GENERAL INTEREST — Quick Takes
Hess to sell Indonesian assets for $1.3 billion
Hess Corp. entered into two separate agreements with a joint venture of PT Pertamina and PTT Exploration & Production Co. Ltd. to sell its interests in the Pangkah and Natuna A assets offshore Indonesia for $1.3 billion. The agreements are expected to close before the end of first-quarter 2014.
In this year's first three quarters, the assets produced a combined 15,000 boe/d net to Hess. The company is a partner with Kuwait Foreign Petroleum Exploration in Pangkah.
The company will use the sale's proceeds to continue repurchasing shares under its existing $4 billion authorization.
Earlier this year Hess disclosed plans to divest its exploration and production assets in Indonesia and Thailand as well as its remaining downstream businesses, including terminals, retail, marketing, and trading (OGJ Online, Apr. 30, 2013).
Hess also closed its sale of Russian unit Samara-Nafta to Lukoil for a $2.05 billion (OGJ Online, Apr. 1, 2013). Through that month, Hess had reported or completed the sale of interests in Beryl field in the UK North Sea, the Eagle Ford play in Texas, and the Azeri, Chirag, and Guneshli fields in Azerbaijan and the associated pipeline (OGJ Online, Mar. 18, 2013).
Hess in October entered into an agreement with Buckeye Partners LP to sell its US East Coast and St. Lucia terminal network for $850 million. At that point, Hess had divested $5.4 billion this year to repay debt and strengthen its balance sheet (OGJ Online, Oct. 9, 2013).
A month later, the company completed the sale of its energy marketing business to Centrica PLC subsidiary Direct Energy for $1.2 billion (OGJ Online, Nov. 1, 2013).
QEP to pursue separation from midstream business
QEP Resources Inc. said it will pursue a separation of its midstream business, QEP Field Services Co., including the company's interest in QEP Midstream Partners LP (QEPMP). QEP Resources is majority owner of QEPMP.
The split is driven by QEP Resources' board's conclusion that the separation of QEP Field Services from QEP will benefit the company in the following ways:
• It allows for the separate valuation of QEP's midstream business.
• The value of QEP's midstream business is not fully recognized in the QEP share price and a separation is expected to unlock shareholder value.
• It allows each business to independently deploy resources and allocate capital according to their strategic initiatives and growth strategies.
• It permits each business to compete more effectively in their respective markets.
QEP Resources said it expects to update shareholders on the progress of the separation in first-quarter 2014. Meanwhile, it will continue to operate its business as normal and will continue to support ongoing activities.
QEP Resources holds assets in the northern US, primarily in the Rockies and the Williston basin (OGJ Online, Aug. 24, 2012), along with the southern US, primarily in Oklahoma, the Texas Panhandle, and Louisiana. QEP was spun off from Questar Corp., Salt Lake City, in 2010 (OGJ Online, July 2, 2010).
NPS director orders fracing comments withdrawn
National Park Service Director Jonathan B. Jarvis asked that comments the US Department of the Interior agency submitted about the Bureau of Land Management's proposed hydraulic fracturing and well stimulation regulations on public and Indian lands be withdrawn, Jarvis said in a Nov. 12 letter to US Rep. Rob Bishop (R-Utah). Bishop released the letter on Nov. 26.
"The inclusion of a quote from an article on the New York Times op-ed page was inappropriate," Jarvis wrote Bishop in response to a Sept. 6 letter the chairman of the House Natural Resource Committee's Public Lands and Environmental Regulation Subcommittee sent him.
Citations of peer-review scientific studies did not include references to support technical comments that were submitted, Jarvis continued. "In addition, the comments did not receive appropriate review and were not signed," he told Bishop. "For these reasons, I have asked that these comments be withdrawn from the record."
