[OFFSHORE TECHNOLOGY CONFERENCE] Oil services giants look ahead
Published | 10-May-2008
Bill Coates added that his industry need not worry about national oil companies adopting their expertise and similarly casting them aside, as long as Schlumberger, Halliburton and others stay ahead on the technology front.
"I think it's incumbent on us to stay one step ahead of it," Coates told a gathering of executives at the Offshore Technology Conference, which winds down today. "The risk of us being pinched out of the market is relatively small."
Once sleeping giants
In the past, national oil companies often were sleeping giants that relied on the Exxon Mobils, Shells and Texacos of the world to develop their resources. But increasingly, government-owned firms are working on the same level as the majors, using their wealth to invest in attractive oil and gas plays beyond their borders, such as the Gulf of Mexico.
But oil field services — from drilling to technical support to providing tools for exploration — remain something both private-sector and national oil companies seek.
Four decades ago, services companies were small and typically niche-oriented, and the big oil companies often performed their duties in-house until they began outsourcing work. That created a bigger oil field services industry with huge, consolidated players who support exploration, production and refining.
In-house improvement
Coates acknowledged that major oil companies may beef up their own oil field services divisions to differentiate themselves as they jockey for access to fields dominated by national oil companies, which now control the vast majority of worldwide reserves.
Neil Bruce, chief operating officer for engineering and project management consulting company AMEC, noted that 14 of the world's top 20 oil companies are government-run. They include PETROBRAS, China National Petroleum Corp. (CNPC), SaudiAramco and StatoilHydro.
"In a lot of cases, they're looking to us to provide — if you look back 30 years — what international oil companies would have provided," Bruce said.
Bruce said AMEC focuses on engineering, project execution, modernization and decommissioning old facilities. Growth areas where national oil companies are seeking help to run more complex projects include the Middle East, India, China, Brazil and the Caspian Sea.
"The opportunities are huge," he said.
Gazprom No. 1
Hesketh Streeter, an analyst with consultancy Wood MacKenzie, said national oil companies' hold on global reserves offers oil field services firms a wealth of opportunity. And in terms of sheer size, he said, Russia's government-run natural gas behemoth, Gazprom, is the world's biggest company in the industry, followed by China National Petroleum Corp with ExxonMobil coming in third. ExxonMobil is the world's largest in terms of revenue, though.
National oil companies will expand their in-house services, but that shouldn't necessarily threaten the industry. Successful oil field services companies "have to think like oil companies," with long-term plans for growth.
A frequent question
So might national oil companies try to buy major players in the services industry? Schlumberger's Coates said he wasn't concerned about it but added that "every other week" he talks to a new Schlumberger hire who asks him whether the company could be acquired.
"They usually work for us an hour before they ask," he quipped.
However, he said technology-oriented oil field services companies like Schlumberger are "asset poor," in that they focus more on people than equipment.
"Anyone who acquires a services company takes an enormous risk because the assets are people and people can leave," he said. "It would be an unusual risk to spend so much money on an asset that is portable." Bruce added that a national oil company would be more likely to make such an acquisition "to accelerate the investment they've got."
Source: Houston Chronicle| by KRISTEN HAYS
UNITED STATES: Motiva approves a plan to double the capacity of its Port Arthur plant
Published | 25-Sep-2007Motiva Enterprises made a huge bet Friday that America's appetite for gasoline will keep growing well into the future, giving final approval to a $7 billion expansion of its Port Arthur refinery that will make it the largest in the nation.
The decision came after more than three years of study by Motiva, a joint venture of Royal Dutch Shell and Saudi Arabia's state-owned oil company, and after a jolt in costs doubled the project's price tag.
With the move, two of the world's biggest oil companies have signaled their belief that petroleum-based fuels are here to stay despite the growth of biofuels like ethanol and calls to curb U.S. gasoline use.
It also suggests the companies see more road ahead for the domestic refining industry's recent profit run, despite its history of boom and bust cycles.
"Even at this kind of investment level, this is still a very attractive project," Rob Routs, Shell's top global refining operations executive, said in a conference call with reporters Friday.
Recent increases in the cost of building materials and labor, along with concerns about the long-term demand for gasoline, have pushed some refiners to delay or cancel expansion projects.
As recently as May, the American Petroleum Institute said refiners planned to boost the nation's refining capacity almost 11 percent through expansion projects representing 1.6 million barrels a day. Now, the trade group says only about
1 million barrels a day in projects will go forward.
