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Vol. 227 No. 12 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Oil prices generate news for an entirely different reason
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After being in the news for much of the year because of high levels, oil prices are now garnering attention after slipping measurably in the last couple of months. On Nov. 17, the futures price for the December contract for West Texas Intermediate crude on the New York Mercantile Exchange (NYMEX) hit a low for 2006 at $55.81/bbl. Somewhat paradoxically, the January contract for WTI settled that same day at $58.97/bbl, up 40 cents. The steep difference between the immediate and second-month prices is a sign of a well-supplied crude market in the short term, said analysts. However, while the market is showing weakness now, these same analysts expect it to tighten up as the year comes to an end. They point out that once refiners come out of maintenance projects and increase runs, the drawdown on crude will firm up prices. Furthermore, any worsening of weather will also provoke an increase in North American and European demand.
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Louisianans pushes for offshore bill in lame duck session
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Louisiana’s congressional delegation at press time was pushing for enactment of offshore drilling legislation this year, worried that there would be far less chance of a bill passing when Democrats take control of Congress next month. Rep. Bobby Jindal (R-La.) told Capitol Hill reporters, “We want to get it done in December. We’re closer to victory than ever before.” This appeared to be a rather optimistic outlook, given that the legislation was already dangling by a thread in the last days of the Republican-controlled 109th Congress. Legislation to open up more federal areas to offshore drilling was stuck in strained negotiations between Senate and House leaders, when it was tabled while members campaigned for the Nov. 7 mid-term election. The election was disastrous, as the pro-drilling Republicans lost control of both houses. Thus, supporters of the legislation redoubled their efforts to try to gain final passage of the bill before the current Congress finishes business this month.
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Strikes put a large dent in Argentina’s production
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Nearly 50% of Argentina’s oil output remained shut in last month, as negotiations between striking workers, producers and officials failed to yield a new agreement. Most fields remained closed in Chubut and Santa Cruz provinces, where the Golfo San Jorge basin is situated. It is one of Argentina’s main oil-producing areas. There were reports from Repsol-YPF, Argentina’s largest producer, that output had been frozen for two days in Chubt and Santa Cruz. In Neuquen, operations resumed after a strike shut down production on Nov. 14, forcing the government to scale back its normal 775 MMcfd of gas exports to neighboring Chile. Operations were restarted in Neuquen after officials imposed involuntary arbitration, which requires workers to go back on the job while a solution is negotiated. Workers in Chubut and Santa Cruz refused to accept the process and continued striking. Golfo San Jorge produces about 220,000 bopd. Last year, Argentina’s average output was about 500,000 bopd. Talks became stalled, when companies rejected a petition by union leaders that overtime hours should be exempt from income taxes.
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BP’s Alaskan outage spurred crude buying spree, says EIA
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According to import data from the US Energy Information Administration (EIA), large volumes of imported oil and products flowed into the US West Coast during September, as refineries went on a buying spree to replace an anticipated long-term outage of 400,000 bopd from BP’s Prudhoe Bay field in Alaska. EIA data show that California and Washington imported a combined 1.66 million bpd of crude and products, versus an average 1.21 million bpd in the seven months before the early August outage. Ironically, the production volume shut in at Prudhoe Bay never amounted to more than 200,000 bpd, and the field was back to fully onstream by mid-October. The imports pushed West Coast crude oil inventories to 15 million barrels by late September from 13 million bbl in late August.
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Gazprom denies plan to build gas cartel
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A Gazprom official said that Russia is not building a natural gas producers’ cartel, despite rumors heard by NATO officials and others. Sergey Chelpanov, deputy director general of Gazprom Export, said, “There is no ‘gas OPEC’ . . . and no work is under way to set up such a body.” However, what is being debated, he noted, is how to foster greater producer-consumer cooperation. “We need to build harmonious relations with everyone, but there is not any formal union . . .,” Chelpanov told an EU-Russian conference in Moscow. Russian media had reported that Valery Yazez, head of Russia’s parliamentary energy committee, had called for a gas alliance to unite former Soviet republics and Iran with Russia against the European Union.
