OGJ Newsletter
GENERAL INTEREST — Quick Takes
Total to buy $2.2 billion in Petrobras assets
Total SA has agreed to acquire $2.2-billion in upstream and downstream assets from Petroleo Brasileiro SA (Petrobras) as part of the firms' strategic alliance announced in October 2016.
Total will partner with Petrobras in two presalt licenses in the Santos basin, taking 22.5% interest in the BMS-11 license, which includes the Iara fields that are currently under development; and 35% interest and operatorship of the BMS-9 license, which includes Lapa field that recently started production.
The firms say they will jointly develop solutions for long subsea tie-backs, reservoirs with high carbon dioxide content, and digital geosciences data management. Total also will offer Petrobras the option of taking 20% stake in the Perdido Belt deepwater exploration Block 2 recently awarded off Mexico.
Total also will acquire some regasification capacity in the Bahia LNG terminal and 50% interest in two cogeneration plants in the Bahia area. The deal includes pipeline transport capacity that will allow Total to supply gas to the plants.
Total and Petrobras jointly participate in 19 E&P consortiums worldwide. In Brazil, the firms are partners in development of the giant Libra field, which is the first production sharing contract in the Brazilian presalt Santos basin.
Outside Brazil, Petrobras and Total are partners on Chinook field in the US Gulf of Mexico, the deepwater Akpo field in Nigeria, and the gas fields of San Alberto and San Antonio-Itau in Bolivia, as well as in the Bolivia-Brazil gas pipeline.
Anadarko parts with Marcellus assets for $1.24 billion
Anadarko Petroleum Corp. has agreed to sell its operated and nonoperated upstream assets and operated midstream assets in the Marcellus shale of north-central Pennsylvania to Alta Marcellus Development LLC, a wholly owned subsidiary of Houston-based Alta Resources Development LLC, for $1.24 billion.
The deal includes 195,000 net acres. At the end of third-quarter 2016, sales volumes from the properties totaled 470 MMcfd. Excluded from the deal are the Marcellus midstream assets owned by Western Gas Partners LP.
"With this transaction, we have announced or closed monetizations totaling well in excess of $5 billion in 2016, while principally focusing Anadarko's US onshore activities on our world-class oil-levered assets in the Delaware and DJ basins," said Al Walker, Anadarko chairman, president, and chief executive officer.
Anadarko in November sold its Carthage upstream and midstream assets in East Texas to Castleton Commodities International LLC for $1 billion. The firm this month also closed on its $2-billion purchase of Freeport McMoRan Oil & Gas's deepwater Gulf of Mexico assets.
Anadarko confirmed that it added 2 rigs in each of its Delaware and DJ basin positions early in fourth-quarter 2016. The firm plans to further increase activity in each area, expecting to end first-quarter 2017 with 14 operated rigs in the Delaware and 6 in the DJ, compared with 7 and 1 in the basins, respectively, at the end of third-quarter 2016.
Haynesville assets net $465 million for Chesapeake
Chesapeake Energy Corp. has agreed to sell a portion of its acreage and producing properties in its Haynesville shale operating area in northern Louisiana to an affiliate of Dallas-based Covey Park Energy LLC for $465 million.
The sale includes 41,500 net acres and 326 wells currently producing 50 MMcfd of gas net to Chesapeake. The deal is expected to close in this year's first quarter.
The first deal comprised Chesapeake agreeing to sell 78,000 net acres with 250 wells producing 30 MMcfd of gas net to Chesapeake to Indigo Minerals LLC, a Houston-based firm created in 2006 that's backed by Martin Cos., Yorktown Partners LLC, Trilantic Capital Partners LLC, and Indigo management.
Chesapeake says it has now exceeded its 2016 asset sales goal by $500 million, bringing total gross proceeds from divestitures either signed or closed in the year to $2.5 billion.
