Even the first pullout of an OPEC member can't undermine stability in oil prices (see story, p. 34).
Markets shrugged off the withdrawal of Ecuador from the group, which this month agreed to maintain current production in the fourth quarter, a time of increasing demand that usually spurs a boost in OPEC quotas. Nymex light sweet crude closed Sept. 23 at $22/bbl, about flat on the week and within $1 of where it's ranged since the end of spring.
In fact, this has been the most stable year for oil prices since before the 1986 price collapse. A look at the spread between high and low closings for the Nymex marker shows only $4.62 for the year to date, compared with $14.09 in 1991 - which came in 1 month - $25.12 in 1990 - in 4 months' time - $5.22 in 1989, $6.68 in 1988, $6 in 1987, and $15.45 in 1986.
Natural gas prices are a different story, continuing to show surprising strength in the U.S. Nymex gas futures closed Sept. 23 at a record $2.74/Mcf, up almost 500 on the week and $1 more than 1 year ago.
Higher gas prices could spark a wave of fuel switching this winter. Nymex heating oil last week closed at almost 64/gal, up about 70 in 1 month.
Oil price stability and gas price strength may be reason enough to be optimistic about a turnaround in the gloomy U.S. drilling sector (see story, p. 38).
The two most recent Baker Hughes weekly counts of U.S. active rigs showed single digit year to year declines the first time since the week ended Apr. 12, 1991, when the drop was only 6.4%. For the week ended Sept. 19 there were 720 active rigs in the U.S. - 348 oil and 356 gas-down just 7% from a year ago and up 33 from the previous week.
During first quarter 1991 and most of 1990, the Baker Hughes tally logged mostly year to year increases because of crises in the Middle East and Soviet Union. Since April 1991, year to year declines in the weekly rig count since Desert Storm mostly have been 20-30%.
Paine Webber upped its Baker Hughes rig count projection for 1995 to 1,015, citing higher gas price forecasts and the likelihood of U.S. legislation aiding the ailing U.S. industry beginning in 1993.
The analyst forecasts an average 750 rigs in 1993 and 910 in 1994.
The view from Washington, however, may be less sanguine about help for U.S. E&P. Senate conferees working on U.S. omnibus energy legislation made little progress in their first full day at work. Neither side would retreat from differing approaches to promote alternate transportation fuels. Both would require the federal government to use more alternate fueled vehicles, but the Senate bill would expand that to state governments and private fleets. Sen. Bennett Johnston (D-La.) said unless negotiations are speeded, there may not be time to pass the bill before adjournment, adding, "This bill is in pretty bad shape. I think it is rapidly going down the drain. "
The Senate has approved an 8 month extension of the Section 29 tax credit for unconventional gas production.
The measure, part of a tax package, now goes to the House.
President Bush has started the clock running on approval of the North American free trade agreement (Nafta). He submitted the agreement to Congress last week, beginning a review period of 90 legislative days. That period will not end until next spring because Congress is due to adjourn soon.
Chevron plans for 2 months next summer to use ETBE as an alternative to MTBE in its gasolines sold in southern California.
Tests are under way to confirm if ETBE will meet its standards.
Chevron has three MTBE plants in operation or under construction that would require only slight modification to have flexibility to produce MTBE or ETBE. If ETBE test results are good, it would allow Chevron more choice in oxygenates in meeting Clean Air Act standards.
Canadian gas exports to the U.S. will increase by about 20% in the contract year scheduled to end Oct. 31, Ottawa says. EIA tallied Canadian gas shipments to the U.S. at 1.719 tcf during the November 1990-October 1991 contract year. Canada's federal energy department says record exports of gas have been set the past 4 years and will continue another 4 years. It predicts Canadian exports to the U.S. will reach 2.25 tcf by 1995 and be worth about $4 billion (U.S.)/year, even at discounted prices. Ottawa cites as factors lower prices and planned or completed expansions of pipeline capacity to U.S. markets in the U.S. Northeast and California.
