GENERAL INTEREST — Quick Takes
API suit challenges 2013 ethanol volume requirements
The American Petroleum Institute petitioned the US Environmental Protection Agency to review 2013 ethanol volume requirements the oil and gas trade association considers unrealistic. It filed the action Oct. 8 in federal appeals court for the District of Columbia.
"EPA's unrealistic ethanol mandates for 2013 are simply bad public policy," said Harry Ng, API's vice-president and general counsel. "EPA issued this year's requirements 9 months late and has once again mandated significantly more cellulosic ethanol than is available in the marketplace."
The agency issued its 2013 ethanol volume quotas Aug. 19. It also said it would investigate cellulosic ethanol production capacity problems API and the American Fuel & Petrochemical Manufacturers brought to its attention as it prepared its proposed 2013 quotas.
EPA mandated refiners use 4 million gal of cellulosic ethanol in 2013, but admitted that only 142,000 gal have been available for blending so far, according to API. The court rejected EPA's 2012 cellulosic ethanol quota in January, Ng said.
"The 2013 mandates are an example of why EPA can't be relied upon to implement the RFS effectively and in the interest of consumers," he said. "Ultimately, Congress must fully repeal this unworkable and costly mandate."
Renewable Fuels Association Pres. Bob Dineen called API's petition frivolous. "While the 2013 [quotas] were issued later than anyone would have liked, the fact is the statute is crystal clear, and all stakeholders have been producing and blending at levels that will unquestionably meet the 2013 requirements," he said on Oct. 8. "This is a lawsuit in search of a problem."
Templar Energy buys Panhandle assets for $1 billion
Oklahoma City-based independent Templar Energy LLC has acquired oil and gas assets in the Texas Panhandle from Forest Oil Corp. for $1 billion.
Templar's wholly owned subsidiary Le Norman Operating LLC will operate the assets, which have produced 100 MMcfe/d so far in 2013 and have proved reserves of 517 bcfe as of Dec. 31, 2012, Forest said. Forest said it intends to use the proceeds mainly to reduce debt and enhance financial flexibility.
Forest said the divestiture allows the company to focus on its core Eagle Ford shale assets.
First Reserve Corp. invested in Templar in December 2012. A month later, Templar made its first acquisition of 7,000 net acres in Ellis and Roger Mills counties in Oklahoma with average production of 1,500 boe/d (OGJ Online, Jan. 14, 2013).
Approach closes on sale of Midland oil line assets
Fort Worth-based independent Approach Resources Inc. and partner Wildcat Permian Services LLC have closed on the previously reported sale of Wildcat to an affiliate of JP Energy Development LP for $210 million in cash. Cash proceeds to Approach are expected to be $108 million.
Approach's core operations, production, and reserves are in the Permian basin in West Texas. The company operates 152,000 net acres in the Permian, targeting multiple oil and liquids-rich formations.
In January 2011, Approach added to its 109,000-net-acre position in the southern Midland basin by purchasing 10,900 contiguous net acres in northeastern Crockett County, Tex., from undisclosed private sellers (OGJ Online, Jan. 27, 2011).
Exploration & Development — Quick Takes
KRG approves Iraq Atrush first phase oil development
The Kurdistan Regional Government has approved first-phase oil development of the Atrush block in Iraq's Kurdistan Region by a group led by TAQA.
Production, authorized for 25 years, would start by early 2015 at 30,000 b/d of oil, and subject to appraisal drilling results, a potential Phase 2 development would include a second 30,000 b/d facility. The partners are preparing to drill a fourth well on the block.
The group drilled the Atrush-1 discovery well in 2011 about 50 miles northwest of Erbil. The development project will consist of drilling three production wells and constructing a central processing facility.
The partners will also evaluate the feasibility of producing associated gas for delivery to the domestic market.
TAQA Atrush BV, a subsidiary of TAQA, is the operator with a 39.9% working interest. ShaMaran Petroleum Corp., Vancouver, BC, has a 20.1% working interest through its wholly owned subsidiary ShaMaran Ventures BV, which is 100% owner of General Exploration Partners Inc. The KRG has 25%, and Marathon Oil KDV BV owns 15%.
Marathon noted that its asset portfolio in the Kurdistan region includes a 25% nonoperated working interest in the Sarsang block and a 45% operated working interest in the Harir and Safen blocks.
Taranaki's deep Kapuni zone gets looks
Tag Oil Ltd., Vancouver, BC, is under way with a three-well exploratory program to examine the deep Eocene-Paleocene Kapuni sandstone formation onshore in New Zealand's Taranaki basin.
The company has drilled the Cardiff-3 well, spudded Sept. 2 on PML 38156, to 3,918 m enroute to its projected total depth of 4,900 m, expected to take 14 more days. The company has received regulatory approval to stimulate the well if results warrant.
