OGJ Newsletter

April 23, 2018
International news for oil and gas professionals


BP, Petrobras to explore cooperation

BP PLC and Petrobras have signed a memorandum of understanding to explore broad areas of cooperation.

A press statement said the companies have “committed to exploring potential joint commercial agreements in areas of mutual interest in upstream, downstream, trading, and across low-carbon initiatives, inside and outside Brazil.”

The alliance is expected to include technology transfer, joint training, and research.

BP and Petrobras are partners in 16 exploration blocks in Brazil. Both are members of the Oil & Gas Climate Initiative.

AG can seek Exxon climate-change data, court rules

Massachusetts Atty. Gen. Maura T. Healey (D) has authority under state law to investigate whether ExxonMobil Corp. suppressed information related to global climate change, the Bay State’s highest court ruled on Apr. 13.

“In its decision today, our state’s highest court affirmed that Exxon is subject to our laws, and that our office has the authority to investigate,” Healey said following the ruling. “Now Exxon must come forward with the truth, what it knew about climate change, when, and what it told the world.”

ExxonMobil did not respond immediately to OGJ’s request for a comment on Apr. 16.

Healey requested the information nearly a year earlier in an Apr. 16, 2017, civil investigation demand (CID) alleging that the multinational oil company may have violated the state’s consumer protection law by not passing climate impact information on to Massachusetts motorists.

ExxonMobil responded by asking the Massachusetts Superior Court to set aside or modify the CID. Its arguments included the company’s not being subject to personal jurisdiction in the state, and the CID’s violating the company’s statutory and constitutional rights. In a Jan. 11 ruling, Suffolk Superior Court Judge Heidi E. Brieger denied ExxonMobil’s petition and ordered company to comply with the CID, which the company appealed.

ExxonMobil also asked that the Massachusetts case be stayed pending a lawsuit seeking relief from actions seeking climate change information by New York Atty. Gen. Eric T. Schneiderman (D) as well as Healy, which it filed in in US District Court for Northern Texas on June 15, 2017. That court issued a March 29 order transferring the proceeding to US District Court for Southern New York, where Judge Valerie Caproni dismissed ExxonMobil’s complaint on Mar. 29.

Mitsui goes unconditional on AWE takeover bid

Japan combine Mitsui & Co has declared its takeover bid for Sydney-based AWE Ltd. to now be unconditional following the acquisition of 51.89% of AWE’s shares.

Mitsui made an unsolicited, nonbinding, and conditional proposal in February to acquire 100% of AWE for 95¢ (Aus.)/share, valuing the company at $602 million (Aus.). The offer was subject to a 50.1% minimum acceptance condition and is not subject to any regulatory approvals or financing conditions. Mitsui began from a base interest of 3.01% of AWE’s shares.

This week Mitsui’s interest increased to more than 50.1% and the offer became unconditional and automatically extended by 14 days. It is now scheduled to close on Apr. 18.

Mitsui has urged AWE shareholders to accept the offer without delay.

AWE’s board also has recommended that shareholders accept the offer in the absence of a superior bid. This recommendation was endorsed by an independent expert appointed by AWE.

Mitsui says it will provide accelerated payment terms such that AWE shareholders will be paid within seven business days after Mitsui receives a valid acceptance of the offer.

The takeover means that Mitsui will gain access to AWE’s current projects including the Waitsia onshore gas project in Western Australia, the Casino offshore gas project in western Victoria, and the Ande Ande Lumut offshore oil project in Indonesia.

Breitburn emerges from Chapter 11 as MNR

On Apr. 6, Breitburn Energy Partners emerged from Chapter 11 as Maverick Natural Resources LLC, a portfolio company majority owned and controlled by funds and accounts managed by EIG Global Energy Partners (OGJ Online, May 16, 2016).

