OGJ Newsletter

GENERAL INTEREST Quick Takes

OPEC+ agrees to small production increase for September

OPEC and its allies including Russia (OPEC+), agreed to produce an additional 100,000 b/d for September, a small increase amid high oil prices and inflation and growing fears of a global recession. The increase would be one of the smallest since OPEC introduced quotas in 1982, OPEC data shows.

The OPEC+ group faces pressure to boost supply and lower oil prices after US President Biden’s trip to Saudi Arabia to persuade OPEC’s leader to pump more.

OPEC+ has been increasing production by about 430,000-650,000 b/d a month as they lift record supply cuts introduced when pandemic lockdowns stifled demand. They had, however, struggled to meet full targets as most members encounter production capacity constraints and ongoing technical and operational issue following years of underinvestment.

Ahead of the meeting, OPEC+ trimmed its forecast for the oil market surplus this year by 200,000 b/d to 800,000 b/d.

Diversified to acquire central region assets from ConocoPhillips

Diversified Energy Co. PLC has agreed to acquire certain upstream assets and related infrastructure in Oklahoma and Texas from ConocoPhillips Co. for $240 million.

With the deal, Diversified expands its central region portfolio. The assets include about 250,000 net acres and 1,500 producing wells. Diversified will operate about 60% of the acquisition’s net production of about 9,000 boe/d (52 MMcfed; 90% natural gas and NGLs), which represents a 6% increase to Diversified’s first-quarter 2022 exit rate (136,000 boe/d; 816 MMcfd).

Diversified expects the deal to close in September 2022.

TotalEnergies starts Angola projects

TotalEnergies SE launched three projects in Angola, including Begonia oil field, Quiluma gas field, Maboqueiro gas fields, and a photovoltaic project.

Begonia, the first development of Block 17/06, is 150 km off the Angolan coast and consists of five wells tied back to the Pazflor FPSO already in operation on the block. After commissioning, expected in late 2024, it will add 30,000 b/d to the FPSO’s production.

Quiluma and Maboqueiro, Angola’s first non-associated natural gas projects (NAG1), will supply the Angola LNG plant. Production is scheduled to start mid-2026.

The company will construct the Quilemba photovoltaic plant in the southern city of Lubango with initial capacity of 35 Mw, with the possibility of adding 45 Mw in a second phase. The plant should come on stream end 2023.

TotalEnergies is operator at Block 17/06 (30%) with partners Sonangol P&P (30%), SSI (27.5%), ACREP/Somoil (5%), Falcon Oil (5%), and PTTEP (2.5%).

Eni is operator of NAG1 project (25.6%) with partners TotalEnergies (11.8%), Chevron (31%), Sonangol P&P (19.8%), and bp (11.8%).

TotalEnergies holds a 51% interest in Quilemba solar with affiliates of Sonangol EP (30%) and Angola Environment Technology (Greentech, 19%).

Santos lets contract for Bayu-Undan CCS project

Santos Ltd., Adelaide, let a contract to Worley to support the Bayu-Undan carbon capture and storage (CCS) project in the East Timor sector of the Timor Sea.

Worley will provide front-end engineering design (FEED) services for offshore infrastructure and pipeline, including repurposing of the field and pipeline from hydrocarbons to carbon dioxide (CO2) service.

Worley also will provide FEED services for life extension of the infrastructure and pipeline to enable continued.

The Santos-operated joint venture’s CCS project is expected to store up to 10 million tonnes/year of CO2 derived from Timor Sea fields including Barossa field to the east.

A final investment decision on Bayu-Undan CCS is scheduled for 2023, subject to relevant regulatory agreements.

Exploration & Development Quick Takes

Chevron to develop Aphrodite offshore Cyprus

Chevron Cyprus Ltd. will develop Aphrodite gas field offshore Cyprus, according to a joint statement by Chevron and the Ministry of Energy, Commerce, and Industry of the Republic of Cyprus.

