GENERAL INTEREST Quick Takes
Norwegian fund shedding oil sands holdings
Norway’s largest pension fund will divest holdings worth $58 million in Canadian oil sands producers because of their contributions to climate change. The fund, KLP, said it is limiting exposure to “companies involved in an activity that is not aligned with a 2º C. temperature target.” The 2015 Paris Climate Summit set a goal of limiting the Industrial Age rise in globally averaged temperature to that increment.
KLP will shed holdings in Cenovus Energy, Suncor Energy, Imperial Oil, Husky Energy, and Tatneft. Its holdings in those firms total $33 million in equity and $25 million in bonds.
“We have gone from removing companies with 30% of their business coming from oil sands to 5%,” it said. “This may well set a new investor standard.” The divestment follows the Norwegian Finance Ministry’s Oct. 1 reporting of a pullback from oil and gas divestment plans of the country’s sovereign wealth fund (OGJ Online, Oct. 3, 2019).
Aramco, Gazprom Neft sign joint-study MOU
Saudi Aramco and Gazprom Neft have signed a memorandum of understanding to exchange technical knowledge for oil applications and identify technical studies of interest to both companies.
The agreement was one of nine MOUs Aramco signed with Russian companies during a state visit by Russian President Vladimir Putin to Riyadh, where he met with Crown Prince Muhammad bin Salman. The other MOUs covered equipment and services.
Aramco, the Public Investment Fund of Saudi Arabia, the Russian Direct Investment Fund, and Rusnano also signed a confirmation agreement for a share purchase agreement covering Rusnano’s 30.76% share in Novomet, a Russian service provider and manufacturer of electrical submersible pumps.
An Aramco press release cited the company’s “evolving strategic relationship with Russian companies.”
Putin was to make a state visit to the United Arab Emirates on Oct. 15.
Lukoil enters UAE with 5% Ghasha interest
Lukoil has entered the United Arab Emirates by signing an agreement with Abu Dhabi National Oil Co. to acquire a 5% interest in the Ghasha Concession offshore Abu Dhabi (OGJ Online, Feb. 5, 2019).
The agreement was signed during a state visit by Russian President Vladimir Putin to the UAE.
ADNOC and partners are developing nine shallow-water fields in the Ghasha project, expecting to produce more than 120,000 b/d of crude oil and condensate and 40 million cu m/day of natural gas. Other partners are Eni, 25%; Wintershall Dea, 10%; and OMV, 5%.
Lukoil, ADNOC, and the Russian Direct Investment Fund also signed a framework agreement on future cooperation on the Ghasha concession.
Seplat to acquire Nigerian producer Eland
Seplat Petroleum Development Co. PLC, Lagos and London, has agreed to buy share capital of Eland Oil & Gas, an independent oil and gas company focused on Nigeria and based in Aberdeen, for £382 million cash.
Eland holds a 45% interest in OML 40 and a 40% interest in the Ubima field license, both in the Niger Delta.
Eland operates OML 40, where gross production at the end of last year reached 29,422 b/d of oil from Opuama field. Also on OML 40, which is 65 km northwest of Warri, the company this year started an early production facility at Gbetiokun field, for which it plans phased development.
On the Ubima license, Eland last year reentered the 1963 Ubima-1 discovery well with a dual-string completion over four intervals in preparation for an extended production and possible full-field development. Ubima field is 40 km north of Port Harcourt. Seplat has net production of about 26,000 b/d of oil and 145 MMscfd of natural gas from several Niger Delta blocks.
FERC general counsel nominated as commissioner
US President Donald Trump nominated Federal Energy Regulatory Commission General Counsel James Danly last month to fill the remainder of a 5-year term expiring June 30, 2023.
Before joining FERC, Danly was a member of the energy regulation and litigation group at Skadden, Arps, Slate, Meagher & Flom. He previously served as law clerk to Judge Danny Boggs at the US Appeals Court for the Sixth Circuit, a managing director of the Institute for the Study of War, and an International Affairs Fellow at the Council on Foreign Relations.
