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Vol. 228 No. 4 |
| KURT S. ABRAHAM, MANAGING/INTERNATIONAL EDITOR |
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Pemex sets monthly gas production record
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Mexico’s Pemex said that it set a monthly gas output record in February, averaging 5.81 Bcfd. Average gas output during January-February increased to 5.77 Bcfd, up 14% from the same period in 2006. The gain was attributed to higher output for both associated and non-associated gas. For all of 2006, Pemex’s gas output averaged 5.36 Bcfd, up 11% from 2005. The three producing areas included the northern region (2.23 Bcfgd), the marine region, Sonda de Campeche (1.78 Bcfgd) and the southern region (1.35 Bcfgd).
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Japanese firms to spend on Indonesian field
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Japan Petroleum Exploration Co. (Japex) and Mitsubishi Corp. said they will spend $400 million to increase output from Indonesia's Kangean oil and gas field in East Java. The firms announced the figure after buying 50% of the block for $360 million from PT Energi Mega Persada (EMP). The 50% stake is split evenly between the two companies, with the remaining 50% retained by EMP. Over three years, the investment should boost Kangean output to 60,000 boed from 10,000 boed.
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Pohokura field online
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Shell said that its Pohokura field offshore New Zealand has begun producing gas and condensate from its first well. The well is about 8 km (5 mi) off the Taranaki coast of the North Island. Output is flowing through a subsea pipeline to the Pohokura processing and production station at Motunui, near New Plymouth. Shell said this production from an offshore well follows the startup late last September of three onshore wells in the southern part of the structure. Five additional offshore wells are expected to be drilled.
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Abu Dhabi plans CO2 storage, capture project
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State-owned Abu Dhabi Future Energy Co, (ADFEC) will develop a national carbon capture and storage (CCS) network under the Masdar Initiative. The plan will potentially cut the UAE's CO2 emissions by almost 40% and boost oil output by up to 10%, said ADFEC. CCS is the most promising technology for the reduction of energy-based CO2 emissions, said ADFEC CEO Sultan Ahmed Al Jaber.
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Canada to drop tax breaks for new oil sands projects
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The profit margin for Alberta's oil sands projects will be squeezed further, now that the Canadian government has decided to phase out tax incentives that were used earlier to attract investment to those operations. As part of the 2007-2008 federal budget announcement on March 19, Finance Minister Jim Flaherty announced that the Accelerated Capital Cost Allowance (ACCA) would be eliminated, beginning in 2010 and reduced consistently during 2011-2015. ACCA has been applied to general oil sands spending and is worth about C$300 million (US$255 million) to the projects, collectively. The budget document stated, �With Canada's oil sands sector now healthy and vibrant, ACCA is no longer required.� However, the standard 25% capital cost allowance for these assets will remain in effect. The ACCA provision will be available for oil sands projects that began before March 19, 2007. Some analysts estimate that the loss of ACCA could add C$1/bbl to production costs for the leading projects. This move occurred almost simultaneously with introduction of new legislation by the Alberta provincial government that will take effect on July 1. This legislation will order a 12% reduction in the intensity of greenhouse gas emissions by the province's 100 largest industrial facilities. This could add another C$0.18/bbl to costs.
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Halliburton's move to Dubai leaves questions
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Halliburton's plan to move its corporate headquarters and CEO from Houston to Dubai brought congressional calls for an investigation, but investors and industry executives seemed less fazed. Per the plan, Halliburton Chairman and CEO Dave Lesar, as well as some of his top staff, will move to Dubai and open what Lesar called a new corporate headquarters office in the United Arab Emirates. The Houston office will remain open with key administrative staff and some high-level executives staying, including the COO and the CFO. In a statement, Lesar said the opening of a headquarters in Dubai is the next step in a strategic plan announced in 2006 to focus on expanding customer relations with national oil companies while concentrating more of the company's investments and resources in growing its business in the Eastern Hemisphere. �This is a surprising development,� said US Rep. Henry Waxman (Dem.�Calif.), a critic of Halliburton and President George W. Bush. �I want to understand the ramifications for the US taxpayer and national security.� Added Sen. Patrick Leahy (Dem.�Vt.), �It's an example of corporate greed at its worst. This is an insult to the US soldiers and taxpayers who paid the tab for [Halliburton's] no-bid contracts and endured their overcharges for all these years. At the same time, they'll be avoiding US taxes. I'm sure they won't stop insisting on taking their profits in cold hard US cash.�
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King Abdullah re-appoints cabinet, including Naimi
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Saudi Arabian King Abdullah issued a royal order, reappointing his entire cabinet, including Minister of Petroleum and Mineral Resources Ali Naimi, reported the official news agency, SPA. The 71-year-old Naimi was first appointed in 1995 and will now begin his fourth term as oil minister. The move hardly came as a surprise to most observers, or even to Naimi, himself. In a February interview in The Wall Street Journal, Naimi said, �Ministers normally do not retire. �Ministers are appointed by the king and relieved by the king, unless there is a serious medical reason, and as you can see, I am fairly fit and in good shape. There are still many challenges ahead of us.� Naimi's re-appointment is also seen as a move to keep oil markets stable.
