OGJ Newsletter

• U.S. INDUSTRY SCOREBOARD 6/28 [43,929 bytes]

Norsk Hydro has beat out Elf in the battle for control of Saga and, in doing so, has increased government domination of Norway's petroleum industry. A Hydro official told OGJ that 90% of Saga shareholders were in favor of the Hydro bid vs. a threshold of 70% (OGJ, June 21, 1999, p. 24). An extraordinary general meeting of shareholders was set for June 23 to rubber-stamp the deal. "If everything goes okay at the meeting," said the source, "then the actual transaction is planned for June 28, and we can begin planning to integrate the organization. After that, it will be a matter of waiting for European Union and Norwegian government approval." With Oslo expected to maintain its stake in the enlarged Hydro at 51%, Saga CEO Diderik Schnitler said the government would now control almost 90% of Norway's production.

Total Fina is now an official entity, with the former Total securing 94.3% of the former Petrofina's shares in a public exchange offer (OGJ, Dec. 14, 1998, p. 30). And Spain's Repsol has gained control of former Argentine state firm YPF, acquiring an additional 83.24% of YPF common stock for more than $13 billion (OGJ, May 17, 1999, p. 30). This brings Repsol's stake in YPF to 98.2%.

Not taking "no" for an answer, NiSource has launched a $68/share tender offer for Columbia Energy Group after its unsolicited bid for the firm was rejected (OGJ, June 14, 1999, Newsletter). NiSource has also launched litigation against Columbia and its directors in a bid to enable the firm's shareholders to elect an independent candidate to an open director's seat.

Two long-entrenched state oil firms are attempting to make themselves over into profit-oriented, multinational energy companies.

Most legislators in Indonesia are supporting new draft legislation that would reform the country's oil and gas industry and lift state firm Pertamina's decades-old monopoly on the country's downstream sector, says Mines and Energy Minister Kuntoro Mangkusubroto. He wants Pertamina to be run as an independent, profit-oriented company that would compete with private operators. The role of Pertamina is to be reduced under the bill, with the government taking charge of awarding future E&P contracts and regulating the industry. But some legislators have demanded that liberalization of Indonesia's downstream sector should ensure that fuel supplies are never disrupted.

Meanwhile, Pdvsa has drawn up a new 10-year business plan incorporating a big budget cut compared with a 10-year plan released 2 years ago. The 2000-09 plan calls for investments totaling about $22 billion, a reduction of $13.7 billion from the 1998-2007 plan. Foreign investments in Venezuela are expected to total $30 billion over the period.

The company said investments during 2000-09 would be aimed at "positioning in new markets, increasing the production of light and medium-gravity crudes, expanding refining capacity, and developing the gas and chemical business with active participation of national capital." Petrochemicals spending is up $3 billion vs. the previous plan, while gas investments will rise by $2.2 billion. Petrochemicals capacity would grow to 23 million metric tons/year from 7.7 million tons/year under the plan, gas production capacity to 14.5 bcfd from 6.05 bcfd, and Orimulsion output capacity to 19 million tons/year from about 5 million tons/year. Domestic refining capacity will rise 300,000 b/d by 2009, while Pdvsa's oil production capacity target has been cut to 5.8 million b/d in 2009 vs. the previous 6.2 million b/d in 2007. The company said, "Pdvsa no longer is simply an extractive operator, generating income. It has become an international energy company, geared to securing monetary value in each phase of the business and aimed at the development of positioning in new markets to generate the maximum value in each step of the business for the shareholder." Pdvsa Pres. Roberto Mandini said, "Pdvsa is, and must continue to be, perceived and dealt with as a corporation with a business sense."

Recent labor unrest in Venezuela has been quelled, after reaching a level that caused firms to halt operations over safety concerns (OGJ, June 21, 1999, Newsletter). The Conoco-Pdvsa Petrozuata joint venture resumed work on its heavy oil upgrader at Jose following a week-long construction halt. After Conoco's shutdown, other operators at the Jose industrial complex-including Sincor, Cerro Negro, Fertinitro, Metor, Pequiven, Soc. Williams Enbridge, Supermetanol, and Superoctanos-followed suit. All are thought to have restarted operations or are still in the process of doing so.

