GENERAL INTEREST — Quick Takes
Oil to help Alberta, Saskatchewan recover
Oil production will help Alberta and Saskatchewan recover from recession and lead Canadian provinces in economic growth this year, predicts the Conference Board of Canada (CBC). The group's Provincial Outlook: Spring 2017 says Alberta will have the fastest economic growth among the provinces, with an increase in real gross domestic product of 3.3%.
Alberta's economy has contracted during the past 2 years.
"Nonconventional oil production in the province will see a big increase this year thanks to new capacity coming online, while energy investment is expected to make a comeback this year and next," CBC said in a press release.
Improvements in labor markets, consumer demand, and housing also will help Alberta's economy this year.
Saskatchewan and British Columbia will have GDP growth of 2.5% this year, tying for second place.
Saskatchewan will emerge from recession after drilling recovered last winter and oil production increases.
British Columbia's forecast growth rate will be down from 3.7% in 2017 because of a housing slowdown and forest-industry struggles.
The study projects GDP growth of 2.3% in Ontario, 2.1% in Manitoba, and 1.8% in Quebec.
Aging populations are limiting growth in labor supply and hampering economies in the Atlantic provinces, according to CBC.
Newfoundland and Labrador will be the only province in recession this year as the economy contracts by 3%. CBC expects oil production from the Hebron project to help the province "bounce back strongly" next year.
The CBC projects 2017 GDP growth of 0.5% in Nova Scotia, 1% in New Brunswick, and 1.8% in Prince Edward Island.
Shell to acquire Chevron's unit in Trinidad and Tobago
Royal Dutch Shell PLC said it has signed an agreement to acquire the interests of Chevron Corp.'s subsidiary in Trinidad and Tobago. The deal, worth $250 million, includes Chevron's holdings in East Coast Marine Area Blocks 6, 5a, and E.
The deal includes Chevron's Trinidad and Tobago's interest in the massive 10-tcf Loran Manatee cross-border gas field shared between the Caribbean twin-island nation and neighboring Venezuela. Chevron, however, retains its interest in the block but on the Venezuela side of the border.
The deal is expected to close around midyear.
Shell has been expanding its holdings in Trinidad and Tobago since its purchase of BG Group PLC. It has not become the largest shareholder in Atlantic LNG and is seeking to rival BP PLC as the biggest player in Trinidad and Tobago.
Shell also has interest in the deepwater blocks being explored by BHP Billiton Ltd. and has shares in the Le Clerc gas discovery in the deep water.
"Trinidad and Tobago represents a rich opportunity for us to continue building our integrated gas position in country and securing new competitive production," said Derek Hudson, vice-president, Shell Trinidad & Tobago. "Shell continues to actively evaluate other options to increase supply from our existing assets, as well as pursue additional opportunities such as the previously announced purchase of Centrica's interests in the North Coast Marine Area."
NOAA: Above-normal Atlantic hurricane season likely
The US Atlantic region is likely to experience another above-normal hurricane season this year, National Oceanic & Atmospheric Administration forecasters said. For the upcoming Atlantic hurricane season from June 1 through Nov. 30, they forecast a 45% chance of an above-normal season, a 35% chance of a near-normal period, and only a 20% chance of a below-normal season.
The numbers included Tropical Storm Arlene, a rare preseason storm that formed over the eastern Atlantic in April, NOAA said in an initial May 25 outlook, which will be updated in early August. The 2016 season was the most active since 2012, with 15 named storms, including 7 hurricanes and 4 major hurricanes.
"The outlook reflects our expectation of a weak or nonexistent El Nino, near- or above-average sea-surface temperatures across the tropical Atlantic Ocean and Caribbean Sea, and average or weaker-than-average vertical wind shear in that same region," said Gerry Bell, lead seasonal hurricane forecaster at NOAA's Climate Prediction Center.
Strong El Ninos and wind shear typically suppress development of Atlantic hurricanes, so the prediction for weak conditions points to more hurricane activity this year, he said. Also, warmer sea surface temperatures tend to fuel hurricanes as they move across the ocean. The climate models are showing considerable uncertainty, however, which is reflected in the comparable probabilities for an above- and near-normal season.
Exploration & Development — Quick Takes
Husky Energy approves West White Rose project
Husky Energy Inc. expects to start oil production from its West White Rose project offshore Newfoundland and Labrador in 2022 with a gross peak production rate of 75,000 b/d in 2025. The company and its partners will use a fixed wellhead platform tied back to the SeaRose floating production, storage, and offloading vessel, which began operations in 2005.
The West White Rose project, which is expected to cost $5.2 billion over its lifespan, involves a concrete gravity structure supported wellhead platform to include drilling facilities, utilities, support services, and accommodations for personnel. Construction will start in this year's fourth quarter.
