European companies look to East as Libyan oil production halts

The International Energy Agency (IEA) has reported that between 500,000 bpd and 750,000 bpd of crude had been removed “at present” from the market. This represents less than 1% of global daily consumption.

The drop in production comes days after Libyan representatives accused Britain of damaging an oil pipeline in an air strike. Libyan rebels said that because of government attacks, such as the reported pipeline damage, had halted production of oil they hope to sell to finance their uprising. Reuters also reported on Friday that a lack of staff at ports and security concerns also contributed to the halt in production.

A number of European oil firms said they were looking to buy more crude from Russia, Iran and other Caspian countries and the IEA said there was no need for an immediate strategic stock release.

Libya is the world’s 12th-largest oil exporter, most of which flows to Europe. As of January 2011, according to IEA, Libya’s total proven oil reserves reached 46.4 billion bbl, with nearly 80% of its proven oil reserves are located in the Sirte basin. During Jan-Nov 2010, Libya exported over 1.5 million bpd during that time. Nearly 85% was directed to the European market: Italy (28%), France (15%) and Germany (10%).

Libya’s oil production, which was set at 1.6 million bpd during January 2011, fell by over 70% since the unrest began in February 2011.

Beach begins 3D seismic survey in Albania

Beach advises it has commenced a 3D seismic survey in offshore Albania which will cover 840 square kilometres in the Durresi Block

Beach Energy Limited and its joint venture partner San Leon Energy advise that they have commenced an 840 square kilometre 3D seismic survey in the Durresi Block, offshore Albania.

San Leon is Operator of the joint venture and, through a subsidiary, holds a 75% interest in the Durresi block with Beach holding the remaining 25%. Beach has agreed to pay 50% of the seismic program costs, rather than its 25% working interest requirement, in exchange for an option which, if exercised after review of the seismic data, will give Beach a 50% working interest in the licence moving forward.

Petroleum Geo-Physical AS has been contracted to carry out the survey using the M/V Ramform Vanguard seismic vessel. The 3D seismic program will evaluate a number of prospective targets in the Durresi Block, including the A4-1X discovery, in preparation for drilling in 2012.

The A4-1X gas condensate field was discovered in 1993 and is located 30 km off the southern coast of Albania. San Leon estimates the discovery to contain approximately 38 million barrels of circa 51 API condensate and 150 billion cubic feet of gas. The joint venture is also exploring potentially significant oil and gas targets adjacent to A4-1X.

The Durresi block is situated on the proven Apulian Margin, which extends from Italy into Albania.

Southern Albania contains a highly prolific petroleum system, including one of the largest onshore oil accumulations in Europe, the Patos-Marinza field, which is estimated to contain up to 5.7 billion barrels of original oil in place.

Global Industries awarded contract for deepwater 'Who Dat' project in GOM

Global Industries has been awarded a project from LLOG for the installation of a deepwater subsea development in the Gulf of Mexico. The project, which will take place in Blocks MC 503/547, is located in 3,000 FSW and is scheduled to begin in May.

The project includes the installation of 19 miles of 10-inch export oil pipeline, 17 miles of 14-inch gas pipeline, 10 miles of 6-inch insulated rigid flowlines, 6 flexible risers, nine jumpers and jumper tie-ins, three subsea manifolds, 6 PLETs, and other additional equipment.

Global will be utilizing four vessels for the execution of this project: the 485-foot DLB Hercules, a DP-2 equipped vessel with a crane capable of lifting 2,000 tons; the Global Orion, a DP-2 equipped multi-service vessel; the Olympic Challenger, a 347-foot, DP-2 multi-service subsea construction vessel, equipped with two 200hp Schilling UHD ROVs; and the Chickasaw, a 275-foot reel ship.

Commenting on the award, Global's CEO John B. Reed said, "We are extremely pleased and proud that LLOG Deepwater chose Global to handle this deepwater project. We continue our focus on execution excellence in increasingly challenging deepwater projects and look forward to assisting LLOG in achieving a successful outcome for the 'Who Dat' project."

