Kulczyk completes drilling first well in Brunei's onshore Block M since 1988

Kulczyk Oil Ventures has drilled its Mawar-1 exploration well in Brunei Darussalam's onshore Block M to a measured total depth to become the first well to be drilled on the block since 1988.

Tap Oil, Kulczyk's partner in the project, said today that this is the first of a minimum of two wells that will be drilled on Block M during 2010. It said that the well has penetrated its targeted reservoirs and has reached it total measured depth of 1,292 meters (4,240 ft). Preliminary drilling and log data indicate the presence of hydrocarbons in the well which will be further evaluated over the next few days. Current operations on the rig are proceeding with the electric wireline logging program. The well was drilled with the MB Century Rig 104.

Tap's CEO, Peter Stickland, said Mawar-1 reached the planned total depth ahead of schedule and penetrated all of the planned targets. "Following evaluation of the log data a decision will be reached on the well potential," he said.

The partners in Brunei Block M and in the Mawar-1 well are Kulczyk Oil Ventures Borneo, the operator with 36% interest; Tap Energy (Borneo) with 39%; China Sino Oil with 21%; and Jana Corporation with the remaining 4%.

Libra discovery offshore Brazil could contain 8 billion bbl of oil

The Petrobras Libra Field discovery offshore Brazil in the Santos Basin's prolific pre-salt play has been estimated to contain approximately 8 billion bbl of oil.

Marco Antonio Almeida, Brazil's secretary of oil and gas at the Ministry of Mines and Energy, said yesterday that the Libra Field was independently appraised by Gaffney & Cline at 7.9 billion bbl - considerably more than the previous estimate of 5.5 billion bbl first reported by Haroldo Lima, director general of the government's Agencia Nacional do Petroleo (ANP), and making the field rival the 5-8 billion bbl Tupi Field and become second largest discovery in ten years after Kazakhstan's 17.2 billion bbl Kashagan Field.

Llocated 230 km offshore Rio de Janeiro state northeast of Petrobras' Iara discovery and near the estimated 4.5 billion bbl Franco area that is to provide most of the oil for the Petrobras oil-for-shares program, the Libra area may be included in the first round of tenders for production sharing agreements after the Brazilian Congress approves the new production sharing scheme, Almeida said.

"Libra, which according to estimates has up to 8 billion bbl of recoverable reserves, should be one of the first under the production sharing model," said Almeida, who added that Petrobras' drilling operations in the area should be completed within a month.

He added that he anticipates the first auction of production sharing contracts is likely to be in early 2011 and that he expects the Libra Field along with others to be offered.

Carrizo closes Marcellus Shale JV with RIL subsidiary

Carrizo Oil & Gas, Inc. has closed its previously announced joint venture transaction in the Marcellus Shale with a subsidiary of Reliance Industries Limited (Reliance).

In connection with the joint venture, Reliance acquired a 20% interest in approximately 52,200 net Carrizo acres in Pennsylvania considered highly prospective for Marcellus Shale natural gas at a purchase price of $65 million. Reliance paid $11.4 million in cash to Carrizo at closing with $1.7 million more expected later this year. In addition, Reliance will pay an expected $52 million of Carrizo's share of future drilling, completion, and seismic costs (development carry). The joint venture agreement is effective immediately.

Simultaneous with the closing of this transaction, an affiliate of Carrizo's already existing joint venture partner, Avista Capital Partners ("Avista"), closed on the sale its entire interest in the same properties to Reliance for approximately $327 million. Under the terms of Carrizo's current joint venture agreement with Avista, Carrizo expects to receive approximately $44 million in cash from Avista based on the sale of Avista's approximately 52,200 net acres. The amounts to be received by Avista and Carrizo are subject to adjustment, pending completion of land title work.

The new Carrizo/Reliance joint venture agreement covers approximately 104,400 gross acres in northern and central Pennsylvania. Under the terms of the agreement, Carrizo retains a 40% working interest in the acreage and Reliance owns 60%. In addition to funding its own share of future development obligations, Reliance will fund 75% of Carrizo's portion of these costs over the next two years or until the earlier full utilization of the $52 million development carry, subject to certain conditions and extensions. Carrizo will continue as operator with Reliance having the right to assume operations in certain parts of Central Pennsylvania after one year.

