GENERAL INTEREST Quick Takes
Santos, Oil Search agree to implement merger
Santos Ltd. and Oil Search Ltd. entered a Merger Implementation Deed under which the two companies will combine via a Scheme of Arrangement.
The move follows the companies successfully completing reciprocal confirmatory due diligence.
Terms are the same as reported in early August, namely that Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search shares held on Aug. 2, 2021.
If the merger is implemented, Oil Search shareholders will own about 38.5% of the combine. Santos shareholders will have 61.5%.
That combined entity is expected to have a market capitalization of $21 billion (Aus.) and the merger would unlock pretax synergies of US $90-115 million/year, Santos has said.
Oil Search directors have unanimously recommended that shareholders vote in favor of the merger, subject to an independent expert concluding that the transaction is in the best interests of Oil Search shareholders and provided there is no superior proposal prior to implementation date.
The merger deal must also be approved by the Papua New Guinea government through the PNG court.
The combine’s head office would be in Adelaide and led by Kevin Gallagher, current Santos managing director and chief executive officer. Oil Search would have three non-executive directors on the board.
The merged entity would have a diversified portfolio of high-quality, long-life assets in Australia, Timor Leste (in the Timor Sea), Papua New Guinea, and the US (particularly Alaska).
Novatek wins Arkticheskoye, Neytinskoye fields
PAO Novatek’s wholly owned subsidiary, Yamal LNG Resource, won the geological survey, exploration, and production licenses for Arkticheskoye and Neytinskoye fields on the Yamal Peninsula in the Yamal-Nenets Autonomous Region. The fields have combined estimated hydrocarbon reserves of 2.9 billion boe, including 413 billion cu m of natural gas and 28 million tons of liquids, according to the Russian hydrocarbon classification system.
The new license areas are close to Novatek’s existing assets on the Yamal Peninsula and expand its resource base for implementing LNG projects.
License terms are for 27 years and resulted in cumulative one-time payments for the subsoil use of RR 13.155 billion ($180 million).
Modules for Train 1 of Novatek’s 19.6-million tonne/year (tpy) Arctic LNG 2 plant are en route from Wison Offshore & Marine’s fabrication yard in Zhoushan, China, to the Gydan Peninsula for installation on the plant’s gravity-based structure. Train 1 is expected to start operations in 2023, with the subsequent two 6.6 million tpy trains following at 1-year intervals.
Arctic LNG 2 will initially use gas from Utrenneye field on the Gydan Peninsula in Yamal-Nenets.
Southwestern updates 2021 guidance with Indigo deal completion
Southwestern Energy Co. updated its 2021 guidance, incorporating Haynesville assets acquired in the completed acquisition of Indigo Natural Resources.
In June, the Houston area company announced its deal to acquire the Haynesville shale producer for $2.7 billion (OGJ Online, June 2, 2021).
In the Haynesville, Southwestern Energy expects to complete the 2021 capital investment program currently in progress, and will average 6 rigs and 2 completion crews, placing 15-20 gross wells to sales. To incorporate the investment in the Haynesville, Southwestern’s expected 2021 capital investment has increased to $1.085-1.145 billion, which also includes the associated increase in capitalization of interest and expense.
Third-quarter 2021 production is expected to reach 302-310 bcfe (18% liquids), fourth-quarter production is expected to be 370-380 bcfe (14% liquids), and total year 2021 production is guided at 1,217-1,235 bcfe (18% liquids).
Free cash flow generation for 2021 is expected to increase to $425-475 million.
The acquisition expands the company’s opportunity set, “adding high-margin Haynesville production and substantial core drilling inventory while providing additional global market access through the LNG corridor,” said Bill Way, president and chief executive officer, in a Sept. 1 statement.
Exploration & Development Quick Takes
ExxonMobil makes oil discovery at Stabroek block offshore Guyana
Stabroek block partners made another oil discovery offshore Guyana, operator ExxonMobil said in a release Sept. 9.
The Pinktail well encountered 220 ft (67 m) of net pay in high-quality oil-bearing sandstone reservoir. Pinktail lies some 21.7 miles (35 km) southeast of the Liza Phase 1 development, which began production in December 2019, and 3.7 miles (6 km) southeast of Yellowtail-1. Pinktail was drilled in 5,938 ft (1,810 m) of water by the Noble Sam Croft.
“These discoveries are part of an extensive well program in the Stabroek block utilizing six drillships to test play extensions and new concepts, evaluate existing discoveries and complete development wells for the Liza Phase 2 and Payara projects,” said Mike Cousins, senior vice-president of exploration and new ventures at ExxonMobil.