Economic factors for completion, which would likely include a hydraulic-fracture stimulation, will consider net gas pay thickness, indicative in situ permeability, and the interpreted volume of original gas in place that could be accessed with this well bore, Tag Oil said.
In the event of a success, three wells would be needed to fully develop the midrange prospective resource estimated at 160 bcf of gas and 5.49 million bbl of condensate. The midcase resource for the three Kapuni prospects totals 476 bcf and 18 million bbl.
Careful study has shown the formations being targeted for potential hydraulic fracturing at Cardiff-3 to be completely sealed by more than 4 km of impermeable rock. If hydraulic fracturing is required, new generation plant-based fracing fluid will be used and all fluids and water will be contained in a closed system, the company said.
The Cardiff structure is a 12 by 3 km anticlinal trap. Gas-condensate was discovered in the Cardiff-1 (Shell-1991) and Cardiff-2A (Austral-Pacific 2002) wells: Cardiff-2 encountered 12 m of net pay in the uppermost McKee formation of the Kapuni Group sands and flowed more than 3 MMcfd and 100 b/d without fracture stimulation on a short-term test.
More significant prospective resources exist in the deeper K1A and K3E zones, the primary targets in the Cardiff-3 well, where strong gas shows were encountered over a gross 600-m interval in the Cardiff-2A well. These went untested due to mechanical problems during drilling, but the lower Kapuni Group formations are the primary producing intervals in nearby 1.4 tcf and 65 million bbl Kapuni field.
Newark basin study part of US earthquake network
Pennsylvania's Department of Conservation & Natural Resources has let a contract to Penn State University for a 2-year study of the geology of the southern Newark basin.
The Newark Triassic basin covers portions of southern New York, western New Jersey, and eastern Pennsylvania. Drilling is sparse, and no commercial hydrocarbon production is taking place in the basin.
Drilling has occurred in Bucks County, Pa., but a drilling moratorium is in effect in Bucks and Montgomery counties until 2018 (see map, OGJ, Feb. 12, 2007).
The study is part of a larger federal program to place a network of permanent and temporary seismic sensors across the US to monitor earthquakes.
The US Geological Survey has estimated that the South Newark basin could contain an undiscovered technically recoverable resource of 363-1,698 bcf of natural gas.
ONGC Videsh, OIL okayed for Mozambique offshore block
India's cabinet committee on economic affairs has approved the proposal of the ministry of petroleum and natural gas to authorize ONGC Videsh Ltd. and Oil India Ltd. to acquire interest in the Rovuma Area 1 block offshore Mozambique.
ONGC Videsh and OIL will acquire 10% from Videocon Mauritius Energy Ltd. for $2.475 billion, with closing by Dec. 31 (OGJ Online, June 25, 2013).
ONGC Videsh will acquire another 10% from Anadarko Mozambique for $2.64 billion, with closing in February (OGJ Online, Aug. 26, 2013).
The block, covering 2.6 million acres, is in the deepwater Rouvma basin.
Drilling & Production — Quick Takes
North Rankin B gas project comes on stream
Woodside Petroleum Ltd.'s $5 billion (Aus.) North Rankin B project offshore Western Australia has been brought on stream and is sending gas to the Burrup Peninsula gas plant.
The development involved installation of a second platform (the 650,000-tonne North Rankin B) beside the original North Rankin A structure and a modification of the latter.
The second platform will aid the recovery of about 5 tcf of low-pressure gas reserves in the North Rankin and nearby Perseus fields.
The new development maximises the value of the major North West Shelf Gas Project by extending resource life and supporting the joint venture's onshore gas commitments.
Joint venture partners include BHP Billiton, BP PLC, Chevron Corp., and Royal Dutch Shell PLC.
Since 1989, the NWS Project has exported more than 3,200 LNG cargoes to the Asia-Pacific region.
Gazprom Neft unit performs frac jobs in Orenburg field
Gazprom Neft says its subsidiary has performed multiple hydraulic fracturing operations for the first time in horizontal wells drilled into carbonate reservoirs in the eastern area of Orenburg oil and gas-condensate field.
Gazprom Neft Orenburg's efforts in the field are part of the company's tight reserves program. The drilling of horizontal wells using multiple fracing "is the key technology for development of tight reserves," the company said, adding that the multistage borehole operations increase oil recovery by impacting individual strata one at a time.
The company conducted five-stage fracing operations on two wells, and estimates combined average flow rate of both wells will total 80 tonnes/day via natural flow. The company said horizontal length reached 600 m.
Acid multiple fracing involves metered injection of a gelatinous compound and inhibited hydrochloric acid into the stratum.
