Forties Pipeline System reopens in time for the New Year

On 11^th December, INEOS the owner of the Forties Pipeline System, had discovered a hairline crack in the pipeline at Red Moss near Netherley. The crack continued to grow upon monitoring and the entire system was subsequently shutdown. INEOS announced this morning that the repairs are "mechanically" complete with the system being restarted - export rates should resume to previous levels around the new year.

The system carries c.450mbbl/d of production from the North Sea to the Kinneil processing facility in Scotland. The 235 mile pipeline links more than 80 North Sea fields and delivers almost 40% of UK North Sea production. Upon its outage, Brent crude jumped to USD65/bbl signalling the importance of North Sea production to the global oil markets.

Read More

Amerisur putting plans in motion

Amerisur is a story of slow and steady wins the race. The company had targeted 10mbbl/d to be reached a few years ago - with current production only at c.7mbbl/d, this target has clearly fallen by the wayside. Amerisur has learnt, and is continuing to learn, that doing business in Colombia (and Ecuador) is not straightforward and getting necessary government approvals can take months and sometimes years rather than weeks - the OBA pipeline being a case in point. Layer on top of this the local community liaisons and security issues in the Putumayo Basin, one begins to understand the impediments to Amerisur's progress over the past years.

Nevertheless the Amerisur team has managed its portfolio and navigated the winding road of being a Colombian E&P carefully and is now one of a small handful of successful producers in the Putumayo Basin. As well as building up its asset base beyond what was effectively a single asset company in Platanillo, Amerisur has made good progress on the exploration and appraisal front which will set the company up for the longer term.

Amerisur is a company we continue to watch with interest and with enough patience, is a rare success story that will materialise over time.

Drilling Update

North Platanillo
At the start of 2017, Amerisur had success at Plat-22 encountering 43ft of U-sands and flowing at 800bbl/d, extending the Platanillo field north. This was followed by Plat-21 which derisked the extension further testing 430b/d.  Plat-25 came in below expectations, but was sidetracked to target better reservoir quality and additional pay thickness, and was brought on production at 180 bbl/d. In December, Plat 27 encountered net pay of 12ft in the U and 9ft in the T sands. This success could add up to 10mmbbl of reserves.

In 2018, drilling activity on Platanillo switches to the N sand stratigraphic play with the upcoming planned three-well programme targeting the 18.8mmbbl N Sand Anomaly (expected to start in Q1 2018).

Mariposa (CPO-5, Amerisur 30%, ONGC 70%)
Mariposa-1 was successfully drilled in May 2017 which flowed at 4.6mbbl/d 41API light oil. The well was drilled to a total depth of 11,556ft with an indicated 120ft net pay in the L3 Sands. The well is now producing around 3,200b/d (gross) on Long Term Test on a restricted choke.

Further drilling is planned on the block in 2018 (including Indico-1 and Sol) which could add material reserves to the portfolio.

Read More

Premier's Christmas present

Premier Oil announced today that the Catcher field achieved first oil on 23^rd December, on schedule and almost 30% below budget. Initial production will be c.10mbopd as gas processing and water injection modules are commissioned. Production will be ramped up in phases through H1 2018 as the Varadero and Burgman fields are brought onstream increasing production to 60,000mboepd (gross).

The Catcher partners are Premier Oil (50% operator), Cairn Energy (20%), MOL (20%) and Dyas (10%). For Premier Oil, Catcher will account for c.25% of 2018 production with successful ramp up of the field important to deleveraging the balance sheet next year. For Cairn, this will diversify the production base following first oil at Kraken (29.5% interest) earlier this year.

Read More

Kosmos: An unfinished West African story

Kosmos has had a busy 2017 chasing a high risk high reward oil play and working up its Senegal/Mauritania gas resources.

In the second half of the year Hippocampe and Lamantin both came in dry ending the company's campaign for higher value oil. It can now focus on developing the c.40tcf of gas found at Tortue, Teranga, Yakaar and BirAllah. It has hopefully found the right partner in BP who farmed-in in late 2016. Although not generally seen as a big gas player, BP is increasingly focussed on gas as it turns to the future - the major is shifting to investing in large scale gas projects and look to increase global production to c.60% gas from the current c.50%.

When we met with Kosmos earlier this year, they noted that they had their choice of Supermajor when seeking a partner with attractive offers from the usual suspects. Kosmos see BP as the partner who is fully aligned with them, with BP going as far as setting up Senegal/Mauritania a separate profit centre to demonstrate their seriousness.

