OGJ Newsletter
GENERAL INTERESTQuick Takes
Shell sells West Qurna 1 interest in Iraq
Royal Dutch Shell PLC has taken another step in the trimming of its oil and gas interests in Iraq.
Shell EP Middle East Holdings BV sold all share capital in Shell Iraq BV, which holds a 19.6% interest in West Qurna 1 oil field, to a subsidiary of Itochu Corp.
Itochu paid $406 million and assumed $144 million of debt.
Last year, Shell Iraq Petroleum Development BV won endorsement by the Iraqi Ministry of Oil of its proposal to withdraw from Majnoon oil field, which it operates with a 45% interest (OGJ Online, Oct. 18, 2017). Majnoon produces more than 200,000 b/d of oil.
ExxonMobil Corp. operates West Qurna 1 field, which produces about 400,000 b/d of oil, with a 32.7% interest. Other partners are PetroChina, 32.7%; Pertamina, 10%; and state-owned Oil Exploration Co., 5%.
Shell said its other business in Iraq will not be affected.
It is a 44% partner in Basrah Gas Co., a 25-year joint venture with state-owned South Gas Co. (51%) and Mitsubishi (5%) that captures, treats, and sells associated gas from West Qurna 1, Zubair, and Rumaila oil fields.
SEA Hibiscus completes North Sabah PSC acquisition
SEA Hibiscus Sdn. Bhd., an indirect wholly owned subsidiary of Hibiscus Petroleum Bhd., has completed its acquisition of a 50% participating interest in the 2011 North Sabah enhanced oil recovery production-sharing contract and the joint operating agreement in relation to the PSC (OGJ Online, Nov. 11, 2011).
On Oct. 12, 2016, SEA Hibiscus had entered into a conditional sale and purchase agreement with Sabah Shell Petroleum Co. Ltd. and Shell Sabah Selatan Sdn. Bhd. to acquire Shell’s participating interests in the PSC between Petronas, Shell, and Petronas Carigali Sdn. Bhd. and the JOA between Shell and Petronas Carigali for $25 million.
The North Sabah PSC includes 20 offshore platforms across four producing fields in the South China Sea off the west coast of Sabah and the Labuan crude oil terminal in Malaysia’s Labuan federal territory. The fields have been producing since 1979 and the PSC provides the group with operatorship and production rights up to 2040.
The North Sabah PSC will boost the group’s production and proved and probable reserves. On a 100% PSC basis, the total oil production averaged 14,600 b/d in 2017, with 2P reserves and contingent oil resources as of Jan. 1 at respective totals of 40.9 million bbl and 79 million bbl.
SEA Hibiscus assumed the role of operator of the North Sabah PSC on Mar. 31.
ConocoPhillips reports 1Q divestments, purchases
ConocoPhillips provided updates on its first-quarter asset sale and purchase activity.
In this year’s first quarter, the company closed or entered definitive agreements for $250 million of proceeds from the sale of noncore assets. Several small packages in the Permian basin closed during the quarter. A package of largely undeveloped acreage in South Texas is expected to close in this year’s second quarter. The company expects production impacts from the transactions to be minimal and to complete its disposition program in the second quarter (OGJ Online, Nov. 10, 2016).
In February, ConocoPhillips reported an acquisition of 245,000 net acres that it now identifies as located mostly in the Austin Chalk play in central Louisiana where “several” exploration wells are expected to be drilled starting this year.
The company also recently acquired 35,000 net acres in the Montney play in Canada for $120 million. The acreage is adjacent to the company’s existing position in the liquids-rich portion of the Montney where the company now holds 140,000 net acres, with appraisal under way.
SandRidge rejects takeover bid, evaluates options
SandRidge Energy Inc., Oklahoma City, will evaluate strategic alternatives after rejecting Midstates Petroleum Co. Inc.’s unsolicited public offer to combine the two companies (OGJ Online, Feb. 6, 2018).
