Development

With its acquisitions of Mitchell Energy & Development Corp. and Anderson Exploration on the books last year, Devon Energy Corp. scored record oil and natural gas production and revenues in 2002, and also could boast that it pumped up its oil, gas and natural gas liquids (NGLs) reserve replacements by 278% at a low cost of $7.18/boe. This year, said management, will be no different.

After building itself a growing customer base, it looks like the U.S. natural gas industry may not be able to service it all if the economy picks up this year. If the gas-directed rig count ramps up to 1000 by the end of the year — averaging about 900 rigs through 2003 — then supply available in the U.S. will only be down about 2 Bcf/d from 2002 levels, EOG Chairman Mark Papa estimates. He believes drilling will pick up, but if active rigs don’t hit that level “then production is going to fall harder.”

After building itself a growing customer base, it looks like the U.S. natural gas industry may not be able to service it all if the economy picks up this year. If the gas-directed rig count ramps up to 1000 by the end of the year — averaging about 900 rigs through 2003 — then supply available in the U.S. will only be down about 2 Bcf/d from 2002 levels, EOG Chairman Mark Papa estimates. He believes drilling will pick up, but if active rigs don’t hit that level “then production is going to fall harder.”

KeySpan LNG LLC, a unit of KeySpan Energy Development Corp., announced Friday it purchased Duke Energy’s Algonquin liquefied natural gas (LNG) facility, which operates a 600,000-barrel storage and receiving terminal in Providence, RI, for an estimated $28 million.

BP started producing about 15,000 b/d of oil and 12 MMcf/d of gas from a single well at its Horn Mountain development in the Gulf of Mexico. Production from the facility, which is located in 5,400 feet of water 100 miles southeast of New Orleans, is expected to reach a peak rate next year of more than 65,000 b/d of oil and 68 MMcf/d of gas after a total of seven production wells are completed. BP started exploration on the field in July 1999 after acquiring leases in 1997 and 1998. The first discovery was announced in August 1999, and BP and partner Occidental Petroleum began delineation drilling immediately after that. The $600 million project, which includes the deepest free-floating dry tree drilling system in the world, went from discovery to production in about 40 months. It is expected to result in ultimate recovery of an estimated 150 million boe. BP is the operator and holds a 67% equity interest. Occidental Petroleum holds the remaining 33%.

Devon Energy Corp. of Oklahoma City, OK, announced Tuesday that it will acquire Mitchell Energy & Development Corp. for $3.1 billion in cash and stock, making it the second largest independent natural gas producer in the United States after Anadarko Petroleum Corp.

Alaska voters approved by a wide margin Tuesday a ballot initiative to create the Alaska Natural Gas Development Authority as a public corporation of the state for the purpose of acquiring North Slope gas and building a pipeline to deliver supplies to Port Valdez in Prince William Sound, where the gas would be liquefied and marketed to the Lower 48 states.

Questar Corp. said Wednesday that its low-risk development gas drilling programs have deliverability by 40% this year at its core Rocky Mountain plays in western Wyoming and eastern Utah. Despite intentionally curtailing Rockies production because of low prices and unprecedented basis differentials, the company is on track to grow production by 12% this year, said Chuck Stanley, executive vice president of Questar’s Market Resources (QMR) subsidiary.

“I think we are at the critical moment in the development of our energy markets and energy infrastructure for the future economy of this country,” FERC Commissioner Nora Mead Brownell said last week. “This is an economy made competitive in part by its access to cheap and reliable power.”