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Vol. 224 No. 3 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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US energy profits, spending soar
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Profits rose 70% for 21 of 23 US energy companies, according to a Bloomberg index that reported before Feb. 7, despite strong profit-taking in related commodity prices and after five quarters of earnings declines. Standard & Poor’s 500 Index showed that US energy companies had the highest fourth-quarter earnings gains of any industry. Anadarko Petroleum and ExxonMobil were the top performers. ChevronTexaco, the best performer among integrated firms, saw a nearly 2% gain after closing a gas deal with Venezuela. Due to increased profits, companies have begun to increase spending. Anadarko has committed to spending $2.17 billion of its $2.3-billion capital budget for 2003 on development projects. ChevronTexaco revealed it will spend about 75% of its $8.5 billion on worldwide E&P in 2003. Marathon Oil Corp. approved a $2-billion capital investment and exploration expenditure budget for 2003 – an 8% increase over 2002 actual expenditures, excluding acquisitions.
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Kerr-McGee sells Kazakhstan interests
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Kerr-McGee Corp.’s subsidiaries have agreed to sell their interests in Kazakhstan to Shell Kazakhstan Development for $165 million. Kazakhstan assets include 50% interest in the Arman producing field, 100% interest in the Mertvyi Kultuk exploratory area and 1.75% working interest in the Caspian Pipeline Consortium. This transaction is expected to close in March. During fourth-quarter 2002, Kerr-McGee’s net daily production from the Kazakhstan properties was approximately 2,500 bbl.
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BP acquires Russian interests
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BP and Alfa Group/Access/Renova (AAR) will combine their interests in Russia, with BP taking a 50% interest in a new company incorporating Tyumen Oil (TNK) and its subsidiary, Sidanco. Last year, TNK and Sibneft became strategic partners. With all companies involved, the new firm is expected to produce 1.2 MMbpd. It will own significant exploration interests in Siberia and Sakhalin, with a major downstream business. BP estimates that the resources of the new concern are at least 5.2 billion boe. The firm will be governed by 10 board members nominated equally by BP and AAR. AAR will nominate the board chairman, and BP will nominate the chief executive. The merger is subject to a $1.5 billion lawsuit filed by Norex Petroleum in February 2002, claiming corruptive actions by TNK and AAR.
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Petrobras finds oil in Campos basin
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Petrobras discovered oil in the Campos basin through well 9-MLL-3 in 3,215 ft of water. The well proved the existence of two new accumulations with estimated reserves of 150 MMboe. Petrobras is studying possible commercial development and may use its East Marlim production system, now being completed. The operation of the East Marlim system is expected to start in 2006.
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World’s largest subsea pipeline
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Norsk Hydro received approval on the Ormen Lange license to build a direct pipeline from Aukra in Møre og Romsdal County, via the Sleipner installation in the North Sea, to Easington/Dimlington in the southeastern UK. Approval was granted after considering the use of existing pipelines. There is also a demand for transport capacity in other parts of the system for gas from other fields. Ormen Lange, alone, requires at least 2.1 Bcfd of pipeline capacity. The pipeline should increase Norwegian gas exports by 25%. Its combined length is 145 mi, and flow is expected to begin in October 2007. Development operator Norsk Hydro holds 18% interest in the license and affiliated export systems. Production operator A/S Norske Shell holds 17%, along with partners Petoro a.s (36%), Statoil (11%), BP (11%), and Esso Norge (7%).
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Production begins at Ringhorne
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Esso E&P Norway began production on its Ringhorne platform in the North Sea. The platform lies in 420 ft of water and is part of a $1.1-billion development of multiple hydrocarbon accumulations. Project plans include eventually drilling up to 24 wells by 2006. Production is estimated to peak at more than 80,000 bopd and 28 MMcfgd. The platform is tied back to an FPSO at nearby Balder field.
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ANWR drilling plan shot down, again
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US President George Bush’s plan to open the Arctic National Wildlife Refuge for drilling as part of the 2004 spending bill will not pass, due to six Republican senators whose votes are critical to passage. They believe opening the refuge would raise too many policy concerns and environmental ramifications. Their decision was explained in a letter to Majority Leader Bill Frist (Republican – Tennessee) and Budget Committee Chairman Don Nickles (Republican – Oklahoma). The Bush administration had hoped to evade a filibuster by adding wording to the 2004 budget bill that would approve ANWR drilling, since budget legislation cannot be filibustered.
