OGJ NEWSLETTER

Upstream and downstream activity is stepping up in developing nations while the U.S. industry continues to crumble.

The first licensing round off Greenland will get under way later this year. It could lead to the first exploration there since the 1970s, when five dry wells were drilled. Greenland Resources Administration will offer 133 blocks off western Greenland, south of the 66th parallel.

Companies have until Jan. 15, 1993, to make bids on acreage.

A second licensing round is planned for 1995 or 1996 mainly covering areas between 66 and 68 latitudes. And 2-3 years later a third round is planned for areas between 68 and 70 and including unlicensed or relinquished acreage from the two previous rounds. Other offshore areas, including Northwest Greenland, may be included in these rounds.

Esso Production Malaysia has embarked on an aggressive E&D program that includes drilling more than 50 exploratory wells and installing 45 platforms the next 20 years. Three platforms will be installed this year, and in 1994 the company plans to spend $490 million on a platform complex in Guntong field, Esso's largest off Malaysia. Esso Malaysia also plans to spend $800 million the next 5 years on downstream projects, mostly retail outlets, marketing terminals, and refinery projects.

Nigerian National Petroleum Corp. is considering two sites for a $1 billion export refinery. Eket in Akwa Ibom and Calabar are being considered for the 100,000 b/d complex and NNPC is looking for foreign financing, OPEC News Agency reports. NNPC Group Managing Director Thomas John said NNPC's decision to venture into exporting products stems from a need to diversify sources of foreign exchange.

Algeria's Sonatrach will hold its first international licensing round at midyear. It will offer 19 oil and gas exploration blocks divided into three concession areas. England's Integrated Exploration & Development Services, promoting the acreage, says wells have been drilled in all three concession areas and seismic data are available.

One area covers 12,080 sq km in Blocks 413, 414, and 415B near the Tunisian border. Blocks 209, 210, 235, and 406B cover 13,393 sq km in the Ghadames basin, also near the Tunisian border. Another 12 blocks covering 126,961 sq km will be offered in Tindouf basin and adjacent areas.

More signs of hard times emerge on the U.S. scene.

Chevron will cut 1992 capital spending by 11% to $4.7 billion vs. a previously announced budget.

Chevron's cost cutting program is expected to save at least $600 million/year by third quarter 1993. Chevron will continue to shift focus outside the U.S. and expects to sell 60% of its remaining U.S. fields this year.

Facing a 1992 budget cut of 16% to $55 million, API is consolidating departments and encouraging early retirements. Employees 52 years old with 5 years service are being offered early retirement incentives, and after the voluntary program ends, API will decide whether to dismiss additional staff. API says the actions won't result in reduced services. API's last major cuts came in 1986. Meantime, API Chairman C.J. Silas says API will no longer use general funds in lobbying for industry access to federal lands. Last year API spent heavily on a failed campaign to persuade Congress to lease the ANWR Coastal Plain. Interested companies will be asked to subscribe to and share costs of such campaigns in the future. Also, National Ocean Industries Association and API have scheduled talks on how the two groups can avoid duplication of their lobbying and other activities.

Enron Corp. will sell about $250 million of nonstrategic assets.

Mitchell Energy & Development Corp. started a voluntary early retirement program as a first step in reorganization, a plan that includes sale of nonstrategic assets and cost-cutting.

Alyeska Pipeline Service Co. may cut 400 of its 1,725 jobs within 3 years because of declining North Slope oil production. The company expects attrition, retirement, and early retirement to take care of most of the cuts.

Exploration Co. of Louisiana will take a $15 million writedown of its full cost pool as of Dec. 31, 1991, and reduce its investment account by $7 million. Excol uses full cost accounting, which requires net hook value of proved properties not exceed net present value discounted at 10% of estimated future net revenues. Although net present value of the company's reserves currently exceeds costs, the company says the decline in prices since yearend 1991 may cause a problem in the first quarter.

