OGJ Newsletter
GENERAL INTEREST — Quick Takes
Energy XXI files bankruptcy, restructuring
Energy XXI Ltd., an independent oil and gas producer active in South Louisiana and the Gulf of Mexico, has filed for voluntary bankruptcy to accommodate a restructuring it says will allow operations to continue.
The company and some of its subsidiaries entered a restructuring support agreement with holders of more than 63% of secured second-lien notes. The agreement eliminates nearly all funded indebtedness previously in place other than a first-lien reserve-based loan facility.
The firm is negotiating with a steering committee of lenders representing first-line indebtedness not part of the restructuring agreement.
Energy XXI said the restructuring will remove more than $2.8 billion in debt from its balance sheet. John Schiller remains president and chief executive officer.
"The company believes it has sufficient liquidity, including approximately $180 million of cash on hand as of Mar. 31, 2016, and funds generated from ongoing operations, to continue its operations and support the business in the ordinary course during the financial restructuring process," the firm said.
Energy XXI reported average production in the last calendar quarter of 2016 of 54,500 boe/d, of which 70% was liquids.
Goodrich Petroleum files bankruptcy
Goodrich Petroleum Corp., Houston, has filed for voluntary bankruptcy to implement a restructuring agreement and expects to remain liquid enough to sustain business.
The bankruptcy will enable it to remove about $400 million in debt from its balance sheet. The restructuring agreement eliminated funded indebtedness other than its first-lien reserve-based loan facility, which has about $40 million outstanding. Existing managers remain in place.
At yearend 2014, the firm had reserves of 104 bcf of natural gas, 1 million bbl of NGL, and 27.1 million bbl of crude oil and condensate in the Tuscaloosa Marine shale of eastern Louisiana and southwestern Mississippi, the oil window of the Eagle Ford shale of South Texas, and the Haynesville shale of northeastern Texas and northwestern Louisiana. Last year the firm sold its Eagle Ford assets, which accounted for 23% of total reserves.
Cox Oil acquires Chevron gulf properties
Privately held Cox Oil Offshore LLC, Dallas, has acquired Gulf of Mexico properties from Chevron Corp. that include 19 oil and gas fields and associated assets in federal and Louisiana state waters. Financial terms weren't disclosed.
More than 100 Chevron employees will join Cox. The acquisition includes 170 active wells, 70 platforms, 70 caissons, and other offshore structures. Production rates covered by the transaction weren't disclosed.
Last year from the Gulf of Mexico shelf, Chevron produced at average rates of 45,000 b/d of oil, 218 MMcfd of natural gas, and 6,000 b/d of NGL.
White Star to buy Devon assets in Oklahoma
White Star Petroleum LLC, until recently known as American Energy-Woodford LLC, has entered a definitive agreement to buy Mississippi Lime and Woodford shale properties from Devon Energy Corp. for $200 million.
White Star is becoming a standalone company after operating as a unit of American Energy Partners LP. As part of that change, Elliot J. Chambers, chief financial officer, has been named to the additional role of chief executive officer, and Joseph D. Craig, formerly vice-president of operations, has been named chief operating officer.
The acquisition from Devon covers 210,000 largely contiguous acres offsetting acreage White Star holds in central-northern Oklahoma. Average net production from 555 operated and nonoperated wells in the acquisition was 12,800 boe/d in the first quarter, about 30% oil. Reserves at yearend 2015 totaled 11 million boe.
White Star said the acquisition doubles its production and acreage in north-central Oklahoma.
Devon called the deal part of its plan to sell $2-3 billion of noncore assets this year.
Total targets gas, renewables, electricity
Total SA is reorganizing to give new emphasis to natural gas, renewable energy, and electric power.
It is creating a business segment focused on those activities to "spearhead Total's ambitions in the electricity value chain by expanding in gas midstream and downstream, renewable energies, and energy efficiency," the company said.
