GENERAL INTEREST — Quick Takes
CNOOC completes acquisition of Nexen
CNOOC Ltd. completed its acquisition of Nexen Inc. for $15.1 billion giving the Chinese oil and gas firm holdings in Nexen's oil sand and shale gas plays in Canada along with conventional crude oil reserves in the North Sea and Gulf of Mexico.
Closing followed a series of approvals from Canadian, UK, and US regulators (OGJ Online, July 30, 2012).
CNOOC Chairman Wang Yilin called Nexen "a leading international platform." CNOOC Chief Executive Officer Li Fanrong will assume the chairmanship of Nexen's board.
Nexen, which will operate as a wholly owned CNOOC unit, will continue to be led by its existing CEO Kevin Reinhart. CNOOC said Nexen's headquarters will remain in Calgary.
A new Nexen board including CNOOC representatives, Nexen representatives, and Canadian independent directors was established. Nexen's stock was expected to be delisted from the Toronto Stock Exchange within days.
Sinopec to buy stake in Mississippi Lime acreage
Sinopec International Petroleum Exploration & Production Corp. plans to buy a 50% stake in Chesapeake Energy Corp.'s Mississippi Lime oil and natural gas acreage in northern Oklahoma for $1.02 billion.
The joint venture involves 850,000 acres (425,000 acres net to Sinopec). Terms call for Chesapeake to receive 93% of the $1.02 billion upon closing, expected in the second quarter.
Payment of the rest will be subject to certain customary title contingencies. All future exploration and development costs in the joint JV will be shared proportionately between the parties with no drilling carries involved.
Production from these assets (including Mississippi Lime and other formations), net to Chesapeake's interest and before Sinopec's purchase, averaged 34,000 boe/d in the 2012 fourth quarter. About 45% of that production was oil, 46% was gas, and the rest was natural gas liquids.
As of Dec. 31, 2012, some 140 million boe of net proved reserves was associated with the assets involved in the JV.
As the operator of the project, Chesapeake will conduct all leasing, drilling, completion, operations, and marketing activities for the JV.
Chesapeake has about 2.1 million net acres of leasehold in the Mississippi Lime, which straddles northern Oklahoma and southern Kansas.
Sinopec's JV will help Chesapeake of Oklahoma City reduce its debt, which was $12 billion as of Dec. 31, 2012. Chesapeake sold $12 billion of assets last year and has said it aims to sell another $4-7 billion this year.
Chesapeake is the second largest US gas producer, after ExxonMobil Corp., the largest. The independent continues working toward previously announced debt-reduction goals (OGJ Online, Feb. 14, 2012).
Alberta, Swan Hills Synfuels end CCS pact
The government of Alberta and Swan Hills Synfuels have agreed to cancel an agreement under which the province was to have helped fund a carbon capture and storage (CCS) project.
Alberta in 2011 committed to pay $285 million over 15 years for the capture of carbon dioxide produced by the underground gasification of coal. The CO2 was to have been sold for use in enhanced oil recovery. Swan Hills Synfuels, Calgary, operates an in situ coal gasification demonstration plant 17 km southwest of Swan Hills, Alta.
Energy Minister Ken Hughes said, "Persistent low prices for Alberta's natural gas have driven this business decision" to discontinue the agreement.
Swan Hills Synfuels CEO Martin Lambert explained, "At present, it's more economical to purchase natural gas than it is to manufacture synthetic gas. It's a market reality that has led to significant delays on the CCS side of the project."
The province has made no payments to the project.
It is supporting two other CCS projects, both related to oil sands development: Alberta Carbon Trunk Line, a 240-km pipeline that will collect CO2 from upgraders in the Industrial Heartland area of Alberta for transport for use in EOR, and Shell Quest, which will capture CO2 from the Scotford upgrader near Fort Saskatchewan and sequester it in the subsurface.
Exploration & Development — Quick Takes
Junggar CBM exploratory drilling progresses
TerraWest Energy Corp., Vancouver, BC, has provided results of its 2012 exploratory drilling program on the Liuhuanggou coalbed methane production sharing contract area covering 255 sq miles adjacent to the city of Urumqi, capital of China's Xinjiang Uygur Autonomous Region, in the Junggar basin.
