GENERAL INTEREST Quick Takes
Aramco’s initial public offering approved
Saudi Arabian Oil Co. (Saudi Aramco) is proceeding with its long-planned initial public offering of equity shares.
The company has received approval to offer shares on Taduwal, the Saudi stock exchange, which favors local investors but allows foreign investment.
An IPO of 5% Aramco was part of a package of reforms introduced in April 2016 by then Deputy Crown Prince Mohammad bin Salman aimed at modernizing the Saudi economy and lowering dependence on revenue from oil production (OGJ Online, Apr. 26, 2016). Bin Salman now is crown prince.
A Taduwal announcement said the approved IPO is for “a portion” of Aramco shares and said the percentage “will be determined at the end of the book-building period.”
The IPO could be expanded to exchanges elsewhere.
The announcement reported Saudi reserves at yearend 2018 at 256.9 billion boe.
It said average production last year was 10.3 million b/d of crude oil and blended condensate, 200,000 b/d of unblended condensate, 1.1 million b/d of natural gas liquids, 8.9 bscfd of natural gas, and 1 bscfd of ethane.
Aramco’s average upstream lifting cost last year was $2.80/boe. Its average capital expenditure was $4.70/boe.
The announcement said Aramco can produce 12 million b/d of crude for 1 year “during any future planning period, after taking into account all planned capital expenditures and maintenance, repair and operating costs, and after being given 3 months to make operation adjustments.”
Abu Dhabi increases oil, gas reserves
Abu Dhabi has increased its estimates of crude oil and conventional natural gas reserves, reported the discovery of large volumes of unconventional gas, and liberalized trading of Murban crude.
The Supreme Petroleum Council (SPC) said reserves are now 105 billion stb for oil, up 7 billion stb, and 273 tscf for conventional gas, up 58 tscf.
Ryder Scott, Houston, said it conducted an independent assessment of Abu Dhabi National Oil Co.’s conventional reserves and confirmed the increments. The consultancy said its work for ADNOC followed the 2018 Petroleum Resources Management System of the Society of Petroleum Engineers.
The SPC also reported discovery of unconventional recoverable gas resources totaling 160 tscf.
“The increase in reserves and new discoveries follows ADNOC’s extensive drilling of dozens of new exploration and appraisal wells across Abu Dhabi’s conventional and unconventional oil and gas fields over the past few years,” ADNOC said in a report of the SPC meeting. Also boosting reserves are work toward boosting production capacity to 5 million b/d by 2030 from 3 million b/d and “expanded oil recovery schemes, as well as ongoing in-fill drilling,” it said.
The SPC said ADNOC in the second half of next year will implement a forward pricing mechanism for Murban crude, replacing the traditional retroactive official selling price. The mechanism will use a market-driven futures contract, traded on an unspecified independent exchange, as its price marker.
Destination restrictions on ADNOC sales of Murban crude will be lifted.
Canadians reelect Trudeau without majority
Canadian Prime Minister Justin Trudeau was reelected as his Liberal Party lost its majority in the House of Commons.
The Liberals won no seats in Alberta or Saskatchewan, where Trudeau’s aggressive polices on climate change and resistance to pipeline construction are blamed for slumping investment in oil and natural gas.
According to CBC, the Liberals won 157 seats, one of which remained uncertain at this writing. To win a majority required 170 seats.
The Conservative Party, led by Andrew Scheer, was runner-up with 121 seats. The Conservatives won more votes than the Liberals: 6,150,177 (34.4% of total votes) vs. 5,911,588 (33.1%), CBC reported.
The Bloc Quebecois won 32 seats, New Democrats 24, Greens 3, and Independents, 1.
Conservatives won 33 of Alberta’s 34 seats and all of Saskatchewan’s 14 seats. The sole non-Conservative seat in Alberta was won by a New Democrat.
Because Liberals lost their majority, Trudeau will have to govern in some form of cooperation with at least one of the non-Conservative parties, all of which oppose pipeline construction.
