GENERAL INTEREST — Quick Takes
Caerus to buy Encana's Piceance assets
Caerus Oil & Gas LLC, Denver, has agreed to acquire gas assets in the Piceance basin of northwestern Colorado from Encana Oil & Gas (USA) Inc., a wholly owned subsidiary of Calgary-based Encana Corp., for $735 million in cash.
The assets include 550,000 net acres of leasehold and 3,100 operated wells that produced 240 MMcfd of gas and 2,178 b/d of liquids in the first quarter. Estimated yearend 2016 proved reserves were 814 bcf of gas equivalent.
Encana also will reduce its midstream commitments by $430 million on an undiscounted basis and market Caerus' production from the assets. Encana last year also exited nearby DJ basin by selling 51,000 net acres to Crestone Peak Resources.
Caerus' existing Piceance operations include 800 producing wells and 2,000 future drilling locations.
The deal, effective Jan. 1, is expected to close during the third quarter.
Centrica to sell Canadian E&P business
Centrica PLC said it will focus its exploration and production activity solely on European assets as it sells its 60% interest in a Canadian joint venture.
The CQ Energy Canada Partnership is to be sold to a consortium that includes MIE Holdings Corp., The Can-China Global Resource Fund, and Mercuria.
Centrica's net share of sale proceeds is expected to be about £240 million. The transaction is subject to customary regulatory approvals, and is expected to close by yearend.
Centrica completed the sale of natural gas assets in Trinidad and Tobago in May.
Implementation date for RMP amendments extended
US Environmental Protection Agency Administrator E. Scott Pruitt extended the effective date for the agency's chemical Risk Management Plan amendments by 20 months until Feb. 19, 2019. The additional time will let EPA consider petitions for reconsideration and take further regulatory action, including possibly considering a fresh rule that might revise or rescind the amendments, he said in a June 9 final rule.
"We are seeking additional time to review the program so that we can fully evaluate the public comments raised by multiple petitioners and consider other issues that may benefit from additional public input," Pruitt said. He originally proposed the extension in April.
Groups that expressed concern about the amendments approved the EPA administrator's action. "The American Chemistry Council believes [he made] the right and necessary decision to review the problematic changes that could undermine the safety of chemical facilities and communities across the country and threaten the continued success of the underlying program," an ACC spokesman told OGJ.
American Fuel & Petrochemical Manufacturers Pres. Chet Thompson also endorsed Pruitt's decision. "This regulation never received the proper scrutiny and was rushed through under the Obama administration without regard to the needless and excessive regulatory burdens," he said.
"Safety is a core value of AFPM's members, but the rule, as currently written, would have no meaningful impact on safety and would only increase costs. If advancing worker and public well-being is the goal, then this rule needs significant changes," Thompson said.
EPA finalized the chemical risk management plan amendments late last year.
Exploration & Development — Quick Takes
PPR finds momentum in Alberta Wheatland play
Prairie Provident Resources Inc. (PPR) will continue drilling in mid-July in the wake of a successful 4-well program in southern Alberta at its Wheatland prospect. The operator drilled wells Wayne-1, 2, 3, and Entice-1 during this year's first 3 months, deferring completions until late April and early May.
The Wayne wells tested at 1,000, 450, and 500 b/d, respectively, during 4-6 day tests. The company's reported test results included total fluids—recovered and formation water.
The Entice-1 well tested 200 b/d with 2.8 MMcfd of gas at 700 psi flowing casing pressure with a 15% oil cut and GOR 92,000. The operator said all four wells are believed to have penetrated the primary target zones in the Cretaceous Ellerslie formation. The Wheatland prospect is below the company's Mannville fairway where it has 7 producing wells. Targets include lithic glauconite fluvial channels and subaqueous marine Ellerslie deposition.
Oil cut from the well flow tests reflects recovery of both formation water and water-based load fluid. The company also said Wayne-1 was tied-in and has produced sales since mid-May. The 20-day production rate is 300 b/d of oil and 85 boe of natural gas, exceeding the company's expectations. Wayne-2 and 3 wells are expected to be tied-in by the end of June.
The Entice-1 is expected to be tied-in by July 15. PPR confirmed that long-term performance and ultimate recoveries may differ from initial production rates, but the operator holds 145 unrisked drilling locations in the area and plans to locate follow up horizontal prospects with each new well.
PPR also is monitoring commodity prices to add Princess drilling targets to its capital program in the second half. The company's Princess prospect is southeast of Wheatley and contains 70 gross sections of which PPR holds 95% working interest. The company has identified 15 drilling locations and has three recompletions—16-13 Detrital, 9-9 Glauconite, and 05-24 Detrital—waiting to be tied-in with more than 500 b/d cumulative production behind pipe. PPR says that Princess is a 3D controlled, low-risk exploration play.
