GENERAL INTERESTQuick Takes
CARB begins petroleum-source air-quality study
The California Air Resources Board (CARB) formally began its study of neighborhood air near petroleum sources, or SNAPS, as it launched a web site on Nov. 13 and prepared to hold its first public meeting a day later. The Nov. 14 meeting will be held at the California Environmental Protection Agency headquarters in Sacramento.
SNAPS will include limited-term, intensive air-quality monitoring near oil and gas production, transportation, and storage sites within the state, with a particular focus on production.
The program will use mobile monitoring trailers equipped with state-of-the-art technologies to measure toxic air contaminants, volatile organic compounds, particulate matter, metals, and criteria pollutants, it said.
The trailers will be deployed initially in communities to collect preliminary screening data and to respond quickly to events statewide where near-immediate air monitoring is warranted, CARB said. Its staff will use that information as well as other criteria, including community concerns, to locate stationary trailers at a site for several months.
Staff members then will analyze air-quality measurements to identify potential areas of elevated health risk within the community. Where appropriate, CARB said that California's Office of Environmental Health Hazard Assessment will perform a more in-depth health analysis, potentially including a risk assessment. CARB's staff will post real-time air-monitoring data and publish the analysis of results for each site in a report. It also will share the results with communities in local meetings.
SandRidge acquiring Bonanza Creek Energy
SandRidge Energy Inc., Oklahoma City, will deepen its inventory of drilling locations in the Denver-Julesburg basin of Colorado under a definitive merger agreement it has entered with Bonanza Creek Energy Inc., Denver. SandRidge will acquire all Bonanza Creek common stock in a cash-and-stock transaction with an implied value of $746 million.
The acquisition includes 67,000 net acres in the rural oil window of the DJ basin as well as acreage in the North Park basin and producing interests in the Upper Jurassic-Lower Cretaceous Cotton Valley play of Arkansas.
Average production from the acquired properties during this year's third quarter was 15,800 boe/d, 52% oil. Bonanza Creek estimates 2P oil and gas reserves at 91 million boe, 55% oil.
Empire Oil & Gas acquired by largest shareholder
Troubled Perth-based producer Empire Oil & Gas NL (EOG) has been acquired by its largest shareholder, Mineral Resources Ltd. (Min Res), also of Perth.
Min Res acquired all the assets of the collapsed EOG, including the Red Gully gas-condensate project in the onshore north Perth basin.
The transaction was settled Nov. 9 following approval by EOG's creditors.
Min Res now will begin working with EOG's contractors to begin reviving and developing the company's assets. The immediate focus will be to start a well intervention plan with the aim of restarting the Red Gully processing plant near Gin Gin.
Under a deed of company arrangement, Min Res will pay $679,000 (Aus.) into a creditors' trust, much of which will go to Ferrier Hodgson, EOG's administrators. Ferrier Hodgson estimate that unsecured creditors will receive 15-18¢ on the dollar under this arrangement.
EOG collapsed in September after a blocked well caused a suspension of operations at Red Gully plant, which supplies gas under contract to aluminium giant Alcoa.
Min Res then demanded immediate repayment of a $15 million loan. EOG could not comply.
Min Res says the move to acquire EOG is consistent with its strategy of obtaining and operating gas assets to provide lower and certain fuel costs over the long term.
EQT completes Rice Energy acquisition
EQT Corp. has completed its $8.2-billion acquisition of Rice Energy Inc, Canonsburg, Pa. (OGJ Online, June 26, 2017).
Acquired properties include 421,000 net acres in the Marcellus and Utica shale plays, average natural gas sales of 1.3 bcfd, and midstream interests.
IPAA elects chairman, vice-chairman
The board of the Independent Petroleum Association of America elected Michael Watford as the organization's chairman and Steven Hinchman as its vice-chairman.
Watford serves as chairman, president, and chief executive officer of Ultra Petroleum, Houston. Watford previously served as IPAA chairman during 2013-15.
