The world crude oil surplus has finally begun to undercut prices.
Prices held up well for awhile in the face of high levels of OPEC production, but the turning point came with removal of a threat against Soviet oil exports. Western Siberian oil workers postponed until Apr. 30 a decision whether to strike over poor living and working conditions (OGJ, Apr. 2, p. 28).
North Sea Brent blend for May delivery drifted from $18.25/bbl through the $18/bbl level, then dropped sharply to about $16.50/bbl on the Soviet news and a Middle East Economic Survey report that March OPEC production was 24.1 million b/d compared with the IEA's estimate of 23.7 million b/d.
Oil traders had expected prices to fall in the second quarter unless there were signs of restraint from OPEC.
Last month's ministerial monitoring committee meeting signaled a lack of concern for the second quarter situation. Exporters appear ready to sit out a price slump and wait for the driving season in the U.S. and Europe.
MEES laid the big OPEC production increase to a sharp jump in Iranian output. Iran's production averaged 3.15 million b/d, compared with 2.8 million b/d in February.
In the U.S., WTI futures for June delivery closed Apr. 10 at $17.68/bbl, down $2.62 on the week and the lowest since February 1989. Posted prices began to adjust and were expected to settle at little more than $16/bbl for 40 gravity crude based on .the latest spot and futures prices.
Closing prices of natural gas futures for June delivery spent the first week of trading in New York at $1.615-1.637/MMBTU.
Enron Gas Marketing Inc. unveiled a service program it said unbundles delivery service from pricing. Enron designated four pricing points from which customers can buy and sell gas on a firm basis at a specified period in the future.
The points are Wharton, Tex., for Texas and the southern region; Waha, Tex., for California; Henry, La., for eastern markets; and Kiowa County, Kan., for the Midcontinent region. The program contains a swap option for customers that do not desire to take delivery of gas.
Natural Gas Clearinghouse Inc., Houston, completed acquisition of a 507, interest in Apache Corp.Is 200 mile Nagasco gas gathering system in the Anadarko basin of Oklahoma and Texas.
NGC will operate the system, moving 140 MMcfd of gas.
It also plans to form a supply pool to accommodate independent producers desiring to commit gas long term--but not to a single pipeline--and reduce gas marketing overhead.
It has begun trading gas futures, will aggressively compete for crude oil purchases-trades, and conduct "BTU trading."
ABB Lummus Crest Inc. reported start-up of three grassroots ethylene plants in Asia, where rapid demand growth is pacing big petrochemical expansions in the 1990s (see story, p. 26, and OGJ, Apr. 9, p. 24).
They are a 300,000 metric ton/year plant at Shanghai Jinshan, China, operated by a Sinopec unit; a 315,000 metric ton/year ethane-propane based plant at Map Ta Phut Industrial Estate in Rayong, Thailand; and a 250,000 metric ton/year plant at Yeachon, South Korea, owned by Honam Ethylene Co.
All three use ABB Lummus Crest's short residence time (SRT) pyrolysis process. In China, SRT ethylene plants are also under construction at Panjin, Fushun, and Puyang Henan provinces in addition to those operating at Beijing, Nanjing, and Qilu.
A third refinery planned by Chinese Petroleum Corp., the Taiwan state concern, probably will be built in Hawaii instead of Taiwan, says CPC Pres. Kuan Yung-shih.
The refinery, planned for several years, has been delayed by protests from Taiwan's growing environmental movement. Hawaii tops the list of overseas sites because of its proximity to Alaskan oil supplies and Taiwan's need to improve its trade balance with the U.S.
CPC also will acquire Huffington Corp., Houston, through CPC's Opicoil America Inc. affiliate based in Houston.
Huffco, which sought a purchaser in November, controls a 20% voting interest in an Indonesian joint venture formed in 1968 to explore for oil and gas in East Kalimantan.
The joint venture, with affiliates of Union Texas Petroleum Holdings Inc., Ultramar plc, and Universe Tankships Inc., supplies gas to one of the world's largest liquefied natural gas plants. CPC, which signed a 20 year contract in 1987 to buy LNG from Indonesia's Pertamina, recently began receiving LNG cargoes from the joint venture's plant (OGJ, Apr. 9, p. 40). Huffco also owns extensive real estate assets in Houston.
Orders for 26 tankers with double hulls or bottoms have been placed with Japanese shipbuilders during 1 90.
Fearnleys Shipbrokers, Oslo, said the contracts call for standard designed tankers and give the buyer an option to convert to a double hull later.
The brokers' monthly report says VLCC construction prices in Japan are about $75 million with options for a double hull, exercised at the design stage, costing an extra 15%.
Building new vessels for the domestic market dominates the Japanese shipbuilding industry, Fearnleys noted. This has been spurred by rising demand for crude oil transportation and the need to replace existing tonnage.
The report says as many as 24 VLCCs are currently on order with Japanese yards, all for completion by yearend 1992.
It adds that the tanker market looks promising for the next few years but warns that the boom could be shortlived because of speculative ordering of tonnage.
Enactment of U.S. double hull legislation could have a dramatic effect on the situation, it added.
California regulatory officials aren't through with sweeping environmental programs affecting the petroleum industry.
Having adopted the most stringent environmental rules ever seen in its air quality management plan last year, the South Coast Air Quality Management District is focusing on purported global warming from the greenhouse effect.
Scaqmd wants to draw up rules requiring recycling of chlorofluorocarbons from air conditioners and refrigerators and phasing out CFCs and halons in fire extinguishers and to study ways to cut carbon dioxide emissions 20% by 2000 and 40% by 2010.
The U.S. Department of Energy is concerned about the Clean Air Act reauthorization bill the House energy and commerce committee has reported to the floor.
DOE said an acid rain prevention provision would destroy its Clean Coal Technology program with midwest utilities.
"This short sighted action will preclude development of advanced repowering technologies that are not only extremely clean but provide for more efficient power generation," DOE said.
Canada's National Energy Board has approved an average 31.2% tariff hike for Trans Mountain Pipe Line Co. Ltd. in 1990.
NEB said about two thirds of the increase is attributable to a 52% increase in the rate base, reflecting a $57 million expansion in 1989 and improvements of nearly $9 million this year. One third is for higher operating expenses.
Cretaceous Austin chalk horizontal drilling fever is moving east from the Pearsall, Tex., area to less densely drilled Gonzales, Wilson, and Karnes counties, says Paramount Petroleum Co., Houston.
Paramount since third quarter 1989 has developed prospects, with liberal use of recent geophysical technology, and acquired more than 30,000 acres in the tricounty area, which produces oil from the chalk and underlying Buda formation.
The company is seeking partners for a large horizontal drilling program.
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