The process includes, but is not limited to, an evaluation of divestment or joint venture opportunities associated with its North Park basin assets and potential corporate and asset combination options with other Midcontinent operators. SandRidge engaged RBC Capital Markets as its financial advisor.
SandRidge concluded that the relative asset values of the two companies do not support a combination effected at current stock prices. The decision was primarily based on widely differing opinions of Midstates’ proved oil and gas reserves, largely related to the assessment of the number of economically viable drilling locations at current oil and gas prices, the firm said.
PNR to sell part of western Eagle Ford acreage
Pioneer Natural Resources Co., Dallas, signed an agreement with Sundance Energy Inc. to sell 10,200 net acres in the western portion of its Eagle Ford shale position for $102 million.
The acreage, all held by production, is in Atascosa, LaSalle, Live Oak, and McMullen counties in Texas. Current net production is 1,100 boe/d.
The sale, expected to close in the second quarter, is part of PNR’s plan to divest properties in South Texas, Raton, and West Panhandle field and operate solely in the Permian basin.
Following the sale, PNR will hold 59,000 net Eagle Ford acres, all held by production.
Province plans separate oil and gas unit
The government of Newfoundland and Labrador plans to strip oil and gas operations from Nalcor Energy and create a separate provincially owned entity.
In his 2018 budget speech, Finance Minister Tom Osborne said the stand-alone oil and gas company would “work directly with the Department of Natural Resources to accelerate the growth and opportunity of our petroleum industry.”
Nalcor Energy Oil & Gas holds working interests in fields off the province: 4.9% in Hebron oil field, 5% in the White Rose Growth Project, and 10% in the Hibernia Southern Extension Project.
EnerVest MLP seeking reorganization
EV Energy Partners LP, a publicly traded master limited partnership created by EnerVest Ltd., Houston, has proposed a prepackaged plan of reorganization under bankruptcy protection.
The plan would exchange $343 million of debt with equity in 95% of the reorganized company.
EV Energy Partners produced an average 167 MMcfd of natural gas equivalent oil, gas, and gas liquids in third-quarter 2017 It has interests in Michigan, the San Juan basin, Midcontinent, Appalachian basin, Permian basin, Barnett shale, Austin chalk, and Monroe field in Louisiana.
Neither EnerVest nor EnerVest Operating LLC is seeking bankruptcy protection.
Exploration & DevelopmentQuick Takes
Bahrain reports large offshore oil find
The National Oil and Gas Authority (NOGA) of Bahrain expects production to begin within 5 years from an oil and gas discovery in shallow water off the island nation’s west coast.
At a press conference reported by the official Bahrain News Agency (BNA), a DeGolyer & MacNaughton official estimated P50 oil in place at 80 billion bbl.
The BNA dispatch described the find as “tight oil.” It said drilling also confirmed the discovery of “significant gas reserves in two accumulations below Bahrain’s main gas reservoir.” The discovery is in the Khalij Al-Bahrain basin.
Yahya Al Ansari, chief exploration geologist of Bahrain Petroleum Co. (Bapco), said, “The presence of a layer with moderate conventional reservoir properties on top of an organic-rich source rock creates a unique self-sourcing and trapping system, enhancing production and economic viability.”
The press dispatch said an unspecified number of test wells have flowed “high-quality oil” and said two more appraisal wells are planned this year.
Mexico awards 16 shallow-water blocks
Mexico’s National Hydrocarbons Commission (CNH) has awarded 16 shallow-water blocks in the first open bidding of its third round of oil and gas licensing.
The awards are subject to government approval.
In the Southeast basin, CNH awarded Block 28 to a combine of Eni and Lukoil; Block 29 to state-owned Pemex; Block 30 to a consortium of DEA, Premier Oil, and Sapura Exploration; Block 31 to Pan American; Blocks 32 and 33 to a combine of Total and Pemex; Block 34 to a consortium of Total, BP, and Pan American; and Block 35 to a combine of Shell and Pemex.
