OGJ Newsletter

May 15, 2017
International news for oil and gas professionals


Trump nominates FERC commissioners

US President Donald Trump has nominated Neil Chatterjee, currently energy policy advisor to US Senate Majority Leader Mitch McConnell (R-Ky.), and Robert F. Powelson, who chairs Pennsylvania's Public Utility Commission, as Federal Energy Regulatory Commission members on May 8.

Their confirmations by the US Senate would restore FERC's quorum, which was lost when former Chairman Norman Bay resigned on Jan. 26, reducing the number of commissioners to two and making it unable to issue major final decisions. Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-Alas.) said last week she would make the nominations a priority once they were announced.

Natural gas trade association leaders welcomed the news. "We estimate that about $15 billion of shovel-ready, natural gas pipeline projects are stranded on the sidelines because FERC's lack of quorum prevents the commission from acting on major energy projects," Interstate Natural Gas Association of America Pres. Donald F. Santa said.

Separately, American Gas Association Pres. David K. McCurdy noted, "Having a quorum will allow FERC to continue its important work for the natural gas industry-including timely decisions on pending and future interstate gas infrastructure project certificates."

Christopher Guith, a senior vice-president at the US Chamber of Commerce's Institute for 21st Century Energy, said the two nominations were phenomenal, given the complexity and importance of the issues before the commission.

"From strained competitive markets to crucial energy infrastructure, these nominations are a great step forward to securing America's energy future," Guith said.

Before joining McConnell's staff, Chatterjee was a principal in government relations at the National Rural Electric Cooperative Association and an aide to House Republican Conference Chair Deborah Pryce of Ohio. He began his Washington career as a House Ways and Means Committee staff member.

Powelson, who has been a Pennsylvania PUC member since 2008, is president of the National Association of Regulatory Utility Commissioners and a member of the Electric Power Research Institute's board.

Court denies legality of Yukos bankruptcy

The Russian government wrongly forced the defunct oil giant Yukos into bankruptcy with excessive taxation in 2006, a Dutch appeals court has ruled (OGJ Online, Aug. 3, 2006).

In a dispute over assets once held by a Dutch subsidiary, Yukos Finance BV, the Amsterdam Appeals Court said an administrator appointed to sell Yukos shares lacked authority to do so.

A shareholders group led by former Yukos Chief Executive Officer Steve Theede said the ruling "exposed the extent to which the Russian Federation will go to manipulate the legal process and ignore the rule of law."

The Yukos bankruptcy followed the 2003 imprisonment of owner Mikhail Khodorkovsky, an outspoken critic of Russian President Vladimir Putin.

Khodorkovsky was released in 2013 and went into exile. The government denies his prosecution was politically motivated.

According to press reports, members of an opposition group Khodorkovsky founded, Open Russia, have been harassed recently by Russian authorities. The group's office in Moscow was raided last week.

DNO reestablishes N. Sea presence with Origo bid

DNO ASA has agreed to buy Origo Exploration Holding AS, a private exploration firm focused offshore Norway and the UK. Origo will be renamed DNO Norge AS.

DNO will pick up stakes in 11 exploration and appraisal licenses in the North Sea, of which 7 are on the Norwegian Continental Shelf and 4 on the UK Continental Shelf. As consideration, DNO assumes Origo's drilling commitments and license obligations, with certain working capital adjustments.

The deal fast-tracks DNO's reentry into Norway after a 6-year hiatus during which the firm has built a Middle East presence, anchored by the DNO-operated flagship Tawke field in the Kurdistan region of Iraq.

DNO will retain Origo's management, staff, and headquarters in Stavanger. "We are now positioned to pursue further asset acquisitions and, importantly, to compete in future exploration bid rounds offshore Norway," commented DNO Executive Chairman Bijan Mossavar-Rahmani.

Origo was launched in 2014 by founding members of private equity-funded exploration firms Revus Energy ASA and Agora Oil & Gas AS.

Swift Energy changes name to SilverBow, doubles capex

Swift Energy Co., Houston, will change its name to SilverBow Resources Inc. and double its capital budget for 2017 as it expands drilling in the Eagle Ford shale of South Texas.

The rebranding initiative follows the firm's recent strategic shift to becoming a pure-play Eagle Ford focused operator.

Swift Energy will continue its complete transition to SilverBow Resources in the coming weeks.

The firm announced a revised full-year capital budget of $190-200 million, up from the original budget of $85-95 million. The budget accounts for the completion of 26 wells, up from 12 in the previous budget.

Based on this level of activity, the firm is providing full-year 2017 average production guidance of 145-155 MMcfd of natural gas equivalent. For the second quarter, SilverBow expects average production to be 138-144 MMcfed.