The segment will combine current gas and new-energies divisions, excluding biotechnologies, and pair them with a new "innovation and energy efficiency" division. The biofuels business will group all bioenergy-related activities within the refining and chemicals business.
Total also will create a "global services segment," globally pooling accounting, purchasing, information systems, training, human resources, and facilities management.
An existing finance organization will be refocused on "strategic corporate functions." The current organization, handling finance, insurance, and information systems, will be joined by two new divisions, one for "people and social responsibility" and the other for "strategy and innovation."
Exploration & Development — Quick Takes
UK operator seeks fracing permit in North Yorkshire
Barclays-owned Third Energy seeks to hydraulically fracture and test a preexisting well in Kirby Misperton in North Yorkshire, UK. The county council overseeing this development has announced the company's application will be considered on May 20, which will include a site visit before the meeting.
Third Energy operates the nearby Knapton Generating Station, which is supplied from four producing gas fields beneath the Vale of Pickering and has processed 30 bcf of gas, generating 2,000,000 Mw-hr of electricity since 1995.
In 2013, the company drilled the KM8 well in its existing Kirby Misperton gas field with the goal of adding conventional reserves. While the shallower prospects were disappointing, the deeper Bowland section featured interbedded sandstone and shale sections. Further analysis determined these gas-bearing zones would need to be stimulated with fracing.
"The program detailed in the application is actually of a smaller scale and shorter time than the drilling of the KM8 well 2013," said Third Energy Chief Executive Officer Rasik Valand.
The company also is applying to the UK Environment Agency for the necessary permits for the proposed project. These include a mining waste operation permit, including a nonhazardous mining waste facility, a radioactive substances permit, and a groundwater activity permit. The region has several environmental groups who are actively protesting the plan, and the outcome of the application is unclear at this writing.
Third Energy is owned 97% by Barclays but is managed by Global Natural Resources Investment (GNRI). The latter, then called BNRI, was also Barclays-owned until a management buyout in October 2015.
Gavea appraisal well in Campos basin proves fruitful
The Gavea A1 well in presalt Block BM-C-33 of the Campos basin encountered a 175-m hydrocarbon column in a good-quality reservoir of silicified carbonates of the Macabu formation.
The well, which lies in ultradeep waters offshore Brazil, reached a total depth of 6,230 m and was successfully tested, producing about 16 MMscfd of gas and 4,000 b/d of oil through a 32/64-in. choke.
The well results were reported by the BM-C-33 consortium comprising operator Repsol Sinopec Brasil with 35% interest, and partners Statoil ASA 35% and Petroleo Brasileiro SA 30%.
Gavea A1 is the fourth appraisal well on the license, which includes the Seat; Gavea (OGJ Online, June 28, 2011); and Pao de Acucar (PDA) discoveries (OGJ Online Feb. 27, 2012). In 2013-15, the consortium drilled and tested the Seat-2, PDA-A1, and PDA-A2 appraisal wells.
With the Gavea A1 results, the consortium has finalized appraisal activities on BM-C-33 and will now evaluate the subsurface data and assess development concepts.
As part of a deal that was reported in December 2015, Statoil is slated to take over operatorship of the license in the third quarter, subject to the approval from Brazilian authorities (OGJ Online, Dec. 11, 2015).
IMCA revises offshore guidance documents
The International Marine Contractors Association has revised two technical guidance documents often incorporated into offshore contracts of the oil and gas industry.
According to Richard Benzie, IMCA technical director, Guidelines for the Design and Operation of Dynamically Positioned Vessels (IMCA M103) "now includes generic design and operational guidance, as well as vessel type-specific guidance for 17 representative vessel types that utilize dynamic positioning (DP) in support of the offshore oil and gas and offshore energy industries-a feature we know the industry was eager to have included."
The other document, Guidance on Failure Modes & Effects Analyses (IMC M166 Rev1), highlights good practice in the use of an engineering quality tool that assists in the identification and countering of weak points early in the design of products and processes. The document applies to technical systems associated with offshore vessels, especially DP systems.
