GENERAL INTERESTQuick Takes
Oxy, Anadarko merger moves to approvals phase
A deal to combine Anadarko Petroleum Corp. and Occidental Petroleum Corp. is moving to the approvals phase. Anadarko on May 9 entered into a definitive merger agreement with Oxy following the termination of its previously announced merger agreement with Chevron Corp. (OGJ Online, May 9, 2019). Anadarko paid a termination fee of $1 billion to Chevron.
The deal by Oxy to acquire Anadarko, valued at $57 billion including the assumption of Anadarko’s debt, creates a more than $100-billion company with 1.3 million boe of production, Oxy said in a press statement.
Oxy expects to fund the cash portion of the consideration through a combination of cash and debt and equity financing, including proceeds from a $10 billion equity investment by Berkshire Hathaway Inc.
Closing, subject to Anadarko shareholder and regulatory approvals, is expected in this year’s second half, at which time “investors will begin focusing on Oxy’s progress achieving the stated $2 billion in yearly synergies and targeted $10-15 billion of divestitures,” said Capital One Securities Inc. analysts in a May 10 research note.
IFM Investors to acquire Buckeye Partners
IFM Investors, through IGM Global Infrastructure Fund, agreed to acquire Buckeye Partners in an all-cash deal with an enterprise value of $10.3 billion and an equity value of $6.5 billion.
Buckeye owns and operates networks of integrated midstream assets including 6,000 miles of pipeline with more than 100 delivery locations and 115 liquid petroleum products terminals with aggregate tank capacity of more than 118 million bbl. Its network of marine terminals lies primarily in the East Coast and Gulf Coast regions of the US, as well as in the Caribbean.
The deal is complementary to IFM’s investments in energy infrastructure across North America, said Jamie Cemm, IFM executive director.
Equinor claims Shell’s Caesar Tonga stake
Equinor said it will increase its interest in deepwater Caesar Tonga oil field in the Gulf of Mexico to 46% by exercising a preferential right to acquire Shell Offshore Inc.’s 22.45% interest for $965 million.
Shell earlier agreed to sell the interest to Delek Group for the same amount (OGJ Online, Apr. 11, 2019).
The field produces 70,000 b/d of oil and natural gas, 90% oil. It’s in 4,900 ft of water in the Green Canyon area 190 miles south-southwest of New Orleans.
Anadarko Petroleum Corp. is operator with a 33.75% interest. Chevron USA Inc. holds 20.25%.
ENR acquires remaining Eagle Ford assets from PNR
Pioneer Natural Resources Co. (PNR), Dallas, has closed on the sale of its Eagle Ford shale and remaining South Texas assets to Ensign Natural Resources LLC (ENR).
PNR will receive as much as $475 million in total proceeds, of which $25 million was received at closing and $450 million is contingent on future commodity prices.
The deal includes 59,000 net acres in Bee, DeWitt, Karnes, and Live Oak counties, Tex., with net production of 14,400 boe/d in this year’s first quarter. The assets sold represent all of PNR’s remaining interests in the field including all of its producing wells and the associated systems.
The deal marks ENR’s first acquisition. The company was formed in 2017 with private equity firm Warburg Pincus. The company is funded through Warburg Pincus and the Kayne Private Energy Income Funds platform.
Exploration & DevelopmentQuick Takes
NPC submits assessment of Arctic oil, gas potential
The National Petroleum Council approved and submitted a supplemental assessment to its 2015 US Arctic Oil and Gas Potential Resources Report to Energy Sec. Rick Perry on May 2. It contains recommendations addressing enhanced safety and environmental stewardship, regulatory effectiveness and certainty, drilling season length, lease term competitiveness, and enabling infrastructure, the council noted.
In his August 2018 request, Perry asked the council to consider recent exploration experience and technological advancements in Arctic offshore oil and gas development that could inform government decision making. He also asked the NPC to provide views on whether the nation’s regulatory environment could be enhanced to improve reliability, safety, efficiency, and environmental stewardship, the council indicated.