TWE has a 47% interest in and is operator of the Liuhuanggou PSC. Petromin Resources Ltd., Vancouver, BC, has a 47% interest in TWE. China National Petroleum Corp. holds 53% of the PSC. The PSC is now administered by PetroChina Coalbed Methane Co. Ltd., an indirect subsidiary of CNPC.
Petromin said TWE drilled the LHG10-02 well, spudded Nov. 11 near the previously drilled LHG10-02 well, reached the planned total depth of 750 m and was cased. Completion and fracture stimulation of prospective formations is planned for spring 2013.
The target formation is the Jurassic Badaowan J1B, which contains multiple coal seams and prospective surrounding rocks. The well intersected target coals as planned, and initial indications from geophysical logs show that key zones reflect gas potential as expected and that some surrounding rocks above coal seams show excellent further gas potential.
The LHG12-02 well is located such that a multiple pilot production configuration can be considered in the future. In particular it is planned that the LHG12-02 and LHG10-02 wells will communicate once completed.
Severe winter weather forced cessation of field work on Dec. 8. Drilling at LHG12-01, located to intersect and test the thick coal seams in the Jurassic Xishanyao J2X formation on the west side of Liuhuanggou, was to follow LHG12-02 and due to weather will spud in spring 2013.
Petromin said it is believed to be the only Canadian junior public firm listed on the TSX Venture Tier One Board to have an interest in China's massive coalbed methane/shale gas PSCs.
Eni group adds 4 tcf at Coral offshore Mozambique
A group led by Eni SPA has elevated the gas potential of the Mamba Complex in Area 4 offshore Mozambique to 75 tcf in place with drilling of the Coral-3 delineation well.
Coral-3 encountered 117 m of gas pay in a high-quality Eocene reservoir and adds at least 4 tcf of gas in place to Area 4. Eni said the well "confirms the potential of Area 4 operated by Eni at 75 tcf of gas in place, of which 27 tcf is exclusively located in Area 4."
The Eni group drilled Coral-3 to 5,270 m in 2,035 m of water 5 km south of Coral-1, 15 km from Coral-2, and 65 km off the Cabo Delgado coast. It is the eighth well drilled back-to-back in Area 4. The discovery proved the existence of hydraulic communication with the same reservoir encountered in Coral-1 and 2 and results in a new estimate of 13+ tcf of gas in place in the Coral discovery solely in Area 4.
The deliverabilities demonstrated by the Coral wells during production tests were excellent, and each well is expected to flow at very high rates in production configuration, Eni said.
Eni plans to drill the Mamba South-3 delineation well in order to assess the full potential of the Mamba Complex discoveries before moving back to exploratory drilling in the southern part of Area 4.
Area 4 operator Eni holds 70% participating interest. Galp Energia and Korea Gas Corp. have 10% each, and Mozambique's state ENH has 10% carried through the exploration phase.
Chevron farms into Cooper basin in Australia
Chevron Corp. has signed a potential multimillion-dollar farmin deal with Adelaide-based Beach Energy Ltd.'s acreage in the Cooper basin in Australia.
The deal means that Beach will transfer up to 60% of its interests in South Australian permit PEL 218 and Queensland permit ATP 855 to Chevron in two stages.
The first stage involves transfer of 30% in PEL 218 in exchange for $36 million (Aus.) in cash and a $95 million carry.
This stage also includes an 18% interest in ATP 855 transferred to Chevron for $59 million cash.
If Chevron elects not to proceed after the first stage, the interest held by Chevron will revert back to Beach for no consideration.
If Chevron does elect to continue, Stage 2 will mean Beach transferring another 30% interest in PEL 218 to Chevron for $41 million in cash and a $47 million carry. It will also provide Chevron with another 18% in ATP 855 for $36 million.
At the end of Stage 2 Chevron will make a decision whether to go ahead with more work. If it does go ahead it will spend a further $35 million on the program.
