GENERAL INTEREST — Quick Takes
API launches campaign to make energy a bigger issue
The American Petroleum Institute launched a nationwide campaign to get more people to vote for candidates in the 2012 election who support energy and economic growth. The campaign, "Vote 4 Energy," will encourage voters to make energy a bigger election issue, but not endorse specific office-seekers or parties, API Pres. Jack N. Gerard said at the association's annual State of American Energy luncheon. "It's not about any political party or candidate, but making energy a major part of the 2012 election discussion," he maintained. "We won't be picking sides or candidates. Energy should not be a partisan issue."
Gerard said recent surveys clearly show Americans are looking for consensus, "which has, unfortunately, become rare here in Washington. Without question, in this election year, what voters are saying is: Give us leadership. Give us leaders who share our vision of a strong and prosperous America, based on our ability to create and innovate. It's a vision that's shared by the men and women in the US oil and gas industry."
He said the vision is based on three main facts: The United States is energy-rich, with more potential than overseas suppliers. Oil, gas, and other energy businesses are tremendous economic contributors. And access to more domestic resources means greater national security.
"This year, an election year, presents the perfect opportunity to encourage that discussion, so we're launching a national initiative—'Vote 4 Energy'—that will help Americans understand what's at stake and why energy issues should figure prominently in their voting decisions," he explained.
The campaign will include social media to go beyond people API has reached already and target states such as Ohio, Pennsylvania, and Virginia where there's significant local interest in energy, Gerard said. He would not divulge how much this will cost, but said it would be a significant amount.
Sinopec to buy Devon interests for $2.2 billion
Devon Energy Corp. said it signed an agreement to sell one third of its interest in five new plays to Sinopec International Petroleum Exploration & Production Corp. (SIPC) for $2.2 billion.
Before the agreement, Devon had assembled 1.2 million net acres in the company's previously announced positions in the Tuscaloosa Marine shale, Niobrara, Mississippian, Ohio Utica shale, and the Michigan basin.
The companies have recently added acreage in the Ohio Utica shale, increasing their joint position in the play to 235,000 net acres.
SIPC also will reimburse Devon for drilling costs incurred prior to closing and acreage acquisition costs incurred subsequent to the effective date of the agreement.
SIPC will make a $900 million cash payment upon closing and $1.6 billion paid in the form of a drilling carry.
The drilling carry will fund 70% of Devon's capital requirements, which results in SIPC paying 80% of the overall development costs during the carry period.
Based on the current work plan, the company expects the entire $1.6 billion carry to be realized by yearend 2014. Through 2012, the companies expect to drill about 125 gross wells in the five plays.
Devon will serve as the operator and will have ultimate responsibility for the allocation of capital. The company is also responsible for commercially marketing all production from these plays into the North American market.
Williams completes spinoff of E&P business
Williams Cos., Tulsa, has completed separating the company's businesses into two stand-alone, publicly traded corporations.
The company's former exploration and production business, WPX Energy Inc., began trading on the New York Stock Exchange on Jan. 3.
The spinoff was completed with the Dec. 31, 2011, distribution of one share of WPX Energy common stock for every three shares of Williams common stock.
Williams became an infrastructure company, and many of its pipeline assets are held through the master limited partnership Williams Partners LP.
In Canada, Williams owns a midstream and domestic olefins production business that processes the off-gas created by the oil sands production into 14,000 b/d of an NGL/olefins mixture. Expansion to the olefins plant is under way and a Canadian NGL pipeline is under construction.
Separately, William also is expanding its Geismar ethylene plant in Louisiana that currently produces 1.35 billion lb/year.
Exploration & Development — Quick Takes
Total signs Utica shale JV with Chesapeake
Total E&P USA Inc. signed a joint venture agreement with Chesapeake Exploration LLC and affiliates of EnterVest Ltd. in which Total acquires a stake in the Utica shale in Ohio.
Terms call for Total to obtain a 25% share in the transaction signed Dec. 30 and effective as of Nov. 1, 2011. Total paid Chesapeake and EnerVest $700 million in cash.
In addition, Total agreed to pay up to $1.63 billion during 7 years in the form of a 60% carry of Chesapeake and EnerVest's future drilling and completion expenditures.
The Utica JV covers 619,000 net acres, of which 542,000 net acres are brought by Chesapeake and 77,000 net acres are brought by EnerVest. Total will acquire its 25% share from each of Chesapeake and EnerVest on identical terms, giving a total of 155,000 net acres.
Chesapeake will operate the acreage. Total also will acquire a 25% share in any new acreage that Chesapeake acquires in the Utica play.
As of yearend 2011, 13 wells had been drilled across the acreage. The joint venture plans to ramp up the drilling activities in the coming 3 years with 25 rigs planned by 2014.
