Looking ahead

U.S. Senator pushes for drilling in ANWR. The attacks in New York and Washington have created new support within the debate about opening the Alaskan refuge for drilling. Senator Larry Craig (Republican-Idaho) is leading the revived discussion, claiming that the U.S. should open the refuge to ensure adequate oil supplies and encourage economic growth. "The reality is we can drill in ANWR, and we can do it safely," said Craig. Supporters of drilling in the area said the barred region contains enough crude to equal U.S. imports from Iraq for 70 years.

EIA predicts drop in world, U.S. oil demand. To account for possible negative effects on the petroleum industry since the terrorist attack on the U.S., the Energy Information Administration slashed its forecast for global oil demand for fourth-quarter 2001 by 700,000 bpd, to 76.6 million bpd. The agency also reported in its monthly short-term outlook that it has cut its demand estimate for first-quarter 2002 by 900,000 bpd, to 77.7 million bpd. Fourth-quarter oil demand in the U.S. is expected to be 280,000 bpd less than previously forecast, averaging 19.7 million bpd, and 270,000 bpd lower in first-quarter 2002 at 19.9 million bpd. EIA revised its estimates for U.S. inventories at the end of the current quarter upward by 3 million bbl, to 292 million bbl. It also raised its forecast for the close of the first quarter by 4 million bbl to 310 million bbl. OPEC is expected to exceed its official September output quota by 1.3 million bpd, to ensure world oil supplies are adequate during the crisis and the probable delay in world economic recovery.

Caspian investments expected to remain heavy amidst crisis. Oil majors continue to pour investments into the oil-rich Caspian region, despite declining prices and economic slowdown. Officials believe that area projects could weather even a sharp drop in oil prices (a scenario that is probable, due to a trend toward global recession). Chevron Eurasia President Guy Hollingsworth, speaking at a conference in Kazakhstan, said, "We have contingency plans; we look at scenarios for all different oil prices." Chevron said that in spite of terror attacks on the U.S., "(it doesn’t) see prices going low enough to stymie development in Kazakhstan." Hollingsworth added that Chevron plans to proceed with its investments in Tengizchevriol even if prices fall further. Albert Isangunov, president of the Kazakh arm of LUKOIL, said, "there is nothing for existing or potential investors in the Caspian region to be concerned about. Security in the Republic of Kazakhstan is normal, and oil prices are always cyclical anyway."

Alaskan pipeline may not be economically viable. Major producers said that the $17-billion pipeline project to route gas from Alaska to the U.S. is not a sensible plan, given highly volatile, currently low gas prices. However, the Bush administration and some lawmakers claim that the pipeline is essential to the country’s energy security. Nonetheless, there is still wide disagreement over what route such a pipeline should take. Joseph Marushack, a Phillips Petroleum vice president, said the project "is not economic regardless of the route selected." Moreover, a recent report from Phillips, ExxonMobil and BP concluded that a gas pipeline would produce only about 10% to 11% return on equity. This finding is lower than the assumed economic margin. The producers said that they will continue to examine the possibility of a pipeline but have no immediate plans to apply for federal permission to build one. Still, they are urging Congress to ease the regulatory process for a pipeline’s approval, saying that this might "improve the prospects of an economically viable" project.

Petrobrás will use eight-year issue to fund expansion. Brazil’s state firm is raising up to $1.7 billion in non-convertible debentures to finance a production increase at one of its main fields. However, the announcement coincides with an admission by Petrobrás President Henri Phillippe Reichstul that oil production will increase only 7% this year, to about 1.4 million bpd, instead of the 11% originally projected. The new funds will be used to increase output at Marlim field – part of Campos basin, offshore Rio de Janeiro – by 13%, to 584,000 bpd from 515,000 bpd. The increase will contribute to Brazil’s strategy of becoming self-sufficient by 2005.

Iran to offer development licenses. New gas development projects may be tendered offshore at Parsian, Bid-boland and South Pars fields, said Iranian oil minister Bijan Namdar Zangeneh. The Tehran Times reports that some of the projects, including Phase 9 and 11 of South Pars field have already been offered for tender, and proposals have been received by some bidders. However, finalization of some projects, originally expected in August, will not occur until new documents from bidders are examined. Although several bids for Phase 11 and 12 have been received, Eni and TotalFinaElf appear to be the strong candidates. Each of Phases 9 through12 requires an estimated $1-billion investment. The fields are expected to hold about 310 Tcfg.

CPC denies deal planned with CNOOC. Taiwan’s national oil firm, Chinese Petroleum Corp., denied reports that it is close to a deal with China National Offshore Oil Corp. on joint exploration projects in the Taiwan Straits. Industrial relations deputy director Chen Lie-way said the firm’s president, Wenent P. Pan, plans to visit China, but the reason is to sell oil products to Chinese firms, not sign a deal. However, a CPC official reportedly had claimed recently that CPC may discuss with CNOOC a possible joint venture to manage E&P activity in the Taiwan Straits.