OGJ Newsletter

March 30, 2015
International news for oil and gas professionals


Shell completes $1.7 billion sale of Nigeria assets

Shell Petroleum Development Co. of Nigeria Ltd. (SPDC) has completed its assignment of interest in oil mining lease 29 (OML 29) and the Nembe Creek trunk line (NCTL) and related facilities in the Eastern Niger Delta to Aiteo Eastern E&P Co. Ltd. for $1.7 billion.

OML 29 covers 983 sq km and includes Nembe, Santa Barbara, and Okoroba fields and related facilities. NCTL, which was commissioned in 2010, is a 100-km, 600,000-b/d system that transports oil to the Bonny crude oil terminal (BCOT).

BCOT is not part of the transaction and will remain owned and operated by the SPDC joint venture. Among the divested assets are flow stations, associated gas systems, and oil and gas pipelines within the OML. The divested fields produced 43,000 boe/d during 2014.

Total E&P Nigeria Ltd. and Nigerian Agip Oil Co. Ltd. also have assigned their respective 10% and 5% interests in the lease, giving Aiteo Eastern E&P 45% interest in OML 29 and NCTL. SPDC operates a JV with 30% interest alongside Nigerian National Petroleum Corp. with 55%, Total 10%, and Nigerian Agip Oil 5%.

During 2011-12, SPDC shed interests in several other Nigerian OMLs. Just last week, the company completed its assignment of 30% interest in OML 18 to Eroton Exploration & Production Co. Ltd. for $737 million (OGJ Online, Mar. 20, 2015). Altogether, proceeds from those sales totaled about $2 billion.

Chesapeake lowers 2015 budget to $3.5-4 billion

In response to lingering low oil and gas prices, Oklahoma City independent Chesapeake Energy Corp. has reduced its 2015 capital budget to $3.5-4 billion, which is a $500 million reduction from its previous guidance of $4-4.5 billion (OGJ Online, Feb. 25, 2015).

Chesapeake plans to operate 25-35 rigs in 2015, which represents a decrease of 55% from an average of 64 rigs in 2014. The company intends to spud and connect to sales about 520 and 650 gross operated wells, respectively, in 2015.

As a result, the company is lowering its targeted 2015 production to 231-236 million boe, or average production of 635,000-645,000 boe/d, which represents 1-3% production growth over the prior year after adjusting for 2014 asset sales.

First-responder crude-by-rail safety course unveiled

Associations representing the US oil and rail industries jointly announced a new safety course for first responders to crude-by-rail accidents.

The program will complement existing training efforts for firefighters and other first responders, American Petroleum Institute Pres. Jack N. Gerard and American Association of Railroads Pres. Edward R. Hamberger said in a Mar. 25 teleconference with reporters.

"While the first steps are to prevent and mitigate the impact of train derailments, if an incident happens, we also need to make sure firefighters and first responders have the knowledge they need to protect local communities," Gerard said.

The course covers the characteristics of crude oil, the rail cars in which it is shipped, considerations and strategies for spill response and firefighting, and the importance of following training and the incident command system, the association officials said. It will be taught for the first time this week at conference in Nebraska and Florida, they noted.

Course materials will soon be posted and publicly available on the web site of the Transportation Community Awareness and Emergency Response (Transcaer) program, which will distribute the course.

API and Transcaer worked with the Federal Railroad Administration to identify states for the program's initial rollout, which will be offered free of charge at hazardous materials and emergency response conferences across North America. Course offerings are already confirmed or being planned in more than 15 states, API said.

USGS issues Appalachian basin study for oil, gas, coal

The US Geological Survey issued a professional paper that examines large segments of the Appalachian basin's oil, gas, and coal resources, including accumulations, stratigraphic and structural framework, and geochemical characteristics.

Professional Paper 1708 also includes the results of recent USGS assessments of oil, gas, and coal resources in an area stretching from New York to Alabama, the US Department of the Interior agency said.

"This publication supplements and updates older USGS regional studies of Appalachian basin coal and petroleum resources," it noted. "Some chapters are new, and several have been published in outside journals or as other USGS publications."

USGS said many of the paper's maps and accompanying data are downloadable geographic information system data files about the characteristics of selected coal beds and oil and gas fields, locations of oil and gas wells, coal production, coal chemistry, total petroleum system boundaries, and bedrock geology.

Log ASCII Standard files for geophysical (gamma ray) wireline well logs are included in other chapters, it indicated.

AFPM, groups challenge low-carbon fuel standard

Oregon's low-carbon fuel standard violates the US constitution, the American Fuel & Petrochemical Manufacturers, American Trucking Associations, and Consumer Energy Alliance jointly charged in a lawsuit filed in US District Court for Oregon.

