GENERAL INTEREST — Quick Takes
Midstream Copano to complement KMEP's operations
Kinder Morgan Energy Partners LP (KMEP), Houston, will purchase Copano Energy LLC, also of Houston, for about $5 billion.
A midstream natural gas company, Copano operates gas gathering, processing, treating, and NGL fractionation in Texas, Oklahoma, and Wyoming. The company owns an interest in or operates about 6,900 miles of pipelines with 2.7 bcfd of throughput capacity and nine processing plants with more than 1 bcfd of processing capacity and 315 MMcfd of treating capacity.
Copano announced last year it would add 400 MMcfd of cryogenic processing at its Houston Central complex in Colorado County, Tex., west of Houston, to handle natural gas liquids from the Eagle Ford shale.
The $190 million expansion will bring capacity at Houston Central to 1 bcfd and be in service by mid-2014 (OGJ Online, May 10, 2012).
An initial 400-MMcfd cryogenic processing expansion at Houston Central, announced in 2011, is to start up this quarter (OGJ Online, Apr. 19, 2011).
When KMEP's purchase closes, it will own all of Eagle Ford Gathering (currently a joint venture with Copano), which provides gathering, transportation, and processing in Southwest Texas's Eagle Ford shale. Eagle Ford Gathering consists of about 400 miles of pipelines, including its capacity rights in certain KMEP pipelines, with capacity to gather and process more than 700,000 MMbtu/day (OGJ Online, June 19, 2012).
The larger midstream and transportation company will acquire all of Copano's outstanding shareholder units and assume Copano's debt. KMEP Chairman and Chief Executive Officer Richard D. Kinder said the company will be able to pursue development in the Eagle Ford shale, enter the Barnett shale in North Texas and the Mississippi Lime and Woodford shales in Oklahoma.
Sinochem to buy stake in Wolfcamp shale from PNR
Sinochem Petroleum USA LLC, a subsidiary of China's Sinochem Group, plans to pay $1.7 billion to acquire 40% of Pioneer Natural Resources Co.'s (PNR) stake in 207,000 net acres in the Wolfcamp shale in the Spraberry trend of West Texas.
At closing, Sinochem will pay $500 million in cash to PNR, before normal closing adjustments, and will pay the remaining $1.2 billion by carrying a portion of PNR's share of future drilling costs.
Sinochem and PNR plan to drill 86 horizontal Wolfcamp shale wells during 2013, 120 wells in 2014, and 165 wells in 2015. The transaction is expected to close during the second quarter, subject to customary governmental approvals.
Terms call for Sinochem to acquire 82,800 net acres held by PNR for all Wolfcamp depths and deeper horizons. PNR retains 60% of its interest and operates those assets.
The joint interest area covers portions of the Texas counties of Upton, Reagan, Irion, Crockett, and Tom Green. PNR retains its current working interests in all horizons shallower than the Wolfcamp horizon.
PNR has 6 years to utilize the drilling carry, subject to extension under certain circumstances.
Sinochem has an option to elect to participate in future vertical wells drilled in the joint interest area. PNR's and Sinochem's participation in vertical wells will be based on each party's interest without any drilling carry being applied. PNR will retain 100% of its existing vertical production in the joint interest area.
As of Dec. 31, 2012, PNR had drilled and completed 39 horizontal wells in the Wolfcamp shale joint interest area of which 22 wells were on production and 4 additional wells were flowing back.
Of the 22 wells on production, 20 wells were completed in the B interval and 2 wells were completed in the A interval. PNR's net horizontal Wolfcamp shale production in the joint interest area averaged 2,000 boe/d in 2012, with a yearend exit rate of 5,000 boe/d.
Last year, Sumitomo Corp. of Japan signed a $1.4 billion joint venture with Devon Energy Corp. for the Wolfcamp-Cline shales (OGJ Online, Aug. 23, 2012).
PNR discontinues divesting Barnett shale properties
Pioneer Natural Resources Co. (PNR) discontinued efforts to divest its properties in the Barnett shale saying that several bids were received during December but none matched the value PNR places on the assets.
