OGJ NEWSLETTER
Market jitters over the growing prospect of Iraqi oil returning to a soft market have sent oil prices to their lowest level in 3 years.
Nymex light sweet crude for August delivery closed at $17.49/bbl July 14, the lowest since July 11, 1990, shortly before Iraq invaded Kuwait. U.N. diplomatic sources last week hinted talks between the U.N. and Iraq were near agreement over limited sale of Iraqi crude. The drop of 64cts on the day-and almost $1.50 on the month to date-came after U.N. officials insisted there is no link between the proposed limited sale of $1.6 billion of crude for humanitarian aid and mounting tensions between the Security Council and Iraq over monitoring of weapons destruction (OGJ, July 12, Newsletter).
The first tankering of Point Arguello field crude directly from the Santa Barbara Channel to Los Angeles is expected by the end of July.
Chevron and its 12 Point Arguello partners, after 6 months of detailed dickering, accepted an interim tanker permit from the California Coastal Commission. That will allow Chevron to hike field productive capacity to 85,000 b/d. Some Arguello crude previously had been tankered from the San Francisco Bay area after transporting it via pipeline from Santa Barbara County. Tankering is limited to 50,000 b/d via double hull vessels and allowed only for 3 years, forcing partners to later choose among a variety of pipeline proposals.
Responding to whistleblower complaints and other investigations, BLM will toughen oversight of the Trans-Alaska Pipeline System (TAPS).
BLM will double the number of inspectors for TAPS and take other actions to ensure the line's safe operation. BLM Director Jim Baca said, "There has been a long history of problems at the pipeline and numerous investigations that have failed to produce significant reform. I intend to get to the bottom of these problems and resolve them."
Alyeska is required to pay costs of added oversight. On a recent visit to the Valdez terminal, House energy and commerce committee investigators found about 1,000 electrical code violations Alyeska said will cost about $10 million to correct.
Natural Gas Supply Association says the U.S. gas deliverability bubble continues to shrink. Its survey of gas deliverability found producers had a modest inventory surplus in 1992 that was substantially smaller than in 1991. The producers, representing 63% of U.S. gas production, said they used 88.2% of total capacity to deliver gas-their maximum feasible capacity utilization was about 92%-vs. 85.4% used in 1991.
U.S. refiners are running full throttle, API reports. Utilization rates jumped to 96.3% for the week ended July 2, up from 92.7% the previous week. That situation has resulted in a glut of gasoline supplies that is squeezing margins. Valero reports a 15% drop in net income for first half 1993 vs. a year ago because of persistent weak refining margins.
Two key Democrats appeared to agree on energy taxes last week as U.S. House and Senate conferees began work to draft a compromise deficit reduction bill. Rep. Dan Rostenkowski (D-Ill.) and Sen. Daniel Patrick Moynihan (D-N.Y.) favor upping the 4.3cts/gal gasoline tax increase in the Senate bill a few more cents and adding an excise tax on consumers' use of natural gas and electricity. The House bill BTU tax would be dropped.
Tax reforms introduced in the U.K. government's March budget came under fire again as the House of Commons held a final debate on the finance bill. U.K. operators claimed petroleum revenue tax (PRT) reforms' removal of third party tariff tax relief on pipelines would force owners to raise tariffs to maintain income (OGJ, Mar. 29, p. 33). Treasury Sec. Stephen Dorrell agreed July 13 to review an anomaly that means use of existing pipelines with spare capacity could prove more expensive than building new pipelines, reports London's Financial Times. Wood Mackenzie says proposed tax reforms mean participants in existing pipelines will have to bear the extra tax on new third party volumes of oil or gas or raise tariffs for new fields.
Dorrell said the latest review would be narrow and not alter the bulk of reforms, passed by Parliament after debate. The bill will next be debated in the House of Lords, with the aim of passing legislation before government's recess in August. Last month Treasury reacted to complaints about loss of exploration and appraisal drilling allowances by granting concessions until yearend 1994 (OGJ, June 29, Newsletter).
