OGJ Newsletter
GENERAL INTEREST Quick Takes
Chevron promotes proposed sale of North West Shelf project assets
Chevron has begun promotion of its proposed sale of the company’s interest in the North West Shelf project in Western Australia with a flyer sent to potential buyers, Australian media reported.
Chevron said in June it had plans to sell its 16.6% interest in the LNG project anchored by production from North Rankin and Goodwyn gas-condensate fields in the offshore Carnarvon basin (OGJ Online, June 29, 2020).
Chevron has been a member of the NWS joint venture since the outset more than 3 decades ago.
Chevron and its banker UBS are reported to have sent out a detailed promotion to Australia’s large superannuation and infrastructure funds along with global wealth funds, oil and gas companies, and other prospective buyers.
The asking price is believed to be $3-3.5 billion.
The NWS project has an LNG capacity of 16.9 tonnes/year through five LNG trains and a history of more than 500 LNG cargos shipped to various customers since the project came on stream in 1989.
Woodside Petroleum Ltd., NWS project operator and 16.6% interest holder, has already flagged its interest in the Chevron stake.
Other joint venture partners are BHP Group, BP, Royal Dutch Shell, the Japanese combine of Mitsubishi-Mitsui and CNOOC of China.
Woodside pre-empts Sangomar sale to Lukoil
Woodside Petroleum has pre-empted the sale of Cairn Energy’s 40% share of the Rufisque Offshore, Sangomar Offshore, and Sangomar Deep Offshore (RSSD) joint venture offshore Senegal to Russia’s Lukoil (OGJ Online, July 27, 2020).
Woodside will purchase Cairn’s interest in the permits, which include Sangomar oil field development, for an up-front purchase price of $300 million plus working capital adjustments. These include reimbursement of Cairn’s development capital expenditure incurred since the beginning of January.
Contingent payments of up to $100 million are linked to commodity price and timing of first oil.
The economic effective date for the purchase is Jan. 1, 2020.
Woodside said the participating interest may be reduced to the extent that JOV participant FAR Ltd. or La Societe Des Petroles Du Senegal exercise their pre-emption rights in respect of the Cairn-Lukoil transaction.
The acquisition is subject to approval by the Senegalese government, along with Cairn Energy shareholder approval and other conditions precedent.
Woodside said it will fund the acquisition from cash reserves.
Woodside’s equity in the RSSD joint venture upon completion of the sale will increase to 68% and the company will remain as operator.
It is not known whether Woodside will sell down some of this interest, but managing director Peter Coleman said the company looks forward to completing the transaction with Cairn and working with all stakeholders, including potential new joint venture partners, to deliver Senegal’s first oil, which is targeted for 2023 following a final investment decision for the project earlier this year.
Oxy to sell certain land grant assets for $1.33 billion
Occidental Petroleum Corp. has agreed to sell Wyoming, Colorado, and Utah land grant assets to Orion Mine Finance for $1.33 billion. The transaction, which is expected to close in this year’s fourth quarter, has a footprint of about 4.5 million mineral acres and 1 million fee surface acres. Occidental will retain all cash flow from currently producing oil and gas properties on the position, which are primarily cost-free royalties. Not included in the sale is some 2.5 million mineral acres derived from the land grant in Colorado, including Occidental’s core Denver-Julesburg basin position.
“This transaction significantly advances the progress against our $2 billion plus divestiture target for 2020,” said Vicki Hollub, Oxy president and chief executive officer. “We will retain our core oil and gas assets in the Rockies, including the prolific DJ basin in Colorado and the highly prospective Powder River basin in Wyoming.”
With the deal, Orion is acquiring mineral rights to the world’s largest known trona deposit. Trona is a mineral used to make soda ash, the principal ingredient in baking soda, global glass manufacturing, pollution control systems, as well as other critical chemical applications.
The acquired properties will be held under Sweetwater Royalties, a new base metals and industrial minerals royalty company, managed by Orion.
Orion Resource Partners specializes in institutional metals and mining investment strategies in the base and precious metals space.
Exploration & Development Quick Takes
Barron Petroleum makes Permian basin discovery
Barron Petroleum, Graham, Tex., made a Permian basin field discovery in Val Verde County, Tex., estimated to hold 417 bcf, or 74.2 million bbl in oil and gas reserves, according to a company statement Aug. 20. The privately owned company has been working with geoscientist William J. Purves on the project since 2018.
The Sahota Carson 20BU #1 was drilled with a company rig to 12,650 ft TD. About 70 ft of gas-bearing Strawn porosity was encountered. The discovery lies 6 miles southwest of Massie (Strawn) field that has produced over 157 bcf.
Following stimulation, the well tested at rates up to 5 million cu ft/d of gas.
