OGJ Newsletter

July 10, 2017
International news for oil and gas professionals

ConocoPhillips to exit Barnett shale

ConocoPhillips has agreed to sell its interests in the Barnett shale of North Texas to an affiliate of Miller Thomson & Partners LLC, Lafayette, La., for $305 million plus net customary adjustments.

The assets' 2016 production averaged 11,000 boe/d, of which 55% was natural gas and 45% was NGLs, and yearend proved reserves were 50 million boe. As of May 31, their net book value was $900 million. ConocoPhillips expects to take a noncash impairment on the assets in the second quarter.

As of yearend 2016, the firm had 68,000 net acres in the Barnett, according to the firm's annual report.

The firm says proceeds from the deal, expected to close in the third quarter, will be used for general corporate purposes. It expects a less than 5,000 boe/d impact to its full-year 2017 production guidance.

ConocoPhillips late last year said it was planning to divest $5-8 billion in assets primarily relating to North American gas as part of its effort to accelerate "the company's value proposition of a strong balance sheet, growing dividend, and disciplined growth."

The firm in April agreed to sell its interests in the San Juan basin of northwestern New Mexico and southwestern Colorado to a partnership of Houston-based Hilcorp Energy Co. and Washington DC-based private equity firm The Carlyle Group for up to $3 billion.

That move followed ConocoPhillips' March agreement to sell its 50% interest in the Foster Creek-Christina Lake oil sands partnership and the majority of the firm's Deep basin conventional assets in Alberta and British Columbia to Cenovus Energy Inc. for $13.3 billion.

Miller Thomson acquires and develops producing gas properties and related pipeline gathering and processing facilities, and markets gas to large-scale end users, primarily gas-fueled chemical, electric-generating, and LNG businesses along the US Gulf Coast and in Mexico.

Ireland set to ban hydraulic fracturing

Ireland is set to ban hydraulic fracturing of onshore oil and gas wells, joining France, Germany, and Bulgaria in prohibiting the completion method.

Seanad, the upper house of the Irish legislature, passed an antifracing measure after a similar move by Dail, the lower house. The legislation awaits a presidential signature.

The most recent international rig count reported by Baker Hughes Inc. showed no drilling in Ireland.

Gazprom Neft buys stake in Evrotek-Yugra field

PJSC Gazprom Neft has acquired a 25.02% stake in Evrotek-Yugra, which is owned by Spain's Repsol SA and holds exploration and production rights to seven license blocks in the Khanty-Mansiysk autonomous okrug.

This joint enterprise will continue geological prospecting works in the Kondinsky district, in the southwest part of the Khanty-Mansiysk autonomous okrug, where all of the acquired license blocks are located.

Gazprom Neft and Repsol will be jointly managing Evrotek-Yugra on a parity basis. Gazprom also reserves the right to increase its stake to 50%.

Seismic investigations are under way at all license blocks belonging to Evrotek-Yugra, with nine exploration wells drilled during 2013-16. Ouryinskoye field, with recoverable reserves of 33.8 million tonnes of oil, was discovered in Karabashsky 1 and Karabashsky 2 fields in 2013.

A final investment decision in the development of Ouryinskoye field will be taken at yearend 2019 following completion of the geological prospecting program.

ONGC Videsh to acquire interest in Namibia offshore

India's ONGC Videsh Ltd. is to acquire 30% in an exploration license offshore Namibia from a unit of Tullow Oil PLC.

The definitive binding agreements with Tullow Namibia Ltd. are for Blocks 2112A, 2012B, and 2113B in Namibia petroleum exploration license 0037. The interests would come from Tullow's existing 65%.

Other partners are Pancontinental Namibia (Pty.) Ltd. with 30% and Paragon Oil & Gas (Pty.) Ltd. with 5%. Tullow would remain operator.

The acquisition requires approvals from regulatory authorities and joint venture partners. Completion would mark ONGC Videsh entry in Namibia's offshore.

