OGJ NEWSLETTER

Natural gas still has a bright future in the U.S., despite current poor market conditions.

That's one of the themes underlying the forecast of IPAA's supply and demand committee. IPAA sees U.S. gas production slipping 0.4% in 1992 to 17.8 tcf but growing by 2%/year to 20.3 tcf by 2000. U.S. gas consumption is expected to rise by 0.8% in 1992 to 19.6 tcf as imports jump 10% to 1.8 tcf. U.S. gas consumption is to climb to 21 tcf by 2000, reflecting rapid electric power sector demand growth and strong industrial demand and outpacing growth rate of all other energy sources. IPAA also sees:

U.S. crude output falling by 2.9% to less than 7.2 million b/d in 1992, lowest level in 30 years, and to 5.8 million b/d in 2000, lowest since 1950.
U.S. oil demand rising 1.4% in 1992 to 16.9 million b/d and 1%/year to 2000 and U.S. oil imports reaching 7.8 million b/d in 1992 and 10.3 million b/d in 2000 at a growth rate of 5%/year in 1992-95 and 2.8%/year in 1995-2000.
U.S. energy demand climbing by 1.5% in 1992 and continuing to grow in the 1990s but at half the rate of economic growth, which will post a sluggish 1.5% gain in real terms in 1992. U.S. economic growth will increase by 2.5% in 1992-2000 while the inflation rate falls to 2.7% in 1992 but accelerates thereafter at 4%/year to 2000.

The grim specter of retrenchment continues to walk the corridors of U.S. petroleum companies.

Mobil will close E&P offices in Oklahoma City and Denver and consolidate its exploration staff in Dallas. The Oklahoma City office employs about 125 and the Denver office 150. Overall, Mobil's U.S. E&P unit's workforce will be reduced by about 900 under its reorganization plan, but some will be relocated to other Mobil units.

Marathon will begin restructuring by offering a voluntary enhanced retirement program targeting about 1,100 employees.

Employees age 47 and older in certain Marathon units are included, and the retirement package adds 3 years to an employee's age and service. More than 50% of Marathon's employees over age 50 took part in a voluntary retirement program in 1986.

Kerr-McGee laid off 160 of its 6,000 employees worldwide last week, 43 at the Oklahoma City headquarters where 1,800 are employed.

Chevron will close its northwest marketing region in Seattle this summer and merge it with its west central region in San Ramon, Calif. About 95 employees will be affected.

Chevron is offering U.S. employees an enhanced retirement plan, but some transfers and terminations in the Seattle office will he necessary. Last year Chevron's U.S. refining and marketing arm was hit with environmental compliance expenses exceeding $1 million/day. Chevron says it will spend more than $2 billion the next 5 years to meet new regulations.

As expected, President Bush vetoed a sweeping economic recovery bill that contained a provision granting independent producers a margin of relief from the alternative minimum tax (OGJ, Mar. 9, p. 32).

Bush objected to the $77.5 billion bill because it "would increase taxes and harm the economy." Congress is not likely to override the veto.

A group of oil and gas companies plans to ask the California legislature to put a measure on the ballot requiring another cost benefit analysis of that state's strict new air emissions requirements before proceeding with the rules, to take effect in 1996. Texaco told the New York Times the referendum would be worded broadly so all environmental rules would be covered. Texaco said the goal is to cope with California's flagging economy, which is being hurt by the high cost of environmental compliance.

Negotiators have told the Bush administration not to expect approval of the U.S.-Mexico free trade agreement before November elections. The pact, which includes Canada, may be negotiated by then, but there is not enough time to convert it to legislative language and get congressional approval. U.S. negotiators have been unable to persuade Mexico to work around its constitutional ban against foreign ownership of oil and gas reserves.

Mexico has rebuffed OPEC's request that major non-OPEC producers trim exports to help stabilize oil markets. Deputy Minister of Energy Jose Luis Aburto says OPEC's own accord to trim output 1 million b/d has yet to show tangible results, so Mexico will take a wait and see stance.

Alirio Parra, Venezuela's new minister of energy and mines, last week called on non-OPEC producers to trim crude production and avoid excessive stockbuilding until demand picks up again later this year. He contends OPEC members are producing at about 90% of current quotas and non-OPEC producers could help stem a possible oil price slide by performing workovers and other rehabilitation programs that would crimp production temporarily but jump productive capacity later to meet higher demand.

There may still be snags in the possible resumption of oil sales from Iraq. U.N. and Iraqi officials were to resume talks last week in Vienna, but Iraq News Agency says Iraq rejects any U.N. plan to resume oil sales that violates its sovereignty.

Disarray still is the order of the day in the petroleum sector of the former U.S.S.R.

Russia has postponed a big jump in crude prices to June from the previously scheduled Apr. 15 (OGJ, Mar. 9, p. 40), according to unconfirmed press reports from Moscow. Russia wants to hike crude prices to 2,000-2,500 rubles/ton from the current 350 rubles/ton, which would still leave Russian prices at about one fourth of world market levels.

Russia held off the price jump in response to lobbying from other former Soviet republics worried about the effect on their own troubled economies, reports the Moscow bureau of London's Financial Times. Russian Deputy Prime Minister Yegor Gaidar told FT it's still essential to raise oil and other energy prices to avoid economic collapse, noting 40% of Russian oil is now sold through oil exchanges at free market prices.

But Russian Parliament Chairman Ruslan Khasbulatov says it's sufficient to sell 40% of oil at free market prices through exchanges, adding that any presidential decree to raise prices would be vetoed by Parliament.

And the Sakhalin saga continues. The Russian Parliament has deferred final action on the government's decision to ask Marathon-McDermott-Mitsui to conduct a feasibility study for Sakhalin Island development, Kyodo News Service reports (see story, p. 34).

China may open more acreage to foreign investors.

A plan to explore for oil in less than 5 m of water is under consideration, but no time frame has been decided, China National Petroleum Corp. Chief Engineer Li Yugeng told a CNPC-Society of Petroleum Engineers joint exhibition and seminar in Beijing. Li said some work also will he done with foreign companies in the Tarim basin.

Natural gas share of Taiwan's electric power market is expected to jump to 20.1% by 2002 from the current 4.4%, says Minister of Economic Affairs Vincent Siew in a report to Taiwan's legislature.

While natural gas costs are much higher than other competing fuels, he says, that's offset by savings from pollution control costs and lower costs of building gas fired power plants.

Clean air programs are targeting refined products worldwide.

Japan's Environment Agency wants domestic refiners to cut sulfur content in light oil, planning to tighten rules to follow guidelines to be adopted in the U.S. and European Community. Refiners cite capital constraints in voicing concerns over the rule, Asahi News Service reports.

The voluntary level for light oil sulfur content is 0.4% vs. 0.5% set by the Japan Industrial Standard. Japanese refiners agreed to start supplying light oil with 0.2% sulfur in October hut say further near term cuts are not likely. "Technologically speaking, it is possible to lower the sulfur concentration further. But it will take 5 years of preparation and cost $2.2 billion for our industry as a whole," says Petroleum Association of Japan.

Thailand will phase out leaded fuel the next 4 years and consult with refiners on its plan to toughen fuel specs.

Adding oxygenates is part of the Thai program, aromatics will be cut to 35% from 50% in 8 years, benzene trimmed to 3% from 5% in 3 years, and diesel sulfur halved to 0.25% the next 4 years and to 0.05% by 2000.

India's plan calls for reducing lead content to 0.15 g/l. by October 1993 from the current ceiling of 0.56 g/l. Six of India's 11 refineries produce gasoline with lead content below 0.2 g/l., five below 0.46 g/l.