OGJ Newsletter

Dec. 4, 2017


Shell adds product use to carbon dioxide goals

Royal Dutch Shell PLC plans to cut by half the emissions of carbon dioxide from its own work and from the use of its products.

In a strategy update, Chief Executive Officer Ben van Beurden said the company would target a 20% cut in emissions by 2035 and the full 50% cut by 2050.

Until now, it has disclosed the "net carbon footprint" from its operations and energy use. Accounting also for emissions associated with use of its products is new.

Shell measures emissions as grams of CO2 per megajoule consumed and takes account of any emissions offset.

"It is critical that our ambition covers the full energy lifecycle from production to consumption," Van Beurden said.

Jones Energy adjusts credit, mulls options

Jones Energy Inc., Austin, is "exploring strategic alternatives" with financial advisers after gaining flexibility from lenders on its revolving credit during regularly scheduled redetermination of its borrowing base.

Alternatives under consideration include formation of drilling joint ventures to continue development of properties in the western Anadarko basin of Oklahoma and Texas.

The company last year acquired 18,000 net acres in the Merge area of the STACK and SCOOP plays of Oklahoma from Scoop Energy Co. LLC for $136.5 million, increasing its existing leasehold in Oklahoma and the Texas Panhandle (OGJ Online, Sept. 28, 2016).

Jones Energy's third-quarter earnings report warned of a possible breach at yearend of financial ratios in revolving-credit covenants. The company reported a third-quarter net loss of $66.772 million, compared with a net loss of $10.618 million in the same quarter a year earlier.

Adjustment of the lending agreements, said Johnny Jones, the company's founder, chairman, and chief executive officer, "gives us the flexibility to increase our Merge activity in 2018 and beyond."

In a separate press statement Jones said, "We believe it is prudent to explore additional opportunities to strengthen our balance sheet, secure additional capital, and improve the company's financial flexibility."

The statement said Jones Energy is working with Credit Suisse "to evaluate strategic and financial alternatives and to assist the company in determining the most appropriate course to deliver shareholder value." Tudor Pickering, Holt & Co. is helping the company evaluate potential drilling joint ventures.

BSEE okays first Arctic OCS drilling permit in 2 years

The US Bureau of Safety and Environmental Enforcement has approved Eni US Operating Co.'s application to drill in the Beaufort Sea off Alaska's North Slope. The project represents the first fresh exploration on the US Arctic Outer Continental Shelf in more than 2 years, BSEE said.

Eni US submitted the application to drill from a manmade island in state waters in August, BSEE said. It said its action will allow the Eni SPA unit to start as early as December. Activity will not commence until personnel in BSEE's Alaska regional office in Anchorage thoroughly review the project to make certain it meets appropriate technical adequacy, safety, and environmental sustainability standards.

BSEE said Eni US noted that new exploratory well drilling will add 100-110 jobs. Any potential development plan will depend on the results of Eni US's proposed exploration wells. At a minimum, new development could lead to the creation of 100-150 jobs in the region and new production of 20,000 b/d of crude oil, the agency said.

Eni US's exploratory drilling will take place on Spy Island, a manmade artificial island 3 miles offshore Oliktok Point in Alaskan state waters. Both the island and Oliktok Point are already home to Eni production facilities comprised of 18 producing wells, 13 injector wells, and 1 disposal well. Eni US now proposes to use extended-reach drilling techniques to drill into federal submerged lands, BSEE said.

The extended-reach drilling will target a formation in the newly formed Harrison Bay Block 6423 unit, a 13-lease unit on the OCS which BSEE approved in December 2016. Eni US will explore the Harrison Bay Block 6423 Unit in partnership with Shell and plans to drill 2 explorations wells plus 2 potential sidetracks over the next 2 years, BSEE said.

US House members pose energy policy reform bill

US House Majority Whip Steve Scalise (R-La.) introduced legislation early last month that would reform federal onshore and offshore energy resource management policies substantially. Natural Resources Committee Chairman Rob Bishop (R-Utah) and two Texas Democrats, Reps. Henry Cuellar and Vincent Gonzalez, were cosponsors.

H.R. 4239 contains several provisions similar to a discussion draft that the Natural Resources Committee's Energy and Minerals Subcommittee was scheduled to examine in a Nov. 7 hearing.

But the bill goes further in some respects, such as directing that 6.25% of qualifying US Outer Continental Shelf revenue go to the National Park Service and to energy infrastructure projects in coastal ports. It also aims to extend offshore energy development opportunities to US territories by applying the 1953 Outer Continental Shelf Lands Act there.

Exploration & DevelopmentQuick Takes

Iraq to offer nine blocks in 2018

Iraq's Oil Ministry invited international companies to compete for nine blocks on the country's borders with Iran and Kuwait and one in southern Iraq's territorial waters in the Persian Gulf, which is the country's first offshore block.

