GENERAL INTEREST Quick Takes
IEA: Russia’s March oil exports hit highest level since pandemic start
Russia’s oil exports surged in March to their highest level since April 2020 as product flows returned to levels last seen before Russia invaded Ukraine, according to the International Energy Agency (IEA).
Total oil shipments in March increased by 600,000 b/d to 8.1 million b/d, with products climbing 450,000 b/d month-on-month (m-o-m) to 3.1 million b/d. Revenues were estimated to rebound by $1 billion to $12.7 billion but were down 43% from a year ago.
Russian crude oil exports increased by 100,000 b/d in March to 5 million b/d. Shipments to the European Union (EU) continued to decline at a rate of 300,000 b/d. Onshore trade via the Druzhba pipeline was noticeably weaker (230,000 b/d), and pipeline flows are expected to continue to decline as Poland’s largest refiner, PKN Orlen, canceled its contract with Tatneft in early April. Most of Russia’s EU seaborne exports, totaling 110,000 b/d, are destined for Bulgaria, which is exempt from the embargo.
In Asia, top importers switched ranks in March, with India overtaking China as the top importer of Russian crude oil. Exports to India edged up by 200,000 b/d to 2.1 million b/d, while exports to China fell by 500,000 b/d to 1.7 million b/d. Roughly 200,000 b/d of Russian crude oil exports had no known destination at the time of writing.
Meanwhile, product exports surged by 450,000 b/d to 3.1 million b/d. Product flows to EU destinations nearly doubled to 300,000 b/d (+140,000 b/d m-o-m) but were down almost 1.5 million b/d compared with pre-war levels. Sales to Turkey rose 130,000 b/d m-o-m, led by a notable increase in gasoil/diesel shipments to almost 370,000 b/d – the highest level at least since 2018. Other gains came from the Middle East, Africa, and Latin America, which rose by 350,000 b/d, 320,000 b/d, and 80,000 b/d, respectively, compared with pre-war levels, with nearly 1 million b/d of Russian oil products heading for these three regions in March. At the time of writing by the IEA, roughly 400,000 b/d of Russian product exports had no known destination.
Chevron enters ammonia waterborne transportation joint study
Chevron Corp. subsidiary Chevron Shipping Co. LLC has entered a joint study agreement with the Angelicoussis Group, through its energy transition division, Green Ships, to explore how tankers can be used to transport ammonia, a potential lower-carbon marine fuel. The initial study will evaluate the ammonia transportation market, existing infrastructure, the safety aspects of ammonia, potential next-generation vessel requirements and a preliminary system to transport ammonia between the US Gulf Coast and Europe. Future work will focus on additional global markets.
Ammonia is a carrier of hydrogen and is believed to have potential to lower the carbon intensity of the marine industry. The companies said that they intend to advance ammonia’s technical and commercial feasibility at scale, particularly as an export for petrochemicals, power, and mobility markets.
“We believe this study will contribute towards identifying the technical, operational, and commercial challenges of carrying ammonia at scale and using it as a fuel in a safe and sustainable way,” said Stelios Troulis, Green Ships and energy transition director for the Angelicoussis Group.
Chevron last year formed a consortium with Air Liquide SA, LyondellBasell Industries NV, and Uniper SE to evaluate development of hydrogen and ammonia production infrastructure along the US Gulf Coast.
BlueNord enters partnership, submits application for first license outside DUC
Norwegian Energy Co. ASA (NORECO), to be renamed BlueNord ASA following a shareholders meeting in May, will partner with Semco Maritime A/S to jointly investigate oil and gas opportunities, and has submitted a license application for acreage containing the Elly-Luke gas discovery in the Danish part of the North Sea.
With the application, the company will participate in the Danish Ministry of Climate, Energy, and Utilities’ upcoming licensing mini-round. If successful in its application, BlueNord expects to carry out a preliminary technical review of Elly-Luke prior to any longer-term commitment, which is currently believed to hold potential to provide about 5 billion cu m of natural gas to Denmark and Europe, the company said.
BlueNord expects the license to be awarded late this year, with an initial study period of limited financial commitment through 2024.
