OGJ Newsletter

Sept. 27, 2021


ConocoPhillips to acquire Shell’s Permian business for $9.5 billion

ConocoPhillips has agreed to acquire the Permian business of Shell Enterprises LLC, a subsidiary of Royal Dutch Shell PLC, for $9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals, Shell said in a release Sept. 20.

Shell’s Permian business includes ownership in about 225,000 net acres with current production of around 175,000 boe/d with producing properties entirely in Texas, as well as over 600 miles of operated crude, gas and water pipelines and infrastructure.

Estimated 2022 production from the assets is expected to be 200,000 boe/d, roughly half of which is operated, ConocoPhillips said in a separate release.

In conjunction with the deal, ConocoPhillips said it plans to increase its targeted level of dispositions to $4-5 billion by 2023 from the previously announced $2-3 billion. The incremental $2 billion of planned dispositions are expected to be sourced primarily from the Permian basin as part of the company’s ongoing portfolio high-grading efforts, it said.

Shell said a majority of Midland-based Permian employees and many Houston-based employees will be offered employment by ConocoPhillips.

The effective date of the transaction is July 1, with closing expected in this year’s fourth quarter.

BOEM increases reserves in GoM outer continental shelf

The Bureau of Ocean Energy Management (BOEM) released a new report increasing reserves in the Gulf of Mexico region on the outer continental shelf (OCS).

Discoverable, recoverable, and commercially viable reserves are estimated at 4.65 billion bbl oil and 6.1 tcf gas. These reserves are recoverable from 414 active fields. Oil reserves have increased 35.2% and gas reserves have increased 7.0% since the 2018 report. These increases are the result of six new fields being added during the reporting period.

Original reserves, a combination of cumulative production and reserves, are 26.77 billion bbl oil and 197.0 tcf gas from 1,325 oil and gas fields, including 911 fields that have produced and expired. Cumulative production from all fields accounts for 22.12 billion bbl oil and 190.9 tcf gas.

BOEM develops independent estimates of natural gas and oil in previously discovered OCS fields by conducting field reserve studies and reviews of fields, sands, and reservoirs. BOEM then revises estimates of natural gas and oil volumes to reflect new discoveries, development, and annual production.

Laredo Petroleum to acquire western Glasscock leasehold

Laredo Petroleum Inc., Tulsa, Okla., has agreed to acquire about 20,000 net acres in western Glasscock County, Tex., from Pioneer Natural Resources Co., Dallas, for $230 million, subject to customary closing price adjustments.

The deal adds leasehold of about 20,000 net acres (about 80% operated, 98% held by production) directly offsetting the company’s existing western Glasscock leasehold in the Midland basin, increasing the company’s acreage to about 22,000 net acres, the company said in a Sept. 19 release.

About 135 gross operated oil-weighted locations are included in the deal (90% WI, average royalty of 20%) with an average lateral length of 9,700 ft.

Current production is about 4,400 boe/d (59% oil, 82% liquids).

The purchase price is comprised of $160 million in cash and issuance of 959,691 shares of Laredo common equity to Pioneer.

Laredo plans to maintain expected 2022 activity levels of two drilling rigs and one completions crew.

In May, Laredo Petroleum agreed to acquire the assets of Sabalo Energy LLC and a non-operating partner for $715 million, adding 21,000 contiguous net acres directly offsetting its existing Howard County leasehold (OGJ Online, May 10, 2021).

The transaction is expected to close in October 2021.

EIA releases plant-level US biofuels production capacity data

As of Jan. 1, 2021, total US biofuels plant production capacity reached 21 billion gallons per year (gal/y) (or 1.3 million b/d), as reported by 278 facilities, according to the latest survey data from the US Energy Information Administration (EIA). Fuel ethanol producers accounted for 85% of US total biofuels production capacity, followed by biodiesel producers at 11%, and the remaining 4% by other renewable fuel producers.

Biodiesel producers, operating 75 biodiesel plants, accounted for 2.4 billion gal/y of US total biodiesel production capacity (157,000 b/d) at the start of 2021, down by 0.1 billion gal/y since January 2020. More than half of US biodiesel production capacity is in the Midwest, primarily in Iowa, Missouri, and Illinois. The remainder is mostly located on the Gulf Coast and West Coast.

Of the 13 states with the most fuel ethanol production, 12 are in the Midwest. The three states with the most production—Iowa, Nebraska, and Illinois—contain half of the nation’s total ethanol production capacity. Fuel ethanol production capacity was 17.5 billion gal/y (or 1.1 million b/d) as of Jan. 1, 2021, as reported by 197 producers, an increase of 0.2 billion gal/y since the beginning of 2020.