Material costs rose as a spate of refiners launched expansion projects simultaneously to take advantage of high refining profits, while labor costs spiked because of a shortage of construction workers after the 2005 Gulf Coast hurricanes. The cloudy demand picture, meanwhile, is the result of proposals in Congress that could greatly boost the nation's ethanol output and also create higher fuel economy standards for cars and trucks, both of which could weaken demand for gasoline.
President Bush also has set a goal to cut gasoline use 20 percent by 2017.
Given those challenges, it is highly significant that Motiva decided to move forward with its Port Arthur expansion, said Mike Wilcox, head of global downstream consulting for Wood MacKenzie in Edinburgh, Scotland.
"On balance, I'd say it gives a positive message to other refiners," he said.
Most U.S. refineries now run near their peak, and still do not produce enough gasoline to keep up with Americans' demand for gasoline. To make up the shortfall, the U.S. imports about 10 percent of the gasoline it consumes each year.
Motiva CEO Bill Welte said those factors helped persuade the company to expand in Port Arthur, even though the partners considered pulling the plug when costs ballooned. "That was always an option," Welte said in an interview.
Expected to be complete in 2010, the expansion will more than double the Motiva facility's oil-processing capacity to about 600,000 barrels per day. That will make it the nation's largest refinery, edging out an Exxon Mobil Corp. facility in Baytown that processes nearly 563,000 barrels per day.
Exxon Mobil spokeswoman Prem Nair said the world's largest oil company had no plans to match Motiva in order to retain the top spot.
Along with the expansion, Motiva is also adding equipment that will allow the Port Arthur plant to process a broader range of crude oils.
Prices for light, sweet crude recently have hit records as refiners in the Far East have snatched it up to feed rising energy demands, Routs said.
But Port Arthur will now be able to run heavy, sour crudes found in South America and thick tar sands from Canada, which can be produced at roughly $20 per barrel less than lighter crudes, he said.
Motiva said the project will create 300 new jobs, produce lower emissions per barrel of oil put through the system and spur more development in the region.
Though Port Arthur encouraged the plant expansion with tax incentives, Mayor Deloris "Bobbie" Prince still called the Motiva project a "gift from God."
"The quality of life for the people of this town will never be the same as of this morning," Prince said Friday.
Hilton Kelley, a community activist, said he will be watching to make sure Motiva makes good on promises to the area, including the installation of more air-monitoring devices at the plant.
"They have answered a lot of our concerns," Kelley said. "But we are not totally 100 percent satisfied with the expansion."
Motiva has been preparing the Port Arthur site for the expansion for more than a year. Hundreds of construction workers have been coming and going. Recently, they began driving pilings to undergird what essentially will be a new refinery connected to the original one.
That's why word of the final investment decision, even if it took awhile, was not totally unexpected Friday.
Said Routs: "We haven't been exactly hiding the fact that we wanted to do this."
UNITED STATES: Aboard the discover deep seas
Published | 03-Sep-2007But it's worth the risk for companies betting on big rewards.
"Everything we drill, we're going at it because we think there's something there," said Kevin Koen, a drilling engineer for Chevron Corp. aboard Transocean's Discoverer Deep Seas, a state-of-the-art drillship under contract to the San Ramon, Calif.-based oil major.
The vessel is drilling a third exploratory well about 130 miles southeast of New Orleans, looking for oil in Chevron's Bob North field under more than a mile of water.
The first two wells didn't find oil, but discoveries by other companies surrounding the field, as well as Chevron's own scientific data, indicate something's there. They just have to pick the right spot.
Exploratory wells, known in the industry as "wildcat" wells, assess whether oil exists in a field. Subsequent appraisal wells help gauge how much.
Exploratory wells take several months to drill, and 65 percent or more fail. Koen projects a 1-in-12 chance of success in the Bob North field probe.
Chevron spends $500,000 to $850,000 a day to lease the Discoverer Deep Seas. The daily cost depends on how much hardware, what type of work, and how many people are needed on a given day.
The well will cost about $100 million, regardless of whether it produces oil.
"We're not going to drill a hole just to drill a hole. But believe me, I've drilled more than one well when we've sat there with all the pre-drill data in the world and said, 'Dude, this thing is great!' and you get down there and it ain't nothing but salt water," Koen said.
But nearby producing fields in the Gulf area known as Mississippi Canyon, including Shell's Ursa and Eni's Devil's Tower, as well as Hess Corp.'s Tubular Bells prospect, showed a longtime target-rich environment deserving more exploration.
