OGJ Newsletter
GENERAL INTEREST Quick Takes
Supreme Court asks US solicitor to weigh in on PennEast pipeline case
The Supreme Court, unready to decide whether it will review the legal fight between PennEast Pipeline Co. LLC and New Jersey, on June 29 asked US Solicitor General Noel Francisco to file a brief offering the Justice Department’s views on the pipeline right-of-way case.
PennEast has received approval from the Federal Energy Regulatory Commission to build a natural gas pipeline from Pennsylvania into New Jersey, and it has tried to use eminent domain authority under the Natural Gas Act to obtain rights-of-way over private and state-controlled land.
New Jersey balked at conceding eminent domain over two state-owned properties and 40 parcels of land where the state has obtained easements for conservation, recreation, or agricultural purposes. PennEast sued. The state argued the Eleventh Amendment to the Constitution gives states sovereign immunity from lawsuits by private parties, and in a September ruling the US Court of Appeals for the Third Circuit agreed.
PennEast in February asked the Supreme Court to review the case. Trade associations filed briefs at the court in support of PennEast. Among their fears is the possibility that state governments opposed to pipeline projects could acquire an effective veto power over the projects. A state might block new pipelines by obtaining environmental easements from private property owners along the proposed routes.
The Supreme Court is in the last days of its current term as far as rulings. A brief from the solicitor general could be used to help the court decide whether to accept or reject the case for its next term, starting in October.
ADNOC enters $20.7-billion energy infrastructure deal
A consortium of investors has agreed to a $20.7-billion energy infrastructure deal with Abu Dhabi National Oil Co. (ADNOC).
Global Infrastructure Partners, Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, Ontario Teachers’ Pension Plan Board, NH Investment & Securities, and Snam agreed to the deal that would see the consortium acquire a 49% stake in ADNOC Gas Pipeline Assets LLC (ADNOC Gas Pipelines), a newly formed ADNOC subsidiary with lease rights to 38 pipelines covering 982.3 km. ADNOC will hold the 51% majority stake.
Under the terms of the agreement, ADNOC will lease its ownership interest in the assets to ADNOC Gas Pipelines for 20 years in return for a volume-based tariff subject to a floor and a cap. The transaction will result in upfront proceeds of over $10 billion to ADNOC and is subject to customary closing conditions and regulatory approvals.
The gas pipeline network connects ADNOC’s upstream assets to local UAE off-takers. Ownership of the pipelines, management of pipeline operations, and all responsibility for associated operational and capital expenditures will remain with ADNOC.
The transaction—carried out remotely over the past months—is the largest transaction since ADNOC announced the expansion of its partnership and investment model in 2017. Since then, ADNOC has entered the debt capital markets for the first time, issuing a $3 billion bond backed by the Abu Dhabi Crude Oil Pipeline; partially floated ADNOC Distribution, the first-ever IPO of an ADNOC Group company; and entered into several strategic partnerships in its drilling, refining, fertilizer and trading businesses, amongst others, the operator said in a release June 23.
Australian government boosts frontier basin exploration
The Australian government has injected $125 million (Aus.) into the Exploring for The Future (EFTF) program which is managed by the country’s minerals and petroleum resources agency, Geoscience Australia.
The program provides geoscientific data on the potential for discovering oil and gas deposits in Australia’s frontier basins, such as the Beetaloo and the McArthur basins in the Northern Territory.
The aim is to encourage exploration in lesser known and untried regions. All the data gathered is freely available to the petroleum industry.
The new investment adds to an earlier grant of $100 million (Aus.) and is designed to boost the Australian economy struggling with the COVID-19 pandemic and a domestic recession.
The Minister for Resources and Northern Australia, Keith Pitt, said the EFTF program will aid the next round of investment and job creation in the resources sector.
Phase 1 of the program began in Northern Australia 2016 and was due to conclude at the end of June. Pitt said the additional funding will extend the program for another 4 years.