Prior to Ultra Petroleum, Watford was chief executive officer of Nuevo Energy Co. He also has experience in managed product marketing, processing, pipeline, and the chemical business.
Hinchman has more than 35 years of experience in the upstream industry and is president and chief executive officer of Houston-based Scala Energy. Prior to founding Scala Energy, Hinchman served as chief executive officer of HighMount E&P, chief operating officer of Callon Petroleum, and executive vice-president of Marathon Oil Co.
Both Watford and Hinchman will serve for 2 years.
Exploration & Development Quick Takes
Devon reports 5,100 boe/d STACK well in Oklahoma
Devon Energy Corp. expects to increase net production in its Oklahoma STACK development to more than 120,000 boe/d by yearend, bringing about 25 wells online in the fourth quarter.
The operator's Faith Marie 1-H is the most recent well completed and Devon reported the well produced a 24-hr peak rate of 5,100 boe/d. The well's 9,000-ft lateral is projected to produce a 30-day average of 4,600 boe/d, 65% of which is oil.
The company said the Faith Marie's productivity is the highest of any STACK well to date targeting the Lower Meramec interval. Devon has introduced new completion design that uses a higher viscosity slickwater fluid system and increases in frac-stage length. The new design lowered well costs at Faith Marie to $9 million, Devon said.
Devon Chief Operating Officer Tony Vaughn said the company could "improve capital efficiencies by up to 20%," as it shifts to full-field development in the multizoned STACK play with its enhanced completion design.
Faith Marie is adjacent to the company's Coyote development project in Blaine County, Okla., where the company launched a seven-well drilling program in September. The Coyote development is targeting the same landing zone in the Lower Meramec, and three wells have landed in zone with about a 15% improvement compared to offsetting the Faith Marie well. Devon has three dedicated rigs in the Coyote project and plans to announce initial production rates in the first quarter 2018.
Devon's first multizone development in the STACK is under way in neighboring Kingfisher County at its Showboat project, which consists of 24 wells across two drilling units and is codeveloping four intervals. Five rigs are expected to complete the drilling phase by yearend.
The Showboat development is offset by the Privott 17-H well, which was completed in July. The well landed in the upper Meramec with a peak rate of 6,000 boe/d.
Tethys adds Block 49 to Oman stake
Tethys Oil AB has acquired the 15,449-sq-km Block 49 onshore Oman. The company said it has access to 11,000 km of 2D seismic collected by previous operators and cores from nine historical wells, including Dauka-1, which was the first well drilled in Oman in 1955. Several of the cores show traces of oil.
The award, to be signed on Nov. 14, covers an initial 3-year exploration period with an option for a 3-year extension. The agreement will convert to a 15-year production-sharing agreement in the event of a commercial discovery. The agreement will include a 5-year extension on production.
Block 49 encompasses a large swathe of sand dunes in southwestern Oman on the sultanate's border with Saudi Arabia. The block is one of four offered as part of the 2016 Oman licensing round. It will be operated by Tethys Oil Montasar Ltd., a wholly owned subsidiary of the Swedish oil firm. The company will 100% interest in the concession.
Tethys currently has a 30% interest in Blocks 3 and 4 in the eastern part of the sultanate and covering an area of 29,130 sq km. CC Energy Development is the operator of Blocks 3 and 4 with a 50% interest. The remaining 20% is held by Mitsui Oil Exploration Co. Ltd. Crude production from the two blocks averaged 40,400 b/d in 2016. Block 3 and 4 production comes from three fields: Farha South, Saiwan East, and Shah.
Oman's Ministry of Oil & Gas in September opened 10 blocks to be tendered over the next several years. Bidding started Sept. 20 for Blocks 43B, 47, 51, and 65.
More Omani blocks assigned on and offshore
In conjunction with Tethys Oil Oman Ltd.'s Block 49 acquisition, Oman's Ministry of Oil & Gas signed deals on two additional onshore blocks and one underexplored offshore block.
