GENERAL INTEREST Quick Takes
Moody's: Venezuela in 'deeper' stress phase
Falling oil production has pushed hard-pressed Venezuela into "a deeper phase of economic stress," warns Moody's Investors Service. Because of mismanagement and underinvestment, Venezuelan production is falling faster than crude-price stabilization can offset financially, Moody's says in a research note.
After falling to nearly a 3-decade low in October 2017, Venezuelan crude output dropped further to 1.837 million b/d in November. Contrary to predictions of a rebound by new Oil Minister Manuel Quevedo, new data from the government indicate another decline in December.
Production now is about 1.621 million b/d, and Moody's expects production to fall below 1.5 million b/d later this year.
"The fall in production will only exacerbate cash-flow stress," Moody's writes in a research note. "While oil prices have rallied in recent months, the decline in oil production will more than offset the would-be increase in dollar inflows from oil exports.
"This has negative implications for both debt repayment capacity and Venezuela's already grim economic outlook."
Moody's sees "a negative feedback loop between declining production across all economic sectors, accelerating scarcity of hard currency, and an economic policy mix defined by price controls and forced discounting that exacerbate supply shortages and hyperinflation."
The credit-monitoring firm earlier expected inflation to moderate this year after exceeding 1,800% in 2017.
"However, the latest production news suggests that hyperinflation will persist," the firm says. "We now expect it to accelerate to well over 4,000% this year due to falling production capacity and the current policy mix."
WPX exits San Juan basin with $700-million sale
WPX Energy Inc., Tulsa, will exit the San Juan basin with an agreement to sell its Gallup oil play holdings for $700 million to an undisclosed buyer who will also assume the associated transportation commitments.
Gallup oil production averaged 10,800 b/d in third-quarter 2017. Overall, the Gallup position represented less than 5% of WPX's gross undeveloped locations. With the sale, WPX is forecasting 75,000-80,000 b/d of oil and 117,000-126,000 boe/d of production in 2018.
WPX previously divested natural gas assets in the San Juan basin for $175 million and a gathering system in the basin for $309 million. Capital previously earmarked for the assets will be reallocated to the company's two remaining core positions in the Delaware (Permian) and Williston basins. WPX has 100,000 net acres in the Delaware basin, with the majority in Loving County, Tex., and Eddy County, NM. The company's operations in the Willison basin span 85,000 net acres on the Fort Berthold Indian Reservation.
Ridge Runner launched with equity from Warburg Pincus
Newly formed Ridge Runner Resources LLC, Midland, Tex., plans to pursue partnerships with other exploration and production companies and acquire acreage positions across the Delaware basin with a line of equity financing of as much as $300 million from Warburg Pincus.
Ridge Runner is led by CEO Scott Germann, a geologist with 20 years of financial and operational experience in the Permian basin. Germann grew and led Nadal & Gussman's Permian business over the last few decades. Most recently, Germann served as president of BC Operating, where he led the company's oil and natural gas exploration, development, and production efforts in the Delaware basin until the sale of the company to Marathon Oil for $1.1 billion in June 2017.
The senior executive team includes Chief Financial Officer Tim Patuwo, Chief Operating Officer Kelvin Fisher, and Vice-Pres., Business Development Brian Cassens.
Vine Oil & Gas, GEP Haynesville exchange basin assets
Vine Oil & Gas LP, Plano, Tex., and GEP Haynesville LLC, The Woodlands, Tex., exchanged non-operated Haynesville basin working interests in the majority of Vine and GEP's joint venture assets in Red River, DeSoto, and Sabine parishes in northwestern Louisiana.
The exchange unwinds a portion of the joint venture area of mutual interest and allocates to each party the entirety of the future development. For the past 2 years, the companies worked together to implement enhanced completion techniques.
Vine and GEP continue to share joint ownership in 50 producing wells that were brought online in 2015 and 2016, and which were excluded from the exchange.
PetroQuest erases liability by giving away gulf assets
PetroQuest Energy Inc. has eliminated a $35.4 million undiscounted abandonment liability from future obligations by releasing certain oil and gas assets in the Gulf of Mexico to Northstar Offshore Ventures LLC, Houston.
PetroQuest received no proceeds from the sale but paid $3.75 million in cash to satisfy future abandonment costs. Connected with the sale, the PetroQuest expects to receive a cash refund of $10.3 million related to a depositary account that served to collateralize a portion of the company's offshore bonds. PertoQuest now derives all production from onshore Louisiana and Texas assets.
During fourth-quarter 2017, the Outer Continental Shelf assets, consisting of seven producing fields, produced 26.1 MMcfd of gas equivalent (21% oil, 75% gas, and 4% NGL). PetroQuest estimates net production for January to be 13.8 MMcfed (24% oil, 71% gas, and 5% NGL), or 47% below the fourth-quarter 2017 rate, a result of natural declines, the company said.