Exploration & DevelopmentQuick Takes

Total, NIOC to develop Phase 11 of South Pars field

National Iranian Oil Co. will begin supplying its domestic market in 2021 with the country's first-ever international petroleum contract with Total SA and China National Petroleum Co. for Phase 11 of the giant South Pars gas field (SP11).

The first phase of the new contract consists of 30 wells and two wellhead platforms for an estimated cost of $2 billion. The project will produce 2 bcfd (400,000 boe/d) through existing onshore treatment facilities by two newly built subsea pipelines. Pending reservoir conditions, a second phase will call for the installation of offshore compression facilities in South Pars field. The 20,000-tonne compressor platforms will be the largest ever installed in the gulf, says Wood Mackenzie Ltd.

This agreement marks Iran's first upstream contract with a foreign firm in 10 years. WoodMac senior research analyst Homayoun Falakshahi said, "The [SP11] deal will, Iran hopes, prompt other [international oil companies] to reenter the country's upstream sector." He added that this development could become one of President Hassan Rouhani's main achievements.

The 20-year contract is based on the terms of the head of agreement signed in 2016, and it can be extended by another 5 years. Total project investment is estimated at $5 billion.

South Pars has an estimated 21 tcf of gas in place, and WoodMac estimates SP11 could recover more than 10 tcf of sweetened gas with 450 million bbl of condensate.

The SP11 consortium includes operator Total 50.1%, CNPC 30%, and Petropars 19.9%.

Iran's domestic gas market is the third largest globally with 200 billion cu m (bcm) consumed annually, which does not include nearly 50 bcm/year reinjected into oil field. Increased gas production could lead to new LNG export opportunities, WoodMac said. The analyst firm said Iran started text exports to Iraq in mid-June and could export as much as 20 bcm to Iraq by 2019. More than $2 billion was invested in the 10.5 million tonne/year Iran LNG project under former President Mahmoud Ahmadinejad.

In 2010, a number of international sanctions prompted cancellation of three LNG projects involving Total, Royal Dutch Shell PLC, Repsol Exploration SA, OMV AG, and China National Offshore Oil Corp., several of which are revisiting Iranian LNG capability.

Statoil finds oil near Johan Castberg in Barents Sea

The Statoil ASA-operated Kayak well in production license 532 of the Barents Sea found oil in two sandstone intervals with thicknesses of 27 m and 18 m, with moderate-to-poor reservoir quality in the upper part of the Kolje formation.

The 7219/9-2 well met the primary exploration target of proving petroleum in Early Cretaceous reservoir rocks. However, it failed to prove petroleum in the somewhat older early Cretaceous rocks while in the lower part of the Kolje formation.

Kayak was drilled by Songa Offshore's Songa Enabler moored harsh-environment semisubmersible drilling rig to a TVD of 2,532 m and was terminated in the Sto formation in the Middle Jurassic. The well was drilled in 336 m of water 23 km southwest of Johan Castberg discovery well 7220/8-1 and 225 km northwest of Hammerfest, Norway.

Preliminary estimates of the discovery size show 100-180 million bbl of oil in place and 25-50 million bbl of oil recoverable, with further potential to be evaluated. Extensive data capture and fluid sampling has been conducted in the well. Tie-in of Kayak to the Johan Castberg discovery will be assessed.

"Efforts will be made to find a commercial solution for the Kayak discovery towards the Johan Castberg license and to bring out other similar prospects in the Barents Sea," commented Jez Averty, Statoil senior vice-president for exploration, Norway and the UK.

"There may be additional resources in this structure, and we will now analyze the acquired data and consider possible appraisal of the discovery," he added.

Statoil has 50% interest in PL532 alongside Eni SPA 30% and Petoro AS 20%. Kayak is the eighth exploration well on the license, which was awarded in Norway's 20th licensing round in 2009.

