OGJ Newsletter

Oct. 3, 2016
International news for oil and gas professionals


InterOil shareholders agree to ExxonMobil offer

Shareholders of Singapore-based InterOil Corp. have overwhelmingly voted to approve ExxonMobil Corp.'s $2.5-billion bid for the company at a special meeting on Sept. 19. More than 80% of shareholders voted in favor of the deal.

InterOil Chairman Chris Finlayson thanked shareholders for their support for what he called a value-creating transaction.

Finlayson said the deal will deliver shareholders a material and immediate premium, a potential direct cash payment based on the Elk-Antelope gas-condensate field resource certification in Papua New Guinea, and exposure to future value through ownership of ExxonMobil shares.

The transaction is now expected to be completed by the end of this month.

InterOil intends to seek a final order with respect to the plan of arrangement at a hearing in the Supreme Court of Yukon scheduled for Sept. 27.

InterOil's major asset is Elk-Antelope field in the eastern highlands of Papua New Guinea along with surrounding exploration permits covering about 16,000 sq km.

The gas resources are the potential feedstock for the proposed Papua LNG project, which is operated by Total SA. ExxonMobil now joins Total and its fellow joint venturer Oil Search Ltd. in appraising and planning the development that calls for a pipeline from the fields to an LNG plant at Caution Bay about 20 km from Port Moresby.

The plant is notionally next door to the existing ExxonMobil-operated Papua LNG plant and there will be synergies with the two projects. ExxonMobil and Oil Search are participants in both projects.

Maersk splits oil, transport businesses

A.P. Moller-Maersk AS, Copenhagen, is separating its transportation and oil businesses and starting a 2-year strategic review of the latter. In a press statement the firm said its "main growth focus" will be "delivering best in class transportation and logistics services as an integrated transport and logistics company."

Oil and oil-related services, the statement said, "will require different solutions for future development, including separation of entities individually or in combination from AP Moller-Maersk AS in the form of joint ventures, mergers, or listing."

The company said it "aims to find solutions for the oil and oil-related businesses within 24 months."

A new energy division will comprise Maersk Oil, Maersk Drilling, Maersk Supply Service, and Maersk Tankers.

The statement said Maersk Oil will change strategy to focus "in fewer geographies to gain scale in basins, particularly in the North Sea," and "aim to strengthen its portfolio through acquisitions or mergers."

Maersk Oil now has interests in Algeria, Angola, Brazil, Denmark, Ethiopia, Greenland, Iraqi Kurdistan, Kazakhstan, Kenya, Norway, Qatar, the UAE, the UK, and the US.

The operating company "will mature existing key development projects while keeping exploration activities and expenses at a low level," the statement said. Investments in sanctioned "strategic projects" will continue.

Future investment in Maersk Drilling, Maersk Supply Services, and Maersk Tankers "will be limited," the firm said.

Claus V. Hemmingsen will become chief executive officer of the new energy division and group vice-CEO of A.P. Moller-Maersk. Jakob Thomasen, now CEO of Maersk Oil, will leave the company in November.

OGUK: Fresh investment vital to UKCS

Lack of capital investment and low exploration activity are among the major challenges for the UK oil and gas industry, according to Oil & Gas UK in its Economic Report 2016.

"The UKCS is in urgent need of fresh investment to boost exploration and drive activity, particularly for the supply chain," said Deirdre Michie, OGUK's chief executive. "Exploration has fallen to record lows and little new investment has been approved in 2016, and 2017 looks no better."

In the past 2 years, about 120,000 jobs have been lost, and the supply chain has seen an average 30% fall in revenues.

On the positive side, production was up 10.4% in 2015-the first increase in 15 years. And the cost of extracting oil or gas from the UKCS has dropped 45% since 2014.

"Now it is time for the UK and Scottish governments to reinforce their efforts to promote the UKCS, nationally and internationally, as an attractive investment with world leading capability from front end exploration to late life operations," Michie said.

Exploration & DevelopmentQuick Takes

Jordanian firm agrees to buy Leviathan gas

Partners in the Leviathan natural gas project offshore Israel have signed an agreement to supply as much as 45 billion cu m of gas to a Jordanian power company.

The deepwater project recently received development approval of the Petroleum Commissioner of Israel's Ministry of National Infrastructure, Energy, and Water Resources and awaits permitting and a final investment decision (OGJ Online, June 2, 2016).

NBL Jordan Marketing Ltd., a wholly owned subsidiary of the Leviathan partners, will supply the gas at the Jordan-Israel border to National Electric Power Co. of Jordan.

The agreement is for 15 years unless shipments reach the maximum volume earlier.

