OGJ NEWSLETTER

Think environmental extremism is taking the sidelines while the petroleum industry teeters at the edge of an oil price abyss? Think again.

Greenpeace is on the warpath against natural gas, notwithstanding industry and government praise of it as environmentally benign fuel.

It will file a petition with U.S. Federal Trade Commission claiming AGA and Long Island Lighting Co. ads touting natural gas environmental benefits violate FTC guidelines on environmental claims made to the public. Greenpeace ripped natural gas as a "dirty fuel" that contributes to global warming and acid rain and whose development damages wilderness areas while hindering the switch to renewables such as solar and wind power.

Greenpeace also has launched a campaign against increased use of Canadian gas and exploration and drilling for gas in Alberta's eastern Rockies foothills. It says electricity should be generated with renewable fuels, and consumers should pay a levy making them competitive with gas.

Canadian Natural Resources Minister Anne McLellan says talk of Ottawa imposing a carbon tax is irresponsible and purely speculative. The minister accused Reform party leader Preston Manning of stirring up rumors by raising the issue (OGJ, Feb. 7, Newsletter). She said talk of a carbon tax is not coming from Liberal government cabinet members or Finance Minister Paul Martin, who is expected to unveil a federal budget late this month. McLellan said the only discussion of a carbon tax has been speculative by parliamentary committee. Meanwhile, Alberta warns Ottawa it won't tolerate a federal fossil fuels tax. Alberta Energy Minister Pat Black said, "That kind of intrusion is not acceptable, not in Alberta or anywhere else in the country." She is working with industry on options if a tax is imposed.

Indian tribes in Ecuador's Amazon region may be muting their opposition to oil and gas exploration there on environmental grounds.

The Ecuadorian government says Indians will permit exploration on their land if companies take steps to protect the environment. A commission of Indian representatives, environmentalists, and Petroecuador officials will review company proposals to monitor protective measures. Indian groups earlier had sought a moratorium on oil and gas exploration and threatened to take over facilities in the jungle (OGJ, Feb. 7, p. 38).

Ironically, the same Indian groups last week blocked Ecuador's two main highways to protest gasoline price hikes of as much as 71.5%.

A vote in the U.S. House has cast a pall over all environmental legislation this session. The House voted 227 191 not to consider a hill elevating EPA to cabinet status unless legislators also can consider three amendments to ease EPA regulatory controls. The key issue is whether Congress should require EPA to conduct health and environmental risk assessments that include proving new rules are cost effective. The Senate approved a similar amendment last fall. Another amendment would compensate landowners when environmental rules restrict use of their property, and a third would require federal funding when federal rules require environmental actions by states and local governments. The issue could stall reauthorization of the 1972 Clean Water Act. Congress was preparing to act on an administration bill that would cut CWA compliance costs $30 billion/year while improving enforcement and controls on polluted runoff. Congress is less likely to act this year to revamp the 1980 Superfund law. The Clinton bill proposes faster, more effective cleanup of hazardous waste sites and halving private litigation costs by allocating liability among responsible parties.

Some U.S. Northeast states want to adopt California style emissions controls for autos beginning in 1999.

The action, by the multistate Ozone Transport Commission, now goes to EPA for approval, rejection, or other options within 9 months.

The California agency that sponsored those emissions controls predicts forthcoming state reformulated gasoline (RFG) mandates will have the same kind of problems seen in the adoption of new state specs for diesel fuel that caused outages and price spikes in California last fall. "It's obvious that the episodes in diesel fuel will graduate into RFG," said California Air Resources Board's Terry Martin. That does not reflect CARB's intent, said Martin, but the "politicking" evident among California refiners that indicates there could he heavy pressure on the state to relax RFG timetables. The comment came after CARB last week granted Tosco an unusual variance from its clean diesel specs one in which Tosco won't have to pay a noncompliance fee of as much as 6/gal other refiners with variances must pay. ARCO has filed suit to compel CARB to apply its standards equitably.

