OGJ Newsletter
GENERAL INTERESTQuick Takes
Caspian leaders sign territorial agreement
Leaders of countries with Caspian Sea coasts have signed an agreement on territorial claims under dispute since collapse of the Soviet Union in 1991.
Clarification of at least some legal questions will ease impediments to oil and gas exploration and development and to pipeline construction.
Leaders of Russia, Iran, Kazakhstan, Azerbaijan, and Turkmenistan signed the agreement Aug. 12 at a summit in Aktau, Kazakhstan.
Speeches by signatories indicated it was little changed from a draft made public in Russia last December defining territorial waters as ending 15 nautical miles from countries’ shorelines and extending a further 10 miles for fishing.
Demarcation of the sea beyond territorial waters depends on future negotiations.
The agreement allows pipeline development to be approved through bilateral agreements between nations involved. But all the nations can object to pipeline work on ecological grounds.
The agreement also prohibits the presence of military forces other than those of the littoral states.
NuVista to buy Pipestone assets for $625 million (Can.)
NuVista Energy Ltd. has entered into an agreement with Cenovus Energy Inc., both of Calgary, to acquire Cenovus Pipestone Partnership, which holds the Pipestone and Wembley natural gas and liquids business in northwestern Alberta, for $625 million (Can.). The assets are mainly in the core of the condensate-rich Alberta Triassic Montney fairway and on 35,250 net acres of land, the majority of which is a single contiguous block with four layers of well-delineated development potential.
The transaction also includes the Pipestone business’ 39% operated working interest in the Wembley gas plant.
The assets represent a 29% increase to NuVista’s current Montney land position. The acquisition includes current production of 9,600 boe/d (83% Montney) with a low decline rate estimated to be 22% as well as associated infrastructure. The acquisition also holds 157 million boe (gross) proved plus probable reserves.
The sale is expected to close in the third quarter.
Carrizo to acquire Delaware basin assets from Devon
Carrizo Oil & Gas Inc., Houston, has agreed to acquire certain Delaware basin properties from Devon Energy Corp. for $215 million in cash. The deal includes 10,600 gross acres—9,600 net with 90% operated—in Reeves and Ward counties, 94% of which is held by production. Net production is 2,500 boe/d, 60% of which is oil, with more than 100 net potential derisked drilling locations identified across the Wolfcamp A and B based on 7,000-ft laterals. The deal also includes saltwater disposal wells that can be integrated into Carrizo’s system.
The acquisition fits with the company’s existing Phantom-area acreage, said Carrizo Pres. and Chief Executive Officer S.P. Johnson IV. “Upon completion of the transaction, we will hold approximately 26,300 net acres in our Phantom area and 46,000 net acres in the Delaware basin,” he said.
The company expects to integrate the assets into its existing development plan for the area, “which currently assumes a ramp-up in activity in the second half of 2019 as Permian pipeline takeaway is forecast to increase,” Johnson said.
An equity offering of 9.5 million shares of common stock expected to generate total gross proceeds of $218.5 million will be used to fund the acquisition.
Minerals unit formed for SCOOP, STACK buys
Continental Resources Inc., Oklahoma City, has formed a minerals subsidiary with Franco-Nevada Corp., Toronto, to acquire additional minerals in the SCOOP and STACK plays of Oklahoma, primarily in areas operated by Continental. Franco-Nevada will pay $220 million for its initial interest. The companies will spend up to a combined $125 million/year over the next 3 years for additional acquisitions. Continental will fund 20% of future mineral acquisitions and earn 25-50% of total revenues generated by the new venture based on certain targets.
Franco-Nevada is a gold-focused royalty and stream company with a current market capitalization of $14 billion. The company aims to have 80% of its business in precious metals and up to 20% of its business in nonprecious resources including oil and gas.
Petronas unit due interest off Senegal
PC Senagal Ltd., a Petronas subsidiary, has agreed to acquire a 30% participating interest in the Rufisque Offshore Profond block in Senegal from Total E&P Senegal.
Total remains operator with a 60% interest. Ste. Nat. des Petroles du Senegal (Petrosen) holds the other 10%. The block covers 10,357 sq km and has water depths of 100-3,000 m.
Petronas said exploratory drilling will begin in 2019 after interpretation of 3D seismic data. The farmin is the first venture in Senegal for the company, which is expanding its activity in West Africa.
Exploration & DevelopmentQuick Takes
Savannah reports fourth Niger oil strike
Savannah Petroleum PLC, London, reports a fourth indicated discovery of light oil in the R3 part of its R3/R4 production-sharing contract area in southeastern Niger.
