OGJ Newsletter

July 6, 2015
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

USGS: Water usage for fracing varies across shale plays

The volume of water required to hydraulically fracture wells varies widely across the country, according to the first national analysis and map of hydraulic fracturing water usage detailed in a recent US Geological Survey study.

The analysis was published in Water Resources Research, a journal of the American Geophysical Union. Researchers found water volumes for fracturing varied from 2,600 gal/well to 9.7 million gal/well.

As of 2014, median annual water volume estimates for fracturing in horizontal wells increased to more than 4 million gal/well for oil wells and 5.1 million gal/well for gas wells. That compared with an initial average of about 177,000 gal/well for oil and gas wells in 2000, the study said.

"One of the most important things we found was that the amount of water used per well varies quite a bit, even within a single oil and gas basin," said USGS scientist Tanya Gallegos, the study's lead author. "A better understanding of the volumes of water injected for hydraulic fracturing could be a key to understanding the potential for some environmental impacts."

USGS noted that horizontal drilling accounted for the highest average water use for fracturing in 52 out of the 57 watersheds studied. The watersheds where the most water was used to fracture wells involved shale formations.

Horizontal wells generally require more water than vertical or directional wells. USGS said this research was part of its larger effort to understand the resource requirements and potential environmental impacts of unconventional oil and gas development.

FWS issues LOA to Shell for Chukchi Sea lease

The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar bears and Pacific walrus resulting from the company's proposal to operate two drilling rigs in the Chukchi Sea this summer.

The letter, which is effective July 1 and expires Nov. 1, is one of the remaining permits that the Royal Dutch Shell PLC subsidiary must obtain to move forward with an exploration program continuing activity it began in 2012 on a federal lease it obtained in OCS Lease Sale 193 in 2008.

Shell has proposed drilling as many as 6 wells from 2 offshore rigs there from July 4 through Oct. 31, FWS's Alaska office indicated in the June 30 LOA, which allows incidental, but not intentional, takes of game.

It authorizes Shell to proceed, provided the company complies with mitigation, monitoring, and reporting measures under the Marine Mammal Protection Act, which include maintaining a 15-mile buffer between the rigs while they are in operation.

Another US Department of the Interior agency, the Bureau of Safety and Environmental Enforcement, continues to review Shell's drilling permit applications, DOI said. FWS's action neither approves of nor precludes the company's proposed activity on its lease this summer, which will be subject to all applicable regulations and conditions, it emphasized.

Survey begins of collaboration on the UKCS

Deloitte has begun a survey about collaboration in the oil and gas producing industry of the UK Continental Shelf.

With support from Oil & Gas UK, the business advisory firm is studying the level and quality of collaboration now occurring on the UKCS and how companies might work together in new ways.

The survey asks participants what collaboration means, what constitutes effective collaboration, and how companies view themselves and each other as collaborators.

Justin Watson, a partner in Deloitte's consulting practice, said collaboration is a focus of many of the firm's conversations with clients.

"With subdued oil prices set to continue, it's more important than ever that companies look at what could be gained by working more closely together to bring down costs, reduce complexity, and boost efficiency," he said. "However, what collaboration means for the oil and gas industry is not well understood."

Collaboration received emphasis in the 2013-14 Wood Review, which called for strategies aimed at achieving "maximum economic recovery" from remaining oil and gas resources of the UKCS (OGJ Online, Feb. 24, 2014).

Exploration & DevelopmentQuick Takes

Lundin has spudded three wells offshore Norway

Lundin Norway AS, a wholly owned subsidiary of Lundin Petroleum AB, has spudded three wells: its second Alta appraisal well in the Barents Sea, an appraisal well on Edvard Grieg field in the Norwegian North Sea, and the partner-operated Zeppelin exploration well in the southern North Sea.

Alta appraisal well 7220/11-3 in PL609 is 4.3 km south of Alta discovery well 7220/11-1 (OGJ Online, Mar. 25, 2015), and 3.4 km northeast of recently completed appraisal well 7220/11-2 (OGJ Online, June 12, 2015). The first appraisal well encountered a 50-m gas column in reservoir rocks of good-to-poor quality, with a sidetrack encountering gas and oil.

The main objectives of well 7220/11-3 are to confirm the reservoir model and prove the presence of hydrocarbon columns and fluid contacts similar to those established in the Alta discovery well, and to test the reservoir properties of the Permian carbonates, Lundin says.

Drilled by Island Drilling's Island Innovator semisubmersible rig, the well will reach a total depth of 2,070 m below mean sea level over a period of 60 days. Lundin Norway operates PL609 with 40% working interest, while DEA Norge AS and Idemitsu Petroleum Norge AS each hold 30%.