The Interior Department's Minerals Management Service, which oversees activity in the Gulf, estimates that 50 billion barrels of undiscovered oil lie beneath layers of sediment, rock and thick, undulating salt.
Companies around the world are pushing to tap that potential.
Leasing bids
Last month, 47 companies submitted bids in the Minerals Management Service's latest lease sale, in which the highest bids were accepted for blocks amid 18 million acres south of Texas. Each block is 5,000 acres, and once leased, companies study the oil potential and weigh the risks of drilling.
Norway's state-owned Statoil far outbid the other companies, committing $139 million — nearly half of the total $289 million in high bids — for 36 blocks. London-based BP, already a major player in the Gulf, came in second with $31 million for 91 blocks. Brazil's state-owned Petrobras was third, followed by Oklahoma City-based Devon Energy and Houston-based ConocoPhillips.
Chevron leads the Gulf pack in terms of leased acreage. The company has interests in 973 blocks, 587 of which are in depths greater than 1,000 feet.
Scottish consulting firm Wood Mackenzie projects that Gulf oil production will reach 1.8 million barrels a day by 2010. Current oil production is about 1.3 million barrels a day, according to the Minerals Management Service.
Julie Wilson, lead Gulf analyst for Wood Mackenzie, said the basin attracts producers largely because it already has extensive infrastructure in place, including undersea pipelines to transport oil and gas to shore, and Gulf Coast refineries to process it. Other hot areas, such as offshore West Africa, don't have that infrastructure.
"And in terms of attractiveness, there are still significant barrels to be found," she said.
The Discoverer Deep Seas is looking. It's what the industry calls a "fifth-generation" drillship, meaning it is among the most advanced in operation, Transocean spokesman Guy Cantwell said.
First of its kind
Essentially a floating town, the Deep Seas has seven floors and can house up to 200 workers. Unlike an oil platform with multiple open decks, most of its levels are enclosed. Workers can move from level to level in a roomy elevator, unlike platform workers who typically go up and down stairs.
The noise never stops on the top deck where the 226-foot-tall derrick surrounds the drill. Workers wear earplugs, hard hats and steel-toed boots.
Chevron workers wear polo shirts with the company's logo, while workers for oil services companies helping with the operation — such as Halliburton — wear red coveralls with their logo. Transocean workers wear blue and their logo as well.
The work is continuous. Employees put in 12-hour shifts for 14 days straight, then go ashore for 14 days while a fresh crew takes over. At night, huge lights "make it look like the middle of the day here," Koen said in the control room next to the drill, where the floor was slippery with grease tracked in from the deck.
From that room, engineers see the drill through windows and on computer screens, and control it with joysticks.
Viewing the drill where it enters the water, known as a "moon pool," is similar to the view out of a glass-bottom boat without the glass.
Reflections off the ship's inner walls give the water a brilliant royal blue hue, in which sharks and schools of other fish are visible.
The ship is designed to work in moderate environments, such as the Gulf, offshore Brazil, India and Southeast Asia, Cantwell said. It can't work in harsher environments, such as offshore Norway, which are more suitable for semisubmersible rigs moored to the seafloor.
But a moderate environment doesn't mean moderate drilling. While exploratory wells tend to have fairly simple paths, production wells can make twists and turns to hit reservoirs, Koen said. Also, drilling mechanisms must withstand extreme temperatures and pressures.
Sometimes the drill doesn't make it past the salt layer because top layers of sediment cave in, "like digging a hole in the beach," Koen said.
Also, the sides of the hole must be shored up as drilling progresses or the well will collapse, Koen said. After a certain length has been drilled, that operation is suspended to place pipe, or casing, into the open hole to stabilize it.
Koen said the casing in a finished deepwater well can weigh more than a million pounds. "Everything out here is supersized from what you would see somewhere else," he said.
The next frontier
Technological advances also allow companies to assess what they're drilling through in real time. While the Mississippi Canyon area has been drilled extensively, another deeper system in the Gulf known as the Lower Tertiary is the basin's next frontier. Chevron
Last year Chevron conducted a well test in an exploratory well in its Jack field that indicated the entire region could hold up to 15 billion barrels of oil. That would be the biggest find in North America since the Alaska North Slope in the 1960s.
The Deep Seas drilled that exploratory well, and another Transocean drillship, the Cajun Express, conducted the record-setting test in 7,000 feet of water and more than 20,000 feet under the seabed. The Cajun Express is now drilling an appraisal well in the Jack field to further evaluate its potential, Chevron spokesman Mickey Driver said.
