MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING FRIDAY, MAY 29 1998 (4)
International Stories
BAKU, June 1 - Azerbaijan will sign three new agreements with foreign firms on Tuesday aimed at developing its Caspian basin oil industry, an official of state oil company SOCAR told Reuters on Monday.
The largest deal, worth $2.5 billion in investment over 25 years, inovlves SOCAR, Italy's AGIP, Japan's Mitsui & Co Ltd, and Turkish Petroleum (TPAO) to develop the Kyurdashi block of fields in the south Caspian sea, Rafik Abdullayev, assistant to the SOCAR president, said.
The Kyurdashi fields are estimated to hold 100 million tonnes of crude.
Abdullayev said a second, $800 million, 25 year contract to develop the southwest Gobustan field, will be signed between SOCAR, Canada's Commonwealth Oil and Gas Ltd, a unit of A and B Geoscience Corp, and Union Texas Petroleum Holdings Inc of the United States. The field is estimated to contain 20 million tonnes of crude and 12 billion cubic metres (bcm) of natural gas, he said.
He said a third agreement will be signed between SOCAR and the U.S. company Frontera Resources on the Kyursangi-Karabagli group of on-shore fields. The agreement lays down basic principles to be used by SOCAR and Frontera for drawing up a formal contract.
The project is worth an estimated $700 million in investment over 25 years, said Abdullayev. The site is estimated to contain over 19 million tonnes of crude, he said
Offshore Oil Sector Developing Rapidly in China
China has so far verified 1.46 billion tons of offshore geological oil reserves and 320 billion cubic meters of natural gas reserves and put 19 oil and gas fields into operation.
According to a spokesman of the China National Offshore Oil Corp (CNOOC), China's annual offshore crude output has risen from less than 100,000 tons 16 years ago to the present 16 million tons. And the country's annual offshore natural gas output has reached 2.6 billion cu m.
To boost offshore oil development, the CNOOC has by now signed 126 contracts and agreements with 67 oil companies in 18 countries and regions, absorbing a total foreign investment of 6 billion US dollars.
Offshore Oil Contract Put into Effect in Taiwan Straits
BEIJING (May 29) XINHUA - The China National Offshore Oil Corp
(CNOOC) and the Taiwan-based CPC oil company today formally put into effect a contract of oil exploration signed two years ago.
According to a senior CNOOC official, it is the largest-ever cooperation project between both sides of the Taiwan Straits.
Located 150 km south of Guangdong province's Shantou City and 250 km west of Taiwan's Kaohsiung City, the contract area covers 15,400 square kilometers bordering the waters of the Taiwan Straits.
The implementation of the contract signals a major breakthrough in economic cooperation between both sides of the Taiwan Straits, the official stressed.
He said that the contract, signed in July, 1996, has finally got approval by higher administrative authorities of both sides after removing a series of barriers.
Under the contract, the two sides will jointly accomplish a total of 1, 500 kilometers of seismic lines and examine the seismic data for possible oil exploitation in a 3,000-km stretch.
First-phase investment for the seismic survey is expected to be one million US dollars, which will come from both sides on a fifty-fifty basis, with each of them holding a 50-percent stake in the venture.
The official said that the CNOOC and the CPC will set up a joint administrative group to carry out the contract, and all decisions will be made through friendly consultation.
If evidence of oil-bearing structures is found, the two sides will sign agreements on oil exploitation in the area.
Oil experts say that the contract area has good prospects, since seven oilfields with a combined annual production of 10 million tons have already been discovered in the Pearl River Basin to the north and west of the Chaoshan Basin in the contract area.
In addition, the CPC has found natural gas resources in the Tainan Basin.
Geologists with the CNOOC and the CPC have high hopes for the exploratory work in the contract area. They are showing increasing interest in launching more cooperative oil projects.
Experts here said that the Taiwan Straits and the neighboring South China Sea and East China Sea are rich in oil and gas resources, which provides huge potential for oil cooperation on both sides.
Petroleum Giant Cedes in Battle with Still-Wary Colombian Indians
Occidental Petroleum Corp. has canceled plans to drill for oil on lands deemed sacred by Colombia's U'wa Indian tribe, effectively conceding defeat in a three-year battle in which tribal leaders threatened mass suicide.
