GENERAL INTERESTQuick Takes
OPEC eyes long-term oil-supply management
The Organization of Petroleum Exporting Countries is working toward long-term management of oil supply by its members and collaborating countries, according to the new president.
Suhail Al Mazrouei, UAE minister of energy and industry and OPEC's president for 2018, said a draft framework for a long-term alliance will be ready by yearend.
OPEC said recently that its 12 participating members and 10 non-OPEC oil-exporting countries complied last year at a monthly average rate of 107% with the agreement to trim production by a combined 1.8 million b/d. The agreement took effect at the start of 2017.
Participants have extended the accord twice to last through this year.
Al Mazrouei told The National newspaper of the UAE that the new aim is "for this group to stay together for a longer time."
He noted that success of the effort to balance the oil market and firm oil prices has improved relations between leaders of the OPEC and non-OPEC groups, Saudi Arabia and Russia.
Saudi Oil Minister Khalid Al Falih, the OPEC president last year, said that the kingdom's energy alliance with Russia would last for "decades and generations," Al Mazrouei pointed out.
In conformance with the agreement, Russia has trimmed oil production against a 2016 baseline by 300,000 b/d, half the cut agreed by non-OPEC parties to the production accord.
Russian and Saudi officials now are discussing joint investments. Interviewed by CNBC at a security conference Feb. 17 in Munich, Kirill Dmitriev, chief executive officer of the Russian Direct Investment Fund, confirmed Russia's interest in investing in a planned initial public offering of 5% of Saudi Aramco. He said his group could form a consortium of Russian banks and investors to participate in the IPO.
Egyptian group to buy Leviathan, Tamar gas
Noble Energy Inc. has signed agreements to sell 1.5 tcf of natural gas each from Leviathan and Tamar deepwater gas fields off Israel to an industrial consortium in Egypt.
Noble said the consortium, Dolphinus Holdings Ltd., will supply industrial and petrochemical customers and future power generation in Egypt.
Gas sales from Leviathan are to begin at a firm rate of about 350 MMcfd when the field starts production at the end of 2019.
The agreement for Tamar, which is on production, provides for an interruptible rate of as much as 350 MMcfd, depending on gas availability beyond existing customer needs in Israel and Jordan.
Noble, operator of both fields, will have the option to convert the Tamar interruptible quantity to a firm basis with a take-or-pay commitment. Both contracts have 10-year terms.
Gary W. Willingham, Noble's executive vice-president, operations, said the firm now has deals for Leviathan gas totaling nearly 900 MMcfd. Its target sales rate for the field is 1 bcfd.
The new Leviathan and Tamar contracts link gas prices to Brent crude oil prices.
OVL group acquires 10% Lower Zakum stake
A group of state-owned Indian companies led by ONGC Videsh Ltd. has bought a 10% interest in the Lower Zakum Concession offshore Abu Dhabi for $600 million.
The deal, representing the first acquisition by Indian firms of a stake in the emirate's hydrocarbon resources, emerged during a visit by Indian Prime Minister Narendra Modi.
Abu Dhabi National Oil Co. operates and holds a 60% interest in the concession, carved out of the concession formerly held by Abu Dhabi Marine Operating Co. (ADMA-OPCO), now part of ADNOC Offshore.
Other members of the Indian consortium are Indian Oil Corp. and the international arm of Bharat Petroleum Corp.
Lower Zakum field produces about 400,000 b/d of oil. Production is to climb to 450,000 b/d by 2025.
Neptune Energy Group acquires Engie E&P
Neptune Energy Group, London, has acquired the 70% of Engie E&P International SA it didn't already own, gaining interests in 148,000 boe/d of oil and gas production in the North Sea, North Africa, and Southeast Asia.
The deal's value to Engie, according to the French company when it received the binding offer last May, is €4.7 billion. That includes €1.1 billion in decommissioning liabilities.
Engie's oil and gas interests are in the UK, Norway, Germany, the Netherlands, Indonesia, Algeria, and Egypt.
The sale is part of the parent company's plan to concentrate on regulated and contracting businesses and to lower exposure to commodity pricing.
Engie is retaining its 30% interest in a production-sharing contract covering 10 natural gas fields under development in the Touat region of southwestern Algeria. Neptune is operator.
Exploration & DevelopmentQuick Takes
Work starting on Abu Dhabi's Haliba field
Al Dhafra Petroleum, a joint venture operating firm of Abu Dhabi National Oil Co., plans to start producing 20,000 b/d of oil by mid-2019 at Haliba field in southeastern Abu Dhabi.
Production is to rise to 40,000 b/d by 2020, ADNOC said.
Al Dhafra, operator, has let an engineering, procurement, and construction contract to Larsen & Tourbo Hydrocarbon Engineering Ltd., Mumbai, for the development.
