Schlumberger: International, N. American Drilling Solid at Current Prices

Schlumberger Ltd. Chief Executive Paal Kibsgaard told analysts during an earnings conference call Friday that the recent drop in oil prices is not yet worrisome, and prices are still high enough to support drilling in North America and around the world.

"I'm not overly concerned," Mr. Kibsgaard said. "International activity and North American liquids activity is pretty solid at these levels."

West Texas Intermediate, the U.S. benchmark crude, has dropped by more than $10 a barrel from highs in early April, and front-month Brent, the European benchmark, has fallen by about $12 a barrel this month.

Mr. Kibsgaard said he still expects Schlumberger, the world's largest oilfield-services company, to grow international operations by about 10% this year, with "strong and consistent growth" in Sub-Saharan Africa, Russia, China and Australia.

Mr. Kibsgaard said a joint venture announced lasst week with Forest Oil Corp. (FST) in Texas's Eagle Ford shale is a "one-off" deal intended to serve as a showcase to demonstrate the company's technological capabilities.

Under the deal, Schlumberger will get a 50% stake in Forest's Eagle Ford acreage in exchange for paying $90 million in drilling costs in the form of services it will provide.

Mr. Kibsgaard said the company has invested in technology aimed at making shale wells more productive, but "uptake has been quite slow in the U.S." The joint venture is aimed at changing that and showing off technologies that he said the company is eager to bring to the marketplace.

Mr. Kibsgaard said he expects conditions onshore in North America to remain difficult. The company's margins there came in ahead of analysts expectations and were relatively flat from last quarter, and Mr. Kibsgaard said he hopes they'll remain steady next quarter.

"In pressure pumping, we're not pursuing share, we're looking to protect margins," he said.

During the quarter, growth in revenue in the U.S. Gulf of Mexico helped offset declines onshore in North America, but Mr. Kibsgaard said the need to change out faulty bolts on some rigs slowed work down there.

He said exploration and production companies are reevaluating plans in North Africa following the raid on the In Amenas natural gas field in Algeria.

Schlumberger expects activity to "remain subdued" in the area while companies re-evaluate their plans.

Copyright (c) 2013 Dow Jones & Company, Inc.

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WBENC Advocates Women-Owned Businesses in the Energy Industry

Women's Business Enterprise National Council (WEBNC) recently held a conference that recognized America's Top Corporations for Women's Business Enterprises (WBEs) with six energy companies making the list.

Founded in 1997, Women's Business Enterprise National Council (WBENC) is the nation's leading third-party certifier of businesses owned and operated by women, with nearly 11,000 WBENC-Certified Women's Business Enterprises (WBE). WBENC certification is accepted by more than 1,000 corporations representing America's most prestigious brands, in addition to many states, cities and other entities.

Six energy companies – BP America Inc., Chevron Corp., Energy Future Holdings Corp., Exxon Mobil Corp., Pacific Gas and Electric Company, and Royal Dutch Shell plc – made the 14th annual listing of America's Top Corporations for Women's Business Enterprises, the only national award honoring corporations for world class programs that level the playing field for women's business enterprises to compete for corporate business. WBENC recognized these corporations for developing and driving best practices across their organizations that result in productive business partnerships with women entrepreneurs and valuable products and services for their customers. 

Rigzone recently conducted an interview with WBENC to find out more information on how this influential organization grooms, cultivates and recognizes women-owned businesses through development and collaborative success among corporate and government members of WBEs.

Rigzone: WBENC recognized several oil and gas companies for programs that level the playing field for women's business enterprises. Can you elaborate?

WBENC: The organization has seen consistent focus in developing opportunities and access for women's business enterprises among the energy companies that are top corporations for Women's Business Enterprises. 

These companies set high goals for themselves to increase their sourcing with WBEs; and they advance innovative programs to identify, develop and sustain WBE growth as suppliers over the long term.   

One key strategy is to ensure that procurement officers across their organizations are knowledgeable about and connected to quality WBEs that can deliver the products and services they need for their clients or employees.  These officers can provide the WBEs with exposure to decision makers in upstream, midstream and downstream segments of the company. Companies also encourage prime suppliers to source and utilize WBEs as second and third tier suppliers.

Another is to offer strategic mentoring and development, so that the WBEs can build their capacity to take on more business with the corporation.

Rigzone: Considering the oil and gas industry is male-dominated, what does this recognition mean for women and the industry?

