Home' Trinidad and Tobago Guardian : October 8th 2015 Contents BG10 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt OCTOBER 8 • 2015
The auctioning of blocks of
oil and gas fields, both
onshore and in the Gulf of
Mexico, is designed to bring
foreign investment into
Mexico's decrepit energy
industry as part of President Enrique Pena
Nieto's flagship reforms. The first of the
"Round One" auctions, which took place
in July, was a flop, with only two of the 14
blocks finding buyers. The second, on Sept.
30, went much better.
Three of the five shallow-water production
blocks on offer were awarded, thanks to
bids far above the government's stated min-
imums. Nine of the 14 companies and con-
sortia that had qualified put in bids, which
also was an improvement on last time. The
two biggest, Shell and Chevron, stayed away,
but that Eni of Italy was awarded the first
block was a welcome sign of faith from one
of the world's energy majors.
Changes to the contracts and to the run-
ning of the auction showed how the state
bodies involved had learned from earlier
missteps. The government said in advance
what minimum share of a field's production
it expected successful bidders to agree to
give it, rather than revealing this only after
the auction. Last time bids for three blocks
were rejected for being only a few percentage
points below what the government wanted.
The US$6 billion guarantee that companies
had been required to put up was cut, and
the government provided further clarification
of the circumstances under which the reg-
ulator, the National Hydrocarbons Com-
mission, could rescind a contract.
Competition would have been fiercer if
oil prices were not so weak, and in this the
energy ministry has been unfortunate in its
"Everyone was interested" during the
international road shows that preceded the
auctions, said David Shields, the editor of
Energia a Debate, a Mexican industry mag-
azine. "Then prices collapsed."
Many oil companies now lack the cash
flow to make such investments. Eni apart,
the oil majors also may be waiting for the
deep-water blocks that Mexico is due to
auction next year.
That the government is showing such
flexibility in tailoring its auctions to the
realities of the oil market is nonetheless
encouraging. In a country where resource
nationalism long has been rampant, and
where the 77-year monopoly of Pemex, the
state oil firm, ended only this year, that is
achievement enough. The Economist
US energy firms cut 26 oil rigs in the latest
week, the biggest reduction since April and
the fifth straight weekly decline, data showed
on Friday, a sign low prices were pushing
drillers away from the well pad.
The cutback for the week ended October 2
brought the total rig count down to 614, the
least since August, 2010. In the previous four
weeks, drillers cut a total of 35 rigs, oil services
company Baker Hughes Inc said in its closely
followed report. US crude prices rose 1.5 per
cent in the minutes after the report.
The latest rig count is less than half the
1,591 oil rigs in the same week a year ago and
also far below the all-time high of 1,609 in
October 2014. They have erased the 47 oil rigs
energy firms added in July and August.
The summertime additions came when US
crude was priced around US$60 a barrel. This
week, US oil averaged US$45 a barrel, the
same as during the month of September, on
continued worries about lackluster global
demand and oversupply.
US crude futures jumped after Baker Hughes
released the report on expectations of reduced
crude production in the months ahead. Crude
prices had been flat just before the report.
Baker Hughes also reported a reduction in
natural gas rigs, bringing total US rigs were
to a 13-year low. Natural gas rigs were down
two this week to 195, the lowest level in at
least 28 years, according to the Baker Hughes
data going back to 1987.
Drillers reduced the number of oil wells in
all the major US shale basins this week. Seven
were cut in the Permian in West Texas and
eastern New Mexico; five in the Eagle Ford in
South Texas; two in the Niobrara in Colorado
and Wyoming; and one in the Bakken in North
Dakota and Montana.
Analysts at Simmons & Co International,
an investment banking services firm, said in
a note they expect oil and gas rig counts to
decline in the fourth quarter of 2015 with the
rate of decline stabilising in the first half of
Despite drilling cutbacks, US oil production
edged up to 9.4 million barrels per day (bpd)
in July from 9.3 million bpd in June, according
to the latest U.S. Energy Information Admin-
istration's (EIA) 914 production report.
Royal Dutch Shell said it started operations at
the third phase of operations in the deep waters
off the coast of OPEC-member Nigeria.
Shell said its Nigerian exploration and production
company started production at the third phase of
the offshore Bonga prospect.
"This new start-up is another important milestone
for Bonga, adding valuable new production to this
major facility," upstream director Andrew Brown
said in a statement.
Shell last year started oil production from the
deepwater Bonga North West development off the
coast of Nigeria. At its peak, the company said the
third phase of operations offshore Nigeria should
be around 50,000 barrels of oil equivalent.
Nigeria was among the member states contribut-
ing most to the production from Organisation of
Petroleum Exporting Countries. In August, the last
full month for which data are available from OPEC,
Nigeria produced about 1.86 million barrels of oil
per day, about four per cent higher than the previous
Reserves taken from the third phase of the Bonga
prospect will be fed through existing production
infrastructure offshore, which can produce more
than 200,000 barrels of oil and 150 million cubic
feet of natural gas per day at full capacity.
The entire Bonga prospect started oil and gas
production in 2005 and was Nigeria's first devel-
opment in deep waters.
To date, the full project has produced more than
600 million barrels of oil. rigzone.com
Oil rose on Monday after Russia said it was
ready to meet other producers to discuss the mar-
ket, where prices have more than halved from last
year's highs due to a supply glut.
A report showing a fifth weekly fall in the number
of oil rigs drilling in the United States also under-
Brent was 50 cents higher at US$48.63 a barrel
by 0930 GMT after ending up 44 cents on Friday.
US crude was 50 cents higher at US$46.04 a barrel
after settling up 80 cents.
Russia, one of the world's top three oil producers,
has been unwilling to cut output to support prices
and last November declined to cooperate with the
Organisation of the Petroleum Exporting Countries
in order to defend its market share.
But Moscow is now prepared to meet OPEC
and non-OPEC oil producers to discuss oil markets
if such a meeting is called, its energy minister said
on Saturday. A separate meeting between Russian
and Saudi officials was being planned for the end
of October, he said.
Russian oil output hit a new post-Soviet monthly
high of 10.74 million barrels per day in September,
despite a drop in global crude prices to 6-1/2-
year lows in August.
Brent reached a low of almost US$42 a barrel
in August, down from a high above US$115 in June
"Geopolitical tension created by Russia's involve-
ment in Syria makes cooperation with OPEC highly
unlikely," said Tamas Varga, oil analyst at London
brokerage PVM Oil Associates. "But talk of such
collaboration is supporting prices short-term."
Russia has angered Saudi Arabia and other Gulf
Arab states by helping support Syrian President
Bashar al-Assad with air strikes and military aid
against rebel fighters.
Russia said on Monday its planes had struck 10
Islamic State targets in Syria.
Yoo-jin Kang, commodities analyst at NH Invest-
ment & Securities in Seoul, said the global oil
market was oversupplied and any talk of production
restraint was supportive.
"As Russia requested talks, investors seem to
expect a possible reduction in oil output to be
agreed during rebalancing procedures," Kang said.
Data on Friday showed US energy firms reduced
the number of oil rigs by 26 in the latest week,
the most since April and the fifth straight weekly
fall, a sign low prices were pushing drillers away
from the well pad. Reuters
Mexico's oil-field auction:
Oil up as Russia
mulls OPEC talks,
rig count drops
Baker Hughes: US oil drillers cut rigs for 5th week
Shell starts new work
Brent reached a low of
almost US$42 a barrel in
August, down from a high
above US$115 in June 2014.
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