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Transocean, Sedco to merge

Schlumberger’s offshore drilling unit, Sedco Forex, and Transocean Offshore plan to merge in a $3.2-billion transaction that will create the world’s largest offshore contract drilling company. The combined company will have an offshore fleet of 75 rigs. Transocean’s strengths lie in the Gulf of Mexico and Norway, while Sedco has been strong in West Africa and Asia. The deal is expected to close by the end of the year.

U.S. to refill Strategic Petroleum Reserve

The Departments of Energy and Interior put into effect four new contracts that will add another 9.3 million bbl of federal royalty oil to the Strategic Petroleum Reserve (SPR). The contracts are part of an initiative to use royalty oil taken in kind from federal leases in the Gulf of Mexico to replenish oil previously sold from the reserve for non-emergency purposes. Another competition will be conducted later this year to choose additional contracts that will meet the administration’s target of adding about 28 million bbl of royalty-in-kind oil to the SPR. These contracts were the first to be awarded in a competitive bidding process open to all companies holding leases in the federal reserve waters in the Gulf of Mexico.

Alaskan oil field holds significant reserves

ARCO Alaska and Anadarko Petroleum said that their Fiord field, north of Alpine field, is estimated to contain more than 50 million bbl of proven and potential oil reserves. The 5 Fiord exploration well initially tested 1,400 bpd of 29° oil and 650 Mcfgd. A subsequent flow test yielded 2,500 bopd and 1.2 MMcfgd. ARCO has been drilling at Fiord since 1992, when it made its first discovery. Meanwhile, Alpine is on schedule to begin producing in mid-2000, at a starting rate of 40,000 bopd, increasing to 70,000 bopd in 2001.

Chevron announces job cuts

About 2,500 jobs will be cut, as Chevron struggles to combat low oil prices and compete with merging rivals. The company laid off 1,000 people at the end of last year, in an effort to reduce annual expenses by $500 million. Chevron attempted to purchase Texaco, but negotiations were called off in June of this year.

U.N. awards $2.8 billion to oil companies

To help pay for damages in Middle East oil fields from Iraq’s invasion of Kuwait in 1990, the United Nations granted nearly $2.8 billion to several companies, including Saudi Arabian Texaco and the Kuwait Oil Co. The money came partly from an account funded by Iraqi oil sale revenue that the U.N. Compensation Commission retains under an agreement with Iraq.

U.S. demand on imports increases

An API report stated that U.S. dependence on petroleum imports is growing more rapidly this year than in 1998. Compared to the first five months of last year, imports in 1999 were down. However, imports a year ago exceeded immediate needs because companies were building their stocks while oil supplies were relatively cheap. Domestic crude production in May was 5.9 million bpd, down 6.8% from 1998. Therefore, the rapid decline, combined with demand growth, caused the gap between domestic supply and demand to increase 7% so far in 1999. Natural gas liquids (NGLs) have been a contributing factor for increased imports. NGL production fell 5% in May 1999 to 1.7 million bpd, compared to the previous year.

Enron Oil & Gas gains independence

Enron Corp. will exchange 62.27 million of its 82.27 million shares of Enron Oil & Gas (EOG) common stock for EOG’s operations in China and India. In addition, EOG will contribute $600 million in cash to one of the company’s Indian subsidiaries that will be transferred to Enron Corp. The independent company will focus on its operations in North America and Trinidad, as well as seek new international concessions.

Texas legislature works to improve industry

In the state’s 76th Legislative session, Texas lawmakers from the Railroad Commission discussed and enacted ways to improve the industry. Recently completed legislation, including a $45-million severance-tax relief package for marginal well producers, and an extension of the high-cost gas and inactive-well incentive programs were reviewed. Over the next two years, the government plans to invest an estimated $16 million on well plugging and site cleanup. In addition, the Commission received approval to capitalize on benefits of the Internet. Beginning in just over a year, the agency will institute online permit filing and initiate a move toward a paperless system by 2005.

Exploration in Angola soars

Despite an ongoing civil war in Angola, foreign explorers added more than 2.3 billion bbl of oil in new finds last year. The country’s promising deepwater prospects have spurred new drilling from international oil firms. Angola plans to license more deepwater acreage in 2000. Algeria and Tunisia also showed significant increases in wildcat drilling in 1998.

Oil discovered in Tibet

The China National Star Petroleum Corp. discovered oil in the world’s highest oil field (15,500-ft elevation) in Tibet. The Luenpola basin could hold up to 1.095 billion bbl of oil and gas. This is the first commercially viable crude oil found in eight years of exploration in the country.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company