OGJ Newsletter

GENERAL INTEREST Quick Takes

Victoria passes bill to restart onshore conventional gas exploration 

The Victorian Parliament has passed the Petroleum Legislation Amendment Bill 2020 which enables the restart of onshore conventional gas exploration in the state (OGJ Online, Mar. 17, 2020).

Companies can begin exploration and development work on July 1, 2021, after a best practice regulatory framework has been put in place.

The restart follows a 3-year moratorium during which a detailed scientific investigation was conducted by a government appointed body (the Victorian Gas Program) overseen by Victoria’s Lead Scientist, Dr. Amanda Caples.

The study found that that an onshore conventional gas industry would not compromise the state’s environment or its agricultural sector.

The government plans to work closely with communities, industry and local government to prepare the supporting regulations for the restart of conventional operations.

However, the moratorium on fracturing and coal seam gas exploration is still in place and a bill to enshrine this ban in the Victorian Constitution is going through Parliament.

IHS Markit: China’s oil inventories to swell by  440 million bbl in first-half 2020  

China’s crude oil inventories will increase by 440 million bbl over the first 6 months of 2020, IHS Markit estimates.

This “big fill” dwarfs the largest ever 6-month increase in US crude stocks to date which was during late 2014 and early 2015 when stocks increased 111 million bbl—just 25% the size of the inventory build currently underway in China.

“The world has never seen an increase of this magnitude in such a short period of time. Crude oil in storage has increased around the world as demand has fallen this year. But no geography—not even floating storage—matches the scale of China’s inventory increase,” said Jim Burkhard, vice-president and head of oil markets, IHS Markit.

The peak of China’s stockbuild, on a daily average basis, was 4.8 million b/d in February when Chinese oil demand was at a low point. The size of China’s inventory build was believed to have been a source of support for an otherwise exceptionally weak crude oil market which has faced record-level falls in crude demand and, briefly in April, negative oil prices due to the impacts of COVID-19.

Recoverable oil loses 282 billion bbl as COVID-19 hastens peak oil 

The COVID-19 downturn will expedite peak oil demand, putting a lid on exploration efforts in remote offshore areas and as a result reducing the world’s recoverable oil by around 282 billion bbl, according to the 2020 release of Rystad Energy’s annual global energy outlook.

Global total expected remaining recoverable oil resources decrease to 1,903 billion bbl, 42% of which are in OPEC territory, with the remaining 58% located outside the alliance.

“Non-OPEC countries account for the lion’s share of ‘lost’ recoverable resources with more than 260 billion bbl of undiscovered oil now more likely to be left untouched, especially in remote exploratory areas,” said Rystad Energy’s Head of Analysis, Per Magnus Nysveen.

OPEC countries are much more resilient to the current crisis and will only lose a fraction compared to their non-OPEC counterparts such as the US (-49 billion bbl) and Russia (-31 billion bbl).

“OPEC countries are expected to lose 21 billion bbl of reserves potential as the negative developments in Venezuela and Iran outweigh the increased strength and reserves potential of core OPEC countries in the Arab Gulf region,” Nysveen added.   

Exploration & Development Quick Takes 

Vintage Energy advances Vali gas discovery testing  

Vintage Energy Ltd. expects fracture stimulation of Vali-1 ST1 well in the Vali gas discovery of Cooper and Eromanga basins (ATP 2021), Queensland, to begin in early July (OGJ Online, Mar. 3, 2020).

Following successful casing pressure test on May 26, and successful cement bond log on May 10, the work confirmed wellbore integrity for the fracture treatment. A baseline temperature log was acquired which will aid in assessing effectiveness of fracture stimulation stages.

Condor Energy Services will perform the fracture stimulation and will mobilize to site later in June, subject to the service company’s schedule. Six stages are expected to be stimulated in Vali-1 ST1, five in the Patchawarra section, and one in the deeper Tirrawarra/Basal Patchawarra section. Gas-saturated zones to be fracture stimulated are at depths of 2,810-3,140 m.

Fracture stimulation is expected to take a week to complete. Flow testing will immediately follow, with potential gas flow rates recorded over several weeks. Results are expected in early August. GPA Engineering has been engaged for concept design work on a pipeline connection and discussions with Santos regarding access to gas infrastructure have been initiated, as a successful economic outcome will prompt the company to have the well connected to nearby gas infrastructure, said Neil Gibbins, Vintage managing director,

Vintage is operator of ATP 2021 with 50% interest (OGJ Online, May 22, 2019). Joint venture partners are Metgasco Ltd. (25%), and Bridgeport (Cooper Basin) Pty Ltd. (25%).

