Looking ahead

Conoco to buy Gulf Canada. Joining the stream of firms desiring to capitalize on high U.S. natural gas prices, Conoco said it will purchase Gulf Canada Resources for $6.3 billion in cash and assumed debt. The deal, which is expected to close during the third quarter of this year, will make Conoco the seventh-largest North American gas producer. In fact, the firm’s North American natural gas production and proved reserve base will increase by 50%. The acquisition allows Conoco to add nearly 1.4 Tcf of net proved gas reserves and an additional 2.9 net Tcf of probable gas reserves in North America. The Houston-based firm will more than double its South East Asian proved reserves to 365 million boe, and more than triple its total net production in the region. South East Asia will become a fourth core area for Conoco, through Gulf Canada’s 72% interest in Gulf Indonesia Resources Ltd.

Canadian producers to spend record $18.2 billion. According to Canadian Association of Petroleum Producers’ (CAPP) survey, Canada’s E&P companies have allotted a record U.S.$18.2 billion for their domestic and international budgets this year. Based on a separate survey, Calgary-based investment dealer Peters & Co. believes the entire Canadian Petroleum industry will generate $27.3 billion in cash flow. This will create a projected cash flow surplus of about $9.1 billion. A CAPP spokesman said prolonged, high oil/gas prices could increase the final tally for the firms’ capital spending budgets to $19.5 billion. The survey reveals that one of the strongest growth areas involves international activity by Canadian-based firms (Nexen in Yemen, Talisman in Sudan, Gulf Canada Resources in Indonesia, and Alberta Energy in Ecuador and the U.S. Rocky Mountains). Canada’s domestic spending is forecast at $11 billion, up from $9.1 billion last year.

Three oil giants to join Angola LNG project. Texaco’s Angolan LNG project manager, Bill Hauhe, said his company and Angolan state oil firm Sonagol have selected three additional partners for the $2-billion LNG development in Angola. The partners are BP, ExxonMobil and TotalFinaElf. These firms will operate respectively, Blocks 15, 17 and 18, which, along with Texaco’s Block 2, will provide gas for the project. At press time, negotiations were underway for terms and working interest percentages. However, Texaco has held a 50% working interest and will maintain a percentage appropriate for its role of operator. Speaking at the IBC conference in London, Hauhe said that Angola LNG has defined Brazil, Spain, Portugal, the U.S., France, Italy, Greece, South Africa and Turkey as potential markets for the project.

Qatar poised to dominate Gulf gas supply. With the world’s third-largest gas reserves (after Russia and Iran) Qatar is positioned to become the leading gas exporter to its Persian Gulf neighbors, who are facing shrinking supplies. The country’s North field is the biggest concentration of non-associated gas, with more than 500 Tcf of deposits. "We have gas for everybody in the world who wants it," said a Qatari official. Gulf-region gas demand has been rising 6.5%/year. Qatar Petroleum’s oil and gas ventures director, Nasser Jaidah, said, "The current year is the last year of surplus gas supply in the Gulf Cooperation Council (GCC) states." By 2005, the overall deficit in the GCC (grouping Saudi Arabia, Kuwait, Bahrain, the UAE, Oman and Qatar) will rise to 4.5 Bcfgd, and in 2010, it will climb to 6 Bcfgd.

Iran targets Gulf neighbors for gas export sales. Iran is increasing its efforts to sell natural gas to its oil-producing, Gulf Arab neighbors. National Iranian Oil Co. Vice President Ahmad Rahgozar, told a regional conference that some of the best potential customers are Oman, Kuwait and the United Arab Emirates (UAE).

Advisory panel urges Outer Shelf drilling. An Interior Department advisory panel has recommended that the federal government move forward with a plan that could open U.S. coasts for exploration. This action is the first step that may lead to renewed drilling in an offshore area that has been off-limits for nearly two decades. The plan is expected to be approved by the entire committee on Outer Continental Shelf policy issues, and then be sent to Interior Secretary Gale Norton. The committee requested that the Minerals Management Service select five offshore areas (that are under the moratorium) as test cases for exploration. The earliest that a lease could be proposed would be in two to five years.

Indonesian impeachment may delay oil sector reforms. The chance of passing a bill that would open Indonesia’s energy sector to competition this year may be gone, due to a parliamentary decision to impeach President Aburrahman Wahid. A Jakarta-based analyst said, "it’s more reasonable to say we’ll see some action next year," considering the political upheaval in the country. Attempting to offer hope, Indonesian Petroleum Association President, and Gulf Indonesia Resources Chief Executive and President Bill Fanagan, said he believes the bill will be passed late in the third or fourth quarter of this year. Currently, state-owned Pertamina holds exclusive exploration / exploitation rights, although the firm may contract out the blocks.

Apache signs Khalda deal. Houston-based Apache Corp. signed a memorandum of understanding with Egyptian General Petroleum to extend the term of its development lease in the prolific Khalda concession. Under the terms, Apache will invest $250 million over the next four years for E&P upgrades in the region, in exchange for lease-term extension.