The documents are available on the IMCA web site.
Drilling & Production — Quick Takes
ExxonMobil starts production from Julia oil field in gulf
The first oil production well has come online at ExxonMobil Corp.-operated Julia field in the Gulf of Mexico, and a second will begin flowing in the coming weeks.
The Julia development is 265 miles southwest of New Orleans in more than 7,000 ft of water (OGJ Online, May 8, 2013). The initial development phase uses subsea tie-backs to the Chevron Corp.-operated Jack-St. Malo production facility (OGJ Online, Dec. 2, 2014).
More than 30,000 ft below the ocean's surface, Julia's development utilizes subsea pumps with "one of the deepest applications and highest design pressures in the industry to date," ExxonMobil says.
The Maersk Viking drillship is currently drilling a third well expected to come online in early 2017. Production results will assist in the evaluation of additional wells included in the initial development phase, which has a design capacity of 34,000 b/d of oil.
Discovered in 2007, Julia field comprises five leases in the ultradeepwater Walker Ridge area. ExxonMobil and Statoil Gulf of Mexico LLC each hold 50% interest.
ExxonMobil is on track to start up 10 upstream projects in 2016-17, adding 450,000 boe/d of working-interest production capacity. Over the past decade, the firm has drilled 187 deepwater wells worldwide in water ranging 2,100-8,700 ft.
Two gas-condensate projects advance offshore India
Natural gas and condensate production from two projects in the Arabian Sea off western India is expected to start later this year.
Oil & Natural Gas Corp. Ltd. (ONGC) said the Daman development project and the C-26 Cluster development project are expected to peak at about 11 million cu m/day of gas and 11,000 b/d of condensate (OGJ Online, Aug. 29, 2014).
The two projects include construction "in progress" of 10 wellhead platforms, one riser platform, and subsea pipelines. Drilling rigs have been "earmarked for" 36 wells.
ONGC said the projects will use processing and export facilities from the adjacent Tapti field. A Tapti asset transfer was signed Apr. 12 between ONGC and a joint venture, PMT, consisting of ONGC, 40%, British Gas, 30%, and Reliance Industries, 30%.
The asset transfer "is the first of its kind" in India's upstream, ONGC said. Facilities no longer required by one operator "can be optimally used by another operator to expedite the field development activities and also to reduce capex burden."
Husky starts production from Edam East project
Husky Energy Inc., Calgary, reported the start of production from its 10,000-b/d Edam East heavy oil thermal project in Saskatchewan. The company started steam operations last month (OGJ Online, Mar. 1, 2016).
The company has startup plans for two more projects in the Lloydminster area in the third quarter: the 10,000-b/d Vawn and the 4,500-b/d Edam West. Husky's total thermal production is expected to reach about 80,000 b/d by yearend.
Husky said operating costs for its Lloydminster thermal projects in the fourth quarter were $7/bbl.
PROCESSING — Quick Takes
RIL schedules unit shutdown at Jamnagar refinery
Reliance Industries Ltd. (RIL), Mumbai, is planning to shut down a crude unit for scheduled maintenance beginning in May at one of the two refineries that form part of its 60 million-tonne/year integrated refining and petrochemical complex at Jamnagar in Gujarat, India.
On May 1, the company will shut down a crude distillation unit for routine maintenance and inspection activities at the 27 million-tpy Special Economic Zone (SEZ) refinery of the Jamnagar complex, RIL said in an Apr. 18 filing to India's BSE Ltd., formerly Bombay Stock Exchange.
RIL does not anticipate any impacts to commercial commitments during the scheduled 3-week shutdown, as the three remaining crude units as well as all secondary processing units at the complex will continue operate at normal throughput rates during the unit's closure, the company said.
RIL disclosed no additional details regarding the specific types of maintenance or inspections it plans to undertake during the planned shutdown.
In addition to the SEZ refinery, the integrated complex includes the 33 million-tpy Jamnagar refinery as well as a series of associated petrochemical production units.
