GENERAL INTEREST — Quick Takes
ConocoPhillips exec wants ban lifted on US oil exports
Ryan Lance, chief executive officer of ConocoPhillips, said lifting an existing US ban on exporting crude oil could encourage more production from tight oil formations.
Speaking Nov. 19 at the Deloitte Oil & Gas Conference in Houston, Lance said many US refineries are set up to process heavy, sour crude from Canada and South America rather than the light, sweet crude coming from US unconventional plays.
"The refineries are tooled up for sour crudes, with only so much capacity for light sweet crudes," he said.
Refineries overseas likely could process the light, sweet crude cheaper than could US refiners, who would first have to invest in altering their processing equipment, he said.
"It will ultimately give the consumer cheaper prices at the pump," Lance said. "I accept that it is going to be a pretty hard climb," to convince US lawmakers. "But we need to start making the case for the economic benefits."
ConocoPhillips, based in Houston, reported $55 billion in yearly revenue and $120 billion of total assets as of Sept. 30. Proved reserves were 8.6 billion boe as of Dec. 31, 2012.
Oil industry faces high retirement numbers
Oil and gas companies are on the cusp of an unprecedented number of retiring workers, and the ranks of suitable replacements remain thin, speakers said during the 2013 Deloitte Oil & Gas Conference in Houston on Nov. 19.
In a paper released at the conference, Deloitte said the industry is looking to improve its workforce planning, talent acquisition, and retention rates.
Bruce Culpepper, executive vice-president of human resources for Shell Americas, said Shell is evaluating how it might better measure the effectiveness of employee training programs.
"Are people learning anything from the investment?" Culpepper questioned. "There is a lot of opportunity there for us to get sharper on that."
Currently, the number of job openings for the North American oil and gas industry exceeds the number of qualified applicants, said Michelle Seale, a principal with Deloitte Consulting LLP.
"There is an uptick in retirements," Seale said. A 2011 survey by Schlumber Ltd. estimated that industry likely will lose a net of 5,000 experienced geoscientists and petroleum engineers by 2014.
IEA, nonmember countries seek cooperation
The International Energy Agency, a 1974 offshoot of the Organization for Economic Cooperation and Development, said it has agreed to pursue closer cooperation with Brazil, China, India, Indonesia, Russia, and South Africa. The OECD represents industrialized nations.
In a statement from an IEA ministerial meeting in which the nonmember countries participated, IEA said the aim is to start multilateral cooperation to build on bilateral programs it has developed with what it calls "partner countries."
It said the effort reflects "common understanding that global energy challenges and energy security require shared solutions by producer, consumer, and transit countries."
Exploration & Development — Quick Takes
Dana Petroleum makes gas discovery in North Sea
Dana Petroleum PLC and its partners made a gas discovery in the Pharos prospect in the southern North Sea.
The 47/5d-6 well, which was drilled in license P1566 using Noble Corp.'s Noble Lynda Bossler jack up rig, found gas in a Rotlegendes reservoir. Dana plans to conduct a detailed evaluation to determine the volume of gas initially in place. The rig was subsequently returned to the Dutch North Sea for further operations with Dana.
"This is the fifth North Sea exploration and appraisal well that Dana has drilled as operator or in partnership during 2013," said Paul Griffin, Dana's UK managing director. "Pharos is well-located to take advantage of a number of gas export options in the area and we now need to undertake further detailed technical work to evaluate its commercial potential."
Dana's partners in the license include Hansa Hydrocarbons Ltd. with 15% interest, Dyas Exploration UK Ltd. 15%, MPX North Sea Ltd. 15%, and Parkmead (E&P) Ltd. 20%.
Dana's recent southern North Sea activities consist of a five-well campaign to explore potential around existing platforms, including its De Ruyter platform offshore the Netherlands, on which the company spudded in April an exploratory well to test new-pool potential (OGJ Online, Apr. 25, 2013).
Last year, Dana flowed gas at the rate of 27 MMscfd through a 96/64-in. choke with its Platypus appraisal well (OGJ Online, Aug. 2, 2012).
Hemisphere sees oil potential in Alberta lands
Hemisphere Energy Corp., Vancouver, BC, has closed a $3.35 million acquisition of oil and gas assets in the Atlee Buffalo area of southeastern Alberta.
Hemisphere plans to apply its technical experience and successful track record in drilling horizontal wells and implementing pressure maintenance programs to achieve higher recovery factors.
The acquisition gives the company 100% working interest in 8.25 contiguous sections covering two significant Glauconitic oil pools about 25 km east of Hemisphere's core Jenner oil producing property.
