Looking ahead

Indonesia to grant more incentives to attract foreign investors. The Indonesian government will give incentives, on a case-by-case basis, to parties interested in developing marginal fields. The cash-strapped country is desperate to attract funds after four years of crises. Energy Minister Purnomo Yusgiantoro said, "There are potential oil reserves in marginal fields, and we understand oil companies need incentives to develop those fields." Unocal Indonesia CEO Brian Marcotte said suitable incentives would be in the form of oil and gas splits, flexibility in taxation and investment credit. Marcotte added that the government had to give clear direction on new regulations.

Bush renews ANWR drilling proposal; plans to keep sanctions on Iran, Libya. U.S. President George W. Bush announced a new version of his proposal to open the Arctic refuge for drilling. However, supporters and opponents of the issue expressed no interest in his plan to reduce acreage to be made available in the disputed area. Sen. Lincoln Chafee (Republican – Rhode Island) said, "even limited drilling in ANWR represents failure to live up to our duty to preserve America’s resources for future generations." Senator Frank Murkowski (Republican – Alaska), who favors drilling in the refuge, said reducing the acreage would take more domestic energy resources off the table. Meanwhile, Bush intends to keep sanctions on energy investment in Iran and Libya, and will renew an executive order prohibiting U.S. oil firms from investing in the country. However, TotalFinaElf is chasing deals in several Middle East hotspots, and hopes to sign a historic Saudi Arabian deal very soon.

OPEC Secretary General Ali Rodriguez

Russia stalls commitment to OPEC cuts. Concerns arose over Russia’s delay in reaching an agreement on export limits. OPEC Secretary General Ali Rodriguez said talks are continuing with Russia to influence the country to continue export cuts into the second quarter of this year. However, Russia has yet to give a positive answer to OPEC’s request. Russia, which is trying to boost itself as a strategic alternative supplier to the Middle East, still has time to analyze the oil market situation, said Rodriguez. He also said that international oil demand is expected to be weak in second-quarter 2002, and lower demand levels will put further downward pressure on prices. Rodriguez claims OPEC’s reduced output target (announced in December) can be met in the second quarter, if Russia maintains its current output cuts. Rodriguez expects "modest" growth in demand for oil in the second quarter, by as much as 300,000 bpd between July and December, and an increase in output by about 700,000 bopd.

Amerada Hess to cut UK workforce. Amerada Hess will reduce its UK-based, E&P staff by 15% (110 people). The firm employs about 730 people in London and Aberdeen. The layoff is part of a global restructuring that mandates only onshore staff to be redundant. The firm is a relatively small North Sea producer, with equity stakes in fields in the UK, Norway and Denmark. Its production from these areas totaled 175,000 bopd and 363 MMcfgd in fourth-quarter 2001.

Shareholders perturbed with oil compensation deal. Conoco shareholder approval of the Conoco-Phillips merger will trigger a "change of provision," and deliver early compensation to the firm’s executives. Conoco Chairman and CEO Archie Dunham, as well as other executives, stands to gain millions of dollars in compensation if the planned merger of Conoco and Phillips falls through. This arrangement has some shareholders upset. Dunham, who will be chairman of ConocoPhillips, will be able to exercise options and stock-based awards worth $6 million. A popular shareholder question, "Why do we (shareholders) have to pay them (executives) if there is no merger?" Nonetheless, the planned merger is due to close in third-quarter 2002, but could still be blocked by the Federal Energy Regulatory Commission, as well as the European Union.

Pemex to increase production. Pemex plans to raise crude output by 11%, to 3.6 million bpd by the end of the year. It produced an average of 3.1 million bopd last year, but increased its daily output, to 3.3 million bbl in December, after the company completed maintenance at a major drilling site. Plans to boost production come as Mexico prepares to restrict its exports under an agreement with OPEC. Mexico is expected to export only 1.6 million bopd in first-half 2002.

ExxonMobil pulls out of Turkmenistan; signs MOU with PNG. After disappointing well test results, ExxonMobil is shutting down its operations in Turkmenistan. The Garashsyzlyk 2 well was drilled to 11,320 ft, instead of the 17,390 ft originally planned. Operator ExxonMobil (52.4%) has led a consortium developing the field since 1998. The firm will leave the former Soviet state completely next month. Meanwhile, the firm has signed a memorandum of understanding with Papua New Guinea to develop and produce more than 6 Tcfg in the Southern Highlands of the country.

ONGC looks for deepwater partners. ONGC needs joint venture partners to develop deepwater exploration blocks offshore India’s coast. The firm has solicited 12 companies to review the data on these blocks. ONGC Chairman Subir Raha said he will invest in deepwater E&P areas in 2002 – 2007. He added that he is willing to form strategic alliances to explore deepwater areas. This action is a part of a plan to double India’s oil and gas reserve base over the next 20 years.