Merger mania shows no sign of slowing with last week's announcement of the planned coupling of Phillips's downstream operations with Ultramar Diamond Shamrock (UDS), itself a combine.
Phillips will offer its North American refining, marketing, and transportation (RM&T) assets to the joint venture, to be called Diamond 66. UDS will contribute its entire operations. The firms say the JV will be North America's largest independent RM&T company. UDS will own 55% and Phillips 45%. Phillips also will receive or retain a one-time cash, or cash equivalent, payment of $500 million at closing and a $300 million cash distribution 1 year later.
The partners expect to gain more than $250 million worth of efficiencies in the second year of operation and save at least $50 million/year.
Taking a contrarian strategy to the mergers, acquisitions, and cost-cutting that have become commonplace in recent months, Calgary-based Canadian 88 is doubling its drilling capital budget for October 1998-December 1999.
The firm boosted planned spending on Western Canada drilling to $170 million (Canadian). It will concentrate its efforts in the Alberta foothills, taking advantage of Western Canada's ideal drilling locale and low service expenses.
The move comes just as former Gulf Canada Chairman J.P. Bryan was named chairman of the firm.
Angola's deep water has yielded another apparent big oil discovery.
Chevron announced a fourth find on Block 14 (see map, OGJ, Dec. 1, 1997, p. 42). On test, 14-10X, drilled in 1,000 ft of water about 50 miles offshore, flowed at more than 10,000 b/d of 37.5? gravity oil.
Chevron has named the find Belize. Mark Puckett, managing director of Chevron's southern Africa business unit, said, "Preliminary results from Well 14-10X indicate the possibility of a significant oil accumulation in close proximity to the Kuito and Benguela fields." Its other predecessor is the Landana find. Chevron operates Block 14 on behalf of partners Sonangol, Agip, Total, and Petrogal.
Shell has shut in more than 10 flow stations in Nigeria because of interference by protesting youths. According to local reports, the protesters are expressing opposition to the government's refusal to return a regional government headquarters to its original site before December elections.
Company official Albert Arambi said Shell is losing about 269,000 b/d of production as a result-108,000 b/d in its western Nigeria division and 161,000 b/d in the east. Contract employees were evacuated from the area.
Meanwhile, Italian firm ENI said locals had shut off the valves on two pipelines that transport oil and condensate to the Brass terminal, shutting in 120,000 b/d of production operated by ENI.
U.K. oil production averaged 2.6 million b/d in first half 1998, a 5% shortfall on anticipated volumes but higher than the 2.5 million b/d recorded in first half 1997.
Wood Mackenzie said about 60% of the shortfall was due to existing and new fields producing less than predicted; the rest was due to mechanical problems in some fields and slower than expected development of two fields.
The analyst expects U.K. oil output to average 2.75 million b/d in the second half. This would bring average U.K. production for the year to 2.67 million b/d, surpassing the 1985 record output of 2.62 million b/d.
Brazil is laying the groundwork for its first oil and gas licensing round (OGJ, Sept. 14, 1998, p. 33).
The National Petroleum Agency (ANP) has signed Gaffney, Cline & Associates (GCA) to provide support and advisory services. GCA will provide advice on which areas should be offered, preparation of data, management of industry participation, and administration of the bidding and awards process.
Bill Cline, CEO of GCA's Americas division, said, "We expect strong interest, not only from the international oil industry but also fromellipseBrazilian groups that hope to take advantage of the upstream opening and develop further indigenous participation in the industry."
Prospects for a revival of Alaska North Slope activity continue to brighten (see related story, p. 39). Interior Sec. Bruce Babbitt has approved the Bureau of Land Management's proposal to lease most of the northeastern quadrant of the National Petroleum Reserve-Alaska (OGJ, Aug. 24, 1998, p. 26).
Although the approval fell short of Alaska's preferred plan to open the entire 4.6 million-acre study area to leasing, Gov. Tony Knowles, long a proponent of NPR-A leasing, said, "I'm confident that we can do it right, that the industry can develop this resource without harming the environment."
A few days earlier, environmental groups filed suit in Washington, D.C., federal court to halt the leasing. Sierra Club, Greenpeace, Alaska Wilderness League, and five other groups alleged Interior's environmental impact statement was faulty because it relied on old data.
A broad coalition of U.S. congressmen plans to push legislation next year to earmark up to half of the federal revenues from Outer Continental Shelf oil and gas production for conservation and wildlife programs in 34 coastal states, including the Great Lakes states.
The House and Senate bills differ; they will be referred to committees chaired by two of the sponsors, Sen. Frank Murkowski and Rep. Don Young, both Alaska Republicans. They pledged to give the legislation top priority in 1999.
The major problem facing the sponsors will be to find offsetting revenues of about $2.3 billion/year or to get a waiver of budget laws.
U.S. EPA has ordered 22 eastern states and the District of Columbia to reduce smog-causing NOx emissions by 1.1 million tons/year by 2007, or 28% overall. It said the $1.7 billion/year program will allow most eastern urban areas to meet the new public health smog standard. The plan was partly based on recommendations by the 37-state Ozone Transport Assessment Group.
EPA said the program gives states maximum flexibility to decide how to achieve reductions. It will work with states to develop an emissions trading system for utilities, since power plants can cut nitrogen oxides emissions for as little as $1,500/ton vs. up to $10,000/ton for other methods.
Speculation continues about possible western investment in Saudi Arabia's oil industry, following a recent meeting between Crown Prince Abdullah Ibn Abdulaziz and seven U.S. oil majors (OGJ, Oct. 5, 1998, Newsletter).
Middle East Economic Survey said, "It will be interesting to see whether the kingdom will now go on to extend its invitation for the submission of investment proposals to European oil majors as well."
While the prince did not rule out the possibility of investment by U.S. firms in Saudi oil E&P, he is apparently most keen to hear of projects to boost gas reserves and produce gas to feed new Saudi industrial projects.
Kuwait Petroleum Corp. (KPC) is considering building a fourth oil refinery as part of a restructuring plan for the country's petroleum sector, according to local press reports. The plant would be designed to process the country's growing supply of heavier crude oil.
KPC's three refineries have nearly 900,000 b/d of distillation capacity.
Kuwait is reportedly looking to steady its revenue flows by increasing sales of higher-value refined products.
The United Arab Emirates is reportedly preparing to privatize its petrochemicals industry. Citizens will be offered 55% of the shares in a newly created company, Emirates Basic Industries Co., said to be worth $1.1 billion.
The firm is equally owned by emirates Dubai and Abu Dhabi. According to one official, it will specialize in petrochemicals and "primary industries," that together account for 75% of U.A.E.'s gross domestic product.
The move is aimed at boosting GDP growth and employment.
Malaysia continues to be the exception to the rule regarding the Asian petrochemical downturn (see related story, p. 24).
Petronas subsidiary MTBE Malaysia plans to increase propylene production by 300,000 metric tons/year at its new Kuantan plant. The firm licensed UOP's Oleflex process to dehydrogenate propane feed. This unit, the company's second Oleflex license, is planned to start production July 2000.
Phillips has downplayed reports that it was to invest $500 million to build a gas plant in Kazakhstan.
A Phillips official said the firm had agreed to do a feasibility study on marketing natural gas and LPG in the Central Asian republic as part of an oil deal in which Phillips and Japan's Inpex agreed to purchase a one-seventh share in certain Kazakh Caspian Sea blocks (OGJ, Sept. 21, 1998, Newsletter).
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