A large increase in drilling and production costs in the USA Shale Oil sector will likely slow the growth of production from the Permian Basins.

To just maintain production hundreds of new wells must be drilled each year due largely to the rapid decline in tight wells. In the Permian Basins in the last 15 years consolidation has been aggressive and while the largest producers, Chevron, Devon and ConocoPhillps have a sizeable drilling inventory smaller companies have exhausted their drilling locations.

Continue reading Has Midland and Delaware Basin Oil production peaked? →

Chief Engineer at the country’s Federal Power Ministry, Ghanshyam Prasad, said coal capacity is likely to reach 238GW by 2022

India expects coal-fired power capacity to grow by 22% in three years. That’s according to the Chief Engineer at the country’s Federal Power Ministry, Ghanshyam Prasad, who Reuters reported as stating coal capacity is likely to reach 238GW by 2022.

India’s Coal Minister, Pralhad Joshi previously said annual coal demand rose by 9.1% during the year ending March 2019, noting the figure hit 991.35 million tonnes, driven primarily by utilities, which accounted for three-quarters of total demand.

India’s electricity demand rose by 36% in the seven years up to April 2019, while coal-fired generation capacity during the period rose by three-quarters to 194.44GW.

On April 20, 2010, in the Gulf of Mexico on the BP-operated Macondo Prospect, a catastrophic failure on the Deepwater Horizon platform resulted in a massive oil spill considered to be the largest marine oil spill in the history of the petroleum industry and estimated to be 8% to 31% larger in volume than the previous largest, the Ixtoc oil spill, also in the Gulf of Mexico.

The U.S. Federal Government estimated the total discharge at 4.9 million barrels (210 million US gal; 780,000 m3). After several failed efforts to contain the flow, the well was declared sealed on September 19, 2010.

The ultimate cause of the blow-out was a poor cement job, undetected because a Bond Log was not conducted. This resulted in ingress of formation fluids into the well-bore when heavy drilling mud was circulated out and replaced with sea-water, placing the well in an under-balanced situation, prior to planned well suspension as a producer.

This should not have produced the uncontrolled flow to surface however and the BOP should have been capable of controlling flow. This video examines the failure of the BOP and does so well. Differential pressure between the tubing and annular pressures resulted in flexing of the drill-string out of the path of the blind-shear rams which would normally have sheared the drillpipe and contained the well.

However, there was one decision that ultimately lead to the inability of the crew to control the well. In their haste to de-mob the rig, instead of circulating out the drilling mud to monitored mud tanks on the rig, the crew elected to dump the mud directly off-rig to a waiting barge. The barge had no ability to accurately monitor mud volumes. If the mud tanks on the rig had been used the crew would have quickly seen that the volumes being reported to the mud tanks were increasingly greater than the volumes of seawater being circulated into the well. The crew would immediately have realised that they had a well control issue, would have circulated heavier mud weights and would likely have controlled the well.

The US Government reports on the Deepwater Horizon investigation are available below.

Deepwater Horizon Final Report
Volume I – US Coast Guard Report
Volume II – US Department of the Interior Report 

Deepwater Horizon Report Appendices

• Appendix A: Map of the Macondo Well, MC 252 Lease OCS-G 32306
• Appendix B: Report of John Rogers Smith
• Appendix C: Keystone Report 
• Appendix D: DNV Report Volume 1 and Volume 2
• Appendix E: DNV Addendum to Final Report
• Appendix F: Halliburton Post-Job Cementing Report
• Appendix G: Negative Test Protocols
• Appendix H: Closing Sequences for the Deepwater Horizon BOP Stack 
• Appendix I: APD Departures at the Macondo Well Granted by MMS
• Appendix J: Risk Register for the Macondo Well 
• Appendix K: BP RACI Chart
• Appendix L: Production Casing Cement Job Decision 
• Appendix M: Report of Oilfield Testing & Consulting
• Appendix N: Information on Transocean’s 21-Day Hitch Policy

The Internal BP investigation report on the Deepwater Horizon accident can be viewed and downloaded below.

deepwater-horizon-accident-investigation-report-executive-summary

Sonoro Energy Ltd (TSXV: SNV) with it local partner PT Menara Global Energi has won the Selat Panjang PSC in the 2019 Conventional Bid Round in Indonesia.

Deputy Minister of Energy and Mineral Resources Arcandra Tahar announced the winner of 2019 Phase I Oil and Gas Working Area Offers with Regular Auction mechanism at EMR Ministry Building in Jakarta, on Tuesday (05/07). Photo by TheInsiderStories.

