GENERAL INTEREST Quick Takes
Diamondback Energy, Five Point Energy form Midland basin water management JV
Diamondback Energy Inc. and private equity firm Five Point Energy LLC have formed a new joint venture entity, Deep Blue Midland Basin LLC, an integrated midstream water infrastructure company in the Midland basin.
The joint venture’s water infrastructure network comprises over 800 miles of pipelines for gathering, transport, disposal, and reuse with permitted disposal capacity of about 2 million b/d and over 65 million bbl of water storage and recycle infrastructure in place with capacity to supply over 500,000 b/d of recycled water for completions activity, the companies said in a joint release Sept. 11.
As part of the transaction, Diamondback entered into a 15-year dedication for its produced water and supply water within a 12-county area of mutual interest in the Midland basin. Diamondback will retain a 30% equity interest in Deep Blue and has received about $500 million in upfront cash proceeds, with potential for more cash proceeds through performance-based earnouts over the next 24 months.
Additionally, Five Point and Diamondback anticipate collectively contributing $500 million in follow-on equity capital to fund future growth projects and acquisitions.
In conjunction with closing the joint venture, Deep Blue also executed long-term acreage dedications with two unnamed customers, totaling over 20,000 acres with expected produced water volumes of over 75,000 b/d during 2024.
Crescent Energy adds interests to operated Eagle Ford position
Crescent Energy Co., Houston, has agreed to acquire incremental working interest in its operated Western Eagle Ford assets, primarily in Dimmit and Webb Counties, Tex., for $250 million in cash. Looking ahead, the company estimates the deal will increase net production by 12,000 boe/d (about 70% liquids) in this year’s fourth quarter, adding about $5 million to capital investments in the quarter.
The deal, through an undisclosed seller, is the second to increase its Eagle Ford shale position this year following the July close of its $600-million acquisition of operatorship interests in the western portion of the play, the company said in a release Sept. 6 (OGJ Online, May 3, 2023).
Combined, Crescent will have increased its legacy 15% non-operated interest to a 63% operated working interest in the acquired assets and will operate about 90% of its broader Eagle Ford position. Crescent Energy sees potential upside from the Austin Chalk and Upper Eagle Ford.
As a result, Crescent Energy has increased its full year 2023 production guidance to 146,000-151,000 boe/d and its capital expenditures budget (excluding acquisitions) to $580-630 million.
The transaction is expected to close in September 2023, subject to customary closing conditions, with an effective date of June 1, 2023.
Permian Resources to acquire Earthstone Energy
Permian Resources Corp., Midland, Tex., has agreed to acquire Earthstone Energy Inc., increasing its operating size and scale in the Delaware basin with inventory that immediately competes for capital, the companies said in a release Aug. 21.
The all-stock transaction—valued at $4.5 billion, inclusive of Earthstone’s net debt—increases Permian Resources’ position in the Permian basin by about 223,000 net acres to over 400,000 net acres with pro forma production of about 300,000 boe/d.
In the Delaware basin, the deal adds about 56,000 net acres of stacked-pay reservoirs, largely offset to Permian Resources’ existing acreage in Lea and Eddy Counties. Earthstone’s remaining acreage is in the Midland basin, the companies said.
Currently, the companies are running an 11-rig drilling program in aggregate, primarily focused on the Delaware basin. The combine expects to allocate at least one of Earthstone’s two rigs currently in the Midland basin to the Delaware basin.
In 2024, the combine expects to allocate about 90% of capital to high rate-of-return projects in the Delaware basin, predominantly focused on Lea, Eddy, Reeves, and Ward Counties. Delaware basin activity is expected to be weighted slightly more towards New Mexico, according to the release.
Total synergies are expected to drive about $175 million in annual cash flow improvements, which include $145 million of operational and G&A synergies expected to be fully realized by year-end 2024. Expected annual operational synergies total $115 million and are primarily associated with reduced drilling, completions, and facilities (DC&F), lease operating and midstream costs.
After closing—expected by year-end 2023, subject to customary closing conditions, regulatory approvals and shareholder approvals—existing Permian Resources shareholders will own about 73% of the combined company and existing Earthstone shareholders will own about 27%.
Permian Resources’ executive management team will lead the combined company with the headquarters remaining in Midland, Tex.
Equinor acquires stake in Bayou Bend CCS project
Equinor Energy AS has acquired Carbonvert Inc.’s 25% interest in Bayou Bend CCS LLC, a carbon capture and sequestration project sited along the Texas Gulf Coast. Equinor acquired the share through the purchase of Texas Carbon 1 LLC, a subsidiary of Carbonvert.
