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Vol. 228 No. 6 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Pertamina seeks partners
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Indonesian state firm Pertamina said it will solicit partners for developing 20 oil and gas blocks later this year. Speaking to a local press gathering, Pertamina E&P President Kun Kurnely said that his firm needs partners to explore 11 blocks, with additional firms required to help produce nine other blocks. The tracts are in Java, Sumatra and Kalimantan. He hoped to make the offer sometime this month.
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Ireland extends shelf
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Irish Minister for Communications, Marine & Natural Resources Noel Dempsey said that his country has secured a recommendation from the UN Commission on the Limits of the Continental Shelf to extend Ireland’s shelf limit beyond 200 nautical miles. The area in question concerns the Porcupine Abyssal Plain. According to Dempsey, the UN’s action now allows Ireland to add about 56,000 sq km to its continental shelf through legislative approval in its parliament.
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Nova Scotia works to attract exploration
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The government of Nova Scotia has put more money into R&D to encourage new exploration offshore the province. Officials awarded a $100,000 grant to Petroleum Research Atlantic Canada, to examine greater use of electromagnetic imaging technology to help find oil and gas offshore. “Nova Scotia has proven oil and gas reserves. I want more exploration, and that is why the government is helping to make it happen,” said provincial Energy Minister Bill Dooks. Officials hope the to accelerate identification of drilling prospects.
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Fire kills two in Congo
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A May 10 fire at Total’s Nkossa production platform offshore Congo (Brazzaville) killed two people, injured two others and halted the field’s 60,000-bopd production. The two fatalities were Congolese workers, while the two injured were another Congolese national and an Australian citizen. An oil ministry official said that repairs were underway to fix the damage, which was termed “quite significant.” He estimated that output might begin within three weeks. An investigation is being conducted to determine the cause of the blaze, which broke out early in the morning.
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As oil prices remain high, OPEC refuses to pump more crude
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After taking a brief drop back toward $61/bbl, the NYMEX futures price for WTI crude rebounded in mid-to-late-May to $66, and it appeared that the bullish market would continue. The gasoline pricing situation in the US was exacerbated by well-below-average stocks and a lag in finishing normal turnarounds in refinery blends, as well as seasonal maintenance. In the third week of May, regular unleaded gasoline retailed for an average $3.196/gal in the US, up 33.7 cents/gal from a month earlier. Gasoline futures were at $2.3755/gal. Also, natural gas prices were around $7.85/Mcf. At the same time, OPEC Secretary General Abdalla El-Badri said that his group would stand firm on output. “There’s no need for us to do more,” said El-Badri while talking to various news services. He described US gasoline stock levels as “acceptable,” despite the industry’s worries that inventories have fallen too low to handle summer travel season demand. US-based analysts collectively predicted that a meaningful rise in OPEC oil production is unlikely at current prices. Accordingly, they expect the oil market to overheat in second-half 2007. Ironically, in late April, Kuwait Petroleum’s managing director of international marketing, Jamal Alnouri, had warned that “any increase above that level ($60/bbl) is damaging,” to both producers and consumers.
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ExxonMobil claims new world record drilling effort
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ExxonMobil’s subsidiary, Exxon Neftegas Limited (ENL), said it has completed drilling of the Z-11 well onshore Sakhalin Island, offshore eastern Russia, setting a new world’s record for the longest measured-depth extended-reach well. The firm said that the Z-11 well achieved a total MD of 37,016 ft, or more than 7 mi. The well was drilled into the Chayvo reservoir form the Yastreb rig, which is believed to be the world’s largest land-based drilling rig. The Z-11 is the 17th ERD producing well to be completed as part of the Sakhalin 1 Project. It was drilled in 61 days, more than 15 days ahead of schedule and below expected cost, with no safety or environmental incidents. Since the first Sakhalin 1 well was drilled in 2003, the time required to drill these wells has been reduced by more than 50%, said the company.
