GENERAL INTEREST Quick Takes
EIA revises up second-half 2023 oil price forecasts
In its August Short-Term Energy Outlook (STEO), the US Energy Information Administration (EIA) forecast the Brent crude oil price to average $86/bbl in second-half 2023, up about $7/bbl from its July STEO forecast for the same period.
Crude oil prices have increased since June, primarily because of extended voluntary cuts to Saudi Arabia’s crude oil production and growing global demand. EIA expects these factors will continue to reduce global oil inventories and put upward pressure on oil prices in the coming months.
According to EIA’s latest forecast, global liquid fuels consumption will increase by 1.8 million b/d in 2023 and by 1.6 million b/d in 2024. Most of the expected liquid fuels demand growth is in non-OECD Asia, led by China and India. EIA expects China’s liquid fuels consumption will rise by 800,000 b/d in 2023 and by 400,000 b/d in 2024.
EIA forecasts global liquid fuels production to increase by 1.4 million b/d in 2023 because of strong growth from non-OPEC producers and despite decreases in production from OPEC and Russia. This forecast reflects Saudi Arabia’s announcement on Aug. 3 that it would extend its voluntary 1 million b/d product cut through September. EIA expects Russia’s production will decline 200,000-300,000 b/d on average this year compared with 2022 and remain unchanged in 2024.
Global liquid fuels production in the forecast rises by 1.7 million b/d in 2024, which is over 200,000 b/d more than EIA forecasted last month. Despite ongoing production cuts extending through 2024, EIA expects that OPEC’s crude oil production will likely rise by an average of 600,000 b/d in 2024. This increase is attributed to higher production targets set by the UAE, along with rising production from Iran and Venezuela.
Thanks to improved well-level productivity and higher crude oil prices, EIA expects US crude oil production to average 12.8 million b/d in 2023 and 13.1 million b/d in 2024, setting new annual records.
EIA estimates global oil inventories will transition from a period of inventory builds in first-half 2023 to inventory draws through yearend, placing upward pressure on global oil prices. Global oil inventories increased by an average of 600,000 b/d in first-half 2023, and EIA forecasts they will decrease by an average of 400,000 b/d in second-half 2023. EIA expects slight inventory builds in 2024, which puts some downward pressure on oil prices in the forecast for next year.
Chevron earnings down year-on-year on lower commodity prices
Chevron Corp. posted earnings of $6 billion for second-quarter 2023, compared with $11.6 billion in second-quarter 2022. Included in the current quarter was a one-time tax benefit of $225 million related to impairments that were recognized in prior periods. Foreign currency effects increased earnings by $10 million. Adjusted earnings of $5.8 billion in second-quarter 2023 compared with adjusted earnings of $11.4 billion in second-quarter 2022.
The decline in second-quarter 2023 earnings is attributed primarily to lower upstream realizations and reduced margins on refined product sales. Sales and other operating revenues during second-quarter 2023 amounted to $47.2 billion, a decrease from $65.4 billion in the same period last year, primarily due to lower commodity prices.
Chevron had upstream earnings in second-quarter 2023 of $4.94 billion, down from $8.5 billion in second-quarter 2022 and $5.16 billion in first-quarter 2023. Downstream earnings in second-quarter 2023 were $1.5 billion, down from $3.5 billion in second-quarter 2022 and $1.8 billion in first-quarter 2023.
The company’s worldwide net oil-equivalent production was up 2% from the year-ago quarter, mainly driven by record Permian basin production of 772,000 boe/d.
Capital expenditures in second-quarter 2023 rose by 18% from a year ago, primarily because of increased investments in the US.
Shell signs deal to sell Indonesia Masela block interest
Shell Upstream Overseas Services Ltd. agreed to sell its 35% participating interest in Indonesia’s Masela production sharing contract in Masela block, 150 km offshore Saumlaki in Maluku province, Indonesia. The sale, to Indonesia’s PT Pertamina Hulu Energi (PHE) and Petronas Masela Sdn. Bhd., includes Shell’s interest in the Abadi LNG project.
The Abadi project is expected to produce about 9.5 million tonnes/year of LNG and up to about 35,000 b/d of condensate, according to operator INPEX Corp.’s website. The project is also expected to supply 150 MMcfd via pipeline to address local demand for natural gas.
In April, INPEX Masela Ltd. submitted a revised plan of development for the Abadi LNG project in the block, incorporating a carbon capture and storage component.
Base consideration for the sale is $325 million in cash with an additional $325 million to be paid when final investment decision (FID) is taken on the Abadi LNG project.