Chief Executive Officer Rob Peabody said the project has been improved since it was first considered for sanction, "achieving a 30% improvement in capital efficiency and increasing the expected peak production rate by 40% over our initial investment." The tie-back to the SeaRose is expected to lower incremental operating costs to less than $3/bbl over the first 10 years. Overall operating costs are expected to drop for the entire White Rose field as the project ramps up.
Husky has 70% working interest in the field with partners Suncor Energy Inc. and Nalcor Energy Oil & Gas splitting the remaining 30%.
In conjunction with West White Rose project approval, Husky has made a series of discoveries and satellite developments in the White Rose production area. In Northwest White Rose, the White Rose AZ-78 well delineated a light oil column of more than 100 m about 11 km northwest of the SeaRose FPSO in this year's first quarter. Husky reported that assessment of the discovery was ongoing. The operator has 93.2% ownership interest, and cited that potential development could leverage the SeaRose, existing subsea systems, and the new West White Rose wellhead platform. Husky plans to bring a third South White Rose production well online later this year.
Oil Search farms into former InterOil PNG permits
Oil Search Ltd., Sydney and Port Moresby, has bought 30% interest in each of five permits in the Papua New Guinea eastern Foldbelt from ExxonMobil Corp.
ExxonMobil acquired interest in the permits-PPLs 474, 475, 476, 477, and retention lease PRL 39-when it completed its purchase of InterOil Corp. earlier this year.
The permits lie near Elk-Antelope fields in PRL 15 in which Oil Search and ExxonMobil are joint venture participants along with operator Total SA. Three of the five permits in the farm-in deal contain recent gas discoveries: Triceratops (PRL 39), Bobcat (PPL 476), and Raptor (PPL 475).
As part of the farm-in, Oil Search will run a seismic program across the five licenses during the remainder of 2017 and into early 2018 on behalf of operator ExxonMobil.
The full terms of the agreement between Oil Search and ExxonMobil, however, have been kept confidential.
Oil Search sees this part of the onshore Papuan basin as significant for further gas potential. The move also materially enhances the company's exploration portfolio. Apart from the existing discoveries, Oil Search has already identified a number of additional leads and prospects on the acreage and these will be the focus of the coming seismic work.
Energean signs pact for western Greece block
Energean Oil & Gas SA, Athens, has signed a lease agreement with the Greek government for the exploration and exploitation of hydrocarbons on the 4,360-sq-km Aitoloakarnania block onshore western Greece.
Aitoloakarnania is an underexplored block and is part of the same system commonly referred to as the Ionian basin. The area is a geological continuation of Ioaninna block, which has been explored by Energean since 2014. Both blocks cover a total of 8,547 sq km and are priority exploration targets for Energean.
The area also is considered to be the southern-most extension of the greater peri-Adriatic basin, which has proven prolific with oil and gas production in Albania, Italy, and Croatia, Energean says. In total, more than 10 billion bbl of oil and 30 tcf of gas have been discovered throughout the region.
Energean in March agreed to farm out 60% interest in Ioannina and Aitoloakarnania blocks to Repsol SA, which will be operator of both Aitoloakarnania and Ioannina blocks. The two companies have already submitted an application to the Greek government to approve Repsol's plans to farm in and undertake a 2D seismic survey over Ioannina in 2017-18 and conduct a full tensor gravity and 2D seismic survey over Aitoloakarnania in 2018-19.
Joint venture to explore Oman's offshore Block 52
Oman's Ministry of Oil and Gas has granted Eni SPA and Oman Oil Co. SAOC (OOC), the Sultanate's energy investment arm, exploration rights for Block 52, a 90,000-sq-km area in 10-2,000 m of water offshore Oman. The area is largely unexplored, and was awarded following an international bid round launched in October 2016.
In conjunction with its Block 52 exploration, Eni finalized a memorandum of understanding with OOC to enter the Oman upstream.
Drilling & Production — Quick Takes
Statoil gets nod to start production at Gina Krog field
Statoil ASA received approval from the Norwegian Petroleum Directorate to start oil and natural gas production at Gina Krog field, 30 km northwest of Sleipner in the North Sea.
Gina Krog production is expected to start as early as June. Statoil expects to process gas through the Sliepner A platform. Statoil operates the field with 58.7% interest.
Initially considered a minor gas discovery in 1974, Gina Krog was previously known as Dagny. A plan for development and operation of the field was submitted in 2012. Statoil let a contract for design and installation of topsides for the field's platform.
Ensco to acquire Atwood Oceanics, bolster rig fleet
Ensco PLC has agreed to buy Atwood Oceanics Inc. in an all-stock deal that will create a combined company valued at $6.9 billion based on the closing price of each company's shares on May 26.