In the marine area of Tampico, Misantla, and Veracruz, the commission awarded Block 15 to a combine of Capricorn Energy and Citla Energy; Blocks 16 and 17 to a consortium of Pemex, DEA, and CEPSA; and Block 18 to a combine of Pemex and CEPSA.
And in the Burgos basin, CNH awarded Blocks 5 and 12 to Repsol and Blocks 11 and 13 to Premier Oil.
Spirit Energy has minor find off Norway
Spirit Energy reports a “technical oil discovery” on its Tethys Prospect in the Norwegian North Sea.
Well 35/9-14 on PL 682 cut 20 m of hydrocarbon-bearing sandstone in the Oxfordian (Upper Jurassic) Heather formation. Reservoir quality was poor. A downdip sidetrack encountered 30 of sandstone with hydrocarbon shows, but reservoir quality there also was low.
The well is on the Maloy Slope, 66 km west of Floro and 6 km northwest of Gjoa field.
An appraisal well, 35/9-14A, was dry. Both wells were drilled by the Songa Enabler semisubmersible rig.
Well 35/9-14 is 35 m northwest of well 35/9-13, which encountered technical problems and was plugged. Water depth in the area is about 365 m.
Calling results “disappointing, Spirit Energy Director Arne Westeng said the wells “confirm that the stratigraphic trapping mechanism for the prospect works.”
Spirit Energy operates the license with a 30% working interest. Partners are Capricorn Norge AS, 30%, and Wellesley Petroleum AS and Petoro, 20% each.
Drilling & ProductionQuick Takes
Algeria’s Timimoun gas field brought on stream
Total SA reported that natural gas production has started from Timimoun field in southwestern Algeria. Algeria’s Sonatrach jointly operates the Timimoun production complex with partners. Sonatrach has 51% interest, Total 37.75%. and Cepsa 11.25%.
Gas from Timimoun eventually will be produced with a total of 37 wells connected to a processing plant tied into the GR5 pipeline to move gas from southwestern Algeria to Hassi R’mel (OGJ Online, Oct. 9, 2009).
Total has held Algerian assets for decades. In 2017, Total’s production in Algeria averaged 15,000 boe/d, all of it from the Tin Fouye Tabankort gas-condensate field 300 km west of the Libyan border.
Through the Maersk Oil acquisition, which closed on Mar. 8, Total also holds 12.25% interest in the El-Merk, Hassi Berkine, and Ourhoud oil fields with a combined production capacity of 400,000 boe/d.
Cuadrilla drills UK horizontal well for shale gas
Cuadrilla Resources Ltd., Reston, UK, said it has finished drilling a horizontal shale gas well at Preston New Road in Lancashire. The well was drilled vertically to 8,858 ft through the Upper Bowland and Lower Bowland shale. The horizontal portion extends laterally for around 2,624 ft.
Cuadrilla said it will drill a second horizontal well in the Upper Bowland shale. The first well has yet to be completed pending authorization from UK authorities.
Francis Egan, Cuadrilla chief executive officer, said it was UK’s first horizontal shale gas well.
Cuadrilla previously estimated its Lancashire assets hold 200 tcf of natural gas in place in shale (OGJ Online, Sept. 22, 2011).
XTO settles charges at Indian reservation operations
XTO Energy Inc. agreed to upgrade operations and undertake new projects at its oil and gas production operations at the Fort Berthold Indian Reservation in North Dakota in a proposed settlement of charges that it violated the federal Clean Air Act, the US Department of Justice and the Environmental Protection Agency jointly announced on Mar. 26.
They said the proposed settlement resolved claims that the ExxonMobil Corp. subsidiary did not adequately design, operate, and maintain vapor-control systems on its storage tanks at its 20 oil and gas well pads, resulting in emissions of volatile organic compounds.
XTO agreed to ensure its vapor-control systems at the wells are adequate and improve operation and maintenance practices, monitoring, and inspections, including use of infrared cameras during monthly inspections to better detect and respond to air emissions, the federal entities said.
