GENERAL Interest — Quick Takes
Sunoco Logistics to buy ETP in $20-billion deal
Sunoco Logistics Partners LP agreed to acquire Energy Transfer Partners LP (ETP) in a unit-for-unit deal valued at $20 billion.
Sunoco Logistics says the combined partnership will have increased scale and diversification across multiple producing basins and will have greater opportunities to more closely integrate Sunoco's natural gas liquids business with ETP's natural gas gathering, processing, and transportation business.
The companies, which are already participating in several partnerships, expect the deal will allow for commercial synergies and costs savings in excess of $200 million/year by 2019.
The deal, approved by the boards and conflicts committees of both partnerships, is expected to close in first-quarter 2017.
ETP unitholders will receive 1.5 common units of Sunoco Logistics for each common unit of ETP they own. This equates to a 10% premium to the volume weighted average pricing of ETP's common units for the last 30 trading days immediately prior to the announcement of the deal.
At the closing of the transaction, the chief executive officer, chief commercial officer, president, and chief financial officer of the combined partnership will be Kelcy Warren, Mackie McCrea, Matt Ramsey, and Tom Long, respectively.
Mike Hennigan and other members of the Sunoco Logistics management team are expected to continue in leading management roles of the combined company with the Sunoco Logistics business headquartered in Philadelphia.
ETP last week sued in federal district court for permission to complete the Dakota Access crude oil pipeline after the US Army Corps of Engineers said the previous day that it would continue to delay issuing easement permits under Lake Oahe in North Dakota for further consultations with the Standing Rock Sioux Indian tribe (OGJ Online, Nov. 16, 2016).
Suncor provides 2017 spending, production outlook
Suncor Energy Inc., Calgary, said it expects its capital spending to reach $4.8-5.2 billion (Can.) in 2017. A midpoint would represent a $1-billion (Can.) decrease from 2016.
About 40% of next year's capex program is allocated toward upstream growth projects, including the Fort Hills oil sands project and the Hebron heavy oil project. Both are expected to reach start of production by yearend 2017.
The remaining 60% of capex is planned for sustaining upstream, downstream, and corporate segments.
Suncor's forecast for production is 680,000-720,000 boe/d. A midpoint would represent a 13% increase over 2016. Suncor did not provide an outlook for production in Libya because of continued political unrest.
The company's refinery utilization rate is expected to be 92-96% of capacity at Montreal, Sarnia, Edmonton, and Commerce City.
CCI buys certain East Texas assets for $1 billion
Castleton Commodities International LLC (CCI), Stamford, Conn., has acquired Carthage upstream and midstream assets in East Texas from subsidiaries of Anadarko Petroleum Corp. for more than $1 billion.
With the acreage included in the deal, CCI will own more than 160,000 net acres of leasehold in East Texas. As of the effective date, net production to CCI in East Texas increased to 320 MMcfd of natural gas equivalent.
"The company is well-positioned to enhance the value of these acquired assets through further development of the Haynesville shale, amongst other operational activities," commented Craig Jarchow, president of CCI's oil and gas division.
CCI is a global commodities merchant with operations consisting of physical and financial commodities trading, and the ownership, operation, and development of commodities-related upstream and infrastructure assets.
Exploration & Development — Quick Takes
ExxonMobil set to develop Liza discovery off Guyana
ExxonMobil Corp. has informed the Guyanese government that it intends to fast-track development of the Liza discovery on the 6.6 million-acre Stabroek block (OGJ Online, June 30, 2016). The company's partners, Nexen Energy ULC and Hess Corp., gave Minister of Natural Resources Raphael Trotman notice of the discovery's commercial quantities early last week.
ExxonMobil announced that the Liza-1 well encountered more than 295 ft of high-quality, oil-bearing sandstone in May 2015. The Liza-2 well, drilled 120 miles offshore Guyana, encountered more than 190 ft of oil-bearing sandstone reservoirs in Upper Cretaceous formations.
The Liza-2 well was drilled to 17,963 ft in 5,551 ft of water about 2 miles from the operators first exploration well, Liza-1, on the 6.6 million acre Stabroek block.
ExxonMobil's notification is the first time Section 31 of Guyana's Petroleum Act has been activated in its 50-year history as an independent nation. "This is profound and watershed moment in the development of our country," Minister Trotman said in a press report.
Esso Exploration & Production Guyana Ltd. is operator and holds 45% interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30% and CNOOC Nexen Petroleum Guyana Ltd. holds 25%.
India gets bids for small fields in 34 contract areas
Thirty-four contract areas received bids in India's effort to develop small fields, the country's Press Information Bureau said. Forty-six contract areas were offered across nine sedimentary basins.
The response to the Discovered Small Fields Bid Round "has been very favorable and exceeded expectations of all experts."
