GENERAL INTEREST Quick Takes
Leaseholders told to recalculate royalties
A federal court’s March decision that vacated the US Office of Natural Resources Revenue’s (ONRR) repeal of its consolidated federal oil and gas and federal and Indian oil and gas effectively reinstated the 2016 requirements, ONRR advised federal leaseholders. Accordingly, the leaseholders should recalculate royalties under the 2016 rule for production since Jan. 1, 2017, it said in a June 13 notice.
US District Court for Northern California vacated ONRR’s repeal of the rule on Mar. 29. “Lessees should resubmit amended royalty reports, pay any underpaid royalties (or take a credit for overpaid royalties), and then prospectively report and pay under the provisions outlined in the 2016 Rule,” the US Department of the Interior agency instructed.
Because lessees may need time to modify their royalty reporting systems and submit amended royalty reports, ONRR expects them to submit corrected reporting and royalty payments for all production from January 2017 on no later than Jan. 1, 2020, the notice said.
ONRR also is evaluating additional rulemaking options because of the 2016 rule’s reinstatement, it said. “This includes ONRR’s ongoing commitment to offer greater simplicity, certainty, clarity, and consistency in product valuation for mineral lessees and mineral revenue recipients,” the agency said.
It also will continue, in furtherance of the Interior secretary’s trust responsibilities and in alignment with applicable lease terms, to ensure that Indian mineral lessors receive every dollar due, it said.
“Additionally, ONRR endeavors to decrease industry’s cost of compliance and ONRR’s cost to ensure industry compliance, as well as providing early certainty to industry and to ONRR that royalties are paid correctly,” the agency said.
ConocoPhillips to acquire Nuna discovery acreage
ConocoPhillips Alaska reported it will acquire 11 tracts covering 21,000 acres in the western Alaska North Slope, which includes the 2012 Nuna oil discovery, from Caelus Natural Resources Alaska LLC. Nuna lies east of the Colville River and 5 miles southwest of Oooguruk oil field where, in January, Caelus agreed to sell a 70% interest to Eni SPA (OGJ Online, Jan. 7, 2019).
ConocoPhillips will appraise Nuna over the next several years with a plan to make a final investment decision thereafter, possibly developing the field using company-operated Kuparuk oil field infrastructure, it said (OGJ Online, July 5, 2018).
“This transaction represents an attractive addition to our expanding [ANS] position and will allow ConocoPhillips to cost effectively develop Nuna utilizing Kuparuk River Unit infrastructure,” said ConocoPhillips Alaska Pres. Joe Marushack.
PTTEP agrees to acquire Partex Holdings
PTT Exploration & Production Co. Ltd., Bangkok, has signed an agreement to acquire 100% of Partex Holding BV, Lisbon, from the Calouste Gulbenkian Foundation of Portugal for as much as $622 million.
The deal, expected to close by yearend, will boost the Thai company’s net-interest production by 16,000 b/d of oil and reserves by 65 million boe of oil and gas.
PTT E&P will acquire:
• A 2% interest in Petroleum Development Oman’s Block 6 project in Oman, where total production last year was 610,000 b/d of oil.
• A 1% interest in Mukhaizna oil field, which produces 120,000 b/d of oil on Oman’s Block 53 operated by Occidental Petroleum Corp.
• A 2% interest in the 10.4-million-tonne/year gas liquefaction complex operated by Oman LNG LLC.
• A 2% interest in ADNOC Gas Processing plants in Abu Dhabi with capacities of 1.2 bcfd.
• A 20% interest in Total SA’s Dunga oil field in Kazakhstan, which produces 20,000 b/d of oil.
• A 50% operated interest in Potiguar oil field in Brazil with production of 300 b/d of oil.
• A 2.5% interest in the Block 17/06 Project under consideration for development by operator Total in Angola.
