OGJ Newsletter

Jan. 20, 2014
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

NTSB issues initial report on oil train incident

A BNSF crude oil tanker train's Dec. 30, 2013, collision with a derailed train carrying grain near Casselton, ND, caused $6.1 million of damage and spilled more than 400,000 gal of crude, the National Transportation Safety Board said in its initial report on the incident.

It said the westbound BNSF grain train derailed 13 of its cars around 2:11 p.m. on Main Track 1, with one of them fouling Main Track 2. The oncoming eastbound oil unit train then collided with that derailed grain car soon after, making the oil train's head-end locomotives and first 21 cars leave the tracks.

Eighteen of those cars were breached, spilling the crude, it noted. The train consisted of two head-end locomotives, one rear DPU locomotive, and 106 cars.

Crews from both trains left the lead locomotives before the spilled crude caught fire, NTSB said. Both trains had been traveling below the speed limit for that stretch of track before derailing, according to data recorders on the rear locomotives and information from traffic control system signals.

About 1,400 Casselton residents were voluntarily evacuated, but returned to their homes by Jan. 2. No injuries were reported from the incident (OGJ Online, Jan. 2, 2014).

NTSB said its investigation will continue at its Washington headquarters. A broken axle and two wheels, as well as locomotive event and video recorders, were sent to its laboratory there for further analysis, it noted.

Rumors peak about majors' exit from Australian refining

Rumors are swirling around the Australian oil and gas industry about the exit of major companies Royal Dutch Shell PLC and BP PLC from that country's refining and retail scene.

Sources suggest that three consortia have bid for Shell's estimated $3 billion (Aus.) Australian service station and refinery assets. They are speculated as an alliance of private equity firm TPG, the Ontario Teachers' Pension Plan, and Kuwait Investment Authority; a joint venture of oil trader Vitol and the Abu Dhabi Investment Council; and a consortium including the Macquarie Investment Bank and Thai energy company PTT.

Speculation is of a rapid agreement concluded this month for Shell's downstream Australian assets that includes 900 service stations, the refinery in Geelong, Victoria, and several import terminals.

Speculation also surrounds BP's downstream assets with the company said to be considering a $3 billion (Aus.) sale of its Queensland (Brisbane) and Western Australian (Kwinana) refineries and 225 service stations.

Neither company has commented on the rumors, but it is said that aging infrastructure and related expenses along with the high Australian dollar and increasingly fierce competition in the retail market with imports of refined product from the big Asian refineries is forcing the move.

Meanwhile, ExxonMobil Corp. and the 7-Eleven chain stores have recently agreed to help return the Mobil petrol brand to the Australian east coast during 2014.

ExxonMobil sold 300 Mobil outlets to 7-Eleven in 2010. ExxonMobil continued to supply refined product to these stations, but it has been marketed as 7-Eleven.

It is now thought that the Mobil brand may be more attractive to consumers seeking quality in the premium-priced petrol market than 7-Eleven.

Significant events affected oil markets in 2013

The US Energy Information Administration listed significant events affecting oil markets in 2013. The events include:

• US crude oil production increased 1 million b/d, marking the largest annual increase in US history. The increase in 2013 in the US is more than the combined increases in the rest of the world.

• Production exceeds imports during several weeks for the first time in nearly 20 years.

• Transportation system developments enabled crude oil from Cushing, Okla., and the Bakken, Permian, and Eagle Ford formations, to better reach refineries, reducing the need for foreign oil and moving up West Texas Intermediate spot prices by 4% from 2012.

Also, China replaced the US as the world's largest oil importer, accounting for almost one third of global demand growth.

Global unplanned supply disruptions averaged 2.6 million b/d in 2013, 37% higher than the previous year. The Organization of Petroleum Exporting Countries accounted for nearly 70% of the total unplanned disruptions.

The significant global supply outages were offset by a surge in US crude oil production and seasonally elevated Saudi Arabian production. International crude oil prices were relatively stable last year.

Non-OPEC liquid fuels production growth, concentrated in the US, more than offset production declines from member countries of OPEC. The global liquid fuels production increased more than 500,000 b/d in 2013.

Hess closes on $650 million sale of Pangkah asset

Hess Corp. has completed the sale of its Pangkah asset to a subsidiary of PT Saka Energi Indonesia, which exercised its preemption rights, for $650 million.

The deal encompasses the sale of equity interests in certain holding entities and certain intercompany debts.

Hess said the asset, which lies offshore Indonesia, produced an average of 9,000 boe/d net to Hess in the first three quarters of 2013. The company was a partner with Kuwait Foreign Petroleum Exploration in the asset.

Hess last month entered into two separate agreements to sell its interests in the Pangkah and Natuna A assets, the latter of which also is off Indonesia, for $1.3 billion (OGJ Online, Dec. 2, 2013).

