PDVSA may sell some US assets

Orellana did not specify when such a divestment might occur, and he did not specify that such a sale would include Citgo, the Houston-based refining and marketing unit of PDVSA. However, Venezuelan energy minister Rafael Ramirez told reporters on Feb. 14 that PDVSA was “reviewing” its Citgo assets.

Four oil companies-two foreign and two domestic-reportedly have made offers for the Citgo refineries. The bidders, according to the Venezuelan newspaper El Universal, are US refiners Premcor Inc. and San Antonio-based Valero Energy Corp., along with Brazil’s national oil company, Petroleo Brasileiro SA (Petrobras), and Russia’s OAO Lukoil. Citgo’s total assets are believed to be worth in the neighborhood of $12 billion.

Hugo Chavez, Venezuela’s leftist president, has hinted on several occasions that he might liquidate assets in the US, including refineries. Citgo has 1.1 bbl/d of refining capacity in the US through wholly owned and joint venture interests. It also owns 14,000 retail service stations.

During a recent trip to Argentina, Chavez was quoted in the press as saying, “Not one Venezuelan works at these [Citgo] refineries [in the US]. They don’t give us one cent of profit. They don’t pay taxes in Venezuela. This is economic imperialism.”

Citgo earned $440 million in net income in 2003 and was expected to have earned even more in 2004. Contrary to Chavez’s comments, the firm’s profits flow back to parent company PDVSA and help fund many of Venezuela’s social programs.

Citgo CEO Felix Rodriguez has said that no decision has been made and that Venezuela’s review of Citgo’s assets has not yet been finished. Meanwhile, the company’s expansion plans have been put on hold pending the outcome of the review.

Some industry observers have expressed concern that a Citgo sale could set the stage for the nationalization of Venezuela’s oil and gas industry. If this were to occur, companies such as ChevronTexaco, ConocoPhillips, and Harvest Natural Resources that have invested heavily in Venezuela could stand to lose billions of dollars worth of energy assets collectively. It is widely believed that a first step toward nationalization would be for Chavez to “cash out” in the US.

Other analysts believe Chavez’s objective is not to throw out US companies but to increase the amount of taxes they pay. In recent years, the Venezuelan government has passed legislation requiring a majority stake in upstream production and increasing royalty payments to 30 percent.

Foreign investors in Venezuela’s petroleum sector thus far have remained willing to participate in the development of Venezuelan energy infrastructure and even to rework old deals that have been less favorable to Venezuela than the Chavez regime would like. However, one industry insider commented that, when it comes to political risk, even the most eager investors have limits.

If Chavez continues to give rhetorical fuel to their fears of having assets nationalized, US and other foreign investors may begin to taken him seriously. In that case, he added, Venezuela - currently the world’s fifth-largest petroleum exporter - may find itself increasingly isolated, with an abundance of natural resources and no one to develop them.

Deloitte suggests overhaul of reserves reporting rules

Regulators around the world need to update reporting requirements for oil and gas reserves to expand the scope of mandatory disclosures in annual reports and financial statements, according to a report published by Deloitte’s Global Oil & Gas Group. The recommendations are needed to improve information available to markets and to restore investor confidence in reserves reporting, says Victor A. Burke, chairman of Deloitte’s Houston-based oil and gas group, who co-authored the report with Peter J. Newman, London-based managing partner of Deloitte & Touche LLP.

Current reserves disclosures and definitions are commonly based on US Securities and Exchange Commission rules introduced in 1978 that focus on “proved” reserves. Since then, petroleum engineers globally have significantly updated the structure and definitions for categorizing reserves. Today, information widely used by the industry for making investment, planning, and portfolio decisions typically relates to “probable” as well as “proved” reserves, says Burke. Estimates of reserves use sophisticated data capture and analysis techniques not available 25 years ago.

“Regulators should work together globally and adopt the definitions and categorization structures already endorsed by petroleum experts and widely used within the industry today,” says Burke. “The continuing focus only on ‘proved’ reserves information is limiting and prone to misinterpretation. Confidence has waned in this area following the restatements over the last year of reserves previously reported. Our suggestions are designed to promote disclosure of a fuller and more meaningful picture of oil and gas reserves information.”

The report is available at www.deloitte.com/us.

Analyst says LNG won’t cause natural gas prices to fall

James Trifon, Wood Mackenzie’s managing consultant for North American LNG, does not believe a projected upswing in liquefied natural gas imports to the US will cause domestic gas prices to drop significantly. Trifon’s remarks were made prior to his appearance at GasMart in New Orleans, March 18.

“LNG is going to be sold based on the market price in whatever area you are bringing it in,” said Trifon. He added that power generators and industrial users are mistaken if they think they will be getting a discounted price from an LNG supplier.