Eni signs MoU for upstream cooperation in Ukraine

The parties agreed to collaborate on the study of initiatives in conventional and unconventional oil and gas on the basis of a mutual sharing of data, competencies and technology.

The Minister of Ecology and Natural Resources Mykola Zlochevskiy of Ukraine and Eni CEO Paolo Scaroni signed in Kiev a Memorandum of Understanding defining the framework for possible cooperation initiatives in exploration and production of hydrocarbons in Ukraine.

The parties agreed to collaborate on the study of initiatives in conventional and unconventional oil and gas on the basis of a mutual sharing of data, competencies and technology. They also arranged to set up a joint working team that will begin the evaluation of such opportunities.

During his visit to Kiev, Eni CEO Paolo Scaroni also had the opportunity to meet with the Minister of Energy and Coal Industry Yuriy Boyko to discuss possible cooperation in Ukrainian upstream sector.

Anadarko makes new discovery offshore Ghana at Teak-2 prospect

Anadarko Petroleum Corporation announced a deepwater discovery at the Teak-2 prospect, located in the West Cape Three Points Block offshore Ghana. The Teak-2 exploration well encountered approximately 90 net feet of high-quality oil, condensate and natural gas pay in stacked Campanian- and Turonian-age reservoirs.

"The Teak-2 discovery is another confirmation of our geologic model that adds to the substantial resource potential of the area and extends the success of our multi-well exploration program on the West Cape Three Points Block," said Bob Daniels, Anadarko Sr. Vice President, Worldwide Exploration. "We are very pleased with the results encountered in this discovery, which will be further evaluated with future appraisal activity. We continue to work with our partners and the Republic of Ghana to advance our exploration and appraisal programs, as well as the increasing number of development opportunities in both the West Cape Three Points Block and adjacent Deepwater Tano License."

The Teak-2 well was drilled to a total depth of 11,185 feet in water depths of approximately 2,900 feet. The well is approximately 5,900 feet southwest and fault separated from Teak-1, and approximately two miles northeast of the Mahogany-2 well. After preserving the well at Teak-2 for future use, the partnership plans to mobilize the rig to drill the Banda prospect, also located in the West Cape Three Points Block.

Anadarko owns a 30.875-percent working interest in the West Cape Three Points Block, which is operated by Kosmos Energy (30.875-percent working interest). Other co-owners in the block include Tullow Oil plc (22.896-percent working interest), the E.O. Group (3.5-percent working interest), Sabre Oil & Gas Holdings Ltd (1.854-percent working interest) and the Ghana National Petroleum Corporation (10-percent carried interest).

West Africa Exploration Update
Anadarko has finalized plans for its previously announced 2011 drilling campaign in the Liberian Basin. To carry out this program, Anadarko intends to mobilize the Discoverer Spirit drillship from the Gulf of Mexico to West Africa after it finishes completion activities on the third Caesar/Tonga well. Subject to the finalization of a contract amendment with the rig owner, the Discoverer Spirit is expected to begin drilling in West Africa during the third quarter.

As part of this program, Anadarko plans to drill its first Mercury appraisal well, located approximately seven miles west of the Mercury discovery well offshore Sierra Leone in Block SL-07B-10. In addition, the company plans to drill the Jupiter exploration prospect on the same block later in the year. Anadarko operates Block SL-07B-10 with a 65-percent working interest.

Offshore Liberia, the company plans to drill the Montserrado exploration well on Block 15, which is operated by Anadarko with a 57.5-percent working interest. Further to the east, on Block 10, Anadarko recently completed the acquisition of a 2,400-square-kilometer 3D seismic survey. Processing of the survey is expected to take approximately six to nine months, and with the acquisition of this data, Anadarko will have 3D seismic information covering virtually all of its acreage in the Liberian Basin.

"Mobilizing the Discoverer Spirit to West Africa ensures our ability to deliver upon our exploration and appraisal programs in a timely fashion in an area that offers tremendous potential with more than 30 identified Jubilee-like prospects on our acreage," said Al Walker, Anadarko President and Chief Operating Officer. "We plan to keep the ENSCO 8500 rig in the Gulf of Mexico to conduct an extended well test at Lucius and, once we receive drilling permits, we are confident that we will be able to utilize the ENSCO 8500 and contract a deepwater rig of opportunity to resume our development and exploration programs in the Gulf."

