May 2017, Vol. 244, No. 5

In The News

World News

CERI: Technology Reduces Oil Sands Costs, Emissions

The Canadian Energy Research Institute (CERI) released a study identifying new technologies and processes that will enable the oil sands industry to significantly reduce costs and greenhouse gas emissions.

The report identifies six technology configurations, any of which will reduce the chances of reaching the 100 MtCO2eq. a year cap to zero within the study period (2016-2036). The configurations that meet minimum costs and emissions objectives can potentially lower bitumen supply costs by 34-40% and reduce fuel-derived emissions from in situ oil sands production by over 80%.

The full study, Economic Potentials and Efficiencies of Oil Sands Operations: Processes and Technologies, is available for download from CERI’s website.

Eni Drills First International Well Off Mexico

Italian company Eni has successfully drilled the first well by an international company offshore Mexico since government reforms ended state-owned Pemex’s 70-year monopoly in 2013. The Amoca-2 well, drilled in shallow waters of Campeche Bay, confirmed the presence of oil in multiple reservoirs and may indicate a “meaningful” upside to estimates.

The discovery’s location within 20 miles of existing Pemex infrastructure makes accelerated development possible. “We want to go fast,” Eni CEO Claudio Descalzi told the FT, adding that “it’s reasonable to think that in a couple of years, three years, we could start production.”

The drilling campaign will continue in 2017 with a new well in the Amoca area and two delineation wells that will seek to both appraise existing discoveries and target new ones. Meanwhile, news of Eni’s discovery may boost support for privatization and encourage more bidding in Mexico’s June auction.

ExxonMobil Discovers Oil Offshore of Guyana

ExxonMobil announced positive results on the Snoek well offshore Guyana, confirming a new discovery on the Stabroek Block. Drilling targeted similar aged reservoirs as encountered in previous discoveries at Liza and Payara, and the latest discovery is about five miles southeast of the 2015 Liza-1 discovery.

The Snoek well was drilled to a total depth of 16,978 feet in 5,128 feet of water and encountered 82 feet of high-quality, oil-bearing sandstone reservoirs. Following completion of the Snoek well, the Stena Carron drillship moved back to the Liza area to drill the Liza-4 well.

Exxon affiliate Esso Exploration and Production Guyana Ltd. is operator and holds 45% interest in the 6.6-million-acre Stabroek Block. Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Nexen Petroleum Guyana Ltd. holds 25% interest.

Latvia Opens Natural Gas Market to Competition

Latvia opened its natural gas market to third-party access as it aims to end the country’s decades-long dependency on Russia’s Gazprom, Reuters reported.  Latvia split its monopoly gas utility, in which Gazprom owns 34%, and spun off a new company – Conexus Baltic Grid. The transmission and storage operator owns the region’s largest underground gas storage facility.

Latvia, the last Baltic country to liberalize its gas market, agreed in December with Lithuania and Estonia to establish a regional gas market by 2020. They plan to connect the market to Finland via a planned Estonian-Finnish pipeline called the Baltic Connector, which is expected to begin operations in 2020.  The Baltic governments also hope to connect their combined gas market to mainland Europe by 2021 via the planned Gas Interconnection Poland-Lithuania (GIPL) pipeline.

Concrete Weight Coating of Nord Stream 2 Begins in Finland

The Nord Stream 2 pipeline took another step toward operating status as Wasco began concrete weight coating of the pipes needed for the natural gas pipeline through the Baltic Sea. Nearly half of the project’s 200,000 pipes will be concrete weight coated at Wasco’s plant in Kotka, Finland, and over 35,000 of those have already been delivered to the facility.

Concrete weight coating, which doubles the weight of each 12-meter, 48-inch pipe joint to 24 tons, prevents damage and increases pipeline stability on the seabed. During construction, coated pipes will be delivered on-demand from storage yards.

BC First Nations Approve LNG Facility

Huu-ay-aht First Nations citizens voted 70% in favor of a plan to jointly develop the proposed Sarita LNG Project with Vancouver-based Steelhead LNG. The proposed project is a natural gas liquefaction and export facility located on Huu-ay-aht First Nations-owned land at Sarita Bay on Vancouver Island.

Natural gas would be sourced from northeastern British Columbia and northwestern Alberta and transported to Sarita Bay by a combination of existing and new pipelines and rights of way.  The project is still in the preliminary engineering and conceptual design stage.

