OGJ Newsletter

Jan. 15, 2018
International news for oil and gas professionals


Lucid to sell Delaware basin unit for $1.6 billion

Lucid Energy Group, Dallas, agreed to sell Lucid Energy Group II LLC (Lucid II), to a joint venture controlled by Riverstone Global Energy and Power Fund VI LP, an investment fund managed by Riverstone Holdings LLC, and investment funds managed by the Merchant Banking Division of The Goldman Sachs Group Inc. for $1.6 billion in cash. The transaction includes committed debt financing provided by Jefferies LLC.

The Lucid II assets, in the northern Delaware basin, include the South Carlsbad and Artesia natural gas gathering and processing systems.

The deal includes 1,700 miles of natural gas gathering pipelines and 585 MMcfd of processing capacity. An additional 200 MMcfd is under construction and scheduled to be in service by mid-2018.

Lucid II holds long-term dedications and production volume commitments from oil and gas producers operating in the 450,000 acres spanning New Mexico’s Eddy and Lea counties.

Privately held Lucid Energy Group holds more than 1 bcf of gas processing capacity in operation or under construction in the Permian basin and more than 2,400 miles of pipeline assets. EnCap Flatrock Midstream serves as its financial sponsor.

Lucid II will retain its name and operate as a Riverstone and Goldman Sachs MBD portfolio company. The members of the Lucid management team will remain in their current roles with Lucid II.

Closing is expected in the first quarter of this year.

Court rejects climate challenge to licenses

Two environmental groups have lost a court fight against Arctic oil and gas licenses off Norway that they called the first lawsuit claiming governmental violation of the Paris climate accord.

The Oslo District Court supported the Norwegian Ministry of Petroleum and Energy against a challenge to its issuance of 10 licenses covering 40 blocks in the Barents Sea (OGJ Online, May 18, 2016).

Greenpeace and Nature and Youth said award of the licenses in Norway’s 23rd licensing round violated the country’s constitution and the Paris accord.

The court disagreed and ordered plaintiffs to pay court costs.

Operators of the blocks in question are Statoil Petroleum AS, Capricorn Norge AS, Centrica Resources (Norge) AS, Det Norske Oljeselskap ASA, and Lundin Norway AS. Three other companies hold interests.

Oil firms agree to cut methane emissions

BP PLC, Eni SPA, ExxonMobil Corp., Repsol SA, Royal Dutch Shell PLC, Statoil ASA, Total SA, and Wintershall AG have committed to further reduce methane emissions from natural gas operations.

The companies signed a Guiding Principles document in 2017 put forth by the Climate & Clean Air Coalition (CCAC) to address priority areas for action highlighted in the International Energy Agency’s World Energy Outlook 2017.

The principles focus on continually reducing methane emissions, advancing strong performance across gas value chains, improving accuracy of methane emissions data, advocating sound policies and regulations on methane emissions, and increasing transparency.

Companies plan to work, in part, through various partnerships, studies, and collaboration with industry groups, institutions, governments, and others across the gas value chain; establishment and maintenance of monitoring and reduction plans; improvements in methane emissions data collection methodologies and data; and efforts to provide and standardize relevant reports and reporting processes.

Tim Gould, head of the supply division, World Energy Outlook, IEA, called credible action to minimize methane emissions “essential to the achievement of global climate goals, and to the outlook for natural gas.” He said, “Implementing all of the cost-effective methane-abatement measures worldwide would have the same effect on long-term climate change as closing all existing coal-fired power plants in China.”

The document signed by the companies was developed in collaboration with the Environmental Defense Fund, IEA, International Gas Union, Oil & Gas Climate Initiative Climate Investments, Rocky Mountain Institute, Sustainable Gas Institute, Energy & Resources Institute, and United Nations Environment.

The companies agreed to encourage other companies to apply the principles.

Study urged of gulf loop current system

The National Academies of Science, Engineering & Medicine (NASEM) has called for international, multi-institutional research, observation, and analysis of the Gulf of Mexico’s loop current system (LCS).

The position, strength, and structure of the gulf’s dominant ocean circulation feature has major implications for oil and gas operations, oil spill response, hurricane intensity, commercial fishing, tourism, and other aspects of the region’s economy, NASEM said in a Jan. 3 report.

The report identifies complementary research efforts, which would take nearly 10 years to prepare and cost $100-125 million. The research would provide critical information about the LCS to help promote safer offshore operations, better understand the gulf’s complex oceanographic systems, facilitate disaster response, help protect coastal communities, protect and manage ecological resources, and predict and forecast weather and climate impacts, it said.

The recommended research campaign is critical for more accurate predictions of the current’s path, the report noted.

