OGJ NEWSLETTER
There are conflicting views about where oil markets will be in 1993, but for now the market seems to be making needed adjustments.
Purvin & Gertz points to growing fourth quarter demand in the U.S. and cuts in crude runs underpinning rising oil prices and improved refining margins in early first quarter. P&G pegs spot WTI at $20.75 in January, up more than $1 from December levels, with some softening likely ahead of the next OPEC meeting in February.
Centre for Global Energy Studies, London, sees the call on OPEC oil up 700,000 b/d in the first quarter, assuming a normal winter and continued economic recovery in the U.S. CGES notes forecasts of first quarter demand vary considerably but expects the call on OPEC to be 26.1 million b/d with expected stock draw of about 1.4 million b/d, allowing OPEC to produce 24.7 million b/d, exceeding its target of 24.58 million b/d.
But Salomon Bros. says oil prices could weaken further the next 46 weeks, possibly hitting $18/bbl for WTI due to chronic OPEC overproduction. The analyst notes that price corresponds to about $15/bbl for OPEC's basket of crudes, a level that has historically caught the cartel's attention.
Salomon Bros. believes it's critical for OPEC to effect a credible, meaningful output cut to avoid a price freefall.
Iran has proposed a 2% cut in OPEC production until February, paring OPEC's ceiling to 24.09 million b/d, Middle East Economic Survey reports. Saudi Arabia would have to cut output by 168,000 b/d and Iran 70,000 b/d. MEES notes, "It would be a very tough job to orchestrate a firm deal involving all the big players."
A group led by Australia's BHP has won the hotly contested right to develop Dai Hung (Big Bear) oil field in the Con Son basin off southern Viet Nam. BHP and Malaysia's Petronas Dec. 24 signed a heads of agreement with Petrovietnam and Vietsovpetro for a production sharing contract that will include an undisclosed group to be chosen by Hanoi.
A three phase, $1.5 billion development would lead to production of 25,000 b/d within 12 months of PSC signature-expected in March-and a peak of 250,000 b/d by 2000.
Chevron and Kazakhstan expect their joint venture to develop Tengiz and Korolev oil fields on the northeastern Caspian Sea coast to begin full scale operation Apr. 1, 1993. Seven months of work by joint venture groups has yielded agreement on all significant issues, Chevron says.
The joint venture sees potential peak production of more than 700,000 b/d by 2010 vs. current Tengiz production of about 65,000 b/d.
Russia is considering a jump in crude oil sales to Turkey.
Turkish officials have offered to hike imports of Russian oil from less than 10,000 b/d to 60,000-80,000 b/d, with Ankara paying partly in hard currency but mostly in goods and services. Overall Turkish oil imports are about 400,000 b/d. Biggest problem is that Russia's falling oil production greatly limits how much crude it can export. Turkey wants to help rebuild and expand Russia's Black Sea oil ports and modernize crude pipelines serving these terminals. Such assistance is badly needed by Russia, which lost jurisdiction over major Black Sea oil ports that are in the now independent Ukraine.
Russia's Ministry of Foreign Economic Relations and its State Statistical Committee differ sharply on how much oil the nation exported the first 9 months of 1992.
The committee reports oil exports fell 12% vs. the same 1991 period, while the ministry claims foreign oil sales increased almost 10%.
The ministry contends the committee did not consider a significant part of Russia's foreign trade, including petroleum, that was not handled directly by government agencies but by private firms.
Izvestia concedes the committee's data gathering "is of low quality" but notes the ministry's more optimistic report would be more credible if it had not been timed to coincide with the recent meeting of Russia's parliament, at which the Yeltsin administration tried to portray the Russian economic crisis as less severe than claimed by parliamentary critics.
MMS estimates Gulf of Mexico oil and gas production at 95% of pre-Hurricane Andrew levels. MMS says 190-200 MMcfd of natural gas production remains shut in as a direct result of the hurricane. Average output pre-Andrew was 12.5-13 bcfd, but because of increased production due to winter demand and stronger prices, output stands at about 12.5 bcfd.
