With oil prices dominating industry news in recent months, the continuing strength in US natural gas prices seems to be getting overlooked.
PaineWebber has raised its projected composite spot natural gas price forecast for 2000 by 10¢ to $2.50/MMbtu from its original projection. "Evidenced by the 12-month NYMEX strip trading north of $2.90/MMbtu on the heels of the warmest winter on record," the analyst said, "the natural gas supply-demand environment remains very favorable."
PaineWebber bases its revised assessment on expectations for "solid" demand for gas from power generators and on continuing deliverability issues.
"Our newellipseestimate compares with the current [Wall] Street consensus of $2.49/MMbtuellipse.These changes reflect ongoing increases in weather-normalized demand, depressed deliverability, as well as the reality that the drilling response, while increasing, remains limited," it said.
Salomon Smith Barney concurs, saying, "With only 1 week left in the traditional storage withdrawal season, total storage levels will start the summer injection season around 1 tcf, or at least 25% lower than last year. The anticipation of a difficult storage injection season-given current storage levels and the year-over-year deliverability shortfall-has already put the heat on natural gas prices."
North American natural gas prices, supplies, and demand should continue to be strong through 2001, although expectations among various business sectors "may not all be moving in the same direction," Ziff Energy Group reported at its Houston conference on North American gas strategies last week.
In Ziff's latest annual gas industry outlook survey, 54% of the 144 respondents-representing 65 US and 59 Canadian companies across the gas industry spectrum-predicted NYMEX gas futures prices will be $2.73-3.13/MMbtu by yearend. Another 40% expect yearend prices to exceed $3.13/MMbtu.
Almost all of the respondents think North American gas sales will grow at least 2%/year through 2001. Producers are more optimistic about growth of supply than about demand growth, with 70% of the Canadians and 54% of the US firms expecting to hike production at least 5% this year. In fact, 25% of the Canadians and 19% of the US firms expect to boost output by more than 15%.
Most producers expect to increase spending on gas operations by more than 5%/year through 2001, with about a third planning spending increases in excess of 15%/year.
The announced merger of Anadarko and Union Pacific Resources (see story, p. 34) will bring together two independent E&P companies that are polar opposites on the environmental risk continuum, according to New York-based investment advisory firm Innovest Strategic Value Advisors.
Based on a study of 15 Canadian and US E&P companies, Innovest sized the firms up against such weighty issues as regulatory pressures, waste management, emissions and discharges, and operations in sensitive areas internationally. And while Anadarko was found to be "among the best in the business" with regard to emissions and regulatory compliance, UPR "was judged to have above-average exposure on key risk factors and to lack depth in their overall management system."
"E&P companies' efforts to reduce operating risk, cut costs, and improve efficiency all fall under the rubric of eco-efficiency," said Martin Whittaker, an Innovest senior analyst. "They are using environmental performance as a way of differentiating themselves from their competitors. Like them, we believe that environmentally driven attributes can and often do contribute directly to a company's competitive advantage in the marketplace," he said.
Alaska Gov. Tony Knowles expects ExxonMobil to drop its lawsuit against BP Amoco over its sale of Alaskan oil assets-including ARCO's Prudhoe Bay field stake-to Phillips Petroleum (OGJ, Apr. 3, 2000, p. 30). Knowles deems the lawsuit to be "without merit," and said that it "hinder[ed] efforts to restore stability in Alaska's oil patch and get Alaskans back to work."
Knowles says his state will seek to intervene in ExxonMobil's suit and would also work with other states with a stake in the issue to intervene.
Knowles also testified before the US Senate energy and natural resources committee, saying the US should work diligently on upping domestic oil and gas output through, among other things, greater access to federal lands. That, he says, would reduce US dependence on "uncertain sources of foreign oil" and help maintain reasonable levels on oil prices.
Knowles recommends, among other things, that the federal government permit "responsible development" of the Arctic National Wildlife Refuge Coastal Plain, which is believed to contain a potential oil resource estimated at as much as 16 billion bbl of recoverable oil, based on data from the US Geological Survey.
"Every barrel of oil we get from an American well is a barrel we don't import," Knowles said.
BP Amoco official Tim Holt says the firm will consider joining one of several proposals to build new infrastructure to develop and market natural gas reserves in the Mackenzie Delta and Beaufort Sea. Holt-new head of BP Amoco's Calgary-based Canadian unit-says the firm will evaluate building a gas pipeline from Alaska's North Slope through Canada to the US.
A Colombian court has issued an injunction ordering Occidental Petroleum to stop work at the controversial Gibraltar-1 wildcat wellsite, in the Samoré region of Colombia, in response to claims by the U'wa tribe that the land is theirs (OGJ, Jan. 17, 2000, p. 30). The government has in the past said the area, although near ancestral U'wa lands, does not belong to them.
Among other emotional appeals, the tribe has in the past threatened mass suicide if Oxy is allowed to produce from the area.
An Oxy spokesman says an appeal will be filed this week. Work was halted with about 50% of the work on the access road and the wellsite complete. The spokesman alleged that protests against the company in the area have been encouraged, in some cases coercively, by the National Liberation Army guerrilla group. Oxy hopes to get back to work in mid-May. In a worst-case scenario, the work could be delayed a year. In any case, drilling will likely not begin in 2000 because of the necessity of working around the Colombian rainy season.
A deal between Turkmenistan and Royal Dutch/Shell's central Asia unit to develop six fields has been postponed due to technical reasons. Shell had originally hoped to sign its production-sharing agreement with Turkmenistan in February, for five fields operated by state gas company Turkmengaz and one field operated by state oil firm Turkmenneft. Gavin Graham, vice-president of the Shell unit, said the company last year had nearly completed negotiations with the government on the project.
Graham said that Shell would further explore and develop the concessions through joint ventures with the operators. Two of the fields, Malai and Shatlyk, are believed to hold 165 billion cu m (bcm) and 460 bcm of gas, respectively.
The output from some of the concessions could be used to fill the proposed Trans-Caspian Gas Pipeline. Shell joined the group set up to build the line, and Graham says the fate of the gas pipeline project would help determine the success of the upstream development efforts.
Nigeria has created a new police unit-authorized to shoot vandals on sight-to protect its oil pipelines.
A rash of recent incidents involving tapping of pipelines for profit or sabotage has led to costly shutdowns and repairs, as well as some fatal explosions. AP quoted Nigerian National Petroleum Corp. spokesman Ndu Ughamadu as saying, "Deliberate action is necessary to send a strong message. We've tried everything else. It's time to get tough. Shoot them on sight is the necessary response."
The European Commission plans to ban single-hulled oil tankers from European Union ports. The proposal would require double-hulled tankers to be used and calls for the phase-out of single-hulled tankers by 2005, 2010, or 2015, depending on tonnage.
In response, independent tanker association Intertanko submitted an analysis showing the rule would mean that, in the near term, 1,292 pre-1981 tankers of 600-20,000 dwt would have to be phased out, plus 888 pre-1981 tankers bigger than 20,000 dwt. The move was spurred by public fallout from the incident involving the single-hulled Erika tanker, which sank off France in early June, spilling thousands of barrels of fuel oil.