GENERAL INTEREST — Quick Takes
IPAA president urges Obama to lift crude export ban
Commending the administration for its actions allowing some condensate to be exported as a petroleum product, Independent Petroleum Association of America Pres. Barry Russell urged US President Barack Obama to go further and remove export restrictions for domestically produced crude oil.
"American families and businesses in every state stand to benefit as crude exports will increase the US gross domestic product and stimulate economic activity across the nation," Russell said in a July 7 letter to Obama.
"Adding a surplus of America's crude oil into the world market would reduce market volatility, stabilize oil prices that are set by the global market, and therefore lower US gasoline prices, which are based on international oil prices," Russell said.
Russell said in order for the US to continue to grow as "an energy superpower," the nation's energy policies must reflect modern global markets instead of concerns over scarcity left over from the 1970s.
"Current law provides authority to the administration to approve oil exports without requiring any action from Congress," Russell noted. "For example, granting exemptions for American allies would not only beneficially serve the national interest, it would also be consistent with the administration's broad free-trade agenda."
IPAA and its members have made lifting US crude export restrictions a top priority for 2016, the association said. Russell endorsed comments US House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) made on the matter at a June 2 hearing.
The association also supports the bill that would allow more US crude to be exported introduced by US Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-Alas.) and Sen. Heidi Heitkamp (D-ND) (OGJ Online, May 13, 2015).
Cenovus sells royalty business for $3.3 billion
Cenovus Energy Inc., Calgary, inked an agreement to sell its wholly owned subsidiary Heritage Royalty LP to Ontario Teachers' Pension Plan for gross cash proceeds of $3.3 billion. HRP holds 4.8 million gross acres of royalty interest and mineral fee title lands in Alberta, Saskatchewan, and Manitoba.
In this year's first quarter, Heritage Royalty had associated third-party royalty interest volumes of 7,800 boe/d. Additional royalties have also been added: a royalty on Cenovus's working interest production with implied first-quarter volumes of 5,400 boe/d and a gross overriding royalty on Cenovus's Pelican Lake heavy oil property in northern Alberta and its enhanced oil recovery project in Weyburn, Sask., with implied first quarter volumes of 1,600 boe/d.
FourPoint Energy to acquire Anadarko basin assets
FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Exploration LLC and CHK Cleveland Tonkawa LLC for $840 million.
The assets cover nearly 250,000 net acres centered in Roger Mills and Ellis counties in Oklahoma. About 95% of the leasehold is held by production.
Various transactions for the entire package involve interest in 1,500 producing wells primarily in the Cleveland, Tonkawa, and Marmaton formations. The wells had average net production of 21,500 boe/d for the 12 months ended Apr. 30.
The production mix was 7,000 b/d oil, 5,000 b/d of natural gas liquids, and 57 MMcfd of gas. FourPoint will assume full operations of the assets at closing, anticipated to be Aug. 31.
George Solich, FourPoint president and chief executive officer, said the acquisition complements FourPoint's current acreage, boosting its inventory in formations largely unrepresented in the company's current holdings.
Kamil Tazi, FourPoint executive vice-president and chief operating officer, said, "Chesapeake has developed this asset by drilling and completing over 190 horizontal wells since 2012."
Chesapeake halted development and eliminated the active rigs working in the area during the first quarter.
Exploration & Development — Quick Takes
AGL Energy to scale back upstream gas operations
Gas retailer AGL Energy Ltd., Sydney, says it will exit the oil business and scale back its upstream gas operations.
AGL intends to produce just 20% of its downstream gas requirements in the next 10 years, well below its previous target of 50%.
A number of poorly performing assets have been deemed noncore and will be sold or relinquished. The focus will be on fewer gas projects and avoiding the high capital expenditure that goes with exploration.
Core projects to be retained are the Camden coal seam gas development, the Gloucester gas project, and the recently opened Newcastle gas storage facility, all in New South Wales. The company will also retain its Silver Springs underground storage facility and the Wallumbilla LPG plant in Queensland.
AGL believes it can cover the expected demand for domestic gas supplies until 2007 and contracted commercial and industrial demand until 2021. The supply can be augmented by ongoing portfolio management tailored to customer requirements. The company's future will be firmly rooted in its downstream interests.
AGL says the Camden North expansion and the Hunter gas projects will not go ahead and the surrounding permits will be sold back to the New South Wales government for a figure believed to be about $600,000 (Aus.). The company also will sell its share of two Queensland gas fields: Springvale and Moranbah.
The Cooper oil project in Queensland permit ATP 1956P will also be sold. The block covers 3,800 sq km and straddles a significant part of the prospective southeast Cooper basin margin oil fairway close to existing fields.
