In another OTC address, Newfoundland and Labrador Premier Brian Tobin described how E&D activity is progressing off Eastern Canada (see related article, p. 35). Hibernia field is producing an average 100,000 b/d, said Tobin, which will increase shortly to about 135,000 b/d and may rise to 180,000 b/d or more. Progress on a second field, Terra Nova, is on schedule and on budget, he said. An FPSO intended for the site will depart from South Korea in December and arrive at Newfoundland's Bull Arm shipyard by February 2000. Meanwhile, Petro-Canada has just spudded another delineation well on Ben Nevis field. So far, drilling indicates a potential for nearly 600 million bbl of oil reserves. And Husky Oil is evaluating the nearby Whiterose discovery in the Jeanne d'Arc basin. Husky estimates it holds potential reserves of 250 million bbl of oil, 1.5 tcf of gas, and 58 million bbl of NGL. It spudded the first delineation well Apr. 7 and plans a second one later.
As OTC attendees were focusing on offshore E&D, Conoco and Ocean Energy unveiled another deepwater Gulf of Mexico discovery, on their Magnolia prospect on Garden Banks Block 783. The well was drilled in 4,700 ft of water. It was the first to be drilled by the Deepwater Pathfinder, an ultradeepwater drillship co-owned by Conoco and R&B Falcon (OGJ, Feb. 22, 1999, p. 28). Drilled to 16,868 ft, the well cut 150-200 ft of net hydrocarbon-bearing pay. The firms said the find was an oil and gas strike but did not elaborate. Following completion of work at Magnolia, the Pathfinder will move to Conoco's K2 prospect on Green Canyon Block 562, where it will drill a 24,500-ft well in about 3,960 ft of water.
Chevron began shutting down its beleaguered Point Arguello project off California May 1 but is still hopeful it can find a buyer for the $2.6 billion development-once touted as the biggest find ever on the U.S. OCS.
The unit includes the onshore Gaviota processing plant and three offshore platforms: Hidalgo, Hermosa, and Harvest in the Santa Barbara Channel.
"Chevron's exit from California offshore production is a long-standing, strategic corporate goal," said Chevron's Ed Spaulding. "It has nothing to do with oil prices," but rather a goal "to invest in more profitable projects around the world," he said. The unit is producing only 20,000-25,000 b/d of oil, about a fourth of its peak production. To cut costs, Chevron last fall switched oil processing from onshore to the platforms and started reinjecting gas, using the Gaviota plant only to heat oil for transport in the All-American Pipeline (OGJ, Nov. 30, 1998, p. 26). Santa Barbara County is conducting hearings on the future of the Gaviota plant, with environmentalists hoping it will be dismantled and industry pushing to keep it at least in stand-by status for possible future oil projects.
Hidalgo platform, producing only 2,000 b/d, is the first to go into stand-by status, while the other two will continue to produce temporarily. The shut-down of all three platforms will take about 4 months. Spaulding said it would not be stopped "unless we get a signed purchase agreement and the approval of our partners," which include Pennzoil, Phillips, and Texaco. Venoco is in negotiations to buy the Point Arguello project (OGJ, Nov. 16, 1998, p. 46), but Spaulding said Chevron is also talking to other companies. Venoco last year bought Chevron's Gail and Grace platforms and its Carpinteria processing plant, and is already embroiled in an environmental battle in the area (see Industry Briefs, p. 36).
Former Interior aide Walt Rosenbusch has been named MMS director as of May 17. He succeeds Cynthia Quarterman, who resigned in February.
Rosenbusch has been a senior tax manager for Ernst & Young's Houston energy service since July 1996. Prior to that, he worked on federal oil, gas, and mineral royalty issues as an aide to the assistant Interior secretary for land and minerals. Before joining Interior in 1993, Rosenbusch was Deputy Lands Commissioner of Energy Resources for the Texas General Land Office.
Interior Sec. Bruce Babbitt said, "Walt Rosenbusch is no stranger to the issues of the department and, in particular, the MMS. He brings an impressive array of skills and experiences that will allow him to hit the ground running."
