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Vol. 228 No. 02 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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China saw growth in 2006 crude output
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China’s oil production in 2006 rose by a moderate 1.7%, or 3.07 million tons, year on year, to 183.68 million tons (3.67 million bopd), according to figures from the country’s National Bureau of Statistics. The growth rate was down from a 3.5% annual gain recorded in 2005. Offshore fields were likely to have contributed most to the country’s crude output growth last year.
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Pertamina set to evolve
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Indonesia's state-owned oil and gas firm, Pertamina, might take its subsidiaries public, but the holding company, itself, will not be listed, said Oil Minister Purnomo Yusgiantoro on January 30. The Indonesian government owns 100% of Pertamina, which was transformed from a national oil and gas company into a limited liability company in 2003, under the provisions of oil and gas law No. 22 of 2001. The government expects to further restructure Pertamina, to make it more efficient and competitive. This move is part of Indonesia's transition from years of closed, monopolistic domestic markets to a liberalized sector.
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Marathon ups spending
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Marathon Oil has set its 2007 worldwide E&P budget at $2.231 billion, for a 21% gain from 2006 spending of $1.848 billion, excluding major lease acquisitions of about $463 million in the Bakken Oil Shale of North Dakota and the Piceance Gas basin of Colorado. The company's 2007 worldwide exploration and exploitation budget is $802 million, which is up 38% from 2006 spending. About 48% of this budget is for exploration activity that includes funds to drill 14-17 significant exploration/appraisal wells. Worldwide production capital spending is projected to be $1.429 billion.
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Colombia gets big bucks
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Seeking to revive its upstream sector, Colombia attracted a record level of private investment last year and is hoping for a repeat performance in 2007. According to the country's National Association of Hydrocarbons (ANH), private oil investment in 2006, through the third-quarter, amounted to $1.2 billion, indicating that companies probably invested as much as $1.5 billion for the whole year.
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Chavez gains powers, gives ultimatum to Orinoco operators
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On Jan. 31, Venezuela's Congress granted President Hugo Chávez powers to rule by decree for 18 months, as he tries to force through the nationalization of key industries and businesses that are crucial to his leftist revolution. The vote allows anti-US leader Chávez, who has been president since 1999, to deepen state control of the economy and other public sectors, such as defense, security and oil. Chávez's increasing centralization of power in the fourth-largest oil exporter to the US prompted comments from US President George W. Bush. �I'm concerned about the Venezuelan people, and I'm worried about the diminution of democratic institution(s),� said Bush in an interview with Fox News. Anti-Chávez newspaper Tal Cual headlined its front page, �Heil Hugo,� equating the enabling law with powers granted to Nazi leader Adolf Hitler in the 1930s. The El Mundo newspaper ran the headline, �Superchavez enabled.� The lawmakers, all loyal to Chávez after opposition parties boycotted the 2005 congressional elections, took the flamboyant step of holding their vote in public, in a square in downtown Caracas. In Spain, newspapers also denounced the granting of powers to Chávez. The central-left wing newspaper, El Pais, said that Chávez intends to �establish a dictatorship based on presidential decrees,� and said that the enabling law bestowed upon him �almost dictatorial� powers. Right after receiving his new powers, Chávez exercised them on Feb. 1 by declaring that foreign companies that partner with state firm PDVSA in Orinoco upgrade projects have until May 1 to adapt their structures to new joint ventures in which PDVSA will have at least a 60% stake. �I'm sure they will accept, because we will continue to be partners,� said Chávez. �But if they do not agree, they are free to leave.�
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OPEC members strive to implement additional cuts
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Crude oil futures jumped above $56/bbl after Saudi Arabia said that it would cut 158,000 bpd from its production during February. The cut is in line with commitments made by OPEC members as part of the group's supplementary production cut of 500,000 bopd, agreed on Dec. 14, 2006. As of the Feb. 1 cuts, Saudi Arabia will have cut 1 million bopd since last summer, said kingdom officials. Oil traders were expected to focus on whether other, less reliable OPEC members will follow suit and cut crude output to match their respective commitments from the Dec. 14 agreement. There had been some cynicism expressed about the validity of OPEC's previous 1.2-million-bopd cut that was approved in October, with implementation to begin last November. Tanker trackings had indicated export loadings were averaging 350,000 bopd above the reduced quota.