As he released Jarvis' letter, Bishop said, "It concerns me that the National Park Service attempted to pass off unsubstantiated information as 'science.' This thinly veiled attempt to vilify energy production and hydraulic fracturing on our public lands illustrates a shared agenda between the administration and anti-energy special interest groups."
Exploration & Development — Quick Takes
Noble makes gas discovery offshore Israel
Noble Energy Inc. has made a natural gas discovery with its Tamar Southwest (SW) exploration well offshore Israel. This find marks the company's eighth consecutive discovery in the Levant basin.
The Tamar SW well, testing a new exploration prospect, encountered 355 ft of net natural gas pay within the targeted Miocene intervals. The well was drilled to a total depth of 17,420 ft in 5,405 ft of water.
The field lies 8 miles southwest of the Tamar field, which contains gross resources of 640-770 bcf of gas. The well encountered high-quality reservoir sands, with per well productivity expected at 250 MMcfd.
"In Israel, the discovery at Tamar SW further enhances our discovered resources in the Eastern Mediterranean, which now totals nearly 40 tcf of natural gas," stated Mike Putnam, Noble's vice-president, exploration and geoscience.
Noble in 2009 estimated Tamar's overall gross resource potential at 5 tcf (OGJ Online, Feb. 10, 2009). That year, the company made a gas find in Tamar equal to the predrill estimate of more than 3 tcf of gas (OGJ Online, Jan. 19, 2009). Three major gas discoveries were made at the Leviathan exploration prospect, 47 km southwest of the Tamar, by Noble and its partners in 2010, amounting to 25 tcf (OGJ Online, Dec. 29, 2010).
Following completion of operations at Tamar SW, the drilling rig will be released to another operator.
Noble Energy operates Tamar SW with 36% working interest. Other interest holders include Isramco Negev 2, 28.75%; Delek Drilling, 15.625%; Avner Oil Exploration, 15.625%; and Dor Gas Exploration, 4%.
Noble discovers oil in deepwater Gulf of Mexico
Noble Energy Inc. has made an oil discovery at the Dantzler exploration well in deepwater Gulf of Mexico. Dantzler's discovered gross resources are estimated at 55-95 million boe.
The well encountered more than 120 net ft of primarily crude oil pay in two high-quality Miocene reservoirs. The well was drilled to a total depth of 19,234 ft in 6,580 ft of water on Mississippi Canyon Block 782. Dantzler is 12 miles west of the company's Rio Grande development area encompassing discoveries at Big Bend and Troubadour. In September Noble discovered natural gas in the gulf's Troubadour prospect (OGJ Online, Sept. 11, 2013).
"Dantzler represents our third consecutive exploration discovery in the Miocene trend of the Gulf of Mexico and complements our existing developments at Rio Grande and Gunflint," said Mike Putnam, Noble vice-president, exploration and geoscience. "The field's proximity to our Rio Grande area provides the opportunity for an accelerated development at Dantzler."
The company said it plans to drill at least two more Miocene trend prospects in deepwater gulf in 2014.
Noble is Dantzler's operator with 45% participating interest. Other interest holders include entities managed by Ridgewood Energy Corp., including Riverstone Holdings LLC and its portfolio company ILX Holdings II LLC, with 35%; and W&T Energy VI LLC, a wholly owned subsidiary of W&T Offshore Inc., with 20% (OGJ Online, Sept. 30, 2013).
USGS updates resource estimate for Puerto Rico
About 19 million bbl of undiscovered, technically recoverable crude oil and 244 bcf of undiscovered natural gas lie within the Puerto Rico-US Virgin Islands Exclusive Economic Zone, the US Geological Survey said in a Nov. 25 report.
It said the assessment was based on the postulated presence and viability of petroleum system elements including source rocks, reservoir rocks, traps, and timing considerations.
The US Department of the Interior agency said it used this geologic framework to define three hypothetic petroleum systems and five assessment units (AU) to assess the potential for technically recoverable resources in new field discoveries. Economic resources were not evaluated, it added.
