OGJ Newsletter

• U.S. Industry Scoreboard 10/28 [70696 bytes]

Worldwide E&P investment will gain another 8% this year, following last year's 9% rise, projects Institut Francais du Petrole.

This indicates $86 billion/year of E&P investment outside centrally planned economies-the highest level since 1982, IFP says.

As a result, the upstream service and supply sector is seeing a surge in new contracts, including a 10% rise in the number of seismic studies under contract since January, IFP says.

Following a 12% drop in 1995-by IFP estimates-U.S. drilling rose by 17% in first half 1996. IFP expects European drilling is to rise 20% this year.

This has boosted work for drilling rigs, notably in the Gulf of Mexico, where demand for rigs has risen 39% since first quarter, says IFP. Day rates have jumped accordingly, more than doubling to $80,000/day for semis rated to 3,000 ft of water.

Rising day rates in turn mean new outlays for rig fleets. IFP estimates about $2 billion in new investments will be made in the near term to reactivate or modernize rigs and support vessels.

Underscoring the high demand for rigs, Parker Drilling has had a recent flurry of new contracts worldwide, including: in Viet Nam with Anzoil, in Indonesia with Conoco, in Pakistan and Colombia for Lasmo, in New Zealand for IndoPacific New Zealand Ltd., and in Peru for Quintana Minerals.

In the U.S., Parker recently won six new jobs. Three are in Louisiana, where renewed deep gas development in Louisiana's Tuscaloosa trend and expanded horizontal drilling in the Austin chalk have put to work six Parker rigs, its highest U.S. concentration.

"These developments reflect an increasing strength in worldwide markets," said Pres. and CEO Robert L. Parker Jr. "That strength has led to operators' confidence in expanding their exploration and development programs."

Reflecting that confidence, U.S. independents are capitalizing on experienced management/technical teams, 3D seismic, drilling opportunities, and selective acquisitions-and getting Wall Street's attention to boot.

That was the picture provided by companies participating in A.G. Edwards & Sons Inc.'s E&P conference in San Antonio this month.

Barrett Resources, Key Production, Lomak Petroleum, Newfield Exploration, Nuevo Energy, and Stone Energy together have created more than $2 billion in value during 1991-96 in terms of market capitalization, says A.G. Edwards' Shannon Nome.

Barrett, apparent highest bidder for a single block in the recent western Gulf of Mexico sale (OGJ, Oct. 7, p. 40), could drill as many as 12 exploratory wells in 1997 on Sale 161 acreage it stands to be awarded. Barrett also is moving internationally for the first time, entering exploration onshore in Peru.

Last week, it was to sign contracts for three Maranon basin concessions.

Newfield, an aggressive gulf player that went public in 1993, is now the seventh most active driller and 17th largest operator of production in the gulf.

Newfield plans to drill 23 total operated wells this year and complete six others drilled in 1995. It recently completed installation of a four-pile platform in 385 ft of water on Vermilion Block 398. Production from as many as five to six wells is planned early next year.

Another four-pile structure is planned for installation on Ship Shoal Block 354 next summer.

Key, an Apache Corp. spinoff, recorded a 121% reserve replacement in 1995 and is participating in drilling about 40-50 wells/year. It's focusing mostly on moderate-risk prospects in the Anadarko, Big Horn, Wind River, Powder River, and Sacramento basins and on the Texas-Louisiana Gulf Coast.

Lomak, a highly focused, low-cost producer, replaced 664% of its reserves in 1995 and 1,015% in 1994. Fort Worth-based Lomak, one of the top operators in Appalachia, is producing about a net 80 MMcfd equivalent company-wide but plans to hike that to 90-95 MMcfde by yearend.

Lomak has been getting a premium on Appalachian gas volumes, roughly 30-40¢/Mcf. Gas prices in the region have been averaging about $2.60/Mcf recently.

Stone Energy, a self-styled "exploitation" company, had a 570% oil and gas reserve replacement ratio through August.

