OGJ Newsletter

Dec. 5, 2016


OPEC agrees to adjust production levels next year

Members of the Organization of Petroleum Exporting Countries agreed to cut their production levels by slightly more than 1 million b/d effective Jan. 1, 2017, to 32.5 million b/d from the cartel's October production of 33.6 million b/d. OPEC delegates said the decision did not involve a change in production quotas but rather what OPEC is calling "an adjustment."

In a statement, OPEC said, "The market rebalancing is under way," adding that investment levels in oil and gas dropped worldwide in 2015-16 as a result of low oil prices.

The OPEC agreement was reached in Vienna with the expectation that key non-OPEC countries will adjust production downward by 600,000 b/d. Russia is expected to account for 300,000 b/d of that 600,000 b/d, OPEC officials said.

Saudi Arabia, OPEC's biggest producer, agreed to reduce production by 486,000 b/d, officials said in a news conference.

Meanwhile, Indonesia-currently a net importer of crude oil-decided to suspend its OPEC membership. OPEC spokesmen said Indonesia could return to the cartel in the future.

The next OPEC meeting is set for May 25 and the production adjustment could be extended for 6 months, said OPEC Pres. and Qatar Energy Minister Mohammed Bin Saleh Al-Sada.

Reach Energy shareholders okay Kazakh buy

Reach Energy Bhd., Kuala Lumpur, has received shareholder approval to buy 60% interest in the owner of the productive Emir-Oil Concession Block in Kazakhstan for $154.9 million.

The company entered a conditional agreement last March to buy the interest in Palaeontol BV from Palaeontol Cooperatief UA (Palaeontol COOP) and MIEH Holdings Corp. of Hong Kong. Palaeontol COOP is a wholly owned subsidiary of MIEH.

Palaeontol BV is an investment holding company and the sole interest holder in the Emir-Oil concession.

The 850,300-sq-km contract area is in the Mangyshlak basin about 40 km northeast of Aktau.

Aksaz natural gas and condensate field and Dolinnoe, Emir, and Kariman oil fields are producing on the block at restricted rates. North Kariman and Yessen oil fields are on pilot production.

A gas pipeline, gas processing plant, oil-processing equipment, and oil storage and transport facilities are in place.

Reach Energy estimates gross proved reserves of the fields, including the pilots, at 24.6 million stock-tank bbl of oil and 17.7 bcf of natural gas. At least 10 exploratory prospects have been identified.

In a statement, MIEH said Reach Energy shareholder approval satisfied all conditions for the sale.

CEPSA, Sonatrach sign E&P cooperation agreements

Spain's Compania Espanola de Petroleos SA (CEPSA) and Algeria's Sonatrach have signed an agreement that will have particular relevance to oil field contracts in Algeria. CEPSA has maintained its exploration and production activities in that country for the past 30 years "without interruption," the company said.

The agreements, which were signed Nov. 22 by CEPSA Chief Executive Officer Petro Miro and Sonatrach's counterpart, Amin Mazouzi, will present the "potential to study other opportunities beyond [the] upstream sector."

Both companies also have signed a memorandum of understanding to "study collaborating on new opportunities in other business areas where both companies share interests, as much in Algeria as in other countries."

RKF oil field, which lies in the Berkine basin, is operated under Sonatrach-CEPSA collaboration. RKF, which produces an average of 11,000 b/d of oil, was the first oil field put into production by CEPSA in Algeria in 1996.

CEPSA also continues to work with Sonatrach and other firms in Ourhoud oil field, also in the Berkine basin.

Together with Sonatrach, CEPSA also operates other oil fields including Bir el Msana (BMS) and Rhourde er Rouni II.

CEPSA holds 42% stake in the subsea gas pipeline, Medgaz, which links Algeria and Europe through Spain.

Energean gets western Greece exploitation license

The Greek Ministry of Environment and Energy and Energean Oil & Gas SA have agreed to the conversion of the West Katakolon exploration license to a 25-year exploitation license effective immediately.

West Katakolon is part of the Katakolon concession area and covers 60 sq km with 10 million bbl of recoverable oil. Energean will be operator of the field development, which follows that of its operated Prinos oil field and South Kavala gas field, both in the North Aegean Sea.

A field development plan (FDP) for West Katakolon will be submitted to the energy ministry by the end of February. Drilling is planned for 2018 and will use extended-reach drilling technology to drill from onshore to offshore reservoirs. Production startup is expected in 2018-19.

"We are committing to the $50-million investment in Katakolon as a first step in seeking to open up the oil and gas opportunities in this highly promising territory, an area with similar geology to the wider Adriatic Zone, well known for its prolific hydrocarbon systems in Italy, Albania, and Croatia," said Mathios Rigas, Energean chief executive officer.

