GENERAL INTEREST Quick Takes
Chevron to add DJ basin, Permian basin acreage through $7.6 billion deal
Chevron Corp. has agreed to acquire PDC Energy Inc., Denver, in an all-stock transaction valued at $6.3 billion that would increase its production volumes by about 8%. Total enterprise value of the deal, including debt, is $7.6 billion.
The deal adds low breakeven production and development opportunities adjacent to Chevron’s current position in the Denver-Julesburg (DJ) basin, as well as additional acreage in the Permian basin, the operator said.
In the DJ basin, Chevron gains 275,000 net acres adjacent to existing operations that add over 1 billion boe of proved reserves. PDC operations in the basin are focused on horizontal Niobrara and Codell development in Wattenberg field in Weld County, Colo. First-quarter 2023 production was 216,000 boe/d (60% liquids).
In the Permian basin, the deal gives Chevron 25,000 net acres that are held by production and will be integrated into Chevron’s existing development operations. PDC’s operations in the basin are focused on the Delaware basin in Reeves County, Tex, primarily targeting Wolfcamp A and B development. In this year’s first quarter, the acreage produced about 28,000 boe/d (62% liquids).
Chevron expects to increase its capital spending by about $1 billion per year, raising its guidance to $14-16 billion through 2027, after realizing about $400 million in capital efficiencies post-closing, which is expected by end-2023.
The deal is expected to achieve run-rate cost synergies of around $100 million before tax within a year of closing, Chevron said.
Chord strikes Williston basin deal with XTO
A subsidiary of Chord Energy Corp., Houston, has agreed to acquire assets in the Williston basin from Exxon Mobil Corp. subsidiary, XTO Energy Inc., and affiliates, for total cash consideration of $375 million.
The deal includes production over 6,000 boe/d (62% oil) and 62,000 net acres (77% undeveloped), the majority of which is adjacent to Chord’s core Indian Hills area, that include 123 estimated net 10,000 ft locations (77 operated), “40-50% of which are anticipated to be developed as 3-mile laterals slightly lower than [Chord’s] 55-60% 3-mile lateral inventory, but coinciding with the 2023 activity plan for 3-mile wells to be about half of the year’s TILs [turned-in-line],” TD Cowen analysts detailed in a report May 22.
The deal also includes royalty interests in certain drilling and spacing units.
Closing is expected end-June 2023.
Crescent adds Eagle Ford operated interest
Crescent Energy Co. agreed to acquire incremental working interest in its existing western Eagle Ford assets from Mesquite Energy Inc. for $600 million in cash.
The asset is 100% operated with about 75,000 contiguous net acres, primarily in Dimmit and Webb counties, Tex., the company said in a release May 2.
Pro forma for the transaction, Crescent will increase its interests to a 50% operated working interest from its legacy 15% non-operated interest and operate about 90% of its Eagle Ford position.
The deal includes potential upside from the Austin Chalk and Upper Eagle Ford while operatorship provides opportunity for capital efficiency improvements, the company said.
With the deal, Crescent grows its base of predictable cash flow with current production of about 20,000 boe/d (70% liquids) and a 12-month decline rate of 17%, the company continued.
Mesquite Energy was formed in June 2020, emerging from the 2019 Chapter 11 restructuring of Sanchez Energy Corp. which saw the company eliminate substantially all its $2.3 billion debt (OGJ Online, June 30, 2020).
Cresent Energy’s deal with Mesquite Energy is expected to close early in this year’s third quarter, subject to customary closing conditions.
Exploration & Development Quick Takes
Trillion hits gas pay at fifth well on SASB field
Trillion Energy International Inc., Vancouver, is evaluating how to maximize gas production from multiple wells at SASB gas field in the Turkish sector of the Black Sea as preliminary gas indications from Bayhanli 2 well—the fifth well in the program—discovered “an abundance” of gas pay.
On May 13, Bayhanli 2 reached 3,425 m total measured depth (TMD) and true vertical debt (TVD) of 1,231 m, the company said in a release May 17.
