What's new in production

	Vol. 226 No. 5
ROBERT E. SNYDER, EXECUTIVE ENGINEERING EDITOR

Oil price selection critical to reserve estimation. Ryder Scott Petroleum Consultants has collected some interesting and enlightening data on the pitfalls companies face in following federal regulations on calculating oil and gas reserves. In their March-May quarterly publication, Reservoir Solutions, they show some facts on results of the FASB 69 requirement to use single-day, year-end prices in estimating petroleum reserves in US 10-K filings. Industry has recommended to FASB (Financial Accounting Standards Board) and SEC, the US Securities and Exchange Commission, that they consider allowing filers to report reserves using historically averaged prices rather than a one-day “snapshot” price. A chart in Ryder Scott’s report shows 15 years of price comparisons of year-end and annual average price, see figure.

ExxonMobil said it reported year-end proved reserves using December 31 prices for the first time based on the federal guidelines. Exxon’s year-end price use reduced its proved reserves by 500 million BOE, and dropped its reserve replacement ratio to 83% from 112%. This drop was entirely due to a price drop in Canadian heavy crude which quickly rebounded, raising all of the drop.

The Ryder Scott article discussed relevant recommendations on reserve reporting by Deloitte & Touche LLP accountants and the Cambridge Energy Research Assoc. Inc. (CERA). A key recommendation from D&T was that “market regulators and accounting standard setters should adopt the current framework for definitions and categorization of petroleum reserves as jointly developed by SPE, AAPG and the World Petroleum Congress.” Of the several points highlighted by Ryder Scott from CERA’s 121-page study, it was noted that, “The SEC has become a de facto global regulator, because of globalization of capital markets.”

First US LNG terminal in 20 years. Excelerate Energy of Houston announced successful commissioning and commercial operation of its Gulf Gateway Energy Bridge Deepwater Port (Gulf Gateway) – the world’s first offshore liquefied natural gas (LNG) receiving facility, and the first new LNG regasification facility in North America in over 20 years. Gulf Gateway, using Excelerate’s proprietary Energy Bridge technology, completed, in early April, its first cargo discharge of almost 3 Bcf natural gas from the LNG tanker Excelsior and is now capable of delivering up to 690 MMcfd to downstream markets. The new deepwater port was constructed and operational in less than 15 months after project approval.

The Energy Bridge Regasification Vessel (EBRV) system comprises Excelerate’s proprietary shipboard regasification technology and a submerged offloading buoy (STL Buoy) provided by Advanced Production and Loading, AS of Norway. The EBRV retrieves the submerged buoy connected to an underwater pipeline, and draws it into a specially designed compartment within the EBRV. It then begins the process of regasifying its LNG cargo and transferring the gas to markets onshore.

Gulf Gateway, located 116 mi off the coast of Louisiana in 298 ft water, will receive EBRVs, each with an LNG capacity of 3 Bcf. Gas may be delivered into both the Blue Water and Sea Robin offshore pipeline systems at a rate between 50 and 690 MMcfd. Excelerate has three EBRVs under long-term contract. The first, Excelsior, was delivered in January and is owned by Exmar; the second, Excellence, was to be delivered in late April and is owned by a charitable foundation funded by George Kaiser. The third, Excelerate, is scheduled for delivery in October 2006 and will be owned by a joint venture between Excelerate and Exmar.

There are presently four onshore LNG import terminals in the US that take LNG from tankers and regasify onshore. By doing the regasification on the delivery vessel 100 mi offshore and piping the gas into existing pipeline systems, major environmental concerns are avoided.

US Gulf hydrates restudied. Marine sediments in the northern Gulf of Mexico are likely too warm and salty to hold the amount of methane gas hydrates originally thought to exist in the ocean floor there. Researchers reported high-resolution geophysical and geochemical data for two representative sites off the coast of New Orleans, Louisiana, that suggest previous estimates for the region should be revised sharply downward, according to their paper published in the March 15 issue of the journal Geophysical Research Letters (GRL).

They found that conditions are not favorable for the formation of methane gas hydrates at these sites because of the geology of the northern Gulf of Mexico, which comprises salt domes that one can think of as “mushroom clouds of salt that rise buoyantly through sediments.” The thermal properties of salt make the sediments hotter there, and the heat, coupled with the presence of salt in pore spaces, makes it harder to form gas hydrates. The research, a collaboration between Georgia Tech, Rice University and the Scripps Institution of Oceanography, was funded by the National Science Foundation.

Research to characterize methane gas hydrates is ongoing throughout North America and the world. At Georgia Tech, researchers have also studied hydrates at Blake Ridge off the South Carolina coast. And through the International Ocean Drilling Program, other scientists have drilled boreholes to explore hydrates off the coasts of Oregon, Vancouver and numerous other world locations.

This brief introduction is a small part of the information available about this subject. Key data is available by contacting: Jane Sanders, at: jane.sanders@edi.gatech.edu, or John Toon at: john.toon@edi.gatech.edu.