Northstar, purchased by Orinoco Natural Resources LLC in August 2017 for $71 million, said the deal fits in with the company's plan to expand through acquisition. In recent years, Orinoco's owners, who control the Virginia Conservation Legacy Fund Inc., a nonprofit seeking sustainable approaches and public awareness about natural resource use, have acquired oil and gas and decommissioning assets.
Financing kills Samson's Foreman Butte Project sale
Samson Oil & Gas Ltd. intends to proceed with a new $30-million debt facility following the cancellation of its proposed Foreman Butte Project sale by Firehawk Oil & Gas LLC, Denver (OGJ Online, Jan. 23, 2018).
The sale, a divestiture of substantially all of Samson's assets for $41.5 million, was terminated as Firehawk was unable to complete its financing plan for the transaction.
Dependent upon transactional expenses, Samson will proceed with refinancing for funds to repay its existing lender in full and to provide working capital for recommencement of its development drilling program. If expenses cannot be meaningfully reduced, the company said, another asset sale may be pursued.
Exploration & DevelopmentQuick Takes
Stampede comes on stream in Gulf of Mexico
Stampede, a Gulf of Mexico deepwater oil and gas development, has come onstream, said CNOOC whose subsidiary Nexen Petroleum Offshore USA is a partner. Hess Corp. operates Stampede, which is 185 km south of Fourchon, La., in about 1,066 m of water with a reservoir depth of 9,100 m.
"Three production wells are currently completed, and production is expected to ramp up through 2018," CNOOC said. Partners include Unocal, a subsidiary of Chevron Corp., Statoil Gulf of Mexico LLC, and Nexen. Nexen, Chevron, Statoil, and Hess each have a 25% working interest.
The Stampede tension-leg platform is designed for a processing capacity of 80,000 b/d of oil, 40 MMscfd, and 100,000 b/d of water injection.
Current development plans call for six subsea production wells and four water injection wells tied back to the TLP. Three production wells are currently completed, and production is expected to ramp up through 2018.
Stampede involves development of the Pony and Knotty Head deepwater fields on Green Canyon Blocks 468, 511, and 512.
QP, Total join as exploration partners in South Africa
Total SA reported signing an deal to sell 25% interest in the exploration Block 11B/12B, off South Africa, to Qatar Petroleum.
The transaction, said Arnaud Breuillac, Total president, exploration and production, "enhances the partnership on Block 11B/12B in preparation for the high-potential exploration well scheduled to be drilled on the block at the end of 2018."
Block 11B/12B covers 19,000 sq km in 200-1,800 m of water in the Outeniqua basin 175 km offshore southern South Africa.
The new partnership structure will be as follows: Total, operator, 45%;, Qatar Petroleum, 25%; CNR international, 20%; and Main Street, 10%.
Total acquires interests offshore Guyana
Total SA will acquire two exploration licenses covering more than 12,000 sq km offshore Guyana.
It agreed to acquire a 35% working interest in the Canje Block from an affiliate of JHI Associates Inc., Toronto, and Mid-Atlantic Oil & Gas Inc. of Guyana. The block, operated by ExxonMobil with a 35% interest, is in 1,700-3,000 m of water.
JHI and Mid-Atlantic will retain a shared 30% interest.
Total also agreed to acquire a 25% working interest in the Kanuku Block from operator Repsol, which will retain a 37.5% interest. Tullow Oil holds a 37.5% interest in the block, which has water depths of 70-100 m.
Total in September 2017 acquired an option to purchase a 25% working interest in the Orinduik Block from an affiliate of Eco (Atlantic) Oil & Gas Ltd., Toronto, which would retain a 15% interest. Tullow, with 60%, operates the block, which is in 70-100 m of water.
Kosmos' Requin Tigre-1 well off Senegal dry hole
Kosmos Energy, Dallas, continues to evaluate oil prospects across Mauritania and Senegal ahead of the next phase of exploration offshore the two countries despite results of its latest exploration well.
The well, Requin Tigre-1, was drilled in Senegal's Saint Louis Offshore Profond block to 5,200 m total depth and was designed to evaluate Cenomanian and Albian reservoirs in a structural-stratigraphic trap charged from an underlying Neocomian-Valanginian source kitchen. The well encountered no hydrocarbons.
Post-well analysis continues as the company believes there is "substantial remaining prospectivity" in its acreage position.
The Reguin Tigre well was the last in the second phase of exploration of the deepwater Cretaceous petroleum systems in the area, targeting large basin floor fan structures, said Kosmos Energy Chairman and Chief Executive Officer Andrew G. Inglis. The company drilled 4 wells in the second phase, with success at Yakaar (OGJ Online, May 8, 2017).
