Looking ahead

Clinton administration seeks increased 2000 energy budget. The Clinton administration proposed a $15.76-billion budget for the U.S. Department of Energy, up $212 million from the department’s existing $15.54-billion budget. Included in the budget for the fiscal 2000 spending year, is $1.6 billion in tax benefits to encourage development of traditional and alternative energy sources. Also highlighted in the DOE budget are: 1) $178 million for the Federal Energy Regulatory Commission; 2) $838 million for programs designed to improve the fuel economy of various transportation modes and increase the productivity of energy-intensive industries; 3) $364 million in fossil energy research and development programs; and 4) $234 million for nuclear waste activities.

U.S. Senate panel hears domestic oil industry concerns. A hearing intended to examine the current state of the oil industry, in the face of historically low oil prices, took place before the Senate Energy and Natural Resources Committee at the end of January. Testifying on behalf of the IPAA, member Steve Layton called for a number of immediate legislative and administrative actions to be taken to preserve the future health of the domestic oil and gas industry. Concerns included buying oil for the nation’s Strategic Petroleum Reserve. Another major worry expressed by Senate Energy Committee Chairman Frank Murkowski was U.S. dependence on oil imports. Iraq has become a major supplier of oil to the U.S. market, and was the seventh-largest crude supplier to the U.S. in the first 11 months of 1998. Venezuela remains the number-one supplier to the U.S., at 1.7 million bpd of crude and products, followed by Canada’s 1.6 million bpd.

MMS plans Eastern Gulf lease sale. The U.S. Department of Interior’s Minerals Management Service (MMS) is asking for $240.2 million for the fiscal year 2000 budget, to manage mineral resources on the Outer Continental Shelf (OCS). A significant investment is proposed in the budget request for the Royalty Management Program (RMP) re-engineering project, which provides royalty management services at low costs. Meanwhile, the MMS is beginning a three-year planning process for conducting an oil and natural gas lease sale in federal waters in the Eastern Gulf of Mexico Planning Area. The area is 15 mi offshore Alabama and 100 mi, or more, offshore Florida. A call for interest and information and the notice of intent to prepare an environmental impact statement for proposed Lease Sale 181 are the first steps the MMS will take in preparation for the sale, tentatively scheduled for December 2001. Sale 181 is an area identified for leasing in the 1997–2002 OCS Oil and Gas 5-year Leasing Program.

Global economic woes shrink oil demand further. According to the International Energy Agency (IEA), world oil demand will continue to shrink more in 1999 than was previously expected, due to economic problems in developing countries. IEA said world oil demand would rise only 1 million bpd, or 1.4%, to 74.67 million bpd this year. Analysts also said countries in the Organization for Economic Cooperation and Development (OECD) would account for most of the increase in 1999. Assuming the winter weather in the U.S. is normal this year, domestic oil deliveries are expected to rise by 360,000 bpd, almost 2%.

Colombia’s oil output to remain stagnant. Oil production in Colombia will continue to average about 850,000 bpd over the next two years, despite a prior production goal of 1.6 million bpd by 2010. Output in 1998 averaged 846,000 bopd. To stay competitive in the industry, Carlos Rodado, head of state oil company Ecopetrol, plans to cut 5% of the firm’s 8,600 employees by the end of this year, as well as another 5% annually for an indefinite period in the future. Mr. Rodado believes Colombia’s current rate of production will allow the country to remain self-sufficient in oil supply.

Murphy joins explorers in Malaysia. Murphy Oil Co. signed three production-sharing contracts with national oil firm Petronas. Murphy will operate the blocks and has committed to spend $29 million. The money will be spent on acquiring new 2-D and 3-D seismic data, reprocessing existing seismic data and drilling five exploration wells. Two deals cover blocks off the East Malaysian state of Sarawak on Kalimantan, and the third site is a deepwater block off neighboring Sabah state. The firm is the fourth new investor in Malaysia’s exploration sector in the past year. The country exports only 400,000 bopd, but the oil’s low sulfur content makes it desirable.

Shell to invest in Nigerian energy projects. Royal Dutch/Shell wants to invest $8.5 billion in an integrated development plan for Nigeria, sub-Saharan Africa’s biggest oil exporter. Over the next eight to 10 years, Shell Nigeria plans to exploit new offshore oil and gas reserves, plus existing gas that is currently flared into the environment. The project could increase Nigeria’s output capacity by 600,000 bopd by 2005. Part of the plan is to develop four offshore fields, including the giant 350,000-bopd Bonga discovery and the shallow-water, 60,000-bopd EA field. However, the government first needs to pass a long-promised decree that will sign into law the terms for development of production-sharing contracts agreed to in 1993.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company