OGJ Newsletter

June 12, 2017
International news for oil and gas professionals


Potential boost seen from UKCS oil and gas

Extending the life of oil and gas production from the UK Continental Shelf and taking full advantage of the related supply chain could generate more than £290 billion of extra revenue through 2035, says Oil & Gas UK in a policy proposal for the next government.

The trade group includes in its estimate £140 billion in increased gross revenue from oil and gas production via policies oriented to maximum economic recovery (MER) from UKCS resources.

"Our supply chain has the potential to double its turnover within a generation by capturing a larger share of export markets as well as increasing gross revenue from extending UKCS oil and gas production," the group says.

The UK held a general election called by Prime Minister Theresa May on June 8.

In its "blueprint for government," Oil & Gas UK identifies these priorities:

• Establish an energy policy that realizes the full benefits of indigenous resources.

The group says the government should acknowledge the long-term need for oil and natural gas and the role of gas in lowering emissions of greenhouse gases.

• Ensure the UKCS is globally competitive for investment.

The government, according to Oil & Gas UK, should build "competitive" fiscal and regulatory regimes and invest in "world-class infrastructure to ensure that oil and gas hubs across the UK are connected physically and digitally."

• Manage the UK's withdrawal from the European Union, Brexit, to support, develop, and promote the oil and gas industry.

The blueprint seeks "frictionless access to markets and labor," maintenance of a strong voice in Europe, and protection of energy trading and access to the internal energy market.

• Take practical steps to protect, progress, and promote operators, the supply chain, and the offshore and onshore workforce.

The blueprint lists potential improvements in the oil and gas supply chain, technical development, physical infrastructure, funding of MER-based initiatives, and workforce skills.

India tightens oversight of ONGC, OIL

India's Ministry of Petroleum and Natural Gas has created individual committees to monitor work in legacy oil and gas fields of the two main state-owned producing companies.

The Directorate General of Hydrocarbons will lead committees overseeing resource development by Oil & Natural Gas Corp. and Oil India Ltd.

The committees will require ONGC and OIL to submit status reports and plans for work in "nomination fields"—those on licenses the government granted directly before it began offering production-sharing contracts competitively.

The companies will have representatives on their respective committees.

Tesoro to change name to Andeavor

Tesoro Corp. and Tesoro Logistics LP will change their names to Andeavor and Andeavor Logistics LP, respectively, on Aug. 1.

"We are announcing a new name to reflect the company's ongoing transformation," said Tesoro Chairman, Pres., and CEO Greg Goff.

Tesoro was founded in the 1960s as a company primarily engaged in petroleum exploration and production. It built and commenced operating its Kenai, Alas., refinery in 1969 and began shifting its focus to refining and marketing in the late 1990s.

Tesoro expects to close its acquisition of Western Refining Inc. on June 1. Following the merger, Tesoro will own 10 refineries with a combined refining capacity of more than 1.1 million b/sd (1.05 million b/cd).

After Aug. 1, Andeavor will continue to license the Tesoro brand to retail stations that currently utilize it. The company does not intend to make the Andeavor name part of its retail portfolio, which will include 3,000 locations following the Western Refining purchase.

Penn West looks to change name to Obsidian Energy

Penn West Petroleum Ltd., Calgary, is proposing a name change to Obsidian Energy Ltd. following a major restructuring and renovation effort.

Penn West's asset disposition program this year has netted an additional $80 million in proceeds after ending 2016 with proceeds of $1.4 billion. The company's long-term debt has been reduced to less than $400 million.

The company's operations are focused on the Cardium, Peace River, and Alberta Viking areas of Alberta.

"As we look around today, our company is very different from just a few short years ago," commented Penn West Pres. and CEO David French. "Over the past several months, we spoke a lot about concluding the story of our restructuring, which touched everything from our balance sheet, key development areas, people, and operating practices. We rebuilt the company from the assets up and refocused from the top down."

Shareholders will vote on the name change at the company's annual and special meeting on June 26 in Calgary.

Exploration & DevelopmentQuick Takes

Equatorial Guinea names bid-round winners

Equatorial Guinea's Ministry of Mines and Hydrocarbons expects offshore production-sharing contracts to be signed by Sept. 15 by six bid-round winners announced at the Africa Oil & Power conference in Cape Town, South Africa.

For a seventh license, ExxonMobil Corp. already has signed a PSC covering Block EG-11, which it acquired through direction negotiation.

