Newsletter

U.S. Industry Scoreboard 10/13 [242,033 bytes]

While U.S. sanctions against Iran threaten to impede the determination of export options for Caspian oil (see related story, p. 27), talks concerning field development plans and exports are flourishing.

Azeri state oil firm Socar is offering investment opportunities for redevelopment of four mature onshore oil fields: Bibi-Eybat, Buzovni-Mashtagi, Kala, and Zirya. Data rooms have been set up in Houston and Henley-on-Thames, U.K.

Socar and GeoQuest made presentations to a number of E&P companies in the U.S. and Europe. Socar's Vitaly Begliarbekov, deputy general manager for foreign investments, said, "The natural decline in oil production has been exacerbated by a lack of money to repair inactive wells to return them to production."

At the Kazakhstan International Oil & Gas Exhibition in Almaty early this month, William G. Christensen, vice-president of Unocal International Energy Ventures, said the best export option for Kazakh oil is a southward route through Afghanistan and Pakistan. "Kazakhstan lacks export routes, not oil," he said, "and the southern pipeline is not only a viable option but the one that would provide the highest netbacks."

Amoco Eurasia Chairman Charles Pitman favors a trans-Caspian line from Kazakhstan to Baku because it will give Azerbaijan and Kazakhstan an opportunity to share infrastructure costs and capacity.

"The time to act is within the next 12 months," said Pitman, "when the Azerbaijan International Operating Co. stakeholders will decide the route, capacity, participation in, and financing of the main export pipeline west from Baku."

A recent pact between Kazakhstan and China to lay a pipeline from the Caspian to China offers another export option (OGJ, June 9, 1997, Newsletter).

Given the current agreement involving major Chinese participation in the Caspian oil race, more contracts are sure to be signed in the near future.

In fact, Kazakhstan's position vis-a-vis investment potential seems to be equal to Azerbaijan's for the first time since the breakup of the Soviet Union.

Much of this is due to Almaty's stance on export flexibility and wanting to play up its geographical position as a crossroads between Asia and Europe.

Meanwhile, amid the fallout from Total's latest pact with Iran (see Watching Government, p. 34), the U.S. seems mute on Italy's continuing participation in Libya's oil industry-subject to the same U.S. sanctions as Iran.

An official of SNAM, the Italian gas transmission company, has told OGJ that his firm is well along in negotiations to take gas from a Libyan project. Plans include producing gas from offshore NC-41 field, laying wet gas and condensate pipelines to shore, and building an onshore processing plant.

The plant will also take dry gas from onshore Wafa field.

The gas will then move to Sicily via a new 500-km trans-Mediterranean pipeline.

Amerada Hess and Oryx have hit deep subsalt pay on Garden Banks 216 block in the Gulf of Mexico.

The Penn State Deep discovery well, GB 216 No. 3, cut 123 ft of net pay in four zones at about 20,500 ft in 1,450 ft of water. The new discovery lies below the Penn State Shallow discovery made last year.

The pay zones for the new well are in geologic horizons not previously found productive, says Oryx, a 50-50 partner with operator Amerada on the GB 260 unit, which includes the 216 block.

The Penn State wells are about 3 miles from Garden Banks 260 Baldpate, which is scheduled to begin production in third quarter 1998. Amerada and Oryx will develop Penn State Shallow via a subsea tie-back to Baldpate.

Union Pacific Resources has upped the ante in its bid to take over Pennzoil (OGJ, June 30, 1997, p. 30).

UPR says its new all-cash offering of $84/share for Pennzoil common eliminates Pennzoil's excuses for denying shareholders the right to choose.

Pennzoil says its board will review the revised tender offer "in due course."

The oil industry has responded adroitly to a sizable oil spill in an area that is extremely sensitive, both politically and ecologically.

A quick response, automatic shutdown, and calm seas helped contain damage from a subsea pipeline rupture that spilled as much as 500 bbl into the Santa Barbara Channel near a national marine sanctuary (OGJ, Oct. 6, 1997, p. 38). But, despite a valiant effort, some oil did reach beaches.