The deal will provide Ensco with six ultradeepwater floaters, including four drillships, and five high-specification jack ups. The combined company will have a fleet of 63 rigs, including ultradeepwater drillships, deep and midwater semisubmersibles, and shallow-water jack ups, with a customer base of 27 national oil companies, supermajors, and independents.
The combined firm's fleet of 26 floating rigs will include 21 ultradeepwater drilling rigs, with an average age of 5 years, capable of drilling in 7,500 ft of water or greater. The jack up fleet will consist of 37 rigs, including 27 premium units.
The two firms' current regions of operation include the Gulf of Mexico, Brazil, West Africa, Middle East, North Sea, Mediterranean, and Asia Pacific.
The move will not affect Ensco's executive management structure, and the firm will continue to be based in the UK with senior executive officers in London and Houston.
The combination is expected to provide expense savings of $45 million in 2018 and $65 million/year in 2019 and beyond due to the consolidation of offices as well as the standardization of systems, policies, and procedures across the organization.
Upon close of the deal, expected as early as the third quarter, Ensco and Atwood shareholders will own 69% and 31%, respectively, of the outstanding shares of Ensco.
EOG, Carlyle form $400-million Oklahoma drilling JV
EOG Resources Inc., Houston, and global alternative asset manager Carlyle Group LP have formed a combine for development of EOG's oil and gas assets in Ellis County, Okla.
Carlyle Energy Mezzanine Opportunities Fund II LP will fund $400 million for the development program over 4 years. After certain performance hurdles are achieved in the program, Carlyle's working interests will largely revert to EOG.
Carlyle Energy Mezzanine Opportunities Group provides growth and refinancing capital to projects and companies in the energy business through Carlyle Energy Mezzanine Opportunities Fund LP and Carlyle Energy Mezzanine Opportunities Fund II LP, which have combined assets of $4 billion.
EOG was granted four drilling permits in the Marmaton play of Ellis County. Two were for the Teddy 1-4H and Teddy 1-5H wells, both vertical; the other two were for the Max 11-3H and Max 11-4H wells, both vertical. The firm's most recent Marmaton drilling activity came during 2013-14.
EP Energy, Tesoro form Uinta drilling partnership
Houston producer EP Energy Corp. and San Antonio refiner Tesoro Corp. have formed a joint venture to fund a 60-well oil and gas development program in EP Energy's Altamont program in the Uinta basin of Utah.
Tesoro will provide a capital carry in exchange for 50% of EP Energy's working interest in JV wells. EP Energy, whose net share of capital is expected to be $64 million, will retain operational control of the JV's assets.
The first wells under the partnership are expected to begin production in July. EP Energy's average working interest in the JV wells is currently 80%.
Tesoro and EP Energy also entered into a multiyear crude oil supply agreement through which Tesoro will purchase all of the oil produced in the JV along with additional waxy crude oil produced by EP Energy in the Uinta for Tesoro's 63,000-b/d Salt Lake City refinery.
Brent Smolik, EP Energy chairman, president, and chief executive officer, commented, "In the Altamont field we have a deep inventory of high-return drilling opportunities. This joint venture will enable us to significantly increase the well-level returns and capital efficiency of our program."
EP Energy plans to keep two rigs working in the Uinta going forward. During the first quarter, EP Energy completed three wells in its Altamont program and produced 11,900 b/d of oil, a 4% increase compared with first-quarter 2016. Altamont total equivalent production for the first quarter was 17,300 boe/d, roughly flat from fourth-quarter 2016.
Tesoro Chairman, Pres., and CEO Greg Goff said, "This agreement with EP Energy is an important step to further enhance our integrated value chain in the Rockies by supporting the growth of waxy crude oil production in the Uinta basin and allowing us to secure additional supply of this advantaged crude oil to further optimize the operation of our Salt Lake City refinery."
PROCESSING — Quick Takes
Joint venture to build Delaware basin gas plant
Crestwood Equity Partners LP and First Reserve, via a joint venture focused on developing, owning, and operating midstream systems in the Delaware basin, has sanctioned construction of a 200-MMcfd cryogenic gas processing plant in Orla, Tex.
Initial project scope will include a 33-mile, 20-in. OD high-pressure line-the Orla Express Pipeline-connecting the existing Willow Lake gathering system in Eddy County, NM, to the Orla plant in Reeves County, Tex. The Orla plant will offer full liquids handling and multiple residue and NGL interconnects, serving customers across Eddy and Lea counties in New Mexico, and Loving, Ward, Reeves, and Culberson counties in Texas.
Crestwood anticipates several expansions once the plant is in service, including connecting it to the JV's Nautilus gas gathering system and building additional laterals to gather incremental volumes for offset producers.
The company expects the Orla plant to enter service in second-half 2018 at a cost of $170 million.
