Looking ahead

Gasoline prices set to reach $2 per gallon by summer due to tight supplies. Gasoline prices which jumped 12 cents per gallon in two weeks, are expected to rise still more and not drop until early fall. Even if OPEC does boost production at the beginning of April, it will be too late to stop gasoline prices from reaching close to a national average of $2 per gal, says the U.S. Energy Department. Already-tight supplies of gasoline and crude will not be replaced in time for the summer driving season. Motorists are not yet showing indications of changing travel plans or conserving gas.

Higher natural gas prices could prompt more GOM drilling. Drilling activity has yet to catch up to the rise in natural gas prices. R&B Falcon Chairman Paul Loyd told analysts, during a conference call on 4th-quarter earnings, that he believes independent E&P firms are waiting until the end of the gas withdrawal season on March 31 to see storage figures before signing any new contracts. If the numbers are low, it could prompt higher drilling activity.

Talisman JV in Sudan faces U.S. sanctions. Despite rumors that Talisman’s activities in Sudan are exacerbating the nation’s civil war, Canadian government officials have cleared the firm’s operations. Foreign Affairs Minister Lloyd Axworthy said that there were no effective sanctions open to Canada in light of the fact that Talisman has done nothing illegal, and that most of Canada’s exports to Sudan are food and pharmaceuticals." The U.S., however, did put sanctions on two project JV partners, Sudapet and GNOPC. Talisman says these sanctions will not affect the project, since they were already aware of U.S. sanctions against Sudan. Meanwhile, company officials have been scouring the Middle East looking for new core production zones, and are now considering Iran and Iraq as possibilities.

Shell to develop Nigeria’s gas reserves. Shell says it plans to invest up to $8.6 billion in Nigeria’s natural gas sector in the next five years. An integrated long-term joint venture program calls for one third of the money to be spent on operation costs and the remainder on capital projects. Shell’s Development Director, John Barry, said the project would focus on developing an indigenous market and achieving a 40% indigenous staff positioning within the next four years.

Texaco to boost E&P spending for 2000. Texaco released its revised capital expenditure plan of $3.7 billion, up 20% over its estimated 1999 capex budget, but down $600 million from its original $4.3 billion plan. Plans call for increased spending on the commercial development of high-return, high-margin, upstream projects in the Philippines, Kazakhstan, West Africa and the North Sea.

Colombia’s oil tender attracts 44 companies. Colombia says 44 companies are interested in the oil tender slated for June, and 36 companies have already bought information packets. Interested firms include Texaco, Occidental, Chevron, Repsol YPF and Japan’s state oil company JNOC. Only seven companies were interested in the original tender, which called for firms to assume control of an incremental field where Ecopetrol had already begun exploring or producing oil. The new tender allows companies to choose the type of field on which they want to bid. Up to 17 firms are bidding for each field.

No licensing round in Falkland Islands, just open door policy. "There will be no licensing round," said Director of Mineral Resources Phyllis Rendell. "We have an open door bidding policy," she added. Bids are received by mail at any time. Meanwhile, Rendell confirmed another bidding round is called for by the "Kelpers." The round is slated for this month.

Rig contracted to drill in Guyana. CGX Energy contracted R&B Falcon’s C.E. Thornton jackup to drill its Eagle wildcat, offshore Guyana, in 270 ft of water. Spud date is May 2000. In less than two years since obtaining the concession, the firm has completed a seismic survey, arranged financing and rig commitments and are prepared to drill four targets. The firm is also considering a second wildcat on the Wishbone West target. Both are potentially giant fields, with Eagle being the largest with 29,000 acres above an apparent hydrocarbon / water contact, in a 1,700-ft vertical column. Target depth is 12,000 ft.

Oil spikes expected if Kyoto agreement succeeds. Prices seen now are nothing compared to what they will be if the Kyoto treaty is ratified by the U.S. Senate. Global Climate Coalition (GCC) Executive Director Glenn Kelly said, "If the U.S. Senate were to ratify the Kyoto Protocol on climate change, the sticker shock for gasoline and other oil products that American families are struggling with today will seem like small change by comparison." Estimates from forecasting firms and DOE predict such strict emissions limits will nearly double electricity costs, increase gasoline prices by more than 70 cents / gallon, and throw nearly 2.5 million Americans out of work. The average American family would pay more than $2,700 per year in higher costs for food, fuel and other basic necessities.