Diamond Offshore to Move Rig from US GOM to Vietnam

- Diamond Offshore to Move Rig from US GOM to Vietnam

Wednesday, June 15, 2011
Dow Jones Newswires
HOUSTON
by Ryan Dezember

Diamond Offshore said that it will move one of its deep-water rigs from the U.S. Gulf of Mexico later this year to drill wells off Vietnam for BP.

When the Ocean Monarch is moved, it will be the third Diamond rig to leave the Gulf of Mexico since BP's deadly Deepwater Horizon explosion in April and the subsequent shut-down of deep-water drilling in U.S. waters.

Diamond said in a fleet status report that the Ocean Monarch should conclude its current contract with Marathon, for which the driller earned about $290,000 per day, in mid-August.

The rig, capable of drilling in up to 10,000 feet of water, is scheduled to arrive in Vietnam in November to drill two wells for the British oil giant with options to drill two more. That contract carries a day rate of about $340,000, Diamond said.

The Ocean Monarch's move did not come as a surprise as Diamond has talked about its intentions with analysts, said Simmons & Co. analyst Pearce Hammond, who said the day rate is "in line" with expectations.

The Ocean Monarch, which was featured in the 1997 Bruce Willis movie "Armageddon," was stripped down and rebuilt in 2006 after it was acquired by Diamond.

It was drilling for Anadarko when U.S. regulators shut down Gulf operations. Anadarko sued Diamond in a U.S. court in Houston, claiming that the drilling moratorium triggered cancellation clauses in its contract.

Anadarko and Diamond last month decided to dismiss claims against one another as the companies entered into a pair of long-term drilling contracts for rigs that are now under construction.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Philippines Welcomes US Help to Contain China

- Philippines Welcomes US Help to Contain China

Tuesday, June 14, 2011
Dow Jones Newswires
MANILA

Philippine President Benigno Aquino said Tuesday his country needed help from longtime ally the United States in its increasingly tense dispute with China over rival claims in the South China Sea.

Aquino accused China of breaking international law by sending vessels into waters claimed by the Philippines and close to its landmass, while portraying his country as weak compared with its militarily superior Asian neighbor.

"Of course they (China) are a superpower, they have more than 10 times our population. We do not want any hostilities to break out," Aquino told reporters when asked about recent Chinese actions in the disputed area.

"Perhaps the presence of our treaty partners, the United States of America, ensures that all of us will have freedom of navigation (and) will conform to international law."

The U.S. and the Philippines are bound by a 1951 Mutual Defense Treaty that calls on both parties to come to one another's aid if either were to be attacked by an external party.

Aquino's comments came after the U.S. ambassador to the Philippines, Harry Thomas, Tuesday said the U.S. remained committed to helping its former colony in any dispute over the South China Sea.

Thomas emphasized at a public forum in Manila that the Philippines and the U.S. were "longstanding treaty allies" and "strategic partners".

"We will continue to consult each other closely on all issues, including the South China Sea and Spratly Islands," Thomas said.

Aquino welcomed Thomas's comments, which are likely to irk China as it has long insisted that the U.S. has no role to play in resolving its territorial disputes with Asian countries.

"We are pleased by that, especially the reiteration that we are a strategic partner," Aquino said when asked to respond to Thomas's comments.

Aquino's remarks continued an escalation in tensions between China, the Philippines and other rival claimants to the strategically vital and resource-rich South China Sea over recent months.

The Philippines and Vietnam, in particular, have expressed alarm at what they say are increasingly aggressive actions by China in the disputed waters.

The Philippines has accused China of putting up posts and a buoy in Philippines-claimed areas of the Spratlys, an archipelago of more than 100 islands and reefs in the South China Sea.

It also accused China of sending naval vessels to intimidate Filipino fishermen and the crew of an oil exploration ship near an atoll called Reed Bank.

Aquino on Tuesday specifically highlighted recent "incidents" at Reed Bank, pointing out it was well within the Philippines' exclusive economic zone of 200 nautical miles.

He said the Reed Bank was just 80 miles from the nearest major Philippine landmass, but 576 miles from Chinese territory.