In addition to successful appraisal of the Turbot discovery, the Turbot-2 well encountered 43 ft (13 m) of net pay in a newly identified, high-quality oil-bearing sandstone reservoir separate from the 75 ft (23 m) of high quality, oil bearing sandstone reservoir pay encountered in the original Turbot-1 discovery well.
The Turbot-2 discovery is another example of the additional pay found in deeper reservoirs such as those encountered at Whiptail, the company said. These results will be incorporated into future developments.
The Turbot-2 discovery lies some 37 miles (60 km) to the southeast of the Liza Phase 1 development and 2.5 miles (4 km) from Turbot-1. Turbot-2 was drilled in 5,790 ft (1,765 m) of water by the Noble Sam Croft.
The Stabroek block is 6.6 million acres. At least six FPSOs are expected to be online by 2027 with the potential for up to 10 FPSOs on the block to develop the current discovered recoverable resource base.
ExxonMobil affiliate Esso Exploration and Production Guyana Ltd. is operator with 45% interest. Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Petroleum Guyana Ltd., a subsidiary of CNOOC Ltd., holds 25%.
Energy Resources JV makes discovery at Lockyer Deep-1
A joint venture of Energy Resources Ltd. and Norwest Energy NL made a conventional gas discovery in the Lockyer Deep-1 wildcat onshore North Perth basin permit EP368 in Western Australia.
Gas has been encountered in the target Kingia and underlying High Cliff sandstone reservoirs.
Norwest Energy reports that logging-while-drilling resistivity separation indicates good inferred porosities throughout a gross interval of 26 m in the Kingia (4,041-4,067 m). Elevated gas readings continued to the top of Bit Basher shale at 4,109 m well depth.
Available data suggests that no gas-water contact is evident in the Kingia which supports the case for significant resource potential across the greater Lockyer Deep-North Erregulla Deep structure.
Elevated gas readings also have been observed in a gross interval of 42 m in the High Cliff reservoir (4,172-4,214 m).
Additional hydrocarbon potential, including oil shows, was encountered within a 158 m gross interval in the shallower Dongara-Wagina formations.
The joint venture is running a comprehensive wireline logging program across the entire bottom-hole section to appraise the gas-oil deliverability of all four hydrocarbon intervals. If positive results are obtained, the Lockyer Deep-1 well will be completed for production testing.
Lockyer Deep is a three-way dip structure, fault closed to the west.
The discovery lies in permit EP368, but the overall structure spills into the western sector of adjoining permit EP426. EP368 also contains the undrilled Greater Springy Creek prospect on trend to the north.
The Lockyer Deep discovery well lies 10 km north of Strike Energy-Warrego Energy’s 2018 West Erregulla gas discovery now being readied for development. It is also 15 km east of Mitsui-Beach Energy’s Waitsia producing gas field.
Energy Resources is operator of Lockyer Deep with 80% interest. Norwest Energy NL holds 20%.
PGNiG, ERU to begin joint exploration operations in Ukraine
Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) signed an agreement with ERU Management Services to acquire 85% of the shares of Karpatgazvydobuvannya LLC, the sole holder of the Byblivska license in Western Ukraine.
Karpatgazvydobuvannya holds a license to explore for and produce hydrocarbons in the western part of the Lviv Oblast, adjacent to the Polish border. The area is an analogue of Przemys´l, Poland’s largest natural gas field operated by PGNiG for more than 60 years, PGNiG said in a statement Aug. 30.
In accordance with the license work schedule agreed between the partners, preparations for spudding an exploration well are to be completed by end 2021. Drilling is scheduled for second-half 2022, followed by formation tests. If it delivers positive test results, the well will be connected to the Ukrainian gas network and brought onstream in 2023. Additional geophysical surveys of the license area are planned to help design additional wells, according to the statement.
“The agreement signed today marks a step in PGNiG’s strategy to expand its operations on foreign markets, being a part of the company’s efforts to diversify its sources and directions of natural gas supply,” said Paweł Majewski, president of the PGNiG management board.
Execution of the agreement was preceded by the receipt of relevant approvals from the Polish Competition and Consumer Protection Authority and its Ukrainian counterpart.
Drilling & Production Quick Takes
Neptune starts production at Duva field
Neptune Energy and its partners have started production from the Duva development in the Norwegian sector of the North Sea.
Duva oil and gas field, in production license 636, was discovered in 2016. The project was granted startup approval by the Norwegian Petroleum Directorate in July.
Duva was developed as a subsea installation with three oil producers and one gas producer, tied back to the Neptune Energy-operated Gjøa semi-submersible platform.
For efficiency, Duva was executed in parallel with the Gjøa P1 development which began production in February.
Duva lies 14 km northeast of Neptune Energy-operated Gjøa field at a water depth of 340 m. Estimated total reserves are 71 MMboe, of which 56% is gas. It is expected to add about 30,000 boe/d (gross) to the Gjøa infrastructure at plateau.
