Briefs

As part of the agency’s royalty-in-kind (RIK) program, the Minerals Management Service (MMS) requested written offers last week to purchase 387,000 MMBtu/d of royalty gas produced from federal leases in the Gulf of Mexico. The production is delivered into 11 offshore pipeline systems, including ANR Nearshore, Columbia Gulf Bluewater, Central Texas Gathering System, Garden Banks, Mississippi Canyon, Matagorda Offshore Pipeline System, Seagull Shoreline, Stingray, Tennessee Gas 800 Leg, Tetco East Louisiana and the Transco Southeast Lateral. MMS said it may award a contract on the basis of the initial offer received without discussion. However, MMS may negotiate with offerers in the event offers of similar or unanticipated value are received. MMS said the Henry Hub and/or Nymex are preferred indices on all packages in addition to the named indices. Initial deliveries of royalty gas to the buyer will commence on Nov. 1. The royalty gas delivery period will be for a term of five months ending March 31, 2005 or 12 months ending Oct. 31, 2005, depending on the value of offers received. The MMS-implemented RIK program generates revenues through receiving oil and gas royalties in kind, rather than in cash, and competitively selling the commodities in the marketplace.

MarkWest Hydrocarbon executed agreements with Equitable Production that restructures their processing relationship in Appalachia. The new agreements provide Equitable with additional flexibility in its gathering operations upstream of the MarkWest Energy Partners LP processing facilities, and provide Equitable with assurances of continued processing capacity and operations. The new agreements also protect MarkWest Hydrocarbon during periods of low processing margins. Terms of the deal were not disclosed.

Calgary-based independent Esprit Exploration Ltd. has completed its reorganization into two entities: Esprit Energy Trust and ProspEx Resources Ltd. Esprit, known until last year as Canadian 88 Energy Corp., held a special shareholder meeting at the end of September to vote on reorganizing into an income trust and an exploration and production company. Under the reorganization, the energy trust will hold 90% of Esprit’s existing proved producing reserves, and gain Canadian tax advantages. ProspEx will own the balance of the assets and some of the undeveloped lands and will operate as an exploration and production company.

ConocoPhillips last week won an auction with a bid of nearly $2 billion for the Russian government’s 7.6% stake in Russia’s Lukoil — the world’s No. 2 oil company by reserves. ConocoPhillips offered $1.988 billion, only slightly above the $1.928 billion starting price. Immediately following its winning bid, the company announced that it planned to increase its stake in Lukoil to 20%. It also announced that it had offered to buy a 17.5% stake in a production sharing agreement allowing Lukoil to develop Iraq’s, four billion barrel West Qurna field, and would pay another $374 million to secure a 30% stake in a new joint venture to tap into rich Siberian oil reserves in the Timan Pechora region. The price tag of the Lukoil bid made it the single largest cash deal in the history of Russian privatization.

Pioneer Natural Resources said it has released all of its existing shallow gas leases in the Matanuska-Susitna Valley in Alaska in response to a contentious debate with residential landowners over the leases and to new legislation affecting the area. The leases were part of its merger with Evergreen Resources that closed on Tuesday. The released leases cover 235,500 acres and include farm-outs and the Mental Health Trust lease No. AK550.185 located east of the Pioneer Unit near the town of Palmer. As a part of the strategic planning and due diligence associated with the merger, Pioneer decided to relinquish the leases issued under the over-the-counter leasing program and to withdraw the exploration license applications made by Evergreen in August. “We strongly support the state’s new gas-only leasing program defined by HB531, and we encourage them to continue the best interest finding process for the Mat-Su,” said CEO Scott D. Sheffield. “We support the efforts of the Mat-Su Borough Assembly to develop a regulatory program that recognizes the state’s primacy while at the same time representing the borough’s interests.” The leases being released were on residential land. Pioneer also holds nearly one million gross acres on the North Slope and has working partnerships with ConocoPhillips, Anadarko and others.

ConocoPhillips on Wednesday won an auction with a bid of nearly $2 billion for the Russian government’s 7.6% stake in Russia’s Lukoil — the world’s No. 2 oil company by reserves. ConocoPhillips offered $1.988 billion, only slightly above the $1.928 billion starting price. Immediately following its winning bid, the company announced that it planned to increase its stake in Lukoil to 20%. It also announced that it had offered to buy a 17.5% stake in a production sharing agreement allowing Lukoil to develop Iraq’s, four billion barrel West Qurna field, and would pay another $374 million to secure a 30% stake in a new joint venture to tap into rich Siberian oil reserves in the Timan Pechora region. The price tag of the Lukoil bid made it the single largest cash deal in the history of Russian privatization.

Houston-based Contango Oil & Gas Co. reported net income for the year, which ended June 30, at $7.1 million (68 cents/share), compared with a loss of $4.9 million (minus 54 cents) for 2003. Natural gas and oil sales for the year were $27.6 million, down from $33.9 million a year earlier. After reflecting gains and losses from hedging activities, total revenues were $27.7 million, compared with last year’s $28.2 million. Total proved reserves as of June 30 were 15.6 Bcf and 297,000 bbl. “Our fiscal year 2004 onshore exploration program was a disappointment,” said CEO Kenneth Peak. “Although we participated in the drilling of 14 exploratory wells, eight of which were successful, we only found 1.7 Bcfe, far short of replacing our 5.0 Bcfe of fiscal year 2004 production. We expect to participate in five to seven onshore exploration wells over the next six to nine months.” Peak said current production is 15 MMBtue/d.

The Federal Energy Regulatory Commission staff said it will prepare an environmental impact statement (EIS) for the proposed Golden Pass LNG Terminal and Pipeline Project, owned by ExxonMobil. The proposed facilities would consist of a liquefied natural gas (LNG) import terminal and interconnecting pipelines near Sabine Pass, TX, 10 miles south of Port Arthur; with a 1 Bcf/d capacity, expandable to 2 Bcf/d, targeted for late 2008. ExxonMobil and Qatar Petroleum have signed an agreement to supply 15.6 million tons a year of LNG (2 Bcf/d) to the United States from Qatar for 25 years. The proposed project joined the FERC pre-filing process in November 2003. The proposed facility mirrors another ExxonMobil proposal, the Vista del Sol project on the Texas coast near Corpus Christi, which entered the pre-filing process at FERC in January of this year. The Commission’s notice earlier this week follows on a notice of environmental review and scoping issued by FERC in January. It offers a final opportunity for parties, including other government agencies to submit comments on the project’s environmental impact.

The Federal Energy Regulatory Commission staff said it will prepare an environmental impact statement (EIS) for the proposed Golden Pass LNG Terminal and Pipeline Project, owned by ExxonMobil. The proposed facilities would consist of a liquefied natural gas (LNG) import terminal and interconnecting pipelines near Sabine Pass, TX, 10 miles south of Port Arthur; with a 1 Bcf/d capacity, expandable to 2 Bcf/d, targeted for late 2008. ExxonMobil and Qatar Petroleum have signed an agreement to supply 15.6 million tons a year of LNG (2 Bcf/d) to the United States from Qatar for 25 years. The proposed project joined the FERC pre-filing process in November 2003. The proposed facility mirrors another ExxonMobil proposal, the Vista del Sol project on the Texas coast near Corpus Christi, which entered the pre-filing process at FERC in January of this year (see Daily GPI, Nov. 21, 2003). The Commission’s notice earlier this week follows on a notice of environmental review and scoping issued by FERC in January. It offers a final opportunity for parties, including other government agencies to submit comments on the project’s environmental impact.