"Five-hundred-and-seventy-six miles is obviously greater than 200 miles, so why is there suddenly a dispute if we are all conforming to international law," he said.

Under the United Nations Convention on the Law of the Sea, a country's exclusive economic zone extends to 200 miles from its continental shelf.

In response to earlier complaints from the Philippines, China has denied taking any aggressive actions and insisted it remained committed to resolving territorial disputes with its neighbors peacefully.

Aside from China, the Philippines and Vietnam, Taiwan, Brunei and Malaysia have overlapping claims to sections of the South China Sea.

The area is believed to hold major oil and gas deposits, and has commercial shipping lanes that are vital for global trade.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Linc Expands US Acreage with Tx., La. Acquisitions

- Linc Expands US Acreage with Tx., La. Acquisitions

Monday, June 06, 2011
Linc Energy Ltd.

Linc announced that its wholly-owned subsidiary, Linc Gulf Coast Petroleum Inc., has acquired 14 producing oil fields (consisting of 156 leases covering approximately 13,400 acres) from ERG Resources LLC., for a price of US $236 million. The acquisition secures immediate oil production of approximately 3,300 barrels per day (BOPD), and a significant CO2 enhanced oil recovery (EOR) opportunity.

The 14 oil fields purchased from ERG Resources are located in Texas and Louisiana and are within the Gulf Coast Onshore and Inland Waters Regions and include all related infrastructure such as pipelines, tank batteries and processing facilities. All of the fields are either salt domes or faulted four-way closures related to deep-seated salt movement. Independent reports commissioned by Linc Energy indicate that the fields have the potential to increase recoverable oil by up to 24 million barrels by optimisation of current production and additional drilling operations.

Cumulative production for the 14 fields is estimated to be over 700 million barrels of oil to date with a regional recovery factor of approximately 40%, indicating a significant potential to achieve substantial increases in production from Enhanced Oil Recovery (CO2 flooding).

All of the acquired fields in the asset package are 100% operated by ERG Resources, with ERG Resources also holding 100% of the working interest in the majority of the fields.

A significant factor regarding this acquisition is that ERG Resources has to date only advanced significant development into one area, the Barbers Hill salt dome, achieving some excellent results. There are 6 more salt domes in the asset package that Linc Energy can assess to drill and expand with similar techniques to those that ERG Resources has utilized on the Barbers Hill field.

Texas oil fields

12 of the fields are located along the Texas Gulf Coast and Texas inland waters areas. The majority of the value at this stage is attributed to 5 of the 12 fields, being Barbers Hill, High Island, Port Neches, Atkinson Island and Cedar Point. Linc Energy anticipates additional value being attributed to the remaining assets once further evaluation has been completed.

Louisiana oil fields

Portions of the Leeville Field and the Black Bayou fields are part of the ERG Resources assets in Louisiana. The majority of the immediate opportunity in Louisiana is in the 100% owned and operated Black Bayou field. This field is one area that Linc Energy plans to aggressively drill in the coming 12 to 24 months to build production.

Key terms of the Agreement

The key terms of the Asset Purchase Agreement between Linc Energy and ERG Resources are as follows:

• The purchase price of the assets is US $236 million (subject to completion adjustments and necessary consents from parties holding a "first right of refusal" over approximately 4,300 acres of the acquired oil fields).
• The assets purchased consist primarily of oil & gas leases, property interests (including all related infrastructure such as pipelines, tank batteries and processing facilities) and 410 wells upon the Texas and Louisiana oil fields which are held directly by ERG Resources or by three wholly-owned subsidiaries of ERG Resources. Linc Energy will acquire the assets held by ERG Resources and will acquire 100% of the equity interests in the ERG Resources subsidiaries.
• The total area of these leases is approximately 13,400 acres held across 156 oil & gas leases with 410 wells of which 177 wells are currently producing.
• Completion of the transaction and operational handover is scheduled for 1 August 2011.

To support this acquisition and future expansion plans in the USA Gulf Coast region, Linc Energy will be opening a new office in Houston, Texas prior to the transaction completion date. At completion, Linc Energy will become the employer of most of the experienced team of professionals (approximately 25 staff), covering both field and office operations, who are currently employed by ERG Resources. These arrangements will ensure continuity of operations on the oil fields immediately on handover.