WBENC: WBENC as an organization is extraordinarily proud of all of the 32 Top Corporations. The fact that there are six energy companies on the list – including Energy Future Holdings which has been on the list in each of the 14 years that the award has been bestowed – demonstrates that this sector is committed to women's business success. These companies passionately believe in the value of women's business to their ability to serve their clients and their employees with superior goods and services that these WBEs deliver.

Rigzone: How does WBENC groom women or help them along the way of their chosen career path?

WBENC: First of all, WBENC delivers world-class certification of WBEs as 51 percent-owned and operated by women. WBENC currently certifies more than 11,000 WBENC-WBEs.  Our corporate and government members rely on our WBEs' quality and they can access these WBEs through WBENCLink (a proprietary database) as well as the hundreds of events throughout the year presented by WBENC.

In fact, WBENC offers continuous development resources to WBEs throughout the year. This includes WBENC's major events, the Summit & Salute to WBEs where the Top Corporations were announced; and the upcoming 2013 WBENC National Conference & Business Fair, held June 25-27th in Minneapolis, which will attract some 3,500 corporations and women's businesses.

These WBEs have access to three days of nationally-acclaimed speakers, interactive workshops and business networking opportunities including the business fair with some 350 exhibitors. Workshops focus on what WBEs need to know to enhance their positions as suppliers: how to hone skills that are sought-after by their clients, leverage existing expertise for greater growth and build their capacity.

On an ongoing basis, WBENC offers a dynamic website with opportunities for WBEs to acquire important information on best practices for how to do business with major corporations, and the business trends affecting the marketplace.

Rigzone: With very few women CEOs in the energy industry, how can one pursue becoming a supplier to this industry without a mentor? How can they find one, if needed?

WBENC: We are speaking here of mentoring women business owners to become suppliers to major corporations, and once hired, to grow their business with them. WBENC's top corporations are exemplary in providing WBE development and access to direction and support in various forms. WBEs can and should also take the initiative to develop connections and present clear and compelling value propositions. To make connections with corporate decision makers, they should start by registering at the companies' supplier diversity websites, attend and network at the National Conference & Business Fair, and become involved in their RPOs.

Rigzone: With the energy industry seeking to diversify the companies they hire, what can they pull from WBENC?

WBENC: WBENC-certified WBEs are committed, established business owners. While they have families and outside interests, they come to WBENC events with a strategic business focus and a dedication to delivering quality products and services to their clients.  

What we have found is that the entire WBENC community – with our marketplace access, inspirational speakers and recognition of women's business owners who have demonstrated success – empowers women to succeed.  

Fifteen years ago, WBENC's goal was to level the playing field for women's businesses to compete and win corporate business. Today we have evolved to a point where we join forces and succeed together. We foster collaboration among corporations and WBEs to innovate, create improved products and services, and fuel economic growth. This lifts the conversation from "Can a woman-owned business succeed?" to "How do we work together to succeed." Our energy companies are at the heart of that positive conversation.

Rigzone: There are certain skills/personality traits one must possess to succeed in the business world. What are they and how can women pinpoint or instill this in young girls?

WBENC: Young women and girls interested in energy careers are strongly encouraged to pursue the Science-Technology-Engineering-Math (STEM) areas of expertise. Energy is a highly technical business, and many of the leaders of these companies have technical degrees. Technical training is also a very strong background for any young woman interested in starting her own business. Another key to success for a woman business owner is to take advantage of opportunities to surround her with peers and mentors who will help her grow her capabilities and business.

As an example of what energy companies are doing in this realm, Shell sponsored the 2012 Student Entrepreneur Program at last year's WBENC National Conference & Business Fair. This helped to prepare 15 promising young female entrepreneurs from historically black colleges and universities to fill the pipeline of future WBEs. This included cultivating mentors among leading WBEs and corporations, and attending the business fair and WBE workshops. Shell executives also worked with the students on the importance of building relationships, honing their technology expertise and building business skills.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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Nymex Crude Rises, Bouncing Off Recent 2013 Low

U.S. crude futures posted modest gains Friday following sharp declines early this week as traders paused to gauge whether weak demand will keep prices moving lower.

Light, sweet crude for May delivery settled higher by 28 cents, or 0.3%, at $88.01 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange for June delivery settled 52 cents higher at $99.65 a barrel.

Oil prices fell 3.6% this week, and are down nearly 10% in April amid high domestic crude-oil supplies and a broader investor retreat from commodities markets. With futures trading near 2013 lows, some investors say a brief rebound is likely even if further declines are ahead.

