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Vol. 225 No. 3 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Olmos Block signed up
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Mexico's Pemex and Texas-based Lewis Energy signed a multiple ser-vice contract (MSC) for the Burgos basin's Olmos Block. Lewis will spend $344 million over 15 years. Pemex expects the block's output to rise by 40 MMcfgd. This is the fifth of Pemex's gas-oriented MSCs to be awarded, although Lewis was the only bidder. Pemex predicts that the first five MSCs, combined, will hike gas output by 440 MMcfgd.
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Beaufort, Mackenzie Delta plans updated
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Apex Resources Group, a minority shareholder of the Itiyok I-27 well in the Beaufort Sea, said that operator Imperial Oil has submitted proposed revisions to the Beaufort Area Operating Agreement. The revisions are intended to simplify and clarify agreement for future operations, particularly if a field development takes place. This, of course, depends on a gas pipeline being constructed 800 mi between Beaufort Sea gas wells and an existing line in northwestern Alberta. Apex said that the Mackenzie Gas Project partners, Exxon-Mobil, ConocoPhillips, Imperial Oil and Shell Canada, will be submitting further applications later this year.
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LNG set to hit stride
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A push for new supplies and rising global demand give the LNG industry a great opportunity, said Cambridge Energy Research Associates Director of Global LNG Michael Stoppard. He told a briefing in Houston that “the imperative to achieve '40 in 8' – the need to construct as much LNG capacity in the next eight years as was built in the previous 40 years – is a startlingly large target.” He said that another 140 million t of capacity are needed by 2012.
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Philippines solicits wells
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The Philippine Dept. of Energy is looking for investors to drill exploration wells in at least 51 onshore and offshore sites over the next 10 years. “We are targeting to sign at least four to five (exploration) contracts each year, starting this year, up to 2014,” said Energy Undersecretary Eduardo Manalac. More information is available at www.doe.gov.ph.
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OPEC throws another curve ball at world markets
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Much like a crafty baseball pitcher fooling an opposing batter, OPEC stunned the so-called experts by agreeing to trim oil output 4%, rather than maintain or boost levels. Effective April 1, the group will cut quotas 1.0 million bopd, to 23.5 million bopd. Additionally, OPEC will attempt to eliminate another 1.5 million bopd of “leakage” or quota-cheating. The group's decision generated immediate reaction. Traders drove up futures prices by more than $1/bbl, to nearly $34/bbl. In Washington, the Bush White House chided OPEC, saying, “It is our hope that producers do not take actions that undermine the American economy…and American consumers.” And US Treasury Secretary John Snow said that any OPEC quota cut would effectively be a tax on US consumers. Airlines suffering from weak travel demand worried about higher prices eating profits. In rebuttal, a leading Saudi Arabian newspaper, al-Riyadh, accused the US of waging “open war” on OPEC. “America made no secret of its strategy to rob OPEC of the right to protect its interests,” said the paper.
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MMS issues final notice of central GOM lease sale
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Later this month, the US MMS will hold Lease Sale 190, covering 4,324 unleased blocks and 22.7 million acres in the central Gulf of Mexico. Blocks range from 3 to 210 mi offshore, in water depths between 4 and 3,425 m (13 and 11,237 ft). This sale will now include a new royalty suspension provision affecting shallow-water, deep gas production. It will apply to leases in water depths less than 200 m (656 ft) and where new deep gas is drilled and begins production by March 1, 2009. In addition, recent royalty suspensions for deepwater oil and gas production will continue.
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New Yukos head predicts Russian supremacy by 2009
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Russia will be the world's largest oil producer by 2009, surpassing Saudi Arabia, predicted Simon Kukes, the newly appointed head of oil major Yukos. “Russia's reserves are increasing,” said Kukes in an interview with Russian media. “The price of oil will not decline and will rest at a level of $24/bbl for several years. Russia will be a strong player on the market for the next five to seven years.” Although Russia is already close to Saudi's output level, Saudi Aramco has the capability to push output well beyond 9 million bopd, and Russia does not. Further Russian output gains will require greater investment than recently seen. Meanwhile, Yukos major shareholder and former Chairman Mikhail Khodorkovsky remained jailed in Moscow. However, there were signs that he and other significant shareholders might be ready to strike a deal with authorities for surrendering control of the company.
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BP receives go-ahead for Angola's Greater Plutonio project
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State firm Sonangol has authorized BP to begin awarding contracts for development of Angola's Greater Plutonio field area offshore. The project will develop six fields in Block 18 – Galio, Cromio, Paladio, Plutonio, Cobalto and Platina. Block water depths range from 1,200 to 1,500 m. Development will comprise a single FPSO linked by risers to subsea flowlines, manifolds and wells. First output is slated for 2007. The fields were discovered in a period from 1999 through 2001.
