World of Oil

China output hit by floods

China’s crude production fell in July as heavy rain across the country flooded a number of producing wells. In July, China’s crude production reached 113.6 million barrels of oil, down 1.7% from the same period last year. Floods in the west and east of the country have crippled production at some fields, an industry official said. China’s production has been struggling to fight the natural decline in mature fields, with extra capacity in remote fields in the west just managing to offset the decline.

Cambodia boost navy

Cambodia has stepped up naval patrols to protect newly discovered fields off the country’s southwestern coast, government officials said. The country has transferred a brigade of troops to its navy and is training the soldiers in marine skills, the Associated Press reported. Yim Sovann, head of the parliament committee on defense and the interior, said the move “responds to the routine need to protect maritime borders and, more especially, the offshore oil fields being explored in Cambodia.”

PDVSA rig explosion

An oil rig exploded in Venezuela’s eastern state of Monagas on Aug. 10, and burned for most of the day, an official from state oil company PDVSA said. There were no reports of any injuries at the scene. Energy minister Rafael Ramirez told reporters, “I don’t have information about that. I believe we had a problem in an [oil] well.” He added that exploration and production vice president Luis Vierma had travelled to eastern Venezuela to investigate the problem.

Chevron, Total in pact on Iraq’s Majnoon 

Oil giants Total SA and Chevron Corp. have recently started preparatory work on the development of hydrocarbons from one of Iraq’s biggest oil fields, targeting possible operational startup in 2009. The companies signed an agreement last year around Majnoon, Iraq’s fourth biggest oil field, near the Iranian border, and at least one other field in the south of Iraq. Total and Chevron have recently started assessing above-ground conditions for a possible 2009 launch of oil operations such as exploration.

 OPEC sees higher oil flows in July 

A Reuters survey of oil companies, traders and OPEC officials showed OPEC members, excluding Iraq and Angola, had an increase in crude production from June to July, led by a rebound in supply from Nigeria after outages. Ten OPEC members, bound by output targets, pumped 26.8 million barrels per day, up 150,000 bpd from June. The survey indicates most OPEC members are keeping a lid on output even after a jump in crude prices, which hit an all-time high of $78.88 a barrel in July, and despite consumer calls for more production. OPEC agreed last year to lower oil production by 1.2 million bpd from Nov. 1 and by a further 500,000 bpd from Feb. 1, to prop up prices. OPEC officials have repeatedly said crude supply is adequate, rebuffing calls from consumer nations for higher output.

 Countries intensify claims to the Arctic 

Five countries-the US, Canada, Russia, Norway and Denmark-are competing to secure subsurface rights to the Arctic seabed. Under the United Nations Law of the Sea treaty, the countries have rights to economic zones in the Arctic Ocean within 200 mi of their shores; the US is the only country bordering the Arctic Circle that hasn’t signed the treaty. One study by the US Geological Survey estimates the Arctic has as much as 25% of the world’s undiscovered oil and gas. Recently, in an effort to stake their claim, Russian subs dove 2.5 mi to the Arctic shelf and planted their country’s flag. Russia’s claim is based on a belief the Lomonosov Ridge, a vast underwater mountain range that runs underneath the Arctic, is an extension of Russia. Cliff Kincaid, veteran journalist who runs UN watchdog group America’s Survival, Inc., said the US State Department is siding with the Russians, and their motive is to panic the US Senate into passing the UN Convention on the Law of the Sea, thereby giving the UN jurisdiction over the Arctic region. “The UN’s Law of the Sea treaty will give away America’s resources at the North Pole and in other areas of the world,” Kincaid said. In an effort to reinforce Canada’s claim to the area, Prime Minister Stephen Harper began a three-day trip to the Arctic on Aug. 8, 2007, to assert Canada’s sovereignty over the region a week after Russia’s claim. Denmark has also sent an expedition to the Arctic. Danish scientists will seek evidence that the Lomonosov Ridge is attached to the Danish territory of Greenland, making the ridge a geological extension of the island.