The work will include on-site drilling of a new well in the coming months as part of the field’s approved development and production plan, the government said.

Chevron is in the process of optimizing the field’s development concept through possible synergies with other infrastructure in the region. The development concept will be presented to the Minister of Energy for approval by yearend. 

Aphrodite is a deepwater field in Block 12 of the exclusive economic zone of Cyprus, 160 km south of Limassol, and 30 km northwest of Leviathan field in 1,700 m of water. It was discovered by the A-1 well in September 2011 (OGJ Online, Dec. 28, 2011). It is estimated to hold 4.5 tcf recoverable resources.

In November 2019, the Government of Cyprus granted the partners in Block 12 a production license for 25 years, with an option to extend the term by another 10 years, together with the approval of an outline for development of the reservoir, according to partner NewMed Energy.

Chevron is operator of Aphrodite with 35% interest. Partners are Shell (35%) and Israel’s NewMed Energy, formerly Delek Drilling (30%).

ExxonMobil makes two more discoveries offshore Guyana

ExxonMobil has made two new discoveries offshore Guyana to the southeast of the Liza and Payara developments in the Stabroek block. Discoveries at Seabob and Kiru-Kiru are the sixth and seventh in Guyana this year, with the total number of discoveries in Guyana at more than 25, the operator said in a July 26 release.

The Seabob-1 well encountered about 131 ft (40 m) of high-quality hydrocarbon-bearing sandstone and was drilled in 4,660 ft (1,421 m) of water by the Stena Carron drillship. The Kiru-Kiru-1 well encountered about 98 ft (30 m) of high-quality hydrocarbon-bearing sandstone and was drilled by the Stena DrillMAX in 5,760 ft (1,756 m) of water. Drilling operations at Kiru-Kiru are ongoing.

Eni makes second gas discovery offshore Abu Dhabi

Eni SPA discovered gas in a second zone of its first exploration well offshore Block 2, Abu Dhabi, United Arab Emirates (UAE).

Gas-bearing reservoirs in a deep zone were tested, yielding an estimated 1-1.5 tcf raw gas in place. This discovery follows an initial finding in a shallower zone of the same well, aggregating to total gas in place of 2.5-3.5 tcf.

Fast-track development options are currently under evaluation.

Eni is operator of the block (70%) with partner PTTEP (30%).

Petrobras discovers gas offshore Colombia

Petróleo Brasileiro SA (Petrobras) discovered natural gas accumulation in the Uchuva-1 exploratory well, drilled in deep waters of Colombia, 32 km off the coast and 76 km from the city of Santa Marta, in a water depth of about 830 m.

The well was drilled in the Tayrona block, where Petrobras (operator, 44.44%) and partner Ecopetrol SA (55.56%) will continue activities, aiming to assess the dimensions of the new gas accumulation, the company said in a release July 29.

Consortium sanctions Angolan Quiluma, Maboqueiro gas project

Eni and New Gas Consortium (NGC) partners, together with Angola’s National Agency for Oil, Gas, and Biofuels (ANPG), have made a positive final investment decision (FID) for development of Quiluma and Maboqueiro (Q&M) fields. This is Angola’s first non-associated gas development project.

The project includes two offshore wellhead platforms, an onshore gas processing plant, and a connection to Angola LNG plant for the marketing of condensates and gas via LNG cargoes. Project execution activities will start in 2022 with first gas planned in 2026 and an expected production of 330 MMscfd at plateau (about 4 bcf/year).

Consortium partners are Eni (25.6%, operator), Chevron affiliate CABGOC (31%), Sonangol P&P (19.8%), bp (11.8%), and TotalEnergies (11.8%).

Eni holds a 13.6% interest in Angola LNG, together with Chevron affiliate CABGOC (36.4%), Sonangol (22.8%), bp (13.6%), and TotalEnergies (13.6%). The plant is in Soyo, Province of Zaire, and has a treatment capacity of about 353 bcf/year of feed gas and a liquefaction capacity of 5.2 million tonnes/year of LNG.

