OGJ Newsletter

April 2, 2018
International news for oil and gas professionals


Cypriot gas dispute colors Turkey-EU summit

A meeting in Varna, Bulgaria, between Turkish President Recep Tayyip Erdogan and leaders of the European Union ended with repeated EU condemnation of Turkey's recent interference with oil and gas exploration off Cyprus.

"The European Union stands united behind the Republic of Cyprus," declared Donald Tusk, president of the European Council, in Varna.

Just days before the summit, the EU had said it "strongly condemns Turkey's continued illegal actions in the Eastern Mediterranean and the Aegean Sea and underlines its full solidarity with Cyprus and Greece."

Omer Celik, EU affairs minister, called that statement "not acceptable for Turkey."

Turkish military vessels in February prevented Eni from moving a drilling rig to Block 3 off Cyprus from Block 6, where it had drilled a gas discovery designated Calypso (OGJ Online, Feb. 9, 2018).

Turkey's government says the exclusive economic zone claimed by Cyprus overlaps Turkish territory and argues that gas development sanctioned by the Greek Cypriot government violates rights of Turkish Cypriots in the divided island.

The unresolved dispute over oil and gas exploration off Cyprus simmered in the background as Erdogan, Tusk, and other EU officials debated broader controversies over migration, combatting terrorism, the rule of law in Turkey, and Turkey's involvement in Syrian conflicts.

After the meeting, Erdogan said EU membership remains "a strategic goal" of Turkey, which has been in negotiations over EU accession since October 2005.

Statoil's name to be changed to Equinor

Statoil SA will become Equinor.

The name will change after a shareholder vote scheduled May 17. The Norwegian government, Statoil's majority shareholder, supports the proposal by the board of directors.

"The name change supports the company's strategy and development as a broad energy company," a company statement said.

Dio named chairman, president of BP Americas

Susan Dio has been named chairman and president of BP Americas Inc.

She has worked for BP for 33 years, most recently as chief executive of BP Shipping. A chemical engineer, Dio has worked in the US, UK, and Australia.

She succeeds John Minge, who has led BP Americas since February 2013. At the request of the National Petroleum Council, Minge will chair a study of carbon capture, utilization, and storage.

He will retire from BP in March 2019.

Watkins to step in as Shell US president

Royal Dutch Shell PLC has made changes to its US leadership team.

Former Maersk Oil Chief Executive Officer Gretchen Watkins will succeed Executive Vice-Pres. Greg Guidry, who will leave Shell June 31, following 36 years with the company. Watkins will join Shell on May 1 and will be appointed executive vice-president unconventionals, effective July 1. She will report to the upstream director and be based in Houston.

Shell Oil Co. Pres. and US Country Chair Bruce Culpepper plans to step down Dec. 31 following 37 years of Shell service. Concurrent with Culpepper stepping down, Watkins will assume the role of Shell Oil president and US country chair. While serving in her expanded role, Watkins will retain her title as executive vice-president unconventionals.

Exploration & DevelopmentQuick Takes

Governors extend Tri-State shale deal through 2021

The governors of Ohio, Pennsylvania, and West Virginia agreed to extend a 2015 agreement to cooperate on developing shale oil and gas resources in their states through Dec. 31, 2021. Their Mar. 21 action continues an effort to show the Appalachian basin's shared goal to assure the gas will attract manufacturers to the region instead of simply being exported, Pennsylvania Gov. Tom Wolf (D) said in Harrisburg.

"The shale gas resources in the Appalachian basin represent enormous economic opportunity not just for Pennsylvania, but for the region as a whole," Wolf said. "We have a unique proposition: abundant and low-cost feedstock for petrochemical and plastics manufacturing, all within the same geographic footprint." Ohio's John R. Kasich (R) and West Virginia's James C. Justice (R) also signed the extension.

Under the Tri-State Shale Coalition agreement, the states work together on issues in infrastructure, workforce development, and marketing to harness the potential of Appalachian gas and natural gas liquids, Justice said. The coalition identifies key areas for cooperation to help the gas industry grow, and holds annual summits where government, education, and industry leaders share information and best practices, he noted.

Kasich pointed out that since becoming part of the coalition in 2015, horizontal shale wells in Ohio have produced an average 19.2 million bbl of oil and 1.36 tcf of gas-increases of 275.5% and 619.4%, respectively, from the 3-year average preceding the agreement. Production of gas has increased each consecutive year since 2014, he added.

"Instead of competing, our three states are working together to promote the region as a center for shale-related manufacturing," said Justice.