The 8,000-member Indian nation says its fight may not be over yet.
Company spokesman Robert Stewart confirmed Thursday that Occidental was relinquishing rights to the 800-square mile oil field in Colombia's Samore region. He said the Colombian government has offered Occidental smaller sites in the region, but he declined to specify where or give other details of talks.
Occidental's plans had been in limbo since February 1997, when Colombia's highest court ruled the Los Angeles-based company could not drill in U'wa territory.
It was unclear whether the government's new offer included sites on tribal lands and if so, whether that would contradict the court's ruling.
"We can't be certain the rights of this people are being safeguarded," the National Indigenous Organization of Colombia, an umbrella group representing the U'wa, said in a statement.
The U'wa consider oil "the blood of mother earth" and say drilling will destroy their culture. Supporters of the tribe mounted an international campaign to prevent drilling, taking out ads in U.S. newspapers and gaining backing from human rights activists concerned about the threatened mass suicide.
The Colombian government stood to receive up to 85 percent of the profits from exploitation of the field, which is believed to hold as much as 2.5 million barrels of crude and be worth billions of dollars.
Some Colombian oil executives were angered by Occidental's defeat, saying the country's greater interests are being sacrificed for a tiny group in a nation of 37 million.
The deal offered to Occidental was part of a broader government effort to reactivate oil exploration stalled by disputes such as this one. Oil has surpassed coffee as Colombia's chief legal export, and the country is producing an average of 840,000 barrels of oil a day this year.
State oil officials recently warned that unless exploration rebounds, Colombia will become a net oil importer by 2004.
Russia Looks to Key Energy Sector for Tax Revenues
MOSCOW, May 29 - Russia's financial crisis and the government's urgent need for cash have led to a wave of personnel and regulatory changes in the country's key energy sector, as the government looks to it for tax revenues.
The government suffered a setback at the beginning of the week when it failed to attract any bids for the sale of a controlling stake in Rosneft, the last major energy asset still in state hands.
The stake had been priced at $2.1 billion, and the failure to raise this money was a major blow to a budget whose total value has been pared back to just 438 billion roubles ($71.35 billion).
Late on Thursday Prime Minister Sergei Kiriyenko sacked the president of Rosneft, Yuri Bespalov, and the chairman of its board, Alexander Putilov. A new Rosneft tender has already been announced.
Other high profile dismissals on Friday included the head of Russia's tax service, Alexander Pochinok, and the long-serving head of the country's crude oil pipeline monopoly Transneft, Valery Chernyayev.
At the same time as sweeping out the people who are perceived as failing to deliver the revenues the sector is expected to provide, the government has made adjustments to the tax regime to maximise income.
On Friday morning the government scrapped a plan, announced by Kiriyenko at the end of April, to reduce the excise duty paid by oil producers from 55 roubles per tonne of oil to 45 roubles. Apparently it can no longer afford to forego this revenue.
It also stipulated that from July 1, oil exporters will only be allowed to put crude oil into export pipelines - which carry oil to the most profitable markets where payment is all but guaranteed - when they can show their taxes are paid.
Earlier in the week the government adjusted the basis on which excise duty on natural gas is paid. The 30 percent duty now falls due when the gas is produced rather than when the producer is paid for the gas, as previously.
Analyst Sergei Glaser at Salomon Smith Barney said this measure could yield around a billion roubles by the end of the year.
Deputy Prime Minister Boris Nemtsov had shown the government's new
determination to boost tax receipts from energy on Wednesday when he called in the heads of several major oil companies and told them to settle their budget debts by May 30.
Stephen O'Sullivan, co-director of research at United Financial Group in Moscow, said the people on their way out represented the old regime of former Prime Minister Viktor Chernomyrdin, and Kiriyenko will now get his own team in place.
''It looks as if the remnants of the Chernomyrdin team are on the way out, which must be good,'' he said.
He said that it was not the fault of Putilov or Bespalov that Rosneft had failed to sell, although ''stewardship was not great under the tenure''.
Analysts have said the failure to sell Rosneft owed more to the fall in world oil prices and the financial crisis in Russia rather than mismanagement of the company itself.
It was the weakness in oil prices which had originally led the government to offer the oil industry tax concessions, but this was a luxury the government apparently felt it could no longer afford.
