OGJ Newsletter

Drilling commences in Egypt's Al Jahraa field

A two-well drilling program will target the Cretaceous Abu Roash-C reservoir in the fault block immediately south of the Al Jahraa SE-1X discovery in Abu Sennan concession in Egypt, according to partner Rockhopper Exploration PLC, Salisbury, UK.

Rockhopper acquired its interest in the Abu Sennan concession from Beach Petroleum (Egypt) Pty. Ltd., the Egyptian subsidiary of Beach Energy Ltd., Adelaide. The concession is in the Abu Gharadig basin in Egypt's Western Desert, where SE-1X well intersected 16.4 m of net pay. Rockhopper along with operator Kuwait Energy PLC spudded the Al Jahraa SE-2X on Apr. 25 and expects to complete drilling and evaluation in 40 days. The company estimates an addition of 20 million bbl of oil in place if the well proves successful. The company plans to complete the well as an oil producer.

Following successful completion, the rig will move to the Al Jahraa-9 location to test the Abu Roash-C at a deeper location than the current deepest well, Al Jahraa-4. The company aims to demonstrate connection between the Al Jahraa and Al Jahraa South East fields through the oil leg.

Since 2000, the Western Desert has emerged as the key oil producing region where most of Kuwait Energy's oil fields are located. The operator did report a 4% decline in Egyptian production for this year's first quarter over yearend of 2016.

Kuwait Energy holds an operating interest of 50% in Abu Sennen, Dover Petroleum has 28%, and Rockhopper holds 22%.

Cairn-led group to drill wildcat offshore Senegal

A group led by Cairn Energy PLC working offshore Senegal will spud a wildcat in the deepwater Basin Fan play in the coming weeks.

Combine partner FAR Ltd., Perth, said the well, FAN South-1, will be the group's first pure exploration well offshore Senegal since the SNE discovery in 2014.

All the activity since then has been taken up with appraisal work, but FAR said the wildcat will be drilled on completion of the current SNE-6 appraisal, which has now reached total depth with logging, sampling, and testing under way.

Fan South-1 is planned as an evaluation of the South Fan prospect, which lies 35 km south of the Fan-1 discovery, also made in 2014.

The prospect comprises several stacked reservoir targets and the well will be drilled to a total depth of 5,317 m in 2,139 m of water.

The well will assess the upside potential for improved reservoir presence and quality in the deepwater play. FAR says the prospect has the potential to contain 134 million bbl of recoverable oil. The company rates the well as having an 18% chance of success.

FAR has 15% interest in the prospect while operator Cairn, Woodside Petroleum Ltd., and Petrosen hold respective 40%, 35%, and 10% interests.

Woodside steps up exploration program off Myanmar

Woodside Petroleum Ltd., Perth, plans to drill five wells offshore Myanmar in 2017, one more than originally scheduled, following encouraging results in 2016.

Interpretation of seismic data has indicated what the company calls "an additional low-cost exploration target with upside" on Block A-6.

This block already contains the Shwe Yee Htun-1 discovery where Woodside found 32 m of net gas pay in January 2016. Woodside is operator for local firm MPRL E&P Pte. Ltd. and France's Total SA-a combine that Woodside entered into in December 2012.

The company has also participated in a successful well on Block AD-7 called Tha lim-1A-operated by South Korea's Daewoo International-that encountered 62 m of net gas pay.

The Thalin-1B appraisal was drilled earlier this year as a reentry and side-track of Thalin-1A and recovered 99 m of core and wireline logs across the objective reservoir interval.

Initial multirate drillstem test results from the lower reservoir section in this well provided sustained flow rates of 50 MMcfd of gas during a 50-hr period through a 48/64-in. choke. The result indicates a good-quality reservoir.

Preparations are now being made to test the upper reservoir in Thalin-1B.

The rig will then be moved to drill the Thalin-2 appraisal well followed by two exploration wells-one on Block A-6 and another on Block AD-7.

Woodside has interests in six large offshore permits in Myanmar covering a total of 46,000 sq km.

Myanmar was opened up for exploration following the political reforms of 2011 and subsequent lifting of European Union and US sanctions, enabling international companies to reenter the region.

Drilling programs began in 2014. The country is estimated to contain 3.2 billion bbl of oil and 18 tcf of gas with potential for vastly greater amounts, thus attracting most of the world's major players.

Fitch forecasts increasing US rig counts

US exploration and production budgets are expanding for the first time since 2014, Fitch Ratings said, adding that its analysts expect higher US rig counts along with increased drilling and completion spending in 2017 compared with 2016.

"Capital allocation is expected to be weighted toward the highest-return shale plays with growth potential such as the Permian, Eagle Ford, STACK, Haynesville, and Marcellus basins," Fitch said.

Growing production, higher oil and gas prices, and leaner cost structures should lead to increased cash flows for producers, analysts said.

Fitch forecast average US Lower 48 land rig counts will increase 60-65% year-over-year, with the pace of rig additions moderating following this year's first quarter.

"This translates into a US Lower 48 land rig count averaging around 800 rigs in 2017, with rig counts growing to about 850-875 rigs by yearend 2017," Fitch said.

