OGJ Newsletter

Dec. 11, 2017
International news for oil and gas professionals


Lebanese PM stays in job; oil threat eases

A potential disruption to the oil market eased on Dec. 5 when Lebanese Prime Minister Saad Hariri rescinded the resignation he had announced Nov. 4 in Saudi Arabia (OGJ Online, Nov. 13, 2017).

The announcement threatened to escalate already high tension between Saudi Arabia and Iran, which together produce 13.9 million b/d of crude oil—14% of global oil supply.

Hariri had blamed his resignation on Iran and its Hezbollah proxy, a governing partner with growing influence in Lebanon. He has dual citizenship in Saudi Arabia.

The Saudi-Iranian conflict is most overt in Yemen, where the Saudi military is fighting Iranian-back Houthi rebels.

Saudi officials last month blamed Hezbollah and Houthi militants for at least two rockets fired harmlessly from Yemen toward Riyadh. Hezbollah's military wing also is active in Syria in support of President Bashar al-Assad.

The Saudi government also is known to be concerned about rising Iranian influence in Iraq.

After withdrawing his resignation, Hariri said his coalition government had reaffirmed its policy of nonparticipation in conflicts in Arab countries.

Lebanon sets 80% local worker requirement

Lebanon will require that the workforce of its prospective oil and gas industry be 80% Lebanese.

Energy Minister Cesar Abi Khalil said in a news conference in Beirut that the requirement is part of legislation to be submitted soon to the Cabinet, according to Lebanese press reports.

The country in October concluded its first offshore licensing round after nearly 4 years of delay caused by political conflicts and a vacancy in the presidency.

The round drew bids from two of five blocks on offer from a consortium of Total SA, Eni SPA, and Novatek (OGJ Online, Oct. 13, 2017).

Alberta to help industries cut emissions

Alberta has pledged $1.4 billion over 7 years to help industries cut emissions of greenhouse gases.

The oil sands industry is to be the largest recipient. The government is making $440 million available to it to increase production while reducing emissions as it adjusts to new rules for large emitters.

The government also will make $400 million in loan guarantees available to support investment in efficiency and renewable energy, $240 million for industrial energy-efficiency projects, $225 million for "innovation projects across sectors," and $60 million in grants for bioenergy projects.

Most of the funding will come from carbon levies imposed by Alberta's Climate Leadership Plan.

Saskatchewan's climate plan lacks carbon tax

Saskatchewan has departed from the approaches of neighboring provinces and the government of Canada with a climate-change strategy lacking carbon taxation.

Environment Minister Dustin Duncan introduced a plan he called "broader and bolder than a single policy such as a carbon tax." He said it will "achieve better and more meaningful outcomes over the long term."

The strategy includes performance standards for large facilities emitting greenhouse gases, including those in the oil and gas industry.

"These standards will be developed in consultation with industry throughout 2018 and will recognize actions already taken by industry to reduce emissions," the government said in a press release.

Compliance options for industrial emitters include improving facilities to reduce emissions intensity, purchasing carbon offsets, using best-performance credits, using a market mechanism outlined in the Paris Climate Agreement, and contributing to a technology fund.

Saskatchewan Premier Brad Wall has strongly criticized a federal framework for climate policy that emphasizes carbon pricing.

Saskatchewan's oil production of 460,000 b/d is second-highest among Canadian provinces behind Alberta's 2.6 million b/d.

Alberta's climate policy includes carbon taxation and cap on emissions from oil sands work. It has received blame for some of a recent slump in oil sands investment.

Dustin said Saskatchewan's plan will enable the province's industries to grow "while staying competitive on the world stage."

Oil & Gas UK welcomes tax-history measure

A UK industry group is welcoming changes to UK fiscal policy that will allow buyers of offshore oil and gas fields to benefit from the past tax payments of sellers.

The autumn budget released last month by the chancellor of the exchequer includes a mechanism for transferable tax histories (TTH) in deals completed after Oct. 31, 2018.

"This will allow companies selling North Sea oil and gas fields to transfer some of their tax payment history to the buyers of those fields," the government said. "The buyers will then be able to set the costs of decommissioning the fields at the end of their lives against the TTH."

The provision assures new investors in UK Continental Shelf oil and gas of tax relief for decommissioning costs.

In an article published by several UK newspapers, Oil & Gas UK Chief Executive Deirdre Michie hailed the change as "news we had been hoping for from the autumn budget."

Deals had progressed without TTH, she noted, adding, "They have taken months if not years to put in place and are very complicated indeed."

The TTH mechanism, she said, will boost investment UKCS oil and gas and revenue for the government—"an extra £70 million in the short term by the treasury's own estimates."

It also will defer decommissioning along with the associated tax relief by prolonging production from mature fields.