Pemex, Lewis to develop Eagle Ford field

Mexican state oil company Petroleos Mexicanos (Pemex) signed an exploration and extraction contract with privately held US firm Lewis Energy Group for work in Olmos field in the northern border state of Coahuila, the company said.

With an expected investment of $617 million, the goal is to assess and develop the Eagle Ford field in Mexico with sights set on producing 117 MMcf of natural gas by 2021, Pemex said.

Lewis Energy has drilled more than 500 wells in the Eagle Ford, focusing on natural gas production. The company has executed a public works contract in Olmos field for 14 years. Olmos field is estimated to contain 800 bcf of gas.

India extends open-acreage bid round

India's Directorate General of Hydrocarbons has extended into May 2 the bidding under its open acreage licensing program, which opened Jan. 18 (OGJ Online, Jan. 19, 2018).

The Ministry of Petroleum and Natural Gas unit gave no reason for the extension.

The round, for which bidding originally was scheduled to close Apr. 3, offers 55 blocks covering 59,282 sq km nominated by oil and gas operators. It's India's first use of open-acreage licensing.

Of blocks open for bid, 46 are onshore, 8 are in shallow water, and 1 is in deep water.

China, Philippines eye joint exploration

The governments of China and the Philippines say they're moving toward cooperative offshore oil and gas exploration.

The countries have been locked in a territorial dispute over parts of the South China Sea.

The island nation won an arbitration challenge to China's claim to most of the sea in 2016. Brunei, Malaysia, Taiwan, and Vietnam also dispute the Chinese claim.

Last year, Philippines President Rodrigo Duterte approved negotiations with the Chinese government over the possibility of joint exploration (OGJ Online, Aug. 17, 2017).

After a meeting this month with Philippine Foreign Sec. Alan Peter Cayetano, Wang Yi, the Chinese foreign minister, told reporters the countries will "in a prudent and steady way advance cooperation on offshore oil and gas exploration."

Cayetano said the talks yielded "very positive momentum."

Apache finds oil at Garten prospect in UK North Sea

Apache Corp., Houston, reported making an oil discovery on Block 9/18a Area-W in the UK North Sea. The Garten discovery well lies 6 km south of the Beryl Alpha platform.

The Garten well targeted a downthrown structural closure and encountered more than 700 ft of net oil pay in stacked, high-quality Jurassic-aged sandstone reservoirs. Recoverable resource is expected to exceed 10 million bbl of light oil, which is at the high end of predrill estimates, Apache said. Apache has a 100% working interest in the Garten block.

This latest discovery is the company's fourth commercial find in the Beryl area in the past 3 years, said John J. Christmann IV, Apache's chief executive officer and president. These discoveries have spanned several play types ranging from the Tertiary to the Triassic. "Apache's strategy to focus on exploration near operated facilities is set to deliver significant production without the long cycle time of large scale projects," Christmann said.

The Garten discovery well will be suspended as a future producer and tied back to the Beryl Alpha platform. Apache is working closely with the Oil and Gas Authority (OGA) to obtain the regulatory approvals to initiate production, which is anticipated in first-quarter 2019.

Mubadala developing gas field off Malaysia

Mubadala Petroleum, Abu Dhabi, expects production to begin by the first quarter of 2021 from Pegaga natural gas field offshore Malaysia.

The company and its partners will develop the field with an integrated central processing platform on an 8-legged jacket designed for 550 MMscfd of gas plus condensate.

Produced fluids will move through a new 38-in. subsea pipeline linked to an existing system for transport to the Malaysia LNG plant in Bintulu.

The field is in 108 m of water on Block SK 320 in Central Luconia province off Sarawak.

Mubadala, operator with a 55% interest, state-owned Petronas Carigali, with 25%, and Sarawak Shell Bhd., with 20%, expect to invest more than $1 billion in the project.

Mubadala let a contract for engineering, procurement, construction, installation, and commissioning to Sapura Fabrication Sdn. Bhd.

Pegala is one of three discoveries made during 2013-14 on the block. Others are Sirih and Sintok (OGJ Online, June 23, 2014).

BSEE implements permitting process QA program

The US Bureau of Safety and Environmental Enforcement has implemented a new quality assurance process to review and assess its permitting systems. The process aims to help inform best practices for offshore energy permitting, BSEE Director Scott A. Angelle said.

"Taking these actions now will promote BSEE's effective monitoring of permit processes and provide an avenue to progress toward overall improvements such as decreased processing delays," he said.

