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Saudis shock Western oil firms with gas field reversal

Western oil companies’ hopes of entering Saudi Arabia’s upstream gas market appear to have been crushed. In a surprise move that could damage relations with the U.S., Saudi Foreign Minister Prince Saud al-Faisal took three gas development areas previously awarded to foreign consortia off the table. As was leaked to a New York-based newspaper, Prince Faisal divulged his decision in a letter early last month to ExxonMobil and Royal Dutch Shell, leaders of the consortia set to operate the tracts. Talks aimed at signing final contracts for the areas had been bogged down for months over the rate of return that foreign firms would receive. Instead of these premier areas, the Saudis were preparing to offer a scaled-down, "take it or leave it" program of less significant gas tracts. Oil companies said that they do not believe these areas can produce sufficient income to offset investments needed for desalination, power and other projects.

Iraqi war fears push oil prices to yearly highs

The pounding of war drums in Washington and London, ahead of a scheduled OPEC meeting that was expected to be contentious, set oil prices soaring to 12-month highs. West Texas Intermediate shot up to $30.03/bbl on Sept. 6, and Brent crude hit $28.75/bbl, fueled by relentless dialogue from U.S. President George W. Bush and UK Prime Minister Tony Blair about potential military removal of Iraqi President Saddam Hussein from power. Oil traders kept prices high in ensuing days, spooked additionally by rumors about the Sept. 19 OPEC meeting. Kuwait and Venezuela were said to be leading an argument against release of further crude supplies ahead of slacker, winter market conditions.

Russian officials give the shaft to exporters

Given the latest inexplicable move from Moscow, someone had better give the Russian regime a refresher course on how to encourage free enterprise investment. In typically terse Kremlin behavior, Finance Minister Alexie Kudrin announced, without detailed explanation, that Russia has raised its export duty on crude oil 19.6%. The new rate, $26.20/metric ton, is up from the previous figure of $21.90/metric ton and takes effect on Oct. 1, 2002. Kudrin did manage to explain that the export duty is indexed to prices for Urals blend exports over previous quarters. This rather stiff hike in duties is seen as a blow to efforts to expand Western firms’ joint ventures with Russian companies on E&P projects.

Bush uses oil and gas to cultivate labor vote

The "season of silliness," also known as the mid-term congressional elections, has descended upon the U.S., creating some strange bedfellows. A perfect example is the warming of relations between Republican President George W. Bush and traditionally Democratic Party-leaning organized labor. Eager to siphon off votes, Bush has courted labor for most of this year, using energy policy as a magnet. In a Labor Day appearance last month in Pennsylvania, Bush reminded hundreds of union members that expansion of U.S. E&P opportunities and activities could be a job creation machine, a goal that his policies are geared toward. Indeed, Bush, the Teamsters and the Carpenters / Joiners Union have worked together already to push his energy plan, which includes opening Alaska’s Arctic National Wildlife Refuge to drilling. "Congress needs to get moving," Bush told the crowd, urging the Senate to quit blocking his efforts.

Lawmakers fret over U.S. energy legislation

Pushed by President Bush to pass a broad energy bill before adjourning for election campaigns this month, U.S. lawmakers struggled to reconcile their chambers’ competing measures. Resident congressional Cajun, Republican Rep. Billy Tauzin (Louisiana), chair of the House-Senate conference committee, had set an Aug. 30 deadline for compromising on more contentious provisions. However, as of mid-September, language was still not finalized on such issues as ANWR, ethanol and vehicle fuel mileage mandates. Originally, the House bill had included drilling in ANWR, while the Senate measure excluded such activity. Staffers on both sides scurried to find ways to work out language in these sections, so that Senate and House negotiators could meet weekly to begin voting on final bill provisions. Given the difficulties, it was not at all certain that work would be completed before Congress adjourned on Oct. 4.

Brazil puts some flex into exploration licensing rules

To accommodate oil companies’ changing needs, Brazilian regulatory agency ANP said its 5th E&P licensing round will allow operators to define block sizes. This new, flexible scheme is already used in numerous countries. It should attract additional companies for bidding, particularly medium-sized and local independents. Until now, ANP had defined all block sizes. ANP is also considering the holding of auctions every six months, beginning in 2004. An announcement of areas available for the June 2003 round is due this month.