A long-time Gulf Coast basin player, Stone operates 13 of 14 significant onshore and offshore Louisiana properties. It plans to spend $82 million in 1996 to drill 11 wells and set three platforms in the Gulf of Mexico.

Nuevo Energy, in what might be viewed as a contrarian opinion, sees big potential in California, including offshore. In central and coastal onshore California, Nuevo has identified more than 800 potential exploitation projects, including more than 700 drilling locations and 16 EOR possibilities.

Offshore, 65 exploitation projects have been identified. In two deals last April, Nuevo completed acquisition of California onshore properties from Unocal and Torch Energy's interest in offshore Point Pedernales field.

FERC has reprimanded Natural Gas Pipeline Co. of America for its transportation contract practices and warns other pipelines not to follow suit.

FERC was responding to complaints from shippers that NGPC was contracting outside the terms and conditions of its tariff. The agency decided NGPC had restricted capacity release rights by rescinding discounted rates when firm shippers released capacity. In addition, NGPC reserved the right to terminate firm service on 24 hr notice. FERC said these practices violated its rules as well as NGPC's tariff. It voided NGPC's offending practices and said that any deviation from tariff must be filed with FERC.

Gas utility deregulation continues apace, with the latest emphasis on customer-choice programs aimed at residential users.

Columbia Gas of Ohio has launched a program in Toledo to allow 170,000 residential and small commercial customers to choose their natural gas suppliers.

It will allow customers using less than 2 MMcf/year the option of buying gas from nonutility marketers and give them the same variety of price structures and service levels as large-volume industrial customers.

Bay State Gas Co. of Massachusetts also is gearing up for the next phase of a pilot allowing residential customers free choice of gas suppliers.

Bay State says 6,300 residential customers have enrolled in the program to date, triple the number it first expected.

A total 83,000 residential customers were offered participation in the pilot. Participants will begin getting gas from nine qualified suppliers next month at average savings of $67/year.

"Probably the most important thing we learned as a gas utility is that working with marketers as trade allies in an unbundled environment can be a powerful new tool for converting nongas users to gas heating from other fuels," said Bay State Gas Pres. Joel L. Singer.

Marketers offering gas directly to customers signed up about 30 households interested in converting to gas, he said.

Majors continue to pursue downstream joint ventures in China.

BP Chemicals will join Chinese firms in a 2-year feasibility study that could lead to a $2.5 billion ethylene project.

BP signed a letter of intent with Shanghai Petrochemical Co. to build a 650,000 metric ton/year ethylene plant at Shanghai. It would be BP's biggest project in China and signals a change in BP's China focus to downstream away from upstream.

BP will own a 50% stake, with the rest owned either by Shanghai Petrochemical or shared with parent Sinopec. Sinopec plans to more than double ethylene capacity to about 5 million tons/year by 2000 from 2.36 million tons/year.

Nigeria is taking a new look at privatizing its oil industry.

The government is "seriously considering" sale of its 57% stake in petroleum joint ventures, Finance Minister Anthony Ani told a workshop on foreign investment last week in Lagos (see editorial, p. 17).

He values the government's stake in JVs at more than $20 billion and says divestment would take 5 years, starting in 1997. Nigeria's six JV partners-Agip, Elf, Chevron, Mobil, Shell, and Texaco-have not been notified officially of these plans, Ani said, but will be given a chance to boost their stakes. Nigerian investors may also be given incentives to bid for equity shares.

Ani also confirmed that Nigeria's government is looking into privatizing the nation's four refineries after assessing their value.

He indicated Nigeria's government is willing to grant licenses to private investors willing to establish export-oriented refineries in the country.

Nigeria's refineries run at only a fraction of their combined capacity of about 445,000 b/d.

The state-owned Nigerian National Petroleum Corp. is said to be mulling a plan to turn over interim management of the four refineries to foreign oil companies for the next 2 years, before full privatization gets off the ground.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.