GENERAL INTEREST Quick Takes
China imposes 10% tariff on US LNG
China has imposed a 10% tariff on LNG imports from the US, describing the measure as a response to the latest US tariffs on $200 billion of Chinese goods. The 10% tariff includes other products as well to affect $60 billion worth of trade and went into effect Sept. 24, according to China’s ministry of commerce. The tariffs were less than the 25% rate publicly contemplated by China in August 2018. Crude oil was excluded from the latest tariff announcement.
China’s LNG tariffs, given the size of its market, could hinder development of a second wave of US LNG export projects as final investment decisions approach by making LNG from other export regions more attractive. The International Energy Agency in its Gas 2018 annual report released in June predicted that China would become the world’s largest importer of natural gas in 2019, its overall demand expected to grow 60% between 2017 and 2023, reaching 376 billion cu m (bcm). IEA predicted China’s LNG imports would reach 93 bcm over the same period, from 51 bcm in 2017, an 82% rise.
PetroChina and Qatar recently announced a 22-year deal for supply of 3.4 million tonnes/year of LNG produced by Qatargas, starting immediately. “Such a large deal would have been under negotiation before the early August announcement that China planned to impose 25% tariffs on US LNG imports,” notes Alex Froley, ICIS LNG analyst. “Nevertheless, the contract will help underpin Qatar’s plan to expand production by 30% [to 100 million tpy] by 2023, while developers of new US LNG export projects must [hope] that the US-China trade war will cool soon to help them win more of the long-term deals they need to secure FIDs.”
ExxonMobil to join oil, gas climate initiative
ExxonMobi Corp. will join the Oil & Gas Climate Initiative (OGCI), a group of 13 of the world’s largest oil and gas producers working collaboratively toward solutions to mitigate the risks of climate change. The CEO-led organization focuses on developing practical solutions in areas including carbon capture and storage, methane emissions reductions, and energy and transportation efficiency (OGJ Online, Oct. 27, 2017). As part of the initiative, ExxonMobil will expand its investment in R&D of long-term solutions to reduce greenhouse gas emissions as well as partnerships and multi-stakeholder initiatives that will pursue lower-emission technologies.
“Our mission is to supply energy for modern life and improve living standards around the world while minimizing impacts on the environment. This dual challenge is one of the most important issues facing society and our company,” said Darren Woods, ExxonMobil chairman and chief executive officer.
Earlier this year, ExxonMobil announced initiatives to lower GHG emissions associated with its operations by 2020, including reducing methane emissions 1% and flaring by 25%.
OGCI was established following the 2014 World Economic Forum and formally launched at the United Nations Climate Summit the same year. Members include BP, Chevron, CNPC, Eni, Equinor, ExxonMobil, Oxy, Pemex, Petrobras, Repsol, Shell, Aramco, and Total.
OGCI sets first collective methane target
The Oil & Gas Climate Initiative (OGCI) set a target to reduce by 2025 the collective average methane intensity of its aggregated upstream gas and oil operations by one-fifth to below 0.25%, with the ambition to achieve 0.2%, corresponding to a reduction by one-third. The methane intensity refers to the methane that gets lost in the atmosphere when producing oil and gas, as a percentage of the gas sold.
Achieving the intensity target of 0.25% by the end of 2025 would reduce collective emissions by 350,000 tonnes/year of methane, compared with the baseline of 0.32% in 2017.
“Our aim is to work towards near zero methane emissions from the full gas value chain in support of achieving the goals of the Paris Agreement. We have worked to make our ambition concrete, actionable and measurable, helping to ensure that natural gas can realize its full potential in a low-emissions future,” the heads of the OGCI member companies said.
Member companies will target key emissions sources and are engaging with other companies in the industry to help ensure that methane emissions are addressed across the full gas value chain (OGJ Online, Oct. 27, 2017).