The producer also agreed to pay a $320,000 fine and spend at least $450,000 to install and operate auto-gauging equipment on storage tanks to reduce how often thief hatches are opened as an environmental mitigation project, DOJ and EPA said.
EPA estimated that XTO’s system upgrades would reduce the emission of at least 2,200 tons/year of VOCs. Improved operation and maintenance will result in additional emissions reductions, it said.
The case arose from the agency’s inspections and information requests in 2015 that found related VOC emissions violations at produced oil and produced water storage tanks, due to undersized vapor control systems and inadequate operation and maintenance, EPA said.
Statoil lets drilling contract for Norwegian North Sea
Statoil has let a drilling contract to contractor KCA Deutag to provide drilling, maintenance, and engineering support for Oseberg and Kvitebjorn fields in the Norwegian North Sea.
The contract, effective Oct. 1, will run for 4 years with options to extend by three additional periods of 2 years each. The contract, including the options to extend, is worth up to $800 million, KCA Deutag said.
Statoil will change its name to Equinor later this year (OGJ Online, Mar. 16, 2018).
LLOG lets contract for Who Dat field in gulf
LLOG Exploration Co. LLC, Covington, La., has let an integrated engineering, procurement, construction, and installation contract to TechnipFMC for delivery and installation of a multiphase pumping station in Who Dat field in the Gulf of Mexico.
The contract includes a manifold, umbilical termination assembly, power umbilical, jumper, and topside control equipment.
The pumping station, to be optimized for the field’s high gas content, will provide pump hydraulics with high-speed permanent magnetic motor technology and subsea system design.
Who Dat field, on stream since December 2011, lies on the Mississippi Canyon blocks in 945 m of water.
PROCESSINGQuick Takes
CNOOC lets contract for Ningbo refining complex
China National Offshore Oil Corp. subsidiary CNOOC Ningbo Daxie Petrochemical Co. Ltd. has let a contract to CB&I, Houston, to deliver technology licensing and design for a grassroots polypropylene plant at its refining and petrochemical complex in Ningbo, Zhejiang Province, China.
CB&I will provide process design engineering as well as licensing of its proprietary Novolen gas-phase polypropylene process technology for the new 300,000-tonne/year unit, CB&I said.
As part of the order, CB&I also will supply its proprietary Novolen high-performance catalyst for the unit, which will produce a full range of polypropylene products with a focus on high-end copolymers, according to the service provider.
CB&I did not disclose a value or duration of the contract.
In July 2016, CNOOC Ningbo Daxie Petrochemical completed a nearly $2-billion modernization and upgrading program at the complex to lift overall crude processing capacity at the site to 7 million tpy, according to reports from local Chinese media outlets.
Originally known as the distillation integrated utilization project, the revamp intended to boost refining capacity at the site to 8 million tpy, according to documents from CNOOC and the Daxie state-level development zone.
Petrobras lets contract for gas processing unit
Petroleo Brasileiro SA (Petrobras) let a contract to a consortium of Shandong Kerui Petroleum Equipment Co. Ltd. of China and Metodo Potencial Engenharia SA, Sao Paulo, to build a natural gas processing unit (UPGN) to be installed in Itaborai, in the Brazilian state of Rio de Janeiro.
Signed on Mar. 28, the 1.95 billion-real contract calls for construction of a 21 million-cu m/day UPGN that, once completed, will become the country’s largest, Petrobras said.
Scheduled to begin construction this year, the UPGN comes as part of the operator’s Route 3 project to expand transportation and processing of natural gas from the presalt fields in Santos basin (OGJ Online, July 25, 2016).
Due for startup in second-half 2020, the UPGN will increase Petrobras’s presalt gas offloading and processing capacity to 44 million cu m/day from its current 23 million cu m/day and help reduce the need for natural gas imports, the company said.