Unocal brings some good news to the Gulf of Mexico

"We are planning to return to exploration drilling in the deepwater Gulf of Mexico after about a year’s hiatus," said Unocal Chairman and CEO Charles Williamson while forecasting third-quarter earnings. "We wanted to digest the significant information we acquired in our 2001 program and also see what success the industry had. We now feel we have an excellent inventory of prospects, as we (focus) completely in areas that have seen recent industry success, namely Green Canyon and Mississippi Canyon. In the coming months, we should have multiple deep shelf wildcats drilling concurrently. Our portfolio of leads and prospects continues to grow."

Iran suspends awards to foreign companies

In what seems a setback for the past seven years’ trend of liberalization, Iranian Oil Minister Bijan Zanganeh has put a one-year hold on awarding any new E&P contracts to foreign companies. In comments released to local media, Zanganeh said, "The only reason for this policy is that, given the fall in demand, we have seen it more desirable to delay signing deals. Besides, we do not need to produce beyond our output capacity and can always use these resources." However, some industry observers believe that the minister’s comments are merely a smokescreen to hide his real agenda, which is to mollify hardliners within the Tehran regime that want to put limits on business with Western firms.

Marathon hits deepwater gas find off Nova Scotia

Roughly 100 ft of net gas pay over several zones were found in a deepwater wildcat drilled by Marathon Oil, 215 mi south of Halifax. The Annapolis G-24 well was drilled in 5,500 ft of water on Exploration License 2377. The well has been temporarily abandoned, allowing for re-entry at a later date. "While the results of the Annapolis well are promising, further activities will be required to determine the commerciality of the discovery," said Phil Behrman, vice president of worldwide exploration. "Plans are being developed for additional seismic and drilling in 2003."

Russia claims role in Kuwaiti oil fields

Although he was irritatingly short on specifics, Russian Energy Minister Igor Yusufov said in mid-August that several firms, including Lukoil and Sibneft, were slated to work at four Kuwaiti oil fields. The work involves further development of the fields in northern Kuwait. Yusufov’s comments came during the first meeting of a bilateral commission, originally set up between the two countries in 1994. The Kuwaiti delegation head, Sheik Ahmed Al Fahd Al Ahmed Al Sabah, said his country sought to increase working groups with Russia, inside and outside of OPEC.

Sao Tome and Nigeria end offshore spat

Finally, Nigeria and Sao Tome and Principe have hammered out an agreement that clarifies offshore oil rights along the two countries’ maritime border. Sao Tome officials said that Nigeria will give their country 40,000 bbl of oil per month from Block 246, which Nigeria is developing. Nigeria also agreed to help Sao Tome build an oil refinery and deepwater port in exchange for exploration rights. Nigerian President Olusegun Obasanjo and Sao Tome President Fradique de Menezes crafted the deal while they attended the Earth Summit in South Africa in late August.

Gas discovery struck in northeastern Syria

For the second time in a month’s period, natural gas has been found in Syria. The latest find was drilled by Syrian Petroleum in desert Block 22 near al-Raqqa, about 250 mi northeast of Damascus on the Euphrates River. The discovery well has a capacity of 7 MMcfgd, said Syrian Oil Minister Ibrahim Hadad. Previously, a gas field was found by Croatia’s INA Naftaplin near Palmyra, 140 mi northeast of Damascus. Syrian gas output was averaging 770 MMcfgd before the new finds.

Marathon gets thumbs-up for Alba expansion

Equatorial Guinea has approved Marathon Oil’s Alba field Phase 2A expansion, which will boost condensate output to 46,000 bpd from 17,000 bpd. If all goes well, the project should finish by fourth-quarter 2003. Details include installation of two new offshore platforms, and the drilling of several new production and gas injection wells. "Quick alignment with the (government) and our partners has allowed us to go forward without delay," said Marathon Senior Vice President Dave Golder.

Nigeria’s Yoho gains life

ExxonMobil has started the $400-million development of 400-MMbbl Yoho field offshore Nigeria, in OML 104. Development of discoveries in 200 to 300 ft of water will utilize an FPSO to begin output of 90,000 bopd in late 2002, almost two years ahead of full-field start-up. A central production platform and an FSO will replace the FPSO in 2004. Target peak production is 150,000 bopd.

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