OGJ Newsletter

Feb. 3, 2014
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

Republicans press Obama for Keystone XL decision

Republican members of the US Senate asked US President Barack Obama for a decision on the proposed Keystone XL crude oil pipeline's cross-border permit in the days leading up to the president's State of the Union address on Jan. 28.

"On Mar. 14, 2013, at a meeting with Senate Republicans, you were asked when we could expect a final decision on the Keystone XL pipeline," the Jan. 24 letter signed by all 45 GOP Senate members said.

"At that time, you told us that a decision on the presidential permit would be made before the end of the year," it continued. "We are well into 2014, and you still have not made a decision."

TransCanada Corp., the project's sponsor, filed its original cross-border permit application in 2008, the letter noted. It said the State of Nebraska approved a modified route for the project on Jan. 22, 2013, and the US Department of State closed the comment period on the draft supplemental environmental impact statement on Apr. 22, 2013—"notably, a year after you personally directed federal agencies to make more 'timely' decisions on infrastructure projects."

The senators told Obama, "Your administration has had more than enough time to issue a final EIS and make a decision on the pipeline. Given the length of time your administration has studied the Keystone XL pipeline and the public's overwhelming support for it, you should not further delay a decision to issue a presidential permit."

Sens. John A. Barrasso (Wyo.) and John Hoeven (ND), who serve on the Energy and Natural Resources Committee, initiated the letter.

QPI to buy BC-10 project interest off Brazil from Shell

Royal Dutch Shell PLC has agreed to sell 23% interest in the Parque das Conchas (BC-10) project offshore Brazil to Qatar Petroleum International for $1 billion. Shell will continue to operate BC-10 with 50% working interest.

The transaction is subject to approval by Brazil's National Petroleum and Gas Agency along with the country's Administrative Council for Economic Defense.

Currently the company's presence around Brazil includes the floating production, storage, and offloading vessels Espirito Santo at Parque das Conchas and Fluminense at the Bijupira-Salema fields.

Shell said the BC-10 is currently producing 50,000 boe/d, and since coming on stream in 2009, BC-10 has produced more than 80 million boe. Phase 2 of the project, to tie-in the Argonauta O-North field, came online in October, with expected peak production of 35,000 boe/d (OGJ Online, Oct. 2, 2013).

The final investment decision for Phase 3 of the BC-10 project was taken in July and once online is expected to reach peak production of 28,000 boe, the company said (OGJ Online, July 22, 2013).

Hess to sell Utica acreage for $924 million

Hess Corp. has agreed to sell 74,000 acres of its dry gas acreage in the Utica shale to an undisclosed buyer for $924 million.

"While our wells in the dry gas portion of the Utica were highly productive, we concluded that the potential returns from such an investment, at current and projected natural gas prices, no longer justified retaining this acreage as a strategic part of our overall liquids-based asset portfolio," said John B. Hess, chief executive officer.

Hess this month stated plans to increase expenditures in the Utica to $550 million from $455 million in 2013, targeting the wet gas window with 35 new wells (OGJ Online, Jan. 24, 2014).

The company in 2011 acquired Marquette Exploration LLC, which held 85,000 net acres in the Utica, for $750 million (OGJ Online, Sept. 13, 2011).

Exploration & DevelopmentQuick Takes

Cobalt makes deepwater discovery offshore Angola

Cobalt International Energy Inc. and partners have made an oil and condensate discovery in the syn-rift interval with the Bicuar 1A presalt deepwater exploratory well drilled offshore Angola.

The well was successfully drilled to 5,739 m measured depth and encountered 56 m of net pay from multiple presalt intervals.

Results of an extensive logging, coring, and fluid acquisition program confirmed the existence of both oil and condensate in multiple intervals. No free gas zones or water contacts were observed. All well data was collected with open-hole logging technology.

"The syn-rift discovery in Bicuar validates the presence of a viable seal and trap with quality reservoir rocks in the deeper reservoir section," said James Farnsworth, Cobalt's chief exploration officer.

He said, "These characteristics have been present in similar features in the Campos basin of Brazil and will be key to expanding the potential of the broader Angola Kwanza basin presalt."

This is Cobalt's and national concessionaire Sonangol's fourth deepwater presalt discovery offshore Angola. The Bicuar 1A well is the first discovery of mobile hydrocarbons that have been tested in the deeper presalt syn-rift reservoir. After running production casing, the well was temporarily abandoned.

Following full processing and integration of all subsurface data collected from the well, the Block 21 partners will evaluate any additional activities necessary to assess Bicuar's commerciality. The Bicuar 1A well was drilled to total depth in just 59 days, ahead of schedule by 63 days.

Cobalt is operator, owning 40% working interest in Block 21. Partners include Sonangol Pesquisa e Producao SA, Nazaki Oil & Gaz, and Alper Oil Ltda.

