OGJ Newsletter

Oct. 28, 2013
International news for oil and gas  professionals

GENERAL INTERESTQuick Takes

Newfield to sell offshore Malaysian business

Houston independent Newfield Exploration Co. has signed a share purchase agreement to sell all of its equity interests in Newfield Malaysia Holdings to SapuraKencana Petroleum Bhd. for $898 million. The deal is expected to close in early 2014.

The agreement is subject to the approval of state-owned Petronas under the applicable production-sharing contracts, the buyer's shareholder approval, and customary closing conditions. Newfield plans to offer preferential rights to its partners under the joint operating agreements. Newfield said the agreement was executed after it conducted a bidding exercise involving more than 40 companies.

Lee K. Boothby, Newfield chairman, president, and CEO commented that the sale is in accordance with the company's plans announced earlier this year to exit its international businesses and focus its investments on US resource plays.

In 2004, the unit signed two PSCs off Malaysia in partnership with Petronas Carigali. David A. Trice, then-Newfield's president and CEO, remarked at the time, "This transaction establishes a new international growth area for Newfield (OGJ Online, May 27, 2004)." A year later, the unit signed a third PSC with Petronas Carigali, this time for the PM 323 area off Malaysia (OGJ Online, June 16, 2005).

In April, Newfield gauged gas at a second pinnacle reef discovery on Block SK 310 offshore Sarawak, Malaysia, estimating initial gas in place at 1.5-3 tcf, the largest conventional exploratory success in the company's 25-year history. Newfield signed a PSC for Block SK 408 and completed farming into Block SK 319 in Dec. 2012 covering a combined 1.7 million acres and almost doubling the company's position offshore Malaysia (OGJ Online, April 3, 2013).

EPA: GHG emissions lower due to gas conversions

Greenhouse gas emissions from US electric power plants declined 10% from 2010 to 2012 because of conversions to natural gas from coal and from slightly reduced demand, the US Environmental Protection Agency said.

EPA said 1,611 power plants emitted 2.09 billion tonnes of carbon dioxide equivalent (CO2e) in 2012, down from 2.33 billion tonnes CO2e from 1,587 plants 2 years earlier as measured by EPA's GHG reporting program. Fossil fuel-fired plants accounted for 40% of total US carbon pollution, EPA said.

Total US refining CO2e emissions fell 2.8% to 173 million tonnes from 144 facilities in 2012 from 2010's 178 million tonnes from 145 facilities, it added.

CO2e emissions from petroleum and gas facilities—representing onshore and offshore production; gas processing, transmission, underground storage, distribution; and LNG import and export operations, and storage—totaled 217 million tonnes from 2,058 facilities in 2012, 3.3% more than 210 million tonnes from 1,904 facilities in 2011, the first year it collected data for this sector, EPA said.

EPA began collecting data for its GHG program in 2010 from more than 8,000 facilities in the most heavily emitting industries, including power plants, refineries, oil and gas facilities, chemical plants, iron and steel mills, and landfills. EPA said its program is the only one which collects facility-level GHG measurements from major industrial sources across the US.

Noble, Anadarko exchange DJ basin acreage

Houston independents Noble Energy Inc. and Anadarko Petroleum Corp. have closed on an acreage exchange in the greater Wattenberg area of northern Colorado, with each party contributing 50,000 net acres.

David L. Stover, Noble's president and CEO, said the consolidation of acreage in key operating areas will improve efficiency with centralized field facilities, streamlined operations, and reduced land work. "The large contiguous acreage blocks will provide the opportunity to optimize drilling activities and add more extended-reach lateral wells to the program," he said.

Anadarko reimbursed Noble $202 million for capital spent to drill and complete wells on the conveyed acreage, partially offsetting other adjustments in determining the $105 million of cash Noble received at closing. Noble said the exchange will lower net production from recent levels by 8,000 boe/d—almost entirely related to the recently drilled wells—but it is expected to be offset by operational efficiencies and cost savings. Noble said its DJ basin volumes are still expected to increase by at least 20% in 2014.

