OGJ Newsletter

Nov. 9, 2015
International news for oil and gas professionals


Oxy to sell assets in Bakken formation

Occidental Petroleum Corp., Houston, announced it will make $600 million net by selling its Bakken formation acreage, saying its North Dakota operations were unprofitable at current crude oil prices. The buyer's name was not disclosed during a third-quarter earnings call.

"With this $600 million we could run four to five rigs in the Permian for a year and generate more production than we would get out of the Bakken," said Steve Chazen, Oxy's chief executive officer. "We just don't see how it competes for capital inside the company in any reasonable price scenario."

Occidental spent $1.2 billion during the third quarter of which more than 50% was directed to the Permian basin.

MDU nearly completes exit from E&P business

MDU Resources Group Inc., Bismarck, ND, has nearly completed the sale of producing assets of its indirect subsidiary, Fidelity Exploration & Production Co., Denver.

The parent has entered sales agreements for five properties and closed on one of them in October. It expects to close on the others before yearend for aggregate proceeds and associated tax benefits of about $450 million. It didn't identify buyers, all of which, it said, are private exploration and production companies.

MDU Resources is still seeking a buyer for one property representing less than 10% of Fidelity E&P's production.

The subsidiary had yearend 2014 reserves of 91.9 million boe-48% oil, 44% gas, and 8% NGL. Production in 2014 totaled 9 million boe-54% oil, 39% gas, and 7% NGL.

"Exiting the exploration and production business will allow us to focus more fully on our remaining businesses," said David L. Goodin, president and chief executive officer of MDU Resources, in the company's third-quarter earnings statement.

The group's other businesses are electric and natural gas utilities, pipeline and energy services, and construction. The group's WBI Energy is a partner with Calumet Specialty Products Partners in the 20,000-b/d Dakota Prairie Refining LLC toppint refinery, which started up in May near Dickinson, ND (OGJ Online, May 4, 2015).

Eni due €463 million for Saipem stake

Eni SPA reports that the price of its agreed sale of a 12.5%-plus-one-share interest in Saipem SPA to Fondo Strategico Italiano SPA (FSI) will be €463,238,681.60.

In conjunction with the sale, the agreement for which was disclosed Oct. 27, Saipem will launch a rights offering and restructure its debt. The sales price, reported Nov. 4, depended on the average price of Saipem's ordinary shares during a stipulated period before and after announcement of the firm's capital increase.

Saipem was a wholly owned subsidiary of Eni until 1984. The sale to FSI will reduce Eni's stake in the construction and drilling contractor to about 30% and deconsolidate it from the former parent's finances.

Eni said a reason for the sale is its intention to focus on upstream oil and gas operations.

FSI acquires mainly minority interests in companies it identifies as having "significant national interest."

Exploration & DevelopmentQuick Takes

Mozambique invites groups to negotiate for contracts

Mozambique has invited operator-led groups to start negotiations for six contracts as a result of the fifth licensing round for exploration and production concessions.

The Institute of National Petroleum of Mozambique (INP) said it received bids from potential operators for eight of 15 offshore and onshore areas offered in the round.

Bids were evaluated based on health, safety, and environmental criteria, financial strength, technical competence, and economic terms offered to Mozambique. A unit of ExxonMobil Corp. is operator for three of the six selected blocks.


• Angoche Area A5-A, Eni Mozambico SPA.

• Angoche Area A5-B, Zambezi Area Z5-C, and Zambezi Area Z5-D, ExxonMobil E&P Mozambique Offshore Ltd. (OGJ Online, July 30, 2015).


• Pande/Temane Area PT5-C, Sasol Petroleum Mozambique Exploration Ltd.

• Palmeira Area P5-A, Delonex Energy Ltd.

