International Focus

The Kashagan structure, upper northeast Caspian [49,561 bytes] Asked to name the world's leading oil companies, most people would readily name what are glibly called the majors - Exxon, Mobil, Chevron, Shell, Texaco, BP, and so on. But if we make a list of the world's largest oil companies in terms of proven oil reserves, or the companies with the highest upstream operating profit per barrel of oil and gas output, the answers would be surprisingly different.

World's top oil companies

Asked to name the world's leading oil companies, most people would readily name what are glibly called the majors - Exxon, Mobil, Chevron, Shell, Texaco, BP, and so on. But if we make a list of the world's largest oil companies in terms of proven oil reserves, or the companies with the highest upstream operating profit per barrel of oil and gas output, the answers would be surprisingly different.

This is the conclusion of a remarkable new report produced by Price Waterhouse and PIW, Ranking the World's Top Oil Companies, which compares and ranks the world's 100 largest oil companies according to more than 100 key criteria.

Most remarkable of all, is perhaps the revelation that the world's large state-owned oil companies far surpass the majors in terms of both oil production and reserves, despite the trend toward privatization, with just 17 of these companies, from the Mideast, Latin America, and Russia, dominating the top 20 companies and accounting for 880 billion boe reserves - 82% of the world's reserves.

Russia has five companies in the top 20, the largest number for any single country. Its Gazprom holds 23% of the world's natural gas reserves and accounts for 26% of global production, seven times more than second-place Royal Dutch/Shell. The country's big five (Lukoil, Yukos, Gazprom, Sidanko, Rosneft) rank with Shell, Exxon, and BP, and all are being privatized, so this process will definitely alter the dominance of state-owned companies.

And, because each of these giants have the resources to become major players in the international petroleum industry, they can be expected to be seen more and more often as partners, concession holders, and perhaps operators in all the world's major plays.

In spite of the predominance of state-owned companies, in terms of financial performance, the traditional majors top the list, with Royal Dutch/Shell and Exxon leading the pack. If, however, the state companies provided comparable financial data, it is thought that companies such as Gazprom and Saudi Aramco would give Shell and Exxon a race for the top positions.

Narcomex: oil vs drugs

In 1996, Mexico is estimated to have grossed approximately $35 billion in illegal drug exports, achieving a conservative increase from the Mexican Attorney General's 1994 official figures. That same year, Mexico's international oil trade, its largest legal export, brought in only $7 billion. Trade in drugs earned five times that of oil. Is it any wonder, then, that the Mexican government has serious corruption problems?

Mexico's petroleum industry is ranked second in importance after drugs. Is it no surprise that a reduction in drug trafficking would impede recovery of the Mexican economy and possibly negatively impact NAFTA, destabilize the PRI ruling party, and precipitate increased illegal immigration.

Colombia may be the source, but Mexico is the apparent wholesaler, packager, and transporter of narcotics to the United States via an intricate network of four narcotics cartels that achieve an estimated 90% success rate in delivering their drugs to the streets of Houston, New York, Los Angeles, Miami, and middle America. Fully 80% of cocaine comes through Mexico.

What happens to the billions in narcotics earnings? The money is laundered through investment in legitimate enterprises, particularly tourism and banking, which produces legal foreign exchange. Some of that is paid out to Mexican government officials, the military, judges, and police.

So, then, despite the constant clamoring of the international petroleum industry for the privatization of the Mexican petroleum sector, it simply won't happen - not only because it has a quasi-religious sanctity in the minds of the Mexican people, but because there is really no incentive to the powers that be in Pemex and elsewhere in the government; the fully privatized narcotics trade's cocaine, heroin, and marijuana bring in far better returns to all concerned.

Will the Clinton administration do anything more than posture and pretend it is conducting a war on drugs, when the highly profitable NAFTA business could be endangered, or will the Mexican government stop looking the other way while crime and corruption engulf the nation? No. The truth is today's Mexican economy would be devastated by only a 25% reduction in drug trafficking.

New Zaire negotiations

Laurent Kabila, the leader of the popular rebellion against Zaire's long-time autocrat Mobutu Sese Seko, is already planning for the end to the country's civil war and a fresh beginning for the country's much beleaguered people, with establishment of a transitional government and early free elections.

Having already occupied the mineral-rich eastern half of the country, he is approaching Kinshasa and wasting no time in asserting that it is his regime, not that of Mobutu, that will be granting mineral concessions, presumably including those to Zaire's small Atlantic aquatory, wedged between Angolan and Congolese waters.

Awards have already been made, some openly, some secretly, during his march from Kisangani to Lubumbashi, as a means of funding his troops and weapons. Further awards will likely be more reasoned and related to national interests. Although all existing concession blocks in Zaire's aquatory are held by Chevron (Zaire Gulf Oil) and its partners Teikoku and Union Oil, several other operators have already made overtures to Kabila's economic negotiators for those areas adjacent to Angola's Cabinda deepwater sector, which may well spark new bidding.

Tony Blair and the British Labour Party

The coming to office of the British Labour Party and the UK's new Prime Minister Tony Blair won't make much of a ripple in the offshore petroleum industry, with the possible exception of a greater emphasis on environmentally sound practices. John Battle, the new minister for industry and energy has shown concern about offshore disposal, as in the case of the Shell's near dumping of the Brent Spar, and has said the new government will be tough on environmental issues and not allow regression to less sound procedures, but that the Labour Party did not envisage the introduction of any new taxes on the oil industry.