"We've looked at past assets that have changed hands and seen them benefit on average from field-life extensions of nearly 5 years," she said. "Several of the fields assessed are even expected to have their lives extended by 10 or more years."

Exploration & DevelopmentQuick Takes

Norway draws bids in 24th licensing round

Norway's Ministry of Petroleum and Energy aims to award new production licenses in the 24th Licensing Round before the summer of 2018. The round covered newly opened, frontier acreage including 102 blocks or partial blocks of which nine were in the Norwegian Sea with the remaining 93 blocks in the Barents Sea. Eleven companies applied for production licenses by the Nov. 30 deadline.

Newly appointed Norwegian Petroleum Directorate (NPD) exploration director Torgier Stordal said the "list of applicants is dominated by large and medium-sized companies with good technical and financial capacity."

No new acreage was opened in the 24th licensing round, which is similar to the 23rd round that drew production licenses from 26 companies. NPD also reported that 39 companies delivered a "record-breaking number of applications," in the predefined area (APA) round in 2017, signifying that many companies are prioritizing exploration in mature areas this time around.

The companies that have production licenses under review include AS Norske Shell, AkerBP ASA, Centrica Resources (Norge) AS, DEA Norge AS, Idemitsu Petroleum Norge AS, Kufpec Norway AS, Lundin Norway AS, OMV (Norge) AS, RN Nordic Oil AS, Statoil Petroleum AS, and Wintershall Norge AS.

NPD is currently evaluating applications based on companies' technical expertise and geologic understanding of the area of interest. All announced blocks are subject to fishery and environmental terms and constraints, NPD said.

ExxonMobil signs PSCs for blocks off Mauritania

ExxonMobil Exploration & Production Mauritania Deepwater Ltd. will begin seismic data acquisition and exploration analysis as operator with 90% interest of three deepwater blocks offshore Mauritania following government approval of production-sharing contracts signed with that country's government.

Blocks C22, C17, and C14, which cover a total of nearly 8.4 million acres, lie in 3,300-11,500 ft of water 124 miles offshore Mauritania. Societe Mauritanienne des Hydrocarbures et de Patrimoine Minier holds 10% interest in the work program.

Eni to operate Angola's Cabinda North Block

Eni SPA has become operator of the Cabinda North Block in Angola under an agreement with state-owned Sonangol, the former operator.

Eni describes Cabinda North as an onshore block in the little-explored northern part of the country.

The companies also signed a memorandum of understanding to define joint projects "throughout the whole value chain of the energy sector," according to an Eni press release.

Drilling & ProductionQuick Takes

Dana Petroleum brings Western Isles on stream

Dana Petroleum Ltd. has brought its Western Isles development on stream in the UK North Sea after project partners invested about $2 billion on the project involving Harris and Barra oil fields in 540 ft of water nearly 100 miles east of the Shetlands.

The two fields hold combined estimated oil reserves of more than 45 million bbl. Production and water-injection wells are tied back to a floating production, storage, and offloading vessel. The newbuild cylindrical FPSO has the capacity to produce 44,000 b/d of oil and store 400,000 bbl.

Dana Petroleum operates Western Isles and holds 77% interest. Cieco has 23% interest. The Western Isles development is expected to produce as much as 44,000 boe/d when fully on production.

Dana Petroleum, a Korea National Oil Corp. subsidiary, produces an average of 50,000 b/d. In addition to its UK operations, Dana Petroleum also has interest in projects in Egypt and the Netherlands.

Maersk Drilling outlines alliance with Aker BP

Maersk Drilling and Aker BP announced a drilling rig alliance based on a tripartite collaboration model that also includes service provider Halliburton Co.

The alliance involving high-performance jack ups aims at lower cost for Aker BP and increased profitability for Maersk Drilling and Halliburton.

Duration of the framework agreement is 5 years firm with the option to extend for another 5 years. It will be based on an integrated well delivery model with aligned incentives.

The new alliance focuses on increased efficiency, enabling standardization and simplification of processes to reduce the lead time from discovery to production.

Maersk Drilling has 24 drilling rigs, including drillships, deepwater semisubmersibles, and high-end jack ups.

Cole becoming Syncrude managing director

Doreen Cole will become managing director of Syncrude Canada Ltd. on Dec. 11, succeeding Mark Ward, who is retiring as president and chief executive officer. The title of Syncrude's top operational position has changed.

Cole has 24 years of experience in the Alberta oil sands, most recently as senior vice-president, regional maintenance and reliability, with Suncor Energy Inc., a Syncrude partner.

Ward, who has worked in the oil and gas industry nearly 40 years, became Syncrude president and CEO in May 2014.