Alongside the new gas processing unit, the Route 3 project involves ongoing construction of a 355-km gas pipeline that will deliver natural gas from the Santos basin presalt cluster to the UPGN.
The pipeline consists of an already built 307-km offshore stretch and will include a 48-km onshore stretch.
ZPC lets contract for Eni slurry technology
Zhejiang Petroleum & Chemical Co. Ltd., also known as Zhejiang Petrochemical Co. Ltd. (ZPC), has let a contract to Eni SPA to provide technology licensing and basic engineering for two bottom-of-the-barrel upgrading units at ZPC’s grassroots 40 million-tpy refining and chemical integrated complex to be built in Zhoushan, Zhejiang Province, China (OGJ Online, Feb. 14, 2017).
The two production lines, which will replace a previously proposed petcoke production line, each will have a processing capacity of 3 million tpy and be equipped with Eni’s proprietary Eni slurry technology (EST) for startup in 2020.
Alongside technology licensing for EST, Eni’s scope of work under the contract will include delivery of the process design package and other services, including operational and technical training, as well as catalyst supply, Eni said.
Phase 1 of ZPC’s complex, which also will produce 1.4 million tpy of ethylene, is due for startup by December. Phase 2, which will nearly double processing and production capabilities at the site, is slated for commissioning during first-quarter 2021 (OGJ Online, May 11, 2017).
TRANSPORTATIONQuick Takes
Nord Stream 2 completes German permitting
Nord Stream 2 natural gas pipeline has received its permit for construction and operation in the German exclusive economic zone (EEZ). Germany’s Federal Maritime and Hydrographic Agency (BSH) issued the permit for the roughly 30-km section within the EEZ in accordance with the country’s Federal Mining Act.
The Stralsund Mining Authority had in January approved construction and operation in German territorial waters and the landfall area. Nord Stream 2’s German passage will cross a total of 85 km.
The BSH permitting, begun in April 2017, determined that Nord Stream 2:
• Is needed to cover part of Europe’s future supply gap.
• Will contribute to increasing security of supply and competition in the European Union gas market.
• Is the most efficient way, both economically and ecologically, to transport gas from Russia to European consumers.
• Can be built in an environmentally friendly way, with any impacts being local and temporary.
• Can help achieve climate goals.
The national permitting processes in the other four countries along the route—Russia, Finland, Sweden, and Denmark—are proceeding as planned, Nord Stream said. Further permits are expected to be issued in the coming months, with construction scheduled to start this year.
Christi NGL pipeline begins Phase 1 service
Epic Y Grade Pipeline LP, a subsidiary of Epic Y Grade Holdings LP and Epic Midstream Holdings LP, has placed Phase 1 of its NGL pipeline in service, operating between DLK Black River Midstream’s processing plant in Eddy County, NM, and Delaware Basin Midstream’s terminal in Orla County, Tex. NGL was introduced to the pipeline Mar. 12.
Phase 2 is under construction with an expected in-service date of June. Phase 3 is expected to be complete in second-half 2019. The pipeline also will have an origination point near Benedum field in Upton County, Tex. When complete, Epic Y Grade will transport 350,000 b/d from multiple origin points in the Delaware and Midland basins to Corpus Christi, Tex.
Epic is building a complex in Corpus Christi with multiple 100,000-b/d fractionators (OGJ Online, Sept. 29, 2017). The company also is building a purity product pipeline distribution system, including an ethane pipeline to the Markham, Tex., area for storage and interconnection to other market centers including Mont Belvieu, Tex.
Epic began building the NGL pipeline in December 2017 after signing a definitive agreement with BP Energy Co. to anchor the 700-mile system. Epic completed an open season earlier this month to offer other interested shippers an opportunity to secure firm capacity on the pipeline.
Epic Midstream in January received sufficient customer interest to sanction its proposed 730-mile crude pipeline between the Permian basin and Corpus Christi. Its route will roughly parallel Epic Y Grade’s (OGJ Online, Jan. 2, 2018).