Barron presently holds development rights to over 13,000 acres over the prospect, which was developed with the use of a 3D seismic survey. The company has identified 67 high-graded Strawn formation locations and is refining future location placement based on results of the first well. The company is also contemplating testing and potential development in the Canyon formation at a depth of 9,000 ft and Ellenburger at about 16,000 ft.
The discovery is near existing infrastructure, the company said, and the next step, according to Manjit (Roger) Sahota, president and chief executive officer, is “evaluating means to further enhance location selection and well performance.” The company intends to continue its drilling program and “figure out how to develop the lease or get someone to join the venture,” he said.
Barron Petroleum holds 100% working interest in the prospect.
Qatar Petroleum enters exploration agreement in Angola
Qatar Petroleum entered into a farm-in agreement with Sonangol, the national oil company of Angola, and Total to acquire a 30% participating interest in Block 48 offshore Angola.
Total and Sonangol agreed in 2018 to a 50-50 partnership in Block 48 deepwater exploration under a risk-service agreement. The block, with a drill ready opportunity, covers an area of 3,600 sq km and is expected to be drilled as part of a 2020-2021 drilling program.
The farm-in agreement is subject to customary approvals by the Angolan government. Upon receipt, Total, as operator, will hold 40% interest in the block while Sonangol and Qatar Petroleum each will hold 30%.
Block 48 lies in the ultradeep waters offshore Lower Congo basin 400 km northwest of Luanda and 200 km west of Soyo onshore facilities. Average water depth in the block is 2,500 m.
Deltic increases gas estimates at Selene, UK Southern North Sea
Deltic Energy PLC materially increased the estimated volume of gas compared and significantly increased the chance of success in the Selene prospect in the P2437 license area, UK Southern North Sea.
The improvements came from reprocessing existing 3D seismic and utilizing an innovative approach to depth conversion, the company said. The work was performed by a joint Deltic-Shell team after Shell farmed into the license in 2019. Further work was completed on the depositional environment, structural history, gas charge timing, and reservoir quality prediction.
Results from this technical analysis have increased P50 Selene gas initially in place (GIIP) by 44%, to 629 bcf from 437 bcf, while simultaneously improving the geological chance of success (GCoS) by 79%.
Further work will focus on potential development scenarios, estimation of recovery factors, and project economics which are required to support the well investment decision prior to the proposed 2022 drilling activity.
Deltic is operator in license P2437 with 50% interest. Shell holds the remaining 50%.
TPAO discovers large gas field in Western Black Sea
Türkiye Petrolleri Anonim Ortaklı˘gı (TPAO) discovered a large gas field in the Western Black Sea. It is the first gas discovery in Turkish ultradeep water.
Tuna-1 was drilled with 6th generation drillship Fatih in Block AR/TPO/KD/C26-C27-D26-D27. The well is in 2,115 m of water and reached final total depth of 4,525 m. It encountered more than 100 m of natural gas bearing reservoir in Pliocene and Miocene sands.
Based on data collection and geophysical studies, the prospect has potentially 11 trillion cu ft of gas (about 2 billion bbl recoverable oil equivalent) which represents the largest discovery in the Turkish exclusive economic zone and the entire Black Sea.
TPAO has 100% equity in the block.
Drilling & Production Quick Takes
Turkmenistan: Tadjibay gas field production to ‘significantly’ increase in coming years
Turkmengeology State Corp. expects production of natural gas from Tadjibay gas field in Turkmenistan’s Karakum Desert to “significantly” increase with the commissioning of new production wells in the coming years after “an industrial inflow of natural gas with a daily flow rate of 400,000 cu m was received” at the field, state media reported Aug. 13.
The prospect well drilling was carried out by specialists of the Lebapnebitgazgozleg expedition. The productive layer of the new well lies at a depth of 3,700 m.
Tadjibay, in the south of the Lebap region, was commissioned in December 2019. Industrial production is carried out by specialists from the Lebap Gas Production Dept. of the Turkmengas State Concern. It is reported that tens of millions of cu m of gas have already been recovered obtained from the first production well.
In October 2019, at the Oil and Gas of Turkmenistan-2019 conference, the country estimated its hydrocarbon resources at more than 71 billion tons of oil equivalent, comprised of more than 20 billion tons of oil and more than 50 trillion cu m of natural gas. The largest gas reserves are in Galkynysh field with 27.4 trillion cu m of gas.
Spirit drills dry well near North Sea Ivar Aasen field
Spirit Energy Norway AS, operator of production license 780 will plug well 16/1-33 S in the central part of the North Sea (OGJ Online, June 22, 2020). The well is dry.
