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Vol. 225 No. 7 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Mexico needs more cash
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To ensure sufficient energy supplies at competitive prices, Mexico will have to invest $140 billion in its oil and gas sector by 2009, said new Secretary of Energy Fernando Elizondo. Speaking to a local industry event hosted by state firm Pemex, Elizondo said that natural gas is a pressing problem, as the country still imports more than a third of its gas supplies. Mexican gas prices have jumped 61% higher this year, to nearly $6.50/Mcf.
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Venezuela to set bidding
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By the end of June, Venezuela's Ministry of Energy & Mines planned to call for bids on seven offshore blocks in the Gulf of Venezuela, near Falcon state. According to Hydrocarbons Deputy Minister Luis Vielma, some heavy crude projects in the Orinoco Belt might also be included. All projects would be offered in line with regulations in the proposed new hydrocarbons law.
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Brazil stays busy
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Although Brazilian production was down 4% in May from a year earlier at 1.94 million boed, officials are not concerned. Petrobrás attributed the decline to scheduled maintenance and programmed stopages offshore. Meanwhile, the firm said it will boost oil output 15%, to 1.78 million bpd by the end of 2005, by adding production from five new platforms in the Campos basin. By 2008, Petrobrás will have added 11 new platforms. State regulator ANP also said that recent discoveries could double Brazil's proven reserves, including finds in ultra-deep water.
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Lukoil in Uzbek accord
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Russia's Lukoil signed a 35-year PSA with the Uzbekistan government to develop the Kandym-Khausak-Shady gas project. First output is expected in 1997. Annual production is slated to reach roughly 9 Bcm of gas (870 MMcfgd). Cumulative output could go as high as 207 Bcm (7.3 Tcf). The project is tied to planned construction of a new gas-fueled chemical complex. That 6-Bcm (212-Bcf) facility will see first-phase commissioning in 2010. In addition to Lukoil (90%), state firm Uzbekneftegaz will hold a 10% interest.
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Sabotage knocks Iraqi oil exports off the market
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Exports of Iraqi oil through offshore terminals were halted last month after saboteurs blew up a section of the main pipeline along the Faw Peninsula in southern Iraq. A second pipeline was shut down as a precaution until engineers repaired fractured piping. It was unclear at press time as to when exports would resume. A Coalition Provisional Authority South spokesman said that it would take two days to fix one line and 10 days to repair the other. Iraqi exports had averaged about 1.5 million bopd before the latest interruptions, and that figure matched the amount of global spare capacity believed to still be available. A consensus among industry analysts was that this means there will be no margin of error left in world supplies for third-quarter 2004. In early June, OPEC, principally through Saudi spare capacity, pledged to put another 2.5 million bopd on the market. The group asked such non-OPEC producers as Russia, Norway and Mexico to help with additional output. However, Russia and Norway said that there was very little they could do to help, as both nations were already producing at full capacity.
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Exodus of Western ex-pats threatens Saudi output ability
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Western ex-pat workers, particularly Americans, have been leaving Saudi Arabia in growing numbers since the current wave of violence began in late May. The exodus has been prompted by such incidents as the May 29 attack on the Oasis housing complex in Khobar that left 22 people dead, as well as the subsequent killings of two Americans and the kidnapping of a third. There are reports of a flurry of memos between Western oil executives and their Saudi counterparts that have discussed the likelihood that a large-scale exodus of Western ex-pats will affect the Kingdom's ability to fully maintain its oil production. Of about 6 million ex-pat workers in Saudi, roughly 35,000 are American professionals working in oil and gas or as military advisors. Among 56,000 Saudi Aramco employees are 2,300 US and Canadian professionals, plus 1,200 Europeans.
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Britain's Timms warns of North Sea difficulties ahead
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In a foreword to the annual report by PILOT, the joint government-industry think tank, UK Energy Minister Stephen Timms expresses concerns about sustaining North Sea capital investment at £3 billion annually for the next six years. In tandem with that target, Timms worries about the other PILOT goal of maintaining output at 3 million bpd of liquids to 2010. He notes that achieving this goal is becoming ever more challenging, given rising production costs and stagnating exploration activity that require innovative solutions. “We need to work quickly to influence this,” said Timms. “Production costs are rising, and exploration is at an all-time low.”
