GENERAL INTEREST Quick Takes
BP report sees energy-emissions ‘mismatch’
Citing a “growing mismatch” between hope and action, BP executives released the company’s annual Statistical Review of World Energy featuring slow progress on climate change and rapid growth in energy demand and emissions of carbon dioxide.
The report also noted that the US recorded the largest-ever annual production increases by any country for oil and natural gas, “the vast majority” coming from onshore shale plays.
Global energy demand grew by 2.9%, and carbon emissions grew by 2% in 2018, “faster than at any time since 2010-11,” BP said in a press release.
“There is a growing mismatch between societal demands for action on climate change and the actual pace of progress,” said Chief Economist Spencer Dale, citing the increases in energy demand and carbon emissions. “The world is on an unsustainable path.”
Natural gas consumption and production increased 5% last year and accounted for 40% of global energy demand growth.
Consumption of renewable energy grew by 14.5%, near the record increase of 2017, but still accounted for only one third of the increase in total power generation. Global oil consumption grew by 1.5%. The record production increments in the US were 2.2 million b/d for oil and 86 billion cu m for natural gas.
Comstock to acquire Covey Park for $2.2 billion
Comstock Resources Inc. has agreed to acquire privately held, Haynesville-focused Covey Park Energy LLC in a $2.2-billion cash and stock deal. The deal, which includes the assumption of Covey Park’s outstanding debt and the retirement of its $1.1 billion in existing preferred units, expands Comstock’s position in the Haynesville natural gas basin to 293,000 net acres with 2,000 net drilling locations including 1,300 net locations with lateral length over 5,000 ft and over 1.1 bcfd of gas equivalent net production, and 500 miles of gas gathering infrastructure.
Jerry Jones, owner of the Dallas Cowboys Football Club Ltd., will invest an additional $475 million in cash for 50 million newly issued shares of Comstock common stock to be issued at an agreed upon price of $6/share and $175 million of newly issued shares of perpetual convertible preferred stock. Jones remains Comstock’s largest shareholder with 75% ownership interest. Denham Capital becomes the second largest shareholder with 16% common stock ownership interest.
Upon closing—expected on or before July 31 subject to regulatory approvals and closing conditions—Comstock’s board will be expanded to include Covey Park’s co-CEO John Jacobi and Jordan Marye, a managing partner of Denham Capital. The management team will be led by Comstock’s current CEO M. Jay Allison but will include representation from both management teams and will combine the two firms’ operating staffs.
PGNiG to buy Total’s King Lear interest
PGNiG Upstream Norway said it will acquire Total E&P Norge’s 22.2% interest in King Lear gas and condensate field under development in the Ekofisk area of the Norwegian North Sea.
Operator Aker BP bought the remaining 77.8% interest in the field from Equinor last October for $250 million and plans to develop it as a satellite to Ula field (OGJ Online, Oct. 15, 2018).
King Lear is 50 km south of the three-platform Ula complex, which handles production from Aker BP’s Tambar and Tambar East satellites and third-party fields.
Dragon Oil due BP’s Gulf of Suez interests
Dragon Oil, Dubai, has agreed to buy BP PLC’s producing and exploration concessions in Egypt, including the British company’s interest in Gulf of Suez Petroleum Co. (GUPCO).
The move is part of BP’s plan to divest more than $10 billion of assets globally over the next 2 years but does not indicate an exit from Egypt. BP CEO Bob Dudley said the company has invested $12 billion in Egypt during the past 4 years—“more than anywhere else in our portfolio”—and plans to invest $3 billion in the next 2 years.
GUPCO, a partnership with Egyptian General Petroleum Corp., produces 70,000 b/d of crude oil from mature fields. Dragon Oil is a wholly owned unit of Emirates National Oil Co.
BP’s continuing operations in Egypt include natural gas developments in the West Nile Delta region and in the Mediterranean.
Dragon Oil holds a 100% interest in the undeveloped East Zeit Bay Block in the southern Gulf of Suez.
Nigerian regulator revokes six licenses
Nigeria’s Department of Petroleum Resources has revoked five oil mining leases (OMLs) and one oil prospecting license (OPL).
