Look for U.S. natural gas markets to turn the corner sooner than later.
So says PaineWebber, contending there is a handful of reasons U.S. gas prices should be higher, although they are at the lowest point for November in 8 years. Spot gas prices for November are averaging $1.58/MMBTU, reports Natural Gas Clearinghouse.
"We are hard pressed to sketch a scenario to rationalize sustenance of natural gas prices at current levels and believe a couple of factors may work to turn natural gas market sentiment sooner rather than later," the analyst said.
"Natural gas prices reflect the winding down of the storage refilling season and little else," PaineWebber said. It cites data showing that U.S. natural gas storage is about 94% of estimated available capacity, almost 15 percentage points higher than where storage volumes were estimated at the start of the year. PaineWebber contends that refill storage volumes to come this winter may he greater than previously anticipated.
MMS has invited bids for sale of royalty gas from federal leases in the Gulf of Mexico under a pilot project.
Bids will be opened Nov. 21. One year contracts will be awarded in early December and take effect Jan. I (OGJ, July 18, p. 27). The pilot is based on 91 leases volunteered by 19 companies. MMS will take the royalty share of production from the leases, about 170,500 MMBTU/day, at or near the lease and sell it to competitively selected gas marketing companies.
Participating producers are Amerada Hess, Amoco, Apache, Brooklyn Union, Chevron, Devon, Enron, Freeport McMoRan, Mobil, Murphy, Oryx Oxy, Pennzoil, Smith, Texaco, Unocal, Walter, Whiting, and Zilkha.
The environmental benefits of burning natural gas are maintaining a, higher profile in the U.S. The Coalition for Gas Based Environmental Solutions says pipelines could deliver as much as another I tcf/year of gas beginning in 1997 in an effort to help control nitrogen oxide emissions in the U.S. Northeast. Natural gas could replace coal and oil in many power plants and cut NOx emissions, which have contributed to the region's air quality woes.
DOE has accepted an advanced natural gas vehicle that performs as well as a comparable gasoline fueled car and has a 300 mile driving range. Johns Hopkins University's Applied Physics Laboratory, Laurel, Md., modified a Geo Prizm to use natural gas. DOE says the vehicle, if mass produced, would cost $2,000-3,000 more than the gasoline version.
API sees no problem with U.S. distillate supply this winter, even if temperatures aren't as cold as last year's.
It said weather as cold as the 1993-94 winter could result in 3.7 million b/d of demand for distillates, but U.S. refineries could produce as much as 3.5 million b/d for brief periods, inventory draws could supply 300,000 b/d, and imports another 200,000 b/d. API also contends industry will be able to meet expected demand of 2.6 million b/d for reformulated gasoline (RFG), to be on the market Jan. 1, but it warns supplies could he tight on the East Coast, especially if there are refinery or pipeline failures. Petroleum Industry Research Foundation Inc.'s Larry Goldstein says RFG could cost 150/gal more than conventional gasoline because of higher crude and MTBE prices.
Refiners and marketers will be required to use detergent additives in all U.S. gasoline effective Jan. 1, 1995.
EPA has simplified requirements of the detergent additive rule, proposed last December. Originally, it called for a rigorous additive testing and certification program, but inadequate lead time for industry prompted EPA to delay this portion of the requirements. Although ASTM has introduced its D-5500 performance test for intake valve deposit control, it has not finalized a fuel injector deposit control test. EPA expects to promulgate full certification requirements by June 30, 1995, to go into effect about a year later.
Alberta is considering changes to its royalty tax credit program that paid companies about $262 million (Canadian) in fiscal 1993-94.
The provincial auditor general's department said the current royalty tax credit program lacks accountability and the government has no basis for assessing and reporting on the effectiveness of the program, which provides tax rebates on E&P outlays. The auditor says the rebates could be tied to performance measures such as increased drilling, cash flow, or job creation by companies.
Provincial Treasurer Jim Dinning said his department likely will implement any changes as soon as possible. Dinning prefers setting industry standards instead of performance measurements for individual companies.
TransCanada plans to withdraw from the $400 million Bach Ho gas pipeline/LPG export project off Viet Nam.
British Gas, Mitsui, and Petrovietnam are other partners in the project to lay a pipeline-currently under way-from Bach Ho to Ho Chi Minh City. TransCanada joined a feasibility study for the project as operator, but its role has been changed to an investor. The company says the nature of the project has changed to the point that it no longer meets the company's objectives.
The U.K. has approved the first West of Shetland development, BP/Shell's $820 million project to develop Foinaven oil field.
A joint study commissioned by 10 petroleum companies identifies I 1 development prospects in the region with estimated combined reserves of 3.5 billion bbl of oil and estimates West of Shetland outlays at $14.25 billion during 1995-2010. An earlier report predicted West of Shetland production could reach 500,000 b/d of oil by 2005 from seven fields. Foinaven, with reserves pegged at 250-500 million bbl, is expected to start production at yearend 1995 and peak at 85,000 b/d (see related story, p. 31).
