OGJ Newsletter

Feb. 17, 2014
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

Baytex to acquire Aurora for $2.6 billion

Baytex Energy Corp., Calgary, has agreed to acquire Aurora Oil & Gas Ltd., Subiaco, Western Australia, for $2.6 billion, providing Baytex with 22,200 net contiguous acres in the Sugarkane field in the Eagle Ford shale of South Texas.

Aurora's fourth-quarter 2013 gross production was 24,678 boe/d (82% liquids) of predominantly light, high-quality crude oil. The company forecasted this year's average gross production at 29,000-32,000 boe/d, about a 43% increase from 2013.

Baytex said Sugarkane field has been largely delineated with infrastructure in place, facilitating low-risk future annual production growth. The company added that the assets have future reserves upside potential from well downspacing, improving completion techniques, and new development targets in additional zones.

Following the purchase, Baytex's 2014 production is expected to reach 85,000 boe/d, comprised of 53% heavy oil, 34% light oil and liquids, and 13% natural gas. The deal gives Baytex additional proved reserves of 106.7 million boe and proved plus probable reserves of 166.6 million boe.

Baytex in 2012 purchased 100% working interest in 46 sections of undeveloped oil sands leases in the Cold Lake region of northeastern Alberta for $120 million (OGJ Online, Oct. 4, 2012). Provincial authorities had conditionally approved the company's 1,200 steam-assisted gravity drainage pilot and a 10,000-b/d development that was expected to launch in 2013.

YPF to buy Argentina assets from Apache

YPF SA has agreed to acquire all of Apache Corp.'s Argentina operations for $800 million plus the assumption of $52 million of bank debt as of June 30, 2013.

YPF paid a $50 million deposit in the transaction, which is expected to be completed in the next 30 days.

Apache at yearend 2013 had reserves in Argentina of 540 bcf of natural gas equivalent. Apache's 2013 production from Argentina averaged 256 Mcfed.

The transaction complements Apache's realization of more than $7 billion of cash proceeds from asset sales in the last two quarters. The firm in May 2013 disclosed plans to sell properties worth $4 billion by yearend (OGJ Online, May 9, 2013).

Apache in July sold its Gulf of Mexico shelf business consisting of more than 500 blocks and 1.9 million net acres to Fieldwood Energy LLC for $3.75 billion (OGJ Online, July 18, 2013).

The following month, the company sold its oil and gas producing properties in the Nevis, North Grant Lands, and South Grant Lands areas of western Alberta to Ember Resources Inc. for $214 million (OGJ Online, Aug. 15, 2013), as well as 33% minority participation in its Egypt oil and gas business to China's Sinopec for $3.1 billion (OGJ Online, Aug. 30, 2013).

Apache in September agreed to sell certain oil and natural gas producing properties in Canada in two separate deals for a combined total of $112 million (OGJ Online, Sept. 18, 2013).

Statoil reports 2013 income of $25 billion

Statoil ASA reported its 2013 net operating income was $25 billion along with plans to reduce capital expenditures by more than $5 billion from 2014-16.

Adjusted earnings in 2013 were $26.4 billion compared with $31.3 billion, including divestments and redetermination.

Statoil from 2014-16 will invest an average $20 billion/year, a reduction of 8% from previous estimates primarily due to strict prioritization and increased capital efficiency, the company said.

Through a comprehensive improvement program, the company expects to save $1.3 billion/year through 2016.

Statoil expects to drill 50 wells in 2014 and 20 high-impact wells from 2014-16, purposing $3.5 billion for exploration.

Fourth-quarter 2013 net income was $2.4 billion, a 14% increase from $2.1 billion in fourth-quarter 2012.

Fourth-quarter net operating income was $7.1 billion compared with $7.4 billion in fourth-quarter 2012.

Statoil expects 3% average rebased organic production growth from 2013-16.

Equity production reached 1.94 million boe/d in 2013 compared with about 2 million boe/d in 2012, decreasing because of divestments and redetermination.