"Traders are looking for a reason for why this thing might bounce back," said Pete Donovan, an oil broker at Vantage Trading in New York.

Earlier Friday, crude futures rose after Venezuela's oil minister Rafael Ramirez said the Organization of the Petroleum Exporting Countries was discussing holding a special meeting after Brent crude fell below $100 a barrel. But prices pared gains when three OPEC officials said the group isn't taking formal steps to gather, making such an event unlikely before a scheduled conference at the end of next month.

Venezuela officials have made frequent calls to hold an oil-price "floor" of $100 a barrel.

Meanwhile, many analysts and investors have grown concerned in recent weeks about weak fuel demand, particularly with the approach of the summer driving season in the U.S.

Last week, the U.S. Energy Information Administration predicted spring-summer demand for gasoline will fall to a 12-year low of 8.877 million barrels a day.

The slump also coincides with a broader turn from commodities markets. Traders have fled from gold, silver, copper and several energy markets in recent weeks. In addition to weaker demand for oil in the U.S., many commodity investors are concerned that slowing growth in China will also limit demand for raw materials.

"Commodities may face a slow growth environment for the next few quarters," said Barclays analysts in a research report Friday.

Mark Waggoner, head of Excel Futures, said any rebound in oil will be brief.

"The market may try and bump up a little bit, but that's it. It's going down," he said, though he added that market activity on Friday was muted, possibly because people were following the search for a suspect in the Boston Marathon bombing. "Most of the people are just talking about Boston."

Front-month May reformulated gasoline blendstock, or RBOB, settled 1.69 cents higher at $2.7724 a gallon. May heating oil settled 0.85 cent higher at $2.7876 a gallon.

Copyright (c) 2013 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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WBENC Advocates Women-Owned Businesses in the Energy Industry

Women's Business Enterprise National Council (WEBNC) recently held a conference that recognized America's Top Corporations for Women's Business Enterprises (WBEs) with six energy companies making the list.

Founded in 1997, Women's Business Enterprise National Council (WBENC) is the nation's leading third-party certifier of businesses owned and operated by women, with nearly 11,000 WBENC-Certified Women's Business Enterprises (WBE). WBENC certification is accepted by more than 1,000 corporations representing America's most prestigious brands, in addition to many states, cities and other entities.

Six energy companies – BP America Inc., Chevron Corp., Energy Future Holdings Corp., Exxon Mobil Corp., Pacific Gas and Electric Company, and Royal Dutch Shell plc – made the 14th annual listing of America's Top Corporations for Women's Business Enterprises, the only national award honoring corporations for world class programs that level the playing field for women's business enterprises to compete for corporate business. WBENC recognized these corporations for developing and driving best practices across their organizations that result in productive business partnerships with women entrepreneurs and valuable products and services for their customers. 

Rigzone recently conducted an interview with WBENC to find out more information on how this influential organization grooms, cultivates and recognizes women-owned businesses through development and collaborative success among corporate and government members of WBEs.

Rigzone: WBENC recognized several oil and gas companies for programs that level the playing field for women's business enterprises. Can you elaborate?

WBENC: The organization has seen consistent focus in developing opportunities and access for women's business enterprises among the energy companies that are top corporations for Women's Business Enterprises. 

These companies set high goals for themselves to increase their sourcing with WBEs; and they advance innovative programs to identify, develop and sustain WBE growth as suppliers over the long term.   

One key strategy is to ensure that procurement officers across their organizations are knowledgeable about and connected to quality WBEs that can deliver the products and services they need for their clients or employees.  These officers can provide the WBEs with exposure to decision makers in upstream, midstream and downstream segments of the company. Companies also encourage prime suppliers to source and utilize WBEs as second and third tier suppliers.

Another is to offer strategic mentoring and development, so that the WBEs can build their capacity to take on more business with the corporation.

Rigzone: Considering the oil and gas industry is male-dominated, what does this recognition mean for women and the industry?

WBENC: WBENC as an organization is extraordinarily proud of all of the 32 Top Corporations. The fact that there are six energy companies on the list – including Energy Future Holdings which has been on the list in each of the 14 years that the award has been bestowed – demonstrates that this sector is committed to women's business success. These companies passionately believe in the value of women's business to their ability to serve their clients and their employees with superior goods and services that these WBEs deliver.