Bayou Bend is positioned to be one of the largest CCS solutions in the US for industrial emitters, with nearly 140,000 gross acres of pore space for permanent CO2 sequestration and gross potential storage resources of more than 1 billion metric tons. Bayou Bend total acreage includes nearly 100,000 gross acres onshore in Chambers and Jefferson Counties, Tex., and about 40,000 gross acres offshore Beaumont and Port Arthur, Tex.
Bayou Bend is a joint venture of Chevron USA Inc. (operator, 50%), through its Chevron New Energies division, Talos Energy Inc. (25%), through its Talos Low Carbon Solutions division, and Equinor.
Exploration & Development Quick Takes
TotalEnergies launches development studies for proposed $9-billion oil hub offshore Suriname
TotalEnergies SE has launched development studies for a potential oil hub in Block 58, in deep water offshore Suriname, to develop the combined Sapakara and Krabdagu resource.
The studies “are a major step towards the development of the petroleum resources of Suriname” said Patrick Pouyanné, chairman and chief executive officer of TotalEnergies, at a meeting held in Paramaribo attended by Pouyanné; His Excellency Chandrikapersad Santokhi, president of the Republic of Suriname; and Annand Jagesar, chief executive officer of Staatsolie.
Appraisal of the two main oil discoveries, Sapakara South and Krabdagu, was successfully completed in August 2023, with the drilling and testing of three wells, and confirmed combined resources close to 700 million bbl for the two fields, according to TotalEnergies (OGJ Online, Feb. 8, 2023; Feb. 21, 2022; July 29, 2021).
These reserves, in water depths of 100-1,000 m, will be produced through a system of subsea wells connected to a floating production, storage, and offloading unit sited 150 km off the Suriname coast, with an oil production capacity of 200,000 b/d. The project is expected to cost about $9 billion.
Detailed engineering studies (FEED) will start by end-2023 and a final investment decision is expected by end-2024 with first production targeted for 2028.
TotalEnergies is operator (50%) of the block, which comprises about 1.4 million gross acres in water depths ranging from less than 100 m to more than 2,100 m. APA Corp. holds the other 50%.
Woodside granted regulator approval for Trion development
Woodside Energy will progress to execution phase activities to develop Trion field offshore Mexico, having received field development plan approval from Mexican regulator, Comision Nacional de Hidrocarburos, said chief executive officer Meg O’Neill in a release Aug. 30.
In June, the operator made a final investment decision to develop the resource, which lies 180 km off the coastline and 30 km south of the US-Mexico border in 8,200 ft of water. First oil is targeted for 2028.
The project will target an estimated 479 MMboe of best estimate (2C) contingent resource of oil and gas. The subsurface has been extensively appraised with six well penetrations across the field.
Trion will be developed with 18 wells (nine producers, seven water injectors, and two gas injectors) drilled in the initial phase and a total of 24 wells drilled over the life of the project. A 100,000 b/d capacity floating production unit (FPU) will will connect to a floating storage and offloading (FSO) vessel with a capacity of 950,000 bbl of oil.
Woodside is operator at Trion (60%) with partner PEMEX Exploración y Producción (40%).
Shell signs LOI for Gulf of Mexico Sparta newbuild project
Shell Offshore Inc. has signed a letter of intent (LOI) with Seatrium Ltd. subsidiary Seatrium Oil and Gas International Pte. Ltd. for construction work related to the Sparta floating development in the Gulf of Mexico about 170 miles off the Louisiana coast (OGJ Online, June 29, 2022).
Sparta straddles four blocks (915, 916, 958, and 959) of the Garden Banks area in about 1,300 m of water.
The floating production unit is envisioned as a replicable project between Shell and Seatrium to leverage Seatrium’s topsides single lift integration methodology, following the Vito and Whale newbuild infrastructure, Seatrium said in a release Aug. 28. It comprises a single topside module supported by a four-column semisubmersible floating hull.
The final contract award is subject to a final investment decision. Shell (operator, 51%) and Equinor Energy AS (49%) are progressing the project toward a final investment decision expected later this year.
Drilling & Production Quick Takes
Woodside starts production at Gulf of Mexico Shenzi North
Woodside has started production at its Shenzi North project in the deepwater US Gulf of Mexico.
Shenzi North, the first development phase of the Greater Wildling mini-basin, was discovered in 2017. The project is a two-well subsea development tied back to the Shenzi tension leg platform installed in 1,310 m of water. The development is onstream ahead of targeted first oil in 2024. Final investment decision (FID) was taken in July 2021.
Shenzi field lies about 195 km off the coast of Louisiana in the Green Canyon area. It was discovered in 2002 and started oil and natural gas production in 2009. Shenzi platform produces both oil and gas with a production capacity of 100,000 b/d and 50 MMscfd.
Crude oil and natural gas produced from the field is transported to connecting pipelines for onward sale to Gulf Coast customers. Oil is transported through the 115-mile Ceasar pipeline. Natural gas is transported via a lateral pipeline tied into the 20-in. OD Cleopatra natural gas pipeline for ultimate transmission onshore to the Enterprise Products Partners-operated Neptune gas processing plant in St. Mary’s Parish, La.