Equity production outside Norway increased to a record 723,000 boe in 2013 after starting up and ramping up new fields, and added 1.25 billion boe from exploration. The company completed 59 exploration wells, 26 of which were discoveries.

Statoil said it made the world's largest conventional oil discovery by volume in 2013 in Bay du Nord offshore Canada (OGJ Online, Sept. 26, 2013).

The company announced divestments in 2013 with net proceeds of more than $4 billion, including the divestments of assets on the UK and Norwegian continental shelves to OMV (OGJ Online, Nov. 1, 2013; Nov. 4, 2013), and the agreement to reduce ownership in the Shah Deniz project in Azerbaijan and the South Caucasus Pipeline.

MDU Resources unit to acquire Powder River assets

Fidelity Exploration & Production Co., an indirect, wholly owned subsidiary of MDU Resources Group Inc., has agreed to purchase working interests and leasehold positions in oil and natural gas production assets in Wyoming's southern Powder River basin from undisclosed private sellers. The deal is expected to close on or before Apr. 1.

The Converse County, Wyo., properties consist primarily of undeveloped mineral leasehold positions of 41,000 gross acres and 23,700 net acres, MDU said.

The purchase includes working interests in several producing wells and an ongoing two-rig development drilling program targeting the Frontier play.

Current net production totals more than 1,100 boe/d, 80% of which is oil, with additional production expected to be on line before closing. In addition to the Frontier, the acreage is prospective in multiple other zones that may significantly enhance its value, the company said.

Exploration & DevelopmentQuick Takes

CNPC proves major gas find in Anyue field

China National Petroleum Corp. has confirmed that its Moxi block in the Anyue gas field contains technically recoverable reserves of up to 308.2 billion cu m.

The Longwangmiao formation, in the Cambrian system, is the largest monomer marine uncompartmentalized carbonate gas reservoir discovered in China to date, according to a statement from China's Ministry of Land and Resources.

CNPC also said production tests have obtained 1.1 million cu m/day. Both wells, Gaoshi-1 and Moxi-8, are yielding an average 600,000 cu m/day. The wells are producing from the Simian and Cambrian systems, respectively.

Located in the paleo uplift of China's central Sichuan basin, the Anyue gas field features high formation pressure, high gas flow, and superior gas components, CNPC said.

CNPC and its subsidiary, PetroChina Co., have been actively exploring the Longwangmiao reservoir since 2012. The company reported that its current tests have a cumulative capacity of 1 billion cu m. With completion of its Phase-I development, the company expects to increase this number to 4 billion cu m. Phase-II, which has also begun, will bring this capacity to 6 billion cu m, the company said.

Cumulative production at Anyue's Moxi block is 600 million cu m to date.

Tethys makes oil discovery in Oman

Tethys Oil AB has made an oil discovery onshore Oman, 13 km south of the B4EW4 discovery (OGJ Online, Feb 12, 2013).

Exploration well B4EW6, drilled on a previously undrilled structure, has tested flows of more than 2,200 b/d on a 32/64-in. choke from the Lower Buah formation.

Tethys said the well constitutes the best flows encountered so far from the Lower Buah outside the B4EW4 area. The well is connected to the production system to undergo a long-term production test.

"B4EW6 looks similar to B4EW4. As data comes in, we will learn more, but we are hopeful it could prove as prolific as B4EW4," said Magnus Nordin, Tethys Oil managing director.

Tethys, through wholly owned subsidiary Tethys Oil Block 3 & 4 Ltd., holds 30% interest in Blocks 3 and 4. Partners are Mitsui E&P Middle East BV with 20% and operator CC Energy Development SAL (Oman branch) with the remaining 50%.

Tethys is one of the largest onshore oil and gas concession holders in Oman.

Origin drills exploration well in Canterbury basin

Origin Energy Resources NZ Ltd. and a unit of Anadarko Petroleum Corp. have started drilling a joint venture exploration well in the Canterbury basin east of New Zealand's South Island. The drilling operation will take about 40 days and will reach an expected total depth of 9,100 ft subsea in 3,600 ft of water, according to Origin.

