OGJ Newsletter
GENERAL INTEREST — Quick Takes
Buckeye Partners to buy half of VTTI for $1.15 billion
Buckeye Partners LP has agreed to acquire 50% equity interest in the holding company of VTTI BV for $1.15 billion. VTTI is a unit of Vitol Group.
The deal is expected to close in early January 2017. VTTI will be 50% indirectly owned by Buckeye and 50% indirectly owned by Vitol.
VTTI, through its subsidiaries and partnership interests, owns and operates 54 million bbl of petroleum product and crude oil storage capacity across 13 terminals on five continents.
Buckeye is a publicly traded master limited partnership that owns and operates a diversified network of integrated assets providing midstream logistic solutions, primarily consisting of the transportation, storage, and marketing of liquid petroleum products. It has 6,000 miles of pipeline and a terminal network comprising more than 120 liquid petroleum products terminals with aggregate storage capacity of 110 million bbl.
VTTI will continue to be run as an independent, standalone company under the leadership of CEO Rob Nijst.
Santos to sell Victorian assets to Cooper Energy
Adelaide-headquartered Santos Ltd. has agreed to sell all its remaining Victorian assets to fellow Adelaide company Cooper Energy Ltd. for up to $82 million (Aus.).
These include a 50% interest in the Casini-Henry gas development offshore Otway basin, 50% interest in the proposed $550-million Sole gas project in the offshore eastern Gippsland basin, 10% in the Minerva gas field and gas plant offshore Otway basin, and 100% interest in Patricia-Baleen gas field offshore Gippsland basin.
Santos began to withdrawal from Victoria in March this year with the sale of its interest in Kipper gas field in the offshore Gippsland basin to Mitsui E&P Australia for $520 million (OGJ Online, Mar. 3, 2016).
Santos' share of production from the most recent asset sale fields during the first half of this year was 5.2 petajoules.
For Santos the sale is in line with its objective to rationalize and shape its portfolio to become a low cost, reliable business.
For Cooper Energy the acquisition provides it with a commanding position in the eastern Australian gas market and good leverage to find an equity partner in the Sole project.
Casillas, Kayne Anderson JV expands SCOOP position
Casillas Petroleum Resource Partners LLC, a partnership formed earlier this year by Tulsa producer Casillas Petroleum Corp. and Los Angeles private equity firm Kayne Anderson Capital Advisors LP, has made its second deal for acreage in the South Central Oklahoma Oil Province (SCOOP) play.
The firm bought 30,000 net acres with net production of 550 boe/d in Garvin, Grady, and McClain counties from Continental Resources Inc., Oklahoma City, for $294 million. Ninety percent of the acreage is held by production.
"Casillas' footprint has grown to over 42,000 net acres, yielding immediate development potential in the Woodford and Springer shales with tremendous upside in multiple horizons that have produced vertically in the area for decades," commented Greg Casillas, president and chief executive officer of Casillas Petroleum.
Casillas Petroleum Resource Partners' first purchase was 12,000 net acres and 260 producing wells in the SCOOP from Chesapeake Energy Corp. for $106 million (OGJ Online, Apr. 22, 2016).
Kayne Anderson's energy segment just last week sold its Dallas-based Silver Hill firms and their 41,000 net acres in the Delaware basin of West Texas to RSP Permian Inc. for $2.4 billion (OGJ Online, Oct. 14, 2016).
Alberta boosts methane-reduction funding
The Alberta government is making an additional $33 million available to advance technologies for cutting emissions of methane from industries that include oil and gas.
The money comes from Emissions Reduction Alberta (ERA), formerly Climate Change and Emissions Management Corp., which is funded by large emitters paying into the province's Climate Change and Emissions Management Fund to comply with emission-reduction targets.
Methane-reduction projects will be selected competitively. Winners will be eligible for as much as $5 million each.
The program targets medium and long-term opportunities to lower methane emissions from oil and gas, agriculture, and landfills as well as improvements in methane detection and quantification.
The total earmarked by ERA for methane reduction is now $40 million.
The program is part of Alberta's commitment under its climate-change mitigation plan to reduce methane emissions by 45% by 2025.
Since 2009, the ERA has committed more than $300 million to more than 100 projects targeting emissions of all types of greenhouse gas. The projects have a combined value of more than $2 billion.
Exploration & Development — Quick Takes
Blocks off Bangladesh draw interest
Three international oil companies have expressed interest in two deepwater and one shallow-water blocks in the Bay of Bengal offered in a bidding round in Bangladesh.
According to press reports, Statoil ASA, Daewoo, and KrisEnergy Ltd. of Singapore filed expressions of interest by an Oct. 19 deadline.