Except for the Muertos Deformed Belt, the AU had been considered in previous oil and gas investigations, according to USGS. In this study, it was the only one with petroleum system elements which, although largely uncertain and risked, lay above the 10% threshold to justify a quantitative assessment.
That assessment produced the estimates of 19 million bbl of crude, 244 bcf of gas, and 6 million bbl of natural gas liquids.
The five AU form about 13% of the total evaluation area, the report said. The rest, including the Atlantic and Caribbean oceanic crusts, the Puerto Rico trench, and the Puerto Rico and Virgin Island shelf areas, have no petroleum potential and were not considered further.
There also is no petroleum potential in US Virgin Islands and Puerto Rico onshore areas, the report noted.
UK awards record number of offshore licenses
The UK's energy ministry awarded 52 new production licenses as part of the second tranche of offers in the 27th offshore oil and gas licensing round, bringing the round's total to a record 219, almost 30 more than the previous round.
"We are particularly encouraged by the fact that 21 of these licenses have been awarded to small independents who are new entrants to the market," commented Oonagh Werngren, operations director of Oil & Gas UK, a nonprofit representative body for the UK offshore oil and gas industry.
"This is three times the number of licenses granted to independents last year, and highlights the strategic importance of achieving a balance between established operators and newcomers," he stated, adding, "Successful exploration and production not only helps to promote security of energy supply but also strengthens the UK's economy and ever-growing supply chain and the hundreds of thousands jobs it supports."
The round began in February 2012 and closed for applications on May 1. A total of 224 applications were submitted for 418 blocks of the UK continental shelf. It was the largest number since offshore licensing began in 1964 and was 37 more than the previous high total received in the 26th round, according to the UK's government web site.
Drilling & Production — Quick Takes
BOEM proposes lease sale for eastern gulf
The US Bureau of Ocean Energy Management (BOEM) said it will hold an oil and gas lease sale covering the Gulf of Mexico's Eastern Planning Area on Mar. 19, 2014, in New Orleans. BOEM said the proposed Lease Sale 225 could result in the production of 71 million bbl of oil and 162 bcf of natural gas.
Lease Sale 225 is comprised of 134 whole or partial unleased blocks over 465,200 acres 125 miles offshore Louisiana in 2,657-10,213 ft of water. The area is south of eastern Alabama and western Florida, bordered by the Central Planning Area boundary on the west and the Military Mission Line on the east.
Ninety-three of the 134 blocks available are in the same area offered in Sale 224 in March 2008. The Gulf of Mexico Energy Security Act of 2006 (GOMESA) specifies that Alabama, Louisiana, Mississippi, and Texas share in 37.5% of the bonus payments. Those four states will also share in 37.5% of all future revenues generated from those leases.
Another portion of revenues from those leases, 12.5%, is allocated to the Land and Water Conservation Fund. The remaining 41 blocks south of that area are not subject to revenue sharing under GOMESA.
This is the first lease sale proposed for the Eastern Planning Area in the 2012–17 Outer Continental Shelf Oil and Natural Gas Leasing Program.
The 5-year program, including as many as 15 lease sales in the gulf and Alaska, consists of 219 million acres on the US Outer Continental Shelf for lease, making all areas of the OCS with the highest oil and gas resource potential available for exploration and development.
US drilling rig count edges up to 1,763
The US drilling rig count tallied 2 units to reach 1,763 rigs working in the shortened week ended Nov. 27, Baker Hughes Inc. reported.
The overall gain was represented by a 2-unit increase in land-based rigs to 1,687. Rigs drilling offshore and rigs drilling in inland water were unchanged from last week at 57 and 19, respectively.
Oil rigs accounted for 4 more units to 1,391 while gas rigs lost 2 units to 367. Rigs considered unclassified remained at last week's total of 5.
Direction drilling rigs added 6 units to reach 222. Horizontal drilling rigs were unchanged from last week at 1,127.
