Oil prices remain volatile in response to events in the Middle East (see stories, pp. 23-26, and 28-30).
After falling from a high of almost $27/bbl seen immediately after the invasion, Brent last week rebounded to $26.20/bbl only to fall again to $25.20/bbl at Aug. 16 closing once the implications of the Iran/Iraq peace initiative had been absorbed. Dubai also seesawed to regain the $23.50/bbl peak of the previous week before falling back to $$22.60/bbl.
Products prices are stabilizing at higher levels after riding the same roller coaster in Rotterdam. Premium gasoline last week returned to $333/metric ton, and gas oil advanced to $231/metric ton. Several marketers that trimmed gasoline pump prices at the first sign of declining spot prices were forced to increase them as crude and product costs rose again. Industry officials say this is likely to deter European marketers from moving product prices in lockstep with spot crude and product prices for fear of further confusing retail markets.
In the U.S., Nymex WTI also has been whipsawed since peaking at more than $28/bbl shortly after the crisis started.
Nymex for September delivery closed Aug. 15 at $26.46/bbl, up 50 on the week but mostly jumping or falling in 50-75 increments last week until then.
Retail oil products pricing is causing industry grief in the U.S. (see story, pp. 32-33) and elsewhere.
Japan's Showa Shell last week denied it plans to raise products prices after earlier press reports quoted company officials as saying oil price hikes will boost products prices by 5-6 yen/l. In Canada, Ontario warns major marketers against price-gouging, hinting of possible intervention in the market.
Production from the Neutral Zone shared by Kuwait and Saudi Arabia has been halted on the Kuwaiti side but is continuing on the Saudi side. Iraqi troops are reported in full control of the Kuwaiti area and have shut in fields operated by Kuwait Oil Co. and Texaco. Without access to feedstock, Texaco has had to shut down its 70,000 b/d Mina al-Zour refinery. In the Saudi zone, Arabian Oil Co., a joint venture of a Japanese group and Saudi and Kuwaiti governments, continues to produce about 100,000 b/d and operate its 30,000 b/d refinery at Ras Al Khafji.
These operations are now within view of Iraqi forces, ironically recalling that during the Iran/Iraq war Saudi Arabia and Kuwait dedicated Neutral Zone output to Iraq to help make good production shortfalls caused by the fighting.
Near term prospects for non-OPEC supplies taking up the slack from the embargo on Iraqi/Kuwaiti oil are not promising.
Colombian President Gaviria's announcement that his country would raise oil production during the crisis was dampened by Ecopetrol's comment that Colombia could boost flow by only 10,000 b/d because of transportation constraints. Colombia exports about 190,000 b/d.
DOE's startling effort to intervene in the stalemate blocking start-up of giant Point Arguello field off Santa Barbara County, Calif., has made little headway with county officials who still insist the oil be shipped via onshore pipeline and oppose even interim tankering. Chevron is considering adding heaters to Four Corners' Line 90 into Los Angeles or laying a new pipeline along Santa Fe Southern Pacific railway's corridor from Gaviota through the San Fernando Valley to Los Angeles.
In either case, it would take 24-30 months if permits were expedited. Chevron says it expects to be allowed to tanker Point Arguello crude until one of the lines is available.
Even with speedy approval of tankering, it would take at least 6 months to start up, calling for rehiring and retraining employees, added development drilling, and demothballing platforms and pipelines and the Gaviota processing plant. The field would start up at 10,000 b/d the first month and take 6 months to build to 75,000 b/d. The 100,000 b/d level DOE cited is the maximum permitted for Point Arguello, but flow from the tricky Miocene Monterey off California can be unpredictable.
Disruptions of non-OPEC oil production could worsen the oil supply situation. Although U.K. North Sea production had not been directly affected by August strikes, the disruption to the weather window installation programs could lead to some platforms staying shut down for longer periods than projected.
Construction and maintenance workers staging four 1 day strikes this month have temporarily suspended further stoppages, and labor talks are under way. The strikes disrupted plans to install emergency shutdown valves on U.K. platforms this summer.
The 112 mile crude pipeline from Oxy's Claymore field to Flotta terminal in the Orkney Islands will be closed for 2 weeks from Aug. 23 while a corroded section is replaced. Inspection with an intelligent pig found corrosion in a 1/4 mile section of the line about 6 miles from Claymore platform.
European Marine Contractors will use the lay barge Castoro Sei to lay a new section of line. The Flotta line handles about 200,000 b/d from Oxy's fields in the area and from five other fields operated by Texaco and Amerada Hess.
Shell-Esso expects throughput of the Brent pipeline to Sullom Voe will fall to 306,000 b/d in September from an average 355,000 b/d expected in August because of continuing maintenance and construction work on the 13 fields using the line.
Offshore E&P continues to be a strong lure. McDermott, with a record $2 billion backlog at the end of the second quarter, says about $3.5 billion of offshore projects worldwide will be offered in the next 12 months.
Taiwan's OPIC has begun preliminary exploration work in northern Namibia with seismic surveys in the Ovamob region along a belt 50 km east-west and 60 km north-south of Okankolo.
Another accident has hit the U.S.S.R.'s petroleum industry. A compressor station exploded and sparked a fire that damaged a cat reformer at the Yaroslavl refinery 400 km north of Moscow. At least three workers were killed and 10 injured. The fire was extinguished in 3 hr, and fuel output is not expected to be affected.
The movement for autonomy among some Soviet republics could threaten industry joint ventures in the U.S.S.R. The Russian Republic said foreign ventures in Russia conducted by Moscow without the rebellious republic's approval would be invalid and considered crimes against the state, Tass reported.
More petrochemical capacity is on tap in the Far East and Middle East. Amoco signed a letter of intent with Indonesia's Salim Group to study feasibility of a $200 million-plus 250,000 ton/year purified terephthalic acid plant on Java. Amoco says the plant is needed by 1994 to supply Indonesia's growing polyester industry. The 50-50 venture would use Amoco's PTA technology.
Sabic confirmed plans to expand into basic aromatics recovery and propylene. The Saudi petrochemical company plans to produce propylene at its Yanpet plant at Yanbu in a joint venture with Mobil and at its Petrokemya plant at Jubail. Both units will have flexibility to use naptha, NGL, LPG, or ethane to yield propylene, butadiene, benzene, toluene, and xylenes.
Most or all U.S. gasoline will have to be reformulated by 2000, calling for a $22 billion investment by U.S. refiners, Arthur D. Little projects in a multiclient study. That will hike gasoline pump prices by 7-12/gal. Refiners can't remain complacent gasoline reformulation will be limited to the nine urban areas targeted for ozone cuts, Little says. Reformulation will proceed more slowly in Europe, Little says, although refiners there will have to spend $4 billion by 2000 to phase out lead and meet demand for lighter products. Cutting diesel sulfur to U.S. levels will cost European refiners another $2 billion.
U.S. consumer food prices could jump $4.5-8 billion/year after 1995 as a result of the Senate-approved Daschle amendment to Clean Air Act reauthorization, says API. Oxygen levels mandated for gasoline could require ethanol use in gasoline and spark unprecedented growth in grain demand, hiking corn prices by 40%, with ripple effects throughout U.S. agriculture.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.
