GENERAL INTEREST — Quick Takes
Warren Resources files for Chapter 11
Warren Resources Inc., Denver, filed for bankruptcy protection in a Houston federal court on June 2 after negotiating a debt-for-equity swap with a group of senior lenders led by Blackstone Group's GSO Capital Partners. Senior lenders agreed to swap $248 million they are owed for an 82.5% stake in the reorganized company, court papers showed.
Claren Road Asset Management LLC is among second-lien lenders who are owed about $57 million. Court papers showed the Claren-led group would get the rest of the reorganized independent in return for canceling debt. Unsecured bondholders owed $167.3 million would get cash or new notes equal to Claren's equity stake.
Court papers said GSO also agreed to provide $130 million as a bankruptcy-exit loan and an additional $20 million to pay for the Chapter 11 bankruptcy court case.
Warren Resources primarily focuses on oil in Wilmington field in the Los Angeles basin of California, natural gas in the Marcellus shale in Pennsylvania, and the Washakie basin of Wyoming.
Callon Petroleum adds Midland basin acreage
Callon Petroleum Co., Natchez, Miss., has completed its acquisition of certain assets in the Midland basin in Texas operated by Big Star Oil & Gas LLC, Midland, Tex., for $220 million in cash and 9.3 million shares of Callon common stock.
The deal includes 17,298 gross (14,089 net) surface acres, primarily in Howard County, with additional acreage in Martin, Borden, and Dawson counties.
Including the previously reported area of mutual interest transaction in western Reagan County that closed earlier this month, the Big Star acquisition increases Callon's surface acreage position in the Midland basin to 34,000 net acres and establishes a new core area for development.
"We are looking forward to advancing our planned development of this important new acreage position centered in Howard County that we have named the WildHorse area," commented Fred Callon, chairman and chief executive officer. "We currently expect to complete our first well on this acreage in mid-June and are finalizing plans to add a drilling rig to the area in the second half of the year."
Darre to take helm as YPF chief executive officer
Ricardo Darre will take the role of chief executive officer of Argentina's 51% state-owned YPF SA on July 1.
He succeeds Chief Financial Officer Daniel Gonzalez, who has served as interim chief executive officer since the departure of Miguel Galuccio in April under the direction of new Argentinian President Mauricio Macri.
Darre has led Total SA's US exploration and production unit based in Houston since August 2014, overseeing its shale and ultradeepwater operations in the country.
He jointed Total in 1987 and served in technical roles in Tierra del Fuego, France, and Thailand before becoming the head of drilling offshore Argentina and in the country's onshore Neuquen basin. He also has worked in Norway, Russia, and the UK. He began his career at Schlumberger Ltd. in various roles covering oil and gas production in Angola, Zaire, and the Neuquen basin.
Exploration & Development — Quick Takes
SOCAR, BP sign MOU for Caspian Sea exploration
State Oil Co. of Azerbaijan Republic (SOCAR) has signed a memorandum of understanding with BP PLC, giving the operator the exclusive right to negotiate on exploration and development of offshore Block D230 in the North Absheron basin in the Azerbaijan sector of the Caspian Sea. Block D230 lies in 300 m of water with reservoir depths of 3,000-5,000 m.
In April, SOCAR let a contract to Amec Foster Wheeler for work related to the ongoing modernization and expansion of the Heydar Aliyev refinery at Baku in Azerbaijan (OGJ Online, Apr. 26, 2016).
Total E&P's Absheron X-2 well was drilled 100 km southeast of Baku in September 2011. Drilled to 6,874 m in 474 m of water, the well tested one hydrocarbon-bearing interval at 33.9 MMcfd of nonassociated gas and 2,500 b/d of 42.5° gravity condensate (OGJ Online, July 2, 2012).
The Absheron block lies just east of Shah Deniz field where BP let a $1.5-billion contract for the transport and installation of the deeper water subsea production systems for Shah Deniz Stage 2 (OGJ Online, May 6, 2016).
Inpex spuds exploration well offshore southern Japan
Inpex Corp., Tokyo, commences drilling of an exploration well June 5 offshore the Shimane and Yamaguchi prefectures in southern Japan. The well is 130 km off Shimane in 210 m of water, about halfway between Tsushima and Oki Island.
The well is part of an Agency for Natural Resources & Energy program called Heisei 26-28 Domestic Offshore Drilling Program in Japan, which was announced in mid-2015 (OGJ Online, Aug. 12, 2015).
The Japanese government conducted a geophysical survey over the area in 2011, and Inpex conducted a 3D geophysical survey in 2013 based on the earlier project.
AWE boosts gas reserves onshore Western Australia
AWE Ltd., Sydney, reported a 93% increase in the 2P reserves in its Waitsia natural gas field in the onshore North Perth basin of Western Australia.