"Given our solid financial position as well as the strong returns generated from our assets at current prices, we have decided to keep our current contracted high-performance rig operating throughout the remainder of the year," said Swift Energy CEO Sean Woolverton.

Swift Energy emerged from bankruptcy a year ago and has divested all of its Louisiana assets (OGJ Online, Apr. 26, 2016).

Exploration & DevelopmentQuick Takes

Lundin completes Gohta appraisal well in Barents Sea

Lundin Norway AS, a wholly owned unit of Lundin Petroleum AB, Stockholm, has completed drilling its Gohta appraisal well 7120/1-5 in PL492 in the southern Barents Sea.

The Gohta discovery, made in Permian carbonate reservoir rocks with well 7120/1-3 drilled in 2013, was estimated to contain gross contingent resources of 91-184 million boe prior to the drilling of well 7120/1-5.

The appraisal well was drilled 4 km north of the original discovery well and was the second appraisal well on the Gohta discovery. The main objective of the well was to delineate the northeastern segment of the discovery, Lundin said. The well encountered a 300 m gross sequence of Permian-age carbonates with poor reservoir quality. Hydrocarbon shows were observed but no pressure gradients could be established, the firm said. The well will be permanently plugged. Extensive data acquisition and conventional coring was carried out in the reservoir.

This fourth well in the 2016-17 drilling campaign on the Loppa High was drilled to a total depth of 2,502 m below mean sea level and in 344 m of water.

Gohta is considered a satellite opportunity to the larger adjacent Alta discovery. This result has no impact on Lundin Norway's appraisal and conceptual development plans for Alta, which includes an appraisal well that will be spudded imminently and an extended well test planned for 2018, Lundin said.

Lundin Norway is operator of PL492 and holds a 40% working interest in the license. Aker BP is partner with a 60% working interest.

The well was drilled using Ocean Rig UDW Inc.'s Leiv Eiriksson semisubmersible drilling rig. Once the rig has plugged the 7120/1-5 well, it will move 15 km northeast to spud the Alta appraisal well 7220/11-4 in PL609 where Lundin Norway also is operator.

ONGC Videsh to test well in Colombia

A well in the Llanos basin in Colombia revealed 120 ft of oil-saturated net pay, said operator ONGC Videsh Ltd. of India.

The firm began drilling the Mariposa-1 well on the CPO-5 block in late March. It has directionally drilled to 11,556 ft. Electric log analysis indicates oil presence in the Lower Sands Unit 3 of the Une formation. A testing program is planned.

ONGC Videsh holds 70% and Amerisur Resources PLC has 30%.

Timor Resources secures Timor-Leste onshore permits

Timor Resources Holdings (TRH), a member of New South Wales engineering company Nepean Group, has been awarded two onshore oil and gas permits in Timor-Leste.

A production-sharing contract was signed by TRH and Timor-Leste officials late last week following negotiations that began in September 2016.

The areas are in the south of the country where there are as many as 60 known oil seeps.

Work on the exploration program will begin immediately. TRH has pledged to spend at least $60 million (Aus.) during the next 3 years.

Initial work will involve a 900-km, 2D seismic survey next year.

Drilling & ProductionQuick Takes

Esso E&P Guyana lets contract for Liza project

ExxonMobil Corp. unit Esso Exploration & Production Guyana Ltd. has let an engineering, procurement, construction, and installation (EPCI) contract to Saipem SPA for the Liza project 120 miles offshore Guyana in 1,800 m of water.

EPCI work is scheduled to begin in 2019. Saipem will provide work on the risers, flow lines, and associated structures and jumpers. The contract also includes transportation and installation of umbilicals, manifolds, and foundations for production as well as water and gas injection systems.

Esso executives have said Liza is expected to produce an average 100,000 b/d of oil when it is scheduled to come on stream in 2020. Natural gas production of 165 MMscfd also is expected.

Plans call for use of a floating production, storage, and offloading unit (OGJ Online, Dec. 20, 2016).

ExxonMobil submitted an application for a production license and its initial development plan for Liza field in early December (OGJ Online, Nov. 18, 2016). The development plan was submitted to the Guyana Ministry of Natural Resources.

Liza field is on the 27,000-sq-km Stabroek block and has a potential resource estimate of more than 1 billion boe.

Esso is operator and holds 45% interest in Stabroek. Hess Guyana Exploration Ltd. holds 30% while CNOOC Nexen Petroleum Guyana Ltd. holds 25%.

Vaca Muerta output to reach 113,000 boe/d by 2018

Wood Mackenzie Ltd. has forecast that production from the seven most advanced developments in Argentina's Vaca Muerta play-covering only 8% of play acreage-will reach 77,000 boe/d during 2017 and 113,000 boe/d by 2018, which would double 2016 levels.

