July 2007
News & Resources

World of Oil


Chile launches tender

World of Oil 
Vol. 228 No. 7

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Chile launches tender

Chilean government officials launched an international tender for exploration and exploitation in the Magallanes region, at the southern tip of South America. The tender is for 10 on- and offshore blocks that cover 32,356 sq km. Mining Minister Karen Poniachik estimated that at least $200 million would be invested for exploration of these blocks. Chile is forced to import 98% of the oil and 75% of the gas that it consumes, due to low domestic output.

Cambodian outlook vague

Prime Minister Hun Sen said that Cambodia’s petroleum prospects are uncertain, reversing his earlier comments that the country could begin tapping oil reserves by 2010. “Oil under the sea is still a dream. It is better to think of how to keep the current economy growing,” said Sen, in a broadcast speech. Chevron had said two years ago that it struck oil in four of five test wells drilled off Cambodia’s southern coast. The firm is drilling five more test wells in offshore Block A.

Murphy to explore offshore Suriname

Murphy Oil has signed a PSC for Block 37 offshore Suriname. Block 37 covers about 2.1 million acres and lies in water depths of 160 to 1,000 ft. The PSC is for an initial six-year exploration phase and includes commitments to drill two wells and acquire 3D seismic. “We….look forward to beginning our exploration program in this new area,” said Murphy President and CEO Claiborne P. Deming. “With multiple play types, offshore Suriname has a lot of attraction.”

ONGC approves platform reconstruction 

The board of India’s ONGC has approved the reconstruction of the NQO platform in Mumbai Offshore, a complex that includes the NQO, NQD and NQG platforms. The NQO processing platform is more than 20 years old. The Mumbai High North field should produce oil and gas up to 2030, after implementation of the Mumbai High Redevelopment Project during 2001–2007. The reconstruction is necessary to the life of the existing infrastructure and facilities up to 2030. ONGC said the project is set to complete in 2009.

 OPEC may re-think expansion plans 

OPEC members, who hold 40% of global oil production capacity, may re-think their expansion plans beyond 2012, said OPEC Secretary-General Salem el-Badri. He said that this is a possibility, unless dialogue with consuming nations gives them assurances about future demand. In interviews with reporters, el-Badri said that there was little enthusiasm among OPEC members to spend billions of dollars on idle production capacity. Insisting that OPEC is committed to supplying the world with oil, el-Badri said that members had already designated $130 billion of capacity expansions that would add a net 6.7 million bopd to current production levels by 2012. But an additional 9 million bopd of capacity, slated to be in place by 2020 and costing between $250 billion and $500 billion, could be in doubt. This is because “we don’t see the situation (developing) after 2012,” said el-Badri.

 House panel rejects OCS gas drilling expansion 

The US House Appropriations Committee rejected a proposal that would open up more of the US Outer Continental Shelf (OCS) to natural gas exploration and development. By a 39-25 vote, the committee rejected an amendment by Rep. John Peterson (Rep.-Pennsylvania) to end the moratorium on exploration drilling for gas beyond 25 mi off the US shoreline. Peterson said that his proposal was “about supplying jobs, heating homes and securing our energy future with clean, green natural gas.” Peterson has been one of the leading figures, who have consistently tried to open up more of the OCS to exploration. Late last year, Congress passed a compromise drilling bill that opened up a few areas to exploration, but maintained the federal drilling ban for much of the OCS, out to 50 mi offshore. Despite E&P industry warnings about dwindling domestic gas supplies, rising demand and high prices, the amendment was voted down over environmental and fishing concerns, as well as warnings that naval exercises would be impeded. Separately, that same committee approved an amendment to an Interior Dept. budget bill that would require oil companies to renegotiate 1998-99 lease contracts that don’t satisfy price thresholds, to obtain future exploration leases. The Government Accountability Office contends that about $1 billion in royalties have already been “lost,” as a result of the “omissions,” and the situation could cost an additional $9 billion in future royalties.