State-owned Bangladesh Oil, Gas, and Mineral Corp. (Petrobangla) is offering deepwater Blocks DS-10 and DS-11 and shallow-water block SS-10 under terms to be negotiated.
Of the companies reported to have submitted expressions of interest, only KrisEnergy has operations in the country.
It operates onshore Block 9 under a production sharing contract. It holds a 30% interest in the block with partners Niko Exploration (Block 9) Ltd., 60%, and Bangladesh Petroleum Exploration & Production Co. Ltd., 10%.
The block includes Bangora field, recently producing 93.5 MMcfd of natural gas and 276 b/d of condensate.
Total Bangladeshi production is 2.7 bcfd of gas and 12,300 b/d of condensate.
Egdon expands interests in UK onshore licenses
Egdon Resources PLC has agreed to acquire additional interests in two of its recently announced UK 14th Onshore Oil and Gas Licensing Round awards, PEDL334 and PEDL306, through an assignment of interests from Celtique Energie Petroleum Ltd. at no cost.
The deals, covering the East Midlands area, will add 14,428 net acres to Egdon's license holdings.
Egdon and Petrichor Energy UK Ltd. have agreed to jointly take over Celtique's interest in PEDL334 covering the Humber basin. Egdon's equity in the license will increase to 60% from 37.5%, and Petrichor's to 40% from 25%.
Egdon and Petrichor have agreed to jointly take over Celtique's interest in PEDL306 covering the Widmerpool basin. Egdon's interests in the license will increase to 30% from 18.75%, and Petrichor's to 20% from 12.5%. Hutton Energy Ltd. and Coronation (Oil & Gas) Ltd. each holds 25%.
Earlier this month UK's Oil & Gas Authority, as part of the 14th Round, issued Egdon nine petroleum exploration and development licenses covering 18 UK national grid blocks and partial blocks with a total area of 281,979 acres.
In addition to the East Midlands Petroleum Province, Egdon gained licenses in the Cleveland basin.
Norway, Russia exchange Barents Sea seismic data
Norway and Russia are exchanging seismic data from areas around the countries' demarcation line in the Barents Sea.
The Norwegian Petroleum Directorate and Russia's Federal Subsoil Resources Management Agency (Rosnedra) signed an agreement in July, NPD said on Oct. 26.
"This agreement is extremely important," said Stig-Morten Knutsen, NPD's assistant director of exploration. "It allows us to achieve a better understanding of the regional geological conditions on both sides of the demarcation line and, not least, of geological structures that span across the line."
NPD has received 6,500 km of 2D seismic and Rosnedra has received 5,900 km of 2D seismic. The agreement says the authorities will exchange about the same volume of data.
From the Russian side, the exchange includes all seismic collected in 2013 in the Fedynsky license and the central Barents Sea license, in a zone 50 km from the demarcation line (OGJ Online, July 8, 2013). Also included is a line from a natural gas discovery on Kildinskoye High.
From the Norwegian side, the exchange includes seismic data that NPD collected in 2012, 2013, and 2014, limited to east of 35°E. and south of 76°10'N. The Russians will also receive a seismic line from stratigraphic boreholes on the Sentralbank High, and a long line that spans north to south in the Arctic Ocean.
Drilling & Production — Quick Takes
Statoil cancels rig contract for the Stena Don
Statoil ASA has cancelled a contract with Stena Drilling Ltd. for the Stena Don semisubmersible. The cancellation will take effect after plugging activity on Troll field has been completed in November.
The original contract termination date was Feb. 7, 2017. The rig has been on contract to Statoil since Feb. 7, 2014, performing operations for the Troll and Fram licenses.
Statoil said the Stena Don had been committed to the Fram license, but there is not a work program there and Statoil does not have any other activities where the rig could be used (OGJ Online, May 23, 2016).
Aker BP's Ivar Aasen field gets nod for December startup
The Norwegian Petroleum Directorate (NPD) authorized the production startup on Ivar Aasen field in the North Sea. Aker BP AS, the operator, has scheduled the field in 360 ft of water to come on stream during December.
Oil and gas from Ivar Aasen will be processed using Edvard Grieg field equipment. NPD said investment costs for the development are $3.2 billion.
Det norske ASA was operator of Ivan Aasen until the company merged with BP earlier this year, becoming Aker BP (OGJ Online, June 10, 2016).
BP Oman: Khazzan gas production to start in late 2017
BP Oman said Phase 1 of its massive Khazzan natural gas project in the desert 350 km south of Muscat is 80% complete and on track to start gas deliveries in late 2017. The tight gas project began in 2014 and is expected to eventually contribute about 33% of Oman's gas supply.