The companies announced their intention to drill the Cretaceous Kawau and Herbert formations on the twin-crest Carrack-Caravel prospect in 2010 (OGJ Online, Feb. 25, 2010).

At the Cretaceous level, the Carrack-Caravel prospect covers more than 390 sq km, compared with 160 sq km at Maui, New Zealand's largest gas field. Origin previously said the prospect could hold a mean of 750 million bbl of recoverable oil or 2.7 tcf of gas and 500 million bbl of condensate in Herbert formation reservoirs. The company added that, if Kawau sandstone reservoirs also trapped hydrocarbons, the recoverable volumes could more than double.

The Caravel-1 exploration well was initiated by the drillship Noble Bob Douglas on Feb. 10.

Drilling & ProductionQuick Takes

Gazprom: Kirinskoye production to start this year

OAO Gazprom says it will launch commercial gas production this year from the Kirinskoye natural gas-condensate field (OGJ Online, Oct. 25, 2013). The project status was discussed in a Feb. 4 working meeting in Moscow with Alexander Khoroshavin, governor of the Sakhalin region, and Alexey Miller, chairman of Gazprom's management committee.

Gazprom said its capital investment in the Sakhalin region exceeded 250 billion rubles in the past 5 years and that it will spend 10 billion rubles this year.

The funds were primarily targeted on construction of the Sakhalin-Khabarovsk-Vladivostok gas transmission system, predevelopment of Kirinskoye (Sakhalin 3), and construction of a gas pipeline from the Kirinskoye onshore processing facility to the Sakhalin main compressor station of the gas transmission system.

Buru loads out first Ungani crude

Buru Energy Ltd., Perth, has completed its first load-out of Ungani field crude from the Port of Wyndham on Cambridge Gulf in the far north of Western Australia.

The oil has been shipped to an undisclosed refinery in Southeast Asia under a sale and purchase agreement.

Ungani field, which lies in the onshore Canning basin permit EPA-PRA-0004 about 120 km east of Broome, is producing from the Ungani 1 and 2 wells. Ungani 1 is flowing at 1,500 b/d and Ungani 2 at 1,000 b/d.

A third well, Ungani-3, has encountered oil shows at the top of the same dolomite reservoir in keeping with the two producing wells.

Buru has previously estimated the field reserves to be 5-20 million bbl.

The field is being developed with 50-50 partner Mitsubishi Corp.

Statoil lets contract for subsea compression stations

Statoil ASA has let a contract to Technip for future intervention services on the Asgard subsea compression stations.

Asgard field, one of the largest developments on the Norwegian continental shelf, lies in the Halten Bank area 200 km off Norway in the Norwegian Sea. The Asgard subsea compression facility is the world's first project of its kind, the firms said.

The awarded project corresponds to an extension of both the dedicated vessel and equipment, developed under the current Asgard subsea compression marine operations contract, Technip said.

The new contract also will cover the use of the vessel for other inspection, maintenance, and repair and construction work for the Asgard field or for other licenses in Statoil's portfolio on the NCS. Technip's operating center in Stavanger, Norway, will manage the contract.

Statoil in June 2013 received the first piece of subsea compression equipment for developing Asgard, along with the manifold module shortly thereafter (OGJ Online, June, 13, 2013), after letting a contract to Aker Solutions in 2010 (OGJ Online, Dec. 1, 2010).

PROCESSINGQuick Takes

Axiall selects partner for Gulf Coast ethylene project

Axiall Corp. and South Korean firm Lotte Chemical have entered a 50-50 joint venture for the design, construction, and operation of a proposed 1 million tonne/year ethane cracker to be built in Louisiana.

The joint venture follows Axiall's Dec. 19, 2013, announcement of its intention to find a partner to build the potential cracker, the company said (OGJ Online, Dec. 20, 2013).