 Pemex says it needs $2.0–2.5 billion for exploration annually 

The chief executive of Mexican state firm Pemex said that the company expects to invest between $2 billion and $2.2 billion annually in exploration, in an effort to increase reserves. Speaking at an event in Mexico City, Jesus Reyes Heroles reiterated that Pemex requires annual budgets of $33 billion, of which two-thirds would be for capital expenditures. The goal, he said, is to replace reserves 100% by 2013, up from a 41% rate last year. He also wants to bring the ratio of reserves to production back above 10 years from 9.3 years. As of Jan. 1, 2007, Pemex had proven reserves of 15.5 billion boe, down 5.8% from a year earlier. Of that, about 70% was crude oil. The company produces about 3.2 million bopd, down from 3.33 million bopd in 2006.

 Cuba and Vietnam sign agreement on oil activity

 Contracts for exploration and drilling, both in the Gulf of Mexico and onshore Cuba, were signed by the state oil firms of Vietnam and Cuba. The agreements were signed by Petrovietnam Director-General Tran Ngoc Canh and the director-general of Cuba Petroleo, Fidel Rivero. Observing the signings were Acting Cuban President Raul Castro and the secretary-general of the Vietnamese Communist Party, Nong Duc Manh. Both firms signed two shared-risk contracts for “exploration, perforation and exploitation of oil” in Blocks 31, 32, 42 and 43 of Cuba’s economic exclusion zone, plus Blocks 16, 17 and 18 onshore. The Vietnamese oil company joins Repsol-YPF, which shares six blocks with Norsk Hydro and India’s ONGC. The latter also has contracts for two blocks, as well as deepwater tracts with Sherrit and Petronas.

 Norwegian parliament okays Statoil-Hydro merger 

Last month, Norway’s parliament approved Statoil’s takeover of Hydro’s oil and gas assets. The deal is now set for an Oct. 1, 2007, completion. A parliamentary spokesman said that “the merger was passed by a large majority.” The roughly $30-billion merger was recommended to parliament earlier this year by the government’s Energy and Environment Committee. That panel had examined the potential impact on the domestic industry. The new company will be called StatoilHydro initially and will be the world’s largest offshore producer. The deal has already won approvals from the European Union and the US Securities and Exchange Commission. A 62.5% stake will be retained by the government.

 US BLM approves wells on Colorado’s Roan Plateau 

Federal officials have authorized up to 1,570 new gas wells over the next 20 years on a 3,000-ft plateau that features both reserves and quality wildland. The Bureau of Land Management (BLM) decision covers about 115 sq mi of federal land. Some wells have already been drilled on private land. Drilling on top of the Roan Plateau has been contested, because of significant wildlife and several areas of pristine backcountry. Some Coloradans, including two congressmen, had called for a moratorium on drilling on the plateau. The decision does not include areas considered to have critical environmental concerns, which includes about 30% of the BLM land. BLM officials said that they were delaying a decision on those areas, because they were not fully described.

Newfoundland invests in exploration

In a move to advance onshore exploration on the west coast, the Newfoundland and Labrador provincial government announced a $5-million, two-year exploration enhancement program to assist companies in obtaining geoscientific information in exchange for an equity position in future projects. The Petroleum Exploration Enhancement Program (PEEP) will encourage onshore exploration by providing funding to Newfoundland and Labrador Hydro to invest in geoscientific activity. Hydro will be able to commission seismic work independently and/or partner with private companies. The 2007 budget allocated $2 million toward the program in this fiscal year. This program will be a major boost to the province’s onshore oil and gas sector,” said Minister of Natural Resources Kathy Dunderdale.

Four firms to work on GOM pipeline repairs

Four companies working in the Gulf of Mexico have formed a partnership that will allow them to expedite deepwater pipeline repairs after a hurricane or other emergency. However, the equipment required will not be available for this storm season. The cooperative arrangement involves pipeline operators Enterprise Products Partners LP and Enbridge Inc., and two oil companies, BP and Eni. They agreed to buy $12 million of equipment that will be used to fix damaged pipelines after a storm or accident. Mike Stark, Enterprise’s director of offshore pipelines, said the arrangement allows the co-owners to have repair systems “readily available” for emergencies. Although the concept was created before Hurricanes Katrina and Rita in 2005, it fits well with industry-wide efforts to use lessons learned from the storms.