Rigzone: How does WBENC groom women or help them along the way of their chosen career path?

WBENC: First of all, WBENC delivers world-class certification of WBEs as 51 percent-owned and operated by women. WBENC currently certifies more than 11,000 WBENC-WBEs.  Our corporate and government members rely on our WBEs' quality and they can access these WBEs through WBENCLink (a proprietary database) as well as the hundreds of events throughout the year presented by WBENC.

In fact, WBENC offers continuous development resources to WBEs throughout the year. This includes WBENC's major events, the Summit & Salute to WBEs where the Top Corporations were announced; and the upcoming 2013 WBENC National Conference & Business Fair, held June 25-27th in Minneapolis, which will attract some 3,500 corporations and women's businesses.

These WBEs have access to three days of nationally-acclaimed speakers, interactive workshops and business networking opportunities including the business fair with some 350 exhibitors. Workshops focus on what WBEs need to know to enhance their positions as suppliers: how to hone skills that are sought-after by their clients, leverage existing expertise for greater growth and build their capacity.

On an ongoing basis, WBENC offers a dynamic website with opportunities for WBEs to acquire important information on best practices for how to do business with major corporations, and the business trends affecting the marketplace.

Rigzone: With very few women CEOs in the energy industry, how can one pursue becoming a supplier to this industry without a mentor? How can they find one, if needed?

WBENC: We are speaking here of mentoring women business owners to become suppliers to major corporations, and once hired, to grow their business with them. WBENC's top corporations are exemplary in providing WBE development and access to direction and support in various forms. WBEs can and should also take the initiative to develop connections and present clear and compelling value propositions. To make connections with corporate decision makers, they should start by registering at the companies' supplier diversity websites, attend and network at the National Conference & Business Fair, and become involved in their RPOs.

Rigzone: With the energy industry seeking to diversify the companies they hire, what can they pull from WBENC?

WBENC: WBENC-certified WBEs are committed, established business owners. While they have families and outside interests, they come to WBENC events with a strategic business focus and a dedication to delivering quality products and services to their clients.  

What we have found is that the entire WBENC community – with our marketplace access, inspirational speakers and recognition of women's business owners who have demonstrated success – empowers women to succeed.  

Fifteen years ago, WBENC's goal was to level the playing field for women's businesses to compete and win corporate business. Today we have evolved to a point where we join forces and succeed together. We foster collaboration among corporations and WBEs to innovate, create improved products and services, and fuel economic growth. This lifts the conversation from "Can a woman-owned business succeed?" to "How do we work together to succeed." Our energy companies are at the heart of that positive conversation.

Rigzone: There are certain skills/personality traits one must possess to succeed in the business world. What are they and how can women pinpoint or instill this in young girls?

WBENC: Young women and girls interested in energy careers are strongly encouraged to pursue the Science-Technology-Engineering-Math (STEM) areas of expertise. Energy is a highly technical business, and many of the leaders of these companies have technical degrees. Technical training is also a very strong background for any young woman interested in starting her own business. Another key to success for a woman business owner is to take advantage of opportunities to surround her with peers and mentors who will help her grow her capabilities and business.

As an example of what energy companies are doing in this realm, Shell sponsored the 2012 Student Entrepreneur Program at last year's WBENC National Conference & Business Fair. This helped to prepare 15 promising young female entrepreneurs from historically black colleges and universities to fill the pipeline of future WBEs. This included cultivating mentors among leading WBEs and corporations, and attending the business fair and WBE workshops. Shell executives also worked with the students on the importance of building relationships, honing their technology expertise and building business skills.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Baker Hughes' Reports Lower Profits, Revenue for 1Q 2013

Oilfield services provider Baker Hughes Inc. reported lower profits and revenue for the first quarter amid higher activity levels in Canada and improved utilization in its pressure pumping business.

The company's net income fell to $267 million, or $.60 per share, from $379 million, or $.086 per share last year. Revenue for the first quarter of 2013 was $5.23 billion, down 2 percent compared to $5.33 billion for the fourth quarter of 2012 and down 2 percent compared to $5.36 billion for the first quarter of 2012.

"Our first quarter results reflect improvement in our North America segment," said Martin Craighead, Baker Hughes' president and chief executive officer, in a released statement. "The increased revenues and profit margins in North America are due to higher activity levels in Canada, along with improved utilization in our pressure pumping business despite a 3 percent decline in the U.S. onshore rig count since last quarter. Following five consecutive quarters of declines in the U.S. rig count, we are now forecasting a modest increase for the remainder of the year."

