GENERAL INTEREST — Quick Takes
W. Canadian liquids production on upward trajectory
Wood Mackenzie Ltd. believes the economics of core areas within shale plays in western Canada will yield comparable returns to key producing plays in the US Lower 48.
"Our western Canadian liquids production forecast is underpinned by an increasing commodity price environment and growing demand for oil sands diluent. We anticipate an upward trajectory in volumes beginning in 2016 and peaking in 2021 with the Montney, Duvernay, and Cardium formations driving volumes," said Peter Argiris, WoodMac upstream analyst.
While WoodMac's liquids growth outlook remains positive, there is a potential downside to the forecast. "One factor that is currently front of mind is the supply-infrastructure constraints from the lighter end of the NGL stream," Argiris said. "Propane supply is at historic levels and we have seen material price declines as a result. How this affects the remaining NGL stream (apart from diluent) from a pricing-infrastructure capacity perspective could have a negative impact on producer pricing and future activity going forward."
While plays like the Montney and Duvernay will account for most of the anticipated production growth, operators are well-positioned in numerous Canadian plays to create value at current prices.
The Duvernay largely will drive liquids growth through production of condensate and NGLs, Argiris said.
"Within our coverage universe, this is projected to grow from 27,000 b/d in 2015 to over 320,000 b/d in 2025," he said. An additional surge of liquids production is anticipated to come from the Montney formation, where he expects production will double to more than 160,000 b/d in 2025.
From a natural gas perspective, a group of small and midsize independents has emerged that have low debt and also have gas-producing assets with low breakeven economics. Economics for many of these assets are supported by associated liquids production, he said.
USFS withdraws proposed groundwater directive
The US Forest Service withdrew a proposed directive on groundwater resource management on June 19, and announced it would hold public discussions on ways it might improve groundwater management on lands it oversees instead. Conservation organizations and Indian tribes generally favored the May 7 proposal, but states and a number of other groups expressed concern that the proposed directive would exceed the US Department of Agriculture agency's authorities and infringe on state authorities to allocate water, USFS Chief Thomas L. Tidwell said in the Federal Register notice.
"The proposed directives did not, and any future actions will not, infringe on state authority, impose requirements on private landowners, or change the long-standing relationship between the forest service, states, and tribes on water," Tidwell said.
Any new proposed groundwater directive or other steps would be intended to establish an approach that is more clear and consistent to evaluate and monitor the effects of actions on USFS groundwater resources, Tidwell said. The agency clearly must have discussions with key stakeholders on the matter, he said.
Responding to the announcement, Kathleen Sgamma, vice-president of government and public affairs at the Western Energy Alliance in Denver, said the regional organization of independent oil and gas producers was glad the USFS withdrew the proposal.
"[It] was federal overreach infringing on state water rights and even conflicted with other federal agency jurisdiction," she told OGJ in an e-mail. "We've seen other federal regulatory actions that exceed the agency's authority and ability to implement, but in this case Chief Tidwell wisely recognized the problems with the directive and withdrew it."
Williams rejects unsolicited bid from ETE
Williams Cos. Inc., Tulsa, has rejected an unsolicited all-equity acquisition proposal valued at $53.1 billion from Dallas-based Energy Transfer Equity LP (ETE), but has announced the exploration of "strategic alternatives," including "a hypothetical merger or sale." The bid was for the purchase of Williams at $64/share, which Williams' board found "significantly undervalued" the company.
Most recently, Williams' subsidiary Williams Partners LP agreed to buy an additional 21% interest in Utica East Ohio Midstream LLC from EV Energy Parnters LP for $575 million (OGJ Online, Apr. 6, 2015). If it transpired as outlined, ETE's acquisition of Williams would represent the largest midstream and master limited partnership transaction ever, and would have created the largest midstream entity and third-largest energy group of any kind in North America.
