OGJ Newsletter

As expected, the U.S. Senate last week confirmed the nomination of Federico Peña to be Energy Secretary. The vote was 99-1 in favor of Peña. Sen. Rod Grams (R-Minn.), who has introduced a bill to dismantle DOE, cast the only dissenting vote. President Clinton thanked members for their strong affirmative vote, citing Peña's accomplishments while he served as Transportation Secretary.

March 17, 1997

7 min read

As expected, the U.S. Senate last week confirmed the nomination of Federico Peña to be Energy Secretary.

The vote was 99-1 in favor of Peña. Sen. Rod Grams (R-Minn.), who has introduced a bill to dismantle DOE, cast the only dissenting vote.

President Clinton thanked members for their strong affirmative vote, citing Peña's accomplishments while he served as Transportation Secretary.

IPAA Chairman Lew Ward said, "He (Peña) seems to understand the importance of a strong, domestic oil and natural gas industry. And he has reached out to us." Added Ward, "We are eager to meet...to discuss his goals, and our ideas...."

ARCO Alaska and BP Exploration (Alaska) signed an alignment agreement to speed exploration, appraisal, and development of a 580-sq mile area in proximity to, and including, Kuparuk River field on the North Slope.

Also, the companies disclosed they found oil in Tarn, a prospect west of Kuparuk River field.

The agreement aligns all of ARCO's and BP's ownership of tracts within the Greater Kuparuk Area at 58.5% for ARCO and 41.5% for BP; it does not change ownership of existing production.

The deal allows for production of satellite oil accumulations through the existing Kuparuk infrastructure-and ARCO says it clears the way for a planned 50-well initial drilling program to develop West Sak reservoir (OGJ, Mar. 10, 1997, p. 31).

ARCO committed $54 million to the estimated $92 million project; however, BP has yet to sanction West Sak development, according to BP.

The partners are currently assessing Tarn reserves after testing 2 Tarn, first well drilled in this year's three-well Tarn exploration program.

The well tested more than 2,000 b/d of 38° gravity oil from a sandstone reservoir at 5,200 ft.

Meanwhile, ARCO and BP may drill two additional prospects this year, Cache and Tabasco. Cache will test three prospective horizons below the Kuparuk reservoir; and a well drilled and tested in 1995 indicated Tabasco could be commercial.

A separate accumulation identified by 3D seismic will be tested in the planned Tabasco well.

Despite Ecuador's recent political uncertainty, there are optimistic signs that foreign investment in oil and gas development in that country will not be derailed.

The Ecuadorian Ministry of Energy and Mines issued a decree that clears the way for ARCO Oriente and partner Agip Petroleum (Ecuador) to begin Villano oil field development (OGJ, Nov. 4, 1996, p. 27).

The decree authorizes previously agreed to modifications to the companies' existing development plan to include construction of an 81-mile, 80,000 b/d secondary pipeline slated to be operational in 1999.

It will move oil from the planned Villano field processing complex to the Trans-Ecuadorian Pipeline System.

Prospects are as bright as they've been in years for the international service and contract drilling sectors.

The SPE/IADC drilling conference in Amsterdam earlier this month was the most upbeat in perhaps 15 years, as drilling contractors and service companies enjoy a surge of E&D activity sparked by higher oil and gas prices.

But the perennial adversarial relationship still exists between service/contractor companies and operating companies.

Service/contractor company representatives complained in plenary sessions that operators aren't paying enough for the benefits of R&D and rig upgrading. Another worrisome problem cited is a lack of experienced personnel as a result of corporate staff cuts.

Also, they noted older employees with valuable expertise are nearing retirement, and there is no wave of younger replacements on the horizon.

Technical specialists at the Amsterdam conference expressed dismay at the slowness with which the international oil industry embraces new upstream technology.

But they noted the positive effects resulting from horizontal drilling.

It now takes special approval to drill a vertical well at Shell, said Tim Warren, director of research and technical service at Shell International Exploration & Production BV. Horizontal drilling and other advances, he said, have cut production costs in Oman's Yibal field to about $2/bbl from about $12/bbl, revitalizing the field.

Horizontal drilling ushered Venezuela's Orinoco heavy oil belt into a new era, said Juan M. Szabo, Pdvsa E&P coordinator. Vertical Orinoco wells previously cut about 150 ft of pay, while horizontal wells penetrate 2,000 ft of pay, eliminating the need for steam, Szabo said.

The government of Bangladesh, currently tendering 12 onshore and three offshore exploration blocks, approved a model production-sharing contract (see related story, p. 34).

State-owned Petrobangla scheduled promotional conferences in the Hotel Britannia Mar. 24 at London and in the J.W. Marriott Hotel Mar. 31 at Houston.

Bangladesh's Energy and Mineral Resources Minister Lt. Gen. M. Nooruddin Khan and Syed Sajedul Karim, acting Petrobangla chairman, are scheduled to attend each session.

Companies will be able to bid alone or with others for one or more blocks; contracts will be based on the model PSC.

The PSC includes repatriation of profits, no signature bonus, no duty on E&P and development equipment and machinery, assignment provisions, and provisions for exploration in deeper zones of existing fields.

The model PSC contains no corporate tax or administration fee.

Petrobangla-paid income tax continues, and an annual contract service fee of $100,000 will apply.

Mexico's Pemex appears to be changing the way it calculates proved reserves, which have been questioned over the years as to accuracy.

Pemex says it used internationally accepted technology, agreed by the Organisation for Economic Cooperation and Development, in calculating proved reserves of 17.1 billion bbl of crude oil reserves in 39 areas of the Campeche basin.

The effort is part of a major investment push by Pemex to insure efficient exploitation in specific regions of Mexico.

Sewell & Associates, a Netherlands company, audited and approved Pemex's findings, Pemex officials maintain.

The latest report is part of a 3-year project to calculate proved reserves in three key areas.

Other studies will cover the southern region, including Chiapas, Tabasco, and the area south of Veracruz; and the northern region, including Tamaulipas, Nuevo Leon, Coahuila, and the rest of Veracruz.

Results will be released in 2 years.

A Pemex spokesman said the most recent effort should not be compared with past reserve calculation results.

API reports U.S. highway fuel consumption grew 88% during 1966-94, but that kind of growth is not expected in the future. It said fuel demand for heavy trucks is expected to grow 3%/year through 2010, but fuel demand for cars and light trucks will increase only 1.1%/year.

Meantime, the U.S. downstream retailing segment continues to add efficiencies for the motoring public.

For Mobil customers, buying fuel for their vehicles will soon be as easy as waving a hand in front of a pump-almost.

A new system known as Speedpass will be implemented across the country this year, allowing Mobil customers to simply wave Speedpass in front of pumps to authorize fuel purchases.

Speedpass, a miniature electronic device, can be attached to customers' key chains.

After being passed in front of a pump, the pump acknowledges the device and enables the customer to select and dispense the fuel desired.

Speedpass was developed for Mobil in cooperation with Texas Instruments and Dresser Industries' Wayne division.

Texaco, meanwhile, reports its Global Brand Initiative, including the Star 21 retail outlet image implementation program, is being well-received by the consuming public.

Texaco Refining & Marketing (TRMI) and Star Enterprise report 528 Star 21 outlets have opened across the U.S., with plans to have about 40% of the TRMI and Star outlets converted to the new Star 21 image by mid-1998.