ExxonMobil to merge R&M units, appoints president

ExxonMobil Corp. reported it will combine its refining and marketing operations into a single company—ExxonMobil Fuels & Lubricants Co.—in first-quarter 2018. Bryan Milton, currently president of ExxonMobil Fuels, Lubricants & Specialties Marketing Co., was appointed president of the combined division by the company's board, effective Jan. 1, 2018.

By combining activities of the two divisions—ExxonMobil Refining & Supply Co. and ExxonMobil Fuels, Lubricants & Specialties Marketing Co.—the company will "achieve further integration to improve decision-making and enhance performance in the market," it said.

ExxonMobil Fuels & Lubricants, along with other affiliates, will manage crude purchasing and logistics, refining, supply, trading, midstream, marketing, and sales of refined products.

Milton joined Exxon Chemical in 1986 at Fawley in the UK where he worked in various plant and developmental engineering roles, including assignments as operations manager and as plant manager. He also spent time in upstream natural gas commercial sales. He previously held various leadership positions within ExxonMobil Chemical in Houston and in 2004 was named managing director for ExxonMobil Aviation Fuels in the UK.

Milton was appointed manager of the Baton Rouge chemical plant in 2006 and in 2008 was assigned executive assistant to the chairman and chief executive officer of ExxonMobil. In 2009, he was appointed vice-president of basic chemicals for ExxonMobil Chemical. Before his current role, Milton was president of ExxonMobil Global Services Co.

Chavez to head Citgo after execs arrested

Asdrubal Chavez, a cousin of the late former president of Venezuela, was named acting president and CEO of Citgo Petroleum Corp. a week after the arrests of his predecessor and five other company executives on charges of corruption. The appointment of Chavez, a chemical engineer and former oil minister, came after President Nicolas Maduro named Maj. Gen. Manuel Quevedo petroleum minister and president of Petroleos de Venezuela SA, Citgo's parent (OGJ Online, Nov. 28, 2017).

Maduro, who became president after the death of Hugo Chavez, also appointed Ysmel Serrano executive vice-president of PDVSA. Serrano had been vice-president of commerce and supply. What Maduro calls a response to corruption at Citgo and PDVSA is widely seen outside the country as consolidation of power as Venezuela approaches default on its international financial obligations and its oil industry struggles.

Oil production has fallen by 500,000 b/d since 2013 to below 1.9 million b/d.

Maduro on Nov. 27 declared the start of "a new revolutionary phase" for PDVSA. In a speech to the National Assembly, he called for a 1 million-b/d increase in oil production; recovery of the refining system; a 100% increase in Venezuelan petrochemical capacity; and fulfillment of oil supply obligations to China, India, the US, and Petrocaribe countries, to which Venezuela under Chavez pledged oil under concessionary terms.

Rosneft, Pertamina form Tuban joint venture

Rosneft and Pertamina have formed PT Pertamina Rosneft Pengolahan dan Petrokimia to develop their joint venture refinery and petrochemical project in East Java, Indonesia.

They plan to build a 300,000-b/d refinery and complex with capacities of 1 million tonnes/year of ethylene and 1.3 million tpy of aromatics at Tuban (OGJ Online, May 27, 2016).

Indonesia lets contract for gas processing plant

State-owned PT Pertamina (Persero) subsidiary PT Pertamina EP Cepu (PEPC) has let a lump-sum turnkey contract to a subsidiary of JGC Corp., Yokohama, Japan, to provide engineering, procurement, and construction for a grassroots gas processing plant in Bojonegoro, East Java, Indonesia.

Alongside partner PT Rekayasa Industri of Indonesia, JGC will deliver EPC for a gas plant designed to process 330 MMcfd of natural gas containing 1% hydrogen sulfide and 34% carbon dioxide produced by PEPC and partners' unitized Jambaran-Tiung Biru gas field in Indonesia's Bojonegoro area, JGC said.

Once in service, the proposed gas plant will produce 172 MMcfd of sales gas, condensate, and other associated gases to be used principally by a gas-fired power plant of Indonesia's state-owned electric power company in East Java Province.

The gas plant comes as part of the Indonesian government's program to develop a gas supply network to respond to increased energy demand in the country, JGC said.

JGC valued its share of the total 100 billion-yen EPC contract at 40 billion yen.

Sinopec lets contracts for alkylation units

China Petrochemical Corp. (Sinopec) has let a contract to a division of E.I. DuPont de Nemours & Co. for delivery of grassroots alkylation units to an additional two of its subsidiaries' refineries in China.

DuPont Clean Technologies will deliver technology licensing, engineering, and equipment for two of its proprietary STRATCO alkylation units to be installed at Yangzi Petrochemical Co.'s 281,151-b/d refinery at Nanjing, Jiangsu Province, and Zhenhai Refining & Chemical Co.'s 461,890-b/d refinery at Ningbo City, Zhejiang Province, the service provider said.