The application is the company’s first tangible step taken outside of its 36.8% non-operated ownership in the TotalEnergies Denmark A/S-operated Danish Underground Consortium (DUC), which holds four hubs containing 15 fields, four export pipelines, and related infrastructure.
The DUC is currently producing oil and gas from three operational hubs (Dan, Halfdan, and Gorm), of which BlueNord’s share was 26,700 boe/d in 2022. The fourth hub, Tyra, is being redeveloped and is set to start production in winter 2023-24, which will lead to a more than doubling of BlueNord’s net production to over 55,000 boe/d.
Exploration & Development Quick Takes
Aker BP discovers hydrocarbons west of Vilje field
Aker BP ASA and partners will assess a recent North Sea hydrocarbon discovery alongside others with a view towards possible development. The newest discovery was made in production license (PL) 919 about 215 km west of Stavanger. Preliminary calculations place the size of the discovery at 0.5-0.8 million std cu m of recoverable oil.
Exploration well 25/4-15, the first in the license, was drilled about 5 km west of Vilje field by the Scarabeo 8 semisubmersible drilling unit to a vertical depth of 2,375 m below sea level in 119 m of water. It was terminated in the Heimdal formation in the Palaeocene. The objective was to prove petroleum in Paleocene reservoir rocks in the formation.
The well encountered a 31.5-m oil column in the Heimdal formation, 29 m of which was a sandstone reservoir with good reservoir quality. The formation was 187 m thick in total.
Oil-water contact was encountered at 2,253 m subsea, and the contact was confirmed with pressure points. A 1.5-m zone of residual oil was also encountered in deeper Heimdal sand with good reservoir quality.
Small-scale formation tests were conducted, and data acquisition and sampling were also carried out. The well has been permanently plugged.
The drilling rig will now drill wildcat well 25/2-24 S in PL 873 where Aker BP ASA is operator.
Aker BP is operator at PL 919 (80%) with partner ConocoPhillips Skandinavia AS (20%).
88 Energy finds oil in Alaska’s North Slope
88 Energy Ltd., Perth, confirmed the presence of multiple hydrocarbon-bearing zones across all the pre-drill targets in its Hickory-1 well in the Project Phoenix program on the North Slope of Alaska. Drilling also found a new upper SFS reservoir.
The company has now completed a full suite of wireline logging runs and sidewall coring and is currently planning a flow test program.
Wireline logging data suggests an estimated net pay of 450 ft across all pay zones at depths of 7,700-10,500 ft. Gross pay is estimated to be over 2,000 ft, better than pre-drill expectations.
Average total porosity across all zones is 9-12%, including key zones identified for potential testing in the Upper and Lower SFS reservoirs with 11-16% total porosity.
Retrieved sidewall cores fluoresced under ultraviolet light and will be sent to a laboratory in Anchorage for detailed analysis.
A preliminary petrophysical comparison of the Hickory-1 prospective zones against the interval that flowed oil in Pantheon’s Alkaid-1 wildcat in a neighboring permit to the north has indicated favorable potential for successful flow tests from multiple zones in Hickory-1, the company said.
Pantheon’s four wells have all flowed 35–40-degree API oil from similar sandstones.
88 Energy will now case and suspend Hickory-1 in preparation for flow testing scheduled for as early as possible in the 2023/24 winter season. A detailed evaluation of the data gathered so far will be made to plan the test program.
Hickory-1 lies in state lands adjacent to the Dalton Highway and the Trans Alaska pipeline within lease ADL 392314. The well was spudded Mar. 9 and drilled to a total depth of 10,650 ft.
88 Energy holds 75% interest and is operator of the Project Phoenix area.
The company’s earlier well, Icewine-1, encountered 380 ft of net oil pay within the SMD sands.
ONE-Dyas lets subsea power cable contract for N05-A platform
ONE-Dyas BV has let a first contract to N-Sea Group to install a subsea power cable between the Riffgat offshore wind farm and the proposed N05-A gas production platform, which is expected to be the first Dutch offshore gas treatment platform in the North Sea to run entirely on wind energy (OGJ Online, Sept. 28, 2022).
