GENERAL INTERESTQuick Takes
US President Donald Trump fired Rex W. Tillerson as secretary of State after barely more than 13 months on the job in a 5:45 a.m. tweet on Mar. 13 and said he intends to name Central Intelligence Agency Director Mike Pompeo as his successor.
Tillerson reportedly had not been happy recently as the country’s top diplomat, and critics quickly called him ineffective in response to his being discharged. A few also conceded that he received little support from the White House.
Tillerson accepted Trump’s offer to lead and implement US foreign policy after a 41-year career that began as a petroleum engineer at Exxon Co. USA in 1975 and concluded on his retirement as ExxonMobil Corp.’s chief executive in 2016.
When Tillerson was nominated, time that he spent in Russia while he was with ExxonMobil was considered by some an asset and others a liability. Coincidentally, one of his last statements as secretary was on Mar. 12 after speaking with British Foreign Sec. Boris Johnson following a nerve gas attack there a week earlier for which Russia was believed responsible.
“There is never a justification for this type of attack—the attempted murder of a private citizen on the soil of a sovereign nation—and we are outraged that Russia appears to have again engaged in such behavior,” Tillerson said. “From Ukraine to Syria—and now the UK—Russia continues to be an irresponsible force of instability in the world, acting with open disregard for the sovereignty of other states and the life of their citizens. We agree that those responsible—both those who committed the crime and those who ordered it—must face appropriately serious consequences.”
OPEC forecasts rising non-OPEC oil supply
The Organization of Petroleum Exporting Countries has raised its expectation for oil supply growth from US shale and other non-OPEC producers, its Monthly Oil Market Report said.
In 2018, world oil demand is anticipated to rise by 1.6 million b/d to average 98.63 million b/d, marginally higher than the assessment that OPEC made a month ago.
Total non-OPEC supply was revised upward to 59.53 million b/d, representing a year-on-year oil supply growth of 1.66 million b/d. Of that total growth, US liquids production is expected to account for 1.46 million b/d.
OPEC’s forecast of non-OPEC supply growth for 2018 fell short of a recent forecast from the International Energy Agency, which expects 1.8 million b/d.
Regarding OPEC supply, secondary sources estimate the cartel produced a rounded 32.19 million b/d in February, a decrease of 77,000 b/d from January. The February OPEC production was its lowest since April 2017.
Production declines in Venezuela, the UAE, and Iraq were partially offset by higher production in Nigeria and Angola.
Devon sells Barnett shale assets for $553 million
Devon Energy Corp., Oklahoma City, has agreed to sell the southern portion of its Barnett Shale position for $553 million to an undisclosed buyer.
Net production from the assets, located largely in Johnson County, currently average 200 MMcfd of gas equivalent.
“Combined with other recent asset sales, divestiture proceeds associated with our 2020 Vision have now reached $1 billion,” said Pres. and CEO Dave Hager.
The company’s remaining position in the Barnett shale primarily resides in Denton, Wise, and Tarrant counties, with current production of 680 MMcfed. The position contains an inventory of 1,500 potential locations, consisting of undrilled inventory and horizontal refracturing opportunities.
EPA proposes withdrawing 2016 CTGs for VOCs
The US Environmental Protection Agency proposed withdrawing control techniques guidelines (CTGs) for the oil and gas industry which it instituted in 2016 to control volatile organic compound emissions from oil and gas operations. The proposal would save the industry $14-16 million in compliance expenses from 2021 to 2035, the agency said on Mar. 1.
The agency also announced that it finalized amendments for certain requirements contained within the 2016 Oil and Gas New Source Performance Standards (NSPS). Comments on each action will be accepted for 45 days following its publication in the Federal Register in the next few days.
The CTGs were intended to provide recommendations to certain states and ozone non-attainment areas to address formation of VOC emissions from the industry and other covered sources as part of state implementation plans (SIPs) to meet EPA’s national standards for ground-level ozone. The 2016 Oil & Gas CTG included recommendations for reducing VOC emissions from existing oil and gas equipment and processes.
EPA said it is reconsidering certain aspects of the 2016 NSPS and intends to look broadly at the rule during the reconsideration process. Because Oil and Gas CTG recommendations are linked to conclusions in the 2016 NSPS, EPA said it considers it wise to withdraw the entire Oil and Gas CTG.
Exploration & Development Quick Takes
IFR preparing Mexico directional drilling campaign
International Frontier Resources (IFR), Calgary, is preparing rig mobilization and drilling operations for its TEC-10 well in historic Tecolutla field. The Tecolutla block lies just onshore near Poza Rica, Mexico, in Veracruz state.
IFR is participating in a 50-50 joint venture, Tonalli Energia, with Mexican petrochemical company Grup IDESA. The block was awarded to Tonalli as part of Mexico’s first round and third call on “mature fields” or “Round 1.3.”