Gazprom Neft said the east area of Orenburg field is unique and one of the largest fields in the Orenburg region. Development of the field is complicated primarily by its geological characteristics, since fractured carbonate reservoirs with a high gas-oil ratio and hydrogen sulfide content predominate at the field.
Dutch North Sea infill well flows 3,500 b/d
Dana Petroleum PLC has started production from an infill well in Hanze oil field in the Dutch North Sea at a rate of 3,500 b/d (OGJ Online, June 14, 2010).
The start-up nearly doubled the field's production, Dana said.
Drilled by the Noble Lynda Bossler jack up, the Hanze Infill Well A06 is one of five Dana is drilling near existing infrastructure offshore the Netherlands.
Earlier this year, it drilled the P11-08 exploratory well from its De Ruyter platform, 90 km south of Hanze (OGJ Online, Dec. 28, 2004). It's evaluating results.
De Ruyter and Hanze fields each has a steel gravity storage platform with an integrated deck. Oil is offloaded directly onto shuttle tankers through a single anchor loading system.
Dana operates Hanze field with a 45% interest. Partners are Oranje-Nassau Energie BV, 35%, and Dyas BV, 20%.
PROCESSING — Quick Takes
Qatargas lets contract for Laffan refinery expansion
Qatargas has awarded Qatar Kentz WLL, a unit of Kentz Corp. Ltd., a manpower services contract for the Qatargas Laffan refinery Phase 2 (LR2) at Ras Laffan. When the expansion opens in 2016, it will double capacity, adding 146,000 b/d of condensate recovered from Qatar's North field (OGJ Online, Aug. 19, 2011).
Laffan refinery Phase 1 (LR1) currently produces 61,000 b/d of naphtha, 52,000 b/d of jet fuel, 24,000 b/d of gas oil, and 9,000 b/d of LPGs. Qatar Petroleum is the lead shareholder of LR1 with 51%. Remaining shares are spread among ExxonMobil, Total, Idemitsu, and Cosmo each with 10%, and Mitsui and Marubeni, 4.5% each.
Laffan refinery, Qatar's first condensate refinery, started production in September 2009 and, according to Qatargas, was designed to be one of the largest condensate refineries in the world (OGJ Online, Apr. 11, 2009).
Qatargas says that, in addition to this expansion, some debottlenecking and a new gas oil hydrotreater is to be built in the first refinery LR-1. The company anticipates that, starting next year, gas oil produced will be converted to diesel (<10 ppm sulfur).
Kentz Corp. is a holding company of the Kentz engineering and construction group, registered in London.
Indonesian refinery upgrades due study
PT Pertamina (Persoro) and UOP LLC have agreed to develop a recommendation called a bankable feasibility study for modernization of five of the state-owned oil company's refineries in Indonesia.
UOP said Pertamina recently completed a feasibility study for construction of a refinery it hopes to open in 2018.
The refineries to be covered in the modernization master plan have capacities totaling 1.035 million b/d, according to Pertamina. They're at Balikpapan, East Kalimantan; Cilacap, Central Java; Dumai, Riau; Plaju, South Sumatra; and Balongan, West Java.
Karen Agustiawan, president director of Pertamina, said the work to be studied includes upgrades to enable the refineries to process heavier, lower-quality crude oil. Pertamina also is evaluating plans for a centralized terminal for crude imports.
Not covered by the new study is a 10,000 b/d refinery in West Papau.
The study will be partly funded by a $1 million grant from US Trade and Development Agency (OGJ Online, Aug. 30, 2013).
Small Kentucky refinery due gas plant
Continental Refining Co. has begun the design and construction of a gas plant at its small refinery at Somerset, Ky.
The plant will recover as much as 10,000 b/d of propane, butane, and natural gas liquids.
Continental Refining will work with Viewpoint Energy LLC to install 70% of the required equipment. The rest is in place.
Nameplate of the hydroskimming refinery is 5,500 b/d.
TRANSPORTATION — Quick Takes
Hess to sell terminal network for $850 million
Hess Corp. reported it has entered into an agreement with Buckeye Partners LP to sell its US East Coast and St. Lucia terminal network for $850 million in cash.
As a result of this sale, the company is expected separately to release $900 million of working capital, with another $100 million continuing to be retained by the retail business as part of its ongoing operations.
Hess has divested $5.4 billion this year, including the sale of its terminal network, four upstream producing assets, and the energy marketing business.
The company stated its intention to withdraw from downstream operations to focus on exploration and production in January, when it reported a 2013 exploration and production budget of $6.7 billion, investing 40% to unconventional oil and gas plays (OGJ Online, Jan. 11, 2013). That month, it exited refining by closing its 70,000-b/d fluid catalytic cracking unit at Port Reading, NJ (OGJ Online, Jan. 29, 2013).