''Oil companies are now under pressure to improve their performance,'' said O'Sullivan. ''They haven't done so yet, they've just asked the government for more money.''
He said they should now look at restructuring, by cutting staff and non-core businesses, for example.
''There's a black hole in the government's finances - don't expect the government to help, it needs the taxes,'' he added.
Oil prices remain critically low for Russia, which is still overdependent on the export of certain key raw materials but especially oil and gas.
Benchmark front month Brent crude futures were a little over $14.00 a barrel on Friday, well below the 1997 average of $19.30
Russia is, unusually, to attend a meeting of Organisation of the Petroleum Exporting Countries in Vienna at the end of June to discuss ways of boosting oil prices.
WEEKLY NEWS ON KERM'S LISTINGS OF COMPANIES
Top 20
052798 Berkley Petroleum Corp. and Paramount Resources Ltd. announced that the companies have entered into an agreement to purchase Shell Canada Limited's interest in the southern Northwest Territories and the Maxhamish area of northeast British Columbia. The acquisition includes 196,285 acres in the Fort Liard area including Shell Canada Limited's 50 percent interest at Bovie Lake and Arrowhead. Also included is 42,450 acres in the Maxhamish area of northeast British Columbia with working interests ranging from 50 to 100 percent. As a result of the transaction, Paramount and Berkley now control 100 percent in all of the prior joint venture lands. The Berkley/Paramount joint venture plans to continue its drilling program in the upcoming
winter by completing the Bovie Lake C-76 sidetrack operation and completing the Arrowhead N-65 well that, as previously announced, flowed significant rates of gas; in addition, drilling operations at Arrowhead O-65 and Netla M-23 will continue. The companies' Liard F-36 well will also be completed as soon as access can be established. Further additional exploratory locations for the area are currently being evaluated.
052798 Carmanah Resources reported first quarter results. Weak oil prices and the late arrival of the Pride Pennsylvania jackup rig at the Camar oil field offshore Indonesia caused lower first quarter results for Carmanah. The rig, which was originally to be at Camar in January, 1998 to initiate drilling, completion and tie-back operations, did not leave Singapore until the end of March, after undergoing more extensive modifications than originally anticipated by its owner. As a consequence, no new wells were placed onstream at Camar. Simultaneously, the price of oil declined from $26.87 last year to $20.58 this year. While overall results were relatively unchanged from the fourth quarter of 1997, lower revenue, production, cash flow and earnings were recorded compared to the first quarter,
1997.
During the reporting period, Carmanah finalized a $50 million credit facility for its development programs with CIBC; completed preparations for Camar and Natuna drilling and saw the handover of the Onado Field in Venezuela occur with field operations initiated.
Production was limited to 928 net barrels per day at Camar, as normal declines occurred without the impact of scheduled new wells being onstream. Last year production averaged 1,585 barrels per day.
Presently, CN-3, which was recently completed, is being placed onstream and the rig is scheduled to commence tie-back operations at Camar-6 in the next several days, following the successful installation of a monopod at this well's surface location. Immediately thereafter a third development well, MPA-1, which offsets Camar-6, will be drilled and should be onstream by mid-July. As a result, financial and operating results should show considerable improvement as the year progresses, with most of the Company's forecast cash flow generated in the second half of 1998.
Reworks and new drilling in Venezuela should be underway in June, while the Company's 15,000 BOPD project at Langsa in Indonesia is progressing.
Carmanah remains in a strong financial condition with adequate cash, working capital, available credit and projects in hand to significantly expand its production base by year-end if program timetables remain unaltered and forecast well results are achieved. exchange2000.com
052698 Carmanah Resources Ltd. (CKM/TSE) announced it has been paid in full for Camar crude oil delivered earlier this year to Pertamina, the Indonesian state oil company. The payment was made in U.S. dollars and was originally due on April 26, 1998 but was delayed because of disruptions arising from recent civil unrest which has now subsided.
Carmanah also advises that its expatriate staff has returned to Jakarta and that field operations at Camar are continuing. The Pride Pennsylvania jackup rig is expected to arrive at Camar-6 for completion and tie-back operations on May 28, 1998. Perforation and acidization of several zones at CN-3 are being concluded, after which the well will be placed on production.
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