Covey Park was formed in June 2013 with $300 million of financial sponsorship from energy and resources private equity firm Denham Capital Management LP. In November, Covey Park said it agreed to acquire 90,000 net acres with average net production of 35 MMcfd in Panola, Nacogdoches, and San Augustine counties in Texas; and DeSoto, Bossier, and Sabine Parishes in Louisiana from an undisclosed seller.
At the time, the firm said it owned 321,000 gross and 218,000 net acres of leasehold in Texas and Louisiana, with expected fourth-quarter net production of 325 MMcfd and total proved reserves of 2.5 tcf.
Obama signs RESPONSE bill into law
US President Barack Obama has signed into law S. 546, which aims to provide first responders the resources and tools to handle hazardous spills from crude-oil train derailments, said the measure's sponsor, US Sen. Heidi Heitkamp (D-ND).
The Railroad Emergency Services Preparedness, Operational Needs, and Safety Evaluation (RESPONSE) bill became law just days before the third anniversary of the Dec. 30, 2013, derailment of a crude-oil train in Casselton, ND, which prompted her to introduce it on Feb. 24, 2015, Heitkamp said.
She wanted to make certain that first responders are prepared to handle the transportation of crude oil on the rails, especially since many of them in rural communities like Casselton are volunteers, the senator said.
The law will establish a public-private council that combines emergency responders, federal agencies, and leading experts to review training and best practices for first responders. This council-co-chaired by the Federal Emergency Management Agency and the Pipeline & Hazardous Materials Safety Administration-will provide Congress with recommendations on how to address first responders' safety needs with increased railway safety challenges so they can best protect communities across the country, Heitkamp said.
Exploration & Development — Quick Takes
Anadarko gulf tie-back program adds discoveries
Anadarko Petroleum Corp. encountered more than 210 ft of net oil pay in multiple Miocene-aged reservoirs with Warrior exploration well, which was drilled 3 miles from K2 field in the Gulf of Mexico on Green Canyon Block 562. Anadarko, the well's operator, expects to tie-back the Warrior discovery to its Marco Polo production facility on Green Canyon Block 608.
Anadarko reported the net pay with no other details related to the discovery. The company holds 65% working interest in the well. At its Phobos appraisal well in the Sigsbee Escarpment Blocks 39 and 40, the company has encountered more than 90 ft of net oil pay in Pliocene-aged reservoir similar to nearby Lucius field. This secondary accumulation will be evaluated for tie-back to Anadarko's Lucius facility, which is 12 miles north of Phobos. Drilling is ongoing toward the primary Wilcox formation objective, Anadarko said. The operator owns 100% working interest at Phobos.
The operator's fifth production well at its Heidelberg field has encountered the reservoir sand with more than 150 ft net oil pay to date. The well will be completed once drilling operations finish, and Anadarko expects to bring the well on production early in 2017. Heidelberg is in 5,260 ft of water 130 miles off Louisiana.
Gazprom Neft makes Serbian discovery
A new deposit in Serbia's Pannonian oil and gas basin may contain recoverable reserves of 432,000 tonnes, according to Russia's PJSC Gazprom Neft. The Idos-X-4 well was drilled to the Neogene-aged formation at a depth of 2,268-2,287 m in the Idos-Sever (Northern Idos) field.
The well was drilled by Serbia's Naftna Industrija Srbije (NIS Oil Co.) with plans based on its 3D seismic interpretation. The well was completed with an initial flow rate of 27.8 tonnes/day. Idos-Sever field is under pilot development and is expected to begin production in 2017, the company said.
Gazprom's Head of Geological Exploration and Resource Base Development Alexei Vashkevich said, "The challenge for discovering new deposits in traditional oil and gas areas is related to the small size of these deposits." The Pannonian basin contains highly complex geological structures formed through unconventional traps. Recent advancements is seismic operations have improved Serbian drilling rates to 100% in 2015 from 83% in 2014, Vashkevich said.
Gazprom acquired a 51% stake in Serbia's NIS for €400 million in 2009. The acquisition led the way for NIS to begin a long-term campaign to revamp its refining facilities. In September 2016, NIS completed a major turnaround at its 4.8 million-tonne/year Pancevo refinery.