The company also reported that adjusted net income for the first quarter of this year excludes a foreign exchange loss of $23 million before and after-tax ($.05 per diluted share) on the devaluation of Venezuela's currency in February.

Baker Hughes' revenue decreased 9 percent in North America to $2.603 billion and slipped 4 percent in Europe/Africa/Russian Caspian to $854 million.

"We believe Baker Hughes' 1Q13 earnings release has positive implications for the stock," noted analyst James West in Barclays Earnings at a Glance analysis. "Results in North America improved sequentially with higher revenue and stronger operating margins and the company showed solid growth, especially for margins, in the Middle East/Asia Pacific region as well."

Baker Hughes' cash increased roughly 8 percent from last quarter to $1.1 billion and its capital expenditure for the quarter was $490 million, compared to $727 million in 4Q 2012, West reported. Additionally, Baker's debt increased from $176 million to more than $5 billion.

An area worth noting in the company's lineup is the Middle East/Asia Pacific region. Revenue for this segment, $894 million, improved 1 percent sequentially and was higher than Barclay's forecast of $864 million.

"Operating income of $116 million rose 45 percent from the previous quarter and far exceeded our $77 million estimate," West stated. "The margin at 13 percent expanded from 9 percent in the prior period and was well above our 8.9 percent forecast."

"Offset was impressive in the Middle East/Asia Pacific region, which suggests BHI is making progress in Iraq," Tudor Pickering Holt also noted in its daily Energy Thoughts analysis.   

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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San Leon to Begin Czaslaw-1 Stimulation, Test

San Leon Energy announced that its planned stimulation and test of the Czaslaw-1 well on the Company's Nowa Sol Concession in the Permian Basin of Poland will begin April 22 with the mobilization of coiled tubing, nitrogen lift equipment, and surface test equipment from Vechta, Germany. Recent measurements of the well have shown that the well is building pressure. After taking samples of the fluid in the wellbore the Company has recovered natural gas (including C1-C8) and light oil. Schlumberger has been contracted to complete this phase of the project. 

The Company estimates the following timeline:

April 25 - acid wash and clean out of the wellApril 26-30 - acid squeeze into the Main Dolomite reservoir; after soaking lift fluids in the well bore using nitrogen, followed by 3 day flow test up to 400 bbls of oilMay 1 - shut-in the well for 5 day build-up with downhole gaugesMay 6 - decision on a long term test and oil production, based upon results of the acid stimulation and test

The Czaslaw SL-1 well reached a total depth of 5,112 feet (1,558 meters) measured depth (4,032 feet or 1,229 meters TVD). The well penetrated 141 feet (43 meters) of the targeted Permian Main Dolomite reservoir. Petrophysical analysis shows moderate fracturing of the Main Dolomite within an estimated 95 feet (29 meters) of naturally fractured reservoir. Live oil shows were present on 90 percent of the core plug and detailed petrophysical and core analysis indicates moveable light oil in the Main Dolomite reservoir. The entire Main Dolomite interval shows high fluorescence suggesting both moveable and residual oil. Integrated petrophysical and rock-mechanical analyses suggest the well is a good candidate for artificial stimulation to enhance the natural fractures in the reservoir. There were no indications of water encountered during drilling. The well is the first well on the Czaslaw structure, with room for additional vertical and/or horizontal wells. Several similar structures have been identified in the Company's Nowa Sol 3D seismic survey which covers less than 15 percent of the Nowa Sol Concession area.

Executive Chairman, Oisin Fanning commented:

"The recent recovery of hydrocarbons and build-up of pressure in the Czaslaw-1 well is very exciting. We have been studying the Main Dolomite extensively over the past months with experts both in Europe and North America. We are now ready to stimulate and test the well and with success immediately move to production. There is a huge amount of oil in place in the Main Dolomite and we are committed to unlocking both the conventional and unconventional potential of the petroleum system."

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Schlumberger: International, N. American Drilling Solid at Current Prices

Schlumberger Ltd. Chief Executive Paal Kibsgaard told analysts during an earnings conference call Friday that the recent drop in oil prices is not yet worrisome, and prices are still high enough to support drilling in North America and around the world.

"I'm not overly concerned," Mr. Kibsgaard said. "International activity and North American liquids activity is pretty solid at these levels."