As a result, PNR will retain operatorship of the assets. The Dallas independent holds 155,000 gross acres in the play.
PNR's Barnett shale properties were reclassified to discontinued operations in the third quarter of 2012 (OGJ Online, Sept. 18, 2012).
With the discontinuance of the divestment process, the financial and operating results for these properties will be reclassified back to continuing operations beginning in the fourth quarter of 2012.
PNR's future plans for its Barnett shale properties will be discussed during a quarterly conference call on Feb. 14.
CNOOC extends closing of Nexen acquisition
Nexen Inc. and CNOOC Ltd. mutually agreed to extend the closing date of CNOOC's $15.1 billion acquisition of Nexen by 30 days to Mar. 2 because regulatory approvals have yet to be obtained from US authorities, Nexen said in a news release.
The US Committee on Foreign Investment has yet to approve the transaction. Nexen owns assets in the Gulf of Mexico.
Consequently, Nexen also announced that it will postpone the release of its 2012 fourth quarter and annual operating and financial results.
Key regulatory approvals have been received from Canada, the UK, the European Union, and China (OGJ Online, July 30, 2012).
Exploration & Development — Quick Takes
McMoRan to design frac job for Davy Jones-1 well
McMoRan Exploration Co., New Orleans, will move the rig off its Davy Jones-1 well on South Marsh Island Block 230 on the Gulf of Mexico shelf offshore Louisiana for several months while it designs a large-scale hydraulic fracture treatment for the Wilcox reservoirs.
McMoRan said future plans will incorporate data gained to date at Davy Jones as well as potential core and log data from the in-progress well at Lineham Creek onshore 50 miles northwest of Davy Jones.
The Davy Jones-1 well logged 200 net ft of pay in multiple Wilcox sands that were all full to base. The Davy Jones-2 offset appraisal well, 2½ miles southwest of Davy Jones-1, confirmed 120 net ft of pay in multiple Wilcox sands, indicating continuity across the major structural features of the Davy Jones prospect. Davy Jones-2 also encountered 192 net ft of potential hydrocarbons in the Tuscaloosa and Lower Cretaceous carbonate sections.
McMoRan is the operator with 63.4% working interest and 50.2% net revenue interest in Davy Jones. Energy XXI (Bermuda) Ltd. has 15.8%, JX Nippon Oil Exploration (Gulf) Ltd. 12%, and Moncrief Offshore LLC 8.8%.
Norway offers 51 licenses in offshore areas
The Norwegian Ministry of Petroleum and Energy offered 51 offshore production licenses to 40 companies in a program it calls Awards in Predefined Areas (APA 2012).
Of the total, 34 licenses are in the North Sea, 14 in the Norwegian Sea, and 3 in the Barents Sea. The APA round covered mature areas with known geology.
Forty-seven companies applied for licenses. Of the 40 offered shares in one or more licenses, 23 were offered operatorships.
Statoil received offers to operate seven licenses; AS Norske Shell, Spring Energy Norway AS, and Total E&P Norge AS, four each; and Centrica Resources Norge AS, DNO ASA, Faroe Petroleum Norge AS, and Wintershall Norge ASA, three each.
Dong E&P Norge AS, E.On E&P Norge AS, Lundin Norway AS, Talisman Energy Norge AS, and VNG Norge AS received two operatorship offers each.
Receiving one operatorship offer each were Bayerngas Norge AS, BG Norge AS, Bridge Energy AS, Eni Norge AS, Maersk Oil Norway AS, Marathon Petroleum Norge AS, Norwegian Energy Co. ASA, OMV Norge AS, Repsol Exploration Norge, and RWE Dea Norge AS.
Eni, Kogas sign for three blocks offshore Cyprus
Eni SPA and South Korea's Kogas have signed exploration and production-sharing contracts with the Cyprus Ministry of Commerce, Industry, and Tourism covering Blocks 2, 3, and 9 in the Levant basin offshore Cyprus.