 Iraqi Kurdish prime minister approves regional oil legislation 

Iraq’s Kurdish government approved a regional oil law on Aug. 07, despite Iraq’s parliament failing to pass a national law after months of negotiations by the country’s main political blocs. This law will pave the way for foreign investment in their northern oil and gas fields. The measure gives the regional government the right to administer its oil wealth to the three northern governates-Irbil, Sulaimaniyah and Dahuk-as well as what it called “disputed territories,” referring to Kirkuk, one of Iraq’s largest crude production hubs. Kurdish Prime Minister Nechirvan Barzani signed the law, calling it a historic moment. “This is the first time in Iraq’s history that we have a say regarding our natural resources within the frame of the Iraqi constitution,” he said at a news conference in Irbil.

 Ireland announces new licensing round and new terms

 Ireland will launch a new licensing round for oil and gas exploration in the Porcupine Basin in early autumn, said Irish Energy and Natural Resources Minister Eamon Ryan. The new licensing terms include a profit resource rent tax operated on a graded basis of profitability, which will be in addition to the 25% corporate tax rate currently employed. Outlining the details of the changes, Minister Ryan said, “The basis for this decision was to ensure a greater return to the state from our own natural resources, while maintaining the incentive for companies to explore off our shores.”

 PetroChina starts offshore production in Bohai Bay 

PetroChina Co. has started its first offshore production in Bohai Bay. This move is part of an effort to develop the bay’s offshore area, which potentially has vast oil and gas reserves, said parent company China National Petroleum Corp. On July 29, PetroChina launched a trial operation in shallow water in the Chenghai-1 block, said CNPC on its website. The company plans to drill 37 wells in the block to produce 532,000 metric tons of crude a year. The company has drilled 21 wells so far, of which eight have been completed. Of the eight, four have yielded high amounts of crude oil and gas. Although the block has limited designed production capacity, PetroChina predicts that the shallow water area has rich oil and gas reserves and will increase exploration, the company said.

 Norway’s PSA investigating lethal accident on Saipem 7000 

The Petroleum Safety Authority Norway has initiated an investigation into a lethal accident on the lifting facility Saipem 7000 on Aug. 12. A person fell overboard and died during a lifting operation performed for Statoil at Tordis field. Two Petroleum Safety Authority Norway representatives traveled out to the Saipem 7000 to investigate the incident, clarify the chain of events and identify trigger factors and underlying causes. This accident is the first to occur in petroleum activities on the Norwegian Shelf since 2002.

UAE to shut down Lower Zakum West field

In late October, the United Arab Emirates will shut down Lower Zakum West field, which produces 280,000 barrels a day of crude oil, for 17 to 25 days, officials said. “There will be a total shutdown of Lower Zakum West from Oct. 26 for tie-ins of a new gas reinjection facility,” said an official at Abu Dhabi Marine Operating Co. The new facility will inject gas into oil wells, exerting pressure in the reservoir to enable more oil to be pumped out. Lower Zakum Field is one of the largest oil fields in the world. During the shutdown, output of 60,000 barrels a day will continue from Upper Zakum Central, ADMA-OPCO said.

Iraq stifles union with Saddam-era law

Oil union boss Hassan Juma’a has been at the forefront of a public campaign against the signing of a controversial new oil law that would lead to long-term profit-sharing contracts with multinational oil giants. However, the campaign faces difficulty. Oil Minister Hussein Shahristani has issued a directive banning unions from taking part in any official talks about the new law, claiming “these unions have no legal status to work within the state sector.” Juma’a told The Observer, a London-based newspaper, that Shahristani’s approach echoed an infamous law passed by Saddam Hussein in the 1987, Article 150, suppressing trade unions. He insisted that his members would not follow the directive, saying ,“We are working for Iraq.” Iraq’s new constitution, passed in 2005, protects “the right of forming and joining professional associations and unions,” adding, “This will be organized by law,” but since no legislation has yet been enacted, campaigners claim the oil ministry is simply reverting to Saddam-era laws that banned unions.