Callon closes sale of noncore Midland assets
Callon Petroleum Co., Natchez, Miss., has closed on the sale of noncore assets in the southern Midland basin to Sequitur Permian LLC for net cash proceeds of $245 million. Proceeds do not include potential contingent consideration payments of up to $60 million based on West Texas Intermediate average annual pricing over 3 years.
Callon is updating its full-year guidance to 38,000-39,500 boe/d from 39,500-41,500 boe/d to account for the impact of this divestiture and a previously announced acreage trade involving producing properties in Midland County.
Management also is lowering its estimates for operational capital expenditures to $495-520 million from $500-525 million to reflect realized efficiencies and cost reductions.
Lime Rock to buy certain Oklahoma assets from BP
Lime Rock Resources, Houston, has agreed to acquire from BP America Production Co. certain oil and natural gas properties in Cleveland and McClain counties, Okla.
The properties lie 50 miles east of Lime Rock’s existing Norge unit operations that it acquired in 2014. The Norge-Marchand acquisition of oil-weighted assets in Oklahoma in 2014 added to Lime Rock’s core Midcontinent operating area.
The transaction is expected to close in this year’s third quarter, subject to customary closing conditions.
Husky fined for 2016 Saskatchewan oil spill
Husky Oil Operations Ltd. entered guilty pleas June 12 on federal and provincial charges related to a 2016 oil spill in Saskatchewan and will pay fines totaling $3.82 million.
Husky was fined $2.5 million under the federal Fisheries Act and $200,000 for a violation of the federal Migratory Birds Convention Act. It was fined $800,000 under the Saskatchewan Environmental Management and Protection Act and assessed a 40% victim impact surcharge of $320,000.
On July 21, 2016, a leak was discovered on a pipeline crossing the North Saskatchewan River (OGJ Online, July 26, 2016). Some 225 cu m of crude blended with condensate were released, with about 60% of the volume contained on land. The cause was determined to be ground movement over time.
“From the outset of this event, we accepted full responsibility for the spill, and we restated that today,” said Chief Executive Officer Rob Peabody. “We recognize this event had significant impacts on the cities, towns, and Indigenous communities along the river. We appreciate the way they worked with us on the cleanup and their patience and understanding in the months following the spill.”
Husky has since worked to improve its pipeline operations with an updated leak-response protocol, regular geotechnical reviews, and installation of fiberoptic sensing technology on all new large-diameter and higher-consequence projects.
Exploration & Development Quick Takes
Rathlin: UK appraisal results ‘encouraging’
Rathlin Energy (UK) Ltd., Beverley, UK, is assessing initial results it calls “encouraging” in an appraisal well drilled to assess a natural gas discovery in Humberside, England.
Rathlin drilled the West Newton A-2 appraisal well to 2,061 m on PEDL 183 near Hull. It cut 28 m of core and ran wireline logs in the Permian Kirkham Abbey formation.
A look-through partner, Reabold Resources PLC, London, said a deeper target, the Permian Cadeby formation, yielded hydrocarbon shows and an oil-saturated core.
Reabold said the well encountered a net 65-m hydrocarbon-saturated interval in Kirkham Abbey, “indicating a substantial hydrocarbon accumulation, including a significant liquids component.” Reabold said production casing has been run in the well, drilled to appraise Rathlin’s West Newton A-1 gas discovery drilled in 2014. It said testing of the A-2 well is expected to begin in the third quarter of the year.
Rathlin, in which Reabold holds a 36% interest, holds a 66.67% interest in the license. Union Jack PLC and Humber Oil & Gas hold 16.665% interests each.
Dominican Republic set to open first licensing round
The Dominican Republic’s Ministry of Energy and Mines will open its first licensing round at an event in partnership with Wood Mackenzie July 10, with an offering of 14 blocks.
The offering, which closes in December, includes 10 onshore blocks—6 in the Cibao basin, 3 in the Enriquillo basin, and a single block in the Azua basin, and four offshore blocks in the San Pedro basin.
