MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, MARCH 26, 1998 (6)
OTHER COMPANIES IN THE NEWS, con't
Ram Petroleums Limited has received log results for its Airu-1 indicated oil discovery drilled on its 321,000 acre Rio Putumayo block in southern Colombia in which it has a 100% working interest. The well reached total depth of 6,195 on February 8, 1998.
Because of logistical problems experienced by Schlumberger in bringing its logging unit on to Ram's location, Ram cased the well on February 17 to protect the hole from collapse of shale formations. Drill mud was circulated in the hole for ten days before 7'' casing was cemented resulting in fluid invasion of the exposed formation.
Since March 17 Gamma Ray-Neutron, DSI (Sonic), Cement Bond and RST logs have been run.
Schlumberger reports that the upper sand (6,018-6,096) has good porosity of 15-20 PU and appears to show a possible oil-water contact at about 6,050, although oil saturation readings of over 50% are recorded as far down as 6,095. Because it is impossible to evaluate the effect of the invasion of drilling fluids into the formation while it was uncased, Ram cannot determine if the interval 6,050-6,095 is oil saturated or a transition zone. There is 32' of oil saturation and the possibility that oil saturation extends from 6,018-6,095, or for 77 feet in the upper zone.
The interval 6-095-6,112 is shaly sand. A second sand with porosity of 14-16 PU is reported in the interval 6,112-6,136 with oil indicated in the interval 6,112-6,126.
The RST tool, used to log cased holes, was used by Schlumberger to pick possible oil water contacts. Schlumberger reports that under normal conditions the logs run would allow it to identify the oil-water contacts, but that in this case there was the added uncertainty of filtrate invasion.
Ram believes that this is all the information that can be obtained currently and will proceed to complete and production test the well. Test results will be announced as soon as they are available.
Pioneer Natural Resources Company (NYSE/PXD) announced that it has entered into an agreement with Mariner Energy, Inc. to acquire a 25 percent working interest in Mississippi Canyon Block 305 located in the Central Gulf of Mexico, pending award of the lease by the U.S. Minerals Management Service (MMS).
A bidding group comprised of Elf Exploration, Inc. (Operator) and Mariner Energy Inc. was the apparent successful bidder on the block at the OCS Oil and Gas Lease Sale 169, which was held on March 18, 1998. If a lease is awarded by the MMS, the resulting ownership will be Elf Exploration, Inc. (50 precent), Mariner Energy, Inc. (25 percent) and Pioneer (25 percent).
The potential acquisition of Mississippi Canyon Block 305, located in approximately 7,000 feet of water, will mark Pioneer's initial investment in the deep water Gulf of Mexico. Scott Sheffield, Pioneer's President and Chief Executive Officer, stated, "This is a high quality 3-D seismic prospect with reserve impacting potential. Pioneer will continue to evaluate investment opportunities in the Gulf of Mexico slope to increase its exposure to significant reserve and production growth."
SERVICE SECTOR
Serval Corporation (SI.UN/ASE) of Calgary has placed orders for three technologically innovative coiled tubing drilling units to be delivered in 1998. The first unit will be operating in August and the next two units will be delivered in October and December.
Serval expects to invest between $18 and $24 million on serving the coiled tubing market over the next two years.
Serval is one of Western Canada's leading energy service companies providing a wide range of integrated oilfield services in Canada and internationally.
The coiled tubing drilling units being constructed for Serval utilize new technology and will be able to drill to a vertical depth of 1200 meters. They will be used in the drilling of shallow gas wells in southern and central regions of Alberta and are designed to accommodate vertical and directional drilling.
These high penetration rate, exceptionally mobile drilling units provide significant efficiencies in rig up, rig down and drilling times. Cost savings to producers are expected to be in the order of 20 per cent and drilling times are expected to be reduced to 18 hours or less. The control cab on the units is fully computerized with real time data acquisition and data transfer links.
The Serval coiled tubing units will utilize 6 1/4 inch drill bit for the hole and a 9 5/8 inch bit for surface drilling. The drilling will utilize a 2 7/8 inch 1200 metre tubing coil and can run production casing of 4 1/2 inch diameter.
The compact Serval Coiled Tubing units require the moving of only four highway loads - the rig unit, a pump unit, mud tank unit and casing trailer. The four units are supported by a combined tool room and generator trailer which is towed by a one-ton crew cab.
Serval provides services to clients through five business units - Coiled Tubing, Construction, Environmental, Fluid and Production Services.
J&L Capital Venture Corp.(JLX/ASE) a junior capital pool company, announces that it has by a Letter of Intent dated March 13, 1998, reached an agreement to acquire all or substantially all of the assets (the "Assets") of Cancoil Technology Corporation ("Cancoil"), a private Alberta company. The purchase price of the Assets shall be the sum of $2,829,734.
Cancoil was incorporated on April 24, 1997 and has no history of operations but is currently constructing an oil and gas drilling and service rig utilizing the latest advances in coil tubing technology (the "Rig"). Upon the acquisition of the Assets the Corporation intends to complete the manufacture of the Rig. It is anticipated that the Rig and other surface equipment to be manufactured by the Corporation will allow cost effective drilling of shallow vertical/slant wells and deep directional re-entry (underbalanced / overbalanced). It is anticipated that the Rig will also have the capability to perform underbalanced production logging / perforating with both coiled tubing and wireline.
Effective March 27, 1998, the common shares of J&L Capital Venture Corp. will be listed upon and trade on the facilities of The Alberta Stock Exchange under the stock symbol "JLX".
