Falklands : Hydrocarbons Weekend Record (28/29 October 2006)
Submitted by Falkland Islands News Network (Juanita Brock) 30.10.2006 (Article Archived on 13.11.2006)
Bolivia has successfully negotiated contracts with international investors to continue exploiting natural gas from that country.
HYDROCARBONS WEEKEND RECORD: 28 and 29 OCTOBER 2006
By J. Brock (FINN)
WEEKEND DEVELOPMENTS
(Bolivia)
The Government of Bolivia has successfully cleared a giant hurdle. With the deadline past for new contracts to be negotiated, Bolivia is celebrating the signing of several agreements for the exploitation of its natural gas reserves, said to be the second largest in South America. BG Group Plc, a British Gas producer, announced that it had agreed to new operating contracts with Bolivia’s government and that these should broadly be as profitable as the old ones. Another contract belongs to Total SA, the world's fourth-largest oil company, and a third belonging to Occidental Petroleum Corp. They agreed to invest about $2 billion in Bolivia. Petroleo Brasileiro SA, Brazil's state-controlled oil company and the biggest investor in Bolivia's energy industry, has has not yet reached an agreement with the government, Hydrocarbons Minister Carlos Villegas said on state radio late yesterday.
(Iraq)
A hydrocarbons law is due to pass through Iraqi parliament at the end of the year that would feature the announcement of a bidding round so that investors could benefit from helping to repair Iraq’s oil infrastructure. Iraq is capable of producing 3.5 million bpd but has not been able to reach the target due to terrorism and poor infrastructure.
(Falkland Islands)
In his editorial piece entitled “Big Oil May Have to Get Even Bigger to Survive,” Oliver Morgan said something less than truthful about the state of the hydrocarbons industry in the Falkland Islands. In the late ‘90s we sank seven exploratory wells with indications of hydrocarbons in six of them. Further to this, seismic and aerial research has pin-pointed areas where reserves are said to be huge. None of this was brought out in Mr. Morgan’s article.
“Not only must the companies be able to offer technological solutions to these owners far ahead of those from the national oil companies, but they must be able to negotiate terms of access that ensure they get value from them that will stick over time. The arguments over the Sakhalin production agreements show how problematic this could be.
Within these constraints, if there are no finds outside national companies' territories (in the Falkland Islands, for example), there are hi-tech, high-value avenues to explore. Birol says: 'They will have to find access or look at other activities and niches - gas, LPG, biofuel - to make up the decline.' Investment by oil majors in alternative sources is currently a minute fraction of capital expenditure on oil and gas infrastructure. The other option is a mega-merger, such as between BP and Shell. This has become a major talking point. Gheit says: 'I believe that these companies are either thinking about, or actually discussing, the possibility of a merger’.”
To insinuate there is no oil in the North and South Falkland Basins when the seismic indicates we have reserves in commercial quantities is naïve to say the least. It is hoped that investors will take the story with a pinch of salt and have faith that hydrocarbons will be found in commercial quantities in the North and South Falkland Basins.
It’s true that we cannot find a rig or ship to come down to do further exploration but that is the only reason why there are no further positive developments in the location of viable reserves in the area.
CRUDE PRICES LAST WEEK:
Monday, 23: Light Sweet Crude - $58.81 and Brent Crude - $59.20
Tuesday, 24: Light Sweet Crude - $59.35 and Brent Crude - $59.86
Wednesday, 25: Light Sweet Crude - $61.85 and Brent Crude – 62.05
Thursday, 26: Light Sweet Crude – 60.36 and Brent Crude – 60.77
Friday, 27: Light Sweet Crude – 60.21 and Brent Crude - $60.75
TRENDS
Monday, 23: Crude prices dropped today over scepticism about OPEC’s decision to cut production by 1.2 Million bpd. The market reaction leads buyers to feel that OPEC’s actions either weren’t enough, or more likely the production cuts came too soon and that they should have been instituted from a benchmark price much less than $60.00. The weakening demand will get weaker if alternative energy sources become more cost-effective than hydrocarbons products.
Tuesday, 24 Inventory data due out shortly has caused nervousness in the futures market and has caused gains in the price of crude today.
Wednesday, Crude prices gained significantly when the weekly inventory report showed an alarming drop in supplies. It is hoped that those responsible for buying in supplies will do so when the price per barrel is low.
