International
The good, the bad and the uglyFactors affecting the global E&P market continue to be an unholy mixture of good and bad news. Oil prices are in the tank, failing to rise above $15/bbl. Yet, natural gas prices in North America have held steady. Similarly, some regions' drilling has fallen off measurably, as in Canada and the U.S. On the other hand, rotary rig counts offshore Latin America and the Asia-Pacific area are running ahead of last year's pace. What follows is a blend of items that occurred just before press time — some good news, a bad prediction and one ugly little problem. Britain backs off tax question. Leading the good news is the UK's decision to call off a review of taxes on offshore oil and gas. Back in July 1997, the Labour government began stage one of this review, including extensive discussion with the British industry. Then, in March 1998, Chancellor of the Exchequer Gordon Brown proposed additional measures, such as an extra Corporation Tax or Petroleum Revenue Tax on fields approved for development after March 1993. Originally, Brown was due to issue a consultation document in April to the industry.
However, oil and gas executives lobbied the government intensively, trying to convince officials that low oil prices and declining North Sea prospects left no room for extra taxes. Oil prices cooperated in bolstering their case by languishing at 10-year lows, with Brent crude trading at only about $13/bbl by the end of August. Meanwhile, Brown held off repeatedly on releasing the consultation document, waiting to see if conditions improved. On Sept. 7, 1998, Brown announced that the Labour regime had decided "not to proceed with consultation on options for reform of the North Sea fiscal regime." In a statement released by the Inland Revenue tax authority, Brown said, "The government has been monitoring changes in oil prices, and I have concluded that at the current low level of oil prices, it would not be right at this stage to proceed with reform of the regime." The UK Offshore Operators Association (UKOOA) had campaigned vociferously against the tax review and welcomed Brown's decision. A UKOOA statement said, "We now look forward to detailed discussion with the government to enhance the future of the UK oil and gas industry in the context of a stable regime." Indeed, BP had postponed development of Clair field in the Atlantic Margin while the tax matter was unsettled, and other firms had scaled back submissions for the 18th Licensing Round. Now, this trend may reverse itself, assuming officials do not try to make changes if prices recover. Another piece of good news comes from Angola, where Elf and partners have drilled their fourth deepwater discovery on Block 17. The Lirio 1 was drilled to a 10,316-ft TD in 4,500 ft of water, and tested 1,000 bopd. Meanwhile, ARCO's Temane 3 exploration well tested 25 MMcfgd from the Cretaceous Grudja G-9 horizon in Mozambique. This confirms a significant gas accumulation first indicated by two wells drilled by Gulf Oil in 1956 and 1967. Low oil prices also have not stopped a Conoco-PDVSA joint venture from producing first oil from the Orinoco Belt of eastern Venezuela on schedule. After one year, 31 wells on the 55,000-acre tract already are complete. Another 45 are in various stages of development. Oil began flowing on August 30 through a 36-in. pipeline to the northern coast. Yamani predicts doom and gloom. In the bad news category, former Saudi Oil Minister Sheik Zaki Yamani told a London conference, organized by his Global Center for Energy Studies, that oil prices will remain weak for the foreseeable future and potentially could split OPEC apart. "Some are saying that current price weakness cannot persist. These hopes look overly optimistic," Yamani told conference attendees. "Can the tiger (Far Eastern) economies grow at previous rates? This is unlikely." Asian countries, of course, had propelled recent jumps in global oil demand. Yamani predicted that the Asian economic crisis will not be short-term. He said that low economic growth and rising taxation on petroleum products endanger the oil industry's future. Furthermore, if weak prices continue, Yamani said he is not sure that OPEC can hold together. "Members' interests are diverging, and their ability to influence the market has become eroded," he warned. "(The demise of OPEC) could lead to oil price wars and extreme price instability." Yamani also fears that new global warming policies in various countries also could reduce oil demand. Correction. Now for an item from our "ugly" department. In this computerized age, the ability to directly transfer large tables electronically to typesetting and page layouts allows quick, last-minute changes to listings. This is particularly helpful when data comes in late from afar. However, it also leaves one more vulnerable than ever to last-minute mistakes, especially if correct and incorrect versions of the same table are floating around at the same time. Such is our problem in the world oil production table on page 28 of the August 1998 issue. There are bad entries in the Brazil and "Others" lines of South America, something that many of you, our faithful readers, quickly pointed out via E-mail and fax messages. These bad entries also threw off the South American subtotal line, as well as the World Total line. The correct figures (in bopd) should be:
With all good humor, we have typeset these lines in exactly the same font as the original
table, in case readers wish to resort to a tried and true method — cutting and pasting
these entries back into the original table.
Copyright © 1999 World
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