Table of Contents

• JV starts up grassroots refinery in Malaysia
  PSR-2 is the largest initial-dollar investment ever made by Conoco Inc. in a refining project. The vacuum unit is in the center of the photo, the tall column on the right is the crude tower, and the right-most vessel is the hydrocracker reactor. About this report... In this year's annual Refining Report, Thi Chang, Refining/Petrochemical Editor, focuses on two Asian grassroots refineries, one in Malaysia and the other in Taiwan. Also in this report is coverage of major refinery upgrades in
• Formosa to build new refinery by yearend
  Formosa Petrochemical Corp. is busy building the first phase of its new 450,000 b/d refinery in Mailiao, Taiwan. The entire refinery will be completed at the end of 2000. The red reactors for the atmospheric-resid desulfurization (ARDS) unit are shown in the back and associated fin-fan exchangers are in the front. Construction workers are bolting U-bend piping to the top of the ARDS reactor. The ARDS units will have two trains, each with a capacity of 70,000 b/d (Fig. 2).
• Valve-actuator controls for Taiwan refinery nearly complete
  AT THE END OF 1997, FORMOSA PLASTICS CHEMICAL CO., Kao Hsiung, Taiwan, contracted Rotork Controls Ltd. to provide nearly 3,000 valve actuators and associated control systems. The new equipment will be installed in Formosa's new 21 million metric ton/year grassroots refinery at Mailiao, to be completed in 2000. Rotork is providing its Pakscan two-wire digital control system to operate about 2,000 Rotork IQ intelligent valves. As of December 1998, 49 Pakscan IIE masterstations had been built
• Beau Canada has tight focus on gas, NGL at home, takes plunge in Cuba
  Calgary-based Beau Canada Exploration Ltd. is using a tight focus on natural gas and liquids in its own geological backyard to counter the current oil price slump. The company also maintains stringent control on costs in the specific areas of the Western Canada sedimentary basin where it operates. That is a current textbook strategy for many companies, but the firm has also made a radical and relatively quick turnaround in its main business line.
• U.S. energy firm compensation squeezed by oil price slump
  About 94% of U.S. energy firms have taken steps to cut their compensation benefits due to the downturn in oil and gas prices (see table). In fact, of the 222 energy firms surveyed Jan. 8 by the Lakewood, Colo.-based consulting firm, Effective Compensation Inc. (ECI), only 13 had not altered their compensation practices for the preceding 6 months. Taking the hardest hits were drilling contractors and exploration and production (E&P) companies, said ECI. Of those surveyed, 62% of the drilling
• Oil too crucial to be left to fluctuations of markets
  It is common knowledge that the oil industry is going though dire times. Prices have collapsed to levels unimagined a couple of years ago. The seeds of the current crisis were planted in the midst of the short-lived upturn of the mid-1990s. In an orgy of investment, unwarranted optimism, and reckless expansions in production capacity, the oil industry put in motion a trend that has inflated inventories and flooded the world with oil. The consequences were obvious, but the signs went unheeded
• Crude oil price rises as OPEC pledges cuts
  A new pledge by the Organization of Petroleum Exporting Countries (OPEC) and a number of non-OPEC producers to reduce global oil production by more than 2 million b/d has buoyed crude oil prices.
• U.S. industry skeptical about an increase in crude oil price
  Oil industry representatives are treating a recent rise in the price of crude oil with caution. At the ninth Oilfield Breakfast Forum in Houston on Mar. 12, talk was more of fundamental change in the industry than of a quick return to the prosperity of 1996-97. The day before the forum, the New York Mercantile Exchange futures price for light, sweet crude closed at $14.31/ bbl, nearly $2/bbl more than its low of mid-February.
• White House officials hear industry's pleas
  Oil industry representatives said they had a productive meeting with White House officials last week regarding the industry's depression. U.S. Energy Sec. Bill Richardson arranged the meeting and moderated most of it. Twenty oil company and trade association officials met for an hour with Treasury Sec. Robert Rubin, White House Chief of Staff John Podesta, and National Economic Council Director Gene Sperling.
• U.S. upstream lost 8,900 jobs in February
