Spears March 2007 DPO

DRILLING AND PRODUCTION
OUTLOOK
MARCH 2007
SPEARS & ASSOCIATES, INC.

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Drilling and Production Outlook – March, 2007
activity for the full year down only 2%. The dark clouds on the horizon in
EXECUTIVE SUMMARY Canada come in the form of proposals that the federal government is
expected to make to eliminate or restrict the accelerated depreciation
allowance available to oilsands operators and to tighten CO2 emissions
Three months in, 2007 looks like it will be another good year for most
limits. Depending on what is proposed and how it is implemented, this
segments of the oilfield equipment and service industry.
could have a major impact in the future on the capital-spending plans of the
fast-growing oilsands industry.
Oil prices are on track to be down about 10% compared to 2006, due to
the fact that oil supply capacity will grow faster than incremental oil
Many state-owned oil companies continue an aggressive effort to expand
demand in 2007 largely due to the fortunate circumstance that several
production capacity and/or increase the government take from higher oil
mega-projects in the Caspian Sea, West Africa, and Canada are reaching
prices. We expect that overall rig count in the international market will
completion at about the same time. But more importantly, by continuing
increase 6% in 2007, with regional changes as follows: Africa (+18%
to trade around $60/bbl oil prices remain high enough to attract new
compared to last year), the Mid East (+13%), Central and South America
investment into the upstream sector. Which is good, because the same
(+4%), the Far East (+2%), and Europe (-1%). As it unfolds, 2007 may be
analysis that shows supply growing faster than demand this year also
a watershed year, perhaps nowhere more importantly than in Mexico,
indicates that after 2008 demand will once again be outpacing supply as
where the collapse in production from its flagship oilfield has ramifications
the number of new mega-projects slows.
not only for Pemex but also for the government and throughout the
economy, which will force policymakers to decide what path it will take to
In contrast, gas prices look to move about 10% higher in 2007 after finally
respond and adapt.
seeing gas inventories return to near-normal levels after a spate of very cold
weather in January and February. With La Nina promising a hot summer
Drilling Forecast
and gas imports from Canada expected to slide over the course of the
2006 2007
year, there may be more upside to gas prices down the road than we are
Spot WTI Prices ($/bbl) $66.55 $59.53
forecasting.
Spot Gas Prices ($/mmbtu) $6.38 $7.04
Rig Count
We continue to expect that 2007 will see the fifth consecutive increase in
U.S. 1,649 1,836
overall US drilling. We now forecast that an 11% gain in US activity is in
Canada 471 463
the cards for 2007. Unfortunately, this will not be enough to prevent the
International 909 965
sharp fall in land rig day rates that is currently underway because for the
Russia 246 277
time being the number of new rigs entering the market is exceeding the
China NA NA
growth in drilling activity. This is good news for operators who were
Total 3,275 3,541
complaining about oilfield inflation six months ago but whom we think will
Wells Drilled
see their finding and development costs flat or moving lower as the year
U.S. 49,325 55,497
unfolds.
Canada 27,855 27,172
International 11,936 12,595
The recovery in gas prices has come too late to salvage the winter drilling
Russia 4,763 4,858
program in Canada, which so far has run 10%-15% behind last year’s level.
China 17,095 17,278
However, we continue to expect a pick-up in activity in the second half of
Total 110,974 117,400
’07 as operators respond to higher gas prices and lower well costs, leaving
1
PRICE OUTLOOK OPEC Productive Capacity, Utilization
OIL MARKETS
2.5 98%
97%
According to the US Energy Information Administration, world petroleum 2.0
demand grew by 1.1 million bpd in 2006 and is projected to grow by 1.6 96%
Million bpd
Utilization
million bpd in 2007, helped by continued strong world economic growth. 1.5 95%
Over the 2007-2010 timeframe, we project that world oil demand will 94%
increase at an average rate of 1.8% per year. 1.0 93%
92%
0.5
91%
World Oil Demand
0.0 90%
90
J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND
2004 2005 2006
86
Source: EIA
Spare OPEC Capacity Utilization
Million bpd
82
78 We are currently tracking approximately 350 oilfield development projects

located outside the US that are scheduled to come onstream over the 2007
74 to 2011 timeframe. Based on the current start-up dates estimated for
these projects and their initial production levels, we have estimated the
incremental global oil production capacity to be added each year from 2007
70 through 2010. (This analysis assumes that the global decline rate of
00 01 02 03 04 05 06 07 08 existing fields averages 3% per year).
Source: EIA, Spears
Combining the analysis of incremental oil production capacity with
estimates of annual oil demand growth, it appears that world oil supply
Despite ramping up their field development efforts over the past two years, growth will outstrip world demand growth over the 2006 to 2008 period, as
OPEC’s crude oil production capacity has remain virtually unchanged at shown by the following chart. After 2008, oil markets are expected to
about 31.2 million bpd as decreases from Venezuela and Indonesia have tighten as demand growth once again outstrips the increase in production
offset gains elsewhere. However, because OPEC production is down 1.0 capacity.
million bpd over this period - as it has been replaced by increased non-
OPEC output - spare OPEC production capacity has recently risen to
about 2.2 million bpd. Based on current trends, we anticipate that OPEC’s
surplus capacity will grow by about 500,000 bpd in 2007.
2
World Oil Market US Spot Oil Prices ($/bbl)

Incremental Prod'n Capacity
Incremental Demand $70
3.0
$60
2.5
2.0 $50
Million bpd
1.5 $40
1.0 $30
0.5 $20
0.0 $10
-0.5
$0
00 01 02 03 04 05 06 07 08 09 10
00 01 02 03 04 05 06 07 08
Source: IEA, Spears Source: NY Merc, Spears
In an environment characterized over the near term by further increases in

demand but larger increases in oil production capacity, we expect that oil
markets will be soft (assuming no geopolitical crises affecting supply or GAS MARKETS
demand) and that oil prices can continue to trade near current levels if
major oil exporting nations are successful in managing their production and
Since last November, weather – and weather forecasts – have driven the
in turn the level of commercially-held crude inventories. We believe that
US gas market. To the consternation of many, winter got off to a slow
this will be the case and that US spot oil prices will average $59.53/barrel
start across much of the US, with December coming in much-warmer than
in 2007, down 11% from 2006, and that US spot oil prices will remain
normal and raising fears that this winter would be a repeat of last year’s
around $60/barrel in nominal terms through 2008 before gradually
record-breaking warm weather (and record-breaking low gas withdrawal).
increasing after 2008 as supply growth begins to fall short of demand
This pushed average US spot gas prices below $5.50/mmbtu by early
growth.
January as gas inventories stayed above 3,000 bcf.
Two other factors impacting future oil prices are the increasing cost to find
and develop reserves and the increasing “take” required by host
governments in production-sharing agreements. Observers estimate that
the combination of these two factors now means that the threshold oil price
required to justify international projects is now in the $50-$60 range.
3
US Weather US Weekly Gas Storage

Heating/Cooling Degree Days vs 65F Injections/Withdrawals
1000
Total Degree Days over/under 65F
900 10-yr Ave Degree Days 150
800 2005 Heat+Cool Degree Days

100
700 2006 Heat+Cool DD

50
600
500 0
400 -50
BCF
300 -100
200 -150
5 Year Average
100
-200
0 2007 Actual
-250
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
-300
Winter finally got rolling in January, with extremely cold temperatures

across much of the US, and more importantly for the gas market, with As a result of the massive pull on storage in January and February, overall
some record-breaking weekly gas withdrawals. As shown by the following gas inventories are currently about 240 bcf lower than they were at this
chart, weekly withdrawals rose to over 250 bcf by mid-February. In time last year but about 175-200 bcf higher than the five-year average.
response, average US spot gas prices rose above $8/mmbtu by mid- “Normal” winter gas demand results in about 2,000 bcf being taken about of
February, a jump of about 50% from the level seen just six weeks earlier. storage over the November to March timeframe; based on current trends, it
appears that this winter will see about 2,075 bcf taken out of storage. This
would leave inventories around 1,400 bcf exiting winter, about 175 bcf
above the five-year moving average but also about 300 bcf below the 2006
level.
We think the story on storage – in combination with gas demand

developments - will set up a pattern for spot gas prices to be higher in 2007
than they were in 2006.
4
U.S. Working Gas Storage (bcf) US Gas Demand

3,500 24.0
23.5
3,000
23.0
22.5
2,500
TCF
22.0
2005
2,000 21.5
2006
21.0
1,500 2007 20.5
20.0
1,000 00 01 02 03 04 05 06 07 08
Sources: EIA Source: EIA
One reason that the EIA is now projecting much future higher gas
The EIA now projects a 2.7% increase in total US natural gas consumption consumption than it had in the past is that the agency has significantly
in 2007 (double its prior estimate of gas demand growth in 2007), due to increased its forecast of US gas production over the near-term. Previously
colder winter weather and increased gas consumption by the industrial (as of 10/06), the EIA had projected that US natural gas production would
sector as the result of continued economic growth. In addition, the EIA increase by about 0.4 percent in 2007. In its most recent (2/07) outlook,
currently forecasts a 2.5% increase in US gas consumption in 2008 with the EIA now forecasts that overall US gas output will rise 2.7 percent in
increased demand across the board. 2007 and 0.7 percent in 2008.
5
US Gas Production (TCF)

US Gas Production (TCF)
20.0 1.2 4.0
19.5
1.0
3.9
19.0
Other Lower-48
Federal GOM
0.8
18.5 3.8
0.6
18.0
3.7
17.5 0.4
17.0 3.6
0.2
16.5
0.0 3.5
16.0 Q1Q2Q3Q4Q1Q2Q3 Q4Q1Q2Q3Q4Q1 Q2Q3Q4Q1Q2Q3Q4
00 01 02 03 04 05 06 07 08
2004 2005 2006 2007 2008
Source: EIA, Spears
Federal GOM Other Lower-48
The reason that overall US gas production is expected to increase over the
near term is that growth in output from onshore gas fields – which rose On the other hand, gas production from federal waters in the Gulf of
almost 4% in 2006 – is now projected to rise 2% in 2007 and 1% in 2008 Mexico, although it has largely recovered from 2005’s hurricane-related
(previously the EIA had forecast virtually no change in output from onshore damage, is projected to not increase over the 2007 to 2008 period but
gas fields). rather hold steady at around 8 bcfd (2.92 TCF/year).
The increase in onshore gas production is largely due to increased output With much of the gas inventory overhang that plagued the market last year
from “unconventional” gas fields – tight gas, coal bed methane (CBM), and removed, as gas demand rising, we project that spot gas prices will
shale gas – which account for about half of the gas-related drilling currently average $7.04/mmbtu in 2007, up 10% for the year.
taking place in the US. These unconventional fields are estimated to now
account for about 25% of total US gas output.
6
US Spot Gas Prices ($/mmbtu)

US DRILLING AND PRODUCTION ACTIVITY
$9
$8
Due to the weekly and monthly variation in drilling activity that any one rig
$7 count source might report, we now track the monthly rig counts of Baker
$6 Hughes, Smith Tool, and MI Swaco to find if a change in activity by one
source is confirmed by the others. As shown by the accompanying chart,
$5 over the past two years the three US rig counts have generally, but not
$4 always, moved together. It should be noted that MI Swaco typically
$3 reports 15%-20% more active rigs in the US than Baker Hughes or Smith
Tool, largely due to how an active rig is defined.
$2
$1 Recently the most widely-followed measure of activity, the Baker Hughes
rig count, has risen about 2% since November; during the same period the
$0
US rig counts of MI Swaco and Smith Tool have fallen 5% and been
00 01 02 03 04 05 06 07 08 unchanged, respectively. Clearly there has been a distinct slowing in the
Source: Natural Gas Week, Spears rate of growth in the US market since mid-2006, probably due to weakness
in gas prices beginning early in 2006; however, there has not been a
general downturn in drilling activity.
The US currently imports about 3.5 TCF per year from Canada; FirstEnergy
Capital has recently forecast that Canadian gas exports to the US may
US Rig Count
slide 10% by the end of 2007(!) due to the combination of falling gas
production and rising domestic gas demand. One important source of 2,100
increased gas demand inside Canada is from the many new oilsands 2,000
projects under development. It is reported that these projects burn an
1,900
average of 1 mcf of gas per barrel of synthetic crude. At that rate, a
300,000 bpd increase in oilsands output would translate into about a 100 1,800
bcf increase in gas demand. 1,700
1,600
1,500
BHI
1,400
Smith
1,300
MI Swaco
1,200
J F M A M J J A S O ND J F MA M J J A SO N D J F
2005 2006 2007
7
Even without a downturn in drilling activity, day rates for land rigs began to We expect the decline in US land rig day rates will bottom out in Q3 2007
come under significant pressure in late 2006 as the number of new and and rise slightly before year-end; for the full year we estimate that US land
refurbished units entering the US market exceeded incremental rig demand rig day rates will average about $19,200, down 8% from last year.
growth. We estimate that on average 20 new units per month entered the Combining lower rig rates with the fact that prices for many grades of
US market in 2006, for a total of about 240 new additional units. In other OCTG are continuing to inch down - reflecting rising production capacity
words, the US rig fleet has been growing at a rate of about 1% per month. and growing imports – we expect that average overall well costs will fall
As similar-sized increase in the US rig fleet is expected for 2007. about 10% in 2007.
The accompanying chart tracks historical and projected monthly rig activity
US Land Rig Market as measured by Baker Hughes. We had previously been forecasting a
slight dip in monthly rig activity in Q1 2007, but indications are now that
drilling activity will instead move higher throughout the quarter. We
$22,500 50%
continue to expect to see a strong second half of ’07 for rig activity as
$20,000 40% operators take advantage of both lower well costs and higher gas prices.
Annual Inflation
We continue to project that by Q4 2007 US rig activity will exceed 1,900
$17,500 30%
Day Rates
units.
$15,000 20%
$12,500 10% U.S. Monthly Rig Count

$10,000 0% 2,000
$7,500 -10% 1,900
$5,000 -20% 1,800

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
1,700
2003 2004 2005 2006 2007
Day Rates Inflation Rate 1,600

1,500
As shown on the preceding chart, average land rig rates in Q4 2006 were 1,400
unchanged from the previous quarter, averaging about $21,400 per day and
1,300 2007
marking the first quarter since Q4 2003 that day rates had not increased.
Anecdotal evidence collected since the start of the year leads us to believe 2006
1,200
that average day rates will fall about 7% from the Q4 2006 level in Q1 2007, 2005
to about $19,500 per day. (While most rigs in the US are believed to be on 1,100
well-to-well contracts, some are on longer term arrangements. Average Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
day rates that we track reflect both types of contracts. If only well-to-well Source: Baker Hughes, Spears
contracts are considered, quarter-to-quarter day rate declines might be
15% or more in Q1 2007.)
8
In our revised forecast we now expect that overall US drilling activity will on CBM projects in the San Juan basin. More than 700 new wells are to
rise 11% in 2007 to an average of 1,836 active units (as measured by be drilled.
Baker Hughes), accounting for 55,497 new wells (up 12%) and 324.9
million feet of hole drilled. We now forecast that about 32,619 new gas
wells and 17,210 new oil wells will be drilled in 2007, up 13% and 12%,
respectively. Total spending to drill and complete new wells is expected to
reach $126.8 billion in 2007, up 1% for the year. Indicators of Drilling Activity Trends
Offshore The forecast now calls for overall offshore activity to US seismic activity continues to accelerate. IHS Energy’s count of active
average 88 active rigs in 2007, down 2%, accounting for 778 wells drilled seismic crews in the US in January 2007 was up 13% compared to the
and 8.8 million feet of hole. year-ago period, continuing a growth trend that has been in-place since
mid-2003.
Deep Drilling In 2007, deep rigs (those with a measured well depth in
excess of 15,000 feet) are now expected to see an average of 233 active
rigs (as tallied by Smith Tool), up 10% from last year, accounting for 1,558 US Seismic Crew Count
wells drilled.
Directional Horizontal drilling continues to outpace the gain in overall 70

drilling because of its increased use by operators in their unconventional 65
gas field development programs. We now project that overall horizontal
drilling activity will rise 28% in 2007, accounting for an average of 365 60
active rigs and over 6,200 wells drilled. Directional drilling, much of which
is re-entry work, is projected to grow 5% in 2007 to 402 average active 55
units and about 2,750 wells.
50
Unconventional We estimate that in 2007 there will be
45
approximately 1,000 wells drilled in the Fayetteville Shale. Southwestern
Energy and Chesapeake are the most active operators at this time. 40
Although it has been “below the radar” for some time, unconventional 35
drilling in the Appalachian basin is picking up. Indicative of this is a recent
announcement by Talisman of its plans to drill 25 wells in upstate New 30
.
York this year where it expects to produce at an initial rate of 15 mmcfd
2003 2004 2005 2006 .
per well from the Trenton Black River formation.
Source: IHS
Unconventional as plays also continue to draw in operators who most

recently were walking away from US operations. For example, BP recently
announced plans to spend about $2.4 billion over the 2007-2020 timeframe
9
US Well Service/Workover Outlook
The forecast for 2007 now projects that US workover activity will average
1,603 active workover rigs, up 2%, while the Weatherford AESC well
service/workover unit count is forecast to gain 2% to an average of 2,402
active units. The total number of producing oil wells is expected to
increase almost 1% in 2007 to about 500,785 wells, the first increase in
the number of producing oil wells since 2000, while the number of
producing gas wells is expected to rise 4% to 413,174 wells, continuing a
multiyear trend. The number of oil and gas well completions in the US is
expected to rise 12% in 2007 to 49,800 jobs, while about 25,000 wells are
forecast to be abandoned in 2007, down about 7% from 2006.
10
U.S. DRILLING ACTIVITY
Drilling and Completion

Spending Wells Drilled Footage Drilled Average Active Rigs
Year WTI Spot Spot Gas Oil Gas Total* Oil Gas Total* Oil Gas Total* Oil Gas Total
($/bbl) ($/Mmbtu) (Bil) (Bil) (Bil) (Mil) (Mil) (Mil)
2000 $30.38 $4.09 $4.9 $10.8 $21.9 8,859 17,765 31,113 39.0 84.9 149.0 197 720 918
2001 $26.06 $3.88 $6.9 $18.2 $34.8 9,710 21,908 36,240 45.2 111.7 185.4 217 941 1,156
2002 $26.21 $3.11 $6.0 $16.3 $28.6 7,312 16,985 28,114 31.2 92.4 145.8 137 691 830
2003 $31.22 $5.38 $9.1 $21.3 $38.3 9,008 19,974 32,956 41.3 111.5 175.9 156 874 1,030
2004 $41.46 $5.69 $19.2 $35.5 $62.7 11,716 23,187 39,063 62.7 126.7 213.8 165 1,024 1,190
2005 $56.69 $8.21 $30.2 $46.0 $84.9 13,781 26,360 44,586 88.1 142.1 254.3 194 1,189 1,383
2006 Q1 $64.10 $7.26 $10.1 $15.1 $28.3 3,627 6,916 11,741 23.2 37.4 67.4 233 1,289 1,522
Q2 $71.05 $6.18 $10.8 $16.4 $30.5 3,842 7,294 12,403 24.9 40.1 72.2 270 1,365 1,635
Q3 $70.39 $5.78 $11.9 $17.9 $33.4 3,850 7,243 12,350 25.9 41.6 74.9 306 1,414 1,721
Q4 $60.64 $6.31 $11.8 $17.7 $33.0 3,984 7,535 12,830 26.1 42.0 75.7 285 1,434 1,719
Total $66.55 $6.38 $44.6 $67.2 $125.2 15,303 28,988 49,325 100.1 161.0 290.2 274 1,376 1,649
2007 Q1 $58.12 $7.35 $11.4 $17.2 $32.1 4,055 7,684 13,077 26.4 42.4 76.6 274 1,461 1,735
Q2 $60.00 $6.90 $11.2 $16.9 $31.6 4,201 7,959 13,544 27.4 44.1 79.4 306 1,494 1,800
Q3 $60.00 $6.75 $11.1 $16.7 $31.1 4,375 8,286 14,100 28.6 46.0 82.8 338 1,538 1,875
Q4 $60.00 $7.15 $11.4 $17.2 $32.0 4,579 8,690 14,776 29.6 47.7 85.9 348 1,587 1,935
Total $59.53 $7.04 $45.1 $68.1 $126.8 17,210 32,619 55,497 112.0 180.2 324.7 316 1,520 1,836
2008 $60.00 $7.50 $46.6 $68.4 $128.7 18,473 34,037 58,509 120.2 188.0 342.7 339 1,599 1,938
2009 $62.00 $7.75 $49.0 $71.6 $134.9 19,442 35,600 61,337 126.5 196.7 359.3 356 1,676 2,032
2010 $64.00 $8.00 $50.6 $74.8 $140.3 20,069 37,191 63,797 130.6 205.5 373.6 359 1,754 2,113
2011 $66.00 $8.25 $52.2 $78.0 $145.8 20,697 38,810 66,288 134.7 214.4 388.0 362 1,832 2,194
2012 $68.00 $8.25 $53.9 $80.5 $150.4 21,343 40,023 68,359 138.9 221.1 400.1 385 1,878 2,263
Note: All prices and expenditures are in current dollars.
* Includes dry holes
Sources: API, Baker Hughes, NY Merc, Natural Gas Week, Spears and Associates
11
Drilling and Completion

Average Active Rigs Wells Drilled Footage Drilled Spending
Year Land Offshore Total Land Offshore Total Land Offshore Total Land Offshore Total
(Mil) (Mil) (Mil) (Bil) (Bil) (Bil)
2000 778 140 918 29,700 1,412 31,113 135.1 13.8 149.0 $13.4 $8.5 $21.9
2001 1,003 153 1,156 34,724 1,516 36,240 169.8 15.6 185.4 $21.4 $13.4 $34.8
2002 718 112 830 27,255 859 28,114 136.7 9.1 145.8 $19.1 $9.5 $28.6
2003 922 108 1,030 32,057 898 32,956 166.4 9.5 175.9 $25.7 $12.6 $38.3
2004 1,094 97 1,190 38,210 853 39,063 204.5 9.2 213.8 $50.1 $12.5 $62.7
2005 1,290 93 1,383 43,763 823 44,586 245.2 9.1 254.3 $70.8 $14.2 $84.9
2006 Q1 1,440 82 1,522 11,562 179 11,741 65.4 2.0 67.4 $24.3 $3.9 $28.3
Q2 1,539 96 1,635 12,192 212 12,403 69.9 2.4 72.2 $25.8 $4.7 $30.5
Q3 1,626 95 1,721 12,141 209 12,350 72.5 2.3 74.9 $28.5 $4.8 $33.4
Q4 1,632 87 1,719 12,639 191 12,830 73.6 2.1 75.7 $28.6 $4.4 $33.0
Total 1,559 90 1,649 48,534 792 49,325 281.3 8.9 290.2 $107.3 $17.9 $125.2
2007 Q1 1,649 86 1,735 12,887 190 13,077 74.4 2.1 76.6 $27.5 $4.6 $32.1
Q2 1,712 88 1,800 13,350 194 13,544 77.3 2.2 79.4 $27.1 $4.5 $31.6
Q3 1,786 89 1,875 13,904 196 14,100 80.6 2.2 82.8 $26.8 $4.3 $31.1
Q4 1,845 90 1,935 14,578 198 14,776 83.7 2.2 85.9 $27.7 $4.3 $32.0
Total 1,748 88 1,836 54,719 778 55,497 315.9 8.8 324.7 $109.1 $17.7 $126.8
2008 1,846 92 1,938 57,698 811 58,509 333.3 9.4 342.7 $111.0 $17.8 $128.7
2009 1,936 96 2,032 60,488 849 61,337 349.3 10.0 359.3 $116.4 $18.6 $134.9
2010 2,012 101 2,113 62,911 887 63,797 363.1 10.4 373.6 $120.9 $19.4 $140.3
2011 2,089 105 2,194 65,363 925 66,288 377.1 10.9 388.0 $125.6 $20.2 $145.8
2012 2,154 108 2,263 67,405 954 68,359 388.9 11.2 400.1 $129.5 $20.9 $150.4
Sources: API, Baker-Hughes, Spears and Associates
12

