Newsletter

Environmental concerns top world petroleum news this week, with President Clinton's long-awaited global warming policy proposal drawing tough criticism (see related story, p. 36).

House commerce committee Chairman Tom Bliley said, "Regardless of the president's false assurances that our trade competitors like Brazil, China, India, and Mexico will be asked to make meaningful commitmentsellipsethe negotiating framework he agreed to in Berlin in 1995 makes that impossible.

"What the President is proposing is unilateral economic disarmament by the U.S. The result will be a treaty that isn't global and which won't work and thatellipsewill cost American jobs and raise American taxes.

"It inevitably will cause a 26¢/gal gasoline tax increase, a massive increase in what Americans pay for electricity and natural gas, and a slowing of our economic growth by at least a full percentage point in just 8 years."

Senate energy committee Chairman Frank Murkowski says, to meet Clinton's targets, the U.S. will need a $50/ton carbon tax.

"There is a huge difference between the president's assurances that developing nations will participate and what those nations are actually saying," he said. "Developing nations have proposed that the U.S. must make reductions of 35% below 1990 levels by 2020 and that we must pay them if the targets are missed. In addition, nations such as Saudi Arabia have proposed that we compensate them for any lost petroleum sales they suffer as a consequence of our emissions controls."

In other dissent, the Global Climate Coalition sees many problems in implementing and enforcing Clinton's proposed global emissions trading mechanism.

GCC Pres. Gail McDonald says such a system should be studied more carefully before it is made the centerpiece of U.S. climate policy.

Meanwhile, Canada is preparing its position for December's international conference on climate change at Kyoto.

Federal Environment Minister Christine Stewart has praised a Japanese proposal that countries such as Canada reduce greenhouse gases by as little as 2.5%. "Canada is committed to medium-term, legally binding targets at Kyoto," she said. Stewart will push for a side deal in Kyoto that would encourage developing countries to sign by offering credits for instituting energy efficiencies.

There is no lack of controversy over Canada's climate plan, however.

Responding to a push by environmental groups for a mandatory 20% reduction in 1990 emission levels, Canadian Association of Petroleum Producers (CAPP) says cutting greenhouse gas emissions to 1990 levels could cause the loss of 56,000 jobs in petroleum and related sectors alone.

Costs would rise for all energy users, and jobs would be lost, says CAPP.

There could be an $8 billion/year (Canadian) drop in oil and gas revenues, and Canada's GDP could plunge by $17-31 billion.

Environmental pressure groups continue to press their agenda, as further anxiety looms over U.K. Atlantic Frontier developments.

Greenpeace will take its appeal for a judicial review of the government's licensing regime to the European Court (OGJ, Oct. 20, 1997, Newsletter). Greenpeace has been told an appeal against the High Court ruling would likely lead only to a long delay in the hearing, such that the court would be unwilling to quash the licenses because of large investments by oil companies.

Greenpeace added, "The judgment has, however, opened up the possibility of other legal challenges to future oil licensing rounds in the Atlantic Frontier that Greenpeace will be considering."

Across the North Sea, Norwegian oil firms expect the country's newly elected coalition government to put environmental concerns ahead of the petroleum industry's concerns.

Statoil believes the new government intends to postpone the 16th offshore licensing round until after 2000 and may reintroduce a development queue for discoveries. Nor does the company expect the new regime to permit exploration of the near-shore Skagerrak Sea area-long contested by environmental groups.

Also, plans to introduce an auction system for awarding offshore licenses are being shelved, added Statoil. The new government is expected to strengthen the legal basis for state control of Norway's oil and gas resources and maintain Statoil as a wholly owned company.

Industry's revived push into renewable energy is escalating.

Royal Dutch/Shell is to make the largest ever investment in renewable energy to establish a division to promote solar power, biomass, and forestry projects. The company plans to set up a fifth core business for renewables, on a par with its E&P, oil products, chemicals and gas, and coal units.

Shell International Renewables will invest more than $500 million in the next 5 years, split equally among solar and biomass projects and forestry.

