OGJ Newsletter

April 14, 2014
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

US House subcommittee forwards LNG-export bill

A US House Energy and Commerce Committee subcommittee voted to forward a bill aimed at facilitating approvals of US LNG exports to the full committee. The Energy and Power Subcommittee's action by 15 to 11 votes was along party lines, with Republicans favoring the move and Democrats opposing it.

The subcommittee also approved an amendment to HR 6 by Rep. Bobby L. Rush (D-Ill.), the subcommittee's ranking minority member, which would require applicants seeking US Department of Energy certification that their exports are in the US national interest to publicly disclose specific destinations of their proposed LNG sales.

The votes came hours before the Ways and Means Committee's Trade Subcommittee was scheduled to hold a hearing on the trade implications of removing barriers to LNG exports and other US energy policy questions.

American Petroleum Institute Pres. Jack N. Gerard applauded the subcommittee's action. "Today's vote is just the latest signal that momentum for action on natural gas exports is stronger than ever," he said, adding, "In the last few weeks, new proposals have won bipartisan support in both the House and Senate, and we are optimistic that members will come together on efforts to harness the full economic and strategic power of America's energy exports."

Gazprom urges Ukraine to settle accumulated debt

OAO Gazprom says Ukraine needs to settle more than $2.2 billion in accumulated debt for Russian gas supplies (OGJ Online, Mar. 5, 2014). The total includes overdue payments for March supplies. Andrey Kobolev, chief executive officer of Naftogaz of Ukraine, met Apr. 3 at Gazprom headquarters with Alexey Miller, chairman of Gazprom's management committee.

Miller also met Apr. 3 with Russia's Prime Minister Dmitry Medvedev. According to a transcript on Gazprom's web site, the natural gas price for Ukraine in April was set at $485 per 1,000 cu m. The Russian government has abolished the "zero customs duty" for Ukraine.

Miller said Ukraine received 1.956 million cu m of gas in March "and so far no payments have come for these supplies." The situation, he said, "is not improving, but only getting worse." Medvedev said, "I think our Ukrainian partners should raise the necessary funds to settle the debts and pay off the current bills."

Laclede to acquire Alagasco for $1.6 billion

Laclede Group Inc., St. Louis, has entered into an agreement with Energen Corp. to acquire subsidiary Alabama Gas Corp. (Alagasco) for $1.6 billion, with an effective purchase price of $1.34 billion.

Alagasco is the largest natural gas utility in Alabama, serving more than 422,000 customers. The transaction is expected to close this year, increasing Laclede's customer base to 1.55 million from 1.13 million.

Laclede said that it made the acquisition in accordance with its regulated growth strategy, including its desire to expand outside of Missouri.

Talisman aims to divest Timor Sea assets

Talisman Energy Inc., Calgary, has placed its Timor Sea production interests up for sale in a move to exit the Kitan and Laminaria-Corallina oil fields as soon as a buyer is found. It has a 25% interest in Kitan oil field, a 40.1% interest in Laminaria, and a 33.33% hold on Corallina.

Kitan, operated by Eni SPA, lies on the northwest edge of the Timor Gap Joint Petroleum Development Authority shared between Australia and East Timor. It has been on stream since 2011 and has produced at rates as high as 40,000 b/d.

Oil is processed through the Bluewater Glas Dowr FPSO. Appraisal work earlier this year saw two successful wells drilled by the Stena Clyde semisubmersible rig at Kitan South and Kitan-6. It is thought the field still contains 20 million bbl of oil.

Laminaria-Corallina oil fields, operated by Woodside Petroleum Ltd., also are in the northwestern Timor Sea, but in Australian waters.

The fields have been on stream since 1999 and have produced about 200 million bbl of oil since then. However the fields are in decline and recent production rates had fallen to 3,400 b/d.

Production is through the Northern Endeavour FPSO.

Talisman is conducting a planned divestment of select capital-intensive assets around the world.

Exploration & DevelopmentQuick Takes

GeoPark makes oil discovery in Colombia

GeoPark Ltd. reported the successful drilling and testing of the Aruco 1 exploration well on the Llanos Block 34 in the central Llanos basin in Colombia.

A test conducted with an electrical submersible pump in the Guadalupe formation, at a total depth of 10,075 ft, resulted in a gross production rate of 1,154 b/d of 16.8° gravity oil. The well flowed with 4.8% water cut through a 42/64-in. choke and wellhead pressure of 193 psi. The company said further production history will be required to determine stabilized flow rates and the extent of the reservoir.

The Aruco discovery is GeoPark's sixth oil discovery on Llanos Block 34. Since acquiring the block in 2012 with no production or reserves, the company has increased production on the block to more than 15,000 b/d gross and more than 6,700 b/d net (OGJ Online, July 11, 2012; Mar. 27, 2013; June 17, 2013).

