Operators announce 2004 budgets, drilling plans

Feb. 16, 2004
Operators plan to increase drilling budgets around the world in 2004, with the greatest increases expected at state-owned companies.

Operators plan to increase drilling budgets around the world in 2004, with the greatest increases expected at state-owned companies.

Russia's OAO Gazprom spending will be up 53% in 2004, to $1.2 billion. But three other large Russian companies plan to reduce spending in 2004: OAO Yukos, OAO Sibneft, and OAO Lukoil Holdings, citing lack of pipeline capacity, among other factors.

Norway's Statoil ASA expects to increase spending by 20% in 2004.

Petróleos Mexicanos has $800 million allocated for 2004 projects (OGJ, Feb. 2, 2003, p. 45), up only 9% from 2003. About 35% will be funded by the state; the remainder will be financed by outside investment. Oil and oil-related taxes account for about a third of Mexico's federal revenue, and Pemex receives the largest share of the state budget.

State oil company Petróleos de Venezuela SA plans to spend $29 billion in exploration and production in 2003-08, in order to raise oil production to 5.1 million b/d from its claimed 3.7 million b/d (OGJ, Dec. 22, 2003, p. 22). Planned 2004 spending is up 129% over 2003.

PDVSA will begin exploration in the Gulf of Venezuela, close to the maritime border with Colombia in early 2004.

Brazilian state oil company Petróleo Brasileiro SA (Petrobras) plans to invest $5.5 billion in exploration and production in 2004, up from $4.8 billion in 2003. Guilherme Estrella, exploration and production director, said in late December that the company would evaluate recent discoveries as well as explore new areas in 2004.

Petrobras needs additional drilling rigs, but building plans stopped in 2003 when the Rio de Janeiro state government levied a tax on Petrobras's rigs. Estrella said the government might drop the tax if rig hulls were constructed in Rio, but this was not yet seen as economically viable.

In December, Petrobras awarded three contracts totaling $753 million for construction of the P-52 semisubmersible production platform to the Technip/Fels Setal consortium. The platform is destined for the Roncador field in the Campos basin (OGJ, Jan. 5, 2004, p. 8).

Taiwan-based Chinese Petroleum Corp. plans to invest more than New Taiwan $7 billion (US $210 million) in the next 4-5years for overseas oil exploration and will also buy into natural gas fields. CPC is currently involved in joint-venture projects in four countries: Indonesia, Ecuador, Venezuela, and Australia.

The company plans to continue its activities in Indonesia, Venezuela, and Australia, as well as possible projects in the US, Canada, Brazil, Peru, Malaysia, the Middle East, and Africa. CPC is encouraged by the success of subsidiary OPIC Karimum Corp. in the Corocoro field in Venezuela's Gulf of Paria West, which will begin commercial oil production by 2005.

The Deepwater Pathfinder ultradeepwater drillship is now owned by Transocean Inc. (Fig. 1; photo by Dean Gaddy).
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CPC joined with ConocoPhillips and Agip SPA, to acquire a 7.5% interest in an unidentified company in order to participate in exploitation of the Delfin and Blue Point wells in the Paria East platform, off Venezuela. Production is expected to begin in 2008.

ChevronTexaco Corp. plans to raise overseas expenditures by 10% in 2004. ExxonMobil Corp. plans to increase overseas spending by 8%. ConocoPhillips's 2004 budget is about $6.9 billion, close to that in 2003, with $4.5 billion (78%) allocated to exploration and production.

Canadian operators

Canadian independent Talisman Energy Inc. plans to spend a $2.35 billion (Can.) on exploration and development in 2004, up 3% over the estimated expenses for 2003. The majority ($1.2 billion) is designated for drilling, including 640 wells in Canada and 118 international. Half the budget will be spent on North American projects, one quarter in the North Sea, and the remaining quarter internationally.

In North America, Talisman will focus on underdeveloped parts of the Western Canadian Sedimentary Basin, including the Alberta Foothills, Bigstone and Wild River area, the Deep Basin, the Greater Arch, Edson, and Monkman.