Chevron won't fight Santa Barbara County's denial last week of an emergency tanker permit it requested to move Point Arguello crude to market because the Jan. 17 Northridge, Calif., earthquake ruptured a key pipeline to Los Angeles (OGJ, Jan. 31, Newsletter). California suspended Chevron's interim tankering permit Feb. 1 because it did not have in hand contracts for construction of a pipeline to handle full transport of Arguello oil by 1996, a condition of the permit. "Given the cultural bias in the county, we wouldn't expect any relief (by appealing)," Chevron said. Environmentalists opposed to any tankering hailed the county's decision.

Australia's South West Queensland Gas Producers (Swqgp) group has reaffirmed its desire to supply gas to growing markets in Southeast Queensland. Swqgp last year surveyed a route for a pipeline to transport gas east from southwestern fields and polled prospective customers around Brisbane about likely placements of distribution lines in the area (OGJ, July 19, 1993, p. 14). Producers are willing to build and operate an intrastate gas transportation system and are determined to set commercial terms that will assure a reliable supply of southwestern Queensland gas and continued growth of intrastate demand.

Taiwan's state owned Chinese Petroleum Corp. (CPC) and Total have agreed with Petrovietnam to build a $1.26 billion, 130,000 b/d refinery in Viet Nam. The project is scheduled for completion in 4 years.

Each will hold a 30% interest in the project, with the remaining 10% to be held by China Investment & Development Co., a company controlled by Taiwan's ruling Nationalist party.

Meantime, CPC has completed a feasibility study for Taiwan's eighth naphtha cracker and will submit the plan for evaluation by government authorities by the end of February. The $11 billion project calls for a 200,000 b/d refinery as well as a naphtha cracker capable of producing 400,000 metric tons/year of ethylene and related downstream petrochemical units. At least 20 downstream petrochemical producers have agreed to participate in the project. Several, however, also have agreed to invest in a competing project planned by a Tuntex group, and it is likely some will be forced to withdraw from one of the projects for lack of funds.

Nigeria has decided to reduce its interests in certain joint ventures with multinational companies operating oil fields in the country. The JVs account for 90% of Nigeria's oil production. The country's economic crisis is forcing Nigerian National Petroleum Corp. to cut its stake in the JVs from the traditional 60% to "a more manageable size" enabling NNPC to meet its up front capital commitments to the JVs. The government, increasingly uncomfortable with the big up front cash outlays, recently switched to production sharing contracts for new upstream deals under which government participation kicks in only when oil is found in commercial volumes. NNPC now has JVs in partnership with Shell, Mobil, Chevron, Agip, Elf, and Texaco.

Norway may invite exploration of Skagerrak Sea area off southern Norway. In a white paper to be presented to Norway's parliament Feb. 25, licensing of blocks in the Voring plateau of the Norwegian Sea also will be proposed. Decisions on both areas are expected in spring. More attractive offshore concession rules and incentives for further Barents Sea exploration may also be on the agenda in the wake of government disappointment in the 14th offshore licensing round (OGJ, Sept. 20, 1993, Newsletter).

BP has cranked up the heat in the west of Shetlands play, with disclosure of its second recent oil discovery. BP said its Block 204/20 1 wildcat found a field with estimated reserves of 250 500 million bbl The field, Schiehallion, lies in 375 m of water. BP's earlier find on Block 204/24a, another 250 500 million bbl field, raised the hunt for oil west of Shetland to fever pitch (OGJ, Jan. 24, p. 21). Schiehallion is on one of several BP operated blocks awarded last year to BP Shell 50 50.

The earlier find, Foinaven, lies on a block owned 80% BP and 20% Shell. First phase Foinaven development could involve a 100,000 b/d capacity floating production unit within the next few years. The company is reviewing proposals for floaters and expects to begin development drilling later this year. BP plans to drill six wells in the area in 1994 and has chartered the Sovereign Explorer semi. It is expected on location by end of February and will be joined by another rig in summer.