In March, Hess sold its South Texas Eagle Ford shale properties and acreage to Houston's Sanchez Energy Corp. for $265 million in cash (OGJ Online, March 18, 2013).
In April, Hess said it was looking to divest its exploration and production assets in Indonesia and Thailand, where it also was trying to sell its remaining downstream businesses, including terminals, retail, marketing, and trading divisions. Also that month, the company closed its sale of Russian subsidiary Samara-Nafta to OAO Lukoil for a $2.05 billion (OGJ Online, April 30, 2013).
In July, Hess agreed to sell its energy marketing business to Direct Energy Business LLC, a North American subsidiary of Centrica PLC, London, for $1.025 billion (OGJ Online, July 30, 2013).
The company has used the divestiture's initial proceeds to repay debt and enhance its balance sheet.
The company began acquiring shares under its $4 billion authorization and intends to use proceeds from, and working capital released by, the sale of its terminal network to continue this program.
Alaska LNG project selects terminal location
ExxonMobil Corp., BP PLC, ConocoPhillips, and TransCanada Corp. have selected a site in the Nikiski area on the Kenai Peninsula as the lead site for the companies' proposed South Central Alaska LNG project's LNG plant and terminal (OGJ Online, June 10, 2013), reported ExxonMobil.
It said more than 20 locations were evaluated based on environment, socioeconomics, cost, and "other project and technical issues."
Senior project manager Steve Butt said the site results in a pipeline route that provides access to North Slope natural gas by the major population centers in Fairbanks, Mat-Su Valley, Anchorage, and the Kenai Peninsula.
Several engineering, technical, regulatory, fiscal, commercial, and permitting issues remain on the $45-65+ billion project. Pipeline routing definition also continues, said the announcement, based on summer field work, which will be extended south of Livengood.
The companies continue to refine the concept that includes a gas-treatment plant on the North Slope, an 800-mile, 42-in. pipeline with up to eight compressor stations and at least five off-take points for in-state gas delivery, and a liquefaction plant and terminal.
Kinder Morgan to expand KMCC line in Eagle Ford
Kinder Morgan Energy Partners LP (KMEP) reported signing an agreement with a large Eagle Ford shale producer to extend the Kinder Morgan Crude and Condensate (KMCC) pipeline farther into the Eagle Ford shale in South Texas.
KMEP will invest $74 million to build an 18-mile, 24-in. lateral pipeline northwest from its DeWitt station in DeWitt County, Tex., to a new facility in Gonzales County, Tex., where KMEP will build 300,000 bbl of storage, a pipeline pump station, and truck offloading facilities.
The lateral will have a capacity of 300,000 b/d and will enable KMEP to batch Eagle Ford crude and condensate from the new Gonzales Station via KMCC to its delivery points on the Houston Ship Channel and the soon-to-be-completed Sweeny lateral pipeline serving the Phillips 66 Sweeny refinery in Brazoria County, Tex.
In May, KMEP reported it was expanding Sweeny, increasing the capacity of the 27-mile, 12-in. OD line to 100,000 b/d from an initially planned 30,000 b/d (OGJ Online, May 3, 2013). A month later, KMEP said it would expand the KMCC pipeline 31 miles from the KMCC DeWitt station to ConocoPhillips's central delivery facility near Helena in Karnes County (OGJ Online, June 4, 2013).
KMEP said the arrangement brings optionality to Eagle Ford producers and Houston market consumers. The project is expected to be immediately accretive to cash available to KMEP unit-holders on completion in early 2015.
With joint ventures and other projects, KMEP's planned investments for Eagle Ford shale crude and condensates total $900 million.
Longhorn Pipeline to get new origin point
Magellan Midstream Partners LP said it will build a new origin at Barnhart, Tex., to accept crude oil shipments on its Longhorn Pipeline. The new origin point, about 75 miles east of the pipeline's Crane, Tex., origin, will cost $25 million and will begin to receive crude in early 2015.
Magellan also plans to expand the capacity of the Longhorn Pipeline by 50,000 b/d while increasing the capacity to 275,000 b/d, all committed by long-term customer agreements. The $55 million expansion will be ready by mid-2014.
Magellan owns the longest refined petroleum products pipeline system in the US, which includes access to more than 40% of the country's refining capacity. It can store more than 80 million bbl of petroleum products.
Earlier this year, Blueknight Energy Partners LP agreed with Advantage Pipeline LLC to purchase 30% ownership in the 70-mile Pecos River crude oil pipeline from Pecos, Tex., to Crane, which allows West Texas producers to deliver to Gulf Coast markets through a connection to the Longhorn Pipeline at Crane (OGJ Online, Feb. 5, 2013).