Exploration & Development Quick Takes
Brazilian round draws bids on 12 blocks
Ten companies, alone or in groups, from nine countries bid a record-high $2.1 billion in signing bonuses for 12 of 36 offshore blocks offered in Brazil’s 16th bidding round.
A group led by Total E&P of Brazil, Petronas, and Brazil QPI offered the largest signing bonus ever in a Brazilian concession round: about $1 billion for Block CM-541 in the Campos basin.
Licensing agency ANP said the round will generate investment totaling at least $380 million in exploration phases of the new concession contracts covering a total of about 11,800 sq km. It said the round aimed to explore areas of the Campos and Santos basins outside the presalt play and to attract investment to the little-explored Pernambuco-Paraiba, Jacuipe, and Camamu-Alamada basins.
Only blocks in the Campos and Santos basins drew bids.
Other winning bids for Campos basin blocks were about $490 million by Petrobras and BP Energy for Block CM-477; $171 million by Shell Brazil, Brazil QPI, and Chevron for Block CM-659; $6.1 million for Block CM-479 by ExxonMobil Brasil; $268 million for Block CM-661 by Petronas; $6 million for Block CM-715 by Petronas; $132 million for Block CM-713 by the Shell group; $2.3 million for Block CM-795 by Repsol; $3 million for Block CM-825 by Repsol and Chevron; and $6.5 million for Block CM-845 by Chevron, Wintershall Brazil, and Repsol. Winning bids for Santos basin blocks were about $13 million for Block SM-766 by the Chevron group and $74 million for Block SM-1500 by BP Energy.
ANP expects contracts to be signed by Feb. 14, 2020.
ExxonMobil, ONGC eye upstream cooperation
ExxonMobil Corp. and Oil & Natural Gas Corp. have signed a memorandum of understanding covering exploration and development in India.
ONGC said the agreement “will enable the two petroleum companies to undertake joint technical studies and cooperate in frontier areas like deep water and other petroleum exploration license blocks of ONGC” in India and in open-acreage bidding.
It said three phases of MOU work will lead to a joint technical study for potential collaboration.
ExxonMobil’s work in India now is mainly marketing and distribution of oil products.
The company also has signed 5-year agreements with the Indian Institute of Technology expanding cooperative research in biofuels, gas conversion, and industrial emissions reduction.
Shell signs agreement for Oman Block 55
Shell Exploration & Production Oman BV has signed an exploration and production sharing agreement with the Ministry of Oil and Gas for Block 55 in southeastern Oman.
Oman Shell will have a 100% working interest and be operator.
It said the work program includes “regional studies and seismic acquisition as well as other potential exploration activities.”
Its other exploratory interests in the sultanate include Block 42 and part of Block 6.
OVL reports oil finds in Colombia, Brazil
ONGC Videsh Ltd. (OVL), the international operating arm of India’s Oil & Natural Gas Corp., reports two oil discoveries in Latin America.
On the CPO-5 Block it operates in Colombia, the Sol-1 well encountered 8 m of oil-bearing sands at 2,852 m, extending an existing play southward.
OVL is producing oil from earlier discoveries in the play, Mariposa-1 and Indico-1 (OGJ Online, Jan. 24, 2019).
Participating interests in the block are OVL, 70%, and Petrodorado South America SA, Sucursal Colombia, 30%.
Offshore, OVL is a 25% partner with operator Petrobras in the Moita Bonita-2 deepwater gas strike on the BM-SEAL-4 Block.
The well encountered 39 m of total gas-bearing sand at 5,227 m in 2,629 m of water. OVL said a drillstem test at 5,252-91 m “showed good production.”
Achimov development starts in West Siberia
Messoyakhaneftegaz, a joint venture of Rosneft and Gazprom-Neft, has begun full-scale development of geologically complex Lower Cretaceous Achimov deposits in Vostochno-Messoyakhskoye oil and gas field in West Siberia.
A horizontal well with total length of 3,200 m flowed naturally at an initial rate of 435 tonnes/day, eight times the average of other wells in the field, the companies said.