The new directive by BSEE's Office of Offshore Regulatory Programs requires the agency to periodically review and assess permitting processes for consistency, timeliness, and efficiency across the US Department of the Interior agency's districts and regions.

The quality assurance process will be conducted by carefully selected teams of BSEE staff who will develop the assessment plans and conduct the assessments, the agency said. These assessments will review permitting and include in-person site visits to district or regional offices where applicable, it indicated

Drilling & ProductionQuick Takes

BSEE plan will increase inspection time offshore

The US Bureau of Safety and Environmental Enforcement will begin a new program on Apr. 1 that will increase physical inspection time offshore while saving nearly $20 million over 3½ years, the US Department of the Interior agency reported. A team in its Gulf of Mexico regional office in New Orleans developed the approach as it explored ways to make inspections more efficient and reduce helicopter operating expenses, it said.

"This new process will allow BSEE inspectors to increase physical inspection time on offshore oil and gas facilities," noted Michael Saucier, who supervises district field operations in the region.

Using technology that provides inspectors access to onshore electronic records, inspectors now will have much more time to inspect operations offshore at more than 2,200 facilities in the gulf, BSEE said. It also will reduce helicopter operating expenses by 15% without affecting safety and environmental protections, it added.

The agency pointed out that production from the US Outer Continental Shelf accounts for 1 of every 6 bbl of crude produced in the US. "With 98% of all OCS energy produced from the Gulf of Mexico, it is critical that BSEE continues to maximize efficiency and ensure that oil and gas operations are conducted safely and in an environmentally sustainable manner," it said.

Pearl to boost gas flow in Kurdish Iraq

Pearl Petroleum Co. Ltd., a five-company consortium based in Sharjah, has signed a 10-year gas sales agreement with the Kurdistan Regional Government (KRG) that will allow production from Khor Mor natural gas field in Kurdish Iraq to increase to 385 MMcfd by yearend from 305 MMcfd at present.

The company last year reached an arbitration settlement with the KRG that included $1 billion in cash for past receivables and a commitment to expand investment and operations (OGJ Online, Oct. 23, 2013).

The expansion is to include a multiwell drilling program in Khor Mor and Chemchemal fields, operated for Pearl by Crescent Petroleum and Dana Gas, which hold 35% interests each in the consortium.

Pearl said debottlenecking will achieve the initial production increase from Khor Mor.

It plans to boost output from the fields eventually to 900 MMcfd.

A 58-km, 24-in. pipeline connects the Khor Mor field and gas processing plant with a power station at Chemchemal field to the north. A 116-km, 24-in. pipeline connects Chemchemal with a power station at Erbil.

Other partners in Pearl Petroleum are OMV, MOL, and RWEST.

Gas flow starts at B15 field off Malaysia

Sapura Exploration & Production (Sarawak) Inc., Kuala Lumpur, has started production from B15 natural gas field off Sarawak, East Malaysia.

The field, discovered in December 2010, is on Block SK310. It produces through a processing platform linked by a 35-km pipeline to an existing system carrying gas to the Malaysia LNG plant at Bintulu.

The company expects B15 production to peak at 100 MMcfd.

Sapura E&P (Sarawak) operates the Block SK310 production-sharing contract with a 30% participating interest. Other interests are state-owned Petronas Carigali, 40%, and Diamond Energy Sarawak Sdn. Bhd., a subsidiary of Mitsubishi Corp., 30%.


RNPK delivers first batch of high-octane gasoline

PJSC Rosneft subsidiary JSC Ryazan Oil Refining Co. (RNPK) has produced the first batch of AI-100 high-octane gasoline at its 18.8 million-tonne/year Ryazan refinery about 120 miles southeast of Moscow.

Production of the low-sulfur gasoline, which occurred in mid-March, is a result of implementation of Rosneft's broader program to modernize and upgrade operations of its Russian refineries for production of fuels meeting more stringent global environmental quality specifications, Rosneft said.

Designed for high-power engines, the new product also has passed all qualification and benchmark tests for compliance with fuels conforming to the Eurasian Economic Commission's technical specifications for the K5 emission class (equivalent to Euro 5-quality environmental standards), the operator said.

According to Rosneft's web site, the following projects are currently under implementation at RNPK's refinery:

• Reconstruction of the diesel fuel hydrotreating unit.

• Construction of a two-unit desulfurization plant for dry hydrocarbon gases with a saturated amines regeneration block.

• Construction of a production complex for elemental sulfur applying the Klaus method, with storage, shipping, and operation infrastructure.

• Construction of the crude-vacuum distillation Unit 5.

