Due to a holiday in the US, data for this week's Industry Scoreboard are not available.
Crude oil prices continue to sustain near-peaks for the decade amid mixed signals from OPEC.
While Kuwait, UAE, and Qatar all suggest that they will resist efforts by US Energy Sec. Bill Richardson, on a whistlestop tour of OPEC and key non-OPEC exporters last week, to jawbone oil supplies up and oil prices down, Venezuela's and Mexico's oil ministers hint that exporters likely will agree to allow more oil onto markets in small increments in the months ahead.
And Saudi Oil Minister Ali al-Naimi says that he expects oil demand to fall in the second quarter, leading to slippage in oil prices.
Still, the bulls won out last week, as NYMEX crude for April delivery closed at $29.39/bbl Feb. 23, up 47¢ on the day, while April Brent ended the day at $27.06, up 48¢. Apparently, traders responded to the prospect of oil supplies increasing only in small increments as a sign that markets will continue to remain tight in the run-up to the summer driving season.
That could be seen in the continuing price strength shown on the Singapore exchange at presstime last week.
April Brent closed at $27.20/bbl Feb. 24 in Singapore, up 65¢ on the day. Traders there expressed concern that, even if producers boosted output by as much as 2 million b/d, supply would still fall short of demand.
That sentiment seemed to prevail in early trading on London's IPE, where midday trading Feb. 24 had April Brent up 15¢ on the day.
The hawks in OPEC apparently are banking on a big drop in demand in the second quarter to justify their reticence over hiking production.
Iran suggests that demand could drop by as much as 2.8 million b/d in the second quarter, thus supporting the view that a production increase isn't warranted until the second quarter.
Don't count on Iraq making a significant contribution to oil supply increases in the near term. Citing concern over long-term damage to its oil fields, Iraq reported that continuing production at full capacity has become increasingly difficult, as shown by the drop in Iraqi oil exports by 250,000 b/d to 300,000 b/d since mid-December. Iraq is now producing 1.9 million b/d of oil.
Iraq also expressed interest in being included in OPEC's quota system again, signaling its intent to increase its production by yearend, with the help of spare parts for its oil field equipment trickling in during the months to come.
Meanwhile, more than 70 US congressmen-primarily Democrats-have signed a letter urging President Clinton to ask the UN to lift sanctions against Iraq. The congressmen say the trade embargo is hurting the people of Iraq, not dictator Saddam Hussein. The US policy has been that normal trade won't resume until Iraq complies with all UN resolutions.
Venezuela must reshape its petroleum industry into "a lever for the sustainable development" of that country, says President Hugo Chavez. In a nationwide television address last week with Energy and Mines Minister Alí Rodríguez Araque, PDVSA Pres. Hector Ciavaldini and other industry executives, Chavez claims the "old rentist model" of the oil industry is "a thing of the past."
The result is a shift in PDVSA's policy to ensure that, while the US remains its primary oil client, the firm will also focus on other markets in the Caribbean and Latin America.
With the current push to develop a transcontinental gas grid in South America, PDVSA has made development of its gas industry a high priority. Its new 10-year plan calls for PDVSA to double its production capacity for gas and petrochemicals. "During this century, Venezuela is going to be a great producer of chemicals, petrochemicals, and gas," Chavez said. The plan calls for total investments of about $55 billion, which will also allow a hike in oil reserves.
PDVSA has budgeted about $8.5 billion for investment this year and expects to generate about $7.6 billion in revenues, Ciavaldini says. Venezuela's oil output will remain about 2.7 million b/d this year, with production capacity held at 3.5 million b/d-enough to meet any increase in OPEC production quotas, he says.
The last obstacle has been cleared for the start of development of the Phillips group's Bayu-Undan gas-condensate field in the Timor Gap Zone of Cooperation with the signing of the Timor Gap treaty by the UN on behalf of the newly independent state of East Timor. Australian Foreign Minister Alexander Downer says Australia looks forward to a close collaboration with the UN acting on behalf of East Timor during the transition period to self-government.
Both Australia and the UN are confident that the arrangements now in place will continue to provide a sound basis for Timor Gap operations.
The $2.2 billion (Aus.) Phase 1 Bayu-Undan project involves a condensate stripping operation that will tap the field's estimated 400 million bbl of liquids. It is expected to come on stream in 2003. The dry gas produced with the liquids will be reinjected for recovery in Phase 2 of the project.
BP Amoco and Sonatrach have green-lighted the $2.5 billion development of the In Salah gas fields complex in Algeria's Sahara.
The seven fields, to be linked via pipeline to Hassi R'Mel field, will supply about 9 billion cu m/year of gas to the fast-growing markets of southern Europe. First deliveries of gas are due in 2003. Already, 4 billion cu m/year of gas have been assigned to Italy's ENEL, and negotiations are at "an advanced stage" to sell the rest in Italy and Spain, says BP Amoco.
