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Vol. 223 No. 12 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Bush warning after U.N. resolution spooks oil prices
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Global oil prices jumped higher after a new UN resolution against Iraq was followed by interpretation and pronouncements by U.S. President George W. Bush. Recovering from recent five-month lows, Brent crude futures rose back above $24/bbl. Similarly, U.S. crude futures topped $26/bbl in what some analysts predicted could be a prolonged spike upward, given new geopolitical realities. On Nov. 8, the UN Security Council unanimously approved a resolution giving Iraq a final chance to eliminate its weapons of mass destruction or face “serious consequences.” Many oil traders said that they believe the resolution is a blueprint for war, rather than a measure designed for disarmament. Bush did nothing to dissuade observers from that conclusion. “His (Iraqi President Saddam Hussein’s) cooperation must be prompt and unconditional, or he will face the severest consequences,” said Bush. “Iraq must now, without delay or negotiations, fully disarm.”
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Mexico looks at potential output boost if Iraq attacked
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Faced with a significant chance that the U.S. and allies may attack Iraq if the latter nation fails to meet the latest UN resolution, Mexico is assessing its potential to boost oil production. As a move to counteract any global supply shortage, state firm Pemex “will analyze the possibility of raising production,” said the company's director general, Raul Munoz Leos. Mexico is the world's eighth-largest oil producer and one of the top four suppliers to the U.S. “I do not know how much Pemex can raise production,” said Munoz Leos at the Asia-Pacific Economic Cooperation summit in Los Cabos. “It is difficult to say.” Mexican output averaged 3.56 million bopd in 2001 and has been running at about 3.2 million bopd for much of this year.
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White House encouraged about energy bill prospects
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Last month's election results have improved the Bush administration's chances to pass a broad energy bill, said White House spokesman Ari Fleischer. Provisions to promote more U.S. oil and natural gas production, and to initiate exploratory drilling in the Arctic National Wildlife Refuge, stand a much better chance of passage, now that Republicans control both the House and Senate. An energy measure before the election stalled in the Senate, due to sharp divisions between Republicans and Democrats over opening ANWR. In the short term, nothing is expected to happen in the lame-duck Congress. However, once the Republicans' new 51-seat majority takes effect in January, a flurry of new energy-related measures is anticipated.
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Earthquake stops Trans-Alaskan pipeline for three days
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A 7.9-magnitude earthquake on Nov. 3 forced operator Alyeska Pipeline Service Co. to shut down the Trans-Alaskan pipeline while damage inspections and some repairs were made. Alyeska subsequently said that while no damage occurred to the pipeline, itself, there were some cracks and breaks in H-supports used to hold the line in portions above ground. Crews were able to successfully repair or replace affected parts, and the line was restarted on Nov. 6, with full flow restored a day later. The pipeline has an average daily throughput of 1 million bopd. North Slope operator BP said that it had shut in 95% of its Alaskan oil output during the line's closure. The shutdown was estimated to have cost $20 million per day in cash flow, including the state's share of $3 million. Officials said the lack of actual pipeline damage was a testimonial to its original design, which specified an ability to withstand an 8.5-magnitude earthquake.
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Canadian firm sells Sudan assets to Indian company
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Talisman Energy said it would sell all its oil interests within Sudan to ONGC Videsh Ltd., a subsidiary of India's national oil company. The transaction's final figure should be about $758 million. Talisman's 25% stake in the Greater Nile Oil development, production and pipeline project has been a political / logistical headache. Human rights groups and churches have repeatedly contended that project revenues helped finance the country's civil war. Not so, said Talisman, which had argued that its presence promoted peace and helped to maintain stability. “We have consistently said that we liked our position in Sudan, the people and the project,” said Talisman President and CEO, Dr. Jim Buckee. “But, we have also always said that we would sell at the right price.” The company expects to complete the sale by Dec. 31, 2002.
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Court temporarily halts Utah exploration project
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A federal judge temporarily blocked the U.S. Interior Department from permitting oil exploration on public wild lands on the eastern boundary of Utah's Arches National Park. The decision puts on hold plans by WesternGeco to shoot seismic over parts of the 23,000-acre Dome Plateau. In his Oct. 31 ruling made in Washington, U.S. District Judge James Robertson agreed with environmental groups that the potential existed for irreparable harm to be done to the area's fragile soils and plants if seismic vehicles were allowed to roll through the area. The Dome Plateau is also home to such endangered species as the black-footed ferret, the bald eagle and the Mexican spotted owl. Robertson scheduled a full hearing on the matter for Dec. 13.
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ABB shocks industry with plans to sell division
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In an aggressive, ongoing program to wring out cost savings, Swiss-Swedish firm ABB said it would restructure into three divisions from five existing units and save $800 million within 18 months. In addition, the firm is exploring opportunities to sell its large Oil, Gas and Petrochemicals Division. Chief Executive Juergen Dormann indicated that the company has been approached by several firms interested in buying the division. In a previous $500-million restructuring, ABB cut 13,000 staff.
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WesternGeco pulls plug in U.S. and Canada
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The world's largest seismic service firm, WesternGeco, said that sustained, unprofitable market conditions are forcing it to close its land seismic operations in the U.S. Lower-48 and Canada. Other company sectors are expected to be downsized, with about 1,200 employees to be affected by the end of this year. Land operations will continue in Alaska, Mexico and other economically viable areas. "The action we've taken is an inevitable result of the high-risk, no-return state of affairs in the seismic industry," said WesternGeco President Gary Jones.