Maverick’s current portfolio of assets includes production averaging 39,742 boe/d in 2017 (88% operated), estimated proved reserves of 152.2 million boe (97% of which are proved developed reserves with a proved reserve life index averaging more than 10 years), 1 million gross acres (600,000 net), and 11,500 gross wells (7,600 net).

Maverick has debt of $105 million and borrowing capacity of $295 million under a new bank credit facility.

Maverick is focused on the development and production of oil and gas reserves throughout the United States, including those in the US Midwest, Ark-La-Tex, Rockies, California, Permian basin, Southeast, and the Midcontinent regions.

Lilis Energy names CEO, executive vice-president

Lilis Energy Inc. Executive Chairman Ronald D. Ormand has been appointed chief executive officer in addition to chairman of the company. James W. Denny III has been appointed executive vice-president of production and operations.

Ormand joined Lilis’s board in March of 2015 and became executive chairman in 2016.

Prior to joining Lilis, Denny served as vice-president at Siltstone Resources and as executive vice-president of operations and as president of the Appalachian division of Magnum Hunter Resources.

Lilis, based in San Antonio, operates in the Permian’s Delaware basin. Its current total net acreage in the Permian is more than 19,000 acres. For 2018, the company plans to run a two-rig operated drilling program in the Delaware basin targeting 14 gross (11 net) wells (OGJ Online, Feb. 12, 2018).

Exploration & DevelopmentQuick Takes

ConocoPhillips confirms Willow appraisal on ANS

ConocoPhillips upped its five-well drilling campaign to a sixth with the 2018 Winter exploration and appraisal program on Alaska’s wester North Slope at the Willow discovery. Discovered in January 2017, the Tinmiaq 2 and 6 were drilled in early 2016 and encountered 72 ft and 42 ft of net pay, respectively, in the Brookian Nanushuk formation in the Greater Mooses Tooth (GMT) Unit in the northeast section of the National Petroleum Reserve-Alaska (NPR-A) (OGJ Online, Jan. 13, 2017).

The company’s original plan called for two appraisal wells plus three exploration wells. Improved drilling efficiencies made it possible to drill a third appraisal well and a sidetrack, all of which encountered oil and verified the play’s potential. The company previously estimated Willow to contain at least 300 million bbl of recoverable oil.

ConocoPhillips conducted flow tests on the five scheduled wells and said results were “encouraging,” but provided no further details. The company is now anticipating exploration and appraisal plans for the 2019 drilling season.

Angola streamlining oil and gas work

Angola is trying to streamline oil and gas administration, reports Maja Bovcon, senior Africa analyst at Verisk Maplecroft.

A recent decree by President Joao Lourenco “will most likely speed up the process of acquiring new oil blocks and the procurement of services and goods,” Bovcon writes in a risk note.

The legislation scraps the prequalification phase for oil and gas companies applying for acreage. In the past, allocation of blocks by state-owned Sonangol took more than a year.

The legislation also raises value thresholds above which purchases or contracts for services require public tender of approval by Sonangol.

The purchase threshold has been increased to $5 million from $750,000. The threshold for contracts for services and goods has risen to $1 million from $250,000.

“The fact that the new legislation has been adopted as a presidential decree—which is faster than passing it through the parliament—indicates Lourenco’s commitment to speed up the reform of the oil and gas sector,” Bovcon writes.

Lundin starts Alta extended reach horizontal well

Lundin Norway AS has commenced drilling a 700-m horizontal well in the oil zone of the Alta discovery. Well 7220/11-5 is in PL 609 in the southern Barents Sea.

The extended well test will improve the lateral geological understanding of the Permian-Triassic karstified and fractured carbonate reservoirs. Lundin’s main objective is to prove sustainable production rates and reduce uncertainty around the reservoir’s recovery mechanism. The Alta discovery is 160 km from the Norwegian coastline, and it was made in 2014 with three successful appraisal wells completed to date.

