OGJ NEWSLETTER

Natural gas continues to dominate much of the day's news. In Europe, the energy division of the United Nations Economic Commission for Europe, working with Romanian authorities, is organizing a seminar on ways to improve gas exploration and production in eastern and central Europe. Romania's Romgas RA says sessions will focus on things such as new exploration methods in complex geological settings, enhancing production from old reservoirs, and well stimulation techniques.

British Gas plc is absolutely relentless in its "global gas" campaign (OGJ, May 6, p. 27). The latest move: an agreement to acquire a 24% interest in Gasversorgung Sachsen Anhalt, a new gas distribution company that will serve the Halle region of eastern Germany. In addition, British Gas has been offered interests in gas distribution companies in Leipzig and Magdeburg, as well as in the German transmission company Verbundnetzgas. Negotiations are under way.

Marathon started up its second gas field in the Celtic Sea off Ireland. Ballycotton field, 9 miles north of MaratHon's Kinsale Head gas field, is headed for a peak flow of more than 50 MMcfd from about 70 bcf of reserves. Ballycotton is the first subsea development off Ireland. It's producing through a 10 in. line to Kinsale Head's Bravo platform. A March 1989 discovery, Ballycotton went on stream 3 months ahead of schedule.

Enron Power Corp. found a market for more North Sea gas through a joint venture with the U.K.'s Eastern Generation Ltd. The combine plans to build a 380,000 kw, gas fired, independent power plant at Lawford on the Essex-Suffolk border. The project, carrying a price tag of more than $300 million, is to start construction next year. Eastern, largest of 12 regional power companies in the U.K., last February began building a 360,000 kw, gas fired, joint venture power plant at Peterborough.

In Canada, the National Energy Board set a July 22 deadline for intervenors to express views on Alberta gas exports to California. The Canadian Petroleum Association asked for a review of federal licenses granted for the exports. Alberta producers and California regulators and buyers are involved in a price dispute, with California seeking lower prices. The review covers licenses for sales worth about $1 billion/year to Pacific Gas & Electric Co., San Francisco. NEB called for comments as a first step to determine whether an inquiry is needed into the licenses. CPA says California is violating terms of the licenses and the Canada-U.S. Free Trade Agreement.

In the U.S., a first: California Public Utilities Commission will allow PG&E and San Diego Gas & Electric Co. rate hikes to provide a total of $18.8 million in funds for programs to expand use of compressed natural gas as a motor fuel. Southern California Gas Co. also is promoting CNG in its service area (OGJ, July 8, p. 29).

Phillips expects its second quarter net to be down sharply from the figure for the same period 1990. The reasons: depressed natural gas prices and lower margins on petroleum products and chemicals.

Kerr-McGee also expects a slide in second quarter profits-- in its case to about one third of the $30 million booked in last year's second period. It too blames lower refining margins, as well as high exploration costs and a $14 million pretax charge stemming from its streamlining program.

West Virginia independent producers asked the state Public Service Commission to require a power plant to burn gas. Monongahela Power Co. and Potomac Edison Power Co. plan to install scrubbers to reduce sulfur emissions at Monongahela Power's Harrison County plant, which burns coal. Noting the state's large natural gas reserves, the oil group told PSC cofiring by burning gas with high sulfur coal would be a cheaper way to comply with federal clean air standards than using scrubbers.

Another independent producer will further curtail gas production in July and August in response to the lowest prices in the history of the spot gas market (see story, p. 28). Kaiser-Francis Oil Co., Tulsa, which began curtailing sales last February when spot prices dropped 40/Mcf from the January level, will choke back gas flow further "until prices increase sufficiently to justify current sale rather than deferral." Kaiser-Francis produces about 250 MMcfd in 22 states and provinces.

Algeria took the occasion of the oil producer/consumer dialog in Paris early this month to unveil plans to bolster outside participation in its petroleum sector. Plans call for changes in the 1986 hydrocarbons law to improve conditions under which state owned Sonatrach's partners will operate. Downstream, foreign partners will be offered "attractive partnerships in the framework of new legislation on funds and credit." Operators will be able to join Sonatrach in enhanced oil recovery projects. Tax breaks will aim to direct operators toward promising areas where access is difficult--the central and western Sahara, for example, where there is no infrastructure.

The U.K. tax structure could stand some improvement too, says Peter Bijur, president of Texaco Ltd. Speaking at a Financial Times conference in London, Bijur called for a review of the government's current practice of waiting 3 years to determine whether research and development is field specific before deciding whether it can be set against the Petroleum Revenue Tax (PRT). "All North Sea related research and development costs should be immediately recoverable against a company's U.K. PRT liability wherever generated," he said. "This change would spur further North Sea related research and development and support increased offshore investment levels that will be required in the future."

Total signed that contract making it the first western company to participate in China's refining industry (OGJ, June 17, Newsletter). Total will hold a 20% interest in West Pacific Petrochemical Co. Ltd. (Wepec), which will build a 100,000 b/d refinery near Dalian, Liaoning province, with target start-up in second half 1994. Planned are catalytic reforming, vacuum distillation, residue hydroconversion, FCC, MTBE, alkylation, and polypropylene units. The plant will run Middle East crude, with most of its products destined for export. Production of heavy fuel oil will be less than 6% of refined volumes.

Japan's Nippon Mining Co. is branching out into petrochemicals. Kyodo News Service reports Nippon at first will import about 15,000 tons/year of polypropylene from South Korea's Lucky group, then build its own polypropylene plant in about 4 years.

Mobil Oil Canada, a pioneer in operations in the Canadian Atlantic, wants to resume drilling this summer on the Grand Banks off Newfoundland, where activity is lagging. Mobil and partner Amoco Canada Ltd. will spend about $20 million to drill the Botwood G-89 wildcat this summer on a Petro-Canada farmout 15 miles east of Hibernia oil field. The well, projected to 3,000 m in 104 m of water, will be drilled by the Treasure Searcher semisubmersible, currently drilling a $30 million test in the Hibernia area for BP Resources Canada Ltd., which is scheduled for completion in August. Mobil drilled its last well off eastern Canada in 1988.

Marathon lost no time in drilling a hefty oil strike on a new permit in Northeast Tunisia, 30 miles southeast of Tunis. Marathon estimates its 1 Belli can produce more than 15,000 b/d, based on a flow rate of 6,800 b/d of 48 gravity oil-with a 180:1 GOR from Paleogene Bou Dabbous. The well, bottomed at 4,671 ft, cut a fractured limestone interval more than 300 ft thick. Tunisia's ETAP has an option to obtain a 50% working interest in the well on the 435,000 acre Grombalia permit, acquired earlier this year (OGJ, Apr. 22, p. 48). Marathon began production last November from Ezzaouia oil field, 200 miles south of Grombalia. Current flow is 27,000 b/d, making it Tunisia's second largest oil field. Marathon's interest is 31.4%.