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BP to significantly increase CBM activity in San Juan basin
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BP said that it will invest up to $2.4 billion over the next 13 years to increase its share of ultimate recovery of coalbed methane from the San Juan basin of southwestern Colorado by an estimated 1.9 Tcf. The company anticipates a steady development program that will increase BP's net production of 425 MMcfgd by more than 20%, and maintain production above present levels for more than a decade. The project includes funding for the drilling of more than 700 new wells, for which BP has obtained regulatory infill approval, and associated field facilities. To minimize environmental impact, BP plans to drill nearly all of the new wells from existing well pads, using existing roads and pipelines, where possible. �This investment will allow us to continue the responsible development of one of the largest gas fields in the US while enhancing our ability to continue delivering clean-burning natural gas to domestic markets,� said Tony Hayward, Chief Executive, BP Exploration and Production. The San Juan basin project is part of a 10-year, $45-billion-plus US E&P program that includes major investments in the deepwater Gulf of Mexico, Alaska and the Lower 48 states. �Continued development of the San Juan basin is an important part of that effort,� said Bob Malone, Chairman and President of BP America.
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Estimated US drilling activity hits 21-year high
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US drilling estimates in third-quarter 2006 showed nearly twice the activity level as recorded during lows of the early-to-mid-1990s, said API. As per API's 2006 Quarterly Completion Report: Third Quarter, an estimated 21-year high of 37,261 wells was completed during the first three quarters of 2006. In the third quarter, there were 12,687 completions. This is the highest single-quarter figure since first-quarter 1986, and the 12th consecutive quarter of increases. US wells are not as skewed toward gas�3,960 oil wells were completed in third-quarter 2006. This number exceeds every oil figure in every quarter of this decade and the 1990s. API also reported total footage drilled in the first three quarters and in the third quarter at 212.5 million ft and 73.1 million ft, respectively, the highest levels since 1985.
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NOIA says officials need to spend money to make money
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The Newfoundland Ocean Industries Association believes that provincial officials can do more to foster E&P activity. A NOIA statement said, �For more than a decade, oil and gas have fueled Newfoundland and Labrador's economy. In recent years, petroleum-related activity has accounted for up to 24% of provincial GDP and as many as 17,000 jobs. (The year) 2006 saw the first �petroleum budget,' with oil providing almost C$1 billion, close to 20% of total revenues, to fund provincial priorities. Clearly, the petroleum industry has become critical to our provincial economy and treasury. It can contribute more in the future, if managed effectively. Therefore, some portion of government's petroleum revenues should be reinvested . . . . The first priority for this investment must be attracting exploration.�
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Iran signs majors to develop South Pars
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Iran signed a service agreement worth $4.3 billion with Royal Dutch Shell and Repsol YPF for the development of Phases 13 and 14, called Persian LNG, of the giant South Pars offshore gas field. As this issue went to press, Iran was within days from signing a second LNG deal with Total and Petronas. As reported by the official Iranian news agency, IRNA, �The development project of Phases 13 and 14 of South Pars was signed by the National Iranian Oil Company, Shell and Repsol on Saturday evening (Jan. 27).� IRNA quoted NIOC Managing Director Gholam Hossein Nozari as saying, �The value of the upstream project is $4.3 billion, and the total worth of the project will reach $10 billion with the finalization of the [downstream] contracts due at the end of 2007.�
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Bush to expand US petroleum reserve slowly
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Last month, US President George W. Bush announced a plan to double the US Strategic Petroleum Reserve to 1.5 billion bbl. Amplifying Bush's announcement, Energy Secretary Samuel W. Bodman said, �I believe that expanding the Strategic Petroleum Reserve is a wise and prudent policy decision that will provide an additional layer of protection for our nation's energy security.� Outlining the logistics, Bodman added, the current (reserve) holds about 691 million bbl of crude oil, which is the approximate equivalent of 55 days of net imports. By expanding the reserve, we will have (about) a 97-day supply of net import protection. Adding to the current reserve will happen in stages over the next two decades, to coincide with construction and expansion of our facilities. Our goal is to have the expansion completed by 2027.�
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Shell provides surprise, outlines 2007 plans
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Royal Dutch Shell pleasantly surprised its investors on Feb. 1 by reporting a fourth-quarter profit gain of 11%, besting most analysts' predictions. The firm also replaced its oil and gas production with new reserves in 2006 for the first time in a least four years. However, Shell did admit that last year's replacement ratio of about 150% is partially due to the unusual inclusion of new reserves from Canadian oil sands and a gas-to-liquids project in Qatar. Furthermore, the company has been able to defer, to 2007, a downward revision to reserves from the divestment of half of its stake in the giant Sakhalin 2 project to Gazprom. Shell said that the sale's impact will be substantial on the company's reserves replacement ratio this year. Shell said capital spending after acquisitions and disposals should rise to $22 billion to $23 billion this year. The new spending will cover 30 additional upstream projects.
