GENERAL INTERESTQuick Takes
UK streamlining shale gas administration
The UK government is making administrative changes it says will support development of natural gas resources in shale.
“Recent decisions on shale exploration planning applications remain disappointingly slow against a statutory time frame of 16 weeks where an environmental impact assessment is required,” Greg Clark, secretary of state for business, energy, and industrial strategy, told Parliament.
“Shale gas development is of national importance,” he said. “The government expects mineral planning authorities to give great weight to the benefits of mineral extraction, including to the economy. This includes shale gas exploration and extraction.”
The initiatives apply only in England. Scotland, Wales, and Northern Ireland do not allow hydraulic fracturing (OGJ Online, May 10, 2017).
Operators exploring for shale gas in England have met strong opposition to drilling and hydraulic fracturing, including by local governments.
Clark said the UK government will streamline handling of applications for shale work and create a shale environmental regulator and planning brokerage service for this purpose.
The government also will develop a £1.6-million shale support fund over 2 years to help local authorities handle shale applications.
Williams to acquire MLP after FERC policy reversal
Williams Cos. Inc. has agreed to acquire Williams Partners LP in an all stock-for-unit transaction valued at $10.5 billion.
The companies decided to merge following the US Federal Energy Regulatory Commission’s Mar. 15 reversal of its 2005 income tax policy that permitted master limited partnership interstate oil and natural gas pipelines to maintain an income tax allowance in cost-of-service rates.
Under the agreement, Williams will acquire all 256 million public outstanding units of Williams Partners at a fixed exchange ratio of 1.494 Williams shares for each public unit of Williams Partners. Assuming a 1.494 exchange ratio, Williams will issue 382.5 million shares, representing 31.6% of the total shares outstanding of the combined entity.
The merger is expected to close in the fall subject to standard closing conditions and shareholder approval at which time Williams Partners will become a wholly owned subsidiary of Williams.
Rex Energy files for voluntary bankruptcy
Rex Energy Corp., State College, Pa., has filed for voluntary bankruptcy and plans to sell its assets.
The company has interests in the Appalachian basin (OGJ Online, Aug. 14, 2014).
The company operates and has 70% working interest in the Butler Operated Area prospective for liquids-rich gas from the Marcellus shale and the overlying Upper Devonian Burkett shale, according to Rex Energy’s web site. The company holds 100% working interest in 207,000 net acres prospective for the Marcellus shale, Upper Devonian shale, and Utica shale. In the Westmoreland, Clearfield, and Centre Country project areas, Rex Energy holds 40% non-operated working interest. The dry gas producing areas are operated by WPX Energy.
In the fourth quarter last year, the company produced an average 205.3 MMcfd of natural gas-equivalent—of which 40% was condensate and NGL.
Exploration & DevelopmentQuick Takes
Talos submits drilling plans for Zama well off Mexico
Talos Energy LLC, Houston, and partners have submitted appraisal drilling plans to Mexico’s government regarding the Zama-1 discovery well on Block 7 in the shallow-water Sureste basin offshore Mexico. The appraisal well is expected to spud in the fourth quarter.
Talos Energy operates Block 7 with 35% interest. Partners are Sierra Oil & Gas 40% and Premier Oil PLC 25%. Premier Oil said the group plans to drill an appraisal well with one sidetrack to confirm the oil-water contact as defined by a seismic flat spot. Drilling plans also seek to confirm detailed distribution of the reservoir.
Zama’s principal target is Tertiary clastic reservoirs. The Zama structure is estimated to have a gross unrisked resource range of 100-500 million bbl. The Zama exploration well spudded in 2017 (OGJ Online, May 22, 2017). A secondary target is Zama Deep.
Kosmos to respud well offshore Suriname
Kosmos Energy Ltd. will respud its first well off Suriname after the Anapai-1 encountered shallow-borehole stability issues.
The well is testing an Early Cretaceous structural-stratigraphic concept on 5,126-sq-km Block 45.
The Ensco DS12 drillship will drill the redesigned Anapai-1A to the same target. Kosmos, the operator, expects drilling to take 50-60 days. Water depths on the block are 200-2,000 m.
