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Vol. 228 No. 5 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Marathon hits in GOM
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Marathon Oil said that it struck oil in a new deepwater discovery well in the Green Canyon region of the Gulf of Mexico. The Droshky 1, previously known as Troika Deep, is about 137 mi south-southwest of Venice, Louisiana, in about 2,900 ft of water. The well was drilled to 21,190 ft, and net oil pay is about 250 ft, said the firm. Marathon owns 100% interest in the find. The company has started to drill up to two sidetrack wells, which will be followed by engineering development studies.
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Ecuador to rejoin OPEC
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President Rafael Correa confirmed that Ecuador will return to OPEC, 15 years after leaving the group. “The decision to return to OPEC has been taken, and this will open up a lot of opportunities, among them access to credit in Middle East banks,” Correa told reporters during a visit to Brasilia, Brazil. OPEC had already said that Ecuador could return “at any time.” The country’s re-admission is backed by Venezuela, which has been the only Latin American member of OPEC since 1992. Ecuador’s output is 530,000 bopd.
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Uganda drafts bill
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Government officials have begun drafting a Ugandan Oil and Gas Policy, to avoid difficulties associated with sharing oil revenues, as has occurred in numerous other countries. Simon D’Ujang, Uganda’s state Minister for Energy, said that the policy would be ready by fourth-quarter 2007. “The Oil and Gas Policy is coming,” said D’Ujang. “The public will have a chance to look at the draft and discuss it before we make it (official).” Potential oil reserves have been identified around Lake Albert in western Uganda.
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Shell pays Caracas
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Shell’s Venezuelan affiliate has paid 29.4 billion bolivares ($13.7 million) to the country’s tax agency, known as Seniat. The payment covers a so-called discrepancy in the firm’s 2005 tax filing. Reportedly, Seniat complained about the manner in which some “loans” were handled between Shell’s subsidiary and headquarters in the Netherlands. As part of a tax enforcement process begun in 2005, Seniat has filed numerous claims for hundreds of millions of dollars against several foreign and domestic oil companies.
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China plans hike in output to meet demand
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China’s top planning agency said that the country expects to produce 193 million t (3.87 million bpd) of oil and 92 Bcm (8.9 Bcfd) of natural gas in 2010. According to the Eleventh Five-Year Plan for Energy Development, released by the National Development and Reform Commission, China will achieve the gain in oil and gas production by applying new technologies and increasing investment. The plan will also spawn incentives to encourage additional investment in oil and gas exploration and production. Oil and gas will not be the only energy sectors receiving greater government attention. China also will step up development of recyclable, nuclear and hydroelectric energy, within environmental constraints and while resettling displaced citizens. The country will try to limit growth in coal consumption to 4% annually.
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Occidental covets a $10 billion Abu Dhabi sour gas project
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According to company officials, Occidental Petroleum intended to bid last month on an estimated $10 billion sour gas project in Abu Dhabi, while BG Group said it will not pursue the project further. State firm Abu Dhabi National Oil Co. (ADNOC) had pre-qualified several international oil companies, including Oxy, BG, BP and Shell, to submit bids by April 15. Oxy’s bid will include a final proposal on how to develop these gas reserves, to meet the emirate’s fast-rising requirements for satisfying regional gas supply contracts. As this issue went to press, it was not clear whether ExxonMobil or Total would submit bids, although both had been pre-qualified by ADNOC. Whichever company wins the bid will enter into a joint venture with ADNOC to develop some of Abu Dhabi’s sour gas fields, whose output will be more costly and challenging to process. Abu Dhabi claims to have more than 200 Tcf of gas reserves, which would be the fifth largest gas holding worldwide. Most of that gas is sour.
