GENERAL INTEREST Quick Takes
China to impose 5% tariff on crude from US
China has announced a 5% tariff on imported US crude oil in retaliation for US President Donald Trump’s recent escalation of the countries’ trade war.
Crude oil is on a new list of goods worth about $75 billion subject to tariffs as high as 10%, some taking effect Sept. 1 and others Dec. 15.
Timing of the Chinese tariffs matches that of Trump’s two-phase round announced Aug. 1 on about $300 billion worth of goods. The new US round will make almost all Chinese imports by the US subject to new or increased duties.
In June 2018, China had listed crude among products subject to duties retaliating for an earlier round of US tariffs but replaced it with other goods when the round took effect last August.
China imposed a tariff of 10% on US LNG in September 2018 and increased the rate to 25% in May.
US crude oil exports to China in May averaged 247,000 b/d, according to the US Energy Information Administration.
DOE reports congress-mandated sale of SPR crude
The US Department of Energy plans to sell crude oil from the Strategic Petroleum Reserve, DOE’s Fossil Energy Office reported. DOE will sell crude from three of the four SPR sites—Bryan Mound and Big Hill in Texas, and West Hackberry in Louisiana—in 2020 and 2021 to meet requirements under Section 403 of the 2015 Bipartisan Budget Act and the 2018 Consolidated Appropriations Act, it said on Aug. 21.
DOE will offer as much as 10 million bbl from Bryan Mound, and up to 5 million bbl each from Big Hill and West Hackberry, it said. DOE must receive bids no later than 2 p.m. CDT on Aug. 27 and will offer contracts to successful bidders no later than Sept. 5. Deliveries will take place in October and November.
Any company registered in the SPR’s Crude Oil Sales Offer Program is eligible to participate in SPR crude oil sales. Other interested parties can register at SPR’s web site.
Savannah gets nod to acquire Seven Energy
Savannah Petroleum, London, has received approval from the Nigerian Department of Petroleum Resources to acquire restructured assets of Seven Energy International Ltd., an oil and gas producer and midstream company operating in southeastern Nigeria.
The complex transaction covers Seven’s 40% participating interest in Uquo oil and gas field; 62.5% interest in Universal Energy Resources Ltd., which holds a 51% participating interest in Stubb Creek oil and gas field; and an unspecified interest in Accugas Ltd., which has a 260-km gas pipeline network and associated gas processing facilities.
Savannah estimates acquisition enterprise value at $270 million.
Reserves net to Seven’s interests have been estimated independently at 92 million boe at Uquo field and 44 million boe at Stubb Creek.
Average gross production in January-April was 2,700 b/d of oil at Stubb Creek field and 100 b/d of oil and condensate and 89.3 MMscfd of natural gas at Uquo field.
Exploration & Development Quick Takes
Equinor, YPF expand exploration deal for Argentina
Equinor and YPF have signed an agreement to jointly explore the CAN 100 block in the North Argentinian basin offshore Argentina. The agreement sets core terms and conditions for YPF’s transfer of 50% of its share in the CAN 100 block and “will enable both companies to expand their alliance and move forward with the exploration process in the Argentinian offshore,” the companies jointly said.
Currently, Equinor is partners with YPF in two offshore blocks—CAN 102 and CAN 114—in the same area and the companies are also jointly exploring onshore in the Vaca Muerta formation in Neuquen province, said Tim Dodson, Equinor executive vice-president for exploration.
The CAN 100 block covers an area of 15,000 sq km and is the largest block in the North Argentinian basin. The first exploratory period of 4 years began when YPF acquired 100% of the block earlier this year in the Argentina’s first offshore licensing round (OGJ Online, Apr. 29, 2019).
During that round, Equinor submitted the winning bids for five blocks as operator and participated in winning bids for one block to be operated by YPF and one block to be operated by Total SA.
Equinor holds a 50% share in the Bajo del Toro block with partner and operator YPF, following a farmin agreement signed in January 2018. The Bajo del Toro exploration permit covers 157 sq km. Equinor also holds 90% in the neighboring Bajo del Toro Este block as operator with partner GyP retaining a 10% interest.
Four areas get bids in Philippines round
The Philippines Department of Energy received bids for service contracts covering four of 14 predetermined areas offered in a licensing round. It received nominations for three other areas.
According to the Manila Bulletin, bids for predetermined areas opened Aug. 20 came from Ratio Petroleum Ltd. of Israel for Area 3 in East Palawan, Filipino firms Esmaulana iGlobal Ventures Inc. and Sulu Sea Energy Resources Development Corp. for Area 6 in the Sulu Sea, a Filipino combine of Phildrill Corp. and PXP Energy Corp. for Area 7 in the Sulu Sea, and Esmaulana iGlobal Ventures for Area 10 in Agusan-Davao.