Exploration & Development Quick Takes
Eni: Gulf of Suez appraisal discovers oil
Petrobel plans fast-track development of a Gulf of Suez discovery made by an appraisal well on the Abu Rudeis Sidri development lease. It’s completing for production the Sidri 36 well, drilled to appraise downdip westward extension of the Sidri-23 discovery, reports Eni, which owns half of Petrobel.
The well encountered a 200-m hydrocarbon column in Cretaceous Nubia clastics. It’s expected to start production at 5,000 b/d of oil. The earlier discovery, Sidri South, will be reassessed on the basis of the new results. It’s estimated to hold 200 million bbl of oil in place. Development with 10 wells is planned.
Eni’s 50% partner is Egyptian General Petroleum Corp.
Well confirms Natuna Sea gas field extent
Conrad Petroleum Ltd., Singapore, confirmed lateral extent of high-quality, Plio-Pleistocene intra-Muda sandstone reservoir in Mako gas field offshore Indonesia with the Tambak-2 appraisal well (OGJ Online, Mar. 11, 2019).
Logs indicated a 33-ft gross, 30-ft net, pay zone with permeabilities calculated at more than 1 Darcy. The reservoir top is 10 ft updip of the Mako South-1 discovery well more than 13.5 km away in the Duyung production-sharing contract area of the Natuna Sea. Pressures and gas-water contact were the same as those encountered in Mako South-1, Conrad said. West Natuna Exploration Ltd., 90% owned by privately held Conrad, drilled the discovery well. During preparations for a drillstem test of Tambak-2, a packer failed. While the crew attempted recovery, the well flowed gas to surface and had to be shut in and killed with heavy mud, some of which entered the reservoir.
Two subsequent DSTs failed because of formation damage.
Despite the DST failures, Conrad CEO Miltos Xynogalas called the Tambak-2 results “extremely encouraging” for field development. “The well confirmed the lateral extent of the high-quality reservoir and the presence of a continuous hydrocarbon accumulation,” he said. “Initial petrophysical analysis suggests high gas saturations, while the gas mobility encountered during pressure measurements and the flow of gas while retrieving the packer confirms the ability of the hydrocarbons to flow to the surface.”
The China Oilfield Services Ltd. Asian Endeavor 1 jack up will next drill the Tambak-1 exploration well, testing a large Oligocene Lower Gabus prospect and intersecting intra-Muda sands. Conrad operates the Duyung PSC, which covers 890 sq km in 60-100 m of water in the Riau Islands province, with a 76.5% participating interest. Other interests are held by Coro Energy PLC, 15%, and Empyrean Energy PLC, 8.5%.
Santos farms in to Beehive prospect; Total declines
Santos Ltd., Adelaide, has exercised its option to farm in to a 40% interest in Melbourne-based Melbana Energy Ltd.’s permit WA-488-P in the Western Australian sector of the offshore Bonaparte basin, which contains the prospective Beehive prospect.
French company Total E&P Australia Exploration Pty. Ltd. however has declined to exercise a similar option in the permit. Total’s option now expires with immediate effect.
Based on the terms of the option agreement, Santos’ option has now been modified such that it may now acquire an 80% interest in the permit in return for funding 100% of the costs for an exploration well in the permit area, which is likely to be Beehive-1.
Santos now has until Dec. 4 to exercise this modified option. If Santos chooses not to go for this new version, it will not acquire any interest at all in the permit, which will revert to Melbana’s current 100%.
Beehive prospect has been independently assessed as having an estimated prospective resource of 388 million boe. It is a shallow-water prospect close to existing infrastructure. Santos and Total have recently run a 3D seismic survey in the area.
Melbana Chairman Andrew Purcell expressed regret not to have the opportunity to work with Total, but he looked forward to continuing to work closely with Santos and any partner that Santos may wish to introduce to replace Total.
Cairn’s first Block 9 test off Mexico dry
The first well in Cairn Energy PLC’s two-well drilling program on Block 9 offshore Mexico is a dry hole.
