OGJ Newsletter

May 30, 2016
International news for oil and gas professionals


Israel cabinet okays gas development deal

The Israeli cabinet has approved a revised outline for natural gas regulation needed for development of deepwater Leviathan field and expansion of nearby Tamar field.

The approval came after Noble Energy Inc., operator, and Delek Group, a major interest owner, agreed to the revisions in a meeting with officials of the Ministry of National Infrastructures, Energy, and Water Resources.

In March, Israel’s High Court of Justice rejected a part of the outline that guaranteed regulatory and price stability for 10 years (OGJ Online, Mar. 28, 2016).

“The new version obviates the government’s obligation to oppose private legislation seeking to change policy relating to Israel’s offshore gas fields and provides greater leeway for future government administrations to revise natural gas policy, should the need arise,” the energy ministry said in a statement.

Prime Minister Benjamin Netanyahu, who supports further development of Israel’s offshore gas resources, welcomed the cabinet’s approval of the gas deal.

“The important thing now is not to delay,” he said.

Opposition remains strong, however. Environmental Protection Minister Avi Gabbay asserted a lack of competition and said the outline allows prices too high to enable gas to cut pollution.

Alberta submits bill creating carbon tax

The Alberta government has submitted legislation to impose a carbon tax, part of its plan announced last year to address climate change (OGJ Online, Nov. 23, 2015).

The tax would be imposed on sales of transportation and heating fuels at the rate of $20/tonne of carbon dioxide emitted in 2017 and $30/tonne in 2018 and after.

Low and middle-income Albertans, representing about two thirds of the population, would be eligible for rebates.

A government statement said, “Every penny raised through the carbon levy will be reinvested in Alberta to reduce carbon pollution and provide rebates to help Albertans adjust.”

The law also would establish Energy Efficiency Alberta, “an agency that will develop and deliver provincial-scale energy efficiency and small-scale renewable programs and services.”

Still in development is legislation implementing parts of the climate program affecting the oil and gas industry, which includes a cap on greenhouse gas emissions from operations in the oil sands region.

Parente appointed as Petrobras chief executive

Pedro Pullen Parente has been tabbed by Brazil’s acting President Michel Temer to take the role of chief executive officer of state-owned Petroleo Brasileiro SA (Petrobras).

He succeeds Aldemir Bendine, who took the position in February 2015 following the resignation of Maria das Gracas Silva Foster and five other senior executives amid a corruption scandal that involved the highest reaches of the Brazilian government (OGJ Online, Feb. 9, 2015).

Parente, currently chairman of Sao Paolo stock market operator BM&F Bovespa, previously served as chief executive officer and president of agribusiness and food giant Bunge Brasil SA from 2010 to 2014.

Petrobras posted a first-quarter net loss of $340 million, attributing it primarily to higher interest costs and negative monetary and exchange rate variations; a 7% reduction in oil and gas production; an 8% decline domestic sales of oil products; an increase in depreciation costs; and higher spending on idle equipment, particularly drilling rigs.

Exploration & DevelopmentQuick Takes

India launching bid round for small fields

India is launching a bid round for 67 small fields in 46 contract areas in nine sedimentary basins, India’s Press Information Bureau reported. The fields, both on and offshore, have been discovered by India’s national oil firms. The round will have no mandatory domestic participation. It also will have no mandatory work program or prior technical experience for the bidders. There will be no restriction on exploration during the contract period.

The Discovered Small Field Policy “is designed to be investor friendly” and is based on an “easy-to-administer” revenue-sharing contract model. Goods and services imported for petroleum operations will be exempted from custom duty.

The round begins May 25 in New Delhi in an event led by Dharmendra Pradhan, the petroleum and natural gas minister.

PPL finds gas with first exploration well on Kotri block

The Kotri X-1 well flowed gas at an a rate of 3.4 MMcfd with a wellhead pressure of 608 psi, according to a press release from Pakistan Petroleum Ltd. (PPL). The operator holds 100% working interest in the Kotri block, and its first exploration well is in the Hyderabad district of Pakistan’s Sindh Province.

