OGJ Newsletter
Is gloom setting in again in oil and gas markets? Despite a recent recovery in oil and gas prices, continuing concerns about oversupply of both commodities are darkening the price outlook.
That's the conclusion NatWest Securities, New York, draws from its latest survey of institutional investors' outlook for energy prices.
The survey's consensus forecast of $18.25/bbl for spot WTI and $1.75 for U.S. spot gas in 1996 is the lowest since the analyst began the survey in 1987.
The consensus view for oil prices is an average $17.75/bbl in 1995, rising 50-75/year thereafter. Predictions for 1996 by those surveyed ranged from an average $17 forecast by bears to $19 forecast by bulls. NatWest tends to side with the bulls, predicting WTI at $20 next year, $19 in 1997 - because of Iraq's gradual reentry into the market - and rising $1/year in 1998-2000.
On the gas side, NatWest's survey produced a forecast average price of $1.55/MMBTU in 1995, rebounding to $1.75 in 1996, and rising 10/year thereafter.
The bears see gas at $1.55 in 1996, the bulls $1.95. NatWest estimates U.S. spot gas at an average $1.80 in 1996.
Purvin & Gertz, Houston, sees the latest world oil supply/demand balance updates confirming the weakness of market fundamentals it thinks will remain soft through 1996.
It expects a 2 million b/d stockbuild in the third quarter as the latest data show demand below IEA projections, notably in the U.S. and Japan.
U.S. gas production will rise, but prices will not, says ICF Kaiser International, Fairfax, Va., in a new study.
It predicts U.S. gas consumption will increase 25% by 2005, as power generation demand for gas grows. However, gas prices, adjusted for inflation, will remain below $2/MMBTU at Henry hub. ICF Kaiser reckons advances in gas exploration, drilling, and production technology will offset gradual depletion of gas resources. As a result, the consultant says, gas prices in 2005 will be almost $1/MMBTU lower than they would be without the advances.
Texas Railroad Commission is undergoing its most comprehensive restructuring in more than 100 years (OGJ, Sept. 11, p. 15).
TRC late last month approved creation of a 100 employee natural gas services division to help the agency focus on the gas industry. The new division will help smaller communities negotiate rate cases with LDCs. There also will be increased emphasis on pipeline safety, and TRC is trying to map all the state's pipelines. Further, David Garlick, head of TRC's oil and gas division, will be reassigned to head a policy/research group to develop strategies promoting Texas oil and gas resources. More details will be forthcoming in 2 months.
Sen. Alfonse D'Amato (R-N.Y.) has filed a bill to impose U.S. sanctions on any foreign company that supplies Iran with equipment to produce oil or gas.
The bill is designed to thwart Iranian attempts to circumvent a U.S. trade embargo. The Clinton administration has warned such a law could damage U.S. relations with other nations.
The House ways and means committee has passed a bill that would cut the 5.4/gal tax break on gasoline blended with ethanol to 5.1.
Chairman Bill Archer (R-Tex.) also pushed through a provision extending for 2 years a 4.3/gal aviation fuel tax exemption for the airline industry.
MMS has placed tough environmental stipulations on a Chevron wildcat 26.4 miles off Pensacola, Fla. The Destin Dome Block 57 wildcat will test gas prone Norphlet sands. Chevron must have an oil spill response boat on site in the event of an accidental spill from fuel transfer operations and is limited on the discharge of muds and cuttings, among other requirements.
The White House Council on Environmental Quality (CEQ) will decide by December whether to recommend tougher steps to reduce U.S. emissions of CO2 and other gases believed to contribute to global warming.
The current voluntary program is meant to cut greenhouse gas emissions to 1990 levels by 2000 in compliance with the 1992 Rio de Janeiro treaty on global warming. But CEQ says it appears this program won't meet the goals.
NOVA will decide this fall whether to expand a petrochemical operation at Joffre, Alta. The company is looking at several ways to expand production at its ethylene and polyethylene plants, but no decision has been made.