Early analysis indicates the Alom-1 well encountered more than 500 m of high-quality water-bearing sands across multiple zones. The well tested stacked Pleistocene targets in the southern part of the block.
The Maersk Developer semisubmersible rig drilled the well to 2,056 m below sea surface 120 km northwest of Villahermosa. The well will be plugged and abandoned. The Developer next will drill the deeper Cairn Bitol-1 well on Block 9.
Cairn holds a 50% working interest in and is operator of the block. Partners are Citla Energy, 35%, and Eni, 15%.
Drilling & Production Quick Takes
PSAC: Canadian drilling slump to continue
Expectations for oil and gas drilling in Canada continue to fade.
The Petroleum Services Association of Canada (PSAC) projects drilling of 4,500 wells in Canada during 2020, based on rig releases, compared with 5,000 expected this year.
This year’s expected well total is down 100 from PSAC’s third update of its 2019 projection in July and down 1,600 from its forecast of a year ago (OGJ Online, May 2, 2019).
The 2020 forecast assumes an average natural gas price of $1.60/Mcf (Can.) at the AECO hub and an average West Texas Intermediate crude oil price of $58/bbl (US).
PSAC Pres. and CEO Gary Mar blamed the darkening outlook on transportation bottlenecks and regulation.
“Following a very disappointing 2019 that saw activity plunge to 2015-16 levels with about 2,000 fewer wells drilled than forecast, the outlook for 2020 is even worse with exploration and production companies choosing to buy back their own under-valued shares, pay dividends, and pay down debt rather than reinvest in Canada,” he said. “It’s hard to justify spending or attract new capital investment when market access constraints remain and policy uncertainty persists.”
PSAC projects drilling decreases from 2019 levels of 235 to 2,155 wells in Alberta, 200 to 1,795 in Saskatchewan, 20 to 190 in Manitoba, and 45 to 345 in British Columbia.
It expects 2020 drilling in eastern Canada to be unchanged from this year’s expected level of 15 wells.
Alberta eases limits for oil moved by rail
Oil producers in Alberta soon will be able to win exemption from curtailment limits for oil shipped by rail that hasn’t been nominated to pipelines.
The provincial government has announced a policy recommended by the producing industry to allow increased shipment of crude by rail in exchange for curtailment relief.
Responding oil values suppressed by pipeline congestion, the government since last year has set provincial output limits with cuts apportioned among producers and applicable to output above 20,000 b/d.
The provincial limits are 3.79 million b/d in October, 3.80 million b/d in November, and 3.81 million b/d in December.
Beginning in December, operators can apply monthly to Alberta Energy to increase oil production if the additional amount is moved out of the province by new rail capacity.
“The special allowance program will protect the value of our oil by ensuring that operators are only producing what they are able to move to market,” said Energy Minister Sonya Savage. “Pipeline delays ultimately have constrained market access and dampened investment in our oil sector.”
Rystad Energy: Permian gas flaring hits another high
Flaring and venting of natural gas in the Permian basin in Texas and New Mexico reached an all-time high in this year’s third quarter, averaging more than 750 MMcfd, according to a preliminary analysis conducted by Rystad Energy.
“This represents a new all-time high. Oil production in the Permian basin is growing at an accelerated pace again, and we observe high, sustained levels of flaring and venting of associated gas in the basin,” says Artem Abramov, head of shale research at Rystad Energy.
Rystad Energy has been closely monitoring the level of natural gas flaring in the Permian since 2017. Their previous quarterly estimate suggested that basin-wide gas flaring averaged between 600 and 650 MMcfd during the 9-month period from the fourth quarter of 2018 through the second quarter of 2019.
The Permian basin has experienced a vast increase in natural gas flaring and venting at the wellhead in recent years, driven by a combination of higher activity levels, more production from areas with less developed gas gathering infrastructure, and basin-wide takeaway capacity bottlenecks.