It holds a 50% working interest in the Block 45 production-sharing contract with state-owned Staatsolie. Chevron Corp. holds the other 50%.
Kosmos said it expects to spud a well on a prospect called Pontoenoe on Block 42, adjacent to Block 45 to the west, in the third quarter.
It has identified two trends on Block 42, Aurora and Apetina, which it describes as stratigraphic plays analogous to ExxonMobil Corp.’s deepwater Liza discovery to the west off Guyana. Water depths on the block are 1,800-2,700 m.
Kosmos, operator, Chevron, and Hess Corp. hold one-third interests each in Block 42.
Basra Oil lets contract for Majnoon development
Basra Oil Co. (BOC) has let a contract to KBR Inc., Houston, for the development of Majnoon oil field in Basra, Iraq (OGJ Online, Dec. 27, 2017).
KBR will provide overall project management, multidiscipline engineering support, procurement, and construction management services under a 2 plus 1-year extendable service contract.
Majnoon, which lies in southern Iraq 70 km north of Basra City, is one of the world’s largest oil fields with 38 billion bbl of oil in place, according to the Iraqi government. The field produces about 220,000 b/d of oil.
Husky testing exploration well off China
Husky Energy is testing the first of two exploration wells planned on Block 15/33 in the Pearl River Mouth Basin of the South China Sea to assess potential for development (OGJ Online, Apr. 17, 2017). The well, in 80 m of water 160 km southeast of Hong Kong, encountered four oil-bearing zones with combined thickness of 70 m.
After testing the first well, Husky will drill a well on a separate structure on the 155-sq-km block.
It plans to drill two exploratory wells on nearby Block 16/25 in the second half of 2018.
Husky holds a 100% working interests in the blocks under production sharing contracts with CNOOC Ltd., which can back in for 51% in the event of commercial discovery. Husky would be able to recover exploration costs from production.
Husky and CNOOC have signed PSCs structured similarly for Blocks 22/11 and 23/07 in the Beibu Gulf area of the South China Sea.
Block 22/11 covers 1,663 sq km with water depths of 40-80 m. Block 23/07 covers 1,210 sq km with water depths of 20-40 m.
Australia details new offshore acreage release
The Australian government has released a total of 21 new blocks across six offshore basins around the country in its 2018 acreage release. There is also a rerelease of a further seven blocks not taken up in the 2017 program.
The releases are split into nine Round One and seven Round Two work program bid blocks along with five cash bid blocks.
Applications for Round One blocks closes on Oct. 18, as do applications for the re-released work program blocks from the 2017 program. Prequalification for cash bid blocks closes Oct. 4. Applications for Round Two work program blocks close on Mar. 21, 2019. For prequalified applicants, the cash bid auctions will also be held on Feb. 7, 2019.
The Round One work program bid blocks comprise three on the Exmouth Plateau, two in the Vulcan subbasin, two in the Otway basin, and two in the Gippsland basin.
Round Two work program bid blocks comprise two in the Beagle subbasin, two in the Caswell subbasin, two in the eastern Gippsland basin, and one in the controversial Ceduna subbasin of the Great Australian Bight.
Of the cash bid blocks, there is one in each of the Dampier subbasin, the Rankin platform, the Barrow subbasin, the Exmouth Plateau, and the Otway basin.
The 2017 rerelease work program bids comprise one in each of the Vulcan subbasin, the Calder graben, the Cape Wickham subbasin, the Durroon subbasin, the Roebuck basin, the Dampier subbasin, and the Exmouth plateau.
Drilling & ProductionQuick Takes
Anadarko lets contract for Lucius field in gulf
Anadarko Petroleum Corp. has let a contract to McDermott International Inc. for subsea umbilical and flowline installation in support of a tieback to Anadarko-operated Lucius field in the Gulf of Mexico (OGJ Online, Jan. 9, 2015).
The contract includes engineering, fabrication, installation and precommissioning of subsea infield flowlines, production umbilicals, and related subsea equipment to the field, which lies 275 miles southeast of Galveston, Tex.
The Lucius Subsequent Development is a subsea tieback to the Anadarko-operated Lucius spar, which is on Keathley Canyon Block 875. The new development is in 7,400 ft of water on Keathley Canyon Block 919.
