Table of Contents

• U.S. Drilling To Slump In '99 Despite Oil, Gas Demand Gains
  U.S. Energy Demand [15,153 bytes] Forecast and Review [431,697 bytes] OGJ Forecast of U.S. Supply and Demand [20,665 bytes] U.S. Natural Gas Supply and Demand [29,245 bytes] Crude and Products Prices [32,328 bytes] U.S. Production of Crude Oil and Lease Condensate [67,248 bytes] Supply and Demand for Crude in the U.S. [33,920 bytes] U.S. Energy Consumption and Efficiency [79,751 bytes] Crude Imports by Country of Origin [46,699 bytes] Exports of Refined Products and Crude [21,487 bytes] Imports
• Global Oil Glut Keeps Pressure On OPEC
  Worldwide Supply and Demand [48,276 bytes] Growing worldwide supply of crude oil crossed paths with slowing growth in worldwide demand for petroleum products in 1998. The surplus pushed oil prices to their lowest level since 1986. Prices started sliding late in 1997 and continued to drop throughout 1998. The average price of world export crude oil dipped as low as $9.32/bbl in mid-December. The demand slowdown-largely resulting from Asia's economic collapse-came as heavy production
• Extended Decline Likely In U.S., Canada Drilling
  A 26 Year Record of U.S. Well Completions [29,219 bytes] Oil & Gas Journal Well Forcast for 1999 [51,100 bytes] U.S. Fields with Ultimate Oil Recovery Exceeding 100 Million BBL [27,892 bytes] PDF Format Another decline in drilling activity is likely in the U.S. and Canada in 1999 following the off-year of 1998 in both countries.
• Roots of systemic woes in Russian oil sector traceable to industry evolution
  Major Oil and Gas Basins of Russia Russia's Transition Era Production And Consumption An overview of the Russian oil industry, from the Soviet era to the policies and structures of present-day Russia, is necessary because of Russia's importance to world energy markets and the importance of the oil and gas sector to the country's economic development.
• Joint ventures in the Russian oil sector: rocky marriages?
  The principal vehicle of foreign participation in Russia's oil industry has been joint ventures among Western oil companies, service companies, and Russian producers. Despite a lack of reliable production-sharing agreement legislation, an unsure investment climate, and domestic political opposition, Western companies have entered into JVs within Russia based primarily on the promise of the vast hydrocarbon reserve base in Russia.
• Energy industry to transform in next decade
  Oil's dominance as the world's primary fuel will be challenged in the next decade, and the structure of the energy industry will continue to undergo substantial change. These themes emerged at a Canadian Energy Research Institute's international oil and gas markets conference late in 1998.
• Oil price steady amid U.S./Iraq deadlock
  Oil prices fell away last week after reduced stocks estimates and cold weather briefly raised their value, but continued strained relations between Washington and Baghdad kept them from returning to free-fall. In the most recent diplomatic development, United Nations Sec. Gen. Kofi Annan rejected criticism of his handling of the Iraq crisis, after the U.S. government accused him of not being tough enough on Baghdad.
• Why this downturn is hard on people
  A business mogul, asked the secret of his success, once said that he bought shares cheaply when everyone else was selling and sold them at a profit when everyone else was buying. In the petroleum industry, the lag time between the onset of low oil prices and the cancellation of projects and staff layoffs has passed: mergers and payroll trimming show that hard times are here. As an example of what's ahead, Salomon Smith Barney Inc., New York, predicts that worldwide exploration and
• INDUSTRY BRIEFS
  The collision of a German cargo ship, leaving for Brazil from the port of Buenos Aires, with a Liberian-flagged Shell Oil Co. tanker caused a large oil spill on Jan. 15. The collision occurred 25 km offshore in the Rio de la Plata estuary. The spilled oil covered 100,000 sq m of water. According to reports, the spill did not reach the coast or the shipping canal. Cleanup efforts-involving 2,500 m of floating dykes, support barges, and vacuum pumps-resulted in the pickup of over 150 cu m of

• Mistakes with Iraqi oil
  U.S. Vice-President Al Gore must have thought he was playing a humanitarian trump card this month when he proposed that the United Nations lift restrictions on oil production by Iraq. A year earlier, U.N. Sec. Gen. Kofi Annan, just before a visit to Baghdad, doubled the amount of money Iraq may raise for humanitarian purposes by producing oil under U.N. sanctions.

• Oil prices, mergers change drilling markets
  Low oil prices and the resulting merger mania in the oil industry are changing contract drilling markets, says Houston-based drilling contractor Global Marine Inc. The firm's worldwide summary of current offshore rig economics (Score) fell nearly 30% during 1998. And the December Score revealed dayrate declines in all regions. Global Marine President and CEO Bob Rose said, "The effect that (low oil prices) have had on the offshore rig fleet has been dramatic. After almost 10 years of steady
• Fluid design impacts drilling and production operations
  Whether back producing or stimulating the filter cake in an open-hole completion, the nature and location of the filter cake can profoundly impact drilling and production operations. The filter cake must quickly and effectively shut-off mud invasion into the reservoir, provide an unimpeded pathway for hydrocarbon flow into the well, and facilitate flow back through the completion assembly.
• Southern Ute case
  The U.S. Interior Department has undercut Amoco Production Co. in a case about ownership of coalbed methane gas around the Southern Ute reservation in Colorado. The reservation area is a patchwork of private and tribal land holdings. In the Coal Lands Acts of 1909 and 1910, Congress claimed the rights to coal under the area and later awarded them to the tribe. Nothing was said about the methane, then considered both hazardous and worthless. In the last 2 decades, methane has become a valuable

• Technique predicts oil recovery from waterfloods
  X-Plot Calculations [51,984 bytes] The X-plot technique can predict oil recovery and obtain the permeability ratio and fractional-flow curves for determining displacement efficiency. Two field examples show how this approach was applied in the El-Morgan South Kareem and South Belayim reservoirs in Egypt. Both reservoirs have produced with water cuts greater than 50% since 1987.