The first phase will include drilling of 32 wells and construction of a 65-km pipeline between Haliba and ADNOC Onshore's Asab Central Gassing Station.
Stabilized crude will move through existing oil lines to marine export terminals.
A second phase of development will develop nearby marginal fields, possibly increasing production capacity beyond 40,000 b/d by early 2022.
Al Dhafra is the first joint venture between ADNOC, with a 60% interest, and a consortium of Korea National Oil Corp. and GS Energy, which holds 40%.
Cepsa gets 10% of concession off Abu Dhabi
Cia. Espanola de Petroleos SAU (Cepsa) has acquired a 20% interest in the Satah al Razboot (SARB) and Umm Lulu Concession offshore Abu Dhabi from Abu Dhabi National Oil Co.
Cepsa is a wholly owned subsidiary of state-owned Mubadalla Investment Co. of Abu Dhabi. It contributed a participation fee of $1.5 billion, which also accounts for previous ADNOC investments in the concession. Its agreement has a 40-year term. ADNOC is operator.
The area includes Umm Lulu and SARB oil fields, which are under development, and two smaller fields, Bin Nasher and Al Bateel. Umm Lulu production began in 2014 and is to peak at 105,000 b/d (OGJ Online, Oct. 20, 2014). SARB field is to produce about 100,000 b/d from two artificial islands (OGJ Online, Apr. 3, 2013).
The concession is one of three created from the holdings of the former Abu Dhabi Marine Operating Co. (ADMA-OPCO), which is now part of ADNOC Offshore.
Earlier this month, ADNOC farmed out a 10% interest in one of the other concessions, Lower Zakum, to a group led by ONGC Videsh Ltd. of India for $600 million (OGJ Online, Feb. 12, 2018).
The third concession is Umm Shaif and Nasr. ADNOC, which will retain 60% interests in the offshore concessions, said it is completing agreements with other potential partners for the remaining stakes to be farmed out.
Gazprom Neft confirms Uransky block discovery
PJSC Gazprom Neft subsidiary Gazpromneft-Orenburg will drill three additional exploration and appraisal wells on its Uransky license in Russia. The company reported its plans following a hydrocarbon field discovery in the Novo-Sergievsky and Sorochinsky districts of the Orenburg oblast in southeast Russia near the Kazakhstan border. Novozarinskoe field contains 11 million tonnes of oil in place, according to Gazprom Neft.
The firm added that the discovery appears to confirm early predictions that the Uransky block contains several small fields. Novosamarskoye field was discovered on the block in 2016 and is estimated to contain more than 8 million tonnes of oil.
Pertamina discovers more West Java gas
According to The Jakarta Post, state-owned Pertamina's Karunia 1-X exploration well discovered 84 bcf of natural gas on West Java's Abar block. Pertamina's upstream subsidiary PT Pertamina Hulu Energi (PHE) has operated the block since May 22, 2015. The operator conducted a 2D seismic survey with a commitment to drill an exploration well within the first 3 years of operation. The gas was discovered in the Miocene Cisubuh and Parigi formations at 2,600 ft.
PHE drilled a total of 17 exploration wells in 2016, discovering 137.91 million boe of contingent resources in West Java. That same year, PHE produced 63,000 b/d of oil and 722 MMcfd of gas.
Last year the Indonesian government implemented new production-sharing terms for oil and gas (OGJ Online, Jan. 20, 2017). The Ministry of Energy and Mineral Resources issued regulations for the new "gross-split contract," which is based on gross production with no mechanism for cost recovery.
Shares were adjusted for new contracts from government-contractor "base splits" starting at 57-43 for oil and 52-48 for gas. PT Pertamina Hulu Energi signed the first contract under the new scheme, covering an extension of the Offshore North West Java block.
Energean extends Prinos development off Greece
Energean Oil & Gas will drill as many as 25 wells and install two platforms as part of an investment program on the Prinos license offshore northeastern Greece. The $180-million investment will increase production from Prinos and Prinos North oil fields through 2021, as well as develop Epsilon oil field.
Energean announced the plan as an extension of the Prinos long-term offtake agreement with BP Oil International Ltd. through Nov. 1, 2025. The group's Prinos basin oil production is currently sold to BP under the offtake agreement, which was originally signed in 2013 and covered the period until July 31, 2021. The 4-year extension will safeguard the group's cash flow, Energean said.
The Energean Force offshore drilling rig will execute the proposed development wells, and the GSP Jupiter jack up rig will drill the first three Epsilon wells.
Energean also plans to develop its Katakolon field alongside the Prinos development. In September 2017, the operator said drilling and production would commence in 2019-20 pending government approval later this year (OGJ Online, Sept. 8, 2017).