However, if Chevron doesn't proceed after Stage 2 Beach may elect to receive a reassignment of the interests then held by Chevron.
The key to the deal is the deep Nappamerri Trough in which Beach has been working hard to prove up commercial unconventional gas reserves.
Beach says its Encounter-1 and more recent Holdfast-1 wells in PEL218 had proved that the tight Permian strata could flow at significant rates. Meanwhile in ATP855 the joint venture between Beach and Icon Energy Ltd., Queensland, has just finished drilling Halifax-1 which flowed at 2.23 MMcfd post-fracing on a constraining choke.
For Beach the Chevron deal vindicates its vision for unconventional gas in the Cooper basin. For Chevron the deal is a chance to enter the Cooper basin and bring in its onshore gas experience in the US.
Drilling & Production — Quick Takes
Statoil lets contracts for Dagny oil field
Statoil has let a contract to Daewoo Shipbuilding & Marine Engineering for design and construction of the topsides of the platform to be installed on Dagny oil and natural gas field offshore Norway. Aker Solutions will be a major subcontractor.
Dagny field, discovered in 1974, lies in 120 m of water in the North Sea about 30 km northwest of the Sleipner A platform (OGJ Online, Jan. 17, 2012). Liquids produced from it will be loaded onto tankers. Gas will flow by pipeline to Sleipner.
Heerema Vlissingen has the contract to build the platform jacket. Maersk Drilling will drill production wells from a jack up, and Allseas will handle pipelaying.
Dagny production is expected to start in the first quarter of 2017 and continue for 20 years.
Statoil expects plateau production of 60,000 b/d of oil and 9 million standard cu m/day of rich gas. It plans to inject 8 million cu m/day of dry gas to enhance oil production.
The field spans several production license areas.
Statoil is the operator with a 100% interest in PL303. It also is operator of PL048 with an interest of 78.2%. Total holds the remaining 21.8% of PL048 and 100% of PL029. In PL029B, Statoil is operator with 50%; Total holds 30%, and Det Norske has 20%.
YPF to drill unconventional well in Chubut province
Argentina's YPF SA plans to spend $12 million to drill an unconventional well in Chubut province, marking YPF's strategy to expand beyond Neuquen province in its search for unconventional oil and gas. Other exploratory drilling for unconventional resources has in Argentina's southern Neuquen basin to test the Vaca Muerta shale and possibly other formations (OGJ Online, July 11, 2012).
President Cristina Fernandez de Kirchner, Chubut Gov. Martin Buzzi, and YPF Chief Executive Miguel Galuccio announced the well spudded on Feb. 13, saying YPF also is moving to reverse declining oil and gas production in Argentina.
This is the first time YPF has drilled a well for unconventional oil or gas in Chubut province, Galuccio said. He expects the well will be drilled to more than 3,000 m.
Kirchner nationalized energy producer YPF in April 2012, seeking to stop declining output (OGJ Online, Apr. 23, 2012).
During a speech from Chubut province. Galuccio said YPF's gas production dropped while YPF, based in Buenos Aires, was controlled by Spain's Repsol SA.
Queensland okays Aussie oil shale project
Australia's Queensland state government said it will allow Queensland Energy Resources Ltd. to proceed with efforts to develop commercial oil shale operations at a Gladstone plant, provided QER comply with environmental requirements, the government said.
QER built a small-scale plant to produce ultralow-sulfur diesel, jet fuel, and other transportation fuels.
In 2008, the Queensland government imposed a 2-year moratorium on oil shale projects, halting the proposed QER project in the McFarlane deposit about 15 km south of Proserpine (OGJ Online, Aug. 25, 2008.)
The development approval was announced by Natural Resources and Mines Minister Andrew Cripps in Gladstone on Feb. 13.
"Under the new policy, existing operator [QER] will be able to proceed," Cripps said. "But new entrants to the industry will need to prove their oil shale extraction technologies through trials."