Funding

While Linc Energy can fund this acquisition from cash, the Company has mandated RBS (The Royal Bank of Scotland) to complete the financing to support both the ERG Resources asset acquisition and the first year of capital expenditure upon the ERG Resources (Gulf Coast) and the Rancher (Wyoming) assets to support Linc Energy's development plans. This debt financing will have minimal recourse to Linc Energy and the financing process is well underway. Under the current financing proposal, Linc Energy will provide approximately 25% of the capital.

Peter Bond, Chief Executive Officer of Linc Energy, said, "This acquisition is the next big necessary step that Linc Energy has taken to meet its two key business targets over the coming 12 to 18 months. The first of these targets is to achieve in excess of 20,000 barrels per day of oil production by the end of 2012, with at least 10,000 barrels of production by the end of 2011. The second key target for the Company, supported directly by achieving this first target, is to develop very profitable, solid cash flows from operations."

"Linc Energy has a number of excellent assets and will continue to acquire more. These assets will be systematically developed over the coming years, but to support the Company's long-term strategic plans, Linc Energy needs to focus on developing strong operational revenues that can support our growth. The reality is, Linc Energy can gain a permit to drill an oil well in days or at most a few weeks; we can then drill those oil wells similarly within weeks, meaning the time difference from project commitment to cash flow can literally be a few months. If I dare compare that timetable with the years of effort it takes to gain a permit on a coal mine or a GTL facility, you get the picture pretty quickly why it's necessary for the Company to be dynamic in its approach and to focus upon our immediate entrepreneurial targets and produce strong cash flows."

"Linc Energy's strategic plans have resulted in the Company gradually re-focusing its energies over the past several months, shifting its long term focus into three distinct areas covering our short, medium and long term goals. We are building the Company on 3 distinct fronts in Oil & Gas, Coal & Clean Coal and Clean Fuel & Clean Energy. On the Oil & Gas front, we are pursuing oil production assets that yield immediate revenue and profits. We are targeting assets that have the potential to increase production initially with aggressive drilling and workover campaigns, whilst also providing excellent long term opportunity to multiply our returns with Enhanced Oil Recovery from CO2 flooding that in some cases can last 10 to 20 years. This philosophy positions Linc Energy to obtain solid cash returns in the short term and yet keep those assets profitable and growing for many years to come."

"This ERG Resources asset package is a great example of what I'm saying. First, we already have good daily oil production of approximately 3,300 barrels per day, which is currently cash flow positive. Secondly there is a clear drilling and workover plan in place which is anticipated to effectively double this production to over 6,300 barrels per day in the next 12 to 18 months, improving cash flows and increasing the value of the assets."

"Finally, Linc Energy expects to use about 75% debt funding to purchase the ERG Resources assets. I've always run Linc Energy as a low to no debt company. However, my philosophy with ERG Resources and assets like them is that you borrow on cash flow positive assets that have the capability to comfortably pay their own debt down, minimizing the risk, whilst leveraging the upside opportunity. Simply put, because Linc Energy is buying cash flow positive oil production assets which we believe can easily cover their respective debt arrangements; and because we expect to increase oil production in the short-term from these oil assets, we can lower real cost and risk of funding. Combine all of this with the strong Australian dollar and suddenly it makes perfect sense to debt fund these assets."

"Personally, I strongly believe that Linc Energy can grow to greater than 100,000 barrels of oil per day production within the next 5 years, and I'm pleased to say this ERG Resources acquisition is the first BIG step towards that very goal, whilst also ticking another Linc Energy milestone. As always I look forward to updating you on the journey ahead. There will be a lot to keep up with, because there is now a lot of traction in the business," Mr Bond said.

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Statoil Plans to Become US Shale Operator by Early 2013 -Exec

- Statoil Plans to Become US Shale Operator by Early 2013 -Exec

Friday, June 03, 2011
Dow Jones Newswires
by Angel Gonzalez

Statoil, which built its oil and gas expertise in Norway's offshore waters, is stretching its land legs in the U.S., where it seeks to partake of the shale bounty.