Hungary's two leading state petroleum companies are talking over a possible merger. MOL and Mineralimpex are mulling the merger to help create operating efficiencies and improve profits. Both stress retaining a certain degree of independence, but Mineralimpex worries about its identity surviving under the umbrella of the much bigger MOL.
Officials of MOL, bemoaning 1994 losses imposed by a government ceiling on residential heating oil prices, welcome the merger as a "logical consolidation." MOL net worth is estimated at 231 billion forints ($2. 1 billion) and Mineralimpex at 38.2 billion forints ($347 million).
Finland's Neste is undertaking an environmental impact assessment (EIA) of the effects of the Komi pipeline oil spill on Russia's Nenets autonomous area (OGJ, Nov. 7, p. 35). Purpose of the study is to survey the environment near the town of Naryan-Mar before the spring thaw of the Pechora River and follow up with a survey in the spring.
There are conflicting reports as to whether the spill has reached the Pechora River, and Nenets officials want a preliminary EIA that would postulate effects of the spill reaching the Nenets area via the Pechora. Neste is involved in Nenets E&P and planning for a marine oil terminal in the area.
JKX Oil & Gas, Guildford, U.K., expects this month to become the first foreign company to produce oil in Ukraine.
Poltava Petroleum Co., a joint venture of JKY formerly JP Kenny Exploration & Production Ltd., and two Ukraine firms, is developing three fields in the Poltava area (OGJ, Apr. 11, p. 107). JKX tested a well in Ignatovkskoye field that flowed 2,175 b/d of 35.5' gravity oil and 2 MMcfd of gas through a "j/&4 in. choke with flowing tubing pressure of 920 psi. The three field complex has reserves estimated at 100 million bbl of oil and 1.1 tcl of gas. The company is targeting production from the three fields of 20,000 b/d of oil and 200 MMcfd of gas.
Kazakhstan, Turkmenistan, and Uzbekistan have proposed laying a 725 km, 1.7 bcfd, 600 billion ruble gas export pipeline from their territories across Russia and Ukraine, with participation by Russia's Gazprom.
About 591 km of the line would cross Russian territory, and Russian companies are expected to be involved in design of the project. Project work is tentatively scheduled for 1994-96.
Turkmenistan and Ukraine earlier this month began talks on supply of Turkmen gas to Ukraine, payment of arrears for previous gas deliveries, and payment for current and future gas deliveries. Ukraine, in the midst of a severe debt crisis, says it is ready to consider leasing part of its Black Sea fleet and related Sevastopol infrastructure to Russia for 5 years with possible options to extend in payment of its $1.7 billion debt for Russian gas deliveries.
BHP and Iran's state gas company have agreed to study feasibility of laying an onshore gas pipeline from Iran to Pakistan, according to Iranian press reports. The two companies reportedly signed a memorandum of understanding that calls for BHP to prepare a preliminary study of the project for National Iranian Gas Co. by January.
A separate, partly offshore gas pipeline project from Iran's Pars field via Oman to Pakistan and India also is under study (OGJ, Oct. 3, p. 26).
BHP started up a $70 million pilot methanol plant at Melbourne it says is the first to use new technology developed by ICI Katalco, Billingham, U.K. After starting up Oct. 17, the plant has operated at more than 90% of its 164 metric ton/day design capacity. Natural gas feedstock comes from Australia's Bass Strait fields, and plant output is marketed in Victoria. BHP says early output is within spec, but more work is needed to evaluate and improve the technology. The company describes the new technology as more environmentally benign and compact than conventional technology.
"If this technology proves to be commercially viable," said Plant Manager Ian Reese, "it opens the way for future development of Australia's remote gas reserves. Conversion of this natural gas to methanol, which is readily transportable, could make those reserves economic to develop."
Madagascar wants to revive petroleum company interest in oil and gas exploration there.
State owned Office des Mines Nationales et des Industries Strategiques (Omnis) hired Simon Petroleum Technology Ltd., Llandudno, U.K., to help market data packages for prospective exploration plays. Promotional meetings are slated for spring 1995 in London and Houston.
Simon says Madagascar is underexplored but has proven hydrocarbon potential (OGJ, Aug. 1, p. 54). Wells have yielded shows in the Paleozoic/Mesozoic Karroo play, while younger source rocks recently have been identified and new post-Karroo play concepts defined. Simon is to produce a technical report assessing each of the plays, including the influence of salt tectonics offshore. Madagascar's petroleum law is being revised, and new exploration terms are to he outlined at the spring meetings. Omnis also is inviting companies to discuss opportunities individually.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