The Gohta discovery is adjacent to Alto in PL 492. Lundin has considered both discoveries as a joint development. Both discoveries contain a combined gross contingent resource range of 115-390 million boe. The Leiv Eiriksson semisubmersible rig is drilling the extended-reach Alta test, and will be tied up with testing and producing the well for another 2 months after drilling is completed.

Lundin Norway is a wholly owned subsidiary of Lundin Petroleum AB, and it operates PL 609 with a 40% working interest. The partners are DEA Norge AS and Idemitsu Petroleum Norge AS with 30% working interest each.

AWE farms out NZ permit in North Island gas region

AWE Ltd., Sydney, has farmed out its New Zealand onshore Taranaki basin permit PEP 55768, which includes the forthcoming Kohatukai-1 wildcat. The permit is southeast of New Plymouth in a prolific gas-producing region.

Currently AWE has a 51% operating interest and Mitsui E&P Australia has 49%.

The deal will see the firms farmout a combined 50% working interest in the permit to New Zealand Oil & Gas along with NZOG’s majority shareholder OG Oil & Gas (Singapore) Pte. Ltd.

Each of the incoming companies will acquire a 25% interest. AWE will remain operator with 12.5% interest and Mitsui will retain 37.5%. However, as Mitsui is now in the final throes of takeover of AWE, it means Mitsui will be operator with 50%.

The proposed Kohatukai wildcat is scheduled for drilling in this year’s fourth quarter and aims to evaluate dual objectives in the Eocene age Matapo and Mangahewa sands. The prospect itself is analogous to nearby Pohokura gas field.

Drilling & ProductionQuick Takes

QGEP completes early production system off Brazil

McDermott International Inc. has completed Phase 1 of the deepwater Atlanta Early Production System for independent Brazilian exploration and production company Queiroz Galvao Exploracao e Producao SA (QGEP). Atlanta field lies in Santos basin on Block BS-4 in about 5,000 ft of water.

The system includes project management, engineering, and installation of subsea hardware for subsea umbilicals, risers, and flowlines. The project is 115 miles southeast of Rio de Janeiro.

McDermott’s North Ocean 102 handled the umbilical installation scope while a third-party vessel, the Skandi Niteroi, handled the flexible installation.

The early production system (EPS) consists of a dedicated floating production, storage, and offloading vessel with a single-point mooring turret that connects to three wells (2HP and 3H already drilled; 4HA to be drilled late 2018 or early 2019).

The system is equipped with horizontal wet christmas trees with individual vertical flowline connections.

EPS production is estimated to reach 20,000 b/d with the commissioning of the first two wells and is expected to increase to 30,000 b/d with the commissioning of the third well.

A definitive production phase, scheduled to start in 2021, will integrate a larger FPSO with a processing capacity of 80,000 b/d and development of as many as nine additional horizontal wells.

QGEP holds 30% interest and is the operator of Block BS-4. Other Atlanta partners include Dommo Energia 40% and Barra Energia 30%.

ONGC spuds first KG-DWN-98/2 project well

State-owned Oil & Natural Gas Corp. has spudded the first of 34 subsea wells planned in its $5-billion KG-DWN-98/2 deepwater oil and gas development (OGJ Online, Mar. 28, 2016).

The Vantage Drilling International Platinum Explorer drillship is drilling the KDG-A well to a target depth of 2,346 m in 518 m of water off eastern India.

In addition to the drilling, the project includes 425 km of 6-22-in. pipeline, 150 km of control umbilicals, an offshore process platform able to process 6.5 million standard cu m/day of gas, and a floating production, storage, and offloading vessel to process oil and gas.

Water depths are 300-1,400 m. The FPSO will be in 413 m of water. ONGC expects the project to produce 78,000 b/d of oil and 15 million standard cu m/day of natural gas at peak. Flow will start in 2019 for gas and in 2020 for oil.

