OGJ Newsletter

Oct. 7, 2013
International news for oil and gas professionals


Fieldwood closes on acquisition of gulf shelf assets

Fieldwood Energy LLC has closed its previously announced $3.75 billion acquisition of Gulf of Mexico shelf operations and properties from Apache Corp.

Apache kept a 50% stake in all exploration blocks and in horizons below production in developed blocks, where high-potential deep hydrocarbon plays are being tested (OGJ Online, July 18, 2013).

G. Steven Farris, Apache chairman and chief executive officer, said the transaction helps the company toward its goal of rebalancing Apache's assets toward properties that can drive more predictable production growth, including onshore liquids assets in North America.

Apache also announced that it has completed the previously announced sale of oil and gas producing properties in the Nevis, North Grant Lands and South Grant Lands areas of western Alberta to Ember Resources Inc., a private Canadian company, for $214 million.

Including the Fieldwood and Ember transactions, the partnership with Sinopec and two additional agreements to sell oil and gas producing properties in western Canada, Apache has completed or announced more than $7 billion in asset sales year-to-date.

Harvest negotiating sale of Gabon interest

Harvest Natural Resources Inc., already in negotiations for a restructuring of ownership, said a wholly owned unit has begun exclusive discussions for sale of a two-thirds interest in the Dussafu Permit offshore Gabon (OGJ Online, Feb. 11, 2013).

The subsidiary, HNR Global Holding BV, is negotiating with Vitol SA for a $137 million cash sale. After deductions for transaction costs and taxes, net proceeds would be about $123 million. The permit is held under a production-sharing contract.

Harvest has made two presalt discoveries on the block, Tortue and Ruche, and describes them as ready for development.

In West Africa, Vitol now holds offshore interests in Ivory Coast, Ghana, Nigeria, Cameroon, and Congo (Brazzaville).

Separately, Harvest Natural Resources is in exclusive negotiations with Pluspetrol SA, Buenos Aires, for a deal in which Pluspetrol would acquire Harvest's Venezuelan interests and Harvest's other assets would form the basis of a new company to be spun off to shareholders (OGJ Online, Sept. 11, 2013).

House looks at standardizing cross-border permits

US House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and committee member Gene Green (D-Tex.) unveiled proposed legislation to reform the application process for energy infrastructure projects seeking cross-border permits.

They said their North American Energy Infrastructure Act would consolidate and modernize the cross-boundary permitting process for oil pipelines, natural gas pipelines, and electric transmission lines, replacing and superseding the current processes that have been created in an ad hoc fashion by multiple executive orders.

North America is in the midst of an energy renaissance, and new infrastructure is needed to transport the growing energy supply and ensure consumers have access to affordable and reliable energy, Upton and Green maintained.

Their bill would bring more certainty to the process for constructing or modifying energy infrastructure projects with respect to North American border-crossing permitting decisions, they said. Such projects also would create jobs, the lawmakers observed.

Encana shuffles management for revised strategy

Encana Corp., Calgary, will set up a new management structure as part of its ongoing strategy development process and has appointed a senior management team that will report directly to Doug Suttles, president and chief executive officer.

Suttles said, "The new organizational structure aligns with the core competencies needed to get Encana back to winning. These include resource identification, operational excellence, market fundamentals, and capital allocation combined with balance sheet strength."

The company needs to "involve a much wider group of people to determine the next steps in our strategy development process," Suttles added. The new structure and management appointments are to take effect by yearend.

Mike McAllister is appointed executive vice-president and chief operating officer.

David Hill is appointed executive vice-president, exploration and business development.

Sherri Brillon continues as executive vice-president and chief financial officer, and Renee Zemljak continues as executive vice-president, midstream, marketing and fundamentals.

Senior management leaving the company include Jeff Wojahn, executive vice-president and president of the USA Division, retiring after 23 years with Encana.

Others departing are Eric Marsh, executive vice-president, gas economy and senior vice-president, USA Division, 13 years; Bill Stevenson, executive vice-president and chief accounting officer, 21 years; Bob Grant, executive vice-president, corporate development, EH&S and reserves, 28 years; and Bill Oliver, executive vice-president and chief corporate officer, 31 years.

Exploration & DevelopmentQuick Takes

Statoil raises Flemish Pass recoverable estimates

Results from a sidetrack indicate 300-600 million bbl of recoverable oil at the Statoil-Husky Bay du Nord discovery in the remote Flemish Pass basin offshore Atlantic Canada, and the companies have identified more prospective resources that require further delineation.

Bay du Nord, in 1,100 m of water on EL 1112 about 500 km northeast of St. John's, Newfoundland and Labrador, is the combine's third discovery in the basin. Recoverables are estimated at 100-200 million bbl at the Mizzen discovery, while the Harpoon discovery is still under evaluation.

