JX May Sell Stake in Qatar Gas Project

Japan’s JX Nippon Oil & Gas Exploration might take a partner for its exploration and development programs in block A in the the deep pre-Khuff reservoirs offshore Qatar, a senior company official told Platts this week.

The company could also make the Middle East its new core region, depending on its success in Qatar.

JX Nippon Oil & Gas Exploration signed in May a 30-year exploration and production sharing agreement or EPSA, with the Qatari government for the offshore gas block. The upstream arm of the JX Group, which a 100% working interest in block A, is the operator.

“We do not necessarily intend to stick with the 100% stake in the block,” Ryunosuke Onogi, general manager in charge of the Middle East, Africa, Central Asia and Japan, said in an interview with Platts. “A possible partnership is something we are continuing to think about positively.”

Over the next five years, JX Nippon Oil & Gas Exploration’s costs for the block A exploration is estimated at around $100 million.

Onogi did not say how large a stake it might sell. But he stressed that JX Nippon Oil & Gas Exploration will continue being operator of the block even if the company does decide to take a partner.

JX Nippon Oil & Gas Exploration aims to start commercial production at deepwater gas block in Qatar in 2020.

QATAR WILL DIRECT THE SALE OF GAS

Under the EPSA, JX Nippon Oil & Gas Exploration will have to sell gas to companies at the direction of the government, Onogi said. It is also up to the government to decide whether gas output will be piped to countries in the Middle East or liquefied for export, he added.

The block covers an area of more than 6,000 sq km offshore Qatar and is northeast of the Ras Laffan Industrial City. The contract entails exploring for gas in the pre-Khuff geological formations at 3,400-4,000 m below sea level, beneath the reservoir of the North Field, the world’s biggest concentration of non-associated gas with reserves of 900 Tcf.

A part of the same structure extends into Iran’s territory where it is known as South Pars.

“Developing gas from the pre-Khuff geological intervals, which have low productivity, is a common technological issue in Saudi Arabia and other countries in the region,” Onogi said.

While not technically challenging, it could be more costly than other kinds of projects, Onogi added.

JX Nippon Oil & Gas Exploration might have been qualified and awarded the EPSA of the pre-Khuff reservoir development because of its technologies, including enhanced oil recovery as well as its financial strength.

In a separate interview with Platts in August 2010, JX Nippon Oil & Gas Exploration President and CEO Makoto Koseki said the company was weighing options for commercialization of EOR technologies it was developing in response to growing interest from oil-producing countries in Southeast Asia and the Middle East.

JX Nippon Oil & Gas Exploration has been holding talks with Qatar Petroleum to decide procedures for its five-year exploration program in block A, which would involve seismic surveys and drilling exploration wells, Onogi said, adding that the company opened its office in Doha in October.

JX Nippon Oil & Gas Exploration plans to start seismic surveys in 2012, Onogi said, but he could not say whether the company would also start exploratory drilling next year as it would have to consult with QP on the results of the seismic surveys.

Qatar has the world’s largest conventional natural gas reserves after Russia and Iran, and is the biggest producer and exporter of LNG with current capacity of 77 million mt/year. Japan is also a key buyer of Qatari LNG.

Qatar has imposed a moratorium on further development of its offshore North Field, which is up for review in 2014 when it finishes studying the reservoir’s performance.

Iran is concerned that Qatar’s production of gas from the North Field will reduce its own production capacity when it comes to develop South Pars on a large scale.

JX Nippon Oil & Gas Exploration, which produces 140,000 b/d of oil equivalent and holds around 775 million boe of proved and probable reserves in projects in 14 countries around the world, is weighing its options to raise output to 200,000 boe/d by the fiscal year ending March 2021.

JX Nippon Oil & Gas Exploration, which has identified Vietnam and Malaysia and the UK’s North Sea as its “core” priority areas for upstream investment, is now looking at the Middle East as its next potential core area, Onogi said.

By March 2013, the company plans to invest Yen 320 billion ($4.1 billion) upstream. Of this, Yen 125 billion will be for asset acquisition; Yen 75 billion for exploration; and Yen 120 billion for development.

(platts)

[mappress]

Source: platts, December 2, 2011; Image: jx