GENERAL INTEREST Quick Takes
Phillips 66 strikes $3.8-billion deal for DCP Midstream public units
Phillips 66 has struck a deal to acquire all of the publicly held common units representing limited partner interests in DCP Midstream for $3.8 billion (cash consideration of $41.75 per common unit). The deal increases Phillips 66’s economic interest in DCP Midstream to 86.8% and enhances its existing NGL platform through value chain integration, the company said in a release Jan. 6.
In combination with the 2022 realignment of Phillips 66’s economic and governance interests in DCP Midstream, the transaction is expected to generate an incremental $1 billion of adjusted EBITDA for Phillips 66, the company said (OGJ Online, Aug. 18, 2022).
The company also expects to capture operational and commercial synergies of at least $300 million by integrating DCP Midstream into its existing midstream business.
In early December, Phillips 66 said its 2023 capital program of $2 billion includes a midstream capital plan of $639 million comprised of $329 million for sustaining projects and $310 million for growth projects, which it said will be directed toward enhancing the company’s integrated NGL value chain from wellhead to market.
The deal for DCP Midstream’s common units is expected to close in second-quarter 2023, subject to customary closing conditions.
APA 2022: 25 companies offered ownership interests
Twenty-five companies have been awarded ownership interests in production licenses on the Norwegian Continental Shelf as part of Norway’s Awards in Predefined Areas (APA) 2022 licensing round. A total of 47 production licenses were on offer by Norway’s Ministry of Petroleum and Energy to oil and gas firms – 29 in the North Sea, 16 in the Norwegian Sea, and 2 in the Barents Sea.
Equinor Energy AS was awarded 26 new production licenses—16 in the North Sea, nine in the Norwegian Sea, and one in the Barents Sea. Of those licenses, Equinor will serve as operator in 18 and in eight as partner.
In 2023, the operator plans to participate in 25 exploration wells, most of them around existing infrastructure, the company said in a release Jan. 10.
Aker BP ASA was offered interests in 17 new licenses, nine as operator. Of the 17 licenses, 13 are in the North Sea (six as operator) and four are in the Norwegian Sea (three as operator).
Wintershall Dea has been awarded 11 licenses, including three as operator. Neptune Energy was awarded two licenses, one as operator.
DNO Norge AS has been awarded participation in 11 exploration licenses, of which one is an operatorship. Of the 11 new licenses, nine are in the North Sea and two in the Norwegian Sea.
Other companies offered operatorship include Var Energi ASA, OMV Norge AS, ConocoPhillips Skandinavia AS, Wellesley Petroleum AS, OKEA ASA, Petrolia NOCO AS, and Harbour Energy.
National Native Title Tribunal authorizes Santos to apply for Narrabri gas production leases
The National Native Title Tribunal has granted approval for Santos Ltd. to apply for four petroleum production leases to cover the proposed $3.5 billion (Aus.) Narrabri coal seam gas project in northern New South Wales.
The tribunal’s determination imposed a condition in each case that Santos takes all necessary steps to ensure an additional research program be implemented as specified in the Narrabri Gas Project Aboriginal Cultural Heritage Management Plan, which must be completed prior to beginning Phase 2 of the project.
Santos said it will continue to work with the Gomeroi people to ensure their heritage is protected and that they benefit from the project development via training and employment.
The tribunal’s decision ends talks which began in 2014 when Santos proposed to drill for gas on Gomeroi land, a move opposed by the Gomeroi people.
The tribunal’s intervention came when the two parties failed to reach a negotiated agreement under the Native Title Act.
The Narrabri project involves drilling 850 wells to produce 1,500 petajoules of gas to be piped to Australia’s east coast markets.
Exploration & Development Quick Takes
Talos Energy to tie back new discoveries to Ram Powell
Talos Energy Inc. will tie back production from deepwater Lime Rock and Venice prospects to the Ram Powell platform in the Gulf of Mexico.
Commercial hydrocarbons were discovered in both prospects during sequential drilling operations in fourth-quarter 2022. Net pay of 78 ft was discovered in Lime Rock and 72 ft of net pay was discovered in Venice, and both have excellent geologic qualities, the company said in a release Jan. 3. Talos collected pressure, fluid, and core samples from the wells to confirm the discoveries.
Completion operations will be in second-half 2023, with first production from both wells by first-quarter 2024. The wells will produce through a shared riser system at Talos’s 100% owned and operated Ram Powell platform.
Expected combined gross production rates are 15,000-20,000 bo/d, in-line with pre-drill estimates. Combined gross recoverable resources are 20-30 MMboe, averaging 40% oil and 60% liquids.
Lime Rock was acquired in Lease Sale 256 in November 2020 and is about 9 miles from the Ram Powell platform. The Venice prospect was identified within the existing Ram Powell unit acreage about 4 miles from Ram Powell. Talos held 100% working interest in the prospects prior to farmouts leaving 60% working interest.