The company will continue the deep drilling at Monkman in the British Columbian foothills, with as many as four Paleozoic wells (OGJ, Aug. 26, 2002, p. 47). Talisman will drill a $15 million well in Alaska and evaluate prospects in the eastern US.

In South America, Talisman plans two exploration wells onshore Colombia in 2004, spending $28 million. The company spud two wells there in 2003, although four had been planned at a projected cost of $33 million (OGJ, Jan. 6, 2003, p. 38).

In the North Sea, Talisman plans $485 million for a major drilling program to include 25 development wells and 8 exploration wells. Three of the development wells will be drilled in Norwegian waters. Exploration wells will be drilled in the Clyde area (3), the Ross/Blake area (2), and the Flotta Catchment area (2).

In Trinidad and Tobago, Talisman plans to spend $170 million, including 15 development wells and 2 appraisal wells for the Greater Angustura project offshore Block 2C. The company anticipates that the seismic program in the Eastern Block will finish in 2004 and lead the way for a drilling program there in 2005.

In Algeria, Talisman plans to spend $44 million, including 6 wells in the Greater Menzel Lejmat North (MLN) area in the Berkine basin, and 10 wells at Ourhoud.

Calgary-based Cheyenne Energy Inc. secured funding for its 2004 drilling program in late December using a flow-through share issue. Cheyenne acquired 1,280 acres in northern Alberta at an Alberta crown land sale in fall 2003. The company has an 80% working interest in 1,920 acres (net 1,536 acres) in the area.

US operators

New Orleans-based McMoran Exploration Co. announced in mid-January that it has a 3-5 year agreement with an unidentified, private E&P company that will provide at least $200 million for exploration drilling in exchange for 40% of McMoran's interest in the prospects.

In 2004, McMoran expects the joint venture to drill 10-12 wells in the Gulf of Mexico, particularly deep gas prospects in shallow water. The company expects to spud three wells in the first quarter, including the Deep Lombardi prospect at Vermilion Block 208, the Deep Tern prospect at Eugene Island Block 193, and the Phoenix prospect at Eugene Island Blocks 212-213.

El Paso Corp. announced plans in mid-December to slash its net debt to $15 billion from the current $21 billion by 2006. The company plans to boost production by shifting capital spending from Texas onshore to deep-shelf Gulf of Mexico natural gas fields and coalbed methane reserves in the midcontinent. El Paso president and CEO Doug Foshee said 2004 capital spending will be reduced to $850 million, compared with $1.4 billion spent in 2003.

Fort Worth-based independent Range Resources Corp. announced a $126 million capital budget for 2004, a 21% increase over 2003 expenditures. It includes $109 million for drilling and recompletions in 2004. Range participated in drilling 359 gross (201 net) wells and 56 gross (45 net) recompletions in 2003. The company plans to drill 409 gross (237 net) wells and carry out 35 gross (29 net) recompletions in 2004. About half of the budget is allocated to the southwest region, including the Permian basin, the Midcontinent, and East Texas. The other half will be divided between the Gulf Coast and Appalachia.

Range president John H. Pinkerton said, "We expect the 2004 drilling budget will allow us to continue to more than replace production, to fuel a steady increase in production, and based on current oil and gas prices, to generate exceptional rates of return."

Dallas-based Remington Oil & Gas Co. is planning to spend $104 million in 2004, a 21% increase over the $86 million spent in 2003. The company's exploratory drilling program will cost $56 million, and it plans 22 offshore wells and 7 onshore wells on the Gulf coast.

Remington president and CEO James A. Watt said, "We anticipate operating a three-to-four offshore rig program through the year, drilling a mix of higher reserve potential-higher risk projects coupled with lower risk-lower potential projects."

Houston-based independent KCS Energy Inc. planned a 2004 capital budget of $105 million, with plans to drill 96-130 wells in the US. The company is targeting the Elm Grove field (35-40 wells), Joaquin field (10-15 wells), Oklahoma's Talihina field (6-10 wells), Sawyer Canyon field (10-20 wells), and 15-19 wells in other Midcontinent areas (15-19 wells). KCS also plans 10-13 development wells and 10-13 exploration wells for the Gulf coast.

