GENERAL INTEREST — Quick Takes
Russia shuts off natural gas shipments to Ukraine
Russia's Gazprom has halted shipments of natural gas to Ukraine after the collapse of negotiations over prices. The shutdown is the first since January 2009 (OGJ Online, Jan. 7, 2009).
In a daily market update, analysts at Raymond James & Associates Inc. pointed out the differences between the two disputes: "In contrast to the 2009 gas crisis,…the fact that this is June will naturally mute the impact of the supply cut-off. In the past, these gas shutdowns have had an impact beyond Ukraine, across central and eastern Europe, as far west as Germany."
RJA analysts said, "Since the vast majority of the pipelines carrying Russian gas westward traverse Ukraine, Ukraine can effectively siphon whatever gas it needs out of the portion allocated to other customers. The immediate political backdrop, of course, is the crisis over Crimea and eastern Ukraine."
They added that the broader context is Europe's energy security. "European countries have been taking proactive steps to reduce their dependence on Russian gas—precisely to protect themselves from such an eventuality—including more LNG imports, greater renewable power adoption, and tentative moves towards domestic shale gas development. Similarly, Russia's recent gas megadeal with China will result in the diversification of its gas exports as well," they said.
Chevron to sell interests in Chad, Cameroon
Chevron Corp. reported that its subsidiary Chevron Global Energy Inc. has sold its 25% nonoperated interest in a producing oil concession in southern Chad and the related export pipeline interests to the Republic of Chad for $1.3 billion. The sale closed June 13.
"These assets have played a significant role for Chevron in Africa for the past 14 years," said Ali Moshiri, president of Chevron Africa & Latin America Exploration & Production Co. "They have been a profitable part of our portfolio for many years. The combination of current market conditions and the size of the assets relative to our portfolio make this an ideal time for a divestiture."
The transaction includes the sale of the Chevron subsidiary's interests in seven fields in Chad's Doba basin, which in 2013 had an average net crude oil production of 18,000 b/d. The sale also includes the Chevron subsidiary's 21% nonoperated interest in a pipeline system that transports crude to the coast of Cameroon as well as associated marine facilities.
Williams to buy Access Midstream Partners
Williams, Tulsa, has agreed to acquire the 50% general partner interest it doesn't now own in Access Midstream Partners LP, Oklahoma City, along with limited partnership units raising its stake to 50% from Global Infrastructures Partners II for $5.995 billion cash.
Williams also proposes to merge Access Midstream with Williams Partners LP, of which it is general partner. Williams bought its original half-interest in Access Midstream and 23% of the limited partnership interests from Global Infrastructure Partners II in December 2012.
Access Midstream is a gathering and processing master limited partnership formed in 2010. It's active in the Barnett, Eagle Ford, Marcellus, Haynesville, Niobrara, Midcontinent, Utica, and Permian basin plays in nine states.
Its assets, valued at about $8.3 billion, include more than 6,300 miles of gathering and transmission pipeline. The company gathers about 3.8 bcfd of natural gas.
The acquisition isn't contingent on completion of the proposed merger.
The proposal is for an exchange of units at the rate of 0.85 unit of Access Midstream per unit of Williams Partners, subject to adjustments.
The resulting master limited partnership would be called Williams Partners LP.
The existing Williams Partners owns interests in three interstate gas pipelines—Transco, Northwest, and Gulfstream—with combined peak-day delivery capacity of about 14 bcfd.
It also owns gas-gathering and processing assets in Colorado, New Mexico, Wyoming, the Gulf Coast, and the Marcellus shale region of Pennsylvania.
Its Gulf Coast assets also include a petrochemical plant at Geismar, La., with capacity of 1.3 billion lb/year of ethylene.
Crestwood Midstream secures capital boost
Crestwood Midstream Partners LP has received commitments of as much as $500 million in preferred equity for expansions and development projects in unconventional resource plays in the US.
The company has entered into definitive agreements for the sale of new preferred units worth up to that amount to a group of investors including Magnetar Capital, affiliates of GSO Capital Partners LP, and GE Energy Financial Services.
At the time of the agreement, Crestwood sold $300 million of the preferred units at a price reflecting a 16% premium to the closing price of its common units. The company expects to issue $200 million of additional preferred units to the investors before Sept. 30, 2015.
Crestwood's activities include gathering, processing, treating, compression, storage, and transportation of natural gas; transportation and terminalling of NGL; and gathering, storage, terminalling, and marketing of crude oil.
