OGJ Newsletter

GENERAL INTEREST Quick Takes

Energy Transfer adds Permian basin assets with $1.45-billion Lotus acquisition

Energy Transfer LP has agreed to acquire Lotus Midstream Operations LLC in a deal that will increase its crude pipeline assets across the Permian basin.

The definitive agreement signed with an affiliate of EnCap Flatrock Midstream values the deal at about $1.45 billion ($900 million cash, 44.5 million newly issued Energy Transfer common units).

Lotus Midstream owns and operates Centurion Pipeline Co. LLC, an integrated, crude midstream platform in the basin. The company provides a full suite of midstream services including wellhead gathering, intra-basin transportation, terminalling, and long-haul transportation services. Its system, encompasses about 3,000 active miles of pipeline from southeast New Mexico across the Permian basin of West Texas to Cushing, Okla., with nearly 1.5 million b/d of capacity, Energy Transfer said in a release Mar. 27.

Lotus Midstream’s Midland terminal offers 2 million bbl of crude oil storage capacity and additional supply and demand connectivity.

The acquisition also includes a 5% equity interest in the Wink to Webster Pipeline, a 650-mile system transporting more than 1 million b/d of crude oil and condensate from the Permian basin to the Gulf Coast.

Increased connectivity

In addition to increasing Energy Transfer’s footprint in the Permian basin, the deal provides increased connectivity for the company’s crude oil transportation and storage businesses, providing direct access to hubs in Cushing, Midland, Colorado City, Wink, and Crane.

Upon closing—expected in second-quarter 2023 subject to regulatory approval and closing conditions—Energy Transfer expects to begin construction on a 30-mile pipeline project that will allow the company and its customers the ability to originate barrels from its Midland terminals for ultimate delivery to Cushing, the release noted. The project is expected to be completed in first-quarter 2024.

Crescent Point to acquire Montney assets in $1.25-billion acquisition

Crescent Point Energy Corp., Calgary, has agreed to acquire the oil and liquids-rich Montney assets of Spartan Delta Corp., Calgary, for $1.7 billion (Can.) (US $1.25 billion).

With the deal, the company’s asset base will include inventory in both the Kaybob Duvernay and the Montney, while also maintaining low-decline assets in Saskatchewan that provide additional cash flow, said Craig Bryksa, president and chief executive officer of Crescent Point in a release Mar. 28.

The acquired assets include about 38,000 boe/d (55% oil and liquids), total drilling inventory of 600 net Montney locations, and some 235,000 net acres of contiguous land with Montney rights in Alberta within the Gold Creek and Karr area, Crescent Point said.

Updated guidance

Crescent Point’s revised 2023 annual guidance, which incorporates the impact of the acquisition, includes annual average production of 160,000-166,000 boe/d and development capital expenditures of $1.15-1.25 billion (Can.).

The revised 2023 capex budget incorporates some $150 million (Can.) of development capex associated with the newly acquired assets. Crescent Point plans to manage the Montney assets by drilling 25 wells per year, which requires $250 million of annual capital expenditures, inclusive of infrastructure spending, it said.

The 5-year production forecast is now expected to grow to 195,000 boe/d by 2027. The company’s Kaybob Duvernay and Montney assets are expected to represent about 45% of its pro-forma total production at closing, increasing to about 60% within its 5-year plan.

The purchase price will be paid in cash, which is expected to be funded through existing credit facilities. Crescent Point has implemented a new 2-year revolving credit facility for $400 million (Can.). At closing, the company’s unutilized credit capacity is expected to total about $850 million.

Going forward, Crescent Point expects to pay down debt with cash flow generation and will pursue the potential sale of one or more of its assets. In aggregate, the company is looking to reduce its net debt by about $1 billion over the next 12 months.

The acquisition is expected to close on May 10, 2023, subject to regulatory approvals and customary closing conditions.

 Exploration & Development Quick Takes

TotalEnergies spuds Benriach prospect

TotalEnergies E&P UK has spudded the Benriach exploration well on Block 206/05c, offshore the UK West of Shetland, prospect partner Kistos PLC said in a release Mar. 29.

The well is being drilled by the Transocean Barents semi-submersible drilling rig and is expected to complete in third-quarter 2023. Targeted P50 prospective resources are 638 bcf. The prospect is targeting the same Royal Sovereign sands discovered in Glendronach field in the Greater Laggan Area according to Kistos’ website. If successful, Benriach could extend production at the Shetland gas plant, the site notes.

In January 2022, TotalEnergies farmed out 25% interest in the Banriach prospect to Kistos PLC (OGJ Online, Jan. 31, 2022).