IFR Chief Executive Officer Steve Hanson said Tecolutla field has been underdeveloped, and new interpretation of 3D seismic data is informing the JV’s exploration. TEC-10 will be the first Tecolutla well to target new locations within the Cretaceous El Abra formation. Tonalli also acquired offsetting field data in Mexico’s Round 2.3, indicating El Abra reservoir properties and production capabilities.
The TEC-10 drill pad is expected to be completed by mid-March and a spud date is expected in mid-April.
The El Abra formation, a carbonate reservoir, lies at a depth of 2,340 m. To date, four previous Tecolutla wells have recovered 1.9 million bbl of oil. The wells were drilled by Petroleos Mexicanos (Pemex) between 1956 and 1972 with initial production rates of up to 473 b/d.
In 2017, Pemex announced that it discovered an estimated 350 million boe with its Ixachi-1 well, which is 72 km south of the port of Veracruz, close to Cosamaloapan in the southern part of the state (OGJ Online, Nov. 7, 2017).
Eni sells stake in Shorouk concession to Mubadala
Mubadala Petroleum, a wholly owned subsidiary of Mubadala Investment Co., has agreed to acquire 10% participating interest in the Shourouk concession and its supergiant Zohr gas field offshore Egypt from Eni SPA for $934 million.
The deal is subject to the satisfaction of certain standard conditions, including approvals from relevant Egyptian government authorities.
Eni is operator with 60% interest. BP PLC holds 10% interest and Rosneft holds 30% interest (OGJ Online, Dec. 12, 2016).
Zohr field was discovered by Eni in August 2015. Located 190 km north of Port Said in 1,500 m of water, Zohr holds total potential of as much as 30 tcf of gas in place. Production in the first phase of Zohr gas field started in December 2017 (OGJ Online, Dec. 20, 2017).
Concession extended for Al Bunduq field
The Japanese-owned operator of Al Bunduq oil field shared by quarreling Abu Dhabi and Qatar has won a new concession.
In a statement, Qatar Petroleum said it signed a concession agreement with the Abu Dhabi Supreme Petroleum Council, Abu Dhabi National Oil Co., operator Bunduq Co. Ltd., and United Petroleum Development Co. Ltd., a Japanese consortium that owns 100% of the operator.
Qatar Petroleum didn’t disclose details, saying only that the agreement “will ensure the continued development and operation of the Al Bunduq oil field for many years to come.”
The field produces oil and gas from 28 wells at a complex of platforms tied to Abu Dhabi’s Das Island by a 27-km pipeline. The companies don’t report flow rates. Press reports indicate production in 2012 was 13,000 b/d.
Al Bunduq production began in 1975. The original concession expired on Mar. 8.
Partners in United Petroleum Development are Cosmo Energy Exploration & Production Ltd. and JX Nippon Oil & Gas Exploration Corp., 45% each, and Mitsui Oil Exploration Co. Ltd., 10%.
An unnamed official of Abu Dhabi’s Supreme Petroleum Council said no concession had been made to Qatar Petroleum.
The United Arab Emirates, Saudi Arabia, Bahrain, and Egypt are boycotting travel and other contact with Qatar in retaliation for what they say is the emirate’s support for Muslim extremists.
In a statement, the source said extension of the concession involved “no direct communication or engagement between the two states.” The source said, “There is no commercial or trading relationship being established between the UAE and Qatar by the extension of this concession.”
PPL reports Adhi field oil discovery
Pakistan Petroleum Ltd. (PPL) has flow tested its Adhi South X-1 well in Rawalpindi District, Punjab, from the Khewra formation with a maximum flow rate of 1,550 b/d of oil and 2.62 MMcfd of gas on a 32/64-in. choke.
The Adhi South X-1 well, which was spudded on June 30, 2017, was drilled to 3,395 m to test the Cambrian Khewra and Tobra formations.
Wireline logs confirmed hydrocarbon-bearing zones in both formations. The prospect was delineated based on 3D seismic data. The discovery lies in the down thrown block and has opened new horizons in the Potwar and Kohat area.
Joint venture partners include Oil & Gas Development Co. Ltd. and Pakistan Oilfields Ltd.
Drilling & Production Quick Takes
Another Ineos Shale UK core test rejected
Ineos Shale has encountered another setback in its effort to assess natural gas potential of shale formations in England.
The company said the Rotherham Metropolitan Borough Council rejected its application to drill a vertical core hole west of the village of Woodsetts in South Yorkshire.
Ineos Shale wanted to extract core samples and run a pressure transient test.
An Ineos Shale application for similar drilling in the East Midlands region of England was rejected by local officials in February (OGJ Online, Feb. 7, 2018).