Exploration & Development — Quick Takes
Partners make 'high-impact' find offshore Tanzania
Statoil ASA and coventurer ExxonMobil Corp. have made what the companies are calling a "high-impact" gas discovery in the Piri prospect offshore Tanzania, marking the sixth discovery on Block 2 by the firms (OGJ Online, Dec. 6, 2013).
Piri-1, drilled by the Discoverer Americas drillship, is 2 km southwest of the Lavani-1 well in 2,360 m of water. Discoverer Americas is now drilling the Binzari prospect on Block 2.
The discovery was made in the same Lower Cretaceous sandstones as the gas discovery in the Zafarani-1 well drilled in 2012 (OGJ Online, Dec. 22, 2012).
Statoil says discovery of an additional 2-3 tcf of gas in place in the Piri-1 well brings to 20 tcf the total of in-place volumes on the block.
Additional prospectivity has been mapped and will be tested throughout this year and next, Statoil said, adding that the company expects to drill several more exploration and appraisal wells in the area.
Statoil operates the license on Block 2 on behalf of Tanzania Petroleum Development Corp. with 65% working interest. ExxonMobil Exploration & Production Tanzania Ltd. holds the remaining interest. Statoil has been in Tanzania since 2007, when it was awarded the operatorship for Block 2.
Stall continues for Lebanon licensing round
Lebanon's Petroleum Administration (LPA) awaits government action to finalize the country's licensing round announced Apr. 18, 2013. A spokesman from Petroleum Geo-Services (PGS) represented the Lebanon's Petroleum Administration in absentia at the European Association of Geophysicists & Engineers' annual conference on June 17.
The country has delineated 10 blocks, five of which are offered in the tender, although the act has not been ratified by Lebanese officials. In addition, the final versions of the country's exploration and production agreement have not been decreed.
"The country currently has no president serving in office," the spokesman said. On May 24 President Michel Suleiman's 6-year term expired and the Lebanese Parliament failed to appoint a successor. The political situation in Lebanon has cast a shadow over specific timelines for the country's bid round.
To date, 12 operators have been prequalified to bid along with 34 nonoperators. Companies await final decrees, and the bidding period is slated to end in August. Interest in the region is primarily driven by recent offshore discoveries in Israel (OGJ Online, Dec. 4, 2013) and Cyprus (OGJ Online, Oct. 4, 2013). Early contestants for Lebanon's first licensing round expect this discovery trend to continue offshore the country. LPA plans to announce awards in November, although delays could be imminent if the political situation remains unchanged.
Beach Energy, 3D Oil form JV for Otway basin permit
Beach Energy Ltd., Adelaide, has acquired a 20% interest in Tasmanian offshore Otway basin permit T/49P from 3D Oil Ltd., Melbourne, for $3 million (Aus.).
The two companies have also formed a joint venture through a joint operating agreement to explore the area.
Beach will pay 3D Oil the $3 million in cash. 3D Oil will remain operator.
Plans include a 755 sq km seismic acquisition program in the next 12 months.
T/49P is about 20 km west of King Island at the western entrance to Bass Strait and close to Geographe and Thylacine gas fields in the adjacent permit. It has an area of 4,960 sq km in 100 m of water.
Drilling & Production — Quick Takes
RPSEA aids seismic, well planning research
The Research Partnership to Secure Energy for America will provide $1.9 million to a wholly owned subsidiary of the Society of Exploration Geophysicists for joint-industry research into the use of seismic data in well planning.
SEG Advanced Modeling Corp. (SEAM) is conducting the project, which it calls Pressure Prediction & Hazard Avoidance.
"The intent of this project is to show our industry what current practice will produce when compared to a perfectly known geologic setting and fluid setting when the data used to determine pore pressure is as perfect as it will ever be," said Bill Head, ultradeepwater senior manager of RPSEA, a nonprofit organization that manages research programs under contract to the Department of Energy National Energy Technology Laboratory. "Then opportunity exists to improve how we predict pore pressure from seismic now and hopefully create suggestions to advance the science to a better, safer outcome."
According to SEAM, the research consortium will provide a forum through which industry experts assess challenges in the use of seismic velocity and other seismic attributes to construct predrill pore pressure and shallow-hazards forecasts.
Project participants will use those challenges to design a comprehensive earth model and to acquire, through advanced computer simulation, benchmark data sets to be used by industry for quantifying risk and uncertainty associated with velocity models derived from seismic work.
The researchers also will develop methods for assessing risk and uncertainty in pressure prediction from seismic. The work will focus on the deepwater Gulf of Mexico, but results are expected to be more broadly applicable.
