A surging world economy continues to fuel the locomotive of growing oil demand.
IEA says world oil demand will jump almost 1 million b/d in a year, reaching 70.2 million b/d in first quarter 1995 vs. 69.3 million b/d in first quarter 1994. IEA hiked its estimate of OECD oil demand in first quarter 1994 by 100,000 b/d to 38.5 million b/d, or 700,000 b/d more than in first quarter 1993. It sees OECD demand in first quarter 1995 up 1.2% from first quarter 1994, with an increase of 400,000 b/d in Europe to 14.1 million b/d and flat in North America at 19.8 million b/d.
But OPEC won't benefit much from the surge, IEA contends, because production increases in the North Sea and Latin America will deter the group from jumping output in response to increased demand.
Meantime, OPEC oil production remains near quota.
Output for July averaged 24.69 million b/d, says Middle East Economic Survey (MEES), down 330,000 b/d from average June output and 170,000 b/d over quota. Iranian production continued its switchback pattern, dropping to about 3.5 million b/d from a high of 3.7 million b/d in June. Iran produced an average 3.56 million b/d the first 7 months of this year, 44,000 b/d below its OPEC quota, says MEES. Nigerian production fell to 1.78 million b/d in July from 1.93 million b/d in June. MEES notes this is the first time in many years Nigeria's output fell below quota.
That contributed to an increase of almost $1 in OPEC's marker basket price to average $17.41/bbl for the month.
Nymex crude at the end of July hit a 17 month peak of $20.55/bbl on reports of disrupted Nigerian production.
However, the market now seems to be taking the Nigerian situation a bit more in stride, despite angry words exchanged between that country's military regime and striking oil workers (see story, p. 33).
MEES estimates Nigerian output fell another 350,000 b/d the first week of August. But Nymex September crude slumped to $18.96/bbl Aug. 10, down more than $1 on the week. That drop also was influenced by a fall in gasoline futures in response to API's report showing a lower than expected decline in U.S. gasoline inventories the preceding week.
Another factor is an increase of about 20,000 b/d each from Indonesia, Libya, Venezuela, U.A.E., and Qatar to make up for the Nigerian shortfall.
Look for action soon on Turkey's efforts to flush about 12 million bbl of Iraqi oil trapped in the 616 mile Turkey-Iraq pipeline.
So says Britain's U.N. envoy, claiming most problems concerning a U.N. Security Council resolution allowing the move have been resolved, and a final resolution could be hammered out by end of August. Turkey owns 3.8 million bbl of the trapped oil, and proceeds from sale of Iraq's share must go toward humanitarian aid destined mainly for rebellious Kurds in northern Iraq. Unless action comes soon, the region's stormy season could delay inspection and repairs to the corroding line until spring.
The Russian bottleneck for Chevron and its Kazakh partners trying to boost exports of Caspian area Tengiz crude is easing.
Joint venture Tengizchevroil has doubled its crude exports but is still operating far below capacity. Under an exchange agreement between Russia and Kazakhstan, Tengizchevroil on Aug. I started exporting via Russian pipelines about 57,000 b/d, up from an average 29,000 b/d during January-July. Chevron reportedly could almost triple that volume.
Russia loosened the export taps slightly despite its dispute with other Caspian Sea nations over E&D rights and territorial claims in the region.
President Yeltsin has sent a letter to members of parliament calling for changes to draft oil and gas legislation.
Duma, Russia's lower parliament, will debate in early October draft laws including production sharing and exploration licensing rules. The current proposal is for major oil and gas legislation to be set out in a law decreed by parliament. Yeltsin wants production sharing rules decided by the government's energy department, rather than set out in law, for increased flexibility. Also, Yeltsin wants exploration rules to be outlined under the subsoil law proposal due for debate and oil and gas transportation to be covered under a proposed monopoly law. Charbel Ackermann, vice-president of Boston Consulting Group, Moscow, says Yeltsin's letter does not mean draft oil and gas laws will be scrapped. Rather, it renders moot a shift of much legislation to the government department level.
"Foreign investors have said production sharing should be enshrined in law to give more authority, " he said. "This is not the view of the president's staff. "
Ackermann contends Yeltsin's letter will lead to conflict once Duma convenes after the summer vacation. The outcome is unsure, he says, except that the reform drive won't be stopped. As the legislation progresses, an exploration issue is likely to have little effect on efforts to restructure Russia's petroleum industry. Last month Boston Consulting was hired to advise on whether to structure Russia's oil industry in vertically integrated companies or set up independent oil producing and refining firms (OGJ, Aug. 8, p. 32).
One exploration proposal calls for allowing companies to issue sublicenses on big concessions enabling other companies to develop small fields near big developments. If adopted, said Ackermann, it likely will increase the number of E&P companies but not otherwise affect restructuring advice.
Egypt and Libya have signed economic accords that include creation of a joint venture in oil products and services calling for installation of an oil pipeline linking the two nations, a refinery near Alexandria, and a network of service stations between Alexandria and Tobruk.
Saudi Aramco has hit the sweet spot in its first try to tap deep gas on the flanks of megagiant Ghawar oil field.
Its 200 Hawiyah wildcat found extensive sweet and sour gas and condensate accumulations about 100 km south of Abqaiq. Wireline logs indicated extensive gas zones in Khuff Band and C carbonate reservoirs at 12,500 ft, and an open hole drill stem test at 13,650-14,353 ft yielded 20.2 MMcfd of sweet gas and 3,286 b/d of condensate below Khuff. Wireline logs and core samples below the tested interval indicated "very substantial" multiple gas bearing sandstone reservoirs. Delineation drilling is planned.
As predicted, more potentially commercial hydrocarbon strikes are being disclosed off Viet Nam (OGJ, Aug. 1, Newsletter).
Petronas 1 Ruby, drilled to 3,108 m TD on Block 0 1 in the Mekong basin about 78 km northeast of Bach Ho oil field, found significant oil accumulations in a number of zones. One test of a zone near granitic basement flowed 400 gravity oil at a rate of 1,750 b/d. A test of a lower clastic reservoir yielded 880 b/d of 380 gravity oil and 7.2 MMcfd of gas.
Further tests of upper clastic reservoirs are under way, as are geological and engineering studies and plans for 3D seismic. If the find proves commercial, Petronas thinks production could start in 1996.
Final government approval has come for a Filipino-Indonesian joint venture's proposed $2.2 billion, 140,000 b/d export refinery on Mindanao's Nonoc Island.
The green light follows issuance of Manila's petroleum deregulation policy allowing establishment of foreign owned refining ventures in Philippines.
Scheduled to start up in 1997, the Kaibigan Holdings Inc. project won Energy Department approval earlier this year (OGJ, July 11, Newsletter).
ARCO and Corpoven have completed a feasibility study on using a new hydroconversion process for upgrading extra heavy crudes from Venezuela's Orinoco oil belt.
The two are considering a project to upgrade 160,000 ID/d of 100 gravity Orinoco crude to 280 gravity crude using HDH, a new catalytic hydroconversion process developed by Pdvsa's Intevep research arm.
Spain's petroleum privatization continues apace, and officials are worried that control of the country's biggest privately held oil company will be in foreign hands.
U.K. investment fund SMM Co. recently acquired 18% of Cepsa from Banco Central Hispano for 55 billion pesetas ($418 million), leaving the bank with 18% and buyback options for 3 years.
Elf is Cepsa's biggest shareholder with 30.5% and first right of refusal among potential petroleum industry interests. SMM is controlled by U.K. banker Morgan Grenfell, in turn controlled by Deutsche Bank.
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