Total write-downs for the financial year just ended will be about $808 million (Aus.).
Stone confirms oil pay with Cardona development well
Stone Energy Corp., Lafayette, La., encountered 288 ft of net pay in two intervals with its Cardona No. 6 development well on Mississippi Canyon Block 29 in the deepwater Gulf of Mexico. Logging and pressure data confirmed the existence of oil in the pay zones.
The company says the results are similar to net pay of 275 ft found through the Cardona No. 5 well (OGJ Online, Dec. 4, 2014). Cardona No. 6 has been cased and cemented across all productive zones, the subsea tree has been installed, and completion operations have begun.
The well will be tied into Stone's existing Cardona subsea infrastructure, which flows into the company's Pompano platform. Gross production from Cardona No. 6 is expected to reach 5,000 boe/d from the lower completion by late September. The upper completion is expected to have a similar production rate and will be accessed in the future by hydraulically shifting sleeves between the upper and lower completions.
Upon completion of Cardona No. 6, of which Stone holds 65% working interest, the Ensco 8503 deepwater drilling rig will be released for 60 days to receive scheduled maintenance and to be outfitted with mooring capabilities (OGJ Online, Oct. 7, 2014). The rig will then be mobilized to Mississippi Canyon Block 26 to finish the completion of the Amethyst discovery, of which Stone holds 100% working interest.
Amethyst will also be tied back to the Pompano platform, where production is expected to begin early in first-quarter 2016. Following the Amethyst completion, the rig is projected to drill the Cardona No. 7 development well and the Lamprey deepwater exploration prospect.
Stone expects second-quarter production to be at or above the high end of its previous guidance of 246-258 MMcfd of gas equivalent. It attributes the increase to reduced scheduled third-party pipeline downtime in the deepwater gulf and flatter than expected production declines in Appalachia. Additional upward revisions in Appalachian production may be realized in the second-quarter earnings results pending participation elections by Stone's operating partners.
Drilling & Production — Quick Takes
Giant Perla field flows gas off Venezuela
A 50-50 joint venture of Eni SPA and Repsol SA has started production from giant Perla natural gas field in shallow water offshore Venezuela.
Production is to reach 450 MMscfd by yearend in the first of three development phases. In a second phase, production will climb to 800 MMscfd in 2017. A third phase will increase output to 1.2 bscfd in 2020, a rate the partners say is sustainable through the end of their contract in 2036.
Perla, discovered in 2009, holds an estimated 17 tcf of gas in place in Miocene-Oligocene carbonates occurring at about 3,000 m below sea level.
The Cardon IV SA joint venture, named for the Gulf of Venezuela block, has drilled seven wells. It plans to drill a total of 26 wells, 21 of them producers, in a development scheme involving four light platforms installed 50 km offshore in 60 m of water. The platforms will be linked by a 30-in. pipeline to a central processing facility onshore at Punto Fijo on the Paraguana Peninsula. Two treatment trains have capacities of 150 MMscfd and 300 MMscfd.
State-owned Petroleos de Venezuela SA is buying the gas (OGJ Online, Jan. 5, 2012).
AER shuts in 16 Murphy Oil sites
Alberta Energy Regulator said it has shut in or partially shut in 16 sites operated by Murphy Oil Co. Ltd. in the Peace River region. The sites were noncompliant with requirements "to capture and flare, incinerate, or conserve all casing gas and tank top gases" from heavy oil and bitumen operations based on a schedule submitted to and approved by AER.
The sweep occurred June 15-19, and AER directed Murphy to conduct inspections on other sites. Murphy shut in or partially shut in an additional 17 sites that were venting casing gas or tank top gas. A partial shut in involves shutting in the piece of equipment that is in noncompliance without shutting down the entire site.
All sites will remain shut in or partially shut in until AER approves Murphy's action plan to achieve compliance. AER has conducted six sets of targeted compliance sweeps since June 2014, inspecting 834 sites in the Peace River area.
Production ramps up from Sunrise oil sands project
Husky Energy Inc., Calgary, reported that 25 well pairs are now on production at its Sunrise oil sands project in northeastern Alberta. Steaming is under way on 43 of 55 well pairs.
Strong reservoir and facility performance has contributed to increasing production volumes averaging 5,000-5,500 b/d at the end of June, which is ahead of schedule, the company says.
"We continue to follow a steady, deliberate timetable as we increase production at Sunrise, and this approach is delivering better than expected results," said Asim Ghosh, Husky chief executive officer. "Sunrise is one of many low sustaining capital projects in our near-term portfolio that is designed to provide increasing value through and beyond the current low oil price environment."