Electrified with hydropower from shore, CO2 emissions per boe on the Gjøa platform are less than half the average on the Norwegian Continental Shelf, Neptune said in a statement released Aug. 23.
Duva is expected to produce for about 10 years and contribute to extending the life of the Gjøa platform, which “will help lower Gjøa’s production costs per barrel, adding significant value for license partners and future tie-backs,” said Erik Oppedal, Neptune Energy’s projects and engineering director in Norway.
Neptune is operator with 30% interest. Partners are Idemitsu Petroleum Norge (30%), PGNiG Upstream Norway (30%), and Sval Energi (10%).
BW Energy: Hibiscus North reserves below pre-drill estimates
BW Energy Ltd. said planning for the next phase Hibiscus-Ruche development remains on track, but wireline logging operations and fluid sampling showed the recent oil discovery at Hibiscus North in the Dussafu block offshore Gabon showed lower volumes of hydrocarbons than expected.
BW Energy concluded the drilling and the logging of the exploration well, Hibiscus North (DHBNM-1). The well lies in a separate structure, some 6 km north-northeast of the Hibiscus discovery in 115 m of water depth. It was drilled to 3,336 m TD. Oil-bearing reservoir was encountered in the Upper Gamba sandstone and in the deeper Dentale formation.
Pending further analysis, the preliminary results indicate that the field could be incorporated into future development planning with a possible tie back to the Hibiscus Ruche development but with reserves below the lower end of the pre-drill resource estimate of 10-40 million bbl of oil, the company said in a Sept. 2 release.
The existing Hibiscus 2P gross recoverable reserves of 46.1 million bbl established by the Hibiscus well (DHIBM-1) and its appraisal sidetrack, drilled in 2019, remain unaffected and will form the core of the upcoming Hibiscus/Ruche development project, the company said.
The Borr Norve jack up is now continuing to finalize drilling operations and the well will then be plugged.
BW Energy is operator of the 850-sq km Dussafu block with 73.5% interest. Panoro Energy holds 17.5% and the Gabonese Oil Co. holds 9%.
PROCESSING Quick Takes
Valero restarting Louisiana refineries following Hurricane Ida-related shutdowns
Valero Energy Corp. is restarting operations of its refineries in Louisiana temporarily shuttered following extensive regional power outages in the aftermath of Hurricane Ida, which made landfall as a Category 4 storm near Port Fourchon on Aug. 29.
As of Sept. 14, refinery restarts were under way at subsidiaries Valero Refining Meraux LLC’s 125,000-b/d refinery in Meraux, La., and Valero Refining New Orleans LLC’s 215,000-b/d refinery in Norco, with teams diligently working in a safe and environmentally responsible manner to resume normal operations, Valero said in an e-mail to OGJ.
Restart activities also are under way at the Valero-Darling Ingredients Inc. 50-50 joint venture Diamond Green Diesel Holdings LLC’s (DGD) 290-million gal/year renewable diesel plant in Norco, La., according to the operator.
Valero additionally confirmed DGD’s 400-million gal renewable diesel expansion project at Norco still remains on track to be operational by the middle of fourth-quarter 2021.
The company did not reveal whether the Louisiana manufacturing complexes sustained any notable damages resulting from Ida.
Lukoil inks MOU for new complex at Perm refinery
PJSC LUKOIL is cooperating with local government on construction of a grassroots catalytic cracking complex at subsidiary LLC LUKOIL-Permnefteorgsintez’s 13.1-million tonnes/year (tpy) refinery in Russia’s North Urals region, on the north bank of the Kama River (OGJ Online, Aug. 20, 2021).
The operator signed a Sept. 8 memorandum of understanding (MOU) regarding the refinery investment project.
Alongside a 1.8-million tpy catalytic cracking unit featuring high flexibility to adjust its yield of propylene, the proposed grassroots complex also will include construction of a unit for production of high-octane gasoline components and associated off-site installations, LUKOIL said in August.
Part of LUKOIL’s ongoing program to upgrade and modernize its Russian refining system, the planned Perm catalytic cracking complex specifically aims to increase production of high-octane motor gasoline, as well as to begin production of polymer-grade propylene, which will be used as feedstock at the operator’s petrochemical production sites.
Scheduled for startup in 2026, the new complex follows the Russian Ministry of Energy’s agreement to an incentive plan granting LUKOIL an investment premium to the refundable excise tax on crude oil until Jan. 1, 2031, that will support completion of the project.
The Perm refinery currently has a catalytic cracking capacity of 9,300 b/d, according to the latest data available on the operator’s website.
