The antidumping petition targeting the four biggest exporters of oil to the U.S. looks to be in jeopardy and may be dismissed.
That`s the latest word from Washington, where officials assessing the petition are hinting that the group sponsoring it, Save Domestic Oil Inc., may be hard-pressed to prove it has standing to file the petition. In part because of defections of some large independents from the effort, SDO may have trouble showing that the petition is supported by producers representing at least 25% of U.S. crude oil production.
If the petition is accepted and the claims sustained, that would set off a process leading to the imposition of massive countervailing duties on oil imports from Venezuela, Mexico, Iraq, and Saudi Arabia, which could yield a domino effect on markets, possibly spiking oil prices worldwide (OGJ, July 19, 1999, pp. 30 and 32). It could also set the stage for retaliatory trade action by OPEC countries-notably Venezuela, Mexico, and Saudi Arabia. SDO claims these three and Iraq have been dumping oil on the U.S. market for less than fair value.
Meantime, efforts by U.S. Energy Sec. Bill Richardson to mediate the dispute-which has SDO and IPAA lined up against API, Ingaa, a number of majors, and the exporters-have already been rebuffed. SDO earlier rejected Richardson`s request to sit down with the independents in a bid to resolve the issue before SDO filed the petition. Mexican Energy Sec. Luis Tellez also refused to negotiate with U.S. producers on the issue, saying, "We`re not going to negotiate in a case where we`re certain we`re right." Mexico has already made a preemptive strike in retaliation against the petition by backpedaling on its promise to immediately lift its tariff on natural gas imports. It now is left to the International Trade Commission to make its recommendations following an Aug. 9 hearing to determine the degree of support for the petition.
Analysts are skeptical about Elf`s surprise counterbid to take over TotalFina, although they believe it could force TotalFina to raise its offer for Elf (see Watching the World, p. 40). But the four banks advising Elf must have confidence in Elf Chairman Philippe Jaffr?; Goldman Sachs, Morgan Stanley Dean Witter, Banque Nationale de Paris, and Cr?dit Agricole Indosuez each have promised to loan Elf 4.5 billion euros for the counterattack.
Following a meeting of the TotalFina board on July 21 to analyze the Elf offer, TotalFina said, "From a financial perspective, Elf Aquitaine`s projected cash payment of 87 billion francs ($14 billion) would reduce the combined entity`s ability to finance major development programs.ellipse" TotalFina added that it was open to discussions that would lead towards a friendly takeover.
Meanwhile, Paris stock exchange authority Conseil des March?s Financiers gave the green light to the TotalFina bid. London`s Financial Times said "an individual close to the TotalFina board" suggested the company would sweeten its offer to Elf in time and would study Elf`s idea of separating the oil and gas and chemicals businesses of the combined companies.
The "inevitable" split-off of Enron Oil & Gas from parent Enron Corp. has happened (OGJ, July 19, 1999, Newsletter). Enron will exchange about 76% of its 82.27 million shares of EOG common for EOG`s China and India operations; Enron retains the remaining shares under a 6-month lock-up. EOG will kick in $600 million in cash to an EOG India unit that will be shifted to Enron.
The deal gives EOG greater access to debt and equity capital for funding growth in North America and Trinidad and Tobago, and Enron will use the cash infusion to trim debt. The credit rating agencies took differing views of the deal: Duff & Phelps rated it neutral, while Moody`s placed EOG on review for downgrade, noting a continued rise in EOG`s debt-to-capital ratio. Wall Street consensus seems to be that it is a "win-win" deal but with reservations about EOG`s continuing tie to Enron.
Taiwan`s state-owned oil firm, Chinese Petroleum Corp., has cemented plans to place 20-30% of its 13 billion outstanding shares on overseas markets. CPC selected J.P. Morgan & Co. and Chiao Tung Bank to underwrite the placement. The move follows a similar one by China National Petroleum Corp. (OGJ, July 19, 1999, Newsletter). CPC`s placement is part of a partial privatization plan that calls for the release of more than 50% of its shares to the private sector by June 30, 2001. CPC also agreed to set up a fund that will purchase 15-17% of its stock to be used in an employee stock option program.