The industry body Australian Petroleum Production and Exploration Association (APPEA) welcomed the new funding.
APPEA Chief Executive Andrew McConville said the challenging conditions facing the industry, both globally and in Australia, mean it is more important than ever to ensure the policy and regulatory framework facing the oil and gas industry in Australia remains competitive and encourages further exploration and development activity.
Exploration & Development Quick Takes
CNOOC: Huizhou 26-6 discovery further proves exploration potential
The Huizhou 26-6 discovery in the eastern South China Sea is expected to be the first mid-to-large sized condensate oil and gas field in the shallow water area of Pearl River Mouth basin, according to CNOOC Ltd.
The structure, in Huizhou Sag in Zhu1 Depression lies in average water depth of 113 m. The discovery well, HZ26-6-1, was drilled and completed at a depth of 4,276 m and encountered oil and gas pay zones with a total thickness of 422.2 m. The well was tested to produce around 2,020 b/d of oil and 15.36 MMcfd of gas.
The successful exploration of Huizhou 26-6 is the first time that the company has achieved commercial and highly productive oil and gas flow in buried hill exploration in the eastern South China Sea, marking an exploration breakthrough in Paleogene and buried hill complex oil and gas reservoir in Pearl River Mouth basin, and further proves the exploration potential in the new field, the company said.
Aker submits PDO for Hod field redevelopment
Aker BP has submitted a plan for development and operation (PDO) to the Ministry of Petroleum and Energy for a redevelopment of Hod field in the Valhall area in the North Sea.
The field was in production via a dedicated unstaffed wellhead platform, remote-controlled from Valhall, from 1990 until it was shut down in 2012. There has also been limited production from the field via the Valhall Flank South platform.
Only 20% of the resources in place had been produced at the time the Hod wellhead platform was shut down. The shutdown platform will be removed in accordance with a previously approved cessation plan, while redevelopment will include installation of a new normally unmanned platform tied-back to and remotely controlled from the Valhall Central Complex (OGJ Online, June 17, 2020). The new platform, Hod B, is a copy of Valhall Flank West and will be delivered with an electric lifeboat monitored from Valhall field center. The crane and seawater pump will also be electric. The plan is to drill five wells with side-tracks to increase the recovery factor. Recoverable reserves are estimated at 40 MMboe.
The plan is to resume production at the beginning of 2022. Total investment costs for the redevelopment are estimated at 5.7 billion kroner.
Hod lies in Block 2/11 in the southern part of the Norwegian sector of the North Sea, some 12 km south of Valhall Central Complex, 6 km south of the Valhall Flank South platform.
Aker is operator with 90%. Pandion Energy AS holds the remaining 10%.
Gazprom advances Arctic shelf development with start of ice-resistant platform construction
Construction of an ice-resistant platform (ICP) for Gazprom’s Kamennomysskoye-Sea field on the Arctic shelf has begun.
Gazprom estimates the gas field, in the Ob Bay of the Kara Sea, holds some 555 billion cu m of gas reserves. Production operations are expected to begin in 2025, with a design output (for Cenomanian deposits) of 15 billion cu m/year.
The field lies in a marine environment characterized by low temperatures (up to minus 60 degrees Celsius), heavy storms, shallow depths (5–12 m), and thick and dense freshwater ice. Gazprom said development of the field would be the first shelf project in the world to be implemented in such extreme ice and climate conditions.
The platform will be more than 135 m long, 69 m wide, 41 m tall from the base to the helicopter pad and will weigh over 40,000 tons. The structures placed on the platform will include auxiliary drilling modules, operational and energy complexes, and living quarters. It will be used to build 33 main directional production wells. Another 22 wells for production maintenance are expected to be placed on satellite ice-resistant conductor platforms without permanent personnel at a later date.
Extracted gas will be fed into pipelines and arrive onshore into a comprehensive gas treatment unit and a booster compressor station to then route to Russia’s Unified Gas Supply System.
