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Australia I New Zealand Mike Twiss, Miklin Business Services, Unit 15, 3 Benjamin Wa}\ Rockingham, Western Austmlia 6168: Tel +618 9529 4466, Fax +61 8 9529 4488 Email: [email protected]

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Canada Stan TCrt)\ (713) 963-6208, [email protected]

France I Belgium I Spain I Portugal/ Southern Switzerland I Monaco Daniel Bernard, B allee des Herons, 78400 Chatou, France; Tel; 33(0)1.3071.1119, Fax: 33(0)1.3071.1119; E-mail: [email protected]

'Germany I Austria I Northern Switzerland I Eastern Europe I Russia I Former Soviet Union Sicking Indusnial Marketing, Kun-Schumacher-Str. 16, 59872, Freienohl, Germany. Tel: 49(0)2903.3385.70, Fax: 49(0)2903.3385.82; E-mail: wilhehns@pennwel\. com; www.sicking.de <http://wwwsicking.de> Andreas Sicking

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· --...~nter, Singapore 247909, Republic of Singapore; Tel: 65 '. _)~_16.8080, Fax: 65.6734.0655; E-mail: yi}-ee@singnet.

·• com.sg

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Center for Energy Economics, The University of Texas (Houston)

Michael lynch Strategic Energy & Economic Research Inc., Amherst, Mass.

Tom Miesner Pipeline Knowledge & Development. Houston

Ralph Neumann Badger Midstream EnergylP Kent F. Perry RPSEA, Houston Ignacio Quintero Chevron Pipe line Co., Houston Bill Schlesing KBC Advanced Technologies Inc.,

Houston John A. Sheffield John M. Campbell & Co.,

lechlade, UK Andrew J. Slaughter IHS Energy, Houston John Thorogood Drilling Global Consultant llP,

lnsch, Scotland Steven Tobias Hess Corp., Houston Shree Vikas Conoco Phillips Co., Houston Colin Woodward Woodward International Ltd.,

Durham, UK

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Member Audit Bureau of Circulations & American Business Media

Copyright 2014 by PennWell Corporation (Registered in U.S. Patent & Trademark Office). All rights reserved. Oil & Gas Journal or any part t~ereof may not be reproduced, stored in a retrieval system, or transcribed in any form or by any means, electronic or mechanical, int:luding photocopying and recording, without the prior written permission of the EdHor. Permission, however, is granted for employees of corporations licensed under the Annual Authorization Service offered by the Copyright Clearance Center Inc. (CCC), 222 Rosewood Drive, Danvers, Mass. D1923, or by calling CCC's Customer Relations Department at 978-75D-8400 prior to copying. Requests for bulk orders should be addressed to the Ed~or. Oil & lias Journal (ISSN 1944-9151) is published 12x per year- monthlyt~e first Monday of each month in print and ot~er Mondays in digital form by PennWell Corporation, 1421 S. S~eridan Rd., Tulsa, Okla., Box 1260, 74101. Periodicals postage paid at Tulsa, Okla., and at additional mailing offices. Oil & Gas Journal and OGJ are registered trademarl!s of PennWell Corporation. POSTMASTER: send address changes, letters about subscription service, or subscription orders to P.O. Box 3497, Northbroo~. IL 60065, or telephone (800) 633-1656. Change of address notices should be sent promptly with old as well as new address and with ZIP code or postal zone. Allow 30 days for change of address. Oil & Gas Journal is available for electronic retrieval on Oil & GasJournal Online (WIWI.ogj.com) or the NEXIS®Service, Box 933, Dayton, Ohio 45401, (937) 865-5800. SUBSCRIPTION RATES in the US: 1 yr. $89; latin America and Canada: 1 yr. $94; Russia and republics of the former USSR, 1 yr. 2,200 rubles; all ather countries: 1 yr. $129, 1 yr. premium digital $59 worldwide. These rates apply only to individuals holding responsible positions in the petroleum industry. Single copies are $10 each except for lOOt~ Anniversary issue which is $20. Publisher reserves t~e right to refuse non-qualified subscriptions. Oil & Gas Journal is available on the Internet at httpJ/www.ogj.com. (Vol. 112, No. Be) Printed in the US. GST No. 126813153. Publications Mail Agreement Number 602914. Return Undeliverable Canadian Addresses to: P.O. Box 1632, Windsor, ON N9A 7C9.

~1•111 =Ill I~ [¢1 :i•l =I!Jl1 '!J ::&!J =t ~ I•I•l =~1 China Petrochemical Corporation (Sinopec) is an international petroleum and petrochemical enterprise group, ranking the 3rd in Fortune Global 500 in 2014. Its key business activities include the exploration, production, storage, and marketing of oil and natural gas as well as oil refining, the production, marketing, storage, and transportation of petrochemicals and other chemical products. Sinopec also engages in the design, construction, and installation of petroleum and petrochemical engineering projects, etc. For detailed information, please visit www .sin opecgroup.co m.

Sino pee Procurement Department (Sinopec International Co. Ltd.) is the Functional Procurement Management Department, Purchasing Center and International TradingArm of Sinopec.

TECHNICAL REQUIREMENTS For detailed technical requirement of the valves and other materials, please visit www.zgsh.sinopec.com, Sinopec Procurement E-commerce Website and Sinopec Supplier Management website.

MANUFACTURERS Manufacturers who would like to join Sinopec Supplier Network should submit a self-recommendation letter, company profile, catalogue, reference list, and other relevant documents before August 31, 2014. Please e-mail the aforementioned documents to [email protected]. For those manufacturers who can demonstrate in their documents that they have the capabilities to meet Sinopec's demands, a specific visit will be organized in the In order to better meet the demands of production, construction and

strategic development of Sinopec, Sinopec Procurement Department is launching this global sourcing notice for valve manufacturers with an exceptional track record, noting that Sinopec's demand for valves in 2013 was about USD 600 million. We would (ike to invite qualified manufacturers who produce premium quality products and have exceUent performance histories to join Sinopec Supplier Network for the types of valves listed below. Extruder, Centrifugal Compressors and Fluid Coupling vendors are also welcome.

fourth quarter of 2014. •

VALVE TYPES EXPLORATION & EXPLOITATION REFINING & CHEMICAL

Gas-liquid interaction Ball valve 12 Nickel-based oxygen check valve

2 Pneumatic sin_gle actiQ.fl .. ~iillyalve 13 Nickel-based oxygen Ball Valve

3 Nickel-based high-pressure gate valve 14 Expander Inlet Tri-eccentric Metal Seated Butterfly Valve

4 Nickel-based high-pressure ball valve 15 Blow-off Valve

PIPELINE TRANSPORTATION 16 Piston Valve

5 Cry..Q.g~!!JQi:~Xial-flow check valve 17 Bellows seal globe valve

6 Dual Plate Check Valve 18 Ball Valve for Catalyst+H2 Service

7 Dual Plate Check Valve (Overlay welding of nickel-based alloy) 19 Knife Gate Valve

8 Pilot-Operated Surge Relief Valve 20 Micro flow control valve

9 Axial Flow Control valve 21 Three-way control valve ( ")

10 DBB Plug Valve 22 Compressor anti-surge control valve

11 Pressure-balanced plug valve 23 Track Ball Valve

OTHER EQUIPMENT Extruder

2 Centrifugal Compressor

Sinop«PI'oa.JI"Wil!!FTtDepar1mmt. ISil>:!>e< lntemallonal eo. Udl

SINOPEC HEADQUARTERS: ForValves: Mr. KongXiaoqiang, +86-10-5996-6335 [email protected] Mr. WangHongpu, +86-10-5996-6280 [email protected]

24 Self-actuated control valve

25 Hydrofluoric acid valve

3 Fluid Coupling

For Extruder, Compressor and Fluid Coupling: Mr. zhangxiufe ng, +86-10-5996-6254 [email protected] Mr. dongjin, +86-10-5996-8984 [email protected]

SlNOPEC USA: Mr. Jin Yu, +713-840-0499 ext 338 [email protected] Ms.Shujing (Sylvia) Gua n,+1-713-840-0499 ext. 319 [email protected]

SIN OPEC EUROPE: Ms. Wang Rong, +49-69-6690-9448 [email protected]

'-/

Aug.25,2014

Newsletter International News For up-to-the-minute news, visit www.ogjonline.com for oil and gas professionals

GENERAL INTEREST QUICK TAKES

API: Energy exports boost US economic vitality American energy exports are revitalizing the economy and shifting the balance of power around the world, as shown by the Aug. 6 trade report from the US Department of Commerce,

)said American Petroleum Institute ChiefEconomistjohn Felmy. According to the report, US exports in goods and services

totaled $2,280 billion in 2013, up from $2,216 billion in 2012. The US trade deficit in 2013 decreased by $61 billion from 2012. Exports in this year's first half were $1,159 billion compared with $1,127 billion and $1,101 billion for the same periods of 2013 and 2012, respectively.

The report also showed that exports of crude oil and petroleum products are up from the same month last year more than $1.2 billion to $12.7 billion. For year-to-date, the total trade deficit for crude oil and petroleum products is down $20.4 billion from the same period last year.

"Domestic oil and natural gas production helped drive record exports last year, and our ability to impact global markets continues to grow," said Felmy. He emphasized, however, that outdated trade restrictions that prevent more US oil and gas from reaching world markets hampers America's potential as an energy superpower. Lifting these barriers will mean more jobs

a more powerful position, economically and diplomatically. ''Already, innovations in hydraulic fracturing and horizontal drill

ing have allowed US energy exports to put a major dent in the trade deficit. If policymakers act now to allow free trade, US energy exports can further reduce the impact of unrest overseas and limit the influence of foreign suppliers that dominate other markets," said Felmy.

He added, "By acting now, we can send a major signal to world markets that competitors overseas cannot ignore. Congress and the administration must act quickly to accelerate Department of Energy approval of LNG projects and lift '70s-era restrictions on crude oil exports."

USCG issues interim DSV size-limit rule The US Coast Guard issued an interim offshore supply vessel (OSV) size limit rule after a 2010 law removed the previous statutory limit. The regulation became effective upon its publication in the Aug. 18 Federal Register. Comments on it will be accepted until Nov. 17.

The 2010 Coast Guard Authorization Act, which removed the limit, also require the US Department of Homeland Security Agency to issue new regulations "to ensure the safe carriage of oil, hazardous substances, and individuals in addition to the crew" on OSVs exceeding the previous size limit, USCG said.

It said it issued the interim rule to ensure that oil, hazardous substances, and individuals other than crew members are safely carried. The interim rule requires that US-flagged OSVs of at least 6,000 gross register tons comply with existing regulatory requirements and international standards for design, engineering, construction, operations and manning, inspections, and certification.

"This rule also will affect any vessel of at least 500 gross register tons as measured under the Regulatory Measurement System, if that vessel is not assigned a measurement under the Convention Measurement System and the owner desire·s to have the vessel certificated as an OSV," USCG indicated.

The interim rule also allows a large OSV to carry more than 36 offshore workers if the vessel meets stability, marine engineering, fire protection, and lifesaving provisions the interim rule sets forth. Large OSVs are capable of carrying more than the 36 offshore workers previously allowed and conducting operations requiring more personnel, and this interim rule implements safety provisions intended to address the risk associated with carrying more personnel.

Lawler to lead BP's US Lower 48 onshore business BP PLC has appointed David Lawler as chief executive officer of its Houston-based US Lower 48 onshore business that's slated to formally become a separate entity in early 2015 (OGJ Online, Mar. 4, 2014). The move takes effect Sept. 15. Lawler will report to Lamar McKay, BP's upstream segment chief executive.

Lawler previously served as executive vice-president and chief operating officer of Oklahoma City independent SandRidge Energy Inc. Before that, Lawler was the chief executive officer and president of PostRock Energy Corp., another Oklahoma City independent.

While BP will continue to own the US onshore business, Lawler and his leadership team will develop and implement the strategy to expand the company's crude oil and natural gas liquids portfolio, BP says. The business will have its own governance, processes, and systems. 1m1J

US INDUSTRY SCOREBOARD- 8/25

4wk. 4 wk. avg. Change, latest week 818 average year ago 1 % Product supplied, 1,000 b-'d

Motor gasoline 9,020 9,141 11.31 Distillate 3,954 3,943 0.3 Jet fuel 1,657 1,558 6.4 Residual 213 235 19.41 Other products 4,926 4,680 5.3 TOTAL PRODUCT SUPPLIED 19,770 19,557 1.1

Supply, 1, 000 bld

Crude production 8,504 7,557 12.5 NGL production2 2,900 2,472 17.3 Crude imports 7,640 8,008 14.61 Product imports 1,670 2,007 (16.81 Other supply2 3 1,874 2,209 (15.21 TOTAL SUPPLY 22,588 22,253 1.5 Net product imports (1,744) 18961 -

Refining, 1,000 b/d

Crude runs to stills 16.439 16,123 2.0 Input to crude stills 16,642 16,437 1.2 %utilization 92.8 92.3 -

Latest Previous latest week 8/8 week week' Change Stocks, 1,000 bbl

Crude oil 367,019 365,618 1,401 Motor gasoline 212,689 213,849 11,1601 Distillate 122,502 124,923 12.4211 Jet fuel-kerosine . 34,670 34,205 465 Residual 34,595 35,133 15381

Stock cover (days)4 Change,%

Crude 22.3 22.1 0.9 Motor gasoline 23.6 23.6 0.0 Distillate 31.0 32.2 13.71 Propane 71.7 71.6 0.1

Futures prices5 38J15 Change

Light sweet crude ($/bbll 97.19 97.52 10.31 Natural gas, $/MMbtu 3.89 3.90 -

YTD YTD avg. average' year ago 1

8,762 8,668 3,888 3,794 1,482 1,436

243 303 4,525 4,536

18,900 18,737

8,313 7,241 2,732 2,455 7,375 7,794 1,813 2,027 2,255 2,088

22,488 21,605 11,5821 18681

15,706 15,134 15,961 15.502

89.3

Same week year ago 1 Change

360,490 6,529 222,430 19,7411 128,482 15,9801 38,033 13,3631 37,472 12,8771

Change,%

22.7 (1.81 24.3 12.91 32.6 14.91 57.9 23.8

Change

105.12 17.931 3.28 0.61

Change, %

1.1 2.5 3.2

(19.81 10.21

0.9

14.8 11.3 15.41

110.61 8.0 4.1

3.8 3.0

1.8 14.41 14.71 18.81 17.71·

%

17.51 18.5

1Based on revised figures. 10GJ estimates. 3lncludes other liquids, refinery processing gain, and unaccounted for crude oil. lStocks divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices. Source: Energy Information Administration, Wall Street Journal

BAKER HUGHES INTERNATIONAL RIG COUNT, TOTAL WORLD I TOTAL ONSHORE/TOTAL 0 FFSHO RE 3,500 3,600 3,300 3,000 2,700 2,400 2,100 1,800·

3,608 ,--·)

~ ~I\__~ 3,213

~_::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::3:·:5~ "' ' Jul. 13 Au£. 13 Sept. 13 Ott. 13 Nov. 13 Dec. 13 Jan. 14 Feb. 14 Mar. 14 Apr. 14 May 14 Jun. 14 Jul. 14

Note: Monthly average count

BAKER HUGHES RIG COUNT: US I CANADA

=----------·=t,-913---

500·· 358 ····4Dt

300· ------------~---

/00 617113 6121113 715113 7119113 812/13 8116113 616114 6120114 714114 7118114 811114 8115114

5131113 6114113 6128113 7112/13 7126113 819113 S/JQI/4 6113114 6127114 7111114 7125114 818114

Note: End of week average count

0

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:EXPLORATION & DEVELOPMENT. QUICK TAKES

Apache makes major oil discovery off W. Australia Apache Corp. has made an oil discovery with its Phoenix South-1 well, drilled llO miles north of Port Hedland in 435ft of water in permit WA-435-P of Australia's offshore Canning basin.