Oryx updates production plans in Iraq Kurdistan

Oryx Petroleum Corp., Calgary, updated its continued exploration and development plans for its Demir Dagh discovery in the Kurdistan Region of Iraq. The company reported in late 2013 that it believed it was months away from a commerciality declaration and could start oil production in midyear (OGJ Online, Nov. 11, 2013).

The Sakson Hilong-10 rig spudded the first well in the Demir Dagh appraisal program (DD-3) in mid-November 2013 and is expected to reach a total depth of 4,115 m and conclude testing and completion in the second quarter, the company said.

The well is being drilled on the axis of the anticline about 3 km southeast of the DD-2 discovery well and will test the Cretaceous, Jurassic, and Triassic reservoirs. The DD-3 well is currently on schedule, having reached a depth of 3,800 m in the Triassic. Drilling experience to date with DD-3 has been consistent with the drilling of the DD-2 discovery well.

The Romfor 22 rig recompleted the DD-2 in the Upper Cretaceous reservoirs. The recompletion will enable oil production from DD-2 once the production facilities at Demir Dagh are operational, which is expected in the second quarter. The Romfor 22 rig has since spudded the DD-4 appraisal well, which is planned to be completed in the Cretaceous reservoirs. The well is being drilled downdip on the southern flank of the anticline in order to determine the depth of the Cretaceous oil-water contact. DD-4 has reached a depth of 1,800 m and is expected to reach total depth and conclude testing late in the first quarter.

Lundin nears completion on Torvastad sidetrack

Lundin Norway AS, a wholly owned subsidiary of Lundin Petroleum AB, is in the process of completing sidetrack well 16/2-20A on the Torvastad prospect on PL501 in the North Sea sector of the Norwegian Continental Shelf (OGJ Online, Nov. 19, 2013).

The well was drilled 770 m west of the main Torvastad exploration well 16/2-20S to investigate the potential of an up-flank continuous Jurassic reservoir.

The reservoir section has been cored with oil shows, but demonstrates poor reservoir quality, Lundin said. Wireline logging is ongoing and preliminary results confirm the core observations. Further wire-line logging is required to confirm the initial results.

Once the logging of the well has been completed, the Island Innovator rig will move to PL338 to drill the Edvard Grieg South East appraisal well 16/1-18.

Lundin Norway is PL501 operator at 40% interest. Its partners are Statoil Petroleum AS 40% and Maersk Oil Norway 20%.

Drilling & ProductionQuick Takes

Jalila field off Dubai due second platform

State-owned Dubai Petroleum Establishment has let a contract to Technip for a second platform in the development of Jalila oil field, a 2010 discovery made in the sidetrack of a reentered 1986 dry hole offshore Dubai (OGJ Online, Apr. 9, 2010).

Technip will provide engineering, procurement, construction, and installation of a platform with a 900-ton deck and 500-ton jacket. The contract also covers 13 new risers on existing platforms and installation of 110 km of pipelines with diameters of 6-24 in.

The field, details about which haven't been reported by the Dubai government, lies 90 km offshore, east of small Rashid oil field, in 60 m of water.

A joint venture of Global Industries Ltd., which became a Technip subsidiary in 2011, and Lamprell of Dubai handled design, construction, and installation of the first platform, a basic unmanned wellhead unit. The earlier project involved installation of a 27-km, 6-in. gas lift pipeline and a 27-km, 12-in. oil production pipeline to an existing offshore processing facility.

US drilling rig count remains at 1,777

The US drilling rig count was unchanged from a week ago with 1,777 rigs working during the week ended Jan. 24, Baker Hughes Inc. reported.

A 1-unit gain in land-based rigs to a total of 1,701 was offset by a single-unit loss in offshore rigs to 56. Rigs drilling in inland waters were unchanged from a week ago at 20.

Oil rigs increased 8 units to 1,416 while gas rigs gave up 9 units to 356. Rigs considered unclassified were up 1 unit to 5.

Horizontal drilling rigs declined 3 units to 1,170 as directional drilling rigs dropped 8 units to settle at 211.

In Canada, a 25-unit rise to 590 consisted of a 15-unit jump in oil rigs to 394 and a 10-unit increase in gas rigs to 196. Canada now has 31 fewer rigs working compared with this week a year ago.

New Mexico and Kansas were up 2 units apiece to respective totals of 79 and 31, representing the largest gains in a quiet week among the major oil and gas producing states. Adding 1 unit each, Oklahoma reached 187, North Dakota hit 169, Louisiana claimed 111, and Colorado counted 62. Unchanged from a week ago were Wyoming at 53, Ohio at 36, Utah at 26, Arkansas at 12, and Alaska at 11. Pennsylvania and West Virginia were each down a unit to 55 and 33, respectively. Texas lost 2 units to 839. California was down 3 units to 31.

