OGJ Newsletter

GENERAL INTEREST Quick Takes

Woodside to exit certain Canadian licenses

Woodside has initiated an exit from operated license EL1157 (100%) in Newfoundland and Labrador, and operated license EL1158 (100%) in the Orphan basin offshore eastern Canada following a review of its exploration portfolio.

The news comes as part of the company’s third-quarter 2022 report released Oct. 20. The decision is expected to impact 2022 net profit after tax by about $140 million, the company said.

“We took decisive action to initiate an exit from our exploration position in the Orphan basin, offshore Canada, consistent with our exploration focus on clear pathways to commercialization,” said Meg O’Neill, chief executive officer.

The Orphan basin is estimated to comprise an area of over 150,000 sq km. Water depths in the basin range from 200 m on the western side to 3,000 m on the eastern side. BHP previously called the area a frontier opportunity with large oil resource potential (OGJ Online, Sept. 5, 2019).

Woodside's production and revenue increased in the third quarter, reflecting the first full 3 months of contribution from former BHP petroleum assets acquired by Woodside (OGJ Online, Aug. 17, 2021).

Production was 51.2 MMboe, up 52% from second-quarter 2022 and more than twice that of third-quarter 2021.

Strong operational performance across the combined portfolio has led the company to increase its full-year production guidance to 153-157 MMboe, O’Neill said.

Sales volume for the quarter increased 59% from the previous quarter to 57.1 MMboe. Revenue increased 70% to $5.86 billion, reflecting both higher sales volume and average portfolio realized price, she said.

Ring Energy reduces fourth-quarter capital guidance by 15%

Ring Energy Inc. has reduced its fourth-quarter 2022 capital guidance by 15% while maintaining production guidance.

The Permian basin-focused company now estimates fourth-quarter capital expenditures of $42-46 million, down from the prior estimate of $50-54 million, the company said in a release Oct. 13. Fourth quarter sales volumes are estimated at 18,000-19,000 boe/d (70% oil, 17% natural gas, 13% NGLs) despite the reduction in estimated fourth-quarter capital expenditures.

The company plans to complete and place on production the remaining three wells drilled in this year’s third quarter and drill and complete eight to nine new wells, including four horizontal wells (two Northwest Shelf (NWS), two Central Basin Platform (CBP) North), and four to five vertical wells in CBP South. Ring also expects to recomplete eight to twelve wells in CBP South.

An initial outlook for full year 2023 envisions capital expenditure of $150-175 million that includes drilling horizontal wells on legacy assets and drilling vertical wells on recently acquired CBP South assets. Plans are to maintain or slightly grow 2023 full year average sales volumes compared with anticipated fourth-quarter 2022 sales volumes.

In this year’s third quarter, the company drilled eight horizontal wells (five NWS, three CBP) bringing the total number of horizontal wells drilled in 2022 to 23. The company completed and placed on production nine horizontal wells of which four were drilled in the second quarter and five were drilled in the third quarter. Three recompletions were performed on the CBP South acreage recently acquired from privately held Stronghold Energy II Operating LLC and Stronghold Energy II Royalties LP (OGJ Online, July 5, 2022). Six wells were converted with electrical submersible pumps to rod pumps on horizontal wells, including five in NWS and one in legacy CBP acreage (CBP North).

Continental Resources agrees to Hamm family acquisition

Continental Resources Inc., Oklahoma City, has agreed to be acquired by the Hamm family. The company, founded by Harold Hamm, agreed to the merger following Hamm’s increased offer of $74.28 per share from the original $70-per share proposal, a 9% premium to the Oct. 14 close and a 15% premium to the June 13 close ahead of the initial offer.

The company entered an agreement and plan of merger with Omega Acquisition Inc., an Oklahoma corporation (merger sub), an entity owned by Hamm. Based on the shares outstanding as of Oct. 12, 2022, the tender offer would be for about 58 million shares of common stock.

The merger sub will merge with and into Continental, with Continental continuing as the surviving corporation and wholly owned by the Hamm family.

Hamm currently serves as chairman of Continental’s board of directors. He and the rest of the Hamm family collectively own about 83% of Continental’s common stock.

For the quarter, net income was $1.21 billion, adjusted net income was $1.25 billion. Total debt was reduced by about $265 million. 