PROCESSING — Quick Takes
Hess union widens buyer search for refinery
The union representing employees at Hess Corp.'s 70,000 b/d Port Reading, NJ, refinery has expanded its search for a new owner. Hess announced Jan. 28 that it plans to close the plant at the end of February and complete its withdrawal from the refining business after losing money there in two of the last 3 years.
"The gigantic gasoline price spikes hitting customers are a direct result of the closing of the Port Reading refinery and similar industry actions," said Bruce Klipple, president of the United Electrical, Radio, and Machine Workers (UE).
"Our early outreach to interested firms who could continue operation of the refinery is promising," he reported on Feb. 25. "Within 1 week of the start of our campaign, we have half a dozen interested parties who have consulted with UE. We expect more to come forward."
When it announced the sale, Hess said the refinery is comprised solely of a fluid catalytic cracking unit, and it primarily manufactures gasoline and heating oil blending components.
"The financial outlook for the facility is expected to remain challenged due to the requirement for future expenditures to comply with environmental regulations for low-sulfur heating oil and the weak forecast for gasoline refining margins," the company said in late January.
Workers at the plant are represented by UE Local 106. "The news media tell us day after day that [gasoline] prices are skyrocketing," said Chris Townsend, the UE representative heading up its plant sale efforts. "Consumers see this every day at the pump. But somebody has to do something about it," he continued. "Our union is taking action. We are going to find a buyer to continue operations of this critically important refinery. The public should contact their lawmakers and tell them to help our effort, before prices go even higher."
Saudi lube-oil JV awards expansion contract
Saudi Aramco Lubricating Oil Refining Co. (Luberef) has contracted with Jacobs Engineering Group Inc. to provide project management consulting for an expansion at Luberef's lube oil refinery in Yanbu. Overall expansion cost, according to Jacobs, will be about $1 billion.
Under the agreement, Jacobs is providing PMC services for both inside battery limits (ISBL) and outside battery limits (OSBL). The ISBL services include a new lube-oil unit, a new sulfur complex, a new hydrogen manufacturing unit, and an expansion of the propane deasphalting unit. The OSBL services involve all utilities, tanks, and infrastructure.
The Yanbu Refinery expansion will increase base oil production of high-quality GR-II and GR-III base oils; increase GR-I Bright stock to almost double current production; produce higher-value byproducts—naphtha, diesel, and kerosine; and satisfy Saudi Arabia's requirements for drilling fluid, currently being imported.
TRANSPORTATION — Quick Takes
Shell to buy Repsol LNG assets for $4.4 billion
Royal Dutch Shell PLC agreed to acquire various LNG assets from Repsol SA, including supply positions in Peru and Trinidad and Tobago, for $4.4 billion.
In addition, Shell will assume another $500 million in debt and $1.8 billion in lease obligations. The transaction is expected to generate $3.5 billion in pre-tax capital gain, Repsol said. The sale process excludes the Canaport regasification terminal in Saint John, NB. Repsol owns 75% interest in that terminal.
"The North American facility is not included in the sale process as the low gas prices currently seen in the US market do not allow the asset's medium and long-term potential to be adequately valued," Repsol said, adding that it was analyzing operational, financial, and strategic options for Canaport. Irving Oil owns 25% interest in Canaport.
In the meantime, Repsol and Shell have signed a 10-year agreement to supply 1 million tonnes/year to Canaport.
Shell Chief Executive Officer Peter Voser said the assets that Shell is acquiring from Repsol will increase Shell's ability to bring LNG to areas that need it the most.
The acquisition will provide Shell with LNG capacity in the West Atlantic from Atlantic LNG in Trinidad and Tobago, and in the East Pacific from Peru LNG.
Shell has agreed to acquire holdings from several Repsol subsidiaries, subject to regulatory approvals.
These additions will complement Shell's existing LNG capacity in Africa, Asia, Australia, the Middle East, and Russia.
The acquisition is expected to add 7.2 million tpy of LNG volumes through long-term off-take agreements, Shell said.
Senators ask Kerry to approve Keystone XL in 1Q
US Sens. John Hoeven (R-ND) and Max Baucus (D-Mont.) were joined by 18 other senators from both parties as they urged newly confirmed Secretary of State John F. Kerry to approve the proposed Keystone XL crude oil pipeline during this year's first quarter.