Additionally, Total, Chesapeake, and EnerVest have agreed to jointly develop the construction of the necessary midstream assets to transport the production.
Total and Chesapeake already have a joint venture in the Barnett shale play.
BOEM completes draft EIS for lease sale program
The US Bureau of Ocean Energy Management completed a draft environmental impact statement regarding 10 oil and gas lease sales it has tentatively scheduled in the central and western Gulf of Mexico under the proposed 2012-17 US Outer Continental Shelf program. Five sales are planned for each of the two planning areas, BOEM indicated.
Comments will be accepted until Feb. 13, 2012, the US Department of the Interior agency said on Dec. 29. Public hearings on the draft EIS also will be held in Houston on Jan. 10, New Orleans on Jan. 11, and Mobile, Ala., on Jan. 12, it added.
BOEM said the draft multi-sale EIS provides information on baseline conditions and potential environmental effects of oil and gas leasing, exploration, development, and production in the central and western gulf.
The agency sought information pertinent to the lease sales, including consideration of the 2010 Macondo well accident and crude oil spill; surveys of scientific journals and credible scientific data from academic institutions and federal, state, and local government agencies; and interviews with personnel from those groups, it indicated.
It also examined potential impacts of routine activities and accidental events, including a possible low-probability, catastrophic event associated with the proposed lease sales, as well as the proposed sales' incremental contributions to cumulative environmental and socioeconomic resource impacts, according to BOEM.
Oil and gas resource estimates and scenario information for this draft, multi-sale EIS are presented as a range encompassing resources and activities available for the 10 proposed lease sales in the two planning areas, it said.
Mozambique gas bounty elevated to 30-50+ tcf
Deepwater wells off Mozambique have encountered an estimated 30 tcf to more than 50 tcf of natural gas in place, said Anadarko Petroleum Corp.
"Recoverable resources of this size and quality are perfectly suited for a large-scale LNG development, which is currently being designed to consist of at least two trains with the flexibility to expand to six trains," Anadarko said. "We also plan to leverage our experience with Independence Hub by constructing an offshore hub facility that will be tied back to the LNG plant onshore."
Anadarko, operator of the 2.6 million acre Offshore Area 1, said its Barquentine-3 appraisal well encountered more than 662 net ft of gas pay in two high-quality Oligocene-aged fan systems, greatly expanding the estimated recoverable resource range to 15 tcf to 30+ tcf. Barquentine-3 marks the sixth successful penetration in the complex that includes the Windjammer, Lagosta, Barquentine, and Camarao discoveries.
The complex could be "one of the most important natural gas fields discovered in the last 10 years," said Anadarko chairman and CEO Jim Hackett.
Anadarko President and Chief Operating Officer, Al Walker, said, "The results of Barquentine-3 indicate that we continue to encounter very thick sands with high-quality rock throughout these massive, connected reservoirs."
Walker said Anadarko is nearing the completion of the pre-FEED activity and expects to begin FEED work in the near future. The company has analyzed its two new 3D seismic datasets and has rig commitments in place to continue appraisal work while accelerating exploration.
Anadarko is mobilizing the Deepwater Millennium drillship to test more high-potential prospects in other parts of Offshore Area 1 and has signed a 4-year contract extension to keep the Belford Dolphin drillship working in the basin.
Barquentine-3 went to a total depth of 13,400 ft in 5,170 ft of water 2.75 miles southeast of the Barquentine discovery well and 1.8 miles south of the Barquentine-2 appraisal well. The partnership will preserve Barquentine-3 for use as a monitor well during its upcoming testing program. The drillship will next move to top set the Barquentine-4 appraisal well.
Offshore Area 1 working interests are Anadarko 36.5%, Mitsui E&P Mozambique Area 1 Ltd. 20%, BPRL Ventures Mozambique BV 10%, Videocon Mozambique Rovuma 1 Ltd. 10%, and Cove Energy Mozambique Rovuma Offshore Ltd. 8.5%. Mozambique's state Empresa Nacional de Hidrocarbonetos is carried for a 15% interest through the exploration phase.
Drilling & Production — Quick Takes
SilverBirch seeks approval for bitumen mine
SilverBirch Energy Corp. announced the filing of a regulatory application and environmental impact assessment for the Frontier bitumen mine, including Equinox, for producing about 277,000 b/d of partially deasphalted bitumen.
The mine is 110 km north of Fort McMurray, Alta.
The application was submitted to Alberta Environment, the Alberta Energy Resources Conservation Board, and the Canadian Environmental Assessment Agency.
SilverBirch expects a production start in 2020-21 and recovery of 2.8 billion bbl of bitumen over the project's life.
The company said corporate sanctioning of the project could occur as early as 2014-15 with construction commencing in 2016.