Carrizo's joint venture with Avista Capital will continue, and now covers approximately 140,000 gross Marcellus acres primarily in the states of West Virginia and New York.

CBM gas wells being drilled in Ordos Basin, Northwest China

Sino Gas & Energy Holdings has spudded its TB-08 well step-out well from the successful TB-07 well that flowed at an estimated rate of 2.9 million cf/d. The company reported that the Ordos Basin coalbed methane (CBM) drilling program on the Tuban prospect is being carried out to verify the extent of the same high production gas-bearing reservoir sands encountered in the TB-07 well. It said the TB-08 well is intended to do that as part of the company's reserves upgrading program. Sino Gas' drilling contractor Bohai Drilling Engineering Company has completed mobilization of the rig, associated equipment, and all staff to the site. Sino Gas has now completed an audit and confirmed their acceptance of the rig.

As per the work program, the TB-08 well will now be drilled down to around 2,200 m, completed, and electronically logged before setting casing. This process is expected to take around 25 days. Following completion of the drilling, it is intended that the TB-08 well be flow tested through hydraulic fraccing.

CNOOC approves transfer of South China Sea PSCs from Devon to Chevron and BP

CNOOC has announced the signing of amendment agreements to the Production Sharing Contracts (PSCs) with Chevron China, BP China and Devon Energy for deepwater blocks 42/05, 64/18 and 53/30 in South China Sea. Prior to the amendments, Chevron acquired a 59.18% interest in block 42/05 and a 100% interest in blocks 64/18 and 53/30 from Devon in the exploration phase; and BP acquired the remaining interest of Devon in block 42/05. In 2005 and 2006, CNOOC had signed PSCs with Devon for these three blocks. Block 42/05, located in Baiyun Sag of Pearl River Mouth Basin in the Eastern South China Sea, covers a total area of 6,939 sq km. Blocks 64/18 and 53/30 are located in Qiong Dong Nan Basin in the Western South China Sea with acreage of 7,712 and 6,313 sq km respectively. Water depth of the three blocks ranges from 300 to 2,000 m.
During the exploration period, Chevron will act as the operator in the three blocks. CNOOC Ltd. has the right to participate in up to a 51% interest in the event of any commercial discovery in the blocks. Zhu Weilin, CNOOC Executive Vice President and General Manager of the Exploration Department commented, “We welcome Chevron and BP to become our new partners in these blocks and look forward to the joint exploration of the great deepwater potential in the South China Sea.”

BP investigative report spreads blame for Macondo well blowout

A report released by BP today concludes that decisions made by “multiple companies and work teams” contributed to the accident which it says arose from “a complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces.”

The report – based on a four-month investigation led by Mark Bly, BP’s Head of Safety and Operations and conducted independently by a team of over 50 technical and other specialists drawn from inside BP and externally – found that:
- The cement and shoe track barriers – and in particular the cement slurry that was used – at the bottom of the Macondo well failed to contain hydrocarbons within the reservoir, as they were designed to do, and allowed gas and liquids to flow up the production casing;
- The results of the negative pressure test were incorrectly accepted by BP and Transocean, although well integrity had not been established;
- Over a 40-minute period, the Transocean rig crew failed to recognise and act on the influx of hydrocarbons into the well until the hydrocarbons were in the riser and rapidly flowing to the surface;
- After the well-flow reached the rig it was routed to a mud-gas separator, causing gas to be vented directly on to the rig rather than being diverted overboard;
- The flow of gas into the engine rooms through the ventilation system created a potential for ignition which the rig’s fire and gas system did not prevent;
- Even after explosion and fire had disabled its crew-operated controls, the rig’s blow-out preventer on the sea-bed should have activated automatically to seal the well. But it failed to operate, probably because critical components were not working.