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Shots fired at oil workers on helicopter in Yemen
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Gunmen last month directed small-arms fire at a helicopter owned by U.S. independent oil firm Hunt Oil Co. The helicopter had just taken off from the airport in the capital city, Sana'a, and was headed toward the Marib oil-producing area of eastern Yemen, where Hunt is a major operator. Marib is about 105 mi east of Sana'a. Two Hunt employees suffered "minor scratches" and received first aid on the scene, said Hunt spokesman Jim Oberwetter. At press time, the identity of the gunmen was not known, nor had anyone been captured by authorities.
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Cameroon touts Bakassi
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Following an Oct. 10 ruling by the International Court of Justice that gave it control of the Bakassi Peninsula over Nigeria, Cameroon is now shopping the highly prospective region to the oil majors. Officials at state firm SNH are dangling incentives to the companies, and officials promise further revision of petroleum laws. For its part, Nigeria has denounced the ruling, accusing judges of colonial-era bias.
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Indian field plans debated
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Reliance Industries is considering development of the 7-Tcf Krishna Godavari offshore gas field. Plans call for drilling 25 wells in water depths of 400 to 2,000 m. Reliance won this block during the NELP-1 licensing round.
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Large Tarim gas find hit
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China's Sinopec said it has made a potentially large gas discovery in the northwestern Tarim basin. The find is estimated at between 700 Bcm and 1.5 Tcm of gas. The company is drilling additional appraisals and conducting further seismic surveys to gain a more accurate figure for reserves. Just previous to this gas find, Sinopec discovered Tahe oil field in Tarim. Estimated proven reserves at Tahe are 1.5 billion bbl. Sinopec also found gas in the Xihu Trough of the East China Sea, and those reserves are 80 Bcm.
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Newbuild rig begins contract offshore Canada
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Norwegian firm Ocean Rig confirmed that its newbuild, harsh-environment semisubmersible, Eirik Raude, arrived offshore Nova Scotia and began drilling under contract Nov. 1. Drilling on behalf of EnCana Corp. at the Deep Panuke project, Eirik Raude is the second of Ocean Rig's two fifth-generation semis. Built specifically with the eastern Canadian market in mind, the rig's presence solidifies a role for Ocean Rig as a harsh-environment niche player. The firm's first semi, Leiv Eiriksson, began drilling last February offshore Canada for ExxonMobil.
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Tyumen Oil enjoys success at Samotlor
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Russia's Tyumen Oil successfully drilled 10 development wells in the Ust Vakh area of West Siberia's Samotlor oil field. Particularly noteworthy is that one new well produces 2,500 bopd, and two others are producing 1,500 bopd, each. These are the highest individual well rates experienced at Samotlor since 1980. “The Samotlor field extension at Ust Vakh is a good example of an existing upside of a mature field in Russia,” said Igor Dibtsev, Tyumen's senior vice president for upstream. The firm plans 25 more wells next year.
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Sao Tome and Nigeria not sparring yet
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Negotiations with Nigeria to implement a joint exploration treaty are at a standstill, but have not collapsed, said Sao Tome's oil minister, Rafael Branco. He indicated that temporary problems have cropped up regarding a compensation package that is part of last year's treaty. Branco expected the hurdle to be overcome without a long delay. 
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Opinion
Whether they know it or not, American voters set off a geopolitical chain reaction at the polls during the U.S. mid-term elections on Nov. 5. By handing control of the Senate to Republicans and thus giving President George W. Bush a clear path for his policy agenda, voters have narrowed the number of scenarios that international events are likely to follow. Additionally, they have opened up a vastly wider range of possibilities for domestic energy initiatives.
Let us consider international repercussions first. For months, several UN Security Council nations had dragged their feet on turning up the political heat on Iraq. Yes, they equivocated by espousing various vague and contradictory stances as being noble reasons for inaction. Yet, all the while, they clearly were marking time, waiting to see the outcome of the U.S. elections. Once the voters spoke, it became obvious that President Bush's hand had been strengthened considerably, and he was more likely than ever to pursue a tough policy against Iraq. So, it is not surprising that the equivocators began losing their nerve. In rapid succession, France, Russia and China fell into line, and in a dizzying round of quick negotiations, the compromise resolution on Iraq that Bush had sought was hammered out and approved unanimously. Now comes the interesting part – how quickly will the inevitable military action occur, and how greatly will oil prices and supplies be affected? Judging from Bush's comments, Iraqi President Saddam Hussein will barely have to sneeze to provoke a U.S. attack.
Meanwhile, Republican control of Congress should open up a floodgate of energy legislation creativity that had been held back by the stubborn will of one Sen. Tom Daschle (Democrat-South Dakota). Fresh tax credits to boost domestic output are back on the table, as is repeal of the Public Utility Holding Company Act. Some of the onerous environmental restrictions on upstream activity may be repealed or cut back and, dare we say, drilling in ANWR is again a possibility. One cloud remains on the horizon – don't expect anyone among Republicans to push too hard to open up the eastern Gulf of Mexico to drilling. After all, the Prez is not about to do anything that compromises Florida's governor – his little brother, Jebbie Bush.
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