OGJ Newsletter

July 17, 2017
International news for oil and gas professionals

US reps ask for probe into Russian ties to markets

Two senior Republicans on the US House Science, Space, and Technology Committee asked Treasury Sec. Steven T. Mnuchin to investigate allegations that Russian state-sponsored entities funneled money to US environmental organizations opposed to fossil fuels in an effort to disrupt domestic energy markets.

"If you connect the dots, it is clear that Russia is funding US environmental groups in an effort to suppress our domestic oil and gas industry, specifically hydraulic fracturing," Committee Chairman LaMar Smith (Tex.) said on July 7 as he released a letter he and Energy Subcommittee Chairman Randy Weber (Tex.) sent to Mnuchin.

"They have established an elaborate scheme that funnels money through shell companies in Bermuda. This scheme may violate federal law and certainly distorts the US energy market," Smith asserted.

Publicly available reports reveal that the Russian government and complicit parties funneled money from that country through Bermuda-based shell companies to environmental groups in the US with the aim of disrupting the US energy industry and influencing public opinion of the oil and gas industry, he and Weber said in their June 29 letter.

Such a scheme potentially violates federal statutes pertaining to agents of foreign governments or those lobbying on behalf of domestic and foreign interests, they said.

Aramco to invest $300 billion over next decade

Saudi Aramco will invest more than $300 billion on oil and gas projects over the next decade, the company's president and CEO said, while warning of lagging investment elsewhere.

Amin H. Nasser told the World Petroleum Congress in Istanbul that Aramco's aim is "to reinforce our preeminent position in oil, maintain our spare oil production capacity, and pursue a large exploration and production program centering on conventional and unconventional gas reserves."

Aramco, Nasser said, plans to double production of natural gas to 23 bscfd as part of an effort to lower greenhouse-gas emissions. The push also includes participation with automobile manufacturers to develop "ultraclean engine-fuels systems of the future" and with other oil and gas companies to promote low-emission technologies.

Although a global transition to nonhydrocarbon energy is under way, Nasser said, "It still takes a long time for new fuels to seize market share from legacy fuels."

Even as traditional fuels begin to lose market share, he added, "history tells us that absolute demand for them continues to rise significantly for long periods of time."

Nasser said that the current oil-industry slump has canceled investments totaling about $1 trillion and that 20 million b/d of new oil production is needed to offset depletion and meet demand growth.

Yet investors are reluctant to risk capital on large investments in exploration, long-term development, and infrastructure.

"Investments in smaller increments such as shale oil just will not cut it," Nasser said. "Without those higher investment levels, the energy transition-and therefore energy security-may be fatally compromised."

ADNOC expanding partnership opportunities

Abu Dhabi National Oil Co. is expanding its partnership model to cover all of its value chain and to more actively manage its assets. The company emphasized in a press statement that it plans no initial public offering of an equity share.

It said the new approach offers new partnership and investment opportunities in oil, gas, refining, and petrochemicals.

ADNOC plans, for example, to develop and expand "a regional, fully integrated drilling company" and seek new strategic partners for other upstream ventures.

In midstream work, it hopes to "create a new energy infrastructure venture to both generate value and further optimize ADNOC's assets." The venture might include "bundling of select ADNOC infrastructure assets such as oil, gas, or refined product pipelines and storage facilities."

And ADNOC will further open its downstream business to offer new refining and petrochemical opportunities.

The firm said it will seek partners able to access the world's fastest-growing markets for ADNOC products, to contribute technical expertise and develop technologies alongside its own capabilities, and to invest with ADNOC "strategically across different parts of a more-integrated ADNOC value chain."

The company said expansion of its partnership model is part of its "ADNOC 2030" strategy, which envisions higher oil production capacity and innovation in enhanced oil recovery, expansion of petrochemical production to 11.4 million tonnes/year by 2025 from 4.5 million tpy at present, and further development of natural gas resources.

The gas effort includes a potential $20-billion investment to develop Hail, Ghasha, Delma, Nasr, and Shuwaihat fields, which could produce 1.2 bscfd of gas. ADNOC also hopes to increase production from Shah gas field to 1.5 bscfd and consider development of Bab and Bu Hasa gas fields.

Exploration & DevelopmentQuick Takes

Talos discovers oil with Zama-1 well off Mexico

Talos Energy LLC's Zama-1 well has discovered an 1,100-ft contiguous gross oil-bearing interval on Block 7 about 37 miles offshore the Port of Dos Bocas, Mexico.

The well contains 558-656 ft of net oil pay in Upper Miocene sandstones with no water contact. Initial tests recovered light oil samples with 28-30° gravity oil and some associated gas.