The Baker Hughes rig tally climbed 19 last week to 658, ending a 3 week fall. Oklahoma gained 12 rigs, Texas nine, and Louisiana seven.

Government partners in a $1.4 billion, 44,000 b/d heavy oil up-grader project at Lloydminster, Sask., have agreed to cover cost overruns estimated at $170-190 million (Canadian). Husky Oil, which is building the plant on the Alberta-Saskatchewan border, said the money is needed to complete construction. The company blamed unforeseen field and engineering costs. The project is scheduled for completion in November.

Ottawa has a 31.67% interest in the upgrader, Alberta 24.17%, Saskatchewan 17.5%, and project manager and operator Husky 26.67%. The government partners, which agreed to cover a $170 million overrun last October, expressed concern but said they are committed to completing the project.

Husky notes the original cost estimates were prepared 5-6 years ago and there were substantial delays in negotiating a development agreement.

The European Community plans new rules on oil and gas licensing that will prevent member states from discriminating in favor of domestically owned companies. A draft directive has been approved that would give foreign companies equal treatment with local companies. It would also outlaw requirements placing orders with domestic suppliers and directing companies into bidding groups. Governments would ]De required to publish all criteria under which licenses are issued but still be free to impose restrictions on grounds of national security or control depletion of hydrocarbon resources. The proposals are likely to encounter stiff opposition from Danish, Dutch, and Italian governments but be vigorously supported by Britain.

Uzbekistan's state oil company Uzbekneft has discovered oil with a wild well near Namangan in Fergana Valley after 4 years of exploration, Nezavisimaya Gazeta reports. Productive capacity has not been determined, but the blowout is flowing oil into the Syr-Darya River, and Azeri oil workers have been called in to control it.

Gaz de France, under its Spbyergaz joint venture with Russia's Lengaz, has signed a cooperation agreement with St. Petersburg to revamp the gas pipeline network there, boost exploration, and study and carry out all projects related to the gas industry. The agreement is similar to that signed with Mosgaz and Mostieploenergo in Moscow. And through its Oukrfragaz joint venture, GDF is revamping and expanding Ukraine's natural gas grid.

Taiwan's Chinese Petroleum Corp. is pressing investment in foreign downstream interests. CPC is studying feasibility of forming a partnership with Saudi interests to build a refinery in Saudi Arabia.

CPC Pres. Kuan Yung-shih says the venture was proposed by Saudi officials during his recent visit to the kingdom. The refinery would expand Saudi integration while assuring Taiwan of priority access to Saudi oil.

Meantime, CPC and Pacific Resources Corp., Honolulu, plan to build a 150,000 b/d refinery in Malaysia for $1.26 billion.

CPC and PRC each will hold a 45% interest of controlling stock in the venture with the remaining 10% to be held by the Malaysian government.

And Taiwan's first privately owned refineries could be operating by 1996 under a new privatization push, says Vice Economics Minister Chiang Pin-kung. He notes any private refineries will he required to have capacity of at least 200,000 b/d. Taiwan's Ministry of Economic Affairs has commissioned the College of Management at National Taiwan University to conduct a study of how best to privatize the country's petroleum industry. The study will indicate feasibility of as many as four private firms competing for the nation's petroleum markets. In addition to a privatized CPC, Formosa Plastics Group is expected to be a major player in Taiwan's oil sector through its new Formosa Petrochemical Corp. unit. The completed study is to serve as the basis for a new oil business law to be drafted by September.

The Japanese trend toward mergers is gaining momentum.

Cosmo Oil is bidding to take over Tokyo based Abu Dhabi Oil (ADO), which has an oil concession in the U.A.E., Nikkei Weekly reports. Abu Dhabi shareholders were to vote on the merger proposal Mar. 31. ADO produces about 20,000 b/d of crude from a field off Abu Dhabi and is Japan's second largest oil producer after Arabian Oil, partly owned by Nippon Mining. The move follows the Nippon-Kyodo Oil merger (OGJ, Mar. 23, p. 32), a trend sparked by MITI relaxing its grip on the domestic market.