"We have an ambitious risk-balanced work plan for 2014 with 50-60 new wells, with the objective of continuing to build an attractive and enduring upstream business in the high-potential Latin American hydrocarbon market," said James F. Park, GeoPark chief executive officer.

GeoPark, operator of Llanos Block 34, holds 45% working interest.

Large seismic survey starts offshore Norway

CGG has begun shooting the largest broadband multiclient seismic survey it has conducted in Northwest Europe and what it calls the largest multiclient 3D survey ever shot by any company offshore Norway.

The 19,000-sq km survey will cover more than 80 production licenses in the North Sea between the Horda platform in the southeast to the Sogn graben in the north. The area covers all of Quadrant 35 and parts of Quadrants 31, 32, and 36, including the Troll, Brage, Fram, and Gjoa licenses.

Responding to increased exploratory interest due to recent discoveries in the Horda area, the survey aims to provide a large, uniform dataset with increased seismic resolution, CGG said.

Data acquisition by the Viking Vanquish seismic vessel, to be joined later by a second vessel, will continue into 2015.

OMV, Murphy acquire blocks offshore Namibia

OMV AG and Murphy Luderitz Oil Co. Ltd. have acquired 65% interest in Blocks 2613A and 2613B offshore Namibia from Brazil's Cowan Petroleum.

Murphy will operate the joint venture with 40% interest, OMV will hold 25%, Cowan will retain 20%, and the remaining 15% will be held by Namibian national oil company Namcor.

The joint venture partners will conduct an extensive 3D seismic program starting in the second quarter.

"Offshore Namibia offers great exploration potential as it is largely unexplored, yet has all the elements of an effective hydrocarbon system. The transaction is fully in line with our growth strategy and our focus on the North Sea region, Black Sea, and opportunities like these in Sub-Saharan Africa," said Jaap Huijskes, OMV executive board member responsible for exploration and production.

OMV acquired interests in Madagascar and Gabon in 2013 (OGJ Online, Aug. 30, 2013; Dec. 18, 2013).

Drilling & ProductionQuick Takes

Shell starts crude oil exports from Majnoon field

Royal Dutch Shell PLC has exported its first shipment of crude from Iraq's Majnoon field after surpassing its initial commercial production target. The field, operated in conjunction with South Oil Co., Malaysia's Petronas, and Missan Oil Co., is producing 210,000 b/d, said Shell.

The milestone comes just 8 months after Majnoon production was restarted by the partners following major overhauls, including clearing war munitions, upgrading safety standards, and building a greenfield central processing plant that will allow increased capacity. Shell said it drilled 18 wells in that time.

"The lifting of Shell's first oil shipment from Majnoon has great significance to us and our partners in the [Iraqi] government as it is a testimony to our shared progress and signals the start of Majoon's long-term journey toward generating further revenue for Iraq's economy, and as an investment in Iraq's future," said Shell Iraq Vice-Pres. and Chairman Hans Nijkamp.

In 2010, Iraq's Ministry of Oil signed a 20-year contract with Shell and its partners for the development of Majnoon field, one of the largest oil fields in the world. (OGJ Online, Jan. 18, 2010). Shell owns a 45% stake, Petronas 30%, and Missan 25%.

The consortium targets a production plateau of 1.8 million b/d of oil from its Majnoon operations.

Statoil starts production from Gudrun field

Statoil ASA and partners have started oil and natural gas production from Gudrun field in the Norwegian North Sea (OGJ Online, Sept. 28, 2011).

Gudrun is the first new Statoil-operated platform to come on stream on the Norwegian continental shelf since 2005. "This is a red-letter day for the company," said Arne Sigve Nylund, an executive vice-president.

Gudrun field lies in PL025 about 55 km north of the Sleipner installations. The platform will produce from seven production wells. Statoil expects to recover 184 million boe.

Statoil has 51%. GDF Suez E&P Norge has 25% and OMV Norge AS 24%.

Gudrun has a process facility for partial stabilization of oil and gas, which are transported to the Sleipner A platform. The oil is routed to Karsto, while the gas goes to European markets through gas pipelines tied in to Sleipner.

Some 112 km of pipeline have been laid, along with a 55-km power cable on the seabed between Gudrun and Sleipner.

The reservoir is at a depth of 4,200-4,700 m and originates from the Jurassic. Gudrun was discovered in 1975. Statoil said the "high temperature-high pressure field" required new drilling technology, which was "one of the reasons why these reserves were left in the bank for such a long time."

Statoil farms out interest in block off Angola

Statoil ASA has agreed to farm out a 15% interest in Block 39 of the Kwanza presalt basin offshore Angola to WRG Angola Block 39 Ltd. (WRG). The deal is subject to approval by Sonangol EP, the Angolan minister of petroleum, and the license partners, according to the company.

