OGJ NEWSLETTER

U.S. Industry Scoreboard 11/6 (73028 bytes)

Progress reports are mixed for some major export pipeline projects.

Will a new group of companies take over the troubled Kazakhstan-Russian Black Sea crude export pipeline project? Kazakh Oil Minister Nurlan Balginbayev last week claimed a new group had been formed to lay the $1.2 billion, 1,500 km pipeline from Tengiz oil field to Novorossiisk consisting of Chevron, Mobil, Lukoil, Agip, and British Gas. It reportedly replaces the Caspian Pipeline Consortium (CPC) formed by Oman, Kazakhstan, and Russia.

Balginbayev said Oman was ousted after failing to fulfill its financial obligations to CPC by an Oct. 1 deadline. CPC long has been at odds with Tengiz operator Chevron over capital contributions and equity stakes in the line, and Chevron in turn has refused to join CPC. Meantime, the Washington Post reported Mobil is negotiating to buy half of Kazakhstan's 50% stake in Tengiz.

In Chile, the government has approved rights-of-way for both sponsors of rival gas pipelines from Argentina.

NOVA contends it has firm service contracts with three Chilean power producers and a Santiago LDC for its GasAndes project. NOVA says construction could begin this month on the $350 million project. British Gas-Tenneco's Trans-Gas project, however, lost a key customer when Entergy, New Orleans, dropped plans to build two power plants that would have used gas from that pipeline. Construction on the $689 million TransGas project is to begin in May. Although Tenneco has dropped its Oct. 31 deadline for a green light on the project-now targeting a decision for mid-December-- it insists the project remains on track.

Plans to build the $600 million, 1.9 bcfd Interconnector gas pipeline to link Britain's gas grid to continental Europe have hit a snag over permitting in the U.K. The 240 km, 40 in. gas line from Bacton, Norfolk, U.K., to Zeebrugge, Belgium, would carry 1.9 bcfd beginning in 1998 (OGJ, Dec. 19, 1994, p. 26).

North Norfolk District Council has voted to defer consideration of Interconnector's plans to build a compressor station at a new site near the existing Bacton terminal. There is no room to add a station at the Bacton terminal, and residents worry about the effects of a proposed new unit on noise levels, landscape, and local industry. Local officials want project sponsors to respond to those concerns before they take up the proposal. Some project partners are eyeing other sites, although this would result in more delays.

Gaz de France has received approval from Norway for Dunkirk to serve as the terminal for the 860 kin, 42 in. gas pipeline from Sleipner gas field off Norway. Gas will arrive at Loon-Plage receiving station prior to transport to Gournay sur Aronde storage site via a 185 kin, 1,100 mm pipeline to be built in 1997-98 at a cost of 1.2 billion francs. Storage capacity at Gournay sur Aronde is to be hiked to 721 bcf from 651 bcf. By 2005, Norway's gas deliveries to France will be 525 bcf/year, one third of its projected gas consumption.

Local gas distribution companies in the U.S. Upper Midwest and Mid-Atlantic regions face the greatest risk of losing competitive ground in heating and cooling markets as a result of electricity industry restructuring.

Richard J. Rudden, president of R.J. Rudden Associates Inc., made that projection at an American Gas Association conference but added that restructuring poses a major competitive threat to LDCs in other markets as well.

Rudden said, "The expectation is that, overall, electricity prices will decline as the electricity industry restructures and more customers gain access to an open grid, making electricity generally more competitive with natural gas.

"However, the patterns of change will vary according to region, market, and season. While there are some exceptions, summer electricity rates will tend to increase, and winter rates will tend to decrease. This pattern will create very stiff electricity competition within natural gas space heating markets, while opening opportunities for natural gas cooling." He contends the summer gas price advantage in some regions could improve by 12-30%. Rudden said, "If gas companies could price their summer rates closer to their marginal supply costs, their summer price advantage could be improved even more."

Seeking to forestall a congressional rewrite of the Endangered Species Act (ESA), the Clinton administration has released a report showing the law is working. It said 58% of the 106 species listed during 1968-73 are stable or increasing, while 30% are declining, and the status of 12% is unknown.

Meanwhile, API praised an ESA reform bill by Sen. Dirk Kempthorne (R-Idaho), saying, "Current law imposes stifling command and control restrictions, tedious multistep compliance requirements, and the possibility of protracted and costly legal battles that unfairly burden private landowners."

