GENERAL INTEREST — Quick Takes
API: Energy exports boost US economic vitality
American energy exports are revitalizing the economy and shifting the balance of power around the world, as shown by the Aug. 6 trade report from the US Department of Commerce, said American Petroleum Institute Chief Economist John Felmy.
According to the report, US exports in goods and services totaled $2,280 billion in 2013, up from $2,216 billion in 2012. The US trade deficit in 2013 decreased by $61 billion from 2012. Exports in this year's first half were $1,159 billion compared with $1,127 billion and $1,101 billion for the same periods of 2013 and 2012, respectively.
The report also showed that exports of crude oil and petroleum products are up from the same month last year more than $1.2 billion to $12.7 billion. For year-to-date, the total trade deficit for crude oil and petroleum products is down $20.4 billion from the same period last year.
"Domestic oil and natural gas production helped drive record exports last year, and our ability to impact global markets continues to grow," said Felmy. He emphasized, however, that outdated trade restrictions that prevent more US oil and gas from reaching world markets hampers America's potential as an energy superpower. Lifting these barriers will mean more jobs and a more powerful position, economically and diplomatically.
"Already, innovations in hydraulic fracturing and horizontal drilling have allowed US energy exports to put a major dent in the trade deficit. If policymakers act now to allow free trade, US energy exports can further reduce the impact of unrest overseas and limit the influence of foreign suppliers that dominate other markets," said Felmy.
He added, "By acting now, we can send a major signal to world markets that competitors overseas cannot ignore. Congress and the administration must act quickly to accelerate Department of Energy approval of LNG projects and lift '70s-era restrictions on crude oil exports."
USCG issues interim OSV size-limit rule
The US Coast Guard issued an interim offshore supply vessel (OSV) size limit rule after a 2010 law removed the previous statutory limit. The regulation became effective upon its publication in the Aug. 18 Federal Register. Comments on it will be accepted until Nov. 17.
The 2010 Coast Guard Authorization Act, which removed the limit, also require the US Department of Homeland Security Agency to issue new regulations "to ensure the safe carriage of oil, hazardous substances, and individuals in addition to the crew" on OSVs exceeding the previous size limit, USCG said.
It said it issued the interim rule to ensure that oil, hazardous substances, and individuals other than crew members are safely carried. The interim rule requires that US-flagged OSVs of at least 6,000 gross register tons comply with existing regulatory requirements and international standards for design, engineering, construction, operations and manning, inspections, and certification.
"This rule also will affect any vessel of at least 500 gross register tons as measured under the Regulatory Measurement System, if that vessel is not assigned a measurement under the Convention Measurement System and the owner desires to have the vessel certificated as an OSV," USCG indicated.
The interim rule also allows a large OSV to carry more than 36 offshore workers if the vessel meets stability, marine engineering, fire protection, and lifesaving provisions the interim rule sets forth. Large OSVs are capable of carrying more than the 36 offshore workers previously allowed and conducting operations requiring more personnel, and this interim rule implements safety provisions intended to address the risk associated with carrying more personnel.
Lawler to lead BP's US Lower 48 onshore business
BP PLC has appointed David Lawler as chief executive officer of its Houston-based US Lower 48 onshore business that's slated to formally become a separate entity in early 2015 (OGJ Online, Mar. 4, 2014). The move takes effect Sept. 15. Lawler will report to Lamar McKay, BP's upstream segment chief executive.
Lawler previously served as executive vice-president and chief operating officer of Oklahoma City independent SandRidge Energy Inc. Before that, Lawler was the chief executive officer and president of PostRock Energy Corp., another Oklahoma City independent.
While BP will continue to own the US onshore business, Lawler and his leadership team will develop and implement the strategy to expand the company's crude oil and natural gas liquids portfolio, BP says. The business will have its own governance, processes, and systems.
Exploration & Development — Quick Takes
Apache makes major oil discovery off W. Australia
Apache Corp. has made an oil discovery with its Phoenix South-1 well, drilled 110 miles north of Port Hedland in 435 ft of water in permit WA-435-P of Australia's offshore Canning basin.
Wireline and formation pressure tools have confirmed at least four discrete oil columns ranging 85-151 ft in thickness in the Triassic Lower Keraudren formation, within an overall, sand-rich section between 13,648-14,763 ft below sea level, Apache says. Six light oil samples have been recovered from three intervals to date. Apache estimates as much as 300 million bbl of oil could be in place.
"Although evaluation is at an early stage, Phoenix South-1 is an exciting result," commented Thomas E. Voytovich, Apache executive vice-president and COO, international. "The oil and reservoir quality we have seen point to a commercial discovery. If these results are borne out by further appraisal drilling, Phoenix South may represent a new oil province for Australia."