They plan two exploratory wells and continued geophysical studies of Achimov strata, which have abnormal reservoir pressures and high GORs.
The Messoyakha group of fields includes the Vostochno (Eastern) and Zapando (Western) Messoyakhskoye blocks on the Gydan Peninsula in the Tazovsky district of the Yamalo-Nenets Autonomous Okrug. Production totaled 4.5 million tonnes of oil in 2018. Messoyakhaneftegaz holds licenses to both blocks. Gazprom-Neft is operator.
Local firm spuds deepwater well off Ghana
Springfield Exploration & Production Ltd., Accra, has spudded the first of two deepwater wells planned on its West Cape Three Points Block 2 offshore Ghana.
The Stena Forth drillship is drilling the exploratory Afina-1x well, to be followed by the Oak-1x well. Drilling of both Tano-Western basin wells is expected to take 3 months.
Springfield E&P operates the block with an 84% interest. Ghana National Petroleum Co. holds the rest.
Petroleum Geo-Services shot a 3D seismic survey over the block, which Springfield was awarded in 2016.
Springfield says it’s the first independent Ghanaian operating company to drill in deep water. Springfield E&P is a subsidiary of Springfield Group, an oil product distributor and oil services provider in Ghana.
NIOC reports gas strike in southern Iran
National Iranian Oil Co. reported a major discovery of natural gas in Fars Province, southern Iran. It estimates the field, Eram, holds 13 tcf of recoverable gas with 19 tcf in place. Eram is 200 km south of Shiraz. NIOC says the field is 50 km long with an average width of 5 km.
Drilling & Production Quick Takes
Shell hires Dolphin for Knarr field work off Norway
AS Norske Shell has hired Dolphin Drilling’s Borgland Dolphin semisubmersible drilling rig for drilling and completion of a gas production well in Knarr field.
Dolphin Drilling will be working in 450 m of water on the Norwegian Continental Shelf. Shell’s work will start in February 2020 following completion of two other projects for which the rig is already contracted.
Dolphin Drilling recently announced the Borgland Dolphin rig had secured contracts with i3 Energy for drilling in Liberator oil field followed by the Serenity prospect in the UK’s central North Sea.
Leviathan, Tamar sales commitments hiked
Noble Energy Inc. and partners in deepwater Leviathan and Tamar natural gas fields offshore Israel have amended their agreements with an Egyptian gas buyer to more than double firm volume commitments (OGJ Online, Feb. 19, 2018).
Firm quantities under contracts with Dolphinus Holdings Inc., a consortium of Egyptian industries, now total 3 tcf. Contract terms have been extended to 15 years from 10 years.
Under the changes, Noble and partners commit to supply 200 MMcfd of gas from Leviathan field during Jan. 1-June 30, 2020; 350 MMcfd from Leviathan and 100 MMcfd from Tamar during July 1, 2020-June 30, 2022; and 450 MMcfd from Leviathan and 200 MMcfd from Tamar during July 1, 2022-Dec. 31, 2034. The earlier contracts provided for a firm commitment of 1.15 tcf from Leviathan field and interruptible supply of 1.15 tcf from Tamar. Both contracts have take-or-pay commitments. During July 1, 2020-June 30, 2022, Leviathan supply will compensate for any shortfall against firm commitments from Tamar.
Noble expects Leviathan to start producing by yearend. Tamar is on production. Noble holds a 39.66% working interest in Leviathan. Other interests are Delek Drilling LP, 45.34%, and Ratio Oil Exploration LP, 15%. Noble’s Tamar interest is 25%. Parters are Isramco Negev 2 LP, 28.75%; Delek Drilling, 22%; Tamar Petroleum Ltd., 16.75%; Dor Gas Exploration, 4%; and Everest Infrastructures, 3.5%.
Petrobras signs letters for Marlim FPSOs
Petroleo Brasileiro SA (Petrobras) has signed letters of intent for the chartering of two floating production, storage, and offloading vessels for development of Marlim and Voador oil and gas fields in its Marlim cluster revitalization project offshore Brazil.
