New Projects and good prospects. will be the winner in 2004. IMO
25p in early 2004

Some good read here:

Global oil capacity growth hinges on mega-projects
Thu 1 July, 2004 13:44

By Jonathan Leff

LONDON (Reuters) - The smooth, prompt start-up of about a dozen big-ticket oil projects over the next 18 months is more important than ever to meeting global oil demand growth and keeping prices under control, analysts say.

These multi-million-dollar oilfield and pipeline plans should deliver 2.4 million barrels per day (bpd) of new production capacity before the end of 2005, mostly in non-OPEC areas such as the former Soviet Union, Brazil and West Africa, a Reuters survey found.

A host of second-tier developments adds more than one million bpd.

Delays to a few of these fields could propel oil's five-year price boom to new highs, with demand growth galloping at its fastest rate in 24 years and OPEC pumping closer to its own capacity than any time in more than a decade.

"The diminishing cushion of surplus capacity within OPEC means that there is real need for these big non-OPEC projects to come through," said Steve Turner of Commerzbank.

Just a few months ago analysts saw 2005 as a major test for OPEC, with a burst of new oil from non-cartel countries stealing market share. Now, the test is whether OPEC and other producers will be able to pump enough oil to keep up with consumption.

Driven by China's economic expansion, oil demand growth this year has surged an estimated 2.3 million bpd, while the rise in non-OPEC output will lag that substantially at only 1.2 million bpd, the International Energy Agency says.

Analysts expect average non-OPEC supply growth of around 0.8-1.4 million bpd next year, still likely to fall short of an estimated 1.5-2.0 million bpd rise in demand.

"The global oil industry has been caught out by two consecutive years of oil demand growth above two percent and production capacity has not risen fast enough to meet increased demand while maintaining a buffer of spare capacity," the Centre for Global Energy Studies said.

The shortfall in capacity growth next year has added a heightened sense of urgency for new fields to deliver on-time oil -- or risk a shortage.

The Organisation of the Petroleum Exporting Countries is now producing crude to within one to two million bpd of its maximum, or less than three percent of the 80 million bpd world market, analysts estimate.

With such a small margin of error, relatively minor supply hiccups can have a major impact on oil prices, which a month ago soared to 21-year peaks over $40.

Major outages like the Iraqi pipeline sabotage in June and last week's Norwegian strike have kept the market on edge.

"Had these disruptions lasted for months, as opposed to days, there would likely not have been enough excess capacity available worldwide to make up for the total loss of exports, resulting in upward price pressure," the U.S. Department of Energy said in a weekly report.

"Since capacity expansion involves substantial investment and long lead times, minimal spare capacity for the mid-term appears likely, barring a significant decline in oil demand growth."

SOME PROJECTS PRONE TO DELAYS

The 11 mega-projects of more than 150,000 bpd expected onstream before the end of next year are heavily concentrated in the former Soviet Union, Brazil and West Africa, a Reuters survey found.

International oil majors have focused on big projects as a drive to improve profit margins force them into frontier areas to find the big fields that bolster profits.

These emerging provinces have already suffered setbacks and delays.

Shell's flagship 225,000 bpd Bonga field in Nigeria has already been pushed back by more than a year and will now start up "well into" 2005, while Brazil's numerous offshore platforms have also suffered repeated delays.

Russian and Caspian production growth depends heavily on three near-term pipeline projects bringing the oil to market, one of which still needs government approval.

More than three-quarters of the new mega-projects will launch next year, with the majority delivering peak flows quickly since they are largely pipeline or offshore developments.

Including smaller developments, more than 3.5 million bpd of capacity at platform should be started up next year, up from 2.5 million bpd this year, according to Robert Skinner, director of the Oxford Institute of Energy Studies.

The estimates of new capacity next year are much higher than forecasts for non-OPEC production growth, which averages output over the year and takes into account declining production from mature basins like the North Sea, where production fell six percent last year.

