Looking ahead

Merger madness returns. Numerous firms have begun to acquire each other again. Amerada Hess will pay $2.7 billion for Triton Energy, which has made a series of substantial new finds offshore Equatorial Guinea. Amerada will buy shares at $45 each, at a 52 % premium above share price. It also will assume Triton’s $500-million debt. Westport Resources will buy rival Belco Oil & Gas for $922 million, in a deal that will increase its presence in the Rocky Mountain region in the U.S. The deal closely follows another acquisition in the same region by Kerr-McGee of HS Resources for $1.3 billion. Lundin Oil accepted Talisman’s cash offer for its outstanding Series A and B shares for SEK 36.5 ($3.40) each. Lundin’s Sudan and Russia assets will be spun off into Lundin AB and distributed to shareholders. Anadarko Petroleum will acquire Gulfstream Resources Canada in an all-cash deal worth $137 million, giving the Houston-based firm greater presence in Qatar and Oman. Finally, Hanover Compressor acquired Production Operators Inc. from Schlumburger for $761 million. The deal should close before year-end.

New players to join Brazil’s upstream sector. Brazil’s Round 3 has attracted first-time bidders to the country’s oil and gas industry. The newcomers, which include Phillips Petroleum, Ocean Energy, Wintershall and Samson, all paid top dollar to compete in the region. The highest bid was signed by Phillips for $48.9 million. The Brazilian National Petroleum Agency received several large payouts totaling about $250 million. As in the past two years, Petrobrás was the top bidder. It won bids as operator for 13 fields (either alone or with partners), and was a partner in two other fields, one with ExxonMobil, and the other with TotalFinaElf as operator. Analysts call the round a success, due to the involvement and aggressiveness of majors such as ExxonMobil, Royal Dutch / Shell and Statoil.

U.S. Senate votes to allow drilling offshore Florida. After it passed in the House, the Senate defeated an amendment that sought to delay, for six months, drilling activities off Florida’s Gulf Coast. Eighteen Democrats joined all 49 Republicans in supporting the lease sale, in what is seen as a victory for the Bush administration’s energy plan. The vote came on an $18.7-billion bill to fund public lands programs in the next fiscal year, starting October 1. President Bush agreed to shrink the tract by 75%, and thus keep it at least 100 mi away from the state’s coast.

Cheney, team travel nation to boost support for energy plan. Imitating a forum favored by former President Bill Clinton, Vice President Dick Cheney, along with members of the energy policy task force and supportive lawmakers, will be holding town meetings in various states (instead of arguing from the White House) to gain backing for the Bush administration’s energy strategy. President Bush’s plan is intended to boost U.S. energy production.

Cuba to begin drilling in GOM. Cuba is set to launch its first deepwater exploration in the Gulf of Mexico, while the U.S. remains locked in a heated debate about plans to explore for potential energy reserves off Florida’s coast. Teamed with Repsol YPF, state-firm Cupet expects to start seismic studies in the area, this month. Cupet officials said they intend to commence drilling as early as next year. Unlike Floridians whose main argument is that drilling off their state’s coast will hurt the coastline and jeopardize a multi-billion-dollar tourism industry, Cubans consider domestic oil production an essential part of their country’s economy and a way to gain autonomy from high prices.

Colombia extends royalty law until 2002. A law that cuts royalties paid by foreign firms was declared unconstitutional by Colombia’s high court. However, the ruling was deferred for one year, and the existing law remains in effect until June 20, 2002. The one-year extension will allow Congress to pass an updated measure. The royalties law, which became effective last year, contains several procedural flaws. It allowed foreign firms that drill new wells, with output levels below 125,000 bopd, to pay only 5% royalty. If output climbed above 125,000 bopd, the firms would pay 20%. A 25% royalty would be gained only if output reached 400,000 bopd, a rate that no Colombian field produces. Previously, firms paid a flat royalty rate of 20%, regardless of the production size.

National, private firms may team up to gain better advantage. Chevron’s chief economist, Edgard Habib, said state oil firms and private oil companies will benefit greatly by joining forces. "There are internal demands and global market situations that will compel national firms to coordinate with international firms in opening up certain sectors," said Habib. The demand for capital and technology, combined with the need to tap potential reserves of fresh prospects, is better achieved by combining resources. A great example of this is the recent return of majors, including ExxonMobil, Royal Dutch / Shell, BP and Phillips Petroleum, to the upstream gas sector in Saudi Arabia.

U.S. looks at investing more in Algeria beyond $4 billion for energy. Algerian President Abdelaziz Bouteflika met at the White House for the first time with President George W. Bush. They discussed the possibilities for U.S. investments in the prolific North African country. "The cooperation between both countries could be a model of lasting and durable partnership," said Bouteflika, who sees this opportunity as a means of revitalizing other sectors of his country’s economy. The security of U.S. interests in the war-torn nation, and human rights issues and peace efforts, were discussed.