OPEC to make up shortfall from Persian Gulf production shutdowns

Judy Clark
Associate Editor

HOUSTON, Mar. 24 -- Because Iraq has shut down production of more than 2 million b/d of oil, OPEC announced Mar. 20 that it was temporarily suspending members' production quotas to maintain world oil supplies and prices in the wake of shortfalls due to the hostilities in Iraq.

OPEC President and Qatar Energy Minister Abdullah al-Attiyah said OPEC had called on its members "to take full advantage of crude-extracting capacities beyond each nation's established quotas."

Saudi Arabia's Minister of Petroleum and Mineral Resources Ali Al-Naimi said Saudi Arabia is committed to keeping oil prices and the market as stable as possible despite the current disruptions in the area.

"All precautions have been taken to ensure the flow of oil supplies," Al-Naimi emphasized. Saudi Arabia "will continue to implement the resolutions of the 124th conference of the Organization of Petroleum Exporting Countries" that stressed OPEC's readiness to make supplies available "under any circumstances," the ministry said.

Other curtailments
Although a small number of southern Iraqi oil well fires have been confirmed, overall damage to Iraq's southern fields appear to have been minimal, reported the US Department of Energy's Energy Information Administration Monday. The US military stepped up security in the vicinity of Rumaila oil field on Monday after reports of armed Iraqis in the vicinity, but a US military spokesman stressed that "they won't be able to destroy the (Rumaila) wells." Oil operations in Kuwait were normal Monday, and no damage there has been reported, EIA said.

Various companies operating in the Persian Gulf area, however, have shut down active operations and removed personnel from the war theater:

-- Shell Iran Nowrooz-Soroosh Development, a Royal Dutch/Shell Group unit, suspended operations at its 60,000 b/d Soroosh oil field in the northern Persian Gulf 90 km west of Kharg Island, Iran, citing concern for the safety of its employees. Soroosh, which has been in production since December 2001 and was producing about 60,000 b/d, and nearby Nowrooz oil field, which is scheduled to start producing by third quarter of this year, lie close to Iraqi territorial waters.

A Shell spokesman in Tehran said 260 foreign and Iranian staff had been pulled out of the area, but that activities at the offshore fields would resume "as soon as possible." National Iranian Oil Co. will provide security for the sites during the shutdown.

Shell said that when hostilities cease, it would try to compensate for the lost production. Iran's oil ministry earlier this year had said that Soroosh oil production would reach peak capacity of 190,000 b/d by September. A Japanese consortium including Japan National Oil Corp. owns a 20% interest in the Soroosh-Nowrooz venture.

A Shell spokesperson in London said these fields were the only closures Shell plans due to war fears, although some staff members have been evacuated from Syria as well.

-- GlobalSantaFe Corp. reported earlier this month that it would suspend drilling operations at all six of its land rigs drilling in Kuwait by Mar. 17 (OGJ Online, Mar. 14, 2003). The company evacuated 386 nonresident employees.

-- The Kuwait Oil Co.-Saudi-Texaco Co. joint venture shut in a Wafra field well in midmonth, following a blowout at the Kuwait-Saudi Neutral Zone. Emergency crews contained the blowout and have capped the well. The blowout apparently was unrelated to the Iraqi situation.

-- Kuwait Petroleum Co. shut in Al Abdali and Al Ratqa oil fields near the Iraqi border that together produced 35,000 b/d, but said it would make up the production with increased output at Al Ahmadi, Burqan, and Al Muqawa'a fields to compensate for the curtailment.

Meanwhile France's TotalFinaElf SA said it would maintain output at Balal oil field off Iran, which started producing 20,000 b/d of oil in February. The oil is exported from National Iranian Oil Co.'s processing facilities on Lavan Island (OGJ Online, Mar. 6, 2003).

No other problems in the Persian Gulf have been reported at the moment, and EIA said tankers are reported to be loading normally, although insurers are evaluating premiums for ships and cargoes on a case-by-case basis.

User impacts uncertain
With OPEC making up much of the shortage, the production curtailments are unlikely to affect markets in the short term.