  The American Petroleum Institute says the oil industry depression continued in February, with U.S. crude production falling 6.8% from a year ago to 5.946 million b/d, and a further 8,900 petroleum jobs being lost. API said the additional 8,900 U.S. upstream jobs lost in February brought the total petroleum employment decline since December 1997 to 51,400 jobs, or more than 15% of the work force. It said early 1999 production was at the lowest level in nearly 50 years. And wellhead prices
• El Paso, Sonat ink $6 billion merger deal
  El Paso Energy Corp., Houston, and Sonat Inc., Birmingham, Ala., have signed a definitive merger agreement, creating a U.S. natural gas powerhouse with a total enterprise value of more than $14 billion. The proposed deal is valued at an estimated $6 billion, including the assumption of $2 billion in Sonat debt. It involves a 1-for-1 stock swap and will be accounted for on a pooling-of-interests basis. It is expected to close in the third or fourth quarter of this year.
• Alberta Energy makes bid for Pacalta; reaction awaited
  Alberta Energy Co. Ltd. (AEC) has announced an offer to acquire all of the outstanding shares of fellow Calgary-based independent Pacalta Resources Ltd. for a total of about $748 million (Canadian), including the assumption of $274 million in Pacalta debt and working capital deficiency. Pacalta's board of directors has scheduled a meeting to consider the offer and possible alternatives. AEC says the offer constitutes a premium of about 29% over the 10-day market average share price of
• Clinton team backs Iraqi oil-for-aid plan
  Clinton administration officials last week defended the United Nations oil-for-aid program for Iraq, claiming it was not deflating the world oil market. They testified at a joint Senate Energy Committee and Foreign Relations Committee hearing that had been requested by oil-state senators. The administration currently is supporting an increase in the $5.25 billion worth of oil that Iraq is allowed to sell every 6 months.
• Exxon, Mobil to take vote on merger May 27
  The chairmen of Exxon Corp. and Mobil Corp. say they need to merge into a $77 billion conglomerate in order to stay competitive with national oil companies overseas. Exxon's Lee Raymond and Mobil's Lucio Noto testified before the U.S. House energy and power subcommittee last week. No congressional representatives at the hearing opposed the merger, which is pending before the Federal Trade Commission (FTC). And Rep. Joe Barton (R-Tex.), subcommittee chairman, declared, "it's in the
• 10 years on from Exxon Valdez spill
  Campaign group Greenpeace never gives advance warnings of protest stunts, but a forthcoming anniversary will put oil companies on their guard. On Mar. 24, it will be 10 years since Exxon Corp.'s Exxon Valdez tanker ran aground in Alaska's Prince William Sound, releasing more than 250,000 bbl of crude oil into the water. While Exxon Valdez was not the biggest tanker spill-Greenpeace claims there have since been at least seven larger tanker spills around the world-it certainly had the
• Ludicrous linkage
  Environmental groups often have good causes but bizarre methods. An example of that was their recent claim that Exxon Corp.'s litigation over the Exxon Valdez accident a decade ago is a reason for the federal government to block its pending merger with Mobil Corp. (see story, p. 42). A coalition of public interest groups is opposing the merger on the general principle that it would make big oil bigger.
• INDUSTRY BRIEFS
  Caspian Pipeline Consortium
• Three projects expand product capacity of Memphis refinery
    The top of the new east crude-unit tower, shown on the left, is being lifted to match its bottom portion. The completed tower and associated structure are shown in the right photo (Fig. 4). Cranes erected the new east crude-unit kerosine/diesel stripper in December 1998 (Fig. 5). To continually meet local demand for gasoline and kerosine, Williams Energy Services has more than doubled its Memphis refining capacity since 1990.
• Petrobras implements $29 million refining-technology program
  The RFCC unit at the Capuava (Recap), Maua, Sao Paulo, refinery, to be completed in 1999, is presently under construction. Here, the crane is lifting the regenerator head (Fig. 2). Acrylic cyclones at the Shale Industrialization Superintendence (SIX) facilities' pilot unit are useful in studying the fluid dynamics of the system and testing the performance of various cyclone conceptions (Fig . 3). In a move to modernize its refineries and adapt them for heavier crudes, Petroleo Brasileiro SA

