International

July 2002 Vol. 223 No. 7  International

Kurt S. Abraham,  Managing/International Editor

Canadian show exudes improved industry attitude. CALGARY – As this column is being written, your intrepid editor is in the midst of attending Canada’s bi-annual Global Petroleum Show (GPS). Considered one of the world’s premier upstream / midstream exhibitions and conferences, GPS certainly seemed as healthy as ever. There was literally no more room for anyone to have come in as a late exhibitor – all four buildings, as well as the very large outdoor exhibition area, were full. Regarding the latter category, somewhat cramped might be a better description.

As regards the number of attendees, traffic throughout the show appeared to be very good. On the first day, Tuesday, June 11, exhibitors were quite pleased by the volume of traffic through their areas. Given that the middle day, Wednesday, of each GPS is traditionally the high traffic point, exhibitors were almost dazed by the early groundswell of attendance that occurred on Tuesday afternoon. Activity around the World Oil / Gulf Publishing "Centre Stage," which featured two technical presentation theaters, was consistently brisk. Indeed, most presentations were well-attended and frequently 100% full. Two notable examples were presentations by Canada’s Tesco (casing drilling) and Russia’s Sibneft (using new technology in Siberia’s winter). In both cases, there were people standing two-deep in the rear, with some folks crowding in the doorways.

Readers may wonder about attendees’ attitudes, given activity levels to date. Interestingly enough, the vast amount of locals, the Canadian participants, were quite optimistic that a turnaround is due any day now. They all believed that Canadian operators have overdone their deliberate underspending in first-half 2002 and that a mid-course correction toward higher levels must occur, just to maintain output levels. There is also a sense that the Canadian and U.S. economies are recovering from the Sept. 11 fallout, and energy usage is about to trend higher.

Optimism, albeit more guarded, was also present among U.S. attendees. As a group, they tended to expect somewhat longer timelines for exploration, drilling and development increases. Perhaps the most optimistic people were from outside North America. European and Middle Eastern personnel collectively expected a better second half in 2002, and they also seemed to be in a "buying mood" as they visited the various equipment and logistics exhibits.

At the Canadian International Petroleum Conference, held in conjunction with GPS, Saudi Aramco president and CEO, Abdullah Jum’ah, vowed not to use oil exports as a weapon in any political dispute with Western countries.   Abdullah Jum’ah

Brazil’s 4th Round appears fine despite fewer bidders. Our friends (using the term loosely) in the general media seem to feel compelled from time to time to look for negativity in anything that the global oil industry is doing. The latest example is a Reuters story that blew out of proportion the fact that a few less bidders were attracted to Brazil’s 4th E&P licensing round than to the previous round.

"Brazil E&P 4th Round Attracted Fewer Bidders," screamed the story’s headline, obviously inferring that the offering was in danger of becoming a failure. Sure enough, the story’s second sentence emphasized that the number of potential bidders, 35, "was well below the 44 companies who subscribed for the 3rd licensing round last year." Of course, the final number of bidders last year dropped to 38 from 44, and after the Reuters piece was written, this year’s final tally also dropped to 29.

Only grudgingly did the writer acknowledge that, within the 35 firms that subscribed to bid, there were 10 newcomers. Furthermore, the item never did mention that despite many top firms already working in Brazil, the quality of the newcomers was quite high. Examples of the new firms included Norway’s Norsk Hydro and Canada’s Encana and Nexen.

ANP offered 39 offshore and 15 onshore areas in 19 basins for the 4th round, or one more area than in 2001. The auction fee for various tracts ranged from $12,500 to $437,500. Officials were due to award tracts during the actual auction on June 19 – 20.

Indonesian reserves face exhaustion, says local firm. According to Indonesian research group Pelangi, the country’s oil reserves face the prospect of running out in 20 years. This gloomy prognostication is, of course, contingent upon the current output level of 1.37 million bpd being maintained throughout the period.

Pelangi focuses on energy / environmental issues and policies. The group said that liquid hydrocarbons continue to hold a high share of Indonesia’s energy mix. They account for roughly half of all industrial energy usage, about 70% of household consumption and 99.9% of transport needs. This usage, contend analysts, will lead to Indonesia becoming a net oil importer within 10 years. If the country loses its ability to generate significant revenues from oil exports, there could be serious repercussions for Indonesia’s balance-of-payments, including potential social disruptions that could be triggered.

"This spells disaster," said Moekti Soejachmoen in an interview with the AFX news agency on Bali island. He was in Bali at a U.N. meeting, where attendees were preparing logistics for the World Summit on Sustainable Development that opens in Johannesburg on Aug. 26, 2002. "Indonesia can no longer rely on non-renewable sources of income, such as oil," said Soejachmoen. "Instead, it should develop its renewable sources of income, such as human capacity."

Soejachmoen correctly asserts that Indonesia should work toward diversifying its economy. He also is correct to project that the situation will be exacerbated by a growing population. However, his scenario assumes that the country will quit generating any more new discoveries that would extend reserves. He also fails to account for technological progress that is likely to improve recovery ratios. Nor does he account for the growing role that natural gas will surely play. This year’s governmental budget assumes that Indonesian crude output will average 1.32 million bpd, or just over 480 million bbl. The U.S. embassy in Jakarta recently estimated Indonesian oil reserves at 9.6 billion bbl.

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