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US Interior Dept. posts final OCS development plan
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The final draft of the next five-year OCS development plan has been published by the US Interior Dept.’s Minerals Management Service (MMS). In addition to proposing drilling lease sales for controversial acreage offshore Alaska and Virginia, the plan expects total results from 21 lease sales held between 2007 and 2012 to produce 10 billion bbl of oil and 45 Tcf of natural gas, and generate $170 billion in federal royalty revenues. Twelve lease sales are slated for the Gulf of Mexico, plus eight offshore Alaska, and one in the Mid-Atlantic Planning Area, about 50 mi offshore southern Virginia. The Mid-Atlantic sale is tentatively set for 2011, but it requires a partial lifting of federal moratoria on such acreage by the President and Congress. The OCS plan also includes one lease sale in the Eastern Gulf of Mexico in 2008. The program must be submitted to Congress and the President, and after 60 days, if no objections are raised, it can be approved by the Interior Secretary to take effect on July 1.
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Upstream projects cost increases are slowing, says index
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Capital costs for E&P projects rose 7% in the six months ending March 31, compared to a 13% increase in the previous six months, said IHS Energy and Cambridge Energy Research Associates (CERA). This suggests that cost inflation will peak in the next 12 months. The firms’ new Upstream Capital Costs Index, which tracks about two dozen major onshore and offshore projects worldwide, hit 179 points, compared to 167 points in the previous six months. These data suggest an annual cost inflation of 14% for 2007, said Richard Ward, CERA’s senior director for costs research. This compares to the 30% annual rate recorded for 2006. Lack of experienced staff in the industry is a major factor in the cost hikes. Largest increases were for engineered equipment, including compressors, turbines and generator sets, added Ward.
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Chavez further extends grab of Venezuelan properties
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On May 1, Venezuelan President Hugo Chavez instructed Oil Minister Rafael Ramirez to declare that all Orinoco River basin projects had reverted to state control at midnight on that day. Accordingly, state firm PDVSA will now take a minimum 60% stake in, and operatorship of, four major heavy crude projects that collectively produce over 600,000 bpd. As of the second week of May, BP, ExxonMobil, Chevron, Total and Statoil had agreed to cede control of the projects to PDVSA. ConocoPhillips remained a hold-out, refusing to sign an agreement and asking for better compensation. Venezuelan officials threatened to expel the firm if it did not sign the papers. Meanwhile, China has agreed to contribute $4 billion of a $6-billion fund to finance heavy crude projects in Venezuela, to produce up to 800,000 bpd after a five-year period. Venezuela will contribute the remaining $2 billion. Ramirez also announced that PDVSA will nationalize 18 rigs operated by foreign firms.
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Alaskan judge dismisses ExxonMobil’s suit
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ExxonMobil is not entitled to seek financial compensation from the state for cancellation of the Point Thompson field lease, said Alaska Superior Court Judge Peter Michalski, who threw out the firm’s lawsuit with prejudice. Last December, the Alaska Dept. of Natural Resources terminated the lease, saying that ExxonMobil, BP, Chevron and ConocoPhillips had waited too long to develop the 300-million-bbl, 8-9-Tcf field. All four firms filed administrative appeals, and Michalski’s ruling noted that this is the proper forum in which to seek redress, and not his courtoom.
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Eni to invest heavily in GOM, Egypt
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Italy’s Eni has purchased Dominion Resources’ upstream assets in the US Gulf of Mexico for $4.8 billion. Subject to governmental approval, the deal will complete on July 2. Eni Chief Executive Paolo Scaroni said his firm is acquiring “the necessary critical mass for its activities in the Gulf of Mexico.” It also gives Eni access to a host of technologies applied to development of the Independence Hub deepwater fields. Separately, Eni will spend $12 billion on Egyptian gas operations over the next five years, said a statement from Egypt’s Ministry of Petroleum. In addition, the company will oil reserves in Belayim field, in the Gulf of Suez, by 180 million bbl over the next 12 years. This increase would be worth $9 billion.
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Pemex needs government tax reform
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During a visit to New York, Pemex Chief Executive Jesus Reyes Heroles told wire services that his firm needs the Mexican government to pass tax reform plans that would relieve spending pressures on the company. “The money left for Pemex after taxes has been clearly insufficient,” explained Reyes. “Pemex cannot keep paying the amount of taxes that it is paying and at the same time go out and borrow.” The government took 54% of Pemex’s revenues as taxes in 2006, down from 64% in 2005, but Reyes said this level is still too high. The tax burden prevents Pemex from investing its profits back into operations sufficiently, at a time when oil production has been falling.