CRUNCH MAY EASE

While the capacity crunch is big news now, there is no certainty it will last. OPEC's own capacity should increase in the medium-term, analysts say, while a near-term fall in prices should also take some of the pressure off.

"We believe there will be a significant price decline in the next six to 12 months," said Sarah Emerson of Boston-based Energy Security Analysis. "At that point the nervousness over tight spare capacity will drop off because OPEC is likely to cut back."

Nigeria and Saudi Arabia have big plans in the works in the next 18 months, but the real expansion should come from 2006 onward, analysts say.

Geoff Pyne, consultant for Sempra Energy, estimates cartel capacity, which stagnated around 30-32 million bpd for the past seven years, will climb to 35 million bpd by 2006.

Saudi Arabia has said it could raise its sustainable capacity by as much as four million bpd if demand warranted it, but says the 800,000 bpd of new oil from Qatif and Abu Safah flowing from October is only meant to offset intentional declines in older fields.

Libyan production is likely to get a fillip from the post-sanctions return of U.S. firms to frozen assets, while the United Arab Emirates, Iran and Nigeria all have projects in the works in several years' time.

Iraq holds the world's second-largest oil reserves and could probably ramp up production relatively quickly, but the massive investment necessary for that still appears years away.

xmortal: Good article. The world needs more oil!

Morning all,

Your right Grevis, seems like lots of people like this share! Good to see institutions buying more, long may it continue. Good article Xmortal, the world does indeed need more oil, and I can only see world demand for oil rising, as will the price in my view. Heres to a good day for PCI!

gavdfc : Morning! Nice steady buying so far.

Good to see steady buying so far, looks good. Yesterday the Saudi oil minister said he believed the oil price was "fair" just now, so dont think OPEC will be increasing supply soon, even if it could. Demand will continue to outstrip supply in the long term, so oil prices will remain high and I think go higher. Makes the oil in the ground that PCI find worth more!

It's looking good for a rise. The MMs have started drawing up the bid.

400000 buy just went through, looking good to me. Hopefully start to move up soon.

Just read an article about Cairn Energy. Company now valued at over 2 billion pounds, much of this based on 500 barrels of oil found in India. If CPI confirms 400 million barrels, what price would CPI be worth I wonder?

Just read that article about the 500m barrels Grevis. People seems to love Cairn right now, value up from 550m to 2bn! Would have loved to have been in that one from the start. Also an article in the Independent saying that ABN Amro taking an optimistic view on Cairn, believe it could be worth excess of 29 a share! If PCI come up with 400mpb surely the sp would rocket.

Looking forward to that day. They reckon their prospecting rights are worth
41p per share, even without drilling a well.

Nice one Grevis, looking forward to the drilling results. Think they are going to drill in September. Don't know when the results will come out but looking forward to them. Interesting debates over on the Oil board at the Fool re PCI and the Oil Barrel conference. Makes some good reading.

Just wonder if we may get another late Friday surge. Buyers have started to nibble again. Buys now 1.9 million. Sells 1.2 million.

gavdfc: Any chance of posting that fool article?

Here's the link for it Grevis. It's quite a long thread but well worth the read. Some decent buys today so hopefully a small tick up before the close. A few of the people posting on that thread were at the Oil Barrel conference this week.

http://boards.fool.co.uk/Message.asp?mid=8635736&sort=whole#8639244

gavdfc: Thanks for that link. Will try it later.

This item was posted on another BB after last weeks oilbarrel.com conference:

One new piece of news coming out of the conference for me is that Petroceltic will drill the Sidi Toui well at sole risk. I remember when I first looked at PCI that it wasn't clear whether Sidi Toui would be sole risked or drilled via farm-in. Oilbarrel reported on 10/12/03 that "Petroceltic is thinking it might sole risk the project" But in the oilbarrel 02/07/04 article about the conference:

"Craven said the company had received a number of approaches from companies looking to farm-in to its Ksar Hadada licence in southern Tunisia, home to the 400 million barrel Sidi Toui prospect and a number of look-alike structures. Craven told investors, however, that Petroceltic will hold onto its stake for now. The well will drill to 1,400 metres at a cost of US$2 million and we can absorb that on our own, said Craven. We plan to drill it and keep the equity going forward because we believe we will get better value for it later on.


