World of Oil

Oman aims for further output boost

Oman aims to boost its total oil output for the second year running after halting a six-year production decline from aging fields last year. The country aims for total crude and condensate output of 805,000 bpd in 2009, up from 757,000 bpd in 2008, said Nasser al-Jashmi, the state undersecretary for oil and gas. Total oil output in 2008 rose 47,000 bpd from 2007, Jashmi said. That was the first year of growth since peaking in 2001 at 956,000 bpd, official data showed.

CNOOC to invest billions

China National Offshore Oil Corporation (CNOOC) announced it will increase total investments in 2009 to $16.5 billion, up 26% from last year. The company plans to produce 352.2 million bbl of oil equivalent this year, 14% more than last year, general manager Fu Chengyu said. The targeted growth is sharply higher than its output gains last year, when it produced 314.7 million boe, 6% more than 2007. The company is expected to bring its first major refinery, the 240,000-bpd Huizhou plant, into operation early this year after months of delays.

Petrobras’ oil production hits record

Petrobras’ oil production in Brazil reached a monthly record in January. The company announced that it produced 1.923 million bpd in January, a 5.3% rise compared to last January and up 2.5% from volumes in December last year. Though oil production was up, natural gas production went down. The company said natural gas production in Brazil was 1.663 Bcfgd in January, 184 MMcfd less than in December last year.

Repsol buys EnCana’s Deep Panuke output

Spain’s Repsol agreed to buy all the output from EnCana Corp.’s $700 million Deep Panuke natural gas project off Canada’s Atlantic Coast. Repsol will buy Deep Panuke’s production of up to 300 MMcfgd for the life of the project, adding to the Spanish firm’s growing Canadian presence. Deep Panuke contains as much as 892 Bcf of gas. The project is expected to begin production in the fourth quarter of 2010. It will be Nova Scotia’s first offshore development since the Sable gas field, which started up in 1999.

 Chavez wins referendum 

Venezuelan President Hugo Chavez won a referendum to lift term limits, allowing him to stay in power as long as he keeps winning elections. Electoral officials said the referendum received 54% of votes in favor of the constitutional amendment to remove limits on presidential re-election. The margin of victory was larger than expected after opinion polls before the vote gave Chavez only a slim lead. Chavez, whose current term ends in 2013, has already been in power for 10 years, and his win in this referendum helps clear the way for him to fulfill his declared goal of ruling the nation for decades. The victory allows Chavez to put behind him a vote loss in 2007, when his first attempt to remove constitutional restraints on his extended rule was defeated. Of the 2012 election, Chavez said, “Unless God decides otherwise, unless the people decide otherwise, this soldier is already a candidate.”

 US oil and gas leases canceled and pulled from sale 

US Interior Secretary Ken Salazar, the US Bureau of Land Management (BLM) and the US Forest Service have canceled 77 energy leases and pulled 37 parcels from scheduled lease sales. In Utah, Salazar canceled 77 energy leases covering 130,000 acres, saying the parcels were too close to national parks and needed more environmental review. The parcels were among 116 sold in that state at auction in mid-December. Salazar instructed the BLM not to accept the bids, totaling about $6 million. Instead, the money will be returned to the bidders. Salazar said the leases were all “in close proximity” to Arches and Canyonlands national parks, Dinosaur National Monument and Nine-Mile Canyon, and that drilling on the parcels could hurt air quality in those areas. Salazar also took eight leases in Wyoming off the table the day before the BLM’s scheduled auction. Salazar said he was responding to concerns expressed in a letter from Wyoming Governor Dave Freudenthal to BLM Wyoming State Director Don Simpson on parcels in the Rock Springs and Cody field offices. The auction took place on Feb. 3 and saw the sale of 112 parcels covering 121,700 acres of land for about $2.4 million. Freudenthal said that leasing the Cody acreage could harm wildlife and traditional land uses such as grazing. Freudenthal said the Rock Springs parcels, which lie within the Jacks Morrow Hills, need to be reexamined because of their possible impact on sage grouse. The BLM and Forest Service have pulled 30 parcels of 120 total from a Colorado lease sale. The Forest Service asked the BLM not to sell 20 parcels that had been set for auction so the agency could complete further study. The bureau’s own San Juan field office asked to defer an additional 10 parcels from the sale, bringing the total acreage available to 81,557 acres, down from more than 130,000 acres.

