GENERAL INTERESTQuick Takes
Global gas output hits highest growth in a decade
The worldwide oil and gas industry achieved a net production increase of 164 billion cu m (bcm) in 2018, representing the highest production growth since 2010, says Rystad Energy.
“Year-on-year growth was clearly driven by North America, which accounted for 71 bcm, followed by the Middle East with 39 bcm. Europe was the only region that experienced a reduction in 2018,” Rystad Energy partner Espen Erlingsen said.
Rystad Energy forecasts the supply surge will continue in the coming years. Expected average annual growth from 2018 to 2021 is 115 bcm, which would outpace the average annual growth from 2011 to 2017 by 90%.
Global growth, Erlingsen said, will be driven by North American gas, which is experiencing an LNG development phase. Rystad Energy expects that US gas production will reach almost 1,000 bcm (94 bcfd) by 2025.
The weakest global annual growth was observed in the 2015-16 cycle, when global gas output rose by only 12 bcm. This was also the only period in which North America experienced a year-on-year reduction in gas production growth.
Judge halts BOEM Mid-Atlantic OCS seismic prep
A federal judge in South Carolina issued an injunction stopping the US Bureau of Ocean Energy Management’s processing of applications for offshore oil and gas seismic permits on the US Mid-Atlantic Outer Continental Shelf during the federal government’s partial shutdown.
US District Judge Richard M. Gergel issued his Jan. 18 order after South Carolina Atty. Gen. Alan Wilson brought the situation to his attention following reports that BOEM employees were continuing preparation of the permits while much of the rest of the US Department of the Interior was closed.
Gergel’s order concerned a US Department of Justice request for a stay in Wilson’s request to join a lawsuit that 16 coastal South Carolina communities and several environmental organizations filed to stop the oil and gas seismic tests, according to the Southern Environmental Law Center in Charleston.
If approved, the permits that five offshore geophysical contractors are seeking would be the first surveys for oil and gas on the Mid-Atlantic OCS since the 1980s. Development of 3D seismic technology during that period has improved offshore discovery rates. Opponents say 3D seismic tests endanger whales and other marine life.
The judge granted the request for the stay but added that processing the seismic permit applications could not continue while the court considers Wilson’s motion to join the lawsuit. “Practically, that means the case over the seismic permits will be on hold for the duration of the shutdown plus as many as 18 additional days to hear Wilson’s motion to intervene,” it said.
Husky’s offer for MEG expires without extension
Husky Energy Inc. will not extend its $3.3-billion (Can.) offer to acquire MEG Energy Corp. after the October proposal expired Jan. 16 (OGJ Online, Oct. 1, 2018). The minimum tender condition was not met by the deadline and the proposal received insufficient MEG board and shareholder support.
In response, MEG said the rejection of the offer “confirms that the bid did not fully recognize the quality and long-term potential of MEG.”
Husky cited “several negative surprises in the business and economic environment” since making the proposal, including departure of Alberta from free-market principles, “introducing uncertainty through the imposition of government-mandated production cuts,” and “continued lack of meaningful progress on Canadian oil export pipeline developments.”
All MEG shares that have been tendered to the offer will be returned to shareholders.
Exploration & DevelopmentQuick Takes
India’s small-field bid round extended
India’s Directorate General of Hydrocarbons has extended for the second time the close of bidding for its second round of licensing of discovered small fields (OGJ Online, May 15, 2018).
Bidding remains open through Jan. 30, DGH said. Under the earlier extension, bidding was to have closed Jan. 18.
DGH is offering 25 contract areas, one fewer than in the original licensing-round announcement.
New survey supports Gabon’s latest licensing round
Geoscience company CGG is extending its Gabon multiclient data footprint with a 9,800-km offset 2D seismic survey in an unexplored deepwater area of the South basin.
CGG said it is building on the recent success of its 25,000-sq-km 3D BroadSeis survey, which led to the Boudji-1 and Ivela-1 oil discoveries. A subset of the data over the offered license blocks will be available in advance of Gabon’s 12th offshore licensing round planned for June.
The new 2D data will help define the full extent of existing and new plays in the region, CGG said. “It will also aid in understanding the thickness variations in the sediment overburden for source rock and maturity analysis,” it said.
Woodside lets contracts for Scarborough project
Woodside Petroleum Ltd. has let four contracts for the front-end engineering and design phase of its proposed Scarborough gas development on the Exmouth Plateau off Western Australia.
McDermott Australia Pty. Ltd. was let a contract to undertake engineering studies for the floating production unit. This includes the option to progress to an engineering, procurement, and construction contract for the execute phase activities.
