OGJ Newsletter

Jan. 8, 2018
International news for oil and gas professionals


ExxonMobil, Petrobras sign alliance MOU

ExxonMobil Corp. and Petroleo Brasileiro SA (Petrobras) have signed a memorandum of understanding envisioning a strategic alliance to identify and evaluate business opportunities.

In a statement, the companies said they will evaluate opportunities "across all sectors of the oil and gas production value chain, including opportunities for cooperation in exploration, production, gas, and chemicals both inside and outside Brazil."

ExxonMobil, BHP end gas marketing venture

Bass Strait partners ExxonMobil Corp. and BHP Billiton have agreed to abandon their gas marketing joint venture for Bass Strait production after 50 years of operation.

Pressure for the break-up has come from the Australian Competition & Consumer Commission (ACCC) amid concerns about east coast gas supply and increasing prices.

Both companies have provided ACCC with court-enforceable undertakings that requires them to separately market gas from the Gippsland basin fields in offshore eastern Victoria as separate entities starting Jan. 1, 2019.

ACCC said it has been concerned that the joint marketing arrangements were likely to have resulted in a substantial lessening of competition in the marketplace for the supply of gas to buyers in Australia's southern states.

Although the agreement has now been made for separate marketing arrangements, the two companies have always argued that joint marketing actually saved costs. They added that the cessation of this joint arrangement could make it more difficult to invest and bring on new supplies in Gippsland.

Production from the Gippsland basin joint venture is forecast to drop to 244 petajoules for 2018 from the record output of 330 petajoules for this current year.

McKay named Canadian Natural Resources president

Tim McKay has been promoted to president of Canadian Natural Resources Ltd., Calgary.

He succeeds Steve Laut, who will become executive vice-chairman and remain on the management committee.

A CNRL employee since 1990, McKay had been chief operating officer, which is becoming a dual position.

Darren Fichter, now executive vice-president of Canadian conventional, will be chief operating officer, exploration and production.

Scott Stauth, now executive vice-president, field operations, will be chief operating officer, oil sands.

Mathur named CEO of Cairn Oil & Gas

Sudhir Mathur, formerly acting chief executive officer and chief financial officer of Cairn India, which parent Vedanta Ltd. now calls Cairn Oil & Gas, has become chief executive officer.

Suniti Bhat, formerly director of oil and gas, is now chief operating officer.

Petrolia enters Indonesia with acquisition

Petrolia Energy Corp., Houston, will gain nonproducing interests in Indonesia by acquiring Bow Energy Ltd., Calgary, in an all-stock deal.

Bow Energy holds stakes in five production-sharing contracts and a joint study agreement covering 948,000 net acres near Medan in North Sumatra. It operates four of the PSCs.

Bow Energy will become a wholly owned subsidiary of Petrolia, which has executed a definitive agreement covering the acquisition.

Petrolia's existing interests are in Texas, New Mexico, and Oklahoma.

Exploration & DevelopmentQuick Takes

Lukoil plans Iraqi Block 10 seismic work

Lukoil plans additional seismic surveys over Eridu oil field on Block 10 in Iraq and over southern and central parts of the block not yet surveyed.

It signed contracts with state-owned Oil Exploration Co. to acquire 983 sq km of 3D data at Eridu field and 3,500 line-km of 2D data elsewhere on the block.

Earlier this year, Lukoil reported the Eridu 1 discovery well tested more than 8,000 b/d of oil from the Middle Cretaceous Mishrif formation (OGJ Online, Feb. 22, 2017). It has drilled two other wells and plans further appraisal drilling.

Lukoil operates Block 10, in the governates of Dhi Qar and Muthanna 120 km west of Basra, with a 60% interest. Inpex Corp. holds 40%.

Rosneft okays boost to Samotlor recovery

Rosneft has approved the drilling of more than 2,400 wells during 2018-27 to boost recovery by more than 50 million tonnes of oil equivalent (toe) at supergiant Samotlor field in Western Siberia, according to a company statement.

The Russian government has agreed to cut the mineral extraction tax applicable to the field by 35 billion rubles ($600 million) over 10 years, Rosneft said.

Discovered in 1965 and placed on production in 1969, Samotlor has produced 2.7 billion toe of hydrocarbons. More than 19,000 wells have been drilled in the field.

Production now comes from reservoirs with low permeability and low saturation and from edge zones of depleted reservoirs. Water cut is as high as 96, Rosneft said.

Rosneft unit Samotlorneftegaz operates the field.

China to offer five Tarim basin blocks

The Chinese government plans to offer five oil and gas exploration licenses in the Tarim basin to nonstate operators, according to China Daily.