Through its $1-billion-plus investment fund, OGCI Climate Investments, OGCI aims to increase the ambition, speed, and scale of initiatives to reduce greenhouse gases. For 2018, OGCI Climate Investments is focused on recycling and storing carbon dioxide and on reducing methane emissions.
Expanding its global impact, OGCI Climate Investments has partnered with Chinese National Petroleum Corp. to create OGCI Climate Investments China, an investment fund focused on China.
CME Group to launch WTI Houston futures contract
CME Group will offer a new West Texas Intermediate Houston crude oil futures contract with three physical delivery locations on the Enterprise Houston system. Pending regulatory review, WTI Houston oil futures will be listed with and subject to the rules of the New York Mercantile Exchange, beginning with the January 2019 contract month.
Participants will be able to make or take delivery of US light sweet crude oil at the Enterprise Crude Houston (ECHO) terminal, Enterprise Houston Ship Channel (EHSC), or Genoa Junction through the new contract.
“Houston’s importance as a trading and export hub for physical crude oil from Cushing and the Permian basin continues to evolve due to the shale oil revolution and repeal of the crude oil export ban,” said Peter Keavey, CME Group global head of energy. The WTI Houston contract “offers commercial customers and physical traders a way to hedge their physical price risk, enhances the transparency of US crude oil prices on the water in Houston, and reinforces the strength of our global benchmark WTI Cushing contract,” Keavey said.
Total ups share in Danish Underground Consortium
Total SA has agreed to purchase from Chevron Corp. all the share capital of Chevron Denmark Inc., which holds 12% interest in the Danish Underground Consortium (DUC), 12% interest in license 8/06, and 7.5% interest in the Tyra West pipeline.
The acquisition will increase Total’s operated share of DUC to 43.2%. Partners are Royal Dutch Shell PLC, 36.8%, and Danish state-run Nordsofonden, 20%. The consortium, which started production in 1972, operates 15 fields in the Central Graben area of the North Sea and covers nearly 90% of the Danish oil and gas production. Production in 2017 averaged 182,000 boe/d.
Following Total’s acquisition of Maersk Oil, the deal further expands the company’s presence on the Danish shelf, increases its interest in company-operated asset, and allows the company to benefit from Tyra gas field, said Michael Borrell, senior vice-president, North Sea and Russia (OGJ Online, Aug. 21, 2017).
Start-up of Tyra field after redevelopment, sanctioned by the DUC partners in December 2017, is planned in 2022 (OGJ Online, Dec. 5, 2017). It will enable a production capacity of 60,000 boe/d.
Exploration & DevelopmentQuick Takes
Total makes gas discovery offshore UK
Total SA made a natural gas discovery on the Glendronach prospect offshore UK West of Shetland that it believes can be commercialized quickly and at low cost by leveraging the existing Laggan-Tormore infrastructure.
The well, drilled to a final depth of 4,312 m, encountered a gas column of 42 m of net pay in a high-quality Lower Cretaceous reservoir. Preliminary tests confirm good reservoir quality, permeability, and well production deliverability, with recoverable resources estimated at about 1 tcf, Total said.
Total said the discovery, which was drilled in 300 m of water on Block 206/04a in a formation below the Edradour reservoir, can be developed quickly with the existing systems around Edradour field and the Laggan-Tormore facilities of the Shetland gas plant (OGJ Online, Aug. 30, 2017).
“Glendronach is a significant discovery for Total which gives us access to additional gas resources in one of our core areas and validates our exploration strategy,” said Arnaud Breuillac, Total president, exploration and production.
Glendronach is operated by Total E&P UK with 60% interest. Partners are Ineos E&P UK, 20%, and SSE E&P UK, 20%.
Total updates Shwe Yee Htun-2 appraisal off Myanmar
Total SA reported encouraging preliminary test results from the Shwe Yee Htun-2 natural gas discovery on A6 Block offshore Myanmar. An appraisal well, drilled to 4,820 m TD, encountered 40 m of net pay in a high-quality reservoir that Total executives believe offers production deliverability.
