CBM Asia reported plans for commercializing its 705 Bcf resource at Kutai West PSC

CBM Asia reported plans for the Kutai West PSC development. CBM Asia’s primary goal for 2014 is to commercialize the Kutai West Production Sharing Contract (PSC) in East Kalimantan, Indonesia, located near the Bontang LNG export facility. Achieving early-stage commercial production will help unlock the value of this asset, which is situated close to high-priced Asian gas markets.

CBM Asia holds an 18% working interest in the Kutai West PSC, representing 705 Bcf of recoverable prospective resources net to CBM Asia from the total 3.9 Tcf estimated by an independent audit conducted in 2013 by Netherland, Sewell & Associates. Kutai West is regarded as one of the best and commercially most advanced of the more than 50 awarded CBM blocks in Indonesia.

Kutai West is adjacent to the Sanga-Sanga PSC, where VICO (BP and partners) is commercially producing and selling CBM for power generation and gas to the nearby Bontang LNG facility. As VICO notes: “This is the first time in Indonesia that any CBM facilities have produced and sold gas and represents a major milestone in the exploration of CBM potential.”

Kutai West will produce from the same coal seams as at Sanga-Sanga. To date, the company and its partners have drilled four CBM test wells on the block, verifying thick coal seams (average 105 ft) with high gas content (average 300 ft3/ton; dry, ash-free basis) and gas saturation (close to 100%), as well as 5-mD permeability. The KWCBM-01 well is currently being dewatered, venting produced gas from the flare stack, which is a key first step towards larger scale production.

Management’s main focus this year is to initiate commercial gas production at Kutai West with a 5-well pilot, followed by a larger commercial scale 25-well development (total 30 wells). To this end CBM has reached consensus with its partners to sell the produced gas to locally installed gas engine power generation units selling power into the PLN grid and later to feed gas into the gas-short Bontang LNG export network. Anticipated gas prices are $8/Mcf or higher. Bontang exports LNG to Japan and other Asian rim importers, which are critically short of natural gas.

Under Phase 1 four new CBM wells will be drilled near the existing KW-CBM01, forming an effective dewatering pilot on tight 40-acre spacing to accelerate gas production and demonstrate commerciality. Produced gas estimated at 2.0-2.5 MMcfd (gross) would be sold to a power station developer/operator and PLN for on-site power generation at about $8/Mcf. The government of Indonesia strongly supports such commercialization prior to formal Plan of Development (POD) approval. Total capex for Phase 1 is estimated at $7.16 mn, comprising four wells at $1.46 mn/well cost (drilling & completion, water management, and surface facilities) plus $1.32 mn in engineering and overhead costs. An additional $200,000 would be required for field operating expenses during the first year. CBM Asia’s share of the Phase 1 costs is estimated at $2.15 mn.

The 10-MW power station would employ an array of 1-to5-MW reciprocating engines; hundreds of such installations already are in operation throughout Indonesia.The power station would be independently owned and operated, with no capital required from CBM Asia. Drilling and completing the wells would require about two months, plus an additional four months to install and commission the power plant. An updated engineering audit would be conducted to certify proved and probable reserves, with an excellent chance of qualifying the project for low-cost Phase 2 project financing.

Following success in Phase 1 and the approval of the Phase 2 POD, CBM Asia and its partners would utilize two rigs to drill an additional 25 wells (30 total) over a 7-month period. The increased production initially would supply the power station. Pending successful conclusion of a sales agreement, a 12-in., 20-km pipeline would be constructed to the Badak compressor station by a third party under BOO basis and funded via an estimated $0.50/Mcf transport tariff. Total capex for phase 2 is estimated at $36.3 mn with CBM Asia’s share of costs estimated at $8.0 mn. Production estimated at 12.5 MMcfd (gross) would be sold into the Bontang LNG export network at approximately $8/Mcf or more. Note that Bontang is the world’s second largest LNG plant (22.5 mtpa), shipping primarily to Japan, but local  conventional gas supplies are in decline and the facility is currently operating at less than 60% of capacity.
 
