Occidental Petroleum 2008 Annual Report Download - page 21

During 2008, Occidental drilled 162 new wells and performed a number of recompletions and well repairs. Occidental plans to
increase production through drilling, waterflooding and EOR projects.
Occidental’s share of production from Argentina was approximately 36,000 BOE per day in 2008. Proved reserves from these assets
totaled 160 million BOE at December 31, 2008.
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In 2006, Occidental acquired working interests in four blocks located in the Tarija, Chuquisaca and Santa Cruz regions of Bolivia as
part of the Vintage acquisition. At the end of 2006, Occidental signed two new operation contracts with commercial terms that provide Bolivia
with greater operational control and control over the commercialization of hydrocarbons. These contracts went into effect in May 2007. During
2008, Occidental completed two workovers in Naranjillos Field.
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Occidental is the operator under four contracts within the Llanos Norte Basin: the Cravo Norte, Rondón, Cosecha, and Chipirón
Association Contracts. Occidental’s working interests under the four contracts are 42 percent (39 percent starting January 1, 2009), 44
percent, 53 percent and 61 percent, respectively. Colombia's national oil company, Ecopetrol, operates the Caño Limón-Coveñas oil pipeline
and marine-export terminal. The pipeline transports oil produced from the Llanos Norte Basin for export to international markets.
In the Middle-Magdalena Basin, Occidental signed an agreement with Ecopetrol in 2005 for an EOR project in the La Cira-Infantas
field, in which Occidental holds a 48-percent working interest. In December 2006, Occidental entered into the commercial phase of the
project. Production from the field is transported by Ecopetrol through its pipeline and sold to Ecopetrol.
Additionally, Occidental holds various working interests in two exploration blocks.
Occidental's share of 2008 production from its Colombia operations was approximately 37,000 BOE per day and proved reserves for
these interests totaled 85 million BOE at the end of 2008.
Proved Reserves
Occidental's consolidated subsidiaries had proved reserves at year-end 2008 of 2,978 million BOE, as compared with the year-end
2007 amount of 2,866 million BOE. Proved reserves consisted of 74 percent oil and 26 percent natural gas. Proved developed reserves
represented approximately 74 percent of Occidental’s total proved reserves at year-end 2008 compared to 80 percent at year-end 2007.
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The total proved reserve additions from consolidated subsidiaries from all sources were 463 million BOE in 2008, before the effect of
price-related revisions. The total revisions were as follows:
In millions of BOE
Revisions of previous estimates (18)
Improved recovery 247
Extensions and discoveries 24
Purchases and divestitures 210
Total additions excluding price revisions 463
Price revisions (127)
Total additions including price revisions 336
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In 2008, Occidental experienced a reduction, before the effect of price revisions, of 18 million BOE of proved reserves through
negative revisions of previous estimates, primarily in the Permian Basin, California and Argentina, partially offset by positive revisions in
the Middle East/North Africa. Occidental experienced an additional negative net price-related revision of 127 million BOE that was attributable
to changes in the prices of oil and gas from year-end 2007 to year-end 2008. Negative domestic price revisions were partially offset by positive
price revisions in the Middle East/North Africa as a result of the impact of PSCs. Oil price changes affect proved reserves recorded by
Occidental. For example, when oil prices increase, less oil volume is required to recover costs under PSCs, which would result in a
reduction of Occidental's share of proved reserves. Conversely, when oil prices drop, Occidental's share of proved reserves would increase
for these PSCs. Oil and natural gas price changes also tend to affect the economic lives of proved reserves, primarily in domestic properties,
in a manner partially offsetting the PSC reserve volume changes. Apart from the effects of product prices, Occidental believes its approach to
interpreting technical data regarding proved oil and gas reserves makes it more likely that future proved reserve revisions will be positive
rather than negative.
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In 2008, Occidental added reserves of 247 million BOE through improved recovery. In the United States, improved recovery additions
were 146 million BOE. Latin America additions were 52 million BOE and Middle East/North Africa added 49 million BOE. These improved
recovery additions were attributable to EOR techniques, such as CO 2, water and steam injection programs, as well as Occidental's ongoing
development programs.
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