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The Saga takeover bid story is winding down, with Saga's board recommending that shareholders accept the Norsk Hydro offer (see story, p. 24). But a last-minute move by rival Elf could mean more grappling between the firms vying for control of Saga. While Elf hasn't upped its 125 kroner/share cash bid for Saga to match Hydro's 135 kroner/share stock-plus-cash offer, it has extended the deadline for acceptance of its bid. Instead of 5:00 p.m. Norwegian time June 18, Elf's offer will now remain open until 5:00 p.m. June 25. And Elf said it is now prepared to accept more than 50% of Saga's shares as a minimum, rather than its previous threshold of 66.67%. By OGJ presstime, neither Saga nor Hydro had made any response to the Elf offer, but it wouldn't be advisable to bet against further developments.
Meanwhile, Brussels has announced it will put the planned Exxon-Mobil and BP Amoco-ARCO mergers under the microscope.
The European Commission began a 4-month, second-phase investigation of the Exxon-Mobil marriage that will focus on its potential dominance in Europe's E&P, gas distribution, and gas processing technology markets. The probe will also examine how the deal will affect refining-marketing and lubricants. Exxon and Mobil say they had anticipated such an inquiry and that it is not unusual for a merger of this magnitude. The U.K. has asked EC to defer to its authority on the potential effects of the combine in the Scottish motor fuels market.
With regard to BP Amoco-ARCO, EC will assess the effects of the transaction in exploration, development, and production. It will also look at whether the deal would limit other firms' access to the partners' pipelines and gas processing facilities. The commission is coordinating its regulatory review with that of the U.S. Federal Trade Commission and expects to reach a final verdict on BP Amoco-ARCO in mid-October.
While EC concerns over Exxon Mobil had been flagged, doubts over BP Amoco-ARCO came as a surprise. Again, the Brussels bureaucrats apparently fear the dominance of energy markets by a small number of large companies.
New Nigerian President Olusegun Obasanjo has elaborated on his decision of a few weeks ago to suspend contracts signed with the outgoing administration just before power was handed over (OGJ, June 7, 1999, p. 33). Obasanjo now promises that awards of E&D licenses in Nigeria will be made solely on a competitive basis in order to maximize the country's revenues. He also told a joint session of Congress, "We will be more active in the implementation of joint-venture agreements with our multinational partners so as to better protect our national interest." Multinationals operating in Nigeria include Shell, Mobil, Chevron, Elf, Agip, and Texaco.
The suspension order on contracts and appointments made in the last few months of the military regime will not affect oil-lifting deals, a Department of Petroleum Resources official said: "Most of the crude marketing contracts were signed last year."
Brazil's first licensing round is proving successful, with 8 of the initial 12 blocks on offer receiving bids on opening day (OGJ, Jan. 25, 1999, p. 38). The remaining four blocks were taken in the second day of bidding.
Several of the blocks were won by groups of companies, with state firm Petrobras participating in five winning bids. But the real story was the rush of multinationals into Brazilian waters and a high-bid total of almost $190 million.
Blocks with the highest bids were: Santos basin Block 4, won by Agip for $76 million; Campos basin Block 4, won by Agip (55%) and Argentina's YPF (45%) for $28.9 million; and Espirito Santo basin Block 2, won for $18 million by U.S. firms Unocal (40.5%) and Texaco (32%) in combination with YPF (27.5%). The other nine blocks were garnered for bids of $0.5-16 million.
Crisis appears to have been averted-at least temporarily-in Venezuela's oil industry. Last week, the government backed down from its decision to forego annual pay hikes for the country's oil workers. The salary freeze had been prompted by low oil prices and resulting budget cuts.
An agreement seemed all but impossible June 13, the day before a nationwide strike was slated to begin, when Pdvsa negotiators reportedly failed to attend a scheduled meeting with union leaders. But, after talks with Venezuelan President Ch vez, Oil Minister Al! Rodr!guez surprised many observers by announcing a merit increase of 3-6%.