In addition to commissioning new units earlier this year as part of its broader upgrading program at subsidiaries OOO LUKOIL-Volgogradneftepererabotka’s 14.8-million tpy Volgograd refinery in southern Russia and LLC Lukoil-Nizhegorodnefteorgsintez’s (NNOS) 17-million tpy Kstovo refinery in Russia’s Nizhny Novgorod region, LUKOIL said it also remains on schedule to fully commission NNOS’ deep conversion, delayed coking at Nizhny Novgorod by yearend.
BUA Group lets contract for Akwa Ibom integrated refining complex
BUA Group, Lagos, let a contract to OLAX Engineering Ltd. to provide project management consultancy (PMC) services for the front-end engineering design (FEED) of BUA Refinery’s 200,000-b/d grassroots integrated refining and petrochemical complex under development in Nigeria’s state of Akwa Ibom.
OLAX Engineering—which already has deployed a complete project management team overseeing all contractors and licensors on the project—is already executing its PMC responsibilities for the complex’s FEED phase from its UK and Nigerian offices, the service provider said on Sept. 7.
The contract follows BUA’s contract award to KBR Inc. to provide FEED for the petrochemicals portion of the project.
Through contractor KBR, the operator also previously awarded contracts to Lummus Novolen Technology GMBH to license its proprietary Novolen gas-phase polypropylene (PP) technology for a new 285,000-tonnes/year PP unit at the refinery, as well as deliver basic design engineering, training, services, and catalyst supply for the project, and to Axens Group for delivery of basic engineering, proprietary equipment, catalysts, adsorbents, as well as training and technical services, for the planned multibillion-dollar RFCC-based complex that—alongside propylene, an essential component for the petrochemical industry used in PP-based plastics and packaging—will produce high-quality gasoline, diesel, and jet fuel meeting Euro 5-quality specifications for the Nigerian and regional markets (OGJ Online, Apr. 29, 2021).
Sited in Akwa Ibom to take advantage of the location’s proximity to raw feedstocks and export routes to regional countries, BUA Refinery’s integrated complex will produce Euro 5-quality fuels—including gasoline, diesel, jet fuel, LPG, and polypropylene—to help reduce Nigeria’s dependence on imported fuels and petrochemicals, as well as reduce the country’s costs of shipping its domestic crude production abroad for refining by other operators.
In his most recent project update earlier this year, Abdul Samad Rabiu—BUA Group’s chairman and chief executive officer—said the Akwa Ibom refinery remains on schedule for startup in 2024.
TRANSPORTATION Quick Takes
Gazprom completes Nord Stream 2 construction
PJSC Gazprom has completed construction of Nord Stream natural gas pipeline, according to management committee chairman Alexey Miller. The announcement came despite ongoing legal actions regarding the sourcing of gas to be transported.
European Union regulations stipulate that gas transported by pipeline must be provided by a company other than the pipeline’s operator, the application of which to Nord Stream 2 was most recently affirmed by Germany’s high court. The court’s ruling can be appealed, or Gazprom could agree to transport third-party production via the pipeline. Germany’s regulator also still needs to test and certify the pipeline.
The 55-billion cu m/year, 760-mile Nord Stream 2 system roughly parallels Nord Stream 1’s route, doubling transportation capacity between Ust-Luga, Russia, and Greifswald, Germany, along the Baltic Sea’s floor. Nord Stream 1 has been operating since 2011.
Uniper SE, Wintershall DEA, OMV Group, Engie SA, and Royal Dutch Shell PLC are Nord Stream 2 project partners.
KMI, Neste partner on Louisiana renewables storage
Kinder Morgan Inc. (KMI) is partnering with Neste Oyj to create a raw material storage and logistics hub in the US supporting increased production of renewable diesel, sustainable aviation fuel (SAF), and renewable feedstock for polymers and chemicals. Upon completion of the project, KMI’s Harvey, La., terminal will serve as the primary hub at which Neste will store a variety of raw materials including, for example, used cooking oil it collects from more than 40,000 restaurants across the US.
As part of the initial, committed phases of the project, Kinder Morgan will modify 30 existing tanks and associated piping to enable segregated storage of a variety of raw materials. The work also includes installation of a new boiler for heating tanks and railcars and infrastructure improvements for rail, truck, and marine movement. The project, supported by a long-term commercial commitment from Neste, is expected to begin operations first-quarter 2023. At Neste’s option, it can be further expanded.
The 100-acre Harvey terminal, on the Mississippi River near New Orleans, has 192 tanks totaling more than 3 million bbl of storage. It includes three ship docks, one barge dock, and a rail terminal serviced by Union Pacific Railroad and New Orleans & Gulf Coast Railway Co. KMI and Neste have partnered in the past. In 2020, Neste began supplying SAF directly to San Francisco International (SFO) airport via a Kinder Morgan pipeline. More than 1 million gal of SAF have been supplied to SFO to date.