The department received nominations for areas in East Palawan from Sulu Sea Energy Resources Development, Northwest Palawan from Troika Giant Power Corp., and Ragay Gulf from Superior Shipping Inc.
Beetaloo drilling approved by Northern Territory
The environmental management plan for the Origin Energy Ltd.-Falcon Oil & Gas Ltd. joint venture’s next well in a drilling program slated for the Beetaloo subbasin in the Northern Territory has been approved.
Origin, as operator, will spud the Kyalla 117 N2 horizontal appraisal well in permit EP 117 in September.
Civil works to prepare the well pad are nearing completion.
The well is targeting the Kyalla shale liquids-rich gas fairway and will be drilled, hydraulically fracture stimulated, and tested as part of Stage 2 evaluation of the Kyalla and Velkerri shales in the region.
The Beetaloo subbasin, about 600 km south southeast of Darwin, contains rocks of Proterozoic age within the larger McArthur basin.
Sydney-based Origin has 70% interest while Falcon, incorporated in British Columbia and headquartered in Dublin, holds 30%.
Drilling & Production Quick Takes
Shell lets contract for PowerNap project
Royal Dutch Shell PLC has let an integrated engineering, procurement, construction, and installation contract to TechnipFMC for the PowerNap project in the Gulf of Mexico.
TechnipFMC will design, manufacture, and install subsea hardware, including subsea tree systems, subsea distribution controls, topside controls, flying leads, and connectors for three wells, in addition to the supply of 20 miles of production umbilical and flowlines.
PowerNap is a subsea tie-back project to the Olympus production hub and on Mississippi Canyon Block 943 and lies in 4,200 ft of water. The project is expected to complete installation in late 2021 and produce as much as 35,000 boe/d at peak rates. TechnipFMC values the contract at $75-250 million.
In August, Shell made a final investment decision to develop the field with three subsea wells flowing into manifolds tied back to the Olympus production hub, which it operates (OGJ Online, Aug. 1, 2019).
Equinor gets approval for start-up of Utgard field
The Norwegian Petroleum Directorate has granted consent to start production from Equinor-operated Utgard field. Production is expected to begin in September.
Utgard, discovered in 1982, is a natural gas and condensate field on the Norwegian and UK continental shelf in 110-120 m of water. The field lies 21 km from Sleipner field. The reservoir has good quality and is in sandstone of Middle Jurassic age in the Hugin formation at a depth of 3,700 m.
The Norwegian share of the field is 62%. Consent for start-up is granted to the licensees in production licenses 046E and 046F on the Norwegian shelf and in PL 312 on the UK shelf. The current development plan was approved in January 2017 (OGJ Online, Jan. 17, 2017).
The development concept is a 4-slot subsea template with two wells tied-back to the Sleipner T facility for processing and reduction of the carbon dioxide level in the gas. Modifications have been made on the facility to process the well stream. Gas will be exported to the Gassled pipeline system and unstable condensate will be transported via the existing condensate pipeline to the Karsto terminal for further processing and export. Investments in field development are 2.7 billion kroner.
Equinor and its license partners let a contract for use of Odfjell Drilling’s Deepsea Atlantic semisubmersible drilling rig to complete a drilling program for the Visund and Utgard licenses before it undergoes 10-year classification, Equinor reported in May 2018. The contract with Deepsea Atlantic is a confirmation of the letter of intent announced by Odfjell in April 2018 (OGJ Online, Apr. 18, 2018).
Equinor estimates the expected total sales volume at 1.71 million cu m of condensate, 2.73 billion cu m of gas, and 560,000 tonnes of NGL.
Equinor Energy AS holds 38.44%. Equinor UK Ltd. holds 38%. Partners are LOTOS E&P Norge AS 17.36% and KUFPEC Norway AS 6.2%.
Eni: Zohr gas production reaches 2.7 bcfd
Production at giant Zohr natural gas field offshore Egypt has increased to 2.7 bcfd after the start-up of a second pipeline connecting the field with an onshore treatment plant, Eni SPA reports.
The last production increase reported by Eni was to 2 bcfd last September.
Start-up on Aug. 18 of the 216-km, 30-in. pipeline followed completion of all eight onshore treatment production units in April and all sulfur production units in August.
Production also has begun from two wells in the field’s southern lobe.
Eni expects Zohr production to reach 3.2 bcfd by yearend.
Eni holds a 50% interest in the Shorouk Block encompassing the field and is a partner with Egyptian General Petroleum Corp. in Petrobel, which executes the project on behalf of Petroshorouk, jointly held by the contractor’s group and Egyptian Natural Gas Holding Partner.
Other contractor interests are Rosneft, 30%; BP and Mubadala Petroleum, 10% each.
PetroTal converts Peru water well into oil well
PetroTal Corp. has completed the BN 95-2WD well (2WD) in Bretana field on Block 95 in Peru. Upon completion of the 2WD well, PetroTal converted an existing water disposal well (BN 95-1W) into an oil producer, which the company renamed the BN 95-1.
