GENERAL INTEREST — Quick Takes
Shell bows out of Kidan gas project in Saudi Arabia
Royal Dutch Shell PLC confirmed it will bow out of the Kidan natural gas development project in Saudi Arabia's Empty Quarter.
Citing that it has been in "regular dialogue" with officials at the Ministry of Petroleum and Mineral Resources as well as Saudi Aramco—its joint venture partner in the South Rub Al Khali Co. Ltd. (SRAK) gas exploration project—Shell said it "has decided to end further investment in the Kidan development."
In an e-mailed statement to OGJ, Shell added, "This was a difficult decision, but Shell remains committed to the Kingdom and we are keen to grow our investments, both in upstream and downstream."
Shell and other partners were transferred a 30% share in SRAK in early 2008 when Total SA withdrew from the project after three dry wells were drilled (OGJ Online, Feb. 8, 2008).
In fall 2010, SRAK reported making what it called "promising" discoveries in the area, saying at the time it would start a second phase of exploration (OGJ Online, Jan. 6, 2011).
SRAK then extended its license by 5 years to 2015, and announced plans to drill three more exploration wells as well as to collect 3,600 km of 3D seismic data and 3,000 km of 2D data.
SRAK also agreed to draw up a development plan for sour gas reserves that have been discovered at Kidan, close to the southern border of the UAE, and a possible extension of the Shah sour gas field being developed by the Abu Dhabi National Oil Co.
Saudi Arabia's search for gas has become a priority as it struggles to keep pace with rising demand. Both Eni SPA and Repsol-YPF SA have recently withdrawn from similar Saudi projects.
Warren Resources to enter Marcellus with assets purchase
Warren Resources Inc., New York, has agreed to acquire the Marcellus assets of Citrus Energy Corp., Castle Rock, Colo., along with two additional working interest owners for $352.5 million, effective July 1.
The Wyoming County, Pa., assets, as of June, are producing 82 MMcfd net of natural gas. Estimated net proved reserves, as of the July 1, total 208.3 bcf, 55% of which are proved developed, according to estimates from Netherland, Sewell & Associates Inc., Warren's independent petroleum engineering firm.
Warren says its pro forma net production will increase by more than 200% to 118 MMcfd of gas equivalent from 36 MMcfed, while its pro forma net proved reserves will increase by more than 100% to 410.8 bcfe from 202.5 bcfe.
Warren will operate the assets with 100% interest. Complete midstream infrastructure is in place, the company says.
Upon closing of the transaction, management personnel from Citrus will join Warren, including Lance Peterson, president and cofounder of Citrus, who will join Warren's board; Zachary Waite, who will become vice-president, business development and Marcellus operations; and Daniel Collins, who will become vice-president, Marcellus land.
Warren enters the Marcellus with existing activities primarily focused on oil in Wilmington field in the Los Angeles basin and the Leroy Pine project in the Santa Maria oil basin, both in California, and gas in Wyoming's Washakie basin (OGJ Online, May 12, 2010; June 8, 2011).
KKR, Riverstone to form Trinity River Energy
Kohlberg Kravis Roberts & Co. LP (KKR) and Riverstone Holdings LLC have signed a definitive agreement to combine the existing assets held by KKR Natural Resources Funds with the assets of Legend Production Holdings LLC, a Riverstone company, to create a Fort Worth-based oil and gas company named Trinity River Energy LLC.
The transaction forms one of the largest operators in the Barnett shale, with gross production of 258 MMcfd of gas equivalent in the basin. KKR in 2012 agreed to acquire certain Barnett and Arkoma basin assets from WPX Energy for $306 million (OGJ Online, Apr. 2, 2012).
Trinity also will have liquid-rich assets in the Permian basin, East Texas, South Texas, Louisiana, and Mississippi.
Chris Hammack, the current president and chief executive officer of Legend, will assume Trinity's leadership role. Trinity's operations executive team will be based in Fort Worth while its finance, accounting, and information technology executive team will be based in Houston.
The transaction is expected to close in the third quarter.
Phillips 66 boosts capital expenditures for 2014
The board of Phillips 66 has approved a $1.2-billion increase for the company's capital expenditures this year to $3.9 billion to support the company's growth strategy.
The company says the increased capital program is designed to accelerate the development of the Sweeny Fractionator One and Freeport LPG export terminal (OGJ Online, Feb. 7, 2014); as well as fund the recent acquisitions of specialty lubricants company Spectrum Corp. and the Beaumont terminal in Texas (OGJ Online, June 6, 2014).