Falcon waives pre-empt rights on Beetaloo deal

Falcon Oil and Gas Australia Ltd. waived its pre-emptive rights over acquisition of Origin Energy Ltd.’s interest in Beetaloo basin onshore Northern Territory by Tamboran Resources Ltd. and Sheffield Holdings.

Falcon and Tamboran-Sheffield (Tamboran) have entered a binding Letter of Agreement to amend the original joint operating agreement and existing farm-in agreement between Falcon and Origin.

The letter provides for Falcon to retain its 22.5% non-operating interest in Beetaloo assets and earn an additional carry on future well costs of up to $30 million (Aus.) ($6.75 million net to Falcon).

Well data on any sole-risked wells will be shared. Falcon can receive data analysis even where it decides not to participate.

Tamboran will acquire Origin’s 77.5% interest in the Beetaloo acreage and its operatorship, subject to Northern Territory government approval.

The deal would make Tamboran the largest Beetaloo acreage holder with about 1.8 tcf of net 2C contingent gas resources.

Once closed, Tamboran plans to accelerate work to commercialize Beetaloo gas resources, beginning with sanction of the proposed Amungee pilot development in permit EP98.

Drilling of the first of the Stage 3 wells is expected shortly with Falcon benefitting from the remainder of the carry under the previous farm-in agreement and joint operating agreement.

 Exploration & Development Quick Takes

Cooper plans pivot to gas in offshore Gippsland basin

Cooper Energy Ltd., Adelaide, is looking to develop a gas hub at Manta field in the offshore Gippsland basin of Bass Strait with plans for an exploration program in retention leases Vic/RL13, 14, and 15, and exploration permit Vic/P80.

The operator also has commenced planning for abandonment of its Basker, Manta, and Gummy (BMG) oil fields in the same region.

Retention lease prospects Manta and Chimera have combined unrisked prospective resource potential of about 1 tcf, Cooper said in its latest quarterly report.

The main prospect in nearby Vic/P80, Wobbegong, has a mean unrisked prospective resource potential of about 236 bcf.

A 2020 3D seismic survey by CGG produced excellent quality data, which Cooper has licensed. Interpretation and results will be used to plan an exploration program to begin in the mid-term future.

The BMG abandonment project involves decommissioning seven wells and associated subsea infrastructure at the three oil fields. Detailed planning and the ordering of long-lead time equipment has begun.

Intervention vessel Helix Q7000 has been contracted for abandonment work which Cooper estimates will cost $165 million (Aus.) on a 100% gross basis.

Cooper holds 90% interest in BMG abandonment. Indonesian company PT Pertamina Hulu Energi holds the remaining 10%.

The plan is to plug the BMG wells by Dec. 31, 2023, and remove the remaining infrastructure by Dec. 31, 2026, in accordance with the regulatory requirements.

Sinopec makes Sichuan Basin shale gas discovery

Sinopec Southwest has discovered new shale gas reserves in exploration well Jinshi 103HF in the Sichuan basin, the first in the Cambrian Qiongzhusi formation, the company said in a release Oct. 25.

The discovery, reaching production of 258,600 cu m/d, has an estimated resource capacity of 387.8 billion cu m, and derisks expansion of shale gas exploration and development in the basin, the company said.

Sichuan basin is comprised of two main formations, Longmaxi and Qiongzhusi. The former has seen significant exploration and production, including China’s first deep shale gas field, Weirong, while Qiongzhusi holds exploration potential, Sinopec said.

“The breakthrough will provide a strong impetus for expanding shale gas exploration and development from the single formation to reach new formations and field types and contribute to build a national natural gas (shale gas) reserve with 100 bcm of capacity in the Sichuan and Chongqing region,” the company said.

Hartshead lets contract to define offtake route for UK North Sea gas fields

Hartshead Resources has let a contract to Petrofac to conduct an engineering study to define the company’s Phase I offtake route from Somerville and Anning gas fields in license P2607 on the UK Continental Shelf, the service provider said in a release Oct. 11.

The study will provide a basis for the design and cost estimate, and the brownfield modifications needed, to tie in Hartshead’s proposed new infrastructure to Shell’s Corvette and Leman A platforms in the North Sea. From there the gas will be transported to Bacton for onshore processing and delivery to the UK’s transmission system.

Hartshead Resources NL received a Letter of No Objection from the North Sea Transition Authority (NSTA) with respect to Phase I development of the fields earlier this year. Hartshead plans to take final investment decision (FID) on the development, including new platforms, in 2023 and aims to achieve first gas in late 2024. Combined, the fields have been classified to hold 2P reserves of 301.5 bcf (52 MMboe).

