ETE to buy Southern Union in $7.9 billion deal
In a move to create one of the largest consolidated natural gas pipeline companies in the US, Dallas-based Energy Transfer Equity LP (ETE) entered into a merger agreement with Southern Union Co. to acquire the Houston-based gas transportation, storage, and gathering company for $7.9 billion. The deal includes $3.7 billion of existing Southern Union debt.
The deal, which has been unanimously approved by the boards of both companies, will provide ETE with direct ownership of assets that are complementary to assets already owned and operated by ETE's two master limited partnership subsidiaries, Energy Transfer Partners LP and Regency Energy Partners LP. The combined footprint of ETE (together with ETP and RGNC) along with Southern Union will include more than 44,000 miles of gas pipelines and 30.7 bcfd of gas transportation capacity.
After the transaction closes, Southern Union will become a wholly owned ETE subsidiary. The deal is expected to close in first-quarter 2012.
Encana, PetroChina call off Cutbank Ridge talks
Encana Corp. and PetroChina International Investment Co. were "unable to achieve substantial alignment" after more than a year on a proposed venture in Encana's Cutbank Ridge assets in western Canada, including the joint operating agreement.
Instead, Encana will initiate broad-based marketing of portions of its undeveloped Montney resources and midstream assets in Cutbank Ridge.
Encana will offer a variety of joint venture opportunities for portions of the undeveloped resources, and, separately, examine a transaction with respect to its midstream pipeline and processing assets in the area. Each opportunity has the potential for strong long-term growth and value generation, said Randy Eresman, Encana's president and chief executive officer.
Meanwhile, Encana said discussions are well under way on its April plan to seek investors in the Horn River shale lands and Greater Sierra resource play in Northeast British Columbia. Talks are also advanced on a potential divestiture of producing assets in the north part of Greater Sierra.
Those transactions are expected 2011 proceeds and venture investments of $1-2 billion, exceeding Encana's net divestiture target for 2011 of $500 million to $1 billion. That estimate for higher 2011 divestiture and venture proceeds does not include any potential investments in Cutbank Ridge.
Repsol, Alliance to form Russian E&P joint venture
Alliance Oil Co. Ltd., Moscow, and Repsol of Spain will form an exploration and production venture in the Russian Federation.
Alliance will hold a 51% stake in the venture and contribute producing assets in the Volga-Urals Region. Repsol will own 49% and make an initial cash investment to finance future growth. The companies said the deal will combine Alliance's knowledge and privileged access to Russian exploration and production business opportunities with Repsol's knowhow and technical capabilities to create a long-term exploration and production alliance.
Repsol owns a 3.47% stake in Alliance resulting from the merger between Alliance and West Siberian Resources in 2008. Repsol also owns 74.9% of Eurotek-Yugra, which has exploration and production licenses in the Karabashsky-1 and 2 blocks in Western Siberia.
The transaction is subject to negotiation of final contractual terms, due diligence of the assets to be contributed by Alliance, and the procurement of relevant regulatory and corporate approvals. It is expected to be completed in 2011.
Alliance has vertically integrated operations in Russia and Kazakhstan. It has proved and probable oil reserves of 638 million bbl and downstream operations that include the Khabarovsk refinery and the leading network of gasoline stations and wholesale oil products terminals in the Russian Far East.
Reliance hits sprawling Krishna-Godavari gas find
Reliance Industries Ltd. drilled a gas discovery on the D9 exploration license in the Krishna-Godavari basin off India. The play is expected to cover a considerable area of the 8,695 sq km block, said 10% interest owner Hardy Oil & Gas PLC.
Reliance is gathering more data to assess the potential commerciality of the KGD9-A2 exploratory well, which went to 4,881 m measured depth in 2,700 m of water. It has been named Dhirubhai-54. Drilled with the objective of exploring the play fairway in the Early and Late Miocene channel levee complex, the well encountered three sand reservoirs with a combined gross thickness of 22 m that were evaluated by wireline MDT.
The license's minimum work program provides for the drilling of four exploratory wells.
Hardy Chief Executive Officer Yogeshwar Sharma said, "We are encouraged by this discovery which extends the proven Miocene play fairway into the frontier D9 block. The discovery further enhances our understanding of the block's petroleum systems and reinforces our enthusiasm for unlocking its hydrocarbon potential. The D9 joint venture expects to drill the fourth exploration well prior to the end of 2011."
Bulgaria grants Chevron shale gas permit
Bulgaria granted Chevron Corp. a 5-year permit to explore for shale gas at what it called "a potentially huge field" in northeastern Bulgaria.