Oil Search continues appraisal of Muruk gas find
A group led by Oil Search Ltd. in the Papua New Guinea highlands has reported a successful production test of the Muruk-1ST3 appraisal well, which was drilled southwest of last year's Muruk-1 natural gas discovery.
Oil Search said there were tubing limitations, but that the well flowed gas at a maximum equipment-constrained rate of 16 MMcfd through a ½-in. choke. Multiple hydrocarbon samples have been collected for further analysis.
The test was taken to assess reservoir productivity and to make sure a number of samples were taken across the gas-saturated Toro sandstone reservoir from 3,968-4,065 m.
Mechanical problems limited the test to a number of short flow and build-up periods over 8 days, but the results confirmed a good reservoir quality with a high deliverability consistent with Toro reservoirs throughout the central Papua New Guinea fold belt.
The well will now be plugged and abandoned with downhole pressure gauges in place to monitor the response of potential future appraisal activity.
Muruk field is 21 km northwest of the Hides processing facilities and immediately north of Juha gas field, all of which derisks the gas prospectivity along the Hides-P'nyang geological trend.
The data from all Muruk wells will now be evaluated to assess the potential gas resources. Follow-up site preparations are being scheduled for late this year ahead of a potential appraisal program in 2018. Participants are operator Oil Search 37.5%, ExxonMobil Corp. 42.5%, and Santos Ltd. 20%.
Wildcats planned for southwest Iowa
Austin-based Chocolate Flats Petroleum Inc. will spud the first of two Forest City and Midcontinental Rift basin wildcats in August. The company has identified Pennsylvanian targets in the Iowa Shenendoah subbasin including Morrowan, Atokan, Desmoinesian, Missourian, and Virgilian. The company is drilling on four-way anticline horst and stratigraphic trap.
The wildcats are following an extensive 3-year geologic study, the company said. Chocolate Flats submitted plans for the wells in spring 2015, which were permitted by the Iowa Department of Natural Resources that same year.
The isolated graben-type filled depression of carbonates is in the shallow Paleozoic Silurian-Devonian Hunton petroleum trend whose northern two oil traps are represented by Falls City and Barada oil fields in Richardson County in southeastern Nebraska. There, initial oil production was 50-900 b/d of oil from 2,400 ft (OGJ, Mar. 16, 2009, p. 41).
Drilling & Production — Quick Takes
AWE reports Waitsia Stage 2 entering FEED phase
AWE Ltd., Sydney, operator of the north Perth basin production licenses L1/L2, has announced the beginning of the design competition phase of front-end engineering and design of the Waitsia gas project Stage 2.
The design for the facilities will include a gas plant capable of processing 100 terajoules/day of gas along with carbon dioxide extraction, collection hubs, and flow lines.
AWE says the competition will enable the joint venture to establish a high degree of capital cost certainty.
Four contractors have been selected to submit designs: Quanta-Suez, ATCO Australia, SNC-Lavalin, and Clough.
The design competition will begin immediately and will be followed by a commercial phase.
AWE is targeting completion of all phases of FEED by yearend.
AWE is currently drilling the Waitsia-3 appraisal well, the first of a two-well program to fully evaluate the field reserves. The company also is negotiating gas sales agreements with a number of potential customers.
Last year the company said the 2P reserves had increased to 344 bcf of gas. It added that the 2P reserves plus the 2C contingent resources for the field had increased by 30% to 630 bcf of gas.
In addition, the total gross 2P reserves plus 2C contingent resources when combining Waitsia with nearby finds at Senecio, Irwin, and Synaphea went up 20% to 867 bcf of gas.
The project's Stage 1A came on stream in August 2016 at a capacity of 10 terajoules/day. Stage 1A involved connection of the Waitsia-1 and Senecio-3 gas wells to the upgraded nearby Xyris production facility. The gas is flowing into the existing Parmelia pipeline and Alinta Energy is taking up to a maximum quantity of 9.6 terajoules/day under a signed 2½-year take-or-pay gas sales agreement.
Waitsia is about 370 km north of Perth and 16½ km east southeast of Dongara.
AWE and combine partner Origin Energy Ltd., also of Sydney, each hold equal interests.
Contract let for Greater Western Flank second phase
Woodside Petroleum Ltd. has let a $6-million engineering support contract to Wood Group for the second phase of its Greater Western Flank (GWF-2) project on the North West Shelf off Western Australia.
Wood Group will provide engineering support for the subsea pipeline system during the fabrication and construction stages.
