Schlumberger Chief Sees Tough Future For Iraqi Oil
www.quicken.com Tuesday, March 4, 2003 02:07 AM ET Printer-friendly version (From The Wall Street Journal)
Schlumberger Ltd.'s (SLB, news) chief executive said international oil companies aren't likely to invest big dollars to pump up a postwar Iraqi oil industry in the first few years, and he predicted Iraq could only modestly increase production without developing new fields.
Andrew Gould, who last month took over as chairman and CEO of the oil-services company, based in New York, said that any postwar government in Iraq isn't likely to be "sufficiently stable" in the short term to allow the private international oil industry to invest in Iraq. Big oil companies would require " all sorts of guarantees" before investing in the first phase of a postwar Iraq, he said.
Mr. Gould, addressing analysts in New York, also laid out plans for the company to shave its debt by one-third this year through asset sales and tighter control of spending. The announcements came after the 4 p.m. close of regular trading on the New York Stock Exchange.
Iraq can increase its oil production by only 500,000 barrels a day above its peak production in the past two years of about two million barrels a day, Mr. Gould said. That increase assumes that Iraq can upgrade 90% of the country's 3, 000 wells. To take production to an even higher level will require developing new fields, which would take three to five more years, Mr. Gould said.
"The key trigger here is not the U.S. invading Iraq; it is when the United Nations embargo is lifted," he said.
Mr. Gould said Venezuela has lost 10% to 15% of its production permanently because of a lockout by workers at its state oil company. Restoring oil production there will depend on whether the government of President Hugo Chavez extends a moratorium on the firing of trained professionals from Petroleos de Venezuela, the state oil company, and whether he can lure them back to work. Mr. Chavez has fired about a third of
PdVSA's 38,000 employees since the strike began.
World crude-oil prices have risen more than a third in the past three months because of fears of a war with Iraq and because of the supply shortfall caused by the Venezuelan oil strike. Venezuela is operating at only about half of its prestrike level of three million barrels a day.
"They no longer have the technical staff inside PdVSA that can build activity back up," Mr. Gould said.
Mr. Gould said Schlumberger expects to cut its debt below $4 billion this year, from $6.03 billion, through assets sales of $1.4 billion and more capital discipline, including giving regional managers more motivation to share capital across the company.
Schlumberger has struggled amid a poor seismic-testing climate and a depressed market for information technology, and has been criticized for mediocre results from its 2001 acquisition of software firm Sema PLC for $5.2 billion. Mr. Gould acknowledged that the Sema acquisition had reduced the company's financial flexibility. He reiterated the push, announced in December, to reorganize the unit to focus on developing Schlumberger's core oil-field-service business.
Write to Alexei Barrionuevo at Alexei.Barrionuevo@wsj.com.