OGJ Newsletter
GENERAL INTEREST Quick Takes
Sarawak claims authority over oil and gas
Oil and gas companies operating in the Malaysian state of Sarawak must apply for licenses from the state by the end of next year, according to a July 1 statement from Chief Minister Datuk Patinggi Abang Johari Tun Openg. Until then, companies may conduct business as usual, meaning under agreements with the country’s state-owned Petronas, the statement said.
“As for state laws which are already in force like the Oil Mining Ordinance 1958 and the Land Code 1958, the relevant authorities will also begin the process of ensuring compliance with these laws, including gathering the necessary information from all industry players, as well as a more detailed comprehensive engagement with them,” the statement said.
“The state (Sarawak) accepts that this process will take time, and that is why the industry players would be permitted to conduct their business and operations as usual up to the end of 2019 and at the same time, taking the necessary steps to ensure compliance with the state laws.”
Sarawak last month won a decision against a Petronas request that a federal court declare it to be the country’s sole owner of hydrocarbon resources and industry regulator. Petronas argues that the Petroleum Development Act of 1974 makes it the country’s only resource owner and regulator.
In response to the Sarawak chief minister’s statement, Petronas said it maintains its position and will seek “views and guidance from the government of Malaysia, being the sole shareholder of Petronas, in carrying out our duties.”
Earlier, Petronas said last month’s court decision “does not in any way impair Petronas’s ability to further pursue its legal actions, with the intent to seek clarity on its rights and position under the PDA 1974.”
Cox Oil unit to acquire Energy XXI Gulf Coast
An affiliate of privately held Cox Oil LLC, Dallas, has agreed to acquire Energy XXI Gulf Coast Inc. (EGC), Houston, in a deal worth $322 million. The deal expands Cox’s presence in the Gulf of Mexico. Cox holds assets in both the Outer Continental Shelf and the shallow waters off Louisiana and operates more than 200 producing wells over 25 fields.
EGC’s key assets are located primarily offshore on the OCS and onshore in the Gulf Coast region. The company operates 89% of its proved reserves. In this year’s first quarter, the company produced an average of 26,600 boe/d, of which 79% was oil. During the quarter, the company incurred a net loss of $33.1 million, which included a $12.8 million loss on derivative financial instruments.
The deal addresses EGC’s asset retirement obligations, liquidity challenges, and need for financing, the firms said. EGC’s board approved the proposed transaction after evaluating others, including a proposal from Orinoco Natural Resources LLC to assume EGC’s noncore asset portfolio and related asset retirement obligations. Those negotiations have been terminated, EGC said.
“We have been a proponent of consolidation in the Gulf of Mexico for some time. Cox currently operates approximately 35,000 boe/d and the combined entities will have production exceeding 61,000 boe/d,” said Douglas E. Brooks, EGC’s chief executive officer and president (OGJ Online, Apr. 18, 2017).
Cox will acquire all outstanding common shares of EGC for $9.10/diluted share in cash, representing a 21% premium to EGC’s closing share price on June 15, the companies said.
There is no financing contingency, but customary conditions including approvals from EGC stockholders and regulatory authorities apply. Closing is expected in this year’s third quarter.
EnLink Midstream makes executive changes
Executive and senior leadership changes have been made to Dallas-based EnLink Midstream.
Benjamin D. Lamb has been promoted to executive vice-president and chief operating officer. Lamb previously served as executive vice-president of Oklahoma and North Texas.
Alaina K. Brooks has been promoted to executive vice-president, chief legal and administrative officer, and secretary. She most recently served as senior vice-president and general counsel.
Eric D. Batchelder, executive vice-president and chief financial officer, adds corporate development to his CFO responsibilities.
Michael J. Garberding remains president and chief executive officer (OGJ Online, Jan. 3, 2018). Barry E. Davis remains executive chairman.
Enlink is changing its structure from having liquids and gas business units to a focus on four core asset teams: Oklahoma, Permian, North Texas, and Louisiana, the company said. Promoted are Michael S. Burdett, senior vice-president—Texas; Cynthia L. Jaggi, senior vice-president—Oklahoma; Christopher H. Tennant, senior vice-president—Louisiana; and Jared C. Larew, senior vice-president—Engineering. They will report to Lamb.
McMillan Hummel, EnLink executive vice-president and president of the liquids business unit, will leave the company. He has been with EnLink since its creation in 2014.
Exploration & Development Quick Takes
Troll Phase 3 development plan filed
Equinor and partners have submitted the development and operation plan (PDO) for Phase 3 of giant Troll oil and gas field in the Norwegian North Sea. The phase will produce from the gas cap of the Troll West structure, which produces oil under Phase 2 development involving the Troll B and C platforms.