It cited “noncompliance with statutory regulatory obligations” and said it was acting under a “presidential directive on recovery of legacy debts.”
Companies and licenses affected are Pan Ocean Oil Corp., OML 98 in the Niger Delta onshore; Allied Energy Resources Nigeria Ltd., OML 120 in the Niger Delta and OML 121 in the deep offshore; Express Petroleum & Gas Co. Ltd., OML 108 in the Niger Delta continental shelf; Cavendish Petroleum Nigeria Ltd., OML 110 in the Niger Delta continental shelf; and Summit Oil International, OPL 206 in the Anambra basin.
Devon establishes target to reduce methane emissions
Devon Energy Corp., Oklahoma City, has set a methane-intensity rate target for its US oil and natural gas production operations of 0.28% or lower by 2025. In 2018, Devon’s methane-intensity rate was estimated at 0.32%, which is pending US Environmental Protection Agency review and third-party verification.
The company’s methane-intensity rate is calculated based on emissions from Devon-operated oil and gas production facilities as a percentage of gas produced. This includes all sources of emissions as reported to the EPA, plus emissions from all basins that fall below the threshold that require EPA reporting and would otherwise go unreported.
As part of its methane emissions management program and to help achieve and maintain the goal, Devon is executing leak detection and repair (LDAR) at sites where LDAR is not required by federal or state regulation. Devon has trained personnel whose primary focus is conducting infrared camera surveys and ensuring that any necessary repairs are successful. Data collected through the program will allow Devon to establish best management practices and identify technology, equipment, and materials for improved performance. Devon’s new methane-intensity measure will be a component of executive and employee compensation, along with short-term emissions performance that already exists.
Exploration & Development Quick Takes
Gazprom, Shell forming Russian venture
Gazprom Neft and Royal Dutch Shell PLC have agreed to form a joint venture for development of oil and gas fields in the Yamalo-Nenets Autonomous Okrug of northwestern Russia.
The companies signed an agreement for purchase of a 50% interest in authorized share capital of Meretoyakhaneftegaz, which holds license rights to Meretoyakhinskoye oil field.
At closing of the transaction, the joint venture will receive the Tazovsky and Severo-Sambrugsky blocks and two Zapadno-Yubileiny blocks, which are in varying stages of development.
Gazprom Neft said oil in place in fields owned by Meretoyakhaneftegaz totals 1.1 billion tonnes.
Lukoil, KazMunayGaz mull Kazakh block JV
Lukoil and KazMunayGaz have signed a heads of agreement calling for negotiation of mineral rights on the I-P-2 block offshore Kazakhstan.
The block is 130 km off Aktau in 300-400 m of water. Lukoil said 2D seismic surveys have been shot over the area. The next step will be conclusion of a contract for hydrocarbon exploration and formation of a venture in charge of block operations.
Angola to offer 10 blocks in bid round
Angola’s new licensing agency will offer 10 oil and gas blocks in the first of several auctions it plans in a 6-year strategy (OGJ Online, Aug. 20, 2018).
Paulino Jeronimo, chief executive officer of the National Agency of Petroleum, Gas, and Biofuels (ANPG) said at a conference in Luanda that tendering will begin in October.
On offer are Blocks 11, 12, 13, 27, 28, 29, 41, 42, and 43 in the Namibe basin and Block 10 in the Benguela basin.
ANPG plans presentations during September in Houston, London, and Dubai. The public auction will be Angola’s first since an offering of presalt blocks in 2011.
ANPG said it will offer as many as 55 blocks—31 through public bidding in 2019, 2020, and 2023 and the rest through direct negotiation—by 2025. It plans this year to launch Angola’s first-ever marginal fields bidding round.
Drilling & Production Quick Takes
ExxonMobil, partners to redevelop Angola Block 15
ExxonMobil Corp. and its partners reported they will invest more into Block 15 offshore Angola to increase production by an additional 40,000 b/d as part of an agreement with Angola’s recently established National Agency for Petroleum, Gas, and Biofuels. As operator, ExxonMobil will complete a multiyear drilling program on the block and install infrastructure technology to increase capacity of existing subsea flow lines, the company said. The project will generate about 1,000 local jobs during the execution phase.