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Iraqi oil minister warns against outside deals
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Iraqi Oil Minister Hussein al-Shahristani has warned foreign oil companies not to sign contracts that bypass the central government in Baghdad, including his ministry. The warning clearly refers to recent deals signed by some firms with the Kurdistan Regional Government. “Any contract that is signed without the knowledge of the federal government is illegal,” said al-Shahristani. No governmental entity, other than the Kurds, has tried to sign exploration or development contracts with foreign oil companies. According to current Iraqi law, all contracts must be signed by the federal government until the new oil and gas law is issued, said al-Shahristani.
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Total blanches at So. Pars cost over-runs
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Costs for Total’s planned $10-billion gas development offshore Iran at South Pars field have risen so much, that the company has postponed launching the project, said Total CFO Robert Castaigne. While discussing his firm’s first-quarter results, Castaigne said that executives are reviewing “all the elements of the project.” He declined to say when they would decide on a new schedule. Back in April 2007, Total Chief Executive Christophe de Margerie described the South Pars costs as being “so high that they are close to damaging the project.”
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Kuwait quickly controls fire at Burgan field
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State firm Kuwait Oil Co. said that a fire that broke out at a gathering center within giant Burgan oil field was brought under control in record time. One contractor was injured in the incident, which occurred on May 7. Extent of the blaze was limited to the supply of natural gas to an LPG plant operated by parent company Kuwait National Petroleum. Repairs were expected to proceed quickly. Burgan holds more than half of Kuwait’s proven oil reserves, producing 2 million bpd.
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Opinion
A milestone in Western politics occurs on June 27, when Tony Blair serves his last day as UK Labour prime minister (PM), having been in that post since May 1997 with the ninth-longest tenure. His successor will be Chancellor of the Exchequer Gordon Brown, who has a record tenure in that post. Britain is losing one of its better PMs - whatever his faults and decisions may be, Mr. Blair has always tried to do what he thought was right, regardless of consequences. In this era of politicians bending to opinion polls and blaming each other, such leadership is rare. Accordingly, he has functioned as a centrist, something desperately lacking in America’s pathetically polarized politics. On the left, Blair increased spending on health and education, and introduced a minimum wage. On the right, he oversaw the granting of greater home rule to Scotland and Wales. He has performed on economic/management issues to the right of much of his own party, and UK E&P has been relatively healthy, at least up to late 2001, and after 2004. He also has equally good relations with US Presidents Clinton and Bush, and their respective parties. His approval rating in the UK may be at a low of 26%, due to his support of Bush and the US in Iraq. But his original decision to have the UK go into Iraq was based on the best information that he had, at that time, albeit flawed US intelligence. People also forget that Blair almost single-handedly propped up the British monarchy by convincing Queen Elizabeth II to do the right things after Princess Diana’s death. Whether his own citizens appreciate him, he will certainly be missed by the American public.
Now for observations from the Random Thoughts Department. First, isn’t it time that oddsmakers in Las Vegas start offering odds/wagers on how long it will take for Hugo Chavez to ruin the Venezuelan upstream industry? At the rate that Hugo is progressing, we should have resolution of this wager in time for the 2008 US elections. It is also a sad day, when the US Interior Dept. has more guts than the average member of the US Congress. Kudos to planners at the MMS for including the controversial offshore Virginia, offshore Alaska and eastern Gulf of Mexico lease sales in their new, five-year plan. But who wants to wager that these items will get past the Democratically-controlled Congress? Is it just me, or are Chinese characters popping up everywhere on a map of worldwide PSCs being awarded? And are Western oil companies paying any attention, whatsoever? Finally, a reader chastised me for last month’s Opinion, insisting that I was critical of how Pemex manages Cantarell field. To that subscriber, I say, “Go back and read the text again.” Comments about Cantarell’s decline were not a criticism. They were meant to be a wake-up call to Mexican politicians, imploring them to allow Pemex to re-invest more money into operations, so that oil and gas production can be increased. This editor has been consistently sympathetic to the plight of Pemex managers.
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