Equinor in May exercised an option for delivery of a processing module for the Troll A platform, subject to filing of the PDO with the Ministry of Petroleum and Energy and a final investment decision (OGJ Online, May 16, 2018). Troll A was installed during the first development phase to handle gas produced from the Troll East structure.
Troll field has produced 33 billion boe of oil and gas since production began in 1995. The Norwegian Petroleum Directorate estimates remaining reserves at 38 billion boe.
Third-phase development will include the installation of two subsea templates and drilling of eight production wells tied back to the Troll A platform with a 36-in. pipeline.
Equinor, operator, holds a 30.58% interest. Other interests are Petoro, 56%; Norske Shell, 8.10%; Total E&P Norge, 3.69%; and ConocoPhillips Scandinavia, 1.62%.
Field off Abu Dhabi due full development
Al Yasat Co. for Petroleum Operations, a joint venture of Abu Dhabi National Oil Co. and China National Petroleum Corp., has moved toward full development of Bu Haseer oil field off Abu Dhabi. The firm let an engineering, procurement, and construction contract to National Petroleum Construction Co. for facilities that will double production to 16,000 b/d.
The field is on a mixed onshore-offshore concession held by Al Yasat, in which ADNOC holds 60% and CNPC 40%. The joint venture also holds an onshore concession.
Other fields under appraisal and development in the offshore concession are Belbazem, Umm Al Dholou, and Umm Al Salsal. The first shipment of Bu Haseer crude, from an early production system, left Das Island last month.
Total lets subsea contract for Zinia 2
Total SA has let a subsea contract for the development of Zinia Phase 2 field offshore Angola (OGJ Online, May 29, 2018).
The contract to TechnipFMC covers the engineering, procurement, and construction of subsea equipment including 9 subsea tree units as well as wellheads, subsea control systems, connection systems, and associated equipment. The contract also covers support services, performed by TechnipFMC in Angola, for the assembly, test, mobilization, and installation.
Block 17 partners, with Total as operator, approved investment in Zinia 2, which will produce as much as 40,000 b/d of oil from subsea wells tied back to the Pazflor floating production, storage, and offloading vessel.
Total has a 40% interest in Block 17, where total production averaged 600,000 b/d last year. Partners are Equinor, 23.33%, ExxonMobil Corp., 20%, and BP PLC, 16.67%. State-owned Sonangol is the concessionaire.
Sonatrach, partners to extend TFT gas field license
Sonatrach, Total, Repsol, and Alnaft (the National Agency for the Valorisation of Hydrocarbon Resources), signed a 25-year concession contract to extend Tin Fouye Tabankort (TFT) gas and condensate field, pending approval by Algerian authorities, Total said.
The contract will give Total a 26.4% interest, Sonatrach 51%, and Repsol 22.6%. The firms also signed a marketing agreement.
Partners will make drilling and development investments required to develop additional reserves estimated at more than 250 million boe. These investments will help maintain TFT production, which is at 80,000 boe/d, for 6 additional years.
Total is providing technical expertise to keep developing the gas reserves. In 2017, Total produced 15,000 boe/d in Algeria, all of it from TFT field. In March, Total started production from Timimoun gas field in southwestern Algeria.
Through the Maersk Oil acquisition earlier this year, Total holds 12.25% interest in El Merk, Hassi Berkine, and Ourhoud oil fields, which have a combined production of 400,000 boe/d.
Iran, Azerbaijan to jointly develop Caspian Sea field
The presidents of Iran and Azerbaijan have signed protocols for possible development of a jointly owned deepwater oil field in the Caspian Sea, citing a report in Iran Petroleum, news service Shana reported. The name of the field was not disclosed.
If ratified, the two countries would produce oil on a 50-50 joint venture. National Iranian Oil Co. assigned Khazar Exploration & Production Co. (KEPCO) to work on Iran’s behalf.
KEPCO Chief Executive Officer Mohsen Delaviz said the development would cost at least $10 billion. Delaviz expects finalizing the agreement with SOCAR could take 2 years, followed by 3-4 years for development.
The Caspian Sea is shared by Iran, Russia, Azerbaijan, Turkmenistan, and Kazakhstan.
Drilling & Production Quick Takes
ExxonMobil lets second Liza FPSO contract
ExxonMobil Corp. subsidiary Esso Exploration & Production Guyana Ltd. (EEPGL) has let contracts to SBM Offshore of Amsterdam for the front-end engineering and design of a second floating production, storage, and offloading vessel for the Liza development on the Stabroek block offshore Guyana.
EEPGL operates Stabroek block with partners Hess Guyana Exploration Ltd. and CNOOC Nexen Petroleum Guyana Ltd.
Following FEED and subject to requisite government approvals, project sanction, and an authorization to proceed with the next phase, SBM Offshore will construct, install, and then lease and operate the FPSO for up to 2 years. EEPGL will take over FPSO ownership and operation after that.
