Looking ahead

Canadian output to increase in 2002. Despite expected lower prices and company expenditures than in recent years, a big boost is expected this year in Canada’s output, induced by start-up of oil sands and offshore projects, said Purvin & Gertz consultant Susan Bell. Led by Suncor Energy Inc.’s Project Millennium oil sands expansion in Alberta and the Terra Nova development off the Newfoundland coast, Canada’s oil production may rise as much as 5% to 7%. This increase would overshadow 2001’s strong growth of 3.8%, estimates the National Energy Board.

BP to meet output targets despite profit drop. BP achieved its 5.5% output target increase in 2001, but suffered depressed overall profits, due to low prices and other market conditions. Production in the last quarter of 2001 hit a record 3.5 million boepd, up 3% compared to a year earlier. Last year’s increased production was aided by the first full year inclusion of ARCO output. "Among the super majors, BP has set itself the most aggressive production target and met it," said Neil Perry of UBS Warburg. "In addition, most of its volume growth in 2002 is to come from ramping up existing fields’ production rather than from new start-ups which are inherently more uncertain."

Bush urges courts to appeal drilling ban offshore California. The Bush administration has appealed a judge’s decision to block new drilling off California’s coast, saying that the judge erred in ruling that leases could be extended only with the state’s approval. This follows a decision to bar exploration from the area, due partly to environmental concerns. The Minerals Management Service appeal states that its decision to extend the leases on the offshore tracts would have "no effect on coastal uses or resources" and does not mean that new drilling or exploration would begin. In 1999, Interior Secretary Bruce Babbitt extended the 40 leases in dispute for 10 years, as they were set to expire. The lease extension has widely been viewed as a prelude to renewed oil prospecting in the area.

Search for Florida oil gets first boost. A proposal to explore for oil in the Big Cypress National Preserve has won approval from the National Park Service. Plans call for a seismic survey, requiring 14,700 shotholes and the drilling of an 11,800-ft exploratory well. However, an environmental assessment, including stipulations intended to protect the vegetation and wildlife within the 729,000-acre preserve, was issued soon afterwards. Collier Resources Co. still needs approval from the state and several other regulatory bodies. The firm plans to build a 7-1/2 -mi access road in the preserve. The Sierra Club’s Roderick Tirrell said he is concerned about the potential damage to the environment the road would cause since it could alter water flows southeast into the Everglades. "Big Cypress National Preserve maintains a high degree of environmental protection and will continue to do so," said Collier General Manager Bob Duncan. Exploration in the area has been ongoing for 60 years.

U.N. slashes forecast for expected recovery. The United Nations expects the world economy to recover this year but at a drastically slower pace than was predicted in October. The world body cut its forecast for 2002 global economic growth to 1.5%, compared to its previous 2%, which underestimated the magnitude of the shock of the September 11 attacks on the U.S. As a result of the rapid decline in economic activity late in 2001, world output expanded 1.3% (the slowest pace in a decade) for the full year while global trade grew just 0.8%, stated the U.N. Department of Economic and Social Affairs, reporting on the global economy. U.N. official Ian Kinniburgh said he believes at least 12 of the world’s largest economies are in recession. This means that the countries have experienced two successive quarters of negative growth. He adds that the recession may be one of the most widespread. The report also states that world trade is expected to expand 3% in 2002. Trade grew at a remarkable rate of 11.4% in 2000.

Brazil’s Petrobrás issues $300 million bond. Petrobrás issued five-year, international bonds insured against political risks. The insurance guarantees interest payments for a certain period to investors in case of a sovereign debt moratorium. Last year, the firm persuaded Moody’s Investor service to upgrade its debt rating higher than Brazil’s sovereign or central government debt. Petrobrás financial director Joao Nogueria Batista said the firm could have three to four bond issues this year, and it plans to return to the international markets in April with an unspecified bond issue. Meanwhile, Shell successfully completed first production test in a Brazilian offshore field. The tests confirm the first significant result by an international operator since the opening of the E&P sector. The firm said the BS-4 Block in the Santos basin showed favorable (crude) flow and indicated estimated reserves of 300 million to 500 million bbl although it said commercial viability still had to be confirmed.