GENERAL INTEREST — Quick Takes
Encana to focus 2015 spending on core shale assets
Encana Corp., Calgary, reported plans to spend $2.7-2.9 billion on its capital budget with roughly 80% of this total directed towards four of what the company is calling its "highest margin growth plays," namely the Montney and Duvernay shale areas in Canada and the Eagle Ford and Permian areas in the US. Encana expects to generate about 75% of its 2015 cash flow from oil and liquids production.
"Following the launch of our new strategy, we took aggressive action and transformed our portfolio, significantly reduced our cost base, and built a culture that drives efficiencies throughout our business," said Doug Suttles, Encana president and chief executive officer.
The company estimates it will increase its total liquids production next year to 140,000-160,000 b/d, up 70% vs. 2014. It expects overall production to reach 405,000-440,000 boe/d.
Encana expects total cash flow to reach $2.5-2.7 billion, "reflecting the impact of higher margin production and continued cost efficiencies, partially offset by anticipated lower commodity prices."
Suttles said, "In 2015, we plan to continue to execute our strategy and capitalize on the portfolio we have built by investing in our highest margin plays and highest impact projects to keep us on track to reach our long-term strategic goals."
The company's 2015 capital program is based on assumptions of $70/bbl WTI crude oil prices and New York Mercantile Exchange natural gas prices of $4/MMbtu.
The company also expects to generate net proceeds of around $800 million in first-quarter 2015 through the completion of the previously announced divestiture of the majority of its Clearwater assets and other anticipated transactions.
Rosneft, Essar sign terms of oil supply agreement
OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015. The agreement is for about $10 billion over a 10-year period, and involves 10 million tonnes/year, The Economic Times reported.
The agreement was signed by Shashi Ruia, founder of Essar, and Rosneft Pres. Igor Sechin. Attending were Indian Prime Minister Narendra Modi and Russian President Vladimir Putin.
Ruia said the agreement "provides good long-term raw material security to our refineries." Sechin said the strategic potential "can hardly be overestimated."
Essar Oil Ltd.'s Vadinar refinery in Gujarat has a capacity of 20 million tonnes/year and a complexity of 11.8.
Sunshine Oilsands appoints chief executive officer
Sunshine Oilsands Ltd., Calgary, has appointed Luo Hong as chief executive officer and Jiang Qi as president and chief operating officer.
The effective date of Hong's appointment is subject to obtaining all necessary immigration approvals, Sunshine said. In the interim, Michael Hibberd, executive vice-chairman, will continue to perform the functions of chief executive officer (OGJ Online, Sept. 2, 2014).
Hong is executive vice-president of Sinopec Canada and has 30 years of experience in the oil and gas industry. Hong's previous positions included work in West Africa, Kazakhstan, Saudi Arabia, and northwest China.
The effective date for Qi's appointment is Jan. 5, 2015. Qi has 31 years of experience, including 25 in heavy oil and oil sands, having served as vice-president, reservoir and production engineering, for OSUM Oil Sands Corp. since 2012.
Exploration & Development — Quick Takes
Crown Point reports on Argentine exploration wells
Crown Point Energy Inc., Calgary, has released test results for the first of two exploration wells at its Tierra del Fuego concessions in Argentina. A 25.78% owner, the company also updated work on a second exploration well and expects to release test results by the end of the month.
Crown Point Chief Executive Officer Murray McCartney said if timely government approvals arrive for a gas line from the first well to the company's nearby San Luis gas plant, "we should have this well on production by the end of January."
The exploration well SL x-1003 was completed on Dec. 4. During a 4-hr production test, it flowed gas from the Springhill sand formation at a gross rate of 5.6 MMcfd and liquids at a gross rate of 88 b/d.
Total gross production during the test was 0.936 MMcf and 14.7 bbl consisting of 100% oil at an average wellhead flowing pressure of 1,010 psi through a 14-mm choke.