A webinar about the report and the first NASEM Gulf Research Program funding opportunity related to it is scheduled for Jan. 18. The funding opportunity will open in early February and will focus on the report’s near-term recommendations, which address activities that can be started before extensive planning for the larger research campaign gets under way.

Verchere appointed to top jobs at OMV Petrom

Christina Verchere has joined OMV AG as president of the executive board and chief executive officer of the company’s Southeast European oil and gas subsidiary, OMV Petrom SA, Bucharest.

She has worked for BP PLC for more than 20 years, most recently as regional president of the Asia-Pacific region, based in Jakarta. Verchere succeeds Mariana Gheorghe, who held the positions for 12 years.

Helms promoted to COO, EOG Resources

Lloyd W. “Billy” Helms Jr. has been promoted to chief operating officer of EOG Resources Inc.

An EOG employee for 36 years, Helms most recently was executive vice-president, exploration and production.

Gary L. Thomas, who has been president and chief operating officer, will remain president until his expected retirement at yearend.

Ezra Y. Yacob has been promoted to executive vice-president, exploration and production, responsible for EOG’s Midland, San Antonio, and Artesia operating areas. He had been vice-president and general manager of the firm’s Midland office.

Carrell joins Southwestern Energy as COO

Clayton A. Carrell joined Southwestern Energy Co., Houston, last month as executive vice-president and COO.

He had been executive vice-president and chief operating officer of EP Energy, Houston, which he helped establish as an independent firm in conjunction with the acquisition of El Paso Corp. by Kinder Morgan Inc. (OGJ Online, Feb. 27, 2012).

Exploration & DevelopmentQuick Takes

Ineos Shale challenges Scottish frac ban

Scotland’s ban on hydraulic fracturing has come under legal attack. Ineos Shale said it is seeking judicial review of the government’s decision in October to extend indefinitely a moratorium in place since 2015 (OGJ Online, Oct. 3, 2017).

Ineos Shale holds two exploration licenses between Glasgow and Edinburgh. Its 20% partner in one of the licenses, Reach Coal Seam Gas Ltd., joined it in the challenge.

An Ineos Shale statement alleged “very serious errors in the decision-making process, including a failure to adhere to proper statutory process and a misuse of ministerial power.”

The statement said the 2015 moratorium took effect after Ineos and other shale operators in Scotland, relying on earlier support from the Scottish and local governments, had invested heavily to acquire licenses and permissions.

“Such investment has been rendered worthless as a consequence of the ban, even in areas where no fracing was proposed,” the statement said, noting that a panel of specialists appointed by the government had concluded that shale development can be managed safely.

Tom Pickering, Ineos Shale operations director, said the company “has been left with no option other than to raise this legal challenge.”

Esso’s Ranger well yields sixth oil find off Guyana

ExxonMobil Corp. says it plans additional exploration drilling on its Starbroek block offshore Guyana in 2018. The company’s affiliate, Esso Exploration & Production Guyana Ltd., encountered 230 ft of high-quality, oil-bearing reservoir with its Ranger-1 well about 60 miles northwest of the Liza discovery.

Ranger makes the sixth discovery on the block, and its potential resources add to a total of 3.2 billion boe from the operator’s previous five Stobroek block discoveries: Liza, Payara, Snoek, Liza Deep, and Turbot (OGJ Online, Oct. 5, 2017).

Ranger-1 was drilled to 21,161 ft in 8,973 ft of water. Following completion, the Stena Carron drillship will move to the Pacora prospect, about 4 miles from the Payara discovery. ExxonMobil has been active on the 6.6 million-acre Stabroek block since 2015 (OGJ Online, May 20, 2105). In June, the operator made an final investment decision for the first phase of development for its initial Liza discovery (OGJ Online, June 16, 2017).

ExxonMobil makes oil find off Equatorial Guinea

ExxonMobil Corp. is now assessing potential commerciality at its Avestruz-1 well on Block EG-06 160 km offshore Malabo, Equatorial Guinea. The operator drilled the oil discovery in October but has not released any production data.

Block EG-06 is next to the legacy oil-producing Block B and EG-11, ExxonMobil’s most recent acquisition in the region (OGJ Online, June 5, 2017).

Avestruz-1 is adjacent to ExxonMobil’s Zafiro field in Equatorial Guinea’s northern maritime area. Zafiro has produced more than 1 billion bbl of oil since 1996. In May, ExxonMobil subsidiary Mobil Equatorial Guinea Inc. let a 5-year contract to GEPsing to continue operation and maintenance of the Serpentina floating production, storage, and offloading vessel on Zafiro field (OGJ Online, May 12, 2017).

Karoon entices Tullow for offshore Peru well

Karoon Gas Australia Ltd., Melbourne, has sealed a deal to bring Tullow Oil PLC, London, into its exploration venture offshore Peru.