West Texas Intermediate, the U.S. benchmark crude, has dropped by more than $10 a barrel from highs in early April, and front-month Brent, the European benchmark, has fallen by about $12 a barrel this month.

Mr. Kibsgaard said he still expects Schlumberger, the world's largest oilfield-services company, to grow international operations by about 10% this year, with "strong and consistent growth" in Sub-Saharan Africa, Russia, China and Australia.

Mr. Kibsgaard said a joint venture announced lasst week with Forest Oil Corp. (FST) in Texas's Eagle Ford shale is a "one-off" deal intended to serve as a showcase to demonstrate the company's technological capabilities.

Under the deal, Schlumberger will get a 50% stake in Forest's Eagle Ford acreage in exchange for paying $90 million in drilling costs in the form of services it will provide.

Mr. Kibsgaard said the company has invested in technology aimed at making shale wells more productive, but "uptake has been quite slow in the U.S." The joint venture is aimed at changing that and showing off technologies that he said the company is eager to bring to the marketplace.

Mr. Kibsgaard said he expects conditions onshore in North America to remain difficult. The company's margins there came in ahead of analysts expectations and were relatively flat from last quarter, and Mr. Kibsgaard said he hopes they'll remain steady next quarter.

"In pressure pumping, we're not pursuing share, we're looking to protect margins," he said.

During the quarter, growth in revenue in the U.S. Gulf of Mexico helped offset declines onshore in North America, but Mr. Kibsgaard said the need to change out faulty bolts on some rigs slowed work down there.

He said exploration and production companies are reevaluating plans in North Africa following the raid on the In Amenas natural gas field in Algeria.

Schlumberger expects activity to "remain subdued" in the area while companies re-evaluate their plans.

Copyright (c) 2013 Dow Jones & Company, Inc.

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A $30 Billion Hole In Caspian Sea?

For more than a decade, the promised bonanza from Kazakhstan's giant offshore Kashagan oil field has been a costly mirage for its developers. And the wait still isn't over.

The companies backing the project -- which include Exxon Mobil Corp., Eni Spa and Royal Dutch Shell PLC -- in March missed the startup date Eni predicted last year. And now, after a decade of work and more than $30 billion in expenses, it isn't clear when one of the world's biggest untapped fields will produce its first drop of oil.

Eni CEO Paolo Scaroni said last month the operators "are going to begin production in June." A spokesman for the North Caspian Operating Company BV, which represents all of the oil companies in the project, says "we are confident that we will deliver oil in the course of this year," though he said he isn't sure when. A person close to KazMunaiGas, or KMG, the Kazakh state oil company that owns close to 20% of Kashagan, said it may be 2014 before significant amounts of oil flow.

Delays beyond Oct. 1 could subject the companies to new financial penalties on top of tens of millions of dollars worth of concessions they have already given the Kazakh government for missing earlier deadlines and cost overruns, according to energy consultancy IHS CERA. Setbacks could also heighten tensions with a frustrated Kazakh government, say several people close to the project -- and will make it difficult for the firms to make more than a marginal profit from their investments.

Kashagan is an example of the challenges energy companies face in a world where the easy oil has already been pumped. To find big new fossil-fuel deposits, companies must look in places that are remote, technically challenging or politically thorny. In Kashagan, cold weather, difficult supply routes and friction with government officials have contributed to the lag time.

A spokesman for the North Caspian Operating Company said the biggest cause of delays is Kashagan's technical complexity and a cautious approach by the companies to avoid problems like oil or gas leaks.

Kashagan's potential upside is enormous, said Laurent Ruseckas, a consultant with IHS CERA who advises companies in Kashagan. Oil is now trading at close to $90 a barrel, and the 370,000 barrels a day Kashagan is projected to produce in its first phase is supposed to triple as companies make further investments.

But technical challenges and strained relationships among the operating companies and with the Kazakh government have made the project "a nightmare for almost 10 years," said Fadel Gheit, an oil-company analyst with Oppenheimer & Co. When production does start, it will largely be in Shell's hands, since a joint venture between Shell and KMG is operating that phase, according to the companies.

Kashagan's challenges were evident from the time big oil companies -- including Eni, Exxon, Shell, Total SA, Statoil PLC, BP PLC and BG Group PLC -- explored the area after the Soviet Union's breakup. Companies signed a production-sharing agreement with the Kazakh government in 1997 that expires in 2041 and allows companies to recover much of their costs before paying a big portion of oil revenue to the government. Of the initial foreign oil-company players, only Eni, Exxon, Total and Shell remain.

