GENERAL INTERESTQuick Takes
ExxonMobil reports earnings of $20.8 billion in 2018
ExxonMobil Corp. reported estimated 2018 earnings of $20.8 billion compared with $19.7 billion a year earlier. Excluding US tax reform and asset impairments, earnings were $21 billion vs. $15.3 billion in 2017. Cash flow from operations and asset sales was $40.1 billion, including proceeds associated with asset sales of $4.1 billion. Capital and exploration expenditures were $25.9 billion, including incremental spend to accelerate value capture. The company’s full-year cash flow from operating activities—$36 billion—is its highest since 2014.
Fourth-quarter 2018 earnings were $6 billion compared with $8.4 billion in the prior-year’s last quarter. Earnings excluding US tax reform and impairments were $6.4 billion compared with $3.7 billion in the prior-year quarter.
Production for the quarter increased to 4.01 million boe/d, up 4% from the 3.9 million boe/d reported in fourth-quarter 2017, driven by growth in the Permian basin where the company plans to triple total daily production by 2025. Meanwhile, the tenth discovery off Guyana increased Stabroek resource estimates to more than 5 billion bbl (OGJ Online, Dec. 3, 2018).
Trump nominates Bernhardt to Interior secretary post
US President Donald Trump formally nominated David Bernhardt as secretary of the Interior. Bernhardt has led the department in an acting capacity since Ryan Zinke resigned late last year (OGJ Online, Dec. 17, 2018). His nomination requires the US Senate’s confirmation.
Leaders of two oil and gas trade associations applauded the president’s Feb. 4 action. “Bernhardt knows the department well and understands the integral role that [Interior] plays in oil and gas development, both onshore and offshore,” Independent Petroleum Association of America Pres. Barry Russell said.
“As a westerner, Bernhardt is familiar with western lands and how by statute [Interior] manages public lands and waters with multiple use policies that balance conservation, recreational opportunities, job-creating economic activities, and safe, responsible energy development,” Russell said.
National Ocean Industries Association Pres. Randall B. Luthi cited Bernhardt’s additional experience at Interior as deputy secretary and, before that, solicitor as additional evidence of his knowledge about the department and how it works. “His selection as secretary will assure that important energy and conservation policies will not miss a beat in the transition,” said Luthi, who worked at DOI himself before taking NOIA’s helm.
Bill to repeal foreign tax credit introduced in US House
US House Rep. Julia Brownley (D-Calif.) has introduced a bill that would repeal the foreign tax credit, a provision US multinational oil companies consider essential for them to compete with overseas enterprises that receive government subsidies.
The measure would redirect the money to the Surface Transportation Block Grant (STBG) program, which helps states and localities fund infrastructure projects, Brownley said on Jan. 30.
“Our nation’s roads, bridges, and transit systems are in dire need of repair. What better way to invest in our nation’s crumbling infrastructure than by getting rid of a tax windfall for Big Oil?” said Brownley, who is a member of the House Transportation and Infrastructure Committee.
AGL calls off north Queensland asset sale
AGL Energy Ltd., Sydney, has ended the agreement to sell its natural gas assets in north Queensland to the Order Moranbah Holdings group that was originally announced in August 2017 (OGJ Online, Aug. 28, 2017). Order Moranbah is a consortium of Chinese gas distribution firm Shandong Order Gas Co. and Australian energy investment company Orient Energy Pty. Ltd.
AGL gave few details of the cancellation, saying only that certain conditions precedent were unable to be satisfied to secure counter-party support for the sale to proceed.
The assets comprise AGL’s 50% interest in each of the Moranbah Gas Project Joint Venture (MGPJV) and the North Queensland Energy Joint Venture (NQEJV) as well as AGL’s participation rights in the exploration permit ATP1103 in the Bowen basin. The MGPJV includes producing gas fields near Moranbah and associated gas sales contracts. The NQEJV includes transportation rights on the North Queensland gas pipeline, a power purchase agreement to toll gas through the Yabulu power station and gas sales and purchase agreements.
