Looking ahead

August 1998 Vol. 219 No. 8 Looking Ahead Lower oil prices spur industry groups to seek marginal well incentives. The Interstate Oil and Gas Compact Commission has called on nat

August 1998 Vol. 219 No. 8
Looking Ahead

Lower oil prices spur industry groups to seek marginal well incentives. The Interstate Oil and Gas Compact Commission has called on national leaders, including President Clinton, to take action to preserve marginally economic U.S. crude production that is threatened by low prices. Already, several states, on their own, have acted to provide incentives to keep marginal wells active or to provide flexibility regarding idle wells. Governors of the IOGCC states are also urging President Clinton to be more cautious in shaping global warming policies.

DOE Secretary faced tough sledding before confirmation. Former U.N. Ambassador and new Energy Secretary Bill Richardson endured a grilling by senators during his confirmation hearing. Judging by the questions asked by members of the Senate Committee on Energy and Natural Resources, Richardson will have a tough crowd to please in the future. Senators pelted him with questions on energy policy, global warming, nuclear waste disposal and even former White House intern Monica Lewinsky. Senator Larry Craig (R-Idaho) had threatened to hold up Richardson's approval until the issue of nuclear waste disposal policy was settled.

Gas hassles with Russia spur Turkmenistan new state firm. Frustrated by limited natural gas export options made worse by pipeline access disputes with Russia, Turkmenistan is turning its energy focus to oil. Intent on boosting its oil output, the country is forming a new state concern, Turkmen National Oil Co. (TNOC), to achieve that goal. TNOC will evolve from the splitting up of four oil and gas units of the existing firm Turkmenneft. TNOC will control about 80% of Turkmenistan's 90,000-bpd oil production.

Industry asks Viet Nam to improve investment conditions. Oil companies have asked Prime Minister Phan Van Khai to lessen the production tax paid by the E&P industry, which is the highest tax levied in the country on any business. Wire service reports said that the prime minister listened and seemed eager to find ways to accommodate them. Businessmen also complained that profit-sharing terms are unfavorable (in other words, not competitive enough), that granting block rights takes too long, and that the government has too many cloudy, complex procedures.

MMS looks at long-term preparation of drilling tracts despite ban. Although President Clinton recently extended the ban on drilling offshore California until 2012 by executive order, the Minerals Management Service is readying 39 tracts for potential drilling. These are parcels that were sold by the U.S. government back in 1984 and are exempt from any presidential order. MMS currently is working on a $1.5-million feasibility study. Until it is completed, no drilling will be allowed. As regards the ban, industry officials were not even allowed by the administration to tout new offshore technology or training and safety measures as reasons to end, or at least reconsider, the moratorium.

Alaska's new law may prompt new pipeline. Alaska Governor Tony Knowles signed a state bill that he introduced into law, creating incentives for the sale of vast, untapped deposits of North Slope natural gas. The bill authorizes the state revenue commissioner to negotiate "favorable" state and local tax plans to make a North Slope gas pipeline economically viable. To date, market prices have made it uneconomical to recover any of the 30 to 40 Tcf of gas that lies on the North Slope, so the gas has been reinjected into the ground to enhance oil recovery. A proposed 800-mi gas pipeline would carry Prudhoe Bay gas to the southern port of Valdez, where a liquefaction plant would convert the gas to LNG for transshipment by tankers to Asian markets.

Bolivia seeks foreign investors for upstream activity. Bolivia is working hard to secure more oil and gas investment by foreign companies within its borders. Officials believe a revamped tax and royalty structure, and economic / political stability make Bolivia very attractive. Several U.S. firms plan to sharply accelerate development of the country's producing fields. A drilling boom is expected to support the new gas pipeline running from Bolivia to Brazil.

UN children's group wants food for oil deal for Iraq. The UN Children's Fund says that unless Iraq's food-for-oil deal is implemented properly, an even greater number of women and children will suffer from malnutrition in the future. The group says the plan is not generating enough cash to feed everyone. Under the latest six-month phase of the deal, Iraq is supposed to spend over $5 billion on food, medicines and infrastructure projects. At the current Iraqi production rate of 1.93 million bpd, with an average price of $12.61/bbl, petroleum revenues would be $4.4 billion over six months.