When will uncertainty ease over status of joint ventures in the former U.S.S.R.?
A committee of Russia's Supreme Council last week recommended the government honor its original award of a feasibility study of Sakhalin oil and gas development to Marathon, McDermott, and Mitsui, Kyodo News Service quoted from Russian newspaper reports. The award to MMM was reportedly suspended last month amid Moscow-Sakhalin jurisdictional squabbles and political infighting between reformers and reactionaries. The Supreme Council will consider the committee's recommendation at a meeting soon.
However, the committee also recommends Moscow divide the Sakhalin tender areas for development, give priority to improving the Sakhalin infrastructure, allow Russian companies to participate, and consider other foreign proposals, Kyodo quoted committee Chairman Vladimir Shumeiko as saying. Russian oil industry analysts worry such measures could further delay the $9 billion project and doom any chances of meeting a targeted 1995 production start-up (see story, p. 19).
Undaunted, the parade of joint ventures into the former U.S.S.R. marches on.
Fracmaster, Norcen, Vakhneft Oil & Gas, and Tomskneft production association have formed a joint venture, Vakh Fracmaster Services, to boost production via well stimulation in Vakh oil field, Tomsk, western Siberia.
Equipment is to be shipped from Calgary next month, and first frac is scheduled for late spring.
Fracmaster said within 2 years it expects incremental production to approach that of its Uganskfracmast venture, about 20,000 b/d.
McDermott and Shelfproekstroi (SPS), Azerhaijan's main marine contractor, have formed Macshelf Ltd., London, a 50-50 joint venture to perform engineering feasibility studies for oil and gas development, promote export of steel components from SPS fabrication yards on the Caspian Sea, and market SPS design and construction services. Plans call for Macshelf to support a second McDermott-SPS joint venture, headquartered at SPS facilities near Baku, that will fabricate and install offshore structures.
Sofregaz leads a group including France's Framatome and Germany's European Gas Turbine GmbH formed to recover flared gas at Surgut and Pour oil fields in Northwest Siberia. Russia's Gazprom will market the recovered gas, which could total 315 bcf/year, about what Russia exports to France. The $600 million project will require international financing.
A gas price/supply dispute with Turkmenistan has led Ukraine to threaten closure of a gas pipeline that crosses its territory, thus blocking exports to Europe, according to wire service reports.
Turkmenistan earlier suspended gas deliveries to Ukraine, accusing it of reneging on an agreement to buy 980 bcf of gas at about 23 rubles/Mcf.
That's 25 times the previous rate hut a fraction of the world price Turkmenistan seeks. Turkmen officials said Ukraine demanded the price include delivery and stopped food deliveries to Turkmenistan. The pipeline transports 3.5 tcf/year to Europe, including 385 bcf/year of Turkmen gas.
Iran is prepared to sell 80,000 b/d of oil and 290 MMcfd of gas to Ukraine if a price agreement can be reached, reports OPEC News Agency.
A meeting between Iranian Petroleum Minister Gholamreza Aghazadeh and Ukranian Deputy Prime Minister Konstantin Masic also yielded discussions about construction of an oil pipeline linking the two nations, an oil terminal near the Black Sea, and a 2.4 bcfd gas pipeline constructed jointly by Iran, Ukraine, and Azerbaijan.
OPEC cohesiveness remains shaky.
OPEC flow fell only 190,000 b/d last month to 24.29 million b/d, leaving the group's output far above its quota ceiling of 22.98 million b/d, Middle East Economic Survey reports. Saudi Arabia cut output 500,000 b/d to 8 million b/d, the newsletter said, while price hawk Iran produced 3.41 million b/d in February vs. its 3.18 million b/d quota, and Nigeria's output averaged 150,000 b/d above quota at 1.9 million b/d, MEES reported. Iran's Oil Ministry said Iran reduced its output to the quota effective Mar. 1.
Postwar reconstruction continues apace in the Persian Gulf.
