OGJ Newsletter
GENERAL INTEREST — Quick Takes
DEA to buy E.On E&P Norway for $1.6 billion
DEA Deutsche Erdoel AG, Hamburg, said it is acquiring E.On E&P Norway and its interests in 43 licenses on the Norwegian Continental Shelf for $1.6 billion. The deal includes three producing fields.
DEA Norge AS will add 45,000 boe/d through working interests in Skarv, 28.1%; Njord, 30%; and Hyme, 17.5%.
It will also acquire interests in other developments and discoveries, including Snilehorn, Snadd, and Fogelberg, and a broad portfolio of exploration licenses, the company said.
The transaction is subject to approval by Norwegian authorities and the European Commission.
DEA Norge has 31 licenses, including interests in producing fields such as Snorre, Gjoa, Knarr, Snohvit, and Veslefrikk. It serves as operator of Zidane field, currently being considered for development, and is a partner in the Alta discovery (OGJ Online, Sept. 30, 2015).
DEA said its Norwegian production is expected to more than double with the acquisition.
The announcement comes just days after DEA reported reaching an agreement for the sale of its offshore UK interests to Ineos (OGJ Online, Oct. 12, 2015).
Phillips 66 cuts 2016 capital budget by $1 billion
Phillips 66 reported plans for a 2016 capital budget of $3.6 billion, excluding Phillips 66 Partners' capital program. That's down from the $4.6 billion the Houston-based firm budgeted for 2015.
Excluding Phillips 66 Partners' capital spending, Phillips 66 plans to invest $2 billion in its midstream business.
In its natural gas liquids segment, it continues construction of the 4.4 million-bbl/month Freeport LPG export terminal on the Texas Gulf Coast, with completion expected in second-half 2016.
The budget also includes spending associated with expansion of the Sweeny NGL midstream hub in Mont Belvieu, Tex.
In transportation, the company is investing in the new DAPL and ETCOP pipeline projects to move crude oil from the Bakken production area of North Dakota to market centers throughout the US. Storage capacity is being added at the Beaumont terminal in Nederland, Tex., and the company is investing in the Bayou Bridge pipeline project to move crude from Texas to Louisiana (OGJ Online, July 31, 2015).
Phillips 66 plans $1.2 billion of capital expenditures in refining, with 70% to be invested in reliability, safety, and environmental projects, including compliance with the new Tier 3 gasoline specifications (OGJ Online, Apr. 15, 2015).
Discretionary refining capital of about $400 million will improve product yields and lower feedstock costs, the company says. These investments include a modernization of the fluid catalytic cracker at Bayway, NJ, and an upgrade of the vacuum tower at Billings, Mont.
Phillips 66 over the summer reported second-quarter earnings of $1.02 billion, up from $997 million in the first quarter and $872 million in second-quarter 2014 (OGJ, Aug. 24, 2015, p. 16).
The firm's refining-adjusted earnings were $604 million in the second quarter, up from $495 million in the first quarter.
NEB: Large midsized producers lead tight-gas surge
Canada's National Energy Board says a decade-long shift away from conventional natural gas resources toward tight gas production has been led by large midsized producers.
That group of producers accounted for 44% of tight gas production in 2014, up from 22% in 2006. Tight gas production from major producers also accounted for 44% in 2014, down from 64% in 2006. The numbers are based on operated-production vs. net production.
Tight gas production's share of western Canadian gas production increased to 42% in 2014 from 27% in 2006 (OGJ Online, June 10, 2015).
NEB classified major producers as companies producing more than 500 MMcfd of gas and large midsized producers as companies producing at least 100 MMcfd of gas.
Several majors in recent years have focused on projects outside Canada or sold their Canadian gas assets.
NEB said tight gas drilling is very capital intensive, requiring large amounts of land and drilling capacity and that marginal and small producers generally have insufficient drilling prospects to attract the investment capital needed for tight gas operations.
