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Vol. 224 No. 10 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Upstream employment in US shows hopeful signs
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Even as oil companies laid off employees or maintained a workforce status quo, drilling contractors bucked the trend, engaging in a noticeable hiring binge. The trend is particularly apparent among contractors with heavy onshore US activity, where rig counts have risen to two-year highs. Forced by activity to add workers, contractors have boosted employee counts by an average 20%, with one firm reportedly adding 40%. The firms believe that strong gas and oil prices will continue to support drilling increases for the next few years. Nabors Industries Chairman and CEO Gene Isenberg typified the attitude, saying, “Our outlook for full-year 2003 continues to be quite positive, as all of our businesses, except Alaska, anticipate sequential quarterly improvement for the foreseeable future.”
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Two rare accidents mar offshore safety record
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In an unusual coincidence, two offshore accidents occurred in the Gulf of Mexico and UK North Sea on the same day, Sept. 11. In the Gulf, offshore the Mississippi/Louisiana border, a leg on Parker Drilling’s Rig 14J collapsed after what the company vaguely termed “a malfunction.” The Coast Guard rescued 41 workers, including eight that sustained injuries (none severely). While authorities investigated, Parker said that insurance would cover most of the drilling equipment that was lost overboard. Meanwhile, a fatal gas leak occurred at Shell Expro’s Brent Bravo platform on the UKCS. Two men were overcome and killed when gas escaped from the platform’s utility leg during a routine inspection. Safety systems shut down the platform, and all nonessential personnel were evacuated until the gas was safely eliminated. The platform remained shut down while authorities investigated. Ironically, Shell 10 days earlier had emphasized its continued commitment to North Sea operations during the Offshore Europe conference/exhibition in Aberdeen. At that same event, the UK Health and Safety Executive had released its latest statistics, predicting that UKCS safety performance would see a major improvement in this decade.
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NPD imposes emergency rules; names three operators
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New emergency measures were introduced by the Norwegian Petroleum Directorate for helicopter accidents in the safety zone or emergency evacuations of installations that cause personnel to go overboard into the sea. The temporary measures will be in force until improved survival suits are ready for use on the Norwegian shelf. Until then, rescue equipment must be on site within 30 min. A new, improved suit design is under development and should be tested on location this autumn. Meanwhile, NPD granted official operator status to Anadarko Petroleum, Maersk Oil & Gas and Talisman Energy. Talisman was already an unofficial operator after purchasing BP’s Gyda field. There are now 19 operators offshore Norway, including nine with production.
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IHS Energy forum sees global challenges ahead
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At the APPEX Perspective 2003 conference in Houston, various global oil and gas supply/demand challenges were identified. In the short run over five years, worldwide oil supply is projected to grow faster than demand, but long-term figures show the converse. Participants debated as to whether 62% world demand growth to year 2025 from 2001’s 76.0 MMbopd can be satisfied. After hitting 40.5 billion boe in 2000, new oil and gas resources discovered fell to 18.9 billion boe in 2001 and 13.4 billion boe in 2002. Global gas demand is expected to grow 78% by 2020 from 2000’s 91-Tcf figure, and gas usage should eventually outstrip oil. Asia remains the fastest growing gas market, while Africa is now a key oil supplier. All parties agreed that further technology enhancements are needed to improve operating efficiencies and reduce costs.
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Canadian operators rush to exempt Alberta gas wells
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Although the Alberta Energy and Utilities Board (EUB) ordered operators to shut down 938 gas wells on Sept. 1 to protect oil sands reserves, roughly 80% of those wells are still pumping. The board confirmed that 633 wells continued pumping, because various operators applied for exemptions from the July order. EUB had justified the order by noting that the oil sands were more valuable to the provincial economy than the depleting gas reserves. Nevertheless, EUB offered gas-prone producers an opportunity to apply for exemptions, if they submitted evidence that pumping gas did not damage the bitumen reserves. Wells subject to an exemption request can continue producing unless another operator or the board challenges the application. Meanwhile, Ziff Energy Group’s study of 176 Western Canadian oil and gas fields shows that operating costs are still rising. Average oil operations rose 6%, to $6.85/boe during 2002. Gas operations increased 3%, to 70 cents/Mcfe.
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GOM Sale 187 hits five-year peak, marks milestone
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The Minerals Management Service (MMS) said that Western Gulf of Mexico Lease Sale 187 received the highest amount of money bid for tracts since 1998, although the total of high bids, $148.7 million, was short of last year’s $151.2-million high-bid figure. In addition, Sale 187 marked the 50th anniversary of the Outer Continental Shelf Lands Act (OCSLA), which opened federal waters to exploration. One tract, High Island Block 170, accounted for 43% of all money bid in Sale 187. Winner of the block was LLOG Exploration, which bid an incredible $22.6 million, or $1 million more than the second place bid. There were 335 blocks receiving 407 bids, and 63 companies participated in the sale. Amerada Hess won the most blocks, 57.