RIL continues to progress on work related to the Phase 3 expansion project at the Jamnagar complex, which aims to boost the site's production capacities for ethylene and other petroleum products, including expansions of Jamnagar's gasification plants, ethylene cracker complex, and paraxylene plant (OGJ Online, Feb. 26, 2015).
The refinery off-gas cracker expansion would increase Jamnagar's production capacities as follows: ethylene to 3.248 million tpy from 1.883 million tpy; propylene to 913,000 tpy from 759,000 tpy; monoethylene glycol to 1.466 million tpy from 733,000 tpy; low-density polyethylene to 590,000 tpy from 190,000 tpy; high-density and linear low-density polyethylene to 1.478 million tpy from 928,000 tpy; and paraxylene to 3.656 million tpy from 1.856 million tpy (OGJ Online, May 3, 2012).
As of the 9-month period ending on Dec. 31, the Jamnagar complex reached record processing rates for crude, with of the complex's refineries operating at 116% of Jamnagar's total combined nameplate capacity, RIL said in its latest presentation to investors on Jan. 16.
Construction begins on Kandym gas processing complex
PJSC Lukoil reported startup of construction of the Kandym gas processing complex in southwestern Uzbekistan (OGJ Online, Feb. 13, 2015).
The complex in Bukhara province will include a gas treatment plant with a capacity of 8.1 billion cu m/year. Lukoil anticipates 114 producing wells, 11 well pads, 4 gathering stations, and 370 km of gas pipelines.
The Kandym development project consists of six gas condensate fields: Kandym, Kuvachi-Alat, Akkum, Parsanal, Khoji, and West Khoji.
About 7,000 people will be involved in construction.
Rosneft plans new gas processing plant at Tagulskoye
CJSC Vankorneft, the OJSC Rosneft subsidiary that operates Vankor oil and gas-condensate field and the North Vankor license in the Turukhansky district of Russia's Krasnoyarsk Territory, is planning a gas processing plant and pipeline at its Tagulskoye oil and gas field, part of the Vankor cluster of fields in eastern Siberia (OGJ Online, Mar. 18, 2016).
The company plans to build a 2 billion-cu m/year gas processing plant and gas-compressor station as well as a 65-km Tagul-Vankor gas pipeline at Tagulskoye field, at which operational drilling started in April, Rosneft said.
While Rosneft did not disclose a timeframe for either the processing plant or pipeline projects, the company said it expects to complete four production wells and one injection well by drilling at the well pad No. 5 by yearend 2016.
With a second drilling rig already under installation at Tagulskoye's well pad No. 14, the company plans to complete another five wells at the field this year, according to Rosneft.
The overall operational drilling project at Tagulskoye field is to include construction of 39 well pads and 506 wells, of which 267 are production and 239 injection, the company said.
As of Jan. 1, Tagulskoye field's total recoverable reserves in accordance with the Russian classification (ABC1+C2) are 286 million tons of oil and condensate and 228 billion cu m of gas, Rosneft said on Apr. 11. As part of its associated petroleum gas (APG) utilization program, Rosneft plans to maximize use of APG in development of Tagulskoye.
In 2014, the company commissioned a gas-treating unit, compressor station, and the 108 km-long Vankor-Khalmerpayutinskoye gas transmission pipeline at nearby Vankor field to enable delivery of up to 5.6 billion cu m/year of gas to the Gazprom Unified Gas Supply System (UGSS) for distribution to end users at an APG efficiency utilization rate of 95%, Rosneft said in a May 6, 2014, release.
As of Apr. 8, Vankorneft has delivered 10 billion cu m of gas from Vankor field to Russia's UGSS, according to Rosneft.
The company said active infrastructure development also currently is under way at Suzunskoye field, another member of the Vankor cluster.