The Shwe Yee Htun-2 follows earlier A6 Block discoveries: Shwe Yee Htun-1 in 2016 and Pyi Thit-1 in 2017, Total said. It estimates cumulated A6 Block resources at 2-3 tcf.
“This new discovery on A6 Block is a major step towards unlocking new gas reserves,” said Arnaud Breuillac, president of Total’s exploration and production. “Total’s track record of Myanmar’s Yadana gas field exploitation is a key asset to lead these discoveries to commercial development.”
Total holds 40% interest in A6 Block. Woodside Energy Ltd. holds 40% interest as a technical joint operator for exploration and appraisal operations. MPRL E&P Pte. Ltd. has 20% interest. Joint venture agreements call for Total to be the operator during development.
Total E&P Myanmar (TEPM) is the operator with 31.2% interest of M5 and M6 blocks on Yadana offshore gas field. Yadana came on stream in 1998. Production from M5-M6 blocks supply 50% of Myanmar’s gas consumption and 12% of Thailand’s gas consumption.
In 2017, TEPM brought the Badamyar project on stream, extending Yadana gas field’s production plateau beyond 2020.
Pemex, Talos sign preunitization pact
Petroleos Mexicanos (Pemex) and a Talos Energy group have signed a preunitization agreement allowing the sharing of information about contiguous shallow-water areas offshore Mexico.
One of the blocks, the Talos group’s Block 7 production-sharing contract area, contains the 2017 Zama oil find, where the group earlier this year reported plans for an appraisal well.
Pemex operates the adjacent Amoca-Yaxche-03 allocation area, tracts within which are covered by the new agreement.
Pemex said the 2-year pact is the first of its kind in Mexico. The agreement allows sharing of information about the Zama discovery and its potential extension into the Pemex area.
It also provides for the signing of unitization and unit-operating deals if a shared reservoir is confirmed. The parties will form a group to manage affairs covered by the pact.
Drilling & ProductionQuick Takes
India seeks to boost oil, gas recovery
India’s Union Cabinet has approved a policy framework aimed at boosting oil and gas production through enhanced and improved recovery and development of unconventional resources.
The framework includes financial incentives through the partial waiver of taxation or royalties on incremental production.
A government statement said the objective “is to build a supportive ecosystem through academic and research institutes, industry-academia collaboration, and to support and encourage exploration and production contractors to deploy” methods to boost rates of oil and gas recovery.
“The policy envisages systemic assessment of every field for its [enhanced recovery] potential, appraisal of appropriate ER techniques, and fiscal incentives to derisk the cost involved in ER projects to make the investment financially viable,” it said.
The framework calls for creation of an Enhanced Recovery Committee with members from the Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons, and experts from industry and academia “to monitor and implement the policy.”
The policy will be effective for 10 years. Fiscal incentives will be available for 120 months from the start of production in ER and unconventional resource projects. In improved recovery projects, starting points for incentives will be dates of achievement for prescribed benchmarks.
Aramco lets Berri drilling-island contract
Saudi Aramco has let a contract to China Harbour Engineering Arabia for construction of two drilling islands in its expansion of Berri oil field. The expansion will double Berri production capacity to 500,000 b/d of Arabian Light crude. It includes installation of a gas oil separation plant on Abu Ali Island and 40,000 b/d of additional condensate-processing capacity at the Khursaniyah Gas Plant. China Harbour will build the drilling islands near shore on the north and south sides the King Fahad Industrial Port causeway in Jubail to support the Berri production capacity islands.
Drill Site A will cover 616,533 sq m, and Site B will cover 263,855 sq m.
Giant Yamal field’s third phase starting
Gazprom is placing onstream the third production facility at giant Bovanenkovskoye gas and condensate field in the Yamal Peninsula of northwestern Siberia.
The facility will allow the field to produce as much as 115 billion cu m/year (OGJ Online, Mar. 2, 2017).