Commenting on the report, which he commissioned immediately after the Macondo explosion, BP’s outgoing chief executive Tony Hayward said: “The investigation report provides critical new information on the causes of this terrible accident. It is evident that a series of complex events, rather than a single mistake or failure, led to the tragedy. Multiple parties, including BP, Halliburton and Transocean, were involved. “To put it simply, there was a bad cement job and a failure of the shoe track barrier at the bottom of the well, which let hydrocarbons from the reservoir into the production casing. The negative pressure test was accepted when it should not have been, there were failures in well control procedures and in the blow-out preventer; and the rig’s fire and gas system did not prevent ignition.

“Based on the report, it would appear unlikely that the well design contributed to the incident, as the investigation found that the hydrocarbons flowed up the production casing through the bottom of the well,” Hayward suggested. Several ongoing US government investigations have yet to issue their findings. The failed BOP was recovered earlier in the week and has been transported by the FBI to a NASA facility in Louisiana for forensic analysis.

BP’s incoming chief executive Bob Dudley said: “We have said from the beginning that the explosion on the Deepwater Horizon was a shared responsibility among many entities. This report makes that conclusion even clearer, presenting a detailed analysis of the facts and recommendations for improvement both for BP and the other parties involved. We have accepted all the recommendations and are examining how best to implement them across our drilling operations worldwide.

Based on its key findings, the investigation team has proposed a total of 25 recommendations designed to prevent a recurrence of such an accident. The recommendations are directed at strengthening assurance on blow-out preventers, well control, pressure-testing for well integrity, emergency systems, cement testing, rig audit and verification, and personnel competence.

BP said the report was based on information available to the investigating team. It noted that additional relevant information may be forthcoming, for example, when Halliburton’s samples of the cement used in the well are released for testing and when the rig’s blow-out preventer is fully examined now that it has been recovered from the sea-bed. There will also be additional information from the multiple ongoing US government investigations.

The investigation report is available online at www.bp.com, together with an accompanying video.

Sagres Energy estimates Jamaica blocks to hold 3 billion bbl

Sagres Energy has obtained an independent evaluation of the resource potential of certain prospects identified in its blocks 9, 13, and 14 in the shallow waters (20 meters) of the Pedro Bank 120 km offshore Jamaica showing a gross mean prospective resource estimate (oil) of 3 billion bbl.

Chapman Petroleum Engineering prepared the evaluation of prospects identified by Sagres, effective 1 July.

The La Conception prospects straddle the division between Blocks 9 and 13, and as there are no other prospects identified in Block 13, these prospects were grouped with the block 9 prospects for evaluation purposes.

Block 9 contains the La Concepcion and El Angel prospects and the Carrea del Mar lead. La Concepcion is an extremely large prospect that overlaps into Block 13 and has an independent closure of approximately 150 sq km and a fault dependent closure of approximately 390 sq km. The Carrea del Mar lead and El Angel prospect are both large opportunities with areas of approximately 30 sq km and 40 sq km respectively.

Block 14 contains the Regla del Oest and Regla del Este leads. These leads are 40 sq km and 70 sq km in area, respectively.

Sagres has completed its phase one commitments under its production sharing agreements with the Petroleum Corporation of Jamaica with the acquisition and processing of 2,458 km of 2D seismic data over blocks 9, 13, and 14. The interpretation and integration of the new and old data was completed in July. As part of this process, 51 existing seismic lines were digitally scanned and migrated, eight well logs were reprocessed, and two lines of the new seismic data were selected for improved seismic processing.

Geophysical and geological analyses of the data have resulted in a new suite of new interpretations, the definition of two drill-ready prospects, the identification of three additional leads, and a reassessment of the potential resource covered by the blocks.

Sagres is continuing to pursue joint venture partners to further explore and develop its interests in the blocks. Several international energy companies have signed confidentiality agreements with Sagres in order to access the data for the blocks, and evaluate the potential for a joint venture. Over the rest of this year, Sagres plans to continue geologic work to progress exploration opportunities from lead to prospect status, which may include further seismic processing; to begin formative work on the environmental impact assessment and site surveys for exploration drilling; and to complete the annual review and budget process with the Petroleum Corporation for Jamaica.