Indonesian Ministry of Energy and Mineral Resources (MEMR) announced on 7th May 2019 that the Sonoro Energy Ltd-PT Menara Global Energi consortium was the winner of the 2019 Phase I Oil and Gas Working Area Offer on the Selat Panjang PSC area in the Central Sumatra Basin.  The total commitment value and signature bonus was US$ 116.7 million.  The PSC tender process is important to the Government of Indonesia as during the last two years 14 blocks were successfully tendered which resulted in signature bonuses totaling US$865 million and Definitive Work Commitments totaling US$2.13 billion.

It is unlikely that the PSC will be formalized and executed before the end of Ramadan on June 5th, 2019.

Terms

• Sonoro has a 25% interest in the project with an option for up to an additional 24%.
• Menara Global Energi has an initial 75% interest and shall be responsible for the signature bonus and for funding the first year G&G program.  Sonoro interest to be repaid on terms to be agreed.

Tender Bid

• Signature Bonus: US$5 million
• G&G Study
• 2D: 500 line km
• 3D: 200 km²
• 6 wells

The 923 km² Selat Panjang PSC is situated in Riau province, Central Sumatra and is approximately 925 km from Jakarta and 110 km from Pekanbaru (capital city of Riau Province).

In 2015 the Indonesian Ministry of Energy awarded  the Selat Panjang PSC, then totalling 1,316 km² to Petroselat NC Ltd. part owned by Petrochina International.  The agreed work program included a G&G Study and data compilation, 2D seismic and 1 exploration well.  The PSC was terminated by the Ministry in 2018 and the development program proposed by the previous operator was not implemented.

The previous operator reported that the PSC had produced since 1994 with average annual production of 100,000 barrels with remaining 2P reserves of 7 MMBO.  Petroselat identified 7 leads and prospects on the PSC with reported potential for 320 MMBO and 1.5 Tcf.

The Central Sumatran Basin

The Central Sumatra Basin along with the North and Southern Sumatra Basins formed as a result of back-arc extension resulting from the subduction of the Indian oceanic plate beneath western Indonesian portion of the Sundaland Plate.  During the Eocene to Early-Oligocene, extension resulted in rifting which generated a series of half-grabens.  These grabens filled with syn-rift nonmarine facies, including fluvial, del­taic, marginal lacustrine sandstones, and shallow to deep-water lacustrine shales.  With the cessation of rifting, thermal relaxation resulted in a sag phase which increased accommodation and saw further deposition and increased thermal maturity of the lacustrine source rocks.  Renewed subduction or more likely a change in subduction rate saw compression in the back-arc environment from the middle Miocene to the Holocence producing many structural traps for conventional hydrocarbon accumulations.

Reservoirs formed in upper Pematang Group (Palaeogene) non-marine sandstones however the principal reservoirs in this system formed in the Early Miocene Sihapas Group marine sandstones.  The Pematang Group was deposited in a series of small en-echelon grabens which have a Lower Red Bed fluvial-alluvial unit, overlain by the Brown Shale lacustrine unit and capped by the Upper Red Bed unit.

The basal transgressive unit of the Sihapas Group, the Menggala Formation consists of well-sorted quartzose to sub-arkosic sandstones which typically constitute more than 50% of the formation.  The Menggala Formation has an average porosity of >20% and an average permeability of 1500 mD.

An abnormally high thermal gradient has resulted in a shallow oil window with the Oligocene Brown Shale of the Pematang Group being the principal petroleum source rock.  The Brown Shale Formation (lacustrine) of the Pematang Group with the Sihapas Group sandstones is one of the most important lacustrine oil systems in SE Asia.  Source Rock summary

• Principle source rock is the Pematang lacustrine brown shale;
• Type 1 source rock average TOC 2-23%  with an average of 4%(Williams et al 1985, Yarmanto et al 1995 & Katz abd Dawson 1997).  HI 200-950;
• Derived oil gravity API 20° to 47°; <2% S; Pour Point 4 to 46º and paraffinic

The Pematang reservoirs are generally small and occur with the rift basin.  The giant fields of Minas and Duri with Sihapas reservoirs occur principally along the eastern margins of the rift basins.  Most of the oil-fields are located in drape structures of basement highs along the eastern flanks of the half-grabens up-dip of the Pematang formation source rocks while others are related closure generated by basin bounding faults.  The lack of gas within the fields of the Central Sumatra Basin is notable reflecting the maturity of the Pematang-Sihapas system and the dominance of lacustrine source rock.

