OGJ Newsletter

Exploration & Development — Quick Takes

Alaska's DNR to hold Cook Inlet, Alaska Peninsula sales

Alaska's Department of Natural Resources has scheduled its annual Cook Inlet and Alaska Peninsula area-wide oil and gas lease sales for May 7.

The Cook Inlet lease sale area is divided into 815 tracts ranging in size from 100 to 5,760 acres, while the Alaska Peninsula lease sale area is divided into 1,047 tracts ranging in size from 1,280 to 5,760 acres.

"Cook Inlet holds significant oil and gas resources and we are looking forward to a successful lease sale and the continued development of these resources," said Bill Barron, the state's Division of Oil and Gas director.

Woodside consolidates position in Porcupine basin

Woodside Petroleum Ltd. has consolidated its position in Porcupine basin off western Ireland following the award of two exploration licences to Petrel Resources PLC, Dublin.

Woodside signed a farm-in deal with Petrel in mid-2013 pending the official award of the licences (3/14 and 4/14) (OGJ Online, July 2, 2013). The company will take an 85% interest in both and assume operatorship. The licences are both valid for 15 years.

Petrel has already identified several geological plays in the acreage. The company says the structural make up on this Atlantic margin region is different from that of the North Sea and it is keen to run a 3D seismic survey during the 3-year Phase 1 program.

Petrel rates the two permits, which cover a total of 1,400 sq km, as priority areas in the basin.

Woodside will carry Petrel through Phase 1 and begin with a full technical review of historic data before moving onto the seismic acquisition.

Woodside has already secured a position in the Porcupine basin with a 90% stake in the 1,271-sq-km permit FEL 5/13 following an earlier deal with Bluestack Energy Ltd. It also has a 60% interest in two licence options in the region acquired from Two Seas Oil & Gas Ltd. in October 2013.

Woodside believes the Irish assets have low-cost access and they are a good match for its deepwater exploration capabilities.

KrisEnergy increases assets offshore Bangladesh

KrisEnergy (Asia) Ltd. has been awarded a 45% nonoperating working interest in the production-sharing contract for the shallow-water Block SS-11 offshore Bangladesh.

Santos Sangu Field Ltd. holds 45% of the block as operator with Bangladesh Petroleum E&P Co. Ltd. holding the remaining 10%.

Block SS-11 is in the Bay of Bengal and covers 4,475 sq km above the Bengal Fan. Water depth for the block ranges from 200 m to 1,500 m in its farthest southwest portion. The PSC includes a 5-year term, acquisition, and processing of 1,893 line-km of 2D seismic data and 300 sq km of 3D seismic, and a commitment to drill one exploration well.

In April 2013, KrisEnergy initiated the acquisition of a 30% working interest in Block 9 onshore Bangladesh, which contains Bangora gas field. The transaction was finalized in December (OGJ Online, Dec. 17, 2013). KrisEnergy's director of business development Richard Lorentz said, "We see high potential in the geology in the offshore area although there has been negligible exploration activity in SS-11 itself."

Contracts awarded for Barents Sea seismic surveys

The Statoil ASA-operated collaboration for joint seismic acquisition in the recently opened southeastern Barents Sea awarded contracts to WesternGeco, Houston, and Petroleum Geo-Services ASA, Oslo. The companies will acquire 3D data from blocks covering 13,700 sq km along the Norway-Russia Arctic border, said Statoil.

The surveys will extend through this year's third quarter and will use broadband technology. Statoil expects this technology to improve resolution on the seismic data and provide a more detailed interpretation of the subsurface.

Statoil operates the joint-acquisition project on behalf of 33 participating oil and gas companies (OGJ Online, Dec. 10, 2013; Feb. 25, 2014). The project's objective is to prepare for applications to the 23rd licensing round on the Norwegian continental shelf (OGJ Online, Sept. 3, 2013).

Caza reports results on Bone Spring test well

Caza Oil & Gas Inc., Houston, says its second Bone Spring test well in West Copperline, NM, produced at a peak gross rate of 879 b/d of oil and 1,374 Mcfd of natural gas.