Wireline and formation pressure tools have confirmed at least four discrete oil columns ranging 85-151 ft in thickness in the Triassic Lower Keraudren formation, within an overall, sand-rich section between 13,648-14,763 ft below sea level, Apache says. Six light oil samples have been recovered from three intervals to date. Apache estimates as much as 300 million bbl of oil could be in place.

''Although evaluation is at an early stage, Phoenix South-1 is an exciting result," commented Thomas E. Voytovich, Apache executive vice-president and COO, international. "The oil and reservoir quality we have seen point to a commercial discovery. If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia."

Apache operates WA-435-P and adjacent permit WA-437-P with 40% interest. Its partners are Carnarvon Petroleum 20%, Finder Exploration 20%, and JX Nippon 20%.

Apache also has exercised its option to acquire 40% interest and operatorship of the WA-436-P and WA-438-P permits, giving the company a total position of more than 5 million acres.

The area includes several large, undrilled structures, including the Roc prospect on WA-437-P, with potential to be significant additional oil accumulations, the company says, adding that more drilling and evaluation is planned for next year.

BP, Noble plug, abandon deepwater Bright well The BP Exploration & Production Inc.-operated Bright exploration well in the deepwater Gulf of Mexico did not show hydrocarbons after reaching the targeted Upper and Middle Miocene objectives, said Noble Energy Inc., an equal partner in the well.

The well, drilled to a TD of 13,500 ftin 5,600 ft of water on Atwater Valley Block 362, has been plugged and abandoned.

Noble says full well assessment and the integration of drilling results into the company's geologic models is ongoing to determine forward exploration plans on its Atwater Valley acreage, which was acquired from BP in June.

"While we are disappointed with the results of the Bright well, we remain extremely encouraged by the recent success of our exploration program in the gulf," said Susan Cunningham, Noble senior vice-president, Gulf of Mexico, West Africa, and frontier. "We look forward to results at our Katmai and Dantzler exploration wells later this month," she said.

Gabon, Eni leaders discuss Nyonie Deep gas discovery Eni SPA CEO Claudio Descalzi met with Gabon President Bongo Ondimba in libreville on Aug. 18 to outline the appraisal campaign programs aimed at bringing the Nyonie Deep natural gas discovery into production over a short period of time (OGJ Online, july 31, 2014).

During the meeting, Descalzi informed Ondimba that preliminary studies are under way to determine the commercial development of the gas in both domestic and export markets.

The well, drilled on Block D4, is initially estimated to hold 500 million boe. Eni credits the find to its proprietary technologies specifically used in West Africa's presalt basin. lffi!l

DRiLLING & PRODUCTION QUICK TAKES

Statoil shuts in production from Troll C platform Statoil ASA has temporarily shut in production from its Troll C platform in the North Sea after inspectors detected corrosion damage in pipe connected to the oil export system.

The shutdown occurred on Aug. 17, the company said. The corroded pipe will be replaced during what is expected to be a 7-day shutdown.

Statoil said Troll C has equity oil production of 58,000 b/d and exports of 8 million cum/day of gas. The Fram field is also, affected, with 34,000 b/d and 2 million cu m/day of gas trans-'-.__...; ported through Troll C.

Statoil shut Troll C in late 2012 because of corrosion in some tanks on the auxiliary system for treating gas (OGJ Online, Nov. 15, 2012).

Statoil has 30.58% interest in Troll C and 45% in Fram.

Angolan oil flow seen above 2 million b/d Angola will produce 2.1-2.2 million b/d of crude oil by 2016, predicts Moody's Investors Service.

In a credit analysis of the Angolan government, Moody's cited deepwater projects due on stream soon in the Lower Congo basin and the government's plans to offer deep and ultradeepwater blocks to international operators next year in the southern Kwanza basin and unexplored Namibe basin.

The Kwanza basin, Moody's points out, has presalt geology similar to that of Brazil's Campos and Santos basins (OGJ Online, Dec. ll, 20ll).

Important to the imminent production gain is Total SA'r-\ Kaombo project in 1,400-1,900 m of water in the Lower Con.....__j go basin. Total and its partners decided to proceed with the $16-billion development in April (OGJ Online, Apr. 14, 2014).

That decision, Moody's said, boosts Angola's production prospects.

"First, it signals investors' positive assessment of Angola's long-term offshore prospects, considering the relatively high cost of deep-sea oil exploration globally," the analyst said. "Secondly, it supports Angola's plans to ramp up oil production (to a targeted 2 million b/d for the next 5 years), notwithstanding a decline in output associated with maturing oil fields."

Total projects Kaombo output at 230,000 bid, which will join a further 300,000 b/d of production starting up from other developments over the next 18 months.

That non-Kaombo increment includes I60,000 b/d from Total's CLOY project, which started production in May, and a

CSI Tubular Products is investing more than $1 00 million in a new ERW pipe mill, with commercial production availability beginning the fourth quarter of 2014. With two pipe mills in operation, CSITP will offer API certified line pipe with the quality and service you expect from a leading producer of ERW pipe.

californiasteel.com (909) 350-6259

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combined 140,000 b/d due on stream this year and next from Eni on Block 15/06 and Esso on Block 15.

Angola's total oil production last year averaged 1.73 million b/d. In the Kwanza basin, south of the lower Congo basin, operators have made seven discoveries on presalt blocks, Moody's said. Th~ largest, according to Moody's, is Cobalt International Energy's Orea-l strike on Block 20. Cobalt said the well found 250 ft of oil and condensate pay in multiple presalt intervals and has a resource potential of 400-700 million bbl.

Lukoil's West Qurna-2 field production tops 280,000 b/d lukoil issued an update on West Qurna-2 field in Iraq, saying its production has exceeded 280,000 b/d compared with 120,000 b/d when Lukoil started flow from the field in March.

West Qurna-2, still being developed, is expected to play a role in Iraq's plans to increase production from its southern fields. lukoil said the West Quma project is being implemented on schedule.

Iraq has set a goal of producing 8.4 million b/d from its southern oil fields by yearend 2020, and West Qurna-2 is expected to contribute 1.2 million b/d by that date.

lukoil said Sea Triumph, a crude oil tanker chartered by a lukoil marketing subsidiary, has left the port of Basra with 1 million bbl, which was the first shipment of oil in reimbursement for lukoil's costs as part of the West Quma-2 project.

Upon unloading, the oil will be transported for refining to its ISAB refinery in Priolo Gargallo near Siracusa in Sicily. liii!l

!i'ROGESSiNGi QUICK TAKES

Canadian firms plan BC gas plant, target LNG export Alta Gas Ltd. and Painted Pony Petroleum Ltd., both of Calgary, have agreed to develop processing and marketing of natural gas and NGls for Painted Pony's liquids-rich Montney gas production in northeast British Columbia.

In the first phase, AltaGas will build and operate a 198-MMcfd shallow-cut gas processing plant in the Montney for which Painted Pony will retain rights to a minimum 150 MMcfd of firm capacity.

The Townsend plant will be built 62 miles north of Fort St. John and 12 miles southeast of AltaGas's Blair Creek plant, through which Painted Pony has already been processing a large portion of its Montney production, the companies said.

Estimated cost for the Townsend plant is $325-350 million (Can.) to be built and funded by AltaGas. It will start up by yearend 2015, subject to regulatory and other approvals.

In addition to building gas processing systems, AltaGas will become primary marketer for Painted Pony's gas and NGL production from northeast British Columbia. Painted Pony will become a major supplier to Alta Gas under the alliance, which will "provide preferred access to export opportunities" for LNG and NGls from "existing and planned facilities," the companies said.

They also said that, upon completion of this first phase, further construction of processing infrastructure in northeast

British Columbia, including a second phase of Townsend to include a deep-cut system for the enhanced recovery of additional NGls and fractionation, is possible.

NRL lets contract for Karachi refining complex Pakistan's National Refinery ltd. (NRL) has let a contract to China National Chemical Engineering Corp. Ltd. (CNCEC) for work related to the upgrade and expansion of its refming complex in the Korangi Industrial Zone, about 9 miles southeast of the center of Karachi.

The contract, for installation of a high-sulfur diesel desulfurization plant and isomerization plant, as well as associated units, is valued at $242 million, NRL said.

The value of the contract represents 80% of the total investment of the Karachi revamp project, with the other 20% consisting of components that are to be presented to the company's board at a later date, NRL said.

Designed to help the plant meet Euro-2 environmental dards, the diesel desulfurization unit is scheduled to be commissioned by December 2015, NRL said in its latest corporate environmental report.

The naphtha isomerization project, which is intended to increase the production of motor gasoline by 192,000 tonnes/ year, also is due to be commissioned by December 2015, the company said.

Additional proposed elements of the revamp project at the Karachi complex-which consists of two lube refineries and one fuel refinery with a combined crude oil processing capacity of 2.9 million tpy-includes work to expand processing capacities at the complex, according to NRL's corporate environmental report.

At its Lube 1 refinery, NRL plans to increase installed crude oil processing capacity to 17,000 b/sd from its current capacity of 12,050 b/sd, as well as to expand its vacuum fractionation capacity to 6,600 b/sd from 5,200 b/sd. Engineering design for this project component is completed, with the project likely to be commissioned in 2015, NRL said.

At its fuel refinery, NRL said it has envisioned a project 'lift installed crude processing capacity at the crude distillation unit to 53,000 b/sd from its current capacity of 50,000 b/sd. In 2012, the company said it expected this element of the revamp project to be completed by December 2015.

Hydrogen unit shuttered at Neste's Porvoo refinery Neste Oil Corp. has shuttered a hydrogen production unit for repairs at its 205,000-b/d Porvoo refinery in the Kilpilahti Industrial Area, about 20 miles east of Helsinki, Finland.

"One of the two hydrogen production units at the Porvoo refinery has been damaged, and production at the site has been reduced," NeSte Oil reported.

While it did not disclose the nature or cause of the damage, the company said that preliminary findings indicate repairs to the unit will take several weeks.

A more accurate timetable for the unit's repair should emerge

in the next 2 weeks, at which time Neste Oil said it will be able to estimate the incident's impact to production and profitability.

The unit's shutdown, however, will not have any impact on product deliveries for which the company already has contracted, Neste Oil said.

Neste Oil in April let a contract to Linde Group, Munich, for long-term hydrogen supply at the Porvoo refinery, under which Linde agreed to invest in and be responsible for the construction of a new hydrogen production plant at the refinery to replace the older of Porvoo's two existing hydrogen units (OGJ Online, Apr. 28, 2014).

Construction work on the $139 million project was to start immediately, with the unit scheduled to be commissioned in summer 2016, Neste Oil said. [iJ!!I

'TRANSPORTATION' QUICK TAKES

Enlink to continue Utica expansion with condensate line EnLink Midstream Partners LP and EnLink Midstream LLC, affiliates of En Link Midstream, plan to build a 45-mile, 8-in. condensate pipeline and six natural gas compression and condensate stabilization facilities in the Ohio River Valley at a total cost of more than $250 million.

The expandable, 50,000-b/d condensate pipeline will connect to the EnLink's existing 200-mile pipeline in eastern Ohio and West Virginia, providing producers in the Utica shale region with additional market access through the company's Bells Run barge facility and Black Run rail terminal.

EnLink expects the pipeline to be completed in second-half 2015, and an open season could take place in the fall.

Part of the project includes a long-term, fee-based agreement with Utica exploration and production company Eclipse Resources for compression and stabilization services and for the purchase of stabilized condensate. Eclipse is running four horizontal rigs in the play and expects to add an additional two rigs by yearend.

EnLink will build and operate six natural gas compression condensate stabilization facilities in Noble, Belmont, and

Guernsey counties in Ohio. When finished, the facilities will have a combined capacity of 560 MMcfd of natural gas compression and 41,500 b/d of condensate stabilization.

The company expects the first two compression and condensate stabilization facilities to be operational in this year's second half and the remaining four facilities to be operational by yearend 2015.

EnLink also plans to add 120,000 bbl of above ground storage to its Bells Run facility to support the project, bringing its total storage capacity at the facility to more than 360,000 bbl.

