OGJ NEWSLETTER
Projections of soaring Far East natural gas demand are heating competition among prospective suppliers and their projects.
If the scramble of potential suppliers is any indication, India looms as the next megamarket for natural gas.
India's first LNG facility is a step closer to reality. Maharashtra State Electricity Board has agreed to buy all the power produced for 20 years from a 2 million kw complex under development by an Enron group. The plant will be near Dabhol, about 100 miles south of Bombay, and is to he developed in two phases starting next year. First phase will he 695,000 kw, fueled by fuel oil, with construction to begin in 1994 and commercial start-up by early 1997. Second phase will add 1.3 million kw, fueled by LNG. Enron earlier signed a letter of intent to buy 2.5 million tons/year of LNG from Qatar's Ras Laffan LNG project starting in 1997-98 (OGJ, June. 28, p. 23). Enron will develop and manage the power project, Bechtel will handle design and construction, and GE will supply equipment. Financing is in progress.
Oman contends the first of two parallel pipelines from Oman to India will start up by 1998-99. The $5 billion project would deliver 2.1 bcfd of Omani gas to India. Oman Oil Co. (OOC), which earlier signed a memorandum of agreement to sell gas to India, is disputing price of the gas with New Delhi. That led Iran to approach India about a possible subsea gas line from Iran to India via the Strait of Hormuz (OGJ, Oct. 25, Newsletter).
OOC completed a feasibility study and soon will begin preliminary engineering, setting project specs, and preparing construction tenders.
Meanwhile, Pakistan and Iran have signed a memorandum of understanding on construction of a $4-4.5 billion, 1,880 km gas pipeline from Iran via Oman and Qatar that could get financing from Oman and Qatar, according to an aide to Pakistan President Benazir Bhutto. Initial plans call for Iran's Kangan field to supply 1.4 bcfd of gas to Pishin in Pakistan's Baluchistan province. Iran had wanted to extend the line to India, but Pakistan says that must await improved relations with India.
Prospects for a third LNG complex in Malaysia are looking brighter. Oxy has made its fifth gas discovery off East Malaysia.
The 1 Cili Padi flowed at a combined rate of 94.5 MMcfd of gas and 614 b/d of condensate from two zones totaling 264 ft in a carbonate reef. The well is near the Selasih discovery (OGJ, May 3, p. 40), which Oxy Pres. Ray Irani says could facilitate cluster development. The find brings estimated combined gas in place for the discoveries on Block SK-8 to more than 6 tcf. "This discovery clearly enhances the feasibility of the LNG-3 project, which is currently being evaluated by Occidental, Petronas, and Nippon Oil," Irani said. Four more wildcats are to be drilled in the 1993-94 campaign, two on reef structures on the adjacent SK-3 block (OGJ, Nov. 1, p. 38).
Israel has invited British Gas, Sofregaz, Tractebel, SRI, Arthur D. Little, and South Africa's Batemen to bid for gas fired electric power generation and gas transmission projects. Bids are to include power plant construction and gas import pipelines, reports London's Financial Times. Three gas routes into Israel are to be considered: LNG imports to a Mediterranean port or to Eilat on the Red Sea and natural gas by pipeline from Egypt.
Egypt and Israel recently agreed to a feasibility study for a $1 billion pipeline from the Nile Delta to Israel (OGJ, Nov. 29, Newsletter).
Privatization continues to sweep Latin America's petroleum sector.
In a surprise move, Brazil's government has called for an end to state petroleum company Petrobras's monopoly. Last week Finance Minister Fernando Henrique Cardoso disclosed the government is sending to Brazil's congress 81 amendments to the constitution. Among them is an amendment authorizing Petrobras to sign contracts with foreign and private domestic companies to participate in oil and gas E&P, refining, transportation, and import and export of crude and refined products, along with the ability to pay in cash or in products for services. Petrobras's monopoly, established in 1953, was reaffirmed in the October 1988 constitution, which is under a 6 month review that began in October 1993. Petrobras assets are pegged at more than $50 billion, excluding the value of oil and gas reserves.