The program is unconstitutional because it would discriminate against transportation fuels produced outside the state, with the intent to promote and development in-state fuel production, and attempts to regulate conduct outside Oregon, the groups said in their Mar. 23 filing.

Implementing Oregon's LCFS also would violate the Constitution's Supremacy Clause, since the Clean Air Act and other federal laws preempt regulation of transportation fuels' carbon and renewable fuel content, they added.

"Greenhouse gas emissions have the same impact regardless of where they are emitted, and forcing the consumption of low carbon fuels in Oregon-or in any state-will not reduce global carbon emissions due to fuel shuffling," AFPM General Counsel Rich Moskowitz said.

Exploration & DevelopmentQuick Takes

Gazprom Neft to shoot 2D seismic in Iraqi Kurdistan

Gazprom Neft Middle East, operator for JSC Gazprom Neft in the Kurdistan region of Iraq, will conduct a 2D seismic survey on the southeastern section of Halabja block.

Technical equipment and personnel required for the survey are being transferred from the southwestern section, where the company has already successfully completed a survey spanning 225 line-km.

Overall, 2D seismic surveys covering 870 line-km are scheduled to be conducted on the block by yearend. Last year, a 2D seismic survey covering 130 line-km was conducted on the block. The first exploration well is expected to be drilled in 2015-16.

"The Halabja block has until now undergone very little geological study," explained Mikhail Kholodov, chief executive officer of Gazprom Neft Middle East.

Gapzrom Neft is involved in four projects in Iraq, three of which are in Kurdistan.

Gazprom Neft holds 80% interest in the Halabja and Shakal blocks, with the remaining 20% held by the Kurdistan Regional Government (KRG). In August 2014, drilling of two exploration wells began on Shakal, which is currently undergoing testing (OGJ Online, Aug. 1, 2014).

Gazprom Neft also holds 40% interest in Garmian block and will become operator this year. Detailed appraisals of the field and preparation for its full-scale development are ongoing. The KRG is considering a preliminary plan for the block's development.

Gazprom Neft's fourth project in Iraq is development of Badra oil field in Wasit Province in the eastern portion the country. Gazprom Neft last year completed laying, testing, and connecting a 165-km oil pipeline from Badra to Gharraf field (OGJ Online, Mar. 5, 2015).

Preliminary estimates indicate total oil reserves at Badra at 3 billion bbl. Gazprom Neft operates the project and holds 30% interest. Commercial production from Badra began in August 2014 (OGJ Online, Sept. 2, 2014). A third well was brought online in January (OGJ Online, Jan. 2, 2015).

Chevron unit inks Myanmar PSC for Rakhine basin

Chevron Corp. subsidiary Unocal Myanmar Offshore Co. Ltd. has entered into a production-sharing contract with Myanmar national oil and gas company Myanma Oil & Gas Enterprise (MOGE) to explore for oil and gas in the Rakhine basin.

The new PSC area, Block A5, lies 125 miles offshore northwest of Yangon and covers more than 2.6 million acres. Unocal Myanmar will operate the block with 99% interest. Myanmar-based Royal Marine Engineering Co. Ltd. (RME) will hold the remaining interest.

Myanmar's Ministry of Energy awarded the block to Chevron a year ago (OGJ Online, Mar. 26, 2014).

In addition to Block A5, Chevron has 28.3% nonoperated interest in a natural gas PSC from Yadana and Sein fields in Blocks M5 and M6 in the Andaman Sea.

The company also has 28.3% nonoperated interest in a pipeline company that transports most of the natural gas to the Myanmar-Thailand boarder for delivery to power plants in Thailand. The remaining volumes are dedicated to the Myanmar market.

Cue gains Indonesian farm-in approval for Mahato PSC

Cue Energy Resources Ltd., Melbourne, received approval from Indonesia for a farm-in agreement with Bukit Energy to acquire 12.5% interest in the Mahato production-sharing contract.

The 5.6-sq-km PSC area lies in the central Sumatra basin nearby a number of producing fields, including the country's largest onshore oil fields at Minas and Duri.

Cue says the Mahato block contains multiple appraisal and exploration drilling potential. Two wells will be drilled during this year's second half, one of which will endeavour to define a possible extension of Petapahan field into the Mahato PSC. The other will be an exploration well nearby. There also will be a program of seismic acquisition to upgrade the region's other exploration prospects.

As part of the farm-in, Cue's share of costs for the two wells and the seismic work are capped by Bukit.

Libra extension well confirms 200-m oil column

Results from an extension well drilled by the Petroleo Brasileiro SA (Petrobras)-operated Libra consortium confirmed the presence a 200-m oil column with good reservoir permeability and porosity. Well 3-BRSA-1267-RJS, also known as C1, is in the central portion of the 1,550-sq-km Libra block in the Santos basin, about 220 km offshore Rio de Janeiro. The well was drilled to a total depth of 5,780 m in 2,160 m of water.

