OGJ Newsletter
GENERAL INTEREST — Quick Takes
Proposed US budget deal includes sale of SPR crude
A tentative 2-year federal budget deal, which at presstime last week was expected to come to a US House floor vote Oct. 28, includes a provision authorizing the sale of 58 million bbl of oil from the US Strategic Petroleum Reserve during 2018-25.
Proceeds would be deposited in the US Treasury's general fund to help reduce the budget deficit. Sales would not be allowed if it was determined that they would limit the SPR's ability to meet its strategic purpose and prevent and reduce adverse impacts of severe domestic energy supply disruptions.
Title IV in the proposed budget agreement, which Speaker John O. Boehner (R-Ohio) unveiled on Oct. 27, also would require the US Department of Energy to conduct a strategic review of the SPR and develop proposals related to its role in national policy, relevant legal authorities, configuration, and performance, and long-term effectiveness.
US Energy Sec. Ernest G. Moniz has said that such a review is needed, as has US Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-Alas.), who opposes selling crude from the reserve to reduce the deficit or to fund other federal programs.
A spokesman for the committee's majority said on Oct. 27 that the senator was reviewing the proposal. "As the budget process advances, we will further evaluate steps needed to update our nation's energy and natural resources policies," Moniz said.
Pemex gets license for US crude swaps
The US government has issued a license to Petroleos Mexicanos (Pemex) subsidiary Pemex International Trade (PMI) to import as much as 75,000 b/d of US light crude oil for 1 year in exchange for exporting Mexican heavy crude to the US.
The US light crude will be processed in Mexico's national refining system, while the Mexican heavy crude will be processed by high-conversion refineries on the US Gulf Coast.
Pemex says the use of light crude in Mexican refineries will reduce fuel oil production and promote production of higher-value fuels such as gasoline and diesel, which contain lower sulfur content.
It will also reduce the logistical costs of exporting fuel oil from refineries in central Mexico, as well as imported automotive fuels, the company says.
Pemex through PMI in mid-2014 presented the exchange proposal to the US Department of Commerce, and the Obama administration in August said it would begin to allow limited swaps (OGJ Online, Aug. 14, 2015). The company originally sought a 100,000-b/d exchange.
Chinese company to buy Permian basin assets
A Chinese holding company signed a letter of intent to purchase oil and gas assets in the Permian basin of West Texas for $1.3 billion through a limited liability partnership.
Yantai Xinchao Industry Co. filed a statement with the Shanghai Stock Exchange, saying assets in the West Texas counties of Howard and Borden will be bought from Tall City Exploration and Plymouth Petroleum, both of Midland, Tex.
In the Oct. 24 filing, Yantai Xinchao said it had signed a letter of intent with Ningbo Dingliang Huitong Equity Investment Center, a limited liability partnership, to buy the Permian assets through a Ningbo Dingliang subsidiary, Moss Creek Resources LLC, the Associated Press reported.
It said the transaction has been approved by the US Committee on Foreign Investment, which is part of the Treasury Department.
Exploration & Development — Quick Takes
Survey: Most Colorado voters back more development
Sixty-eight percent of registered Colorado voters said they were more likely to back a candidate who supports developing more oil and gas, a survey commissioned by the Colorado Petroleum Council found.
The American Petroleum Institute affiliate released the telephone survey's findings a day before the third Republican presidential candidates' debate was to be held at the University of Colorado at Boulder. The debate, hosted by CNBC, focused on jobs and the economy.
"This poll shows that energy is a top issue for voters next year because it plays a key role in job creation and economic growth," CPC Executive Director Tracee Bentley said on Oct. 27 in Denver.
"Colorado voters understand the opportunities that prodevelopment policies create and the need for an all-of-the-above energy policy that helps produce more domestic energy and lower energy costs for American consumers," Bentley said.
Harris Poll randomly interviewed 604 registered Colorado voters by telephone over Oct. 15-18 for API. Eighty-two percent responded that producing more oil and gas domestically is important, while 72% said they support increased US oil and gas production. Asked if they thought the federal government does enough to encourage domestic oil and gas resource development, 53% said no.
Eighty-five percent agreed with a statement that increased access to US oil and gas could lead to more jobs, according to the survey. It noted that 83% agreed that such access could help stimulate the broader US economy, 83% agreed it could help strengthen US energy security, 79% agreed it could help reduce consumers' energy costs, and 69% agreed it could help increase US influence as a global energy power and enable it to assist allies in Europe and elsewhere who need energy supplies.
AWE starts flow testing of second zone in Waitsia-1 well
AWE Ltd.'s Waitsia-1 well in the North Perth basin onshore Western Australia has recorded a strong gas flow during tests of the second zone at the field.
The company said the well had achieved flow, constrained by tubing size, of 25.7 MMcfd of gas from the Kingia formation.
