Looking ahead

Saudi investment talks end as oil giants plan to invest. Saudi Arabia’s two-week long negotiations with international oil companies ended without any specific agreements being signed, but they created, sources say, "a [clear] understanding of the [very defined] investment process. However, negotiations are not expected to be finalized until the end of the year by a committee that will work out the details, said Prince Saud al-Faisal, foreign minister and head of the Supreme Petroleum Council. Negotiations excluded upstream oil production (still the sole right of Saudi Aramco – the state oil firm seen as opposing opening the door too wide to foreigners) but focused on gas field development, electricity generation and oil refining. Twelve Western oil companies have committed to invest $100 billion over the next 20 years.

U.S. firms still restricted from Libyan oil sector. Although Libya is no longer a threat, the U.S. refuses to ease sanctions against domestic and foreign investment in its petroleum sector. Ronald Nueman, Deputy Assistant Secretary of State for Near Eastern Affairs, said U.S. sanctions against foreign firms that make large investments in Libya’s oil industry "will continue to be considered." Also, U.S. oil companies, forced to pull out of Libya by President Reagan in the ’80s, will continue to be prohibited from investing in the country. However, as a result of improved international relations, European companies get access to the country, which plans to increase its oil production to 2.0 million bpd from 1.4 million bpd.

India signs pacts with oil companies for 25 blocks. India signed contracts for 25 oil exploration blocks, of which 22 are under the new liberal exploration licensing policy, and three are from earlier bids. Total investment in the 22 blocks is expected to be $240 million. Of the 22 blocks signed, 12 were awarded to Reliance Industries Ltd, and five to Oil and Natural Gas Corp. The government said that the second round of oil blocks would be in the third quarter of this fiscal year. The remaining three blocks could not be finalized, because the companies have sought an extension of time.

House approves energy bill for Northeast. An energy bill that would help out smaller drillers when oil prices drop too low, and set up a home heating oil reserve to assist the Northeast when prices get too high, was passed (416–8) by the U.S. House. The bill allows the Northeast to create a heating oil reserve of 2 million bbl to alleviate situations, such as occurred this winter, when the tight oil market caused heating oil prices to skyrocket. The main aim of the legislation was to re-authorize a program that allows the President in times of energy crises, to withdraw oil from the Strategic Petroleum Reserve. The House also amended the legislation to give the Energy secretary the discretion to purchase oil (from foreign sources) at $15/bbl from small-scale stripper wells when oil prices drop below that level.

Three oil companies sign production sharing agreement. Marking the end of over three years of another geological evaluation and business development effort in Yemen, Adair Yemen Exploration and its partners – Occidental Yemen Sabatain and Saba Yemen Oil Co. – have signed a production sharing agreement with Yemen’s Ministry of Oil and Mineral Resources. The agreement allows the companies to explore for oil on Block 20, within the prolific area produced by Yemen Hunt Oil Co. Projected cumulative output from that area is expected to be about 1.0 billion bbl by the end of 2005. Pipelines and export facilities already are in place to bring any new oil finds to market within short timeframes and at minimum cost. Adair, the exploration-phase operator, believes that the block contains up to 340 million bbl of recoverable oil reserves.

Congress approves undersea hydrate-energy study. A bill, passed in the House and expected to be signed by the President, approves $47.5 million for the Department of Energy to study a methane, hydrate-energy source buried under the sea, and the arctic permafrost – which has the energy potential equal to more than twice that of all other fossil fuels combined. The bill also authorizes the Energy secretary, guided by the Interior, Defense and Commerce secretaries, to study methane hydrates as an energy source, as well as the technologies needed for safe, efficient development. "If only 1% of the methane, hydrate resource could be made recoverable, the U.S. could more than double its natural gas resource base," said House sponsor, Rep. Mike Doyle, (Democrat – Pennsylvania).

FSU countries and partners active in various oil projects. Russia’s Lukoil hopes to resume talks with foreign investors and become operator of the Timan Pechora Project, in which it plans to invest up to $4.7 billion and boost its oil reserves in the region by 227.5 million t within this decade. The project, which was stalled for years, due to the Nenets region’s opposition to the field’s exploitation, involves the development of a number of oil fields in that region in Russia’s Far North. Also, Russian Gazprom and Bluestream Pipeline Co. signed a $1.333-billion syndicated loan deal with three banks for the BSP gas-pipeline project, which involves construction of a gas pipeline from Russia to Turkey through the Black Sea. Meanwhile, Azerbaijan’s parliament approved an oil project with Exxon and Conoco on joint development of the Zafar and Mashal offshore oil blocks in the southern Caspian Sea, worth $3 billion. The reserves of the blocks are estimated at 140 million t of oil.