• Why there's too much oil
  An unstable market is not good for the industry that supplies it. A volatile market is endurable; an unstable one is not. The difference between these market characteristics has been suggested here before (OGJ, Jan. 11, 1999, p. 23). A volatile market changes rapidly. An unstable market inclines toward upset.

• EIA says OCS development lead time cut
  A U.S. Energy Information Adminstration report says dramatic advances in offshore drilling technology have tripled the water depth record for gas or oil production on the U.S. outer continental shelf from 1,760 ft in 1989 to 5,376 ft in 1997. Since then, operators have drilled in depths exceeding 7,000 ft.
• Italian land rig exploits small reserves
  On location in Italy's Po Valley, the G-125 drill rig can be set up on pads as small as 30 x 30 m. Conventional rigs require locations about 70 x 90 m in size (Fig. 2). Photo courtesy of Saipem. Both the G-125 and G-200 drill rig handles all drilling and casing tubulars from a vertical position, eliminating the need for horizontal pipe racks, catwalks, and v-doors (Fig. 3). Photo courtesy of Saipem.
• MMS adjusts relief for offshore fields
  The U.S. Minerals Management Service has altered two of its policies to help keep offshore fields in production during the current oil price slump. For the second time in 5 months, MMS devalued the price forecasts it applies when it considers leaseholders' applications for deepwater royalty relief. Operators of fields in more than 200 m of water in the central and western Gulf of Mexico can apply for a suspension of royalty payments upon demonstrating economic need.

• DOWS reduce produced water disposal costs
  A relatively new technology, downhole oil/water separators (DOWS), can reduce the cost of handling produced water. DOWS are devices that at the bottom of the well separate out water from the oil and gas stream. Some of this water is reinjected into another formation or horizon, while the oil, gas, and remaining water are produced to surface. Water is the largest-volume waste stream associated with oil and gas production.
• Nigeria LNG to add third train at Bonny Island
  Nigeria LNG Ltd. (NLNG) let an engineering, procurement, and construction contract for a third liquefied natural gas (LNG) train to be built at its Bonny Island export project. The contract was awarded to the TSKJ consortium. The group, which comprises Technip SA, Snamprogetti SpA, Kellogg Brown & Root, and JGC Corp., is building two LNG trains at the site. The first two LNG trains will come on stream, respectively, in the summer of 1999 and at the end of 1999. The third train will be completed

• Dutch North Sea platform expands on conventional glycol scheme
  Nam's 16-MMscmd L9 gas-production platform, shown here during installation, is the largest gas producer in the southern North Sea. It consists of a 12-slot wellhead platform bridge linked to a production platform with the single-train, gas-treatment process and a 20-bed accommodation module. The L9 field lies some 80 km north of Den Helder (Fig. 1). The L9 production platform is rolled out to the barge. Visible are the 1.6-m high beams of the cellar deck that extend to the staggered

• Industry depression dampens Gulf of Mexico lease sale
  Speculation that the Central Gulf of Mexico Lease Sale No. 172 would be a small one was substantiated last week when the results of the latest U.S. Minerals Management Service sale were announced. Of the 3,806 blocks on offer, only 207 received bids. This compares with 794 blocks of 4,180 on offer in central Gulf Sale No. 169 (OGJ, Mar. 23, 1998, p. 32).
• Royalty that slides with oil price can add value to producing fields
  Sliding Scale Royalty Rate Sensitivity [142,813 bytes] Business calls for cooperation when it comes to creating an economic pie and competition when it comes to dividing it up. It is not Leadership Secrets of Attila the Hun or St. Francis of Assisi. 1 In negotiating a profit sharing agreement, the goal is to compete with but not destroy the opposition. If a high royalty rate destroys the pie (or field value), nothing will be left for either producer or royalty owner to capture. This results in
• Thailand E&P gets new, revitalized participants
  Thailand is the recipient of renewed vigor on its exploration and production scene. Royal Dutch/Shell Group, which looked to be exiting Thailand in 1998, has decided to press ahead with a multiyear spending plan. Unocal Thailand Ltd. is placing on production the country's first offshore horizontal well. Chevron Corp. steps into active operations in the country for the first time with the purchase of interests in an offshore block that contains several fields.

OGJ Newsletter

• OGJ Newsletter
  Oil markets are reacting positively to the news that key producing countries have agreed to further production cuts ahead of this week's OPEC meeting in Vienna (see story, p. 34). In London trading on Mar. 17, the price of May-delivery Brent crude rose to $13.32/bbl and dated Brent to $13.02/bbl, following reports that U.S. inventories were falling and that Saudi Arabia had begun informing customers of cuts in April deliveries. By presstime, May Brent had reached $13.53, the highest price
• Area Drilling
  Agencia Nacional do Petroleo cleared Schlumberger Geco-Prakla to conduct a 60,000 km 2D regional seismic, gravity, and magnetic survey in six offshore basins covered by the first licensing round. The company plans to use three vessels for the surveys in the Campos, Santos, Espirito Santo, Jequitinhonha, Camamu, and Almada basins (see map, OGJ, Jan. 25, 1999, p. 38). Completion is set for yearend 1999. The first phase of a Niger delta regional seismic data compilation is complete.