Drilling & ProductionQuick Takes
BLM proposes changes to 2016 venting, flaring rule
The US Bureau of Land Management proposed revisions to its 2016 venting and flaring rule on Feb. 12 after a review found that it underestimated its impact on operators and overlapped with many existing state and federal regulations. The agency previously suspended implementation of several provisions in the rule until Jan. 17, 2019, while it completed the reevaluation.
"In order to achieve energy dominance through responsible energy production, we need smart regulations not punitive regulations," said Joe Balash, assistant US Interior secretary, land and minerals management. "We believe this proposed rule strikes that balance and will allow job growth in rural America."
BLM proposed replacing the venting and flaring rule with requirements like those that were in force prior to the 2016 final rule. This proposal would align the regulations with administration priorities on energy development, job creation, and reduced compliance costs while also working more closely with existing state regulatory efforts, other officials said. Comments on the proposed revisions will be accepted for 60 days.
An American Petroleum Institute official welcomed the news. "We support smart regulation that is effectively tailored to BLM's authority to prevent waste and conserve resources, an objective that our industry shares," said Erik Milito, API upstream and industry operations group director.
Suncor buys Mocal Energy's Syncrude stake
Suncor Energy Inc. has agreed to acquire Mocal Energy's 5% interest in the Syncrude oil sands joint venture for $730 million.
The acquisition will increase Suncor's interest in Syncrude, based in Fort McMurray, Alta., to 58.74%. Other partners are Imperial Oil Resources, 25%; Sinopec Oil Sands Partnership, 9.03%; and Nexen Oil Sands Partnership, 7.23%.
Syncrude produces about 350,000 b/d of crude oil.
Operators participate in Aussie subsea study
Oil and gas services company Wood Group is leading a subsea equipment research program offshore Australia in collaboration with Chevron Corp., Royal Dutch Shell PLC, and Woodside Petroleum Ltd.
The National Energy Resources Australia (NERA) will provide $115,000 in financing for the project, entitled Transforming Australia Subsea Equipment Reliability (TASER).
TASER follows the Subsea Equipment Australian Reliability joint industry project, also led by Wood. TASER's goals are to improve subsea equipment design. Marine fouling offshore northern Australia affects subsea equipment performance.
Robin Watson, Wood's chief executive, said the research could help operators save costs by maximizing equipment reliability and reducing production downtime.
DNO to boost spending in Iraqi Kurdistan
DNO ASA, Oslo, will increase spending by 50% this year in the Kurdistan region of Iraq, where it brought its second oil field online in 2017.
The company discovered Peshkabir field early in 2017 and expedited development. Early production began in June, and flow had tripled by yearend (OGJ Online, Dec. 11, 2017).
Peshkabir, a Cretaceous discovery, now produces 16,000 b/d of oil from two wells. Tawke field, which DNO operates on the same license, produces 97,000 b/d.
The company plans to drill six Peshkabir wells this year. It expects production at the field to reach 30,000 b/d by summer and to continue increasing in the second half of the year.
"We have only started to appraise and develop this field, which continues to surprise to the upside," said DNO Executive Chairman Bijan Mossavar-Rahmani in a press statement.
At Tawke field, DNO soon will complete the Tawke-48 well and is finalizing plans with partner Genel Energy to drill four wells this year.
Elsewhere in Kurdistan, the company has reentered and sidetracked the Hawler-1 well to appraise Benenan heavy oil field on the Erbil license. Testing will start soon.
DNO said Hawler-1 is Kurdistan's first multilateral well and first dual completion.
PROCESSINGQuick Takes
Poland's Grupa Lotos restarts Gdansk refinery
Grupa Lotos SA has resumed operations at its 10.5 million-tonne/year refinery in Gdansk, Poland, following power outage on Feb. 8 that halted production at the site.
All units impacted by the outage were restarted and in operation as of Feb. 9, with no impact on external sales of products manufactured at the refinery, the operator said.
Operations at almost all refinery units were briefly suspended on Feb. 8 due after a 30-min disruption in electricity supply from Energa SA's external Blonia 1 station occurred, according to a notice to investors regarding the unscheduled downtime.
Otherwise, Grupa Lotos continues to advance work on its Effective Refining Program (EFRA), which is designed to increase the Gdansk refinery's yield of high-margin middle distillates while simultaneously reducing in its output of less-profitable heavy products (OGJ Online, July 15, 2015).
Previously scheduled for startup during this year's first half, the more than €500-million EFRA, once completed, will boost the refinery's overall production of high-margin products (primarily diesel oil and aviation fuel) to about 900,000 tpy, as well as lift its refining margin by about $2/bbl.
