Looking for oil and gas around the globe
Production kept at a high level
Achimgaz to start production in mid-2007
Large investments in the search for new deposits
Kassel. In spite of a planned oil production standstill for maintenance in Libya and production restrictions imposed by OPEC toward the end of the year, Wintershall succeeded in 2006 in maintaining its oil and gas produc-tion totaling 111 million barrels oil equivalent or 14.8 million tonnes oil equivalent at the high level reached in 2005. Although crude oil and con-densate production declined year-on-year by 2.7 percent to 8.5 million ton-nes, natural gas production rose by two percent in 2006, to 7.5 billion cubic meters, primarily due to the first full year of production from the Carina and Aries fields off the coast of Argentina.
Wintershall, Germany’s largest crude oil and natural gas producer, has in-ternational activities in selected core regions, where the company has built up a high level of regional and technological expertise: These are Europe, North Africa, South America, as well as Russia and the Caspian Sea region As part of its “Gas for Europe” strategy, one of its focus areas is to develop and produce natural gas reservoirs in Europe and surrounding countries. In the implementation of this strategy, the Company relies primarily on strong partnerships for the development of new projects. The prime example of this type of strategic partnership is its cooperation with the world’s largest natural gas producer, OAO Gazprom.
Investments of 524 million euros
Wintershall’s Exploration and Production sector spent a total of 524 million euros on exploration, investments, and acquisitions in the search and de-velopment of new oil and gas deposits in 2006 (2005: 492 million euros). Of this amount, 221 million euros were spent in Europe (2005: 239 million eu-ros), 138 million euros in North Africa, including the Middle East (2005: 89 million euros), 62 million euros in South America (2005: 94 million euros), and 102 million euros in core region of Russia and the Caspian Sea region (2005: 70 million euros). The most significant capital spending projects in-volved the development of the Achimov horizon in a section of the Urengoy gas field, where Wintershall and OOO Urengoigazprom together operate the ZAO Achimgaz joint venture, as well as the commissioning of a new gas field in the Dutch sector of the North Sea and the development of new oil and gas reserves in Libya and the Netherlands.
14 wells identify new deposits
In 2006, Wintershall took part, either directly or through subsidiaries, in 32 completed exploration and appraisal wells – twice as many as in the year before. 14 (2005: 11) of these have discovered new crude oil or natural gas reservoirs1. The results of a further ten exploration wells were not available as of the end of the year. The good discovery rate is also due to the fact that in the past few years, Wintershall focused primarily on nearfield explo-ration, i.e., in close proximity of known deposits. This generally leads to a higher success rate. But in future Wintershall will shift its efforts to include more greenfield exploration projects in areas where oil and gas have al-ready been proven, but not near any known deposits.
In 2006, the Mittelplate offshore field, in which Wintershall and RWE DEA AG each hold a 50 percent interest, made the most significant contribution to the production volume in Germany. The Mittelplate offshore oil field, which has proved initial reserves of around 200 million barrels, is Ger-many's largest known oil deposit. In 2006, a new drilling rig was commis-sioned on the production island in the North Sea tidal flats. With invest-ments totaling 50 million euros, this rig is one of the most modern such fa-cilities in Europe. It allows wells to be drilled within a radius of 6,000 meters around the artificial island, covering distances of up to 10,000 meters. This now also allows wells to be drilled into oil-bearing sandstone strata that were previously inaccessible.
In what is known as the Entenschnabel in the German sector of the North Sea, Wintershall operates the only German offshore production platform with an annual production volume of around one billion cubic meters of natural gas. The BASF subsidiary has a 49.95 percent interest in the A6-A platform. To accelerate production and increase the reserves, the A6-A5a appraisal well successfully started production last year.
In the southern part of the German North Sea sector, Wintershall was awarded a total of nine oil and gas exploration blocks with a term through 2009. Concession B 20 001 of the German North Sea Consortium in the Entenschnabel has been extended by one year.
The tight-gas exploration well Leer Z4, which was drilled in 2005, started producing in the middle of 2006. Tight-gas reservoirs are characterized by gas that is embedded in highly compact, almost impermeable rock. With multiple-frac technology, the rock of the deposit is fractured in several places below ground to make it easier for the gas to enter the well. At Leer in Northern Germany, Wintershall cooperates with Gaz de France Produk-tion Exploration Deutschland GmbH (operator).