Drilling & Production Quick Takes

Wintershall Dea starts production at Nova field

Wintershall Dea Norge started production from Nova oil field in the Norwegian North Sea in license 418, about 120 km northwest of Bergen and 17 km southwest of Gjøa.

The field is in 370 m of water and consists of two subsea templates, one with three oil producers and one with three water injectors, tied back to the Neptune Energy-operated Gjøa platform (OGJ Online, June 30, 2022). The host platform will provide gas lift and water injection to the field and receives Nova hydrocarbons.

Oil from Nova will be transported via Gjøa through Troll Oil Pipeline II to Mongstad, Norway. Associated gas will be exported via the Far North Liquids and Associated Gas System (FLAGS) pipeline to St Fergus, UK, supplying the European energy market.

Expected recoverable gross reserves are estimated at 90 MMboe, of which the majority will be oil.

Wintershall Dea is operator of the field with 45% interest. Partners are Sval Energi AS (45%) and Pandion Energy Norge (10%). Wintershall Dea has agreed to transfer a 6% share of Nova to OKEA. Completion is expected in fourth-quarter 2022 and Wintershall Dea’s share will then be lowered to 39%.

Equinor resumes production in Peregrino field, Brazil

Equinor Energy has resumed production in Peregrino field, Campos basin, Brazil. Production was suspended in April 2020. Since then, Equinor has executed a program of maintenance, upgrades, and repairs on the floating production, storage, and offloading (FPSO) vessel, and has installed a new platform, Peregrino C.

Peregrino Phase I consists of the FPSO unit, supported by wellhead platforms Peregrino A and Peregrino B.

Peregrino II consists of wellhead platform Peregrino C and related infrastructure. The platform will extend the life of the field and add 250-300 million bbl. Equinor is preparing to start Peregrino Phase II, with first oil expected third-quarter 2022.

Peregrino is the largest field operated by Equinor outside of Norway and the first of a series of major field developments in Brazil. Remaining reserves from Peregrino Phase I are estimated at 180 million bbl.

Equinor is operator at Peregrino (60%) with partner Sinochem (40%).

TotalEnergies starts production at Ikike field, Nigeria

TotalEnergies has started production from Ikike field offshore Nigeria.

Ikike platform, in OML99 about 20 km off the coast in water depth of about 20 m, is tied back to the existing Amenam offshore infrastructure through a 14 km multiphase pipeline. It will deliver peak production of 50,000 boe/d by yearend, the company said in a release July 25.

The project leverages existing infrastructure and is designed to minimize greenhouse gas emissions: estimated at less than 4kg CO2e/boe, the company said.

TotalEnergies is operator at OML99 with 40% interest. The Nigerian National Petroleum Corp. (NNPC) holds 60%.

Shell lets deepwater GOM contract to Worley

Shell PLC has let a 3-year contract to Worley to provide engineering and procurement services for several of its assets in the Gulf of Mexico.

Worley will provide engineering, procurement, project services, and support fabrication and construction. Shell currently operates eight oil and gas developments across the Gulf of Mexico deepwater basin, and Worley will focus on five: Appomattox, Perdido, Stones, Auger, and Enchilada-Salsa.

The contract also allows for further support of Shell’s Whale development by delivering greenfield engineering and procurement services.

Shell to drill UK Southern North Sea gas prospect

Shell UK Ltd. and partner Deltic Energy PLC will drill the Selene gas prospect on license P2347 off England’s northeast coast in the UK Southern North Sea.

Selene is one of the largest unappraised structures in the Leman Sandstone fairway of Southern Gas basin. Deltic estimates Selene to contain gross P50 prospective resources of 318 bcf gas (P90 to P10 range of 132 to 581 bcf) with 70% geological chance of success, Deltic said in a release.  