The well is in 546 ft of water in the Sureste basin and drilled to a target vertical depth of 11,000 ft. Talos reported initial gross oil-in-place for Zama-1 ranges 1.4-2 billion bbl, which exceeds predrill estimates. The company also said the resource may extend into a neighboring block.

The Ensco 8503, a moored floating drilling rig, spudded Zama-1 on May 21. The company is setting liner to protect the discovery before drilling deeper to additional exploration targets at a total vertical depth of 14,000 ft. There are no plans for further testing.

Zama-1 is the first exploration well to be drilled on acreage awarded in Mexico's first international licensing round in 2015.

Eni's Amoca-3 well off Mexico sparks fast-track plan

Eni SPA's Amoca-3 well in the shallow waters off Mexico has boosted its resource estimate of Amoca field to 1 billion boe in place and prompted a fast-track development plan.

The well encountered 410 m net pay of 25-27° gravity oil in several high-quality Pliocene reservoir sandstones, of which 300 m were found in the deeper sequence of the Cinco Presidentes formation in various cluster levels of Pliocenic age with good reservoir characteristics.

Amoca-3 is in Contractual Area 1, 200 km west of Ciudad Del Carmen in Campeche Bay, 1.5 km southwest of Amoca-1, and 3 km northwest of Amoca-2. It lies in 25 m of water.

During the production test, 45 m of the Cinco Presidentes reservoir were opened to production and the well flowed 6,000 b/d of 25° gravity oil.

Eni will submit an accelerated and phased development plan in 2017 targeting an early production phase with a plateau ranging from 30,000-50,000 b/d of oil with the start of operations planned for early 2019.

The well has been temporarily suspended but will be used for production at a later stage. The Area 1 drilling campaign will continue with the first appraisal of the Mizton discovery, followed by other wells that will appraise existing discoveries and explore new undrilled pools.

The Area 1 total estimated resource base is now 1.3 billion bbl of oil in place, of which 90% is oil with further upside.

Eni holds 100% interest in Area 1. In Mexico's first phase of Round 2 bidding last month, Eni was awarded three blocks as operator in the shallow waters of the Sureste basin. Eni, present in Mexico since 2006, established its wholly owned subsidiary Eni Mexico S. de RL de CV in 2015.

DNO fast-tracks Peshkabir discovery in Kurdistan

Norway's DNO ASA is fast-tracking its Peshkabir discovery on the Tawke license in the Kurdistan region of Iraq with plans to acquire and install a production facility by yearend. That work will be followed by a pipeline connection to the Tawke export terminal at Fish Khabur.

The operator spudded its Peshkabir-3 appraisal well on July 8 to further test Cretaceous and Jurassic reservoirs discovered in the Peshkabir-2 well. Three Cretaceous horizons including Upper, Lower Shiranish, and Qamchuqa tested 8,900 bo/d collectively of 28° gravity oil during a 2-week cased-hole testing program in May. Peshkabir-2's Cretaceous column ranges 380-590 m, DNO said.

DNO placed Pishkabir-2's Lower Shiranish Cretaceous zone on production in May at an average of 4,500 bo/d, which is trucked to Fish Khabur some 12 km away and commingled with Tawke production for pipeline export through Turkey.

Tawke license production has averaged 115,000 bo/d from two fields as of July.

Cairn-led group makes oil discovery off Senegal

The Cairn Energy PLC-led group has made an oil discovery with the FAN South-1 exploration well drilled in deep water offshore Senegal.

The well was drilled to a total depth of 5,343 m. A suit of wireline logs was run that indicated oil in target Cretaceous-age reservoirs. Oil samples were obtained from the well.

The well had dual targets: an Upper Cretaceous stacked multilayer channelized turbidite fan prospect and a lower Cretaceous base-of-slope turbidite fan prospect similar to the FAN-1 discovery made in 2014 some 30 km to the northeast. Oil samples were obtained from the latter target. Preliminary analysis indicates 31° gravity oil.

Work is continuing to integrate this discovery with FAN-1 to establish the commercial potential of the resource.

The best predrill estimate of the prospective resource was 134 million bbl with an 18% chance of success.

FAN South-1 was the tenth well drilled offshore Senegal and the fourth in the group's current campaign. It was drilled in 2,175 m of water and lies about 90 km offshore in the Sangomar Deep offshore block.

The well is now being plugged. Stena Drilling's Stena DrillMAX drillship is being moved to the SNE North-1 location on the Sengalese shelf.

This well, in 900 m of water, will drill into the Sirius prospect, which has the potential to hold 294 million bbl of oil. It is located 15 km north of the SNE-1 oil discovery well and will be the most northerly step-out on trend with SNE field.