Junior and midsized producers have been able to maintain relatively stable shares of tight gas production at 4% and 7%, respectively, NEB said.
Orlen to acquire another Canadian producer
Orlen Upstream Canada Ltd., a unit of Polski Koncern Naftowy Orlen SA, has agreed to acquire all shares of Kicking Horse Energy Inc. for $293 million (Can.). The deal was reported just as Orlen Upstream Sp. z o.o. agreed to buy FX Energy Inc., Salt Lake City, with assets in Poland (OGJ Online, Oct. 13, 2015).
Total deal value including the assumption of Kicking Horse's net debt, working capital, and other adjustments is $356 million (Can.). The deal is expected to close in the fourth quarter.
Kicking Horse Energy's key assets, situated in the region of Kakwa, Alta., carry low risk and "good prospects for growth," PKN Orlen says. According to the assessment performed as part of the due diligence process, upon the execution of the transaction, Orlen expects to increase its production by more than 4,000 boe/d, and to expand its resource base by 30,000 boe of 2P reserves.
TriOil's Alberta-heavy portfolio includes the Cardium development at Lochend, Dunvegan development at Kaybob, and Montney development at Pouce Coupe. PKN Orlen last year purchased Birchill Exploration LP, which discovered and appraised crude oil and natural gas reserves of 26.6 million boe in Alberta's Ferrier-Strachan areas.
Through the Cardium, Dunvegan, and Montney formations, OKN Orlen produces more than 7,000 boe/d, with 2P reserves of 50,000 boe.
Exploration & Development — Quick Takes
Eni, BP take licenses off Egypt in 2015 bid round
Eni SPA and BP PLC have been awarded exploration rights to the 1,927-sq-km Block 4 and 1,389-sq-km Block 7 offshore Egypt following the 2015 Egyptian Natural Gas Holding Co. (Egas) bid round.
BP will operate Block 4, or North Ras El Esh, where interest is split 50-50 between BP and Eni. Eni will operate Block 7, known as North El Hammad, with 37.5% interest while BP will have 37.5%. Total SA is the third partner for Block 7, with 25%.
BP also was awarded Block 14, North El Tabya; and Italy's Edison SPA was awarded Block 12, Northeast Hapy, according to a statement from Egypt's petroleum ministry.
Blocks 4 and 7 will be managed on behalf of Eni by affiliate International Egyptian Oil Co. (IEOC). Both blocks are in the shallow waters of the Mediterranean Sea, facing the Nile Delta and southwest of the Temsah area and west of the Baltim area, where Eni operates existing fields and production facilities (OGJ Online, Apr. 22, 2013).
The new concession agreements follow the award to Eni earlier this year of the deepwater Karawan and North Leil blocks (OGJ Online, Jan. 15, 2015), and further relaunch Eni's exploration activity after recent successes at Nidoco NW and Zohr, the latter of which rivals other giant Mediterranean discoveries (OGJ Online, Aug. 31, 2015).
Eni has been present in Egypt since 1954. Current production totals 190,000 boe/d.
BP and partners last year committed to investing $240 million in Blocks 3 and 8, respectively known as North El Mataria and Karawan Offshore. (OGJ Online, Nov. 13, 2014). Block 8 was awarded in 2014 and is operated by Eni.
BP and Dana Gas earlier this year completed an agreement for drilling an exploration well on the 960-sq-km El Matariya onshore concession area, awarded to the companies last year, in Egypt's Nile Delta (OGJ Online, June 2, 2015).
Also earlier this year, BP and a local partner signed final agreements for the West Nile Delta (WND) gas project, whereby $12 billion will be invested to develop 5 tcf of gas resources and 55 million bbl of condensates (OGJ Online, Mar. 6, 2015).
Lukoil makes gas discovery offshore Romania
PJSC Lukoil has made a natural gas discovery 170 km offshore Romania in the Black Sea.