Timing of a well slot has yet to be confirmed and will be subject to drilling schedules.

Shell is operator of the license (50%). Although Deltic holds 50% working interest in the license, it will carry 75% of the costs of drilling and testing on the Selene prospect up to $25 million.

PROCESSING Quick Takes

Sinopec, INEOS ink deals for petrochemical ventures

China Petroleum & Chemical Corp. (Sinopec) and INEOS Group have entered a series of agreements to collaborate on three joint ventures (JV) aimed at expanding production of petrochemicals to help meet rising demand in China’s domestic market.

Signed on July 28, the three separate JV collaboration deals—worth an estimated $7 billion—will collectively involve a combined 7 million tonnes/year (tpy) of both existing and future petrochemical production capacity in China, INEOS said in a release.

As part of one deal, INEOS will acquire 50% of Sinopec subsidiary SECCO Petrochemical Co. Ltd., which produces 4.2 million tpy of olefins, polymers, and other derivatives—including ethylene, propylene, polyethylene, polypropylene, styrene, polystyrene, acrylonitrile, butadiene, benzene, and toluene—across a series of plants at its 200-hectare complex inside the Shanghai Chemical Industry Park, a 29.4-sq km national professional development zone specializing in petrochemicals situated at North Shore, Hangzhou Bay (OGJ Online, Apr. 27, 2017).

Under a second agreement, INEOS and Sinopec will form a new but yet-to-be-named 50-50 JV to focus on increasing China’s production capacity of acrylonitrile butadiene styrene (ABS) by up to 1.2 million tpy via construction of two new 300,000-tpy ABS plants—one in Tianjin, and the second at a location to be later decided—both of which will be equipped with INEOS’ proprietary Terluran ABS technology, INEOS said.

The planned ABS JV will also become responsible for operation of INEOS Styrolution Group GmbH’s 600,000-tpy ABS plant currently under construction in Ningbo upon the site’s scheduled commissioning by yearend 2023, according to the operator.

Under a final agreement, INEOS and Sinopec propose establishing a third JV that would oversee construction and operation of a grassroots 500,000-tpy high-density polyethylene plant (HDPE) in Tianjin by yearend 2023, as well as at least two additional HDPE plants in China sometime in the future.

Subject to regulatory approvals and other conditions, INEOS—which plans to finance the deals through a combination of internal cash resources and external financing—said it expects to finalize all three of the proposed transactions by yearend 2022.

The three proposed deals with Sinopec would generate a combined turnover of about $10 billion, INEOS said.

Details from Sinopec regarding the planned INEOS petrochemical collaborations have yet to surface, with many of the state-owned operator’s official news and investor websites inaccessible as of midday on July 28.

EIA: Asia, Middle East refining projects could add 2.9 million b/d capacity by end 2023

In Asia and the Middle East, at least nine refinery projects are beginning operations or are scheduled to come online before end 2023. At current planned capacities, they will add 2.9 million b/d of global refinery capacity once fully operational, according to analysis from the US Energy Information Administration (EIA).

In the International Energy Agency’s (IEA) June 2022 Oil Market Report, the IEA expects net global refining capacity to expand by 1 million b/d in 2022 and by an additional 1.6 million b/d in 2023. Net capacity additions reflect total new capacity minus capacity that has closed.

The scheduled expansions follow a period of reduced global refining capacity. Net global capacity declined in 2021 for the first time in 30 years, according to the IEA. The new refinery projects would increase production of refined products, such as gasoline and diesel, and in turn, may reduce the current high prices for these products.

China’s refinery capacity is scheduled to increase significantly this year. Trial crude oil processing at the estimated 320,000 b/d Shenghong petrochemical plant in Lianyungang began in May 2022. PetroChina’s 400,000 b/d Jieyang refinery is expected to come online in third-quarter 2022. A planned 400,000 b/d Phase II capacity expansion also began operations earlier this year at Zhejiang Petrochemical Corp.’s (ZPC) Rongsheng operation.

