Oil country hot line

Maritime border fight may spoil tract

Neighboring South American countries asked for a regional mediator to help settle a century-old dispute that could cost millions in potential revenue. Tempers erupted in June, when Suriname’s military ousted CGX Energy, Inc. from its drilling rig, where it was working a concession granted by Guyana in 1998. Suriname claims the Canadian firm was operating in the disputed area of the Corentyne River, and Guyana accuses Suriname of hostile violation of its territory. After three rounds of talks, an agreement has yet to be reached, but CGX remains confident that it will be allowed to resume drilling the Eagle target, with potential recoverable oil reserves of 850 million bbl. If the deal falls through, the countries could lose the profit of the Suriname-Guyana basin, which holds potentially 15 billion bbl of oil reserves, according to the U.S. Geological Survey.

LukOil tangled in Russian organized attack

Last month, LukOil and several other big businesses were accused of tax evasion by Russia’s tax police. LukOil Vice President Leonid Fedun said the allegations could not be proved and were a publicity stunt to discredit the company. He further stated that the charges "are hitting the whole of the Russian equity market and creating the image of chaos and uncertainty among investors." The surprise attacks came at a time when LukOil is preparing to go up against two, leading oil producers (Yukos and Sibneft) for valuable privatization rights for the remaining state oil companies. President Vladimir Putin met with 21 heads of the big companies to discuss the police action, but few specific agreements were made. However, it seems that tensions have been appeased.

Canadian takeover is worth $2 billion

Husky Oil, a private company controlled by Hong Kong financier LiKa-shing, acquired Renaissance Energy in a deal that may be worth up to $2.04 billion. The merger will create Canada’s second-largest oil and gas producer. This venture is the latest in a series of mergers that has drastically decreased the number of mid-sized Canadian oil producers who continue to be overlooked by investors, despite optimistic commodity prices.

ExxonMobil starts North Sea development

The British Department of Trade and Industry approved the development of Brigantine, a $150-million gas project. ExxonMobil’s subsidiary, Esso Exploration and Production, expects the development to come onstream in 2001. Production rate is projected at 130 MMcfgd from three fields, with potential recoverable reserves of about 280 Bcf of gas. This project, a 50/50 joint venture with operator, Royal Dutch Shell, will eventually develop oil-equivalent reserves of about 50 million bbl.

U.S. government sued for blocking gas lease

A lawsuit against the U.S. government, filed by three oil companies, accuses the defendant of generating barriers that hindered the plaintiffs from developing gas reserves on leases purchased about 20 years ago in the Gulf of Mexico. The suit claims that the government did not provide "timely and fair review" of the development leases. The companies filed the suit in the U.S. Court of Federal Claims and are seeking compensation for the $10.5-million purchase, plus exploratory and other expenses related to the endeavor. The parties – Chevron Corp., Conoco Inc. and Murphy Oil Corp. – have sunk three wells costing roughly $125 million. The leases are a part of the Destin Dome 56 Field, about 25 mi south of Florida. The Energy Department reports that the field contains an estimated 2.6 Tcf of gas. The Commerce Department and the Environmental Protection Agency are playing "pass-the-ball" with the issue, each refusing to act before the other.

Discoveries continue across Pacific

At widely distant points of the Pacific, operators continue to get good results. Fletcher Energy tested flows of up to 30.7 MMcfgd and 2,670 bcpd at the Pohokura 2 exploration well off the coast of New Zealand. This find represents the country’s biggest in 30 years. Texaco’s Bozhong discovery well in Bohai Bay, offshore China, was drilled to a TD of 7,134 ft. Initial results show reservoir sand in the Tertiary Minghuazhen formation, at a depth of 5,500 to 5,700 ft, with net pay of 115 ft.

Senate backs Northeast heating oil reserve

To prevent a repeat of last winter’s Northeast fuel cost dilemma, the U.S. Senate voted to set up a permanent heating oil reserve for the region. The reserve would afford a 10-day supply of heating oil for the area. However, President Clinton is being accused of playing games with the plan for a 2-million-bbl, heating-oil emergency stockpile, which reportedly is inadequate to ease the problem of skyrocketing fuel prices. The House of Representatives also approved the plan but did not have a payment strategy for the reserve. Thus, the U.S. government is soliciting bids from energy companies to fund the reserve. The winning contracts will be announced in September.

U.S. oil/gas wells, dry hole completions rise

In the second quarter, completions of U.S. oil and gas wells and dry holes increased 54% over last year’s comparable period, reports API. Completed oil wells rose 95%, while natural gas completions rose 42%. A total of 6,326 oil and gas wells and dry holes were completed.

Norwegian oil company sells UK assets

Norsk Hydro has agreed to sell its British oil and gas assets to Conoco for $540 million. This amount does not include net operating capital. Hydro’s UK assets were accumulated only last year due to a purchase of Saga Petroleum. The deal will create a pre-tax gain of roughly $58.8 million when completed.