Negotiations for PSCs of the open-bidding blocks will begin June 19. The ministry offered 17 blocks in a bidding round that opened in June 2016. It received expressions of interest from 23 companies and bids from 12 companies.

Winning bidders and their blocks are Ophir Energy, EG-24; Offshore Equator PLC, EG-23; Contarf Energy, EG-18; Elenilto, EG-09; Taleveras, EG-07; and Atlas Petroleum and Strategic Fuel Fund, EG-10.

OIL adds discovery in Upper Assam basin

India state-owned Oil India Ltd. (OIL) is planning further appraisal drilling after bringing its latest oil discovery on production in the Baghjan petroleum mining lease in the Upper Assam basin in northeastern India.

The South Baghjan-2 well encountered 15 m of pay in multiple sands in the Narpuh and Lakadong-Therria formations at a depth of 4,154 m. The well, completed in May, produced 100 cu m/day of oil.

The South Baghjan-2 joins 10 previous discoveries made by OIL during the last 2 years, the company said.

IPR continues exploration program in Egypt

Irving, Tex., independent IPR Inc. reported continued drilling success and a series of Western Desert and Nile Delta, Egypt, discoveries through this year's first 5 months.

IPR's calendar year drilling program in Egypt budgeted for the drilling of 23 wells, making 2017 one of the most active years operationally for IPR since its 1993 acquisition of the Phillips Petroleum Western Desert assets.

The work program includes onshore exploration, appraisal, and development drilling and workovers offshore in the Gulf of Suez.

IPR's 10 licenses of both operated and nonoperated concessions cover 6.2 million acres in some of Egypt's most prolific hydrocarbon systems.

IPR's North Ras Qattara concession in the Western Desert saw success from NRQ-11X and appraisal well NRQ-9-2, which tested 715 bo/d and 3,700 bo/d, respectively. Both discoveries were from the Abu Roash "G" formation (ARG) in separate structures. After choking the discovery wells, production in the lease increased 60% to 4,100 bo/d.

The encouraging outcome of the results has prompted expanded drilling plans in the near term along with eventual monetizing of the deep Jurassic gas-condensate discoveries in NRQ-3151 and NRQ-8X.

In the Nile Delta's South Disouq concession, where IPR holds 45% working interest, the exploration discovery of the Phase I commitment well, SD-1X, was drilled to 11,068 ft. The gas-condensate discovery in the Abu Maadi formation at 7,100 ft tested 25.8 MMcfd and 43 bbl of condensate on a 48/64-in. choke.

TGS plans second Permian seismic project of 2017

TGS-NOPEC Geophysical Co. ASA is set to launch its West Lindsey 3D multiclient seismic survey covering a minimum of 190 sq miles predominantly in Reeves County, Tex., southwest of the West Kermit 3D project launched earlier this year.

The West Lindsey 3D will provide high-resolution 3D seismic data in an area where strong potential exists in multiple zones from the Delaware sands through the Wolfcamp, as well as deeper plays including the highly prospective Siluro-Devonian and Ordovician Ellenburger along the Grisham Arch.

Permitting on the survey has already commenced and data acquisition is expected to begin in the third quarter. Preliminary data will be available in late fourth quarter and final data available in early 2018. The data will be processed by TGS utilizing its modern land imaging technology.

The West Kermit 3D project is a high-resolution 3D survey designed to assist in the evaluation and development of multiple zone potential including the Wolfcamp and Bone Spring intervals. Final data for that project is expected to be available in the fourth quarter.

"The West Lindsey 3D, combined with the recently expanded West Kermit 3D, are located in an exciting part of the basin where [exploration and production] companies are demanding modern 3D seismic data," said CEO Kristian Johansen.

Drilling & ProductionQuick Takes

SM Energy ups Eagle Ford completion activity, output

SM Energy Co., Houston, is increasing its production guidance by 400,000 boe, all in the second quarter, after accelerating completion activity by 11 wells in its Eagle Ford program.

The firm has completed 31 wells in its Eagle Ford program year-to-date and its current full-year plan is to complete 39 wells. Second-quarter production guidance is revised to 10.7-11.1 million boe and to 43.2-46.2 million boe for the full year.

"Due to the favorable terms and performance under our pumping services agreement for the Eagle Ford, we are pleased to accelerate this activity, which we believe will result in higher cash flow and capital cost savings in 2017," said SM Energy Pres. and CEO Jay Ottoson.

In Howard County, Tex., the firm's Viper 14-9 1WA well, with a 10,400-ft lateral drilled in the Wolfcamp A, has produced more than 1,000 boe/d with 92% oil during completion flowback with oil rates still increasing.