SilverBirch said it is under no obligation to provide major project funding at this time and will not proceed with construction until a partnership agreement and funding solutions are in place.
Teck Resources Ltd. with a 50% interest is the operator of the project with SilverBirch holding the remaining 50%.
Well examination guidelines published in UK
Oil & Gas UK, as part of work begun in response to the Macondo disaster in April 2010, has published two sets of guidelines to help operators understand and meet goals set by Health and Safety Executive regulations for oil and gas wells off the UK.
The Well Life Cycle Practices Forum (WLCPF) produced the guidelines. WLCPF was formed as a permanent body within Oil & Gas UK at the recommendation of the Oil Spill Prevention and Advisory Group, which convened after the Macondo blowout and spill and disbanded in September after completing its work (OGJ Online, Sept. 23, 2011).
The new guidelines, first two in a series, cover well examination and competency of well examiners.
PROCESSING — Quick Takes
Petroplus to shut down refineries in January
Petroplus Holdings AG reported Dec. 30 it will start the temporary shutdown of three of its refineries in Europe next month after lenders froze a $1 billion credit facility.
The Zug, Switzerland-based independent refiner said it will start temporary economic shutdowns in January of its refineries in Petit Couronne, France, 161,800 b/d; Antwerp, Belgium, 107,500 b/d; and Cressier, Switzerland, 68,000 b/d, "given limited credit availability and the economic climate in Europe."
Restart of the facilities, the company said, is "dependent on economic conditions and credit availability."
Petroplus Holdings is the largest independent refiner and wholesaler of petroleum products in Europe. In addition to the three affected refineries, the company also owns and operates a 220,000-b/d refinery in Coryton, UK, and a 110,000-b/d refinery in Ingolstadt, Germany.
All five refineries have a combined throughput capacity of 667,300 b/d.
More processing, treating planned in West Texas
Nuevo Midstream LLC plans to increase processing and treating capacity at its Ramsey plant in the Delaware basin near Orla, Tex.
Nuevo of Houston bought a cryogenic processing plant with capacity of 100 MMcfd and a second amine treating plant with a capacity of 475 gpm, both to be installed and operational in second-quarter 2012, the company said.
Plans call for Nuevo to extend its Ramsey gathering system with additional large-diameter gas gathering lines and an interconnect to El Paso's natural gas pipeline. The Ramsey system crosses through Eddy County in southeast New Mexico and Culberson, Loving, and Reeves counties in West Texas. It currently serves 38 gas producers in the liquids-rich Bone Springs, Wolfcamp, and Avalon shale plays.
This is Nuevo Midstream's second major expansion in the Delaware Basin, it said, since it launched in April 2011. Phase 2 expansion is supported by additional customer dedications of acreage and production in the Avalon shale trend.
When the expansion is complete, Nuevo Midstream will have 110 MMcfd of processing capacity and 625 gpm of treating capacity at Ramsey along with more than 180 miles of high and low-pressure pipeline and residue connections to interstate and intrastate markets.
Nuevo recently completed its Phase 1 expansion, which included recommissioning a 10-MMcfd refrigerated Joule-Thomson processing plant and fractionator and installing 150 gpm of amine treating at the Ramsey plant, as well as adding 13 miles of 8-in. pipeline to the Ramsey gathering system with an interconnect to the Enterprise Products pipeline 9 miles south of the Ramsey plant.
Jay Lendrum, Nuevo Midstream's president and CEO, said "Based on the level of current and planned drilling activity in the area, it is very conceivable that by the time our Phase 2 expansion is operational, we will be in the advanced planning stages of a Phase 3 expansion.
HollyFrontier to expand refinery in Utah
HollyFrontier Corp. will expand crude capacity at its 31,000-b/d refinery at Woods Cross, Utah, to 45,000 b/d with idle equipment from Western Refining Inc.'s facility at Bloomfield, NM.
HollyFrontier will move and revamp the crude, fluid catalytic cracking, and polymerization units from the Bloomfield refinery, operations of which were consolidated with Western's 23,000 b/d Gallup, NM, refinery, about 95 miles away, in 2010 (OGJ Online, Nov. 10, 2009). Western acquired the New Mexico refineries from Giant Industries Inc. in 2006.
HollyFrontier has signed a definitive agreement to buy the Bloomfield units from Western. It also plans to expand the diesel hydrotreater at Woods Cross.
The company expects the expansion, estimated to cost $225 million, to be complete in late 2004.
It has signed a 10-year agreement with Newfield Exploration for the supply of 20,000 b/d of black and yellow wax crude oil from the Uinta basin, beginning when the refinery expansion is complete.
At that time, the refinery will be able to process about 24,000 b/d of waxy Utah crudes.