Exploration & DevelopmentQuick Takes

Wintershall nears completion on Skarfjell well

Wintershall Norge AS and its partners are nearing completion on the 35/9-10 appraisal well to assess the 35/9-7 Skarfjell (PL418) oil discovery. The appraisal well is in the North Sea 40 km north of the Troll field and 2 km southeast of the discovery well.

The current assessment of recoverable resources from Skarfjell is 10-23 million cu m of oil and condensate, and 8-15 billion cu m of natural gas. The license owners in PL418 are currently evaluating possible development concepts.

Appraisal well 35/9-10 was drilled in the southern part of the Skarfjell structure with the wellbore 35/9-10S on the southeast flank and the sidetrack 35/9-10A near the top of the structure in the southwestern part.

The partners said the purpose of the two wellbores was to investigate the thickness, properties, fluid content, and depth of the upper Jurassic reservoir to further define the Skarfjell discovery extension towards the south.

Wellbore 35/9-10A, near the top of the structure to the southwest, found a 59 m gross gas column in the upper Intra Heather sandstone with better reservoir properties than expected.

Pressure data indicates that the gas cap is in communication with the oil proven in the 35/9-7 and 8 wells in the northern part of Skarfjell. The lower Intra Heather sandstone was 4 m gross thick.

Wellbore 35/9-10S, on the southeast flank of the Skarfjell structure, proved a 13-m gross gas column above an oil column of 49 m gross in three thin sandstones in the upper Intra Heather reservoir with reservoir quality as expected.

Pressure data shows that this area has a lower reservoir pressure and is not in direct communication with the western and northern part of Skarfjell.

The appraisal wells were terminated in the middle Jurassic, Rannoch formation.

"This is an important area for us," said Hugo Sandal, partner RWE Dea Norge managing director, "We are participating in several surrounding licenses. One being PL420 where we made the Titan discovery in 2010, and where we will drill an appraisal well in February this year."

Preliminary estimates in 2010 of the Titan discovery size were 2-10 million cu m of oil equivalent, which was mostly oil (OGJ Online, Dec. 8, 2010).

"We have a good geological understanding of this area, and we will be well positioned to take on even more responsibility in this part of the North Sea in the years to come," Sandal said.

Wintershall is operator in the license with 35% interest. Partners include Bayerngas Norge 20%, Capricorn Norge 20%, Edison International Norway Branch 15%, and RWE Dea Norge 10%.

Partners gets West Seahorse field reserves confirmed

Oil reserves in the West Seahorse field in Bass Strait offshore Victoria have been confirmed by an independent appraisal. The assessment has provided greater certainty for the development project financing and the letting of major contracts (OGJ Online, Nov. 14, 2013).

Carnarvon Hibiscus holds 51.1% in the field and is operator; 3D Oil Ltd. holds 49.9% interest.

Gaffney, Cline & Associates estimated that, as of Dec. 31, 2013, the field's proved and probable reserves are 6.5 million bbl. Oil in place has been put at 10.3 million bbl plus an estimated 1.5 million bbl potential in secondary reservoirs.

Four wells have been drilled in West Seahorse, including the 1981 discovery well by a group led by Beach Energy. Three wells have encountered the oil reservoir, while the fourth intersected the reservoir below the oil-water contact.

Front-end engineering and design for the development began in April 2013. The development concept centers on production via a leased mobile offshore production unit (a jack up) feeding oil at 12,000 b/d through a 1.5-km, 4-in. flexible flow line to a catenary anchor leg moored buoy. This in turn will be connected to a leased tanker serving as a floating storage and offtake facility.

Commercial life of the field is expected to be 5-6 years, but the group is also looking at the nearby exploration prospect named Sea Lion. If it too contains oil, it could be quickly tied into the planned facilities to extend production and increase the value of the project.

A final investment decision for West Seahorse is expected in the next few months. The schedule calls for the field to be brought on stream in early 2015.

West Seahorse lies in 39 m of water 14 km off the Ninety Mile Beach near Loch Sport. It lies 2 km west of ExxonMobil Corp.-BHP Billiton's Seahorse field in the adjoining permit.

Gazprom Neft completes Badra appraisal well in Iraq

JSC Gazprom Neft reports completion of well testing at its BD4 appraisal well in the Badra field in eastern Iraq, recording a natural flow rate of 7,000 b/d.

Sequential testing of six strata was followed by concurrent testing of all pay horizons. Testing continues at two other wells.

Infrastructure to bring the field into commercial production is nearing completion, Gazprom Neft said. Work continues on construction of a 170,000-b/d central gathering facility. Gazprom Neft also plans on a 1.5 million cu m/year gas conversion plant.