Like many international oil and gas companies, Norway's Statoil has poured billions into joint ventures with some of the North American independents that in the last decade figured out how to profitably unlock the oil and gas trapped in shale, bankrolling their drilling while hoping to learn some of their techniques. But peering over its partners' shoulders is not enough: Statoil plans to run its own U.S. shale operation in South Texas's Eagle Ford Shale by early 2013, said the company's executive vice president for North America, Bill Maloney.

"We have aspirations and definite plans to become an operator in the onshore ourselves," he told Dow Jones Newswires in a recent interview at Statoil's North American headquarters in Houston. The company last October struck a $1.3 billion joint venture deal with Talisman in the Eagle Ford, which allows it the option to become operator.

"We are working towards that," Maloney said.

Statoil has been in the shale business since 2008, when it acquired 32.5% of a joint venture with Chesapeake in the Marcellus Shale, a big natural gas-rich rock formation in the Northeastern U.S. for $3.4 billion. Maloney said he sees some expansion in the Marcellus, but added that Statoil is really interested in growing its presence in the Eagle Ford, which is richer in oil.

High oil prices have turned the Eagle Ford into one of the hottest drilling basins in the world. On Wednesday, Marathon said it bought $3.5 billion in acreage from a company partially owned by private equity firm Kohlberg Kravis Roberts & Co., in one of the largest deals seen in the region.

Statoil is also interested in investment opportunities in other shales around the U.S., Maloney said.

Statoil's shale forays underscore the newfound promise found in the U.S. oil patch, once thought tapped out of its energy riches. It is now seen by large international oil companies as a key area for growth, as high oil prices have enabled many developing oil-rich countries to erect barriers to foreign investment.

Statoil helped make Norway the third-largest energy exporter, after Russia and Saudi Arabia, but the company's investments now extend all over the planet, from Algeria to Canada to Venezuela.

Its expansion in North America was gradual; throughout the years company made several large acquisitions in Canada and the U.S., including sizable deepwater acreage in the U.S. Gulf of Mexico, a position in Albertan oil sands, and the 2008 Chesapeake deal. By the time Maloney assumed the helm of a newly created North America unit in January, Statoil's assets in the continent had reached a critical mass.

Statoil had no employees in Houston in 2003, Maloney said. Now the company occupies nine floors in a high-rise near Houston's energy corridor--three floors more than last year--where nearly 400 employees work.

"We saw opportunities; we went after them," Maloney said. "Then, lo and behold, we built something here of size that we needed to separate out."

Copyright (c) 2011 Dow Jones & Company, Inc.

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Under New Rules, Chevron Ramps Up Activities in US Gulf

- Under New Rules, Chevron Ramps Up Activities in US Gulf

Thursday, June 02, 2011
Dow Jones Newswires
by Isabel Ordonez

Within the maze of gray tanks, pipes and machinery that make up this gigantic oil platform rising from the sea is a small red rectangle about the size of a wine bottle, with a rapidly clicking numeric panel. Rick Bullock, who runs Chevron's deep-water production operations, calls it "the cash register."

The instrument counts every barrel of oil the Tahiti platform, located 190 miles south of New Orleans, pulls from miles beneath the sea floor. During a visit last Friday, the meter showed the field was producing oil at the tune of about 109,000 barrels a day. With oil prices hovering at $100 per barrel, that's about $10 million a day flowing into the coffers of Chevron, which owns 58% of the field, and its partners Total and Statoil.

Making sure the money keeps rolling out of Tahiti is crucial for Chevron, at a time when oil prices are high and the company has ambitious growth projections to meet. The company aims to grow worldwide output this year by 1% to 2.79 million barrels of oil equivalent per day and to 3.3 million barrels of oil equivalent by 2017, or 19% more than it produced last year. That's a prodigious ramp up, especially as it navigates an array of new regulations that have slowed drilling in the U.S. Gulf of Mexico, one of its main theaters of operation. The regulations came in the wake of last year's massive oil spill, which also resulted in a nine-month-long drilling suspension.