MMS proposes first Chukchi Sea sale in 17 years

 The Minerals Management Service (MMS) proposes to hold an oil and gas lease sale, Sale 193, in the Chukchi Sea in February 2008, which would be the first Chukchi Sea Outer Continental Shelf lease sale since 1991. The Proposed Notice of Sale was published in the Federal Register on Aug. 3, 2007. The Proposed Notice outlines terms for the sale and describes the proposed sale area, financial terms and lease stipulations designed to protect human, coastal and marine environments. MMS estimates that the Chukchi Sea could contain 15 billion barrels of oil and 76 trillion cubic feet of natural gas. The Proposed Notice also includes proposed royalty suspensions on the production of both oil and natural gas subject to price thresholds. The proposed area is located offshore Alaska from north of Point Barrow to northwest of Cape Lisburne. It contains about 29 million acres and extends from about 25 to 200 mi offshore.

Forum Energy to contest Chinese claim over gas field

 United Kingdom based Forum Energy plc plans to contest a Chinese firm’s claims on a potentially world class gas discovery off the Palawan coast. The area being claimed by the Chinese is part of a “conflict area” in the Spratlys islands which is under a tripartite deal for joint exploration among the Philippines, China and Vietnam. Jose Raymund L. Apostol, Forum Energy Philippines Corp. president, said the company “will exhaust all legal remedies” to assert its right over the Sampaguita oil and gas discovery in the Reed Bank basin covered by the geophysical survey and exploration contract (GSEC) 101 under license from the Philippine government.

 Bahrain to set up $2.7B energy company 

Bahrain will establish a holding company for all oil and gas assets creating a $2.7 billion firm to attract greater foreign investment in the country’s energy sector, the Bahrain Tribune reported. The Holding Company for Oil and Gas will include the Bahrain Petroleum Co., Bahrain Aviation Fueling Co., Bahrain National Oil Co. and Bahrain National Gas Co. under the umbrella of the Bahrain Government’s Mumalkaath Holding. Bahrain is in the process of tendering four offshore oil exploration blocks, with contracts to be awarded by the end of October.

 Venezuela, Cuba begin oil exploration 

Venezuela and Cuba will begin joint offshore oil exploration in Cuban waters in the first such joint venture between the two nations. The project, between PDVSA and Cuba’s energy company CUPET, will include six oil blocks, PDVSA said. The partners expect to find light crude in sufficient amounts to keep a high production level. Initially both companies will perform a seismic study using two-dimensional technology in an area that includes both deep and shallow water. PDVSA currently only produces oil in shallow-water offshore fields in the lake of Maracaibo, in northwest Venezuela.

 Western Gulf of Mexico sale by MMS 

The Minerals Management Service (MMS) recently held a lease sale in the western Gulf of Mexico, attracting $290 million in high bids. Sale 204 offered 3,338 tracts comprising approximately 18 million acres offshore Texas. The MMS received 358 bids on 282 tracts from a total of 47 companies. The top five companies who submitted bids in the lease sale included Statoil Gulf of Mexico LLC, 40 bids with a sum total of $143 million; BP Exploration & Production Inc, 108 bids with a sum total of $55 million; Petrobras America Inc., 40 bids with a sum total of $30 million; Shell Offshore Inc., 11 bids with a sum total of $23 million, and Devon Energy Production Company, L.P., 34 bids with a sum total of $22 million. “The success of this lease sale once again demonstrates industry’s commitment and interest in the Gulf,” said MMS Director Randall Luthi. “The bidding in this sale is an indicator that the Gulf of Mexico will continue to be a strong source for the nation’s energy production future.” The sum of all bids received totaled $369 million.

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