BY TYPE OF WELL AND RIG
Wells Drilled Footage Drilled (mil)
Surface to TD Surface to TD
Offshore Re-Entry Subtotal Offshore Re-Entry Subtotal
Year Horizontal Development Sidetracks Directional Vertical Total Horizontal Development Sidetracks Directional Vertical Total
2000 1,144 565 1,735 3,444 27,669 31,113 7.8 6.3 11.1 25.2 123.8 149.0
2001 1,150 599 1,789 3,538 32,701 36,240 8.4 6.8 11.1 26.3 159.1 185.4
2002 994 327 1,212 2,533 25,581 28,114 7.0 4.0 6.8 17.7 128.1 145.8
2003 1,411 377 1,613 3,401 29,554 32,956 9.0 4.2 8.4 21.6 154.3 175.9
2004 2,021 333 1,779 4,133 34,930 39,063 14.8 3.7 9.1 27.7 186.1 213.8
2005 3,053 321 2,266 5,640 38,946 44,586 22.4 3.6 11.6 37.6 216.7 254.3
2006 Q1 1,042 70 620 1,732 10,009 11,741 7.7 0.8 3.2 11.6 55.8 67.4
Q2 1,162 83 662 1,907 10,497 12,403 8.5 0.9 3.4 12.8 59.4 72.2
Q3 1,277 82 672 2,031 10,320 12,350 9.4 0.9 3.4 13.7 61.2 74.9
Q4 1,356 75 657 2,087 10,743 12,830 10.0 0.8 3.3 14.2 61.6 75.7
Total 4,837 309 2,612 7,757 41,568 49,325 35.5 3.5 13.3 52.3 237.9 290.2
2007 Q1 1,460 74 638 2,173 10,904 13,077 10.9 0.8 3.3 15.0 61.5 76.6
Q2 1,515 76 677 2,267 11,277 13,544 11.3 0.9 3.5 15.7 63.8 79.4
Q3 1,594 76 707 2,378 11,723 14,100 11.9 0.9 3.7 16.4 66.4 82.8
Q4 1,645 77 732 2,454 12,323 14,776 12.3 0.9 3.8 16.9 68.9 85.9
Total 6,213 303 2,754 9,271 46,226 55,497 46.3 3.4 14.3 64.1 260.7 324.7
2008 6,754 316 2,850 9,920 48,588 58,509 51.0 3.6 15.1 69.7 272.9 342.7
2009 7,255 331 2,912 10,498 50,839 61,337 55.5 3.8 15.7 75.0 284.2 359.3
2010 7,722 346 3,026 11,094 52,704 63,797 59.8 4.0 16.6 80.5 293.0 373.6
2011 8,206 361 3,058 11,625 54,663 66,288 64.4 4.2 17.1 85.8 302.2 388.0
2012 8,655 372 3,153 12,180 56,179 68,359 68.8 4.4 18.0 91.2 308.9 400.1
Sources: API, and Spears and Associates
13

BY DEPTH INTERVAL
Wells Drilled by Depth Interval Active Rigs by Depth Interval (Smith Tool)
Under 5001- 10001- Over Under 5001- 10001- Over
Year 5000' 10000' 15000' 15000' Total 5000' 10000' 15000' 15000' Total
2000 17,323 9,070 4,020 700 31,113 100 330 402 121 953
2001 19,869 10,527 4,943 900 36,240 127 385 491 162 1,165
2002 14,911 8,817 3,690 697 28,114 97 262 315 126 800
2003 16,727 10,626 4,792 811 32,956 98 335 423 143 999
2004 19,929 12,035 6,125 975 39,063 113 391 511 171 1,186
2005 22,919 13,389 7,134 1,145 44,586 90 460 586 187 1,323
2006 Q1 6,009 3,475 1,916 341 11,741 143 530 629 204 1,507
Q2 6,110 3,921 2,018 355 12,403 142 585 647 208 1,582
Q3 5,616 4,203 2,170 361 12,350 129 621 689 211 1,651
Q4 6,118 4,260 2,076 375 12,830 146 650 680 226 1,702
Total 23,853 15,859 8,181 1,431 49,325 140 597 661 212 1,610
2007 Q1 6,348 4,253 2,088 387 13,077 150 646 681 232 1,709
Q2 6,548 4,409 2,202 385 13,544 155 669 718 230 1,773
Q3 6,782 4,623 2,308 387 14,100 161 702 753 232 1,847
Q4 7,240 4,771 2,367 398 14,776 172 724 772 238 1,906
Total 26,917 18,057 8,965 1,558 55,497 159 685 731 233 1,809
2008 28,358 19,049 9,457 1,646 58,509 168 723 771 246 1,909
2009 29,724 19,972 9,915 1,726 61,337 176 758 808 258 2,002
2010 30,925 20,768 10,310 1,794 63,797 183 788 841 269 2,081
2011 32,142 21,573 10,710 1,862 66,288 190 819 873 279 2,161
2012 33,147 22,247 11,045 1,920 68,359 196 844 901 287 2,229
Sources: API, and Spears and Associates
14
OFFSHORE DRILLING ACTIVITY
Gulf of Mexico West Coast Total

Explo Devel Total Explo Devel Total Explo Devel Total
Year Rigs Wells Wells Wells Footage Rigs Wells Wells Wells Footage Rigs Wells Wells Wells Footage
(Mil) (Mil) (Mil)
2000 136 186 1,143 1,329 13.3 4 4 80 84 0.5 140 190 1,222 1,412 13.8
2001 148 199 1,225 1,424 15.0 5 5 87 92 0.6 153 204 1,312 1,516 15.6
2002 108 133 648 781 8.6 4 4 75 79 0.5 112 137 723 859 9.1
2003 104 140 683 823 9.1 4 4 72 76 0.5 108 144 755 898 9.5
2004 93 126 660 785 8.8 3 3 64 68 0.4 97 129 724 853 9.2
2005 90 121 636 757 8.6 3 3 62 65 0.4 93 124 698 823 9.1
2006 Q1 79 26 139 165 1.9 3 1 14 14 0.1 82 27 152 179 2.0

Q2 93 31 164 195 2.3 3 1 16 17 0.1 96 32 180 212 2.4
Q3 92 31 162 193 2.2 3 1 16 17 0.1 95 32 178 209 2.3
Q4 84 28 148 176 2.0 3 1 14 15 0.1 87 29 162 191 2.1
Total 87 117 612 729 8.5 3 3 60 63 0.4 90 120 672 792 8.9
2007 Q1 83 28 147 175 2.0 3 1 14 15 0.1 86 29 161 190 2.1
Q2 85 29 150 178 2.1 3 1 15 15 0.1 88 29 164 194 2.2
Q3 86 29 152 180 2.1 3 1 15 16 0.1 89 30 166 196 2.2
Q4 87 29 153 182 2.1 3 1 15 16 0.1 90 30 168 198 2.2
Total 85 115 601 716 8.4 3 3 59 62 0.4 88 118 660 778 8.8
2008 89 119 627 747 9.0 3 3 61 64 0.4 92 123 689 811 9.4
2009 93 125 656 781 9.5 3 3 64 67 0.4 96 128 720 849 10.0
2010 97 131 686 816 10.0 4 4 67 70 0.5 101 134 752 887 10.4
2011 101 136 715 852 10.4 4 4 70 74 0.5 105 140 785 925 10.9
2012 105 141 738 878 10.7 4 4 72 76 0.5 108 144 810 954 11.2
Sources: API, Baker-Hughes, Spears and Associates
15
U.S. WELL SERVICE/WORKOVER ACTIVITY
Jobs (000) Workover

Active Wells WS/WO Units
Year Oil Gas Abandonments Completions Total Units* Baker
(1/1) (1/1)
2000 546,195 316,888 31.1 26.6 57.7 2,692 1,056

2001 533,685 324,933 4.6 31.6 36.2 NA 1,210
2002 529,995 355,666 9.5 24.3 33.8 1,830 1,010
2003 528,724 371,719 40.5 29.0 69.5 1,967 1,129
2004 513,194 375,725 17.3 34.9 52.2 2,064 1,235
2005 511,610 394,955 50.1 40.1 90.2 2,222 1,356
2006 498,454 398,175 27.0 44.3 71.3 2,364 1,573

2007 500,785 413,174 25.0 49.8 74.8 2,402 1,603
2008 505,495 433,293 25.0 52.5 77.5 2,402 1,572
2009 511,468 454,830 25.0 55.0 80.0 2,476 1,618
2010 518,410 477,930 32.5 57.3 89.8 2,565 1,668
2011 520,980 500,122 32.5 59.5 92.0 2,630 1,710
2012 524,176 523,932 32.5 61.4 93.9 2,695 1,755
* Guiberson 1995-June, 2001; Weatherford July, 2001 forward
Sources: Baker Oil Tools, Weatherford, World Oil, Spears and Associates
16
While gas drilling has slowed sharply since mid-2006 in response to a drop
CANADIAN DRILLING AND PRODUCTION ACTIVITY in gas prices, it is important to note that oil-related drilling activity has held
steady. Drilling for natural gas generally accounts for 75% to 80% of all
rigs working in Canada. As a result of the weakness in gas prices during
Drilling activity in Canada, as measured by Baker Hughes, saw a total of
much of 2006, gas drilling activity dropped sharply in the second half of last
568 active onshore and offshore rigs during January 2007, down 14% (92
year. In Q3 2006, gas rig count was down 3% from the year-ago period,
rigs) compared to the year-ago period. A similar decline was reported by
while in Q4 2006 gas rig count was off 28% from Q4 2005. In contrast,
MI Swaco, whose Canadian rig count stood at 509 active units in January
over the second half of 2006 oil rig count was virtually unchanged from the
2007, down 13% (65 rigs) from January 2006. (MI Swaco generally reports
2005 level.
10%-15% fewer rigs than Baker Hughes in Canada, largely due to
definitional differences).
Canada Drilling Activity
600
Canadian Rig Count
Oil Rigs
500
BHI Gas Rigs
800 800
MI Swaco 400
700 700
300
600 600
MI Swaco
200
500 500
BHI
400 400 100
300 300 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
200 200
2004 2005 2006
100 100
J F MA M J J A S O ND J FM AM J J A S O N D J F Source: Baker Hughes
2005 2006 2007
As shown by the following graph, we project that rig count in the second
We now expect that overall Canadian drilling activity will fall 2% in 2007 to half of 2007 will exceed that turned in during the second half of 2006.
an average of 463 active units (as measured by Baker Hughes), accounting
for 27,172 total wells and 105.2 million feet of hole drilled. A total of 16,470
new gas wells (down 7%) and 6,817 new oil wells (up 11%) are forecast for
2007. Drilling and completion expenditures are projected to fall 6% to a
total of $18.9 billion (US) in 2007.
17
Canadian Monthly Rig Count Alberta Spot Gas Prices

800
$11
700
$10
600
$9
500 $8
$/mmbtu
400 $7
300 2007 $6
2006 $5
200 2005 $4
100
$3
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec J FMAMJ J ASONDJ FMAMJ JASOND JFMAMJ J ASONDJ FMAMJ JASOND
Sources: Baker Hughes, Spears
2004 2005 2006 2007
The reason for this recovery we believe is two-fold. The first factor is the
recovery in spot gas prices seen since the first of this year. When cold
winter weather finally arrived in January, spot gas prices in Alberta rallied
The second factor that is acting to restore drilling activity is the fall in
from a low of about $4/mmbtu to over $6/mmbtu, as shown by the following
drilling costs that has helped lower the breakeven point for operators. The
chart.
following chart illustrates the change in land rig day rates in Canada since
2003 and our forecast of these rates through the end of this year. Land rig
Our gas price forecast calls for Alberta spot gas prices to average
rates in Q4 2006 were only 5% higher than in Q4 2005, the smallest
$6.05/mmbtu in 2007, up 9% for the year, as the inventory overhang
quarterly rise in two years. We estimate that overall land rig rates will be
diminishes, demand continues to grow due to increased oilsands usage
down between 5% and 10% in Q1 2007 (relative to the Q1 2006 level).
and continued economic growth, and supply shortfalls begin to be felt.
As the economics of gas well drilling get restored, we expect that firms will
gradually begin to ramp up their gas drilling operations during the second
half of 2007.
18
One issue that has been satisfactorily resolved deals with the
Canada Land Rig Market government’s plan that was announced last September to phase out
income trusts by 2011. The terms under which the proposed change will
take place will allow income trusts to maintain a respectable level of growth
$20,000 40%
– via either acquisition or drilling - until the phase-out deadline.
$17,500 30%
Annual Inflation
Oilsands The Canadian Association of Petroleum Producers
Day Rates
$15,000 20% (CAPP) reports that in 2005 capital spending on oilsands projects
amounted to Cdn$ 10.4 billion, up 70% from the prior year. Over the 1997
$12,500 10% to 2005 period, spending for mining projects accounted for about 65% of
overall oilsands capital spending, while in-situ projects represented 25%-
$10,000 0% 30% and upgraders accounted for 5%-10%.
$7,500 -10%
$5,000 -20%
Canada Oilsands Capital Expenditures
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
$12,000
2003 2004 2005 2006 2007
Day Rates Inflation Rate $10,000 Upgraders

Mining
Cdn Million
Other Issues While the fundamentals of the industry are improving the $8,000 In-Situ
outlook for activity for the balance of the year, actions by the federal
government are clouding the outlook over the intermediate term. $6,000
Canadian operators are expecting that the federal government will soon $4,000
unveil tougher tax and environmental policies. On the tax side, some
analysts expect that the government will propose rolling back the $2,000
accelerated capital cost allowance available to oilsands operators that
allows them to fully depreciate the cost of the equipment they buy in the $0
year it is purchased. On the environmental side, the industry expects that 1997 1998 1999 2000 2001 2002 2003 2004 2005
tough new CO2 emissions limits may be proposed which could have a Source: CAPP
significant impact on the oilsands industry, the source of one-third of all
CO2 emissions in Canada. Rather than accept an output level, the
industry has been pushing for so-called intensity targets (measured in A survey by CAPP in 2006 found that the Alberta oil sands industry may
terms of CO2 output per barrel produced) to be adopted, focusing on spend Cdn$65 billion on new oil sands projects in the 2006 to 2011 period
technology to reduce emissions. and as much as Cdn$81.6 billion in the 2006 to 2016 period. Oilsands
spending is expected to peak in 2008/2009 at around Cdn$12 billion per
year. However, several industry executives have begun to sound warnings
that skyrocketing costs in northern Alberta caused by labor and
19
infrastructure shortages are jeopardizing future oil sands projects. Some

operators have already delayed projects, but more could be halted as Canadian Seismic Crew Count
profitability continues to drop. It is estimated that in general new oil sands
projects need prices higher than $50/bbl in order to continue to go forward.
40
Shell recently announced plans to boost bitumen production capacity to 35
770,000 bpd and upgrading capacity to 700,000 bpd by 2020. Its current
mining projects – Jackpine and Muskeg – will see production increase to 30
500,000 bpd from 155,000 bpd. The additional increase is to come from 25
development of the Pierre River mine.
20
15
10
Indicators of Drilling Activity Trends 5
IHS Energy’s count of active seismic crews in Canada in January 2007 0

.
was 30% below the year-ago period. Relative to the year-ago period,
seismic surveying activity has been weak for the past three months, 2003 2004 2005 2006 .
reflecting the new-found caution of operators in the wake of low gas prices
dating back to early 2006. Source: IHS
Canadian Well Service/Workover Outlook
We now project that Canadian well service/workover unit activity (as

measured by Weatherford) will rise 1% in 2007, averaging 787 active rigs.
The Baker Oil Tools workover rig count is forecast to average 642 units in
2007, up 3% for the year. The number of oil and gas well completions in
Canada is expected to fall 2% in 2007 to 23,300 jobs, while the number of
oil and gas well abandonments is estimated to hold steady at about 6,000
jobs.
20
CANADIAN DRILLING ACTIVITY
Alberta
Spot Drilling Wells Drilled Footage (Mil) Average Active Rigs
Year Gas Prices Expenditures Oil Gas Dry Service Total Oil Gas Dry Service Total Oil Gas Total
($/mmbtu) ($ Bil)
2000 $3.51 $6.53 5,706 9,078 2,699 348 17,831 22.8 30.0 11.6 1.5 65.9 134 211 345
2001 $3.43 $7.70 4,732 10,757 2,811 297 18,597 20.1 34.6 11.9 1.1 67.7 110 231 341
2002 $2.44 $6.48 4,319 9,061 2,300 193 15,873 17.7 28.5 10.2 0.8 57.2 79 184 263
2003 $4.61 $9.65 4,845 12,951 3,652 243 21,691 19.9 37.8 17.0 1.0 75.8 105 266 372
2004 $4.80 $12.09 4,526 15,126 3,182 317 23,151 18.9 48.7 13.6 1.0 82.2 91 274 366
2005 $7.12 $17.61 5,482 15,931 3,737 284 25,434 24.9 57.6 15.7 1.3 99.6 100 355 455
2006 Q1 $6.38 - 2,153 6,195 1,329 103 9,781 9.7 21.8 5.6 0.5 37.5 125 536 661
Q2 $5.13 - 949 2,731 586 46 4,312 4.3 9.6 2.5 0.2 16.5 69 223 292
Q3 $4.77 - 1,595 4,588 984 77 7,243 7.2 16.1 4.1 0.3 27.8 121 369 490
Q4 $5.88 - 1,435 4,130 886 69 6,520 6.5 14.5 3.7 0.3 25.0 127 314 441
Total $5.57 $20.20 6,132 17,644 3,785 294 27,855 27.7 62.0 15.9 1.3 106.9 111 360 471
2007 Q1 $6.38 - 2,100 5,073 1,107 90 8,370 9.5 17.9 4.6 0.4 32.4 194 378 572
Q2 $5.80 - 954 2,306 503 41 3,804 4.3 8.1 2.1 0.2 14.7 83 177 260
Q3 $5.75 - 1,799 4,346 948 77 7,170 8.1 15.3 4.0 0.3 27.8 142 348 490
Q4 $6.30 - 1,964 4,745 1,035 84 7,828 8.9 16.7 4.3 0.4 30.3 134 401 535
Total $6.05 $18.87 6,817 16,470 3,594 291 27,172 30.9 58.0 15.1 1.3 105.2 138 326 463
2008 $6.45 $19.32 6,987 16,882 3,684 299 27,851 31.6 59.4 15.5 1.3 107.8 142 332 475
2009 $6.67 $19.87 7,196 17,388 3,794 307 28,686 32.6 61.2 15.9 1.4 111.1 147 342 489
2010 $6.88 $21.26 7,340 17,736 3,870 314 29,259 33.2 62.4 16.2 1.4 113.3 150 349 499
2011 $7.10 $22.75 7,487 18,091 3,947 320 29,844 33.9 63.7 16.6 1.4 115.5 153 356 508
2012 $7.10 $24.35 7,636 18,452 4,026 326 30,441 34.6 64.9 16.9 1.5 117.8 156 363 519
Note: Expenditures are in current US dollars at an exchange ratio of US$0.7:Can$1.0 from 1995-2004; and US$0.825:Can$1.0 from 2005-2012
Sources: Baker Hughes, Canadian Association of Petroleum Producers, Spears and Associates
21
CANADIAN WELL SERVICE/WORKOVER ACTIVITY
Jobs (000) Workover

Active Wells WS/WO Units
Year Oil Gas Abandonments Completions Total Units* Baker
(1/1) (1/1)
2000 54,559 59,535 5.9 14.8 20.6 557 342

2001 58,055 64,971 5.1 15.5 20.6 NA 339
2002 58,331 75,058 1.8 13.4 15.2 627 261
2003 58,760 86,205 7.9 17.8 25.7 710 350
2004 62,555 92,279 5.6 19.7 25.2 755 615
2005 64,053 104,850 5.9 21.4 27.3 795 654
2006 65,799 118,606 6.0 23.8 29.8 779 626

2007 68,931 133,250 6.0 23.3 29.3 787 642
2008 72,748 146,720 6.0 23.9 29.9 800 648
2009 76,735 160,602 6.0 24.6 30.6 842 684
2010 80,931 174,991 6.0 25.1 31.1 882 717
2011 85,271 189,727 6.0 25.6 31.6 923 752
2012 89,757 204,817 6.0 26.1 32.1 965 787
* Guiberson 1995-June, 2001; Weatherford January, 2002 forward
Sources: Baker Oil Tools, Weatherford, CAPP, Spears and Associates
22
drilled (up 5%). Onshore activity is projected to rise 7% to 10,024 new wells
and 63.6 million feet of hole. Offshore drilling is projected to rise 2%
THE INTERNATIONAL MARKET accounting for 2,582 new wells and 26.3 million feet of hole drilled. Total
spending internationally to drill and complete new wells is expected to reach
$79.7 billion in 2007, up 16%.
International drilling activity, as measured by Baker Hughes, saw a total of 954
active onshore and offshore rigs during January 2007, up 7% (66 rigs)
compared to the year-ago period. As measured by MI Swaco, international rig INTERNATIONAL
RIGS WELLS FOOTAGE (MIL) SPENDING (BIL)
count stood at 1,509 active units in January 2007, up 13% (176 rigs) from Land Off Total Land Off Total Land Off Total Land Off Total
January 2006. (MI Swaco typically reports 50%-60% more international rigs 2000 466 177 643 6,070 1,909 7,978 35.5 17.7 53.2 $14.2 $20.9 $35.1
2001 525 209 734 7,423 2,207 9,629 46.4 21.0 67.3 $18.6 $25.1 $43.7
than Baker Hughes, largely due to definitional differences and the fact that 2002 507 216 723 7,069 2,105 9,174 43.5 21.0 64.6 $18.8 $25.0 $43.9
2003 543 217 761 7,523 2,159 9,682 45.1 21.0 66.1 $20.0 $26.8 $46.8
Baker Hughes no longer reports rig activity in Iran and Sudan). 2004 594 231 825 7,886 2,165 10,051 48.3 21.8 70.1 $21.0 $26.8 $47.8
2005 643 250 893 8,458 2,315 10,773 53.3 23.4 76.7 $25.5 $30.2 $55.7
2006 Q1 628 252 880 2,244 642 2,886 14.1 6.6 20.7 $7.6 $9.1 $16.7
Q2 643 254 897 2,294 654 2,948 14.6 6.8 21.4 $7.8 $9.4 $17.2
International Rig Count Q3 671 253 924 2,409 624 3,033 15.2 6.4 21.5 $8.2 $9.1 $17.3
Q4 684 251 935 2,451 619 3,070 15.4 6.2 21.7 $8.4 $9.1 $17.6
(1/00-1/07) Total 656 252 909 9,397 2,539 11,936 59.3 26.0 85.3 $32.0 $36.7 $68.8
2007 Q1 692 260 952 2,471 670 3,141 15.7 6.8 22.4 $9.4 $10.6 $20.0
Q2 701 257 958 2,482 645 3,127 15.8 6.5 22.3 $9.5 $10.3 $19.8
Q3 713 255 968 2,510 629 3,139 15.9 6.4 22.4 $9.6 $10.3 $19.9
Q4 724 256 980 2,551 637 3,188 16.2 6.5 22.8 $9.7 $10.2 $20.0
1000 1600 Total 707 257 965 10,014 2,582 12,595 63.6 26.3 89.9 $38.2 $41.5 $79.7
2008 736 266 1,002 10,487 2,664 13,151 66.6 27.2 93.7 $41.9 $45.0 $86.9
900 1500 2009 755 274 1,029 10,752 2,730 13,482 68.2 27.8 96.1 $45.1 $48.4 $93.5
2010 769 278 1,047 10,955 2,760 13,716 69.5 28.1 97.7 $48.3 $51.4 $99.7
800 1400 2011 780 282 1,062 11,108 2,783 13,891 70.5 28.3 98.8 $51.5 $54.3 $105.9
MI Swaco Rigs
2012 791 287 1,078 11,268 2,807 14,076 71.5 28.6 100.1 $55.0 $57.5 $112.5
Sources: Baker Hughes, Spears and Associates
BHI Rigs
700 1300
600 1200
For coming year the regional engines of growth are expected to be the Mid
500 1100
East, which is expected to account for about half of the incremental increase in
400 BHI 1000 rig count in 2007, followed by Africa and Central and South America.
300 MI-Swaco 900
A description of expected activity by region and for the major countries is found
200 800 in the following sections.
.
2000 2001 2002 2003 2004 2005 2006
In our revised forecast we expect that international drilling activity will rise 6%
in 2007 to an average of 965 active rigs (as measured by Baker Hughes),
accounting for a total of 12,595 wells (up 6%) and 89.9 million feet of hole
23
The steady increase of drilling activity in the international market has pushed
up both offshore and land rig rates over the past two years. Rates for
international onshore rigs are now rising faster than rig rates in North America.
Leading Indicators of Drilling Activity
In Q4 2006 international land rig rates averaged almost $24,700 per day, 27%
higher than in Q4 2005. Given our outlook for continued gains in international
drilling activity, we expect that overall land rig rates in the international market IHS Energy’s count of active seismic crews in International market in January
will continue to increase through 2007. 2007 was up 4% compared to the year-ago period, primarily due to a sharp
increase in seismic surveying in Africa over the past year.
International Land Rig Market International Seismic Crew Count