Statoil operates Block 39 and retains a 40% interest after the farmout. The remaining interest is held by Sonangol (30%) and Total SA (15%) in addition to the interest held by WRG.

"This is part of Statoil's active portfolio management," said Gareth Burns, senior vice-president for exploration strategy and business development.

According to Statoil, the Angolan continental shelf is the largest contributor to its oil production outside Norway. Angola yielded about 200,000 boe/d in equity production in 2013, about 28% of the company's total international oil and gas production.

Statoil says it will start drilling in its Kwanza-operated portfolio during this year's second quarter, with Dilolo-1 becoming the first high-impact prospect drilled on Block 39. After Dilolo, Statoil will operate its second commitment well on Block 38.

WRG acquired 15% interest in the Statoil-operated Block 38 from Sonangol. Following the acquisition, Statoil still holds a 55% interest with the remaining 30% held by Sonangol.

WRG is a 50-50 joint venture of White Rose Energy Ventures and Genel Energy PLC.

PROCESSINGQuick Takes

CNPC, Shell strengthen global cooperation

China National Petroleum Corp. (CNPC) and Royal Dutch Shell PLC have reached an agreement to deepen their strategic partnership by increasing cooperation in the development of both companies' global projects.

The agreement—China Petroleum & Shell Global Cooperation Agreement—was signed by the two companies Apr. 8 in Beijing, according to CNPC.

Under the deal, CNPC and Shell have agreed, on a global scale, to strengthen long-term mutually beneficial cooperation in the development of unconventional resources, deep water, LNG, and other upstream and downstream businesses, according to CNPC.

Shell and CNPC previously signed a Global Alliance Agreement to jointly pursue opportunities internationally and in China. The two parties also signed an agreement to establish a well manufacturing joint venture (50% CNPC and 50% Shell) (OGJ Online, Mar. 20, 2012).

Chevron launches Gulf Coast petchem project

Chevron Phillips Chemical Co. LP has broken ground on its US Gulf Coast petrochemicals project at the company's existing Cedar Bayou plant in Baytown, Tex.

A groundbreaking ceremony held on Apr. 2 marked the start of construction for the project, which was sparked by increased shale resource development, the company said.

First announced in March 2011 (OGJ Online, Mar. 29, 2011), the Texas Gulf coast project will include a 1.5-million tonne/year ethane cracker to be built at the Cedar Bayou plant in Baytown, and two 500,000-tpy polyethylene plants to be constructed in Old Ocean, Tex. (OGJ Online, Nov. 20, 2013; May 2, 2012).

The engineering, procurement, and construction phase of the ethane cracker project will be executed through a joint venture of JGC (USA) Inc. and Fluor Enterprises Inc., while Gulf Coast Partners—a partnership of Technip USA Inc. and Zachry Industrial Inc.—will execute EPC for the two polyethylene plants, Chevron Phillips Chemical said.

Chevron Phillips Chemical will host a groundbreaking for the polyethylene units on June 17.

The estimated completion date for the project is in 2017, according to the company.

Contracts inked for Egyptian petchem complex

Carbon Holdings Ltd. (CHL) of Egypt has let contracts for engineering, procurement, construction, and commissioning (EPCC) activities related to the development of its Tahrir petrochemical complex planned at Ain Sokhna, Egypt (OGJ Online, Oct. 19, 2010).

The contracts, awarded to a consortium consisting of Maire Tecnimont SPA, Milan, and Netherlands-based Archirodon Group NV, were signed during an Apr. 6 ceremony in Cairo, Maire Tecnimont said.

The EPCC contracts, awarded on a direct-negotiation basis, are valued at $1.7-1.95 billion, 50% of which will go to Maire Tecnimont, the company said.

Maire Tecnimont's scope of work will consist in EP activities for a utilities island, seawater desalination system, wastewater treatment, power plant, and auxiliary packages and systems, as well as in the commissioning of all related services.

Archirodon's scope of work under the contract will cover EPC supply of sea works, tanks, jetty works, and pipelines, including construction activities for all associated structures, according to Maire Tecnimont.

Financial close the project is scheduled to take place by yearend, Maire Tecnimont said.

CHL previously awarded contracts for work on the Tahrir petrochemical complex to Foster Wheeler USA Corp. and Univation Technologies for project management consultancy and polyethylene process technology, respectively (OGJ Online, Oct. 19, 2010).

Most recently, in November 2013, CHL let a $500 million contract to GE to provide technology and equity support to the greenfield naphtha cracker and olefins complex at Tahrir, including aero-derivatives gas turbines, steam turbines, generators, water filtration and desalination equipment, turbo machinery compressors, and industrial solutions services, GE said in a Nov. 18, 2013, release.

Once completed, the Tahrir complex, which will be at the entry of the Suez Channel, will have a combined ethylene and propylene production capacity of 1.36 million tonnes/year, making it the world's largest naphtha liquid cracker, says GE.