Eni SPA and Oman Oil Co. Exploration & Production (OOCEP) will explore Block 52, which covers 90,760 sq km offshore southern Oman in 10-3,000 m of water. The underexplored block extends from the Al Wusta region toward Dhofar, encompassing the Hallaniyat Islands.
OOCEP Chief Executive Officer Isam Al Zadjali said the joint venture plans to conduct a 3D seismic survey and drill one exploration well, according to the Times of Oman. Eni's subsidiary Eni Oman BV will operate Block 52 with an 85% stake, while partner OOCEP will hold the remaining 15% interest. Eni has further agreed to assign 30% interest in Block 52 to Qatar Petroleum, pending required approvals from the Omani government.
Oman's Ministry of Oil & Gas also awarded two additional onshore blocks. Occidental Oman and OOCEP will explore the 1,185-sq-km Block 30 and ARA Petroleum has been awarded the 8,528-sq-km Block 31.
Winners were awarded the four oil blocks following the 2016 bidding round (OGJ Online, Dec. 14, 2016).
AWE details Waitsia gas field appraisal results
The AWE Ltd.-led group at Waitsia gas field in the onshore north Perth basin of Western Australia has shown strong flows from its Waitsia-2 drilling program.
The Waitsia-2 well flowed an average 38.5 MMcfd of gas on an 80/64-in. choke from a 42-m interval in the Kingia sandstone reservoir. Flowing wellhead pressure was measured at 1,315 psig during the 2-hr test.
The well was drilled between the Waitsia-1 discovery well, which previously flowed 25.7 MMcfd, and the Waitsia-3 well, which flowed 50 MMcfd.
This evaluation of Waitsia-2 is the second well in AWE's three-well test program designed to determine deliverability from the southern extent of the field and to collect gas for compositional analysis.
AWE CEO and Managing Director David Biggs said the net pay at Waitsia-2 is only 30% of that at Waitsia-3, so the high flow rate achieved in the test is an excellent result.
It also confirms that the Kingia sandstone at Waitsia-2 shares all the good reservoir properties observed in other wells in the field, notably high porosity and low total inerts content.
Further tests will be done on Waitsia-2 at various chokes and wellhead pressures before the company will address the final well in the 2017 program-Waitsia-4.
Waitsia field, which lies in production licences L1/L2, was discovered in September 2014 and is the largest onshore conventional gas discovery made in Australia in 40 years. It has the capability of supplying the Western Australian gas market with 100 terajoules/day for 10 years.
AWE is operator and shares equal partnership with Lattice Energy Ltd.-now owned by Beach Energy Ltd.
Drilling & Production Quick Takes
ADNOC deals to boost oil output by 380,000 b/d
Abu Dhabi National Oil Co. (ADNOC) has advanced two projects that will increase production by 380,000 b/d of crude oil.
In the larger of the projects, the company entered an agreement with partners in supergiant Upper Zakum offshore field to boost production to 1 million b/d from 650,000 b/d now.
The agreement extends the concession of ExxonMobil Corp., which holds a 28% interest, and Japan Oil Development Co. Ltd. (Jodco), with 12%, by 10 years to 2051. ADNOC holds the remaining 60%. Jodco is wholly owned by INPEX Corp.
The project will include construction of four artificial islands in shallow water to support drilling of extended-reach wells with onshore rigs as well as offices and housing.
Initial Upper Zakum development involved 450 wells and more than 90 offshore platforms. The field produces 33.9° gravity crude, which is partially processed offshore then moved by pipeline to Zirku Island, 55 km away, for further processing, storage, and tanker loading.
In the other project, ADNOC let an engineering, procurement, and construction contract to China Petroleum Engineering & Construction Corp. (CPEC) to boost production capacity of onshore Bab field to 450,000 b/d of crude oil from 420,000 b/d by 2020.