Songa Enabler will now return to PL 849 in the Barents Sea to complete drilling of the Blamann well, or 7121/8-1, where Statoil Petroleum AS is operator. Statoil also plans to begin work at Gemini North as early as July 10.

Statoil launches three-well UK exploration campaign

Statoil ASA is set to spud the Mariner Segment 9 well in early July, beginning a three-well exploration campaign on the UK Continental Shelf.

The wells will be drilled by Transocean's Spitsbergen semisubmersible rig over 2-3 months.

Drilling of Mariner Segment 9 will last 15-25 days and could prove additional resources and increase the extent of Mariner field. The rig will then drill Jock Scott, a prospect on the underexplored margins of the Viking Graben, over 20-40 days. The third well, expected to last 30-70 days, will be at the Verbier prospect in the Moray Firth area.

Segment 9 partners are Statoil with 65.1111% interest, JX Nippon Oil & Gas Exploration Corp. 20%, Siccar Point Energy Ltd. 8.889%, and Dyas UK Ltd. 6%.

Jock Scott partners are Statoil 75% and BP Exploration Operating Co. Ltd. 25%. Verbier partners are Statoil 70%, Jersey Oil & Gas PLC 18%, and CIECO Exploration & Production (UK) Ltd. 12%.

Drilling & ProductionQuick Takes

Gina Krog field begins production in North Sea

Gina Krog field on the Utsira High in the Norwegian North Sea started production, said operator Statoil ASA and the Norwegian Petroleum Directorate. The field lies 30 km northwest of Sleipner field.

NPD said recoverable reserves total 16.8 million cu m of oil, 11.8 billion cu m of natural gas, and 3.2 million tonnes of natural gas liquids.

Statoil said Gina Krog was a small-size gas discovery in 1974. Oil was discovered in 2007.

Gina Krog has 20 well slots, a production facility on the seabed, and an oil storage vessel. Oil is exported via buoy loaders and gas is sent to the Sleipner A platform for final processing.

With Gina Krog, NPD said three of four fields on the Utsira High are producing. Edvard Grieg started in 2015 and Ivar Aasen started in 2016. Johan Sverdrup is slated to start producing in 2019.

Oil production starts in Kurdistan's Atrush block

Abu Dhabi National Energy Co. PJSC (TAQA) Atrush BV subsidiary brought oil production on stream at its Atrush block in Iraq's Kurdistan region on July 3 through the Atrush central processing unit, which has the capacity to handle 30,000 b/d.

TAQA, the operator, expects to ramp up production to 30,000 boe/d this year. Atrush field, discovered in 2011, is 85 km northwest of Erbil. Development started it 2013.

TAQA holds a 39.9% working interest in the production-sharing contract. Other partners are the Kurdistan regional government 25%, General Explorations Partners Inc. 20.1%, and Marathon Oil KDV BV 15%.

Aramco lets $500-million in offshore contracts

Saudi Aramco has let a contract to Saipem for engineering, procurement, construction, and installation as well as trunklines and installation works in Saudi Arabia under a long-term agreement in force, renewed in 2015 until 2021. Aramco also let a contract extension in Angola for the Gimboa floating production, storage, and offloading vessel to Saipem.

Both contracts total $500 million.

The scope of work of the EPCI contract includes the design, engineering, procurement, construction, and installation of a total of 19 jackets for the development of Marjan, Zuluf, Berri, Hasbah, and Safaniya fields.

The extended FPSO contract in Angola includes management and maintenance services, personnel, material, and consumable supplies for 3 years, plus one optional year.

Deal advances Nigerian field developments

Anyala and Madu oil fields offshore Nigeria have moved toward development with an agreement for financial and technical assistance from Schlumberger Ltd.

A joint venture of Nigerian National Petroleum Corp. and First Exploration & Petroleum Development Co. Ltd. signed a deal with Schlumberger envisioning combined production of 50,000 b/d of oil and 120 MMscfd of gas starting in 2019.