Most of the infrastructure already is in place, including roads, power lines, and a 60-km water pipeline from Hanya. Equipment installation is under way for a two-train gas processing plant.
The water treatment plant, waste management area, and electricity substation also have been completed along with accommodation units for the construction workforce of as many as 12,000.
The Khazzan drilling program is on track with 38 of the 50 wells needed by first gas already drilled. More than 300 wells eventually will be drilled.
BP Oman operates Block 61 with 60% interest. Oman Oil Co. E&P holds the remaining interest. Khazzan's Phase 1 is expected to produce 1 bcfd. The combined plateau production from Phases 1 and 2 is expected to be 1.5 bcfd.
Oil production starts from Pyakyakhinskoye field
PJSC Lukoil has started commercial crude oil production from Pyakyakhinskoye field in Russia's Yamal-Nenets autonomous district. Thirty-six oil wells are now in production, with a total flow rate exceeding 20,000 b/d. Crude is transported via the Zapolyarye-Purpe pipeline.
The launch of natural gas production is planned for later this year. Gas will be transported via trunk pipeline to a gas compressor station near Nakhodkinskoye field and on to the Yamburgskaya compressor station (OGJ Online, June 11, 2013).
The company said the field was discovered in 1989 in the Bolshekhetskaya depression, and that 107 wells have been drilled.
Field facilities include a 36-Mw gas turbine power plant, an oil treatment unit, a condensate de-ethanization and stabilization unit, a transfer-and-acceptance station, a gas treatment unit, and a field camp for 300 people. Facilities are designed to withstand extreme operating conditions, including ambient temperatures as low as -56° C.
PROCESSING — Quick Takes
ExxonMobil sells Nigerian retail business
ExxonMobil Corp. has agreed to sell its retail business in Nigeria to Nipco Investments Ltd., a wholly owned subsidiary of Nipco PLC, Abuja.
Terms of the sale of the company's 60% interest in Mobil Oil Nigeria weren't disclosed.
Nipco estimated market value of the deal at the time of the announcement at $130 million.
Mobil Oil Nigeria operates more than 200 service stations, with outlets in all 36 Nigerian states.
It started work when Socony Vacuum Oil Co. began selling sunflower kerosene in Nigeria in 1907.
Nipco said it will retain the Mobil brand at the service stations and continue to sell Mobil lubricants under license.
US independent refiners enter merger talks
Delek US Holdings Inc., Brentwood, Tenn., has made a formal offer to buy Alon Israel Oil Co. Ltd.'s US-based refining and marketing subsidiary Alon USA Energy Inc., Dallas, which owns and operates a 74,000-b/sd refinery in Krotz Springs, La., a 73,000 b/sd refinery at Big Spring, Tex., as well as an idled 70,000-b/sd, three-refinery complex in California.
Delek submitted a proposal to a special committee of Alon's board to acquire all outstanding shares of the company's common stock not already owned by Delek in an all-stock transaction at a fixed exchange ratio of 0.44 shares of Delek common stock for each outstanding Alon share, Alon said.
Given the all-stock nature of the proposed transaction, Delek's proposal would not be subject to any financing contingency should the deal move forward, Delek said in a filing to the US Securities and Exchange Commission.
The buyout offer follows Delek's previous purchase of about 47-48% of Alon's outstanding shares in 2015.
Alon's special committee is evaluating Delek's proposal and will respond in due course, according to Alon.
The company, however, did not disclose a specific timeframe for when it would reach any decisions regarding the offer.
Reliance plans FCCU shutdown at Jamnagar
Reliance Industries Ltd., Mumbai, is planning to shut a fluidized catalytic cracking unit (FCCU) at the Jamnagar refinery for about 5 weeks for routine maintenance and inspection beginning the second week in November.
The company said all four crude distillation units and other major secondary processing units are expected to operate at normal throughput.
The shutdown will provide an opportunity to carry out a revamp job in one of the polypropylene units.
Reliance informed various stock exchanges of its plans at the 1.24 million-b/d refinery in Gujarat, India (OGJ Online, Apr. 18, 2016).
BP pledges Kwinana renewal for 30 years
BP Australia has agreed to renew its State Agreement with the government of Western Australia for a further 30 years.
The renewal, which is subject to WA parliamentary approval, will ensure the ongoing operation of the company's oil refinery in Kwinana south of Perth.
BP says it has earmarked $80 million (Aus.) in planned maintenance and investment activities at the refinery in a bid to provide competitively priced fuels across Australia.
The company has also invested in its fuels retail business in Australia, including the opening of new retail sites and truck stops and the refreshment of existing sites.
Kwinana refinery employs more than 700 people and supplies more than 6 million tonnes/year of fuel to Western Australia, South Australia, and Tasmania.