Changes to the production-sharing agreement extend operations through 2032 and bring Angola state-owned oil firm Sonangol into the Block 15 partnership with a 10% interest. Under the agreement, other interest holders include Esso Angola 36%, BP Exploration 24%, Eni Angola Exploration 18%, and Equinor Angola 12%.
ExxonMobil has interest in three deepwater blocks covering nearly 2 million gross acres in Angola. These blocks have a gross recoverable resource potential of 10 billion boe. Block 15 has produced more than 2.2 billion bbl of oil since 2003.
ExxonMobil proceeds with Vaca Muerta expansion
ExxonMobil Corp. announced plans to proceed with long-term oil development on Bajo del Choique-La Invernada block within Argentina’s Vaca Muerta basin. The project is expected to produce as much as 55,000 boe/d within 5 years. The project will include 90 wells, a central production complex, and export infrastructure connected to the Oldeval pipeline and refineries.
“We are encouraged by the excellent results of our Neuquen pilot project,” said Staale Gjervik, ExxonMobil senior vice-president of unconventional. “The reforms implemented by the federal and provincial governments have been critically important.”
If the expansion succeeds, ExxonMobil could invest in a second phase, which would produce as much as 75,000 boe/d. Timing of the second phase depends on various factors including initial project performance and market conditions.
“ExxonMobil has been an active player in the Neuquen basin since 2010 and in Argentina for more than 100 years,” said Daniel De Nigris, ExxonMobil’s lead country manager.
In 2015, the Neuquen provincial government granted ExxonMobil a 35-year concession in Vaca Muerta for the Bajo del Choique-La Invernada block. ExxonMobil began an exploration pilot in 2016 and now has three producing wells with three additional wells moving toward production.
A production complex, gas pipeline, and oil terminal have been operating since 2017 and were recently connected to the Pacific Gas pipeline by a 16-in. pipeline.
Bajo del Choique-La Invernada is a 99,000-acre block about 58 miles northwest of Anelo and 114 miles northwest of the city of Neuquen.
ExxonMobil Exploration Argentina is operator with 90% interest while Gas y Petroleo del Neuquen holds 10%. Under a joint venture agreement, Qatar Petroleum has 30% interest in ExxonMobil’s upstream units in Argentina.
Culzean field starts production off UK
Production has begun from Culzean gas-condensate field in the Central Graben area of the UK North Sea (OGJ Online, May 11, 2018). Development by Total SA and partners involved the drilling of six wells and construction of three bridge-linked platforms and a floating storage and offloading unit.
The field, discovered in 2008 by Maersk Oil, is in 88 m of water on Block 22/25a about 230 km off Aberdeen. Plateau production will be 100,000 boe/d of gas and condensate. Gas flows into the CATS pipeline. Shuttle tankers carry condensate away from the FSO.
Total, which bought Maersk Oil in 2018, operates Culzean with a 49.99% interest. Other interests are BP, 32%, and JX Nippon, 18.01%.
Petrobras, SBM sign LOI for Mero 2 FPSO
Petroleo Brasileiro SA (Petrobras) signed a letter of intent with SBM Offshore for a 22.5-year lease and operation of the Mero 2 floating production, storage, and offloading vessel to be installed on giant Mero oil field in the Santos basin offshore Brazil.
SBM Offshore is to design and build the FPSO with capacities to handle production of 180,000 b/d of oil and injection of 250,000 b/d of water. The vessel will have associated-gas treatment capacity of 12 million cu m/day and minimum storage capacity of 1.4 million bbl of oil.
Topside modules will weigh about 33,000 tons. The FPSO will be spread-moored in about 2,000 m of water 180 km offshore Rio de Janeiro.
The Mero 1 Guanabara MV31 FPSO is due onstream in 2021 with oil and gas-handling capacities identical to those of the Mero 2 (OGJ Online, Oct. 5, 2018). It’s being built by MODEC.
