Exploration

GT gets Cairn nod
Geofizyka Torun (GT), a Poland-based geophysical contractor, has been awarded the second phase of Cairn Energy's seismic exploration program in the Rafasthan desert in India. Phase 1 resulted in the discovery of the largest oil field found in India in the past 40 years and the largest onshore find in the country ever.

Wavefield, Inseis merge
Newly launched marine geophysical company Wavefield Geophysical AS has merged with Oslo-based multiclient specialist Inseis AS to form Wavefield Inseis AS. The newly merged company will focus on the towed streamer market but also on permanent seismic monitoring.

Ohm, Rock Solid collaborate
Offshore Hydrocarbon Mapping plc (Ohm) is working with Rock Solid Images to advance the integration of seismic and well log data with controlled-source electromagnetics (CSEM). The ultimate goal is to provide explorers with the ability to evaluate their prospects using a fully integrated dataset incorporating seismic, CSEM and well log data, offering a heightened level of information on likely rock and fluid properties.

Landmark to manage data
Halliburton Energy Services Group has been awarded 8-year and 6-year contracts by the Norwegian Petroleum Directorate to provide software and manage the operations, respectively, of the DISKOS database in Stavanger. The DISKOS database is the world's largest multiclient database.

Brazil sends up gas balloon
Brazil's Petrobras, following Bolivian President Evo Morales' nationalization of its Bolivian assets, ramped up plans to spend US $16 billion between now and the end of 2010 to develop its own natural gas base. Bolivia now supplies Brazil with some 883 MMcf/d of gas, or around half of its consumption. Among projects, the Brazilian company has put Espirito Santo Basin gas projects on a fast-track for exploration and development. It wants to raise production from 564 Mcf/d of gas to 1.4 Bcf/d by the end of 2008. The company had planned to produce those fields in 2012.

Utah sets auction record
The US Bureau of Land Management's Utah office collected commitments for a record US $54 million as it sold 262 parcels of land for exploration. That almost doubles the previous record of $28 million, according to an article in the Salt Lake Tribune. Indicating the high level of interest, nearly $30 million of the record came from bids as high as $3,000/acre ($1,215/hectare) on properties targeted by conservation and outdoor recreation groups to be taken off the auction table.

Brazil offers 1,153 tracts
Brazilian energy regulator ANP settled on 1,153 blocks that will come up for auction at the country's eighth annual oil and gas licensing round on Aug. 28. The organization originally had planned to hold the auction in November, and the forward movement caused some protests by companies that said they didn't have adequate time to look over the offered tracts, according to Business News Americas. In the 2005 licensing round, 41 companies took 251 of the 1,134 blocks offered, and 85 of the 116 registered companies actually submitted bids.

Drilling

Record contract signed
GlobalSantaFe Corp. signed a record drilling contract for the company as it agreed to send four rigs to Saudi Arabia to work for Saudi Aramco for 4-year terms, beginning in the first half of next year. The deal includes the GSF Main Pass I, GSF Main Pass IV, GSF High Island I and GSF High Island II, now working in the Gulf of Mexico for rates in the mid-US $120,000 range.
The new agreement calls for day rates in the mid-$160,000 range. At a $165,000 day rate, the contracts would be worth $241,065,000 per rig, plus $24 million per rig for mobilization charges, or $265,065,000 per rig.

First Chinese offshore rig
The China Oilfield Services Ltd. (COSL) subsidiary of CNOOC took delivery of China's first self-built 400-ft (122-m) jackup rig, the COSL 941. COSL and FGL Buyer LLC in the United States collaborating on pre-construction work, and construction took place in China's Dalian New Shipbuilding Heavy Industries Co. Ltd. shipyard. The US $135-million project included parts from National Oilwell Varco, Caterpillar and Siemens.
The new rig can drill to 30,000 ft (9,144 m) and handle high-temperature, high-pressure drilling tasks. It also is the first offshore drilling rig in the world to apply frequency variation engineer technology for drilling machinery. The rig's first job is in Tonkin Bay, west of Nanhai, for one exploratory well and two production wells for CNOOC.

AGR buys Peak Group
Ability Group (AGR) of Norway has agreed to buy Aberdeen-based The Peak Group, which provides well construction services and software to upstream oil and gas companies, for US $84.8 million. Peak will continue operating under its own name and probably will bring some AGR services under than umbrella. All Peak officers and staff members are scheduled to remain with the company. The company managed the drilling of 24 wells last year and recently contracted the Bredford Dolphin to perform multiclient drilling programs for independent operators.

Production

Output beats demand
Around the world, oil supplies are surging ahead of demand, according to Ali al-Naimi, Saudi Arabia's oil minister. Part of the reason is increased conservation as consumers avoid high energy costs caused by oil prices above US $70/bbl. The International Energy Agency recently cut its growth forecast for 2006 by 220,000 b/d, or 15%, to a growth of 1.25 million b/d and a projected world average oil demand of 84.83 million b/d.