Gazprom plans fracturing in Western Siberia 

Gazprom Neft subsidiary Bazhenov Technology Centre will drill and complete in the Salymsky-3 Block for commercial development of the Bazhenov formation, Khanty-Mansi Autonomous Okrug-Yugra of western Siberia. Commercial production of non-conventional oil is expected in 2025.

The first exploration and appraisal well, with a 1 km-plus horizontal section, has been drilled at the block. More than 300 m of core samples were sent to laboratories in Khanty-Mansiysk and Tyumen. Preliminary results indicate hydrocarbons at six intervals throughout the strata.

Gazprom Neft has completed 3D-seismic investigations, surveying more than 300 sq km using “Green Seismic” technology which minimizes clearance through the forest for seismic equipment. Data interpretation is expected to be complete by the end of 2020. The results will update the geological concept of the Bazhenov formation and traditional deposits in the asset.

The Bazhenov formation comprises a group of oil-bearing rocks covering about 1 million sq km at at a depth of 2-3 km. Provisional forecasts indicate geological reserves of 18-60 billion tonnes.

Salymsky-3 Block will undergo a 15-stage fracturing operation with plans to begin geological prospecting at neighboring Salymsky-5 Block before yearend. Reserves in place at Salymsky-3 and Salymsky-5 stand at more than 500 million tonnes oil.

Salymsky-3 and Salymsky-5 license blocks form part of the asset portfolio of a joint venture between Gazprom Neft and Zarubezhneft.

Aker adds second FPSO to Pecan field plan  

Aker Energy Ghana Ltd. has altered its development plan for Pecan field in the Deepwater Tano Cape Three Points Block offshore Ghana to utilize two floating producing storage offshore (FPSO) vessels in a phased approach with an altered timeline.

In March, a final investment decision for development was placed on hold. No new date has been set for FID, the operator said in a release June 5, but the company and its partners—Lukoil, Fueltrade, and Ghana National Petroleum Corp.—are “working actively to confirm the feasibility of a phased Pecan field development by executing conceptual studies.”

The original field development concept was based on a centralized FPSO supporting development of the entire Pecan field, as well as tie-ins of all other area resources (OGJ Online, Mar. 28, 2019). A new, phased approach “will enable Aker Energy to commence with one FPSO for Pecan in the south and expand to a second FPSO in the north after a few years, with tie-ins of additional discovered resources,” the company said.

The first FPSO will be deployed 115 km offshore Ghana over a subsea production system installed in ultra-deep waters of 2,400-2,700 m.

Partners are currently assessing FPSO candidates for redeployment.

Drilling & Production Quick Takes 

Wintershall starts production from second Sillimanite well  

Wintershall Noordzee BV, a 50-50 joint venture between Wintershall Dea and Gazprom EP International, started production from b2, the second production well in Sillimanite gas field in the southern North Sea. The JV began drilling the well in February.

The field, discovered in 2015, lies about 200 km off the coast of Den Helder on the maritime border of the Netherlands and the United Kingdom. An agreement was reached to allow for development to proceed. Production begin early this year (OGJ Online, Feb. 20, 2020).

Produced gas from b2 will be transported through the newly laid 12-km pipeline connecting the B platform to the existing production platform, operated by Neptune Energy. Both facilities are in Dutch waters. From there, gas will be transported through the Noordgastransport BV system to shore.

A third exploration well, the Sillimanite South, is currently being drilled. If successful, the well will add gas to the export pipeline in this year’s fourth quarter.

Wintershall Noordzee BV is operator with 39.7%. Partners are EBN BV 25%, Gazprom International UK Ltd. 19.9%, Neptune Energy Netherlands BV 2.3%, Neptune Netherlands Participation BV 1.6%, Neptune E&P UK Ltd. 3.6%, ONE-Dyas BV 3.1%, and ONEDyas UK Ltd. 4.8%.

Wassana production suspended in Gulf of Thailand 

KrisEnergy Ltd. will suspend production from Wassana oil field in the G10/48 concession in the Gulf of Thailand until further notice due to uncertainties surrounding duration of the COVID-19 pandemic, speed of economic regeneration and recovery in petroleum demand, and the magnitude and sustainability of any upturn in oil prices. Relevant authorities in Thailand have been informed.

First onstream in August 2015, Wassana comprises a mobile offshore production unit (MOPU) and a floating storage and offloading vessel (FSO). Gross production averaged 3,605 bo/d in first-quarter 2020. Agreements with respect to the FSO have been terminated. The company is in discussions for warm-stacking the MOPU with a skeleton crew, supported from Songkhla shore base. The company will reduce its workforce in Thailand by about 25%.

Operations at remaining assets—B8/32 oil and gas fields in the Gulf of Thailand and Bangora gas field in Block 9, onshore Bangladesh—continue as usual.

KrisEnergy holds 89.0% working interest and is operator in G10/48. Palang Sophon Offshore holds the remaining 11%.