Apache operates WA-435-P and adjacent permit WA-437-P with 40% interest. Its partners are Carnarvon Petroleum 20%, Finder Exploration 20%, and JX Nippon 20%.
Apache also has exercised its option to acquire 40% interest and operatorship of the WA-436-P and WA-438-P permits, giving the company a total position of more than 5 million acres.
The area includes several large, undrilled structures, including the Roc prospect on WA-437-P, with potential to be significant additional oil accumulations, the company says, adding that more drilling and evaluation is planned for next year.
BP, Noble plug, abandon deepwater Bright well
The BP Exploration & Production Inc.-operated Bright exploration well in the deepwater Gulf of Mexico did not show hydrocarbons after reaching the targeted Upper and Middle Miocene objectives, said Noble Energy Inc., an equal partner in the well.
The well, drilled to a TD of 13,500 ft in 5,600 ft of water on Atwater Valley Block 362, has been plugged and abandoned.
Noble says full well assessment and the integration of drilling results into the company's geologic models is ongoing to determine forward exploration plans on its Atwater Valley acreage, which was acquired from BP in June.
"While we are disappointed with the results of the Bright well, we remain extremely encouraged by the recent success of our exploration program in the gulf," said Susan Cunningham, Noble senior vice-president, Gulf of Mexico, West Africa, and frontier. "We look forward to results at our Katmai and Dantzler exploration wells later this month," she said.
Gabon, Eni leaders discuss Nyonie Deep gas discovery
Eni SPA CEO Claudio Descalzi met with Gabon President Bongo Ondimba in Libreville on Aug. 18 to outline the appraisal campaign programs aimed at bringing the Nyonie Deep natural gas discovery into production over a short period of time (OGJ Online, July 31, 2014).
During the meeting, Descalzi informed Ondimba that preliminary studies are under way to determine the commercial development of the gas in both domestic and export markets.
The well, drilled on Block D4, is initially estimated to hold 500 million boe. Eni credits the find to its proprietary technologies specifically used in West Africa's presalt basin.
Drilling & Production — Quick Takes
Statoil shuts in production from Troll C platform
Statoil ASA has temporarily shut in production from its Troll C platform in the North Sea after inspectors detected corrosion damage in pipe connected to the oil export system.
The shutdown occurred on Aug. 17, the company said. The corroded pipe will be replaced during what is expected to be a 7-day shutdown.
Statoil said Troll C has equity oil production of 58,000 b/d and exports of 8 million cu m/day of gas. The Fram field is also affected, with 34,000 b/d and 2 million cu m/day of gas transported through Troll C.
Statoil shut Troll C in late 2012 because of corrosion in some tanks on the auxiliary system for treating gas (OGJ Online, Nov. 15, 2012).
Statoil has 30.58% interest in Troll C and 45% in Fram.
Angolan oil flow seen above 2 million b/d
Angola will produce 2.1-2.2 million b/d of crude oil by 2016, predicts Moody's Investors Service.
In a credit analysis of the Angolan government, Moody's cited deepwater projects due on stream soon in the Lower Congo basin and the government's plans to offer deep and ultradeepwater blocks to international operators next year in the southern Kwanza basin and unexplored Namibe basin.
The Kwanza basin, Moody's points out, has presalt geology similar to that of Brazil's Campos and Santos basins (OGJ Online, Dec. 11, 2011).
Important to the imminent production gain is Total SA's Kaombo project in 1,400-1,900 m of water in the Lower Congo basin. Total and its partners decided to proceed with the $16-billion development in April (OGJ Online, Apr. 14, 2014).
That decision, Moody's said, boosts Angola's production prospects.
"First, it signals investors' positive assessment of Angola's long-term offshore prospects, considering the relatively high cost of deep-sea oil exploration globally," the analyst said. "Secondly, it supports Angola's plans to ramp up oil production (to a targeted 2 million b/d for the next 5 years), notwithstanding a decline in output associated with maturing oil fields."
Total projects Kaombo output at 230,000 b/d, which will join a further 300,000 b/d of production starting up from other developments over the next 18 months.
That non-Kaombo increment includes 160,000 b/d from Total's CLOV project, which started production in May, and a combined 140,000 b/d due on stream this year and next from Eni on Block 15/06 and Esso on Block 15.
Angola's total oil production last year averaged 1.73 million b/d. In the Kwanza basin, south of the Lower Congo basin, operators have made seven discoveries on presalt blocks, Moody's said. The largest, according to Moody's, is Cobalt International Energy's Orca-1 strike on Block 20. Cobalt said the well found 250 ft of oil and condensate pay in multiple presalt intervals and has a resource potential of 400-700 million bbl.
