GENERAL INTEREST Quick Takes
Occidental forms JV with BlackRock to develop Stratos direct air capture plant
Occidental Petroleum Corp. subsidiary 1PointFive has formed a joint venture with BlackRock to develop Stratos, the world’s largest direct air capture (DAC) plant.
The private equity firm has committed $550 million for development of the project in Ector County, Tex. BlackRock will act solely as a financial partner at a rate of about half of the Permian basin-area project’s total upfront capex of about $1.3 billion, TD Cowen analysts said Nov. 7.
For full-year 2023, Oxy expects its low-carbon spending to be near the high end of its $600 million guidance, and to continue around $600 million through 2026 compared with previous guidance of $500-600 million through 2025, Jefferies analysts detailed in an equity research note Nov. 7.
Stratos is designed to capture up to 500,000 tonnes/year (tpy) of CO2. With construction about 30% complete, the DAC plant is expected to be commercially operational in mid-2025.
Kosmos adds interest, assumes operatorship of discoveries offshore Senegal
Kosmos Energy Ltd. has increased its working interest to 90% and assumed operatorship, subject to customary government approvals, of the Yakaar-Teranga gas discoveries offshore Senegal. The increase in working interest follows bp’s exit from the field (60%).
The Yakaar and Teranga discoveries in the Cayar Offshore Profond block confirmed that a prolific inboard gas fairway extends about 200 km from Mauritania through the Greater Tortue Ahmeyim project area along the maritime boundary and into Senegal.
The discoveries hold around 25 tcf of advantaged gas in place, with negligible CO2 content and minimal impurities, reducing the need for processing ahead of transportation/liquefaction, Kosmos said in a release Nov. 6. Three wells, Teranga-1, Yakaar-1, and Yakaar-2 encountered natural gas at reservoirs of Lower Cenomanian age.
Kosmos has been working with partner Petrosen and the government of Senegal on a development concept that prioritizes cost-competitive gas to the domestic market, combined with an offshore LNG plant targeting exports into international markets. A phased approach is being considered.
The currently envisioned concept is an offshore development producing about 550 MMscfd of gas with domestic gas transported via pipeline to shore and export volumes liquified on a floating LNG vessel. Kosmos said the concept is “being optimized to best meet the domestic and international requirements, after which the project will move into front-end design and engineering (FEED),” and that as the optimization progresses, the company aims for Petrosen “to participate as an equal partner in the full value chain with a greater working interest.”
CCED begins gas-to-power project in Oman
CC Energy Development S.A.L. (CCED) has started a flare gas-to-power project in Blocks 3 & 4 (Afar & Ghunaim) on the eastern coast of Oman as part of a plan to reduce greenhouse gas (GHG) emissions in pursuit of zero gas flaring by 2027.
Together with Aggreko, CCED will replace diesel with unutilized associated gas to generate electricity to power its field production assets. The project is expected to reduce the company’s GHG emissions by 30%.
To reduce gas flaring and convert the flare gas, Aggreko implemented a power solution using unspecified gas capture and conversion technologies. The company is responsible for the design, construction, operation, and maintenance of two independent gas power plants within the larger operational framework of CCED’s Blocks 3 and 4, utilizing 33 Mw of power at 33kV.
CCED is operator of both blocks with 50% interest. Partners are Tethys Oil (30%) and Mitsui E&P Middle East (20%). The blocks lie in eastern central Oman. Block 3 covers 5,911 sq km and includes main producing fields Farha South, Ulfa and Samha. Block 4 covers 23,212 sq km with main producing fields Saiwan and Shahd.
Exploration & Development Quick Takes
Equinor to place new gas discovery on production this year
Equinor AS made a gas discovery by Gina Krog field in the North Sea about 30 km northwest of Sleipner in 120 m of water. While the discovery is small, it is commercially viable due to nearby infrastructure, and plans are to place the discovery into production during this year’s fourth quarter, the operator said Nov. 6.
Well 15/6-B-20, drilled by the Noble Lloyd Noble rig is expected to make use of existing infrastructure by the Gina Krog platform which is tied in to Sleipner A.
Gina Krog was discovered in 1978 and the plan for development and operation was approved in 2013. The field produces oil and gas from sandstone of Middle Jurassic age in the Hugin formation at 3,300-3,900 m depth. Recoverable volumes are estimated at 5-16 MMboe.
Equinor is operator at Gina Krog (58.7%). Partners are KUFPEC Norway AS (30%) and PGNiG Upstream Norway AS (11.3%).
CNOOC discovers deep coalbed methane field
CNOOC Ltd. has discovered the Shenfu deep coalbed methane (CBM) field in China, adding proved gas in-place of over 100 billion cu m (bcm), the company said in a release Oct. 22.