Early exploration revealed more than 10 billion recoverable barrels of oil -- along with great challenges. The reservoir is about 12,000 feet below the northeast Caspian Sea floor and mixed with toxic sulfur gas. The sea freezes for several months a year. The north Caspian harbors endemic seals and rare sturgeon.

The companies debated who would take the project's lead, settling on Eni, though it had less experience with giant oil developments than Shell and Exxon. The companies projected first oil in 2005, though Eni soon began pushing back the startup date due to technical problems.

Missteps, cost overruns and controversies have dogged the project. Eni has disclosed in public filings that Italian authorities are investigating whether it has paid bribes in Kazakhstan. An Eni spokeswoman said the company "has zero tolerance towards illegal acts and bribery" and is fully cooperating with the authorities.

In 2003, Saipem SpA -- a company in which Eni owns about 43% -- formed a joint venture with a company co-owned by a former Kazakh deputy energy minister, Nurlan Kapparov. Last year Mr. Kapparov became Kazakhstan's minster of environmental protection.

Oil companies including the Kashagan operators have since 2003 awarded more than $100 million in contracts to the joint venture for projects like building pipe racks and rigs for Kashagan and other Kazakh oil projects.

In an email, the Kazakh Ministry of Environmental Protection said Mr. Kapparov resigned from his management positions at his companywhen he became environment minister, and that his shares are in a trust that Mr. Kapparov doesn't control.

The joint venture "is regularly checked by the Ministry of Environmental Protection, but Minister Kapparov has never taken any role in the review," the ministry said.

The Eni spokeswoman said Saipem "has always been managed at arm's length" from Eni. She said the joint venture received the Kashagan work after a competitive bid process. Saipem declined to comment.

Meanwhile, some partners such as BP, Statoil and BG sold their stakes in Kashagan, as Eni pushed back its first oil production to 2008, and then to 2010. By 2008, Eni's projected budget for the first phase had risen from less than $10 billion to $25.6 billion, according to IHS CERA.

That year, the companies renegotiated the management structure, taking Eni out of the lead role. The Kazakh government imposed increased penalties on the companies for production delays beyond October.

Since then development has progressed and the companies finished drilling their production wells last year.

Perhaps most significantly, the Kazakh government hasn't agreed to extend the Kashagan companies' production-sharing agreement past its 2041 expiration, according to the person close to KMG and a consultant advising companies in Kashagan. Without the extension, it would be difficult for the companies to make the profits that they expected when the project began.

Copyright (c) 2013 Dow Jones & Company, Inc.

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Argentina to Create $2 Billion Oil, Gas Development Fund

BUENOS AIRES -

Argentina's government plans to put up to $2 billion into a new petroleum exploration-and-production fund as the South American nation struggles to become self sufficient in oil and natural gas.

The Argentine Hydrocarbon Fund is authorized to lend money, contribute capital and buy securities issued by oil companies in which the government has an equity stake, according to a resolution published Friday in the government-published Official Bulletin.

The government controls energy companies Enarsa and YPF SA.

It wasn't immediately clear how President Cristina Kirchner will capitalize the fund. Barclays said in a report it thinks the money will come from central bank's foreign currency reserves.

The 2013 budget earmarks almost $8 billion of reserves to pay creditors. But economic growth of just 1.9% last year means that Argentina won't have to pay several billion dollars to investors that own securities whose payouts are linked to the economy's performance.

"We expect, therefore, the treasury to tap reserves and issue a low-coupon hard-currency bond [most likely not marketable] to the central bank," Barclays economist Sebastian Vargas wrote.

A spokeswoman for the Economy Ministry didn't immediately reply to a phone call and email seeking comment.

The central bank, a virtual appendage of the Economy Ministry, is struggling to rebuild its reserves even as a bumper soybean harvest brings billions of export dollars into the country.

On Thursday, those reserves, which the government uses to pay its creditors and buy imported fuels like natural gas, slipped to a six-year low of $39.8 billion. Analysts blame the gradual erosion in reserves on the decline in the value of the bank's gold holdings and persistent capital outflows.

A fire last month that crippled YPF's largest refinery which supplies about 30% of Argentina's domestically produced fuel will force the state controlled company to import significantly more diesel and gasoline this year, putting even more pressure on reserves.

