• Home

  • Documents

  • Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits...
16
page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs ● EXPLORATION & PRODUCTION ● NATURAL GAS ● NATURAL GAS Vol. 17, No. 43 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of October 21, 2012 • $2 Making the most of it Shell drilling top holes on OCS while Coast Guard certifies Arctic Challenger By ALAN BAILEY Petroleum News W hile disappointed at not drilling into hydrocarbon bearing zones in Alaska’s Chukchi and Beaufort seas this year, Shell sees as a success its massive operation of deploying its drilling vessels and their support fleet to the Arctic, togeth- er with the subsequent start of drilling operations, Pete Slaiby, Shell’s vice presi- dent in Alaska, told a field hearing in Anchorage of the U.S. Senate Committee on Commerce, Science and Transportation on Oct. 11. “For the first time in more than 20 years Shell’s turned a drill bit in the Chukchi and Beaufort seas,” Slaiby told committee member Sen. Mark Begich. “We’ve had a very, very successful year and I’m pleased with the operational aspects of that.” “I don’t think people should lose sight of the fact that we’re moving 900 people every two to three weeks in and out of northern Alaska,” Slaiby told Petroleum News on Sept. 28, when reflecting on his company’s experiences this year. Top holes Delays in the completion of retrofit work on Shell’s oil containment barge, the Arctic Challenger, and damage to the company’s new containment dome during testing of the containment system, ultimately caused Shell to abandon plans to complete some More new wells needed Analyst says rate of drilling insufficient to head off Cook Inlet gas shortage By ALAN BAILEY Petroleum News A new revision to a study by Petrotechnical Resources of Alaska, or PRA, into Cook Inlet gas supplies makes sobering reading for anyone living in Southcentral Alaska. Essentially, the revised study has found that, in the absence of a fairly dramatic increase in the amount of gas well drilling or the discovery of a significant new gas field close to the existing gas infrastructure, sup- plies of gas from the Cook Inlet basin will start to fall short of gas demand perhaps as early as 2014. Southcentral residents depend on natural gas for the heating of buildings and for about 90 percent of the region’s power generation. “Without some really large discoveries that can be brought on quickly, the current pace of devel- opment activity, even if it continues or increases, could still mean a shortfall in Cook Inlet supplies to meet our demands as early as 2014, but more likely 2015,” PRA consulting petroleum engineer No time to waste on LNG Sabine Pass seeks permission to speed up construction; not all favor Henry Hub PETE SLAIBY see SHELL DRILLING page 11 The other crucial gas supply issue is ensuring that the gas deliverability — the rate at which gas can be delivered through pipelines — is adequate to meet peak demand levels, especially in the depths of winter. see MORE WELLS NEEDED page 16 By GARY PARK For Petroleum News T he Sabine Pass proponent has applied to the Federal Energy Regulatory Commission to accelerate construction of its LNG export project in Louisiana — hardly a surprise given the need to take advantage of prices being dangled by a Japanese LNG customer. While proponents of Canada’s LNG are digging in, determined to negotiate oil-indexed prices, Sabine Pass has already done deals tied to Henry Hub gas prices for the Sabine operation. And estimates of the returns it stands to make indicate that its haste is justified. Shigeru Muraki, executive vice president of Tokyo Gas, told a gas conference in London earli- er in October that the U.S. shale gas boom could supply LNG to Japan at sustainable prices up to 40 percent lower than current oil-indexed capital prices. He said Asian consumers are currently paying about $17 per million British thermal units, Btu, for LNG imports under oil-linked pricing mecha- nisms, which Japanese buyers increasingly view as “no longer acceptable.” If shale gas enters the LNG market there is an opportunity for sellers and buyers to discuss the “most appropriate price level to provide a return on investment for the sellers and for the healthy and sound development of the market,” Muraki said, see LNG PACE page 14 Inside: Petroleum News Bakken ● ANALYSIS ● EXPLORATION & EVALUATION ● MIDSTREAM & DOWNSTREAM Vol. 1, No. 13 • www.PetroleumNewsBakken.com A semi-monthly newspaper for industry and government October 21, 2012 BAKKEN page 7 Calgary-based Gibson expands in US, in part to establish ND Bakken ops CONTINENTAL RESOURCES Continental to triple reserves See page 3: Continental outlines aggressive plans for Bakken and Anadarko Woodford; says hot new Bakken-type SCOOP play has as much upside as Bakken. The above slide from an earlier Investor’s Day is a reminder of Continental’s vision for the Bakken. Keeper of the core LeFever talks about ND’s core library; helping vertical and lateral exploration, including tap shale By MIKE ELLERD For Petroleum News Bakken T he North Dakota Geological Survey’s Wilson M. Laird Core and Sample Library currently houses more than 400,000 feet of core and some 38,000 boxes of cuttings samples, allowing geologist Julie LeFever, who has managed the library since 1987, to gain a lot of insight into the geology of the Williston Basin. In a recent interview with Petroleum News Bakken, LeFever said she believes the information maintained in the library significantly contributed to the rapid rate at which exploration has proceeded in the current Bakken petro- leum system play. The collection, she said, “is primarily the reason the Bakken play took off see KEEPER OF THE CORE page 13 COURTESY WILSON M. LAIRD CORE AND SAMPLE LIBRARY Digital core of Middle Bakken member. Wrestling over US exports US pits energy independence goal against producer push to send oil to CA refiners By GARY PARK For Petroleum News Bakken G lobal oil supply and demand has been turned on its head in the past five years, with North America — powered by the Bakken, Eagle Ford and Permian plays — now the fastest-growing source of crude outside OPEC, setting the stage for a pivotal debate in the next session of the U.S. Congress over whether or where to draw the line on exports. The shifting of market forces is captured in the latest medium-term outlook by the International Energy Agency, which forecasts that U.S. produc- tion will rise by 3.3 million barrels per day over the next five years to 11.4 million bpd, surpassing cur- rent output in Saudi Arabia. The IEA also predicts Canadian output will grow by 1.1 million bpd, primarily from the oil see US EXPORTS page 15 Shell, BP and Statoil have either obtained or applied for U.S. government permission to deliver crude to refineries in Eastern Canada that welcome the chance to shed their reliance on Brent- priced crudes from West Africa, Venezuela and the North Sea. Bakken cuts next? Selling a third of its Eagle Ford acreage, MRO’s ND, Mont. might be next By KAY CASHMAN Petroleum News Bakken H aving announced Oct. 15 that it will unload 96,738 net acres in South Texas’ Eagle Ford play as part of a goal to shed non-core properties, Marathon Oil’s non-essential Bakken acreage in North Dakota and Montana is likely to be next on the chopping block — perhaps as soon as Nov. 6, when the company is sched- uled to report third-quarter earnings. The company is looking to raise $1.5 billion to $3 billion by year-end 2013. But unlike its early October placement of some 80,000 acres up for sale in the Marcellus gas play, Marathon’s reasons for dropping nearly one-third of its 325,000 net Eagle Ford acreage was not about reducing its focus on the oil-rich region, but instead dropping leases that were reportedly a combina- tion of gassier and lower productive oil areas in the play. In fact, Marathon’s chief operating officer and executive vice president, David Roberts, was clear at an Oct. 15 conference that despite the acreage reduction, the company’s 2016 daily pro- duction goal and estimated capex for the next five years will remain the same for the Eagle Ford: 120,000 net barrels of oil equivalent per day, up from 21,000 net boe a day during the second quar- ND oil production surpasses 700,000 barrels per day in August North Dakota’s oil production in August jumped 3.6 per- cent from July to surpass the 700,000 barrels per day mark for the first time, according to data provided by state Industrial Commission showed Oct. 17. August oil production increased by nearly 25,000 bpd over the previous month and reached just above 701,000 bpd. Most of this was from the Bakken and Three Forks shale prospects, where production rose to just above 635,000 bpd, according to the commission. Information shows that North Dakota oil production grew by an average 3.4 percent per month during the first eight months of 2012. And output has doubled since February last year and the state is now the second biggest oil producer in the country after Texas. —PETROLEUM NEWS BAKKEN Utica assessment shows potential The U.S. Geological Survey has released its first oil, gas liq- uids and natural gas assessments for the unconventional Utica shale play that covers areas of Maryland, New York, Ohio, Pennsylvania, Virginia and West Virginia. The Utica shale has a mean of 940 million barrels of undis- covered oil resources and a mean of 9 million barrels of natural gas liquids, USGS said. Oil ranged from 590 million barrels to 1.39 billion barrels, and gas liquids ranged from 4 to 16 million barrels, with a 95 percent probability the play holds the lesser amounts. Utica also contains an estimated mean of 38 trillion cubic feet of undiscovered natural gas. Estimates ranged from 21 tcf to 61 tcf, with a 95 percent probability it holds the lesser amount. CN aims to double oil shipments Canadian National Rail expects to double its crude oil ship- ments in 2013 from the 30,000 carloads it is scheduled to carry this year, Jean-Jacques Ruest, the railway’s chief marketing offi- cer, estimated. CNR logged only 5,000 carloads in 2011, since when it has recorded increases every quarter, he said. Ruest said the estimate for 2013 factors in “projects that we have on the plan right now” and assumes a “reasonable winter” will allow necessary construction to be finished. CNR has experienced the same rapid increase in crude oil see UTICA SHALE page 12 see CN SHIPMENTS page 12 see MARATHON MOVES page 10 DAVID ROBERTS SEC sued over rule making companies reveal payments The American Petroleum Institute and other business groups are suing to try to block a new rule requiring oil and mining companies to disclose payments such as taxes and royalties to foreign governments. The groups filed a 39-page lawsuit Oct. 10 in federal court in Washington, D.C., against the U.S. Securities and Exchange Commission. The suit argues that the SEC’s new payment disclosure rule for resource extraction stock issuers is a violation of the First Amendment, as well as the Administrative Procedures Act. The groups argue the reporting rule will be hugely expen- Committee hears lessons learned from Shell’s Arctic OCS operations It was standing room only on Oct. 11 as members of the pub- lic crammed into a meeting room in the University of Alaska Anchorage, to hear testimony on lessons learned from Shell’s drilling venture in the Chukchi and Beaufort seas this year. The occasion was a field meeting of the U.S. Senate Committee on Commerce, Science and Transportation. And Sen. Mark Begich, the lone committee member at the hearing, sat at a table facing representatives from Shell, government agencies and North Slope communities, each of whom presented their perspective on the summer’s events in the Arctic offshore. Drilling started Pete Slaiby, Shell’s vice president in Alaska, emphasized the significance of drilling finally starting in the Arctic outer conti- see SEC LAWSUIT page 15 see LESSONS LEARNED page 13

Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

  • Upload
    others

  • View
    0

  • Download
    0

Embed Size (px)

Citation preview

Page 1: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

page4

Arctic sea ice hits record lows,Antarctica ice hits record highs

� E X P L O R A T I O N & P R O D U C T I O N

� N A T U R A L G A S

� N A T U R A L G A S

Vol. 17, No. 43 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of October 21, 2012 • $2

Making the most of itShell drilling top holes on OCS while Coast Guard certifies Arctic Challenger

By ALAN BAILEYPetroleum News

While disappointed at not drillinginto hydrocarbon bearing zones in

Alaska’s Chukchi and Beaufort seas thisyear, Shell sees as a success its massiveoperation of deploying its drilling vesselsand their support fleet to the Arctic, togeth-er with the subsequent start of drillingoperations, Pete Slaiby, Shell’s vice presi-dent in Alaska, told a field hearing in Anchorage ofthe U.S. Senate Committee on Commerce, Scienceand Transportation on Oct. 11.

“For the first time in more than 20 years Shell’sturned a drill bit in the Chukchi and Beaufort seas,”Slaiby told committee member Sen. Mark Begich.

“We’ve had a very, very successful yearand I’m pleased with the operationalaspects of that.”

“I don’t think people should lose sightof the fact that we’re moving 900 peopleevery two to three weeks in and out ofnorthern Alaska,” Slaiby told PetroleumNews on Sept. 28, when reflecting on hiscompany’s experiences this year.

Top holesDelays in the completion of retrofit work on

Shell’s oil containment barge, the Arctic Challenger,and damage to the company’s new containment domeduring testing of the containment system, ultimatelycaused Shell to abandon plans to complete some

More new wells neededAnalyst says rate of drilling insufficient to head off Cook Inlet gas shortage

By ALAN BAILEYPetroleum News

Anew revision to a study by PetrotechnicalResources of Alaska, or PRA, into Cook Inlet

gas supplies makes sobering reading for anyoneliving in Southcentral Alaska. Essentially, therevised study has found that, in the absence of afairly dramatic increase in the amount of gas welldrilling or the discovery of a significant new gasfield close to the existing gas infrastructure, sup-plies of gas from the Cook Inlet basin will start tofall short of gas demand perhaps as early as 2014.

Southcentral residents depend on natural gas forthe heating of buildings and for about 90 percent ofthe region’s power generation.

“Without some really large discoveries that canbe brought on quickly, the current pace of devel-opment activity, even if it continues or increases,could still mean a shortfall in Cook Inlet suppliesto meet our demands as early as 2014, but morelikely 2015,” PRA consulting petroleum engineer

No time to waste on LNGSabine Pass seeks permission to speed up construction; not all favor Henry Hub

PETE SLAIBY

see SHELL DRILLING page 11

The other crucial gas supply issue isensuring that the gas deliverability — the

rate at which gas can be deliveredthrough pipelines — is adequate to meet

peak demand levels, especially in thedepths of winter.

see MORE WELLS NEEDED page 16

By GARY PARKFor Petroleum News

The Sabine Pass proponent has applied to theFederal Energy Regulatory Commission to

accelerate construction of its LNG export projectin Louisiana — hardly a surprise given the need totake advantage of prices being dangled by aJapanese LNG customer.

While proponents of Canada’s LNG are diggingin, determined to negotiate oil-indexed prices,Sabine Pass has already done deals tied to HenryHub gas prices for the Sabine operation.

And estimates of the returns it stands to makeindicate that its haste is justified.

Shigeru Muraki, executive vice president of

Tokyo Gas, told a gas conference in London earli-er in October that the U.S. shale gas boom couldsupply LNG to Japan at sustainable prices up to 40percent lower than current oil-indexed capitalprices.