The well reached a depth of 15,800 ft in the third Bone Spring Sand interval and was fracture stimulated beginning on Feb. 20. The well continues to produce on a 22⁄64-in. adjustable choke at 1,650 psi at a rate of about 1,108 boe/d.

Infrastructure in place since the completion of the first West Copperline well in the second Bone Spring Sand interval, directly above the recent test well, has enabled the sale of oil and gas from the new well, said Caza.

Drilling & Production — Quick Takes

Gazprom Neft completes test on second Badra well

JSC Gazprom Neft has completed testing its second well in Badra field in Iraq, with average flow rates of 10,000 b/d from three tests.

An earlier well recorded a natural flow rate of 7,000 b/d (OGJ Online, Jan. 9, 2014).

Drilling is continuing on a third well, and six additional wells are planned. Construction is almost complete on the first phase of a central gathering station.

The company said commercial production from Badra should begin in the next few months (OGJ Online, Mar. 5, 2014). By 2017, production is forecast to reach 170,000 b/d.

SSPC advances Malikai oil field work

Sabah Shell Petroleum Co. Ltd. (SSPC) let a contract to Flowserve Corp. for supply of custom designed water injection and liquid transfer pumps for the Malikai oil field project, which lies 68 miles offshore Sabah, Malaysia. Flowserve also will supply pumps for seawater lift, firewater, drain caisson, flare knockout drum, circulation, and sump services.

This TLP, which will weigh 26,000 tonnes including topsides and hull, will be designed as a fully manned platform to be installed 110 km offshore Sabah in 500 m of water. The structure will have the capacity to process 60,000 b/d of oil and 1.4 million cu m/day of gas.

Flowserve will provide four variable speed drive barrel pumps of super duplex stainless steel construction. Two WIK (BB5) multistage double case diffuser pumps will supply high-pressure deoxygenated water for well injection and a pair of HSO (BB5) multistage, double case volute pumps will transport the crude from the field to the KBB processing facility.

Flowserve will additionally supply 6 WUC (VS6) vertical, double case, multistage pumps, 6 Pleuger submersible pumps in super duplex materials, and 6 HPX (OH2) single stage API process pumps for various process services.

SSPC in 2004 reported an oil discovery on Block G with the Malikai-1 exploration well (OGJ Online, Sept. 22, 2004). In 2006, the company made its fourth discovery with the Pisagan-1A exploration well on Block G (OGJ Online, Jan. 19, 2006).

Southwestern Energy to acquire Niobrara acreage

Southwestern Energy Co., Houston, has agreed to purchase 312,000 net acres in northwest Colorado targeting oil, natural gas liquids, and natural gas in the Niobrara shale play, the company reported. Southwestern will acquire the land from Quicksilver Resources Inc. and Swepi LP, a unit of Royal Dutch Shell PLC, for $180 million.

"This acreage covers a substantial area in the Sand Wash basin," said Steve Mueller, Southwestern president and chief executive officer. "Basin characteristics include proven oil production with minimal water cut, preferred fluid-phase windows, demonstrated overpressure, evidence of matrix permeability and porosity, a continuous reservoir with ample storage capacity, and potential upside from downspacing and stacked reservoir benches."

The sale is expected to close in this year's second quarter. The company expects to begin drilling as early as June.

EnerJex begins production from J sand well

EnerJex Resources Inc., San Antonio, has started natural gas production from a well in the J sand formation of Adena field, Colorado's third-largest oil field. The well is flowing at a rate of 0.5 MMcfd of liquids-rich natural gas, the company reported.

EnerJex owns most of Adena field after a merger last year with Black Raven Energy Inc. (OGJ Online, July 29, 2013). The company plans to begin production from two additional wells before April.

About 130 wells in the field are shut in or temporarily abandoned. EnerJex has identified 75 wells to be reactivated in the J sand formation or recompleted in the D sand formation. Harsh operating conditions and cold weather have slowed operations over the past month, the company said.

PROCESSING — Quick Takes

Sasol advances US ethylene projects

Sasol Ltd. said it has commissioned the world's first commercial ethylene tetramerization unit at its Lake Charles, La., chemical complex (OGJ Online, Sept. 13, 2011).