Shell lets Manatee FEED contract

Shell Trinidad and Tobago Ltd. has let a front-end engineering design (FEED) contract to McDermott International Inc. for the Manatee gas development project offshore Trinidad and Tobago, the service provider said in a March release.

Under the contract scope, McDermott will provide comprehensive FEED services for a wellhead platform, export pipeline system, shore approach, midstream pipeline, and onshore control room.

Manatee field lies in Block 6(d) in 91 m of water. Production is projected to begin in 2025 and expected recovery is 47.9 MMboe.  

Shell is 100% owner and operator of Manatee. 

ExxonMobil farms out interests off Eastern Canada to QatarEnergy

ExxonMobil Canada agreed to farmout certain exploration portfolio interests in Atlantic Canada to Qatar Energy.

QatarEnergy entered a farm-in for two exploration licenses offshore the province of Newfoundland and Labrador, the company said in a release Mar. 29.

Pursuant to the agreement, QatarEnergy holds a 28% working interest in ExxonMobil-operated (50%) license EL 1167, where the Gale exploration well and associated activities are planned. Cenovus Energy holds the remaining 22%.

QatarEnergy also gains 40% working interest in ExxonMobil-operated (60%) license EL 1162.

The licenses lie offshore Eastern Canada in water depths of 100-1,200 m and cover an area of about 1,420 and 2,400 sq km, respectively.

The deal has completed necessary formalities with the Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB), QatarEnergy said.

Drilling & Production Quick Takes

Equinor moves rig after drilling dry hole near Visund

Equinor Energy AS drilled a dry hole in production license (PL) 554 in the North Sea, according to a Mar. 24 release by the Norwegian Petroleum Directorate. The operator will move the Transocean Spitsbergen rig to drill a development well on Vigdis field in PL 089, also in the North Sea.

Well 34/6-6 S, the seventh exploration well in the license, was drilled by the semisubmersible drilling rig 10 km north of Visund field and about 190 km northwest of Bergen in 364 m of water (OGJ Online, Oct. 13, 2022). The objective was to prove petroleum in reservoir rocks in the Brent Group from the Middle Jurassic.

The well was drilled to measured and vertical depths of 3,965 m and 3,713 m subsea. It was terminated in the Burton formation from the Early Jurassic. It encountered 140 m total of the Tarbert, Etive, and Rannoch formations, of which about 90 m were sandstone layers with poor to good reservoir quality. In addition, 14 m of sandstone layers with poor to moderate reservoir quality were proven in the Cook formation with a total thickness of about 75 m. The well is dry.

Data acquisition has been carried out, and the well has been permanently plugged.

Equinor is operator of PL 554 with 40% interest. Partners are Aker BP ASA (30%) and Vår Energi ASA (30%).

DNO shuts oil production from Tawke, Peshkabir fields

DNO ASA started an orderly shutdown of its operated oil fields in the Kurdistan region of Iraq 4 days after it was instructed to temporarily cease deliveries to the Iraq-Turkey Pipeline destined for the Mediterranean port of Ceyhan.

The shutdown follows an arbitration ruling in favor of Iraq against Turkey for exporting Kurdish oil without Baghdad’s approval, DNO said in an updated release Mar. 29 (OGJ Online, Mar 27, 2023). DNO had diverted oil production to storage tanks, but capacity is limited, it said.

Tawke and Peshkabir fields averaged combined production of 107,000 bo/d in 2022, representing a quarter of Kurdistan’s total exports. Peshkabir production was halted Mar. 28. Plans have been drawn up to conduct deferred maintenance, the company said. Tawke production had begun, but shutdown required an additional day to complete given the larger number of wells spread across some 10 km, the company said.

Prior to shutdown, the Iraq-Turkey Pipeline carried some 400,000 b/d of Kurdish oil and another 70,000 b/d of Iraqi oil for export to Mediterranean and other refineries.

DNO operates the license containing Tawke and Peshkabir fields with 75% interest. Genel Energy plc holds 25%.

Montara field back on line

Jadestone Energy, Singapore, has resumed oil production at its troubled Montara field in the Timor Sea offshore northern Australia following a 7-month shut-in due to oil leaks and related problems on the Montara Venture floating production storage and offtake vessel (FPSO).

Production re-started with the H-6 well. Other wells will be brought back on stream during in the coming weeks, including the first Skua subsea well drilled on a nearby accumulation.

Production flow rates are expected to increase with the systematic re-opening of additional wells, the company said.

Montara Venture was shut in in August 2022 when a small oil leak was found. Following repairs to the FPSO’s storage tanks and completion of inspections, Jadestone performed its scheduled four-yearly maintenance program of the vessel’s topsides.

Further delay was experienced with the onset of severe weather conditions in February which hampered topsides maintenance work. The field was brought back online Mar. 21. 