Initial petrophysical analysis indicated about 43 total m gas pay in 6 Sand Units of Akcakoca Member. The thickest pay (14 m) is in the E Sand and (13 m) in AA Sand, the company said. The 7-in. production casing has been run in and cemented.
Initial perforation intervals are being selected to bring the well into production. Completion and flow testing will occur once the well is perforated, the company said.
After well completion, the rig will be moved to the Akkaya Tripod to begin drilling the Alapli 2 well.
“The Bayhanli 2 well gives Trillion Energy five wells for five activities now at SASB,” said Arthur Halleran, chief executive officer. The company is evaluating how to maximize each well as more are brought into production, possibly hiring an engineering firm that specializes in multi-well gas fields with different production pressures, he said.
ExxonMobil lets umbilical contract for Uaru
ExxonMobil Corp. has let a contract to Aker Solutions to provide dynamic and static subsea umbilical for the Uaru project, the fifth development on Stabroek block in Guyana.
The contract includes delivery of three dynamic and seven static umbilicals totaling over 52 km. Project execution, engineering, and manufacturing will take place in Mobile, Ala.
Work will begin immediately. Delivery is expected in first-quarter 2026. Uaru is expected to add about 250,000 b/d after start-up in 2026.
Shell lets contract for Sparta development offshore Louisiana
Shell Offshore Inc. has let a services contract to Worley for the Sparta floating development in the Gulf of Mexico about 170 miles off the Louisiana coast.
The project incorporates Worley’s design for a lightweight floating production unit, previously deployed on two other Shell projects. Worley will provide engineering, design, procurement support, construction, and commissioning support for the FEED. Worley will also provide detailed design and follow-on phases for the project.
Services will be executed by Worley in Houston, Tex., and Metairie, La., with support from a team in India.
Sparta is the renamed North Platte deepwater development project of which Shell became operator following its acquisition of 51% of Equinor’s interest. Equinor retained 49% interest (OGJ Online, June 29, 2022).
Sparta is progressing towards final investment decision this year.
QatarEnergy enters Suriname offshore exploration
QatarEnergy entered two production sharing contracts for Blocks 6 and 8 immediately south of Block 58, offshore Suriname, in 40 and 65 m of water.
Partners in the blocks will license new 3D seismic data and plan for associated exploration.
QatarEnergy acquired interest in the blocks in June 2021 (OGJ Online, June 29, 2021). Pursuant to the signed agreements, QatarEnergy will own a 20% working interest in both blocks. The remaining working interest is shared equally between TotalEnergies SE (operator) and Staatsolie’s affiliate, Paradise Oil Co.
Drilling & Production Quick Takes
Norway production down in April, NPD says
Norway’s production averaged 2.035 million bbl in April, the Norwegian Petroleum Directorate (NPD) reported. The figure is down from the 2.049 million bbl produced in March (OGJ Online, Apr. 19, 2023).
Average daily liquids production in April consists of 1.808 million b/o, 205,000 bbl of NGL, and 23,000 bbl of condensate.
Oil production in April is 0.5% lower than the NPD’s forecast and 1.3% lower than the forecast so far this year.
CNOOC increases net production 8.6% year-over-year
CNOOC Ltd. had total net production of 163.9 MMboe in first-quarter 2023, an increase of 8.6% year-over-year.
Net production from China grew by 5.5% year-over-year to 115.3 MMboe, mainly attributable to production from newly commissioned oil fields in the Bohai Sea and the South China Sea (OGJ Online, Mar. 21, 2023). Overseas production rose by 16.6% year-over-year to 48.6 MMboe, mainly driven by increased production from Guyana and Brazil.
During the quarter, CNOOC made two discoveries and appraised six oil and gas structures. Among nine new projects scheduled to begin production this year, five have started installation, the operator said (OGJ Online, Jan. 11, 2023).
Quarterly revenue was RMB 97.7 billion for the quarter, an increase of 7.5% year-over-year. Net profit attributable to equity shareholders was RMB 32.1 billion.
Trio Petroleum to drill second well on newly expanded South Salinas acreage
Trio Petroleum Corp., Bakersfield, Calif., has leased an additional 667 mineral-acres in the South Salinas project in Monterey County, Calif., increasing the leasehold in its core project to 9,267 acres from 8,600 acres.
