Industry News

DARWIN will have a new condensate processing plant at a cost of $1.2 billion in a joint venture between McDermott and Darwin Clean Fuels.

This will be first new refinery built in Australia in 45 years, reversing a trend that has seen multiple refineries shuttered or mothballed over the past decade-plus as Australia opted to send crude to and import petroleum from Asia's burgeoning supply of new, low cost mega-refineries.

It will also be the first in Australasia that will be entirely devoted to condensate, which Australia currently sends to the UAE in large quantities according to a recent Resources and Energy Quarterly.

The new processing plant will supply high quality petrol, diesel, LPG and jet fuel to the domestic market, with a capacity of 60,000 barrels per day of condensate and 10,000bopd of LPG and will be the Top End's first refinery.

The project is being delivered through a joint venture between McDermott and private company Darwin Clean Fuels.

Engineering giant McDermott signed the memorandum of understanding with DCF yesterday. Under the agreement McDermott will conduct a feasibility study, technology, front-engineering design and engineering procurement and construction for the condensate processing plant.

"The refinery would leverage our proprietary technologies, including alkylation and sulphur recovery, and is evidence of McDermott's technology-led EPC capabilities," McDermott Asia Pacific senior vice president Ian Prescott said.

"Our engineering feasibility studies often serve as the essential underpinning of client decisions about moving forward with major investments."

Source: Energy News Bulletin

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SENATE Estimates in Canberra heated up last week, with both Senator Pauline Hanson and Senator Rex Patrick putting the spotlight on the national offshore regulator’s conduct when ordering the shutdown of the Northern Endeavour FPSO in the Timor Sea offshore Western Australia earlier this year.

The National Offshore Petroleum Safety and Environmental Management Authority issued Northern Oil & Gas Australia (NOGA) a prohibition order in July over safety concerns.

The company owns the Northern Endeavour FPSO and two production licenses, WA-18-L and AC/L5, in the Timor Sea.

The contracted operator is Upstream Production Solutions.

The notice was issued shortly after an object fell from the vessel and corrosion was identified aboard. According to a NOPSEMA release the FPSO was in a condition that a "release of hydrocarbons" could catch fire, risking multiple lives.

However the two senators in Estimates believe NOPSEMA acted too soon and never physically inspected the vessel.

"NOPSEMA did not go and inspect the Northern Endeavour but relied on a desktop calculation that showed, if the four-kilo object had fallen from a height of four metres onto an unprotected head, then there would have been a fatality," Hanson said.

"You could have actually given an improvement notice rather than a prohibition, which shut down the company."

The statement was taken as a ‘question on notice.'

Months after the notice NOGA and its associated subsidiary companies TOGA Services and Timor Sea Oil & Gas Australia, entered into voluntary administration.

In Estimates last week, Senators Hanson from One Nation and Patrick from the Centre Alliance, expressed concerns that NOGA was the only Australian company in the region, aside Chinese-owned firms and Indonesian companies.

"We have got an Australian company that has now gone into voluntary administration, which is never a good thing. It is one of the few companies we have working on the southern plateau," Patrick said.

"If it were to shut down, all that would remain are the Chinese and the Indonesians because we don't have much in the way of presence there, having been there and having had a very good look around. There is a national interest perspective to this."

Hanson also accused NOPSEMA of "raiding" Lloyd's Register International's offices in Perth without due cause.

"In mid-May of this year, NOPSEMA raided the Perth offices of Lloyd's Register International. We understand NOPSEMA was only really interested in the records relating to Northern Endeavour," Hanson told the committee.

However NOPSEMA Safety and Integrity head of division Derrick O'Keeffe disputed this, saying Hanson's allegations were not correct and the regulator has not "raided anyone's office."

Source: Energy News Bulletin

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ARMOUR Energy is celebrating encouraging results after encountering thick Tinowon sand packages and its Myall Creek North-1 development well in Queensland.

The company said yesterday it has carried out open hole wireline logging and modular formation dynamic testing, with the Tinowon sand packages encountered including gassy sands with potentially sufficient pressure and permeability for conventional production.  

Armour said it's encouraged by logging and testing, and the 4½" production casing has been run and cemented earlier this week.  

Further analysis of the logging and MDT data will enable the well completion design to be finalised and installed, followed by a flow test of the primary conventional sandstones before finally installing the wellhead skid and the tie-in pipeline.  

The company said the logging results provides a line of sight to possible future drilling targets based on geophysical mapping and sandstone property prediction conducted by Armour.  

The SCD Rig 20 will move to the Horseshoe 4 well pad to drill the next well in the program after its work on MCN1 is completed, with the well being planned to be spud next week.  