Subsea Integration Alliance, a consortium of OneSubsea Australia Pty. Ltd. and Subsea 7 Australia Contracting Pty. Ltd., has been let the contract to undertake engineering studies for subsea umbilical risers and flowlines. This also contains the option to progress to a next stage engineering, procurement, construction, and installation contract.
The third contract has been let to Saipem Australia Pty. Ltd. for provision of export trunk line engineering support services with the option to execute line pipe coating and installation activities.
The fourth contract has been let to Intecsea Pty. Ltd. for export trunk line engineering.
Woodside CEO Peter Coleman said the Scarborough project schedule targets a final investment decision in 2020.
The company’s preferred concept for development of the 7.3-tcf (2C) Scarborough gas resource is through offshore facilities connected by a 430-km export line to the Burrup Peninsula and expanded onshore processing facilities at the Pluto LNG plant. The proposed offshore development will comprise 12 subsea production wells tied back to a semisubmersible platform moored in 900 m of water close to the field.
The field, which lies in 950-1,400 m of water, was discovered in 1979 by a partnership of ExxonMobil Corp. and BHP Petroleum. Woodside now has a 75% interest in Scarborough field following the $444-million acquisition of ExxonMobil’s interest in March 2018.
PGNiG to explore for, produce hydrocarbons in UAE
PGNiG SA will explore for and produce hydrocarbons in Ras Al Khaimah—the northernmost member of the United Arab Emirates—under a production-sharing agreement signed by PGNiG, the Ras Al Khaimah Petroleum Authority, and Rak Gas LLC.
PGNiG won a tender for acquisition of rights to explore for, to appraise, and to produce hydrocarbons in Ras Al Khaimah in December 2018 (OGJ Online, May 24, 2018). License Block 5, which covers 619 sq km, is comprised of onshore “thrust front” compressive structures extending in the offshore transition zone with Cretaceous “Arabian Platform” and Tertiary potential, according to the RAK Petroleum Authority web site.
The agreement allocates obligations and provides for a split of costs and profits under the license. Initially, the work will be carried out in three 2-year exploration stages, to be followed by a 30-year production phase. After each exploration stage, the company may choose to relinquish its interest in the license.
Execution of activities under the license will be the responsibility of a newly established branch of PGNiG in the emirate of Ras Al Khaimah. Latest statistics from the Organization of Petroleum Exporting Countries put UAE proved reserves at 98 billion bbl of oil and more than 6 trillion cu m of natural gas. Crude oil production amounts to 3 million b/d and marketed production of natural gas to 54.1 billion cu m/year.
Drilling & ProductionQuick Takes
Aramco taps Saipem for Berri, Marjan work
Saudi Aramco has let contracts to Saipem for offshore work expanding Berri and Marjan oil fields.
The contracts, totaling $1.3 billion, cover design, engineering, procurement, construction, installation, and implementation of subsea systems and the laying of pipelines, subsea cables and umbilicals, platform decks, and jackets.
Aramco is expanding production capacity of Marjan field, now 500,000 b/d, by 300,000 b/d. It’s doubling capacity of Berri field, part of which is onshore, to 500,000 b/d.
Gullfaks partners submit PDO for more oil recovery
Equinor and its partners in Gullfaks oil field in the Norwegian North Sea’s Tampen area will drill seven wells believed to improve oil recovery by 17 million bbl with good profitability.
The amended plan for development and operation (PDO) submitted to Norway’s Ministry of Petroleum and Energy calls for additional resource recovery with water injection and production wells in the Shetland-Lista Phase 2 development. The planned horizontal wells will be drilled in the Shetland Group, a carbonate reservoir that lies above the main reservoir at Gullfaks, using existing facilities.
A 2012 well test proved the reservoir had oil production potential. Since 2013, the Gullfaks partners have invested more than 1 billion kroner in production wells in the formation, which have so far produced more than 6 million bbl of oil from Shetland-Lista Phase 1. “These formations that used to pose a challenge are now due to producing at a break-even below $30/bbl,” said Arne Sigve Nylund, executive vice-president for development and production, Norway.
Oil from Shetland-Lista is a small contribution to the total Gullfaks reserves, but a major contributor to the remaining field potential, the company said. The project also will deepen knowledge of carbonate reservoir production, which can be used in other parts of the world.
Equinor is operator with 51%. Partners are Petoro 30%, and OMV 19%. The original PDO stated a field life up to 2005. In 2016, a plan was approved to extend the field life to 2034.
Van Gogh infill project comes on stream
Santos Ltd., Adelaide, has announced that oil from its two-well infill project in Van Gogh field in the Exmouth basin offshore Western Australia has been brought on stream.
The infill project began in September 2018 and involved the drilling and completion of two subsea wells and connecting them to the existing field infrastructure.
Van Gogh field is one of three subsea oil field developments in the basin that are tied in to the Ningaloo Vision floating production, storage, and offloading vessel.
