billion and $17 billion in assets by the end of 2012. To get to that, the company is replacing the previous $10 billion-by-2011 target and adding the asset sales announced Wednesday to the $7 billion sold last year.


$156 billion of assets


     At the end of 2010, ConocoPhillips had $156 billion of assets. "We are confident that the execution of our plan uniquely positions ConocoPhillips for long-term value creation," Mulva said at an analysts' meeting in New York.


     Proceeds from the additional asset sales announced Wednesday will go mostly to a $10 billion share repurchase program announced in February and capital investment opportunities, the company said. The recent $9 billion sale of its 20 percent stake in Russia's Lukoil - not part of the asset disposal program - also will give a boost to that effort.


     Under the asset sale program, company officials have said in 2011 they could unload additional non-core oil and gas properties in the U.S. and western Canada, as well as other international assets. In addition, the company aims to sell $1 billion in refining assets this year. Its Wilhelmshaven refinery in Germany is already up for sale.


     By 2013, ConocoPhillips plans to whittle its global refining capacity to as low as 1.8 million barrels per day, from 2.7 million barrels per day in 2010, and it could fall further after that. "We're talking to many people about everything we have in the downstream," Mulva said.


More capital spending


     This year, the company plans to boost capital spending to $13.5 billion, up from $10.7 billion last year, with approximately 90 percent going to the upstream oil and gas exploration business. Beginning in 2012, annual spending should be closer to $14 billion to $15 billion.


     Production, which stood at 1.75 million barrels of oil equivalent per day in 2010, could fall to 1.6 million per day by 2013 because of asset sales. But it should grow 2 to 3 percent a year thereafter as new projects come on line, Mulva said.


     Elsewhere, Mulva reiterated his plan to retire sometime in 2012 as chairman and CEO, a post he has held since 2008. He said a "robust" succession plan is in place following a management overhaul in October, though his replacement still has not been named. Mulva said he did not foresee any big move before his exit, such as merging ConocoPhillips with a rival. Instead, he praised the work his management team has done in restructuring the company and putting it on a growth path.


Algeria: BP Decides Against Sale of Algerian Assets
( - March 8, 2011) 

 Algerian Flag                                                                      


   BP has backed off from plans to sell assets in Algeria, the country's energy minister said Sunday, a blow to potential Russian buyer TNK-BP but a vote of confidence for the nation amid unrest in other parts of North Africa. BP's decision to stay put in Algeria contrasts with its decision to suspend some operations and repatriate staff from neighbouring Libya, where turmoil has shut more than half of oil output. The announcement also came after the company's Russian joint venture TNK-BP, half-owned by BP, said Tuesday it was still interested in buying the assets owned by the British company, the largest foreign oil-and-gas investor in Algeria.


     In an interview, Algerian Energy Minister Youcef Yousfi said 'BP doesn't want to go. BP has decided to cancel its plan to sell' the assets in the North African nation. BP, which has never confirmed plans to sell assets in Algeria, and TNK-BP declined to comment. The minister said he wasn't given a reason for BP's decision to end the planned sale - which would have involved a large chunk of its Algerian portfolio. But he suggested the oil giant no longer needed the cash for a divestment program launched after the oil spill in the Gulf of Mexico last year.


     'One can imagine they are aware of the potential there in their oil and gas assets and decided to stay,' Mr. Yousfi said. The company had planned to sell the assets as part of a $30 billion asset-disposal plan designed to cover the costs of the 2010 Gulf of Mexico spill. The sale of assets 'was not tied to the situation in Algeria ... Maybe they have resolved this problem' of selling assets to cover the costs of the Gulf of Mexico spill, Mr. Yousfi said.


     While confirming its interest in the BP Algerian assets, TNK-BP had cautioned it didn't expect a breakthrough in negotiations soon. Algeria's state energy firm, Sonatrach, had signaled an interest in exercising a right of first refusal to the BP assets. Separately, TNK-BP's Russian shareholders are in a dispute with BP over the U.K. company's possible participation in an Arctic deal with Russian oil company Rosneft.


     In Algeria, BP has two large natural-gas projects, In Salah, which covers seven fields in the southern Sahara desert, and In Amenas. BP also participates in the Rhourde El Baguel oil project and is exploring for oil in the Bourarhet block next to In Amenas. Mr. Yousfi said negotiations continued for an expansion phase at the Rhourde El Baguel project. 'There are discussions (with Sonatrach). They are solving it,' he said.


     After revolutions toppled regimes in Egypt and Tunisia and threatened the rule of Col. Moammar Gadhafi in Libya, some experts have wondered whether oil supplies could come under threat in the rest of the Middle East and North Africa. But after riots in January were met with economic and political responses, Algeria has been insulated from the sort of turmoil faced by its neighbors to the east.