Scope of the contract includes survey, design, supply, engineering, transport, installation, burial, termination, and testing of about 10 km of subsea cable. Final permits were received from the Dutch Government in June 2022 followed by a final investment decision in September 2022. Preparations have started and N-Sea will mobilize various spreads in Summer 2023 and 2024 to execute work ahead of a plan for first gas delivery by August 2024.
N05-A is part of the Gateway to the Ems (GEMS) area in the North Sea, about 20-100 km north of the mouth of the River Ems, where ONE-Dyas and partners Hansa Hydrocarbons and EBN are developing gas production destined for both Dutch and German markets.
The proposed platform lies about 1.5 km from German waters. Expected volume to be produced from N05-A field and surrounding prospects is 4.5-13 billion normal cu m. Potential for the wider Dutch-German GEMS field has been estimated at 50 billion normal cu m, depending on exploration success.
Drilling & Production Quick Takes
Equinor begins production at Bauge
Equinor Energy AS began production Apr. 8 from Bauge field in the Norwegian Sea. Recoverable reserves at Bauge are estimated at 50 MMboe, mainly oil.
Bauge consists of two oil producers in a subsea template, in addition to pipelines and an umbilical connecting the wells to the upgraded Njord A platform. In 2016, Njord field installations were brought ashore for upgrading. In December 2022, the field was back online.
Bauge, discovered in 2013, lies in water depth of 282 m.
Oil from Bauge is transported by pipeline from Njord A to the Njord Bravo floating storage and offloading vessel (FSO), and onwards by tankers to the market. Gas is transported in a 40-km pipeline from Njord A to the Åsgard Transport System, and on to the Kårstø terminal.
Equinor is operator with 42.5%. Partners are Wintershall Dea Norge AS (27.5%), Vår Energi ASA (17.5%), and Neptune Energy AS (12.5%).
Arrow Exploration spuds well in Llanos basin
Arrow Exploration Corp. has spudded the RC-5 well at Rio Cravo Este (RCE) on the Tapir block in the Llanos basin, Colombia.
RC-5 follows completion of RCE-4 in C7-A and C7 Stringer zones. A submersible pump has been inserted but had yet to be turned on. The well is being choked back and it is naturally flowing with a 25/168-in. choke. A 24-hr span produced 728 bo/d gross at 28.5° API and with 1% water cut, the company said in a release Mar. 22.
The RCE-3 well is flowing at 822 bo/d gross while being choked back with a 21/128-in. choke. The submersible pump had been inserted but not turned on. Water cut remains at 0%.
Once RCE-5 is on production, the rig will be moved from the pad at Rio Cravo Este to Carrizales Norte field where Arrow plans to drill three oil wells at the 3D seismic identified extension of Carrizales field.
Capella field remains shut in. Discussions among the government, protesters, and the perator are ongoing.
Arrow Exploration is operator at Tapir (50%).
Petrobras resumes partial Bahia Terra production
Petróleo Brasileiro SA (Petrobras) is restarting production from the Bahia Terra Cluster in Bahia, Brazil, as the company gains restart approvals from the National Agency of Petroleum, Natural Gas and Biofuels (ANP).
Following an audit carried out by the ANP, Petrobras received in December 2022 an order to shut down operations in 37 onshore oil and gas production plants in Bahia.
On Apr. 12, the company received approval to resume production from Fazenda Bálsamo field. Petrobras has started necessary operational procedures to return the field to production, which, added to production from infrastructure previously authorized for operational return, will result in reestablishment of about 36% of the cluster’s total production.
On Mar. 31, Petrobras obtained authorization to resume production from Araçás field. At that time, the operator began procedures to resume operations of wells and pipelines, as well as oil treatment and natural gas compression stations, enabling the resumption of about 27% of the cluster’s production.
ADNOC Offshore lets drilling contract for Upper Zakum field
ADNOC Offshore, a subsidiary of Abu Dhabi National Oil Co. (ADNOC), has let a 5-year integrated drilling services contract to ADNOC Drilling Co. PJSC for development of Upper Zakum field 84 km northwest of Abu Dhabi Islands.
The contract, valued at $412 million, will begin in second-quarter 2023.
