GENERAL INTEREST — Quick Takes
BP Norge and Det norske agree to merge
BP Norge AS and Det norske oljeselskap ASA have agreed to merge through a share-and-cash transaction into an independent exploration and production company with more than 120,000 boe/d of production offshore Norway.
The main industrial shareholders will be Aker ASA, which owns 49.99% of Det norske, and BP. Aker will own 40% of the merged company, and BP will own 30%. Other Det norske sharholders will hold the remaining 30%. Named Aker BP ASA, the new company will be based in Fornebuporten, Norway.
At yearend 2015, BP Norge had proved and probable reserves of 225 million boe. Its net average production from 13 licenses last year was 62,100 boe/d.
Det norske, Trondheim, had 498 million boe of proved and probable reserves last year and net average production from 84 licenses of 60,000 boe/d.
The company operates Alvheim, Volund, Vilje, and Jette oil and gas fields, which are on production, and Ivar Aasen oil and gas field, which is under development. It holds 20% and 22% interests in two of the three licenses encompassing giant Johan Sverdrup oil and gas field, which is under development.
Det norske will issue 135.1 million shares based on 80 krone ($9.74)/share to acquire BP Norge, including assets, a tax-loss carry-forward of $267 million, and a net cash position of $178 million. Aker will acquire 33.8 million of those shares from BP at the same price. BP also will receive a $140-million cash payment.
BP said all of BP Norge's 850 employees will transfer to the new company. At yearend 2015, Det norske employed 530 workers.
Det norske Chairman Oyvind Eriksen will be chairman of the combined company. Det norske CEO Karl Johnny Hersvik will have that position at Aker BP.
Teine to buy Saskatchewan assets for $975 million
Teine Energy Ltd. has agreed to acquire all of fellow Calgary-based firm Penn West Petroleum Ltd.'s assets in Saskatchewan, including the Dodsland Viking area, for $975 million in cash. The deal is effective May 1 and expected to close in the second quarter.
Split evenly between medium and heavy-oil properties in the West and the Dodsland light-oil properties in the East, the assets cover 16,300 boe/d of production (91% liquids) as of the first quarter, estimated proved plus probable reserves of 53.2 million boe (91% liquids), and 410,000 net acres of undeveloped land.
Teine, a Viking producer backed by the Canada Pension Plan Investment Board, acquires and develops oil and gas properties in the Western Canadian Sedimentary Basin, with 90% of its total production weighted towards crude oil and NGLs.
Dave Roberts, Penn West president and chief executive officer, explained the move from his firm's perspective. "While the Dodsland Viking was an important contributor to Penn West's growth profile in recent years, this transaction will allow us to replace these largely mature assets by funding the more prospective and numerous growth opportunities in our Cardium and Alberta Viking positions-areas where we are more focused and more competitive," he said.
Penn West in the Cardium area has 700 net sections and 1,500 drilling locations, with first-quarter production of 19,500 boe/d. The firm notes the deal gives it the financial flexibility to begin exploiting the area's multihorizon potential. In the Belly River and Mannville formations, the firm has 500 net sections that it believes are highly prospective and will form part of its development strategy over the next several years.
Penn West says that its technical understanding of the Viking play in recent years has extended into Alberta through an active farmout program as well as the exploratory findings and strong production results from offsetting peers. Its Alberta Viking position encompasses 174 net sections and has 500 potential drilling locations. First-quarter production from Viking in Alberta was 1,000 boe/d, but Penn West notes the area will be a primary focus of its 2017 development program.
API, Mexican regulator to share standards, practices
The American Petroleum Institute and Mexico's recently created oil and gas regulatory agency, the National Agency for Industrial Safety and Environmental Protection of the Hydrocarbons Sector (ASEA), reached an agreement for ASEA to get access for its safety programs to API's technical standards and recommended practices.
The memorandum of understanding that API and ASEA reached earlier this month assures that ASEA will be able to include the API recommended standards and practices in its own regulations, API said. The MOU also supports the opportunity for regulatory agencies in the Gulf of Mexico to cooperate in implementing safety and environmental management systems (SEMS) based on API's Recommended Practice 75 and Center for Offshore Safety (COS) processes and best practices, it added.
The US Bureau of Safety and Environmental Enforcement has incorporated SEMS into its federal regulatory requirements for offshore oil and gas operations in US waters, API noted.
Exploration & Development — Quick Takes
Pemex seeking partners to explore Trion field
Mexico's Petroleos Mexicanos (Pemex) is seeking partners to explore and develop offshore Trion field in the Perdido belt, a Pemex executive said at a news conference in Mexico City.
Pemex Chief Executive Jose Antonio Gonzalez Anaya said Pemex estimates Trion to hold 480 million boe in total proved, potential, and possible oil and gas reserves. The field lies in more than 2,500 m of water about 200 km offshore Mexico. No contract details were immediately available such as what percentage share Pemex expects.