Contributing to the crisis atmosphere were security concerns of the flagship strategic heavy oil venture Petrozuata, led by Conoco, which shut down operations after demonstrations by strikers started to turn violent. At presstime, Petrozuata had shut down work on the project-which started up initial operations last year-until its employees' safety could be secured. Press reports from Caracas indicate Ch vez has ordered troops into the area.
The troubled Caspian export pipeline from Baku, Azerbaijan, to the Russian Black Sea port of Novorossiisk has run into further difficulty. A recent explosion severely damaged a section of the line in Dagestan near the border with Chechnya, reportedly shutting down the export route indefinitely. The pipeline has fallen victim to repeated attacks, thought to be the work of Chechen rebels. This has made the rival export route, from Baku to Supsa, Georgia, more attractive, although the capacity of that line is limited (OGJ, Apr. 19, 1999, p. 35).
The latest sabotage heightens not only the importance of establishing added Caspian export capacity but also the lingering challenges of doing so (OGJ, June 7, 1999, p. 21).
Sudan, slated to begin exporting 150,000 b/d of crude oil at the end of this month, has already said it hopes to join OPEC in the future.
Sudanese Minister of State John Dore told a Saudi newspaper that Sudan plans to raise its output capacity to 270,000 b/d within a year. The oil will be transported to Port Sudan on the Red Sea coast through a 1,600-km pipeline from fields in Al Wahda province in southern Sudan (OGJ, May 31, 1999, p. 21). Dore said Sudan expects to earn $200-300 million/year from oil exports, which will go a long way toward offsetting the nation's oil import bill. He estimated Sudan's reserves at 800 million bbl and average production costs at $4/bbl.
U.S. energy giant Enron is planning to set up a natural gas grid in India now that its gas-fired power project at Dabhol has begun operating (OGJ, June 14, 1999, p. 34). In Phase 1 of its gas network project, Enron proposes to lay an 800-km pipeline along the western coast of India, extending both north and south of its planned 5 million metric ton/year Dabhol LNG terminal. The line would be used to meet growing Indian gas demand.
"We propose to invest up to 36 billion rupees ($847 million) in the first phase of the pipeline project," said a senior Enron official. "The work will be undertaken by our 100% Indian subsidiary, Metgas."
Fuel in India is transported inefficiently by road and rail. Enron's gas grid would be linked to the Hazira-Bijaipur-Jagdishpur pipeline in northern India, giving Enron a huge supply advantage over its competitors. This link would involve a 2.89 billion rupee pipeline from Dabhol to Hazira, Gujarat. The line would ship about 400 MMcfd of gas, to be used in power and fertilizer projects.
Enron plans to spend about $260 million/year importing LNG into India from the Middle East-mainly Qatar.
Pending EU requirements for "greener" gasoline and diesel fuels will lead to a radical shake-up in regional products markets, says Wood Mackenzie. The regulations will be implemented starting in 2000. The first round of new specifications is not likely to have any significant detrimental effects on the refining industry, says WoodMac, but the 2005 requirements are much stricter and could prompt the closure of nine refineries. This is similar to the view taken by Petro Finance, which said 17 refineries are at high risk of closure and a total of 28 are at risk to some degree (OGJ, June 14, 1999, p. 26).
The "green" movement in Canada has prompted Petro-Canada, Ballard Power Systems, and Methanex to join forces. The firms announced they will "lead the charge in Canada towards making alternative fuel sources available for Canadians, in preparation for the next generation of vehicles powered by fuel cells." This will be done by bringing together the retail marketing expertise of Petro-Canada, the fuel cell know-how of Ballard, and the methanol production capability of Methanex.
The three signed a 5-year memorandum of understanding for a joint project to establish a "commercially viable fuel distribution network" to meet expected demand for fuel cell vehicles. The firms will work toward a pilot project for supply and distribution of "appropriate fuel," beginning with methanol, to facilitate introduction of this new type of vehicle.
Ballard Chairman Firoz Rasul said, "As the introduction of fuel cell-powered cars approaches in the year 2004, and as these vehicles become more common, Canada will require a local fuel distribution network for these vehicles, which this association begins to address."
Copyright 1999 Oil & Gas Journal. All Rights Reserved.
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