GENERAL INTEREST — Quick Takes
Russian firms to discuss Iranian contracts
Representatives of Russian oil and gas companies will visit Tehran this week to discuss possible contracts after a visit Nov. 13-14 by Russian officials.
According to news reports, a delegation from the Russian parliament met with senior Iranian officials to discuss cooperation on energy and defense.
Amir-Hossein Zamanina, the Iranian deputy minister of petroleum for international affairs, said officials of Gazprom, Tatneft, Lukoil, and Zarubezhneft would follow to discuss projects made accessible to international investors by the lifting of international sanctions against the Islamic Republic last January.
Earlier this month, Total SA became the first western country to enter an agreement with Iran following the lifting of sanctions. In partnership with China National Petroleum Corp. and Iran's Petropars, it signed a preliminary agreement for 11th-phase development of South Pars natural gas field.
On Oct. 8, Tatneft signed a memorandum of understanding with National Iranian Oil Co. to study development opportunities related to Dehloran oil field in Ilam Province.
ConocoPhillips to divest $5-8 billion in assets
ConocoPhillips intends to divest $5-8 billion in assets primarily relating to North American natural gas as part of its effort to accelerate "the company's value proposition of a strong balance sheet, growing dividend, and disciplined growth."
The Houston independent has set its 2017 capital expenditures guidance at $5 billion, down 4% compared with its 2016 guidance and less than half of its 2015 capex and investments. The firm recently cut its 2016 capex from $5.5 million (OGJ Online, Oct. 27, 2016).
Spending in 2017 will focus mainly on flexible unconventional development programs in the Lower 48; and conventional projects in Europe, Asia-Pacific, and Alaska.
About $600 million is included for exploration, which is primarily focused on unconventionals, appraisal of the Barossa discovery in the Timor Sea, and closeout of deepwater Gulf of Mexico and Nova Scotia drilling obligations.
Full-year 2017 production is expected at 1.54-1.57 million boe/d, which results in 0-2% growth compared with expected full-year 2016 production of 1.54 million boe/d when adjusted for expected dispositions for the year. Growth is expected to come primarily from ramp up at the Australia Pacific LNG (APLNG) project, Surmont 2 in Canada, and Kebabangan in Malaysia, as well as increased activity in Lower 48 unconventionals, partly offset by normal field decline. The company's production outlook excludes Libya.
"The acceleration actions we've announced today will allow us to achieve our value proposition priorities at Brent prices of about $50[/bbl]," said Ryan Lance, ConocoPhillips chairman and chief executive officer.
ConocoPhillips last month reported a third-quarter net loss of $1 billion, slightly down from a third-quarter 2015 net loss of $1.1 billion.
Beijing Gas to buy Rosneft unit stake for $1.1 billion
Beijing Gas Group Co. Ltd. is to buy from OJSC Rosneft a 20% stake in a subsidiary of the Russian firm for $1.1 billion.
The subsidiary, Verkhnechonskneftegaz, holds a license to develop Verkhnechonsk oil, natural gas, and condensate field in East Siberia. Rosneft said the field is one of East Siberia's largest, and that Beijing Gas is one of the largest distributors of natural gas in China.
Rosneft CEO Igor Sechin said the agreement is "a new milestone of the energy dialog between Russia and China."
OMV to divest UK subsidiary for $1 billion
OMV AG, Vienna, has agreed to sell all of the shares in its wholly owned subsidiary OMV (UK) Ltd. to Siccar Point Energy Ltd., Aberdeen, for $1 billion.
OMV (UK) Ltd., a wholly held subsidiary of OMV, is headquartered in London and has been active in the UK for more than 20 years. Its asset portfolio, concentrated in the West of Shetlands region of the UK Continental Shelf, comprises current production, future developments, and exploration acreage.
Key assets include 11.8% interest in Schiehallion oil field and 20% interest in Rosebank field. Other assets include 5.6% interest in the producing Jade field and several West of Shetland discoveries that would be operated by Siccar Point.
The deal value consists of a firm payment of $750 million and a contingent payment related to the Rosebank final investment decision of up to $125 million. The companies also agreed on a purchase price adjustment with respect to capital expenditure as of the deal's effective date of Jan. 1, resulting in further consideration of $125 million. The deal is expected to close in first-quarter 2017.
Siccar Point is a North Sea-focused exploration and production company backed by private equity firms Blue Water Energy LLP and Blackstone Energy Partners LP. In August Siccar Point acquired 8.9% interest in the Greater Mariner Area including Mariner oil field.
Output sting from Alberta GHG cap delayed
"Terrible market conditions" will delay the sting of Alberta's pending 100 million-tonne cap on greenhouse-gas emissions from oil sands work, says a Fraser Institute analyst.
