OGJ Newsletter

Aug. 28, 1995
U.S. Industry Scoreboard 8/28 (72394 bytes) The global petrochemical building boom shows little sign of slowing despite signs petrochemical prices have peaked (see story, p. 103). Union Carbide, Lyondell, and Quantum have started an engineering study of a proposed expandable 1.5 billion lb/year olefins plant at Lyondell's Channelview, Tex., petrochemical complex with Lyondell as operator.

U.S. Industry Scoreboard 8/28 (72394 bytes)

The global petrochemical building boom shows little sign of slowing despite signs petrochemical prices have peaked (see story, p. 103).

Union Carbide, Lyondell, and Quantum have started an engineering study of a proposed expandable 1.5 billion lb/year olefins plant at Lyondell's Channelview, Tex., petrochemical complex with Lyondell as operator.

The plant could be on line by mid-1998, but a final decision on timing will be determined during the study. Integrating the plant into existing Channelview infrastructure will save substantially vs. building a grassroots plant.

Enron and Venezuelan firms Maraven and Grupo Polar will sign a joint venture (JV) pact next month to manufacture and market about 150,000 tons/year of purified polypropylene at an undisclosed site in Venezuela.

The project is part of Maraven's program to make high value specialty products from refinery byproducts. It is to sign seven more such JV deals the next 5 years for a total investment of $1.5 billion under the program.

The most recent deal is with Pennzoil and Venezuela's Puramin involving specialty chemicals (OGJ, Aug. 14, p. 23). Also in the offing is a $425 million JV project to produce 10,000 b/d of superrefined lubricants in which Mobil, Unocal, and Chevron may participate.

Oman will begin work on its first petrochemical plant in the next 2 months. Officials won't disclose details of the $700 million project, other than to say it will be operated by the private sector and will be fed by liquids-rich Omani gas, possibly byproducts from Oman's proposed $9 billion LNG export project. It isn't clear whether foreign investment will be allowed.

More operating companies are entering into strategic alliances with contractors. The special projects group of British Gas' engineering unit signed a cooperative agreement with U.K. contractor AMEC plc to identify, develop, and carry out projects in oil, gas, and power related projects onshore and offshore that encompass production, processing, generation, transmission, distribution, and utilization. Scope ranges from individual project elements to turnkey jobs. The two intend to develop the accord into a full JV by yearend 1997.

The privatization steamroller lumbers on. Italy's government has approved a law creating an energy authority to supervise the privatization of state owned petroleum conglomerate ENI and state electric utility ENEL. Rome wants to keep Italy's electric transmission grid under a single private or public company but will promote competition between local distribution companies and independent power producers after ENEL's power plants are sold to private concerns.

A strategy for selling the government's stake in ENI probably will emerge within a month, once Rome decides who will coordinate the effort. Plans call for selling, possibly by 1996, about 15% of ENI for an expected $4-5 billion.

Companies aren't rushing to line up to buy a big piece of ENI, however. Royal Dutch/Shell, returning to Italy after a 22 year absence, is taking a wait and see stance toward ENI privatization. "It's too big a bite for us," said Shell Italia Managing Director Howard Shields. "We are convinced that it will take time before it goes fully private. Anyway, the beginning of the privatization process will contribute to market freedom and transparency and, we hope, to the deregulation of the fuel distribution market."

Shell marked its return to Italy by buying back as much as 100% of the Monteshell JV with Italy's Montedison for $125 million. Shell left Italy in 1973, selling to ENI its 4,000 gasoline stations there but keeping a toehold in chemicals via Monteshell. Shell will spend $93 million in Italy's petrochemical sector, including doubling polyethylene terephthalate capacity at its Frosinone, Italy, plant. Overall, Shell Italia plans outlays of $250 million the next 5 years.

U.S. gasoline demand is likely to get a boost from what American Automobile Association projects will be the busiest Labor Day weekend for motorists in at least 11 years. Citing sizzling summer weather and cheaper gasoline prices, AAA estimates 29.6 million motorists plan to vacation 100 miles or more from home during the holiday weekend beginning Sept. 1, up 2% from a year ago. It estimates 85% of all U.S. holiday travel will be by auto, light truck, or recreational vehicle. Auto travel intentions are the highest since AAA began reporting on Labor Day travel in 1985. The average price of self-serve regular unleaded gasoline has dropped 0.5 since the July 4 holiday and now stands at $1.178/gal. Another 4.1 million people are expected to take a trip by airplane, train, or bus, a 2.5% increase from 1994 vs. an 11% rise last year.

