MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, JANUARY 15, 1998 (6)
INTERNATIONAL - COUNTRIES IN THE NEWS
KAZAKHSTAN
Russian oil company LUKoil wants to boost its total investments in the former Soviet republic of Kazakhstan to $740 million by the year 2000 from $300 million at the start of 1998, President Vagit Alekperov said on Thursday.
Alekperov said that LUKoil wanted to double its stake in the giant onshore Kazakh Tengizchevroil project.
LUKARCO, a joint venture between LUKoil and Atlantic Richfield Co (NYSE:ARC) of the U.S., has a five percent stake in the $20 billion project.
''LUKoil's investments in Kazakhstan as of January 1, 1998, were around $300 million,'' Alekperov said in the new Kazakh capital of Akmola after meeting Kazakh President Nursultan Nazarbayev. ''By January 1, 2000, we estimate this total will be $740 million.
''We already have five percent (in Tengizchevroil), and would like to increase our stake by five percent,'' he said. The project groups U.S. oil major Chevron Corp (NYSE:CHV), with 45 percent, Kazakhstan and Mobil Corp (NYSE:MOB) of the U.S. (25 percent each) and LUKARCO (five percent).
Alekperov also said LUKoil was looking to develop a deposit in Kazakhstan's Aktyubinsk region called Alibek-Mola, and was awaiting approval from the Kazakh government. More exploration work was being carried out in the Kzyl-Orda region.
''We are carrying out geological exploration on the Badenginskaya depression in the Kzyl-Orda region of Kazakhstan, where LUKoil already has a joint venture with the Canadian company HURRICANE HYDROCARBONS (Toronto:HHL),'' Alekperov said.
ARGENTINA
Minex has received a preliminary report from its Denver based technical team on the reprocessing of seismic lines shot by YPF in 1985.
A total of five lines have been reprocessed to date and the initial results show not only a clear presence of several shallow prospects but also of a number of deeper, large structures that were previously undiscovered. The seismic also shows the deep prospects are in an area that previously had very little activity during drilling by YPF.
A major fault, running east west through the property, is evident in both seismic and satellite imagery. Examination of several well logs of drilling done on both sides of the fault indicate that the hydrocarbon bearing formations of Mina Carmen and Pozo D.129 are present in considerable thickness north of the faults. These formations are the major oil bearing formations of the Gulf of San Jorge and are host to some of the largest hydrocarbon deposits currently being exploited in the area.
In the gulf of San Jorge there continues to be aggressive exploration activity. For example, Comodoro Rivadavia, on Argentina's Atlantic Coast (Nasdaq:ACAI), is home to an Amoco Argentina Oil Co. field office. Amoco Argentina operates some 1,100 wells, with a net production of around 46,000 barrels of oil per day. And PIONEER NATURAL RESOURCES recently closed a $915 million CHAUVCO RESOURCES acquisition. Four rigs currently are running in Argentina, and Pioneer
expects to drill 120 new wells with a capital budget of $100 million in 1998. Minex is in a very good position as five of its seven fully owned oil and gas concessions are exempt from provincial royalties making the ultimate value of the reserves even greater. An exploration and production program will be announced shortly.
Minex Minerals is a publicly listed company (Symbol MNXM) with a corporate focus of acquisition, exploration and development of natural resources worldwide. The company has acquired a large onshore concession in the hydrocarbon rich San Jorge Basin, Province of Chubut, Argentina. The basin is host to an estimated 2 billion barrels of oil, but has only been partly explored to date with more than 65 percent of the area remaining unexplored. Through its recent acquisition of Pampa Salamanca, Minex is now one of the largest landholders in the area.
LATIN AMERICA
Oil Slump To Cut Latin American Investment
Plummeting oil prices will hit oil and gas investment in Latin America, but other, higher risk areas such as central Asia will feel the pinch more as oil money flies to quality, industry executives and analysts said Thursday.
The private sector is most likely to reconsider mega-projects and high risk exploration, while the big state oil companies, excluding Brazil's Petrobras (PET.SA), can expect a raid from the finance ministry if prices stay low, they added.