Torch Operating Co. manages the platform for Nuevo and handled the cleanup, which cost more than $1 million. Exact cause of the rupture is under investigation, but Torch managers say a weld may have failed on a flange connecting two sections of the 11-year-old pipeline.

At presstime, divers had sealed the rupture with fiberglass tape while awaiting a more permanent clamp.

The line will remain shut down until federal and state officials conclude their investigation.

Torch expects to replace the damaged portion and hopes to get the Irene platform back on line in 4-6 weeks.

The offshore cleanup is finished, but work continues at the affected beaches. The spill killed about 50 birds.

The Alliance Pipeline group and Nova have broken off talks to cooperate on a natural gas export pipeline project.

Nova said Alliance rejected its proposal to provide services in Alberta for the British Columbia-to-Chicago line.

Nova claims that higher transportation costs will result for Alberta shippers because Alliance will mean unnecessary duplication of existing pipeline facilities.

Alliance plans a 1,864-mile, 1.3 bcfd high-pressure gas line from northeastern British Columbia to Chicago (OGJ, Aug. 25, 1997, p. 29). Nova says $1 billion (Canadian) would be saved if Alliance used Nova's Alberta facilities.

The two groups have been discussing a deal for several months.

Alberta Energy Co., an equity partner in Alliance, said Alliance is doing a job that Nova was never designed to do. "When Alliance is fully running, it will bring a continental gas market," said AEC's Gwyn Morgan. "For the first time, we'll get full netbacks from the U.S."

BP has struck a virtually exclusive worldwide supply deal with Sumitomo Metal, under which Sumitomo will supply oil country tubular goods for several years beginning in 1998.

Sumitomo will provide OCTG to BP worldwide, except for ordinary steel pipe used at the firm's U.S. facilities. While it did not disclose the value of the contract, the Japanese steelmaker is expected to receive orders from BP for tens of thousands of tons per year. That would make the deal worth more than 10 billion yen/year, about triple the value of its previous orders from BP.

Contract periods are for 5-7 years, depending on the product.

Pakistan's offshore oil exploration policy will be unveiled in November at the U.K. government's London International Conference.

Pakistan chose the London investment conference venue because the U.K. government is heavily involved in Pakistan's oil and gas sector, says Petroleum Minister Nisar A* Khan.

Khan says the policy will provide "massive" incentives for offshore drilling, which is the major thrust of the government's petroleum policy.

It will also provide large tax rebates and duty concessions.

Foreign investment, much of it targeting equity stakes in state-owned operations, will continue to expand in Venezuela's booming petroleum sector.

That's the word from Pdvsa Pres. Luis Giusti, addressing an Ernst & Young conference in Houston last week.

Topping the list will be an IPO next year of state-owned Pdvsa affiliate Pequiven, which operates all of Venezuela's state petrochemical assets. The offering will occur as soon as Venezuela's Congress approves changes in the country's petrochemical structure, perhaps as soon as April-May 1998, or maybe in second half 1998 if problems arise.

Following that, Pdvsa's 10% stake in upstream joint ventures with international companies in Venezuela will be traded publicly-at first domestically, then on international markets.

Giusti also is hopeful about talks currently under way that will allow an increase in the domestic price of Venezuelan gasoline to the international fob level. This would pave the way for "true competition" in that country's heavily subsidized retail sector. Some movement on this issue could come early in 1998.

Meantime, Giusti said in response to some criticism within OPEC about Venezuela exceeding its production quota that OPEC "can't remain stuck in the conventional wisdom of 1983 (when group quotas were established)," adding that the OPEC quota system "is a simplistic way of dealing with the problem (of production in excess of market needs").

"It's useless to sit around the table accusing each other of violating quotasellipsewhen 26-27 million b/d of production can't give you control of a 74 million b/d market."