Entered into operation in February, the project, which uses Sasol-developed technology to convert ethylene to higher-value comonomers 1-octene and 1-hexene, currently is in start-up, with first product already produced, the company said.

Sasol expects the 100,000-tonne/year tetramerization plant to be fully operational by midyear.

Sasol also said it continues to progress with the front-end engineering and design phase of an integrated ethane cracker and downstream derivatives complex and adjacent GTL plant in Westlake, La. (OGJ Online, Nov. 25, 2013; Dec. 3, 2012).

The final investment decision for the Westlake ethane cracker and downstream derivatives project is anticipated by yearend, with FID for the GTL plant expected to follow subsequently within 18-24 months, Sasol said.

FEED phase also remains ongoing for a planned 470,000-tpy high-density polyethylene (HDPE) plant jointly under development with Ineos, according to Sasol, which said it expects FID on the project by yearend.

While Sasol previously confirmed in a July 24, 2013, release that the HDPE plant will be located in the US to complement production from the company's ethane cracker and derivatives project in southwest Louisiana, a final site decision has yet to be disclosed.

Fire hits Israeli petrochemical plant

Gadiv Petrochemicals Industries Ltd., a wholly owned subsidiary of Oil Refineries Ltd. (Bazan), currently is evaluating impacts from a fire that broke out on Mar. 7 in one of the xylene furnaces at the plant, which lies in Bazan's 180,000-b/d refining complex in the Haifa Bay area of northern Israel along the eastern Mediterranean Sea.

Early indications show the fire apparently started as a result of a puncture in a xylene tube in the combustion section of the furnace, which produces aromatics and solvents, according to Bazan.

The fire, which was quickly extinguished by company employees after isolating the oven, caused no reported injuries or damages to the environment, Bazan said.

While economic impacts of the incident still are under evaluation, Bazan anticipates Gadiv will resume normal operations this week at most of the plant's sectors and that there will be no significant impact on fulfilling existing supply obligations to its customers, according to the company.

Ukraine gas plant starts up

KUB-Gas LLC, a partially owned unit of Calgary-based Serinus Energy Inc., has completed and commissioned a gas processing plant at Makeevskoye, Ukraine.

Supplementing existing infrastructure, the added capacity raises KUB-Gas's overall processing capacity to 68 MMcfd from 30 MMcfd. KUB-Gas anticipates gross production will ultimately increase by 5 MMcfd or more from existing wells previously constrained by plant limits, with further increases expected from ongoing drilling.

KUB-Gas is partially owned by Serinus (70%) through its 70% shareholding of KUBGas Holdings Ltd..

Construction of the Makeevskoye plant began in September 2013 and was completed in December. Testing and commissioning followed in early 2014 until final operating approvals were received, and gas began flowing into the plant on Mar. 6.

The plant was built at a cost of about $7.8 million.

Serinus's announcement explained that existing facilities in Makeevskoye could not handle increasing production resulting from KUB-Gas's recent exploration and development successes.

By diverting some of the newer wells in Makeevskoye to the plant, Serinus anticipates benefits at both Makeevskoye and Olgovskoye fields (OGJ Online, June 3, 2013).

Serinus closed out 2013 with overall production of 4,986 boe/d, of which 73% came from its Ukrainian assets. The company said its target for this year is to increase overall production by 30-35%.

NWR lets contract for Alberta bitumen refinery

Partners in the North West Redwater Partnership (NWR) have let a services-related contract to Jacobs Engineering Group Inc. for work at NWR's greenfield bitumen refinery project in Sturgeon County, about 45 km northeast of Edmonton, Alta. (OGJ Online, Jan. 28, 2010).

Under the terms of the contract, Jacobs will provide engineering and procurement services for the refinery's utilities requirements, which is a fundamental component of Phase 1 of the project, Jacobs said. A contract value was not disclosed.

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

Once completed, Phase 1 of the $8.5 billion 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.

Following commissioning of all three phases, the Sturgeon refinery will operate at a capacity of 150,000 b/d to produce diesel, diluent, and other bitumen products for both Canadian and global markets.

NWR plans to commission commercial operations for Phase 1 in September 2017 (OGJ Online, Mar. 3, 2014; Dec. 20, 2013).