The fields are in 35-55 m of water 40 km offshore in the Niger Delta. Anyala is on oil mining license 83, and Madu is on OML 85.

Schlumberger said a final investment decision is expected in December. Development will use an existing floating production, storage, and offloading vessel.

Schlumberger will contribute services in kind and an estimated $700 million for development until production starts.

First E&P operates both licenses with 40% interests. NNPC holds the remaining interests.

The fields together have estimated oil initially in place of more than 450 million stb and gas initially in place exceeding 800 bcf. First E&P acquired its interests in OML 83 and OML 85 from Chevron Corp. in 2015.


PetroKazakhstan wraps first leg of Shymkent revamp

PetroKazakhstan Oil Products LLP (PKOP), a joint venture of state-owned KazMunaiGas and China National Petroleum Corp., has commissioned a 600,000-tonne/year naphtha isomerization unit as part of the first phase of the long-planned upgrade of its 5.25 million-tpy Shymkent refinery in Kazakhstan.

The unit, which entered operation in late June, completes Phase 1 of the refinery's two-phase modernization program, PKOP and CNPC said in separate releases.

Designed to enable production of Euro 4 and Euro 5-quality fuels and reduce environmental impacts by enhancing the high-octane gasoline production process to meet the latest requirements set by Kazakhstan law, Phase 1 of the modernization project also included reconstruction of the refinery's existing diesel hydrotreater as well as construction of a sulfur treatment plant, both of which were completed in 2015, PKOP said.

Currently under implementation, Phase 2 aims to increase the Shymkent refinery's crude processing capacity to 6 million tpy and includes construction of a grassroots residual fluid catalytic cracking (RFCC) complex at the site.

Initiated in 2014, the refinery modernization comes as part of Kazakstan's plan to increase production of light, high-quality fuels to meet increased domestic demand and help reduce the country's dependence on foreign fuel imports.

Takreer lets contract for Ruwais refinery repairs

Abu Dhabi Oil Refinery Co. (Takreer), the refining arm of state-owned Abu Dhabi National Oil Co., has let a contract to GS Engineering & Construction Corp. to repair damages caused by an early January fire at the 417,000-b/d West plant of its more than 800,000-b/d Ruwais refining complex in the UAE.

As part of the $865-million contract, GSEC will deliver engineering, procurement, and construction services for restoration and repair of units at the West plant, the service provider said in a filing with the Korea Exchange.

The project will involve maintenance and reinstallation of unidentified damaged units and will take 18 months to complete from commencement, GSEC said.

The Jan. 11 fire, which led to a brief but complete shutdown of the West plant and has since impacted gasoline and propylene production at the site, did not affect operations at the Ruwais complex's East refinery.

Takreer has yet to confirm an official cause of the incident.

Commissioned in 2015 as part of Takreer's $10-billion expansion at Ruwais, the complex's West refinery includes the following unit capacities: crude distillation, 417,000 b/d; vacuum distillation, 200,000 b/d; residual fluid catalytic cracking, 127,000 b/d; hydrocracking, 57,000 b/d; naphtha hydrotreating, 69,000 b/d; kerosine hydrotreating, 108,000 b/d; diesel hydrotreating, 75,000 b/d; gasoline hydrotreating, 37,000 b/d; and isomerization (C4), 23,000 b/d.

Enterprise to double Orla gas plant capacities

Enterprise Products Partners LP (EPP), Houston, has approved a project to expand originally planned capacities of its 300-MMcfd Orla I cryogenic natural gas processing plant currently under construction near Orla, Tex., in Reeves County.

Already supported by long-term commitments, the Orla II expansion project will add a second 300-MMcfd processing train as well as another 40,000 b/d of NGL extraction capability at the site to further accommodate rising NGL-rich gas production in the Delaware basin of West Texas and southeastern New Mexico, EPP said.