In a blog post, Kenneth Green says newly lowered forecasts for production, based on lower oil prices and unrelated environmental policies, indicate the GHG cap won't restrict oil sands production before 2040.
Green and a colleague earlier predicted that the emissions cap would start affecting production in 2025 if emissions intensity didn't improve, lowering cumulative output by 3.34 billion through 2040 and costing the province $254.74 billion (Can.).
In that earlier analysis, emissions-intensity improvement delayed the production effect to 2027 and lowered the expected cumulative loss through 2040 to 2.03 billion bbl and the financial loss to $153.41 billion (OGJ Online, Aug. 17, 2016).
New projections from Canada's National Energy Board change the outlook, according to Green.
The NEB has lowered base-case oil-price assumptions by $17/bbl from expectations underlying the forecast on which the Fraser Institute analysts based their earlier outlook.
And NEB now projects oil production in Canada will rise 41% through 2040, indicating output unaffected by an emissions cap that allows a 50% increase from recent levels. Technical improvements will keep the emissions increase below the production gain.
"While terrible market conditions may have made Alberta's carbon cap temporarily moot…we should remember that market conditions can equally make it unmoot and dampen regrowth of the oil sector when, as is widely assumed, the price of oil rebounds in the future," Green writes.
Calling the carbon cap "arbitrary," he charges, "The government seemingly failed to do any meaningful analysis of the potential costs and benefits of the action."
Legislation recently filed in Alberta to impose the oil-sands emissions cap also sets a $30/tonne carbon price (OGJ Online, Nov. 2, 2016).
Exploration & Development — Quick Takes
USGS: Permian's Wolfcamp has 20 billion bbl of oil
The Wolfcamp shale in the Midland basin portion of Texas's Permian basin contains an estimated mean of 20 billion bbl of oil, 16 tcf of associated natural gas, and 1.6 billion bbl of NGLs, according to an assessment by the US Geological Survey.
The estimate-which is for continuous unconventional oil and consists of undiscovered, technically recoverable resources-is nearly three times that of the 2013 USGS Bakken-Three Forks resource assessment, making this the largest estimated continuous oil accumulation that USGS has assessed in the US to date (OGJ, Jan. 6, 2014, p. 48).
"The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more," commented Walter Guidroz, program coordinator for the USGS energy resources program.
Although the USGS has assessed oil and gas resources in the Permian, this is the first assessment of continuous resources in the Wolfcamp. Since the 1980s, the Midland Wolfcamp has been part of the "Wolfberry" play that encompasses Mississippian, Pennsylvanian, and Lower Permian reservoirs. Oil has been produced using traditional vertical well technology.
However, more recently, US exploration and production firms have been using horizontal drilling and hydraulic fracturing, and more than 3,000 horizontal wells have been drilled and completed in the Midland Wolfcamp section.
The Wolfcamp is also present in the Delaware basin portion of the Permian, but was not included in this assessment.
Firms active in the Wolfcamp include Pioneer Natural Resources Co., WPX Energy Inc., Devon Energy Corp., and Diamondback Energy Inc., each of which has reported recent or planned increases in drilling activity there (OGJ Online, Nov. 4, 2016).
South African firm yields to antifrac pressure
Sungu-Sungu Gas Pty. Ltd. has yielded to activist pressure and suspended applications to explore for shale gas in Free State and KwaZulu-Natal, South Africa.
The company wrote a letter to Petroleum Agency South Africa withdrawing the applications and confirmed the move to the Sunday Times, Johannesburg.
The newspaper quoted a company official saying: "It's no longer worth it. There are many objections. We decided to just pull out."
The activist group Frack Free South Africa called the news "the first of many victories."
Sungu-Sungu Gas, a unit of South African mining conglomerate Sungu-Sungu Group, is among several oil and gas companies that have shown interest in the shale potential of massive Karoo basin.
The South African government banned hydraulic fracturing during 2011-12 (OGJ Online, Sept. 11, 2012).
Tullow to start four-well drilling program in Kenya
Tullow Oil PLC plans a four-well drilling program in the South Lokichar basin in Kenya beginning in December. Two wells are exploration prospects, and two others are appraisals of Ngamia and Amosing fields.
The Etete well will be drilled south of the Etom field (OGJ Online, Dec. 15, 2015). The Erut well will be drilled in the northern part of the basin.
Ngamia South, an appraisal well, will be drilled to extend Ngamia to the southeast (OGJ Online, Apr. 15, 2013). Amosing Updip will target "undrilled near-fault volumes," the company said (OGJ Online, Jan. 22, 2015).
Drilling & Production — Quick Takes
OPEC production reached 33.64 million b/d in October
The Organization of Petroleum Exporting Countries increased its crude oil output by 240,000 b/d during October to average 33.64 million b/d, OPEC said in its Monthly Oil Market Report.