With an excellent source rock package and an anomalously high thermal gradient the Central Sumatra Basin is a prolific producer from shallow depths and has the highest petroleum endowment of the major basins in Asia-Pacific.  25 billion barrels STOIIP has been identified within the Central Sumatra Basin of which 4 billion and 8 billion barrels are in the Duri and Minas fields respectively, making them amongst the largest in SE Asia.

Solstad Offshore ASA has been awarded a contract by Ophir Thailand (Bualuang) Limited to perform the offshore installation of the Bualuang Charlie wellhead platform structure as part of the Bualuang Phase 4B Development Project.  The Charlie platform will have 12 slots at full production will increase field production to 11,000 BOPD.

The project is located in the Gulf of Thailand and comprises the installation of a bridged-linked wellhead platform structure along with the retrofitting of extension structures to existing in-field platforms. Offshore activities are planned to commence in July 2019 and will be performed using the Derrick Lay Barge “Norce Endeavour”. Solstad Offshore will perform all project management, engineering and installation activities from its offices in Singapore.

Bualuang Oil Field

The Bualuang oil field in the Gulf of Thailand has been on-stream since 2008. The field was initially thought to contain 15 mmbo of 2P reserves and have a productive life of approximately five years. However, the field has undergone numerous reserve upgrades and year-end 2018 it had produced over 35 million barrels of oil, with a further 27 mmbo of 2P reserves and 10.3 mmbo of 2C resource.

• The Bualuang field has been on-stream since 2008
• Stable production with over 99% uptime in 2018.  7,800 BOPD during 2018, to be increased to 11,000 BOPD
• OPEX US$13/BOPD increase to US$16 BOPD in 2018.
• A facilities debottlenecking project in 2016 increased water handling capacity, and therefore allowed for increased rates of oil production
• A three well infill drilling campaign in 2017 saw two wells in the deeper T2 reservoir and and infill well under the platform guided by data from the Ocean Bottom Node seismic survey completed in 2015.
• Phase 4 commenced in 2018 with drilling of three new wells and four workovers.

Phase 4B Development

• A third platform with 12 slots allowing expansion of water disposal to 100k BPD;
• 10 slots to be used for increased production with conversion of some wells on the Bravo platform to water disposal.
• CAPEX: US$138 million
• Development drilling from July 2019 with first oil from Charlie in October 2019

Medeco to Acquire Ophir Energy

On 30 January 2019, the boards of Medco, Medco Global and Ophir announced that they had reached agreement on the terms of a recommended acquisition pursuant to which Medco Global will acquire the entire issued and to be issued ordinary share capital of Ophir for GBP 0.55 per share (later revised upwards to GBP 0.575).  This all cash bid valued the company at US$ 550 million.

A number of activist institutional investors were unhappy with the bid and on 8 March 2019, the Ophir Board received an unsolicited and highly preliminary indication of interest from Coro Energy PLC regarding a possible offer for the entire issued and to be issued share capital of Ophir.  Coro proposed that Ophir Shareholders would receive 40 pence in cash, and, in addition, shares in Coro for each Ophir Share, resulting in an ownership by Ophir Shareholders of between 85 per cent. and 95 per cent. of the enlarged company.  The cash component would be funded with debt.

Following a modest increase in the offer price by Modeco, Coro withdrew its offer after discussions with their financiers, Sand Grove Capital Management.

Note: Cmi Capital holds shares in Ophir Energy.

Schlumberger introduces new and novel diamond composite drill-bit which allows for deeper cutting –  which will improve steerability on the curve.

The  distinctive geometry of Hyper* hyperbolic diamond cutting elements that cut 20% deeper into rock compared with conventional polycrystalline diamond compact (PDC) cutters. A thicker, precision-molded diamond table makes the Hyper element tougher and more durable for drilling soft and plastic rock formations, while armored cutting edges withstand high-impact transitions.

Additionally, bit balling is mitigated by the chip-breaking profile at the center of the element, which improves cuttings removal during drilling. With the combination of these features, the HyperBlade bit maintains steerability and directional tracking, and increases average ROP by more than 20% compared with conventional PDC cutters.

The HyperBlade bit has undergone extensive field testing in North America, specifically in the Denver-Julesburg and Appalachian Basins. In the Marcellus Formation in northern Pennsylvania, the HyperBlade bit drilled an 8 ½-in section with a measured depth of 6,891 ft in 16.6 drilling hours. The operator achieved an on-bottom ROP of 415 ft/h, resulting in a 62% improvement compared with offset runs using conventional PDC bits.

