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UPI: Analysis: Energy firms eye Gulf of Mexico

HOUSTON, Nov. 8 (UPI) — This week’s decision by Norway’s ASA Statoil to spend nearly $1 billion for access to the Gulf of Mexico’s deep-water reservoirs underscores the area’s increasing allure to global energy operators.

Houston’s Anadarko Petroleum Corp. agreed to sell Statoil working interests in two discoveries, known as Knotty Head and Big Foot, and one prospect, North Big Foot, for $901 million. Statoil will hold a 25-percent stake in Knotty Head, which is operated by Canada’s Nexen Inc., a 15-percent share of Big Foot and a 15-percent interest in North Big Foot, both of which are operated by Chevron Corp. The properties have yet to produce one drop of oil but tests indicate massive reserves.

The migration of non-U.S. energy companies, like Statoil, into the deep waters of the Gulf will accelerate as U.S. lease sales begin next year and continue into 2008.

Meanwhile, that new foreign interest in U.S. companies’ backyard is producing much stronger domestic balance sheets. In August, Anadarko bought Kerr-McGee Corp. and Western Gas Resources Inc., helping to lift its debt to 67 percent. But the Statoil divestiture, along with other such sales, will result in its current 67 percent debt being reduced by next year at this time to around 40 percent, John Colglazier, an investor relations official, said Tuesday. While not as strong as the 25 percent Anadarko had this time in 2005, it illustrates how some Gulf of Mexico holdings can enable a corporation to slash debt.

“The agreement with Statoil represents an opportunity to realize the value from a portion of our extensive portfolio,” said Jim Hackett, Anadarko’s chief executive. Anadarko’s success at getting top dollar for choice Gulf properties also means it can minimize the amount of equity it plans to issue as it wrestles with debt.

Other U.S. companies with similar potential from holdings in the Gulf’s deep waters are Chevron, Devon Energy Corp., Royal Dutch Shell PLC and BP PLC.

For its part, Statoil, which has declining North Sea reserves, expects its Gulf of Mexico production to go from zero currently to 100,000 barrels per day by the end of 2012, said Oivind Reinertsen, president of Statoil Gulf of Mexico.

Statoil regards the Gulf of Mexico, Algeria, Venezuela and Angola as key targets for expansion so that it can sustain production at around 1 million barrels of oil equivalent per day until 2015.

Despite the costs of producing oil in 8,000 feet of water, Reinertsen said his company calculates that its new Knotty Head and Big Foot properties are commercially viable even if the price of crude drops to between $30 and $35 per barrel, a little over half of today’s price.

Monday’s announcement of the Anadarko deal is only the latest for Norway’s state-run energy company. In September, Statoil acquired working interests in Big Foot, Big Foot North and Caesar from Plains Exploration & Production Co. These assets are located in the Greater Tahiti and Walker Ridge areas, near the properties Statoil is buying from Anadarko.

“In less than two years we have developed a strong deep-water position in the Gulf of Mexico,” said Helge Lund, Statoil’s chief executive. “Our experience and strong technology base from the Norwegian continental shelf are great assets in tackling future developments in the Gulf of Mexico

“We are a leading subsea operator and have a strong track record in increased oil recovery, which will add value in our Gulf of Mexico operations. We are well positioned in key deepwater areas, with working interest in 11 discoveries, including the current development of the Tahiti field.”

Deep-water Gulf holdings are not just ways to strengthen U.S. corporate balance sheets; they represent long-term but long-lasting sources of cash.

Late last month Chevron — the largest leaseholder in the deep waters of the Gulf — announced its commitment to develop its Great White, Tobago and Silvertip fields in the U.S. Gulf of Mexico, approximately 200 miles south of Freeport, Texas, and in about 8,000 feet of water.

The fields will be produced with a so-called direct vertical access spar tethered to the seabed in what will be the deepest spar production facility in the world. First production from is expected around the turn of the decade, with the facility capable of handling 130,000 barrels of oil-equivalent per day.

“This project adds to the already impressive list of opportunities and projects we are aggressively developing to bring new supplies to markets for consumers and to create additional value for our stockholders,” said George Kirkland, Chevron’s executive vice president, Upstream and Gas.

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