May 1998 Vol. 219 No. 5  Production

Robert E. Snyder,  Editor

European gas, more on oil prices

The European gas market plays a major role in influencing natural gas exploration and development nearly everywhere in Eastern and Western Europe, and North Africa. A report published in December 1997 by CEDIGAZ called The European gas market players, describes this market. It tells who produces gas in Europe, who imports it, which companies are involved in transport, how the different European markets are organized, the shareholders and what the present gas company holdings are.

The study comprises five sections which deal with the different branches of activity: 1) production, 2) European gas trade, 3) transport, and 4) market organization in the 16 countries studied. A final section is devoted to shareholders and holdings of the gas companies. The report contains 127 pages, 32 tables and 70 figures. It is available for FF 7000 from CEDIGAZ, Paris, Tel. 331 4752 7370, Fax. 331 4752 7014.

CEDIGAZ, founded in 1961, is a non-profit organization, now comprising 190 members, including most leading international oil / gas companies, major national / international organizations, banks, consultants, engineering companies and equipment suppliers. The organization offers weekly bulletins, annual statistical surveys, special-topic surveys, and statistical data and consultation. Full, Associate and Corresponding memberships are available.

Oil prices. That's about all anyone talks about these days. But the conversations don't seem to go far before one runs out of something intelligent to say. If you are looking for background information, there are several reports / articles that are good food for thought — in addition to Bob Scott's useful comments on the subject on page 148 — though none of these can help you say what the price of oil will be in September, or next year.

It would be hard to find better background material than Matthew Simmon's February 1998 World Oil article, "Crude oil prices: Facts don't support weakening market."

The Arthur Andersen / Cambridge Energy Research Associates' World Oil Trends, 1998 Edition, released in mid-February, has a lot of statistics and good discussions on: demand — the impact of Asia's economic crisis; non-OPEC supply; oil industry infrastructure; OPEC — its changing status; politics; and environmental regulation, i.e., the Kyoto Protocol. You can call Arthur Andersen at 713 237 2472, to obtain Trends.

And it would be a good idea to become conversational about Colin Campbell and Jean Laherrere's March 1998 article in Scientific American, titled "Preventing the next oil crunch." This article presents a convincing analysis which concludes that, within the next 10 years, the world's oil production will hit the top of its bell-shaped curve and start its permanent decline. From that point, there will be no such thing as cheap oil.

Meanwhile, one tangible thing that has happened regarding oil prices is OPEC's attempt to cutback production. Norway — as reported in Statoil's weekly newsletter — says the OPEC cutback is a positive signal to the market. "Combined with the output reduction announced by Norway for offshore producers after Easter, the OPEC decision could help stabilize the crude oil market," a Statoil oil trader says.

OPEC had agreed to cut production by 1.245 million bopd from April 1. Norway resolved to reduce its production by 3%, or about 100,000 bopd. With reductions by several other countries, the total cut should be around 1.5 million bopd.

Weather forecasting. If you aren't confident in discussing crude oil prices using the above tips, you can always change the subject to the weather. And if your interests happen to be offshore in the U.S. Gulf, you might want to be aware of the Weather Research Center in Houston, where folks keep up with such things. And you can too, at their Web page: http://www.wxresearch.com.

The Weather Center says Florida may see a stormy season. Predictions for the 1998 hurricane season indicate Florida has the highest risk of experiencing a tropical storm or hurricane, 90% on the West Coast, 70% on the East Coast. Mexico has a 70% chance, and Texas a 60% chance.

The team at the Center calls for eight named storms to develop in the Atlantic basin, with five reaching hurricane intensity. Two to three storms will make landfall somewhere on the U.S. coast. When —? The monthly distribution is 50% (June), 70% (July), 90% (August), 100% (September), 90% (October), 80% (November) and 10% (December).

More deepwater projects. If you have deep pockets and 1998 cash flow with $15 oil isn't critical, starting deepwater development this year makes sense — at least Exxon and Shell think so.

As noted on page 13, these two operators are proceeding with the development of Hoover and Diane fields (Exxon) in 4,800-ft water in the Gulf of Mexico, and three separate projects called Europa, Macaroni and Angus (Shell Offshore) in the GOM in 3,900, 3,700 and 2,000-ft water, respectively.

In Brazil, Petrobras is stepping up the development of its Roncador field, located in 6,000 + ft of water. The effort could accelerate production to December 1998, several months ahead of an earlier schedule.

In late March, Offshore Data Services said the operator had been negotiating with R&B Falcon to sign for the DP production vessel Seillean, to move to the project. Petrobras reportedly expects six wells to be onstream by July 1999, producing 60,000 bopd, with another five wells by year-end. Petrobras calls the accelerated program a pilot production program. The original field concept was to utilize the P-36 FPU, formerly the Spirit of Columbus. More details are obviously forthcoming.

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