BSEE releases report on subsea jumper’s leak
A ductile tensile overload fracture of a subsea jumper’s load limiting joint led to an estimated 1,926 bbl of crude oil leaking from a Shell Offshore Inc. offshore platform in the Gulf of Mexico on May 11, 2016, a US Bureau of Safety and Environmental Enforcement panel’s investigation concluded.
Loss of containment in the glider jumper on Subsea Well No. 4 on Green Canyon Block 245 was caused by the bending loads imposed by the partial burial of the Glider No. 4 jumper and subsequent subsiding of the subsea sled No. 2, BSEE said as it released the findings on Mar. 9.
The panel recommended that when drilling the riserless portion of a subsea well nearby pipelines, sleds, subsea wells, and other subsea systems, operators should ensure the resulting drill cuttings and cement are not adversely affecting or posing additional risks to existing subsea infrastructure.
BSEE recommended in a Sept. 12, 2016, safety alert that operators review their emergency shut-in procedures and requirements because factors involved in the failure are common in the gulf. The well and subsea equipment were in about 3,500 ft of water, with production tied back through a manifold to a host facility nearly 7 miles away via a 6-in. flow line, it said.
TAEP: Texas upstream industry expansion continues
Oil and gas producers in Texas continue to increase production in response to higher wellhead prices, boosting the statewide upstream oil and gas economy.
The Texas Alliance of Energy Producers’ Texas Petro Index, a composite index based on a comprehensive group of upstream economic indicators, showed a 14th straight monthly expansion in January. The index rose to 192.7 from 188.9 in December 2017. The index is up 25% year-over-year, and up more than 30% from November 2016 when the TPI stood at 148.2.
“According to TPI estimates, crude oil production in Texas in January totaled 119.4 million bbl, which would surpass all prior volumes in January, including the early 1970s when the statewide annual production record was set,” said Karr Ingham, economist and TPI creator. “In addition, the posted price for crude oil in Texas in January jumped more than $6/bbl compared to December to average $60/bbl for the first time since November 2014,” Ingham said.
Estimated January crude production in Texas is up 21.9% from January 2017. With oil prices averaging $60.10/bbl, the value of Texas-produced crude amounted to $7.2 billion, up 48.8% year-over-year.
Texas natural gas output increased 2.7% compared with January 2017 to nearly 665.9 bcf. With gas prices in January averaging $3.62/Mcf, the value of Texas-produced gas increased 16.4% to more than $2.4 billion.
Baker Hughes’ count of active drilling rigs in Texas during January averaged 456 units, up 35.7% from January 2017. The number of original drilling permits issued was 1,166, up 22% year-over-year.
An estimated 226,200 Texans remained on upstream industry payrolls, up 15.5% from revised year-over-year levels, but down 23.4% from the high of 295,200 in December 2014.
Pioneer to restart Texas field shut by fire
Pioneer Natural Resources Co. expects production to restart at diminished rates by early April from its portion of West Panhandle gas field in Texas, which it shut in Mar. 6 after a fire heavily damaged a compressor station. The fire was contained within the station and caused no injuries.
Pioneer’s West Panhandle production averages 8,000 boe/d—20% oil, 55% NGL, and 25% natural gas.
Pioneer expects to use several idle compressors to restart production at 80-90% of prior rates.
Eni strikes deals for concessions off Abu Dhabi
Eni SPA has signed two concession agreements to establish a long-term presence in the UAE.
For $875 million and a 40-year term, Eni agreed to acquire a 5% stake in the Lower Zakum offshore oil field and a 10% stake in the oil, condensate, and gas offshore fields of Umm Shaif and Nasr.
ADNOC Offshore is operator in both concessions with a 60% stake.
Lower Zakum lies 65 km offshore Abu Dhabi. Discovered in 1963 with first production in 1967, the field has a target production of 450,000 b/d. ADNOC earlier awarded, in separate transactions, a 10% interest in the concession to a group of state-owned Indian companies led by ONGC Videsh Ltd., and a 10% interest to Inpex Corp., Tokyo (OGJ Online, Feb. 12, 2018; OGJ Online, Feb. 27, 2018).
Umm Shaif and Nasr are 135 km from the coast of Abu Dhabi and have a target production of 460,000 b/d.
PROCESSING Quick Takes
Alberta commits funds to petrochemical boost
Alberta’s government is committing as much as $1 billion to programs designed to attract petrochemical investment and expand infrastructure for petrochemical feedstocks.
Legislation introduced by Energy Minister Margaret McCuaig-Boyd provides $500 million in royalty credits for a second round of a petrochemicals diversification program over 4 years beginning in 2020-21 and $500 million in loan guarantees and grants to create a petrochemical feedstock infrastructure program over 3 years beginning in 2021-22.
The commitments join $1 billion the province announced in February to support development of facilities for the partial upgrading of bitumen (OGJ Online, Feb. 27, 2018).