The cartel's October production was above the high-end of a production range OPEC proposed at a September meeting in Algiers. Ministers are expected to discuss that proposed production cap of 32.5-33 million b/d during a Nov. 30 meeting in Vienna.
The OPEC report came a day after the International Energy Agency issued its own report of high OPEC production (OGJ Online, Nov. 10, 2016).
On Nov. 11, OPEC said its members produced almost 1 million b/d more than its anticipated 2017 demand for OPEC oil.
"Looking ahead, it is important to consider the immediate impact that the assumed global supply-demand balance has on inventories, given the expected demand for OPEC crude in 2017 of 32.7 million b/d," OPEC said. "Adjustments in both OPEC and non-OPEC supply will accelerate the drawdown of the existing substantial overhang in global oil stocks and help bring forward the rebalancing of the market."
Nigeria, Libya, and Iraq all reported increased production. These producers also have requested an exemption from any reduction in production quotas. Meanwhile, production in Angola showed the largest decline of OPEC members in October.
PDVSA signs deals to fund production hikes
State-owned Petroleo de Venezuela SA (PDVSA) has entered financial agreements with joint venture partners that it says will boost oil production in two areas.
PDVSA and ONGC Videsh of India signed agreements related to their Indovenezolana SA venture focused on redevelopment of San Cristobal oil field in the Orinoco Belt (OGJ Online, Apr. 11, 2008).
The agreements include a loan of as much as $318 million by ONGC Videsh to PDVSA and provide a mechanism for payment of dividends due ONGC Videsh. PDVSA owns 60% of Indovenezolana, ONGC Videsh the remainder. The Indian firm said a San Cristobal "remediation plan" calls for a production increase to 27,000 b/d from 18,000 b/d via waterflood.
Separately, PDVSA entered an agreement with DP Delta Finance BV to raise production by the Petrodelta SA joint venture to 110,000 b/d from 40,000 b/d in 5 years.
Petrodelta is a joint venture of Corporacion Venezolana del Petroleo SA, PDVSA, and Delta DP Finance, a private company that recently acquired interests formerly held by affiliates of Harvest Natural Resources Inc. (OGJ Online, June 30, 2016).
Petrodelta operates six fields in eastern Venezuela.
OGUK: Survey shows decommissioning costs on the rise
Decommissioning expenditures offshore the UK and Norway in 2015 totalled £2.1 billion, up from £1.6 billion in 2014.
Last year's decommissioning expenditures represented about 5% of total industry expenditures, compared with 2% in 2010.
Oil & Gas UK said its "Decommissioning Insight 2016" is the first survey of both the UK and Norwegian decommissioning markets.
During the next 10 years, more than 100 platforms are forecast for complete or partial removal from both the UK and Norwegian continental shelves. More than 1,800 wells are scheduled to be plugged and abandoned, while about 7,500 km of pipeline is forecast to be decommissioned.
Mike Tholen, OGUK's upstream policy director, said some companies "may be expediting decommissioning to take advantage of falling costs in the current downturn."
But, Tholen said, others are deferring cessation of production as field life has been extended by sustained efficiency improvements, and still others are delaying decommissioning activity due to cash-flow constraints (OGJ Online, Feb. 10, 2016).
"With low oil prices continuing, you might expect decommissioning to be a key focus for the sector in the years ahead," Tholen said. "However, we are not witnessing a rush to decommission."
PROCESSING — Quick Takes
Kuwait partners with Oman on Duqm refinery
Kuwait Petroleum Corp. subsidiary Kuwait Petroleum International Ltd. (KPI) has entered an agreement with Duqm Refinery & Petrochemical Industries Co. LLC (DRPIC), Muscat, a joint venture of state-owned Oman Oil Co. (OOC) and the UAE's International Petroleum Investment Co. (IPIC), to cooperate in development of DRPIC's grassroots 230,000-b/d refinery and petrochemical complex to be built in Oman's Duqm Special Economic Zone (SEZAD) in Duqm.
As part of a memorandum of understanding signed between the companies, KPI has agreed to invest an undisclosed amount in the project, which once completed, will produce transportation fuels and petrochemicals to meet rising demand in Oman and abroad, OOC said.
The MOU follows DRPIC's goal of attracting investors to help complete the proposed complex following IPIC's conclusion earlier in the year that the new direction of project to include petrochemicals did not fit its investment strategy, OOC said.
In 2015, DRPIC said it planned to award a total of two EPC contracts for the project by yearend 2016, including a larger package for all equipment and structures required for main crude oil processing units, as well as a second package to cover all supporting installations, utilities, tankage, and buildings.
The company, which previously awarded a contract to Galfar Engineering & Contracting SAOG, Muscat, to provide site preparation work for the project, has yet to reveal timelines for either construction or possible startup of the integrated refining complex. Primarily designed to produce and recover naphtha, jet fuel, diesel, and LPG, the refinery will include units for hydrocracking, hydrotreating, delayed coking, sulfur recovery, hydrogen generation, and Merox treating.