The agreement to resume work came after federal and state government officials met with several companies operating at Jose. Energy and Mines Minister Al! Rodr!guez Araque told reporters the government had guaranteed the safety of the installations. Petrozuata said, "The decision (to halt work) was never related to labor problems. It was a direct consequence of the lack of safety and public order manifested in the events perpetrated by a small group of people..."

Shell's and Mobil's Peru units have ended the suspense over whether they would buy bid documents for the retender of the Camisea project (OGJ, June 21, 1999, p. 30). The companies each spent $30,000 to buy both sets of data-one for the exploitation of the Camisea natural gas fields and the other for gas transport and distribution. Twenty companies bought the documents, although not all are expected to bid. Purchasing both data sets were Pluspetrol, Esso Exploration, Duke Energy, Talisman, Chevron, TransCanada, Shell, Conoco, and Mobil. Acquiring data for the production contract only were Elf Peru, Total, Tecpetrol, and Mosbacher Energy. Purchasing only the gas transport and distribution data were Promigas, Luz del Sur, Techint, Enron, Mitsui, El Paso Energy, and Coastal.

Only a few days after Brazil's first licensing round concluded (see story, p. 28), Petrobras Pres. Henri Philippe Reichstul said that his company and its partners will invest $5 billion in Brazilian E&P over the next 5 years. These investments are for the areas Brazil's National Petroleum Agency allocated to Petrobras to sign joint ventures with foreign companies. Of the total, $3 billion will come from Petrobras and $2 billion from partners.

Reichstul said Petrobras expects to sign 15 exploration joint ventures by mid-July, while development-phase partnerships will be inked by the end of July. Petrobras will sign a contract with Esso for joint development of giant Albacora-A-Leste field in the Campos basin, off Rio de Janeiro state, he said. Along with operator Esso, Texaco, Shell, and Japanese firms Japex and Marubeni also will sign the JV deal. Reichstul estimates the field's output will reach 100,000 b/d.

Consolidating Natural Gas's E&P unit, CNG Producing, has made two unplanned purchases of interests in three South Texas natural gas fields, including Lope?o, from Pogo and Pioneer. The deals, worth a combined $125 million, can be taken as another indicator of the upstream industry's nascent recovery (see story, p. 24)-because it is the main reason CNG's 1999 E&P outlays will rise $139 million vs. the originally budgeted $326 million.

Pres. Pat Riley said, "While many other companies have curtailed capital investments in 1999, we have increased our spending to take advantage of the current environment. At $465 million, CNG will have one of the five largest domestic E&P budgets in the (U.S.) for an independent oil and gas company."

OPEC is due to choose a new secretary general after new Nigerian President Olusegun Obasanjo poached Rilwanu Lukman, the current man in the OPEC hot seat, to be his adviser on petroleum and energy affairs. The choice will be made at the next OPEC meeting in Vienna on Sept. 22.

Middle East Economic Survey reports that Saudi Arabia has shown its hand early by nominating Sulaiman al-Herbish for the top job. Al-Herbish, Arabian Drilling Co. chairman and Saudi Aramco executive committee chairman, reportedly participated in talks that led to OPEC's recent cutbacks agreement.

With the Kosovo crisis apparently ended, the U.K. has turned its attention back to Iraq and the policy limbo that has existed since the U.S. and U.K. launched air strikes on Iraq in December (OGJ, Dec. 28, 1998, p. 24). The U.K. has proposed a U.N. Security Council resolution that would see U.N. sanctions remaining in place until Baghdad had destroyed all its weapons of mass destruction but that would suspend sanctions for 120 days to give Baghdad time to answer a list of remaining questions over disarmament.

The U.S. and the Netherlands have come down in favor of the U.K. proposal, but there has been little support for the move from Russia and China, which want sanctions removed to give Baghdad an incentive to cooperate.

The BG-Agip group developing supergiant Karachaganak field in Kazakhstan has reportedly agreed to build a $440 million liquids export pipeline. The 460-km line will link Karachaganak with the Caspian Pipeline Consortium trunk line-due for completion in 2001-which will export oil from Tengiz field to the Russian Black Sea oil port of Novorossiisk. The new line will enable co-operators BG and Agip and partners Texaco and Lukoil to increase output from Karachaganak to 180,000 b/d by 2001 from 60,000 b/d today (OGJ, Nov. 24, 1997, p. 42).

Copyright 1999 Oil & Gas Journal. All Rights Reserved.

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