Upper Zakum and Lower Zakum together contain about 50 billion bbl total oil in place. ADNOC plans to increase field capacity of Upper Zakum to 1 million b/d by 2024 through the UZ750 mega-project which includes construction of four artificial islands in shallow water. The islands can accommodate 450 wells, 90 platforms and drilling rigs, processing plants, and infrastructure.
ADNOC Offshore is operator at Upper Zakum (60%) with partners ExxonMobil Corp. (28%) and Japan Oil Developing Co (12%).
PROCESSING Quick Takes
Sinopec commissions new Hainan copolymer project
China Petroleum & Chemical Corp. (Sinopec) subsidiary Hainan Baling Chemical New Material Co. Ltd. has commissioned the world’s largest plant for production of styrene-butadiene copolymer (SBC) at its operations in Hainan, China.
At an overall investment of $279.74 billion by Hainan Baling Chemical New Material and fellow Sinopec subsidiary Hainan Refining & Chemical Co. Ltd., the new 170,000-tonne/year (tpy) plant produces 120,000 tpy of SBC and 50,000 tpy of styrene-ethylene-butylene styrene (SEBS) products, Sinopec said on Apr. 10.
Consisting of 13 units and based on Baling Chemical New Material’s proprietary clean, environmentally friendly SBC polymerization technologies, the plant uses a feedstock of styrene and butadiene it receives from Hainan Refining & Chemical’s nearby 8-million tpy refinery in the Yangpu Economic Development Zone of Hainan Free Trade Zone (HFTZ).
The plant’s SBC production will be exported via the HFTZ to destinations in Europe and Southeast Asia Pacific, as well as to other unidentified markets in the region.
Following mechanical completion of Hainan Refining & Chemical’s 1-million tpy ethylene and refining expansion project in June 2022, the operator completed commissioning of the site’s new polypropylene plant on Dec. 20, 2022, with the project’s remaining unidentified units subsequently achieving startup, Sinopec told investors in its final 2022 annual report.
Vertex increases Q1 capex for renewable diesel conversion project
Vertex Energy Inc., Houston, increased its first-quarter 2023 capital expenditure guidance to $65-70 million from $30-35 million, the result of moving $35 million of planned second-quarter spending for subsidiary Vertex Refining Alabama LLC’s renewable diesel conversion project to the first quarter.
The total budget for Phase I of the conversion project at the 75,000-b/d refining and petrochemical complex in Mobile, Ala., remains in line with the previous target range of $110-115 million, the company said.
The project is currently in commissioning and startup following mechanical completion in late March and remains on the projected timeline, said Benjamin P. Cowart, president and chief operating officer.
“While the updated capex range for [first-quarter 2023] is now expected to be higher than we had initially forecasted, we believe our decision to leverage [second-quarter 2023] capital expenditures on the [renewable diesel] project, to include some Phase II items, provides the best value over time,” as the company moves toward startup and launch, he continued.
Throughput volumes at the Alabama refinery for first-quarter 2023 are 69,000-72,000 b/d, in line with the previous forecast, the company said.
The sequentially lower throughput volumes compared with fourth-quarter 2022 reflect the planned downtime associated with the final stages of reaching mechanical completion of the renewable project.
Once operable, the Mobile refinery’s converted hydrocracking unit—which previously produced olefins as feedstock for petrochemical manufacturers—will be capable of processing a wide range of organic, pretreated feedstocks including soybean and corn oil, meat tallow, and waste vegetable oils, among others, according to the operator’s website (OGJ Online, Sept. 12, 2022).
Shell, Petronas let preliminary contract for Malaysian gas plant
Shell PLC subsidiary Sarawak Shell Bhd. (SSB) and partner Petronas Carigali Sdn Bhd, through contractor Samsung Engineering Co. Ltd., have let a preliminary contract to KKB Engineering Berhad (KKB) subsidiary OceanMight Sdn. Bhd. to provide manufacturing and supply of equipment for the onshore gas plant (OGP) that will process deepwater sour gas from the operators’ Rosmari-Marjoram gas project offshore Malaysia.
On Apr. 10, OceanMight received a purchase order contract from Samsung Engineering (M) Sdn. Bhd. under which the KKB division will deliver module fabrication and supply of steel structures for SSB’s Rosmari-Marjoram OGP in Bintulu, Sarawak, Malaysia, KKB said in a release.