 Iran signs new Turkmen gas deal 

Turkmenistan will export 353 Bcf of gas per year from Bolutun Field to Iran, which in turn will help develop the field, under the terms of a new deal struck by the pair. Under the deal, Iranian companies would develop the field in Turkmenistan and, in exchange, gas from the field would be exported to the Islamic Republic. “According to this agreement, 353 Bcf of gas will be exported to Iran per year from the Bolutun gas field,” Iran’s Oil Minister Gholamhossein Nozari said. The two sides have yet to reach a final agreement on the price of the exported gas, giving no details on when the accord would take effect and gas exports start.

 Italy suspends Total Italia’s Gorgoglione project

Italian authorities suspended Total Italia’s license to develop Gorgoglione Field in the southern region of Basilicata, police said, the latest development in an ongoing corruption probe. Police said that the suspension of the license to develop liquid and gas hydrocarbons at the field would last for one year. In December, police arrested Lionel Levha, chief executive officer of Total Italia exploration and production, as part of the inquiry. Total Italia said at the time Levha and three other managers were being investigated for possible irregularities in the Tempa Rossa project in the Basilicata region.

 Texas activity reverses course after multi-year climb

A six-year expansion of the Texas E&P economy halted in late 2008, according to the December Texas Petro Index, published by the Texas Alliance of Energy Producers. Economic recession undercut demand, and plummeting wellhead prices discouraged producers from applying for drilling permits and starting new wells. “The Petro Index reached a record high of 282.3 last September, and every indicator of the Texas industry’s economic health ended 2008 with a higher average than in 2007,” said economist Karr Ingham, who compiles the Petro Index. “However, leading indicators—such as wellhead prices, rig counts, production values and drilling permits—have dropped severely since the Petro Index peaked.” Based on many upstream indicators, the Texas Petro Index declined to 278.6 in November and 271.8 in December. It stood at 244.6 in December 2007. “In the December data, petroleum employment fell for two straight months to 221,200, down from 226,800 in October,” Ingham said. “We shouldn’t think that we’ll escape the US economic downturn without notable job losses that typically come with such a cyclical decline.”

Peru to investigate Petro-Tech sale 

Peru’s Congress voted to establish a commission to investigate the sale of Petro-Tech Peruana for $900 million to a partnership made up of Colombia’s Ecopetrol and the Korea National Oil Corporation (KNOC). The legislature gave the commission 60 days to report its findings. Lawmakers acted on a request from President Alan Garcia, who has strongly criticized the sale. The announcement of the Petro-Tech sale has caused a controversy in Peru, in part because the state won’t receive any tax revenue from the deal. “If it is proven that there is some kind of irregularity or if it is shown that Peru has been hurt by this, then the executive branch will have to take some decision. This is also why the Congress has to act, although we will do so carefully,” Prime Minister Yehude Simon said. Petro-Tech has one operating lot in Peru and 10 exploration lots. Garcia said that the commission could investigate the relationship between Petro-Tech and two government bodies: Petroperu, the state-owned oil refiner, transporter and retailer; and PeruPetro, the agency that awards concessions for lots. Reports have also suggested that Petro-Tech was involved in industrial espionage and the awarding of concessions for oil and gas lots, although the company has denied that.

Gazprom officially takes over NIS 

Russian monopoly Gazprom formally took control of Serbian oil monopoly NIS and appointed Kirill Kravcenko as chief executive in mid-February. “The biggest strategic goal is to make NIS a leading oil company in this part of Europe,” Gazprom Neft head Alexander Dyukov said. As part of a wide-ranging accord, Serbia will allow the building across its territory of the South Stream gas pipeline to transport Russian gas to southern Europe while Moscow will build an underground gas storage facility in Serbia. Previously, a new board of directors was named comprising six Russian and five Serbian representatives. Dyukov’s adviser, Dmitry Malishev, was appointed chairman of the board. Gazprom bought a 51% stake in NIS for $520 million this month, pledging to invest about $709 million in the Serbian company.