The support structure will be V-shaped, and nearly all of the facility’s equipment will be encased in the hull. The ICP will be firmly fixed on the muddy bottom of Ob Bay with the help of a piled gravity base foundation: the platform will be placed on the seabed, the underwater part of the ICP will be filled with seawater and then fixed in place with 56 piles more than 2 m in diameter, driven 47 m into the seabed.
Separate components of the platform will be constructed in Astrakhan, Kaliningrad, Severodvinsk, Yekaterinburg, and Rybinsk and final assembly into one piece in Kaliningrad. A summer 2024 tow of the ICP to the field is planned.
Krasnoyarskgazprom Neftegazproject is the general designer and contractor for construction of the platform and Gazprom Dobycha Yamburg is operator and holder of the exploration and production license.
Drilling & Production Quick Takes
Baytex revises guidance as shut-in volumes restart
Baytex Energy Corp., Calgary, resumed production in June of some previously shut-in crude oil volumes and has revised production guidance for 2020 to 78,000-82,000 boe/d from the May expectation of 70,000-74,000 boe/d.
Some 25,000 boe/d of production (80% heavy oil) had been shut-in and remained off-line for April and May. As operating netbacks improved in June, the company began plans to bring 80% of these volumes back on-line. For the second half of 2020, 5,000 boe/d of heavy oil production is expected to remain shut-in.
Capital spending for the year is still expected to be $260-290 million—a 50% reduction from its original plan of $500-575 million. With the revised program, drilling operations in Canada were suspended and a moderate pace of activity in the Eagle Ford is expected.
Production in this year’s second quarter is expected to be 72,000-73,000 boe/d. If operating netbacks change, the company can shut-in additional volumes or restart wells in short order, it said.
Petrobras, partners increase presalt production in Brazil with second FPSO
Production of oil and natural gas has started from the Iara license in Brazil’s deepwater Santos Basin presalt from Petroleo Brasileiro SA’s (Petrobras) P-70 FPSO, reported BM-S-11A consortium partner Total.
The new unit, with capacity to process up to 150,000 b/d of oil and treat up to 6 million cu m of natural gas, is expected to double the overall production capacity of the Iara cluster—initiated in November 2019 on Berbigão field with the FPSO P-68—and will produce the reserve of Atapu field.
P-70 will operate 200 km off the coast of the state of Rio de Janeiro in a water depth of 2,300 m, with interconnection of up to eight producing wells and eight injector wells.
“The group production in the country should reach 150,000 b/d of oil by 2025 thanks to ongoing developments on the Iara, Mero, and Lapa projects,” said Arnaud Breuillac, president, exploration and production at Total.
The BM-S-11A license comprises parts of Sururu, Berbigão, and Atapu fields. Total acquired a 22.5% working interest the license in January 2018 as part of an alliance with operator Petrobras (42.5%), Shell Brasil Petróleo Ltda. (25%), and Petrogal Brasil SA (10%).
Neptune Energy begins Dugong drilling campaign
Neptune Energy spudded the Dugong exploration well in the Norwegian sector of the North Sea, the first Neptune-operated exploration well in the area since the Duva discovery in 2016.
The well will be drilled with a down-dip sidetrack from the main bore, subject to the results of the main bore. Dugong will be drilled by the Deepsea Yantai, a new semi-submersible rig owned by CIMC and operated by Odfjell Drilling.
Dugong lies 158 km west of Florø, Norway, at a water depth of 330 m, close to existing production facilities of Snorre field. The reservoir lies at a depth of 3,250-3,400 m.
Neptune is operator of Dugong with 40%. Partners are Concedo 20%, Petrolia NOCO 20%, and Idemitsu Petroleum Norge 20%.
PROCESSING Quick Takes
Sasol commissions new units at Louisiana petrochemical complex
Sasol Ltd. has started up the fifth and sixth of seven new production units at its Lake Charles Chemicals Project (LCCP), an integrated ethane cracker and downstream derivatives complex under progressive commissioning since 2019 in Westlake, La., near Lake Charles (OGJ Online, Dec. 17, 2019).