The eastern Mediterranean deepwater blocks lie generally south and southeast of the island of Cyprus. Block 9 extends within a few miles of a Noble Energy Inc. group's late 2011 Aphrodite gas discovery at the eastern edge of Cyprus Block 12, where Blocks 9 and 12 meet Israeli waters (OGJ Online, Jan. 2, 2012). Blocks 2 and 3 are northeast of Block 9.
The three Eni-Kogas blocks cover a combined 12,530 sq km. Interests are Eni 80% and operator and Kogas 20%. The two companies were awarded the blocks in the May 2012 Cyprus second offshore license round.
Drilling & Production — Quick Takes
CNOOC expects production to jump in 2013
CNOOC Ltd. has set a net production target of 338-348 million boe for 2013, compared with 341-343 million boe in 2012, anticipating the start-up of 10 oil and natural gas fields offshore China.
In a strategy statement, the state-owned company said the start-ups will include Liwan 3-1 gas field on Block 29/26 in the South China Sea. The field lies in about 1,345 m of water 350 km southeast of Hong Kong. Husky Energy Inc. operates deepwater parts of the field, including development drilling and completions, subsea equipment and controls, and subsea tiebacks to a platform in shallow water, with a 49% interest. CNOOC operates shallow-water infrastructure, including the platform, a pipeline to shore, and an onshore gas processing plant, with 51%.
Liwan 3-1 is one of three fields in the Liwan Gas Project, production from which eventually is to reach 500 MMcfd (OGJ Online, Sept. 20, 2011). The other fields in the project are Liuhua 34-2 and Liuhua 29-1.
CNOOC expects this year to drill 140 exploratory wells and acquire 15,400 line-km of 2D seismic data and 24,800 sq km of 3D seismic data.
It projects capital expenditures of $12-14 billion in 2013, of which 19% will be for exploration, 70% for development, and 11% for production.
BP starts production at Valhall field redevelopment
BP PLC reported that oil production began from the Valhall field redevelopment in the southern part of the Norwegian North Sea.
BP Chief Executive Officer Bob Dudley gives Valhall a further 40-year design life with the capacity to handle 120,000 b/d of oil and 143 MMscfd of gas. BP expects Valhall production to increase to 65,000 boe/d in this year's second half.
Redevelopment includes a 180-bed process-hotel (PH) platform, as well as a system of bridges and walkways that contain all utilities and process piping that link the PH to the existing complex. It is powered by a power-from-shore system via a 183-mile DC cable from southern Norway, a plan BP expects will reduce direct emissions to air from Valhall field to near-zero.
BP Norway operates Valhall field and holds a 35.9% interest. Hess Norge owns the remaining 64.1% interest (OGJ Online, June 22, 2010).
Mittelplate field offshore Germany gets land base
RWE Dea AG, Hamburg, has inaugurated a two-unit land base to serve the artificial drilling and production island on Mittelplate oil field in the Wadden Sea tidelands of Schleswig-Holstein, Germany.
Mittelplate, Germany's largest oil field, produced 1.4 million tonnes of crude oil in 2011. RWE Dea, the operator, estimates the field has produced more than 27 million tonnes of crude since coming on stream in 1987, with 23 million tonnes still in place and considered commercially recoverable.
One unit of the new land base, at Helgolander Kai, will handle daily supplies for the drilling and production island. The other unit, at Neuer Fischereihafen, will store pipes and rig parts.
The Mittelplate island sits 7 km offshore Friedrichskoog in the Wattenmeer tidal flats. Eighteen wells drilled from it to depths as great as 3,000 m, some horizontal, produce from the western and larger part of the field. A closed waste-disposal system prevents contamination of the sensitive tidelands.
Since 2000, the eastern part of the field has produced through extended-reach wells drilled from land with total lengths of 7,727-9,275 m.
RWE Dea and Wintershall Holding GMBH each holds a 50% interest. EnTec Industrial Services GMBH & Co. KG, Cuxhaven, built the land base.