$30,000 30% (Excluding CIS)
Day Rates 160
$27,500 25%
Inflation Rate
150
$25,000 20%
Annual Inflation
140
$22,500 15%
Day Rates
130
$20,000 10%
120
$17,500 5% 110
$15,000 0% 100
$12,500 -5% 90
$10,000 -10% 80
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 .
2003 2004 2005 2006 2007
2003 2004 2005 2006 .
Source: IHS
24
Baker Hughes), accounting for 5,081 new wells and 32.1 million feet of hole.
Onshore activity is projected to rise 4% to an average of 271 active land rigs
accounting for 4,720 new wells and 28.9 million feet of hole. Offshore rig count
CENTRAL AND SOUTH AMERICA in Central and South America is expected to rise 3% to an average of 65 active
rigs, accounting for 361 new wells, and 3.2 million feet of hole. We project that
spending will grow 14% in 2007 to a total of $21.8 billion to drill and equip new
Drilling activity in Central and South America, as measured by Baker Hughes, wells.
saw a total of 335 active onshore and offshore rigs during January 2007, up 4%
(12 rigs) compared to the year-ago period. As measured by MI Swaco, Central
CENTRAL AND SOUTH AMERICA
and South American rig count stood at 408 active units in January 2007, up RIGS WELLS FOOTAGE (MIL) SPENDING (BIL)
3% (13 rigs) from January 2006. (MI Swaco typically reports 15%-25% more Land Off Total Land Off Total Land Off Total Land Off Total
2000 186 41 227 2,535 296 2,832 15.3 2.7 18.0 $5.5 $3.4 $9.0
rigs than Baker Hughes in Central and South America, largely due to 2001 215 47 262 3,849 342 4,191 24.0 3.1 27.1 $8.9 $4.2 $13.1
definitional differences). 2002 168 46 214 3,141 355 3,496 19.2 3.2 22.4 $7.4 $4.6 $12.0
2003 188 56 244 3,551 388 3,939 20.4 3.6 23.9 $8.3 $5.5 $13.8
2004 225 66 290 3,786 365 4,151 23.2 3.3 26.6 $9.0 $5.2 $14.2
2005 251 64 316 4,148 289 4,437 26.3 2.5 28.8 $11.2 $4.4 $15.6
2006 Q1 253 60 313 1,074 81 1,154 6.7 0.7 7.4 $3.2 $1.4 $4.6
Central and South America Rig Count Q2
Q3
266
265
63
62
329
327
1,149
1,187
91
83
1,240
1,270
7.1
7.1
0.8
0.7
7.9
7.9
$3.4
$3.4
$1.5
$1.4
$4.9
$4.8
Q4 258 67 326 1,144 94 1,237 6.9 0.8 7.8 $3.3 $1.6 $4.9
Total 261 63 324 4,553 348 4,901 27.8 3.1 30.9 $13.3 $5.8 $19.1
2007 Q1 261 69 330 1,151 96 1,247 7.0 0.9 7.8 $3.7 $1.7 $5.4
350 425 Q2 266 65 331 1,161 92 1,253 7.1 0.8 7.9 $3.7 $1.7 $5.4
Q3 273 61 334 1,186 81 1,268 7.3 0.7 8.0 $3.8 $1.5 $5.3
325 400 Q4 283 65 348 1,221 92 1,313 7.5 0.8 8.3 $3.9 $1.7 $5.6
Total 271 65 336 4,720 361 5,081 28.9 3.2 32.1 $15.1 $6.6 $21.8
2008 287 69 356 5,048 413 5,461 30.9 3.6 34.5 $17.0 $8.0 $24.9
300 375 2009 295 71 366 5,200 424 5,623 31.8 3.7 35.5 $18.4 $8.5 $26.9
2010 302 73 374 5,319 431 5,750 32.6 3.8 36.3 $19.8 $9.1 $28.9
2011 305 75 380 5,387 438 5,825 33.0 3.8 36.8 $21.1 $9.8 $30.9
MI Swaco
275 350 2012 309 76 386 5,461 445 5,906 33.5 3.9 37.4 $22.6 $10.4 $33.0
BHI
250 325
On a regional basis, the increase in drilling activity over the coming year is
225 300
expected to be led by Argentina and Colombia. In Argentina, provincial
200 BHI 275 governments – which in the past have had better relationships with producers
than the federal government has had – are to be given more authority to
175 MI Swaco 250 negotiate with producers about contract terms. Colombia continues to attract
interest from foreign operators as it seeks to increase output due to attractive
150 225
contract terms, good exploration results, and an improving security situation.
.
2000 2001 2002 2003 2004 2005 2006

We estimate that in Mexico the sharp decline in output from Pemex’s flagship
Cantarell field could reduce oil export revenues by 20% this year. In response,
Pemex proposes an increase in exploration and development but budget
In our revised forecast we expect that drilling activity in Central and South constraints may become a problem, although some restrictions on foreign
America will rise 4% in 2007 to an average of 336 active rigs (as measured by investment in downstream development may be relaxed.
25
In Brazil, Petrobras is fast-tracking gas development to offset the looming Central & South America Seismic Crew Count
shortfall in imports from Bolivia.
30
PdVSA’s finances have come under increasing pressure as the company is
being looked to as the source of funding for the president’s nationalization 25
program in the telecom and power sectors. As a result, exploration and
development spending looks to fall short of planned activity once again in 2007.
20
15
10
5
IHS Energy’s count of active seismic crews in Central and South America in
January 2007 was 4% behind the year-ago period. Overall activity has
remained fairly flat for the past two years. 0
.
2003 2004 2005 2006 .

Source: IHS
26
ARGENTINA BRAZIL
The Argentine federal government plans to hand over control of the country’s Petrobras is fast-tracking the Jabuti, Marlim Sul, and Parque das Conchas gas
onshore oil and gas concessions to provincial authorities by mid-2007. Several field development projects this year in an attempt to boost gas production to
provinces are carrying out tender rounds – the first major offering of exploration make up the expected shortfall in imports from Bolivia. Gas demand in Brazil
acreage since 2001. These provinces include: Rio Negro, Santa Cruz, Tierra has grown by an average of 20 percent per year over the past decade and now
del Fuego, Salta, and Mendoza. totals 55 million cm/year. It is forecast to reach 128 million cm/year by 2015.
BRAZIL
ARGENTINA RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
RIGS WELLS FOOTAGE (MIL) SPENDING (MIL) Land Off Total Land Off Total Land Off Total Land Off Total
Land Off Total Land Off Total Land Off Total Land Off Total
2000 9 14 23 257 200 457 1.1 1.7 2.8 $356 $2,420 $2,776
2000 57 0 57 962 6 968 5.9 0.0 5.9 $1,747 $51 $1,798 2001 10 18 28 291 250 541 1.2 2.1 3.4 $424 $3,171 $3,594
2001 71 0 71 1,419 0 1,419 8.6 0.0 8.6 $2,750 $0 $2,750 2002 10 16 27 287 230 517 1.1 2.0 3.1 $438 $3,063 $3,501
2002 49 0 49 1,124 5 1,128 6.5 0.0 6.5 $2,178 $42 $2,221 2003 10 16 26 287 225 512 1.2 1.9 3.2 $460 $3,157 $3,617
2003 60 1 60 1,288 13 1,301 7.6 0.1 7.7 $2,498 $115 $2,613 2004 10 16 26 273 189 462 0.9 1.5 2.4 $438 $2,647 $3,085
2004 71 0 71 1,269 3 1,272 8.0 0.0 8.0 $2,460 $23 $2,483 2005 10 17 27 293 170 463 0.9 1.4 2.3 $517 $2,619 $3,136
2005 76 1 77 1,288 7 1,295 8.0 0.1 8.1 $2,746 $69 $2,815 2006 Q1 13 18 31 94 45 139 0.3 0.4 0.7 $183 $763 $946
2006 Q1 75 0 75 317 1 318 2.0 0.0 2.0 $745 $6 $750 Q2 13 18 31 92 46 138 0.3 0.4 0.7 $179 $775 $954
Q2 81 0 81 343 0 343 2.1 0.0 2.1 $805 $0 $805 Q3 13 17 30 96 43 139 0.3 0.3 0.6 $187 $720 $907
Q3 83 0 83 353 0 353 2.2 0.0 2.2 $827 $0 $827 Q4 14 19 32 99 47 146 0.3 0.4 0.7 $193 $792 $985
Q4 80 0 80 339 0 339 2.1 0.0 2.1 $795 $0 $795 Total 13 18 31 382 180 562 1.2 1.4 2.6 $741 $3,051 $3,792
Total 80 0 80 1,352 1 1,352 8.4 0.0 8.4 $3,171 $6 $3,177 2007 Q1 15 19 34 109 48 156 0.3 0.4 0.7 $232 $886 $1,118
2007 Q1 85 0 85 361 1 362 2.2 0.0 2.3 $932 $6 $938 Q2 13 18 31 92 46 138 0.3 0.4 0.7 $197 $853 $1,049
Q2 87 0 87 370 0 370 2.3 0.0 2.3 $954 $0 $954 Q3 14 17 31 102 43 144 0.3 0.3 0.7 $217 $792 $1,009
Q3 89 0 89 378 0 378 2.4 0.0 2.4 $976 $0 $976 Q4 14 19 33 102 48 149 0.3 0.4 0.7 $217 $886 $1,102
Q4 91 0 91 387 0 387 2.4 0.0 2.4 $998 $0 $998 Total 14 18 32 404 183 587 1.3 1.5 2.7 $862 $3,416 $4,278
Total 88 0 88 1,496 1 1,497 9.3 0.0 9.3 $3,860 $6 $3,867 2008 14 19 33 408 224 632 1.3 1.8 3.1 $914 $4,391 $5,305
2008 92 0 92 1,571 1 1,571 9.8 0.0 9.8 $4,256 $7 $4,263 2009 14 19 33 412 229 641 1.3 1.8 3.1 $969 $4,703 $5,672
2009 94 0 94 1,602 1 1,603 10.0 0.0 10.0 $4,558 $7 $4,566 2010 14 19 34 416 233 649 1.3 1.9 3.2 $1,028 $5,036 $6,064
2010 94 0 94 1,602 1 1,603 10.0 0.0 10.0 $4,786 $8 $4,794 2011 14 20 34 420 238 658 1.3 1.9 3.2 $1,090 $5,394 $6,484
2011 92 0 92 1,570 1 1,571 9.8 0.0 9.8 $4,925 $8 $4,933 2012 15 20 35 424 243 667 1.3 1.9 3.3 $1,156 $5,777 $6,933
2012 91 0 91 1,539 1 1,539 9.6 0.0 9.6 $5,068 $8 $5,076 Sources: Baker Hughes, Spears and Associates
Petrobras Energia announced it intends to invest $400 million from 2006 to

Petrobras plans to develop five production centers – Merluza (starting up in
2014 in the southern Patagonian province of Santa Cruz to develop the
2008), Mexilhao (2008), BS-500 (2010), Polo Sol, and Polo Centro – in the
Glencross and Estancia Chiripa gas fields, which have combined gas reserves
offshore Santo basin. In all, a total of 29 blocks in the Santos basin are
of 900 bcf.
currently under development.
Repsol-YPF intends to invest up to $1.1 billion in E&P activities in the Santa
Petrobras recently announced the commercial viability of the 700-100 million
Cruz province between 2007 and 2009.
bbl Papa-Terra heavy oilfield in the Campos basin. Development costs are
27
estimated to be around $1 billion, with production of about 200,000 bpd likely

to begin in 2011. The Cachalote-Baleia heavy -oil complex is slated to go into Ecopetrol plans to drill 15 exploratory wells in 2007 (up from 6 or 7 in 2006),
production in 2012 starting at 100,000 bpd. gradually increasing the number to 25 in 2011. The company hopes to total
output reach 500,000 bpd by 2011, up from about 320,000 bpd at present.
Shell is planning development of the 14 TCF Mexilhao gas field in the Santos
basin, Brazil’s largest-ever gas discovery using seven production wells. First Ecopetrol plans to increase output from its Castilla heavy -oil block from 60,000
production from three fields – Ostra, Abalone, and Argonauta – on Shell’s bpd at present to 90,000 bpd by 2009. About $700 million is to be spent on
heavy-oil discovery on deepwater block BC-10 is planned for 2010; initial the project..
production may reach 100,000 bpd.
COLOMBIA
RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
Chevron’s $2.4 billion Frade heavy oil development will make use of 12 Land Off Total Land Off Total Land Off Total Land Off Total
production wells and seven injectors. Production is scheduled to begin in early
2000 14 0 14 105 0 105 1.0 0.0 1.0 $371 $0 $371
2009 with peak production expected to be 85,000 bpd. 2001 15 0 15 107 0 107 0.9 0.0 0.9 $398 $0 $398
2002 11 0 11 72 0 72 0.5 0.0 0.5 $281 $0 $281
Devon Energy has proposed to develop the shallow water Polvo field by the 2003 11 0 11 95 0 95 0.7 0.0 0.7 $386 $0 $386
2004 9 0 9 92 0 92 0.7 0.0 0.7 $375 $0 $375
second half of 2007 using a fixed platform to produce 50,000 bpd. The field will 2005 15 0 15 194 0 194 1.4 0.0 1.4 $872 $0 $872
be produced using 18 development wells and 10 injection wells. 2006 Q1 19 1 20 61 1 61 0.4 0.0 0.4 $301 $0 $301
Q2 22 1 23 70 0 71 0.5 0.0 0.5 $348 $0 $348
Q3 24 0 24 76 0 76 0.6 0.0 0.6 $375 $0 $375
Q4 23 0 23 75 0 75 0.5 0.0 0.5 $369 $0 $369
Total 22 0 22 282 1 282 2.1 0.0 2.1 $1,393 $0 $1,393
2007 Q1 24 0 24 77 0 77 0.6 0.0 0.6 $418 $0 $418
Q2 26 0 26 83 0 83 0.6 0.0 0.6 $453 $0 $453
COLOMBIA Q3
Q4
26
28
0
0
26
28
83
90
0
0
83
90
0.6
0.7
0.0
0.0
0.6
0.7
$453
$487
$0
$0
$453
$487
Total 26 0 26 333 0 333 2.4 0.0 2.4 $1,811 $0 $1,811
2008 27 0 27 349 0 349 2.6 0.0 2.6 $1,996 $0 $1,996
According to the national hydrocarbons agency, ANH, foreign investment in 2009 29 0 29 367 0 367 2.7 0.0 2.7 $2,201 $0 $2,201
Colombia’s oil and gas sector is forecast to reach $1.5 billion in 2007, 2010 30 0 30 385 0 385 2.8 0.0 2.8 $2,426 $0 $2,426
2011 32 0 32 405 0 405 3.0 0.0 3.0 $2,675 $0 $2,675
unchanged from the total thought to have been invested in 2006. About $1.1 2012 33 0 33 425 0 425 3.1 0.0 3.1 $2,949 $0 $2,949
billion was spent in 2005. A total of 56 exploration wells are reported to have Sources: Baker Hughes, Spears and Associates
been drilled in Colombia in 2006. In all, ANH signed a total of 32 E&P
contracts and 12 technical evaluation contracts in 2006. Over the 2007-2010
timeframe the government hopes to sign 120 new upstream contracts. In
contrast, over the 2002-2006 period a total of 150 contracts were signed. The
four-year plan calls for drilling 160 exploratory wells, up from 125 wildcats that
were drilled during 2002-2006.
Ecopetrol plans to spend about $1.6 billion for exploration and production in
2007. It plans to participate in more than 550 development wells. A similar
budget is expected for 2008 under the terms of its initial public offering later
this year.
28
basin, where 1,500 wells are to be drilled. Other high-priority target areas
include the offshore Ku-Maloob-Zap oilfield and Light Marine Crude.
ECUADOR
Pemex has delayed for the third time the date to submit bids for multiple-
services contracts for the Euro, Monclova, and Nejo blocks in the Burgos
PetroEcuador has set a budget of $72 million for production and development
basin. Bidding for integrated services contracts for work in the oil-prone
spending to operate block 15. The government may invite other state-owned
onshore Chincotopec region has also been delayed. A review of onshore field
firms to bid on operating the block.
services contracts is believed to be underway.
ECUADOR
Land Off Total Land Off Total Land Off Total Land Off Total In December 2006 output from the giant offshore Cantarell oilfield averaged 1.4
2000 6 1 7 57 3 59 0.5 0.0 0.5 $231 $32 $263
million bpd, down 25% from December 2005. Exports were just over 1.5
2001 9 1 10 101 3 104 0.9 0.0 1.0 $436 $34 $470 million bpd. Recent studies project a further drop of 300,000-600,000 bpd from
2002 9 0 9 98 1 99 0.8 0.0 0.9 $444 $13 $457
2003 9 0 9 98 1 99 1.0 0.0 1.0 $468 $14 $482
Cantarell over the next two years.
2004 10 0 10 96 1 97 1.0 0.0 1.0 $457 $14 $471
2005 12 0 12 120 0 120 1.2 0.0 1.2 $627 $5 $631
MEXICO
2006 Q1 12 0 12 31 0 32 0.3 0.0 0.3 $180 $5 $185
Q2 11 0 11 29 0 29 0.3 0.0 0.3 $165 $0 $165
Q3 11 0 11 28 0 28 0.3 0.0 0.3 $160 $0 $160
Q4 12 0 12 30 0 30 0.3 0.0 0.3 $175 $0 $175
2000 38 6 44 253 29 282 1.9 0.3 2.2 $810 $473 $1,283
Total 11 0 11 118 0 118 1.2 0.0 1.2 $681 $5 $686
2001 48 6 54 433 28 461 3.2 0.3 3.5 $1,457 $479 $1,936
2007 Q1 11 0 11 29 0 29 0.3 0.0 0.3 $181 $6 $187
2002 54 12 65 407 60 466 3.0 0.7 3.6 $1,367 $1,018 $2,385
Q2 11 0 11 29 0 29 0.3 0.0 0.3 $181 $0 $181
2003 67 26 92 499 102 602 3.9 1.1 5.1 $1,679 $1,748 $3,427
Q3 10 0 10 26 0 26 0.3 0.0 0.3 $165 $0 $165
2004 76 34 110 570 122 692 5.0 1.3 6.3 $1,916 $2,080 $3,996
Q4 10 0 10 26 0 26 0.3 0.0 0.3 $165 $0 $165
2005 76 31 107 687 61 748 6.3 0.7 7.0 $2,540 $1,148 $3,688
Total 11 0 11 109 0 110 1.1 0.0 1.1 $693 $6 $698
2008 10 0 10 107 3 110 1.1 0.0 1.1 $713 $58 $771 2006 Q1 61 25 85 137 25 161 1.3 0.3 1.5 $556 $511 $1,067
2009 10 0 10 105 3 108 1.1 0.0 1.1 $733 $61 $794 Q2 61 24 85 137 24 161 1.3 0.3 1.5 $556 $497 $1,052
2010 10 0 10 103 3 106 1.1 0.0 1.1 $755 $64 $819 Q3 54 23 77 122 23 145 1.1 0.3 1.4 $494 $482 $977
2011 10 0 10 101 3 104 1.0 0.0 1.1 $776 $67 $844 Q4 58 26 84 131 26 157 1.2 0.3 1.5 $531 $538 $1,069
2012 9 0 10 99 3 102 1.0 0.0 1.0 $799 $71 $870 Total 58 25 83 525 98 623 4.8 1.1 5.9 $2,136 $2,029 $4,165
Sources: Baker Hughes, Spears and Associates 2007 Q1 57 26 83 128 26 154 1.2 0.3 1.5 $574 $592 $1,166
Q2 57 24 81 128 24 152 1.2 0.3 1.4 $574 $546 $1,120
Q3 60 24 84 135 24 159 1.2 0.3 1.5 $604 $546 $1,151
Q4 63 25 88 142 25 167 1.3 0.3 1.6 $634 $569 $1,204
Total 59 25 84 533 99 632 4.9 1.1 6.0 $2,386 $2,254 $4,640
2008 60 25 86 544 101 645 5.0 1.1 6.1 $2,555 $2,414 $4,970
2009 62 26 87 555 103 658 5.1 1.1 6.2 $2,737 $2,586 $5,323
2010 63 26 89 566 105 671 5.2 1.2 6.4 $2,931 $2,769 $5,700
MEXICO 2011 64 27 91 577 107 684 5.3 1.2 6.5 $3,139 $2,966 $6,105
2012 65 27 93 589 109 698 5.4 1.2 6.6 $3,362 $3,177 $6,539
Pemex plans to invest a total of $87 billion over the next decade in exploration
and production. In all, about $40 billion is to be spent on exploration, including Pemex plans to lease three offshore rigs starting in the second half of 2008 for
the drilling of about 1,200 exploratory wells including 150 deepwater wells. The a period of five years to drill about 30 wells to explore deepwater structures in
second priority is to spend about $25 billion to drill about 10,700 development the Gulf of Mexico. Each well is projected to cost about $100-$200 million.
wells in the Chincotopec region. About $5 billion is to be spent on the Burgos
29
PERU TRINIDAD AND TOBAGO
The government will hold a bidding round in 2007 for 18 blocks, of which 13 are BP will resume drilling in 2008. It now plans 10 wells in 10 years.
onshore.
EOG Resources has begun development of a gas find it made off the east
PetroPeru recently signed an E&P contract with Gold Oil Peru and Plectrum coast of Trinidad. Production is scheduled to begin by mid-2009.
Petroleum covering offshore block Z-34. In all, PetroPeru signed a total of 16
upstream contracts in 2006 and 15 in 2005. TRINIDAD & TOBAGO
PERU
RIGS WELLS FOOTAGE (MIL) SPENDING (MIL) 2000 0 3 4 80 41 121 0.1 0.4 0.5 $82 $312 $394
Land Off Total Land Off Total Land Off Total Land Off Total 2001 2 4 5 90 44 134 0.1 0.4 0.6 $97 $352 $448
2002 0 4 4 60 46 106 0.1 0.4 0.5 $68 $388 $455
2000 3 1 4 30 10 40 0.2 0.1 0.3 $65 $66 $131 2003 0 3 3 140 37 177 0.2 0.3 0.5 $166 $325 $491
2001 3 1 4 23 12 35 0.2 0.1 0.3 $53 $81 $133 2004 0 4 4 120 43 163 0.2 0.3 0.5 $142 $381 $523
2002 1 1 2 10 10 20 0.1 0.1 0.2 $24 $74 $97 2005 0 2 3 50 41 91 0.1 0.3 0.4 $65 $395 $461
2003 2 0 3 24 1 25 0.2 0.0 0.2 $57 $7 $65 2006 Q1 1 2 3 10 7 17 0.0 0.1 0.1 $14 $77 $91
2004 2 0 2 40 2 42 0.2 0.0 0.2 $95 $15 $110 Q2 1 4 6 10 18 28 0.0 0.1 0.2 $14 $195 $209
2005 3 0 4 75 2 77 0.4 0.0 0.4 $195 $13 $208 Q3 4 3 7 40 14 54 0.1 0.1 0.2 $57 $149 $207
2006 Q1 3 0 3 15 1 16 0.1 0.0 0.1 $43 $6 $49 Q4 2 4 6 30 17 47 0.0 0.1 0.2 $43 $181 $224
Q2 5 0 6 29 1 30 0.2 0.0 0.2 $84 $6 $90 Total 2 3 5 90 57 147 0.1 0.5 0.6 $129 $603 $732
Q3 4 0 4 22 1 23 0.1 0.0 0.1 $63 $6 $69 2007 Q1 3 4 7 30 17 47 0.0 0.1 0.2 $47 $199 $247
Q4 5 1 6 28 2 29 0.2 0.0 0.2 $79 $14 $93 Q2 3 4 7 30 17 47 0.0 0.1 0.2 $47 $199 $247
Total 4 0 5 94 4 98 0.5 0.0 0.6 $268 $32 $300 Q3 2 3 5 20 13 33 0.0 0.1 0.1 $32 $149 $181
2007 Q1 6 1 7 33 3 36 0.2 0.0 0.2 $104 $22 $126 Q4 2 4 6 20 17 37 0.0 0.1 0.2 $32 $199 $231
Q2 5 1 6 28 3 30 0.2 0.0 0.2 $87 $22 $109 Total 3 4 6 100 64 164 0.2 0.5 0.7 $158 $747 $905
Q3 5 0 5 28 0 28 0.2 0.0 0.2 $87 $0 $87 2008 3 4 7 100 67 167 0.2 0.5 0.7 $166 $824 $990
Q4 4 0 4 22 0 22 0.1 0.0 0.1 $69 $0 $69 2009 3 4 7 100 70 170 0.2 0.6 0.7 $174 $909 $1,083
Total 5 1 6 110 5 115 0.6 0.1 0.7 $347 $44 $391 2010 3 4 7 100 70 170 0.2 0.6 0.7 $183 $954 $1,137
2008 5 1 6 116 5 121 0.6 0.1 0.7 $383 $49 $431 2011 3 4 7 100 70 170 0.2 0.6 0.7 $192 $1,002 $1,194
2009 6 1 6 121 6 127 0.7 0.1 0.7 $422 $54 $475 2012 3 4 7 100 70 170 0.2 0.6 0.7 $202 $1,052 $1,253
2010 6 1 6 121 6 127 0.7 0.1 0.7 $443 $56 $499 Sources: Baker Hughes, Spears and Associates
2011 5 1 6 115 5 120 0.6 0.1 0.7 $442 $56 $498
2012 5 0 5 109 5 114 0.6 0.0 0.7 $441 $56 $497
VENEZUELA
Fresh doubts have surfaced about PdVSA’s ability to fund its capital spending
program this year in light of the government’s intention to have PdVSA provide
the $1.5 billion required to finance the nationalization of the telecom and power
industry. In addition the firm is committed to spend $1.0 billion to build three
30
thermal power plants this year. Plans to acquire majority stakes in four heavy - gas injection, and developing the Tacata, Mix Said, Bare-Arecuna, Pesao
oil crude production companies a l ter this year could cost about $20 billion. Oeste, and Marichal fields in the Orinoco heavy oil belt.
PdVSA’s own six-year capacity expansion plan is now expected to cost about
$130 billion with the addition of refinery and modernization programs that have
been promised in 12 foreign countries. In all, $10 billion that is thought to be
necessary to be spent in 2007 to get its domestic production back on track,
but further expansion of the government’s financial demands on PdVSA could CENTRAL AND SOUTH AMERICA - OTHERS
delay planned investments this year.
Bolivia
VENEZUELA
Land Off Total Land Off Total Land Off Total Land Off Total Plans by foreign operators concerning future investment under the new more
heavily-taxed contract terms have yet to be announced. The government has
2000 47 15 63 688 3 691 3.9 0.0 3.9 $1,556 $36 $1,592
2001 50 18 67 1,282 3 1,285 8.3 0.0 8.3 $3,043 $44 $3,087 said that operators will spend around $3.5 billion from 2007-2009, with about
2002 30 12 42 949 2 951 6.3 0.0 6.3 $2,253 $31 $2,284 $600 million invested in the Itau field and $900 million in the Margarita field.
2003 26 11 37 960 5 965 5.0 0.0 5.0 $2,280 $66 $2,346
2004 43 12 55 1,150 6 1,156 6.8 0.1 6.8 $2,730 $74 $2,804
2005 55 13 68 1,270 7 1,277 7.5 0.1 7.5 $3,317 $92 $3,409 Chile
2006 Q1 65 13 78 364 2 366 2.1 0.0 2.2 $1,046 $25 $1,072
Q2 67 16 83 385 2 387 2.3 0.0 2.3 $1,105 $30 $1,135
Q3 67 18 85 397 2 399 2.3 0.0 2.4 $1,140 $35 $1,175 The government’s plan to launch a tender for 11 blocks in the far-south
Q4 59 18 77 357 2 359 2.1 0.0 2.1 $1,025 $34 $1,059 Magallanes region has been delayed to the end of March 2007.
Total 64 16 81 1,502 8 1,510 8.8 0.1 8.9 $4,316 $124 $4,440
2007 Q1 55 18 73 339 2 342 2.0 0.0 2.0 $1,073 $38 $1,111
Q2 59 18 77 358 2 360 2.1 0.0 2.1 $1,132 $38 $1,169 CENTRAL AND SOUTH AMERICA - OTHERS
Q3 63 17 80 372 2 374 2.2 0.0 2.2 $1,176 $36 $1,211 RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
Q4 67 17 84 391 2 393 2.3 0.0 2.3 $1,235 $36 $1,270 Land Off Total Land Off Total Land Off Total Land Off Total
Total 61 18 79 1,460 9 1,469 8.6 0.1 8.7 $4,615 $147 $4,762
2008 70 20 90 1,679 10 1,689 9.9 0.1 10.0 $5,573 $177 $5,750 2000 11 1 12 105 5 110 0.7 0.0 0.8 $296 $55 $351
2009 74 21 95 1,763 11 1,774 10.4 0.1 10.5 $6,144 $195 $6,339 2001 7 1 7 102 3 105 0.6 0.0 0.6 $290 $36 $327
2002 4 0 5 135 1 136 0.8 0.0 0.8 $343 $17 $359
2010 77 22 100 1,851 11 1,862 10.9 0.1 11.0 $6,774 $215 $6,989
2003 4 0 4 160 3 163 0.6 0.0 0.6 $328 $39 $367
2011 80 23 104 1,925 12 1,937 11.3 0.1 11.4 $7,397 $235 $7,632
2004 5 0 5 176 0 176 0.5 0.0 0.5 $362 $0 $362
2012 84 24 108 2,002 12 2,014 11.8 0.1 11.9 $8,077 $257 $8,334
2005 4 0 4 172 2 174 0.4 0.0 0.4 $317 $24 $341
2006 Q1 5 0 5 44 0 44 0.1 0.0 0.1 $94 $0 $94
Q2 5 0 5 54 0 54 0.1 0.0 0.1 $110 $0 $110
Some of the PdVSA’a planned work includes exploratory drilling in the Barinas- Q3 5 0 5 54 0 54 0.1 0.0 0.1 $108 $0 $108
Q4 6 0 6 56 0 56 0.1 0.0 0.1 $126 $0 $126
Apure basin (along the Venezeula-Colombia border) and in eastern Total 5 0 5 208 0 208 0.5 0.0 0.5 $438 $0 $438
Venezeula’s Naricual formation, where 14 wells will be spudded before the end 2007 Q1 5 0 5 45 0 45 0.1 0.0 0.1 $119 $0 $119
Q2 5 0 5 44 0 44 0.1 0.0 0.1 $105 $0 $105
of 2007 targeting formations 20,000 feet deep. “Priority” projects include Q3 4 0 4 43 0 43 0.1 0.0 0.1 $96 $0 $96
development of heavy -oil fields such as Urdaneta, Ceuta-Tomoporo, and Barua- Q4 4 0 4 43 0 43 0.1 0.0 0.1 $96 $0 $96
Total 5 0 5 175 0 175 0.5 0.0 0.5 $416 $0 $416
Motatan around Lake Maracaibo. PdVSA has sanctioned plans to drill around 2008 5 0 5 175 2 177 0.5 0.0 0.5 $436 $31 $467
400 wells over the next five years to develop heavy oil fields in the San 2009 5 0 5 174 2 176 0.5 0.0 0.5 $456 $32 $489
Cristobal region of eastern Venezuela. In eastern Venezuela, PdVSA will 2010 5 0 5 174 2 176 0.5 0.0 0.5 $478 $34 $512
2011 5 0 5 174 2 176 0.5 0.0 0.5 $501 $36 $536
focus on expanding light oil production at the El Furrial field using water and 2012 5 0 5 174 2 176 0.5 0.0 0.5 $524 $37 $562
31
Onshore activity is projected to average 22 active land rigs accounting for 486
new wells and 2.6 million feet of hole. We project that spending will grow 7%
in 2007 to a total of $10.3 billion to drill and equip new wells in Europe.
EUROPE
EUROPE
Drilling activity in Europe - as measured by Baker Hughes - saw a total of 70 RIGS WELLS FOOTAGE (MIL) SPENDING (BIL)
active onshore and offshore rigs during January 2007, down 9% (seven rigs) 2000 30 47 77 521 556 1,077 2.6 5.5 8.1 $0.7 $6.3 $7.1
2001 31 58 89 574 707 1,281 3.0 7.4 10.3 $0.8 $8.4 $9.3
compared to the year-ago period. As measured by MI Swaco, European rig 2002 29 54 83 510 559 1,070 2.7 6.6 9.3 $0.8 $7.0 $7.8
count stood at 184 active units in January 2007, up 3% (six rigs) from January 2003 32 48 79 449 531 980 2.2 6.1 8.3 $0.7 $6.7 $7.4
2004 25 41 66 456 476 933 2.1 5.4 7.6 $0.7 $6.0 $6.7
2006. (MI Swaco routinely reports 130%-160% more rigs than Baker Hughes 2005 21 44 66 478 493 971 2.4 5.9 8.2 $0.8 $6.8 $7.6
in Europe, largely due to definitional differences). 2006 Q1 23 55 78 134 153 287 0.7 1.8 2.5 $0.3 $2.3 $2.6
Q2 20 58 78 117 157 274 0.6 1.9 2.5 $0.2 $2.4 $2.6
Q3 21 51 72 117 141 257 0.6 1.7 2.3 $0.2 $2.1 $2.4
Q4 24 42 66 127 121 247 0.7 1.4 2.1 $0.3 $1.8 $2.1
Total 22 51 73 494 572 1,066 2.6 6.8 9.4 $1.0 $8.6 $9.6
Europe Rig Count 2007 Q1 21 49 70 124 136 260 0.7 1.6 2.3 $0.3 $2.3 $2.6
Q2 21 49 70 122 136 258 0.7 1.6 2.3 $0.3 $2.3 $2.5
Q3 22 52 74 120 142 262 0.6 1.7 2.3 $0.3 $2.4 $2.6
Q4 22 50 72 120 138 258 0.6 1.6 2.3 $0.3 $2.3 $2.6
Total 22 50 72 486 553 1,038 2.6 6.6 9.1 $1.1 $9.2 $10.3
120 250 2008 22 51 73 491 564 1,055 2.6 6.7 9.3 $1.2 $9.9 $11.0
2009 22 52 74 497 575 1,072 2.6 6.8 9.5 $1.3 $10.6 $11.8
2010 22 52 74 497 576 1,073 2.6 6.9 9.5 $1.3 $11.1 $12.4
2011 22 51 73 493 565 1,058 2.6 6.7 9.3 $1.4 $11.4 $12.8
100 225 2012 22 50 72 488 556 1,044 2.6 6.6 9.2 $1.4 $11.8 $13.2
MI Swaco
80 200
BHI
In the UK, exploratory drilling activity is expected to rebound in 2007 following