"We are executing our growth plans through disciplined organic capital spending and by selective acquisitions in our transportation and lubricants businesses," said Greg Garland, Phillips 66 chairman and chief executive officer.
Exploration & Development — Quick Takes
Repsol reports oil discovery east of Trinidad and Tobago
Spain's Repsol says it discovered oil with its TB14 well drilled on the TSP block offshore Trinidad and Tobago, upgrading the northern portion of Teak B field.
The well is outside the existing Teak field extension, east of the island of Trinidad. It tested at 1,200 b/d and is in commercial production. The company estimates 40 million bbl of oil in place.
Repsol said the discovery adds to the completion of the TB13 development well, which recently added nearly 1,400 b/d. The block's production averaged 10,900 b/d in 2013.
Repsol, the operator, has 70% interest. Petroleum Co. of Trinidad & Tobago and National Gas Co. of Trinidad & Tobago each have 15%.
Repsol and partners expect to complete at least two more wells this year.
OMV makes Barents Sea oil discovery
OMV (Norge) AS, operator of PL 537 in the Barents Sea offshore Norway, estimates that its Hanssen discovery (Sto formation) contains 20-50 million boe, largely oil.
The company's third wildcat, 7324/7-2 Hanssen is undergoing completion. It was drilled to a vertical depth of 1,679 m in 417.5 m of water. The well was terminated in the Snadd formation of Middle Triassic age. The main objective of the well was to prove hydrocarbons in Middle Jurassic to Late Triassic reservoir rocks (Sto, Nordmela, and Fruholmen formations), with the secondary objectives in Late to Middle Triassic reservoir rocks (Snadd formation).
The well encountered a 20-25 m gross oil column in the main target (Sto formation). Once the operator performs a formation test, and the well will be permanently plugged abandoned.
The operator and its joint venture partners made the Hanssen discovery 7 km northwest of the 7324/8-1 Wisting Central oil discovery and 315 km north of Hammerfest (OGJ Online, Sept. 6, 2013). Confirmed potential for Wisting ranges 200-500 million boe.
Interests in PL537 are OMV (Norge) 25%; Tullow, Idemitsu, and Petoro, 20% each; and Statoil, 15%.
Woodside signs farm-in for permits off Morocco
Woodside Petroleum Ltd. has finalized a farm-in agreement with independent firm Chariot Oil & Gas Ltd. for a position in the Doukkala basin offshore northwest Morocco.
Woodside will take up an initial 25% participating interest in six permits in the Rabat Deep region plus an option to move to 50% and operatorship for a capped well carry obligation.
The six permits are all undrilled and cover a total area of 10,782 sq km. Water depths vary at 150-3,600 m.
Geologically the permits lie on the Atlantic margin and geographically they are close to Woodside's existing interests in the Canary Islands.
Woodside says the farmin is in line with the company's strategy to secure international growth opportunities in frontier and emerging basins characterised by materiality and quality.
Chariot is a company incorporated in Guernsey, Channel Islands, with the aim of exploring opportunities around the Atlantic margins. It also has acreage offshore Mauritania, Namibia, and Brazil.
Drilling & Production — Quick Takes
Suncor, GE aim to reduce GHG emissions
Suncor Energy Inc., Calgary, and GE have signed two agreements that aim to reduce greenhouse gas (GHG) emissions and water usage in the oil sands.
The agreements, which involve other members from Canada's Oil Sands Innovation Alliance (COSIA), could result in investments totaling as much as $18 million.
One agreement is for an oil sands water treatment pilot project that would reduce water use, energy consumption, and GHG emissions, as well as operating costs.
The steam-assisted gravity drainage (SAGD) Produced Water Treatment pilot project is expected to cost $20 million in total, including $5 million in new funding, and is currently running at Suncor's MacKay River facility, following preliminary lab work dating back to late 2011.
The pilot is testing technology so water can be treated more efficiently, and to increase reuse of water in the in situ process.
Suncor says additional support from COSIA members will help extend the pilot's testing phases to obtain more data, allow for additional laboratory-scale testing to further refine the processes involved in the pilot, and enable the improvements to be shared across the oil sands sector.
Six COSIA members have also signed a memorandum of understanding to pursue other joint industry projects, with investment of up to $13 million, that would further aim to reduce GHG emissions and advance water treatment technology.
Poland approves underground coal gas work
Linc Energy Ltd., Brisbane, has received initial approval to begin an underground coal gasification (UCG) project in Poland.
The company says the coal resource in its license area, near Krakow, might yield 800 billion cu m of pipeline-quality gas over 80 years if the operation reaches commercial scale.
