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Nominal crude futures price hits new all-time high

The May delivery price for light, sweet crude on the New York Mercantile Exchange (NYMEX) hit a new, all-time nominal high on April 19, settling at $72.17/bbl. This exceeded closing records set on the immediate two past days, at $71.35/bbl and $70.40/bbl. At one point during April 19, the price was as high as $72.40/bbl. That figure topped the previous intra-day record of $71.60, set on April 18, and that figure had broken an earlier intra-day record of $70.85, set on Aug. 30, 2005. Geopolitical concerns on the part of oil traders continued to fuel the high prices, particularly the Western world’s stand-off with Iran on nuclear issues, as well as production disruptions in Nigeria and economic growth in China. Separately, Indonesia’s OPEC governor, Maizar Rahman, said that his country would propose that the group increase its output at the organization’s next meeting. However, several other member countries said that they saw no reason for a hike at this time.

Senator calls for probe into US gasoline prices

As oil prices hit new nominal highs, gasoline prices are rising in lock-step, and US politicians are taking notice. Chief among these lawmakers is Sen. Charles Schumer (Democrat - New York), who called for a formal investigation into whether oil companies recently plotted to withhold supplies and thus boost gasoline prices. More specifically, Schumer’s request to the Federal Trade Commission (FTC) asks whether oil companies and refiners deliberately held back gasoline production, taking advantage of the normal switch from winter gas to summer gas to jack up prices. “The bottom line is they are producing at 85% capacity, when they should be producing over 90%,” alleged Schumer. For their part, oil company executives denied the allegation. The FTC said it would take Schumer’s request seriously and “respond appropriately,” although it might take several months for it to compile a finding.

Venezuela continues tough stance with operators

Oil field seizures were the latest tactic employed by Venezuelan President Hugo Chavez, as he continued his campaign to reverse the effects of 1990s marginal oil field deals that he labeled “criminal and treasonous giveaways.” Chavez’s regime had already shut down the offices of Total and Eni for not paying a combined amount of $126.5 million in back taxes retroactively figured on the operating agreements, as per the 2001 Hydrocarbons Law. But after the two companies failed to meet an April 1 deadline for converting their operations to joint ventures with state firm PDVSA, officials seized both firms’ oil fields. “This country does not allow itself to be blackmailed,” said Energy and Mines Minister Rafael Ramirez. “These two multinational companies resist adjusting to our law.” After threatening to seek legal recourse, Total and Eni eventually paid the back taxes. Whether either firm would continue a presence in Venezuela remained unclear at press time. One firm that is leaving is ExxonMobil. The company sold its stake in the La Ceiba-Quaimare oil field to Repsol-YPF and now only holds an interest in the Cerro Negro heavy oil project. Of the original 22 operators holding marginal field agreements, 16 have converted their deals to JVs. Chavez also said that his regime might take a 51% interest in heavy, tar-like oil ventures in eastern Venezuela.

High prices fuel budget surplus for Newfoundland/ Labrador

A major expansion in offshore royalties and corporate taxes brought by high oil prices will provide the Canadian province of Newfoundland and Labrador with a significant budget surplus. In the 2005-2006 fiscal year just coming to a close, the province expects to net a surprise C$76.5 million surplus. Beyond that, the Tory government of Premier Danny Williams projects a C$6.2 million surplus for the 2006-2007 fiscal year. The additional revenue comes from royalties and corporate taxes that are estimated to be taking in C$927 million. A mere two years ago, Newfoundland and Labrador was facing large deficits and projections that the province would have to downsize its public service workforce by 4,000 people. Next fiscal year’s budget will add C$350 million in program spending on education, health and roads, bringing total spending to nearly C$4.6 billion.

Congressman says US must drill off Florida before Castro

Pennsylvania Rep. John Peterson (Republican) has introduced a bill in the US House to allow drilling for natural gas just 20 mi off the Florida coastline. He says such exploration is necessary, because Fidel Castro’s Cuba may soon explore offshore tracts as close to Key West, Florida, as 50 mi away. “It’s astounding that we’re going to sit here and say that we’re not going to produce, and, meanwhile, our good friend, Fidel Castro, is going to suck it (gas) up under our noses,” Peterson told The Miami Herald. Peterson’s bill has 150 co-sponsors from both parties. Not surprisingly, members of Florida’s congressional delegation are already whining that the state needs even more protection from this potential drilling.

Virginia governor’s exploration plan pleases all parties

One of the more bizarre accomplishments has been Virginia Governor Timothy Kaine’s (Democrat) compromise offshore exploration plan that has won praise from both environmentalists and the E&P industry. While a Sierra Club statement said, “Virginia’s coast was spared today by Governor Tim Kaine,” a release from Virginia Natural Gas contradicted it by saying, “This is a key step for Virginia and the nation to help ensure our energy security for years to come.” The paradox was created by Kaine’s substitute state energy bill, which endorses exploration, but not development, of natural gas reserves at least 50 mi from the shoreline. The “half-loaf” idea has placated both energy companies and environmentalists.