It signed one letter with Modec Inc., Tokyo, for Marlim Unit 1 to be installed in 670 m of water. Marlim 1 will be able to process as much as 80,000 b/d of oil and 7 million cu m/day of natural gas. It will have water-injection capacity of 390,000 b/d and minimum storage capacity of 1 million bbl of crude oil. Start-up is due in 2022.
Modec is to handle engineering, procurement, construction, mobilization, chartering, and operations for Marlim 1.
Petrobras also signed letters with Yinson, Kuala Lumpur, for charter, operations, and maintenance of Marlim Unit 2, due onstream in 2023 in 930 m of water.
Marlim 2 will have capacities of 70,000 b/d of oil and 4 million cu m/day of gas. The Campos basin fields are 150 km offshore. The agreements have 25-year terms.
Valhall West Flank facility start-up approved
The start-up of the Valhall West Flank facility in the North Sea has been approved by the Norwegian Petroleum Directorate. The facility is a further development of Valhall field in the southern part of the Norwegian Continental Shelf, 290 km offshore.
Aker BP ASA plans start up of West Flank this fall. Tied to Valhall field center, the facility is unmanned with 12 well slots. Reserves are estimated at 9.6 million standard cu m of oil equivalent (60 million bbl). The estimate is a median value, the NPD said, and indicates some uncertainty regarding how much can be recovered. A plan for development and operation for Valhall Flank West was approved in 2018 with an investment estimate of 5.4 billion kroner.
Valhall produces oil from chalk in the Upper Cretaceous Hod and Tor formations. Reservoir depth is 2,400 m. The Tor formation chalk is fine-grained and has good reservoir quality. Considerable fracturing allows oil and water to flow more easily than in the underlying Hod formation. Oil and natural gas liquids are routed via pipeline to Ekofisk field and further to Teesside. Gas is sent via Norpipe to Emden in Germany.
Aker BP is operator of Valhall with 90%. Pandion Energy AS holds the remaining interest.
PROCESSING Quick Takes
Salt Creek starts up second Pecos gas processing plant
Salt Creek Midstream LLC, a portfolio company owned by funds managed by Ares Management LP and ARM Energy Holdings LLC, has commissioned its second cryogenic processing plant in Pecos, Tex. The 200-MMcfd Pecos II plant is now in service, raising overall installed natural gas processing capacity at the site to 400 MMcfd, ARM Energy said. The Pecos site also is equipped to process more than 30,000 b/d of NGLs.
Formed in 2017, Salt Creek is one of the largest privately owned gas gatherer and processors in the Delaware basin, with more than 400,000 dedicated acres procured, about 58,000 hp of installed compression, and a 400-mile, 1.4-bcfd gathering network offering producers access to critical takeaway pipelines at the Waha Hub and firm deliveries to the US West Coast and Mexico as well as downstream LNG markets.
Tidewater Midstream starts up Alberta sour gas plant
Tidewater Midstream & Infrastructure Ltd., Calgary, has commissioned its previously announced Pipestone Montney sour gas processing plant near Grande Prairie, Alta.
Designed to process 100 MMcfd of sour gas at full capacity, the plant began processing operations in mid-September and is currently processing 30 MMcfd during its start-up phase, the operator said. Tidewater said it expects processing to ramp up to (or near) full capacity by yearend.
The Pipestone Montney plant—capacity of which is fully contracted with customers including two investment-grade counterparties—includes an acid-gas injection well, saltwater disposal well, and pipelines that directly connect to Tidewater’s Pipestone gas storage facility.
The plant—which is anchored by two 10-year, take-or-pay agreements with Kelt Exploration Ltd. and Pipestone Energy Corp. for 30 MMcfd each—also is connected to both the Alliance and TC Energy pipeline network.
In an August presentation to investors, Tidewater said there is large customer support for a Pipestone Plant Phase 2 project—for which it already has a 10-year, 20-MMcfd take-or-pay commitment—upon which the operator plans to reach a final investment decision in the coming months.