The Lira-1X exploratory well, drilled on the Trident block (EX-30), found a gas-saturated thickness of 46 m while being drilled 2,700 m by Transocean Ltd.'s GSF Development Driller II semisubmersible rig. Water depth is 700 m.
Lukoil said seismic data indicate the gas field can reach up to 39 sq km. Plans for 2016 include drilling another well and reprocessing seismic data.
The exploration stems from a 2011 concession agreement with Romania (OGJ Online, Feb. 24, 2011).
Drilling & Production — Quick Takes
Oil production starts from Kuparuk site in Alaska
ConocoPhillips Alaska Inc. has started oil production from its Kuparuk drill site on Alaska's North Slope (ANS). Known as Kuparuk Drill Site 2S, or DS2S, the project is expected to add 8,000 bo/d gross at peak production.
The project includes 14 development wells, a gravel road, a drilling pad capable of handling 24 wells, power lines, pipelines, and other surface facilities. The drill site is in the southwestern section of Kuparuk field.
Drilling continues on the fourth 2S well. In addition to DS2S, the company has added two drilling rigs at Kuparuk since 2013, and two more newbuild rigs are on order for delivery in 2016. Work also is concluding on Alpine drill site CD5.
The project was approved for funding in October 2014 (OGJ Online, Oct. 27, 2014); and production was originally expected in December. DS2S is the first new drill site at Kuparuk in more than 12 years.
ConocoPhillips also plans to pursue viscous oil development 1H NEWS (North East West Sak) at Kuparuk, and has received permits for the Greater Mooses Tooth No. 1 (GMT1) development in the National Petroleum Reserve-Alaska (OGJ Online, Feb. 16, 2015).
A funding decision for GMT1 is expected later this year.
The company says DS2S, CD-5, GMT1, increased rig count, and NEWS have an estimated cost of about $3 billion gross and could add 40-50,000 bo/d gross to ANS production by 2018.
Gullfaks subsea wet gas compression starts up
Statoil ASA reported startup of a wet gas compressor in Gullfaks field from the seafloor of the North Sea (OGJ Online, July 6, 2015). The company said the effort will increase recovery by 22 million boe and extend plateau production by 2 years from the Gullfaks South Brent reservoir.
The system consists of a 420-tonne protective structure, a compressor station with two 5-Mw compressors totaling 650 tonnes, and all equipment needed for power supply and system control on the platform. A wet gas compressor does not require gas and liquid separation before compression.
In mid-September, Statoil started subsea gas compression at Asgard field. The company said the two projects are the first of their kind worldwide, and represent two different technologies for maintaining production when the reservoir pressure drops (OGJ Online, June 9, 2015).
Statoil said subsea compression has a "stronger impact" than conventional platform-based compression, and avoids increased weight and extra space needed on the platform for a compression module.
EIA: US shale oil output to fall in November
Crude oil production in November from seven major US shale plays is expected to drop 93,000 b/d to 5.12 million b/d, according to the US Energy Information Administration's latest Drilling Productivity Report (DPR). That's back up to the same level forecast for September after a somewhat smaller decline was projected for October (OGJ Online, Sept. 14, 2015).
The DPR focuses on the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian, and Utica, which altogether accounted for 95% of US oil production increases and all US natural gas production increases during 2011-13.
Continuing a trend that has persisted since the overall declines began in spring, the Eagle Ford is expected to make up a bulk of the drop, losing 71,000 b/d to 1.37 million b/d. The Bakken is projected to fall 23,000 b/d to 1.16 million b/d and the Niobrara is projected to fall 20,000 b/d to 372,000 b/d.
The Permian will continue its growth in November, EIA forecasts, with a 21,000-b/d rise to 2.03 million b/d.
New-well oil production/rig across the seven plays is expected to be flat at a rig-weighted average of 465 b/d in November. Notable increases include the Niobrara, up 13 to 616 b/d; and the Utica, up 12 to 260 b/d.