He said Asian consumers are currently payingabout $17 per million British thermal units, Btu,for LNG imports under oil-linked pricing mecha-nisms, which Japanese buyers increasingly view as“no longer acceptable.”

If shale gas enters the LNG market there is anopportunity for sellers and buyers to discuss the“most appropriate price level to provide a return oninvestment for the sellers and for the healthy andsound development of the market,” Muraki said,

see LNG PACE page 14

Inside: Petroleum News Bakken

� A N A L Y S I S

� E X P L O R A T I O N & E V A L U A T I O N

� M I D S T R E A M & D O W N S T R E A M

Vol. 1, No. 13 • www.PetroleumNewsBakken.com A semi-monthly newspaper for industry and government October 21, 2012

B A K K E Npage7

Calgary-based Gibson expands in US,in part to establish ND Bakken ops

CO

NTI

NEN

TAL

RES

OU

RC

ES

Continental to triple reserves

See page 3: Continental outlines aggressive plans for Bakken andAnadarko Woodford; says hot new Bakken-type SCOOP play hasas much upside as Bakken. The above slide from an earlierInvestor’s Day is a reminder of Continental’s vision for theBakken.

Keeper of the coreLeFever talks about ND’s core library; helpingvertical and lateral exploration, including tap shale

By MIKE ELLERDFor Petroleum News Bakken

The North Dakota Geological Survey’s Wilson M. Laird Core and SampleLibrary currently houses more than 400,000 feet of core and some

38,000 boxes of cuttings samples, allowing geologist Julie LeFever, who hasmanaged the library since 1987, to gain a lot of insight into the geology of theWilliston Basin.

In a recent interview with Petroleum News Bakken, LeFever said shebelieves the information maintained in the library significantly contributed tothe rapid rate at which exploration has proceeded in the current Bakken petro-leum system play.

The collection, she said, “is primarily the reason the Bakken play took off

see KEEPER OF THE CORE page 13

CO

URT

ESY

WIL

SON

M.

LAIR

D C

OR

E A

ND

SA

MPL

E LI

BR

ARY

Digital core of MiddleBakken member.

Wrestling over US exportsUS pits energy independence goal against producer push to send oil to CA refiners

By GARY PARKFor Petroleum News Bakken

Global oil supply and demand has been turnedon its head in the past five years, with North

America — powered by the Bakken, Eagle Fordand Permian plays — now the fastest-growingsource of crude outside OPEC, setting the stage fora pivotal debate in the next session of the U.S.Congress over whether or where to draw the lineon exports.

The shifting of market forces is captured in thelatest medium-term outlook by the InternationalEnergy Agency, which forecasts that U.S. produc-tion will rise by 3.3 million barrels per day over the

next five years to 11.4 million bpd, surpassing cur-rent output in Saudi Arabia.

The IEA also predicts Canadian output willgrow by 1.1 million bpd, primarily from the oil

see US EXPORTS page 15

Shell, BP and Statoil have either obtainedor applied for U.S. government

permission to deliver crude to refineriesin Eastern Canada that welcome the

chance to shed their reliance on Brent-priced crudes from West Africa,Venezuela and the North Sea.

Bakken cuts next?Selling a third of its Eagle Ford acreage, MRO’s ND, Mont. might be next

By KAY CASHMANPetroleum News Bakken

Having announced Oct. 15 that it willunload 96,738 net acres in South

Texas’ Eagle Ford play as part of a goal toshed non-core properties, Marathon Oil’snon-essential Bakken acreage in NorthDakota and Montana is likely to be nexton the chopping block — perhaps as soonas Nov. 6, when the company is sched-uled to report third-quarter earnings.

The company is looking to raise $1.5 billion to$3 billion by year-end 2013.

But unlike its early October placement of some80,000 acres up for sale in the Marcellus gas play,Marathon’s reasons for dropping nearly one-third

of its 325,000 net Eagle Ford acreagewas not about reducing its focus on theoil-rich region, but instead droppingleases that were reportedly a combina-tion of gassier and lower productive oilareas in the play.

In fact, Marathon’s chief operatingofficer and executive vice president,David Roberts, was clear at an Oct. 15conference that despite the acreagereduction, the company’s 2016 daily pro-

duction goal and estimated capex for the next fiveyears will remain the same for the Eagle Ford:120,000 net barrels of oil equivalent per day, upfrom 21,000 net boe a day during the second quar-

ND oil production surpasses700,000 barrels per day in August

North Dakota’s oil production in August jumped 3.6 per-cent from July to surpass the 700,000 barrels per day markfor the first time, according to data provided by stateIndustrial Commission showed Oct. 17.

August oil production increased by nearly 25,000 bpd overthe previous month and reached just above 701,000 bpd.Most of this was from the Bakken and Three Forks shaleprospects, where production rose to just above 635,000 bpd,according to the commission.

Information shows that North Dakota oil production grewby an average 3.4 percent per month during the first eightmonths of 2012. And output has doubled since February lastyear and the state is now the second biggest oil producer inthe country after Texas.

—PETROLEUM NEWS BAKKEN

Utica assessment shows potentialThe U.S. Geological Survey has released its first oil, gas liq-

uids and natural gas assessments for the unconventional Uticashale play that covers areas of Maryland, New York, Ohio,Pennsylvania, Virginia and West Virginia.

The Utica shale has a mean of 940 million barrels of undis-covered oil resources and a mean of 9 million barrels of naturalgas liquids, USGS said. Oil ranged from 590 million barrels to1.39 billion barrels, and gas liquids ranged from 4 to 16 millionbarrels, with a 95 percent probability the play holds the lesseramounts.

Utica also contains an estimated mean of 38 trillion cubic feetof undiscovered natural gas. Estimates ranged from 21 tcf to 61tcf, with a 95 percent probability it holds the lesser amount.

CN aims to double oil shipmentsCanadian National Rail expects to double its crude oil ship-

ments in 2013 from the 30,000 carloads it is scheduled to carrythis year, Jean-Jacques Ruest, the railway’s chief marketing offi-cer, estimated.

CNR logged only 5,000 carloads in 2011, since when it hasrecorded increases every quarter, he said.

Ruest said the estimate for 2013 factors in “projects that wehave on the plan right now” and assumes a “reasonable winter”will allow necessary construction to be finished.

CNR has experienced the same rapid increase in crude oil

see UTICA SHALE page 12

see CN SHIPMENTS page 12

see MARATHON MOVES page 10

DAVID ROBERTS

SEC sued over rule makingcompanies reveal payments

The American Petroleum Institute and other businessgroups are suing to try to block a new rule requiring oil andmining companies to disclose payments such as taxes androyalties to foreign governments.

The groups filed a 39-page lawsuit Oct. 10 in federal courtin Washington, D.C., against the U.S. Securities andExchange Commission.

The suit argues that the SEC’s new payment disclosurerule for resource extraction stock issuers is a violation of theFirst Amendment, as well as the Administrative ProceduresAct.

The groups argue the reporting rule will be hugely expen-

Committee hears lessons learnedfrom Shell’s Arctic OCS operations

It was standing room only on Oct. 11 as members of the pub-lic crammed into a meeting room in the University of AlaskaAnchorage, to hear testimony on lessons learned from Shell’sdrilling venture in the Chukchi and Beaufort seas this year. Theoccasion was a field meeting of the U.S. Senate Committee onCommerce, Science and Transportation. And Sen. Mark Begich,the lone committee member at the hearing, sat at a table facingrepresentatives from Shell, government agencies and NorthSlope communities, each of whom presented their perspectiveon the summer’s events in the Arctic offshore.

Drilling startedPete Slaiby, Shell’s vice president in Alaska, emphasized the

significance of drilling finally starting in the Arctic outer conti-

see SEC LAWSUIT page 15

see LESSONS LEARNED page 13

http://www.PetroleumNews.com/
http://www.PetroleumNewsBakken.com/
Page 2: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

2 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

Petroleum News North America’s source for oil and gas news

FINANCE & ECONOMY

EXPLORATION & PRODUCTION

ENVIRONMENT & SAFETY

GOVERNMENT

4 Hitting opposite records at opposite poles

While the Arctic sea ice extent hits record lows, thewinter sea ice around Antarctica has expanded to the highest extent on record

7 Harper edgy about takeovers

Canadian PM says China’s political, economic systemsare concern in investment reviews of CNOOC-Nexen,Petronas-Progress deals

6 Interior creates public gas utility

Fairbanks North Star Borough forms utility to expandnatural gas distribution, but Fairbanks Natural Gas challenges move

5 BC government lets loose

Emerges from shadows to accuse Enbridge of avoidingsafety commitments for Northern Gateway; company says no activity without risk

10 BP’s post-Deepwater divestitures continue

Company announces deal to sell its Texas City refinery to Marathon for $2.5 billion; deal is latest in string of asset spinoffs

NATURAL GAS

contents

10 PHMSA faults Alyeska procedural docs

10 Valdez group calls for escort tug upgrades

9 Jack-up Endeavour to dock at Port Graham

4 USCG recertifies Cook Inlet RCAC

LAND & LEASING9 Call for new information for sales

9 Gas line operator gets ‘warning letter’

6 Latchem proposing North Slope LNG

PIPELINES & DOWNSTREAM

SEC sued over rule makingcompanies reveal payments

Committee hears lessons learnedfrom Shell’s Arctic OCS operations

Making the most of it

Shell drilling top holes on OCS while Coast Guard certifies Arctic Challenger

More new wells needed

Analyst says rate of drilling insufficient to head off Cook Inlet gas shortage

No time to waste on LNG

Sabine Pass seeks permission to speed up construction; not all favor Henry Hub

ON THE COVER

http://www.gci-industrialtelecom.com/
http://www.PetroleumNews.com/
Page 3: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012 3

Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status

Alaska Rig StatusNorth Slope - Onshore

Doyon DrillingDreco 1250 UE 14 (SCR/TD) Milne Point MPS-41A BPDreco 1000 UE 16 (SCR/TD) Milne Point MPE-03 BPDreco D2000 UEBD 19 (SCR/TD) Alpine CD1-01 ConocoPhillipsAC Mobile 25 Prudhoe Bay Z-10A BPOIME 2000 141 (SCR/TD) Kuparuk 2A-08 ConocoPhillips

Kuukpik 5 Stacked in Deadhorse Linc Energy

Nabors Alaska DrillingTrans-ocean rig CDR-1 (CT) Prudhoe Bay StackedAC Coil Hybrid CDR-2 Kuparuk 2F-11 ConocoPhillips Dreco 1000 UE 2-ES Prudhoe Bay Stacked out AvailableMid-Continental U36A 3-S Prudhoe Bay Stacked out AvailableOilwell 700 E 4-ES (SCR) Deadhorse AvailableDreco 1000 UE 7-ES (SCR/TD) Prudhoe Bay Available Dreco 1000 UE 9-ES (SCR/TD) Prudhoe Bay Available Oilwell 2000 Hercules 14-E (SCR) Prudhoe Bay AvailableOilwell 2000 Hercules 16-E (SCR/TD) Prudhoe Bay Available Oilwell 2000 17-E (SCR/TD) Prudhoe Bay Stacked Emsco Electro-hoist -2 18-E (SCR) Prudhoe Bay StackedEmsco Electro-hoist Varco TDS3 22-E (SCR/TD) Prudhoe Bay Stacked Emsco Electro-hoist 28-E (SCR) Prudhoe Bay StackedEmsco Electro-hoist Canrig 1050E 27-E (SCR-TD) Prudhoe Bay* Available Oilwell 2000 33-E Prudhoe Bay Available Academy AC electric Canrig 105-E (SCR-TD) Dalton Highway Merak #1 Great Bear Petroleum

*Pioneer winter work

Nordic Calista ServicesSuperior 700 UE 1 (SCR/CTD) Prudhoe Bay Drill Site P-19L1 BPSuperior 700 UE 2 (SCR/CTD) Prudhoe Bay Well Drill Site 18-27E BP Ideco 900 3 (SCR/TD) Kuparuk Well 3M Pad conducting rig ConocoPhillips

maintenance

Parker Drilling Arctic Operating Inc. NOV ADS-10SD 272 Prudhoe Bay final construction and commission BPNOV ADS-10SD 273 Started acceptance testing on Aug. 2, BP

scheduled to complete Aug. 11

North Slope - Offshore

BPTop drive, supersized Liberty rig Inactive BP

Nabors Alaska DrillingOIME 1000 19-E (SCR) Oooguruk ODST-45 Pioneer Natural ResourcesOIME 2000 245-E Oliktok Point ENI

Doyon DrillingSky Top Brewster NE-12 15 (SCR/TD) Spy Island SP30-W1 ENI

Cook Inlet Basin – Onshore

Kenai Land Ventures LLC (All American Consultants, labor Contract)Taylor Glacier 1 Kenai Loop Drilling Pad #1 Buccaneer Energy Ltd

Aurora Well ServiceFranks 300 Srs. Explorer III AWS 1 Finishing up Happy Valley, Hilcorp Alaska LLC

Planning on moving to drill HV 16

Cook Inlet EnergyAtlas Copco RD20 34 Finalizing Otter Project west side Cook Inlet Energy

of Beluga River Field

Doyon DrillingTSM 7000 Arctic Fox #1 Swanson River SRU 23B-22 Hilcorp Alaska LLC

Nabors Alaska Drilling99AC North Fork 23-25 Armstrong Cook Inlet LLC

Continental Emsco E3000 273E Kenai AvailableFranks 26 Kenai StackedIDECO 2100 E 429E (SCR) Stacked Available Rigmaster 850 129 Kenai AvailableAcademy AC electric Heli-Rig 106-E (SCR/TD) Tiger Eye 1 NordAq

Hilcorp Alaska LLC (Kuukpik, labor contract)Steelhead Platform Well M-13,workover Hilcorp Alaska LLC

Cook Inlet Basin – Offshore

XTO EnergyNational 110 C (TD) Idle XTO

Spartan Drilling Baker Marine ILC-Skidoff, jack-up Spartan 151 Furie

Upper Cook Inlet KLU#1

Cook Inlet EnergyNational 1320 35 Osprey Platform RU-1, Cook Inlet Energy

workover

Hilcorp Alaska LLC (Kuukpik, labor contract)Steelhead Platform Well M-16, Hilcorp Alaska LLC workover

Monopod Platform, rig refurb work Hilcorp Alaska LLC preparing for workovers

Mackenzie Rig StatusCanadian Beaufort Sea

SDC Drilling Inc.SSDC CANMAR Island Rig #2 SDC Set down at Roland Bay Available

Central Mackenzie Valley

Akita/SAHTUOilwell 500 51 Still out of the NWT, but is again Available

available

Alaska - Mackenzie Rig ReportThe Alaska - Mackenzie Rig Report as of October 18, 2012.