After much lobbying APPEA has announced the Western Australian Government’s decision to lift the hydraulic fracturing moratorium on existing onshore gas projects.

How many studies need to be done to confirm that fracking kilometres beneath the surface of the planet has no material impact on the surface or the near surface waters?  We all know this has nothing to do with actual environmental impact and everything to do with a  small subset of the left that detests Capitalism  – the one “ism” that has made the world a better place as distinct from the others that have merely killed tens of millions.

“The independent scientific inquiry has confirmed that properly regulated, hydraulic fracturing is a safe practice.  Hydraulic fracturing has been used safely in Western Australia since 1958,” said APPEA Chief Executive Dr Malcolm Roberts.

“The inquiry shows there is no environmental or public health justification for maintaining the moratorium.  The inquiry also rejects claims that onshore projects will mean a significant increase in emissions.

“While the industry would have preferred the removal of the moratorium across the state, this decision will give communities in regional WA the choice to support local projects and jobs.

“More than any other state, WA relies on investment in resource projects to sustain jobs and economic growth.  The government has made the right decision to respect the substantial investments already made by projects in the Kimberley region and the Perth basin.

Dr Roberts said prohibiting hydraulic fracturing would have crushed the viability of some of these projects, damaging WA’s reputation as a safe place for investment.

“The government has added a new regulatory requirement which will only allow these projects to use hydraulic fracturing for producing gas with the approval of the landowner,” Dr Roberts said.

“The industry respects that we operate on someone else’s land to develop a natural resource owned by the community.

“WA producers have close working relationships with traditional owners and pastoralists.

“During the inquiry, many regional communities expressed strong support for local gas projects.  The right of these communities to make their own decisions must be respected, including by anti-gas activists.”

Financial Times, 31 October 2018

Leslie Hook, David Sheppard and Myles McCormick

A fleet of new coal plants in Asia threatening to derail global emissions targets has exposed the growing “disconnect” between energy markets and climate goals.

Fatih Birol, head of the International Energy Agency, said the growth of coal-fired power in Asia was worrying because the new plants would “lock in the emissions trajectory of the world, full stop”.

Asia has 2,000GW of coal-fired power plants that are operating or under construction — more than 10 times as much as the EU — and many of them are inefficient plants.

While the coal fleets in the US and Europe are older, 42 years on average, and nearing the end of their life, Asia’s coal plants are just 11-years-old on average and most still have decades left to operate.

Energy-related carbon dioxide emissions ticked up 1.4 per cent last year, following several years of staying flat, and are set to rise again in 2018 owing to greater demand for fossil fuels. Asia accounted for two-thirds of the growth in emissions last year.

Last year China’s coal-fired power generation grew 4 per cent, while India’s rose 13 per cent, according to IEA data. The rate of investment in the construction of new coal-fired power plants, however, also slowed down last year, according to the agency………

Read full Text

 

 

OMNIS, in partnership with TGS and BGP, announce a licensing round in Madagascar, to be launched at Africa Oil Week, 5-9^th November 2018.

Exploration in Madagascar began in the early 20^th century with the discovery of heavy oil-rich sedimentary basins in the west, however this frontier region remains relatively under-explored. The Island shares a maritime boundary with Mozambique, which is in the same oil province where large quantities of natural gas have been discovered. Studies conducted in collaboration with TGS and BGP have resulted in new data that suggest there is significant potential for future discoveries both on and offshore.

“With the aim of intensifying offshore exploration activities, we are delighted to announce that OMNIS will be inviting investment from interested parties, during a licensing round to start in November 2018. We are working together with TGS and BGP to create an attractive environment for exploration in the offshore, and we are confident that this will signal the start of renewed investment for the upstream oil sector in Madagascar,” Voahangy Nirina Radarson, General Manager of OMNIS, commented.

We are looking for an industry partner who can leverage our local knowledge and presence in Madagascar to secure some of the most prospective offshore acreage in East Africa.  Email:  admin.mdg@cmi-capital.com 

Without subsidies and the ongoing presence of backup power based on fossil-fuel generation, the outlook for more renewable energy in Australia is extremely uncertain. Indeed, without the intervention of governments, the salad days for renewable energy will quickly fade.

The Australian 1st September, 2018

Judith Sloan

One of the most astute investors in the world is Warren Buffett. Since 2004 his company, Berkshire Hathaway, has invested more than $US17 billion in renewable energy, predominantly wind farms. In case you think Buffett is some bleeding-heart global warming believer, here is his explana­tion for the investment: “I will do any­thing that is basically covered by the law to reduce Berkshire’s tax rate … We get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

Under the US production tax credit scheme, American taxpayers forked out more than $US14bn to renewable energy operators between 2014 and last year. The scheme provides for a tax credit of $US23 per megawatt hour and each project can claim this credit for 10 years. Unfortunately for the renewable energy sector, the scheme is being phased out.

