Oil and natural gas production from the Gulf of Mexico Holstein spar ramped up earlier this month, according to BP plc, the 50% owner and operator. At peak production, the facility will produce more than 100,000 bbl of oil and 90 MMcf/d of natural gas. Holstein, which is also 50% owned by Shell EP Americas, is about 100 miles south of Grand Isle, LA, and is located in approximately 4,300 feet of water in Green Canyon Block 645. The spar is the largest of its kind in the world. Production began on Dec. 9 and will increase over the next year as additional wells are completed and brought online. The Holstein development consists of a truss spar, equipped with facilities for simultaneous production and drilling operations. Oil from Holstein will be transported via the Mardi Gras Transportation System to Ship Shoal 332B, where it will interconnect with the Cameron Highway Oil Pipeline System (CHOPS). Holstein gas will be exported to Ship Shoal 332A, where it will interconnect with Manta Ray Gathering System, and from there to the Nautilus Gas Transportation System into Louisiana. Holstein was discovered by BP in 1999 using the Ocean America mobile offshore drilling unit.

EnCana Corp.‘s proposed Entrega Gas Pipeline is expected to be under construction by next June if all goes to plan, the company said last week. The pipe, to be constructed in two stages, would begin transporting natural gas from the Piceance Basin to the Cheyenne Hub by the end of next year (see NGI, Oct. 25). Entrega expects to receive a draft environmental impact statement in January on the proposed route from the Federal Energy Regulatory Commission, which would be followed by a 45-day comment period. The proposed 1.3 Bcf/d pipeline would bring gas from the Piceance Basin in northwestern Colorado through the Wamsutter Basin and Hub, and other supply areas, to the Cheyenne gas trading hub in northeastern Colorado, where several proposed and existing eastbound pipelines converge. Entrega plans to construct the pipe in two phases, with the 36-inch portion in service by the end of 2005 and the remaining 42-inch pipe in service in late 2006. Construction is estimated to be $650 million.

Kerr-McGee Corp. remains on track to hit its 2004 oil and natural gas production target of 310,000 boe/d, the company said last week. In an interim quarterly conference call, Gregory F. Pilcher, general counsel, said that for 2004, the company expects to average 922-933 MMcf/d in natural gas. Crude oil is expected to average 154,000-157,000 bbl/d. Kerr-McGee’s 4Q output should average 1,130-1,175 MMcf/d in natural gas, with more than 90% of the total coming from the United States. Crude oil output is expected to range between 169,000 and 180,000 bbl/d in 4Q. Fourth quarter average production will range between 357,000 and 375,800 boe/d. More than 90% of Kerr-McGee’s total gas output is coming from the United States, Pilcher said. He noted there would be no significant operating impact and that operating cost projections remain unchanged for the quarter at $4.15/Mcf. Kerr-McGee would have even higher natural gas output, said Pilcher, but about 9 MMcf/d of gas remains shut in because of last summer’s Hurricane Ivan.

Unocal Corp. reported that the Sequoia well in its Mirage drilling program in the deepwater Gulf of Mexico came up a dry hole and will result in a $29 million pretax write-down in the fourth quarter 2004. Unocal said the write-down will cover its share of costs associated with the well and an earlier Mirage exploration well.Located in Mississippi Canyon Block 941, the well was drilled to a total depth of 29,100 feet to test the deeper Miocene intervals of the 1999 discovery called Mirage. The Mirage drilling program included an initial well drilled to 16,600 feet and a sidetrack that reached a depth of 22,400 feet. Unocal had hoped that a successful test of the deeper intervals with the Sequoia well would lead to development, but the hydrocarbons encountered in the deeper interval were deemed to be noncommercial. Unocal was the operator, and other working interest holders included Total, Marathon Oil and Spinnaker Exploration. Unocal said development of the Mirage discovery is now unlikely given the results of the Sequoia well. It estimates that its fourth quarter dry hole expense will be $75-85 million, compared to previous expectations of $50-75 million.