Angola opens tenders for offshore blocks

National oil company Sonangol last month opened tenders submitted by 20 oil companies for five blocks offshore Angola – 1, 5, 6, 26 and the relinquished portion of Block 15. Each block attracted proposals. A 30-day evaluation period by Sonangol ensued, and an announcement of the successful tenderers is due this month. This was the first public opening ceremony for tenders since the country won its independence in 1975. An additional public opening of tenders for Blocks 17 and 18 was slated for May 9.

New line links Barnett Shale to eastern US

Crosstex Energy completed construction of the $115-million, 24-in. North Texas Pipeline, covering more than 140 mi across six North Texas counties. The new line will gather and transport natural gas out of the prolific Barnett Shale. Some of the gas will be delivered to Coserv Energy and Atmos Energy for sale to local consumer and business markets in the North Texas area. The remainder will be transferred into interstate pipelines near Paris, Texas, for shipment to markets in the eastern US. Full operation of the pipeline began on April 4, with an initial capacity of 250 MMcfgd. With added compression, this capacity could increase to 375 MMcfgd. Gas output from the Barnett Shale averages 1.4 Bcfd, and that rate is predicted to grow to 3.0 Bcfd in the next three to five years.

Large offshore rig building boom underway

According to data compiled by RigLogix, there are 88 mobile offshore drilling units (MODUs) under construction or on order. This is the greatest growth in offshore rig building in more than 20 years, since the last great construction boom of 1980-1983. During that four-year period, nearly 300 MODUs were built, including 230 jackups ($90 million, each, in today’s money), 48 semisubmersibles ($210 million, each, in today’s money) and eight drillships ($185 million, each, in today’s money). Comparatively, for the 2006-2009 period, there are 61 jackups being built ($135 million, each), plus 21 semisubmersibles ($410 million, each) and six drillships ($535 million, each). In all classes, on a per-rig basis, more is being spend for each new unit now, due to greater water depth capabilities.

Colombia picks eight firms to bid on project

Colombian officials have selected eight oil companies to bid for a $1.6 billion E&P project in Meta province, said Mauricio Tellez, spokesman for state firm Ecopetrol. Firms bidding for the project, to be awarded in June or July, include ExxonMobil, Chevron, BP, Total, Repsol-YPF, Lukoil, Petrobras and Sinopec. “The winner will be the company that offers to transfer the biggest proportion of its oil production to Ecopetrol,” said Tellez. The projected investment figure includes boosting output at fields currently operated by Ecopetrol, plus exploration for new oil deposits across 1.7 million hectares. Officials claim that 1.0 billion bbl of heavy crude lie in existing fields, with another 2.0 billion bbl still to be discovered.

OPEC reduces global oil demand projection

Forecasters at OPEC have trimmed their projection for world oil demand growth to 1.42 million bopd this year, down from 1.46 million bopd. They cited weaker US consumption in the first three months of 2006 as the primary reason for revising the average world call on oil down to 84.53 million bpd. Estimated need for OPEC oil is now 27.85 million bpd.

Barclays analyst calls $65/bbl the new $20/bbl

Speaking to a gathering of the International Association of Independent Tanker Owners in Singapore, Barclays Capital’s head of Commodity Research, Paul Horsnell, said that oil prices at current levels are “fully justified” by fundamentals. He also noted that long-term tightness in the global oil production capacity will prop up crude prices, even if inventories rise. He also observed that production growth from non-OPEC exporting countries, led by Russia, was “absolutely zero” last year, forcing net importing nations like the US to build inventories, where they can. “$65 is the new $20,” Horsnell said of the price target that, for about 16 years until 2000, had been the “absolute anchor” point for oil. He said that OPEC wants prices at least in the mid-$50s.

Arctic plan still missing

As this issue of World Oil went to press, Norway’s long-awaited, long-term Arctic management plan had still not been released to the upstream industry. This is despite assurances by the Ministry of Petroleum and Energy that the report would come out before Easter (April 16). Such operators as Statoil and Norsk Hydro have been waiting on the plan, to see where they will be able to explore. The plan will detail where, when and how companies can develop Norway’s northern coast.

IPAA signs on to STAR

IPAA has agreed to be an endorsing association for the Natural Gas STAR program, a voluntary, flexible partnership that tries to keep more gas in pipelines and out of the atmosphere. The program aims to cost-effectively increase revenues, energy supplies and independence, and reduce environmental impacts. Since its inception in 1993, Natural Gas STAR has reduced 403 Bcf of methane emissions, earning the industry more than $1 billion.

African blocks withdrawn

Nigeria and Sao Tome and Principe withdrew three of nine blocks in their Joint Development Zone, due to lack of interest. The director of the Sao Tome National Oil Agency said the market’s lack of interest stems from the blocks being in very deep water that requires a large investment. The other six blocks have been, or will be, awarded. 

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