The Arrow Energy group, a firm owned 50-50 by Shell and PetroChina, is the 50% joint venture partner in the AGL assets. The overall sale agreement had followed AGL’s announcement in February 2016 that the firm intended to exit the sector.
Exploration & DevelopmentQuick Takes
Ineos calls for UK to reduce seismic thresholds
Ineos has asked UK government officials to change the shale seismicity limit from what Ineos calls “an unworkable 0.5 to a more sensible level on the Richter scale” to help companies development shale gas onshore the UK.
“The current 0.5 level is over 3,000 times lower than the 4.0 level,” typically found in US regulations where “more than 1 million shale wells have been safely drilled,” Ineos said, adding UK current policy will do irreparable damage to the island nation’s manufacturing base.
Ineos is among many companies trying to develop UK shale gas. Previously, privately owned Cuadrilla Resources Ltd. also has asked the Oil & Gas Authority for changes in the induced seismicity regulations. Induced onshore seismicity has prompted numerous shutdowns in hydraulic fracturing operations in the Bowland shale. UK regulations require companies stop fracturing and investigate whenever any seismic monitoring reading registers at least 0.5 in magnitude.
Jim Ratcliffe, Ineos chairman, called the government’s position, “Unworkable, unhelpful, and playing politics with the country’s future.” He added that planning policy remains slow, inordinately expensive, and virtually unworkable.
Compared with the number of US wells completed using fracturing, Ratcliffe said, “The UK, by contrast, has no coherent energy policy.” Ratcliffe noted the US Permian basin produces twice the amount of gas vs. the UK North Sea.
Separately, a UK business lobbying group said UK shale gas development could lessen the nation’s future dependence on gas imports. The Institute of Directors said, “Shale gas could be a new North Sea for Britain, creating tens of thousands of jobs, supporting our manufacturers, and reducing gas imports.”
In late 2018, Cuadrilla again stopped hydraulic fracturing operations at its Preston New Road natural gas drilling site in Lancashire, northwest England, after minor tremors were detected. Fracturing in the Bowland shale has been halted three times since October (OGJ Online, Dec. 12, 2018).
Oxy awarded onshore Block 3 in Abu Dhabi
Occidental Petroleum Corp. will invest $244 million, including a participation fee, in exploration of onshore Block 3 in Abu Dhabi.
Abu Dhabi National Oil Co. awarded the 5,782-sq-km block as part of its competitive bidding round launched in April 2018 (OGJ Online, Apr. 10, 2018). The block is in the Al Dhafra region near Shah, Asab, Haliba, and Sahl fields.
Oxy will hold a 100% interest during exploration and receive development and production rights to discoveries. ADNOC has the option to hold a 60% stake in production.
During exploration, Oxy will contribute financially and technically to a large 3D, land and marine seismic survey ADNOC commissioned last year (OGJ Online, July 19, 2018).
The concession agreement has a 35-year term. The block is the first awarded of four onshore blocks offered in the bid round. The two offshore blocks offered in the round have been awarded, both to a combine of Eni and PTT Exploration & Production (OGJ Online, Jan. 14, 2019).
India’s small-field round nets 145 bids
India’s second round of bidding on licenses encompassing discovered small fields attracted 145 bids for 24 of the 25 blocks on offer (OGJ Online, Aug. 8, 2018).
Vedanta Ltd. submitted the most bids by a single company, 21.
Thirty-nine companies submitted bids, alone or as group members, including Indian state-owned and private companies and small companies from the US, UK, Australia, Singapore, and the UAE. The license receiving no bids was a Kutch offshore block. The government plans to award the revenue-sharing licenses by the end of February.
Drilling & ProductionQuick Takes
Alberta eases month-old production cut
The government of Alberta is easing the production cut in effect since Jan. 1 to address historic price discounting due to pipeline congestion (OGJ Online, Dec. 3, 2018).
Saying it is responding to “new storage data,” the province will allow production to increase to 3.63 million b/d in February and March from the January limit of 3.56 million b/d. The January limit reflected a cut of 325,000 b/d.
