OGJ NEWSLETTER

Uncertainty over world oil supplies in the near and long term continues to dominate markets. Wild well specialist Red Adair says it will take 4-5 years to kill all of Kuwait's wild wells at the current rate of progress. Testifying before a Senate committee last week, Adair said only the "easy" wells have been killed and 157 high pressure wells burning in Burgan field present a particular challenge. Adair complained of poor logistical support from Kuwait and its contractors, noting the

June 17, 1991

7 min read

Uncertainty over world oil supplies in the near and long term continues to dominate markets.

Wild well specialist Red Adair says it will take 4-5 years to kill all of Kuwait's wild wells at the current rate of progress. Testifying before a Senate committee last week, Adair said only the "easy" wells have been killed and 157 high pressure wells burning in Burgan field present a particular challenge. Adair complained of poor logistical support from Kuwait and its contractors, noting the timetable could be halved "if we had proper equipment and enough water."

Adair said the Kuwaiti wild wells were easier to combat than typical blowouts because there is no need to remove collapsed drilling rig equipment but the biggest worry for crews remains Iraqi mines around wellheads.

Iraq wants to boost crude productive capacity to 6 million E/d and is ready to consider new ways of cooperating with major oil companies in developing its reserves, Iraq's new Oil Minister Usama al-Hiti told Middle East Economic Survey.

Al-Hiti said Iraq export capacity, currently hobbled by U.N. sanctions, is about 700,000 b/d and should reach 1 million b/d by yearend. Iraq should return to its prewar production level of 3.2 million b/d by yearend 1992, he said.

Meantime, U.S. stockbuilding combined with high Brent blend production levels this month continue to make European markets nervous. Brent, which fell to $18/bbl on the previous week's U.S. stock figures, slipped another 15 on the week June 13. The fall in Brent was not reflected in WTI in European trading, widening the spread between the two crudes to $2.24/bbl.

Dubai was little moved by the downturn in Brent, and European products also remained almost unaffected.

Moscow's renewed effort to attract more western investment in the U.S.S.R. still is being undermined by the bureaucracy. Soviet agency Interofis recently told representatives of more than 400 businesses, including U.S., European, and Japanese oil companies, their rent for space in Moscow's Mezhdunarodnaya II hotel will jump to $7,300/month Aug. 1 from $3,500/month. The firms were told to respond by early June, but they instead formed a coordinating committee to fight the hike.

Foreign companies continue to pursue Soviet joint ventures, however. Fire Bird Inc., a company created by independent geologist John Gray and Albert Hanna, both of El Dorado, Ark., has established a joint venture with the Oil and Gas Research Centre of the the U.S.S.R.'s World Laboratory to explore and develop oil and gas properties as well as other minerals in the- Soviet Union. El Dorado Joint Ventures is structured to allow for E&D throughout the U.S.S.R. and will focus on smaller projects to encourage participation of independents.

First area of emphasis is an undisclosed region west of the Urals Gray claims holds more than 1 billion of oil reserves.

Total will acquire an undisclosed interest in a venture to build a $470 millon, 100,000 b/d export refinery at Dalian, Liaoning province making it the first western company to participate in China's refining industry. It will be fed by Middle East crude and export naphtha, gasoline, kerosine, and diesel.

Total soon will disclose size of the stake in West Pacific Petrochemical Co. Ltd., a joint venture of Sinochem International Oil (H.K.) Co. Ltd., Hong Kong, and Chinese concerns Dalian Economic & Technical Development Corp., Dalian economic and technical development zone, China National Chemicals Import & Export Corp. (Sinochem), Beijing, Qingda Economic Trading Co., Daqing, and China National Chemical Engineering Co.

China Daily quoted a Sinochem official as saying Total will invest about $100 million in the project.

A major debottlenecking program at the 190,000 b/d Singapore Refining Co. refinery may be followed by a further expansion and upgrading. The refinery,jointly owned by BP, Caltex and Singapore Petroleum Co., is undergoing a debottlenecking to hike capacity by about 30,000 b/d to 220,000 b/d.

Also planned is installation of a catalytic cracker to boost light ends output and another crude unit to hike overall capacity another 50,000 b/d. The plant is running full out in response to rapidly increasing Pacific Rim products demand.

Pdvsa is interested in acquiring ARCO's 49.9% stake in Lyondell Petrochemical Co., which operates a refining/petrochemical complex near Houston, according to press reports in Caracas. Pdvsa confirms only that conversations have been held on the possible purchase. The 250,000 b/d Lyondell refinery buys about 10,000 b/d of medium gravity crude from Pdvsa. ARCO sold 50.1% of the company in a public stock offering in 1985 for about $345 million.

Venezuela's executive branch has approved Pdvsa's $3 billion Cristobal Colon LNG export project with Exxon, Royal Dutch/Shell, and Mitsubishi (OGJ, Jan. 14, p. 35).

Pdvsa expects Venezuela's congress to follow suit despite some opposition party criticism the government is trying to privatize the country's oil industry.

A gas pipeline under construction from Canada's mainland to Vancouver Island is $70 million over budget. British Columbia Energy Minister Jack Weisgerber said cost of the 334 mile line is now projected at $345 million (Canadian) vs. an initial estimate of $275 million. Overruns stem from calls for new tenders after the original ones expired, an increase in the size of the pipeline, and problems in building the line across the Strait of Georgia, he said. Pacific Coast Energy Inc. is builder and operator of the line, a joint venture of Westcoast Energy Inc. and Alberta Energy Ltd. Gas deliveries are to begin this fall.

Bidding will close July 15 on a sale of exploration leases covering 18.3 million acres in the Canadian Beaufort Sea.

Exploration is dormant in the area after key operators such as Gulf Canada, Amoco Canada ' and Esso Canada dropped drilling plans this year. The offering includes acreage near Gulf's 1984 Amauligak oil discovery with estimated reserves of 400 million bbl. The northern development branch of the federal Department of Indian and Northern Affairs says several Calgary companies have expressed interest in the leases.

The House interior appropriations subcommittee has continued leasing moratoriums blocking lease sales in the mid-Atlantic, Pacific, and eastern Gulf of Mexico.

It continued a ban on leasing in Bristol Bay off Alaska but rejected proposals to buy back existing leases in Bristol Bay and off Southwest Florida because of the expense. The legislation now goes to the full appropriations committee.

Interior Sec. Manuel Lujan will rule this month on a controversial issue involving drilling and environmental studies, says Interior Solicitor Thomas Sansonetti.

Interior's land appeals board decided last July BLM must prepare a full environmental impact statement for all stages of oil and gas operations, including exploratory drilling.

DOE Sec. Watkins says the U.S. has not decided whether to attend a proposed producer-consumer conference July 1-2 in Paris as an observer (OGJ, May 27, p. 38).

Watkins maintains oil consuming nations would be unwise to collaborate with producing countries to regulate the world oil market and nothing could be achieved on other issues that could not be raised through normal diplomatic channels.

EPA has proposed a rule to eliminate a major problem for companies attempting to comply with Superfund requirements.

Companies have complained banks won't lend them money for waste cleanup projects because court cases have raised the possibility lenders could be considered part owners of the properties and thus be jointly liable for cleanups.

The proposed rules would allow lenders to oversee loans and even foreclose and sell the collateral without being considered to be the owner or operator of the property.