This 15-month contract, which will be supported by Wood Group's Perth office, is the third contract secured by Wood Group to support the GWF-2 project and follows the company's completion of detailed engineering design and procurement activities for the pipeline system.
The GWF-2 development represents the next phase of gas supply to the existing North West Shelf project system following the Persephone project. GWF-2 will develop the hydrocarbon resources of Keast, Dockrell, Sculptor, Rankin, Lady Nora, and Pemberton fields.
Statoil lets contract for Visund Nord field
Statoil ASA has let a contract extension to TechnipFMC regarding an ongoing engineering, procurement, and construction contract for an improved oil recovery project in Visund Nord field in the Norwegian North Sea.
The existing EPC covers subsea equipment including template structure, manifold, and two subsea trees. The contract extension covers installation of the template structure and manifold in addition to delivery and installation of flowline spool and umbilical.
The extension will be executed as an integrated engineering, procurement, construction, and installation contract.
Visund Nord is an oil and gas field 10 km from the Visund A platform. A subsea installation with two wells started producing in November 2013. Production is tied back to the Visund A platform.
Statoil operates Visund oil and gas field 22 km northeast of Gullfaks field. Visund was developed with a floating production, drilling, and quarters platform. It came on stream in 1999. The subsea-completed wells in the field are tied back to the floater with flexible risers.
A pipeline transports oil from Visund to Gullfaks for storage and export. Visund field began producing gas in October 2005.
PROCESSING — Quick Takes
Ineos plans European ethylene, propylene growth projects
Ineos AG, Rolle, Switzerland, is planning a series of proposed grassroots and brownfield projects to expand its ethylene and propylene production capacities in Europe to support continued growth of the firm's European petrochemical business.
A combination of expansions to existing units and newbuilds, the projects come as part of Ineos's goal to increase its self-sufficiency in all key olefin products as well as lend further support to its derivative businesses and polymer plants in Europe, said Gerd Franken, chief executive officer of Ineos Olefins & Polymers Europe (North).
A first project will involve construction of a propane dehydrogenation (PDH) plant designed to produce 750,000 tonnes/year of propylene for Ineos units across Europe.
While Ineos is considering a number of possible locations for the PDH plant—including some of its own in Antwerp—the company has yet to make a final site selection for the project.
Alongside the PDH plant, Ineos also said it will expand ethylene production capacities of its existing crackers at Grangemouth, Scotland, and Rafnes, Norway, to more than 1 million tpy each, which will add up to 900,000 tpy to the company's total ethylene production.
Marking Ineos's first major investment into the European chemicals industry in many years, the three growth projects come as a direct result of the operator's previous $2-billion investment in the Dragon Ships program, which has allowed the operator to import huge quantities of price-advantaged US shale ethane and LPG supplies to Europe for use as feedstock, said Jim Ratcliffe, Ineos's founder and chairman.
The three projects to expand ethylene and propylene capacities collectively are the equivalent of building a European cracker, Ratcliffe added.
Despite its current 4.5 million-tpy combined production of ethylene and propylene across Europe, Ineos remains the region's largest buyer of ethylene and propylene feedstock, the company said.
Ineos disclosed neither definitive timelines nor further details regarding the trio of projects.
Venezuela, China advance plans for Chinese refinery
Petroleos de Venezuela SA (PDVSA) and China National Petroleum Corp. (CNPC) have entered a series of agreements related to development and operation of the long-planned Nanhai 400,000-b/d refinery in Jieyang, Guandong Province, China.
Alongside formation of a joint venture to be named Petrochina-PDVSA Guandong Petrochemical Co. Ltd., the agreements outline terms both for supply of Venezuelan crude to be processed at the refinery as well as sale of finished products that will be produced at the site, PDVSA said.
The Nanhai refinery will process a mix of Venezuelan heavy Merey 16 and DCOM 16 crude from PDVSA-CNPC's jointly developed Petrourica and Petrosinovensa projects in Venezuela's Orinoco heavy belt, or other sources, to be delivered to China using CV Shipping Pte. Ltd.—a Chinese-Venezuelan JV—as a first choice for transportation.
PDVSA, which signed the agreements on June 7 in Beijing, also held meetings with China Development Bank to discuss financing for about 700 projects in different areas, including the petroleum sector, the state-run company said.
First approved by the Venezuelan and Chinese governments in 2009, the Nanhai refinery is scheduled for startup by yearend 2020, according to local media reports out of Venezuela.
RIL starts up unit at Jamnagar integrated complex
Reliance Industries Ltd. (RIL) has commissioned the last of three crystallization trains as part of the Phase 3 expansion project at its integrated 60 million-tonne/year refining and petrochemical complex at Jamnagar in Gujarat, India.
