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Vol. 226 No. 5 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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ChevronTexaco grabs Unocal for $18 billion
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ChevronTexaco Corp. said that it would acquire Unocal Corp. in a stock and cash transaction valued at about $18 billion, including net debt. The acquisition, subject to approvals by Unocal shareholders and certain regulatory agencies, will significantly enhance ChevronTexaco’s position among major oil companies. “Unocal is a unique independent with super-major assets that are an excellent fit with our existing portfolio and our long-term strategies – to grow profitably in core upstream areas, build new legacy positions and commercialize our large undeveloped natural gas resource base,” said ChevronTexaco Chairman and CEO Dave O’Reilly. “It is an attractive transaction that provides value in both the near- and long-term.” ChevronTexaco expects oil-equivalent production from the combined portfolios during 2006 to average about 3 million bpd. Unocal’s 1.75 billion boe proved reserves would increase ChevronTexaco’s reserve base as of the end of 2004 by about 15%. The resultant weighting of natural gas reserves would increase by about 5 percentage points to roughly one-third of the oil-equivalent total. Unocal’s assets will enhance ChevronTexaco’s presence in the Asia-Pacific, Caspian and Gulf of Mexico regions.
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OPEC says more oil will accelerate stock builds
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OPEC was on schedule to increase its oil output in April to accelerate crude stock builds, said the group’s acting secretary general, Adnan Shihab-Eldin. He told various news services that production will near 30 million bpd, allowing for a greater cushion of crude inventories in large oil-consuming countries. That would be about 240,000 bopd extra over OPEC’s March production estimate, or just under 1% more crude. But oil prices will not crash despite signs of sluggish US and European economic growth and fatter inventories, he added. “We’re not expecting a collapse, but we’re keeping a careful watch on it,” Shihab-Eldin said. There are no signs that high prices have hurt the world economy, but OPEC is on alert for a global slowdown as economies plateau. A quota hike of 500,000 bopd on top of a current production ceiling of 27.5 million bopd is still on the group’s agenda, he said. But it would only be added, if benchmark crude prices edge back toward their all-time highs. Meanwhile, US Treasury Secretary John Snow warned that high energy prices and weak growth in Europe and Japan were hurting the US economy.
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Pemex requires more spending on exploration
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Pemex said it must spend at least $1.5 billion annually on exploration to reach its medium-term reserve replacement goals. Speaking to investors in a conference call, Pemex E&P head Carlos Morales said that if such sums are spent, the company should be able to reach its 100% replacement goal for total reserves by 2010. Throughout the 1990s, Pemex invested an average $400 million/year on exploration as oil flowed freely from Cantarell field offshore, which accounts for nearly two-thirds of company production. Output at Cantarell, however, should begin declining this year, with output dropping to 2.02 million bopd from 2.11 million bopd. Pemex is developing nearby fields in an effort to compensate for Cantarell’s decline, Morales said, adding that Pemex may need to boost investment in coming years to realize the full potential of other deposits.
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Saudi Arabia reaches new output level
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The consensus among industry supply-and-demand analysts is that Saudi Arabia pumped 9.5 million bopd in March, boosting output to meet its pledge to increase supplies, in an effort to cool down high crude prices. As noted by some analysts, it would be wrong to gauge output by tanker tracker estimates that placed Saudi output closer to 9.0 million bopd. In other words, one cannot look just at the weekly loading schedule, one has to look at the average. At the March 16 meeting of OPEC, Saudi Oil Minister Ali Naimi said the kingdom had raised its output to 9.5 million bopd, up from 9.25 million bopd in February.
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US House committee backs ANWR drilling
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A House panel backed drilling in Alaska’s Arctic National Wildlife Refuge, advancing a key element of President Bush’s energy plan. The House Resources Committee endorsed drilling in ANWR’s coastal plain as part of a package of energy measures approved by voice vote. Committee members rejected an effort by Democrats to strip the drilling provision from the measure by a 30-13 vote. In previous years, the House has repeatedly supported similar measures, but those efforts were unsuccessful because of opposition in the Senate or from then-President Bill Clinton. However, this year, prospects for drilling are stronger. Last month, the Senate included a provision allowing drilling in its budget resolution, the first time the Senate has endorsed ANWR development since the President took office. The legislation is similar to what was approved by a conference committee in 2003, but it died because of a Senate filibuster.