The abbreviated week saw modest gains in several of the major oil- and gas-producing states. Texas and Oklahoma each collected 3 more units to respective totals of 834 and 175. Louisiana and Kansas each gained 2 units to 112 and 30, respectively. North Dakota, Wyoming, Pennsylvania, and Ohio each edged up a single unit to 168, 57, 55, and 35, respectively. Arkansas was unchanged from last week at 11. New Mexico, Colorado, Utah, and Alaska each dropped a unit to respective totals of 78, 67, 27, and 8. California experienced the steepest decline this week, losing 2 units to settle at 35 total.
PROCESSING — Quick Takes
Sonangol taps Standard Chartered for Lobito refinery
Angola's state-owned Sonangol EP has selected Standard Chartered Bank UK to provide financial consulting for the construction of its Sonaref refinery at Lobito in Angola's Benguela Province.
As financial advisor, Standard Chartered will provide economic modeling for the project, including the development of the funding strategy, budget planning, risk management, auditing, and adjustments to the fiscal and trade matrices, Sonangol reported.
The Lobito refinery, on which construction began in December 2012 (OGJ Online, Dec. 2, 2013; Aug. 20, 2009), will have a processing capacity of 200,000 b/d, with commissioning to take place sometime between 2017-18, Sonangol said.
Kuwait lets contract for Al-Zour refinery
Kuwait National Petroleum Co. has let a services-related contract to Honeywell for its 615,000-b/d Al-Zour refinery complex to be built in southern Kuwait.
As part of the contract, Honeywell will provide the integrated control and safety system for the refinery as well as the front-end engineering design, according to Honeywell.
The refinery is targeted for start-up in 2018 and will help to meet domestic demand and export of ultralow-sulfur products such as fuel oil, diesel and kerosene, as well as petrochemical feedstocks, Honeywell said.
The Al Zour refinery, which was approved in 2011, will be Kuwait's fourth refinery, making it the largest refinery in the entire Middle East (OGJ Online, Apr. 1, 2013; Dec. 4, 2012; July 1, 2011).
Fire hits Petrobras refinery at Parana
A small fire occurred on Nov. 28 at the crude unit of Petroleo Brasileiro SA's (Petrobras) 193,000-b/d Presidente Getulio Vargas refinery (Repar) at Araucaria, Parana, Brazil.
The fire, which broke out in the refinery's distillation unit U-2100, was quickly brought under control, Petrobras said in an e-mail to OGJ.
While neither injuries nor damage to the environment occurred as a result of the incident, the distillation unit has been shut down for a technical evaluation, according to Petrobras.
There is no timetable for when the unit might restart, but supplies to the market will not be affected, the company said.
The cause of the fire remains under investigation.
End seen to limit on Navajo Refinery runs
HollyFrontier Corp. said it expects by about the end of January 2014 to have resolved waste-water problems that have restricted crude runs at its 100,000-b/sd Navajo Refinery in Artesia, NM, since last month (OGJ Online, Nov. 11, 2013).
Until the problem is solved, crude throughput will remain about 60,000 b/d, HollyFrontier said.
TRANSPORTATION — Quick Takes
Shell floats hull for world's largest FLNG facility
The 488-m hull of Royal Dutch Shell PLC's Prelude floating LNG (FLNG) plant was floated from the dry dock at the Samsung Heavy Industries yard in Geoje, South Korea, where Prelude is being built. The company laid the keel for the vessel in May.
Shell's first deployment of FNLG technology, Prelude FLNG will be the largest floating facility in the world once it's complete and is expected to produce 3.6 million tonnes/year of LNG.
The facility will operate for 25 years in a remote basin 475 km northeast of Broome, Western Australia, developing the Prelude and nearby Concerto gas fields in permit WA-371-P with total reserves of 3 tcf of gas and about 120 million bbl of condensate. Prelude FLNG is designed to withstand a category 5 cyclone.