The BN 95-1 well’s initial production rate of 2,700 b/d exceeds expectations, PetroTal executives said. Management plans to provide more information on the BN 95-1 well later this month.
PetroTal also has spudded the BN 95-4 oil well, a development well planned with a horizontal completion. The target is the Vivian formation. Drilling is expected to take 60 days. A 500-m lateral is planned.
Central processing facilities to increase Bretana field’s total oil production, expected to be commissioned in December, could bring total field production to 10,000 b/d by yearend, with the drilling and completion of two additional oil development wells, the BN 95-4 and BN 95-5.
Saturn spuds first of five 3Q Viking wells
Saturn Oil & Gas Inc., Calgary, has spudded the first of five extended-reach horizontal wells planned this quarter in its light oil play targeting the Cretaceous Viking formation in west-central Saskatchewan.
The company plans to drill 18 wells in all of 2019, aiming to raise production from 806 b/d on average in the first quarter to 1,000 b/d by yearend.
Viking wells, drilled on 150 m spacing to 700-750 m, produce 36-38º oil.
Saturn expects the five wells to be on production by the last week of September.
Four of the wells are in an area called Prairiedale. The other will be the first Saturn well in an area called Dodsland East.
Saturn drilled nine Viking wells in the first quarter and expects to drill four in the fourth quarter.
PROCESSING Quick Takes
Motiva inks deal to buy Port Arthur petchem plant
Saudi Aramco-owned Motiva Enterprises LLC has signed an agreement to purchase complete ownership interest in Flint Hills Resources LLC (FHR) subsidiary Flint Hills Resources Port Arthur LLC, including its chemical plant in Port Arthur, Tex., which produces ethylene, polymer-grade propylene, and cyclohexane.
The proposed acquisition is scheduled to close in this year’s fourth quarter, subject to satisfaction of unspecified closing conditions, Motiva said.
The parties will not be disclosing terms of the transaction, according to Motiva.
Once completed, the Port Arthur acquisition will mark Motiva’s entry into the chemical industry, said Patrick Kirby, principal analyst at Wood Mackenzie.
“[FHR] Port Arthur LLC incudes a 635,000-tonne/year mixed-feedstock steam cracker, a cyclohexane plant, and associated storage and pipeline infrastructure,” Kirby said.
The Port Arthur chemical assets are located adjacent to Motiva’s 635,000 Port Arthur refinery, of which Aramco took full ownership and operation in 2017 following Royal Dutch Shell PLC’s exit (OGJ Online, May 15, 2017).
“The steam cracker, which can handle a range of feedstocks—including ethane and those from the refinery—forms an integral part of the transaction. The steam cracker primarily produces ethylene and propylene for the merchant market,” Kirby said.
“It remains unclear as to what Motiva has planned post-acquisition, however, some options could include strengthening refinery-chemicals integration, expansion of the asset capacity, or potentially longer-term derivative plant development.”
Kirby noted Motiva also has previously expressed plans for further chemical developments at Port Arthur, including a “steam cracker and aromatics facility.”
QP unit to supply condensate to Singapore complex
Qatar Petroleum for the Sale of Petroleum Products Co. (QPSPP), the marketing arm of Qatar Petroleum, has executed a 5-year agreement to supply 6 million bbl of low-sulfur condensate to ExxonMobil Asia Pacific Pte. Ltd.’s integrated manufacturing complex in Singapore, which has a crude oil processing capacity of 592,000 b/d and includes two steam crackers.
The 5-year sales agreement, which began in July, is the first condensate long-term sale to an end-user in Singapore, highlighting QPSPP’s push for more direct sales with established end users, QPSPP said.
Further details regarding the deal were not disclosed.
The long-term sales agreement follows a series of recently completed refining and upcoming petrochemical projects at ExxonMobil’s Singapore integrated manufacturing complex, the company’s largest (OGJ Online, July 8, 2019; June 12, 2019; Apr. 2, 2019).
PetroChina unit lets contract for PP plant
PetroChina Guangdong Petrochemical Co. Ltd., a subsidiary of China National Petroleum Corp.’s PetroChina Co. Ltd., has let a contract to W.R. Grace & Co. to provide technology licensing for a grassroots polypropylene (PP) unit as part of a refining-chemical integration project under way at its 400,000-b/d heavy crude oil processing and petrochemical site in the Jieyang Nandahai Petrochemical Industrial Zone of China’s Guangdong province.
As part of the contract, Grace will license its proprietary UNIPOL PP process technology as well as its sixth-generation, non-phthalate CONSISTA catalyst for the 500,000-tonne/year, single-line PP unit, which will produce homopolymer, random copolymer, and impact copolymer resins, the service provider said.