The well was spudded on Feb. 20 and reached a final depth of 3,892 m on Apr. 23. Based on gas shows encountered during drilling and wireline logs, the operator tested the Massive Sands of the Lower Goru formation, the company said. Preliminary testing indicates a tight gas reservoir, however, the company is planning further evaluation to determine commercial nature of the discovery.

PPL was awarded four exploration blocks by Pakistan’s government in 2010 with the expectation of investing $24.2 million on exploration for hydrocarbon reserves in the area, including Blocks 2468-12 (Kotri), 2568-21 (Kotri North), 2468-10 (Sirani), and 3170-6 (Dera Ismail Khan) (OGJ Online, May 3, 2010).

Petroceltic finds gas, condensate with Ain Tsila well

The AT-13 appraisal well penetrated 73 m of gas, condensate-bearing Ordovician formation in Algeria’s Ain Tsila development (OGJ Online, Sep. 25, 2014). Petroceltic International PLC reported on May 23 that its latest appraisal well is the second in a campaign of as many as 24 development wells. The AT-13 is north of the field, 1.8 km from the AT-8 well, and 6.1 km from the original discovery well AT-1 (OGJ Online, Aug. 4, 2009).

The field is part of the Isarene production-sharing contract in the Illizi basin in eastarn Algeria. The initial agreement, signed in August 2012, called for 18 vertical wells to produce a combined 355 MMscfd of wet gas during a 14-year plateau to the new gas processing plant (OGJ Online, Aug. 14, 2012). A further 106 development wells were estimated to be needed to maintain the plateau.

The well was spudded on Apr. 20 and reached TD of 2,220 m on May 14. Wireline logging results indicate good reservoir quality similar to that encountered in AT-8, the company said.

Test results will be confirmed later in 2016 in a planned batch completion. The Sinopec rig will move to the AT-11 development well, which is 4.2 km north of AT-8 and 1.8 km from the AT-1. The AT-11 will target the Ordovician at a planned MD of 2,050 m.

Petroceltic holds 38.25% interest, Sonatrach 43.375% interest, and Enel 18.375% interest in the Isarene PSC. Petroceltic sold 18.375% interest to Sonatrach in July 2014.

Cairn has success with sixth Senegal appraisal well

Cairn Energy PLC’s SNE-4 well, drilled 85 km offshore Senegal on the Sangomar offshore block in 942 m of water, confirms the extension of reservoirs in the eastern extent of SNE field, more than 5 km east and down-dip of SNE-3 (OGJ Online, Mar. 9, 2016). The SNE-4 reached TD of 2,944 m and encountered oil-bearing upper reservoir sands similar to those encountered as gas-bearing elsewhere in SNE field, the company said.

The uppermost gas sands encountered in SNE-3 and BEL-1 (OGJ Online, Apr. 11, 2016) were also present and gas-bearing in SNE-4. The newest venture marks the sixth well Cairn and its JV partners have drilled offshore Senegal, the fourth well this year. The SNE-4 encountered a gross oil column of 100 m similar to SNE-1, SNE-2, SNE-3, and BEL-1. Initial indications confirm 32° gravity oil seen across the field, confirmed by 108 m of continuous core taken across the oil bearing reservoir interval, the company said.

SNE field was discovered in 2014, and Cairn’s latest appraisal well further confirms the eastern extent of the field.

The Ocean Rig Athena drillship will now be demobilized and the fourth well has been plugged while the JV continues work on its data collected during this drilling campaign, including two drillstem tests and more than 600 m of core.

Drilling & ProductionQuick Takes

Rystad: 3,900 DUC horizontal oil wells in US

US shale operators have accumulated about 3,900 drilled but uncompleted (DUC) horizontal oil wells with more than 90% in major liquids plays, said Rystad Energy’s latest analysis.

Rystad estimates the Permian basin has 1,200 wells awaiting completion services; Eagle Ford, 1,000; the Bakken, 850; the Niobrara, 620; and 270 DUCs are spread across other plays.