Iraq has quantified damage it sustained as a result of the Persian Gulf war and economic sanctions. Baghdad cites $6 billion in damages to its oil sector, with production centers sustaining damages affecting 25-95% of individual capacity. Eighty oil installations were targeted by allied forces seeking to oust Iraq from its occupation of Kuwait, and the country's refining capacity had fallen to just 3% of prewar levels. Iraqi officials claim a nationwide reconstruction effort is more than 80% complete and that sanctions have cost Iraq $26.5-32 billion in lost oil export revenue.
Kuwait expects to spend about $10 billion the next 2 years to restore its oil infrastructure to the precrisis level, says Abdulhamid al-Awadi, Kuwait's ambassador to Austria. He contends only about 40-50% of the oil spilled in the war--which he put at more than 100 million bbl--would be recoverable and that the affected area would take about 50 years to recover.
Al-Awadi also said Kuwait plans to spend about $300 million in eastern Europe in the long term, focusing on refining/marketing joint ventures.
Iran has completed first phase of reconstruction in Bahregan and Hendihjan offshore oil fields, shut in at the start of the 8 year war with Iraq in 1980, reports Opecna. When fully restored Bahregan will produce about 20,000 b/d and Abuzar platform about 30,000 b/d.
Chevron and Sudan have signed a memorandum of understanding allowing third parties to develop oil fields the company discovered in southern Sudan, MEES reports. Development would occur via outright purchase, farmout, or any other form of participation that would expedite production.
Sudan will give priority to third parties willing to reimburse Chevron for its previous exploration outlays, according to MEES.
Chevron, which halted work towards development in 1984 following rebel attacks on seismic crew camps, contends the development/crude export project is no longer competitive with projects it has elsewhere.
China's biggest offshore project finally is taking shape.
ARCO and Kuwait's Kufpec China Inc. have signed an agreement in principle with China National Offshore Oil Corp. for sale of gas from its 3 tcf 1983 Yacheng discovery in the South China Sea off Hainan Island to an electric power company owned by China Light & Power and an Exxon unit for power production in Hong Kong. Plans for the $1.3 billion project call for start-up in January 1996 and peak output of 330 MMcfd from two production/processing platforms. About 280 MMcfd will move to Hong Kong via a 475 mile subsea line and 50 MMcfd to Hainan Island via a 60 mile subsea line. A definitive sales agreement is expected at midyear.
Imperial Oil is tightening the screws still further in its continuing retrenchment. It plans to cut exploration spending of its Esso Canada unit to $60 million (Canadian) from $100 million in 1991 following a $36 million operating loss in 1991 (OGJ, Mar. 2, p. 19). In addition to eliminating 1,700 jobs (OGJ, Feb. 10, Newsletter), which the company expects will save $350 million, Imperial plans to shelve oilsands expansion plans, including phases 7 and 8 of its Cold Lake project in Alberta. Its five refineries have until yearend to match efficiency levels of North American refining industry's top 25%, or they will be closed, and Imperial is considering operating its Sarnia and Nanticoke refineries in Ontario as one unit. Imperial plans to slash marketing costs by $100 million/year by requiring its service stations to develop low cost operations similar to independent retailers.
In an unprecedented step, the Securities and Exchange Commission has ruled Exxon shareholders can vote this spring on whether to form a special panel to oversee performance of the Exxon board.
The three member panel would draw salaries and have a $12 million budget and space in the annual report.
Omnibus energy legislation is on a roll in Congress. The House energy and commerce committee in 1 day marked up and reported out its omnibus energy bill. The measure now goes to the House floor. The legislation is similar to one the Senate passed, except for some Strategic Petroleum Reserve provisions. Rep. Phil Sharp (D-Ind.), principal author of the House bill, fought to retain an SPR measure that industry and DOE oppose.
It would require refiners and oil importers to contribute 1% of their products or cash equivalent to the SPR to fill it at a 150,000 b/d rate. They would be repaid if and when the crude was sold in a drawdown.
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