The companies expect to jointly award a front-end engineering design contract for the 1 million-tpy cracker in first-quarter 2014. In addition, Lotte Chemical would begin a FEED study for a wholly owned monoethylene glycol plant to be built next to the planned cracker, the company said.

If the projects are approved by each company's board, both plants could begin commercial operation in 2018, Axiall said.

"As part of Axiall's long-term growth strategy, we believe it is important we have further integration with cost-based economics on 50% of our annual ethylene requirements," said Axiall Pres. and Chief Executive Officer Paul Carrico said.

"Lotte Chemical has a global presence in the chemicals industry, and the fact that it currently operates three crackers with more than 2.8 million tonnes of ethylene capacity worldwide demonstrates that Lotte Chemical would be a strong and experienced partner in this important strategic investment," Carrico added.

While no new cost estimates were disclosed, Axiall previously estimated a total capital investment of about $3 billion for the project, with Axiall's portion amounting to around $1 billion (OGJ Online, Dec. 20, 2013).

Formed by a merger of Georgia Gulf Corp. and the commodity chemicals business of PPG Industries in January 2013, Axiall already holds three manufacturing plants in Louisiana, two of which are in the Lake Charles area, with another in Plaquemine.

India's MRPL updates refinery expansion project

Mangalore Refinery & Petrochemicals Ltd. (MRPL), a subsidiary of Oil & Natural Gas Corp. Ltd., is nearing completion of a long-delayed expansion project at its 194,000-b/d refinery in Mangalore, India.

Progress on the third phase of the expansion and upgrading project stood at 99.5% as of Jan. 15, MRPL said in a Feb. 8 statement announcing its third-quarter 2013 financial results.

The last three major secondary processing units—which include a delayed coker and associated hydrotreater, a fluid catalytic cracker, and a captive power plant (CPP) at the refinery site—have yet to be commissioned, MRPL said, adding that Bharat Heavy Electrical Ltd.'s work progress on the CPP continues to be "a major factor for delayed commissioning of the units."

The overall progress on an integrated polypropylene unit included in the expansion stood at 93.4% as of Jan. 15.

But no timeframe was disclosed for either the commissioning of remaining processing units or the full completion of the third-phase expansion.

The Phase 3 expansion project, announced in February 2010 (OGJ Online, June 8, 2010), was designed to increase the refinery's complexity and profitability by increasing refining capacity to 300,000 b/d as well as equip the plant to process lower-cost heavy, sour, and high-TAN crudes, according to past MRPL annual reports.

As of July 15, 2013, all major process units associated with the expansion had achieved mechanical completion and were awaiting uninterrupted steam and power from the CPP to begin commissioning activities, which MRPL had expected to occur by October 2013, the company said in its most recent annual report.

TAIF Group lets contract for Nizhnekamsk refinery

PSC TAIF-NK, a wholly owned subsidiary of TAIF Group of Kazan, Tatarstan, Russia, has let a construction-related contract to Linde Group, Munich, for two hydrogen plants at its 7 million tonnes/year Nizhnekamsk refinery.

Linde will be responsible for basic and detail engineering, procurement, and supply of equipment and materials for two new hydrogen plants, each with a capacity of around 110,000 normal cu m/hr, according to a Feb. 11 release from Linde.

The hydrogen plants, which are scheduled to be delivered by yearend 2015, will supply high-purity hydrogen to the heavy residue conversion complex at the Nizhnekamsk refinery site, Linde said. The contract is valued at about £120 million, according to Linde.

PSC TAIF-NK's Nizhnekamsk refinery, which is Tatarstan's largest, includes a gasoline plant and gas condensate processing plant.

Takreer lets contract for Ruwais refinery

Abu Dhabi Oil Refining Co. (Takreer) has let a service contract to Honeywell's UOP LLC for a purifying hydrogen system at its 350,000-b/d Ruwais refinery, some 385 miles west of Abu Dhabi City in the United Arab Emirates.