Meantime, Sen. Jeff Bingaman (D-N.M.) has urged MMS to reissue its proposed royalty reform rule, with some key changes.
Several oil industry groups, in comments to MMS, said a workable regulation could be drafted but asked for some significant changes. They said MMS should not second-guess arm's-length crude sales simply because a published index may report a higher sales price in the region. And they said any realistic valuation for crude should consider actual costs for oil transportation, location, quality, and processing.
The U.S. Commerce Department has launched an inquiry under Sec. 232 of the Trade Expansion Act, in response to congressional requests, to determine how rising crude and product imports are affecting U.S. security.
Interested parties are invited to submit comments by June 3. The law requires the study to be completed by Jan. 29, 2000, but Commerce Sec. William Daily pledged, "We will do everything possible to expedite the process." A similar study in 1994 concluded imports threatened national security, but the Clinton administration determined no radical actions were necessary.
EIA estimates gas shippers may turn back 18 trillion BTU/day of firm transportation capacity to pipeline companies as current contracts expire over the next few decades. That is about 20% of the 97 trillion BTU/day of firm capacity held on July 1, 1998. EIA said some of the capacity will be picked up by other customers, but the turnover will affect pipeline companies' revenues.
Watch for a spirited but ultimately futile fight by Argentina's privatized oil and gas firm YPF to remain independent, after Spanish petroleum major Repsol launched a hostile takeover bid. On Apr. 30, Repsol surprised the investment community with a $13.44 billion cash offer for the outstanding YPF shares, having bought a 14.99% interest from the Buenos Aires government in January for $2 billion. Repsol Chairman Alfonso Cortina told reporters in Madrid that his firm hopes to save $300-350 million/year, primarily through merging its Astra Argentine unit with YPF.
Most YPF shares are held by U.S. institutions and investors, with the Argentine government retaining 5.3% and three provinces holding small interests. Analysts thought Repsol might make a cash and shares bid, but Repsol reckons its all-cash offer will prove irresistible. YPF called in Credit Suisse First Boston to study the bid, to which the YPF board is expected to respond by May 13. YPF Chairman and CEO Roberto Monti reportedly declared his opposition to the bid, but analysts reckon he will not be able to put together a better proposal.
The plans of two Canadian companies may well reveal the vast differences in expectations for a recovery in the oil and chemical sectors.
Ranger Oil is reactivating some heavy oil production in Alberta as a result of improving oil prices. The company has increased production by 500 b/d to 11,000 b/d and plans to reactivate 130 shut-in wells this year. Ranger had shut in more than half of its 22,000 b/d production in response to weak prices. The firm plans to boost output further to 15,000 b/d by yearend but says this is contingent on prices remaining at about $18 (U.S.)/bbl, and on no large increases in the light-heavy spread. Ranger plans to sell $100 million in properties in Canada and the North Sea this year to reduce long-term debt.
Nova Chemicals says it will cut 125 staff this year as part of a program to reduce operating costs by $75 million (U.S.). The company has about 4,200 employees as a result of recently acquiring the assets of Huntsman Corp. Most of the job cuts will involve Nova's U.S. styrenics business. It is dismantling a polystyrene production facility at Peru, Ill. It is also seeking a buyer for its 26% interest in Dynegy Inc., a natural gas and electricity marketer.
Malaysian and Iranian state oil firms Petronas and NIOC have entered the race to take a stake in the 180,000 b/d Nagapattinam refinery planned by Indian Oil Corp. (IOC) and Madras Refineries Ltd. (MRL). IOC and MRL decided to look for a multinational or private refiner to pick up 50% of the equity in the project. The formal proposal for the joint-venture refinery may finally materialize, as the MRL and IOC boards have given their approval.
The location of the refinery is of prime importance to IOC, which has been trying to establish a refinery base in southern India. To date, IOC-which has most of its refineries in the North and East-has depended on marketing tie-ups with southern refineries to meet its requirements.
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