OGJ Newsletter
GENERAL INTEREST Quick Takes
Santos rejects Harbour takeover proposal
Santos Ltd., Adelaide, has rejected the latest conditional, binding takeover offer from Harbour Energy Ltd. (OGJ Online, May 21, 2018).
Harbour confirmed that last month’s proposal of a scheme of arrangement at a cash price of $5.21/share was its best and final offer. It followed a 7-week period of engagement with Santos on the price and terms of an indicative proposal which began with a price of $4.98/share announced Apr. 3.
Santos said last night that the consideration would be in US dollars and Santos shareholders would be subject to fluctuations in the exchange rate, with no adjustment if the US dollar depreciated against the Australian dollar.
Santos added that since the receipt of the indicative proposal, Brent oil prices have increased by 14% and the share prices of other Australian stock exchange peers by an average of 18%.
The company said the Harbour proposal was a highly leveraged private equity-backed structure that, prior to implementation, would have required Santos to provide much support for Harbour’s debt raising and to hedge a large proportion—30%—of oil-linked production.
Santos said after considering these aspects, the company’s independent directors and the managing director and chief executive officer unanimously resolved to reject the final Harbour proposal on the basis that it did not represent a full value of Santos. When combined with the associated risks it would not be in the best interests of Santos shareholders.
The Santos board said it believes superior shareholder value can be realized by executing the company’s existing strategy with Santos expecting to reach its 2019 net debt target of $2 billion (Aus.) more than a year ahead of schedule.
Santos has now terminated all discussions with Harbour.
Callon to buy certain Permian basin assets
Callon Petroleum, Natchez, Miss., will acquire from Cimarex Energy Co., Denver, certain oil and gas properties principally in Ward County, Tex., for $570 million cash.
First-quarter production from the properties is 6,831 boe/d, of which 73% is oil, and is mostly from the Bone Spring formation. Undeveloped acreage includes 18,925 net Wolfcamp acres of which 11,500 net acres have rights to the Wolfcamp base.
The sale adds 28,657 net surface acres to Callon’s Spur operating area in the Delaware basin, more than 90% held by production, that is adjacent and complementary to the company’s existing position, Callon said.
The acreage contains an estimated delineated base inventory of 212 net identified horizontal drilling locations targeting the Third Bone Spring, Wolfcamp A and Wolfcamp B zones, with 86% to be operated by Callon.
Over 60% of the inventory is comprised of well locations with laterals of 7,500 ft or more, with opportunities for enhanced development efficiencies from increased scale, integration of infrastructure, and multiwell pad development.
Additionally, there is potential for horizontal drilling locations from emerging prospective zones in the Second Bone Spring and Wolfcamp C formations.
After the sale closes, which is expected in the third quarter, on a pro forma basis, Callon’s aggregate Permian basin position will include 86,000 net surface acres concentrated in four core operating areas within both the Midland and Delaware basins.
Ingram adds exploration to Anadarko role
Mitch Ingram has been named executive vice-president, international, deep water, and exploration at Anadarko Petroleum Corp. He will oversee international and deepwater operations as well as global exploration and project management.
Ingram has been executive vice-president, international and deepwater operation and project management. He joined Anadarko in 2015 from BG Group and before that worked for Occidental Oil & Gas.
Ernie Leyendecker, Anadarko’s executive vice-president, exploration, is retiring.
Bryksa named Crescent Point interim CEO
Craig Bryksa has been named interim president and chief executive officer of Crescent Point Energy Corp., Calgary, replacing Scott Saxberg, a company founder.
Bryksa, a 12-year Crescent Point employee who most recently was vice-president, engineering west, also replaces Saxberg on the board of directors.
Exploration & DevelopmentQuick Takes
Offset to SDX Egyptian strike noncommercial
The second of two near-field prospects offsetting the SDX Energy Inc. SD-1X discovery north of Cairo, Egypt, is not commercial, the operator said.
The well, Kelvin-1X, reached 8,075 TD and encountered 606 net ft of high-quality reservoir in Upper Miocene Abu Madi sands with average porosity of 21%. But gas saturation was low.
The other near-field exploration well in the SDX South Disouq play, Yunus 1X, discovered commercial gas in the Abu Madi formation and will be developed along with the SD-1X well (OGJ Online, May 18, 2018).
The Kelvin-1X, drilled updip of the SD-1X discovery, tested a possible connection of pay zones in the wells. The layers now are thought to be separate.
“The Kelvin-1X location was an ambitious step-out from the crest of the identified structure where we were exploring for a larger stratigraphic portion of the identified trap,” explained SDX President and Chief Executive Officer Paul Welch. “Further potential exists within the current structure but in a location that could not be reached by side-tracking the well from the Kelvin-1X location.”