“The most recent increase in flaring is predominantly driven by the Delaware Texas portion of the basin, which accounted for more than 40% of basin-wide flaring and venting as of the third quarter of 2019,” Abramov said. “Northern Midland also saw a significant boost in new activity, which resulted in increased flaring of associated gas. The subbasin has basically returned to the record level of flaring seen in the fourth quarter of 2018.”
At a company level, Rystad Energy notes that several operators have reduced their flaring intensity over the past 12 months. “A significant number of operators have exhibited a clear downwards shift in flaring intensity in 2019. Yet there are other examples of a recent increase in flaring intensity, which are primarily represented by some operators active in the Eastern Midland basin,” Abramov observed.
Appraisal confirms Karish North resource
Energean Oil & Gas PLC confirmed its best estimate of recoverable resources in its Karish North gas discovery offshore Israel with a sidetrack drilled 700 m north of the original hole.
The sidetrack encountered the gas-water contact at 4,791 TVD, 13 m below the gas-down-to depth of the original wellbore. A thin rim of light oil or condensate was identified immediately above the gas-water contact.
The appraisal confirmed a total mapped hydrocarbon column of 310 m.
Energean plans to develop the discovery, in more than 1,700 m of water, as a tie-back to a floating production, storage, and offloading vessel under construction to handle production from Karish and Tanin gas fields (OGJ Online, Apr. 16, 2019).
Energean’s best estimate for the resource is 1.3 tcf of gas initially in place, 900 bcf of recoverable gas, and 34.2 million bbl of recoverable liquids.
The Stena DrillMax drillship will next drill three Karish Main development wells.
PROCESSING Quick Takes
Husky finalizes sale of Prince George refinery
Husky Energy Inc. has closed the sale of its 12,000-b/d refinery in Prince George, BC, to Tidewater Midstream & Infrastructure Ltd. for $215 million (Can.) in cash, plus a closing adjustment of about $53.5 million (OGJ Online, Oct. 4, 2019).
As part of the deal, which also includes a contingent payment to Husky of up to $60 million over 2 years, Husky also has entered into a 5-year offtake agreement with Tidewater for refined products from the refinery, including 90% of the nameplate capacity on diesel and gasoline volumes produced at the site. Tidewater previously said it will retain all refinery staff.
The Prince George refinery processes light oil into low-sulfur gasoline and ultralow-sulfur diesel, along with other products.
The refinery sale follows Husky’s previously announced plan to consider selling the Prince George refinery as part of a strategy to focus on core assets in its integrated corridor and offshore business in Atlantic Canada and the Asia-Pacific region, which includes a series of physically linked assets involving upstream thermal crude production, storage, committed pipeline capacity, and refineries (OGJ Online, Jan. 11, 2019).
Chinese operator lets contract for C3 Oleflex unit
Zibo Qixiang Tengda Chemical Co. Ltd. (QXTD), a subsidiary of Zibo Qixiang Petrochemical Industry Group Co. Ltd., has let a contract to Honeywell UOP LLC to provide its proprietary C3 Oleflex technology for a grassroots polymer-grade propylene unit at its operations in Zibo, Shandong Province, China.
Alongside technology licensing, Honeywell UOP also will deliver the process design package, proprietary and nonproprietary equipment, on-site operator training, technical services for start-up, as well as continuing operation, catalysts, and adsorbents for the project, the service provider said.
Designed to expand production of propylene in response to growing demand for propylene derivatives, the new unit will join QXTD’s existing C3-C4 Oleflex unit that converts propane and isobutane into propylene into propylene and isobutylene.
With the new C3 Oleflex unit, QXTD will produce additional quantities of polymer-grade propylene to make propylene oxide for production of polyurethanes.
Partners let contract for East Java complex
PT Pertamina Rosneft Pengolahan dan Petrokimia, a joint venture of PJSC Rosneft and Indonesian state-owned Pertamina, has let a contract to Tecnicas Reunidas SA to carry out deliver basic engineering design and front-end engineering design for construction of a grassroots integrated refinery and petrochemical complex in Tuban, East Java, Indonesia.