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Pertamina re-enters Iraq for exploration project
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This month, Indonesian state firm Pertamina will re-start a $24-million exploration project in Iraq’s Western Desert Block 3. A contract for the block, 93 mi south of Baghdad, had been awarded to Pertamina last year by the former regime of Saddam Hussein. The contract had required Pertamina to begin work on the block last April, but US-led military action delayed the project. Just last month, the newly reconstituted Iraqi Oil Ministry gave Pertamina permission to begin work. “We are very pleased to finally begin exploration in Iraq and to open an office in Baghdad,” said Pertamina President and CEO Baihaki Hakim.
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East Timor laws expected
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Officials in East Timor expect to pass upstream oil and gas legislation next year. The nation also intends to set up a fund similar to one in Norway that sets aside a portion of oil and gas earnings for future generations. “We hope the petroleum law will be implemented in mid-2004,” said Alfredo Pires, head of natural resources in the office of the president. He said the law will be “a flexible piece of legislation.”
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Marathon alters structure
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An organizational realignment and changes in business processes being made by Marathon Oil should generate $65 million in pre-tax savings and eliminate 265 staff positions. About 55% of the savings will come from personnel reductions. The firm’s US production operations will be consolidated into Northern and Southern business units, and headquartered in Houston.
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Halliburton wins in court, Cheney loses
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A federal judge in Dallas dismissed a lawsuit that alleged accounting fraud at Halliburton Co. when US Vice President Dick Cheney was its CEO. Halliburton said that US District Judge Sam Lindsay threw out the charges, finding no evidence that the firm’s reporting of revenue from long-term, fixed construction projects was wrong or false. Washington-based Judicial Watch, which filed the suit in July 2002, may appeal the decision. Meanwhile, Cheney lost his attempt to have the US Court of Appeals reconsider its ruling that he cannot keep documents from his 2001 energy task force secret. The US Court of Appeals voted 5-3 against rehearing a lower court ruling that Cheney must release information about contacts with the oil and gas industry.
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Oil major subpoenaed
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ChevronTexaco confirmed that it has been cooperating with a Justice Dept. investigation into charges of bribery in Kazakhstan’s oil sector. The firm does not appear to be targeted by the investigation. Yet, it is providing information to a probe of banker James Giffen, who supposedly arranged payments totaling $78 million to two Kazakh officials. 
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Opinion
To quote an old saying, “The devil is in the details,” and that certainly applies to the Bush administration’s problem with the US Congress over reconstructing Iraq’s oil sector. Last month, lawmakers complained about the President’s $87-billion additional funding request for reconstructing Iraq, particularly a section providing $2.1 billion “to rehabilitate oil infrastructure and secure domestic consumption.” That amount is in addition to $948 million already given to Halliburton subsidiary KBR as the Army Corps of Engineers’ sole oilfield contractor. In a letter to Office of Management and Budget Director Joshua Bolten, Rep. Henry Waxman (Democrat – California) and Rep. John Dingell (Democrat – Michigan) called the $2.1-billion figure a “radical departure” from previous estimates, pointing to a Bush figure from July of $1.1 billion for remaining work.
Neither side is completely right. The congressmen are guilty of not paying attention to detailed figures and caveats buried in such documents as “Iraqi Oil Infrastructure Restoration Strategic Plan: Rough Order of Magnitude,” aka ROM. This document was prepared by the administration, based on KBR data. In it, officials said that $1.68 billion of funding would be required, including a 20% contingency, plus a potential variance of up to 40%. Well, if 40% is added to $1.68 billion, the new figure becomes $2.35 billion. Furthermore, said ROM, “there remains the possibility of significant, additional intentional damage or looting affecting the oil fields and related infrastructure.” Sure enough, media reports have shown never-ending incidents of looting and intentional damage. So, indeed, the administration left itself enough wiggling room through which to drive an oilfield service truck.
By the same token, the administration is, at a minimum, guilty of doing a poor job of communicating its message and mission. The burying of essential monetary figures in obscure documents is, at best, incompetent, and, at worst, deliberately vague and misleading. If a majority of the American public begins to perceive that the administration is shading the facts on other key foreign and domestic issues, as it gives the appearance of doing on the Iraqi oil sector, then the Bush White House may find itself on the short end of the ballot box in November 2004.
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