Ukraine, Shell sign unconventional gas agreement
Ukraine signed a production-sharing agreement with Royal Dutch Shell PLC for Ukrainian shale gas field Yuzivske as part of the government's effort to reduce dependence on Russian gas.
Terms call for Shell to hand over 31-60% of the produced gas to Ukraine. The PSC was signed at the World Economic Forum in Davos, Switzerland.
Shell received exploration rights for Yuzivske gas last year (OGJ Online, Sept. 7, 2012).
At the same time, Chevron Corp. obtained the right to develop gas deposits at Oleske gas field in western Ukraine.
PROCESSING — Quick Takes
Plans advance for Vietnam's second refinery
Plans for Vietnam's second refinery have advanced with the issuance by Nghi Son Refinery & Petrochemical LLC (NSRP) of a letter of award for key contracts to a consortium of construction firms (OGJ Online, Mar. 28, 2008).
The 200,000-b/d refinery is to be built in the Nghi Son Economic Zone in Thanh Hoa Province, about 200 km south of Hanoi. The estimated cost is $9 billion.
In addition to the crude distillation unit, the refinery will have an 80,000-b/d residue fluid catalytic cracking unit, a 105,000-b/d resid hydrodesulfurizatioin unit, and a 700,000-tonne/year aromatics complex for production of paraxylene.
The complex will be designed to run 30.2º gravity Kuwaiti crude oil or equivalent feedstock.
The consortium receiving the engineering, procurement, and construction contract for the project comprises JGC Corp., Chiyoda Corp., Technip Group, SK Engineering & Construction, and GS Engineering & Construction.
NSRP expects the refinery to be mechanically complete at yearend 2016 and to begin commercial operation by mid-2017.
Partners in NSRP and their interests are Itemitsu Kosan Co. Ltd. and Kuwait Petroleum International, 35.1% each; state-owned PetroVietnam, 25.1%; and Mitsui Chemicals Inc., 4.7%.
Vietnam's first refinery, PetroVietnam's 148,000 b/d facility at Dung Quat, started up in 2009 (OGJ Online, Feb. 27, 2009).
Hess closing FCCU to concentrate upstream
Hess Corp. will exit refining by closing its 70,000-b/d fluid catalytic cracking unit at Port Reading, NJ, as part of a strategy to concentrate on exploration and production.
Earlier this month, the company announced a $6.7 billion budget for 2013, of which 40% will be for work in unconventional oil and gas plays (OGJ Online, Jan. 11, 2013).
In addition to closing the Port Reading FCCU, Hess will try to sell its 19 US terminals, which have total storage capacity of 28 million bbl. In a statement, it said the terminals haven't been central to its strategy since last year's closure of the 350,000 b/d Hovensa LLC refinery, in which it was a partner with Petroleos de Venezuela SA (OGJ Online, Jan. 23, 2012).
It said the Port Reading FCCU, which is 10 miles from New York City, hasn't been profitable for two of the past 3 years.
"The financial outlook for the facility is expected to remain challenged due to the requirement for future expenditures to comply with environmental regulations for low-sulfur heating oil and the weak forecast for gasoline refining margins," it said.
It expects sale of the terminals to release about $1 billion of working capital beyond sale proceeds. It also hopes to sell oil and gas assets in Russia and the Eagle Ford play of Texas.
Hess said divestitures of nonstrategic assets it has announced during the past several months are worth an estimated $2.4 billion.
Contract let for Cambodian hydrocracker
Cambodian Petrochemical Co. Ltd., through a contractor, has let a licensing and engineering services contract to KBR for a hydrocracker at a 5-million tonne/year refinery planned in Cambodia.
Tinajin Petrochemical Engineering Design Co. Ltd. is engineering, procurement, and construction contractor for the 1.2-million tpy unit, which will use Veba Combi Cracking technology.
KBR said China Perfect Machinery Industry Corp. Ltd., Shanghai, will build the refinery in the Kampong Som Petrochemical Industrial Zone.