Tullow Oil will take a 35% interest in Karoon’s Block Z-38 in the Tumbes basin in exchange for funding about 44% of a wildcat well on the Marina prospect up to a cap of $27.5 million, plus as much as $9 million in cash. The cash component will comprise $2 million on completion of the farmout and the balance if and when a commercial discovery is declared. This makes the overall deal worth as much as $36.5 million.

Karoon’s stake in the permit will drop to 40% while private firm Pitkin Petroleum PLC holds the remaining 25% interest.

Karoon describes the permit as being at the heart of the Tumbes basin, which in turn is adjacent to the onshore Talara basin that has produced 1.7 billion bbl of oil since the 1880s.

The company has identified two prospects—Marina and Bonito—which together have the potential to hold close to 2 billion bbl of oil. It says the Tumbes basin has a proven working petroleum system and the work so far suggests the two prospects are accessing the same source rocks as the producing onshore Talara basin fields.

Block Z-38 has been in force majeure since 2014 because Karoon was not able to secure a drilling rig. The Tullow deal seems set to lift the impasse and give the joint venture 22 months to complete the required two wells.

Erin Energy targets Miocene off Nigeria, Oyo field

Erin Energy Corp., Houston, expects a 60-day drilling and logging window at its Oyo North West (Oyo-NW) well, which the company spudded on Dec. 6 on its oil mining lease (OML) 120 block offshore Nigeria.

Oyo-NW is one several drill-ready Miocene prospects on blocks OML 120 and 121, which are near to many of Niger Delta’s giant fields. Pacific Drilling’s Pacific Bora, a sixth generation double-hulled drillship, is drilling the Oyo-NW. In June, Erin Energy reported its intent to extend the rig’s contract for 1-2 wells on Block 120 (OGJ Online, June 12, 2017).

Citing third-party estimates and managerial input, Erin Energy reports 1.1 billion bbl of mean resource for the region’s Miocene prospects.

In the event of a discovery, Oyo-NW will be tied back to Erin Energy’s 40,000-b/d Armada Perdana floating production, storage, and offloading vessel in the company’s Oyo field.

Drilling & ProductionQuick Takes

Gazprom Neft drills quadruple multilateral well

Gazprom Neft subsidiary Gazpromneft-Yamal LLC completed Russia’s first multilateral well with four horizontal cased-hole sidetracks at Novoportovskoye oil, gas, and condensate field.

Operator Gazpromneft-Yamal drilled a total 6,756 m of which 4,411 m was in the target zone. Crews completed the well in 39 days at a rate of 5.78 days/1,000 m.

The horizontal sections increased drainage from disjointed low-permeability areas, increasing oil recovery and bringing marginal reserves into development without the need to drill additional wells.

Novoportovskoye field is the largest oil field on the Yamal Peninsula. It was discovered during the 1960s but development was delayed by absence of transport infrastructure and complex geology.

Although 117 exploratory wells were drilled by 1987, proactive development did not begin until after 2010 when Gazprom transferred the field to Gazprom Neft.

MODEC, partners advance FPSO project off Brazil

Mitsui & Co. Ltd., Mitsui OSK Lines Ltd., Marubeni Corp., and Mitsui Engineering & Shipbuilding Co. Ltd. agreed to invest in Sepia MV30 BV, which will provide a floating production, storage, and offloading vessel in the Sepia area offshore Brazil, MODEC Inc. said.

MV30 signed a 21-year charter agreement to deploy an FPSO with Petroleo Brasileiro SA (Petrobras) in a presalt oil field. MODEC established MV30 and retains 20.1% interest while Mitsui & Co. has 32.4%, Mitsui OSK 20.6%, Marubeni 17.6%, and Mitsui Engineering 9.3%.

Petrobras operates the Sepia area in Santos basin on Block BM-S-24 about 160 miles offshore Rio de Janeiro state in 7,100 ft of water. Galp Energia, through its subsidiary Petrogal Brasil, has a 20% interest in the block. Total estimated recoverable volume of Sepia East is 130 million boe.

The FPSO will have the capacity to process 180,000 b/d of oil and 212 MMcfd of natural gas. Storage capacity is 1.4 million bbl.

Statoil lets umbilicals contract for Johan Castberg

Statoil Petroleum AS has hired Oceaneering International Inc. to supply umbilicals for the Johan Castberg project offshore Norway in the Barents Sea.

In late 2017, Statoil ASA submitted a plan for the development and operation of its Johan Castberg project to Norwegian authorities. Statoil estimated recoverable resources at 450-650 million boe (OGJ Online, Dec. 5, 2017).

The contract is for dynamic and static control umbilicals as well as associated hardware. The umbilicals will carry hydraulic control fluid and chemicals as well as provide electricity and fiber-optics needed to monitor subsea wells in 1,312 ft of water.