The well was drilled to a TD of 2,207 m and cased on Nov. 11 as a potential Springhill gas well with about 24.5 m of gross pay. It is 2.6 km from the San Luis gas plant and was drilled to evaluate the potential of the Springhill sandstones on a separate fault block adjacent to the San Luis Springhill gas pool, the company said.
Field work and tie-in will begin as soon as the previously mentioned government approvals are issued. Additional drilling to exploit the pool discovery may be conducted during first-quarter 2015 and, if successful, would also be tied into the San Luis plant, the company said.
PQ x-1001, the second exploration well, has been drilled to a TD of 1,939 m and cased on Dec. 8 as a potential pool discovery with about 14 m of gross pay in the Springhill sandstones formation.
PQ x-1001 was drilled to evaluate the Springhill formation over the 50-sq-km 3D seismic mapped Puesto Quince structure. Completion and testing of the Puesto Quince well will take place later this month.
Crown Point said a successful completion of the well would generate additional drilling locations for 2015. The well is about 5 km from its gas and oil processing at Rio Chico.
Eni reports test rates for well off Congo (Brazzaville)
A production test conducted by Eni SPA on the Minsala Marine 1 NFW well offshore Congo (Brazzaville) flowed 5,000 b/d of 41° gravity oil and 14 MMscfd of gas from an opened section comprising 37 m out of the 420 m oil column identified in the discovery (OGJ Online, Oct. 30, 2014).
The well is well part of the Marine XII block, which lies 35 km from the shoreline and 12 km from the recent Nene Marine discovery (OGJ Online, Feb. 13, 2014).
Preliminarily estimates by Eni on the potential of Minsala Marine discovery total 1 billion boe in place, 80% of which is oil. The company has scheduled an appraisal plan for the discovery and begun studying the commercial development of its hydrocarbons reserves.
"The production test results [have] exceeded expectations and [enable] us to plan a fast commercial development of the important Minsala Marine find, similarly to what had been done at Nene' Marine," said Claudio Descalzi, Eni chief executive officer.
During the past 4 years, Eni has been carrying out a targeted exploration program in the presalt geological plays of West Africa's shallow waters. Eni has already discovered 4 billion boe in place in the play between Congo and Gabon.
The Marine XII permit has been the site of the Minsala Marine, Litchjendily Marine, and Nene Marine discoveries, each of which lies in conventional waters close to existing infrastructure. Eni says this will enable them to be brought into production shortly and at competitive costs.
Eni Congo SA operates Marine XII with 65% interest.
Santos makes gas discovery in Cooper basin
Santos Ltd. has made a wet natural gas discovery in its South Australian Cooper basin permit PEL 513.
The company reported that its Yarowinnie South-1 wildcat encountered an estimated 15 m of net gas pay across a gross 410-m interval in the Permian-age Patchawarra formation.
The well is southwest of the earlier Varanus South-1 well that discovered wet gas in the same permit during November.
Yarowinnie South-1 has now been cased and suspended as a future producer. Operator Santos holds 60% interest in the permit, while Drillsearch Energy Ltd. holds the remainder.
Drilling & Production — Quick Takes
Husky, CNOOC start gas production at Liuhua 34-2
Husky Energy Inc. and China National Offshore Oil Corp. Ltd. reported the start of natural gas production at the Liuhua 34-2 gas field in the South China Sea.
The field is producing 30 MMcfd from one well, CNOOC said. Peak production of 45 MMcfd is expected in 2015.
It's the second field to be brought online at the Liwan gas project this year. Liwan 3-1 field started production in March (OGJ Online, Mar. 31, 2014).
The Liwan gas project is about 300 km southeast of Hong Kong. Liwan 3-1, Liuhua 34-2, and Liuhua 29-1 fields share a subsea production system, subsea pipeline transportation, and onshore gas processing infrastructure.