60 175 the record-setting license round just completed and the fact that some drilling
rigs are moving back into the UK sector in the near term, helping to alleviate a
BHI
40 150 constraint on activity. Similarly, Norwegian authorities are expecting to see a
MI Swaco pick-up in exploratory drilling in 2007 following a successful tendering round.
20 125 Across the North Sea, development drilling is expected to hold steady and
.
remain tightly focused on marginal field development.

2000 2001 2002 2003 2004 2005 2006
The effect of the planned merger of Statoil and Norsk Hydro on field
development plans in the North Sea and elsewhere is not known at this time;
the combined entity will account for about 50% of all activity in the Norwegian
We now expect that drilling activity in Europe will be down 1% in 2007, sector and presumably have first claim on exploration and development
averaging 72 active rigs (as measured by Baker Hughes), 1,038 new wells and resources, making it a challenge for other operators to smoothly carry out their
9.1 million feet of hole. Offshore rig count is expected to fall 2% to an average planned projects.
of 50 active rigs, accounting for 553 new wells, and 6.6 million feet of hole.
32
Although seismic surveying activity always falls sharply at the end of the year,
the chart below illustrates that the overall trend in seismic activity over the past
2½ years has been on the rise. IHS Energy’s count of active seismic crews in
Europe in January 2007 was 22% ahead of the year-ago period.
Europe Seismic Crew Count

25
20
15
10
0
.
2003 2004 2005 2006 .

Source: IHS
33
DENMARK NETHERLANDS
Maersk’s Halfdan phase 3 project will include two platforms to be installed in NAM and ExxonMobil are evaluating a plan to redevelop the Schoonebeek
mid-2007. heavy oilfield. The current plan call for drilling 40 production wells and 20
steam injection wells. A decision will be made sometime in 2007.
ConocoPhillips’ Hejre discovery may see a phased development with first oil by
2009. Some five to ten wells may be drilled in the HTHP reservoir. Northern Petroleum will bring onstream the onshore Papekop, Ottoland, and
Brakel oilfields starting in late 2007 and finishing up in 2008. License transfer
Maersk’s Ella and Alma gas projects are due to start production in 2007, with delays have slowed development of the Grolloo and Geesburg gas fields.
development of the Freja gas field another possibility during this timeframe.
NETHERLANDS
DENMARK RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
RIGS WELLS FOOTAGE (MIL) SPENDING (MIL) Land Off Total Land Off Total Land Off Total Land Off Total
2000 1 3 4 8 18 27 0.1 0.2 0.3 $21 $312 $333
2000 0 3 3 0 28 28 0.0 0.4 0.4 $0 $312 $312 2001 1 5 6 9 30 39 0.1 0.3 0.4 $25 $553 $579
2001 0 4 4 0 44 44 0.0 0.4 0.4 $0 $528 $528 2002 2 3 5 18 23 41 0.2 0.3 0.5 $53 $445 $498
2002 0 4 4 1 34 36 0.0 0.6 0.6 $2 $439 $441 2003 1 4 5 13 27 40 0.1 0.3 0.4 $39 $507 $546
2003 0 4 4 0 34 34 0.0 0.5 0.5 $0 $430 $430 2004 1 4 4 5 22 27 0.0 0.2 0.2 $15 $419 $433
2004 0 4 4 0 32 32 0.0 0.5 0.5 $0 $413 $413 2005 1 3 4 9 21 30 0.1 0.2 0.3 $30 $443 $473
2005 0 2 2 0 14 14 0.0 0.2 0.2 $0 $191 $191 2006 Q1 2 4 5 4 6 11 0.0 0.1 0.1 $15 $145 $161
2006 Q1 0 3 3 0 7 7 0.0 0.1 0.1 $0 $102 $102 Q2 1 4 6 3 7 11 0.0 0.1 0.1 $12 $169 $181
Q2 0 4 4 0 9 9 0.0 0.1 0.1 $0 $133 $133 Q3 1 5 6 2 9 10 0.0 0.1 0.1 $6 $197 $203
Q3 0 3 3 0 5 5 0.0 0.1 0.1 $0 $83 $83 Q4 1 3 4 2 5 7 0.0 0.0 0.1 $6 $118 $124
Q4 0 2 2 0 3 3 0.0 0.1 0.1 $0 $52 $52 Total 1 4 5 11 27 38 0.1 0.2 0.3 $39 $629 $668
Total 0 3 3 0 24 24 0.0 0.4 0.4 $0 $370 $370 2007 Q1 1 4 5 3 7 9 0.0 0.1 0.1 $10 $173 $183
2007 Q1 0 4 4 0 8 8 0.0 0.1 0.1 $0 $136 $136 Q2 1 4 5 3 7 9 0.0 0.1 0.1 $10 $173 $183
Q2 0 4 4 0 8 8 0.0 0.1 0.1 $0 $136 $136 Q3 1 4 5 3 7 9 0.0 0.1 0.1 $10 $173 $183
Q3 0 4 4 0 8 8 0.0 0.1 0.1 $0 $136 $136 Q4 1 4 5 3 7 9 0.0 0.1 0.1 $10 $173 $183
Q4 0 3 3 0 6 6 0.0 0.1 0.1 $0 $102 $102 Total 1 4 5 10 27 37 0.1 0.2 0.3 $39 $692 $731
Total 0 4 4 0 30 30 0.0 0.5 0.5 $0 $509 $509 2008 1 4 5 10 28 38 0.1 0.2 0.3 $42 $741 $783
2008 0 4 4 0 31 31 0.0 0.5 0.5 $0 $545 $545 2009 1 4 5 10 28 39 0.1 0.3 0.3 $45 $794 $838
2009 0 4 4 0 31 31 0.0 0.5 0.5 $0 $584 $584 2010 1 4 5 10 28 39 0.1 0.3 0.3 $47 $833 $880
2010 0 4 4 0 32 32 0.0 0.5 0.5 $0 $625 $625 2011 1 4 5 10 28 38 0.1 0.2 0.3 $48 $857 $906
2011 0 4 4 0 32 32 0.0 0.5 0.5 $0 $669 $669 2012 1 4 5 10 27 37 0.1 0.2 0.3 $50 $882 $932
2012 0 4 4 0 33 33 0.0 0.5 0.5 $0 $717 $717 Sources: Baker Hughes, Spears and Associates
34
Shell plans to develop the Trym oilfield, with first production due in Q4 2007.
NORWAY ENI is studying field development options for its Goliat discovery in the Barents
Sea, where reserves are estimated to total 250 million barrels plus
considerable associated gas.
The Norwegian Petroleum directorate forecasts that up to 30 exploration wells
could be drilled in 2007, up from only 18 exploration wells drilled in 2006 and
Talisman has submitted plans for a $630 million re-development plan for its
nine in 2005.
Yme oil field; plans call for 12 new production and injection wells. Field start-
up is expected in early 2009 at 40,000 bpd. Talisman will develop its marginal
The government handed out 48 licenses covering parts of all of 85 blocks in
Rev gas-condensate field with production to start in 2007. A second
January 2007 as part of its 2006 Awards in Predefined Area (APA) round. A
development phase could be completed in 2008.
total of nine firm commitment wells are planned from these awards. The 2007
APA round, covering 13 new blocks, will be held in September 2007. However,
the 20th licensing round, covering frontier areas, which had been set for next NORWAY
year, has now been postponed to 2009. RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
The planned merger of Statoil and Norsk Hydro is set to be completed by 2000 0 22 22 0 201 201 0.0 1.9 1.9 $0 $2,384 $2,384
October, 2007. The combined firm would operate more than 80% of total 2001 0 23 23 0 212 212 0.0 2.7 2.7 $0 $2,634 $2,634
2002 0 19 19 0 177 177 0.0 2.6 2.6 $0 $2,317 $2,317
Norwegian production and more than 85% of total reserves. The impact on 2003 0 19 19 0 176 176 0.0 2.5 2.5 $0 $2,305 $2,305
each firm’s ongoing field development has not be determined at this point, 2004 0 17 17 0 150 150 0.0 2.1 2.1 $0 $1,962 $1,962
although some expect the immediate impact to be minimal. In the meantime, 2005 0 17 17 0 173 173 0.0 2.4 2.4 $0 $2,492 $2,492
2006 Q1 0 19 19 0 47 47 0.0 0.6 0.6 $0 $740 $740
Statoil plans a four-slot template for its Alve field where first production is Q2 0 20 20 0 50 50 0.0 0.7 0.7 $0 $791 $791
targeted for late 2008. Statoil will drill nine production wells and three injection Q3 0 16 16 0 39 39 0.0 0.5 0.5 $0 $621 $621
wells on its Tyrihans subsea project, with field start-up expected in 2009. Q4 0 13 13 0 33 33 0.0 0.4 0.4 $0 $514 $514
Total 0 17 17 0 169 169 0.0 2.3 2.3 $0 $2,666 $2,666
Statoil is moving ahead with development of the Gjoa field, calling for 8-10 2007 Q1 0 16 16 0 40 40 0.0 0.5 0.5 $0 $696 $696
horizontal oil wells and four gas wells, with possible production start-up in Q2 0 17 17 0 43 43 0.0 0.6 0.6 $0 $740 $740
2010. For its part Norsk Hydro is planning to develop its CBB complex Q3 0 18 18 0 45 45 0.0 0.6 0.6 $0 $783 $783
Q4 0 17 17 0 43 43 0.0 0.6 0.6 $0 $740 $740
(Camilla, Belinda, and Fram B fields) as subsea tiebacks to the Gjoa platform Total 0 17 17 0 170 170 0.0 2.3 2.3 $0 $2,959 $2,959
with production to begin by Q4 2010. Six subsea wells are thought likely. 2008 0 17 17 0 173 173 0.0 2.4 2.4 $0 $3,169 $3,169
Norsk Hydro is considering a plan for development of the Vilje oilfield, with 2009 0 18 18 0 177 177 0.0 2.4 2.4 $0 $3,394 $3,394
2010 0 18 18 0 177 177 0.0 2.4 2.4 $0 $3,564 $3,564
production to start in 2007. Norsk Hydro’s Ormen Lange field now looks to
2011 0 17 17 0 173 173 0.0 2.4 2.4 $0 $3,667 $3,667
start-up in 2007; eight subsea development wells are planned for the first 2012 0 17 17 0 170 170 0.0 2.3 2.3 $0 $3,773 $3,773
phase, with 24 production wells planned in total. Norsk Hydro will use 11 Sources: Baker Hughes, Spears and Associates
multi-lateral wells to increase production at the Grane field.
BP’s Valhall re-development project is now set to come onstream in 2010 at a

