OGJ Newsletter

March 26, 2018
International news for oil and gas professionals


OMV to buy Shell's upstream New Zealand business

OMV AG, Vienna, reported it would acquire from Royal Dutch Shell PLC the supermajor's upstream assets in New Zealand for $578 million. The deal adds recoverable resources of as much as 100 million boe to OMV's portfolio, the company said.

The company noted the move was an "important step to develop Australasia into an OMV core region."

The assets comprise joint venture interests in Pohokura (48%), the largest gas producing field in New Zealand, and Maui (83.75%) as well as related infrastructure for production, storage, and transportation.

OMV is an existing partner in the acquired assets. OMV's current stakes are 26% in Pohokura and 10% in Maui, and the firm said it plans to assume operatorship in both joint ventures.

The economic effective date of the transaction is Jan. 1. Average production of the acquired assets in this year's first 2 months was 31,000 boe/d.

The transaction is likely to be completed in 2018. It is subject to conditions, including New Zealand Commerce Act and overseas investment approvals.

In parallel to the acquisition of the interests in Pohokura and Maui, OMV also has acquired Shell's 60.98% interest in the Great South Basin exploration block. The transfer is immediately effective and increased OMV's stake in GSB to 82.93%.

EnerVest, TPGE enter $2.66-billion combine

EnerVest Ltd., Houston, has agreed to sell its Eagle Ford and Austin Chalk assets to TPG Pace Energy Holdings (TPGE), an energy-focused special purpose acquisition entity led by former Occidental Petroleum Corp. Chief Executive Officer Steve Chazen, for $2.66 billion in cash and stock.

TPGE and EnerVest will create a new company, Magnolia Oil & Gas Corp., led by Chazen as chairman, president, and CEO. Magnolia will acquire EnerVest's 360,000 total net acres in South Texas, consisting of 14,000 net acres in Karnes County and 345,000 net acres in Giddings field. Current production is 40,000 boe/d (62% oil, 78% liquids).

EnerVest Operating LLC will continue to operate the assets under a long-term arrangement, and EnerVest Ltd. will provide certain additional corporate services to Magnolia. Upon closing, Magnolia will trade on the New York Stock Exchange under a new ticker, and EnerVest will receive $1.2 billion in cash and will retain roughly 120 million shares of common stock.

The transaction is expected to close late in second quarter.

W&T Offshore to buy Cobalt's Heidelberg interest

With a $31.1 million cash offer, W&T Offshore Inc., Houston, was the successful bidder on an interest in three blocks in Heidelberg field in the Gulf of Mexico offered in connection with the Chapter 11 bankruptcy proceedings of Cobalt International Energy Inc., Houston, and its subsidiaries.

The bid covers all of Cobalt's interest in Anadarko Petroleum Corp.-operated Heidelberg field, which includes 9.375% working interest in each of Green Canyon Blocks 859, 903, and 904.

February's gross production from the field was 33,513 b/d and 16,705 Mcfd or 36,300 boe/d. Cobalt's production from the field, net to its interest, was 2,749 b/d and 1.4 MMcfd in February or nearly 3,000 boe/d from 5 wells. The wells flow to the Heidelberg Spar, which is in on Green Canyon Block 860.

Closing is expected in April.

Barrett-Fifth Creek combine: HighPoint Resources

HighPoint Resources Corp. is the name of the company formed through combination of Bill Barrett Corp. and Fifth Creek Energy Co. (OGJ Online, Dec. 7, 2017).

Bill Barrett disclosed the new name in an announcement about completion of the $649-million merger of the Denver companies.

API: US petroleum demand hit 20.3 million b/d

Led by gasoline and seasonal demand for heating fuels, US petroleum demand hit 20.3 million b/d in February. Demand was up by more than 1 million b/d from February 2017, nearing record highs not seen for more than a decade, according to the American Petroleum Institute.

"The economy and energy demand have continued to show solid momentum so far in 2018," said API Chief Economist Dean Foreman. "With US oil and NGL production at record levels—and a resilient industry value chain that has absorbed the growth—consumers are benefiting from this momentum and enjoying affordable and reliable fuels made right here at home."

The strength in US petroleum demand is consistent with indicators that the macroeconomic backdrop has remained solid. However, crude prices declined in February after seven consecutive monthly increases. International crude oil prices fell by more than domestic ones (5.4% for Brent vs. 2.3% for WTI) in February. WTI crude oil prices averaged $62.23/bbl, down 2.3% from January, while Brent averaged $65.32/bbl for the month, down 5.4% from January.

At these prices, US supply achieved new highs for production in February of crude oil (10.3 million b/d) and natural gas liquids (4.1 million b/d). US refineries also processed crude and other feedstocks (16.4 million b/d) at record levels for the month, which displaced petroleum imports other than a seasonal winter need for distillate.