The scope of Petrofac’s study includes offshore construction support for the subsea pipeline tie-in activities on the Corvette to Leman Alpha export pipeline, communication connections, pipework for system control and export route options and control room integration.

 Drilling & Production Quick Takes

Norway production down in September, NPD says

Norway’s production averaged 1.832 million in September, the Norwegian Petroleum Directorate (NPD) reported. The figure is down from the 1.998 million b/d produced in August (OGJ Sept. 21, 2022).

Average daily liquids production in September consists of 1.642 million b/o, 170,000 bbl of NGL, and 19,000 bbl of condensate.

Oil production in September was 9.5% lower than the NPD’s forecast and 5.2% lower than the forecast so far this year.

Touchstone produces first gas from Coho in Trinidad and Tobago

Touchstone Exploration Inc.’s Coho project has delivered first natural gas, the first onshore production to come onstream in Trinidad and Tobago in more than 20 years.

Coho lies in Ortoire block, where Touchstone is operator with 80% interest. Heritage Petroleum Co. Ltd. holds the remaining 20%.

Commercial deliveries were achieved Oct. 10, with a field estimated sustained gross production rate of about 10.5 MMcfd. The company will monitor the Coho-1 well in an effort to optimize production.

In conjunction with initial production, the operator has sold to The National Gas Company of Trinidad and Tobago Ltd. (NGC) the 2.7-km, 6-in. gathering line tying the project to Baraka natural gas infrastructure. Production from the Coho project will be sold to NGC pursuant to a December 2020 agreement.

The project can produce 24 MMcfd (gross) of natural gas per day, “giving us the ability to potentially add incremental production volumes through a combination of additional drilling and well optimization,” said Paul Baay, president and chief executive officer.

ADNOC lets $1.53 billion contract to ADNOC Drilling

Abu Dhabi National Oil Co. (ADNOC) let a contract valued at $1.53 billion to ADNOC Drilling to support the expansion of ADNOC’s operations offshore Abu Dhabi and increase production capacity.

ADNOC Offshore awarded the 2-year contract which covers the provision of 12 jack up rigs and two island rigs and the associated integrated drilling services, the operator said in a release Oct. 10.

The award helps support the expansion of ADNOC’s crude oil production capacity to 5 million b/d by 2030 and gas self-sufficiency for the UAE, the operator said in the release.

Novatek increased y-o-y hydrocarbon production by 4%

PAO Novatek, Moscow, increased total hydrocarbon production by 4% year-over-year with estimated production of 155.6 MMboe in third-quarter 2022.

Production in the quarter was comprised of 19.94 bcm of natural gas and 3.0 million tons of liquids (gas condensate and crude oil), a total increase of 6.1 MMboe from third-quarter 2021.

In third-quarter 2022, preliminary total natural gas sales volumes, including volumes of LNG sold, aggregated 16.19 bcm, representing a decrease of 2.3% as compared with the corresponding volumes in third-quarter 2021. The natural gas volumes sold in the Russian Federation were 14.26 bcm, representing a decrease of 4.1% as compared with the prior year period, whereas LNG volumes sold on international markets amounted to 1.93 bcm, representing an increase of 12.9%.

In third-quarter 2022, Novatek processed 3.2 million tons of unstable gas condensate at the Purovsky processing plant, representing an increase in processed volumes by 2.7% as compared with the corresponding period in 2021. Novatek processed 1.7 million tons of stable gas condensate at the Ust-Luga complex, which was 7.1% higher as compared with third-quarter 2021.

According to preliminary data in third-quarter 2022, petroleum product sales volumes aggregated 1,711 thousand tons, including 1,036 thousand tons of naphtha, 291 thousand tons of jet fuel, and 384 thousand tons of fuel oil and gasoil. The company sold 703 thousand tons of crude oil and 835 thousand tons of stable gas condensate.

As of Sept. 30, Novatek had 1.8 bcm of natural gas, including LNG, and 1,033 thousand tons of stable gas condensate and petroleum products in storage or transit and recognized as inventory.

 PROCESSING Quick Takes

Imperial lets major contract for Strathcona renewable diesel complex

ExxonMobil Corp.’s majority owned affiliate Imperial Oil Ltd. let a contract to Fluor Corp. to provide a suite of engineering services for the operator’s proposed grassroots renewable diesel production complex to be built at the 196,000-b/d Strathcona refinery near Edmonton, Alta., in western Canada.