cost of $2.1 billion. First production from BP’s Skarv oil and gas field is also
set to come onstream in late 2009.
35
Norwegian independent Pertra is planning to re-develop the 50 million bbl Froy UNITED KINGDOM
field, with output starting in 2011 at 30,000 bpd from five producing wells, two RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
water injection wells and two water production wells.
2000 1 18 18 25 274 299 0.3 2.8 3.0 $35 $2,898 $2,932
2001 0 24 24 7 384 391 0.0 3.7 3.7 $10 $4,248 $4,258
2002 1 26 26 30 295 325 0.3 2.9 3.2 $46 $3,427 $3,472
2003 0 19 20 20 271 290 0.1 2.6 2.7 $30 $3,143 $3,172
2004 0 15 16 9 247 256 0.0 2.5 2.5 $14 $2,867 $2,881
UNITED KINGDOM 2005 1 20 21 75 260 335 0.5 2.9 3.3 $126 $3,322 $3,448
2006 Q1 2 27 29 26 89 114 0.2 1.0 1.1 $47 $1,247 $1,294
Q2 1 26 27 11 85 96 0.1 0.9 1.0 $19 $1,201 $1,221
A record-setting total of 150 licenses covering 246 blocks were awarded in late Q3 1 25 26 15 80 95 0.1 0.9 1.0 $28 $1,128 $1,156
Q4 1 23 24 15 76 91 0.1 0.8 0.9 $28 $1,064 $1,092
January 2007 following the 24th licensing round that was held in 2006. In all Total 1 25 27 66 330 396 0.4 3.6 4.0 $122 $4,641 $4,763
these firms committed to drill 17 exploration and appraisal wells. Experts at 2007 Q1 1 24 25 15 78 93 0.1 0.9 0.9 $30 $1,206 $1,236
Hannon Westwood Associates estimate that about 200 E&A wells have been Q2 1 23 24 15 75 90 0.1 0.8 0.9 $30 $1,156 $1,186
Q3 1 24 25 15 78 93 0.1 0.9 0.9 $30 $1,206 $1,236
committed to be drilled over the next three years – and point out that this is a
Q4 1 24 25 15 78 93 0.1 0.9 0.9 $30 $1,206 $1,236
level of E&A activity not seen for about 20 years. Total 1 24 25 60 309 369 0.4 3.4 3.8 $122 $4,774 $4,895
2008 1 24 25 61 315 376 0.4 3.5 3.8 $130 $5,113 $5,243
2009 1 25 26 62 321 384 0.4 3.5 3.9 $139 $5,476 $5,615
UKOOA estimates that UK operating costs now average $9-$10 per boe,
2010 1 25 26 62 321 384 0.4 3.5 3.9 $146 $5,749 $5,896
compared to $5-$6 per boe three years ago. There were 69 exploration and 2011 1 24 25 61 315 376 0.4 3.5 3.8 $151 $5,916 $6,067
appraisal wells drilled in 2006 as opposed to 78 in 2005. However, a survey of 2012 1 24 25 60 309 368 0.4 3.4 3.8 $155 $6,088 $6,243
operators found that some 80 exploration and appraisal wells are forecast to be Sources: Baker Hughes, Spears and Associates
drilled in 2007.
Antrim will begin a three well development program on its Causeway field in
Talisman is currently working on the development of the Tweedsmuir field, mid-2007.
which it expects to bring onstream in early 2007. It is also evaluating options
for re-developing the Yme oilfield. Nautical Petroleum will develop its Kraken and Mermaid heavy oil structures.
BG will be the operator for the Jackdaw discovery, which may be onstream by Ithaca Energy expects to put together a development plan following its
2012. discovery of the Athena oilfield; first oil may be produced in 2008.
ConocoPhillips intends to fast-track development of its Jasmine gas Gaz de France may bring its Cygnus gas discovery in the UK Southern basin
condensate field, with field start up targeting 2009 or 2010. The firm is onstream as early as 2008.
targeting a 2007 start-up of its BritSats project.
BP’s Harding Area Gas Project is now scheduled to come onstream in 2010;
Venture Production is planning on about five development wells for its Acorn the platform will be geared to handle 400 mmcfd. BP’s phase 2 development of
and Beechnut discoveries, with drilling to start in 2009. its Clair heavy oil project has been fast-tracked, with production start-up now
targeting 2010.
36
As of Q1 2007 Apache was proceeding with exploration on its 100 million EUROPE - OTHERS
barrel Howgate prospect. RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
Nexen’s Buzzard oilfield came onstream in early 2007. To-date a total of nine 2000 29 2 31 488 35 523 2.2 0.3 2.6 $671 $419 $1,089
production and five injection wells have been drilled; an additional 18 producers 2001 30 2 32 558 38 596 2.8 0.3 3.1 $798 $476 $1,274
2002 26 2 29 461 30 491 2.2 0.3 2.5 $671 $384 $1,055
and six injection wells are to be drilled. Nexen’s Ettrick field is to start
2003 30 2 32 416 24 440 2.0 0.2 2.2 $667 $313 $979
production in late 2007 using three development and two injection wells. The 2004 24 2 26 442 25 467 2.0 0.2 2.3 $655 $319 $974
company is evaluating development options for its recent Golden Eagle 2005 19 2 21 393 25 418 1.9 0.2 2.1 $681 $331 $1,012
discovery located near Ettrick; it could be onstream by 2009. 2006 Q1 20 2 22 104 5 109 0.5 0.0 0.6 $209 $60 $269
Q2 18 3 21 103 6 109 0.5 0.1 0.6 $208 $87 $295
Q3 19 3 22 100 7 107 0.5 0.1 0.6 $202 $120 $322
ATP will develop the Cheviot oilfield using 15 to 20 wells and a gravity based Q4 22 1 23 110 4 114 0.6 0.0 0.6 $235 $56 $291
structure. Start-up is targeting late 2008. Total 20 2 22 417 22 439 2.1 0.2 2.3 $853 $324 $1,177
2007 Q1 19 1 20 107 4 110 0.6 0.0 0.6 $250 $56 $306
Q2 19 1 20 104 4 108 0.5 0.0 0.6 $238 $61 $299
Q3 20 2 22 103 5 107 0.5 0.0 0.5 $229 $76 $306
Q4 20 2 22 103 5 107 0.5 0.0 0.5 $229 $76 $305
Total 20 2 21 416 17 432 2.1 0.2 2.3 $946 $270 $1,216
2008 20 2 21 420 17 437 2.1 0.2 2.3 $1,008 $292 $1,300
EUROPE - OTHERS 2009 20 2 22 424 17 441 2.1 0.2 2.3 $1,074 $311 $1,385
2010 20 2 22 424 17 442 2.1 0.2 2.3 $1,129 $327 $1,456
2011 20 2 21 421 17 438 2.1 0.2 2.3 $1,171 $337 $1,508
Bulgaria 2012 20 2 21 418 17 435 2.1 0.2 2.3 $1,215 $348 $1,563
Melrose Resources will begin drilling the first of what may ultimately be five
exploration wells in the Bulgaria sector of the Black Sea in Q2 2007.
Hungary
Falcon Oil and Gas is developing the Mako Trough gas field.
37
an average of 85 active land rigs accounting for 1,064 new wells and 7.7 million
feet of hole. Offshore rig count in Africa is expected to increase 13% to an
average of 26 active rigs, 330 new wells, and 2.9 million feet of hole. We
AFRICA project that spending will grow 23% in 2007 to a total of $10.8 billion to drill and
equip new wells.
Drilling activity in Africa as measured by Baker Hughes saw a total of 113
AFRICA
active rigs during January 2007, up 43% (34 rigs) compared to the year-ago RIGS WELLS FOOTAGE (MIL) SPENDING (BIL)
period. As measured by MI Swaco, Africa rig count stood at 300 active units 2000 38 26 64 457 246 702 3.8 2.2 6.0 $1.1 $3.6 $4.7
in January 2007, up 23% (56 rigs) from January 2006. (MI Swaco routinely 2001 47 31 78 507 263 771 4.3 2.4 6.7 $1.3 $4.0 $5.4
2002 55 29 85 692 295 986 5.6 2.7 8.3 $2.0 $4.7 $6.7
reports 160%-200% more rigs than Baker Hughes in Africa, largely due to 2003 61 26 87 744 316 1,060 5.8 2.8 8.6 $2.2 $5.1 $7.3
definitional differences and the fact that Baker Hughes no longer reports rig 2004 67 24 91 755 292 1,047 5.4 2.6 8.0 $2.3 $4.5 $6.9
2005 76 20 96 795 278 1,074 5.7 2.5 8.2 $2.8 $4.7 $7.5
activity in the Sudan). 2006 Q1 64 20 84 219 61 279 1.6 0.6 2.1 $0.8 $1.2 $2.0
Q2 63 23 86 215 68 283 1.6 0.6 2.2 $0.8 $1.3 $2.1
Q3 76 24 100 238 74 312 1.7 0.6 2.4 $0.9 $1.4 $2.3
Q4 81 26 108 257 83 341 1.9 0.7 2.6 $1.0 $1.5 $2.5
Total 71 23 94 929 286 1,215 6.7 2.5 9.3 $3.5 $5.3 $8.8
Africa Rig Count 2007 Q1 87 26 114 277 90 367 2.0 0.7 2.7 $1.1 $1.7 $2.8
Q2 85 27 112 265 86 351 1.9 0.7 2.7 $1.1 $1.7 $2.8
Q3 84 25 109 259 79 338 1.9 0.7 2.6 $1.0 $1.6 $2.7
Q4 85 24 109 263 74 338 1.9 0.7 2.6 $1.1 $1.5 $2.6
120 300 Total 85 26 111 1,064 330 1,394 7.7 2.9 10.6 $4.3 $6.6 $10.8
2008 88 26 115 1,117 311 1,427 8.1 2.8 10.9 $4.8 $6.6 $11.4
2009 91 27 119 1,151 320 1,472 8.3 2.9 11.2 $5.2 $7.1 $12.3
2010 94 28 121 1,174 325 1,499 8.5 2.9 11.4 $5.5 $7.6 $13.1
2011 96 28 124 1,197 328 1,525 8.6 3.0 11.6 $5.9 $8.1 $14.0
100 250 2012 98 28 127 1,221 331 1,552 8.8 3.0 11.8 $6.3 $8.5 $14.8
MI Swaco
Increased drilling in North Africa is expected to drive the overall regional
BHI
80 200 increase in activity over the coming year. In Algeria, Sonatrach is increasing
its E&P activity. Libya will see a number of operators start exploration work
BHI over the next 12-24 months. In Egypt onshore gas development activity is on
60 150 the rise while offshore deepwater drilling is holding steady.
MI Swaco
Offshore drilling is expected to hold steady in West Africa in Nigeria and
40 100 Angola as major operators remain on course with exploration and development
programs. Elsewhere in Africa, numerous small-scale exploration and
.
2000 2001 2002 2003 2004 2005 2006 development projects are taking place in Gabon, Equatorial Guinea,
Mozambique, Mauritania, and South Africa.
We expect that drilling activity in Africa will increase 18% in 2007 to an

average of 111 active rigs(as measured by Baker Hughes), accounting for
1,394 wells and 10.6 million feet of hole. Onshore activity is projected to see
38
IHS Energy’s count of active seismic crews in Africa in January 2007 was up
41% compared to the year-ago period. Seismic surveying is up sharply in
Libya (which accounts for about 35% of total regional activity) as several
operators are currently working on new exploration licenses.
Africa Seismic Crew Count

50
45
40
35
30
25
20
15
.
2003 2004 2005 2006 .

Source: IHS
39
ALGERIA ANGOLA
First Calgary has won approval for its proposed $1.3 billion development of its The government’s “queue system” for approvi ng new field development has
MLE gasfield on block 405b. First production is expected in late 2009. meant a slower but more orderly process.
Rosneft will develop its block 245 South prospect in the Illizi basin. It is Chevron is targeting first oil from its Negage field in block 14 in 2010 or beyond.
estimated that development cost will reach $1.3 billion. The nearby heavy -oil Gabela field is also expected to see start-up in the same
timeframe. A third discovery in block 14, Lucapa, is being studied from
ALGERIA development.
Land Off Total Land Off Total Land Off Total Land Off Total ANGOLA
2000 15 0 15 139 0 139 1.3 0.0 1.3 $380 $0 $380 Land Off Total Land Off Total Land Off Total Land Off Total
2001 20 0 20 149 0 149 1.7 0.0 1.7 $427 $0 $427
2002 19 0 20 175 0 175 1.9 0.0 1.9 $527 $0 $527 2000 0 6 6 0 79 79 0.0 0.8 0.8 $0 $1,300 $1,300
2003 20 0 20 190 0 190 1.9 0.0 1.9 $573 $0 $573 2001 0 5 5 0 76 76 0.0 0.7 0.7 $0 $1,290 $1,290
2004 19 0 19 77 0 78 0.7 0.0 0.7 $234 $0 $234 2002 0 5 5 0 84 84 0.0 0.8 0.8 $0 $1,512 $1,512
2005 20 1 21 51 2 53 0.5 0.0 0.5 $169 $22 $191
2003 0 4 4 2 61 63 0.0 0.6 0.6 $23 $1,095 $1,118
2006 Q1 21 0 21 21 0 21 0.2 0.0 0.2 $78 $0 $78 2004 0 3 3 6 42 48 0.0 0.4 0.4 $0 $759 $759
Q2 21 0 21 21 0 21 0.2 0.0 0.2 $78 $0 $78
2005 0 3 3 1 41 42 0.0 0.4 0.4 $0 $813 $813
Q3 28 0 28 28 0 28 0.2 0.0 0.2 $101 $0 $101 2006 Q1 0 4 4 0 15 15 0.0 0.1 0.1 $0 $321 $321
Q4 27 0 27 27 0 27 0.2 0.0 0.2 $99 $0 $99 Q2 0 4 4 0 16 16 0.0 0.2 0.2 $0 $347 $347
Total 24 0 24 97 0 97 0.9 0.0 0.9 $355 $0 $355
Q3 0 4 4 0 15 15 0.0 0.1 0.1 $0 $321 $321
2007 Q1 25 0 25 25 0 25 0.2 0.0 0.2 $100 $0 $100 Q4 0 4 4 0 16 16 0.0 0.2 0.2 $0 $347 $347
Q2 25 0 25 25 0 25 0.2 0.0 0.2 $100 $0 $100
Total 0 4 4 0 62 62 0.0 0.6 0.6 $0 $1,335 $1,335
Q3 27 0 27 27 0 27 0.2 0.0 0.2 $108 $0 $108 2007 Q1 3 3 6 3 12 15 0.0 0.1 0.1 $0 $286 $286
Q4 27 0 27 27 0 27 0.2 0.0 0.2 $108 $0 $108
Q2 2 4 6 2 16 18 0.0 0.2 0.2 $0 $382 $382
Total 26 0 26 104 0 104 0.9 0.0 0.9 $418 $0 $418 Q3 2 4 6 2 16 18 0.0 0.2 0.2 $0 $382 $382
2008 27 0 27 106 0 106 1.0 0.0 1.0 $447 $0 $447
Q4 1 4 5 1 16 17 0.0 0.2 0.2 $0 $382 $382
2009 27 0 27 108 0 108 1.0 0.0 1.0 $479 $0 $479
Total 2 4 6 8 60 68 0.0 0.6 0.6 $0 $1,431 $1,431
2010 28 0 28 110 0 110 1.0 0.0 1.0 $513 $0 $513 2008 2 4 6 8 57 66 0.0 0.5 0.5 $0 $1,437 $1,437
2011 28 0 28 113 0 113 1.0 0.0 1.0 $550 $0 $550
2009 2 4 6 8 59 67 0.0 0.6 0.6 $0 $1,539 $1,539
2012 29 0 29 115 0 115 1.0 0.0 1.0 $589 $0 $589 2010 2 4 6 8 59 67 0.0 0.6 0.6 $0 $1,615 $1,615
2011 2 4 6 8 59 67 0.0 0.6 0.6 $0 $1,696 $1,696
2012 2 4 6 8 59 67 0.0 0.6 0.6 $0 $1,781 $1,781
PetroVietnam and PTTEP have a $3 billion plan to develop blocks 433a and
416b, with commercial production to begin in 2009.
On block 15, ExxonMobil is developing the Mondo oilfield, with startup in 2007
Anadarko will develop its four oil discoveries on block 208 with about 100 new producing 120,000 bpd. The Saxi/Batuque field is expected to be onstream in
wells. The block is to produce about 100,000 bpd as of 2008. 2007 or 2008 using a larger subsea production system. The company could
40
also develop up to five other discoveries – Mavacola, Bavuca, Kakocha,

Mbulumbumba, and Vicango - as subsea tie-backs to the Kozomba A and B
fields. Appraisal drilling is planned for the Clochas and Tchihumba discoveries. EGYPT
BP’s Greater Plutonio development in block 18 off Angola is expected to
involve up to 45 subsea wells. BP’s ultra-deepwater block 31 Northeast 2000 12 6 18 149 53 202 1.3 0.5 1.8 $339 $598 $937
discoveries – Marte, Plutao, Saturno, Venues – could see 37 development 2001 14 8 22 127 64 191 1.1 0.7 1.7 $303 $758 $1,061
2002 17 6 23 171 45 216 1.3 0.5 1.8 $429 $565 $994
wells drilled targeting initial production of 180,000 bpd by late 2009. A third 2003 19 8 26 206 61 266 1.6 0.6 2.2 $516 $754 $1,270
development hub, in the southeastern part of block 31 involving the Ceres, 2004 19 9 28 223 75 298 1.8 0.8 2.5 $560 $928 $1,488
Hebe Palas, Juno, and Astrea finds, is likely some time after 2010. Another 2005 22 7 29 256 62 318 2.0 0.6 2.7 $706 $855 $1,561
development, this time in the western part of block 18 involving the Cesio, 2006 Q1 27 6 32 67 11 78 0.5 0.1 0.6 $203 $172 $374
Q2 26 9 34 64 17 82 0.5 0.2 0.7 $195 $262 $457
Chumbo, and Platina discoveries, is under consideration. Q3 31 7 38 77 15 91 0.6 0.1 0.8 $233 $220 $453
Q4 32 8 39 79 15 95 0.6 0.2 0.8 $241 $232 $473
Total is now targeting first oil from its 230,000 bpd Pazflor project involving four Total 29 7 36 287 59 346 2.3 0.6 2.9 $872 $885 $1,757
2006 Q1 35 8 43 88 16 104 0.7 0.2 0.9 $292 $265 $557
fields - Acacia, Perpetue, Hortensia, and Zinia - on block 17 by 2011. It is also
Q2 36 8 44 90 16 106 0.7 0.2 0.9 $301 $265 $566
studying options for developing the CLOV complex – comprised of the Cravo, Q3 36 9 45 90 18 108 0.7 0.2 0.9 $301 $298 $599
Lirio, Orquidea, and Violeta fields. Also, tentative plans call for Total’s first Q4 37 9 46 93 18 111 0.7 0.2 0.9 $309 $298 $607
development on ultra-deepwater block 32 – the so-called GCG project - to start Total 36 9 45 360 68 428 2.8 0.7 3.5 $1,203 $1,126 $2,329
2008 37 9 46 369 70 439 2.9 0.7 3.6 $1,295 $1,212 $2,506
production in the 2010 to 2012 timeframe. A second development on block 32 2009 38 9 47 378 71 450 3.0 0.7 3.7 $1,393 $1,304 $2,698
now looks to be in the works with the recent Manjericao and Caril discoveries. 2010 39 9 48 388 73 461 3.1 0.8 3.8 $1,500 $1,404 $2,903
2011 40 9 49 397 75 472 3.1 0.8 3.9 $1,614 $1,511 $3,125
2012 41 10 50 407 77 484 3.2 0.8 4.0 $1,737 $1,626 $3,363
EGYPT Melrose Resources plans to drill about 23 exploratory and development wells in
2007 as part of a plan to lift oil production to 22,500 bpd by the end of the year.
Burullus Gas is currently working on phase four development of its WDDM Most of the drilling will be at its El Mansoura concession in the Nile Delta.
(West Delta Deep Marine) concession. The project involves eight subsea wells
on the Scarab, Sinbad, and Serpent fields. Phase four should be onstream in Amerada Hess plans to develop its deepwater fields on the West
2009. In all, WDDM field development could ultimately hold a total of 60 Mediterranean concession; work is to involve nine development wells in the
subsea wells. initial phase (five of which have already been drilled) targeting production start-
up in the second half of 2009.
Apache reported a successful test of a wildcat located north of its Qasr gas
field in the Western Desert. Its subsidiary, Khalda Petroleum, is building a
another train at its Salam natural gas processing plant to expand output from
the Khalda field, where it has already completed 34 producing wells.
BG is currently involved in phase three development of its Rosetta concession
offshore Egypt.
41
Amerada Hess plans to drill exploratory wells in 2007 and 2008 on block 54 in
LIBYA Libya’s deep Mediterranean waters.
Oxy plans to drill 27 exploration wells in the Sirte, Murzuq, and Cyrenaica
The oil ministry hopes that exploration drilling will reach 50 wells per year.
region between Q4 2006 and the end of 2008.
NOC finalized three exploration deals with Wintershall, Inpex, and
Wintershall plans to spend $400 million and exploration and field development
PetroCanada in early 2007.
work in Libya over the 2005-2007 timeframe.
ExxonMobil was awarded four blocks in offshore contract area #20 in January
2007. The company is already in the early stages of an exploration program in
offshore contract area 44.
LIBYA NIGERIA
Nigeria’s upcoming general election may delay a number of Nigerian oil and
2000 7 0 7 109 0 109 0.8 0.0 0.8 $271 $0 $271 gas field development projects now in the planning stage.
2001 5 0 5 109 0 109 0.7 0.0 0.7 $286 $0 $286
2002 9 1 10 135 8 143 0.9 0.1 0.9 $374 $179 $553
2003 9 1 10 111 14 126 0.7 0.1 0.9 $308 $311 $619 Chevron is planning to develop its $2.4 billion deepwater Nsiko discovery in
2004 9 1 10 132 8 140 0.8 0.1 0.9 $366 $179 $545 block 249, with first oil due by 2012. The Sasol-Chevron Escravos GTL project
2005 8 1 9 114 3 118 0.7 0.0 0.8 $347 $84 $431
2006 Q1 9 0 9 32 0 32 0.2 0.0 0.2 $105 $0 $105
is being developed, with start-up projected for 2009.
Q2 9 0 9 32 0 32 0.2 0.0 0.2 $105 $0 $105
Q3 10 1 10 34 1 35 0.2 0.0 0.2 $114 $37 $151 ExxonMobil’s deepwater Bosi field development, in block 209, is expected to
Q4 11 1 12 39 1 40 0.2 0.0 0.3 $129 $37 $166
require about 25 subsea wells; however, problems in securing subsea risers
Total 10 0 10 135 3 138 0.9 0.0 0.9 $453 $75 $528
2007 Q1 11 1 12 39 2 41 0.2 0.0 0.3 $142 $59 $200 are believed to push initiation of the project to beyond 2007. Output from its
Q2 12 1 13 42 2 44 0.3 0.0 0.3 $155 $59 $213 Abang, Oyot, and Itut fields is due by 2008 using at least three and possibly
Q3 12 0 12 42 0 42 0.3 0.0 0.3 $155 $0 $155 as many as six wellhead platforms.
Q4 13 0 13 46 0 46 0.3 0.0 0.3 $167 $0 $167
Total 12 1 13 168 4 172 1.1 0.0 1.1 $618 $117 $736
2008 13 1 14 185 4 189 1.2 0.0 1.2 $714 $136 $850 Total is evaluating development options for its Erina discovery on OML-130 that
2009 15 1 15 203 5 208 1.3 0.0 1.3 $825 $157 $982 it shares with the Akpo find. Total’s deepwater Akpo project is expected to
2010 15 1 16 213 5 219 1.4 0.1 1.4 $909 $173 $1,082
use a 44-well subsea production system that is to be in production by late
2011 16 1 17 224 5 229 1.4 0.1 1.5 $1,003 $190 $1,193
2012 17 1 18 235 6 241 1.5 0.1 1.6 $1,105 $210 $1,315 2008. Elsewhere, Total will develop the 500 million barrel Usan/Ukat field on
Sources: Baker Hughes, Spears and Associates block OPL-222 using 35 subsea wells (20 producers and 15 injectors), with
RWE-DEA will drill at least 10 wells on its six exploration blocks in Libya first oil now expected on the 160,000 bpd project in 2011. Phase 2
between 2006 and 2008. development of Total’s shallow-water Ofon project is expected to be completed
by Q1 2009. A total of 16 producing wells and 17 injection wells are expected
Woodside plans to drill 13 onshore and four offshore exploration wells between to be drilled from three wellhead platforms. Total is also planning to drill eight
mid 2006 and the end of 2008. wells in the Ima field on shallow-water blocks 112 and 117. Total will employ
42
one or two land rigs for work onshore at its OML 58 block during 2008 and
2009.
SUDAN
NIGERIA
RIGS WELLS FOOTAGE (MIL) SPENDING (MIL) Petronas Carigali and Sudapet plan to spend $130 million to drill three wildcats
Land Off Total Land Off Total Land Off Total Land Off Total in 2007 on block 5B, with additional exploration drilling to take place in 2008
2000 1 7 8 23 66 89 0.2 0.6 0.8 $88 $1,110 $1,198
and 2009.
2001 2 9 12 36 73 109 0.3 0.6 1.0 $144 $1,296 $1,440
2002 3 9 12 44 72 116 0.4 0.6 1.0 $184 $1,335 $1,519 SUDAN
2003 2 8 10 28 77 104 0.2 0.7 0.9 $122 $1,489 $1,612 RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
2004 1 7 8 14 72 85 0.1 0.7 0.8 $59 $1,397 $1,456
2005 2 7 9 26 67 94 0.2 0.6 0.9 $128 $1,443 $1,571
2006 Q1 2 8 10 8 18 26 0.1 0.2 0.2 $43 $417 $460
2000 NA NA NA 23 0 23 0.2 0.0 0.2 $109 $0 $109
Q2 1 7 9 5 17 22 0.0 0.2 0.2 $28 $396 $423 2001 4 0 4 48 0 48 0.3 0.0 0.3 $213 $0 $213
Q3 1 9 10 5 21 26 0.0 0.2 0.2 $28 $488 $515 2002 4 0 4 70 0 70 0.5 0.0 0.5 $325 $0 $325
Q4 2 8 10 8 18 26 0.1 0.2 0.2 $43 $417 $460
2003 7 0 7 117 0 117 0.7 0.0 0.7 $457 $0 $457
Total 2 8 10 26 73 99 0.2 0.7 0.9 $141 $1,718 $1,858 2004 14 0 14 215 0 215 1.4 0.0 1.4 $910 $0 $910
2007 Q1 3 6 9 12 14 26 0.1 0.1 0.2 $70 $358 $428
2005 18 0 18 255 0 255 1.7 0.0 1.7 $1,188 $0 $1,188
Q2 2 8 10 7 18 25 0.1 0.2 0.2 $40 $477 $517 2006 Q1 NA NA NA 65 0 65 0.4 0.0 0.4 $327 $0 $327
Q3 1 8 9 4 18 22 0.0 0.2 0.2 $23 $477 $500
Q2 NA NA NA 65 0 65 0.4 0.0 0.4 $327 $0 $327
Q4 2 8 10 7 18 25 0.1 0.2 0.2 $40 $477 $517
Q3 NA NA NA 65 0 65 0.4 0.0 0.4 $327 $0 $327
Total 2 8 9 30 69 99 0.3 0.6 0.9 $174 $1,788 $1,962 Q4 NA NA NA 65 0 65 0.4 0.0 0.4 $327 $0 $327
2008 2 8 10 31 72 104 0.3 0.7 0.9 $191 $1,971 $2,163
Total NA NA NA 260 0 260 1.7 0.0 1.7 $1,309 $0 $1,309
2009 2 8 10 33 76 109 0.3 0.7 1.0 $211 $2,173 $2,384 2007 Q1 NA NA NA 65 0 65 0.4 0.0 0.4 $360 $0 $360
2010 2 8 11 33 78 111 0.3 0.7 1.0 $227 $2,339 $2,566
Q2 NA NA NA 65 0 65 0.4 0.0 0.4 $360 $0 $360
2011 2 9 11 34 79 113 0.3 0.7 1.0 $241 $2,481 $2,721 Q3 NA NA NA 65 0 65 0.4 0.0 0.4 $360 $0 $360
2012 2 9 11 34 80 114 0.3 0.7 1.0 $255 $2,631 $2,886 Q4 NA NA NA 65 0 65 0.4 0.0 0.4 $360 $0 $360
Total NA NA NA 260 0 260 1.7 0.0 1.7 $1,440 $0 $1,440
2008 NA NA NA 280 0 280 1.8 0.0 1.8 $1,660 $0 $1,660
2009 NA NA NA 280 0 280 1.8 0.0 1.8 $1,743 $0 $1,743
2010 NA NA NA 280 0 280 1.8 0.0 1.8 $1,830 $0 $1,830
Shell has started work on its shallow-water H-block development which is due
2011 NA NA NA 280 0 280 1.8 0.0 1.8 $1,922 $0 $1,922
onstream by 2009 at the earliest; the area is expected to produce 140,000 bpd 2012 NA NA NA 280 0 280 1.8 0.0 1.8 $2,018 $0 $2,018
and 460 mmcfd. Shell’s Bonga Southwest-Aparo field development will involve Sources: Baker Hughes, Spears and Associates
34 subsea wells; plans call for the field to be put onstream in 2008, but the
project is currently experiencing administrative delays.
Petrodar has started up production on block 3 from the Palogue, Adar-Yale, and
Agordeed fields, as well as other fields in block 7. Production from these areas
is expected to increase to 300,000 bpd in the future.
CNPC is developing the Neem prospect on block 4 and the Abu Gabra and
Bashair fields in block 6, where production will eventually reach 200,000 bpd.
43
Tunisia
BG and Etap are planning to develop their Hasdrubal gas field located on the
AFRICA - OTHERS Amilcar exploration permit.
Senegal
Niger
Several operators, including Hunt Oil, Edison, Al Thani, Tullow Oil, Fortesa,
CNPC is testing the Saha-1 wildcat in Niger’s Tenere permit. A wildcat is to
and Maurel & Prom, have acquired offshore acreage and have started
be drilled on the West Fachi prospect later in 2007. CNPC and others are
exploration programs.
bidding to take over the 350 million barrel Agadem find which ExxonMobil
abandoned last year after development talks with the government went
South Africa
nowhere.
AFRICA - OTHERS South Africa will hold a licensing round covering four offshore basins in 2007.
RIGS WELLS FOOTAGE (MIL) SPENDING (MIL) At least 20 blocks will be on offer.
2000 2 8 10 37 70 107 0.3 0.5 0.8 $71 $753 $824