"The State Department received the new route approved by the state of Nebraska on Jan. 22…but [it] has yet to inform the public and stakeholders of a definitive process for the final decision," the 10 Democrats and 10 Republicans said in their Feb. 22 letter. "We urge you as Secretary of State to ensure that this decision process be completed promptly."
GAIL starts Dabhol-Bengaluru gas pipeline
GAIL (India) Ltd. has begun operations of its 1,000-km Dabhol-Bengaluru pipeline, supplying the city of Bengaluru with 16 million cu m/day of natural gas. GAIL and Karnataka Power Corp. Ltd. also concluded a gas supply agreement by which GAIL will supply KPCL's 700-Mw Bidadi electric power plant with 2.1 million cu m/day starting in the next 30 months. Initial gas supplies to Bengaluru include fuel for Toyota Kirloskar Auto Parts' 6½-Mw electric power plant.
The pipeline passes through Belgaum, Dharwad, Gadag, Bellary, Devanagere, Chitradurga, Tumkur, Ramanagaram, Bengaluru Rural, and Bengaluru Urban, featuring crossings of 18 national highways, 382 other road crossings, 20 railway crossings, 83 cased crossings, and 276 water body crossings including what GAIL describes as Asia's largest river crossing in rocky terrain at Ghatprabha. It crosses a 25-km forest reserve area and 10 other major rivers. The project also involved laying 73 km of 18-in. OD pipeline in the city of Bengaluru.
GAIL last month commissioned the 5 million tonne/year Dabhol LNG terminal at Ratnagiri, Maharashtra, about 210 miles south of Mumbai. GAIL expects to expand the terminal to 10 million tpy within 3 years (OGJ Online, Jan. 22, 2013).
ETP, partners evaluating Gulf Coast NGL exports
Energy Transfer Partners LP, Sunoco Logistics Partners LP, and Regency Energy Partners LP are jointly evaluating a project to export NGLs from the US Gulf Coast. A Sunoco Logistics pipeline would connect ETP's Lone Star fractionator in Mont Belvieu, Tex., to Sunoco's Nederland terminal.
ETP plans to launch an open season for the project "very shortly" and has targeted an early-2015 in-service date. ETP acquired Sunoco Logistics last year (OGJ Online, Apr. 30, 2012).
ETP and Regency put the 100,000 b/d Lone Star Fractionator I in service in December 2012, taking shipments from the companies' 209,000-b/d Lone Star West Texas Gateway NGL pipeline, completed earlier that same month (OGJ Online, Dec. 7, 2012). Lone Star expects the Mont Belvieu site's second 100,000 b/d fractionator to enter service during the fourth-quarter of this year. Lone Star NGL LLC is a joint venture between ETP and Regency.
The 600-MMcfd first train of ETP Jackson County, Tex., gas processing plant entered service yearend 2012. ETP expects the 200-MMcfd second train to come on line next month. ETP's 130-mile Justice NGL pipeline also began operations late last year, connecting the Jackson plant to Mont Belvieu.
LNG agreement boosts plant offshore Israel
Levant LNG and Gazprom Marketing & Trading Switzerland AG have signed a heads of agreement covering the sale of LNG from the floating liquefaction plant Levant hopes to install offshore Israel (OGJ Online, Nov. 29, 2012).
If approved, the plant would receive gas produced from deepwater Tamar and Dalit fields by the Tamar Partnership, which includes Noble Energy Mediterranean Ltd., Isramco Negev 2 Partnership, Delek Drilling LP, Avner Oil Exploration LP, and DorGas Exploration LP. Levant LNG is a subsidiary of Pangea LNG BV. Under the new agreement, Levant LNG and Gazprom Marketing & Trading will negotiate the latter's purchase of 3 million tonnes/year of LNG for 20 years. The purchase amount is estimated to be the total output of the FLNG plant.
Pangea said the facility would be the world's first project-financed floating LNG export facility. A final investment decision about the plant is expected by yearend.