Oil country hot line

OPEC okays large production cut

At last month’s meeting in Vienna, OPEC approved a 5% reduction in oil supplies, intended specifically to maintain oil prices at a mid-target of $25/bbl. The decision was made despite the potential threat to unstable economies worldwide. OPEC cut 1.5 million bopd, collectively capping limits for 10 members at 25.2 million bopd, starting this month. The cartel is expected to make additional cuts, totaling as much as another million bpd, when it meets in March. U.S. Energy Secretary Bill Richardson expressed his disappointment with OPEC’s decision. Last year, OPEC was blamed for stirring inflation by moving too slowly to restore output curbs that were put in place in March 1998.

ExxonMobil fights jury’s $3.5-billion verdict

A jury in Montgomery, Alabama found ExxonMobil guilty of deliberately duping the state out of $1 billion in royalties from 13 natural gas wells that the oil company drilled in the state’s coastal waters. The jury ordered ExxonMobil to pay $87.7 million in actual damages and $3.42 billion in punitive damages. It is the largest punitive damage verdict ever returned by an Alabama jury. However, the state and its attorneys may have to wait years before seeing the money because ExxonMobil plans to appeal the decision, and the case is likely to go all the way to the U.S. Supreme Court. ExxonMobil claims that its lease on the gas reserves allows it to deduct production costs from royalties due, and that "this dispute is, and always has been, one between ExxonMobil and the (Conservation) Department over the proper interpretation of a lease form never before used in any U.S. jurisdiction." On the other hand, Alabama’s special assistant attorney general, Robert Cunnigham, stated that officials "discovered numerous written documents from ExxonMobil disclosing that the oil firm knew what they were supposed to pay."

Trinidad expands share of LNG market

The Trinidad and Tobago government, along with a group of North American and European companies, has signed a deal to spend $1 billion, to expand an LNG plant. The agreement allows the Atlantic LNG consortium to triple production to 9 million t/year. The expansion should be completed by 2003, with the first well drilled this year. Initial output is due in 2002. Industry analysts say the expansion would demand additional investment of $1 billion, bringing total investment in the LNG facility to $3 billion. It would also increase the country’s LNG production to about 15 million t/year.

Sweet gas discovered at Mazalij

Saudi Aramco has struck yet another sweet gas and condensate field. Mazalij 24 is the newest in a series of commercial gas hits in the southern Ghawar region. The discovery further confirms the high, non-associated gas / condensate potential of the Unayzah reservoir in eastern and central Saudi Arabia. Mazalij 24 is on the east flank of Mazalij oil field, 17 mi north of the recently discovered Ghazal gas field. Saudi Aramco’s intensive exploration campaign to find new supplies of non-associated gas began in 1994. Previous gas discoveries in the program are Ghazal, Manjurah, Haradh, Waqr, Sham’a, Shaden, Wudayhi and Tinat.

Federal lands are leased in southern states

The U.S. Department of the Interior’s Bureau of Land Management (BLM) received $367,337 for the lease of 38 parcels of federal lands in Alabama, Louisiana and Mississippi. Hanna Oil and Gas Co. paid $23,745 for a 180-acre parcel in Arkansas. Its bid of $130/acre was the highest per-acre bid. The U.S. Treasury will gain $270,068 – equal to the total funds that amounted from bonus bids, filing fees and rental revenue. The states affected will share $97,269. BLM is responsible for leasing federally-owned tracts in the 31 states east of, and adjoining, the Mississippi River.

Russia attempts to boost its exploration

In a concerted effort to attract more interest in its Far Eastern upstream oil sector, Russia may offer investors an offshore oil lease sale this summer in the Sea of Okhotsk. The concession area is 50 mi offshore the province of Magadan, a resource-rich province that is far from markets. By some estimates, the subsea shelf may contain more than 4 billion bbl of oil and 32 Tcf of gas. There has been no E&P activity in the area, due to a lack of infrastructure and political instability. However, the chairman of the Magadan Natural Resource Committee, Yuri Prouss, said the country’s political situation has stabilized, and the legal / regulatory framework is now able to hold a lease sale and begin exploration.

   Meanwhile, Russian Prime Minister Mikhail Kasyanov said six leading Russian petroleum firms will invest $7 billion to $8 billion this year on development of new deposits and on measures to boost oil production. He also said that a part of the firms’ surplus profits, derived from high oil prices worldwide, should be remitted to the government.

Chevron wins prized Nigerian oil license

Chevron, won oil Block OPL 250 in Nigeria’s deep offshore waters, in a long-awaited exploration licensing round. Eight onshore and offshore oil blocks were divided among 14 companies, including ExxonMobil, Royal / Dutch Shell, Chevron and Agip. Malaysia’s Petronas and Brazil’s Petrobrás were among successful bidders entering Nigeria’s industry for the first time. The awards were made after a competitive bidding process, intended to indicate a break with obscure past practices in awarding licenses.

Rig counts achieve new peaks

The December 2000 international (outside U.S. and Canada) offshore rig count increased by five units from the November figure, for a 3% gain. From a year ago, it increased by 42 units, to 201 rigs. The U.S. rig count rose 14 units to 1,121, creating a new peak for the January 12th cycle. Canada’s rig count rose 57 units to 546, compared to January 5th’s numbers.