Karoon produces from second well at Patola

Karoon Energy Ltd. brought the second Patola well onstream in the BM-S-40 production license in Patola field, offshore Brazil.

Well PAT-1 was brought onstream Mar. 27, 2023, at an initial rate of more than 12,000 bo/d. Together with the PAT-2 well, which started production Mar. 15, current total production from the license is now more than 40,000 bo/d (OGJ Online, Mar. 15, 2023).

Overall flow rates are gradually stabilizing on the FPSO, with total throughput now approaching the processing capacity of 80,000 b/d. After an initial period of Patola flush production, rates from the license will decline to about 33,000-35,000 bo/d over the next few weeks, prior to entering a more normal natural decline phase, the company said.

Petrobras discovered Patola in 2011, encountering 38° API oil in the same Oligocene turbidite sandstones found in Bauna and Piracaba fields. Patola is in 280 m of water and has proven and probable (2P) reserves of 16.4 million bbl.

PROCESSING Quick Takes

Placid refining relocates headquarters to Louisiana

Privately held petroleum refining company Placid Refining Co. LLC, plans to spend $66 million to relocate its headquarters to Baton Rouge, La., from Dallas, Tex., and modernize its nameplate-capacity 82,000-b/d refinery in Port Allen, La.

While details were not given, the company said in a Mar. 23 release that the investment will enhance refining processes at the Port Allen refinery and will continue over the next 5 years.

The company expects to create 20 new direct jobs and retain all 215 current positions at the refinery. Louisiana Economic Development estimates the project will result in 88 new indirect jobs for a total of 108 new jobs in the region. To secure the project in Baton Rouge, the state offered Placid an incentives package that includes a performance-based retention and modernization tax credit, the company said.

The company is also expected to participate in the state’s Industrial Tax Exemption and Enterprise Zone programs.

Placid produces a full range of transportation fuels that service a variety of industries and supplies jet fuel to the US Department of Defense.

QatarEnergy, CPChem break ground on USGC petrochemical complex

Chevron Phillips Chemical Co. LLC (CPChem)—a joint venture of Chevron Corp. and Phillips 66—and QatarEnergy started construction on their previously delayed grassroots petrochemical complex in Orange, Tex., about 113 miles east of Houston.

The March groundbreaking on the $8.5-billion project—to be operated by Golden Triangle Polymers Co. LLC—a JV of CPChem (51%)and QatarEnergy(49%)—follows the partners’ final investment decision (FID) on the petrochemical complex in late 2022 (OGJ Online, Nov. 17, 2022).

Scheduled for commissioning in 2026, Golden Triangle Polymers integrated polymers complex will include a 2.08-million tonne/year (tpy) ethylene cracker and two 1-million tpy high-density polyethylene (HDPE) units for production of proprietary Marlex polyethylene pellets for sale primarily to manufacturers in the Asia Pacific, Europe, and Latin America.

The partners previously deferred taking FID on the Golden Triangle Polymers project in 2020 amid a then-uncontrolled global pandemic (OGJ Online, Aug. 2, 2021).

Earlier this year, CPChem and QatarEnergy also took FID on a previously announced plan to jointly build and operate the proposed Ras Laffan petrochemical project (RLPP) in Ras Laffan Industrial City, Qatar (OGJ Online, Jan. 24, 2023).

Slated for startup in late 2026, the proposed $6-billion RLPP, too, will feature a 2.08-million tpy ethane cracker and two HDPE units. (OGJ Online, June 9, 2022).

CPChem and QatarEnergy already serve as JV partners in Ras Laffan Olefins Co. and Qatar Chemical Co. Ltd., which respectively operate petrochemical production complexes in Ras Laffan and Mesaieed, Qatar.

Delek makes leadership changes, splits COO roles between new hires

Delek US Holdings Inc. made changes to its senior leadership team, splitting the duties of chief operations officer with the departure of Todd O’Malley.

Joseph Israel has been named executive vice-president, operations for Delek US and Delek Logistics effective Mar. 27. Israel and Patrick Reilly, who was named executive vice-president and chief commercial officer on Mar. 1, will split O’Malley’s responsibilities.

Israel will be responsible for refining operations at Delek US and for logistics operations at Delek Logistics Partners LP. Chavez will report to Israel and will oversee refining operations at Delek US.

Israel holds over 25 years of energy experience and recently served as president and chief executive officer of Par Petroleum LLC. He held leadership positions at Hunt Refining and Alon USA, which were acquired by Delek US in 2017.

Chavez brings over three decades of refining experience, most recently with TotalEnergies SE where he held the position of general manager, Port Arthur refinery and petrochemical complex.

O’Malley joined Delek in 2021 and was named chief operating officer in March 2022.