ExxonMobil's Texas PE plants due new units
ExxonMobil Corp. will add a unit to expand production of granular and pelletized polyethylene (PE) by 65% from current rates at its 1-million tonne/year PE plant in Beaumont, Tex.
Already under construction and scheduled for startup sometime in 2019, the 650,000-tpy PE unit comes as part of the company's goal to meet rising demand for high-performance plastics, ExxonMobil said.
Alongside aligning with the company's strategy to capitalize on lower feedstock prices resulting from rising supplies of US shale gas and associated liquids, the Beaumont project builds on supply advantages created by a concurrent expansion of the 1-million tpy PE plant in Mont Belvieu, Tex., where ExxonMobil said it is adding two similar units.
Combined, the multimillion investment at Beaumont and Mont Belvieu will increase the ExxonMobil's US PE production by about 2 million tpy or 40%, making Texas the company's largest PE supply point.
ExxonMobil lets contract for Texas PE expansion
ExxonMobil Corp. has let a contract to Jacobs Engineering Group Inc., Dallas, to provide engineering, design, and construction management services for the company's recently announced plan to add a new polyethylene (PE) unit at its 1-million tonne/year PE plant in Beaumont, Tex. (OGJ Online, Nov. 14, 2016).
Jacobs will deliver front-end engineering, detailed design, and construction management to support enabling works and installation of off site installations for the project, including rail as well as interconnecting piping required for the new PE train, the service provider said.
Already under construction and scheduled for startup sometime in 2019, the new 650,000-tpy unit will expand production of granular and pelletized PE by 65% from current rates to help meet rising demand for high-performance plastics.
TRANSPORTATION — Quick Takes
Trump's election revives Keystone XL prospects
Donald J. Trump's position as US president-elect has revived TransCanada Corp.'s stalled Keystone XL crude oil pipeline project. Trump stated repeatedly while campaigning that he would like to see the pipeline built and that he would invite TransCanada to resubmit its application for the project once he assumes office. TransCanada, meanwhile, has stated in media reports this week that it "remains fully committed" to completing the project.
TransCanada applied for US permission to build Keystone XL in 2008. The administration of President Barack Obama denied permission Nov. 6, 2015, with TransCanada filing suit against the decision earlier this year, claiming it was arbitrary and unjustified under terms of the North American Free Trade Agreement and that it exceeded the president's constitutional powers (OGJ, Jan. 18, 2016, p. 19).
The 1,179-mile, 36-in. OD pipeline would ship crude from Hardisty, Alta., to Steele City, Neb., for delivery onward to the Cushing, Okla., storage hub and Gulf Coast refiners.
ETP sues to complete Dakota Access oil pipeline
Energy Transfer Partners sued in federal district court on Nov. 15 for permission to complete the Dakota Access crude oil pipeline after the US Army Corps of Engineers (ACE) said the previous day that it would continue to delay issuing easement permits under Lake Oahe in North Dakota for further consultations with the Standing Rock Sioux Indian tribe (OGJ Online, Nov. 15, 2016).
An ETP spokesperson confirmed to OGJ on Nov. 16 that the petition had been filed in US District Court for the District of Columbia. Additional details were not immediately available.
ETP and its partner in the project, Sunoco Logistics Partners, jointly denounced the additional delay as unjust and a reinforcement of the Obama administration's lack of interest in enforcing and abiding by the law around 11 p.m. EST on Nov. 14.
"Furthermore, there was no legal or factual justification stated by [ACE] for the delay," they said. "In fact, [ACE] admitted again today that its review had concluded that all previous decisions complied with the all applicable legal requirements."
In their statement, the partners said, "ACE knows full well that it is seeking consultation with a party which steadfastly has refused to consult. Rather than holding Standing Rock Sioux Tribe accountable for its decisions over the past 3 years, it seeks to reward them at this late date."
Puma Energy to buy BP fuel terminal in N. Ireland
Puma Energy International BV has agreed to acquire BP PLC's bulk storage fuel terminal in Belfast.
The terminal provides storage for gasoline, distillates, and aviation fuels, with road gantry loading facilities and a jetty berth capable of handling MR-class vessels. The site comprises 20 bulk fuel storage tanks with a working capacity of 143,000 cu m. The 53-acre former refinery site is between George Best Belfast City Airport and Belfast Harbor. The refinery was opened in 1964 and converted to a terminal in 1982.
The addition takes Puma Energy's global network of bulk storage terminals to 100, comprising 7.9 million cu m of storage capacity. The deal follows the purchase of the 1.4 million cu m Milford Haven terminal in Wales in 2015.