Delivery of the Mero 2 is expected in 2022.
Interests in the Libra production-sharing contract covering Mero are Petrobras, the operator, 40%; Royal Dutch Shell PLC and Total SA, 20% each; and China National Petroleum Corp. and CNOOC Ltd., 10% each. State-owned Pre-Sal Petroleo is contract manager.
East Med due second Turkish drillship
Turkey will increase its controversial drilling in the Eastern Mediterranean when Turkish Petroleum AO (TPAO) launches a second drillship in July. Energy and Natural Resources Minister Fatih Donmez said at a Ramadan fast-breaking dinner that retrofit of the Yavuz drillship, formerly the Deepsea Metro I, is nearly complete, according to the Daily Sabah newspaper.
He said the ship’s twin vessel Fatih will drill the Finike-1 as planned in an area claimed by Cyprus. The first well drilled by the Fatih was in uncontested Turkish water (OGJ Online, Oct. 30, 2018). Movement of the ship to the Finike location drew criticism from the US Department of State.
“The United States is deeply concerned by Turkey’s announced intentions to begin offshore drilling operations in an area claimed by the Republic of Cyprus as its Exclusive Economic Zone,” the department said. “This step is highly provocative and risks raising tensions in the region. We urge Turkish authorities to halt these operations and encourage all parties to act with restraint.”
PROCESSING Quick Takes
ExxonMobil wraps expansion at Singapore refinery
ExxonMobil Corp. has completed a project to expand production of high-quality lubricant base stocks at affiliate ExxonMobil Asia Pacific Pte. Ltd.’s 592,000-b/d integrated, two-site refining complex on mainland Jurong and Pulau Ayer Chawan, Jurong Island, offshore southwestern Singapore (OGJ Online, Feb. 16, 2017).
The expansion, which began in 2017 and was completed on schedule, supports production of ExxonMobil’s EHC Group II base stocks to enable customers to blend lubricants that satisfy more-stringent specifications, help reduce emissions, and improve fuel economy and low-temperature performance.
The company said it expects supply to customers to begin in third-quarter 2019, building upon recent expansions at ExxonMobil’s Rotterdam complex, which along with existing production at its operations in Baytown, Tex., strengthens the operator’s global supply of high-quality base stocks.
Confirmation of the newly completed EHC Group II base stocks expansion follows ExxonMobil’s April announcement that it had taken final investment decision on a multibillion-dollar expansion to convert fuel oil and other bottom-of-the-barrel crude products into higher-value lube base stocks and distillates at the Singapore integrated manufacturing complex to further enhance competitiveness of the site (OGJ Online, Apr. 2, 2019).
Scheduled for start-up in 2023, the proposed expansion project will add 20,000 b/d of Group II base stocks capacity—including EHCTM 50 and EHCTM 120 grades, in addition to a new high-viscosity Group II base stock to meet increasing demand in the Asia-Pacific region—as well as expand capacity to increase production of cleaner fuels with lower-sulfur content by 48,000 b/d, including high-quality marine fuels to enable customers to meet the International Maritime Organization’s 0.5% sulfur requirement set to take effect in January 2020.
Eni enters waste-conversion partnership
Eni SPA has signed a partnership agreement with NextChem, Maire Tecnimont’s green chemistry subsidiary, to become codeveloper of technology to produce hydrogen and methanol from solid urban waste and nonrecyclable plastic.
Eni and NextChem will assess technical and financial impacts of the high-temperature gasification technology, which could be used at the company’s industrial sites in Italy.
TRANSPORTATION Quick Takes
Shell’s Prelude ships first LNG cargo
Shell Australia Pty. Ltd.’s Prelude floating LNG (FLNG) project, 475 km offshore Broome, Western Australia, has shipped its first LNG cargo, loading the 173,400-cu m Valencia Knutsen for delivery to Asia. Prelude came on stream in January and shipped its first condensate cargos in March.