Bulgaria's Economy and Energy Minister Traicho Traikov said Chevron will prepare a 5-year work program valued at €50 million after last month winning a tender for rights to a 4,400-sq-km block near the city of Novi Pazar.
Traikov said Chevron will pay €30 million to the state to begin exploring for shale gas in a field for which initial estimates showed the potential for 0.3-1 trillion cu m of shale gas.
Traikov has said shale gas and hydraulic fracturing have the potential to reduce harmful emissions, boost energy security, and cut Bulgaria's almost full reliance on gas imported from Russia.
The government said Chevron would invest €4 million over 5 years on environment protection after protests by opposition politicians. Socialists called for a moratorium on shale gas exploration in Bulgaria until reliable studies prove the search will not harm the environment or trigger earthquakes.
Bulgaria is preparing two more tenders for shale gas exploration in the same region with offers to be submitted by the end of June.
Meanwhile, the Balkan country also hopes to link its gas transportation network with that of neighboring Greece in 2014, aiming to receive gas from Azerbaijan via an interconnector.
The award in Bulgaria follows an announcement by Chevron last month that it has agreed to acquire oil and gas assets, primarily 228,000 net leasehold acres, in the Marcellus shale from Chief Oil & Gas LLC and Tug Hill Inc. Terms of the transaction, expected to close by the end of June, weren't disclosed.
Chevron Vice-Chairman George Kirkland said his firm has acquired nearly 5 million net acres of shale gas assets in the US, Canada, Poland, and Romania over the past year.
The new US acreage, which is principally in southern Pennsylvania, will give Chevron an estimated 5 tcf of additional gas resources in its Marcellus shale operations.
Beach finds more Eromanga oil in southern Australia
The Beach Energy Ltd.-Drillsearch Energy Ltd. joint venture made another Cooper basin west flank oil discovery in Eromanga reservoirs in southern Australia.
The JV's Snellings-1 wildcat in permit PEL 91 flowed a total of 31.5 bbl of oil in a 2-hr test. Production has been suspended, but the well is expected to be brought on stream in the fourth quarter.
Snellings is the second in a planned five-well exploration program in the permit. The first, Hanson-1, drilled 1,500 m south of Snellings, also was a discovery with estimated recoverable reserves of 1 million bbl. It will be brought on stream during the third quarter.
The third well in the series is Arno-1, drilled a little to the north. It will spud soon.
Beach operates the permit with 40% interest. Drillsearch has 60%.
Drilling & Production — Quick TakesAnadarko, Kerr-McGee settle gas royalty charges
Anadarko Petroleum Corp. and Kerr McGee Corp., which Anadarko acquired in 2006, agreed to pay more than $17 million to settle charges that they filed false claims on natural gas produced from federal lands, the US Departments of Justice and the Interior said on June 20.
The settlement resolved federal charges that the producers improperly deducted from royalty values the cost of boosting gas up to pipeline pressures, and improperly reported processed gas as unprocessed to reduce royalty payments, DOI's Office of Natural Resources Revenue said.
The companies were independent and were separately named when Harold Wright sued them as a private citizen in 1996 under the False Claims Act, ONRR said. Wright's heirs will receive $1.95 million as their share of the settlement because he is deceased, it added.
The settlement involved ONRR, DOJ's Civil Division, and the US Attorney for Texas's Eastern District, with assistance from DOI's Inspector General and Solicitor's offices, ONRR indicated. It said this and preceding settlements since 2007 with other companies named in Wright's whistle-blower lawsuit total $250 million.
Maersk Oil approves Golden Eagle development
Maersk Oil North Sea UK Ltd. has approved its $1 billion share of the investment in the Golden Eagle area development on Block 20/1 in the UK North Sea. Nexen Petroleum UK Ltd. is the operator of the $3.3 billion development.
Maersk said subject to partner and regulatory approvals, construction of a platform and other infrastructure will begin in November. The company expects first oil in 2014 at an initial 60,000-65,000 b/d.
The Golden Eagle area includes Golden Eagle and Peregrine fields. Peregrine was known as Pink, while the Hobby discovery on Block 20/1N is now defined as part of Golden Eagle field (OGJ Online, Feb. 17, 2009).
The fields, discovered in 2007-09, are about 110 km northeast of Aberdeen in 90-120 m of water.
Nexen has estimated the Golden Eagle area contains 140-150 million boe of recoverable contingent resources, making it one of the largest oil discoveries in the UK North Sea in recent years.
Statoil to lower separator pressure on Njord
Statoil plans to invest 500 million kroner to lower separator pressure on the Njord A semisubmersible production platform in the Norwegian Sea.