Lime Rock and Venice are the first two deepwater exploitation wells in Talos’s current open-water rig program which began in fourth-quarter 2022 and will continue in first-half 2023 with the Rigolets and Lisbon prospects, among others.
Separately, Talos expects results from its operated Mount Hunter development well and its non-operated Puma West exploration well in first-quarter 2023. The company’s non-operated Pancheron exploration well is also expected to spud in first-half 2023.
TAG begins Badr Phase 1 unconventional development
TAG Oil Ltd. is advancing Phase 1 development of the unconventional Abu Roash F (ARF) reservoir in Badr oil field (BED-1), a 107 sq km concession in the Western Desert of Egypt.
TAG Oil has chosen the BED 1-7 vertical well for its first re-completion and evaluation operations in BED-1. The well had previously tested at a peak rate of 418 bbl of 24ᵒ API oil and produced about 20,000 bbl from the ARF during a 1-year production period before being suspended.
First stage operations will include conditioning the open-hole section with a production liner, recompleting the ARF, and conducting a diagnostic fracture injection test (DFIT) to determine geomechanical properties, and imaging the natural fracture network in the ARF reservoir. This will be followed by hydraulic fracture stimulation to improve permeability and productivity, flowback, and a production cycle to assess oil recovery potential.
Production is expected to start mid-January with well results in March 2023.
Data collected from BED 1-7 will be incorporated into modeling studies to provide guidance to drill the first horizontal ARF well in BED-1. The company has submitted permits and anticipates a drilling rig will be secured and ready to spud in May-June 2023. An additional well could be drilled in fourth-quarter 2023 or early 2024.
TAG Oil was awarded a petroleum services agreement in September 2022 to develop unconventional resources in ABF after negotiations with Egyptian General Petroleum Corp. (EGPC) and a letter of intent confirming EGPC had commissioned Badr Petroleum Co. to conclude the petroleum services agreement with TAG Oil. The 10-year concession includes an optional 10-year extension. Multiphase development is planned (OGJ Online, Oct. 14, 2022).
TotalEnergies encounters hydrocarbons south of Elgin Franklin field
TotalEnergies SE found hydrocarbons at the Isabella discovery (P1820) in Block 30/12d-12 in the Central North Sea of the UK Continental Shelf about 25 miles south of its operated Elgin-Franklin field, partner Ithaca Energy said in a Jan. 5 release. The operator intends to complete data gathering, plug the well, and evaluate drilling results to establish commerciality of the reservoir.
The well was drilled to a total depth of 15,600 ft (4,754 m) in water depths of 262 ft (80 m). Hydrocarbons were encountered in Upper Jurassic and Triassic sandstone reservoirs with 148 ft (45 m) net thickness. Logging while drilling and wireline logs were acquired to establish reservoir quality.
TotalEnergies is operator at Block 30/12d-12 (30%) with partners Ithaca Energy (UK) Ltd. (10%), Neptune E&P UK Ltd. (50%), and Energean Exploration Ltd. (10%).
QPD, QatarEnergy sign new agreement for Al-Karkara, A-Structures development
Japan’s Qatar Petroleum Development Co. (QPD) and QatarEnergy will continue development and production of Al-Karkara and A-Structures oil fields in the territorial waters of the State of Qatar under a new 5-year agreement. QPD, which is owned by Cosmo E&P and Sojitz Corp, will continue as operator.
The agreement succeeds the development and production sharing agreement signed in December 1997.
Al-Karkara and A-Structures are offshore fields which lie about 90 km to the east of Doha and consist of three small fields: Al-Karkara, which was discovered in 1988, and the A-Structures (A-North and A-South), which were discovered in 1971. The fields were initially considered non-commercial until QPD proved commercial viability in the late 1990s. The fields started production in March 2006, and since then have produced a total of 33.5 million bbl of crude oil.
Al-Karkara and A-Structures are the first fields in the State of Qatar to achieve zero gas flaring by re-injecting the excess sour gas underground, QatarEnergy said.
Drilling & Production Quick Takes
Neptune Energy starts production at Römerberg well, Germany
Neptune Energy began first oil production at the operated Römerberg 6 well in Speyer, southwestern Germany. Initial production tests indicate flow rates up to 1,800 boe/d, the company said in a release Jan. 9.
Römerberg 6 is the ninth production well on Römerberg field and is expected to increase Neptune’s production in the Rhine Valley to around 3,700 boe/d.
Römerberg was discovered in 2003 and began producing in 2008.
In October 2022, Neptune received approval from the State Mining Authority for Rhineland-Palatinate to raise the production limit at the field. This enables Neptune to mature its full-field development plans, including significant investment in surface infrastructure to support higher production rates, upgrade water treatment, and reduce emissions associated with flaring, the company said.