CPEC is an affiliate of China National Petroleum Corp.
The upgrade will make the field's first use of cluster drilling and digital oil field technology.
The project also will increase water and gas-handling capacities and add a degassing and processing train to seven trains now in place.
ADNOC is increasing its total production capacity to 3.5 million b/d next year from about 3.1 million b/d at present.
ADNOC, CNPC agree to offshore collaboration
Abu Dhabi National Oil Co. (ADNOC) and China National Petroleum Corp. (CNPC) signed an agreement covering potential collaboration, including potential offshore opportunities and the sour gas development projects.
The agreement covers discussions between the two companies on possible CNPC participation in the Lower Zakum, Umm Shaif, and Nasr areas as well as the Bab, Bu Hasa, Ghasha and Hail sour gas development projects.
ADNOC is seeking partners to help drive its upstream business and maximize returns from offshore assets.
In February, ADNOC signed an agreement in which CNPC acquired an 8% interest in Abu Dhabi's onshore oil concession operated by ADNOC Onshore. The 40-year agreement has an effective date of Jan. 1, 2015.
CNPC also has oil and gas assets and interests in 37 countries in Africa, Central Asia-Russia, America, the Middle East, and Asia-Pacific.
Hess halts production from gulf fields after fire
Hess Corp. said it has shut in production at three of its Gulf of Mexico platforms after a Nov. 8 fire at Shell Oil Co.'s Enchilada platform. The fire was associated with a 30-in. export pipeline (OGJ Online, Nov. 9, 2017).
Shell is developing a plan for repairing the damaged portions of Enchilada and associated assets. All production coming into the Garden Banks Gas Pipeline system also remains shut in until further notice. Shell shut in production at Enchilada, Auger, and Salsa platforms.
Hess shut in production at its Baldpate, Conger, and Penn State fields. Production also is shut in at Shell-operated Llano field of which Hess has 50% interest. Hess production at these fields is about 30,000 boe/d. Hess continues to work closely with Shell regarding Enchilada's restart.
PROCESSING Quick Takes
IOCL lets contract for Indian unit upgrade
In what is being called the first ever unit of its type in India, Indian Oil Corp. Ltd. (IOCL) has let a contract to CB&I, Houston, for the license, engineering design, and catalyst supply for a vacuum residue upgrading unit in Mathura, India.
The unit will use Chevron Lummus Global's LC-MAX and Isocracking technologies. The scope of work also includes the supply of catalysts, proprietary reactor internals, and training and technical services. Chevron Lummus is a combine of Chevron USA Inc. and CB&I.
Sinopec JV lets contract for Zhanjiang complex
China Petrochemical Corp. (Sinopec) and joint-venture partner Kuwait Petroleum Corp. (KPC) have let a contract to Kaji Technology Corp. of Japan to supply equipment for the long-planned Sino-Kuwait integrated refining and petrochemical complex now under construction on Donghai Island of Zhanjiang City in China's Guangdong Province.
Kaji will deliver a reciprocating compressor to accommodate high-pressure nitrogen gas service for an ethylene vinyl acetate (EVA) production plant at the planned complex.
The EVA plant, which will be equipped with Lupotech process technology from LyondellBasell Industries NV, joins a series of other planned petrochemical units at the integrated project, for which Sinopec Engineering Incorp. is providing overall EPC services, according Kaji and LyondellBasell.
Originally planned as a $9-billion complex that would be able to process 15 million tonnes/year of crude as well as 1 million tpy of ethylene, 460,000 tpy of polyethylene, and 750,000 tpy of polypropylene beginning in 2016, the delayed project's $5.1-billion first phase-which began construction on Dec. 20, 2016-will include a 10 million-tpy refinery and 800,000-tpy ethylene plant scheduled for startup in 2020, the government of Zhanjiang said in a March news release.