Devon, a minority partner in the Jack field, is drilling its first exploratory well in its Chuck field about 30 miles away. Diamond Offshore's Ocean Endeavor, a renovated semisubmersible rig, is doing the drilling.
While Chevron and Devon have snapped up acreage in the Lower Tertiary, one-fourth or less of that area likely will present drillable prospects, said Tony Vaughn, vice president and general manager of Devon's Gulf division.
Having a lot of area to study increases chances of finding the right spot, he said.
"When you think about the investment with the rigs and the drillbit," he said, "that makes you want to high-grade your inventory to drill only what you think has the best chance of being successful."
Via: Chron
by
Tags:
IRAQ: Iraqi Oil Minister Lays Out the Rules
Published | 11-Aug-2007Hussain al-Shahristani did say, however, that LUKoil had a competitive edge over many other companies wishing to work in Iraq because of its previous experience and knowledge of the country.
"We believe LUKoil enjoys some advantages in winning tenders," Shahristani said after two hours of talks with Industry and Energy Minister Viktor Khristenko.
Shahristani said all foreign companies would have an equal chance at access to Iraqi oil fields, but that the Iraqi National Oil Company would be given preferential treatment and would have exclusive rights to the country's 27 largest producing fields.
The Iraqi firm can then hire contractors as it sees fit, he said.
West Qurna, a field already under production with estimated reserves of 4 billion barrels, would go to INOC, Shahristani said.
Legislation before the Iraqi parliament would give the rights to already producing or untapped adjacent fields to INOC. Foreign companies would have the right to bid in tenders for entirely new fields.
LUKoil CEO Vagit Alekperov, who returned to Moscow from vacation for the meeting, and Shahristani "discussed joint projects, in particular West Qurna-2," the company said in a tersely worded statement quoted by The Associated Press. LUKoil was not available for further comment late Thursday.
Zarubezhneft, Rosneft, TNK-BP and a number of Iraqi companies also participated in the meeting with the Iraqi oil minister, a statement released by the Industry and Energy Ministry said.
Shahristani's comments concerning the West Qurna field, in particular, appeared to put a final damper on Russian hopes that contracts existing under the previous regime of Saddam Hussein might be revisited.
Khristenko said the Russian companies were prepared to see previous agreements "corrected somewhat."
"We don't have to start from scratch," Khristenko was quoted as telling Shahristani in a statement released by the ministry. "We have achieved a lot, both at the state level and at the company level."
The Iraqi parliament, which is currently adjourned for a month, is expected to pass the bill next month, Shahristani said, adding that the first tenders could start immediately after that.
Most importantly, he said the ultimate decision on all oil production in the country would rest with the Iraqi oil council, a body that includes himself and is headed by Prime Minister Nouri al-Maliki.
Iraq has vast oil reserves, but its oil industry has suffered from decades of war and neglect. There are about 500 fields believed to hold oil, and only 80 of them have proven reserves, Shahristani said, adding that these fields have already been proven to hold 115 billion barrels of oil.
"The general expectation in the industry is that the last barrel of oil will be produced in Iraq," he said, adding that the more Iraq explores, the more oil it finds. Despite the decision on existing fields, Shahristani told reporters, the companies with whom the minister met expressed their willingness to start work in Iraq immediately.
Analysts said the time for determining how access to Iraq's oil wealth would be distributed had now arrived.
"We are now getting to the point where the Iraqi prize is about to be allocated -- that is, Iraq now has the potential to be the second largest oil producer after Saudi Arabia," said Chris Weafer, chief strategist at Alfa Bank.
But there was no agreement on what kind of chance Russian companies had to regain former positions in Iraq.
Colin Lothian, senior analyst for the Middle East at energy consultancy Wood Mackenzie in Edinburgh, said LUKoil had a good chance of re-establishing its position in Iraq because it had access to important geological data that provide an advantage over competitors.
Lothian added that it was in Iraq's interest to provide all foreign companies with access to the fields to encourage competition.
"Iraq is in a unique position and many companies are wishing to work there," he said. "Therefore it doesn't have to offer preferential treatment to anybody."
Yevgenia Dyshlyuk, an oil and gas analyst with UralSib, said a lot would depend on the ability of Russia's political leaders to strike deals on access to Iraqi fields with the United States and Europe.
"They should agree on a political level," she said.
