Do foreign tyrants really have their hands on the spigots that control oil flowing to the US? President George W. Bush thinks so, but oil companies have other ideas.
“I spend a lot of time worrying about disruption of energy because of politics or civil strife in other countries-because tyrants control the spigots,” Bush said last week.
And, for good measure, he repeated a claim from his state of the union address: “It is in our national interest that we become less dependent on oil.”
It is not altogether clear what the president is driving at with such remarks, but foreign fields continue to be the source of much oil and profit for oil companies.
Algeria grows
Consider Algeria, where Sonatrach Chief Executive Officer Mohammed Meziane said investments by foreign oil companies came to $1.3 billion in 2005.
But that’s not all. Meziane said some $8.6 billion will be invested in the development of Algerian fields during 2006-10, about 71% of it financed by Sonatrach and the remainder by foreign partners.
No mention was made of tyrants controlling any spigots in Algeria.
To the contrary, Sonatrach made eight discoveries in 2005, six by itself, and oil production grew 4% over 2004, reaching 232.3 million tonnes. Even more to the point, production in partnership also grew by 18% in 2005. Oil exports amounted to 141.3 million tonnes.
And, pace the tyrants, Sonatrach aims this year to increase oil production by 1.5% over 2005 to 235.6 million tonnes.
Occidental’s MENA plans
Nor do there seem to be any concerns about tyrants elsewhere in the region, where Occidental Petroleum Corp. expects to raise oil production by 5%/year as part of its 2006-10 growth plan through new projects in the Middle East and North Africa (MENA).
Oxy intends to invest in a number of new developments and enhanced oil recovery projects over the next 4 years.
Oxy’s biggest project is Dolphin Energy, in which a gas pipeline is being laid between Qatar and the United Arab Emirates. Oxy also has fields due on line in Libya and Argentina.
Oxy Pres. and Chief Executive Officer Ray Irani expressed no concern about control of the spigots when he told investors that “we have short and medium-term projects that will keep our combined oil and gas production growing at a sustainable annual rate of at least 5% and possibly 7%.”
He said the company should be producing at least 700,000 boe/d in 2010 and possibly 785,000 boe/d based on its holdings.
In the absence of tyrants, the only thing controlling Oxy’s spigots is money.
“If oil prices remain above $50/bbl, we will generate significant free cash flow in excess of what is required to sustain growth,” he said. “The extra cash will be used to increase our growth rate and to buy back shares.” ✦