Amid a plan by two companies to merge their refining operations into an oil refining giant, MITI plans to abolish restrictions on petroleum product exports by yearend.
Following liberalization of imports last April, Japan now plans to no longer regulate oil products trading.
The plan will be discussed at the Petroleum Council, along with other ideas for deregulating trading.
Liberalization will facilitate sale of excess gas oil and gasoline, helping refiners improve capacity utilization and cut costs.
Under current rules, exports of oil products require government approval. For each application, the Agency of Natural Resources and Energy studies possible effects on domestic supplies and energy policies of trading partners.
This time-consuming inspection has hindered exports. The bulk of products refined in Japan now go on sale on the domestic market.
The new policy, to be worked out by May, would envision a company handling crude oil purchases, refining, storage, and distribution.
Meanwhile, Showa Shell Sekiyu and Mitsubishi Oil reached broad agreement to form a new firm by 1998, merging their eight oil refineries, according to local reports.
The deal is virtually a merger of the No. 5 and No. 6 oil wholesalers. Only their sales divisions will remain separate.
The new company is expected to surpass Nippon Oil as Japan's largest refiner, accounting for 20% of total crude processing capacity. Japan's crude refining capacity is estimated at 5.2 million b/d. The new firm's daily output, estimated at a little more than 1 million b/d, compares with Nippon Oil's 870,000 b/d.
The merger will be the first since the one in 1984 between Maruzen and Daikyo, which resulted in the formation of Cosmo Oil.
The new company will likely be owned evenly by Showa Shell and Mitsubishi. The merger will proceed in phases to combine the refineries of the two companies first before taking over affiliates' facilities.
Showa Shell tells OGJ reports are largely correct, but stresses nothing has been set in concrete. There are a number of options to be decided concerning the nature of the merger-whether or not it will strengthen the firms' refining operations or be a vehicle to strengthen retailing operations, affecting the shape of the new company and its shareholder structure.
"Nevertheless, both Showa Shell and Shell International view a merger with Mitsubishi in a positive light," a Shell official said. "This is a strategic move, which is part of our ongoing program to improve our position in the Japanese market."
But one senior Japanese oil analyst says there is considerable opposition from certain quarters within Showa Shell following recent revelations concerning a rogue oil trader at Mitsubishi.
"It is very unlikely that a deal will be struck before next year at the earliest," he said.
Iran expects big increases in its natural gas production by 2000, keeping pace with internal demand and requirements of export projects with Turkey and Pakistan.
Disclosing that Iran's gas reserves now total 17% of world gas reserves (see Journally Speaking, p. 25), officials said that country will ramp up gas output dramatically in coming years.
Iran sees its gas production rising to 4.4 tcf in 2000 from the current level of 2.83 tcf.
Gas exports to Turkey are anticipated to begin at yearend 1998 under a $23 billion supply deal signed last year. Other plans include shipping gas to Pakistan via pipeline and LNG shipments to the Far East in 2002.
Talks were slated last week during a meeting of the Iran-India Joint Commission, including discussion of an Iranian plan to build a gas pipeline to India.
Meanwhile, Indian officials are pursuing plans to build a joint-venture fertilizer project at a cost of $350 million in a free-trade zone on Iran's Qeshm Island.
The plant will produce urea and ammonia using Iranian gas as feedstock, and India has agreed to buy the entire urea output to meet its growing fertilizer demand.
Work began last year to update a 1994 feasibility study. India's Iffco and Kribhco will hold a 30% interest in the project, with the remainder to be owned by the Qeshm Free Area Authority.
Oil, gas, and power generation action in Bangladesh may heat up, with word that Royal Dutch/Shell plans a return after exiting in 1990.
Shell is reported to be interested in the country's planned offering of exploration blocks, as well as the potential of Shahbazpur gas field in the coastal district of Bhola, where state-owned Petrobangladesh made a major find in 1995.
According to reports from Dhaka, quoting official sources, Shell may also be interested in a project to convert natural gas into petroleum products at a reported investment of $2.5 billion. Officials say Shell is also interested in power generation projects.
Residential gas customers in the Dorset and Avon areas of England are now part of the U.K.'s liberalized gas market.
That area of southwest England, with 500,000 residential customers, is the latest to be opened to competitive gas supply.
Regulator Office of Gas Supply says more than 90,000 households are now supplied by recent gas market entrants after the residential sector was opened in April 1996 (OGJ, Oct. 14, 1996, p. 23).
U.S. oil and gas companies continue to add efficiencies and increase reserves and production.
Coastal reports its E&P units more than tripled production from the Gulf of Mexico in 1996, increasing levels to 145 MMcfd at yearend 1996 from 47 MMcfd the year before.
The company says the increased production stemmed from exploration and development drilling on blocks in its existing inventory, as well as from exploitation drilling on additional producing blocks acquired during the last 2 years.
Citing benefits from its refocused exploration program, Amoco replaced more reserves than it produced for the fourth consecutive year, improved finding costs, and achieved a "world-class" wildcat success rate.
Amoco's most significant reserve additions were off Trinidad, where it has discovered more than 8 tcf of gas resources since 1994. It expects to book more than 2.5 tcf in reserves from Trinidad projects this year, mostly associated with its supply contract for Trinidad and Tobago's LNG export project (OGJ, Dec. 16, 1996, p. 12).
Amoco cut its average finding cost to a little more than $4/bbl the last 4 years, slightly better than the industry average, and its wildcat success rate was a "world-class" 44%, the company says.
Chevron replaced 112% of its production in 1996, for the fourth consecutive year. Its worldwide replacement rate was 106% for liquids and 128% for natural gas.
"Our worldwide net liquids production of 1,043,000 b/d was our highest oil production level since 1985," said Chairman Ken Derr.
"In addition, in the fourth quarter, Chevron U.S.A. Production Co. reversed its decline in oil and gas production."
United Meridian replaced 226% of total production, continuing a company trend of more than replacing its reserves the past 7 years.
"This year, for the first time since UMC's inception, the success of our international exploration efforts generated more reserve additions than its North American counterpart," said Chairman and CEO John Brock.
It's becoming more dangerous for expatriate oil personnel.
Searches were continuing at presstime last week for U.S. engineers employed by Production Operators and Halliburton Energy Services, kidnapped in Venezuela and Yemen, respectively.
In Nigeria, reports said a French engineer working for Elf Aquitaine was shot and killed in an ambush by gunmen.
In Colombia, state-owned Ecopetrol plans to launch a nationwide ad campaign to help safeguard the country's main oil pipeline from Cano Limon to the Caribbean, a frequent target of attack during the last decade.
The pipeline has experienced 426 dynamite explosions since it began operating in 1986, and it was attacked 47 times during 1996 alone.
During 10 years, more than 1.4 million bbl of crude have been lost. Oxy and Shell will help pay for the campaign, to be launched before the end of this month.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
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