GENERAL INTEREST — Quick Takes
Whiting to acquire Kodiak in $6 billion deal
Whiting Petroleum Corp. has agreed to acquire Kodiak Oil & Gas Corp., both of Denver, in an all-stock transaction valued at $6 billion, creating the largest Bakken-Three Forks producer with more than 107,000 boe/d of first-quarter production, 855,000 combined net acres, and 3,460 net future drilling locations.
Whiting says the combined company's oil-weighted platform will drive production and operational synergies through complementary acreage positions, the application of technological expertise, and greater access to capital to accelerate drilling.
The combined entity is expected to have an initial enterprise value of $17.8 billion, total production for this year of 152,000 boe/d, and proved reserves of 606 million boe, 80% oil.
James Volker, Whiting president and CEO, said the combined company "will also participate in Whiting's 175,000 gross (123,000 net) acre, oil-rich Redtail-Niobrara prospect in the northeast DJ basin, where production is rapidly growing."
Whiting's largest current projects are in the Bakken, Three Forks, and Niobrara, and its EOR field in Texas.
Whiting in August 2013 purchased acreage primarily targeting the Middle Bakken and Three Forks zones, including 17,282 net (39,310 gross) acres in and around the company's properties in the Missouri Breaks and Hidden Bench prospects in its western Williston area (OGJ Online, Aug. 29, 2013).
The boards of both companies have unanimously approved the transaction, which is expected to close in the fourth quarter.
Swift, Saka complete Eagle Ford development deal
Swift Energy Co., Houston, has completed its agreement with PT Saka Energi Indonesia to fully develop 8,300 acres of Fasken properties in the Eagle Ford in Webb County, Tex.
Saka purchased 36% full participating interest in the properties from Swift for $175 million in total cash consideration, with $125 million to be paid at closing. The remaining $50 million was to be paid by Saka over time to carry a part of Swift's field development costs incurred after the Jan. 1 effective date.
Swift received $147 million consisting of the initial $125 million plus Saka's share of capital costs. Saka expects to fulfill the remainder of the drilling carry obligation in 2016.
"This arrangement marks the beginning of a strategic partnership to grow production in the Eagle Ford dry-gas window of South Texas," said Terry Swift, Swift chief executive officer.
Swift will use the proceeds to reduce the amount of borrowings under the company's credit facility and fund accelerated development of the company's Eagle Ford properties.
Rosneft ups stake, takes over operatorship of Solimoes
OAO Rosneft reported that Brazil has approved a transaction that would give Rosneft an additional 6% in a joint venture in the Solimoes basin for $96 million. The transaction would give Rosneft 51% interest and operatorship in the JV.
Completion of the purchase from Brazilian independent HRT O&G is expected within 30 days of the July 9 approval by Brazil's National Petroleum Agency (ANP).
The JV covers the BT-SOL-4 and BT-SOL-4A concessions. HRT O&G will hold 49% interest (OGJ Online, Mar. 19, 2013).
Separately, Rosneft, HRT, and Petroleo Brasileiro SA signed a memorandum of understanding to study "development schemes" for joint monetization of gas in the Solimoes basin.
OGUK welcomes 'urgently needed' tax consultation
Oil & Gas UK said it welcomes "urgently needed" formal consultation announced July 14 by HM Treasury into the future of the UK offshore oil and gas tax regime.
"The current fiscal regime has become increasingly complicated and unpredictable with high tax rates combined with a multiplicity of allowances," said Michael Tholen, OGUK economics director. "While targeted allowances have successfully encouraged a wave of activity in recent years, temporarily halting the production decline, their impact is diminishing in an ever more expensive business climate. Investors are increasingly looking to invest elsewhere rather than in the UK."
OGUK believes there could be as much as 24 billion boe to recover, but will remain untapped unless there is "swift change."