Pacific Gas and Electric displayed its holiday spirit doling out $85 million in property taxes to 49 California counties in which it has utility operations. They payments, made last Friday, represent the utility’s property taxes for the period covering the last six months of 2004. The latest payments collectively represent a $7.5 million increase over similar payments made last April to cover the first half of the calendar year, the utility said. PG&E said the increase was prompted by a higher overall appraisal by the California State Board of Equalization. In its county-by-county listing, the PG&E utility again noted that its largest single county property tax payment was to San Luis Obispo County ($11.2 million) in which the multi-billion-dollar Diablo Canyon Nuclear Generating Plant is located. The next largest were in the counties in the greater San Francisco Bay area — Santa Clara in the Silicon Valley ($8.2 million), Alameda in the East Bay ($7.7 million) and San Francisco City/County ($5.5 million).

ExxonMobil Corp. and Qatar Petroleum said Wednesday they lined up $7.5 billion in financing for their giant Qatargas II project, which will export liquefied natural gas (LNG) to Great Britain. The companies said they tapped 57 financial institutions to fund the project, which carries an overall price tag of $12 billion. About $6.5 billion of the $7.5 billion raised to date is in the form of debt. Qatar Petroleum holds a 70% stake in the project, while ExxonMobil owns the remaining 30%. The two companies also said they had awarded $4.5 billion in engineering and construction contracts linked to the project, under which LNG shipments would commence during the winter of 2007-08 using eight tankers engaged on 25-year charters. The Qatargas II project will ship up to 7.8 million tons per year of LNG from a liquefaction plant at Qatar’s Ras Laffan Industrial City to a regasification terminal at Milford Haven in Wales. The initial $700 million construction phase of the Wales project was awarded last month to Texas-based Chicago Bridge & Iron Co.

Vintage Petroleum closed an acquisition of producing properties in Escambia County, AL, from ExxonMobil Corp. for $76.4 million cash. Vintage acquired 100% of ExxonMobil’s interest in the Big Escambia Creek field and gas processing facility. The field produces condensate, gas and liquids from the Smackover formation and current net sales are 1,920 boe/d. The field is adjacent to the existing Vintage-operated Flomaton and Fanny Church fields and plant. Vintage believes it will be able to increase production and profitability through a series of planned facility modifications, drilling and increased operational efficiencies.

Texas Eastern Transmission LP, a subsidiary of Duke Energy, filed a Form 15 with the Securities and Exchange Commission Wednesday to suspend its reporting obligations under the Securities Exchange Act of 1934. The company is eligible to suspend its reporting obligation pursuant to the act because it has fewer than 300 holders of record of any class of its securities, the company said. Duke Energy said it determined that keeping Texas Eastern Transmission LP a registered issuer was not cost- effective. Texas Eastern will continue to provide investors with quarterly financial statements and annual audited financial statements.

Lexington, KY-based NGAS Resources Inc. said its Daugherty Petroleum Inc. subsidiary has entered into an agreement with Duke Energy Gas Services to operate and maintain the Stone Mountain natural gas gathering system owned by Duke Energy. The system runs through southeastern Kentucky, western Virginia, and northeastern Tennessee and interconnects with Duke Energy’s East Tennessee Natural Gas pipeline at Rogersville, TN. It consists of 50 miles of natural gas production lines, 100 miles of natural gas gathering lines, five delivery measuring and regulation stations, four compression stations, and a liquids extraction plant. “Our operation of the Stone Mountain natural gas gathering system for Duke Energy will enhance our operating and production position in our core area while also adding to our ongoing profitability,” said William S. Daugherty, CEO of NGAS. NGAS controls 250,000 acres in the Appalachian Basin where it owns 154 miles of gas gathering lines and interest in over 575 wells.