Exploration & DevelopmentQuick Takes

Inpex awarded offshore Canning basin permit

Japanese combine Inpex Corp. was awarded an exploration permit in the Canning basin offshore northwest Western Australia as part of the federal government's 2017 offshore petroleum acreage release.

The company will take 100% interest in the block, designated WA-533-P, which covers an area of 12,400 sq km and lies in 50-600 m of water.

The block lies west of Broome nearby the recent Phoenix South and Roc discoveries and brings Inpex's offshore permit tally in Australia to 22.

The company won exploration permit WA-532-P in the Browse basin just south of the company's Ichthys gas-condensate field last November in the 2016 acreage release. It also holds this area with 100% interest.

PGNiG, Mari Petroleum to cooperate on E&P

Polish Oil & Gas Co. (PGNiG) has signed a memorandum of understanding to form a partnership with Mari Petroleum Co. Ltd., Pakistan's second-largest producer of natural gas.

The MOU provides for cooperation in exploration and production in and outside of Pakistan.

Mari Petroleum operates Mari gas field in Sindh Province in southeastern Pakistan.

PGNiG holds a 70% interest in the Kirthar license in Sindh Province, under which it produces natural gas from Rehman and Rizq fields (OGJ Online, Jan. 24, 2017). Production net to its interest totaled 150 million cu m last year.

SDX reports West Gharib discovery, Egypt

SDX Energy Inc. encountered 151 ft of net heavy oil pay across the Lower Miocene age Yusr and Bakr formations, with an average porosity of 18%. The Rabul 5 well is first of two development wells the firm is drilling in the West Gharib concession in Egypt this year (OGJ Online, Feb. 21, 2018).

The well was drilled to 5,280 ft TD, and the firm expects to complete the well as a producer connected to the central processing facilities at Meseda.

Rosehill furthers White Wolf development

Rosehill Resources Inc. is surveying, staking, and permitting the first four White Wolf well locations in its Pecos County prospect in West Texas's Delaware basin. The first well is expected to spud in April, with early well results expected this summer. Rosehill expects to drill 16-22 new wells in the White Wolf area this year and it plans to complete 12-16 of those wells.

The company will target the Wolfcamp B in all four initial wells with plans to obtain cores and perform data gathering and analysis to best determine the optimal development of its White Wolf acreage. With initial drilling at White Wolf providing a technical framework for full-scale development, Rosehill plans to acquire 3D seismic of the area in this year's second quarter. Core analysis will be performed on Wolfcamp A, Wolfcamp B, and the Bone Spring intervals.

The majority of Rosehill's White Wolf wells will have lateral lengths of 5,000 ft, but the company has said at least 4-8 of the planned wells this year will have extended laterals of more than 7,000 ft.

On Mar. 8, Rosehill's 90-day additional acreage acquisition window closed on its original purchase agreement. The company added no acreage in its White Wolf area, leaving the company's total acreage intact at 6,505 net acres.

The company has two core Delaware basin assets, the other to the north in Loving County where Rosehill reported production of 13,000 net boe/d for the first week of March, 72% of which was oil. Rosehill has completed six wells with initial flowback and clean up planned within the next few weeks. The company has two rigs drilling and one dedicated frac crew.

Rosehill Resources was formed in 2017 through the combination of Tema Oil & Gas Co. and KLR Energy Acquisition Corp. (OGJ Online, Dec. 20, 2016).

Oil field in Philippines called commercial

The Philippines Department of Energy and privately held China International Mining Petroleum Co. Ltd. have declared an oil and gas discovery on southern Cebu Island commercial.

The agency said exploration and drilling at Alegria field, covered by Petroleum Service Contract 49, began in 2009.

It didn't report past or planned drilling.

It estimated discovery volumes at 27.93 million bbl of oil, 3.35 million bbl recoverable, and 9.42 bcf of natural gas, 6.6 bcf recoverable.

Drilling & ProductionQuick Takes

PDO starts flow from Mabrouk North East find

Petroleum Development Oman has started production from a natural gas and condensate discovery it calls Mabrouk North East in its northern concession area.

Five wells drilled to 5,000 m in the field have encountered gas. Test rates have been as high as 1.2 million cu m/day after fracturing of the Cambro-Ordovician Barik and Cambrian Misqrat formations.

PDO estimates recoverable volumes at more than 4 tcf of natural gas and 112 million bbl of condensate.

It said a second well will be brought on production soon. Exploratory drilling continues.

PDO in 2015 acquired 3D wide-azimuth seismic data in the area after its 2013 discovery called Mabrouk Deep, 40 km west of Saih Rawl (OGJ Online, Apr. 3, 2013).

DNO to relinquish Block 8 offshore Oman

DNO ASA, Oslo, plans to relinquish its 50% participating interest in Block 8 offshore Oman, which includes the country's only offshore production.

