Brent crude for June delivery briefly showed some muscle last week, trading above $18.50/bbl on Apr. 22, an increase of more than 20¢/bbl over the previous day's trading.
By mid-week, however, Brent had fallen close to the $18/bbl level.
U.S. Nymex crude prices lost ground after reports began circulating that the U.S. would not retaliate if Iraq violates a no-fly zone to bring Muslim pilgrims home from Mecca.
Nymex crude for May delivery declined 78¢/bbl on Apr. 22 to close at $19.60/bbl. At mid-week, Nymex crude for June delivery closed at $19.73/bbl, up 14¢/bbl, after showing weakness earlier.
Although prices are less than rosy, London's Centre for Global Energy Studies (CGES) says an imminent price meltdown is unlikely.
CGES notes dated Brent crude oil touched $17/bbl early in April, adding weight to the mood of entrenched price pessimism. A mild winter has meant oil stocks have not declined as usual, according to CGES.
As OPEC output continues to rise, concern has switched from Venezuela's quota-busting to Saudi Arabian output, rumored to have risen above 8.6 million b/d. "This is an exaggeration," said CGES, "for there is no evidence of large incremental volumes being lifted from the gulf. Nevertheless, secondary sources report that Saudi output has been creeping up since last September, touching 8.3 million b/d in February."
Latest figures from the Middle East Economic Survey (MEES) show total OPEC production averaged 26.6 million b/d last month. MEES reports Venezuela, Nigeria, and Qatar were the chief culprits of overproduction. But Saudi output, long pegged to 8 million b/d, has noticeably inched up since 1997 began.
CGES' reference price forecast for OPEC's basket of crudes calls for prices to average $20.80/bbl in the first quarter, $17.50/bbl in the second quarter, $16.40/bbl in the third, and $16.20/bbl in the fourth. If Saudi Arabia increased output to about 8.15 million b/d, predicts CGES, the OPEC basket would average $17.40/bbl in the second quarter, $15.90/bbl in the third, and $15.10/bbl in the fourth.
Separately, CGES says Latin American producing regions will show continued strength (see related story, p. 40).
Industry fallout has begun after the Clinton administration announced plans to impose economic sanctions on Myanmar (formerly Burma), banning new investment because of the actions of the current government (see Watching Government, p. 37). An executive order was being prepared for President Clinton's signature before OGJ presstime last week.
Clinton signed a law last year that grandfathers projects already underway in Myanmar, but it gave him power to ban new American investment and impose U.S. economic sanctions, if repression increased.
"The decision reflects a major victory in the struggle to make multinational corporations accountable for their actions at home and abroad," said Robert E. Wages, president of the Oil, Chemical and Atomic Workers International Union, which has been at the forefront of recent U.S. efforts to seek change in Burma.
Unocal, one of the largest U.S. investors in Myanmar, maintains sanctions are counterproductive and hurt people.
Unocal is dropping plans for at least two future offshore field developments, and it will forego other potential investments, company officials said.
The company is an interest owner in a major development involving Yadana field in the Gulf of Martaban-which is not affected by the sanctions or by Unocal's latest decision to stop new investments there.
Unocal has a 28.26% interest in the Total-operated project.
"...We are terribly disappointed because we feel that engaging in other infrastructure projects for Myanmar at this time would be very beneficial to the development of the economy of Myanmar," Unocal Chairman and CEO Roger Beach told Reuters wire service.
Construction of the onshore portion of the Yadana pipeline has become a lightning rod over alleged human rights abuses carried out by the Myanmar government in laying the line and protecting pipeline right-of-way.
Construction of the offshore segment is to begin in mid-1997 and be completed early in 1998. Gas deliveries to the Petroleum Authority of Thailand (PTT) are set in mid-1998.
As controversy flares, long-awaited development of natural gas reserves from Yetagun field off Myanmar is apparently a step closer to reality, concluding almost 3 years of negotiations involving the 1992 discovery (OGJ, Feb. 13, 1995, p. 28).
PTT on Mar. 13 consummated a 30-year gas purchase agreement with state-owned Myanma Oil & Gas Enterprise and a Yetagun contractor group led by Operator Texaco Exploration Myanmar. The agreement is expected to generate an estimated $200 million/year of revenue to be shared by the Yangon (formerly Rangoon) government and the development group.
At this point, Texaco does not believe Yetagun development will be affected by the sanctions, but "the situation is somewhat unclear" because the company has yet to review the executive order, a Texaco spokesman said before OGJ presstime.
Myanmar's government-the State Law and Order Restoration Council (Slorc)-seized power in 1988. Opposition leader Aung San Suu Kyi's National League for Democracy won election in 1990, but the Slorc never recognized the results.
President Clinton marked Earth Day last week by announcing the administration would extend the community "right-to-know" program to seven more industrial sectors-including petroleum bulk terminals.
The program requires reporting of all toxic emissions and makes data publicly available. Industry groups say the costs far outweigh the benefits.
The Minerals Management Service is withdrawing a proposed rule that would have relied largely on published indices of gas sales to value natural gas production on federal lands for royalty purposes. MMS says it will pursue other alternatives and requested industry suggestions.
The Natural Gas Supply Association says it's "disappointed" at MMS' decision, since "the producing industry has expended hundreds of thousands of dollars and more than 2 years in an effort to modify gas valuation so that it is simpler to administer and more equitable to all parties."
The U.S. Supreme Court will not review a tax court ruling that held Texaco does not owe about $1 billion in back taxes due to the "Aramco Advantage." The Internal Revenue Service, which was appealing the tax court's ruling, claimed Aramco companies benefited when Saudi Arabia declined to sell crude at prices lower than those set by OPEC member countries from 1979-81.
Exxon, Texaco, and Chevron settled disputes with the IRS some time ago; Mobil says it expects to receive $700 million in IRS refunds.
API reports 4,957 oil wells, gas wells, and dry holes were completed in the U.S. in first 3 months of 1997-3% below the 5,128 in the same period a year ago.
Gas completions were up 7%, to 2,204, while oil completions declined 18% to 1,572. Dry holes rose 1% to 1,181. Higher gas well completions reflect the increased gas rig count of 484 in August 1996, compared with 395 in August 1995, API said. API said the drop in oil completions may be due, in part, to the lower oil rig count, which went from 330 in August 1995 to 298 in August 1996.
API said footage drilled in the first quarter was 30,996,000 ft, up 2% from the 30,337,000 ft drilled in the same period last year.
Exploratory drilling fell 6%. Oil discoveries were down 32% at 90, and gas finds were down 3% at 116. Dry holes rose 2% at 436. Development drilling fell 3%. Oil completions were down 17% at 1,482, gas completions were up 8% at 2,088, and dry holes were down 1% at 745.
Strategic alliances and reserves growth are on the minds of Canadian producers.
As a result of a strategic alliance with Calgary's Petro-Canada involving a swap of offshore petroleum rights, Norway's Norsk Hydro Canada Oil & Gas has opened an office in Calgary.
Petro-Canada obtained interests in the Njord and Veslefrikk fields in the North Sea, and Norsk Hydro Canada obtained interests in Hibernia and Terra Nova fields off eastern Canada, as well as interests in other East Coast licenses.
PanCanadian Petroleum, another Calgary company, is considering spending as much as $1.5 billion (Canadian) on an international acquisition this year. The objective is to become Canada's number one crude oil producer.
The company is currently in second place with production of 218,000 b/d behind Toronto's Imperial Oil.
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