TPT November 2008

Oil & Gas News

As noted by senior staff writer Paula Dittrick of the Oil & Gas Journal (8 September), capital spending varied widely by region, with lower levels of investment in the West offset by gains in regional spending elsewhere. The review showed Asia-Pacific investments having risen on China’s increasing natural gas demand and rising demand for liquefied natural gas (LNG) in the rest of Asia. Upstream spending in Russia and the Caspian region soared 58 per cent upon higher acquisition activity and development spending. In contrast, conventional oil and gas spending in Canada last year plunged by nearly $30 billion from 2006. Analysts saw rising royalty rates in the province of Alberta and new Canadian royalty trust legislation as contributing to lower overall upstream investment in Canada by more than 25 per cent. In the US, substantially lower acquisition activity contributed to a 9 per cent decline in 2007 upstream spending compared with 2006. “Higher prices drove a 10 per cent increase in revenue to $931 billion [worldwide],” said Robert Gillon, IHS Herold senior vice president. “But cost pressures have been unrelenting, with lifting costs rising by 17 per cent and government take up 5 per cent to $253 billion, or 51 per cent of pre-tax profit. As a result, net income edged up 2 per cent to $246 billion, which is a record result but is far from the heady advances of the prior three years.” An Iraqi plan to award six contracts to Western oil companies has been withdrawn, participants in the negotiations said on 10 September. Hussain al-Shahristani, the oil minister of Iraq, told reporters at a summit meeting of OPEC in Vienna on the previous day that talks with Exxon Mobil, Chevron, Shell, Total, BP, and several smaller companies for one-year deals had been broken off. Finalization of the contracts, which were announced in June, was said to have dragged on for so long that the companies could not fulfill the work within the stipulated time frame. The six no-bid deals, which would have been the first major oil contracts with the central government in Iraq since the toppling of Saddam Hussein in 2003, were for work to raise production from existing oil fields by half a million barrels a day. While not especially lucrative by industry standards, the contracts were valued for offering a toehold in Iraq at a time when oil companies are being shut out of energy-rich countries around the world. The companies will be eligible to compete for future contracts, but in open bidding. The award of the contracts had come under sharp criticism from several US senators on grounds that they could undermine the efforts of Iraqi Kurds, Sunnis, and Shiites to reach agreement on a hydrocarbon law and a revenue-sharing agreement. This criticism was conveyed to Mr Shahristani by the American Embassy in Baghdad in late June, whereupon the deals were delayed. A spokesman for the Iraqi Oil Ministry said on 14 September that Iraq had signed its first major oil deal with a foreign company since the fall of Saddam Hussein’s regime. The contract, with China National Petroleum Corp, could be worth up to $3 billion and would allow CNPC to develop an oil field in southern Iraq’s Wasit province over about 20 years, Oil Ministry spokesman Assim Jihad said in Baghdad. Iraq cuts Western oil companies loose, signs a contract with China’s CNPC

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Metals Technologies

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N ovember 2008

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