The first phase of its work, approved by the Polish Ministry of the Environment, will include gas-production trials and process verification.
The company has completed coal resource drilling, a seismic survey, and a detailed evaluation indicating the coal is suitable for UCG.
Linc will move some of the equipment from its Chinchilla UCG demonstration plant in Queensland to the Polish demonstration operation (OGJ Online, Oct. 15, 2008).
Linc began decommissioning the Chinchilla plant last November after the fifth gasifier at the site completed its 2-year design life, having produced 48 million normal cu m of synthetic gas from 19,300 tonnes of coal.
It began work at the Chinchilla research and development site in late 1999. When it announced decommissioning the facility, the company said it saw no commercial opportunity to use its UCG technology in Queensland.
Linc said it expects key items from the Chinchilla facility to begin arriving in Poland by yearend.
DNO resumes production from Yemen blocks
DNO Yemen AS, a DNO ASA subsidiary, has resumed oil production from Block 32 Howarime and Block 43 South Howarime in Yemen.
The company in late June issued force majeure notices to the Ministry of Oil and Minerals after labor unions started unilateral actions leading to work stoppages on the blocks, halting production totaling 3,400 b/d of oil gross (OGJ Online, June 24, 2014).
DNO, operator of both blocks, holds 38.95% interest in Block 32 and 56.67% interest in Block 43.
PROCESSING — Quick Takes
Texas refinery completes capacity expansion
Alon USA Partners LP, Dallas, has completed a turnaround and vacuum tower project which, together, have resulted in increased crude oil processing capacity at its Big Spring, Tex., refinery.
The vacuum tower project has increased distillate recovery at the plant by 2,000 b/d, allowing the refinery to increase utilization of various process units, Alon said.
As a result, the increased utilization has supported a rise in crude throughput rates at Big Spring to 73,000 b/d from 70,000 b/d, with no negative impact on finished product yields, Alon said.
Since completion of the projects, crude throughputs at the Big Spring refinery have stood at about 73,000 b/d, the company said.
While the refinery had a throughput rate of about 39,000 b/d during this year's second quarter, the company said it expects total crude throughputs at Big Spring during the third and fourth quarters to reach 74,000 b/d and 75,000 b/d, respectively.
Alon postponed until this year's second quarter the planned turnaround at Big Spring to allow time to better integrate the implementation of the vacuum tower project with the turnaround, the company said in a Jan. 27 news release.
In addition to boosting the Big Spring refinery's distillate production and improving energy efficiency, the vacuum tower project was designed to increase the plant's ability to handle lighter shale crude oil feedstocks, Alon said.
Louisiana complex resumes full operations
Axiall Corp. has returned its vinyl chloride monomer manufacturing plant at the company's chemicals complex in Lake Charles, La., to full operating rates following a December 2013 fire (OGJ Online, Dec. 26, 2013).
The PHH facility returned to full service at the end of June but followed a slower ramp-up to full operating rates, the company said.
The company said in April it had completed repairs to damages stemming from the December fire and, at the time, had expected the plant to reach full operating rates in May (OGJ Online, Apr. 15, 2014).
Formed by a merger of Georgia Gulf Corp. and the commodity chemicals business of PPG Industries, Pittsburgh, in January 2013, Axiall holds three manufacturing plants in Louisiana, two of which are in the Lake Charles area, with another in Plaquemine (OGJ Online, Dec. 20, 2013).
Fire hits Port Arthur ethylene plant
Chevron Phillips Chemical Co. LP said the cause of a fire at its petrochemical plant in Port Arthur, Tex., on the evening of July 7 has yet to be determined.
The localized fire, which occurred around 8:00 p.m. CST, has been contained, with two workers treated for injuries as a result of the incident, Chevron Phillips Chemical said.
A team of trained emergency response professionals are working to secure the plant as well as assess damages, and an investigation into the fire's cause is under way, according to the company.
"We will communicate additional information when it can be confirmed," said Margie Conway, Chevron Phillips Chemical's plant manager at Port Arthur.
Further details regarding the incident, including the status of operations at the plant, were not disclosed.
The Port Arthur plant produces about 855,000 tonnes/year of ethylene, according to Oil & Gas Journal's latest survey of the industry (OGJ, July 7, 2014, p. 99).
Operations remain halted at Okinawa refinery
Nansei Sekiyu KK, a wholly owned subsidiary of Brazil's Petroleo Brasileiro SA (Petrobras), has suspended operations at its 100,000-b/d Nishihara refinery on the island of Okinawa in southwestern Japan ahead of Typhoon Neoguri's arrival to the region.