     Mr. Yousfi pointed out that even during a wave of terrorist attacks in 1990s, Algerian oil and gas production wasn't affected. 'Even during the difficult period of the 1990s when we had a very strong terrorist activity, there was never any disruptions in the sector,' he said.




Lebanon Preparing for Offshore Oil and Gas Exploration Tender 

( - March 23, 2011) 


Lebanese Flag     


     Lebanon's Ministry of Energy & Water signed an agreement with French consulting firm Beicip-Franlab  to prepare the tender process for offshore oil and gas exploration. Beicip-Franlab, in partnership with the Norwegian government's program, 'Oil for Development' and the Norwegian company Petroleum Geo-Services (PGS),  is expected to finalize 27 decrees by July and present them to the Cabinet for approval. Beicip-Franlab will be in charge of the technical aspect of the bidding process, the Norwegian program will be responsible for the legal and institutional aspects, and PGS will manage the marketing and promotional sides. The ministry indicated that the first licensing round for offshore gas exploration would take place in November 2011, and expected exploration to start in November 2012.


     Last August, the Lebanese Parliament ratified a draft law that authorizes for the first time offshore oil and gas exploration and drilling. The law provides the basis to apply an international law called Production Sharing Agreement (PSA), essential in the production sharing deals that usually take place between states and international oil companies.

     Last March, the United States Geological Survey (USGS) estimated that the Levant Basin Province has a mean of 1.7 billion barrels of recoverable oil and a mean of 122 trillion cubic feet of recoverable gas. The Levant Basin Province encompasses approx. 83,000 sq kms of the eastern Mediterranean area off the coasts of Lebanon, Syria, Cyprus and Israel. The USGS stressed that the estimates represent technically-recoverable oil and gas resources, and are not estimates of economically-recoverable resources.


Egypt: The Future of the Oil & Gas Industry in Egypt

( March 8, 2011)

Egyptian flag small



     The Ministry of Petroleum (MoP) oversees four holding companies that manage all elements of the oil and gas business and form joint ventures with international partners: the Egyptian Holding Company for Natural Gas (EGAS), the Egyptian Holding Company for Petrochemicals (ECHEM), Ganoub El Wadi Petroleum Holding Company (GANOPE), and the Egyptian General Petroleum Company (EGPC).  EGPC, set prices and controls every facet of the oil business in Egypt.  Oil and gas revenues go directly to EGPC and aren't incorporated into the Egyptian treasury.


     Abdallah Ghorab, the new minister, will be under pressure to reform the Oil & Gas sector and to facilitate transparency. A major shake-up at EGPC is inevitable. The likeliest scenario would split EGPC in three between exploration and production activities, refining, and marketing and sales. This will allow the Government of Egypt to have greater visibility into oil and gas revenues.


     Egypt's Declining Oil Fields Lead to Growing Reliance on Gas. Many question marks surround the Natural Gas business in Egypt. Israel is importing large quantities of gas from Egypt, which was expected to significantly grow in the coming years. The deal with Israel has raised controversy at home. Ghorab faces many challenges and will have to answer tough questions raised by the Egyptian people.


Morocco: Circle Oil Spuds Fifth and Final Well in Current Sebou Permit Drilling Campaign   

( March 15, 2011)

Circle Oil logo

      Circle Oil has announced that following improvements in ground conditions in parts of the Rharb Basin the fifth and final well in the current drilling campaign has been spudded. The well designated KSR-11 is targeting the Hoot formation at an estimated depth of 1,750 metres. The target is similar to those previously proven successful in KSR-8 and KSR-10. It is presently anticipated that the drilling, logging, and if successful, testing of the well will take approx. 5-6 weeks to complete.


     The Sebou Permit lies to the north-east of Rabat in the Rharb Basin in Morocco. The Rharb Basin is a foredeep basin located in the external zone of the Rif Folded belt. The concession agreement, in which Circle has a 75% share and ONHYM, the Moroccan State oil company, has a 25% share, includes the right of conversion to a production licence of 25 years, plus extensions in the event of commercial discoveries.


OPEC Considering Output Boost  


( - March 9, 2011)  

OPEC Logo (No Text)

     Opec is in consultations regarding a potential boost in oil output but hasn't decided whether to approve one, said Kuwait's Oil Minister. "We are in consultations about a potential output increase," Reuters quoted Sheikh Ahmad Abdullah Sabah telling reporters as he entered Kuwait's parliament.Asked if Kuwait had been increasing its own oil production, Sabah said, "We did not increase production, sticking to quotas."