“We’re not out of the woods yet, but this temporary measure is working,” said Premier Rachel Notley. “While it hasn’t been easy, companies big and small have stepped up to help us work through this short-term crisis while we work on longer-term solutions, like our investment in rail and our continued fight for pipelines.”
ExxonMobil lets contract for Ca Voi Xanh field
ExxonMobil E&P Vietnam Ltd. (EMEPVL) and its joint venture partners PetroVietnam and PetroVietnam EP Corp. have let a front-end engineering and design contract to Saipem’s XSIGHT division for the Ca Voi Xanh project in Vietnam.
The project encompasses the design of the facilities for the development of an offshore gas and condensate reservoir—the largest gas field in the country—on Block 118 offshore Vietnam. Ca Voi Xanh’s capacities are 3,000 b/d of liquids and 375 MMcfd of gas. The treated gas will be delivered to two power complexes, each containing two power trains. Vietnam Electricity, PetroVietnam, and Sembcorp are in talks to construct and operate the power plants. The proposed base development is expected to generate 3 Gw of power, or about 10% of Vietnam’s current total power demand.
Saipem will provide FEED services consisting of an offshore platform, offshore gas and condensate pipelines, offshore fiber optic cabling, an onshore gas treatment plant, onshore pipelines, and an onshore condensate offloading facility.
A final investment decision is set for 2020, said EMEPVL, which holds a 64% working interest in the project.
Production starts from Lula North off Brazil
Production of oil and natural gas has started from the Lula North presalt area in Brazil’s Santos basin from Petroleo Brasileiro SA’s (Petrobras) P-67 floating production, storage, and offloading vessel, reported BM-S-11 consortium partner Shell Brasil Petroleo Ltda. The FPSO, which is 260 km off Rio de Janeiro in 2,130 m of water, will produce through nine production wells.
The production hub is the seventh FPSO deployed in Lula field and the third in a series of standardized vessels built for the consortium. It is designed to process as much as 150,000 b/d of oil and 6 million cu m/day of natural gas.
Shell and its partners began production at Lula Extreme South with the P-69 FPSO in October 2018 (OGJ Online, Oct. 24, 2018). Petrobras is the Lula consortium operator with 65% interest. Shell holds 25% and Petrogal Brasil holds 10%.
Vietsovpetro starts oil field off Vietnam
JV Vietsovpetro reported the start of production from Ca Tam (Beluga) oil field offshore Vietnam with commissioning of the CTC-1 wellhead platform. Initial flow from three wells was 11,900 b/d, according to the Russian-Vietnamese joint venture and state-owned Zarubezhneft of Moscow.
The CTC-1 wellhead platform connects with the RP-2 wellhead platform on Dragon field, the reconstruction of which Vietsovpetro completed in December.
The Cuu Long basin field is on 6,000-sq-km Block 09-3/12, which has water depths of 15-60 m about 160 km offshore.
Vietsovpetro operates the production sharing contract with a 55% interest. Partners are PetroVietnam Exploration & Production Corp., 30%, and Bitexco Group, 15%.
Limited White Rose field restart approved
Husky Energy Inc. has received approval for the limited restart of oil and gas production from White Rose field offshore Newfoundland and Labrador and for its plans to repair equipment that leaked oil last November (OGJ Online, Nov. 28, 2018). The leak occurred at a subsea flowline connection during the restart of production, which had been shut in during heavy weather.
The Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) approved resumption of production from the Central Drill Center (CDC), where flushing and leak testing of flowlines were completed in mid-January. Husky is to ensure that key elements of the restart occur during daylight.
Production through the CDC flows into the Sea Rose FPSO vessel through a system without the type of flowline connecter that failed on the loop serving the South White Rose Extension Drill Center (SWRX).
C-NLOPB also approved Husky’s plan for plugging the SWRX flowline and recovering the failed flowline connector under strict conditions related to spill preparedness and wildlife protection.
Before the shut-in, White Rose produced about 23,640 b/d of oil and 122.5 MMcfd of natural gas.
CNX remediates Utica shale well
CNX Resources Corp., Pittsburgh, said it remediated the Shaw 1G well in Washington Township, Westmoreland County, Pa., “to arrest a subsurface flow of gas.”