Six renewable fuel producers reported to EIA for the first time. They provided data for renewable diesel fuel, renewable heating oil, renewable jet fuel, renewable naphtha, renewable gasoline, and other renewable fuels. Their combined operable production capacity totaled 791 million gal/y (or 52,000 b/d). The Gulf Coast contains more than half of all US renewable fuels production capacity, all in Louisiana, as of January 2021.

 Exploration & Development Quick Takes

Shell selects McDermott vessel for Whale development

Shell Offshore Inc. will utilize McDermott International Inc.’s Amazon vessel to support the US Gulf of Mexico Whale development in the Alaminos Canyon.

Under the contract’s scope, McDermott will provide engineering, procurement, construction, installation, and commissioning (EPCIC) for 30 miles (50 km) of pipeline and about 9 miles (15 km) of umbilical to connect five drill centers to a new offshore platform.

The project will begin immediately and is expected to be completed in 2024.

Shell Offshore Inc., a Royal Dutch Shell PLC subsidiary, made final investment decision (FID) for the deepwater development in July (OGJ Online, July 26, 2021).

Engineering, procurement, and project management services will be led by McDermott’s team in Houston. McDermott’s North Ocean 102 will install the umbilical and the Amazon will transport and install the rigid ultra-deepwater pipelines.

LUKOIL, Gazprom to develop cluster in Yamal-Nenets region

PJSC LUKOIL and PJSC Gazprom Neft signed an agreement to create a joint venture to develop an oil and gas cluster in the Nadym-Pur-Tazovsky area of Russia’s Yamal-Nenets Autonomous District.

The JV is being set up via Meretoyakhaneftegaz, a subsidiary of Gazprom Neft. Tazovskoye oil and gas condensate field, which was put on-stream in June, is the core of the new production area. The field lies 525 km from Salekhard. Its geological reserves—419 million tons of oil and 225 billion cu m (bcm) of gas—make it one of the largest in Western Siberia. Its peak annual production volume is expected to reach 1.7 million tons of oil and 8 bcm of gas.

The JV plans to develop Severo-Samburgskoye and Meretoyakhinskoye fields, as well as two Zapadno-Yubileiny license blocks. Additional appraisal and pilot works are under way, on which a development strategy for the cluster will be developed, the companies said.

The aggregate geological reserves of the new cluster amount to more than 1 billion tons of oil and about 500 bcm of gas. A considerable proportion of the reserves initially in place lie within the Achimov formation and are categorized as hard-to-recover reserves.

Meretoyakhaneftegaz is the first asset to be managed by LUKOIL and Gazprom Neft on a parity (50-50) basis. Over the next few months, the parties expect to prepare detailed binding documents establishing the JV and secure necessary corporate and regulatory approvals.

The companies also will continue to explore additional opportunities to expand their cooperation on other projects in their regions of operation across Russia.

Lundin granted Solveig startup approval

Lundin Energy Norway AS will tie back production from Solveig field to Edvard Grieg in the North Sea this autumn. Startup approval for Solveig was granted by the Norwegian Petroleum Directorate on Sept. 9.

The field, in PL359 15 km from Edvard Grieg, is estimated to hold recoverable reserves of 9.2 million std cu m oil equivalent in Phase 1, distributed between 6.98 million standard cu m (44 million bbls), 1.44 billion standard cu m sales gas, and 0.42 million tonnes of NGL. Oil and gas will be processed at Edvard Grieg before further transport.

Phase 1 consists of three oil production wells and two water injection wells. The field is expected to produce up to 2041.

Investment decision for Phase 2 will come later, based on experience and information from Phase 1.

Lundin is operator at PL359 (65%) with partners OMV (Norge) AS (20%) and Wintershall Dea Norge AS (15%).

 Drilling & Production Quick Takes

Shell: Certain GoM production to remain offline until 2022

Shell Offshore Inc. expects some of its Gulf of Mexico production to remain offline until 2022 following a comprehensive assessment of damage to its West Delta-143 (WD-143) offshore facilities from Hurricane Ida in August.

The WD-143 “A” platform facilities will be offline for repairs until end 2021, and facilities on WD-143 “C” platform will be operational in fourth-quarter 2021, the company said in a release Sept. 20.

WD-143 facilities are the transfer station for production from the Mars corridor (tension leg platforms Mars, Olympus, and Ursa) to onshore crude and natural gas terminals.

Production from Olympus platform, which flows across WD-143 “C” platform, will resume in fourth-quarter 2021, and production from Mars and Ursa facilities, which flow across WD-143 “A” platform, will resume in first-quarter 2022.

Perdido, in southwestern Gulf of Mexico, was not disrupted. Turritella (aka Stones) FPSO is online.

At the time of the release, about 60% of Shell-operated production in the Gulf of Mexico was back online.

WD-143 is operated by Shell Pipeline Co. LP and owned by Shell Offshore (71.5%) with partner BP Exploration & Production Inc. (28.5%).