Elena Nikolova, WoodMac Latin America upstream oil and gas research analyst, said production could peak at 1.25 million boe/d by 2031.

Companies having natural gas acreage are exposed to the greatest upside by capitalizing on gas price incentives and attractive well performance, Nikolova said. While still in early development, Vaca Muerta production for some wells already is on par with certain US shale plays.

Nikolova believes labor union and price agreements finalized with the Argentina government earlier in the year have provided enough flexibility and pricing predictability to encourage operators to commit to new pilots.

Nearly 100 Vaca Muerta wells were completed through October 2016 of which 80% were horizontal. WoodMac expects future development will involve horizontal wells with laterals up to 2,500 m.

"Cost reductions are a key focus for operators," Nikovova said, adding WoodMac's type curves heavily reflect cost achievements reported by YPF SA.

"YPF has significantly brought down costs to $8.2 million in the fourth quarter 2016." She expects more operators will enter Vaca Muerta.

Vedanta outlines process to ramp up India production

Vedanta Ltd. has announced a prequalification process for service providers to participate in plans to increase Cairn India Ltd.'s production from Mangala, Bhagyam, and Aishwariya fields on the Rajasthan block.

Documents outlining prequalification criteria invite service companies having "end-to-end capabilities" in enhanced oil recovery, improved oil recovery, and production optimization techniques to express interest in an international competitive bidding process.

Plans call for two categories of floods to enhance ultimate recovery rates. Category 1 involves polymer floods in Bhagyam and Aishwariya fields and alkaline-surfactant-polymer (ASP) floods in Mangala field. Category 2 calls for ASP floods in Bhagyam and Aishwariya fields.

Mumbai metals and mining group Vedanta on Apr. 11 completed its buyout of oil and gas explorer Cairn India despite investor opposition. Vedanta Ltd. is a unit of diversified energy group Vedanta Resources PLC.

Cairn operates Block RJ-ON-90/1 in the Barmer basin in northwestern India. Cairn, with 70% interest, and Oil & Natural Gas Corp. (ONGC), with 30%, are the operating committee for Block RJ-ON-90/1.

Cairn and ONGC made 38 oil and gas discoveries on Rajasthan block, including Mangala, Bhagyam, and Aishwariya fields. Those three fields, discovered in 2004, have an estimated 2.1 billion bbl of oil in place.

The fields were brought on stream in stages starting in 2009 (OGJ Online, Jan. 28, 2010).


Esso Australia completes gas conditioning plant

ExxonMobil Corp. affiliate Esso Australia Resources Pty. Ltd., Melbourne, has completed construction and is in the final stages of commissioning of its Longford gas conditioning plant, 19 km south of Sale in southeastern Victoria.

Startup of the $1-billion (Aus.), 400-MMcfd gas conditioning plant, which is designed to process gas from Kipper, Tuna, and Turrum fields in Bass Strait of southeast Australia, also marks completion of the $5.5-billion (Aus.) Kipper-Tuna-Turrum project, the largest domestic gas development on Australia's eastern seaboard, Esso Australia said.

The plant will help maintain current gas supply levels from Bass Strait and ensure continued supply of gas to Australia's east coast, said Esso Australia Chairman Richard Owen.

The new plant comes as part of Esso Australia's ongoing investment in its 50-50 Gippsland basin joint venture with BHP Billiton Petroleum (Bass Strait) Pty. Ltd., which to date has produced more than half of all of Australia's crude oil and hydrocarbon liquids.

The Kipper-Tuna-Turrum develop will supply 1.6 tcf of gas to eastern Australia, the Gippsland basin combine said.

Participants in the Kipper group include operator Esso Australia 32.5%, BHP Billiton Petroleum 32.5%, and Mitsui E&P Australia Pty. Ltd. 35%.

CB&I, Houston, provided engineering, procurement, fabrication, and construction of the plant (OGJ Online, Jan. 8, 2013).

GPA asks EPA not to add gas processing plants to TRI

The GPA Midstream Association asked the US Environmental Protection Agency to withdraw its proposal to add natural gas processing plants to its Toxic Release Inventory (TRI).

TRI's general purpose is to make information about chemical releases publicly available, the Tulsa-based association said in comments submitted to EPA. GPA Midstream believes its information is being shared already through existing state and federal regulations, it said.

"In fact, most of the pertinent data reported under TRI is already in EPA's own files due to existing regulatory programs under the Clean Air Act, Clean Water Act, Safe Drinking Water Act, and Resource Conservation and Recovery Act," said Matthew Hite, vice-president for government affairs, in Washington. "In most cases, state regulatory agencies will already possess the data EPA is requesting in this proposal."