Abu Sennan well encounters larger than expected undrained area updip of existing wells 

Analysis following logging and testing of the El Salmiyah-5 development well in the Abu Sennan concession in Egypt’s Western Desert suggests that the well significantly exceeds pre-drill estimates, partner United Oil & Gas (UOG) reported.

Spudded Feb. 3, the well reached total depth of 4,400 m MD (3,911 m TVDSS) on Apr. 17. After logging, testing, and completion, the rig was released on May 21.

The well targeted previously undrained reservoirs of the El Salmiyah field, with primary focus on the Kharita formation and secondary objectives in Abu Roash C and Abu Roash E. Net pay, encountered in all targeted intervals, totaled more than 120 m, exceeding pre-drill expectations.

The main Kharita target interval was encountered some 16 m shallow to expectations, indicating larger than expected undrained area updip of existing wells in the field. This was further supported by an encouraging flow test which achieved rates of 4,100 bo/d, with a further 18 MMscf/d gas (8,700 boe/d in total).

Although the well may initially be brought onstream close to the test rate, longer-term, UOG expects to choke it back for sustainable production through existing facilities.

UOG holds a 22% working interest in the Abu Sennan concession gained through its acquisition of Rockhopper Egypt Pty earlier this year (OGJ Online, July 23, 2019). The Abu Sennan concession comprises seven development concessions, each containing a producing field, as well as a 644 sq km exploration license. The license is operated by Kuwait Energy Egypt 25%. Parnters are Global Connect Ltd. 25% and Dover Investments 28%.

PROCESSING Quick Takes 

Tatneft begins planned maintenance works at Nizhnekamsk refinery 

PJSC Tatneft, Almetyevsk, Russia, is undertaking a 3-week turnaround at the more than 10 million-tonnes/year refinery of subsidiary JSC Taneco’s multiphase integrated refining and petrochemical complex in Nizhnekamsk, 250 km from Tatarstan’s capital city of Kazan.

The scheduled maintenance overhaul—which began on June 10 and will run to July 2—will include works to ensure the safe, reliable operation of process equipment at the refinery’s 2.4 million-tpy sulfur dioxide (SO2) visbreaking unit and 2 million-tpy SO2-oil vacuum distillation unit, Tatneft said on June 11.

Scheduled major repairs during the turnaround include the following:

• Replacing vacuum column nozzles.
• Cleaning process deposits from unit equipment.
• Ultrasonic thickness-gauging of furnace coils.
• Technical inspection of tanks, vessels, and pipelines.
• Hydraulic testing.
• Modifying instrumentation and automation controls.

Particular attention will be paid during maintenance work to ensure compliance with sanitary and epidemiological standards for preventing proliferation of COVID-19, Tatneft said.

Per Taneco’s turnaround procedures, overhaul activities will be carried out in a manner that enables minimizing equipment downtime while allowing all work to be fully completed on installations and interconnections. As such, operation of other process units not involved in the turnaround will continue to operate normally to ensure yields of petroleum products in accordance with the refinery’s approved production plan, according to the company.

PTTGC-Daelim JV revises plan for proposed Ohio ethylene complex 

PTTGC America LLC (PTTGCA), the US subsidiary of Thailand’s PTT Global Chemical (PTTGC), and partner Daelim Chemical USA LLC, a subsidiary of South Korea’s Daelim Industrial Co. Ltd., has revised the timeline for reaching final investment decision (FID) on the partnership’s (PTTDLM) proposed 1.5 million-tonnes/year ethane cracker and petrochemical complex planned for Mead Township along the Ohio River in Shadyside, Belmont County, Ohio.

As a result of prioritizing health and safety of all employees and stakeholders, as well as focusing on business continuity in navigating new challenges amid the COVID-19 pandemic, the partnership now anticipates a timeline of 6-9 months for taking FID on the project, PTTGCA said in a release.

Even among these challenges and despite the current delay, PTTGCA said it is still progressing with the project and at no point has put the project on indefinite hold.

The company expects a final investment decision by the end of this year or in the first quarter of 2021.

Confirmation of the revised timeline for FID follows PTTDLM’s initial notification of a delayed project FID in April.

With the first phase of site preparation, engineering, and design work for the project completed as of late February, PTTDLM also said in April it was planning to continue investing in safety of the project site’s surrounding neighborhood by demolishing vacant structures.

According to a final air pollution permit-to-install (PTI) issued on Dec. 21, 2018, by the Ohio Environmental Protection Agency, PTTDLM’s proposed complex—which will be equipped with six ethane-cracking furnaces—will produce ethylene, high-density polyethylene (HDPE), and linear low-density polyethylene (LLDPE) using the following units and capacities:

• Ethylene plant, 1. 5 million tpy.
• HDPE Unit 1, 350,000 tpy.
• HDPE Unit 2, 350,000 tpy.
• LLDPE-HDPE Unit 1, 450,000 tpy.
• LLDPE-HDPE Unit 2, 450,000 tpy.

