Looking ahead

Gas Research Institute study looks at future natural gas supply, prices. GRI’s 1999 Baseline Projection — released in August 1998 — outlined a low-price energy future, in which U.S. natural gas consumption rises to record levels, and producers are able to meet demand with only modest increases in wellhead prices. The projection assumed that: 1) technology would continue to advance at 50% to 75% of historical levels; 2) the undiscovered gas resource base would remain ample; and 3) producers would continue to reinvest nearly three-quarters of their cash flow from domestic sales back into U.S. E&P. In a new study titled Gas Supply Sensitivities: An Alternate View of Gas Supply Trends, the three assumptions are challenged by five "what if" questions. Prepared for GRI by Energy and Environmental Analysis Inc. of Arlington, Virginia, the report uses a case-study format to examine the impact of the five questions on the 1999 GRI projection.

Florida GOP lawmaker wants to extend halt to oil exploration. The U.S. House of Representatives passed a measure to prevent oil and gas exploration off Florida’s west coast during the next fiscal year. Porter Goss (Republican-Florida) introduced an additional measure to halt oil and gas leasing, and exploration, until scientific tests are conducted to study the environmental impacts that could result from such activities. Although Florida lawmakers push through annual moratoriums on oil and gas exploration each year, Goss does not believe this method has staying power.

U.S. royalty system under debate. Walter Rosenbusch, the new head of the U.S. Minerals Management Service (MMS), believes that congressional proposals to change the way government collects royalties from federal oil and gas leases could cost the government as much as $200 million per month. Currently in a dispute with the oil industry over how government should value oil for royalty purposes, the MMS wants to switch from a system that allows major oil companies to use their own prices as a benchmark, to a new formula based on market prices. The current system has spawned dozens of lawsuits alleging fraud from private lease-holders, state governments and even the U.S. Justice Department. Oil companies want the MMS to move to a "royalty-in-kind" system, involving the government collecting the oil and selling it to itself, to avoid the royalty valuation argument. However, Rosenbusch feels this would cost too much to administer.

Shell finds new partners in oil sands project. Western Oil Sands Inc. and Chevron will join Shell Canada in developing its Alberta oil sands project. Australia’s BHP, which conducted the feasibility study for the huge development, decided several months ago not to take part in the full-blown project. Terms of the new agreement — still subject to due diligence — give Western and Chevron a 20% stake, each. Production of 150,000 bpd of synthetic crude is expected to begin in 2002. Also included in the development is a mine at Shell’s Muskeg River site in northeastern Alberta, a pipeline to the company’s Scotford refinery near Edmonton and an upgrader at the plant to process the tar-like bitumen into light oil.

Despite political instability, Yemen continues to seek investors. The government of Yemen plans to promote seven new oil blocks for exploration in London and Houston this month. None of the country’s offshore areas have been explored. However, the country may find it difficult to compete with neighboring oil giants offering production deals worth billions of dollars. Canadian Occidental Petroleum, Yemen’s biggest oil producer, plans to stay active in the country for a while. The firm set a new quarterly record of 210,000 bopd at its Masila project in the second quarter of this year.

Chevron to develop Angolan oil field with new FPSO. Development of Chevron’s 1997 discovery, Kuito, continues about 50 mi offshore Angola. A new FPSO, dubbed Kuito by national oil company Sonangol, will be used to produce the oil at an initial rate of 50,000 bpd in late 1999, increasing to 100,000 bpd by the end of first-quarter 2000. After its commissioning, the vessel will sail to the west coast of Africa to be spread-moored in about 1,260 ft of water above Kuito oil field, which is being developed in phases. Phase one consists of 12 subsea wells, of which 11 are already drilled. As they are completed, the wells will connect to, and produce into, the FPSO.

OPEC summit planned for early 2000. In the first part of next year, OPEC members will meet in Caracas, Venezuela, to discuss strategies to keep oil prices at a reasonable level. Russia, Mexico, Oman and Norway, along with other independent producers, are invited to attend the meeting. The discussions also will include broadening the use of natural gas, an environmental protection policy and trade / economic issues. An agreement by OPEC to cut additional oil production and exports expires in March 2000.

BP Amoco considering North Sea EOR project. BP Amoco is examining its options to increase production from Magnus oil field, about 150 mi northeast of Shetland. The enhanced oil recovery (EOR) project involves importing gas and gas liquids to the platform and injecting them into the reservoir. The project has the potential to increase the field’s recoverable reserves by 50 million bbl of oil and extend its life several years, to beyond 2015. The project’s viability depends on the availability of gas for injection. Possible options involve importing gas from Foinaven and Schiehallion fields, which could reduce the amount of gas flared at the two fields.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company