Edvard Grieg appraisal well 16/1-23 S is in PL338 in the southeastern part of Edvard Grieg field and 2.4 km southeast of the Edvard Grieg platform (OGJ Online, May 12, 2014; Apr. 14, 2015).

Lundin says the objectives of well 16/1-23 S are to confirm the geological model at this part of the field so the company can optimize drainage strategy and the placement of development wells, and to test for upside reserve potential in the field, which is estimated at up to 50 million boe (gross).

Drilled by the Rowan Viking jack up rig, the well will reach a total depth of 2,200 m below mean sea level over a period of 60 days. Lundin Norway operates PL338 with 50% working interest. Partners are OMV Norge AS 20%, Statoil Petroleum AS 15%, and Wintershall Norge AS 15%.

Zeppelin exploration well 10/4-1 in PL734, operated by Wintershall, lies in the southern North Sea 35 km southeast of Yme field.

The main objectives of well 10/4-1 are to prove the presence of hydrocarbons in sandstones of the Middle to Late Jurassic Vestland Group. Lundin estimates the Zeppelin prospect to have the potential to contain unrisked, gross prospective resources of 152 million boe.

Drilled by Dolphin Drilling AS's Borgland Dolphin semisubmersible rig, the well will reach 2,300 m below mean sea level over a period of 30 days. Wintershall operates PL734 with 40% interest, while Lundin Norway and Centrica Resources (Norge) AS each hold 30%.

Junex provides update on Galt oil property drilling

Junex Inc., Quebec City, Que., said it is finalizing construction of the surface drilling pad for the Junex Galt No. 5 horizontal well that the company plans to start drilling in late July.

This well is on the company's Galt oil property where Netherland, Sewell & Associates Inc. recently provided an update of their best estimate of the total oil initially in place resources at 557 million bbl for the Forillon and Indian Point formations. NSAI's best estimate of Junex's net share of the total recoverable oil resource volume is 55.7 million bbl of oil.

Galt No. 5 horizontal well is the first well of the next phase of operations on the Galt oil property, which includes the drilling of the Galt No. 5 horizontal well, the completion of a detailed 3D seismic program, then the drilling of the Galt Nos. 6 and 7 horizontal wells whose final locations will be determined from the 3D seismic data.

The Junex Galt No. 5 horizontal well is planned to be drilled to a total measured depth of 2,500 m, of which 1,300 m is to be horizontal drilled within the Forillon oil reservoir. Similar to Junex's Galt No. 4 horizontal oil discovery well, the horizontal portion of the Galt No. 5 horizontal well is designed to intersect the maximum number of open, near-vertical, natural fractures in the Forillon oil reservoir.

Junex holds a 70% interest in the Galt oil property and it holds 100% interest in the adjacent acreage. The adjacent 100% Junex acreage has not yet been independently evaluated for its resource potential. These properties are situated 20 km west of the town of Gaspe in eastern Quebec.

Drilling & ProductionQuick Takes

Statoil submits amended PDO for Gullfaks license

Statoil ASA has submitted an amendment to the plan for development and operations (PDO) for the Gullfaks license for the first phase of the Shetland-Lista development.

Shetland-Lista has been producing under a test production license since 2013. The amendment submitted to Norway's Ministry of Petroleum and Energy defines the longer-term development.

The first phase involves depressurization down to bubble point pressure in the reservoir and will not require any new infrastructure. It is expected to add 18 million boe, using 15 existing wells from Gullfaks platforms.

"By utilizing the existing infrastructure, we manage to recover new resources at a lower cost, thus sustaining profitable production and long-term activities on the Norwegian continental shelf," said Ivar Aasheim, Statoil senior vice-president.

Investment costs are estimated at 900 million kroner.

Statoil said the Shetland Group and Lista Formation have different properties compared with deeper deposits of the Brent Group, where the main Gullfaks reservoirs are located. The producing interval in Shetland-Lista consists of thin limestone beds that are fractured.

"Good productivity" was established in December 2012 and has been confirmed through perforation in another three existing Gullfaks wells, which Statoil said has warranted commercial development.

Statoil said current recovery rate from the main Gullfaks field is 59%. Since start of oil production in 1986, the field has produced more than 2.56 billion bbl of oil and exported more than 70 billion cu m of gas (OGJ Online, Apr. 19, 2013).

CNOOC starts production from Bozhong 28/34 fields

CNOOC Ltd. reported the start of production from its Bozhong 28/34 oil fields comprehensive adjustment project.