Wireline logs, fluid samples, and pressure data indicate the Eridal-1 well encountered 13.6 m of net oil-bearing sandstone in the E1 unit of the primary Eocene Sokor Alternances objective.
Savannah is suspending the well, which was drilled to 2,542 m TVD, for future reentry.
The company plans production tests of at least two of its discoveries before starting an early production scheme.
Exercising the second of six options under its drilling contract with Great Wall Drilling Co. Niger SARL, Savannah will use the GW215 rig to drill the Zomo-1 exploration well 12 km south of Eridal-1 and slightly north of its Bushiya-1 discovery.
Eni gets license, extensions in Egypt
Eni SPA plans to drill an exploration well this year on its Nour prospect in the East Nile Delta basin under a new license in Egypt. In addition to approval of that concession, Eni has received extensions governing four other Egyptian assets.
The 739-sq-km Nour license is in 50-400 m of water 50 km from shore. Eni operates the license through its IEOC unit with an 85% interest. Tharwa Petroleum Co. holds a 15% stake.
Meanwhile, the government has approved a 10-year extension of the 203-sq-km Abu Madi West Development Lease and further exploration of the 64-sq-km El Qar’a Exploration Lease, both in the Nile Delta’s Great Nooros Area.
Nooros field produces 32 million cu m/day of natural gas. Through IEOC, Eni holds a 75% stake in the concession. BP holds 25%. The Nile Delta operator is Petrobel, a joint venture of IEOC and Egyptian General Petroleum Corp. (EGPC).
The government also approved a 5-year extension of the Ras Qattara concession agreement and a related development lease in the Western Desert, where Eni plans new drilling in Zarif and Faras fields.
Eni holds a 75% interest in the 104-sq-km Ras Qattara concession with 25% partner INA. The operator is AGIBA, a joint venture of IEOC and EGPC.
Santos, Total add prospect with Beehive 3D program
The Beehive 3D seismic program in the Bonaparte Gulf, funded by Santos Ltd. and Total SA as part of farm-in obligations to obtain an option to drill in Melbourne-based Metana Energy Ltd.’s WA-488-P permit, has been completed and evaluation has begun.
The survey was extended by about 100 sq km (16%) to cover an additional, newly identified lead called Egret that is partially within the permit boundary.
Santos and Total now have a 6-month option from the time of receipt of the processed data to drill a well in the giant Beehive structure that lies immediately southeast of Eni SPA’s producing Blacktip gas field.
Beehive is billed as one of the largest undrilled prospects in Australia.
The survey acquisition area of 600 sq km lies 225 km west-southwest of Darwin, 65 km from the closest land (Cape Domett in Western Australia), and 60 km from Yelcher Beach in the Northern territory. Water depths range 30-50 m.
Santos and Total have the option, together or individually, to acquire a direct 80% participating interest in WA-488-P in return for funding the cost of all activities until completion of the first well in the permit.
In the event of a commercial discovery, Melbana Energy will repay carried funding from its share of cash flow from Beehive field.
The Beehive prospect is a Carboniferous-age carbonate structure some 18 km across and a mapped 400 m of vertical relief. The play type is new and unexplored in the Bonaparte basin. It is in 40 m of water with conditions suitable for drilling with a jack up rig.
Egdon to appeal another Wressle setback
Egdon Resources PLC, Odiham, UK, plans another appeal to another local setback to its development of the 2014 Wressle oil discovery in North Lincolnshire, England.
The North Lincolnshire Council Planning Committee has rejected the company’s application to extend planning consent to Aug. 1, 2019.
The committee also rejected its original development application plan in January 2017 and a supplemental application the following July (OGJ Online, July 3, 2017).
On a 2015 test, the discovery well flowed a combined 710 boe/d of oil and natural gas from Carboniferous Ashover Grit, Wingfield Flags, and Penistone Flags.
Egdon plans conventional development with no hydraulic fracturing.
In June, it said it would submit a new development application to account for changes in license interests and new information about the discovery.
Promising a prompt appeal to the latest rejection, Egdon Managing Director Mark Abbott said, “The decision of the committee is clearly disappointing given that the application had been recommended for approval by North Lincolnshire Council’s own professional planning officers, that an appeal for a previous refusal of such an application had been successful, and that we have recently submitted a new application for the development of the Wressle oil field which we strongly believe comprehensively addresses the reasons for the refusal of the original planning applications and the subsequent appeals.”
India launches second small-field bid round
India will launch a second bid round under its discovered small field policy on Aug. 9, offering 26 contract areas in which about 60 discoveries have been made.
The Directorate General of Hydrocarbons originally estimated the launch date would be in June (OGJ Online, May 15, 2018).
It’s offering revenue-sharing contracts requiring no signature bonus and covering all types of hydrocarbons.