The second round of the petrochemicals diversification program accommodates proposals that include using ethane, in addition to propane and methane, as feedstock.
The feedstock infrastructure initiative aims at encouraging projects needed to increase supplies of natural gas liquids, such as gas processing plants, straddle plants, and extraction plants along major gas pipelines.
Aramco, SABIC let contract for COTC complex
Saudi Aramco and Saudi Arabian Basic Industries Corp. (SABIC) have let a contract to John Wood Group PLC, Aberdeen, for development of their plan to build a fully integrated crude oil-to-chemicals (COTC) complex in Saudi Arabia.
As part of the contract, Wood’s offices in Reading, UK, and Al-Khobar, Saudi Arabia, will provide both preliminary front-end engineering and design and FEED as well as project management services during the engineering, procurement, and construction phases to support development of the complex, the service provider said.
While it did not disclose a value of the agreement, Wood said its work under the contract is scheduled to continue through startup of the complex, which is slated for 2025.
The contract award follows Aramco and SABIC’s November 2017 signing of a memorandum of understanding to execute FEED for the proposed COTC complex, which they expect will process 400,000 b/d of crude oil to produce about 9 million tonnes/year of chemicals and base oils.
The complex would use a COTC process derived from improved refining technology that mixes configurations with proved conversion technologies to create an integrated petrochemical complex capable of maximizing chemical yield, transforming and recycling byproducts, driving efficiencies of scale and resource optimization, and diversifying Saudi Arabia’s petrochemical feedstock mix, the companies said upon announcing the project in 2016.
If approved, the COTC project—which would fulfill Saudi Vision 2030 goals for the downstream sector and will mark the first time the two largest economic entities in Saudi Arabia jointly enter into a strategic partnership—would create an estimated 30,000 direct and indirect jobs.
TRANSPORTATION Quick Takes
Pipeline exec talks tariffs, streamlined permitting
Industry faces many political uncertainties including time-consuming permitting requirements, which can be costly for pipeline companies, Greg Armstrong, chairman and chief executive officer of Plains All American Pipeline LP, said during CERAWeek by IHS Markit on Mar. 5 in Houston.
“We are seeing an atmosphere of partnership right now,” Armstrong said of some regulators, adding performance benchmarks would help the permitting process. “There is nothing that starts the clock when you file a permit.”
Different agencies sometimes “wrestle” during the permitting process regarding jurisdiction overlaps, Armstrong said. He also said paperwork requirements call for thousands of pages of documentation.
On other topics, Armstrong advocated a modernized North American Free Trade Agreement (NAFTA). He said abandoning the existing NAFTA could prove damaging to US energy.
Armstrong said PAA is trying to figure out proposed changes to tariffs on steel and aluminum as suggested by US President Donald Trump.
“We buy pipe and valves that aren’t manufactured in the United States, so we don’t think that it would be appropriate to put a tariff on something that you can’t buy here in the United States,” Armstrong said.
He noted his company has its own steel standards based on experience, and that the standards are higher than the American Petroleum Institute standards.
Statoil outlines development to feed Hammerfest LNG
Statoil AS and its partners have committed 5 billion kroner and started work on the next steps in the development of Snohvit field in the Barents Sea. Development of Askeladd field is the second phase of the Snohvit development, which will provide feedstock for the LNG plant at Melkoya in Hammerfest.
The Askeladd development will supply 21 billion cu m of gas and 2 million cu m of condensate to Hammerfest LNG, and production is scheduled to come on stream in late 2020.
“Askeladd will help maintain a plateau production rate at the Hammerfest LNG plant until 2023,” said Torger Rod, Statoil’s senior vice-president for project development, but the perspective for Snohvit and Hammerfest LNG is much longer.
Askeladd will be developed with three wells via two subsea templates from Aker Solutions with space for future additional wells. Infrastructure will be installed to tie-in the Askeladd development to existing Snohvit field infrastructure. Additional contracts will be awarded in the coming months.
Mozambique LNG, Golfinho-Atum plans get approval
Anadarko Petroleum Corp. received official approval from the Government of Mozambique for its Golfinho-Atum field development plan, including Mozambique LNG. The plan outlines the integrated onshore project from the reservoir to the LNG market and is a culmination of progress made to date on the Mozambique LNG development.
Mozambique LNG will be the country’s first onshore LNG plant, initially consisting of two trains with total nameplate capacity of 12.88 million tonnes/year (mtpy) supporting development of the Golfinho-Atum fields located entirely within Offshore Area 1. The project paves the way for future expansion of up to 50 mtpy from Offshore Area 1. Golfinho-Atum will also supply initial volumes of about 100 MMcfd for domestic use in Mozambique. Pending FID, Mozambique LNG should enter service in 2023.