Delek Group, whose Delek Drilling LP and Avner Oil Exploration LP subsidiaries hold interests in Leviathan, said total revenues under the agreement are estimated at $10 billion. The agreement includes an annual take-or-pay provision. It's subject to approvals of Israeli and Jordanian authorities and the signing of transportation agreements.

Two state-owned Jordanian companies, Arab Potash and Jordan Bromine Co., have agreements to buy gas from Tamar field, which came on stream east of Leviathan in 2013 (OGJ Online, Feb. 20, 2014).

Noble Energy Inc., which operates Leviathan field with a 39.66% interest, recently said it has signed contracts with Israeli buyers for 100 MMcfd of Leviathan gas.

Delek Drilling and Avner Oil Exploration hold 22.67% interests each. Ratio Oil Exploration (1992) LP holds 15%.

Partners see 3 tcf of OGIP at Great Nooros area

The Baltim South West 2X appraisal well, drilled in the Nile Delta, encountered an 86-m net gas column in two sand layers of Messinian age with excellent reservoir characteristics.

The results have prompted partners Eni SPA and BP PLC to upgrade the potential of Baltim South West field to 1 tcf of gas in place. Potential of the Great Nooros area, which encompasses both Baltim South West and Nooros fields, has been lifted to 3 tcf of gas in place.

Eni in June reported the Baltim SW-1 exploration well reached a total depth of 3,750 m, encountering 62 m of net gas pay in high-quality Messinian sandstones (OGJ Online, June 9, 2016). Baltim South West field is 12 km from the Egyptian coastline in 25 m of water.

Eni and BP are reviewing development options for the latest discovery. As for Nooros, the plan is to maximize synergies with existing systems in the area in accordance with Eni's nearfield exploration strategy. Production from Nooros reached 700 MMcfd of gas 13 months after the discovery, Eni and BP said this month. Eni unit IEOC operates Baltim South with 50% interest while BP holds the rest. Operator Petrobel is a joint venture of IEOC and state partner EGPC.

Roc-2 well confirms gas, liquids off W. Australia

The Quadrant Energy Ltd.-operated Roc-2 appraisal well, drilled offshore Western Australia in permit WA-437-P, has recovered condensate-rich gas samples from several zones.

A full suite of wireline logs has been run resulting in the interpretation of a 30-m net reservoir and 60 m of gross gas and condensate charged sands intersected. There also has been excellent quality reservoir of 100-350 md permeability calculated from downhole sampling rates.

Wireline cores are now being acquired, an operation expected to take a week.

Another 10 days will then be required to install tubes and valving preparatory for flow-testing the well.

Quadrant plans to perforate the well across the uppermost 35-m sand interval and open the valves for a controlled test for about a week. Results of the well test are expected in 3 weeks' time.

Overall, Roc-2 has now confirmed the presence of a high-quality reservoir within the Calley formation, which is almost fully saturated with gas and condensate. Porosities of up to 15% were observed, the average being about 9%.

Estimated liquid content within the gas is similar to Roc-1 at about 50-60 bbl of condensate per MMcf of gas. Permeability is also similar to Roc-1.

However pressure data obtained from the wireline logs did not correlate with Roc-1 data and it seems that Roc-1 and Roc-2 are likely to be separate structures in all or at least some of the sands. Nevertheless they are all within the same greater structural closure.

Quadrant has 80% interest with Carnarvon Petroleum Ltd., also of Perth, with 20%.

Production license sought for Galt prospect

Junex Inc. has applied with Quebec's government for a 20-sq-km production lease on its Galt oil prospect in eastern Quebec. The company's application focuses on the central portion of the Galt structure, which was mapped from data in the company's 37-sq-km 3D survey conducted in 2015.

As early as 2012, Junex said its Galt-4 stepout well 20 km west of Gaspe encountered an oil column from 760-1,757 m at a total depth of 2,000 m (OGJ Online, Sep. 25, 2012). The Galt-4 wellsite is 2.5 km west of the Galt-1, 2, and 3 wells. At the time, Junex said the Galt-4 confirmed the extension of the Galt structure, and the well was temporarily suspended in view of drilling horizontally into the hydrothermal breccia encountered in the Devonian Forillon formation.

Junex Pres. and CEO Peter Dorrins said the application for an oil production lease was the first in Quebec's history, to the company's knowledge. The company has held a gas production lease on the 2-sq-km area surrounding its Galt-1 well since 2003 where it operated a pilot project using compressed natural gas transported by truck to local customers.

Netherland, Sewell & Associates Inc. has estimated Galt field to contain 260.2 million bbl of oil in place.

Drilling & ProductionQuick Takes

RAK brings gas fields on stream off Ivory Coast

RAK Petroleum PLC said Marlin and Manta gas fields offshore the Ivory Coast were brought on stream following completion of a 4-year, $850-million development by operator Foxtrot International LDC, Abidjan, on Block CI-27. Production from the two fields follows installation of a platform in 110 m of water and the drilling of one exploration and seven production wells.