      However, Sabah said he believed Saudi Arabia was already boosting production in response to the supply shortfalls from Opec member Libya, whose bloody conflict has slashed production. Sabah gave no timeline for when Opec could decide on any group-wide production boost or whether ministers would convene soon to discuss output policy. Brent oil futures traded down, falling 1.2% to $113.70 a barrel. They fell by around $1 a barrel following the Kuwaiti comments about a potential Opec supply boost.  


     Separately, Qatar's Oil Minister Mohammed Saleh Sada said "oil inventories and production are at an acceptable level globally." He said Opec and non-Opec countries would step in to make up for any production lost in Libya "in a timely manner", but declined to comment on any specific plans.


     The Financial Times also reported that Opec members including Kuwait, United Arab Emirates and Nigeria had plans to boost output before April by as much as a combined 300,000 barrels a day, citing industry officials.




Egypt Gas to Jordan Supplies to Resume  


( - March 15, 2011)   


Egyptian flag small      


     Jordan's natural gas supplies from Egypt are set to resume this weekend, ending a nearly five-week disruption in the country's main source of electricity generation, said a senior energy official. According to Minister of Energy and Mineral Resources Khaled Toukan, officials are to hold a series of high-level discussions in Cairo aimed at resuming natural gas supplies this weekend.


     The minister is set to meet with Egyptian Minister of Oil Abdullah Ghourab later this week to discuss the agreement, under which Jordan receives 240 million cubic feet of gas per day at preferential prices.  "Our position is that we will stick to the old agreement," Toukan told The Jordan Times. Recent press reports claim that Cairo has set adjusting gas prices as a prerequisite to resuming supplies to Jordan, which have been suspended since a February 5 attack on the Arab Gas Pipeline in Al Arish.


     Toukan said the ministry has not been officially informed of Cairo's intention of amending the agreement, under which Egypt is to provide the Kingdom with gas at below-market prices through 2016. He indicated that during this week's talks, the Jordanian side will request additional gas quantities in line with a principle agreement between the two sides that has not been ratified.


The Kingdom relies on Egyptian natural gas for 80 per cent of its electricity generation needs. Ministry of Energy and Mineral Resources Secretary General Farouq Hiyari is currently heading a ministry team in Egypt to review outstanding technical issues regarding the pipeline serving Jordan.



UAE: KNOC Signs Agreement with Abu Dhabi to Develop Oil Feilds



( March 15, 2011)

UAE Flag  

     South Korea has secured access to more crude oil reserves after signing a deal with Abu Dhabi to develop oil fields in the United Arab Emirates (UAE). The agreement with Abu Dhabi National Oil Company  will give Korean National Oil Corp (KNOC) guaranteed stakes in reserves of at least one billion barrels of oil. The deal comes as countries around the world try to secure energy reserves as the price of oil surges. South Korea is reliant on imported oil. It is Asia's fourth-largest economy, and Korea competes with the likes of China and India to secure energy resources. In recent years it has been trying to reduce its dependence on imported oil.


     This deal, which will be finalised next year, will raise the amount of South Korean-owned oil imports from 10 - 15% of consumption. Last year KNOC bought Dana petroleum, an oil exploration and production company, for $2.6bn (1.8bn). In a memorandum of understanding issued by the South Korean presidential office, the two countries also agreed to store six million barrels of Abu Dhabi crude oil in Korean storage facilities for free.

Yemen: Calvalley Preparing to Test Qarn Qaymah-3 Well in Block 9

( March 6, 2011)
Yemen flag
     Calvalley Petroleum has announced that its Qarn Qaymah-3 well reached total depth of 4,460 metres on February 25, 2011. A wellbore cleaning process was then undertaken to remove all drilling solids before commencing logging operations and production testing. The logging program is now underway and is expected to be complete on March 4, 2011. The production testing is expected to commence on March 8, 2011 and test results will be announced as they are made available.

     The well is an appraisal of the Qarn Qaymah structure in Block 9. The drilling of the well commenced on October 2, 2010. QQ-3 was targeted to have a total depth of 4,460 meters including an openhole section of approx. 1,000 meters in the oil bearing Fractured Granitic Basement (FGB). The openhole section was expected to encounter seven major fracture zones in the FGB.


     As well, Calvalley recently completed all mechanical and civil work on the Truck Offloading Facilities, located in Block 51, and is currently completing the telecommunication and instrumentation components of the project. The project commissioning team expects to have the facilities in operation within the next month. Calvalley has assured its investors that operations continue to be unaffected by recently reported unrest in the region.