DUC numbers have grown during the current oil-price slump. The DUC inventory includes wells with varying production expectations. Given differences among firms, the pace of DUC conversions will vary by operator, analysts have said.

Rystad Energy, an independent oil and gas consultant, maintains a shale well database called NASWellCube, which includes the DUC inventory.

BP starts up water injection at Thunder Horse

BP PLC has started up a water injection project at its Thunder Horse platform in the deepwater Gulf of Mexico to boost oil and gas recovery from one of the field’s three main reservoirs.

The firm over the past 3 years has refurbished the platform’s existing topsides and subsea equipment while also drilling two water-injection wells. The improvements are expected to allow the facility to recover an additional 65 million boe over time.

The Thunder Horse platform, which sits in more than 6,000 ft of water and began production in June 2008 (OGJ Online, Dec. 22, 2008), has the capacity to handle 250,000 bbl of oil and 200 MMcfd of natural gas. The facility continued to operate while work on the water injection project was under way.

The project is the second of five major upstream projects BP expects to bring online in 2016. It is part of the firm’s plan to add 800,000 boe/d of new production globally from projects starting up during 2015-20.

In the deepwater gulf, the Thunder Horse South expansion project will add a subsea drill center roughly 2 miles from the Thunder Horse platform, and the Mad Dog Phase 2 project will develop resources in the central area of Mad Dog field through a subsea development tied back to a new floating production hub consisting of as many as 24 wells from four drill centers.

Thunder Horse is operated by BP with 75% working interest. ExxonMobil Corp. holds the remaining 25%.

Statoil cancels West Hercules rig contract

Statoil ASA has cancelled a contract with Seadrill Ltd. for the West Hercules semisubmersible drilling rig. The contract was to expire in 8 months on Jan. 31, 2017. Seadrill said it will receive a lump-sum payment of about $61 million plus reimbursement for costs associated with rig demobilization.

The rig has been on contract with Statoil since Jan. 31, 2013. For the past 18 months, it has been involved in an exploration campaign offshore Newfoundland and Labrador.

Statoil said the original plan was for the rig to move to the Norwegian Sea for a drilling campaign that was to start around July 1 in the Aasta Hansteen license (OGJ Online, Jan. 8, 2013).

But in fall 2015, it was decided to postpone Aasta Hansteen production startup for 1 year until the last half of 2018. The field drilling program also was postponed in part because Statoil said “it is not preferable to complete the wells too early before production startup.”

Freeport-McMoRan cancels third drillship contract

Freeport-McMoRan Oil & Gas LLC (FMOG), a unit of Freeport-McMoRan Inc., has agreed with Rowan Cos. PLC to immediately cancel the contract for the Rowan Relentless drillship, which was scheduled to terminate in June 2017.

FMOG will pay Rowan $215 million in cash to settle outstanding receivables and early termination of the contract. Rowan may also receive additional contingent payments from FMOG of $10 million and $20 million, respectively, depending on the average price of oil over a 12-month period.

Rowan expects to reduce costs by warm stacking the rig.

Freeport, which is restructuring its oil and gas business (OGJ Online, Apr. 6, 2016), also this month agreed with Noble Corp. PLC to cancel the contracts for the Noble Sam Croft and Noble Tom Madden drillships (OGJ Online, May 11, 2016).


TonenGeneral commissions unit at Chiba refinery

TonenGeneral Sekiyu KK has implemented technology from GTC Technology US LLC, Houston, for a recently commissioned grassroots mixed xylene recovery unit at its 152,000-b/d Chiba refinery in Ichihara City, Chiba Prefecture, Japan.

GTC Technology has supplied its proprietary Dividing Wall Column (GT-DWC) technology for the 230,000-tonne/year unit, which TonenGeneral entered into commercial operation in April, the service provider said.

Equipped to produce xylenes, high-purity toluene, and high-purity C9 aromatics out of the same column, the unit also features a first-of-its-kind design for DWCs that enables overhead vapors to provide heating duty to two upstream units, GTC said.