WPX Energy adds to acreage in Gallup oil play
WPX Energy Inc., Tulsa, has added to its San Juan Gallup acreage in New Mexico with the purchase of another 14,300 net acres from an undisclosed seller for $26 million.
The purchase increases WPX's owned or controlled position to 100,000 acres in the area and also represents an estimated 100 gross drilling locations, boosting to 500 the tally of sites the company has in the San Juan Gallup area.
WPX has spud more than 100 wells in the area following a discovery in early 2013 (OGJ Online, Aug. 5, 2013).
Since then, WPX has lowered its drilling times on Gallup wells by 75%. The company recently drilled two Gallup wells in fewer than 8 days each. During the second quarter, WPX is averaging 9.8 days/well so far, it said.
Exploration & Development — Quick Takes
YPFB Andina makes oil discovery in Boqueron field
YPFB Andina reported an oil discovery in Boqueron field in Bolivia's Santa Cruz region. The Boqueron 4D well reached a total depth of 3,237 m and had a flow rate of 700 b/d in initial tests.
YPFB Andina is a joint venture of Spain's Repsol SA (48.3%) and YPFB (51%). The companies referred to the discovery as "the most significant made in Bolivia in more than 2 decades." They also forecast the drilling of as many as 25 wells in the field in first-quarter 2016 and expenditures of $200 million.
Drilling commences on Lithuanian Raseiniai license
Tethys Oil AB has spud the Bedugnis-1 well, which is targeting Silurian reefs at a total measured depth of 1,100 m. The Raseiniai license covers 1,535 sq km onshore Lithuania, and the three-well program is drawing from 80-sq km of 3D seismic data acquired in 2014.
In 2013, the Lapgiriai-1 confirmed the presence of oil in the Raseiniai's Silurian limestone formation with small amounts produced to surface. Drilling and evaluation are expected to continue for 45 days, Tethys said.
Bedugnis-1 will be followed by two more wells. Tethys Oil has 30% indirect interest in the license.
Lundin reports Alta appraisal results
Lundin Norway AS and the Norwegian Petroleum Directorate reported results from two appraisal wells of the Alta oil and gas discovery in PL609 in the southern Barents Sea (OGJ Online, Oct. 14, 2014).
The 7220/11-2 appraisal well was drilled to a vertical depth of 2,020 m subsea in 379 m of water, some 6.5 km southwest of the 7220/11-1 discovery (OGJ Online, Mar. 25, 2015). It encountered a 50-m gas column in reservoir rocks of good to poor quality. NPD said the oil zone is in tight rocks and a decision was made to drill a sidetrack.
Sidetrack 7220/11-2A was drilled 330 m west to a vertical depth of 2,041 m and encountered gas and oil. NPD said a formation test through a 24/64-in. choke resulted in production of 136 cu m/day of oil and 18,500 cu m/day of gas. Lundin reported rates of 860 b/d of oil and 650 Mcfd of gas.
The wells were drilled by Island Drilling's Island Innovator semisubmersible rig, which will now drill appraisal well 7220/11-3. Lundin holds 40% in PL609. DEA Norge AS and Idemitsu Petroleum Norge AS each have 30%.
Drilling & Production — Quick Takes
Subsea structures en route to Erha North Phase 2
Aveon Offshore Ltd. has completed fabrication, testing, load-out, and sail-away of five suction piles, production and water-injection manifolds, and a riser-base lift module with a choke-loop bridge for the Erha North Phase 2 project offshore Nigeria.
The Nigerian engineering and fabrication services firm says other works, such as the fabrication of the Christmas tree elements, are ongoing and delivery is on schedule.
The project was executed at Aveon's 280,000-sq-m fabrication yard in Rumuolumeni near Port Harcourt, Rivers State, Nigeria. OneSubea Offshore Systems Nigeria Ltd. let the contract to Aveon in 2013.
ExxonMobil Corp. unit Esso Exploration and Production Nigeria Ltd. operates the Erha North Phase 2 project. Production from Erha launched in 2006 (OGJ Online, May 2, 2006).