The Dominican Republic forms part of Hispaniola Island, and lies within the North Caribbean strike-slip plate boundary zone. During World War II, oil production was achieved in Maleno and Higuerito fields. Seismic data for the Enriquillo, San Juan, and Cibao basins is held by the ministry, and recent surface and seismic stratigraphic mapping has clarified the geological story of the area. The existing seismic data identifies undrilled prospects in the Enriquillo basin.
Third KG D6 project off India sanctioned
Reliance Industries Ltd. and BP PLC have sanctioned the third of three projects in the integrated natural gas development of Block KG D6 in deep water off eastern India.
The new project, MJ, is a high-pressure, high-temperature gas condensate field with well depths of 4,200 m below mean sea level in 700-1,100 m of water. It’s also called D55.
MJ wells will be completed subsea and tied back to a floating production, storage, and offloading vessel. After separation on the FPSO, gas and liquid will flow into existing 24-in. trunk pipelines. Production is to begin in mid-2022.
MJ and the other projects, R-Series and Satellite cluster, will produce a combined 1 bcfd of gas from discovered resources estimated at 3 tcf.
R-Series development is on track to start producing gas by mid-2021. All six wells in the project have been drilled. RIL said installation of a 54 line-km, 18-in./4-in. piggyback flowline installed in 1,920 m of water for R-Series production set a world water-depth record.
Gas flow from the Satellites cluster is to start in mid-2021. RIL said all major contracts for that project have been awarded.
RIL holds a 60% interest in Block KG D6 and is operator. BP holds the 30%, and Niko Resources holds 10%.
Drilling & Production Quick Takes
CAPP: Canadian crude output growth slowing
Canadian production of crude oil and condensate will increase through 2035 but at rates sharply lower than predicted before the crude-price slump of 2014-15 and the onset of problems associated with pipeline congestion.
In its annual outlook for crude oil, the Canadian Association of Petroleum Producers projects total Canadian production of 5.86 million b/d of crude oil in 2035, compared with 4.59 million b/d in 2018.
Total Western Canadian supply—which includes diluent, some imported—will increase to 6.34 million b/d in 2035 from 4.66 million b/d in 2018, CAPP said.
In 2014, CAPP predicted total supply from Western Canada would grow to 7.5 million b/d by 2030.
CAPP projects capital investment in Canadian oil sands projects this year at $12 billion (Can.), down for the fifth straight year from $33.9 billion in 2014.
“We need pipeline capacity and more efficient regulatory policy to help bring investment back to the oil sector and drive growth,” said Tim McMillan, CAPP president and chief executive officer.
Lancaster oil shipments start off the UK
Hurricane Energy PLC has sold the first cargo of crude oil from the early production system on Lancaster field in the West of Shetland area offshore the UK (OGJ Online, Sept. 4, 2018).
Hurricane says Lancaster is the UK’s first producing basement field. The company is developing it in phases, beginning with two wells tied back to the Bluewater Energy Services Aoka Mizu floating production, storage, and offloading vessel.
It expects production from the early phase to average 17,000 b/d of oil, which assumes gross production of 20,000 bd and operating efficiency of 85% after ramp-up.
Production began on June 4. The Amundsen Spirit shuttle tanker lifted the first cargo on June 18.
Russia’s Kharyaga field starts gas sales
Zarubezhneft and production-sharing partners have started sales of associated sour gas at Kharyaga oil field in the Nenets Autonomous Region of northwestern Russia (OGJ Online, July 25, 2018).
The Russian company estimated marketable gas sales at 18 million cu m/year. The Usinsk processing plant operated by Lukoil-Komi LLC processes the gas. Kharyaga produces about 30,000 b/d of waxy oil from complex, heterogeneous carbonate reservoirs. Oil production began in 1999.
Zarubezhneft operates the production sharing agreement with a 30% interest. Its partners are Equinor, 30%; Total, 20%; and Nenets Oil Co., 10%.