Russian major Sidanko`s creditors have agreed to a package deal to rescue the firm from bankruptcy, Agence France Presse quoted BP Amoco as saying. Over 95% of creditors approved the deal, which still must pass muster with a Moscow arbitration court, under which BP Amoco would secure control of as much as a third of Sidanko shares.
BP acquired a stake in Sidanko in 1997. The Russian firm`s inability to pay its tax bills has earned it punitive export restrictions from Moscow.
U.S. Rep. John Dingell (D-Mich.) has asked the Department of the Interior to investigate allegations that Alyeska Pipeline Service Co. is operating the trans-Alaska pipeline unsafely. Six employees anonymously wrote several congressmen and BP Amoco, half owner of the line, alleging unsafe practices. BP Amoco said it will investigate but added that the claims appeared to mirror allegations raised 6 years ago that Alyeska has addressed.
Chechnya`s bid to be the main transshipment route for Azerbaijan`s Caspian Sea oil exports is in jeopardy. Azeri officials, noting that about 350,000 metric tons of crude oil were lost in the first half due to a string of incidents related to pipeline security, contends that continuing disruptions are undermining Moscow`s credibility. Moscow blames Grozny for the incidents, which have included several bomb attacks; the breakaway republic blames Moscow for not paying for security and maintenance (OGJ, June 21, 1999, Newsletter).
North Transgas Oy has completed a feasibility study of three possible routes for a trans-Baltic natural gas pipeline that would transport gas from Russia to Germany via Finland (OGJ, July 14, 1997, p. 32). The work was commissioned by Russia`s Gazprom and Finland`s Fortum Oil & Gas.
The pipeline would transport 21.6-35.5 billion cu m/year. It would be about 1,000 km shorter than existing Russia-Western Europe routes and is envisioned to tie into the Nordic pipeline system, "enhancing the E.U.`s objectives to create a homogeneous gas market within the E.U.," said North Transgas. The partners expect to reach a decision by yearend on the pipeline`s route and timetable.
Three top Pemex officials have been suspended for supposed contract irregularities in work done under their supervision, according to local Mexican news reports. Cantarell Project Director Antonio Acu?a Rosado, Northeast Marine Region Director Luis Nader, and Northeast Marine Region Sub-Director Rafael Vega Monter were all suspended for 90 days.
The work in question involved repairing offshore infrastructure damaged in hurricanes in 1995. The emergency repairs were undertaken by Mexican firm Protexa, which often works with U.S. subcontractors. The contract for the work was reportedly signed after the work had been completed.
Pemex confirmed the suspension of the officials but gave no further details.
NPRA and API are hoping the U.S. EPA will reconsider its proposed rule reducing gasoline sulfur levels. In a hearing before the House energy and environment subcommittee, Citgo Petroleum Senior Vice-Pres. Jerry Thompson-representing both organizations-asked the subcommittee to urge EPA to create a "more workable and flexible plan."
"The combined impact of this gasoline sulfur rulemaking, upcoming reductions in diesel sulfur, and an MTBE phase-down could deliver a knock-out punch to America`s refining industry-with devastating impact on consumers," Thompson said. "EPA`s compressed timeframe will not allow all refiners access to what appears to be promising emerging technologies for sulfur reductionellipseIn addition, EPA`s proposal does not take into account the often lengthy permitting process that is required for all major capital construction projects.
"Neither states nor EPA`s regional offices have the available staff in place to turn these permits around in 6 months." In Texas alone, as many as 29 refineries would be seeking permits at once, says NPRA.
Chevron has asked the California Air Resources Board for permission to market as much as 3.5 million bbl of conventional gasoline in the state over 45 days. The request is the result of an outage in a key unit at Chevron`s Richmond, Calif., refinery, which was still operating at reduced rates due to a similar incident in March. Gasoline output at the plant is down by 70%.
Chevron asked that CARB allow it to pay a penalty of 15¢/gal, or about $22 million total, if all the conventional fuel is sold. The appeal is an attempt to curtail supply disruptions and minimize further price hikes in the state, where Phase 2 reformulated gasoline has been in tight supply for much of the year.