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Socar to boost spending on gas development
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The State Oil Company of the Azerbaijani Republic (Socar) plans to invest $224 million to expand natural gas production during the 2005-2015 period, said Azerbaijani Deputy Prime Minister Yaqub Eyyubov, in a message to parliament. “To increase gas production, the company plans to drill 23 gas wells from six platforms in the shallow part of the Gunashli field,” said Eyyubov. “It is also planned to expand a number of platforms and build underwater gas pipelines. All of this work will involve spending of $224 million. Socar would increase gas output to 9.3 Bcm in 2010, from 4.5 Bcm in 2004.
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ChevronTexaco will evaluate Newfoundland field
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Chevron Canada Resources and its joint venture participants signed a Unitization and Joint Operating Agreement that will advance joint evaluation of Hebron, Ben Nevis and West Ben Nevis oil fields offshore Newfoundland and Labrador. “We are pleased to have agreement among the owner companies,” said Alex Archila, president of Chevron Canada Resources. “However, a significant amount of work must be done before a decision can be made to seek regulatory approvals and determine how best to proceed with development.” Hebron is a challenging field, and factors such as its heavy oil and complex reservoirs have the potential to add significant cost and economic risk. “We continue to work toward addressing the technical and economic challenges of developing this heavy oil field,” added Archila. Heavy crude reservoirs require more wells to be drilled to achieve the same oil recovery and production rates as lighter crude. Additionally, Hebron’s heavy crude would sell for about 15% to 20% less, because it is more costly to refine, and fewer refineries are set up to handle it. At present, the joint evaluation will focus on a gravity based structure (GBS) concept, including a detailed examination of such factors as construction methodology and cost.
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Venezuela to replace operating pacts with JVs
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The 32 operating agreements that Venezuela signed with foreign and national oil companies in the 1990s will be replaced by joint ventures, in which state oil firm PDVSA owns at least 51%, said PDVSA President and Energy and Oil Minister Rafael Ramírez. In addition, Venezuelan President Hugo Chavez said operating agreements between PDVSA and private companies “are finished.” The “operating cost of the agreements is $14/bbl, compared to the $4/bbl cost of producing through our own effort,” said Ramírez. “In some of these agreements, we earn more by not producing any oil.” The deadline for switching to the new JVs is six months. Companies could receive new natural gas exploration contracts, if they agree to the new conditions. The agreements have six to 10 years left before they expire, but Ramírez stressed that allowing them to run out will be a disservice to the country.
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Australia urged to explore more
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Australia’s leading upstream petroleum organization said that the country will be hit by a steeply rising import bill for energy if it does not increase oil and gas exploration. During the Australian Petroleum Production and Exploration Association’s annual conference in Perth, executive director Barry Jones said that every barrel of oil that Australia imports puts pressure on mortgage rates and the cost of living. He said that with oil trading at record levels, it is time for a more effective dialogue with government officials on tax measures to stimulate exploration. “People are finding oil, people are finding gas, but we need to double or treble the amount of oil we’re finding, if we’re going to deal with some of the emerging self-sufficiency problems that the Treasurer’s been talking about,” he said. A spokesman for federal Resources Minister Ian Macfarlane says the last federal budget contained a 150% tax offset for oil exploration in frontier areas around Australia, and an extra $60 million to ensure that all petroleum exploration remains viable for companies exploring in Australia.
