OGJ NEWSLETTER

Companies fighting the massive Kuwaiti oil field fires soon may get more relief from delays caused by bottlenecks there. At all levels, contractors have run into bureaucratic delays stemming mainly from lack of effective communication and cooperation between the oil ministry and Kuwait Petroleum Co. Industry officials express hope some of these barriers will disappear with appointment of new Kuwaiti Oil Minister Hammud Adbullah al-Ruqbah, formerly electricity and water minister.

May 13, 1991

7 min read

Companies fighting the massive Kuwaiti oil field fires soon may get more relief from delays caused by bottlenecks there.

At all levels, contractors have run into bureaucratic delays stemming mainly from lack of effective communication and cooperation between the oil ministry and Kuwait Petroleum Co.

Industry officials express hope some of these barriers will disappear with appointment of new Kuwaiti Oil Minister Hammud Adbullah al-Ruqbah, formerly electricity and water minister.

Although he has no oil industry experience, western companies hope al-Ruqbah's roles as Kuwait University engineering professor and head of Kuwait Institute for Scientific Research will lead to better appreciation of problems faced in firefighting and rehabilitation of oil industry facilities.

Meantime, Kuwaiti officials echo Wild Well Control's Joe Bowden's confidence Kuwait's burning wells can be doused in a shorter time than expected earlier (see story, p. 34).

Abdul Hadi al-Awadi, Kuwaiti Ministry undersecretary for planning on Kuwait's recovery, thinks the remaining 500 or so wells can be killed in 5-6 months.

Rep. John Conyers (D-Mich.) has asked GAO to investigate whether U.S. troops are being subjected to health risks from Kuwaiti oil well fires. Conyers doubts a recent EPA study that found no toxic chemicals in significant quantities in the air in Kuwait and thus no health risk from exposure to the smoke for people with normal respiratory capacity.

Papua New Guinea is mulling forward sales of its share of crude from the Kutubu development (OGJ, Apr. 8, p. 34).

PNG Prime Minister Namaliu says talks are under way with Japanese officials willing to give low interest loans or advance cash against future oil sales. That would net the government about 600 million kina, or $806 million (Australian), in 1992-93 instead of middecade under a joint venture deal.

State owned Petroleum Resources Kutubu Pty. Ltd. has taken a 22.5% stake in the project for 200 million kina. Under the deal, Chevron Niugini group will pay all up front development costs. PNG government was to repay its share of these costs by waiving its right to production until other partners had been reimbursed for the government's interest. Total project cost is pegged at almost 1 billion kina. First oil is due in mid-1992.

Norsk Hydro has become the third European concern to withdraw from management contracts in Qatar this year (OGJ, Mar. 25, Newsletter). Hydro won't renew its contract to manage and market output from Qatar Fertilizer Co.'s two plants that produce 710,000 tons/year of ammonia and 760,000 tons/year of urea. Hydro also has 257, equity interest in the operations. Qatar General Petroleum Corp. plans a third plant fed by North field gas.

Norwegian crude and NGL production will overtake U.K. offshore output in 1991, the first time since North Sea production began. Norwegian production this year is expected to average 1.94 million b/d, up 13% from 1990. U.K. production, hit by bigger than average summer maintenance shutdowns, is uncertain but will be below the Norwegian level.

County Natwest Woodmac says a Norwegian record of 1.96 million b/d was set in February, but production will fall by about 400,000 b/d in August because of maintenance shutdowns in Ekofisk and Statfjord fields. Output will recover dramatically in the fourth quarter as Norsk Hydro brings another 100,000 b/d on stream by commissioning North Oseberg development in October. By yearend, Norwegian output could be about 2.1 million b/d.

British Gas has licensed a 3-D sonar system for seabed mapping to Brown & Root Survey Ltd., Aberdeen. BG says the system, tested in the North Sea, will speed underwater surveying to support E&P work by replacing manual surveys by divers.