Contango completes drilling deepwater GOM well

Contango has drilled a successful exploratory well at its Swimmy prospect located Offshore Gulf of Mexico on Vermilion block 170. The Company's independent third party engineer estimates this well to have 8/8ths proved reserves of 48 billion cubic feet of natural gas and 1.2 million barrels of condensate, approximately 55 billion cubic feet equivalent (Bcfe), or 37.5 Bcfe net to Contango's 68% net revenue interest.

Production is expected to begin this fall at an estimated rate of 15 million cubic feet equivalent per day (WMmcfed), net to Contango. Estimated net costs to Contango, to acquire, drill, complete, and bring this well to full production status are approximately $26.5 million.

Kenneth R. Peak, Contango's Chairman and Chief Executive Officer, said, "We expect this discovery will replace our production for the fiscal year ended June 30, 2011. Production for the six months ended December 31, 2010 was approximately 18.7 Bcfe. As a result of this well, our all-in estimated offshore Gulf of Mexico finding and development (F&D) costs for fiscal year 2011 are now estimated to be about $1.20/mcfe. The costs used in this calculation include $8.7 million for a potential second well at Vermilion 170; $9.5 million from our earlier dry hole at Galveston Area 277 (His Dudeness); and the $26.5 million outlined above, all net to Contango."

Mr. Peak continued, "Currently, our two Eloise wells are both shut-in for remedial work. Prior to being shut-in, they were producing at a combined rate of 5.0 Mmcfed, net to Contango. Our plan is to recomplete our Eloise South well uphole in the CibOp section as our Dutch #5 well. This recompletion is estimated to cost approximately $6 million, with an estimated initial production rate of approximately 8.5 Mmcfed, both net to Contango. Our Eloise North well recently sanded up and we are currently attempting to repair the well to restore production. If we are unsuccessful, our plan is to recomplete the well uphole in an upper Rob-L section at a net cost of approximately $0.5 million and an estimated initial production rate of approximately 1.5 Mmcfed, both net to Contango. We plan to have both of these wells on-line by mid-summer."

"We submitted our permit to the BOEM to drill our Vermilion 170 well on September 29, 2010, received permission to spud the well on February 16, 2011 and began drilling on February 24, 2011. We estimate this one well will help sustain dozens of jobs and pay royalties to the federal government in excess of $50 million. On March 3, 2011, we submitted an exploration permit to drill our Eagle prospect at Ship Shoal 134. We are hopeful that we will receive a permit to drill this prospect sometime this summer, but due to hurricane season, we may not spud the well until the October/November 2011 time frame."

Petronas makes new 100 MMboe discovery offshore Malaysia

Petronas has made major oil and gas discoveries through the drilling of NC3 and Spaoh-1 wells in Blocks SK316 and SK306 offshore Sarawak.

In March 2010, successful drilling of the NC3 wildcat well and a subsequent appraisal well brought significant discovery for Petronas in Block SK316 with early estimation of 2.6 trillion standard cubic feet (tscf) of net gas in place. The wells were each drilled to a depth of almost 4,000 meters below sea level. Additionally, production flow test results of the wells demonstrate that the field is technically producible.

The Spaoh-1 well of 3,000m drilling depth, located in Block SK306, shows similar promise. It was drilled in December 2010 and found both oil and gas. The preliminary evaluation indicates around 100 million barrels (mmstb) of oil and 0.2 tscf of gas in place, respectively. Currently, the well is being prepared for production testing.

These discoveries support Petronas' strategy to intensify exploration activities in Malaysia and is expected to further enhance exploration potential offshore Sarawak.

In the next three years, over 50 exploration wells are expected to be drilled offshore Malaysia by Petronas and its production sharing contractors. These activities, especially if they result in discoveries, are expected to spur business opportunities in the oil and gas industry and will promote upstream investment in the country.