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East Timor prepares for first licensing round
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Three years after the country’s liberation and two years after a major collaborative project with the Norwegian Petroleum Directorate (NPD) got underway, East Timor is now ready for its very first licensing round as an independent nation. The area to be announced includes areas offshore the southern coast of the island nation, in the Timor Sea. According to Project Manager Geir Ytreland, there are great expectations linked to these areas. “There are large gas/ condensate fields south of the areas to be made available for licensing now. New acreage, proximity to large, proven reservoirs and a generally low geological risk are important sales arguments for the oil industry,” says Ytreland. Some companies have already indicated their interest in the upcoming licensing round. Ytreland hopes that many more will join them, and he believes that the resource potential should make the area attractive even for the largest, multinational oil companies. “The road to a better future depends on petroleum. The citizens of East Timor know this, therefore the expectations of quick results are enormous,” said Ytreland.
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Petrobras breaks output record
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Brazil’s Petrobras registered record output of 1.65 million bopd on March 30 as units at the Barracuda and Caratinga fields in the Campos basin increased their production, the company said in a statement. The previous production record was 1.64 million bopd on March 14, 2003, the statement said. The P-43 floating production, storage and offloading (FPSO) vessel at Barracuda field started operations in December 2004 and produced 85,500 bopd on March 30, while the P-48 FPSO on Caratinga field that began operations in February produced 57,000 bopd.
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Falklands seismic results are encouraging
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Falkland Oil and Gas Ltd said the outcome of seismic surveys at its offshore fields in the Falkland Islands has been “encouraging.” The firm said it is halfway through the survey of 10,000 km of its license areas and overall, “the indications for the data were encouraging. As a result, Falkland Oil has many more opportunities than originally anticipated,” said executive chairman John Armstrong. Results of further surveys will be unveiled in the third quarter. The company also announced it appointed Patrick Bird as exploration manager, replacing Jim Webb.
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Bass Strait output likely to halve
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Esso has confirmed that oil production in the Bass Strait, off the Gippsland coast in southeast Victoria, is expected to halve within five to 10 years. The company told an industry conference in Perth that Bass Strait oil production has slumped to 110,000 bpd. That compares to 550,000 bpd in the glory days of the mid-1980s. However, Esso spokesman Tony Cudmore said the company’s operations in Gippsland will not be cut back in the immediate future. He says the firm will instead shift its focus to gas production. “We’ve been doing some exploration work and we’re certainly continuing to look for more oil; our assessment would be that the oil that remains is not going to be in the order of magnitude that we’ve seen in the past,” he said.
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CNOOC has record year
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China National Offshore Oil Corp. reported that in the past year, the company’s net profit hit a historical high of $1.96 billion, a year-over-year increase of $562 million, or 40.3%. CNOOC Ltd generated oil and gas revenues of $4.46 billion, an increase of $106 million, or 31.2%, from 2003. The company produced 140 million boe in 2004, representing a 7.5% increase. Meanwhile China’s offshore production, overall, increased 13.5%. In 2004, six development projects went onstream successfully. The company’s exploration activities resulted in five discoveries and 14 appraisal successes offshore.
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Bush pushes platform fish farm plan
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Some of the roughly 3,500 idle oil and gas platforms in the Gulf of Mexico could be converted into deep-sea fish farms, under a plan supported by US President Bush. Ocean fish farming is presently limited commercially to waters within state jurisdictions. However, a Commission on Ocean Policy report recommended last year that the country should move forward with offshore aquaculture. In response, the President listed offshore farming legislation as a priority for 2005. Much of the interest in platform fish farming is due to a lackluster seafood industry that accounts for about $7 billion in the nation’s foreign trade deficit. Proponents have said that the farms would provide a needed boost to coastal communities that have lost jobs and money as the traditional fishing industry has struggled.
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Iranian legislators okay output expansion bill
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Iran’s parliament has approved the country’s expansion of its crude oil production capacity by a much-needed one million bpd over the next five years, according to local media reports. The initiative, part of Iran’s current, fourth five-year economic development, which began March 21, means the country’s production capacity should rise to 5.0 million bopd from its current 4.0 million bopd. Iranian oil officials had expressed concern that the country could lose its status as OPEC’s number-two oil producer. Iran needs to spend $30 billion on all energy projects in coming years.
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