In addition to process licensing, GTC’s scope of work on the project included basic engineering design, equipment supply, and process guarantees for the unit.

The new mixed xylene recovery unit comes as part of Tonen-General’s shift from fuels to petrochemicals, one of the core business strategies outlined in its medium-term management plan announced in February 2013, TonenGeneral said in an Apr. 27 news release.

Alongside maximizing the value of crude processed at the refinery, the unit also will enable the company to respond flexibly to the drop in US demand for petroleum products and anticipated increase in demand for petrochemical products in China and elsewhere, the company said.

TonenGeneral cut crude oil processing capacity at the Chiba refinery to 152,000 b/d from its previous capacity of 175,000 b/d at the end of March 2014 to comply with a 2010 ordinance enacted by Japan’s Ministry of Economy, Trade & Industry (METI) requiring Japanese refiners to raise their mandatory cracking-to-crude distillation capacity ratio to 13% or higher from 10% by March 2014 (OGJ Online, Mar. 26, 2014; Dec. 3, 2012).

Chinese integrated refiner commissions unit

Shandong Shouguang Luqing Petrochemical Co. Ltd. (SSLPC) formally has accepted performance of Honeywell International Inc. subsidiary Honeywell UOP LLC’s C4 Ole-flex process unit for production of isobutylene at its integrated refining and petrochemical complex in Bohai Industrial Park in Shouguang City, Shandong Province, China (OGJ Online, Sept. 15, 2014).

First commissioned in November 2015, the 170,000-tonne/ year unit has enabled SSLPC to begin producing isobutylene— a key ingredient for making high-octane fuel and synthetic rubber—nearly a year ahead of schedule to help support growing demand for fuel and petrochemicals in China’s industrial sector, Honeywell UOP said.

Following its gradual build to full capacity, the unit continues to operate as planned at normal rates of production.

Initially scheduled for startup in 2016, the C4 Oleflex unit—China’s first—began operating only 20 months after project kick-off as a result of preengineered unit components, the service provider said.

Alongside engineering design, catalysts, adsorbents, specialty equipment, staff training, and technical service for the unit, Honeywell UOP also provided technology licensing for its proprietary C4 Oleflex process, which uses catalytic dehydrogenation to convert isobutane to isobutylene.

In addition to the 170,000-tpy C4 Oleflex unit, SSLPC’s integrated refining and petrochemical complex includes the following capacities: crude distillation, 3 million tpy; catalytic cracking, 2.1 million tpy; catalytic reforming, 1 million tpy; delayed coking, 1.5 million tpy; diesel hydrotreating, 1.2 million tpy; gasoline hydrotreating, 1.2 million tpy; alkylation, 200,000 tpy; asphalt, 600,000 tpy; sulfur recovery, 30,000 tpy; aromatics, 800,000 tpy; gas separation, 600,000 tpy; MTBE, 100,000 tpy; polypropylene, 200,000 tpy.

Enterprise commissions Delaware basin gas plant

Enterprise Products Partners LP (EPP), Houston, has commissioned a cryogenic natural gas processing plant in Eddy County, NM, along with associated gas and NGL pipelines to handle growing production of NGL-rich natural gas in the Delaware basin (OGJ Online, Sept. 30, 2014).

Equipped with a nameplate capacity to process 200 MMcfd of natural gas as well as the capability to extract as much as 25,000 b/d of NGLs, the South Eddy plant entered commercial operation in early May, EPP said.

The South Eddy plant, which is supported by long-term, fee-based agreements, is now processing gas volumes that prior to the plants startup were flared, shut-in, or blended into a residue pipeline with no NGL upgrade, the company said.

Alongside construction of the South Eddy plant, EPP also built about 90 miles of linking high-pressure gathering lines as well as a 71-mile extension of its Mid-America Pipeline system that provides Delaware basin producers connectivity to the operator’s integrated midstream network, including access to the NGL fractionation and storage hub at Mont Belvieu, Tex.