TRANSPORTATION — Quick Takes

Enbridge receives approval for Line 9B reversal

Enbridge Pipelines Inc. received permission from Canada's National Energy Board to proceed with its Line 9B reversal and Line 9 capacity expansion project. NEB approved the project with conditions, allowing Enbridge to operate all of Line 9 in an eastward direction, moving crude from western Canada and the US Bakken shale to refineries in Ontario and Quebec.

Enbridge will reverse flow on a 639-km segment of Line 9B between North Westover, Ont., and Montreal, Que., and increase Line 9's overall capacity to 300,000 b/d from 240,000 b/d from Sarnia to Montreal. Enbridge will also be allowed to transport heavy crude oil.

The approval is subject to Enbridge fulfilling 30 conditions, including requiring Enbridge to undertake activities regarding pipeline integrity, emergency response, and continued consultation. NEB's reasons for decision and conditions also reference Enbridge's ongoing emergency response planning and consultation with municipalities, first responders, and Aboriginal groups.

NEB in 2012 approved reversal of the western portion of Line 9, a 194-km section linking Sarnia to North Westover (OGJ Online, July 30, 2012). This reversal was completed last August and Line 9A now flows in a west-to-east direction supplying Imperial Oil's 112,000-b/d Nanticoke refinery.

Reaction from the environmental community was quick and pointed. "While today's ruling brings the threat of tar sands to New England's doorstep, it will only stiffen the resolve of New Englanders who have adamantly rejected the idea of allowing tar sands into the region at every turn," said Jim Murphy, National Wildlife Federation legal counsel. "New England will refuse to accept the risks of this carbon-intensive dirty fuel, and instead continue the push forward for a clean, advanced energy future that will benefit our children and wildlife."

South Stream pipeline project moves forward

OAO Gazprom's board has approved the signing of a contract for the laying of the first string of the South Stream gas pipeline's offshore section. It also has approved a pipe procurement contract for the second string of the section.

The contract for the first string will envisage the landfalls infrastructure development and the construction of production facilities for four offshore gas pipeline strings in the shore crossing areas in Russia and Bulgaria, Gazprom said.

South Stream Transport—a consortium of Gazprom, Italy's Eni SPA, France's Electricite de France (EDF), and Germany's Wintershall Holding GMBH—on Jan. 29 signed a contract and launched a tender among Russian and German pipe plants for the procurement of more than 75,000, 12-m pipes with a diameter of 813 m for the first string.

South Stream's offshore section will be comprised of four parallel strings laid under the Black Sea within a single routing at the depth of more than 2,200 m. Each string will be longer than 930 km.

The contracts are expected to be signed by the end of March. Gazprom plans to begin deliveries on one 15-billion cu m/year string of South Stream by yearend 2015, with a second string bringing capacity to 30 billion cu m/year in 2016 (OGJ, Feb. 3, 2014, p. 97).

The pipeline, which will stretch across the Black Sea to southern and central Europe with an expected capacity of 63 billion cu m, will reach its full design capacity in 2018. Construction on the pipeline began in December 2012 near Anapa in Krasnodar Territory (OGJ Online, Jan. 20, 2012).

Gazprom holds 50% stake in the project, Eni 20% (OGJ Online, Dec. 3, 2007; Feb. 18, 2011), and Wintershall and EDF each with 15% (OGJ Online, Sept. 17, 2009; Dec. 3, 2009).

TAGP signs with Tajiktransgaz for Line D

Trans-Asia Gas Pipeline Co. (TAGP) signed with Tajiktransgaz to establish a company to manage construction of Line D of the Central Asia-China Gas Pipeline.

The agreement was signed Mar. 4 in Dushanbe, Tajikistan. TAGP is a subsidiary of China National Petroleum Corp.

Feasibility studies have been completed and construction of the Takijistan section of Line D is expected to start this year.

The Chinese government in September 2013 signed intergovernmental agreements on Line D with Uzbekistan, Tajikistan, and Kyrgyzstan. Preparations for Line D began after the signing of a gas supply agreement in 2011 between China and Turkmenistan.

CNPC said 80 billion cu m/year of gas will be transported from Central Asia to China after construction of Line A/B/C/D and auxiliary facilities in China are completed.