Novus Petroleum is planning a six-well program looking for deep shelf gas beneath Padre Island, Tex., in 2004. The first to spud was the La Playa Mid Frio Unit No. 1 on the La Playa Deep prospect, directionally drilled from an onshore location. The second well will be a redrill of the Murdock Deep prospect, previously attempted in 2002.

Tulsa-based independent Vintage Petroleum Inc. announced a total capital-spending budget for 2004 of $240 million. The company expects to continue its four-rig drilling program in Argentina and drill 90 wells in 2004 (88 wells in the San Jorge basin and 2 wells in the Piedras Coloradas concession). It will also complete 84 workovers in the San Jorge basin and begin waterflood projects.

Vintage plans a 2004 domestic drilling program that will include 31 exploitation wells in California, Louisiana, Oklahoma, and Texas, with 63 workovers budgeted in those same states. In Canada, the company plans to drill 15 exploitation wells in the Peace River Arch, West Central and Sturgeon Lake areas, and complete 11 workovers in the Peace River Arch, East of 5, and Sturgeon Lake areas.

About 27% of the capital budget targets North American natural gas, and $25 million have been allocated to drill 10 exploration wells on eight prospects in West Texas, the Texas Gulf Coast, and South Louisiana. About $13 million have been allocated to Canadian gas exploration, and 12 wells will be drilled in the foothills trend of Northeast British Columbia and Peace River Arch.

Vintage is also active in the Republic of Yemen and plans to drill six An Nagyah development wells and one Harmel appraisal well during 2004.

The company has allocated $9 million to drill two wells in Italy's Po Valley, on Bastiglia and Cento block acreage acquired in 2001.

US drilling

Oil and gas wells were drilled in 30 of the 50 states in 2003, according to RigData's well-start statistics. Among the 24,103 wells drilled in the US through November, 8,341 were drilled in Texas, 2,203 in California, 2,156 in Oklahoma, 1,855 in Louisiana, 1,619 in Wyoming, 1,197 in New Mexico, 1,165 in Kansas, 1,044 in Colorado, 222 in Alaska, and 256 in deepwater Gulf of Mexico.

The US land rig count rose more than 30% through 2003, and yet day rates increased only 5-10%. The rig count was 1,114 during the week of Dec. 26, 2003, compared with 860 a year earlier. The land rig fleet is now at nearly 70% utilization.

Analysts at Raymond James & Associates Inc. offer two scenarios for land drilling:

The rig count continues to rise, driving exponential increases in day rates through 2004 and 2005.

Sustained high prices for natural gas drive a longer-term, 3-5 year, slower, steady increase in drilling activity and day rates.

The company concludes that the US land drilling business should fare well in the next several years.

Nabors Drilling USA LP, a division of Nabors Industries Ltd., is the largest land-based driller in the Lower 48, with nearly 400 land rigs.

Patterson-UTI Energy Inc., the second-largest operator of land-based oil and natural gas drilling rigs in North America, plans to acquire Midland-based TMBR/Sharp Drilling Inc. TMBR/Sharp shareholders were scheduled to vote on the proposed merger Feb. 11, 2004.

Snyder, Tex.-based Patterson-UTI has 343 land-based drilling rigs and 4,607 employees. For the last quarter of 2003, the company reported an average of 189 drilling rigs operating (55% utilization), including an average of 177 rigs in the US and 12 rigs in Canada. Patterson-UTI's main competitors are Grey Wolf Inc., Helmerich & Payne Inc., and Nabors.

TMBR/Sharp has 17 land rigs (4 doubles, 13 triples) and 340 employees. A company spokesperson told OGJ that most of the fleet was constructed in the early 1980s by Midland-based Tom Brown Inc. and that 9 to 12 rigs were working consistently in 2002-03 (53-71% utilization). On Jan. 6, 2003, eight were working under contract. The company is primarily focused on contract drilling for oil and gas in the Permian basin of West Texas and eastern New Mexico.