ONGC moves 35 rigs ahead of monsoon season
India’s Oil & Natural Gas Corp. Ltd. reported moving a record-high 35 offshore drilling rigs to new locations ahead of the Indian monsoon season. Aqualis Offshore said it assisted with many of the moves.
Each of the 35 rigs were placed at their respective monsoon locations before the onset of the seasonal adverse weather conditions. Twenty-two rigs were moved on, to, or from wellhead platforms and 13 rigs to open locations. The combined total distance travelled for all rigs was 2,535 nautical miles.
DNO to decommission up to 21 wells offshore UK
DNO North Sea (ROGB) Ltd., a unit of DNO ASA, hired Well-Safe Solutions to decommission up to 21 UK Continental Shelf wells in Schooner and Ketch fields, which DNO acquired in 2018 from Faroe Petroleum. The North Sea fields stopped producing in August 2018.
Well-Safe said it would start decommissioning the wells in late 2019. The work, involving 20 platform wells and one subsea well, is expected to take 2 years. Well-Safe will handle engineering contractor management and logistics with DNO retaining well operatorship.
Recently Well-Safe acquired its first semisubmersible drilling rig, the Well-Safe Guardian, to be used for plugging and abandoning activities.
PROCESSING Quick Takes
ADNOC, OCI form fertilizer joint venture
Abu Dhabi National Oil Co. has entered a strategic partnership that will combine ADNOC Fertilizers into the Middle East and North Africa (MENA) nitrogen fertilizer business of OCI NV, Amsterdam. The new joint venture “will become the largest export-focused nitrogen fertilizer platform globally and the largest producer in the MENA region,” ADNOC said.
It will have production capacities of 5 million tonnes/year of urea and 1.5 million tpy of sellable ammonia. Revenue of the combined entity, based on 2018 results, will be $1.74 billion/year.
Interests will be ADNOC, 42%, and OCI, 58%. The joint venture will be based in Abu Dhabi.
ADNOC Fertilizers operates two plants at Ruwais with combined capacities of 1.2 million tpy of gross ammonia and 2.1 million tpy of urea. In conjunction with formation of the joint venture, ADNOC Fertilizers signed a long-term gas-supply agreement with ADNOC.
Hyundai lets contracts for Daesan petchem complex
Hyundai Chemical Co. Ltd., a joint venture of Hyundai Oilbank Co. Ltd. and Lotte Chemical Corp., has let a contract to W.R. Grace & Co. to provide technology licensing for a grassroots polypropylene (PP) unit at its Daesan petrochemical complex under construction in Chungcheongnam-do Province, South Korea.
As part of the contract, Grace will license its proprietary UNIPOL PP process technology as well as its CONSISTA catalyst for the 250,000-tonne/year unit, the service provider said.
The UNIPOL PP unit, which will be used to produce high-end, specialty-grade random copolymer resins, comes as part of a larger cracker complex that is scheduled to begin operations in 2021, Grace said.
This latest contract follows Hyundai Chemical’s previous award in May to Univation Technologies LLC to provide its UNIPOL PE technology for a 300,000-tpy high-density polyethylene (HDPE) plant at the Daesan site.
As part of that contract, Univation will deliver a broad range of its HDPE product technology portfolio, including the ACCLAIM K-100 catalyst series for advanced HDPE products such as film, large part blow molding, and geomembrane applications, the service provider said in a May 20 release.
Additionally, Hyundai has taken advantage of the flexible design of its UNIPOL PE Reactor line by investing in future production capabilities for both linear-low density polyethylene (LLDPE) and metallocene polyethylene products, according to Univation.
As part of the project, Univation said it also will implement its latest process control system, PREMIER APC+ 2.0, to deliver process control specifically designed for UNIPOL PE technology to maximize production rates, enable product transitions, and enhance overall economic performance.