These latest contracts for STRATCO alkylation technology and equipment follow recent previous awards to DuPont for another three units to be implemented at Sinopec subsidiaries Qilu Petrochemical Corp.'s 281,151-b/d refinery at Zibo, Shandong Province; Tianjin Co.'s 277,134-b/d integrated complex at Tianjin Binhai New Area, Tianjin; and the Sinopec-Kuwait Petroleum Corp. (KPC) 300,000-b/d planned Sino-Kuwait integrated complex under construction on Donghai Island of Zhanjiang City in China's Guangdong Province (OGJ Online, Nov. 10, 2017; Aug. 25, 2017; Jan. 26, 2017).

All five STRATCO alkylation units, four of which are scheduled for startup from mid- to late-2018, will have alkylate production capacities ranging 300,000-400,000 tonnes/year.

DuPont, which did not reveal a contract value, said the units come as part of Sinopec's broader plan to produce low-sulfur, high-octane, low-RVP alkylate to help ensure overall quality of its fuel production complies with China 5 emission standards—which equivalent to Euro 5 specifications, cap the maximum sulfur content of gasoline and diesel at 10 ppm—as well as even stricter China 6 emission standards scheduled to be adopted by July 2020.


Yamal LNG to load first cargo

PAO Novatek has begun production at its Yamal LNG plant, bringing its 5.5 million-tonne/year first train online. The first cargo is scheduled to load Dec. 8 at Sabetta port onboard the first Arc7 ice-class LNG tanker, Christopher de Margerie, operated by Russian state-owned shipping company Sovcomflot.

Novatek plans two more trains, bringing full capacity to 16.5 million tpy. Train 2 is expected to start in third-quarter 2018 and Train 3 in first-quarter 2019. Four double-containment 160,000-cu m storage tanks are in place.

The project draws its natural gas from South Tambey field, with estimated reserves of 926 billion cu m.

Arc7 LNG carriers carry 170,000 cu m and can operate year-round without icebreaker assistance along westbound navigation routes and during the summer season eastbound via the Northern Sea route. Christopher de Margerie is the first of 15 planned Arc7-class vessels.

Yamal LNG is a joint venture of Novatek 50.1%, Total SA 20%, CNPC 20%, and Silk Road Fund 9.9%.

Statoil lets contract for Northern Lights terminal

Statoil has let a contract to KBR Inc. for the concept and front-end engineering design of its Northern Lights onshore carbon dioxide storage terminal in Norway. The terminal is a key component of the carbon capture and storage demonstration project being undertaken by Gassnova, with Statoil, in partnership with Royal Dutch Shell PLC and Total SA, responsible for transport and storage.

The first phase of this project will provide storage for as much as 1.5 million tonnes/year of CO2 captured from onshore industrial plants in eastern Norway and transported by ship to the onshore terminal. The project will allow for expansion to receive additional CO2 volumes, with the aim of stimulating commercial carbon capture projects in Norway, Europe, and other countries.

KBR will perform its work in conjunction with its Granherne subsidiary. In addition to the CO2 storage terminal, engineering will address import jetty topsides, CO2 reinjection lines, and associated utilities.

Construction of the full-scale project including the onshore terminal is subject to the Norwegian parliament making a positive investment decision, scheduled for 2019.

DOT plans to rescind rail tank car ECP rule

The US Department of Transportation said its Pipeline & Hazardous Materials Safety Administration and Federal Railroad Administration plan to rescind a requirement that electronically controlled pneumatic (ECP) brakes be used on certain rail tank cars. The American Petroleum Institute welcomed DOT's Dec. 4 announcement.

The determination was made with congressionally mandated input from the National Academy of Sciences' Transportation Research Board, US Government Accountability Office, and FRA studies, which found that the cost-benefit analyses were not sufficient justification for requiring ECP brakes.

It said NAS determined it was unable to make a conclusive statement regarding the emergency performance of ECP brakes relative to other braking systems. In addition, the updated regulatory impact analysis incorporated recommendations from GAO audits and updated costs and benefits of the ECP brake provision based on current economic conditions. DOT said this review demonstrated that the mandate's costs would exceed the benefits it would produce threefold.

Given the lack of evidence in favor of ECP braking systems, an API official urged DOT and the industry agencies to pursue other efforts to improve rail safety.

"Safety is a core value throughout the entire natural gas and oil industry," said API Midstream and Industry Operations Group Director Robin Rorick. "The safety impacts of ECP brakes are marginal at best and mandating implementation of these systems ignores concerns about their reliability, availability, and intrinsic safety while various other braking technologies have been proven reliable and effective."