Megaprojects behind what once was the Iron Curtain are dominating industry news for the moment.
Preparations for laying Russia's first Yamal Peninsula gas pipeline are under way in the northern reaches of the peninsula. Construction camps were set up, and equipment arrived this month at Kharasveyskey gas field. Plans call for six 48 in. diameter Yamal pipelines to be laid across an arm of the Kara Sea from the peninsula to the mainland. Ultimately they will move almost 6 tcf/year of gas from Kharasveyskey and Bovanenkovsky gas field into Russia's pipeline system for delivery to Central Russia, former Soviet republics, and Europe. The last line will be laid after 2000. Earlier plans called for eight 48 in. lines (see map, OGJ, May 3, 1993, p. 34).
Chevron says no agreement has been reached between it and the group proposing to lay a pipeline to deliver Kazakhstan's new crude supplies to the Black Sea for tanker export. The comment came in response to Kazakhstan's claim last week that the former Soviet republic has agreed to all terms of a proposed transportation agreement between Caspian Pipeline Consortium Ltd. (CPC) and Tengizchevroil, a 50 50 partnership of Chevron and Kazakhstan developing Tengiz and Korolev fields. Chevron said it is unaware of terms agreed to between Kazakhstan and CPC and is unable to reach agreement with CPC on a pipeline proposal. Kazakhstan called for a Mar. 30 meeting of the Tengizchevroil partnership council to approve the agreement with CPC. Plans call for start up by early 1997 of the 42 in., 500 mile pipeline from Grozny to Novorosiisk (see map, OGJ, Nov. 2, 1992, p. 32). CPC members are Oman, Kazakhstan, Russia, and Azerbaijan.
Meantime, a group led by Arthur D. Little (ADL) will conduct an environmental impact study related to a major seismic survey in the northeastern Caspian Sea off Kazakhstan planned by a group of Mobil, Agip, British Gas/Statoil, Royal Dutch/Shell, Total, and state owned Kazakhstancaspishelf. The initial survey will cover 40,000 sq miles, said to be the biggest single hydrocarbon survey ever conducted. The EIS is to be complete in May.
Russia and the Marathon led 4M S group were expected to finally sign a development agreement covering oil and gas fields off Sakhalin Island last week. If Russia's parliament approves the accord this month, a final contract will he signed, and the first well spudded in April. Production split will be 55 45 in favor of Russia. The project has been in the wings more than 5 years.
As trade tensions between China and the U.S. mount, foreign investment continues to pour into China's petroleum sector, notably via Sino-Taiwanese cooperation. Taiwan's Formosa Plastics Group (FPG) expects to sign an investment pact with Chinese officials by the second half. FPG Chairman Y.C. Wang met with China Vice Premier Zhu Rhongji this month for talks over a $34 million project of undisclosed nature. FPG unit Nan Ya Plastics is committing as much as $246 million to projects in China.
FPG also plans to build two naphtha crackers, each with capacity of 450,000 metric tons/year or 900,000 tons/year of ethylene, at Shanghai and Guangzhou after completing its Mailiao, Taiwan, petrochemical complex.
Meantime, Taipei has agreed in principle to let state owned Chinese Petroleum Corp. (CPC) cooperate with Chinese partners in offshore exploration through foreign subsidiaries but still bars it from onshore E&D in China.
Oil demand in the first quarter is a little higher than expected, due to cold weather in North America. IEA raised its estimate for first quarter OECD demand to 40.3 million b/d, up from 39.8 million b/d a year ago.
That slightly offsets a non OECD year to year demand decline to 28.4 million b/d due to the continuing plunge in former Soviet Union demand.
IEA sees second quarter demand dipping seasonally to 65.9 million b/d, with non OPEC countries providing 40.4 million b/d of supply. Most significantly, crude stocks in the first quarter were abnormally high in Europe and remained high in Japan but dropped 5% in North America.