Noble has core operations in the US onshore, primarily in the DJ basin and Marcellus shale, in the deepwater Gulf of Mexico, offshore eastern Mediterranean, and offshore West Africa.

Earlier this month, Noble and Anadarko provided updates on DJ basin activity following September's floods. After the inundation of its assets, Noble reported a total average net production loss of 2,000 boe/d for this year's third quarter, 70% of which was oil, condensate, and natural gas liquids. Anadarko said it experienced delays to its expansion of capacity in the Greater Wattenberg area caused by flooding, reducing the company's total estimated full-year sales volumes by 2.5 million boe (OGJ Online, Oct. 7, 2013).

Court confirms Israeli gas-export policy

The Israeli High Court of Justice has upheld a June decision by the government on division of gas supply between exports and domestic use (OGJ Online, Oct. 2, 2013). At issue was whether policy on the allocation of gas from large deepwater discoveries was important enough to require a parliamentary vote.

The court confirmed a decision by a committee of ministers reserving 540 billion cu m of gas for domestic use and essentially limiting exports to 40% of Israel's gas reserves.

Questions had arisen whether that export limit would jeopardize LNG schemes under consideration for giant Leviathan field operated by a group led by Noble Energy Corp. Noble has entered an agreement to farm out a Leviathan interest to Woodside Petroleum Ltd. of Australia to bring into the project a partner with LNG experience.

The export limit the government set June 23 was lower than one announced last year in a decision by the same committee that fell subject to controversy.

In an indication that the lower export limit hasn't discouraged Woodside, the company said in a recent presentation that the June policy "provided a basis for a commercially viable export project for Leviathan."

Exploration & DevelopmentQuick Takes

Libra presalt rights awarded offshore Brazil

A consortium of majors has won a 35-year production-sharing contract to develop the Libra presalt oil discovery in the Santos basin offshore Brazil.

Petroleo Brasileiro SA (Petrobras), Royal Dutch Shell PLC, Total SA, China National Petroleum Corp., and China National Offshore Oil Corp. comprise the group of companies that will attempt to recover 8-12 billion bbl of oil, as estimated by Brazil's National Petroleum Agency (ANP). In 2010, ANP initially estimated the Libra discovery could hold as much as 15 billion bbl of oil, more than 2.4 billion bbl greater than the country's existing reserves (OGJ Online, Nov. 5, 2010).

The ultradeepwater Libra accumulation, one of the largest in the world, is 105 miles off Rio de Janeiro. The block covers 1,550 sq km in 2,000 m of water. The reservoir depth is 3,500 m below the seafloor. ANP estimates that total gross peak oil production could reach 1.4 million b/d.

The PSC is expected to be signed in November. As part of the winning bid, Shell said it will pay its 20% share of the total signing bonus of $1.4 billion and fulfill the minimum work program no later than yearend 2017.

Shell has worked in Brazil for more than a century, with 65,000 boe/d of operated production in 2012. Shell is currently operating two floating, production, storage, and offloading vessels off Brazil—the Espirito Santo at Parque das Conchas and the Fluminense at the Bijupira/Salema fields—and has recently announced projects to expand production at both fields (OGJ Online, July 22, 2013; Oct. 2, 2013). Shell also operates and owns an 80% interest in the BM-S-54 block, where the Gato do Mato discovery is being appraised.

Petrobas holds 40% in the consortium and serves as operator; other partnership interests are Shell 20%, Total 20%, CNPC 10%, and CNOOC 10%.

CNOOC has midsized oil find in Bohai's Liaodong

CNOOC Ltd. said it has discovered heavy oil at a midsized oil and gas structure in the Liaodong Bay area of Bohai Gulf and made another oil discovery elsewhere in the southern part of Bohai offshore China.

The Luda 5-2N-2 and LD 5-2N-4 discovery wells in 31 m of water were both drilled and completed at a depth of 1,140 m and encountered oil pay zones with total thickness of 120 m and 85 m, respectively. Luda 5-2N-2 tested at 1,040 b/d.