Activity in the major US basins centered on Texas, where the Permian claimed 6 more units to reach 484 while the Eagle Ford relinquished 9 units to 216.

Suncor reports oil sands employee fatality

Suncor Energy Inc. reported a fatality occurred Jan. 19 at its oil sands site after an employee was unable to be located earlier in the day.

The company said it's working with the appropriate authorities and will complete a full investigation into the cause of the incident.

Upon being notified of the missing employee, Suncor activated its emergency response plan, began full-scale search operations, and notified the Royal Canadian Mounted Police and Alberta Occupational Health and Safety.

The employee was found a few hours later and was declared deceased at the scene.

PROCESSINGQuick Takes

Alon updates timeline for Texas refinery project

Alon USA has delayed scheduled maintenance at its 70,000-b/d Big Spring, Tex., refinery until later in the year in an effort to cut costs as well as the time it will take to complete the project.

A planned turnaround at the refinery scheduled for this year's first quarter has been postponed until the second quarter, Alon said.

The delay will allow the company to better integrate the implementation of a vacuum tower project with the turnaround, reducing both the down time required to complete the work and costs, according to Alon.

The vacuum tower project, primarily designed to increase the refinery's ability to handle processing lighter shale crude oils, also will increase the plant's distillate production by an estimated 2,000 b/d as well as improve energy efficiency, the company said.

As a result of the postponement, Alon expects first quarter-2014 throughput at Big Spring to average 73,000 b/d.

Following the planned turnaround, crude throughput at the Big Spring refinery is slated to expand beginning in the third quarter, Alon said in its January presentation to investors.

Azerbaijan discloses investment in Turkish project

State Oil Fund of the Republic of Azerbaijan (Sofaz) said it allocated just over 3% of its budget expenditures in 2013 for financing the construction of the 214,000-b/d Star Refinery planned in Aliaga, Turkey (OGJ Online, Dec. 14, 2010).

Between January and December 2013, Sofaz allotted $474 million of its total budget expenditures of $15.7 billion to construction-related costs for the Star refining complex, the oil fund said.

The investment announcement from Sofaz follows the US Export-Import Bank's recent authorization of a $640.7 million direct loan to Star Refinery AS, Istanbul, to finance export of US equipment for the construction of the complex (OGJ Online, Dec. 6, 2013).

Star Refinery is the first project planned on the Petkim Peninsula by SOCAR Turkey Energy AS, a joint venture of State Oil Co. of Azerbaijan Republic and the government of Turkey. SOCAR Turkey owns 51% of Petkim, operator of a petrochemical complex with which the new refinery will be integrated.

The planned refinery 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.

Iraq advances new unit at Basra refinery

Iraq is nearing the start-up of a gasoline-producing unit that will boost overall processing capacity to more than 210,000 b/d at state-owned South Refineries Co.'s 140,000-b/d refinery in Basra Province.

The 70,000-b/d unit is designed to help the country's manufacturing sector to meet rising local need for oil-derived products, Iraq's Minister of Oil Abdul Karim Laibi said in a Jan. 28 release from the ministry.

Commissioning of the unit comes as part of a series of projects being implemented by the oil ministry to increase processing capacity at the refinery (OGJ Online, Dec. 20, 2011), which also will include improvements to existing isomerization and naphtha units at the plant, Laibi said.

No specific timeframes were disclosed for either the unit's start-up or future improvement projects at the refinery.

GTL pilot tests method aimed at cost cuts

Gas2, Aberdeen, has produced hydrocarbon liquids at low rates from natural gas with a technology it says can reduce costs in small gas-to-liquids plants.

The proprietary technology uses a catalytic ceramic-based semipermeable membrane in reactor cores for synthesis gas production and Fischer-Tropsch processing. Gas2 says it eliminates the compression stage common in GTL processes between syngas and FT reactors.

Formed in 2005 with the award of an exclusive license from Robert Gordon University, Aberdeen, the company, recently produced 3 b/d of liquids at its Wilton Research Centre pilot plant in Teesside, UK.

TRANSPORTATIONQuick Takes

Magnolia LNG taps Kinder Morgan for gas transport

Liquefied Natural Gas Ltd. subsidiary Magnolia LNG LCC (MLNG) executed a precedent agreement with Kinder Morgan Louisiana Pipeline LLC (KMLP) for transportation of natural gas sufficient to meet the full 8-million tonne/year Magnolia LNG Lake Charles, La., liquefaction project capacity.

MLNG will stand on 115 acres of leased land in Lake Charles' harbor and terminal district. LNG Ltd.'s lease runs for as long as 70 years. The liquefaction plant has received approval from the US Department of Energy for export of up to 4 million tpy the countries having free trade agreements with the US.