As part of the Oct. 24 contract, Fluor will use a modular-based execution approach to deliver front-end engineering and detailed design (FEED), engineering, and procurement (EP) services for the project, including design and integration of the new renewable diesel unit into the refinery, the service provider said.

Fluor’s scope of work also covers integration of utility tie-ins, electrical and control systems, and associated commodity storage, loading, and unloading structures.

Without revealing a value of the FEED-EP contract, Fluor did confirm the order has been booked as part of its third-quarter 2022 earnings.

This latest contract for the renewable diesel project follows Imperial’s previous award to Air Products Inc. for long-term supply of low-carbon blue hydrogen—or hydrogen produced from natural gas with carbon capture and storage (CCS) technology—to support operations at the complex.

The proposed renewable diesel project will combine blue hydrogen with locally sourced renewable feedstocks and a proprietary catalyst to produce more than 1 billion l./year (roughly 20,000 b/d) of low-carbon, renewable diesel to reduce greenhouse gas emissions from Canada’s transportation sector by about 3 million tonnes/year.

Imperial expects to take final investment decision (FID) by yearend. If approved, the proposed complex would begin production in 2024, according to the operator.

Par Pacific to acquire ExxonMobil Billings refinery, related assets

Par Pacific Holdings Inc., Houston, agreed to acquire the Billings refinery and certain associated midstream assets in Montana and Washington from ExxonMobil Corp. and two of its subsidiaries for $310 million plus hydrocarbon and other inventory to be valued at closing, the companies said in separate statements Oct. 20.

Through the deal, Par Pacific expands its fully integrated downstream network in the western US and increases total throughput capacity to about 218,000 b/d.

The 63,000 b/d Billings refinery is a high-conversion, complex refinery, which processes Western Canadian and regional Rocky Mountain crude oil. Par Pacific is evaluating renewable fuels opportunities to supplement the refinery’s conventional fuel production and utilize its existing market position in Washington to reduce the carbon intensity of its fuel sales in accordance with the recently enacted Washington low-carbon fuel standard, the company said. The state aims to cut auto emissions numbers by 20% by 2038.

The deal also includes a 65% interest in adjacent cogeneration infrastructure and a PADD IV & V marketing and logistics network that includes the wholly-owned 70-mile, 55,000 b/d Silvertip pipeline, a 40% interest in the 750-mile, 65,000 b/d Yellowstone refined products pipeline, Yellowstone Energy LP, and seven refined product terminals. Total storage capacity across the refinery and logistics locations is 4.1 million bbls. Par Pacific also agreed to a long-term ExxonMobil-branded fuels marketing arrangement to supply about 300 retail locations.

Par Pacific expects over $30 million in commercial and cost synergies through the deal. Employees directly supporting the assets will be offered positions at Par Pacific, the companies noted.

 TRANSPORTATION Quick Takes

QatarEnergy selects Shell as second international NFS expansion partner

QatarEnergy selected Shell plc as its second international partner in the 16-million tonne/year (tpy) North Field South (NFS) expansion project comprised of two 8-million tpy liquefaction trains. The project is expected to raise Qatar’s total LNG production capacity to 126 million tpy.

Shell will hold an effective net participating interest of 9.375% out of a 25% interest available for international partners, QatarEnergy and Shell said in separate releases Oct. 23. QatarEnergy will hold the remaining 75% interest.

The North Field Expansion Project, comprising NFS and the North Field East (NFE) expansion projects, will start production in 2026 and will add more than 48 million tpy to the world’s LNG supplies by 2027, QatarEnergy said.

QatarEnergy selected TotalEnergies SE as the first international partner in the NFS project in September. A third partnership announcement is expected.

Invenergy confirms commercial operations at El Salvador LNG-to-power plant

Invenergy has reached commercial operations at the Energía del Pacífico (EDP) LNG-to-power project at the Port of Acajutla in El Salvador. Completion of EDP increases electric reliability and lowers emissions through natural gas supply to the Central American region, the company said in a release Oct. 20.

The project, the country's largest ever private foreign direct investment, is providing power to meet up to 30% of El Salvador's energy demand. The $1-billion project comprises a permanently moored floating storage and regasification unit (FSRU), a 1.8-km subsea pipeline, a 378-Mw natural gas-fired power plant, and a 44-km electric transmission line, connecting output to the Central American Electrical Interconnection System.