The two dual-lateral wells were designed to access bypassed oil not drained by the original field wells. The technically challenging operation involved drilling horizontal sections in the reservoirs up to 3,500 m in length and only 950 m subsea.
Van Gogh was discovered in 2003 and production began in 2010. Nearby Coniston field, discovered in 2000, and Novara field, found in 1989, were respectively tied back to the FPSO in 2015 and 2016. Santos has 52.5% interest and operatorship of the Van Gogh-Coniston-Novara development, which it acquired last year when it bought Quadrant Energy Ltd. Inpex has the remaining 47.5%.
Jadestone ready to restart Montara oil field
Jadestone Energy Inc. has completed work required for the restart of production from Montara oil field in the Timor Sea following an extensive maintenance and inspection shutdown.
The facilities are now undergoing the final stages of pressure testing. Jadestone said the oil train has been successfully leak-tested and the gas train is now being tested so that both can begin together. This will enable immediate gas-lift and gas reinjection to optimize oil production.
Documentation required to lift the prohibition notice and direction letter issued last year by the Australian offshore regulator, the National Offshore Petroleum Safety and Environmental Management Authority, are being evaluated to allow the reintroduction of hydrocarbons to the facility.
Jadestone and Thai company PTTEP are managing Montara under the terms of the operator and transitional services agreement whereby PTTEP continued to operate Montara, but all critical leadership positions in the operation are now filled with Jadestone secondees.
Jadestone CEO Paul Blakeley said the shutdown of Montara has been safely concluded and this completes all overdue inspection and maintenance items identified by Jadestone during the initial weeks after closing the acquisition of Montara.
PROCESSINGQuick Takes
Part of Chinese refining could close by 2020
About 150,000 b/d of refining capacity could close in China by 2020, due to a tight operating environment, according to a recent analysis from Wood Mackenzie. “Chinese refineries did not face crude supply issues in 2018 but there were other challenges,” said WoodMac consultant Rui Hou.
In addition to squeezed margins due to higher crude prices and volatility in 2018, refiners are additionally affected due to a new taxation system that requires online filing of fuel transactions. It raises input costs and the teapots have struggled to sell, which in turn lowers utilization affecting margins further.
State-owned refiners, meanwhile, benefit with reduced competition leading to improved utilization and margins. Currently, average utilization for state-owned refiners is 78% and that for teapots is 58%. This compares with 90% in the US.
The quality parameters for refined products also are becoming stringent. At sea, China will extend three designated emission control areas along its entire coastline from January. In addition, the 0.5 wt % sulfur content limit is expected to be applied to vessels sailing within 12 nautical miles of the coast.
On land, the government will nationally enforce the China VI (equivalent of Euro 6) fuel specification for both gasoline and automotive diesel from next year. This demonstrates the strong commitment to fighting pollution from mobile sources.
The combined impact of these measures means Chinese refineries will need more investment and technology to upgrade and that is possible if prices are deregulated. A level playing field and tight operating environment will weed out inefficient plants, which could lead to the refining capacity closure.
India approves Numaligarh refinery expansion
Numaligarh Refinery Ltd. (NRL), a group firm of Bharat Petroleum Corp. Ltd., has received clearance to proceed with the long-planned expansion of its 60,250-b/d Numaligarh refinery in the Golaghat district of Assam in far-northeastern India.
India’s Cabinet Committee on Economic Affairs on Jan. 16 approved the 225.94 billion-rupee project, which intends to expand crude processing capacity at the refinery by 120,500 b/d to 180,750 b/d, NRL said. Alongside the capacity expansion—which will take 48 months to complete from the start of construction—the project also will include construction of a 180,750-b/d, 1,398-km crude pipeline from Paradip to Numaligarh, as well as a 120,500-b/d, 654-km products pipeline from Numaligarh to Siliguri, the operator said.
Cabinet approval of the project provides for granting of a capital subsidy of about 10.2 billion rupees and continuation of a 50% excise-duty benefit for a period of 15 years following project commissioning.
Part of India’s Hydrocarbon Vision 2030 for the North-East, which aims to double oil and gas production by 2030, the proposed capacity expansion and pipelines project aims to help meet growing demand of petroleum products in northeastern India, ensure secure crude feedstock supplies to all four state-owned refineries in Assam, and enhance product exports to India’s geographically contiguous neighbors, namely Myanmar, Bhutan, and Bangladesh, NRL said.
TRANSPORTATIONQuick Takes
NEB okays clearing work for KXL’s north section
TransCanada Corp.’s Keystone Pipeline GP Ltd. can begin winter clearing work on the North Spread of its Keystone XL project. Canada’s National Energy Board (NEB) approved the company’s request as Keystone has satisfied the regulatory requirements for clearing of trees and shrubs along the pipeline route’s north section, starting at Hardisty, Alta.