It has invested about $150 million a year in its retail fuels business. The renewal agreement was introduced to the Western Australian parliament as a bill with modernized terms, including a focus of ensuring local businesses continue to have access to supply chain opportunities generated by the refinery.
The existing Agreement Act of 1952 was due to expire in 2020.
LG Chem plans ethylene expansion at Daesan complex
LG Chem Ltd., Seoul, is undertaking a 3-year program to expand ethylene capacity at its Daesan petrochemical complex in South Chungcheong Province, South Korea.
The expansion project will increase ethylene production capacity at Daesan's existing 1.04 million-tonnes/year naphtha cracker by 230,000 tpy to 1.27 million tpy, LG Chem said.
Due to be completed in 2019, the ethylene expansion comes as part of LG Chem's strategy to conform with the government of South Korea's call for a restructuring of its domestic petrochemicals industry to ensure its ongoing competitiveness as well as its ability to meet rising demand.
LG Chem said it will invest 287 billion won-about $250 million-to complete the project.
Once fully commissioned, the Daesan expansion will raise LG Chem's total ethylene output to 2.43 million tpy, which includes production from the company's 1.16 million-tpy Yeosu plant in the province of South Jeolla.
TRANSPORTATION — Quick Takes
Finland-Estonia gas pipeline advances
Directors of state-owned Baltic Connector Oy, Helsinki, have approved investment in the Finnish segment of the Balticconnector natural gas pipeline between Finland and Estonia.
When completed by the end of 2019, the 150-km pipeline will link Finland with the European natural gas system. The country now relies on Russia for all its gas.
The final investment decision came after Baltic Connector, the European Commission, and Elering AS of Estonia signed a construction agreement.
The EC has granted €187.5 million to the project form its Connecting Europe Facility for Energy, covering 75% of the total construction cost. The government of Finland has committed €30 million to the project.
The bidirectional Balticconnector pipeline is to have capacity of 7.2 million cu m/day. About 82 km of the pipeline will be subsea. Of the onshore portion, 22 km will be in Finland, and 47 km will be in Estonia.
In a related project, the Connecting Europe Facility is helping to fund the €558 million cost of a 534-km pipeline linking Lithuania and Poland. Of the total length, 357 km is to be in Poland and 177 km in Lithuania.
Completion of the Gas Interconnection Poland-Lithuania project also is due by the end of 2019. The EC and governments of Poland, Lithuania, Latvia, and Estonia reached agreement on construction of the project last October.
ETP to buy interests in PennTex Midstream
Energy Transfer Partners LP (ETP) has agreed to acquire certain interests in PennTex Midstream Partners LP from various parties for $640 million.
After closing, ETP will own 100% of the general partner of PennTex Midstream, all of its incentive distribution rights, and 65% of the total limited partner interests in PennTex Midstream. The payment comprises 50% ETP common units issued directly to sellers and 50% cash. The deal is expected to close in the fourth quarter.
PennTex Midstream owns midstream assets in the Terryville complex of northern Louisiana consisting of a rich natural gas gathering system, two cryogenic natural gas processing plants totaling 400 MMcfd of capacity, and residue gas and NGL pipelines. ETP says the assets complement its existing midstream footprint in the region.
PennTex Midstream's primary customer is Range Resources Corp. In addition to long-term fee-based gathering and processing agreements that include minimum volume commitments, PennTex Midstream has exclusive right to build all midstream infrastructure for Range within an area of mutual interest (AMI) in northern Louisiana, and provide midstream services to support Range's current and future production on its operated acreage within the AMI.
NuStar to buy Corpus Christi storage assets
NuStar Energy LP has agreed to purchase crude oil and refined product storage assets in the Port of Corpus Christi, Tex., from Martin Midstream Partners LP for $93 million. The deal is expected to close by yearend.
The acquired terminal comprises 1.15 million bbl of total storage, representing 900,000 bbl of crude storage, commonly known as the Corpus Christi crude terminal, and 250,000 bbl of refined product storage. The terminal has direct connectivity to Eagle Ford crude production and receives crude and condensate via its connection to the Harvest pipeline and six-bay truck rack. The terminal has access to two of the port's deepwater crude docks, including exclusive use of the port's new crude dock, and a barge dock. The terminal is on 25 acres and has room for further expansion.
NuStar also expects to achieve operational synergies between its existing North Beach terminal and the Martin terminal, which are adjacent to each other in the Port of Corpus Christi. When combined with its existing terminal operations, the purchase will give NuStar more than 3.6 million bbl of total storage in the Port of Corpus Christi, including 3.1 million bbl of crude storage and 577,000 bbl of refined product storage.