In mid-April, Trio contracted Ensign Drilling for a fully equipped ADR 350 rig drilling rig capable of drilling to 10,000 ft.
The HV-1 well is a 2-mile step-out to the HV-3A discovery that found and produced mid-gravity oil on Trio’s acreage at depths of about 3,750-5,100 ft.
Trio Petroleum holds an 85.75% working interest in the South Salinas project, which holds an estimated 39 million bbl of oil plus 40 bcf of gas, or 45.7 MMboe, in probable (P2) undeveloped reserves, according to a March 2023 company presentation.
Galp signs rig contract for exploration drilling in Namibia’s Orange basin
Galp Energia, operator of petroleum exploration license 83 in Namibia’s Orange basin, has secured a rig for drilling to begin in this year’s fourth quarter.
A contract with SFL Corp. for the Hercules semisubmersible drilling rig was secured by a Galp subsidiary, said Sintana Energy Inc., a carried interest holder, in a May 8 release.
The contract is for two wells plus optional well testing.
PEL 83, in water depth of 250-2,550 m, lies immediately north of Shell plc-operated PEL 39, where basin opening discoveries at Graff-1, La Rona-1, and Jonker-1 were drilled, Sintana Energy said. It also lies north and east of TotalEnergies’ Venus-1 oil discovery on PEL 56.
Galp is operator of PEL 83 and holds an 80% interest. Partners include the National Petroleum Corp. of Namibia (Namcor) with 10%, and Custos Investments (Pty) Ltd. with 10%. Sintana holds a 49% indirect interest in Custos.
PROCESSING Quick Takes
Orlen lets contract for Lithuanian refinery modernization project
Polski Koncern Naftowy Orlen SA (PKN Orlen) subsidiary Orlen Lietuva AB has let a contract to Petrofac Ltd. to provide engineering, procurement, and construction (EPC) for work supporting the ongoing modernization, environmental upgrade, and expansion program at the operator’s 10-million tonne/year (tpy) refinery in Mažeikiai, Lithuania.
Petrofac will deliver design, EPC, and commissioning services for new installations intended to expand and further enhance the refinery’s ability to meet more stringent requirements for production of cleaner fuels, the service provider said. Installations included within the work scope of the less-than €200 million contract target improving the site’s operational and carbon efficiency.
This latest contract follows Orlen Lietuva’s previous award to Petrofac in October 2021 for delivery of EPC and commissioning services on a residue conversion unit to be built as part of the operator’s planned bottom-of-the-barrel improvement project. Petrofac’s scope of work on that contract covered the addition of a new residue hydrocracking unit (RHCU) and associated outside battery limits (OSBL) installations.
EPC works for RHCU’s new OSBL specifically include installation of a new amine regeneration unit and stabilization tower, as well as interconnecting pipework and tie-ins to existing refining units and associated system modifications, Petrofac said.
The more-than €640 million RHCU project—which began construction in August 2022—is scheduled to reach mechanical completion in 2024 and will enable the refinery to process its high-sulfur fuel oil production into cleaner, lighter finished products.
As part of the refinery’s modernization, Orlen Lietuva also let a contract in February 2021 to DuPont Clean Technologies to license its proprietary alkylation and spent acid regeneration (SAR) technologies for the addition of new STRATCO alkylation and MECS SAR units at the site, both of which are scheduled for startup in 2025.
BPCL to add petrochemical capacity at Bina refinery
Bharat Petroleum Corp. Ltd. (BPCL) has approved a project to add petrochemical production capacity at its 7.8-million tonne/year (tpy) refinery at Bina, Madya Pradesh, India.
At a meeting of the company’s board on May 15, BPCL approved an investment of 490 billion rupees (nearly $6 billion) for an ethylene cracker project at the Bina refinery that, alongside a cracker, would include the addition of other downstream petrochemical plants as well as an expansion of the refinery, the operator said in separate regulatory filings to BSE Ltd. and the National Stock Exchange of India Ltd.