Wintershall is one of the biggest gas producers in the Netherlands and operates at total of 25 offshore platforms in the southern sector of the North Sea. The new L5-C natural gas field came on stream in November 2006. The gas is produced from a refurbished production platform, which had provided many years of service as platform K10-V and has now been com-pletely modernized. Within only seven months, this facility was dismantled, refurbished, refitted, and shipped to its new location.
Field E18-6 is another discovery, made in 2006, of a deposit near the exist-ing F16-A platform. The field is to be connected to the platform. The F16-A is Wintershall’s biggest platform in the Dutch sector of the North Sea.
Many of the gas production platforms in the Dutch sector of the North Sea will in future be controlled by a telemonitoring system. The satellite-based system is expected to start operating in mid-2007.
Rijswijk near The Hague is home to the corporate-wide competence center for offshore technology. At this center, Wintershall is also advancing its shallow-water expertise. The expansion of offshore expertise is generally gaining importance in the exploration and production of oil and gas, and the company also applies this expertise to its activities in other regions of the world. Thus, the Company, which has had activities in the southern sector of the North Sea since 1965, has expanded its operations into the British, Danish, and Norwegian sectors.
In Denmark’s sixth licensing round, Wintershall was awarded North Sea exploration blocks 4/06 through 6/06 covering a total area of around 1,600 square kilometers. The areas are near German territorial waters. Winter-shall operates all these blocks and has an interest of 35 percent in each of them. In Norway, subsidiary Wintershall Norge A.S. opened a representa-tive office in Oslo in April 2006. In September, Wintershall farmed into li-cense PL273, headed by U.S.-based Conoco, by acquiring a 25 percent interest. Block PL353 was returned at the end of the year. In Great Britain, one well proved a gas deposit, one exploration well proved unsuccessful and was plugged, and drilling started on a development well.
Wintershall is the first foreign company after 1989 to discover commercially recoverable hydrocarbons in Romania. As early as 2004, Wintershall started production in a gas field in Sighisoara in Romania.
Russia and the Caspian Sea region
In Russia, we participate in the development of the Achimov formation in a section of the Urengoy field in Western Siberia through the ZAO Achimgaz joint venture. Our partner, Gazprom subsidiary OOO Urengoigazprom, and Wintershall each have a 50 percent interest in Achimgaz. In 2006, less than three years after the joint venture was established, the first production wells were completed successfully. Construction of the above-ground facilities has meanwhile progressed to such an extent that operations are expected to start in mid-2007. In 2006, Wintershall continued to expand its long-standing partnership with Russia’s OAO Gazprom. In another joint project with Gazprom in Western Siberia, Wintershall will acquire an interest of 25 percent less one share in Severneftegazprom (SNG), which owns the license in the Yuzhno Russkoye natural gas field. In addition, we will re-ceive additional non-voting preference shares, which will take our share of the rewards generated by the Yuzhno Russkoye gas field to 35 percent less one share.
3D seismology is being used for the first time in the Volgograd production field – to date, this sub-surface area had only been surveyed with 2D tech-nology. Here, Wintershall and Russia’s largest oil producer Lukoil have been producing oil through the Volgodeminoil joint venture for more than a decade. Volgodeminoil is now the longest-standing joint venture for hydro-carbon production between a Russian and a Western European partner. Two exploration and appraisal wells were successful in 2006, and drilling started on a third well.
To build on its exploration activities in the Caspian region, Wintershall has also opened a branch office in Ashkhabad, Turkmenistan. In Turkmenistan, Wintershall acquired a 20 percent interest in each of two offshore ex-ploration blocks. The exploration activities started there continued in 2006. Wintershall started new business activities in Azerbaijan, where an exclu-sive agreement for the assessment of possible offshore deposits was con-cluded.
Wintershall has been engaged in exploration and production in Libya since 1958. The Company operates eight onshore oil fields. Wintershall also pro-duces from the Al Jurf offshore field in the Mediterranean Sea off the Lib-yan coast as part of a consortium with the Libyan National Oil Corporation (NOC) and French oil producer TOTAL.
Near Jakhira, the Company also operates a gas conditioning facility, which conditions the associated gas and transports the resulting products, gas and condensate, for sale on the coast. Wintershall has already invested more than 1.2 billion U.S. dollars in Libya and drilled a total of over 120 wells.