CNOOC said the Luda 5-2 North discovery "demonstrates the company's successful experience in the thermal recovery technology of heavy oil, and creates a new methodology to commercialize heavy oil reserves."

Kenli 9-5/9-6 is on the Laixi structure in 9 m of water. The company drilled the Kenli 9-5-2D and Kenli 9-6-2 wells and completed them at 2,200 m and 1,250 m, respectively, in pay zones 70 m and 120 m thick, respectively.

Kenli 9-6-2 tested at 200 b/d and Kenli 9-5/9-6 "has further expanded the scale of the reserve in the area," CNOOC said.

Lukoil vague on outcome of Sierra Leone well

Lukoil Overseas said its first exploratory well offshore Sierra Leone went to a total depth of more than 4,700 m and that the company identified oil-saturated reservoirs and took oil samples from Turonian sands.

Press reports quoted a government source as having said the well encountered "light oil" on the Savannah structure in more than 2,000 m of water on the SL-5-11 block.

"The set objectives were achieved: targeted prospects were penetrated, oil saturated reservoirs were identified; oil samples were taken from the Turonian sands," Lukoil Overseas said, adding that the company will complete its analysis by yearend.

The current well was the only one required under the block's 30-year PSA, and the company didn't say whether it foresees further drilling (OGJ Online, Sept. 17, 2013).

Lukoil Overseas is operator of the 4,022 sq km block in the Sierra Leone-Liberia basin with a 49% interest. Oranto Petroleum Ltd. of Nigeria has 30% interest and PanAtlantic Exploration Co., Houston, 21%.

Repsol adds Libya Murzuk light oil find

A group led by Repsol has added a light oil discovery on the 4,400 sq km NC 115 block in the Murzuk basin in the Sahara 800 km south of Tripoli, Libya.

The A1-129/02 discovery well flowed 528 b/d of 40° gravity oil on a 32/64-in. choke from perforations at 4,502-22 ft in the Ordovician Memouniat formation. Total depth is 1,836 m.

The well is the third of eight that the company will drill on the block. Repsol began an exploratory campaign on the block this year that will continue through the end of 2015.

Repsol operates NC 115 with a 40% stake. Austria's OMV and Total of France have 30% each.

Drilling & ProductionQuick Takes

NFGC touts Marcellus, Utica completions

National Fuel Gas Co., a subsidiary of Seneca Resources Corp., Williamsville, NY, said it produced 120.7 bcf of gas equivalent in the fiscal year ended Sept. 30, 45% more than the previous fiscal year, and that its proved gas and oil reserves are up 24% to a record 1,549 bcf of gas equivalent.

Fourth quarter production of 28.9 bcf, up 42% despite nearly 3 bcf of price-related shut-ins, was driven by the continued success of Seneca's Marcellus shale development program in Lycoming County, Pa.

Growth in crude oil production was limited mainly as a result of a continued constraint in a third-party pipeline used to transport associated natural gas production in Sespe field. This is expected to be resolved by the end of January 2014. Oil reserves were 41.6 million bbl, down 3% due to production.

In delineation efforts in the Western Development Area, Seneca in the quarter tested two more Marcellus shale wells in the Owl's Nest area of Elk County, Pa. Both used a reduced cluster spacing completion design and achieved 24-hr peak production rates of 6.1 and 3.4 MMcfed.

The second well was completed using linear gel to place larger proppant near the wellbore. Seneca believes longer laterals and standard RCS completion design are more representative of expectations for this area. Both wells are shut-in awaiting connections.

On DCNR Tract 100 in Lycoming County, Seneca brought a new five-well pad on line. The wells achieved 24-hr peak production rates ranging from 14.8 to 22.1 MMcfd. In its first 30 days, the pad produced 2.3 bcf of gas.