The proposed refinery will have a crude processing capacity of 300,000 b/d and include a petrochemical complex equipped to produce more than 1 million tonnes/year of ethylene and 1.3 million tpy of aromatic hydrocarbons, Rosneft said.
The JV was established according to an agreement signed in October 2016. Rosneft owns a 45% stake, Pertamina, 55%.
The integrated complex—which will prompt a future petrochemical cluster in the surrounding area of Tuban—is scheduled for start-up within 5 years, Roseneft said.
TRANSPORTATION Quick Takes
TC Energy details $1.2-billion West Path program
TC Energy Corp., Calgary, announced the West Path delivery program, a combined $1.2-billion expansion of its NOVA Gas Transmission Ltd. (NGTL) and Foothills systems, which will connect with the $335-million GTN XPress project recently announced by TC PipeLines LP, to deliver the volumes to downstream markets (OGJ Online, Apr. 16, 2019). The $1.2 billion to be invested includes 119 km of pipeline and associated facilities.
“The West Path delivery program, along with the GTN XPress project, further enhances connections of the Western Canadian Sedimentary Basin to high-value downstream markets,” said Russ Girling, president and chief executive officer.
The program brings the company’s sanctioned expansions of NGTL and Foothills infrastructure to $10 billion, Girling said.
The West Path delivery program is underpinned by 258 MMcfd of new firm service contracts with terms that exceed 30 years, beginning between fourth-quarter 2022 and fourth-quarter 2023.
Applications for approvals to construct and operate the facilities are expected to be filed in 2020 and construction is expected to begin as early as fourth-quarter 2021.
Canadian pipelines had 19 incidents in 2018
Canadian oil and gas transmission pipelines sustained 19 incidents last year while total system length grew to about 121,000 km, according to an annual survey by the Canadian Energy Pipeline Association (CEPA).
Four liquids incidents occurred in 2018, releasing a total of 175.5 bbl of oil, of which 94% was recovered. One release was considered significant by totaling more than 50 bbl. All oil in that release of 113.2 bbl was recovered.
Five of 15 natural gas incidents were deemed significant because they were reported as ruptures. Three of those were caused by third-party damage, one was caused by cracking, and one remains under investigation.
Incident prevention and environmental protection measures reported in the CEPA report include 2,665 proactive integrity digs to examine pipelines for defects and make repairs; 51,563 km of in-line inspections completed with smart pigs; $2 billion invested in the maintenance and monitoring of pipeline systems; $22.6 million invested in technology focused on reducing pipeline corrosion and improving leak detection and damage prevention; and 452 emergency-response exercises.
Canadian transmission pipelines last year delivered more than 1.6 billion bbl of oil and 5.9 tcf of gas, CEPA reported.
Michigan court rejects Enbridge pipeline opinion
A Michigan Court of Claims judge rejected Atty. Gen. Dana Nessel’s opinion that an agreement Enbridge Inc. negotiated with the previous administration to rebuild its Line 5 crude oil pipeline across the Mackinac Straits was unconstitutional. Nessel immediately said she intends to appeal Judge Michael J. Kelly’s Oct. 31 summary judgment. Enbridge said in a statement that it was pleased with his finding.
“We have always anticipated that this matter would be resolved in the appellate courts, and we are more resolved than ever to continue this fight on behalf of the people of Michigan,” said Nessel, a Democrat.
Gov. Gretchen E. Whitmer, also a Democrat, asked Nessel on Jan. 2 to review the agreement Enbridge reached on Dec. 19, 2018, with the administration of outgoing governor Rick Snyder, a Republican, to construct a tunnel beneath the straits between Lakes Huron and Michigan which would accommodate utility lines as well as a rebuilt Enbridge pipeline.
Nessel said in her Mar. 28 opinion that certain provisions of 2018 Public Act 359 “including those transferring all authorities related to a utility tunnel from the Mackinac Bridge Authority to the Straits Corridor Authority and requiring the Corridor Authority to enter into an agreement for the construction of a tunnel if a proposed agreement was presented by a specific date and met listed criteria, are unconstitutional.”.