In Phase 1, targeting inboard structures on the slope, the company encountered hydrocarbons in its three test wells: Tortue, Marsouin, and Teranga.
"Overall we have discovered gross resource of 40 tcf, at a net cost of 20¢/boe benefiting from the partner carry, and have created the potential for two world scale LNG hubs," Inglis said.
Kosmos was fully carried on the cost of the Requin Tigre well. The drillship will proceed with plans to test two oil prospects off Suriname starting early in this year's second quarter.
Kosmos holds 30% interest in the Saint Louis Offshore Profond license. BP PLC holds 60% interest. State oil concern Petrosen holds 10%.
Deep potential confirmed in far-north Russia
A joint venture of Rosneft and Gazprom Neft has confirmed the potential of deep strata in Vostochno-Messoyakhskoye oil field in northern Yamalo-Netets Autonomous Okrug of Russia, 340 km north of Novy Urengoy (OGJ Online, Sept. 22, 2016).
The venture, Messoyakhaneftegaz, achieved initial flow of 250 tonnes/day of oil in its first deep horizontal well.
The well, with two pilot boreholes, went to 4.4 km TD in Early Cretaceous pay at a depth of 3.3 km. It was completed with multiple-stage hydraulically fracturing.
The oil is lighter than that produced in the main reservoir, the depth of which is about 800 m.
Messoyakhaneftegaz expects to drill 10 more deep wells in the area in 2018.
Local council in UK rejects core drilling
Plans by Ineos Shale for core-well drilling in the East Midlands of England have met resistance from local officials.
Planning committee members of the Derbyshire County Council voted 9-1 to reject a recommendation that the test be approved.
Ineos Shale proposes to drill the vertical well to 2,400 m adjacent to Bramleymoor Lane near the village of Marsh Lane to test suitability of subsurface shale for hydraulic fracturing (OGJ Online, Mar. 14, 2017).
The rejected report, by council planners, found that the Ineos proposal would be acceptable under "strict planning controls related to dust, ecology, the impact on roads and traffic, archaeology, lighting, and noise."
A decision on the Ineos application will be made under appeal following a public inquiry starting on June 19.
Ron Coyle, chief executive officer of Ineos Shale, called the move a "bad decision" and noted that the goal of the proposed well is knowledge.
"The fact that it may help to make decisions about potential unconventional gas extraction sometime in the future should not change the fact that this was an application for a simple core-bore well and no more," he said.
Three VPs to lead key Laredo functions
James R. Courtier, Jason R. Greenwald, and Mark H. Elliott will jointly assume leadership of Laredo Petroleum Inc.'s exploration, development, and land initiatives as Patrick J. Curth, senior vice-president-exploration and land, becomes a senior advisor before retiring in March.
Courtier is vice-president-exploration and geosciences technology of the Tulsa company. Greenwald is vice-president-reservoir engineering. Elliott is vice-president-land.
Drilling & ProductionQuick Takes
CNOOC Ltd. sees production gain in 2018
CNOOC Ltd. expects its worldwide oil and gas production to increase by as much as 2.3% in 2018, during which it plans to drill 132 exploration wells and acquire 19,000 sq km of 3D seismic data.
From net oil and gas production expected to total 469 million boe in 2017, the company's production will increase this year to 470-480 million boe.
CNOOC Ltd. expects net oil and gas output to total 485 million boe in 2019 and 500 million boe in 2020.
Of this year's expected production, 64% will be in China.
The company expects production to start from five projects in which it holds interests this year: Stampede oil field operated by Hess in the deepwater Gulf of Mexico and, offshore China, Weizhou 6-13 oil field, Penglai 19-3 oil field 1/3/8/9 comprehensive adjustment project, Dongfang 13-2 gas fields, and Wenchang 9-2/9-3/10-3 gas fields.
The company has budgeted capital spending of ¥70-80 billion ($11-13 billion), of which 18% will be for exploration, 65% for development, and 16% for production.
Vladimir Filanovsky Phase 2 well starts
The first well in second-phase development of Vladimir Filanovsky oil field in the Caspian Sea has started production at an initial rate of 2,400 tonnes/day of oil.
Operator Lukoil drilled the well to 3.5 km MD with a horizontal section of 1.2 km.
The start-up boosts production in the field to 16,800 tonnes/day.
Lukoil has started drilling an injection well as part of the second phase, which includes a fixed, ice-resistant platform and an accommodation block platform.
The field is in 7-11 m of water 220 km off Astrakhan. Production began in 2016.
In the first phase, which also included a fixed, ice-resistant platform and accommodation block platform as well as a riser block and central platform, Lukoil drilled six production and two injection wells (OGJ Online, Oct. 30, 2017).
Construction of a wellhead platform in the third development phase began last year.
Lukoil estimates reserves at 129 million tonnes of oil and 30 billion cu m of natural gas.
