Oil country hot line

January 2000 Vol. 221 No. 1 Hot Line U.S. reserves plunge U.S. proved crude reserves fell 7% in 1998, the largest percentage decline in 53 years, according to the U.S. Energy Information Age

January 2000 Vol. 221 No. 1
Hot Line

U.S. reserves plunge

U.S. proved crude reserves fell 7% in 1998, the largest percentage decline in 53 years, according to the U.S. Energy Information Agency (EIA). Crude prices were assigned the blame, which, when inflation-adjusted, were the lowest since 1935. A drop of nearly 60% in rigs drilling for oil during 1998, followed by a decline in the number of new and producing oil wells, caused the reserves drop. EIA says, only twice in over 100 years have fewer oil wells been drilled than in 1998. Just 24% of 1998 crude production was replaced by proved reserve additions. U.S. dry gas reserves declined 2% in 1998. The decline broke a 4-year string of annual increases. Only 83% of gas production was replaced in 1998.

Exxon / Mobil merger gets FTC OK

Exxon and Mobil received approval from the U.S. Federal Trade Commission (FTC) for the merger of the two companies. The new company, Exxon Mobil Corp. (NYSE: XOM) had earlier gained the European Commission’s approval. ExxonMobil agreed to satisfy FTC conditions involving numerous divestitures to complete the merger, including: selling fee and leased service stations from New York to Maine (Exxon) and from New Jersey through Virginia (Mobil), and assigning its contracts with all dealers and distributors in those areas to a new supplier. A host of other interests, including terminals, fuel distributors, refineries, pipelines and jet turbine lubricating oil must also be sold.

Gore, Bush vow to continue offshore ban

Presidential candidates Al Gore and George W. Bush remain opposed to drilling offshore Florida and California and vow to continue the current offshore moratorium if elected. Florida and California governors Jeb Bush and Gray Davis also oppose any drilling. As reported in last month’s International, the decision to proceed with Chevron’s existing Destin Dome Florida leases currently resides with U.S. Secretary of Commerce William Daley, who is expected to rule in early 2000. Florida says E&P is inconsistent with the state’s Coastal Management Plan, and doesn’t want any drilling within 100 mi of its coast. At a recent NOIA meeting, Florida Petroleum Councilman Dave Mica commented, "What remains to be seen is Florida’s attitude to Sale 181 and offshore tracts – all of which are located beyond 100 mi from the state."

Texaco pulls out of Fuji and McKinley

Texaco discontinued appraisal drilling of the Fuji and adjacent McKinley prospects, located 150 mi SW of New Orleans in the Gulf of Mexico. Although the rank wildcat well in Green Canyon Block 506, drilled in 1995, encountered 180 ft of oil pay, three subsequent wells indicated that the reservoir was of limited areal extent. The nearby McKinley prospect in Block 416 was first drilled in 1998. That wildcat found 100 ft of oil pay, but a November 1999 appraisal well was dry. Texaco continues to hold more than 400 deepwater GOM leases.

Nigerian oil budget

Nigerian President Olusegun Obasanjo unveiled his first budget since taking office six months ago. Noting that government taxes on profits were negligible last year, he called for a review of incentives for oil and gas investment. Obasanjo also said that the government would review its policy on import duty waivers and relatively high port charges and levies. The budget was based on average exports of 1.84 million bopd at $18/bbl. Texaco, Elf, Shell, Chevron, Agip and Mobil together control 98% of Nigeria’s reserves and operating assets.

Recent Africa discoveries

Elf added to a growing list of Angola deepwater discoveries on with its Block 17, Cravo-1 well. The well, drilled in 4,451-ft waters, tested 12,800 bpd of 34°API oil. Triton Energy struck pay in Block G, La Ceiba field, offshore Equatorial Guinea. Test data from Mbini-1 indicate that the 9,700-ft well should produce about 20,000 bopd when completed. A subsequent La Ceiba appraisal well, Ceiba-2, encountered 300 ft of net oil pay in a single, continuous column, and proved more than the minimum reserves necessary for development. The well was drilled one mile SW and 340 ft downdip of the Ceiba-1 discovery well. Tanganyika Oil Co. gained commercial status and development approval for its Hana-1 and Hana-2 discovery wells in West Gharib Block, onshore Gulf of Suez, Egypt. Early production from the two wells is expected to be 4,000 bopd.

New U.S. royalty rule slated

MMS plans to publish a new oil valuation rule by mid-January. Earlier, Congress had prevented MMS from issuing a final rule for two years, but an Interior Appropriations bill that recently passed will end extension of the current rule by March 15, 2000. The new rule will try to end reliance on posted prices for royalty purposes and substitute index prices or gross proceeds, adjusted for quality, transportation and location. MMS estimates the new rule will increase the government’s royalty take by $66 million annually. MMS will hold workshops in January to give the public an opportunity to comment on the proposed changes. Senator Jeff Bingaman (Democrat-New Mexico) said improvements must be made on deciding marketing costs, determining local comparable sales as a basis for calculating royalties, and binding guidance as to how valuation questions of producers will be handled. MMS officials have said the reproposed rule would take industry’s concerns into account. A final ruling is due in March.

Deepwater getting deeper

Petrabras set another deepwater record on November 29 by spudding Well RJS-543 in 9,111 ft (2,777 m) of water. The drillship Peregrine 4, owned by R&B Falcon, together with ABB’s Multiplex drilling control system helped set the new depth record.