Individually or as members of a bid consortium, 42 companies submitted a total of 134 electronic bids to the Directorate General of Hydrocarbons by the Nov. 21 deadline. PIB said 120 bids are for onshore areas and 14 offshore.
All 26 onshore contract areas received bids while 8 of 20 offshore areas received bids.
The fields have been discovered by India's national oil companies, and the bid round is part of an effort to reduce India's oil imports by 10% by 2022.
The Discovered Small Fields Policy "is designed to be investor friendly" and is based on an "easy-to-administer" revenue-sharing contract model (OGJ Online, May 24, 2016).
Road shows to attract investors to the bid round took place in India, the US, the UK, Canada, Singapore, and UAE.
DNO signs development deal for western Iran
Norwegian operator DNO ASA has signed a memorandum of understanding with National Iranian Oil Co. to conduct a development study for Changuleh oil field. The field-which was discovered in 1999 but yet to be developed-is thought to contain more than 2 billion bbl of oil in place.
DNO managing director Bjorn Dale cited the operator's fractured carbonate reservoir experience in the Kurdistan region of Iraq as an easily applied "low-cost, fast-track development stategy" for the region.
DNO has established wholly owned subsidiary DNO Iran AS in preparations to increase its presence in Iran.
Lundin makes oil, gas find in southern Barents Sea
Lundin Norway AS has made an oil and natural gas discovery in the southern Barents Sea after deepening a well that had been plugged in November 2015.
The 7220-/6-2 R well, also known as Neiden, encountered a total oil column of 20 m with an overlying gas column of about 10 m in Permian-to-Carboniferous carbonate rocks in the Orn formation. Another primary target was the Snadd formation in Middle Triassic sandstone.
The well was drilled by Ocean Rig's Leiv Eiriksson semisubmersible drilling rig to a vertical depth of 1,293 m subsea in 387 m of water in PL 609. It was not production tested.
Lundin Petroleum AB said the total gross resource estimate is 25-60 million boe. Partner DEA Norge AS said the preliminary estimate is 19-44 million bbl of oil recoverable and 1-2 billion cu m of gas recoverable. For the oil estimate, the Norwegian Petroleum Directorate reported 3-7 million cu m.
Lundin has 40%, DEA Norge 30%, and Idemitsu Petroleum Norge AS 30%.
The well is 60 km northeast of the 7220/11-1 Alta discovery and 20 km east of the 7220/8-1 Johan Castberg. It's also about 2 km northwest of exploration well 7220/6-1, Obelix, drilled in 2005.
The Leiv Eiriksson will next drill wildcat 7219/12-1, the Filicudi prospect, for Lundin in PL 533.
Azerbaijan: Absheron find enters development phase
Total E&P Absheron and State Oil Co. of Azerbaijan Republic (SOCAR) will drill a well in 450 m of water to begin production from the Absheron discovery offshore Azerbaijan.
The operator declared the discovery as commercial in 2012 after one of the hydrocarbon-bearing intervals in the Absheron X-2 well tested at 33.9 MMcfd of nonassociated gas and 2,500 b/d of 42.5° gravity condensate (OGJ Online, July 7, 2012). The Absheron discovery is estimated to contain 5-10 tcf of nonassociated gas with condensate in the Pliocen Balakhany and Fasila formations on the northern compartment of the structure, which is 270 sq km with cumulative net pay zone of more than 160 m.
The operators have signed an agreement establishing the contractual and commercial terms for a first phase of production of Absheron gas and condensate field, the company said. The Absheron offshore block lies east of Shah Deniz field in the Caspian Sea. Total Chief Executive Officer Patrick Pouyanne said close cooperation with SOCAR has "allowed us to design a cost-competitive development scheme by tying the field to existing infractructure."
Production is expected to reach 35,000 boe/d and produced gas will supply Azerbaijan's domestic market.
Total serves as operator of Absheron with 40% interest alongside SOCAR 40% and Engie 20%.
Drilling & Production — Quick Takes
Victoria proposes law to ban hydraulic fracturing The Victorian government has introduced legislation into parliament to permanently ban hydraulic fracturing for coal seam gas and tight oil and gas resources throughout the state. The government also has moved to extend the moratorium on conventional onshore gas exploration and development until mid-2020 saying it will take time to study the economic and environmental impacts.
Premier Daniel Andrews flagged the legislative move back in August this year following a parliamentary inquiry in 2015 into the unconventional gas industries and what he called one of the most amazing community campaigns Victoria and Australia has ever seen against fracing.
There are about 17 onshore exploration permit holders in Victoria. Resources Minister Wade Noonan says the government will offer compensation for the companies involved.
The Bill will contain a compensation provision where a license holder is prepared to voluntarily relinquish the license.