Valued at about $25.3 million, a formal contract for the purchase order will be executed in due course, the service provider said.
KKB said its work on the OGP will parallel the duration of Samsung Engineering’s contract, which is scheduled to be completed in third-quarter 2024.
The April purchase order contract follows the partnership’s September 2022 final investment decision (FID) to move forward with the project, as well as its award of a $680-million contract to Samsung Engineering in July 2022 for delivery of engineering, procurement, construction, and commissioning (EPCC) for the proposed OGP.
With a nameplate processing capacity of 800 MMcfd, the OGP will process natural gas produced from the Rosmari-Marjoram project in Block SK318, about 220 km offshore Sarawak, beginning in 2026.
With 80% equity in the SK318 production sharing contract (PSC), SSB serves as operator alongside partner Petronas Carigali Sdn Bhd (20%).
TRANSPORTATION Quick Takes
US DOE approves non-FTA exports from Alaska LNG
The US Department of Energy (DOE) has approved LNG exports to non-free trade agreement countries from Alaska Gasline Development Corp.’s (AGDC) 20-million tonne/year Alaska LNG plant, to be sited near Cook Inlet in Nikiski, Alas.
The move follows DOE’s Jan. 10, 2023, release of a final supplemental environmental impact statement (SEIS) for the project, which generally confirmed the conclusions of the draft SEIS. Among the findings noted by DOE in that document were that Alaska LNG’s shorter shipping routes to Asia would produce fewer emissions than US Gulf Coast-based alternatives, as would the fact that 75% of the natural gas used to feed the plant would be produced as associated gas.
Natural gas would be supplied to Alaska LNG by an 800-mile, 3.5-bcfd pipeline from the North Slope. The project is expected to be operational by 2030.
Alaska Gov. Mike Dunleavy and US Ambassador to Japan Rahm Emanuel have been spearheading talks with Japan-based potential customers, touting US-sourced LNG as an alternative to supplies from the Russian Arctic.
Sierra Club and other environmental groups have announced their intention to file suit against DOE’s decision. A 2020 permit issued by the Federal Energy Regulatory Commission has faced legal action since its issuance.
AGDC last year signed an MOU with Mitsubishi Corp., Toyo Engineering Corp., and Hilcorp Alaska LLC to assess the potential to produce zero-carbon ammonia at Cook Inlet using North Slope gas (OGJ Online, Oct. 7, 2022).
Kinder Morgan launches SFPP products pipeline expansion open season
Kinder Morgan Inc. has launched a binding open season to support a proposed 10,000-12,000 b/d expansion of the East Line portion of its SFPP LP refined products pipeline system. The expansion, measured on a gasoline-equivalent basis, would handle gasoline, jet fuel, and diesel shipment.
The total amount of expansion capacity available is scalable and will depend on the overall level of interest SFPP receives during the open season, scheduled to end May 26, 2023.
East Line runs 400 miles from El Paso, Tex. to Tucson, Ariz.
ADNOC L&S places new VLGCs into service
ADNOC Logistics & Services (ADNOC L&S), the shipping and maritime logistics arm of Abu Dhabi National Oil Co., has deployed five new-build very large gas carriers (VLGC). The 86,000-cu m ships were built at Jiangnan Shipyard Co. Ltd. in Shanghai, China, and will be owned and operated by AW Shipping Ltd., an ADNOC L&S joint venture with Wanhua Chemical Group Co. Ltd. (Wanhua).
The five VLGCs (Al Ain, Zakher, Rabdan, Al Salam and Baynounah) will transport LPG sourced from ADNOC and other global suppliers to Wanhua’s five manufacturing bases in China and one in Hungary. AW Shipping was formed in 2020 to support a 10-year LPG supply contract signed in 2018 between ADNOC and Wanhua.
The ships have dual-fuel engine technology and use LPG as their primary fuel, making them among the lowest-emission vessels of this type, according to ADNOC.
Jiangnan Shipyard is also building five LNG carriers for ADNOC L&S, scheduled for delivery 2025-26. ADNOC L&S has a fleet of more than 800 owned, operated, and chartered vessels.