Thursday, Traders took profits and lowered the price of crude by more than $1.00 today. Though disappointing inventory results were the major factor in the sharp rise yesterday the nervousness didn’t last long. And, the promised 1.2 Million bpd cut by OPEC members also helped to lower prices. News of those cuts had an opposite affect due to businesses feeling that some of the members might not make good on the decision.
Friday, The Royal Navy warns that Al Qaida has threatened to target Saudi Oil infrastructure and shipping. Despite the warning, crude prices lowered again today. Along with the nervousness caused by the threats traders continued to take profits.
DEVELOPING REGIONAL FACTORS
Monday, 23
(Bolivia) The South American Press are reporting that estimates of resources in some of Bolivia’s natural gas fields are incorrect. There has been an audit in fields run by Brazil’s state run operative, Petrobras, where the inadequacies were discovered. This is a developing story, so watch this space.
Tuesday, 24
(Brazil and Bolivia) As Saturday’s deadline looms Brazil and Bolivia are hoping to hammer out an agreement over exploration and exploitation of Bolivia’s natural gas, according to Brazilian Mines and Energy Minister Silas Rondeau. He is expected to travel to Bolivia on the weekend to finalise the agreement. If this fails it is possible that Petrobras will leave Bolivia.
Wednesday, 25
(Brazil and Bolivia) Reports in the Latin American press say that at least two companies will finalise contracts for exploitation of Bolivia’s natural gas reserves. Brazil and Bolivia are hoping to complete an agreement over exploration and exploitation of Bolivia’s natural gas, according to Brazilian Mines and Energy Minister Silas Rondeau. He is expected to travel to Bolivia on the weekend to finalise the agreement. If this fails it is possible that Petrobras will leave Bolivia.
(Argentina and Bolivia) According to the Bolivian Information Agency, an agreement on selling Bolivian gas to Argentina forbad Enarsa to resell gas to Chile. Enarsa will explore for and exploit gas, oil and other hydrocarbons in Bolivia. The contract ensures the sale of up to 27.7 million cubic meters of gas every day and the two parties expect to increase sale gradually to reach the maximum export level in 2010.
(Venezuela and the United States) Shipments of Venezuelan oil to the United States have dropped by an estimated 40,000 bpd, or 3.3 percent from 1.19 million bpd in June to 1.15 million bpd in August. The monthly numbers were provided by the Energy Information Administration (EIA) - the statistical arm of the US Department of Energy
Thursday, 26
(Venezuela and Nicaragua) Supported by Venezuela’s President Hugo Chavez, Nicaragua’s presidential candidate, Daniel Ortega – remember him – looks set for a return to power in his country. Geopolitics in the region could help to put the dollars on to crude prices. This is a developing story that will be visited again.
(Nicaragua and Panama) A project to widen the Panama Canal has been approved by the people of that country. Larger oil tankers will find it easier now to travel between oceans. However, Nicaragua also has stated it wants to do an Atlantic/Pacific canal. Again, depending on charges, there could be keen competition should this project go ahead. FINN will monitor progress on both stories.
Friday, 27
(Falkland Islands) Mrs. Phyl Rendell left the Falklands for Australia where she will be attending the 2006 International Association of American Petroleum Geologists Conference in Perth, from 05 to 08 November 2006. Mr. Colin Moore from FOGl will be in attendance as well as Dr. Phil Richards from British Geological Survey will. A presentation by Borders & Southern will feature well in the conference. More reporting will be available in due course.
RELEVANT EXPLORATION SHARE PRICES
Desire Petroleum: Monday, 23 – 33.75, Tuesday, 24 – 33.50, Wednesday, 25 – 33.50. Thursday, 26 – 33.50, Friday, 27 – 33.50
FOGL: Monday, 23 – 80.00, Tuesday, 24 – 79.00, Wednesday, 25 – 76.00, Thursday, 26 – 78.00, Friday, 27 – 80.00
Rockhopper Exploration: Monday, 23 – 43.50, Tuesday, 24 – 42.50, Wednesday, 25 – 43.00, Thursday, 26 – 43.00, Friday, 27 – 43.00
Borders & Southern: Monday, 23 – 39.75, Tuesday, 24 - 39.75, Wednesday, 25 – 39.75, Thursday, 26 – 37.50, Friday, 27 – 37.50
Tullow Oil: Monday, 23 – 408.00, Tuesday, 24 – 406.00, Wednesday, 25 – 409.00, Thursday, 26 – 407.00, Friday, 27 – 400.00
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