ExxonMobil sees crude prices falling: executive
Reuters Business Channel Reuters.com
ANTANANARIVO (Reuters) - ExxonMobil (XOM.N: Quote, Profile, Research), the world's largest oil company, expects that oil prices will fall as the current bullish cycle slows, the company's head of exploration operations said on Friday.
"We primarily don't believe the price will stay this high. The oil business is cyclic ... Our expectations are that prices will drop," Tim Cejka, president of ExxonMobil Exploration Company, told Reuters in an interview at the opening of company's new offices in Madagascar on Friday.
The U.S. benchmark West Texas Intermediate crude was quoted at $67.40, up $1.14, on Friday.
Exxon is ramping up operations in Madagascar, the world's fourth largest island, where it believes its leases could hold as much as 7 billion to 10 billion barrels of oil.
The company plans to begin drilling its first exploratory well later this year or in early 2007, which would be the first-ever deepwater well to be drilled off of Madagascar.
Cejka said he thought Exxon's chances of finding economically recoverable reserves there were in the range of 10 to 20 percent.
"The first discovery needs to be large enough to build infrastructure. Madagascar has no oil industry infrastructure. So we have to find something sizeable - upward of a billion barrels," he said.
Exxon has stakes in 87,000 kilometers off the northwestern coast of the island, located off the east coast of Africa.
ExxonMobil's concessions sit in water from 1,000 meters to 3,000 meters deep, which means the cost of drilling is going to be high.
"We've heard estimates as high as $100 million for a single well. We're trying to bring it down but it's probably going to be $60-70 million," Cejka said.
NEW AFRICAN FRONTIER?
The other problem will be getting a hold of one of roughly two dozen rigs in the world capable of drilling at that depth, and Cejka said they were all under contract right now.
If Exxon finds economically viable fields, production could start in 4 or 5 years, Cejka has said.
A promising seismic study in 2004 by independent U.S. exploration company Vanco Energy sparked interest in its potential, but Madagascar's prospects are still not well-mapped.
Besides Exxon, Norway's Norsk Hydro (NHY.OL: Quote, Profile, Research) has invested in offshore blocks.
Madagascan government officials in September said they are negotiating possible concessions with Chevron Texaco (CVX.N: Quote, Profile, Research), Royal Dutch Shell (RDSa.L: Quote, Profile, Research) (RDSb.L: Quote, Profile, Research), BP (BP.L: Quote, Profile, Research), Total (TOT.N: Quote, Profile, Research), Norway's Statoil (STL.OL: Quote, Profile, Research) and China's National Petroleum Corp.
Besides offshore prospects, some believe that onshore deposits locked in bituminous shale can be economically recoverable if oil prices stay over $30 a barrel.
With larger fields in traditional areas yielding less or becoming tougher to access, oil majors like Exxon have started looking in more remote corners like Madagascar where the risk is high but the potential is equally so.
Madagascar is home to 17 million people, has some of the world's most unique flora and fauna, and is one of the last unexplored frontiers in the hunt for African oil.
ANTANANARIVO (Reuters) - ExxonMobil (XOM.N: Quote, Profile, Research), the world's largest oil company, expects that oil prices will fall as the current bullish cycle slows, the company's head of exploration operations said on Friday.
"We primarily don't believe the price will stay this high. The oil business is cyclic ... Our expectations are that prices will drop," Tim Cejka, president of ExxonMobil Exploration Company, told Reuters in an interview at the opening of company's new offices in Madagascar on Friday.
The U.S. benchmark West Texas Intermediate crude was quoted at $67.40, up $1.14, on Friday.
Exxon is ramping up operations in Madagascar, the world's fourth largest island, where it believes its leases could hold as much as 7 billion to 10 billion barrels of oil.
The company plans to begin drilling its first exploratory well later this year or in early 2007, which would be the first-ever deepwater well to be drilled off of Madagascar.
Cejka said he thought Exxon's chances of finding economically recoverable reserves there were in the range of 10 to 20 percent.
"The first discovery needs to be large enough to build infrastructure. Madagascar has no oil industry infrastructure. So we have to find something sizeable - upward of a billion barrels," he said.
Exxon has stakes in 87,000 kilometers off the northwestern coast of the island, located off the east coast of Africa.
ExxonMobil's concessions sit in water from 1,000 meters to 3,000 meters deep, which means the cost of drilling is going to be high.
"We've heard estimates as high as $100 million for a single well. We're trying to bring it down but it's probably going to be $60-70 million," Cejka said.
NEW AFRICAN FRONTIER?
The other problem will be getting a hold of one of roughly two dozen rigs in the world capable of drilling at that depth, and Cejka said they were all under contract right now.
If Exxon finds economically viable fields, production could start in 4 or 5 years, Cejka has said.
A promising seismic study in 2004 by independent U.S. exploration company Vanco Energy sparked interest in its potential, but Madagascar's prospects are still not well-mapped.
Besides Exxon, Norway's Norsk Hydro (NHY.OL: Quote, Profile, Research) has invested in offshore blocks.
Madagascan government officials in September said they are negotiating possible concessions with Chevron Texaco (CVX.N: Quote, Profile, Research), Royal Dutch Shell (RDSa.L: Quote, Profile, Research) (RDSb.L: Quote, Profile, Research), BP (BP.L: Quote, Profile, Research), Total (TOT.N: Quote, Profile, Research), Norway's Statoil (STL.OL: Quote, Profile, Research) and China's National Petroleum Corp.
Besides offshore prospects, some believe that onshore deposits locked in bituminous shale can be economically recoverable if oil prices stay over $30 a barrel.
With larger fields in traditional areas yielding less or becoming tougher to access, oil majors like Exxon have started looking in more remote corners like Madagascar where the risk is high but the potential is equally so.
Madagascar is home to 17 million people, has some of the world's most unique flora and fauna, and is one of the last unexplored frontiers in the hunt for African oil.
posted by Marcel at 4:43 AM
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