Armour said the MCN1 and Horseshoe-4 wells continue Armour's Phase 3 growth strategy which includes the drilling of new wells and investigations into workovers, stimulation of existing wells and new 3D seismic surveys. 

The company believes this together with further work on the Kincora Gas Plant will help reach its 20TJ/day gas production target.  

Earlier this week, Armour announced Santos would farm into its vast North Queensland and Northern Territory acreage. 

The two will jointly explore and develop the junior's extensive acreage across the South Nicholson Basin in Queensland and the Northern Territory. 

Source: Energy News Bulletin

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ARMOUR Energy’s share price, which has been falling steadily through the year, recovered yesterday after it announced Santos would farm into its vast North Queensland and Northern Territory acreage. 

Armour was up 50% by the close of the market.  

The big news of the week has been Santos' buy of ConocoPhillips' Northern Australia assets for close to US$1.4 billion or over A$2 billion but it is also improving its North Queensland and Northern Territory onshore footprint with a move into a huge swathe of Armour's dormant frontier acreage.  

The two will jointly explore and develop the junior's extensive acreage across the South Nicholson Basin in Queensland and the Northern Territory.  

Armour holds 408 million acres there alone which includes the Egilabria 2DW1 well, the first successfully fracced horizontal shale well in Australia.  

Armour is now clearly looking beyond its Kincora gas project, with a presentation made to the Northern Territory Energy Club yesterday outlining its plans for the area. Armour's presentation said it is also working towards conventional gas targets.  

Armour was granted the huge swathe of frontier acreage in 2011, which totals over 130,000sq.km.  

It says it was the first company to lead the shale charge in Australia and had an 80% success rate.  It has spent over $30 million in the NT. 

Source: Energy News Bulletin

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Santos media Centre

Key Highlights

• Acquisition of ConocoPhillips’ northern Australia business with operating interests in Darwin LNG, Bayu-Undan, Barossa and Poseidon for US$1.39 billion plus a $75 million contingent payment subject to FID on Barossa
• Value accretive acquisition of operating interests in long-life, low cost natural gas assets and strategic LNG infrastructure consistent with Santos' core asset growth strategy
• Fully funded from existing cash resources and new committed debt
• Materially accretive: ~16% expected earnings per share accretion and ~19% EBITDAX accretion in 2020¹
• Increases pro-forma production by ~25%, pro-forma 2P reserves by ~5% and pro-forma 2C contingent resources by ~27%²
• Reduces forecast 2020 free cash flow breakeven oil price by ~US$4 per barrel
• Targeting pre-tax synergies of US$50-75 million per annum (excluding integration and other one-off costs) driven by Santos operatorship and efficiencies
• Acquisition delivers operatorship and control of strategic LNG infrastructure with growth potential
• Acquisition advances and supports Santos’ goal of taking Barossa FID by early 2020. Santos is prepared to sell down equity in Barossa and Darwin LNG to a target ownership of 40-50% to achieve increased partner alignment
• Barossa partner SK E&S is highly supportive and has signed a Letter of Intent to acquire a 25% interest in Bayu-Undan and Darwin LNG
• Santos is also in discussions with existing Darwin LNG joint-venture partners for equity in Barossa and in advanced discussions with LNG buyers for Barossa offtake volumes, including with an existing partner in Darwin LNG

Santos Managing Director and Chief Executive Officer Kevin Gallagher said Santos has enjoyed a long-established relationship with ConocoPhillips which has operated its northern Australia natural gas assets for many years.

“Santos was a founding partner with ConocoPhillips in Darwin LNG, which has been operating since 2006. The acquisition of these assets fully aligns with Santos’ growth strategy to build on existing infrastructure positions while advancing our aim to be a leading regional LNG supplier,” Mr Gallagher said.

“This acquisition delivers operatorship and control of strategic LNG infrastructure at Darwin, with approvals in place supporting expansion to 10 mtpa, and the low cost, long life Barossa gas project.

“These assets are well known to Santos. It also continues to strengthen our offshore operating and development expertise and capabilities to drive growth in offshore northern and Western Australia.”

“Santos is also committed to be Australia’s leading domestic gas supplier and we will be pursuing domestic gas opportunities in the Northern Territory from our broader northern Australia gas portfolio where we have significant resource potential both onshore and offshore.”

“Santos intends to manage gearing within our stated operating range and is targeting to sell-down equity in Darwin LNG and Barossa to 40-50% in order to create alignment between joint venture participants as well as by optimising equity levels in our Western Australia assets.”