Neptune is operator of the field with 50% interest. Palatina GeoCon is license owner and 50% interest holder.
Kuwait Energy drills dry hole in Abu Sennan
Kuwait Energy Egypt drilled a dry hole in the ASW-1X well in the Abu Sennan license, 7 km north of the producing Al Jahraa field in Egypt’s Western Desert, partner United Oil & Gas PLC said in a Jan. 4 release.
The well was drilled to a total depth of 3,640 m. Although the well encountered net reservoir in the Abu Roash, Bahariya, and Alam El Bueib targets, the logs did not indicate the presence of hydrocarbons. Results will be integrated into the subsurface understanding of the license, and the additional data used to help prioritize future drilling locations, United said.
The well will be plugged,and the Sino Tharwa-1 rig will mobilize to drill the ASH-8 development well, the first well of the 2023 drilling campaign, which will target an undrilled area of the license.
Abu Sennan is operated by Kuwait Energy Egypt (25%). Joint venture partners are United Oil & Gas (22%), Global Connect Ltd. (25%), and Dover Investments (28%).
Ithaca Energy to drill K2 prospect
Ithaca Energy (UK) Ltd. will carry out exploration drilling in the K2 prospect in license P2382, Block 22/14c, Central North Sea.
Water depth at the site is 294 ft (90 m). Final planned depth of the drilling is 9,000 ft (2,743 m), targeting the Forties Member sandstones.
The well is expected to spud in June or July and take about 41 days to determine the presence of hydrocarbons.
Ithaca Energy is operator at K2 (50%) with partner Dana Petroleum (50%).
PROCESSING Quick Takes
Lukoil to shed Sicilian refinery
PJSC Lukoil has reached an agreement for the sale of subsidiary ISAB SRL, which operates the 320,000-b/d Priolo refinery in Sicily’s eastern province of Syracuse (OGJ Online, Feb. 23, 2021).
As part of the Jan. 9 deal, Lukoil subsidiary Litasco SA will sell its 100% ownership interest in ISAB to G.O.I. Energy Ltd., an energy sector arm of Cyprus-based Argus Management Ltd.’s Argus New Energy Fund AIF V.C.I.C. Ltd., Lukoil said in a release.
G.O.I. Energy already has formed a partnership with global trading firm Trafigura Group Pte. Ltd. that will secure uninterrupted feedstock supplies to the refinery and provide for production offtake—as well as necessary working capital—to ensure operation of ISAB’s integrated complex following the acquisition, according to Lukoil.
Pending regulatory approvals, the sale is scheduled to close by end-March 2023. Financial details were not disclosed.
Announcement of the proposed sale follows Lukoil’s notification to the market in December, that—based on feedstock already in storage and ongoing deliveries of non-Russian oil—ISAB would be able to ensure uninterrupted operation of the Priolo refinery during the coming months despite restrictions on supply of Russian crude to countries of the European Union set to take effect Dec. 5.
Lukoil assumed ownership of the Priolo refinery—which consists of refining, gasification, and electricity cogeneration sites interconnected via a system of pipelines across three plants—from former joint-venture partner ERG SPA in late 2013.
Cenovus reduces downstream throughput guidance
Cenovus Energy Inc., Calgary, reduced its expected downstream throughput for fourth-quarter 2022, citing the impact of winter storms at the company’s US and Canadian refining operations, unplanned operational challenges, and third-party pipeline outages.
Refineries in the US and the Lloydminster heavy oil upgrader in Saskatchewan experienced various degrees of impacts, and as a result, downstream throughput was reduced in December.
Fourth-quarter 2022 downstream throughput for Canadian manufacturing has been reduced to 90,000-95,000 b/d, while US manufacturing has been reduced to 370,000-380,000 b/d. The Lima refinery in Ohio is now operating at full rates, the company said. The Lloydminster upgrader in Canada and the Phillips 66-operated Borger refinery in Texas (50% interest) are each expected to return to full rates by mid-January. The Phillips 66-operated Wood River refinery in Illinois (50% interest), currently operating at about 65% capacity, is expected to continue to increase rates through the first quarter, Cenovus said. Impacts are expected to reduce first-quarter 2023 downstream refinery throughput.
Delek plans 2023 capital spending of $350 million
Delek US Holdings Inc. plans a consolidated capital expenditure budget of about $350 million for 2023.
Growth capital is largely allocated toward expanding the gathering business in the Permian basin, the company said. Sustaining capital includes a planned turnaround at the 75,000-b/d Tyler, Tex. refinery in first-half 2023.