Now Chevron, the second-largest U.S. oil company after ExxonMobil, has to cram more work into less time to meet its expectations even as its engineers try to grasp the new rules, a scramble that underscores how oil and gas producers in the Gulf's deep water are adapting to a new legal environment.

The San Ramon, Calif., oil giant is so concerned about the sluggish pace that it is considering contracting more drilling ships than it originally intended in order to meet its 2013 deadlines for the Tahiti expansion and the 2014 start up of two massive ultra deep-water fields, Big Foot and Jack/St. Malo, located 35 and 140 miles south of Tahiti, respectively.

"It's probably a fact that we are going to have to bring additional drill ships into the Gulf of Mexico to be able to meet that schedule," Warner Williams, Chevron's vice president for the Gulf of Mexico Business Unit, said in an phone interview. Williams didn't specify how many more rigs the company could add. Chevron currently has three rigs doing development and exploratory drilling in the Gulf.

With the arrival of hurricane season, which started Wednesday and lasts through November, Chevron and other companies face even more pressure as the presence of a storm could result in lengthy evacuations and lost work days.

Chevron was among the first oil companies to receive government approval to drill back in the Gulf's deep water, including here, where the Transocean's Discovery Clear Leader drillship can be seen floating a few miles from the platform, doing work that will allow the field to increase production to 150,000 barrels a day in 2013. But the company still has 10 development and exploration plans and approximately 15 drilling permit applications pending approval elsewhere in the Gulf.

"The pace of the permitting process has been slow. It's clear we are not where we need to be," Williams said. "We would like the process to go a little bit faster." The federal government says it is approving permits as fast as it deems safe.

Energy consultancy Wood Mackenzie said the drilling suspension, along with a new, more time consuming permitting process, will result in the loss this year of about 375,000 barrels of oil a day--or 20% of previously estimated production levels.

"Nobody really knows when things in the Gulf are going to be back to what we called a new equilibrium," said Mohammad Rahman, Wood Mackenzie's analyst for the Gulf of Mexico. "Our previous assumption was it will be some time in 2012, but now it could be 2013 when we see a more stable, consistent level in permitting process."

The main reason for the slowdown in the permitting process is that the Department of Interior's Bureau of Ocean Energy Management, Regulations and Enforcement--the federal agency on charge of offshore operations--doesn't have enough regulators to handle the backlog of projects, Rahman said.

The bureau, which was created after the oil spill, is still in the midst of a reorganization, Rahman said.

Melissa Schwartz, a spokeswoman for the agency, said the government "is working as expeditiously as is safely possible to approve exploration plans and permits."

It began approving permits in February, when two oil deep-water oil spill containment systems were deemed operationally ready by the authorities.

Tahiti, discovered in 2002, is one of the largest fields in the Gulf, with 400 million to 500 million barrels of oil equivalent in recoverable resources. Oil production, which began two years ago, accounts for about 64% of Chevron's total output in the Gulf.

Copyright (c) 2011 Dow Jones & Company, Inc.

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French, US, Canadian Oil Ventures in Libya

French, US, Canadian Oil Ventures in Libya

Thursday, April 14, 2011
Deutsche Presse-Agentur (dpa)

Three Libyan oil ventures involving French, US and Canadian companies had their assets frozen by the European Union on Thursday, as it issued a fresh round of sanctions in a bid to increase pressure on the regime of Moammer Gaddafi.

Sanctions against a total of 11 Libyan energy firms came into force Thursday.

The three joint ventures are between Libya's National Oil Corporation and France-based Total, and the US-based Occidental Petroleum Corporation and Petro Canada.

The other companies targeted by the sanctions are all subsidiaries of the National Oil Corporation.

These sanctions add to the 16 energy companies already placed under sanctions, implementing a "de facto oil and gas embargo," said German Foreign Minister Guido Westerwelle on Tuesday while announcing the extra sanctions.

The EU also froze the assets of 15 other Libyan companies, including banks, investment firms and Libyan Arab Airlines, which is owned by the Libyan government.

Libya's ambassador to Chad and the governor of Libya's southern Ghat district were also hit with travel bans and asset freezes for recruiting mercenaries to support Gaddafi's regime.

Some two dozen people, including Gaddafi, his relatives and close associates, had earlier been targeted by EU sanctions.

