The current oil price recovery is sustainable, some analysts say, and they're ratcheting up their price projections to match that belief.
NatWest Washington Analysis contends the recent spike in oil prices up almost $4 since Mar. 28 is no fluke and sees WTI at $18 19/bbl in the second half and an average $20 in 1995. Here's why: World economic recovery is boosting demand forecasts, OPEC's output has remained steady, inventory concerns have eased, North Sea production hikes have slowed, former Soviet Union exports are falling again, Iraqi exports remain hobbled for the foreseeable future, and supply risks owing to economic or civil strife Iran, Yemen, Algeria, Nigeria are a market factor again.
Salomon Bros. hiked its 1994 average spot WTI price 70cts to $16.80 and sees it averaging by fourth quarter $18.50 also the 1995 average.
The analyst attributes continued strength in trading to falling crude and gasoline stocks and sharply higher U.S. demand for gasoline.
Crude and gasoline stocks fell the week ended Apr. 29 by 2.6% and 3.3%, respectively, from the same time a year ago. U.S. demand for gasoline is up 3.9% year to date from the same period a year ago. API says demand for gasoline, kerojet, and distillate fuel oil was higher in April than the same month a year ago, while resid demand dropped 15%.
Add Venezuela to the list of countries whose oil production is being disrupted by civil strife.
A labor conflict provoked by radical leftist party Causa R cost Pdvsa unit Corpoven about $7.6 million in lost production and expenses associated with restarting production at the Oritupano oil field in Venezuela's Monagas state. Oritupano is operated for Corpoven under the marginal oil fields program by a group led by Argentina's Perez Companc. Production is back to normal after a 2 week shutdown, but Corpoven must pay for cleaning up about 250,000 bbl of crude that overflowed from storage tanks due to a lack of local supervision. Causa R is trying to penetrate labor unions in the Venezuelan oil industry and has clashed with representatives of the Democratic Action party, which has dominated Venezuelan oil unions for years.
Taipei's decision to permit the private sector to own and operate power plants is expected to boost Taiwan's oil and gas imports.
After the Ministry of Economic Affairs (MOEA) disclosed the policy shift, Tuntex said it plans to include a 1.32 million kw power plant in its proposed naphtha cracking complex. Formosa Plastics, which had earlier disclosed plans for a 2.4 million kw power plant at its Mailiao petrochemical complex now also is studying feasibility of a power plant at Tatan.
Construction/retail/services conglomerate Rebar Group also plans a power generation complex to compete for a share of the 9.5 million kw of private sector capacity expected to be available by 2003. MOEA will continue to bar private entities from operating hydro or nuclear plants, and analysts say environmental concerns are almost certain to rule out coal fired plants, leaving oil and gas the only real choice for private power generation.
Meantime, Taiwan's Chinese Petroleum Corp. (CPC) may invite Saudi Arabia to participate in a large scale petrochemical complex CPC plans to build in conjunction with its third refinery. CPC notes Saudi Arabia is aggressively seeking investments in East Asia and the latter's cooperation in the project would ensure a stable source of crude supplies.
The Far East refining boom continues to mushroom.
Saudi Aramco wants to expand the Philippines' 155,000 b/d Petron refinery it just acquired a key interest in and make it a regional products exporter, says Chairman and Saudi Oil Minister Hisham Nazer. Aramco earlier this year acquired 40% of Petron Corp. for $502 million. State owned Philippine National Oil Co. (PNOC) still holds 60% in Petron but will sell another 20% stake to the public later this year. Meantime, PNOC will privatize its shipping businesses to help fund geothermal power development and the country's first petrochemical complex at Limay, Bataan. Included are domestic and international tanker operations consisting of 13 vessels, Batangas Bay shipyard, and interests in Kepphil shipyard.
China's Sinopec and South Korea's Yukong have signed an agreement to proceed with the previously disclosed joint venture refinery at Shenzhen, Guangdong province (OGJ, May 9, p. 36). The refinery's capacity is now pegged at 110,000 b/d, up from an earlier planned 60,000 b/d.
