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Vol. 225 No. 5 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Norway gives okay to Ormen Lange project
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Parliamentary approval was given to operator Norsk Hydro in Oslo for development of Ormen Lange gas field. The project will be a significant milestone for Norway's upstream industry, as Ormen Lange will be the second-largest gas field developed on the Norwegian Continental Shelf. Only Troll field is larger. As the single largest project in Norway, Ormen Lange will have considerable effect on employment levels in mid-Norway, where up to 2,500 people will help develop a processing plant.
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Carlsbad totals the cost
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Well control crews succeeded in taming a gas well that blew out on March 11 during drilling on the south side of Carlsbad, New Mexico. However, the money that Chi Operating Inc. (owner of the well) will have to pay for dealing with the well's aftermath extends beyond the cost of well control and service company personnel. Carlsbad City Manager Jon Tully said the town already has spent nearly $200,000, a figure that he hopes (and expects) the operator to reimburse. Included in the total were $56,716 for hotel and motel rooms to house evacuees from the neighborhood around the well. The largest figure is $98,585 for city personnel, including police and firefighters.
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Ecuador replaces energy minister
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Citing "strictly personal reasons," Ecuadorian Energy Minister Carlos Arboleda resigned his post in the wake of criticism over the way he handled a tender round for four producing fields. Unions and left-leaning politicians had complained that Arboleda, a retired colonel and personal friend of Ecuadorian President Lucio Gutierrez, was giving away some of the country's oil reserves too cheaply after he eliminated a 35% state participation requirement. Gutierrez has replaced Arboleda with Eduardo Lopez, who has been the presidential representative on the board of state oil firm Petroecuador. Lopez and Gutierrez were expected to proceed with the tender, and then decide whether to accept those bids or issue a new call for fresh submissions.
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OPEC moves ahead with output reduction
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Despite chatter that several members might not honor a pledge to reduce output, OPEC voted formally at the end of March to cut its production 4%. The 1-million-bopd reduction took effect last month, keeping crude prices near a 13-year high of $38/bbl. Accordingly, US gasoline prices hit a new record high, nationwide, for self-serve regular at $1.78/gal. That figure was 17.8 cents higher than a year earlier. The five states with the highest average prices were California ($2.20/gal), Hawaii ($2.15), Nevada ($2.11), Arizona ($1.99) and Oregon ($1.93). OPEC's reasoning was explained by Saudi Oil Minister Ali al-Naimi, who told a media gathering, "Throwing more oil on the market would be destructive for everybody." US Energy Secretary Spencer Abraham reacted with a call for new policies: "Today's action illustrates why we must enact a national energy policy that reduces our dependence on foreign oil by increasing domestic supply. As we have (said) for the last three years, we need to develop ANWR's (Arctic National Wildlife Refuge's) significant resources."
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Alaskan governor applauded for unilateral leasing decision
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Coinciding with OPEC's move to lower crude output, Alaska Gov. Frank Murkowski (Republican) said he will begin planning oil and gas lease sales in state waters offshore ANWR and the National Petroleum Reserve-Alaska (NPR-A). He will include these lease sales in a state offering by this October. In Washington, the decision was applauded by US House Resources Committee Chairman Richard Pombo (Republican-California), who said, "Governor Murkowski is to be commended for taking decisive action to lower our dependence on foreign sources of energy." "There are about 425 mi of coastline between Barrow and the Canadian border," said Murkowski. "That's just under 2 million acres, in all. The new areas to be offered (include) 670,000 acres of land off the coast of the NPR-A and more than 350,000 acres off the coast of ANWR." Further details are available at the governor's website, at www.gov.state.ak.
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Daqing begins to tire as Chinese consumption skyrockets
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Even as the International Energy Agency issued a second revision of Chinese oil demand (now pegged at 18% growth), officials worried about sagging production at China's largest oil field, Daqing. After going onstream in 1960, Daqing had annual output of more than 50 million t (more than 1 million bopd) between 1975 and 2003. However, output fell to 48.4 million t (968,000 bopd) last year. A report delivered to Daqing's management predicts that output will fall 7% annually until 2010. By then, production will be only 30 million t (600,000 bopd) unless new technologies are embraced to stem the decline. Managers plan to implement new drilling techniques and intensify exploration to find new oil pools in the greater Daqing area.
