Canada needs to push harder on Gateway pipeline, Alberta minister says

Canada’s federal government isn’t doing enough to build support for Enbridge Inc.’s proposed pipeline to ship crude from the oil sands to the nation’s Pacific coast, said Alberta Finance Minister Doug Horner.

“The federal government needs to step up here a little bit” to convince aboriginal groups and the general public that the Northern Gateway pipeline is in the nation’s interest, Horner said in an interview at Bloomberg headquarters in New York. “We’ve suggested to them that they may want to get involved.”

Opposition by aboriginal groups and environmentalists is clouding Canada’s plans to develop Alberta’s oil sands, home to the world’s third-largest recoverable crude reserves. Producers such as Royal Dutch Shell Plc and Total SA are counting on projects such as Northern Gateway and TransCanada Corp.’s Keystone XL to ease a transportation bottleneck that has suppressed the price of Canada’s heavy crude, costing the economy C$50 million ($46 million) a day, according to the Canadian Chamber of Commerce.

The federal government should make it clear the pipeline is of national economic importance, said Horner. “You have to remember that a lot of what we do in western Canada creates economic activity and jobs in eastern Canada,” he said.

Harper’s government must decide whether to approve Northern Gateway by June. A regulatory panel said in December the project could move ahead under certain conditions.

British Columbia, the country’s westernmost province, has said it will only back the project if it meets five conditions, including greater engagement with aboriginals and increased financial benefits for the province. Local communities say there’s too much risk and too little benefit to having an oil pipeline cross their region.

Canadian Finance Minister Joe Oliver, who was the country’s natural resources minister until last month, told reporters today the government is constrained in what it can say until the cabinet issues its decision.

Horner’s comments followed a speech by former Canadian prime minister Brian Mulroney in which he called for a “strong national commitment” to export the nation’s natural resources to markets around the world, in particular Asia.

“We cannot sit back, contemplating our collective navel and expect customers to knock on our door,” Mulroney said yesterday. “We have to demonstrate convincingly that we are capable of doing what is required to earn their confidence that we are a reliable, efficient source of supply.”

Horner said he’s “cautiously optimistic” the U.S. will approve TransCanada Corp.’s Keystone XL pipeline, which would link the oil sands to refineries along the Gulf Coast.

President Barack Obama’s administration is reviewing the route, which was first proposed in 2008.

“We are not just focused on Keystone,” Horner said. “We are looking at all three of the opportunities that are there today -- that’s east coast, west coast and to the south.”

Horner also said he is “seriously considering” running to succeed Alison Redford as leader of Alberta’s ruling Progressive Conservative Party. Redford stepped down last month amid questions about her expenses and leadership.

Horner is also speaking today to the Canadian Association of New York.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Gazprom Neft selects contractor for Badra oil field

Gazprom Neft, operator of the Badra oilfield development project, has appointed a contractor to lay the pipeline connecting the field to the power station in Zubaidiah, Wasit Province. The tender was won by Pakistani company Techno Engineering Services (Pvt.) Ltd.

In line with the contract, Techno Engineering Services will produce the designs, supply the equipment and materials, and carry out construction of the pipeline. The pipeline - which will be nearly 100-km long and have a daily capacity of 4.4 million cubic meters (circa 1.6 Bcm per year) - is scheduled to begin operations in 2015.

Under Gazprom Neft’s contract with the Iraqi government for the development of the Badra oil field, investors are to be compensated for costs related to infrastructure construction.

Gas supply from the Badra oil field will enhance the Zubaidiah power station’s daily power output and provide a 24-hour power supply to the city of Kut, which currently has electricity supplied for only 16 hours per day. Some of the extracted gas will be used to provide electricity to the Badra oil fields themselves.

In March, Gazprom Neft completed testing on a second well at Badra. The laying and testing of the oil pipeline to the Gharraf oilfield was completed in February, connecting the section to Iraq’s main pipeline system. The construction of the first phase of a central gathering station point with a capacity of 60,000 bpd is nearing completion. Work has also started on a gas treatment plant with the capacity to process 1.5 Bcm per year.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

VNG Norway discovers 226-m hydrocarbon column near Njord field

VNG Norge AS, operator of production licence 586, has concluded the drilling of exploration well 6406/12-3 S. The test results indicate a discovery far larger than expected.

The well was drilled on the Halten Terrace, about 33 km southwest of the Njord field.

The main objective of the well was to test the hydrocarbon potential in the Pil prospect, up-dip from the offset well 6406/12-1 S. The primary reservoir target was Upper Jurassic sandstones of the Rogn and Melke formations.

The well encountered a 91 m gas column and a 135 m oil column in Upper Jurassic sandstones. Preliminary analyses based on extensive coring, wireline logs and pressure data show that the well has encountered sandstones with very good reservoir properties.

An extensive data acquisition program was carried out in the well, including a successful production test. The production rate was 1,067 Sm3 oil per flow day through a 56/64-in. nozzle. The test showed good flow properties and the gas/oil ratio was 152 Sm3/Sm3. Preliminary estimates place the size of the discovery at between 8 and 27 million Sm³ recoverable oil equivalents with a considerable additional upside volume within the Pil closure not proven by the well.

Production licence 586 was awarded on 4 February 2011 (APA 2010) and this was the first well to be drilled in the licence. 6406/12-3 S was drilled to a vertical depth of 3,738 ms below sea level, and was terminated in the Upper Jurassic Melke formation. The water depth is 324 meters. The well will now be permanently plugged and abandoned.

