GENERAL INTEREST Quick Takes
US LPG exports set to climb
Renewed LPG demand growth in India and China will lead to growth of US exports later this year, according to ESAI Energy’s newly published Global NGL Outlook. Since exports have bumped up against capacity constraints, the timely completion of new LPG export terminals in the US and Canada will be vital to this export growth. Stronger demand has implications for propane and butane prices, whose discounts to naphtha have widened considerably.
As the year progresses, strengthening demand in India and China will lead to higher US LPG exports, according to ESAI Energy’s 12-month outlook.
As the report describes, Indian demand growth has already emerged from its 2018 slump. Annual demand growth in that country will jump to 60,000 b/d after falling to a 5-year low in 2018. Given that the country’s supply will barely grow this year, imports will be needed to meet almost all the new demand.
Demand in China, until recently the locomotive of global demand, fell in the second half of 2018 and barely changed so far in 2019. Following in India’s footsteps, the near-term commissioning of PDH and NGL-fed ethylene units in China will lead to renewed growth in that country.
“Due to the US-China trade dispute, China will import more LPG from Middle East and Asian sources,” explains Andrew Reed, ESAI Energy head of NGLs. “However, there will be greater demand for US product to swap into other Asian markets as non-US product is swapped into the Chinese market. Between bullish Asian demand and new LPG terminals in Western Canada and the US Gulf Coast that eliminate export bottlenecks, developments will provide a boost to Mont Belvieu propane and butane prices.”
US Senate bill would boost carbon capture research
US Sen. John Cornyn (R-Tex.) introduced legislation on May 23 that would require the US Department of Energy to establish a research, development, and demonstration program for carbon capture technologies at natural gas-fired power plants.
“The US leads the world in emissions reduction, but to build on that success, we need to incentivize innovation and partner with the private sector to create affordable solutions,” Cornyn said. “Instead of a one-size-fits-all mandate that would bankrupt our country, this bill encourages the continued use of natural gas so we can protect the environment and remain a global leader in energy innovation.”
The bill, S. 1675, aims to accelerate development and commercial application of natural gas carbon capture technologies and create a partnership with the private sector for demonstration projects. The bill also would encourage DOE to include its National Energy Technology Laboratories, universities, and research facilities, including the National Carbon Capture Center. DOE would be required to solicit applications for demonstration projects and submit a report to Congress detailing legislative recommendations, applicant evaluation method, expected goals for technology development, estimations of project costs, and timelines for project construction.
The bill was referred to the Senate Energy and Natural Resources Committee.
BHP considers conventional oil attractive for decades
Melbourne-based BHP said its conventional oil assets look to be attractive investments “for several decades,” particularly its holdings offshore Mexico and offshore eastern Canada.
During an operations update, BHP executives said the company expects to spud an appraisal well on Trion in late December with earliest production expected in the mid 2020s. BHP is the operator with 60% interest.
Previously, BHP Petroleum (New Ventures) Corp. has said it plans a drilling program in the Orphan basin offshore eastern Canada where it holds two exploration licenses (EL1157 and EL1158). BHP holds 100% interest in the licenses.
Subject to regulatory approval, BHP expects drilling will begin in 2021 or 2022 offshore Newfoundland. Earliest production tentatively is scheduled for the early 2030s, BHP said.
Previously, BHP sold its US shale operations to focus on conventional oil and gas in the US Gulf of Mexico and Australia. Current oil and gas holdings also include properties in Trinidad and Tobago, Algeria, and the UK.
Move to London approved for SDX Energy
SDX Energy shareholders have approved a move of corporate headquarters to London from Calgary as part of a court-approved reorganization.
A new, UK-based company, SDX Energy PLC, will acquire shares in the former SDS Energy Inc. and apply for its shares to be traded on the London Stock Exchange.
Meanwhile, Mark Reid, chief financial officer, has become interim chief executive officer to succeed Paul Welch, who resigned as president, chief executive officer, and director.
The company has oil and gas interests in North Africa.
Exploration & DevelopmentQuick Takes
Offshore Cuba licensing to be outlined in June
Blocks will be offered offshore in Cuba’s economic exclusive zone in the Gulf of Mexico, said state-owned Union Cuba-Petroleo Co. (Cupet), which is helping promote the licensing round with roadshow presentations and data viewing in London this month. Cupet said the licensing round will include 24 blocks. Information and data packages will be available to registered and qualified companies. Interested parties can contact MakingWaves for more information. No licensing round timetable was immediately available.
The roadshow is being held at the same time as the European Association of Geoscientists & Engineers meeting in London.
