Will the U.S. government's reformulated gasoline program prove to be a costly white elephant for refiners?
Crude futures plunged Dec. 2 on news that 28 Pennsylvania counties had gained approval from their governor to opt out of the RFG program over concerns of gasoline price hikes. Nymex light sweet crude for January delivery plummeted 830/bbl to $16.99/bbl, the lowest price for near term deliveries since Oct. 14. January unleaded gasoline fell 3.69/gal to 50.61/gal. The counties aren't among nine U.S. metropolitan areas required to offer RFG under federal mandates but originally had opted into the program voluntarily. Traders feared other areas that opted in to the program may pull out. Futures prices fell again Dec. 5 but rebounded Dec. 6 with unleaded gasoline settling at 50.46/gal and light sweet crude closing at $16.94/bbl.
Shell's planned $100 million crude pipeline to serve the deepwater Gulf of Mexico may have some competition (see story, p. 28). Leviathan Gas Pipeline Partners plans to reactivate a 14 in. pipeline that will provide a new outlet for sour crude production from Ewing Bank and Green Canyon areas. Leviathan acquired remaining ownership interest in the inactive Placid Green Canyon pipeline system and related assets from Hunt Petroleum and EP Operating, which include 51 miles of parallel 14 in. and 16 in. pipelines, and has renamed it the Manta Ray Gathering System. The company says crude production from Tatham Offshore's Sunday Silence and Seattle Slew fields, and Enserch's Allegheny project is dedicated to Leviathan for transportation on the 14 in. line, and it is considering a western expansion to transport sour crude from Tatham and MidCon leases on Garden Banks blocks 117 and 72. Leviathan plans to reactivate the 16 in. gas pipeline this month.
Affiliates of Williams Cos., Tulsa, operator of some of the biggest U.S. gas pipelines, are venturing into other fields in the post-Order 636 world. Williams, developers of Arizona's first refinery, wants to nearly double the capacity of the controversial $450 million project. The company is proposing to Maricopa County officials to refine 50,000 b/d at the site near Mobile vs. the 30,000 b/d Maricopa Refining Co. originally proposed.
Williams, which is buying the project from Maricopa, also wants to extend the permit, set to expire in 13 years, for at least 20 years and says it will scrap the project if the county doesn't approve the changes. The company hopes the County Planning and Zoning Commission will hear its case Dec. 15 and plans to start production in 1997, supplying a quarter of the county's gasoline. At least two opposition groups hope to derail the project.
Meantime, Williams Field Services Group (WFS) is organizing a team to devote attention strictly to growth opportunities in the worldwide natural gas industry. The company notes gas industry restructuring, triggered by FERC's Order 636, has created many opportunities for acquisitions and joint ventures. "We believe we are looking at a fairly narrow window of opportunity," says WFS President Lloyd Hightower, "Probably 2 years or less." The move will allow one part of the company to focus on existing business and another to concentrate solely on new business and strategic planning.
The Hibernia group has refused a bid by Ottawa to reopen a drilling module contract for its oil production project off Newfoundland.
Prime Minister Jean Chretien says the contract award, worth about $35 million (Canadian), should be reconsidered so the MIL-Davie shipyard in Quebec City can bid on it. Earlier this year, the Hibernia group took the contract from a shipyard in Marystown, Newf., and awarded it to a shipyard in Saint John, N.B., over concerns about possible delays. Acting Prime Minister Herb Gray says Ottawa doesn't have the power to reopen the tender but that it was unfair for Hibernia to grant the contract without giving others a chance to bid. The federal government has an 8.5% equity interest in Hibernia and has provided more than $1 billion in grants.
England's royal family may be living on top of a major oil field.
A well will be drilled in August 1995 on the grounds of Windsor Castle, targeting a reservoir that might hold as much as 100 million bbl of oil. U.K. Crown Estate Commissioners approved plans submitted by Canuk Exploration Ltd., Gerard's Cross, U.K., for drilling from a site 500 m from the castle, one of several homes of Britain's royal family. Desmond Oswald, director of Canuk, says the well will be a vertical hole targeting a structure about 300 m deep. Oswald says final approval for the well depends on the planning committee of Berkshire County Council, due to meet Jan. 4, 1995. Development drilling in the event of a commercial find would be conducted from a site outside the royal property, Oswald says. Oswald detailed prospects under the royal home last year (OGJ, Nov. 22, 1993, p. 85).