"Liuhua 34-2 will contribute to the ramp up of Liwan next year," said Husky Chief Executive Officer Asim Ghosh. "The project is making a sound contribution to our business and is now delivering significant cash flow from gas sales that are at a higher price than in North America."
Gas from Liwan 3-1 and Liuhua 34-2 is being processed at an onshore gas terminal at Gaolan and sold to mainland China, with initial production covered by fixed-price gas sales agreements, Husky said.
Husky holds a 49% interest in the Liwan gas project and operates the deepwater system. CNOOC holds 51% and operates the shallow-water facilities and the gas terminal.
Husky reports start of steam operations at Sunrise
Husky Energy, Calgary, reported the start of steam operations at the in situ Sunrise Oil Sands Project in northeastern Alberta.
The project's Phase 1 includes the development of 60,000 b/d (gross) with two processing plants. The first 30,000-b/d plant is expected to begin production towards the end of first-quarter 2015. The second 30,000-b/d plant is expected to start steaming midyear 2015, with production commencing a few months later. Production is expected to ramp up to full capacity over a 2-year period.
"The production of steam is the last major milestone before first oil," said Chief Executive Officer Asim Ghosh. "As a longer-life project, Sunrise will deliver steady production and cash flow to support our expansive portfolio of projects."
Husky is the operator of Sunrise with equal working interest with BP PLC, which operates the jointly owned BP-Husky Toledo refinery.
Sunrise contains estimated reserves of 3.7 billion bbl (440 million proved, 2.4 billion probable, and 860 million possible) as of Dec. 31, 2013. Husky has 50% working interest in these reserves.
Pengrowth starts steam operations at Lindbergh
Pengrowth Energy Corp., Calgary, reported the startup of commercial steam operations at Phase 1 of its Lindbergh thermal project in the Cold Lake area of eastern Alberta.
"First steam is a significant milestone for the Lindbergh project as it represents the completion of construction and commissioning of the facilities and is the last major milestone before first oil," said Derek Evans, president and chief executive officer (OGJ Online, Nov. 4, 2014).
For the past 34 months, Pengrowth has operated a pilot project at Lindbergh with two well pairs producing about 1.6 million bbl of bitumen. November production averaged 1,760 b/d. The pilot demonstrated lower-than-expected steam/oil and diluent blending ratios and faster-than-expected reservoir response to steam, the company said.
Pengrowth said the initial 12,500-b/d commercial project has "robust economics" that make it able to generate positive cash flow "even in a low oil price environment." The project includes 23 well pairs and central processing facilities.
By yearend 2018, with two expansion phases, Pengrowth expects bitumen production to reach 50,000 b/d.
Development plan outlined for Gullfaks Rimfaks
A consortium led by Statoil ASA has submitted a development plan for the Rutil discovery in the North Sea's Gullfaks Rimfaks Valley that will extend production from the Gullfaks A platform, providing close to 80 million boe.
The plan consists of installation of a standard subsea template with two simple gas production wells, with the ability to connect two additional wells. The well stream will be connected to an existing pipeline leading to the Gullfaks A platform (OGJ Online, Aug. 22, 2012).
Gas and condensate will be transported, also via an existing pipeline, to the gas processing facility at Karsto, north of Stavanger. The development will cost 4.6 billion kroners, and production is slated to begin during first-quarter 2017. It's one of Statoil's fast-track projects (OGJ Online, Sept. 10, 2014).
"Statoil is currently implementing a major improvement effort to reduce costs and increase profitability to secure long-term activity and value creation on the [Norwegian continental shelf]," explained Ivar Aasheim, Statoil senior vice-president for field development on the NCS. "The Gullfaks Rimfaks Valley is a good example of this work," he added.
Statoil operates the development with 51% interest. Partners are Petoro 30% and OMV AG 19%.