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Iraq invites 15 firms to drill 50 wells in southern fields
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In an official statement, the Iraqi Oil Ministry said that it has invited 15 international oil companies to drill 50 new oil wells in fields within the southern part of the country. The goal is to raise oil output 70,000 bpd. “The Oil Ministry has instructed the South Oil Company to invite 15 specialized and well known international oil companies to take part in a tender to drill some 50 wells in Maysan province,” said the statement. A two-month period has been set aside by South Oil to receive bids from those firms. The plan calls for drilling 50 wells in the Fakka, Bazerkan, Abu Ghareb, Halfaya and Amarah oil fields. As part of the deal, the winning companies will drill the wells in return for an undisclosed but specific amount of money. The wells must be completed and ready for operation by South Oil within six to seven months after work begins. The ministry also disclosed that it plans to drill another 50 wells in Basra province of southern Iraq. Iraq has struggled to maintain its oil exports, which are languishing at about 1.5 million bpd.
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Bush administration appeals ruling on national forest drilling
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The White House and the timber industry have united in an appeal of a federal court ruling that strikes down an administration policy to allow logging and oil and gas drilling in large, undeveloped portions of US national forests. Last September, US District Judge Elizabeth Laporte, who has jurisdiction in northern California, reinstated an early 2001 rule created by the Clinton administration, which prohibited most logging activity and oil and gas drilling in 50 million acres of national forests, known as “roadless areas.” The rule’s purpose supposedly was to protect clean water and habitats for fish and wildlife. Laporte found that the Bush administration had failed to conduct necessary environmental studies before instituting a process in May 2005 that required state governors to petition the federal government to protect these areas. Conservation groups and several Western state attorneys general challenged the policy. Bush officials and the American Forest Resource Council have both filed notices of appeal in US District Court in San Francisco.
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UKDTI approves 350th British offshore development project
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Hitting a major milestone and underscoring the North Sea’s continued importance to the country, UK Trade and Industry Secretary Alistair Darling announced approval for three new field projects, bringing the total British offshore projects approved to 350 in a 40-year period. The new project includes Caravel and Shamrock fields, operated by Shell, and Kelvin field, operated by ConocoPhillips. Caravel is in the southern North Sea and was found in 2002. First output from two gas wells will be in December 2007. Shamrock is nearby, and will be developed similarly and tied into Caravel. Kelvin will be developed through a single well drilled through an unmanned, two-slot wellhead platform and tied back to facilities at ConocoPhillips’ Murdoch field. It should also go onstream in December.
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Norwegian government endorses Statoil, Hydro merger
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A favorable opinion is rendered in a proposition presented by the Norwegian administration to the Storting (parliament), as regards the effects of the merger between Statoil and Hydro’s petroleum business on upstream activity within Norway. In the view of Minister of Petroleum and Energy Odd Roger Enoksen, the merger will not reduce “value creation on the NCS (Norwegian Continental Shelf). However, it will lead to changes in activity, which will require attention from authorities.” The merger will unite the two largest players on the NCS. At present, Statoil operates 62% of NCS production. After the merger, the figure will rise to 80%. Officials insist that the merged entity must retain a strong presence in R&D.
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Mars returns to 100% in the Gulf of Mexico
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Shell said that its Mars oil platform in the deepwater Gulf of Mexico is finally whole again, after significant repairs were made in the wake of damage sustained during Hurricane Katrina in August 2005. Ironically, the announcement came last month, just two months before the start of the 2007 hurricane season. Mars is the Gulf’s largest producing platform, about 130 mi southeast of New Orleans. The final major repair was the placement of a new 250-ft derrick on top of the 1,000-t drilling substructure. According to a Shell technology spokesman, the new substructure will be far more resilient to hurricane damage. That’s because re-engineered clamps give the substructure a much stronger grip on the platform. The new clamps are designed to prevent vertical toppling and side-to-side sliding. Katrina’s winds sheared through the original 3-in. steel clamp, causing the rig to lift and then slam back onto the platform. The derrick was blown into the Gulf’s waters.
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Election, blocks cloud Nigerian picture
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As this issue went to press, Nigeria was on the verge of holding an election for a new national government. Assuming that the election went smoothly, and the transition is not interrupted by violence or a coup, this will be the first time in Nigeria’s history that power passes peacefully from one civilian government to another. However, the question of how a new regime will handle oil and gas matters remains a cloud over the local upstream industry. Furthermore, a late offer of 45 blocks for bidding by the Department of Petroleum Resources, right before the election, was widely criticized. Firms must submit bids by May 1 for the round, which includes 10 deep offshore blocks, 11 inland basin blocks and 24 blocks from established onshore and continental shelf areas.