Oil prices have rallied slightly in spite of little likelihood of production cuts from OPEC's Vienna meeting getting under way at presstime last week. Expiration of the April contract and unconfirmed rumors of a 700,000 b/d OPEC cut and a 300,000 b/d non OPEC cut pushed Nymex light crude to $15.37/bbl at closing Mar. 21, up almost $1 on the week and the highest in almost 7 weeks. Rancor between Saudi Arabia and Iran over a quota for Iranian Hajj pilgrims to Mecca in May did not bode well for the meeting as the two swapped charges of oil production quota cheating.
Mexico held a somber 56th birthday party for Pemex Mar. 18 as outgoing Director General Francisco Rojas disclosed a 534 million bbl drop in oil reserves, a predicted slump in oil exports for 1994, and postponement of construction of the 150,000 b/d refinery at Salina Cruz.
On a positive note, Pemex finances are healthy, with the state petroleum company earning a pretax profit in 1993 of almost $13 billion, up $2 billion from 1992. Despite taking on a record $3.7 billion in new debt last year, Pemex was able to trim its overall debt by $100 million in 1993. And Pemex predicts Mexico will continue to be a net gas exporter in 1994.
Is Venezuela's new government pursuing economic policies that might crimp the growing role of foreign companies in that country's upstream oil and gas sector? Maraven collected a $250,000 bond posted by a combine of Olympic Oil & Gas Corp., Houston, and Hyundai Heavy Industries Co. Ltd., Seoul, for failing to sign an operating contract to develop Falcon field off western Venezuela. Olympic/Hyundai last year won the right to develop Falcon under Venezuela's marginal fields program.
The combine reportedly was unhappy with the evolving economic policies of the new administration of President Rafael Caldera, which since taking office Feb. 2 has suspended the constitutional right to engage freely in business activities thus giving the government more power to dictate economic measures and returned to price controls to slow inflation.
Meantime, Pdvsa's new boss is an industry veteran. Caldera broke with predecessor Perez's trend of hiring executives outside the oil industry by appointing petroleum engineer and former Maraven Vice Pres. Luis Giusti to the Pdvsa top slot. Pdvsa's two new vice presidents are former Corpoven Vice Pres. Claus Graf and former Lagoven Vice Pres. Luis Urdaneta.
Giusti says Pdvsa will cut operating expenses this year but doesn't expect its $48 billion investment plan to 2002 to be affected.
U.S. EPA has compromised with Venezuela on how new environmental standards will apply to that country's gasoline exports to the U.S.
Venezuela had claimed baseline standards in EPA's new reformulated gasoline (RFG) rules did not provide equal treatment for domestic and foreign refiners and violated the General Agreement on Tariffs and Trade.
Under the compromise, Venezuela agreed to accept the baseline approach for RFG but not conventional gasoline. For gasoline export volumes less than 1990 levels, Venezuela is exempt from RFG standards for olefins levels the original bone of contention with EPA (OGJ, Jan. 3, Newsletter).
U.S. demand for petroleum products has registered a sharp increase the second month in a row.
API reports February demand averaged 18,340,000 b/d, a 5.4% rise from February 1993's level. The year to year increase was 12% in January. U.S. crude production, which recorded a modest gain in January, resumed its decline. It averaged 6,775,000 b/d, down 1.7% from the same month a year ago. Total imports of crude and products were up 3% at 8,168,000 b/d.
The Gulf of Mexico is hot, with a record number of rigs drilling in deep water there and a major lease sale focusing on the sizzling subsalt play slated for this week (OGJ, Mar. 21, Newsletter).
MMS reports that on Mar. 10 a record 14 rigs were drilling in more than 1,000 ft of water in the gulf, up from just five rigs a year ago.
Tom Fry, MMS director, said, "Few events have excited the offshore industry interest as much as the recent deepwater activity. Two rigs are working in water depths greater than 3,200 ft, an additional two rigs in waters deeper than 2,200 ft, and the other 10 are working in 1,500 ft. The majority of rig activity is 30 150 miles offshore in water depths of 1,000 2,520 ft."
MMS said operators hold leases on more than 8 million acres in waters of more than 1,000 ft. Fry said, "The current high rig count is a reflection of the numerous good prospects. We expect rig activity in deep water will continue its remarkable comeback as more units move into the gulf because of the increase in approved exploration plans. That current number is 326, up from 243 a year ago."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.