INP said it expects the first 4-year period of exploration to result in a minimum of 10 wells, with 8 in deepwater, the acquisition of more than 3,000 km of 2D seismic, the acquisition of more than 18,400 sq km of 3D seismic, 10,000 sq km of full tensor gravity, high-resolution magnetic programs, and other geotechnical studies.

Chevron updates Anchor discovery in deepwater gulf

Chevron Corp. has confirmed a combined hydrocarbon column of at least 1,800 ft in the Lower Tertiary Wilcox reservoirs at its Anchor prospect on Green Canyon Block 807, 140 miles offshore Louisiana in the Gulf of Mexico.

The company's original Anchor-2 discovery well was drilled in late 2014 to a depth of 33,750 ft in 5,180 ft of water and encountered 690 ft of net oil pay (OGJ Online, Jan. 6, 2015). The company said it began appraisal drilling in June. Venari Resources LLC reported that a sidetrack from Anchor-2 was drilled down dip and found an additional 694 ft of net oil pay.

"The positive results of our appraisal work at Anchor indicate a significant discovery of potentially hub-class scale," said Jay Johnson, executive vice-president, upstream. The company is pursuing additional appraisal work to further evaluate the results and assess development alternatives for the field.

Chevron is Anchor's operator with 55% working interest, Cobalt International Energy Inc. has 20%, and Samson Offshore Anchor LLC and Venari Resources LLC each have 12.5%.

Cobalt: North Platte appraisal 'encouraging'

Cobalt International Energy Inc. is considering bypass coring and sidetrack options for the North Platte 3 appraisal well in the deepwater Gulf of Mexico.

Although commerciality of the 2012 North Platte discovery, in the Garden Banks area, remains in question, Cobalt called early results of the first appraisal well "encouraging."

The North Platte 3 encountered about 550 ft of net oil pay, similar to the discovery well "but with evidence of even better developed inboard Lower Tertiary reservoirs," the company said in its third-quarter earnings statement (OGJ Online, Dec. 5, 2012). It's still evaluating logging and pressure data.

Cobalt is operator with 60% working interest. Total E&P USA holds the other 40%.

Noble plugs Humpback well offshore Falkland Islands

Noble Energy Inc., Houston, reported that the Humpback well offshore the Falkland Islands reached total depth and is being plugged. Humpback was drilled in the Fitzroy sub-basin of the Southern Area license and encountered noncommercial quantities of crude oil and natural gas (OGJ Online, Oct. 1, 2014).

Full well assessment and the integration of drilling results into Noble's geologic models is ongoing to determine remaining exploration potential in the Southern Area license, the company says. The geologic play including Humpback is only one of a number of prospect play types in the license.

The rig that drilled the Humpback well will be released to another operator before returning to Noble to spud the Rhea prospect in late 2015 or early 2016.

Located in the Northern Area license offshore the Falkland Islands and 265 miles from Humpback, Rhea is in a proven petroleum basin near existing oil discoveries, the company says (OGJ Online, Apr. 13, 2015). Rhea is a Cretaceous-aged prospect with multiple reservoir targets and total estimated gross mean unrisked resources in excess of 250 million bbl of oil.

Noble now expects total third-quarter 2015 exploration expense to be $200 million, which includes the majority of net costs related to the Humpback well.

Drilling & ProductionQuick Takes

Big Bend starts production in Gulf of Mexico

Noble Energy Inc., Houston, started production on Oct. 26 from its Big Bend oil development in the deepwater Gulf of Mexico (OGJ Online, Aug. 28, 2014).

Production from the single-well field is ramping up as expected and is anticipated to reach a maximum gross rate of 20,000 boe/d over the next few weeks, Noble says. About 90% of the volumes being produced are oil.

Noble says it continues to accelerate its Dantzler development and now expects production to start by early November.

Big Bend and Dantzler, respectively on Mississippi Canyon Blocks 698 and 782, are subsea tiebacks to the third-party Thunder Hawk production facility. The company last year signed a production handling agreement with SBM Offshore to produce Big Bend and Dantzler via the Thunder Hawk DeepDraft semisubmersible (OGJ Online, Sept. 18, 2014).