The second Liza FPSO design involves a newbuild, multipurpose hull combined with several standardized topsides modules. The FPSO will be designed to produce 220,000 b/d of oil, will have associated gas treatment capacity of 400 MMcfd, and water injection capacity of 250,000 b/d.
The FPSO will be spread moored in 1,600 m of water and able to store 2 million bbl of oil. Meanwhile the Liza Destiny FPSO for Liza 1 is being converted in Singapore.
Esso has started drilling 17 planned wells for the Liza Phase 1 development with production startup expected in 2020.
The company and its coventurers have so far discovered estimated recoverable resources of more than 3.2 billion boe on the block. The Liza Phase 1 development includes a subsea production system and the Liza Destiny FPSO, designed to produce as much as 120,000 b/d of oil (OGJ Online, Jun. 22, 2017). Four subsea drill centers with 17 production wells are planned.
The second FPSO is planned as part of Phase 2, and a third is under consideration for the Payara development. Together they will produce more than 500,000 boe/d, Esso said.
Premier Oil lets contract for Huntington field
Premier Oil has let a contract to Ocean Power Technologies Inc. (OPT) to provide communications and remote monitoring services in Huntington field in the central North Sea. The contract calls for a 9-month lease, including an initial 3-month trial.
The project was expected to start in June with deployment of an OPT PowerBuoy anticipated for October.
The OPT PowerBuoy will serve as a self-sustaining intelligent platform. The project is backed by the Aberdeen-based Oil & Gas Technology Centre (OGTC), which has provided co-funding, support, and technical input to the monitoring requirements for the buoy.
Chris Pearson, OGTC small pools solution center manager, said it’s the first time that a wave-power device is being deployed on the UK Continental Shelf oil and gas development.
“The system can provide monitoring to safeguard subsea safety zones and generate power with a view to operate subsea assets, meaning it fits well with our focus on reducing the cost of decommissioning and unlocking small pools,” Pearson said.
Shell lets Penguins flow-systems contract
Royal Dutch Shell PLC has let an engineering, procurement, construction, and installation contract to Subsea 7 for flow and control systems in its redevelopment of Penguins oil and gas field 150 miles northeast of the Shetland Islands.
The contract covers two pipeline bundles containing pipe-in-pipe flowlines, gas-lift flowlines, and control systems. It also includes fabrication of a 9-km, 16-in. gas-export pipeline, flexible riser system, dynamic umbilical riser system, and subsea tie-ins.
Subsea 7 said the offshore work will occur in 2020 and 2021.
Shell, the operator, and 50-50 partner ExxonMobil Corp. are replacing the Brent Charlie platform with a circular FPSO vessel able to handle production of 45,000 boe/d of oil and natural gas. Water depth is 540 ft.
Cairn Energy acquires stake in Agar Plantain well
Cairn Energy PLC has agreed to join Azinor Catalyst Ltd. to help drill an appraisal well on the Agar Plantain in the UK North Sea, subject to regulatory and joint venture party consents, Azinor Catalyst said. Azinor Catalyst hired the Transocean Leader semisubmersible to drill the well.
Plans call for Cairn to join Azinor Catalyst for 50% of the drilling activity on Agar Plantain and 25% of the wider P1762 license with existing partner Apache Corp.
The appraisal well, expected to spud in the third quarter, seeks to delineate the downdip element of the Agar discovery reservoir with a sidetrack aimed at testing the Plantain prospect.
Azinor Catalyst retains operatorship for the appraisal well with Cairn acquiring an option to take over operatorship. The 50% interest involves two blocks, 9/9d and 9/14a, containing the Agar discovery and the Plantain prospect. Agar was discovered in Eocene Frigg formation sands during 2014.
Agar and Plantain have estimated combined resources of up to 98 million boe, Azinor Catalyst said.
PROCESSING Quick Takes
Gas processing plant planned for DJ basin
Discovery DJ Services LLC, the operating company of Discovery Midstream Partners, Dallas, has let a contract to BCCK Holding Co., Midland, Tex., to deliver engineering, procurement, and construction for a 225-MMcfd cryogenic gas processing plant in Weld County, Colo. As part of the contract, BCCK will self-perform all engineering, fabrication, and construction services on the project based a flexible technology solution for both ethane recovery and ethane rejection, the service provider said.
The plant will increase Discovery DJ’s processing capacity to about 500 MMcfd during first-half 2019, BCCK said.
Discovery DJ delivers midstream services to producers in Colorado’s Niobrara and Codell stacked-pay zones in the Denver-Julesberg (DJ) basin via infrastructure and related installations in southern Weld and northern Adams counties to provide customers in southern Wattenberg field much-needed takeaway capacity, according to the operator’s web site.