Shell expects Prelude FLNG to remain on station for 25 years. The company has filed plans with Australian regulators to develop Crux natural gas-condensate field, also in Browse basin 160 km northeast of Prelude, as a tie-in to Prelude FLNG (OGJ Online, Feb. 5, 2019). Gas would be piped via 26-in. OD pipeline to Prelude for processing, starting as early as 2025 based on an anticipated 2020 final investment decision.
Consultant Wood Mackenzie notes that Shell will be spudding its Bratwurst exploration well later this year and that if substantial gas is discovered the company will likely develop this resource through Prelude as well. “The completion of Prelude marks the end of the Australian greenfield LNG bloom,” WoodMac said. “The next investment cycle is already in sight, with backfill projects—Scarborough, Barossa, Browse, Arrow, and Crux—vying for FID.”
Prelude can produce 3.6 million tonnes/year of LNG, 1.3 million tpy of condensate, and 400,000 tpy of LPG. The FLNG is operated by Shell in joint venture with Inpex Corp. 17.5%, Korea Gas Corp. 10%, and CPC Corp. subsidiary Overseas Petroleum & Investment Corp. 5%.
Sinopec, Novatek eye gas-marketing venture
Another Chinese national oil company is showing interest in Russian LNG projects.
Sinopec signed a heads of agreement with Novatek and Gazprombank on formation of a joint venture to market LNG and natural gas to end-users in China.
Earlier, CNOOC Ltd. and a subsidiary of China National Petroleum Corp. signed agreements to acquire 10% interests each in Novatek’s planned Arctic LNG 2 liquefaction plant on the Gydan Peninsula in the Russian Arctic (OGJ Online, Apr. 25, 2019).
Phillips 66 forms crude oil pipeline JVs
Phillips 66 has formed two separate 50-50 joint ventures to build pipelines that will transport crude oil from the Rockies and Bakken production areas to Cushing, Okla. and from Cushing and the Permian basin in West Texas to the Gulf Coast.
The company and Bridger Pipeline LLC formed Liberty Pipeline LLC to proceed with construction of the 24-in. Liberty Pipeline to transport crude oil from the Rockies and Bakken production areas to Cushing. Phillips 66 will lead project construction and operate the pipeline. The project is expected to cost $1.6 billion.
With Plains All American Pipeline, Phillips 66 formed Red Oak Pipeline LLC to construct the Red Oak Pipeline system to transport crude oil from Cushing and the Permian basin in West Texas to Corpus Christi, Ingleside, Houston, and Beaumont, Tex. Initial service from Cushing to the Gulf Coast is targeted to begin as early as first-quarter 2021, subject to receipt of applicable approvals.
The Red Oak JV will lease capacity in Plains’ Sunrise Pipeline system, which extends from Midland to Wichita Falls, Tex. The JV plans to construct a 30-in. pipeline from Cushing to Wichita Falls and Sealy, Tex. From Sealy, the JV will construct a 30-in. pipeline segment to Corpus Christi and Ingleside and a 20-in. pipeline segment to Houston and Beaumont. Plains will lead project construction and Phillips 66 will operate the pipeline. The project is expected to cost $2.5 billion.
On both the Liberty and the Red Oak systems, where feasible, the companies will use existing pipeline and utility corridors and advanced construction techniques to limit environmental and community impact. Initial service on both pipelines is targeted to begin as early as first-quarter 2021. Both pipelines are underpinned with long-term shipper volume commitments with plans for supplemental binding open seasons expected later.
Court rule allows Petrobras gas line sale
A June 6 ruling by Brazil’s Supreme Court allows Petroleo Brasileiro SA (Petrobras) to proceed with its $8.6 billion sale of a 90% interest in the Transportadora Associada de Gas SA (TAG) natural gas pipeline to a combine of Engie and Caisse de Depot et Placement du Quebec (OGJ Online, Apr. 26, 2019).
The sale had been suspended by a decision in May by Supreme Court Justice Edson Fachin requiring congressional approval of asset sales by state-owned companies.
The full court ruled against that decision, which Fachin made in a case involving a labor union.
The TAG sale is part of a divestment program from which Petrobras expects to raise $26.9 billion by 2023.