Substantial Artic exploration drilling has taken place in the last 4 years, with 47 wells drilled, including 2 wells in the US Arctic, the supplemental assessment said. Substantial progress also has been made in demonstrating and advancing technology to prevent and respond to an oil spill in Arctic conditions, it added.
NPC is a federal advisory committee to the US Energy secretary. Its sole purpose is to advise, inform, and make recommendations to the secretary, at his request, on matters relating to the oil and gas industry. The council has roughly 200 members, representing all oil and gas industry segments, as well as a broad cross section of non-industry members.
Indonesia awards two blocks; second round opened
Kufpec Regional Ventures (Indonesia) and a combine of Sonoro Energy and Menara Global Energy won production-sharing contracts for two of five blocks offered in a licensing round opened by the government early this year, the Jakarta Post reported.
Kufpec, a unit of Kuwait Foreign Petroleum Exploration Co., won the offshore Anambas exploration block in West Natuna.
Sonoro, Calgary, and Menara won the Selat Panjang development block in Riau Province about 925 km from Jakarta.
Officials said bidders on the three blocks not awarded had not met auction requirements.
Separately, Indonesia opened the year’s second oil and gas licensing round, in which two of four blocks on offer were part of the earlier round, the Jakarta Post reports.
Oil production has occurred on one of the blocks, West Kampar on the border of Riau and North Sumatra provinces.
The other blocks, West Ganal and Kutai off East Kalimantan and Bone off South Sulawesi, are exploratory.
The West Ganal block was one of three areas that received first-round bids rejected as having failed to meet all auction requirements. The new round will close July 31. The government uses a gross-split PSC (OGJ Online, Jan. 20, 2017).
Eni sees more potential in Ghana strike
Eni said a natural gas and condensate discovery offshore Ghana has gas and oil potential requiring further drilling.
Its Akoma-1X well proved a single gas and condensate column in a 20 m-thick Cenomanian sandstone reservoir with good petrophysical properties.
The Maersk Voyager drillship drilled the well, the first on CTP-Block 4, to 3,790 m TD in 350 m of water 50 km offshore.
The discovery is 12 km northwest of the Sankofa hub, where the John Agyekum Kufuor floating production, storage, and offloading vessel is a tie-back possibility. Sankofa field is part of Eni’s Offshore Cape Three Points integrated oil and gas project (OGJ Online, July 6, 2018).
Eni Ghana operates the block with a 42.469% interest. Its partners are Vitol Upstream Tano, 33.975%; GNPC, 10%; Woodfields Upstream, 9.556%; and Explorco, 4%.
Oil Search completes Muruk-2 appraisal well
Oil Search Ltd., Port Moresby, has plugged its Muruk-2 appraisal well in PDL9 in the Southern Highlands of Papua New Guinea following an extended test program.
Oil Search said the well confirmed that gas in the Cretaceous-age Toro Sandstone reservoir was in pressure communication with the Muruk-ST3 sidetrack well along structure about 12 km southeast. Cores were cut through the reservoir zone.
Muruk-2 flowed at a maximum rate of 16.5 MMcfd of gas through a 52/64-in. choke. The company added that, as expected, the flow rate was reduced by drilling-induced formation damage caused by mud and other fluid losses into the reservoir.
Pressure gauges have been installed downhole in Muruk-2 to monitor the well during the pressure build-up phase. The company said this information will help to evaluate the overall contingent resources in Muruk field, the southern end of which is only about 20 km away from existing infrastructure at the Hides field associated with the PNG LNG project.
The Muruk-1 gas discovery was made in December 2016. Oil Search operated both wells on behalf of Esso PNG Juha.
Drilling & ProductionQuick Takes
BP lets contract for next phase of Thunder Horse project
BP PLC has let an integrated engineering, procurement, construction, and installation contract to TechnipFMC for the Thunder Horse South expansion Phase 2 project in the deepwater Gulf of Mexico. The contract, valued by TechnipFMC at $75-250 million, is the second contract let to TechnipFMC by BP following Atlantic Phase 3 in this year’s first quarter.
