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U.S. Industry Scoreboard 12/4 Table (76918 bytes)

Winter weather has shunted OPEC into the background for oil markets, as oil prices in late November pushed to 5 month highs.

Brent crude for January closed Nov. 28 at $17.18/bbl, its highest since OPEC's June meeting. Merrill Lynch says oil prices in the U.S. were boosted by the onset of winter weather, resulting in high demand for heating oil at a time when U.S. stocks are low. A threatened strike by oil workers in Venezuela - which exports most of its crude output to the U.S.-added to volatility.

Weather Service Corp., Boston, says temperatures in key areas of the U.S. Northeast so far this fall are about 30% lower than last year, "with a particularly cold November catching some in the oil industry unawares."

London's Centre for Global Energy Studies (CGES) says the loss of 400,000 bid of Mexican crude supplies owing to hurricane damage coupled with an expected jump of 500,000 b/d in oil consumption in response to cold weather will tighten the fourth quarter supply/demand balance by the equivalent of about 12% of U.S. consumption. CGES estimates OECD countries held crude and products stocks equal to 62 days of consumption, 2 days less than a year ago. U.S. consumption coverage was down by 4 days.

Cold weather in the U.S. and higher than expected withdrawals from storage has prompted Salomon Bros. to hike its forecast of 1996 U.S. wellhead gas prices. If cold weather persists, storage levels by Jan. 1 could decline to 50% of working gas capacity or less compared with 80% Jan. 1, 1995. The analyst contends that could result in LDCs scrambling for gas in the field, which in turn could boost U.S. wellhead prices to as much as $1.75/MMBTU.

Longer term, oil prices will remain relatively low in real terms.

Shell International Director Ferdinand Berger told a Dubai forum the price of Dubai crude will remain at $12-18/bbl in the next decade. Part of the problem, he contends, is many producers have spent heavily to increase productive capacity and are under heavy pressure to use it to recoup investments. If the signifi- cant excess capacity waiting in the wings should begin coming on line, he said, crude prices could plunge to almost the cost of a marginal barrel.

Although OPEC rolled over its 24.52 million b/d quota the next 6 months as expected (see story, p. 38), Berger estimates OPEC potential capacity at 36 million b/d. Iraq within a year after its oil embargo is lifted could ramp up production to 2.5-3 million b/d. Producers' only recourse, he contends, is to offset effects of low prices by using technology to cut costs.

Poland has joined the long list of countries liberalizing their petroleum sectors, approving a long awaited restructuring program that includes privatizing certain downstream assets. Industry Minister Klemens Scierski says the country's seven state owned refineries by yearend will be consolidated with CPN distribution network into one company - Nafta Polska SA - to trim operating costs and generate revenue to modernize the industry. An estimated $3-3.5 billion will be needed by 2000 for the task.

Scierski says the government by yearend 1996 could offer private investors interests of 20-30% in state refineries, especially the two largest, at Gdansk and Plock. Poland's petroleum industry generates revenues of $400 million/year, and the state plans to retain control of pipelines and E&R

U.S. and Canadian gas companies continue to position themselves to play big roles in gas industry reforms under way in other countries.

TransCanada and NorAm Energy plan to join with Mexican construction firm Gutsa to build, own, and operate a gas utility in Mexico City. Each company would have a one-third interest in the new company, Distribucion de Gas Natural (DGN). This follows Mexico's steps to set up the legal framework for reforms to the country's gas industry (see related story, p. 36). No financial details were disclosed, but Gutsa says the project would require 10 years to develop. Pemex would deliver gas through its pipelines to a proposed DGN distribution system.

Consolidated Natural Gas and Australia's largest electric utility MetNorth Energy (MNE) plan to form a strategic alliance to take advantage of Australia's restructured energy industry. It will focus on expanding gas marketing capabilities and helping MNE's industrial and commercial customers find gas or power solutions to fit individual energy needs.

The combine also intends to jointly develop energy projects in Australia and Asia. MNE, with 1.3 million customers in New South Wales, was formed Oct. 1, 1995, by merging LDCs Sydney Electricity and Orion Energy.

