Looking ahead

Kazahkstan strikes first offshore oil find. The Offshore Kazakhstan International Operating Co. (OKIOC) discovered oil for the first time in the Kazakh sector of the Caspian Sea. The Kashagan East 1 wildcat, drilled to a TD of about 17 000 ft, in roughly 10 ft of water, flowed oil at a rate of 3,774 bopd and 7.06 MMcfgd. The field may be a deciding factor in the U.S.-backed plan to build a trans-Caspian oil export system that would circumvent Russia and Iran. Kazakhstan president Nursultan Nazarbayev claims that, by 2015, the country would be in a position to challenge the world’s largest oil producer, Saudi Arabia. Complete appraisal will extend to 2002, with another well drilled this year. The nine-member OKIOC group predicts oil/gas reserves as high as 50 billion bbl. If confirmed, the country will finally gain the respect it craves as a major oil producer.

Russia’s Sakhalin Island sees activity blossom. Russia’s state-owned oil company, Rosneft, supports the government’s decision to split up the Sakhalin 5 contract area into several blocks. The 7,720-sq-mi. area is too large for one operator, said Rosneft Vice President Sergey Oganesyan. BP Amoco, Rosneft’s partner, is against the decision, claiming that it increases the project’s risks and makes the area less attractive to operate. However, BP Amoco is under a several-year-old contract that obliges the company to bid (jointly with Rosneft) for the area. Meanwhile, Rosneft began test drilling offshore Sakhalin island at Astrakhanovsky block. Earlier, Rosneft, along with ExxonMobil and Japan’s Sodeco also began test drilling at the Chaivo 6 block in the Sakhalin 4 contract area. No PSA has been signed for Sakhalin 4 although drilling has begun. Recoverable reserves from the three blocks in Sakhalin 1 total 2.36 billion bbl oil and 15.008 Tcf gas.

PGS to help Brazil gather E&P data. Petroleum Geo-Services (PGS) signed a five-year contract with Brazil’s Geological Survey to create the Brazilian Petroleum Agency Exploration and Production Data Bank. The venture, called Banco de Dados E&P (BDEP), will give clients individual access to Brazil’s E&P information via the Internet. More than 20 operators and service companies will benefit from this endeavor, which stipulates that PGS employ its PetroBank technology to "consolidate, archive and deliver seismic well production and cultural data to companies" engaged in E&P activity in Brazil. PGS President and COO, Bjarte Bruheim, said the company has "cleaned and re-mastered more than 280,000 tapes of E&P data of various vintages, and they have been prepared for management by BDEP."

New Mexico stands to get several million dollars from federal lawsuit. New Mexico’s Taxation and Revenue Department is charging 22 natural gas companies with failure to fully pay federal mineral royalties. Tax Secretary John Chavez said if the court finds the charges to be valid, New Mexico stands to gain "tens of millions" of dollars that appear to have been systematically withheld. The state is entitled to 50% of the royalties paid by producers extracting gas from federal lands within state lines. However, the department became aware of a potential problem after audits revealed that several of the underpayments were directly proportionate to the amount of royalties owed. BP Amoco, one of the companies named, said it "will work very hard to come to a resolution." A similar suit eventually led to a $240-million nationwide settlement.

EuroGas acquires 10 Polish concessions. The Republic of Poland’s Ministry of Environmental Protection, Natural Resources and Forestry awarded 10 concessions, covering more than 1,670 sq mi, to EuroGas. A two-year study of the concession by an independent group of Polish geologists identified 12 exploration targets in the Rymanow-Lesko area. The largest of the targets contains an estimated 350 million bbl of oil, "or an equivalent in gas," making it the biggest oil/gas find in Central Europe, if it is confirmed. An exploration well is expected in 2001, and EuroGas is talking with three major oil companies about the potential to share the project.

Drilling to begin offshore Gaza Strip. An Israeli consortium has filed a complaint against British Gas (BG), arguing that BG’s drilling permit is invalid because the Palestinian Authority had no right to issue it. The consortium claims to have found enough gas in Israeli territorial waters to supply Israeli demand for 10 to 15 years. BG plans to begin exploration drilling this month, starting with an area offshore Palestine’s Gaza Strip, then expanding to areas near Israeli maritime borders. BG has asked the Israeli defense ministry to resolve the matter. The company said it would invest up to $500 million over 25 years to develop the Palestinian gas industry.

U.S. Congress urged to repeal net receipts sharing. Interstate Oil and Gas Compact Commission (IOGCC) Vice Chairman, Lawrence E. Bengal pushed for Congress to enact H.R. 4340, which will eliminate net receipts sharing – a system whereby states share the federal cost of managing onshore mineral royalties. However, the new law would allow for an equal sharing of royalties between the states and the U.S. government without any federal administrative deductions. The seven-year-old, net receipt system was implemented by the Omnibus Budget Reconciliation Act of 1993. Before implementing the 1993 act, states were already using the system being proposed. In its 1999 meeting, IOGCC supported the repeal of net receipts sharing, and called for a return to a "fair and equitable means" of royalty distribution.