I N T E R N A T I O N A L

Dev George
Houston

US-Russia Chukchi Sea leasing area.Chukchi Sea exploration and development blocks are to be leased simultaneously by the US and Russia, according to a memorandum of understanding recently signed and intended to promote cooperation in scientific and technological information and joint efforts assessing the region's offshore prospectivity. The sale will probably be in 1997.

Norwegian nearsightedness?

On November 28th, Norway chose to ignore indications that it would be in its best interest and reject membership in the European Union. The referrendum, the second in which Norwegians thumbed their noses at the association of European nations, was a resounding refusal to be a party to the rapidly evolving European political and economic integration effort and left Norway isolated as the only Western European country to remain outside the Union.

The Norwegian disdain for fraternity resulted despite a deluge of appeals by political and private personalities, including the prime minister and his party, as well as business and industrial interests, led by Statoil and Norske Hydro. Yet the isolationist nature of the Norwegians emerged once more to errect a fortress around Norway as much to protect and maintain its political and social status quo as to prevent foreign inroads in its currently prosperous economy.

Many Norwegians have painted this rejection of community as of little consequence, and even such promoters of EU membership as Statoil are now saying they don't expect the no vote to have significant effect on gas markets or Norway's position as a major supplier, but it must, if in no other way than denying Norway participation in determination of Europe's energy future.

This position was also expressed by the OLF, Norway's oil industry association, which said it was a great disappointment that the Norwegian people chose to take an independent path. The organization did not anticipate any short-term effects, but felt in the medium and long term, Norway would loose its position in energy leadership.

The OFS, however, appeared unconcerned and maintained that Europe would continue to need the steady supply of gas that Norway could supply, as opposed to Russia.

Unfortunately, not only will Norway now not be able to promote its North Sea gas to Europe from a favorable position within the Union, but it will no longer have a competitive edge among energy suppliers, including those of alternative fuels - particularly coal. And being left to fend for itself in the world market, where gas is abundant, where Russia, Qatar, Venezuela, and Indonesia are offering their own gas, makes Norway appear decidedly nearsighted at a time when its continental shelf may very well be beginning to decline.

Additionally, investments, particularly from Europe, may become harder to come by not only in the petroleum industry, but in every sector of the Norwegian economy. To attract participation in its North Sea prospects, the country will have to compete with other world venues, adjusting its terms and PSCs to meet or beat those of other producers.

Norwegians reportedly voted 52.2% against EU membership and 47.8% in favor - not an enormous spread. One major market loss may be all it takes to tip the balance the other way.

Neutral Zone ménage à trois

A cozy domestic arrangement is drawing to a close unless the suiter can convince his two partners it's to their advantage to keep things as they are. Japan's Arabian Oil Company, the country's largest oil producer, has only five and seven years to effect new agreements with Saudi Arabia and Kuwait, respectively, for their continued concession of its Neutral Zone lease, which accounts for some 300,000 b/d of oil production.

In negotiation for more than two years now, AOC has gotten nowhere with either party. Saudi Arabia has refused any agreement without Kuwait first granting approval of a new contract with the Japanese. And Kuwait has continually demurred.

At risk is AOC's entire investment in the partitioned Neutral Zone's offshore sector in the Arabian/Persian Gulf. The company has all but given up on getting any improvement in its present contracts with the two Arab states and is now just trying to obtain extensions of the current arrangements it has with them - perhaps even on a year by year basis.

The problem is, the NZ fields are old and in need of considerable new technological investment - costing at least $350 million. To recover such a new investment, AOC would need about 10 years, but chances look slim that will be awarded. Short of that, it is planning a $100 million test program to improve production from the giant Khafji and Hout Fields, in which it will drill two horizontal wells into the Ahmadi strata of the Khafji reservoir and then apply reservoir simulation to determine precisely what to do if given an extension.

Frustration with the stalemated contracts, however, has driven Japan's Ministry of International Trade & Industry to join the negotiations for extensions, so far without success. Minister Ryutaro Hashimoto appealed to Kuwait's Oil Minister Abdel Mohsen al-Mudej to no avail, and it appears the ball is now in the back pocket of Kuwaiti Crown Prince Saad Abdulla al-Sabah, where it could very well languish for a few more years.

BRIEFS:

Africa

Nigerian tracts farmed-inby Texaco. Three licensing areas - OPL213, 217, and 218 - in depths from 200 to 1000 meters, have been farmed-in, with 30% interest. The blocks were held by operator Statoil and British Petroleum. Drilling will begin soon.

Angola's new Cabinda field, Kokongo, has begun production by Chevron and partners at from 6,000 to 10,000 b/d of oil. Located 40 miles offshore in Area B, Kokongo is expected to produce 60,000 b/d by 1996.

Europe

Albania will finally see drilling this year, as Hamilton Oil gears up to explore their Block III license. The company plans to spend $13 million drilling prospects found during their recently completed $4.5 million seismic program. Spudding is expected in June or July.

Romanian drilling underway by Enterprise, using the Odeco Ocean Liberator semisubmersible. Two wells are in progress, both in the Midia concession block in the Black Sea. First well, the Rapsodia-1, is going to a depth of 4,000 meters, then comes the 3,000-meter Domina-1, 36 km away, sometime later this month or in early February.

Mideast

Qatar's mighty North Dome Field has another new participant. Atlantic Richfield has acquired 27.5% interest in a portion of the huge prospect. The interest, bought from Gulfstream Resources Canada, gives Arco exploration and production rights on Qatar's Block 2.

Renovation of Iran's Aboosar Field is to begin right away, with NIOC's Iranian Offshore Engineering & Construction Company undertaking the work to bring the production facilities back to full output. The field, 75 km from Kharg Island, was severely damaged during the Iran-Iraq War. Some US$4 billion has been set aside to reconstruct war-damaged oil field in the Persian Gulf during the next five years.

Asia

Vietnam, defying China, is going ahead with exploratory drilling in the contested South China Sea Block 135 at the southwestern limit of Vietnam - claimed aquatory. The jackup Tan Dao was quietly brought in from the Persian Gulf, refitted in Vung Tao, and sent on site. It will be operated by PetroVietnam with a Russian crew from Vietsovpetro.

Australia's Bass Straitsare set for a boom in exploration drilling this year, according to 50% concessions holder and operator Esso. The company expects to employ four or five drilling rigs in the Straits much of the year. Drilling will be based on 45,000 km of seismic shot since 1992.

Portugal is challenging Australia in the International Court of Justice over Australia's right to be exploring and producing oil and gas in the Timor Gap between the island of Timor and northern Australia. Basis of the litigation is the illegality of Indonesia's invasion and occupation of East Timor in 1975. Portugal was its protector until that time, and the Timorese have not been allowed self-determination.

China's Bohai Bay Block 04/36 will be explored this year by operator Kerr-McGee and its partner Murphy Pacific Rim in joint venture with CNOOC. Seismic acquisition is to be done early, with at least one wildcat well later in the year.