The refinery, which was taken offline as of July 7, remains shut down, Petrobras told OGJ via e-mail on July 9.
Details regarding the status of the refinery, including a timetable for the restart of operations, will be released as they become available, the company said.
TRANSPORTATION — Quick Takes
EPP, Enbridge complete Seaway pipeline loop
Seaway Crude Pipeline Company LLC, a 50-50 joint venture owned by affiliates of Enterprise Products Partners LP and Enbridge Inc., has mechanically completed the 512-mile loop of the Seaway crude oil pipeline system that reaches from Cushing, Okla., to the Jones Creek storage and terminal facility near Freeport, Tex.
The 30-in. pipeline is expected to more than double to 850,000 b/d the capacity of the Seaway system (OGJ Online, Mar. 27, 2012; OGJ, Feb. 3, 2014, p. 93).
The Jones Creek facility is connected to EPP's ECHO crude oil storage facility in Houston via a 65-mile, 36-in. pipeline. The companies say construction of a 100-mile, 30-in. pipeline from ECHO to Beaumont-Port Arthur, Tex., is expected to be completed in July. Commissioning of the Seaway loop, as well as the pipeline from ECHO to Beaumont-Port Arthur, will continue throughout the third quarter.
Along with the pipeline that transports crude oil from Cushing to the Gulf Coast, the Seaway system consists of a terminal and distribution network originating in Texas City, which serves refineries locally and in the Houston area. The Seaway system also includes dock facilities at Freeport and Texas City.
Golden Pass files FERC application for LNG project
Golden Pass Products LLC, Houston, has submitted a formal application with the US Federal Energy Regulatory Commission to construct and operate its proposed LNG project at the existing Golden Pass LNG import facility in Sabine Pass, Tex.
The FERC permitting process will involve an environmental impact study and multiple agency regulatory reviews, a public comment period, and other public input opportunities.
Golden Pass, a joint venture of Qatar Petroleum International and ExxonMobil Corp., started the National Environmental Policy Act prefiling process with FERC in May 2013 (OGJ Online, May 17, 2013).
The project has received US Department of Energy authorization for exports to Free-Trade Agreement countries and is awaiting DOE approval to export to non-FTA nations (OGJ Online, Aug. 20, 2012).
The company says a final investment decision is expected in 2015, after which Golden Pass would invest $10 billion over 5 years to build the proposed facility, which would create about 45,000 direct and indirect jobs across the nation during the construction phase.
Ichthys LNG development reaches another milestone
The Inpex group's Ichthys LNG development in the Browse basin offshore Western Australia has recorded another milestone with the hull for the project's condensate floating production, storage, and offloading vessel recently floated from the dry dock at the Daewoo Geoje shipyard in South Korea.
Prefabricated sections weighing a total of 60,000 tonnes were successively lifted into the dry dock and assembled to construct the FPSO's 336-m hull.
Work will now begin on the fabrication and integration of the topsides, living quarters, and the installation of the turret. The latter is under construction in Singapore.
When completed, the FPSO will have storage capacity for more than 1 million bbl of condensate and have accommodation for a workforce of 200 people.
In Ichthys project will produce about 100,000 b/d of condensate at peak flow. In addition, there will be 8.4 million tpy of LNG produced from two trains at the LNG facility in Darwin along with 1.6 million tpy of LPG.
The gas-condensate reservoirs lie 200 km offshore Western Australia and contain an estimated 12 tcf of gas and 500 million bbl of condensate.
Centrgaz to build South Stream segment in Serbia
OAO Gazprom reported that its Centrgaz unit signed a contract July 8 for South Stream gas pipeline construction in Serbia.
Centrgaz will focus on design, procurement, construction, commissioning, and personnel training. The contract stipulates involving Serbian subcontractors for "certain operations."
For the Serbian segment of South Stream, Gazprom will hold 51% and Srbijagas 49%.
Gazprom said the bidding procedure for the project began in March and that there were four bidders.
South Stream will ship natural gas across the Black Sea to Southern and Central Europe (OGJ Online, June 25, 2014). It is scheduled to reach full capacity of 63 billion cu m/year in 2018. First flow is expected late in 2015.
Correction
Distances required in Colorado between oil and gas well drilling and homes were reported incorrectly in a recent editorial (OGJ, July 7, 2014, p. 30). The Colorado Oil & Gas Conservation Commission last year increased setback requirements to 500 ft statewide. For high-occupancy buildings, the requirement is 1,000 ft. COGCC also requires operators working within 1,000 ft of an occupied structure to meet new mitigation standards for several types of disturbance.