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Ukraine’s gas producers may see royalty hike
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Ukrainian officials plan to raise royalties 63.4% on gas output in 2007, causing a protest from the country’s two major gas producers. The firms, ChornomorNaftoGaz and UkrGazVydobuvannya, warned that a hike could force them to postpone most Black Sea offshore gas development projects. The Finance Ministry would hike royalties to Hryvnia 50 ($9.90)/Mcm produced, and boost the rate on oil and condensate from depths less than 5,000 m by 24%, to Hryvnia 1,090 ($215.8)/ton.
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H&P sees strong land rig demand
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Although it has built or planned 73 new land rigs since starting its latest round of construction in March 2005, US drilling contractor Helmerich & Payne believes that there is no shortage of client operators wanting new rigs. During an earnings conference call, H&P Executive Vice President John Lindsay told analysts that his firm continues to look for opportunities for new rigs in other parts of the world outside the US. His firm’s greatest areas of interest are North Africa, Indonesia, India and Russia. However, Lindsay said there may still be significant opportunities for deals with customers that desire new US land rigs, due to a rapidly aging world fleet. In the US, he noted, there are about 1,000 older, conventional rigs, aged 30 or more years, many of which are without major refurbishments. Internationally, he said that another 500 such rigs exist, and this figure does not include Iraqi, Iranian and Russian rigs.
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Large IOCs consider Africa crucial to E&P
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Major international oil companies declared that Africa has great importance as an E&P center during a conference in Cape Town, South Africa. Several firms described its importance to their portfolios and spending plans. However, there is also the problem of dispensing revenue, technical expertise and community involvement in various countries, as officials ask for a greater share of oil earnings. ExxonMobil’s vice president for Africa, Kevin Biddle, told attendees that the continent is vital to his firm’s operations, contributing 16% of its worldwide output. Exxon produces about 800,000 boed, net, on the continent, with E&P operations in 10 nations. Of 120 ExxonMobil development projects globally, 49 are in Africa. Likewise, Africa is important to Total. The French firm produces 800,000 boed in Africa, or about one-third of its total output. The continent also represents one-third of Total’s capital employed, as well as proven and probable reserves.
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Suncor ramps up its investment plans
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Canadian oil sands producer Suncor Energy expects to invest C$5.3 billion (US$4.7 billion) in 2007. Most of the money will go toward projects that can lift the firm’s total output to more than 500,000 bopd by 2010. Suncor’s capital spending program for 2007 is much larger than what is expected to be a final 2006 spending total of C$3.5 billion. Suncor’s oil sands operations will directly receive about C$4.4 billion, equal to about 83% of the company’s 2007 budget. Included in that figure is C$1 billion for debottlenecking and productivity improvements at existing Suncor projects. The goal is to increase production to 350,000 bopd during 2008.
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BHP Billiton grabs Genghis Khan in GOM
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BHP Billiton, with co-venturers Hess Corp. and Repsol YPF, purchased the Genghis Khan oil and gas development from Anadarko Petroleum for $1.35 billion. The deal includes rights for Green Canyon Blocks 652 and 608 (certain rights only) in the deepwater Gulf of Mexico. Genghis Khan field already has two wells and development infrastructure in place. It is part of the same geological structure as the recently sanctioned Shenzi project. Genghis Khan was discovered in 2005 on Block GC 652. It includes estimated gross hydrocarbon reserves between 65 million and 170 million boe. It is in water depths of about 4,300 ft. The field is situated within 3 mi of the Marco Polo production platform.
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Husky hikes White Rose
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Husky Energy said its 2006 delineation program at White Rose field offshore Newfoundland has generated an 80% gain in recoverable oil resources. The firm said the program boosted White Rose’s reserves by 190 million bbl, to a total of 430 million bbl. Husky said a discovery made in the North Amethyst K-15 delineation well, in the field’s southwestern section, is estimated to hold 40 million to 100 million recoverable bbl, with a likely estimate of 70 million bbl. The K-15 well was drilled to a 2,566-m (8,419-ft) depth and found a 50-to-55-m (164-to-180-ft) oil column in the Ben Nevis Avalon formation.