• Italian refinery to install 193 radar-tank gauges
  ESSO ITALIANA SPA AWARDED SAAB TANK CONTROL a contract to provide tank gauges for 193 tanks in its Augusta, Italy, refinery. The Saab TankRadar L/2 system (Fig. 1), to be installed on each tank, is a gauging system that uses radar to detect the liquid level within tanks. It has no moving parts and no contact with the liquid. The tank gauges can be installed while the tanks are still in service. They flange up to existing nozzles or still pipes on tank roofs.

• U.S. became net LNG importer in 1997
  Despite a slight increase in exports, 1997-the most recent year for which full data are available from the U.S. Energy Information Agency (EIA)-saw the U.S. become a net importer of LNG for the first time. LNG imports into the U.S. for the year nearly doubled, compared with those for 1996. Total 1997 LNG imports were 77.78 bcf, compared to 40.27 bcf in 1996 (OGJ, Jan. 19, 1998, p. 52), an increase of 93.1%.
• European petrochemicals 'at crossroads'
  European petrochemicals producers are at a crossroads, with most companies continuing to rationalize operations in a bid to be more competitive in an increasingly global market. This is the view of Datamonitor plc, London, which said companies need to accelerate rationalization and operate on a global scale if they are to remain competitive. "Europe is hindered by cost disadvantages and insufficient plant investment," said Datamonitor. "The issue of overcapacity has been compounded by problems
• Mexico's petrochemical privatization in doubt
  Further doubt is looming for Mexico's planned privatization of the state-run Morelos petrochemical complex. Mexico is slated to reveal on Feb. 19 the winning bid in the sell-off of a 49% stake in the plant, but the Energy Secretariat has announced that iti will give the winner an extra week to form an alliance with other companies to complete the purchase.
• Indonesia-Singapore line gets sales pacts
  Following some balky steps late last year, key contracts have now been signed for a pipeline project that will bring Indonesian gas to Singapore, following 2 years of planning. The 28-in., 300-mile subsea pipeline will carry gas from fields in the West Natuna Sea to Singapore for use mostly in power generation. It will have a capacity of 325 MMcfd and is slated to begin deliveries by 2001.
• Brazil begins first open licensing round
  Brazil's National Petroleum Agency (ANP) has conducted road shows promoting its first open licensing round. The first presentation took place Jan. 14 in Rio de Janeiro, where the agency outlined details of the 27 blocks being offered. Following the that show, ANP made identical presentations in Houston and London. Last year, the agency sent letters to about 500 oil companies around the world inviting them to participate in its first open bidding round. It presented a draft bid notice for
• Greenpeace threatens U.K. over licensing
  Environmental campaign group Greenpeace has threatened the U.K. government with legal action if further exploration and production licenses are issued in the Atlantic frontier area. Greenpeace said it considers the granting of licenses unlawful according to European Commission (EC) legislation.
• Two blocks licensed off Madagascar
  The recent signing of licensing agreements for blocks off Madagascar by two U.S. companies could rekindle exploration interest in the area, said Marex Inc., a Houston consulting firm that acted as intermediary on both contracts. In two unrelated transactions, Xpronet Inc. and Frontier Resources International Inc., both based in Houston, signed 1-year contracts with Madagascar's petroleum-granting authority, Omnis. Each company's licensing agreement is for two 2-block areas off
• China coalbed methane reaches turning point
  Phillips Petroleum Co. conducts wire line coring operations at the LXC-003 coalbed methane exploration well in Shanxi Province, China. Whereas 1.1 tcf of coalbed methane (CBM) was produced in the U.S. during 1997, some 6% of total U.S. natural gas production, E&P efforts overseas have yet to achieve a major commercial success for this promising natural gas resource. China's conventional natural gas production is small, about 2.0 bcfd. Indeed, the 2.5 bcfd of coalbed gas produced in the U.S.
• E&P activities remain steady in Peru
  Peru is hosting several exploration programs in early 1999, while the start-up of Aguaytia field buoyed the country's production in 1998. In offshore action, Perupetro expects Repsol SA to begin drilling two exploration wells by mid-1999 on Block Z-29 in the Trujillo and Sechura-Salaverry basins (see map, OGJ, Dec. 7, 1998, p. 87). Repsol and partners Braspetro, Ranger Oil, and YPF of Argentina have requested an expansion of the block Z-29.

OGJ Newsletter

• OGJ Newsletter
  Due to a holiday in the U.S., data for this week's Industry Scoreboard are not available. IEA has revised its 1999 global oil demand forecast downward. In its latest monthly oil market report, IEA predicted oil demand would increase only 1.5%, or 1.1 million b/d, this year, to 75 million b/d. This is a 600,000 b/d decline from estimates made at the end of last year.