Well 6406/12-3 S was drilled by the Transocean Arctic drilling facility, which will now first drill a a down dip sidetrack to prove up the lateral extent of the Pil reservoir and the upside case.

This will be followed by a further sidetrack to assess the potential of the neighbouring Bue target.

VNG Norge is the operator in PL586 with a 30% share. Partners are Spike Exploration (30 %), Faroe Petroleum Norge (25 %) and Rocksource Exploration Norway (15 %).

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Aker Solutions wins subsea contract for Total's Kaombo project

Aker Solutions won a contract worth $234 bn from Total to provide a subsea production system for the Kaombo Block 32 development in Angola.

Aker Solutions will deliver 20 subsea manifolds and 65 vertical subsea wellsets. The order also includes associated controls as well as work-over and tie-in systems. The first deliveries are scheduled for the second quarter of 2015.

"This is a landmark contract and further strengthens an important relationship with a key partner," said Oyvind Eriksen, Executive Chairman of Aker Solutions."It' s a significant commercial achievement for our subsea business as well as an important strategic development in our expansion in Angola and the broader region."

Kaombo, one of the world' s largest subsea developments, is located in block 32 about 150 km off the coast of Angola.

Aker Solutions is committed to developing local content and project execution capabilities in Angola, where it employs about 130 people. The company has set up a JV with Prodiaman Oil Services, an Angolan company that will execute local content activities related to this and other future Aker Solutions subsea projects in Angola.

"I am delighted to be part of this significant project with Aker Solutions for Total," said Prodiaman' s president Pedro Godinho."I look forward to seeing that this project makes significant contributions to the education system through knowledge transfer and job creation in a high-tech industry, all for the benefit of Angola."

Aker Solutions has been in Angola since 1999.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Parex to focus on Colombia in bid to double production

Parex Resources Inc., the Canadian oil producer operating in Latin America, is focusing its growth efforts on Colombia as it aims to double production in the next five years.

CEO Wayne Foo is planning more land and asset acquisitions to boost the company’s output to as much as 50,000 bpd, he said in an interview at Parex’s headquarters in Calgary yesterday. Colombia’s stable government and well-understood oil resources make it a better investment than other countries in the region such as Argentina, Foo said.

“To be relevant in the market, you really have to be in the range of 25,000 to 50,000 barrels a day,” he said. Production will grow as much as 20% annually from 17,500 to 18,500 bpd this year, he said.

Parex began as an oil producer in Argentina in 2003. The Colombian business was spun off in 2009 and based in Calgary. One of about 10 Canadian energy producers operating in Colombia, Parex produces both light and medium crude in the Llanos basin.

Parex’s shares have more than doubled in the past 12 months, valuing the company at about C$1 billion ($911 million). The stock declined 2.1% yesterday, closing at C$9.50 in Toronto.

“They still have upside,” said John Stephenson, who helps oversee about C$3.1 billion at First Asset Investment Management Inc. in Toronto. “Historically they have been drilling targets that were small and they’re now going after bigger plays to add resource.”

The Canadian company has focused on purchasing land near its current holdings in the Llanos basin, boosting its position to about 2 million acres (809,371 hectares) from 250,000 acres in 2009.

Parex’s largest non-state-owned competitor is Pacific Rubiales Energy Co., a Bogota and Toronto-listed company with a market value of about C$6.7 billion. Colombia in February produced about 1 MMbpd of crude, according to the country’s Mines and Energy Ministry.

Oil transportation infrastructure has caught up with production, helping to relieve a bottleneck that existed for producers a couple of years ago, said Parex V.P. Mike Kruchten. Last year the Bicentenario line began operating, while the Ocensa pipeline has been expanded. Calgary-based Enbridge Inc. is also considering building a line to Colombia’s Pacific coast.

“At present there’s lots of excess capacity” in pipelines, said Foo.

Parex earns about 3% to 4% less on its Colombian oil than Brent crude, the global benchmark, said Kruchten. Brent crude for May settlement traded at about $106 a barrel on April 7.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Magnolia LNG, SKEC Group sign technical services agreement

Liquefied Natural Gas Limited has reported that Magnolia LNG, LCC (MLNG), its wholly-owned subsidiary, has executed a technical services agreement (TS Agreement) with SK E&C USA, Inc., a wholly-owned subsidiary of SK Engineering and Construction Co. Ltd., of Korea (SKEC Group).

The TS Agreement relates to the ongoing engineering, procurement and construction (EPC) activities for MLNG’s planned 8 mtpa Magnolia LNG Project, in Lake Charles, Louisiana.

SKEC Group has already completed a satisfactory detailed review of Liquefied Natural Gas Limited’s OSMR process technology, which will be employed in the Magnolia LNG Project, and provided the company with an initial estimated EPC cost of $1.57 bn, which was consistent with the company’s budget estimate, including appropriate contingencies.

Liquefied Natural Gas Limited’s Managing Director, Maurice Brand, said that the EPC activities remained on schedule with the SKEC Group and will be managed going forward by the recently appointed COO, John Baguley, who will commence on May 1, 2014.

“We also remain on schedule to lodge our application for Filing with the Federal Energy Regulatory Commissions on the 30 April 2014,” Brand said.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.