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Vol. 226 No. 11 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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ANP awards blocks
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Brazilian upstream regulator ANP awarded 251 of 1,134 exploration blocks that it offered in the seventh licensing round, yielding $342 million in signing fees. This compares to 154 blocks awarded out of 913 tracts in last year’s sixth round. Leading companies in the tender were Petrobras (95 blocks), Portugal’s Petrogal (30 blocks), Repsol-YPF (16 blocks) and BG Group (10 blocks). In addition, Brazilian Mines and Energy Minister Silas Rondeau said that his country will continue tendering exploration licenses every year to maintain oil self-sufficiency, something that Brazil hopes to achieve in 2006.
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New Zealand sees boom
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Several operators’ plans have prompted New Zealand officials to prepare for what is being called a mini-boom in activity. Already, Shell Todd’s $1-billion Pohokura gas field development is underway, and development of Origin Energy’s Kupe gas and oil field begins in about two months. Also due for initiation is work on the Tui and Maari fields offshore southwest Taranaki. First output from all these fields could occur by early 2007. Underscoring that these projects will proceed is the fact that Diamond Offshore’s Ocean Patriot semisubmersible has been contracted to drill in these areas and will arrive early in 2006.
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Total courts Chavez
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As Venezuela’s largest foreign investor, Total has tried to gain more cooperation from President Hugo Chavez, telling him that mutual trust is needed to overcome disagreements over some oil contracts. During Chavez’s two-day visit to France last month, Total Vice President for America, Philippe Armand, told Chavez that his firm understands the changes underway in Venezuela that involve putting “energy at the service of the people.” The company has mentioned the possibility of using state-of-the-art technology to triple or quadruple recovery rates of extra-heavy crude in the Orinoco region of eastern Venezuela. “I can ensure to you that we are ready to contribute to this,” Armand told Chavez during a briefing. Chavez has implemented what he calls a “Bolivarian revolution” to expropriate business holdings considered idle.
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Hurricane Rita piles on damage, interrupts production
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Before Gulf of Mexico (GOM) operators could make significant progress in repairing and/or replacing facilities damaged by Hurricane Katrina, the area suffered another major hit by Hurricane Rita on Sept. 23 – 24. At least 63 mostly older platforms were destroyed by Rita, which also forced a 100% shut-in of average Gulf oil production of 1.5 million bpd, plus a shut-in of 80% of average GOM gas output of 10 Bcfd. As of Oct. 21, 986,805 bopd were still off-line, as were 5.34 Bcfgd. In all, Katrina and Rita destroyed 109 platforms and significantly damaged another 53 platforms. The two storms also caused 19 mobile drilling rigs to break free from their moorings and drift off location, in some cases for dozens of miles. Several rigs that either drifted or capsized were damaged beyond repair. For more details on the extent of damage, as well as what the industry may have to do to in terms of future practices and design standards, please see the "Battering of US GOM structures brings standards discussion" article.
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Alaskan producers help to fill supply gap
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North Slope oil producers have pledged to help fill the US supply gap left by Hurricanes Katrina and Rita. In response to a request by Alaska Gov. Frank Murkowski (Republican), two of the largest producers said that they will increase output by about 10,000 bopd. According to Murkowski, much of the increase will result from accelerated work on previously planned projects. Furthermore, when state approval is required for this work, Alaskan agencies are expediting the producers’ requests. BP Exploration (Alaska) Inc. told the state Division of Oil and Gas that it would increase output from wells in Niakuk and Northstar fields, due to accelerated well workovers and increased injection of fluids in reservoirs to stimulate production. ConocoPhillips Alaska said it would ramp up output from the Kuparuk River and Alpine fields. “I appreciate the willingness of the producers, in this time of national need to leave no stone unturned in their efforts to increase production,” said Murkowski. He also noted cooperation in efforts to boost long-term production.
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ConocoPhillips and Alaska reach gas pipeline agreement
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As announced by the office of Gov. Frank Murkowski, the state of Alaska and ConocoPhillips have agreed on base fiscal contract terms for a natural gas pipeline. In addition to ConocoPhillips, Alaska has been negotiating with BP and ExxonMobil. “This is a significant milestone, and there are other positive signs on the horizon,” said Murkowski. “Additional work remains.” Although Murkowski said that he cannot disclose contract terms until the state reaches contract agreements with all three companies. However, he did say that the ConocoPhillips terms reflect six principles that he has insisted upon. These principles include Alaskans receiving a fair share of revenues from a gas pipeline; residents being able to access the gas; future explorers must have access to the pipeline; the pipeline must be expandable; the state should own a share of the pipeline; and Alaskans should have jobs related to building the project. The governor stressed that the agreement provides maximum value to Alaskans.
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Oil prices weaken on a variety of factors
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Light sweet crude prices on the New York Mercantile Exchange (NYMEX) declined to the low $60s/bbl range, as surging imports and re-opened refining capacity eased US supply problems during the third week of October. As of Oct. 21, only about 5% of US refining capacity was still off-line. Furthermore, high product prices appeared to have reduced demand, as consumers put the brakes on consumption. The US Energy Information Administration said that four-week gasoline demand figures were off 2.2% from the same period a year earlier. API also reported that higher gasoline prices in September cut total US crude oil and petroleum product demand by 5.3% from a year earlier. On Oct. 24, the NYMEX price fell below $60/bbl, as traders reacted to Hurricane Wilma bypassing Gulf of Mexico producing areas. Moderating prices may be short-lived, as EartSat predicts a colder-than-normal winter, particularly in the US Northeast. This could push natural gas and heating oil prices higher again.