PROCESSING — Quick Takes
Turkish refinery secures Canadian financing
Export Development Canada (EDC) said it is participating as lead arranger in the $3.3 billion debt-financing consortium supporting STAR Rafineri AS's planned 214,000-b/d SOCAR Turkey Aegean Refinery (Star) in Aliaga, Turkey (OGJ Online, Dec. 14, 2010).
EDC financed $150 million within the bank consortium, which will be used for development and construction of the Star refinery, the Canadian export agency said.
Based on SOCAR's interest and involvement with EDC to date, and given its significant capital expansion plans in Eurasia, EDC said it expects strong growth in Canadian procurement from the Azerbaijani-owned oil company over the 15-year term of the loan.
EDC's announcement follows the signing of loan agreements by SOCAR Turkey Energy AS, the Turkish arm of State Oil Co. of Azerbaijan Republic, with 23 export credit agencies, commercial banks, and development banks to finance the Star refinery project (OGJ Online, May 30, 2014).
The planned refinery, which is scheduled to be commissioned in 2018, will include a 66,000-b/d hydrocracker, a 40,000-b/d delayed coker, and a 28,000-b/d continuous catalytic regeneration reformer.
In addition to a hydrogen unit able to produce 3.84 million cu m/day, the complex also will have hydrotreating capacities of 20,000 b/d for naphtha, 26,000 b/d for kerosine, and 68,000 b/d for diesel.
Sonangol secures $2 billion loan for refinery
China Development Bank (CDB) has extended a $2-billion line of credit to state-owned Sonangol EP to support expansion projects in Angola's oil and gas sector.
The financing agreement was signed on Dec. 12 in Beijing, China, Sonangol said.
In addition to allowing execution of other large projects in crude oil exploration, refining, and logistics, the 10-year loan agreement, which opens prospects for other long-term financing, also will fund in part construction of Sonangol's planned 200,000 b/d Sonaref refinery in Lobito, Angola, the Angolan state-owned company said.
First announced in 2009, the Sonaref refinery is a strategic project intended to reduce Angola's reliance on imported fuels by processing Angolan crude for the production of unleaded gasoline, diesel, jet fuel, kerosene, LPG, and small amounts of sulfur (OGJ Online, Aug. 20, 2009).
Late in 2013, Sonangol selected Standard Chartered Bank UK to provide financial consulting for construction of the $8 billion refinery, which at the time was due to be commissioned fully sometime in 2017-18 (OGJ Online, Dec. 3, 2013). While initial construction activities on the Lobito plant began in December 2012, construction of the refinery will begin in 2015, Sonangol said.
According to the most recent information available on Sonangol's web site, the Sonaref refinery is to be built in two phases. A first 120,000-b/d phase of 9 low-conversion units designed to process Angolan Girassol crude (30.1° gravity; 0.33 wt % sulfur) initially was scheduled to become operational in 2015, with the second 80,000-b/d phase of 11 remaining high-conversion units aimed at processing heavier and more acidic Angolan crudes to be installed a year later.
Qatar Shell lets contract for Pearl GTL operations
Qatar Shell Ltd., a unit of Royal Dutch Shell PLC, has let a contract to a division of SNC-Lavalin Group Inc., Montreal, to provide long-term engineering, procurement, and construction management services for its Pearl gas-to-liquids onshore and offshore installations in Ras Laffan Industrial City, Qatar.
Under the 4-year call-off contract, which includes a possible 2-year extension, SNC-Lavalin's Qatar Kentz will manage the EPCM work for all services related to plant changes, as well as minor base and medium projects for a new phase of the Pearl GTL project, SNC-Lavalin said.
In addition to EPCM services, Qatar Kentz's scope of work will include project management, specialist studies, logistics activities, commissioning management, and execution of construction works, SNC-Lavalin said.
SNC-Lavalin did not release a precise value of what it called a "multimillion dollar" contract.
While no details regarding the "new phase" of the Pearl GTL project were disclosed, SNC-Lavalin said the project will allow Shell Qatar to continue to enhance local development.