It describes the UK continental shelf is a mature offshore oil and gas province and one of the world's most expensive basins in which to operate and invest. Despite current record rates of investment, there are "warning signs" that investment will halve over the next 4 years, while exploration remains at an "all-time low." Production has fallen rapidly in recent years, the group said.
OGUK Chief Executive Malcolm Webb said the current fiscal regime "is becoming a barrier to investment both in new fields and in the many mature opportunities."
He said, "While our members will work closely with HM Treasury to respond in depth to the consultation, the review must lead to early action. It cannot simply be a paper exercise."
Exploration & Development — Quick Takes
Shell makes third oil discovery in Norphlet play
Royal Dutch Shell PLC has made its third major oil discovery in the Jurassic-period Norphlet play in the deepwater Gulf of Mexico with the Rydberg exploration well, drilled 75 miles offshore on Mississippi Canyon Block 525 in the eastern gulf.
The well was drilled in 7,479 ft of water by the Noble Corp.'s Noble Globetrotter I drillship to a total depth of 26,371 ft, encountering more than 400 ft of net oil pay. Shell says it's wrapping up evaluation of well results and expects the resource base to reach 100 million boe.
The firm's Rydberg, Appomattox, and Vicksburg discoveries in Norphlet area are estimated to hold a total 700 million boe.
Shell, operator with 57.2% interest, is partnering in the block with Ecopetrol America Inc. 28.5% and CNOOC Ltd. affiliate Nexen Energy ULC 14.3%.
The discovery, the first for the group, is within 10 miles of the planned Appomattox development, of which Shell is operator with 80% and Nexen holds 20% (OGJ Online, Apr. 2, 2012); and the 2013 Vicksburg discovery, of which Shell is operator with 75% and Nexen holds 25% (OGJ Online, July 5, 2013).
Noble Globetrotter I will now move to drill an exploratory well at Gettysburg on Desoto Canyon Block 398, also within 10 miles of the planned Appomattox development.
Shell says Appomattox is in the design phase of development and moving forward with engineering design for the floating production system, subsea infrastructure, and wells.
Shell in 2013 produced about 180,000 boe/d from the gulf, which accounts for half of Shell's production in the US.
VNG Norge makes oil discovery in Bue prospect
VNG Norge AS has made an oil discovery in the Bue prospect near Njord field in the Norwegian Sea, while results from an appraisal well adjusted resource estimates for the Pil discovery.
The company and the Norwegian Petroleum Directorate said the drilling occurred in PL 586, which VNG Norge operates.
VNG Norge drilled exploration well 6406/12-3 A (Bue) some 2.1 km from 6406/12-3 S (Pil). The Bue well encountered an 18-m oil column in sandstones from the Rogn formation, with reservoir quality varying from good to very good, VNG said.
Pressure data indicate no communication between the Pil and Bue finds. Preliminary calculations indicate Bue has 1-4 million standard cu m of recoverable oil and condensate.
Appraisal well 6406/12-3 B, drilled 1.7 km from Pil, encountered an 82-m oil column in Upper Jurassic reservoir rocks of good quality, VNG said. Resource estimates for Pil have been adjusted to 8.8-21.1 million standard cu m (scm) of recoverable oil and condensate and 2.7-6.1 billion scm of recoverable gas.
The two wells, drilled by Transocean Ltd.'s Transocean Arctic semisubmersible rig in 324 m of water, were terminated in the Jurassic Melke formation. They were not production tested. Both will be permanently abandoned.
Atle Sonesen, VNG Norge managing director, said the company strongly believes there is a further upside in the license and may drill two more wells with the same rig in 2015.
InterOil suspends work on Wahoo-1 well
InterOil Corp., Houston, has suspended drilling of its Wahoo-1 well in PPL 474 in Papua New Guinea after intersecting gas and higher-than-expected pressures that could compromise the rig.
InterOil said significant concentrations of methane, ethane, propane, and butane were recorded and believed to be entering the wellbore from permeable zones above the predicted reservoir zone, which is yet to be penetrated.
