Sweeping political and economic forces are battering South America's two biggest state petroleum companies.
In addition to being hit by a spreading oil workers'
strike (see story, p. 28), Brazil's Petrobras is about to be hit with an audit of its operations.
Aepet, the association of Petrobras engineers, has asked Brazil's federal accounting tribunal to audit the state company to determine why it is in a financial crisis.
The tribunal agreed to the audit, noting that Petrobras' effective subsidies of domestic product prices have caused massive losses over the years--a $1.67 billion loss in first 9 months of 1989--amid claims of widespread mismanagement and inefficiency.
Despite international pressure and huge losses for Pdvsa, Venezuela will not raise gasoline prices for the time being, says President Carlos Andres Perez.
Violent street protests over plans to hike gasoline prices--currently lowest in the world--earlier this month alarmed the government enough to back off those plans.
Last year, higher gasoline prices sparked widespread rioting that left 300 persons dead and led to martial law.
Premium gasoline in Venezuela sells for the equivalent of about 23/gal, and Pdvsa says it will lose $260 million this year on domestic gasoline sales unless prices rise. The government has an IMF commitment to hike gasoline prices. The administration may stagger price hikes for other refined products.
How far will oil prices fall this summer? Nymex WTI continued its plunge, dropping almost $2 on the week to close June 20 at $15.65/bbl for July delivery, the lowest closing since Dec. 6, 1988. Gasoline futures had been propping up crude futures, but they finally peaked for the month June 18 at 65.3/gal for July delivery before dropping more than 5 in 2 days.
What's surprising is the relative lack of alarm among analysts, who generally are focusing on the long term price outlook and cite overhyped gasoline futures and an overhang of crude stocks, as well as an expectation OPEC will rediscover cohesion.
But will it? As OPEC Pres. Boussena last week toured OPEC nations to twist quotabreakers' arms, Iran and Iraq reportedly were offering discounts to Japanese buyers for delivery in July-September in the wake of demand slippage. That follows reports of Saudi discounts of 25-70 for July delivery to Japan.
Abu Dhabi has approved a $500 million program to hike onshore oil production capacity by about 360,000 b/d to 1.125 million b/d by 1995. A program to hike offshore capacity by about 200,000 b/d to a little more than 1 million b/d is under way.
First focus will be Asab field, slated to jump by 60,000 b/d to 280,000 b/d by 1991. A major infill drilling program in Bab field will ramp up flow from 40,000 b/d to 210,000 b/d by 1995. Water injection capacity in Bu Hasa field will be upgraded, pushing productive capacity by 100,000 b/d to 550,000 b/d by 1994. Another 15,000 b/d is targeted in Shah and Sahil fields, increasing their combined capacity to 45,000 b/d.
Shell MDS (Malaysia) Sdn. Bhd. signed an agreement for $185 million in guaranteed fixed rate notes to help finance construction and operation of its natural gas to middle distillate synthesis plant at Bintulu, Sarawak.
Construction started last year, and it is to go on stream in late 1992. Other project shareholders, Shell Gas BY, Mitsubishi, Petronas, and Sarawak state government, will contribute a further $296 million. Arab-Malaysian Merchant Bank Bhd. acted as lead manager and arranger for the issue for a group of nine guarantor banks and five investors.
Total wants to broaden the base of its international petrochemicals operations, first in western Europe and then in eastern Europe. A start in the latter would be Hungary, where Total acquired the right to develop a gasoline distribution network.
It also is targeting Southeast Asia and North America for further expansion. Total also wants to establish petrochemical joint ventures in oil producing countries. Any such venture would also involve oil and trading. Algeria seems the most likely choice because of Total's long relationship with that country.
Canada's industry continues in doldrums.
Alberta conventional oil reserves fell 5%, to 3.5 billion in 1989, continuing a slide since 1986 and compared with a 1.5% drop in 1988, ERCB says. Oil sands reserves slipped 3% and bitumen reserves fell 13% in 1989. Gas reserve additions topped output the first time since 1982, climbing 1.4%, or 800 bcf.
Statistics Canada reports petroleum industry spending fell 18.7% in 1989 to the lowest level in the 1980's.
Total Canadian spending last year was $6.1 billion (Canadian), a drop of $4.5 billion from the peak in 1985.
Canadian Beaufort Sea drilling also is slumping.
Hearings were to resume last week by a federal panel on proposals by Gulf Canada for a 3 year Beaufort program. The panel earlier said it won't recommend approval unless Gulf provides more data on effects of a major oil spill. Gulf says risk of such a spill is extremely low and it,has provided all data it can.
Amoco Canada has dropped plans to drill in the Canadian Beaufort this summer due to lack of partner interest. Instead, it will shoot about 930 line miles of seismic. Amoco last year spent about $100 million on seismic and drilling there. One Amoco drillship will continue to work in the U.S. Beaufort.
Esso Resources doesn't plan any Beaufort wells this season but will drill one test on Tuktoyaktuk Peninsula.
Negotiations are continuing after Alberta producers rejected an initial offer from Alberta & Southern Gas to buy gas for California (OGJ, June 18, Newsletter). A&S said most of its 190 suppliers rejected its 1 year contract proposal, which producers said would out revenues by 5%, or $40 million/year. A&S is confident contracts can be negotiated.
Interior Sec. Manuel Lujan says MMS won't slash the acreage it offers in future Gulf of Mexico lease sales.
Although MMS plans to offer less acreage elsewhere under the next 5 year plan, Lujan said "the gulf is different," and area-wide leasing will continue there.
Rep. John Rowland (R-Conn.), dissatisfied with how FERC has handled the Iroquois pipeline project application, has filed a bill to create an inspector generals office at FERC, saying, "This will close a serious loophole of accountability within the agency and help restore public confidence in the integrity of the process."
The U.S. government should require refiners to use dyes to mark gasoline grades, says David Booth of Morton International Inc., Chicago. Booth, testifying at a House hearing on octane mislabeling, proposes no dye for premium, red for regular, and blue for midgrade gasoline at a cost of 0.02-0.04/gal, far less than costs of boosting inspection/enforcement programs.
Owners of the Mega Borg tanker will provide $275,000 for environmental studies of its oil spill in the Gulf of Mexico (see story, p. 26). Funds go to NOAA and the Texas Water Commission for studies on environmental damages, especially to Texas coast shrimp fisheries. Also, NOAA will relocate some loggerhead turtles from areas threatened by the oil and will reschedule release of 2,000 lab-reared Kemp's Ridley turtle hatchlings. The agreement is unusual because no court ordered the payment, and NOAA hasn't made a determination of damage.
Texaco claims it has drilled and completed the first documented horizontal well in the Gulf of Mexico.
Its B-12 OCS C-0974, drilled in 180 ft of water from East Cameron Block 265 Platform B, flowed 11 MMcfd from an unconsolidated sandstone at 1,700 ft TVD. The development well, drilled in 20 days, had a horizontal displacement of 670 ft within a vertical variation of 15 ft. Texaco also spudded a second horizontal well from the platform and plans to accelerate use of the technology to expoit shallow gulf zones.
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