The UOP Polybed PSA system will recover and purify hydrogen for Takreer's carbon black and delayed coker project to meet the increasing need for clean transportation fuels, according to Honeywell.

In addition to recovering and purifying hydrogen from steam reformers and refinery off-gases, Polybed PSA systems can be used to produce hydrogen from other sources such as ethylene off-gas, methanol off-gas and partial oxidation/synthesis gas, Honeywell said.

Takreer previously announced a $10 billion expansion of the Ruwais refinery that will add 417,000 b/d of crude capacity, taking the plant to more than 800,000 b/d. The company expects start-up in first-half 2014 (OGJ Online, Dec. 2, 2013).

TRANSPORTATIONQuick Takes

Tesoro to upgrade rail fleet to more-compliant cars

Tesoro Corp. unit Tesoro Refining & Marketing Co. LLC (TRMC) reported it will begin to replace older cars in its crude oil rail car fleet with post-October 2011 design, CPC 1232-compliant rail cars, after evaluating rail car safety features.

Specifically, TRMC said, the company is "committing that its rail car fleet will consist entirely of the newer DOT-111 design rail cars equipped with reinforced shields and relief devices by mid-2014."

The company added, "While this action applies to the vast majority of crude oil deliveries into Tesoro facilities, beginning in mid-2014 Tesoro will also make rail car design a part of its commercial considerations with all business partners who may ship crude oil into company-owned facilities," which includes Tesoro's 120,000 b/d Anacortes, Wash., refinery as well as the proposed Tesoro-Savage Energy Distribution Terminal (TSEDT) in Vancouver, Wash.

The upgrades to Tesoro's rail car fleet will be completed before construction of TSEDT would begin and before the terminal would start accepting crude oil deliveries, the company said, adding, "Because Tesoro is underpinning the initial capacity of the facility, many of the crude oil deliveries handled at the terminal at start-up will be owned by Tesoro and will arrive in Tesoro rail cars."

Crosstex to add Permian gas gathering capacity

Crosstex Energy is building a 35-mile, 12-in. OD high-pressure natural gas pipeline, providing Permian basin gathering capacity for its previously announced 60-MMcfd Bearkat gas processing complex in Glasscock County, Tex. (OGJ Online, Oct. 28, 2013). The pipeline is underpinned by a long-term, fee-based agreement with a major oil and gas producer in the region.

The 100-MMcfd pipeline, in the eastern portion of the Wolfberry oil play, will provide gas takeaway solutions for constrained producer customers in Howard, Martin, and Glasscock counties. Right-of-way acquisition is under way. Crosstex expects the pipeline to begin operations in this year's second half.

Occidental Petroleum Corp. last year planned to have an average of 25-27 rigs active in the Permian basin, with one third of that program devoted to Wolfberry (OGJ Online, Feb. 1, 2013).

In addition to this project and the Bearkat processing site, Crosstex has made recent Permian basin investments in a joint venture with Apache Corp. (OGJ Online, July 12, 2011) and the Mesquite NGL terminal and 7,500-b/d fractionator. NGLs move by train from Mesquite to Crosstex's Eunice, La., site.

The new pipeline will cost about $70 million.

Oxy to ship NGL to Mont Belvieu on idle NuStar line

NuStar Energy LP has signed a long-term agreement allowing Occidental Petroleum Corp. to ship NGL on NuStar's currently idled, 200-mile, 12-in. OD pipeline between Mont Belvieu and Corpus Christi, Tex. NuStar has begun work to reactivate the line, reverse its flow and convert it from refined products service to NGL service.

The line can move about 110,000 b/d from Corpus Christi. Oxy will use a majority of the line's capacity to transport NGL via an interconnect with an Oxy pipeline to the Oxy Ingleside Energy Center export terminal in Ingleside, Tex. NuStar will continue to market any remaining capacity on the pipeline.

NuStar expects the project to be completed and in full operation second-quarter 2015, with operations at reduced rates possible this year.