Nikaitchuq oil output reaches 25,000 b/d
Oil production has reached 25,000 b/d at Nikaitchuq field offshore Alaska's North Slope, reports Eni SPA.
The field, in 3 m of water, began producing in 2011 through facilities onshore and on an artificial island in the Beaufort Sea (OGJ Online, Feb. 9, 2011).
Eni calls Nikaitchuq horizontal wells, with lateral displacements up to 22,000 ft, "the most complex wells drilled by the industry to date in Alaska."
The company plans to raise production to 30,000 b/d in the next 12 months.
Nikaitchuq holds reserves of 200 million bbl of crude oil. The field treatment plant can handle 40,000 b/d of oil and 120,000 b/d of water.
Produced crude moves through the Trans-Alaskan Pipeline.
Eni is operator with 100% interest.
PROCESSING — Quick Takes
American Energy, EMG form midstream unit
American Energy Partners LP (AEP) and The Energy & Minerals Group (EMG) have formed American Energy–Midstream LLC (AE-MidCo) to focus on areas where affiliates of both companies have active upstream operations.
AE-MidCo plans to build a portfolio of midstream assets focused on natural gas gathering and processing systems and long-haul pipelines associated with American Energy–Woodford LLC (AEW), American Energy–Utica LLC (AEU), American Energy–Marcellus LLC (AEM), and American Energy–Permian Basin LLC (AEPB).
AELP earlier this month entered into the Permian and southern Marcellus while expanding its Utica acreage in deals totaling $4.25 billion (OGJ Online, June 9, 2014). AELP, founded by Aubrey K. McClendon in April 2013, provides management services to AEU, AEW, AEM, and AEPB, while EMG is the lead equity investor in each.
This deal marks the latest in a series of company transactions focusing capital toward unconventional midstream gas operations. This month alone four such deals were reported: Navitas Midstream Partners and Crestwood Midstream Partners LP each received investments of as much as $500 million (OGJ Online, June 5, 2014; June 17, 2014), Noble Energy Inc. and Consol Energy Inc. launched a Marcellus master limited partnership (OGJ Online, June 12, 2014), and Williams purchased Access Midstream Partners LP for $5.995 billion (OGJ Online, June 16, 2014).
Chevron advances Gulf Coast petrochemicals project
Chevron Phillips Chemical Co. LP has broken ground on two 500,000-tonne/year (tpy) polyethylene (PE) plants in Old Ocean, Tex., initiating a second phase of its US Gulf Coast petrochemicals project.
A groundbreaking ceremony held on June 17 marked the start of construction for the PE units, which will include the installation of an on-site, 45-mile railroad track to hold and transport production from the units, CPCC said.
Gulf Coast Partners—a partnership of Technip USA Inc. and Zachry Industrial Inc.—is executing engineering, procurement, and construction for the PE units, the company said.
CPCC began construction on the first phase of the Texas Gulf coast petrochemicals project with an April groundbreaking for a 1.5-million tpy ethane cracker at its existing Cedar Bayou plant in Baytown, Tex. (OGJ Online, Apr. 8, 2014).
First announced in March 2011 (OGJ Online, Mar. 29, 2011), the US Gulf Coast project was sparked by increased shale resource development (OGJ Online, Nov. 20, 2013; May 2, 2012).
The estimated completion date for the project is in 2017, to the company said.
Loan approved for grassroots Nigerian refinery
Nigerian business conglomerate Dangote Group has secured a $300 million loan for the construction and operation of a greenfield refinery and polypropylene plant in Nigeria.
The board of directors of African Development Bank (ADB) on June 13 approved the loan, which also will be used for the construction of a greenfield fertilizer manufacturing plant, ADB said.
Together, the planned projects will double the country's refining capacity, reduce by 80% current fuel imports into Nigeria, eliminate foreign fertilizer imports, and help Nigeria to progressively become a major exporter of both petroleum products and fertilizers, according to ADB.
Dangote Group previously signed a $3.3 billion loan agreement with a consortium of international banks for the refining complex and fertilizer plant in September 2013, according to a Sept. 4, 2013, release from Standard Chartered Bank, who served as lead financier for the deal.
Land acquisition for the refinery and petrochemical plant, both to be cited in the free-trade zone of Nigeria's Ogun state, is nearing completion, according to information posted to Dangote Group's web site.
The company earlier let a contract to Engineers India Ltd. (EIL) for project management consultancy and engineering, procurement, and construction management for the planned 400,000-b/d refinery and 600,000-tonne/year polypropylene plant (OGJ Online, Nov. 25, 2013).