Active drilling companies only listed.

TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig

This rig report was prepared by Marti Reeve

Baker Hughes North America rotary rig counts*Oct. 12 Oct. 5 Year Ago

US 1,835 1,837 2,023Canada 361 372 512Gulf 42 44 33

Highest/LowestUS/Highest 4530 December 1981US/Lowest 488 April 1999Canada/Highest 558 January 2000Canada/Lowest 29 April 1992

*Issued by Baker Hughes since 1944

The Alaska - Mackenzie Rig Report is sponsored by:

JUDY

PAT

RICK

http://www.xtoenergy.com/
Page 4: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

4 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

Kay Cashman PUBLISHER & EXECUTIVE EDITOR

Mary Mack CHIEF FINANCIAL OFFICER

Kristen Nelson EDITOR-IN-CHIEF

Clint Lasley GM & CIRCULATION DIRECTOR

Susan Crane ADVERTISING DIRECTOR

Bonnie Yonker AK / NATL ADVERTISING SPECIALIST

Heather Yates BOOKKEEPER

Shane Lasley IT CHIEF

Marti Reeve SPECIAL PUBLICATIONS DIRECTOR

Steven Merritt PRODUCTION DIRECTOR

Alan Bailey SENIOR STAFF WRITER

Eric Lidji CONTRIBUTING WRITER

Wesley Loy CONTRIBUTING WRITER

Gary Park CONTRIBUTING WRITER (CANADA)

Rose Ragsdale CONTRIBUTING WRITER

Ray Tyson CONTRIBUTING WRITER

John Lasley DRILLING CONSULTANT

Allen Baker CONTRIBUTING WRITER

Judy Patrick Photography CONTRACT PHOTOGRAPHER

Mapmakers Alaska CARTOGRAPHY

Forrest Crane CONTRACT PHOTOGRAPHER

Tom Kearney ADVERTISING DESIGN MANAGER

Amy Spittler MARKETING CONSULTANT

Renee Garbutt ADVERTISING ASSISTANT

Julie Bembry CIRCULATION SALES EXECUTIVE

Dee Cashman CIRCULATION REPRESENTATIVE

Petroleum News and its supple-ment, Petroleum Directory, are

owned by Petroleum Newspapersof Alaska LLC. The newspaper ispublished weekly. Several of theindividuals listed above work forindependent companies that con-

tract services to PetroleumNewspapers of Alaska LLC or are

freelance writers.

ADDRESSP.O. Box 231647Anchorage, AK 99523-1647

NEWS [email protected]

CIRCULATION 907.522.9469 [email protected]

ADVERTISING Susan Crane • [email protected]

Bonnie Yonker • [email protected]

FAX FOR ALL DEPARTMENTS907.522.9583

OWNER: Petroleum Newspapers of Alaska LLC (PNA)Petroleum News (ISSN 1544-3612) • Vol. 17, No. 43 • Week of October 21, 2012

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518(Please mail ALL correspondence to:

P.O. Box 231647 Anchorage, AK 99523-1647)Subscription prices in U.S. — $98.00 1 year, $176.00 2 years, $249.00 3 years

Canada — $185.95 1 year, $334.95 2 years, $473.95 3 years Overseas (sent air mail) — $220.00 1 year, $396.00 2 years, $561.00 3 years

“Periodicals postage paid at Anchorage, AK 99502-9986.”POSTMASTER: Send address changes to Petroleum News, P.O. Box 231647 Anchorage, AK 99523-1647.

www.PetroleumNews.com

Bombay DeluxeThe Spice of Life...

Serving the finest Indian Cuisine in AlaskaTraditional chicken, lamb, seafood dishes

& Indian naan bread cooked in our

Tandoor (clay oven).

Vegetarian Specialties

Delicious Appetizers — Samosas, Pakoras

Lunch Buffet

Monday — Friday, 11:00 am — 2:00 pm

Dinner

Monday — Friday, 4:30 pm — 9:00 pm

Saturday & Sunday, 12:30 pm — 9:00 pm

Ph: 907-277-1200Conveniently located in Midtown

(Valhalla Center)

555 W. Northern Lights

Anchorage, Alaska

www.BombayDeluxe.com

Order on-line for pick-up or delivery at www.FoodOnTheWay.com

� E N V I R O N M E N T & S A F E T Y

Hitting opposite recordsat opposite polesWhile the Arctic sea ice extent hits record lows, the winter sea icearound Antarctica has expanded to the highest extent on record

By ALAN BAILEYPetroleum News

In what is perhaps one of this year’s morecurious climatic features, while the sum-

mer Arctic sea ice extent has sunk a longway below the previous record set in 2007,the winter ice extent in the Antarctic hassimultaneously reached an all-time high.According to the National Snow and IceData Center, or NSIDC, the winter maxi-mum ice extent in the Antarctic, achievedon Sept. 26, was 7.51 million square miles,with the average extent in September beingslightly higher than the previous record setin 2006.

However, before global warming skep-tics start tweeting their “I told you so” mes-sages, they might want to look into the rea-son for this apparent climatic anomaly.

According to Dr. Sharon Stammerjohnof the Colorado Institute of Arctic andAlpine Research the climate has beenwarming over much of the Antarctic,NSIDC says. But the Antarctic is still cold.And the persistent year-round cold condi-tions over Antarctica coupled with a coldstratosphere, thanks to a polar hole in theatmosphere’s ozone layer, have coupled

with a generally warming climate tostrengthen the circumpolar winds in thewinter. These stronger winds have pushedthe sea ice outwards and northwards, exceptin the area of the Antarctic Peninsula, thusincreasing the area of ocean covered by ice.

Arctic windsInterestingly, changes in wind patterns

may have contributed to this year’s excep-tionally high summer sea ice loss in theArctic according to a new study publishedrecently in Geophysical Research Letters bya team of scientists led by the NationalOceanic and Atmospheric Administration’sPacific Marine Environmental Laboratory.According to this study a previous west-to-east, upper-level wind flow in the summerhas changed to a more north-south undulat-ing pattern in recent years. Essentially, since

GOVERNMENTUSCG recertifies Cook Inlet RCAC

The Cook Inlet Regional Citizens Advisory Council said Oct. 16 that it hasearned U.S. Coast Guard recertification for another year.

The council has been recertified as an alternative voluntary advisory group forCook Inlet, allowing it to continue monitoring oil facility operations and marinetransportation under authorization provided by the Oil Pollution Act of 1990.

“In addition to ongoing oil discharge prevention and contingency plan review,environmental monitoring, and ensuring industry spill preparedness, we haverecently worked to strengthen spill prevention measures at the Drift River OilTerminal, promote our position in support of a subsea pipeline as an alternative tofuture Drift River terminal and tanker operations, and have made significantprogress toward completing a Cook Inlet navigational risk assessment,” CookInlet RCAC Executive Director Mike Munger said in a statement.

The council’s 13 members represent boroughs, cities and municipalities, aswell as Alaska Native, commercial fishing, aquaculture, tourism, recreational andenvironmental groups in the Cook Inlet region.

By law, Cook Inlet RCAC must recertify each year with the Coast Guard toensure it meets mandates spelled out in OPA ’90 and represents interests of com-munities in the vicinity of oil terminal operations.

—PETROLEUM NEWS

And, with more solar energy goinginto the Arctic Ocean, North

America and Europe are likely tosee a continuation of extreme

weather events, the researchers say.

see ICE EXTENT page 5

http://www.bakerhughes.com/capabilities/geothermal-energy
http://www.FoodOnTheWay.com/
Page 5: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

By GARY PARKFor Petroleum News

The British Columbia government,having kept its powder dry for most

of this year, has emerged guns blazing inthe final stages of regulatory hearings intoEnbridge’s Northern Gateway project.

Environment Minister Terry Lakeshowed up in the northern city of PrinceGeorge to accuse Enbridge of providing“incomplete” responses that are “lackingin commitment” when it was challengedto include enhanced leak detection sys-tems or an automatic shutdown in the twinpipelines to export 525,000 barrels perday of Alberta oil sands crude and import193,000 bpd of condensate.

About 60 percent of the 720-milepipelines to and from the port of Kitimatwill cover British Columbia territory.

“Their answers suggest that the compa-ny is not taking the very real concerns ofBritish Columbians seriously,” he said in astatement.

Lake said it is “crystal clear that(Enbridge) is putting off making commit-ments about including enhanced leakdetection systems or an automatic shut-down until after they get approval to pro-ceed.”

“The only way to protect BritishColumbia’s interests is to ensure that thesecommitments are made up front, so thateveryone will understand how they intendto run this project,” he said.

Mounting pressure on governmentThe government has emerged from the

shadows over recent weeks under mount-ing pressure from communities, FirstNations and environmentalists who areopposed to Northern Gateway.

New Democratic Party leader AdrianDix, who is a strong bet to defeat theLiberal Party government of PremierChristy Clark next spring, said Lake’scomments are all about politics.

“What we’ve had now for really a cou-ple of years is a government that hasn’tbeen serious about its approach and B.C.has paid the price for that.

“Now, late in the day, having finallyheard what British Columbians have tosay, the government is playing catch-up.

“I think what the people of B.C. wantare serious, well-considered positions, notpositions that change every day based onthe Liberal Party’s latest polling,” he said.

Dix said the Liberals “want to be on allsides of this question.”

Withering attacksLake’s stance came a day after

Enbridge faced one of its most witheringattacks, when former British Columbiaenergy minister Richard Neufeld, now afederal senator, said the company has sobadly mismanaged the project that hedoubts it can proceed even if the NationalEnergy Board and the Canadian govern-ment approve the application next year.

“I just think Enbridge has left a sourtaste in most peoples’ mouths,” he said,scoffing at the company’s promises to cre-ate 3,000 construction jobs and 560 long-term jobs, arguing most of those jobs willgo to people outside British Columbia.

Neufeld also said Enbridge has notdone enough to gain support from BritishColumbians in remote regions, especiallyFirst Nations.

A Joint Review Panel of the NEB and

Canadian Environmental AssessmentAgency is in the final stages of hearingsthat started in January.

Questioning of Enbridge is scheduledto end Dec. 18, followed by oral state-ments in January.

The NEB is expected to issue its rec-ommendations by late 2013, turning afinal decision over to the Canadian gov-ernment of Prime Minister StephenHarper.

Enbridge defends projectJohn Carruthers, president of Enbridge

Northern Gateway Pipelines, toldreporters outside the hearings thatalthough his company has designed astate-of-the-art system “whatever industri-al activity you have, there is some elementof risk.”

“The real key is to try and get that aslow as possible. In our case, we’re tryingto get it to zero,” he said.

Barry Callele, Enbridge’s director ofpipeline control systems and leak detec-tion, told the regulators that the twinpipelines will have five overlapping leakdetection systems, including aerial sur-veillance, foot patrols and 132 monitoredpressure valves along the route.

“We will have one of the best instru-mented pipeline systems not only in NorthAmerica, but probably the world,” he said.“It is not an issue of trust us, wait untilconstruction.”

But Chris Jones, an attorney for thegovernment, argued that the “sensitivity ofthe pipeline … can only be determinedwhen it’s actually been constructed andyou’re able to test it in operation.”

He said U.S. data indicates there havebeen 31 leaks from Enbridge pipelines inthe U.S. since 2002, including 22,000 bar-rels in the Kalamazoo River in Michiganin 2010 and six of the 10 largest spills

were from Enbridge pipelines.Of those six, none were detected by

Enbridge leak detection systems, Jonessaid.

Ziad Saad, vice president of theCanadian Energy Pipeline Association,told a conference in Vancouver Oct. 10data collected from the association’smember companies show there have beenthree spills a year in Canada over the pastdecade.

“We don’t pretend that we will havezero incidents next year, but that remains

the goal,” he said.Meanwhile, about 300 residents

attended a public meeting Oct. 10 inVancouver to register their opposition toplans by Kinder Morgan for expanding itsTrans Mountain pipeline from Alberta to atanker terminal in the Port of Vancouver to750,000 bpd from 300,000 bpd and com-pete with Enbridge for markets in theAsia-Pacific region. �

PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012 5

� P I P E L I N E S & D O W N S T R E A M

BC government lets looseEmerges from shadows to accuse Enbridge of avoiding safety commitments for Northern Gateway; company says no activity without risk

Contact Gary Park through [email protected]

A Joint Review Panel of the NEBand Canadian Environmental

Assessment Agency is in the finalstages of hearings that started in

January.

2007 the summer winds have blownnorth through the Bering Strait, acrossthe polar region and then south into theAtlantic Ocean. This new wind patternmoves warmer air into the Arctic whilecausing cold Arctic air to move south.

The changing route of the wind,apparently caused by changes in atmos-

pheric pressure, likely contributed both tothe melting of ice in the Arctic andchanging weather conditions in WesternEurope and North America, theresearchers concluded. And, with moresolar energy going into the Arctic Ocean,North America and Europe are likely tosee a continuation of extreme weatherevents, the researchers say. �

continued from page 4

ICE EXTENT

Contact Alan Bailey at [email protected]

http://www.lounsburyinc.com/
http://www.astac.net
Page 6: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

By ERIC LIDJIFor Petroleum News

As Interior Alaska works to increase itsnatural gas supply, policymakers are

debating how best to manage the public andprivate obligations needed to expand infra-structure.

With an eye toward bringing natural gasto as many people as soon as possible, theFairbanks North Star Borough recentlyformed the Interior Alaska Natural GasUtility, an entity capable of either collabo-rating or competing with Fairbanks NaturalGas LLC, a private distribution companyalready operating on a small scale in theFairbanks area.

Fairbanks North Star Borough MayorLuke Hopkins and two borough assembly-women proposed the public utility conceptthis past summer, following the recommen-dations of a borough-commissioned reportshowing significant cost-savings for theregion if a non-private entity built a naturalgas and propane distribution system. “Wemust get affordable energy to our town.This local public natural gas utility will cre-ate the strongest tool we have to fight forour interests, assuring that we have a seat atthe table as discussions progress on how webring gas to Fairbanks,” Hopkins said inAugust.