The Bay du Nord well encountered light 34° gravity oil and excellent Jurassic reservoirs with high porosity and high permeability (OGJ Online, Aug. 27, 2013). The basin, nonproducing as yet, has the potential to become a core producing area for Statoil beyond 2020, said Tim Dodson, executive vice-president of Statoil Exploration.

Dodson said, "With only a few wells drilled in a large licensed area totaling about 8,500 sq km, more work is required. This will involve new seismic as well as additional exploration and appraisal drilling to confirm these estimates before the partnership can decide on an optimal development solution in this frontier basin."

All three discoveries are about the same water depth. The two companies discovered Mizzen in 2009 and Harpoon earlier this year. Interests in the three discoveries are Statoil operator with 65% and Husky Energy 35%.

Total to operate CNR Outeniqua deepwater block

Total E&P South Africa BV has taken and the South African government approved a farmout from Canadian Natural Resources Ltd. on deepwater block 11B/12B in the Outeniqua basin offshore South Africa.

In exchange for a 50% working interest in the block and the right to operate, CNR received an undisclosed upfront cash payment, recovery of 50% of past costs, and a carry in the first exploratory well drilled up to a gross cost of $150 million.

The first well is to be drilled in 2014. In the event of a successful multiwell program to define the prospect and subsequent commercial development, additional consideration will be received.

The block covers 19,000 sq km in 200-1,800 m of water 175 km off South Africa's southern coast. CNR has undertaken extensive seismic on the block, and the two companies will work to finalize a location for the first exploratory well.

The block lies southeast of Mossel Bay and east of established oil and gas-condensate fields.

Canadian Natural said it received a number of strong, competitive offers from well-known industry participants to partner with CNR on the blocks.

Permian carbonates flow 4,300 b/d at Gohta find

A group led by a unit of Lundin Petroleum AB has flow-tested its Gohta discovery in the Barents Sea at 4,300 b/d of oil, confirming for the first time oil and gas in a play model that so far has been unsuccessful on the Norwegian Continental Shelf.

The 7120/1-3 well, in PL492 about 35 km north of Snohvit field, proved oil in contact with an overlying gas cap (OGJ Online, Sept. 10, 2013). The well's purpose was to prove petroleum in reservoir rocks in Triassic sandstone reservoirs and Permo-Carboniferous carbonate reservoir.

In the carbonate reservoir the well found a 25-m gross gas column above a 75-m gross oil column in karstified and dolomitized limestone. The Triassic sandstone was water bearing.

A production DST performed to assess the quality of the carbonate reservoir yielded a flow rate of 4,300 b/d of oil through a 44⁄64-in. choke with a gas-oil ratio of 1,040 scf/bbl. The main flow of the reservoir was stable over 24 hr, and the pressure buildup lasted 36 hr and did not show any barriers such as faults or significant reservoir characteristics variations, Lundin Norway AS said.

The well represents the first successful test of Permian carbonate reservoirs on the Norwegian shelf.

The DST confirmed good reservoir production properties. Preliminary evaluation of the gross recoverable oil and gas resources from the Gohta discovery is estimated at 60-145 million bbl of oil and 275-545 bcf of gas.

Lundin Norway, which drilled Gohta to 2,525 m below mean sea level in 342 m of water, said it "will now look to drill similar exploration prospects in adjoining licenses where we have a significant acreage position."

Drilling & ProductionQuick Takes

Shell starts production from BC-10's second phase

Royal Dutch Shell PLC and its partners have reported start of production from the second development phase of the Parque das Conchas (BC-10) project 62 miles offshore southeastern Brazil. The BC-10 project consists of several subsea fields connected to the Espirito Santo floating production, storage, and offloading vessel.

The first phase of the project began production in 2009 when the Abalone and Ostra fields were connected along with the Argonauta B-West reservoir. The peak production of the first phase was more than 90,000 boe/d in 2010, and is currently producing 35,000 boe/d. Shell started developing Phase 2 in 2010 and connected a fourth reservoir to the Argonauta O-North vessel (OGJ Online, Oct. 15, 2010). At its peak, Phase 2 is expected to produce 35,000 boe/d.

In July, Shell and its partners announced the decision to move forward with the project's third development phase, which will include the installation of subsea-infrastructure at the Massa and Argonauta O-South reservoirs (OGJ Online, July 22, 2013). Phase 3 of the BC-10 project is expected to reach a peak production of 28,000 boe/d. The entirety of the BC-10 project has produced more than 70 million boe since it began production in 2009.