The well was drilled the by the Leiv Eiriksson semisubmersible drilling rig about 5 km north of Ivar Aasen field and about 200 km west of Stavanger to respective vertical and measured depths of 3,042 and 3,158 m subsea. It was terminated in the Skagerrak formation in the Upper Triassic. Water depth at the site is 116 m.
The objective of the exploration well, the first in the license, was to prove petroleum in reservoir rocks in the Middle Jurassic (Sleipner formation) and the Upper Triassic (Skagerrak formation).
The well encountered the Sleipner formation with a thickness of about 205 m, with 85 m of aquiferous sandstone layers of moderate to very good reservoir quality. The Skagerrak formation came in at a thickness of about 75 m, with a total of 15 m of aquiferous sandstone layers with moderate to good reservoir properties.
The well was not formation-tested, but data acquisition was carried out.
The Leiv Eiriksson rig will now proceed to drill wildcat well 6507/4-1 in production license 1009 in the southern part of the Norwegian Sea, where ConocoPhillips Skandinavia AS is operator (OGJ Online, Aug. 3, 2020).
Orca Energy to increase production at Songo Songo, Tanzinia
Orca Energy Group Inc. will support production on Songo Songo Island, Tanzania, with new compression and is exploring options for additional production with workovers and new drilling.
The company signed a contract with China Petroleum and Technology Development Co. for design, supply, installation, and commissioning of natural gas compressors within the Songas gas processing facility. The compressors will work with previously installed refrigeration to support declining reservoir pressure and sustain maximum production, subject to demand, through end of the production sharing agreement in 2026.
The compressors are scheduled to be operational by the end of second-quarter 2022. The compressors are forecast to cost $38 million of which $6 million was expended in 2019 and $19 million will be incurred over the remainder of 2020.
The company is preparing to work over onshore well SS-10 in early 2021. A decision on remedial work for two older onshore wells, SS-3 and SS-4, will be taken once a major subsurface review of Songo Songo gas field is finalized in fourth-quarter 2020. This review, which includes a rebuild of static and dynamic reservoir models, will enable the company to assess whether either workover of SS-3 and SS-4 or drilling of new infill wells will be preferable over the remainder of the license period. The review will also incorporate latest trends in pressure measurements to allow full re-assessment on contingent and prospective resource potential and associated economics of drilling and developing natural gas in Songo Songo North and Songo Songo West areas.
PROCESSING Quick Takes
China’s Baofeng Energy lets contracts for coal-to-olefins plant
Ningxia Baofeng Energy Group Co. Ltd. has let two contracts to KBR Inc. to license technology and provide design for new units at its grassroots 500,000-tonnes/year coal-to-olefins (CTO) complex and 500,000-tpy C2-C5 comprehensive utilization project to be built in Ningdong Town, Kingwu City, Ningxia Province, China.
As part of the contracts, KBR will deliver process technology licensing and process design packages for its proprietary Selective Cracking Optimum Recovery (SCORE) steam cracking and MTO recovery technologies for the project that—with a planned olefins production capacity of 1 million tpy—will become the largest single-train methanol-to-olefins (MTO) plant in the world once completed, the service provider said on Aug. 24.
The SCORE steam cracking unit will convert the ethane and propane feedstock into ethylene and propylene, which will subsequently be separated and further purified in the MTO recovery section to ensure requisite quality specifications for production of polymer-grade ethylene and propylene, KBR said.
KBR revealed neither a value of the contracts nor a timeline for the project’s completion.
The newly awarded contracts follow Baofeng Energy’s Dec. 3, 2019, announcement of the release of an environmental impact assessment for a project that would involve construction of a newly proposed 500,000-tpy CTO complex at Ningdong, which would also include a new 1.5-million tpy methanol plant (OGJ Online, June 29, 2020).
Baofeng Energy recently commissioned a separate MTO plant an as part of its existing 600,000-tpy CTO complex at Ningdong Energy Chemical Base in Yinchuan City, Ningxia Province, China, as well as let an additional contract for a third methanol synthesis plant to be built at the site (OGJ Online, Aug. 5, 2020).
Baofeng Energy’s Ningdong CTO complex currently produces 4 million tpy of methanol, 1.2 million tpy of olefins, 4 million tpy of coke, and 780,000 tpy of specialty chemicals from coal-derived feedstock.
Hengyi lets contract for alkylation unit at Brunei refinery
Zhejiang Hengyi Group Co. Ltd. subsidiary Hengyi Industries Sdn. Bhd. has let a contract to a division of E.I. DuPont de Nemours & Co. to license technology for an alkylation unit to be built at Hengyi Industries’ 8-million tonnes/year integrated refining and petrochemical complex on Pulau Muara Besar island in Brunei.
