World of Oil

Click Here for Kurt's Opinion

OPEC jacks up forecast of oil demand growth

OPEC raised its world oil demand growth forecast by 1.6 million bpd to 83.6 million bpd for 2005, equal to a 2% rise from 2004. The OPEC forecast is slightly below the 83.9-million-bopd figure estimated by the International Energy Agency. However, both entities agreed that the upward revision reflects solid consumption in late 2004 in several OECD nations, as well as China, the world’s second largest market. IEA expects Chinese oil demand to average 6.73 million bpd in 2005, up 5.7% pct from 2004. OPEC predicts Chinese demand to hit 6.9 million bpd. Analysts said Chinese demand will be a key factor affecting oil prices this year. Meanwhile, at press time, OPEC was expected, at its Jan. 30 meeting, to keep its output ceiling steady at 27 million bopd. 

Libya awards 15 licenses; US firms get lion’s share

In a watershed event for the E&P industry, Libya granted its first exploration licenses since oil was found in 1959, awarding 15 tracts to foreign operators, with US companies taking the majority. Occidental Petroleum picked up five licenses, and will share rights in four others with Australia’s Woodside Petroleum. ChevronTexaco received a license to explore the Marzouk basin south of Tripoli. Amerada Hess also won a tract. India Ltd and India Corp. received a license to explore the Sirte region. Verenex Energy Inc. of Canada, Algeria’s Sonatrach, and Medco Energy International of Indonesia also won tracts. The 15 licenses give rights to explore more than 127,000 sq km (51,000 sq mi). Libya seeks massive investment to boost its oil sector, of which development was hindered by international sanctions imposed following the bombing of a Pan Am passenger jet over Lockerbie, Scotland, in 1988. Those sanctions were eased after Libya agreed to pay compensation in 2003. Each company that received a license is expected to invest $750 million. 

Norway sees positive development trend

Oil companies have indicated to the Norwegian Petroleum Directorate (NPD) that they plan to submit three times as many plans for development and operation (PDOs) in 2005, as compared with last year. “One of the reasons for this is rising oil prices,” said NPD. Today, oil sells for about $46/bbl. Both the companies and the market, noted NPD, have a firm belief that the oil price will remain high in the years to come, i.e., from $30 – 40/bbl. “In addition to the fact that more projects are being approved, there is also considerable growth in the companies’ generation of new ideas and concepts,” said NPD Principal Engineer Erik Søndenå. “We have seen an unprecedented supply of new ideas that enable us to produce more oil. There are no signs that this will stagnate in the years to come. This means that the recovery rate for oil could exceed our target of 50% if this positive trend continues.” A few years ago, projects were evaluated on the basis of $13 – 18/bbl. Today, projects are measured against a price of $20 – 25/bbl. 

US House member tries to halt anti-ANWR campaign

Rep. Richard Pombo (Republican – California), chairman of the US House Resources Committee, urged lawmakers not to co-sponsor a bill that would keep the coastal plain of the Arctic National Wildlife Refuge (ANWR) closed to drilling. “DO NOT co-sponsor the Udall-Eisenhower Arctic Wilderness Act,” said Pombo in a letter to House lawmakers. The bill, which is backed by Rep. Edward Markey (Democrat – Massachusetts), “Would lock away the energy-rich lands of the 1002 (coastal plain) area that Congress set aside in 1980 for the purpose of energy development,” he noted. “You recently received several ‘Dear Colleague’ letters urging you to ‘defend the Arctic National Wildlife Refuge’ and co-sponsor the Udall-Eisenhower Arctic Wilderness Act. I urge you to approach the hyperbolic and emotional pleas in these letters with great caution, if not incredible skepticism,” Pombo warned House members. Exploration and production in ANWR would take place on just 2,000 acres of its 1.5-million-acre coastal plain, Pombo noted, amounting to 0.0003% of Alaska’s protected lands. 