While Grupa Lotos confirmed reaching an 85% completion rate on the project in a November 2017 presentation, the operator said in a Jan. 12 notice to investors that the ready-for-startup (RFSU) status of the project's delayed coking unit may be postponed amid the risk of EFRA contractor KT-Kinetics Technology SPA's inability to meet the contractual RFSU target set forth in a July 2015 agreement.
CB&I details contract for ADNOC's Ruwais refinery
CB&I, Houston, has confirmed details of its previously awarded contract to deliver engineering and procurement for Abu Dhabi National Oil Co. (ADNOC) subsidiary ADNOC Refining's (formerly Takreer) $3.1-billion project to increase crude processing flexibility and improve margins at the 417,000-b/d West plant of the more than 800,000-b/d Ruwais refining complex in the UAE (OGJ Online, Feb. 8, 2018).
As part of its more than $500-million portion of a contract jointly awarded with Samsung Engineering Co. Ltd., CB&I will provide EP services for two atmospheric residue desulfurization units, which will be equipped with technology licensed by CB&I-Chevron Corp. joint venture Chevron Lummus Global, the service provider said.
Additionally, CB&I's scope of work will include the engineering, procurement, fabrication, and construction of 14 flat-bottom tanks and 10 process heaters for the crude flexibility project (CFP), according to CB&I.
Part of ADNOC's program to accelerate downstream strategy delivery, the CFP will enable the Ruwais West plant to process up to 420,000 b/d of Upper Zakum crude or similar medium-sour crude types from the market in lieu of fellow UAE-produced, light, sweet Murban crude.
Increased crude-processing flexibility at the refinery, in turn, will free higher-priced Murban crude for export sales to global oil markets to help UAE garner greater returns from its domestically produced oil resources.
ADNOC's multibillion-dollar investment in crude-quality arbitrage at Ruwais follows the operator's late-2017 announcement that it will boost production capacity of supergiant Upper Zakum offshore field by 350,000 b/d to 1 million b/d (OGJ Online, Nov. 15, 2017).
ADNOC said it expects to complete the CFP by yearend 2022.
TRANSPORTATIONQuick Takes
EQT splits upstream, midstream businesses
EQT Corp., Pittsburgh, will separate its upstream and midstream businesses, all in the Appalachian basin.
The upstream company will retain the EQT name, with Steve Schlotterbeck remaining as chief executive officer.
The midstream company will be named NewCo. Jerry Ashcroft, now EQT vice-president and president, midstream, and senior vice-president and chief operating officer of EQT Midstream Partners (EQM), will be NewCo's CEO.
The companies will remain in Pittsburgh.
Before the separation, EQT will transfer its retained midstream interests to EQM, which will be merged with Rice Midstream Partners, to form NewCo.
EQM owns about 950 miles of interstate pipeline, 1,800 miles of high and low-pressure gathering lines, and storage in the Marcellus and Utica shale plays. Rice Midstream operates gathering, compression, and water assets of the former Rice Energy Inc., which EQT acquired last year (OGJ Online, Nov. 14, 2017).
EQT expects total production this year of 1.52-1.56 tcf of natural gas-equivalent hydrocarbons. It holds 680,000 core net acres in the Marcellus shale play and 65,000 core net acres in the Utica play.
Before the separation, incentive distribution rights of Rice Midstream will be sold to EQT GP Holdings, which holds the general partner interest, all the incentive distribution rights, and part of the limited partner interests in EQM. EQT owns the general partner interest and a 90% limited partner interest in EQT GP Holdings.
After the separation, EQM and EQT GP Holdings will remain separate, publicly traded entities.
NASEM's TRB releases hazardous liquids report
US pipelines and waterways have accommodated most of the growth in the transportation of crude oil, petroleum products, and other hazardous liquids and gases well as the US energy landscape has changed, the National Academies of Science, Engineering & Medicine's Transportation Research Board indicated.
"They have done so without creating major new safety problems and within the basic framework of their longstanding regulatory and safety assurance systems," it said in a Feb. 20 report. Emergency response preparedness has improved overall, but progress varies by location and opportunities to do better remain, the report said.
"Many communities lack familiarity with responding to large-scale incidents involving trainloads of flammable liquids," it said. "Industry and government authorities face a continuing challenge in ensuring that these response procedures are widely known and that existing training opportunities are exploited."
The committee recommended that the US Pipeline & Hazardous Materials Safety Administration comprehensively review successes and failures in responding to transportation safety challenges since 2005 to inform the development of more anticipatory and robust safety assurance systems.
"Moreover, PHMSA and other safety regulators should encourage pipeline, barge, and rail carriers to make greater use of quantitative risk analysis tools, for instance, to inform decisions about priorities for maintenance and integrity management of the equipment and infrastructure and about the routing of energy liquids by rail," it said.