While previous shareholders including Total SA, Dow Chemical Co., and Royal Dutch Shell PLC now no longer attached to the project, the Sino-Kuwait integrated complex-which is designed to process Kuwaiti crude-will be jointly held and operated on a 50-50 basis by Sinopec and KPC, according to the Zhanjiang government.
Details regarding a timeline for the project's second phase have yet to be revealed.
TRANSPORTATION Quick Takes
Bahrain blames Iran for oil pipeline blast
Bahraini officials blamed Iran for a Nov. 10 oil pipeline explosion south of Manama in an escalation of Persian Gulf tensions dismissed by Iranian counterparts as "absurd and false."
The blast at the village of Buri, 10 miles south of Manama, damaged several buildings. The fire was quickly extinguished after Bahrain Petroleum Co. (Bapco) cut flow through the damaged AB3 pipeline.
The pipeline is one of three that carry crude to the 260,000-b/d Bapco refinery at Sitra from offshore Abu Safa, shared by Bahrain and Saudi Arabia and operated by Saudi Aramco.
A press statement said Interior Minister Rashid bin Abdullah Al Khalifa called the incident "the latest example of a terrorist act performed by terrorists in direct contact with and under instruction from Iran."
A spokesman for the Iranian Foreign Ministry, Bahram Qassemi, said Bahraini officials "should know that the era of making such absurd and false statements and the time of playing such childish blame games has come to an end."
Iran also has denied claims by Saudi Arabia that it supplied a missile launched in Yemen that was destroyed before hitting its target in Riyadh on Nov. 4. One Saudi official alleged the missile was launched by Hezbollah, which Iran supports.
Saudi-Iranian antagonism rose further when Lebanese Prime Minister Saad Hariri announced his resignation while in Riyadh, citing rising Hezbollah influence in Lebanon and saying he feared assassination (OGJ Online, Nov. 7, 2017).
Mostly-Sunni Saudi Arabia has been fighting Shia Houthi rebels, who receive support from Shia Iran, in Yemen.
Bahrain has a Shia majority population but is ruled by Sunnis. Saudi officials are resisting what they see as Iranian expansionism in Iraq, Syria, Lebanon, and Yemen.
DOJ vows to prosecute vandalism at pipelines
Strong federal prosecutions will occur when individuals or groups vandalize oil and gas pipelines or other US energy transportation systems, the Department of Justice pledged. "This department is committed to vigorously prosecuting those who damage this critical energy infrastructure in violation of federal law," a DOJ spokesperson said Nov. 10.
The declaration was part of a response to an Oct. 23 letter US Rep. Ken Buck (R-Colo.) and 69 other House members sent Atty. Gen. Jeff Sessions asking whether DOJ took any prosecutorial or investigative actions after four major crude oil pipelines in multiple states were attacked more than a year earlier (OGJ Online, Oct. 12, 2016).
"This is a critically important issue. Oil and natural gas pipelines provide vital services to millions of Americans," DOJ's statement noted. "Attempts to damage or shut them down not only deprive local communities of these services, but can put American lives at risk, cost taxpayers millions of dollars, and threaten our environment."
The Association of Oil Pipe Lines applauded DOJ's statement. "The federal government can provide a deterrent to anyone getting hurt or causing a pipeline release into the environment," AOPL Pres. Andrew J. Black said.
Operators place shut-off valves periodically along the length of a pipeline to help control the flow of product and isolate certain segments of pipe if needed, Black noted. But pipelines operate under as much as 1,000 psi of pressure, and incorrectly closing a valve in the middle of a line without simultaneous control of pumps before and after the valves could cause a pressure surge, rupture the pipeline, and cause a spill, he said.
An industry review of pipeline valve incidents found nine different examples of pressure surge releases with 1ne resulting in nearly 4,000 bbl of crude oil spilled, Black said. "For these reasons, pipeline facilities behind lock and key are protected for the safety of the public," he said. "Vandalizing, attempting to operate or otherwise tampering with pipeline equipment is dangerous and risks hurting those involved, the public, or the environment."
