MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, JANUARY 16, 1998 (7)
WESTERN LOGIC RESOURCES INC. announced that all preparations to accept the deep drilling rig are completed at its Long Valley, Nevada drilling location. The Company will proceed to drill the well upon finalization of the Purchase and Sale Agreement with respect to the oil and gas leases
PACIFIC RANGER PETROLEUM INC. announced that on January 16th, 1998 the Corporation closed the acquisition of Sunstone Projects Ltd. Management is pleased with this acquisition as Sunstone has developed a good reputation with its excellent domestic and international client base in its business of engineering, design, construction and commissioning of facilities for the oil and gas industry. Estimated 1998 revenues are $1,200,000.00 for Sunstone, which is also expected to complement the business of the Corporation's other wholly-owned subsidiary, Company Package Technology Ltd.
INTERNATIONAL - COMPANIES IN THE NEWS
MANTAUR PETROLEUM CORP. announced today that Production Sharing Contracts for the Ergel Block XII and Bayantumen Block XVII have been signed with the Petroleum Authority of Mongolia. These Contracts were ratified by the Government of Mongolia prior to year end 1997.
Block XVII is in the northern section of the Tamtsag sedimentary Basin in northeastern Mongolia. The Block has an area of 12,250 km2 or 3 million acres and is adjacent to the regional railway centre of Choibalsan. A number of new light oil discoveries by the SOCO International (LSE) and NTI Resources (ASE) group have been reported in the Tamtsag Basin in 1997, primarily from Lower Cretaceous and Upper Jurassic reservoirs. The group drilled seven wells in this Basin in 1997, recorded four oil discoveries, and has contracted oil sales to China at international prices with sales beginning in early 1998.
Block XII is in the East Gobi basin of southeastern Mongolia, directly south of the Zuunbayan and Tsagaan Els oil fields. The Block is comprised of 11,700 km2 or 2.9 million acres.
In accordance with its agreement of March 17, 1997 Mantaur has issued 2 million common shares to acquire these interests.
Mantaur is a Canadian oil company active in Mongolia and in the exploration of its two Trinidad oil projects to be drilled in early 1998. The presently issued share capital of Mantaur is 19,382,310 common shares (25 million shares fully diluted).
INTERNATIONAL - COUNTRIES IN THE NEWS
LATIN AMERICA
Low Risk Aids Latin American Quest For Oil Investment
The 30 percent drop in crude oil prices will certainly tighten belts throughout the industry but a low geological and political risk assessment may spare Latin America from the most severe cuts, industry executives and analysts said.
In comparison with other areas, Latin America has relatively low risk factors that will weigh in its favor for major oil company money, according to Wilson Crook, Mobil Corp.'s 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.
Over the last three months, oil prices have hit their lowest level since April 1994, marking an abrupt end to the windfall revenues that many Latin American governments and companies have become accustomed to over the last two years. Mega-projects and high risk exploration will be the first items cut from drilling agendas as companies opt for safer returns on exploration spending.
Excluding Brazil's Petrobras, big Latin American state oil companies can expect a raid from the finance ministry if prices stay low, industry analysts said.
''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's Latin America's vice-president for business development.
In the public sector, Mexico's Petroleos Mexicanos (Pemex) and Venezuela's Petroleos de Venezuela (PDVSA) are most vulnerable to budget cuts, said Rafael Quijano of Washington-based consultants Petroleum Finance Co., 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 economizing in other parts of the budget, but Quijano was skeptical.
''In both these cases it will be macro-economical 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.''
Venezuela, a major oil exporter and OPEC's only Latin American member, depends on two-thirds of government revenue on oil dollars. It has already cut its spending by $800 million to help in the government's anti-inflation battle.
Luis Giusti, president of PDVSA said that the cut brings the government budget down to $7.4 billion -- all that is required. This cut will slice 70,000 to 80,000 barrels-per-day (bpd) off 1998 oil output.
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.
In 1996, Venezuela invited international oil companies to return to invest in oil exploration after a 20-year hiatus. Since then, international companies have funneled billions of dollars into the industry, increasing the proportion of private sector participation in the state-run industry, which has declared its intention to double production over the next ten years to around six million barrels-per-day.
In Mexico, 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 program. Because its constitution prohibits foreign investment in exploring for oil, all funding must come from the treasury.
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.
Colombia's state-run Ecopetrol and Ecuador's Petroecuador will also feel the squeeze from lower prices, but net oil importers such as Brazil's state-oil company, Petrobras, will actually benefit from cheaper crude oil costs and bigger refining profits, Quijano added.
Brazil cut $890 million off 1998 planned petroleum sector spending as part of a belt-tightening exercise to fend off an attack on its currency.
Petrobras will award this month for the first time ever joint venture exploration and production agreements to the private sector.
The company hopes to generate some $3 billion over the next three years in both private sector investment and multilateral loans, and boost production to 1.5 million bpd by 2000 from current levels of around one million.
COLUMBIA
Colombia's Cao Limn crude export pipeline remained shut down Friday, more than 32 hours after a rebel bomb blast ruptured the battered line for the third time this year, industry officials said.
Officials at the state oil company Ecopetrol and field operator Occidental Petroleum Corp (NYSE:OXY) said the army was still securing the area where the attack took place, just after midnight Thursday, and repair work on the line had not yet gotten underway.
Occidental said production from the Cao Limn field remained normal, however, because of ample field storage capacity. Production at the field averages about 175,000 barrels per day (bpd).
Cuban-inspired National Liberation Army (ELN) guerrillas blew up the 230,000 bpd capacity pipeline 66 times last year as part of a nationwide campaign of economic sabotage.
A spokeswoman for Ecopetrol said it was hoped that repair work on the line, which spilled an unknown quantity of oil into a river after the latest blast, would begin Friday afternoon and that pumping operations would resume by sometime early Saturday.
The attack occurred in a remote area about 60 miles (99 km) west of the Cao Limn field.
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