"It will be some time yet before we have a 30-day peak rate for this well, but this is clearly an encouraging early indication of productivity," said Ottoson.

Aramco lets contract for Marjan expansion

Saudi Aramco has let contract to Amec Foster Wheeler for expansion of supergiant Marjan onshore and offshore field in Saudi Arabia's Eastern Province.

The project includes an additional 300,000-b/d gas-oil separation train, a world-scale greenfield gas processing plant, a cogeneration facility, and modifications to an existing facility to add NGL fractionation capacity.

The 5-year contract covers pre-front end engineering and design, FEED, overall program management, and other support services.


Shell updates Geismar AO expansion project

Shell Chemical LP remains on schedule with construction of its $717-million project to increase alpha olefins (AO) production at its Geismar, La., chemical manufacturing plant, which post-expansion, will become the largest AO production site in the world.

The 425,000-tonne/year AO unit, which will join three existing units at the site, will begin commercial production by yearend 2018, said Graham van't Hoff, executive vice-president of Royal Dutch Shell PLC's global chemical business.

With the project currently taking delivery of more than 600 large pieces of equipment, Shell recently completed side-by-side placement of two large ramps, each able to sustain a 250-tonne capacity, to load and unload heavy equipment.

Previously completed works include placement of large process equipment—including reactors, columns, vessels, and preassembled modules that will form the core of the new AO unit—as well as construction of a cooling tower and two new storage areas for rail and high-purity butene.

Separately, the company said it also has reached final investment decision on a project to expand mid-cut and light-cut alcohol capacity at Geismar to meet growing demand for surfactant and plasticizer alcohols, which is scheduled to begin commercial production of incremental alcohols concurrently with the new AO unit.

Shell plans to supply the Geismar expansion with ethylene feedstock from its nearby Norco, La., and Deer Park, Tex., manufacturing sites, which following startup of the new AO unit, will bring total AO production at Geismar to more than 1.3 million tpy.

NKNK taps Linde for ethylene expansion

PJSC Nizhnekamskneftekhim (NKNK) has let contract to Linde Group for an olefins plant that will double ethylene capacity of the company's complex at Nizhnekamsk, Tatarstan.

The first-phase expansion plant will have capacities of 600,000 tonnes/year of ethylene and more than 600,000 tpy of other chemicals. Due on stream in 2022, the plant will crack naphtha.

Linde's contract covers licensing, design, material procurement, and technical engineering consulting.

Subsequent expansion will boost ethylene capacity at the complex to 1.8 million tpy by 2025, according to NKNK. Linde said it "aims to support" later expansion phases.

At the signing of the new contract, Linde and TAIF Group, of which NKNK is a subsidiary, also signed an agreement on strategic cooperation.

PDVSA wraps turnaround at El Palito refinery

Petroleos de Venezuela SA is in the process of restarting units shut down for regularly planned maintenance at its 140,000-b/d El Palito refinery near Puerto Cabello in Carabobo state.

PDVSA initiated startup of the refinery's catalytic reforming plant (PTR) and benzene-toulene-xylene (BTX) complex in late May following the conclusion of turnaround activities, which included preventative maintenance works to increase production of petroleum products at the specialized units.

The company revealed no further details regarding either the scope of preventative maintenance projects executed nor the date on which the units were shuttered.

A timeframe for when the PTR and BTX units would return to normal operations was not disclosed.

The operator, however, did confirm the turnaround comes as part of PDVSA's ongoing goal to transform a crude-exporting company to an exporter of high-quality finished products under the Golpe de Timon, a guide to the construction of socialism in Venezuela as outlined under the government of the late Hugo Chavez.

Dow wraps construction of Freeport PE unit

Dow Chemical Co. has completed construction of a polyethylene (PE) plant in Freeport, Tex., as part of its $6-billion US Gulf Coast investment program in Texas and Louisiana on projects to utilize low-cost and advantaged US shale gas feedstock.

Based on Dow's proprietary Solution process technology, the 400,000-tonne/year PE plant has entered its commissioning phase in sequence with the midyear commercial startup of Dow's 1.5 million-tpy Freeport ethylene plant, Dow said.

Scheduled to ramp up during the third quarter and to reach full operations in the fourth, the PE unit will produce Dow's proprietary ELITE enhanced PE resins for use in flexible packaging applications for food, personal hygiene products, and other industrial packaging.

The Freeport PE unit is the first mechanically completed project of four derivative investments under way at Dow's operations in Texas and Louisiana, which alongside a planned debottlenecking project, are staged to enter operation between 2017-18.