When put with the flow of 24.7 MMcfd from the underlying High Cliff Sandstones earlier this month, Waitsia-1 is capable of a combined flow of at least 50 MMcfd, proving the field to be a significant discovery.
The Kingia flow-tested a 15-m interval between 3,333 m and 3,348 m, measured through a 56/64-in. choke at a pressure of 1,530 psi, for about an hour.
AWE said the test program has been designed to determine well deliverability from the two conventional reservoir zones as well as to collect gas samples for compositional analysis.
Managing Director Bruce Clement said the company has now confirmed the flow potential of the two reservoirs. The result will enable AWE to reduce the number of wells, and hence costs of the development program to achieve the targeted production rate of 100 MMcfd of gas.
Engineering and planning for Stage 1 of development is well advanced and early stage production of 10 MMcfd is planned for mid-2016. In the meantime, testing of Waitsia-1 will continue with a series of flows through various choke settings, rates, and wellhead pressures to glean maximum information for the development work.
CNOOC confirms Caofeidian 6-4 as midsized oil field
CNOOC Ltd. has drilled and completed the Caofeidian 6-4-1 discovery well in western Bohai at a depth of 3,100 m, encountering oil pay zones with total thickness of 180 m.
The well produces light crude oil tested at 5,750 b/d. CNOOC says Caofeidian 6-4-1 has set three records in the western Bohai exploration area in achieving maximum cumulative thickness, maximum single pay thickness of oil pay zones, and the highest test production in Paleogene clastic rocks.
The structure, discovered in 2014, lies in the western part of the Shijutuo Uplift in an average of 20 m of water.
"The successful appraisal of Caofeidian 6-4 structure not only represents a significant breakthrough after several years of exploration in the west of Bohai, but also provides important guidance in oil and gas exploration in similar areas," the company said in Oct. 22 news release. "In addition, it also helps ensure reserves and production growth in Bohai."
Drilling & Production — Quick Takes
Oil production begins from CD5 drill site in NPR-A
ConocoPhillips Alaska Inc. has started oil production from its CD5 drill site in Alpine field, marking the first commercial oil development on Alaska Native lands within the boundaries of the National Petroleum Reserve-Alaska (NPR-A) (OGJ Online, Aug. 20, 2015).
CD5 is the second ConocoPhillips North Slope drill site to come on stream this month. Production from Kuparuk Drill Site 2S started on Oct. 12 (OGJ Online, Oct. 13, 2015).
Four wells are complete at CD5, with development plans calling for 11 more by early 2017. Peak gross production is anticipated at 16,000 bo/d. CD5 represents a total project investment of more than $1 billion (gross).
With the completion of CD5, ConocoPhillips is pursuing additional developments in NPR-A. The company has received permits for its Greater Mooses Tooth 1 (GMT1) development, which lies 8 miles west of CD5 (OGJ Online, Oct. 23, 2015). A final investment decision is expected later this year. GMT1 is estimated to cost $900 million gross and could produce up to 30,000 bo/d gross at peak production, ConocoPhillips says.
The company also has filed permits for development of a second drill site in the Greater Mooses Tooth Unit (GMT2) and is considering additional NPRA exploration opportunities.
The ConocoPhillips-led CD5, GMT1, Kuparuk Drill Site 2S, and recently announced 1H NEWS (Northeast West Sak) development represent $3 billion gross in new North Slope projects. Peak gross combined production when all of these projects are on stream is estimated at 40,000-50,000 bo/d. ConocoPhillips says its continued focus on investment in Alaska is due in part to tax reform passed in 2013.
"This announcement is the culmination of more than 10 years of work and collaboration with key stakeholders, including the residents of the nearby village of Nuiqsut," commented Joe Marushack, president of ConocoPhillips Alaska.
CD5 is situated within the boundaries of the NPR-A on land owned by Kuukpik Corp., the village corporation for Nuiqsut, with mineral rights owned largely by Arctic Slope Regional Corp. CD5 is part of the Colville River Unit, which is operated by ConocoPhillips Alaska with 78% interest. Anadarko Onshore E&P LLC holds 22% interest. Greater Mooses Tooth Unit also is owned 78% by ConocoPhillips and 22% by Anadarko Onshore E&P LLC.
Shell halts Carmon Creek in situ project in Alberta
Royal Dutch Shell PLC said it will not continue construction of the 80,000-b/d Carmon Creek thermal in situ project in Alberta. Shell expects to take $2 billion in charges in the third quarter as a result of the decision. Estimated proved reserves of 418 million bbl of bitumen at yearend 2014 will be debooked.
"After careful review of the potential design options, updated costs, and the company's capital priorities, Shell's view is that the project does not rank in its portfolio at this time," the company said. The decision "reflects current uncertainties, including the lack of infrastructure to move Canadian crude oil to global commodity markets."