TRANSPORTATION — Quick Takes
Magnolia LNG, KMLP line receives FERC authorization
Magnolia LNG LLC, a wholly owned subsidiary of Liquefied Natural Gas Ltd., received US Federal Energy Regulatory Commission authorization to site, construct, and operate a plant to liquefy and export US-produced natural gas from its LNG terminal in Lake Charles, La. The Louisiana Department of Environmental Quality (LDEQ) also approved Magnolia LNG's air permit.
FERC also authorized Kinder Morgan Louisiana Pipeline LLC (KMLP) to install compression and other related equipment on the KMLP Pipeline, allowing transportation of full feed-gas volumes to Magnolia LNG.
Magnolia LNG proposes to build and operate up to four 2-million tonne/year (tpy) liquefaction trains using the company's patented optimized single-mixed refrigerant (OSMR) process technology. Construction and operation will include two 160,000-cu m full containment storage tanks; ship, barge, and truck loading; and supporting systems.
Feed gas will come from several US Gulf Coast suppliers, delivered via KMLP under a 20-year binding pipeline capacity agreement. Magnolia LNG has signed a binding agreement with Meridian LNG Holdings Corp. for firm capacity rights for as much as 2 million tpy that has a condition precedent that Magnolia LNG achieves financial close by Dec. 31. Magnolia LNG continues negotiations with a number of other LNG buyers for the purchase of LNG on 20-year terms, with extension options.
A KBR Inc.-SKE&C USA Inc. joint venture will build the project under a lump-sum turnkey engineering, procurement, and construction contract (OGJ Online, Nov. 16, 2015). Magnolia LNG expects to start operations in mid-2018.
Trans Adriatic Pipeline lets offshore pipelay contract
Trans Adriatic Pipeline AG, a joint venture between BP PLC, the State Oil Co. of Azerbaijan Republic (SOCAR), Snam SPA, Fluxys SA, Enagas SA, and Axpo Holding AG, awarded Saipem a pipelay contract for the 105-km offshore section of the Trans Adriatic Pipeline (TAP) natural gas transport system. The engineering, procurement, construction, and installation (EPCI) contract involves installation of a gas pipeline between Albania and Italy, across the Adriatic Sea.
Specific activities beyond installing the 36-in. OD pipeline include marine surveys, supply and installation of an offshore fiber optic cable, precommissioning activities, and civil works at landfall in both Albania and Italy. The landfall in Italy is at San Foca, Puglia, and will use micro-tunnelling.
Offshore installation, which at its deepest will reach 820-m water depths, will begin this year using Saipem's semisubmersible pipelay vessel Castoro Sei and its trench-pipelay barge Castoro 10.
The Shah Deniz II consortium in June 2013 selected TAP as its European transport option. TAP will move as much as 20-billion cu m/year of natural gas from Shah Deniz II through Greece and Albania to Italy, from where it can be shipped further into Western Europe, with service expected to begin in 2018.
Rangeland holding open season for Rio Pipeline
Rangeland Energy is holding a binding open season for its Rio Pipeline, a 109-mile, 12-in. OD common carrier pipeline to transport crude oil and condensate produced in the Delaware basin to terminals in Midland, Tex., and takeaway pipelines to Cushing, Okla., the Gulf Coast, and other markets. The pipeline, already under construction, will have a capacity of more than 125,000 b/d and is expected to become operational in July.
Rio will start at Rangeland's State Line terminal in Loving County, Tex., where the company has built truck unloading and crude storage. Rangeland has also built unloading and tanks at the destination terminal in Midland, where additional space is available to build customer-leased crude storage.
Rangeland has executed a long-term connection deal with Plains Pipeline LP for delivery to the Plains Midland South terminal, giving shippers access to multiple terminals at Midland as well as outbound pipelines. The open season closes May 20.
Rangeland started development last month of its South Texas Energy Products System (STEPS) to receive and store refined products, LPG, and other hydrocarbons at a new terminal in Corpus Christi, Tex., and transport them to terminals primarily in Mexico (OGJ Online, Mar. 24, 2016).