MMS says 50,000-90,000 b/d of oil production remains shut in vs. prestorm production of about 750,000 b/d.
Additional platform and satellite damage has been discovered as a result of inspections required under a mid-September MMS order. The tally of damaged platforms and satellites increased to 296 from 254, including structures leaning, toppled, condemned, or otherwise damaged. There are nearly 3,900 oil and gas platforms in the gulf. MMS says a small part of gulf production affected by the storm has been eliminated, citing instances of marginal production and cases in which replacement cost is prohibitive.
Occidental will book worldwide oil reserve additions of about 100 million bbl at yearend 1992, replacing 147% of its total 1992 worldwide oil production of about 68 million bbl, excluding reserves sales and acquisitions. Oil reserve additions outside the U.S. will replace 1992 non-U.S. production of 46 million bbl by 194%. The additions mainly result from discoveries in Philippines and Yemen, Russian EOR, and successful reservoir management in Oman, Pakistan, and Peru. In the U.S. oil reserves added from drilling and EOR will replace 46% of Oxy's 22 million bbl of 1992 production, while total U.S. reserves will remain about flat with 1991.
By 1994 Oxy expects to increase its consolidated net interest oil production to 250,000 b/d from about 188,000 b/d.
Cancellation of a planned dam project in northern Manitoba may crimp TransCanada's gas pipeline expansion plans and Alberta-Saskatchewan gas sales to Ontario. Ontario Hydro won't proceed with a $5.8 billion (Canadian) hydro project on the Nelson River in northern Manitoba, undercutting plans by producers for gas sales to related Ontario cogeneration projects.
TransCanada has put on hold two $180 million projects in northern Ontario and may have to trim its planned 1993 pipeline expansion by $150 million if some gas fired thermal plants don't go ahead. Ontario Hydro says the utility, Canada's largest, is reviewing all supply needs because of its $36 billion debt.
North Sea exploration still elicits some excitement.
The 14th round of U.K. offshore licensing attracted the highest number of block applications in 20 years-96 from groups involving 62 companies for 122 blocks offered in the first two stages of the round. Applications for the third, frontier phase of the 14th round are due Mar. 9. Forty-nine frontier blocks are available in the lightly explored area southwest of Cornwall (OGJ, Dec. 14, 1992, p. 29). "I am particularly encouraged by the sustained level of interest shown in exploring the southern basin of the North Sea, which historically has been associated with major gas finds," says Energy Minister Tim Eggar. He notes there was considerable interest in such relatively new areas as Rona Ridge, west of the Shetlands, Cardigan Bay, and Solway Firth.
While not as strong as the previous Dutch North Sea offering, Netherlands Ministry of Economic Affairs reports 18 groups won acreage in the eighth offshore round on 36 full or partial blocks, after 53 applications were made. NAM, the Shell/Esso combine, took the largest share with operatorship on 11 licenses. Elf won eight licenses and Mobil six. The eighth Dutch round was low key compared with the seventh, which featured much highly prospective virgin acreage, says County NatWest WoodMac. Since then, the analyst says, many companies have reviewed their leaseholds. Those without a "critical mass" on the Dutch continental shelf moved out, including BP, Statoil, and Norsk Hydro, leaving the round to be dominated by NAM, Elf, and Mobil but also providing a strong showing by smaller independents intent on building a presence. While the seventh round resulted in 59 commitment wells, the eighth resulted in 46. This is very bullish, says County NatWest, considering drilling density of 5.6 wells/1,000 sq km of acreage vs. an eighth round commitment of 6.3 wells/1,000 sq km.
Norway is inviting oil companies to compete for licenses in its 14th round, which covers 50 blocks extending from the Ekofisk area of the North Sea to the Barents Sea. Application deadline is Mar. 1, and awards will be made next fall. It will be the first Norwegian exploration round under new terms for state participation. State owned Statoil must decide its participation in acreage before the exploration stage rather than when development approval is given (OGJ, Dec. 28, 1992, p. 24).