Lukoil's West Qurna-2 field production tops 280,000 b/d
Lukoil issued an update on West Qurna-2 field in Iraq, saying its production has exceeded 280,000 b/d compared with 120,000 b/d when Lukoil started flow from the field in March.
West Qurna-2, still being developed, is expected to play a role in Iraq's plans to increase production from its southern fields. Lukoil said the West Qurna project is being implemented on schedule.
Iraq has set a goal of producing 8.4 million b/d from its southern oil fields by yearend 2020, and West Qurna-2 is expected to contribute 1.2 million b/d by that date.
Lukoil said Sea Triumph, a crude oil tanker chartered by a Lukoil marketing subsidiary, has left the port of Basra with 1 million bbl, which was the first shipment of oil in reimbursement for Lukoil's costs as part of the West Qurna-2 project.
Upon unloading, the oil will be transported for refining to its ISAB refinery in Priolo Gargallo near Siracusa in Sicily.
PROCESSING — Quick Takes
Canadian firms plan BC gas plant, target LNG export
AltaGas Ltd. and Painted Pony Petroleum Ltd., both of Calgary, have agreed to develop processing and marketing of natural gas and NGLs for Painted Pony's liquids-rich Montney gas production in northeast British Columbia.
In the first phase, AltaGas will build and operate a 198-MMcfd shallow-cut gas processing plant in the Montney for which Painted Pony will retain rights to a minimum 150 MMcfd of firm capacity.
The Townsend plant will be built 62 miles north of Fort St. John and 12 miles southeast of AltaGas's Blair Creek plant, through which Painted Pony has already been processing a large portion of its Montney production, the companies said.
Estimated cost for the Townsend plant is $325-350 million (Can.) to be built and funded by AltaGas. It will start up by yearend 2015, subject to regulatory and other approvals.
In addition to building gas processing systems, AltaGas will become primary marketer for Painted Pony's gas and NGL production from northeast British Columbia. Painted Pony will become a major supplier to AltaGas under the alliance, which will "provide preferred access to export opportunities" for LNG and NGLs from "existing and planned facilities," the companies said.
They also said that, upon completion of this first phase, further construction of processing infrastructure in northeast British Columbia, including a second phase of Townsend to include a deep-cut system for the enhanced recovery of additional NGLs and fractionation, is possible.
NRL lets contract for Karachi refining complex
Pakistan's National Refinery Ltd. (NRL) has let a contract to China National Chemical Engineering Corp. Ltd. (CNCEC) for work related to the upgrade and expansion of its refining complex in the Korangi Industrial Zone, about 9 miles southeast of the center of Karachi.
The contract, for installation of a high-sulfur diesel desulfurization plant and isomerization plant, as well as associated units, is valued at $242 million, NRL said.
The value of the contract represents 80% of the total investment of the Karachi revamp project, with the other 20% consisting of components that are to be presented to the company's board at a later date, NRL said.
Designed to help the plant meet Euro-2 environmental standards, the diesel desulfurization unit is scheduled to be commissioned by December 2015, NRL said in its latest corporate environmental report.
The naphtha isomerization project, which is intended to increase the production of motor gasoline by 192,000 tonnes/year, also is due to be commissioned by December 2015, the company said.
Additional proposed elements of the revamp project at the Karachi complex—which consists of two lube refineries and one fuel refinery with a combined crude oil processing capacity of 2.9 million tpy—includes work to expand processing capacities at the complex, according to NRL's corporate environmental report.
At its Lube 1 refinery, NRL plans to increase installed crude oil processing capacity to 17,000 b/sd from its current capacity of 12,050 b/sd, as well as to expand its vacuum fractionation capacity to 6,600 b/sd from 5,200 b/sd. Engineering design for this project component is completed, with the project likely to be commissioned in 2015, NRL said.
At its fuel refinery, NRL said it has envisioned a project to lift installed crude processing capacity at the crude distillation unit to 53,000 b/sd from its current capacity of 50,000 b/sd. In 2012, the company said it expected this element of the revamp project to be completed by December 2015.
Hydrogen unit shuttered at Neste's Porvoo refinery
Neste Oil Corp. has shuttered a hydrogen production unit for repairs at its 205,000-b/d Porvoo refinery in the Kilpilahti Industrial Area, about 20 miles east of Helsinki, Finland.
"One of the two hydrogen production units at the Porvoo refinery has been damaged, and production at the site has been reduced," Neste Oil reported.
While it did not disclose the nature or cause of the damage, the company said that preliminary findings indicate repairs to the unit will take several weeks.
A more accurate timetable for the unit's repair should emerge in the next 2 weeks, at which time Neste Oil said it will be able to estimate the incident's impact to production and profitability.
The unit's shutdown, however, will not have any impact on product deliveries for which the company already has contracted, Neste Oil said.