Outside China, the 300,000 b/d Malaysian Pengerang refinery (RAPID refinery) restarted in May 2022 after a fire forced a shutdown in March 2020. In India, the Visakha refinery is undergoing a major expansion, scheduled to add 135,000 b/d by 2023.

New projects in the Middle East are also likely to be an important source of new refining capacity. The 400,000 b/d Jizan refinery in Saudi Arabia reportedly came online in late 2021 and began exporting petroleum products earlier this year. More recently, the 615,000 b/d Al Zour refinery in Kuwait—the largest in the country when it becomes fully operational—began initial operations earlier this year. A new 140,000 b/d refinery is scheduled to come online in Karbala, Iraq, this September, targeting fully operational status by 2023. A new 230,000 b/d refinery is set to come online in Duqm, Oman, likely in early 2023.

These estimates do not necessarily include all ongoing refinery capacity expansions. Moreover, many of these projects have been subject to delays, and the possibility of partial starts or continued delays related to logistics, construction, labor, finances, political complications, or other factors may result in projects coming online later than estimated, EIA said.

TRANSPORTATION Quick Takes

NextDecade to supply Rio Grande LNG to ExxonMobil

NextDecade Corp. has executed a 20-year agreement to supply ExxonMobil LNG Asia Pacific (EMLAP), an ExxonMobil affiliate, with liquefied natural gas (LNG) from the Rio Grande LNG export project in Brownsville, Tex.

EMLAP will purchase 1.0 million metric tonnes/year of LNG. The LNG will be supplied from the first two trains of Rio Grande LNG, with the first train expected to start commercial operations as early as 2026.

Based on current expected demand for LNG and assuming the achievement of further LNG contracting and financing, NextDecade anticipates making a positive final investment decision (FID) on up to three trains of the Rio Grande LNG export project in second-half 2022, with FIDs of its remaining trains to follow.

Viva signs agreement with GeelongPort for gas terminal

Viva Energy, operator of the Geelong oil refinery in Geelong, west of Melbourne in Victoria, has entered into commercial agreements with GeelongPort for construction and provision of pier and berthing infrastructure for Viva’s proposed gas terminal in the Port of Geelong.

The agreement involves an extension of the existing pier to provide an additional berth for the permanently moored floating storage and regasification unit (FSRU) that will receive LNG imports from visiting carriers.

GeelongPort will construct the pier extension and license the pier to Viva, while Viva will construct the related infrastructure, including a gas pipeline and treatment plant to enable the supply of gas into the Victorian gas distribution network.

The agreement provides a pathway to construction and delivery of the necessary infrastructure underpinning the proposed project.

Construction timing remains subject to satisfaction of conditions, including Viva making a final investment decision and the Victorian government’s environmental assessment of the project.

Cheniere, PTT sign long-term LNG deal

Cheniere Energy Inc. subsidiary Corpus Christi Liquefaction LLC (CCL) has agreed to supply LNG to PTT Global LNG Co. Ltd. (PTTGL), a subsidiary of PTT Public Co. Ltd. (PTT), Thailand’s largest state-owned, multinational energy company.

Under the agreement, PTTGL will purchase 1.0 million tonnes/year (tpy) of LNG from CCL for 20 years beginning in 2026, Cheniere said in a release July 26. The deal calls for a combination of free-on-board (FOB) and delivered ex-ship (DES) deliveries. The purchase price is indexed to the Henry Hub price, plus a fixed liquefaction fee.

The deal marks the first direct LNG contract from a US LNG producer for PTTGL, said Jack Fusco, Cheniere’s president and chief executive officer.

PTT aims to manage an LNG portfolio of 9 million tpy by 2030. By yearend 2022, PTT’s LNG receiving terminals will be able to accommodate regasification capacity up to 19 million tpy, said Auttapol Rerkpiboon, PTT’s president and chief executive officer.