Europe and the US accounted for nearly 70% of Iraqi crude sales in 2000, with Asia netting 19%.

Although Germany's Economics Minister Wolfgang Clement told the Bundestag lower house of parliament Mar. 21 that Germany's oil supply is secure, he also said the war, along with high oil prices, could further weaken Germany's struggling economy. He also said, however, that it was too early to determine precisely what the war's impact would be. Germany is a strong opponent of the war with Iraq.

Meanwhile, US commercial crude oil inventories (which do not include the Strategic Petroleum Reserve) increased by 0.4 million bbl, but nonetheless are barely above the lower operational inventory level, said EIA.

Venezuela's production is increasing and is estimated by striking oil workers to be 2.4 million b/d. The Venezuelan government claims production of 3 million b/d, about what the country was producing before personnel strikes began Dec. 2.

Nongulf curtailments
Meanwhile, ethnic violence in Nigeria continued to escalate last week, causing a total of 600,000-800,000 b/d of production to be shut down.

On Mar. 20, widespread unrest forced Chevron Nigeria Ltd. to declare force majeure, shutting in 140,000 b/d of its 450,000 b/d total production on all its onshore and swamp production in the western Niger Delta. The company said the action impacted its ability to deliver on the rest of its March and April lifting programs. One contractor at the company's Escraovos tank farm was killed Mar. 17 and another wounded. Chevron on Sunday closed most of its other facilities in Nigeria, as well.

And on Mar. 21 a unit of Royal Dutch/Shell also declared force majeure affecting its Bonny and Forcados export terminals. The company earlier in the week had shut in 126,000 b/d of its 800,000 b/d production and evacuated personnel, saying it would likely make up the difference elsewhere in Nigeria. A helicopter carrying personnel to safety came under fire from Nigerian militants, but no one was injured, Shell said.

TotalFinaElf SA also has had to shut down some of its Nigerian facilities.

In addition, local militants in the Niger Delta region reportedly have taken control of a number of pipeline flow stations and threaten to destroy them.

Nigerian authorities are expected to deploy military force in the area in an attempt to bring the civil unrest under control.

Contact Judy Clark at Judyrc@ogjonline.com.

Related Articles

Obama urged by IPAA president to lift ban on US crude exports

07/07/2015 Commending the administration for its actions allowing some condensate to be exported as a petroleum product, Independent Petroleum Association of ...

Cidade de Itaguai FPSO anchors in Lula field

07/07/2015 Petroleo Brasileiro SA (Petrobras) reported that the Cidade de Itaguai floating production, storage, and offloading vessel has arrived at the Irace...

Statoil lets Johan Sverdrup drilling contract to Baker Hughes


Statoil ASA has let an integrating drilling contract valued at 1.5 billion kroner to Baker Hughes Norway for the Johan Sverdrup development.

AER shuts in 16 Murphy Oil sites in Peace River region for noncompliance

07/07/2015 Alberta Energy Regulator said it has shut in or partially shut in 16 sites operated by Murphy Oil Co. Ltd. in the Peace River region. The sites wer...

WAFWA: Aerial survey finds lesser prairie chicken population grew

07/06/2015 A recent range-wide aerial survey found the lesser prairie chicken population rose 25% from 2014 to 2015, the Western Association of Fish & Wil...

Production ramps up from Sunrise oil sands project

07/06/2015 Husky Energy Inc., Calgary, reported that 25 well pairs are now on production at its Sunrise oil sands project in northeastern Alberta. Steaming is...

Buru awarded onshore Canning licenses

07/06/2015 Buru Energy Ltd., Perth, and Mitsubish Corp. have been granted two production licenses for Ungani oil field in the onshore Canning basin of Western...

Cenovus sells royalty business for $3.3 billion

07/06/2015 Cenovus Energy Inc., Calgary, inked an agreement to sell its wholly owned subsidiary Heritage Royalty LP to Ontario Teachers’ Pension Plan for gros...

CERI: Energy, operational efficiencies possible in Canadian oil, gas

07/06/2015 Measures can be taken by operators in the expanding resource-intensive Canadian oil and gas sector to improve both energy efficiency and operationa...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected