EOG's Natgas Production Up 25% in 2004 in Trinidad & Tobago

US oil company EOG Resources (NYSE: EOG) increased natural gas production from its Trinidad operations 25% in 2004 to 186 million cubic feet a day (mcf/d) compared to 2003, the company said in its 4Q04 earnings statement.

EOG expects production from its Trinidad operations to increase another 20% this year, the statement said.

The company attributes the 2004 increase in natural gas sales to the N2000 1,850 tons/day (t/d) ammonia plant at Point Lisas, which started up in August 2004.

Beginning in July 2005, EOG will supply approximately 60mcf/d to the M5000 methanol plant. Both gas supply contracts are for 15 years. The US$280mn N2000 plant belongs to Nitrogen 2000 Unlimited, which, in turn, is owned by EOG, Trinidad's Clico Energy, Germany's Ferrostaal and US company Kellogg Brown and Root (KBR). Methanol Holdings Trinidad (MHTL) is building the US$500mn M5000 project, which will produce about 5,400t/d of methanol.

In 2004, EOG signed a 20mcf/d gas supply contract with Trinidad's National Gas Company (NGC) for NGC's portion of the Atlantic LNG consortium's Train 4. First production from Train 4 is set for 4Q05.

EOG also signed a 10-year extension and amendments to the pricing terms of its natural gas sales contract for the offshore SECC block. Wellhead natural gas pricing for EOG will have a fixed price component and be partially linked to Caribbean ammonia and methanol commodity prices, the statement said.

"Using current commodity prices, the revised pricing structure is expected to result in higher wellhead netbacks to EOG," the statement said. If the contract had been in place last year, the company would have received a US$0.40/mcf higher price on gas sales, its chairman and CEO Mark Papa said in a conference call Thursday to discuss Q4 results.

EOG has "recently" finalized an agreement with British oil company BP for the Deep Ibis prospect, Papa said. The agreement is now pending governmental approval. BP will finance drilling the well, which is set for September of this year, he said, adding EOG will have a 50% interest in any discovery made.

Companywide, EOG Resources posted profits of US$204mn in the fourth quarter of 2004, compared to fourth quarter 2003 net income of US$71.8mn. For the full year 2004, EOG reported net income of US$614mn, up from US$419mn in 2003.

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