Additionally, Tommy Chavez was named senior vice-president, refining operations, effective Apr. 10. Nithia Thaver, the company’s former executive vice-president and president of refining, left Delek to pursue other opportunities.

O’Malley and Thaver will be available for the transition through September 22, the company said.

TRANSPORTATION Quick Takes

Excelerate diverts Germany-chartered FSRU to Argentina for seasonal contract

Excelerate Energy Inc. signed a deal with Argentine officials that commits one of its floating storage and regasification units (FSRU) to the South American country during its winter.

Excelerate, which operates 10 FSRUs around the world, will in coming weeks redeploy the Excelsior vessel being chartered by the German government to the Bahia Blanca GasPort terminal through midyear. It will then return to Germany and start a 5-year contract that was signed in October 2022.

Excelerate president and chief executive officer Steven Kobos said on an earnings call that Argentina is one of the company’s valued markets.

The agreement, which Kobos said came together partly because Bolivian natural gas sales have declined, will give Excelerate a financial boost. Chief financial officer Dana Armstrong told analysts Mar. 28 the company’s EBITDA, which was $295 million in 2022, should grow by $5-6 million this year thanks to the deal.

In fourth-quarter 2022, Excelerate produced a net profit of $33.9 million on revenues of $455 million. Its FSRU and terminal services sales ticked up 6% from third-quarter 2022 to $122 million, helping grow its gross margin to $80.2 million.

In addition to the Argentina work and Excelerate’s focus on Europe following Russia’s invasion of Ukraine, Kobos said the company is focused on growing in Asia-Pacific countries. Demand has remained strong, Kobos said, noting Excelerate signed a spot contract to Bangladesh’s PetroBangla late March.

TotalEnergies launches integrated FEED for Papua LNG project

TotalEnergies has launched the fully integrated front-end engineering and design (FEED) stage of the proposed $10-billion Papua LNG project aimed at developing Elk-Antelope gas fields in the eastern highlands of Papua New Guinea.

Following pre-FEED studies that started in July 2022, the joint venture selected a development concept that includes four electrical LNG trains (e-trains) with total production capacity of 4 million tonnes/year (tpy) of LNG.

The operator will build the trains within the boundaries of the existing liquefaction plant at Caution Bay near Port Moresby, which was built in the country’s central Highlands region 14 years ago for the PNG LNG project.

Papua LNG has secured the use of 2 million tpy of additional capacity in the existing trains of PNG LNG.

Papua LNG will reduce carbon intensity through use of e-trains and the reinjection of produced CO2 (up to 1 million tpy) back into reservoirs.

ExxonMobil, Papua LNG joint venture partner and PNG LNG project operator, will construct and operate the e-trains.

A final investment decision (FID) for Papua LNG is expected at end-2023 or early 2024 with construction to begin in 2024. The fields could be brought on stream by late 2027 or early 2028.

The plan is to bring gas from Elk-Antelope fields to the Caution Bay e-trains via a 320-km onshore and offshore pipeline.

In the framework to integrate the two projects, TotalEnergies will join the PNG LNG project via a heads of agreement signed with JX Nippon for the sale of a 2% interest in PNG LNG after a Kumul Petroleum Holdings (PNG’s national company) back-in right. JX Nippon currently holds 4.7% of PNG LNG.

TotalEnergies holds 40.1% interest in Papua LNG. Partners are ExxonMobil (37.1%) and Santos (22.8%) (acquired through Oil Search Ltd. takeover in 2019). The Papua New Guinea government has the right to exercise a back-in right of up to 22.5% interest at FID.

NextDecade, Bechtel extend agreed pricing of Rio Grande LNG contract

NextDecade Corp. has notified the US Securities and Exchange Commission (SEC) of amendments to its agreements with Bechtel Energy Inc. for engineering, procurement, and construction (EPC) contracts on the 17.6-million tonne/year (tpy) Phase 1 of the proposed Rio Grande LNG plant in Brownsville, Tex.

The amendments lock in agreed upon pricing until June 15, 2023, and follow NextDecade missing a deadline to issue Bechtel a notice to proceed with construction.

NextDecade also told the SEC that is targeting final investment decision (FID) for Phase 1’s three liquefaction trains by the end of second-quarter 2023. It had previously been targeting a first-quarter 2023 FID.

The EPC contract is worth roughly $11.5 billion and includes the three liquefaction trains, two marine berths, and two 180,000-cu m storage tanks.

NextDecade has so far reached long-term sales agreements with eight buyers for a total of 11 million tpy. The most recent of these was a 15-year, 1-million tpy deal concluded with Itochu Corp. earlier this year (OGJ Online, Jan. 19, 2023).

A designed second phase would add two trains and bring total capacity to 27 million tpy.