Canada to double production
Canadian producers are on track to double oil production by 2020, according to the Canadian Association of Petroleum Producers. The growth will come from the Alberta oil sands, both in new projects and expansions to existing projects. That projected production will increase Canada's output from 2.5 million b/d last year to 4.6 million b/d in 2015 and to almost 4.9 million b/d in another 5 years. That expansion will require more pipelines and additional infrastructure to handle the heavier oil mix. It projected an increase in heavy oil from sands from 1 million b/d now to 3.5 million b/d in 2015 and 4 million b/d in 2020.

Nigeria gets higher quota
After years of nagging the Organization of the Petroleum Exporting Countries for higher production quotas, Nigeria finally got the international organization to raise its quota by 1.5 million b/d. The organization sets quotas based on member nations' populations and its proven reserves, and Nigeria is Africa's leader in both categories. The higher quota should help overcome some of the nation's delays in starting up new offshore production projects and increase exploration and drilling.

General

Spending surges 22%
Rewards from high oil prices combined with high service and hardware costs will push exploration and production spending more than 22% higher - to $253.02 billion - in 2006, from planned expenses a year earlier, according to the midyear update of the Citigroup Research annual spending survey.
That trend should continue as 30% of the record number of operators responding said exploration and production expenditures should climb substantially again in 2007. US independents were more optimistic than the world average with 37.1% anticipating substantially higher spending, followed by Canada at 31.8%. The average outside North America was 28.6%. In all, 83% of respondents planned to spend more in 2006 than in 2005.
According to Geoff Kieburtz and W. Michael McNair, the analysts who prepared the report, "We believe the E&P spending cycle is moving into the mid-stage with several more years of robust growth ahead and positive implications for oilfield services and equipment stocks." Worldwide, companies with budgets exceeding US $2 billion plan to increase spending nearly 20%, while smaller companies in the 211-company survey group will increase spending 29%. Asked about oil prices used in planning, the companies anticipated a near-term price of $54/bbl, up from $50 in the December survey, and a 3-year average price of $51/bbl.
In the December Citigroup survey, surveyed companies included allowances for inflation of oilfield service and hardware costs. It was the first time in recent years they had done that. They estimated a 15% increase in those costs for 2006.
A full 56% of the respondents planned to spend more in 2007 than in 2006. That's not a record, but it does suggest double-digit growth next year, the analysts said.
They added, "Absent a supply shock, we may not witness the 30% to 50% annual spending increases that occurred in the mid-'70s; however, the current pace of growth in demand and investment appears to be sustainable for an indefinite period. Such a scenario strongly reinforces our positive outlook for the oil service industry and for the stock performance for the companies in the sector."

North Sea churns
At the end of 2005, 143 companies owned acreage in the North Sea, and during that year 11 companies or subsidiaries sold properties and 34 operating companies started operations in the UK sector of the North Sea.
The combination of newly started companies and internationals testing the waters occurred because of the 23rd licensing round or the 21st and 22nd round promote acreage, according to a new technical intelligence report from Hannon Westwood.
During the past 10 years, non-core acreage held by majors dropped from 60% of the UK portfolio to 40%, as the British government exerted pressure on companies to turn in their fallow acreage for releasing along with a drive to attract US-based independents by the UK Department of Trade and Industry.
The existing distribution of properties in the UK market represents an unstable situation, "where too many small companies are chasing too few short-term reserves," Hannon Westwood said. "Their applications for funds to drill out exploration wells (and hence longer-term payback) will not stand the test of time, particularly if there is a run of dry holes or perhaps only modest discoveries."
As the situation now stands, 143 companies own acreage and only 56 produce. That means 87 need start-up money or must rely on exploration or acquisition budgets.
With the current tight rig market and plenty of extra money, large companies will assemble properties, prospects and well activity offered by smaller start-up companies. An earlier study showed the average size of a successful farm-in discovery in 2005 was more than 60 million boe, or nearly three times larger than the 24 million boe found through joint ventures or step outs.
From a stock of some 1,400 UK blocks only about 460 are core holds. More than 710 blocks are in some process to attract investment, classified as fallow, potential fallow or promote acreage. That leaves another 360 blocks that are non-core, likely to remain inactive and move to fallow. That makes a total of 1,070 blocks that probably will move back into the market in the next 5 years.
This year, the company said, "We are seeing about 100 wells in planning, with over 45 with farm-in opportunities and around 60 as strong spud candidates."
It offered a conservative estimate of risked new oil and gas reserves at around 16 billion boe plus 10 billion boe in current producing or commercial reserves.
"Over the next 30 years, we therefore have the potential to introduce annually around 500+ million boe new oil and gas into the system and to sustain overall daily production well above 2 million boe/d."

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