Erin Energy starts production from Oyo-7
Erin Energy Corp., the Houston-based firm formerly known as Camac Energy Inc., has started production from the Oyo-7 well in OML 120 offshore Nigeria. Erin Energy operates Oyo field with 100% interest.
Oyo-7 was drilled by Transocean Ltd.'s Sedco Express semisubmersible rig to 2,438 m total depth and successfully completed horizontally in the Pliocene formation (OGJ Online, Dec. 4, 2014). The rig also will drill the Oyo-8 development well.
Oyo-7 is in 300 m of water and is producing into the Armada Perdana floating production, storage, and offloading vessel, which has a production capacity of 40,000 b/d and storage capacity of 1.1 million bbl (OGJ Online, Feb. 19, 2014). The well is expected to produce 7,000 bo/d following optimization of choke size.
Erin says its primary objective in drilling Oyo-7 was to target the Pliocene formation from which it is now producing (OGJ Online, Oct. 16, 2013), while the secondary objective was to test the deeper Miocene formation for hydrocarbon potential.
Oyo-7 successfully confirmed hydrocarbon in the Miocene formation, which was previously undrilled on the block (OGJ Online, Nov. 13, 2013). Erin says the successful test has derisked the Miocene in the company's offshore Nigeria blocks and has provided valuable data for its planned Miocene exploration program, which targets recoverable P50 resources of nearly 3 billion boe.
Drilling of the company's first Miocene exploration well is slated for the fourth quarter.
Statoil cancels contract for COSL Pioneer drilling rig
Statoil ASA has canceled its contract for the COSL Pioneer drilling rig. The expiry date was August 2016.
COSL Pioneer has been suspended since Oct. 8, 2014 (OGJ Online, Dec. 5, 2014). Statoil says it hasn't found alternative activity for the rig during the intervening period.
"We regret the need to have to cancel this contract and wish to emphasize that this is not due to how the rig has delivered," explained Jon Arnt Jacobsen, Statoil senior vice-president, supply chain. "Cancellation is a consequence of overcapacity in the rig portfolio."
Statoil also previously suspended the Scarabeo 5 and Songa Trym rigs, both of which have since been rescheduled for use.
PROCESSING — Quick Takes
Axiall updates plans for Louisiana ethylene project
Axiall Corp. and South Korea's Lotte Chemical Corp. have finalized joint-venture plans for the design, construction, and operation of a proposed 1 million-tonne/year ethane cracker to be built in Louisiana (OGJ, July 7, 2014, p. 90; OGJ Online, Feb. 11, 2014).
The companies have formed LACC LLC to design, build, and operate the cracker, for which front-end engineering and design has now been completed, Axiall said.
While a final investment decision (FID) remains subject to approval by both companies' boards, the companies are in the process of evaluating final project details, including site selection, which tentatively is planned in Lake Charles, Axiall said.
If approved by Lotte's board, Lotte Chemical also plans to build a wholly owned monoethylene glycol plant adjacent to the proposed cracker.
FID on the cracker is due in this year's second half.
Pending final approvals, the ethylene plant could begin commercial operation in late 2018 or early 2019, Axiall said in a June 18 conference call with investors.
According to the JV agreement, Axiall will contribute a maximum capital investment of $225 million between 2015 and 2019 towards engineering, procurement, and construction phases of the cracker, with Lotte, as majority owner, to cover remaining construction costs.
The amount of Axiall's capital contribution relative to the actual cost of the cracker's construction, then, would determine the company's ownership stake in the cracker, Axiall said, adding that it will retain an option to increase its equity interest in the completed plant by as much as 50%.
Axiall previously estimated a total cost for the grassroots plant at about $3 billion (OGJ Online, Dec. 20, 2013).