The minister did not nominate a definite compensation figure, but did say that the New South Wales government had previously offered a capped payment of $200,000 (Aus.) for each permit. He added that this is the sort of sum the Victorian government has in mind.
The company most affected by the bans is Melbourne-based Lakes Oil Ltd., which has seven onshore permits in Victoria.
Lakes Chief Executive Officer Roland Sleeman said this week's mention of compensation is the first the company has heard of it. Sleeman said the government has never contacted the company.
Lakes has already sought a judicial view by lodging legal action in the Supreme Court of Victoria over the government's move to introduce the ban.
Aramco, Rowan form offshore drilling JV company
Rowan Cos. PLC and Saudi Aramco have signed, through their respective subsidiaries, an agreement to create a 50-50 joint venture that will own, operate, and manage offshore drilling rigs in Saudi Arabia.
In a joint release, the companies said, "The new joint venture company will use Rowan's established business in Saudi Arabia as its base with a scope of operations covering Saudi Arabia's existing and future offshore oil and gas fields."
The new company is anticipated to start operations in second-quarter 2017.
At the start of operations of the new firm, Rowan will contribute three of its jack up drilling rigs and Aramco will contribute two of its jack up rigs. Rowan will contribute an additional two jack up rigs as they complete their current Aramco contracts in late 2018.
The new JV also will manage the operations of five Rowan jack up rigs currently in Saudi Arabia, until their associated drilling contracts expire, which then may be released, leased by or contributed to the new company thereafter.
Rowan and Aramco have committed the new company to purchase future newbuild rigs that will be constructed in Saudi Arabia.
Maersk Drilling running big-data pilots on XLE rigs
Maersk Drilling and GE announced a partnership to collaborate on a data analytic-driven pilot project starting with an XL Enhanced (XLE) ultra-harsh environment jack up. The pilot seeks to increase Maersk's drilling vessels' productivity while cutting maintenance costs by as much as 20%.
The pilot project will be carried out on one of Maersk Drilling's XLE rigs for 12 months before Maersk Drilling decides whether to deploy the system fleet-wide.
"Digital capability will be one of the key enablers for Maersk Drilling, and we embrace this industrial transition," said Jesper Hansen, Maersk Drilling chief information officer.
Operational sensor data from critical equipment is connected to a historian, a specialized server that stores the data needed to model a drilling blueprint. Drilling engineers will see the real-time information on dashboards.
Advanced algorithms and data-processing capability will forecast potential failure and enable preventive maintenance. Engineers will be given early warnings to mitigate unplanned downtime, Maersk and GE said in a joint news release from the GE Minds + Machines meeting in San Francisco (OGJ Online, Nov. 16, 2016).
PROCESSING — Quick Takes
Lotte's Louisiana MEG plant due ASU unit
Lotte Chemical Louisiana LLC, a subsidiary of South Korea's Lotte Chemical Corp., has let a contract to Taiyo Nippon Sanso Corp. (TNSC) of Japan's subsidiary Matheson Tri-Gas Inc., Basking Ridge, NJ, to build an air separation unit (ASU) at Lotte's monoethylene glycol (MEG) plant under construction next to its 1 million-tonne/year ethane cracker project with Axiall Corp. in Lake Charles, La. (OGJ Online, June 14, 2016).
Matheson will build, own, and operate the ASU unit and associated pipeline, which will supply tonnage oxygen and nitrogen to the 700,000-tpy MEG plant, the service company said.
The ASU unit, which will be fabricated in Japan, will be equipped with TNSC's proprietary advanced cryogenic distillation technology, Matheson said.
The company disclosed no details regarding capacity of the unit or the value and duration of the contract.
LACC LLC, Atlanta, a subsidiary of Axiall and Lotte Chemical USA Corp.'s 50-50 joint venture Eagle US 2 LLC, started construction on its long-planned $3-billion Lake Charles petrochemical project in June, just following announcement of Axiall's now-completed merger with Houston-based Westlake Chemical Corp. (OGJ Online, Sept. 6, 2016).
Under construction on the same property in southwest Louisiana, near Axiall's existing manufacturing plants in Calcasieu Parish, LACC's $1.9-billion ethane cracker complex and Lotte's associated $1.1 billion MEG plant intend to take advantage of access to competitive US shale feedstock resources as well as existing ethylene-distribution infrastructure. Both the cracker and MEG plant remain on schedule for startup in early 2019.
MEGlobal lets contract for Texas MEG plant
Dubai-based MEGlobal International FZE, a subsidiary of Kuwait's first international petrochemical joint venture Equate Petrochemical Co., has let a contract to Jacobs Engineering Group Inc., Dallas, to provide to provide engineering, procurement, and construction management services for its monoethylene glycol (MEG) plant now under construction at Dow Chemical Co.'s currently expanding Oyster Creek petrochemical complex in Freeport, Tex. (OGJ Online, Mar. 28, 2016).
