GENERAL INTEREST Quick Takes
Low European gas prices to prompt US LNG use cuts
European mainland gas prices have fallen now to about $5/MMbtu, a 50% decline from late September peaks. The loss in supply-demand is due to warmer weather, large LNG imports, and more active renewables. Morgan Stanley argues that poor pricing conditions are likely to prompt US LNG utilization rate cuts. Morgan Stanley says current European gas prices are more than $2/MMbtu below long-run marginal cost of US LNG and just shy of US LNG short-run marginal costs. Asian markets are sending similar signals.
“We noticed that in 2016, when global gas prices were also low, LNG output declined both locally in the US as well as globally. We noted that there seems to be no decline in LNG exports from Sabine Pass in the US. But we also noticed that storages at Sabine Pass are now full (according to Platts) including capacity offered by berthed vessels.”
As a share of LNG imports into Europe, US supplies increased 10 times year-over-year in January-February. In the global text, US LNG is rapidly expanding from 0% in 2015 to 11% in 2019. Also, of all the new LNG plants expected in 2019, about 45% are in the US, according to data from Wood Mackenzie.
Meantime, in January-February, LNG imports from Russia (Yamal LNG) rose even quicker year-over-year than US LNG. Competitive European prices (vs. Asia) and an early project completion leading to a large share of spot sales explain this.
BW Offshore eyes Maromba field buy, operatorship
Petroleo Brasileiro SA (Petrobras) agreed to sell 70% interest and operatorship of Maromba field offshore Brazil to BW Offshore for $90 million (OGJ Online, July 7, 2017). The field, 100 km southeast of Cabo Frio in 160 m of water in the southern Campos basin, is close to Papa-Terra, Peregrino, and Polvo oil fields where BW Offshore currently has or has had operations.
BW Offshore intends to deploy one of its existing floating production, storage, and offloading vessels to the field as part of a phased development to derisk the project like at the Dussafu development offshore Gabon (OGJ Online, Sept. 17, 2018).
Internal estimates of the heavy-oil discovery show potential recoverable resources of 100-150 million bbl of low-sulfur (16° gravity) oil in Maastrichtian sandstone intervals.
Eight of nine exploration and appraisal wells drilled thus far have found oil in multiple reservoirs. Four of the 8 wells have defined and delineated the Maastrichtian sand targets. In addition to the Maastrichtian targets, prior exploration data yields more than 1 billion bbl of oil in place upside potential, which will be later defined by further appraisal work post first oil.
BW Offshore will fund the acquisition over three installments. The first installment, $20 million, is due on receipt of ANP approval as operator and formal sanction of the transaction, expected in this year’s second half. Another $20 million is due at start of drilling activities. The remaining $50 million is due at the start of oil production or 3 years after the start of drilling activities, whichever comes first.
Closing is subject to conditions including approval by the Brazilian National Agency of Petroleum, Natural Gas, and Biofuels. The acquisition of the remaining 30% field interest is pending board approval by Chevron Corp.
Denbury, Penn Virginia end merger agreement
Denbury Resources Inc., Plano, Tex., and Penn Virginia Corp., Houston, have ended a merger agreement estimated to have been worth $1.7 billion (OGJ Online, Oct. 29, 2018).
“The Penn Virginia board of directors decided that it is in the best interests of the company and our shareholders to mutually agree to terminate our merger agreement with Denbury,” said Penn Virginia Pres. and CEO John A. Brooks.
Denbury Pres. and CEO Chris Kendall said, “While we firmly believed in the strategic merits of the combination with Penn Virginia, the difficult market conditions since announcement, combined with the opposition of certain Penn Virginia shareholders, led us to the conclusion that the transaction was unlikely to receive the necessary super majority approval from Penn Virginia shareholders.”
RockRose bids for Independent Oil & Gas
RockRose Energy PLC has offered to acquire Independent Oil & Gas PLC in an all-cash deal that it says values IOG share capital at $34.9 million. Both companies are based in London.