Shell will retain the Carmon Creek leases and preserve some equipment while continuing to study options for the 100% Shell-owned project. The company sanctioned the project in 2013 (OGJ Online, Oct. 31, 2013).
Shell, Transocean put off deliveries of two drillships
Shell EP Wells Equipment Wells Services BV, Transocean Ltd., and Daewoo Shipbuilding & Marine Engineering Co. (DSME) have together agreed to delay by 12 months the operating and delivery contracts of the Deepwater Pontus and Deepwater Poseidon newbuild ultradeepwater drillships.
Transocean says the delay won't impact the duration or dayrate of the original 10-year operating contracts for the drillships. Parties will be compensated for the postponement. The specific terms are not disclosed.
The delivery and operating agreements for Shell's Deepwater Thalassa and Deepwater Proteus newbuild ultradeepwater drillships are not impacted by the agreement, Transocean adds.
"We are pleased that the strength of our relationships with both Shell and DSME has enabled us to reach this mutual agreement," said Jeremy Thigpen, Transocean president and chief executive officer. "We are excited by the progress that we have jointly made with Shell on all four high-specification, ultradeepwater drillships, including the Deepwater Thalassa, which was delivered this September; and the Deepwater Proteus, which is scheduled for delivery this December."
Troll A compressors start operations
Statoil ASA started up two compressors this month from its Troll A platform in the Norwegian North Sea. They were lifted onto the platform last year (OGJ Online, June 5, 2014).
The company says the compressors will together add 83 billion cu m to natural gas recovery, extending Troll field's long-term production profile to 2063 from 2045. They also ensure an export capacity from Troll of 120 million standard cu m/day of gas, totaling 30 billion standard cu m/year.
The compressors are operated by land-based power from Statoil's Kollsnes gas processing plant on the southern portion of Ooy island in Norway, without carbon dioxide and nitrogen oxide emissions from the platform. Five 70-km cables have been laid between Troll and land, and a converter station has been built at Kollsnes.
"This is a new strategic milestone for the Troll field. The compressors are an important investment to ensure sustainable, long-term production and activity on the Norwegian continental shelf," said Gunnar Nakken, Statoil's newly appointed senior vice-president for its operations west cluster.
During the past 18 months, Statoil has started up low-pressure compressors on Troll A; Kvitebjorn; Heidrun; Kristin; Asgard (OGJ Online, June 9, 2015); and Gullfaks (OGJ Online, Oct. 12, 2015); the last two of which lie on the seabed. The compressors collectively increase the recovery rate by more than 1.2 billion bbl, extending the life of the installations.
PROCESSING — Quick Takes
Syngas Energy Holdings plans Louisiana methanol plant
Syngas Energy Holdings LLC, Channelview, Tex., will invest $360 million to build and operate a grassroots methanol production plant in St. James Parish, La., on a tract of land with access to the Port of South Louisiana, according to Louisiana Economic Development (LED).
The proposed plant would have a production capacity of 500,000 tonnes/year and would be built on a 130-acre plot of land that Syngas Energy Holdings will buy from NuStar Energy LP, San Antonio, which operates a nearby 11 million-bbl crude oil terminal and logistics complex that provides storage and shipping capabilities for specialty liquids such as methanol, LED said.
While NuStar's St. James complex will provide rail and barge transportation services for the proposed methanol plant, Syngas Energy said it would build additional on site storage capacity at the plant to enable product shipments by truck.
The project intends to produce methanol from a feedstock of Louisiana's abundant natural gas supplies, which would arrive to the plant's location via pipeline, according to Vas Kenyen, Syngas Energy's chief executive officer.
While permit approvals and a final investment decision have yet to be completed, Syngas Energy said it expects to begin construction on the project during second-quarter 2016.
The plant's initial 500,000-tpy production capacity is scheduled to be commissioned by yearend 2018, but plans already are under way for an expansion to 700,000-tpy in a later phase, Kenyen.
Syngas Energy plans to start hiring additional senior management for the project in first-quarter 2016, with broad hiring of operators and other plant functions due to begin during third-quarter 2017.
Earlier in the year, Yuhuang Chemical Inc. (YCI), a subsidiary of China's Shandong Yuhuang Chemical Co. Ltd., announced its plan to build its own $1.85-billion methanol manufacturing complex in Louisiana, also in St. James Parish. (OGJ Online, Sept. 16, 2015; Feb. 11, 2015; July 18, 2014).
Once fully commissioned, the complex will include two methanol plants with a combined capacity of 3 million tpy, as well as a methanol derivatives plant for production of intermediate chemicals.
SOCAR starts up units, breaks ground on Sumgait project
State Oil Co. of Azerbaijan Republic (SOCAR) subsidiary Azerikimya Production Union (PU) has entered two units into operation at its ethylene and polyethylene (PE) plant in Sumgait, north of Baku.