The gas is characteristic of thermogenic hydrocarbons, indicative of an active hydrocarbon-generating source rock.
The Wahoo-1 well was designed for high pressures based on data from other wells in the region. However, pressures have exceeded that of the Antelope discovery, 170 km northwest, by about 50%.
After a review by drilling and engineering teams and expert advisers, InterOil has concluded that drilling ahead would pose an unacceptable safety risk to people and the rig, and the company has received approval from the PNG Department of Petroleum and Energy to suspend the well.
The company says operations will resume as soon it becomes feasible. The company will conduct a detailed review of well engineering, equipment, and options, and then allow a regulator to approve the company's plans.
An option includes testing of the gas-bearing permeable zones encountered in the Orubadi mudstone.
Progress on Wahoo-1 has confirmed an effective seal in the Orubadi mudstone as well as the presence of thermogenic hydrocarbons.
InterOil says drilling is required to confirm the presence of a reservoir below the well's current total depth before Wahoo can be considered a discovery.
Drilling & Production — Quick Takes
NRG, JX Nippon to build $1 billion CCS project
Units of NRG Energy Inc. and JX Nippon Oil & Gas Exploration Corp. have entered into a joint venture to build and operate Petro Nova, a carbon-capture system (CCS) in Houston. The total cost of the project is expected to be about $1 billion.
When completed, NRG says Petro Nova will be the world's largest commercial-scale CCS, recovering 90% of the carbon dioxide in processed flue gas from the existing WA Parish power plant in Fort Bend County, southwest of Houston.
The company expects the system to capture about 1.6 million tons/year of CO2 from a 240-Mw slipstream of flue gas from WA Parish Unit 8, as well as virtually all of the plant's sulfur dioxide, nitrogen oxide, and mercury. NRG says the gas leaving the system will be among the cleanest fossil-fuel emissions in the world.
After capture, the CO2 will be compressed and sent through an 82-mile pipeline to the West Ranch oil field, jointly owned by NRG, JX Nippon, and Hilcorp Energy Co. There it will be used for enhanced oil recovery (EOR) that NRG says will boost production to 15,000 b/d from the current 500 b/d. The company estimates that West Ranch field holds about 60 million bbl of recoverable oil using EOR.
Petro Nova is being financed by a grant of $167 million from the Department of Energy Clean Coal Power Initiative, loans of $250 million from Japan Bank for International Cooperation and Mizuho Bank Ltd., and equity contributions from NRG and JX Nippon of about $300 million.
BLM seeks comments on proposed CO2 wells in Colorado
The US Bureau of Land Management's Royal Gorge Field Office has begun a public scoping period for two proposed carbon dioxide wells near Gardner, Colo. Oxy USA, which operates the existing Sheep Mountain CO2 production unit, proposed the wells, the US Department of the Interior agency said on July 10. Comments will be accepted through July 25.
It said the project would take place within the boundaries of the company's existing operation on both private and BLM surface lands. Existing roads, power lines, and maintenance facilities would be used. A pipeline would be needed, but would be installed in an existing corridor, the notice said.
One well, 7-15-I, would take place on an existing pad with currently producing wells, while a new pad would be constructed next to an existing pad in order to drill the other well, 7-15-D. Most of the expansion would be reclaimed and revegetated as soon as the rig leaves the pad. The notice said each well would take about 3 months to drill.
It noted that the Sheep Mountain unit is 6 miles south of Gardner and has been producing CO2 since the 1980s. The produced CO2 is transported through an existing pipeline to the Permian basin in West Texas, where it is injected underground into producing petroleum reservoirs which are in decline.
Dua oil field offshore Vietnam brought on stream
Premier Oil Group, which includes Santos Ltd., Adelaide, has brought its Dua oil field on stream offshore Vietnam.
Dua is a 3-well subsea development tied back to the nearby Chim Sao facilities on Block 12W of the Nam Con Son basin.