The FDP for West Katakolon will be Energean's third offshore plan in process over the next few years after those of the 15 million-bbl Epsilon oil field, also in the Prinos concession, and the 2.4-tcf Karish and Tanin gas fields offshore Israel, recently acquired from Delek Drilling LP and Avner Oil Exploration LP for $148 million (OGJ Online, Aug. 19, 2016).

"During what has been a challenging period for the industry, Energean has taken advantage of its strong cashflow from Prinos to make sure it is well placed for a recovery in the oil price," Rigas said. Production from Prinos has reached 5,000 b/d and "Energean is aiming to increase this to 10,000 [b/d] by 2018 through an ongoing $200 million investment program with low breakeven costs.

"We have acquired two new licenses in western Greece, been awarded two blocks offshore Montenegro and one more onshore western Greece, and most recently purchased the Karish and Tanin natural gas fields in Israel," Rigas added. Energean also is preparing for exploration drilling on Egypt's onshore West Kom Ombo block in the next few months.

Exploration & DevelopmentQuick Takes

ExxonMobil unit starts drilling offshore Liberia

Drilling has commenced on the Mesurado-1 deepwater well on Block LB-13, 50 miles offshore Liberia. Canadian Overseas Petroleum Ltd. (COPL) says the well, which will target Late Cretaceous, will be drilled in 2,500 m of water using the Seadrill West Saturn drillship.

Block operator ExxonMobil Exploration & Production Liberia Ltd. holds 83% working interest. COPL retains 17% interest through its subsidiary Canadian Overseas Petroleum (Bermuda) Ltd. This is the first well operated by ExxonMobil offshore Liberia, the company said.

Canadian Overseas acquired 100% interest in Block LB-13 in 2011 from Peppercoast Petroleum PLC for $85 million (OGJ Online, May 19, 2011). ExxonMobil Corp. acquired 70% interest in the COPL's production-sharing contract governing the block in November 2011 for $55 million.

Cairn group to drill appraisal wells offshore Senegal

A Cairn Energy PLC-led group and containing FAR Ltd. deported that two firm appraisal wells will be drilled on the SNE oil discovery off Senegal starting in first-quarter 2017.

The group will use the wells to feed in more information to optimize the SNE development plan prior to its submission to the Senegal government for approval.

The wells, SNE-5 and SNE-6, will be drilled by Stena Drilling Ltd.'s Stena DrillMAX harsh-environment dynamically positioned drillship within the known field boundaries.

They are designed to evaluate the upper SNE reservoir units and determine the connectivity of the reservoir section with the depositional model that has been interpreted from the existing wells along with some high-quality 3D seismic data.

Both new wells will undergo extended drill stem testing. If successful, the results are expected to lead to higher than currently estimated ultimate oil recoveries.

The drillship has also been contracted for additional optional wells in the permits.

Cairn has 40% of the permits, ConocoPhillips 35%, FAR 15%, and Senegal national company Petrosen 10%.

Rosneft Brasil signs Solimoes drilling pacts

Rosneft Brasil E&P Ltda., a wholly owned Rosneft PJSC subsidiary, and Queiroz Galvao Oleo e Gas (QGOG) have signed an agreement to charter an onshore drilling rig and associated rig services for Rosneft Brasil's exploration program in Brazil's Solimoes basin.

Schlumberger Ltd., in association with QGOG, will provide integrated project management (IPM) drilling services.

The start of drilling, slated for Jan. 9, 2017, marks the launch of the active phase of Rosneft Brasil's exploration within the Solimoes project. The firm plans to drill at least 2 wells in the campaign in an effort to obtain geological information and confirm the exploration potential and hydrocarbon resources.

Rosneft also continues to evaluate gas monetization options for the Solimoes project, which includes 18 license blocks covering 37,000 sq km. The blocks contain 11 discovered accumulations of hydrocarbons.

In July 2014, Rosneft Brasil and Petroleo Brasileiro SA (Petrobras) signed a memorandum of understanding that envisaged the detailed analysis of options for monetization of gas held in the Solimoes basin, creation of a joint work group, and preparation of a roadmap for advancing the study.

The studies have been completed and Rosneft Brasil is working with stakeholders in the Amazon region to advance the priority monetization options.

Drilling & ProductionQuick Takes

Militancy takes toll on Nigerian oil

Resurgent militancy has cost Nigeria more than 130 million bbl of crude oil since January, according to an official of the Lagos Chamber of Commerce and Industry as reported in the Nigerian press.

Speaking at a conference in Lagos, Shina Bankole, vice-chairman of the Security Subcommittee of the Oil Producers Trade Section, said 58 incidents of sabotage hit facilities owned by oil and gas companies during the period, forcing curtailment of production.

At least 32 militant groups have emerged in the oil-producing Niger Delta since attacks resumed in 2015 after several years of relative calm, Bankole said (OGJ Online, May 13, 2016).

