UK oil and gas reserves still total 36b barrels

London (Reuters) - Britain still has more oil and gas reserves than it has used over the last 30 years but it may cost too much to exploit the small remaining fields, companies operating in the UK said.

British reserves could amount to 36 billion barrels of oil equivalent - 30 per cent more than the 28 billion barrels produced since first oil came onstream three decades ago, the UK Offshore Operators Association (UKOOA) said.

"This is good news for the 270,000 people who work in the industry, for government and the UK economy as a whole," UKOOA Director General James May said in a statement. But his group said unlocking smaller and smaller fields in the North Sea oil and gas province could prove expensive.

"Production costs in the UK are high compared with other oil producing countries," the report said. "Cost reduction and the application of new technology remain key if the UK is to continue to attract investment." The group said a rise in oil prices over the past 18 months had funnelled fresh investment back into an industry that saw spending slump after international crude prices crashed in 1998.

UKOOA said it expected spending on development could top £12 billion between 2001 and 2004, up £4 billion from last year's estimate for the period. "Sustaining investment in the UK will determine how long Britain can delay the need to become a net importer of oil and gas," May said.

The industry has set a production target of three million barrels per day for 2010. Britain now produces 2.5 million barrels of oil each day, exporting 30 per cent. It has identified 120 possible and probable new fields that the association said could sustain record levels of production until 2004.

"But this is a high risk and capital intensive industry. Companies need to deliver acceptable returns to retain the confidence of investors," May said. Britain, the world's ninth largest oil producer, has a 21 per cent success rate for exploration, with an average discovery volume of 29 million barrels of oil equivalent per field.

EU gas directive will cut Norway's revenue

Oslo (Reuters) - Norway faces hefty cash losses once its state gas sales monopoly yields to open competition under the European Union's (EU) gas market directive, Oil and Energy Minister Olav Akselsentold Reuters yesterday.

"If the price on gas drops by 10 per cent, it would mean a loss of 7.0 billion crowns ($783.5 million) a year," the minister said in a telephone interview. "The main reason behind the liberalisation of gas in Europe is to achieve lower prices."

Non-EU member Norway is a leading oil and gas exporter, delivering around 50 billion cubic metres (bcm) of natural gas to Europe last year. It estimates gas exports will increase to 60 bcm in 2001.

Norway currently sells its natural gas through a state monopoly on behalf of operators in the North Sea such as state-owned Statoil and Norsk Hydro, partially owned by the state. It gets about 1.0 crown per standard cubic metre of natural gas, relying on the state gas monopoly to sell its North Sea gas in Europe via "take-or-pay" contracts extending up to 20 years.

Norway has to accept the EU directive, launched last autumn, as a member of the European Economic Area (EEA), which gives it access to the EU's internal markets. "The gas market directive is something the EU has cooked up, but we interpret it as part of the EEA agreement and therefore we have to accept it," Akselsen said.

Norway has tried to get a 3-5 year transition period in order to adapt to EU's deregulated gas market, but the country's requests has been repeatedly turned down by Brussels - the last time at a meeting between Akselsen and EU's Energy Commisioner Loyla de Palacio on Febuary 7.

"There was a good atmosphere in Brussels, we want to get this done as soon as possible and not drag out the process further," Akslesen said. The government aims to present the gas market directive to the parliament within the year, which would mean that it could become part of Norwegian rules and regulations as soon as January 1, 2002.

Goldman, Morgan Stanley top energy derivative trade

London (Reuters) - Investment banks Goldman Sachs and Morgan Stanley Dean Witter continued to dominate global oil derivatives trade last year, while U.S. energy companies were tops on power and gas products, an industry survey found.

The survey was conducted by industry publications Energy & Power Risk Management and Risk of more than 1,000 banks, brokers, end-users and traders worldwide. Goldman Sachs took the lead in 10 categories, including Brent swaps and options as well as European jet fuel and gas oil swaps and options, the survey found.

Morgan Stanley Dean Witter claimed its dominance mainly outside Europe, with the top spot for West Texas Intermediate (WTI) crude swaps and Dubai swaps and options, plus U.S. jet fuel swaps and options and gasoline swaps.

The two banks also held another 13 second and third places in the survey, all in oil or oil products. Among brokerages for oil products, UK-based Intercapital Commodity Swaps led with seven top spots, including Brent crude swaps and options, followed by Starsupply and Prebon Energy, which both claimed four top places among the brokerages.

21 firms show interest in Algeria licensing tender

Algiers (Reuters) - Twenty-one oil companies, including large Western groups, showed interest in bidding in Algeria's international licensing tender for six onshore hydrocarbon exploration blocks, a spokesman for state oil and gas firm Sonatrach said yesterday.

Launched in October 2000, the tender will be the first proceedings of its kind adopted by Algeria in a move to speed up the signing of contracts with foreign oil firms. The six-block tender is what the energy authorities described as "the first operation among a series of operations aiming to promote 60 blocks that Sonatrach wants to open for the international competition."

"Bids will be publicly opened on Thursday (February 15) at around 10am (local time) (0900 GMT) at the Sheraton Hotel in Algiers," the spokesman told Reuters over the telephone. "Twenty-one international firms, including large Western groups are taking part in a tough competition for the six blocks," the spokesman added.

The contracts are expected to be awarded the same day, he added but declined to elaborate. The international licensing round included what the energy authorities called "high petroleum resource areas," which are Block 406b of 2,781.2 square kilometres, Block 237a of 2,063.25 square kilometres, in the south eastern basin of Berkine and Block 126 covering 8,316.80 square kilometres in the province of Constantine, at 430 kilometres east of Algiers.

The other zones are Block 245 of 6,412.37 square kilometres in the Basin of Iilizi, Block 332 of 7,673.92 square kilometres in the region of Ahnet and Block 348 stretching over 8,254.40 square kilometres in the south western province of Timimoun.