OGJ Newsletter

Oct. 8, 2018
International news for oil and gas professionals

GENERAL INTERESTQuick Takes

Trump applauds Europe’s energy source diversification

US President Donald Trump applauded European nations’ efforts to diversify their sources of energy during his Sept. 25 address to the United Nations.

“Reliance on a single foreign supplier can leave a nation vulnerable to extortion and intimidation. That is why we congratulate European states, such as Poland, for leading the construction of a Baltic pipeline so that nations are not dependent on Russia to meet their energy needs,” he said.

“Around the world, responsible nations must defend against threats to sovereignty not just from global governance, but also from other, new forms of coercion and domination,” Trump warned. As the world’s biggest energy producer, the US strongly in energy security for itself and its allies, and stands ready to export its abundant, affordable crude oil, clean coal, and natural gas, he said.

Trump then criticized the Organization of Petroleum Exporting Countries and its members, who he said are, “as usual, ripping off the rest of the world, and I don’t like it. Nobody should like it. We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good.”

Trump said, “We want them to stop raising prices, we want them to start lowering prices, and they must contribute substantially to military protection from now on. We are not going to put up with it—these horrible prices—much longer.”

DJR Energy to acquire San Juan assets from Encana

DJR Energy LLC, Denver, will acquire from Encana Oil & Gas (USA) Inc. its San Juan basin assets in New Mexico in a $480-million deal.

The assets include 182,000 net acres that delivered average production of 5,400 boe/d, including 3,900 b/d of liquids, in 2017. When combined with existing assets, DJR Energy will have over 350,000 net acres focused in the oil window of the basin with production over 6,000 b/d oil equivalent, and an inventory of over 1,100 ‘high value’ drilling locations, the company said.

Encana continues to focus on liquids growth in the Montney in western Canada and is confident in its ability to hit the fourth-quarter target range, Jefferies analysts said in a note following the news (OGJ Online, Apr. 21, 2017).

“[Encana] reported 2Q Montney liquids production of 36,000 b/d and noted that production at the time was running at 45,000 b/d. [Encana] is in the process of doubling Montney liquids production for the second consecutive year, with a fourth-quarter] target of 55,000-65,000 b/d. The company believes the early startup of the Tower liquids hub (9,000 b/d net condensate capacity) further derisks the [fourth quarter] liquids target. The Pipestone liquids hub (10,500 b/d) remains on schedule for an early [fourth-quarter] startup, and [Encana] remains confident in its ability to hit the [fourth-quarter] liquids target,” the analysts said.

Timor-Leste to buy Greater Sunrise fields interest

The Timor-Leste government has agreed to acquire from ConocoPhillips the company’s 30% interest in the Greater Sunrise fields on the maritime border between Australia and East Timor for $350 million (OGJ Online, Feb. 27, 2018).

“ConocoPhillips has a long history in Timor-Leste through our operated interest in the Bayu-Undan field. Although we differ with the government on its proposed development plan for Sunrise, we recognize the importance of the field to the nation of Timor-Leste, and the sale of our interest to the government gives them a working interest in this important development,” said Matt Fox, ConocoPhillips executive vice-president, strategy, exploration, and technology.

The transaction, expected to close in first-quarter 2019, is subject to certain conditions, including funding approval from the Timor-Leste government, regulatory approvals, and partner preemption rights.

Exploration & DevelopmentQuick Takes

Majors awarded Brazil presalt acreage in auction

ExxonMobil Corp., Royal Dutch Shell PLC, BP PLC, and Petroleo Brasileiro SA (Petrobras) added operated exploration positions with awards in Brazil’s 5th presalt bid round conducted by the National Agency of Petroleum, Natural Gas, and Biofuels (ANP) where areas of the Saturno, Tita, Pau-Brasil, and Sudoeste de Tartaruga Verde blocks in the Campos and Santos basins were offered.

ExxonMobil will partner with Qatar Petroleum on the Tita exploration block in the Santos basin off Brazil, which adds more than 71,500 net acres to ExxonMobil’s deepwater portfolio offshore Brazil. ExxonMobil will serve as operator with 64% interest. Through the remainder of 2018 and into 2019, ExxonMobil will obtain 3D seismic coverage and continue work on regulatory requirements for exploration drilling by 2020, the company said.

Shell Brasil Petroleo Ltda. and its bid consortium member Chevron Brasil Oleo & Gas Ltda. were awarded a 35-year production-sharing contract for the Saturno presalt block in the Santos basin. With the award, Shell increases its total net acreage off Brazil to 2.7 million acres. Shell will serve as operator with 50% interest and says it will engage with Chevron to define specific plans for exploration drilling in the area.

BP was awarded the Pau-Brasil block in the Santos basin where it will serve as operator with 50% interest along with partners CNOOC Ltd., 30%, and Ecopetrol, 20%.

