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March 1999 Vol. 220 No. 3 Hot Line Texas Senate passes tax exemption bill The first bill passed by the Senate during the 1999 legislative session was SB290. It offers a temporary exemption fr

March 1999 Vol. 220 No. 3
Hot Line

Texas Senate passes tax exemption bill

The first bill passed by the Senate during the 1999 legislative session was SB290. It offers a temporary exemption from severance taxes on certain marginal oil and gas production. The bill provides a tax exemption to oil leases, where the average well produces 15 bopd or less, when the average oil price drops below $15/bbl for three consecutive months on the NYMEX. Gas wells that produce 90 Mcfgd, or less, also receive a tax exemption, when gas prices drop below $1.80/MMBtu (also for a three-month period). Qualifying producers will receive this exemption until Aug. 1, 1999, or until $45 million in tax exemptions have been granted, whichever comes first.

New Venezuelan energy leaders

Venezuelan President Hugo Chavez appointed Ali Rodriguez as the country’s Minister of Energy and Mines, replacing Erwin Arrieta. Rodriguez said Venezuela would comply with an agreement made last June to cut production by 525,000 bopd. However, he has allowed agreements to be signed with the private sector that will lift output significantly in five years. President Chavez also selected Roberto Mandini to become the next head of state oil company Petroleos de Venezuela (PDVSA), the largest exporter of oil to the U.S. Outgoing PDVSA President Luis Giusti will join the Washington-based Center for Strategic and International Studies.

U.S. adds oil to SPR

Energy Secretary Bill Richardson announced that the Clinton administration is moving to build up the Strategic Petroleum Reserve (SPR). The government will accept oil instead of cash from companies paying royalties for drilling on public lands in the Gulf of Mexico. The plan will add up to 100,000 bopd to the petroleum reserve. This announcement comes after months of clamoring by domestic producers that have been hurt by low oil prices. The replenishment plan does not help the smaller, independent producers. However, Richardson has pledged to offer help in the form of initiatives to be announced in the near future.

Texaco slices upstream personnel

About 750 Texaco employees involved in E&P in both the U.S. and overseas will lose their jobs due to low oil and gas prices. The company’s Gulf of Mexico region was hit hardest, losing 287 workers, mostly in Louisiana. In November 1998, Texaco announced it would eliminate 1,000 positions as part of a worldwide restructuring.

Relief offered to U.S. independents

Interior Secretary Bruce Babbitt announced that independent producers who drill stripper wells on public lands can suspend operations for up to two years without losing their leases. The announcement was made after IPAA released an industry-wide survey in January. Survey results showed that 136,000 oil wells and 57,000 natural gas wells have been shut in since oil prices crashed at the end of 1997. The closings represented some 41,000 lost jobs, along with an economic loss of about $25 billion. IPAA President Gil Thurm hopes the government will realize soon that legislative action needs to be taken beyond concerns for stripper wells.

Apache nears gas output off Cote d’Ivoire

Apache’s first production well offshore Cote d’Ivoire, the Foxtrot A-1, tested 40.6 MMcfgd and 600 bcpd, with a calculated absolute open flow potential of about 350 MMcfgd. Initial output of 30 MMcfgd from the Foxtrot field is expected to begin in the first quarter of this year under a take-or-pay contract. Minimum production will escalate to 50 MMcfgd in 2001. Apache is currently drilling a second well in this location. The Foxtrot field is Cote d’Ivoire’s largest gas field, with 660 Bcf of proved natural gas reserves.

Oil flows from Chevron field

Within 18 months of project startup, Chevron’s Huizhou field has achieved production in Block 16/08 of the Pearl River Mouth basin in the South China Sea. It is expected to produce 27,000 bopd. Chevron and its partners in the CACT Operators Group will now become China’s largest oil producer offshore, with expected production of more than 32.5 million bbl from five fields this year. The HZ/32-5 field, located in 371 ft of water, was the first project in this area to utilize production technology that allows subsea links — or tie-backs — to the existing platform HZ/26-1.

Two finds struck in Caribbean region

Pebercan Corp. discovered hydrocarbons in its Canasi 1 well, located in Block 7 in Cuba. The reservoir was discovered after drilling a 7,073-ft deflected well. Preliminary analyses of the quality and oil saturation percentage are positive. The well’s current yield is 1,500 bopd. Meanwhile, Enterprise Development Corp. will complete sustained production testing of the Las Casas 1X well in Guatemala. In September 1998, the well produced high-gravity crude oil and solution gas at rates as high as 1,728 bopd. Testing was suspended when the well began flowing at rates exceeding the 2,500-bopd capacity of the test separator.

Output begins at Britain’s Janice field

First production has begun at Kerr-McGee’s Janice oil field, located in Block 30/17a in the Central North Sea, about 175 mi southeast of Aberdeen in 240 ft of water. Two of Janice’s existing appraisal wells are being recompleted, and five additional production wells and four water-injection wells will be drilled. Recoverable reserves are estimated at more than 70 million bbl of 37° API crude. Production is expected to peak at around 55,000 bopd in the first half of 1999. Extra processing capacity is available to allow the Janice floating production unit to serve as a hub for future developments.

FROM THE ARCHIVE