OGJ NEWSLETTER

May 21, 1990
The role of two Soviet companies in the group awarded exploration rights covering the jointly administered zone between North and South Yemen is in doubt. Machinoimport and Zarughgeologia planned to meet their contributions to the Hunt-Exxon, Total-CFP, and Kuwait Foreign Petroleum Exploration Co. group with equipment and services. The non-Soviet partners don't like the quality of this equipment, and the Soviet companies have reportedly hit problems finding a cash alternative, leaving the

OGJ NEWSLETTER

The role of two Soviet companies in the group awarded exploration rights covering the jointly administered zone between North and South Yemen is in doubt.

Machinoimport and Zarughgeologia planned to meet their contributions to the Hunt-Exxon, Total-CFP, and Kuwait Foreign Petroleum Exploration Co. group with equipment and services.

The non-Soviet partners don't like the quality of this equipment, and the Soviet companies have reportedly hit problems finding a cash alternative, leaving the operating agreement unsigned.

Meanwhile Total-CFP next month expects to start a 6 month, 1,200 km seismic program. The group is committed to drilling three wells in the subsequent 2 1/2 years.

Agip SpA, Milan, is negotiating a joint venture to develop two oil and gas discoveries in the Soviet Union.

The projects are a heavy oil deposit northwest of Moscow, which may need thermal recovery, and an onshore find near the Caspian Sea, where western technology will be needed to handle corrosive fluids.

Norsk Hydro does not expect North Sea LNG exports to the U.S. in the foreseeable future.

Bengt Lie Hansen, vice-president and chief financial officer, sees steady European demand for North Sea gas and doubtful economics for exports to the U.S.

He predicts Soviet gas exports to western Europe will not increase. It will take many years to develop markets for North Sea gas in eastern Europe, except East Germany, he said.

South Korea's energy and resources ministry has drafted a plan to spend $2.14 billion to lay about 800 miles of pipeline to make regasified LNG available to nearly all major cities by 2000, OPEC News Agency reports.

Pipelines are to be built by 1993 to Taejon, Chongju, and Chonan, 1995 to Taegu and Chonju, 1996 to six cities including Pusan and Kwangju, and after that six more cities a year through 1999. LNG is available only in the Seoul area.

The North Sea Brent oil market is labeled as "an international market an therefore cannot be regarded or regulated as if it were exclusively a U.S. market" in a joint statement by Britain's Department of Trade and Industry and the U.S. Commodity Futures Trading Commission.

The joint statement is the first step in an attempt by both bodies to reverse a U.S. district court ruling (OGJ, May 7, Newsletter) that Brent is a U.S. futures market and subject to CFTC jurisdiction.

Canada's National Energy Board has rejected an appeal by Dene-Metis Negotiations Secretariat, representing native groups that reside in the Mackenzie Delta, of a decision to permit major arctic natural gas exports to the U.S.

The board earlier rejected a similar appeal from the Council of Canadians, representing economic nationalists.

The NEB decision has to be ratified by the federal cabinet and a hearing held on proposals to build a pipeline. Exports are not likely until the late 1990s.

Venezuela has proposed to the U.S. government the creation of a $10 billion hemispheric strategic oil reserve.

Celestino Armas, energy and mines minister, said the reserve would be located in Venezuela and used in cases of emergency. It could be used by any country in the region but would mainly supplement the U.S. Strategic Petroleum Reserve.

The reserves delivery capacity would be 500,000 to 1 million b/d.

Higher oil and gas prices will fuel a rebound in U.S. drilling this year, Baker Hughes Inc. predicts.

The company told the Independent Petroleum Association of America's midyear meeting the count of active rotary rigs will average 1,005 for 1990. That will be up 16% from 1989's 869, the lowest count since 1942.

The count outside the U.S. and Canada will be up only 5% this year.

Crude oil price will average $18.50/bbl, up from $15.85/bbl in 1989, Baker Hughes said. Natural gas price likely will average $1.81/Mcf, up from $1.71/Mcf last year.

Horizontal drilling will account for 750-1,000 U.S. wells in 1990, up sharply from the 255 Baker Hughes tallied last year.

Daniel Akaka (D-Hawaii) has been sworn in as U.S. senator from Hawaii, replacing the late Spark Matsunaga (D-Hawaii).

Akaka, who served in the House since 1977, will be a candidate for the Senate seat in a special election this fall to fill the 4 remaining years of Matsunaga's term.

Blaming Congress for funding delays, the Department of Energy will delay the fourth call for proposals in its $5 billion Clean Coal Technology Program.

DOE was ready to issue a solicitation for nearly $600 million in federal matching funds June 1, but Energy Sec. James Watkins said that would be unwise because of "the risk of having to subsequently cancel or amend it, causing unnecessary expense for both DOE and the participants."

Seventeen California congressmen have told Interior Sec. Manuel Lujan that if their state has enough oil to export, more offshore drilling is unnecessary.

The congressmen were responding to the Reagan administration's proposal that the oil industry be allowed to export as much as 25,000 b/d of California heavy oil (OGJ, Apr. 16, p. 29).

The Bush administration has acceded to the congressional push for double hulled tankers and is backing a Senate proposal made in the conference committee working on comprehensive oil spill legislation.

It would require double hulls on new oceangoing tankers. Single hull vessels would be phased out when 25 years old, beginning in 2000.

The provision would not apply to vessels using Louisiana Offshore Oil Port (LOOP) until 2015.

Tank barges operating on inland waterways and the Great Lakes would be required to have double hulls beginning in 2015.

The outlook for rising oil imports to the U.S. from the Middle East has boosted LOOP's bond rating.

LOOP's owners have subsidized its cash flow until recently according to a throughput and deficiency agreement under which each owner guarantees the facility's bonds, says Moody's Investors Service, New York.

LOOP's owners are Marathon 32.1%, Texaco 26.6%, Shell 19.2%, Ashland 18.6%, and Murphy 3.2%.

Phillips 66 Co. has formally contested all citations issued against it by the Occupational Safety & Health Administration in connection with the Oct. 23, 1989, explosions and fire at its Pasadena, Tex., polyethylene plant (OGJ, Apr. 30, p. 46).

The company said it cannot be determined, at least for now, whether violation of a time worn operating procedure that allowed a gas release that resulted in the explosion was by Phillips employees or those of a maintenance contractor, Fish Engineering Inc.

"Other possible causes such as design, construction, quality of materials, and established procedures were not implicated," Phillips' findings to date show.

Phillips also approved construction of the final 600 million lb/year train of polyethylene capacity at Pasadena.

The train will restore its 1.8 million lb/year U.S. capacity in place or under construction at the time of the disaster. Construction is to begin in first quarter 1991 with start-up in mid-1992.

Copyright 1990 Oil & Gas Journal. All Rights Reserved.