TechnipFMC will manufacture, deliver, and install subsea equipment, including subsea tree systems, manifolds, flowline umbilicals, and subsea tree jumpers, pipeline end terminations, subsea distribution and topside control equipment.
Thunder Horse field, on Mississippi Canyon Blocks 776, 777, and 778 in the Boarshead basin, lies 200 km southeast of New Orleans in 1,830 m of water.
BP sanctioned development of Phase 2 of the Thunder Horse South expansion project earlier this week (OGJ Online, May 6, 2019). The project—which at peak is expected to add 50,000 boe/d gross of production from the existing Thunder Horse platform—is due for startup in 2021.
ExxonMobil unit lets contracts for Liza Unity FPSO
An affiliate of ExxonMobil Corp. let contracts for the next phase of the Liza project offshore Guyana to SBM Offshore, which will construct, install, lease, and operate for up to 2 years the Liza Unity floating production, storage, and offloading vessel.
The FPSO design incorporates SBM Offshore’s newbuild, multipurpose hull combined with several standardized topsides modules. The Liza Unity will be designed to produce 220,000 b/d of oil with associated gas-treatment capacity of 400 MMcfd and water injection capacity of 250,000 b/d.
Liza field is on Stabroek block 200 km off Guyana. The FPSO will be moored in 1,600 m of water. Liza Unity will be able to store 2 million bbl of crude.
Esso Exploration & Production Guyana Ltd. is the operator with 45% interest in the Stabroek block.
Cenovus: Alberta’s production cut working
Production curtailment in Alberta has achieved the provincial government’s goals, according to Cenovus Energy Inc., Calgary.
Responding to the suppression of crude prices by pipeline congestion in Alberta, the outgoing government of Premier Rachel Notley imposed production cuts totaling 325,000 b/d in January from a base rate of 3.885 million b/d. It has eased the curtailment rate in subsequent months (OGJ Online, Jan. 31, 2019).
In its financial report for the year’s first quarter, Cenovus credited the curtailment with a narrowing of the Western Canadian Select (WCS) discount to West Texas Intermediate crude to an average of $12.37/bbl in the first quarter from record highs in the fourth quarter of 2018.
The oil sands producer said the first-quarter WCS average price of $42.53/bbl was more than double the prior quarter’s level. Cenovus paid $191 million in royalties to the province in the first quarter after accruing a royalty credit of $29 million in the preceding period.
“It should now be crystal clear that the government’s temporary curtailment program is doing what it was intended to do and has had an immediate, positive impact not only for our industry but for all Albertans in the form of improved royalty revenue,” said Cenovus Pres. and CEO Alex Pourbaix.
Cenovus’s first-quarter oil sands production of 342,980 b/d was 5 million b/d below that of first-quarter 2018.
The company said it continues to inject steam at normal rates where it has cut output. The practice raises its cost per barrel of oil produced and steam-oil ratios but allows it “to continue mobilizing and storing production-ready barrels in its reservoirs for sale at a later date when curtailment is eased.”
Notley’s New Democratic Party government was defeated in provincial elections Apr. 6 by the United Conservative Party led by incoming Premier Jason Kenney.
Cadogan plans production from Ukraine well
Cadogan Petroleum PLC, London, plans to place on pump its Blazh-10 well in Ukraine near the Polish border.
The well flowed oil to surface at an average rate of 150 b/d during 24 hr after clean-up from perforations of 156 ft of net pay in the Paleocene Yamna formation.
Cadogan plans further tests followed by pump installation.
The well is on the Monastyretska license.