The project is part of the company's plan to add 85,000 b/d of new production by yearend 2016, a portion of which is anticipated to offset natural declines across its overall portfolio.
Bitumen production from Sunrise launched in March (OGJ Online, Mar. 11, 2015). Production is expected to increase to full capacity of 60,000 b/d, split between Husky and 50-50 partner BP PLC, by yearend 2016.
Husky operates Sunrise while BP operates the jointly-owned BP-Husky Toledo refinery. Bitumen from Sunrise can be processed at the Toledo refinery.
Cidade de Itaguai FPSO anchors in Lula field
Petroleo Brasileiro SA reported that the Cidade de Itaguai floating production, storage, and offloading vessel has arrived at the Iracema Norte area of Lula field in the Santos basin presalt.
The unit features a production capacity of 150,000 bo/d, can compress 8 million cu m/day of natural gas, can store 1.6 million bbl of oil, and has an injection capacity of 264 b/d of water. It will be connected to eight producing wells and nine injection wells. Oil production is expected to begin in the third quarter. Gas will be transported to shore by subsea pipeline.
A consortium of Schahin Group and Modec Inc. was tasked with converting the hull, constructing and integrating the modules, and operating the unit. The group also was responsible for the Cidade de Mangaratiba FPSO that deployed last year to the Iracema South area (OGJ Online, Aug. 18, 2014), where production launched in October (OGJ Online, Oct. 15, 2014).
Cidade de Itaguai is anchored in 2,240 m of water 240 km offshore Rio de Janeiro. The Iracema Norte area lies on exploratory block BM-S-11, operated by Petrobras with 65% interest alongside partners BG E&P Brasil Ltda. 25% and Petrogal SA Brasil 10%.
PROCESSING — Quick Takes
Puma completes purchase of Murco's UK refinery
Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of Murphy Oil Corp., including the shuttered 135,000-b/d Milford Haven refinery at Pembrokeshire, on the west coast of Wales (OGJ Online, Mar. 17, 2015).
In addition to closing the deal, Puma Energy has obtained all required government and HMRC licenses to proceed with its plan to convert the closed refinery into a storage facility-one of the largest in northwestern Europe-that will house a full range of international fuel imports for distribution to local markets, the company said.
The refinery-cum-storage facility's strategic location and size will enable large import volumes and play a key role in ensuring a secure supply of finished oil products to the UK and Ireland, Puma Energy said.
In addition to the Milford Haven refinery, the acquisition includes three inland terminals at Westerleigh, Theale, and Bedworth, as well as Murco's UK wholesale and distribution business.
Puma Energy previously said the purchase of Murco's assets would add about 1.4 million cu m in midstream storage capacity to its existing 5.6 million cu m.
Murco Petroleum confirmed it was decommissioning the refinery to be operated solely as a petroleum storage and distribution terminal (OGJ Online, Nov. 5, 2014).
The refinery's sale and closure came as part of Murphy Oil's strategy to divest its UK downstream operations (OGJ Online, Oct. 16, 2012).
ORPIC lets contract for Sohar refinery expansion
Oman Oil Refineries & Petroleum Industries Co. (ORPIC), through a contractor, has let a contract to Metso Corp., Helsinki, to supply valve technology for work related to its Sohar Refinery Improvement Project (SRIP), a brownfield, multibillion dollar modernization project that includes major technical improvements to ORPIC's existing 116,000-b/d refinery about 230 km northwest of the Omani capital of Muscat (OGJ Online, May 1, 2014).
As part of the contract, Metso will deliver its proprietary Neles ValvGuard intelligent solenoid valves to ensure reliable emergency-shutdown valve operation for over 600 safety-critical valves involved in the refinery expansion, Metso said.
South Korean firm Daelim Industrial Co. Ltd., one of the main contractors for the Sohar project (OGJ Online, Nov. 25, 2013), selected Neles ValvGuard valve technology for the contract package because of the valves' ability to perform partial-valve stroke tests on a regular basis to verify performance for predictive maintenance purposes at the plant, as well as their ability to maintain the required safety-integrity level for safety loops.
In addition to their compatibility with both third-party and Metso-produced valves, Neles ValvGuards are fully compatible with the Sohar refinery's Foundation fieldbus communication protocol, according to Metso.
A value of the contract was not disclosed.
ORPIC most recently awarded a SRIP-related contract to MAN Diesel & Turbo SE (MDT), Augsburg, Germany, to provide project management as well as supply parts and comprehensive engineering services for the complete shutdown and overhaul of Sohar's refinery's residue fluidized catalytic cracking unit (RFCC) during a planned maintenance turnaround scheduled for 2016 (OGJ Online, June 16, 2015).