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More Asian output hikes go onstream
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Offshore Vietnam, the country's newest oil field, Su Tu Den (Black Lion), has boosted output to 70,000 bpd, up from 60,000 bpd last year, when it first went onstream. A further increase to 95,000 bopd is set for June, said field operator Cuu Long Joint Operation Co. The 400-million-bbl Su Tu Den is Vietnam's greatest offshore success since the country's original field, Bach Ho, which accounts for 70% of national output. To the north, in China, Ivanhoe Energy's subsidiary, Sunwing Energy, drilled and completed its first development well at Dagang field. Following an extensive pilot project that produces 500 bopd, Sunwing will drill 115 additional new wells and recomplete 27 existing wells in three phases over three years.
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Contractor hands over Dominion's Devils Tower spar
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SparTEC, a subsidiary of J. Ray McDermott, has completed and handed over to operator Dominion E&P Inc. the Devils Tower spar platform. Installed in 5,610 ft of water in the Gulf of Mexico, it is the world's deepest spar. J. Ray McDermott completed the offshore lift and setting of the topsides on Nov. 30, 2003. The firm then conducted hook-up and commissioning of the platform. The hull was constructed in Indonesia, while the topsides were prefabricated in Mexico and assembled near Corpus Christi, Texas. Devils Tower field is in Mississippi Canyon Block 773, about 150 mi south of Mobile, Alabama. It can produce 60,000 bopd and 60 MMcfgd. Dominion expects to begin output in mid-to-late second-quarter 2004.
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Texas group says state had a great production year in 2003
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The Texas petroleum production economy was strong, growing and thriving during 2003, said the Texas Alliance of Energy Producers (the Alliance). According to the group's December 2003 PetroIndex, prices and activity levels continued to be high at year-end. December's index number of 141.3 was only the sixth time that the index has exceeded 140.0 in its nine-year history. The other five months surrounded the index high of 142.8 in August 2001. According to Alliance economist Karr Ingham, the PetroIndex measures growth and cycles in the state's oil and gas production economy, using a comprehensive group of indicators. “Prices certainly qualified as favorable to Texas in 2003,” said Ingham. “Monthly posted oil prices averaged $27.80/bbl, the highest in index history, while gas prices averaged $5.12/Mcf, also the highest in index history.” Rig counts and drilling permits responded in strength to the high prices, noted Alliance President Alex Mills. 
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Opinion
Last month, this column lamented the need for greatly improved tracking of E&P operational data. Ironically, this industry has no trouble keeping accurate financial statistics (thanks to the SEC). I bring this up, because some of our friends among drilling contractors and service companies have complained for months that oil companies are “squeezing” them. Compared to similar high-price periods in the past, contractors and service firms are not seeing the profit levels that one would expect at $30-plus oil and $5 gas. The primary reason, they say, is that major oil companies are forcing them to charge only bare-bones prices for goods and services.
Looking for a way to test this theory, your humble editor looked at end-of-2003 results reported, as well as stock prices at the end of 2002 and the end of 2003. Results were astounding. Among drillers (Pride Int'l. had not released full-year data), these net incomes were reported – Transocean, $19.2 million (0.8%); Diamond, -$48.4 million (-7.1%); Rowan., -$7.8 million (-1.1%); Nabors, $192.2 million (10.0%); and Helmerich & Payne, $17.87 million (3.5%). Excluding Nabors, this group had little or no profit. And their share prices, excluding Nabors, were either down, or up less than $1 for the year. Okay, on to the service companies. They did better, but net percentage incomes were nothing exciting – Schlumberger, $383 million (2.7%); Halliburton (excluding the asbestos/ silica special charge), $331 million (2.0%); Baker Hughes, $128.9 million (2.4%) and Weatherford, $143.4 million (5.5%). As for stocks, Schlumberger and Halliburton were up, but Baker Hughes and Weatherford were down. So, high oil and gas prices helped, but not that much.
Ah, but when one looks at larger oil companies, it's different. ExxonMobil's net income was up 88% ($21.51 billion), although revenues were up only 21%. ChevronTexaco's income rose 64% (to $7.23 billion), yet its revenues were up just 23%. ConocoPhillips went from a net loss to a $4.7-billion net gain, and its revenues jumped 84%. BP admitted that 2003 was a record year, with net income up 42% at $12.4 billion. Occidental's net income was up 54% ($1.53 billion), but revenues gained 27%. Royal Dutch/ Shell was the only major that had net income (up 35% at $12.7 billion) and revenue (up 21%) gains that were similar. Stock prices were up in every case, ranging from gains of 17% to 55%. Circumstantially, one might say that some majors could only increase net income three times as fast as revenues, if they artificially forced down expenses, particularly equipment and service costs. Then, some would argue, they used the extra profits to prop up stock prices. One can't prove such intent, but it will be interesting to see reports of CEO bonus incomes later this year.
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