MISC. SELECTED NEWS STORIES - WEDNESDAY A.M. 10/21/98
August offshore drilling shows biggest drop in 12 yrs
NEW YORK, Oct 19 - Rates operators can charge for offshore drilling rigs showed their biggest monthly drop since June 1986 in August as oil prices remained weak, according to contractor Global Marine Inc's <GLM.N> survey.
Worldwide rates for offshore rigs fell 9.6 percent to 67.6 percent of the cost of building a new rig, Global said on Monday.
Particularly hard hit was the Gulf of Mexico, where rates fell 11.5 percent from July to 42.35 percent of the cost of a newbuild, with daily rates for shallow water jackup rigs, which drill smaller prospects, falling below $20,000, just a few thousand dollars above daily operating costs, Global said.
"The offshore drilling business continues to suffer from low dayrates, and shallow-water drilling markets worldwide have been particularly hard-hit," said Global chief executive Bob Rose.
Rates for North Sea rigs fell 9.5 percent to 75.56 percent of the cost of a newbuild, in West Africa they dropped 8.5 percent to 66.07 percent and by 6.5 percent in Asia to 62.23 percent.
Demand for deeper water semisubmersible rigs was down, but the market remains relatively buouyant, falling just 2.2 percent to 62.73 percent of a new build, Global said.
Shares of oil drilling and service companies have reflected the decline in activity and are amongst the worst performing sector on Wall Street.
The Philadelphia Oil Service Index <.OSX> has dropped from 114.37 points at the end of 1997 to 60.39 points now as oil prices plummeted to 12-year lows earlier this year and have remained subdued since.
GRI Study documents shifting view towards U.S. gas
ARLINGTON, Va., Oct. 20 - Gas Research Institute today released a study examining the historical shift in perceptions about the size of the remaining conventional U.S. natural gas resource base.
The study, "Changing Perceptions Of Remaining U.S. Conventional Gas Resources" (GRI-98/0253), discusses how this transformation -- from the resource-shortage mentality of the 1970s to today's view that gas is abundantly available -- has resulted from an interplay of factors, including increased exploration success rates in frontier plays, improved gas well recoveries and continued reserve appreciation activity in existing fields. GRI, along with Energy and Environmental Analysis Inc., Arlington, Va., developed the study, which includes 13 graphs and tables.
One of the most striking observations comes from an analysis of the discoveries in the deepwater Gulf of Mexico, which concludes that 9.7 billion barrels of liquids and 40.1 trillion cubic feet of total gas have already been found in the deepwater play. Such a level of confirmed discoveries is beginning to challenge the lower range of total deepwater potential envisioned as recently as 1995. A projection at the field level for 85 deepwater fields currently producing or scheduled to go online in the near future indicates that production of 1.6 million barrels per day of oil and more than 5 billion cubic feet per day of gas can be expected. Comparison to newly constructed deepwater pipeline capacity confirms this interim assessment.
"The deepwater Gulf of Mexico is a prime example of a turnaround in resource perceptions," said John Cochener, GRI project manager and principal analyst-resource evaluation. "As the 1990s have progressed, the Gulf has moved from being regarded as a 'dead sea,' with a limited future, to potentially one of the most prolific domestic supply areas. Technology has been the facilitator, allowing industry to extend its reach much further out into the deeper waters.
"Over the course of a decade, the pendulum has shifted to a recognition of gas resource abundance, contingent on invested effort," Cochener said. "The fact that discoveries have converged so rapidly on the lower end of the deepwater resource estimate is good news for gas supply. This progress implies that the unfolding trend has considerable life remaining. Surprisingly, the growth in the offshore resource base has occurred in an environment where gas prices, in real terms, are less than half the level that existed in the 1980s. Technology is obviously substituting for price."
Resource perceptions are influenced by the methodology used to assess new fields and can have a significant impact on whether final resource assessments are overly optimistic or unduly pessimistic. GRI's analysis includes a discussion of the pros and cons of five diverse new field assessment methods including: (1) extrapolation of historical trends, (2) a real or volumetric yield, (3) material balance, (4) play analysis, and (5) direct subjective assessment. In practice, assessments are often based on several approaches, depending on the amount and quality of data for a given area, play, or depth interval.
Perceptions can mask underlying trends. One misconception regarding reserve growth (the growth of proven reserves in existing fields) is the exclusive tie to "old" fields. However, decade-by-decade analysis since the 1940s shows that U.S. reserve growth is distributed across all field-discovery periods. Such a uniform distribution implies a continuation of the trend in expansion of existing proven reserves.