McDermott’s operating center in Houston will perform project management and engineering. McDermott is scheduled to use its spoolbase in Gulfport, Miss., and Lay Vessel North Ocean 105 and North Ocean 102 to perform the work.
Gulfport provides SCOOP Woodford well results
Gulfport Energy Corp., Oklahoma City, updated recent well results on its SCOOP Woodford assets in Oklahoma’s southeastern Anadarko basin.
During an initial 30 days of production, the Lilly 3-15X10H cumulatively produced 395.5 MMcf of natural gas and 9,600 b/d of oil. On a three-stream basis, the well produced an average 16.7 MMcfd of gas equivalent, comprised of 67% gas, 21% natural gas liquids, and 12% oil.
Another well, the Lilly 4-15X10H, cumulatively produced 305.4 MMcf of gas and 8,300 bbl of oil during its initial 30 days of production. The Lilly 4-15X10H produced an average 13.1 MMcfed, comprised of 67% gas, 20% NGL, and 13% oil.
The SCOOP play mainly targets the Devonian to Mississippian Woodford shale.
Neptune lets contract for Gjoa-Nova work
Neptune Energy let a contract to Rosenberg WorleyParsons for work on the Gjoa platform in the Norwegian North Sea to accommodate oil and gas production from Nova field operated by Wintershall Nova AS and partners.
Neptune operates the Gjoa platform, which is designed for third-party tie-in. Nova is 17 km southwest of Gjoa.
The Rosenberg WorleyParsons contract covers engineering, procurement, construction, installation, and commissioning of a topsides module. The engineering firm handled front-end engineering and design.
Wintershall recently submitted a Nova development plan with the Norwegian Petroleum Directorate involving two subsea templates, three production wells, and three water injection wells (OGJ Online, May 16, 2018).
Neptune holds a 30% interest in the Gjoa license. Its partners are Petoro, 30%; Wintershall Norge AS, 20%; AS Norske Shell, 12%; and DEA Norge AS, 8%.
PROCESSINGQuick Takes
Sanchez, Targa expand midstream JV in South Texas
Sanchez Midstream Partners LP (SMP) and Targa Resources Corp. have merged their respective 50% interests in the entities that own the high-pressure Carnero gathering line and Raptor gas processing facility to form an expanded 50-50 joint venture in South Texas (OGJ Online, Jul. 7, 2017).
The combine has acquired Targa’s 200-MMcfd Silver Oak II gas processing plant in Bee County, Tex., expanding the processing capacity to 460 MMcfd from 260 MMcfd, and owns the full capacity of the Carnero gathering line, which has a design limit (without compression) of 400 MMcfd.
Additional enhancements include dedication of more than 315,000 gross Comanche acres in the western Eagle Ford, operated by Sanchez Energy Corp., under a long-term firm gas gathering and processing agreement. The agreement, approved by all unaffiliated Comanche working interest partners, establishes commercial terms for the gathering of gas on the Carnero gathering line and processing at the Raptor gas processing facility and Silver Oak II. Before this, Comanche volumes were gathered and processed on an interruptible basis, with the processing capabilities of the joint ventures limited by the capacity of the Raptor gas processing facility.
The structure simplified the previous combine with Targa, said Gerry Willinger, chief executive officer of SMP’s general partner, which facilitates greater operating efficiencies and provides a platform for growth of the Carnero JV in South Texas.
By adding Silver Oak II and the additional capacity of the Carnero gathering line to the Carnero JV, the South Texas midstream assets, which include Western Catarina Midstream and the Seco Pipeline, are positioned to capture the increase in volumes from development activity in the western Eagle Ford without spending incremental development dollars, Willinger said.
Cheniere reaches FID for Train 3 at Texas plant
Cheniere Energy Inc., Houston, made final investment decision on Train 3 at its Corpus Christi, Tex. liquefaction project (CCL project), marking the first FID on liquefaction capacity in the US since 2015, the company said (OGJ Online, Jun. 11, 2015).
Bechtel Oil, Gas & Chemicals Inc. will continue construction, which began in late 2017.