Stonepeak Partners LP has committed $660 million for construction and commissioning of MLNG's first two 2 million tpy LNG trains (OGJ Online, July 30, 2013). The agreement provides firm gas transportation for all four the MLNG's planned trains from various receipt points on KMLP's pipeline system.

KMLP will now file its application with the US Federal Energy Regulatory Commission to install pipeline compression and additional pipeline and interconnections to provide MLNG's transportation service.

KMLP's FERC approval process will extend in parallel with FERC's regulatory review of MLNG, with LNG Ltd.'s expectation that it will file its formal application with FERC in March-April after the agency's completion of its prefiling process.

Gazprom charters its fifth LNG carrier

OAO Gazprom has chartered its fifth and now largest LNG carrier from Russian shipping company Sovcomflot at the STX O&S shipyard in the city of Jinhae, South Korea.

The Velikiy Novgorod vessel has a capacity of 170,000 cu m, including membrane cargo tanks, and is run by a diesel-electric drive fueled by LNG, fuel oil, or gas oil.

The Ice2 class vessel, first in a series of high-tech ice-class LNG carriers designed for Gazprom, is capable of shipping cargoes in low-temperature conditions, including through the Northern Sea Route during the navigation period in the open water.

"At present, Sovcomflot is constructing a similar gas carrier, Pskov, which is due to be delivered to Gazprom this September," said Alexander Medvedev, director general of Gazprom export.

Medvedev added, "Gazprom is pursuing a stagewise strategy in the LNG production and supply sector. As part of these efforts, we are creating our own tanker fleet capable of shipping LNG to any terminal of the world, as well as along the Northern Sea Route."

The company's tanker fleet is comprised of the LNG Pioneer (138,000 cu m capacity), Yenisei River (149,000 cu m), Lena River and Ob River (each 155,000 cu m), the latter of which successfully delivered in November 2012 the first LNG cargo through the Northern Sea Route (OGJ Online, Dec. 6, 2012).

Gazprom plans to expand its share in the global LNG market to 15% after the Vladivostok LNG and Baltic LNG projects are onstream.

Gazprom accounts for nearly 5% in the global LNG production, supplying LNG to Japan, South Korea, China, India, Taiwan, the UK, the USA, Kuwait, the UAE, and Mexico.

Gazprom in November projected late 2017 for its LNG terminal on the Baltic Sea coast in the far-western region of Kaliningrad, between Poland and Lithuania (OGJ Online, Nov. 26, 2013).

The company's management committee in February 2013 approved investment in the Vladivostok LNG export project in Russia (OGJ Online, Feb. 25, 2013).

NEB responds to Manitoba gas pipeline explosion

Canada's National Energy Board (NEB) responded to a pipeline incident that occurred Jan. 25 in an isolated area near the town of Otterburne, 25 km south of Winnipeg, Manitoba, on a sweet natural gas pipeline owned and operated by TransCanada Pipeline Inc. (TCPL).

The resulting fire from the pipeline break was extinguished by early afternoon and no harm was caused to local residents, NEB reported.

The incident triggered emergency measures that included isolating Line 1 and depressurizing the pipeline to contain the fire and avoid further damage.

The NEB, which is not expecting lasting environmental effects, said it will be working with Canada's Transportation Safety Board in assessing the cause of the incident.

TransCanada's Nova Gas Transmission Ltd. in October suffered a rupture on its pipeline system 138 km west of Fort McMurray, Alta (OGJ Online, Oct. 18, 2013).

Phillips 66 to execute HSC Cross-Channel Connector

Phillips 66 Pipeline LLC, a wholly owned subsidiary of Phillips 66, will advance its 180,000-b/d Cross-Channel Connector refined product pipeline project, expanding transportation capacity across the Houston Ship Channel.

The company completed a successful open season for the project late last year (OGJ Online, Nov. 15, 2013), and also received positive response to a potential Phase 2, which it is evaluating.

The Cross-Channel Connector will combine a 20-in. OD reactivated pipeline under the HSC and expansion of a second active 20-in. line in Pasadena.

Phillips 66 plans to connect to Magellan Midstream Partners' refined product pipeline for transportation from HSC's south side to Magellan and Kinder Morgan Energy Partners systems on the north side of the channel at Galena Park and East Houston.

Phillips 66 expects the project to be complete as early as this year's fourth quarter, subject to regulatory approval. Phase 2 would add an additional 50,000 b/d to the system's capacity.

KMEP last year began an expansion of its HSC liquids storage and docking services, including 1.2 million bbl of liquids storage tanks. The newbuild dock would handle ocean-going vessels (OGJ Online, Jan. 14, 2013).