The target firm holds 100% interests in Blythe, Elgood, Nailsworth, Elland, and Southwark gas fields in the UK North Sea, the Thames gas pipeline, and licenses encompassing the Goddard and Abbeydale gas discoveries off the UK.
Exploration & DevelopmentQuick Takes
Gazprom starts Kharasaveyskoye development
Gazprom has begun full-scale development of Kharasaveyskoye gas and condensate field on Russia’s Yamal Peninsula (OGJ Online, July 23, 2018). It said production will start in 2023 at 32 billion cu m/year from Cenomanian-Aptian deposits. Later production will come from deeper Necomian-Jurassic strata.
Wells drilled directionally from onshore will develop a part of the field below the Kara Sea. Drilling of production wells will begin in June 2020. Development will include drilling of 236 production wells and construction of a gas treatment plant, a booster compression station, and transport and power infrastructure.
A 106-km pipeline will connect Kharasaveyskoye with Bovanenkovskoye field to the south. Gazprom estimates Kharasaveyskoye reserves at 2 trillion cu m.
PTTEP starts developing fields in Algeria
PTT Exploration & Production PCL plans to drill 14 wells in the initial development of its Hassi Bir Rekaiz cluster of oil fields in eastern Algeria. The company has begun development after receiving approval last year for a 25-year production period.
PTTEP expects flow to start in 2021 at 10,000-13,000 b/d of oil. Output is expected to reach 50,000-60,000 b/d in 2025 after construction of a central processing facility and drilling of 139 more wells. The company and its partners found oil and gas in 10 out of 11 exploration wells drilled in the 1,916-sq-km area during 2013-16 (OGJ Online, Aug. 19, 2016).
Field names are Semhari, Semhari East, Mouia Aissa, Rhourde Abadje, Oglat El Bachir, Sahane Bagas, Rhourde Rhorfat, Rhourde Terfaia, Bou Goufa, and Rhourd Ez Zita.
PTTEP is operator during exploration with a 24.5% participating interest in the production sharing contract. Partners are Sonatrach, with 51%, and CNOOC Ltd., 24.5%.
PTTEP makes gas find off Australia
PTTEP Australasia (Ashmore Cartier) Pty. Ltd. reported making a natural gas and condensate discovery with its Orchid-1 well, the first exploration well drilled in permit AC/P54 in the Timor Sea offshore Australia. The Orchid-1 well, drilling of which started in January, reached 2,925 m TD. The well encountered gas and condensate with 34-m net pay thickness.
“The result is in line with PTTEP’s expectation and will be incorporated into development planning of Cash-Maple field, which contains 3.5 tcf of resources,” the company said.
The AC/P54 exploration permit comprises permits AC/L3, AC/RL4, AC/RL5, AC/RL6, AC/RL7 (Cash-Maple field), AC/RL10, AC/RL12, and AC/P54.
Eni evaluating gas discovery off Egypt
Eni SPA is evaluating a natural gas discovery in the Nour North Sinai Concession offshore Egypt (OGJ Online, Feb. 4, 2019).
The Nour-1 New Field Wildcat cut 33 m of gross sandstone pay with a 90-m gas column in the Oligocene Tineh formation.
The Saipem Scarabeo 9 semi drilled the well to 5,914 m TD in 295 m of water about 50 km north of the Sinai Peninsula. Eni operates the concession with 40% interest in participation with Egyptian Natural Gas Holding Co. Partner include BP 25%, Mubadala Petroleum 20%, and Tharwa Petroleum 15%.
East Midlands test indicates gas in shale
IGas Energy PLC, London, encountered more than 250 m of hydrocarbon-bearing shale in its vertical Springs Road-1 exploration well in North Nottinghamshire, England.
IGas reported “significant gas indications” in Upper and Lower Bowland shale and Millstone Grit sands, all of Carboniferous age. IGas has recovered 150 m of shale core and conducted wireline logging at Springs Road-1 and is analyzing data. It’s drilling to a tertiary target to assess potential for multiple pays in the Gainsborough Trough of the East Midlands region.
The operator recently reported “encouraging” shale samples from Millstone Grit at its Tinker Lane-1 well, part of the same exploration and appraisal program. Shales encountered by the well did not include the Bowland primary target. That well was plugged after logging.