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IEA to release reserves
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The International Energy Agency (IEA) said it is ready to release petroleum reserves quickly and on a large scale in case of war between the US and Iraq. Kuwait, a major oil exporter on the front lines with Iraq, claims it has prepared emergency plans to ensure a continued flow of oil and gasoline, if it is attacked by Iraq. If war proceeds, Iraq’s oil, which accounts for 2% of the world total, would cease to flow, and exports from neighboring states could be interrupted, which could lead to tight global supplies.
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Atlantis confirms find
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Results of BP’s Atlantis 6 appraisal well on Green Canyon Block 743 in the Gulf of Mexico confirmed hydrocarbons in the northern structure. Additional drilling is needed to further appraise this portion of the field and assess the overall reserves. Before Atlantis 6 was drilled by the Deepwater Horizon rig in 5,405 ft of water, the company’s estimated proven and probable reserves at Atlantis were 632 MMboe. The well encountered hydrocarbons in several zones, including 460 ft of net oil pay, and 200 ft of net gas pay.
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Venezuela sells Block 2
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The Venezuelan government awarded ChevronTexaco a license for Block 2, one of five offshore blocks in the northeastern Plataforma Deltana, a prospective natural gas region in Venezuela’s Atlantic continental shelf. This block contains a significant undeveloped gas accumulation, known as Loran field, discovered in 1982 by Petroleos de Venezuela, S.A. (PDVSA).
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Kuwait pulls workers
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A rising threat of war with neighboring Iraq prompted Kuwait to pull some drilling rigs and workers from its northern oil fields. The fields affected include Ratqa, Abdali and Raudatain. Kuwait Oil Co. spokesman Bader al-Zuwayyer said that output from the fields would not be reduced. Civilians were also forbidden to travel into the northern half of Kuwait without special military permits. 
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Opinion
How different circumstances are offshore Canada’s East Coast, compared to two years ago. As we shall quickly see, this is one more example of how government regulators’ failure to expedite projects and adjust to industry trends can have serious repercussions. Back in first-half 2001, PanCanadian Energy (now EnCana) announced that it was beginning development of Deep Panuke gas field offshore Nova Scotia. At that time, EnCana’s predecessor hoped to begin production from the $1-billion project by early 2005. Then came gloomy news last November that regulatory hurdles could delay output by another year. Meanwhile, development costs had ballooned to $1.3 billion.
By chance, this editor was in Calgary last month, when the latest chapter in the Deep Panuke saga emerged. In Calgary and Halifax, EnCana released word that it was putting the entire development on hold, saying that the project is too costly and too risky, to proceed at this time. The firm also said that it had requested a time-out from regulators, to spend the rest of 2003 studying ways to make Deep Panuke more profitable. Nova Scotian politicians were caught by surprise by the news and scurried to save face. The party in power, the Tories, had hoped to brag about Deep Panuke’s progress when voters go to the polls this fall. They desperately needed this project, given that several recent exploration wells had been duds.
While the politicians wipe egg off their faces, EnCana is re-thinking how to earn a decent return on the mega-project. “We’re still very, very optimistic about its (Deep Panuke’s) potential, but we have additional work to do,” said Larry LeBlanc, EnCana’s senior vice president for East Coast operations. In an interview with one of Canada’s national dailies, The Globe and Mail, EnCana President and CEO Gwyn Morgan said, “We hope we don’t drop dead. We’re trying to find a way of not doing that.”
Adding fuel to the gas flare (pun intended) were comments by Paul McEachern, managing director for the Offshore/Onshore Technologies Association of Nova Scotia. He noted that time is money, and 600 days had gone by since the company sanctioned the project and still no approval was received. McEachern said his group and others are urging provincial and federal authorities to streamline their regulatory methods, to speed major project approvals.
One can only wonder what might have happened, if the Nova Scotian energy authorities had gotten their act together more quickly. Would we even be talking about a hold on Deep Panuke, if officials had granted approval after only one year? This situation brings up the thorny subject of government inaction, or inattention, on a greater scale. We’ve seen it at work in the US, where the administration buries its head in the sand every time the word energy is mentioned. Equally, the phenomenon is a cause for worry in the North Sea, where the UK jumped up tax rates, and Norwegian officials have failed to provide adequate, additional exploration opportunities. Government officials have got to start paying better, quicker attention, if some of the more notable offshore areas are to remain competitive.
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