Clearly the decision to sole risk the Sidi Toui well shows confidence. Was this previously known? If so where?

PCI's prospects are excellent, hence why Gartmore and now Fidelity have both upped their stakes over the past couple of weeks. If Sidi Toui fulfils just half its potential we will be quids in. What will also help to fuel the share price is the current crisis affecting several major producers.

Iraq's oil production has again been disrupted and Yukos who account for 20% of Russia's oil exports is on the brink of being declared bankrupt. This has all happened when demand for oil is at an all time high. India and China are both expanding rapidly and have added to the pressure on oil stocks. Terrorists have stepped up their attacks within Saudi Arabia and the USA is becoming convinced that the world is too reliant on Middle East oil supplies. As a result spot prices jumped again on Friday and seem set to go much higher. This may be bad for the world's economy but will focus attention on those companies that have most to gain, i.e. small to medium sized oil producers/ explorers. Which ones will rise the most is anyones guess, so spread your risk into PRE, EEN, CPI or whatever you may fancy. Good luck!

From PCI's website:
World class petroleum systems across the region from Algeria through Egypt. Significant remaining potential. Majors increasing investment. Proximity to European Markets.

Petroceltic has signed its first licence in North Africa The Ksar Hadada block in Southern Tunisia

The Ksar Hadada Block
Area: +7,000 sq km on shore
Location: Southern Tunisia adjacent to Libyan Border
Term: 10 years Exploration
Life of field Production
Contract: Production sharing
Petroceltic Interest: 100% working (95% Net)
Hydrocarbon Plays:
1. Ordovician Fractured Quartzite (Sidi Toui appraisal prospect)
2. Triassic

General Comments
The principal Hydrocarbon objective is the Ordovician Fractured Quartzite. This is now the most important objective is Southern Tunisia with three new discoveries (Anadarko and ENI) in 2003.

Within the Ksar Hada Block oil has already encountered in the Ordovician in the Sidi Toui well. However it was drilled in the 1950s without subsurface seismic data and when drilling/completion techniques to exploit fractured reservoirs did not exist. Seismic data acquired in the 1980s demonstrated that the Sidi Toui well was located down-dip to a significant structure. This structure is some 35kms. long and has the potential for reserves of 400mmbbls.

Strategy/ Plans
Drill the Sidi Toui structure in Q3/2004

Three large 300,000 trades appeared after 4.00PM. It is quite uncanny the way these always seem to turn up with this stock towards the close of business. We have seen this over recent weeks after which we've learned that either Gartmore or Fidelity have increased their holdings. Are we wrong to assume that they are still accummulating stock?

Morning Grevis,

Interesting note about the trades after 4.00PM. Hopefully it was Gartmore or Fidelity buying in again. I hope the Fool debate was of interst to you, it certainly was to me. SEY also up again this morning.

Read this bit from Oilbarrel and the conference last week:

A good model for Black Rock to follow might be that of Petroceltic International, which has also undertaken a successful transformation in the past six months. The ex-mining outfit is today one of the most exciting exploration companies in the sector.

We are the e side of E&P, managing director John Craven told delegates. We are an exploration driven company.

Investors have responded to the Petroceltic story, with the London share price climbing from 2p in November to more than 10p in June. The share price has not gone up by magic, said Craven. Its because we put in the activity and continuous news flow.

A chief driver of this success has been Petroceltics Tunisian acreage. Describing Tunisia as north Africa for beginners, Craven said the company had received a number of approaches from companies looking to farm-in to its Ksar Hadada licence in southern Tunisia, home to the 400 million barrel Sidi Toui prospect and a number of look-alike structures.

Looking good for PCI.