Because production in the Delaware basin continues to grow despite the decrease in rig count nationwide, EPP remains on track with its previously planned expansion of midstream services in the region, including startup during this year’s third quarter of a second cryogenic processing plant at Waha under joint development with an affiliate of Occidental Petroleum Corp., Teague added.

The 150-MMcfd cryogenic gas processing plant, which will be owned by the EPP-Oxy joint venture Delaware Basin Gas Processing LLC, also is supported by long-term, firm delivery contracts (OGJ Online, Apr. 30, 2015).

In addition to operating the Waha plant, EPP will build, own, and operate a 12-in. OD pipeline that will move NGLs from the new plant to one of EPP’s NGL pipelines with access to its NGL fractionation and storage in Mont Belvieu.

The Waha plant additionally will be equipped with an NGL-extraction capability of 20,000 b/d, EPP said in a May presentation to investors.


NEB recommends approving KMI’s TMX project

Canada’s National Energy Board (NEB) has recommended approval of Kinder Morgan Inc.’s Trans Mountain Expansion (TMX) project. The project will add 980-km of pipeline, largely in the existing line’s corridor, boosting crude throughput from Edmonton, Alta., to Burnaby, BC, to 890,000 b/d from 300,000 b/d. Likely export destinations include Asia, California, and Washington state.

NEB’s recommendation included a list of 157 primarily environmental conditions to be met. Canadian Association of Petroleum Producers Pres. Tim McMillan described the decision as “a milestone for the future of Canada.” McMillan also expressed his confidence in the current regulatory process, saying, “Canadians can have faith in… the decision at the end of the day.”

Alberta Energy Minister Margaret McCuaig-Boyd said NEB’s recommendation “fits a responsible national approach to energy infrastructure… balancing the need for much stronger action on climate change with the need to pay for that action.”

KMI in December 2013 filed a 16,000-page facilities application with NEB for TMX and has been engaged in community outreach since. The government of Canada will make a final decision on the $6.8-billion (Can.) project by yearend. The company plans to start construction in September 2017 and place the expansion in service December 2019.

Enbridge Inc.’s Northern Gateway pipeline from Bruderheim, Alta., to Kitimat, BC, was approved in 2014 with 209 conditions (OGJ Online, June 18, 2014). Canadian Prime Minister Justin Trudeau, however, has proposed a ban on crude oil tankers off northern British Columbia, placing this project in doubt (OGJ Online, Nov. 16, 2014).

The Canadian Energy Research Institute in a study released earlier this week said it expects both projects to begin operation within the next 5 years despite the delays and opposition each has encountered so far (OGJ Online, May 17, 2016).

Oryx seeks extension of Delaware basin oil line

Oryx Midstream Services LLC operating subsidiary Oryx Southern Delaware Oil Gathering & Transport LLC has launched an additional binding open season to secure volume commitments or acreage dedications supporting a 120-mile extension of its Oryx Trans Permian (OTP) crude oil gathering and transportation project into the liquids-rich southern Delaware basin in Texas. The proposed extension is already supported by two producers operating about 50,000 acres in Reeves and Ward counties.

Construction will begin this month and the system is scheduled for completion in this year’s fourth quarter. The full OTP system will include more than 350 miles of oil pipeline supported by more than 230,000 dedicated acres.

In addition to low-pressure gathering and transportation assets, OTP includes roughly 112 miles of 16-in. OD transmission pipeline spanning portions of the Texas counties of Reeves, Ward, Pecos, Crane, Upton, and Midland. It has two major interconnects, an active connection into Magellan’s Longhorn pipeline near Crane, Tex., and a future connection into Enterprise’s Midland terminal scheduled for completion in August.

OTP also includes three storage terminals near the Texas towns of Pecos, Crane, and Midland, with 150,000 bbl of leased or owned capacity currently in service. Oryx will expand the system’s storage capacity to more than 390,000 bbl with additional tankage in Reeves, Ward, and Crane counties.

The open season closes June 17.