The deal is expected to close in third-quarter 2023, subject to completion of conditions which include regulatory approval from Indonesia’s Ministry of Energy and Mineral Resources.
INPEX is operator of the Abadi gas project and holds 65% interest in the Masela PSC.
Exploration & Development Quick Takes
bp moves Greater Tortue Phase 1 first gas to first-quarter 2024
bp PLC has moved timing of expected first gas from Phase 1 of the Greater Tortue (GTA) project offshore Mauritania and Senegal to first-quarter 2024 from end-2023 due to a delay in completion of the subsea work scope, the operator said in its second-quarter earnings update.
GTA is 120 km offshore in water depth of 2,850 m and holds estimated gas resources of 15 tcf. Phase 1 will export gas from four subsea wells to an FPSO about 40 km offshore at which the gas will be processed for export to a 2.3-million tonne/year (tpy) floating LNG plant (FLNG Gimi) 10 km offshore.
A plan is in place to finish installation of the infield flowlines and subsea structures in first-quarter 2024 with delivery of the other work scopes now being optimized for the updated project schedule, partner Kosmos Energy said in its earnings release Aug. 7.
The floating production, storage, and offloading (FPSO) vessel is now expected to arrive in this year’s fourth quarter. It had earlier been expected at the end of the second quarter. The vessel left COSCO Shipping Heavy Industry Co. Ltd.’s Qidong, China, yard in January 2023, stopping in Singapore to install the fair leads. Arrival on location is expected to align with the revised schedule for the subsea work scope.
Construction and mechanical completion activities are wrapping up on the FLNG plant and pre-commissioning work is under way. Sailaway is targeted for the end of this year’s third quarter and arrival expected at yearend when hookup work is scheduled to begin.
Construction on the hub terminal is complete. Activity is now focused on progressing handover to operations in third-quarter 2023, Kosmos said.
Additionally, all four planned wells have been drilled and completed with expected production capacity ‘significantly higher than what is required for first gas,’ the company said.
OMV discovers natural gas in Austria
OMV group discovered natural gas in the Wittau Tief-2a exploration well onshore Lower Austria.
Preliminary evaluation indicates potential recoverable resources of about 28 MMboe. After full development of the discovery, OMV expects its natural gas production in Austria to increase by 50%.
OMV is considering options to further appraise the field, as well as a fast-track development in conjunction with the OMV-operated natural gas plant in Aderklaa, 10 km from the new discovery.
OMV is operator of the Wittau Tief-2a well.
ExxonMobil granted Stabroek block exploration license extension
ExxonMobil has been granted a 1-year extension to the Stabroek block exploration license offshore Guyana to October 2027, according to partner Hess Corp.
Additionally, the end of the first renewal period of the exploration license, which requires relinquishment of 20% of acreage not held by discoveries, was extended 1 year to October 2024, Hess said July 26 in an earnings release.
Both extensions are a result of force majeure due to the COVID-19 pandemic, Hess said.
In July, the operator was granted environmental authorization by the Environmental Protection Agency of Guyana for a 35-well exploration and appraisal drilling campaign.
Gross recoverable resource on the block is estimated at 11 billion boe.
ExxonMobil affiliate Esso Exploration and Production Guyana Ltd. is operator of the block with 45% interest. Partners are Hess Guyana Exploration Ltd. (30%) and CNOOC Petroleum Guyana Ltd. (25%).
Drilling & Production Quick Takes
Vår Energi production declines 6% q-o-q
Vår Energi ASA saw its average net production of oil, liquids, and natural gas decrease 6% quarter-over-quarter to 202,000 boe/d in this year’s second quarter. The decrease is slightly less (3%) compared with second-quarter 2022.
The production decline is attributed to planned seasonal maintenance, turnarounds, and unplanned downtime on partner-operated assets.
Contribution from Bauge, Hyme, and Fenja fields, which started production in this year’s second quarter, was impacted by start-up issues at the Njord host platform. Production guidance for the year is unchanged at 210,000-230,000 boe/d.
The production split in the second quarter was stable from the previous quarter with 64% oil and NGLs (liquids) and 36% gas. During the quarter, the company continued to reduce NGL recovery to increase gas sales, representing a reduction of 2,000 boe/d on an annual basis.
Total volumes produced in second-quarter 2023 were 18.4 MMboe.
CNOOC Petroleum Europe lets drilling contract for Golden Eagle
CNOOC Petroleum Europe Ltd. has let a contract to Shelf Drilling Ltd. for the Shelf Drilling Fortress jack-up rig for operations at the Golden Eagle platform in the UK Central North Sea.
The firm term of the contract is for two wells—work that is expected to take 4-5 months to complete. The contract includes options for additional wells with a total estimated duration of 13 months.