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BP will spend $2.2 billion on Wamsutter expansion
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BP will invest up to $2.2 billion to double production from its acreage in the Wamsutter gas field in the Rockies region of the US. The firm said a multi-year drilling program should increase BP’s share of ultimate recovery from the field by 450 million boe, and increase BP’s daily net production to 250 MMcfgd from 125 MMcfgd by the end of the decade. This investment includes drilling 2,000 wells over the next 15 years, plus a two-year, $120-million technology field trial program that could lead to still further development. “This major investment follows more than two years of focused, accelerated drilling and technical studies, which revealed the untapped potential of the Wamsutter resource,” said Tony Hayward, chief executive, BP Exploration and Production. “It has created 1,600 new development locations. It will allow us to continue aggressive development of one of the largest (US oil and gas fields).”
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ExxonMobil submits PDO for Ringhorne East
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ExxonMobil has submitted a plan for development (PDO) for Norway’s Ringhorne East oil field in the North Sea. The field is in Block 25/8, near Balder field. The firm estimates that recoverable reserves are about 7.5 MMcm (47.2 million bbl) of oil equivalents. Total development costs are estimated to be about NOK 1 Billion ($153 million). According to the development plan, ExxonMobil will drill the production wells from Ringhorne field. The oil output will be processed from Ringhorne and Balder facilities. Government officials said that they would process the development plan for Ringhorne East before the end of 2005.
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Figures differ on current Saudi output
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If one were to merely take the word of Saudi Arabian King Abdullah at face value, then one would believe that the kingdom is pumping more than 10 million bopd, in an effort to help relieve high oil prices. But that may not be quite true, say other industry sources. They contend that output is averaging more around 9.5 million bopd. So, what accounts for the disparity? Perhaps, noted one source, the king was referring not only to crude production, but also to liquids output. Saudi Arabia produces more than 1 million bpd of NGLs and other liquids not classified as crude. So, adding this output to crude would yield a figure more in line with what was said by the king. Throughout much of this year, Saudi Arabian Oil Minister Ali Naimi has said that the kingdom stands ready to pump at its full capacity of 11.0 million bopd. However, as Naimi has frequently noted, there has been little demand for Saudi’s 1.5 million bpd of spare, high-sulfur crude.
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Domenici pushes offshore initiatives
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Senate Energy and Natural Resources Committee Chairman Pete Domenici (Republican – New Mexico) said he is formulating legislation that will permit states to opt out of offshore oil and gas leasing bans. He was quick to add that it is unlikely that it can pass Congress this year, but he wanted to “get some momentum on it,” so that passage can take place during 2006. In the shorter term, Domenici is urging the Bush administration to quickly open up the Gulf of Mexico Lease Sale 181 area, much of which has been stalemated by political bickering and withheld from leasing. “This area is already fixed, already ready,” said Domenici. “That is why it is so important to the OCS system.”
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Chevron proceeds with new GOM project
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Undeterred by recent problems caused by Hurricanes Katrina and Rita, Chevron said it is proceeding with development of Blind Faith field in the deepwater Gulf of Mexico. The field will be developed using a semisubmersible production facility, with first output slated during first-half 2008. Blind Faith lies in about 7,000 ft of water, 160 mi southeast of New Orleans, on Mississippi Canyon Blocks 695 and 696. Total capital costs for the project are roughly $900 million. Initial production would be 30,000 bopd and 30 MMcfgd, with eventual capacity of 45,000 bopd and 45 MMcfgd, upgradable to 60,000 bopd and 150 MMcfgd. “This project is a key asset in our deepwater portfolio and is expected to provide significant new oil and gas resources in the Gulf of Mexico,” said Chevron North America E and P Co. President Ray Wilcox.
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Tengiz output to double in 2007
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Chevron subsidiary TengizChevroil will be able to nearly double output at Tengiz oil field in western Kazakhstan from 2007, said Chevron CEO David O’Reilly. He said the firm was increasing its investment and developing a major project to enlarge capacity at Tengiz. Implementation is expected to complete by early 2007. O’Reilly’s comments came after holding talks with Kazakhstan President Nursaltan Nazarbayev. O’Reilly said that he and Nazarbayev discussed other investment opportunities in Kazakhstan and continuing efforts to source inputs locally. TengizChevroil is Kazakhstan’s largest oil producer, with 13.6 million t of oil and 4.7 Bcm of gas in 2004. The firm also drills a quarter of all Kazakh wells. 
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Opinion
Simmons last month spoke as a guest lecturer (based on his book), sponsored by Houston financial services firm, Kanaly Trust Co. It was a triumphal return home, of sorts, for him, as he had just wrapped up a series of promotional appearances around the US on behalf of the book. In a conversation beforehand, Simmons told this editor, “Just because you put something in a book (instead of occasional papers), people tend to put you in a different category. When I started on this, it even made my partners nervous. They said, ‘Shouldn’t you line up some reservoir engineers?’” He did listen to the latter suggestion, and in the process, found that “gas problems on top of the Saudi reservoirs were just as bad as the oil problems at the bottom.” This revelation, he said, became the basis for which the above stated issues were then explored. Needless to say, the Saudis see things differently. “Yeah,” said Simmons, “the Saudis have four basic reasons to disqualify my book – 1) That SPE papers tend to exaggerate field problems; 2) That I’m a banker not an engineer; 3) Everything I say that might have been correct is now incorrect, due to advances in modern oil field technology; and 4) They think that they’ve technically proved that they have no problems.” Whether he proves to be 100% right or not, Simmons has achieved one minor miracle – he has forced Saudi Aramco, long known for being tight-lipped about everything, to embark on a public relations makeover, including a significant expansion in press releases and website space devoted to information. That, in itself, was worth writing the book.
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