Drilling & ProductionQuick Takes

Devon reports record rate for STACK well

Devon Energy Corp. reported a production rate of 6,000 boe/d from a well drilled in southwest Kingfisher County, Okla.

The company said it's a record rate for initial production for a well in the STACK play (Sooner Trend, Anadarko, Canadian, Kingfisher), based on its comparison with publicly available data. The company said the rate was facility constrained.

The Privott 17-H well is expected to recover more than 2 million boe. Initial production was 50% oil.

The well was drilled with a 10,000-ft lateral and landed in the upper Meramec interval near the company's Showboat development. Devon will spud the Showboat development in the third quarter and has plans for about 25 wells across four landing zones.

Devon said it also brought online four other high-rate Meramec wells in the overpressured oil window in the second quarter. The company has more than 600,000 net acres by formation in the STACK play.

"Devon will continue to test development concepts including well density, multilayer well stacking, intralayer well staggering, and further completion design improvements," said Wade Hutchings, senior vice-president, exploration and production.

Total reports delay in Martin Linge field production

Total E&P Norge AS said an accident at a South Korean shipyard will delay the shipping of Martin Linge platform modules to Norway. Consequently, production at Martin Linge field in the Norwegian North Sea has been delayed from 2017 to 2018.

Six people died and more than 20 were injured when a crane collapsed at a Samsung Heavy Industries shipyard on May 1 during construction of the Martin Linge platform.

Total sent its experts to join an ongoing investigation into causes of the accident and to prevent any reoccurrence. Following the accident, work related to the Martin Linge project was suspended until June 1.

The installation of the modules and lifting operations, which can only be carried out during summer, initially was planned for this year but now is postponed until summer 2018.

All work at the yard was suspended for several days to prioritize the investigation, Total E&P said.

Total E&P Norge operates Martin Linge with 51% interest. Partners are Petoro 30% and Statoil 19%.

Work on the Egina floating production, storage, and offloading vessel resumed following a 2-week suspension. Egina is expected to come on stream in second-half 2018 on offshore Block OML 130 about 150 km off Nigeria.

Chevron hires Ensco drillship for work off Nigeria

Chevron Corp. has let a contract to Ensco PLC for its Ensco DS-4 drillship to work offshore Nigeria starting in next year's first quarter. The single-year contract has five 1-year priced customer options.

Ensco CEO and Pres. Carl Trowell said Ensco DS-4 previously was preservation stacked for 2 years. It was reactivated on time and within cost estimates of $28 million total, he said. In addition, $15 million of capital upgrades were added.

"We also secured a 1-year contract for Ensco DS-10, our final newbuild drillship, which is among the most technologically advanced rigs in the global fleet," Trowell said. Ensco DS-10 will be tested before heading to Nigeria to start its contract.

Remaining capital expenditures associated with the rig are $190 million. The client for Ensco DS-10 was not identified.

Ensco DS-7 is contracted to Total SA until November. Since November 2016, the rig has been idle, but it now is scheduled to mobilize to Ivory Coast to drill one well starting in August. That well is expected to take 60 days to complete. Additionally, Total has a priced option for one more well.


Gazprom Neft progresses with Omsk refinery revamp

PJSC Gazprom Neft has completed installation of major equipment for a 2 million-tonne/year deep refining complex currently under construction as part of an ongoing modernization and upgrading program to reduce environmental impacts as well as improve processing capacities, conversion rates, energy efficiency, and production qualities of at its 21.4 million-tpy Omsk refinery in Western Siberia.

Gazprom Neft finished installing the 64-m, 350-tonne main processing column for its advanced oil refining complex (AORC) at Omsk in early July, which concludes installation of large-scale manufacturing equipment on the AORC project.

With installation of reactors, separators, and high-pressure heat exchangers also now completed, remaining work for the project includes construction of overhead gangways and steam-reforming furnaces, both of which are currently under way, Gazprom Neft said.

Designed to increase the Omsk refinery's output of Euro 5-quality diesel and jet fuels from heavy residues by more than 6%, as well as supply of as much as 250,000 tpy of raw material for production of high-performance lubricants, the AORC complex will use a combination of hydrocracking and sulfur-removal technologies to remove 99.8% of sulfur compounds from unfinished feedstock to produce finished products meeting the most stringent environmental specifications.

The AORC project joins a series of works under way as part of the second phase of the Omsk refinery's modernization program, which specifically aims to further improve the overall refining depth, environmental performance, and yield of light-end petroleum products.

Total commissions revamped cracker at Antwerp

Total SA has completed a project to increase feedstock flexibility at one of two steam crackers in its 338,000-b/d integrated refining and petrochemical platform in Antwerp, Belgium.

The steam cracker is now producing ethylene using ethane feedstock imported from Norway, Total said.

