OPEC should be scrapped.
That's the view of a top Saudi oil economist who contends the group should be replaced by a group of Persian Gulf nations led by Saudi Arabia. Abdulaziz al-Dukheil, president of Consulting Center for Finance & Investment, Riyadh, claims that despite OPEC, oil prices are controlled by western countries, notably the U.S., that use strategic stockpiles to keep prices low. For a new producers' group to work, he says, members first would have to put their own economies in order by severely curtailing nonessential outlays and shelving nondevelopment projects and then embracing privatization to secure more capital for development.
Persian Gulf producers continue to lobby other producers for production cuts to firm oil prices. Oman's oil minister will resume his whistlestop tour, begun earlier this year, revisiting some producers and making first calls on others and seeking firm pledges to match Gulf Cooperation Council's proposed cuts or at least promises to not take advantage of OPEC cuts.
OPEC meets Mar. 25 in Vienna to set a new, presumably lower ceiling for the seasonally weaker second quarter. Saudi Arabia remains mum on what its stance will be. Oil prices slipped again last week when markets saw no encouraging signs from the preceding weekend's GCC meeting.
Nymex light sweet crude for April delivery closed Mar. 9 at $14.18/bbl, down about 50cts from the prior week's trading range.
Meantime, OPEC oil production rose by 120,000 b/d to 24.76 million b/d-240,000 b/d more than its ceiling-in February mainly because of increases by Venezuela and the U.A.E., reported Middle East Economic Survey. Iranian production was 125,000 b/d below quota, MEES said, citing unconfirmed reports of possible pressure problems in Iran's main oil fields.
Eighty-six congressmen have signed a letter to President Clinton urging legislative and administrative relief for U.S. oil companies. Signatures still were being gathered at presstime for the letter, which was to he sent soon. The congressmen also will request a meeting with the president. They are working to agree on legislative proposals (OGJ, Feb. 28, p. 23) that will include a tax credit for marginal and new oil and gas production.
Meantime, the U.S. Senate energy committee has reported out a modest U.S. oil industry relief bill. It would give Gulf of Mexico oil and gas producers a royalty holiday for new deepwater production (200 m or deeper) until they recover capital costs. Another provision amends the 1990 Oil Pollution Act (OPA) to help independent producers operate offshore. It would allow any operator certifying financial responsibility of $150 million to he eligible for offshore leases. And the bill would allow Interior to reduce OPA's requirement for financial responsibility based on the risk of oil spills.
Four California refiners have filed suit challenging issuance of a special variance to competitor Tosco by the California Air Resources Board involving production of a low aromatics diesel (LAD) fuel.
ARCO, Chevron, Texaco, and Unocal claim CARB illegally granted the variance because Tosco won't endure unreasonable economic hardship by producing the new spec fuel - a requirement for the variance. They also claim the variance gives Tosco an unfair competitive advantage.
Under the variance, Tosco can produce diesel with a 20 vol % aromatics level vs. the CARB mandated 10 vol % cap for a longer time than CARB allows other independents. CARB granted the variance because Tosco exceeded its 5.26 million bbl LAD allocation last fall in an effort to help ease supply shortages that swept the state when the new spec fuel was introduced by CARB mandate. In December, ARCO filed suit charging CARB improperly allowed Tosco to exceed its volume restrictions for LAD-producing the entire 1 year allocation in 5 months.
Are U.S. pipelines' right of eminent domain in danger? Under a Georgia law to be signed by Gov. Zell Miller at presstime last week, a moratorium extending to Mar. 31, 1995, will be placed on pipelines' ability to condemn land for new pipelines. During the moratorium, a study committee will determine whether petroleum companies right of eminent domain can be restricted. The law, passed almost unanimously by Georgia's legislature last month, also calls for pipelines to develop resource protection plans to be approved by Georgia's Department of Natural Resources by 1995. The legislation grew out of a controversial Colonial Pipeline lawsuit against some Grady County, Ga., landowners seeking to gain access to their land for Colonial's proposed 64 mile, 12 in. products line from Bainbridge, Ga., to Jefferson County, Fla. Colonial also ran afoul of politically powerful plantation owners whose land the line would cross and a state representative whose pecan orchard was reportedly contaminated by a Colonial pipeline leak, according to local newspaper accounts. Colonial's project, proposed 6 years ago, also has run into fierce opposition in Florida.