Although the 18-year Conservative Party reign was soundly defeated nationwide, Labour has its greatest support in Scotland, where the issues of autonomy and self-rule have been on a back burner but definitely smoldering. Speculation is strong that a new Scottish parliament will be Labour's payment for Scot support, and perhaps a greater say in how the offshore oil industry functions in Scottish waters.

Briefs. . .

Americas:

Trinidad's deepwater east coast offering has received bids from 13 companies, however no bids were made on the five blocks offered off the east coast of Tobago. Over 1.5 million hectares were offered in the nine deepwater Trinidad licensing. Water depths averaged 1,750 meters.

The deepwater Gulf of Mexico Ram-Powell Field being developed via TLP by Shell, will have six of its seven initial production wells as horizontal completions. Expected to be onstream in August, the 20-well field on Viosca Knoll, 125 miles southeast of New Orleans, will be producing 60,000 b/d oil and 200 MMcf/d gas.

Europe:

Latvia and Lithuania are at loggerheads over jurisdiction in a section of their aquatories. Latvia plans to begin exploration in the area this summer, based on an agreement with Amoco and OPAB of Sweden, going ahead without an agreement. Negotiations have reached no conclusions.

Africa:

A tense situation continues to dominate the Warri region of Nigeria, where Shell produces more than 450,000 b/d in transition zone operations. The area has seen little development despite more than 30 years' oil production, and local residents are demanding both compensation for environmental damage and a share in the oil revenues. So far, it is a standoff between the military government and the people. Shell has declared force majeure on its oil exports.

Mideast:

Kazakhstan 3D seismic survey of over 100,000 sq km of the Kazakh Caspian has revealed an enormous structure that may dwarf the 6-9 billion bbl Tengiz Field. The Kashagan structure lies in the shallow waters of the upper northeast Caspian and could contain 25-70 billion bbl oil, almost double all of the UK's offshore reserves. The consortium that undertook the survey includes Agip, BG, British Petroleum, Mobil, Shell, Statoil, and Total. They will divvy up the structure into 12 blocks among themselves, with further exploration in 1998 and first oil in 2003-04.

Azerbaijan's Zeinalabdin Tagiev Field is still being negotiated by Socar and Chevron, despite expiration of MOU rights last November. It is thought to have been extended because of Chevron's desire to export Tengiz oil through Azerbaijan.

Oman's Bukha Field operation has been taken over by the Australian independent Novus Petroleum, which paid $26.5 million for 30% equity from International Petroleum Corp., bringing its total equity to 40%. Bukha, located just inside the Strait of Hormuz, produces about 4,000 b/d condensate, 1,200 b/d LPG, and 40 million cf/d gas.

Egypt's Rosetta Concession in the Mediterranean Sea has produced a new gas discovery for BG (formerly British Gas). The well, located in 61 meters of water 48 km north of Alexandria, tested more than 60 MMcf/d of high quality gas from three zones. Frank Chapman, managing director of BG Exploration & Production, directly attributed the discovery to a 1,500 sq km 3D seismic survey done two years ago.

Asia:

China's Qinhuangdao 32-6 Field is up for development. CNOOC has called for tenders and gotten the attention of most of the majors. Located in the center of Bohai Bay 25 km from Jintang, it was discovered in 1995 and contains approximately 120 million tons of proven oil in place. Another oilfield, Nanbao 35-2, just 25 km west, holds another 100 million tons.

Indonesia's Natuna Field is about to take a big step closer to development. A Japanese consortium composed of Japex, Inpex, Teikoku, and eight trading conglomerates are set to buy a 13% interest in the massive LNG project this summer at a cost of about US$2 billion. The 13% will come from Pertamina's 24% share. Exxon (Esso) holds 50%, Mobil 26%. Phase I, set for production in 2003, would include two LNG trains that will process 960 million cf/d gas. A Japanese market for the LNG can't be far behind.

India's Bombay High decline has resulted in ONGC seeking a first-time strategic alliance to boost production from its Neelam Field, which has dropped in just over a year from 90,000 b/d oil to 42,000 b/d. Selection of an EOR partner should be announced right away. Shell, Marathon, and BP have made recovery program offers.

Malaysia's Lawit Field has gone into production following Exxon's $700 million development program. Average output is 450 MMcf/d gas, which is piped to onshore facilities at Kerteh. By 1999, Exxon says, the field will be capable of providing a third of peninsular Malaysia's gas needs.

Vietnam's Block 46 has produced another discovery for Fina. The Fina-Sodec JV well 46-PT-1X flowed at 2,507 b/d of oil from one level, 15.5 MMcf/d gas from a second, and 16.2 MMcf/d gas from a third.

Australia's declining Bass Strait has been given a brief reprieve by startup of Esso's new West Tuna and Bream B platforms, which will produce about 25,000 b/d. This will boost Bass Strait production from 200,000 b/d to 225,000 b/d for about two years. The area peaked in 1985 at 500,000 b/d, but has steadily declined since.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.

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