Total sheds stake in German refinery
OAO Rosneft has completed a deal for the purchase of Total SA's minority interest in the 11.5 million-tonne/year PCK Raffinerie GMBH refinery, located along Druzhba pipeline in Schwedt, Germany, about 120 km northeast of Berlin.
Total and Rosneft signed a final sale and purchase agreement for Total's 16.67% share in the refinery at the St. Petersburg International Economic Forum in Russia on June 19, the companies said.
Valued at $300 million excluding working capital, the transaction is due to close following regulatory approvals, Total said.
Rosneft, which already holds an 18.75% stake in the Schwedt refinery, first announced the deal in late 2014 after signing an agreement with Total outlining main terms and conditions for the proposed sale (OGJ Online, Dec. 1, 2014).
At final closing, Rosneft, together with its BP PLC-joint venture Ruhr Oel GMBH (37.5%), will own close to 55% of the German refinery (OGJ Online, May 6, 2011).
Additional stakeholders in the Schwedt refinery include Royal Dutch Shell PLC (37.5%) and Eni SPA (8.33%).
Total's decision to shed minority interest in the Schwedt plant is in line with its 2017 target to reduce the company's European refining and petrochemical capacity by 20%, said Philippe Sauquet, president of Total Refining & Chemicals.
Petronas lets technology contract for RAPID project
Malaysia's state-run Petronas has let a contract to Axens to provide processing technology for its proposed refinery and petrochemical integrated development (RAPID) complex at Pengerang in southeastern Johor, Malaysia (OGJ Online, May 13, 2011).
Under the contract, which was awarded following an open bid in January 2012, Axens will supply a series of its proprietary processing technologies for the refining portion of the RAPID complex, the service provider said on June 22.
The contract package includes delivery of a 21,000-b/d hydrotreater equipped with Axens' naphtha hydrotreating process; a 14,000-b/d continuous catalytic regenerator equipped with Axens' Octanizing process; a 30,000-b/d catalytic hydrotreater equipped with Axens' Prime-K technology; a two-trained, 140,000-b/d residue fluid catalytic cracking unit, which includes a propylene recovery section, equipped with Axens' R2R technology; and a 75,000-b/d cracked-gasoline desulfurization unit equipped with Axens' Prime G+ catalytic process. The unit includes a selective hydrogenation reactor-splitter and hydrodesulfurization reactor-stabilizer.
This latest contract follows a previous award to Axens for RAPID's detailed feasibility study in October 2010, Axens said.
With a planned capacity of 300,000 b/d, the proposed RAPID refinery will produce naphtha and liquid petroleum gas feedstock for the petrochemical complex, as well as gasoline and diesel meeting European specifications to help address Asia-Pacific's growing need for petroleum and petrochemical products (OGJ Online, Mar. 27, 2014).
The refinery and petrochemical complex will have a combined capacity to produce 7.7 million tonnes/year of various grades of products, including differentiated and specialty chemicals products (OGJ Online, Oct. 23, 2014).
Most recently, Petronas said it currently estimates RAPID will cost $16 billion, while associated installations for the project will involve an additional investment of about $11 billion (OGJ Online, July 25, 2014).
RAPID's refinery start-up is to take place by early 2019.
TRANSPORTATION — Quick Takes
Gassco to operate Johan Sverdrup gas line
Norwegian state-owned Gassco reported it will take over operatorship of the 156-km natural gas transportation system from Johan Sverdrup field in the North Sea when it becomes operational.
Norway's parliamentary body the Storting approved the plan for development and operation of Johan Sverdrup on June 18.
The 18-in. pipeline, which extends from Johan Sverdrup field's riser platform, will be tied into the Statpipe rich-gas system on the seabed west of Karmoy. That will allow its gas to flow to the Karsto process plant north of Stavanger.
The pipeline's capacity will exceed the Johan Sverdrup's own requirements, creating opportunities for additional gas exports from the Utsira High area, Gassco said. "This new link accordingly has great strategic importance for the Karsto facility," the company said.