Badra development plans include 17 total production wells and 5 injection wells, with output expected to reach 170,000 b/d by 2017.

"With well testing completed, we are one step closer to beginning commercial production at the Badra field," said Vadim Yakovlev, Gazprom Neft first deputy chief executive officer. "Since beginning development—practically from scratch—just 3 years ago, a Gazprom Neft-led consortium has completed a major project in establishing all the facilities necessary for large-scale production at Badra, and this will begin as early as this year."

Gazprom Neft has 30% interest in the Badra project in Wasit Province. Partners include Iraqi Oil Exploration Co. 25%, South Korea's Kogas 22.5%, Malaysia's Petronas 15%, and Turkey's TPAO 7.5%.

Repsol, IFPEN plan reservoir research

Repsol, Madrid, and IFP Energies nouvelles (IFPEN), Rueil-Malmaison, France, have signed a framework collaboration agreement for research in reservoir modeling.

The effort will blend IFPEN's development of basin-modeling and reservoir-characterization software with Repsol's research in underground modeling and reservoir characterization. A priority will be carbonate-reservoir characterization.

The collaboration will validate and jointly develop technologies in these areas using data from fields operated by Repsol, the companies said in a press statement.

"IFPEN and Repsol will use these data to fine-tune the software and adapt it to the specific problems faced by Repsol," the statement said.

Drilling & ProductionQuick Takes

Statoil group cancels gas spur offshore Norway

Statoil ASA and partners have ended the Kristin gas export project, a pipeline that was to have connected Kristin gas and condensate field with the Polarled pipeline under development in the Norwegian Sea (OGJ Online, Jan. 8, 2013).

In a statement, Statoil cited "unsustainable economics caused by increased investment costs and increased risk to volume availability."

The cancelled project would have linked Polarled with the existing Aasgard Transport System via a 30-km spur to the Kristin platform, which serves as a hub for oil, gas, and condensate produced by Kristin and Tyrihans fields in the Halten Bank area.

Statoil said the Kristin spur would have represented less than 5% of total Polarled flows.

"The termination does not influence the Polarled project execution," the company said.

Polarled will be a 480-km pipeline between deepwater Aasta Hansteen gas and condensate field and a gas plant operated by Shell at Nyhamna, Norway. At the field, the 36-in. pipeline will lie in 1,300 m of water.

Statoil leads a group developing Aasta Hansteen with the first use of a spar platform on the Norwegian continental shelf.

Partners in the Kristin gas project are Statoil 53.4%, Petoro 35.6%, and GdFS 11%.

Mubadala developing oil field offshore Thailand

Mubadala Petroleum expects to produce 10,000 b/d of oil from the first phase of development of Nong Yao field in the southern Gulf of Thailand.

The company has let a contract to Nippon Steel and Sumikin Engineering Co. Ltd. for engineering, procurement, construction, installation, and commissioning of Nong Yao platforms.

Development includes a wellhead processing platform and a minimum-facility wellhead platform with interconnecting pipelines to a floating storage and offloading vessel. Production capacity will be 15,000 b/d.

In the initial phase of development, Mubadala plans to drill 23 wells. It expects production to begin in mid-2015.

The field, discovered in 2009, is about 165 km offshore in 75 m of water. Pay is Oligo-Miocene fluvio-deltaic sandstone.

The company operates 6,791-sq-km Block G11/48 with a 75% working interest. KrisEnergy Ltd., an independent producer based in Grand Cayman with interests in Southeast Asia, holds a 25% interest.

Mubadala and KrisEnergy are partners with the same interests in Block G10/48 west of G11/48, where they are considering development of an oil discovery called Wassana. Water depths on the 4,696-sq-km block reach 60 m.

Camac secures rig for Oyo drilling offshore Nigeria

Camac Energy Inc. has signed a long-term drilling contract with Northern Offshore Ltd. for the Energy Searcher drillship, covering an initial period of a year, with an option to extend the contract for an additional year.

The rig is slated for delivery in this year's first half for drilling activity in Oyo field in OML 120 offshore Nigeria.

The Energy Searcher is capable of drilling to 25,000 ft in as much as 2,500 ft of water. Oyo field, which started production in 2009, is in 650-1,600 ft of water.

Camac and partner Allied Energy PLC in October 2013 encountered oil and gas in the producing Pliocene reservoir in the Oyo-7 well on OML 120 (OGJ Online, Oct. 16, 2013). A month later, the partners confirmed the presence of oil in Miocene (OGJ Online, Nov. 13, 2013).

Block interests in Oyo field are Allied 70% and Camac 30%.

CNOOC starts gas production at Liuhua 19-5 field

China National Offshore Oil Corp. Ltd. said production has begun at its Liuhua 19-5 natural gas field in the Pearl River Mouth basin of the South China Sea.