Expectations of lower prices have been heightened due to a rash of new LNG import terminals coming on stream and a misguided belief that this will result in a flood of the commodity entering the market, he said, adding that there will be some downward pressure on gas prices, but not enough to “crater the market.”

Trifon also said that LNG terminal developers that have designed their business models around an LNG spot market may be in for a rude awakening. Long-term agreements will continue to be the norm because terminals and liquefaction projects depend on them financially to support their construction.

He doubts that most of the planned LNG receiving terminals in the US will ever be built. The LNG market can’t be overbuilt, he said, because upstream and downstream infrastructure must be brought online in concert. Upstream will not be developed without having an outlet, and no one is going to build downstream without having supply, he added.

NYMEX to launch Brent floor in London; will trade NOx, SOx emissions this year

The New York Mercantile Exchange plans to launch an open-outcry Brent crude oil futures floor in London, NYMEX president James Newsome told reporters gathered for IP Week in mid-February. The move would put the New York exchange in direct competition with the International Petroleum Exchange (IPE), which is owned by Atlanta-based Intercontinental Exchange (ICE).

Newsome said that no decision had been made yet as to the site of the exchange or when it will begin operation. Once the Brent contract opens in London, NYMEX plans to close its Brent contract in Dublin, Ireland, which it launched in November 2004.

To lure customers away from IPE, Newsome said that NYMEX will offer incentives to existing IPE Brent customers to the new exchange, which will be called NYMEX Europe Ltd. Clearing of the Brent contract will be done through NYMEX’s clearing system in New York.

Although most new exchanges opened in recent years offer electronic trading, NYMEX plans to adhere to its open-outcry format, which Newsome said is better for some commodities, such as oil.

Meanwhile, the NYMEX board has approved the trade of pollutant gases nitrogen oxide (NOx) and sulfur dioxide (SOx). The two contracts will begin trading on NYMEX “sometime this year,” said an exchange spokeswoman.

In spot markets already trading, SO2 emitters, such as coal-fired power plants, can earn allowances by installing expensive scrubbers to reduce emissions or by switching to low-sulfur coal or cleaner natural gas. Companies that choose not to make such investments can buy those allowances in the market.

NYMEX contracts would increase the market’s liquidity by improving efficiency. Emissions brokers have said trading NOx and SOx futures on NYMEX will allow hedge funds and investment banks to enter the market.

GE Commercial Finance launches clean energy financing initiative

Companies focused on clean energy and related technologies have a new funding source that targets them directly. GE Commercial Finance has announced it will help provide financial solutions to the growing number of companies in this space. The initiative is a joint effort of GE Commercial Finance’s technology lending and energy financial services businesses.

The technology group provides debt financing to technology-related businesses, including emerging growth companies. The energy financial services business unit provides financial products, including structured equity, leveraged leasing, partnerships, and project finance to companies throughout the energy industry.

The joint initiative will provide a full range of financing products and services to companies that deliver clean or renewable energy directly, or develop new technologies for cleaner and more efficient energy generation and distribution. Key market segments targeted are oil and gas, including clean fuels; pollution control technologies; transportation components, including motors; energy storage; energy related information technology; and transmission and distribution - to name a few.

GE Commercial Finance has assets of more than $230 billion and is headquartered in Stamford, Conn.

AIG Financial Products will open Houston office, expand energy team

Noting the growing capital requirements within the energy industry, AIG Financial Products Corp. plans to open a new office in Houston and has hired Thomas Plagemann and Russell Sherrill as managing directors of its energy team. Plagemann recently joined the company and will be located at company headquarters in Wilton, Conn. He began his energy career arranging financing with Deutsche Bank Securities’ project finance group and more recently was an originator with the GE Global Energy Group.

Sherrill, who began his professional career in the oil and gas industry serving in the exploration and production division of Exxon Company USA, has been an investment banker for the past 15 years. He will head up AIG’s new Houston office. During his years as an investment banker, Sherrill has completed $20 billion in mergers, acquisitions, and equity and debt financings for upstream, midstream, and downstream energy companies in North America and Europe.

Joe Cassano, president of AIG-FP commented: “Targeting investments and financial solutions in energy is a natural fit for our firm. . .we manage a $60 billion investment portfolio and trade approximately 40 currencies, 18 commodities, and numerous financial securities in four offices around the world.”

AIG-FP is a wholly-owned subsidiary of American International Group Inc. In addition to its Connecticut headquarters and new office in Houston, AIG-FP has offices in London, Paris, and Tokyo.

Southwest Bank of Texas changes name to Amegy Bank

Effective March 7, Southwest Bank of Texas became Amegy Bank - a name derived from “American” and “energy,” said Scott McLean, president of the largest Houston-based bank. He added that he felt the new name reflects the energy of the American people. Others have noted that it is evocative of the global energy industry, which is centered in Houston.