Natural gas production from the plays in November is forecast to fall 294 MMcfd to 44.88 bcfd. The DPR shows the Marcellus leading the way with a bulk of the decline, giving up 215 MMcfd during the month to 15.89 bcfd, followed by the Eagle Ford losing 135 MMcfd to 6.72 bcfd, and Niobrara losing 55 MMcfd to 4.27 bcfd.
FAR contracts rig for Senegal work
FAR Ltd., Perth, and its joint-venture partners have finalized contracts for the use of Ocean Rig's Athena drillship for the forthcoming program offshore Senegal.
The rig is under long-term contract to ConocoPhillips (one of the JV partners) and is currently offshore Angola. The vessel will begin mobilization to Senegal later this week.
FAR says the new drilling program will include three wells-two appraisal wells on the SNE-1 oil discovery and one shelf exploration well to evaluate that region's prospectivity.
The work will involve coring and testing at SNE and the whole three-well program is scheduled for completion by mid-2016.
The SNE-2 and SNE-3 appraisals are planned to prove up the threshold economic field size which FAR estimates is about 200 million bbl for a foundation project.
The exploration well, BEL-1, will be drilled further north and will be the first exploration of the shelf area following the discoveries at FAN-1 and SNE-1.
The aim is to build the resource base within tie-back range of a potential future hub development over SNE field. BEL stands for Bellatrix prospect which, as currently mapped, has a strong seismic amplitude anomaly similar to the one over SNE field and has potential to contain 168 million bbl of oil.
FAR estimates that there are a total of 1.5 billion bbl of prospective resources in several prospects within subsea tie-back distance to the proposed SNE production hub. Bellatrix will be the first of these to be evaluated.
Athena is a new seventh generation dual derrick dynamically positioning drillship first delivered from the shipyard in March 2014. ConocoPhillips has it on a 3-year contract with an option to extend for a further 2 years.
UAE oil-output capacity plans on schedule
The United Arab Emirates remains on schedule to boost crude oil production capacity to 3.5 million b/d by 2017 from 2.7 million b/d at present, according to the federation's energy minister. In response to questions at the POWER-GEN Middle East conference in Abu Dhabi, Suhail bin Mohammed Faraj Al Mazroui said investments in production capacity growth continue without delay despite the slump in crude prices.
Mazroui also said the UAE is investing $35 billion in nuclear, wind, and solar projects to lower its reliance on natural gas.
Although production is high-totaling about 1.9 tcf of dry gas in 2013, according to the US Energy Information Administration-the UAE became a net importer of gas in 2008 because of heavy usage for oil field injection and power generation.
PROCESSING — Quick Takes
Lukoil begins deliveries to Sosnogorsk gas plant
PJSC Lukoil subsidiary OOO Lukoil-Komi LLC has initiated deliveries of associated petroleum gas (APG) from its group of production fields in northern Russia's Komi Republic to PJSC Gazprom's 3 billion-cu m/year Sosnogorsk gas processing plant.
Lukoil began APG shipments to Gazprom's Sosnogorsk plant on Sept. 7 following commissioning of a newly completed lateral from the 1,100-km Bovanenkovo-Ukhta gas trunkline system to Pechora Gas Distribution Station (GDS) 2, the companies said in a series of separate releases.
Bulk gas deliveries to the Sosnogorsk plant during 2015-21 will amount to about 3.9 billion cu m/year, Lukoil and Gazprom said.
First gas deliveries and precommissioning activities at the lateral from the Bovanenkovo-Ukhta to Pechora GDS 2 previously were scheduled to begin during this year's second quarter, Gazprom said in a Mar. 12 release.
Intended to enable increased utilization of available processing capacity at Gazprom's Sosnogorsk plant, the APG supply agreement also will contribute to increased APG recovery at Lukoil's Komi Republic production fields, Lukoil said.