He reported more than 275 kidnappings in 29 Nigerian states during January-November, 45 related to oil and gas industry personnel.

Lukoil to boost Yaregskoye field oil flow

Lukoil Oil Co. expects to increase oil production at old Yaregskoye field in the Republic of Komi, Russia, to 700,000 b/d from last year's average of 140,000 b/d with expanded thermal development. The company recently commissioned oil-gathering and treatment facilities and a water-treatment unit in a first phase with capacity of 350,000 b/d of heavy oil.

The water-treatment unit can clean 700 cu m/hr of formation water used to generate steam for reservoir injection.

Lukoil plans more than 20 other facilities, including steam-generating units and a 75-Mw power plant.

The field was discovered in 1932 in the southern part of the Timan-Pechora province. Lukoil estimates yearend 2015 proved reserves at 321 million bbl of oil.

Contract let for Romanian offshore gas development

Black Sea Oil & Gas SRL (BSOG), Bucharest, a unit of Carlyle Investment Management LLC's Carlyle International Energy Partners LP, has let a contract to Xodus Group Ltd., Aberdeen, to provide front-end engineering and design of offshore and onshore installations for its Midia gas development project in the Black Sea offshore Romania (OGJ Online, May 18, 2016).

The contract will cover delivery of FEED services for development of the Midia project's Ana and Doina gas discoveries on XV Midia Shallow, BSOG and Xodus said.

Specifically, Xodus will provide engineering and design for the following:

• A wellhead jacket at Ana, which lies in 69.5 m of water, that will receive and support production from a subsea tieback from the Doina subsea well, controlled through an umbilical system.

• An 18-km infield pipeline from the Doina subsea well to the Ana wellhead platform.

• A 121-km offshore export pipeline from the Ana wellhead platform to shore.

• A 5-km onshore pipeline to an onshore gas treatment plant.

• The gas treatment plant-of unknown capacity.

BSOG and Exodus disclosed no details regarding either the value or duration of the contract.

Mark Beacom, BSOG's chief executive, said the company expects to reach final investment decision in 2017 on the Midia gas project, which comes part of an ongoing program to explore and develop Romania's offshore conventional oil and gas resources.

BSOG holds interest in three blocks-XIII Pelican, XV Midia Shallow, and EX-25 Luceafarul-which cover 5,000 sq km within the underexplored Romanian continental shelf.

The company operates the blocks on behalf of its partners Gas Plus International BV (Midia and Pelican) and Petro Ventures Europe BV (Midia, Pelican, and Luceafarul). Junex reports Galt production test results in Quebec

Junex Inc. of Quebec City said its Galt No. 4 horizontal well has produced 17,798 bbl of light, sweet crude oil total during a 221-day production test in eastern Quebec.

Junex has received a drilling permit for the Junex Galt No. 6 horizontal well.

The Galt No. 5 horizontal well was drilled in 2015 and remains shut ending a pressure build.

Quebec regulations allow 240 days total for production testing, but Junex used the last 19 days performing various other operations on Galt No. 4, including retrieval and replacement of downhole pressure gauges and testing from specific intervals in the horizontal leg.

The extended production test ended Nov. 28. The Galt No. 4 discovery well was drilled in 2014 to 2,400 m TD, of which 1,503 m was in the reservoir. The well tested in 2015 and 2016.

Maximum production measured during 2015 was 396 b/d over 24 hr. The average production rate observed at 30 days of production was 240 b/d.

Junex Pres. and CEO Peter Dorrins said oil production will be brought on stream at Galt No. 4 once the production lease is issued. Substantial oil shows associated with fracture porosity recorded during drilling and from logging indicate the reservoir is intensely fractured. Junex said Galt No. 4 had no reservoir stimulation. Junex holds 70% interest in the Galt property and 100% interest in the adjacent acreage.


ADNOC lifting petchem, oil-flow capacities

Abu Dhabi National Oil Co. (ADNOC) plans to increase its petrochemical-production capacity to 11.5 million tonnes/year (tpy) in 2025 from 4.5 million tpy at present while expanding its capacity to produce crude oil.

ADNOC CEO Sultan Ahmed Al Jaber told a chemical-industry conference in Dubai the firm will integrate its refining and petrochemical businesses "and exploit the full portfolio of derivatives from naphtha."

Al Jaber, who also is United Arab Emirates minister of state, said the petrochemical expansion is part of a new Abu Dhabi strategy for 2030 and 5-year business plan. The emirate plans to increase production capacity by 400,000 b/d to 3.5 million b/d of crude oil by 2018.

Earlier this month, ADNOC said it will expand enhanced oil recovery and extended-reach drilling to "expedite the development of its hydrocarbon resources and enhance recovery from the large number of smaller and more-complex structures within its resource base."