Oil prices have plummeted 30 percent in three months to their lowest level since April 1994, marking an abrupt end to the windfall revenues that governments and companies have got used to over the last two years.
''Private sector investment projects that are on line I don't think will be affected, but national oil companies will see an impact and they will have to reschedule spending,'' said Jaime Varela-Walker, Chevron (NYSE:CHV) Latin America's vice-president for business development.
In the public sector, Mexico's Pemex and Venezuela's PDVSA are most vulnerable to budget cuts, said Rafael Quijano of Petroleum Finance Co in Washington, because planned oil spending will be needed to fill holes in fiscal expenditure if prices stay low.
Both companies have insisted they can go ahead with current petroleum sector spending plans by economising in other parts of the budget, but Quijano was sceptical:
''In both these cases it will be macro-economic financial drivers that will push for a cut in the budget of the national oil companies. It is not that the projects are less profitable, although they are.''
The relatively low geological and political risks in Latin America will weigh in the region's favour for major oil company money, said Wilson Crook, Mobil Corp (NYSE:MOB) director of South American natural gas.
''A big fall in oil prices has got to hit everybody, but Latin America has an advantage over many places in the world because it is a mature hydrocarbon province and as a result the geological risk is not that great,'' he said.
''When you look at country risk, I would stack up on any country in South America versus central Asia.''
Colombia's Ecopetrol and Ecuador's Petroecuador will also see budget pressure from the price fall, but importers such as Petrobras will actually benefit from cheaper crude oil costs and bigger refining profits, Quijano added.
Venezuela, a major oil exporter that depends for two-thirds of government revenue on oil, has already cut its spending by $800 million to help in the government's anti-inflation battle. PDVSA president Luis Giusti said that the cut, which will slice 70-80,000 barrels per day (bpd) off 1998 output and brings its budget down to $7.4 billion, is all that's required.
Quijano said Venezuela will also benefit from a growing proportion of private sector spending and rising output, but still saw it as vulnerable if prices stay low.
Mexico's Pemex contributes about a third of that country's public purse and it is planning a whopping $9.1 billion oil and gas spending in 1998 as part of a $25 billion three-year programme.
The government announced Wednesday a $1.8 billion cut in the overall budget due to weak oil prices, but said that spending on major upstream petroleum projects would not be affected.
''If you take only the national oil companies then Venezuela will suffer much more from low prices than Mexico and therefore the pressure to cut PDVSA's budget will be higher. But Mexico has more of a tradition of cutting the Pemex budget than Venezuela has with PDVSA,'' Quijano said.
Brazil cut $890 million off its planned petroleum sector spending as part of a belt-tightening exercise to fend off an attack on its currency.
Quijano said Brazil's $3.9 billion budget is now looking modest since the country will not only benefit from lower import costs, but a predicted explosion of foreign investment as the sector opens tothe private sector for the first time.
COLUMBIA
Pumping through Colombia's Cao Limn crude export pipeline was halted on Thursday following a rebel bomb blast which severed the line, a spokesman for Cao field operator Occidental Petroleum Corp said.
The attack took place just after midnight local time, 99 kilometers away from the field, the spokesman said.
Production at the field was still running at normal levels of around 175,000 barrels per day (bpd).
''Field production remains normal because we still have storage capacity,'' said the spokesman for Occidental (NYSE:OXY).
He said the area was in the process of being secured to allow engineers in, but did not indicate when repairs were likely to begin.
"It is a particularly difficult area to secure," he said.
The spokesman added that an undetermined quantity of oil had been spilled into a river as a result of the blast.
The attack was the third this year on the pipeline, Colombia's second largest, which runs from the Cao Limn field in the northeast Arauca province to the Caribbean port of Coveas.
Last year the Cuban-inspired National Liberation Army (ELN) blew up the pipeline a record 66 times, and twice forced Occidental and state oil company Ecopetrol, which operates the pipeline, to declare force majeur at the field and on exports. |
