July 1998 Vol. 219 No. 7  Offshore

Robert E. Snyder,  Editor

Falklands drilling, expensive rigs, permanent moratoria

Amerada Hess has reportedly come up dry with its first exploration well, and the first well ever drilled, offshore the Falkland Islands in the South Atlantic. As reported in Platt’s Oilgram News, the operator said in late May that it will P&A the 4/09-1 exploration well after encountering "traces of hydrocarbon." The operator used the semi Borgny Dolphin to drill the well in Tranche A, the first of five tranches to be drilled by a group of companies awarded concessions. Partners in the Hess well were Petrofina, Murphy, Teikoku and Argos Evergreen.

Offshore Data Services says the rig is under a three-year contract to the group of companies participating in the Falklands Offshore Sharing Agreement. The rig will move out of the Hess-operated area to drill in Tranche C and D for Lasmo; Hess will then take it back late this year to drill a second well in Tranche A. Later, wells will be drilled by IPC, Shell and Lundin Oil AB.

ODS reports, further, that Argentina continues to press territorial claims on the Falklands; and it will levy a 3% royalty on any produced oil, with a $10 million fine for unpaid royalties. Argentina does not recognize Britain’s right to authorize exploration in and around the Falkland Islands.

$Half-billion drillships? Statoil says that two Smedvig drillship newbuildings, West Navion I and West Navion II will cost more, and be delivered later, than planned. The cost of Navion I has escalated to an estimated $470 million, from $240 to 250 million. It is scheduled to start work for Statoil in deep water in second quarter 1999, meaning the operator has to reschedule its 1998 drilling plans.

The Navion II price has jumped to $490 million from $280 million, and it will not be ready until mid-1999, or later. The rig is under construction at Spain’s Astilleros Espanoles yard. Smedvig is responsible for managing both drillships; and it is a 50/50 owner with Navion, a Statoil shipping subsidiary. Navion II has a five-year contract to drill for Shell in the U.S. Gulf. Shell reportedly says the delay will "not significantly impact its drilling plans."

Cooperating on marginal North Sea projects. The Centre for Marine and Petroleum Technology (CMPT) in Aberdeen is coordinating an industry-government initiative to address the problem of marginal, subsea developments in deep Atlantic water, initially, with broader future applications. Presently, many such developments are too far from existing production facilities. The initiative will attempt to double the distance at which such projects would be viable, to more than 100 km (64 mi).

CMPT (Fax: 44 1224 706601, Website: http://www. cmpt.co.uk/) says the project brings together UK oil industry companies with operations in the Atlantic Margin, and the infrastructure and energy projects directorate of the Department of Trade and Industry (DTI). The group will carry out an initial nine-month study, followed by second-phase studies and system developments. It is hoped that the project will produce, install and try a prototype of equipment needed for the working distance extension.

OCS permanent ban debate. A California delegation led by Sen. Barbara Boxer (Democrat) wants the Administration to issue a permanent ban on oil and gas leasing and drilling on most of the U.S. federal OCS, excluding the Gulf of Mexico and portions of offshore Alaska, presumably. President George Bush issued an executive order prohibiting leasing in these areas; that order will expire the first of 2001.

Since 1981, Congress has also applied year-to-year moratoria. These are challenged every year; and supporters of a ban hope to have President Clinton or Vice President Gore make the moratoria permanent, as reported by Platts Oilgram News, June 1. The newsletter notes that neither Boxer nor the White House would comment on the issue.

MMS said it does not seek a permanent ban, but acknowledged that it is unlikely that the areas would be open soon because of environmental concerns. Both the Departments of Interior and Energy are expected to oppose a permanent ban.

The National Ocean Industries Association (NOIA) notes that several OCS Moratoria bills were introduced during the 105th congress, including Bill S.2084 by Boxer, which would direct DOI to "cease all OCS leasing adjacent to a state with a moratorium on exploration, development and drilling in state waters." This is apparently in reference to the 5-year leasing program under which DOI now operates.

On May 14, the House Energy and Mineral Resources Subcommittee, chaired by Rep. Barbara Cubin (R-Wyoming) heard from the Administration and members of Congress on the issue of OCS leasing. Cubin said, "Given the passion of this debate, it seems unlikely that the entire OCS will ever be opened." "As we approach the end of the current Five-Year plan in 2002," Cubin added, "perhaps Congress and the coastal states can engage in a rational discourse about the next phase." A "rational discourse" from California — don’t hold your breath.

Platform construction up. As analyzed in ODS’s recent Offshore Field Development International publication, more than 260 offshore fixed platforms are slated for installation worldwide this year, eclipsing 1997’s 239 offshore platform installations, and the most since 1986, when 272 fixed platforms were installed worldwide. About 201 offshore fixed platforms are under construction, and an additional 236 are in various stages of planning and engineering, mostly for installation in water depths less than 300 feet.

Southeast Asia leads all of the major offshore oil producing regions with an identified total of 114 structures slated for installation, 35 of which are under construction. The Middle East follows with a total 75 platforms earmarked for installation; 42 are now being fabricated.

The U.S. Gulf of Mexico places third with 60 units slated for installation; 33 are already under construction. Latin America, including Mexico, Central and South America, will install 51 platforms. And Northwest Europe and West Africa are nearly tied with 45 platforms planned for the North Sea, and 44 for West Africa.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company