Neste Oil in April let a contract to Linde Group, Munich, for long-term hydrogen supply at the Porvoo refinery, under which Linde agreed to invest in and be responsible for the construction of a new hydrogen production plant at the refinery to replace the older of Porvoo's two existing hydrogen units (OGJ Online, Apr. 28, 2014).
Construction work on the $139 million project was to start immediately, with the unit scheduled to be commissioned in summer 2016, Neste Oil said.
TRANSPORTATION — Quick Takes
EnLink to continue Utica expansion with condensate line
EnLink Midstream Partners LP and EnLink Midstream LLC, affiliates of EnLink Midstream, plan to build a 45-mile, 8-in. condensate pipeline and six natural gas compression and condensate stabilization facilities in the Ohio River Valley at a total cost of more than $250 million.
The expandable, 50,000-b/d condensate pipeline will connect to the EnLink's existing 200-mile pipeline in eastern Ohio and West Virginia, providing producers in the Utica shale region with additional market access through the company's Bells Run barge facility and Black Run rail terminal.
EnLink expects the pipeline to be completed in second-half 2015, and an open season could take place in the fall.
Part of the project includes a long-term, fee-based agreement with Utica exploration and production company Eclipse Resources for compression and stabilization services and for the purchase of stabilized condensate. Eclipse is running four horizontal rigs in the play and expects to add an additional two rigs by yearend.
EnLink will build and operate six natural gas compression and condensate stabilization facilities in Noble, Belmont, and Guernsey counties in Ohio. When finished, the facilities will have a combined capacity of 560 MMcfd of natural gas compression and 41,500 b/d of condensate stabilization.
The company expects the first two compression and condensate stabilization facilities to be operational in this year's second half and the remaining four facilities to be operational by yearend 2015.
EnLink also plans to add 120,000 bbl of above ground storage to its Bells Run facility to support the project, bringing its total storage capacity at the facility to more than 360,000 bbl.
The company's expansion in the region will end with the company operating more than 250 miles of pipeline; 11 natural gas compression and condensate stabilization facilities with a total capacity of 1 billion bcfd and 60,000 b/d, respectively; a fleet of more than 110 trucks; and eight brine disposal wells.
Dakota Plains, Hiland sign interconnection deal
Dakota Plains Holdings Inc., Wayzata, Minn., and Hiland Partners LP unit Hiland Crude LLC reported signing an interconnection agreement that will link Dakota Plains' Pioneer Rail terminal in New Town, ND, with Hiland's Market Center gathering system crude oil pipeline network.
Construction for the final link—now under way—is expected to be commissioned by Oct. 31.
Hiland's gathering system is the largest in the Bakken, the company says, extending through the heart of the field in Divide, Dunn, Mountrail, McKenzie, and Williams counties in North Dakota, as well as Richland and Roosevelt counties in Montana.
Hiland's gathering system has multiple connection points into pipeline outlets and crude-by-rail terminals, with the Pioneer terminal being the only Canadian Pacific Railway origin.
The connection to the Pioneer terminal is expected to have an initial capacity of more than 15,000 b/d of oil and expandable to 60,000 b/d, the companies said.
Prelude FLNG turret sets sail for Samsung shipyard
The largest piece of the turret for Shell's 3.6 million tonne/year Prelude floating LNG (FLNG) plant has set sail from Dubai for the Samsung Heavy Industries shipyard in Geoje, South Korea, where the vessel is under construction.
Prelude FLNG will operate in Browse basin about 200 km offshore northwestern Australia, developing the Prelude and nearby Concerto gas fields in permit WA-371-P with total reserves of 3 tcf of gas and about 120 million bbl of condensate. Shell expects startup in 2016.
In addition to its LNG output, Prelude will produce 1.3 million tpy of condensate and 0.4 million tpy of LPG (OGJ Online, Dec. 3, 2013). After the first 25-year assignment, Prelude FLNG could be refurbished and moved to a different field for another quarter century, Shell said.
The turret is part of a mooring system designed to ensure Prelude FLNG can operate safely in the most extreme weather conditions. At almost 100 m high, it is the largest in the world, according to Shell. The turret will run through the front of the vessel and connect to giant chains that will keep it moored securely over the Prelude gas field.
Prelude FLNG, at 488 m long and 74 m wide, will be the largest floating facility in the world once it's complete, weighing more than 600,000 tonnes with cargo tanks full. Prelude FLNG is designed to withstand a category 5 cyclone.
Shell was the first company to commit to an FLNG project, and it expects Prelude FLNG to be the first of many such Shell facilities.
Shell is the operator of Prelude FLNG in joint venture with Inpex (17.5%), Kogas (10%), and OPIC (5%) and working with long-term strategic partners Technip and Samsung.
