International
Taking the pulse of Western EuropePARIS — Sitting in a hotel that is in the shadow of "La Grand Arche" (no, this is the new arch, not the "Arc de Triomphe"), your faithful editor is musing — what an interesting time this is to be in Western Europe. As this page is being written, war drums are beating toward Iraq, Asian economies continue to deteriorate, and oil prices are still languishing. The above factors, plus a few country-specific problems, have got the Western European folks spooked. As I traveled from country to country as part of a 1998 forecast presentation team, I found that the upstream people had plenty to say. What follows are samplings of their comments. Germany. In Düsseldorf, the first person wants to know why we're not more concerned about the Far East. We explain that our extensive surveys of operating companies revealed that most firms already had committed funds to projects that are mostly long-term. These surveys and other information were received late enough that the companies were well aware of Asian woes when they sent the data. The man is unconvinced. "I know what you say, but these Asians think they are in a crisis, and they are panicking. I tell you, by the end of this year, they will be kaput." Well, that was inspiring. When we talk to the Mannesmann folks (who are coming off last October's OCTG/seamless steel pipe partnership deal with Vallourec), they remain optimistic but express concern about mediocre oil prices. They fret that this may prompt postponement of "discretionary drilling" and some smaller field developments. Netherlands. Sure enough, the first question is about Asia's economic problems. We repeat our earlier assertions to this fellow from a Dutch oilfield services company. We throw in the fact that the International Energy Agency is predicting 2.2% growth in oil demand, even with Asia's woes. The gentleman says he is "satisfied." I wonder whether he was just being polite. The next person in Rotterdam asks if we think the FPSO market is about to be overbuilt. If OPEC overproduces enough to keep prices depressed, he can see offshore projects being postponed or cancelled at the very moment that a dozen or more new FPSOs (some built on spec) hit the market. We say that there is no short-term evidence this will happen, but admit that the situation bears watching. France. Our intrepid group knows we're in for trouble as soon as we peruse the Paris newspapers' headlines. They scream about Texans being "lady killers" (a female death row inmate was executed by lethal injection for a gruesome murder) and condemn Americans for being "war hungry" and "imperialistic." Fortunately, our audience is more concerned at first about the now-repetitive topics of Asia and sluggish oil prices. A lady also walks up and asks whether Iran's E&P will involve more foreign firms. Just when I think the audience has amnesia about Iraq, a gentleman says he has figured out exactly what U.S. energy policy is. "Yes," he says, "Your energy policy consists solely of antagonizing Saddam." Before I can reply, our group's "handler" drags me away to catch a flight to Milan. Italy. The crowd in Milan also is concerned about the Far East, oil prices and Iraq, but these are overshadowed by a local issue. Italian E&P personnel are worried that governmental interference is increasingly cutting into their activity. They complain about the Minister of Environment, whom they claim is on a power grab. "He is insane, this minister," says a gentleman with an Italian consulting firm. "This fool is out, every day, expanding his control. He thinks he should be more important than the Minister of Industry. Somebody needs to stop him before he shuts our companies out of all the best prospects in Italy on grounds of environmental protection." Indeed, even Guglielmo Moscato, chairman of ENI (parent of Agip) as well as the Italian Extracting Association, voiced frustration and irritation with governmental officials in his speech. He decried unprecendented stagnation of upstream activity caused by slowdowns in licensing, as well as environmentally oriented blocking of project authorizations. UK. Although the familiar litany of concerns about oil prices, Asia and Iraq was discussed, E&P personnel in Aberdeen are relatively buoyant. Last year was extremely good for upstream activity; and there is a plethora of long-term projects still underway or awaiting action. Of greater concern are questions about logistics (rigs and manpower) and what the Labour government may do to oil and gas in its ongoing review of taxes. As one sage remarked, "Perhaps it's good that low oil prices hit early. They may have made a big enough impression to dissuade Labour from doing anything." Paris. Back to France for two post scripts. In a meeting with World Oil, officials at geoscience giant CGG expressed confidence in the long-term market, noting that they ordered the building of a fourth offshore seismic vessel. This is CGG's first custom-built vessel. Over at engineering / project management firm Horwell (a subsidiary of Pride Petroleum
Group), President Jean-Claude Bourdon noted the direct relationship between his firm's level
of business and the available rig fleet. "Two years ago, the West Africa offshore
market was still depressed, limiting our business. However, today we have seen good
expansion, due to much greater drilling. Ironically, we can only expand further if more rigs
enter the market, yet there are no more to be found at present. We are thus artificially
limited."
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