Sinopec is expected to put up 35% of the $1.5 billion project capital, Yukong 35%, Shenzhen 25%, and Yukong affiliate Sunkyong 5%. Construction is expected to begin by yearend 1995, with start up slated in 1998.
The Czech Republic has decided against selling the country's two refineries, ending more than a year of talks with a group of European and U.S. companies (OGJ, May 16, Newsletter). The government opted against foreign investment and in favor of a modernization plan submitted by refinery managers. That's because it feared carving out the related, money losing Petrochemical businesses would put their survival at risk.
Agip, Conoco, Total, and Royal Dutch/Shell wanted a 49% stake in just the refineries. The group planned revamps and a crude line from Ingolstadt, Germany, to the refineries. The refineries now will seek domestic and foreign bank financing for $900 million needed for modernization.
Royal Dutch/Shell predicts world energy demand could grow by 70% the next 30 years, with most of the growth in non OECD countries. Group Managing Director John Jennings told an Aberdeen audience that more than half of today's energy is used in OECD countries, where overall demand has grown less than 1.5%/year the last 20 years. Energy demand in non OECD countries has grown 5.5%/year in 20 years. Shell estimates non-OECD countries now use 25% of the world's commercial energy, but this could double the next 30 years. Jennings pegged global oil and gas capital outlays in 2000 20 at $250 billion/year, much of it in non OECD countries.
"The gas industry alone is expected to require aggregate investment on the order of $1 trillion the next 20 years," said Jennings. "Up to 300 greenfield refineries may be required in developing countries the next 30 years."
Italy's Agip plans capital spending of $9 billion the next 4 years, compared with a $2 billion budget in 1994 and $1.87 billion in 1993 outlays.
Much of the focus will be on E&D as it seeks to boost production of oil and gas to 1 million bbl of oil equivalent (BOE)/day from the current 880,000 BOE/day. Agip will shift its focus more toward natural gas E&D because it sees that fuel dominating energy markets in the next century. It will earmark $3.4 billion for work in Italy, $5.3 billion for foreign work notably in the former U.S.S.R. and China and $270 million for R&D. Funds are expected to come from cash flow as profits are targeted at $1.25 billion/year.
Meantime, Agip parent ENI is accelerating sale of its nonstrategic assets. In the next 4 years ENI will sell 70 subsidiaries for a projected $2.375 billion, up $875 million from projections at the beginning of 1993. Last year the conglomerate sold 29 Italian and 21 foreign units to investors.
The next sales focus will be on the chemical sector as ENI seeks to unload detergents, plastics, and fibers units between now and the end of 1995, the slump in Europe's petrochemical markets notwithstanding.
American Gas Association estimates more than $9 billion of U.S. gas pipeline construction projects are in various stages of development.
An AGA survey identified $4 billion of projects totaling 3,000 miles of pipe built last year or now under construction. AGA Pres. Mike Baly said, "The large amount of pipeline construction is due to the fact that natural gas demand had increased in 6 of the last 7 years and should continue to grow as the natural gas industry continues to develop new markets."
Canadian Energy Research Institute warns that the current pace of Canadian natural gas drilling could lead to a domestic market glut.
CERI said Canada's gas productive capacity could be increased by 50% the next 3 years, and market demand may not keep pace. Forecasts call for deliverability to increase to 7.3 tcf from a current 4.8 tcf. Canadian demand in 1994 is estimated at 2 tcf and export demand at 2.8 Tcf.
CERI contends domestic demand won't absorb productive capacity growth the next 3 years, and Canadian producers will have to win a larger share of the U.S. market and build more pipelines to avoid a glut.
Annual reserves replacement will reach almost 140% of production by 1997, CERI says, based on a survey of companies representing 68% of Canadian gas production in 1992. It said companies plan to triple investment in gas development to $4 billion (Canadian)/year and double oil development outlays to $3.2 billion/year in 1992 97.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