The LCCP’s 30,000-tonnes/year Guerbet alcohols unit—equipped with Sasol’s proprietary technology—reached beneficial operations (BO) on June 19 following the operator’s achievement of BO for the complex’s new Ziegler alcohols unit—which, also based on proprietary Sasol technology, adds 173,000 tpy of alcohol and 32,000 tpy of alumina production capacities also—on June 16, Sasol said.
With commissioning of the Guerbet and Ziegler alcohol units now completed, 100% of LCCP´s specialty chemicals units are now online and 86% of the complex’s total nameplate capacity now operational, the company said.
The last remaining unit to come online at LCCP will be the low-density polyethylene plant, which was damaged during a fire in January 2020. This is on track for beneficial operation by the end of September, as per previous guidance. At the end of May, the LCCP capital expenditure was tracking the previously communicated guidance of $12.8 billion.
Startup of the new units follows commissioning of LCCP’s 100,000-tonnes/year ethoxylates unit in January and the 1.5 million-tpy ethane cracker, linear low-density polyethylene unit, and combined ethylene oxide-ethylene glycol unit in 2019.
Sasol said it expects to reach BO at LCCP’s low-density polyethylene plant—the complex’s seventh and final unit damaged during a mid-January fire—by the end of September (OGJ Online, Jan. 14, 2020).
At the end of May, total LCCP capital expenditure amounted to $12.8 billion, according to the operator.
ZPC lets contract for Zhoushan integrated complex
Zhejiang Petroleum & Chemical Co. Ltd., also known as Zhejiang Petrochemical Co. Ltd. (ZPC), has let a contract to Axens Group, Rueil-Malmaison, France, to supply catalysts for units to be built as part of the second phase of its 800,000-b/d integrated refining and petrochemical complex in Zhoushan, Zhejiang Province, China (OGJ Online, June 15, 2020; Nov. 6, 2018).
As part of the contract, Axens will deliver catalysts for the methylacetylene and propadiene and phenylacetylene C3 liquid-phase selective hydrogenation units, as well as catalysts for the pyrolysis gasoline (Pygas) first and second-stage selective hydrogenation units of the Zhoushan complex’s Phase 2 two-train, 2.8-million tonnes/year ethylene cracker currently under construction, the service provider said.
The new contract follows ZPC’s earlier contract award to Axens to supply catalysts for Pygas selective hydrogenation units at the grassroots 1.4-million tpy ethylene plant built as part of the complex’s Phase 1 development, Axens said. First commissioned in late 2019, the Phase 1 petrochemical plant quickly began producing olefins and aromatics to targeted specifications, according to the service provider.
Axens said it began initial technical discussion with ZPC on the complex in 2016 after the operator started its first design studies for the project.
The first 400,000-b/d phase of ZPC’s complex was commissioned in late 2018, while Phase 2—which will nearly double processing and production capabilities at the site—is scheduled for commissioning during first-quarter 2021.
ZPC—a joint venture of China-based Rongsheng Holding Group Co. Ltd. 51%, Juhua Investment Co. Ltd. 20%, Tongkun Investment Co. Ltd. 20%, and Zhoushan Marine Comprehensive Development and Investment Co. Ltd. 9%—previously said it would invest about 160 billion yuan to complete both phases of the project.
In late 2018, Saudi Aramco also signed a memorandum of understanding with ZPC to acquire ownership interest in the complex, agreeing to purchase the government of Zhoushan’s 9% interest in the project and provide long-term crude supplies to the complex.
Petrobras’s REPLAN refinery boosts output of IMO 2020-compliant fuel
Petróleo Brasileiro SA’s 434,000-b/d Paulínia Refinery (REPLAN) refinery in Paulínia, São Paulo, has broken its monthly production record for production of low-sulfur fuel oil (LSFO) that complies with the International Marine Organization’s (IMO) new regulations requiring ships to use marine fuels with a sulfur content below 0.5%
In May, REPLAN’s production of IMO 2020-compliant LSFO—or Bunker 2020—reached 123 cu m, which was 36% higher from the refinery’s previous production record of 90,000 cu m in January, Petrobras said on June 24.
