The depressed U.S. gasoline market, which has been undermining crude prices of late, has gotten a shot in the arm.
After rising more than 2.5cts/gal the last week of September, Nymex unleaded gasoline for next month delivery was poised for further gains at presstime last week. Two factors underlie that development: the prospect of spot gasoline shortages as U.S. refiners begin rolling out the first supplies of federally mandated reformulated gasoline (RFG) and the further squeeze on gasoline markets imposed by the Brazilian oil workers strike (OGJ, Oct. 3, Newsletter).
Also, an expected rise in heating oil demand ahead of the heating season has sparked a 3 week rally in heating oil prices that stalled a bit last week.
The seeming turnaround in refined products markets had analysts predicting late last week that Nymex crude could approach $19/bbl soon.
Meantime, Brazil suspended gasoline exports that had been recently running at about 75,000 b/d-mainly to the U.S.-because of the collapse in gasoline production there resulting from the strike. On Sept. 30, Brazil's supreme labor court ruled the strike illegal and ordered about 30% of the striking oil workers back to work. The court also ordered a wage increase for the workers, one close to the 13% hike that Petrobras is offering vs. the hundredfold jump unions are demanding. The strike reportedly has paralyzed eight of Petrobras' 11 refineries and forced the state petroleum company to slash oil production to about 135,000 b/d from more than 700,000 b/d.
RFG supplies in the U.S. Northeast will be so tight in 1995 that an unexpected refinery, pipeline, or terminal shutdown could lead to spot shortages, DOE warns. That's from a draft report that pegs 1995 RFG demand in the region at about 1.3 million b/d vs. supply projected at 1.21-1.45 million b/d.
Imports of RFG or RFG blendstocks into the U.S. Northeast are expected to be about 160,000-190,000 b/d. However, the report was drawn up before EPA issued a rule for the moment stymied by court order-requiring 15% of all oxygenates in RFG to be renewable (read: ethanol). Some refiners expect problems in obtaining, storing, or blending ethanol as well as market resistance to ethanol blends in the Northeast. In addition, the logistical problems in storage, blending, distribution, and administrative control of the increased number of gasoline grades make the supply system more inflexible in responding to a sudden surge in demand or unexpected loss of capacity, DOE says.
Unocal will supply U.S. government spec RFG to southern California on schedule despite a court case stalling two final permits needed to complete refinery modifications required to make EPA RFG.
A bigger concern for Unocal is the court case also causing a delay in getting permits needed to make California spec RFG (see related story, p. 23). The case involves a lawsuit by a pipefitters union against South Coast Air Quality Management District (Scaqmd) challenging an environmental impact review for Unocal's Los Angeles refinery.
The union, which also is suing Scaqmd over EIRs for Chevron, Mobil, and Powerine clean fuels projects at their Los Angeles refineries, objects to the use of nonunion labor in the projects. Unlucky timing is what has snarled Unocal's EIR in the courts and not the other refiners' EIRs. A hearing on whether the permits should be issued was scheduled for Oct. 7 in Los Angeles.
Offshore California may get its own rigs-to-reefs program, patterned after the successful program in the Gulf of Mexico.
Citing that program, sportfishing group United Anglers of California wants to save the marine habitats clinging to four Chevron platforms in the Santa Barbara Channel slated for abandonment. Chevron isn't opposed but might face opposition from regulatory agencies and environmental groups.
Planning is under way for the first nonexclusive 3D seismic survey in Texas state waters of the Gulf of Mexico by Jebco Seismic Inc. and Petroleum Geo-Services AS (PGS). Thus far, enough companies have committed to underwrite the project to cover an offshore gas prone area extending at least 12 miles from shore in Brazos and Matagorda state planning areas. More participants could expand the shoot. Jebco and PGS propose using an ocean bottom cable receiver array to begin acquiring data in February 1995, with delivery of process data expected by August 1995.
U.S. gas pipelines are seeking to recover $2.1 billion in transition costs stemming from FERC Order 636, according to FERC's Office of Pipeline Regulation (OPR). Kevin Madden, OPR director, urges pipelines to resolve the cases as quickly as possible. He says FERC would move within 6 months to update its requirements for data pipelines must file and recommends gas industry segments resolve outstanding differences regarding electronic bulletin boards "or we will do it for you."
Indonesia's multibillion dollar Natuna LNG project appears to be back on track. Pertamina says it is poised to sign an agreement by yearend with Exxon unit Esso Natuna that could lead to development of the 45 tcf gas field in the South China Sea off Indonesia. Some sources say the deal could be signed by November, when President Clinton is slated to visit Indonesia.
The two sides are in the final stage of negotiations over splitting costs and revenues. Complicating the project is the huge cost of stripping CO2 from the gas and reinjecting it. Disputes over cost and profit split and environmental liability have stalled the project for years.
Ottawa hopes to propose legislation next spring that would require Canadian petrochemical companies to prove chemicals they use or emit are not toxic. The reverse onus program would be part of a new federal toxic substances management system. Environment Minister Sheila Copps set a time limit of 60 days for provinces, industry, and environmental groups to provide input. Canadian Chemical Producers Association, voicing concern, says the proposed policy needs to be completely thought through.
The Czech Republic has promised exclusive negotiations to Royal Dutch/Shell and a combine of Agip, Conoco, and Total, which were hoping for a share in a $700 million revamp of Kralupy and Litvinov refineries in the Czech Republic.
The companies have seen a decision on whether they will be allowed a 49% stake in the project delayed several times (OGJ, May 16, Newsletter). The move was surprising-if welcome-to the western companies, which had expected Prague to rule in favor of an all-Czech project. Conditions for the talks between the companies and the refineries' management are to be disclosed Oct. 15 and are subject to approval by the Czech Council of Ministers.
Japan is about to get its first H-Oil unit.
Tonen Corp. has signed an agreement with Hydrocarbon Research Inc. (HRI), Princeton, N.J., to license the technology in a 25,000 b/d unit to be installed at its 240,000 b/d Kawasaki refinery. The unit will resemble a two stage H-Oil unit in operation at the Star Enterprise refinery in Convent, La., since 1984. The process converts and desulfurizes vacuum resids from a wide range of crudes and boosts yields of clean gasoline and middle distillates while minimizing yield of heavy fuel oil. HRI completed basic engineering, and Tonen, owned 50-50 by Mobil/Esso and Japanese shareholders, started detailed engineering. Japanese refiners' deep conversion capabilities generally lag far behind those of U.S. and European refiners.
Total has presented Hanoi a new proposal for its $1 billion refinery in Viet Nam.
Total proposes to build the plant at Long Son, near the coastal city of Vung Tau in southern Viet Nam instead of at its earlier proposed site, Van Phong, north of Nha Trang in the south central province of Khanh Hoa. Hanoi disapproved the first site. A final decision on the 130,000 b/d refinery is expected within 2 months, and start-up tentatively is scheduled for 1999.
Hanoi wants to build a second world scale, grassroots refinery in northern Viet Nam but hasn't settled on a proposal.
Meantime, Viet Nam's natural gas sector marks more progress.
British Gas says the country will begin receiving natural gas via offshore pipeline by yearend. The line, partly laid by Hyundai, will move gas from Bach Ho oil and gas field in the South China Sea to Vung Tau. Currently, about 95 MMcfd of Bach Ho gas is being flared. It's part of a $400 million joint venture project led by BG that includes an offshore compression platform, onshore gas processing facilities, and possibly future LPG exports.
Viet Nam's gas industry prospects recently got a major boost with BP's discovery of two big gas fields near the pipeline corridor (OGJ, Sept. 26, p. 40).
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