Of the $350 million capital program, refining spending is $202 million with the bulk of that coming from elevated turnaround expenses. Logistics is targeted at $81 million, mainly from spending on ongoing growth initiatives. Retail and corporate spending are relatively flat to 2022 at $31 million and $36 million, respectively.
TRANSPORTATION Quick Takes
Harvest to acquire Belle Chasse terminal from Phillips 66
Harvest Midstream agreed to acquire the Belle Chasse Terminal, formerly the Alliance refinery, in Plaquemines Parish, Louisiana, from Phillips 66.
In November 2021, Phillips 66 closed the 255,000-b/d refinery to transition it into a crude oil ter-minal. The project followed the company’s evaluation of options for the site considering the in-vestment that would have been required to repair refinery infrastructure in the wake of damages caused by Hurricane Ida in August 2021. The infrastructure sits on 3,200 acres, has 1 million bbl of active storage capacity and two crude oil loading docks.
With the deal, expected to close in first-quarter 2023, Harvest will extend the value chain around its existing regional crude pipeline systems and will be able to expand its service offerings to pro-ducers and refinery customers through its Harvest Marketing & Trading affiliate.
Energinet gets DNV certification for Baltic Pipe natural gas pipeline
Energinet, the Danish national transmission system operator for electricity and natural gas, received certificates of conformity from DNV for its section of the 10-billion cu m/year offshore Baltic Pipe natural gas pipeline running from Norway to Denmark and Poland. DNV’s work on Baltic Pipe, which began operations Oct. 1, 2022, took place during its engineering, procurement, construction, installation, hook-up, and commissioning phases.
Energinet’s part of Baltic Pipe consists of 105 km of pipeline in the North Sea, 210 km of pipeline underground across Denmark, an expansion of the Nybro gas terminal, and a new compressor station at Everdrup in Southern Zealand, Denmark. DNV assisted with professional services to Energinet on the onshore pipelines, compressor station, and gas terminal.
Commissioning of Nybro terminal took place in two stages, half of its 6,700 Mw-hr/hr capacity coming online Nov. 1, 2022, and the second half before yearend. Gas began flowing to Poland at partial capacity Oct. 1 as planned. Everdrup compressor station uses three 18.8-Mw electric motor compressors, with two operating and the third serving as a spare.
DNV’s overall contract scope included independent verification, complex independent modelling, and submarine pipeline certification to DNV certification regime DNV-SE-0475. Acceptance criteria met Danish Continental Shelf Law, DNV-ST-F101, and the suite of underlying DNV standards and recommended practices.
TotalEnergies to begin marketing LNG from planned Le Havre FSRU
TotalEnergies SE affiliate TotalEnergies LNG Services France (TELSF) plans to operate a floating storage and regasification unit (FSRU) in Le Havre, northern France, starting September 2023 and will begin marketing regasification capacity early in the year.
TELSF will hold a non-binding call for interest in a total of 2.5 billion cu m/year (242 MMcfd) of regasification capacity between Jan. 16 and Jan. 27, followed by a binding open season in March. Interested parties would commit to a 5-year term.
The terminal will use Hoegh LNG AS’s 400-MMcfd FSRU Cape Ann, already under charter to TotalEnergies.
TotalEnergies said the war in Ukraine has exposed the need for the European Union and France to diversify gas procurement in line with the European Commission’s REPowerEU plan. The French law on emergency measures to protect purchasing power includes provisions aiming at securing the country’s gas supply and introduces a specific regime for the operation of an FSRU on French territory, the company added.
Le Havre previously hosted an onshore terminal that imported Algerian LNG for Gaz de France.
Energy Transfer to place Gulf Run pipeline in service
Energy Transfer LP has received US Federal Energy Regulatory Commission (FERC) approval to place its 1.65-bcfd Gulf Run natural gas pipeline into service. The 42-in. OD pipeline runs 135 miles through Louisiana from the Haynesville shale toward the US Gulf Coast.
In addition to transporting Haynesville output, Gulf Run will use interconnects with other Energy Transfer pipes to carry gas produced in the Permian basin, Barnett shale, Marcellus and Utica shales, and Arkoma and Anadarko basins.
The pipeline consists of two zones. Zone 1 connects the Carthage Hub to Perryville, La., markets, and Zone 2 extends south and connects to the 2.5-bcfd Golden Pass pipeline and Energy Transfer’s 1.5-bcfd Trunkline system. Zone 1 is bidirectional between Perryville and its Westdale, La., interconnect with Zone 2, allowing southbound transport of Perryville volumes as well.
Golden Pass is a 69-mile long, FERC-regulated interstate pipeline that interconnects with several interstate and intrastate pipelines and storage sites enroute to the 18-million tonne/year Golden Pass LNG plant being developed by QatarEnergy and ExxonMobil Corp. in Sabine Pass, Tex. It is expected to enter service in 2024.