Petrobras was awarded Sudoeste de Tartaruga Verde in the Campos basin.

The 5th presalt bid round was the last ahead of Brazil’s presidential election.

New Indian blocks due $820 million outlay

Companies awarded 55 blocks in India’s first open-acreage licensing bid round collectively have committed to invest the equivalent of $820 million in exploration, Petroleum Minister Dharmendra Pradhan said at a contract-signing event in New Delhi.

Vedanta Ltd. dominated the bidding and received 41 blocks (OGJ Online, Aug. 29, 2018). Five other companies, out of nine companies bidding alone or in groups, were awarded blocks.

Pradhan said the 59,282 sq km covered by the new blocks is about 65% of the total area now under exploration in India.

BOEM proposes area-wide Gulf of Mexico lease sale

The US Bureau of Ocean Energy Management plans to offer 78 million acres in the Gulf of Mexico in a region-wide oil and gas lease sale, Deputy US Interior Sec. David Barnhart and BOEM Acting Director Walter D. Cruickshank jointly announced. The sale will include all available unleased areas there, they said on Sept. 25.

OCS Sale No. 252, which will be streamed live from New Orleans, will be the fourth offshore sale under the 2017-22 Outer Continental Shelf Oil and Gas Leasing Program. Under the program, 10 region-wide sales are scheduled for the gulf, where resource potential and industry interest are high, and oil and gas systems are well established. Two gulf lease sales will be held each year and include all available blocks in the combined western, central, and eastern planning areas.

The portion of the gulf, covering about 160 million acres, is estimated to contain about 48 billion bbl of undiscovered technically recoverable crude oil and 141 tcf of undiscovered technically recoverable natural gas, BOEM said.

Sale No. 252 will include 14,696 unleased blocks, 3-231 miles offshore and in 9-11,115 ft of water.

BP wins approval for Vorlich development

BP PLC expects production to begin in 2020 from Vorlich gas condensate field in the Central North Sea, for which it has received development approval from the UK Oil and Gas Authority (OGJ Online, Apr. 16, 2018).

Vorlich will produce as much as 20,000 b/d of condensate from two wells completed subsea and tied back to Ithaca Energy Ltd.’s FPF-1 floating production vessel at the center of the Greater Stella Area hub.

Vorlich is in 75 m of water on Block 30/1c UPPER, 241 km east of Aberdeen. BP expects to recover more than 30 million boe of hydrocarbons.

BP, operator, has a 66% interest. Ithaca Energy holds 34%.

Wintershall gets approval for Nova development

Wintershall Norge AS expects production to begin in 2021 from Nova field (formerly Skarfjell) in the northeastern North Sea, for which it received development and operation approval from the Ministry of Petroleum and Energy (OGJ Online, May 16, 2018).

The field, 120 km northwest of Bergen, Norway, will be developed as a subsea tie-back connecting two templates to the Neptune Energy-operated Gjoa platform for processing and export. Nova is 17 km southwest of Gjoa. Gjoa also will provide lift gas to the field and water injection for pressure support. Power for Nova field comes via the Gjoa platform from shore.

A subsea production system contract, let to Aker Solutions, consists of two templates with manifolds, seven subsea trees including one spare, umbilicals, and associated tie-in and controls equipment. A pipeline and subsea construction contract was let to Subsea 7. Another contract secures Seadrill Norway Operations Ltd. to operate the West Mira semisubmersible on behalf of Northern Drilling (OGJ Online, July 3, 2018).

Investment in the Nova development is estimated at €1.1 billion. Recoverable reserves of the field are estimated at 80 million boe, the majority of which is oil, Wintershall said.

Nova will be Wintershall Norge’s third operated subsea field, after Vega, which is also tied back to the Gjoa platform, and and Maria in the Norwegian Sea.

Nova interests are operator Wintershall 35%, Capricorn Norge AS and Spirit Energy, 20% each, Edison Norge AS 15%, and DEA Norge AS 10%.

Drilling & ProductionQuick Takes

Umm Lulu-SARB output rising off Abu Dhabi

ADNOC Offshore has started production from full development of Umm Lulu and Satah Al Razboot (SARB) oil fields offshore Abu Dhabi, reports partner OMV AG.

Initial capacity is 50,000 b/d of oil. Production will rise to 129,000 b/d by yearend and to 215,000 b/d by 2023.

OMV and Cepsa of Spain, a wholly owned subsidiary of Mubadala Investment Co. of Abu Dhabi, each owns a 20% interest in the concession, which covers Umm Lulu and SARB fields as well as the Bin Nasher and Al Bateel satellites (OGJ Online, Apr. 5, 2018). ADNOC Offshore operates the concession with a 60% interest.