Shell has two FPSOs offshore Brazil: the Espirito Santo at Parque das Conchas and the Fluminense at the Bijupira-Salema fields.

Statoil extends Njord shutdown off Norway

Statoil will extend a suspension of production from Njord oil and gas field in the Norwegian Sea to allow time for reinforcement of the floating steel production facility.

The company halted production on July 27 and emptied the Njord A platform of oil and gas. At the time, it planned to resume output in mid-September.

The suspension was for inspections following reinforcement of the deck framing conducted in the summer of 2012. In that project, the company discovered small deformations in beams and other structural elements. It reinforced some of the deformations and considered others too small to require remediation.

This year the company inspected the entire platform to verify its strength in various weather and load conditions.

"The inspections have not disclosed new damage, but the reanalyses show that some of the deck's structures are too heavily loaded and that reinforcements are necessary before production and drilling can resume," a company statement said.

Njord Production Director Arve Rennemo said, "It already seems clear that we will have to allow for this work to take until the summer of 2014."

Before production ceased in July, the Norwegian Petroleum Directorate estimated Njord this year would produce 10,000 b/d of oil, 980 million standard cu m of natural gas, and 230,000 tonnes of NGL.

The field, on Blocks 6407/7 and 7407/10 about 130 km northwest of Kristiansund, started production in 1997. Water depth is about 330 m.

New Maersk jack up to work offshore Norway

Maersk Drilling has ordered an ultraharsh-environment jack up rig to be used initially under a 5-year contract with BP PLC for plug-and-abandonment work in Valhall oil and gas field in the Norwegian North Sea.

BP Norway, operator with a 35.95313% interest in a combine with Hess Norge (64.04688%), is redeveloping the field, which began production in 1982 (OGJ Online, Jan. 29, 2013). Design life of facilities installed for the redevelopment project is 40 years. Water depth at Valhall is about 70 m.

The new jack up, XL Enhanced 4, will be built at the Daewoo Shipbuilding & Marine Engineering yard in South Korea. Three rigs of the same class, XL Enhanced 1-3, are under construction at the Keppel FELS yard in Singapore. They'll be able to drill to 12,000 m in 150 m of water.

Maersk expects to take delivery of the XL Enhanced 4 in 2016. Total project cost is $650 million.

Maersk estimates the value of its BP contract for the rig at $812 million. BP can extend the contract to a total duration of 10 years.


First commercial North American GTL plant planned

What may be the first commercial small-scale gas-to-liquids (GTL) plant in North America has been announced by Pinto Energy LLC, Houston, to be built near Ashtabula, Ohio, on Lake Erie, northeast of Cleveland.

The Ashtabula GTL project will install a 2,800-b/d plant on 80 acres to convert natural gas from the Utica and Marcellus shales into solvents, lubricants, and waxes, as well as transportation fuels.

Pinto selected Velocys PLC's Fischer Tropsch technology. It said it has agreed to commercial license terms with Velocys and made a down payment towards the FT reactors.

Pinto has also selected Ventech Engineers International LLC as engineering, procurement, and construction contractor. Ventech specializes in design and construction of modular refineries and will build these GTL plants at its Pasadena, Tex., fabrication complex. The modules will be then transported to Ashtabula for installation.

Ventech began designing the Ashtabula plant in April, Pinto reported, and expects to complete the design by yearend. Construction should start in first-half 2014. Pinto expects mechanical completion in late-2015, with start-up in early 2016.

Par Petroleum closes purchase of Hawaii refinery

Hawaii Pacific Energy LLC, a subsidiary of Houston-based Par Petroleum Corp., has finalized its acquisition of Tesoro Hawaii LLC from Tesoro Corp. for $75 million in cash plus market value of net working capital and a contingent earnout payment of up to $40 million.

The acquired assets include the 94,000 b/d Kapolei refinery; storage capacity for 2.4 million bbl of oil and 2.5 million bbl of refined products; and related logistics assets, including five refined product terminals, 27 miles of pipelines, and a single-point mooring terminal. In addition, HPE has rights to sell gasoline through a network of 31 Tesoro-branded retail stations in Hawaii. Tesoro Hawaii, which will be renamed Hawaii Independent Energy LLC, will operate as a separate wholly owned unit of Par Petroleum and will be headquartered in Oahu.

The Kapolei refinery produces gasoline, jet fuel, high-sulfur diesel, and high- and low-sulfur fuel oil. It also is a major supplier of ultralow-sulfur diesel to the Hawaiian Islands. Major process units include crude distillation, vacuum distillation, hydrocracking, naphtha hydrotreating, reforming and visbreaking. The refinery is in the Campbell Industrial Park in Kapolei, 20 miles west of Honolulu.