Gross production from the three wells is expected to be 8,000 b/d for the first year. The oil will be processed through the floating production, storage, and offloading vessel stationed at Chim Sao with sufficient capacity to handle the output from both fields.
Dua field was discovered and appraised in 2006 (OGJ Online, Oct. 11, 2006). Government approval for development was received in December 2012 and the final investment decision was made in August 2012. Subsea wells were completed in 2013 and the flow lines, umbilicals, and hook-ups to Chim Sao finished during this year's first half.
Operator Premier holds 53.12% interest, Santos 31.88%, and PetroVietnam 15%.
FPSO contracts let in Brazil, Angola
Petroleo Brasileiro SA and Sonangol P&P have let respective contracts totaling $600 million to Saipem SPA for floating production, storage, and offloading vessels in Brazil and Angola.
Petrobras added a 4-year extension to the lease contract for the Cidade de Vitoria FPSO in the company's Golfinho field in Brazil's Espirito Santo basin. The vessel has been under contract to Petrobras since 2005, and will remain so until 2022.
Cidade de Vitoria also will receive $110 million in modification and upgrade work that will increase the produced water treatment capacity and allow the connection of two additional gas wells with a high level of condensates by first-quarter 2016.
Upgrade work will be conducted at the Saipem Execution Centre in France, while prefabrication and installation of the topside will be conducted in Brazil. The contracts are worth a combined $450 million.
Sonangol added a 2-year extension to the lease and operation contract for the Gimboa FPSO, which has been under contract to the company on Block 4/05 since 2006 (OGJ, Apr. 6, 2009, p. 52). Expected to last to first-quarter 2017, the deal is worth $150 million.
PROCESSING — Quick Takes
ORPIC advances Omani ethylene plant
Oman Oil Refineries & Petroleum Industries Co. (ORPIC) has let additional contracts to CB&I for its proposed Liwa Plastics Project (LPP) at the Sohar Industrial Port Area in Oman.
CB&I's scope of work under these latest contracts includes the technology licensing and engineering design of three units, according to CB&I.
The company will provide its CDMtbe technology for a new 90,000-tonne/year (tpy) high-conversion methyl tertiary butyl ether (MTBE) unit, as well as technology for a 41,000-tpy butene-1 recovery unit.
CB&I said it also will provide its NGL-MAXSM gas processing technology for a 18-million cu m/day NGL extraction plant.
The value of the recent contracts was not disclosed.
ORPIC previously awarded contracts to CB&I for its ethylene technology and front-end engineering and design services at LPP, under which CB&I will deliver FEED services for the grassroots 800,000-tpy ethylene plant, a pygas unit, a MTBE and butene-1 unit, two polymer plants, a gas plant and pipeline, as well as related offsites and utilities (OGJ Online, Mar. 31, 2014).
LPP, which will be adjacent to ORPIC's existing refinery and petrochemical plants at Sohar, is scheduled for completion in 2018, the state-owned company said.
CB&I previously completed FEED services for ORPIC's Sohar refinery improvement project (OGJ Online, Nov. 25, 2013; Mar. 4, 2011).
Iran to start up third gas plant for South Pars
Iran's Pars Oil & Gas Co. (POGC) reported that construction on Phases 15 and 16 at its third gas processing plant serving South Pars gas field has reached 95% completion. The plant will come online in August, POGC said.
The three-plant complex processes sour gas from Phases 6, 7, and 8 of the gas field. The first and second plants of Phases 15 and 16 are to process 25 million cu m/day of sour gas while the third plant is undergoing precommissioning.
POGC said the three gas processing plants will process at least 40 million cu m/d of gas in winter.
Development of South Pars gas field Phases 15 and 16 aims at producing 56.6 million cu m/day of gas, 75,000 b/d of condensate, and 400 tons/day of sulfur, POGC said. The two phases also will yield 1.05 million tons/day of LPG, propane, and butane as well as 1 million tons/day of ethane mainly for use as petrochemical plant feedstock.
