Schlumberger To The Rescue -- December 25, 2015

Disclaimer: this is not an investment site. Do not make any investment, financial, or travel plans based on what you read here or think you may have read here.

Don sent me this story from USA Today: Iran's oil fields are in a shambles. 

After 37 miserable years of the so-called Islamic Republic and more than $1.6 trillion of oil income, Iran's oil and gas infrastructure has become ineffective and is suffering from poor management and chronic corruption. As a result, the well-respected healthy national oil company, with a 6.3 million b/d crude production prior to the revolution, plunged to a near bankrupt industry with at best a little above 3 million b/d production.

Iranian output has reached a plateau for some time now, and production has been on the wane by over 200,000 barrels/day/per year for the past decade. Pressure dropping in reservoirs and continuous year-to-year decline in production appear to have been triggered by long periods of technical constraints on operations and by natural aging of the Iranian fields. The lack of regular maintenance and application of new technology, and particularly extensive neglect of the fields in the last several years under sanctions, have resulted in further damage to the Iranian reservoirs.

Elsewhere there is a story that Schlumberger is preparing to rush into Iran as soon as sanctions lifted. There are lots of opportunities for companies that go back into Iran. Germany, it appears, has the inside track, but Schlumberger -- French heritage -- is probably going to be the big oil winner in Iran.

The other big winner might very well be GE; wouldn't that be a hoot?

Remember the burning oil wells in Kuwait following the first Gulf War? Media reports at the time suggested an environmental and a financial disaster that would take decades to fix, if "a fix" was even possible. It seems to me that less than a year later, American know-how -- and daring -- did the impossible.

From wiki:

The Kuwaiti oil fires were caused by Iraqi military forces setting fire to a reported 605 to 732 oil wells along with an unspecified number of oil filled low-lying areas, such as oil lakes and fire trenches, as part of a scorched earth policy while retreating from Kuwait in 1991 due to the advances of Coalition military forces in the Persian Gulf War.

The burning wells needed to be extinguished as, without active efforts, Kuwait would lose billions of dollars in oil revenues. It was predicted that the fires would burn from 2–5 years before losing pressure and going out on their own, optimists estimating 2 years and pessimists estimating 5 while the majority estimated 3 years until this occurred.

Reality, not five years, not 3 years, not even two years. How about less than a year:

The fires were started in January and February 1991, and the first well fires were extinguished in early April 1991, with the last well capped on November 6, 1991.

Bragging rights belong to:

The companies responsible for extinguishing the fires initially were Red Adair Company (now sold off to Global Industries of Louisiana), Boots and Coots, and Wild Well Control.

Safety Boss was the fourth company to arrive but ended up extinguishing and capping the most wells of any other company: 180 of the 600. Other companies including Cudd Well/Pressure Control, Neal Adams Firefighters, and Kuwait Wild Well Killers were also contracted.

To the best of my knowledge, the EPA did not fine the US military nor any coalition member for the environmental disaster it/they created.

Companies ready to rush in, from The Wall Street Journal:

Ahead of an expected lifting of sanctions, several U.S. corporate giants including personal-computer seller HP Inc. and General Electric Inc.’s oil-services unit are actively exploring a market entry into Iran.

Near the end of the article:

Other U.S.-registered companies are testing the waters. A spokesman for international oil-services giant Schlumberger Ltd. , based and registered in Houston, Paris, London and The Hague, said its representatives attended a conference in Tehran where oil contracts were presented last month. He declined to comment further.

Iran expects to attract $30 billion in investment in oil and gas fields after offering new, more attractive contracts, its oil minister, Bijan Zanganeh, has said.

Representatives from Nuovo Pignone, an Italian oil and gas subsidiary of GE, visited Iran last month as part of an Italian government delegation to the country, said a spokeswoman for the U.S. industrial-equipment maker, which is based in Fairfield, Connecticut.

Fools Rush In, Ricky Nelson

********************************

Idle Chatter

From simply an observer's view, I look to 2016 as being one of the most exciting years we've seen in the fossil fuel industry in quite some time. Just a few of the big stories we might be talking about in 2016:

• the huge opportunities US oil and gas industry has simply due to relaxation of the ban on crude oil exports
• the huge opportunities for US companies getting back into Iran and Cuba
• whether a major geo-political event rocks the Mideast; how Syria - Russia - Iran plays out
• the likelihood of a major oil company entering the Bakken