OGJ Newsletter

U.S. Industry Scoreboard [58092 bytes]

As a war of words escalates over Union Pacific Resources' tender offer for Pennzoil, oil and gas company ranks continue to shrink.

UPR, lambasting Pennzoil board's rejection of its offer (OGJ, July 7, 1997, Newsletter), says it's "another dry hole for Pennzoil's shareholders."

Most recently, Guy P. Wyser-Pratte, a beneficial owner of more than 150,000 Pennzoil shares, called for a meeting of shareholders to decide whether or not Pennzoil should be acquired.

Meanwhile, Meridian Resource Corp. (MRC), Houston, formerly Texas Meridian Resources, and Cairn Energy USA, Dallas, plan to merge in a pooling-of-interests/stock transaction valued at about $212 million. The deal, covered by a definitive merger agreement, is expected to close in the fall, subject to required approvals. Cairn Energy USA will become an MRC unit.

The U.S. petroleum industry has lost 870,000 employees since 1982 and now faces a "very serious shortage of youthful, energetic talent."

That's the conclusion of John S. Herold, Stamford, Conn., based on job losses by the 25 largest companies surveyed by Herold.

Herold's latest report on an emerging personnel shortage in the industry says "downsizing momentum" continued in 1996 among giants Royal Dutch/Shell, Exxon, Chevron, BP, and Mobil. But the trend may be abating for the E&P sector, and 1997 may see a net employment gain.

"Organic growth is in," Herold said, even though 18 of the 25 companies it surveyed-70%-said they cut staff in 1996. Percentage-wise, biggest downsizers were Burlington Resources, Occidental, and Mobil.

More cuts are ahead in the U.S. refining and chemical sectors.

Koch Industries' Koch Refining unit is implementing a 2-year restructuring/upgrading program at its Corpus Christi, Tex., and Rosemount, Minn., refineries to improve competitiveness.

Koch will invest $100 million in processing/information system upgrades at each plant. But job assignment changes will lead to staff cuts of about 25%.

ARCO Chemical is looking to trim $150 million in costs by 1999, including cutting 800-1,100 employee/contract positions from its worldwide operations.

A restructuring program continues through 1998.

MMS has revised its proposed crude oil valuation rule to make it friendlier for small producers who must calculate royalties owed the federal government (OGJ, June 30, 1997, p. 25).

Revisions broaden eligibility of using arm's-length transactions to calculate royalties and clarify procedures for collecting oil-exchange information.

Operating in part of Wyoming could get tougher-if not impossible.

Numerous oil and gas companies and the Petroleum Association of Wyoming remain at odds with BLM over air quality restrictions associated with gas development in the Green River basin (OGJ, Feb. 3, 1997, p. 42).

In an appeal filed with the Department of Interior's Board of Land Appeals, industry says BLM is effectively imposing a 977-ton/year cap on nitrogen oxide emissions, principally from new gas compressor and well sites in BLM's Rock Springs District.

Restrictions potentially would cut by half the 3,000 wells companies say they may drill in four project areas: Fontenelle, Jonah, Moxa Arch, and Stagecoach Draw.

Cabot Oil & Gas, Texaco, Amoco, UPR, Marathon, Vastar Resources, Snyder Oil, and Cross Timbers Oil are among companies joining in the appeal.

In 1996, BLM determined proposed gas developments on federal lands in the area would have no significant effect on air quality in the airshed over the Bridger Wilderness Area, northeast of the project areas, but changed its stance later.

Meanwhile, the Wyoming Outdoor Council, an environmental group, wants Interior to stay BLM's record-of-decision document imposing restrictions on Fontenelle and Moxa Arch projects on grounds BLM failed to adequately consider air quality effects of volatile organic compounds.

Industry opposes the request.

Natural Gas Supply Association's preliminary gas deliverability survey indicates U.S. production capacity utilization rose 1 percentage point to 95.1% in 1996.

It says annual maximum feasible capacity utilization for the 102 producers surveyed, who represent 59% of Lower 48 gas production, was about 2 points higher at 96.6%.

"This indicates that producers have improved their ability to operate closer to the theoretical limit of 100%. The increase in the maximum feasible capacity utilization also indicates a gas deliverability surplus still exists on an annual basis, given the...spread between the annual capacity factor of 95.1% and maximum feasible capacity factor of 96.6%," NGSA said.

Proliferating Canadian gas pipeline projects (see related story, p. 24) are starting to shake out.

Calgary backers of the proposed $550 million (Canadian) Alberta Pipeline Project (APP) have shelved the line because of insufficient producer support.

Plans called for APP to ship 1.2 bcfd of natural gas on three lines that would have offered an alternative to pipeline service within Alberta provided by Nova. The APP line was backed by Shell Canada and Atco Ltd.

Amoco Canada withdrew from the project earlier this year.

Greenpeace, which says it will expand into Southeast Asia, is still working to stop U.K. Atlantic Frontier developments. After recent protests against BP, Shell, and Conoco over West of Shetland projects, Greenpeace has in recent days held up work by Conoco again, as well as Agip.

On July 3, six activists were removed after 17 hr chained to equipment on the Atlantic Explorer seismic vessel, boarded as it was about to leave Ullapool, northern Scotland, to survey West of Shetland for Conoco.

On July 4, activists in four inflatables disrupted West of Shetland seismic surveys by Geo Explorer and Malene Ostervold surveying for Agip.

After 4 days of unwanted attention from Greenpeace, the Geo Explorer and Malene Ostervold pulled in their streamers and left the area.

Greenpeace says it will expand into Southeast Asia and open an office-either in Thailand or India, planning to step up actions to deter oil and gas development in that region. It already has an office in Hong Kong.

In the U.K., environmental protection accounts for about 3.2-4.9% of capital outlays and 4% of operating costs for offshore oil and gas development. That's the finding of Smith Rea Energy Analysts, Canterbury, which reports environmental measures cost U.K. offshore operators about $640 million in 1996.

Norwegian operators spent about as much as the British last year, and Northwest Europe's offshore sector spent $1.2-1.44 billion overall.

Britain's recently privatized gas, electricity, telecommunications, and water industries face a review by the new Labour government. Officials want to know if they provide value, quality, and choice to consumers.

Margaret Beckett, Board of Trade president, told parliament that the U.K. Department of Trade and Industry will examine regulation of the utilities and report to ministers by yearend (see related story, p. 27).

The review will examine the formula for determining prices but will not consider rate of return regulation, Beckett says.

Japan is pushing for new energy technologies, as officials look to other sectors for tax revenue to pay for environmental protection.

A new breed of LNG power plant is in the wings. Mitsubishi Heavy Industries attained the world's highest level of heat efficiency-49.5%-for a 330-MW power plant fueled by LNG at its Hyogo Prefecture testing complex.

Mitsubishi says results should enable it to develop a commercial power-generating plant fueled by LNG that will produce less pollution and consume less energy. Mitsubishi plans to develop a plant based on the test and integrate it with Tohoku Electric's thermal power plant in Niigata Prefecture.

Japanese officials are targeting the petrochemical sector to generate revenues to be used to pay for environmental protection measures.

A study group of Japan's Environment Agency says revenue would be used to subsidize environmental protection measures, such as increasing use of solar batteries to battle global warming, the group says.

If approved, importers of oil, coal, and other fuels used as petrochemical feedstocks would pay a 3,000 yen ($27)/ton carbon tax, and Tokyo would gain about 1 trillion yen ($8.9 billion)/year in tax revenue.

The panel projects an environment tax would help cut carbon dioxide emissions in 2010 by 2.6% from 1990 levels.