In the Utica shale, Seneca tested a dry gas well at its Mount Jewett prospect area in McKean County, Pa. This well had a treatable lateral length of 5,777 ft and was completed using 38 RCS stages. The 24-hr peak production rate was 8.5 MMcfd, and the well averaged 6.8 MMcfd in 7 days.

Suncor resumes Canadian oil sands operations

Suncor Energy Inc. has resumed normal operations at its oil sands and in situ facilities after slowing them on Oct. 17 following a third-party supplier disruption of natural gas affecting the Wood Buffalo region of northeast Alberta, the company reported late on Oct. 18.

Suncor's supply of natural gas—which is necessary to oil sand production and bitumen upgrading activities—halted on Oct. 17 after TransCanada's Nova Gas Transmission Ltd. suffered a rupture on its pipeline system 138 km west of Fort McMurray, Alta. (OGJ Online, Oct. 18, 2013).

Aramco project to lift Khurais flow

Saudi Aramco has let a contract to Foster Wheeler AG units for front-end engineering design of a 300,000-b/d expansion of production capacity at the Khurais complex of oil fields, 150 km southeast of Riyadh.

Current capacity is 1.2 million b/d of Arabian Light crude from Khurais, Abu Jifan, and Mazalij fields, which began production in 2009. The project aims to increase capacity at the Khurais central processing facilities and enhance production from Jifan and Mazalij through installation of a satellite gas-oil separation plant.

Khurais facilities now can handle 70,000 b/d of condensate and 320 MM scfd of natural gas produced in association with oil. In addition to FEED work, subsidiaries of Foster Wheeler's Global Engineering & Construction Group will handle equipment and material specifications, development of a cost estimate, and procurement assistance for long-lead items. The FEED is to be complete during second-quarter 2014.

PROCESSINGQuick Takes

Grangemouth refinery restart seen possible

Officials of Ineos, which has idled a large refining-petrochemical complex at Grangemouth, Scotland, in a labor dispute, said they'll consider reopening the 200,000-b/d refinery if the threat of a strike subsides, according to UK press reports (OGJ Online, Oct. 22, 2013).

Ineos said in a statement, reported by BBC, that shareholders decided to close the complex after labor-union officials rejected changes the company considered necessary to keep the integrated facility in business.

The Grangemouth refinery receives feedstock from BP PLC's nearby Kinneil Terminal, part of the Forties system, and from the Finnart Ocean Terminal 90 km to the west.

Units at the petrochemical plant include two crackers able to produce a total of 1 million tonnes/year of ethylene. One of the units can crack gas and light distillate feedstocks, and the other is a gas cracker fed mainly ethane and propane.

Eastern Utah Harley Dome helium plant starts up

IACX Energy, Dallas, has begun extracting and selling helium from gas wells in Harley Dome field, Grand County, Utah.

The helium plant, 40 miles west of Grand Junction, Colo., is the first helium-only application to extract the rare gas from federal lands and is IACX's third helium plant.

Discovered in 1925 on the Uncompahgre uplift, Harley Dome field was designated "Federal Helium Reserve No. 2" by President Franklin Roosevelt in 1934.

Despite the proven nature of the reserve, it has remained unexploited until now. The field's unusual gas composition, 7% helium with the balance being mostly nitrogen, and its low reservoir pressure proved to be a barrier to prior attempts to develop the field. IACX's small-scale, low-pressure helium extraction technology has enabled development of Harley Dome.

At a time when domestic helium supplies are on decline and the federal helium storage is depleting, IACX is actively developing new domestic supplies. For almost 100 years, the US has been the world's largest producer of helium, but conventional, domestic supplies are declining and other international sources such as Algeria, Qatar, and Russia are on the rise.

Helium has strategic and indispensable uses in many high-tech applications such as magnetic resonance imaging machines, semiconductor manufacturing, the US space program, and fiber optic cables. The availability of domestic supplies of helium is critically important to a wide array of US industries.

IACX is developing other high-helium deposits across the country and is positioned for rapid growth as it continues to combine its helium purification technology with its ability to locate and produce helium-rich feedstocks. The company is also working with natural gas producers to highlight the considerable value of helium that may be present in their production.