The rating agency believes the rate of US rig count growth in future years will be much more limited.

Encana advances condensate-focused Montney program

Encana Corp., Calgary, expects its Montney acreage in western Canada to produce 70,000 b/d of liquids, most of which will be condensate, as well as 1.2 bcfd of natural gas by 2019.

The program is part of the firm's 5-year, four-basin plan, and is fully self-funding. At a flat $55/bbl West Texas Intermediate oil price and $3/MMbtu New York Mercantile Exchange gas price, Encana expects its drilling program will generate non-GAAP operating margins of $14/boe.

The firm says its latest completion designs across its condensate-rich Montney areas are delivering 60-day initial production rates of 500-1,200 b/d of condensate. Encana now has four wells in Pipestone that have each produced more than 100,000 bbl of condensate in fewer than 100 days.

In addition to examining further oil and condensate growth in Pipestone, the firm is eyeing growth opportunities in the Cutbank Ridge area beyond 2018 and the stacked pay potential of the Montney zone within the Duvernay.

In Cutbank Ridge, two Veresen Midstream Ltd. partnership processing plants, Tower and Sunrise, remain ahead of schedule to be operational in the fourth quarter. A third facility, Saturn, is expected to be operational in early 2018. Encana has secured firm downstream transportation capacity for its expected gas and liquids growth, including service on the Nova Gas Transmission Ltd. system.

Encana's total net position in the Montney is about 600,000 acres. The firm also has a major presence in each of the Duvernay play of Alberta, Permian basin of West Texas and southeastern New Mexico, and Eagle Ford shale of South Texas.

Kashagan production said to be on target

Production at giant Kashagan oil field in the Caspian Sea off Kazakhstan is on track to reach a targeted 370,000 b/d by yearend.

Sauat Mynbayev, chief executive officer of state-owned KazMunayGas, which holds a 16.88% interest in North Caspian Operating Co. BV, told the Kazakhstan National Information Agency onshore facilities can handle production of 450,000 b/d.

The higher rate would require gas injection, for which no decision has been made, he said.

Discovered in 2000, the field was shut in quickly after production started in 2013 because of gas leakage in a marine pipeline. It restarted last September.

OMV plans petchem turnaround at Austrian complex

Austria's OMV AG will shut down the petrochemical portion of its 203,892-b/d integrated refinery and petrochemical complex in Schwechat, Austria, beginning in mid-April for 2 months of routine turnaround activities.

Scheduled to occur every 6 years, the 2017 turnaround at Schwechat will involve a comprehensive, routine safety inspection of petrochemical units to be carried out in cooperation with TUV Austria Holding AG's Schwechat division, OMV said.

To be executed in parallel with the turnaround at the neighboring Borealis AG subsidiary Borealis Polyolefine GMBH's nearby petrochemical plant, the turnaround at Schwechat-which supplies monomer feedstock to Borealis' plastics-manufacturing site-will include maintenance work and safety inspections, as well as a range of unidentified project implementations in various unidentified operational areas.

Alongside coordinated inspections at both the Borealis plant and OMV's refinery to ensure efficient production planning of the integrated operations, the €110-million turnaround specifically will involve work at four process furnaces, 71 columns, 508 heat exchangers, 698 containers, 4,188 fittings, and 1,485 safety valves, as well as repairs and upgrades to about 12 km of pipelines, OMV said.

Maintenance, repair, upgrading, and inspection activities are scheduled to wrap in mid-June, the firm said.

The Schwechat refinery's 2017 turnaround follows a 2-month turnaround of fuel production units at the site during April-June 2016.

Gazprom Neft adds rail project to Omsk refinery upgrade

PJSC Gazprom Neft has started construction of a railcar oil products-loading terminal, AUTN-1, at its 21.4 million-tonne/year Omsk refinery in Western Siberia as part of the ongoing modernization and upgrading program to reduce environmental impacts as well as improve processing capacities, conversion rates, energy efficiency, and production qualities at its Russian refineries by 2020.

Designed to replace the existing open-gallery overhead rail installation at the Omsk refinery's Commodity Supply Base No. 1, the 1.2 million-tpy AUTN-1 will be fully automated to improve accuracy of filling operations and commercial accounting for all product shipments, including gasoline, diesel, marine fuels, aromatic hydrocarbons-paraxylene, o-xylene, benzene, toluene concentrate-and aviation fuels, Gazprom Neft said.

To prevent release of fumes at the loading operations, AUTN-1 will feature unidentified technology to ensure airtight and leak-proof filling, including an activated carbon filtration system capable of absorbing up to 99% of vapor from finished products and returning it to the refinery for reuse in secondary processing activities, the operator said.

While it confirmed a project cost of 2.8 billion rubles, Gazprom Neft did not reveal a firm timeline for startup of AUTN-1.

This latest 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 manufacturing site's overall environmental performance as well as its yield of light-end petroleum products.

RIL completes Dahej ethane project

Reliance Industries Ltd. (RIL), Mumbai, has completed and commissioned an ethane project at its Dahej manufacturing facility in India's Gujarat state. The work took less than 3 years.