The contract value for the firm period is about $17 million. Planned start-up of operations is September 2023.
Golden Eagle lies about 111 km northeast of Aberdeen and first produced oil in October 2014.
CNOOC Petroleum Europe, a wholly owned subsidiary of CNOOC Ltd., is operator at Golden Eagle (36.54%) with partners EnQuest Heather Ltd. (26.69%), NEO Energy Production UK Ltd. (31.56%), and ONE-Dyas UK Ltd. (5.21%).
PT Pertamina starts unconventional drilling in Duri
PT Pertamina (Persero) has partnered with EOG Resources Inc. to conduct the first unconventional drilling technology exploration in Duri field, Indonesia.
The inaugural application of unconventional drilling took place in the North Duri Development (NDD) Area 14 Stage-1 of Rokan block. This technology is part of a new steam flood area development after Pertamina took over Rokan block management.
Duri is about 18 km long and 18 km wide in Riau Province in South Sumatra basin on the eastern coast of Sumatra. It is the largest producing field in the Rokan PSC and has been producing under steamflood since 1985 as one of the world’s largest steamflood developments, the company said.
Pertamina acquired Rokan block from Chevron in 2021 (OGJ Online, Aug. 11, 2021).
PROCESSING Quick Takes
Orlen progresses with major project at Mažeikiai refinery
Orlen SA subsidiary Orlen Lietuva AB is on pace with construction of a major plant included as part of the ongoing modernization program at its 10-million tonne/year (tpy) refinery in Mažeikiai, Lithuania.
The more-than 90-m long, 1,500-tonne key reactor of a new residue hydrocracking unit (RHCU) to be installed at the refinery has arrived for offloading at Lithuania’s port of Klaipeda and will be delivered about 145 km to the construction site via a 2-week road journey, Orlen said on Aug. 3.
Part of the operator’s planned bottom-of-the-barrel improvement program, the Mažeikiai RHCU project progressing on schedule to reach mechanical completion by yearend 2024 for targeted production of cleaner, higher-quality products in 2025, the operator said.
“The [RHCU] plant will bring about a substantial improvement in the profitability and margins of the Mažeikiai refinery, making the company less dependent on the volatile macroeconomic environment. This will enable further development of the company towards new products and extension of the value chain,” said Daniel Obajtek, Orlen’s chief executive officer and president.
Alongside increasing the refinery’s yield of high-margin products to 84% from the current 72%, commissioning of the RHCU also will enable the site to reduce crude oil throughputs while continuing to produce a similar volume of finished fuels. Following the RHCU’s startup, the Mažeikiai refinery will be able to achieve production yields by processing only 8 million tpy of crude, down 2 million tpy from its design capacity, Orlen said.
The operator most recently estimated total capital investment on the RHCU project at €640 million.
Tamarack Valley commissions Wembley gas plant in Alberta
Tamarack Valley Energy Ltd., Calgary, completed construction and commissioning of its owned and operated 15 MMcfd Wembley gas plant, which will process associated natural gas from the operator’s Charlie Lake play in Alberta. The plant, which is expandable to 30 MMcfd, was brought onstream June 9, the company said in a July 27 earnings release.
The company also agreed to sell a 49.9% stake in the sweet natural gas processing plant, in addition to gross overriding royalty interests in the Clearwater and Charlie Lake operating areas including 17,000 gross undeveloped acres to Calgary-based Topaz Energy Corp. for $39.5 million (Can.). Following closing of the sale, Tamarack will continue to operate the gas plant and will retain full access to 100% of the capacity, the company said.
Indian Oil lets contract for new petrochemical expansion projects at Panipat refinery
Indian Oil Corp. Ltd. (IOC) let a contract to McDermott International Ltd. to provide a suite of services for further expansions of olefins and polymers production at the operator’s 15-million tonne/year (tpy) integrated Panipat refining and chemical complex in Haryana, India, 100-km north of New Delhi.
As part of the July 31 contract award, McDermott will deliver both project management consultancy (PMC) and engineering, procurement, and construction management (EPCM) services for a second phase of IOC’s existing naphtha cracker unit (NCU) expansion project that includes increasing Panipat’s polypropylene production capacity as well as adding a grassroots ethylene derivative unit (EDU), the service provider said.
IOC has yet to disclose details regarding the Phase-2 NCU expansion, but McDermott said the project will increase the NCU’s ethylene output by about 20%, with the additional ethylene and associated propylene production to serve as feedstock for unspecified downstream polymer units.
