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Vol. 225 No. 10 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Mauritania gears up
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Two deepwater drilling rigs arrived last month to fulfill drilling commitments at Chinguetti field and elsewhere off Mauritania for Woodside Petroleum. The presence of two rigs allows for wells to be batch drilled, whereby one rig performs the same operation on a number of wells in order, rather than drilling a single well from top to bottom. The West Navigator will drill the top hole sections of several exploration and appraisal wells. Following completion of the top holes, the wells will be temporarily suspended before the bottomhole sections are drilled by the Stena Tay. This tandem drilling arrangement will achieve increased efficiency.
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Bolivian hydrocarbon bill receives industry snub
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Bolivia's national hydrocarbons chamber (CBH) rejected President Carlos Mesa's 14-section hydrocarbons bill. In a statement on behalf of its members, CBH listed several reasons for its opposition, the main one being that the bill only gives companies a 180-day period to modify their existing contracts in line with the proposed regulations. CBH said existing contracts should not be affected by the new law. The bill “unilaterally imposes forced and obligatory migration of existing concessions to new types of still unknown contracts for exploration, production and commercialization of hydrocarbons,” said CBH's statement. The bill would see the re-nationalization of upstream companies Andina and Chaco while increasing royalties and taxes on production to 50%. It would also create a new regulator called Petrobolivia, which would relieve state firm YPFB of regulatory duties and sign E&P contracts on behalf of the state.
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Agbami to proceed
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Statoil has approved participation in a unitized development of Agbami oil field off Nigeria. The project will provide Statoil 40,000 bpd of equity crude at plateau, said Roald Riise, senior VP for development and production. Located 110 km off Nigeria in 1,500 m of water, the field is set to produce 250,000 bopd when it goes onstream in first-quarter 2008. Agbami was proven in Block 216 by ChevronTexaco during 1998.
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Oil market remains volatile but under previous highs
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Crude oil prices settled back down to a range of $40 to $45/bbl last month, as traders recognized that OPEC had met incremental global demand with its last boost in output. Some minor fluctuations occurred as Hurricane Ivan approached the US Gulf of Mexico, and traders feared some supply disruptions. However, barring significant, prolonged disruptions, oil prices were not expected to run up toward $50/bbl any time soon. Additionally, OPEC ministers last month raised their official output limit to 27 million bopd, while quietly lowering actual production from nearly 28 million bopd. With the end of the summer driving season in the US, analysts expected global demand to ease lower during the early portion of fourth-quarter 2004. OPEC is now providing roughly 40% of worldwide oil supply.
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Britain registers oil trade deficit, gradual decline seen
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For the first time since the 1970s, the UK appears to be a net importer of oil, according to the July trade figures released by the Blair administration. As opposed to previous “blips” in supply, officials are concerned that this deficit is the beginning of a permanent trend. Nevertheless, the UK Offshore Operators Association believes that, by year 2010, domestic supply will still cover 80% of indigenous demand. Over the last two decades, oil and gas exports have contributed between £5 billion and £10 billion per annum. Last year, the total value of British oil and gas production was £23.5 billion.
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Mexican legislators present Pemex reform plan
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The energy committee of Mexico's lower house has proposed a plan that would apply a new, variable tax scheme to the upstream division of state oil firm Pemex. In addition, there would be lower tax rates on new oil and gas production to stimulate output. As reported by local newspapers, Energy Commission President Francisco Salazar said the reform would tax natural gas at lower rates than crude oil, to provide the incentive to boost gas output. Pemex would pay 55% tax on existing oil projects and 25% on new ones. The accompanying gas rate would be 15% on existing gas projects and 10% on new ones. Pemex would continue to hand over 69% of its revenues to the government for rights over the country's hydrocarbons. In addition, the firm would pay taxes of between 1% and 10% to the stabilization fund, depending on the global price of oil. These changes supposedly will equate to savings of approximately 130 billion pesos ($11.2 billion) for Pemex.
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Anadarko sheds more onshore US assets
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Anadarko Petroleum agreed to divest certain US onshore properties to undisclosed parties for $850 million in cash, and interests in two oil and gas fields in Wyoming. The transaction includes an estimated 108 million boe in proved reserves as of year-end 2003, and current daily net production of about 38,000 boe. The assets are located in about 180 fields across Texas, Oklahoma, Kansas, Wyoming, Utah, Louisiana and Alabama. The properties to be divested include about 30% of Anadarko's fields worldwide, but only 4% of year-end 2003 reserves and 7% of current production. As part of the sale, Anadarko will receive cash, as well as the buyers' interests in the Brown Cow and Hartzog Draw fields in Wyoming. These fields represent 2 million boe of proved reserves and an estimated 7 million boe of probable reserves.