Shell said the facility will enable the development of gas resources ranging from clusters of smaller more remote fields to potentially larger fields through multiple facilities.
Shell in September began drilling the first of seven development wells in the Prelude field using the Noble Clyde Boudreaux drilling vessel. The drilling campaign is expected to last 2 years (OGJ Online, Sept. 17, 2013).
The facility is scheduled for startup in 2016 (OGJ Online, Oct. 14, 2009).
The company in 2010 signed contracts with Technip and Samsung Heavy Industries specifying front-end engineering and design aspects of the project and terms under which it would be built (OGJ Online, Mar. 10, 2010).
Shell is the operator of the Prelude field with Inpex 17.5%, Kogas 10%, and OPIC 5% (OGJ Online, Mar. 19, 2012; May 10, 2012).
Gazprom projects first LNG to Kaliningrad in 2017
OAO Gazprom is projecting late 2017 for an LNG terminal on the Baltic Sea coast in the far-western region of Kaliningrad, between Poland and Lithuania.
Several locations are being considered. Gazprom said the output would be at least 9 million cu m/day. The regasification terminal will be linked with the existing gas pipeline near the Kaliningradskoye underground storage system.
Gazprom said the "investment rationale" for the LNG terminal will be completed in 2014.
The Kaliningrad region will also be affected by the "accelerated development" of underground storage facilities in salt caverns. "The number of tanks is to be gradually increased from 2 to 14," Gazprom said. Working gas capacity by 2025 is expected to be 800 million cu m.
Gazprom in September commissioned Phase 1 of the Kaliningradskoye underground storage facility with working gas capacity of 52 million cu m.
Marathon signs as anchor Sandpiper crude line shipper
Marathon Petroleum Corp. signed with Enbridge Energy Partners LP as an anchor shipper for the Sandpiper Project crude oil pipeline, which will become part of Enbridge's North Dakota System when completed. The companies expect Sandpiper to be operational first-quarter 2016.
Sandpiper will run from Beaver Lodge, ND to Superior, Wis., expanding and extending the Bakken shale takeaway capacity of the North Dakota System by 225,000 b/d to a total of 580,000 b/d.
Enbridge is conducting an open season to solicit commitments from shippers for capacity created by Sandpiper. Sandpiper will include 375 miles of new 24-in. OD line from Beaver Lodge to the current end of the North Dakota system at Clearbrook, Minn., adding 225,000 b/d to the existing 210,000 b/d of capacity. The project also includes a new 375,000 b/d, 233-mile, 30-in. OD line to be built extending the North Dakota System from Clearbrook to connect with Enbridge's Lakehead Pipeline mainline terminal at Superior, Wis.
Marathon said its participation in Sandpiper, combined with last year's commitment to Enbridge's Southern Access line (OGJ Online, Dec. 14, 2012), further its ability to cost-effectively access Bakken production and that its equity ownership in each would help plans to grow its midstream logistics business.
Marathon has also been active in the Utica shale in eastern Ohio, participating in both transportation and processing projects in the region, including condensate splitters at its Canton, Ohio, and Catlettsburg, Ky., refineries and a new pipeline project connecting multiple production sites in eastern Ohio to its Canton refinery and MPLX LP pipelines.
Sandpiper will cost $2.6 billion. Marathon will fund 37.5% of its construction, earning a 27% interest in the North Dakota System when Sandpiper is placed into service based on this commitment and participation in the pipeline's open season. Marathon will have the option to increase its ownership interest to 30% through additional investments in future system improvements.
Marathon agreed in 2012 to be the anchor shipper on Enbridge's Southern Access Extension pipeline from Flanagan, Ill. to Patoka, Ill. As a result of that commitment, Marathon has the option to acquire 25% ownership interest in Southern Access. Its subsequent commitment to Sandpiper increases Marathon's option for ownership interest in Southern Access to 35%.