Woodside holds a 72% interest in the Shenzi conventional oil and gas field as operator. Repsol holds the remaining 28% interest.
Woodside Petroleum Ltd. acquired the asset as part of its 2021 deal with BHP Group to combine their respective oil and gas portfolios (OGJ Online, Aug. 23, 2021).
Neptune Energy begins Egypt exploration drilling
Neptune Energy has started drilling operations at its Yakoot exploration well in the North West El Amal concession in the southern Gulf of Suez, Egypt. It is the first operated well to be drilled by Neptune in Egypt.
The work is being carried out with the ADES-operated ADM-8 rig and has a final target depth of about 3,600 m.
Neptune was awarded the exploration license for the North West El Amal concession in February 2019, and acquired advanced 3D seismic data in 2020. Phase one includes the drilling of one exploration well, with two further wells planned in phase two.
The offshore concession covers 365 sq km about 42 km southeast of Ras Gharib and 105 km northwest of Hurghada.
Neptune Energy holds the license with 100% operated interest.
Perenco Mexico increases production at Santuario Noreste
Perenco Mexico has increased production through a recent drilling campaign at Santuario Noreste, onshore Mexico.
The latest drilling campaign entailed drilling six new wells (three producing, three water injection) as part of a secondary recovery project.
Of the three producing wells, the first started in April 2023 and is currently producing around 2,300 b/d of oil. The second well, in addition to providing data, reached an average production of 1,500 b/d of oil. With additional potential to be exploited, the company said, the third well is being ramped up from its current rate of about 1,300 b/d of oil.
The three water injection wells have been designed to maximize the ultimate recovery rate of the field, with expected additional reserves comparable to those of the producing wells drilled this year, although over a longer period, the company said.
Since arriving in Mexico in 2018, initially alongside Petrofac, Perenco has increased production on the Santuario & El Golpe permit to 17,000 b/d of oil from 5,500 b/d of oil from existing wells. Using artificial lift technologies, Perenco has converted seven wells to electric submersible pumps on Santuario Main and El Golpe fields, doubling their production since 2018.
PROCESSING Quick Takes
Trafigura lets contract for Bahía Blanca refinery
Trafigura Group Pte. Ltd.’s Trafigura Argentina SA has let a contract to Elessent Clean Technologies Inc. to deliver technology licensing and engineering services for a new processing unit to be installed at subsidiary Refinería Bahía Blanca SAU’s 27,000-b/d Ricardo Eliçabe refinery at Bahía Blanca, in Argentina’s province of Buenos Aires.
As part of the September contract awards, Elessent will license its proprietary IsoTherming technology and provide engineering for a grassroots 18,870-b/d diesel hydrotreating that will increase the refinery’s capacity to produce and supply the domestic market with ultralow-sulfur diesel (ULSD) complying with upcoming regulations requiring a ULSD maximum sulfur content of 10 ppm, the service provider said.
Alongside helping Trafigura ease foreign diesel imports by enabling increased production of ULSD from domestically sourced crude from the Vaca Muerta formation in nearby Neuquén basin, the planned IsoTherming diesel hydrotreater also will allow the Bahía Blanca refinery to reduce energy consumption, as well as decrease its carbon dioxide emissions by about 50% compared with traditional hydrotreating technology, Elessent said.
In addition, Elessent confirmed the proposed IsoTherming hydrotreater will be designed to optionally co-process a renewable feedstock of vegetable oil for production of ULSD, supporting Trafigura’s commitment to the global effort of transitioning to cleaner fuel sources.
While Trafigura has disclosed little to no information publicly about operations at the Bahía Blanca refinery since acquiring it from Pampa Energía SA in May 2018, Elessent said the operator is targeting startup of the new IsoTherming hydrotreater sometime in 2025-26.
Petrobras considers partnership for potential biofuels project
Petróleo Brasileiro SA (Petrobras) has signed a memorandum of understanding (MoU) with Abu Dhabi-based Mubadala Investment Co. (MIC) subsidiary Mubadala Capital (MC) to explore potential investment in a biorefinery project currently under development at MIC-owned Refinaria de Mataripe SA’s (REFMAT) 300,000-b/d refinery in the Recôncavo Baiano region of Bahia, Brazil.
Under the Sept. 4 MoU, Petrobras and MIC Capital Partners have agreed to develop studies covering future business in the downstream segment, including evaluating Petrobras’ participation in an integrated biorefining project at REFMAT that would produce renewable diesel and sustainable aviation fuel (SAF) from a feedstock of macaúba palm, a native Brazilian crop, Petrobras and MC said in separate releases.