Moreover, with the dramatic cut to the federal company tax rate (from 35 per cent to 21 per cent) implemented by the Trump administration, the value of tax credits for existing renewable energy schemes suddenly has dropped.

Just recently the plan to construct the largest wind farm in the US, to be located in Oklahoma, has been shelved. The business case for the project just didn’t stack up without the tax credits. Its loca­tion in a remote, albeit windy, part of the country meant that close to 900km of transmission lines would need to be built. The cost of and local opposition to the erection of the pylons were further factors killing the project.
It’s early days, but there are indications that investment in renewable energy worldwide may have peaked and is trending down.

To be sure, there is the left-wing Californian government proposing that the state’s electricity generation should be carbon-free by 2045, although electricity still will be sourced from interstate generators using fossil fuels.

By contrast, the recent election of a conservative government in Ontario — Canada’s most populous province — and the wipe-out of the previous progressive Liberal government has meant a rapid reversal of fortune for renewable energy there. The Liberals had held power since 2003, implementing a radical green agenda. Coal-fired electricity plants were closed, albeit with significant delays, and incentives were put in place for investment in renewable energy projects, particularly wind farms.

Ontario joined a limited cap-and-trade scheme with California and several US eastern states, thereby imposing a form of carbon tax in Ontario. Interestingly, the emissions reduction targets set by the Liberal government still were not achieved, notwithstanding these interventions. The election of Progressive Conservative Premier Doug Ford has taken a big stick to most of these policies. The latest cap-and-trade auction has been cancelled and approvals for new wind farms have been withdrawn. The $C14,000 ($14,863) subsidy to the purchasers of electric vehicles has been cancelled.

At a federal level in Canada, the Trudeau government has run into difficulties with its plan to impose an escalating carbon tax. The original idea was that the tax would be levied in all provinces deemed to be acting inadequately to reduce emissions. Some provincial governments are threatening to sue the federal government. And the Trudeau government has needed to tweak its carbon tax plans to deal with the commercial threats to energy-intensive, trade-exposed firms operating in Canada. This situation has been made more difficult by the recently imposed tariffs on some Canadian exports by the US administration.

In Germany, the solar industry basically has collapsed in line with sharply reduced subsidies from the government. Subsidies to wind turbines have oper­ated since 2000 but are due to run out in 2020. Some older turbines will need to be decommissioned, raising several thorny issues, including the lack of provisioning for the costs by the operators. The blades are incapable of being recycled and the turbines are anchored to the ground using hundreds of tonnes of concrete, making the decommissioning process problem­atic. One estimate puts a potential loss of existing turbines in Germany at 5 per cent of the stock by 2022.

German Chancellor Angela Merkel is under pressure to extend the life of coal-fired power stations. And recently she rejected the proposal of several EU countries to lift the shared emissions reduction target by 2030 from 40 per cent to 45 per cent. This is notwithstanding her earlier support for the higher target.

China often is cited as an example of a country that has invested heavily in renewable energy. What is less often cited is China’s substantial investments in new coal-fired and nuclear power stations. Providing affordable and reliable electricity across the country while shutting down old coal-fired power stations with damaging particulate emissions has been the top priority in China for some time.

A major event occurred in June with the decision of the Chinese government to slash the subsidies paid to solar power operators. In the future, there will be no subsidies and the incentives for existing projects are being cut to 10c per kilowatt hour. As a result of this change, the price of solar stocks has fallen significantly. (We should note here the dominance of China in the production of solar panels. Of the 10 largest firms, seven are China-based and another is based in Hong Kong. There is a large supplier in Canada but the firm has Chinese links.)

So what does this mean for Australia? The renewable energy sector is keen to spruik its economic case. It notes that about 7200MW of capacity has been added in the past few years, although this is nameplate capacity rather than actual 24/7 generation capacity. It also notes that the cost of renewable energy is falling, more so for solar than wind.

The combination of the dying days of the renewable energy target and active subsidisation of renewable energy projects by state and territory governments, mainly through the reverse auction process, has driven this latest burst of investment in wind and solar farms. However, no new projects are proceeding in which operators are taking the merchant risk. (A possible exception could be Chinese-backed projects.) Without power purchasing agreements from users, no new projects are likely to proceed.