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HOW A NONINTEGRATED NORTH SEA PRODUCER VIEWS OIL PRICE RISK

Liz Gall Enterprise Oil plc London Over the last 10 years, attitudes towards the causes of oil price volatility and how to cope with the attendant price risk have undergone a revolution. This is nowhere more apparent than in the trading rooms of the non-integrated North Sea oil producers. The aspirations of such companies remain straightforward-to sell their crude oil at the highest price possible. The tools available to help achieve this goal have increased in number and improved in

WATCHING WASHINGTON PROBING THE PRICE RUNUP

with Patrick Crow It's difficult for lawmakers to ascertain the truth from conflicting testimony by witnesses at a congressional hearing. It's even harder when lawmakers not only want truth from the hearing but also publicity. That seemed a major impediment at two recent hearings on last month's runup in heating oil and propane prices. No doubt some of the congressmen at a House of Representatives hearing were truly angry about the price increases (OGJ, Jan. 15, p. 23). No doubt

U.S. BRIEFS

CHEVRON CORP. said a court sustained its right to pursue its claim that Pennzoil Co.'s filings with the Securities and Exchange Commission contain misrepresentations about Pennzoil's intentions regarding purchase of 8.8% of Chevron stock and that the misrepresentations violate securities laws. Chevron said the part of the suit the court dismissed will have no significant effect on its case.

SOFTWARE USES RISK ATTITUDE IN PROSPECT APPRAISAL

Michael R. Walls Strategic Systems Group Austin

PHILLIPS TO REDUCE VALUE OF ARGUELLO

Phillips Petroleum Co. last week disclosed it will take an estimated $280 million after tax writedown on assets related to giant Point Arguello field off California. The writedown is to be charged against fourth quarter 1989 earnings, resulting in "substantial negative results" for the quarter, the company said. Phillips holds 40% and 50% interests in Point Arguello field and related offshore and onshore production/processing facilities. "We intend to begin production of Point Arguello as soon

INDUSTRY TO STEP UP E&P SPENDING

Salomon Bros.' survey shows that more than 200 companies have schedules a combined 10.5% jump in upstream outlays this year. U.S. operators expect higher oil prices, as well as better match between gas supply and demand. Solid increases in world exploration and production spending are in store for 1990. More than 200 companies plan a combined 10.5% hike in E&P spending compared with 1989 outlays, an annual survey by Salomon Bros. Inc., New York, shows.

INTERNATIONAL BRIEFS

BP OIL will enter the East German retail market with construction of a service station in Dresden as a 3 million mark pilot project. The city will provide a site on long term lease for the station, to be operated by VEB Minol, the organization responsible for oil distribution in East Germany. A range of gasoline will include unleaded grades for western vehicles.

CYCLONE-TYPE SEPARATORS SCORE HIGH IN COMPARATIVE TESTS

L. Oranje Gasunie Research Groningen, The Netherlands Full-scale performance tests of four types of gas-liquid separators have indicated a cyclone-type separator can have a catch-efficiency rate which approaches 100%. The tests were carried out by Gasunie Research, Groningen, The Netherlands, under operating conditions.

ENVIRONMENTAL, RELATED ISSUES TAKING THEIR TURN IN RESTRUCTURING INDUSTRY

Bob Williams Senior Staff Writer The petroleum industry is in the midst of a subtle restructuring in response to heightened public concern over environmental, safety, and health issues in the 1990s. Although not as drastic as the restructuring caused by plunging oil prices in the 1980s, the changes could ultimately be significant.

ASSESSING OIL PRICE RISKS IS A KEY TO HEDGING

Robert Boslego The Boslego Corp. Winchester, Mass. In my article on hedging management here 2 years ago (OGJ, Feb. 1, 1988), 1 discussed the major weaknesses I had identified in many hedging programs. One weakness was the lack of a reliable, ongoing assessment of the level of price risk, and I mentioned the use of frequency distributions as a tool for developing future price probabilities (Fig. 1). This article will focus on some of the elements of price probability analysis and why it is

IPE EXPANDS TRADING, PLANS DISTILLATE CONTRACT

Peter Wildblood International Petroleum Exchange London London's International Petroleum Exchange has experienced a remarkable growth period over the last 3 years. During this time both turnover and open interest have increased tenfold with a growth rate over the last calendar year of 130%. These developments reflect the acceptance by the oil industry of futures as a valuable hedging and pricing vehicle, and the validity of the exchanges' contracts to fulfill this need.

PRICE QUESTIONS COOL INTERNATIONAL DRILLING

International drilling will increase in 1990 as activity catches up with last year's crude oil price gains. But the increase will be modest because of lingering price uncertainty. Oil & Gas Journal projects the average active rig count outside the U.S. and Canada at 940-950, compared with an estimated 923 in 1989. Last year's tally was down from 1,023 in 1988, a year of price weakness. Some drilling increase seems inevitable after last year's price strength. Indeed, oil companies

ENVIRONMENTAL CONCERN OUTWEIGHS ACTION ON ENERGY IN CONGRESS

Patrick Crow Washington Editor U.S. environmental issues will continue to outweigh energy concerns in this session of Congress. And the environmental issue with the top priority is reauthorization of the Clean Air Act. Although the legislation is hotly debated and although previous attempts to amend it have failed, passage is likely this year because most key parties involved-congressmen, the administration, and environmentalists, for example-want a bill. Congress is expected to agree on

OGJ NEWSLETTER

New production facilities are planned for the Middle East in preparation for higher demand for crude from the region later in the decade. Arabian Petroleum Pipelines (APP) will boost capacity of the Sumed pipeline from the Gulf of Suez to the Mediterranean Sea to 2.4 million b/d from 1.6 million b/d during the next 3 years. In the Persian Gulf, Abu Dhabi Co. for Onshore Oil Operations (ADCO) will expand capacity of Bab onshore oil field and the Jebel Dhanna export terminal.

CHEVRON SETS 1990 SPENDING AT $4.3 BILLION

Chevron Corp. plans a slight increase in worldwide capital and exploratory spending to $4.3 billion in 1990 as it continues to restructure. The budget includes $2.2 billion for exploration and development, unchanged from 1989, and about $1.2 billion for refining and marketing, up about 26% from 1989. Chemical spending will be $380 million, unchanged from last year excluding the 1989 acquisition of Plexco, a polyethylene pipe and products manufacturer. The rest of the budget is for shipping,

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