The Bozhong 28/34 oil fields lie in Bohai in an average of 22 m of water. The project consists of three comprehensive adjustment projects, namely Bozhong 28-2S oil fields, Bozhong 34-1 oil field, and Bozhong 34-2/4 oil field.

The main production facilities of the project include 6 offshore platforms and 79 producing wells. There are currently 39 wells producing 22,000 b/d of crude oil.

The adjustment project is expected to reach its designed peak production of 30,000 b/d of oil in 2016.

The Bozhong 28/34 are independent oil fields in which CNOOC holds 100% interest and acts as operator.

BHP, Woodside move to decommission Stybarrow

BHP Billiton Ltd. and Woodside Petroleum Ltd. have started preparations for decommissioning of the Stybarrow group of oil fields in production licence WA-32-L offshore Western Australia towards yearend. The field has been producing for 8 years.

As operator, BHP has lodged the first documents to the National Petroleum Safety and Environmental Management Authority to begin the abandonment process.

The Stybarrow project, including Stybarrow and Eskdale fields, was originally flagged to produce 60-90 million bbl over 10 years. At the end of this year, 60 million bbl will have been produced.

The fields were found in 2003 in 825 m of water and developed using the Stybarrow Venture floating production, storage, and offloading vessel, which came on stream in 2007.

The facility comprises 6 production wells, 2 gas-lift wells, 1 gas-injection well, and 2 water-injection wells. Development costs were $760 million.

The MODEC Inc.-operated FPSO, leased for an initial 10-year period with the option of 1-year extensions for a further 5 years, will have its contract terminated early.

Tullow provides update on Jubilee, other fields

Tullow Oil PLC reported that gross production for the Jubilee field offshore Ghana averaged 105,000 b/d in this year's first half, up from 102,000 b/d in 2014 (OGJ Online, Jan. 15, 2015).

Tullow said natural gas exports from Jubilee have averaged 80 MMscfd since final commissioning of the onshore gas processing facility was completed in March.

In Kenya, appraisal drilling and extended well tests are continuing in South Lokichar Blocks 10BB and 13T. Tullow is preparing for water injection tests into each of five completed reservoir zones in Amosing-2A (OGJ Online, Mar. 11, 2015).

Tullow is also preparing for extended well tests in Ngamia field. Multizone completions have been installed in the Ngamia-8, Ngamia-3, and Ngamia-6 wells.

The Ngamia-9 appraisal well was spudded in June by the PR Marriott 46 rig, which is also scheduled to drill the Twiga-3 and Amosing-5 appraisal wells.

A basin-testing exploration well is planned this quarter at Cheptuket on Block 12A.

PROCESSINGQuick Takes

SIBUR plans MTBE expansion at Togliattikauchuk

Russian conglomerate OAO SIBUR Holding, Moscow, has started preparatory work for a project designed to expand production capacity for methyl tertiary butyl ether (MTBE) at its Togliattikauchuk petrochemical complex in Togliatti in Russia's Samara region.

The project, which involves construction of a new unit, will increase MTBE production capacity at the plant to 135,000 tonnes/year from its current 75,000 tpy, SIBUR said.

As part of the expansion, SIBUR will install 58 pieces of equipment, as well as upgrade existing equipment, with automated process-control systems to improve efficiency and safety at the site, the company said.

Feedstock for Togliatti's expanded MTBE production will come from the plant's own output of isobutane-isobutylene fraction, which SIBUR said it will boost to 130,000 tpy from its current 105,000 tpy.

Preparation of the construction site is under way, as is development of project documents for an upcoming tender the company plans to issue for the purchase long-lead equipment, SIBUR said.

The expansion project comes as part of SIBUR's company-wide initiative to expand its MTBE production capacities to help meet industry demand in regional fuel markets for octane-enhancing additives, the petrochemical producer said.

SIBUR disclosed no details regarding when the expanded plant would be commissioned.

Ingleside lets contract for ethylene storage

Ingleside Ethylene LLC, a 50-50 joint venture of Occidental Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), has let a contract to CB&I, Houston, to provide engineering, procurement, and construction for an ethylene storage complex in Markham, Tex. The complex will be built as part of the JV's ethylene cracker project now under way at nearby Ingleside, Tex. (OGJ Online, Dec. 17, 2014).

CB&I's scope of work under the EPC contract will consist of surface installations and includes compression, dehydration, metering, and associated pipe fabrication at the salt cavern storage site, the service provider said.

CB&I valued the contract at about $115 million.

This latest contract follows OxyChem's previous letting of a $1-billion EPC contract to CB&I for the cracker project, including associated utilities and offsites (OGJ Online, Dec. 2, 2013).