Operated by Shell under a development and production-sharing agreement with Qatar Petroleum, the Pearl GTL plant has a GTL production capacity of 140,000 b/d as well as the ability to produce 120,000 b/d of NGLs and ethane (OGJ Online, Mar. 23, 2011).
Major construction on Pearl GTL was completed in 2010, with the gas processing plant starting production of condensate, LPG, and sulfur in March 2011. The plant ramped up to its full GTL production of 140,000 b/d near yearend 2012 (OGJ Online, Sept. 11, 2014).
Keyera to take majority interest in Alberta gas plant
Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta. The company did not name the seller, but 2014 data from the Alberta Energy Regulator shows a Ricinus gas plant of similar capacity owned by Apache Canada Ltd. Neither company responded as OGJ went to press.
The sweet-gas processing plant, which is 22 km south of Keyera's 275-MMcfd Strachan deep-cut gas plant, is able to extract a C3+ mix of NGLs. Current operating capacity is about 124 MMcfd, compared with to licensed capacity of 221 MMcfd, because only one of two NGL trains is operating, the company said. The plant underwent a turnaround in September.
Keyera will operate the Ricinus plant and plans to restart the second NGL train. Keyera also plans to build a pipeline connecting the Ricinus and Strachan plants and to invest in associated gas gathering.
The company's gas plants operate in the west central, foothills, and deep basin gas areas of the Western Canada Sedimentary Basin. Its NGL and crude oil infrastructure, including pipelines, terminals, processing, and storage, as well as its iso-octane facility, are in Edmonton and Fort Saskatchewan.
Keyera markets propane, butane, condensate, and iso-octane to Canada and the US.
TRANSPORTATION — Quick Takes
EPP kills plans for Bakken-to-Cushing crude pipeline
Enterprise Products Partners LP (EPP) has elected not to proceed with development of its proposed crude oil pipeline that would have extended 1,200 miles from the Bakken shale to the Cushing, Okla., hub.
EPP says commitments received from potential shippers during the recent open season, which launched Sept. 4 and was extended to Nov. 14, were not sufficient to support the project.
The 30-in. line was designed to have an initial capacity of 340,000 b/d, be expandable to more than 700,000 b/d, and be capable of transporting up to six grades of crude and products, including Rockies condensate and processed condensate.
KMI to deliver gas to Corpus Christi Liquefaction
Kinder Morgan Inc. (KMI) companies Kinder Morgan Texas Pipeline, Kinder Morgan Tejas Pipeline, and Tennessee Gas Pipeline Co. (TGP) have entered into 15-year firm transportation agreements and a multiyear storage agreement with Cheniere Energy Inc. subsidiary Corpus Christi Liquefaction LLC to provide 550 MMcfd of firm natural gas transportation service and 3 bcfd of gas storage capacity to serve the LNG export Cheniere is developing near Corpus Christi.
The Corpus Christi plant is designed and permitted for up to three LNG production trains, with aggregate design capacity of 2.1 bcfd. Gas transportation service can increase to 800 MMcfd upon completion of certain conditions in the Kinder Morgan Texas Pipeline agreement.
KMI will expand its existing Texas intrastate pipeline system in South Texas to provide 250 MMcfd of the firm transportation and 100% of the storage, and expand its TGP Pipeline to provide 300 MMcfd of firm transportation from various Zone 1 receipt points near its Station 87 Pool in Portland, Tenn.
Kinder Morgan will coordinate construction necessary to support these services with startup of the LNG export plant, expected in 2018-19. KMI expects the combined expansions to cost roughly $187 million. KMI also services a portion of Cheniere's Sabine Pass liquefaction plant in Louisiana.
The agreements are subject to Corpus Christi Liquefaction making an FID to build the plant. The US FERC earlier this year issued a final environmental impact statement for the Corpus Christi LNG project (OGJ Online, Oct. 8, 2014).