The operator responded to a pressure anomaly observed while it was hydraulically fracturing the Utica shale well during the last week of January. It reported successful completion of the remediation on Feb. 5 and said the well had been contained with no injuries or environmental effects.
It suspended fracturing on the four-well pad from which the well was drilled and said it was monitoring the Shaw 1G and nearby wells. “While we continue to evaluate the cause of the initial pressure anomaly, we believe it is isolated to this well,” the company said.
PROCESSINGQuick Takes
ExxonMobil lets contract for Beaumont refinery
ExxonMobil Corp. has let a contract to TechnipFMC PLC to provide detailed engineering, procurement, and construction for the operator’s recently approved project to expand refining capacity by more than 65% at its 366,000-b/d integrated refining complex in Beaumont, Tex. (OGJ Online, Jan. 29, 2019).
TechipFMC’s scope of work under the reimbursable contract covers the addition of four units at the refinery, including an atmospheric pipe still, kerosine hydrotreater, diesel hydrotreater, and benzene recovery unit, the service provider said.
Designed to help increase the manufacturing site’s flexibility to process lighter crudes, the proposed units to be implemented as part of the expansion project will be integrated into the refinery’s existing operations, TechnipFMC said.
While it did not disclose a specific amount of the agreement, TechnipFMC valued the EPC contract at between $500 million and $1 billion.
Already under construction, the expansion project will add a third crude unit within the refinery’s existing footprint that will increase light crude refining capacity at the site by 250,000 b/d, supported by increased production in the Permian basin.
Part of the operator’s 10-year, $20-billion “Growing the Gulf” investment initiative, the crude unit is scheduled for startup by 2022.
Petrobras restores full operations at Replan
Petroleo Brasileiro SA (Petrobras) has resumed full production rates at the operator’s 434,000-b/d Replan refinery in Paulinia, Sao Paulo, following a late August 2018 fire that led to a temporary suspension of operations at the complex.
The refinery’s return to 100% of its nominal production capacity follows restart of the complex’s atmospheric distillation unit (U-200), which was back in operation as of Jan. 25.
Restart of U-200 followed Brazil’s National Petroleum, Natural Gas, and Biofuels Agency’s (ANP) Jan. 16 approval for Petrobras to safely resume operations at the unit.
A precautionary suspension of processing operations at the site occurred after a fire broke out on Aug. 20, 2018, following an explosion in a tank of one of the acidic water units associated with the U-220A catalytic cracking unit, which also impacted U-200. Other units temporarily shuttered because of the incident were restarted in the days following the fire.
Satorp lets contract for Jubail refinery
Saudi Aramco Total Refinery & Petrochemicals Co. (Satorp) has let a contract to KBR Inc. for a debottlenecking project at its 440,000 b/d full-conversion refinery complex at Jubail on Saudi Arabia’s eastern coast. Alongside subcontractor Wison Engineering Services Co. Ltd., KBR will deliver debottlenecking services at Train 2 of the refinery in a project that, once completed, is anticipated to increase the refinery’s original throughput capacity by 15%, the service provider said.
The debottlenecking project is scheduled to be executed during an upcoming major refinery turnaround in 2020, with completion targeted for August 2020, KBR said.
IOC lets contracts for Paradip refinery
Indian Oil Corp. Ltd. (IOC) has let contracts to Larsen & Toubro Ltd. subsidiary L&T Hydrocarbon Engineering Ltd. (LTHE) to provide engineering, procurement, construction, and commissioning on two units at IOC’s more than 300,000-b/d full-conversion refinery at Paradip in India’s state of Odisha on the country’s northeastern coast.
As part of the two contracts, LTHE will deliver EPCC for a 357,000-tonne/year monoethylene glycol (MEG) plant as well as a 180,000-tpy ethylene recovery unit (ERU).
Saudi Basic Industries Corp. and Clariant International Ltd.’s jointly owned Scientific Design Co. of Little Ferry, NJ, will license process technology for the MEG unit, while Lummus Technology LLC—a McDermott International Inc. (formerly CB&I) group company—will provide its proprietary process technology for the ERU, LTHE said.