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OPEC retains oil production quotas
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OPEC ministers agree last month to keep their production cut of 1.7 million bpd in force for the next six months, as they expect supply and demand to remain in balance for the rest of the year. But the group added that a primary concern about oil market stability is volatility in financial markets, which could cause lower economic growth. �An economic downturn is of concern to us,� said OPEC President and United Arab Emirates Oil Minister Mohammed al-Hamli after the meeting in Vienna.
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Iraq begins to boost Majnoon productive capacity
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Iraq's Southern Oil Company has begun constructing new production facilities with a 100,000-bopd capacity at Majnoon oil field in the Al-Nashwa region near the Iranian border. In the local New Sabah newspaper, project director Mahmoud Abbas was quoted as saying that he did not know when the facilities will be completed. Majnoon field is estimated to have reserves between 10 billion and 30 billion bbl of oil, with a potential peak production of 600,000 bpd. Iraq is currently producing around 50,000 bopd at Majnoon.
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Australian output shut-in by two cyclones
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The Gulf of Mexico is not the only place for devastating tropical weather. As of March 15, most of Australia's offshore oil production on the North West Shelf was restarted after a week-long disruption from two cyclones, with BHP Billiton's Griffin field being the only exception. On March 8, about 45% of Australia's crude production was shut-in, as a result of Cyclone George, which ravaged the Western Australian town of Port Hedland, killing two people and injuring 20. Production was suspended at five separate crude facilities with total output of around 170,000 bpd. Then, on March 12, Cyclone Jacob roared through the same area. Offshore fields shut in by Jacob included Woodside's Cossack, Pioneer and Legendre facilities, Santos' Mutineer-Exeter fields and BHP Billiton's Griffin field, which together produce 160,000 bopd. However, Chevron's 6,500-bpd Barrow Island and 3,000-bpd Thevenard Island operations were brought back onstream on March 12.
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UK cuts taxes for all, except oil industry
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UK officials on March 21 extended tax breaks in the annual budget, but snubbed the oil and gas industry by cutting standard corporation tax for all other industries. Chancellor of the Exchequer Gordon Brown did hint that there might be further discussions about the future North Sea fiscal regime after admitting that tax receipts from production last year were billions of dollars below target. British producers are still irritated about a surprise 10% rise in taxes levied by Brown in 2005. That tax hike left producers paying a 50% corporate rate or more on some older fields, compared with a standard tax rate on company profits of 30% for other industries. That standard rate has now been cut to 28%, but not for producers, prompting complaints from the UK Offshore Operators Association. �The Treasury clearly recognizes that lower taxes are good for business, but unfortunately fails to apply that principle to our industry,� said UKOOA chief executive Malcolm Webb.
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Indonesia signs projects for over $6 billion
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Indonesia has signed agreements for a number of energy projects worth about $6.2 billion, Energy and Mines Minister Purnomo Yusgiantoro said March 21. The projects include seven oil and gas operations, worth a combined $1.36 billion, and nine oil and gas PSCs, totaling $411 million. Among the projects were Pertamina's Subang and Pondok Tengah fields in West Java and Bekasi, respectively ($343 million); ConocoPhillips' Suban II block development in South Sumatra, representing $220 million; and Total's Tunu field phase X and Tambora field phase II developments in East Kalimantan, worth $326 million and $404 million, respectively.
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Pemex lowers reserves figures
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Mexico's proved oil and gas reserves dipped to 15.5 billion boe at the end of 2006, down 5.8% from a year earlier, said Jesus Reyes Heroles, head of state oil company Pemex. Mexico's possible, probable and proved oil and gas reserves, known as 3P, fell to 45.376 billion bbls in 2006 from 46.418 billion bbl the year before, said Pemex. Probable reserves were 15.257 billion bbl at the end of last year, and possible reserves stood at 14.605 billion bbl.
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PDVSA keeps on borrowing money
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Venezuelan state oil company Petroleos de Venezuela S.A. (PDVSA) expects to issue $4 billion in domestic bonds soon, as part of the firm's effort to raise cash to finance an ambitious investment program through 2012, according to Venezuelan Finance Minister Rodrigo Cabezas. PDVSA officials had earlier said the bond sale would total $3.5 billion. The bond sale follows two other debt offerings over the past four months by PDVSA, together with the Argentine government, which raised a total of $2.5 billion. These two earlier financial instruments were denominated Bond of the South I and II, and were made up of bonds issued by both countries. Also last month, PDVSA obtained a $1 billion credit facility from a private French bank. That came on top of a $3.5 billion loan from Japanese lenders, in exchange for oil and products, in late February. The government said earlier it plans to use the bonds for financing PDVSA's very involved business plan, which calls for $70 billion in spending by 2012, with the hope of boosting oil output to 5.8 million bpd.