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Iraqi oil field development plan readied for submission
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At press time, the Iraqi Oil Ministry was preparing to submit a plan for several new oilfield developments to the country's new cabinet. The plan reportedly involves development of West Qurna, Majnoon, Nahr bin Umar and Halfaya oil fields. Recent estimates put potential production figures at 800,000 bopd for West Qurna, 600,000 bopd for Majnoon, 450,000 bopd at Nahr bin Umar and perhaps 250,000 bopd at Halfaya. In 1997, West Qurna's development was awarded to Russia's Lukoil, but former President Saddam Hussein abolished the deal in 2002. French firm Total also was in the late stages of negotiating a contract to develop Majnoon and Nahr bin Umar, when the US invaded Iraq in March 2003. At one time, Australia's BHP Billiton had been in talks for Halfaya. In remarks published by Arabic-language newspaper al-Zaman, Iraqi Oil Minister Thamer al-Ghadhban said the new projects are essential to maintain countrywide output.
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US government fights flood of land use lawsuits
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US Justice Dept. officials said that they are defending a record number of lawsuits related to environmental aspects of drilling on public lands. About 7,100 cases are being handled by the department's Environment and Natural Resources Division. Most of these were filed by environmental and so-called citizen's groups, said Assistant Attorney General Thomas Sansonetti. He told IPAA's Mid-Year Meeting that the total is more than double the 3,200-case load that was handled during the Reagan administration and greater than the 4,500 cases litigated at the start of the Clinton administration in 1993. “The lawsuits make it harder to develop oil and gas on public lands,” he noted, just when gas production is on the increase in the Rockies.
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Alberta riles producers with gas well shut-in decision
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A heated dispute between regulators and Alberta gas producers has generated the latest ruling by the Energy and Utilities Board (EUB). In a June 8, emailed letter to affected producers, EUB informed them that the board had ruled to uphold 82% of previous recommendations to shut in various gas wells in northern Alberta, to protect Athabasca oil sands reserves. EUB has been concerned for a number of years that this gas output is jeopardizing reservoir pressure needed to extract the bitumen. No doubt pressured by provincial politicians, who have staked Alberta's future to the oil sands, EUB Chairman Neil McCrank justified the shutting-in of 1,026 gas wells by noting that the energy content of the 25.5 billion bbl of bitumen is 500 times larger than the gas shut in. Producers like Paramount Energy Trust, which will lose 21% of its output, are weighing whether to launch further appeals of the decision.
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Anadarko to sell Canadian properties as part of overhaul
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As part of a company-wide restructuring, Anadarko Petroleum will sell 40% of its Canadian properties in Alberta, British Columbia and Saskatchewan. Last year, the firm's Canadian output comprised 16% of total company volumes, including 383 MMcfgd and 19,000 boed. Some job reductions are expected, although some employee positions will go with the assets to the new owner or owners. 
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Opinion
Once again, the vagaries and unpredictability of mainstream media coverage of oil and gas have been shown with a vengeance. The latest example was last month, when the US media, and their Canadian and European colleagues, ceased a pattern of several weeks of intensive scrutiny of high prices, refining bottlenecks and governmental handwringing with breathtakingly fast action.
In addition to oil and gas, mainstream media also managed to put news from Iraq on the back-burner; not an easy feat, given the steady flow of negative stories and commentary in recent months. So, one has to ask, what news event is so large that it could knock high energy prices and Iraq right off the front page? Why, it's the death of former US President Ronald Reagan, of course. I say “of course” with some exasperation. Who could have predicted that Reagan's passing would knock Iraq, and oil and gas, out of primary news coverage for a solid week, not only in the US, but in Canada and Europe? And in Canada, the distraction was enhanced by gnashing of teeth over the loss of the NHL Stanley Cup Championship by the local hockey team, the Flames. As this editor can attest to, having been at Calgary's Global Petroleum Show, the only news coming out of Canada all week was the Flames' failure, Reagan's death and the vulnerability of Prime Minister Paul Martin in the upcoming elections.
When professionals in the E&P industry bemoan the public's lack of understanding about oil and gas issues, they need to center their targets on the true source of the problem – the childishly short attention span of the media, both electronic and print. Inconsistent, uninformed and, dare I say, arrogant news coverage of oil and gas issues has caused this industry more operational and political headaches than any technical challenge could hope to generate. Part of the problem resides with media personnel, who already think they know enough about every subject. Yet, they seldom take the time to learn enough basic knowledge about E&P operations, so that they can accurately tell/explain a story to the public. The other half of the fault lies with the industry, itself, where too many executives (particularly in a few, large major companies) would rather lay low and avoid all media encounters. But, in so doing, they are neglecting their own inherent duty to the industry to educate and guide the media, who, in turn, inform the public. Combined, these factors generated the media's whiplash coverage, from the extreme of micro-analyzing energy prices to the other extreme of almost no news (due to Reagan), back again to incessant speculation about supply levels in the aftermath of Iraqi pipeline bombings.
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