The refinery project will include a crude distillation unit, single-train residual fluid catalytic cracking unit, diesel hydrotreating unit, continuous catalyst regeneration unit, alkylation unit, and polypropylene unit, EIL said.
A single-point mooring terminal for crude oil and product handling also would be integrated with the refinery, EIL said.
An official timetable for construction and commissioning of the refining and petrochemical project has not been disclosed.
Williams delays Geismar plant restart
Williams Partners LP, of which Williams, Tulsa, is a general partner, has postponed until July the planned June start-up of its Geismar, La., olefins plant rebuild and expansion projects, the company told investors in a recent financial guidance update for 2014 (OGJ Online, Apr. 10, 2012; Jan. 4, 2012).
The postponement has resulted from delays and construction cost increases specific to work to bring the expanded, rebuilt plant back into service, Williams Partners said.
While the plant's restart will be initiated in late July, the company said it expects ethylene sales to begin in mid-August.
Williams Partners also said it expects the delays related to the Geismar expansion have increased capital spending for the project by $65 million to $715 million.
The company's rebuild and expansion work at Geismar follows a June 2013 explosion that originated in the area of the plant's propylene fractionator, killing two workers (OGJ Online, June 25, 2013; June 13, 2013).
Following the June blast, Williams Partners proceeded with repair and expansion work at Geismar for an initially planned restart in April (OGJ Online, Dec. 12, 2013; Aug. 6, 2013).
The 600 million-lb/year Geismar expansion project will increase the plant's ethylene production capacity to 1.95 billion lb/year from 1.35 billion lb/year, with Williams Partners' share of the total capacity amounting to about 1.7 billion lb/year, the company said in an Apr. 30 release announcing its first-quarter 2014 earnings.
TRANSPORTATION — Quick Takes
BG Group to sell CATS interest for $954 million
BG Group has agreed to sale its equity interest in the Central Area Transmission System (CATS) gas pipeline in the UK North Sea along with associated infrastructure to Antin Infrastructure Partners SAS, Paris, for total proceeds of as much as $954 million.
According to the deal, which is expected to close in this year's second half, BG will sell 62.78% interest in CATS for a consideration of $888 million on completion of the transaction and a deferred amount of $66 million. BG says the sale does not impact the company's rights to capacity in CATS.
CATS is comprised of a fixed-riser platform linked to the Everest oil and gas platform, a 404-km, 1.7-bscfd capacity subsea pipeline, and a two-train, 1.2-bscfd capacity onshore gas processing terminal at Teesside.
EPP to site ethane export terminal on HSC
Enterprise Products Partners LP (EPP) will build its recently announced ethane export terminal on the Houston Ship Channel (HSC). The company has signed a 30-year agreement with the Port of Houston Authority for use of facilities adjacent to EPP's existing Morgan's Point terminal.
EPP also plans to build a pipeline from its Mont Belvieu, Tex., NGL fractionation and storage complex, providing direct access to ethane supply. Its Mont Belvieu complex includes 650,000 b/d of NGL fractionation and 100 million bbl of NGL storage (OGJ Online, Apr. 22, 2014). The export terminal will have a designed capacity to load fully refrigerated ethane at about 10,000 bbl/hr.
The company expects the terminal to begin operations third-quarter 2016. EPP has long-term contracts in place to support the terminal and is in discussions with other potential customers for remaining capacity.
EPP is already expanding its existing HSC LPG export terminal, increasing its fully refrigerated low-ethane propane capacity by 1.5-million bbl/month by the first quarter of next year. Enhanced refrigeration will boost the terminal's total capacity to 9-million bbl/month (OGJ Online, Sept. 25, 2013).
KMEP to build fifth Jones Act product tanker
Kinder Morgan Energy Partners LP (KMEP) has expanded its contract with General Dynamics Nassco for the design and construction of an additional 50,000 dwt LNG-conversion-ready product tanker with a cargo capacity of 330,000 bbl.
Construction is slated to start in fourth-quarter 2015 with delivery expected in second-quarter 2017.
The tanker will be constructed as a sister tanker to the four Jones Act tankers currently under construction at the Nassco shipyard in San Diego.
KMEP in January acquired APT and State Class Tankers for $960 million. At that time, KMEP purchased five operating vessels and noted it would invest an additional $214 million to complete funding for the construction of four new Jones Act-qualified vessels, which will be delivered between November 2015 and October 2016.
KMEP says pricing for the additional tanker is consistent with the previously reported transaction.