Configured with crystallization technology from BP PLC, Train 3 of Jamnagar's paraxylene complex entered operation on June 9, bringing the plant to its full 2.2 million-tpy capacity and more than doubling RIL's total paraxylene production to 4.2 million tpy, the operator said.
Startup of Train 3 follows previous commissioning of the complex's Trains 1 and 2 in December 2016 and April 2017, respectively.
With the plant now at full capacity, RIL has become the world's second largest paraxylene producer with about 11% of global production, the company said.
Designed to increase RIL's petrochemical production by integrating and using feedstock from its Jamnagar refining operations, the J3 project also includes ongoing commissioning activities for an off-gas cracker expansion and gasification project.
In fourth-quarter 2016, RIL completed installation of its Jamnagar 1.5-million tpy ethylene cracker and derivatives units for production of high-density, low-density, and linear low-density polyethylene at Jamnagar, all of which were in precommissioning and startup phases by April, RIL said.
The ethylene complex will have the flexibility to crack both ethane and propane to help further optimize feedstock mix during periods of price volatility, the operator said.
Installation and mechanical completion of gasification projects linked RIL's domestic-tariff area and Special Economic Zone refineries at Jamnagar also are completed, with both projects on schedule to be fully commissioned later this year.
TRANSPORTATION — Quick Takes
CAPP: Oil pipelines still urgently needed
Projected growth in Canadian crude oil production will exceed existing pipeline capacity, according to a recent forecast from the Canadian Association of Petroleum Producers highlighting the "urgent need for pipelines heading east, west, and south."
CAPP's report, 2017 Crude Oil Forecast, Markets & Transportation, said the pipeline network can transport 4 million b/d of oil and oil products, but by 2030 will need to move more than 5.5 million b/d.
"The urgent need for new pipelines to increase our competitiveness continues to be one of the biggest challenges facing our industry," said Tim McMillan, CAPP's president and chief executive officer. "Without access to emerging new markets we're putting our economy at risk."
Overall Canadian oil production will increase to 5.1 million b/d in 2030, up from 3.85 million b/d in 2016, CAPP said. The growth will be driven by a 53% increase in forecasted oil sands production of as much as 3.7 million b/d in 2030 from 2.4 million b/d in 2016.
In the short term, however, CAPP said capital spending in the oil sands is expected to decline for the third consecutive year to $15 billion in 2017 from $34 billion in 2014.
Drilling by conventional crude oil producers is forecast to increase 70% compared to 2016 levels, but will still be 40% lower than in 2014.
New offshore production from the Hebron project in Newfoundland and Labrador, expected at yearend, will contribute to a rise in eastern Canadian output to 307,000 b/d by 2024. But due to natural declines, production is expected to drop to 186,000 b/d by 2030.
Regarding exports, CAPP said about 99% goes to the US.
Data for the annual forecast was collected from producers in March and April
TransCanada moves ahead with NGTL expansion
TransCanada Corp. will move forward with a $2-billion expansion of its NOVA Gas Transmission Ltd. (NGTL) system, adding to the system's current $5.1 billion near-term capital program.
The expansion will be comprised of numerous projects that will, in aggregate, include 273 km of NPS 16 to NPS 48 pipeline, 150 Mw of compression at five compressor stations, new meter stations, and other associated facilities. Applications for the various projects will be filed with Canada's National Energy Board starting in the fourth quarter.
Construction is expected to start in early 2019, with initial projects expected to be in service in fourth-quarter 2019 and final projects in service by second-quarter 2021.
The expansion plan arises from growing producer demand to link Montney, Duvernay, and Deep basin production to the NGTL system and move it to intra-basin and export markets. Shippers have recently signed 2.6 bcfd in total new firm supply contracts at multiple receipt points across the system.
The 24,012-km NGTL system gathers 75% of Western Canada Sedimentary Basin gas production in Alberta and northeastern British Columba, TransCanada says.
The firm also concluded a recent expansion open season for incremental service at the Alberta-British Columbia export delivery point, which connects Canadian supply through downstream TransCanada pipelines to Pacific Northwest, California, and Nevada markets. All 381 MMcfd of available expansion service was awarded under long-term contracts.
Qatar lets contract to expand LNG processing
Qatar Petroleum (QP) has let a contract to Chiyoda Corp. to conduct a detailed study to expand the operator's natural gas processing capacity in Ras Laffan Industrial City, Doha, Qatar.
The study will identify modifications required to debottleneck capacity of QP's existing LNG trains in Ras Laffan Industrial City in order to process additional gas production from the planned development in the southern sector of North field.
Scheduled to be completed before yearend, the study will allow QP to kick off front-end engineering and design work in early 2018.