This is the second successful well recently drilled by the block's consortium. Well 3-RJS-731, 18 km from 3-BRSA-1267-RJS, previously confirmed a 290-m oil column with samples of 27° gravity (OGJ Online, Nov. 25, 2014).

The consortium, operated by Petrobras with 40% interest, will continue its exploratory plan by drilling additional wells to evaluate Libra. Partners are Royal Dutch Shell PLC with 20%, Total SA 20%, China National Petroleum Corp. 10%, and CNOOC Ltd. 10%. Brazilian state-owned Pre-Sal Petroleo SA manages the contract.

Drilling & ProductionQuick Takes

PIRA: US shale oil production to fall during 2Q

US shale oil production will flatten and slightly decline during the second quarter, PIRA Energy Group of New York said in an Energy Market Recap.

Weak oil prices have dominated fourth-quarter results and the 2015 outlook as oil and natural gas companies slash spending and slow drilling programs and completions.

"The effect of falling prices rippled throughout the production chain, both on an operational and a financial level," PIRA said, adding that capital expenditure guidance for 2015 for companies that its analysts cover has been 35% lower than 2014 capex on average.

Simultaneously, technology and productivity improvements continued in the fourth quarter 2014, and these improvements are expected to accelerate in 2015.

"The consensus seems to be a target of a 10% reduction in costs from efficiency gains, and a further 20% cost reduction from service price deflation," PIRA said.

OMV-led group brings Maari field well on stream

OMV Group's latest redevelopment well drilled in Maari oil field on permit PMP 38160 offshore New Zealand's Taranaki basin has been brought on stream at a rate of 7,800 b/d.

The well is producing from the Mangahewa formation in a previously untapped location and is expected to potentially exceed predrill expectations. It will add to the field's production along with other redevelopment wells being drilled in the field (OGJ Online, Dec. 1, 2014).

Maari now produces about 14,000 b/d, but the company says an optimal rate will be determined following several weeks of production and take into consideration reservoir management matters.

OMV says there are underdeveloped reserves at Maari and nearby Manaia that will be considered for future production by the joint venture.

OMV operates the field with 69%. Other partners include Todd Maari 16%, Horizon Oil 10%, and Cue Energy 5%.

Central completes Dingo gas field commissioning

Central Petroleum Ltd., Brisbane, has completed commissioning of Dingo natural gas field in Northern Territory's southern Amadeus basin.

Central fast-tracked the pipeline and plant work, which was completed ahead of schedule and under budget. The company bought the undeveloped field from Magellan Petroleum Australia in early 2014 (OGJ Online, Feb. 19, 2014). All necessary approvals also have been secured.

Central says that the flow of sales gas from the field will begin as soon as customer NT Power & Water Corp. completes its engineering and tie-in work to the delivery point at Owen Springs power station near Alice Springs.

The field will produce gas from the Dingo-2 and Dingo-3 wells on production licence PL7. These are connected by a 43-km, 100-mm pipeline north to the Brewer industrial estate in Alice Springs. The pipeline and processing plant capacity is as much as 2.4 petajoules/year.


Neste plans major turnaround at Porvoo refinery

Neste Oil Corp. will begin a 2-month planned maintenance turnaround beginning in April at its 9.8 million-tonne/year Porvoo refinery in the Kilpilahti Industrial Area, about 20 miles east of Helsinki.

The major turnaround, to be the largest in the plant's history and its first since 2010, is scheduled to start on Apr. 6 with unit shutdowns and will last about 8 weeks, Neste Oil said.

In addition to executing standard maintenance work designed to optimize the safety, reliability, and efficiency of Porvoo's operations, the company also plans to use the spring turnaround to carry out a series of other projects related to the refinery's future development, including:

• Installation of furnaces in the crude oil distilling unit.

• Replacement of automation in several unidentified areas of the refinery.

• Preparation of connections for other unidentified, future investment projects.

Neste Oil's total investment into the turnaround amounts to about €100 million, according to the refiner.

The maintenance shutdown will not impact the refinery's oil terminal or distribution of products via road, and the company will continue to sell products from storage, Neste Oil said.

In October 2014, Neste Oil reported it would invest €500 million to closely integrate refinery operations at its Porvoo and 3 million-tpy Naantali refineries to achieve better efficiencies as part of an effort to keep the company's European operations competitive (OGJ Online, Oct. 7, 2014).

All first-phase units in operation at Abreu e Lima plant

Petroleo Brasileiro SA (Petrobras) has commissioned the first of two 75,000-b/d delayed coking units at its Abreu e Lima refinery (Rnest) at the port of Suape, near Recife, the capital of Brazil's Pernambuco state.