Phase 1 of Forest Oil’s proposed offshore Ibhubesi gas project would see
2001 2 8 11 87 72 160 0.6 0.6 1.2 $170 $872 $1,041 production start-up in 2009 via 19 subsea wells.
2002 2 9 11 97 85 181 0.7 0.7 1.3 $208 $1,085 $1,293
2003 5 5 11 90 104 194 0.6 0.8 1.5 $205 $1,416 $1,621 Gabon
2004 5 4 8 88 95 183 0.6 0.7 1.3 $219 $1,270 $1,489
2005 5 3 8 93 102 195 0.6 0.8 1.4 $252 $1,456 $1,708
2006 Q1 5 3 8 26 17 43 0.2 0.1 0.3 $76 $275 $351 CNR proposes to develop the Olowi offshore oil and gas field with production
Q2 6 3 8 28 18 46 0.2 0.1 0.3 $83 $248 $331 beginning in 2009; output is expected to plateau at 20,000 bpd.
Q3 6 4 10 29 23 52 0.2 0.2 0.4 $88 $303 $390
Q4 9 6 16 40 33 72 0.3 0.2 0.5 $124 $495 $619
Total 7 4 10 123 90 213 0.8 0.6 1.5 $370 $1,321 $1,692 Equatorial Guinea
2007 Q1 10 8 19 46 46 92 0.3 0.3 0.6 $152 $703 $855
Q2 8 6 14 34 34 68 0.2 0.2 0.5 $112 $560 $672 Devon may develop the Venus discovery in offshore block P in 2008.
Q3 6 4 10 29 27 56 0.2 0.2 0.4 $94 $463 $557
Q4 5 3 8 26 22 48 0.2 0.2 0.3 $84 $366 $450
Total 7 5 13 135 129 264 0.9 0.9 1.8 $442 $2,092 $2,534 Mozambique
2008 8 5 13 137 107 244 0.9 0.8 1.7 $475 $1,834 $2,310
2009 8 6 13 141 110 250 0.9 0.8 1.8 $512 $1,973 $2,485 Sasol plans to drill 14 development wells in 2007 on its Pande gas field.
2010 8 6 13 141 110 251 1.0 0.8 1.8 $538 $2,076 $2,614
2011 8 6 13 141 110 251 1.0 0.8 1.8 $566 $2,185 $2,751
2012 8 6 13 142 110 252 1.0 0.8 1.8 $596 $2,299 $2,895 Congo
Equipment delays look to force the start-up of Total’s Moho/Bilondo field
located in the Haute Mer block to the back half of 2008. Cost overruns are
pushing up project costs beyond the planned $1.6 billion budget.
44
2,024 new wells and 16.0 million feet of hole. Offshore rig count in the Mid
East is expected to remain unchanged at an average of 22 active rigs, 168 new
wells, and 1.7 million feet of hole. We project that spending will grow 28% in
MID EAST 2007 to a total of $13.2 billion to drill and equip new wells.
Drilling activity in the Mid East as measured by Baker Hughes saw a total of MID EAST
203 active rigs during January 2007, up 21% (35 rigs) compared to the year- RIGS WELLS FOOTAGE (MIL) SPENDING (BIL)
ago period. As measured by MI Swaco, Mid East rig count stood at 331 active 2000 119 15 134 1,196 106 1,303 7.8 0.8 8.6 $3.1 $1.1 $4.2
2001 127 24 150 1,138 145 1,283 8.8 1.3 10.1 $3.4 $1.6 $4.9
units in January 2007, up 21% (57 rigs) from January 2006. (MI Swaco 2002 138 31 168 1,236 166 1,402 9.5 1.8 11.3 $3.9 $1.8 $5.8
routinely reports about 60% more rigs than Baker Hughes in the Mid East, 2003 147 23 170 1,364 136 1,500 10.2 1.3 11.6 $4.2 $1.7 $5.9
2004 156 25 181 1,334 147 1,481 10.5 1.5 12.0 $4.2 $1.8 $5.9
largely due to definitional differences and the fact that Baker Hughes no longer 2005 167 27 193 1,429 179 1,608 11.2 1.7 12.9 $5.1 $2.3 $7.5
reports rig activity in Iran). 2006 Q1 149 23 172 394 45 439 3.1 0.5 3.5 $1.7 $0.7 $2.3
Q2 162 21 183 431 40 471 3.4 0.4 3.8 $1.9 $0.6 $2.5
Q3 175 22 197 462 42 504 3.6 0.4 4.1 $2.1 $0.6 $2.7
Q4 183 21 204 480 40 520 3.8 0.4 4.2 $2.2 $0.6 $2.8
Total 167 22 189 1,766 167 1,933 13.9 1.7 15.6 $7.8 $2.5 $10.3
Mid East Rig Count 2007 Q1 184 20 204 481 39 520 3.8 0.4 4.2 $2.5 $0.6 $3.1
Q2 190 22 212 501 42 542 4.0 0.4 4.4 $2.6 $0.7 $3.3
Q3 197 23 220 522 43 565 4.1 0.4 4.6 $2.7 $0.7 $3.4
220 350 Q4 197 24 221 521 45 565 4.1 0.4 4.6 $2.7 $0.7 $3.4
Total 192 22 214 2,024 168 2,192 16.0 1.7 17.7 $10.4 $2.8 $13.2
2008 197 24 220 2,066 176 2,242 16.3 1.7 18.1 $11.2 $3.0 $14.2
2009 202 25 227 2,100 184 2,284 16.6 1.8 18.5 $11.9 $3.3 $15.2
200 300 2010 206 26 231 2,131 192 2,323 16.9 1.9 18.8 $12.7 $3.5 $16.3
2011 208 27 235 2,159 200 2,359 17.1 2.0 19.1 $13.6 $3.8 $17.4
2012 210 28 238 2,188 209 2,397 17.3 2.1 19.5 $14.5 $4.1 $18.6
MI Swaco
180 250
BHI
160 200 The primary driver of increased drilling over the coming year will be Saudi
Arabia as the Kingdom starts to put in place a 15% increase in crude output
BHI capacity; by the end of 2007 it plans to increase its fleet of drilling rigs by 25%
140 150 in order to address its major field development projects including Manifa,
MI Swaco
Khurais, Marjan, Zuluf, Safaniya, Abu Hadriyah, Harach, Shaybah, and
120 100 Nuayyim.
.
2000 2001 2002 2003 2004 2005 2006 The other major oil exporters in the region will also be active in 2007. In Oman,
PDO is looking to EOR projects to stabilize oil output, and may soon approve
its first tight gas field development project. Abu Dhabi is seeking a major
boost in gas output by 2008. Yemen has reworked contract terms and is
In the revised forecast, we expect that drilling activity in the Mid East will
poised to announce the winners of its most recent acreage tender round.
increase 13% in 2007 to an average of 214 active rigs (as measured by Baker
Maersk is working on a large field expansion project in Qatar.
Hughes), accounting for 2,192 wells and 17.7 million feet of hole. Onshore
activity is projected to see an average of 192 active land rigs accounting for
45
IHS Energy’s count of active seismic crews in the Mid East in January 2007
was up 13% from the year-ago period.
Mid East Seismic Crew Count

40
35
30
25
20
15
10
.
2003 2004 2005 2006 .

Source: IHS
46
Other UAE development plans include: the Lower Zakum and Umm Shaif
offshore fields, to increase output from 470,000 bpd to 600,000 bpd by 2008;
and the Habshan onshore gas development project, where ADCO will drill 22
ABU DHABI new gas wells and 12 new injection wells.
Adnoc is soliciting proposals to develop its offshore sour gas reserves to

supply its domestic market. The country has over 200 TCF of mostly sour gas
reserves. The company plans to produce 6 bcfd of gas by 2008, up from 4.5
bcfd at present. IRAN
Zadco is developing the offshore Umm al-Lulu oilfield that is aimed at producing Iran’s third licensing round will take place in 2007; it will include 17 blocks,
100,000 bpd initially. Project cost is estimated at $1.5 billion. mostly onshore.
ABU DHABI ENI and NIOC have been considering a third stage at the Darkhovin oilfield that
would nearly double output to 300,000 bpd. Even so, the partners are already
considering a fourth stage that would lift output to 400,000 bpd. Working has
2000 7 4 11 64 16 80 0.7 0.2 0.8 $ 160 $ 252 $ 412 begun on stage two, in which 29 new wells are planned.
2001 8 6 14 65 22 87 0.6 0.2 0.8 $ 169 $ 369 $ 538
2002 9 6 14 70 22 92 0.6 0.2 0.9 $ 193 $ 382 $ 575
2003 9 5 14 75 20 95 0.7 0.2 0.9 $ 207 $ 340 $ 548 IRAN
2004 10 4 14 77 16 93 0.7 0.2 0.9 $ 213 $ 278 $ 491 RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
2005 9 4 13 80 25 105 0.7 0.3 1.0 $ 243 $ 476 $ 719 Land Off Total Land Off Total Land Off Total Land Off Total
2006 Q1 9 5 14 20 8 27 0.2 0.1 0.3 $ 66 $ 158 $ 223
Q2 9 5 14 20 8 27 0.2 0.1 0.3 $ 66 $ 158 $ 223 2000 24 3 27 141 11 152 1.1 0.1 1.2 $ 407 $ 150 $ 557
Q3 9 5 14 20 7 27 0.2 0.1 0.3 $ 66 $ 148 $ 214 2001 24 6 30 120 20 141 0.9 0.2 1.1 $ 357 $ 292 $ 649
Q4 9 6 15 20 9 28 0.2 0.1 0.3 $ 66 $ 180 $ 246 2002 25 8 34 112 25 137 0.8 0.2 1.0 $ 347 $ 380 $ 727
Total 9 5 14 79 31 110 0.7 0.3 1.0 $ 263 $ 643 $ 906 2003 28 7 35 94 29 124 0.7 0.2 0.9 $ 309 $ 463 $ 771
2007 Q1 9 5 14 20 8 27 0.2 0.1 0.3 $ 72 $ 173 $ 246 2004 32 9 41 140 36 176 1.0 0.3 1.3 $ 481 $ 592 $ 1,073
Q2 9 5 14 20 8 27 0.2 0.1 0.3 $ 72 $ 173 $ 246 2005 32 8 40 143 45 188 1.1 0.4 1.4 $ 539 $ 820 $ 1,359
Q3 9 5 14 20 8 28 0.2 0.1 0.3 $ 72 $ 184 $ 256 2006 Q1 NA NA NA 35 10 45 0.3 0.1 0.3 $ 146 $ 194 $ 340
Q4 9 5 14 20 8 28 0.2 0.1 0.3 $ 72 $ 184 $ 256 Q2 NA NA NA 35 10 45 0.3 0.1 0.3 $ 146 $ 194 $ 340
Total 9 5 14 79 31 110 0.7 0.3 1.0 $ 290 $ 714 $ 1,004 Q3 NA NA NA 35 10 45 0.3 0.1 0.3 $ 146 $ 194 $ 340
2008 9 5 14 81 32 112 0.7 0.3 1.1 $ 310 $ 765 $ 1,075 Q4 NA NA NA 35 10 45 0.3 0.1 0.3 $ 146 $ 194 $ 340
2009 9 5 15 82 32 115 0.8 0.3 1.1 $ 332 $ 819 $ 1,152 Total NA NA NA 140 40 180 1.0 0.3 1.3 $ 582 $ 777 $ 1,359
2010 9 5 15 82 32 115 0.8 0.3 1.1 $ 349 $ 860 $ 1,209 2007 Q1 NA NA NA 35 10 45 0.3 0.1 0.3 $ 160 $ 214 $ 374
2011 9 5 14 80 31 112 0.7 0.3 1.1 $ 357 $ 881 $ 1,238 Q2 NA NA NA 35 10 45 0.3 0.1 0.3 $ 160 $ 214 $ 374
2012 9 5 14 78 31 109 0.7 0.3 1.0 $ 366 $ 901 $ 1,267 Q3 NA NA NA 35 10 45 0.3 0.1 0.3 $ 160 $ 214 $ 374
Sources: Baker Hughes, Spears and Associates Q4 NA NA NA 35 10 45 0.3 0.1 0.3 $ 160 $ 214 $ 374
Total NA NA NA 140 40 180 1.0 0.3 1.3 $ 641 $ 854 $ 1,495
2008 NA NA NA 140 40 180 1.0 0.3 1.3 $ 673 $ 897 $ 1,570
2009 NA NA NA 140 40 180 1.0 0.3 1.3 $ 706 $ 942 $ 1,648
Sinochem is developing the offshore Umm-al-Quwain gas field. Production 2010 NA NA NA 140 40 180 1.0 0.3 1.3 $ 742 $ 989 $ 1,731
2011 NA NA NA 140 40 180 1.0 0.3 1.3 $ 779 $ 1,038 $ 1,817
start-up is expected by the end of 2007. 2012 NA NA NA 140 40 180 1.0 0.3 1.3 $ 818 $ 1,090 $ 1,908
47
expected to start up in 2011 at 200 mmcfd in order to meet domestic needs.

BP intends to spend up to $700 million over the next three to four years to
KUWAIT appraise the property.
OMAN
KOC has made two large oil and gas finds in the north of the country, RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
containing an estimated 35 tcf of gas. Another southeast field that has Land Off Total Land Off Total Land Off Total Land Off Total
recently been discovered is expected to be onstream by the end of 2007 and 2000 24 0 24 327 0 327 1.5 0.0 1.5 $ 414 $ - $ 414
producing 50,000 bpd. 2001 25 0 25 348 0 348 2.5 0.0 2.5 $ 462 $ - $ 462
2002 29 0 29 399 0 399 2.8 0.0 2.8 $ 557 $ - $ 557
2003 35 0 35 451 0 451 3.2 0.0 3.2 $ 629 $ - $ 629
2004 35 0 35 414 0 414 3.7 0.0 3.7 $ 578 $ - $ 578
KUWAIT
2005 34 0 34 405 0 405 3.6 0.0 3.6 $ 622 $ - $ 622
2006 Q1 34 0 34 99 0 99 0.9 0.0 0.9 $ 167 $ - $ 167
Q2 38 0 38 110 0 110 1.0 0.0 1.0 $ 186 $ - $ 186
Q3 40 0 40 117 0 117 1.0 0.0 1.0 $ 197 $ - $ 197
2000 12 0 12 141 0 141 0.7 0.0 0.7 $ 110 $ - $ 110
Q4 41 0 41 120 0 120 1.1 0.0 1.1 $ 202 $ - $ 202
2001 9 0 9 104 0 104 0.8 0.0 0.8 $ 131 $ - $ 131
Total 38 0 38 445 0 445 4.0 0.0 4.0 $ 752 $ - $ 752
2002 6 0 6 73 0 73 0.6 0.0 0.6 $ 96 $ - $ 96
2007 Q1 40 0 40 116 0 116 1.0 0.0 1.0 $ 216 $ - $ 216
2003 5 0 5 66 0 66 0.5 0.0 0.5 $ 87 $ - $ 87
Q2 42 0 42 122 0 122 1.1 0.0 1.1 $ 226 $ - $ 226
2004 10 0 10 71 0 71 0.6 0.0 0.6 $ 94 $ - $ 94
Q3 45 0 45 131 0 131 1.2 0.0 1.2 $ 242 $ - $ 242
2005 12 0 12 75 0 75 0.6 0.0 0.6 $ 108 $ - $ 108
Q4 43 0 43 125 0 125 1.1 0.0 1.1 $ 232 $ - $ 232
2006 Q1 12 0 12 18 0 18 0.1 0.0 0.1 $ 30 $ - $ 30
Total 43 0 43 493 0 493 4.4 0.0 4.4 $ 916 $ - $ 916
Q2 13 0 13 20 0 20 0.2 0.0 0.2 $ 31 $ - $ 31
2008 43 0 43 503 0 503 4.5 0.0 4.5 $ 981 $ - $ 981
Q3 14 0 14 21 0 21 0.2 0.0 0.2 $ 34 $ - $ 34
2009 44 0 44 513 0 513 4.6 0.0 4.6 $ 1,051 $ - $ 1,051
Q4 15 0 15 22 0 22 0.2 0.0 0.2 $ 35 $ - $ 35
2010 45 0 45 523 0 523 4.6 0.0 4.6 $ 1,125 $ - $ 1,125
Total 14 0 14 81 0 81 0.7 0.0 0.7 $ 130 $ - $ 130
2011 46 0 46 534 0 534 4.7 0.0 4.7 $ 1,205 $ - $ 1,205
2007 Q1 16 0 16 24 0 24 0.2 0.0 0.2 $ 42 $ - $ 42
2012 47 0 47 544 0 544 4.8 0.0 4.8 $ 1,291 $ - $ 1,291
Q2 15 0 15 23 0 23 0.2 0.0 0.2 $ 40 $ - $ 40
Q3 15 0 15 23 0 23 0.2 0.0 0.2 $ 40 $ - $ 40
Q4 16 0 16 24 0 24 0.2 0.0 0.2 $ 42 $ - $ 42
Total 16 0 16 93 0 93 0.7 0.0 0.7 $ 164 $ - $ 164
2008 16 0 16 95 0 95 0.8 0.0 0.8 $ 175 $ - $ 175
2009 16 0 16 97 0 97 0.8 0.0 0.8 $ 188 $ - $ 188
Medco Energi (Indonesia) will develop a cluster of 18 small oilfields in the Nimr-
2010 16 0 16 97 0 97 0.8 0.0 0.8 $ 197 $ - $ 197 Karim area on block 6 that currently produce 18,000 bpd. Similarly, PDO has
2011 16 0 16 95 0 95 0.8 0.0 0.8 $ 203 $ - $ 203 put out for bid a service contract for several small fields in the Rima area. Bids
2012 15 0 15 93 0 93 0.7 0.0 0.7 $ 209 $ - $ 209
are due in early 2007.
PDO has begun work on an EOR project for its extra-heavy Marmul oilfield on
block 6 involving the injection of polymers and waterflooding. The project is to
be completed in 2008.
OMAN Daleel Petroleum expects to spend $450 million on a five year work program
using water injection to double output from block 5 to 30,000 bpd by 2012.
BP has been awarded development of the Khazzan-Makarem tight gas field, About 20 wells per year are to be drilled in the field. A mix of ESPs and beam
which is estimated by authorities to hold up to 20 TCF of gas. Output is
48
pumps is to be used on the approximately 150 wells ultimately installed in the

field. QATAR
PDO will develop the Sakhiya-SW and Mamour fields as part of the Harweel
field development project. PDO is planning a phase 2 development of its 2000 3 4 6 13 55 68 0.1 0.3 0.4 $ 20 $ 304 $ 324
Harweel oilfields. The plan calls for miscible gas injection in seven fields to lift 2001 2 7 9 9 77 86 0.1 0.7 0.8 $ 19 $ 506 $ 525
2002 2 11 13 8 88 96 0.1 1.1 1.1 $ 15 $ 581 $ 596
production to 125,000 bpd. PDO is also working on the Qarn Alam steam 2003 1 6 8 14 49 64 0.1 0.6 0.7 $ 29 $ 326 $ 355
injection EOR project, which is scheduled to produce up to 30,000 bpd in 2004 1 8 9 17 60 77 0.1 0.7 0.9 $ 34 $ 397 $ 432
2005 2 10 12 21 72 93 0.2 0.9 1.1 $ 46 $ 523 $ 569
2009.
2006 Q1 2 11 13 6 19 25 0.0 0.2 0.3 $ 15 $ 154 $ 168
Q2 2 8 10 6 15 21 0.0 0.2 0.2 $ 15 $ 119 $ 134
Oxy is on schedule to produce 50,000 bpd from the Mukhaizna heavy oilfield Q3 2 9 11 7 16 23 0.1 0.2 0.2 $ 17 $ 125 $ 142
Q4 2 7 9 5 13 18 0.0 0.2 0.2 $ 12 $ 105 $ 117
by 2008, where it intends to lift oil production to 150,000 bpd by 2012. Plans Total 2 9 11 24 63 87 0.2 0.8 1.0 $ 58 $ 503 $ 561
call for drilling 1,800 new wells and the construction of up to 80 steam plants. 2007 Q1 1 8 9 3 14 17 0.0 0.2 0.2 $ 8 $ 126 $ 134
Q2 2 9 11 6 16 22 0.0 0.2 0.2 $ 16 $ 142 $ 158
Q3 2 8 10 6 14 20 0.0 0.2 0.2 $ 16 $ 126 $ 142
Q4 2 9 11 6 16 22 0.0 0.2 0.2 $ 16 $ 142 $ 158
Total 2 9 10 21 61 82 0.2 0.8 0.9 $ 56 $ 538 $ 594
2008 2 9 11 23 67 90 0.2 0.8 1.0 $ 65 $ 621 $ 686
2009 2 10 12 25 74 99 0.2 0.9 1.1 $ 75 $ 717 $ 792
QATAR 2010 2 11 14 28 81 109 0.2 1.0 1.2 $ 86 $ 828 $ 914
2011 3 12 15 31 90 120 0.2 1.1 1.3 $ 99 $ 957 $ 1,056
2012 3 14 17 34 99 132 0.3 1.2 1.5 $ 115 $ 1,105 $ 1,220
ExxonMobil and QPC have launched the Barzan gas project designed to Sources: Baker Hughes, Spears and Associates
supply 1.5 bcfd of gas to Qatar’s domestic market. The project is reported to
be similar to ExxonMobil’s Al Khaleej phase 2 gas project which is expected
to produce 1.6 bcfd when it comes onstream in 2009 at a cost of $3 billion.
Maersk will spend $5 billion to more than double oil production from the SAUDI ARABIA
offshore Al Shaheen field to 525,000 bpd. Work will involve a six-rig drilling
schedule and up to 160 new wells. The expansion is planned for completion
Saudi Aramco has indicated that it will spend almost $4 billion on development
by 2009.
well drilling in 2007, an increase of 60%, and another $620 million on
exploration.
Sasol expects to start production from its Oryx gas-to-liquids plant in Q1 2007.
Saudi Aramco will develop plans to exploit the recently-discovered offshore
Qatar Petroleum is to build three new wellhead platforms at the Bul Hanine
Karan gas field. Karan is expected to produce about 1 bcfd when it comes
field where QPC plans to drill 86 new wells over the next 10 years.
onstream in 2001-2012. In all, Saudi Aramco’s five-year gas plan calls for
drilling 300 development gas wells and more than 70 exploration and appraisal
Other operators currently exploring in Qatar include Anadarko (block 4),
wells.
Talisman (block 10), EnCana (block 2), and Wintershall (block 11).
Aramco is to spend $1 billion to product 100,000 bpd from the onshore
Nuayyim field.
49
producing 500,000 bpd. A follow-on stage that is being considered could take
SAUDI ARABIA production capacity of the field to 1 million bpd.
Aramco also will develop the onshore Khurais field, targeting output of 1.2
2000 22 4 25 237 18 255 1.9 0.1 2.1 $ 1,444 $ 234 $ 1,678
2001 27 4 30 255 14 269 2.0 0.1 2.2 $ 1,625 $ 197 $ 1,822
million bpd by 2009. The project will include a waterflood for the Kurais, Abu
2002 29 4 32 297 15 312 2.4 0.1 2.5 $ 1,988 $ 211 $ 2,199 Jifan, and Mazalij fields. The project calls for the use of 23 rigs to drill more
2003 29 3 32 301 28 329 2.4 0.2 2.6 $ 2,012 $ 398 $ 2,411 than 300 wells.
2004 28 4 32 283 28 311 2.3 0.2 2.5 $ 1,892 $ 404 $ 2,296
2005 34 3 37 348 24 372 2.8 0.2 3.0 $ 2,564 $ 378 $ 2,942
2006 Q1 47 7 54 118 7 125 0.9 0.1 1.0 $ 957 $ 116 $ 1,073
Q2 54 6 60 135 6 141 1.1 0.0 1.1 $ 1,093 $ 109 $ 1,202
Q3 62 8 70 156 8 163 1.3 0.1 1.3 $ 1,261 $ 134 $ 1,394
Q4 68 8 76 170 8 178 1.4 0.1 1.4 $ 1,376 $ 139 $ 1,515
Total
2007 Q1
58
72
7
7
65
79
579
180
29
7
608
187
4.7
1.4
0.2
0.1
4.9
1.5
$
$
4,686
1,603
$
$
498
134
$ 5,184
$ 1,736
YEMEN
Q2 75 8 83 188 8 196 1.5 0.1 1.6 $ 1,669 $ 153 $ 1,822
Q3 80 9 89 200 9 209 1.6 0.1 1.7 $ 1,781 $ 172 $ 1,952
Q4 80 9 89 200 9 209 1.6 0.1 1.7 $ 1,781 $ 172 $ 1,952 OMV plans to increase production from its S2 block in two phases. First
Total 77 8 85 768 33 801 6.2 0.3 6.4 $ 6,833 $ 630 $ 7,463 phase of the work is to be completed by 2008, when oil production should
2008 78 8 87 783 34 817 6.3 0.3 6.5 $ 7,318 $ 674 $ 7,993
reach 16,000 bpd. Phase two will lift output to 32,000 by 2010.
2009 80 9 88 799 34 833 6.4 0.3 6.7 $ 7,838 $ 722 $ 8,560
2010 81 9 90 814 35 849 6.5 0.3 6.8 $ 8,394 $ 773 $ 9,168
2011 83 9 92 831 36 866 6.7 0.3 6.9 $ 8,990 $ 828 $ 9,819
2012 85 9 94 847 36 884 6.8 0.3 7.1 $ 9,629 $ 887 $ 10,516 YEMEN
Sources: Baker Hughes, Spears and Associates RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
2000 6 0 6 84 0 84 0.6 0.0 0.6 $ 224 $ - $ 224