The department contends Canada will have to jump production to 4.5 tcf/year from the current 3.6 tcf/year to support projected 1995 exports.
Canada's National Energy Board will begin hearings Nov. 2 on natural gas export applications to serve the California market.
The board will review export bids by 12 companies tied to Pacific Gas Transmission's $1.6 billion pipeline expansion. The Altamont group, planning a rival pipeline to move Canadian gas to California via Wyoming, has sought to halt construction on the PGT project. Altamont deferred its project this summer for 1 year and asked NEB to stay or suspend previous approvals for the PGT project until legal disputes are resolved.
Pemex has requested U.S. Export-Import Bank cancel part of the $1.3 billion credit line extended last September.
The loan was to help fund E&D in the Gulf of Campeche (OGJ, Sept. 30, 1991, p. 48). Pemex says the work is on hold due to low prices.
Mexico City newspaper El Financiero quotes unidentified sources saying the Pemex decision also was affected by progress on Nafta, which will allow Pemex to purchase directly from the U.S. and Canada.
U.S. DOE and Kazakhstan Energy Ministry plan an oil and gas industry conference in Alma Ata Nov. 2-5, open to U.S. oil and gas companies, contractors, and service and supply companies. DOE says Kazakhstan is the second largest potential market for U.S. petroleum goods and services in the former U.S.S.R. after Russia. Kazakh participants will include senior representatives from oil and gas associations, refineries, and petrochemical plants, parliamentary officials, and political leaders from the three leading Kazakh energy producing regions. After the conference, participants may join a 2 day field trip to Aktau, a principal production complex in Kazakhstan.
As expected, Boris Yeltsin signed Sept. 18 a decree lifting Russian state controls on energy prices but at the same time imposing steep, graduated taxes and other levies on domestic oil companies that raise prices more than twice the current level of 4,000 rubles/ton in order to discourage them from hiking prices too fast. The move is seen as a transition to world market prices in 1993 (OGJ, Sept. 21, Newsletter).
Russian Energy Minister Vladimir Kolesnikov predicts gasoline prices in Moscow won't exceed 80 rubles/gal.
Thailand and Viet Nam have reached tentative agreement on maritime boundaries in the Gulf of Thailand. Thai officials say the two would like to jointly develop disputed areas believed to be hydrocarbon prone. The two nations reached the accord at a 3 day meeting in Bangkok, and Thailand expects significant progress at a November meeting in Hanoi.
Indonesia is sweetening production sharing contract terms to boost investment in frontier drilling. The package, to be issued this month and made retroactive to Jan. 1, increases a contractor's share in frontier areas to 40% vs. 30% in conventional areas under the old contracts, gives contractors 35% of the gas found in conventional areas, and abolishes the incremental share system for oil found in frontier areas, replacing it with a set ratio of 80:20 in Pertamina's favor. Contractors will be allotted 30% of the oil and 45% of the gas found in water depths greater than 1, 500 m.
The plan stipulates contractors must sell oil to Pertamina at 15% of the export price, compared with 10% under the old contracts. And investment credits for oil and gas development will be increased to an average of 110% and a ceiling of 125% for development of deepwater oil and gas fields.
The plan also shortens the asset depreciation period on capital goods for gas field development. So far this year, Indonesia has awarded seven PSCs and expects to sign another eight by yearend.
Norway may abandon what would have been its first attempt to divest North Sea oil assets after an auction drew disappointing bids.
The government hoped a successful auction of its 5% stake in Brage field would be the first of many sales of its North Sea assets. Statoil handled the sale, and sources say its lack of success means it's highly unlikely other planned sales would go ahead. The Energy Ministry had planned sales of minor stakes in Heidrun and Statfjord fields as well. Norway's Oil Minister Finn Kristensen may consider more changes to offshore licensing terms, including a more flexible system for state participation.
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