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Vol. 225 No. 1 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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US energy bill stalls in Senate, new attempt vowed for 2004
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After months of work by congressional and industry backers, the omnibus energy bill stumbled just short of the finish line, thanks to a plank related to the gasoline additive, MTBE. By a 57-40 vote, senators failed to invoke cloture (the procedure to end debate and force a final vote) on the bill, blocking it from final consideration. An unlikely mix of environmentalists and fiscal conservatives blocked the bill, based on a section that contained MTBE lawsuit restrictions. They also objected to the bill’s $25.7 billion in tax breaks and $5.4 billion in federal spending. “I warned our Republican friends that they were going to load up this bill to a point where it couldn’t pass,” said Sen. Minority Leader Tom Daschle (Democrat – South Dakota), who did support the bill. Senate Majority Leader Bill Frist (Republican – Tennessee) was more succinct: “We just couldn’t get all sides to agree.” Along with Sens. Pete Domenici (Republican – New Mexico) and Larry Craig (Republican – Idaho), IPAA and API vowed to bring the bill back for consideration this month, as quickly as possible. “All policy choices are compromises; some of them are difficult ones,” lamented IPAA.
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OPEC keeps production quotas unchanged
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Keeping watch on global crude supplies, OPEC ministers agreed last month to retain their 24.5-million-bopd output ceiling, but they reserved the right to cut output when they meet in February. Prices have remained at the high end of OPEC’s price band, at roughly $28/bbl, but ministers insisted that consuming nations are enjoying a discount, due to the weakened US dollar. “The current prices are right,” Saudi Arabian Petroleum Minister Ali Naimi told reporters in Vienna. “The dollar is weakening, you know its purchasing power is quite weak, so the price is okay.” In a related story, OPEC members are divided on who should be their next secretary general. Iran has threatened to block all other candidates if its own nominee, Hadi Nejad Hosseinian, is not chosen. Venezuela is renominating current Secretary General Alvaro Silva, while Kuwait has nominated OPEC Research Director Adnan Shihab-Eldin.
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Iran spars with Kuwait over Arash/ Al-Durra offshore oil field
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The Foreign Ministry in Tehran was startled by comments from Kuwait’s Energy Minister, as relates to the Iranian/Kuwaiti dispute over the status of a Persian Gulf oil field. Iran had conducted drilling operations in Arash field until 2001, when state firm NIOC halted activity after territorial objections by Kuwait. Adding a new angle to the dispute, Kuwaiti Energy Minister Sheikh Ahmad Fahad Al Ahmad Al Sabah threatened to take Al-Durra, as the emirate calls the field, to international arbitration. “The remarks by the Kuwaiti minister are surprising and astonishing, since they were made as the two sides were in the process of negotiations,” said Iranian Foreign Ministry spokesman, Dr. Hamid Reza Asefi. “Moreover, recently, on the proposal of Kuwaiti authorities, it was agreed to conduct a seismic survey of the disputed area to demarcate the continental shelf between the two countries.” Iran’s parliamentary energy committee is reviewing the latest Kuwaiti statements about Arash field, which is adjacent to Dorra field in the Divided Neutral Zone shared by Saudi Arabia and Kuwait.
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Alabama jury throws $11.8-billion judgment at ExxonMobil
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An Alabama District Court jury found ExxonMobil guilty of underpaying royalties from its Mobil Bay gas fields, ordering the firm to pay $11.8 billion in punitive damages. The verdict includes $103 million in actual damages, including interest. Back in 2000, a jury had returned a $3.5-billion judgment against the operator, finding that the company defrauded the State of Alabama on royalties from gas wells in state waters. Two years later, the Alabama Supreme Court reversed the verdict on a legal technicality, remanding the case back to district court. Announcing that ExxonMobil will appeal, a company spokesman called the punitive damages award “excessive and absolutely unjustified,” and defying common sense.
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Several major projects go onstream
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Esso’s Xikomba deepwater development offshore Angola is just one of several new fields to begin production recently. In Block 15, Xikomba is producing in 4,850 ft of water, with an eventual output target of 80,000 bopd. Across the Atlantic Ocean, in the US Gulf of Mexico, Shell and BP have achieved first production from the giant Na Kika deepwater project. Na Kika actually comprises five fields – Kepler, Ariel, Fourier, Herschel and East Anstey – with water depths ranging from 5,800 to 7,000 ft. Peak, combined output will be 110,000 bopd and 425 MMcfgd. Another Shell project, Carrack gas field, went onstream on the UKCS. The firm’s Sole Pit Clipper platform is hosting output from Carrack, which only received development approval last February. Eventual output will be 150 MMcfgd. Finally, ExxonMobil reported that gas production began at Alma field, the first Tier 2 output from the Sable Project offshore Nova Scotia. Alma is producing 120 MMcfgd and 3,000 bcpd from a platform in 220 ft of water.
