OGJ NEWSLETTER

Prospect of oil supply tightness and higher prices in the fourth quarter continues to grow with the mounting likelihood Iraqi and Kuwait oil exports won't be on stream by then.

Kuwait is beginning to take full measure of the daunting task of containing history's worst oil field fires, and the outlook is not good (see story, p. 32). At presstime, seven wild wells had been killed, mainly by shutting valves.

Compounding that situation is the civil war in Iraq and the Kurds' seizure of northern oil fields with pro-Saddam forces attacking production facilities there. Allied bombing had scarcely touched northern production facilities and pipelines.

Status of the northern fields worries Turkey--anxious to see output resume through the line to the Mediterranean as soon as feasible via U.N. resolutions.

Turkey's Botas says Iraq's strategic two way flow lines between Basra and Kirkuk were badly damaged by allied bombing, leaving the Turkish line as Iraq's only viable export outlet.

That leaves the status of Soviet and North Sea oil exports a critical issue in the months ahead. The Soviets last month announced a halving of crude exports this year (OGJ, Mar. 25, Newsletter). However, another summer of industrial unrest in the U.K. North Sea looks unlikely following a new pay and conditions offer from the Offshore Contractors Council. The package, giving about 8,000 workers a 10% increase in pay and improved benefits effective Apr. 1, has been welcomed by unions that say chances of strike action interrupting the peak summertime installation and maintenance programs now look remote.

In the interim, OPEC members continue to press efforts to boost productive capacity. Without disclosing how, Iran plans to hike sustainable productive capacity to 5 million b/d by March 1993, says Oil Minister Aghazadeh.

He says Iran's 1990 output averaged 3.5 million b/d, well in excess of industry estimates of Iran's sustainable capacity. IEA estimates Iranian output in 1990 at 3.1 million b/d.

Saudi Arabia continues to pursue a range of solutions to tackle history's worst oil spill in the Persian Gulf.

Envirotech International Ltd., North Lauderdale, Fla., is expected to visit Saudi Arabia this month to demonstrate its ECO/+ oil spill dispersant/cleanup compound the company describes as nontoxic and biodegradable. Meantime, the International Maritime Organization has called for establishment of an international fund to help combat the gulf spill.

Apparent high bids totaled almost $260 million in OCS Sale 131 of central Gulf of Mexico acreage last week in New Orleans. Companies offered 637 bids totaling more than $320 million for 464 tracts. Ewing Bank Block 991 received the highest bid, about $6.2 million by Amerada Hess. Five blocks received apparent high bids topping $4 million, and Amerada had three of them. South Marsh Island Block 17 was the most sought after tract, with Agip Petroleum's bid of $2,125,000 topping offers by seven other companies.

California will seek to toughen safety standards at offshore terminals in the wake of the second spill in about 13 months involving a tanker attempting to dock off its coast. Chevron within 3 days had cleaned up the Mar. 16 spill, involving 500 bbl of light oil that leaked into Santa Monica Bay from a pipeline to its El Segundo refinery. The line, not in service at the time, was ruptured by the anchor of the OMI Dynachem tanker carrying MTBE and toluene as the vessel tried to moor at Chevron's offshore mooring berth. California State Lands Commission was to hold an Apr. 1 meeting of 10 offshore oil terminal operators to consider new safety rules. Under consideration are requirements for escort tugs, stepped up seafloor surveys, a ban on dropping anchors directly, added protection for subsea lines, and requiring lines to be filled with nonpetroleum liquids when not in use.

Japan's Liberal Democratic party has called for about $28 billion in economic aid to the U.S.S.R. Funds would go for developing oil and gas fields off Sakhalin Island (OGJ, Mar. 18, p. 33), a refining/petrochemical complex at Tobolsk, a big automaking plant at Bryansk, and other projects. However, the aid would hinge on Soviet willingness to return to Japan several small islands in the southern Kurile chain the U.S.S.R. seized at the end of World War II. Moscow has opposed giving up any of the islands that are near Japan's northern island of Hokkaido.

European Community has asked member countries for suggestions to end gas and electricity import and export monopolies.

The French industry ministry said it has not yet received the letter and does not know what the government's reaction will be. The letter is part of an EC campaign to promote common carriage for energy transportation. Gaz de France, which imports most of its gas, fears common carriage will lead to breakup of groups that buy most imports at advantageous prices.

Elf Aquitaine and Pdvsa have agreed to study upstream and downstream joint ventures in Venezuela, France, and elsewhere in Europe. In Venezuela, a venture would pursue E&P in new areas as well as development and refining of heavy and extra heavy crudes. In Europe, the two will study ventures in refining/marketing, including developing new refining technologies.

Increasing European demand for Norwegian gas has spurred the Statoil led Zeepipe group to approve a third large diameter gas pipeline from the Norwegian North Sea to continental Europe, a 279 mile line from Block 16/11 to landfall in Northwest Germany. The 40 in. and 36 in. system is expected to cost about $1.41 billion. If Norwegian government approval is forthcoming this summer, the line could be in place by 1995.

Repsol's logo is about to make an appearance in the U.K. gasoline market as that company continues its aggressive downstream expansion outside Spain. Repsol U.K. affiliate Carless Petroleum Ltd. will change its name to Repsol Petroleum Ltd. as of Apr. 1 and will phase out the Anglo brand from some of its 527 retail outlets. The U.K. unit has about 37,, of gasoline outlets but a smaller share of U.K. volume. Existing stations will be upgraded to increase market share. Repsol intends to continue acquiring new sites singly or in small groups and may buy a company with a larger number of outlets.

Romania's state owned Rompetrol has formed a joint venture with Libya's National Oil Co. to develop the 2 billion bbl Murzuk field in Southwest Libya. The venture expects first oil in 2-3 years. First phase output will build to 75,000 b/d, doubling in a later phase. Initially, Rompetrol plans 15 wells and to survey the route for a 250 mile pipeline from Murzuk to the existing Hamada al Hamra infrastructure that includes a pipeline to the Mediterranean coast. Libya also plans a 20,000 b/d hydroskimming refinery at Sebha fed by Murzuk crude.

Brazilian gasoline exports to the U.S. may resume in the weeks to come now that the 24 day strike by oil workers has ended. After facing mass firings, Petrobras workers returned to work late last month without winning major demands. Workers with the state owned oil tanker company Fronape also ended their 4 day strike after reaching a deal on salary renegotiation. Products stocks were expected to be back to normal within days, but Petrobras wants to review domestic supply needs before resuming exports because of shortages during the Persian Gulf war.

Oil exploration in Honduras has revived after a 13 year hiatus. Cambria Co. of Venezuela expects to begin work this month on exploration in Mosquitia province along the Caribbean coast. It plans to build a $1 million access road to an undisclosed wildcat location in the jungle. New Honduran President Rafael Leonardo Callejas has enlisted U.S. and Venezuelan help in stimulating interest in that country's oil sector. A technical team from Venezuela is in Honduras to conduct a feasibility study of a refinery at Trujillo, also on the Caribbean coast.

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