Volgograd refinery producing low-sulfur fuel oil
PJSC Lukoil subsidiary OOO Lukoil Volgogradneftepererabotka has started production of low-sulfur fuel oil that complies with International Maritime Organization (IMO) mandates set to take effect in 2020 at its more than 281,000-b/d Volgograd refinery in southern Russia.
The Volgograd refinery began production of bunker fuel oil 0.5% sulfur on Oct. 11 and will produce about 1 million tonnes/year of the fuel, Lukoil said. The IMO’s upcoming global cap of 0.5% sulfur on fuel oil by all ocean-going vessels becomes effective Jan. 1, 2020. The Lukoil unit also is advancing the construction of a deasphaltizing unit at the refinery, Lukoil said in an Aug. 29 presentation to investors.
The operator confirmed work on the deasphaltizing unit is about 25% completed.
India ramps up support for new Mongolian refinery
The government of India is extending an additional $236-million line of credit to the government of Mongolia for the country’s first refinery project now under construction on 150 hectares in Altanshiree Soum near Sainshand in the southeastern province of Dornogovi. The new line of credit comes on top of India’s earlier $1-billion soft credit line to Mongolia in May 2015 for the new refinery, India’s Minister of Petroleum and Natural Gas Shri Dharmendra Pradhan said.
The announcement follows the government of Mongolia’s—through wholly owned Mongol Refinery State Owned LLC—award of a contract to India’s state-owned Engineers India Ltd. (EIL) for delivery of project management consultancy services for construction of the 30,100-b/d grassroots refinery. EIL also delivered a detailed feasibility study for the project.
The new refinery comes as part of India’s effort to develop further ties with landlocked Mongolia and help reduce its energy dependence on neighboring China and Russia.
Scheduled to be completed by yearend 2022, the refinery will process Mongolia’s own shale crude production currently exported to China to produce 560,000 tonnes/year of gasoline, 670,000 tpy of diesel, and 107,000 tpy of liquefied gas for domestic use, helping to reduce Russian product imports.
TRANSPORTATION Quick Takes
NextEra to buy Central Penn gas line stake
NextEra Energy Partners LP, Juno Beach, Fla., has agreed to acquire Meade Pipeline Co., part owner of a natural gas pipeline in Pennsylvania, for $1.37 billion, including $90 million future capital contributions related to an expansion opportunity through 2022.
Meade owns 39.2% of the 185-mile Central Penn Line in Pennsylvania’s Susquehanna and Lancaster counties, part of the Atlantic Sunrise gas pipeline system operated by Transcontinental Gas Pipe Line Co. (OGJ Online, Sept. 21, 2018).
Meade was formed in February 2014 by WGL Midstream Inc., Vega Midstream MPC LLC, and River Road Interests to co-own the Central Penn Line with Transco. The pipeline has capacity of 1.7 bcfd of Marcellus shale gas, all under contract with nine shippers. Cabot said it will receive $256 million for its 20% ownership interest in Meade.
NextEra, which owns interests in wind and solar energy and seven gas pipelines in Texas, said the anticipated Central Penn expansion opportunity would add 600 MMcfd of capacity through compression additions at new and existing stations. Meade will own 40% of the incremental capacity.
First unit at Elba Island liquefaction project starts up
The first of 10 liquefaction units at the $2-billion Elba Liquefaction Facility at Elba Island near Savannah, Ga., is in service, said Elba Liquefaction Co. LLC (ELC). The 51-49 joint venture of Kinder Morgan Inc. and EIG Global Energy Partners, respectively, said progress is being made on the remaining nine units.
Previously only an LNG import terminal, the facility is now also able to produce LNG for export. With the first unit in service, the company is now earning 70% of the expected total daily revenue of the liquefaction units.
Start-up activities are under way on the second and third units, the commissioning of units four through six is ongoing, and construction on the remaining units is largely complete, ELC said. Under full development, the Elba project is expected to have a total capacity of 2.5 million tonnes/year of LNG for export. ELC will own the liquefaction units and other ancillary equipment. Certain other facilities associated with the project are wholly owned by KMI. The project is supported by a 20-year contract with Royal Dutch Shell PLC, who is subscribed to 100% of the liquefaction capacity.
