June 2001 Vol. 222 No. 6  International

Kurt S. Abraham,  Managing/International Editor

Venezuela, Norway clarify upstream intentions

Late April and early May are usually a busy conference period for this editor, and 2001 has been no exception. In late April, Boulder, Colorado-based International Research Center for Energy and Economic Development (ICEED) held its annual conference of international energy economists. The following week, the 33rd Offshore Technology Conference (OTC) took place in Houston. Given the heightened attention to energy matters worldwide, both events generated their share of news, including policy and activity goals from Venezuela and Norway.

Venezuela’s exploration plans detailed. At ICEED’s conference in Boulder, state firm PDVSA’s goals within its new 2001 – 2006 business plan were presented by Iván Orellana, senior advisor for Planning Coordination in Caracas. Of particular interest is the plan’s exploration component. As outlined by Mr. Orellana, PDVSA expects $45.3 billion to be spent among all of Venezuela’s petroleum sectors through 2006. About 47% of this total would be provided by PDVSA through its own activities or in associations with foreign firms. Spending on E&P would constitute 59% of the total, including 16% for the Orinoco Oil Belt and roughly 10% for exploration. Investment for natural gas would be $1.15 billion.

A $2.4-billion exploration investment hopes to find 7.8 billion bbl of new oil reserves and 23 Tcf of new gas reserves (see table). Just over half of the oil (4 billion bbl) is projected to come from the eastern region, and another 31% would be found offshore. Although major 2-D and 3-D seismic work will be conducted in the east, the greatest acquisition effort will take place offshore, where activity has been the slimmest.

Along with the beginning of "real" offshore activity, the expanded seismic program is one of the five-year plan’s major highlights, said Mr. Orellana. "We will conduct an intensive seismic effort for the first three years, to target the finding of reservoirs greater than 500 million bbl," he said. Somewhere around the third year, the exploratory drilling effort will pick up momentum, eventually totaling 142 wells by 2006 (see table). Of these, 53% will be drilled in the east, and another 28% will be spudded in the mature, but still prolific, west.

PDVSA hopes that a combination of new fields onstream and completion of secondary / enhanced recovery projects will boot productive capacity to 5.5 million bopd from the current 4.2 million bopd. Within the overall figures, output from Orinoco Oil Belt projects is expected to hit 601,000 bpd in 2006, up from 171,000 bpd in 2001. This and all the other goals, of course, depend on several factors, including a consistently profitable oil price, cooperation within OPEC and maintenance of good relations with foreign operators.

On the gas side, $10 billion in capex is targeted to several areas. Projects include development of new, non-associated gas reservoirs, optimization of existing NGL facilities and joint ventures in transmission and local distribution.

Norway sets "structural changes" in motion. In contrast to the conspicuous absence of officials from the UK, which faced a parliamentary election on June 7, Norwegian officials were in ample supply at OTC. Heading Norway’s delegation was Deputy Minister of Petroleum and Energy Bjørg Sandal.

As Ms. Sandal noted, "the single, most important adjustment in Norwegian oil and gas policy is the ongoing process of improving the state’s ownership interests" relative to industry activity on the Norwegian Continental Shelf (NCS). Specifically, this refers to ownership of state firm Statoil and future management of SDFI (state’s direct financial interest). Accordingly, the government last fall put forward a proposal to Norway’s parliament, the Storting, to partially privatize Statoil and restructure SDFI. That proposal was approved on April 26, just a few days before OTC, said Ms. Sandal.

The SDFI and Statoil measures are part of the government’s goal to increase the number and quality of NCS players. "We believe that increased diversity of players on the NCS, with smaller and more specialized companies, downstream companies and service companies, will be necessary to further develop the petroleum resources," said Ms. Sandal.

The Storting approved listing Statoil on the Oslo Stock Exchange and initially selling between 15% and 25% of shares to private investors this summer. However, the state will retain at least two-thirds of Statoil’s shares. To the global financial community, this may seem to be a modest, even timid first step, but Ms. Sandal defended the size. "No, this is not going to be Statoil in a new dress," she said. "However, in my mind, this first step is a real big step for the Norwegian government. On our scale, it is a big deal."

Also approved by the Storting was a restructuring of SDFI. The SDFI was first established in 1985, by dividing most of Statoil’s NCS production licenses into direct financial interests for the state (SDFI) and commercial shares for Statoil. An SDFI share has been included in nearly all production licenses awarded since. Now, however, the Storting has decided to sell 21.5% of SDFI holdings – 15% to Statoil, and the remaining 6.5% to other companies. As of press time, a sale date had not yet been set. Officials also will establish a state-owned, incorporated company to manage the SDFI portfolio.

In other news, Norway will launch its 17th Licensing Round in third-quarter 2001. Included in the tracts offered will be some areas of the Norwegian Sea. Awards for this round should be made sometime in second-quarter 2002.