OGJ NEWSLETTER

Will a future OPEC include the U.S.S.R.?

The Soviets used an international conference on producer-consumer cooperation in Isfahan, Iran (see story, p. 40) last week to renew a request to join OPEC. A Soviet delegation put the request to Iran Petroleum Minister Gholamreza Agazadeh, who handed it off to OPEC Sec. Gen. Subroto, who in turn said he had not received an official letter of request from the Soviets. With Iran now hewing to a line of market stability and consumer confidence vs. its previous hawkish stance on prices, the likelihood grows of OPEC quota cohesiveness, leaving status of Soviet oil exports as the likely key to oil market stability this year.

This, of course, presumes the Soviets will have oil to export in the near term--a valid question in light of that country's energy sector woes (see story, p. 112).

Moscow reports increased vandalism against oil installations in autonomy minded areas of the nation as oil workers' unions continue to oppose Gorbachev's ban on strikes (OGJ, May 27, p. 40). Unknown persons recently broke into an unmanned facility controlling operation of about 60 wells of the Tatar Oil Production Association and destroyed equipment. The wells, each producing about 2,000 b/d, were shut in. Moscow newspaper Trud notes political extremists recently attempted to damage the big Druzhba crude pipeline in the Almetyevsk district of Tataria. Druzhba moves oil from Volga-Ural area to eastern Europe.

Meantime, the breakaway republic of Lithuania hopes to hike its oil flow from its small fields to as much as 20,000 b/d. Lithuanian officials say that level can be maintained for only a few years based on identified reserves, but geologists are optimistic about potential for more discoveries. Although recent production figures aren't available, flow from Lithuania's nine commercial fields is likely a fraction of the 30,000 b/d peak in the early 1980s (OGJ, Apr. 30, 1990, p. 34).

Soviet oil problems are increasing pressure on Moscow to expedite joint ventures with foreign oil companies, notably in light of "test" production from Tengiz field, seen as providing the litmus test of such ventures--in this case, involving a joint venture Chevron has pursued without conclusion since March 1989 (see stories, pp. 36, 54). Conoco has agreed to supply pipeline equipment to speed oil and gas development in the U.S.S.R.'s Timan-Pechora basin. The pipeline would carry oil south for domestic and export use from part of the basin 400 miles east of Arkhangelsk. Details aren't disclosed.

In September 1990, Conoco and Soviet officials signed a protocol to study feasibility of Timan-Pechora oil and gas E&D.

Iraqi oil exports may be blocked even if U.N. sanctions are lifted. Turkey won't allow reopening of Iraq's 1.5 million b/d twin export pipelines through its territory until sanctions are lifted and Iraq pays off debt of $700-800 million, Anatolia News Agency quotes State Minister Mehmet Kececiler as saying.

At the same time, Turkey is anxious to reopen the lines and has expressed disappointment over U.S. and U.K. insistence sanctions remain until Saddam is ousted.

Turkish officials, citing a Persian Gulf crisis cost to Turkey of $10 billion, say the quid pro quo means "a deadlock in the whole affair," reported Istanbul Daily News.

Meantime, Iraq has its first full time oil minister since October, reports Iraqi News Agency.

Usama Abdel-Razzaq's appointment follows two interim appointments by Saddam--one his son-in-law--after he sacked Issam Abdul Rahim al-Chalabi in October 1990 for introducing motor fuel rationing during the U.N. embargo on Iraqi trade.

The idea of a European Community version of the Strategic Petroleum Reserve has reared its head again.

EC Energy Commissioner Antonio Cardoso e Cunha says strategic EC stocks similar in size to the U.S. SPR would help ensure price stability and security of supply during crises. However, prospects for such a project are dim, given most members' contentment with IEA emergency procedures and their fears of a bureaucracy possibly emerging from a second tier emergency system.

India's ONGC has refloated tenders for the $1.4 billion Neelam development off Bombay, setting a deadline of July 31.

The action follows President Venkataraman's order to Finance Minister Yashwant Sinha to hold off on the contract award to Hyundai until after the national elections--marred last month by the assassination of former Prime Minister Gandhi.

The retender will enable participation of Japanese companies previously barred from bidding on oil tenders by the predecessor government under V.P Singh. That ban came after government charges Sumitomo allegedly paid $4 million in kickbacks to Indian agent Jyotsana Holdings to win an ONGC pipeline contract. The current Chandrasekhar caretaker government lifted the ban ahead of Sinha's visit to Tokyo last month.

Venezuela is studying possibility of building a refinery in Malaysia fed by heavy crudes, says Foreign Minister Armando Duran. He made the comment after a visit there last month, offering no further details.

Pdvsa seeks to penetrate Far East markets, but thus far officials have spoken only about building or acquiring a storage/transshipment terminal in Malaysia. Pdvsa also wants to market its Orimulsion heavy crude/water/surfactant boiler fuel in Japan.

Another Canadian company plans a major scaledown. Amoco Canada plans a major restructuring into separate business units by September, a move that will ultimately entail disposal of interests in several thousand properties and staff cuts totaling as many as 1,550 jobs out of current total payroll of 4,400.

By yearend 1993, as many as 650 Amoco Canada staffers will transfer to other companies because of the property disposals, 650-700 will leave via early retirements and layoffs, and another 150-200 through attrition and other rationalization steps.

Shell Canada, Petro-Canada, Gulf Canada, Husky, and Bow Valley also have undertaken major staff cuts.

Congress has approved a fast track for a U.S.-Mexican free trade agreement, enabling negotiators to open talks and guaranteeing no amendments. U.S. FTA negotiators will seek a bigger role for the U.S. oil industry in Mexico. Canada will participate in talks to maintain its position in the U.S.-Canada FTA.

Meanwhile, GAO says Mexico needs to invest $5-10 billion to build petrochemical plants by 1995, or it could continue to incur large trade deficits in basic petrochemicals. U.S. companies hesitate to invest in Mexico's petrochemical industry because of concerns over surplus world capacity and the chance Mexican petrochemical investment reforms might be reversed. U.S. firms contend lack of a U.S.-Mexico FTA deters investment and worry about protection of patents and technical expertise.

Louisiana plans to oppose Gulf of Mexico OCS Sale 135 as inconsistent with its coastal resources program, citing federal failure to provide funds to mitigate adverse socioeconomic and environmental effects of new OCS oil and gas development on Louisiana's coastal communities. MMS considers the sale, set for August 1991, to be off the Texas coast. Louisiana contends seven coastal parishes will be directly affected by related activities and further vows it won't approve future OCS leasing activities until Washington deals with issues pertaining to effects of OCS development and "impact assistance."

For the first time in 7 years, profitability of 19 major U.S. oil companies in the first quarter was higher than that of nonoil manufacturing firms (see stories, pp. 27, 46).

Citing unusual circumstances in foreign refining, marketing, and transportation, API notes operating income of four of the 19 increased 54.3% in the quarter from first quarter 1990. Operating income for the others fell 14.6%, however.

Oil company profitability--annualized net income as a percent of stockholders equity--averaged 17.7% in the first quarter vs. 14.2% for a group of 100 nonoil companies.

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