OGJ NEWSLETTER

April 23, 1990
Mexico's Pemex plans to invest more than $1 billion in an ecological program, Xinhua News Agency reported. The program, involving construction of nine oxygenated fuel plants and process modifications at refineries and petrochemical plants, is expected to substantially reduce emissions from gasoline, diesel, and fuel oil sold domestically. Dealing with environmental issues could cost Canada's petroleum industry $1 billion, and meeting new standards will add $100 million/year to operating

Mexico's Pemex plans to invest more than $1 billion in an ecological program, Xinhua News Agency reported.

The program, involving construction of nine oxygenated fuel plants and process modifications at refineries and petrochemical plants, is expected to substantially reduce emissions from gasoline, diesel, and fuel oil sold domestically.

Dealing with environmental issues could cost Canada's petroleum industry $1 billion, and meeting new standards will add $100 million/year to operating costs, a Shell Canada Ltd. executive says.

Don Taylor, executive vice-president, said industry needs to focus on prevention, not just containment and dilution.

The former policy created onerous liabilities. Shell spent more than $15 million and 5 years to restore a closed refinery site to current environmental standards, he said.

Taylor expects oil companies to be required within 3 years to include estimates of environmental liabilities in financial statements. Identifiable environmental costs will be included in capital budgets, mostly in the downstream sector.

Troodos Maritime International, Monaco, banished alcohol from the 44 tankers under its control, prohibited drinking by crews during shore leave, and banned new crew members from drinking for 12 hr before joining a ship.

Troodos Chief Executive Stelios Hajiloannou told Lloyds List shipping newspaper in London the company believes this kind of alcohol ban could soon become an industry standard.

Crews on Troodos tankers must agree to random alcohol and drug testing, and anyone failing a test will be dismissed.

Crude prices look set for a rough ride until Persian Gulf OPEC producers convince world oil markets that promised production cuts will be implemented.

In response to tumbling crude prices, Saudi Arabia, Kuwait, and Abu Dhabi met in Jeddah, Saudi Arabia, to discuss the worsening price situation. Instead of steadying market nerves, the meeting exerted more pressure on prices.

After the meeting, Kuwait and Abu Dhabi promised unspecified production cuts. Saudi Arabia promised nothing.

The result was a further 50cts/bbl decline in the price of Brent blend for May delivery to $16.20/bbl.

Market are looking to OPEC to reduce production from the present 24 million b/d to the agreed quota level of 22 million b/d until demand begins to pick up later next month or in June.

CMS Energy Corp., Midland, Mich., the company that spearheaded the first U.S. conversion of a nuclear power plant to natural gas, is moving toward other such conversions.

Midland Cogeneration Venture, also the world's largest cogeneration plant, started commercial operations Mar. 16 (OGJ, Apr. 2, p. 36).

CMS will submit by June a bid for similar conversions of the idle Rancho Seco nuclear plant near Sacramento and a never used nuclear plant at Fort St. Vrain, Colo. CMS and two partners plan to complete by May 1 a feasibility study of converting the shutdown Shoreham, Long Island, N.Y., nuclear plant and will follow that with a bid.

Similar conversions are being considered in other states. The company has estimated that about $20 billion of inactive U.S. nuclear plants are candidates for conversion to gas.

There is more activity among competing interstate gas pipeline projects to serve California.

Shell Canada Ltd. has pulled out of the Altamont Gas Transportation Project as an equity partner, citing other contractual obligations.

Shell will continue to negotiate contracts for 100 MMcfd of capacity on the proposed 700 MMcfd line to move Canadian gas from Port of Wild Horse, Mont., to link with the proposed 904 mile Kern River Transmission Co. line from Opal, Wyo., to southern California.

Remaining Altamont partners Tenneco Gas, Petro-Canada, Amoco Canada, and Montana Power unit Entech Inc. will absorb Shell's equity. Tenneco will become project leader in mid May.

Meantime, Kern River fully subscribed initial capacity of 700 MMcfd when Union Pacific Resources exercised options in a previous transportation agreement. Kern River expects to award construction contracts later this year.

Mojave Pipeline, a 30 in. line from Topock, Ariz., to interconnect with Kern River at Daggett, Calif., has firm transportation commitments for all but 90 MMcfd of its 400 MMcfd capacity. It expects construction to begin in January 1991 and start-up in early 1992.

And California Public Utilities Commission filed a statement of support with the Federal Energy Regulatory Commission urging speedy approval of Pacific Gas Transmission Pacific Gas & Electric Co.'s proposed 1 bcfd expansion of their system from British Columbia to California.

CPUC certification hearings on the project are to start in late May, and construction on the parallel expansion in 1992.

Saudi Arabia keeps finding more light crude and gas in its central desert, where some estimates put potential new reserves at 2 billion bbl of oil (OGJ, Apr. 9, p. 21).

Saudi Aramco 1 Naeem flowed 2,800 b/d of 42.4 gravity crude and 600 Mcfd of gas from 8,843-8,965 ft east of Hawtah about 125 miles southeast of Riyadh. Aramco plans further drilling to probe deeper pay.

Shell Canada plans to apply for a significant discovery designation for a multizone oil and gas discovery 71 miles northwest of Inuvik, N.W.T.

Shell Unipkat N-12, drilled to 5,268 ft, flowed 11.5 MMcfd of gas from one zone, 590-1,570 b/d of oil from three zones, and water from another zone. Two zones did not flow.

The discovery is 6.2 miles south of Niglintgak gas field, which Shell opened in 1972, and 0.6 mile northeast of Shell Unipkat I-22, abandoned in 1972.

Occidental Eastern and partners have begun an extended production test of Lufeng oil field in the South China Sea to confirm design parameters and reservoir performance prior to full development in 1991 (see map, OGJ, Sept. 18, 1989, p. 40).

Oxy Lufeng 22-1-3, drilled in late 1989, began producing 10,000 b/d of 31 gravity oil Apr. 11. The oil flows into a semisubmersible floating well platform, then into a converted 45,000 dwt tanker used as a floating production, storage, and offloading system in 1,100 ft of water 120 miles off China.

Elsewhere off China, BP Development Co. Ltd. signed its 11th and 12th agreements with China National Offshore Oil Corp. covering exploration and development in Chinese waters, reported Xinhua News Agency.

BP signed a production sharing contract for the 10/15 area of Bohai Bay. In addition, BP and Cnooc signed an agreement to conduct a joint study of geology of the Pearl River Mouth basin in the South China Sea.

Fabrication of a fluid catalytic cracking unit in Boston is astounding, given the region's attitude toward the industry.

The catch: The unit is being built at PX Engineering Co.'s yard on Boston Harbor for shipment to Amerada Hess Corp.'s Port Reading, N.J., site early in 1991.

The FCCU, rated at about 40,000 b/d, will be barged with the riser, reactor, head, and other major components assembled and refractory in place.

It is estimated 3 weeks will be required to erect the unit. A company manager said this approach will cut perhaps 80% from conventional field construction cost.

Hess will replace an old FCC at Port Reading, which it uses to crack feed from its huge Virgin Islands refinery, where conversion capacity is small.

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