The move shows the frustration many inthe Interior feel about ongoing efforts toconvert the region to gas from heating oil.With crude oil prices staying high and airquality concerns plaguing the region,Fairbanks officials believe the switch musthappen soon.

Locally, those efforts include separateproposals by Fairbanks Natural Gas and theregional electric cooperative Golden ValleyElectric Association to build liquefactionfacilities on the North Slope and truck liq-uefied natural gas to local consumers. On a

state level, the Interior could be served byone of many large natural gas pipeline proj-ects.

The Interior Alaska Natural Gas Utilitywould have a seven-member board of direc-tors, with four chosen by the borough, twoby Fairbanks and one by North Pole. Theutility will begin drafting bylaws and abusiness plan once it is official formed inNovember.

Seeking state fundsWhile many stakeholders believe public

funding is needed — or at the very leastwelcome — to bring gas to the Interior, theydisagree on the level of public involvement.

Specifically, Interior officials want tocapitalize on signs Gov. Sean Parnell iswilling to contribute state funds to helpsolve the problem — if the Interior cancome together around a single project. “Youdon’t want to squander that kind of an offerfrom the governor,” Steve Haagenson, theformer head of Golden Valley Electric anda name being considered for the boroughutility board, recently told the FairbanksCity Council.

To that end, the Interior Alaska NaturalGas Utility came together quickly.

Within the span of two weeks, the citiesof Fairbanks and North Pole both voted totransfer their utility authority to the bor-ough, and the borough voted to form theutility.

But all three votes included lengthy pub-lic hearings, where policymakers and thepublic debated how the utility would andshould interact with existing players,specifically Fairbanks Natural Gas.Although all three measures passed, nonepassed unanimously.

While North Pole made the transferunconditionally, Fairbanks tacked on sever-al provisions, including one prohibiting theutility from competing with private utilitieswithout its permission. The FairbanksNorth Star Borough added similar languagerequiring the utility to act first as a facilita-tor, second as a contracting agent and onlycompeting as a provider if private entitiesaren’t offering service to specific areas.

The provisions rankled Hopkins andother supporters of the plan, who saw themas unnecessary obstacles placed before anentity meant to project unity. According tothe Fairbanks Daily News-Miner, the bor-ough provision inspired “many shockedfaces” when it passed, but officials insistedthe language wouldn’t jeopardize the ven-ture.

While acknowledging the potential forthe public utility to compete with privateentities, Hopkins believes local govern-ments should not worry about the issuebecause the Regulatory Commission ofAlaska is already responsible for managingsuch competition.

Unfair competition?Fairbanks Natural Gas disagrees.

6 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

��������������Emerald Services, Inc.

Don’t worry, we’ve got this.

Serving all of Alaska 907 258-1558 Toll Free 877 375-5040e m e r a l d n w . c o m

� N A T U R A L G A S

Interior createspublic gas utilityFairbanks North Star Borough forms utility to expand naturalgas distribution, but Fairbanks Natural Gas challenges move

“I’m 100 percent for the goal:more natural gas to Fairbanks.”

—Fairbanks Natural Gas President Dan Britton

Latchem proposing North Slope LNGAs the Interior debates the best way to bring natural gas to its homes and busi-

nesses, a familiar Alaska businessman is coming out of the woodwork to proposea liquefied natural gas project for the North Slope, according to recent regulatoryfilings.

Through a new subsidiary called Spectrum Alaska LLC, Ray Latchem wants tobuild an LNG plant and an associated pipeline in the Prudhoe Bay unit, near PumpStation No. 1.

The Spectrum LNG project would serve operations on the North Slope inter-ested in converting their diesel-fired equipment to natural gas. While Spectrumspecifically mentioned drilling rigs, work trucks, local mines and power plants,the company would “provide LNG for use in any market that chooses to convert,”according to filings.

In documents filed with the State Pipeline Coordinator’s Office, Latchemdescribed the $30 million project as a 1,100-foot above ground pipeline carrying50 million cubic feet of gas per day south from Flow Station No. 3 to a proposedliquefaction facility north of Spine Road. Calling the Prudhoe Bay natural gassupply “ample” but “of a very poor quality,” Latchem said the project wouldinclude a “significant” upstream treatment.

With timely regulatory approval, Spectrum anticipates being able to start con-struction on the project in July 2013 and bringing the system into operation assoon as August 2014.

The proposed location for the liquefaction terminal is one Latchem previouslysuggested to Fairbanks Natural Gas, as a preferred alternative for its proposed liq-uefaction plant.

A self-described member of the “lunatic fringe of the natural gas industry,”Latchem founded the North Slope utility Norgasco, the Interior utility FairbanksNatural Gas and the Cook Inlet LNG outfit Northern Eclipse before pursuingLower 48 energy projects.

Latchem remains the largest shareholder of Norgasco, he said.In addition to Latchem, Spectrum Alaska includes the former Colville Inc.

executive Jeff Helmericks and the former Qualitech Environmental Inc. founderMark Ploen.

—ERIC LIDJI

see GAS UTILITY page 8

http://www.ArcticMats.com/
http://www.emeraldnw.com/
Page 7: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

� G O V E R N M E N T

Harper edgy about takeoversCanadian PM says China’s political, economic systems are concern in investment reviews of CNOOC-Nexen, Petronas-Progress deals

By GARY PARKFor Petroleum News

The Canadian government has placedtwo proposed takeovers of

Canadian-based petroleum companies bystate-owned Asian enterprises underextended review, hinting at deepeningunease within political circles.

If there was any doubt that the govern-ment is on edge, it was put to rest Oct. 12when Prime Minister Stephen Harper,one of the strongest advocates of foreigninvestment in the energy sector, saidChina’s “very different” political and eco-nomic systems are a concern as hisadministration decides whether toapprove the US$15.1 billion bid forNexen by China’s CNOOC.

Seen as some of the most revealinginsights into Harper’s thinking, they rein-forced the views leaking out of govern-ment circles thatsenior cabinet minis-ters are wary ofopening the door toCNOOC and othersfrom China’s stableof national oil com-panies because ofwhat are viewed asunfair Chinese busi-ness practices.

Harper, speaking to reporters at a con-ference in Senegal, said Canada is eagerto build a trade relationship with China,but insisted those investments must becarefully scrutinized from a nationalsecurity standpoint.

“The relationship with China is impor-tant,” he said. “At the same time it’s com-plex because the Chinese obviously havevery different systems than we do, eco-nomic and political systems, and that’swhy obviously some of these particulartransactions raise concerns.”

“We will ensure as a government thatwe have not only a growing relationshipwith China but a relationship with Chinathat is in Canada’s best interests,” Harpersaid.

Review extendedHis views coincided with an

announcement by Industry MinisterChristian Paradis that the deadline for areview under the Investment Canada Actof the CNOOC-Nexen arrangement hasbeen extended from Oct. 12 to Nov. 12and could face another 30-day delay atthe request of CNOOC, although a finalverdict is possible at any time during thatperiod.

The delay matches a similar govern-ment decision to postpone its ruling onthe C$5.5 billion acquisition of naturalgas producer Progress Energy Resourcesby Malaysia’s Petronas.

CNOOC said it does not comment onthe regulatory process and Nexen did notanswer a request for its reaction.

Paradis said in a statement that extend-ing the review period is “not that unusu-al,” explaining that the government needsmore than its initial 45-day review periodto “conduct a thorough and careful reviewof this proposed investment.”

He said the continued examination ofCNOOC’s offer will cover six factorscontained in the Investment Canada Actrelating to government’s “guidelines oninvestment by state-owned enterprises.”

Call for rulesThere is also growing concern among

Canadian energy leaders who are callingfor rules to protect domestic ownership ofthe oil sands, although a new report bythe Canadian Imperial Bank ofCommerce said only 10 percent of theresource is in the hands of foreign state-owned companies, 7 percent of themChinese.

However, CIBC concluded that Asianstate-owned companies have an edge over

western firms because of their access tolower-cost capital and their longer invest-ment horizons, which could slow devel-opment of the oil sands.

Murray Edwards, chairman ofCanadian Natural Resources, told energyleaders earlier this month there is anurgent need for the Canadian governmentto introduce “some ground rules” beforeapproving CNOOC’s takeover.

He said that regardless of the oil sandssector’s desire to access foreign capital,there should limits on what Canada iswilling to approve given the strategicimportance of the northern Alberta bitu-men deposits.

Net benefit, no risksThe CNOOC-Nexen deal, which has

already been approved by Nexen share-holders and Canadian courts, is beingheld up until the government is satisfied

that it will generate a net economic bene-fit for Canada and does not pose any risksto Canada. United States regulators arealso conducting a review linked toNexen’s holdings in the Gulf of Mexico.

The Canadian Security IntelligenceService, in a report prepared before thetwo takeover bids were launched, warnedthat when companies with ties to foreignintelligence services or hostile govern-ments try to acquire control over strategicsectors of the Canadian economy they canpose a threat to national security.

Debt-rating agency DBRS said thebenefits of CNOOC gaining control ofNexen are “somewhat mixed” because thedeal is not financially necessary forNexen, which has a strong portfolio ofglobal oil and natural gas assets and goodaccess to capital markets. �

PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012 7

V S ON

Industrial lighting and power distribution for hazardous areas and extreme environments At Larson Electronics’ Magnalight.com our business philosophy is very simple; provide high quality lighting productsat good prices and get them to the customer fast. We support our customers before, during, and after the sale and maintain a wide inventory of parts and accessories allowing us to service the products we sell. Browse our collectionof products and information here on Magnalight.com to learn more about us and how we can help you find solutionsfor all of your heavy duty and hazardous location lighting needs.

MAGNALIGHT.COM

800-369-6671 | 903-498-3363 | [email protected]

Ready to ship inventory of Magnalight portable lighting, explosion proofluminaires and power distribution systems. Rapid delivery of custom configurations

also available with in-house CNC and fabrication capabilities.

However, CIBC concluded thatAsian state-owned companies have

an edge over western firmsbecause of their access to lower-

cost capital and their longerinvestment horizons, which couldslow development of the oil sands.

STEPHEN HARPER

Contact Gary Park through [email protected]

http://www.magnalight.com/
Page 8: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

“I’m 100 percent for the goal: more nat-ural gas to Fairbanks,” Fairbanks NaturalGas President Dan Britton told theFairbanks City Council before their recentvote.

While Britton supports the boroughfacilitating existing efforts, he believes thebest way to move the project forward is tobring Fairbanks Natural Gas and GoldenValley Electric together as a single unit toask for funds from the state to offset the costof building the liquefaction terminal. Thetwo entities are currently in “active discus-sions,” Britton said.

A public utility would have two advan-tages over Fairbanks Natural Gas, though,according to Andy Warwick, a member ofthe Doyon Utilities management committeeand another name currently being consid-ered for a spot on the public utility board.

First, it would be easier for the boroughto ask the state for money than for a privatecompany. Second, any money the boroughreceived would be tax-exempt, whileFairbanks Natural Gas would end up payingsome 40 percent in taxes, a cost ultimatelytransferred to ratepayers. Warwick, who

previously chaired the Alaska Natural GasDevelopment Authority, called this way offunding infrastructure “terribly inefficient.”

Of course, the public utility would alsohave to keep a percentage of any funding itreceived to cover its overhead costs, Brittonnoted. And if the public utility issued bondsto pay for its proposals, it would need aguarantor, most likely the state or the bor-ough.

As far as taxes are concerned, local gov-ernments could always relieve the burden byexempting any project, Britton suggested.“We’ll be happy to pass that savings on,” hesaid. Of course, even so, Fairbanks NaturalGas and its customers would still be on thehook for federal taxes. But as Britton noted:“If we want to eliminate private businessbecause they pay taxes, we won’t have anygovernment to provide services to people.”

Ready for constructionWhile many in the Interior want to

expand distribution, especially to remotecorners of the region, Britton said the majorfactor limiting expansion is supply. “Withan increased level of supply, there’s going tobe increased distribution in Fairbanks,” hesaid.

With the stranded gas fields of the NorthSlope just 500 miles away by road, the sup-ply problem is actually an infrastructureproblem. There is broad consensus in theInterior for trucking liquefied natural gasdown the Dalton Highway, a way to get gasto Fairbanks quickly without shutting thedoor on a future spur line from a large-diameter pipeline.

Although the pace of development hasbeen too slow for some in Fairbanks,Fairbanks Natural Gas is ahead of the pack,Britton argued. “We’re at a stage that’sready for construction,” he said, pointing toits 15-year supply agreement with Exxonand its list of approved permits, includingsome with long leads times, such as an air

quality permit.Additionally, Fairbanks Natural Gas is

preparing for expansion, on numerousfronts.

With an eye toward bringing new cus-tomers online quickly, the company isadding 5 million gallons of capacity to its240,000-gallon storage facility onFairbanks.

And with the expectation of increasedscrutiny should the company ask for stategrants or tax credits — or in the entirelypossible situation it one day monopolizesthe Interior heating market now dominatedby unregulated heating oil suppliers — thecompany is negotiating a possible return tofull rate regulation. (Currently, FairbanksNatural Gas can change its rates at will, aslong as it notifies the state and maintainscertain price caps.)

Asked at the Fairbanks hearing aboutthat unusual move, Britton said the cost tokeep revisiting rate regulation has negatedsome of the financial benefits of beingexempt.

“We’re just trying to shorten theprocess,” he said.

As required by a 2009 settlementbetween the utility and the state AttorneyGeneral, the Regulatory Commission ofAlaska is currently investigating whetherFairbanks Natural Gas should once again berate regulated. Despite some reluctance, theRCA recently allowed the Fairbanks NorthStar Borough to become a party to thoseproceedings.

Asked why Fairbanks needs to set itssights north, Britton said, “If we could get along term gas supply in the Cook Inlet, wewould do so and do so happily.” WhileBritton said he is enthused by the recentincrease in Cook Inlet exploration, hemade a point to note, “it has not proven upany supplies that changed the marketdynamic in Cook Inlet yet.” �

8 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

Safer. Smarter.

Our CDR2-AC rig reflects the latest innovations in Arctic drilling to provide our customers with incident free performance and operational and technical excellence.

CDR2-AC is the first Arctic rig designed and built by Nabors specifically for Coil Tubing Drilling operations. The rig was built to optimize CTD managed pressure drilling to provide precise control

of wellbore pressures for improved safety, decreased costs, and increased wellbore lengths.