Three blocks awarded offshore Cyprus
Cyprus's Ministry of Energy, Commerce, Industry, and Tourism has awarded Blocks 6, 8, and 10 in the country's exclusive economic zone to four international firms.
Exploration Block 6 was awarded to a partnership of Eni Cyprus Ltd. and Total E&P Cyprus BV. Eni will be operator with 50% stake.
Exploration Block 8 was awarded to Eni Cyprus, which will hold 100% interest.
Exploration Block 10 was awarded to a partnership of ExxonMobil Exploration & Production Cyprus (Offshore) Ltd. and Qatar Petroleum International Upstream OPC. Operatorship and distribution of interests in that block were not reported.
Applicants not receiving bids were Cairn Energy PLC and Delek Group Ltd. Eni says the blocks "have geological affinities" with those successfully explored by Eni in the neighboring areas offshore Egypt, where supergiant Zohr gas field was discovered.
Eni already has interests in Blocks 2, 3, and 9 following the 2nd international bid round in 2012, and it holds three exploration blocks on the Egyptian side: Shorouk, where Zohr is located; Karawan, where Eni has 50% stake; and North Leil, where Eni holds 100% interest.
BOEM schedules central gulf lease sale for March
The US Bureau of Ocean Energy Management will livestream central Gulf of Mexico Lease Sale 247 at 9 a.m. CST on Mar. 22.
The 12th and final gulf sale under the Obama administration's Outer Continental Shelf 2012-17 leasing program offers more than 48 million acres offshore Louisiana, Mississippi, and Alabama, encompassing all available unleased areas in the central planning area (CPA). It covers 9,118 blocks 3-230 miles offshore in 9-11,115 ft of water.
The previous 11 sales held in the current 5-year program netted more than $3 billion, BOEM says.
Activity in the last central gulf auction, Lease Sale 241 held in March 2016, was down markedly compared with the previous year's auction, drawing 148 bids on 128 blocks from 30 companies, with apparent high bids totaling $156 million (OGJ Online, Mar. 23, 2016). Shell Offshore Inc. led all firms with apparent high bids totaling $24.9 million.
Drilling & Production — Quick Takes
Libya expects more oil output after line reopening
Libya's National Oil Corp. said an oil pipeline that had been shut down for more than 2 years has reopened in western Libya.
NOC estimated the reopening of the pipeline along with increasing production from two oil fields could supply an additional 270,000 b/d of crude oil within 3 months. The reopened oil fields were Sharara and El Feel.
Libya's current production fell to less than 300,000 b/d at times during 2016. Analysts noted that it remains uncertain if Libya will get additional oil to the world market. The nation's oil production fell from a peak of more than 1.6 million b/d after Moammar Gadhafi death in 2011.
Increased Libyan production could complicate an attempt by the Organization of Petroleum Exporting Countries attempt to support oil prices. OPEC plans to cut cartel production by 1.2 million b/d starting in January. Libya and Nigeria were exempted from that agreement.
Brent crude oil prices fell on the London market after NOC's announcement on Dec. 21, 2016.
The fields could add 175,000 b/d to Libya's output within 1 month, NOC estimated, adding that volume could grow to 270,000 b/d in 3 months. OPEC reported Libya produced almost 575,000 b/d during November.
NOC Chairman Mustafa Sanallah issued a news release saying the pipeline and fields were reopened without any "payoffs" or "backroom deals." Sanallah said, "For the first time in nearly 3 years all our oil can flow freely. I hope this marks the end of the use of blockade tactics in our country."
BP, SOCAR sign LOI for ACG field development
State Oil Co. of the Republic of Azerbaijan (SOCAR) and BP PLC-operated Azerbaijan International Operating Co. (AIOC) have signed a letter of intent for future development of Azeri-Chirag-Gunashli (ACG) field off Azerbaijan in the Caspian Sea.