Wintershall is the leading foreign oil producer in Libya and is also regarded as the technology leader in that country. It is one of only a few companies that do not flare the gas associated with crude oil production and thus makes a significant contribution to reducing CO2 emissions. The central processing facilities of the Nakhla and As Sarah fields are used to process the increasing volume of oil and associated gas from the N field, which is currently under development. Following the integration of the Hamid field in December 2006, flaring has now finally ceased and all the associated gas is processed further.
The expansion of existing onshore fields continued in 2006, and Wintershall started the development of new oil discoveries. The N6-97 was the last well to be drilled as part of the first development phase of the N field in conces-sion 97. One of the five appraisal and exploration wells completed in Libya in 2006 discovered oil; the result for two wells was still outstanding. The drilling of another well had not been completed as of the end of the year. One well did not discover any oil.
Under the third international EPSA-IV licensing round in Libya, Wintershall acquired the license for an onshore exploration area measuring 11,500 square kilometers. Wintershall had submitted its bid as part of a consortium with the Japanese MOECO (Mitsui Oil Exploration Company Ltd.); it has a 65 percent interest and will operate the venture. The exploration of hydro-carbon reservoirs is expected to start early in 2007 with geological and geophysical studies.
A significant proportion of the seismic survey activities that Wintershall will carry out in 2007 will be focused on Libya. Off the Libyan coast alone, geo-physical measurements will be taken of an area of more than 2,000 square kilometers.
In Mauritania, the contracts for the Ta5 and Ta6 onshore blocks were offi-cially ratified in 2006. The geophysical surveys in this area have started.
In Dubai, Wintershall has a five percent interest in the biggest local off-shore oil concession with production activities. The consortium will return the concession, in which Wintershall holds a minority interest, to the State of Dubai in 2007. In Qatar, an appraisal well proved hydrocarbons, but wa-ter penetrating the well meant that it had to be plugged because production would not have been economically viable.
In Argentina, Wintershall has interests in oil and gas fields offshore Tierra del Fuego and in the Neuquén basin; both areas rank among the most promising hydrocarbon reserves in Argentina. Off the coast of Tierra del Fuego, the development of the Carina and Aries fields continued. Produc-tion from the Aries field started in early 2006. By 2027, these two fields are expected to produce a total of 56 billion cubic meters of natural gas, 3.4 million tonnes of condensate, and 2.4 million tonnes of LPG. To date, a total of 440 million U.S. dollars has been invested in the development of this project. Wintershall’s subsidiary Wintershall Energía has a 37.5 percent interest in this venture.
One of Wintershall’s most important projects in Argentina in 2006 was the development of the Aguada Pichana field in the Neuquén basin.
Outlook: Oil and gas production to increase to 140 million barrels
In 2000, the Exploration and Production sector was set the target of in-creasing oil and gas production in the first decade of the new millennium by 50 percent – in terms of volume, the target was 120 barrels oil equivalent. The encouraging growth experienced to date and the positive outlook for the oil and gas segment have caused BASF to specify highly challenging, yet achievable targets for oil and gas production. As a result, oil and gas production is to increase to around 140 million barrels oil equivalent by 2010.
To achieve this, the Company wants to keep its expenditure on searching for new fields and expanding existing ones at a high level: The Company is planning to invest over 475 million euros in this segment in 2007 alone.
In 2007, the search for oil and gas will be driven by seismic surveys planned around the globe, in Libya, Qatar, Russia, Denmark, as well as in Germany, covering a total area of around 5,500 square kilometers.
Wintershall is a wholly-owned subsidiary of BASF Aktiengesellschaft in Ludwigshafen. The company has been active in the exploration and pro-duction of crude oil and natural gas for over 75 years. Today, the company is Germany's largest crude oil and natural gas producer.
Wintershall. Shaping the future.
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Forward-looking statements and forecasts
This release contains forward-looking statements under the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current expecta-tions, estimates and projections of the board of executive directors and currently available information. They are not guarantees of future performance, involve cer-tain risks and uncertainties that are difficult to predict and are based upon assump-tions as to future events that may not prove to be accurate. Many factors could cause the actual results, performance or achievements to be materially different from those that may be expressed or implied by such statements. Such factors include those discussed in BASF’s Form 20-F filed with the Securities and Ex-change Commission. We do not assume any obligation to update the forward-looking statements contained in this release.