One, however, had his travel ban and asset freeze lifted on Thursday, former foreign minister Musa Kusa, who had been defected on March 30, in Britain.

US, Mexico Work to Raise Bar in Gulf

US, Mexico Work to Raise Bar in Gulf

Tuesday, April 05, 2011
Houston Chronicle

by  Jennifer A. Dlouhy

 

Offshore drilling regulators from the U.S. and Mexico met Monday in a bid to strengthen standards governing oil and gas exploration throughout the Gulf.

U.S. Interior Secretary Ken Salazar said the goal was a single "gold standard" for all Gulf of Mexico drilling, whether in U.S. or Mexican territorial waters.

Salazar said the regulators were discussing how to share "best practices in the Gulf of Mexico" and "move forward in development of a single protocol between our two nations."

"We want to share the lessons learned from the Macondo Deepwater Horizon tragedy so we can move forward with the development of oil and gas," Salazar said in a conference call with reporters.

The initial talks were focused on what happens near the U.S. and Mexico, although Cuba has plans for drilling in its Gulf waters.

The co-chairmen of a presidential commission that investigated last year's oil spill and who took part in the meetings Monday said they are optimistic Cuba eventually will agree to baseline drilling standards adopted by the United States and Mexico.

"We would very much hope that they would ascribe to what is emerging as a globally accepted standard, much of it informed by the experience of the United States with the Macondo tragedy," said William Reilly, a panel co-chairman.

Concerns about Cuba

Bob Graham, the other co-chairman, a former Democratic senator and governor of Florida, said the Sunshine State is understandably worried about nearby drilling in Cuba's waters.

"There is concern about the prospect of drilling so close to our coast with a country that has not engaged in this previously," Graham said. He said he is optimistic that any pact with Mexico would "become truly a Gulf of Mexico agreement with any country in these waters being under the same standards."

Graham noted that the problem of setting common standards in areas where multiple nations are drilling is arising in many other places.

The meetings in Mexico City on Monday are a preview of an international summit with offshore drilling regulators and energy officials from more than a dozen countries scheduled for April 14 in Washington.

Separately Monday, Salazar took issue with Transocean's claim that 2010 was "the best year in safety performance" in its history, despite the explosion of its Deepwater Horizon rig in the Gulf of Mexico last April.

Transocean made the assertion in regulatory filings on Friday as partial justification for bonuses awarded top company executives.

Transocean owned the Deepwater Horizon drilling rig that was working on BP's Macondo well when it blew out last April, destroying the rig, killing 11 workers and triggering a massive oil spill.

"From what I have seen from various investigative reports," Transocean was "at some fault with respect to what happened at the Macondo well," Salazar said.

A Transocean executive apologized for the company's safety claim.

"We acknowledge that some of the wording in our 2010 proxy statement may have been insensitive in light of the incident that claimed the lives of 11 exceptional men last year, and we deeply regret any hurt that it may have caused," said Ihab Toma, the company's executive vice president. "Nothing in the proxy was intended to minimize this tragedy or diminish the impact it has had on those who lost loved ones."

Also Monday, House Democrats asked federal officials to investigate whether Transocean's decision to adopt three-week work shifts -- instead of the two-week schedule it had been using -- may have contributed to the spill.

Seven months before the disaster, Transocean switched its workers from a hitch schedule with 14 days on rigs followed by 14 days onshore to one with 21-day rotations.

"We believe Transocean's decision to move to the longer shift schedule should be closely examined," said Rep. Henry Waxman, D-Calif., and Rep. Diana DeGette, D-Colo. "Six of the 11 people who died aboard the Deepwater Horizon were on day 20 of their 21-day shift and a seventh was on day 19."

'Fatigue issues'

An assessment of workers on the Deepwater Horizon, conducted in March 2010 by Lloyd's Register and obtained by the lawmakers, found that employees were dealing with "fatigue issues" under the new 21-day cycles, especially during the final seven-day stretch.

According to the assessment, as quoted by Waxman and DeGette, one manager on the Deepwater Horizon said there was a "big difference in their attitudes on the third week," and another said the policy was "definitely increasing the risk of an incident."