Amended credit facilities of Cheniere subsidiary Cheniere Corpus Christi Holdings LLC will be used to fund portion of the costs of developing, constructing, and placing into service Trains 1, 2, and 3 and associated pipeline and other infrastructure at or near the CCL project, and for related business purposes. Total commitments under the facilities were increased to $6.1 billion on May 22.
Each train in the three-train CCL project is expected to have a nominal production capacity, which is prior to adjusting for planned maintenance, production reliability, and potential overdesign of 4.5 million tonnes/year of LNG.
TRANSPORTATIONQuick Takes
Canada and Alberta push BC on pipeline
The governments of Canada and Alberta have taken steps to break the logjam in British Columbia over expansion of the Trans Mountain Pipeline System.
Canadian Finance Minister Bill Morneau said in a news conference May 16 the government would indemnify project sponsor Kinder Morgan Canada Ltd. or a subsequent developer against financial loss resulting from BC’s resistance to pipeline expansion.
Calling opposition to the project by BC Premier John Horgan “unconstitutional,” Morneau said the aim is to “remove politically motivated investment risks.”
The Alberta Legislative Assembly, meanwhile, passed Bill 12 authorizing the provincial energy minister to require licenses for the transport of natural gas, crude oil, or refinery products away from the province (OGJ Online, Apr. 17, 2018).
The legislation would enable the Alberta government to block energy deliveries to BC.
“Albertans, British Columbians, and the rest of Canada should understand that if the path forward for the pipeline through BC is not resolved soon, I am ready and prepared to turn off the taps,” Alberta Premier Rachel Notley said.
Transport congestion is widening the discount at which Albertan bitumen and heavy crude oil sell against West Texas Intermediate crude and is therefore costly to the province’s producers and government.
Kinder Morgan last month suspended most work on the Trans Mountain expansion and set a May 31 deadline for reaching agreements that would allow work to resume (OGJ Online, Apr. 9, 2018).
The project would nearly triple capacity of the system between Alberta and Burnaby, BC.
In Vancouver, Horgan dismissed Morneau’s comments as “rhetoric and hyperbole.”
And BC Atty. Gen. David Eby threatened a legal challenge to any restriction of oil or gas movement to BC under the new law.
TransCanada plans construction of Coastal GasLink
TransCanada Corp. will begin building its 415-mile, 48-in. OD Coastal GasLink pipeline in early 2019, pending a positive final investment decision on the linked LNG Canada liquefaction plant.
TransCanada’s statement followed a commitment from the chief executive of LNG Canada that the $40-billion (Can.) LNG export terminal would be under construction in 2018. LNG Canada is a joint venture of Royal Dutch Shell PLC, PetroChina Co. Ltd., Mitsubishi Corp., and Korea Gas Corp.
Coastal GasLink will carry 5 bcfd of natural gas from shale fields in Alberta and northeast British Columbia to LNG Canada’s proposed 24 million-tonne/year export terminal near Kitimat on British Columbia’s northwest coast.
TransCanada will own and operate the pipeline and expects to award contracts for its construction to four consortia in the next 2 months. TransCanada estimates Coastal GasLink’s cost at $4.8 billion (Can.). The company expects to provide a cost update by the time it awards construction contracts.
The $4.8-billion (Can.) price tag in 2011 dollars would equate to $5.3 billion (Can.) now, according to the Bank of Canada inflation calculator.
Magellan to expand western leg of Texas products line
Magellan Midstream Partners LP, Tulsa, will expand the western leg of its products pipeline system in Texas to handle incremental shipments of gasoline and diesel fuel to centers in Abilene, Midland-Odessa, and El Paso, Tex., and New Mexico. The pipeline also can access Arizona and Mexico via connections to other systems.
The decision was made following an open season conducted in March (OGJ Online, Mar. 9, 2018).
Capacity will increase to 150,000 b/d from the current 100,000 b/d by increasing the pipeline size along the partnership’s existing route. Connectivity to the ExxonMobil Pipeline Co.’s terminal in Wink, Tex., also will be added.
The expanded capacity will be available by mid-2020, subject to permits and approvals, and will cost $300 million, the company said. Capacity could be expanded by another 20,000 b/d, up to 170,000 b/d. A supplemental open season for additional commitments for another expansion will be conducted, the company said.