Elixir’s Richcairn well opens new CSG basin in Mongolia

Elixir Energy Ltd., Adelaide, has uncovered a new coal-bearing subbasin within its 100%-owned Nomgon IX coal seam gas production sharing contract in the South Gobi basin of southern Mongolia.

The Richcairn-1S well was drilled to a depth of 792 m and encountered 16 m of coal and 20 m of highly carbonaceous mudstone, determined by wireline logs.

The well is the first of Elixir’s to intersect coal purely from seismic identification. It lies in a depocentre defined by four seismic lines with a length over 100 km.

The rig is moving to an up-dip step-out location to spud Richcairn-2S, which will, with other future wells in the new subbasin, evaluate key coal seam gas characteristics such as gas content and permeability, the company said.

Elixir will mobilize a third rig to accelerate the program during the remainder of 2021.

Meantime, the Nomgon Central-1 well in the Nomgon subbasin reached total depth of 559 m and logged 65m of coal. Data gathering is under way to underpin design of future production testing and various laboratory tests are expected during the next few months.

Results of the next well in the region, Nomgon-6, will help design a 2022 production testing campaign.

Elixir expects to soon begin a new seismic program to acquire 300 km of 2D data in addition to the 220 km of data already acquired, processed, and interpreted this year.

Falcon reports Beetaloo gas flow

Falcon Oil & Gas Ltd., JV partner to Origin Energy Ltd. in the Beetaloo basin of the Northern Territory, has reported a normalized gas flow rate equivalent to 5 MMcfd per 1,000 m of horizontal section in the group’s Amungee NW-1H well.

The well, in exploration permit EP 98 about 60 km east of Daly Waters, is the first horizontal well to be drilled and the first to be fractured in the basin.

Amungee NW-1H was drilled in November 2015 to a total measured depth of 3,808 m, including a 1,100 m horizontal section.

Eleven hydraulic stimulation stages were completed in September 2016 along the horizontal section in the Middle Velkerri B shale zone.

In December 2016, a 57-day extended production test was completed with production averaging 1.1 MMcfd.

The well was put back on production testing on Aug. 7 with initial flow rates during the first 48 hours ranging from 2-4 MMcfd. Flow rates averaged 1.23 MMcfd over the first 23 days.

Origin, as operator, ran a production log test on Aug. 19 which confirmed that only 5-15% of the production came from stages 1-7 beyond the casing deformation point at 3,112 m, while 85-95% of the production came from stages 8-11 spanning a 200 m horizontal section prior to the casing deformation.

The production log test results equate to a normalized gas flow rate of 5.2-5.8 MMcfd per 1,000 m of horizontal section.

Stages 8-11 may be representative of the deliverability that can be achieved within the Middle Velkerri B shale at Amungee, Falcon said, adding that a typical future production well would be likely to have a horizontal production section of up to 3 km.

The result significantly increases the company’s assessment of the Velkerri dry gas play and the potential of the Beetaloo basin, the company continued.


Shell takes FID on Rotterdam SAF, renewable diesel complex

Royal Dutch Shell PLC has taken final investment decision (FID) on an 820,000-tonne/year biofuels plant at the Shell Energy and Chemicals Park Rotterdam, the Netherlands, formerly known as the Pernis refinery. The plant is expected to start production in 2024.

The plant will be among the biggest in Europe to produce sustainable aviation fuel (SAF) and renewable diesel made from waste, producing enough renewable diesel to avoid 2,800,000 tonnes/year of carbon dioxide (CO2) emissions, Shell said. A range of certified sustainable vegetable oils, such as rapeseed, will supplement the waste feedstocks until even more sustainable advanced feedstocks are widely available. SAF will make up more than half of the plant’s production.

Shell plans to capture carbon emissions from the plant’s manufacturing process and store them in the empty P18-2 gas field beneath the North Sea via the Port of Rotterdam CO2 Transport Hub and Offshore Storage (Porthos) project. Porthos will include a roughly 30-km 42-in. OD onshore pipeline through the port which Denys has been contracted to build. FID for Porthos is expected next year.

As part of its Powering Progress strategy, Shell is transforming its 14 refineries into five energy and chemicals parks. Shell aims to reduce the production of traditional fuels by 55% by 2030 and provide more low-carbon fuels such as biofuels for road transport and aviation, as well as hydrogen. The Energy and Chemicals Park Rotterdam is the second park to be announced, following the launch in July 2021 of the Energy and Chemicals Park Rheinland, Germany.

Lysekil refinery producing renewable fuel via coprocessing

Swedish refiner Preem AB, a wholly owned subsidiary of Corral Petroleum Holdings AB, Stockholm, is producing renewable fuel from a feedstock of biomass-based pyrolysis oil using coprocessing technology from Honeywell UOP LLC at the operator’s 220,000-b/d refinery in Lysekil, Sweden.