The proposed multi-billion-dollar complex will also include on-site railcar and truck loading, supporting utilities, infrastructure, storage tanks, logistics facilities, and installations for either production or provision of required natural gas, water, air, nitrogen, steam, and electricity to support operation of process units, according to the PTI.

Daelim officially entered as a partner on the proposed Ohio petrochemical complex in early 2018, according to a series of releases from PTTGCA.

TRANSPORTATION Quick Takes 

Mirage Energy secures Mexico pipeline, storage financing 

Mirage Energy Corp. and Northern Hemisphere Logistics Inc. have secured funding for development of natural gas pipelines and 786 bcf of underground storage, both focused on moving natural gas produced in the US to Mexico, and the Isthmus Corridor liquids transportation project. Mirage signed a $4-billion debt facility with Bluebell International LLC.

The pipeline, interconnected to WhiteWater’s Whistler line, would move gas through a new 42-in. OD line to be built from Agua Dulce-Banquette hub in Texas to the border at Progreso, Tex., and into Mexico. From there, natural gas could be stored at the new underground site or sent to Compressor Station #19 on Mexico’s national Sistrangas system. The pipeline and storage together comprise Mirage 1 – Burgos Hub Storage & Natural Gas Pipeline.

An already operating 42-in. OD line to Los Ramones would interconnect to the 48-in. OD San Fernando-Cactus line (Mirage 2) and bring natural gas from Reynosa, Mexico, to Nuevo Pemex processing center in Tabasco State and the neighboring Yucatan Peninsula.

Mirage says its natural gas storage site will be the largest in North America and will give Mexico a 6-month supply of gas once filled.

The Isthmus Corridor project consists of 30-in. and 48-in. OD pipelines as well as storage sites in Mexico connecting the Port of Pajaritos on the Gulf of Mexico side of the country to Salina Cruz on the Pacific side. The pipelines would deliver crude oil and refined products from the US to Asia, Mexico, and the west coast of the US as an alternative to the Panama Canal or Cape Horn routes.

Northern Hemisphere hired Mirage to participate in development of the Isthmus Corridor project in earlier this year.

Qatar Petroleum signs additional carrier contracts 

Qatar Petroleum signed three agreements to reserve LNG ship construction capacity in the Republic of Korea for its future LNG carrier fleet requirements, including those for the ongoing expansion projects in the North Field and in the US.

Under the agreements, Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries, and Samsung Heavy Industries will reserve a major portion of their LNG ship construction capacity for Qatar Petroleum through 2027.

In a statement, Saad Sherida Al-Kaabi, minister of state for energy affairs and president and chief executive officer of Qatar Petroleum reiterated a May comment to move “full steam ahead” with the North Field expansion projects to raise Qatar’s LNG production capacity to 126 million tpy by 2027 from its current 77 million tpy (OGJ Online, May 22, 2020).

With the agreements, he said, the company has everything in place to commence the largest LNG shipbuilding program in history. “We have secured approximately 60% of the global LNG shipbuilding capacity through 2027 to cater for our LNG carrier fleet requirements in the next 7-8 years, which could reach 100+ new vessels with a program value in excess of 70 billion Qatari Riyals.”

In April, the company agreed to reserve LNG ship construction capacity with Hudong-Zhonghua Shipbuilding Group Co. Ltd. (Hudong), a wholly owned subsidiary of China State Shipbuilding Corp. Ltd. (CSSC) for its future fleet requirements (OGJ Online, Apr. 22, 2020).

The new LNG vessels will be equipped with the latest generation slow speed dual fuel engines, utilizing LNG as a fuel, he said.

InfraStrata to buy UK FSRU project 

InfraStrata PLC has agreed to terms with West Face Long Term Opportunities Global Master LP for acquisition of Meridian Holdings Co., owners of a proposed 5 to 6-million tonne/year floating storage and regasification (FSRU) project offshore Barrow-in-Furness, Cumbria, northwest England. The proposed FSRU would be the UK’s first, the company said.

The project is designed to deliver natural gas directly into the UK market via a National Transmission System interconnection at Barrow-in-Furness.

InfraStrata expects to execute a sales and purchase agreement for LNG on or before July 31, 2020, with final investment decision expected within 3 years of this agreement.

The project has an estimated cost of £350-450 million, funded by a planned consortium of partners at the project level. InfraStrata says discussion with these partners, “globally recognized companies involved in the development, construction, operations, and commercialization of regasification terminals worldwide,” is underway. Long-term offtake talks have also begun.