During the first 5 months of 2020, REPLAN was responsible for 12% of all Bunker 2020 fuel produced by Petrobras refineries, the operator said.
REPLAN’s Bunker 2020 production is transported by pipeline to the Barueri onshore terminal, where it is stored to be sent via pipeline to the Porto de Santos in Santos, São Paulo, for loading to ships.
TRANSPORTATION Quick Takes
Whistler pipeline secures $325-million construction investment
Whistler Pipeline LLC received $325 million from Global Infrastructure Partners (GIP) to fund construction of the 500-mile, 2-bcfd Whistler natural gas pipeline. Whistler, expected to enter service third-quarter 2021, will connect the Permian basin to Agua Dulce hub near Corpus Christi, Tex.
Whistler consists of a 450-mile, 42-in. OD transmission line running between the Waha hub and Agua Dulce and a 50-mile, 36-in. OD lateral providing Waha connectivity to Midland basin gas processors (OGJ Online. Nov. 15, 2019).
The pipeline is underpinned by long-term, contractual minimum volume agreements from investment grade Permian producers, providing them with direct access to South Texas, LNG, and Mexican gas markets.
GIP’s credit fund, GIP Spectrum Fund LP, along with its affiliates and co-investors purchased $325 million of an aggregate $400 million of senior secured bullet notes in Whistler Pipeline LLC. Whistler is owned by MPLX LP, WhiteWater Midstream, and a joint venture of Stonepeak Infrastructure Partners and West Texas Gas Inc.
Cyprus LNG terminal gets eight construction supervision bids
Cyprus’ state Natural Gas Infrastructure Co. (ETYFA) received eight bids for supervising construction of its planned 600,000-tonne/year LNG terminal. ETYFA said the floating storage and regasification unit (FSRU)-based terminal, stationed in Vasilikos Bay, will be completed by end-2021 or early 2022, including a mooring jetty, natural gas pipeline, and other infrastructure.
Bidding companies included: DNV GL, Technip E&C Ltd., AMEC Foster Wheeler Iberia SLU, RINA Consulting SPA, and consortiums or joint ventures consisting of MITAS Generators Ltd., Kelberry Ltd Joint Venture, and MT Milan Tractor SPA; EPCM Consultants SA (Pty) Ltd., Global Maritime Consultancy Ltd., and IX Engineers (Pty) Ltd. (collectively Abamba Ltd.); Lloyd’s Register, Sofregaz, Rogan Associates; and Hill International NV with Bureau Veritas Solutions Marine & Offshore.
The terminal secured a €101-million grant from the European Union under its Connecting Europe Facility (CEF), with the Cyprus Electricity Authority contributing €43 million and taking a 30% share in ETYFA. ETYFA will seek the balance of project funding from sources such as the European Investment Bank and European Bank for Reconstruction and Development.
ETYFA in December 2019 signed a contract with a consortium led by China Petroleum Pipeline Engineering Co. Ltd. to build the terminal. Other members of the consortium include Hudong-Zhonghua Shipbuilding, Metron SA, and Wilhelmsen Ship Management.
TC Energy lets construction contract for Keystone XL in Canada
TC Energy Corp. let a contract to Michels Canada to construct some 260 km of the Keystone XL Pipeline project in Alberta.
Construction is scheduled to begin this summer near Oyen, Alta. and finish near Hardisty, Alta. in the spring of 2022.
In March, TC Energy said it would proceed with construction of its 1,210-mile crude oil pipeline that will carry 830,000 b/d from Hardisty, Alta., to Steele City, Neb., where it will connect with the company’s existing system to reach US Gulf Coast refiners. The pipeline is expected to enter service in 2023.