Mrs. Kirchner seized a controlling stake in Argentina's No. 1 oil and gas producer, YPF, from Spain's Repsol SA last year and has tasked the company with reversing years of declining production that have turned Argentina into a net energy importer.

Mrs. Kirchner accused Repsol of decapitalizing YPF through an overly generous dividend policy, which left the firm with scant resources to reinvest in its business. Repsol has denied those accusations and is suing her government for about $10.5 billion in compensation for its YPF shares.

YPF invested 16.48 billion pesos ($3.2 billion) in 2012, an increase of nearly 26% on the year.

The company is also seeking foreign investors to help it develop what are believed to be the world's third-largest shale gas deposits, which are mainly located in the Patagonian province of Neuquen.

Last year, YPF held talks with Norway's Statoil ASA, Russia's government-controlled gas company, Gazprom, and Chevron Corp., among others.

In December, YPF signed a preliminary agreement with Chevron to spend $1 billion to drill 100 wells in Neuquen, and in a separate deal it agreed to invest $1.5 billion with a company linked to Argentina's Bulgheroni family.

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Petrobras Will Be 'Selective, Focused' in Oil Concession Auction

RIO DE JANEIRO - Brazilian state-run energy giant Petroleo Brasileiro SA, or Petrobras, is in talks with the world's largest oil companies about forming partnerships to bid for new oil and natural-gas exploration concessions at a much-anticipated auction set for next month, Chief Executive Maria das Gracas Foster said in an interview.

"Our participation in the auctions this year is going to be focused and selective," Ms. Foster said. "We are making it a priority to work in partnership with big oil companies."

Brazil will auction off 289 oil and natural-gas exploration blocks on May 14-15, the country's first such auction of new exploration acreage since 2008. This auction doesn't include blocks from the subsalt area, as these will be sold later this year at an auction that will be under new legislation passed in the wake of the discovery.

Potential tie-ups with big oil companies for the round of blocks in May would help to reduce costs for Petrobras as the company embarks on a $237 billion investment plan through 2017, one of the world's largest corporate-spending campaigns, as well as ease the company's workload as it moves quickly to boost flagging crude-oil output by bringing the massive new subsalt fields into production.

While partnerships would help to diminish the company's financial risk in the new exploration areas, they would also provide a sounding board to discuss the best way to develop any potential discoveries, Ms. Foster said in an interview this week.

After primarily playing the lead role in Brazil's offshore oil industry for more than 30 years, Petrobras also appears ready to let potential partners take the reins for awhile. "We are negotiating to not be the operator" in new exploration blocks, Ms. Foster said.

Because Petrobras already serves as the operator in many of its oil fields and exploration blocks, Ms. Foster said that "we are discussing the partner's interest in being the operator. We're not going to fight about that."

But with whichever companies Petrobras forms partnerships for this year's planned auctions, they will be major players, Ms. Foster emphasized. The companies will have know-how and be strong financially, Ms. Foster said.

On Thursday, Royal Dutch Shell PLC Chief Executive Peter Voser noted that his company has "a very successful partnership" with Petrobras and is interested in further collaboration. The oil major will study the bid areas but hasn't yet decided whether it will participated in the May auction, he said.

Separately, Ms. Foster said Petrobras isn't considering taking an active role in developing infrastructure projects with billionaire Brazilian businessman Eike Batista's EBX Group of companies. EBX holds interests in such diverse areas as mining, real estate, shipbuilding, oil production and ports.

"Petrobras is not going to participate in the construction of any shipyard," Ms. Foster said. "Petrobras doesn't know anything about shipyards, Petrobras wants to use shipyards."

Mr. Batista's shipbuilding company, OSX Brasil, was part of a consortium that won a tender to provide processing modules for two floating-production platforms, Ms. Foster noted.

Brazil is especially keen to see the Acu port currently under construction by Mr. Batista's LLX Logistica completed, according to a person close to the government. Since September, Petrobras has held talks with EBX Group about buying services from the group, but won't go beyond that, Ms. Foster said.

"What we are seeking with this group are contracts to use the infrastructure it's building," Ms. Foster said. "Because [LLX] is building the port, but hasn't completed construction yet, these contracts will only happen when the port is built and will have to be at the lowest cost."

Petrobras will hold a tender that will make sure any services are contracted at the lowest-possible price, Ms. Foster added. Talks with EBX Group will likely be "better defined" starting in June, but contracts are unlikely to be signed at that time, Ms. Foster said. "I don't have any dates set to sign contracts," the executive said.

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