EnQuest to decommission Thistle, Deveron
EnQuest PLC will manage physical decommissioning of Thistle and Deveron oil fields in the UK North Sea using as much as $50 million from BP, which holds 1% interests in the fields.
EnQuest, which holds the remaining interests, received an option for BP funding of the projects when it acquired a 25% interest in Magnus oil field from the larger company last year (OGJ Online, Jan. 24, 2017).
Production from Thistle, discovered in 1973, began from the Thistle Alpha platform in 1978. Deveron, a 1972 discovery, started producing in 1984 through deviated wells drilled from the Thistle platform.
PROCESSINGQuick Takes
Operator lets FEED contract for La. methanol complex
IGP Methanol LLC (IGPM), Houston, has let a contract to CB&I, Houston, to provide front-end engineering design (FEED) services for work related to construction of its proposed 7.2 million-tonne/year Gulf Coast Methanol Complex (GCMC) on a 140-acre parcel next to the Mississippi River near Myrtle Grove in Plaquemines Parish, La. (OGJ Online, Jan. 8, 2018).
The FEED contract, which also includes terms for exclusive selection of CB&I for the engineering, procurement, and construction of each of the complex's four identical methanol trains, will be used to produce a binding lump-sum price contract for GCMC's construction, the service provider said.
CB&I did not reveal a value of the contract.
This latest contract follows IGPM's previous award to Haldor Topsoe AS to deliver engineering and technology licensing for GCMC's four identical 1.8 million-tpy methanol plants that will be equipped with Haldor Topsoe's proprietary SynCOR methanol technology, including supply of proprietary state-of-the-art catalysts and equipment (OGJ Online, Feb. 2, 2018).
Awarded its Title V air-quality operating permit by the Louisiana Department of Environmental Quality on Jan. 4., the grassroots complex will be developed in four phases and, once completed, will produce refined methanol from gas, water, and oxygen, which will be sent to dedicated tanks and transferred to associated marine vessel-loading facilities for export.
As part of the project, IGPM will install a product-loading system at the existing dock with a vapor-recovery system to recycle product back to the complex to reduce emissions and provide best-in-class safety.
Wherever technologically feasible, control equipment (e.g., tank-vessel scrubbers) will be employed to recover methanol emissions and recycle it back into the process with 95-98% efficiency, while the boiler and related process equipment will emit only substances associated with burning of clean fuel (i.e., natural gas) and small amounts of process gases.
Construction of each $900-million train will last about 26 months, with some overlap of subsequent units, the operator said.
IGPM-which also has selected project partners for natural gas supply, gas transportation, oxygen and nitrogen supply, as well as storage and loading-additionally will build common services infrastructure for the complex.
GCMC is scheduled to begin production in late 2020.
Contract confirmed for SOCAR's Baku refinery revamp
Tecnicas Reunidas SA, Milan has confirmed its previously let contract by State Oil Co. of Azerbaijan Republic (SOCAR), through its joint-venture contractor SOCAR-KBR LLC, for work on the modernization and expansion now under way at the Heydar Aliyev refinery at Baku.
As part of the $800-million lumpsum contract, Tecnicas Reunidas subsidiaries Tecnimont SPA and KT-Kinetics Technology SPA will deliver engineering, procurement, and construction for reconstruction and refurbishment of processing and associated plant installations, the service provider said.
Alongside installation of several new grassroot process units, Tecnicas Runidas' scope of work under the contract also includes installation of associated utilities and storage aimed at upgrading the refinery to process to about 7.5 million tpy from its current 6 million-tpy capacity as well as enabling 100% production of Euro 5-quality fuels and high-quality raw feedstock for SOCAR subsidiary Azerikimya Production Union's nearby petrochemical plant (OGJ Online, June 9, 2017).
New process units to be included in the project include a naphtha splitter, a diesel hydrotreater, an isomerization unit, a hydrogen production unit, two pressure-swing adsorption (PSA) units, a C4 hydrogenation unit, a methyl tertiary butyl ether unit, and a sour-water stripper equipped and associated sulfur-recovery unit (OGJ Online, Apr. 26, 2016).
Process technologies for new units will be supplied by KT-Kinetics Technology as well as other major refining licensors, Maire Tecnimont said.
The project is scheduled to be completed within 41 months, according to the service provider.
To be implemented in three stages, the modernization project will involve upgrades to existing equipment as well as installation of 14 units, SOCAR said.
Phase 1, to be completed in 2018, includes construction and start-up of a bitumen plant, unidentified associated plants, and a gas-filling station at the site.
Scheduled for completion by yearend 2020, Phase 2 will include construction of storage installations for Euro 5-quality diesel as well as reconstruction of unidentified units.
Phase 3, which will be completed by 2021, involves construction of an A-92/95/98 gasoline plant with products conforming to Euro 5 standards.