TRANSPORTATION Quick Takes
Anadarko sanctions Mozambique LNG project
Anadarko Petroleum Corp. has formally sanctioned its Mozambican LNG project, Mozambique LNG.
Anadarko is developing Mozambique’s first onshore LNG facility, initially consisting of two LNG trains with a total nameplate capacity of 12.88 million tonnes/year.
Feed gas comes from Golfinho-Atum field in Offshore Area 1 where Anadarko and its partners have discovered 75 tcf of recoverable natural gas resources (OGJ Online, Feb. 5, 2019).
“At $20 billion, today’s [final investment decision] is the largest sanction ever in sub-Saharan Africa oil and gas,” said Jon Lawrence, an analyst with Wood Mackenzie’s sub-Saharan Africa upstream team, in a press statement.
“Mozambique LNG is one of two LNG megaprojects that have been seeking sanction for over 4 years in Mozambique,” Lawrence said. The other is the ExxonMobil Corp.-led Rovuma LNG development.
Lawrence said WoodMac expects the two Mozambique LNG projects to be the second and third most valuable oil and gas sanctions taken this year, after Arctic LNG-2 in Russia.
Supply agreements for the project as of May have exceeded 11.1 million tpy, Anadarko said (OGJ Online, May 13, 2019).
A deal to sell Anadarko to Occidental Petroleum Corp. is pending. Contingent upon the deal’s close, Oxy plans to sell Anadarko’s sub-Saharan Africa upstream assets—including its Mozambican holdings—to Total SA in an $8.8-billion deal set to close in 2020.
Anadarko’s partners in the Mozambique LNG project are Japanese company Mitsui, Mozambique’s state energy company ENH, Thailand’s PTT, and India’s Oil & Natural Gas Corp., Bharat Petroleum Resources, and Oil India Ltd.
Agreement advances Indonesian LNG project
Inpex Corp. will submit a revised plan of development for the integrated Abadi LNG project in Indonesia after signing a heads of agreement with authorities on basic principles.
The HOA outlines terms agreed in discussions after completion of a pre-front end engineering and design study conducted by KBR in response to the government’s requirement that the liquefaction plant be built onshore (OGJ Online, May 8, 2018).
The government approved the first development plan for a 2.5 million tonne/year floating liquefaction facility in 2010 but in 2016 stipulated that the plant be built onshore after Inpex proposed to triple capacity based on expansion of reserves at Abadi gas field.
The field is in 400-800 m of water on the 2,503-sq-km Masela block in the Arafura Sea, 150 km offshore Saumlaki, Maluku Province. The onshore liquefaction plant is to have capacity of 9.5 million tonnes/year.
Inpex Masela, of which Inpex owns 51.93%, holds a 65% interest in the Masela block production-sharing contract and is operator. Shell holds a 35% interest.
Russian gas exports to Hungary rise over 2018
Natural gas supplies from Gazprom to Hungary from Jan. 1 through June 5 totaled 4.3 billion cu m, a 57.5% increase vs. the same period last year.
In addition to the contracted amounts, Hungary bought from Gazprom another 2 billion cu m of gas, which will be delivered this year.
The numbers were reported following a working meeting between Alexey Miller, chairman of Gazprom’s management committee, and Peter Szijjarto, Hungary’s minister of foreign affairs and trade.
During the meeting—held at the St. Petersburg International Economic Forum 2019—meeting participants examined the current issues and prospects of their cooperation, putting a special focus on gas supplies.
Development of the Hungarian gas transmission system also was discussed.
The Hungarian party expressed its intention to make sure that the gas that is planned to be supplied to Europe via the transit string of the TurkStream gas pipeline can be received by Hungary in the shortest possible time.
In 2018, Gazprom supplied to Hungary 7.6 billion cu m of gas, an increase of 9.3% from 2017.
In 2017, Miller and Szijjarto signed a roadmap to implement a number of measures aimed at developing Hungary’s gas transmission system.