OGJ Newsletter

U.S. Industry Scoreboard 12/22 [64,316 bytes]

The opening of Gulf of Mexico deepwater frontiers, made possible by advanced technology, is a major reason for oil firms' ambitious 1998 capital spending programs.

Shell Oil's capital and exploratory budget will be $5.3 billion, up about $1.7 billion from 1997. Of the increase, $1.4 billion will come from the acquisition of Tejas Gas (OGJ, Sept. 29, 1997, p. 42), and about $2.7 billion is allocated for E&P activities-the same as 1997. Increased spending related to Gulf of Mexico deepwater activity and the Tejas acquisition will be offset in part by reduced spending onshore and in shallow gulf waters.

Murphy Oil is increasing its capital budget 16% to $539 million for 1998. E&P spending will total $440 million and downstream outlays $97 million.

"Exploration activity will emphasize investment in the Gulf of Mexico's deeper waters and a continuation of the company's successful Gulf of Mexico shelf program," said Murphy. Of its $160 million exploration budget, $100 million will be spent in the U.S.

Unocal's 1998 capital budget will be $1.5 billion, vs. $1.3 billion in 1997. It will focus on expanding exploration in the Gulf of Mexico and Asia.

Chairman Roger Beach said Unocal will drill or participate in more than 180 exploratory wells next year, including several deepwater prospects in the Gulf of Mexico and Indonesia. About $1.33 billion will be directed toward worldwide E&P.

Texaco will cut exploration spending in 1998 and beyond. Its capital budget, excluding acquisitions, will be $4.6 billion vs. $4.5 billion for 1997. E&P spending will be flat, at $3.8 billion, while exploration spending alone will decrease. Texaco will concentrate instead on improving exploitation of existing properties and partnerships.

A study of information technology management in the E&P industry shows that more effective data management will underpin the industry's next growth phase.

The Pohlman & Associates survey of 51 firms suggests E&P productivity hinges on industry's ability to expedite access to seismic data. GeoQuest's Bill Baksi said, "This third-party research confirms a significant trend: The upstream petroleum sector is looking for ways to impact productivity and to manage its knowledge better. E&P operating companies are taking a fresh look at what functions in their operations are core. A large number of companies are now seriously evaluating outsourcing their non-core E&P data management."

U.S. Energy Sec. Federico Pe?a's energy strategy is expected to be completed next spring (see related story, p. 26).

Pe?a said a DOE team has drafted the framework for a market-driven, "comprehensive national energy strategy." Elements include: reversing the decline in U.S. oil output, maintaining the increase in gas output, preparing for oil supply disruptions, expanding gas use, and investing more in energy R&D. Other agencies are reviewing the strategy. DOE plans public hearings early in 1998.

Western Geophysical ensured the release of several employees being held on their houseboat in Nigeria last week.

A company official told OGJ that local laborers and villagers had "detained some of our employees." She said Western Geophysical had met detainers' demands for Christmas bonuses. All detainees had been released by presstime.

Italian state gas firm SNAM has bought a 45% interest in the planned Egyptian LNG export project for an undisclosed sum (see related story, p. 28). Now interest holders in the project are operator Amoco 45%, SNAM 45%, and Egyptian General Petroleum Corp. (EGPC) 10%.

Amoco and Agip recently booked a string of gas discoveries in the Nile Delta play. Amoco plans to develop its finds to supply the $1 billion LNG project, with first deliveries slated for 2001. In November 1996, Amoco and EGPC secured a contract to supply Turkey's Botas with LNG from the project. Amoco is looking for further customers and hopes to develop some of its finds for domestic Egyptian supply. An Amoco official said the partners have not determined the capacity and number of trains of the LNG plant. Neither has Amoco disclosed gas reserves figures supporting the LNG scheme.

Oman appears to be taking a further tentative step towards privatization of its energy industry with the appointment of a new oil and gas minister under a surprise shake-up in its Council of Ministers.