Cuba produces about 60,000 boe/d from the western offshore by drilling extended-reach wells through duplex structures in folded and thrusted belts. Late Jurassic reservoirs feature fractured and lixiviated carbonates seals offering Tertiary shale. In 2012, three exploration wells were drilled in this area, with targets focused on Cretaceous carbonates. No commercial oil was discovered although all wells had oil shows originating in Late Jurassic source rocks.
In 2017, BGP acquired 26,880 km of high-definition 2D multiclient seismic, providing information on basement depth and sedimentary thickness.
Mapping of several leads in a first interpretation stage indicates estimated resources of more than 10 billion bbl with expected 25-35° gravity.
Two areas off Sable Island draw no bids
Exploration rights for two shallow-water areas off Sable Island received no bids in a Canada-Nova Scotia Offshore Petroleum Board round that opened in December and closed on May 8.
The industry-nominated parcels in Call for Bids NS18-3 are near existing discoveries and production.
Dana Gas spuds Merak-1 wildcat off Egypt
Dana Gas PJSC, Sharjah, has spudded a deepwater wildcat on its North El Arish concession area offshore Egypt.
The company says the Merak-1 well is on one of three prospects it describes as “world class” in the area, also known as Block 6. The ADVantage Drilling Services SAE Tungsten Explorer drillship is drilling the well in 755 m of water. The area is southeast of Eni’s giant Zohr natural gas discovery.
Dana Gas holds a 100% interest in the concession. It expects drilling of the Merak prospect to take 70 days.
Blackrock well cuts thin oil sands off UK
The Blackrock exploration well 204/5b-2 in the West of Shetlands area proved the existence of intravolcanic charged reservoirs between undeveloped Cambo and Rosebank oil fields, reports Siccar Point Energy, the operator.
The Diamond Ocean GreatWhite semisubmisersible rig drilled the well in 1,115 m of water 10 km north of Cambo field.
The well targeted intravolcanic Paleocene Flett reservoirs of the Colsay member on trend with equivalent oil-filled sandstones in Rosebank field.
It encountered a 34-m gross package of intravolcanic siliclastic sediments with “a number of thin oil-bearing sandstones” from which Siccar Point recovered samples. The well also encountered gas in the overlying Hildasay supravolcanic member. Siccar Point holds a 52.5% interest in the P1830 license with partners Suncor, 25%, and Shell, 22.5%.
Wintershall Dea installs Nova templates
Wintershall Dea has installed the two subsea templates anchoring development of Nova oil field in the Norwegian North Sea.
The Subsea 7 Seven Arctic vessel transported the 300-tonne units 45 km from Floro, Norway, to the field and lifted them by crane into 370 m of water. Aker Solutions built the templates at Egersund, Norway. The company said it next will lay 65 km of pipelines to tie the field back to Neptune Energy’s Gjoa platform 17 km to the northeast. Lift gas and water for injection will come from Gjoa.
A new module will be installed on the Gjoa platform in 2020. Production is to start at rates not yet reported in 2021.
Interests are Wintershall Dea, the operator, 45%; Capricorn Norge AS and Spirit Energy Norge AS, 20% each; and Edison Norge AS, 15%.
Dual-target, Mol Norge-operated well comes up dry
Mol Norge will plug exploration well 3/7-11 S, which was targeting the Vinstra and Otta prospects in PL539 in the North Sea (OGJ Online, Jan. 10, 2019). Both targets were dry, reported partner Lundin Norway AS.
The well was drilled by the Rowan Viking jack up rig 7 km southwest of Trym field on the eastern side of the Mangal High, 2 km north of the border with Denmark in 66 m of water. Drilled to respective vertical and measured depths of 3,670 m and 3,893 m subsea, the well was terminated in the Permian.
The main objective of the well was to test the reservoir properties and hydrocarbon potential of the Middle Jurassic sandstones in the Otta prospect and of the deeper Rotliegendes sandstones in the Vinstra prospect.
The well encountered thin and tight, dry sandstones in the Otta interval. No reservoir was present in the Vinstra prospect. Data have been acquired and samples were taken. The Rowan Viking will be temporarily laid up.
Mol Norge serves as operator with 60%. Partners are Lundin Norway 20% and Wintershall Norge AS 20%.
Drilling & ProductionQuick Takes
Appomattox field comes on stream
Appomattox field started production ahead of schedule in the deepwater Gulf of Mexico about 80 miles offshore Louisiana. Shell Offshore Inc. operates the field in 7,200 ft of water.
Shell holds 79% interest and CNOOC Petroleum Offshore USA Inc. holds 21% interest. Shell said the Appomattox development is in the Jurassic Norphlet formation, where the company continues exploration.
The Appomattox development involves Appomattox and Vicksburg fields. Average peak production is estimated to reach 175,000 boe/d. Shell discovered Appomattox in 2010 and Vicksburg in 2013. The Appomattox hull, weighing 40,000 tonnes, is Shell’s largest floating production system.