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CNOOC head mum on disputed field
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The chairman and CEO of China National Offshore Oil Corp. (CNOOC), refused to confirm rumors that his firm has begun output from a gas field that is in dispute with Japan. While announcing CNOOC’s 2006 results, Fu Chengyu said that he would not comment on whether Chunxiao gas field is producing. “The issue is too sensitive for me to say,” said Fu. However, he also said that “while the dispute should be dealt with between the Chinese and Japanese governments, CNOOC looks forward to co-development of Chunxiao gas field by companies in the two states.”
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Even the liberal NY Times questions Chavez
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The situation must really be shaky for The New York Times to question the actions of Venezuelan President Hugo Chavez, but that is what occurred last month. In a front-page article, the paper warned of the potential weakening of Venezuela’s petroleum industry after Chavez’s socialist regime asserted control over joint projects with multinational operators. The paper said that both the oil companies and the Venezuelan government could come out losers by “undermining the engine (oil) behind Mr. Chavez’s socialist-inspired revolution.” The article further expressed a fear that state firm PDVSA is already showing “signs of stress,” which were attributed to a growing “polarization” of management, and the diversion of money for maintenance and development to other areas of public spending.
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Opinion
Most “mainstream” media do a poor job of properly covering the upstream oil and gas industry. Half of the problem is that these media people don’t even understand the basics�how many times have television anchors referred to pumpjacks, wellheads, platforms, etc., as “rigs”?
Yet, every so often, a mainstream correspondent authors a thoughtful piece, such as a Dow Jones Newswires story on problems at Mexico’s giant offshore oil field, Cantarell, and the implications for the future. In researching Cantarell’s accelerating decline, the author dredged up some interesting trivia. Yes, we know that production has dropped 20%, from 2.0 million bopd to 1.6 millon bopd, since Jan. 1, 2006. But how many of you knew that the field traces its name to a fisherman named Rudesindo Cantarell? It was Mr. Cantarell, who, in March 1971, took a few geologists from state firm Pemex to the spot that is now this giant field. It seems that his nets kept getting smeared with oil as he trawled for shrimp in the late 1960s, and he assumed that the oil came from Pemex operations. He would regularly transport his nets many miles to the nearest Pemex office in neighboring Veracruz state to ask for compensation. Finally, exasperated officials sent the geologists with him to check out his story and stumbled upon the giant field.
Here is more trivia�Cantarell produces one of every 50 bbl of oil on the world market. Globally, only four fields produce 1 million bopd or more, one of which is Cantarell. Unlike most giant fields that produce from thin intervals that stretch over many miles, Cantarell has huge volumes of oil piled up in a small area. Saudi Arabia’s Ghawar field covers 2,700 sq mi, but Cantarell is just 70 sq mi. From one platform, you can eyeball the entire field. Thanks to abundant pressure, Pemex’s discovery well at the field produced 36,000 bopd. Easily developed in waters only 165 ft deep, Cantarell needs just 208 wells to produce the equivalent of 25% of all US crude output, yet the US needs thousands more wells to produce the same volume. When Cantarell began to lose pressure in 1998, Pemex injected nitrogen, allowing output to more than double, to a peak of 2.3 million bopd in 2004. In retrospect, that temporary fix drained the field even faster and set up a steeper decline. Engineers are coping with Cantarell’s decline by installing water separation equipment and drilling horizontal wells. Yet, the field is a metaphor for bigger problems in Pemex and Mexico. Many fields are in decline, hurt by inconsistent investment, inadequate application of new technology and the constitutional ban on foreign firms serving as operators. New Mexican President Felipe Calderon would like to end the ban, but his chances for success are not good. Mexico faces many choices about its upstream future. Let’s hope, for their sake, that officials begin to make the right decisions to safeguard output.
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