Shenfu deep CBM field lies in Yulin, Shaanxi Province, at the eastern edge of Ordos basin. Discovery well SM2-33-CH1 encountered 16.5 m of coal seam at a depth of about 2,011 m, which is tested to produce about 19,000 cu m/d after fracturing operations, the company said.
The discovery “lays a solid foundation for the company to build a large onshore gas production base, which will tap up to 1 trillion cu m of proved gas in-place,” said Zhou Xinhuai, CNOOC’s chief executive officer and president.
BW Energy finds oil at Hibiscus South prospect offshore Gabon
BW Energy Ltd. discovered commercial volumes of oil in the Hibiscus South prospect and plans to complete the appraisal well as a production well in early 2024.
The well data confirms that the Hibiscus South structure is a separate accumulation with a deeper oil-water contact than nearby Hibiscus field, the company said in a release Nov. 6.
Preliminary evaluation indicates gross recoverable reserves of 6-7 million bbl of oil and about 16 million bbl of oil in place, in line with the mid-case pre-drill expectations reported prior to the start of drilling operations.
The DHBSM-1 appraisal well was drilled from the MaBoMo production platform to a total depth of 6,002 m. The target area lies about 5 km southwest of the MaBoMo and was drilled by the Borr Norve jack-up rig.
Evaluation of logging data, sample examination and formation pressure measurements confirm about 20 m of pay in an overall hydrocarbon column of 26.5 m in the Gamba formation, the company said.
“The successful appraisal of the Hibiscus South satellite structure represents a low-cost and low-risk expansion of the Dussafu production and reserve base,” said Carl K. Arnet, chief executive officer of BW Energy. The result also confirms potential of the Dussafu license where the company has additional future prospects, he said.
BW Energy is operator of the producing Dussafu Marine license offshore Gabon with 73.5% interest.
Drilling & Production Quick Takes
bp starts production from Seagull subsea tieback
bp plc started production from Seagull oil and gas field on license P1622 Block 22/29C, 17 km south of the bp-operated Eastern Trough Area Project central processing facility (ETAP CPF) in UK Central North Sea.
Seagull is a four-well development subsea tieback to the ETAP CPF. It is the first tieback to the ETAP hub in 20 years. Production is delivered via a new 3-mile subsea pipeline which connects to an existing pipeline system. A new 10-mile umbilical has been installed, linking the ETAP CPF to Seagull field, providing control, power, and communications services.
Oil from Seagull is exported through the Forties Pipeline System to Grangemouth in central Scotland and gas is exported to Teesside via the Central Area Transmission System. Seagull is expected to produce about 50,000 boe/d at peak production.
The ETAP hub came online in July 1998. It was initially estimated to have a production life of 20-25 years, with decommissioning predicted to begin in 2023. A $1-billion investment in 2015 secured its future into the 2030s.
Neptune Energy holds a 35% stake in Seagull and is operator through the development phase, drilling wells, and installing subsea equipment (OGJ Online, Jan. 28, 2021). bp holds 50% and is operator for the production phase. JAPEX holds the remaining 15% interest in the field.
Lukoil looks to double production at Iraq’s West Qurna 2 field
PJSC Lukoil signed a supplementary agreement with state-owned Basra Oil Co. to extend the oil service contract for West Qurna 2 field in Iraq by 10 years to 2045 and to double oil production to 800,000 b/d, Lukoil said in a release.
The field development plan envisages bringing new multi-well pads into production, commissioning oil treatment infrastructure and complex gas treatment plants for the Yamama formation, construction of export pipelines and water flooding units, as well as expansion of the tank battery.
West Qurna-2 lies 65 km northwest of Basra in southern Iraq. The license area covers about 300 sq km. Initial recoverable reserves at the field, which delivers 9% of Iraqi total oil production, are estimated at 14 billion bbl. More than 90% of the reserves are concentrated in Mishrif and Yamama accumulations.
Lukoil concluded a service agreement in December 2009, began commercial oil production from the Mishrif formation in 2014, and implemented a new development plan in 2018.
Lukoil is operator of West Qurna-2 (75%) with state-owned North Oil Co. holding the remaining 25%.
YPF increases oil production 7% year-over-year
Argentina’s YPF SA has increased its crude oil production 7% (15,000 b/d) in the first 9 months of the year compared with the same period in 2022. This growth is attributed to accelerated upstream activity with 225 wells drilled in the period compared with 192 wells in the same period last year, according to company reports.