Alaska requests federal gas research funding

Sharply higher natural gas prices and concern over long-term supply brought dozens of suggested solutions to a special work session of the US Senate’s Energy & Natural Resources Committee. Scores of representatives from industry, public interest groups and government agencies, including an Alaskan state official, spoke for two minutes, each, at the opening phase of a new bipartisan energy bill. The director of Alaska’s Oil and Gas Division, Mark Myers, asked Congress to provide another $70 million to study techniques to produce 100 Tcf of crystallized methane gas beneath Prudhoe Bay’s permafrost. In 2000, Congress provided $49 million for gas hydrate research in Alaska and the Gulf of Mexico. That program expires in October. Through an unusual set of circumstances involving seniority and Senate rules, the energy committee is run by New Mexico’s two senators, Chairman Pete Domenici, a Republican, and ranking Democrat Jeff Bingaman. 

Kuwait oil field law rumored

Kuwait is considering a new draft law for development of its northern oil fields, reported local newspaper Gulf News. Foreign firms would be able to tender for contracts without local sponsors, but the state would maintain ownership of all resources, and retain the right to determine output and prices. Meanwhile, Kuwait will re-start a 300,000-bpd oil gathering center by the end of 2005. The center was badly damaged in a fire during 2002. 

Oil companies report astounding 2004 earnings

As illustrated by recent reports from seven companies, major, integrated firms and large independents are swimming in profits that could be reinvested in significant upstream expansions. For instance, ConocoPhillips reported 2004 net income of $8.13 billion, up 72% from 2003’s level on revenues of $136.9 billion. Petro-Canada said it earned a record $1.8 billion or $6.64/share. The firm’s happy results were tempered by news that it had lost the South Middle Area gas project in Syria. Houston-based Apache Corp. tallied a record $1.7-billion income, up 54.5%. Also in the Houston area, Anadarko Petroleum registered record income of $1.6 billion on revenues of $6.07 billion. Down the street, Burlington Resources pulled in record income of $1.527 billion, up 27.1%. Marathon Oil reported its second best year since being spun off in 1998, earning $1.261 billion while continuing a very successful exploration program. Finally, Dominion announced net income of $1.249 billion, up a whopping 293% from 2003’s figure. 

Santos brings exploration back roaring

Australia’s Santos Ltd. announced a 25-well, high-impact exploration program for 2005. The firm will invest $153 million, up 21% from the $126 million spent on exploration in 2004. Oil will be the main focus of the program, with most activity centered in the Kutei and East Java basins offshore Indonesia, the Gulf of Suez in Egypt, the Bonaparte basin in the Timor Sea, and the Carnarvon basin offshore Western Australia. “We are commencing 2005 with a very high activity level in the first quarter,” said Managing Director John Ellice-Flint. Santos also has begun an extensive 3D seismic acquisition program offshore East Java. 

Azerbaijan resists UN mediation of Caspian boundary

Azerbaijan’s Foreign Ministry opposes a proposal by Turkmenistan to submit the problem of dividing disputed Caspian deposits to the United Nations. “There are no reasons to do that, since division of the Caspian Sea is the subject of negotiations between the Caspian countries,” said Azerbaijani Foreign Ministry official spokesman Metin Mirza in comments to local media. “Our position is that the Caspian Sea should be a sea of peace, friendship and cooperation. We consider it inexpedient to transfer the matter to another plane. The sides have certain approaches. We hope that division of the Caspian will find its solution before long.” 

US officials propose drilling in sensitive New Mexican area

The Bush administration proposed a limited plan for exploring the environmentally sensitive Otero Mesa area of New Mexico. The plan was attacked immediately by the state’s governor, Bill Richardson, and attorney general, Patricia Madrid (both Democrats). “The Interior Department is ignoring its stated policies of respecting and working with states regarding major land management decisions,” said Richardson. The Bureau of Land Management has termed the plan for drilling in southeastern New Mexico’s public lands one of the most restrictive ever developed. At most, it would include 141 exploratory wells, and if successful, another 84 producing wells. “We have the science, the tools and the will to ensure that the very limited amount of exploration and development allowed under this plan is accomplished under today’s strict environmental and social standards,” said state BLM director Linda Rundell. 