The fields are in shallow water, Umm Lulu 30 km and SARB 120 km off the Abu Dhabi coast. Their production flows by pipeline to dedicated processing, storage, and loading facilities on Zirku Island.

Abu Dhabi National Oil Co. and partners in the former concession, Japan Oil Development Co., BP PLC, and Total SA, began early production from Umm Lulu in 2014 (OGJ Online, Oct. 20, 2014).

Chevron, PTTEP make Bongkot, Erawan bids

Chevron Corp. and PTT Exploration & Production submitted the only bids for the expiring licenses of Bongkot and Erawan natural gas and condensate fields in the Gulf of Thailand, according to press reports.

Chevron, the current operator through subsidiary Chevron Thailand Holding, bid with Mitsui Oil Exploration for the Erawan license. PTTEP and Mubadala Petroleum of Abu Dhabi submitted a competing bid.

PTTEP bid alone for the Bongkot license, which it operates, against a bid from Chevron and Mitsui. Total, currently a 33.3% Bongkot partner with PTTEP, did not participate.

The current Bongkot license will expire 2023. The Erawan license will expire in 2022.

Winning bids are to be announced as soon as November and approved by the Thai cabinet by December.

Public can track UK frac site seismicity

Privately held Cuadrilla, Bamber Bridge, UK, is offering a public view of seismic activity around two horizontal wells it soon will hydraulically fracture in Lancashire, England.

The company will post records of daily seismic monitoring around its Preston New Road shale gas exploration site and surrounding area on an electronic portal open since April 2017. The portal provides a public view of its environmental work.

Cuadrilla recently received approval to fracture the second well at Preston New Road against strong public opposition (OGJ Online, Sept. 20, 2018). The wells penetrated Carboniferous Upper and Lower Bowland shale.

The UK Oil and Gas Authority requires that operations cease if fracturing induces a seismic event of 0.5 local magnitude (ML) or above. Local magnitude is a Richter-like standard for measuring shallow events at distances less than 600 km.

Using high-sensitivity seismometers, the University of Liverpool has been monitoring the region around Cuadrilla’s 4.8-sq-km Preston New Road operational area, documenting regular, naturally occurring events of 1.5-2.0 ML.

Events below 1.5 ML are unlikely to be widely felt at the surface, according to a University of Liverpool professor working on the project.

PROCESSINGQuick Takes

Marathon completes Andeavor acquisition

Marathon Petroleum Corp. closed on the acquisition of Andeavor to create the largest US refiner by capacity and one of the top five largest refiners globally (OGJ Online, Apr. 30, 2018). Along with Marathon’s six existing refineries in the US Gulf Coast and Midwest, the combined company would operate 16 US refineries with an overall throughput capacity of more than 3 million b/d (OGJ Online, Sept. 24, 2018).

With the deal’s close, the company will begin unlocking potential across the new platform, Marathon Petroleum Chairman and CEO Gary R. Heminger said, “including approximately $1 billion of tangible annual run-rate synergies we expect within the first 3 years.”

Ineos signs PDH technology license

Ineos AG will use Lummus technology from McDermott for the propane dehydrogenation (PDH) unit it plans to build with a gas cracker in northwestern Europe (OGJ Online, July 3, 2018).

It signed a license agreement and an agreement with Clariant for long-term supply of catalyst for the PDH unit, which will be able to produce 750,000 tonnes/year of propylene to feed Ineos polypropylene plants and other propylene-derivative businesses.

Ineos expects to commission the PDH unit in 2023.

It said it will announce location of the €2.7-billion cracker-PDH complex “later in the year.”

Bay-Pol reaches FID on Bayport polyethylene unit

Bayport Polymers LLC (Bay-Pol)—an equal joint venture of Total SA and the Borealis AG-Nova Chemicals Inc. JV Novealis Holdings LLC—has taken final investment decision to build a 625,000-tonne/year polyethylene (PE) unit at the Bay-Pol’s 400,000-tpy PE production site in Bayport, Tex.

To be equipped with Borealis’ proprietary Borstar PE process technology, the unit will more than double the site’s PE production capacity to 1.1 million tpy, Bay-Pol said.

With a contract for engineering, procurement, and construction of the project already awarded to McDermott International Inc. (formerly CB&I), the unit is scheduled for startup sometime in 2021.

First announced in May, the proposed Borstar PE plant project comes as part of Bay-Pol’s strategy to help meet growing global demand for PE by taking advantage of competitively priced ethane feedstock from US shale production and easy export access to markets abroad and follows official start of construction on Bay-Pol’s 1 million-tpy ethane steam cracker at Total’s 200,000-b/d integrated refining complex in Port Arthur, Tex. (OGJ Online, June 5, 2018).

The $1.7-billion ethane steam cracker—on which McDermott is also delivering EPC services—remains on schedule for commissioning in late 2020.