INTERNATIONAL
Latin America Becoming Dominant Source of U.S. Petroleum Needs
Despite steadily expanding exports of crude oil to the U.S., Canada is losing market share to Venezuela and Mexico, which now rank as the number one and two suppliers of crude oil to the United States, according to U.S. Department of Energy statistics.
Between them, Mexico and Venezuela have hiked exports of crude and petroleum products to the U.S. by 929,000 bbls a day between 1994 and1997. Over the same period, Canadian exports have risen by 320,000 bbls per day.
However, the real market share loser has been Saudi Arabia, which in 1994 was the dominant supplier of petroleum to the American market. While the U.S. appetite for petroleum has grown over the four year period, Saudi Arabia's exports to the U.S. have declined marginally from 1.4 million bbls per day in 1994 to 1.39 million bbls a day last year.
In 1997, Canada held on to its position as the fourth largest supplier of crude to the U.S. and the second largest supplier of crude and petroleum products (see graph).
Venezuela ranked first in both categories but Mexico is rapidly catching up on the crude export front. Venezuelans exported 1.73 million bbls a day to the U.S. last year (over 17% of U.S. needs), of which 1.35 million bbls were crude oil and equivalent. Mexico sent a total of 1.37 million bbls north of the border, almost all of which was crude.
Canadian producers exported 1.47 million bbls per day of crude and product to the U.S. (over 13% of U.S. import requirements), of which 1.13 million bbls were crude and equivalent.
In 1994, total Canadian exports south of the border amounted to 1.15 million bbls a day, of which 940,000 bbls per day consisted of crude and equivalent.
With deregulation of the Canadian market in the mid-1980s, exports to the U.S. have been growing rapidly and are expected to increase further as Eastern Canadian refineries rely more on imported oil once the Sarnia pipeline is reversed.
In 1992, Canada sent about 1.05 million bbls of crude and product to the U.S. market. That same year, Saudi Arabia was the dominant supplier of U.S. petroleum needs with exports totalling 1.72 million bbls.
Japan Oil Firms Still Restricted Despite Reform
The legalisation of self-service gasoline stations from April 1 is widely touted as the lifting of one of the last key restrictions shackling Japan's oil industry.
But, some industry sources say a closer look reveals there are still bonds which prohibit oil refiners from making fully free business decisions and that Japanese firms are still at a disadvantage when facing international competition.
"Deregulation is not yet complete," said Ian Scoble, the president of Mobil Sekiyu KK, an affiliate of U.S. Mobil Corp, in a written response to questions from Reuters.
"There remains a number of restrictions in the refining and distribution parts of the industry that need to be addressed before I can say that the industry is fully deregulated."
One Japanese oil company official said that while the industry could now be described as deregulated, there were minor details that still needed to be addressed.
He said that Japanese refiners were still unable to compete on an equal footing with western companies because refining standards in areas of safety and quality were stricter in Japan than in many western countries.
Such standards often added to the financial burden of Japanese firms by boosting personnel and other costs, he said.
This difference in standards "definitely puts Japanese firms on a weaker footing against global competition," he said.
One example raised both by him and Mobil was the guideline on refinery maintenance checks. Despite a relaxing of rules last April, Japanese oil firms must still close their refineries for routine maintenance once every two years.
"There's no doubt that Japan has stricter rules on safety, and that makes it more difficult to compete globally," an oil trader at a refiner said.
After years of debate, the government gave its approval last November to allow self-service stations after concluding they were safe if strict safety measures were followed.
Some industry analysts believe the launch of self-service stations will add momentum to the downward spiral of gasoline prices triggered by a key reform in April 1996, which allowed companies other than oil refiners to import oil products.
Other industry pundits say retail prices, which have lost 19 percent over the last three years, could not drop too dramatically.
Japanese oil company executives have been heard to lament that the money for a litre of gasoline could no longer buy you litre of mineral water.
Competition at the pump have ravaged the profits of leading oil companies, and many firms are expected to report poor earnings when they close their books on March 31.
Few in the industry predict there will be a major wave to build self service stations because of the high costs.
Mobil president Scoble said he believed Japan's oil industry would look very different five and 10 years from now.
He said he believed that the number of gasoline stations, now about 59,000, would be reduced to half.
Despite the severe business environment, he said the sheer size of the Japanese market was enough to lure foreign firms.
"If margins remain relatively high by international standards, it could be anticipated that a number of offshore companies will look closely at entering the Japanese oil industry recognizing that Japan is the second largest market in the world for petroleum products," Scoble said.
Tarim Basin Reports Highest Growth in China's Oil Production
URUMQI (March 27) - The Tarim Oil Zone in northwest China's Xinjiang Uygur Autonomous Region produced 4.2 million tons of crude oil in 1997, an increase of 1.1 million tons in a year, the highest rate of increase in China's 21 oil zones.
The 560,000-square-kilometer Tarim Basin is estimated to have 19.2 billiontons of oil reserves, the country's largest potential, regional Oilfield Coordinating Office sources say. Eleven oilfields have been found there in eight years of exploration. These oilfields have more than 500 million tons of proven reserves.
By the end of last year, The oilfields had produced 15 million tons of oil. The Tarim Oil Zone has become China's seventh largest onshore oil zone, making up for the oil decline in east China.
Five oil pipelines have been completed in the basin oil transport. The Tarim Oil Zone is expected to yield more than five million tons of oil annually.
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