The West African gas play continues to be derisked with the 60tcf Requin Tigre prospect being drilled and results expected in early 2018 which would increase gas resources in the basin to c.100tcf if successful. This could add a significant leg to a multi-phase LNG project. However, a dry well would dampen the high mood in the basin with the growth outlook more constrained.

FID around Tortue is planned in 2018, although success at Requin Tigre could change the development order with Tortue (which straddles the Senegal/Mauritania border) delayed. It should also be noted that gas would come onstream at a time of a gas glut with LNG in North America, East Africa and Australia coming onstream.

Read More

AWE: an unexpected union

The AWE Board has unanimously recommended a revised bid by Mineral Resources (“MinRes”). The offer terms are A$0.415 in cash and between 0.0198 and 0.0277 MinRes shares per AWE share. The exchange ratio will depend on the VWAP for the 10 days prior to the scheme vote. The previous offer was a full scrip offer at A$0.81.

This values the offer at an implied price of c.A$0.83 per AWE share and will be implemented by a Scheme of Arrangement, which will require 75% shareholder approval with the shareholder meeting to be held in mid-April 2018. Shareholders will have the option to receive 100% cash or 100% scrip subject to scale back to ensure total transaction consideration is 50% cash and 50% scrip.

After four years of “tug-of-war” between AWE and various bidders (Senex in 2013, Lone Star in 2016, CERCG in 2017 and various others which have not been made public), it looks like the AWE Board have finally selected a suitor. Although AWE could have gone down the “do it alone” route, the uncertainty on timing of new production from Waitsia and/or Ande Ande Lumut cast a shadow over the company’s story and its future with a declining production profile.

MinRes immediately answers the question of future gas offtake: Min Res has a requirement for c.30TJ/d of gas based on current plans to convert all of its internal power generation to gas fired plant and to use as the primary fuel source for its Lithium/Graphite related downstream processing plants. This gas requirement is expected to grow with the likely conversion of 26 mine sites (growing to 40) to gas as well as potential for more downstream projects. The rationale for MinRes acquiring AWE is so that it can lock in its gas costs for the next 20–30 years. Min Res also plans to provide gas to its mining clients under long-term gas supply contracts.

AWE shareholders will buy into a new story of a miner/mining service provider with its own growth story. The variable cash and scrip components will likely promote higher acceptances and will provide a way for AWE shareholders to fully realize their investment if they choose not to go into MinRes.

MinRes offer is c.14% above the previous all cash A$0.73 bid from CERCG – MinRes would have the right of response to match any competing offer if CERCG or another party came back with a superior proposal. The deal is subject to a break fee of A$5.2 million.

Read More

Zohr record breaker

In record time for a deepwater gas development of this scale, Eni has announced first production from Zohr. The field was discovered in August 2015 and FID taken in early 2016 - Eni achieved first gas from discovery in 2.5 years.

Zohr is the largest gas discovery ever made offshore Egypt and is located in the Shorouk block. The field has begun production at 350mmcfpd and is expected to grow to 1bcfpd by mid-2018. The speed of development is a testament to Eni's "Dual Exploration Model" which was adopted in 2013. Under this model, Eni works the exploration, appraisal and development planning and phases in parallel while bringing in minority partners at the same time to help fund the costs.

Zohr has >30tcf of GIIP and forms an important piece of the jigsaw to solving Egypt's short gas problem. The new production will help feed the hungry and growing domestic gas demand which Egypt has been trying to manage by raising domestic prices on the one hand and incentivising further gas exploration/development on the other.

The Zohr partners are Eni (60%), Rosneft (30%) and BP (10%). Eni is co-Operator of the project through Petrobel, which is jointly held by Eni and EGPC.

Read More

Kurdistan producers get paid for September

DNO and Genel Energy have reported receipt of USD54 million from the KRG for September crude sales from the Tawke licence - shared by DNO (USD40.7 million) and Genel (USD13.6 million) in line with the interests in the licence.

In addition, a payment of USD10.8 million has been received by Genel and DNO, representing 7.5% of gross Tawke licence revenues during October 2017, as provided for under the receivables settlement agreement.

Separately, the Taq Taq field partners have received a payment of $9.7m from the KRG for September oil sales - Genel's net share of the payment is USD5.3 million.

This is the first set of payments that has been made following Kurdistan’s independence election and the choking back of oil exports from the Kirkuk Area, which has limited the KRG’s cash flows. Although a positive, concerns will continue around the continuity of payments.

Read More

Maersk Drilling exits Egyptian JV in line with strategy

Maersk continues to review and streamline its business portfolio. As part of that strategy, it announced today of its exit of the Egyptian rig company joint venture.