In October 2023, YPF hit daily production of 250,000 bbl, the highest production figure in the last 7 ½ years. The company’s refining capacity reached a record high 310,000 b/d in certain months this year, with a 5% increase (13,000 b/d) in the first 9 months of 2023 when compared with the same period in 2022.
In the refined products segment, gasoline and diesel production have hit record levels so far in 2023. For the first 9 months ended Sept. 30, YPF increased its gasoline production by 186 million liters, 5% more than the same period in 2022, and increased diesel production by 206 million liters, 4% more than the year-ago period.
YPF, which is 51% owned by the Argentine state, is looking to increase refining capacity by about 5% in the coming weeks. Next year, the launch of Project NEC A at the La Plata refinery is expected to further increase gasoline production by an additional 500 million liters, or 8%.
PROCESSING Quick Takes
LyondellBasell updates potential plans for Houston refinery site
LyondellBasell Industries Holdings BV is proceeding with a potential plan to transition subsidiary Houston Refining LP’s (HRL) soon-to-be-shuttered 268,000-b/d Houston full-conversion refinery into a hydrogen production site as part of the proposed US government-funded HyVelocity regional hydrogen hub.
While LyondellBasell will continue to develop the conversion of HRL’s refinery to participate in the HyVelocity hub, “there are still a lot of steps that need to be taken” before the company reaches final investment decision [FID] on the matter, Peter Vanacker, LyondellBasell’s chief executive officer, told investors in a quarterly earnings call.
Confirmation of LyondellBasell’s possible participation in HyVelocity follows $1.2 billion of $7-billion in federal grants awarded by US President Joe Biden’s administration in mid-October to the project, which is sponsored by ExxonMobil Corp., Chevron Corp., Air Liquide SA, Mitsubishi Power Americas, AES Corp., Sempra Infrastructure, and Ørsted AS.
As development of the Houston refinery-to-hydrogen site remains ongoing, Vanacker said the company will continue to evaluate other projects in line with its circular and low-carbon solutions business involving reuse of the refinery’s existing hydrotreaters, including:
- Using LyondellBasell’s proprietary MoReTec advanced recycling technology to upgrade and purify mixed plastic waste into pyrolysis oil that can be used as feedstock for new plastic materials.
- Using MoReTec advanced recycling technology to upgrade and purify mixed plastic waste into pyrolysis gas that can be shipped via existing pipeline connections from the refinery to LyondellBasell’s nearby olefins manufacturing complex in Channelview, Tex., for use as feedstock in that site’s steam crackers.
- Revamping the refinery’s existing hydrotreaters to process renewable-based feedstocks for production of renewable hydrocarbons that also could be transported to Channelview for use as feedstock to the site’s steam crackers.
Previously slated for closure by yearend 2023, LyondellBasell said in May 2023 that it would delay ceasing operations at the Houston refinery until ‘no later’ than the end of first-quarter 2025.
Lower refining margins, production cap HF Sinclair income
HF Sinclair Corp., Dallas, reported third-quarter 2023 net income of $790.9 million, down from $954 million during the same quarter in 2022, amid lower refining margins and product sales resulting from increased scheduled plant maintenance during the period.
Alongside lower refining margins in both the US West Coast and Midcontinent regions, the quarterly income decline also stemmed from reduced output and sale of products resulting from turnarounds executed during the period at the operator’s 125,000-b/sd integrated Tulsa West and Tulsa East refinery system in Tulsa, Okla., and the 30,000-b/sd refinery in Casper, Wyo., HF Sinclair said.
Turnarounds at both the Casper and Tulsa refineries were completed on time and on budget, with the Tulsa refinery now in the process of ramping up to normal operations following the planned maintenance event, Tim Go, chief executive officer and president, told investors in a Nov. 2 earnings call.
With capital spending on most scheduled plant maintenance for the year now completed—including $124 million on the Casper and Tulsa turnarounds during the third quarter—HF Sinclair expects to end the year on the lower end of full-year guidance of $900 million to $1.6 billion, said Atanas Atanasov, chief financial officer.
During fourth-quarter 2023, HF Sinclair anticipates crude oil throughputs across its entire refining system in a range of 590,000-620,000 b/d, reflecting downtime for remaining maintenance at the Tulsa refinery during the period, Atanasov said.
Crude oil throughputs during third-quarter 2023 averaged 602,000 b/d, slightly down from 646,000 b/d in third-quarter 2022 amid this year’s higher maintenance activity.
Moving forward, the company plans to focus on safe and reliable operations that lower operating costs amid ongoing integration and optimization of refining availability, including refineries acquired through its 2022 purchase of Sinclair Cos.