US Investors Likely to Help New Regimes in Oil Countries

US Investors Likely to Help New Regimes in Oil Countries

Tuesday, April 05, 2011
The Washington Times

by  Tim Devaney

As political unrest and violence continue to flare across the Middle East, the U.S. capital is seeking its own oases in the desert.

Hotels, restaurants, and tourist-oriented transportation industries in countries that have thus far avoided major unrest -- the United Arab Emirates, Saudi Arabia, Morocco, and Oman -- are either thriving or expected to pick up new business in the near future. The oil industry in Persian Gulf countries such as Kuwait, UAE and Qatar are also likely to benefit as production is curtailed in other countries.

"Some of these markets and cities are doing incredibly well," said Jonathan Worsley, spokesman for the Arabian Hotel Investment Conference. "You're either in the thick of things, or you're doing well by not being in it."

But for major U.S. companies doing business in such long-established markets as Egypt and Tunisia, the future is far more uncertain. Old relationships have crumbled with old regimes, and much uncertainty hangs over economic policy as the new governments struggle to get organized.

Business groups say the turmoil is the Middle East and North Africa is nothing new for American companies operating there.

The region has long suffered from political and civil unrest that undercut their bottom lines. But veteran U.S. investors say they knew the risks they were taking when they went in. Most American investors plan to stay the course and help rebuild the economies under new regimes, according to Lionel Johnson, vice president of Middle East and North Africa affairs for the U.S. Chamber of Commerce.

"The U.S. companies that are there have been there for a long time, they're planning to be there in the future, and they're trying to do everything they can to help," Mr. Johnson said. "You're not seeing disinvestment. You're not seeing companies shutting their doors and pulling out operations. They're continuing to be there."

There are few U.S. companies in Libya, said Mohsin Khan, a senior fellow at the District-based Peterson Institute for International Economics, lessening the impact on American business investment there. American businesses have faced more difficulties in Egypt, where longtime U.S. ally Hosni Mubarak was driven from power by a popular revolt less than two months ago.

Some had to close at the height of the unrest. Kraft Foods, which has operations across the Middle East, was forced to suspend operations in Egypt and Bahrain for several days, but has since reopened its facilities.

The new regime in Egypt and those in other countries throughout the region could turn a cold shoulder to foreign businesses that flourished under the previous rulers, Mr. Khan warned. That could mean price controls that would cut into profits. U.S. producers like Kellogg's and Coca-Cola are among those who could be at risk.

"If you're in that business, your prices could be controlled," Mr. Khan said. "The profits there will be reduced. That, to me, is a serious risk."

A more pressing concern for Mr. Khan is whether these countries will blame foreign businesses for their struggles. Western analysts say Mr. Mubarak made a major move to overhaul the country's lagging economy in 2004, appointing a slate of reform-minded ministers to key economic, tax, labor and trade posts.

More insular, protectionist regimes could turn to tariffs and other barriers to trade as a way to protect local producers.

In recent years, economies across the Middle East were taking steps in the right direction, Mr. Khan added, but they could spiral backward.

Egypt, for example, once ranked near the bottom of the World Bank's list of 183 nations with business-friendly climates. But it had surged to No. 94 in the 2011 survey, before the fall of the Mubarak government.

"These economies were really opening up to the world," he said. "But I think there's going to be a pushback now. My hope is that they won't reverse directions, but that they simply won't push further ahead."

The uncertainty doesn't sit well with businesses in these countries. Tunisian officials reported last month that foreign investments in the country fell by 17.9 percent in January 2011 compared with January 2010, with major revenue declines in tourism and petroleum.

For those with a port in the storm, the picture is much brighter.

Hotels occupancy in Dubai, the largest city of UAE, and Riyadh, Saudi Arabia, has stayed strong at 82 percent and 70 percent, respectively, slight increases from a year ago, as displaced travelers flood there. Occupancy rates in Abu Dhabi are up to 67 percent from only 43 percent a year ago. In Muscat, the capital of Oman, they are up to 68 percent, a 12 point increase.