Tesoro reported its intentions to sell its interest in the Hawaii facility to the Par Petroleum unit in June (OGJ Online, June 19, 2013). Earlier that month, Tesoro closed on its acquisition of BP PLC's 266,000-b/d Carson refinery near Los Angeles for a little more than $1 billion for refining and marketing assets and $1.35 billion for inventory and other working capital (OGJ Online, June 3, 2013; May 17, 2013).

Russian refiner awards gasoline unit contracts

LLC KINEF, a unit of Surgutneftegaz, awarded a construction contract for the 230,000-b/d Kirishinefteorgsyntez refinery at Kirishi in Russia's Leningradsky region to a unit of Foster Wheeler AG's Global Engineering and Construction Group.

The contract is for engineering and material supply for nine fired heaters for the high-octane gasoline compounds production complex at the refinery, which lies about 85 miles southeast of St. Petersburg (OGJ, Feb. 1, 1999, p. 20).

Foster Wheeler's scope of work is scheduled to be completed in first-quarter 2015.


Contracts awarded for Russian Far East LNG

Rosneft and ExxonMobil Corp. have selected CB&I UK and Foster Wheeler Energy as contractors for initial phase front-end engineering and design (FEED) for a proposed Russian Far East LNG project.

Rosneft and ExxonMobil intend to finalize project design by yearend 2014, including FEED for plant, associated facilities and gas pipeline, as well as engineering studies and environmental impact assessment. CB&I UK and Foster Wheeler will be awarded separate contracts.

Scope of work covers a conceptual project including final details for the plant site, gas liquefaction technology, and construction method. Following submission by the companies of concepts and design, said the joint announcement, Rosneft and ExxonMobil will evaluate the companies' work product before awarding a contract for the second-phase FEED.

Plant design capacity is to be 5 million tonnes/year with possible expansion. The liquefaction plant will receive natural gas from Rosneft's Far East and Sakhalin gas reserves.

Earlier this year, Russia's Gazprom approved investment in another Far East LNG project, the Vladivostok LNG to be built on the Lomonosov Peninsula in Perevoznaya Bay.

Plans call for three 5-million tpy trains and are part of Gazprom's Eastern Gas Program integrating field development and transportation projects. The first Vladivostok train is to start up in 2018, receiving gas from the Sakhalin, Yakutia, and Irkutsk production centers (OGJ Online, Feb. 25, 2013).

Satorp ships first products from Jubail complex

Saudi Aramco Total Refinery & Petrochemicals Co. (Satorp) started shipments of refined products from its 400,000 b/d full-conversion refinery complex at Jubail, Saudi Arabia. Satrop, a joint venture of Saudi Aramco 62.5% and Total SA 37.5%, reported earlier this year that the refinery was nearing completion (OGJ Online, Apr. 25, 2013). Mohammed J. Al-Hammad, executive director of the project, said at that time that all units were expected to be in operation by November.

Aramco loaded a first shipment of heavy fuel oil at the Jubail oil terminal on Sept. 23. Total will left a cargo of diesel for the next shipment, slated for later this month.

Satorp has been producing commercial-grade fuel oil and diesel since Sept. 13, the venture said. Crude is being processed into naphtha, diesel, and heavy fuel oil in the first atmospheric distillation unit on line.

Commissioning will be a "months-long process," with units starting up in stages, the venture said, due to the facility's size and complexity. "As more conversion units come on stream, the products will undergo more complex processes and the amount of crude oil refined will ramp up," the venture said.

Construction on Jubail started in April 2010, and all units are slated to be operational by yearend.

The $14 billion refinery will process Arab heavy crude from nearby Safaniya and Manifa fields and yield petrochemicals as well as high-quality fuels. It will be Saudi Arabia's first producer of petroleum coke and paraxylene.

PHMSA awards safety research grants to schools

Eight US universities will receive $792,685 for oil and gas pipeline safety research, the US Pipeline and Hazardous Materials Safety Administration announced. The grants came under the US Department of Transportation agency's new Competitive Academic Agreement Program (CAAP).

"Safety is our top priority, and we're committed to investing in innovative technologies that will strengthen our nation's pipeline system well into the future," US Sec. of Transportation Anthony Foxx said.

PHMSA said it created the program to introduce graduate and PhD students to common pipeline integrity challenges and demonstrate how their engineering or technical backgrounds might contribute to the field of pipeline safety.

CAAP is similar to other federal programs designed to educate and lure more applicants in technical disciplines with lower federal recruitment rates, it noted. The awards are partially matched by nonfederal funding.

PHMSA is looking for research in four primary technical areas: pipeline corrosion; pipeline defect detection; modeling defects, loads in pipelines; and modeling anomalies and repairs for corroded pipe.