Home' Trinidad and Tobago Guardian : October 22nd 2015 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt OCTOBER 22 • 2015
The clock is ticking for oil
companies. The precipitous
decline in the price of oil
has crushed profits across
the industry, and many
drilling projects are expected
to hemorrhage money until prices and costs
can reach some equilibrium.
Dave Lesar, CEO of the oil-services giant
Halliburton, believes that a "day of reck-
oning" for these companies is quickly
Fluctuations in production activity con-
tinue to create volatility in the oil markets.
Lesar, however, thinks it s only delaying a
period of big changes for the business.
"I think we just got to wait," he said in
Halliburton s quarterly earnings call Monday.
"These redeterminations are going on. And
it looks, generally to me, like it s a sort of
kick-the-can-down-a-road approach that s
being taken at this point. But that really
just pushes the day of reckoning into sort
of the first quarter of next year."
Lesar sees three types of firms revealing
themselves when that time comes: those
that are getting ready to get back to drilling;
those that need to wait for prices to go up
a little more; and those whose luck has run
out and who could be acquisition targets
for stronger firms.
The number of active oil rigs in the US
has collapsed amid low prices.
Some firms, especially those called
"unconventional" drillers such as independ-
ent frackers, have loans out from banks that
are reconsidering their lines of credit to oil
companies. Lesar says many of these firms
will be forced to drill before the prices
rebound, losing out on possible profits.
"So if you go a year without drilling a
well, and your production starts to turnover,
you are going to have to start drilling or you
are going to have to take your infrastructure
apart that you ve built up as a company,"
Lesar said. "So I think that as we get to the
end of the year, if these guys have money,
they are going to drill it up, and that s just
the fact that it is."
In the end, more drilling regardless of
price is good for Halliburton, which makes
money from a variety of oil-related products
such as drill bits and oil consulting.
BP Plc and China s CNPC will next week unveil
a strategic alliance to develop oil resources in Iraq
and other regions, industry sources said on Friday.
The deal, one of several high profile deals to be
signed during a visit by Chinese President Xi Jinping
to London, will aim to bolster cooperation between
the two companies in Iraq, where they are developing
the giant Rumaila oilfield.
Rumaila, in southern Iraq, is the world s second
largest oilfield and produced 1.34 million barrels per
day in 2014, according to BP s Web site.
The two companies will also seek to expand into
new joint ventures in other parts of the world, accord-
ing to the sources. No clear production or investment
targets are expected to be included in the deal, they
State-owned China National Petroleum Corp is
Asia s largest oil producer and parent of PetroChina
Brazil s giant offshore "subsalt" oil and gas areas will only
break even with oil worth US$55 a barrel or more, Oswaldo
Pedrosa, chief executive of state-owned oil-asset management
company Pre-Sal Petroleo SA (PPSA), said on Tuesday.
The US$55 a barrel figure is 14 per cent higher than the
current benchmark Brent crude oil price and 22 per cent higher
than the US$45 a barrel break-even figure previously given
by Petroleo Brasileiro SA or Petrobras, Brazil s state-run oil
Pedrosa said the break-even estimate also applies to Libra,
the eight billion to 12 billion barrel prospect being developed
by Petrobras, Royal Dutch Shell Plc, Total SA and China s
state-owned CNOOC and China National Petroleum Co.
If costs in the subsalt are that high, Petrobras, the world s
most-indebted major oil company, faces serious strains on its
already stretched finances. Some of its most important and
highest producing fields may be operating at a loss.
Pedrosa, who will manage the government s share of output
from Libra and other new developments in the subsalt, is
putting his hopes in a recovery in oil prices by the end of the
decade, when Libra is expected to start producing.
"Is Libra operating at a loss?" he said at an event in Rio
de Janeiro. "No, because its hasn t entered in operation."
"Today prices are low," he added. "But by the end of the
decade, certainly, prices won t be where they are now."
Earlier this year, Petrobras estimated "about US$45 a barrel"
to be the break-even point for the subsalt.
The company said its break-even estimate rises about US$5
to US$7 a barrel if gas pipelines are needed to export gas to
shore from the fields, many more than 100 kilometers off
Brazil s coast in water more than 3,000 meters deep.
Asked about Pedrosa s comments on Tuesday, Petrobras
press representatives declined to comment.
The subsalt is an offshore region where oil and gas are
trapped far beneath the seabed by a layer of mineral salts. The
Subsalt Polygon, a region where Pedrosa s company has author-
ity over new development, contains at least 176 billion barrels
of undiscovered recoverable resources, according to Rio de
Janeiro State University.
That would be enough to supply all the world s oil and gas
needs for more than five years and four times what has already
been discovered in the region. Reuters
LGO Energy plc announced Monday that a cement
plug has been set in the surface casing of well GY-
678 in Trinidad, following a mechanical problem ini-
tially reported by the company September 18.
LGO attempted to recover downhole equipment,
which was causing an obstruction below 9 5/8-inch
casing, without success. As a result, the well has now
been plugged with cement and the rig used to drill
the well has been released, pending a decision on
possible re-entry and sidetracking, or re-drilling, to
reach the extensive C-sand net oil pay zone previously
drilled and logged in the well.
In addition to the cost of the well and the unsuc-
cessful recovery attempts totaling approximately $1.9
million, LGO is potentially liable for the cost of the
lost downhole equipment of approximately $1.5 mil-
lion. The loss of anticipated production from the well
has also had a negative impact on the group s cash
flow forecasts, according to LGO.
Neil Ritson, LGO s chief executive, commented in
a company statement:
"Stuck pipe incidents are not common and despite
taking extensive precautions during the drilling of
the 15 new wells, this incident, which occurred at
the very end of the programme, is a setback for LGO.
Whilst there is no long term impact to the company s
assets and indeed the GY-678 well has shown that
there is more and better C-sand reservoir than pre-
viously known, the short-term financial impact has
to be managed. The company is still planning for
additional Goudron Sandstone production and will
report further on its plans in the coming months."
LGO Energy: Trinidad
well plugged following
The oil industry's 'day
of reckoning' is near
Executive: Brazil's subsalt needs US$55/bbl oil to profit
BP, China's CNPC
to unveil oil alliance
Links Archive October 21st 2015 October 23rd 2015 Navigation Previous Page Next Page