Estimated original oil in place on the acquired properties based on Hemisphere's internal mapping was as much as 49 million bbl, of which only 4% has been recovered.
The properties produce 60 b/d of oil equivalent, 75% oil, and have proved plus probable reserves of 224 million boe. As many as 75 horizontal drilling locations are identified, and upside reserve potential exists with implementation of waterflooding and-or polymer flooding.
Lundin group to sidetrack Torvastad near Sverdrup
The PL501 group led by Lundin Norway AS will sidetrack an exploratory well on the Torvastad prospect just north of the Johan Sverdrup discovery in the North Sea offshore Norway.
The 16/2-20S Torvastad well went to 2,070 m below mean sea level into basement rocks. It found a Lower Cretaceous/Upper Jurassic sequence of 24 m with poor reservoir properties above a water-bearing Upper Jurassic Draupne sandstone sequence of 10 m of excellent quality in a 14-m gross sequence.
The 24-m Lower Cretaceous/Upper Jurassic reservoir was found according to depth prognosis but is thicker than expected. As a consequence, the Draupne sandstone came in deeper than expected. The water-bearing Upper Jurassic Draupne sandstone appears to be the same sequence encountered in all Johan Sverdrup wells.
The well's main objectives were to prove the presence of oil-bearing Lower Cretaceous/Upper Jurassic sandstone and to determine whether the Torvastad structure was in communication with the Johan Sverdrup discovery.
The licensees will drill a sidetrack 770 m west of the 16/2-20S target location to investigate the potential of an upflank continuous Draupne sandstone and to establish an oil-water contact. Sidetracking should take 20 days.
PL501 interests are Lundin Norway and Statoil Petroleum AS 40% each and Maersk Oil Norway AS 20%.
Drilling & Production — Quick Takes
ConocoPhillips group starts Jasmine field
ConocoPhillips and partners have started production from Jasmine gas and condensate field in the central North Sea offshore the UK (OGJ Online, Nov. 5, 2010).
The high-pressure, high-temperature field can produce 140,000 boe/d, the operator said. Water depth is about 85 m.
Development involves a 24-slot wellhead platform bridge-linked to an accommodation and utilities platform; a 16-in. multiphase pipeline bundle; and riser and processing platform bridge-linked to the existing Judy platform about 6 miles east of the field.
ConocoPhillips (36.5% interest), Eni (33%), and BG Group (30.5%) discovered Jasmine in 2006.
EnQuest to proceed with Kraken oil development
EnQuest PLC has given its go-ahead for development of the Kraken heavy oil field in the East Shetland basin of the UK North Sea.
Capital and operational investment is estimated at £4 billion, 80% of which will be spent in the UK.
EnQuest said the development has been approved by the Department of Energy and Climate Change.
Field development will include 25 wells. EnQuest expects the start of oil production in 2016 or 2017 and gross peak production of 50,000 b/d. EnQuest said the field contains 137 million bbl of oil.
The development will benefit from heavy oil allowances used to stimulate investment in the UK North Sea.
"Companies like EnQuest are the future of the North Sea," said Amjad Bseisu, EnQuest chief executive officer. "It is only by combining our skills and expertise with fiscal incentives, such as heavy oil allowances, that really substantial projects like Kraken are possible."
EnQuest said the development will support more than 20,000 UK jobs during the construction period and an average of 1,000 operational jobs in the UK for each year of Kraken's 25-year life. EnQuest said it relied on reporting metrics by Oil & Gas UK, the offshore trade group.
"This is yet another clear sign that opportunity remains in the North Sea," said Oonagh Werngren, operations director for Oil & Gas UK.
The Kraken area is west of North Viking Graben, and 125 km east of the Shetland Islands.
EnQuest, the operator, has 60% interest in Kraken; partners are Cairn Energy PLC and First Oil PLC.
Kraken will be EnQuest's sixth production hub in the UK North Sea.
Core program indicates Sask. oil shale potential
Questerre Energy Corp., Calgary, said results from the second core hole program on its oil shale acreage at Pasquia Hills in east-central Saskatchewan exceeded expectations.
The results confirm that the acreage overlies a well-established oil shale deposit, and the company said it plans to commission an independent resource assessment early next year. Questerre said it will use Red Leaf's EcoShale process to convert the resources into reserves.
Red Leaf is securing final permits and should begin work in the field for the first commercial scale capsule this December, Questerre added.
The six-well core program was completed in fall 2012 on the eastern block of Questerre's acreage. Questerre recovered 653 m of good quality core and ran a full suite of logs over the target Second White Specs shale.
All the wells drilled encountered the target formation with a minimum thickness of 26 m and a maximum of 59 m. The first 10 wells on the western block recovered a combined total of more than 30 m of core.