Gazprom CEO evaluates prospects with North Korea

Gazprom CEO Alexei Miller’s spokesmen said that he has engaged in top-level discussions with North Korean officials in Pyongyang about oil and gas cooperation, and evaluation of prospects. Gazprom’s statement did not reveal when Miller and his associates had traveled to North Korea. However, it did say that exploration work conducted by North Korea’s Energy Ministry in 1997 had located seven promising onshore and offshore prospects. The Korean Corporation for Oil Extraction is the only oil and gas company in North Korea, with exclusive rights to explore and develop resources. Several energy industry analysts floated the idea that the visit to North Korea was part of Russian President Vladimir Putin’s strategy of using Gazprom as a powerful geopolitical tool to cement new political ties with Asian nations. The firm controls about 10% of world gas reserves, and its role within Russia’s energy sector has expanded in recent years.

Canadians prod Mexico

Canadian lawmakers have encouraged their Mexican counterparts to try to advance reform of Mexico’s energy industry. During recent talks in Mexico City, both sides discussed President Vicente Fox’s proposal to open Mexico’s energy sector to more private and foreign investment, and how it has stalled in Mexico’s opposition-dominated Congress. “Canada has had a much more open approach to investment in our energy sector,” said Daniel Hays, speaker of the Canadian Senate. “Our energy sector, we believe, is very successful and one that is, we hope, an interesting example for Mexico.” Mexican Congressman Carlos Jimenez said Canadian comments encouraging quick action on new energy regulations were well received. “We agreed in front of our (Canadian) counterparts on the urgency for getting past the debate and finding a different model for developing the energy sector.” However, Mexican Senator Raymundo Cardenas, of the leftist Democratic Revolution Party, said speeding up energy reform may not be possible, as parties stake out political positions in advance of 2006 elections.

Cantarell output to hit 2.1 million bpd in 2005

Nitrogen injection should stabilize crude output from Mexico’s Cantarell offshore oil field complex at 2.1 million bpd this year. According to state firm Pemex, gas production at the field will exceed 774 MMcfd. Britain’s BOC and Japanese partner Marubeni manufacture the nitrogen used for injection. The companies believe that about 600,000 bpd of Cantarell’s output can be attributed to the injection program. 

Iraqi oil officials unveil ambitious budget

Eager to expand productive capacity, Iraq has allocated $3 billion from the country’s 2005 budget to rebuild its oil industry, said officials at the Oil Ministry. Projects will include expanding oil and gas production, overhauling refineries and the pipeline network, building new refineries, developing oil fields and conducting fresh exploration. The government also hopes to attract additional investment through production-sharing deals with oil majors. 

Brazil’s ANP wants to double exploration

Hydrocarbons industry regulator ANP plans to double within eight years the area under exploration in Brazil. The agency is concluding preliminary geological studies of offshore and onshore basins, said ANP concession superintendent Milton Franke. There are 180,000 sq km under concession to about 40 companies, or equal to just 3% of Brazil’s sedimentary basins. ANP expects to complete geological studies of Atlantic offshore basins this year. It will then begin studies of the northern onshore region. In the meantime, ANP expects to publish next month the list of blocks to be offered in the 7th licensing round scheduled for October.

Venezuela makes another ministerial change

The Venezuelan regime of strongman Hugo Chavez has appointed Bernard Mommer as deputy minister of hydrocarbons in the new Energy and Petroleum Ministry. Mommer replaces Luis Vierma, said PDVSA President and Petroleum Minister Rafael Ramírez. Mommer was formerly president of PDVSA’s UK unit and was recently appointed to the firm’s board. As part of Chavez’s shake-up of the energy sector, the old Energy and Mines Ministry was split up into the Energy and Petroleum Ministry, and the Basic Industry and Mines Ministry.

Firms win Liberian tracts

As part of its first offshore licensing round, Liberia’s government awarded Block 15 to Woodside Petroleum, and Block 16 to Repsol YPF. Earlier, last summer, officials handed Block 17 to Repsol YPF. Woodside’s commitment includes acquisition of 600 km of 2D seismic and 1,600 sq km of 3D seismic. Repsol YPF’s plans call for 400 km of 2D seismic and 1,600 sq km of 3D seismic. 

Germany’s Schroeder raps high oil prices

German Chancellor Gerhard Schroeder urged oil-producing countries to put a lid on rising crude prices before they destroy poor nations’ economies. “There is a great responsibility that lies with those who produce oil to ensure prices remain low,” said Schroeder in remarks to the annual World Economic Forum meeting.

Comments? Write: editorial@worldoil.com