Using only existing plant infrastructure, the Lysekil refinery’s FCC has completed its first trial of coprocessing pyrolysis oil to produce partially renewable, low-carbon transportation fuel based on UOP’s proprietary bioliquid feed system with Optimix GF Feed Distributor technology, the service provider said on Sept. 15.

Preem’s coprocessing trial of the UOP technology to coprocess pyrolysis oil produced from sustainable solid biomass materials such as sawdust or agricultural residuals comes as part of the operator’s plan to reduce carbon intensity of its transportation fuel production in line with Sweden’s Integrated Energy and Climate Plan and the European Union’s Renewable Energy Directive, under which pyrolysis oil can qualify as an Annex IX Part A-approved feedstock, UOP said.

Announcement of the completed trial follows Preem’s confirmation June 21 that it had initiated coprocessing of 300 tonnes of pyrolysis oil produced from sawdust at the Lysekil FCC as part of the trial’s first phase. At the time, Preem said it would carry out a second phase of the trial involving the FCC’s coprocessing of up to 50,000 tonnes of pyrolysis oil for 2 years.

“Residual products from our Swedish forests have a unique potential to make Sweden self-sufficient in an increasing share of liquid renewable fuels in the long run instead of importing 85%, as we do today,” said Peter Abrahamsson, Preem’s head of sustainable development.

Given that Sweden’s statutory mixing requirements for renewables in the gasoline pool will increase to 7.8% to help reduce the country’s fuel-related carbon dioxide emissions 28% by 2030, Abrahamsson added that Preem’s renewable fuels production would be an important piece of the puzzle in helping Sweden achieve its climate goals.

“Our long-term goal is to produce about 5 million [cu m/day] of renewable fuels by 2030, which means that we can reduce carbon dioxide emissions by 12.5 million [tonnes/year], corresponding to 20% of Sweden’s total emissions,” Abrahamsson said.


TC Energy sells Northern Courier pipeline

TC Energy Corp. has sold its 15% equity interest in the Northern Courier dual pipeline bitumen and diluent system to Astisiy LP, comprised of Suncor Energy, three First Nations, and five Métis communities in the Regional Municipality of Wood Buffalo (RMWB).

The 56-mile pipeline, which connects the Fort Hills mine to Suncor’s East Tank Farm terminal north of Fort McMurray, Alta., will be operated by Suncor upon completion of the purchase by Astisiy. The system includes two 300,000-bbl bitumen tanks and one 50,000-bbl diluent tank at Fort Hills, a 24-in OD bitumen line running south and a 12-in. OD diluent line running north. It entered service January 2018.

With the Indigenous collaboration in mind, Suncor in 2019 obtained the rights to purchase all of TC Energy’s 15% equity interest in 2019, as part of Northern Courier’s execution of long-term, non-recourse financing of $1 billion and TC Energy’s sale of the 85% to the Alberta Investment Management Corp.

Indigenous communities joining Suncor in Astisiy are: Athabasca Chipewyan First Nation, Chipewyan Prairie First Nation, Conklin Métis Local 193, Fort Chipewyan Métis Local #125, Fort McKay Métis Nation, McMurray Métis, Fort McMurray #468 First Nation, and Willow Lake Métis Nation.

The $1.3-billion transaction is expected to close fourth-quarter 2021, subject to customary conditions and required regulatory approvals.

Spire STL receives temporary FERC certificate

Spire STL Pipeline LLC received a temporary certificate from the US Federal Regulatory Commission (FERC) authorizing continued operation of Spire STL pipeline.

This temporary certificate – issued under Section 7(c)(1)(B) of the Natural Gas Act – comes after a June 22 decision by the US Court of Appeals for the District of Columbia Circuit (DC Circuit) which vacated the STL Pipeline’s FERC authorization and remanded it back to the agency for further review (OGJ Online, June 24, 2021).

Spire STL began operations in November 2019, transporting as much as 400 MMcfd natural gas 65 miles from Illinois to Missouri.

On July 26, the company filed an application for a temporary emergency certificate stating that if the STL pipeline is removed from service, Spire Missouri customers in the St. Louis region would not have adequate gas supply and may see serious service disruptions during extreme cold weather periods.

Since submitting its application, 51 letters of support have been submitted to the FERC docket from a cross section of 106 policymakers, businesses, industry and labor organizations, and community and advocacy groups who recognize the need for the pipeline this winter, the company said.

The temporary certificate issued Sept. 14 will remain in place for 90 days, while the Commission evaluates Spire’s July 26 temporary certificate application. Authorization to continue operations also will allow STL Pipeline to continue to perform land restoration along the project right-of-way.

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