QP farms in to Mozambique exploration block
Qatar Petroleum has reached an agreement with Eni SPA to farm in to Block A5A in the Angoche basin off Mozambique.
Saad Sherida Al-Kaabi, minister of state for energy affairs and QP president and CEO, said the deal is part of a strategy to expand the company’s exploration portfolio “to ensure diversification of geographies as well as geologies and basins.”
Block A5A, which covers 5,133 sq km in 300-1,800 m of water, is adjacent to Block A5B where a QP affiliate in December 2018 acquired 10% participating interest from an ExxonMobil Corp. affiliate, marking its first foray into Mozambique.
After the deal closes, QP will hold 25.5% participating interest in Block A5A with partners operator Eni 34%, Empresa Nacional de Hidrocarbonetos 15%, and Sasol 25.5%.
Mako field development due off Indonesia
Conrad Petroleum Ltd., Singapore, will develop Mako gas field off Indonesia under the “gross-split” production-sharing regime the country adopted in 2017 (OGJ Online, Jan. 20, 2017).
The Ministry of Energy and Mineral Resources approved a resubmitted development plan after Conrad and the government agreed to amend to Duyung production-sharing contract from cost-recovery to the gross-split scheme in January.
Conrad will be able to continue exploration of the 890-sq-km PSC area, which has water depths of 60-100 m in Riau Islands Province of the South China Sea. Mako field gas occurs in Plio-Pleistocene Intra Muda sandstone encountered at about 1,700 ft in a northeast-southwest-trending anticline 47 km long and 16 km wide. Four wells have penetrated the Intra Muda formation, the latest of which, Mako South-1, was cored and flow-tested.
Last November, an audit by Gaffney Cline & Associates assessed contingent resources at 276 bcf of gas.
Drilling & ProductionQuick Takes
BP lets contract for Tortue gas field
BP PLC has let a contract to TechnipFMC for the engineering, procurement, construction, installation, and commissioning of a floating production, storage, and offloading unit to be deployed offshore on the maritime border of Mauritania and Senegal, moving forward Phase 1 of the Greater Tortue Ahmeyim natural gas project. The award is a continuation to the front-end engineering design contract awarded in April 2018.
The initial subsea infrastructure connects the first four wells consolidated through production pipelines leading to this FPSO. Liquids are removed, and the export gas is transported via pipeline to the LNG hub terminal where the gas is liquefied. The project will provide LNG for export, as well as make gas available for domestic use in both Mauritania and Senegal. The start of gas production is expected in first-half 2022. BP Gas Marketing will buy LNG offtake from Greater Tortue Ahmeyim Phase 1. TechnipFMC puts the value of the contract at $500 million-1 billion.
Tortue Ahmeyim field development is in the C-8 block offshore Mauritania and the Saint-Louis Profond block offshore Senegal. BP operates Tortue with 61%.
Equinor gets nod to extend Gullfaks production life
Equinor and its partners have gained approval from the Norwegian Petroleum Directorate to use the C platform in Gullfaks oil field in the North Sea until June 30, 2036, which is the entire period of the production license. In its application, Equinor said the facility can be operated at a profit up to 2032, with an option for further extension in connection with maturing new improved oil recovery projects on Gullfaks.
There is a need for further operation of Gullfaks C, said NPD, both to recover remaining resources on Gullfaks, and as a potential host platform for other deposits in the area. Gullfaks C is key to recovering oil from tight layers in the Shetland group and the Lista formation over Gullfaks (OGJ Online, Jan. 17, 2019).
Gullfaks C is one of three large Condeep concrete platforms on the field with integrated process facilities, drilling facilities, and living quarters. Gullfaks C also treats and exports oil and gas from Gullfaks Sor, Gimle, and Visund Sor. Production from Tordis is processed in a separate facility on the platform.
Gullfaks C was installed in 216 m of water on Block 34/10 in May 1989. It began production Jan. 1, 1990. The design lifetime was 30 years.