Welch said SDX plans to drill two appraisal wells on the SD-1X structure. SDX operates the South Disouq concession with a 55% interest. IPR Energy Resources Ltd. holds 45%.
Buru Energy farms out half of Ungani oil field
Roc Oil Co. Ltd., a wholly owned subsidiary of Hong Kong-based Fosun International Ltd., has agreed to acquire 50% interest in Perth firm Buru Energy Ltd.’s Ungani oil field production licenses L20 and L21 in the onshore Canning basin of Western Australia for $64 million (Aus.).
The two parties also have agreed that Roc will acquire 50% interest in exploration permits EP 391, EP 428, and EP 436 by paying $20 million (Aus.) of a $25 million (Aus.) exploration program of up to four wells in the 2018-19 drilling seasons.
The farm-in deal, however, does not include the Laurel Formation unconventional gas accumulation within the permits, which will remain 100% owned by Buru. These gas assets include Yulleroo gas field.
Buru will remain operator of Ungani oil field, the exploration permits, and the unconventional gas assets.
The Roc subsidiary is Australian-based and has assets in China and Malaysia.
Buru says the farmout provides the funding to enable it to tackle an aggressive exploration program beginning with the 2018 Canning basin drilling season.
The Ungani licenses include the current producing wells in the field along with associated facilities. The licenses also include the oil discovery at Ungani Far West-1, the Ungani North-1 appraisal potential, and a number of subsidiary prospects. Of these, Ungani West, Kurrajong, and Yakka Munga are planned for drilling this year. The Rafael prospect has been slotted for 2019.
Ungani oil field is producing in excess of 2,600 bo/d from four production wells, two of which were brought on stream earlier this year. The field lies 150 km east of Broome.
OGA reports awards for 30th offshore licensing round
The UK Oil & Gas Authority (OGA) has offered for award 123 licenses over 229 blocks or partial blocks to 61 companies in the 30th Offshore Licensing Round. The round was launched on July 25, 2017, and closed for applications on Nov. 21, 2017. Locations vary across the UK Continental Shelf.
OGA has made available huge areas of acreage; a total of 26,659 sq km has been offered for award. If offers are taken, the additional area under license will be an increase of 50% on existing acreage held.
The new work program commitments include 8 firm exploration and appraisal wells, 9 firm new-shoot 3D seismic surveys, and 14 licenses progressing straight to field development planning (second-term licenses).
The round may help to unlock 12 undeveloped discoveries containing a central estimate of 320 million boe/d of resource in undeveloped oil and gas discoveries previously stranded.
Gunther Newcombe, OGA operations director, said, “After a period of low exploration activity, support from the OGA and government has helped kick-off a revival in activity, as demonstrated by industry’s renewed interest through this license round. It was particularly pleasing to see many companies identifying new prospects through the application of the latest seismic processing technologies and modern 3D surveys.”
The 31st Licensing Round, scheduled to launch this summer, will cover the East Shetland Platform, North West Scotland, South West Britain, and the Mid North Sea High.
Appraisal well confirms oil in flank of Tortue field
BW Offshore confirmed oil pay in the western flank of Tortue field with its DTM-3 appraisal well in the Dussafu license offshore Gabon. The well, drilled to 3,550 m TD, penetrated 30 m of hydrocarbon pay in the Early Cretaceous Gamba formation and underlying Dentale Subcrop sandstone at a structural position matching the predrill estimate. It hit additional hydrocarbon pay in the Dentale D2B and Dentale D6 reservoirs.
The DTM-3 well followed completion of the DTM-2H horizontal production well targeting the Dentale D6 reservoir in April. Additional development drilling is likely, including a horizontal development well, the DTM-3H, which will target the Gamba sandstone in the central part of the field.
Production is to start in the second half of the year, said BW Offshore Chief Executive Officer Carl K. Arnet (OGJ Online, Feb. 24, 2017). The Dussafu licence is operated by BW Offshore subsidiary BW Energy.
Husky has discovery north of SeaRose FPSO
Husky Energy is evaluating a discovery 10 km north of its SeaRose floating production, storage, and offloading vessel on White Rose oil field 350 km east of St. John’s, Newf.
The White Rose A-24 exploration well cut more than 85 m of oil-bearing sandstone, the company said.
Husky holds a 68.875% interest in the well. Partners are Suncor Energy, 26.125%, and Nalcor Energy Oil & Gas, 5%.
Drilling & ProductionQuick Takes
Iranian sanctions hit work in field off UK
Recompletion of a well in Rhum gas field in the UK North Sea has been suspended because Iranian Oil Co. (UK) Ltd., a subsidiary of National Iranian Oil Co., holds a 50% interest.
BP PLC, which is selling its interests in Rhum and two nearby gas fields to Serica Energy PLC, deferred the start of work on the R3 well, Serica said, citing the reimposition of sanctions by the US against transactions involving the Iranian government.