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Camisea group signs second development deal
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Peruvian officials signed an agreement with the Camisea upstream consortium for Block 56, clearing the path for Hunt Oil to start LNG exports by 2008. Overall investment in the block is $550 million. Production of up to 600 MMcfd, will go to the Malvinas gas processing plant, and from there to an LNG plant for export to North America. Pangoreni field on Block 56, which is next to the consortium's existing Block 88, reportedly has 3 Tcf of gas reserves. By next month, the group plans to submit its environmental impact study (EIS), which is slated for approval by May 2005. Argentina's Pluspetrol leads the consortium with a 26% stake, while Hunt Oil holds 36%. Other members are Tecpetrol (10%), Sonatrach (10%) and SK Corp. (18%).
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Pentagon will split up Halliburton's Iraqi work contract
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US Defense officials said they would divide up Halliburton Co.'s giant contract to house and feed US troops in Iraq and solicit new bids for the work. Halliburton indicated that it may not be so eager to compete to win back those projects. At press time, military planners were considering slicing the $7.5-billion deal into six smaller, more manageable contracts. The oilfield service, engineering and construction company would have the option to bid on any or all of the new contracts. Nevertheless, Halliburton CEO Dave Lesar told analysts at a New York energy conference that he is “not sure that we're going to rebid if it's hacked up into many pieces.” If Halliburton does choose to rebid, the firm will increase its margins significantly. If the Pentagon does farm out some of the work, this would enable the company to reduce its capital committed to Iraq, a no-lose outcome in Lesar's opinion.
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Congo throws two new laws at Total
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The Republic of Congo's parliament passed two laws geared toward settling a dispute with Total over loss claims. Congo claims to have lost major advantages when old concession contracts were replaced in 1994 by PSAs. The first law covers an amendment to a 1968 convention between Congo and Total, and the second endorses a contract on oil production sharing, affecting an oilfield license off the Congolese coast. Reserves are estimated at 120 millon bbl of oil. The government had refused to renew Total's license to operate the field unless it settled the dispute.
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Opinion
In just another month, the US presidential election will be held, and for most Americans in the upstream oil and gas industry, the end cannot come soon enough. Although the incumbent, President George W. Bush, is favored by the vast majority of these professionals, one would not say that they are necessarily thrilled with him. However, he is considered a far better choice than left-leaning Democratic challenger, Sen. John Kerry (Democrat – Massachusetts). Once again, the US E&P industry is poised to vote against someone rather than for an individual. Why do I say that? Well, for starters, a Kerry administration in many people's eyes would be an unmitigated disaster. Foremost in their concern is the fact that the senator demonstrates a complete lack of understanding of how oil and gas are found, produced and distributed. This flaw is demonstrated time and time again in Kerry's campaign remarks. For instance, he frequently remarks that he will “wean the US off Middle Eastern oil” in just one four-year term. Well, no matter how much money is thrown at alternative energy development, which Kerry champions as the answer, this statement is patently ridiculous, especially when the only source of marginal oil production increases to satisfy demand spikes on the global market is the Middle East. Furthermore, a Kerry administration would make as one of its priorities an effort to permanently seal off Alaska's Arctic National Wildlife Refuge (ANWR) from any exploration, much less development. Industry analysts can also foresee Kerry placating his Hollywood friends by further restricting the few E&P operations now allowed offshore California.
On the other side, Bush began his term with some hopeful and helpful moves for the industry. But as his attention has been diverted by 9/11/01 and then the campaign in Iraq, the President's focus on upstream oil and gas has nearly disappeared. There had been some hope that, unlike his father, who progressively and increasingly distanced himself from the industry while in office, George W. would put his E&P background to good use. Yet, in the final month of the election campaign, the son, afraid to alienate voters in other sectors of the country, is mimicking his father with uncanny precision. Given the never-ending media chatter about Vice President Dick Cheney's former Halliburton ties, it is somewhat understandable, albeit frustrating, to watch. So, yes, US E&P professionals will again vote against and not for a candidate. The US contest is the second of the “Big Three” elections—Canada, US and UK—expected between mid-2004 and mid-2005. Industry personnel in Western Canada are disappointed that the Liberals pulled out a win in June over the Conservatives. However, they take comfort in the fact that the Liberals know that oil and gas are far too important to Canada, to monkey with policy substantially. In the UK, E&P professionals are still furious with Tony Blair's administration for slapping a 10% surtax on output. They might vote to throw out Labour, but they probably won't, given that the fear of the unknown replacement is even greater.
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