The company's expansion in the region will end with the company operating more than 250 miles of pipeline; 11 natural gas compression and condensate stabilization facilities with a total capacity of 1 billion bcfd and 60,000 b/d, respectively; a fleet of more than 110 trucks; and eight brine disposal wells.

Dakota Plains, Hiland sign interconnection deal Dakota Plains Holdings Inc., Wayzata, Minn., and Hiland Partners LP unit Hiland Crude LLC reported signing an interconnection agreement that will link Dakota Plains' Pioneer Rail terminal in New Town, ND, with Hiland's Market Center gathering system crude oil pipeline network.

Construction for the final link-now under way-is expected to be commissioned by Oct. 31.

Hiland's gathering system is the largest in the Bakken, the company says, extending through the heart of the field in Divide, Dunn, Mountrail, McKenzie, and Williams counties in North Dakota, as well as Richland and Roosevelt counties in Montana.

Hiland's gathering system has multiple connection points into pipeline outlets and crude-by-rail terminals, with the Pioneer terminal being the only Canadian Pacific Railway origin.

The connection to the Pioneer terminal is expected to have an initial capacity of more than 15,000 b/d of oil and expandable to 60,000 b/d, the companies said.

Prelude FLNG turret sets sail for Samsung shipyard The largest piece of the turret for Shell's 3.6 million tonne/year Prelude floating LNG (FLNG) plant has set sail from Dubai for the Sam sung Heavy Industries shipyard in Geoje, South Korea, where the vessel is under construction.

Prelude FLNG will operate in Browse basin about 200 km offshore northwestern Australia, developing the Prelude and nearby Concerto gas fields in permit WA-371-P with total reserves of 3 tcf of gas and about 120 million bbl of condensate. Shell expects startup in 2016.

In addition to its LNG output, Pre_lude will produce 1.3 million tpy of condensate and 0.4 million tpy of LPG (OGJ Online, Dec. 3, 2013). After the first 25-year assignment, Prelude FLNG could be refurbished and moved to a different field for another quarter century, Shell said.

The turret is part of a mooring system designed to ensure Prelude FLNG can operate safely in the most extreme weather conditions. At almost 100m high, it is the largest in the world, according to Shell. The turret will run through the front of the vessel and connect to giant chains that will keep it moored securely over the Prelude gas field.

Prelude FLNG, at 488 m long and 74 m wide, will be the largest floating facility in the world once it's complete, weighing more than 600,000 tonnes with cargo tanks full. Prelude FLNG is designed to withstand a category 5 cyclone.

Shell was the first company to commit to an FLNG project, and it expects Prelude FLNG to be the first of many such Shell facilities.

Shell is the operator of Prelude FLNG in joint venture with lnpex (17.5%), Kogas (10%), and OPIC (5%) and working with long-term strategic partners Technip and Samsung. lim)

2014-2015 EVENTCALENDAR-------------------

• Denotes new listing or a change in previously published information.

AUGUST 2014

Pipeline & Energy Expo, Tulsa, website' httpd/www.pipelineenergyexpo.com/home 25-27.

Unconventional Resources Technology Conference, Denver, website, httpd/www. urtec.org/25-27.

GPA Rocky Mountain Annual Meeting, Denver, website, httpsd/ www.gpaglobal.org/ calendar/events/evenU www.rockymountaingpa.org 4.

Annual Shutdowns and Turnarounds Summit, Abu Dhabi, website, http,//www.shutdownsandturnaroundsme. com/7-10.

ACS Symposium on Hydrotreating/Hydrocracking Technologies , San Fransisco, website: httpd/www.linkedin.

LA TAM Oil & Gas Sum- Celie International mit, Houston, website: www.latamoilandgassummit.com 10-11.

Advanced Drilling Technology Conference and Exhibition, Celie, website' http,//

International Oil and www.cefle-drifling. Gas Resources of com/2014/index.html Western Newfoundland 15-16. Symposium, Newfoundland, website' www. http,//www. wnloilandgas.com/ international-symposium/10-11.

CCPS Latin Arnerican Conference on Process Safety, Buenos Aires, website' httpd/ www.aiche.org/ccps/ conferences/ccpslatin-american-con-

Annual India Oil & Gas ference-on-process

safety/2014 15-17.

SAP Solutions for the Energy Industry Oil & Gas Conference, Houston, website: http,//sap-oil-and-gas. com/ogna 16-19.

GPA Europe Annual Conference, Madrid, website' httpsd/www. gpaeurope.com/ events.aspx 17-20.

Rice Annual Global

SPE Liquids Rich Basins Conference, Fort Worth, Texas, website: http,//www.spe.org/ events/lrbc/2014/ 24-25.

European Digital Oilfield Summit, London, website, httpd/www. wplgroup.com/aci/ con feren ces/eu -edg2. asp 24-25.

Engineering & IADC Drilling HSE&T Construction Forum, Europe Confer-Houston, website: ence & Exhibition, http://www.forum.rice. Amsterdam, website: edu/22-23. http,//www.iadc.org/

IADC/SPE Asia Pacific com/groups/lnterna· Drilling Technology tionai-Symposium-or:~

Conference, Bangkok, Hydrotreating-Hydro·

Review Summit and International Exhibition, Mumbai, website: http,//www.oilgasevents.com/iors.html 10-11.

SPE Large Scale Computing and Big Data Challenges in

event/iadc-dril linghse-2014exhibition/ 24-25.

Reservoir Stimulation . C f & E h

. b. www.wraconferences. World Shale 011 &

North America Downstream Week, Houston, website, http,//

on erence x 1 1- . . r I t b I b 't . com/event/north- Gaso Lat1n Amenca

0 website: www.iadc. cracking-4895622 SPE Deepwater Drill

ing and Completions Conference, Galveston, website: www.spe.org/ events/calendar/10-11.

hlon,} an u • we g/SI e. america-downstream- Summit, Buenos

org/events 25-27. 7-11. ttp,,www.spe.or k 22 24 A' b 't htt I' events/mmfd/2014/ wee - . Ires, we Sl e: p:'

SPE Frontiers of Technology Series Forum, Cannes, website, http,//www. spe.org/events/14fsel/ Documents/14FSE1_ Forum.pdf Aug. 31-Sept.4.

SE~TEr~_BER 2Q]4

APPEA National Health, Safety & Environment Conference and HSR Forum, Perth, website: www. appealiseconference. com.au 1-3.

Latin Upstream Oil Week Conference, Rio de Janeiro, website: httpd/www.globalpacificpartners.com 1-3.

International Oil and Gas South of Russia Exhibition, Krasnodar, website' http,//www. oilgas-expo.su/2-4.

Ultra-Deepwater Technology Conference, Houston, website: www.rpsea.org, 3-4.

14

I HS Laf1n America LPG Seminar, Mexico City, website, httpd/www. ihs.com/info/events/ latin-america-!pg-seminar.aspx#cb-content-1 8-10.

15-17. SPE Middle East latam.world-shale. Health, Safety, com/en/ 24-26·

Moscow Refining & Petrochemicals Week, Moscow, website: httpd/www.europetro.com/en/moscow_ week_2014 8-11.

Oil Sands Trade Show and Confer-ence, Fort McMurray, website, http,// petroleumshow.com/ event/oil-sandstrade-show-conference-2014/9-10.

Caspian Offshore Conference, Baku, website' http,//www. theenergyexchange. co. u k/event/cas pi anoffshore 10-12.

GPA Rocky Mountain Annual Meeting, Denver, website: www. gpaglobal.org 14.

AAPG International

EAGE First Applied Shallow Marine Geophysics Conference, Athens, website: httpd/www.eage. org/events/index. php?eventid=l120&0 pendiVS=S3 15-17.

Rio Oil & Gas Expo & Conference, Rio de Janeiro, website: http://www.riooilgas. com .br/data/Pages/ LUMISFC66C792ENIE.htm 15-18. Conference & Exhibi

tion held with APPEX IADC Advanced Rig Regional Conference, Technology ConferIstanbul, website: www. ence & Exhibition, aapg.org/meetings/ Galveston, Tex. web-14-17. site' http,//www.iadc.

Ex R . 1 org/event/2014-iadc-APP eg1ona . f h ld with advanced-ng-tech-Con erence e f r nee/

Oil Sands Trade Show AAPG's International nology-con e e and Conference, McMurray, AB, website: http,//oilsa ndstradeshow.com/2014/9-10.

conference & Exhibi- 16-17• tion, London, website, API Offshore http,//europe.aapg. Structural Reliability org/3467 14-17. Conference, Hous-

ton, website, httpd/ East Mediterranean International Petroleum api.org/events-and-Oil & Gas Conference, Technology Conference training/calendarPaphos, website' httpd/ (IPTC), Istanbul, web- of-events/2014/osrc www.eastmed-og.com/ site: www.iptcnetorg. 16-18. Home.aspx 9-10. 14-17.

Environment and SPE Latin America Sustainable Develop- Heavy and Extra ment Conference Heavy Oil Conference, & Exhibition, Doha, Medellin, website' website: www.spe.org/ http://www.spe.org/ events/mehse/2014/ events/laho/2014/ 22-24. 24-26.

IPAA OGIS San Fran- Operational Excelcisco, website: www. lence Middle East ipaa.org/meetings- Conference, Manama, events/upcoming- website: http://www. meetings/22-24. theenergyexchange.

Sakhalin Annual Oil & Gas Confer-ence & Exhibition, Yuzhno-Sakhalinsk, website' http,//www. adamsmithconferences .com/event/oilgas-sakhalin-russia 22-25.

co.uk/eventloperational-excellence-middle- /~\

east 28-30. 10 Annual Process Safety Implementation Week, Abu Dhabi, website' http,//www.oilandgasprocesssafety.com/ Sept. 28-0ct. 1.

Rice Global E&C An- ASME International nual Forum, Houston, website, httpd/ www.forum.rice.edu/ upcoming-events/ annual-forum/ 23.

Asia Pacific LNG Summit, Singapore, website' http,//asiapacific.cwclng.com/ 23-26.

Pipeline Conference, Calgary Alta., website' httpd/ calendar.asme. org/EventDetail. cfm?Event1D=24998 Sept. 29-0ct. 3.

Annual FPSO Congress, Singapore, website, http,//www.

Oil & Gas /ournalj Aug. 25,2014

------------------------------- 2014-2015 EVENT CALENDAR

fpsoasia.com/ Sept. 30- Oct. 1.

SPE Unconventional Resources Conference, Calgary, AB, website: www.spe. org/events/urcc Sept. 30-0ct. 2.

Kazakhstan International Oil & Gas Conference & Exhibition, Almaty, website' http,//www.kioge.kz/ en/conference/a boutconference Sept. 30-0ct. 3.

Q~To8J~201'!

AFPM Q&A and Technology Forum, Denver, website' httpd/www. afpm .org/confere nces/ 6-8.

SPE Artificial Lift Conference and Exhibition, Houston, website: www.spe.org/events/ calendar/6·8.

MEXICO UPSTREAM, Contracts & Deepwater Summit, Mexico City, website, http,//www. cwxmexicooilgas.com 6-9.

API Fall Committee on

IPLOCA's Annual Convention, Abu Dhabi, website' http,//www. iploca.org/page/con· tent/index.asp?Menul D =518&1D=1360&Menu =1&1tem=34.7 13-17.

Shale Water Expo, Houston, website: http,//www.shaleplaywatermanagement. com/shale-water-expo/ 14-15.

' Pan-African Refining ment Standards Meet-

OpEx Oil, Gas & Petrochemicals Conference, Abu Dhabi, website' httpd/www.europetro. com/en/opexmena14 14-15.

0 Petroleum Measure-

Technology Conference ing, Westminster, Colo., IADC Contracts & & Annual Meeting, website: www.api.org/ Risk Management Cape Town, website: events-and-training/cal- Conference, Hous-http,//events.gtforum. endar-of-events/2014/ ton, website' http,// com/parte 1-2. fa!l-copm 6-10. www.iadc.org/event/

Kazakhstan International Oil & Gas Conference, Almaty, website, http,//www. oilgas-events.com/ Find-an-Event/KIOG E-Conference 1-2.

SPE Liquids Rich Basins Conference, Midland, website, http,// www.spe.org/events/ lrbc/2014/1-2.

OIADC Drilling Africa Conference & Exhibition, Paris, website:

Asia Technology Forum, Kuala Lumpur, website' httpd/www. europetro.com/en/ asia_2014 8-9.

AIChE Southwest Process Technology Conference, Galveston, Texas, website' http,// www.aiche.org/conferences/southwestprocess-technologyconference/2014 9-10.

Africa Oil & Gas Expo,

contracts-risk-management-2014/14-15.

Deep Blue Days/ Sea Tech Week, Brest, website: www. seatechweek-brest.org 14-16.

Deep Offshore Technology International Conference, Aberdeen, website, http,//www. deepoffshoretechnology.com/Conference. html14-16.

Johannesburg, website' GEE and Turkey http://www.africaoi- Refining and Petro-lexpo.com/ 9-10. chemicals Confer-

ence, lzmir, website:

SPE Russian Oil and website' http,//www. Gas Exploration & theenergyexchange. Production Technical co.uk/event/lst-nation-Conference and Exhibi- al-forum-gabon-oil-gas tion, Moscow, website: 22-23.

Amsterdam, website: http,//registration. offshore-energy. biz/ 28-29.

CIS Oil and Gas Trans-www.spe.org/events/ calendar/14-16. FT European Gas Sum- portation Congress,

SPE Asia Pacific Oil & Gas Conference and Exhibition, Adelaide, website: www.spe.org/ events 14-16.

Annual Global LNG Tech Summit, Barcelona, website' http,// www.lngsummit.com/ 15-17.

mit, London, website' Rome, website' http,// www.ft-live.com/gas www.theenergyex-23. change.co.uk/event/

cis-oil-and-gas-SPE Middle East Arti- transportation-con-ficial Lift Conference and Exhibition, Manama, website, http,// www.spe.org/events/ meal/2014/26-27.

Gasification Technology

gress-2014 28-30.

European Autumn Gas Conference, London, website: www.theeagc. com 28-30.

