Looking ahead

OPEC secretary general says oil prices expected to rise. OPEC’s newly appointed secretary general, Alvaro Silva, said he expects oil prices to rise as the global economy recovers during the second half of 2002. However, he declined comment on the cartel’s production decisions to be made at their upcoming meeting next month. At press time, oil prices were steady, due mainly to OPEC’s decision to maintain tough production restraints. Yet dealers said they were keeping a close eye on the organization’s adherence to output curbs after its decision to keep its production ceiling at 21.7 million bopd. This is the lowest level in 10 years. OPEC claims that supplies are sufficient for the modest demand growth it has forecast for the year. Some analysts said that OPEC’s decision was unlikely to have a major impact on prices, especially if it boosts output in fourth-quarter 2002, as many expect it to do.

U.S. Energy Secretary predicts progress on domestic oil development. Energy Secretary Spencer Abraham said he is confident that congressional negotiators will produce a comprehensive, balanced energy bill, but he stopped short of predicting approval for drilling in the Arctic National Wildlife Refuge. Speaking to a gathering of independent producers, Abraham said that the Bush administration is prepared to help the industry by implementing steps, such as opening more drilling opportunities on federal land and reviewing regulation of offshore drilling. He said the Energy Department is testing new technologies to help independents safely and economically recover untapped reserves in old fields and environmentally sensitive areas. Abraham is hopeful that a final version of the administration’s energy bill will be passed, allowing drilling in ANWR.

Canadian firm to sell stake in Sudan’s oil fields. Talisman Energy is in talks with India’s national oil company to sell its controversial stake in the oil fields of war-torn Sudan. Talisman President Jim Buckee said that his firm’s four-year venture into Sudan will be profitable, if they are able to sell. An industry analyst said the Indian government gave approval to ONGC to proceed with an offer of $750 million. While the Sudan project is profitable, Talisman’s critics say oil production is fueling the country’s 20-year-old civil war. Villagers reportedly have been evicted from oil-bearing lands. Buckee has consistently denied these claims, arguing that oil development can lead to peace, and that the firm’s presence has done far more good than harm.

Norwegian oil minister predicts another half-century of production. With new technology and government policies to encourage E&P activity, Minister of Oil and Energy Einar Steensnaes said about 60% of Norway’s crude still remains in the ground. Thus, "[the country] has a potential for maintaining its oil production for another 50 years and its gas production for another 100 years," dependent on the willingness of the entities involved to meet new challenges said Steensnaes. The government is considering changes in current offshore licensing policies to give companies a longer term view of which blocks will become available in the future. Although firms are interested in searching for oil in the Arctic waters off northern Norway and Barents Sea, Steensnaes said these regions can only be opened to drilling after careful study. Arctic waters are rich in fish, and are a delicate, low-temperature ecosystem. But, he believes the industry is capable of developing necessary technology to ensure safe drilling.

Kuwait to send invest bill to companies. Next month, Kuwait’s oil ministry intends to send foreign oil companies a copy of a draft law on the emirate’s $7-billion plan to open up its upstream sector to foreign investment. Parliament’s finance and economic committee is considering the draft law for "Project Kuwait." The aim of this project is to double production in the five northern fields to about 1 million bopd in 5 to 10 years by cashing in on companies’ technical knowledge. The ministry hopes to get feedback from the firms quickly, rather than the usual process of waiting for the committee’s approval. The ministry plans to open discussions with foreign firms once it finalizes the economic model for the first upstream oil opening since nationalization in 1975. Once feedback is gathered, it will be sent to the finance and economic committee for approval before parliament votes on the bill.

Qatar Petroleum and ExxonMobil to supply LNG to the UK. Qatar Petroleum and ExxonMobil signed a Heads of Agreement (HOA) for the supply of LNG from Qatar to the UK. The HOA outlines the development of two LNG trains that are expected to be the largest ever built by industry. The train’s feed gas will be sourced from Qatar’s giant North Field, which has gas reserves in excess of 900 Tcf. LNG shipments to the UK are scheduled to begin in 2006 or 2007, and will be in effect during the next 25 years. Qatar Petroleum will have a 70% equity interest in the trains, and ExxonMobil has the remaining 30%.

Russian firms to keep expanding. Despite a weak performance last year and at the beginning of the current year, executives from Lukoil and YUKOS said future developments remain on target. After meetings with their shareholders, the execs also pledged to continue to push Russia’s dominant export industry toward greater transparency, in a bid to boost its appeal to foreign investors. Lukoil President Vagit Alekperov said, "Improving investor relations, restructuring our management are some of our top priorities." YUKOS CFO Bruce Misamore said the firm is still on target to meet its goal of listing on either the New York or London Stock Exchange by mid-2003 – a move that requires even further adherence to Western business practices. Analysts say the companies now recognize the value of foreign investment and a good stock rating, and they are eager to be seen as responsive and open.