International
France eager to attract upstream investmentMention France or Paris to the average industry person, and the reaction you get first is, "Yeah, fun place – great food, great wine, great scenery," etc. With a little prodding, that person might say that France is known for its innovative, oil field equipment and service companies, or that French oil companies have been very successful explorers, away from their home turf. Seldom, however, do people rave about France being an exploratory mecca. The common perception is that the country is thoroughly explored and exploited, and has little left to offer. Sadly, slumping activity and declining oil production have reinforced this perception in recent years. In the late 1980s, French operators drilled 50 to 70 wells annually. That level deteriorated to only nine wells in 1997, 16 in 1998 and a mere four in 1999. Similarly, oil production peaked at over 65,000 bpd in 1988, only to fall to about half – 32,000 bpd – last year. Just when we were wondering whether the French government had noticed this decline, the French Consulate General in Houston notified us that officials in Paris had been monitoring the activity drop and were eager to push a plan to restore upstream investment. Indeed, the Ministry of Economy, Finance and Industry’s director of Raw Materials and Hydrocarbons, Didier Houssin, brought his message to a briefing of local media last month. "There are three good reasons to invest in E&P in France," said Houssin. "These are good potential onshore and offshore, attractive legal aspects and a good fiscal policy with incentives. This should at least lead oil companies to take a closer look at the upstream in France." Regarding potential, Houssin explained that while France is a fairly small producer, there are still reserves to be found in proved basins, such as Paris and Aquitaine, from where most output has flowed. In addition, some basins are either poorly explored (onshore France and adjacent offshore) or virtually unexplored (offshore overseas territories, such as French Guiana and New Caledonia). In the Paris basin, discovery of some small oil accumulations can be expected, and these plays are being touted to small and medium independents. Average well depths are only about 1,000 m. In the Aquitaine basin, targets are deeper (to 2,000 m) and present greater technical challenges. So, officials are trying to attract medium and large operators to this area. "Recent discoveries by Esso in the Parentis sub-basin prove that it still has significant oil potential," said Houssin. "In the other basins of onshore France and adjacent offshore areas, the strategy would consist of testing new geological ideas and/or exploring deeper targets than those previously drilled." Houssin said firms should not forget the French overseas territories that (with the exception of French Guiana) consist of islands surrounded by large sedimentary basins, some of which already have attracted a few oil companies. Most of these areas are in the deepwater category. Houssin pointed out that oil companies will benefit from an open-door policy, in which French firms do not get priority treatment, nor are foreign operators obligated to partner with French companies. On the legal front, a French exploration permit is good for up to five years, renewable twice. Exploration permit holders have exclusive rights to obtain concessions for up to 50 years, and they may produce even while a concession is being awarded. The application process, including environmental permits, has gained speed, said Houssin. Regarding fiscal policy, there is a progressive oil production royalty that, for wells drilled after January 1980, is roughly a third of that for wells drilled earlier. Local mining taxes are at reduced rates for fields put onstream after January 1992. Additionally, there is a corporate income tax deduction / depletion allowance that can reach 23.5% of sales or 50% of profits, provided that the equivalent amount of cash is reinvested into E&P projects within a two-year period. Asked whether France has goals for its upstream, Houssin said, "To double our output would be a good target for the next several years. To do that, we must make our upstream more known and accessible to small and medium U.S. companies. We really need to have new investors come into the sector." For more information, contact Houssin by fax: +33 (1) 43 19 24 43, or by e-mail: didier.houssin@industrie.gouv.fr.
Saudi offshore work continues.
Although expansion of Saudi Arabian oil output is on hold, some development work to maintain
production levels continues, including offshore. On behalf of Aramco Overseas Co., J. Ray
McDermott Middle East recently loaded out the spreads of a completed fabrication job for
installation offshore Saudi. Work began last June at the Jebel Ali facility to fabricate
five jackets and three production deck modules, along with spools, risers and shrouds for
eight individual pipelines. The modules were completed under a fast-track schedule that
allowed only five months for fabrication. In late December and January, the jackets and
modules were transported to Abu Safa, Marjan, Safaniya and Zuluf fields. Installation of the
units continued as this issue went to press.
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