Conference, Wash- GITA Oil & Gas Pipeline Oil & Gas Myanmar ington, D.C., website' Conference & Exhibi-Conference, Yangon, [email protected] tion, Houston, website: website' www.OGMyan- 26-29. http,//www.oilandgas-mar.com 15-17. pipelineevent.com/

Annual Flare Manage- index.html 28-30. IOGCC Annual Confer- ment and Reduction ence, Columbus, website' http,//iogcc. publishpath.com/ events 19-21.

AFPM Environmental Conference, San Antonio, website, http,// www.afpm .org/conferences/ 19-21.

Summit, Abu Dhabi, website, http,//www. flaremanagementme. com/26-29.

SEG International Exhibi-

GOG Gulf of Guinea Gas Conference, Abuja, website' http,// www.cwcgog.com/ 28-30.

tion and Annual Meeting, Annual Oil & Gas Denver, website' httpd/ member.seg.org/Calendar/tabid/319/ModuleiD/944/ItemiD/348/

International Gas Tech- mctl/EventDetails/Denology Conference and fault.aspx 26-31. Exhibition, Baku, web-

Pipeline Conference & Exhibition, Houston, website, http,// www.oilandgaspipelineevent.com/i ndex. html#showcase_3 28·30.

site: http://www.clo- Shale Gas Environmen-cate.com/conference/ tal Summit, London, Annual Gas to Liquid IGTC-2014-The-6th- website' http,//www. Conference, Lon-lnternationai-Gas-Tech- smi-online.co.uk/ don, website: http:// nology-Conference- energy/uk/conference/ www.smi-online. an d-Exhi bition/139 67/ s hal e·gas-envi ron men- co. uk/20 14gtl42.asp 20-21. tal-summit 27-28. 29-30.

http,//www.iadc.org/ event/iadc-drilling-africa-2014-conferenceexhibition/1-2. PIRA New York Annual http,//www.wraconfer- Oil & Gas Mobility SPE Annual Techni

cal Conference and Exhibition, Amsterdam, website: www.spe.org/ events/calendar 27-29.

Gas Asia Summit, Singapore, website' http,// www.gasasiasummit. com/29-31.

SPE Liquids Rich Basins Conference: Midland, Tex., website: www.spe.org/events/ calendar/1-2.

Annual Balkans and the Adriatic Oil & Gas Summit, Athens, website' http,//www. balkanssummit.com/ 1·3.

Conference, New York, website: www.pira.com 9-10.

API Tank, Valves, Piping and Pumps Conference, & Expo, Las Vegas, website: http,//api.org/eventsand-training/calendarof-events/2014/tvp 13-16.

Oil & Gas journal I Aug. 25, 2014

ences.com/eventlcee- Summit, Calgary, Alta., and-turkey-refining- website' http,//iogcc. and-petrochemicals publishpath.com/ 14-16. events 20-22.

SPE Eastern Regional Meeting, Charleston, website, http,//www. erm2014.org/. 21-23.

Annual HPHT Wells Summit, London, website' http,//www. hphtwells.com/28-29.

Deep Offshore Tech· nology International Conference, Aberdeen, website, http,//www. deepoffshoretechnology.com/index.html 14-16.

Gabon Oil & Gas Na- Offshore Energy Exhitional Forum, Libreville, bition and Conference,

~QVEM,8ER 20l4

Energy Process Excellence Conference, Houston, website' httpd/ www.oilandgasiq.com/ events.cfm?p=3 4·5.

75

. JOURNALLY SPEAKING.

Offshore archaeology

.. PAULA DITTRICK Special Correspondent

16

Ships and a World War Ii-era German U-boat sunk in the Gulf of Mexico continue to make news decades after their discoveries by oil and gas companies conducting seafloor surveys.

Currently, archeologists and others are studying whether oil spilled by the 2010 Macondo well blowout affected organisms living on shipwrecks within miles of the well that was operated by BP PLC.

Researchers will examine 6-10 wrecks to assess their chemical, physical, and biological conditions. Improving technology and growing industry awareness of archaeology continues to yield additional information about the wrecks.

In july, archaeologists working for C&:C Technologies Inc. of Lafayette, La., used a remotely operated vehicle to reexamine the U-166, a German submarine that torpedoed the Robert E. Lee passenger freighter in 1942. The U-166 itself later was sunk.

The U-166 and Robert E. Lee are within the spill area and are likely to have been exposed to spilled hydrocarbons and chemical dispersants used in the cleanup.

The US Bureau of Offshore Energy Management and the Bureau of Safety and Environmental Enforcement commissioned C&C, an underwater survey and mapping company, along with others to conduct the post-Macondo study.

The study also includes researchers from George Mason University, the University of Mississippi, Louisiana Universities Marine Consortium, the University of Montana, the Naval Research Laboratory, the PAST Foundation, National Oceanographic Partnership Program, and Draycon Bioconcepts Inc.

Growing collaboration Archaeologists and offshore operators have come to collaborate more closely in the last 15 years, Daniel ]. Warren, C&C senior marine archaeologist, noted in a paper prepared for presentation at the 2014 Offshore Technology Conference.

"The industry's interest and awareness of the importance of these shipwrecks to our maritime heritage has grown," Warren wrote. "As a result,

today when a wreck is discovered on a survey, it is not uncommon that additional survey work is carried out over the site-something unlikely to occur just over a decade ago."

Since 1998, the number of archaeologists working for the offshore industry in the gulf has roughly doubled to about 20 people today, Warren said. Starting in 2001, commercial autonomous underwater vehicles (AUVs) have been used in the gulf for deepwater geophysical surveys. ()

Contractors working for Shell discovered the,, Robert E. Lee wreck during a 1986 seabed survey. A U-boat wreck was found during a seafloor survey for Shell and BP as they sought a route for the Okeanos natural gas pipeline.

In 2001, C&:C archaeologists were using an AUV when they collected information that helped identify the U-boat wreck as being the U-166. BP and Shell subsequently hired an ROV operated by Oceaneering Inc. of Houston to take video of the U-166 and Robert E. Lee.

Wrecks in the gulf range from wood sailing ships used in the 19th century to steel vessels used during World War II.

Multiyear, multidisciplinary studies by government, academic, and private researchers previously have studied what impact humans have on the deepwater environment and the artificial-reef effect of manmade structures, including scuttledro· platforms (OGJ, Aug. 20, 2001, p. 19).

Numerous federal agencies, including the former Minerals Management Service (now BOEM), sanctioned the Deepwater Program: Natural and Artificial Hard Bottom Habitats with Emphasis on Coral Communities: Reefs, Rigs, and Wrecks. Those programs typically are called the Lophelia and !.ophelia II projects in reference to cold-water coral.

Separately, crews aboard Robert Ballard's exploration vessel Nautilus recently took updated photographs and video of the Robert E. Lee and the U-166.

Researchers and the offshore industry continue working to understand how the wrecks and their biological communities change over time. m!!l

Oil & Cas Journal 1 Aug. 25, 2014

:Ei:iiJORlAL•

New Keystone dawdling

18

New dawdling over the Keystone XL pipeline border crossing fails the US in so many ways that identifying the worst way should be difficult. But it's not.

The worst way the decision fails the country is not that it so thoroughly undermines recent enhancement of energy security. The Keystone XL pipeline should represent the backbone of a logistically optimized North America able to export more oil than it produces. Delaying a permit decision under study nearly 6 years hampers yet again progress toward that goaL Degradation of security interests is bad, to be sure. It's just not the worst part of the Obama administration's mishandling of Keystone XL.

Industrial advantage Bad, too, is the low regard the latest delay displays for a US industrial advantage. The country possesses world-leading high-conversion refining capacity in its Midwest and Gulf Coast states, capacity able to make most profitable and efficient use of lowquality bitumen from Canada. With its latest Keystone XL decision, the administration essentially scoffs, "Big deal." Yet not even this refusal to let the country capitalize fully on its manufacturing infrastructure represents the worst offense.

Thoroughly woeful is the delay's mistreatment of Canada, the closest ally the US has in every sense of the word. Bitumen and synthetic crude from the oil sands of Alberta are finding their ways to markets and will continue to do so. But the Keystone XL pipeline promises to be the most efficient connection of the oil sands to proximate markets for heavy, low-quality crude. The need to use lessefficient, more-costly alternatives-and, perhaps ultimately, divert to more-distant centers of upgrading capacity-lowers the value of bitumen at the point of production. The delay is therefore costly to the Albertan and Canadian economies and governments. But, no, this financial sandbagging of a friend, embarrassing as should be to all Americans, isn't the worst aspect of yet another delay in the Keystone decision.

Nor are the throw-away reasons the State Department gave in its announcement of the decision.

A Nebraska court ruling about a routing decision? Please. The 2.5 million comments received by the State Department? Most of those represent cutand-paste boilerplate from activist groups such as 350.org, the web site of which, after the decision, thanked "everyone who sent a message, shared, and organized to flood the State Department with comments."

And downright laughable are claims that the decision isn't political, such as the Jan. 21 howler by Q White House Press Sec. Jay Carney. Do Carney and his bosses think Americans don't understand how important environmental pressure groups and their money are to Obama and congressional Democrats seeking reelection in November? Maybe they hope no one noticed in February when hedge fund tycoon and climate-change crusader Tom Steyer of California pledged $100 million, half of it his own, to Democratic candidates sharing his environmen-tal views.

None of that speaks well of US judgment. But the worst part of the latest dissembling on Keystone XL is what it exposes about policy-making. Activists representing nowhere near a majority of Americans have captured the regulatory apparatus. They stoke fear with exaggeration and phantom problems, such as Keystone Xl:s supposed threats to drinking water and the climate. They use organization to outmaneuver members of a more-diffuseo majority not sharing their views. Then they block projects when they can, and when they can't -as with Keystone XL so far-they delay. And delay. And delay. The effect in either case is the same.

Activism vs. governance Activism isn't all bad. Activism instigates change when change is needed. Where hydrocarbon energy is concerned, though, activism has congealed into a reflex policy response opposed to any new increment of oil and gas supply, heedless of economic consequences and other national interests. Governance shouldn't work this way.

Keystone XL is more than a pipeline fight. It's a battle over executive power. And obstructionists, for whom delay means triumph and cost means little, are winning. liiill

Oil & Cas journal I Aug. 25, 2014

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Shell reshuffles US shale assets in two major deals Royal Dutch Shell PLC has agreed to two separate transactions in which it will exit its Pinedale and Haynesville onshore gas assets in exchange for $2.1 billion in cash and acreage in the Marcellus and Utica shale regions.

In one deal, Shell will sell its 107,000 net acres in the Haynesville of North Louisiana, along with associated field facilities and infrastructure, to Blackstone affiliates Blackstone Energy Partners and Vine Oil & Gas LP, Dallas, for $1.2 billion in cash.

Vine, formed by Blackstone earlier this year, is an exploration and production company targeting US shale and led by Eric Marsh, a former executive vice-president of Encana (OG] Online, Oct. 2, 2013).

The transaction encompasses 418 producing wells, 193 of which are Shell-operated. Gross production from Shell's assets, as of]uly 1, totaled 700 MMscfd of dry gas, with the company's net working int.erest share totaling 250 MMscfd.

The agreement is effective july l and expected to close in the fourth quarter. Shell says it will continue to operate in Louisiana through its downstream, retail, midstream, and New Orleans-based deepwater operations.

In another deal, Shell will acquire 155,000 net acres in the Marcellus and Utica areas of Pennsylvania and receive a cash payment of $925 million from Ultra Petroleum Corp., Houston, in exchange for Shell's 19,000 net acres of leasehold interest in the Pinedale of Wyoming, including associated gathering and processing contracts.

The Pinedale assets encompass 1,108 gross wells and associated facilities, and an average of 0. 7% overriding royalty interest in 11,500 acres. Shell's second-quarter net production from Pinedale totaled 190 MMscfd of dry gas. Ultra's first-half net production from the Marcellus and Utica assets averaged 109 MMscfd.

Shell will receive 63,000 net acres in the Marshlands area as well as 92,000 net acres in the Tioga area of mutual interest (AMI), an unincorporated joint venture with Ultra, giving Shell100% interest in Tioga AMI.

The agreement is effective Apr. 1 and expected to close this year.

Ultra says the deal with Shell will increase its net proved reserves by 1.8 tcfe and expand company-operated production to 82% from 62%.

20

Shell's recent shale activity Marin Odum, Shell Upstream Americas director, meanwhile explained the deals from his company's perspective: "With this announcement we are adding highly attractive explora-tion acreage, where we have impressive well results in the Utica, and divesting our more mature, Pinedale and Haynes-Q ville dry gas positions."

Shell has recently been involved in a flurry of deal activity relating to its shale assets.

In june, company affiliate East Resources Inc. and an unnamed private company sold 48,000 net acres in the Marcellus and 27,000 net acres in the Utica to units of start-up American Energy Partners LP. The transactions totaled $1.75 billion (OGJ Online, june 9, 2014).

Notably, East Resources was acquired in 2010 by Shell for $4.7 billion during Shell's large-scale venture into US unconventional oil and gas (OGJ Online, May 28, 2010).

In May, the company sold 100% working interest in 106,000 net acres in the Eagle Ford to Sanchez Energy for $639 million (OGJ Online, May 21, 2014).

Two months earlier, Shell divested its acreage position in the Mississippi Lime in Kansas, its Utica position in Ohio, and a portion of its acreage in the Niobrara basin in Colorado (OGJ Online, Mar. 7, 2014). lili!l _______ o Western gulf lease sale attracts $110 million in high bids Matt Zborowski Staff Writer

Gulf of Mexico western planning area Lease Sale 238 drew 93 bids from 14 companies over 81 blocks covering 433,823 acres, totaling $109,951,644 in apparent high bids, reported the US Bureau of Ocean Energy Management (BOEM), which held the event on Aug. 20 in New Orleans.

Although the total bids were more than the 61 received in

Oil & Gas Journal I Aug. 25,2014

last year's western gulf lease sale, the total value in apparent high bids was just modestly higher than last year's $102,351,712 received from 12 companies (OGj Online, Aug. 28, 2013).