U.S. imports of Canadian natural gas will jump to 2.9 tcf/year by 2010 from 2.2 tcf in 1993 and double the 1990 level (OGJ Feb. 28, p. 21). That's what DOE's Susan Tierney told a Canadian Energy Resources Institute conference in Calgary, citing a study that projects U. S. gas consumption.will increase to 26.5 tcf in 2010 from 20.75 tcf in 1995, with much of the jump due to electric utilities switching to gas from coal. Meantime, Sproul & Associates, Calgary, says about 80% of the gas Canada will sell in 2012 remains to be discovered. Sproule estimated another 76-87 tcf of gas remains to be found in western Canada, with 75 tcf of marketable gas produced to date and about 69 tcf still unproduced. Western Canadian gas flow is expected to rise to 5.3 tcf in 1998 from 2.8 tcf in 1988 and 4.6 tcf in 1993.
Colombia is about to hold its first international competitive licensing round, offering 20 parcels covering about 9.2 million acres of land in the Llanos, Putumayo, and Upper Magdalena Valley basins in the states of Putumayo, Huila, and Choco. Bidding is to begin Apr. 18 in Bogota and in Houston and London 2 weeks later. Previously, state owned Ecopetrol handled exploration deals, mainly through association contracts, one on one.
Amoco will pull out of Myanmar by mid-1994. Its assessment of the economic potential of its Myanmar contract areas in light of depressed oil prices has prompted it to halt exploration there.
Abu Dhabi National Oil Co. (Adnoc) reportedly will buy a 20% interest in Austria's OMV for $360 million in the next few weeks, Austrian newspapers reported last week. Mounting losses in recent years have had the mostly state owned OMV shopping for foreign partners, but talks with France's Elf, Russia's Gazprom, and others failed over financial differences and concerns over OMV's beleaguered chemicals unit. It would be Adnoc's first investment in Central Europe.
A row has erupted between Elf and German officials led by eastern Germany privatization body Treuhandelstat because of Elf's failure to begin work as scheduled Feb. 28 on the 200,000 b/d Leuna refinery project in the former East Germany (OGJ, Jan. 17, p. 28).
New Elf Pres. Philippe Jaffre considers the project too expensive and not profitable enough given current refinery overcapacity in Europe. The refinery was promised in exchange for Elf acquiring the Minol service station network in Germany. Jaffre said construction work on the 15-20 billion franc project would begin if Elf finds another partner, preferably German, to cut Elf's stake from its current two thirds. Thyssen holds the other one third interest. German Economic Minister Gunter Rexrodt and Treuhandelstat Pres. Birgit Breuel said Elf can't back out and faces penalties of 1.5 billion deutschemarks and returning the Minol network if it does. Thus far, only the Yugos led Russian group has stepped forward, seeking a 20-40% stake with payment provided in crude at discounted prices to feed the refinery.
Russia has slashed natural gas deliveries to Ukraine and Belarus over combined unpaid debts of $1.14 billion.
Gazprom will maintain deliveries at 1.05-1.75 bcfd until Kiev settles its hill, in Russian rubles or hard currency. That's down from 7 bcfd in less than a week. Ukraine paid $20 million Mar. 5, but that only stopped further cuts. Moldova, also in arrears, dodged a similar bullet by promising to pay in agricultural produce. Turkmenistan halted deliveries of all gas to Ukraine last month over nonpayment of debts.
The cuts have had a domino effect. Ukraine reportedly siphoned off supplies meant for Turkey from pipelines traversing its territory after the Gazprom cuts, leaving the Turks to scramble for future supplies to avoid a repeat. Plans call for an LNG terminal at Mamara to receive LNG from Algeria and Qatar at initial volumes of 70 bcf/year each and construction of a pipeline to import 192.5 bcf/year of Iranian gas.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
