PRODUCTION/EXPLORATION

Shell starts production from Phase 3 of Brazil deepwater development

Shell has announced the start of oil production from the third phase of the deepwater Parque das Conchas (BC-10) development in Brazil’s Campos basin. Production for this final phase of the project should add up to 20,000 boed, at peak production, from fields that have already produced more than 100 MMbbl since 2009. Operated by Shell (50%) and owned together with ONGC (27%) and QPI (23%), Parque das Conchas Phase 3 comprises five producing wells in two Campos basin fields (Massa and O-South) and two water injection wells. The subsea wells sit in water depths greater than 5,900 ft and connect to the Espirito Santo FPSO.

Tullow wildcat strikes oil in northern Kenya

Tullow Oil’s Cheptuket-1 well in Block 12A, northern Kenya, has encountered good oil shows, seen in cuttings and rotary sidewall cores, across an interval of over 700 m, the London-based explorer said March 16. Cheptuket-1 is the first well to test the Kerio Valley basin. It was drilled to a final depth of 3,083 m. The well’s objective was to establish a working petroleum system and test a structural closure in the southwestern part of the basin. The strong oil shows encountered in Cheptuket-1 indicate the presence of an active petroleum system with significant oil generation. Post-well analysis is in progress, ahead of defining the future exploration program in the basin, Tullow said. Tullow operates Block 12A with 40% equity and is partnered by Delonex Energy (40%) and Africa Oil Corp. (20%). “This is the most significant well result, to date, in Kenya outside the South Lokichar basin,” said Angus McCoss, Tullow’s exploration director.

Eni’s Goliat field goes onstream in Barents Sea

Eni has started production at Goliat field, 85 km northwest of Hammerfest, Norway. The field lies within Production License 229, in an ice-free area in the Barents Sea. Goliat, the first oil field to start production in the Barents Sea, was developed through the largest, most sophisticated, cylindrical FPS vessel in the world. The vessel has a capacity of 1 MMbbl of oil. The field’s output will reach 100,000 bopd, and the field is estimated to contain reserves amounting to about 180 MMbbl. Production will take place through a subsea system consisting of 22 wells (of which 17 are already completed), including 12 oil producers, seven water injectors and three gas injectors. Eni (operator) holds a 65% stake in Production License 229; Statoil holds the remaining 35%. Image: Eni.

Chevron’s first Gorgon LNG cargo sails for Japan

Chevron Corp.’s first shipment of LNG from the Gorgon project departed Barrow Island off the northwestern coast of Western Australia, the company said March 20. The cargo was to be delivered, by the Asia Excellence, to one of Chevron’s foundation buyers, Chubu Electric Power, for delivery to Japan. The Gorgon project is supplied from Gorgon and Jansz-Io gas fields, within the Greater Gorgon area, between 80 mi and 136 mi off the northwestern coast of Western Australia. It includes a 15.6-Mtpa LNG plant on Barrow Island, a CO₂ injection project, and a domestic gas plant with the capacity to supply 300 terajoules of gas per day to Western Australia. The Chevron-operated Gorgon project is a JV between the Australian subsidiaries of Chevron (47.3%), Exxon Mobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).

REGULATORY/GOVERNMENT

Norway launches APA 2016, adds new blocks

The Norwegian Ministry of Petroleum and Energy launched the APA 2016 licensing round on March 17. The round comprises predefined areas with blocks in the North Sea, the Norwegian Sea and the Barents Sea. The predefined areas have been extended since APA 2015. The new areas include 24 blocks in the Norwegian Sea and 32 blocks in the Barents Sea. Applications can be submitted for any blocks, or parts of blocks, within the predefined areas that are not already included in a license three months before the closing date for applications. This entails that acreage which is relinquished in the application period is regarded as announced at the time of government-approved relinquishment. Applications for APA 2016 close on Sept. 6. The awards will be announced during first-quarter 2017.

New survey sees M&A activity rising

Mergers and acquisitions within the oil and gas industry are expected to increase, according to a new survey by the Brunswick Group. As detailed by the survey—which polled 106 bankers, lawyers, advisors, investment managers and analysts—62% of respondents are predicting an increase, 10 percentage points more than last year. Of those not expecting an increase, 22% said M&A activity would hold steady, while 16% called for a decrease, which represents a significant shift from last year when 14% called for no change and 34% called for a decrease. According to Brunswick, key drivers of these deals are expected to be falling energy prices, distressed sales and bankruptcies. A majority of respondents, including most of those who see M&A in the sector decreasing, say the regulatory environment will constrain global M&A activity. This is compared to just one-third who see the regulatory environment as an enabler of more M&A.

Lackluster lease sale yields just $156 million in high bids

Central Planning Area Sale 241, held March 23 in New Orleans, La., garnered just $156 million in high bids for 128 tracts covering 693,962 acres in the Central Gulf of Mexico offshore Louisiana, Mississippi and Alabama. The sale was held concurrent with Eastern Planning Area Sale 226, which received no bids. Sale 226 encompassed 162 whole or partial unleased blocks covering 595,475 acres. Most of the Eastern Gulf of Mexico Planning Area cannot be offered for lease until 2022.