Gas production from Block CI-27 reached an average of 170 MMcfd during August, accounting for more than 75% of the Ivory Coast total gas production. Oil and condensate production averaged 3,000 b/d.

In 2015, gas production from the block averaged 145 MMcfd while liquids production averaged 1,140 b/d.

The block's first platform has operated since 1999 processing gas and liquids from Foxtrot and Mahi gas fields (OGJ Online, Mar. 9, 2015).

Foxtrot International said it has identified significant gas reserves and contingent resources on Block CI-27 across four producing fields, including lower and upper Turonian intervals in Marlin field. A reserves certification study by an independent petroleum engineering firm is expected to be completed shortly, RAK Petroleum said.

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 (ENERCI).

Russia's northernmost onshore oil field flowing

OJSC Rosneft reported the startup of production from Vostochno-Messoyakha, Russia's northernmost onshore oil field. The field lies on the Gydan Peninsula in the Taz region of Yamalo-Nenets autonomous district, 340 km north of Novy Urengoy. The nearest settlement, Tazokvsky village, is 150 km away.

The field has 51 active oil wells and a 98-km pipeline to the Zapolyarye-Purpe main pipeline. Rosneft said directional drilling was used for underwater crossings of the Indikyakha and Muduyakha rivers.

Field infrastructure was built within 3 years. Two power stations cover field demand for electricity.

The field is being developed by Messoyakhaneftegas, owned by Rosneft and PJSC Gazprom Neft.

Rosneft said recoverable oil and condensate reserves exceed 340 million tonnes.

Via video linkup, Russian President Vladimir Putin gave the command to start production. Igor Sechin, Rosneft chief executive officer, told Putin that Suzan field, 150 km away, will be ready for startup this month.

PDVSA plans Orinoco drilling, output hike

State-owned Petroleos de Venezuela SA (PDVSA) says it has let contracts for the drilling of 480 wells in a program aimed at raising production in Venezuela's Orinoco heavy oil belt by 250,000 b/d. Investment in the 30-month program, it says, will be $3.2 billion.

"The international companies Schlumberger and Horizontal Well Drillers, as well as Venezuela' Y&V, were selected after a worldwide tender," PDVSA said in a statement. "They will have the support and operational expertise of Halliburton and Baker Hughes for specific project activities; 18 drilling rigs will be available."

Horizontal Well Drillers, Purcell, Okla., confirmed it has a contract to drill as many as 191 shallow, horizontal wells in the Orinoco belt.

The company said Schlumberger's contract is for 80 wells, and Y&V Group's is for 100 wells.

PDVSA said the participating companies will provide $700 million of financing.

The company's joint ventures with international companies-PetroVictoria, PetroCarabobo, and Petroindependencia-will participate in the program, it said.


Moody's sees another tough refining year

Refiners face another tough year in 2017, predicts Moody's Investors Service.

Citing forecasts by the US Energy Information Administration, the firm says global demand for gasoline and distillate products will grow only modestly and "will continue to lag the anticipated high available supplies."

Across North America, Europe, the Middle East, and Africa, the refining industry's earnings before interest, taxes, depreciation, and amortization (EBITDA) will decline by more than 15% in the next 12-18 months as crack spreads-the differences between crude costs and product values-remain thin, Moody's predicts in a research note.

"Record gasoline produced from 2015 to mid-2016 amid low crude prices, along with excess inventories, has outpaced gasoline and distillate demand growth from consumers and industrial customers in every major world economy," the firm says.

US grant to support IOC's refinery revamp program

The US Trade and Development Agency (USTDA) has awarded a grant to India's public-sector refining firm Indian Oil Corp. Ltd. (IOC) to fund a feasibility study that will recommend technology options for the ongoing modernization of the operator's nine refineries.

The grant comes in support of IOCL's efforts to increase operational efficiency, reduce emissions, and expand production of cleaner fuels at its refineries in order to meets India's more-stringent environmental standards, USTDA said.

The grant award follows IOC's participation in a USTDA reverse-trade mission that brought Indian energy officials to the US for meetings and site visits with US companies focused on refinery modernization solutions, the agency said.

The feasibility study will include a market, technical, economic, and financial analysis of advanced technologies to help IOC identify solutions for converting petcoke byproducts from its refineries into cleaner chemical products and fuels, IOC said.

US firms interested in the opportunity to conduct the USTDA-funded feasibility study are invited to submit proposals to the Federal Business Opportunities' (FBO) web site following FBO's forthcoming formal announcement of the opportunity, USTDA said.

