NEWS BULLETIN

March 02, 2009 --- Vol. 15, No. 21March 2009

Eni possibly slowing down Nikaitchuq

Eni Petroleum is “slowing down” the pace of development at the Nikaitchuq unit in the nearshore waters off the North Slope, according to a state oil and gas official.

Division of Oil and Gas Director Kevin Banks told Petroleum News that the American subsidiary of the Italian oil giant planned to move the project from the “fast track” to a “normal pace,” which could delay start up off the field by six months to a year.

In recent days there has been speculation within the oil services community that Eni planned to suspend operations at Nikaitchuq, a $1.45 billion project sanctioned by the company in January 2008. An Eni representative in the company’s Anchorage office declined to comment about future plans at the unit, and a spokeswoman at Eni’s U.S. headquarters in Houston was out of town and could not be reached for comment.

Eni officials last fall talked about producing first oil from onshore pads at Nikaitchuq in late 2009 and bringing offshore pads at the unit into production starting in late 2010.

As of early January, the company completed at least one development well from Oliktok Point, according to records from the Alaska Oil and Gas Conservation Commission.

In a four-year strategic plan presented to analysts on Feb. 13, Eni still lists the North Slope as a “key area” of exploration for the company, and slated the Nikaitchuq prospect for 2010, peaking at 26,000 barrels per day of oil. The company previously announced plans to build processing facilities capable of handling 40,000 barrels of oil per day.

At the presentation, Paolo Scaroni, chief executive officer of Eni S.p.A., gave nuanced thoughts about pursuing high costs ventures during the current economic climate.

Scaroni said a January 2007 decision not to enter the high cost Canadian oil sands was “one of the wisest decisions I’ve ever taken in my life,” but added that unconventional prospects in Venezuela and the Congo remain profitable even at lower oil prices, saying, “Our unconventional oil is much better than some other unconventional oil.”

Scaroni also said Eni likes its position in the Gulf of Mexico and hopes to remain a presence there, but added, “Other areas of the world might be under scrutiny to make sure that either they are material, or we have enough perspectives in order to make them material one day.” He did not elaborate or mention any specific areas under review.

Eni is projecting oil prices to average $43 barrel oil this year and $55 barrel in 2010, and said a “vast amount” of its international portfolio would break even at $35 a barrel prices.

The company sanctioned Nikaitchuq after the state agreed to reduce the royalty rate on many leases at the unit during periods of time when the delivered price of Alaska North Slope crude oil falls below an inflation-adjusted threshold of $42.54 per barrel.

While that price seemed unlikely when the state made its decision in December 2007, as Alaska North Slope crude traded around $90 a barrel, it tracks fairly closely with current oil prices, which have moved between $32 and $48 a barrel since the start of the year.

ANS production up 5%

Alaska North Slope production averaged 738,357 barrels per day in February, up 4.98 percent from a January average of 703,318 bpd. There were weather-related Valdez tanker delay loadings in the early part of January which dropped average production in that month almost 4 percent from December.

Prudhoe Bay had the largest month-to-month increase, averaging 366,445 bpd in February, up 6.4 percent from a January average of 344,391 bpd.

Lisburne and Alpine each had production increases of 5.9 percent from January to February, with Lisburne averaging 37,211 bpd in February, up from 35,140 bpd in January and Alpine averaging 110,428 bpd in February, up from 104,283 bpd in January.

Kuparuk River averaged 156,415 bpd in February, up 4.7 percent from a January average of 149,388 bpd.

Milne Point averaged 30,509 bpd in February, up 4.7 percent from a January average of 29,687 bpd.

Both Endicott and Northstar had month-over-month production declines, with Northstar averaging 23,483 bpd in February, down 0.9 percent from a January average of 23,704 bpd and Endicott averaging 13,866 bpd in February, down 17 percent from a January average of 16,725 bpd.

Cook Inlet production averaged 11,712 bpd in February, down 4 percent from a January average of 12,200 bpd.

See stories in March 8 issue of Petroleum News, available online at noon, Friday, March 6 at www.PetroleumNews.com


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