The agreement will cover development of the field until 2050 and "will add significant resource development potential to the middle of the century," the companies said. ACG currently produces 620,000 boe/d.
In addition to BP, shareholders in AIOC are Chevron Corp., INPEX Corp., Statoil ASA, ExxonMobil Corp., Turkish Petroleum Corp. (TPAO), Itochu Corp., and ONGC Videsh Ltd.
The companies say the agreement sets key commercial terms for future ACG development and enables the parties to conclude negotiations and finalize fully-termed agreements in the next few months.
ACG is a supergiant field 100 km east of Baku covering 432 sq km. It lies in 120-170 m of water. Reservoir depth is 2,000-3,500 m.
The existing ACG production-sharing agreement was signed in September 1994 for 30 years. Oil production from the field began in November 1997. To date the field has produced more than 3 billion bbl of oil with around $33 billion of investment.
There are six producing platforms on ACG, linked with an onshore terminal in Sangachal near Baku. From the terminal ACG oil is exported to market primarily by the Baku-Tbilisi-Ceyhan oil export pipeline and the Western Route Export Pipeline to Supsa.
ExxonMobil unit lets FPSO contract for Liza field
Esso Exploration & Production Guyana Ltd. (EEPGL) has let contracts to SBM Offshore NV for a floating production, storage, and offloading vessel for Liza field offshore Guyana.
SBM Offshore will perform front-end engineering and design for the FPSO, and, subject to the project's final investment decision in 2017, will construct, install, and operate the vessel.
The ExxonMobil Corp. unit submitted an application for a production license and its initial development plan for Liza field in early December. The development plan submitted to the Guyana Ministry of Natural Resources includes development drilling, operation of the FPSO, and subsea, umbilical, riser, and flowline systems.
Liza field lies on the 27,000-sq-km Stabroek block 193 km offshore. Its potential resource estimate is more than 1 billion boe. EEPGL is operator with 45% interest in Stabroek.
PROCESSING — Quick Takes
BP buys outlets in Australia for $1.8 billion (Aus.)
BP PLC has bought Australian retailer Woolworths' national chain of retail outlets for $1.8 billion (Aus.). The deal includes 527 convenience sites and 16 development sites in Australia.
Woolworths has previously been supplied by Caltex Australia, a company that was also in talks to buy the outlets outright.
Once the deal is completed in the next 12 months, Caltex's market share in Australia will slip to about 18% while BP, which already has 15% on its own brand name, will rise to 39% overall and be a clear market leader.
An important part of the deal involves the operation of convenience stores at the outlets. BP will trial the Woolworths Metro format at its own service stations before committing to roll it out across the chain.
The BP-Woolworths deal requires approval from the Foreign Investment Review Board and the Australian Competition and Consumer Commission (ACCC). Given the new BP dominance, some analysts tip that the ACCC will tell BP to divest some of the stations to third parties.
The Woolworths fuel business has a revenue of about $4.6 billion (Aus.)/year, which led to a pretax profit of $117 million in the 2015-16 financial year.
Woolworths is in need of the cash from the sale to reduce debt. The company is attempting to streamline its operations to try to revive declining earnings.
Caltex will continue to supply the Woolworths retail outlets until the BP deal is completed. Caltex has launched two acquisitions of its own in the last few months: Victorian retailer Milemaker Petroleum for $95 million (Aus.) and Gull New Zealand for $340 million (NZ).
Shell divests Australian aviation fuels unit
Royal Dutch Shell PLC's Australian arm, based in Melbourne, has made an arrangement with Viva Energy Australia Pty. Ltd. to sell its local aviation fuels division for $250 million.
The deal comes 2 years after Shell sold its other Australian refining and fuels businesses to Viva for $2.9 billion in 2014. It has also heightened speculation that the major is planning to sell out of its remaining 13.3% stake in Perth-based upstream company Woodside Petroleum Ltd.
The aviation sale is slated to close by mid-2017. The arrangement is similar to the earlier downstream deal in that Viva will still use the Shell brand for the aviation refueling business under a licensing agreement.