Mohammed bin Hamad bin Saif Al Rohmi was appointed minister of oil and gas on Dec. 16, replacing Said Al Shanfri. Al Rohmi's appointment is viewed positively by regional industry, which sees him as potentially more progressive than his predecessor.

While the government controls Oman's oil and gas industry, Omani ruler Sultan Qaboos is expected to take the lead in the spread of private enterprise culture in the Middle East. Oman is considering selling shares in government oil and gas firms and is expected to encourage private funding of new refining, petrochemical, and power generation schemes early next century.

Al Rohmi is a petroleum engineer and was, until recently, second in command at the College of Science at Sultan Qaboos University, Muscat.

Plans for two major Asian gas pipelines are moving forward, while a contender for an important North American gas line has exited the contest.

The CentGas group says it will complete financing of its $2 billion Turkmenistan-to-Pakistan gas pipeline by Oct. 15, 1998, and start construction the following December. This was confirmed by Pakistan's Minister for Petroleum and Natural Resources, Nisar A* Khan.

During a press briefing, Nisar said an agreement was signed by Pakistan, Turkmenistan, Afghanistan's Taliban government, and investors to arrange $2 billion in funding for the 1,271 km pipeline (OGJ, Nov. 3, 1997, p. 31).

"A number of international investors, including the U.A.E. government and Daewoo Co., have shown interest in investing in the proposed pipeline projects as shareholder," said Nisar.

Enron and Royal Dutch/Shell are showing interest in setting up the much-discussed Bangladesh-to-India gas pipeline.

The project will tap the gas reserves of Myanmar, India's Tripura state, and Bangladesh. Bangladesh's gas reserves have been estimated at more than 58 billion cu m. If produced, this gas could be routed to the Haldia industrial district in West Bengal or to Bihar and Orissa states.

Enron International CEO Rebecca Mark held talks with the West Bengal government recently. And Rama Prasad Goenka, chairman of the Indo-U.S. Joint Business Council, said discussions on the $2 billion venture may be held among all four participants-West Bengal, Bangladesh, Enron, and Shell. It is also possible the RPG Group, which Goenka heads, will participate in the project.

Initially, the two energy giants planned to build direct links between Myanmar and India (OGJ, Dec. 15, 1997, p. 24), but Bangladesh's huge gas reserves induced them to include that country in the project.

Meanwhile, one of three groups vying to build a gas line from Atlantic Canada to the U.S. is pulling out.

Canada's NEB approved a federal court decision denying TransMaritime Pipeline Project (TMPP) permission to appeal a court decision to approve the Maritimes & Northeast Pipelines project (see Industry Briefs, p. 30). TMPP said last week it would not pursue further legal action and would withdraw from the running, leaving North Atlantic Pipeline Partners as the only rival.

More non-OPEC oil supply is slated to come on stream near century's end, with Norway giving a Phillips-led group the go-ahead on a water injection EOR project at Eldfisk field in the Norwegian North Sea.

The approval paves the way for Phillips to install a new, unmanned platform. The project will feature eight injection wells. A total of 37 horizontal wells will be drilled during 1999-2009. Total gas lift/injection capacity will be 120 MMcfd. Total water injection capacity will be 670,000 b/d-enough to serve Eldfisk and provide some of the water used in Phillips's Ekofisk waterflood project, 15 miles away. Phillips expects the project to hike recovery from Eldfisk by 177 million boe. In peak-year 2003, production will hike 55,000 boed over expected output without EOR. Total cost of the project will be about $785 million.

Ian Blackburne, incoming CEO of Caltex Australia, predicted the closure of at least two of the country's eight oil refineries due to an oversupply of gasoline in Asia. The glut is primarily the result of new refineries and plant expansions in Asia, although the region's heavy use of diesel fuel makes gasoline a surplus product that is sold cheaply on international markets.

Australian independents import a significant amount of this gasoline, making it difficult for the country's refineries to compete, especially given their relatively small plants. Blackburne says it would behoove the country to close two refineries, although he is quick to add that Caltex's will not be among them. Such closures would allow remaining players to expand production and capitalize on economics of scale, thereby improving their ability to compete with imports.