The company commissioned a 87,600-tonne/year (tpy) unit for the desulfurization of liquefied gas and a 120,000-tpy installation for the hydrogenation of butylene-butadiene fractions, according to social media posts from Azerikimya PU and releases from Ilham Aliyev, president of Azerbaijan.
Aliyev added that Azerikimya also recently commissioned an isopropyl alcohol unit at the petrochemical plant, which produces 260,000 tpy of ethylene and PE.
Located in close proximity to and supplied with raw feedstock from SOCAR's Heydar Aliyev (formerly New Baku) refinery at Baku, the plant also produces 136,000 tpy of propylene, 156,000 tpy of polypropylene (PP), 25,000 tpy of industrial isopropyl alcohol, and 1,750 tpy of absolute diisopropyl alcohol, the company said.
The state-owned operator also is moving forward with construction of Azerbaijan's first PP plant, to be built in the Sumgait Chemical Industrial Park.
President Aliyev participated in the groundbreaking ceremony for the new plant, which will produce 180,000 tpy of PP and 120,000 tpy of high-density PE on Oct. 25, according to a release from Aliyev's office.
Earlier in the year, SOCAR Polymer LLC let a €350-million engineering, construction, and procurement contract to subsidiaries of Maire Tecnimont SPA, Milan, to build the PP plant, which at the time, was due to be commissioned by late 2016 (OGJ Online, Apr. 7, 2015).
Startup of the new plant has now been rescheduled for 2018, according to Aliyev's office.
The PP plant, which SOCAR purchased from Varennes, Que., and had dismantled, reconditioned, and transported to Azerbaijan, will be equipped LyondellBasell's Spheripol process technology.
TRANSPORTATION — Quick Takes
Bill would give PHMSA hire authority for inspectors
Two US House Energy and Commerce Committee members from Texas said they have introduced legislation that would give the US Pipeline and Hazardous Materials Safety Administration direct hire authority for more pipeline inspectors.
HR 3823 would transfer that authority from the US Office of Personnel Management with an emphasis on creating opportunities for women, veterans, and minorities, Democrat Gene Green and Republican Pete Olson jointly announced on Oct 26. Reps. Janice Hahn (D-Calif.) and Brian Babin (R-Tex.) cosponsored the measure.
If the bill becomes law, PHMSA's administrator would be required to report to Congress within 180 days and annually thereafter on administration efforts to hire women, veterans, and minorities as pipeline inspectors since Jan. 1, 2012. The new authority would expire Dec. 31, 2017, unless renewed.
"Pipeline safety is critical and relies upon an adequate supply of inspectors to accomplish inspections in a timely manner to both protect surrounding areas and ensure timely delivery of needed energy," said Olson, who is vice-chairman of the committee's Energy and Power Subcommittee.
"This bipartisan bill expedites the process to hire more inspectors to improve the safety and delivery of vital resources flowing through America's pipelines," Olson said.
Green said, "Updating our infrastructure is only one part of making pipelines safer. We need to hire and invest in pipeline inspectors. This bill will expedite that process while creating opportunities for underrepresented groups."
HR 3823 was referred to the House Transportation and Infrastructure Committee initially, and the Energy and Commerce and Oversight and Government Reform Committees subsequently.
Approval received for Prince Rupert gas line
TransCanada Corp. has received final permits from the BC Oil & Gas Commission (BCOGC) giving regulatory approval for the construction and operation of the Prince Rupert gas transmission pipeline project (PRGT).
The BCOGC permits cover the entire 900-km route from just north of Hudson's Hope, BC, to Lelu Island, off the coast of Port Edward, near Prince Rupert. The permits also approve construction of three compressor stations and a meter station where the gas is to be delivered to the Pacific Northwest (PNW) LNG facility (OGJ Online, Mar. 10, 2014).
The PRGT project, comprising 780 km of land pipeline and 110 km of marine pipeline, will connect the gas production in the Montney fields of northeastern BC with the proposed PNW LNG liquefaction facility on Lelu Island.
PNW LNG must receive a positive decision from the federal government under the Canadian Environmental Assessment Act 2012 for PRGT to proceed with construction. Once approval is received, and PNW LNG has confirmed its decision to proceed with the project, PRGT will begin site preparation for camp locations and right-of-way clearing, with commencement of pipeline construction activities shortly thereafter.
"Receiving the full complement of 11 pipeline and facility permits is a major milestone for the project, and concludes an exhaustive regulatory process that we embarked on more than 2 years ago," said PRGT Pres. Tony Palmer.
"Along with the BC Environmental Assessment Certificate received last November, the BCOGC permitting process was the last major regulatory step for PRGT," Palmer said. "At the same time, we continue to work towards securing more project agreements with First Nations, which provide significant financial benefits while addressing cultural and environmental interests."
TransCanada is advancing the development of $13 billion in British Columbian gas projects.