Fire breaks out at ExxonMobil's Baton Rouge refinery

A fire broke out Nov. 22 at ExxonMobil Refining & Supply Co.'s Baton Rouge, La., refinery, injuring 6 people, but was quickly contained. Four of those injured were in critical condition and hospitalized. The 502,500-b/d facility resumed normal operations later that day, except in a compressor where the fire occurred, according to reports.

The US Chemical Safety Board deployed three investigators to the site the following day. "According to initial inquiries, flammable vapors were released during unplanned maintenance around a pump. Although there was no explosion, the release ignited and caused a large fire," it said.

CSB said the plant is one of 150 US refineries covered by the US Occupational Safety and Health Administration's Process Safety Management regulations. "Despite some positive initial steps toward improvement in process safety management at the federal level, CSB investigations have emphasized the need for a more comprehensive process safety management system in the US to protect worker safety, public health, and the environment," it noted on Nov. 23.

"In fact, the modernization of process safety management regulations is one of the CSB's Drivers of Critical Chemical Safety Change, a list of key chemical safety advocacy initiatives," CSB said.


Colombia due expanded gas distribution network

Canacol Energy Ltd., Calgary, has entered an agreement with Promigas SA ESP, Barranquilla, Colombia, to expand existing gas transportation and sales to Colombia's Caribbean coast by an additional 100 MMcfd.

To be fully funded by Promigas, the expansion project will increase Canacol's current gas distribution network to the Caribbean coast of Colombia by yearend 2018 to an overall 190 MMcfd, Canacol said.

Due to begin this month, the expansion project will involve up to 18 months of permitting followed by 6 months of construction, with first new gas delivery scheduled by December 2018, the company said.

Alongside a twinning of the existing Jobo-Sincelejo gas pipeline, the expansion project will include installation of additional compression on the existing Sincelejo to Cartagena pipeline, as well as construction of a 50-MMcfd gas pipeline between Cartagena and Barranquilla, to result in 100 MMcfd of capacity between Canacol's more-than 180-MMcfd gas processing plant at Jobo and Cartagena.

To support the expansion, Canacol said it also has completed the negotiation of 100 MMcfd of take-or-pay gas sales contracts with existing and consumers on Colombia's Caribbean coast, details of which will be released at a later date.

Neither Canacol nor Promigas revealed financial details of the agreement.

Canacol previously expanded its gas processing capabilities at the Jobo station to 60 MMcfd from 25 MMcfd in December 2015, with additional expansion work on the second train completed in January to bring processing capacity to 85 MMcfd, the company said in a Feb. 16 press release.

A final expansion of the plant, completed in March, raised Jobo processing capacity in excess of 185 MMcfd, Canacol said.

The processing and pipeline capacity expansions come as part of Canacol's plan to boost production and supply of gas to Colombia's Caribbean coast to help solve epic shortfalls in regional gas supplies, Canacol said in an Oct. 27 presentation.

Petronas Satu FLNG receives gas from Kanowit field

Malaysia's Petronas has started to receive natural gas production from Kanowit field offshore Sarawak for its first floating LNG (FLNG) facility.

Gas from the KAKG-A central processing platform ignited the Satu FLNG flare tower at a height of 130 m on Nov. 14. The company said the Satu will soon progress towards commercial operations and first cargo.

Petronas called it a "game changer in the global LNG business" and said the Satu will monetize gas resources from remote and stranded gas fields that are uneconomical to develop via conventional means.

The Satu is designed to last up to 20 years without dry-docking and has the flexibility to be redeployed to multiple locations. It is fitted with an external turret for use in 70-200 m of water.

Kanowit lies about 180 km offshore Sarawak (OGJ Online, May 17, 2016).

Eni okays Coral FLNG development off Mozambique

Eni SPA's board has authorized investment for the first phase of development for the Coral discovery-the Coral South project-in the deepwater Rovuma basin offshore Mozambique, moving the project a step closer to a final investment decision.

The project involves the construction of 6 subsea wells connected to a floating LNG (FLNG) facility with a liquefaction capacity of 3.3 million tonnes/year, or 5 billion cu m. Mozambique authorities approved the project development plan in February (OGJ Online, Feb. 24, 2016).

Discovered in May 2012, Coral field is entirely within Area 4 and contains 450 bcm of gas in place. Eni and its Area 4 partners in October signed a 20-year agreement with BP PLC for the sale of all LNG volumes produced by Coral South FLNG.

Eni is operator of Area 4 with 50% indirect interest owned through subsidiary Eni East Africa (EEA), which holds 70% stake in Area 4. Other concessionaires are Galp Energia SGPS SA, Korea Gas Corp. (KOGAS), and Empresa Nacional de Hidrocarbonetos de Mocambique (ENH), each with 10%. China National Petroleum Corp. (CNPC) owns 20% indirect interest through Eni East Africa.