Aspen Exploration Corp. announced Wednesday that it has begun gas sales from another well in the Sacramento Valley gas province of northern California. The Verona No. 1, located in the Verona Gas Field, Sutter County, CA, was drilled by another operator 21 years ago to a depth of 3,800 feet and encountered 30 feet of gas pay in the Mokelumne Sand at a depth of 2,150 feet. Aspen said the upper portion of this zone was perforated and tested at a rate of 3 MMcf/d. However for various reasons, the prior operators of the Verona No. 1 were never able to connect the well to a gas pipeline. Aspen and partners acquired this well in March 2003 and have been pursuing the issuance of permits with numerous governmental agencies to effectuate the pipeline route construction including a major river bore. After the permits were obtained and the pipeline was constructed, gas sales commenced on Dec. 1 at a rate of 500 Mcf/d with no pressure drawdown.

A bribery and financial misappropriation scandal uncovered by BJ Services Co. in its Asia Pacific region division has forced it to delay filing its fiscal year 2004 annual report. The oilfield services company has requested a 15-day filing extension from Securities and Exchange Commission that will extend the filing deadline to Dec. 29. Company officials said they received information from a whistle-blower in October that an Asia Pacific Region controller had misappropriated company funds in fiscal 2001. After an investigation, the regional controller admitted to multiple misappropriations totaling $9 million during a 30-month period ended April 2002. He repaid the $9 million to the company and his employment was terminated. The misappropriated funds were recorded as an expense in its consolidated statement of operations in prior periods and, therefore, no restatement is required. As a result, BJ Services expects to record $9 million as “Other Income” for the quarter ending Dec. 31. The company also has expanded the scope of its review in order to investigate whether additional funds were misappropriated, but further adjustments to its financial statements are not expected to be significant. However, during the course of the company’s Audit Committee investigation, the company also received additional whistle-blower allegations that illegal payments were being made to foreign officials in the Asia Pacific Region. A separate investigation has found that more than $1.5 million in bribes may have been made over several years.

FERC Wednesday approved a certificate for Paiute Pipeline to acquire and operate the H.G. Laub LNG storage peaking facilities and an associated stretch of pipeline near Lovelock, NV from Uzal LLC for $21.97 million. Paiute currently leases and operates the facilities, which were built in 1982, including the 61 miles of 20-inch pipeline loop. Paiute’s parent, Southwest Gas Corp., originally built the facilities, entering into a sale/leaseback arrangement with General Electric Credit Corp., the predecessor in interest to Uzal, in order to finance the project. The LNG facilities provide service for high-priority peak demand. The Federal Energy Regulatory Commission granted Paiute rolled-in rate treatment for $9 million of its $21.97 million purchase price that will be associated with its transmission function.

Lexington, KY-based NGAS Resources Inc. said its Daugherty Petroleum Inc. subsidiary has entered into an agreement with Duke Energy Gas Services to operate and maintain the Stone Mountain natural gas gathering system owned by Duke Energy. The system runs through southeastern Kentucky, western Virginia, and northeastern Tennessee and interconnects with Duke Energy’s East Tennessee Natural Gas pipeline at Rogersville, TN. It consists of 50 miles of natural gas production lines, 100 miles of natural gas gathering lines, five delivery measuring and regulation stations, four compression stations, and a liquids extraction plant. “Our operation of the Stone Mountain natural gas gathering system for Duke Energy will enhance our operating and production position in our core area while also adding to our ongoing profitability,” said William S. Daugherty, CEO of NGAS. NGAS controls 250,000 acres in the Appalachian Basin where it owns 154 miles of gas gathering lines and interest in over 575 wells.

Aspen Exploration Corp. announced Wednesday that it has begun gas sales from another well in the Sacramento Valley gas province of northern California. The Verona No. 1, located in the Verona Gas Field, Sutter County, CA, was drilled by another operator 21 years ago to a depth of 3,800 feet and encountered 30 feet of gas pay in the Mokelumne Sand at a depth of 2,150 feet. Aspen said the upper portion of this zone was perforated and tested at a rate of 3 MMcf/d. However for various reasons, the prior operators of the Verona No. 1 were never able to connect the well to a gas pipeline. Aspen and partners acquired this well in March 2003 and have been pursuing the issuance of permits with numerous governmental agencies to effectuate the pipeline route construction including a major river bore. After the permits were obtained and the pipeline was constructed, gas sales commenced on Dec. 1 at a rate of 500 Mcf/d with no pressure drawdown.

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