Looking ahead

EEX to merge with Newfield, CMS to sell E&P unit. EEX Corp. has entered into a definitive merger agreement with Newfield Exploration Corp. Tom Hamilton, Chairman, President and CEO of EEX said, "This merger combines two strong onshore U.S. production companies and will provide significant economies of scale in their operation. The combined companies will have the strong balance sheet necessary to realize the potential value represented by EEX’s Llano area assets and Gulf of Mexico deep prospect exploration inventory." The transaction is expected to close in third-quarter 2002. Meanwhile, CMS Energy Corp. plans to put its E&P unit, CMS Oil and Gas Co., up for sale, and exit the upstream business. CMS said it expects to conduct a competitive auction process and will provide details to interested parties in the near future. Proceeds from the sale will be additive to the firm’s total $2.4 billion of cash proceeds from sales, securitization proceeds and LNG monetization, which will go toward its $2.9-billion asset optimization goal by year-end 2002.

Trinidad to shoot seismic with 12 exploration companies. Twelve international companies have signed an MOU with the government of Trinidad and Tobago to carry out seismic exploration in ultra-deep waters, said Energy Minister Eric Williams. The firms will invest up to $500,000, each, to acquire geological and geophysical data in water depths of 5,600 ft to 9,900 ft off the island’s east coast, which is regarded as the Caribbean nation’s last unexplored area. Williams said that participating companies will have access to the information and will be able to enter competitive bidding when the data are offered. Data acquisition is scheduled to be completed next month.

Iraq to produce 100,000 more bopd in southern fields. Iraqi Oil Minister Amer Mohammed Rashid announced that 50,000 more bbl of crude will be produced daily at the Majnoon fields. Rashid’s deputy, Taha Hamoud Mousa, also announced that the country’s Southern Oil Co. will produce another 50,000 bopd from the West Qurna fields, once rehabilitation work on the field is completed. The officials spoke on the 30th anniversary of Iraq’s nationalization of its oil sector.

BP needs additional investment for Azeri gas field. A BP-led consortium needs to raise investment in the Shah-Deniz gas field offshore Azerbaijan to $3.2 billion, from an earlier estimate of $2.5 billion, said a BP official. The first stage of the field’s development is to be officially approved by the country’s government in the third quarter of this year, but the development requires a more expensive stationary submersible rig, said BP Azerbaijan President David Woodward. The consortium will drill 12 wells and begin producing approximately 2 Bcm of gas annually by 2005. The field is estimated to hold 700 Bcm of gas and 300 million metric t of gas condensate. Other members of the consortium include Statoil (25.5%) and TotalFinaElf (10%).

Governor Gray Davis

California seeks drilling block. The Bush administration is being asked to give California the same protections against drilling that it granted Florida said Gov. Gray Davis. Several California officials spoke out on the issue after the President announced plans to purchase individually owned oil and gas rights in three areas of the Everglades for $120 million in federal funds. Bush also plans to spend $115 million to pay oil firms to drop drilling plans in the Eastern Gulf of Mexico region. Davis wrote a letter to Bush, stating that "By providing federal funds to buy out the 36 undeveloped federal oil and gas leases off the south-central coast of California, your vision of coastal protection can be extended to our state." New offshore leases are banned off the California coast, but the state still has 36 undeveloped leases that were issued by the federal government between 1968 and 1984. Oil firms holding the leases have sued the federal government for breach of contract because procedural hurdles have prevented drilling from going forward.

South Pacific countries should cooperate more on gas production. Indonesia, Malaysia and Brunei should work together to enhance their share of the global market, said a Brunei official. "Cooperation is something we’ve done in the past, but only on an opportunistic basis . . . nothing formally agreed to," said Hamdillah Abdul Wahab, CEO of state-controlled Brunei LNG Sdn. Bhd. He reportedly said that the three countries were studying the compatibility of their LNG-carrying ships with each other’s loading ports, as an initial step toward a formal agreement. The interoperability of their fleets is considered key for the countries to better compete in the global LNG market. Hamdillah said some mixing and matching of vessel cargo is already happening. He added that gas consumers, including Asia’s main buyers – South Korea and Japan – would benefit from greater cooperation among the three producers. Any disruption from one country could be offset by supply from another.

Bush supports Caspian pipelines. U.S. President George W. Bush bolstered Washington’s strong support for strategic pipelines to export oil and gas to global markets via Georgia and Turkey. The pipelines will extend from Azerbaijan via Georgia to the Ceyhan port, en route to Western markets. These projects – the Baku-Tbilisi-Ceyhan pipeline followed by the South Caucasus Gas pipeline – will work to better integrate Azerbaijan, Georgia and other countries in the region in the global economy, said Bush. The first planned pipeline, expected to carry 1 million bopd, would help the West reduce its dependence on Gulf exporters. Construction is expected to begin this summer and be completed by the end of 2004.