Set to generate annual revenue of $6 billion, the Tahrir project additionally will strengthen Egypt's overall annual exports by over 25%, said Basil El-Baz, chairman and chief executive officer of Carbon Holdings, in November 2013.

Azure Midstream starts up Haynesville gas plant

Azure Midstream Energy LLC, Houston, has started up its 10-MMcfd Fairway gas processing plant in San Augustine County, Tex. An Azure Midstream spokesperson told OGJ that the plant consists of two 5 MMcfd freon refrigeration plants.

Azure said the plant came into service on Mar. 17 and will recover NGLs from gas produced from the James Lime formation. It will return residue gas into Azure's East Texas Gathering System (OGJ Online, Nov. 18, 2013) for delivery into interconnections with Gulf South's 42-in. pipeline, CenterPoint Energy Gas Transmission's 42-in. line near Carthage, Gulf South's 30-in. pipeline at Milam, and Azure's interconnection with Natural Gas Pipeline Co. of America in Nacogdoches County, Tex.

NGLs recovered at the Fairway plant will move by truck to fractionation in East Texas, South Louisiana, or Mont Belvieu.

The James Lime formation in the Haynesville shale in East Texas has rich associated gas that requires processing to remove the heavy end of the produced gas stream. The announcement said that olume growth for the central portion of Azure's gathering system, where many of the company's customers are drilling, has resulted in the need for additional gathering.

Azure Midstream operates more than 1,300 miles of pipelines, 16,000 hp of compression, 2.4 bcf of gas treating, and natural gas throughput of more than 1.1 bcfd.

TRANSPORTATIONQuick Takes

Aussie LNG projects reach respective milestones

Two of Australia's largest LNG projects reached significant milestones.

The first hull block of the Inpex Group's Ichthys LNG project's central processing facility (CPF) has been laid down at the Samsung Heavy Industry Geoje Shipyard in South Korea.

The CPF, which will be the world's largest semisubmersible platform when completed in 2015, will gather gas from the Ichthys field in the Browse basin offshore Western Australia. Extracted condensate will be sent to a nearby floating storage and offloading vessel while the processed gas will be piped 890 km to the Darwin LNG processing plant.

The CPF will have topside dimensions of 150 m by 110 m.

Ichthys will produce 8.4 million tonnes/year of LNG from 2016. It will also produce and sell 100,000 b/d of condensate and 1.6 million tpy of LPG at its peak.

Separately, onshore Queensland, the final three prefabricated modules for the Santos Ltd.-operated Gladstone LNG (GLNG) project have arrived on site at Curtis Island.

The Train 1 facility comprises 82 modules and it has taken 2 years to construct and transport these components to the LNG plant. The final three modules are all cryogenic modules weighing a total of 2,777 tonnes.

The GLNG project will produce 7.8 million tpy of LNG with first production scheduled for 2015.

Deals advance plans for FSRU off Puerto Rico

Excelerate Energy, Houston, and the Puerto Rico Electric Power Authority have executed agreements for the procurement, construction, and operation of the Aguirre Offshore GasPort LNG terminal off the southern coast of the country, the firm said.

The agreements include the provision of one of Excelerate's floating storage and regasification units (FSRU) specifically designed to provide closed-loop regasification, together with the design, construction, and operation of an offshore terminal for berthing the FSRU and the reception and transfer of LNG from carriers of various sizes.

The terminal, off Puerto Rico's southern coast near the town of Salinas, would provide fuel to the Aguirre central complex and underpin the conversion of power generation from imported oil to natural gas.

The Central Aguirre Power Complex will convert 900 Mw of existing power generation to be dual-fueled, capable of using No. 2 diesel or natural gas or both as primary fuel (OGJ Online, Apr. 19, 2013).

The project is in the approval process in the US Federal Energy Regulatory Commission, and Excelerate expects it to receive its draft environmental impact statement next month. Pending FERC approval, Excelerate said, construction could begin in this year's fourth quarter.

South Africa okays Oiltanking crude terminal

The government of South Africa has granted Oiltanking MOGS Saldanha RF Pty. Ltd. (OTMS), a joint venture of OTGC Holdings Pty. Ltd. and MOGS Pty. Ltd., environmental authorization for a 13.2-million bbl commercial crude oil blending and storage terminal, comprising twelve in-ground concrete tanks, at Saldanha Bay. Eight specialist studies occurred over 2 years as part of the environmental impact assessment.

OTMS also conducted a marine oil pollution control study to ensure any and all environmental risks are adequately understood and addressed. This study was not required as part of environmental approval.

The 12 tanks have a layer underneath them that will collect oil in the event of a leak and relay it to an underground collection point for redirection to a nonleaking tank. OTMS says this layer will be continuously monitored.