More energy regulatory agencies face possible consolidation. Alberta plans a major overhaul of its energy department designed to reduce the regulatory and paperwork burden and provide "one window" access for companies. Energy Minister Patricia Black offers no specific details but says a planned overall 20% cut in government spending will result in major changes. One objective will be to reduce the administrative burden on companies. Industry sources say the changes likely will include a merger of Energy Resources Conservation Board and the Public Utilities Board. Other agencies such as the Alberta Petroleum Marketing Commission could also be merged into the energy department. Canadian Association of Petroleum Producers supports a merger of ERCB and PUB, citing improved efficiency.
Mexico has become a net exporter of gas to the U.S. after importing about as much as 250 MMcfd, or 10% of national consumption, from the U.S. in 1992. Pemex confirms the turnaround, citing rising prices and increased domestic production. Other factors in the reversal include Mexico's current economic downturn and a slowdown in investment in clean fuel technologies. Pemex also points out imports of U. S. gas might resume during periods of seasonally high demand-usually the first quarter.
Gas deliveries from the U.S. into Mexico during January-September fell about 14% from the prior year to about 44.2 bcf. Mexican imports of U.S. gas during the same period in 1991 totaled 7.5 bcf.
Currently Texas Eastern Gas is moving about 20 MMcfd of Mexican gas into the U.S. for Conoco. Deliveries began Dec. 13 under a month to month interruptible contract. Conoco has a contract with Pemex to purchase 20 MMcfd going to parent Dupont's Beaumont, Tex., petrochemical complex through the end of January. Conoco then will sell Pemex 5 bcf during February-September 1994.
Valero says it's not moving gas from or into Mexico. Valero had been moving about 15-30 MMcfd in August-September. Both shippers halted deliveries to Mexico in November.
New wells add luster in the Gulf of Mexico and gloom off Alaska.
Chevron has completed two more big deep natural gas wells as part of its Norphlet trend campaign. Its No. 8 well in Mobile Block 861 field off Mississippi flowed at a rate of 57 MMcfd from a zone below 21,000 ft, and its No. 2 well on Mobile Block 917 off Alabama flowed at a rate of 46 MMcfd from an interval below 22,000 ft. Chevron plans to drill two more gulf wildcats soon, with another two set for later next year.
Chevron expects to begin drilling soon to explore Destin Dome Block 97, 30 miles south of Pensacola, Fla.
Meantime, two delineation wells drilled this fall in the southern portion of the Sunfish prospect in Alaska's Cook Inlet failed to find commercial hydrocarbons, meaning the ARCO-Phillips discovery is much smaller than the previously speculated 750 million bbl.
ARCO and Phillips continue to delineate the structure's northern portion, which ARCO says is commercially viable.
Sagging oil prices are taking a toll in company earnings.
Valero says the recent plunge in feedstock and refined product prices will force it to incur a charge to fourth quarter earnings to write down the value of its refinery inventories unless prices increase significantly before yearend. Based on recent market prices and expected inventory at yearend, Valero pegs the charge at $20-25 million.
An EPA study finds no scientific evidence MTBE in gasoline poses serious public health risks. The study measured acute and chronic health risks and cancer risks, comparing workers in areas of North New Jersey where MTBE is used with workers in South New Jersey, where it isn't.
National Petroleum Council has urged the U.S. government to revise proposed rules under the 1990 Oil Pollution Act that require offshore operators to have at least $150 million of insurance in case of oil spills.
NPC reckons the new rules could drive all but the largest operators from the offshore and cost the U.S. as much as 2 million b/d of production.
The U.S. and European Community have resolved major differences on the General Agreement on Tariffs and Trade, clearing the way for 115 countries to approve the treaty.
The U. S. Congress is due to vote on GATT next spring. The agreement would slash import tariffs more than a third on thousands of products and give consuming countries more protection against products dumping.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.