OGJ Newsletter

Aug. 21, 1995
OPEC oil production is slipping a little closer to quota.

OPEC oil production is slipping a little closer to quota.

The group's output fell 90,000 b/d from June levels to 25.12 million b/d in July compared with its 24.52 million b/d quota, says Middle East Economic Survey (MEES). A Reuter survey, however, put OPEC output at 220,000 b/d higher in July at 25.22 million b/d. Because of a damaged subsea pipeline at Nigeria's Qua Iboe export terminal, that country's output fell 40,000 b/d to 1.81 million b/d, MEES said. Nigeria's state news agency claims Nigerian output fell 70,000 b/d short of its 1.865 million b/d quota but said the nation marketed 1.966 million b/d.

MEES pegs Iranian output as down 60,000 b/d to 3.585 million b/d vs. its 3.6 million b/d quota. MEES sees Venezuela as the biggest quotabreaker, exceeding its 2.359 million b/d quota by more than 340,000 b/d. Not surprisingly, the average price of OPEC's basket of crudes fell to $15.68/bbl in July from $16.98/bbl in June before rebounding to $16.02/bbl the first week of August.

Privatization has run into a roadblock in India.

That country's Petroleum and Natural Gas Ministry is finding it tough to overcome opposition of state oil company Oil & Natural Gas Commission (ONGC) and the State Planning Commission (SPC) in opening further development of Bombay High offshore oil fields to foreign investment.

ONGC issued a tender in 1993 covering added development and enhanced recovery of L-II and L-III reservoirs at Bombay High. Of surviving bids by Amoco, ARCO, Chevron, and Oxy, little was offered in the way of new technology, incremental recovery, or an adequate return to ONGC as a partner, an advisory committee to ONGC said. It suggests the tender be scrapped and ONGC undertake the work itself. SPC, taking it a step further, opposes opening any proved oil fields to foreign investment, taking the view that multinationals be limited to frontier exploration under a profit sharing basis.

Jordan is studying development of a gas pipeline network to move supplies from gas fields in Saudi Arabia, Qatar, and Egypt.

The study is to be complete by yearend and focus on industrial and power generation demand for gas. One pipeline is likely near the Saudi Tabuk gas field, about 60 miles south of Aqaba. Jordan also could get Qatari gas if Enron carries out plans to build gas storage facilities at Aqaba to reexport Qatari gas to the Mediterranean basin. It also is negotiating a gas supply pact with Egypt.

Meantime, Jordan will drill five gas wells in the Northeast Ruwayshid area this year to boost output from the current 30 MMcfd. An Iraqi team arrived in Jordan recently to help with gas exploration near their common border.

That development and the continued export from Iraq of 60,000-70,000 b/d of crude and 20,000 b/d of products via tanker truck to Jordan, apparently remain unaffected by Jordan harboring key Iraqi defectors earlier this month.

More action is percolating on Caspian Sea area oil export pipelines.

Azerbaijan International Operating Co. (AIOC) let contract to Fluor Daniel for engineering and design of a 100,000 b/d pipeline to support fast track development of three fields in the Caspian Sea off Azerbaijan.

AIOC, a group led by Amoco and BP, is studying viability of producing oil from Chirag 1 field as early as mid-1996 (OGJ, June 5, p. 22). Fluor Daniel will use existing infrastructure as much as possible to have the pipeline system on line by yearend 1996. Routes leading to the Black Sea are under study.

Meantime, Bethlehem Steel Corp.'s Pennsylvania pipe making unit had agreed to provide 300,000 tons of 42 in. pipe for another proposed pipeline for transporting oil from the Caspian region to world markets.

The $1.8 billion project led by Oil Capital Ltd. Inc., New York, proposes a 930 mile pipeline to transport 700,000 b/d of regional crude to a Turkish port on the Mediterranean (OGJ, June 19, p. 26). The agreement includes an option in which Pennsylvania Steel Technologies Inc., Steelton, Pa., could provide another 300,000 tons of pipe as construction progresses. An estimated 2.9 million tons of steel pipe could be needed to complete the line.

Siberia's oil producing regions are clamoring for greater autonomy and a bigger share of oil revenues from Moscow.