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BP details Browne succession plan
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BP said that after more than a decade as CEO, Lord John Browne will retire at the end of July, to be succeeded on Aug. 1 by Tony Hayward, who heads BP's E&P operations. Chairman Peter Sutherland noted, �Last summer, John and I had agreed that he would stay as CEO until the end of 2008. John decided that it would be in the company's interest to name a successor now, to provide an orderly transition. Having made that decision, which the board fully supports, we came to the conclusion that a six-month handover would be more appropriate than 18 months.� Browne has presided over a five-fold increase in BP's market capitalization.
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Opinion
Much activity and technical progress have taken place over the last 30 years, yet many issues from the mid-1970s remain relatively unchanged today, both in the US and elsewhere. As regards the US, my sense of déjà vu was prompted by the recent passing of former President Gerald Ford. When he took office in August 1974, energy was a top priority after the Arab oil embargo of 1973 and the run-up in oil prices. In no less than the hallowed pages of World Oil’s September 1974 issue, there are some interesting statements from Ford that still apply today. For instance, Ford stated that the US should “establish and enforce environmental standards for all energy-developing and consuming industries.” He said that the US “should develop all currently known oil and gas resources to the maximum extent, consistent with environmental considerations.” He said the US “should encourage domestic oil exploration and development,” to reduce reliance on foreign oil. And Ford said that the US “should provide incentives for US development of non-historic sources of energy, including oil shale, coal and tar sands, and nuclear energy.”
Parts of President George W. Bush’s State of the Union speech last month almost borrow from Jerry Ford’s outline. Bush wants the US to reduce gasoline usage, to cut reliance on Middle Eastern oil. He also wants to step up US oil production in environmentally sensitive ways. He calls for increasing the supply of alternative fuels, and wants to change more rapidly the fuels used to generate electricity. Perhaps the biggest difference between Bush’s list and Ford’s is that Bush says all his measures will help fight global climate change. Nevertheless, most of the progress made on energy policy occurred under Ford and his successor, Jimmy Carter. Every president since Carter has given lip service to energy and very little effort. Ford named the first “energy czar,” William Simon, and helped to create the International Energy Agency. Carter pushed through the creation of the Department of Energy. They also championed greater US exploration. Their efforts resulted in a peak of US oil production in 1985 at 9.2 million bpd. It’s all been downhill since.
Internationally, after many years of impotence, OPEC is enjoying renewed influence. Angola just joined the group, and Ecuador may apply for re-admission after thumbing its nose 15 years ago. In South America, a new wave of nationalism, led by Venezuela and Bolivia, is invading the continent, just like in the 1970s. Back then, it may have made some political egos feel better, but it wreaked havoc on those countries’ upstream sectors. Unfortunately, a new group of would-be dictators, disguised as self-styled populists, is on a greedy binge, eager to harvest proceeds from high oil prices without properly reinvesting in their E&P sectors. Their shoddy treatment of Western firms will certainly reduce the amount of technical help they receive. Yes, it surely feels like 1974 to 1979 lately.
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