The GRI study identifies a number of other factors contributing to the growing optimism about the U.S. resource base, including:
-- Shelf areas in the shallow Gulf of Mexico waters have excellent potential for both reserve growth and exploration at greater drilling depths, particularly the sub-salt intervals that had been overlooked before the availability of new seismic exploration technologies. Earlier this year, a discovery confirmed a massive new offshore gas play, estimated at 1 Tcf, in a carbonate reef trend.
-- The lower-48 states contain extensive volumes of largely unexplored sedimentary strata at drilling depths greater than 15,000 feet. Advances in exploration and drilling technologies have made previously hard-to-reach deep gas drilling more economic despite relatively flat gas prices.
-- Statistics show that gas-well recompletion activity in the Gulf waters has grown from one-fourth of completions in previous decades to nearly one-half today. Producers have discovered that recompletion in an existing wellbore is one of the lowest-cost methods for adding reserves to existing fields.
-- When the "as published" assessments of the principal resource monitoring organizations (GRI, U.S. Geological Survey and Minerals Management Service, the Potential Gas Committee, and National Petroleum Council) are converted to an equivalent-year basis, all the assessments show a substantial increase over time.
Questions about the report or ordering should be addressed to Val Megginson at GRI's Baseline Center, Arlington, Va., 703-526-7832, or fax, 703-526-7808, or by e-mail, vmeggins@gri.org. The report can be ordered directly from the GRI Document Fulfillment Center, 1510 Hubbard Drive, Batavia, IL 60510, or fax, 630-406-5995. The report is $25 for GRI members and $35 for nonmembers, plus shipping and handling.
GRI, established in 1976, manages cooperative R&D programs for its 335 members and the natural gas industry. GRI conducts R&D that benefits the entire industry and its customers; and targeted benefits R&D in which consortia and individual organizations partner with GRI to develop or apply technologies to improve their competitiveness and benefit customers in specific gas and related energy markets.
SOURCE Gas Research Institute
10/20/98 /CONTACT: John Cochener of the Gas Research Institute, 703-526-7834, or e-mail, jcochen@gri.org/CO: Gas Research Institute ST: Virginia IN: OIL SU:
Survey shows concern about rising U.S. oil imports
WASHINGTON, Oct 21 - Eight out of 10 Americans are worried that U.S. dependence on foreign oil is a threat to national security, and they want the federal government to require better gasoline mileage for vehicles.
Those are the findings in a new survey of 1,000 registered voters nationwide to be released Wednesday in Washington by the Sustainable Energy Coalition. The coalition is made up of more than a dozen activist groups such as the Union of Concerned Scientists and the U.S. Public Interest Research Group.
The survey's results were released as the United States marks the 25th anniversary of the October 1973 oil embargo.
U.S. crude imports have jumped to record levels since then with imports forecast at 8.37 million barrels of crude a day this year, according to the Energy Department.
The United States bought 48 percent of its oil supplies from foreign sources last year, up from 28 percent in the early 1970s.
Almost 77 percent of the 1,000 people surveyed nationwide said they thought current import levels were a threat to national security, while 87 percent thought the U.S. addiction to foreign oil threatened American jobs and the economy.
To reduce dependency on foreign oil, 80 percent of those surveyed said the government should raise the fuel efficiency standards for automobiles and sports utility vehicles.
In response to the 1973 embargo, the government required higher gas mileage for cars and light trucks. The standards for trucks were set lower than cars, because at the time trucks were sold mainly to farmers and construction workers, who hauled big loads and drove off-road in their work.
Many consumers use light trucks today as their main mode of transportation, and minivans and sports utility vehicles -- which did not exist in 1973 -- fall into the light truck category and have lower gas mileage.
While most respondents in the survey were in favor of cutting foreign oil imports, they were against opening new oil drilling in protected U.S. offshore areas and the Arctic National Wildlife Refuge. Some 57 percent of those surveyed opposed such drilling.
The 1973 embargo, imposed by members of the Organization of Petroleum Exporting Countries (OPEC), was the first oil supply disruption to cause major price increases and a worldwide energy crisis. U.S. drivers experienced long lines at gasoline stations, and many times there was no fuel to buy.
The federal government built an emergency oil reserve in 1977 to ensure another embargo would not disrupt U.S. energy needs. But the stockpile holds only about 67 days worth of oil imports, much less than the reserve's goal of 90 days.
The survey was conducted by R/S/M Inc of Rockville, Maryland on behalf of the Sustainable Energy Coalition.
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