TOP 10 COMPANIES BASED ON SUM OF HIGH BIDS SUBMITTED Table l

Sum of high bids, $ Company Total high bids

1. Chevron USA Inc. 2. ConocoPhillips Co. 3. BP Exploration & Production Inc.

5 10 27 14 6 5 1 3 5 1

25,796,605 23,423,000 22,837,729 21,887,500

5,110,720 4. BHP Billiton Petroleum (Deepwater) Inc. 5. Venari Offshore LLC Notably, 24 bids were received for

the 167 blocks offered on or partially within 3 statute miles of the maritime and continental shelf boundary with Mexico. Leases for the blocks are subject to the terms of the US-Mexico

6. LLOG Bluewater Holdings LLC 2,880,000 1,750,314 1,667,512 1,599,290 1,220,200

7. Shell Offshore Inc. 8. ExxonMobil Corp. 9. Focus Exploration LLC 10. Arena Energy LP

Source: US Bureau of Ocean Energy Management

Transboundary Hydrocarbon Reser-voirs Agreement.

Proposed in April and scheduled in july, Lease Sale 238 made available 21.6 million acres for oil and gas exploration and development offshore Texas, encompassing 4,026 blocks that lie 9-250 miles from the coast in 16-10,975 ft of

/")water (OGj Online, Apr. 15, 2014;july 17, 2014). BOEM estimates the sale could result in the production

of 116-200 million bbl of oil and 538-938 bcf of natural gas.

Participating companies Most bids came from BP Exploration & Production Inc., which was the apparent high bidder on 27 of 32 bids it submitted, totaling $22,837,729.

The company said in a statement that its "participation in today's lease sale further underscores its commitment to the gulf," where it hopes "to continue building on that commitment and on the recent momentum that has returned to BP's operations in the deepwater Gulf of Mexico."

BP in March's central gulf Lease Sale 231 submitted a total of 24 apparent high bids totaling $41.63 million after reaching an agreement effectively ending the bar against it on new federal contracts imposed in the wake of the 2010 Deepwater Horizon-Macondo deepwater well incident and crude oil spill (OGj Online, Mar. 14, 2014).

Following BP was Australia's BHP Billiton Petroleum Inc. · )with 14 bids comprising $21,887,500. ConocoPhillips Co.

placed 10 bids comprising $23,423,000, including the highest single bid of $16,788,800 on Ala minos Canyon Block 431.

Chevron Corp. submitted just 5 bids but tallied the high-

COMPANIES SUBMITTING TOP 10 SINGLE HIGHEST BIOS Company

l. ConocoPhillips Co.* 2. Chevron USA Inc.* 3. Chevron USA Inc.* 4. Chevron USA Inc.* 5. BHP Bil!iton Petroleum (Deepwater) Inc.* 6. Chevron USA Inc.* 7. BHP Billiton Petroleum {Deepwater) Inc.* 8. BHP Billiton Petroleum (Deepwater) Inc.* 9. BP Exploration & Production Inc.* 10. Shell Offshore Inc.*

~Denotes the submitter. Source: US Bureau of Ocean Energy Management

Oil & Gas journal J Aug. 25, 2014

Block

Ala minos Canyon 431 Ala minos Canyon 215 Ala minos Canyon 258 Ala minos Canyon 216 Alaminos Canyon 890 Ala minos Canyon 260 Ala minos Canyon 891 Ala minos Canyon 935 Ala minos Canyon 892 Ala minos Canyon 902

est sum of high bids, totaling $25,796,605. Bids it submitted on Alaminos Canyon Blocks 215, 258, and 216 represented three of the five single highest bids overall at $8,539,321, $7,439,321, and $5,739,321, respectively.

Royal Dutch Shell PLC unit Shell Offshore Inc. was the apparent high bidder at $1.75 million on Alaminos Canyon Block 902, the only block on which the company bid, beating out Stone Energy Corp.'s $1.06 million bid.

Shell says the acquisition strengthens its existing position in the Perdido fold belt, where the company has drilled 11 exploration and appraisal wells, with production from 14 wells in the Tobago, Silvertip, and Great White ultradeepwater fields.

"The Gulf of Mexico is a major production area in the US, accounting for almost 50% of our oil and gas production in the country," said Mark Shuster, Shell executive vice-president, exploration. "We look forward to building on our long, successful history there."

The company in july made its third major oil discovery in the Norphlet play of the eastern gulf (OGj Online, july 15, 2014).

BOEM notes that each bid will go through a strict evaluation process within the agency to ensure the public receives fair market value before a lease is awarded.

Industry reaction Randall Luthi, president of the National Ocean Industries Association (NOlA), provided perspective on the day's events.

"Today's sale is a typical western gulf sale, and while it in-

Water depth, m

1,600+ 800·1,600 800-1,600 800·1,600

1,600+ 800-1,600

1,600+ 1,600+ 1,600+ 1,600+

Table 2

High bid amount, $

16,788,800 8,539,321 7,439,321 5,739,321 4,406,250 3,339,321 3,106,250 2,806,250 2,321,027 1,750,314

21

I

I WATCHING GOVERNMENT

nNICK w . om

. 'j s N 0 I Blog at www.og].c ii \ hington Edrtor -, 1 •• Was t

Michigan quietly adjusts rules Michigan's Department of Environmental Quality (DEQ) is moving ahead with development of new hydraulic fracturing rules. They would cover water withdrawals, baseline water-quality sampling, monitoring and reporting, and chemical additive disclosure. Well spacing requirements also would be updated, and terms describing well locations and drilling tracts would be clarified.

"What we're proposing is to expand on permitting instruction," Hal Fitch, who is chief of DEQ's oil, gas, and minerals office, said on Aug. 12. Public hearings on the proposed changes were held July 15 in Gaylord and July 16 in Lansing. Fitch said he and his staff are going through comments, many of which centered on specific areas, and may make changes that will need to be vetted. He hopes final regulations are issued sometime this fall.

It had been 3 years since Fitch last spoke with OGJ. Well construction and flowback fluids management were the main issues at the time in a state that had its first production in 1925 and enacted its first regulation of it 2 years later.

Things have worked well in the time since, Fitch said. "We never saw the kind of high-volume tracing that occurred in some places," he said. "It looked promising in 2010-11, but we only had 12 or 15 holes drilled. Some natural gas liquids were produced. Everyone is competing for investment dollars in places like the Eagle Ford

22

and Marcellus, where the payout has been bigger."

Michigan has not seen much unconventional production, he said. "The biggest play is the Trenton and Black River formations, which primarily produce oil. That's where most of the interest has been the last several years," Fitch said. "We also have an AI carbonate formation which produces gas and NGLs, but I'm not certain if that's going to take off on a big scale."

All the states learn Fitch is the state's representative on the Interstate Oil & Gas Compact Commission. "We keep track of what's going on elsewhere. We tap into what's going on around the country," he said. "I think all the states are learning from each other, and sharing information. It's where regulation should be in place because we're closer to the different situations and the actual stakeholders."

Fitch said Michigan's long-tirne experience with oil and gas has helped in rnore ways than one. "We've benefited both as an agency, where much of our staff has been around for years, and in communities," he said.

"It can be a two-edged sword," Fitch observed. "On one hand, you want people to be aware of the potential. On the other, you want to be transparent about what's going to happen." lim

eluded some healthy bidding, it was not expected to fetch the eye popping bids that typically accompany a central gulf sale."

In comparison, March's central gulf lease sale-far more active than either of the last two western salesreceived 380 bids from 50 companies resulting in a total of $850 million in apparent high bids (OGJ Online, Mar. 19, 2014).

Lease Sale 238 is the sixth offshore sale under the Administration's Outer Continental Shelf Oil and Gas Leasing Program for 2012-17. The first five sales offered more than 60 million acres and garnered $2.3 billion.

"This sale allowed many of the small- ·Q er exploration and production compa- \ nies to successfully compete for leases in both deep and shallow water, keeping a diversity vital to the overall energy and jobs portfolio of the United States," Lu-thi said.

Other companies that placed multiple bids included Venari Offshore LLC, LLOG Bluewater Holdings, and Focus Exploration LLC with 5 each, and Castex Offshore Inc. with 3.

"This sale also reaffirms the industry's great interest in deep water prospects in the transboundary area," Luthi said.

Erik Milito, upstream group director of the American Petroleum Institute, seconded a point also made by Luthi that the sale highlights the benefit of al-l""-) lowing development in the 87% of the OCS the federal government has placed off-limits.

"Today's lease sale is a reminder that opening new areas to offshore energy exploration and production could create nearly half a million American jobs and raise tens of billions of dollars to help fund the government," said Milito.

"The western and central sections of the Gulf of Mexico remain important areas for domestic oil and natural gas production, but they have been continually explored for decades while the vast majority of US waters are kept off-limits.

Oil & Cas journal J Aug. 25, 2014

---------------------------------GENERAL INTEREST

"Tremendous potential exists for job creation and energy development in the Atlantic, Pacific, Arctic, and eastern Gulf of Mexico. We should seize the opportunity to further America's energy renaissance by exploring and producing in new areas offshore," Milito urged. lil1!l

USCG proposes higher offshore oil spill liability limits Nick Snow Washington Editor

/ The US Coast Guard proposed higher offshore oil spillliabil) ity limits under the 1990 Oil Pollution Act to reflect signifi

cant increases in the Consumer Price Index. The Aug. 19 Federal Register notice also proposed a sim

plified procedure for the US Department of Homeland Security agency to make future periodic CPI liability limit increases for vessels, deepwater ports, and onshore facilities.

It also proposed language to clarify application of OPA 90 liability limits to two tank vessel classes-edible oil cargo tank vessels and tank vessels designated as oil-spill response vessels. The regulatory text clarification is needed for consistency with OPA 90, the notice said.

Oil & Cas journal! Aug. 25, 2014

Comments on the proposals will be accepted through I Oct. 20, it indicated.

The liability limit for a single-hull vessel weighing more than 3,000 gross tons would rise to the greater of $3,500/ gross ton or $25.4 million from $3,200/gross ton or $23.5 million; for other tank vessels weighing more than 3,000 gross tons to the greater of $2,200/gross ton or $18.5 million from $2,000/gross ton or $17.1 million; for a single-hull vessel weighing 3,000 gross tons or less to the greater of $3,500/ gross ton or $6.9 million from $3,200/gross ton or $4.3 million; and for other tank vessels weighing 3,000 gross tons or less to the greater of $2,200/gross ton or $4.6 million from $2,000/gross ton or $4.3 million.

These liability limits exclude edible oil tank vessels and oil-spill response vessels. For those and any other vessel, the liability limit would increase to the greater of $1,100/gross ton or $924,500 from $1,000/gross ton or $845,500.

Liability limits for deepwater ports subject to the 1974 Deepwater Port Act, except for the Louisiana Offshore Oil Port, would rise to nearly $404.5 million from $373.8 million. LOOP's liability limit would increase to nearly $94.8 million from $87.6 million. Onshore facilities' liability limits would grow to $404.6 million from $350 million.

The US Bureau of Ocean Energy Management previously proposed increasing offshore oil spill liability limits under OPA 90 for facilities in federal and state waters by 78% to $133.65 million from $75 million (OGJ Online, Feb. 24, 2 0 14). lil1!l

23

I GENERAL INTEREST-----------------------------------

DOE finalizes LNG export national interest review reforms Nick Snow Washington Editor

The US Department of Energy finalized reforms it proposed on May 29 to its process for determining whether planned LNG export projects are in the national interest (OGJ Online, May 29, 2014). The primary change replaced conditional approvals with a requirement for an LNG export project to complete federal environmental reviews first.

LNG export proposals are presumed to be in the national interest under the Natural Gas Act, except to customers in countries that do not have a free-trade agreement with the US. In those cases, DOE has conducted an informal review for more than 30 years, and has issued eight conditional authorizations for LNG exports to non-FTA countries in the last 3 years, according to an Aug. 15 Federal Register notice about the proposed reforms becoming final.

It emphasized that the new procedures won't affect the validity of conditional authorizations DOE already has issued. "For those applications, DOE stated it would proceed as explained in the orders: by reconsidering the conditional authorization in light of the environmental review once that review is complete and taking appropriate final action," it said.

DOE received 74 public comments about the proposed reforms, many from project sponsors and oil and gas trade associations. It also made changes in its Addendum to Environmental Review Documents Concerning Exports of Natural Gas from the US in response to several of these comments.

'Serious reservations' The Center for Liquefied Natural Gas, which previously urged EPA to scrap the proposed LNG export review reforms (OG] Online, july 23, 2014), expressed serious reservations about the direction of DOE's procedural landscape in response to the proposed reforms becoming finaL

lt said that, given recent rule changes, DOE could improve regulatory certainty by instituting a policy of prompt approval for final non-FTA export permits once the applicants have completed their National Environmental Policy Act reviews. "For projects that meet the requirements under NEPA, DOE should set a timeline as to when it issues the final decisions," CLNG Pres. Bill Cooper suggested.

"When developers have already faced a lengthy waiting period for a conditional approval and completed the FERC process, continued regulatory uncertainty is not beneficial,"

24

he continued. "Rather, the development of these projects and the economic benefits they will deliver to this country should be expedited."

US Sen. Mary L Landrieu (D-La.), who chairs the Energy and Natural Resources Committee, welcomed DOE's action.

"Responsible exports of [LNG[ will create thousands of high-paying jobs in the United States, protect our domestic manufacturing renaissance, and provide critical security to our allies abroad," she said on Aug. 15. "I am pleased that [DOE] continues to reduce obstacles to approving new LNG export terminals, and I will continue to lead the effort in Congress to harness the potential of this game changing resource." l:iif!l

CSB releases incident report for Tesoro's C) Martinez refinery Loose pipe fittings are to blame for a sulfuric acid release that seriously injured two workers in early February at the alkylation unit of Tesoro Corp.'s 161,000-b/d Golden Eagle refinery near Martinez, Calif., according to an Aug. 15 report released by the US Chemical Safety Board (CSB) (OGJ Online, Feb. 24, 2014).