Viva is owned by European commodity trader Vitol and Abu Dhabi interests. The company sees the aviation deal as highly complementary to its existing downstream activities.
The arrangement will enable Viva to expand into major Australian airports as well as build supply to the smaller regional airfields and provide fuel direct to customers.
The Shell sellout of its Woodside interest is now widely tipped to occur early in 2017 given that Shell has already said its stake has been reclassified as nonstrategic. Analysts expect the interest will be divested as a block sale to investors.
Shell says that its direct interest in offshore Western Australian operations-the North West Shelf domestic gas-LNG project, Gorgon domestic gas-LNG and Prelude Floating LNG-will remain in place.
Caltex makes first move into New Zealand
Sydney-based fuel importer and refiner Caltex Australia Pty. Ltd. has made its first move into New Zealand with the acquisition of importer and distributor Gull New Zealand for $340 million (NZ).
The deal provides Caltex with a fuel import terminal at Mount Maunganui on the North Island as well as the company's retail outlets throughout the North Island.
The move follows Caltex's purchase last month of Victorian retailer Milemaker Petroleum for $95 million (Aus.) that gave Caltex control of 46 service stations in Victoria, Australia.
Caltex closed its Kurnell refinery in Sydney several years ago and has established a major fuel import facility on that site. It has also established a buying and trading arm in Singapore to supply its Australian operations.
The New Zealand acquisition of Gull increases its infrastructure and enhances the company's retail fuel supply through a low-risk entry into a new market.
Gull operates 77 retail sites and operates a further 22 supply sites. The company sells about 300 million l./year of transport fuel, equivalent to 5% of the New Zealand market.
The Mount Maunganui terminal has a total storage capacity of 90 million l. Caltex said it will retain the Gull brand, management and employees.
TRANSPORTATION — Quick Takes
First cargo departs Freeport LPG export terminal
Phillips 66 reported that its Freeport LPG export terminal in Freeport, Tex., is fully operational after the loading of its first contracted cargo. The Commander, a very large gas carrier, departed the terminal on Dec. 16, 2016.
The Freeport LPG terminal can simultaneously load two ships with refrigerated propane and butane at a combined rate of 36,000 bbl/hr. Supply is sourced from Phillips 66 Partners' Sweeny fractionator and Clemens storage facility, which is connected by pipeline to the Mont Belvieu Hub.
The export facility was developed to satisfy the growing international demand for affordable US NGL. Expecting US production to continue to grow, Phillips 66 says it's evaluating additional NGL fractionation and infrastructure alternatives along the US Gulf Coast.
Tubridgi field to be redeveloped as storage
DBP Development Group, wholly owned by DUET Group, is planning to redevelop the depleted Tubridgi gas field, onshore Carnarvon basin of Western Australia, as a gas storage facility with a capacity to hold 42 petajoules of gas.
Tubridgi is about 30 km from the town of Onslow close to Chevron Corp.'s Wheatstone and BHP Billiton Ltd.'s Macedon domestic gas production facilities. It is also connected to the Dampier-Bunbury natural gas trunkline.
The new Tubridgi facility will be the largest gas storage in Western Australia capable of supporting daily injection and withdrawal rates of about 50 terajoules/day.
DBP has already signed up CITIC Pacific Mining Management Ltd., operator of the Sino iron magnetite project at Cape Preston 100-km southwest of Karratha, as a foundation customer under a 10-year agreement with options for a further 5 years. Further customers are being sought.
The facility is scheduled to be operational by June next year. It will cost an estimated $69 million (Aus.) to build.
Tubridgi field, originally discovered in 1981 by Otter Exploration, produced 69 petajoules during its lifetime between 1991 and 2004 from 21 wells.
The reservoir is at 550 m, so required injection pressures are low. Porosity and permeability are described as excellent and reservoir pressure is supported by an active aquifer that will ensure virtually constant rates of gas deliverability.