Combining safety and environmental excellence with greater efficiency means CDR2-AC can deliver the high value results customers have come to expect from Alaska’s premier drilling contractor.

Learn more about Nabors’ new drilling technologies at Nabors.com.

nabors.com

Better.

continued from page 6

GAS UTILITY

Contact Eric Lidji at [email protected]

Although the pace of development has been too slow for some inFairbanks, Fairbanks Natural Gas is ahead of the pack, Britton argued.“We’re at a stage that’s ready for construction,” he said, pointing to its15-year supply agreement with Exxon and its list of approved permits,

including some with long leads times, such as an air quality permit.

http://www.nabors.com/
http://www.hawkpros.com/
Page 9: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012 9

LAND & LEASINGCall for new information for sales

The Alaska Department of Natural Resources, Division of Oil and Gas, put outa request Oct. 12 for new information for the 2013 Cook Inlet and AlaskaPeninsula areawide oil and gas lease sales, scheduled to be held in the spring.

The deadline for information is Nov. 13. The division said it is looking for “substantial new” information, generally

considered to be relevant published research or data that have become publiclyavailable over the last year.

—PETROLEUM NEWS

Gas line operator gets ‘warning letter’Federal pipeline regulators recently sent a “warning letter” to the operator of a

relatively new natural gas pipeline on Alaska’s Kenai Peninsula.The Sept. 7 letter from the Pipeline and Hazardous Materials Safety

Administration said a “probable violation” of pipeline safety regulations was foundduring a June 27 inspection of the North Fork Pipeline.

The pipeline operator is Anchor PointEnergy LLC, of Denver, Colo.

The warning letter said the operator “failedto inspect and test relief devices at intervals notexceeding 15 months.”

Testing tags on relief devices known as PSV0120 and PSV 0230 indicated they were lasttested on Feb. 13, 2011, the letter said.

“PSV 0120 and PSV 0230 are relief devicesdesigned and installed to provide overpressure protection for the North Fork ‘A’ and‘B’ pipelines, respectively,” the letter said. “At the time of inspection, it had beengreater than 16 months since the PSVs were last tested.”

The letter said a fine was possible, but the agency said it had decided not toassess a penalty and advised the operator to correct the problem.

“The situation was resolved immediately and was due to a misunderstandingwith regard to the timing of the inspection,” Ed Kerr, vice president of land and busi-ness development for parent company Armstrong Cook Inlet LLC, told PetroleumNews on Oct. 16.

The 7.4-mile North Fork Pipeline features two parallel lines of pipe, each with anominal diameter of 4.5 inches. The pipeline connects Armstrong’s North Fork gasfield on the southern Kenai Peninsula to Enstar’s Anchor Point Pipeline.

The North Fork Pipeline began sustained deliveries of gas on April 7, 2011. Itwas the first common carrier line in Alaska to use plastic composite pipe, state offi-cials said. The Fiberspar LinePipe brand pipe has advantages over conventional steelpipe, including easier installation and corrosion resistance, they said.

—WESLEY LOY

� E X P L O R A T I O N & P R O D U C T I O N

Jack-up Endeavour to dock at Port Graham

By KRISTEN NELSONPetroleum News

Buccaneer Alaska Operations hasapplied to the Alaska Department of

Natural Resources Division of Mining,Land and Water for use of half an acre ofstate subsurface at Port Graham for tem-porary docking/moorage for the jack-updrilling rig Endeavour — Spirit ofIndependence.

Andy Rike, Buccaneer AlaskaOperation’s executive vice president ofoperations, said in the company’s applica-tion that the rig initially will be at the can-nery dock in Port Graham, where the baybottom is owned by the Port GrahamCorp., which provides commercial dock-ing facilities.

After about a month, however, the rigwill be moved to the log dock at PortGraham.

“There are two anchorages available inthe area,” Rike said, both commercialdocks owned by the Port Graham Corp.

“The rig will be docked at the cannerydock as long as available, then moved tothe log dock,” he said.

In both cases the rig legs will be low-ered to the bay bottom.

At the log dock location, the bay bot-tom is state land, Rike said in the applica-tion.

The duration of the project is listed asSept. 30 through Dec. 31.

Furie there last yearLast year Furie Operating Alaska used

Port Graham, an ice-free Cook Inlet portsouthwest of Homer on the KenaiPeninsula, to over winter the Spartan 151jack-up rig.

Presumably Furie is using the anchor-age at the cannery dock again this winter,and Endeavour will need to be moved tothe log dock when the Spartan 151 arrives.

Rike said a moorage agreement was inthe process of being executed with PGCEnergy Services, a subsidiary of PortGraham Corp.

Both docking sites are adjacent to com-mercial docking facilities owned andoperated by Port Graham Corp., he said,and wastes generated on the rig while atthe permit site will be collected by anddisposed of by Port Graham Corp. at anapproved disposal facility. �

Contact Kristen Nelson at [email protected]

PIPELINES & DOWNSTREAM

The warning letter said theoperator “failed to inspectand test relief devices at

intervals not exceeding 15months.”

http://www.fugro.com/
http://www.miswaco.slb.com/deepclean
Page 10: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

By WESLEY LOYFor Petroleum News

BP is continuing its campaign of divesti-tures in the wake of the Deepwater

Horizon disaster in the Gulf of Mexico.The British company’s latest deal is the

sale of its giant Texas City, Texas, refinery.BP announced Oct. 8 it had reached anagreement to sell the refinery and a portionof its Southeast retail and logistics networkto Marathon for $2.5 billion.

BP executives called the Texas City sale“the second major milestone in the strategicrefocusing of our U.S. fuels business.”

In August, BP announced a deal to sellits Carson, Calif., refinery and related assetsto Tesoro for $2.5 billion.

With the Texas City sale, BP said thetotal value of divestitures it has agreed tosince the beginning of 2010 is now over $35

billion. The company said it expects toreach its goal of $38 billion by the end of2013.

At one time after the Deepwater Horizondisaster, speculation was rampant that BPmight sell its assets in Alaska, where it oper-ates giant Prudhoe Bay and numerous otheroil fields. But this hasn’t happened.

The Texas City refinery was the scene ofan explosion in 2005 that killed 15 workers.

Fallout from that disaster continues, asthe U.S. Occupational Safety and HealthAdministration on July 12 announced BPhad agreed to pay more than $13 million inpenalties to resolve most of the 439 cita-tions the agency issued for “willful viola-tions” of process safety management stan-dards at Texas City.

BP has three other refineries, includingthe Cherry Point, Wash., refinery, a majordestination for Alaska North Slope crude.The others are in Whiting, Ind., and Toledo,Ohio.

After the April 20 well blowout and sink-ing of the Deepwater Horizon offshoredrilling rig, BP announced it would divestassets to raise cash.

The company has announced a string ofdeals quite recently.

On Sept. 28, BP said it had agreed to sella chemical plant in Malaysia for $230 mil-lion.

On Sept. 13, BP announced it had agreedto sell its 18.36 percent nonoperated interestin the Draugen field in the Norwegian Seato AS Norske Shell for $240 million.

On Sept. 10, BP said it had agreed to sellits interests in a number of oil and gas fieldsin the deepwater Gulf of Mexico to PlainsExploration & Production Co. for $5.55 bil-lion.

BP announced the Carson refinery dealwith Tesoro on Aug. 13, and on June 25 itannounced a deal to sell its interests in theJonah and Pinedale upstream operations inWyoming to Linn Energy for more than $1billion.

A much bigger deal could be near as BPlooks to sell its half share in the huge TNK-BP venture in Russia. �

10 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

Expro’s business is well fl ow management, providing the products and service you need to measure, improve, control and process fl ow from high-value oil and gas wells. We provide tailor-made solutions across the lifecycle of a well, from exploration and appraisal to abandonment.In Alaska our expertise includes:• Well Testing• Electric Line• Downhole Video Services• Mechanical Caliper Services

Contact: Telephone: 907-751-8700Email: [email protected]

www.exprogroup.com

Expro Delivers well fl ow management

PIPELINES & DOWNSTREAMPHMSA faults Alyeska procedural docs

Federal regulators recently notified Alyeska Pipeline Service Co. of “apparentinadequacies” in the company’s operations and maintenance procedures.

An Aug. 9 notice from the Pipeline and Hazardous Materials Safety Administrationto Alyeska, operator of the trans-Alaska oil pipeline, cited 22 items requiring attention.Many appeared to be issues related to Alyeska manuals and other documents.

As an example, PHMSA said one written procedure “does not accurately describe”how Alyeska determines pipeline MOP, or maximum operating pressure. The agencynotice said Alyeska “must amend its procedures to clearly indicate how their MOP isdefined at all locations.”

Another agency criticism concerned a federal regulation requiring pipeline opera-tors to protect valves from misuse. Alyeska “could not show PHMSA documentationthat requires protection from unauthorized operation or vandalism,” the notice said.The agency ordered Alyeska to amend its operations manual and “reference where thisrequired procedure may be found.”

PHMSA said it developed the notice after inspecting Alyeska’s operations andmaintenance procedures in Anchorage on March 29 through April 1, 2011.

The agency did not propose any fine or other penalty.“Once the inadequacies identified herein have been addressed in your amended

procedures, this enforcement action will be closed,” the notice said.Alyeska spokeswoman Michelle Egan on Oct. 17 provided a statement to

Petroleum News that said in part: “The issues raised by PHMSA in the notice pertainto paperwork, such as the use of certain terminology or whether procedures are appro-priately referenced. Alyeska is working with PHMSA to address the issues raised andto update the document in question. The update will be complete in early November.”

Anchorage-based Alyeska operates the 800-mile trans-Alaska pipeline and ValdezMarine Terminal on behalf of companies that own the system, including BP,ConocoPhillips and ExxonMobil.

PHMSA is an agency within the U.S. Department of Transportation. Alyeska’spresident, Thomas Barrett, formerly was PHMSA administrator.

—WESLEY LOY

� F I N A N C E & E C O N O M Y

BP’s post-Deepwaterdivestitures continue

Contact Wesley Loy at [email protected]

PIPELINES & DOWNSTREAMValdez group calls for escort tug upgrades

A nonprofit organization is calling on the oil industry to improve towing equipmentaboard the tugboats that escort loaded tankers through Alaska’s Prince William Sound.

The Prince William Sound Regional Citizens’ Advisory Council, in an Oct. 17press release, said it commissioned a study on the tugs, and the analysis found out-dated winches that control towing lines.

The study was done by Robert Allan Ltd., a Canadian naval architectural firm.“The Allan study concluded that, while the Prince William Sound towing equip-

ment is of high quality and well maintained, some of it has not kept up with technicalinnovation since the tugs entered service in the Sound more than a decade ago,” theRCAC said.

The towing systems on the Prince William Sound tugs no longer qualify as bestavailable technology, primarily because escort winch technology has “changed dra-matically in the past decade,” the Allan study said.

Alyeska Pipeline Service Co., which operates the trans-Alaska oil pipeline and theValdez tanker port, contracts with Crowley Maritime Corp. for several tugs to escortand assist tankers. The tugs are part of Alyeska’s SERVS unit — the ShipEscort/Response Vessel System.

The idea is that tugs can help stop or guide tankers in the event of trouble. Federallaw mandates that two tugs must escort each oil-laden tanker through Prince WilliamSound.

The Valdez-based RCAC is a congressionally sanctioned nonprofit that monitors

see TUG UPGRADES page 11

http://www.amarinecorp.com/
http://www.exprogroup.com/
Page 11: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

Arctic outer continental shelf wells thisyear. Instead the company is drilling a seriesof top holes, the top 1,400 to 1,500 feet ofits wells, in preparation for completing thewells in 2013.

The drill ship Noble Discoverer starteddrilling the Chukchi Sea Burger A well onSept. 9, while in the Beaufort Sea Shell’sfloating drilling platform the Kulluk starteddrilling at the Sivulliq prospect on Oct. 3after the end of the local subsistence whalehunt.

Arctic ChallengerDuring the Senate committee field hear-

ing Slaiby announced that the U.S. CoastGuard had finally issued a certificate ofinspection for the Arctic Challenger, withthe American Bureau of Shipping subse-quently giving the barge its class certifica-tion. Slaiby characterized the containmentsystem, with its ability to collect and sepa-rate oil, gas and water flowing from a wellor pipeline, as a “game changer” for off-shore oil operations.

Slaiby said that the damage to the con-tainment dome during testing resulted froman electrical fault that had caused a valve toopen, precipitating the rapid descent of thedome. Safety systems had prevented thedome from hitting the seabed, but somebuoyancy chambers had been damaged, hesaid. Shell has put in place a program for thenecessary repairs to the system: The con-tainment barge with its containment systemwill be ready for deployment in the 2013open water season, Slaiby said.

A big dealCharacterizing top hole drilling as “a big

deal,” Slaiby told Petroleum News that eachtop hole will take around 14 days to drill,leaving just 10 days or so of subsequentdrilling to reach target zones.

Given the vagaries of weather and sea-ice encroachment in the Arctic, Shell doesnot know exactly how many top holes it willend up drilling this year, but the companydoes have a planned sequence of wells.

“We’ve got our batting order. … We’regetting everybody to the on-deck circle,”Slaiby said.

In the Chukchi Sea, the Noble Discoverwill move to the Burger J well followed bythe Burger B well, after completing the tophole at Burger A; the drilling sequence inthe Beaufort starts with a top hole above the

Sivulliq prospect, followed by a top hole atthe Torpedo prospect.

Slaiby said that Shell’s cumulative costsfor its Alaska venture would go past $4.5billion this year.

Community communicationsIn terms of communications with North

Slope communities, Slaiby said that subsis-

tence advisors stationed in the variousNorth Slope villages had proved particular-ly successful this year. These advisors havenotified Shell of subsistence activities, toavoid conflicts between these activities andindustrial operations. And Shell has investi-gated any reported disturbance to local peo-ple, to prevent a recurrence of a similar inci-dent, Slaiby said.

In addition to continuing offshore envi-ronmental monitoring, done in conjunctionwith other offshore leaseholders, this sum-mer Shell worked with Olgoonik Corp., theNative corporation for the village ofWainwright, on an environmental study inthe National Petroleum Reserve-Alaska.This study, involving biological surveys,hydrology and the identification of archaeo-logical sites, will provide information need-ed to plan an eventual oil pipeline from theChukchi Sea to the central North Slope,Slaiby said.