DuPont Clean Technologies will supply its proprietary technology licensing, engineering services, and equipment for an 800,000-tpy (20,750-b/sd) STRATCO alkylation unit to enable the Pulau Muara Besar refinery to generate low-sulfur, high-octane, low-Reid vapor pressure (RVP) alkylate with zero olefins and zero aromatics for production of gasoline that complies with China 6-quality standards for cleaner fuels, the service provider said.
The refinery will use alkylate produced by the new unit to produce fuels for supply to Brunei’s domestic market as well as for export abroad, according to DuPont.
While DuPont did not disclose a value of the contract award, the service provider did confirm the new STRATCO alkylation unit is scheduled for startup in 2023.
Equivalent to and in some respects more stringent than Euro 6-quality fuel standards, China 6 emission standards taking effect in January 2021 cap the maximum sulfur content of gasoline and diesel at 10 ppm, according to China’s Ministry of Environmental Protection.
Hengyi Industries’ contract award for the new alkylation unit follows the operator’s start of Euro 5-quality transportation fuels to Brunei’s domestic market in May, according to a release from the company.
On May 18, Hengyi Industries delivered its first supply of gasoline, diesel, and Jet A1 fuel from the Pulau Muara Besar refinery to Brunei Shell Marketing Co. Sdn. Bhd. (BSM) as part of a long-term domestic market distribution agreement with BSM signed on Sept. 18, 2019, Hengyi Industries said.
As part of the agreement, the Pulau Muara Besar refinery will regularly supply BSM 190,778 bbl of gasoline, 159,924 bbl of diesel, and 76,807 bbl of jet fuel to meet Brunei’s monthly domestic demand for petroleum products.
The May 2020 supply milestone follows official startup of the Pulau Muara Besar refinery’s first $3.45-billion phase in November 2019, Hengyi Industries said.
A second phase, which includes plans for further expansion of the site’s aromatics and cracker plant as well as increasing the refinery’s crude processing capacity by 14 million b/d to 22 million b/d, is scheduled for commissioning in 2022, according to information on operator’s website and local media reports from China and Brunei.
The Pulau Muara Besar refinery is jointly owned by Hengyi (70%) and the government of Brunei (30%).
TRANSPORTATION Quick Takes
Gaz-System awards Baltic Pipe support contract
Polish natural gas transmission system operator Gaz-System SA awarded Nova People–together with its subcontractors Fulkrum Technical Resources (UK) and PUI EKO-INWEST SA (Poland)–a contract to provide specialized personnel to support survey, construction, and inspection for both offshore pipelay and landfall operations of its 275-km, 10-billion cu m/year Baltic Pipe project.
Gaz-System is responsible for developing the 36-in. OD pipeline from Faxe, Denmark, to landfall at Pogorzelica, Poland. Energinet.dk will take it across Denmark and finalize its route and offshore tie-in to Europipe. The project has an expected completion date of fourth-quarter 2022, with Saipem Ltd. starting pipelay third-quarter 2021.
Baltic Pipe is being co-financed by the European Union to create a new inter-European gas corridor supplying gas directly from Norway via Europipe to markets in Denmark, Poland, and adjacent countries.
Gaz-System earlier this year hired Germanischer Lloyd Industrial Services GMBH, part of international DNV GL group, to provide marine warranty surveyor services for the largely subsea natural gas pipeline (OGJ Online, June 29, 2020).
Brooge hydrotesting Phase II UAE storage
Brooge Energy Ltd., a midstream oil storage and service provider outside the Strait of Hormuz, adjacent to the Port of Fujairah in the UAE, through its wholly-owned subsidiary Brooge Petroleum and Gas Investment Co. FZE, is hydrotesting its eight-tank Phase II storage expansion.
Completion of Phase II construction will increase Brooge’s total oil storage capacity to 6.3 million bbl, from its current capacity of 2.5 million bbl.
A planned Phase III expansion would bring total storage capacity for crude oil, fuel oil, and clean products up to 28.3 million bbl (OGJ Online, July 15, 2020). Phase III will be built in conjunction with a planned 180,000-b/d refinery.
Cheniere awards Worley MSA for Corpus Christi LNG
Cheniere LNG has awarded Worley a master services agreement to provide civil, structural, mechanical, instrumentation and electrical, heating, ventilating, and air conditioning, and marine construction services at Cheniere’s 10-million tonne/year Corpus Christi liquefaction plant. Worley will provide a nested, onsite team to execute small capital construction projects at the Corpus Christi plant.
Corpus Christi Trains 1 and 2 are operational. Train 3 is under construction and expected to be completed in 2021, bringing total capacity to 13.5 million tpy.
Worley recently supported Cheniere with project and operations standards development to maintain and improve all Cheniere assets.