International

China In play For Australian Gas

Australia LNG – the company responsible for marketing North West Shelf gas - is considering a request to allow China National Offshore Oil Company (CNOOC) to take equity in the expansion of the project in an effort to secure supply contracts to growing Chinese markets.

As China currently relies on coal to meet up to 70% of the population's energy needs, the government is turning to cleaner burning fuels, such as natural gas, to help reduce pollution in urban areas. LNG currently supplies 2% of China's energy needs but is expected to increase to 8% within the next decade. It is a potentially huge market, where LNG requirements of the South China province of Guandong alone are expected to top 15 million tonnes per year by 2015 - twice Australia's present exports.

The Chinese government has indicated they are keen to take equity in the gas reserves of northwest Australia before awarding Australia any LNG contracts.

The contract currently under contention will see China import three million tonnes of LNG from 2005, with an additional two million tonnes in 2008. (Reuters) Supply deals with the Chinese are potentially worth more than $20 billion over 30 years.

BP Amoco Plc is expected to be an inside runner in the competition for the initial contract, after the CNOOC recently awarded the British group a $600MM contract to build a liquefied natural gas plant, designed to receive foreign gas destined for the south China province of Guangdong.

Given BP's connections to the North West Shelf project, it was hoped the Australian gas fields may have been BP's preferred supply source. But as operator of the new Tangguh project, BP's submission is believed to have cited the Indonesian fields as their preferred source.

Shell's submission for the same contract was also believed to ignore the North West Shelf, instead intending to import gas from Qatar.

Australia LNG is considering a number of options that would involve the Chinese in varying capacities, with production, shipping, receival and downstream sales all possibilities. Chinese involvement is not expected to alter the present equity structure of the North West Shelf operations.

With construction of the North West Shelf's fourth production train now approved, a commitment from the Chinese would provide the joint venture partners the impetus needed for a fifth train, as well as offsetting the high cost of developing new facilities on the WA's Burrup Peninsula.

Sharper Focus At PGS

Petroleum Geo-Services (PGS) has restructured its geophysical management units, consolidating the different technologies and service divisions into a cohesive management team under the guidance of a single president.

The new management team will be led by Anthony 'Diz' Mackewn, who was recently appointed to the position of President of PGS Geophysical.

Mackewn brings more than 30 years of geophysical management experience to the PGS group, having worked for other major seismic contractors in various management roles, including land seismic acquisition, seismic data processing, and research and development initiatives associated with 3D marine seismic. He joined the PGS group in 1993 and most recently served as President of PGS' Europe, Middle East and Africa offices.

PGS Chairman and CEO, Reidar Michaelson commented, "Diz is one of the our industry's most experienced and well respected geophysicists. Since 1996, Diz and his management team have maintained a dominant market share in the important North Sea market. This continuing success has led to an anticipated 2001 North Sea market share that stands significantly ahead of PGS' closest competition."

The new structure creates a single global business unit of PGS, which will streamline business development activities, create sharper focus and establish clearer responsibilities for the unit members.

"The company and geophysical market in general have matured and a more cohesive global organisation is now required", Michaelson continued. "We anticipate that out customers will notice a more focused and cohesive organisation that is better suited to address the global market."

PGS' Geophysical Services recently reported first quarter revenue totaling US$116.1 million, up 14% from the first quarter of 2000, which is primarily attributed to higher contract seismic revenue. Mutli-client seismic revenue for the first quarter increased by 5% from the same period in 2000. Total first quarter operating profit (before unusual items) from Geophysical Services was US$7.1 million.

Michaelson believes that following the appointment of Diz Mackewn, along with Kaare Gisvold leading the FPSO operations, PGS is well positioned to capture greater market share in its two core businesses.

"In general, the seismic market is now behaving much better and we see an increase in future demand for our data library and a more balanced supply and demand picture, particularly in the North Sea, Canada and the Asia Pacific regions. As a result, our seismic fleet is experiencing the strongest contract backlog in several years", he said.