Counting its majority interest in subsidiary Chennai Petroleum Corp. Ltd.'s two refineries, IOC holds a combined 80.7 million tonnes/year of refining capacity with control of 11 of India's 23 refineries, including: Digboi, 650,000 tpy; Guwahati, 1 million tpy; Koyali, 13.7 million tpy; Barauni, 6 million tpy; Haldia, 7.5 million tpy; Mathura, 8 million tpy; Panipat, 15 million tpy; Bongaigaon, 2.35 million tpy; Paradip, 15 million tpy; Chennai, 10.5 million tpy; and Narimanam, 1 million tpy.

Neste advances maintenance at Porvoo refinery

A process upset at Neste Corp.'s 10.5 million-tonne/year Porvoo refinery in the Kilpilahti Industrial Area, about 20 miles east of Helsinki, Finland, has led the operator to advance planned maintenance activities on diesel production line 4 (PL4) ahead of its previously scheduled spring-2017 turnaround.

The decision to expedite the PL4's 6-week turnaround followed a recent process disruption that led to catalyst coking in the production line, the company said.

Neste did not disclose details regarding either the precise nature of the disruption or the scope of work to be executed during the upcoming turnaround.

While the rescheduled maintenance will not impact diesel deliveries to customers, Neste said it does expect the turnaround to reduce its comparable EBIT by about €30 million, most of which will be booked during this year's fourth quarter.

Neste continues to proceed with its €500-million investment plan to improve the competitiveness of its overall refining operations by integrating its 3 million-tpy Naantali refinery with the Porvoo refinery so that the sites will operate as a single Finnish refining system (OGJ Online, Mar. 23, 2015).

In June 2015, Neste completed a 2-month, €100-million planned maintenance turnaround at the Porvoo refinery, which alongside standard 5-year maintenance to ensure safe and reliable operations, also a series of projects related to the refinery's future development, including startup of a 600,000-tpy isomerization unit (OGJ Online, Aug. 5, 2015; Feb. 25, 2014)

Construction also remains under way on a €200-million solvent deasphalting (SDA) feedstock pretreatment unit and asphaltene pelletizer in the area of PL4 at Porvoo, Neste said in its 2015 annual report.

Due for startup in 2017, the SDA unit will enable Porvoo to decrease its output of heavy fuel oil and increase the production of higher-quality fuels such as diesel, among others, by decreasing the content of asphaltenes present in crude feedstock processed at the refinery.


Atlantic Coast Pipeline hires construction contractor

Atlantic Coast Pipeline LLC, which has proposed a 600-mile, 1.5-bcfd natural gas transmission pipeline to bring Marcellus-Utica shale gas to Virginia and North Carolina, has signed a construction contract with Spring Ridge Constructors LLC, a joint venture of pipeline construction companies Price Gregory International Inc., a Quanta Services Inc. company; US Pipeline Inc.; SMPC LLC; and Rockford Corp., a Primoris Services Corp. company.

Pending approval by the US Federal Energy Regulatory Commission, the Atlantic Coast Pipeline (ACP) would extend from Harrison County, W.Va., southeast through Virginia with a lateral extension to Chesapeake, Va., and then south through eastern North Carolina to Robeson County. If approved, construction is scheduled to begin in fall 2017.

FERC in early August issued a notice of schedule, which established the timeline for the remainder of the project's federal environmental review process. Based on FERC's schedule, ACP expects to receive a FERC certificate in late summer or fall 2017, with construction beginning shortly thereafter. ACP anticipates completing construction and bringing the pipeline into service in late 2019. ACP says it is working with its contractors to evaluate the possibility of bringing on more crews and working on more simultaneous spreads in order to complete construction sooner and expects to finalize this analysis over the next few months.

Atlantic Coast Pipeline LLC consists of four US energy companies: Dominion, Duke Energy, Piedmont Natural Gas Co. Inc., and Southern Co. Gas. The joint venture partners expect the pipeline to cost $4.5-5 billion.

Sunoco Logistics buys Vitol Permian system

Sunoco Logistics Partners LP has bought Vitol Group's Permian basin crude oil system for $760 million plus working capital.

The system includes a crude oil terminal in Midland, a crude gathering and mainline pipeline system, and crude inventories related to Vitol's purchasing and marketing business.

The system includes Vitol's 50% interest in SunVit Pipeline LLC connecting the Midland Terminal with Sunoco Logistics' Permian Express 2 pipeline. Sunoco Logistics now owns all SunVit membership interests.

OMV to sell 49% of Austrian gas unit

OMV AG has agreed to sell a 49% interest in wholly owned Gas Connect Austria GMBH (GCA) to a combine of the European insurance group Allianz and Snam SPA.

Total cash consideration is €601 million, which includes a €147-million adjustment of shareholder debt.

GCA operates a 900-km high-pressure natural gas pipeline network in Austria. Total throughput last year was 152 billion m of gas.