PROCESSINGQuick Takes
Bill reintroduced to limit ethanol quotas under RFS
US Reps. Bill Flores (R-Tex.) and Peter Welch (D-Vt.) reintroduced legislation on May 7 which would limit ethanol quotas under the Renewable Fuel Standard to 9.7% of the total gasoline volumes projected to be sold in the coming year. H.R. 2540 recognizes negative impacts higher ethanol levels could have on consumers if the blend wall—the point at which ethanol represents 10% of total gasoline sold—is breached, an American Petroleum Institute official said on May 8.
“Most vehicles on the road today are not designed to use fuel blends that contain more than 10% ethanol,” API Vice-Pres. of Downstream and Industry Operations Frank J. Macchiarola explained. “The [Trump] administration’s willingness to raise ethanol volumes puts politics ahead of sound policy and consumer protection. API strongly supports the Flores-Welch RFS reform bill, and we continue to call for lawmakers to act.”
The US Environmental Protection Agency formally proposed allowing year-round sales of gasoline with 15% ethanol on Mar. 12, a move which corn ethanol suppliers cheered and oil refiners condemned. It also proposed modifying parts of its Renewable Identification Number (RIN) program which it said would make the biofuel credits more transparent and deter price manipulation (OGJ Online, Mar. 12, 2019).
“We support this bipartisan bill. It recognizes the blend wall and would reduce the cost to comply with this expensive program,” American Fuel & Petrochemical Manufacturers Pres. Chet Thompson said on May 9. “The RFS is bad policy and we welcome all ideas for its reform.”
Pemex to proceed with Dos Bocas refinery project
Petroleos Mexicanos (Pemex) has decided it will build Mexico’s previously proposed 340,000-b/d refinery in the Port of Dos Bocas, Tabasco, on its own (OGJ Online, Dec. 13, 2018).
The refinery, which comes as one of the main projects to help achieve Mexico’s energy independence and ensure national security, will cost about 160 billion pesos and will create 100,000 jobs, Pemex said.
With a budget of 50 billion pesos allocated for this year, construction of the project will begin on June 2 and be completed in May 2022, the operator said. The decision for Pemex to build the refinery follows the government’s rejection of outside bids during an official tender process, all of which came in above the country’s proposed project budget.
Mexican President Andres Manuel Lopez Obrador said Pemex, alongside the country’s Secretariat of Energy, will receive full support in execution of the project.
The United Nations also will actively participate in the project to ensure best practices of transparency and anticorruption are carried out during project execution, Pemex said.
Upon announcing the project in late 2018, the government said the Dos Bocas refinery would produce 170,000 b/d of gasoline and 120,000 b/d of ultralow-sulfur diesel.
Dutch refiner lets contract for Zeeland refinery
Dutch refiner Zeeland Refinery NV, a joint venture of Total SA and PJSC Lukoil, has let a contract to Aspen Technology Inc. to implement asset optimization software designed to bridge gaps in planning and scheduling at its 72,300-b/d refinery at Vlissingen, the Netherlands.
As part of the contract, Aspen will initially deploy its proprietary GDOT dynamic optimization software on middle-distillate production units across the refinery to help drive more consistent product quality, increase middle-distillate production, and advance energy efficiency, the service provider said.
Aspen GDOT’s coordination of advanced process control (APC) for multiple process units across the site also will help optimize all planning and scheduling opportunities.
The technology implementation comes amid the refinery’s efforts to align planned performance with actual performance to improve productivity levels ahead of the International Maritime Organization’s 2020 marine fuel specifications, which demand lower sulfur emissions from marine fuel, Aspen said.
Neither a value of the contract nor specific details regarding the projected increase in fuel production as a result of the technology’s application were disclosed.
The Zeeland refinery currently produces a combined 230,950 b/d of fuels and various raw materials for the petrochemical industry, Aspen said.
MRPL partially shutters Mangalore refining complex units
Mangalore Refinery & Petrochemicals Ltd. (MRPL), a subsidiary of Oil & Natural Gas Corp. Ltd., has implemented a partial shutdown of process units as part of a force majeure at its 300,000-b/d integrated complex in Mangalore, India.