Preliminary results of modified Fischer assay conducted by an independent laboratory on 180 m of core samples indicates grades of 10-17 gal/ton with select intervals from some wells averaging 15-18 gal/ton in an interval of up to 10 m and individual samples of over 26 gal/ton. Another independent laboratory will verify the results.
PROCESSING — Quick Takes
Oneok to expand operations in the Williston
Oneok Partners LP, Tulsa, will invest $650-780 million between now and second-quarter 2016 in more Williston basin projects.
Specifically, Oneok will:
• Build a 200-MMcfd Lonesome Creek gas processing plant and related infrastructure in McKenzie County, ND, in the Bakken shale. The plant will be Oneok's sixth new natural gas processing plant in the region since 2010 and seventh plant overall.
• Complete a second expansion of the Bakken NGL pipeline, increase its capacity to 160,000 b/d from 135,000 b/d (OGJ Online, Apr. 10, 2013).
Terry K. Spencer, president of Oneok Partners, said the expansion of the Bakken NGL pipeline will move additional NGLs from the Lonesome Creek plant to Oneok's Midcontinent NGL infrastructure.
The new Lonesome Creek plant will cost $320-390 million, the company said. When complete, the plant will be Oneok's largest gas processing plant in North Dakota and will increase its total gas processing capacity in the state to about 800 MMcfd.
In addition to the new plant, Oneok expects to invest $230-290 million for related expansions and upgrades to existing gas gathering and compression. The Lonesome Creek plant and related infrastructure will be completed by yearend 2015 and be supported by acreage dedications from producers.
To accommodate NGL volumes produced from the new plant, Oneok will invest an additional $100 million to increase capacity on its Bakken NGL pipeline, a 600-mile pipeline completed in April that transports unfractionated NGLs produced in the Williston basin to the Oneok's 50%-owned Overland Pass pipeline.
This second expansion of the Bakken NGL pipeline, which is to be complete during first-half 2016, will increase its capacity to 160,000 b/d to accommodate NGL volumes from the new Lonesome Creek plant.
The Bakken NGL pipeline is currently being expanded to 135,000 b/d from an original capacity of 60,000 b/d. This previously announced initial expansion is to be complete in third-quarter 2014.
EPP starts up eighth Mont Belvieu fractionator
Enterprise Products Partners LP (EPP) has started operations on its latest 85,000 b/d natural gas liquids fractionator at the partnership's Mont Belvieu, Tex., complex.
The unit is the facility's eighth fractionator, boosting total NGL fractionation capacity at Mont Belvieu to 655,000 b/d. EPP began operations on its seventh NGL fractionator, also with 85,000 b/d capacity, in September (OGJ Online, Sept. 18, 2013).
EPP said the increased capacity allows further NGL production from shale plays such as the Eagle Ford and other basins in the Rocky Mountain and Midcontinent regions. EPP now has more than 1 million b/d of NGL fractionation capacity across its systems, the company said.
The two newest fractionators were constructed as part of a joint venture with Anadarko Petroleum Corp. affiliate Western Gas Partners LP. EPP operates the units and holds 75% interest while Western Gas holds the remaining 25%.
Utah approves HollyFrontier's refinery expansion
The Utah Department of Environmental Quality's Division of Air Quality (UDAQ) has approved HollyFrontier Corp.'s proposed heavy crude processing project at the company's 31,000-b/d Woods Cross refinery, north of Salt Lake City.
UDAQ issued its final approval order to HollyFrontier on Nov. 18 after its review of public comments on revised modifications to the project that were submitted to the agency during a 45-day period that lasted from June 1 to July 25.
Intended to boost the Woods Cross refinery's capability to process black wax from the Uinta basin, the proposed project includes the addition of a crude processing unit, a fluid catalytic cracking unit, a polygasoline unit, a hydro-isomerization unit for lube oils, crude unloading bays, several storage tanks, and additional wastewater treatment, according to UDAQ's web site.
Phase 1 of the proposed expansion will increase processing capacity at the refinery to 45,000 b/d and will be supported by a 10-year agreement with Newfield Exploration Co. for the supply of 20,000 b/d of black and yellow wax crude oil from the Uinta basin (OGJ Online, Jan. 4, 2012).
Following the completion of Phase 1 in early 2015, a second phase of the expansion, expected to be completed by 2016, would lift the refinery's processing capacity to 60,000 b/d, according to a HollyFrontier investor presentation from September.
HollyFrontier has said the estimated capital spend for expansion of the Woods Cross refinery—including Phase 1 and potential Phase 2—will be $625-725 million (OGJ Online, Mar. 4, 2013).