Invenergy and BW LNG closed a $128.3 million package with IDB Invest to finance the FSRU component of the EDP project in May 2021. BW Tatiana, with capacity of 280 MMscfd and storage capacity of 137,000 cu m, is Central America's first FSRU (OGJ Online, May 14, 2021). In April 2022, it performed its first ship-to-ship transfer of about 125,000 cu m of LNG in Acajutla, El Salvador, with LNG tanker Bilbao Knutsen.

By shifting some power supply to natural gas, EDP reduces El Salvador's reliance on diesel and heavy fuel oil-fired power generation, offsetting 600,000 tonnes/year of CO2 emissions, Invenergy said.

Sempra, Bechtel finalize Port Arthur LNG EPC contract

Sempra Infrastructure, a subsidiary of Sempra, has amended and restated its fixed-price engineering, procurement, and construction (EPC) contract with Bechtel Energy for development of the Port Arthur LNG plant’s 13.5-million tonne/year (tpy) Phase 1 project under development in Jefferson County, Tex. Sempra described execution of the final contract as a “critical step” in advancing the project to final investment decision.

Under the EPC contract, Bechtel will also perform Phase 1 commissioning, startup, performance testing, and operator training. The amended contract includes a price of $10.5 billion. Sempra initially awarded the EPC work to Bechtel in 2020 (OGJ Online, Mar. 3, 2020).

Port Arthur LNG Phase 1 is permitted and expected to include two 6.75-million tpy liquefaction trains and as many as three 160,000-cu m LNG storage tanks. A similarly sized Port Arthur LNG Phase 2 project is also under development.

Earlier this year, Sempra Infrastructure substantially completed marketing of Phase 1 production, signing of a series of non-binding agreements with Polish Oil & Gas Co. (PGNiG), RWE Supply & Trading GMBH, INEOS Energy Trading Ltd., and ConocoPhillips Co.

Canacol hires SETCO to build Colombian natural gas pipeline

Canacol Energy Ltd. has hired Shanghai Engineering and Technology Corp. (SETCO) to build a 289-km, 22-in. OD natural gas pipeline from Canacol’s 300-MMscfd Jobo gas processing plant to Medellin, Colombia. The pipeline will have an initial capacity of 100 MMscfd and is scheduled to enter service in December 2024.

SETCO will pay 100% of the cost of building the pipeline and will own, operate, and maintain it. Canacol will pay a fixed fee to transport gas on the line.

Canacol has already executed two 12-year take-or-pay gas sales contracts to ship a total of 75 MMscfd to Medellin through the pipeline and is currently negotiating additional long term take or pay gas sales contracts with customers in the interior to ensure that the new pipeline is filled to initial capacity.

The company can produce 250 MMscfd of gas from the Cienaga de Oro and Porquero reservoirs and anticipates increasing production capacity to more than 300 MMscfd via additional drilling before the pipeline begins operating.

“Construction of this pipeline will allow Canacol to ship its gas to the interior market of Colombia and will lift our gas sales above 300 MMscfd in 2025,” said Canacol president and chief executive officer Charle Gamba. “The project will also provide energy security to customers in the interior of Colombia as Ecopetrol´s gas fields there start declining in 2024.”

Excelerate charters Excelsior FSRU to Germany

Excelerate Energy Inc. and the Government of the Federal Republic of Germany have signed a 5-year contract to charter 5-billion cu m/year floating storage and regasification unit (FSRU) Excelsior, starting first-quarter 2023. The 138,000-cu m vessel will be berthed in the Port of Wilhelmshaven.

Germany’s Federal Ministry for Economic Affairs and Climate Action previously announced that a consortium including Tree Energy Solutions (TES) GMBH, E.ON SE, and Engie SA would jointly develop and implement Germany’s fifth FSRU-based import terminal using an Excelerate vessel. The FSRU will also accelerate development of TES’s green hydrogen terminal at Wilhelmshaven, according to Excelerate.

Excelsior will go to drydock at the end of 2022 for scheduled maintenance before deployment to Germany. It has most recently been operating in Israel.

Europe has been monitoring natural gas supply and discussing a possible price cap as the first heating season in the wake of Russian’s invasion of Ukraine approaches. German storage is 95% full.