Gross average production from Bukha and West Bukha fields was 4,484 boe/d of oil, gas, and condensate last year.

DNO said in its 2017 annual report it will relinquish the interest before the license expires on Jan. 3, 2019.

LG International Corp. holds 50% interest in Block 8.

CNOOC brings Weizhou 6-13 oil field on stream

CNOOC Ltd. has brought Weizhou 6-13 oil field on stream ahead of schedule in the South China Sea's Beibu Gulf. The field lies in an average of 35 m of water.

In addition to using Weizhou 12-1 infrastructure, the Weizhou 6-13 project also built a platform.

Seven wells are on production. Weizhou 6-13 is expected to reach peak production of 9,400 b/d in 2019, said CNOOC, which operates the field with 100% interest.

Yuan Guangyu, CNOOC chief executive officer, said Weizhou 6-13 oil field exceeds initial reserve estimates and anticipated production estimates.

Ophir commits to Bualuang field fourth phase

Ophir Energy PLC committed to a fourth development phase at Bualuang oil field in the Gulf of Thailand, starting with infill drilling of three wells being redrilled plus two workovers.

Ophir's plans to install a 12-slot platform (Bualuang C) in 2019 with a bridge to existing Alpha and Bravo infrastructure.

The fourth development phase targets 9.9 million bbl of reserves in this phase, with an estimated development cost of $138 million. Ophir also could drill various satellite targets adjacent to Bualuang.

The field's production averaged 8,300 boe/d in 2017, with infill drilling helping to offset natural declines. The company added a debottlenecking program that increased Bualuang's water-handling capacity to 75,000 b/d.

Ochigufu oil field starts flow off Angola

Ochigufu oil field has started producing oil on deepwater Block 15/06 offshore Angola, where operator Eni SPA and partners have discovered reserves estimated at 850 million bbl.

The field lies in 1,300 m of water about 150 km west of Soyo and 380 km northwest of Luanda. It produces into subsea connections with the Sangos production system tied in to the N'Goma floating production, storage, and offloading vessel in the West Hub of Block 15/06.

Ochigufu production will reach 25,000 b/d of oil.

Earlier field start-ups on the block are Sangos, 2014; Cinguvu, 2015; Mpungi and Mpungi North, 2016; and East Hub, 2017. Starting later this year will be the Tertiary UM8 reservoir in East Hub field and subsea boosting system for Mpungi field. Vandumbu field in West Hub is to start production in 2019.

Eni, operator, and Sonangol Pesquisa e Producao hold 36.84% interest each in Block 15/06. SSI Fifteen Ltd. holds 23.32%.


ExxonMobil weighs USGC PP capacity expansion

ExxonMobil Corp. has started detailed engineering work on a proposed project along the US Gulf Coast that would expand polypropylene (PP) manufacturing capacity by as much as 450,000 tonnes/year to meet growing demand for high-performance, lightweight durable plastics.

While ExxonMobil did not disclose a specific location for siting of the possible expansion, the company said it expects to take final investment decision—which would require several hundred million dollars—later this year.

If approved, the PP production unit could startup as early as 2021, the operator said.

The possible expansion comes amid abundant supplies of US-produced oil and natural gas, which have reduced energy costs and created new sources of feedstock for the nation's chemical manufacturing, according to John Verity, president of ExxonMobil Chemical Co.

"Most of our planned investment in the [US] Gulf Coast region is focused on supplying emerging markets like Asia [Pacific] with high-demand products, which ultimately will spur new economic growth locally," Verity said.

The proposed PP expansion follows ExxonMobil Chemical's completion of its 1.5 million-tpy ethane steam cracker at the firm's Baytown, Tex., complex, which will provide feedstock for two 650,000-tpy high-performance polyethylene lines that began production in fall 2017 at the company's plastics plant in Mont Belvieu, Tex. (OGJ Online, Feb. 6, 2018; Oct. 18, 2017).

ExxonMobil said the possible PP investment is one of 13 new facilities intended to help expand its chemical manufacturing capacity in North America and Asia Pacific by about 40%.

Iraqi oil ministry seeks refinery bids

Iraq's Ministry of Oil is seeking international bids for construction of a 70,000 b/d refinery near Hadditha in Anbar Province.

Data packages are available from the Department of Studies, Planning, and Follow-up for $30,000 until Apr. 29. Companies interested in investing must submit documents by June 14.

The ministry said investment bases would be build, own, and operate or build, own, operate, and transfer.

It said investors will be eligible for tax exemptions and crude-price discounts.

Zhejiang Petchem lets contract for integrated complex

Zhejiang Petroleum & Chemical Co. Ltd., also known as Zhejiang Petrochemical Co. Ltd. (ZPC), let a contract to a unit of Yokogawa Electric Corp., Tokyo, to provide equipment for the first 20 million-tonne/year phase of ZPC's grassroots 40 million-tpy refining and chemical integrated complex in Zhoushan, Zhejiang Province, China (OGJ Online, Feb. 14, 2017).