Press release
A.P. Møller - Mærsk A/S ("A.P. Moller - Maersk") and Egyptian General Petroleum Corporation ("EGPC") has today signed an agreement whereby EGPC will acquire A.P. Moller - Maersk’s 50 percent shareholding in Egyptian Drilling Company ("EDC") for USD 100m in an all-cash transaction.

Following the transaction EGPC will become sole owner of EDC and will as part of the agreement take over the entire portfolio, obligations and rights. EDC is one of the leading drilling operators in the Middle East and operates 70 rigs in total of which the vast majority are land based drilling rigs.

The divestment of EDC is in line with Maersk Drilling’s strategy to focus on offshore drilling in the harsh environment and deepwater markets.

“I am very pleased with this agreement with EGPC. The divestment is a natural consequence of our announced long-term plans to exit the EDC joint venture, when the timing was right. EDC has a very strong position in the Middle East, and I am confident that the new ownership will enable EDC to develop its business and capabilities even further,” says Jørn Madsen, CEO of Maersk Drilling.

EDC began operations in 1976 as a 50/50 joint venture between Maersk Drilling and EGPC, which is owned by the Ministry of Petroleum and Mineral Resources in Egypt. EDC employs approximately 5,000 people, whereof 34 are Maersk Drilling employees. Maersk Drilling is currently looking into future job opportunities for its employees in EDC.

Source: https://www.maerskdrilling.com/en/media-center/press-release-archive/2017/12/maersk-exits-egyptian-drilling-company-joint-venture

Read More

CNPC could take over Total's interests in Iran

CNPC is considering taking over Total's stake in a the giant South Pars development if Total needs to exit Iran to comply with any new U.S. sanctions. In October, President Trump refused to certify Iran's compliance with the nuclear deal leading to a Congressional vote on whether to reimpose sanctions on Iran.

The date of the vote has not yet been set , but if sanctions are reimposed they could prohibit companies working in Iran from also operating in the United States. For Total, the stakes are high, where they have much larger operations in the United States.

Total signed the USD1 billion deal to develop the South Pars gas field in July. However, the contract provided mechanisms to allow Total to pull out in the case of sanctions imposition, whereby CNPC has the option to take over Total's stake. CNPC could take over Total's 50.1% interest and become operator of the project if Total is forced to withdraw from Iran. CNPC has a 30% stake, while the Iranian national oil company's subsidiary PetroPars holds the remaining 19.9%. If this goes ahead, then CNPC would shoulder 80.5% of the cost of the project, estimated at $2 billion for the first stage.

Any change would also delay the project as Total is already in discussion with service companies and is expected to award contracts early next year.

The South Pars project will have a production capacity of 2bcf/d plus condensates, Total has said. It would start supplying the Iranian domestic market starting in 2021.

Read More

Aker BP submits three PDOs

Aker BP ASA (Aker BP) has submitted the Plans for Development and Operations ("PDOs") for the Valhall Flank West, Ærfugl (formerly Snadd) and Skogul (formerly Storklakken) fields to the Norwegian Ministry of Petroleum and Energy.


Valhall Flank East
This development represents an extension on the western Flank of the Valhall field. It will be developed from a new Normally Unmanned Installation and will be tied back to the Valhall field centre. The platform will be fully electrified and operated remotely from Valhall. Recoverable reserves are estimated at 60mmboe to be drained using six producers with first oil planned for Q4 2019.

Field partners are AkerBP (35.95%) and Hess Norge (64.05%). Aker is in the process of acquiring Hess Norge and has entered into an agreement to farm-down 10% to Pandion Energy.


Ærfugl (formerly Snadd)
This is a gas condensate field near the AkerBP operated Skarv FPSO. The PDO covers the full-field development and includes the resources in both the Ærfugl and Snadd Outer fields which are planned to be developed in two phases.

The first phase includes three new production wells in the southern part of the field tied into the Skarv FPSO with production planned to commence in late 2020. The second phase continues to be worked up and will target the northern part of the field - it is also planned to be tied into the Skarv FPSO with an estimated startup of 2023. The full field development targets 275mmboe.

Partners in Ærfugl are AkerBP (23.8% operator), Statoil (36.2%), DEA (28.1%) and PGNiG (11.9%).
Partners in Snadd Outer are: AkerBP (30% operator), Statoil (30%), DEA (25%) and PGNiG (15%).