The partial shutdown of units comes amid an acute shortage of fresh water in the Nethravathi River in absence of summer showers, the operator said in a May 8 filing to National Stock Exchange of India Ltd.
TRANSPORTATIONQuick Takes
Shell to buy more interests in Explorer, Colonial lines
Shell Midstream Partners LP, Houston, has agreed to acquire Shell’s 25.97% equity interest in Explorer Pipeline Co. and 10.125% equity interest in Colonial Pipeline Co. for $800 million. The acquisition will increase Shell Midstream Partners’ interest in Explorer to 38.59% and in Colonial to 16.125%.
Explorer’s 1,830-mile pipeline transports gasoline, diesel, fuel oil, and jet fuel with a capacity of 660,000 b/d.
The Colonial refined products pipeline supplies 50% of the refined products consumed on the East Coast, sourcing supply from 29 refineries and delivering to more than 260 terminals.
“The Explorer and Colonial systems have the capacity to deliver some 3 million b/d of refined products, providing energy to key demand centers of the US,” said Kevin Nichols, chief executive officer of Shell Midstream.
Energean renews Karish-Cyprus gas line bid
Energean Oil & Gas, London, has submitted an updated proposal to the Cyprus Energy Regulatory Authority to supply gas to the island nation from deepwater Karish field offshore Israel.
The operator proposes to lay a 200-km pipeline from the Energean Power floating production, storage, and offloading vessel, which will handle production from Karish and Tanin fields, to Vasilicos, Cyprus.
Energean first proposed a pipeline between the FPSO and Cyprus last year. The government rejected the proposal and solicited bids for a floating LNG import facility.
In a press release, Energean called its updated plan “supplementary to the LNG import procedures launched by the Cypriot government.” It said it has signed a letter of intent for supply of gas to “private power generation license holders in Cyprus.”
The FPSO, with treatment capacity of 800 MMscfd of natural gas and storage capacity of 800,000 bbl of liquids, is under construction at Zhousan, China (OGJ Online, Apr. 16, 2019).
Energean plans to develop Karish field before Tanin.
The fields are 40 km apart in water deeper than 1,700 m.
DOE approves Tellurian, Sempra LNG export projects
The US Department of Energy issued approvals on May 2 for Tellurian Inc.’s proposed Driftwood facility in Calcasieu Parish, La., and Sempra Energy’s planned installation at Port Arthur, Tex., to export LNG to countries that do not have a free trade agreement with the US.
Under the orders, Tellurian was authorized to export as much as 3.88 bcfd and Sempra received permission to export as much as 1.91 bcfd of domestically produced LNG to non-FTA countries not prohibited under US law or policy.
The projects each received authorization from the US Federal Energy Regulatory Commission to site, construct, and operate their projects on Apr. 18, DOE noted.
Anadarko signs another Mozambique plant LNG deal
Anadarko Petroleum Corp. reported that Mozambique LNG1 Co. Pte. Ltd.—the jointly owned sales entity of the Mozambique Area 1 coventurers—has entered into a 17-year, 1.6 million-tonne/year LNG supply agreement with Jera Co. Inc. and CPC Corp.
Anadarko is developing Mozambique’s first onshore LNG plant, which will contain two initial LNG trains with a total capacity of 12.88 million tpy to support Golfinho-Atum field located entirely within Offshore Area 1, where the company and its partners have discovered 75 tcf of recoverable natural gas resources (OGJ Online, Feb. 5, 2019).
Anadarko operates Offshore Area 1 with 26.5% working interest. Partners are ENH Rovuma Area Um SA with 15%, Mitsui E&P Mozambique Area1 Ltd. 20%, ONGC Videsh Ltd. 10%, Beas Rovuma Energy Mozambique Ltd. 10%, BPRL Ventures Mozambique BV 10%, and PTTEP Mozambique Area 1 Ltd. 8.5%.
The Mozambique LNG project is expected to make a final investment decision on June 19 and has currently executed supply agreements of more than 11.1 million tpy, Anadarko said.