“We are also in discussions with existing Darwin LNG joint-venture partners to sell equity in Barossa and further equity in Darwin LNG and also with LNG buyers for offtake volumes. Santos will target the contracting of ~60-80% of LNG volumes for 10+ years prior to taking FID on Barossa, which is expected by early 2020. Discussions to date have demonstrated strong interest in Barossa LNG, given it is a brownfield upstream development located close to North Asian demand.”

“The acquisition is value accretive for Santos shareholders in year one following completion across a range of metrics and importantly further reduces our free cash flow breakeven oil price by approximately US$4 per barrel in 2020.”

“As we have demonstrated following the acquisition and integration of Quadrant Energy into our offshore business, Santos’ low-cost operating model is creating opportunities for disciplined growth across Australia.”

“We look forward to welcoming ConocoPhillips’ Australia-West employees to Santos and combining the two businesses to create one high performing team with a wide range of exciting career opportunities across Santos,” Mr Gallagher said.

¹   Expected pro-forma accretion in 2020 assuming US$65 per barrel oil price and full-year of ownership. Assumes Santos interest of 68.4% in Bayu-Undan/Darwin LNG and 62.5% in Barossa (i.e. pre sell-down to SK E&S).

²   2018 pro-forma based on Santos’ 2018 production and reserves and resources. Production adjusted for a full-year of Quadrant ownership. Assumes Santos interest of 68.4% in Bayu-Undan / Darwin LNG and 62.5% in Barossa (i.e. pre sell-down to SK E&S).

ConocoPhillips Northern Australia Portfolio Overview

ConocoPhillips holds a high-quality portfolio of operated production, development and exploration assets in northern Australia. It also operates and is the majority owner of the Darwin LNG facility, which has a capacity of 3.7 million tonnes per annum of LNG and significant expansion potential.

KEVIN Gallagher’s Santos will acquire a swathe of assets from ConocoPhillips in Northern Australia under a US$1.4 billion (A$2.05 billion) deal that will see the major gas producer take ConocoPhillips’ interest in the Darwin LNG project and associated fields.

Under the deal Santos will pick up a 37.5% stake in the Barossa project and Caldita field, a 56.9% interest in the Darwin LNG facility and the declining Bayu-Undan field which feeds it, a 40% stake in the Poseidon field and a 50% stake in the Athena field, for a total of US$1.39 billion plus a further $75 million upon a final investment decision of the Barossa development project.

Santos believes the acquisition of the assets would be "materially accretive" and would lift earnings per share by around 19% in 2020.

The company also said the deal would reduce its future breakeven oil price by roughly US$4 per barrel of oil equivalent.

 "This acquisition delivers operatorship and control of strategic LNG infrastructure at Darwin, with approvals in place supporting expansion to 10 million tonnes per annum, and the low cost, long life Barossa gas project," Gallagher said.

"These assets are well known to Santos. It also continues to strengthen our offshore operating and development expertise and capabilities to drive growth in offshore northern and Western Australia."

Source: Energy News Bulletin

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Conoco Phillips Australia Media Centre

HOUSTON – ConocoPhillips (NYSE: COP) today announced it has entered into an agreement to sell the subsidiaries that hold its Australia-West assets and operations to Santos for $1.39 billion, plus customary closing adjustments. In addition, the company will also receive a payment of $75 million upon final investment decision of the Barossa development project.

The subsidiaries hold the company’s 37.5 percent interest in the Barossa project and Caldita Field, its 56.9 percent interest in the Darwin LNG facility and Bayu-Undan Field, its 40 percent interest in the Poseidon Field, and its 50 percent interest in the Athena Field. ConocoPhillips will retain its 37.5 percent interest in the Australia Pacific LNG project and operatorship of that project’s LNG facility. Proceeds from this transaction will be used for general corporate purposes.   

“We are extremely proud of our work in Australia-West over the last 20 years. We are pleased that Santos recognizes the value of the existing business as well as the opportunity to develop Barossa and thereby continue Darwin LNG’s operations for another 20-plus years,” said Matt Fox, executive vice president and chief operating officer. “While we believe the Darwin LNG backfill project remains among the lower cost of supply options for new global LNG supply, this transaction allows us to allocate capital to other projects that we believe will generate the highest long-term value to ConocoPhillips.”   Production associated with the assets being sold was approximately 50 thousand barrels of oil equivalent per day (MBOED) for the first half of 2019 and proved reserves were approximately 39 million barrels of oil equivalent (BOE) at year-end 2018.   