The fields are estimated to contribute a combined maximum net production rate of 20,000 boe/d to the company.

Noble operates Big Bend with 54% working interest. Other interest owners are W&T Energy VI LLC, a wholly owned subsidiary of W&T Offshore Inc. with 20%; Red Willow Offshore LLC 15.4%; and Houston Energy Deepwater Ventures V LLC 10.6%.

Lianzi oil, gas flow begins offshore central Africa

Chevron Overseas (Congo) Ltd., a subsidiary of Chevron Corp., has started oil and gas production from Lianzi field in a unitized offshore zone between Congo (Brazzaville) and Angola.

The company says Lianzi-65 miles offshore in 3,000 ft of water (OGJ Online, July 31, 2012)-is its first operated asset in Congo (Brazzaville) and the first cross-border oil development project offshore central Africa. The project is expected to produce an average of 40,000 bo/d.

The field, discovered in 2004 (OGJ Online, Oct. 12, 2004), includes a subsea production system and a 27-mile electrically heated flowline system, the first of its kind at this water depth, Chevron says. The system transports the oil from the field to the Benguela Belize-Lobito Tomboco platform in Angola's Block 14 and utilizes a direct electrical heating (DEH) system to ensure fluid flow under a wide range of conditions.

"As the first offshore energy development spanning national boundaries in the central Africa region, Lianzi represents a unique cooperative approach to share offshore resources and may serve as a model for the development of similar cross-border fields between two countries," said Ali Moshiri, president of Chevron Africa and Latin America Exploration & Production Co.

Foxtrot begins production offshore Ivory Coast

Foxtrot International LDC, Abidjan, began production from its second platform on Block CI-27 offshore Ivory Coast. The company says the Marlin-B1ST well is producing 26° API crude at an average of 1,100 b/d through a 35/64-in. choke.

Sitting in 100 m of water, B1ST hit 62 m of gross pay in the Cenomanian interval at a total depth of 2,660 m (OGJ Online, Mar. 9, 2015).

Prior to startup of the well, RAK reported a 2015 average of 1,000 b/d of oil and condensates from Block CI-27. Gas production has averaged 145 MMcfd.

The Marlin platform was installed in April as part of a 4-year, $1 billion expansion project to bring Marlin and Manta fields on production. Four additional wells are planned.

RAK Petroleum, through Mondoil Enterprises LLC, holds one third ownership of Foxtrot International, which in turn operates Block CI-27 with 27.5% interest. Other partners on the block are Ivory Coast state oil company Petroci and Energie de Cote d'Ivoire SA.

Flow due from Nooros appraisal in Egypt

Eni SPA expects production to start by the end of November from the Nidoco Northwest 3 appraisal well in the Nile Delta of Egypt, where the Nidoco Northwest 2 Dir discovery of July is producing 15,000 boe/d of natural gas and condensate (OGJ Online, July 20, 2015).

Both wells were drilled directionally from onshore locations to offshore targets on the Nooros prospect in the Abu Madi West license. They'll produce at a combined rate of 30,000 boe/d by yearend and reach a plateau rate of 70,000 boe/d in the first half next year, Eni said.

Gas and condensate flow to the Abu Madi gas treatment plant about 25 km from the discovery. The appraisal well encountered 65 m of pay in Messianian sandstone.

Eni plans three further exploratory wells on the license, in which Eni holds 75% interest through its IEOC subsidiary. BP holds 25%. The operator is Petrobel, owned equally by IEOC and state-owned Egyptian General Petroleum Corp. (EGPC).

In the Western Desert, meanwhile, production has reached 12,000 b/d of light oil from Melehia West Deep field, a January discovery, Eni said (OGJ Online, Jan. 22, 2015).

The company expects output to reach 15,000 b/d after start-up of a gas treatment plant by the end of November.