But these jumps in tourism come at the expense of other Middle Eastern spots that are crippled with unrest. Hotel occupancy for Cairo in Egypt is down to 40 percent from 67 percent a year ago, and Beirut in Lebanon also is down to 40 percent from 62 percent.

The troubling outlook has caused some to leave the area for a short time. But experts expect them to return.

"We find that hotels bounce back pretty quickly," Mr. Worsley said. "It's a long-term investment. I'm sure they're going to be back in there as soon as things settle down."

Bills Requiring US Action on Oil Leases, Permits Gain Support

Bills Requiring US Action on Oil Leases, Permits Gain Support

Friday, April 01, 2011
Dow Jones Newswires

by  Ryan Tracy

A proposal to require the Obama administration to sell offshore oil leases and act on drilling permits within a set time frame gained more supporters Thursday, with Senate Republicans introducing legislation to do so a day after House Republicans backed the idea.

The bills announced by Senate Republicans also took a far broader approach than the House proposals and included a grab bag of initiatives. The Senate bills would open up the Arctic National Wildlife Refuge in Alaska for drilling and direct royalty monies on those lands to "renewable energy development," according to a summary of the legislation distributed by the office of Sen. David Vitter (R., La.).

They would direct the Environmental Protection Agency to reissue a permit to a much-debated coal mine project operated by Arch Coal Inc. (ACI) in West Virginia, direct the State Department to issue permits for TransCanada Corp.'s (TRP) proposed pipeline connecting producers extracting oil from sands in Alberta, Canada, to the central U.S., and prevent the administration from considering greenhouse gases linked to climate change if the administration moves to protect endangered fish or wildlife.

The set of bills announced Thursday by Vitter, John Barrasso (R., Wyo.), and 26 other senators would also require the administration to conduct lease sales in the outer continental shelf, including in the Gulf of Mexico and Virginia.

The bills would require the Interior Department, which oversees offshore oil and gas drilling, to act on permits within 40 days, including a 10-day period for the applicant to respond to possible problems. The House Republicans' bill would require action within 60 days, depending on the application.

The bills have support from many Republicans, but at least one has expressed concern that they outline too rigid a framework.

Sen. Lisa Murkowski, (R., Alaska), the ranking Republican on the Senate Energy Committee, which oversees the Interior Department, told reporters Wednesday that she had "reservations" about rigid timetables for permitting and leasing.

"I think it's important to understand that not all permits may be equal and all leases are not equal," Murkowski said, explaining that permits and leases in less explored areas in Alaska might take longer than permits in "well-established" areas in the Gulf.
"If what we are doing is putting in place a more efficient permitting process, I'm all over it, but I think you need to give yourself a little bit of leeway in the event that it's not a 'one size fits all' type of approach," Murkowski said.

Providence Sells GOM Assets

Providence Sells GOM Assets

Friday, April 01, 2011

Providence Resources plc

Providence announced the immediate sale of its US oil and gas portfolio in the Gulf of Mexico to Dynamic Offshore Resources LLC ("Dynamic") for a consideration of up to $22 million. The consideration comprises an initial cash payment of $15 million, and potentially an additional $7 million deferred cash payment.

This deferred cash payment is dependent on Dynamic reaching certain production levels from any new wells drilled on Ship Shoal 252, 253 and 267 prior to January 2013. Total current production from Providence's Gulf of Mexico portfolio amounts to c. 700 BOEPD.

The proceeds of the sale, which closed on March 31, 2011, are to be applied to a reduction of the Company's Reserve Backed Lending Facility with BNP Paribas. The sale will result in the impairment of the carrying value of the assets, and will necessitate a non-cash write-off to be taken in Providence's 2010 accounts. CIBC World Markets Plc acted as exclusive financial adviser to Providence on this transaction.

Commenting, Mr. Tony O'Reilly, Chief Executive of Providence said, "While the production from the Gulf of Mexico has played an important role in the development of the Company over the past 3 years, it is now less material going forward. With our major multi-year, multi-basin drilling program offshore Ireland starting, combined with our ongoing investment program at Singleton, the investment focus for the Company is now very clear. As such, the opportunity to realise cash from the Gulf of Mexico portfolio, and to deleverage the core business, made sense."