This latest contract follows MEGlobal's previously undisclosed contract award to Jacobs for the front-end engineering package on the project, which incorporated Dow's proprietary METEOR ethylene oxide-ethylene glycol (EO-EG) process technology as well as nonprocessing equipment and piping both inside and outside the plants battery limits, the service provider said (OGJ Online, July 8, 2016).
First announced in March, the grassroots MEG plant comes as part of MEGlobal's program to create greater flexibility to satisfy grown demand for ethylene glycol products in the US and Asia-Pacific markets, as well as strategy to expand the company's global footprint.
The 700,000-tonne/year MEG plant, which will receive ethylene feedstock from Dow's currently expanding Oyster Creek ethylene production site under a long-term supply agreement, remains on schedule for startup in mid-2019.
Qatar Shell lets contract for Pearl GTL
Qatar Shell Ltd. has let a contract to WorleyParsons Ltd. to provide long-term engineering, procurement, and construction management services for its Pearl gas-to-liquids onshore and offshore installations in Ras Laffan Industrial City, Qatar.
To be executed by Worley Parsons Qatar with support from the firm's delivery center in India, the 5-year contract will involve delivery of EPCM services for a portfolio of brownfield projects at Pearl GTL operations, WorleyParsons said.
The service provider disclosed neither the value of the contract nor further details regarding the nature of brownfield projects included in its work scope.
Qatar Shell previously let a 4-year call-off contract to a division of SNC-Lavalin Group Inc., Montreal, to provide EPCM for all services related to plant changes, as well as for minor base and medium projects for a new phase of the Pearl GTL project (OGJ Online, Dec. 11, 2014).
Operated by Shell under a development and production-sharing agreement with Qatar Petroleum, the Pearl GTL plant has a GTL production capacity of 140,000 b/d as well as the ability to produce 120,000 b/d of NGLs and ethane (OGJ Online, Mar. 23, 2011).
TRANSPORTATION — Quick Takes
Tesoro Logistics expands midstream asset base
Tesoro Logistics LP has made $1.1 billion-worth in assets acquisitions in an effort to expand is midstream portfolio.
The firm has agreed to acquire crude oil, natural gas, and produced water gathering systems, and two natural gas processing facilities in North Dakota from Whiting Oil & Gas Corp., GBK Investments LLC, and WBI Energy Midstream LLC for $700 million.
In a separate deal, it has acquired terminalling and storage assets in Northern California from a subsidiary of Tesoro Corp. for $400 million.
The North Dakota gathering and processing assets include more than 650 miles of oil, gas, and produced water gathering pipelines, 170 MMcfd of gas processing capacity, and 18,700 b/d of fractionation capacity in Sanish and Pronghorn fields of the Williston basin.
The revenue from the assets is 90% fee-based and backed by acreage dedications from 10 producers. Tesoro says "the assets are well utilized based on current production levels and provide organic expansion opportunities that support continued drilling in existing well locations with attractive production economics."
The Northern California terminalling and storage assets include 5.8 million bbl of crude oil, feedstock, and refined product storage capacity at Tesoro's 166,000-b/d Golden Eagle refinery near Martinez, Calif., along with a marine terminal capable of handling 35,000 b/d of feedstock and product throughput.
Sunoco, ExxonMobil form crude logistics JV
Sunoco Logistics Partners LP and ExxonMobil Corp. have formed a joint venture, Permian Express Partners LLC, combining crude oil logistics assets primarily in the Permian basin.
Sunoco will contribute its Permian Express 1, Permian Express 2, and Permian Longview and Louisiana Access pipelines to the JV, while ExxonMobil will contribute its Longview-to-Louisiana and Pegasus pipelines, Hawkins gathering system, an idle pipeline in Oklahoma, and its Patoka, Ill., terminal.
Sunoco says the JV establishes a stronger crude logistics network to meet market demand, provides additional takeaway opportunities for shippers, and expands ExxonMobil's options to supply its network of refineries. Concurrent with the deal, ExxonMobil and its affiliates will enter into a preferred provider agreement with the JV. Sunoco will be the majority owner and operator of the JV's assets.
Ownership in Permian Express Partners will be Sunoco 85% and ExxonMobil 15%.
Sunoco this month completed an acquisition from Vitol Inc. for an integrated crude business in West Texas for $760 million plus working capital.
That deal included a 2 million-bbl crude terminal in Midland, Tex., a crude gathering and mainline pipeline system in the Midland basin including a large acreage dedication from an investment-grade Permian producer, and crude inventories related to Vitol's crude purchasing and marketing business in West Texas.
The deal also included the purchase of 50% interest in SunVit Pipeline LLC, which increased Sunoco's overall ownership of SunVit to 100%. SunVit connects the Midland terminal to the Permian Express 2 pipeline.