While the operator has yet to reveal further details regarding either the capacities and types of the proposed cracker and downstream units or the precise nature of the planned refinery expansion, BPCL told investors in December 2022 that it planned to invest 380 billion rupees to add about 2.8 million tpy of petrochemical production capacity to its refining operations between 2022-27.
BPCL took control of the Bina refinery in 2021 after buying out joint-venture partner OQ SAOC (formerly Oman Oil Co. SAOC) to take 100% ownership of equity share capital in former operator Bharat Oman Refineries Ltd.
In addition to the ethylene project at Bina, BPCL’s board also approved a separate investment to set up 50-Mw wind power plants for captive consumption at both its Bina refinery and the 12-million tpy refinery in Mumbai, Maharastra, India.
The board additionally approved a project that would add storage installations as well as receipt pipelines for both petroleum oil lubricants and lube base oil stocks at Rasayani, Maharashtra.
The projects remain contingent on certain conditions including regulatory clearances, BPCL said.
IOC to add new chemical plant at Panipat refinery
Indian Oil Corp. Ltd. (IOC) let a contract to McDermott International Ltd. to provide project management consultancy (PMC) for a new petrochemical production unit to be installed at the operator’s 15-million tonnes/year (tpy) integrated Panipat refining and chemical complex in Haryana, India, north of New Delhi.
McDermott will deliver PMC services covering front-end engineering and design, review of engineering activities, construction supervision services, startup assistance, precommissioning, commissioning, performance guarantee test run, and project closure for the proposed addition of a maleic anhydride (MAH) unit at the refinery, the service provider said on May 24.
Alongside production of MAH that will be used for manufacturing of products such as polyester resins, surface coating plasticizers, agrochemicals, and lubricant additives, the new plant also will produce tetrahydrofuran (THF) used for adhesives and vinyl film, as well as butanediol (BDO) used in engineering-grade plastic and biodegradable fibers, according to McDermott.
A contract value was not disclosed.
On Nov. 1, 2021, IOC confirmed its approval of the MAH plant’s installation at Panipat at an investment of 36.81 billion rupees ($491.89 million).
Scheduled to be commissioned in 54 months from the November 2021 investment approval, the MAH plant was to have the capacity to produce:
- 120,000 tpy of MAH.
- 20,000 tpy of 1,4-BDO.
- 16,000 tpy of THF.
Alongside its use in adhesives and vinyl films, THF production from the unit is also intended to help accelerate the growth of India’s pharmaceutical industry, IOC said.
The proposed MAH plant comes as part of IOC’s ongoing program of establishing a more robust petrochemical presence, complementing the operator’s ongoing project to increase crude processing capacity at the site by 10 million tpy to 25 million tpy.
“This [MAH plant] will consolidate [IOC’s] basket of niche products and increase the Lube and Petrochemical Integrity Index of Panipat refinery to more than 15% after the refinery expansion plan is implemented,” said S.M. Vaidya, IOC’s chairman.
Budgeted at an estimated cost of 329.46-billion rupees, the Panipat capacity expansion remains scheduled for commissioning by September 2024.
TRANSPORTATION Quick Takes
ADNOC changes new LNG site to Al Ruwais
Abu Dhabi National Oil Co. (ADNOC) has changed the site of its planned 9.6-million tonne/year (tpy) LNG plant, currently in design phase, to Al Ruwais Industrial City, Al Dhafrah, Abu Dhabi, from Fujairah, UAE. ADNOC said that the new location offers “significant synergies and existing infrastructure that will be leveraged to deliver project efficiencies.”
The plant will use two 4.8-million tpy electric-powered trains. Using electricity supplied by renewable and nuclear sources will make the plant one of the lowest carbon-intensity LNG production projects in the world, according to ADNOC.
ADNOC expects to follow front-end engineering and design with award of an engineering, procurement, and construction contract in 2023. The company already produces 6 million tpy of LNG from a plant on Das Island off the coast of Abu Dhabi.
Earlier in May, ADNOC Gas PLC agreed to sell TotalEnergies Gas and Power Ltd. LNG for a 3-year term starting this year.