IACX believes that significant volumes of helium are not recovered by today's natural gas producers. Where helium is present in economic quantities, its value help can offset the impact of low natural gas prices.

TRANSPORTATIONQuick Takes

BG, Exco sell TGGT holdings to Azure Midstream

BG Group PLC and Exco Resources Inc., Dallas, have entered into definitive agreements to sell their equal equity holdings in TGGT Holdings LLC to Azure Midstream Holdings LLC.

BG Group and Exco Operating Co. LP, a wholly owned subsidiary of Exco Resources, will offload their combined 100% equity interest in TGGT for an aggregate sales price of $910 million, of which $875 million will be in cash and the remaining portion will be in the form of an 8% equity interest in Azure to be split equally between Exco and BG Group.

Exco expects to receive net cash proceeds of $230 million after TGGT pays off its credit agreement and net of transaction costs and closing adjustments. Cash proceeds will be used to reduce the asset sale tranche under Exco's credit agreement. The deal is expected to close in the fourth quarter.

TGGT is a 50-50 joint venture company that owns and operates natural gas gathering and treating assets in three main systems focused on production from the Haynesville, Bossier, and Cotton Valley shale gas formations across East Texas and North Louisiana.

Gazprom: Kubanskaya CS 'crucial' to Southern Corridor

OAO Gazprom said the Kubanskaya compressor station in Krasnodar "has become a crucial part" of its Southern Corridor gas transmission system in southern Russia.

"It will enhance the security of gas supplies to the Black Sea coast of the Krasnodar Territory as well as the Olympic venues," said Vitaly Markelov, deputy chairman of the Gazprom management committee, at a dedication in the Ust-Labinsk district. "Later on, the compressor station will supply gas via the Southern Corridor to the South Stream gas export pipeline."

The four gas compressor units at Kubanskaya each have 12 Mw of capacity.

The Southern Corridor GTS will be 2,506 km long, with throughput capacity of 63 billion cu m/year. The project plans on 10 compressor stations with a total capacity of 1,516 Mw. The system is due for completion in 2017 (OGJ Online, May 15, 2013).

Gazprom is constructing the South Stream gas pipeline, which will cross the Black Sea to the Bulgarian coast and supply southern and central Europe. Pipeline construction started near Anapa, Krasnodar, in December of 2012. The first string of the offshore line is to be commissioned in late 2015.

Novatek commissioning second frac unit at Baltic port

OAO Novatek has completed construction and begun commissioning at the second stage of its gas-condensate fractionation and transshipment complex at the Baltic Sea port of Ust-Luga, the company reported.

The second stage includes 3 million tonne/year (tpy) of condensate fractionation and an additional deepwater berth. Following start-up of the second-stage, overall gas-condensate processing capacity at Ust-Luga will increase to 6 million tpy, Novatek said.

In June, Novatek started up the 3-million tpy first-stage unit at Ust-Luga, which also included 520,000 cu m of storage for feedstock and products and a deepwater berth equipped with loading arms capable of handling tankers up to 120,000 dwt.

The Ust-Luga complex processes stabilized gas condensate into light and heavy naphtha, jet fuel, gas oil, and heating fuel. The site also ships petroleum products and gas-condensate into international markets, said the company announcement.

The complex currently processes all volumes of stabilized gas condensate produced at the Purovsky gas plant in the Yamalo-Nenets Autonomous Region near East-Tarkosalinskoye field. The 5-million tpy plant can produce about 3.7 million tpy of stabilized gas condensate and 1.3 million tpy of LPG.

In 2012, says Novatek, the Purovsky plant received feed from Yurkharovskoye, East-Tarkosalinskoye, Khancheyskoye, Sterkhovoye, and Samburgskoye fields, supplied via the company condensate pipelines, as well as from North-Urengoyskoye field operated by ZAO Nortgas (OGJ, May 3, 2004. p. 62).