Alongside the PE unit, those projects include:

• A 350,000-tpy specialty low-density PE unit for industrial and supply-chain packaging applications slated to come online in coordination with the Freeport cracker.

• A 200,000-tpy proprietary next-generation NORDEL metallocene ethylene-propylene-diene-monomer (EPDM) unit slated for startup in early 2018.

• A 125,000-tpy bimodal gas-phase debottleneck to increase production of bimodal PE resins for high-performance pipe and fitting applications as well as the cap-and-closure market planned for startup later in 2018.

• A 320,000-tpy increase in output of high-melt index specialty and conventional polyolefin elastomers for flexible packaging, transportation, and consumer markets due to come online in late 2018.

Dow, which began commissioning activities at the Freeport ethylene plant earlier this year, also recently announced a $4-billion round of investments over the next 5 years to expand its US petrochemicals manufacturing business as part the company's next phase of projects designed to take advantage of US shale gas feedstock.


Eni lets FLNG contracts to produce Coral South

Eni SPA and Mozambique signed drilling, construction, and installation contracts for project implementation of Coral South LNG in Rovuma basin's Area 4. A 3.4-million tonne/year floating LNG (FLNG) vessel will produce Coral South—roughly 50 km offshore near the Tanzania border in 2,000 m of water—starting in 2022.

Eni let a contract to JGC Corp.—in partnership with TechnipFMC and Samsung Heavy Industries Co. Ltd. (SHI)—for the FLNG's construction. The lump-sum turnkey contract covers engineering, procurement, construction, installation, and commissioning.

A joint venture of JGC and TechnipFMC will be responsible mainly for the engineering and procurement work for the FLNG's topsides and management of the overall project. Consortium partner SHI will cover EPC work for the FLNG hull and fabrication of the topsides.

Fifteen major international banks are financing 60% of FLNG construction with guarantees from five export credit agencies.

JGC also is handling EPC work for Petronas's FLNG project offshore Malaysia.

Coral field, discovered in May 2012, contains 16 tcf of gas in place. Coral South's final exploration well was drilled in 2014.

Woodside signs LNG deal with Pertamina

Woodside Petroleum Ltd. subsidiary Woodside Energy Trading Singapore Pte. Ltd. has signed a long-term LNG sale agreement with Indonesia's PT Pertamina (Persero) for the supply of LNG beginning in 2019.

The deal is for Woodside to build up supply from 2019 to about 600,000 tonnes/year by 2022 and continue that quantity until 2034. The company also has the option to increase the supply to about 1.1 million tpy from 2024 to 2038.

Woodside intends to source the LNG from its global portfolio. The agreement means that Woodside will become a significant LNG supplier to Indonesia.

CEO Peter Coleman said the company's record as a reliable supplier as well as the close proximity of its sources of LNG to Indonesia were key factors in clinching the deal.

Coleman added Woodside is keen to become a buyer of choice as more regional LNG buyers enter the market in the near future.

LNGL drops Fisherman's Landing LNG in Queensland

Liquefied Natural Gas Ltd. (LNGL), Perth, has decided to abandon the Fisherman's Landing project at the Port of Gladstone in Queensland. The proposed development was to have been a midscale, 3.5 million-tonne/year LNG plant—the fourth in the Gladstone area.

LNGL had secured a 24-hectare site on the mainland via a 20-year lease from Gladstone Ports Corp. Ltd. with two 5-year extension options. The site was directly opposite the three existing LNG plants on Curtis Island and the company planned an initial development based on two trains of 1.5 million tpy each. LNGL had hopes of eventually moving up to four trains for a total capacity of 7 million tpy.

Each train required a minimum gas supply of 260 terajoules/day, which equates to 1,800 petajoules over a 20-year period to be economically viable.

However, after a number of years without any success in securing the long-term gas supplies needed to proceed with construction, LNGL has decided to no longer fund the costs associated with maintaining the site and close the project down.

Managing Director Greg Vesey said it was not an easy decision, but a strategic one and the company is now completing the paperwork involved in relinquishing the site as well as notifying other relevant regulators.

LNGL's remaining portfolio comprises the development of the 8 million-tpy Magnolia LNG export terminal in the Port of Lake Charles, La., and the development of the 8 million-tpy Bear Head LNG terminal in Richmond County, NS. The Canadian project involves the associated proposal to construct and operate a 62½-km gas pipeline lateral to connect gas supply to the Bear Head plant.