Oil Minister Jabbar Ali Al-Allaibi said amendments have been made to the terms and conditions of service contracts from Iraq's previous rounds to better achieve production objectives and lower capital and operating costs, but it is not yet clear how the new terms will differ.

Exploration blocks offered include Basra, Mount Sinam, and Faw fields, which lie on the Iraqi-Kuwaiti border. Two main blocks also contain Zardatia, Tariq, Nefta Kana fields, and the Mandali, Habib, Tal Ghazal, Hattab, Nazardak, Saadia, Nabh Khanh, Aqba, and Naudoman fields, respectively. Iraq's ministry stressed that these blocks fall within the country's land borders.

The blocks fall within several provinces including Basra, Maysan, Muthanna, Wasit, and Diyala.

Contract qualifications will be announced on May 31, 2018, at which time the new round will be open to receive bids.

Iraq produces 4.5 million b/d with 3.37 million b/d coming from seven large fields, all of which are covered by service contracts with international companies (OGJ Online, Oct. 30, 2017). According to the Arab Petroleum Investments Corp. (APICORP), the government wants oil production to reach 6 million b/d by 2020, but interest has diminished from international producers.

Iraq's service contracts provide little control over development with margins of only $1.15-2/bbl of oil, according to APICORP. The most recent amendments to Iraq's service contracts will include improvements for all phases including exploration, development, and production of new discoveries, the ministry said.

UK bid round attracts 96 applications

The UK's 30th Licensing Round drew 96 applications for 239 blocks in mature areas of the UK Continental Shelf (OGJ Online, June 20, 2017).

The round offered 28,257,280 acres in the southern, central, and northern North Sea, the West of Shetland area, and the East Irish Sea.

Bidding involved the Oil and Gas Authority's new "innovate license."

The OGA said it will offer licenses to successful applicants in the second quarter of 2018.

It plans to launch the 31st Licensing Round in mid-2018. The round will offer "high-impact exploration opportunities in underexplored areas of the UKCS," according to the OGA.

Uzbekistan to develop '25 Years of Independence' field

A consortium of investors plans to develop Uzbekistan's "25 Years of Independence" gas field in the Surkhandarya region in the southern part of the country. The first of two stages will begin 2017-18 with the drilling of a confirmation well and developing a feasibility study on expected reserves. The second stage will include field development, geological exploration, and the construction of a gas conversion facility and chemical complex to produce high value-added products.

Andrey Filatov has joined the consortium, which includes Gas Project Development Central Asia AG, Altmax Holding Ltd., and Uzneftegazdobycha. Surhan Gas Chemical Operating Co., established by members of the investment consortium to operate oil and gas PSA projects, manages the field development. Halliburton, Baker Hughes, Schlumberger, and National Oilwell Varco have been contacted for execution.

The 25 Years of Independence field will become a raw material base for the gas chemical complex in the Surkhandarya region, producing polyethylene, polypropylene, and sulfur. Gas conversion is expected to deepen to produce olefins (ethylene glycol, rubber, polyethylene terephthalate, and other products). Currently the reserves of the 25 Years of Independence gas field and the O'zbekiston Mustaqillik investment block are estimated at more than 100 billion cu m.

Andrey Filatov will participate in the consortium through Brighttree Holding Ltd., a special-purpose vehicle that has taken a 50% stake in Altmax Holding Ltd. Therefore, the share of the new investor in the gas field development project will be 37.5%.

The project has a timeframe of 35 years and will cost an estimated $2 billion.

The development of the gas field, one of the biggest in Uzbekistan, is stipulated in the production sharing agreement for the Independence of Uzbekistan (O'zbekiston Mustaqillik) block, signed on Apr. 5 during the state visit of Uzbekistan President Shavkat Mirziyoyev to Russia.

In April, the Uzbekistan broke ground on a 5 million-tonne/year grassroots refinery to be built in the country's eastern Jizzakh region, which will cost an estimated $2.2 billion.

Ineos acquiring more interests off the UK

Ineos UK SNS Ltd. has agreed to farm in to two exploratory licenses in the West of Shetland area off the UK that include a large natural gas prospect called Lyon.

It will acquire two-thirds interests in Licenses P1854, covering blocks 208/1b, 208/2, 208/3b, 217/27b, and 217/28b; and P1935, covering Blocks 217/22a, 217/23a, and 217/24a from Siccar Point Energy E&P Ltd., Aberdeen.

Siccar Point retains one-third interests in the licenses.

Ineos said the farmin complements interests it acquired in the area and elsewhere off the UK and Norway from DONG Energy AS earlier this year (OGJ Online, May 24, 2017).