Crestwood last year reached an agreement with Royal Dutch Shell PLC subsidiary SWEPI to gather natural gas across 100,000 acres in Loving, Reeves, and Ward counties. The initial gathering system being built to service the agreement can move about 250 MMcfd of gas and includes 194 miles of low-pressure gathering lines and 36 miles of high-pressure trunkline. Service is targeted to begin by July 1.
Oriental units start on-purpose propylene production
Ningbo Fortune Petrochemical Co. Ltd. (NFPC) and Zhangjiagang Yangzi River Petrochemical Co. Ltd. (YRPC), both subsidiaries of Oriental Energy Co. Ltd., each have commissioned 600,000-tonne/year on-purpose propylene units at their respective plants in Ningbo City, Zhejiang Province, and Zhangjiagang, Jiangsu Province, in China.
NFPC and YRPC are now producing a combined total of 1.2 million tpy of on-purpose propylene from propane using Honeywell International Inc. subsidiary UOP LLC's proprietary C3 Oleflex process technology, UOP said.
In addition to licensing process technology, UOP delivered engineering design, equipment, staff training, technical service, as well as proprietary catalysts and adsorbents for the operators' Oleflex units, the service provider said.
Increased on-purpose propylene production from NFPC and YRPC comes as part of the companies' efforts to meet China's rising demand for polypropylene and other downstream chemical and plastic products.
Chinese demand for propylene, which currently accounts for more than 15% of total global demand, is growing at a rate of 4%/year, the US Energy Information Administration said.
Lukoil lets contract for Sicilian refinery
Isab SRL, a subsidiary of PJSC Lukoil of Russia, has let a contract to Amec Foster Wheeler PLC to provide engineering services as part of a major turnaround of the 16 million-tonne/year Priolo refinery in Sicily's eastern province of Syracuse.
Amec Foster Wheeler's scope of work will include site engineering, estimating services, and technical assistance during the construction phase for revamps of various facilities at the refinery during a turnaround scheduled to take place sometime in 2018, the service provider said.
While it disclosed no additional details regarding the number of processing units due for overhauls during the planned maintenance event, Amec Foster Wheeler did confirm it will apply its own expertise in fluid catalytic cracking to enable implementation of the turnaround.
Lukoil took full ownership of the Priolo refinery from former joint-venture partner ERG SPA in late 2013.
TRANSPORTATION — Quick Takes
KMI to take FID on Trans Mountain Expansion
Kinder Morgan Inc. will make a final investment decision for the Trans Mountain Expansion Project (TMEP) crude oil pipeline in conjunction with indirect unit Kinder Morgan Canada Ltd. (KML), conditional on completion of an IPO of KML stock.
TMEP will add 590,000 b/d to Trans Mountain's capacity, bringing its total to 890,000 b/d. The project is underpinned by 15 and 20-year shipper commitments of 707,500 b/d, or 80% of capacity on the expanded line, with 20% reserved for spot volumes as required by Canada's National Energy Board. KMI expects to start construction in September. Completion is expected in December 2019.
KMI acknowledged the political climate surrounding TMEP "was not ideal" but that its financing contingency period concluded at the end of May, requiring prompt action.
KML is pricing the IPO of 102.9 million shares of common stock at $17 (Can.)/share for total gross proceeds of $1.75 billion (Can.). KMI will still own about 70% of its current Canadian business, which will be operated and administered by KML and its affiliates. The business consists of the Trans Mountain pipeline including related terminals, the Puget Sound pipeline, the Jet Fuel pipeline, the Canadian portion of the Cochin pipeline, the Vancouver Wharves terminal and the North 40 terminal, and three jointly controlled investments: the Edmonton Rail terminal, the Alberta Crude terminal and the Base Line terminal.
TMEP is a $7.4-billion (Can.) project, with a remaining cash spend of $6.2 billion (Can.) as of Mar. 31, KMI said.
Targa to build Permian-to-Mont Belvieu NGL pipeline
Targa Resources Corp., Houston, plans to construct a common carrier NGL pipeline to transport volumes from the Permian basin, and also from Targa's North Texas system, to the company's fractionation and storage complex at Mont Belvieu, Tex.
Grand Prix will be supported by Targa's volumes and other third-party customer commitments and is expected to be in service during second-quarter 2019. The capacity of the pipeline from the Permian will be 300,000 b/d, expandable to 550,000 b/d.
Targa says its current and future gas processing plants and third-party connections are expected to generate significant NGL volumes for Grand Prix.
Targa in the Permian has 1.7 bcfd of current gas processing capacity after its recently completed acquisition of Outrigger Delaware Operating LLC, Outrigger Southern Delaware Operating LLC, and Outrigger Midland Operating LLC. Targa also has 700 MMcfd of processing capacity being added across both the Midland and Delaware basins.
Total growth capital for Grand Prix is expected to be $1.3 billion, with $250 million of spending in 2017. Total 2017 net growth capital spending from Targa's current list of announced projects is now $1.2 billion.