Egypt:  Energean Spuds WKO-3X Frontier Exploration Well in the West Kom Ombo Block in Egypt

( - March 9, 2011)  

  Egyptian flag small 


    Energean Oil & Gas has provided an update on the drilling of the WKO-3X well in the West Kom Ombo Block covering a total area of 31,520 sq km and located in Upper Egypt. The WKO-3X well was spud on March 7, 2011 and is the second of two committed frontier exploration wells in the vast and highly unexplored West Kom Ombo Licence.


      The main objective of the well is to provide a second stratigraphic control point, approx. 100 km southwest of the WKO-1X well location, in an area with very sparse geological and geophysical data coverage. The findings of the WKO-3X well will be used for defining and further optimizing the future exploratory steps in the license area. Energean's operations in Egypt have not been directly affected by recent political events; however, the Company is closely monitoring the situation on a continuous basis.


West Kom Ombo Block



     The West Kom Ombo Block is located in the South Central Desert of Upper Egypt and has been the site of renewed exploration interest since Centurion Energy/Danagas discovered the Al Baraka Oil Field in the neighbouring Kom Ombo Block in 2007. The initial Exploration Period included the acquisition of 699Km of 2D seismic in addition to the 850Km previously acquired by Repsol in 1997. On the 17th Sept. 2008 GANOPE approved the 2nd exploration phase that has a duration of three years. After a relinquishment of 25% of the block the remaining area amounts to 31,520 sq Km. The work program for the second phase includes two exploration wells.


      Interpretation of the newly acquired 2D seismic has shown that a Miocene rift basin analogous to that in the Kom Ombo area exists beneath the Sinn El Kaddab Plateau within the West Kom Ombo block. The Jurassic and Cretaceous stratigraphy and the fault block structures are considered to be comparable as well as the source rocks and reservoirs. The Al Baraka #4 well (2009) produced from 16 meters of pay in the Abu Ballas and Upper Six Hills formations, flowed oil to surface at a rate 220 BOPD and an artificial lift rate of 1300 BOPD.


      5 potential structures (160 to 900 sq km) mapped at Lower Cretaceous level on the re-processed 1997 Repsol 2D seismic survey, Groundstar's 2008 2D seismic survey confirmed these structures. An independent Resource Evaluation Report carried out by Gustavson Associates in Boulder Colorado resulted in a gross prospective oil resource estimate of 570 MMBO (P50).


Issue: 03-2011
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In This Issue
Asset Sale Expanding for ConocoPhillips
Algeria: BP Decides Against Sale of Algerian Assets
Lebanon Preparing for Offshore Oil and Gas Exploration Tender
Egypt: The Future of the Oil & Gas Industry in Egypt
Morocco: Circle Oil Spuds Fifth and Final Well in Current Sebou Permit Drilling Campaign
OPEC Reaches 'Highest Level in More Than 2 Years'
Egypt Gas to Jordan Supplies Resume
UAE: KNOC Signs Agreement with Abu Dhabi to Develop Oil Feilds
Yemen: Calvalley Preparing to Test Qarn Qaymah-3 Well in Block 9
Egypt: Energean Spuds WKO-3X Frontier Exploration Well in the West Kom Ombo Block in Egypt
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  • the EGU, European Geosciences Union General Assembly 2011 in Vienna, Austria - starting 3 April 2011
  • the EAGE/EGU Job Market in Vienna, Austria - starting 3 April 2011
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  • the 5th German - African Energy Forum in Hamburg, Germany - starting 4 April 2011
  • the 5th Nigerian Independents Forum in Lagos, Nigeria - starting 4 April 2011
  • the Africa Gas Summit 2011 in London, UK - starting 4 April 2011
  • the Naturally & Hydraulically Induced Fractured Reservoirs- from nanoDarcies to Darcies Workshop in Nafplio, Greece - starting 10 April 2011
  • the DGMK/OGEW, Fruhjahrstagung in Celle, Germany - starting 11 April 2011
  • the IOR 2011- 16th European Symposium on Improved Oil Recovery in Cambridge, UK - starting 12 April 2011
  • Education Days Abu Dhabi 2011- Multiple Short Course Programme in Abu Dhabi, UAE - starting 17 April 2011
  • the EAGE/SPE Workshop on Well Placement and Geosteering in Moscow, Russia - starting 19 April 2011
  • the EAGE/SPE Workshop - Well Placement and Geosteering: State of the Art in Geology and Geophysics in Moscow, Russia - starting 19 April 2011
  • Migration, Dmo, and Velocity Model Building Short Course in Abu Dhabi, UAE - starting 21 April 2011
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