IEOC holds 100% interest in the Melehia Deep license and 76% stake in the Melehia license, in which Lukoil holds the other 24%. The operator is Agiba, a joint venture of IEOC and EGPC.


Marathon cancels Garyville refinery upgrade

Marathon Petroleum Corp. has canceled a major upgrade of its 522,000-b/d Garyville, La., refinery (OGJ Online, Apr. 24, 2014).

The company referred to what would have been a $2.2-2.5-billion project as ROUX, for "residual oil upgrade expansion."

Marathon Petroleum Pres. and Chief Executive Officer Gary R. Heminger cited "market conditions."

The company took a $144 million charge against third-quarter earnings to account for capitalized costs, including front-end engineering and long lead-time equipment.

It reported earnings of $948 million for the third quarter, compared with $672 million in the third quarter of 2014.

PBF Energy closes deal for Chalmette refinery

PBF Holding Co. LLC, a subsidiary of PBF Energy Inc., Parsippany, NJ, has completed its deal with ExxonMobil Corp. and Petroleos de Venezuela SA (PDVSA) to become 100% owner of Chalmette Refining LLC, the former ExxonMobil-PDVSA joint venture that operates a 189,000-b/d refinery in Chalmette, La., outside of New Orleans (OGJ Online, June 18, 2015).

Valued at $322 million plus working capital, the deal, which includes the refinery as well as related logistics assets, was finalized as of Nov. 2, PBF Energy said.

During its remaining fourth-quarter 2015 ownership of the refinery, the independent refiner said it plans to operate the refinery at a total throughput of 170,000-190,000 b/d using primarily medium to heavy-sour crudes.

In addition to the dual-train coking refinery, which can process both light and heavy crudes, PBF Energy also acquired the following Chalmette Refining assets:

• 100% ownership of the MOEM pipeline, which provides access to the Empire terminal, as well as to the CAM Connection pipeline, which provides access to the Louisiana Offshore Oil Port (LOOP) through a third-party pipeline.

• 80% ownership interest in both Collins Pipeline Co. and T&M Terminal Co., in Collins, Miss., which together provide the Chalmette refinery access for its clean-product production to reach the Plantation and Colonial pipelines.

• A marine terminal equipped to handle imports of waterborne feedstock as well as loading or unloading of finished products.

• A clean-products truck rack for access to local markets.

• A shell capacity of about 7.5 million bbl in crude oil and product storage.

Alongside its pending acquisition of ExxonMobil Corp.'s 155,000-b/d refinery in Torrance, Calif. (OGJ Online, Oct. 1, 2015), PBF Energy's acquisition of the Chalmette refinery will boost its total throughput capacity to 900,000 b/d to make it North America's fourth largest independent refiner, the company said.

PBF Energy currently operates three US refineries, including a 190,000-b/d refinery in Delaware City, Del., a 180,000-b/d refinery in Paulsboro, NJ, and a 170,000-b/d refinery in Toledo, Ohio. The company is due to complete its purchase of the Torrance refinery during second-quarter 2016.

ExxonMobil plans Rotterdam hydrocracker expansion

ExxonMobil Corp. is moving forward with a planned expansion of its hydrocracking operations at subsidiary Esso Nederland BV's 191,000-b/d refinery in Rotterdam, Zuid-Holland, Netherlands.

The expanded unit, which will use ExxonMobil's proprietary hydrocracking technology, is designed to increase the refinery's ability to upgrade heavier byproducts into high-quality lubricating oils, greases, and ultralow-sulfur diesel, the operator said on Oct. 29.

Following the hydrocracker's expansion, the Rotterdam refinery will be the first in Europe to produce ExxonMobil's EHC Group II base stocks, which are designed to meet evolving industry requirements, and help lubricant blenders both to achieve greater formulation flexibility and simplify global qualification testing, according to the company.