While neither Petrobras nor MC immediately disclosed further details of the proposed development plan, MC confirmed the MoU follows an agreement signed in April 2023 between the state of Bahia and Acelen, a company MC created expressly to operate the Matripe refinery after acquiring the site and related assets from Petrobras in late 2021.
In a project description posted to its website on Apr. 20, Acelen said its MoU with the government of Bahia provides for a large investment over the next 10 years for the production of renewable diesel and SAF at Matripe to help definitely place Bahia and Brazil among the largest global producers of renewable fuels.
Following signing of the April 2023 MoU, Acelen said it next planned to partner with relevant public authorities to define working groups to guarantee the environmental, technical, fiscal, and tax viability of the proposed project to ensure its competitiveness.
Acelen estimated overall investment required to complete the biorefinery at about 12 billion Brazilian real ($2.4 billion).
Final investment decision on the biorefining project is scheduled to take place by yearend, according to Acelen.
TRANSPORTATION Quick Takes
EIA: US was top LNG exporter globally in first-half 2023
The US surpassed all other countries to become the world’s leading exporter of LNG in first-half 2023, the US Energy Information Administration (EIA) said, citing CEDIGAZ data.
As indicated by data from the US Department of Energy, US LNG exports averaged 11.6 bcfd during first-half 2023, marking a 4% increase (0.5 bcfd) compared with the same period in 2022.
Australia secured its position as the second-largest LNG exporter worldwide in first-half 2023, with an average export volume of 10.6 bcfd, closely followed by Qatar at 10.4 bcfd.
The significant growth in US LNG exports can be primarily attributed to the resumption of Freeport LNG’s operations, coinciding with robust global demand for LNG, especially in Europe, EIA said.
Like in 2022, EU countries (Europe) and the UK remained the main destination for US LNG exports in first-half 2023, accounting for 67% (7.7 bcfd) of total US exports. Five countries—the Netherlands, the UK, France, Spain, and Germany—imported more than one-half (6 bcfd) of total US LNG exports.
In April, US LNG exports reached an all-time high, hitting a monthly record of 12.4 bcfd. This surge was fueled by increased LNG production at Freeport LNG and a growing demand from Europe and the UK.
Regasification capacity in Europe and the UK continues to expand in 2023 as new terminals come online in Finland, Germany, Italy, and Spain, allowing these countries to import more LNG. After a mild winter, Europe and the UK end the 2022-23 heating season with the most natural gas in storage on record, and the region continued importing LNG rapidly to refill its storage inventories in the spring and summer.
Notably, for the first half of this year, Europe and the UK saw LNG imports surpass pipeline imports, marking a historic shift. According to data from Refinitiv Eikon, LNG imports to Europe and the UK averaged 15.9 bcfd in first-half 2023, exceeding pipeline imports from all sources by 0.1 bcfd. Europe and the UK’s LNG imports peaked in April 2023 at 18 bcfd and remained above natural gas imports by pipeline from April through June 2023. In comparison, in 2022, LNG imports to the region averaged 14.9 bcfd annually, 28% lower than natural gas imports by pipeline.
Gate terminal starts construction of fourth LNG tank at port of Rotterdam
Royal Vopak NV and NV Nederlandse Gasunie have begun construction on a fourth LNG tank at the 16-million cu m/year (bcmy) Gate terminal on Maasvlakte in Rotterdam.
The companies held an open season for expansion of the terminal’s storage and regasification capacity earlier this year (OGJ Online, Apr. 11, 2023). A final investment decision for the project, estimated to cost EUR 350 million, was taken in August.
The expansion consists of a fourth LNG storage tank of 180,000 cu m and additional regasification capacity of 4 bcmy, the companies said. The new capacity is already rented out under long-term commercial agreements and is expected to be ready for operation by second-half 2026, contributing additional natural gas supply in the Netherlands and Northwest Europe.
Vopak and Gasunie are the founders and owners of Gate terminal which has been operational since 2011 (OGJ Online, Sept. 23, 2011).
Sempra completes Port Arthur LNG Phase 1 interest sale to KKR
Sempra Infrastructure, a subsidiary of Sempra, Houston, completed the sale of a 42% indirect, non-controlling interest in its 13.5-million tonnes/year Port Arthur LNG Phase 1 project in Jefferson County, Tex., to KKR.
Sempra Infrastructure retains a controlling 28% indirect interest in Phase 1 at the project level. ConocoPhillips owns the remaining 30% interest (OGJ Online, Mar. 20, 2023).
Sempra Infrastructure reached a positive final investment decision (FID) for Port Arthur LNG Phase 1 in March 2023 and contracted Bechtel Energy Inc. to build the project.
Over 2.8 million hours of work have been completed since construction began this spring, with no lost-time incidents, the company said. Expected commercial operation dates for Train 1 and Train 2 are 2027 and 2028, respectively.