The bank opted to change its name for several reasons. First, said an Amegy spokeswoman, more than two dozen financial institutions in Texas have “Southwest” as part of their name. Changing the name was intended to avoid confusion with similarly-named banks. Also, changing the name was intended to avoid possible legal entanglements as the bank grew and expanded outside its traditional 10-county Houston metropolitan region. Additionally, having recently merged with Klein Bank, it was an opportunity to bring all the company’s businesses together under one banner.

Amegy paid about $100,000 to the New York office of Enterprise IG, a branding and imaging firm, and spent an additional $6 million on new signs, stationery, and advertising for its new appellation.

Southwest Bancorporation of Texas Inc., the parent company of Amegy Bank, is expected to change its name to Amegy Bancorporation Inc. following a shareholders meeting on May 20.

The company has more than $7.5 billion in assets, deposits of $5.6 billion, and more than 75 full-service banking centers in Houston and Dallas. The energy industry is a prime focus of Amegy’s business strategy, said a spokeswoman.

Fortune magazine names FMCTI among “most admired” companies

Houston-based FMC Technologies Inc. has been named the nation’s “Most Admired Oil and Gas Equipment, Services” company, ranking first in its industry in Fortune magazine’s annual listing of “America’s Most Admired Companies.”

In the oil and gas equipment and services industry, FMC Technologies ranked first in seven of eight key attributes measured by the magazine - innovativeness, employee talent, use of corporate assets, social responsibility, quality of management, long-term investment value, and quality of products and services. The company ranked second in the eighth attribute - financial soundness.

For its survey of 582 companies in 65 industries, Fortune asked approximately 10,000 executives, directors, and securities analysts to rate companies in their own industries on the eight criteria.

“We’re pleased to receive this recognition from Fortune magazine,” said Joseph H. Netherland, chairman, president and CEO of FMCTI. “This is an acknowledgment of the efforts of all our employees worldwide who combine teamwork and technology to help our customers solve their challenges.”

FMCTI provides technology solutions for the energy, food processing, and air transportation industries. The company - which employs about 9,000 people and operates 31 manufacturing facilities in 16 countries - designs, manufactures, and services technologically sophisticated systems and products for its customers.

Quorum launches new oil and gas volumetric data management software

Quorum Business Solutions Inc. has unveiled what it terms “the energy industry’s first comprehensive volumetric data management application.” The software combines traditional field data capture and oil and gas measurement capabilities with the data integrity of a centralized data repository.

Designed to address all phases of the oil and gas volumetric data management process, Quorum Volume Management manages and validates all volume data, including, oil, gas, water, and other petroleum products. The software features data editing and recalculation, volumetric allocation, and the ability to accommodate multiple units of measure. The architecture underlying the application supports multiple languages, web-based volumetric reporting, and flexible and configurable data capture. It is an integrated component of Quorum’s energy software suite of products.

“The release of [this application] is significant for the oil and gas industry as it is the first solution of its kind to handle such a diverse range of functionality,” said Roland Labuhn, Quorum vice president. “Oil and gas companies are struggling to manage their volumetric data with an array of disjointed software tools.”

Founded in 1998, Quorum is a product-centered consulting company that designs, develops, implements, and supports business software solutions for the energy industry. The company has about 160 employees operating out of offices in Houston, Dallas, and Calgary.

Petris achieves full compliance with its well log data model

Houston-based software designer Petris Technology Inc. has announced it has achieved 100 percent compliance with PPDM 3.7 well log management standards for its PetrisWINDS Enterprise WLMS Version 3.0. This certification ensures a high level of conformance between the WLMS product and published PPDM standards.

In achieving the certification, Petris joins a select group of companies whose products have PPDM certification, which helps energy companies provide for more straightforward implementation of new technology through use of standard data definitions that have broad acceptance in the marketplace.

PetrisWINDS Enterprise is a software platform that consolidates a diverse array of data sources into one web-based management system. Its patented Dynamic Common Model is intended to simplify the process of incorporating new data sources while ensuring that no data is lost.

The PPDM 3.7 data models can be used by companies as comprehensive repositories of valuable down-hole information. They can also be used as archive repositories or as an operational data storage site. With the PetrisWINDS Enterprise adapter, in-house applications can withdraw well log data and automatically convert and insert it into application-specific models with a full scope of data.

Founded in 1994, Petris provides IT-based solutions for energy clients by leveraging its expertise in data management, application hosting, geospatial information systems (GIS), and professional services. The company designs and deploys technology that integrates data from diverse data stores to enable better decision making and provide application transparency.