Occidental Petroleum 2001 Annual Report Download - page 18

Current plans call for drilling 13 to 15 wells per year to develop new and
existing fields by the end of 2003, and Occidental continues to evaluate
additional exploration opportunities.
RUSSIA
In Russia, Occidental's 50-percent joint venture company, Vanyoganneft,
produced approximately 28,000 BOE, net to Occidental, in the fourth quarter of
2001.
INDONESIA
In July 2001, Occidental sold its interest in the Tangguh LNG project in
Indonesia, which was in its initial phase of development, to Mitsubishi
Corporation of Japan for a sale price of $480 million. The proceeds were used in
Occidental's debt-reduction program.
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LATIN AMERICA
COLOMBIA
In 2001, production from Occidental's Cano Limon operations in Colombia was
substantially reduced from 2000 and 1999 levels due to a record number of
attacks by local left-wing terrorist groups on the pipeline, which is operated
by Ecopetrol. Nevertheless, Occidental's net share of 2001 production averaged
18,000 barrels of oil per day and this operation continues to be profitable.
This operation accounts for less than one percent of Occidental's worldwide
assets and only three percent of total worldwide reserves and four percent of
worldwide oil and gas production at year-end 2001. Occidental presently
anticipates that it will recover the proved reserves attributable to its
contract. The potential rewards are significant when the pipeline is fully
operational.
The Gibraltar exploration well, which was drilled approximately 100 miles
west of Cano Limon, did not encounter commercial quantities of hydrocarbons, and
the $66 million cost of the well was written off in 2001.
ECUADOR
In 2000, Occidental farmed out a 40-percent economic interest in Block 15
in Ecuador to Alberta Energy Company Ltd. (AEC). This transaction reduced
Occidental's exposure in Ecuador and is expected to largely fund its capital
program in-country through 2004.
Gross production in Block 15 is currently flat with 2001 average production
of approximately 30,000 barrels of oil per day, with 13,000 barrels net to
Occidental.
Occidental has begun development of the Eden-Yuturi oil field in the
southeastern corner of Block 15. The start-up of production is scheduled to
coincide with the completion of the Oleoducto de Crudos Pesados (OCP) Ltd.
heavy-oil pipeline in 2003. In addition, work is being carried out in the
western portion of the block in and around fields currently in production. The
combined effect of these projects is expected to add net incremental production
of 30,000 barrels per day to Occidental's production profile.
In addition, Occidental is expanding its exploration activities in Block 15
with an aggressive 3-D seismic program.
Foreign oil companies, including Occidental, have been paying Value Added
Tax (VAT), generally calculated on the basis of 10-12 percent of expenditures
for goods and services used in the production of oil for export. Until 2001,
these VAT payments were reimbursed to the oil companies because they are
incurred for the production of an export product. In 2001, the Ecuador tax
authority announced that these VAT payments do not qualify for reimbursement. In
response, the affected oil companies filed actions in the Ecuador Tax Court to
seek a judicial determination that the expenditures are subject to
reimbursement. Occidental believes that it has a valid claim for reimbursement
under applicable Ecuador tax law and historic precedent.
BUSINESS REVIEW - CHEMICAL
Although industry volumes improved in early 2001 following weak second-half
2000 demand, PVC resin sales in North America lagged 2000 levels by 8 percent
through June 2001. Overall demand declined 2.6 percent from 2000 to 2001.
Significant oversupply of PVC resin combined with continued inventory reductions
by customers resulted in North American PVC industry operating rates of around
80 percent in 2001, versus 85 percent in 2000.