In the white zone located between the Shetland and Faroe Islands north of Scot-land, exploration activity is about to pick up as the search for oil and gas reserves on the UK continental shelf widens. This area of the northeast Atlantic will likely attract a lot of interest as a considerable number of significant oil and gas prospects have already been identified. The United Kingdom government is offering licenses for companies to search the white zone for oil and gas. A formal invitation will be made to oil companies to bid for the licenses, which will be contained in the 19th UK oil and gas licensing round. This round of licensing will be the first subjected to new regulations designed to protect the habitats of wildlife and marine species in the area. During a three-month public consultation period initiated by the government, the potential environmental impact of activity in the zone will be evaluated. Applications will close early in 2001.
In the United Kingdom, TGS-NOPEC Ltd. announced the completion of data processing of its 4,040 km non-exclusive FSB-2000 seismic and marine gravity survey, which along with the associated Faroe Shetland Basin 1999 survey provides an integrated regional grid of approximately 9,500 km of modern 2D data. Improved data could generate more E&P activity in the area.
Norsk Hydro awarded a letter of intent to Smedvig for semisubmersible drilling rig West Delta to carry out development drilling on the Norwegian continental shelf. The new drilling assignment for the West Delta has a duration of two years with an estimated contract value of $110 million. The assignment will include development drilling on fields operated by Norsk Hydro. At present, the West Delta is operating for Norsk Hydro in the Tampen area, where it is scheduled to complete the ongoing drilling assignment within mid-year 2001. The rig should be ready to begin work under the new contract in third quarter 2001. Norsk Hydro has the right to cancel the second year of the contract should Norsk Hydro's Plan for Devel-opment and Operations for one of the field developments not be approved by Norwegian authorities.
Smedvig also received an award for a 19-month extension of an existing drilling contract for the semi-submersible drilling rig West Vanguard. That contract concludes at the end of December 2002, but Norsk Hydro has an option to extend the contract for another five years. Contract value is estimated at approximately $70 million. Both contracts are subject to approval by Norsk Hydro's license partners.
In the course of an official visit to Denmark in the end of October, Kazakh President Nursultan Nazarbayev reached agreement with the Danish company A.P. Moeller for a project to produce platforms to extract oil on Kazakhstan's Caspian Sea shelf. A caveat of the agreement is the demand to produce the platforms at the republic's enterprises from Kazakh metal, provided there is a supply available when construction commences.
In Baku, Exxon Azerbaijan Operating Company LLC (EAOC), operator of the Zafar-Mashal Production Sharing Agreement (PSA), announced the award of a 3D seismic survey to Caspian Geophysical JLLC, a Schlumberger/ SOCAR (State Oil Company of Azerbaijan) joint venture.
EAOC's PSA area contains the Zafar and Mashal structures located in deepwater approximately 110 km southeast of Baku in the South Caspian Sea. The PSA was ratified in April 2000. Partners are SOCAR (50%), operator Exxon Exploration and Production Caspian Sea Limited (30%), and Conoco UK Limited (20%). The MV Gilavar will acquire the 3D seismic survey in the South Caspian basin over a three-month period concluding in December 2000.
Tanganyika Oil Co. has completed a 400 sq km 3D seismic acquisition program over a portion of the 2,530 sq km West Gharib Block, Gulf of Suez Basin, Egypt. Data processing and interpretation will be complete by year-end, followed by a multi-well exploration program in 2001. Tanganyika and its partners discovered the Hana field with its estimated 40 million bbl when the initial exploration well was drilled in 1999. Field development began in November with the spudding of the Hana-7 and Hana-8 wells. Tanganyika holds 50%, Drucker Petro-leum holds 20%, and GHP Exploration holds 30%.
The government of Tanzania is enticing E&P interest by offering incentives including exemption from paying value-added tax (VAT) on locally purchased goods and services related to the industry. As many as 10 companies, including Chevron, Paladin Resources of the UK, TotalFinaElf of France, and US-based Texaco, are expected to begin exploration activities offshore Tanzania in first quarter 2001. New guidelines indicate that E&P companies will not be restricted to the same foreign exchange limitations as other companies and will not be required to present a bank guarantee when negotiating production sharing agreements with the Tanzania government. Tanzania Petroleum Development Corp. will retain a minority equity stake in new projects. The level will be negotiated for each production sharing arrangement.
Unocal Thailand has issued a letter of intent to Smedvig to contract the T-7 self-erecting tender rig for five years' production drilling. The $75-million contract includes incentives that could increase Smedvig's return, but also includes options for early termination after three years upon payment of a fee. At the conclusion of a five-year contract with Unocal Thailand at the end of 2000, the T-7 will undergo $15 million of upgrades over a six-month period to ready it to begin the new Unocal contract in July.
Unocal Thailand also announced a $500-million E&P budget for activities offshore Thailand for the coming year, up $100 million from 2000. The company's 13 gas fields stand to see the greatest expenditure, with the Pailin field receiving the largest portion at $230 million. The goal is to increase production from 160 MMcf/d to 330 MMcf/d. Also, $270 million is earmarked for areas north of Erawan field, Thailand's largest operating gas field.
Shell has signed a strategic alliance agreement with the China National Offshore Oil Corp. (CNOOC) to jointly develop opportunities in oil and gas exploration and production and gas marketing. Shell has also signed a memorandum of understanding to purchase 20% of CNOOC's IPO up to $300 million.
Pluspetrol is the target of an investigation by Peruvian authorities and the Alternativa Verde environmental group following an oil spill of more than 5,000 bbl in the Maranon River. Local authorities said the 21 mile-long slick may have done immutable damage to the river and rare species in the area. Pluspetrol could be fined up to $400,000 in damages.
Alberta Energy Co. (AEC) will farm into Occidental Petroleum's Block 15 in Ecua-dor. AEC will earn a 40% interest in the block and will assume certain capital costs through 2004. Occidental will remain the operator of the block.
Kerr-McGee Offshore Canada Ltd. was the winning bidder on three offshore deepwater licenses, parcels 1, 2, and 7, in Call for Bids No. NS00-1 for Exploration Licenses offshore Nova Scotia. The company will operate the nearly 1.8 million acres of the newly won leases, in water depths ranging from 350 ft to 10,000 ft, with 100% working interest. In April, Kerr-McGee acquired four exploration licenses off Nova Scotia from Canadian 88 Energy Corp. for $10.5 million. The licenses, which cover about 1.5 million acres, lie 125 miles south of Halifax, Nova Scotia, in 500-9,200 ft. water depths. Both 2D and 3D seismic data have been gathered in this area, and drilling is likely to begin in 2002.