On this front, there was some doubt whether the Iraqi administration would be receptive to Russian bids for fields, given the country's opposition on the U.S.-led invasion of Iraq. While there were questions raised about Washington's willingness to see Russia play a significant role in Iraq's oil future, others suggested that LUKoil's relationship with U.S. major Conoco-Phillips, which owns a 20 percent stake in the company, could be a factor in its favor.
"Nobody can be under any illusion that the final say lies with the United States," Weafer said.
Yury Shafranik, former fuel and energy minister, who now heads the Oil and Gas Workers' Union, met with Shahristani earlier Thursday, a spokesman for the union said.
The CIA has listed Shafranik as one of the Russian officials who helped Hussein secretly amass $11 billion from 1996 to 2003 and said he pocketed an estimated $130 million.
Via: Moscow Times
by Staff Writer Tai Adelaja contributed to this report.
Blogalaxia|Feed
Tags:
THE AMERICAS: Oil majors tread pragmatic path
Published | 28-Jun-2007They could either accept participation on the new terms, in which they would be junior partners to PdVSA, Venezuela’s state oil company, and expected to write cheques for new investment over which they would not have full control – or walk away from assets worth billions of dollars.
Faced with that decision on Tuesday, Chevron of the US, Total of France, BP of the UK and Statoil of Norway chose to bite their lips and stick around.
ConocoPhillips and ExxonMobil of the US have walked away.
For Exxon, the calculation, while painful, was straightforward. It has built a reputation for being a company that regards contracts as sacrosanct and expects its partners to do the same.
With delicate negotiations over its Sakhalin-1 project in Russia under way, it would have been madness to throw that reputation away.
If it could not do a deal with Venezuela on acceptable terms, the cost – losing about 1 per cent of its production – was a price worth paying.
For Conoco, however, the cost of leaving is much higher and analysts had generally expected it would try to stay.
Last year, it made about 4 per cent of its production and had about 10 per cent of its reserves in Venezuela.
Its shares lost 3 per cent on Tuesday, although they steadied yesterday. It expects to write off $4.5bn for its lost assets.
Exxon said in a statement yesterday that “we continue discussions with the Venezuelan government on a way forward”, even though it was clear that it was giving up its stake in Cerro Negro, one of the four upgraders turning Venezuela’s heavy oil into crude so it can be sold on world markets.
Robert de By, of Dewey Ballantine, the law firm, said it might sound too late for talks, adding: “It is a bit like being on the ground being robbed – you can say ‘I’m still talking’ but is the robber listening?”
But he said Venezuela was unlikely to want to cut itself off from the world economy by expropriating assets without compensation.
Verizon of the US was paid what was seen as a reasonable price for its stake in CANTV, a Venezuelan telecommunications company, in February.
Ultimately, Exxon and Conoco can go to arbitration, as Eni of Italy is seeking to do over a conventional oil project in Venezuela that was taken over last year, at the World Bank’s International Centre for Settlement of Investment Disputes.
That would be a long, hard road, however.
Given the difficulties that could lie ahead, it is understandable that the other companies have chosen not to go down that path; particularly as one side-effect of the Exxon and Conoco withdrawal is that some of their stakes will be cut less severely than they had feared.
Chevron, for example, is retaining its 30 per cent holding in the Hamaca project and BP its 16.7 per cent stake in Cerro Negro.
For international oil companies, such difficulties are an increasingly common fact of life. Resource-rich countries have taken advantage of high oil prices to exert greater influence.
Chevron, BP, Total and Statoil are left with the potential for future development in a country that has some of the largest oil resources in the world.
Venezuela’s heavy oil reserves are estimated at 270bn barrels; on a par with Saudi Arabia’s 260bn.
“When all the oil in the world has run out, Venezuela will be one of the last countries turning its taps off,” says Derek Butter of Wood Mackenzie, a consultancy. “Unlike many countries with large reserves, Venezuela is not closed to foreign investment, and there will be plenty of companies still willing to invest there.”
Phoenix Petroleum Philippines
The final IPO price is within the offer price range of P6.08-P11.30 per share disclosed earlier to the exchange.
Phoenix, a retailer of fuel products based in southern Philippines, will sell to the public up to 36.25 million common shares. The estimated proceeds of P355.25 million will be used to expand its operations.
Phoenix booked net profit of P74 million in 2006, up sharply from P3.7 million in the previous year.
VENEZUELA: Chavez Says Oil Companies Got Illegal Profits in Faja
Published | 02-May-2007