The offering will be the third in the Xinjiang Uygur autonomous region under a program opening exploration and production to private companies.

Xinhua reported in May that the government had held public bidding for five Xinjiang blocks in 2015 and planned to offer 29 more blocks.

At least some of the licenses formerly were held by state-owned oil and gas companies.

In the earlier auction, Shandong Polymer Biochemicals Ltd. won one block, and state-owned Beijing Energy Investment Holdings won three blocks, China Daily reported.

The five blocks newly on offer cover more than 9,000 sq km.

According to China Daily, they'll have 5-year exploratory terms. Earlier licenses had 3-year terms.

Bidders must be independent legal entities registered in the Chinese mainland with net assets of at least $151 million.

Rosneft, BP to develop Russian gas field

Rosneft and BP will jointly develop oil and gas resources on two licenses in the Yamalo-Nenets Autonomous District of northern Russia encompassing giant Kharampurskoye natural gas and condensate field.

The Russian company will hold 51% interest in the project, and BP will hold 41%.

The companies will develop conventional gas reserves in Cenomanian strata and conduct pilot production and subsequent development of tight Turonian formations. They'll also optimize oil production.

Drilling & ProductionQuick Takes

Statoil adds interest in Brazil's Roncador field

Statoil ASA is tripling its offshore production in Brazil, adding 25% interest in Roncador field. The operator has said it will attempt to increase the field's recovery by 5% using its improved oil-recovery expertise. The increase would bring Roncador's recoverable volumes to more than 1,500 million boe.

Petroleo Brasileiro SA (Petrobras) received $2.35 billion for Statoil's acquisition plus additional contingent payments of as much as $550 million. Petrobras will retain operatorship and 75% interest.

Discovered in the Campos basin in the 1990s, Roncador has been in production since 1999, producing 240,000 boe/d in November with 40,000 boe/d of associated gas.

Petrobras and Statoil are partners in 13 areas in either the exploration or production phase, ten of which are in Brazil and three abroad. Statoil operates Peregrino field the BM-C-33 block, both in the Campos basin, and the BM-S-8 block in the Santos basin.

The Roncador transaction has an effective date of Jan. 1, 2018, and closing is subject to government approval.

Total to add additional capacity at Libra

Total SA plans to bring its Mero 1 floating production, storage, and offloading unit onstream in 2021 on Libra block offshore Brazil in the Santos basin. The FPSO will have 150,000 bo/d of production capacity, and Total plans to drill 17 wells in the northwestern part of the block. The operator started production with its 50,000-b/d Pioneiro de Libra FPSO in late November (OGJ Online, Nov. 27, 2017).

Total said it plans to add three additional FPSOs in the coming years, bringing production from Libra field to more than 600,000 b/d.

ADES acquires three Nabors rigs

ADES International Holding Ltd. signed a purchase and sale agreement with Nabors Drilling International II Ltd., a subsidiary of Nabors Industries Ltd., to acquire three operating offshore jack up rigs currently contracted in the Persian Gulf.

The agreement is for $83 million, payable in cash and ADES stock. Terms also call for the existing drilling contracts associated with the rigs to be transferred to ADES. Closing is expected in early 2018, subject to renewal of existing multiyear contract terms.

The drilling units being acquired are three ultra-shallow rigs that have been in continuous service for more than 10 years. They were recently refurbished, with 5-year inspections already done on two rigs. Inspection on the third rig is scheduled for 2018.

After closing, ADES will have six rigs under contract in the gulf. In addition, ADES said it is finalizing another agreement with Nabors to acquire two stacked offshore jack ups in a similar cash-and-stock deal, contingent on the awarding of specified drilling contracts.

The names of the rigs were not disclosed but offshore rig broker Bassoe Offshore said the three rigs in the first announcement were most likely rigs that Nabors currently has on contract with Saudi Aramco: the Nabors 655, 656, and 657.

David Carter Shinn of Bassoe added that the two stacked rigs under negotiation in a separate deal are likely Nabors 659 and Nabors 660.

Group restarts oil production from Jingemia field

A group led by Cyclone Energy Pty. Ltd., Perth, has restarted oil production from Jingemia field in Western Australia's onshore north Perth basin.

The field, in production license L14 about 360 km north of Perth and 20 km southeast of Dongara, has been on care and maintenance status since December 2012.

Jingemia first came on stream in late 2003 and has produced 4.4 million bbl of light oil from the estimated 12 million bbl in place.

Cyclone says the field production facilities are in excellent operational condition and all production wells have been successfully brought back online.

A sales contract has been signed with BP PLC's Kwinana refinery south of Perth and a trucking contract is in place to transport the crude to the facility.

The joint venture says PL L14 also has good exploration prospectivity within the permit boundaries as well as within the Jingemia field itself, particularly in deeper reservoirs not tested at the field location.

Cyclone Energy has 33.722% interest. Singapore's RCMA Group holds 60% and Perth-based Norwest Energy Ltd. holds 6.278%.


Enterprise to add train at Orla gas plant

Enterprise Products Partners LP (EPP), Houston, has approved a project that will add 300 MMcfd of capacity at its Orla cryogenic natural gas processing plant under construction near Orla, Tex. (OGJ Online, June 20, 2016).

The addition of the third processing train at Orla will increase inlet-volume capacity to 900 MMcfd at the site and enable the operator to expand NGL-extraction capabilities by 50,000 b/d, to 120,000 b/d, EPP said.

The Orla III processing train is scheduled to begin service during second-quarter 2019. The Orla I and II trains remain on schedule to be completed during the second and third quarters of 2018, respectively, according to the company.

EPP announced in June 2017 that it would add a second 300-MMcfd processing train as well as another 40,000 b/d of NGL extraction capability at Orla to further accommodate rising NGL-rich gas production in the Delaware basin of West Texas and southeastern New Mexico (OGJ Online, June 30, 2017).

The Orla III expansion will raise EPP's total natural gas processing capacity in the Permian basin to more than 1.2 bcfd and boost NGL extraction capacities in the region to more than 200,000 b/d.

Production of natural gas and NGL in the Permian basin could nearly double during the next 5 years, according to A.J. Teague, chief executive officer of EPP's general partner.

Mixed NGLs from Orla will be delivered into EPP's fully integrated NGL system, including the recently announced 571-mile Shin Oak pipeline, which will transport NGLs from the Permian basin to the firm's fractionation and storage complex at Mont Belvieu, Tex. (OGJ Online, Apr. 10, 2017).

Residual natural gas from Orla will move to the Waha area through a 68-mile, 36-in. diameter pipeline scheduled to begin service commensurate with the Orla I train and will connect to EPP's Texas Intrastate pipeline system at the Waha hub.

EPP said the Shin Oak pipeline remains on schedule to enter service during second-quarter 2019.

RIL commissions Jamnagar off-gas cracker

Reliance Industries Ltd. (RIL) has fully commissioned a 1.5 million-tonne/year refinery off-gas cracker (ROGC) as well as associated downstream plants and utilities at its integrated 60 million-tpy refining and petrochemical complex at Jamnagar in Gujarat, India (OGJ Online, June 9, 2017; July 6, 2012).

Able to crack both ethane and propane, the ROGC complex uses off gases from RIL's two Jamnagar refineries to produce ethylene and propylene as feedstock for a series of recently completed downstream plants at the integrated complex for production of monoethylene glycol, low-density polyethylene, high-density and linear low-density polyethylene, paraxylene, as well as purified terephthalic acid, polyester filament, and polyethylene terephthalate, RIL said on Jan. 2.

Start-up of the ROGC complex, now operating at its design-throughput rate, completes RIL's $16-billion J3 expansion project at Jamnagar, which aimed to increase production capacity of ethylene and other petroleum products at the site (OGJ Online, June 21, 2016; Feb. 26, 2015).

With the Jamnagar project completed, combined ethylene capacity of RIL's five manufacturing sites stands at nearly 4 million tpy, the company said.

BP Oman lets contract for second Khaazan gas plant

BP Oman has let a lump-sum turnkey contract to Petrofac Ltd. of the UK to deliver engineering, procurement, construction, and commissioning services for a second-phase central processing plant as part of the Phase 2 (Ghazeer) gas development in Oman's Khazzan field.

As part of the $800-million contract, Petrofac will provide EPCC on Khazzan Phase 2 plant, which will include a third gas train with a capacity for nominally handling 500 MMcfd of gas to bring combined plateau production capacity at the site to 1.5 bcfd, the service provider said.

Petrofac's scope of work under the contract also includes EPCC for liquid and compression trains, associated infrastructure, as well as brownfield work involving connecting the Phase 1 and 2 installations.

This latest contract follows BP Oman's previous $1.4-billion contract award to Petrofac in February 2014 for Khazzan's Phase 1, which began production earlier this year (OGJ Online, Sept. 25, 2017).

Phase 2 of BP's Block 61 project is slated for startup by 2020.

BP PLC operates Block 61 tight gas fields as lead partner with 60% interest, while Oman Oil Co. Exploration & Production holds the remaining 40% interest.