Meanwhile, BP has opened a Berlin gasoline station that has solar panels mounted in the roof. These are expected to produce about 20% of the site's power needs. A site at Milton Keynes, U.K., is being eyed for a similar upgrade. BP and Shell are alone in petroleum industry in seeing solar power and renewables as potential money earners (OGJ, Oct. 20, 1997, p. 43).

A breakthrough in fuel-cell technology may speed the transition to renewables. A partnership of U.S. DOE, Arthur D. Little, Plug Power, and DOE's Los Alamos National Laboratory demonstrated a fuel cell system that generates electricity with gasoline, ethanol, methanol, or natural gas.

The cell converts fuel to hydrogen, which is used to produce electricity.

DOE calls the development a "major automotive research breakthrough" because it opens the possibility for high-mileage electric vehicles that can be refueled at existing stations. The technology is clean and efficient, with emission levels much lower than California's ultralow-emission vehicle standard and an efficiency that could lead to vehicles that get twice the mileage of a conventional vehicle." The goal is to develop technology that leads to an 80 mpg-equivalent passenger car.

A major oil spill in the Singapore Strait last week could cost as much as $100 million to clean up, according to insurance industry estimates. About 180,000 bbl of crude oil was spilled when two tankers-the Thai-flagged Orapin Global and the Cyprus-flagged Evoikos-collided 5 km off Pulau Sebarok, southern Singapore. At presstime, 45 skimmer vessels had been deployed to recover weathered oil and to lay booms. Denholm Ship Management, managers of the Orapin Global supertanker, blamed the Evoikos for the collision, claiming its vessel had been headed for the Persian Gulf after departing Singapore's eastern anchorage, traveling in the correct westbound land of the tanker traffic separation schem.

Denholm charged the Evoikos had been proceeding east in the eastbound lane and-instead of altering course to starboard off Buffalo Rock to continue following the east lane-cut across the westbound lane at a narrow angle rather than at a right angle, as international rules require.

Is another world-class LNG project in the offing for the Timor Sea?

Shell Australia and partners have a major gas discovery in the Timor Gap Zone of Cooperation between Australia and Indonesia that some analysts contend could underpin a proposed $10 billion (Australian) LNG project based on Timor Sea gas.

The project is a potential rival to a proposal by BHP and Phillips for a floating or onshore LNG facility based on gas reserves in the Undan/Bayu discovery in the Timor Gap.

Shell, BHP, and Woodside are equal partners in the latest strike, which some analysts speculate could hold 3 tcf. Their Sunset 1 wildcat on ZOCA 95-19 permit cut an 87 m gross hydrocarbon column, and logs showed the column contains 43 m of gas pay. The trio is spending $120 million in the region in the next 18 months to prove at least 10 tcf to support their LNG plans.

Early reports of third quarter earnings for U.S. petroleum companies reveal mixed results.

Generally, improved downstream results helped offset the effects of lower crude oil prices for integrated firms, while independents had to rely on continuing robustness in natural gas markets to sustain healthy earnings despite lower crude oil realizations.

A comparison of 1996-97 third quarter earnings for a sample of companies follows, with 1997 results listed first, in millions of dollars and losses in parentheses: Amoco 635 vs. 635, Texaco 490 vs. 434, Shell Oil 479 vs. 504, Conoco 282 vs. 256, Phillips 216 vs. 187, USX-Marathon 192 vs. 164, Oxy 157 vs. 194, Coastal 80.4 vs. 58.6, Union Pacific Resources 67.2 vs. 76.9, Burlington Resources 59 vs. 59, Vastar 52.4 vs. 41.6, Valero 51.5 vs. 13.1, Union Texas 48 vs. 34, Oryx 42 vs. 40, Monterey Resources 8.3 vs. 11.7, Pogo 7.4 vs. 7, Giant Industries 6.6 vs. 5.3, LL&A 6.2 v.s 13.7, United Meridian 3.3 v.s 2.8, Williams Cos. (8.4) vs. 71, ARCO Chemical (37) vs. 97, and Enserch Exploration (182) vs. (3.9).

Copyright 1997 Oil & Gas Journal. All Rights Reserved.