Alongside continued investments in hydrogen systems at all of its plants—particularly at the 100,000-b/d Navajo refinery in Artesia, NM—the company is adding and upgrading key equipment at sites to benefit both its refining and renewables production businesses.
TRANSPORTATION Quick Takes
Cheniere earnings rebound, Corpus Christi LNG Stage 3 ahead of schedule
Cheniere Energy Partners LP returned to positive earnings in third-quarter 2023, despite a 57% drop in revenue to $2.1 billion. Third-quarter 2023 net income was $791 million. The company lost $514 million in third-quarter 2022 and attributed the year-on-year improvement to “non-cash favorable changes in fair value of commodity derivatives.”
Subsidiary Cheniere Marketing LLC entered into a 20-year supply agreement with Foran Energy Group Co. Ltd. for 900,000 tonnes/year (tpy) of LNG to be sold on a free-on-board basis indexed to the Henry Hub plus a liquefaction fee. The company described the contract as the first to support development of the 6.5-million tpy second train of its 20-million tpy Sabine Pass LNG expansion project. Sabine Pass currently produces 30 million tpy.
Cheniere earlier this year signed a long-term offtake deal with BASF supporting the expansion (OGJ Online, Aug. 22, 2023).
Jefferies Financial Group Inc. reported Cheniere management as asserting that its 10-million tpy Corpus Christi LNG Stage 3 project (CCL3) “is tracking months ahead of the guaranteed schedule” and could achieve first LNG by end-2024. The financial services company said Cheniere reaffirmed completion of CCL3 between second-quarter 2025 and second-half 2026. The project is 44.1% complete, with engineering more than 74% done and construction 7.5%, according to Jefferies. Corpus Christi LNG’s current capacity is 15 million tpy.
Cheniere said in its quarterly earnings call that it “needs to get going on construction of Train 8 and 9 at Corpus in 2026 as the first seven trains complete.” CCL3 consists of seven midscale trains. The company earlier this year requested US Federal Energy Regulatory Commission permission authorization to build its 3-million tpy Corpus Christi Liquefaction Midscale 8-9 expansion.
CER reveals reasoning behind Trans Mountain route-deviation approval
The Commission of the Canada Energy Regulator (CER) has released its reasons for approving the Trans Mountain Expansion Project (TMEP) route deviation application. The Commission found that continuing micro-tunnelling would most likely fail and could delay the completion of the TMEP by at least 10 months. This delay could result in an estimated $2 billion of lost revenue for Trans Mountain and cause negative impacts on shippers and other parties.
Trans Mountain initially agreed to build a 4.2-km segment using micro-tunnelling. They encountered technical difficulties, however, while micro-tunnelling in a 1.3-km section of the pipeline in the Pípsell (Jacko Lake) area. Even after several attempts, the technique was not successful.
Trans Mountain then applied to revise the route within the approved corridor and change the construction method from micro-tunnelling to a combination of horizontal directional drilling and conventional open trench. The government project said it was confident that about 80% of construction within the Pipsell corridor would be completed using trenchless construction.
Based on Trans Mountain’s engagement efforts, the Commission’s hearing process, and the mitigation measures Trans Mountain is required to implement, the Commission determined that there had been adequate consultation and accommodation with Indigenous Peoples to make its decision.
TMEP will increase the 615-mile pipeline’s capacity to 890,000 b/d from 300,000 b/d and hopes to have the expansion in service by first-quarter 2024.
Comstock forms partnership to support Haynesville build-out
Comstock Resources Inc. has formed a partnership to fund its midstream build-out to support Western Haynesville acreage development.
As part of a deal with Quantum Capital Solutions (QCS), an affiliate of Quantum Capital Group, Comstock will contribute its Pinnacle gathering and treating system—comprised of a 145-mile high pressure pipeline and the Bethel natural gas processing plant—to the partnership in exchange for 100% of the capital required (up to $300 million) to fund the future build-out of the Western Haynesville midstream system over the next 5 years, Comstock said as part of its third-quarter earnings.
Comstock will operate the midstream system and direct its activities and said the partnership will reduce capital outlays that would be required in 2024 to support the expected growth in production from the area. In this year’s fourth quarter, Comstock expects its production to come in at 1,450-1,550 MMcfed.
In the quarter, Comstock had adjusted net income of $11.7 million compared with $326 million in third-quarter 2022. Continued weak natural gas prices weighed heavily on the results, the operator said.
Comstock drilled 13 (10.2 net) operated horizontal Haynesville-Bossier shale wells in third-quarter 2023 which had an average lateral length of 11,644 ft. The company turned 21 (18.1 net) operated wells to sales in the quarter. The wells had initial daily production rates that averaged 29 MMcfd.