“The Kutai West and Sekayu PSC’s both have substantial engineered resources for commercialization, but Kutai West is most viable for near-term commercial development” noted President and CEO Charles Bloomquist. “We are focusing our efforts on achieving commercial production and gas sales at the block as soon as possible, likely before the end of 2014. We estimate that with completion of the Phase 2 development CBM Asia will be operational cash flow positive. Jointly with its partners the company has developed a technical plan and budget for the Kutai West commercial development and will post details in a new presentation on its website in the coming days.”

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

American Sands Energy acquires pilot plant for water-free extraction process

American Sands Energy Corp., an oil sands exploration and development company operating in Utah, has completed the purchase of its pilot plant, used to demonstrate its water-free extraction of bitumen, or heavy oil, from leased oil sands deposits the firm intends to mine. The agreement with Elemax, Inc., included a combination of cash and stock to purchase the trailer-mounted mobile oil recovery system.

The pilot plant, which the company has successfully used to process up to 1 ton of oil sand per hour over multiple days, will be used by American Sands to evaluate other opportunities for hydrocarbon recovery projects, while the company moves toward initial production at its Sunnyside location.

Will Gibbs, chairman and CEO, said that the pilot plant “uses no water, consumes 60% less energy than traditional oil sands mining operations, requires no tailing ponds and produces no toxic byproducts.”

Gibbs added that, going forward, "In addition to the pilot plant being the engineering model for our initial planned 5,000 bpd plant in Utah, we also plan to work with industry partners around the world that can utilize our scalable technology to extract oil from solid materials such as oil sands, oil shale and other substances."

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

Oil India said to study purchase of Shell's Nigerian oil blocks

Oil India Ltd. is studying an acquisition of Nigerian oil and gas assets owned by Royal Dutch Shell Plc, according to people familiar with the matter.

Oil India is weighing a bid for stakes Shell holds in some onshore blocks, valued at as much as $2 billion, the people said. It will partner with India’s Sandesara Group on the potential purchase, according to the people, who asked not to be identified as the deliberations are private.

The explorer joins Dangote Group, controlled by Africa’s richest man, and Seplat Petroleum Development Co. in seeking to acquire Nigerian assets being sold by Western rivals. Shell and Chevron Corp. are divesting fields in the country amid persistent violence and crude theft in the oil-rich Niger River delta.

India’s government-run oil companies are building on their record $5.5 billion of acquisitions last year to secure supplies for Asia’s second-biggest energy consumer. Oil India, which had 124.9 billion rupees of cash at the end of September, has purchased stakes in gas fields in Mozambique and shale assets in the U.S. over the past two years.

Oil India Chairman S.K. Srivastava and finance director Rupshikha Saikia Borah didn’t answer two calls each to their mobile phones seeking comment. Sandesara Group Chairman Nitin Sandesara didn’t immediately respond to an email and phone call to his office.

Sterling Energy & Exploration Production Ltd., a unit of Sandesara Group, has more than 250 MMbbl of certified oil reserves and 1 Tcf of natural gas reserves in the Niger Delta, according to its website. Nigeria pumped about 2.1 MMbpd last month, data compiled by Bloomberg show.

Shell said in October divestments in India have been deferred to 2014. The Anglo-Dutch company’s earnings in the country were curbed by almost $1 billion last year because of oil theft and a LNG export blockade by the government, CFO Simon Henry said March 13.

Earlier this year, Oil & Natural Gas Corp. and Oil India paid $2.5 billion for a 10% stake in a Mozambique natural gas field. Securing fuel supplies is crucial for Prime Minister Manmohan Singh as India relies on imports to meet about three-quarters of its oil requirements.

Seplat Petroleum, based in Lagos, and its partners are bidding for two Nigerian oil and gas permits Shell is selling, Chairman A.B.C. Orjiako said March 11. Dangote Group is in talks to purchase onshore oil blocks in the country as international companies sell assets, Group Executive Director said in January.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

ROC farms in to PSC offshore Malaysia

Roc Oil Co. reported the farm in to a Production Sharing Contract (PSC), which includes three fields D35, D21 and J4, located offshore Malaysia in water depths of approximately 50 m.