As part of its scope of work for Phase 1 of the project, Yokogawa China Co. Ltd. will supply its proprietary 190 Yokogawa GC8000 process gas chromatographs, analyzers that separate and measure the density of the components in gases and volatile liquids, Yokogawa Electric said.

Phase 1 of ZPC's complex—which also will produce 1.4 million tpy of ethylene—is due for startup by December, while Phase 2—which will nearly double processing and production capabilities at the site—is scheduled for commissioning during first-quarter 2021 (OGJ Online, May 11, 2017).

ZPC will invest about 160 billion yuan to complete both phases of the project, the company previously said.

Mereenie gas project given green light in Australia

The Mereenie joint venture of Central Petroleum Ltd. and the Macquarie Group has decided to proceed with development of the Mereenie gas project in central Australia following the Australian Competition and Consumer Commission's interim approval of joint marketing arrangements.

The 50-50 JV confirmed the go-ahead of the drilling of the West Mereenie-26 well and an immediate $12-million (Aus.) upgrade of the processing plant.

This will increase Mereenie plant capacity to 63 terajoules/day from the current 25 terajoules/day. Of this current total capacity, 15 terajoules/day is sold to the Northern Territory and the remainder reinjected into the reservoir. About 58 terajoules/day will be sold as gas without adversely affecting the field's current crude oil production.

The aim is to develop the field's gas potential to coincide with the bringing on stream of the Northern Gas Pipeline, scheduled for December. The pipeline's initial capacity will be 90 terajoules/day of gas of which about 32 terajoules/day has been contracted.

The combine said other rationale for the project includes the fact that the Australian east coast gas market remains critically short with citygate gas prices standing at $8-10 (Aus.)/gigajoule. It added that pipeline reforms promise more internationally competitive pipeline tariffs.

CPL's Managing Director Richard Cottee said the group will use every endeavour to ensure Mereenie's processing plant has the capacity to sell 58 terajoules/day of sales gas by yearend.


TransCanada puts Cameron Access into service

TransCanada Corp. has placed its Cameron Access natural gas pipeline project into service in southwestern Louisiana. Cameron Access involved improvements to existing pipeline, construction of a compressor station, and the addition of 27 miles of 36-in. OD greenfield pipeline.

The bidirectional pipeline will transport as much as 800 MMcfd to the Cameron LNG liquefaction plant, currently under construction and scheduled to put its roughly 5 million-tonne/year Train 1 into service by yearend 2019.

Cameron LNG's first three trains will have a total export capacity of 14.95 million tpy (2.1 bcfd of natural gas). A planned two-train expansion would increase capacity to 24.92 million tpy. The expansion has received necessary authorizations from both the US Federal Energy Regulatory Commission and Department of Energy, but Cameron LNG's partners (Sempra LNG & Midstream, Mitsui & Co., Mitsubishi Corp., Engie, and NYK Line) have not yet decided to expand.

Cameron Access cost about $300 million.

Regulator axes trans-India gas pipeline

India's Petroleum and Natural Gas Regulatory Board has revoked authorization for state-owned GAIL (India) Ltd. to lay a 2,112-km pipeline to carry imported natural gas from the west to east coasts.

The regulator cited the absence of construction during the 6 years the authorization has been in effect.

The pipeline, between Surat, Gujarat, and Paradip, Odisha, was to have capacity of 75 million cu m/day.

Tellurian holding open season for PGAP line

Tellurian subsidiary Permian Global Access Pipeline LLC (PGAP), Houston, is holding a nonbinding open season to secure prospective shippers for a proposed 42-in. interstate natural gas pipeline connecting the Permian basin in Texas to Southwest Louisiana.

The proposed pipeline will extend 625 miles with the capacity to transport 2 bcfd of gas. With multiple receipt and delivery locations connecting multiple common gathering points and third-party pipelines expected, the pipeline will connect supply sources originating at or near the Waha Hub in Pecos County, Tex., and will deliver gas near Gillis, Jefferson Davis parishes in Louisiana.

"Natural gas production from the Permian is expected to exceed 12 [bcfd] by 2023 and continue to grow through the middle of the decade," said Tellurian Pres. and Chief Executive Officer Meg Gentle, driving the need for new infrastructure "to reach growing export and industrial demand in Southwest Louisiana and to establish crude production flow assurance."

At a cost of $3.7 billion, construction is projected to begin as early as 2021 with an in-service target as early as 2022.

PGAP is part of Tellurian's proposed Tellurian Pipeline Network and incremental to the $15.2-billion investment that Tellurian plans for Driftwood LNG, a proposed LNG export facility near Lake Charles, La. (OGJ Online, Nov. 17, 2017).