In July 2017, Discovery DJ said it was constructing more than 120 miles of pipeline and a 60-MMcfd natural gas processing plant scheduled to come online during third-quarter 2017, with an additional expansion of the plant’s capacity to 260 MMcfd scheduled sometime this year.
South Korea due polypropylene plant
PolyMirae Co. Ltd., a 50-50 partnership of LyondellBasell Industries NV and Daelim Industrial Co. Ltd., will establish a joint venture with SK Advanced Co. Ltd. to build a grassroots polypropylene (PP) plant in the southeastern port city of Ulsan, South Korea, to serve the Asia Pacific region.
The proposed 400,000-tonne/year PP plant will begin construction in January 2019 for planned startup during first-half 2021, LyondellBasell and PolyMirae said in separate releases.
Production from the new plant—which will be equipped with LyondellBasell’s proprietary Spheripol PP process technology and receive propylene feedstock from SK Advanced’s nearby 600,000-tpy propane dehydrogenation plant—will be sold to customers in South Korea as well as exported throughout Asia Pacific for use in automotive components, injection molding, blow molding, and packaging film.
Some of PP production will be sold to compounding companies in South Korea and the broader region, LyondellBasell said.
PolyMirae currently operates four PP Spheripol production lines with a combined capacity of 700,000 tpy in Yeosu, South Korea.
ExxonMobil commissions plants at Singapore complex
ExxonMobil Asia Pacific Pte. Ltd. has started production of hydrogenated hydrocarbon resin and halobutyl rubber at its integrated manufacturing complex in Singapore, which has a crude oil processing capacity of 592,000 b/d and includes two steam crackers (OGJ Online, May 11, 2017).
Construction of the multibillion-dollar expansion project was completed safely and on schedule, with the new plants entering production as of June 20, the operator said.
The expansion included ExxonMobil’s proprietary 90,000-tonne/year Escorez hydrogenated hydrocarbon resins plant that will meet long-term demand growth for hot-melt adhesives used in packaging or baby diapers, as well as the 140,000-tpy butyl plant that will produce premium halobutyl rubber used by manufacturers for tires that better maintain inflation to improve fuel economy, the company said.
The facilities expand on ExxonMobil’s flexible steam cracking capability in Singapore, which provides a range of feedstocks for upgraded specialty products to meet growing long-term demand in Asia Pacific.
The Singapore complex also includes a cogeneration unit at the refinery, bringing the total cogeneration capacity of the site to more than 440 Mw, helping to reduce emissions and support more efficient use of energy, ExxonMobil said.
The Singapore projects follow a series of investments ExxonMobil has recently made or announced to upgrade and improve its global downstream operations.
Alongside positioning the company to serve customers in key Asian growth markets, these latest additions also help to further establish the Singapore manufacturing site as a key producer of fuels and petrochemical products.
TRANSPORTATION Quick Takes
ExxonMobil Australia mulls LNG import terminal
ExxonMobil Australia is considering the import of LNG into eastern Australia to help ease the predicted shortfall of gas supply from 2021 and protect its existing market share.
The company also is increasing its exploration program in Bass Strait as well as considering the development of a field extension called West Barracouta.
“Combined with the existing Gippsland basin resource and infrastructure, an LNG import facility could ensure that ExxonMobil can continue to meet our customers’ needs,” the company said. The LNG facility would be timed to become operational by 2022.
Output from the Gippsland basin, dominated by ExxonMobil and the mainstay of Victorian gas production and supply for the last 50 years, is expected to fall to half of its current levels by 2022. If ExxonMobil’s plan to import LNG proceeds, it will compete with two other import proposals: AGL Energy’s planned import terminal at Crib Point in Victoria to bring in gas from 2021 and the Japanese JERA consortium’s planned terminal at Port Kembla on the New South Wales coast to begin imports from 2020.
EnLink to build Delaware basin oil gathering system
EnLink Midstream will construct a crude oil gathering system in the northern Delaware basin. Initial operations for the Avenger Crude Oil Gathering System are expected to begin in this year’s third quarter with full-service operations beginning during first-quarter 2019.
The project is anchored by a 10-year contract with Devon Energy Corp. and is supported by dedications from Devon’s Todd (Eddy and Lea counties, NM) and Potato basin (Eddy County, NM) development areas. Devon previously reported plans to direct a large portion of its capital budget into Delaware basin development.
The $35-40 million planned expenditures by EnLink for development of the system this year are incremental to the previously issued capital expenditures outlook for the partnership’s crude and condensate segment, the company said, and further expenditures are expected as Devon continues to develop its acreage in the region.
Avenger is the third crude oil gathering platform in a high-growth basin that EnLink has announced over the last 2 years, noted EnLink president and chief executive officer Michael Garberding (OGJ Online, June 8, 2016).
EnLink is not constructing or operating Avenger through its Delaware basin joint venture with NGP Natural Resources XI LP (OGJ Online, Aug. 4, 2016).