Initial production is from Cenomanian-Aptian deposits. Gazprom expects later development of Neocomian-Jurassic reservoirs to allow production to reach 140 billion cu m/year.
A loop of the 1,260-km, 1.42-m OD pipeline between Bovanenkovskoye and Ukhta is in operation. And a loop of the 970-km, 1.42-m OD pipeline between Ukhta and a tie-in with existing systems at Torzhok is to be complete year.
Gazprom Neft, CNPC set oil-recovery study
Gazprom Neft and China National Petroleum Corp. will study feasibility of surfactant flooding of Sutorminskoye oil field in Russia’s Yamal-Nenets Autonomous Area as a first step under a new technical partnership. The companies agreed to develop and adopt advanced techniques for increasing oil recovery, including polymer and surfactant injection.
Gazprom Neft claimed a “successful track record” with those methods, saying they helped boost recovery to 69% in a depleted area of West Salymskoye field in the Yamal-Nenets Autonomous Area. CNPC said polymer flooding has been effective in Daqing oil field in China.
Subsalt shelf well uses deepwater methods
GulfSlope Energy Inc., Houston, has spudded its first well in a program using deepwater drilling and completion technologies for subsalt exploration on the Gulf of Mexico shelf.
The Rowan Ralph Coffman jack up rig is drilling the Tau Prospect well in 305 ft of water on Ship Shoal Area, South Addition Block 336. The well will penetrate almost 10,000 ft of salt, with a target depth of 26,000 ft TVD (29,728 ft MD). Horizontal displacement will be about 10,000 ft.
The well will test Upper and Middle Miocene sands that are prolific in deep water and are expected at the Tau Prospect to be trapped against the western flank of a deep-seated salt ridge.
GulfSlope CEO John N. Seitz said the company used reverse time migration depth imaging and “critical noise-suppression technologies” to improve imaging below salt.
“We built upon the intensive subsalt drilling efforts in deep water, leading to a better understanding of the depositional models, and now we are bringing advancements in drilling and completion technology that were pioneered in deepwater subsalt exploration back to the shelf,” he said.
GulfSlope operates the well with a 20% working interest. Other working interests are Delek GOM Investments LLC, 75%, and Texas South Energy Inc., 5%.
Earlier, GulfSlope suspended for possible reentry the OCS-G-35589 No. 1 well on its Canoe Shallow Prospect on Vermilion Block 378. It said logging-while-drilling analysis and fluid sampling indicated the presence of oil sands. The company plans a full integration of well information and seismic data.
Cuadrilla’s second UK frac job approved
Privately owned Cuadrilla is preparing to frac the two horizontal wells it has drilled on its Preston New Road site in Lancashire, UK, after receiving government approval for the second completion. It received approval to frac the first well in July.
Cuadrilla, based in Bamber Bridge, UK, plans to run initial flow tests at both wells for about 6 months. It drilled the first well into Carboniferous Lower Bowland shale at 2,300 m and the second in Upper Bowland shale at 2,100 m.
It says the wells are the first horizontal shale exploration wells drilled onshore in the UK, where popular resistance against hydraulic fracturing is strong.
PROCESSINGQuick Takes
ExxonMobil plots major upgrades at UK refinery
ExxonMobil Corp. is considering a plan to make major upgrades at subsidiary Esso Petroleum Co.’s 270,000-b/d Fawley refinery near Southampton, UK.
Intended to enable the refinery to help meet the UK’s changing fuel demand and reduce the region’s reliance on diesel imports, the multimillion-pound project would involve works designed to allow the manufacturing site to process a wider selection of crude oils, ExxonMobil said.
The project would include installation of a hydrotreating unit as well as a hydrogen plant.
“If this project is approved, it would be a major investment in the site amounting to hundreds of millions of pounds, and a bold statement of confidence in Fawley and its ability to produce high quality fuels for the UK economy,” said Simon Downing, manager of the Fawley refinery.