The supply arrangement follows a 2014-24 strategic partnership master agreement the companies signed in May 2014 for further cooperation in hydrocarbon feedstock supply, petrochemical production, as well as allocation of uncommitted oil and gas condensate resources at processing plants both in Russia and abroad, according to Gazprom.
The companies also have discussed the possibility of Lukoil supplying gas from its 4 million-tonne/year Ukhta refinery, located in the central part of Komi Republic, to the Sosnogorsk processing plant, Gazprom said in a Dec. 11, 2014, release.
Total lets contract for unit at French refinery
Total SA has let a contract to Axens to supply technology for a vacuum gas oil hydrodesulfurization (VGO HDS) unit to be built as part of a €200-million modernization and overhaul of the 220,000-b/d Donges refinery near Saint Nazaire, France (OGJ Online, Sept. 15, 2015).
Axens will provide licensing, basic engineering, proprietary catalysts, equipment, as well as related services, for its VGO HDS technology for the unit, which will have a processing capacity of 40,000 b/d and enable the refinery to produce low-sulfur fuels that meet Europe's more stringent quality specifications, Axens said.
As part of the Donges project, Axens has created a process scheme that is specific to the refinery's existing environment and that incorporates Total's requirements for energy efficiency and operational flexibility, the service provider said.
Upon announcing the Donges modernization program in April, Total said the new HDS unit, which will use intermediate feedstock, will receive its hydrogen supply from a steam methane reformer to be built by a contractor already under a long-term hydrogen supply contract with the refinery (OGJ Online, Apr. 16, 2015).
TRANSPORTATION — Quick Takes
Gulfport, Rice Energy form Utica midstream Ohio JV
Gulfport Energy Corp. and Rice Midstream Holdings LLC, a wholly owned subsidiary of Rice Energy Inc., announced plans to form a midstream joint venture to develop natural gas gathering and water services assets to support dry gas development in the Ohio counties of Belmont and Monroe.
Gulfport will own 25% of the joint venture, and Rice Energy will own the rest with Rice Energy being responsible for constructing and operating the assets. Construction was to begin immediately and first deliveries were scheduled for the middle of 2016.
Plans call for a gathering system of 165 miles of high- and low-pressure pipelines with multiple interconnections to interstate pipelines including: Rockies Express, ET Rover, TETCO and Dominion East Ohio.
The water services part of the joint venture will involve a fresh water distribution system to deliver fresh water to pads for well completions.
Gulfport will dedicate 77,000 leasehold acres. Together, Gulfport and Rice Energy plan to invest $520 million to develop gathering and compression assets and $120 million for water assets during 6 years.
USD Partners to buy Wyo. crude-oil rail terminal
USD Partners LP, Houston, reported plans to acquire 100% of the equity interests in a railroad terminal named Casper Crude to Rail LLC in Casper, Wyo., from Stonepeak Infrastructure Partners, Cogent Energy Solutions, and the Granite Peak Group for $225 million, subject to closing adjustments.
Assets include a terminal with 100,000 b/d of loading capacity and dual loop tracks as well as six storage tanks with 900,000 bbl capacity.
The transaction also includes a 6-mile, 24-in. pipeline with a direct connection from Spectra Energy Partners LP's Express crude-oil pipeline, which runs from Hardisty, Alta., to Casper and provides access to multiple grades of Canadian crude oil.
The terminal's modular design allows for the addition of a second loading station and an additional 1.1 million bbl of storage capacity.
MOU signed on Uganda-Tanzania crude line
The governments of Uganda and Tanzania, the Tanzanian Petroleum Development Corp., and Total E&P Uganda have signed a memorandum of understanding on "development principles" for a crude oil pipeline between Hoima, Uganda, and Tanga Port, Tanzania.
Production has yet to start from any of several oil discoveries made in Uganda since 2006. Total, Tullow Oil PLC, and CNOOC Ltd. have development proposals in various stages of negotiation.
The Ugandan government also is considering two export-pipeline routes through Kenya.