The National Hydrocarbons Commission is expected to select partners for Pemex as part of a tender process. Results are expected to be announced in December at the same time as the government holds an auction for 10 deepwater blocks. Trion is adjacent to several blocks being offered in the deepwater round.
Drilling campaign commences in Colombia
GeoPark Ltd. has started its drilling program on the Llanos 34 block in Colombia. The company spudded its Jacana 3 appraisal well with plans to follow with the Jacana 4.
Jacana oil field was opened with Jacana 1, which flowed 1,880 b/d of 14.9° gravity oil with a water cut of 1.9% in September 2015 (OGJ Online, Sep. 2, 2015). The field is currently producing 5,700 b/d of oil from two wells, the company said. Jacana field lies southwest of large Tigana oil field on Llanos 34 block onshore Colombia. The block was erroneously reported as offshore in a previous story.
GeoPark has plans to drill six wells on the block this year, two of which will be exploration wells. The operator holds 45% operating interest in the 82,000-acre Llanos 34 block.
Baltim SW-1 well finds gas in East Nile Delta
The Baltim SW-1 exploration well in the Baltim South development lease of the East Nile Delta reached 3,750 m TD in 25 m of water, encountering 62 m of net gas pay in high-quality Messinian sandstones, partners Eni SPA and BP PLC reported.
The discovery, drilled 12 km offshore, is a new accumulation along the same trend as Nooros field, discovered in July 2015 and currently producing 65,000 boe/d (OGJ Online, May 13, 2016). The "Great Nooros Area" is now estimated to hold 70-80 billion cu m of gas in place.
Further appraisal activities will be required to underpin the full resource potential of the discovery, BP says. "Our plan is to utilize existing infrastructure which will accelerate the development of the discovery and expedite early production start-up," said Hesham Mekawi, regional president of BP North Africa.
In parallel with appraisal and development activities, Eni says it will continue exploring the Great Nooros Area by drilling two more wells.
Eni unit IEOC operates Baltim South with 50% interest while BP holds the other 50%. Baltim SW-1 was drilled by Petrobel, a joint venture of IEOC and state partner Egyptian General Petroleum Corp.
USGS: Colorado's Mancos shale holds 66 tcf of gas
The Mancos shale of the Piceance basin in Colorado holds mean undiscovered, technically recoverable resources of 66 tcf of shale natural gas, 74 million bbl of shale oil, and 45 million bbl of NGLs, according to an updated assessment by the US Geological Survey.
The previous USGS assessment of Mancos was completed in 2003 as part of a comprehensive assessment of the greater Uinta-Piceance province. That estimate totaled 1.6 tcf of shale gas.
"We reassessed the Mancos shale in the Piceance basin as part of a broader effort to reassess priority onshore US continuous oil and gas accumulations," explained USGS scientist Sarah Hawkins, lead author of the assessment. "In the last decade, new drilling in the Mancos shale provided additional geologic data and required a revision of our previous assessment of technically recoverable, undiscovered oil and gas."
Tight gas in the younger, shallower parts of the Mancos is produced primarily from vertical and directional wells in which the reservoirs have been hydraulically fractured. Shale oil and gas in the older and deeper intervals are produced mostly from horizontal wells that have been fraced.
Drilling & Production — Quick Takes
Statoil approved to start Rutil development
A consortium led by Statoil ASA has been given consent by the Norwegian Petroleum Directorate (NPD) to start up facilities and production on the Rutil deposit on Gullfaks South in the Tampen area of the North Sea. Production is scheduled to start in August-September.
Rutil, a gas-filled structure on production license 050, will be developed with a standard subsea template with four well slots and two gas production wells. The template is tied-in to existing systems on the Gullfaks A facility.
The plan for development and operation for Rutil was submitted in December 2014 (OGJ Online, Dec. 16, 2014). Statoil estimates in-place volumes at 17.9 billion standard cu m of gas and 2 million standard cu m of condensate. Expected recoverable reserves are 11.9 million standard cu m of oil equivalent.
NPD notes that investment in the project has totaled $460 million, down from the $590 million estimated in the PDO.
Statoil operates production license 050 with 51% interest.
Jack up delivered for Culzean development
Sembcorp Marine AS said it has delivered the high-specification Maersk Highlander jack up drilling rig to Maersk Higher UK Ltd. The harsh-environment jack up, formerly known as the Hercules Highlander, is scheduled to be deployed in Culzean field in the UK North Sea. Production is expected in 2019. Maersk Oil is the operator.
The Maersk Highlander was designed to operate in 400 ft of water and drill to 30,000 ft. The rig's construction started in September 2014 and was completed on schedule.
Culzean is a high-pressure, high-temperature field discovered in 2008 on Block 22/25 and appraised during 2009-11 (OGJ Online, Jan. 30, 2009).