Chinese refiner lets contract for olefins unit

Lihuayi Group Co. Ltd. subsidiary Lihuayi Lijin Refining & Chemical Co. Ltd. (formerly Lijin Petrochemical Plant Co. Ltd.) has let a contract to KBR Inc. to supply technology licensing, catalyst, and basic engineering design services for an olefins production unit at its 5.5 million-tonne/year refining complex in Dongying, China.

In addition to basic engineering design services, KBR will deliver licensing for its proprietary Catalytic Olefins Technology (K-COT) and Selective Cracking Optimum Recovery (SCORE) technology for the proposed unit, the service provider said.

The unit—for which a capacity was not disclosed—comes as part of a strategy designed to enable Lihuayi to increase overall profitability by further integrating its refinery with petrochemical production as well as increase its market competitiveness, said Xu Yunting, Lihuayi’s chairman and chief executive officer.

TRANSPORTATIONQuick Takes

Noble signs deals to support gas exports to Egypt

Noble Energy Inc., Houston, has executed multiple agreements to support delivery of natural gas from Leviathan and Tamar fields, offshore Israel, into Egypt through existing infrastructure.

With certain partners, Noble Energy will acquire a 39% equity interest in Eastern Mediterranean Gas Co. SAE, which owns the 90-km EMG Pipeline. Primarily offshore, the pipeline connects the Israel pipeline network from Ashkelon to the Egyptian pipeline network near El Arish.

The EMG group owns the EMG line, which once served as a spur from the Egyptian segment of Arab Gas Pipeline for delivery of gas to Israel but has been idle since 2011 because of sabotage of the main line (OGJ Online, Nov. 25, 2015).

Noble Energy will own an indirect interest of 10% in the pipeline on closing and is expected to operate the pipeline. Technical evaluation and flow reversal planning work on the EMG Pipeline is ongoing.

Conditions prior to closing include gaining regulatory and government approvals, obtaining technical third-party recertification of the EMG Pipeline, completing final due diligence, and confirming sustained gas flow. Estimated acquisition costs of $200 million are payable at closing, which is expected in early 2019.

Initial gas delivery through the EMG Pipeline is expected to occur from Tamar field to Dolphinus Holdings Ltd. in Egypt under the company’s existing interruptible gas sales agreement (OGJ Online, Feb. 19, 2018). At startup of Leviathan field by yearend 2019, Noble Energy expects to sell at least 350 MMcfd of gas (gross) to contracted customers in Egypt.

Meantime, the company secured an option for an additional route and capacity to transport natural gas within Egypt through a transportation agreement with Aqaba EL Arish Pipeline’s owner and operator.

Inpex ships first condensate from Ichthys project

Japanese operator Inpex Corp. has made its maiden shipment of condensate from the $40-billion Ichthys LNG project in the Browse basin offshore Western Australia.

The 350,000-bbl cargo was offloaded from the Ichthys Venturer floating production, storage, and offloading vessel moored 220 km off northwestern Australia.

The shipment is bound for Asia and is a milestone event in the massive project that is expected to have a 40-year life.

Inpex began gas production from the Ichthys wellheads at the end of July. The gas is gathered within the semisubmersible central processing facility (Ichthys Explorer) anchored near the field. Condensate is separated from the raw gas stream and piped to the nearby FPSO. The separated gas is then sent 890 km by subsea pipeline to Darwin.

Later this year the Ichthys project will begin shipments of LNG and LPG cargoes from the Darwin onshore LNG processing facility at Bladin Point.

At peak, the Ichthys project will produce as much as 8.9 million tpy of LNG, 1.65 million tpy of LPG, and 100,000 b/d of condensate.

Inpex has 62.245% and operatorship of the Ichthys project. Partners include Total SA 30%, CPC Corp. Taiwan 2.625%, Tokyo Gas 1.575%, Chubu Electric Power 0.735%, and Toho Gas 0.42%.

Woodside signs LNG supply deal with Uniper

Woodside Petroleum Ltd. subsidiary Woodside Energy Trading Singapore Ptd. Ltd. has signed a heads of agreement (HOA) with Germany energy firm Uniper Global Commodities SE for the supply of as much as 600,000 tonnes/year of LNG over a period of 4 years starting in 2019.

The LNG will be supplied from Woodside’s portfolio sources to Europe and Asia. Pricing arrangements have been kept confidential.

This is the second LNG agreement for Woodside outside its standard Asia-Pacific sphere and follows a similar deal with another German utility, RWE, in October 2017.

Woodside Chief Executive Officer Peter Coleman said this latest agreement illustrates the diversification of the company’s buyer relationships and the increasing interaction between participants in the Asia-Pacific and Atlantic LNG markets as international trading patterns become more liquid.

The HOA is conditional on the execution of a fully termed LNG sales and purchase agreement.