First oil

We’re in the early stages of yet another year in the worldwide E&P industry, which means that it must be forecast time. From the looks of results assembled, this particular forecast has a split personality—not so good in the U.S. and Canada, and noticeably better outside North America.

In the U.S., it boils down to shale having its problems, while conventional oil and offshore activity will do better. In Canada, the industry will suffer another drilling decline, but it won’t be nearly as sharp as in 2019. But the country is still begging for new pipelines. Mexico continues to have issues, and you can see a larger discussion of this, farther down on this page.

The Middle East remains the world’s best-performing region, thanks to NOC agendas. And Australia, while carrying the South Pacific on its back, may pass up Qatar in 2020 as the world’s largest LNG exporter.

Massive UAE gas find struck. Abu Dhabi and Dubai have made what could be the largest natural gas discovery since 2005. If so, it will help the two biggest emirates in the UAE push the area to energy self-sufficiency and break a reliance on imports from Qatar, with which they are in a 21/2-year diplomatic feud.

Abu Dhabi state firm ADNOC struck 80 Tcf of gas resources in the Jebel Ali reservoir situated between the two emirates. As reported by Bloomberg, this was confirmed by tweets from Sheikh Mohammed bin Zayed Al Nahyan, Abu Dhabi’s crown prince, and Sheikh Mohammed bin Rashid Al Maktoum, the UAE’s prime minister and Dubai’s ruler. ADNOC will jointly develop the reservoir with local gas distributor, Dubai Supply Authority. The Jebel Ali project marks the first time that ADNOC has explored for gas offshore Dubai. The company reportedly drilled more than 10 wells to firm up its discovery and will use both standard and unconventional drilling techniques to develop the find.

“This is an enormous discovery for the UAE,” said Liam Yates, an analyst at Wood Mackenzie Ltd. The deposit, he said, could meet the country’s entire gas demand for nearly three decades, depending on the amount of gas that can be recovered.

Mexico could kill the golden goose. One has to wonder what officials running Mexico’s E&P sector are thinking lately, as it’s definitely lacking in common sense. Compared to the previous several years, Mexico in 2019 took a number of steps backwards under President Andres Manuel Lopez Obrador—better known as “AMLO.” Since taking office, AMLO has suspended licensing rounds but left existing agreements with private operators in effect. Also, an effort by state firm Pemex to drill new wells at 20 “priority” fields by using smaller, local service contractors has faltered, and the company expects to re-bid some of the work later this year. Meanwhile, AMLO appears bent on restoring Pemex to its pre-reform status and perhaps wiping out all the “reforms” instituted previously.

Relating to the latter point, Pemex CEO Octavio Romero told a news conference on Jan. 29 that his firm wants operational control over the Zama major offshore oil area discovered by the Talos Energy-led consortium of private companies before development gets underway. Romero said that Pemex believes most of the crude found in Zama lies in an adjacent block, where it holds development rights. Talos CEO Tim Duncan reacted swiftly, citing a technical analysis that showed Talos had a large majority of Zama.

Earlier in January, Talos said a third-party study by Netherland, Sewell & Associates—a reserves consulting firm that Pemex also has used—estimated that 60% of the 700-MMbbl find lies in the Talos Block that the company operates, while Pemex holds 40%. As this issue went to the printer, there was no definitive resolution. One thing is for sure: If Pemex manages to wrest control of developing this find, then all the private and foreign operators can kiss the previous oil reforms goodbye, because Pemex will find a way to control everything, but it will hurt the rebuilding of oil production.

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com