Information from the 3-D sonar is collected through a subsurface buoy linked to a control position on a ship or platform to develop a computerized picture of the seabed. A 10,000 sq m area can be surveyed from one position. Brown & Root will start to operate the prototype in June and expects to have the first commercial system available for hire later in the summer.

Petroleum officials from the two main North Sea producing countries deal cautiously with the subject of cooperative international efforts to stabilize crude prices. At OTC in Houston last week (see stories, pp. 21-24) Finn Kristensen, Norwegian minister of petroleum and energy, said his country will send an unofficial observer to a conference on consumer-producer cooperation in Isfahan, Iran, later this month. But the observer won't discuss crude prices or production volumes. Norway won't automatically limit production, as it has in the past, in support of OPEC restraint, Kristensen said. John Wakeham, U.K. secretary of State for Energy, doubts cooperative efforts by such groups as OPEC or IEA can stabilize prices. "The market system is more likely to do it than anything else," he said.

MMS soon will seek industry comments on what it calls the safety and environmental management program (SEMP) for the Gulf of Mexico, MMS Director Barry Williamson told OTC. The program will focus MMS inspections on company safety plans, assessing systems and their inherent risks as well as devices. "Our goal, after all, is to improve safety and environmental protection not just ensure.regulatory compliance," he said. MMS is considering a royalty reduction for deepwater production and soon will publish a final rule detailing its renewed civil penalty authority under the Oil Pollution Act of 1990, Williamson said.

Baker Hughes forecasts an average U.S. active rig count of 1,074 for 1991, up 6.3% from last year. However, total wells drilled will drop almost 15% to 31,975, and footage drilled will be down 11% at 151.4 million ft. Drilling outlays will fall 5.8% to $10.8 billion. But horizontal drilling activity is expected to continue to grow in 1991 and beyond, Baker Hughes' Ike Kerridge told IPAA's midyear meeting in San Diego. The outlook assumes $17.07/bbl for crude oil and $1.65/Mcf for gas.

Other items from the IPAA midyear notebook:

Bernard Picchi, Salomon Bros. managing director, pegs the "correct long term price of oil" at $17-19/bbl in `1991 dollars for light sweet crude, based on current and foreseeable industry economics. He figures that price would encourage consumption, provide excellent returns--20% or greater after taxes--for U.S. operators, and yet not choke off sales growth of much lower cost oil producers in the Middle East and elsewhere.
For a typical Gulf Coast producer, a long term price of $1.60-1.70/Mcf would produce a 20% or greater after tax return on investment on the margin, Picchi said. In the short run this may be the gas ceiling price rather than its average price, given current weak demand and ample North American supplies.
Sen. Tim Wirth (D-Colo.), a backer of the Johnston-Wallop NES bill (see Watching Washington, p. 40), predicts that measure will hit the Senate floor in mid-June. He expects passage despite opposition by lawmakers who warn of a consumer price runup and abridgement of the free trade agreement with Canada.

Exxon and Alaska have withdrawn from a proposed $1.1 billion settlement of claims related to the Exxon Valdez oil spill, opening the door for criminal trial for the company on federal pollution charges. Exxon has until May 24 to withdraw its guilty plea. The settlement collapsed after a federal judge rejected a $100 million fine and Alaska legislators rejected the $1 billion civil settlement, both as too low.

More Canadian companies are on the block (see story, p. 70). Among the latest are Home Oil and Interprovincial Pipe Line, recently split off from Interhome Energy (OGJ, May 6, p. 38), to be sold by the Reichmann family interests, which hold about 63% of both companies. Analysts peg combined price of the two at as much as $2 billion (Canadian).

The Esso led Oslo group planning a $4.5 billion oilsands project in northern Alberta has shelved plans for a regulatory application this fall pending resolution of financing obstacles. Ottawa withdrew commitments of $850 million in grants and $1.2 billion in loan guarantees for Oslo a year ago.