Permian basin

Several operators plan to spend $500 million drilling in the Permian basin in 2004. OxyPermian Ltd., a subsidiary of Occidental Oil and Gas Corp., expected a drilling budget for 2004 of $70-80 million, about the same as 2003. Joe Fleming, drilling project manager, said the company plans to drill 215 wells in 2004 (compared to 270 in 2003) and hopes to keep 8 to 12 rigs running (it ran 10 in 2003).

ChevronTexaco plans to spend $80 million on Permian drilling in 2004, up $10 million from 2003, and reenter 45-50 wells, about the same as in 2003. The company is considering reducing well-spacing in the Headlee-Devonian unit.

Midland-based Pure Resources Inc., a subsidiary of Unocal Corp., will spend about $100 million "through the drill bit" in 2004, up from about $70 to $80 million in 2003, according to drilling manager Jimmy Harrison. He thinks Pure will drill about 100 Permian wells — 14 "deep, deep gas" wells in the Delaware Basin; 20 to 25 wells in southeastern New Mexico; and 15 to 20 in Andrews and Gaines counties in West Texas. The company will probably keep 6-9 rigs working, as in 2003.

Midland-based independent Concho Resources Inc. had planned to increase its Permian budget to $100 million in 2004, from $70 million in 2003. In late December 2003, Chesapeake Energy Corp. announced plans to buy Concho for $420 million; closing date was Jan. 30, 2004. With this acquisition, Chesapeake becomes one of the top 20 producers in the Permian basin.

Tom Brown Inc. will spend about $30 million in 2004 for drilling and leasehold interests; flat from 2003, but focusing all of the 2004 budget in the Permian basin. Operations manager Hal Lee said the company plans to keep four rigs running.

The Permian division of Fort Worth-based XTO Energy Inc. has a 2004 budget of about $15 million.

Transocean fleet

Transocean Inc., controlling the world's largest offshore fleet, announced Dec. 31 that it acquired ConocoPhillips' 50% interest in the joint venture Deepwater Drilling LLC, making Deepwater a wholly owned subsidiary of Transocean. Transocean acquired a 50% interest when Transocean Sedco Forex Inc. acquired R&B Falcon Corp. in early 2001 (OGJ, Aug. 28, 2000, p. 25). Deepwater Drilling owns the drillship Deepwater Pathfinder (Fig. 1), the second ultradeepwater drillship (capable of drilling in 5,000-ft water or deeper) to work in the Gulf of Mexico, following the Glomar Explorer.

The Deepwater Pathfinder spud its first well Jan. 30, 1999, for Conoco Inc. on the Magnolia prospect, in the Garden Banks area of the Gulf of Mexico (OGJ, Feb. 22, 1999, p. 28). It was one of five new drillships to join the deepwater fleet in 1999 (OGJ, Sept. 20, 1999, p. 43).

Transocean updated its fleet contract status as of Jan. 5, 2004. All but one of the 13 drillships and semisubmersibles in their fifth-generation fleet are under contract (92% utilization), with rates ranging from $125,000/day to $205,000/day. The company is drilling in the Gulf of Mexico (7), Brazil (3), and Nigeria (2).

Four of the contracts expire in January 2004; two have further contracts but two drillships may become idle (Deepwater Discovery; Deepwater Frontier). The Cajun Express semi became idle in December 2003 but is scheduled to begin drilling in May 2004 for ChevronTexaco.

Twelve of the floaters in Transocean's other deepwater fleet of 15 are currently under contract (80%), rates of $44,000/day to $150,000/day. Only one is drilling in the Gulf of Mexico; the others are working off Brazil (4), Nigeria (2), and one each off Angola, Egypt, India, Ivory Coast, and in the UK North Sea. The Discoverer Seven Seas drillship finished a contract in December and will begin working in India for ONGC in February 2004. Two semis are idle: the Transocean Leader (as of December 2003) and the Sovereign Explorer (as of June 2003).

Half of Transocean's midwater fleet of 30 is idle. Seven are working in the North Sea (2 in Norwegian waters; 5 in UK waters). The other 8 under contract are working in Angola, Australia (2), Brazil (2), Eastern Canada, East Guinea, Indonesia, and Tunisia, for $40,000/day to $172,800/day. Three of those working came off contract last month; three others will finish contracts this month.