Some services on Rhum field have been conducted with authorization from the US Office of Foreign Assets Control (OFAC). BP has applied to renew the authorization, which expires Sept. 30.
“The US announcement on 8 May is expected to result in a change of US policy in respect of the granting of OFAC licenses,” Serica said in a press release.
BP decided not to start work on the R3 well while a review is in progress of effects of the renewed sanctions, Serica said.
The US suspended waivers of its Iranian sanctions after withdrawing from the Joint Comprehensive Plan of Action, the multilateral agreement under which Iran agreed to suspend nuclear development.
Serica said work remains on track for its acquisition from BP a 50% interest in Rhum field, a 36% interest in Bruce field, and a 34.83% interest in Keith field (OGJ Online, Nov. 21, 2017).
FSO vessel to head to Culzean gas field in June
The Ailsa, a floating storage and offloading vessel, is scheduled to be moved during June to Culzean gas field in the UK North Sea, said Sembcorp Marine in an announcement about the vessel’s completion. Production is expected to start in 2019 (OGJ Online, July 21, 2017).
The vessel, which can store 430,000 bbl of condensate, will enter service with a hull designed to have twice the average hull fatigue lifespan of other newbuild FSOs as verified by marine assurance company DNV GL.
A longer hull-life enables ships to withstand harsher and more extreme environmental conditions, such as rogue waves, corrosion, large ambient temperature variation, and thunderstorms.
The FSO Ailsa was designed to operate 25 years continuously without drydocking. Sembcorp was commissioned by MODEC Inc., which signed a contract with Maersk Oil North Sea UK Ltd. to supply a FSO.
The Maersk Oil-operated high-pressure, high-temperature Culzean field lies 145 miles east of Aberdeen and at plateau will produce 60,000-90,000 boe/d for at least 13 years.
Maersk Oil, a wholly owned subsidiary of AP Moller-Maersk AS of Copenhagen, started drilling the field’s first production well in 2016 (OGJ Online, Sept. 29, 2016).
Etinde appraisal well spudded off Cameroon
New Age Cameroon Offshore Petroleum SA has spudded the first of two appraisal wells planned this year on the Etinde license area offshore Cameroon.
The Vantage Drilling International Topaz Driller jack up is drilling the IM-6 well to delineate size and extent of Miocene Intra Isongo sand traps as the primary target and the Upper Isongo sand as a secondary target. Schlumberger is handling most drilling services. Etinde wells have tested natural gas and condensate (OGJ Online, Feb. 1, 2013).
Bowleven Oil & Gas, London, which has a 25% working interest in the Etinde license, said drilling and logging will take about 100 days. New Age, the operator, and Lukoil hold 37.5% working interests each.
Small field in the Philippines starts flow
Production has begun from the first oil discovery to be declared commercial in the Philippines since offshore Galoc field, which came on stream in 2008 (OGJ Online, Oct. 30, 2008).
Onshore Algeria oil field started up at a combined rate of 360 b/d of oil from two wells in southern Cebu Island.
China International Mining Petroleum Co., a 51% subsidiary of Polyard Petroleum International Group Ltd. of Hong Kong, is the operator.
It has drilled six shallow appraisal wells since 2009 and plans to drill three development wells this year. The activity is in the southwestern Visayan basin on Service Contract 49 where drilling had occurred with no commercial development.
Partners in SC49 are Skywealth Group Holdings Ltd. and Phil-Mar Energy International Ltd.
PROCESSINGQuick Takes
Thailand’s IRPC lets contract for MARS complex
IRPC PLC has let a contract to Honeywell UOP LLC to provide a suite of advanced process technologies for IRPC’s maximum aromatics (MARS) project, a naphtha-reforming and aromatics complex to be built at the operator’s existing integrated petrochemical complex in Rayong Province, Thailand.
Honeywell UOP’s scope of work on the project—which is designed to convert IRPC’s available intermediate feedstocks to higher-value aromatics products such as paraxylene and benzene—includes delivery of technology licensing, design, and key equipment, as well as state-of-the-art catalysts and adsorbents, the service provider said.
Specific proprietary technologies and equipment Honeywell UOP will provide for the MARS project include:
• A CCR Platforming unit to convert naphtha into high-octane gasoline and aromatics.
• An LD Parex unit to recover high-purity paraxylene from mixed xylenes using a more energy-efficient light desorbent.
• UOP Sulfolane technology to extract aromatics from the feed.
• UOP Isomar technology to convert xylene isomers into more valuable paraxylene.
• UOP Tatoray technology to convert toluene and C9 aromatics into mixed xylenes and high-purity benzene to more than double the yield of paraxylene from the naphtha feedstock.