Hibiscus confirms plans for Anasuria sidetrack well
Hibiscus Petroleum Bhd. said its jointly controlled company, Anasuria Operating Co. Ltd. (AOC), is on schedule to drill Guillemot A GUA-P1 sidetrack well on the Anasuria cluster in the UK North Sea. Drilling is to start by July.
AOC expects the sidetrack well could tap into 1.7 million bbl of oil from proved and probable reserves. The GUA-P1 sidetrack will reenter the GUA-P1 wellbore.
AOC previously signed a rig-sharing agreement with Ping Petroleum UK Ltd. to use the Stena Spey semisubmersible rig. Stena Spey Services Ltd. owns the semi.
The Anasuria cluster includes Teal, Teal South, Guillemot, and Cook fields, which produce to the Anasuria floating production, storage, and offloading vessel.
Key Petroleum to send Tanbar gas to Moomba
Key Petroleum Ltd., Perth, signed a nonbinding memorandum of understanding with Santos Ltd. and Beach Energy Ltd., both of Adelaide, to cover the proposed terms for connection and transport of natural gas from Key’s Tanbar project area in southwest Queensland to the Cooper basin gas-gathering network for processing at Moomba in South Australia.
The commercial terms of the MOU, which were not disclosed, will form the basis for negotiation of a future formal processing and transportation agreement.
Key’s wholly owned Tanbar prospect lies in Queensland permit ATP 924 and is estimated to contain 500 bcf of unrisked gas resources. The estimates are based on mapped structural closures and stratigraphic components of the Permian Toolachee formation.
Key is mainly focusing on Triassic and Permian reservoir targets that lie 20 km west of Santos’ Mount Howitt and Whanto gas developments. The company is planning to drill two prospects, Alfajour and Taj, in the coming months.
PROCESSINGQuick Takes
IOC lets clean-fuels contracts for Indian refineries
Indian Oil Corp. Ltd. has let multiple contracts totaling $12 million to Emerson Electric Co., St. Louis, to provide services related to a major modernization and upgrade of operations and emissions programs to increase operational efficiency, reduce emissions, and expand production of cleaner fuels at several of its refineries to ensure compliance with India’s looming more-stringent environmental standards (OGJ Online, July 30, 2018).
As part of the contracts, Emerson will serve as automation contractor on projects aimed at helping IOC meet the country’s new Bharat Stage VI (BS-VI, equivalent to Euro 6) low-sulfur emissions standards for fuels that, upon taking effect in April 2020, will mandate a maximum sulfur content of 10 ppm, the service provider said.
The project will upgrade 14 different process units, including diesel hydrotreating units designed to reduce sulfur content as well as octane-boosting units either to be installed or augmented with desulfurization technologies.
Specifically, Emerson said it will install advanced technologies, including its proprietary DeltaV distributed control systems; DeltaV safety instrumented systems and AMS asset management software; WirelessHART-enabled instruments; wired field instruments including pressure, temperature, and flow sensors; control and isolation valves; and gas analyzers.
Emerson will also provide installation, commissioning, factory-acceptance testing, and training support services for the project at IOC’s 314,000-b/d Panipat refinery and petrochemical complex in Haryana north of New Delhi, 277,400-b/d Koyali refinery at Vadodara in India’s western state of Gujarat, 164,100-b/d Haldia refinery in the district of Purba Medinipur, West Bengal, and 47,200-b/d Bongaigaon refinery in Assam.
While Emerson did not disclose further details regarding a timeframe for completion of its work under the contract, IOC said it expects to complete the entirety of its 166 billion-rupee BS-VI quality improvement projects at all its refineries by September, according to the operator’s web site.
Irkutsk Oil lets a contract for East Siberian project
Irkutsk Polymer Plant (IPP), a subsidiary of Irkutsk Oil Co. Ltd. (INK), has let a contract to McDermott International Inc. to provide basic engineering and technology licensing for a grassroots ethylene plant in Ust-Kut, in East Siberia’s Irkutsk region.