Aramco will complete development of the 500,000 bpd onshore Abu Hadriyah 2001 6 0 6 81 0 81 0.5 0.0 0.5 $ 225 $ - $ 225
2002 9 0 9 108 0 108 0.7 0.0 0.7 $ 318 $ - $ 318
oilfield cluster (the Abu Hadriyah, Khursaniya, and Fadhli fields) in the Eastern
2003 9 0 9 122 0 122 0.8 0.0 0.8 $ 359 $ - $ 359
Province by Q4 2007. 2004 9 0 9 125 0 125 0.8 0.0 0.8 $ 366 $ - $ 366
2005 12 0 12 142 0 142 0.9 0.0 0.9 $ 459 $ - $ 459
2006 Q1 13 0 13 40 0 40 0.3 0.0 0.3 $ 142 $ - $ 142
Aramco’s expects to have as many as 125 drilling rigs operating in 2007 and Q2 16 0 16 48 0 48 0.3 0.0 0.3 $ 171 $ - $ 171
staying at that level through 2012. Q3 16 0 16 49 0 49 0.3 0.0 0.3 $ 174 $ - $ 174
Q4 16 0 16 49 0 49 0.3 0.0 0.3 $ 174 $ - $ 174
Total 15 0 15 186 0 186 1.2 0.0 1.2 $ 660 $ - $ 660
An $11 billion program to revive the once-mothballed offshore Manifa oilfield has 2007 Q1 15 0 15 45 0 45 0.3 0.0 0.3 $ 176 $ - $ 176
an output target of 900,000 bpd by 2011. New project infrastructure includes Q2 16 0 16 48 0 48 0.3 0.0 0.3 $ 188 $ - $ 188
building 27 shallow-water drilling islands which should be completed by 2009. Q3 16 0 16 48 0 48 0.3 0.0 0.3 $ 188 $ - $ 188
Q4 17 0 17 51 0 51 0.3 0.0 0.3 $ 199 $ - $ 199
Total 16 0 16 192 0 192 1.3 0.0 1.3 $ 751 $ - $ 751
Aramco also is working on increasing production from the offshore Marjan, 2008 16 0 16 196 0 196 1.3 0.0 1.3 $ 804 $ - $ 804
2009 17 0 17 200 0 200 1.3 0.0 1.3 $ 861 $ - $ 861
Zuluf, and Safaniya fields to 450,000 bpd from 300,000 bpd.
2010 17 0 17 204 0 204 1.4 0.0 1.4 $ 922 $ - $ 922
2011 17 0 17 208 0 208 1.4 0.0 1.4 $ 988 $ - $ 988
Aramco will increase production capacity from the onshore Shaybah field by 2012 18 0 18 212 0 212 1.4 0.0 1.4 $ 1,058 $ - $ 1,058
250,000 bpd, with work to be completed in early 2008. The field is currently
50
Iraq
MID EAST - OTHERS The Kurdistan Regional Government is protesting Iraq’s proposed hydrocarbons
law unless the northern Kurdish region is give sole authority to enter into
upstream agreements with international oil companies.
Syria
Authorities report that 165 new oil wells were drilled in the Basra and Amara
The Oil Ministry’s 2007 licensing round is expected to include six offshore
fields in southern Iraq in 2006. Drilling activity is expected to increase in 2007
blocks and up to four onshore blocks.
as authorities hope to increase production.
PetroCanada will develop two gas discoveries, Cheriffe and Ash Shaer,
Neutral Zone
estimated to be capable of producing 80 mmcfd, starting in 2010, at a cost of
between C$550 and C$800 million.
Plans to lift crude production capacity from the Neutral Zone by 100,000 bpd
are now expected to be delayed to 2010-2011 due to a shortage of available
INA will develop its Jihar and Mahr discoveries on the Hayan block with first
rigs.
gas set to come onstream in 2009. It is also developing the Palmyra gas field
on this block.
MID EAST - OTHERS

2000 22 1 23 189 7 196 1.3 0.1 1.3 $328 $114 $442

2001 26 2 28 156 12 168 1.3 0.1 1.4 $378 $192 $569
2002 29 2 31 169 16 185 1.4 0.2 1.6 $431 $285 $716
2003 30 1 31 240 10 250 1.8 0.1 1.9 $572 $180 $753
2004 31 1 32 207 7 214 1.3 0.1 1.3 $505 $114 $619
2005 31 2 33 214 13 227 1.3 0.1 1.4 $560 $128 $688
2006 Q1 31 1 32 58 2 59 0.4 0.0 0.4 $174 $30 $204
Q2 30 1 31 57 2 59 0.4 0.0 0.4 $171 $30 $201
Q3 30 1 32 57 2 59 0.4 0.0 0.4 $173 $39 $212
Q4 32 0 32 59 0 59 0.4 0.0 0.4 $179 $0 $179
Total 31 1 32 231 5 236 1.5 0.0 1.5 $696 $99 $795
2007 Q1 31 0 31 58 0 58 0.4 0.0 0.4 $196 $0 $196
Q2 31 0 31 60 0 60 0.4 0.0 0.4 $198 $0 $198
Q3 30 1 31 60 2 62 0.4 0.0 0.4 $198 $33 $231
Q4 30 1 31 60 2 62 0.4 0.0 0.4 $197 $33 $230
Total 31 1 31 238 3 241 1.5 0.0 1.5 $789 $66 $855
2008 32 1 33 246 3 249 1.6 0.0 1.6 $852 $69 $922
2009 34 1 34 244 3 247 1.5 0.0 1.6 $887 $73 $960
2010 34 1 35 243 3 246 1.5 0.0 1.6 $923 $77 $1,000
2011 34 1 34 241 3 244 1.5 0.0 1.5 $961 $80 $1,041
2012 33 1 34 239 3 242 1.5 0.0 1.5 $1,000 $84 $1,084
51
the Far East is expected to rise 2% to an average of 94 active rigs, accounting

for 1,170 new wells, and 12.0 million feet of hole. Onshore activity is projected
to rise 1% to an average of 138 active land rigs resulting in 1,720 new wells
FAR EAST and 8.5 million feet of hole. We project that spending will grow 13% in 2007 to
a total of $23.6 billion to drill and equip new wells in this region.
Drilling activity in the Far East as measured by Baker Hughes saw a total of
The region’s two largest drillers, India and Indonesia, are expected to increase
233 active rigs during January 2007, up down 3% (eight rigs) compared to the
their drilling activity in 2007. In India, Reliance has doubled the scope of its
year-ago period. As measured by MI Swaco, Far East rig count stood at 286
planned offshore deepwater gas field development and Cairn is carrying out a
active units in January 2007, up 10% (25 rigs) from the January 2006. (Largely
large onshore multi-field development. In Indonesia the government continues
due to definitional differences, MI Swaco routinely reports 15%-20% more rigs
to look for ways to encourage operators to increase exploration activity and
than Baker Hughes in the Far East; the January 2007 differential was 23%, in
increase rehabilitation of older, marginal fields in order to stabilize oil
percentage terms the largest differential since early 2004).
production.
FAR EAST
Far East Rig Count RIGS WELLS FOOTAGE (MIL) SPENDING (BIL)
275 300 2000 93 48 140 1,361 704 2,065 6.0 6.4 12.4 $3.7 $6.5 $10.2
2001 105 50 155 1,355 748 2,104 6.4 6.7 13.1 $4.1 $6.9 $11.0
2002 118 56 174 1,490 730 2,219 6.5 6.8 13.3 $4.7 $6.9 $11.5
2003 116 64 180 1,415 787 2,203 6.5 7.1 13.6 $4.5 $7.8 $12.4
250 BHI 275 2004 122 75 197 1,555 885 2,440 7.1 8.9 16.0 $4.8 $9.3 $14.1
2005 128 94 222 1,609 1,075 2,684 7.7 10.8 18.5 $5.5 $12.1 $17.6
MI Swaco 2006 Q1 139 94 233 424 302 726 2.0 3.1 5.1 $1.6 $3.6 $5.2
Q2 132 90 221 382 297 680 2.0 3.1 5.1 $1.5 $3.6 $5.2
225 250 Q3 135 93 227 405 284 689 2.0 2.9 5.0 $1.6 $3.6 $5.2
MI Swaco
Q4 137 94 231 443 282 725 2.2 2.9 5.1 $1.7 $3.6 $5.3
Total 136 93 228 1,655 1,165 2,820 8.3 12.0 20.2 $6.4 $14.4 $20.8
BHI
2007 Q1 138 96 234 438 309 747 2.2 3.2 5.4 $1.9 $4.3 $6.2
200 225 Q2 140 93 233 434 289 723 2.2 3.0 5.1 $1.8 $4.0 $5.8
Q3 137 94 231 423 284 706 2.0 2.9 4.9 $1.8 $4.0 $5.8
Q4 137 93 230 426 289 715 2.1 3.0 5.0 $1.8 $4.0 $5.8
175 200 Total 138 94 232 1,720 1,170 2,890 8.5 12.0 20.5 $7.3 $16.3 $23.6
2008 142 97 239 1,765 1,200 2,965 8.7 12.3 21.0 $7.8 $17.6 $25.4
2009 145 99 243 1,804 1,227 3,032 8.9 12.6 21.5 $8.4 $18.9 $27.2
2010 146 100 246 1,834 1,238 3,072 9.0 12.7 21.7 $8.9 $20.0 $28.9
150 175 2011 149 101 250 1,871 1,253 3,124 9.2 12.8 21.9 $9.5 $21.3 $30.8
2012 152 103 255 1,910 1,268 3,178 9.3 12.9 22.2 $10.2 $22.6 $32.9
125 150
.
2000 2001 2002 2003 2004 2005 2006 Elsewhere in the region offshore activity will hold steady overall. Pakistan’s
offshore sector will see BP and Shell undertaking exploratory programs in the
coming year. Offshore field development in Malaysia, Brunei, and Myanmar
will hold steady. Operators in Australia are continuing to work on several
In our revised forecast we expect that drilling activity in the Far East will rise offshore gas field development projects. However, offshore activity in New
2% in 2007, averaging 232 active rigs (as measured by Baker Hughes), Zealand will decline as field development work winds down and activity in
accounting for 2,890 wells and 20.5 million feet of hole. Offshore rig count in Vietnam looks to slow as exploratory drilling eases back.
52
Indicators of Future Activity
IHS Energy’s count of active seismic crews in the Far East (including China) in
January 2007 was 26% behind the year-ago period.
Far East Seismic Crew Count
75
70
65
60
55
50
45
40
35
30
.
2003 2004 2005 2006 .

Source: IHS
53
Santos could drill a total of about 1,000 wells over the 2006 to 2010 timeframe
during its onshore Cooper basin project.
AUSTRALIA
Woodside will develop its $720 milliion deepwater Vincent oilfield off western
Australia, with first oil to begin flowing in 2008. Woodisde is developing the
Amerada Hess has won the right to explore block WA-390-P off Western
deepwater Pluto field targeting a 2010 start-up; reserves at the field are now
Australia; it bid a work program that includes four exploratory wells in year two
estimated to be 4.5 TCF using seven subsea production wells.
and 12 exploratory wells in year three.
ExxonMobil is developing the $225 million Kipper field; three or four subsea
Chevron is carrying out a feasibility study to develop its Wheatstone gas field
wells are to be drilled. Its Wirrah field (due online in 2007) and West Whiptail
off Australia that would support the country’s first gas-to-liquids (clean diesel)
field (2006) are in southeast Australia’s Bass Strait.
project. Proposals call for a 200,000 bpd facility costing over $14 billion.
BHP Billiton is working on the Stybarrow multiple-field project where eight to 12
AUSTRALIA
development wells are planned. However, work on the Pyrenees project has
Land Off Total Land Off Total Land Off Total Land Off Total been halted due to cost overruns.
2000 5 5 10 144 57 200 1.0 0.5 1.5 $260 $1,226 $1,486
2001 6 4 10 164 48 212 1.3 0.4 1.7 $311 $1,084 $1,396
2002 5 4 9 133 44 176 1.0 0.4 1.4 $264 $1,039 $1,303
2003 6 5 11 144 66 210 1.0 0.6 1.6 $286 $1,569 $1,855
2004 8 6 14 157 95 252 1.2 1.0 2.2 $313 $2,249 $2,561
2005 8 8 16 157 128 284 1.2 1.4 2.6 $343 $3,327 $3,670 INDIA
2006 Q1 9 7 16 36 29 65 0.3 0.3 0.6 $87 $838 $925
Q2 11 10 21 45 40 85 0.4 0.4 0.8 $109 $1,148 $1,257
Q3 10 10 20 39 41 80 0.3 0.4 0.7 $93 $1,183 $1,276 The sixth licensing round saw 52 blocks awarded in February 2007, although
Q4 11 10 21 44 40 84 0.3 0.4 0.8 $106 $1,148 $1,254
Total 10 9 20 164 150 314 1.3 1.6 2.9 $395 $4,317 $4,711 many large multinational oil companies stayed away from the bidding. The
2007 Q1 10 11 21 40 44 84 0.3 0.5 0.8 $106 $1,389 $1,495 government intends to hold a seventh NELP round in April 2007 where 70 to 80
Q2 11 10 21 44 40 84 0.3 0.4 0.8 $116 $1,263 $1,379
Q3 10 11 21 40 44 84 0.3 0.5 0.8 $106 $1,389 $1,495
blocks may be on offer.
Q4 11 10 21 44 40 84 0.3 0.4 0.8 $116 $1,263 $1,379
Total 11 11 21 168 168 336 1.3 1.8 3.1 $445 $5,304 $5,749 ONGC is looking to develop the B22 “marginal fields cluster” located near the
2008 11 11 22 172 172 344 1.3 1.8 3.2 $479 $5,709 $6,187
2009 11 11 22 177 177 353 1.4 1.9 3.3 $515 $6,144 $6,659 South Bassein gas field, most of which are sour gas. ONGC plans to use
2010 11 11 22 178 178 357 1.4 1.9 3.3 $546 $6,516 $7,062 eight wellhead platforms and 17 development wells for development of the
2011 11 11 23 180 180 360 1.4 1.9 3.3 $579 $6,910 $7,489
2012 11 11 23 182 182 364 1.4 2.0 3.4 $614 $7,328 $7,942
shallow-water C-series fields located in the Arabian Sea. First phase
Sources: Baker Hughes, Spears and Associates development is scheduled to be complete by December 2008.
Reliance Industries now estimates that its prolific D6 block off the east coast of
Apache plans to fast-track development of its Theo-Van Gogh offshore oilfield, India will be onstream by mid-2008 producing 2.8 bcfd using 50 wells at a cost
with production start-up targeting 2008. Output may reach 80,000 bpd. of $5.2 billion. Subsea wells in deeper water would follow in the second phase
Apache will also develop the shallow-water Reindeer-Caribou gasfield off of the project. Separately, Reliance is planning to start production from its
western Australia, with first output scheduled for 2008 at the rate of 50 mmcfd.
54
offshore MA oilfield by 2008; estimates are that the field will produce 40,000
bpd of oil and 100 mmcfd of gas.
Gujarat State Petroleum Corporation is evaluating development options for the INDONESIA
huge KG-8 Deen Dayal HT/HP offshore gas discovery it made in 2005.
The government awarded nine oil and gas blocks this month; the combined
INDIA
work programs could result in up to 22 exploration wells over the next three
Land Off Total Land Off Total Land Off Total Land Off Total years. Operators include Talisman, Total, Esso, Pertamina, and Statoil. In
the hope of boosting flagging oil output, the government is requiring operators
2000 40 9 49 277 51 327 2.2 0.5 2.7 $1,205 $441 $1,646
2001 41 9 50 304 53 357 2.2 0.5 2.7 $1,389 $484 $1,872 working in eastern Indonesia to return their concessions to the government if
2002 43 11 54 320 63 383 2.2 0.6 2.8 $1,539 $599 $2,138 they fail to develop potential resources after three years so that they can be
2003 44 16 60 331 91 422 2.3 0.9 3.2 $1,589 $870 $2,459
2004 47 23 70 330 114 444 2.4 1.1 3.5 $1,586 $1,088 $2,674
placed with other operators.
2005 51 29 79 304 103 407 2.6 1.0 3.6 $1,606 $1,082 $2,688
2006 Q1 56 26 82 84 39 123 0.7 0.4 1.1 $491 $446 $937 INDONESIA
Q2 54 25 80 81 38 119 0.7 0.4 1.1 $473 $439 $913 RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
Q3 52 31 83 78 47 125 0.7 0.5 1.1 $456 $538 $994 Land Off Total Land Off Total Land Off Total Land Off Total
Q4 53 31 84 79 47 126 0.7 0.5 1.1 $459 $543 $1,003
Total 54 28 82 323 170 493 2.8 1.7 4.4 $1,880 $1,967 $3,846 2000 23 9 32 810 216 1,026 1.8 1.7 3.5 $1,598 $2,163 $3,761
2007 Q1 54 32 86 81 48 129 0.7 0.5 1.2 $518 $611 $1,129 2001 31 10 41 721 190 911 1.6 1.5 3.1 $1,493 $1,998 $3,491
Q2 54 32 86 81 48 129 0.7 0.5 1.2 $518 $611 $1,129 2002 37 9 46 854 147 1,001 1.9 1.1 3.1 $1,858 $1,621 $3,479
Q3 55 32 87 83 48 131 0.7 0.5 1.2 $527 $611 $1,138 2003 33 12 45 750 177 926 1.7 1.4 3.1 $1,630 $1,950 $3,580
Q4 55 32 87 83 48 131 0.7 0.5 1.2 $527 $611 $1,138 2004 34 15 49 879 217 1,096 2.0 1.7 3.7 $1,912 $2,392 $4,304
Total 55 32 87 327 192 519 2.8 1.9 4.7 $2,090 $2,444 $4,535 2005 33 22 55 891 269 1,160 2.0 2.1 4.0 $2,131 $3,268 $5,399
2008 57 33 90 340 200 540 2.9 2.0 4.9 $2,283 $2,669 $4,952 2006 Q1 34 21 55 233 63 296 0.5 0.5 1.0 $614 $842 $1,455
2009 58 34 92 347 204 551 3.0 2.0 5.0 $2,445 $2,859 $5,304 Q2 27 16 43 186 48 234 0.4 0.4 0.8 $488 $641 $1,130
2010 58 34 92 347 204 551 3.0 2.0 5.0 $2,567 $3,002 $5,569 Q3 30 16 46 206 48 254 0.5 0.4 0.8 $542 $641 $1,183
2011 59 35 94 354 208 562 3.0 2.0 5.1 $2,749 $3,215 $5,964 Q4 34 18 52 231 53 284 0.5 0.4 0.9 $608 $709 $1,318
2012 60 35 95 361 212 573 3.1 2.1 5.2 $2,945 $3,443 $6,388 Total 31 18 49 856 212 1,068 1.9 1.6 3.5 $2,253 $2,833 $5,086
Sources: Baker Hughes, Spears and Associates 2007 Q1 33 16 49 224 48 272 0.5 0.4 0.9 $649 $705 $1,355
Q2 33 16 49 224 48 272 0.5 0.4 0.9 $649 $705 $1,355
Q3 34 18 52 231 54 285 0.5 0.4 0.9 $669 $794 $1,463
Q4 34 18 52 231 54 285 0.5 0.4 0.9 $669 $794 $1,463
Cairn Energy plans to develop its Mangala, Aishwariya, Saraswati, and Total 34 17 51 911 204 1,115 2.0 1.6 3.6 $2,637 $2,998 $5,635
2008 34 17 52 934 209 1,143 2.1 1.6 3.7 $2,838 $3,226 $6,065
Raageshwari discoveries on onshore block RJ-ON-90/1 in Rajasthan. The 2009 35 18 53 957 214 1,172 2.1 1.6 3.8 $3,055 $3,472 $6,527
fields are expected to produce about 100,000 bpd starting in 2009. The 2010 36 18 54 981 220 1,201 2.2 1.7 3.8 $3,288 $3,737 $7,025
2011 37 19 56 1,006 225 1,231 2.2 1.7 3.9 $3,538 $4,022 $7,560
company will submit development plans in 2007 for Bhagyam and Shakti fields 2012 38 19 57 1,031 231 1,262 2.3 1.8 4.0 $3,808 $4,329 $8,137
in Rajasthan that are expected to start producing 50,000 bpd in 2010. The Sources: Baker Hughes, Spears and Associates
plan for Bhagyam calls for 80 production and water injection wells.
BG Group is working on the Tapti field expansion project, which will boost gas Amerada Hess will soon begin development drilling on the second phase of its
output from 250 mmcfd to 400 mmcfd. Ujung Pangkah oil and gas project off Indonesia that has a production start-up
target of the second half of 2008.
Great Eastern Energy will drill a total of 100 wells over four years at India’s first
commercial CBM project located in West Bengal.
55
Pertamina plans to have the $1.7 billion Donggi area field development project
up and running in 2007.
MALAYSIA
Chevron has decided to proceed with the $6 billion development of the
deepwater Gendalo structure and Gehem Ranngas field. First oil is to flow by
Newfield will drill a total of 10 development wells on its East Belumut and
2010-2012; 10 wells are planned at Gendalo, while the Maha and Gandang
Chermingat offshore fields on block 323 over a two-year period starting in 2007
fields will use subsea tiebacks.
during the first phase of development.
Santos may fast-track development of its 350-500 million bbl Jeruk discovery,
Petronas is developing the Sumandak multi-field complex, set for start-up in
which may be brought onstream in 2008.
early 2008.
ExxonMobil’s Banyu-Urip oilfield development on its offshore Cepu block has
MALAYSIA
finally begun to move forward following a new contract. Production start-up is RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
now expected in late 2008 or early 2009. Land Off Total Land Off Total Land Off Total Land Off Total
2000 0 7 7 0 59 59 0.0 0.5 0.5 $0 $399 $399