TRANSPORTATION — Quick Takes
EPP to build ATEX Express NGL pipeline
Enterprise Products Partners LP (EPP) received sufficient transportation commitments to support development of its 1,230-mile Appalachia-to-Texas pipeline (ATEX Express), delivering ethane production from the Marcellus-Utica shale areas of Pennsylvania, West Virginia, and Ohio to the US Gulf Coast. ATEX Express will transport as much as 190,000 b/d from Appalachian production areas to EPP's storage and distribution assets in Texas.
Originating in Washington County, Pa., the system's first leg would involve construction of about 595 miles of new pipeline extending to Cape Girardeau, Mo., closely paralleling an existing Enterprise pipeline. At Cape Girardeau, EPP will reverse a 16-in. OD pipeline and place it into ethane service.
At the southern terminus of the ATEX Express pipeline, EPP will build a 55-mile, 16-in. OD pipeline providing access to its NGL storage complex at Mont Belvieu, Tex.
EPP is conducting surveys and negotiating right-of-way agreements, and expects. ATEX Express to begin commercial operations first-quarter 2014.
US Gulf Coast petrochemical demand for price-advantaged ethane feedstock over crude oil-based derivatives is about 955,000 b/d and continues to increase, EPP said.
Nebraska DEQ relays Sandhills data to TransCanada
Nebraska's Department of Environmental Quality said on Dec. 29 that it has identified areas it considers part of the Sandhills region, and has forwarded the information to TransCanada Corp. as the company selects a new route for its proposed Keystone XL crude oil pipeline across the state.
"Obviously, the applicant cannot propose the route without knowing the area to be avoided," NDEQ Director Mike Linder said. "NDEQ has been reviewing available information and has selected a map of eco-regions which was finalized in 2001 as best depicting the Sandhills region."
TransCanada considers the information a very positive step, a spokesman told OGJ on Dec. 30. "Now that Nebraskans have defined where the Sandhills are, we'll know sensitive areas to avoid and routes to suggest that will have the least impact on landowners," he said.
Gov. Dave Heineman called the state's legislature back into special session in early November after several officials, residents, and groups expressed concern about the pipeline's original route, which would have crossed the Sandhills lying atop the Ogallala aquifer, Nebraska's primary drinking water source.
The lawmakers quickly passed a bill recommending that an alternative route be developed. US President Barack Obama also announced on Nov. 11 that he would delay deciding on TransCanada's application for the project's cross-border permit until after the 2012 election to allow time to resolve the matter and other environmental questions. Congress included a provision requiring him to issue a decision much sooner in payroll tax cut extension legislation passed in mid-December.
The Nebraska legislature's bill also gave NDEQ new responsibilities relating to supplemental environmental impact statements relating to oil pipelines. The provision's first application will be for the Keystone XL project as the agency works with the US Department of State on its review of TransCanada's cross-border permit application, NDEQ said.
Thomas Pyle, president of the Institute for Energy Research in Washington, said that NDEQ's action underscores the need for the Obama administration to act immediately and approve the project so construction can commence.
Chesapeake Midstream Partners to buy gathering lines
Chesapeake Midstream Partners LP (CMP) agreed to acquire Appalachia Midstream Services LLC (AMS), a Chesapeake Energy Corp. subsidiary, for $865 million. The transaction provides CMP with a 47% stake in 200 miles of gathering pipelines in the Marcellus shale in Pennsylvania.
Closing was expected on Dec. 30. CMP is a gathering and processing master limited partnership. Throughput for the AMS assets as of Dec. 15 was just over 1 bcfd. AMS operates the assets under 15-year fixed fee gathering agreements with Marcellus natural gas and liquids producers.
CMP Chief Executive Officer J. Mike Stice said, "We are excited to expand our footprint into the Marcellus shale, further increasing our basin diversification and, more importantly, exposing us to the increased drilling activity in the liquid-rich regions in the Marcellus South."
CMP is a spun-off subsidiary of Chesapeake, which is selling assets to trim long-term debt. Chesapeake of Oklahoma City formed CMP with Global Infrastructure Partners, a private investment firm. Chesapeake now owns a 35% stake in CMP.
Aubrey K. McClendon, Chesapeake's chief executive officer, said this was the independent's second sale of gathering assets to CMP."Combined with our Springridge Haynesville asset sale of $500 million in December 2010, we have now dropped down gathering assets of approximately $1.4 billion into [CMP]," McClendon said of Louisiana pipelines.
CMP was established under a different name with some Chesapeake gathering pipelines.
"Combined with the $1.2 billion Barnett, Permian, and Midcontinent gathering assets contributed to the formation of [CMP]'s predecessor in September 2009," McClendon said. Chesapeake has monetized $2.6 billion of its midstream asset portfolio at a more attractive valuation than if these assets had stayed on Chesapeake's balance sheet, he added.
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