Start-up of the delayed coker, which took place on Mar. 13, completes commissioning of all processing equipment to be included in Rnest's first 115,000-b/d phase, Petrobras said.

While initial start-up activities for Rnest's first production train began on Nov. 18 following official approval from Brazil's National Petroleum Agency, furnaces in the first train's atmospheric distillation did not enter service until Dec. 3 (OGJ Online, Dec. 5, 2014; Nov. 19, 2014).

Crude oil processing at the refinery's first train started on Dec. 6, with Rnest's first commercial sale of diesel occurring later in the same month, Petrobras said.

The company also recently began start-up activities on a diesel hydrotreater as part of the commissioning process for the refinery's second 115,000-b/d production train, which is due to come on line later this year (OGJ Online, Mar. 13, 2015).

While local media outlets have reported Rnest's second phase has been delayed alongside the currently weaker crude oil price environment, as well as allegations of internal company corruption, Petrobras said on Jan. 29 that it remains on schedule to complete construction and commissioning of the second production train by May.


Enlink to acquire VEX pipeline from Devon

EnLink Midstream Partners LP, Dallas, reported entering into an agreement to acquire the Victoria Express Pipeline (VEX) and related truck terminal and storage assets from Devon Energy Corp. for a total of $210-220 million.

The transaction is expected to close by Apr. 1.

"These assets will give EnLink a tremendous growth platform in the Eagle Ford shale," said Barry E. Davis, EnLink president and chief executive officer.

The VEX assets include a 56-mile multigrade crude oil pipeline, as well as the pipeline's destination facilities at the Port of Victoria, including an eight-bay truck unloading terminal; 200,000 bbl of aboveground storage, of which 50,000 bbl are under construction; and rights to barge loading docks.

Also included in the transaction are facilities near the origin of the pipeline that are currently under construction, including an eight-bay truck unloading terminal and 160,000 bbl of aboveground storage (Cuero Facilities), which are expected to be operational in this year's second half.

The VEX system, which became operational in third-quarter 2014, currently transports condensate from DeWitt County to the Port of Victoria on Texas' mid-coast.

The pipeline's current capacity is 50,000 b/d and, following commencement of operations of the Cuero Facilities, will operate as a batched system designed to segregate up to three different products, including processed condensate deemed eligible for export, unprocessed condensate, and crude oil.

The $30-40 million of additional capital EnLink will invest in 2015 includes the costs of construction being assumed by EnLink in the transaction to complete the Cuero Facilities and expand the pipeline capacity to about 90,000 b/d.

Rio Grande LNG plant granted FERC pre-filing status

NextDecade LLC has received notification from the US Federal Energy Regulatory Commission of acceptance into the pre-filing process for its 27-million tonne/year Rio Grande LNG liquefaction plant and associated Rio Bravo pipeline.

Rio Grande LNG, a wholly owned subsidiary of NextDecade, is a land-based LNG export project on a 1,000-acre site along the Brownsville Shipping Channel in Brownsville, Tex.

NextDecade's proposal includes plans for up to 6 liquefaction trains, each with a 4.5-million tpy nominal output capacity. The plant will be constructed in phases timed to meet market demand.

The 129-mile Rio Bravo pipeline will supply the plant, connecting it to the Agua Dulce natural gas market hub. NextDecade has completed a basis of design for Rio Grande LNG with CB&I.

The company expects to make a final investment decision on the Rio Grande's $8-billion Phase 1 in 2017, pending regulatory approvals.

NextDecade has also proposed the Pelican Island LNG project in Galveston, Tex. The US Department of Energy 2 years ago granted NextDecade-owned Pangea LNG authorization to export LNG to countries with which the US has free-trade agreements from a site on the La Quinta Ship Channel in Corpus Christi, Tex. (OGJ Online, Feb. 5, 2013).

PAA, Delek enter venture to build Caddo pipeline

Plains All American Pipeline LP (PAA) reported the formation of Caddo Pipeline LLC, a 50-50 joint venture with Delek Logistics Partners LP, to develop the Caddo Pipeline, an 80-mile, 12-in. system between Longview, Tex., and Shreveport, La.

The Caddo line, which will originate at the Plains Atlas Terminal in Longview, will have the capacity to move up to 80,000 b/d of crude oil to supply refineries in the Shreveport area and Delek Logistics' pipeline system supplying Delek US Holdings' El Dorado, Ark., refinery.

Under the agreement, PAA will construct and operate the Caddo line.

The total project investment is expected to be about $100 million, and the pipeline is supported by long-term shipper commitments. Completion is expected in mid-2016.