Liuhua 19-5 is expected to hit peak production of 29 MMcfd of gas this year. The field lies in 185 m of water.

CNOOC said the project was designed to share the existing producing facility of Panyu 30-1 gas field. Two new producing wells were drilled.

CNOOC is operator and holds 100% interest.

PROCESSINGQuick Takes

Alberta approves funding for Sturgeon refinery

The government of Alberta has approved up to $1 billion (Can.) in financing for North West Redwater Partnership's (NWR) recently delayed bitumen refinery project already under construction near Redwater in Sturgeon County, about 45 km northeast of Edmonton (OGJ Online, Nov. 13, 2012).

Alberta's Ministry of Energy has authorized Alberta Petroleum Marketing Commission (APMC)—an agent of the province as well as feedstock supplier for the project—"to borrow up to $1 billion from the Crown or any other person, as well to lend money, acquire shares, or enter into a joint venture or partnership or provide guarantees" to fund the Sturgeon refinery, according to council orders published on Jan. 10.

In December 2013, NWR partners North West Upgrading Inc. and Canadian Natural Upgrading Ltd., a wholly owned subsidiary of Canadian Natural Resources Ltd., announced a decision to postpone construction of the first phase of the Sturgeon refinery due to rising capital costs (OGJ Online, Dec. 5, 2013).

Once completed, Phase 1 of the project will be 50,000 b/d and will capture 1.2 million tonnes/year of carbon dioxide to be sold for use in enhanced oil recovery. Two further phases with capacities of 50,000 b/d each also are planned for the refinery.

Under 30-year processing agreements, APMC will supply 75% of the feedstock. CNRL will supply the rest. The suppliers will receive proportionate shares of the products, the main one of which will be ultralow-sulfur diesel.

Despite the delay, work on the project has progressed over the past year, including detailed engineering on many process units as well as the commencement of site preparation activities (OGJ Online, Dec. 20, 2013).

Commissioning of Phase 1 commercial operations currently is planned for September 2017.

Valero trims expansion at Louisiana refinery

Valero Energy Corp. has revised its plans for an expansion of its 250,000-b/d St. Charles refinery at Norco, La., the company said in a recent request to state regulators for an operating permit modification.

Valero has reduced the planned crude oil processing capacity to 275,000 b/d from an original target of 290,000 b/d, according to a public notice filing with the Louisiana Department of Environmental Quality (LDEQ).

The processing capacity expansion comes as part of a series of projects at the St. Charles refinery that are designed to improve the plants efficiency as well as reduce emissions, the filing said.

Other projects slated for the St. Charles refinery include the addition of a catalytic naphtha hydrotreater; a marine vapor recovery unit; and a benzene, toluene, and xylene unit, according to the filing.

No timetables were available as to when the expansion would be completed. Public comments on the proposed permit modifications for the St. Charles plant are due to LDEQ by Feb. 20.

TRANSPORTATIONQuick Takes

TAPI pipeline framework on 'fast-track' basis

The framework for the TAPI pipeline project is being prepared on a "fast-track basis" with officials of the four stakeholder nations: Turkmenistan, Afghanistan, Pakistan, and India, according to India's petroleum and natural gas minister.

Speaking at Petrotech 2014, M. Veerappa Moily said the aim is to bring gas from Turkmenistan to the Indian border by August 2017. He said a transactional advisor for the project has been appointed and a sale and purchase agreement has been drawn.

"Apart from gas, this TAPI pipeline would usher in peace among the nations as well," Moily said.

At 1,680 km and built with 56-in. OD pipe, TAPI would transport gas from Turkmenistan's Daulatabad field to Fazilka, Punjab, at a capacity of 27 billion cu m/year, with part of this total drawn off in Afghanistan and Pakistan (OGJ Online, Feb. 8, 2013).

Mozambique eyes LNG shipments to India by 2019

Mozambique's minister for mineral resources is hopeful for first LNG shipments from his country to start by 2019.

In a meeting at Petrotech 2014, Esperanca Bias discussed pricing and demand with M. Veerappa Moily, India's petroleum and natural gas minister.

The Indian ministerial delegation has been invited to a formal signing of a memorandum of understanding between the two countries.

Oil & Natural Gas Corp. Ltd. said India has a committed demand of 8 trains of LNG, starting with 4 trains.

Moily urged the Mozambique minister to "expedite" consortium-related issues and "fast-track" development of discovered assets offshore Mozambique in deepwater Rovuma basin (OGJ Online, Aug. 26, 2013).

Indian firms hold 30% of the Anadarko Petroleum Corp.-operated project in Mozambique, ONGC said (OGJ Online, Oct. 7, 2013).