The company, which is operator of the field in permits L1/L2, said the 2P reserves had increased to 344 bcf of gas. It added that the 2P reserves plus the 2C contingent resources for the field had increased by 30% to 630 bcf.
In addition, the total gross 2P reserves plus 2C contingent resources when combining Waitsia with nearby finds at Senecio, Irwin, and Synaphea went up by 20% to 867 bcf of gas.
The upgrade follows extensive evaluation of new core data acquired in 2015 from the Waitsia-1 and Waitsia-2 wells along with additional analysis of well test data from Senecio-3 and Waitsia-1.
AWE says the upgrade is another step in the ongoing appraisal of Waitsia gas field. Substantial progress has been made on field modelling and the company is finalizing options for full field development of Waitsia and the satellite fields.
The indications are that an initial plateau rate of about 100 terajoules/day could potentially be achieved from six wells, including the three appraisals already drilled.
Construction and technical work for the preliminary Stage 1A of the Waitsia project is continuing and AWE anticipates delivering contracted initial volumes of 10 terajoules/day of gas into the Western Australian market during this year's third quarter.
Forward plans include another two appraisal wells for Waitsia field in 2017 concentrating on the southeast extent of the structure. These will be completed as production wells if successful.
A total of 15-20 wells are likely to be drilled during the fields expected 20-year life.
The wells will all be connected to a central gas processing facility and sales gas sent to market using existing nearby pipelines. The gas is 93% methane, which means that minimal processing will be required.
AWE has 50% of L1/L2 with fellow Sydney firm Origin Energy Ltd. also holding 50%.
Drilling & Production — Quick Takes
Noble gets POD approval for Leviathan development
Noble Energy Inc., Houston, reported it has received approval from the Petroleum Commissioner in the Ministry of National Infrastructure, Energy, and Water Resources for the development of the deepwater Leviathan field project offshore Israel.
Last month, the Israeli cabinet approved a revised outline for gas regulation needed for development of Leviathan and expansion of nearby Tamar field (OGJ Online, May 23, 2016).
The approved plan of development (POD) involves a subsea system that connects production wells to an offshore fixed platform with tie-in onshore in northern Israel. The fixed platform's initial capacity is expected to start at 1.2 bcfd of gas, but will be expandable to 2.1 bcfd.
Leviathan is expected to provide a second source of supply and an entry point into Israel's gas transportation system, while also delivering exports to regional countries, Noble said.
Separately, Noble said it signed a gas sales and purchase agreement to supply gas from Leviathan field to IPM Beer Tuvia Ltd. Under the agreement's terms, Noble and the Leviathan partners will supply a gross quantity of as much as 473 bcf of gas to a newbuild independent power facility over an 18-year term, or as much as 72 MMcfd. The company expects gas sales to IPM to start once the field starts up.
The price for the gas is linked to the Public Utility Authority Index and includes a firm floor price, the company said. Noble expects total gross revenues under the contract to be in excess of $2.5 billion.
Noble Energy operates Leviathan with 39.66% working interest. Leviathan is thought to hold an estimated 22 tcf of recoverable gas resources.
Statoil moves toward Utgard development
Statoil SA said it plans to make a final investment decision about development of Utgard gas and condensate field in the Sleipner area of the North Sea after agreeing to acquire 45% interest in the UK portion of the license from JX Nippon.
The field, previously known as Alfa Sentral, straddles the UK-Norwegian sector line. After the JX Nippon deal, Statoil will own 100% and become operator of UK License P312. It holds 62% in and is operator of Norwegian Continental Shelf License PL046.
Statoil envisions subsea development tied back to the Sleipner East platform, which it operates, about 21 km to the east in Norwegian waters. Production would start in 2020.
The company acquired stakes in the UK license from First Oil PLC in October 2015 and from Talisman Sinopec Energy UK Ltd. in December 2015.
Kearl, Albian Sands operations return to normal
Imperial Oil Ltd. said operations have returned to normal at its Kearl oil sands site and that the plant was not damaged by the Alberta wildfires (OGJ Online, May 4, 2016).
As a safety precaution in early May, the company cut workforce levels to essential staff only, reduced production, and then completed a controlled shutdown. On May 19, Imperial said it had restarted limited operations.
Shell Canada Ltd. meanwhile said production has returned to planned levels at the Albian Sands mining operations after being suspended on May 3. Production capacity is 255,000 b/d. Shell also said four Shell gas stations have reopened in Fort McMurray.
PROCESSING — Quick Takes
Songo Songo gas plant enters commercial operation
Tanzania Petroleum Development Corp. (TPDC) has commissioned its newly expanded Songo Songo gas plant to process production from Aminex PLC subsidiary Ndovu Resources Ltd.'s Kiliwani North field on Songo Songo Island, 15 km off mainland Tanzania (OGJ Online, Apr. 15, 2011; June 7, 2008).