Eni Portugal lets contract for Saipem drillship
Eni Portugal BV let a contract to Saipem SPA for the Saipem 12000 ultradeepwater drillship, which will operate offshore Portugal starting in this year's third quarter. Saipem 12000 is capable of operating in more than 3,000 m of water. Samsung Heavy Industries built the vessel in 2010. Previously, Total SA terminated its lease of the drillship in Angola.
In addition, Saipem received a contract extension with Eni Norge for the Scarabeo 8, a semisubmersible drilling rig designed to operate in up to 3,000 m of water.
PROCESSING — Quick Takes
Blog: Strikes show French refining vulnerability
Refinery strikes now easing in France highlight vulnerabilities of the country's refining industry, especially in comparison with that of the US, according to analysts at Turner, Mason & Co. (OGJ Online, May 26, 2016).
Strikes at six of eight French refineries have crippled the industry, wrote John Mayes and John Auers in a June 14 blog post on Turner, Mason's web site.
A refining industry strike in the US last year, the first in many years, had much less effect on operations because managers, supplemented by support staff, worked in place of strikers.
In France, labor laws "complicate the operation of French refineries" and "will certainly impact future investment decisions," Mayes and Auers wrote.
A general strike that began last month to protest labor reforms became work stoppages affecting railroads and sanitation services as well as refineries and terminals.
The government approved withdrawal from strategic oil reserves. Much of the lost middle-distillate products, which dominate French demand, were replaced by supply from the Amsterdam-Rotterdam-Antwerp (ARA) refining center.
The writers said Total's 247,000-b/d Gonfreville l'Orcher refinery, France's largest, remains down.
Restarting are Total's Donges (219,000 b/d), Feyzin (109,000 b/d), and Grandpuits (101,000 b/d) refineries.
Total's 153,000-b/d La Mede refinery restarted quickly after the strike and is now at 80% of capacity.
The other refinery hit hard by the strike, Petrolneos's 207,000-b/d Lavera facility, is operating at reduced rates.
Exxon's two French refineries, Fos-sur-Mer (133,000 b/d) and Port Jerome (236,000 b/d) are operating normally.
Mayes and Auers noted that the disruption drew down ARA product inventories and improved normally thin European refining margins.
Citgo, Aruba ink deal to restart idled refinery
Citgo Petroleum Corp., an indirect wholly owned subsidiary of Petroleos de Venezuela SA (PDVSA), has reached an agreement with the Aruban government to restart Valero Energy Corp.'s former 235,000-b/d refinery in San Nicolas, Aruba.
Citgo Aruba will invest $450-650 million to transform the refinery into a plant designed for upgrading extra-heavy crude from Venezuela's Orinoco belt, Citgo and PDVSA said.
Comparable to a large turnaround, the refinery overhaul project will take 18-24 months to complete and will be financed by external sources, said Nelson P. Martinez, Citgo's president and chief executive.
To be operated by Citgo Aruba under a 15-year lease agreement with a 10-year option to extend, the refinery will have a capacity to upgrade 209,000 b/d of Venezuelan extra-heavy crude into intermediate feedstock for further processing at Citgo's refineries in the US, Martinez said.
Naphtha recovered at the plant, in turn, will be sold to PDVSA for use as diluent.
Alongside creating an opportunity to increase production from Orinoco belt, the proposed refinery restart also paves the way for a complementary project under consideration involving construction of a 17-mile gas pipeline from Venezuela to Aruba that would deliver excess natural gas from Venezuela's Paraguana region for use at the upgrader, PDVSA and Citgo said.
While the companies have yet to identify contractors for the project, they did confirm Yokogawa Electric Corp.'s recently acquired subsidiary KBC Advanced Technologies Ltd. and KBR Inc., among other unidentified consultants, participated in an assessment of the project's technical and financial viability.
Citing "unfavorable refinery economics and the outlook for continued unfavorable refinery economics," Valero suspended crude processing operations at the Aruba refinery in March 2012 before converting it into a products terminal.
Westlake, Axiall sign merger agreement
Westlake Chemical Corp., Houston, has entered a definitive agreement to acquire Axiall Corp., Atlanta, in a deal that, once completed, would form the third-largest chloralkali producer and second-largest polyvinyl chloride (PVC) producer in North America.
As part of the agreement, Westlake will purchase all of the outstanding shares of Axiall for $33/share in an all-cash transaction, representing an enterprise value of about $3.8 billion, including debt and certain other Axiall liabilities, the companies said in a joint release.
The transaction, which has been unanimously approved by both companies' boards of directors, is scheduled to be completed by this year's fourth quarter, pending approval of Axiall's stockholders as well as other customary closing conditions.