Interior rules out Atlantic exploration in new leasing program

The Obama administration’s proposal for the nation’s Outer Continental Shelf Oil and Gas Leasing Program for 2017-2022 was unveiled by U.S. Secretary of the Interior Sally Jewell and Bureau of Ocean Energy Management Director Abigail Ross Hopper on March 15. The proposed program includes 13 potential sales in six planning areas—10 potential sales in the Gulf of Mexico and three off the coast of Alaska. The proposed program does not, however, schedule any lease sales in the Mid- and South Atlantic Program Area. According to Interior, the Atlantic was ruled out, due to market dynamics, strong local opposition and conflicts with competing commercial and military ocean uses. However, API accused the administration of catering to extremists. “The decision appeases extremists who seek to stop oil and natural gas production, which would increase the cost of energy for American consumers and close the door for years to creating new jobs, new investments and boosting energy security,” API President and CEO Jack Gerard said.

BUSINESS/MERGERS/ACQUISITIONS

Woodside halts Browse LNG project on price plunge

The participants in the Browse LNG project will not proceed with that development at this time, given the prevailing economic and market environment, said operator Woodside on March 22. The decision was taken following completion of FEED work. Since FEED entry, Woodside has been focused on delivering targeted cost savings and value enhancements. While significant progress was made to improve project value, this has been offset by an extremely challenging external environment, the company said. “The decision represents a disciplined approach to large-scale capital investment and is consistent with our requirements for a development concept to be commercially robust across a range of scenarios,” said Woodside CEO Peter Coleman. The company remains “committed to the earliest commercial development of the world-class Browse resources and to FLNG as the preferred solution,” he added.

Schlumberger-Cameron merger clears final hurdle

Schlumberger and Cameron’s proposed merger cleared its final hurdle in March, with unconditional approval from the Chinese Ministry of Commerce. According to a joint statement by the companies, the transaction was due to close on April 1, 2016.  Meanwhile, in a separate transaction, Schlumberger announced the acquisition of Meta Downhole Limited, a UK-based engineering and service company that offers technology and expertise to provide downhole, metal-to-metal isolation solutions in well integrity applications.

ABB to provide equipment, services for Shell’s Prelude

ABB has won a five-year contract to deliver equipment and services for Shell’s Prelude FLNG, the world’s first floating LNG facility. The order includes the delivery of motors, generators, variable-speed drives, and low-voltage switchgear and guaranteed service and lifecycle management of the electrical equipment, as well as service and support for motors from third-party vendors. ABB will build up a spare parts inventory, workshop repairs and training, and provide round-the-clock technical support, both over the phone and on-site. Spare parts and replacement systems are being procured this year, with training to begin soon after. Once towed to its location off the northwestern coast of Australia, Prelude will be attached to the underwater infrastructure in the Browse basin. It is scheduled to remain there for up to 25 years without uncoupling for overhaul, or to take shelter from cyclones. 

Penn West to sell Slave Point acreage in Alberta

Penn West Petroleum has entered into a definitive agreement for the sale of its properties in the Slave Point area of Northern Alberta for a cash consideration of $148 million. So far this year, Penn West has closed or entered into either definitive agreements or letters of intent to sell some of its non-core assets for an aggregate cash consideration of approximately $80 million which, together with the proceeds from the sale of Slave Point, brings the total expected cash consideration from asset dispositions this year to approximately $230 million. These non-core asset sales are expected to close by the end of the second quarter. “While we believe that Slave Point offers upside, the extension of our Viking play and recent Cardium performance provide us with ample development and growth opportunities and the most attractive rates of return in our portfolio,” said David Dyck, senior V.P. and CFO of Penn West.

ION acquires Ontario-based Global Dynamics

ION Geophysical has acquired Global Dynamics Incorporated (GDI), an Ontario-based company that designs and develops marine towing systems and equipment, including its proprietary SailWing technology. ION plans to leverage SailWing technology to develop and sell commercial products for both source control and streamer deployment optimization in the towed streamer segment. It also will commercialize SailWings for use by its OceanGeo ocean bottom seismic acquisition company.

BP, Kuwait Petroleum sign cooperation agreement

BP and Kuwait Petroleum Corporation (KPC) have signed a framework agreement to explore possible joint opportunities for investment and cooperation in future oil, gas, trading and petrochemical ventures. Signed by BP CEO Bob Dudley and KPC CEO Nizar Mohammad Al-Adsani, the agreement paves the way for both companies to jointly invest and cooperate in oil and gas projects in Kuwait and globally. In addition to enhancing recovery from Kuwait’s existing resource base, the agreement also includes the intention to study opportunities for joint investment in future oil and gas exploration, both inside Kuwait and elsewhere. Other elements of the agreement cover possible future oil and gas trading deals including LNG trading and related ventures.