Drilling & ProductionQuick Takes

Hebron comes on stream off Newfoundland and Labrador

ExxonMobil Corp. reported that production through the Hebron platform came on stream safely and ahead of schedule. Peak heavy oil production is expected to reach as much as 150,000 b/d. Hebron is 19 miles southeast of ExxonMobil's Hibernia project.

Hebron field, discovered in 1980, is estimated to contain more than 700 million bbl in reserves. The Hebron platform consists of a stand-alone, gravity-based structure, which supports an integrated topsides deck. The platform 1.2 million bbl of oil storage capacity.

The platform is 200 miles offshore Newfoundland and Labrador in about 300 ft of water.

The Hebron project involved an 8-year engineering, construction, and startup phase with hundreds of vendors contracted (OGJ Online, Jan. 3, 2013).

Some 7,500 jobs were created during the peak of the construction.

ExxonMobil Canada Properties operates Hebron with 35.5%. Chevron Canada Ltd. holds 29.6% interest, Suncor Energy Inc. 21%, Statoil Canada Ltd. 9%, and Nalcor Energy-Oil & Gas Inc. has 4.9%.

Chevron Corp. was the original operator, but it declined to move forward with the project in 2002, citing low oil prices and technical obstacles. ExxonMobil then took over the project, but it also suspended plans in 2006. Talks renewed in 2008 despite a world economic slowdown.

More Weizhou oil wells start production in S. China Sea

Phase II production from Weizhou 12-2 oil field has been brought on stream, CNOOC Ltd. said of its project in Beibu Gulf in the South China Sea.

The oil field lies in 35.7 m of water. In addition to existing Weizhou 12-2 oil field equipment, one platform was built under Phase II.

Seven wells currently produce 6,400 b/d. The project is expected to reach peak production of 11,800 b/d in 2018 (OGJ Online, Sept. 14, 2016).

CNOOC holds 100% interest and operates the field.

Brazil's giant Libra field brought on stream

Total SA announced Nov. 27 that the Petroleo Brasileiro SA (Petrobras)-led Libra consortium has brought production on stream in ultradeep waters 180 km offshore Rio de Janeiro in Brazil's presalt Santos basin.

Petrobras operates Libra and holds 40% interest in an international consortium. Partners are Total 20%, Royal Dutch Shell PLC 20%, CNOOC Ltd. 10%, and China National Petroleum Corp. 10%.

The Pioneiro de Libra floating production, storage, and offloading unit has a capacity of 50,000 bbl. Initial production will generate revenue while enabling technical data to be collected to optimize the subsequent development phases.

Total Exploration & Production Pres. Arnaud Breuillac said Libra fits into Total's strategy of highly competitive projects with low break-even points. Libra, discovered in May 2010, is estimated to contain 8-12 boe of reserves below a 2-km salt layer (OGJ Online, June 17, 2016).

Petrobras says Libra reservoirs have 27° gravity oil and are expected to have excellent productivity.

The Libra development awaits an investment decision regarding whether to finalize plans for the Libra 1 FPSO with a capacity of 150,000 b/d. Partners expect other production units of similar capacity will be financed in future years to develop the field's full potential.

UK dominates North Sea decommissioning

Operators will perform decommissioning on 349 oil and gas fields in the North Sea during 2017-25, more than half of them in UK waters, according to an annual report by Oil & Gas UK.

Decommissioning will occur on 214 fields off the UK, 106 off the Netherlands, 23 off Norway, and 6 off Denmark, according to the industry group.

For all four regions, the study projects complete or partial removal of more than 200 platforms, plugging and abandonment of nearly 2,500 wells, and decommissioning of nearly 7,800 km of pipeline.

During the next 5 years, Oil & Gas UK expects decommissioning expenditures to average £1.7-2 billion/year off the UK and £400-800 million/year off Norway and to total £650-800 million off the Netherlands.

Off the UK only, 46% of £17 billion estimated to be spent on decommissioning during 2017-25 will be in the central North Sea, and 49% of the total will be for plugging and abandoning wells, according to the report.

Harris, Barra oil flow starts off the UK

Dana Petroleum Ltd. has started production from Harris and Barra oil fields in the northern North Sea (OGJ Online, Sept. 3, 2013).

The operator expects the fields, in a project it calls Western Isles, to produce as much as 44,000 boe/d.

The development, 160 km east of the Shetland Islands, involves production and water injection wells tied back to a floating production, storage, and offloading vessel servicing shuttle tankers.

The 28,000-tonne FPSO can handle production of 44,000 b/d of production and store 400,000 bbl. Water depth is 165 m.

Dana holds 77% interest. Cieco UK, London, holds 23%.


Kuwait lets contract for Al-Zour integrated complex

Kuwait Petroleum Corp.'s newly formed subsidiary Kuwait Integrated Petroleum Industries Co. (KIPIC) has let a contract to W.R. Grace & Co. to provide technology licensing for a polypropylene (PP) plant to be built at the petrochemical portion of KIPIC's grassroots 615,000-b/d Al-Zour integrated refining complex under construction in southern Kuwait (OGJ Online, Aug. 5, 2016).

