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Vol. 226 No. 9 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Chevron wins control of Unocal as CNOOC backs down
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Unocal shareholders voted “yes” on Aug. 10, 2005, to formally accept a takeover offer from Chevron Corp. The roughly $18-billion deal makes Chevron the second largest US oil company and the fourth largest oil production firm. In addition, the company is now the third largest holder of international reserves. The path to victory was made easier for Chevron, when rival bidder, China National Offshore Oil Corp. (CNOOC), dropped its all-cash, $67/share offer a week ahead of the vote. CNOOC said its decision came after “unprecedented political opposition” from US lawmakers in Washington. Nevertheless, Unocal’s board came very close at one juncture to recommending CNOOC’s bid. Only after Chevron increased its bid to $63/share did Unocal reconsider the US firm’s offer. CNOOC had even considered raising its offer further, but the Chinese firm wanted Unocal to pay a $500-million breakup fee to Chevron and publicly endorse CNOOC’s bid – conditions that Unocal found unacceptable. About 90% of Unocal shareholders voted to receive $69 in cash for each share, although they will actually receive $39.75 in cash and 0.4366 shares of Chevron stock.
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Oil price hits new record, shows continued strength
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In early August, the futures price of West Texas Intermediate vaulted out of the $57-to-$59/bbl range and established a new level above $60/bbl. On the New York Mercantile Exchange, WTI set another new record, peaking at $67.10 on Aug. 12. Trader concerns over tight US crude and refined product inventories, along with geopolitical issues, fueled the run-up in prices. A week later, prices eased back to $64/bbl, but as this issue of World Oil went to press, WTI was headed higher again, pushed by trader fears of reduced US stocks, as well as concerns about potential tropical weather in the Gulf of Mexico. There was also concern about Ecuadorean villagers trying to hinder crude output from that Andean nation.
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Saudi maintains output, moves forward on new projects
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Published reports in several financial newspapers quoted Saudi officials as saying, off the record, that they see no reason to boost the kingdom’s oil output for “the foreseeable future.” These officials believe that it will not be helpful to increase production beyond 9.5 million bopd, because record-high oil prices are the result of insufficient refinery capacities and geopolitical jitters in consuming countries rather than an oil supply problem. In the meantime, state firm Saudi Aramco is moving ahead with additional development projects offshore at its Marjan, Zuluf and Safaniya oil fields. The firm has already awarded a fabrication and installation contract to J. Ray McDermott for five wellhead jackets. Water depths at these Persian Gulf fields range from 49 to 170 ft.
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ONGC expects normal Bombay High output by April
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The BPN platform burns offshore India after a workboat hit it.
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India’s Oil and Natural Gas Corp. (ONGC) said that it expects to restore oil output to a normal, 261,000-bpd level at the Bombay High offshore oil field by next April. Output fell to 138,000 bopd after an accident and fire destroyed the BPN platform. The incident occurred on July 27, when the large workboat, Samudra Suraksha, collided with the platform’s infrastructure, rupturing a gas line. Although 11 workers were killed and another 11 were missing, at least 351 personnel evacuated the platform and the adjacent, Noble Charlie Yester jackup, and were rescued. ONGC said it expects that up to two years will be required to contract, fabricate and install a replacement platform. The Bombay High North field produces about 38% of India’s oil output.
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Mississippi’s governor allows more comments on drilling
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In what has to be a disappointment for the upstream industry, Mississippi’s Republican governor, Haley Barbour, has made conciliatory gestures to opponents of offshore drilling, including initiation of a study that will slow the process and allow more public input. Barbour said that he sent a letter to the state’s Department of Marine Resources, asking that agency to conduct a study to see whether drilling would cause any environmental or other problems. He also made it clear that the Mississippi Development Authority (MDA) will only allow drilling for gas, and not oil, in state waters. On the other hand, Barbour has stopped short of supporting a ban on drilling within 12 mi of the Gulf Islands National Seashore.
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Venezuela’s Chavez, evangelist Robertson trade insults
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A surprising comment by a US public figure could impact Venezuelan oil export policies. During a nightly episode of his television program on the Christian Broadcasting Network, evangelist and former US presidential candidate Pat Robertson called for Venezuelan President Hugo Chavez’s assassination. Commenting on reports that Chavez already believes the US is out to kill him, Robertson said, “I don’t know about this doctrine of assassination, but if he (Chavez) thinks we’re trying to assassinate him, I think that we really ought to go ahead and do it. It’s a whole lot cheaper than starting a war, and I don’t think any oil shipments will stop.” Speaking in support of Chavez, Venezuelan lawmaker Desire Santos Amaral said, “This man cannot be a Christian. He’s a fascist. This is part of the policies of aggression from the right wing....” Ironically, Chavez has threatened in recent months to reduce Venezuela’s dependence on oil exports to the US. This incident could solidify his resolve in that direction. During the first half of 2005, the US imported more than 1.3 million bopd from Venezuela.