First announced in November 2013 (OGJ Online, Nov. 1, 2013), the 1.2 billion-lb/year ethane cracker will provide OxyChem with an ongoing source of ethylene for manufacturing vinyl chloride monomer, which Mexichem will use to produced polyvinyl chloride resin and PVC piping systems.

The cracker, which will process ethane feedstocks from growing US shale gas supplies, received final greenhouse gas prevention of significant deterioration construction permits from the US Environmental Protection Agency last year (OGJ Online, May 29, 2014).

CB&I said it also will provide licensing for ethylene technology to be used at the project, including five short-residence-time cracking heaters.

Additionally, the project will use cracking furnaces equipped with selective catalytic reduction technology to control emissions of nitrogen oxides, according to EPA.

At a total cost of about $1.5 billion, the ethylene project, which began construction in late 2014, is scheduled for start-up in 2017.

Petronas lets contract for RAPID complex

Malaysia's state-run Petronas, through a contractor, has let a contract to Industrial Cooling Solutions Inc. (ICS), Lakewood, Colo., to build a 28-cell cooling tower for its proposed refinery and petrochemical integrated development (RAPID) complex at Pengerang in southeastern Johor, Malaysia (OGJ Online, May 13, 2011).

ICS will design and construct the multimillion-dollar cooling tower to be used at RAPID's steam cracker complex, ICS said.

A precise value of the contract was not disclosed.

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 is scheduled for start-up in early 2019, according to ICS.

TRANSPORTATIONQuick Takes

Shell unit takes interest in Poseidon oil pipeline

Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a subsidiary of Shell Oil Products US, for $350 million.

Poseidon is a proprietary 367-mile offshore crude oil pipeline with 350,000 b/d capacity transporting to Texas and Louisiana. It includes ownership of strategic platform South Marsh Island 205.

"This marks the second acquisition by Shell Midstream Partners following the initial public offering," said Peggy Montana, general partner board member (OGJ Online, Apr. 30, 2015)."

She said Poseidon is a "key corridor pipeline" for producers with close proximity to developments in the central and western Gulf of Mexico.

Woodside-led Browse FLNG venture enters FEED phase

The Woodside Petroleum Ltd.-led Browse LNG joint venture has entered the front-end engineering and design phase for a floating LNG (FLNG) development of Torosa, Brecknock, and Calliance natural gas fields offshore Western Australia.

The FEED process will finalize the costs and provide technical definition for the proposed development leading to a scheduled final investment decision in about 12 months.

Woodside Chief Executive Officer Peter Coleman says the decision to enter FEED is a significant step towards developing what he calls a world-class resource.

Two of the fields in the Browse basin-Torosa and Brecknock-were discovered in the 1970s. Calliance field was discovered in 2000. They have been in limbo for decades, despite numerous development studies, the penultimate of which involved plans for an onshore processing plant at James Price Point on the Kimberley coast.

The latest FLNG concept comprises three FLNG vessels using Shell's technology, pioneered-but yet to be brought on stream-at Prelude field, also in the Browse basin. Torosa, Brecknock, and Calliance have a combined 2C contingent resource of 15.4 tcf of gas and 453 million bbl of condensate. This is the last undeveloped mega-LNG project left in Western Australia once Gorgon-Jansz, Wheatstone, Ichthys, and Prelude have been completed.

Retention lease renewal offers covering the three fields have been offered by the government and accepted by the Woodside group following last week's deal with the Western Australia government to reserve the equivalent of 15% of the LNG produced from the two thirds of Torosa field that lies within state waters for domestic use.

Woodside says the Browse LNG volumes for the remainder of the resource will be marketed on an equity basis from its growing LNG portfolio.

Construction starts on Russia-China gas line

Construction has begun on the Chinese section of the Russia-China Gas Pipeline, according to China National Petroleum Corp.

The June 29 commencement ceremony took place at the construction site in Heihe, Heilongjiang province, and by video link to Beijing and Moscow. The Chinese section will extend from Heihe to Shanghai.

CNPC and OAO Gazprom signed a 30-year gas purchase and sales contract for the eastern route pipeline in May 2014 (OGJ Online, May 21, 2014).

Construction of the Russian section, known as Power of Siberia, began in September (OGJ Online, Oct. 14, 2014).

Gazprom will start transporting gas to China via the eastern route in 2018. Gas delivery will gradually increase to 38 billion cu m/year.

CNPC and Gazprom also have signed a heads of agreement for gas supply via a western route from Western Siberia to China (OGJ Online, May 11, 2015).