High Manganese Pipeline Reduces Slurry Erosion

ExxonMobil has signed a licensing agreement with Korean-owned Pohang Iron and Steel Company Ltd. (POSCO) to commercialize jointly developed, high manganese steel slurry pipeline for use in Canadian oil sands mining applications. The new pipeline technology can reduce erosion from slurry, a mixture of liquid and solids, by up to five times better than the industry standard, which has the potential to extend pipeline life, the company said.

ExxonMobil affiliate Imperial installed a 1.2-km commercial trial section of high manganese steel slurry pipe in 2016 to demonstrate and qualify the technology. ExxonMobil and Korean-owned POSCO worked together to identify the best alloy chemistry and develop and field test welding methods to manufacture and install pipelines made from the new steel.

Growing Global Trade may Support Asian LNG Hub

Asia is the world’s largest consumer of liquefied natural gas (LNG), accounting for three-quarters of global LNG trade and a third of global natural gas trade, but the region lacks a pricing benchmark to reliably reflect supply and demand changes in Asia’s natural gas markets.

While no location in Asia yet has sufficient infrastructure or regulatory frameworks to accommodate the creation of a natural gas trading hub, Japan, China and Singapore are each exploring the possibility of establishing an LNG market hub. Given the United States’ emergence as a major LNG supplier, the U.S. Energy Information Agency (EIA) commissioned a study that examines efforts to establish regional LNG trading hubs and price benchmarks in Asia and the challenges they face.

EIA’s study concluded that it will take time to develop functional natural gas market hubs in Asia due to considerable regulatory and infrastructure challenges, including limited pipeline connectivity within and between countries. Market liberalization also will be necessary, including equal third-party access to infrastructure and transparent pricing. The full report, Perspectives on the Development of LNG Market Hubs in the Asia Pacific Region, is available at eia.gov.

Qatar Plans to Increase Gas Production Capacity by 2 Bcf/d

Qatar Petroleum plans to develop a new gas project in the southern sector of the North Field and said it will begin work on the project’s details over the next few months. The development ends the company’s 12-year ban on new projects to assess the impact of its current extraction rate on the reservoir it shares with Iran.

Qatar Petroleum’s President & CEO Saad Sherida Al-Kaabi said technical studies and assessment of the North Field confirmed the potential for developing a new gas project that can be targeted for export with a capacity of about 2 Bcf/d. “It is worth noting that a project of this size will increase the current production of the North Field by about 10%, which will add about 400,000 bpd of oil equivalent to the State of Qatar’s production,” Al-Kaabi said.

INEOS to Acquire North Pipeline, Terminal Assets

INEOS agreed to acquire the Forties Pipeline System (FPS) and associated pipelines and facilities from BP for up to $250 million. The transaction gives INEOS responsibility for a strategic asset that delivers almost 40% of the U.K.’s North Sea oil and gas.

On completion of the deal the ownership and operation of FPS, the Kinneil terminal and gas processing plant, the Dalmeny terminal, sites at Aberdeen, the Forties Unity Platform and associated infrastructure will transfer to INEOS.  The 235-mile Forties pipeline system links 85 North Sea oil and gas assets to the U.K. mainland and the INEOS site in Grangemouth in Scotland.

Russia to Begin Operations on 29 Projects by 2025

Russia has the highest number of key planned oil and gas projects in the Former Soviet Union (FSU), with 29 expected to start operations in the country by 2025, according to research and consulting firm GlobalData.

“Even with the recent production cuts, Russia remains the leader in the region with healthy pipeline of planned assets,” said Anna Belova, GlobalData’s senior oil and gas analyst for the FSU region.

Russian key planned projects are expected to add 800,000 bpd to global crude production in 2025, and 11.9 Bcf/d to global gas production. Russia is expected to spend about $41 billion on key planned projects, of which $10.4 billion will be spent alone on the Sakhalin 3 project. Gazprom, which leads operators with six planned projects in the period, is expected to spend $31.8 billion.

Putin Says Russia Will Become Top LNG Producer

President Vladimir Putin said Russia will become the world’s biggest LNG producer, but he did not specify a time frame for reaching this goal. Russia has just one operating LNG export facility, Sakhalin, but Novatek plans to begin LNG shipments by December from the new Yamal facility to compete with Asian LNG imports from Qatar and Australia.

Despite the ambitious plans to expand its LNG markets, Russia will have to contend with the market realities of capped LNG prices, as a wave of new LNG supply is expected to keep prices subdued at least until 2020, according to Moody’s.