EPA proposed adding gas processing plants to its TRI in January (OGJ Online, Jan. 9, 2017).

Hite said that under the proposed rule EPA estimates that gas processing facilities manufacture, process, or otherwise use 21 different TRI-listed chemicals. Its analysis only accounts for these chemicals, and does not account for costs associated with tracking and analyzing chemicals below the de minimus threshold which are required to be tracked as part of more than 650 substances under the Emergency Planning and Community Right-to-Know Act (EPCRA) Section 313.

GPA Midstream asked EPA to withdraw the proposed because it was improperly vetted on inadequate data and little, if any, outreach to the affected industry, Hite said.

"This is an unnecessary expansion of government regulation where the evidence as presented in the docket does not support the need to add natural gas processing facilities to the list of industries required to report to TRI under EPCRA," he said. "It's also important to note that EPA has completely underestimated the cost of this proposed rule on the industry and does not adequately assess the administrative burden of tracking and record keeping that this proposed rule passes on to GPA Midstream members."

Jordan refiner lets contract for facility upgrade

Jordan Petroleum Refinery Co. Ltd. (JPRC), the sole refining company of Jordan, has let a contract to Honeywell UOP to facilitate a $1.6-billion expansion of its refinery at Zarqa, 35 km east of Amman.

The expansion will increase the capacity of the facility to 120,000 b/d and will allow JPRC to upgrade the quality of its product to meet Euro-V emissions specifications.

JPRC Chief Executive Officer Abdul Karim Alaween said the upgrade is vital as it "will help us meet the rising demand for fuel, which is growing at an average of 3% every year."

As part of the project, which is the fourth such expansion of the JPRC facility, Honeywell UOP will provide managing licensor services, technology licensing, front-end engineering design consultancy services, and basic engineering design. It also will provide catalysts and process equipment and training and start-up services.

Technologies provided by Honeywell UOP will include crude and vacuum distillation units. Honeywell UOP also will provide Unicracking and hydrotreating units as well as CCR Platforming, Penex, MinAlk, Merox, and Selectfining units for producing high-octane motor fuels, and a Polybed PSA unit for purifying hydrogen.


Transportation systems seen as boon to US GDP, jobs

Building new US oil and gas transportation systems could create more than 1 million new jobs, generate as much as $1.34 trillion of private investment, and add $1.89 trillion to nation's gross domestic product, an ICF study commissioned by the American Petroleum Institute concluded.

A robust environment for US oil and gas infrastructure development has not yet run its course and is likely to continue for many years, with $1.06-1.34 trillion of total investments from 2017 through 2035, it said. All states would see advantages, the study added.

"Already, reliable access to energy has helped drive down utility, product, and other energy-related costs, providing a $1,337 boost to the average American household in 2015," said Kyle Isakower, API vice-president of regulatory and economic policy, on May 3 as the study was released.

"US industrial electricity costs are 30-50% lower than those of our foreign competitors, giving manufacturers-including producers of steel, chemicals, refined fuels, plastics, fertilizers, and numerous other products-a major competitive advantage," he said.

"The US leads the world in carbon reductions, thanks primarily to greater use of natural gas," added API Midstream and Industry Group Director Robin Rorick, who also participated.

"Carbon emissions from power generation have plunged to nearly 30-year lows, and more than 60% of those reductions from 2005 to 2016 have been the result of switching to generation from clean-burning gas," he said. "By moving forward with private investments in US oil and gas infrastructure, we can ensure that the US has the critical framework to sustain its energy leadership."

Regulators release underground gas storage report

A multistate group of oil and gas regulators released a 130-page report about underground natural gas storage that aims to be a resource and address risk management, state permitting, well drilling and construction, well integrity, reservoir integrity, monitoring, emergency response planning, and other issues.

The working group was organized in March 2016 by States First, a joint initiative of the Interstate Oil & Gas Compact Commission and the Ground Water Protection Council to collect information from participating US states and help improve underground gas storage and states' other regulatory programs.

Underground gas storage installations generally have operated safely, but became an issue when a leak at Southern California Gas Co.'s Aliso Canyon facility near Los Angeles in late 2015 led to the evacuation of a nearby housing development before it was capped and contained.

"A lot of thought and expertise went into this report," said Hal Fitch, the working group's co-chair and division director for the oil, gas, and minerals division within Michigan's Department of Environmental Quality, as the report was released on May 8.

The report, "Underground Gas Storage Regulatory Considerations," includes input from experts in academia, industry, nonprofit organizations, and other state and federal agencies.