Zennor developing Finlaggan field off UK
Zennor Pathway Ltd. expects production to begin in 2019-20 from Finlaggan natural gas and condensate field in the Central UK North Sea. The Transocean Paul B. Loyd Jr. semisubmersible last month spudded the 21/05c-F1 well in the PL2013 area about 120 miles northeast of Aberdeen.
It’s the first of two slimhole, directional development wells the Zennor Petroleum subsidiary plans to drill to about 16,600 ft for development of a Lower Cretaceous accumulation discovered in 2005 by ConocoPhillips.
Zennor will complete the wells subsea in about 420 ft of water for tieback to ConocoPhillips’s Britannia platform 11 miles northeast. It expects peak production of 80 MMscfd of gas and 4,500 b/d of 52.3° gravity condensate.
Zennor, Guildford, UK, holds a 100% interest.
Drilling & ProductionQuick Takes
Essar to lift Indian CBM output, study shale
Essar Oil & Gas Exploration & Production Ltd. (EOGEP) plans to double production from its Raniganj East coalbed methane block in West Bengal and assess shale resources there and in CBM holdings elsewhere in India.
The company has signed a 15-year agreement to sell CBM output at the increased rate of 2.3 million standard cu m/day (MMscmd) to state-owned GAIL (India) Ltd. GAIL won a competitive bid round held under a government program allowing parties to negotiate the gas price.
The agreement links the CBM price to the 3-month daily average price of Brent crude oil. EOGEP will increase production from 348 CBM wells on the block, where output has exceeded 1 MMscmd, and drill 148 more wells.
The Raniganj East block will be a focus of its study of shale potential. The Union Cabinet recently removed hydrocarbon-type distinctions from oil and gas licenses and allowed shale development under licenses held by nonstate operators.
SGC lets contract to BHGE for flare gas recovery
South Gas Co. of Iraq (SGC) has let a contract for flare gas recovery for Nassiriya and Al Gharraf oil fields to Baker Hughes.
Baker Hughes will develop solutions using modular skid-mounted gas processing technology to build a fully integrated natural gas liquids plant at Nasiriya that will recover 200 MMscfd of dry gas, liquefied petroleum gas, and condensate. Completion is expected by 2021.
The modular solution will support power plants with dry gas for electric power generation and will help curtail the amount of gas flared that otherwise goes to waste.
The technology used to develop the plant will help produce more than 1,000 tons/day of LPG and recover more than 900 cu m/day of condensate. The surplus LPG and condensate will be exported.
Horizontal Ignyalinskoye well flows oil
Gazpromneft-Angara reports commercial oil flow from the first horizontal well drilled in Ignyalinskoye oil and gas condensate field in eastern Siberia.
After multistage fracturing, the well flowed more than 120 tonnes/day, the company said.
Gazpromneft used Schlumberger seismic services to create a model of the field’s complex geology. It said two pilot wells confirmed the model.
The company shipped the first batch of oil from the Ignyalinsky Block about 100 km to the Eastern Siberia-Pacific Ocean pipeline in February. It expects full production to begin in 2024.
The 2,153-sq-km Ignyalinsky license block is the southern module of Gazpromneft’s Chonsky project in the Katangsky District of the Irkutsk Region on the border with the Republic of Sakha (Yakutia) (OGJ Online, Apr. 12, 2016). The northern module comprises the Tympuchikansky and Vakunaysky license blocks.
PROCESSINGQuick Takes
Pemex’s Salina Cruz refinery returns to normal
Mexico’s Petroleos Mexicanos (Pemex) processing subsidiary Pemex Transformacion Industrial (formerly Pemex Refinacion) has resumed operations at its 330,000-b/d Antonio Dovali Jaime refinery in Salina Cruz, Oaxaca, following a power outage that led to a shutdown of the site late on Aug. 8.
The 28 process plants operating at reduced load as a result of the Aug. 8 electrical interruption began gradually ramping up on Aug. 9, Pemex said.
Timely supply of products to customers will not be interrupted as a result of the brief shutdown given supplies in storage at the refinery as well as at the dispatch and maritime storage terminals in Oaxaca, according to the operator.
Pemex revealed no additional details of the incident nor a definitive timeframe for when the refinery would reach full operational levels.
Basra Oil lets contract to expand Majnoon processing
Basra Oil Co. (BOC) has let a contract to Petrofac Ltd. to expand the central processing facility (CPF) at Majnoon oil field in Basra, Iraq (OGJ Online, Dec. 27, 2017).
As part of the lump-sum, $370-million contract, Petrofac will deliver engineering, procurement, and construction services for two oil processing trains equipped to process a combined 200,000 b/d of oil from the field, the service provider said.