The project included securing ethane refrigeration capacity along the US Gulf Coast, delivery of dedicated very large ethane carriers for shipments from the US Gulf Coast to India's west coast, construction of ethane receipt and handling facilities, and laying pipelines and upgrading crackers to receive ethane at Dahej, Hazira, and Nagothane manufacturing facilities.

RIL said the supply of ethane from the US will provide feedstock security and flexibility and allow the company to select the best feed mix based on market conditions.

European firms commit to funding half of Nord Stream 2

Five European energy companies have committed to provide long-term financing for 50% of the total cost of the Nord Stream 2 natural gas pipeline project.

The project company, Nord Stream 2 AG, signed agreements with Engie, OMV AG, Royal Dutch Shell PLC, Uniper, and Wintershall Holding GMBH. Russia's Gazprom is and will remain the sole shareholder of Nord Stream 2 AG.

Total cost is estimated at €9.5 billion. Each of the five European companies will fund as much as €950 million.

The 1,220-km twin pipelines will have a total capacity of 55 billion cu m/year and provide a direct link from Russian gas reserves to European consumers from the Russian coast via the Baltic Sea to Greifswald in Germany.

Construction is scheduled to begin in 2018 and be completed by yearend 2019. Nord Stream 2 will largely follow the route of the existing Nord Stream pipeline.

Australia resurrects west-east gas pipeline concept

The long-considered concept of a natural gas pipeline linking fields in Western Australian to markets along the country's east coast has been resurrected by the federal government as a possible way to solve the looming domestic gas supply shortages in the east.

New support for the scheme has been voiced by Energy Minister Josh Frydenberg and Finance Minister Mathias Cormann. Support has also come from former Western Australian Premier Colin Barnett who believes that gas discoveries off the northwest coast in the last 20 years could provide 100 years of gas for Australia.

Barnett considered the trans-Australian pipeline as an option for supplying the east coast when he was Western Australia's Resources Minister in the 1990s.

But the original concept came from former Federal Energy Minister R.F.X. Connor during the mid-1970s when the Whitlam Labor government was in power. Connor, a staunch nationalist, was opposed to exporting North West Shelf gas as LNG, preferring to keep it for Australia's domestic market.

Current Energy Minister Frydenberg acknowledged that the idea has been around for decades but added that the option was appealing as a way of alleviating the tight gas market in the eastern states. He said it would be nation-building infrastructure and the idea is one that the Australian government is seriously pondering.

Estimated to cost in excess of $5 billion (Aus.), the line could be laid from northwest Western Australia for 1,500 km across the inland to link with the Moomba facilities in northeast South Australia and then use existing pipelines to the east coast.

Enthusiasm for the plan, however, is not universal. Other commentators say that any gas delivered from west to east will be expensive. There could also be major problems in finding sufficient gas in Western Australia as much of the developed offshore gas is already earmarked for international markets. Suppliers are only likely to make gas available beyond their domestic market obligations to the home state if the price is commercially viable.

Frydenberg concedes that the economics would need to step up but says the government is investigating.

The trans-Australian line idea has coincided with this week's announcement that the Northern Territory government is putting $250,000 towards a feasibility study to expand the Darwin LNG project to a two-train facility supplied by undeveloped gas fields in the Timor Sea.

The Northern Territory also is host to unconventional onshore gas resources that analysts suggest are large enough to supply both LNG markets and markets along the east coast, the latter via a pipeline link soon to be built to Queensland. However, this supply is on hold due to the moratorium placed on hydraulic fracturing that has cut onshore exploration and development programs.

ConocoPhillips group ponders Darwin LNG expansion

ConocoPhillips is heading a group of companies involved in Timor Sea gas fields that has started to mull over the feasibility of a multimillion-dollar expansion of the existing Darwin LNG project that currently sources gas from Bayu-Undan field.

ConocoPhillips serves as operator or Darwin LNG, which is cited at Wickham Point. Other Darwin LNG partners include Santos Ltd, Eni SPA, Inpex, Tokyo Electric Power, and Tokyo Gas Co.

Currently, the plant has only one train. With a production capacity of 3.6 million tonnes/year, it has been on stream since 2006 but is expected to run low on gas supplies from Bayu-Undan by 2022. ConocoPhillips and Santos have already been considering a $10-million development of their Barossa and Caldita fields in the eastern Timor Sea to fill the coming shortfall for Train 1.

The new study will look at finding ways to develop other gas fields to supply a second train at the Wickham Point site.

The $625,000 (Aus.) project is being backed by a number of companies, including ConocoPhillips, Santos, Origin Energy Ltd, Royal Dutch Shell PLC, Eni, PTTEP, and SK Corp., that hold interests in these as-yet undeveloped offshore gas fields in the Timor Sea region.

They include Evans Shoal, Poseidon, Cash-Maple, and Petrel-Tern, which have languished in the uneconomic basket for a number of years for various reasons.

The Northern Territory government also is backing the feasibility study with $250,000 because it sees the plan as an important investment towards a business case for potential expansion of Darwin LNG that would result in creation of jobs during construction and operation.

The government backing is in direct contrast to its current moratorium on hydraulic fracturing for the onshore industry in the Northern Territory.