Looking ahead

U.S. producers receive technical assistance from government. Secretary of Energy, Bill Richardson, announced the names of the first seven companies, all with 50 employees or less, that will receive federal grants in a program developed to assist small independent producers. Each company will receive up to $75,000 to experiment with innovative methods and technologies that could boost oil production and prevent premature oil field shut down. Additional companies will be selected in future competitive rounds that will run through November.

BP Amoco to sell assets. Over the next three years, BP Amoco plans to sell an estimated $10 billion in assets as part of a drive toward improving efficiency and increasing profits. CEO John Browne plans to slash costs by 20% by 2001, while increasing capital spending to an estimated $26 billion over the next three years. About $3 billion of the sold assets will be from petroleum product sales.

Massive pipeline construction project underway. Alliance Pipeline began construction of its $3-billion pipeline system that will provide increased access to North American markets for western Canadian natural gas resources. Construction crews have begun working on two pipeline spreads in North Dakota, one in Minnesota, two in Iowa, one in Illinois and two in Saskatchewan. Over the next year, workers in the U.S. and Canada will install over 2,300 mi of steel pipe weighing over 1.2 million t. Fourteen mainline compressor stations will power the system, and Aux Sable Liquid Products extraction and fractionation facilities will be installed. The pipeline will be in service by October 2000.

Mobil to drill in deepwater Brazil. Mobil signed an agreement with Petrobrás to participate in exploration of BES-2 deepwater block in the Espirito Santo basin off Brazil. The tract is over one-half million acres, located in water depths ranging from 1,200 to 4,500 ft. The work program includes 3-D seismic acquisition followed by exploration drilling. When Brazil opened up its oil industry to foreign investment in 1997, Petrobrás was allowed to retain selected onshore and offshore blocks, with the remainder returned to the National Petroleum Agency (ANP) for bid rounds.

PDVSA wants survey of oil industry in dumping case. Venezuela’s state oil company, PDVSA, has asked the U.S. Commerce Department to survey American oil producers to prove the landmark oil dumping petition does not have industry’s support. Save Domestic Oil — a group of independent producers — has accused Venezuela, along with Mexico, Saudi Arabia and Iraq, of selling crude at unfairly low prices, which drove some U.S. producers out of business. The complaining producers must represent at least 25% of U.S. oil production and have the support of 50% of the industry for the Commerce Department to further investigate the case. Several major oil companies, along with U.S. Energy Secretary, Bill Richardson, have expressed doubt about the dumping claim.

Independents get tax relief. Republicans are pushing a multibillion-dollar tax provision in the U.S. House of Representatives. Part of a larger tax bill, the provision would allow independent oil and gas producers to deduct more of their business expenses. Producers could deduct from their income — after the 1999 tax year — any geological and geophysical expenses, as well as "delay rentals," which are payments made to owners of land when there is a production delay on a well being drilled. The bill also would suspend a rule that limits overall depletion deductions to 65% of a producer’s taxable income. The suspension would apply until 2004.

Elf launches offer for TotalFina. French oil company Elf Aquitaine plans to acquire TotalFina in a $50.9-billion bid. This was decided after the company was faced with an unsolicited $42.8-billion all-stock offer from TotalFina last month. Elf rejected the bid as hostile, and in turn, made TotalFina a cash and stock offer. Total recently concluded a merger with Belgium’s Petrafina, while Elf failed to acquire Norway’s Saga Petroleum. The combined companies would boost Elf’s net profit by a minimum of 18% a year until 2002.

API discusses industry’s economic conditions. Although prices oil producers receive at the wellhead have nearly doubled since last December, an API report stated that the U.S. industry’s recovery from economic depression has been slow. And while NYMEX crude prices have been hovering around $20 per bbl, the highest they have been in more than a year and a half, the latest rig count shows that most rigs are searching for natural gas, rather than oil.

Oil companies acquire GOM assets from Shell. Houston-based Santa Fe Snyder has agreed to purchase interests in four deepwater fields in the Gulf of Mexico from Shell Oil. The company will spend $210 million on the acquisition. In April, Shell sold a package of producing fields and exploration prospects in the Gulf’s shallow waters to Apache Corp. for $745 million in cash and stock. Shell has been selling assets in an effort to become more profitable.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company