The decision to develop In Salah follows a 3-year exploration and appraisal program that established reserves of more than 7.5 tcf of high-quality gas, with additional volumes identified in adjacent reservoirs. BP Amoco Exploration Chief Executive Richard Olver said, "Gas forms a major plank of BP Amoco's growth strategy, and southern Europe is a region where demand for gas is expanding rapidly and, we believe, will continue to grow over the coming decades." The estimated $2.5 billion capital cost of the project will be funded 65% by BP Amoco and 35% by Sonatrach. The companies expect to award the main design and construction contracts in the second quarter, with construction work due to begin before yearend.
BP Amoco and India's state-owned Indian Oil Corp. are in talks to jointly study both upstream and downstream activities in the country's growing petroleum sector. BP Amoco is reportedly keen on entering India's large petroleum sector, which is slated for deregulation by yearend 2001.
LNG has been identified as a key product, given India's enormous power needs, and IOC has identified select regions in the south and east for LNG infrastructure, in collaboration with an international partner, while participating in the $700 million Dahej LNG terminal project with state-owned Petronet LNG.
Meanwhile, IOC is seeking listing at the New York Stock Exchange by August 2000 and has chosen Arthur Andersen to upgrade its prospectus to global standards. IOC, slated to divest 10% of government equity by Mar. 31, would seek the listing in view of its massive expansion program. IOC says it will approach the US Securities Exchange Commission by June 2000. The process of listing takes about 45 days, after being granted SEC approval.
Among other efforts to privatize state firms, the Saudi government is reported to be hashing out a time schedule for the privatization of its 70% holdings in SABIC. SABIC, which has experienced declining profits over the last few years, also is seeking a rescheduling of its $4.47 billion debt.
Brazil's Privatization Council plans to sell a bloc of 20 billion shares of Petrobras stock in a public offering to be completed in July.
The shares represent 32% of the state oil firm's voting stock and 18.5% of its capital, analysts say. Based on current market prices, that sale is expected to generate about 8 billion reals, or $4.5 billion, to help the Brazilian government pay down its huge budget deficit, analysts said.
Higher oil prices have buoyed Petrobras's stock recently. The government hopes to sell most of that stake at home. Incentives include a 10% discount for investors who pay immediately for the stock and a 10% bonus for those who hold the shares for a year or more. The Brazilian government plans to maintain at least a 51% controlling interest in the company in the future.
CMS Energy cites politics and the misreading of the Australian market as the key factors behind the decision to divest its ownership in the 2,000-Mw Loy Yang power plant and coal mine complex near Melbourne (see Industry Briefs, p. 37). But misreading the market was not the only mistake made, admitted CMS Energy Pres. and COO Victor Fryling, "The [other] mistake we madeellipsewas that we made too big of an investment; we put our eggs in one basket."
At a news conference last week in Houston, Fryling explained that his company was initially set on making a $100-120 million investment in the plant as a partner with a Japanese firm. But the partnership turned sour 6 weeks before the bid, and CMS Energy ended up investing triple what it had intended. Fryling said, "The right decision [at that point] should have been: 'Go home, don't make the bid.' The lesson we've learned there is discipline and [that] you have to understand what the level of investment is that you can sustain."
Fryling also contends Australian politicians misled US investors. "When they [announced] the privatization program," he said, "what they said was thatellipsethey were going to privatize both the states of Victoria and New South Wales and they were going to integrate the two marketplaces." Victoria embraced privatization, while New South Wales canceled its privatization plans.
In addition, Fryling says the Dearborn, Mich.-based CMS Energy-currently suffering low stock prices-has only a "finite amount of time," probably by summer's end, to rebuild its credibility on Wall Street and strengthen its balance sheet, before possibly falling victim to another firm's craving for inexpensive assets.
"I feel that clock ticking," Fryling said.
CanOxy shareholders have voted 67% in favor of a shareholder rights plan, or "poison pill," to deter any hostile takeover attempts. Occidental Petroleum, which holds a 29% interest in CanOxy, indicated last summer it may sell its shares or swap them for an interest in CanOxy assets, such as the 100,000 b/d Masila oil field in Yemen. Oxy Pres. Dale Laurance is a member of the CanOxy board and attended the special shareholders meeting in Calgary to vote on the poison pill but declined comment after the meeting. The two companies have been meeting to find a solution acceptable to both sides.
The plan adopted would prevent an outside buyer from locking up Oxy's total interest in CanOxy without CanOxy's approval. CanOxy CEO Victor Zaleschuk says the vote results create a level playing field for negotiations with Oxy.
Other CanOxy assets possibly involved in discussions with Oxy include CanOxy's petrochemical operations, its Gulf of Mexico properties, and a 7.2% interest in the Syncrude oilsands consortium in northern Alberta.