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Oman exposed as component of Shell's reserve problems
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Gaining access to internal Royal Dutch/Shell documents and technical papers, The New York Times reported that the firm's Omani crude output had begun to decline rapidly in 1997, in direct contradiction to what former Shell Chairman Philip Watts said in an optimistic public report in 2000. In those comments, Watts said that "major advances in drilling" were allowing the company "to extract more from such mature fields." These same internal documents suggest that Shell's Omani proven oil reserve figure was mistakenly increased in 2000, resulting in a 40% overstatement. Furthermore, senior Shell executives were told in 2002 that the calculations were too high, or about two years before the company finally downgraded its reserves this past January. At Oman's Yibal field, engineers and auditors said that the very technique extolled by Watts not only did not work, but it also increased the water cut to as high as 90% of total volume, jacking up production costs.
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Kerr-McGee acquires Westport in $3.4-billion stock merger
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The boards of directors for Kerr-McGee and Westport Resources unanimously approved a $3.4-billion merger, subject to shareholder ratification. Merger terms call for Westport shareholders to receive 0.71 shares of Kerr-McGee common stock for each common share of Westport. The deal will provide immediate, increased cash flow to Kerr-McGee, thanks to Westport's extensive inventory of low-risk US properties, particularly in the Rocky Mountains. These properties have a probable and possible resource potential of 1.8 Tcf of natural gas equivalent. Acquiring Westport will increase Kerr-McGee's proven reserves by about 30% and boost daily production volume by more than 34%. Roughly 54% of daily output will be natural gas.
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BP hits half-way point in expenditures offshore Azerbaijan
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Spending by BP for construction work on development of the Azeri-Chirag-Gunashli block of fields in the Caspian Sea has hit $3 billion. Enroute to spending $6 billion, the operator has completed 90% of infrastructure construction in the central part of Azeri field. In addition, other construction completion rates are 48% at the West Azeri production platform, 18% at the East Azeri platform and 65% for gas compression and water injection platforms. When completed by first-quarter 2007, the work will boost block output by more than 400,000 bopd.
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BassGas project milestone reached offshore Australia
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Australian Worldwide Exploration said that the Yolla production platform was transported to the Bass Strait and successfully installed at the Yolla gas/condensate field, offshore Victoria and Tasmania states. Assuming that two development wells (Yolla 3 and 4) are drilled on schedule, and facility hook-up proceeds, the field should begin producing gas by the end of third-quarter 2004. An offshore pipeline from Yolla, which will cross the coast at Kilcunda, has already been completed. 
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Opinion
Given the problems with misleading reserve calculations at a few oil companies, not to mention the prosecution of individuals tied to the Enron scandal, the recent arrival of a new survey at this editor's desk is well-timed to the subject of corporate misbehavior. The survey was conducted by TRACE (Transparent Agents and Contracting Entities), a non-profit association headquarterd in Washington, DC. TRACE supports full implementation of anti-bribery measures by multinational corporations and commercial intermediaries. The association specializes in anti-bribery/due diligence reviews and compliance training, and its members must complete a review and sign a code of conduct.
TRACE has just completed a survey of 30 of the world's largest corporations on anti-corruption practices. One quarter of the group is oil and gas firms, including ChevronTexaco, ExxonMobil, Shell and Statoil. Some of the other firms include defense and aerospace contractors. The 30 companies have combined annual revenues in excess of $1.3 trillion. Sixteen are US-based, and the other 14 are from various countries. TRACE President Alexandra Wrage said the survey found that "bribery of public officials in foreign markets (outside the US) is no longer shrugged off as just another cost of doing business by multinational firms. Overwhelmingly, anti-bribery efforts are gaining momentum (internationally)." About 90% of the firms surveyed have maintained or increased their anti-bribery budgets over the past three years. On average, companies employ six to eight full-time staff members to implement such programs. They also spend between $100,000 and $500,000 annually for outside legal advice and other resources. Average anti-bribery expenditures totaled $1 million, annually, per firm.
In the companies surveyed, strong penalties are assessed for bribery transactions. Almost all firms will fire employees and terminate agreements with intermediaries, who participate in bribery or kickbacks. Nearly half also report such offenses to law enforcement authorities. Given the industry's long history of bribery problems in such places as Nigeria, Indonesia and Russia, this apparent sea change in attitude is a welcome development. Perhaps the most sensational bribery case in recent years was the embezzlement of $350 million from former French oil firm Elf Aquitaine by 37 individuals, who paid out bribes to government officials around the world during the late 1980s and early 1990s. Three senior executives in that group were sentenced in late 2003 to four- to-five-year jail terms. The TRACE survey and programs are commendable, but can they root out most of the corruption? In some countries, corruption and bribery are time-honored, traditional ways of doing business, embedded deep within cultures. Government officials in these places often earn modest salaries and thus expect to augment these amounts with under-the-table "payments." Nevertheless, we wish TRACE well on its efforts.
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