Oil Patch Insider

EnCana says it’s No. 1; New player in Alaska? Think Italian

When Gov. Frank Murkowski announced June 28 that Alaska would soon have a new major player in the oil and gas industry, he kicked off speculation as to which oil company was about to enter the state.

“I can tell you that there’s going to be a major announcement here very soon on a major player,” he said at a luncheon in Anchorage, electing not to name the company: “when they’re ready to announce it, you’ll find out.”

Much to the governor’s dismay, Gregg Nady, Alaska land representative for Shell, made a speech right after his, essentially telling attendees what he had just told the governor – that Shell hopes to become a major player in Alaska.

“I messed up,” the governor said June 29, admitting with a chuckle that he felt a bit sheepish.

In the meantime, Petroleum News tried to figure out which company the governor was referring, not suspecting it was Shell since the company had already begun picking up leases in Alaska and top executives in the company had previously announced Shell’s intentions regarding Alaska, albeit not directly to the governor.

The most promising candidate was ENI SpA – pronounced “any” – a major oil and gas company based in Italy.

ENI officials have been interested in Alaska for well over a year and Petroleum News sources all placed their bets on the Italian company being the next big new player in Alaska.

Some sources said they expected ENI to buy EnCana’s leases in Alaska, but EnCana would not confirm a deal is in the works, although all its Alaska leases have been on the market for several months.

The governor might have been a bit late with his announcement about Shell, but his prediction could still prove true, sources say, especially if the rumors about EnCana prove true.

Shell opening Alaska office

Petroleum News sources at both companies would not confirm the rumor. But Kelly op de Weegh, senior external affairs representative for Shell, did say the company is “negotiating for office space in Anchorage” and “will make an announcement at an appropriate time.”

So, is Shell buying EnCana’s leases in Alaska, all of which are up for sale?

Petroleum News sources say there is not a lease deal in the works between the two companies. Op de Weegh said, “Shell did not acquire any leases from EnCana.”

She also said Shell does not yet have a partner for its Beaufort Sea leases, something company officials have said they would like to find.

PetroKaz ready to pack its Kazakh bags

The smallest of Canada’s six integrated oil companies, but the toughest in the challenges it has taken on, PetroKaz said June 27 it is in talks with a number of parties about a merger or sale.

With a market value of about C$3.5 billion and interests in the former Soviet republic that include 550 million barrels of proved and probable reserves, capacity to pump about 158,000 barrels per day (although disputes have currently limited output to 85,000 bpd) and its own refinery, PetroKaz is seen as a ripe takeover target.

For five years it has been on a wild ride in Kazakhstan, including a brief takeover of the refinery in 2000 by armed mercenaries, whose origin remains murky.

Since then it has faced civil and criminal charges by Lukoil, its Russian partner in the Turgai oilfield, and Kazakh authorities, raising suspicions that its hosts were trying to beat it into submission.

In response to a report in the Financial Times of London, a spokesman for PetroKaz confirmed that Goldman Sachs was hired more than a year ago to act as a general financial adviser.

He said that “we have received a number of approaches from various companies,” although there is no assurance that “this will lead to any kind of formalized, final transaction.”

Analysts believe suitors will come from several directions — Lukoil, KazMunaiGaz (Kazakhstan’s stated-owned company), India’s state-owned ONGC Videsh, ENI SpA of Italy, Chevron (which is active in the region), or one of China’s large energy companies that are scouring the globe for oil interests.

The Financial Times said an unidentified Chinese firm has made an offer, but PetroKaz has declined to name any bidders.

Bolstering the Chinese theory is the current construction of a 600-mile crude pipeline by China and KazMunaiGaz from Kazakhstan to a Chinese refining center on Xinjiang, eliminating the current costs of shipping oil by rail.

The pipeline is scheduled to come on stream in 2006 at 200,000 bpd and double those volumes by 2011.

PetroChina is also obtained approval to spend more than US$3 billion upgrading its refining complex in Xinjiang.

Whatever the outcome, there is strong reason to believe that PetroKaz is headed for the history books.

Rightly or wrongly, Chief Executive Officer Bernard Isautier — credited with rescuing PetroKaz from bankruptcy when it was known as Hurricane Hydrocarbons — was seen as dropping hints last year when he cashed out stock options worth C$92.6 million, then announced in May that he will retire in September.

Clark assigned to role of chief gas line negotiator

Alaska Gov. Frank Murkowski made the formal announcement on June 29, saying Clark, his chief of staff, would delegate some of his normal duties to commissioners in order to focus most of his time on wrapping up fiscal terms for a pipeline with at least one of the three applicants under the state’s Stranded Gas Development Act in order to present a contract proposal to the Legislature “this year.”

Murkowski said that he, with Clark at his side, has attended “virtually all of the meetings” with the applicants and that he wants his number one person to coordinate the final stages of gas line negotiations for his administration.

Clark’s new unofficial title, the governor said, is “chief counsel, chief negotiator and chief of staff,” quelling rumors that Cheryl Frasca, director of the state Office of Management and Budget, had been named Clark’s replacement as chief of staff.

But the announcement instigated speculation on the role of van Meurs, who was hired in April 2003 by the Alaska Department of Revenue, and who has often been referred to as lead gas line negotiator by state officials.

“Pedro is still an adviser, a consultant,” the governor said in response to questions from the press following his announcement of Clark’s added responsibilities, noting that van Meurs “travels back and forth to the Middle East … for other clients.”

Without directly saying Clark was replacing van Meurs, Murkowski instead dwelled on van Meurs contribution to date: “We value his input … he has been a great asset.”

EnCana: ‘We’re No. 1, we’re No. 1’

The Globe and Mail’s annual Top 1000 list saw EnCana retain its No. 1 spot, while peer companies filled eight of the leading 25 positions.

EnCana was a clear winner again, posting profits of US$3.513 billion, putting itself well clear of the second place Bank of Nova Scotia with C$2.93 billion (about C$2.37 billion at current trading levels).

ExxonMobil subsidiary Imperial Oil, Canada’s largest integrated oil company, moved from ninth in 2003 to eighth spot at C$2.03 billion.

Otherwise eight of the top 10 positions were filled by Canada’s five largest banks and two life insurance companies.

Other E&P companies to claim places among the leading 25 were: Petro-Canada (10th, unchanged from 2003) at C$1.76 billion, Canadian Natural Resources (dropping to 16th from 12th) at C$1.4 billion, Shell Canada (rising to 19th from 26th) at C$1.29 billion, Suncor Energy (slipping to 21st from 18th) at C$1.1 billion, TransCanada PipeLines (unchanged at 22nd) at C$1.08 billion, TransCanada Corp. (unchanged at 23rd) at C$1.03 billion and Husky Energy (tumbling to 24th from 13th) at C$1 billion.

There is no reason to expect much change in profit levels this year given the latest projections for one entity that neither drills for nor produces oil and gas, but reaps a handsome reward from the industry.

The Alberta government is likely to pile up a surplus of C$5 billion-$6 billion for 2004-05, far ahead of its budget prediction of C$1.5 billion, said DeltaOne Capital analyst Peter Linder

The budget was based on the government’s traditionally conservative forecasts of US$42 per barrel of oil and C$5.60 per gigajoule of natural gas.

Editor’s note: Insider is written by Gary Park and Kay Cashman.