Serica Energy plans to fast-track development of its Kambuna gas and 2001 0 11 11 0 171 171 0.0 1.3 1.3 $0 $1,217 $1,217
condensate field off Sumatra; targeting start-up in 2007. 2002 0 14 14 0 130 130 0.0 1.0 1.0 $0 $972 $972
2003 0 14 14 0 157 157 0.0 1.2 1.2 $0 $1,171 $1,171
2004 0 14 14 0 162 162 0.0 1.3 1.3 $0 $1,207 $1,207
Some 15 wells are planned on BP’s Tangguh gas development project, where 2005 0 13 13 0 133 133 0.0 1.0 1.0 $0 $1,087 $1,087
drilling started in 2006 and is expected to last for about two years. A second 2006 Q1 0 15 15 0 38 38 0.0 0.3 0.3 $0 $338 $338
Q2 0 13 13 0 33 33 0.0 0.3 0.3 $0 $293 $293
development phase at BP’s 400 bcf Kepodang gas field will follow in about Q3 0 14 14 0 34 34 0.0 0.3 0.3 $0 $309 $309
2008. Q4 0 12 12 0 30 30 0.0 0.2 0.2 $0 $271 $271
Total 0 13 13 0 134 134 0.0 1.0 1.0 $0 $1,211 $1,211
2007 Q1 0 14 14 0 35 35 0.0 0.3 0.3 $0 $347 $347
Total is developing the Sisi and Nubi gas fields off East Kalimantan, with Q2 0 13 13 0 33 33 0.0 0.3 0.3 $0 $323 $323
production expected to begin in 2007. As many as nine drilling rigs are Q3 0 13 13 0 33 33 0.0 0.3 0.3 $0 $323 $323
Q4 0 12 12 0 30 30 0.0 0.2 0.2 $0 $298 $298
expected to be working at one time as Total brings the fields online in tandem Total 0 13 13 0 130 130 0.0 1.0 1.0 $0 $1,290 $1,290
with the further development of its Tunu and Peciko fields. Total is planning to 2008 0 13 13 0 133 133 0.0 1.0 1.0 $0 $1,382 $1,382
2009 0 14 14 0 135 135 0.0 1.0 1.0 $0 $1,480 $1,480
begin the 12th development stage at Tunu in 2007; work will involve drilling 2010 0 14 14 0 138 138 0.0 1.1 1.1 $0 $1,585 $1,585
another 84 wells at the field. 2011 0 14 14 0 141 141 0.0 1.1 1.1 $0 $1,697 $1,697
2012 0 14 14 0 144 144 0.0 1.1 1.1 $0 $1,818 $1,818
ConocoPhillips’ Belanak offshore field is slated to have a total of 36
development wells. North Bulut, is anticipated to start production in 2009; the
Kerisi-Hiu fields are expected onstream by 2008.
Murphy is seeking approval to develop a cluster of shallow-water gas fields in
offshore blocks 309 and 311, with the intent of starting production in 2008 or
2009 to feed the Bintulu LNG facility. In addition, Murphy is aiming to have its
700 million barrel deepwater Kikeh field in block K onstream in late 2007.
56
Newfield and Petronas are developing the offshore Abu Cluster in PM 318 that
is expected to come onstream in 2007. OGDC plans to develop its $250 million Uch 2 gas field project, which calls for
drilling 15 development wells. OGDC is conducting a fast track development of
Shell’s deepwater Gumusut field in block J off Sabah may be planned for 2008 the Bhulan Shah discovery and others made on the Nim block, and is ramping
using a TLP. up gas production at the Shakardara field in the Kohat district of the Northwest
Frontier Province.
Talisman is targeting mid-2008 for start-up of its Northern Fields oil and gas
development that is in block PM3-CAA in the Malaysian-Vietnam commercial Shell now plans to drill the Anne-1 deepwater wildcat starting in the second
arrangement area. Talisman plans to drill four exploration wells and 15 quarter of 2007 in Indus block E.
development wells for the project.
THAILAND
PAKISTAN
The Carigali-PTTEP B-17 project in the Malaysia-Thailand joint development
The government’s proposed energy policy seeks to encourage exploration and area is now scheduled to come onstream in late 2009 at an initial rate of 270
production; one step it hopes to achieve is to boost the number of exploration mmcfd.
wells drilled to 100 per year, versus the estimate 21 that were drilled in 2006.
A new tender round involving 17 exploration blocks is expected within weeks. Plans for PTTEP’s S1 oilfield call fro 45 development wells and four exploration
wells to be drilled in 2007. PTTEP also plans to install up to 10 wellhead plans
PAKISTAN
in phase 4 development of its Greater Bongkot South gas production area. A
Land Off Total Land Off Total Land Off Total Land Off Total total of 16 development wells and six exploration wells are to be drilled at
Bongkot in 2007. The project is scheduled for completion in 2010. PTTEP also
2000 9 0 10 37 1 38 0.3 0.0 0.3 $193 $12 $205
2001 9 0 9 44 0 44 0.4 0.0 0.4 $240 $0 $240 plans to develop Arthit and Arthit North fields in the Gulf of Thailand with
2002 11 0 11 57 0 57 0.5 0.0 0.5 $330 $0 $330 production from both starting in 2008. A total of 37 development wells are
2003 13 0 13 71 0 71 0.6 0.0 0.6 $409 $0 $409
2004 11 0 11 50 1 51 0.5 0.0 0.5 $285 $13 $298
planned for the Arthit project.
2005 12 1 12 57 1 58 0.5 0.0 0.5 $360 $15 $375
2006 Q1 14 0 14 17 0 17 0.2 0.0 0.2 $117 $0 $117 Pan Orient’s drilling plan for block L44/43 includes 10 firm wells and 10
Q2 17 0 17 20 0 20 0.2 0.0 0.2 $142 $0 $142
Q3 19 0 19 23 0 23 0.2 0.0 0.2 $159 $0 $159 contingent wells, while it will drill two exploration wells on adjacent block
Q4 17 0 17 21 0 21 0.2 0.0 0.2 $145 $0 $145 L33/44.
Total 17 0 17 81 0 81 0.8 0.0 0.8 $563 $0 $563
2007 Q1 20 0 20 24 0 24 0.2 0.0 0.2 $184 $0 $184
Q2 19 1 20 23 1 24 0.2 0.0 0.2 $175 $18 $192 Drilling is underway in support of Pearl Energy’s expansion plan for the Jasmine
Q3 18 0 18 22 0 22 0.2 0.0 0.2 $166 $0 $166 field involves 12 production wells and eight injectors on the B platform, while the
Q4 18 0 18 22 0 22 0.2 0.0 0.2 $166 $0 $166
Total 19 0 19 90 1 91 0.8 0.0 0.9 $690 $18 $707 C platform will have eight producers.
2008 19 0 19 92 1 93 0.9 0.0 0.9 $742 $19 $761
2009 20 0 20 95 1 96 0.9 0.0 0.9 $799 $20 $819
At Chevron’s Pailin field, plans call for construction of two new platforms and
2010 20 0 20 97 1 98 0.9 0.0 0.9 $860 $22 $882
2011 21 0 21 99 1 100 0.9 0.0 0.9 $925 $24 $949 the drilling of 27 development wells.
2012 21 0 21 102 1 103 1.0 0.0 1.0 $996 $25 $1,021
57
VIETNAM
THAILAND
2000 0 8 8 0 48 48 0.0 0.5 0.5 $0 $510 $510
2000 1 5 6 14 203 217 0.1 2.2 2.3 $38 $1,014 $1,052
2001 0 8 8 0 50 50 0.0 0.5 0.5 $0 $557 $557
2001 1 5 6 20 185 205 0.1 2.0 2.2 $62 $972 $1,034
2002 0 8 9 3 58 62 0.0 0.6 0.6 $8 $685 $692
2002 1 7 8 12 232 244 0.1 2.6 2.6 $37 $1,278 $1,315 2003 0 9 9 0 54 54 0.0 0.6 0.6 $0 $627 $627
2003 0 5 5 28 196 224 0.2 2.2 2.3 $91 $1,079 $1,171
2004 0 8 8 1 48 49 0.0 0.6 0.6 $2 $561 $562
2004 0 5 6 19 207 226 0.1 2.9 3.0 $62 $1,140 $1,202
2005 0 9 9 2 52 54 0.0 0.7 0.7 $4 $669 $674
2005 1 7 8 40 352 392 0.3 4.3 4.6 $143 $2,130 $2,273 2006 Q1 0 10 10 0 15 15 0.0 0.2 0.2 $0 $206 $206
2006 Q1 1 9 10 10 108 118 0.1 1.3 1.4 $39 $720 $759
Q2 0 10 10 0 15 15 0.0 0.2 0.2 $0 $206 $206
Q2 1 9 10 10 112 122 0.1 1.4 1.4 $39 $744 $783
Q3 0 10 10 0 15 15 0.0 0.2 0.2 $0 $206 $206
Q3 2 8 9 17 92 109 0.1 1.1 1.3 $67 $616 $683
Q4 0 8 8 0 12 12 0.0 0.2 0.2 $0 $176 $176
Q4 3 7 10 30 84 114 0.2 1.0 1.2 $118 $560 $678 Total 0 9 9 0 56 56 0.0 0.7 0.7 $0 $795 $795
Total 2 8 10 67 396 463 0.5 4.9 5.3 $264 $2,639 $2,903
2007 Q1 0 6 6 0 9 9 0.0 0.1 0.1 $0 $140 $140
2007 Q1 3 9 12 30 108 138 0.2 1.3 1.5 $130 $792 $922
Q2 0 6 6 0 9 9 0.0 0.1 0.1 $0 $140 $140
Q2 2 8 10 20 96 116 0.1 1.2 1.3 $87 $704 $790 Q3 0 8 8 0 12 12 0.0 0.2 0.2 $0 $187 $187
Q3 1 7 8 10 84 94 0.1 1.0 1.1 $43 $616 $659
Q4 0 8 8 0 12 12 0.0 0.2 0.2 $0 $187 $187
Q4 1 8 9 10 96 106 0.1 1.2 1.3 $43 $704 $747
Total 0 7 7 0 42 42 0.0 0.5 0.5 $0 $655 $655
Total 2 8 10 70 384 454 0.5 4.7 5.2 $303 $2,815 $3,118
2008 0 7 7 0 43 43 0.0 0.6 0.6 $0 $705 $705
2008 2 8 10 72 394 465 0.5 4.8 5.4 $327 $3,029 $3,356 2009 0 7 7 0 44 44 0.0 0.6 0.6 $0 $759 $759
2009 2 8 10 74 403 477 0.5 5.0 5.5 $351 $3,260 $3,612
2010 0 7 7 0 45 45 0.0 0.6 0.6 $0 $804 $804
2010 2 8 10 74 403 477 0.5 5.0 5.5 $369 $3,423 $3,792
2011 0 8 8 0 45 45 0.0 0.6 0.6 $0 $853 $853
2011 2 8 10 74 403 477 0.5 5.0 5.5 $387 $3,594 $3,982 2012 0 8 8 0 45 45 0.0 0.6 0.6 $0 $905 $905
2012 2 8 10 74 403 477 0.5 5.0 5.5 $407 $3,774 $4,181
Start-up of ConocoPhillip’s Su Tu Trang (White Lion) gas field in block 15-1 is

planned for 2011. ConocoPhillips will install a wellhead platform and an FPSO
for its 60,000 bpd Su Tu Den (Black Lion) oilfield in block 15-1, where it is also
developing the Su Tu Vang (Golden Lion) oilfield. The block also contains the
VIETNAM Su Tu Nau (Brown Lion) oilfield and the Su Tu Chua (King Lion) oilfield.
The government expects that gas output will double by 2011 to almost 15 billion PTTEP’s CNV oilfield in the Cuu Long basin will start production by the end of
cubic meters per year, mostly used for power generation. Five oil projects 2007.
currently under development are expected onstream by the end of 2008: Bunga
Orkid, Bunga Pakma, Ca Ngu Vang, Te Giac Trang, Song Doc, and Su Tu Talisman is now planning to start production from the Song Doc oilfield in 2008
Vang. at a peak rate of 15,000 bpd. It is also planning development of the Hoa Mai
gas field.
Petrovietnam will begin phase two development of the Dai Hung (Big Bear)
oilfield sometime after Q1 2007.
Vietsovpetro will start production from its Ca Ngu Vang field in 2007 or 2008 at a
rate of 20,000 bpd; its Te Giac Trang field will start production in Q4 2008 at
about 30,000 bpd.
58
CNPC recently signed contract on three deepwater blocks off Maynmar – AD-1,
AD-6, and AD-8. In addition, Sinopec has been working on block D since 2005.
FAR EAST - OTHERS
Total is working on phase 3 development of its offshore Yadana gas field.
Brunei
Daewoo plans to bring on the giant Shwe gasfield it found on block A1 by 2009.
Total will undertake a year-long exploration and development drilling program off FAR EAST - OTHERS
Brunei in 2007. RIGS WELLS FOOTAGE (MIL) SPENDING (MIL)
Cambodia 2000 16 4 19 80 70 150 0.6 0.6 1.1 $412 $738 $1,150

2001 17 2 19 102 51 153 0.8 0.5 1.3 $591 $588 $1,179
2002 20 3 23 110 56 166 0.8 0.5 1.3 $630 $665 $1,295
Chevron will drill 10 wells in 2006 and 2007 to evaluate discoveries it recently 2003 19 4 23 92 47 139 0.7 0.4 1.1 $536 $566 $1,102
made on block A. 2004 21 4 25 119 42 161 0.8 0.4 1.2 $657 $619 $1,276
2005 23 5 28 159 38 197 1.1 0.3 1.4 $931 $502 $1,433
2006 Q1 24 6 31 44 11 55 0.3 0.1 0.4 $280 $161 $441
New Zealand Q2 21 6 27 40 13 52 0.3 0.1 0.4 $249 $177 $427
Q3 22 4 26 42 7 49 0.3 0.1 0.3 $271 $79 $350
Q4 19 8 27 38 15 53 0.3 0.1 0.4 $246 $228 $474
Origin’s Kupe offshore gas field is scheduled to begin production in 2008. Three Total 22 6 28 164 46 210 1.1 0.4 1.5 $1,046 $645 $1,691
development wells are planned, with three additional wells a possibility. 2007 Q1 18 8 26 39 17 56 0.3 0.1 0.4 $277 $304 $580
Q2 21 7 28 42 14 56 0.3 0.1 0.4 $301 $238 $539
Q3 19 5 24 37 9 46 0.2 0.1 0.3 $259 $128 $387
OMV’s Maari offshore field is due to be onstream by Q2 2008 at a rate of about Q4 18 5 23 36 9 45 0.2 0.1 0.3 $253 $128 $381
35,000 bpd. A total of five horizontal production wells and three water injection Total 19 6 25 154 49 203 1.0 0.4 1.5 $1,089 $797 $1,886
wells are planned. 2008 19 6 25 155 49 204 1.0 0.4 1.5 $1,147 $832 $1,979
2009 19 6 25 156 49 204 1.0 0.4 1.5 $1,210 $869 $2,079
2010 19 6 26 157 49 206 1.1 0.4 1.5 $1,282 $919 $2,201
Output from AWE’s Tui is due to start in mid-2007 at an output of 50,000 bpd. 2011 19 6 26 159 49 208 1.1 0.4 1.5 $1,358 $972 $2,329
2012 20 6 26 161 50 210 1.1 0.4 1.5 $1,439 $1,027 $2,466
A total of nine wells are to be drilled starting in Q3 2006. Sources: Baker Hughes, Spears and Associates
Cambodia Papua New Guinea
Chevron has found a 700 million barrel oilfield in block A. Government Production from the Hides, Kutubu, and Moran onshore fields in the Southern
authorities estimate it could be brought online as early as 2009. A 10 well Highlands is planned for 2009. ExxonMobil is the operator for the PNG Gas
exploration drilling program is underway. Project.
Myanmar (Burma)
PTTEP plans to drill seven exploration and appraisal wells on its offshore block
M-9 in 2007.
59
2010. Sinopec intends to develop the Puguang gas field in Sichuan

CHINA province and produce 140 mmcfd in 2008 and double that by 2010. The
Puguang gasfield is located at depths in excess of 15,000 ft.
Onshore
CNPC plans to spend $500 million over the next five years on upgrading
oil and gas production facilities at its aging Daqing oilfield, where crude
PetroChina, the country’s largest natural gas producer, aims to boost gas
output is falling by 40,000 bpd and this year will hit 840,000 bpd.
production by 350 bcf per year to 2,800 bcf by 2010. In 2007 the plan
calls for drilling almost 500 development wells; the three main fields
Shell plans to produce 300 mmcfd from the Changbei gas field in the
targeted for further development in 2007 will be Tarim, Sichuan, and
northwest Ordos basin by 2008. It plans to drill seven wells there in 2007.
Changqing. At the end of 2006 PetroChina was operating about 2,400
gas wells. At the same time the company is in the middle of a program
Total intends to explore and develop the onshore Sulige gas field in the
to overhaul several hundred high-sulfur gas wells in the Sichuan area.
Ordos basin in China’s northwest. Burlington is still in talks to develop
PetroChina also plans to drill a minimum of 3,000 development wells
block 14 in the Ordos basin.
annually at the Daqing oilfield starting in 2006 and increasing to 4,000
wells per year by 2010 in the hope of maintaining output from the
Longer term, the Chinese government plans to spend $100 million over
country’s largest field at 840,000 bpd until 2010 and at 800,000 bpd until
the next 10 years to study the development of natural gas hydrates. The
2020. In the first half of 2006 PetroChina spudded 84 oil and gas wells in
plan calls for trial production of gas hydrates to start between 2010 and
the Tarim basin in northwest China, up 28% from last year. The firm
2015, with commercial production around 2020. Drilling will first take
plans to start production from its Yingmaili gas field by the end of 2006, at
place in the South China Sea.
175 mmcfd that would lift PetroChina’s total gas output from the Tarim
basin to 1.3 bcfd.
Offshore
CHINA CNOOC will be developing 16 offshore projects in 2007. Between 2007

Land Off Total Land Off Total Land Off Total Land Off Total and 2010 CNOOC plans to drill 55 appraisal wells and 20 exploratory
holes in the East China Sea, with most in the Xihu trough near the border
2000 NA 9 NA 10,001 54 10,055 53.5 0.4 53.9 NA $940 NA
2001 NA 11 NA 9,751 63 9,814 51.7 0.5 52.2 NA $1,080 NA with Japan.
2002 NA 9 NA 9,946 53 9,999 76.6 0.6 77.2 NA $905 NA
2003 NA 10 NA 12,234 59 12,293 93.0 0.7 93.7 NA $1,008 NA
2004 NA 11 NA 13,077 165 13,242 96.8 1.8 98.5 NA $2,300 NA PetroChina will develop its C4 block that is part of the Zhaodong oilfield in
2005 NA 15 NA 16,202 220 16,422 119.9 2.3 122.2 NA $2,900 NA Bohai Bay with 24 development wells (13 producers and 11 injectors),
2006 4 17 NA 16,850 244 17,095 124.7 2.6 127.3 NA $3,222 NA
2007 11 18 NA 17,019 259 17,278 125.9 2.8 128.7 NA $3,412 NA
including 16 horizontal wells. First oil is targeted for 2008.
2008 11 18 NA 17,189 259 17,448 127.2 2.8 130.0 NA $3,412 NA
2009 11 18 NA 17,361 259 17,620 128.5 2.8 131.2 NA $3,412 NA
2010 11 19 NA 17,535 273 17,808 129.8 2.9 132.7 NA $3,601 NA
ROC Oil is considering development of its Wei 6-12 and Wei 6-12 South
2011 11 19 NA 17,710 273 17,983 131.1 2.9 134.0 NA $3,601 NA discoveries in the Beibu Gulf using an FPSO. Initial production is
2012 11 19 NA 17,887 273 18,160 132.4 2.9 135.3 NA $3,601 NA expected to be in the 10,000 to 15,000 bpd range. Further appraisal
Sources: Baker Hughes, MI Swaco, Spears and Associates drilling is planned for 2007.
Sinopec plans to develop up to 10 new gas fields in the Sichuan province

over the next four years and lift gas production to 250 bcf per year by
60
RUSSIA output from 1.25 million bpd at present to 1.5 million bpd by 2010. Most
of the work will involve drilling in the Priobskoye and Prirzalomnoye
oilfields. The Purneftegaz subsidiary of Rosneft is developing the Vankor
As of January 2007 MI Swaco reported a total of 274 drilling rigs (272
oilfield in west Siberia that is scheduled to come onstream in 2008,
onshore; two offshore) working in Russia, up 52% from 1/06. Most of the
increasing to 280,000 bpd by 2012.
increase is thought to be due to improved access to Russian drilling
operations by western oilfield service firms, rather than an absolute
TNK-BP will spend between $3.0 billion and $3.4 billion in 2007,
increase in overall drilling activity.
compared to $2.4 billion in 2006, to improve output. TNK-BP will spent
$270 million for pilot development of the Verkhnechonskoye oilfield in
In January, Gazprom approved spending almost $14 billion in 2007 for
East Siberia. Plans call for 20 new wells, comprised of 13 producers and
work on existing fields, development of new projects, and maintenance
7 injectors. Earlier this year TNK-BP purchased Oxy’s 50% stake in the
and construction of new pipelines. Some $1 billion is to be spent on
Vanyeganeft joint venture in West Siberia.
developing the Bovanankovskoye and Kharasaveyskoye gas fields on the
Yamal peninsula. About $800 million is to be spent on developing the
South Russkoye gas field, and some $650 million is to go toward
developing the Shtokman gas and condensate field in the Barents Sea. CASPIAN REGION
Work is also expected on the Prirazlomnoye oilfield in the Barents Sea.
Separately, $4.5 billion is to be spent on pipeline and gas distribution As of January 2007 MI Swaco reported a total of 76 drilling rigs (74
networks – building new lines and upgrading existing infrastructure. onshore; two offshore) working in Kazakhstan, up 19% from 1/06.
ENI now estimates that its Kashagan project will cost $19 billion for
RUSSIA
RIGS WELLS FOOTAGE (MIL) SPENDING (MIL) phase one, in which two 150,000 bpd systems are to become operational.
Land Off Total Land Off Total Land Off Total Land Off Total First oil is now expected in 2010.
2000 40 1 41 4,714 5 4,719 33.8 0.1 33.9 NA NA NA
2001 76 1 77 5,140 5 5,145 36.9 0.1 36.9 NA NA NA Lukoil is developing the offshore Yuri Korchagina field where production is
2002 68 1 69 4,401 5 4,406 31.0 0.1 31.1 NA NA NA
2003 77 1 78 4,505 5 4,510 31.5 0.1 31.6 NA NA NA expected to start in 2008 at the rate of 44,000 bpd.
2004 127 2 129 3,527 10 3,537 29.5 0.1 29.6 NA NA NA
2005 144 2 146 3,802 10 3,812 32.1 0.1 32.2 NA NA NA
2006 244 2 246 4,753 10 4,763 40.2 0.1 40.3 NA NA NA BP expects to boost production from its ACG complex off Azerbaijan bu
2007 275 2 277 4,848 10 4,858 41.0 0.1 41.1 NA NA NA about 250,000 bpd in 2007.
2008 289 2 291 5,090 10 5,100 43.0 0.1 43.1 NA NA NA
2009 303 2 305 5,345 10 5,355 45.2 0.1 45.3 NA NA NA
2010 318 2 320 5,612 10 5,622 47.4 0.1 47.5 NA NA NA CNPC won a contract from Uzbekneftegaz to drill 15 wells in Uzbekistan
2011 334 2 336 5,892 10 5,902 49.8 0.1 49.9 NA NA NA
2012 351 2 353 6,187 10 6,197 52.3 0.1 52.4 NA NA NA
over the 2007 to 2011 timeframe. Drilling will start in Q2 2007.
Sources: MI Swaco, Spears and Associates
Gasprom is expected to soon take operational control of Sibneft, which it

has since renamed Gazpromneft, which it bought in late 2005.
Rosneft is expected to spend about $2.3 billion in 2007 and $2.5 billion in
2008 on upstream projects at Yuganskneftegaz in an attempt to boost
61

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DRILLING AND PRODUCTION

SPEARS & ASSOCIATES, INC.

PRICE OUTLOOK OPEC Productive Capacity, Utilization

78 We are currently tracking approximately 350 oilfield development projects

World Oil Market US Spot Oil Prices ($/bbl)

In an environment characterized over the near term by further increases in

US Weather US Weekly Gas Storage

900 10-yr Ave Degree Days 150

800 2005 Heat+Cool Degree Days

700 2006 Heat+Cool DD

Winter finally got rolling in January, with extremely cold temperatures

We think the story on storage – in combination with gas demand

U.S. Working Gas Storage (bcf) US Gas Demand

1,500 2007 20.5

US Gas Production (TCF)

US Spot Gas Prices ($/mmbtu)

2005 2006 2007

$12,500 10% U.S. Monthly Rig Count

$7,500 -10% 1,900

$5,000 -20% 1,800

Day Rates Inflation Rate 1,600

Directional Horizontal drilling continues to outpace the gain in overall 70

Unconventional as plays also continue to draw in operators who most

US Well Service/Workover Outlook

U.S. DRILLING ACTIVITY

Drilling and Completion

Note: All prices and expenditures are in current dollars.

* Includes dry holes

U.S. DRILLING ACTIVITY

Drilling and Completion

Sources: API, Baker-Hughes, Spears and Associates

U.S. DRILLING ACTIVITY

Sources: API, and Spears and Associates

U.S. DRILLING ACTIVITY

Sources: API, and Spears and Associates

OFFSHORE DRILLING ACTIVITY

Gulf of Mexico West Coast Total

2006 Q1 79 26 139 165 1.9 3 1 14 14 0.1 82 27 152 179 2.0

Sources: API, Baker-Hughes, Spears and Associates

U.S. WELL SERVICE/WORKOVER ACTIVITY

Jobs (000) Workover

2000 546,195 316,888 31.1 26.6 57.7 2,692 1,056

2006 498,454 398,175 27.0 44.3 71.3 2,364 1,573

* Guiberson 1995-June, 2001; Weatherford July, 2001 forward

400 400 100

2005 2006 2007

Canadian Monthly Rig Count Alberta Spot Gas Prices

Day Rates Inflation Rate $10,000 Upgraders

infrastructure shortages are jeopardizing future oil sands projects. Some

IHS Energy’s count of active seismic crews in Canada in January 2007 0

Canadian Well Service/Workover Outlook

We now project that Canadian well service/workover unit activity (as

CANADIAN DRILLING ACTIVITY

CANADIAN WELL SERVICE/WORKOVER ACTIVITY

Jobs (000) Workover

2000 54,559 59,535 5.9 14.8 20.6 557 342

2006 65,799 118,606 6.0 23.8 29.8 779 626

* Guiberson 1995-June, 2001; Weatherford January, 2002 forward

Sources: Baker Oil Tools, Weatherford, CAPP, Spears and Associates