OGJ Newsletter

U.S. Industry Scoreboard 5/12 [71078 bytes]

As the 29th annual Offshore Technology Conference (OTC) got under way last week in Houston (see related story, p. 22), there was new information surfacing about the promise of subsalt.

The Phillips-operated Mahogany project in the Gulf of Mexico, the world's first subsalt production, is proving both challenging and rewarding.

On the upside, wells are coming in better than expected on the platform, about 80 miles off Louisiana, says Phillips. Two wells, out of six now planned, were flowing at a combined rate of about 15,250 b/d of oil and 19.3 MMcfd of gas at the end of April, roughly half the total output of 33,000 b/d and 40 MMcfd Phillips anticipates for the 1997 peak.

On the downside, work is about 2 months behind schedule, Phillips says, but it believes it will meet estimated 1997 peak output rates despite delays.

Progress was slowed because the 18.6? gravity oil came up much hotter than tests indicated. During drill stem tests, oil registered 115-120? F.

Phillips anticipated the oil would flow at 130-150? F., well below the 170? F. maximum allowed to ship the crude to shore by pipeline.

Oil being produced is 176-180? F., posing a variety of challenges.

A heat exchanger had to be modified to use seawater to cool the oil instead of keeping it warm.

In another reflection of surging activity offshore, Conoco and Reading & Bates will build a second ultradeepwater dynamically positioned drillship, identical to a unit commissioned last year as part of a joint venture (OGJ, Nov. 11, 1996, p. 36).

Steel for the first vessel will be cut beginning June 23. It's scheduled for delivery in 1998, and the second vessel is to be delivered early in 1999 under the current timetable. The second vessel is being constructed under an option with South Korea's Samsung Heavy Industries, which Conoco exercised. The second vessel entails an expansion of the Conoco and Reading & Bates JV.

The first vessel is dedicated to Conoco for 5 years to drill and evaluate 60 federal blocks in the Gulf of Mexico; the second unit could work in the gulf but most likely will be placed in worldwide service.

Conoco will have control of the second drillship for 21/2 years, and it has renewal options on both. Conoco has 15 million acres of deepwater tracts worldwide, including 130 in the gulf and other acreage off Norway, U.K., New Zealand, and in the Caribbean.

By yearend 2000, MMS forecasts Gulf of Mexico production could total as much as 13-17 bcfd of gas vs. about 13 bcfd in 1995 and as much as 1.9 million b/d of oil compared with 945,000 b/d for the same period.

Deep water, which MMS defines as 1,000 ft or greater, shows the greatest potential for development, the agency says.

By 2000, MMS estimates that as much as 65% of gulf oil production and 28% of gas production will originate in deep water.

The gulf has been producing for 50 years, and production represents more than 83% of total production from the Outer Continental Shelf and more than 99% of all OCS gas production. In 1995, gulf production accounted for 15% of all oil produced in the U.S. and 26% of the natural gas.

Speaking to reporters at OTC, the president of the newly formed Kazakh national oil company, Kazakoil, said foreign investment is critical to Kazakh- stan's goal of producing 1.1 billion bbl/year.

Nurlan Balgibayev says $200 billion ultimately is needed to fund both downsteam and upstream projects in Kazakhstan.

The objectives of Kazakoil, formed Mar. 4, are to monitor and control the country's hydrocarbon resources and expedite foreign investment.

Oil production is expected to be 197 million bbl this year, more than enough to supply the country's current demand. But access to foreign markets is bottlenecked by Russia, and Kazakoil has begun several feasibility studies to build pipelines to Europe, China, and the Middle East.

The Caspian Pipeline Consortium's pipeline, expected to be completed by 2000, will not accommodate all of Kazakoil's production goals.

There's more E&D action in Kazakhstan and Azerbaijan.

Houston's Union Texas Petroleum Holdings (UTPH) and Oman Oil signed agreements to develop and produce oil and gas onshore Kazakhstan and offshore in the unexplored Kazakh sector of the Caspian Sea.

UTPH will be operator with a 75% interest.

Onshore work will involve two blocks in the Atyrau region, north of Tengiz oil field, covering about 4 million acres. The JV has preferential rights to select two offshore blocks.

Azeri oil from the ACG field development in the Caspian will be shipped via Turkey before 2000, says Azerbaijan President Geider Aliyev.

In 1996, Turkey agreed to finance the cost of a pipeline to move crude from Baku to Georgia from unitized Azeri, Chirag, and Gunesh* fields (OGJ, Apr. 8, 1996, Newsletter). In spite of a joint Turkish-Azeri declaration on a Turkish pipeline, a final decision on a route has yet to be made.

A first-of-its kind infrastructure fund is on the drawing boards to give companies with integrated energy capabilities a better way to compete in global markets "from wellhead to the meter."

Companies that have agreed in principle to form the fund include San Francisco firms Energy Asset Management and Bechtel Enterprises; Pacific Enterprises, Los Angeles; Dresser Industries, Dallas; and M.W. Kellogg, Houston.

Each will be represented on the fund's board of directors.

The investors have contributed $200 million to the core fund, which is about to close. Plans call for the fund to raise an additional $800 million or more from other investors.

Revenue will be used to acquire interests in growing privatizations and development projects in electric, gas, petrochemical, and related infrastructure, primarily in Latin America and the Asia/Pacific region.

Alberta will fight a new Canadian federal law banning importation or interprovincial trade of the gasoline additive MMT.

David Hancock, Alberta Federal and Intergovernmental Affairs minister, says Alberta will challenge Ottawa under the Canadian Internal Trade Agreement. Alberta has no substantive proof that would support claims that MMT is responsible for health or pollution problems, claims Hancock.

Virginia's Ethyl Corp., which manufacturers and exports MMT, has launched a $350 million damage suit against the Canadian government. It says the new legislation is a breach of obligations under the North American Free Trade Agreement. Ethyl points out that the Canadian bill does not ban the product outright but only forbids importation and interprovincial movement of gasoline containing MMT. It contends the bill prohibits free trade of MMT between the U.S. and Canada.

Gulf Canada forecasts strong results in Indonesian operations could triple the company's reserve base in the next 3 years.

Gulf's current reserves are 800 million bbl of oil equivalent, and Indonesian properties alone could produce an additional 1.6 billion bbl from new exploration, officials say.

The company is changing the name of its Indonesian unit from Asamera to Gulf Indonesia Resources Ltd., and it will incorporate Asamera assets and those acquired in the recent Clyde takeover.

India plans no changes in its oil and gas policies as a result of a change in government late in April.

Prime Minister Inder Kumar Gujral recently told reporters he is retaining all the ministers of the previous government to maintain policy "continuity."

India announced a new exploration licensing policy in March that outlines a comprehensive fiscal package to provide incentives for private investors and frees private companies from having to enter into collaborative agreements with national companies.

The Karen guerrilla faction in Myanmar may be backing off plans to sabotage the Myanmar-Thailand gas pipeline now under construction (OGJ, May 5, 1997, p. 38). Quoting official Thai sources, reports indicate Karen National Union (KNU) leader Gen. Bo Mya-bowing to pressure from others in the KNU and from Thai officials-may be willing to negotiate. KNU wants assurances about the future of Karen people in the vicinity of the pipeline.

Elizabeth Moler, nominated as deputy Energy secretary, drew nothing but praise from senators during her confirmation hearing last week.

Currently, Moler is FERC chairman.

Frank Murkowski, Senate Energy committee chairman, told her, "Your confirmation is a certainty." A Senate vote is expected shortly.