Novatek adds Osenniy license to Yamal-Nenets acreage

PAO Novatek has secured a 25-year exploration license for the Osenniy area in the Yamal-Nenets autonomous region for an estimated 1.4 billion rubles, Novatek said. The license contains an estimated 4.411 billion boe, according to the Russian resource classification.

The license is held under Novatek's joint venture Arcticgas and borders the combine's Samburgskiy area. Both licenses are in the Nadym-Pur-Taz region of Yamal-Nenets. Samburgskiy contains Acticgas' Samburgskoye field, which also encompasses four other fields-North-Yesetinskoye, East-Urengoyskoye, and North-Purovskoye, as well as a part of Urengoyskoye.

In November Novatek announced the completion of two exploration wells, Nos. 306 and 307, in Kharbeyskoye field in the Tazovskiy district of Yamal-Nenets (OGJ Online, Nov. 3, 2017).


Atlantic Coast Pipeline gets Virginia water permit

Virginia's water control board has approved a water quality certification for the proposed Atlantic Coast natural gas pipeline in a 4-3 vote on Dec. 12, but it was not effective immediately. The commonwealth's Department of Environmental Quality plans to complete additional studies dealing with soil and erosion control and stormwater management plans first, a DEQ spokesman said after the vote.

Elaborating in a Dec. 14 e-mail to OGJ, the spokesman said that the board decided that the certification would not take effect until Atlantic Coast Pipeline completes certain studies, which DEQ then would review and approve before presenting them to the water control board. "No specific timetable was set, though DEQ already has determined that the required erosion and sediment-control plans for the pipeline will not be approved until March or April 2018," he said.

"The other main reports are on stormwater management and karst terrain," the spokesman said. "No construction can begin until the erosion and sediment-control plans have been approved by DEQ, or later if the board makes that determination."

Opponents said the board's refusal to give its unconditional approval shows Virginians' concerns about the project are beginning to be heard. A spokesman for the project said it is evaluating some of the additional conditions and would issue a fuller statement later.

The Atlantic Coast Pipeline would extend 600 miles from Harrison County, W.Va., to Greensville County, Va., where a lateral would then extend to Chesapeake before continuing south to Robeson County in eastern North Carolina. Dominion Energy in Richmond, Duke Energy in Charlotte, Piedmont Natural Gas in Charlotte, and Southern Co. Gas in Atlanta are its sponsors.

The board's latest action came a week after it issued a water quality certification to the proposed Mountain Valley gas pipeline in a 5-2 vote (OGJ Online, Dec. 8, 2017).

Gulf Coast Express construction to start

Kinder Morgan Texas Pipeline LLC (KMTP), DCP Midstream LP, and an affiliate of Targa Resources Corp. will build the Gulf Coast Express Pipeline Project (GCX) starting this quarter, having executed definitive joint venture agreements and secured sufficient firm transportation agreements with shippers. About 85% of the project's 1.92-bcfd capacity is subscribed and committed under long-term, binding transportation agreements, and the partners expect the remaining capacity to be subscribed during early 2018.

Shippers that have committed to the project include DCP Midstream, Targa, Apache Corp., and Pioneer Natural Resources Co. KMTP also has committed volumes, backstopped by a long-term purchase agreement that locks in the equivalent transport fee on the pipeline.

GCX's mainline portion consists of roughly 82 miles of 36-in. OD pipeline and 365 miles of 42-in. pipeline starting at the Waha Hub near Coyanosa, Tex., in the Permian basin and ending near Agua Dulce, Tex. GCX's Midland Lateral includes about 50 miles of 36-in. pipeline and associated compression, connecting with the GCX mainline.

KMTP expects GCX to be in service in October 2019, pending the receipt of necessary regulatory approvals. Construction is expected to begin this quarter.

KMI will build, operate, and own a 50% interest in GCX, and DCP Midstream and Targa will each hold a 25% equity interest. In addition to its transportation agreements, Apache has an option to buy up to a 15% equity stake in the project from Kinder Morgan. GCX will cost roughly $1.7 billion.

Operators hold Permian crude pipeline open season

Phillips 66 and Enbridge Inc. are holding an open season for the Gray Oak Pipeline, a 385,000-b/d system that will carry Permian basin production for export and to Texas refineries in Corpus Christi, Freeport, and Houston. Shippers will have the option to select from origination stations in Reeves, Loving, Winkler, and Crane counties in West Texas.

The companies expect Gray Oak Pipeline to have an initial capacity of 385,000 b/d and will evaluate expansion of the system based on shipper interest during the open season. The pipeline system is expected to enter service second-half 2019.