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Bolivia puts brakes on reserve bookings
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According to local newspaper El Diario, Bolivian Hydrocarbons Minister Carlos Villegas has told foreign oil companies that they cannot book Bolivian oil and gas reserves as their own. �I clearly tell them no, because the owner is the Bolivian state,� Villegas is quoted as telling a Bolivian senate commission. Although most operators active in Bolivia have kept quiet on the matter, they reportedly continue to register Bolivan reserves on the US Securities and Exchange Commission. Villegas threatens to expel these companies, if they continue to engage in such reserve booking activities.
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Talisman hits oil offshore Vietnam
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Canadian independent Talisman Energy has made an oil discovery in the Cuu Long Basin, offshore Vietnam, as reported by state media. Testing of the TGT-15-2/01 wildcat on Block 15-2/01 produced about 5,000 bopd, Vietnamese reports indicated. The find is likely to be a continuation of the Te Giac Trang (TGT) field in adjacent Block 16-1, discovered by UK independent Soco International. Soco is trying to achieve a declaration of commerciality for TGT, which it thinks holds 500 million bbl of recoverable reserves. Four out of five discovery wells drilled by Soco on the field tested at more than 9,000 boed, including one that tested at 17,500 boed. The two companies may now have to negotiate possible unitization or joint development of the field. Talisman made the promising Hai Su Trang discovery on Block 15-2/01 this year, which flowed at a combined rate of 14,863 bopd.
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Drilling to resume at key Newfoundland well
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The Eirik Raude semisubmersible began drilling again in late March after some operational snafus took it out of service in late February at an ambitious wildcat offshore Newfoundland. As this issue went to press, the rig had returned to the Great Barasway F-66 site in the Orphan basin to resume work on the Chevron-operated well. Projected to cost C$140 million ($119 million) and originally targeted for completion about mid-February, the well is the first in the deepwater basin by three partners. Chevron Canada has said that no details can be released on drilling progress because of Great Barasway's tight-hole status. The well is being drilled in 7,900 ft of water and is targeting a subsea depth of 24,300 ft. The wildcat is seen as the most important test yet of a basin that some analysts believe could yield greater resources than Newfoundland's Jeanne d'Arc basin, home to three producing fields.
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Petroecuador increases Capex
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Ecuadorean state oil company Petroecuador set its 2007 budget at $4.84 billion, up 27% from $3.80 billion in 2006. In an official statement, Petroecuador also said that around $2.19 billion will be used for financing fuel imports. Of the total, the operating budget will be $1.74 billion, and $912 million will go to investment. Petroecuador hopes to increase oil production by about 9%, to 185,000 bpd by the end of the year from 170,000 bpd, according to its budget. Additionally, Petroecuador wants to raise output at the fields it took from Occidental Petroleum by 1,000 bpd and sustain it at 85,000 bpd.
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Opinion
Readers will notice this month that World Oil has devoted considerable space to a special section on Industry Recruitment and Retention. While talking to executives and experts for this section, one issue that came up repeatedly, is whether high starting salaries, signing bonuses and lucrative advancement programs at oil companies are creating attitude problems among younger professionals, particularly those who are entry-level. In other words, are we creating spoiled brats? As one executive complained, “The shortage of workers has forced us to pay more than we might otherwise expect. But with that higher pay (greater than $70,000 for entry-level engineers), has come a price. Young workers seem to feel, falsely in my opinion, that they are more important and skilled than their meager experience would dictate.”
Or consider the dilemma of a 20-plus-year middle manager at a major oil company. As he told me, “I was put in charge of a brand-new petroleum engineering graduate from a Texas university, who I will just call ‘Bob.’ I was told to start Bob out by familiarizing him with the operations and problems of mature oil fields in South Texas.” So, my middle manager friend sends Bob on a trip out of Houston to a field area, where he was supposed to spend several weeks traveling around with roustabouts and pumpers on their daily duties. However, the plan quickly unravels. Bob is supposed to leave on a Sunday but feels that the oil company is unfairly infringing on his weekend. So, he unilaterally decides to leave on Monday, thereby losing a day in the field. Once he finally arrives, Bob, on Tuesday, rides with pumper No. 1. At the end of that day, he feels that this pumper is hopelessly boring, so he jumps over to pumper No. 2 and rides with him on Wednesday. By the end of that day, Bob is just as bored, because “nothing is happening.” So, on Thursday, he rides with pumper No. 3, hoping that the third time is the charm. However, he finds the experience equally “unenlightening.” Thus, on Friday morning, Bob decides, on his own, to scrap the trip, and he drives back to Houston. By Friday afternoon, he is back in the office, prompting my manager friend to exclaim, “What are you doing here, you’re supposed to be in South Texas.” Bob replies, “I’ve seen all that I need to see. There’s nothing going on except opening and closing gates. I need something more interesting.” My friend complains to his vice president, who says, “You’re going to have to back off. You have to realize the guidelines under which Bob was hired, and we’re going to have to recalibrate his program to meet his special needs. We can’t afford to lose any young people.” Thus, bad behavior is rewarded. Fortunately, Bob was soon re-assigned to someone else, and now my friend has a new graduate to shepherd. But this latest youngster has already written on his career outline that his initial goal is to become president of the company. My friend is rolling his eyes. So much for a little humility.
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