This latest 34-month EPC contract for the CPF’s expansion follows BOC’s 2011 award to Petrofac to provide engineering, procurement, and construction management for execution and completion of Majnoon’s existing CPF, Petrofac said.
Majnoon, which lies in southern Iraq 70 km north of Basra City, is one of the world’s largest oil fields with 38 billion bbl of oil in place, according to the Iraqi government. The field produces about 220,000 b/d of oil.
BOC previously let a contract to KBR Inc. in May for overall project management, multidiscipline engineering support, procurement, and construction management services for development of Majnoon field (OGJ Online, May 14, 2018).
Tatweer lets contract to expand gas production
Tatweer Petroleum, a subsidiary of the National Oil & Gas Authority (NOGA) of Bahrain’s business development and investment arm NOGA Holding Co. (Nogaholding), has let a contract to Petrofac Ltd. to provide additional works related to the service company’s previous installation of a new central gas dehydration plant for Tatweer in Bahrain field.
As part of the multimillion-dollar, lump-sum turnkey contract, Petrofac will deliver engineering, procurement, and construction services for additional gas wells and connect them to the recently completed 500-MMcfd gas dehydration plant, the service company said.
The central dehydration plant and newly proposed well expansion mark the first in a series of planned gas capacity projects scheduled during the next 3-5 years as part of Tatweer’s commitment to secure delivery of natural gas needed to meet Bahrain’s growing demand, the operator said in May 25, 2016, and Sept. 16, 2015, releases.
Neither Tatweer nor Petrofac revealed a duration of the newly awarded contract, nor the volume of gas to be produced by the additional wells.
TRANSPORTATIONQuick Takes
ExxonMobil signs intent to ship gas on PHP
ExxonMobil Corp. plans to support the proposed Permian Highway Pipeline (PHP) Project, signing a letter of intent for subsidiary XTO Energy to contract for as much as 450,000 dekatherms/day of capacity on the pipeline.
The $2-billion PHP Project will provide an outlet for increased gas production from the Permian basin to areas along the Texas Gulf Coast and is designed to transport as much as 2 bcfd of gas through 430 miles of 42-in. pipe from the Waha to Katy, Tex., areas, with connections to the US Gulf Coast and Mexico. The PHP Project is expected to be in service in late 2020 (OGJ Online, June 26, 2018).
With 50-50 ownership of the project, Kinder Morgan Texas Pipeline LLC (KMTP) and EagleClaw Midstream Ventures LLC, a portfolio company of Blackstone Energy Partners, will be initial partners. Apache Corp. and EagleClaw will be weighty shippers, each planning to commit as much as 500,000 dekatherms/day. Apache will have the option to acquire equity from the initial partners. KMTP will build and operate the pipeline.
ExxonMobil’s support is expected to accelerate the path to a final investment decision, said Sital Mody, president of Kinder Morgan Natural Gas Midstream.
KMTP and EagleClaw began an open season Aug. 10 for capacity on the PHP Project.
Yamal LNG Train 2 ships first cargo
The first shipment of LNG from Yamal LNG’s Train 2 in northern Russia has been loaded for shipment. Train 2 adds 5.5 million tonnes/year, doubling the plant’s capacity. A third 5.5 million-tpy train is expected to start operations early in 2019. Train 2 was commissioned 6 months ahead of schedule, according to majority-owner PAO Novatek.
Yamal LNG last month shipped its first two cargoes eastbound via the Northern Sea Route to China, delivered to Jiangsu Rudong port (OGJ Online, July 6, 2018). Two 170,000-cu m Arc7 vessels—Eduard Toll and Vladimir Rusanov—transited the ice-covered part of the route in 9 days with no icebreaker escort. China expects to take more than 4 million tpy once Train 3 begins operations.
Yamal LNG’s shareholders are Novatek 50.1%, Total SA 20%, China National Petroleum Co. 20%, and state-run Silk Road Fund 9.9%. Total also owns a 10% stake in Novatek’s 19.8-million tpy Arctic LNG 2 project, east of Yamal LNG on northern Siberia’s Gydan Peninsula. The two firms agreed in May that Total will have the opportunity to acquire a 10-15% direct interest in Novatek’s future LNG projects in Yamal and Gydan.
Novatek plans to produce 55-60 million tpy of LNG by 2030.
Singh named Indian Oil pipeline director
Akshay Kumar Singh has joined Indian Oil Corp. as director (pipelines), responsible for the state-owned company’s 13,400-km network of crude oil, product, and natural gas lines.
He has 32 years of experience in the oil and gas industry, recently as executive director of GAIL (India) Ltd.