OGJ NEWSLETTER

OPEC is stepping up a campaign to head off international efforts to curb oil use through taxes and other measures.

Oct. 28, 1991

7 min read

OPEC is stepping up a campaign to head off international efforts to curb oil use through taxes and other measures.

Speaking at the World Petroleum Congress in Buenos Aires last week, OPEC Sec. Gen. Subroto warned developing nations against trying to achieve energy security mainly through taxation, noting that taxes on crude and/or petroleum products in western Europe and Japan are double the price of crude on a per barrel equivalent basis. He also assailed the European Community's move to adopt a carbon tax aimed at reducing CO2 emissions tied to postulated global warming, noting OPEC members are trying to develop a consensus position on the issue.

OPEC will be required to develop another 8-9 million b/d of productive capacity in the 1990's, Subroto said.

He also cited estimates by the Montreux Group of France that the world oil industry will have to spend $250 billion the next 5 years to bring supply in line with projected demand.

And that demand will continue to grow as supplies tighten in the years to come, Royal Dutch/Shell Chairman L.C. van Wachem and Unocal Chairman Richard Stegemeier told WPC. Van Wachem cited a demand spurt caused by projected world population growth to more than 8 billion by 2025 from 5.5 billion in 1990.

Stegemeier contends conservation and alternate energy sources can't replace the amount of oil needed to meet global energy requirements. Further, even renewables have environmental drawbacks, Stegemeier said.

He cited the effects of dam building and loss of wild rivers caused by hydro projects and the loss of land caused by solar projects. Supplying the energy equivalent of 170,000 b/d of oil, or only 1% of U.S. demand, would require covering 700 sq km of land with solar cells using current technology.

Many companies' third quarter and 9 months earnings are down because of lower oil and gas prices and weakened demand, notably in the U.S. Santa Fe Energy's third quarter profits fell to $1.9 million from $5 million a year ago as its prehedging oil price plunged to $13.93/bbl from $18.78 and gas prices fell about 8 Mcf in a comparison of quarters. Phillips, citing lower upstream prices and downstream margins, reported profits fell to $56 million in the third quarter from $178 million a year ago.

Oryx posted a loss of $8 million vs. a third quarter 1990 profit of $48 million, citing a 26% drop in oil production stemming from asset sales and a North Sea pipeline disruption and a 9% drop in gas volumes in addition to the drop in oil and gas prices. One bright spot, however, remains: non-U.S. operations. Chevron, while logging an overall 22% slide in third quarter profits and 18%, drop in 9 months profits, notes earnings from international operations jumped to $327 million in the third quarter from $285 million in the 1990 period, with upstream and downstream sectors continuing strong performances.

U.S. industry doldrums continue to spur cuts and restructuring as Du Pont, Halliburton, and Tenneco make further cuts in operations already hit hard by cost cutting measures.

Du Pont's polymers and chemicals units will reduce operating costs by $40 million/year as part of the company's $1 billion, 2 year cost cutting effort (OGJ, Oct. 7, Newsletter). The polymers unit earlier pared costs by $60 million and cut more than 1,300 positions worldwide the last 18 months. The chemicals unit has been hit less hard because of improved productivity.

Halliburton will reduce its energy services group by about 1,200 employees in addition to cuts already implemented (OGJ, Aug. 26, p. 63). Halliburton Services will restructure its 18 divisions into eight. The moves are expected to cost about $50 million after tax in the fourth quarter.

Tenneco will cut its corporate and related staff of 630 by 230, saving about $25 million/year. The cuts are part of Tenneco's $2 billion action plan to strengthen its balance sheet (OGJ, Sept. 16, p. 108). It also wants to shed its Sperry Marine subsidiary and expects to complete the sale in early 1992.

DOE will sponsor a Jan. 27-30, 1992, oil industry conference n Tyumen, western Siberia.

It will be preceded and followed by 2 day field trips into nearby oil fields. Goal of the conference, cosponsored by the Siberian Scientific Research Institute for the Oil and Gas Industry, is to develop a framework to foster U.S.-Soviet business transactions. Ed Smida, in DOE's Washington office, is handling conference arrangements.

There's more action in Kazakhstan (see related story, p. 32). The former Soviet republic expects to announce by yearend results of competitive bidding to develop the Karachaganak gas/condensate field.

The Kazakhs claim it is the largest undeveloped gas/condensate reservoir in the world with gas reserves alone pegged at 35 tcf. Bidders include British Gas-Agip 50-50 and BP solo.

Algeria's National Assembly will be asked to approve amendments to hydrocarbon laws to put that country's E&P terms on a par with other producing countries.

The changes, approved by the Algerian cabinet, will allow foreign companies a role in developing existing oil fields and provide for international arbitration in the case of disputes with Sonatrach. Terms for exploiting oil and gas finds will be similar, and to stimulate exploration in high risk areas, improvements in royalty and tax rates are planned.

Taiwan's state owned Chinese Petroleum Corp. is emerging as a major player on the international oil and gas scene (OGJ, Oct. 7, p. 38). It plans to triple imports of LNG within 5 years from Indonesia and Malaysia and triple capacity of Yung An LNG terminal to 4.5 million tons/year.

CPC also is pressing domestic E&P and seeks to broaden its portfolio of foreign upstream ventures. CPC drilled a major gas discovery in Yung Kung 1 oil field in Taiwan's Yunlin County. With reserves estimated at 24.5 bcf, the find is the biggest to date in southern Taiwan. Plans are to produce it at 3.5 MMcfd.

In addition to participating in recent oil discoveries and development projects in Ecuador, CPC is said to be eyeing Malaysian oil reserves. Industry sources in Taiwan report CPC is negotiating with Maxus Energy to purchase an interest in Maxus' Sumatran concession, where crude reserves are pegged at 100 million bbl. CPC has submitted a proposal to the state Commission of National Corporations for budget appropriations related to the proposed acquisition.

Gas from the Tromsoflaket in the western Barents Sea may be used to generate electricity in northern Norway for export to Finland. Finnish electricity utility Imatran Voima Oy, Norsk Hydro, and Statoil are studying a 650,000 kw power plant fed by about 39 bcf/year of gas.

Gas sales will hinge on agreement between the Norwegian gas sales committee and Italy's ENEL for an LNG plant based on gas from Snohvit field. Gas for the LNG plant would be landed at Soroya in Finnmark, site of the proposed $615-770 million power plant. An electricity grid would be built to Petjaskoski in Finland. The project, to start up in the late 1990s, would cut CO2 emissions because the gas fired plant would replace electricity from a planned coal fired unit in Finland.

NPRA says OSHA plans to declare asphalt fumes carcinogenic and set a 0.2 mg/cu m exposure limit for asphalt workers that is so low it will force U.S. asphalt plants to close and perhaps kill future demand for asphalt. It has asked OSHA to reexamine studies that prompted the rule.

The House merchant marine committee has shelved plans to mark up a bill this week allowing limited exploration on the ANWR Coast 1 Plain.

Chairman Walter Jones (D-N.C.) postponed action until after the Senate decides whether to permit ANWR leasing as part of its energy policy bill (see Watching Washington, p. 27).