Use of mobile production systems worldwide will double by the end of the century, reports Smith Rea Energy Analysts Ltd., Canterbury, U.K.
Smith Rea says there could be 100 floaters in use by 2000, up from 52 in use today. "This represents a near doubling over 5 years of a population which has taken 20 years to reach its present level."
Though demand will be widespread, Smith Rea reckons growth in use of floaters will be particularly rapid in the western Pacific Rim area. The outlook for offshore storage vessels is less encouraging, however, due to monohulls replacing semisubmersibles, especially in harsh environment areas.
Enhanced oil recovery is expected to stave off overall production declines for Indonesia until 1999. The country's primary crude production will likely decline from 968,000 b/d in 1994 to 584,400 b/d in 1998. Indonesia's total crude output is expected to remain stable at 1.36 million h/d until 1999, based on EOR adding incremental production of 358,000 b/d this year and 655,000 b/d by 2000. The country plans to invest at least $4 billion in exploration next year vs. $4.1 billion this year OPEC News Agency reports.
Pdvsa unit Lagoven expects to boost oil productive capacity from Venezuela's western state of Zulia to 907,000 b/d by 2000 vs. current output of 700,000 b/d. Lagoven says it will need to drill about 135 wells/year and repair about 770 wells/year to achieve that goal.
Kuwait Petroleum Corp. plans to invite bids from foreign companies for three exploration tracts in northern and northeastern Kuwait, reports Middle East Economic Survey (MEES). Pending approval by parliament, an open tender inviting bids is expected to he issued in first quarter 1995.
The acreage is expected to ]De in virgin territory.
OPEC increased output by about 170,000 b/d to average 24.92 million b/d during November. MEES says the increase was due mainly to increases by Iran, Qatar, and Iraq. Iranian output increased by 210,000 b/d to 3.7 million b/d, while Iraq and Qatar each posted increases of 40,000 b/d. Output from Nigeria and Venezuela declined during the month.
Russia's environment ministry warns of possible future pipeline leaks in Komi republic, site of an October spill (OGJ, Oct. 31, p. 23). Deputy Environment Minister Viktor Kostin told Itar-Tass only 8.3% of the polluted area had been cleaned up and work on a replacement pipeline was disrupted. "One can expect an even worse failure there at any moment," Kostin said. Spill estimates have varied at 100,000-1.98 million bbl. A study by U.S.-Russian joint venture Nordeco Inc. estimates the spill at 750,000 bbl. Meantime, Komineft, owner of the ruptured pipeline, is soliciting added oil export quotas with profits earmarked for spill cleanup. Komineft hopes to export an added 2.199 million bbl of crude, which would yield about $30 million. The Sevodnya newspaper quotes Komineft General Director Andrei Yakimov as saying a $30 million replacement pipeline would be operating by Dec. 20.
Bateman Project Holdings, Johannesburg, has started work on a gas compression and treatment station at Leuginetskoye on the Ob River in western Siberia, that will compress and process 145 MMcfd from Leuginetskoye oil field that is currently flared. Value of the 2 year turnkey contract is estimated at $100 million. Meantime, about 3.5 tcf of associated gas currently being flared in western Siberia will be produced under a joint Russian-German project spearheaded by Germany's Ruhrgas. About 350 bcf/year will be produced, processed, transported, and sold under a 20 year plan approved by the International Bank for Reconstruction and Development.
The project includes Purneftegaz production association, Sibneftegazperereabotka oil and gas processing association, Russia's Gazprom, and Ruhrgas. The weekly Finansovye I Delovye Novosti estimates Russia's total project earnings at about $10 billion. Project startup is expected in 2-3 years.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
Issue date: 12/12/94