In January, Statoil ASA announced its intent to continue use of the Transocean Searcher in the North Sea. The semisubmersible is working in Statoil's Sleipner fields and will mobilize to Smørbukk South before mid-year. The new contract is for drilling three wells through the new Q subsea template on Smørbukk South and 95 days of work on other wells.

Transocean removed seven rigs from its offshore fleet in 2003: six jack ups (RBF 160, 100, 151, 154, 190, 192), and the semi Sedco 708.

Transocean's US-based fleet includes 25 jack ups and submersibles, and 30 Gulf of Mexico drilling barges. As of Jan. 5, 2004, 12 of the jack ups and submersibles were under contract, at an average of $31,300/day (up from $26,200/day). Contracts for 7 of the 12 working rigs had contracts expiring in January 2004.

Three other rigs were idle and 10 were cold-stacked. Eleven of the barges were under contract, at an average of $19,200/day (up from $18,700/day). Contracts for 8 of the 11 working barges were due to expire in January. Two barges were idle and 17 were cold-stacked.

Atwood fleet

Houston-based Atwood Oceanics Inc. secured new contracts for two of its nine rigs in December 2003. The Atwood Hunter and Atwood Eagle are both third-generation semisubmersibles capable in operating in 5,000 ft water depth, with up to 28,000-ft drill string.

Burullus Gas Co. is using the Atwood Hunter to drill 10 wells off Egypt, about 400 days of work at $62,400/day, with an option to drill another 6 wells (150 more days).

The Atwood Eagle has been mobilized from Angola to Australia in order to drill for BHP Billiton Petroleum Pty. Ltd. and Apache Energy Ltd. The contract includes three wells and options for four more, at a rate of $109,000/day for wells drilled in water deeper than 600 m, and $89,000/day for wells drilled in water shallower than 600 m.

The Atwood Falcon semi is drilling two wells for Japan Energy Development Co. Ltd. (JED) off Japan, which will take 100-120 days, at $83,300/day. It then moves to China to drill one well for Husky Oil China Ltd., requiring 20-25 days, at the same day rate.

Atwood's Seahawk tender assist semi is under contract to ExxonMobil Exploration & Production Malaysia Inc. (EMEPMI) through December 2004.

The Atwood Beacon began drilling four wells off Malaysia in August 2003 for Murphy Sarawak Oil Co. Ltd. Murphy assigned four wells remaining to Petronas Carigali SDN BHD, and the semi began drilling for Petronas under the contract assignment in December 2003, for $52,250/day. Petronas awarded four more wells, which will be drilled for $56,000/day and keep the rig busy through April or May 2004.

The Atwood Southern Cross semi was drilling one well for Cairn Energy India Pty. Ltd. off India, with the option to drill one or two additional wells. The Seascout semi is coldstacked, awaiting a contract to justify conversion to a tender-assist.

The Pride Angola ultradeepwater drillship received a 10-year contract extension for offshore Angola (Fig. 2; photo by Pride International Inc.).
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Angola offshore

Sonamer Ltd., a joint venture of Pride International Inc. (51%) and Angola's national oil company, Sonangol (Sociedade Nacional de Combustíveis de Angola; 49%) signed a $610 million, 10-year aggregate contract extension in mid-December with Total SA's Angolan subsidiary, Total E&P Angola.

The contract covers two drillships owned by Sonamer, the Pride Angola and Pride Africa, currently working under contracts that will expire in mid-2005.

The Pride Africa is a Gusto 10,000 design drillship developed by IHC Gusto Engineering BV and Pride/For- amer. The 208 m long ultradeepwater drillship is capable of operating in water depths to 10,000 ft. It was built in 1999 and began work for Elf Exploration off Angola. It was damaged on Nov. 11, 1999, while working in 5,400 ft water depth; after being re-equipped with a new blowout preventer, top drive, and riser, it resumed work in July 2000.

Its sister ship, the Pride Angola, was also completed in 1999 and began work for Elf in May 2000.