Royal Dutch Shell PLC made its final investment decision on the Appomattox deepwater development in 2015, authorizing construction and installation of the company’s eighth and largest floating platform in the gulf (OGJ Online, July 1, 2015).
“Appomattox creates a core long-term hub for Shell in the Norphlet through which we can tie back several already discovered fields as well as future discoveries,” said Andy Brown, upstream director for Shell.
He said optimized development planning, better designs and fabrication, and expert drilling cut costs for Appomattox by more than 40% since 2015.
PGNiG drills production well in Pakistan’s Rehman field
PGNiG SA has spudded the Rehman-6 production well on the western part of Rehman field in Pakistan to develop tight gas in a Cretaceous sandstone formation. Crews plan to drill to 2,700 m.
PGNiG Pres. Piotr Wozniak said the company plans to drill four wells and put three of them on stream, including Rehman-6, during 2019. Rehman field is on the border of the Sindh and Baluchistan provinces in southern Pakistan. PGNiG is the operator with 70% interest in the production. The company’s partner is Pakistan Petroleum Ltd.
Rehman and Rizq field already produce gas. Production from both fields is sent to a production facility in Rehman field. PGNiG said Rehman field is its first onshore production outside Poland while in Norway, PGNiG operates offshore platforms.
Petrobras lets contract for Sepia field project
Petroleo Brasileiro SA (Petrobras) has let a contract to McDermott International Inc. for subsea risers and flowlines for the first phase of Sepia field, 174 miles offshore Rio de Janeiro. The first phase is part of a 15-well Sepia field development in the presalt layer of the Santos basin on Block BM-S-24. Start of oil production is expected in 2021.
The integrated engineering, procurement, construction, and installation contract includes detailed engineering, surveys, supply, installation and precommissioning of rigid pipelines, jumpers, buoyance modules, strakes and riser monitoring systems for seven-riser wells (three producers and four injector wells) connected to the Carioca floating production, storage, and offloading vessel.
McDermott’s Rio de Janeiro office will perform the work with support from its office in Houston. The company plans to use five vessels for the installation work in 7,021 ft of water. The contract is valued by McDermott at $250-500 million.
PROCESSINGQuick Takes
UAE due IMO 2020-compliant refinery
Brooge Petroleum & Gas Investment Co. FZC (BPGIC) is building a 250,000-b/d refinery designed to produce bunker fuel in Fujairah, UAE.
The refinery will be the first of its kind in the Middle East and North Africa to comply with new regulations of the International Maritime Organization (IMO) 2020 by capping sulfur content in shipping fuels, BPGIC said in a statement published by UAE’s state-owned Emirates News Agency on May 13.
The first phase of the planned refinery will be completed by first-quarter 2020, according to Nicolaas Paardenkooper, BPGIC’s chief executive officer.
IMO’s new regulations, set to take effect in 2020, will require ships to use marine fuels with a sulfur content below 0.5%, down from the current 3.5%.
Thai refiner to shut down cracker for maintenance
Bangchak Corp. Public Co. Ltd. (BCPCL), formerly Bangchak Petroleum Public Co. Ltd., has scheduled a shutdown of the hydrocracking unit for a month of planned maintenance at its 120,000-b/d refinery in Bangkok, Thailand.
The 30-day maintenance shutdown will run from July 9 to Aug. 7, during which time all other refining units will continue with normal operation, the operator said in a May 13 filing to the Stock Exchange of Thailand.
The company said it has planned to cope with the shutdown by taking various measures and arrangements to support the business operations, preparing inventories with crude and oil products, as well as securing purchases of additional supplies to ensure sufficient reserves to serve customer demands and legal compliance during the maintenance period.
Sale an option in CVR Energy review
CVR Energy Inc., Sugar Land, Tex., has designated Bank of America Merrill Lynch its financial advisor for a review of strategic alternatives, which might include sale of the company.
A subsidiary, CVR Refining LP, operates a 132,000-b/cd refinery at Coffeyville, Kan., and a 74,500-b/cd refinery at Wynnewood, Okla.
Another subsidiary, CVR Partners LP, has nitrogen fertilizer manufacturing facilities at Coffeyville and East Dubuque, Ill.
CVR Energy said it has sold its 1.5-million-bbl crude oil terminal and related assets at Cushing, Okla., to an affiliate of Plains All American Pipeline LP for $36 million.
TRANSPORTATIONQuick Takes
Court blocks BC anti-Trans Mountain bill
The British Columbia Court of Appeal has ruled against provincial legislation that could have blocked expansion of the federally owned Trans Mountain Pipeline system.
The legislation would have enabled the BC government to require a permit for the handling of heavy oil and thus to disallow the expansion project, which Premier John Horgan strongly opposes. The court ruled unanimously that the legislation exceeds provincial jurisdiction.
The federal government bought the stymied Trans Mountain system and expansion project from Kinder Morgan in May 2018. Planned to nearly triple capacity of the 1,150-km system between Alberta and BC to 890,000 b/d, the project would ease a transport bottleneck lowering the value of bitumen in Alberta.
Senators’ bill would impose Nord Stream 2 sanctions
US Sens. Ted Cruz (R-Tex.) and Jeanne Shaheen (D-NH) introduced a bill on May 14 that would impose targeted sanctions against vessels involved in constructing the proposed Nord Stream 2 gas pipeline and other Russian energy projects.
“Nord Stream 2 threatens Europe’s energy security and America’s national security,” said Cruz. “The United States simply cannot allow Russia to dominate Europe’s energy future.”
Shaheen said, “Unfortunately, [Russian Pres. Vladimir Putin] is dangling the prospect of cheap gas in front of some of our closest allies to monopolize the supply of energy in Europe and bring increased instability to the continent.” She warned, “This pipeline has the tremendous potential to compromise energy security throughout the continent for decades.”
Their action came hours after Tass, Russia’s official news agency, quoted Gazprom Deputy Chairman Vitaly Markelov saying that only 40 km remains to be built of the 800-km Russian portion of the proposed pipeline from Russia beneath the Baltic Sea to Germany.
Stonepeak invests $1.3 billion in Calcasieu Pass LNG
Venture Global LNG Inc. has received a $1.3 billion equity investment from Stonepeak Infrastructure Partners for its 10-million tonne/year Calcasieu Pass LNG export facility in Cameron Parish, La. Total committed capital to fund construction of Calcasieu Pass and the continued development of Venture Global’s 20 million-tpy Plaquemines LNG and 20 million-tpy Delta LNG facilities is now $2.2 billion.
“Calcasieu Pass is already significantly advanced in both site construction and module manufacturing, owing to the $855 million previously raised to date. We are finalizing the balance of our Calcasieu Pass financing with our consortium of project finance lenders, and we look forward to providing LNG to our global customers—Shell, BP, Edison SPA, Galp, Repsol, and PGNiG—in 2022,” said Bob Pender, Venture Global co-chief executive officer.
The Calcasieu facility will employ a process solution from Baker Hughes that utilizes midscale, modular, factory-fabricated liquefaction trains. Kiewit is designing, engineering, constructing, commissioning, and testing the facility.
Calcasieu Pass has received all permits, including authorization from the US Federal Energy Regulatory Commission and non-free trade agreement export authorization from the US Department of Energy, and construction activities are ongoing with more than $250 million spent on site preparation work, final engineering, and equipment purchases and fabrication. The Plaquemines LNG project is expected to receive its final authorization from FERC in August and start construction this year.
Freeport LNG receives FERC approval for Train 4
Freeport LNG Development LP reported obtaining approval from the US Federal Energy Regulatory Commission to site, construct, and operate its fourth natural gas liquefaction train, which will be integrated into its existing gas liquefaction and LNG export facility on Quintana Island near Freeport, Tex.
Freeport LNG expects approval from the US Department of Energy for the export of Train 4 volumes to non-free trade agreement countries later this quarter.
Freeport LNG’s Train 4 is expected to add more than 5 million tonnes/year of LNG production to its existing project, increasing the total export capability of the four-train facility to more than 20 million tpy.
About 13.5 million tpy of this capacity has been contracted under 20-year tolling agreements to Osaka Gas Trading & Export LLC, Jera Energy America LLC, BP Energy Co., Toshiba America LNG Corp., and SK E&S LNG LLC. Also, about 500,000 tpy has been contracted to Trafigura Pte. Ltd. under a 3-year sale and purchase agreement starting in 2020.
Michael Smith, Freeport LNG founder, chairman, and chief executive officer said that with FERC’s approval now in hand, the company is closer to moving ahead with Train 4 construction “later this year.”
Train 4 is expected to start operations in 2023. Freeport LNG’s export facility currently consists of three liquefaction trains, with Train 1 scheduled for commercial startup in this year’s third quarter, and full three-train commercial operations expected by mid-2020.
Earlier this month, Freeport LNG selected KBR Inc. as the preferred bidder for the engineering, procurement, construction, and commissioning contract for Train 4.
Contract let for first phase of Rio Grande LNG
NextDecade has let an engineering, procurement, and construction contract to Bechtel for Phase 1 of the 27 million-tonne/year Rio Grande LNG plant at the Port of Brownsville in South Texas. The project will consist of three liquefication trains, two 180,000-cu m storage tanks, and two marine berths.
There is an opportunity to build an additional storage tank and LNG truck loading facilities. NextDecade anticipates making a positive final investment decision on Phase 1 by the end of this year’s third quarter.