And, in the offshore, lessons learnedfrom this year include a need to upgradeShell’s helicopters for flying in instrumentconditions. Also, given the experience ofhaving to medevac some people from off-shore because of pre-existing medical con-ditions, fitness to work in remote locationshas emerged as an issue, Slaiby said.

“It’s been an interesting year,” Slaibysaid. “It’s been a lot of hard work on Shell’spart and on the part of our contractors andthe regulators.” �

PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012 11

continued from page 1

SHELL DRILLING

Contact Alan Bailey at [email protected]

The drill ship Noble Discoverer

CO

URT

ESY

USC

G

the oil terminal and tanker operations.It said it has sent the Allan study and its

findings to Alyeska, the Alaska Departmentof Environmental Conservation and theU.S. Coast Guard.

“This study makes specific recommen-dations to further enhance the safety andcapabilities of an already proven system forpreventing tanker accidents in PrinceWilliam Sound,” said Mark Swanson, theRCAC’s executive director. “We hopeAlyeska and its regulators will pay closeattention and make every possible effort tobring the towing equipment in the Sound upto world-class standards.”

Alyeska spokeswoman Michelle Eganprovided this comment to Petroleum News:

“Alyeska agrees that the escort tugs andother equipment in PWS are of ‘high qual-ity and well maintained.’ In fact, we believethe SERVS escort system is the most com-prehensive in the United States. The tugsare built for purpose, meeting the needs ofthe PWS area and the requirements of theoil spill contingency plan.”

—WESLEY LOY

continued from page 10

TUG UPGRADES

http://www.saexploration.com/
Page 12: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

12 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

OMSI adds OSV Sovereign to Cook Inlet support vessel fleetOcean Marine Services Inc. has added OSV

Sovereign to its offshore support vessel fleetin Cook Inlet. Formally the Toby Tide, OSVSovereign arrived Oct. 12 at OSK dock inNikiski, after A short stay in Seattle Ship Yard,where she underwent modifications for theextreme conditions and regulatory require-ments of Cook Inlet.

OMSI said OSV Sovereign will go to workimmediately for Hilcorp servicing offshoreplatforms and be available for charter for otherprojects, including research and survey work, throughout Alaska.

Golder Associates adds three new team members Golder Associates Inc. said Oct. 16 that its Anchorage office welcomes three new hires:

Ryan Campbell, as an engineering geologist; John Thornley, as a project geotechnical engi-neer; and Jeffrey Levison as an engineer.

Prior to joining Golder Associates, Campbell worked as a mineral exploration geologist,

looking for precious metals both in Alaska and in the Lower 48. He has more than threeyears of experience running surficial sampling and drill programs in very remote settingsand graduated from the University of Alaska Anchorage with a Bachelor of Science degreein geology and is a member of the Alaska Miners Association.

Thornley served as field manager of geotechnical studies and prepared geotechnical rec-ommendations for roads, airports, and foundations for a variety of structures in the arcticand sub-arctic regions of Alaska, prior to joining Golder. He has more than seven years ofgeotechnical engineering field exploration and design experience and is a graduate of theUniversity of Nevada, Reno with a master’s degree in geotechnical engineering.

Levison joins Golder with a B.S. degree in geological engineering and a minor in geolo-gy from the University of Alaska Fairbanks. While in school, he was a geological intern withHecla-Greens Creek Mine on their Surface Exploration team, a field technician for the ColdClimate Housing Research Center, and most recently, a construction manager for DiscoveryGold Tours.

Oil and Gas Supply to relocate Kenai warehouse Oil and Gas Supply, an industrial supply company with facilities in Anchorage and Kenai,

said Oct. 11 that it is relocating its Kenai warehouse. Currently at mile 16 of the Kenai Spur

ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

Companies involved in Alaska and northern Canada’s oil and gas industry

All of the companies listed above advertise on a regular basis with Petroleum News

AAcuren USAAECOM EnvironmentAggreko LLCAir Energi Air LiquideAIRVAC Environmental GroupAlaska Air CargoAlaska Analytical LaboratoryAlaska DreamsAlaska Frontier ConstructorsAlaska Interstate Construction (AIC)Alaska Marine LinesAlaska Rubber Alaska Ship & DrydockAlaska Steel Co.Alaska West ExpressAll Pro AlaskaAlpha Seismic CompressorsAmerican Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Arctic ControlsArctic FoundationsArctic Fox EnvironmentalArctic Mats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Arctic Slope Telephone Assoc. Co-op. . . . . . . . . . . . . . . . . . .5Arctic Wire Rope & SupplyARCTOSArmstrongAspen HotelsASRC Energy ServicesAT&TAvalon Development

B-FBaker Hughes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Bald Mountain Air ServiceBombay Deluxe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Calista Corp.Canadian Mat Systems (Alaska) . . . . . . . . . . . . . . . . . . . . .16Canrig Drilling TechnologyCarlile Transportation ServicesCGGVeritas U.S. LandCH2M HillCharter CollegeChiulista ServicesClearSpan Fabric StructuresColville Inc.Computing AlternativesConocoPhillips AlaskaConstruction Machinery IndustrialCook Inlet EnergyCraig Taylor EquipmentCrowley Alaska

Cruz ConstructionDenali IndustrialDonaldson CompanyDowland-Bach Corp.Doyon DrillingDoyon EmeraldDoyon LTDDoyon Universal ServicesEgli Air HaulEmerald Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Era AlaskaERA HelicoptersEverts Air CargoExpro Americas LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10ExxonMobilFairweatherFlowline AlaskaFluorFugro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

G-MGBR EquipmentGCI Industrial Telecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Geokinetics, formerly PGS OnshoreGlobal Diving & SalvageGMW Fire ProtectionGolder AssociatesGreer Tank & WeldingGuess & Rudd, PCHawk Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Haws IntegratedHDR AlaskaInspirationsIntertek MoodyJackovich Industrial & Construction SupplyJudy Patrick PhotographyKenworth AlaskaKiska MetalsKuukpik Arctic ServicesLarson Electronics LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Last Frontier Air VenturesLinc EnergyLister IndustriesLounsbury & Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Lynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden LogisticsLynden TransportMapmakers of AlaskaMAPPA TestlabMaritime HelicoptersM-I Swaco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

MRO SalesM.T. Housing

N-PNabors Alaska Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8NalcoNANA WorleyParsonsNASCO Industries Inc.Nature Conservancy, TheNC MachineryNEI Fluid Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15Nordic CalistaNorth Slope TelecomNorthern Air CargoNorthwest Technical ServicesOil & Gas SupplyOpti Staffing GroupPacWest Drilling SupplyPENCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Pebble PartnershipPetroleum Equipment & ServicesPND Engineers Inc.Polyguard Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13PRA (Petrotechnical Resources of Alaska)Price Gregory International

Q-ZSAExploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Salt + Light CreativeSeekins FordShell Exploration & ProductionSourdough Express Inc.STEELFABStoel RivesTaiga VenturesTanks-A-LotTEAM Industrial ServicesThe Local PagesTire Distribution Systems (TDS)Total Safety U.S. Inc.TOTE-Totem Ocean Trailer ExpressTotem Equipment & SupplyTranscube USATTT EnvironmentalUdelhoven Oilfield Systems ServicesUMIAQUnique Machine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16Univar USA URS AlaskaUsibelliWeston SolutionsXTO Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Oil Patch Bits

see OIL PATCH BITS page 13

OSV Sovereign

CO

URT

ESY

OM

SI

Page 13: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

nental shelf this year and thanked all of thevarious organizations that had helped Shellreach this point. Slaiby commented on thevalue of the federal interagency workinggroup, established by President Obama, inbringing multiple regulatory agencies“under one roof ” for efficient permitting.

Having paid $2.2 billion for outer conti-nental shelf leases, Shell expects govern-ment agencies to be funded at an appropri-ate level to allow the company’s Arctic pro-gram to move forward, Slaiby said.Regulations and regulatory decisions mustbe based on facts and science; the litigationsystem needs reform; and, presumably ref-erencing delays in Shell’s access to its leas-es for drilling, the terms of the leases shouldbe extended, he said.

“These are all subjects for future discus-sion,” Slaiby said.

Interagency groupDavid Hayes, Deputy Secretary for the

Interior, commented on what he sees as thesuccess of the interagency working group.

“I am pleased to report that the federalgovernment has never been more coordi-nated in terms of permitting activities and,I believe, has never before provided a clear-er roadmap to companies who are interest-ed in doing business in the Arctic,” Hayestold Begich. “We’ve enjoyed the workingrelationship with Mr. Slaiby and Shell.”

Interior’s regulations represent the goldstandard for safe and environmentallysound operations and Shell has met ourhigh regulatory standards, Hayes said.Lessons learned from this summer includea need for a better coordinated relationshipwith the science community, and a broaderapproach to decision making, rather thanmaking decisions on a project-by-projectbasis, he said.

USCG operationsRear Admiral Thomas Ostebo of the

U.S. Coast Guard told Begich that for thisyear’s open water season the Coast Guardhad deployed into the Arctic the nationalsecurity cutter, the Bertholf, the high-endurance cutter, the Alex Haley, and two225-foot, ice-capable buoy tenders. TheCoast Guard had positioned two H60Jayhawk helicopters at Barrow. Thisdeployment had been achieved by jugglingCoast Guard assets from other parts of theU.S., without sacrificing Coast Guard

readiness anywhere, he said.The Coast Guard also successfully con-

ducted its first Arctic test of its oil spillrecovery system.

“It does not work in icy waters but itdoes work in the open waters of the Arctic,”Ostebo said.

In addition, the Coast Guard conductedmore than 1,000 hours of community serv-ice activities in North Slope communities.

Many shipsAmong some extensive lessons learned

is a realization that with some 700 to 800ships passing through the Bering Strait thisyear, many of them transiting Russia’sNorthern Sea Route, oil industry activitiesform only one part the picture when itcomes to having a Coast Guard presence inthe far north, Ostebo said.

Also, with big distances to offshoredrilling operations and between those oper-ations, the Jayhawk helicopters provedespecially important to Coast Guard opera-tions. And the Coast Guard had to use thehelicopters to conduct several search andrescue operations involving both commer-cial operations and subsistence hunters.

But the communications and logisticsneeded to support Coast Guard operationsproved challenging. In particular, commu-nications bandwidth is often one of the firstthings to fall short in any emergencyresponse, Ostebo said.

“That would be a critical need in theArctic and we learned that this summer,”he said.

NOAALaura Furgione, acting director of the

National Oceanic and AtmosphericAdministration’s National WeatherService, said that NOAA has been receiv-ing more requests for longer range Arcticweather and ice forecasts, as well as nauti-cal charts, as interest in the region hasincreased. Information needed for accurateforecasting is in short supply and NOAA ismoving forward with a new polar satellitesystem. However, there is a pending gap insatellite coverage from 2016 if an existingsatellite system goes out of operation atthat time.

In addition to services such as regularArctic weather and ice forecasts, NOAAprovides technical support for the U.S.Coast Guard and has developed a new web-based system to help emergency respon-ders deal with oil spills, Furgione said.

As offshore oil industry activity moves

from exploration towards developmentadditional environmental observations,improved nautical charts and improvedforecasting will all be needed.

“There’s a great deal of work to bedone,” Furgione said.

Local involvementRepresentatives from North Slope com-

munities emphasized the need for localinvolvement in decision making for theArctic offshore, especially given the com-munities’ dependence on subsistence hunt-ing for bowhead whales and other marinemammals. And, given the risk of damage tosubsistence resources from oil industryactivities, the communities need to seesome compensating benefit to offset thoserisks, the representatives said.

However, overall, the representativescomplemented Shell on the manner inwhich it had conducted its operations thisyear.

The North Slope Borough feels encour-aged by the responsible and measured

approach of Shell during the drilling sea-son, said Jacob Adams, the borough’s chiefadministrative officer.

Revenue sharingBut, with major oil finds in the Arctic

offshore likely to have a dramatic impacton the North Slope communities, akin tothe impact of onshore oil developments,there needs to be a sharing of oil revenuesbetween the federal government and thepeople of Alaska, Adams said.

“Given our people’s physical and cultur-al reliance on the bowhead whale and otherimportant marine mammals, we bear themajority of the risk with what can gowrong with outer continental shelf devel-opment and receive little direct benefit,”Adams said.

Adams also said that Alaska Natives donot feel involved in the decision makingwhen it comes to outer continental shelfindustrial activities.

PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012 13

Highway, OGS is moving to a larger facility at 53341-A Sandy Lane in Kenai, mile 15Kenai Spur Highway.

The phone and fax numbers will remain the same.According to John Brunton, vice president of Oil and Gas Supply, an increase in the

amount of hydraulic component repair business necessitated the move to a larger facility.Oil and Gas Supply is a premier distributor of Aeroquip hydraulic hose and fittings. OGSalso fabricates industrial as well as hydraulic hose assemblies.

OGS will continue to warehouse Swagelok stainless steel fittings and tubing.

M-I SWACO releases new RHADIANT drilling fluidM-I SWACO, a Schlumberger company, said Oct. 9 that it has released its RHADIANT

ultra-high temperature non-aqueous drilling fluid system. This system eliminates drillingfluid product degradation, prevents wellbore control issues such as barite sag and pro-vides a thin filter cake for enhanced logging conditions.

The RHADIANT drilling fluid system is specially formulated to maintain a stable rheo-logical profile with little maintenance required. Unlike conventional non-aqueous drillingfluids, the RHADIANT drilling fluid system maintains extreme-temperature stability evenduring prolonged static conditions. Stable rheologies in tandem with ultra-thin and slickfilter cake deposits clear the path for logging, casing and cementing operations. Thesecharacteristics of the fluid system enable accurate perforation placement, optimized com-pletions and quality reservoir characterization.

In an ultra-high temperature exploration well in the Gulf of Thailand, the RHADIANTdrilling fluid system effectively delivered filtration control and filter cake quality with sta-ble rheological properties while drilling with zero lost circulation. For logging operations,the fluid system enabled the customer to perform seven open-hole wireline logging runs,despite the fluid remaining static for more than 90 hours. Typical problems associatedwith the usage of conventional non-aqueous drilling fluids, such as barite sag and stuckpipe, were eliminated.