The Songo Songo gas plant and associated subsea pipeline began operations on June 1, with the first Kiliwani North-1 (KN-1) gas processed and entered into to the regional pipeline system for distribution under a take-or-pay agreement to supply the local power market on June 2, Aminex said on June 6.
Gas rates at the plant and pipeline are planned to increase to 30 MMcfd gradually over the course of the ongoing commissioning phase.
The power generation system and other unidentified auxiliary facilities also have been commissioned, the company said.
Startup of the Songo Songo gas plant follows Aminex's previous announcement in early April that it started initial production from the KN-1 (OGJ Online, Apr. 7, 2016).
With certified reserves of 45 bcf of gas (OGJ Online, Aug. 19, 2015), KN-1 lies just 2 km from the Songo Songo field gas plant that in turn is connected to the mainland and the key Ubungo power plant.
LyondellBasell's ethylene project nears completion
LyondellBasell has entered the final phase of construction on an 800 million-lb/year ethylene expansion project currently under way at its complex in Corpus Christi, Tex. (OGJ Online, July 1, 2013).
Final construction work on the major expansion project will occur over the next few months. Once completed, the expansion will increase ethylene capacity at the Corpus Christi plant by 50% from its current production.
The Corpus Christi expansion comes as part of a multiyear growth program the company launched in 2012 that focuses on debottlenecks and cost-effective expansions at its existing plants, all of which were benefitting from rising North American shale gas production.
Alongside the expansion at Corpus Christi, the program also included ethylene expansion projects at LyondellBasell's La Porte, Tex., and Channelview, Tex., plants (OGJ Online, May 2, 2014).
LyondellBasell previously completed the 800 million lb/year LaPorte (OGJ Online, July 28, 2014) and 250 million-lb/year Channelview expansions in 2014 and 2015, respectively, the company confirmed in its latest annual report.
In addition to its 2016 planned investment of $1.9 billion for a maintenance and growth program aimed at further increasing reliability, efficiency, and production at its existing manufacturing sites, LyondellBasell said it also continues to evaluate a total investment of about $3-4 billion over the next 5 years on other growth projects that, once concluded, could to add another $800-900 million to its annual EBITDA.
In a Nov. 19, 2015, release, the company also confirmed it is moving forward with plans to build the world's largest propylene oxide (PO) and tertiary butyl alcohol (TBA) plant at its Channelview complex.
With front-end engineering and design work on the project now under way, the PO-TBA plant-which would produce about 1 billion lb/year of PO and 29,000 b/d of oxyfuels-is scheduled for startup in 2020, the company said.
Unipetrol breaks ground on polyethylene unit
Unipetrol AS has started construction on a grassroots polyethylene (PE) production unit at its Chempark Zaluzi petrochemical complex in Litvinov, Czech Republic (OGJ Online, Sept. 10, 2015).
The company officially broke ground on construction activities for the 270,000-tonnes/year PE3 unit during a ceremony held on June 7, Unipetrol said.
The unit remains on schedule to be commissioned shortly after construction reaches mechanical completion in mid-2018, the company said.
Unipetrol's total investment in the PE3 project amounts to about $357.5 million, the biggest investment to date in the history of the Czech petrochemical industry.
The PE3 project comes as part of Unipetrol's 2013-17 group strategy, the core of which entails further integration of the company's refining and petrochemical businesses.
Designed to replace the complex's existing 120,000-tpy PE1 unit, the two-line PE3 unit will join the remaining 200,000-tpy PE2 unit to boost Unipetrol's overall HDPE production at the site to 470,000 tpy from its current 320,000 tpy.
In addition to increased production safety and reliability, PE3 also will enable higher utilization of the complex's recently damaged steam cracker (OGJ Online, Aug. 14, 2015), which following its reconstruction (OGJ Online, Dec. 7, 2015), will be able to produce 544,000 tpy of ethylene feedstock for the more-profitable HDPE units as global demand for basic ethylene continues to decline.
Technip Italy SPA is providing engineering, procurement, and construction services for the PE3 unit, which will be equipped with Ineos Technologies Ltd.'s proprietary Innovene S slurry technology for production of mono and bimodal HDPE.
TRANSPORTATION — Quick Takes
Oregon town continues train derailment cleanup
An Oregon community ended water use restrictions as cleanup continued of an estimated 1,000 bbl of Bakken crude that leaked from tank cars of a Union Pacific train that derailed on June 3 (OGJ Online, June 5, 2016). But the Mosier City Council and the town's mayor objected on June 6 to the railroad's plans to resume running trains along the affected track before the accident's investigation and the cleanup are complete.