Alongside doubling Orla's inlet capacity to 600 MMcfd, the project will double the site's NGL production to 80,000 b/d.

Scheduled for startup in third-quarter 2018, the Orla expansion will raise EPP's total natural gas processing and NGL extraction capacities in the Permian basin to more than 1 bcfd and 150,000 b/d, respectively.

NGLs from Orla will be delivered into EPP's fully integrated NGL system, including the recently announced 571-mile Shin Oak pipeline that will transport NGLs from the Permian basin to the firm's NGL fractionation and storage complex at Mont Belvieu, Tex., which offers Delaware basin producers pipeline connectivity to US Gulf Coast petrochemical operators and EPP's LPG and ethane deepwater marine export terminals on the Houston Ship Channel.

EPP's Orla I processing train remains on schedule for commissioning in second-quarter 2018, while the Shin Oak line is slated to be in service during second-quarter 2019.


US DOS okays additional NuStar pipeline to Mexico

NuStar Logistics LP received approval from the US Department of State to construct a 108,000-b/d oil products pipeline to Mexico. The system will cross the US-Mexico border near Penitas, Tex., said acting Asst. Sec. for Oceans and International Affairs Judith Garber said in her June 29 announcement. President Donald J. Trump mentioned the project in his energy policy reforms address on June 30.

The 10-in. Burgos pipeline would parallel one that is already in operation and would use the same right-of-way between NuStar's Edinburg, Tex., terminal and Petroleos Mexicanos' (Pemex) gas plant near Reynosa, Tamaulipas, DOS said.

It said NuStar also received cross-border permits for the existing Dos Laredos pipeline, which crosses the border near Laredo, Tex., reflecting a change in the permit holder's name, as well as the existing Burgos pipeline, authorizing transportation of a broader range of petroleum products.

Trans Mountain twin faces BC resistance

A pipeline expansion able to relieve a looming production bottleneck in the Alberta oil sands faces new opposition after a change of government in British Columbia.

The Liberal Party, which has governed the province for 16 years, will be replaced by a coalition of the New Democratic Party (NDP) and Green Party.

The outcome was expected after the Liberals, led by Christy Clark, won an election May 9 but failed by one seat to win a majority.

Clark offered to resign as premier on June 29 as her government lost a vote of confidence. NDP Leader John Horgan will become premier.

The NDP-Green coalition, with a one-seat majority, has vowed to block expansion of the Trans Mountain Pipeline between Edmonton and Burnaby, BC, on the Pacific Coast.

Christy supported the 715-mile twinning project, which is to nearly triple capacity to 890,000 b/d. The federal government approved the expansion last November.

Kinder Morgan Canada Ltd. plans to start construction in September.

The Canadian Association of Petroleum Producers warned recently that future production gains in Canada, dominated by Alberta, will be constrained by transportation capacity if pipelines are not built or expanded.

Freeport LNG advances fourth liquefaction train

Freeport LNG Development LP (FLNG) and its wholly owned subsidiary FLNG Liquefaction 4 LLC have filed a formal application with the US Federal Energy Regulatory Commission for authorization to site, construct, and operate a fourth liquefaction train at its LNG export facility on Quintana Island near Freeport, Tex.

FLNG also is commencing front-end engineering and design for Train 4, which has a nominal production capacity of 5.1 million tonnes/year. FLNG anticipates being ready to start construction of Train 4 by yearend 2018, with operations beginning as early as 2022.

The initial three liquefaction trains at Freeport are under construction and scheduled to begin operations sequentially between fourth-quarter 2018 and third-quarter 2019. Each train has a capacity of at least 5 million tpy.

About 13.4 million tpy of the production capacity from the first three trains has been contracted under use-or-pay liquefaction tolling agreements with Osaka Gas Co., Jera Energy America, BP Energy, Toshiba Corp., and SK E&S LNG.

FERC in August 2015 issued a notice of intent to prepare an environmental assessment for the expansion project.