Of the planned wells, 15 will produce oil, 8 will produce gas, and 11 will inject water. Cluster 2A of the project will have peak production rates of 78,000 b/d of oil and 3 million standard cu m/day of associated gas. Cluster 2B will produce 12.25 million standard cu m/day of free gas at peak.

ONGC expects production from the project to total 25 million tonnes of oil and 45 billion cu m of gas.


Targa completes Joyce gas plant in Permian basin

Targa Resources Corp., Houston, has completed construction of subsidiary Targa Pipeline Mid-Continent WestTex LLC’s grassroots 200-MMcfd Joyce plant in Rankin, Tex., in the Permian basin of Upton County, Tex. (OGJ Online, Feb. 9, 2018; Feb. 7, 2017).

KP Engineering LP (KPE), Tyler, Tex., which provided engineering, procurement, and construction services, completed the project on schedule and on budget, with no recordable safety events, the service provider said.

KPE delivered complete EPC services for the plant, which included the main processing unit, compression, balance of plant items, and associated infrastructure.

In an Apr. 3 presentation to investors, Targa—which commissioned the Joyce plant in March—said it expects the plant to be full once it ramps up to full operations.

As part of the company’s broader program to expand Permian midstream capabilities, Targa also previously let a contract to KPE to provide EPC services for Targa Pipeline Mid-Continent WestTex’s 200-MMcfd Johnson cryogenic gas processing plant in Reagan County, Tex., near Midkiff, in the Permian basin of West Texas (OGJ Online, Mar. 28, 2018; Aug. 25, 2017).

Scheduled to be completed by this year’s third quarter, the Johnson plant also will include a 5,000-b/sd condensate stabilizer, custody transfer metering, slug catchers, and an NGL extraction system.

Targa also said it plans to bring two new gas processing plants online during 2019 in the Midland basin that will collectively add 500 MMcfd of capacity and boost the operator’s total Midland basin processing capacity to more than 2.1 bcfd by fourth

Chinese operator lets contract for PDH unit

Jinneng Science & Technology Co. Ltd. let a contract to CB&I to provide technology licensing and design of a propane dehydrogenation (PDH) unit at its chemical plant in the Qihe County Industrial Park in Qingdao, Shandong Province, China.

Alongside engineering design for the project, CB&I will license its proprietary Catofin catalytic dehydrogenation process technology for the PDH unit that, once completed, will produce 900,000 tonnes/year of propylene to become the world’s largest single-train unit of its kind, the service provider said.

As part of the order, CB&I’s catalyst partner, Clariant International Ltd., will deliver its tailor-made Catofin catalyst and heat-generating material for the unit, CB&I said.

Jinneng’s plant currently produces 1.5 million tpy of coke, 200,000 tpy of carbon black, 100,000 tpy of benzene hydrogenation, 60,000 tpy of silica under a coal-to-chemical production model, according to the operator’s web site.

Japan’s Marifu refinery due feasibility study

JXTG Holdings Inc. subsidiary JXTG Nippon Oil & Energy Corp. has signed a memorandum of understanding with Vietnam National Petroleum Group (Petrolimex) to investigate the possibility of establishing a joint venture company to operate JXTG Nippon O&E’s existing 127,000-b/d Marifu refinery in Iwakuni, Japan.

As part of the MOU signed on Apr. 4, the companies have agreed to carry out a feasibility study on the cooperative project, which would secure future supply sources and outlets for petroleum products in the international petroleum market, JXTG Nippon O&E said.

Scheduled to be completed by April 2019, the feasibility study follows an earlier, unidentified joint study undertaken by the companies on multiple collaborative projects, JXTG Nippon O&E said.


EPP begins full service on Midland-to-Sealy crude line

Enterprise Products Partners LP reported that its 416-mile Midland-to-Sealy pipeline is in full service with an expanded capacity of 540,000 b/d and capable of transporting batched grades of crude oil and condensate (OGJ Online, May 1, 2015). With the completion of incremental tankage, as well as other enhancements, the pipeline has an expected capacity of 575,000 b/d, which is expected to come online in May and is fully subscribed under long-term contracts.