It will continue to be a buyer's market for Canadian gas in the U.S. in the near term. Richard Harrop, president of Petroleum Communication Foundation, says weak Canadian wellhead prices, resulting mainly from heavy drilling in 1994 and insufficient export pipeline capacity, will not rise for another 2 years. David Manning, president of Canadian Association of Petroleum Producers, says lack of export capacity is causing local gas on gas competition.

A proposed 700 MMcfd expansion of Northern Border pipeline system from Alberta to the U.S. Midwest is not expected to be on stream until late 1997.

CAPP recently said Canadian gas prices in 1996 likely will remain flat, averaging $1.35-1.40 (Canadian)/Mcf. Spot prices dipped as low as $1.20/Mcf when the new contract year opened Nov. 1. The low prices are expected to cause continued merger and acquisition (M&A) activity among Canadian firms.

Sayer Securities says Canada's M&A scene this year has been marked by more uncharacteristically unsolicited takeover attempts.

Low gas prices, production curtailments, or high finding costs have revealed the vulnerability of many Canadian companies. Among the more widely publicized battles were the fight between Amoco Canada and Andersen Exploration for Home Oil and between Ranger Oil and Gulf Canada for Czar Resources. Still, Sayer says oil and gas M&A activity in Canada was down for the first 9 months of 1995, with 81 transactions worth about $5.2 billion (Canadian), compared with 83 deals valued at $5.5 billion a year earlier.

Canadian Environment Minister Sheila Copps is drawing opposition from industry and several provinces over a number of environmental proposals. Copps says new economic measures might be needed to help lessen effects of smog, which she estimates costs Canadians billions of dollars in health care.

However, Canada's petroleum, power, and coal industries have agreed to cut greenhouse gas emissions voluntarily where possible, and CAPP warns that if Copps continues to press for new energy taxes, companies might have to abandon voluntary efforts. A recent OECD report recommends Canada consider energy taxes to reshape energy consumption patterns.

CAPP says a new energy tax would amount to a carbon tax, causing job losses and hurting Canada's economy. Other top Canadian officials, including Prime Minister Jean Chretien, say there will be no carbon tax.

Meantime, provincial governments in Alberta, Nova Scotia, Quebec, New Brunswick, and Saskatchewan have asked Copps to reconsider legislation to ban MMT, now awaiting final approval in Canada's parliament. Canadian Petroleum Products Institute says a ban would cost refiners $90 million. The auto industry says MMT fouls emission control systems on new cars.

Ottawa soon will consider tax changes that would open Canada's oil-sands industry to new investments of as much as $2 billion (Canadian), says Syncrude Canada Pres. Eric Newell. He earlier believed the federal government might defer business issues to deal with constitutional problems in Quebec, where voters Oct. 30 barely rejected a proposal to leave the Canadian confederation. Syncrude officials returned to Ottawa last month to resume talks on tax issues related to oilsands development. Newell says companies considering investments in oilsands won't proceed until they can accurately forecast returns, and an agreement in principle with Ottawa will be needed by yearend if tax law changes are to be included in a federal budget next spring.

YPF and British Gas have agreed to jointly study hydrocarbon potential of exploration blocks around the Malvinas (Falkland) Islands and might bid in the licensing round launched recently by the Malvinas government.

YPF has in depth knowledge of the region and BG considerable expertise in frontier E&P in harsh offshore environments.

U.S. EPA has granted the first ultralow emission vehicle (ULEV) certificate - the standard closest to zero emission vehicle certification-for heavy duty natural gas fueled engines to the TecoDrive 4300, a 4.3 1. GM gasoline engine modified to run on gas by units of Thermo Electron Corp.

Developed by Tecogen and built by Crusader Engines, TecoDrive 4300's emissions are less than 6% of EPA's standard for nonmethane hydrocarbons, less than 16% for CO, and less than 45% for NOx. Thermo Power field tested the engine in collaboration with American Trucking Association's Trucking Research Institute and UPS. UPS will install 276 of the engines in fleet vehicles. U.S. DOE in part sponsored development and field testing of the engine.