Alongside basic engineering and technology licensing, McDermott also will deliver detailed engineering and material supply of heaters, including six of its proprietary Lummus Technology Inc.’s short residence time (SRT) pyrolysis heaters for the plant that, once completed, will produce 650,000 tonnes/year of polymer-grade ethylene from ethane and propane.
The plant, which also will feature a low-pressure chilling train and multicomponent refrigeration, additionally will be equipped to produce high-purity hydrogen and C5 by-product, McDermott said. Valued at $50-250 million, the contract was reflected in McDermott’s fourth-quarter 2018 backlog.
This latest contract for the project follows IPP-INK’s previous award to Toyo Engineering Corp. to provide engineering, procurement, and technical advisory services for both precommissioning and commissioning of the plant, which also will use Univation Technologies LLC’s proprietary technology for production of polyethylene (OGJ Online, Feb. 6, 2019).
The proposed project follows INK’s strategy to reduce emissions by utilizing ethane extracted from ethane-rich gas sourced from its regional gas processing and treatment plants at Yaraktinsky and Markovsky fields as feedstock.
While INK has yet to reveal a definitive startup date for the planned petrochemicals plant, the operator previously said it would be undertaking the olefins project, which will be designed to possibly expand production to 1 million tpy, in 2018-22.
INK currently operates a 3.6 million-cu m/year gas processing plant in Yaraktinsky field, and during 2015-18, planned to build two more gas processing plants at Yaraktinsky with a combined capacity of 12 million cu m/year, and a 6 million-cu m/year gas treatment plant at Markovsky field, the firm’s web site said.
Vietnamese operator lets contract for PDH unit
Phu My Plastics Production JSC has let a contract to Honeywell UOP LLC to provide process technology for a grassroots propane dehydrogenation (PDH) unit at its operations in Ba Ria, Vung Tau Province, Vietnam. As part of the contract, Honeywell UOP will deliver licensing for its proprietary C3 Oleflex process technology, the process design package, proprietary and nonproprietary equipment, onsite operator training, technical services for startup and continuing operation, as well as proprietary catalysts and adsorbents, the service supplier said.
The PDH plant, once completed, will produce 306,000 tonnes/year of polymer-grade propylene to help meet growing demand for plastics in Vietnam and other countries in Southeast Asia, helping to supplant propylene products currently imported into the region.
TRANSPORTATIONQuick Takes
Nuevo Midstream to acquire Republic Midstream
Nuevo Midstream Dos LLC, Houston, plans to expand a crude oil gathering, storage, and intermediate transportation system in the Eagle Ford shale after completing a deal to buy Republic Midstream LLC from an affiliate of ArcLight Capital Partners.
The system currently consists of some 100 miles of gathering pipeline in Gonzales, Lavaca, and Dewitt counties in Texas that feeds a central delivery point (CDP) near Shiner, Tex., with 300,000 bbl of crude oil storage and a six-bay truck station. It also includes a 26-mile intermediate pipeline, with a maximum capacity of 120,000 b/d of oil, that carries volumes from the CDP to the Kinder Morgan Crude and Condensate Pipeline (KMCC) and the Eagle Ford Crude Oil Pipeline System, which is owned and operated by Enterprise. The Kinder Morgan and Enterprise pipelines deliver crude and condensate to multiple terminals with access to refineries, petrochemical plants, and export terminals on the Texas Gulf Coast. The transaction is expected to close early in this year’s second quarter.
Line 3 start delayed to second-half 2020
Start-up of Enbridge Inc.’s Line 3 Replacement Project, which will ease a transport bottleneck in the Alberta oil sands, will occur in the second half of 2020 instead of by the end of this year, the company says. The Minnesota government has provided Enbridge a permitting timeline indicating all remaining state permits required for Line 3 construction will be provided by November. The company earlier thought it would receive final state permits in the second quarter of this year. Enbridge said it expects completion of federal permits 30-60 days after state permits are in hand.
Line 3 carries 390,000 b/d of light crude oil—about half its original capacity—1,097 miles from Edmonton, Alta., to Superior, Wisc. Replacement projects in Canada and the US will increase capacity to 760,000 b/d of light and heavy crude (OGJ Online, Apr. 25, 2018).