Appointment Of Santos USA Corp President

Santos has announced the appointment of Ms Kathleen (Kathy) Hogenson as the General Manager and President of its USA subsidiary (Santos USA Corp). Ms Hogenson will be responsible for the growth strategy of Santos' USA activities including the evaluation/development of, and further exploration arising from, the 2000 discoveries at Ashland Deep (Runnells) and Queen City (Mew) prospects.

Ms Hogenson is 41 years old, a USA citizen and lives in Houston, the site of Santos USA Corp's office. She gained a BS Chemical Engineering degree from the Ohio State University in 1982 and has worked in the petroleum exploration and production industry since that time.

Her career has involved both domestic USA and international experience, including Ecuador and Indonesia, with Aminoil, Phillips Petroleum, Maxus Energy, Forest Oil and Unocal. Her most recent appointment was as Vice President of Exploration and Production Technology at Unocal.

Ms Hogenson has 19 years of experience in many facets of the upstream oil and gas industry with an emphasis on development and reservoir/production optimisation. In addition to holding responsibility for Santos' USA operations, Ms Hogenson will be a member of Santos' Executive Committee where her experience in reservoir/production optimisation and technology will be most valuable.

Commenting on Ms Hogenson's appointment, Santos' Managing Director, Mr John Ellice-Flint, said: "Some of Kathy's recent achievements demonstrate significant pro-ductivity improvements in production activities through the application of technology and processes. This experience will be put to good use in the implementation of Santos' strategic review which was unveiled at Santos' Annual General Meeting on May 4th 2001."

Paradigm Geophysical Acquires Geoscene Product Suite

In April, Paradigm Geophysical Limited announced that it has acquired the GeoScene® product suite and related customer services from Oilfield Systems Limited of Southampton, UK.

This acquisition is one of several that Paradigm has recently concluded in its goal to become the oil and gas industry's leading geoscience solutions provider. The company aims to achieve this goal through the consolidation of best-of-class products into Paradigm's integrated data analysis solutions for oil and gas exploration and production.

Eldad Weiss, Paradigm's Chairman and CEO, stated that integrating the GeoScene product suite, along with its development and support team, into Paradigm's global operations, will further strengthen Paradigm's comprehensive offering in geological interpretation.

Weiss sees geological interpretation as a large and growing market which is a key to the industry's current priority – improving production efficiency and recovery rates.

The GeoScene product suite provides geological tools for surface, fault and zonal correlation, cross section definition, structural model building and surface mapping. Current licence holders are situated mostly in the North Sea, Middle East and Canada, and include major oil companies and leading independent oil and gas producers.

PGS Secures Assets

PGS has finalised a program related to its multi-client 3D (MC3D) data library.

Under the program, PGS will transfer ownership of a portion of its MC3D data library to a 100% owned subsidiary that, in turn, will issue cumulative preferred stock to a third party investor.

The proceeds from the sale of the preferred stock, estimated to be in the region of US$240 million, will be transferred to PGS as partial compensation for the data transfer.

As PGS executes its business plan and continues to sell its MC3D data library, a significant portion of future data sales will be used to redeem the preferred stock, as well as pay the minimum preferred dividend. Once the US$240 million plus accrued dividends are repaid through future data sales, all remaining data sales will remain with the company.

The proceeds from the preferred stock to be issued by this PGS subsidiary, which will be received by PGS as a result of this transaction, will be repayable solely from future data sales. Under certain unlikely circumstances, the control of the subsidiary could transfer to the preferred share investor, however, PGS will have the right, through various alternatives such as preferred share redemption and preferred share and data call options, to prevent such loss of control.

PGS' objectives for the program are primarily related to improvements in working capital. In addition, PGS' management hopes that the program will ultimately serve as a revolving facility which can be used in the future to improve the management of the company's liquidity and working capital and to provide funding for future data library investments.

Chairman and Chief Executive Officer of Petroleum Geo-Services, Reidar Michaelsen, said, "This transaction is a first for the geophysical business. …(It) will allow PGS to effectively collect today the cash from future MC3D data sales and accelerate its debt reduction program. The cost of these funds is competitive with the cost we have been incurring on our outstanding debt, and through this program we have retained all of the upside in connection with our data library. There are no penalties associated with an early redemption of the preferred stock, and therefore PGS has also retained flexibility going forward."