Look for U.S. refiners to cut runs as margins approach breakeven this quarter, says Salomon Bros.

Excluding the robust West Coast sector, average U.S. refining margins were $2.25/bbl in late October. Margins have plunged to $2.30/bbl in the Midwest and $1.71/bbl on the Gulf Coast, the latter down by more than 50% from the second quarter average. European refiners aren't faring much better, as margins dropped 10% in October from September's $3.34/bbl. It's a different story in the Far East, however. Singapore refining margins last month rose 25% from September to $3.72/bbl. The Far East picture is likely to become more volatile in 1996, when Japanese refined products import deregulation kicks in, roiling products trade patterns.

France continues to tinker with auto fuel taxes to skew market choices. The National Assembly voted to hike auto fuel taxes by 13 centimes/l., a 7 billion franc boost to the treasury. The new tax trims the spread between premium unleaded gasoline and diesel prices but not enough to dim a growing preference for diesel--a trend giving French refiners fits.

In addition, the tax on LPG auto fuel is to be cut by 1 franc/l. to boost its attractiveness in a nation where only 20,000 of 30 million vehicles use LPG.

The first public share offering of Italy's ENI is expected to raise about $6,25 billion, or 20% of the state owned energy conglomerate's share capital.

Negotiations with stock exchanges and securities agencies are under way in preparation for the float scheduled for this month. It is the culmination of several years of political wrangling to privatize Italy's biggest petroleum company and still just a first step to full privatization. Three international offers will be made directly to institutional investors in Italy, Great Britain/Ireland, and the rest of the world. Public offerings in the U.S. and Canada also are on tap.

The first stage of a $1 billion (Australian) natural gas fed power/fertilizer project in Viet Nam is expected to get under way in 1997, says codeveloper BHP.

Feasibility studies of the power/fertilizer complex planned for Ba Ria, in Vung Tau province 60 km east of Ho Chi Minh City, will be complete in 12 months. BHP this year joined a group studying pipeline and gas processing facilities linking the mainland with gas fields in the Nam Con Son basin off Viet Nam.

The 600,000 kw gas fired power plant would reach full capacity within 2 years of commissioning. The fertilizer plant would start up in 1999 at 1,750 metric tons/day of urea, a volume expected to double soon after 2000.

Downstream project interests are Petrovietnam 38%, BP 24.8%, and BHP, Mobil, and Statoil 12.4% each. BHP agreed to acquire a 35% share of BP's Lan Tay and Lan Do gas fields, where reserves are pegged at 2-5 tcf.

Enron plans to develop a world class gas field in Mozambique and deliver the gas to South Africa, according to Mozambique officials. Enron would not confirm details of the $559 million project to develop Pande gas field in Inhambane province and lay a pipeline to South Africa. Pande, discovered by the former Gulf Oil in 1961, remained undeveloped for lack of market caused by international sanctions against logical customer South Africa and Mozambique's long history of civil war. Newly democratic South Africa is keen to line up new energy supplies to replace costly synthetic fuels that sustained it during its years as a pariah state. The final agreement is expected to be signed this week.

Shell Nigeria has been asked to intervene in the case of one of the company's harshest critics in the country, who has been condemned to death by the country's military regime. Ken Saro-Wiwa, leader of the Ogoni people who led protests against Shell, was one of six people a special tribunal found guilty of murdering four Ogoni chiefs. Attacks on workers and facilities led Shell to pull out of Ogoni in January 1993. Last year other Shell installations in Nigeria were sabotaged during a strike by oil workers. This year Shell disclosed a $2 million environmental study of the Niger Delta as tension mounted between oil and local interests (OGJ, Feb. 13, Newsletter). Anita Roddick, Ogoni backer and founder of British "green" cosmetics firm Body Shop, called on Shell to condemn the death sentences, claiming Shell alone has enough influence with Lagos to overturn the verdicts. Shell said, "We made it clear...that the trials of Saro-Wiwa and the others were for murder, which is a criminal matter. They were not in court for their protests against Shell. Our position has always been that a private company has no right to involve itself in the criminal proceedings of a court." Copyright 1995 Oil & Gas Journal. All Rights Reserved.