At its terminus in Sealy, Tex., the pipeline connects directly to EPP’s 36-in. Rancho II crude oil pipeline, which extends to the company’s 7.4-million bbl ECHO crude oil terminal in southeast Houston (OGJ Online, Sept. 22, 2015). The completion allows Permian basin producers to deliver multiple grades of crude oil to the Gulf Coast.

Supporting the company’s Permian basin solution is an aggregation program that includes construction of a 143-mile pipeline system, which is expected to deliver more than 300,000 b/d of crude oil and condensate from the Delaware Basin into EPP’s Midland Terminal. The project is on schedule for completion in July and is supported by long-term commitments with shippers.

“With crude oil production from the Permian basin projected to grow by approximately 60% to more than 5 million b/d over the next 4 years, Enterprise’s pipeline system from Midland to Houston provides customers with much-needed flow assurance and market choices,” said A.J. Teague, chief executive officer of EPP’s general partner.

Chevron Australia advances Gorgon LNG project

Chevron Australia has reported the start of Stage 2 of the Gorgon LNG project off Western Australia.

The $5.1-billion (Aus.) program will include 11 new wells—7 in Gorgon field 150 km north of Onslow and 4 in Janz-Io field another 70 km offshore. There also will be new subsea installations and pipelaying work.

The drilling program is expected to begin in 2019.

The announcement ensures the overall $69-billion (Aus.) Gorgon project will maintain target production of 15.6 million tonnes/year of LNG.

The massive project comprises offshore field facilities feeding gas and condensate into three LNG trains and a domestic gas plant on Barrow Island. It came on stream early in 2016 with the first LNG cargo departing in March of that year.

Since then more than 250 cargoes have been shipped to Asian markets.

The domestic gas plant came on stream in December 2016, supplying 200 terajoules/day of gas into Western Australia through the Dampier-Bunbury trunkline. There are plans to increase output to 300 terajoules/day.

Th Gron project is among the largest resources developments in Australia’s history. Chevron, as operator, has 47.3%.

Williams seeks FERC approval for SE Trail expansion

Transco, a wholly owned subsidiary of Williams Partners LP, has filed an application with the US Federal Energy Regulatory Commission seeking authorization for its Southeastern Trail expansion project, which would create 296,375 dekatherms/day of additional firm transportation capacity to the US Mid-Atlantic and Southeast.

Subject to FERC approval, the expansion project will consist of 7.7 miles of 42-in. pipeline looping facilities in Virginia, horsepower additions at existing compressor stations in Virginia, and piping and valve modifications on other existing facilities in South Carolina, Georgia, and Louisiana to allow for bidirectional flow.

Williams Partners has executed precedent agreements with utility and local distribution companies located in Virginia, North Carolina, South Carolina, and Georgia for firm transportation service under the project.

The company held an open season for the project last summer and executed long-term binding precedent agreements with five natural gas shippers for 100% of the firm transportation capacity.

The certificate application reflects an expected capital cost of $404.8 million and a target in-service commitment of Nov. 1, 2020.

MVP proposes extension into North Carolina

Pittsburgh-based Mountain Valley Pipeline LLC (MVP) proposed a 70-mile extension of the interstate natural gas pipeline to central North Carolina. The MVP Gateway Project would receive gas from the main pipeline in Pittsylvania County, Va., and ship it to Rockingham and Alamance counties.

EQT Midstream Partners LP will operate MVP Gateway, which is expected to go into service during fourth-quarter 2020, subject to US Federal Energy Regulatory Commission approval. It will be anchored by firm capacity to PSNC Energy, a SCANA Corp. subsidiary.

MVP also announced a binding open season for MVP Southgate, which will end on May 11. The project’s final scope will be determined at that time, officials said.