Amoco Angola BV (a wholly owned subsidiary of BP) and Shell Development Angola BV used the Pride Angola to drill two wells on their Greater Plutonio prospect (Cromio well was completed in October 2000 in 3,940 ft water depth; and the Cobalto well was completed in December 2000 in 4,600 ft water depth) on Block 18, just south of Block 17.

Pride operates a fleet of 328 rigs, including 77 offshore rigs (2 dynamically positioned drillships, 11 semisubmersibles, 35 jack ups, 5 tender-assists, 3 anchored barges, 16 offshore platforms) and 251 land rigs.

Total SA operates the giant Girassol field and Jasmim field in deepwater Block 17, 150 km off Angola, in 1,400-m water depth. Girassol production began in December 2001, and Jasmim production began in December 2003. Total's next focus is the Dalia field, one of the 15 fields in Block 17, scheduled to begin production in the second half of 2006.

Venezuela offshore

More drilling is in store for the Deltana platform area, natural gas fields off Venezuela's eastern coast, close to the maritime border with Trinidad and Tobago. The first exploratory well tested 62 MMcfd of natural gas and condensate. Developing the Deltana platform is expected to cost $3.8 billion over the next 6 years.

Statoil ASA plans to drill three exploration wells on Block 4 (Cociuna-1 Block) of the Deltana platform in first-quarter 2004. Statoil won the block in February 2003, paid a $32-million signature bonus, and committed to spend $60 million in drilling over the next 4 years.

San Ramon-based ChevronTexaco Corp. (operator; 60%) and ConocoPhillips (40%) will jointly explore and develop Block 2 (Loran-1 Block) of the Deltana platform. PDVSA has the right to acquire 35% when the project turns commercial. Block 2 has an estimated 30-38 tcf natural gas in place.

ChevronTexaco was one of 13 pre-qualified bidders for Deltana platform Block 3 (LauLau-1 block) and placed the only bid of $5 million on Nov. 27, 2003. There were no bids for Block 5 (as yet unnamed).

Venezuela onshore

Harvest Natural Resources Inc., formerly Benton Oil & Gas, plans to drill 10 wells in the Uracoa field in Venezuela's South Monagas Unit (SMU) starting in second-quarter 2004, according to President and CEO Peter J. Hill.

The wells will target oil under the gas cap. Harvest's capital expenditures were about $58 million in 2003 and will probably fall to $30 to $35 million in 2004. CFO Steven Tholen said "the capital expenditures we have for 2004 are primarily for the drilling of oil wells [in Uracoa]."

Harvest's Venezuelan operating company, Benton-Vinccler CA, delivered first gas to PDVSA on Nov. 25, 2003, from the Uracoa and Bombal fields in the SMU and is currently shipping about 70 MMcfd, Tholen said.

The company is also involved in a technical study of two oil and gas fields, Temblador and El Salto, near its South Monagas fields (OGJ, Nov. 10, 2003, p. 9).

Tholen said the study should be complete by March-April.

Indonesia offshore

The Ocean Baroness, a fifth-generation semisubmersible owned by Diamond Offshore, is drilling off Indonesia for Unocal Indonesia Co. under a contract that was announced in March 2003.

The semi is one of the Diamond Offshore's signature Victory-class upgrades, designed for self-contained mooring operations in up to 7,000 ft of water.

A third well will be drilled in the Muara Baku PSC in the Makassar Strait, between Sulawesi and Kalimantan. Unocal and Italy's Eni (operator) were awarded a 30-year production sharing contract in offshore southern Sulawesi in December 2002.

They plan to spend $35 million on exploration in 2003-08. Two wells were drilled in 2003.

Diamond Offshore Drilling Inc. supplies deepwater drilling rigs. The company's fleet of 46 offshore drilling rigs currently consists of 31 semisubmersibles, 14 jack ups, and 1drill ship. The fleet operates in the waters of six of the world's seven continents.

State-owned Pertamina is also drilling onshore South Sumatra, in the Gunung Kemala block.

Medco Moeco Langsa Ltd. (MMLL) signed a deal in January with Modec Production (Langsa) Pte. Ltd. to acquire 70% of offshore oil field, Langsa Tac, off Aceh, in the Malacca Strait.