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Two LNG terminal projects announced for US GOM coast
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ExxonMobil said that its Golden Pass LNG Terminal LP affiliate will develop a $600-million LNG receiving terminal near Sabine Pass, Texas. The site in Jefferson County, 10 mi south of Port Arthur, will process LNG imported principally from Qatar. It will take about three years to build and be operational in 2008 or early 2009, with an initial capacity of 1 Bcfgd. Not to be outdone, ChevronTexaco announced that it has received US Dept. of Transportation approval for a Deepwater Port License, to be applied to constructing and operating an offshore LNG terminal. To be sited about 40 mi offshore Louisiana, the receiving and regasification terminal will be the first US facility of its kind, able to handle 1.6 Bcfgd. Construction will begin this year, with commissioning to take place in 2007.
ChevronTexaco also announced that it will reorganize its North American portfolio, selling interests in US and western Canadian producing properties. The US properties are in 15 states and the Gulf of Mexico OCS. They represent more than 60% of the firm’s US properties but only 5% of daily production.
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Oil groups announce greenhouse guidelines
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Three oil and gas groups – API, the International Petroleum Industry Environmental Conservation Association (IPIECA) and the International Association of Oil and Gas Producers (OGP) – adopted new global guidelines for companies to use in voluntarily estimating and reporting greenhouse gas emissions. The guidelines were announced at the UN Framework Convention on Climate Change after nearly a year of work by industry experts on such emissions. “This is a big day for oil and gas companies responsibly managing greenhouse gas emissions at operations worldwide,” said Bob Greco, director of API’s climate change program.
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Libya to set new round
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A new E&P bidding round is likely to be announced during first-quarter 2004, according to Tarek Hassan-Beck, director of planning at Libya’s National Oil Corp. Speaking to a conference in Qatar, Hassan-Beck said his country needed to bring in foreign investment to upgrade the country’s upstream infrastructure, due to US and now-lifted UN sanctions. He said that an open bidding approach was expected for the round.
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East Timor claims fields
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Separated from Indonesia just two years ago, East Timor is accusing Australia of illegally developing three fields in the joint development zone between the two countries. Buffalo, Laminaria and Corralina fields are being developed under terms of a maritime treaty signed with Indonesia, when it controlled East Timor. The smaller country claims that fair, third-party adjudication of maritime boundaries would place all three fields, as well as Greater Sunrise field which is outside the zone, in East Timor territory. Talks between the two nations are virtually at a standstill.
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Buzzard gets UK nod
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UK Energy Minister Stephen Timms approved EnCana’s development plan for Buzzard oil field in the Moray Firth. As the largest UK discovery in a decade, the 400- million- bbl- plus field should go onstream at the end of 2006. 
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Opinion
In London, the British government recently announced a new measure to address flagging exploration levels on the UK Continental Shelf (UKCS) in the North Sea. Although the measure is a step in the right direction, its limited scope is not enough to solve the problem. According to a so-called “Pre-Budget Statement,” Chancellor of the Exchequer Gordon Brown intends to enhance tax relief on exploration costs for new North Sea entrants. However, he failed to broaden the benefit to all companies active on the UKCS. This prompted many observers to predict that the initiative will do little to lift exploration and appraisal activity levels higher.
Industry lobbyists, particularly the UK Offshore Operators Association (UKOOA), had asked the Blair administration to expand the exploration tax credit to appraisal wells and apply that broader definition to all oil companies, not just new participants. In effect, they were asking the government to lift the current 100% write-off on new spending to 150%. However, Chancellor Brown’s statement indicated only a partial response from the government, when he announced “the introduction of an exploration expenditure supplement, so that the full value of the 100% exploration and appraisal allowance for new North Sea companies is maintained over time.”
UKOOA wasted no time in responding, issuing a reply on the same day as Brown’s remarks. “We actively seek government support with tax measures to help offset the increasing risks and high costs of exploration and appraisal in the UKCS today,” said Steve Harris, UKOOA’s acting director general. “While the tax measure will allow new entrants to offset more effectively the cost of their investment capital and explore on a more equal footing with existing operators, we fear that it will not have any tangible impact on exploration and appraisal activity levels. The government-led vision through Pilot (the government/industry effort to reduce costs) of maintaining production levels at 3 million boed in 2010 will only be met through better collaboration.”
Harris went on to point out the ever-growing maturing of the North Sea, the increasingly small size of its prospects and the associated, high E&P costs. Not surprisingly, North Sea exploratory drilling fell to 16 wells in 2002 from a 1990 peak of 159 wells. In a global market, where Britain must compete for investment dollars against other countries that have better terms and geology, UKOOA believes the government must do something more extensive than the latest proposal. This editor could not agree more.
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