For more information about the RHADIANT ultra-high temperature non-aqueousdrilling fluid, visit www.miswaco.com/rhadiant.

continued from page 12

OIL PATCH BITS

continued from page 1

LESSONS LEARNED

see LESSONS LEARNED page 14

http://www.ReactiveGel.com/mav
Page 14: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

estimating that price could be $10-$12per million Btu.

He said the cost of future U.S. LNGplants could add $3 per million Btu toHenry Hub prices and transportationcosts to Asia could add $2.50-$3 per mil-lion Btu.

Muraki said gas consumers in Asiawant stable prices that are not linked tooil, which has caused large price volatili-ty in recent years.

BG Group CEO disagreesBut Frank Chapman, chief executive

officer of the United Kingdom’s BGGroup, told the conference he was lessenchanted with using Henry Hub as a ref-erence price, noting that the cost of ship-ping U.S. LNG to Asia now exceeds thecost of U.S. gas and conversion, whiletransportation is very capital-intensive.

He said the U.S. LNG export industryhas barely started and future projects willtake some time to reach the starting line.

“U.S. domestic gas prices cannot be theultimate determinant of gas price in otherglobal markets,” Chapman argued. “But

we do not expect this to drive a conver-gence of Henry Hub prices and Asian termprices. We expect gas prices to remainhighly regional for the foreseeable future.”

Sabine Pass, which has long-termagreements with BG Gulf Coast LNG,Gas Natural Fenosa, Koreas Gas andGAIL, seems confident with its decisionto march to the Henry Hub drummer andwhat it told FERC is an “overwhelminglypositive market response to the liquefac-tion project,” which FERC authorized inApril to proceed with a 2.2 billion cubicfeet per day export project.

In its new application, Sabine Pass hassought permission to build the two lique-faction trains of Stage 1 immediately, andmove to two or more trains in Stage 2when market demand warrants, althoughcapacity for the second stage has alreadybeen sold.

The proponent has asked FERC toapprove its request by February 2013 sothat it can meet contractual obligationsunder its sale and purchase agreements.

Conversions to LNGMeanwhile, the annual conference of

the Canadian Society for UnconventionalResources was told that converting largeengines in the North American oil patch to

LNG from diesel could create a strong risein natural gas demand.

Robert Taylor, manager of the reservoirstudies team at Halliburton in Calgary,said two major gas producers said themarket opportunity for LNG-poweredengines could eventually soar to 31 bcfper day, having a “very significant imme-diate effect” in North American gasprices.

He said the fact that natural gas forLNG engines is stored at a temperature ofminus 162 degrees Centigrade enablesmore gas to be stored, so vehicles can trav-el much greater distances before refuel-ing.

Taylor said Royal Dutch Shell alreadyplans to open three LNG fueling stationsin Alberta later this year, while CleanFuels Energy in the U.S. plans to open 150fueling stations by the end of 2013.

Although cautioning that his estimateswere “extremely approximate,” he saidLNG could be provided for 20 percent to40 percent less than the cost of diesel atcurrent commodity prices, but concededthat the savings depend on how far the fuelmust be shipped from its supply source.�

14 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

Alaska Section Scholarship Program Supports:Alaska high school graduates

Petroleum engineering studentsUniversity of Alaska petroleum engineering

programEngineering and earth science students

working toward employment in thepetroleum industry

Date: Thursday, 8 November 2012 Dinner: 6:00 pm Raffle: 7:00 pm

Location: Gateway Hall, Alaska Zoo 4731 O’Malley Rd., 99507

DinnerSponsor:

Society of Petroleum En gineers

The Alaska Section hasawarded over $320,000& 228 scholoarships in the last 11 years!

The 2012 section goal is14 scholarships valuedat $51,000.

For donations or for more information contact —

Drew Huck, SPE Treasurer(265.6828)

Chris Shafer, SPE Director(273.3544)

Phillip Hodge, SPE Director(273.1733)

gineers

“Part of the frustration expressed byAlaska Natives towards outer continentalshelf development is due to the fact that wedo not feel that we have been offered a seatat the decision making table,” Adams said.“The federal government must give morethan lip service to the local involvement,and meaningful enquiries must be madethrough the government’s tribal consulta-tion policies.”

Adams particularly emphasized theimportance to the Native communities ofallowing an oil pipeline across theNational Petroleum Reserve-Alaska, toavoid the need to use oil tankers in theChukchi Sea should oil fields be devel-oped there.

Adams urged the federal government tofocus its efforts and financial resources onenabling a year-round presence in theArctic by the Coast Guard, improvingArctic communications systems and theconstruction of more U.S. ice breakers.

A complex balance“The life of a 21st century Inupiat is a

complex balancing act between preservingour culture and developing opportunitiesfor the benefit of our people,” said EdithVorderstrasse, consulting division manag-er for UIC, the Barrow Native village cor-poration.

Vorderstrasse said that during 35 yearsof oil production on the North Slope the oilindustry had made little effort towardslocal hire through local Native corpora-tions. And while Shell had done an out-standing job of working with AlaskaNative corporations, there have been nosimilar in-depth efforts by other offshoreleaseholders in their projects in theChukchi and Beaufort seas, Vorderstrassesaid.

If offshore development takes place, theoil industry must build a strong alliancewith the Inupiat people, she said.

Community needsVorderstrasse said that UIC supports

both onshore and offshore oil and gasdevelopment.

“We will support exploration and devel-opment activities as long as they are donein a way that ensures protection andpreservation of our Inupiat culture and oursubsistence way of life, (and ensures) eco-nomic benefits for our community;employment for our shareholders and theirfamilies; and contract opportunities forcompanies,” she said.

And Vorderstrasse argued for the for-mation of a training consortium to enablethe training of Alaska Natives for oilindustry jobs.

In addition, experience this year hasshown that support for offshore industrialactivity puts a considerable strain on vil-lage infrastructures, including housing,power supplies and water supplies — thefederal government should make availablerevolving loans to help communities dealwith these issues, and there should be localrevenue sharing with federal offshore oilrevenues, Vorderstrasse said.

The federal government also needs toramp up U.S. Coast Guard Arctic opera-tions. And ratifying the United NationsConvention on the Law of the Sea wouldavoid conceding Arctic territory to otherArctic nations.

“We are concerned that the UnitedStates has failed to recognize the Arctic asa new geopolitical frontier,” Vorderstrassesaid.

—ALAN BAILEY

continued from page 1

LNG PACEcontinued from page 13

LESSONS LEARNED

Contact Alan Bailey at [email protected]

Contact Gary Park through [email protected]

Page 15: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

sive, will make companies reveal tradesecrets to competitors, and could evenforce them to abandon projects in certaincountries, costing the firms and theirinvestors billions of dollars in lost busi-ness opportunity.

Other plaintiffs in the suit include theU.S. Chamber of Commerce, theIndependent Petroleum Association ofAmerica and the National Foreign TradeCouncil.

International activists praise the newSEC rule as valuable to investors and apositive step for preventing governmentcorruption in resource-rich countries.

Dodd-Frank origins“The rule as written would impose

enormous costs on U.S. firms and putthem at a competitive disadvantageagainst government-owned oil giants notsubject to the rule,” API President JackGerard said in an Oct. 10 press release.

The lawsuit argues the SEC failed tomeet its legal obligation to limit the costsand anticompetitive harm of the paymentdisclosure rule.

The SEC, which regulates publiclytraded companies, adopted the rule onAug. 22. The agency said the rule wasmandated by the Dodd-Frank Wall StreetReform and Consumer Protection Act of2010.

The rule requires resource extractionissuers — oil and gas and mining compa-nies — to disclose certain payments madeto foreign governments, as well as to theU.S. government. The companies mustdisclose the information annually by fil-ing a new form, Form SD, with the SEC.These filings will be publicly availablevia the SEC’s online database, known asEdgar.

Companies will need to disclose pay-ments of $100,000 or more that are “madeto further the commercial development ofoil, natural gas or minerals,” the SECsays. The types of payments to be dis-closed include taxes, royalties, licenseand other fees, production entitlements,bonuses, dividends and infrastructureimprovements.

The rule requires disclosure of the typeand total amount of payments made for“each project,” the SEC says, as well asthe type and amount of payments made toeach government.

The rule doesn’t specify exactly whatconstitutes a “project.” The SEC says thatwas intentional, to provide resourceextraction issuers “flexibility in applyingthe term to different business contexts.”

But the API and the other businessgroups say this ambiguity is one of therule’s big problems.

Activists hail new ruleThe international development and

relief organization Oxfam America, in anOct. 11 press release, said it was disap-pointed that the oil industry has “decidedto try to use the courts to keep investorsand the public in the dark regarding pay-ments to resource-rich countries.”

The new SEC rule will provide valu-able information to investors and helpprevent corrupt government officialsfrom squandering oil and mineral wealthin resource-rich countries, Oxfam said.

The SEC “acted to lift the veil ofsecrecy on billions of dollars that flowevery year from oil and mining compa-nies to governments around the world,”said Ian Gary, senior policy manager ofOxfam America’s oil, gas and mining pro-gram. “The agency followed the letter ofthe law. Now it’s time for oil companies tocomply with the final regulation, not fight

it in the courts.”Gary continued: “We call on compa-

nies, such as BP, Exxon, Chevron andShell, who are hiding behind industryassociations to do their dirty work whileespousing transparency rhetoric, to disas-sociate themselves from the lawsuit.”

Oxfam added that some companies,such as Talisman Energy and Statoil,already disclose payments in every coun-try of operation, in some cases at the proj-ect level.

Some countries forbid disclosures“The oil and natural gas industry

strongly supports payment transparency,”API’s Gerard said. “We’ve been workinghard to increase transparency for adecade, but this rule could interfere withongoing efforts by making U.S. firms lesscompetitive against state-owned firms inChina and Russia that have no interest intransparency.”

The industry is working with civilsociety groups and the Obama adminis-tration to implement EITI, the ExtractiveIndustries Transparency Initiative, a pro-gram that would more effectively increasetransparency without harming competi-tiveness, Gerard said. The initiativealready has been established in 36 coun-

tries, API said.Under the new SEC rule, companies

will be required to make the payment dis-closures for fiscal years ending after Sept.30, 2013.

The lawsuit says the rule presentsmajor problems. By the SEC’s own reck-oning, it will cost U.S. public companiesat least $1 billion for initial complianceand $200 million to $400 million in ongo-ing costs, the suit says.

Worse, companies will be forced —against their First Amendments right torefrain from speaking — to give competi-tors access to sensitive commercial infor-mation, and to “abandon projects to for-eign state-owned companies in countriesthat forbid the disclosures or that simplyrefuse to do business with U.S. companies

because they do not wish the disclosuresto be made.”

Countries including Angola,Cameroon, China and Qatar prohibit dis-closures such as those the SEC is requir-ing, the lawsuit says.

The SEC is going too far in requiringpublic disclosure of company-specificpayment information, the suit argues.That’s because Dodd-Frank “requiresonly that a ‘compilation’ or aggregationof payment information made by all U.S.companies to each foreign governmentand the federal government be made pub-licly available.”

—WESLEY LOY

PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012 15

Part of the Oil and Gas SpeakerSeries Sponsored By:

Also Sponsored By

With Associated Partners:

"U.S. Energy and Tax Policies: Implications for Alaska’s Economy"Friday, 26th October, 2012 – Hilton Hotel

Doors open at 11:30 a.m. - Program begins at 12:00 p.m.RSVP by Wednesday, 24th of October to the Alaska World Affairs Council

By telephone 276-8038, or by email to [email protected]

Come hear what an independent expert thinksabout various energy tax policies and what they

mean for Alaska.

"U.S. Energy and Tax Policies: Implications for Alaska’s Economy"

Dr. Thorning is an internationally recognized expert on tax, environmental, and competitiveness issues. She writes and lectures on tax and economic policy, is frequently quoted

and has op-eds published in publications such as the Financial Times, New York Times, WallStreet Journal, Forbes, and E&E Daily. Dr. Thorning has appeared internationally on public affairs news programs and has made presentations on the economic impact

of climate change policy in China, India, other Asian countries, the European Union, and Russia.

Dr. Margo Thorning, Senior vice president and chief economist with the AmericanCouncil for Capital Formation

continued from page 1

SEC LAWSUIT

Contact Wesley Loy at [email protected]

http://www.alaskaworldaffairs.org/
Page 16: Making the most of it · 2012-10-19 · page 4 Arctic sea ice hits record lows, Antarctica ice hits record highs EXPLORATION & PRODUCTION NATURAL GAS NATURAL GAS Vol. 17, No. 43 •

Pete Stokes told a meeting of the AlaskaSupport Industry Alliance on Oct. 11.

An earlier incarnation of the PRAstudy, published in 2010, had predictedthat without new development drillingthere would be a gas shortfall in 2013.And, although some new gas wells andnew gas compression in gas fields haveboosted gas supply levels since 2010,these infrastructure additions have onlymoved the time of the predicted shortfallby about a year, Stokes said.

Short-term gapStokes said that although heightened

levels of gas development and explorationin the Cook Inlet basin will likely lead toan eventual improvement in the gas sup-ply situation, the lead time in bringingnew sources of gas on line, coupled withrates of drilling below what is required tostave off the gas production decline, makeit unlikely that new gas can come onstream in sufficient quantities before per-haps 2019. That leaves a supply gap in theintervening period.

“I am concerned about the short term,”Stokes said.

And, with no realistic possibility ofbringing North Slope gas by pipeline tothe Cook Inlet region before 2020, shouldproposals for such a pipeline come tofruition, the import of liquefied or com-pressed natural gas from out of state hasto be considered to bridge the gas short-fall gap, Stokes said. Stokes likened theimport option to an insurance policy: Itmight not ultimately be needed, but with-out the work to enable it to happen, the

option will disappear.“There is ongoing work towards this

goal,” he said, referring to actions that theSouthcentral utilities have been taking tofind some way of importing gas.Although there has been much talk ofimporting gas in liquefied form, theimport of compressed natural gas fromthe Lower 48 may be a better option,given the price differential between cheapNorth American gas and expensive lique-fied natural gas on the Pacific Rim,Stokes said.

Decline trendIn conducting its study into Cook Inlet

gas supplies PRA has investigated theproduction decline rates of the Cook Inletgas fields and the decline characteristicsof individual gas wells. The outcome ofthis work has been a predicted declinecurve for the entire Cook Inlet basin, if nonew wells come on line.