The PP unit is scheduled to be completed in 2023, Grace said.
The service provider disclosed neither a value of the contract nor further details regarding the project.
Started in 2017, PetroChina Guangdong Petrochemical’s refining-chemical integration project at Jieyang is budgeted for RMB 65.43 billion yuan ($9.3 billion), PetroChina said in its 2018 annual report to investors.
Jorda chosen as CEO of Citgo Petroleum
Carlos E. Jorda has been selected as chief executive officer of Citgo Petroleum Corp., Houston.
For the last 16 years, Jorda was a consultant to companies and investors in the oil and gas industry globally, as well as a board member for Delek USA.
He was previously president of PDV America and chairman of the Citgo board. He is a chemical engineer with five decades of experience in the international oil and gas industry.
Jorda has held leadership positions within Petroleos de Venezuela SA (PDVSA) in both the US and Venezuela, including oversight of PDVSA’s refining and marketing.
TRANSPORTATION Quick Takes
Pembina Pipeline to acquire Kinder Morgan Canada
Pembina Pipeline Corp. has agreed to acquire Kinder Morgan Canada Ltd. (KML), including the 70% majority voting interest held by Kinder Morgan Inc. (KMI) as well as the US portion of the Cochin Pipeline, from KMI for $4.35 billion (Can.). The Cochin system extends from the Kinder Morgan station near Riga, Mich., to the international boundary near Maxbass, ND. Closing of the two transactions are cross-conditioned upon each other.
Included in the deal is Vancouver Wharves, a commodity export-import business in the Port of Vancouver. Vancouver Wharves is a 125-acre bulk marine terminal facility, which transfers more than 4 million tonnes/year of bulk cargo supported by fee-based contracts. Pembina has identified expansion possibilities at Vancouver Wharves.
Cochin, a cross-border condensate import pipeline, spans 2,900 km from Chicago to Fort Saskatchewan, Alta., with design capacity of as much as 110,000 b/d. It is primarily underpinned by long term, take-or-pay commitments. It connects Pembina’s Channahon, Bakken, and Edmonton area assets and is connected to markets in Mont Belvieu, Conway, and Edmonton. The company said there is potential to connect the eastern leg of the system to Pembina’s assets and markets in Sarnia, Ont.
The deal also includes a crude oil storage and terminalling business with 10 million bbl (net) of storage capacity in the Edmonton area crude oil complex, which connects Pembina’s conventional and oil sands pipelines to major export systems. The storage business includes direct connectivity to two rail terminals, ownership in which is included in the transaction.
After closing, KML shareholders will receive 0.3068 of a share of Pembina for each KML share. Closing of the proposed transaction is expected late in this year’s fourth quarter or in first-quarter 2020 subject to conditions including the approval of KML shareholders and the Court of Queen’s Bench of Alberta, as well as certain regulatory approvals and customary closing conditions.
Cameron LNG begins commercial operation
Cameron LNG LLC, owned jointly by Sempra LNG LLC, Total SA, Mitsui & Co. Ltd., and Japan LNG Investment LLC, has begun commercial operation of Train 1. Cameron LNG, straddling the Louisiana parishes of Cameron and Calcasieu, will include three liquefaction trains with a combined capacity of nearly 15 million tonnes/year. Trains 2 and 3 are expected to being startup before yearend.
Cameron has received regulatory approval to build two more trains, boosting capacity to almost 25 million tpy. No decision to expand has been made. McDermott International Inc. and its joint venture member on the project, Chiyoda International Corp., provided engineering, procurement, construction, and commissioning for the project.
Cameron LNG is the second LNG plant operating in Cameron Parish, joining Cheniere Energy’s Sabine Pass LNG, which brought its fifth train online in March. Four other projects to be sited in Cameron Parish have been proposed: Calcasieu Pass, Delfin, Monkey Island, and Commonwealth. These could add as much as 47 million tpy of additional liquefaction capacity. But if built none would be in operation before 2022.
Venture Global makes Calcasieu Pass LNG FID
Venture Global LNG Inc. has made a final investment decision and closed project financing for its 10-million tonne/year Calcasieu Pass LNG plant and associated 1.9-bcfd TransCameron pipeline in Cameron Parish, La. Site construction has been under way since February and the project is expected to begin operations in 2022. TransCameron will extend 24 miles of 42-in. OD pipe from east of a Tetco interconnect to the LNG plant.
Calcasieu Pass has received all necessary permits, including authorization from the US Federal Energy Regulatory Commission and from the US Department of Energy for non-Free Trade Agreement export. The project has 20-year LNG sales agreements with Shell, BP, Edison SPA, Galp Energia SGPS SA, Repsol SA, and Polish Oil & Gas Co.
Venture Global also is developing the 20-million tpy Plaquemines LNG project and the 20-million tpy Delta LNG project, both in Plaquemines Parish, La.