The remaining shares are 20% controlled by Modec and 10% by Putera Langsa.

MMLL is a joint venture of Medco Energi Internasional and the Japanese company Mitsui Oil & Gas Co. Ltd. Medco director Sugiharto said MMLL plans to spend up to $33 million in the next five years to develop the Langsa Tac field, which started production in November 2001.

The Malacca Strait, between Indonesia's Sumatra island and peninsular Malaysia, is one of the world's busiest shipping lanes and has suffered increasingly violent pirate attacks (OGJ Online, May 5, 2003).

Malaysia offshore

State-owned Petronas acquired an 11% share of the Natuna gas field from Pertamina in 2003, in exchange for contracts agreeing to buy produced gas. Pertamina retains 13%, and ExxonMobil (operator of the Natuna-B Alpha) holds 76%.

Norway's Smedvig maintains the leading fleet of tender rigs. The company has a new, $67 million self-erecting tender rig being constructed in Malaysia Shipyard & Engineering Sdn. Bnd., scheduled for delivery first-quarter 2004. It is intended for work in southeast Asian waters.

Smedvig's CEO Kjell E. Jacobsen said last year, "This investment reinforces our position as the leading tender rig operator and will expand our activities in one of the fastest growing energy markets in the world."

CS Mutiara Petroleum Co. Sdn. Bhd. was formed in July 2001 to operate two blocks off peninsular Malaysia, PM 301 and PM 302, in which it has drilled three exploration wells.

On Nov. 3, 2003, the company spud the Bunga Kamelia-1 well, 30 km east of the Bergading gas field in Block PM 302. This well drilled to 2,070 m and discovered gas in two zones, estimated to contain 200 bcf.

CS Mutiara Petroleum is a 50-50 joint venture between Petronas Carigali and Shell Malaysia Exploration & Production.

Ukraine, Poland

Poltava Gas & Oil Co. Ltd. (PGOC), wholly owned by UK-based J.P. Kenny Exploration & Production Ltd., a JKX Oil & Gas subsidiary, will spend up to $10 million in 2004, including drilling at least three or four new wells. J.P. Kenny invested $7.5 million in PGOC projects in 2003, including a drilling program.

In May 2003 J.P. Kenny acquired the state-owned interest in PGOC (33.8%) for UAH (Ukraine Hryvnia)5.34 million (US $1.03 million). The company was previously involved in the Poltava Petroleum Co. (PPC) joint venture with Poltavaneftgasgeologia and Poltava Gasprom, a subsidiary of state gas company Ukragasprom. Poltava is 350 km southeast of Kiev (OGJ, Apr. 11, 1994, p. 107).

Jaslo Drilling Co. was drilling the Zaniemysl-2 well for FX Energy Inc. in early January, in western Poland's Permian basin. It targeted the top of the Rotliegendes sandstone at about 2,940 m in the Fences I project area, anticipating dry gas. FX Energy, based in Salt Lake City, holds acreage in five project areas in Poland; four (Fences I, II, III; Pomerania) are in western Poland's Permian basin.

The Wilga project area is in central Poland (OGJ Dec. 1, 2003, p. 38). The Polish Oil and Gas Co. (POGC) holds 51% interest in all areas.

In January 2003, FX Energy entered into a farmout agreement with CalEnergy Gas Ltd., an affiliate of MidAmerican Energy Holdings for the Fences I project area, sharing 49% interest.

In mid-October, the company spud the Zaniemysl-3 well in the Fences I project area.

In November, FX Energy selected a drill site on the Sroda structure in the Fences II area, and President David Pierce said, "Working closely with our partner POGC, we expect to have the Sroda well drilling in the first quarter of 2004."

Houston-based Apache Corp. and FX Energy conducted early exploratory drilling in northeast Poland. Their Tuchola 108-2 wildcat in the Pomeranian concession tested 9.5 MMcfd of gas from the Permian Main dolomite at 8,318-8,514 ft. (OGJ Online, Jan. 15, 2001, p. 8). FX Energy tested Rotliegendes gas in June 2000 from its Kleka 11 discovery well in western Poland.