With the project's environmental impact assessment (EIA) already approved and permitting process under way, ExxonMobil said it expects to receive final permits in early 2016, with construction to start soon after.

The company tentatively plans to commission the expanded unit in 2018, pending permit approvals.

ExxonMobil's investment into the Rotterdam project will amount to more than $1 billion, which alongside the hydrocracker expansion, will include the addition of six new storage tanks that will boost storage capacity at the refinery by 140,000 cu m, the Port of Rotterdam said on Oct. 29.


TAP awards line pipe contracts, plans 2016 construction

Trans Adriatic Pipeline AG (TAP) awarded a contract to Salzgitter Mannesmann International GMBH for 270 km of the onshore 48-in. OD line pipe, as well as the bends TAP requires for both onshore (48-in.) and offshore (36-in.) use. Salzgitter will provide 48-in. line pipes and bends for TAP's onshore sections in Albania, Greece, and Italy, and 36-in. bends for the offshore section across the Adriatic, a total of roughly 170,000 tonnes of line pipe.

TAP said the award would allow it to begin construction in Greece, Albania, and Italy next year as planned.

Awards for the offshore 36-in. OD line pipe and the remainder of the 48-in. onshore pipe will be announced separately.

This year TAP has awarded contracts for construction and rehabilitation of access roads and bridges in Albania (April), large-diameter ball valves and actuators (July), turbo compressors (September), and fittings, isolating joints, and scraper traps (October).

TAP will transport natural gas from Shah Deniz II field in Azerbaijan to Europe. The 878-km pipeline will connect with the Trans Anatolian Pipeline (TANAP) at the Turkish-Greek border at Kipoi, cross Greece, Albania, and the Adriatic Sea, and come onshore in southern Italy.

The pipeline's routing will allow gas delivery to southeastern European countries including Bulgaria, Albania, Bosnia and Herzegovina, Montenegro, and Croatia. Its landfall in Italy provides opportunities for further transport to markets such as Germany, France, the UK, Switzerland, and Austria.

TAP targets first gas sales to Georgia and Turkey in late 2018, with first deliveries to Europe will following in early 2020.

NEB releases report on whistleblower allegations

Canada's National Energy Board has released its investigation into 16 allegations of regulatory noncompliance made through the NEB's "whistleblower process" against TransCanada Pipelines Ltd.

The investigation regarding construction and maintenance practices concluded that six of the third-party allegations were "partially substantiated" and that TransCanada has "taken all appropriate and preventative actions." Ten allegations could not be verified.

NEB said public safety and environmental protection were not at risk. NEB received and responded to the 16 allegations in 2014 and early 2015. The agency sent a draft report to TransCanada on Sept. 18 and TransCanada submitted its response on Sept. 28.

Crestwood building out Delaware Permian midstream

Crestwood Equity Partners LP is holding a nonbinding open season for its Delaware Takeaway crude pipeline system (Delta), a 164-mile crude and condensate pipeline header system starting at a new Crestwood terminal to be built near Orla, Tex. in Reeves County, with potential downstream connections to multiple interconnects shipping to end markets including El Paso, Midland, Cushing, Houston, and Corpus Christi.

Delta will batch multiple grades of crude and condensate, initially transporting more than 200,000 b/d. The project may be expanded based on results of the open season. Crestwood expects Delta to enter service second-quarter 2017. The open season closes Dec. 7.

Crestwood is also in exclusive negotiations with a large producer in the Delaware Permian basin to anchor a large three-stream gathering system spanning portions of Reeves, Loving, and Culberson Counties, Tex., aggregating crude and condensate at the Orla terminal. The gathering system would consist of about 600 miles of pipeline and cover an area in excess of 400,000 acres.

Orla Terminal will initially provide roughly 200,000 bbl of storage, truck loading and unloading, blending, multiple upstream and downstream pipeline connections, and will potentially provide condensate stabilization services for Wolfcamp production.