Looking ahead

West Coast drilling could start back up this year. There are 40 offshore leases along California’s coast belonging to eager oil companies waiting for the green light to resume drilling. In 1990, the federal government suspended development on the sites after local communities demanded a study on how offshore drilling was impacting their lands and economies. These are the only sites along the U.S. West Coast where new offshore development can take place for at least 12 years. At last year’s National Oceans Conference, President Clinton extended a moratorium on new offshore leasing until 2012. However, the ban covers only new licenses. The 40 leases at issue were sold between 1968 and 1984. At press time, the study was not completed, but the suspension was to expire on June 30.

Future U.S. oil supply may depend on small producers. U.S. Energy Secretary Bill Richardson told the IPAA that future U.S. oil production could rely more on small and independent producers, as American majors continually seek new crude reserves in foreign countries. Small operators account for about 20% of U.S. oil supplies and produce about 1.3 million bpd. Richardson said he is working with Congress and the Agriculture Department to develop ways to extend rural development loans to small operators, "who need a short-term infusion of cash."

EIA expects a record U.S. gas demand. A new Energy Information Administration report, "Natural gas 1998: Issues and trends," stated that U.S. natural gas demand this year will exceed the 1972 record level of 22 Tcf. The growth is being attributed to increased natural gas consumption for electricity generation, which is projected to climb to more than 9 Tcf by 2020. By that time, electricity generation is expected to account for about 28% of natural gas consumption, compared to 15% in 1997. If the Kyoto treaty is implemented, that number could range from 12 to 15 Tcf by 2020.

Workover activity increases. The Baker Hughes April 1999 workover rig count showed that U.S. activity was up 14% from the month of March, an indicator that industry fundamentals are improving. In line with the findings, Pool Energy Services, Key Energy Group and Pride International all reported activity increases. A Simmons & Co. International report points out several other key aspects that suggest the industry is on an upswing, including higher oil and natural gas prices and increased activity in Canada, the Permian basin and California.

Drilling resumes on California gas well. The Canadian consortium, led by Berkley Petroleum, that was developing a natural gas well that blew out last November is going back into the area to conduct additional drilling. Located near Los Angeles, the Bellevue 1-17 well was sealed off last month with heavy drilling mud and cement. During the six-month period before the well was capped, it was producing at an average of 10 MMcfgd. Mike Rose, president of Calgary-based Berkley Petroleum, believes there is a sizable reservoir past the original drilling depth, which penetrated 16 ft into the pay zone. Some experts estimate the reserve could hold up to 2 Tcfg, which would make it one of the largest onshore discoveries in North America in 30 years.

Companies awarded licenses to drill off Angola. BP Amoco, Esso and Elf have signed contracts that will give them major shares in the production of three new oil fields in northwest Angola’s deep water. The blocks identified as 31, 32 and 33 range from about 5,000 to 8,000 ft in water depth, and cover more than 1.2 million acres in the lower Congo basin. Angolan oil company Sonangol will take a 20% interest in the fields. The contracts commit the companies to donate $200,000 to hospitals in Angola.

Oil companies bid for Brazilian acreage. By the end of June, 37 international oil firms will have bid on 27 oil and gas exploration and production licenses in a landmark auction in Brazil. After a 45-year monopoly, the sale will mark the first time foreign companies will have direct access to Brazil’s oil reserves. Available blocks are located primarily offshore, in eight different sedimentary basins. Signing fees will range from $50,000 to $150,000.

Saudi Arabia and Mexico pledge to improve oil prices further. Mexico’s Energy Minister Luis Tellez and his Saudi Arabian counterpart Ali Naimi recently met to discuss the world oil market and ways they could increase cooperation. Mexico joined other non-OPEC producers in a March agreement to cut oil production by more than 2 million bpd. In a joint statement, the officials said that the countries are willing to adopt extra measures to help increase prices.

South Korea to drill gas discovery. Two test drillings performed by state-run Korea Oil Co. on a natural gas deposit off the country’s southeast coast proved that commercial extraction of the gas is economically viable. The deposit is 37 mi from Ulsan, and is expected to yield between 170 and 200 Bcfg, said to be worth $800 million — four to five months of the nation’s gas needs. Production facilities will be installed before 2002. South Korea began searching for oil and gas in 1969, and none of more than half a dozen locations have been found to be economically feasible.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company