Colombia releases long-term energy plan

 Colombia’s mining and energy planning unit (UPME) has published a comprehensive, long-term, national energy plan that will be used to develop energy policies. The Contexts and Strategies Plan analyzes Colombia’s energy needs and production possibilities. It also sets various strategies to be implemented by 2025, according to a UPME statement. The document defines five principal objectives, the principal one being to maximize the energy sector’s contribution to the country’s development. Making note of Colombia’s central location in the Americas, UPME hopes to position the country as a major player in the regional energy trade. The report also notes the significant differences in reserves of oil and gas held by the region’s countries.

 Nexen expects Buzzard to peak soon 

Giant Buzzard field in the North Sea, being developed by a consortium led by Nexen and BG Group, is set to achieve peak production this month. Buzzard is the North Sea’s largest discovery in over 10 years. It is designed to produce 200,000 bopd and 60 MMcfgd. It went onstream in January, following a few weeks’ delay, due to bad weather. The seventh well has begun pumping oil, allowing the field to produce up to 180,000 bopd, said Kevin Reinhart, Nexen’s vice president for corporate planning and development. Situated about 100 km northeast of Aberdeen, Scotland, Buzzard has begun testing at 20 MMcfgd and should be ready to produce the target of 60 MMcfgd this month. Buzzard remains well within its original budget of £1.5 billion ($2.97 billion).





This month’s comments come from Calgary, Alberta, where the Canadian industry, despite softening natural gas activity, remains very active and profitable. Buoyed by oil sands development, the industry remains expansive, and optimism abounds. A Calgary Herald headline last month blared, “Oil sands fever draws world to GO-EXPO,” the junior trade show held in the off-years between the Global Petroleum Show. Indeed, pre-registraton was 17,000, up from 10,000 in 2005. If one adds in exhibitors, then attendance was set to exceed 21,000. However, show organizers said a week later that registrations had exceeded even their wildest expectations, hitting at least 25,000, a truly remarkable figure. In addition, an extra exhibition hall at the Stampede Grounds was pressed into service. New features added to the show included professional development courses, an IADD workshop, heavy oil courses and a truck test drive center. Also, Korea, Sweden, the Netherlands, the UK and the US all had pavilions at the show, and Saudi Arabia, Kuwait and China were present, too.

Thus, it is unfortunate that an excellent GO-EXPO was interrupted by two pro-environmental, anti-globalization pranksters pulling off a fraud at the June 14 keynote luncheon. Misrepresenting themselves as being a US National Petroleum Council (NPC) analyst and an ExxonMobil official, they began a speech that soon dove into anti-corporate, anti-oil rhetoric and theatrics. Officials and security personnel quickly ushered the pair off-stage, and apologized to the $50-a-plate crowd for the incident. Despite an offer to refund that money, not a single attendee has asked for his/her money back. Now, before anyone leaps to conclusions, the GO-EXPO organizers, to their credit, did what normally is very good due diligence and could not know that these were well-organized fanatics. The pranksters said they worked for a real, New York booking agency representing NPC. They supplied phone numbers and e-mail addresses that looked very legitimate. They knew that former ExxonMobil Chairman Lee Raymond is a listed member on NPC’s website and offered to have him speak at GO-EXPO. The anarchists could recite everything about his life and career. Yes, they called the show three days ahead of the luncheon to say that Raymond was cancelling, but they said that NPC would find a replacement, and provided details that again seemed quite legitimate. And, when the diabolical pair arrived at the luncheon, they produced business cards that were flawless reproductions of the real NPC and ExxonMobil items. In short, when fanatics want to create mayhem, and have money, time and organization at their disposal, they can be hard to stop. The good news is that many officials from other conventions and exhibitions worldwide have called GO-EXPO organizers for advice on how to avoid a similar incident. The bad news is that Calgary police had to be talked into even charging the pair with trespassing, a $287 fine.


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