Explosion hits Total's Belgian refinery
Total SA reported an explosion occurred early in the afternoon on Nov. 19 in one of the installations at its 338,000-b/d Antwerp, Belgium, refinery.
The blast, which occurred in a steam system of a gasoline-producing unit during maintenance activities, resulted in two fatalities, the company said in an e-mailed statement.
While the refinery was evacuated and partially shut down, the explosion did not result in a fire or any release of hydrocarbons into the atmosphere, according to Total.
Further details regarding the cause of the explosion or the impact to production at the refinery were not disclosed.
Chevron's Pascagoula refinery running at normal rates
Chevron Corp's 330,000-b/d Pascagoula, Miss., refinery is operating at normal rates following a Nov. 15 fire at a furnace in the Cracking II unit area of the plant (OGJ Online, Nov. 15, 2013).
"We continue to operate at normal capacity and produce finished products," Chevron said in a statement posted to its web site early on Nov. 18.
Chevron has secured the affected area of the refinery, and the company is cooperating with the US Occupational Safety and Health Administration in an investigation into the cause of the fire, the company said.
OSHA already made a site visit to the Pascagoula refinery on Nov. 15, and Chevron expects the agency to return this week, according to the company statement.
TRANSPORTATION — Quick Takes
Alaska releases LNG project commerciality study
Alaska's Department of Natural Resources released a study of the commercial aspects of a proposed LNG export project the three major North Slope oil and gas producers and TransCanada Corp. are pursuing.
The 191-page Alaska North Slope Royalty Study by Black & Veatch analyzes key issues that state agencies and legislators will consider before setting fiscal terms for a gas pipeline.
It examines LNG market conditions and the global supply chain, reviews fiscal terms that have been established for successful LNG export projects around the world, and looks at the commercial risks of various business structures for an Alaska project, DNR said.
The study demonstrates that an LNG export project can compete for a place in the Asian LNG markets, but it will likely take changes to Alaska's fiscal terms to ensure a successful project, Natural Resources Commissioner Joe Balash said in Anchorage on Nov. 18.
"We have some work to do, but the good news in this report is that we don't have to sacrifice our royalty revenue in the future to get a project going," he indicated.
Balash said the study also demonstrates that misaligned interests between the state and project sponsors could diminish the state's royalty value.
ANS lessees pay a minimum of 12.5% royalty on all hydrocarbons produced and sold, he explained. The value of that royalty is measured at the lease after transportation costs are deducted. Depending on the business and financing structure chosen by project sponsors, those transportation charges can be higher or lower—with the opposite impact on royalty values.
"If we can find a way to better align our interests with the project sponsors, we can ensure Alaskans get the full value of their ownership of the resource," Balash said.
US gas exports into Mexico to continue growth
Natural gas imports into Mexico from the US—its largest supplier—increased 24% to 1.69 bcfd in 2012, according to data from the US Energy Information Administration cited by law firm Mayer Brown in a legal update on US Federal Energy Regulatory Commission permitting of NET Mexico Pipeline Partners LLC's cross-border gas export project.
FERC issued a Presidential Permit and Granting Authorization Nov. 8 (under Section 3 of the Natural Gas Act) allowing NET Mexico, a subsidiary of NET Midstream, Houston, to build a 2.1-bcfd gas export site at the US-Mexico border.
According to the FERC order, the export hub will be supplied by a 120-mile, 42-in OD intrastate pipeline NET Mexico is planning to build from the Agua Dulce Hub in Nueces County, Tex. Exports would enter Mexico's Los Ramones Pipeline, which has yet to be built (OGJ Online, May 21, 2013).
The FERC order adds that the export facility was "necessary to meet the expanding fuel demand for power generation and industrial activity in Mexico" and to promote North American trade. Gas flows from US pipelines accounted for about 80% of Mexico's overall gas imports in 2012.
Phillips 66 extends Cross-Channel line open season
Phillips 66 Pipeline LLC, a wholly owned subsidiary of Phillips 66, is extending its open season deadline for the Cross-Channel Connector project to Dec. 12. The extension comes at the request of shippers who want more time to evaluate the project.
The company is soliciting binding commitments to transport refined products from the south side of the Houston Ship Channel to the Magellan Midstream Partners and Kinder Morgan Energy Partners systems on the north side of the HSC at Galena Park and East Houston.
As part of this project, Phillips 66 Pipeline is proposing to reactivate an idle section of 20-in. pipeline under the HSC and expand an existing 20-in. active line in Pasadena, Tex. The Cross-Channel Connector could be fully operational in 2014, subject to timely market commitments and receipt of the necessary permits and regulatory approval, the company said.