A final investment decision on the project—which will be based on many factors, including regulatory approvals, market conditions, and economic competitiveness—is due by the end of first-half 2019, ExxonMobil said.
Situated on the western side of Southampton Water, the Fawley refinery—the UK’s largest—features a mile-long marine terminal that annually handles about 2,000 ship movements and 22 million tonnes of crude and other products.
Sidpec lets contract for polypropylene plant
Sidi Kerir Petrochemicals Co. (Sidpec) has let a contract to W.R. Grace & Co. to provide process technology licensing for a polypropylene (PP) plant at its petrochemicals manufacturing site in Alexandria, Egypt.
Grace will extend licensing of its proprietary all gas-phase Unipol PP process technology and supply nonphthalate CONSISTA catalyst for the proposed PP plant that, once completed, will produce 450,000 tonnes/year of PP. The transaction means that Sidpec, already a leader in the production of polyethylene in Egypt, will soon produce value-added PP products for its customers using the most up-to-date technology available.
Investment in the PP plant and selection of Grace technology come as part of Sidpec’s plan to expand its range of products as well as enhance competitiveness of its operations in the region, said Chairman and CEO Mohamed A. Abady.
Sidpec’s Alexandria manufacturing complex currently houses a 300,000-tpy ethylene plant, 225,000-tpy polyethylene plant, 50,000-tpy LPG unit, and 10,000-tpy butene-1 unit.
TRANSPORTATIONQuick Takes
Williams completes Atlantic Sunrise gas line
Williams Cos. has completed construction of its 1.7-bcfd, 200-mile Atlantic Sunrise natural gas pipeline, which is ready to be placed into service pending final approval from the US Federal Energy Regulatory Commission.
Backed by long-term shipper commitments, the expansion of the existing Transco gas line will connect Marcellus formation gas supplies with the US Mid-Atlantic (including Dominion Energy’s Cove Point LNG plant) and the US Southeast.
Greenfield construction on the project’s Pennsylvania portion began in September 2017. The project included two greenfield compressor stations and compressor station modifications in five states. The segment of the project known as the Central Penn Line will be jointly owned by Transco and a third party.
FERC initially authorized the project in February 2017, concluding that environmental impacts associated with it would be reduced to “less than significant levels” with the implementation of mitigation measures.
Atlantic Sunrise cost nearly $3 billion.
Cyprus, Egypt back Aphrodite gas pipeline
Officials of Cyprus and Egypt have signed an agreement supporting construction of a pipeline to carry natural gas from deepwater Aphrodite field off the island nation to Egypt, according to press reports.
Cypriot Energy Minister Georgios Lakkotrypis and Egyptian Petroleum Minister Tarek el Molla signed the agreement, which sees liquefaction of the gas in Egypt for export to Europe.
Also under discussion as an option for Aphrodite gas is the East Mediterranean proposal for a 2,100-m pipeline that also would carry gas from nearby Leviathan field offshore Israel through Greece to Italy (OGJ Online, Dec. 8, 2017).
Enable Midstream plans Gulf Run gas line
Enable Midstream Partners LP, Oklahoma City, launched a nonbinding open season to gather additional interest for firm natural gas transportation capacity on the Gulf Run Pipeline, a planned interstate transportation project designed to connect US gas supplies to LNG export markets on the Gulf Coast.
The project is backed by a precedent agreement with a cornerstone shipper for a 20-year, 1.1 bcfd of firm capacity service.
Subject to a final investment decision by the cornerstone shipper for the LNG export facility to be served by this project and approval of the project by the US Federal Energy Regulatory Commission, up to an estimated 165 miles of large-diameter pipeline will be constructed from northern Louisiana to Gulf Coast markets. The project will utilize existing Enable Gas Transmission LLC transportation system to provide access to gas-producing regions, including the Haynesville, Marcellus, Utica, and Barnett shales as well as the Midcontinent region.
The project is expected to be placed into service in 2022.
The open season continues through Oct. 26.