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Ecuador to invest in Block 15
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Ecuador will spend $300 million next year in Block 15 and the accompanying Eden-Yuturi and Limoncocha fields that it seized last spring from Occidental Petroleum. This news was released by Carlos Blum, the manager of the special unit within state-owned Petroecuador that now administers the fields. Of the total figure, $70 million will go toward three drilling rigs for new exploration, as well as infrastructure required to maintain field production. Petroecuador reportedly spent $220 million on the former Oxy properties this year.
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US emissions rise slows
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An Energy Information Administration report said that total US greenhouse gas (GHG) emissions increased 0.6% in 2005 from the 2004 level. The report, Emissions of Greenhouse Gases in the United States 2005, found that the US emitted 7.15 billion metric tons of carbon dioxide equivalent in 2005. The rise in emissions for 2005 was well below the simultaneous rate of US economic growth of 3.2%. It was also lower than the average 1.0% annual growth rate in US GHG emissions since 1990.
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Chile postpones estimate
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The El Mercurio newspaper reported that Chilean state firm Enap has postponed the release of estimated gas and oil reserves at its Lago Mercedes site in Tierra del Fuego. Enap had been expected to publicize the reserve estimate last May, but this was later postponed to December. Release of the reserve numbers is now expected to wait another six months, as the company awaits results from the drilling of a fourth well at Lago Mercedes. 
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Opinion
A rather unlikely candidate to promote a “green” lifestyle has set Britons on their heels by announcing that his staff must begin using bicycles in the fight against global warming by no later than February. This dedicated warrior against climate change is no less than that previously prolific hydrocarbon consumer, Prince Charles.
Why is the prince, already dubbed “Charles the Green,” embarking on making himself the UK’s greenest royal? Some of his supporters maintain that he has always been outspoken about climate change and the need to address it. After all, they note, he went to the White House and delivered a stinging criticism of the US environmental record in front of President George W. Bush. Yes, but the prince’s record suggests that he’s been all talk and almost no action until now. For instance, he was one of the largest users of the Royal Flight fleet last year, spending £1.1 million ($2.09 million) on travel by private planes and helicopters. He also leases two cars for work – a Jaguar and a Range Rover – and has a classic Aston Martin (a car given to him by Queen Elizabeth II) that gets a shade over 11 mi/gal, not to mention an Audi “runaround” car. Charles is also the Royal Train’s greatest user, although it ran just 14 times last year at an average cost of £22,000/trip.
Perhaps Charles was embarrassed into action by the Blair administration outlining its Climate Change Bill. Or maybe it was a recent vow by Conservative Leader David Cameron that his party would reduce automobile carbon emissions by one-third. Perhaps it was The Stern Review on the Economics of Climate Change, launched on Oct. 30 as the most comprehensive study of its kind. The Stern Review will use research and projections from the Met Office’s (a UK version of the US National Weather Service) Hadley Centre. This editor recently attended a Met Office presentation to the Energy Institute’s Houston Chapter. The presenter noted that, assuming atmospheric concentration of CO2 more than doubles during the 21st century, the worldwide, annual, average surface temperature during 2070-2100 will be 3.2oC (5.76oF) higher than in 1960-1999. The Met Office has a reputation for accuracy – in fact, it predicted the actual paths of Hurricanes Katrina and Rita in 2005 far better than the US National Hurricane Center.
Despite all the criticism, Charles is pressing forward. A complete review, known as a “carbon footprint,” of all his personal and staff travel has been carried out, as well as of their use of water, electricity and paper. The prince has made sure that “hippos,” water reduction bricks, are in all toilets, and a wood chip heating system has been installed at his mansion at Highgrove, England. Two mountain bikes have been ordered and will be kept at Charles’ central London residence, Clarence House. Their use by staff will involve chauffeurs biking to sites of his appointments to check arrangements, as well as aides cycling around central London to handle routine business, as weather permits. Alas, all of this posturing may be reduced significantly, if security concerns cannot be addressed adequately. Furthermore, Charles has refused to give up his car fleet, although staff say that he is considering converting them into “bio-diesel” vehicles.
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