While it confirmed the EPCC contracts were awarded on a lump-sum turnkey basis and will be executed concurrently, LTHE disclosed neither the values nor timeframes for completion of the orders.
Both units come as part of IOC’s ongoing 37.52 billion-rupee ethylene glycol project at Paradip.
TRANSPORTATIONQuick Takes
Anadarko signs LNG deals for Mozambique project
Anadarko Petroleum Corp. reported that Mozambique LNG1 Co. Pte. Ltd.—the jointly owned sales entity of the Mozambique Area 1 co-venturers—has entered into LNG supply agreements with Shell International Trading Middle East Ltd., CNOOC Gas & Power Singapore Trading & Marketing Pte. Ltd., and a co-purchasing agreement with Tokyo Gas Co. Ltd. and Centrica LNG Co. Ltd.
The 13-year agreement with Shell is for 2 million tonnes/year of LNG. The deal with CNOOC Gas & Power calls for the supply of 1.5 million tpy of LNG. The long-term agreement signed with Tokyo Gas and Centrica is an offtake agreement for the delivered ex-ship supply of 2.6 million tpy from the start-up of production until the early 2040s.
Anadarko is developing Mozambique’s first onshore LNG plant consisting of two initial LNG trains with a total capacity of 12.88 million tpy to support Golfinho-Atum field, which lies entirely within Offshore Area 1, where the firm and its partners have discovered 75 tcf of recoverable natural gas resources.
Anadarko operates Offshore Area 1 with 26.5% working interest. Partners are ENH Rovuma Area Um with 15%, Mitsui E&P Mozambique Area 1 Ltd. 20%, ONGC Videsh Ltd. 10%, Beas Rovuma Energy Mozambique Ltd. 10%, BPRL Ventures Mozambique 10%, and PTTEP Mozambique Area 1 Ltd. 8.5%.
Texas Colt submits application for deepwater port
Texas Colt—a proposed joint venture of Enbridge Inc., Kinder Morgan Inc., and Oiltanking—has submitted an application with the US Maritime Administration to construct and operate a deepwater crude oil export port offshore Freeport, Tex.
The project, with an expected in-service date of 2022, includes an offshore platform and two offshore loading single point mooring buoys capable of fully loading a 2 million-bbl very large crude carrier in about 24 hr. The offshore facilities will be connected via a 42-in. pipeline to an onshore tank farm that will have as much as 15 million bbl of storage capacity.
Texas Colt would receive US-produced light, sweet crude oil from three onshore pipelines including the Gray Oak Pipeline, designed to move 900,000 b/d of crude from the Permian basin and Eagle Ford shale to Freeport and three other destinations along the Texas Gulf Coast (OGJ Online, Nov. 9, 2018).
Companies exercise options in Epic crude, NGL lines
Noble Midstream Partners LP has exercised its option for a 30% equity stake in the Epic Crude Oil Pipeline project and a 15% equity stake in the Epic NGL pipeline while Altus Midstream Co., through a subsidiary, and Rattler Midstream LP, a subsidiary of Diamondback Energy Inc., exercised options for 15% and 10%, respectively, in the Epic crude line.
The Epic crude line and the Epic NGL line will transport crude and NGL across Texas for delivery into Corpus Christi, Tex. Construction on the crude line begins this month with an expected in-service date in this year’s second half. The NGL line will extend side-by-side for most of the route with the crude line. Phase 1 was completed and NGL product was introduced to the pipeline in March 2018 (OGJ Online, Apr. 3, 2018). Phase 2 was completed in June 2018 (OGJ Online, June 27, 2018). Phase 3 is expected to be complete in the fourth quarter.
The pro forma ownership for the crude pipeline is Epic 45%, Noble Midstream 30%, Altus Midstream 15%, and Rattler Midstream 10%. Ownership in the NGL pipeline is Epic 75%, Noble Midstream 15%, and Salt Creek Midstream 10%.
Closing of the equity interest in each project is anticipated in February and subject to certain conditions.
