OGJ NEWSLETTER

Prospects abound for increasing worldwide oil production.

Iran has been temporarily producing more than 4 million b/d of oil as a warning to other OPEC members against supplying U.S. companies at Iran's expense after the U.S. ban on oil imports from Iran. Middle East Economic Survey (MEES) says that for I week Iran's onshore production jumped to 3.6 million b/d and offshore production to 465,000 b/d. Iran's Oil Minister Gholamreza Aghazadeh reportedly said Iran might use its productive capacity as a bargaining point to demand a higher quota within OPEC if the group's ceiling is raised for 1996.

While Iran would have problems producing to full capacity of 4.5 million b/d, the minister said, an output of 4.1 million b/d could be sustained under current conditions. Iran's OPEC quota is 3.6 million b/d.

Qatar's state owned Qatar General Petroleum Corp. (QGPC) plans to boost oil E&D in a bid to jump production to more than 500,000 b/d from 420.000 b/d by 2000, MEES reported. MEES reckons the total could be higher if all identified prospects come to fruition. QGPC plans to improve recovery in producing fields via application of 3D seismic, horizontal drilling, and EOR.

"Qatar is also seeking wider participation by international companies in upstream ventures," said MEES, "in order to tap the small and difficult structures available, offering them production sharing ventures with attractive terms."

Qatar's potential oil reserves are estimated at 4.2 billion bbl, of which 2.6 billion bbl is undeveloped, which in turn underpins its expansion plans.

Look for Viet Nam to lead Asia in terms of increased oil production the next 5-7 years, says East-West Center (EWC), Honolulu. The think tank predicts Viet Nam will almost triple oil output to 450,000-500,000 b/d in that time from the current 175,000 b/d. Two thirds of that volume will be exported, but rapid growth in domestic consumption will wipe out net exports in 15 years. EWC sees Asian companies taking a more active role in Vietnamese E&D while U.S. companies' role remains diminished because of their late entry caused by the recently lifted U.S. embargo. EWC also thinks Viet Nam will become a major gas producer early in the next century, absorbing about 5-10 tcf in 20-25 years and leaving at least 10 tcf for export, likely to China and Thailand via pipeline.

Foreign companies are scrambling to take advantage of Australia's trend toward privatization of gas transmission systems.

Tenneco has added to its Australian pipeline assets with the $304 million (Australian) purchase of the Pipeline Authority of South Australia (PASA), which owns the key gas pipeline from Moomba in the South Australian Cooper basin to Adelaide. Tenneco recently proposed laying a $220 million, 760 km gas line from Cooper basin fields in Southwest Queensland to link with the Surat/Bowen basin-Brisbane gas line. The PASA buy provides a springboard for further investment in gas line privatization, notably Queensland's Surat/Bowan-Rockhampton line, Victoria's extensive network, and the former Secwa line from Dampier to Bunbury in Western Australia.

Tenneco offered 20% of PASA to Santos, 15% to the Lend Lease property company, and 5% to the Superannuation Fund Investment Trust. Santos plans to take up the offer, but an answer is still forthcoming from the other two.

Tenneco wants to boost throughput on the 780 km, 245 MMcfd PASA line the next 3 years and develop new customers. PASA moves 211 MMcfd, half of which fuels an Adelaide power plant.

European oil and gas industry associations are warning European Union ministers to resist calls for further intervention in Europe's energy markets when they meet June 1. Brussel's European Petroleum Industry Association and London's Exploration & Production Forum fear the green paper that ministers are to debate will lead to intervention because of concerns over import dependency.

They contend petroleum industry performance shows the benefits of free market principles and the industry's ability to respond to supply difficulties. Existing gas infrastructure also assures supply security, with abundant reserves in nations near EU where interdependency will ensure future supplies. "The green paper seems to be inspired by the desire to impose quantitative shares for different energy sources over time," the groups said. "Such fuel mix rationing has, in the past, consistently led to a misallocation of society's resources and has resulted in detrimental effects both for consumers and for economic growth."