Producers, Tanzania conclude PSA talks surrounding LNG plant
Negotiations on key agreements between Equinor, Shell, ExxonMobil, and the Tanzanian government regarding gas supplies and production sharing for a 10-15 million tonne/year LNG plant in the country have concluded, according to Equinor. Documents comprising a host government agreement and production sharing agreement are now subject to final reviews and approvals before their expected signing in the weeks ahead.
Next steps include detailed engineering and design, according to a statement by Jared Kuehl, vice-president Tanzania and country chair at Shell.
PT Medco Internasional Tbk, Pavilion Energy Pte. Ltd., and Tanzania Petroleum Development Corp. were also party to the negotiations. Equinor, Shell, and Tanzania earlier this year completed negotiations regarding the plant, setting the stage for the recent production sharing talks (OGJ Online, Mar. 8, 2023).
The $42-billion plant would be built in Lindi on the Tanzanian coast and supplied with natural gas from three offshore blocks. Equinor operates Block 2 northeast of Lindi, with total in-place volumes of roughly 22 tcf and ExxonMobil also holding a stake. Blocks 1 and 4, operated by Shell, hold an estimated combined total of 16 tcf of recoverable gas.
Cheniere, KOSPO sign long-term LNG supply deal
Cheniere Energy Inc. subsidiary Cheniere Marketing International LLP signed a long-term LNG supply agreement with Korea Southern Power Co. Ltd. (KOSPO).
KOSPO will purchase about 0.4 million tonnes/year (tpy) of LNG from Cheniere on a delivered ex-ship basis from 2027 through 2046, with a smaller annual quantity to be delivered starting in 2024, Cheniere said in a release May 16.
The purchase price for LNG delivered prior to 2027 will be a market-based, after which it will be indexed to Henry Hub, plus a fee.
Volumes from 2028 through 2046 are subject to a positive final investment decision of the first train of the proposed Sabine Pass Stage 5 Expansion Project adjacent to the existing Sabine Pass liquefaction project in Cameron Parish, La.
The project is being developed to expand production capacity up to 20 million tpy of LNG via three large-scale 6.5 million tpy trains, a boil-off-gas re-liquefaction unit with production capacity of about 0.75 million tpy of LNG, and two 220,000 cu m LNG storage tanks.
In February, Cheniere Energy Partners subsidiaries initiated the pre-filing review process with the Federal Energy Regulatory Commission under the National Environmental Policy Act.
Eni offloads first LNG cargo in new Pembino regasification terminal
Eni SPA has begun offloading the first LNG cargo into Snam’s new regasification terminal in Piombino, Italy, May 5. The terminal has a total processing capacity of 5 billion cu m/year (bcmy), or about 7% of Italy’s gas demand.
The LNG was produced at the 7.56-bcmy Damietta LNG plant in Egypt.
Piombino’s new regasification capacity will help Eni replace Russian gas by 2024-2025 and increase the availability of gas for the country, the company said.
Eni acquired regasification capacity at Piombino terminal as part of its strategy to diversify LNG supplies to Italy through its internationally produced equity gas. The company has increased volumes of available gas from Algeria, Libya, and Italy, and increased the number of LNG cargoes from Egypt, Congo, Qatar, Angola, Nigeria, Indonesia, and Mozambique, the company said.
Contracted LNG is expected to exceed 18 million tonnes/year by 2026, twice as much as in 2022.
Enbridge acquires Aitken Creek gas storage
Enbridge Inc. agreed to acquire a 93.8% interest in FortisBC’s 77-bcf Aitken Creek gas storage site in British Columbia. The storage will be connected to LNG Canada’s 14-million tonne/year plant under development in Kitimat, BC, via TC Energy Corp.’s 415-mile, 2.1-bcfd OD Coastal GasLink project, targeted for completion in late 2023 or 2024.
Aitken Creek is already connected to Enbridge’s 1,835-mile BC Pipeline, its 2,391-mile Alliance Pipeline joint venture with Pembina Pipeline Corp., and Nova Gas Transmission Ltd.’s 186-mile North Montney Mainline.
The $400-million acquisition is expected to close in 2023, subject to customary regulatory approvals and closing conditions.
