Looking ahead

IOGCC releases report on domestic industry’s state of affairs. Oklahoma Secretary of Energy and Interstate Oil and Gas Compact Commission Vice Chairman Carl Michael Smith presented U.S. Energy Secretary Bill Richardson with a report discussing the long-term ramifications of low crude oil prices. Several key issues states currently face, including the loss of infrastructure, personnel and R&D, were included in the report. Also noted was an IOGCC state survey, which found that oil production is down significantly, and oil severance tax revenues have fallen as much as 35% in some states.

Western GOM lease sale set for August. The U.S. Minerals Management Service is holding Sale 174 on August 25, 1999, in New Orleans. The sale encompasses 3,642 unleased blocks, comprising about 19.8 million acres in the Western Gulf of Mexico Planning Area off Texas and Louisiana. The tracts are in water depths ranging from 26 to 9,843 ft. This is the fourth sale in this region, in which blocks in water depths of 656 ft or more that receive bids are eligible for consideration under terms of the Deep Water Royalty Relief Act.

Global Marine says dayrates will continue to decline. In its latest SCORE (Summary of Current Offshore Rig Economics) report, Global Marine said the decline of that index was extended to 10 months by falling 2% between January and February, for near-shore and deepwater rig dayrates. Despite recent oil price increases, President and CEO Bob Rose said, "Rising oil prices will likely have little impact on 1999 drilling plans, but there is rising optimism that 2000 will see a halt to the downturn." SCORE compares the profitability of current offshore mobile drilling rig rates to that of the 1980–1981 offshore drilling cycle, when new rig construction was common, and new-contract dayrates equaled the sum of daily cash operating costs, plus about $700 per day, per $1 million invested.

U.S. companies attempt to strike investment deals with Saudi Arabia. Marathon Oil President Victor Beghini met with Saudi Arabia’s Crown Prince Abdullah to discuss the possibility of oil and gas investment in the kingdom. The meeting was held one day after Beghini met with Saudi Oil Minister Ali al-Naimi, who had also met with Conoco President and CEO Archie Dunham. Both U.S. companies have submitted proposals to invest in the world’s biggest oil producer and exporter. Saudi Arabia has encouraged downstream investment, but is still shying away from foreign participation in upstream ventures.

Development of Iranian oil field opposed by U.S. The U.S. State Department expressed disappointment after learning of a French / Canadian consortium’s plan to develop Iran’s Balal offshore oil field, in a $300-million investment. Elf Petroleum and Bow Valley Energy signed a six-year contract to develop the field, 60 mi southwest of Lavan Island in the Persian Gulf. Output is scheduled to begin in 2001, with an estimated production capacity of 40,000 bopd. Reserves are estimated at 100 million bbl. State Department spokesman James P. Rubin said the administration would review the situation to determine whether sanctions could be placed on the two companies.

Europeans invest in Libya after sanctions lifted. After Libya turned over suspects involved in the 1988 Pan Am airliner bombing that killed 270 people in Scotland, the UN suspended its sanctions that banned the sale of equipment for the country’s oil and natural gas export terminals and refineries. Libya is now in discussions to award 14 new oil exploration blocks to foreign companies. Germany’s Wintershall and Italy’s ENI lead the pack that is willing to invest further in Libya. Those companies, along with Austria’s OMV and Spain’s Repsol, already produce about one-third of Libya’s 1.3 million bopd. The U.S. has no plans to lift its sanctions that were imposed in 1986.

Iraqi oil production on the rise. According to an Iraqi oil minister, the country’s oil production is increasing and approaching pre-1991 Gulf War levels. Before Iraq invaded Kuwait in August 1990 — which led to the war that severely damaged the country’s oil infrastructure — the country produced about 3 million bopd. With the arrival of spare parts to repair the oil infrastructure, Iraq has been able to export more than 2 million bopd. Along with the country’s domestic usage and a quantity being sold to Jordan under special arrangements, total output is currently 2.6 million bopd.

Nigerian residents seize oil equipment. A group that calls itself Mobil Spill Affected Communities was formed after a Mobil oil spill last year that damaged fishing grounds and farmland in the Niger delta region. In an effort to receive compensation for the spill, residents in the area are seizing boats and pipeline facilities from major oil companies. Along with Mobil, Shell and Agip also saw some of its equipment captured. The seizures have been generally peaceful, usually ending with the companies offering some sort of compensation. However, as a result of the sabotage, Nigeria’s crude production has been cut by about 150,000 bpd.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company