Skogul (formerly Storklakken)
Skogul is located 30km north of Alvheim FPSO, and will be developed as a subsea tieback to Alvheim via Vilje. Recoverable reserves are estimated at 10mmboe. The Skogul production well is the 35th well in the Alvheim area and represents the partners' efforts in extending life and recovery in the area. Production is planned for Q1 2020.

Field partners are AkerBP (65% operator) and PGNiG (35%).

Read More

Kosmos dry well at Lamantin

Lamantin-1 on Block C-12 offshore Mauritaniawas was drilled to a TD of 5,150m and designed to evaluate a previously untested structure. The logs and samples collected suggests the reservoir objective was water bearing with small amounts of hydrocarbons. The well will now be plugged and abandoned.

Kosmos will drill the Requin Tigre prospect next and is targeting 60tcf. The well is epected to take around 60 days.

Read More

In AWE

China Energy Reserve and Chemical Group (“CERCG”) has returned with a second bid for AWE at A$0.73/share, valuing the company at A$463 million. This follows the withdrawal of the earlier offer at A$0.71/share on 4^th December.

On 30^th November, CERCG put out a takeover offer for AWE at A$0.71/share contingent on due diligence, approval by the regulatory authorities and the CERBG board. The offer was at a 30% premium to the share price was deemed insufficient by AWE to grant access for due diligence. The bid was subsequently withdrawn on 4^th December.

CERCG remains fiercely private with limited information in the public domain. It is reported to have deep pockets with material property investments in Hong Kong to the tune of billions. It is also understood that some of the directors are also on the board of China New Energy Mining Limited, which is the JV partner to Sino Gas on upstream gas developments in China.

On 8^th December, CERCG re-launched an offer at A$0.73/share – marginally better but places limited value on the vast contingent resource base of the company with potential upgrade at Waitsia. The approach from CERCG is the third bid in four years. The Lone Star bid at A$0.80/share (A$421 million) in 2016 and Senex scrip/cash bid in 2013 (at A$672 million) were both rejected.

This bid demonstrates continued Chinese interest in pursuing overseas acquisitions, and follows GeoJade’s venture into the international E&P arena with the acquisition of Bankers Petroleum in 2016. However the Chinese state oil companies remain on the sidelines having been burned by poorly timed acquisitions in the past decade, and it is the smaller private Chinese E&Ps and investors that are coming to the foreground.

Read More

Canacol: Sabanas export flowline comes online

Canacol has announced that the Sabanas gas flowline is now connected. It is in the final stage of testing and gas transportation is scheduled to commence on 5^th December. The flowline has a capacity of 40mmcf/d which is expected to be reached in mid-January following completion of a second compression station - initial gas throughout is expected to be 20mmcfd. Gas will be routed from the Jobo processing facility to the Promigas export line at Bremen with the gas to be sold to consumers at Cartagena. Upon reaching the full 40mmcf/d capacity, Canacol's total gas offtake capacity will increase to 130mmcf/d.

Canacol also added that gas sales for October and November averaged 84.1mmcf/d and oil sales (including Ecuador) of 3,025 bbl/d. In December 2018, the company expects gas production capacity to increase to 230mmcf/d following the completion of the second expansion of the Promigas pipeline from Jobo to Cartagena and Barranquilla.

Read More

Breathing new life into Tyra

The Danish Underground Consortium ("DUC") has approved an investment of DKK21 billion (USD3.4 billion) for the full redevelopment of the Tyra field.

DUC members are Total/Mærsk (31.2 %), Shell (36.8 %), Chevron (12 %) and Nordsøfonden (20 %). The development will ensure continued production from Denmark's largest field for years to come and will also rejuvenate important Danish offshore infrastructure. About 80% of the investment will be for modification of existing and construction of new facilities, with the remainder for decommissioning and removal.

The Mærsk press release noted:
"Tyra is the centre of Denmark’s national energy infrastructure, processing 90% of the nation’s gas production.

Through new development projects and third party tie-ins, the redevelopment of Tyra can be a catalyst for extending the life of the Danish North Sea – not just for Maersk Oil and the DUC, but also for Denmark."

"The new infrastructure can enable operators to pursue new gas projects in the northern part of the North Sea, where the most recent development, Tyra Southeast, delivered first gas in 2015 and is producing above expectations."

"The redeveloped Tyra is expected to deliver approximately 60.000 barrels of oil equivalent per day at peak, and it is estimated that the redevelopment can enable the production of more than 200 million barrels of oil equivalent. Approximately 2/3 of the production is expected to be gas and 1/3 to be oil."

The redevelopment has received government approval and will commence in 2019 with the field being shut-in between November 2019 and Summer 2022 for the works to take place.

Read More