TPT July 2007

From the Americas

(Richmond, Virginia) to shed most of its North American oil and gas exploration and production assets, worth as much as $15 billion, to focus on its pipeline and electric utilities businesses. › The Norwegian oil giant Statoil said April 27 that it would make an all-cash offer of around US$2 billion for North American Oil Sands Corp, of Canada. The Calgary-based company operates an area of almost 700 square miles of oil sands leases, containing an estimated 2.2 billion barrels in recoverable oil reserves, in the Athabasca region of Alberta. As reported by Dow Jones Newswires , the Leismer project – a pilot production program at the site – is in the final phase of gaining regulatory approvals. The deposit could yield 10,000 barrels of produced bitumen a day, with first production expected in late 2009 or early 2010. › According to an April 24 regulatory filing, the Brazilian iron and steel company MMX Mineração e Metálicos plans to sell a large stake in one of its mining projects to the British mining company Anglo American. The preliminary agreement stipulates that Anglo American will acquire 49 per cent of the MMX unit Sistema Minas-Rio for $1.15 billion. Sistema Minas-Rio is the company’s most ambitious mining project, with total investments of more than $2.4 billion. These include development of the Minas mine in Minas Gerais state, a slurry pipeline, and port facilities. Anglo American will pay $704 million for the 30 per cent stake in Sistema Minas-Rio held by an MMX affiliate, Centennial Asset Mining Fund. Ipsco, a leading Canadian producer of oil country tubular goods, has agreed to be acquired by the Swedish steel maker SSAB Svenskt Stal for $7.7 billion in cash, the two companies said on May 4. As noted by Ian Austen of the New York Times , the transaction, if approved by Ipsco shareholders, will leave just two major steelmakers in Canada under domestic control: Stelco, recently emerged from a bankruptcy reorganisation; and Algoma Steel, which has been seeking a buyer. Speculation about a potential takeover of Ipsco (Regina, Saskatchewan), which maintains executive offices in Lisle, Illinois, started only shortly before the announcement of the purchase. After a Russian newspaper reported that the company was in talks with the Evraz Group, a Russian steel maker, Ipsco disclosed that it was in negotiations with another company – presumably SSAB. Both Ipsco and SSAB are prominent in the high-strength plate steel business. While SSAB now sells relatively little steel in North America, in combination with Ipsco it would become the continent’s largest plate steel provider and the second-largest provider of steel pipe to oil and gas companies, after United States Steel. Energy companies buy up to 57 per cent of Ipsco’s total production by volume. Ipsco’s president and chief executive, David S Sutherland, told Mr Austen that Ipsco has recently focused on expanding its energy-related business to include specialised steels Steel Canada’s Ipsco is to be acquired by Swedish steel maker SSAB

Oil and Gas US and other oil majors face uncertainty in Venezuela On May 1, in a boisterous May Day ceremony, the government of Venezuela assumed control of the country’s last privately run oil fields; but questions remain about the status and role of the six international companies involved. President Hugo Chávez has demonstrated that he has the will and power to wrest Venezuela’s oil from what he considers US-led corporate exploitation. But does he command the means and the expertise to develop and operate the world’s single largest known petroleum deposit? ConocoPhillips of the US had resisted signing an agreement in principle to yield control, but it, too, conceded in the end. Now, together with the others – ExxonMobil and Chevron Corp, of the US; BP plc, UK; Total Sa, of France; and Statoil asa, of Norway – Conoco enters a period of uncertainty over the conditions under which the foreign companies would be permitted to stay on as minority partners in a completely nationalized Venezuelan oil industry. Not yet fully explored, the Orinoco River basin of Venezuela holds a potential 1.2 trillion barrels of extra-heavy crude in reserves that could surpass those even of Saudi Arabia. While Mr Chávez knows that Venezuela’s state oil company Petroleos de Venezuela (PDVSA) is not up to the task of transforming that tar-like crude into marketable oil, he has said that state-run oil companies from Asia could step in for the Westerners. But industry experts doubt the ability of newcomers to take over from companies that have been active in Venezuela for decades. For their part, pulling out would be costly for the oil companies whose projects are now worth an estimated $30 billion. The socialist government of Mr Chávez has indicated a willingness to reimburse them only to the extent of their investment – some $17 billion – with partial payment in oil and, perhaps, tax amnesty. It would appear that the angry host and the unloved guests would do well to come to terms. Meanwhile, the uncertainty could affect production. Multinationals active elsewhere in Venezuela, a leading supplier of oil to the US, entered state-controlled joint ventures last year. Venezuela’s output has since declined by close to 4 per cent, or 100,000 barrels a day. The foreign companies were given until June 26 to negotiate contracts under which they will stay and help develop the Orinoco operations, in which PDVSA is taking a minimum 60 per cent stake. Elsewhere in oil and gas › The US oil and energy company Dominion (formerly Dominion Resources) announced April 30 that it had agreed to sell its offshore natural gas and oil operations to Eni Petroleum Co Inc, a subsidiary of the Italian energy company Eni, for around $4.76 billion. These include some 967 billion cubic feet equivalent (cfe) of proven natural gas and oil reserves, both shelf and deepwater, in the Gulf of Mexico. Average daily production for 2006 was approximately 503 million cfe. The sale is part of a broader initiative by Dominion

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J uly /A ugust 2007