Oil country hot line
Nov. 2001 Vol. 222 No. 11 Hot Line Oil price volatile due to OPEC’s ambiguity The market was in disarray earlier last month following a
Oil price volatile due to OPEC’s ambiguity
The market was in disarray earlier last month following a rumor that OPEC supposedly was to hold an urgent meeting before its extraordinary November 14 date. However, trading stabilized after OPEC’s Secretary General Ali Rodriguez dismissed reports that the group planned to hold an emergency meeting to discuss slumping crude prices. Analysts claim that oil prices have slumped by about 20% since the September 11 attacks on the U.S. OPEC’s President, Algerian oil minister Chakib Khelil said, despite falling prices, the oil cartel is reluctant to cut output before any U.S. military action which could have a major impact on prices. Under a price-stability mechanism, the cartel can instigate a 500,000-bpd supply cut if oil prices remain below the $22 – 28 target range. Output cuts to date total 3.5 million bopd.
U.S. House approves oil reserve resolution
U.S. military retaliation against Afghanistan has created new concerns about energy security, thus initiating talks for the government to approve a resolution formally urging that more oil be pumped into the Strategic Petroleum Reserve (SPR), expanding it to its full capacity. Supporters of the resolution said this is an ideal time to buy oil for the reserve because of declining prices. Although there are no committed funds for additional crude purchases, bringing the SPR (which is to be used in case of an interruption of oil supplies) to its full capacity would cost about $6 billion over several years. Meanwhile, a House panel gave an initial approval for extending liability relief to the nuclear industry. The liability relief supporters say the measure is essential for the future of the nuclear industry, which provides 20% of the nation’s electricity. Under the law, the industry is liable up to $9.5 billion for damages from a nuclear accident. Critics say the amount allotted is insufficient, and taxpayers would have to foot too much of the remainder of the bill.
Act of terror sparks added security on rigs
In the wake of U.S. terror attacks, Norway has placed fighter jets at strategic bases to act as a potential defense for North Sea installations. The Aftenposten reports that jets have been sent to Sola air base outside Stavanger and at Rygge south of Oslo. The jets are on stand-by to react to any possible terrorist attacks and defend rigs, along with other potential targets in the cities. Also, Mexico has increased security at drilling platforms. The navy and defense departments said airplanes, helicopters and boats, as well as land patrols, were engaged in around-the-clock increased security at petroleum sites. The Attorney General’s Office announced new offices have been created that will focus on arms trafficking, terrorism and people smugglers. In fact, increased arrests have been made of illegal immigrants from the Middle East crossing into Mexico from Central America, presumably on their way to the U.S.
African expulsion and licensing activity
The Akwa Ibom state assembly threatens to expel ExxonMobil if the firm refuses to relocate its Nigerian headquarters to the southeastern state and contribute more to local communities. These demands are contained in a resolution adopted by the state. Nevertheless, ExxonMobil said it has no intention of moving from the commercial capital, Lagos, where it has been based for 32 years. If the state tried to sanction the company, ExxonMobil would have the federal government’s support.
Meanwhile, to increase investments, Algeria awarded five exploration licenses in its second-ever bidding round. The process has dramatically improved, shortening the two- to three-year period it took to sign a contract. The country is planning its third round within six months. Also, Burlington Resources intends to expand further in North Africa, thus acquiring additional Algerian acreage to secure its position as the second largest U.S. oil firm in Algeria.
Libya, U.S. firms discuss frozen licenses
National Oil Corp. and U.S. firms will hold talks concerning licenses abandoned since 1986. Conoco, Marathon, Amerada Hess and Occidental were forced to leave the Oasis properties due to U.S. sanctions imposed on the north African country. Head of NOC Ahmed Abdulkarim said that they are studying their commitments together and communicating on a very clear understanding basis. In September, Tripoli gave the firms one year to return to Libya or risk having their operating licenses revoked.
Foreign, U.S. rig counts vary: SCORE down
Baker Hughes reported that, in September, the international rig count was 766, up 10 from August totals, and up 52 from a year ago. International offshore rig count was 226, up 7 from August, and up 13 from the same period last year. The U.S. rig count, on the other hand, was 1,193, down 59 from totals in August, yet the count was higher by 182 than the previous year’s count for the same period. Canadian rig count was 317, down by 8 from August tallies. Rig counts worldwide totaled 2,276, down 57 from August counts.
Meanwhile, Global Marine reports that its worldwide SCORE (Summary of Current Offshore Rig Economics) for September 2001 decreased by 4.3% from the previous month’s SCORE. Chairman, President and CEO Bob Rose said that the decline "clearly reflects deteriorating dayrates and utilization in the Gulf of Mexico, where weakening natural gas prices and front-loaded drilling budgets have depressed recent activity; however, international markets remain rock solid, sustaining significant gains made over the past year."
BG buys Enron’s $388-million Indian assets
BG has made a major step toward becoming a leading integrated gas firm in India with its purchase of Enron’s Indian assets. Analysts say the deal is a good value compared to market expectations of $600 million. This is a further sign of Enron’s retreat from the region. BG has been in India for 10 years, but in the gas distribution business. The acquisition will allow it to place emphasis in developing markets. Executive vice president David McManus said, "the transaction would give (the firm) the opportunity to further develop the Indian gas market with a view to creating demand for imported liquefied gas." The agreement is yet to be approved by field partners and the government.