With the export license for the LNGexport facility on the Kenai Peninsulaexpiring in March 2013, PRA hasassumed a fairly constant level of gas

demand from 2014 onwards, with thatdemand essentially coming fromSouthcentral gas and power utilities; fromthe use of gas by the oil refinery on theKenai Peninsula; and from gas used asfuel in the operation of the Cook Inlet oiland gas fields.

PRA’s predicted gas supply declinecurve drops below the anticipateddemand level in 2014, with the supplyshortfall increasing year-on-year afterthat.

But this prediction of gas shortfalls ispessimistic because it assumes that nonew gas wells will be drilled and that nonew compression will be added to fields,Stokes explained.

Required drillingIn 2010 PRA tried to figure out the

drilling rate required to avoid the supplyshortfall and concluded that 13 to 14 newwells per year would be needed.Unfortunately, since then there have onlybeen around five or six new wells drilledper year, so that gas supplies have contin-ued to decline.

PRA has found that the drilling ofthree to four wells per year, perhapsadding 10 million cubic feet per day togas production, would still leave a supplyshortfall in 2014. Upping that drilling rateto six to eight wells, increasing produc-tion by around 20 million cubic feet perday, would delay the shortfall into 2015,Stokes said.

Development activityAnd significant recent changes in the

Cook Inlet gas industry do give somecause for optimism about developmentdrilling activity in the near future.

Hilcorp Energy, the company that hastaken over Chevron’s Cook Inlet assetsand is in the process of acquiringMarathon’s interests in the region, is plan-ning major capital expenditures on CookInlet oil and gas projects. ConocoPhillipshas just completed two new wells in theBeluga River field, Buccaneer Energy isdrilling in its Kenai Loop developmentand Armstrong Cook Inlet has permittedtwo new wells in its North Fork gas fieldin the southern Kenai Peninsula.

But, taken together, these new actionsstill only seem in total to amount to fiveto six new wells per year, a level of activ-ity below what is needed to boost gas sup-plies to required levels in 2015 andbeyond, Stokes said.

ExplorationSo, what about the heightened level of

exploration activity around the inlet?Nordaq Energy plans to delineate its

discovery at Shadura on the Kenai

Peninsula and is exploring at Tiger Eye onthe west side of the inlet; Buccaneer hasannounced new exploration near AnchorPoint on the Kenai Peninsula; Cook InletEnergy is exploring the west side of theinlet; and Apache Corp. has been shoot-ing a major 3-D seismic program, withplans to drill its first well on the west sideof the inlet later this year. Offshore, bothFurie Operating Alaska and Buccaneernow have jack-up drilling rigs in the inletand Apache has shot some offshore 3-Dseismic. Furie is drilling its second wellfrom its jack-up rig.

But exploration is a risky businesswith uncertain outcomes, and unless thereis a significant find near the existinginfrastructure, sufficient gas from explo-ration discoveries is unlikely to come online in time to prevent a gas supply short-fall. In particular, it would likely takethree to five years after an offshore dis-covery to bring a new offshore gas fieldinto operation, Stokes said.

DeliverabilityThe other crucial gas supply issue is

ensuring that the gas deliverability — therate at which gas can be delivered throughpipelines — is adequate to meet peakdemand levels, especially in the depths ofwinter. And Cook Inlet Natural GasStorage Alaska’s new gas storage facilityon the Kenai Peninsula will play a keyrole in ensuring that utilities can meettheir gas deliverability needs. Essentially,the facility can warehouse gas during thesummer when demand is low and thenrelease the gas in the winter whendemand is high. S

The storage facility can help meetabout 50 percent of the average peakmonthly demand level while also elimi-nating the need to overstress gas wells byrunning them flat out during severely coldweather, Stokes said.

Small marketStokes also commented that the small

size of the local Southcentral gas marketis a particular concern. It would take rel-atively few large new gas discoveries toflood that market with gas, he said. Then,without a market to sell into, companiesmight leave the region, ultimately causinga recurrence of the current gas supplyproblems. An industrial consumer, suchas the current liquefied natural gas planton the Kenai Peninsula, can create thetype of larger market that drives long-term market stability, but can also bringconflicts over competing gas demands inthe short term, he said. �

16 PETROLEUM NEWS • WEEK OF OCTOBER 21, 2012

continued from page 1

MORE WELLS NEEDED On the webSee previous Petroleum News coverage:

“Continuing concerns,” in Oct. 7, 2012,issue atwww.petroleumnews.com/pnads/872912384.shtml“No respite ahead,” in March 25, 2012,issue atwww.petroleumnews.com/pnads/725487798.shtml “Cook Inlet needs $2.8B,” in March 4,2007, issue atwww.petroleumnews.com/pnads/784169373.shtml

Contact Alan Bailey at [email protected]

http://www.matsystrems.ca
http://www.umalaska.com/

17-4001 MFB LUs 8-17-17-R1-HI · Top 40 Hits Top 40 Hits '60s Pop Hits '60s Pop Hits '70s Pop Hits Classic '70s Hits/01dies '80s Pop Hits Pop Hits of the '80s

17-4001 MFB LUs 8-17-17-R1-HI · Top 40 Hits Top 40 Hits '60s Pop Hits '60s Pop Hits '70s Pop Hits Classic '70s Hits/01dies '80s Pop Hits Pop Hits of the '80s

Documents
Halogen species record Antarctic sea ice extent over glacial

Halogen species record Antarctic sea ice extent over glacial

Documents
UK Sheet Music by Record Chart Hits - TalkTalkmyweb.tiscali.co.uk/popmusichistory/Charts/Sheet Music by Week.pdf · UK Sheet Music by Record Charts 1946 ... evening at home having

UK Sheet Music by Record Chart Hits - TalkTalkmyweb.tiscali.co.uk/popmusichistory/Charts/Sheet Music by Week.pdf · UK Sheet Music by Record Charts 1946 ... evening at home having

Documents
Chapter 1 The geological record of Neoproterozoic ice ages · Chapter 1 The geological record of Neoproterozoic ice ages EMMANUELLE ARNAUD1*, GALEN P. HALVERSON2,3 & GRAHAM SHIELDS-ZHOU4

Chapter 1 The geological record of Neoproterozoic ice ages · Chapter 1 The geological record of Neoproterozoic ice ages EMMANUELLE ARNAUD1*, GALEN P. HALVERSON2,3 & GRAHAM SHIELDS-ZHOU4

Documents
An Antarctic stratigraphic record of stepwise ice growth

An Antarctic stratigraphic record of stepwise ice growth

Documents
Merged sea-ice thickness product from complementary L … · Altimetry First-year / multi-year sea ice Climate applications (longest data record) Young thin ice (freeze-up) Areas

Merged sea-ice thickness product from complementary L … · Altimetry First-year / multi-year sea ice Climate applications (longest data record) Young thin ice (freeze-up) Areas

Documents
Queen - Greatest Hits II off the record

Queen - Greatest Hits II off the record

Documents
Action Target Hits the Beach with a Record-Breaking Bullet Trap

Action Target Hits the Beach with a Record-Breaking Bullet Trap

Entertainment & Humor
67749629 Greatest Hits I Off the Record

67749629 Greatest Hits I Off the Record

Documents
115year ice-core data from Akademii Nauk ice cap ...epic.awi.de/18879/1/Ope2008c.pdf · 115year ice-core data from Akademii Nauk ice cap, Severnaya Zemlya: high-resolution record

115year ice-core data from Akademii Nauk ice cap ...epic.awi.de/18879/1/Ope2008c.pdf · 115year ice-core data from Akademii Nauk ice cap, Severnaya Zemlya: high-resolution record

Documents
e00 MASTER Quartalsbericht · British luxury brand Bentley celebrated setting the world ice speed record by presenting its limited-edition Continental Supersports “Ice Speed Record”1

e00 MASTER Quartalsbericht · British luxury brand Bentley celebrated setting the world ice speed record by presenting its limited-edition Continental Supersports “Ice Speed Record”1

Documents
Phone: (610) 366-9752 - Double Alpha · 2017-01-19 · 1. A button - to record A zone hits 2. C button - to record C/B zone hits 3. D button - to record D zone hits 4. M button -

Phone: (610) 366-9752 - Double Alpha · 2017-01-19 · 1. A button - to record A zone hits 2. C button - to record C/B zone hits 3. D button - to record D zone hits 4. M button -

Documents
Bachelor Gulch Report€¦ · 30-year Mortgage Rate Hits Record Low of 3.78% - MarketWatch . By Ruth Mantell WASHINGTON (MarketWatch) - Mortgage rates hit record lows in the week

Bachelor Gulch Report€¦ · 30-year Mortgage Rate Hits Record Low of 3.78% - MarketWatch . By Ruth Mantell WASHINGTON (MarketWatch) - Mortgage rates hit record lows in the week

Documents
Ice flow variations at Polar Record Glacier, East Antarctica...Ice flow variations at Polar Record Glacier, East Antarctica QI LIANG,1–3, CHUNXIA ZHOU,1,2 IAN M. HOWAT,3,4 SEONGSU

Ice flow variations at Polar Record Glacier, East Antarctica...Ice flow variations at Polar Record Glacier, East Antarctica QI LIANG,1–3, CHUNXIA ZHOU,1,2 IAN M. HOWAT,3,4 SEONGSU

Documents
ARCTIC SEA ICE COVER September 2005 NASA. SEA ICE EXTENT March 2006 Maximum September 2006 Minimum NEW RECORD! 2006: At or near record minimum in summer

ARCTIC SEA ICE COVER September 2005 NASA. SEA ICE EXTENT March 2006 Maximum September 2006 Minimum NEW RECORD! 2006: At or near record minimum in summer

Documents
Immigrant Population Hits Record 42.1 Million in Second ... · Immigrant Population Hits Record 42.1 Million in Second Quarter of 2015 Growth driven in last year by surge from Mexico

Immigrant Population Hits Record 42.1 Million in Second ... · Immigrant Population Hits Record 42.1 Million in Second Quarter of 2015 Growth driven in last year by surge from Mexico

Documents
ICE Development Objectives Record

ICE Development Objectives Record

Documents
High Arctic Holocene temperature record from the Agassiz ...High Arctic Holocene temperature record from the Agassiz ice cap and Greenland ice sheet evolution Benoit S. Lecavaliera,1,

High Arctic Holocene temperature record from the Agassiz ...High Arctic Holocene temperature record from the Agassiz ice cap and Greenland ice sheet evolution Benoit S. Lecavaliera,1,

Documents
A record-breaking low ice cover over the Great Lakes during winter …jaustin/Publications/Bai_et_al... · 2014-07-07 · A record-breaking low ice cover over the Great Lakes during

A record-breaking low ice cover over the Great Lakes during winter …jaustin/Publications/Bai_et_al... · 2014-07-07 · A record-breaking low ice cover over the Great Lakes during

Documents
Thesun 2009-07-28 Page08 Arroyo Hits Back at Critics Defends Record

Thesun 2009-07-28 Page08 Arroyo Hits Back at Critics Defends Record

Documents
53006911 Queen Greatest Hits II Off the Record

53006911 Queen Greatest Hits II Off the Record

Documents
13-20 Corporate Venture Capital Soars, As Funding Hits Record … · 2018-03-28 · Corporate Venture Capital Soars, As Funding Hits Record $6.3 Billion C orporate venturing exploded

13-20 Corporate Venture Capital Soars, As Funding Hits Record … · 2018-03-28 · Corporate Venture Capital Soars, As Funding Hits Record $6.3 Billion C orporate venturing exploded

Documents
JSPL Hits Record Production & Sales; Profitability improves

JSPL Hits Record Production & Sales; Profitability improves

Documents
Fats Waller - Victor Record Song Hits (book)

Fats Waller - Victor Record Song Hits (book)

Documents
THE LITTLE ICE AGE IN THE ALPS: ITS RECORD IN GLACIAL ... · THE LITTLE ICE AGE IN THE ALPS: ITS RECORD IN GLACIAL DEPOSITS AND ROCK GLACIER FORMATION Abstract. Climatic fluctuations

THE LITTLE ICE AGE IN THE ALPS: ITS RECORD IN GLACIAL ... · THE LITTLE ICE AGE IN THE ALPS: ITS RECORD IN GLACIAL DEPOSITS AND ROCK GLACIER FORMATION Abstract. Climatic fluctuations

Documents
Ice sheet record of recent seaice behavior and polynya variability … · 2018. 12. 7. · Ice sheet record of recent sea-ice behavior and polynya variability in the Amundsen Sea,

Ice sheet record of recent seaice behavior and polynya variability … · 2018. 12. 7. · Ice sheet record of recent sea-ice behavior and polynya variability in the Amundsen Sea,

Documents
60s Pop Hits '60s Pop Hits '70s Pop Hits Classic '70s Hits/01dies '80s Pop Hits Pop Hits of the '80s '90s Pop Hits '90s Pop Hits Pop 2000 Hits Pop 2000 Hits Acoustic Rock Acoustic

60s Pop Hits '60s Pop Hits '70s Pop Hits Classic '70s Hits/01dies '80s Pop Hits Pop Hits of the '80s '90s Pop Hits '90s Pop Hits Pop 2000 Hits Pop 2000 Hits Acoustic Rock Acoustic

Documents
Largest non-nuclear explosion on record hits Beirut ... · Largest non-nuclear explosion on record hits Beirut Marines, 25 years ago "We lost a lot of Marines that day." By Ed Marek,

Largest non-nuclear explosion on record hits Beirut ... · Largest non-nuclear explosion on record hits Beirut Marines, 25 years ago "We lost a lot of Marines that day." By Ed Marek,

Documents
Canadian trade deficit hits record $4.1B in September

Canadian trade deficit hits record $4.1B in September

Economy & Finance
MergedFile - SportsTG€¦ · TOTAL 107 99 132 338 883 Competitor Entries (Record) 1150 Matches (Record) 1100 Ticketed Spectators Over (Record) LIVE STREAMING: Over 65,000 hits (Record)

MergedFile - SportsTG€¦ · TOTAL 107 99 132 338 883 Competitor Entries (Record) 1150 Matches (Record) 1100 Ticketed Spectators Over (Record) LIVE STREAMING: Over 65,000 hits (Record)

Documents