• Reconstruction of treatment installations.

• Construction of the vacuum gas oil hydrocracking complex.

The projects come as part of Rosneft's company-wide refinery modernization plan launched in 2008, which includes the construction of 30 units and reconstruction of more than 20 units at Rosneft's Russian refineries between 2012 and 2020.

Feasibility study due for Mozambican refinery

Empresa Nacional de Hidrocarbonetos EP (ENH), Mozambique's state-owned oil company, has completed a tender seeking expressions of interest (EOI) from consultants to conduct a study evaluating the feasibility of constructing what would become the country's first refinery.

Closed as of 10:00 a.m. local time in Mozambique on Mar. 16, the tender invited interested parties to submit their EOIs to participate in an upcoming tender process for the provision of consultancy services for "the elaboration of the feasibility study for refinery deployment in Mozambique," according to ENH tender documents.

To be based on proposed crude supplies from the Rovuma basin, Mozambique basin, and imported feedstock from the international market, the EOI was to include the following:

• A technical report that analyzes the various alternatives for hydrocarbon processing as well as type and quantity of the products depending on the national and regional market.

• An economic evaluation.

• A market study at both the local and regional levels.

MEGlobal lets contract for Freeport MEG plant

Dubai-based MEGlobal International FZE, a unit of Kuwait's first international petrochemical joint venture Equate Petrochemical Co., has let a contract to Fluor Corp. to provide mechanical construction of its monoethylene glycol (MEG) plant now under construction at Dow Chemical Co.'s currently expanding Oyster Creek petrochemical complex in Freeport, Tex.

Fluor's mechanical construction scope includes the installation of equipment, steel, and piping for the 700,000-tonne/year MEG process unit, the service provider said.

First announced in March, the grassroots MEG plant comes as part of MEGlobal's program to create greater flexibility to satisfy grown demand for ethylene glycol products in the US and Asia-Pacific markets, as well as strategy to expand the company's global footprint (OGJ Online, Mar. 28, 2016).

The new MEG plant, which will receive ethylene feedstock from Dow's currently expanding Oyster Creek ethylene production site under a long-term supply agreement, remains on schedule for startup in mid-2019 (OGJ Online, Oct. 26, 2016).

Equate Petrochemical is an international JV of Kuwait's state-owned Petrochemical Industries Co., 42.5%; Dow, 42.5%; Boubyan Petrochemical Co., 9%; and Qurain Petrochemical Industries Co., 6%.


Inpex further delays Ichthys LNG start-up

Japanese operator Inpex has announced a further delay in its Ichthys LNG project off Western Australia, pushing back the on-stream date by at least 2 months.

The company had set a deadline of Mar. 30 to begin production from the $37-billion development which, in turn, was a 6-month delay of a previous schedule.

Inpex now expects to complete commissioning of the central processing facility near the field offshore Kimberley and bring the gas on stream between April and May.

This will be followed by production and shipment of condensate via the giant Ichthys Venturer floating production, storage, and offloading vessel at the field and then LNG and LPG in sequence from the Darwin liquefaction plant.

Inpex said commissioning of the first LNG production train has been completed, as has the FPSO and subsea production systems. The company hopes to hold to the new timetable but concedes the activity schedule may fluctuate depending on weather conditions at the numerous worksites, along with preparation activities and other factors.

Perenco begins FLNG operations offshore Cameroon

Perenco has begun production at Cameroon LNG via Golar LNG Ltd.'s floating LNG (FLNG) production unit Hilli Episeyo.

Hilli Episeyo arrived in Cameroon in late November. A ship-to-ship transfer of cool down LNG with the Golar Bear took place in mid-December 2017, followed by the introduction of feed gas from the onshore processing plant. Commissioning of the FLNG's refrigerant trains continued into February.

Gazprom has an 8-year purchase agreement for all of Cameroon LNG's anticipated 1.2 million tonne/year production from FLNG Hilli.

Golar said its experience with conversion and commissioning FLNG Hilli would be applied to the Fortuna project in Block R off Equatorial Guinea. Ophir Energy PLC and OneLNG, a joint venture of subsidiaries of Golar and Schlumberger, in late 2016 established a joint operating company to develop Fortuna using the Golar Gandria FLNG. Golar Gandria is now at Keppel Shipyard in Singapore.

Phase 1 Fortuna development would tie four gas wells back to FLNG Gandria, targeting an eventual plateau output of 2.2 million tpy. First gas is expected in 2019. Fortuna Phase 2 would double production via an additional 5 wells and a second FLNG.