Florida may finally get linked with the U.S. interstate liquids pipeline network. After 15 years of trying with five projects backed by a number of companies, Big Bend Pipeline & Terminal Co., Tallahassee, claims to have a viable project. It plans to lay a $20.5 million, 23,000 b/d, 41 mile, 12 in. products line from Bainbridge, Ga., to Midway, Fla., 7 miles west of Tallahassee. Big Bend's line is to tie into Colonial Pipeline's terminus at Bainbridge. Included is a 250,000 bbl products terminal at Midway. Permitting is expected to take 18 months, with start-up slated for January 1997. Big Bend Pres. John Ballentine says his project has resolved problems that sparked environmental opposition to earlier pipeline projects, and state officials back the project. However, Ballentine expects continued opposition from marine carriers, instrumental in defeating the earlier pipeline projects. Florida gasoline prices are among the highest in the U.S., which Ballentine blames in part on marine transportation costs.

An Ingaa survey on U.S. gas transportation in 1994 -- the first full year under total implementation of FERC Order 636 -- found dramatic growth of released capacity and no-notice service, while interruptible transportation continued to decline. It said capacity release accounted for 13% of deliveries in 1994, up from 2% a year earlier. No-notice deliveries increased to 14% from almost zero while interruptible transportation dropped to 18% from 35% a year earlier.

Ingaa said distributors continue to be the largest users of firm transportation and no-notice services. Firm transportation deliveries other than no-notice and released capacity was up by 17% in 1994. Marketers continue to dominate contracting of interruptible transportation and released capacity.

Interstate lines' gas sales continued to decline, with less than 2% of pipeline deliveries in 1994. Another trend Ingaa found was that prearranged deals accounted for 82% of capacity release compared with 18% for open bids.

AGA reports 1,107 natural gas vehicle refueling stations are operational and another 45 will open soon. Its latest directory of NGV fueling stations shows a 19% increase from a year ago and lists stations in 46 of the Lower 48 states.

MMS has proposed some alternative bidding systems to encourage exploration of offshore leases. Targeted are leases in 200 m of water or more, relinquished tracts with wells but uneconomic reserves, and relinquished tracts that received high bonus bids but no exploration activity.

MMS proposes a royalty below the usual 12.5%, allowing operating allowances in determining receipts subject to royalties, royalty suspensions, or a variable system that would take into consideration product prices.

Although some in Congress would like to kill it, U.S. DOE should remain a cabinet level agency, the General Accounting Office says.

GAO said DOE has yet to resolve basic questions about what its role should be, but it should be retained to direct environmental cleanup of the nuclear weapons complex, and because "energy policy directly affects all Americans and the U.S. economy."

Charles B. Curtis has been sworn in as deputy energy secretary, replacing Bill White, who resigned Aug. 11 to return to Texas.

Curtis, FERC chairman during 1977-81, has been DOE undersecretary since February 1994. He is known well enough on Capitol Hill that the Senate energy committee waived the usual confirmation hearing.

DOE plans to simplify its process of issuing grants for energy projects.

It will cut by more than 50% internal rules to solicit, review, process, and make financial assistance awards.

DOE said, "In most instances, rather than requiring department officials to go through detailed procedures, the proposed new rules will establish standards or basic requirements and let the decision be made at the operational level."

National Petroleum Refiners Association has taken President Clinton to task for claiming an amendment to the EPA appropriations bill would allow refineries "to spew benzene without stringent safeguards."

NPRA told Clinton, "Nothing could be further from the truth. It is unfortunate that you were not provided with accurate information before your presentation."

The appropriations rider would block an EPA rule requiring refiners to use maximum achievable control technology to limit toxic air emissions (OGJ, Aug. 7, p. 34).

Copyright 1995 Oil & Gas Journal. All Rights Reserved.