Prepared by California-based engineering and laboratory testing firm Anamet Inc., the report details findings from a technical examination of stainless-steel tube assembly recovered by the California Division of Occupational Safety and Health (Cal!OSHA) following the Feb. 12 incident.

According to the report, the spill of 84,000 lb of sulfuric acid immediately resulted from the insufficient tightening upon installation of a tube and a compression joint located at a sulfuric acid sampling station in the refinery's alkyla-.tj~. tion unit. \

The insufficient tightening between the tube, which was being pressurized at the time of the incident, and the compression joint allowed the tube to be forced from the joint, most likely by internal pressure, the report says.

"This incident highlights the need for strong process safety management at facilities that ensures mechanical integrity is verified prior to the introduction of hazardous chemicals into equipment," CSB Chairperson Rafael Moure-Eraso said in a statement.

The need becomes all the more necessary, says MoureErase, given another incident on Mar. 10 in the same sulfuric acid alkylation unit at the Golden Eagle refinery, when two additional contract workers were sprayed with sulfuric acid while conducting planned maintenance.

"Four workers burned by sulfuric acid in less than a month clearly demonstrates there are significant opportu-

Oil & Gas Journal I Aug. 25, 2014

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nities within the refinery for improvement in safety performance," Moure-Eraso said.

Cai/OSHA-who ordered the Golden Eagle alkylation unit shut from Feb. 18-28 based upon testimony from refinery workers that they were afraid to operate the unit prior to the Feb. 12 incident amid safety concerns-is continuing a separate regulatory investigation at the refinery.

Cai/OSHA:s investigation at Golden Eagle is focusing on the refinery's mechanical integrity and operating procedures, according to CSB. 1!1!!1

EPA extends comment period for proposed refinery regulations The US Environmental Protection Agency has extended the public comment period by 60 days for its proposed rule that would force petroleum refiners to implement additional controls on toxic air emissions from their refineries (OGJ Online, May 15, 2014).

The public comment period for the proposed "Petroleum Refinery Sector Risk and Technology Review and New Source Performance Standards" has been extended to Oct. 28 from an original deadline of Aug. 29, according to a posting on EPA's web site.

The extension notice is to be published officially in the Federal Register on Aug. 15, according to the Office of the Federal Register.

The purpose in extending the deadline is to ensure the public has sufficient time to review and comment on all of the information available on the proposed rule, EPA said.

The proposed rule, which was first announced on May 15, would require refiners to measure benzene emissions around their refineries' fences and make the results publicly available.

The rule also would require storage tank upgrades, including controls for smaller tanks; establish flares to ensure that waste gases are properly destroyed; and set emissions standards for delayed coking units that it said are currently a significant unregulated source of toxic air emissions at refineries.

This proposed rule would also eliminate current exemptions to emission limits at refineries during periods of startup, shutdown, and malfunction.

EPA estimates that, when fully implemented, the provisions in the proposed rule will result in a 5,600-tonne/year reduction of toxic air pollutants, including benzene, toluene, and xylene. Volatile organic compound emissions would be cut by about 52,000 tpy, EPA said.

Public hearings on the proposed rule were held near Los

26

Angeles and Houston in July and August. EPA previously has said it expects to finalize the require

ments for the rule in April2015. 1!1!!1

Mexico accelerates energy reform efforts Paula Dittrick Special Correspondent

Mexico's Petroleos Mexicanos (Pemex) faces the task of determining areas where it wants to bring in partners under the sweeping energy reform that President Enrique Pena Nieto signed into law to open Mexico's oil and gas exploration and production to private and foreign companies for the first() time since 1938. ·--

Attorneys for Mayer Brown issued a legal brief saying the executive branch has to issue the regulations under the hydrocarbons law within 180 calendar days from its enactment, which ended a monopoly on Mexico's oil and gas activities. The law was signed on Aug. ll.

Pemex had first choice of the projects that it wanted to keep under the reform's Round Zero, and Mexico's Ministry of Energy (SENER) on Aug. 13 announced Pemex would be granted all of its requested producing and probable reserves, estimated at 83% of Mexico's total producing and probable reserves.

Pemex was granted 21% of Mexico's prospective resources instead of the 31% it had requested, Mayer Brown said.

The Round Zero decision was accelerated in efforts so that the first private contracts might be revealed during the 2015 first quarter, Pena Nieto said in a speech earlier this month. Mexico's senate approved the reform legislation on Aug. 6 (OGJ Online, Aug. 7, 2014). Q

"The energy reform opens a great opportunity for Mexico, and we need to seize it with complete and fast implementation," he has said. "I've told different areas of the government to accelerate all of the measures necessary to put this reform into action for the good of Mexico."

Mayer Brown partners Dallas Parker, jose Valera, and Pablo Ferrante wrote a legal update for dients. Mayer Brown associates Gabriel Salinas and John Furlow helped write the update.

"It is through the entitlement regime that Pemex has historically received areas for E&P activities in Mexico," Mayer Brown attorneys said. "However, the entitlements to be granted to Pemex pursuant to the new legal framework will have stricter terms than the entitlements granted to Pemex in the past, including relinquishment and termination events."

The law provides Pemex request SENER's approval for migration of entitlements into exploration and production


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contracts. In the migration process, the Ministry of Finance will establish the fiscal terms, and SENER will establish the technical terms related to the migrated contracts, Mayer Brown attorneys said.

"The hydrocarbons law further provides that SENER will seek Pemex's favorable opinion with regard to the experience and the technical, financial, and operational qualifications that bidders would need to meet in order to participate in the bidding process," they said. lili!l

EIA: China to increase natural gas consumption, investment

China more than tripled natural gas production since 2003, producing 3.8 tcf in 2012, and the government is targeting production to reach about 5.5 tcf!year of gas by the end of 2015, according to a recent analysis from the US Energy Information Administration.

China is attempting to use more natural gas to reduce air pollution and carbon dioxide emissions, which are largely caused by coal and oil usage for energy. Underpinned by large investments in domestic gas production and infrastructure, along with growing imports, the Chinese government anticipates increasing its gas share of total energy consumption to around 8% by yearend 2015 and to 10% by 2020. In 2012, natural gas accounted for only 4.9% of China's total energy consumption.

"Most of the anticipated production growth is from large onshore fields in the western and north-central regions of China as well as from the offshore deepwater regions in the South China Sea," EIA said. "China's natural gas consumption has outstripped domestic supply since 2007, triggering rising imports of both LNG and pipeline gas. China's natural gas consumption rose at an average annual rate of 17% from 2003 through 2013, reaching nearly 5.7 tcfin 2013."

In 2013, China imported nearly 1.8 tcf of LNG and pipeline gas to fill the growing gap between supply and demand. Imported gas met 32% of China's demand in 2013, up from 2% in 2006.

"China is swiftly developing its LNG import capacity in the urban coastal areas and currently has 10 major regasification terminals with an annual capacity of 1.7 tcf," EIA said. In 2012, China rose to become the third-largest LNG importer in the world, after japan and South Korea, and in 2013, the country imported 870 bcf of LNG. Estimates for the first half of 2014 show LNG imports growing at faster levels than in previous years.

Natural gas pipeline infrastructure that links production areas in the western and northern regions to demand centers along the coast are also being planned and developed. The new infrastructure will accommodate greater imports from neighboring countries. By 2013, gas supplies from Turk-

28

menistan, Uzbekistan, and Kazakhstan reached 974 bcf. A recently finalized gas agreement with Russia allows China to purchase and transport gas from eastern Russia through a proposed pipeline. The deal, valued at roughly $400 billion, will supply China with as much as 1.3 tcf/year of gas starting in 2018.

Meanwhile, according to EIA estimates, China holds the largest reserves of technically recoverable shale gas in the world, although investors face a variety of challenges from geological, technical and water resource, regulatory hurdles, transportation constraints, and competition with other fuels. "China's potential wealth of shale gas, coalbed methane, and coal-to-gas resources has spurred the government to invest and partner with foreign ·companies that have technical expertise to unlock these reserves," EIA said. [iii!J

TSB report outlines 'multitude 0 of factors' behind Lac-Megan tic train derailment

A multitude of factors led to July 6 derailment of a runaway train in Lac-Megantic, Que., carrying 72 carloads of Bakken crude oil bound for Irving Oil Ltd.'s refinery in Saint John, NB, according to an investigation report released Aug. 19 by the Transportation Safety Board of Canada (TSB) (OGJ Online, July 8, 2013).

The incident, which involved a train operated by Montreal, Maine &: Atlantic Railway (MMA), a division of Rail World Inc., resulted in fires and explosions that destroyed much of the town and left 47 people dead.

TSB now is calling for additional physical defenses to prevent runaway trains, and for more thorough audits of safety management systems to ensure railways are effectively man-

aging safety. o "Accidents never come down to a single individual, a sin

gle action, or a single factor. You have to look at the whole context," said TSB Chair Wendy Tadros. "In our investigation, we found 18 factors played a role in this accident."

TSB found that MMA was "a company with a weak safety culture that did not have a functioning safety management system to manage risks."

The board said it also learned that, ''Transport Canada did not audit MMA often and thoroughly enough to ensure it was effectively managing the risks in its operations."

The board also found issues with training, employee monitoring, and maintenance practices at MMA; with industry rules for the securement of unattended trains; and with the tank cars used to carry volatile petroleum crude oil, it said.

"This investigation and its findings are complex, but our goal is simple: we must improve rail safety in Canada," Tad-


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EIA: July Brent prices drop on reduced market risk

In the August issue of its Short-Term Energy Outlook (STEO), the us Ener-Q gy Information Administration maintains its 2014 US liquid fuels consumption forecast at 18.88 million b/d as projected in july compared with 18.89 million b/d in 2013. The 2015 consumption is set at 18.98 million b/d, 30,000 b/d higher than projected in last month's STEO.

EIA forecasts that motor gasoline consumption will rise 40,000 b/d in 2014 and then fall10,000 b/d in 2015 as improving fuel economy in new vehicles increasingly offsets highway travel growth. Consumption of distillate fuel will rise 140,000 b/d and 70,000 b/d in 2014 and 2015, respectively, which is 20,000 b/d and 10,000 b/d higher, respectively, than projected in last month's outlook. o

After a 150,000 b/d increase in hydrocarbon gas liquids consumption, EIA projects a 60,000 b/d decline in 2014, with propane consumption returning to 2012 levels as higher propane prices reduce the use of propane as a petrochemical feedstock. As new propane dehydrogenation units, which produce propylene, are expected to come online in the second half of 2015, HGL consumption is forecast to increase by 100,000 b/d for the year.

Total US crude oil production is forecast to increase from an estimated 7.5 million b/d in 2013 to 8.5 million b/d in 2014 and 9.3 million b/d in 2015. With II projects starting this year, oil

Oil & Cas Journal J Aug. 25, 2014

-------------------- GENERAL INTEREST

production from the Gulf of Mexico is expected to increase by 190,000 b/d in 2014.

Global oil market balance E1A's world oil balance is virtually unchanged from last month's STEO. With surplus crude oil production capacity averaging 2.1 million b/d in 2014 and 2.7 million b/d in 2015, the balance is expected to remain relatively tight.

Global unplanned supply disruptions remain elevated and averaged 3.2 million b/d in july, of which Libya accounted for more than one-third. Iraq's southern production and export volumes continue to be unaffected de-

/.) spite the ongoing unrest in northern ', and western Iraq.

. EIA projects world petroleum and other liquids supply to increase by 1.5 million b/d in 2014 and by another 1.3 million b/d in 2015, with most of the growth coming from countries outside of the Organization of the Petroleum Exporting Countries. Global consumption is forecast to rise 1.1 million b/d in 2014 and 1.4 million b/d in 2015.

OECD commercial oil inventories totaled 2.55 billion bbl at yearend 2013, equivalent to roughly 55 days of consumption. Projected OECD oil inventories rise to 2.57 billion bbl at yearend, EIA said.

. Oil prices 1 _)The market's perception of reduced

risk to Iraqi oil exports and news regarding increasing Libyan oil exports contributed to a drop in the Brent crude oil spot price to an average of $107/bbl in july, $5/bbllower than the june average.

EIA projects Brent crude oil prices to average $108/bbl in 2014, $1/bbl lower than in last month's STEO, and $105/bbl in 2015. The West Texas Intermediate crude oil price discount to Brent is now expected to average $8/ bbl in 2014 and $9/bbl in 2015, reductions of $1/bbl respectively, from last month's STEO.

"Driven in large part by record lev-


els of demand for crude oil by US refmeries over the last month, the spot price discount for WTI crude oil to dated Brent crude oil was cut nearly in half since June to $3/bbl in july," said Adam Sieminski, EIA chief economist, adding "the WTl to Brent discount is expected to increase to an average of $10/bbl in the fourth quarter of this year as refinery runs decrease heading into the refinery turnaround season and US crude oil supplies continue to grow."

There monthly outlook projects regular gasoline retail prices to average $3.50/gal and $3.46/gal in 2014 and 2015, respectively, compared with $3.51/gal in 2013.

"US drivers could find more savings at the pump in the months ahead as gasoline prices are expected to fall through the end of the year to an average of $3.30/gal in December," Sieminski said. liil!l

OIL & GAS JOURNAL REPRINTS

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Oil & Gas Journal may be purchased by contacting

Rhonda Brown, Reprint Marketing Manager,

Foster Printing Co. 4295 Ohio St.,

Michigan City, IN 46360, 1-866-879-9144 (ext. 194)

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~ . .. .

'~-'

'THE_EDIJOR'S_PERSPECTIVE • (From the Subscribers Only area of www.ogj.com)

Study links states' economic growth to energy regulation by Bob Tippee, Editor

Judged strictly by economic efficiency, energy regulation at the state level works best in the US South and interior and worst on the West Coast and in the Northeast and Upper Midwest.

The geographic pattern emerges in results of a study published by the Pacific Research Institute focused mostly on electric power but including regulations affecting motor vehicles.