Scheduled to be completed in 2022, the MARS naphtha-reforming and aromatics complex will produce 1.2 million tonnes/year of paraxylene and increase the site’s benzene production capacity to 495,000 tpy from its current 114,000-tpy capacity, Honeywell UOP said.
Honeywell UOP is slated to complete initial engineering design on the project by yearend, IRPC said.
OMV Petrom lets contract for Petrobrazi refinery
OMV Petrom SA, Bucharest, has let a contract to Honeywell International Inc. to provide a suite of software-based technology and interactive support services aimed at improving productivity, efficiency, and profitability of the CCR Platforming unit at its 4.5-million tonne/year Petrobrazi refinery in the southeast region of Romania, near Ploiesti City.
As a means of providing prescriptive monitoring of the CCR Platforming process unit—which upgrades low-value naphtha into high-octane gasoline and aromatics—OMV will use the Honeywell Connected Plant’s Process Insight Reliability Advisor to continuously feed plant data through Honeywell UOP LLC process and fault models to provide key performance information and process recommendations, the service provider said.
The Reliability Advisor will help the plant run more smoothly and mitigate issues that impact production and plant profitability by detecting and analyzing problems before they occur.
This latest contract follows OMV Petrom’s start of construction last year on a grassroots 200,000-tpy unit at the refinery slated for commissioning in early 2019 that will convert LPG components into Euro 5-quality gasoline and middle distillates.
New Vietnamese refinery produces first diesel
Nghi Son Refinery & Petrochemical LLC (NSRP) is now producing diesel from its 200,000-b/d refinery and petrochemical complex in Thanh Hoa Province in Vietnam.
After successfully producing RON 92 (MOGAS92) and RON95 (MOGAS95) in early May, NSRP produced 5,000 cu m of diesel meeting all required specifications for sale to Vietnam’s domestic market on May 23, the operator said.
The $9-billion Nghi Son refinery is designed to process Kuwaiti crude oil into finished products to help meet Vietnam’s growing domestic demand for transportation fuels and petrochemicals.
TRANSPORTATIONQuick Takes
EPP gauges shipper interest for Texas crude line
Enterprise Products Partners LP is holding a binding open season for expansion capacity on its Enterprise Crude Pipeline LLC (ECPL) West Texas System, which transports oil from points in New Mexico to the company’s terminal in Midland, Tex.
The open season is seeking customer commitments for incremental capacity on the system from ECPL’s Lynch, Hobbs, and Red Hills stations in Lea County, New Mexico, to the Midland terminal. At Midland, shippers have access to storage and terminal services, as well as connectivity to transportation alternatives such as trucking and pipeline infrastructure to downstream markets including the Gulf Coast.
UGI to expand Auburn Gathering System
UGI Corp. subsidiary UGI Energy Services LLC, Valley Forge, Pa., is expanding its Auburn Gathering System with the construction of two additional compressor stations in Pennsylvania’s Susquehanna and Wyoming counties.
The expanded system will increase the capacity by 150 MMcfd to a total system capacity of 620 MMcfd at a cost of $50 million. Deliveries will begin this fall with the balance of capacity available in the fall of 2019, the company said.
The new development project will transport gas from Cabot Oil & Gas Corp. and is supported by a long-term agreement.
Currently, the system provides multiple outlets for gas, including access to the Tennessee and Transco Interstate Pipeline System and consists of 46 miles of pipe, two compressors stations located in Auburn and Mehoopany and other pipeline-related facilities.
DRN challenges FERC’s Penn East line approval
The Delaware Riverkeeper Network (DRN) filed two petitions in US Appeals Court for the District of Columbia on May 9 in its ongoing challenge of the Federal Energy Regulatory Commission’s approval of the proposed PennEast natural gas pipeline.
Attorneys for the Bristol, Pa.-based organization, which lists protection of the river’s watershed in Pennsylvania, New Jersey, Delaware, and New York as its main purpose, requested:
• A writ of mandamus seeking a court order for FERC to issue a final response instead of tolling orders, which DRN said places it in legal limbo because they neither grant nor deny its rehearing request.
• A petition for review, which also challenges the commission’s January order and two subsequent orders which DRN said were designed to give FERC more time to reach a final decision on the group’s rehearing request.
“FERC’s continued use, and abuse, of tolling orders to obstruct or otherwise delay aggrieved parties from obtaining their day in court is not only unfair but reflects a blatant violation of the public’s due process rights,” DRN Senior Attorney Aaron Stempelwicz said. “We look forward to shining a light on these underhanded tactics before the court.”
The proposed $1-billion, 36-in. pipeline would originate in northeastern Pennsylvania and extend 120 miles to Transco Energy’s interconnection near Pennington, NJ, sponsor Penn-East Pipeline Co. LLC said. Construction is slated to begin this year before the pipeline goes into service in 2019.