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Husky’s FPSO arrives at White Rose field
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The Sea Rose FPSO was feted at a ready-to-sail ceremony in Marystown, Newfoundland, on July 4, 2005. Photo courtesy of Husky Energy.
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Offshore Newfoundland, the Sea Rose FPSO arrived last month at White Rose oil field, 350 km (217 mi) east of St. John’s, after a 48-hr journey from Marystown. The vessel first docked at Marystown in April 2004, where topsides work was carried out until the Sea Rose departed on Aug. 20 after 48 hr of sea trials. First task at the field site was to connect to a subsea production system. Three months of additional hook-up and commissioning will follow before first oil.
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Texas group sees impressive activity
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Latest Petro Index data from the Texas Alliance of Energy Producers show that Texas’ E&P activity is at its highest level since the index was created retroactively, back to 1995. Compiling production, drilling, pricing, employment and rig count data, the Petro Index reached 179.3 in June 2005, up from 150.7 in June 2004 and a base of 100 in January 1995. “Texas producers are operating at a feverish pace, to produce all that they can,” said Alliance President Alex Mills. “But activity is still being constrained by manpower and equipment limitations. This is the first time since before the 1986 price collapse that the Texas rig count has gone above 600.”
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GE invests in Houston independent
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General Electric (GE) Co.’s energy financial services unit, which already owns $1.5 billion in oil and gas reserves, said it would invest more than $100 million in a limited partnership with F-W Oil Exploration LLC to produce natural gas in the Gulf of Mexico. GE, which produces more than 140 MMcfgd and 31,000 bopd, will also finance completion of a 48-mi pipeline to transport 30 MMcfgd from F-W’s fields in the South Padre Island area, 12 mi offshore Texas. F-W COO Doug Nester is an editorial advisor to World Oil.
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Large Rockies gas pipeline proposed
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Kinder Morgan Energy Partners and Sempra Energy signed a memorandum of understanding to look at building a $3 billion gas pipeline that would link Rocky Mountain producing fields with Midwestern and Eastern markets. The 42-in. pipeline would carry 2 Bcfgd for 1,500 mi, making it one of the largest lines in the US. Given its size, both firms obviously are betting on future Rockies gas potential.
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PDVSA will do more on its own
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As Venezuelan President Hugo Chavez jousted with world leaders, state firm PDVSA unveiled a 2006 – 2012 strategic plan that will boost output 75%, to 5.85 million bopd while spending $56 billion. About 40% of that will go to E&P work. Funding will be split 70/30 between the government and private sector. PDVSA also said that ExxonMobil and Shell will not be part of the Mariscal Sucre gas development project. Instead, PDVSA will do all the work by itself.
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CNPC grabs Canadian firm as strategic move
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Although its sister company, CNOOC, failed to acquire Unocal, China National Petroleum Corp. (CNPC) had better luck in purchasing PetroKazakhstan Inc. Ranking as China’s largest oil company, CNPC bought the Calgary-based firm for US$4.18 billion, at a rate of $55/share in cash. Formerly known as Hurricane Hydrocarbons, PetroKazakhstan was approached by several firms before agreeing to the CNPC deal. The company operates solely in Kazakhstan, where it has had its share of troubles. A late-April ruling by Kazakh regulators forced the firm to quit flaring gas, which cut second-quarter output 30%, to 106,000 bopd. For its part, CNPC looks at the deal as part of an overall strategy to acquire greater amounts of upstream assets while establishing itself as a major, international upstream player.
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No monopoly, says Putin
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Russian President Vladimir Putin said that he opposes any company holding a monopoly on oil production in the country. His comments responded to statements made by Rosneft President Sergei Bogdanchikov that his firm intends to become Russia’s largest oil producer within the next several years. “We are not going to create any monopolies (in oil production),” said Putin. “I hope that other companies will develop rapidly.”
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Iran swims in cash
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National Iranian Oil Co. official Hojjatollah Qanimi Fard told a state-controlled radio station that the country’s oil export revenues this year will total $43 billion, an all-time high. Oil earnings in this fiscal year have already surpassed Iran’s foreign exchange needs, estimated at $16.1 billion.
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Pemex boosts gas output
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Versus the same period last year, Mexico’s state firm increased gas production 3.9% in first-half 2005, to 4.74 Bcfd, thanks to gains made in the northern region, which accounts for 38% of all gas output. Non-associated gas was up 18.5%, to 1.81 Bcfd. Associated output averaged 2.93 Bcfd. 
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