Clearing activities in other areas of the project, other construction activities, and any activity during the restricted activity periods for migratory birds are excluded from the approval. Further pipeline construction is subject to NEB approval.
In 2009, TransCanada applied to NEB to build and operate the Keystone XL pipeline, a 36-in. system that would ship 700,000 b/d of crude oil from Alberta to the US. The Canadian portion would traverse 529 km from Hardisty, crossing the Canada-US border at Monchy, Sask.
In 2010, NEB issued a report recommending that Governor in Council approve the Keystone XL pipeline project, subject to 22 conditions. On Apr. 22, 2010, GC directed NEB to issue a certificate of public convenience and necessity for the project.
TransCanada has completed oil tank construction at the Hardisty terminal and completed two horizontal directional drill crossings of the Red Deer River and South Saskatchewan River. Work is also ongoing at several pump stations.
Tallgrass, KMI explore Rockies oil transportation
Tallgrass Energy and Kinder Morgan Inc. will jointly develop a solution to increase existing oil takeaway capacity in the Powder River and Denver-Julesburg basins and to add incremental capacity to the Williston basin and parts of Western Canada.
The proposed venture would include existing and newly constructed assets. Tallgrass would contribute its Pony Express pipeline and Kinder Morgan would contribute portions of its Wyoming Intrastate Co. and Cheyenne Plains Gas Pipeline and begin the process of abandonment and conversion to crude oil service. In addition, some 200 miles of new pipeline would be constructed to provide crude oil deliveries into Cushing, Okla.
In total, the combined pipeline system is expected to be capable of delivering up to 800,000 b/d of light crude oil and 150,000 b/d of heavy crude oil from points in Wyoming and Colorado to Tallgrass’ and Kinder Morgan’s Deeprock terminal in Cushing with connectivity to the Gulf Coast and export markets through Tallgrass’ planned Seahorse Pipeline and other existing or proposed future projects. The combined project is expected to provide initial service as early as second-half 2020.
“There are a number of competitive advantages to jointly developing this project and leveraging…existing assets, including the expansion of our Double H Pipeline system,” said Don Lindley, chief commercial officer for products pipelines at Kinder Morgan. “Chief among them is the ability to quickly and efficiently place an additional 550,000 b/d of crude transportation takeaway capacity in service from the Rockies, which helps domestic producers and offers near-term relief for Canadian producers.”
In conjunction with the agreement, Tallgrass extended its Pony Express expansion and joint tariff open season with Seahorse to Feb. 28.
New Pluto inlet station commissioned
The new Pluto inlet station connecting the Woodside Petroleum Ltd.-operated Pluto LNG project on the Burrup Peninsula near Karratha in Western Australia to the Dampier to Bunbury natural gas trunk line has been successfully commissioned by the Australian Gas Infrastructure Group (AGIG).
Woodside had previously contracted AGIG to undertake a front-end engineering and design study to convert an existing outlet meter station to the new inlet facility along with the required increase in gas compression.
AGIG said the completed facility now has capacity to supply as much as 25 terajoules/day of gas from Pluto to Western Australia to add to the flow through the state’s main trunk line from the northwest offshore fields, which has been in operation since 1984. AGIG is a combine of Australian Gas Networks, Dampier to Bunbury Pipeline, and Multinet Gas Networks.
US FERC issues EIS for Driftwood LNG, pipeline
The US Federal Energy Regulatory Commission issued the final environmental impact statement for Tellurian Inc.’s proposed Driftwood LNG export project and an associated pipeline in Louisiana. The project would produce as much as 27.6 million tonnes/year of LNG for export.
The Driftwood LNG Project consists of two main components: the construction and operation of the LNG facility, which includes five LNG plant facilities to liquefy natural gas, three tanks to store the LNG, LNG carrier loading/berthing facilities, and other appurtenant facilities at a site near Carlyss, Calcasieu Parish, La.; and the construction and operation of about 96 miles of pipeline, three new compressor stations, and 15 new meter stations.
Tellurian Pres. and CEO Meg Gentle said that Tellurian is ready to make a final investment decision and begin construction in this year’s first half. First LNG expected in 2023.
Baldridge elected chairman of TPA
Don Baldridge, president of commercial for DCP Midstream, has been elected chairman of the Texas Pipeline Association (TPA). Baldridge has more than 20 years of experience in the energy industry.
In his current role he is responsible for all commercial activity for gathering and processing and natural gas liquids logistics, as well as origination, business development, optimization, contract administration, gas control, and marketing and trading.
TPA is the largest state trade association in the country that solely represents the interests of the intrastate pipeline network.
