Looking ahead

Bayu-Undan gas development decision expected by end of this month. Woodside Petroleum will evaluate rival proposals from Royal / Dutch Shell and Phillips Petroleum, concerning the development of deepwater gas fields lying between Australia and East Timor. Phillips, operator of Bayu-Undan field, failed to reach an agreement on fiscal arrangements with the East Timorese government. Phillips and Woodside had been in negotiations with El Paso over a long-term, $3.7-billion supply contract to bring gas from Bayu-Undan via a pipeline, which was to be shared with Greater Sunrise. The chance of sharing the pipeline is now uncertain, due to Shell’s proposal for the world’s first floating LNG plant to be used at Sunrise – the second, much larger field in the area. This move would reduce costs, said Shell. Nevertheless, Phillips still expects to reach an agreement with East Timor despite negotiations going awry in August. East Timor will benefit greatly from royalties from these fields in the Joint Petroleum Development Area. Woodside expects to complete evaluation of the proposals by the end of October.

China and Taiwan plan joint drilling venture. Two state firms – Taiwan’s Chinese Petroleum (CPC) and China National Offshore Oil Corp. (CNOOC) – have created a test drilling joint venture, and are expected to resume cooperative exploration of the Taiwan Strait. This project represents a growing trust, even in commercial business, between the countries. Both CPC and CNOOC are required to get governmental approval before proceeding with this endeavor. CPC officials said, "The government’s attitude is basically supportive"; thus, the approval process is not expected to be difficult for the Taiwanese firm. Also, CPC says it is willing to give CNOOC technical help to run an LNG terminal in Guangdong. Moreover, Taiwanese President Chen Shui-bian recently adopted an "Active Opening, Effective Management" approach, which is intended to be more flexible than the former policy, and thus, more appealing.

Norway seeks bids for exploration blocks. The Norwegian Ministry of Petroleum and Energy asked companies to propose bids, by September 28, on any Norwegian Sea blocks that they wanted to see included in the upcoming 17th offshore licensing round. The ministry said winning bids would be awarded in the fourth quarter of this year, and production licenses in the second quarter of 2002. Statoil’s project manager for the 17th round said, "We are optimistic that there are sizeable gas reserves, particularly in the deepwater areas."

Cairn seeks partner for Indian offshore project. Cairn Energy is in search for a partner to help develop its deepwater reserves off India’s coast. CEO Bill Gammel boasted that his firm achieved "drill bit success" this year, in six of eight wells in the area. He also said major growth is expected, due to the recent Annapurna gas discovery and other nearby deposits that prove their growth potential in the region. For any gas found beyond the Annapurna field, Cairn would need help with the development and marketing challenges, said Gammel. Meanwhile, Cairn has signed two new contracts for gas sales from Lakshmi field, offshore western India. Minimum price for Cairn’s gas will be $3.30/Mcf.

Budget deficit creates problem for Bush’s energy plans. The Congressional Budget Office has released new estimates that may create obstacles to President George Bush’s energy legislation. Financial Times reported that an advance copy of the estimates reveals that the vaunted budget surplus now shows a $9-billion deficit in 2001. It further shows that the deficit will climb to $18 billion by 2003, although a small $2-billion surplus will be achieved next year. The administration’s response to the disappearing surplus has been to blame Congress. The CBO figures also reveal that funds collected for Social Security taxes will have to be used for general budget expenses this year. The extra funds allocated for energy are expected to use up the $2-billion surplus projected for 2002.

U.S. Senate begins long energy struggle. U.S. Senators geared for a pitched battle over energy legislation passed by the Republican-led House of Representatives in August. A very different program is likely to emerge from the Democratic-controlled Senate. The Senate may pass a bill that contains provisions that are not pleasing to President Bush, or may filibuster and defeat the entire energy plan. The biggest fight will come over drilling in Alaska’s wildlife refuge.

Chevron helps Nigeria to meet 2008 gas flaring deadline. Nigeria National Petroleum Corp. and Chevron have commenced a joint-venture project that will help Nigeria end gas flaring by 2008. This JV allows Chevron’s Escravos projects to proceed with third-stage developments to gather waste gas from the western Niger Delta and utilize for various purposes. The West African country lacks a developed pipeline network and industrial base, and unused gas that is unable to be stored has to be flared. Thus, Nigeria accounts for a quarter of all gas flared in the world, and it has been under pressure to reduce atmospheric pollution. This joint venture gives hope that the country will be able to end gas flaring by the 2008 deadline.