In conjunction with the merger agreement, Westlake, which already has secured commitments from its banks to finance the transaction, also has agreed to withdraw its nomination of a slate of director nominees at Axiall's upcoming annual stockholders' meeting to be held on June 17.
Upon finalizing the merger, Westlake said it will continue working with South Korea's Lotte Chemical Corp. and LACC LLC, a subsidiary of Axiall and Lotte Chemical USA Corp.'s 50-50 joint venture Eagle US 2 LLC, to complete LACC's proposed 1-million tonne/year ethane-based ethylene plant under construction in Lake Charles, La. (OGJ Online, June 9, 2016; Dec. 18, 2015; Sept. 3, 2015; June 18, 2015; Dec. 20, 2013).
The current merger agreement follows Axiall's rejection of Westlake's previous offers to purchase its outstanding common shares at $20/share in January and $23.12/share in March, according to Jan. 29 and Apr. 4 releases from Axiall.
TRANSPORTATION — Quick Takes
US House approves amended pipeline safety bill
The US House unanimously approved an amended federal pipeline safety bill that included changes from bills two of its committees approved in late April and sent the reworked measure back to the Senate for further consideration. The Senate unanimously passed the original version in late March.
The amended bill, the Protecting our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2016, is a collaborative product of the House Energy and Commerce Committee and the House Transportation and Infrastructure Committee, and the legislation incorporates text from separate bills each committee passed in April, leaders of the two committees said.
It reauthorizes the federal pipeline safety program within the US Pipeline and Hazardous Materials Safety Administration (PHMSA) for 4 years and requires the agency to update safety regulations, increase transparency, and embrace emerging technologies, they indicated.
The bill also speeds up the process of completing outstanding safety requirements included in the 2011 reauthorization, and reforms PHMSA to be a more efficient and data-driven agency, the federal lawmakers said in a statement following the full House's vote.
AOPL Pres. Andrew J. Black noted that the PIPES Act:
• Ensures pipeline operators receive timely post-inspection information from the government to allow them to maintain and improve their safety efforts.
• Increases inspection requirements for certain underwater oil pipelines to enhance safety.
• Ensures that product composition information is quickly provided to first responders after an incident.
• Improves protection of coastal areas, marine coastal waters, and the Great Lakes by explicitly designating them as unusually environmentally sensitive to pipeline failures.
TransCanada-IEnova JV to build Texas-Mexico lines
Infraestructura Marina del Golfo (IMG)-TransCanada Corp.'s joint venture with Sempra Energy subsidiary IEnova-will build, own, and operate the 42-in. OD, 497-mile Sur de Texas-Tuxpan natural gas pipeline in Mexico. A 25-year gas transportation service contract for 2.6 bcfd with Comision Federal de Electricidad (CFE), Mexico's state-owned power company, supports the project, expected to enter service in late 2018.
The pipeline will begin offshore in the Gulf of Mexico at the border point near Brownsville, Tex., and extend along the coast to Tuxpan, Veracruz, Mexico. It will connect with Cenegas's pipeline system in Altamira, Mexico, and with TransCanada's Tamazunchale and Tuxpan-Tula pipelines, and other transporters in the region. It will be supplied by gas from the 2.6-bcfd Valley Crossing Pipeline, to be built by Spectra Energy under a CFE contract.
Valley Crossing will extend 168 miles from Agua Dulce hub in Nueces County, Tex., to Brownsville.
TransCanada previously won bids to build and operate the Tuxpan-Tula and the Tula-Villa de Reyes lines, both expected to enter service in 2018.
TransCanada will own 60% of the $2.1-billion Sur de Texas-Tuxpan project and operate it. IEnova will own the other 40%. Spectra is sole owner of the $1.5-billion Valley Crossing line.
EnLink to build Midland basin oil gathering system
A subsidiary of EnLink Midstream Partners LP and EnLink Midstream LLC plans to construct a crude oil gathering system in Upton and Midland counties, Tex., in the Permian basin.
The partnership will invest $70-80 million in the Greater Chickadee crude oil gathering project, which will include more than 150 miles of high- and low-pressure pipelines that will transport crude volumes to several major market outlets and other hub centers in the Midland area.
The project also includes the construction of multiple central tank batteries and pump, truck injection, and storage stations to expand shipping and delivery options for EnLink's producer customers. The initial phase of Greater Chickadee will be operational in this year's second half with full service expected early next year.
Greater Chickadee is supported by long-term, fee-based agreements with Permian producers. The project includes 35,000 dedicated acres in Upton County with current production averaging more than 10,000 b/d.
Formed in 2014 by the merger of the midstream assets belonging to Devon Energy Corp. and Crosstex Energy LP, EnLink Midstream has increased its presence in the Permian over the past couple of years with expansion projects (OGJ Online, Aug. 6, 2014), as well as the acquisitions of LPC Crude Oil Marketing LLC, and Coronado Midstream Holdings LLC.