The study's authors, Wayne Winegarden and Marc A. Miles, define "economic efficiency" as "allocating resources to their most productive uses."

The study evaluates regulations of individual states in seven categories. It assigns a score in each category on a 10-point scale. It then ranks states based on averages of those scores.

Regulatory categories are retail choice, production, transmission, subsidies and net metering, consumption of electricity from utilities, producer flexibility, and motor vehicles.

The data are ordinal, meaning only the ranking order has information that validly can be interpreted.

Four states with equivalent average scores rank at the top, Alabama, Alaska, South DakotE, and Texas.

The fifth-ranking state breaks the geographic pattern, Delaware. North Dakota follows.

Georgia and Kansas tie for seventh. position. And Oklahoma and Wyoming tie at the low end of the top 10 states for economic efficiency of energy regulation.

No tie appears among the bottom 10. New York holds the No. 50 position alone. Ranking 49th is California.

Up, in order, from there are Wisconsin, Connecticut, Maryland, Washington, Michigan, New Jersey, North Carolina, and Oregon.

Historically, the study authors note, regulation of energy by states focused on utilities, service stations, motor-vehicle fuels, and the level of energy consumption. Now, states increasingly regulate how electric power can be generated and the types of energy products consumers can use.

The finding labeled "most interesting" by the study authors is no surprise' Highly ranked states grow faster economically than the bottom-dwellers.

"Energy regulation can, therefore, be an important factor in determining the eventual prosperity of a state," suggest Winegarden and Miles.

Does anyone get that in Albany or Sacramento?

(From the subscription area of www.ogj. com, posted Aug. 14, 2014i author's email: [email protected])

31

32

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PAGE

11

25

4

9

2

17

29

19

27

6

23

This index is pM"idcd as a service. T11e pub!islrer does not assume any !iabilily for crrm:; or omission.

0

(J


IMPORTS OF CRUDE AND PRODUCTS - Districts 1-4- - District 5 - ---Total US---

8·8 8-1 2014 2014

Total motor gasoline ............. 460 424

~i~iifrat~--~~~~~~~~--~-~~~:.::::: 430 410 144 125

Residual .............................. 189 86 Jet fuel-kerosine .................. 55 6 Propane-propylene .............. 102 46 Other ................................... 414 165

--Total products ...................... 1,794 1,262

Total crude ........................... 6,746 6,299

Total imports ........................ 8,540 7,561

*Revised. Source: US Energy Information Administration Data available at PennEnergy Research Center.

8·8 2014

11 9 7

68 25

130) 34

--124

1,101

1,225

8-1 8-8 8·1 2014 2014 2014 1,000 bid

11 471 435 11 439 421 12 151 137 0 257 86 0 80 6

12 72 58 (10) 448 !55 -- --

36 1,918 1,298

1,264 7,847 7,563

1,300 9,765 8,861

: 'IHS PURVIN & GERTZ LNG NETBACK MATRIX-AUG. 15, 2014

8-9"' 2013

513 478 76

251 193 53

212

1,776

7,917

9,693

Receiving 8terminal

-:-:--:---:-:-:----:::-Liquefaction plant c-:-::------,---.,.,-Aigeria Malaysia Nigeria Austr. NW Shell Qatar Trinidad

$/MMbtu

\, Barcelona Everett Isle of Grain Lake Charles Sodegaura Zeebrugge

11.96 1.11 5.39 0.83

10.92 8.61

9.33 11.051

3.60 (1.16) 13.75 5.98

Definitions, see OGJ Apr. 9, 2007, p. 57. Source: IHS Purvin & Gertz

10.84 0.68 4.61 0.56

11.03 7.76

9.17 10.951

3.59 10.951 13.35 5.79

10.11 10.551

3.85 10.711 12.34 6.73

Data available at PennEnergy Research Center. NOTE: No new data at press time.

• CRUDE AND PRODUCT STOCKS

District

PADD 1 .................................... . PADD 2 .................................... . PADD3 ................................... . PADD4 ................... . PADD 5 .... . ........................... .

Aug. 8, 2014 ........................... . Aug. 1, 2014 ........................... .. Aug. 9, 20132 .......................... ..

1lncludeSPADD 5. 2Revised.

Crude oil

10,975 85084

196:687 20,892 53,381

367,019 365,619 360,490

)Source: US Energy Information Administration

·•.. Data available at Penn Energy Research Center.

_REFINERY REPORT-AUG. 8, 2014

-- Motor gasoline -Blending

Total camp.

57,969 47,409 74,148

51,619 40,093 63,986

2~:§g, 3,945 23,913

-- ---212,687 183,556 213,850 185,697 222,429 172,877

10.74 1.44 4.65 !.55 9.90 7.84

Jet fuel, kerosine 1,000 bbl

9,025

18:~~ 522

8,130

34,670 34,205 38,033

[STATISTICS Additional analysis of market trends is available through OGJ Online, Oil & Gas Journal's electronic information source, at http://vvww.ogj.com.

Oil& GAS JQUW.\l research center fum.Erergy.

_ research

. • OGJ CRACK SPREAD 8-15-14* 8-16-13* Change Change,

$/bbl %

SPOT PRICES Product value 114.04 123.37 19.331 17.61 Brent crude 102.05 110.76 18.711 17.9) Crack spread 11.99 12.61 10.621 14.9)

FUTURES MARKET PRICES One month Product value 116.60 125.81 19.211 17.3) Light sweet

97.19 106.92 19.1) crude 19.73) Crack w;read 19.41 18.90 0.51 2.7

Sixmon Product value 113.12 120.35 17.23) 16.01 Light sweet crude 94.51 101.39 16.88) 16Jll

Crack spread 18.61 18.96 10.35) 11.81

*Average for week ending. Source: Oil & Gas Journal Data available at Penn Energy Research Center.

----.Fuel oils----Distillate Residual

40,344 29,785 37,697

11:~~ 122,502 124,922 128,482

8,142 1,281

20,394 181

4,597

34,595 35,133 37,472

Propanepropylene

5,382 23,433 38,718 12,767

70,300 68,480 61,850

REFINERY --OPERATIONS--

Total REFINERY OUTPUT---------

District

PAOO I ............................................. . PAOO 2 ............................................ . PAOO 3 ............................................. . PADD 4 ............................................. . PAOO 5 ........................................... ..

Aug. a, 2014 ...................................... . Aug. 1,2014 ..................................... .. Aug. 9, 2013 ...................................... .

1lncludes PADD 5. 2Revised. Source: US Energy Information Administration Data available at Penn Energy Research Center.


Gross Crude oil inputs inputs

--1,000 bid---

1,141 1,136 3,481 3,477 8,643 8,560

617 612 2,547 2,429

16,429 16,214 16,562 16,392 15,926 15,611

17,931 Operable capacity

motor gasoline

3,131 2,736 2,147

359 1,686

10,059 10,035

9,081

Jet fuel, kerosine

99 245 833

34 444

1,655 1,677 1,545

91.6 utilization rate

---Fuel oils--Distillate Residual 1,000 bid

334 62 941 41

2,707 133 180 11 561 126 -- --

4,723 373 4,829 347 4,856 468

Propanepropylene

!58 289 878

1174

1,499 1,581 1,363

33

: STATISTICS • • OGJ GASOLINE PRICES

Price Pump Pump ex tax price* price

8-13-14 8-13-14 8-14-13 ¢/gal

(Apprcx. prices for self-service unleaded gasoline) Atlanta .......................... 292.6 338.5 348.3 Baltimore ...................... 293.1 338.9 353.8 Boston ...................... 302.6 347.5 335.3 Buffalo .......................... 279.4 348.3 375.8 Miami ............................ 303.4 357.8 353.9 Newark .......................... 304.3 337.2 337.1 New York ........................ 279.2 348.1 383.9 Norfolk ......................... 312.0 347.7 343.6 Philadelphia .................. 296.6 356.8 382.4 Pittsburgh ..................... 288.2 348.4 355.9 Wash., DC ..............•••.•. 306.3 348.2 359.5

PAD I avg ................ 296.2 347.0 357.2

Chicago ..................... 334.8 392.3 414.1 Cleveland .................... 317.8 364.2 336.9 Des Moines .................. 303.5 343.9 332.7 Detroit ............ 278.8 339.2 363.3 Indianapolis ................ 274.3 334.5 339.8 Kansas City .................. 299.1 334.8 342.3 Louisville ..................... 297.5 348.4 360.1 Memphis ...................... 312.3 352.1 328.0 Milwaukee ..................... 298.5 349.8 349.6 Minn.·SI. Paul ............... 304.5 351.5 344.9 Oklahoma City ............... 282.9 318.3 347.7 Omaha .......................... 279.8 325.5 353.9 St.louis ........................ 286.6 322.3 352.9 Tulsa ............................. 280.6 316.0 326.3 Wichita ................. 296.7 339.1 341.5

PAD 11 avg ...... ..... 296.5 342.1 348.9

Albuquerque ................. 294.1 331.4 347.5 Birmingham .................. 290.1 329.3 333.6 Dallas-Fort Worth .......... 287.9 326.3 331b Houston ......................... 290.0 328.4 334.7 Little Rock ...... 290.1 330.3 327.8 New Orleans .................. 294.9 333.3 339.2 San Antonio ................... 292.0 33Q.4 337.4

PAD Ill avg ................ 291.3 329.9 336.0

Cheyenne .................... 315.5 357.9 348.7 Denver ......................... 329.5 369.9 376.3 Salt Lake City .............. 320.0 362.9 372.0

PAD IV avg ........... 321.7 363.6 365.6

los Angeles ................. 337.5 405.7 396.6 PhoeniK. ......................... 338.3 375.7 340.6 Portland ........................ 336.2 385.7 380.2 San Diego .................... 325.1 393.2 396.3 San Francisco ................ 34D.4 408.5 414.0 Seattle ........................... 317.7 373.6 396.2

PADVavg ................ 332.5 39D.4 387.3 Week's avg. _ ................ 302.5 349.8 363.7 July avg ....... -................ 315.5 362.8 342.8 June avg ...... _ ................ 320.6 367.9 353.6 2014to date ................. 305.2 352.5 2013 to date ................. 309.7 355.9

'Includes state and federal motor fuel taxes and state sales tax. Local governments may impose additional taxes. Source: Oil & Gas Journal. Data available at PennEnergy Research Center.

REFINEO PROOUCT PRICES 8-8-14

t/gal

Spot market product prices

No.2 Distillate Low sulfur diesel fuel

8-8-14 ¢/gal

Motor gasoline (Conventional-regular) New York Harbor ......... 269.80 New York Harbor ......... 287.50 Gulf Coast... ............... 263.10 Gufl Coast... ............... 284.60

Los Angeles ................ 295.30 Motor gasoline

(RBOB-regular) Kerosine jet fuel New York Harbor ....... 278.30 Gulf Coast... ............. 285.10

No. 2 heating oil Propane New York Harbor ........ 277.80 Mont Belvieu ............. 101.80

Source: EIA Weekly Petroleum Status Report. Data available at PennEnergy Research Center.

34

BAKER HUGHES RIG COUNT 8-15-14

Alabama .................. .. 6 Alaska ..................... . 9 Arkansas ..................... .. 11 Califomia .... . 47

Land ........... .. 45 Offshore .. 2

Colorado .............................. . 75 Florida ............................ . 2 Illinois ............................................ .. 1 Indiana ........................... .. 2 Kansas ...... . 26 Kentucky ....... . 3 Louisiana ........................ .. 116

N. Land .............. . 31 S.lnland waters ........ . 10 S.land .................. .. 19 Offshore ............. . 56

Maryland ......................................... . 0 Michigan ....................... .. 0 Mississippi ................... .. 14 Montana .. . 8 Nebraska ......................................... . 2 New Mexico ............ .. 94 New York ........... . 0 North Dakota ................................... . 185 Ohio ........................ . 42 Oklahoma ......................................... . 209 Pennsylvania .................................... . 51 South Dakota .......................... .. 1 Texas ................. . 901

Offshore ............... .. 2 Inland waters ........ .. 0 Dist. 1 ...... .. 106 Dis!. 2 ...... .. 82 Dist. 3 .. 69 Dis!. 4 ......... . 40 Dis!. 5 .... .. 11 Dis!. 6 ...................... .. 35 Dist. 78 .. 13 Oist. 7C ......................................... . 97 Dis!. 8 ............................. . 323 Dis!. SA ... . 43 Dist. 9 ....... .. 16 Oist. 10 .......... .. 64

Utah ................. .. 23 29 55

West Virginia .............. . Wyoming ................................... . Others-ID-1 ......................... . __ 1

1,913 ___.1Q!

Total US ....................................... . Total Canada ............................... . Grand total .................................. . 2,314

1,589 321

US oil rigs .................... .. US gas rigs ....................................... . Total US offshore .............................. . 52 Total US cum. avg. YTD ................... .. 1,831

Rotary rigs from spudding in to total depth. Definitions, see OGJ Sept. 18, 2006, p. 46. Source: Baker Hughes Inc. Data available at PennEnergy Research Center.

•IHS PETRODATA RIG COUNT AUG. 15, 2014

8-16-13

6 13 13 42 40 2

7l 2 6 1

25 0

ll3 27 22 13 51 0 0

12 8 3

76 0

172 36

169 51 2

846 7 1

135 81 45 38 14 28 20 79

268 42 18 70 31 37 52

__ 4

1,791 ___ill

2,149 1,397

388 52

1,762

Total Marketed supply supply

"~' ofn~n

Marketed Marketed utilization

contracted rate (%l. US Guu u•

Mexico ...... 115 90 78 86.7 South America 80 78 77 98.7

Northwest Europe ...