Designed to improve the Sohar refinery's ability to overcome existing technical constraints associated with processing the changing quality of Oman Export Blend (OEB) crude, SRIP also will enable the refinery to meet international environmental standards, serve growing domestic demand for refined products, and enhance the refinery's competitiveness and profitability (OGJ Online, Apr. 1, 2015).
In addition to the revamped RFCC, the SRIP will involve integrating five units at the refinery, including a hydrocracker and coker, which will boost crude throughputs by 70% by adding 82,000 b/d of OEB crude oil processing capacity to achieve an expanded refining capacity of 198,000 b/d.
Once completed, SRIP will eliminate fuel oil yields from the refinery entirely as well as increase the plant's product yields for diesel (90%), gasoline (37%), jet fuel (93%), LPG (91%), naphtha (175%), and propylene (44%).
SRIP is scheduled to be commissioned in 2017.
TRANSPORTATION — Quick Takes
BLM approves ROW for Elko pipeline expansion
The US Bureau of Land Management's Tuscarora, Nev., field office signed a decision record approving a right-of-way for Paiute Pipeline Co.'s (PPC) 2015 Elko Area Expansion Project.
The project would consist of 35.2 miles of 8-in. natural gas pipeline, an aboveground interconnection at Ruby Pipeline LLC's Wieland Flat compressor station, two isolation valves, and modifications to PPC's existing Elko City Gate, it said.
The project is designed to address growing residential and business gas demand in the Elko area as well as greater energy needs for mining nearby, the July 6 notice said. The pipeline will require a 75-ft wide temporary ROW during construction, and a 50-ft wide permanent ROW after construction is complete, it noted.
The US Federal Energy Regulatory Commission was lead agency for PPC's project application. It received a certificate on May 14 based on FERC's environmental assessment (EA) under the National Environmental Policy Act. BLM said it participated as a cooperating agency in the EA's preparation because the pipeline would cross federal land in Nevada.
AER orders Apache to address integrity of pipeline
Alberta Energy Regulator has directed Apache Canada Ltd. to address the integrity of its pipeline management system because of "failure to follow provincial legislation and AER requirements."
AER said Apache had six pipeline incidents between June 1, 2013, and Oct. 29, 2014, that caused loss or damage to public lands, and that Apache failed to appropriately report or remediate some of the sites as required.
Between Jan. 23, 2009, and Nov. 6, 2013, AER said it issued 12 high-risk enforcement actions to Apache for noncompliance with the Pipeline Act and Pipeline Rules.
AER directed Apache to: submit a plan to prevent future releases for all its high-risk pipelines by July 31, for implementation by Sept. 30; complete a third-party audit of its pipeline integrity management system by Dec. 31, and implement recommendations within a year; implement recommendations specific to the Zama field by Dec. 31 (OGJ Online, Oct. 22, 2013); and submit a communication plan that describes, at a minimum, monthly progress updates on its web site.
API releases pipeline safety recommended practice
The American Petroleum Institute released a pipeline safety recommended practice that it developed with engagement from the US Pipeline and Hazardous Materials Safety Administration, National Transportation Safety Board, and other key stakeholders.
RP 1173 will build upon existing safety requirements to further monitor and measure the effectiveness of pipeline activities with a "plan, do, check, and act" philosophy that requires periodic reviews and applies changes or corrections to activities as needed, API Midstream Director Robin Rorick said.
"This new standard gives operators a holistic framework to identify and address safety concerns for a pipeline's entire life cycle," Rorick said.
API released the standard on July 8, one day after the US House Energy and Commerce Committee's Energy and Power Subcommittee announced it would hold a pipeline safety hearing on July 14. PHMSA proposed new federal pipeline accident notification requirements on July 1 (OGJ Online, July 2, 2015).
RP 1173 was developed and published using API's American National Standards Institute accredited process that is open, transparent, and ensures that the best minds from government, academia, industry, and the public fully participate, the association said.
Origin lets contract for Otway basin fields
Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onshore pipelines related to Halladale, Black Watch, and Speculant natural gas fields in the Otway basin just offshore western Victoria.
The three fields are in inshore Victorian state waters and because of nearby sensitive marine environments the development wells are being planned with wellheads on land using extended-reach drilling technology to reach reservoirs offshore.
The wells will be tied back to the existing Otway gas plant near Port Campbell.
The work involves detailed design of onshore raw gas and mono-ethylene glycol pipelines from the well site to the gas plant.
Construction is scheduled to begin by yearend.
Speculant-1 wildcat was drilled in 2014 and found a 145-m gas column close to previously discovered Halladale and Black Watch fields. The development program incorporating all three discoveries was approved in October 2014.
Gas produced will be sold into the Victorian domestic grid.
