OGJ Newsletter

Operating in both developed and developing countries is becoming increasingly complicated.

While issues involving economic sanctions, human rights abuses, and state-sponsored terrorism have captured world headlines recently, other concerns are mounting-security and corporate environmental responsibility (see special report, beginning on p. 31).

In Colombia, the U'wa tribe and environment, mines, and energy ministers met recently in Arauca; however, talks broke down. The U'wa say there will be no more meetings until the government agrees to expand the borders of the U'wa reservation to include Oxy's Samore block, where the company wants to drill. The tribe has threatened mass suicide if Oxy encroaches on territory it claims (see story, p. 36).

Meanwhile, the ELN guerrilla group burned six buses used by workers in the Cupiagua area, paralyzing BP's efforts to build area pipeline/processing infrastructure. ELN is also being blamed for yet another oil pipeline bombing.

In London, Greenpeace staged a brief occupation of Conoco's Jet retailing and marketing office last week to protest the company's E&D activities in the West of Shetlands area.

On June 4, Greenpeace sent 15 protesters to Jet's offices to chain themselves to different parts of the building; another 12 activists chained themselves outside.

Greenpeace said protesters would not leave until Conoco promised not to explore in the West of Shetlands area.

Conoco called in police, who cut the protesters free and took them into custody.

As the protest was being broken up, a Greenpeace official told OGJ by phone that further protests against other companies with West of Shetlands interests "could not be ruled out."

The takeover followed a similar assault by Greenpeace on BP's Aberdeen offices in April (OGJ, Apr. 14, 1997, Newsletter).

BP, meanwhile, is calling for positive action by industry on the issue of global climate change.

"The time to consider the policy dimensions of climate change is not when the link between greenhouse gases and climate change is conclusively proven but when the possibility cannot be discounted...We in BP have reached that point," maintains Chief Executive John Browne (see commentary, p. 14).

On the sanctions front, even cities are getting in their licks following the White House's imposition of sanctions on Myanmar (OGJ, May 26, 1997, Newsletter).

New York City has become the 11th U.S. city to impose sanctions.

Mayor Rudy Giuliani signed a local bill approved by the city council that bars city contracts with companies operating in or doing business with Myanmar.

Similar measures have been passed elsewhere in the U.S.

New York City's so-called "Burma law" takes effect late this month. It prohibits city funds from being deposited in banks that provide services to Myanmar, including currency trading, securities underwriting, and government loans.

Also, it prohibits any city agency from contracting for goods, services, or construction with any contractor that sells goods or services in Myanmar, supplies goods that originated in Myanmar, does business in Myanmar, or makes new investments in Myanmar.

The coalition formed to seek constructive engagement and counter imposition of unilateral sanctions by the U.S. is growing.

The International Association of Drilling Contractors (IADC) reports numerous companies are swelling the ranks of USA*Engage (OGJ, May 5, 1997, Newsletter). IADC is a founding member.

The lobbying group, numbering about 500 members, includes the likes of Amoco, ARCO, Unocal, Conoco, Chevron, Texaco, Mobil, Oxy, Exxon, as well as Halliburton, Baker Hughes, Dresser, Petroleum Equipment Suppliers Association, and the International Association of Geophysical Contractors.

More work is on tap to boost production from the Prudhoe Bay Unit on Alaska's North Slope.

Project manager ARCO Alaska and partners BP and Exxon will spend $160 million on a 20,000 b/d incremental natural gas liquids expansion, seeking to boost liquids recovery by about 50 million bbl in the miscible injectant expansion (MIX) project. It will increase by 20% the amount of miscible injectant made at Prudhoe Bay, which will be available for use in the Prudhoe Bay miscible gas enhanced oil recovery project.

Also, MIX will increase to 8 bcfd from 7.5 bcfd the amount of natural gas that can be produced, processed, and reinjected into the Prudhoe Bay reservoir.

ARCO says the increased gas-handling capacity will boost NGL output by 2,000 b/d and allow oil to be produced from more wells.

FERC can do more to encourage competition and expand the potential market for natural gas. That conclusion resulted from testimony by industry groups during a 2-day FERC hearing in Washington on FERC's role in the future of the gas industry.

NGSA maintains reduced pipeline regulation should not be carried too far, and FERC must curb the monopoly power of pipelines to ensure that gas is the fuel of choice.

NGSA says the changing nature of the gas industry-including unbundling, rate discounts, and shorter term pipeline capacity commitments-will make it more difficult for FERC to protect shippers and customers because interstate pipeline operations and practices will become less transparent. NGSA also wants FERC to continue to assert jurisdiction over Outer Continental Shelf pipelines.

Ingaa encourages FERC to continue to use regulation to increase competition rather than increase regulatory controls. "We believe that FERC should remove regulatory barriers to creating a combined energy and information services industry. Traditional factions within the natural gas industry will be meaningless...the future will be customer-driven," Ingaa said.

AGA says FERC should let pipelines and customers negotiate terms and conditions of their contracts, in addition to their rates.

AGA says the ability to negotiate terms and conditions of service will offer LDCs a way to mitigate the fact that they hold long-term, firm contracts on interstate pipelines. "This flexibility could be an answer to the contract hangover still existing from Order 636 implementation," AGA said.

Planned power/natural gas mergers are advancing.

Destec shareholders signed off on the proposed NGC-Destec combination; FERC approval remains (OGJ, Feb. 24, 1997, p. 42). Enron received final approval by Oregon's public utility commission for its merger with Portland General (OGJ, May 5, 1997, Newsletter). A June 24 Portland General shareholder vote remains.

Five consumer groups are urging the U.S. Federal Trade Commission to block a merger of Shell's and Texaco's U.S. oil refining and marketing operations (OGJ, Oct. 14, 1996, p. 29). The merger would give Shell/Texaco 23% of refining capacity and 17% of the retail gasoline market on the West Coast.

The groups claim the combination would reduce competition.

MMS has amended regulations governing surety bond provisions for Outer Continental Shelf (OCS) leases. Changes will provide optimum flexibility for lessees to meet lease bond requirements and ensure they adequately fund lease abandonment and clearance obligations, MMS says.

The rule clarifies MMS position that co-lessees and operating rights owners are liable for compliance with the terms and conditions of their OCS oil and gas or sulfur leases. It also imposes higher bond coverage for the holder of a geological/geophysical permit to drill a deep stratigraphic test well.

The rule sets a Dec. 8, 1997, deadline for every lessee to comply with bond coverage requirements, and it sets a regulatory framework for acceptance of lease-specific abandonment accounts and third-party guarantees.

China's CNPC plans major projects in Kazakhstan and Iraq.

CNPC will build a 2,000-mile pipeline from western Kazakhstan to Xinjiang province as part of a $4.3 billion project. The deal, part of a contract consummated June 4 in Almaty, calls for CNPC to invest $4 billion in the activities of Aktyubinskmunaigaz during 20 years in return for a 60% interest in the oil and gas concern.

Separately, CNPC signed a deal with Iraq pegged at $1.3 billion to develop Ahdab oil field (OGJ, Apr. 14, 1997, p. 19). Development costs and operating costs are placed at $660 million, respectively.

The U.S. says it will support renewal of the U.N.'s oil-for-aid program for Iraq. The U.N. Security Council last week was expected to renew the program for 6 months, allowing Iraq to sell $2 billion worth of oil to buy food and medical supplies.