The refinery will be Cambodia's first since destruction in 1972 of a 10,000-b/d facility built in 1969. Cambodian National Petroleum Authority is a project sponsor, along with Cambodian HKT Special Economic Zone Co. Ltd. and Hong Kong Diamond Industry Co. Ltd. Start-up is scheduled for 2015.
Westlake taps Technip for ethylene work
Westlake Chemical Corp. has let a contract to Technip for the expansion and modernization of the cracking furnaces and recovery section of its ethylene plant in Calvert City, Ky. (OGJ Online, Oct. 2, 2012).
The project will boost capacity to 630 million lb/year from 450 million lb/year and switch feedstock to ethane from propane.
TRANSPORTATION — Quick Takes
CGT to spend $1.5 billion on upgrades
NiSource's Columbia Gas Transmission will spend roughly $1.5 billion over the next 5 years on system upgrades. These expenditures are covered by a customer settlement approved by the US Federal Energy Regulatory Commission.
Under the settlement, filed Sept. 4, 2012, CGT will invest $300 million/year from 2013 through 2017 on system improvements. The company will replace about 1,000 miles of existing interstate transmission pipelines, primary bare steel, with 400 miles to be completed in the first 5 years. It also will replace and modernize more than 50 compressor units.
In addition to these projects, CGT plans to increase system reliability by uprating pressures and looping systems where necessary and expanding its inline inspection abilities. It also plans to spend $100 million for ongoing maintenance.
Work will take place across CGT's system, including Kentucky, Maryland, Ohio, Pennsylvania, Virginia, and West Virginia. Columbia projects that its entire infrastructure investment plan could involve an investment of $4 billion over an extended (10-15 year) period.
Shell to export LNG from Elba Island terminal
Shell US Gas & Power LLC and Southern Liquefaction Co. LLC, a Kinder Morgan company and unit of El Paso Pipeline Partners LP, will form a limited liability company to develop an LNG export plant in two phases at Southern LNG Co. LLC's existing Elba Island LNG terminal near Savannah, Ga.
The total project will have about 2.5 million tonnes/year in liquefaction capacity. In June 2012, the Elba Island terminal received approval from the US Department of Energy to export as much as 4 million tpy of LNG to free trade agreement (FTA) countries. In August 2012, the terminal submitted a filing to DOE seeking approval to export as much as 4 million tpy of LNG to non-FTA countries.
Phase 1 of the project, about 1.5 million tpy, requires no additional DOE approval.
Shell and Kinder Morgan affiliates have agreed to modify EPB's Elba Express Pipeline and Elba Island LNG terminal to move natural gas to the terminal and to load LNG onto carriers for export.
Upon reaching final agreement, EPB, through its affiliates, will own 51% of the entity and operate the liquefaction. Shell, through its affiliates, will own the remaining 49% and subscribe to 100% of the liquefaction capacity.
The project will use Shell's small-scale liquefaction unit, which will be integrated with the existing Elba Island terminal.
Eighty-Eight Oil to build unit train loading station
Eighty-Eight Oil LLC (EEO) plans to build and operate a unit train loading station on BNSF Railway Co.'s mainline near the Guernsey, Wyo., crude oil pipeline hub. The station will be connected to EEO's existing 2-million bbl Guernsey crude terminal, which receives oil from Butte Pipeline, Belle Fourche Pipeline, Platte Pipeline, and the Rocky Mountain Pipeline System. The Guernsey terminal also has truck unloading facilities.
The rail terminal initially will include three loop tracks and required tankage for unit train loading. Each loop track will be capable of holding one unit train, with the automated racks capable of loading different crude types onto two trains simultaneously. Initial rail loading capacity will be 80,000 b/d with expansion capability.
EEO says Guernsey will be the first rail transloading terminal capable of loading multiple crude types, including those from the Williston basin (Bakken), the Powder River basin (Niobrara), Southwest Wyoming, the Big Horn basin, and Canada. The company expects the terminal to enter service later this year.
BNSF also provides transportation for Inergy Crude Logistics' COLT Terminal in the North Dakota portion of the Bakken shale (OGJ Online, June 11, 2012).