Johan Sverdrup is due to come on stream in December 2019, and is expected to produce for 50 years.
Saddlehorn Pipeline to add new origin at Carr, Colo.
Partners owning Saddlehorn Pipeline Co. LLC have reported that the system will extend to Carr, Colo. (OGJ Online, Mar. 19, 2015).
The 50-mile pipeline extension from Platteville to Carr, which is anticipated to be built using 16-in. pipe, will provide a connection to existing crude oil assets in that region.
Saddlehorn Pipeline is a limited liability company owned by Magellan Midstream Partners LP, Plains All American Pipeline LP (PAA), and Anadarko Petroleum Corp.
The company will construct, own, and operate the 20-in., 550-mile Saddlehorn system (600 miles, including the Carr extension), which will transport as much as 400,000 b/d of various grades of crude oil from the DJ basin to storage facilities in Cushing, Okla., owned by Magellan and PAA (OGJ Online, Feb. 27, 2015). The initial capacity of the Saddlehorn system is expected to be closer to 200,000 b/d.
The Carr extension project is currently estimated to cost $80-100 million. Magellan will serve as construction manager and operator of the Saddlehorn system.
Subject to receipt of necessary permits and regulatory approvals, the Platteville-to-Cushing pipeline is expected to be operational during mid-2016 and the extension to Carr is anticipated to be in service by the end of 2016.
Howard Energy proposes South Texas-Mexico line
Howard Midstream Energy Partners LLC plans to develop a 200-mile, 30-in. OD natural gas pipeline connecting its existing Webb County Hub in South Texas to Escobedo, Nuevo Leon, Mexico, and the Mexican National Pipeline System in Monterrey.
The Nueva Era pipeline will be developed in conjunction with Howard Energy's Mexican partner and provide transportation service for as much as 600 MMcfd of gas, connecting Eagle Ford shale producers in South Texas directly with Mexico. It's expected to be in-service July 2017.
The company is accepting nonbinding indications of interest for hub and transportation services on the Nueva Era system until July 17.
CorEnergy to buy Grand Isle gathering system in gulf
CorEnergy Infrastructure Trust Inc. has agreed to acquire 100% of the Grand Isle gathering system (GIGS) from Energy XXI USA Inc. for $245 million in cash, plus the assumption of abandonment liabilities estimated at $12.5 million, for total consideration of $257.5 million.
The system includes 153 miles of subsea pipeline that transports oil and water from six Energy XXI fields and one field operated by ExxonMobil Corp. in the shallow-water Gulf of Mexico.
The 16-acre terminal includes four storage tanks, a saltwater disposal facility with three injection wells, and associated pipelines, land, buildings, and facilities.
The system currently transports 60,000 b/d, of which 18,000 b/d is oil and 42,000 b/d is water, with total capacity of 120,000 b/d.
GIGS volumes represented 42% of Energy XXI's oil production for the fiscal year ended June 30, 2014. Initially FERC regulated, the system was deregulated on Feb. 1.
Energy XXI will continue to operate GIGS under a long-term, triple-net lease with CorEnergy. The primary term of the lease will be 11 years from closing, with an initial renewal term of 9 years, subject to certain conditions.
Energy XXI will retain any revenues generated from transporting third-party volumes.
Open season under way for Caddo crude pipeline
Caddo Pipeline LLC, a newly launched 50-50 joint venture of Plains All American Pipeline LP and Delek Logistics Partners LP, is conducting an open season for committed capacity on a proposed 80-mile, 12-in. OD crude oil pipeline from Longview, Tex., to Shreveport, La. (OGJ Online, Mar. 23, 2015).
The pipeline would originate at the Plains Atlas terminal in Longview and initially transport as much as 80,000 b/d of light, sweet crude to refineries in the Shreveport area and Delek Logistics' pipeline system supplying Delek US Holdings' El Dorado, Ark., refinery.