The nearly $60-million project, which also involved work to upgrade an associated terminal to receive 200,000 tonnes/year of ethane shipments, comes as part of Total's more than $1.3-billion modernization project under way at Antwerp to further integrate processing units and expand petrochemical production at the site using low-cost feedstock.

With the feedstock-flexibility leg of the modernization project now completed, the steam cracker is able to use ethane, butane, or naphtha to produce 1.1 million tpy of ethylene, with price-advantaged feedstock now possibly to account for more than 50% of petrochemical feed at the site, the operator said.

The steam cracker's revamp follows a series of ongoing modernization works at Antwerp, including construction of a solvent deasphalting unit and mild hydrocracking unit for the refinery's upgrading complex, as well as the addition of a plant that will convert refinery offgases into petrochemical feedstock.

Total said it expects to complete remaining modernization upgrades at the Antwerp platform sometime during this year's second half.

The French operator is undertaking similar projects to increase integration and expand petrochemical production at Houston-based subsidiary Total Petrochemicals & Refining USA Inc.'s refining and petrochemical manufacturing site in Port Arthur, Tex., as well as at Hanwha Total Petrochemicals Co. Ltd.'s (HTPCL) Daesan refining and petrochemicals integrated complex in Chungnam Province, South Korea.

AFPM: Venezuelan sanctions could hurt US refiners

A full or partial prohibition of Venezuelan crude oil imports as part of sanctions against that country's government could harm US refiners, consumers, and the economy, American Fuel & Petrochemical Manufacturers Chet Thompson warned.

"It is our understanding that the administration is considering sanctions to address the troubling developments in Venezuela," he said in a July 6 letter to US President Donald Trump.

Limiting imports of that country's crude as part of sanctions against the government of President Nicolas Maduro would place US Gulf and East Coast refiners at a disadvantage because their plants have been reconfigured to process sour crude oil grades from South America, Thompson noted.

It also could affect the prices US consumers and businesses pay for their motor fuel, he added.

"Moreover, because crude oil is traded on an international market, there is no guarantee that sanctions against Venezuelan crude would have the desire effect of punishing the Maduro regime," Thompson said.

If the US imposed sanctions, Venezuela simply would divert the crude to other recipient nations, "most likely trade competitors in Asia," Thompson said. "In that case, the sanctions would be ineffective and would only harm US interests."

Venezuelan crude plays an important role in the US refining system, providing both economic and security benefits, Thompson said. "While placing sanctions on oil imports from Venezuela would not deny a market for this internationally traded commodity, it would likely hurt consumers and businesses right here in the US," he said.


PIRA: US to become major crude oil exporter

Regions along the US Gulf of Mexico will play an increasing role as oil exporters with oil exports forecast to rise to 2.25 million b/d by 2020, a fourfold increase from 2016, said a special report from PIRA, an analytics unit of S&P Global Platts.

Shale production will drive the increased exports, requiring infrastructure redevelopment along the Gulf Coast where operational capacity for crude oil and condensate exports is likely to expand by at least 600,000 b/d by Dec. 31, 2018, PIRA said.

PIRA Senior Analyst Jenna Delaney said three regions are Corpus Christi and Brownsville, Tex., Houston, and Beaumont and Nederland. She listed the state of Louisiana as the fourth region. PIRA has identified 22 active export terminals.

"PIRA believes Corpus Christi is positioned to become an increasingly prominent area for US exports," Delaney said. "Corpus Christ's proximity to the Eagle Ford formation and projected pipeline expansions connecting it to the Permian offer it access to cheap supplies, Infrastructure projects, both private and public, will allow for greater export scale."

She said shippers likely will have to absorb reverse lightering costs. "The US has not yet pushed the bounds of its export capacity," Delaney said.

Civil penalties sought against Rover Pipeline

The Ohio Environmental Protection Agency's (OEPA) director asked Atty. Gen. Michael DeWine (R) on July 7 to seek civil penalties against Rover Pipeline LLC for bentonite slurry and other discharges along the project's route.

OEPA also ordered Rover Pipeline to implement a release prevention and emergency response plan that day and submit a revised contingency plan within 7 days that addresses findings and orders the agency issued at that time.

"Further, if I determine that Rover Pipeline has failed to comply..., I would further request that you initiate civil proceedings to compel compliance with these orders and any other environmental law that has been violated," OEPA Director Craig W. Butler said in his letter to DeWine.

The findings and orders deal with unauthorized discharges and water-quality violations, industrial waste disposal, and open burning. They were issued after OEPA began enforcement actions on May 5. The US Federal Energy Regulatory Commission told Rover Pipeline not to begin horizontal directional drilling in Ohio after OEPA notified the federal regulator that it began enforcement actions.