The fields are currently 100% owned and operated by Petronas Carigali and ROC has farmed into a 50% participating interest. The fields are in production with a combined daily oil rate of approximately 10,000 bopd and gas sales of approximately 17 MMscfd gross working interest. ROC’s economic interest (50%) of the 2P reserves from the Fields is 8.7 MMboe.

Roc Oil Co’s CEO Alan Linn said: “The farm in is an excellent fit for our business and in line with our Asian development strategy, we expect the fields to become cornerstone development assets within our growing regional portfolio. The fields, particularly D35, contain material in place oil and gas volumes, and overall field recovery is expected to benefit significantly from the introduction of secondary and tertiary recovery technologies. The fields provide a portfolio of immediately bookable reserves plus contingent and prospective resources, which combined materially add to and extend the reserves and resources life of ROC.

"The farm in agreement includes amendments to the existing PSC, effective from January 1, 2014, until December 2034.The PSC terms are designed for field redevelopment and enhanced oil recovery (EOR) to commercially encourage progressive incremental oil development over the full life of the PSC. ROC’s experience in the redevelopment of the Zhao Dong fields, offshore Bohai Bay, China, is a good analogy for the redevelopment potential of the fields.

"Since 2006, ROC has doubled the recoverable reserves in Zhao Dong with a combination of reservoir development optimisation, facilities debottlenecking, capacity enhancement and the introduction of low cost drilling for production and injection wells designed to maximise recovery from compartmentalised reservoirs. Petronas Carigali and ROC will work together to unlock the Fields’ redevelopment potential and our track record has been key in bringing this significant redevelopment opportunity to ROC.”

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

Petrobras starts third well at Santos basin’s Sapinhoá field

Petrobras has announced the start-up of well 7-SPH-04-SPS, at a water depth of 2,120 m, in Sapinhoá field, in the Santos basin pre-salt region. This well has an estimated production potential of 26,000 bpd and is interconnected to the FPSO Cidade de São Paulo through the platform connecting system known as BSR (Buoyancy Supported Risers).

This is the third production well of the Sapinhoá Pilot Project and the second to go in operation through the BSR gathering system, following the start-up of well SPS-77A, which has been producing approximately 36,000 bpd since February 18, 2014.

FPSO Cidade de São Paulo has the capacity to process up to 120,000 bpd and has been in operation since January 5, 2013, when it was directly interconnected to well SPS-55. The fourth production well of the project will be interconnected early in the second half of the year. With the start-up of this well, the platform will reach its full output capacity.

Besides the first buoy already installed in Sapinhoá field, three other similar systems have been commissioned for installation in Santos basin pre-salt fields. Of these three, one more will be destined for Sapinhoá field (Sapinhoá Pilot Project - FPSO Cidade de São Paulo) and the other two for Lula field (Lula Nordeste Pilot Project - FPSO Cidade de Paraty). FPSO Cidade de Paraty, with the capacity to process up to 120,000 bpd, went into operation on June 6, 2013, when it was directly interconnected to the output of well LL-11.

Installation of the second buoy, destined for Lula field, was completed in February in less than a third of the time it took to install the first one, due to improvements made to installation processes. Then, on March 9, installation of the rigid steel pipelines to gather the output from two NE Lula wells, through the buoy, was completed.

At this time, installation is underway of the flexible pipelines of well 7-LL-22D-RJS, the first production well to be connected to the Lula NE buoy. This well will go in operation this quarter. Then, two other wells will be interconnected and FPSO Cidade de Paraty will reach its full output capacity in the third quarter of this year.

Two other buoys will be installed in the first half of the year

Operations to interconnect the third buoy in Sapinhoá field are ahead of schedule. The buoy is already submerged and attached to its foundations. Installation work will be completed this quarter.

The fourth and last buoy, designed for Lula field, is already on site and is currently in the initial installation phase, according to schedule. Installation is also expected to be completed this quarter.

Sapinhoá field is operated by Petrobras (45%), in partnership with BG E&P Brasil Ltda (30%) and Repsol Sinopec Brasil S.A. (25%).

Lula field is operated by Petrobras (65%), in partnership with BG E&P Brasil Ltda (25%) and Petrogal Brasil S.A. (10%).

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.