Is another oil price slide on the horizon?
Merrill Lynch worries that a near term drop in prices may be more severe than it earlier expected.
Merrill Lynch projected a slip to $17/bbl after the recent OPEC Geneva meeting, but now says it may have been too optimistic. It cites reports of Iranian and Iraqi production topping quota by a combined 700,000-900,000 b/d in May. The only country making a significant cut in May was Saudi Arabia, Merrill Lynch says, which may renege in frustration.
OPEC's benchmark of $18/bbl will hold for another 2 years, then rise with inflation to $21.50/bbl in 1995, says a leading Bahraini economist. Hamdi Azzam, Gulf International Bank chief economist, sees OPEC's quota system lingering until at least 1993 and OPEC world market share climbing to 48% in 1995 and more than 53% in 2000.
Meantime, U.S. oil prices last week continued to be volatile, as an unexpected jump in U.S. gasoline futures halted a recent slide in oil prices. Buoyed by a week to week jump of almost 5/gal for gasoline futures, Nymex WTI for July closed May 30 at $18.08/bbl, up 40 from the previous week's low.
Traders cited gasoline market tightness owing to better than expected demand at the start of the U.S. driving season. Other factors in the rally were reports of a refinery strike threat in Brazil and unrest in OPEC member Gabon.
Tests of Venezuela's productive capacity of light and medium crudes and condensates were carried out in the first half of May, say unofficial industry sources. After OPEC agreed in May to out production 1.445 million b/d, Venezuela said it would postpone all such tests until June or July. Last month's tests sustained flow at 1.9-2 million b/d, better than expected. Tests of heavy crude potential are slated for this month. Venezuela put total productive capacity at 2.7 million b/d at yearend 1989.
Will Venezuela push for more refining capacity in the Caribbean? Grenada's minister of finance and planning, George Brizan, said Venezuela is considering building a refinery 10 km west of Grenada's capital of St. George.
The announcement came after Brizan's meeting with Venezuelan President Perez, but Venezuelan officials didn't comment.
Pdvsa plans $24 billion in capital outlays for 1990-95, of which $15 billion the Venezuelan state oil company will fund directly or seek financing for. Pdvsa wants foreign partners in oil, petrochemical, and coal ventures to fund the balance.
The U.S.S.R. reports discovery of another large gas field in the Barents Sea and an oil field in the Pechora Sea, a southeast arm of the Barents. Soviet sources say the gas field is the eighth discovery made in far northern waters by the Soviet Arctic Offshore Oil & Gas Exploration Association (Arktikmorneftegazrazvedka). The strike, of undisclosed size, was made by the Finnish built Valentin Shashin drillship. The shallow water Pechora find can be developed with ice resistant platforms.
Production from Barents gas fields probably will begin in the 1990s, the association said. Moscow has described the Barents' Shtokmanovskoye field as one of the world's largest offshore gas discoveries, pegging reserves at 141 tcf. It is under development study (OGJ, Apr. 30, Newsletter).
Cameroon has introduced new terms for exploration and production in a bid to revive activity by foreign companies.
Elf Serepca and Shell Pecten signed new agreements covering 6 years for exploration and 25 years for production.
In the mid-1980s all foreign companies withdrew from Cameroon save Elf, Pecten, and Total. Cameroon also seeks bids for new permits on revised terms for acreage in the Douala basin.
Spain's energy industry will need to invest about $4.3 billion to comply with European Community environmental standards the next 10 years, according to government estimates.
Refiners will account for $370 million of that total, electric power producers $2.77 billion.
A European takeover could spur new drilling in remote Svalbard. Kirkland Resources (Holdings) plc, Harpenden, England, acquired control of Norsk Polar Navigasjon, Oslo, one of the largest acreage holders in Svalbard.
Kirkland started a technical review of NPN's exploration effort and could approve a new well, to spud next spring or summer, on Spitsbergen, largest of the Svalbard islands. NPN has been involved in 18 wells on Spitsbergen.
Another big takeover scrap looms in Canada. ProNational Gas Inc. filed an application with Ontario Energy Board to compete with a proposed $1.1 billion takeover of Consumers' Gas Ltd. by British Gas. ProNational will match a BG offer of $34/share and resell the shares to Canadian investors.
ProNational says purchase of the Ontario gas distributor by non-Canadian investors is not in the public interest. GW Utilities Ltd. owns more than 82% of Consumers' shares and agreed to tender them to BG. The board is to begin hearings on the BG bid by the end of June.
Canada's NEB has suspended testimony related to a proposed $2.6 billion expansion by TransCanada and instead will hear testimony on tolls to issue a special oral ruling.
TransCanada, Alberta, and some producers want to retain rolled in tolls in which all users would pay for the expansion.
Several major producers and eastern consumers want incremental tolls so exporters benefiting on new deliveries from the expansion would pay for it.
A quick ruling is needed because the expansion is tied to the proposed Iroquois project to move Canadian gas to the U.S. Northeast. Deliveries are to begin Nov. 1, 1991, and contracts will expire if construction deadlines aren't met.
Meantime, FERC last week found the Iroquois project-which has met with heated opposition by U.S. independents (OGJ, May 21, p. 28)--environmentally acceptable.
California's Big Green initiative--a grab bag of tough environmental measures for the November 1990 ballot--would, among other things, hike the price of gasoline by at least 25-50/gal by 2000 and by more than 50-$1/gal by 2010, restrict auto buyers' choice to vehicles getting 40 mpg or better, and more than double price and perhaps force rationing of diesel, says the California Coordinating Council.
In addition, a council poll showed a reversal in voter approval of the initiative (OGJ, Feb. 5, p. 30) when confronted with details of the measure.
The U.S. Coast Guard has concluded that failure of Golden West Refining Co., Santa Fe Springs, Calif., and a mooring master and his employer to be aware of accurate water depths caused the 9,458 bbl American Trader tanker oil spill off Huntington Beach, Calif., Feb. 7.
The tanker was maneuvering in waters shallower than shown in 1975 depth charts when a swell caused it impale itself on its anchor. BP, which cleaned up the spill of its Alaskan crude on behalf of tanker owner American Trading & Transport Co., and the captain and crew were found blameless.
The U.S. active rig count has topped 1,000 for the first time in more than 2 years. Baker Hughes' tally last week jumped 29 to 1,001, up 33.6% from a year ago and the highest since Jan. 25, 1988. Except during August 1987-January 1988, the count had remained below 1,000 since Mar. 31, 1986.
The Senate has approved a measure calling for DOE to expand the SPR to 1 billion bbl from the planned 750 million bbl.
The bill now goes to the House. The Bush administration opposes an expansion, which it says would cost $12 billion.
The Senate bill also authorizes DOE to contract for supplementary reserves by leasing oil. DOE has been negotiating with Saudi Arabia, Venezuela, and other countries on such leases.
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