ExxonMobil halts work at Sakhalin

 ExxonMobil stopped work at two deposits at its Sakhalin 1 oil and gas project after Russia failed to approve budgets and work plans for 2008 and 2009. Russia’s Exxon Neftegas (ENL) and its partners “have no choice but to implement a controlled and orderly suspension of work on the Odoptu and Arkutun Dagi projects,” said Dilyara Sydykova, an ExxonMobil spokeswoman. “ENL will continue to make every effort to secure the approval of these budgets.” The Sakhalin 1 partners, which include Russian-owned Rosneft, have complied with all information requests from the Russian authorities as they seek approval, Sydykova added. The projects are in early stages, and no production facilities have been installed. The halt should not affect oil and gas output at Sakhalin 1’s Chayvo Field. Production at Sakhalin 1 peaked at 250,000 bpd in February 2007 and averaged 193,000 bpd last year, according to the Russian Energy Ministry’s CDU-TEK unit. Rosneft and India’s ONGC Videsh each own a 20% stake in the project. Japan’s Sakhalin Oil and Gas Development and ExxonMobil each own a 30% stake.

Petrobras halts GOM work

 In an effort to give priority to Brazil’s sub-salt projects, state-run Petrobras will delay exploration of some blocks in the Gulf of Mexico. However, Petrobras’ International director, Jorge Luiz Zelada, said there would be no cancellation of any international project, nor the return of blocks in the Gulf of Mexico to switch investment to sub-salt deposits. “Our international investments are maintained at the same level as last year,” he said. He did note that the international area had not kept pace with the overall expansion of Petrobras investment for the period 2009–2013. A rig sent to drill in Tupi Field in the Santos Basin, off the coast of Sao Paulo State, would cause the main delay of drilling in the GOM. The rig originally was intended to drill in deep waters off Mexico.

 Abuzar leak cuts output by 40,000 bpd

Oil production at Iran’s offshore Abuzar Field has declined by 40,000 bpd due a gas leak that began two weeks ago, said Ghodratollah Larijani, director of planning at Iran Offshore Oil Company. Larijani added that the situation would soon be brought under full control. “The production of oil [at Abuzar] has dropped by 40,000 bpd to between 100,000 bpd and 110,000 bpd due to an accident that led to the spewing of gas,” Larijani said. Iranian officials reported the leak earlier this month but gave conflicting accounts as to whether a fire had also erupted on one of the field’s three platforms. Another Iran Offshore Oil Company official, Gholam-Abbas Jokar, said 10 of Abuzar Field’s 70 wells had been shut in because of the leak.

 Bonny output slows

Oil production at Shell’s Bonny Light crude terminal in Nigeria has fallen to about 90,000 bpd because of security concerns in the Niger Delta. Shell warned that unrest in the delta meant it may be unable to meet some oil export obligations from its Bonny terminal for the rest of February and some of March. “It’s currently at 90,000 bpd. We hope to get it back to at least 200,000 bpd in the coming days,” a senior Nigeria National Petroleum Corporation (NNPC) official said. Production of Bonny Light has fallen sharply in the last few years since the region’s main militant group, the Movement for the Emancipation of the Niger Delta, began a campaign of violence against the oil industry. The NNPC official said the Bonny terminal was producing more than 500,000 bpd before the attacks started in early 2006.

 KNOC tackles Iraqi fields alone 

South Korea’s state-run Korea National Oil Corporation (KNOC) began an oil exploration project in Iraq on its own, after failing to attract consortium members for the $2.1 billion deal. Under the deal, KNOC will operate two oil fields—Qush Tappa and Sangaw South—and own stakes of between 15% and 20% in six fields including the Bazian Block in the Kurdish region, which is the only block to be run in a consortium. In return, KNOC will provide $2.1 billion worth of infrastructure in the Kurdish region including power facilities, water services, sewage systems and other infrastructure. KNOC will soon announce plans to begin a $600 million operation, the first phase of the infrastructure project. It will offer another $1.5 billion once the prospects for crude exports from the region are clear. The eight blocks—five near Irbil and three others near Sulaymaniyah—have estimated oil reserves of 7.2 billion bbl, of which South Korean companies will have the rights to 1.9 billion bbl.

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