Shell Expro is to cut its exploration division work force of 200 by 20-30% by the end of 1994. The move reflects efforts by the Shell-Esso upstream joint venture to cut North Sea operating costs. Shell says cuts aren't due to proposed PRT changes (OGJ, Mar. 22, p. 31).
"In 1992 it was decided to cut drilling and reduce it further in 1993 and 1994," Shell said. "A study of the effects of PRT reinforced the need to cut exploration costs, without further affecting the drilling program."
France's gasoline tax hike of 33 centimes/l. July 12 jumps to 79.8% the ratio of various taxes embedded in the price of premium gasoline, a record high for Europe. That compares with 73.3% in Italy, 73% Netherlands, and 72.6% Germany. The same 33 centime tax will hit diesel Aug. 21, although diesel will retain its tax advantage, albeit with a lower percentage. Taxes on other French refined products jumped by 8.57% July 12.
Total says its preliminary negotiations with Saudi Arabia involving a Saudi stake in its French downstream operations revolve around a possible partnership in a deep conversion unit (OGJ, July 12, Newsletter).
Saudi presence in the venture would ensure a secure supply of sweet crude and bolster the economics of what is a high risk project in France's current refining slump.
Sarawak Shell has postponed official opening of the world's first commercial natural gas to middle distillates plant at Bintulu, Malaysia, following a fire. The 500,000 metric ton/year plant began production of diesel fuel, kerosine, and naphtha in May, to allow 6 months operation using new technology before an official opening Sept. 1.
A fire broke out on one production unit June 9 and lasted 20 min. Nobody was injured, and the plant was made safe within an hour. The plant was closed down, with middle distillate production expected to restart in mid-August. Lost time was estimated at 4 months. Production of detergent feedstocks and waxes will start once middle distillate production is established.
Shell said quality of the first produced middle distillates is well beyond expectation, with gas oil and kerosine odorless and colorless.
Yemen continues its march toward the ranks of major oil exporters. Canadian Oxy will start output of 40,000 b/d from its Masila block in Yemen this month, reports Middle East Economic Survey. With Masila flow expected to rise to 120,000 b/d by September, Yemen output will reach 300,000 b/d.
The Caspian Sea is on track to becoming a world class petroleum province.
Western oil companies contend proposals to develop Azerbaijan oil fields in the Caspian Sea remain on track despite recent upheaval there.
Company officials met recently in New York with advisers to the Azeri government to discuss development of Azeri, Chirag, and Guneshli fields. Talks will continue in Houston this week. BP remains optimistic about outcome of negotiations with State Oil Co. of Azerbaijan Republic (Socar). BP says an accord will take time but has no idea what form it will take.
London's Financial Times reports that western oil companies hoping for Caspian Sea development contracts are increasingly confident the new government will maintain the stance of the old regime, with contract agreements expected in the fall. Western company officials in Baku were also said to believe that Sabit Bagirov, who resigned as head of Socar recently, will retain his post (OGJ, July 5, Newsletter).
Turkmenistan's model contract and data packages covering South Caspian basin acreage to be leased in a competitive bidding round ending Nov. 12 are available from Wavetech Geophysical Inc., Denver.
Bids received by deadline at Turkmenistan's consulate in Moscow will be opened Nov. 14 in Ashgabat, Turkmenistan.
Included are Gubkin-Livanov Block I, an undeveloped offshore tract in the Caspian Sea, and two onshore producing areas, Barsa-Gelmes Block V and Burun Block VI (OGJ, Mar. 29, p. 28). Proved undeveloped reserves on Block I are estimated at 358 million bbl of oil and condensate and 3.7 tcf of gas. Remaining recoverable reserves on Block V are estimated at 362 million bbl of oil and condensate and 1.6 tcf of gas and on Block VI at 136 million bbl of oil and condensate and 450 bcf of gas.
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