McDermott confirmed its scope of work covers comprehensive EPCM and overall PMC for the duration of the expansion works, it did not reveal details regarding the type or capacity of the new EDU; a project timelines; or the contract value.
McDermott currently is delivering PMC services covering front-end engineering and design, review of engineering activities, construction supervision services, startup assistance, precommissioning, commissioning, performance guarantee test run, and project closure for the proposed addition of a maleic anhydride (MAH) unit at the Panipat refinery (OGJ Online, May 24, 2023).
TRANSPORTATION Quick Takes
Magellan Midstream completes construction on expanded refined products pipeline
Magellan Midstream Partners LP, Tulsa, has completed construction of the new pipeline set to expand the company’s refined petroleum products pipeline system from the Houston area to El Paso, Tex., to a new capacity of about 100,000 b/d.
The 30,000 b/d, 16-in., 30-mile pipeline runs along the existing route between Odessa and Crane, Tex. New operational storage to facilitate incremental shipments is currently under construction (OGJ Online, Aug. 29, 2022).
An early 2024 start-up is still expected, the company said as part of its earnings release Aug. 3.
The company currently can transport about 70,000 b/d of refined petroleum products (gasoline and diesel fuel) from Gulf Coast and mid-continent refineries to El Paso, with further shipper optionality to access markets in New Mexico through its pipeline system, as well as Arizona and Mexico via connections to third-party pipelines.
The company said it still expects the $18.8-billion merger with ONEOK to close before yearend (OGJ Online, May 15, 2023). A unitholder vote will be held Sept. 21.
Rio Grande LNG to use Air Products liquefaction
NextDecade Corp. contractor Bechtel Energy Inc. signed Air Products Inc. to provide liquefaction technology and equipment for the Rio Grande LNG Phase 1 project in the Port of Brownsville, Tex.
The project’s first phase will include three natural gas liquefaction trains with a production capability of about 17.6 million tonnes/year (tpy) of LNG.
Air Products will provide coil-would heat exchangers (CWHEs) and process technology. The CWHEs will be built at the service provider’s plant in Port Manatee, Fla.
NextDecade made a positive final investment decision (FID) on Phase 1 of its 27-million tpy Rio Grande LNG (RGLNG) plant in July (OGJ Online, July 13, 2023).
In conjunction with FID, RGLNG issued the notice to proceed with Phase 1 construction to Bechtel Energy under its lump-sum turnkey engineering, procurement, and construction contract (EPC).
Enbridge to begin building Rio Bravo Pipeline following RGLNG FID
Enbridge Inc. will begin construction of the Rio Bravo Pipeline now that NextDecade Corp. reached a final investment decision to proceed with its Rio Grande LNG (RGLNG) plant, the company said as part of its Aug. 4 earnings report.
NextDecade Corp. gave the greenlight to Bechtel Energy Inc. to begin Phase 1 construction (three liquefaction trains) at its 27-million tonne/year (tpy) RGLNG plant in Brownsville, Tex.
Enbridge now plans to advance construction of the 4.5 bcfd Rio Bravo natural gas pipeline after obtaining regulatory approvals.
The first phase will transport 2.6 bcfd of natural gas feedstock from the Agua Dulce area to RGLNG. It is expected to achieve commercial operations in 2026.
Enbridge acquired Rio Bravo Pipeline Co. LLC from NextDecade in 2020.
Enbridge also noted the extended and upsized open season for long-term contracted service on the Flanagan South crude oil pipeline system (FPS).
FSP provides service from the Enbridge Mainline originating at Enbridge’s Flanagan Terminal in Illinois and delivers near Houston, Tex., through the 950,000-b/d Seaway Pipeline Enbridge owns in partnership with Enterprise Products Partners LP.
If the open season is successful, FSP will approach 90% term-contracted on its 720,000 b/d nameplate capacity.
Pembina Pipeline pushes Cedar LNG FID to year’s fourth quarter
Pembina Pipeline Corp. received its LNG facility permit from the BC Energy Regulator for development of the proposed 3-million tonnes/year (tpy) Cedar LNG plant, a partnership between the Haisla Nation and Pembina Pipeline on the Douglas Channel in Kitimat, BC.
Pembina Pipeline, in its earnings release Aug. 3, said incremental non-binding Memorandums of Understanding have been signed and the project is fully subscribed. Work towards signing definite commercial agreements is ongoing.
An environmental assessment certificate from the British Columbia government was received earlier this year.
Cedar LNG elected to progress a second Front End Engineering Design (FEED) process for the floating LNG plant in late 2022 and has been waiting for that work to progress to the same stage as the original FEED, the partnership said.
In conjunction with detailed commercial discussions and ongoing negotiations between LNG Canada and