In 1994, the plants produced about 3.5 billion lb of ethylene and 1.1 billion lb of polyethylene. NOVA notes chemical companies are watching world prices carefully and do not want to flood the market.
Amoco Canada is frustrated that Ottawa has not acted sooner on the recommendations of a national task force on oilsands strategies.
Amoco Canada Chairman Dave Newman says the task force recommendations are not a priority with Ottawa at the moment because it is focusing on other issues. A major task force proposal released earlier this year asked federal and provincial governments to negotiate a single royalty formula for all projects vs. the current project by project approach.
Newman said individual governments may be tempted to "shave a little off here and there to cut themselves a better deal," and companies will be back at the table negotiating single deals. He contends that would be a setback for the oilsands industry, causing delays and possible cancellation of projects.
Amoco plans expansion of its oilsands operations in Alberta.
Planned expansion of the Northern Border gas pipeline system from western Canada to U.S. markets should help depressed Canadian gas prices, analysts say. Northern Border plans a 42% expansion of its 1.7 bcfd system from the Saskatchewan border to Harper, Iowa. The $1.1 billion (Canadian) project includes a new line from Harper to Chicago to start up in early 1998 (OGJ, June 5, p. 29).
Calgary analyst Brent Friedenberg contends new capacity is needed and will increase prices on major lines not only to the Midwest but across western North America. Kevin Brown, vice-president of PowerWest Financial Ltd., Calgary, says a steady rise to $2/Mcf at the plant gate by 2000 is forecast to meet rising U.S. demand. There is a gas surplus in Alberta because of limits on pipeline capacity to U.S. markets. Spot prices in Alberta are about $1.10/Mcf.
Ottawa has earned $1.75 billion (Canadian) from the sale of most of its remaining 70% interest in Petro-Canada. Underwriters reported they could have sold seven times as many shares in the U.S. and twice as many in Canada as the 123.9 million shares offered. About 76% of shares were sold in Canada, 20% in the U.S., and 4% to other international investors. Ottawa is retaining a 20% interest and has no plans to sell those holdings the next 3 years.
Britain's royal family will have to wait another year to find out if it is sitting on an oil reservoir. A planned wildcat at Windsor Castle has been delayed.
Canuk Exploration Ltd. of Gerard's Cross, U.K., had planned to drill a wildcat near the castle in August. This was to target a structure at about 400 m with potential to hold as much as 100 million bbl of oil. Desmond Oswald, director of Canuk, told Oil & Gas Journal drilling had to be postponed because of problems in getting financing together in time. Oswald notes Canuk had permission to drill only during a couple of weeks in August (OGJ, Jan. 16, p. 24).
"We are going back to do it next year," he said. "The planning permission is good for 5 years, so drilling is likely next year at the same time of year."
Oil and gas exploration of the Falkland Islands can take place without conflict over who rules the islands, under an agreement signed in New York last week between the U.K. and Argentina.
The deal enables setting up of a joint commission to manage E&D and revenue sharing. However, the two governments reportedly had failed to agree on precise terms applying to companies entering the Falklands offshore licensing round tentatively scheduled for Oct. 3 in London and Oct. 11 in Houston.
Gaz de France expects to be among the European companies participating in Russia's Yamal Peninsula-Europe gas pipelines and related Yamal gas field development.
GDF Pres. Loik Le Floch-Prigent expects a decision on the megaproject in 1996. He wants GDF to acquire an equity interest in the pipeline in proportion to the volume of Yamal gas the French state gas utility would import. GDF also is eyeing a stake in Russian state gas giant and main project sponsor Gazprom.
Noting the importance of Central Europe as the hub for Russia's gas supply network to France, Le Floch-Prigent cites a need for gas storage capacity in the region of 175-350 bcf the next 10 years. GDF plans to participate, along with other western European merchant gas utilities, in developing some of this storage as part of an overall restructuring of gas distribution in Central Europe.