Greenpeace protesters have been evicted from Brent spar installation in the North Sea more than 3 weeks after they occupied the idled storage and loading buoy to protest dumping plans (see Watching the World, p. 18).

Brent field operator Shell Expro said the last three protesters, who had held out on the helicopter deck, were removed the evening of May 23. The protesters were lifted in a basket onto Stadive construction vessel operated by Rockwater, Aberdeen. Shell plans no further legal action against Greenpeace. Key to Shell's ability to remove the protest group was placing an offshore installation manager (OIM) for Brent spar on board. Under U.K. criminal law, Shell had no power to evict the protesters, but an OIM can evict people in the interests of safety under the Mineral Workings Act. Stadive immediately will begin a 3 week work schedule involving removal of anything that can be removed from the spar. Once this is completed, explosives will be placed in the buoy, and it will be towed 200 miles out into the Northeast Atlantic for dumping (OGJ, Mar. 20, p. 32). A target date for the dumping has not been fixed.

Argentina and Britain have proposed resuming talks in June-July on oil exploration rights in the Falklands. Negotiations will precede talks between respective foreign ministers Guido Di Tella and Douglas Hurd in late July.

Russia's Volgograd region will issue a tender this fall covering development/production work there to seek a replacement for Elf.

The French firm pulled out early this month over a lack of Russian production sharing legislation. It withdrew earlier from the Saratov region, which also is expected to be put up for tender. In 1992, Elf signed accords with Russia's Interneft joint stock company to develop oil in more than 10,000 sq km in the Saratov region and about 2,000 sq km in the Volgograd region.

Are gasoline markets fated to shrink?

A decline in Europe's refining industry, increased carbon dioxide emissions, and inability of transport policy to reduce traffic levels are in the offing for Europe, predicts WEFA Ltd., London. The economic consultant predicts increasing use of diesel cars, fuel efficiency improvements, and broader use of alternate fuels will lead to a 25% decline in gasoline demand throughout Europe by 2010.

Europe's refiners must therefore look for long term export outlets, said WEFA, or face permanently depressed margins and an inevitable round of refinery closures. CO2 emissions from road traffic are expected to stabilize at about 800 million metric tons/year after 2000, about one third higher than in 1990.

WEFA contends increasing cost of road use through higher fuel and vehicle taxes is the most important of Europe's new transport policies.

"This will be insufficient to prevent further growth in road traffic," said WEFA, "because such measures will be unable to compensate for a continuing rise in car ownership levels. By 2010 there will be an additional 35 million cars on the road and car traffic will have increased by 25%."

Mitsubishi Motors plans to install a new gasoline engine in its Galant model line that uses 25% less fuel than other gasoline engines and emits 90% less nitrogen oxides, reports Tokyo's Nikkei Weekly newspaper. Fuel requirements are cut by spraying gasoline into the combustion chamber without first mixing it with air. The engine reportedly costs $350 more to produce than conventional engines, but this would be reduced with mass production.

U.S. natural gas consumption could fall 5% if Congress passes legislation to repeal Section 210 of the Public Utility Regulatory Policy Act, a gas group warns. Ray Galvin, Natural Gas Supply Association chairman and Chevron U.S.A. Production Co. president, notes the law allows independent power producers to sell electricity to local utilities, of which 900 bcf/year is gas fired. He contends Congress should not repeal Section 210 until the government completes efforts to establish competition in the electricity industry.

Energy projects rank high on the list of South American infrastructure projects that represents export opportunities of more than $4 billion for U.S. companies. U.S. Trade and Development Agency will present a list of 100 of South America's most promising infrastructure projects in 10 nations the next 3 years at a meeting for U.S. and South American business and government leaders June 14-16 in New Orleans. Presentations will include technical descriptions, equipment and services demand, and project financial reviews.