The 19 region Siberian Agreement Association, created in 1990 to deal with the Kremlin after the financial support from the former Soviet regime dried up, demands 50% of the government's share in Siberian oil companies.

Prime Minister Viktor Chernomyrdin's initial offers to Siberia's Tyumen region of regional investment reforms were rebuffed as inadequate. Tyumen accounts for 70% of Russia's oil output and 90% of gas production.

Chernomyrdin then promised to expedite regulations to underpin oil development in South Tyumen, where Tailakovskoye and Uvatskoye field complexes hold about 5.5 billion bbl of oil. Moscow pledged to establish soon Tyumen Petroleum Co., incorporating Nizhnevartovskneftegaz, Tyumenneftegaz, Ryazan refinery, and local fuel suppliers and exploration companies.

Moscow also plans to provide funds to rehabilitate damaged supergiant Samotlor, thought to still hold 14.6 billion bbl of potentially recoverable oil. This project would cost $8 billion to recover 10.95 billion bbl of oil by 2000.

Taiwan will introduce regulations in February 1996 to greatly liberalize the country's refining industry. Under new rules, any investor will be allowed to build and operate an oil refinery. Under current law, only companies operating naphtha crackers may apply to build a refinery. The new rules also will eliminate most restrictions on import of refined products.

A heat wave in France has worsened vehicular air pollution there, sparking a cry for stiff measures against auto air pollution.

Environment Minister Corinne Lepage set up a task force to draft a law for submission to parliament in the fall on a revised clean air law. Stricter vehicular emissions controls are a certainty. What isn't certain now is what role French refiners will play in the new clean air mandate. They contend they have done their part in providing clean fuels and that most of the pollution comes from 20% of vehicles that are poorly tuned or not adapted to use the new fuels.

Venezuela's refiners are studying plans to produce unleaded gasoline for domestic use.

Venezuela currently produces regular unleaded only for export. Gasoline exports accounted for 32% of Venezuela's petroleum exports in 1994. Domestic sales of leaded gasoline were 197,000 b/d in 1994, up 10,000 b/d from 1993.

However, before Pdvsa can make the necessary capital investments to supply unleaded gasoline for local use, the government will have to allow gasoline prices to rise from the current level of 13/gal for 95 octane grade.

Pdvsa loses about $923 million/year from subsidizing domestic sales of refined products. The last time Caracas hiked local refined products prices, the country was rocked by 3 days of rioting and looting that left about 300 dead.

Colombian guerrillas now are targeting Venezuelan oil operations near the countries' common border. Guerrillas recently tried to kidnap several technicians working at a Venezuelan oil production area near the border, and reports have surfaced of industry payments of "protection" money to guerrillas. Earlier this year, an attack on a Venezuelan border outpost left eight Venezuelan soldiers dead. Caracas moved in thousands of troops along the border. Such attacks on Colombian oil facilities are common (see Industry Briefs, p. 32).

Shipments of Alaskan North Slope (ANS) crude diverted to Japan from the Gulf Coast will have a problem competing in that market if they are carried in U.S. flagged tankers, says Honolulu's East-West Center (EWC).

This fall, a congressional conference committee is expected to merge House and Senate bills allowing ANS exports. EWC also contends the West Coast supply/demand balance will not be changed by lifting the ban.

The environmental debate continues to play out in Washington, D.C.

The National Environmental Policy Institute has urged Congress to consider enacting a unified environmental law to replace 16 statutes currently on the books. It said, "A single national law would give the Environmental Protection Agency clear direction to protect our air, water, and land. It would also provide the agency with the tools it needs to set priorities and manage its resources." Under the existing system, EPA reports to more than 70 congressional committees and subcommittees.

President Clinton, angry over House amendments limiting EPA actions (OGJ, Aug. 7, p. 34), has issued an executive order requiring firms that do business with the government to report their air and water emissions.

Existing law requires about 24,000 industrial facilities to report emissions of 651 chemicals, but the House voted to freeze the list and the companies covered.

In debating appropriations for the Interior Department, the U.S. Senate voted this month to place a 1 year moratorium on new listings under the Endangered Species Act. Senators said the moratorium would allow Congress time to review the law.

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