West 95 93 91 97.9

Africa .... 85 80 57 83.8 Middle

East ... 150 145 131 90.3 Southeast

Asia .... 101 93 81 87.1 Worldwide .... 856 801 737 92.0

Source: lHS Petrodata Data available in Penn Energy Research Center

. • OGJ PRODUCTION REPORT 18-15-14 18-16-13 -l,OOOb/d-

(Crude oil and lease condensate) Alabama.............. 29 Alaska ................... ............. 367 California........................... 593 Colorado.... ..... 191 Florida.................................... 6 Illinois....... ..... ................... 26 Kansas................................... 140

~i~~,~~~.::::::::::::::::::::::::::::::. 1,2~~ Mississippi............................. 66 Montana................................. 81 New Mexico............................. 334 North Dakota....... ................. 1,023 Oklahoma............. ................ 358

~fats.::::::::::::::::: .. ::::::::::::::::::: 3,~~J ~ror~~~s·:::::::::::::::::::::::::::::::: 1 ~~

Total.................................. 8,528 10GJ estimate. 1Revised. Source: Oil & Gas Journal. Data available at PennEnergy Research Center.

. US CRUDE PRICES

ti1:~r~f~~nsa'1P:e~~:::::::::::::::::::::::::::::::::::::::::: California-Midway Sunset13° ............................. . California Buena Vista Hills 26° ......................... ..

~rt~~;~~\·t::::::::::::::::::::::::::::::::::::::::::::::::::: West Texas Sour 34° .......................... .. West Texas Intermediate ......................... . Oklahoma Sweet. ............................................ . Texas Upper Gulf Coast ............................... ..

w~~~~:gos~~on·::::::::::::::::::::::::::::::::::::::::::: .. North Dakota Sweet... .................................. ..

29 454 599 175

6 26

131 1,170

21 56 81

277 897 303

2,873 96

181 ___j)_

7,478

8-15-14 $/bbl*

101.47 92.72 92.65 99.40 88.85 90.00 88.75 93.25 93.25 87.50 85.75 92.75 83.94

*Current major refiner's p!ls!ed prices except N. Slope lags 2 months. 40" gravity crude unless differing gravity is shown. Source: Oil & Gas Journal. Data available at PennEnergy Research Center.

: WORLO CRUDE PRICES $/bbl

OPEC reference basket Wkly. a~5-14 101.15 -Mo. avg., $/bbl

OPEC reference basket.. ................... . Arab lig~t-Saudi Arabia ..................... .. Basrah hght-lraq ................................ . Bonny light 37°-Nigeria .. .. Es Sider-Libya ............................. .. Girassoi-Angola ............................ . Iran heavy-Iran ............................... . Kuwait export-Kuwait .............. .. Marine-Qatar ......................... .

~~~Wa-~:~xt~.~~~.::::::::::::::::::::::::::::::: ...

June-14 July-14

105.61 107.15 103.83 109.19 106.19 107.02 106.21 105.50 105.96 95.06

108.87

()

Oriente-Ecuador .................... .. Saharan blend 44"-Aigeria ... Other crudes

107.89 108.61 105.80 114.36 111.31 lll.23 107.45 106.56 107.85 98.71

110.74 98.75

112.66 95.21 "J 106.74 (

Minas 34"-lndonesia .......... .. Fateh 32"-Dubai.. ................................ . Isthmus 33"-MeKico ........................... .. Tia Juana light31"-Venezuela ............ .. Brent38"-UK ................................ . Urals-Russia .................................... .. Differentials

112.13 108.03 106.47 111.66 109.44 102.74

Wfl!Brent .................................... (6.42) BrenVDubai.......................................... 3.63 Source: OPEC Monthly Oil Market Report. Data available at PennEnergy Research Center.

' US NATURAL GAS STORAGE1

8-S.14 8-1-13 S.S.13 bel

Producing region................ 792 783 1,052 Consuming region east...... 1,277 1,219 1,452 Consuming region west ...... ~ 387 493 Total US ............................. 2,467 2,389 2,997

May-14 May-13 Change,

% Total usz ............................ 1 544 2,271 (32.0) 1Workinigas. 1At end of period. Source: nergy Information Administration Data available at PennEnergy Research Center.

105.06 106.13 102.20 106.64 106.23 108.06

13.771 0.51

'"';r· (24.7) 112.1) [19.3) (17.7)

Oil & Cas Journal I Aug. 25 , 2014

[SIAIIStrc_s: WORLD OIL BALANCE -OECD TOTAL NET OIL IMPORTS

-2014- 2013 2012- Chg. vs. 1st 4ili 3rd 2nd 1st 4th previous qtr. '"- '"· qtr. '"· '"· Mar. Feb. Jan. Mar. --year-

Million bid 2014 2014 2014 20t3 Volume % Million bid

DEMAND Canada .............. ........ 11,551) (2,712) (2,7291 (2,584) 1128) 5.0 OECD

US & Territories .................... 18.98 19.45 19.26 18.79 18.76 18.66 us ...... _,,, ...................... 5,382 5,540 5,243 6,345 (805) (12.7) Canada ................ ................ 2.33 2.32 2.30 2.31 2.28 2.37 Mexico ............... ........... 17331 (943) (867) (640) 13031 47.3 Mexico ................... ............. 2.02 . 2.08 2.09 2.14 2.11 2.24 France ................ 1,407 1,436 1,617 1,531 (95) (6.2) Japan ................................... 5.05 4.75 4.32 4.11 5.08 4.86 Germany ........... ......... 1,960 2,249 2,046 2,150 99 4.6 South Korea ........................... 2.34 2.38 2.26 2.28 2.31 2.37 Italy ......... .................. 967 901 1,112 1,020 (119) (11.7) France ............. ..................... 1.65 1.68 1.76 1.75 1.75 1.71 Netherlands........... . ....... 852 429 977 844 (4151 (49.2) Italy ...................................... 1.19 1.31 1.33 1.28 1.28 1.33 Spain ................ ......... 1,135 1,107 1,231 1,023 84 8.2 United Kingdom .............. 1.49 1.49 1.52 1.55 1.50 1.47 other importers ............. 3,447 3,496 3,464 3,525 1291 (0.81 Germany .... ........................ 2.33 2.37 2.44 2.51 2.30 2.44 Norway ................... ........ (1,415) (1,580) (1,6831 (1,581) 1 (0.1)

other DECO United Kingdom ................ 360 474 501 519 1451 (8.7)

Europe .............................. 6.36 6.68 6.90 6.72 6.37 6.71 Total DECO Europe ...... 8,713 8,5t2 9,265 9,031 1519) (5.7)

Australia & New Japan ............................... 5,031 5,095 5,017 4,909 186 3.8 Zealand ............... , ............ 1.29 1.32 1.28 1.29 1.28 1.31 South Korea ...................... 2,209 2,126 2,148 2,278 (152) (6.7)

Total DECO ........................ 45.65 46.43 46.08 45.37 45.65 46.12 OtherOECD . ................... 1,543 1,925 1,857 1,625 300 18.5

NON-DECO Total DECO .................. 19,594 19,543 19,934 20,964 (1,421) (6.8)

China .............. .................. 10.65 10.92 10.56 10.61 10.55 10.89 Source: US Energy Information Administration FSU ........................................ 4.63 4.74 4.76 4.49 4.56 4.50 Non-OECO Europe .................. 0.71 0.73 0.73 0.71 0.70 0.74 Data available at PennEnergy Research Center. Other Asia .............................. 11.44 11.23 10.94 11.36 11.14 11.27 Other non-OECD ..................... 17.24 17.24 17.93 17.33 16.63 16.78

.• -.. · OECD* TOTAL GROSS IMPORTS FROM OPEC Total non-OECO ................ 44.66 44.85 44.92 44.50 43.57 44.17

~~) TOTAL OEMAHO ........................... 90.30 91.27 91.00 89.86 89.22 90.29 Chg. vs. previous

SUPPLY Mar. Feb. Jan. Mar. --year--DECO 2014 2D14 2014 2014 Volume % us .......................................... 13.04 12.95 12.55 12.04 11.69 11.67 Million bid

Canada ..................... 4.34 4.21 4.11 3.86 4.11 4.04 Mexico ............. ..................... 2.88 2.91 2.90 2.89 2.93 2.92 Canada .............. ............. 217 332 186 303 186) (28.4) North Sea ....... ...................... 3.06 2.92 2.74 2.88 2.89 2.90 us ................................. 3,380 3,398 3,314 3,713 (333) (9.01 Other DECO ............................ 1.52 1.48 1.54 1.51 1.47 1.54 Mexico ................ ............. 10 38 - 10

Total DECO ........................ 24.84 24.47 23.84 23.18 23.09 23.07 france ............................... 674 650 567 521 153 29.4

NON-DECO Germany ................. ......... 288 306 276 501 1213) (42.51 FSU ...................................... 13.69 13.74 13.51 13.47 13.53 13.50 Italy ................................... 491 499 485 495 141 (0.81 China ................................... 4.46 4.52 4.37 4.49 4.46 4.51 Netherlands ..................... 316 606 548 541 1225) (41.61 Other non-OECO ................... 11.93 12.54 12.69 12.49 11.95 12.52 Spain ................................. 641 560 709 698 (57) (8.21

Total noo-OECD, Other importers ................ 982 1,261 1,002 1,196 (2141 (17.9) non-OPEC ..................... 30.08 30.80 30.57 3D.45 29.94 30.53

United Kingdom ................. 272 424 453 550 (2781 (50.51 OPEC* ........................................ 35.8& 35.38 36.16 36.43 35.93 36.45

Total DECO Europe ....... 3,664 4,306 4,040 4,502 (838) (18.61 TOTAL SUPPLY ............................ 90.76 90.63 90.55 90.06 88.95 90.02

Japan .................... ......... 3,783 3,690 3,830 3,872 (891 (2.3) Stock change ............................ 0.46 (0.64) (0.45) 0.20 (0.27) (D.27) South Korea ...... ............... 2,531 2,319 2,340 2,579 1481 (1.9)

*Includes Angela. Other DECO .. ................... 245 214 239 330 (85) (25.81 Source: US Energy Information Administration

(9.7) Data available at PennEnergy Research Center. Total DECO ................... 13,830 14,297 13.949 t5,309 (1,419)

*Organization for Economic Cooperation and Development. Source: US Energy Information Administration Data available at PennEnergy Research Center.

) ~US PETROLEUM IMPORTS FROM SOURCE COUNTRY Average

Chg~ vs. 'OIL STOCKS IN OECD COUNTRIES* preVIOUS

Apr. Mar. --YTO-- --year- Chg. vs. 2014 2014 2014 2013 Volume % previous

1,000 b/d Mar. Feb. Jan. Mar. --year-

Algeria .............................. 69 92 77 113 (36) (31.9) 2014 2014 2014 2013 Volume %

Million bbl Angola .............................. 118 117 110 171 161) (35.71 Kuwait .............................. 342 360 382 315 67 21.3 france ................................. 167 167 171 161 6 3.7 Nigeria ........................ 187 112 112 388 (276) (71.1) Germany .......................... 289 296 291 291 121 (0.7) Saudi Arabia ................... 1,607 1,444 1,494 1,102 392 35.6 Italy ..................................... 122 124 127 131 (9) (6.9) Venezuela ....... ................ 853 772 778 781 131 (0.4) United Kingdom ................... 77 78 77 80 131 (3.8) Other OPEC ................. 492 483 486 751 (265) 135.3) other DECO Europe .............. 687 689 693 7ll (24) (3.4) Total OPEC .................. 3,668 3,380 3,439 3,621 1182) (5.0) Total DECO Europe ......... 1,342 1,354 1,359 1,374 (32) (2.3)

Canada .................... 3,169 3,205 3,257 3,251 6 0.2 Canada ............................... 175 175 170 171 4 2.3 Mexico ................ ............ 748 871 880 922 142) (4.61 us ................................... 1,753 1,743 1,743 1,793 (40) (2.21 Norway ........... ................ 72 70 66 43 23 53.5 United Kingdom ............... 170 131 128 113 15 13.3 Japan .................................. 586 576 579 591 (5) (0.81 Virgin Islands ................... - - - - - - South Korea ......................... 187 182 178 188 Ill (0.5) Other non-OPEC ............... 1,757 (3,417) 1,542 1,761 1219) (12.4) other DECO ....... ................ 110 114 111 ll5 151 (4.3)

Total non-OPEC ........... 5,916 5,860 5,873 6,090 12171 (3.6) TOTAL IMPORTS ........... 9,584 9,240 9,312 9,711 (399) (4.1) Total DECO ..................... 4,153 4,144 4,140 4,232 (19) (1.9)

Source: US Energy Information Administration *End of period. Data available at PennEnergy Research Center. Source: US Energy Information Administration

Data available at PennEnergy Research Center.

Oil & Gas ]ourna!J Aug. 25, 2014 35

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EMPLOYMENT

VANTAGE Vantage Drilling is an international offshore drilling contractor which

operates and manages a fleet of modern, high specification drilling rigs on a worldwide basis.

WE ARE CURRENTLY HIRING FOR THE FOLLOWING POSITIONS IN

THE GULF OF MEXICO:

Assistant. Rig Manager Chief Electronic Technician

Sr Toolpusher Electronic Technician

Tool pusher Trainee ET

Driller Mechanical Supervisor

Trainee Driller

Asst Driller Hydraulics Engineer

Chief Mechanic Trainee Asst Driller

Mechanic Derrickman

Motorman Pumpman

Sr Subsea Engineer Floorman

Subsea Engineer Maintenance Supervisor

Asst Subsea Engineer 1st Engineer

Senior Offshore Materials 2nd Engineer Coordinator

3rd Engineer Offshore Materials Coor-dinator

Electrical Supervisor Welder

Chief Electrician MasteriOIM

Electrician

PLEASE APPLY ONLINE AT WWW.VANTAGEDRILLING.COM

Vantage Drilling is an equal opportunity employer and will consider all applications without regard to race, sex, age, color, religion, national origin, veteran status, disability, genetic information or any other characteristic protected by law.

Chief Mate

DP Mate

Senior Dynamic Positioning Officer

Dynamic Positioning Officer

Assistant Dynamic PosiUoning Officer

AB Seaman

Ordinary Seaman

Deck Pusher

Crane Operator

Asst Crane Operator

Roustabout

Radio Operator

Safety Training Coordi-nat or

Safety Officer

39

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