TGS-NOPEC And WesternGeco Acquire New Joint 3D In Norwegian Sea

TGS-NOPEC Geophysical Company ASA and WesternGeco have commenced joint acquisition of a new non-exclusive 3D survey in the Norwegian Sea.

Covering an area of 2000 km², the survey of mainly open acreage is based on TGS-NOPEC's non-exclusive 2D data base in the same area acquired in 1997. Water depth in the area ranges from 1000 m to 1300 m.

The survey is being jointly financed and owned by TGS-NOPEC and WesternGeco. Several oil companies have committed to pre-fund the project.

The data is being acquired and processed by WesternGeco, under joint supervision in accordance with the Scandinavian Co-Operation Agreement between the two parties.

Final data from the survey will be made available to the oil industry for their preparation work prior to the 17th licensing round on NCS.

PGS Selected To Promote Licence Round In West Africa

Petroleum Geo-Services ASA (PGS) has entered into an exclusive agreement with the government of São Tomé and Príncipe to assist them in promoting their offshore acreage in future licence rounds.

The republic of São Tomé and Príncipe, in the deepwater Gulf of Guinea, is a large, under-explored territory, situated within a proven hydrocarbon system. The northern part of the territory contains a deepwater extension of the Niger Delta and is situated near world-class oil fields found offshore Nigeria, such as Akpo and Agbami. The recently discovered La Ceiba field in Equatorial Guinea proves that a separate hydrocarbon system also exists to the east of São Tomé.

PGS will acquire and market high quality 3D seismic data ahead of future São Tomé licence rounds. The company will also assist the government of São Tomé and Príncipe with marketing the exploration opportunities and prospectivity of the São Tomé shelf to the international oil industry. The most popular area of interest is expected to be concentrated in the northern part of the shelf, which lies adjacent to a number of world class oil discoveries in deepwater Nigeria - the most recent discoveries are located in Block 246.

PGS' acquisition and marketing of seismic data will be completed in phases and is dependent on the timing of the licence rounds and subject to the levels of industry pre-funding.

The agreement covers all of São Tomé's territorial waters, including an area known as the São Tomé - Nigeria Joint Development Zone (JDZ). Until recently, this area was the subject of a territorial dispute between the São Tomé and Nigerian governments. The JDZ was created as a result of negotiations between the two governments. Soon to be ratified, this will serve as a legislative framework for permitting and promoting oil and gas exploration on the acreage.

Reidar Michaelsen, Chairman and Chief Executive Officer of Petroleum Geo-Services, commented, "This represents another example of PGS' strategy to work with local governments and the international oil and gas industry to increase interest and accelerate exploration, and ultimately the development, of new hydrocarbon provinces around the world."

This agreement is similar to agreements PGS has successfully employed in Nigeria and Brunei.

PSI Appoints Nicole Williams

Brisbane-based Nicole Williams is back in to the oil and gas industry having just joined up with Predrill Stresses International (PSI) as Commercial Manager.

PSI was set up by Hobart-based John Davidson in 2000 to provide a new technology to the industry that determines SH prior to drilling, to reduce drilling costs, reduce exploration and production risk and increase production revenues. The technology has undergone extensive trials internationally during the past 12 months and a worldwide patent was applied for in May 2000.

Williams, who has joined PSI to oversee the growing international interest in the technology, can be contacted by:
Tel: 0407 440949
or by Email: nicole_williams @mail.com

Unocal RFG Licenses To Improve Air Quality

Unocal Corporation, creators of reformulated gasoline (RFG) formulas that reduce tailpipe emissions, has announced it will offer a uniform license to refiners, blenders and importers for the use of the company's range of patent-bound RFG formulas.

Under the Clean Air Act, RFG is now required in many parts of the United States and comprises about one-third of all gasoline sold. RFG was originally required in nine severe ozone non-attainment areas beginning in 1995. Other areas have since opted into the program, with RFG or similar low vapor pressure gasolines now sold in more than 20 states.