Offshore and onshore installations of the two phases include two drilling platforms (each with 11 wells), two 32-in., and two 71-mile, 4-in. gas pipelines, along with sweetening and related services.
BP lets contract for Washington refinery
BP PLC has let a contract to Jacobs Engineering Group Inc. for work related to coker units at its 234,000-b/d Cherry Point refinery in Blaine, Wash.
Jacobs will provide engineering, design, and procurement services for a coker heater replacement project at the refinery, the company said.
The value of the contract was not disclosed.
The coker heater replacement project at Cherry Point involves the proposed replacement of the refinery's two existing coker heaters, which were installed in 1970 as part of the original plant, according to a description submitted to Metro Vancouver, a governing body designated by provincial legislation to oversee and administer resources and services (including regional planning and air quality) for the Metro Vancouver district in British Columbia.
As of April, preliminary estimates indicated the proposed project—which, at the time, still was in a pre-application stage—would result in increased emissions of air contaminants annually, including 300 tonnes/year of nitrogen oxides, 200 tpy of sulfur dioxide, 25 tpy of fine particulate matter, and 300,000 tpy of greenhouse gases.
Following the pre-application stage, the project was next due to undergo a permitting process that included an evaluation of compliance with US ambient air quality standards, according to Metro Vancouver.
Information regarding the project's evaluation under US air quality standards has not yet been made publicly available.
TRANSPORTATION — Quick Takes
First production train installed at Gladstone project
Construction company Bechtel has completed installation of the first LNG production train for the Santos Ltd.-led Gladstone LNG facility on Curtis Island, Queensland.
The $20 billion project will have two trains—the second due for completion late this year (OGJ Online, May 13, 2014).
Work is now under way to connect the individual parts of the first production train. They will then be tested as part of the overall system.
The first train is made up of 82 modules, built at Bechtel's yard in the Philippines. The company is the engineering, procurement, and construction contractor for all three CSG-LNG facilities under construction on Curtis Island (Santos' GLNG, BG's Queensland Curtis LNG, and Origin Energy's Australia Pacific LNG).
This cluster of projects makes it the largest concentration of Bechtel construction work in the world.
In the meantime it has been reported that China's Hudong-Zhonghua Shipbuilding Group has been awarded a contract to supply four LNG carriers to service the BG Group's CSG-LNG project on the island.
This follows an announcement by Teekay LNG Partners that it has acquired from BG Group a 30% interest in two of the carriers and a 20% interest in the other two.
The carriers will be delivered between September 2017 and January 2019 and will operate under 20-year, time-charter contracts plus extension options with BG subsidiary Methane Services Ltd.
The carriers will have capacity for 174,000 cu m and will be tri-fuel diesel electric vessels.
First exports from the Queensland Curtis LNG project are scheduled for December. The project will produce 8.5 million tonnes/year of LNG.
Teekay JV finalizes shipbuilding plans for Yamal LNG
Teekay LNG Partners LP, Hamilton, Bermuda, through a 50-50 joint venture with China LNG Shipping (Holdings) Ltd., has finalized shipbuilding contracts for six internationally flagged icebreaker LNG carriers for the Yamal LNG project, which lies on Northern Russia's Yamal Peninsula (OGJ Online, May 15, 2014).
Under the agreements, the JV will build six 172,000-cu m ARC7 LNG carrier newbuilds to be constructed by Daewoo Shipbuilding & Marine Engineering Co. Ltd., South Korea, for a total fully built-up cost of $2.1 billion.
The vessels will be constructed with maximum 2.1-m icebreaking capabilities in both the forward and reverse direction.
Yamal LNG—a joint venture of Novatek (60%), Total SA (20%), and China National Petroleum Corp. (20%)—will consist of three LNG trains with a total expected capacity of 16.5 million tonnes/year of LNG and is currently slated to start-up in early-2018.