A lower pressure in the first and second-stage separators will increase production from the wells and along with other measures prolong the life of the facility until 2020, according to the company.
With the work, Statoil aims to increase the recovery factor from the complex Njord reservoir to 30% from the current estimated 23%.
The company also expects to drill several wells in the Njord area. Currently the Njord northwest flank project, 6 km from the Njord A, will add two long-distance wells drilled from Njord A.
The Hyme (Gygrid) fast-track project will also tie-back to Njord A (OGJ Online, May 12, 2011).
Statoil expects the low-pressure production project will boost recovery from Njord by about 18.5 million boe and extend the field life by 2-3 years.
The company has let contracts for the Njord low-pressure production modification and the Hyme topside to Reinertsen AS. In March, it also let a contract for compressor procurement and installation to GE Oil & Gas.
Statoil expects project execution to take place in fall 2012 and has scheduled the start-up of low-pressure production for fourth-quarter 2012. Njord field is in Blocks 6407/10 and 6407/7 and came on stream in 1997.
Connectivity sought at Morocco oil shale pilot
San Leon Energy PLC will drill a third well in August 2011 at its Tarfaya oil shale project in coastal southern Morocco and perform a small frac on the shale in an attempt to establish connectivity between wells.
The first two wells were drilled 10 m apart and confirmed the presence of 30 m of prospective oil shale 195 m deep. This is slightly thicker than prognosis, the company said. An injectivity test with water was applied to collect data on natural connectivity between the two wells. A mini hydrofrac was unable to establish connectivity between the wells.
Initial analysis suggests the presence of natural fractures in the shale. San Leon is encouraged by the possibility of fractures that could enhance the propagation of heated gas throughout the prospective intervals. San Leon will core the third well to determine fracture orientation.
Upon successful flow testing with water followed by nitrogen, propane will be brought to the pilot plant to test the process of heating the shale with natural gas. The pilot plant site construction and the assembly of the process equipment have been completed.
Meanwhile, San Leon's seismic subsidiary, NovaSeis, plans to begin shooting 1,200 km of 2D seismic on the Tarfaya and Zag licenses by July 1. Reinterpretation of seismic on the offshore Foum Draa and Sidi Moussa licenses is near completion, and the company is likely to seek partners for drilling.
PROCESSING — Quick TakesTotal sells UK retail, fuel distribution assets
Total SA signed a sale and purchase agreement to sell most of its marketing assets in the UK, the Channel Islands, and the Isle of Man to Rontec Investments LLP, the company reported.
The assets include the French company's UK retail outlet network, including 810 Total-branded service stations; Butler heating oil business and associated logistics systems; and businesses in the Channel Islands and Isle of Man.
The Rontec Investments consortium comprises Snax 24, one of the leading independent forecourt groups in the UK; Grovepoint, a London-based independent principal investment firm; and Investec, an international specialist bank and asset manager. Total said the transaction, which is expected to complete later this year, is in line with the group's strategy of "rationalizing its downstream portfolio in Europe" and that the sale process for its refining assets in the UK "is ongoing."
Meanwhile, in addition to its exploration and production operations, Total said it will retain a direct market presence in the UK through its lubricants, aviation fuels, special fluids, and chemicals businesses.
In February, in line with its plan to reduce European refining, Total announced that it would sell its share of Spanish oil company CEPSA to IPIC, a wholly owned unit of Abu Dhabi.
AltaGas gets final nod for Montney gas plant
AltaGas Ltd., Calgary, has received final regulatory approval to begin building its 120-MMcfd Gordondale gas processing plant about 100 km northwest of Grande Prairie, Alta. The plant will be equipped with liquids extraction (OGJ, June 6, 2011, p. 88).
AltaGas Chairman and Chief Executive Officer David Cornhill said the two-phase project will allow for early production to the company's Pouce Coupe plant in the months before the Gordondale plant comes on line in late 2012.
The Gordondale plant and gathering system will cost about $235 million. It is in the Montney resource area, one of "the largest, low-cost, liquids rich resource plays in the Western Canadian Sedimentary Basin," the company reported.
The plant will allow AltaGas access to several producers in the area. Addition of deep cut capability to the project allows producers to extract additional value for liquids from the gas.
More processing planned for Eagle Ford shale
Southcross Energy, Dallas, will build a 200-MMcfd gas processing plant in Refugio County, Tex., to process liquids-rich production from the Eagle Ford shale in South Texas. The new plant will expand Southcross's processing in the area to 335 MMcfd.