The license offer is limited to those companies not previously involved in the litigation against Unocal. (See story in April/May 2001 edition of PESA News) Until recently, Chevron, Exxon Mobil, BP Amoco, Texaco and Shell had been involved in a five year battle against the company, challenging the validity of their initial 'Patent 393'. The US Supreme Court ruled in Unocal's favour, awarding damages equaling some US$91 million.

Unocal CEO, Charles Williamson, commented that the license offer was extended to companies not involved in the litigative action "…because those companies did not force us to spend millions of dollars in attorney's fees and devote countless hours of staff time to show the validity of our patent claims."

Williamson has repeatedly said that Unocal's goal is to make the gasoline formulations covered under Unocal's five patents as widely available as possible, while protecting Unocal's intellectual property and the interests of its stockholders.

"We believe that our patented formulations provide refiners and blenders with a cost-effective way of meeting California and Federal standards for cleaner burning gasolines", Williamson said.

Refiner, transporter and marketer of transportation fuels and industrial products, CITGO Petroleum Corporation, was the first organisation to accept the licensing opportunity, announcing the execution of a nonexclusive licensing agreement on May 1st, 2001. Under the terms of the license, CITGO has the right to make and import cleaner burning gasolines using formulations patented by Unocal subsidiary, Union Oil Company of California. The CITGO-operated refineries in Louisiana, Texas and Illinois are all covered under the terms of the agreement, as is any gasoline CITGO imports.

"We're very pleased to complete this licensing agreement since it is advantageous for CITGO to use Uncoal's patented formulations to maximise our reformulated gasoline (RFG) production", Adolph Lechtenberger, CITGO's senior Vice President of refining said. "The agreement enhances CITGO's ability to supply the motoring public with reformulated gasoline at a reasonable cost."

Other agreements have since been signed with other refiners who serve various RFG markets throughout the United States.

Williamson said that because use of the cleaner burning gasoline improves air quality, the terms of the license encourage and reward the licensees who use the patented formulations the most. The licensee's rate per gallon commences at US3.4c and is reduced as more gallons are produced. The lowest rate possible to licensees is US1.2c/gallon.

"We estimate that licenses for our patents would add less than one cent per gallon to the cost of reformulated gasolines nationwide," Williamson said.

Williamson acknowledged the argument that other cheaper blends of the patented gasoline formulations were possible.

"If it were possible for refiners or blenders to blend around our patented formulations for less than a penny a gallon on a practical, sustained basis, we wouldn't expect them to license with us. They would choose not to infringe. Otherwise, it seems to us that reasonable business people would choose to avoid willfully infringing our patents and decide to take the course that is both economic and ethical - license," Williamson said.

West Africa – The New Gulf of Mexico?

Analysts are predicting the Chinguetti-1 well, in deep water off the coast of west Africa, has the potential to be the world's next big oil field find.

Analysts Salomon Smith Barney said, "The potential upside from Woodside's basin-wide position in Mauritania could now be very significant. Woodside has defined 43 leads in its basin-wide acreage offshore Mauritania."

The Chinguetti-1 well is located approximately 80 km from the Mauritania coast, within Production Sharing Contract (PSC) Area B. The well lies in 800 m of water and has been drilled to its total depth of 2,620 m.

Chinguetti-1 intersected several oil bearing sandstones in the primary objective, over a gross hydrocarbon interval of 86 m. A shallower secondary objective contains gas bearing sandstones over a 7 m interval.

Equity in the well is split amongst six parties: Woodside, the operator for Area B, and Italy's Agip, each have a 35% stake, Hardman 18.4%, Mauritania's Planet Oil 3% and Elixir Corporation 2.4%. Fusion has a 6% interest in the area, earned by carrying out a technical study for Hardman, in 1996.

Following the announcement of the discovery, Fusion's share price jumped 42% while Woodside's reached a two month high of A$14.25. Salomon Smith Barney predicted that if the well meets its expectations of 180 MMbbl, it could add an estimated A$0.37 per share to Woodside.

Chinguetti-1 was the first of two structures planned for Mauritania. The Scarabeo-7 drillship is moving to the new well (Courbine-1) where drilling will commence on a separate, deeper structure.

Given the high risk nature of the area, hopes are high that the discovery will prove significant, although earlier exploration in the area has failed to find quantities that warranted production.