*Looking at the latest oil industry merger action, one merger bid hits some major snags, another gets a nod of approval, and a third ties up loose ends.
The US Federal Trade Commission asked a San Francisco US District Court judge to issue a preliminary injunction blocking BP Amoco's combine with ARCO. A hearing is scheduled for Mar. 10. FTC alleged the merger would "substantially lessen competition" in crude oil sold to West Coast refiners, in Alaskan North Slope oil production, and in pipeline and storage services at the Cushing, Okla., hub (see editorial, p. 19).
California, Oregon, and Washington joined the FTC suit, while Alaska filed a motion to intervene on the side of the two companies.
Alaska Gov. Tony Knowles voiced his state's disapproval of the FTC move. "Most Alaskans are very disappointed that [the FTC's] decision fails to resolve the issue," Knowles said. "Alaska's interests and America's interests in developing North Slope oil and gas are being put in the deep freeze and, once again, Alaska's future is left to be decided in a distant court." BP Amoco had agreed to sell about half of ARCO's ANS production and a corresponding share of the trans-Alaska pipeline.
The firms also had made pledges to California, chiefly preserving ARCO's low-price gasoline marketing strategy.
Meanwhile, the European Commission has approved TotalFina's takeover of Elf. EC approval, however, is based on pledges given by TotalFina to sell certain assets, which would help to "maintain competition" in certain market sectors. TotalFina promised to sell 70 service stations in France, half owned by Elf and half by TotalFina; the Elf and TotalFina-operated supply infrastructure at the Lyon and Toulouse airports; part of TotalFina's interest in numerous pipelines and 17 product tank farms; and Elf's French LPG assets.
BP Amoco and ExxonMobil have reached agreement on terms under which the BP-Mobil fuels and lubricants JV would be dissolved, following EC approval of the Exxon-Mobil merger.
The EU merger task force approved the JV dissolution principles Feb. 3.
BP Amoco will buy Mobil's 30% interest in the JV, excluding the Gravenchon refinery, which will transfer instead to ExxonMobil.
In addition, Mobil will transfer its interests in certain pipelines serving the Coryton refinery and Gatwick airport. Also, all base oil manufacturing and finished lubes assets will be divided between the two companies, broadly mirroring their equity stakes in that part of the JV-51% Mobil and 49% BP Amoco.
Ottawa has hired two firms to advise it on the sale of its 8.5% interest in Hibernia oil field off Newfoundland. Investment bankers Waterous & Co. (Canada) and Schroeder Ltd. (London) will analyze a possible sale and timing of an auction to obtain best value.
Potential buyers could include Hibernia partners Petro-Canada, Mobil Canada, Chevron Canada, and Husky Oil. Ottawa is also considering sale of its remaining 18% interest in Petro-Canada.
The Alberta Energy and Utilities Board has approved a switch from a postage stamp tolling structure-in operation since 1980-to one with variable rates for natural gas pipelines in Alberta. The new toll structure is based on the distance traveled and the size of the pipeline used. The Canadian Association of Petroleum Producers (CAPP) said the new tolls better reflect the cost of shipping gas. It said the board's ruling on tolls is similar but not identical to a memorandum on tolling between CAPP and Alberta's major pipeline operator, Trans- Canada PipeLines. AEUB says the old structure had achieved its original objective of enhancing gas development throughout Alberta.
The contract to exploit Peru's Camisea natural gas fields definitely will be put up for auction Feb. 15, according to Energy and Mines Minister Jorge Chamot. The minister said that potential investors continue to be interested in the fields, although he did not identify them.
Early this month, Chamot flew to France, Canada, and the US to inform companies of the latest developments. The auction of the fields, originally called at the end of May 1999, has been postponed three times.
Under the original plan, Peru was to first tender concessions for transport and distribution of Camisea gas and liquids, to be followed later by a tender for field development. At the request of firms interested in downstream concessions, however, the transport-distribution tenders were postponed again, to Mar. 6.
Companies that have qualified to bid for developing the gas fields include TotalFina-Elf, Talisman, Royal Dutch/Shell, ExxonMobil, Chevron, Pluspetrol-Hunt, Techpetrol, Coastal, and a consortium of Anderson Exploration and Ivanhoe Energy. Camisea's reserves are estimated at 9.9 tcf of gas and 622 million bbl of condensate.
US Energy Sec. Bill Richardson says the US won't decide on measures to counteract higher imported oil prices until he talks with foreign oil ministers this month. He was due last week to visit Venezuela, Saudi Arabia, and Kuwait and to talk via phone to other OPEC ministers. US Northeast politicians have been urging the Clinton administration to sell some oil from the Strategic Petroleum Reserve to boost supplies and lower overall prices.
Meanwhile, Richardson will meet Feb. 16 in Boston with New England government officials and oil companies to discuss ways to prevent heating oil price spikes. Prices hit a 9-year high in January but have dropped since then.
DOE has launched a $75 million US research effort to develop ultraclean fuels and better pollution control devices for vehicles. EPA has issued a rule requiring a sharp cut in the sulfur content of US gasoline (OGJ, Jan. 3, 2000, p. 26) and plans a rule this year to slash sulfur levels in diesel fuel.
DOE says the research would verify that fuel processing technologies will perform as expected to meet tighter gasoline standards. It also will examine problems that refiners face with the declining quality of crude oils.
Oil spills are again at the forefront of industry concerns, following major spills off Brazil and France in recent weeks (OGJ, Jan. 24, 2000, p. 28).
The head of Brazil's environmental agency worries about a possible Amazon spill of greater consequence than the recent fuel oil spill in Guanabara Bay off Rio de Janeiro state, which the agency has described as the worst ever in Brazil (see related story, p. 30).
In 4 months, there have been two such incidents on waterways in Brazil's northeastern Amazon region, said Jose Leland, head of environmental agency IBAMA. "The threat of an accident of greater dimensions [in the Amazon] than that which occurred in Guanabara Bay is real," he said. The most recent incident occurred Feb. 7, when a barge carrying 1.9 million l. of fuel for Texaco sank in the Para River. Local reports indicate that while Texaco has taken steps to limit environmental damage, Leland says the possibility of another oil spill is real.
He also noted that last October about 50,000 l. of oil were spilled in the jungle region of Igarape do Cururu, near where the vessel sank in the Para river.
A senate inquiry into the Australian aviation fuel crisis has been told that tight refining margins may be the underlying factor in the grounding of 5,000 light aircraft around the country since Jan. 1.
Prof. David Trimm, head of the School of Chemical Engineering and Industrial Chemistry at the University of New South Wales, told the panel last week that the tight margins currently being felt in the Australian refining industry mean there is little incentive for companies such as Mobil Oil Australia (now part of ExxonMobil) to invest in refinery modernization. He notes that profits in the country's refining industry are very low-a fact borne out by an Ernst & Young survey that pointed out that the four refiners in Australia returned just 2% on about $10.3 billion (Aus.) in assets.
Mobil previously had testified that, to counter the level of acidity in its aviation fuel, it had used a caustic wash and then added the chemical ethylene diamine (EDA) at varying levels. Mobil said that the contamination stemmed from problems with the caustic wash pumps, which caused a doubling of the amount of EDA additive in November 1999.
When asked if this was a process commonly used by other refiners in Australia or overseas, Trimm answered that no other refiner in Australia still uses the method. He said it is rather old-fashioned and is being phased out by newer processes. When asked why Mobil continued to use the process, Trimm speculated that the company probably couldn't afford to upgrade its refinery. The capital costs would have been too high in an industry already suffering from low profitability.