The effective date for the transaction will be Jan. 1, 2019. The transaction is subject to regulatory approval and other specific conditions precedent. The sale is expected to be completed in the first quarter of 2020.   The company has posted an investor table that summarizes the impact of this transaction. The table can be accessed at www.conocophillips.com/investor/    

Minister Paul Kirby

Origin Energy has successfully and safely spudded, an industry term for commencing drilling, the Kyalla 117 well as part of its Beetaloo Exploration Program.

Kyalla 117 is the first of two new appraisal wells to be drilled and fracture stimulated to help determine the potential of the resource in the Beetaloo Basin.

The operations in the Beetaloo are supported by a number of Territory businesses with more than 50 Territorians employed during this early exploration stage. This will increase as the project progresses and, if successful, moves into production. 

Origin has regulatory approval for its Environmental Management Plans related to the well and is required to comply with strict regulatory standards as per the recommendations of the Independent Scientific Inquiry into Hydraulic Fracturing.

Origin’s exploration permits are located around 600km south-east of Darwin, between Daly Waters and Elliott.

The Beetaloo Exploration Project is a joint venture between Origin as Operator (70%) and Falcon Oil and Gas (30%).

Quotes from Minister for Primary Industry and Resources, Paul Kirby:

“The Territory Labor Government’s focus on creating local jobs and supporting local businesses is being delivered from day one of Origin’s new drilling in the Beetaloo.

“Origin successfully drilling in the Beetaloo is another significant milestone reached off the back of completion of all pre-exploration recommendations from the Pepper Inquiry in July, as part of their exploration program.

“Our regulatory framework allows for investment in this emerging industry while protecting our environment.”

Quotes from Origin General Manager for the Beetaloo and Growth Assets, Tracey Boyes:

“This is an important milestone in realising the opportunity the project could deliver for the Northern Territory.

“A number of Territory businesses have partnered and have been working hard with us to reach this point.

“Tens of millions of dollars have been awarded in local contracts and more than 50 Territorians are working with us on this well.

“And we wouldn’t be where we are today without the support of Native Title holders and the host pastoralist on whose land we are currently exploring.’’

Quotes from APPEA Director – Northern Territory and Exploration, Keld Knudsen:

“The NT’s abundant natural gas resources can play a vital role in revitalising the Territory’s economy.

“The industry remains committed to working with the Territory Government and local businesses to maximise opportunities for employment while making a meaningful low-carbon contribution to future energy needs.”

Media contact: Hannah West 0436 641 108

WOODSIDE Petroleum chief Peter Coleman attended the annual Australia-Japan Joint Business Conference this week, outlining the importance of continued LNG exports to Japan from Australia for both nations and the transition to a hydrogen economy.

Coleman stressed the significance of Japanese investment in making large-scale projects including the Pluto LNG plant expansion and future phases in the North West Shelf feasible.

Around 85% of Woodside's contracted LNG is currently sold to Japan.

Coleman told the conference that while the global energy market was continuing to evolve, key challenges faced by industry would be solved through our strong partnership with Japan.

"Our world faces a dual challenge - of providing extra energy, with fewer emissions," Coleman said.

In recent months the private and public sectors in Japan have committed to investing $10 billion into LNG infrastructure globally. This, according to Coleman underscored a "sign of confidence" in the future LNG market.

Longer term that LNG market provides the synergies needed to propel Japan's planned hydrogen economy.

"Just like the genesis of the LNG industry, this (developing hydrogen) is going to require enduring partnerships between buyers and sellers of energy."

Coleman believes that the hydrogen transition will be across two stages; first, ‘blue' hydrogen made from natural gas "with the emissions managed at that point," he said, but did not elaborate.

Source: Energy News Bulletin

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CONOCOPHILLIPS vice president of operations David Boyle said the company is planning ahead for decommissioning of its huge Bayu Undan gas and light oil field, which has been fully in Timor-Leste’s jurisdiction since August 30 when the maritime boundary between the nation and Australia was signed into place in Dili. 

Speaking at last week's Timor-Leste Oil and Gas Summit he explained the aquifer-driven reservoirs were already seeing water rates decline across the wells.  

Bayu Undan provides the lion's share of income to the small nation, but despite the drop in earnings Boyle is hopeful the decommissioning work will provide jobs and local content opportunities.  

"Working early and jointly (with the government) is critical for maximising opportunities for local content," he said.  

"We are in the final phase of Bayu Undan we have complex models to predict when production will end."  

He said the gas and water rates being recorded confirmed ConocoPhillips' predictions.  

"The most critical piece of data is the volume of water that will be produced from each well… we've seen a decrease in water production these past few years and therefore know it's time to start planning for the next phase. 

Source: Energy News Bulletin

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