"Everyone wants to see train traffic restarted, but we are very concerned about the safety of our town," added Mosier City Council Pres. Emily Reed. "The new tracks will be no safer than before the derailment, and now we have tens of thousands of gallons of oil sitting in damaged tankers just feet away from the proposed new active tank."
A UP spokesman confirmed that freight trains are running again along new track where the incident occurred, but at a 10 mph speed limit. None carrying crude oil will use the stretch until the cleanup and investigation are concluded, he told OGJ.
More than half the crude in the derailed cars had been loaded onto tanker trucks by that morning for transfer to The Dalles, Wasco County's seat, where it will be staged for rail transportation to Tacoma, Wash., its original destination, the derailment's unified command said in a June 7 update.
"Union Pacific has identified a preliminary cause of the crash, saying a bolt that fastens the rail to the railroad ties may have been at fault," it added. "But the final determination of the cause has not been made."
An estimated 10,000 gal of crude was removed from Mosier's wastewater system following the derailment, with the remaining 32,000 gal either burned off and vaporized, captured by booms in the Columbia River, or absorbed by soil, the unified command said.
KMI gets FERC approval for Elba Island LNG plant
Kinder Morgan Inc. (KMI) subsidiaries Elba Liquefaction Co. LLC (ELC) and Southern LNG Co. LLC received US Federal Energy Regulatory Commission authorization to build and operate the Elba Liquefaction Project at the existing Elba Island LNG terminal near Savannah, Ga. KMI expects the first of 10 liquefaction trains to enter service in second-quarter 2018, with the remaining nine coming online before yearend 2018. Total capacity will be 2.5 million tonnes/year.
Elba Express Co. LLC (EEC) and Southern Natural Gas Co. LLC (SNG), also KMI subsidiaries, received FERC certificates of public convenience and necessity for their EEC Modification Project and SNG Zone 3 Expansion Project. These projects include additional compression and related work for north-to-south capacity expansions on Elba Express pipeline to supply additional gas to industrial and utility customers in Georgia and Florida and to Elba Island for liquefaction. KMI expects the expansion to enter service late in this year's fourth quarter.
The Elba Liquefaction Project in 2012 received authorization from the US Department of Energy to export to Free Trade Agreement (FTA) countries (OGJ Online, Jan. 28, 2013). An application to export to non-FTA countries is pending, but is not required for the project to move ahead.
A 20-year contract with Royal Dutch Shell PLC supports the roughly $2-billion liquefaction project. KMI last year bought 100% of Shell's equity interest in ELC (OGJ Online, July 16, 2015). The pipeline modifications will cost $306 million.
Mackenzie Gas Project extension approved
Canada's National Energy Board has approved a delay in construction of the Mackenzie Gas Project, including the 1,220-km Mackenzie Valley Pipeline between three Arctic fields and northwestern Alberta.
Imperial Oil Resources Ventures Ltd. applied for the extension last year, citing "challenging North American natural gas market conditions (OGJ Online, Aug. 28, 2015)."
NEB said the project remains in the public interest and granted Imperial's request to delay construction-start deadlines for the Mackenzie Valley Pipeline and Mackenzie Gathering System to Dec. 31, 2022. The pipeline extension requires approval by the federal government.
The entire project would involve 1,842 km of pipelines.
Under NEB's original approval of the project, construction was to have started by the end of 2015. Last November, the board extended the sunset clauses to Sept. 30, 2016, so it could consider Imperial's application.
Eos advances Chilean LNG regasification project
Houston-based Eos Investment Group LLC's Chilean LNG import terminal company GNL Talcahuano SPA successfully submitted its environmental impact study to the regional environmental services department for its floating storage and regasification unit offshore Talcahuano, Chile.
Eos and its Chilean partner CRI Investments SPA are developing the FSRU project to serve Chile's south-central region, which has a natural gas pipeline and distribution network last used to deliver supplies from Argentina in 2004. The companies estimate that close to 2 million tonnes/year of LNG demand lies on or near the gas grid infrastructure.
Spanish utility Gas Natural Fenosa recently committed to spending more than $1.1 billion to develop gas markets in south-central Chile and elsewhere in the country. The Chilean government's Energy Ministry estimates that the four-region demand from the Eos LNG import project could reach 5 million tpy within 8 years of startup.
Eos signed an agreement with Stonepeak Infrastructure Partners to provide as much as $150 million of equity capital in return for a stake in the project on financial close. In conjunction with the Stonepeak agreement, Eos is advancing negotiations with Stonepeak investment-target Magnolia LNG to supply 1 million tpy from its Lake Charles, La., plant.
Eos expects financial close in second-quarter 2017 and operations early 2019.