As part of the contract, Grace will license its proprietary Unipol PP process technology and supply its sixth-generation nonphthalate CONSISTA catalyst for the new plant, which will produce 940,000 tpy of PP, including homopolymer, random copolymer, and impact copolymer thermoplastic resins.

The PP unit is scheduled for startup in 2023, Grace said on Nov. 28.

This latest contract follows KIPIC's recent award of a contract to Honeywell UOP LLC to provide a range of process technologies for the already proposed expansion of the Al-Zour integrated complex (OGJ Online, Nov. 27, 2017).

The cornerstone of Kuwait's Clean Fuels Project to upgrade its refineries to produce clean-burning fuels conforming to Euro 5 standards, Al-Zour's first phase remains on schedule to be commissioned in 2018-19 (OGJ Online, Aug. 24, 2017).

Sasol scrubs US plant in retreat from GTL

Sasol is ending its suspended gas-to-liquids project in Louisiana in a strategic retreat from a business in which it has been an international leader.

The South African company had delayed a final investment decision on the 96,000-b/d facility near Westlake, La., in 2015, citing low oil prices (OGJ Online, Jan. 28, 2015).

Cancellation of the project is part of a decision to invest in no further greenfield GTL projects, company officials said in presentation on investment plans.

Sasol has produced hydrocarbon liquids from coal and natural gas in South Africa for 60 years and expanded its GTL business internationally in 2006 with start-up of the 34,000-b/d Oryx plant at Ras Laffan Industrial City, Qatar (OGJ Online, June 7, 2006).

Lamp succeeding Lipinski as CVR Energy CEO

David Lamp will become co-chief executive officer of CVR Energy Inc., Sugar Land, Tex., on Dec. 1 and chief executive officer on Jan. 1, 2018.

He succeeds the retiring Jack Lipinski, who also has been president of CVR Energy, chief executive officer and president of CVR Refining LP, and executive chairman of CVR Partners LP.

Lamp most recently was president and chief operating officer of Western Refining Co., which was merged this year with Tesoro Corp. to form Andeavor, San Antonio (OGJ Online, Aug. 1, 2017).

Among other businesses, CVR operates a 115,000-b/d refinery in Coffeyville, Kan., and a 70,000-b/d refinery in Wynnewood, Okla.

Ashok to head refinery venture in India

B. Ashok, retired chairman of Indian Oil Corp. Ltd., will become chief executive officer of the joint venture planning a 1.2 million-b/d refinery and petrochemical complex in Maharashtra, India, according to press reports (OGJ Online, Dec. 8, 2016).

The joint venture of IOCL, Hindustan Petroleum Corp. Ltd., and Bharat Petroleum Corp. Ltd., Ratnagiri Refinery & Petrochemicals Ltd., plans to build the complex at Babulwadi in Ratnagiri district on the Maharashtra coast about 170 miles south of Mumbai.

Ashok retired earlier this year after leading IOCL for 3 years.


Iraq plans Kirkuk pipeline bypassing KRG

Iraq plans to build a crude oil export pipeline from Baiji to Fishkhabur on the Turkish border that will carry crude from Kirkuk field for export from the Turkish port of Ceyhan.

Iraq's Oil Ministry instructed interested companies and government agencies to prepare the papers required to participate in the project, which will be offered on a build-operate-transfer basis.

The pipeline will replace a line damaged by repeated sabotage and out of commission since 2014, bypassing a pipeline controlled by the Kurdistan Regional Government (KRG).

Iraqi forces last month reclaimed Kirkuk from the KRG. Turkey has threatened to close its portion of the pipeline if Kurdish independence proceeds (OGJ Online, Oct. 15, 2017).

About 580,000 b/d of oil produced in Iraqi Kurdistan, half from Kirkuk field, now flows through two spurs in Kurdish territory that link with the trans-Turkey pipeline at Fishkhabur, according to the International Energy Agency.

Ancala unit buys Apache's SAGE interests

Ancala Midstream Acquisitions Ltd., London, has let a contract to Wood Group to operate the Scottish Area Gas Evacuation System (SAGE) and Beryl Gas Pipeline in the UK North Sea after acquiring the interests of Apache Corp.

The Ancala Partners unit bought 100% of SAGE North Sea Ltd., which held Apache's 30.28% share of SAGE and 60.58% share of Beryl Pipeline. Terms weren't disclosed.

SAGE North Sea becomes a wholly owned subsidiary of Ancala Midstream.

The 323-km SAGE system transports gas from nine fields in the central North Sea to a gas processing terminal at St. Fergus, Scotland.