Occidental Petroleum 2003 Annual Report Download - page 13

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barrels of oil per day in 2003.
MIDDLE EAST
DOLPHIN PROJECT
In 2002, Occidental purchased a 24.5-percent interest in the Dolphin
Project for $310 million. This investment includes a 24.5-percent interest in
Dolphin Energy Limited (Dolphin Energy), the operator of the Dolphin Project.
The Dolphin Project consists of two parts: (1) a development and production
sharing agreement with Qatar to develop and produce natural gas and condensate
in Qatar's North Field for 25 years, with a provision to request a 5-year
extension; and (2) the rights for Dolphin Energy to build, own and operate a
260-mile-long, 48-inch export pipeline to transport 2 billion cubic feet per day
of dry natural gas from Qatar to markets in the United Arab Emirates (UAE) for
the life of the Dolphin Project and longer. The pipeline will have capacity to
transport up to 3.2 billion cubic feet per day, which will allow for additional
business opportunities.
Several important milestones have been reached since Occidental joined the
Dolphin Project. In 2002, two development wells were drilled and tested,
providing sufficient information to complete the field development plan. In
October 2003, Dolphin Energy signed two 25-year contracts to supply
approximately one BCF of natural gas per day to two entities in the UAE. A third
supply contract with the Emirate of Dubai is currently being negotiated. In
addition, other markets for natural gas and hydrocarbon liquids are being
pursued. In December 2003, the Government of Qatar approved the final field
development plan for the Dolphin Project. Based on the foregoing developments,
Occidental recorded 107 million BOE of proved undeveloped oil and gas reserves
in 2003.
Most recently, in January 2004, Dolphin Energy awarded engineering,
procurement and construction contracts for the gas processing and compression
plant at Ras Laffan in Qatar as well as for two offshore gas production
platforms. The plant will receive wet gas from Dolphin's facilities in Qatar's
North Field and will remove hydrocarbon liquids, including condensate and
natural gas liquids, for further processing and sale. The resulting dry gas will
be compressed and transported to the UAE through Dolphin Energy's pipeline. The
projected start-up date for production is in 2006.
The Dolphin Project is expected to cost approximately $4.0 billion in
total. Occidental expects to invest approximately $1 billion for its
24.5-percent share in the Dolphin Project over the next three years. A portion
of the project costs may be project financed. During 2004, Occidental expects to
invest approximately $250 to $300 million, which is expected to be provided by
Occidental's operating cash flow. This investment is in addition to Occidental's
expected 2004 capital expenditures of $1.4 billion that are discussed under
"Liquidity and Capital Resources."
As the project has not begun operation, no revenue or production costs were
recorded in 2003.
QATAR
By introducing advanced drilling systems and applying new waterflooding and
reservoir characterization techniques in the Idd El Shargi North Dome (ISND)
field, Occidental has increased production and recoverable reserves from the
field.
Occidental is moving forward with a second phase under its existing
agreement in the development of ISND. The new phase is targeting the development
and recovery of additional reserves from ISND.
Occidental is also engaged in full-field development of the Idd El Shargi
South Dome (ISSD) field which, as a satellite to the North Dome, reduces the
overall capital requirement of the two projects.
Combined production from the two fields averaged 45,000 barrels per day,
net to Occidental, in 2003.
Also, see the Dolphin Project discussed above.
YEMEN
In Yemen, Occidental owns direct working interests in the Masila field in
Block 14 (38 percent) and a 40.4-percent interest in the East Shabwa field,
comprising a 28.6-percent direct-working interest and a 11.8-percent equity
interest in an unconsolidated entity. Occidental's net production averaged
37,000 barrels of oil per day in 2003, with 31,000 coming from the Masila field
and the remainder from East Shabwa.