The umbilicals are expected to be tied back to a floating production, storage, and offloading vessel. Oceaneering plans to manufacture the umbilicals in Rosyth, Scotland, with delivery scheduled for early 2021.


Tosoh lets contract to expand ethylene capacity

Tosoh Corp., Tokyo, has let a contract to Toyo Engineering Corp. (TEC) to build a naphtha-cracking furnace for an expansion of ethylene production at its Yokkaichi complex in Mie Prefecture, Japan.

As part of the lump-sum turnkey contract, TEC and fellow domestic subsidiary TEC Project Services Corp. will provide engineering, procurement, and construction for a single cracking, which will be equipped with proprietary technology from CB&I-Chevron Corp. joint-venture Chevron Lummus Global, the service provider said.

While it did not disclose details regarding a value of the EPC contract or capacity of the proposed expansion, TEC did confirm the project is scheduled to be completed in August 2019.

Tosoh in May said it would invest nearly $90 million by 2020 to expand ethylene production at Yokkaichi’s existing 527,000-tonne/year naphtha cracker, according to local Japanese media reports.

In its latest annual report to investors, Tosoh said it continues to operate the Yokkaichi naphtha cracker at full rates amid rising olefins demand, which prompted a decision to increase the cracker’s efficiency.

The project was to involve installation of a gas turbine to be completed by spring 2020, the operator said.

Sasref lets contract for Jubail refinery revamp

Saudi Aramco Shell Refinery Co. (Sasref), a 50-50 joint venture of Saudi Aramco and Royal Dutch Shell PLC, has let a contract to CB&I, Houston, to provide engineering, procurement, and construction management for the modernization and expansion of its 305,000-b/d refinery at Jubail, Saudi Arabia.

Valued at more than $95 million, this latest EPCM contract follows Sasref’s previous contract awards to CB&I for conceptual design and front-end engineering and design phases of the project, the service provider said.

CB&I said it also worked with Sasref to optimize its investment on the proposed project.

The modernization and expansion will entail reconfiguring the refinery to achieve the operating flexibility required for producing Euro 5-quality fuels and reducing emissions at the site, CB&I said.

Further details regarding the refinery’s planned overhaul have yet to be reported.

EPP to expand Mont Belvieu butane isom capacity

Enterprise Products Partners LP (EPP), Houston, will expand capacity of a 116,000-b/d butane isomerization plant at its NGL fractionation and storage complex in Mont Belvieu, Tex.

The partnership is currently evaluating two expansion options that would add up to 30,000 b/d of incremental butane isomerization capacity at the site, EPP said.

Both options are supported by new long-term agreements to provide butane isomerization, storage, and pipeline services, including a 20-year, 35,000-b/d fee-based tolling agreement, the operator said.

The proposed expansion comes amid solid demand growth for high-purity isobutane by the petrochemical and refining industries, said A.J. Teague, chief executive officer of EPP’s general partner.

The company disclosed no further details regarding a timeline or cost of the planned expansion.


House bills introduced aimed at easing LNG exports

US Rep. Bill Johnson (R-Ohio) has introduced a pair of bills designed to facilitate US exports of LNG. H.R. 4605 would let exporters begin shipments after completing the US Federal Energy Regulatory Commission’s review process instead of requiring them to wait for US Department of Energy approval, Johnson said.

H.R. 4606 would codify DOE’s efforts to begin exports of small volumes of LNG to Caribbean and Central and South American countries.

“The US is currently the world’s largest producer of natural gas, with trillions of cubic feet of recoverable gas beneath our feet,” Johnson said. “We should be doing all we can to take advantage of this abundant resource, and it is my hope that these bills will help further that goal.”

Fred H. Hutchison, executive director of LNG Allies & Our Energy Moment, welcomed the measures. “While the US has a strong and transparent regulatory process for the approval of LNG export terminals, there is no question that this process is expensive and time-consuming,” Hutchison said.

H.R. 4605 is particularly important since Congress lifted the ban on US crude oil exports on Dec. 18, 2015, and LNG Allies considers limits on LNG exports similarly anachronistic, Hutchison said.

“After all, the US government imposes no export restrictions on coal, oil, petroleum coke, wood pellets, refined petroleum products, natural gas liquids, solar panels, or wind turbines,” he said.

QP completes Qatargas, RasGas merger

Qatar Petroleum has completed the merger of Qatargas and RasGas Co. Ltd., its LNG subsidiaries (OGJ Online, Dec. 12, 2016).

The merged company, Qatargas, operates 77 million tonnes/year of liquefaction capacity in 14 trains at Ras Laffan Industrial City and a chartered fleet of 70 LNG carriers.