Also to handle rich gas, Southcross is retrofitting and enhancing its Gregory processing plant in San Patricio County to handle 135 MMcfd of rich-gas feed. Southcross's Ron Bancroft said the plant had heretofore been rated at about 150 MMcfd for much leaner gas. The plant lies about 13 miles east of Corpus Christi near the town of Gregory.
Construction of the Woodsboro plant should be completed in second-quarter 2012, the company said. The plant will be about 25 miles northeast of Corpus Christi near the town of Woodsboro.
Southcross said its processing plants will provide multiple options for residue-gas disposition via various pipeline interconnects and connections to the local industrial market in along the Corpus Christi Ship Channel.
The company operates another plant, near Conroe, Tex., nominally rated at 40 MMcfd.
Southcross is engaged in purchase and sale, pipeline transportation, and gathering and processing of gas in South Texas, Mississippi, and Alabama. In addition to the two current processing plants, it operates more than 2,100 miles of pipeline and gathering and four gas-treating plants.
TRANSPORTATION — Quick TakesPlains to expand Bone Spring, Permian capacity
Plains All American Pipeline LP is undertaking a construction and expansion project serving the Bone Spring play in the Delaware basin of West Texas. Plains' Bone Spring project includes adding 6 miles of 6-in. OD pipe to an existing system and constructing 20 miles of 12-in. OD pipe.
Initial capacity of the new lines will be 65,000 b/d, moving production primarily from Ward, Winkler, Reeves, and Loving counties. These pipelines will interconnect with Plains' Basin system and the company also will build as much as 100,000 bbl of new storage and terminalling capacity to be brought on line in stages.
Plains expects the project to be in service by yearend, supported by long-term agreements with Anadarko Petroleum Corp. and Chesapeake Energy Corp.
Plains owns and operates 3,500 miles of oil gathering and trunk pipelines and 20 million bbl of oil storage capacity serving the Permian basin. It says it transported about 470,000 b/d of crude out of the Permian basin in 2010.
Plains announced plans in May to build a 300,000 b/d, 130-mile pipeline delivering Eagle Ford shale crude to market (OGJ Online, May 18, 2011).
Eagle Ford, Williams enter processing agreement
Eagle Ford Gathering LLC, a 50-50 joint venture of Kinder Morgan Energy Partners LP and Copano Energy LLC, reached a long-term agreement with Williams Partners LP to process Eagle Ford shale production at Williams Partners' Markham processing plant in Matagorda County, Tex. EFG will construct a 7-mile, 20-in. OD lateral to connect its previously announced crossover pipeline project to the Markham plant and install 3,400 hp of compression.
The agreement will initially provide EFG with 100 MMcfd of processing capacity at the Markham plant, with an option to increase to 200 MMcfd. KMEP described the agreement as augmenting a previously announced agreement with Formosa Hydrocarbons Co., resulting in as much as 375 MMcfd of total processing capacity through the crossover project.
Copano said the venture's 117-mile, 30-in. and 24-in. OD system through McMullen, La Salle, Dimmit, and Webb counties is nearing completion and is scheduled to enter service in September, processing JV gas at Copano's Houston Central complex in Colorado County via KMEP's Laredo-to-Katy pipeline.
Copano announced plans to expand its Houston Central plant by 400 MMcfd of cryogenic processing in April. The expansion will bring total processing capacity at Houston Central to 1.1 bcfd (OGJ Online, Apr. 19, 2011).
KMEP said it expects to break ground on the crossover pipeline in July and place it in service in this year's fourth quarter, with total pipeline and compression costs estimated at $27 million.
Argentina opens second LNG import terminal
Argentina opened its second LNG import terminal June 16.
GNL Escobar is a joint development of YPF SA, ENARSA, and Excelerate Energy on the Parana River, about 30 miles outside Buenos Aires City, and employs Excelerate Energy's GasPort design.
The terminal has a baseload throughput capacity of 500 MMcfd, with peak throughput capacity at 600 MMcfd, and has direct access to the Buenos Aires region and Argentina's natural gas grid.
It began receiving cargoes on May 24, and has unloaded four cargoes of LNG using ship-to-ship transfers, according to the announcement. Operations and supply logistics are being coordinated jointly among the three companies.
GNL Escobar is similar in design and function to the other Argentine receiving terminal, in Bahia Blanca. It incorporates a jetty mounted, articulated gas-offloading arm (high-pressure gas arm), and uses Excelerate Energy's Energy Bridge floating storage and regasification vessel technology.
The new terminal will provide increased peak capacity for high-demand winter months, said the announcement, as well as deliver additional natural gas and transport capacity to the Buenos Aires region.
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