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• U.S. Industry Scoreboard 10/6 [57,757 bytes]

U.S. oil production averaged 6.3 million b/d in August vs. 6.4 million b/d a year ago-representing a continuing slowdown in declining output-while oil imports were a record 8 million b/d in August.

Crude stocks fell 14 million bbl during the month.

Gas production in 1996 was at its highest level since 1981-19.57 tcf vs. 18.75 tcf in 1995-and reserves additions were adequate to replace produced gas (see related story, p. 37).

U.S. refined products demand set records in June and July, says EIA, with July demand at 18.9 million b/d. Records were also set for year-to-year increases in demand for gasoline, distillate, and kerojet.

Demand for finished motor gasoline was a record 8.5 million b/d in July, while gasoline production averaged 8 million b/d. As a result, end-of-July stocks were at their lowest levels in more than 24 years.

EIA says that, although refinery capacity utilization increased in the 1990s, profitability of the refining/marketing sector has often been lower than that of the U.S. oil industry in general.

"Much of the poor financial performance in the 1990s can be attributed to the decline in the price difference between light and heavy crude oil and products," said EIA. "These price differences were affected to a large extent by increasing availability of light sweet crude oil supply and a large amount of refining capacity available to convert the heavy products like residual fuel into higher-valued products."

Records continue to topple as industry presses the envelope on deepwater frontiers.

Shell Deepwater Production and partners Amoco and Exxon have begun production from their Ram-Powell TLP in the Gulf of Mexico.

The TLP is in 3,214 ft of water, a world record for a production platform.

Current production rates are 56 MMcfd of gas and 7,300 b/d of condensate. Design capacity of 200 MMcfd and 60,000 b/d will be reached early next year, says Shell, as three remaining predrilled wells are placed on production.

As many as six additional wells are planned.

Off Brazil, Petrobras started up production in giant Barracuda and Caratinga oil fields in the Campos basin.

Petrobras claims two records for this tandem development: deepest water for an FPSO (840 m) and largest FPSO turret system (34 production lines).

More small to mid-sized independents are making their way into the big leagues by acquiring majors' noncore properties.

Cross Timbers will acquire for $252 million Amoco's producing properties in the San Juan basin of northwestern New Mexico.

Cross Timbers estimates proved reserves attributable to the acquisition at 258.6 bcf of gas, 16.4 million bbl of NGL, and 1.5 million bbl of oil, for a total 61 million boe. Current net production is about 49 MMcfd of gas, 3,100 b/d of NGL, and 270 b/d of oil from 2,600 gross (900 net) wells, with a reserves-to-production index of 14.5 years. The deal includes warrants to purchase 625,000 shares of Cross Timbers common stock at $22.97/share for 5 years.

The U.S. Senate has agreed to extend the 5.4¢/gal tax exemption for ethanol through 2007 but will gradually lower it to 5.1¢/gal after 2005.

A group of congressmen from farm states has filed a bill in the House to extend the subsidy, due to expire in 2000. Rep. Bill Archer (R-Tex.), House ways and means committee chairman, has been battling to end the subsidy. He said he would not accept an extension in the House version of the highway bill.

Six major U.S. oil and gas associations have urged the Senate to ratify the U.S.-Mexico Maritime Boundary Treaty to resolve jurisdictional claims in the Gulf of Mexico. The treaty would enable the nations to determine ownership of two areas beyond their 200-mile exclusive economic zones.

The U.S. recently received bids on lease tracts in one of those areas but said they will not be opened until the two nations agree on ownership (OGJ, Sept. 1, 1997, p. 30). Both countries signed the treaty in 1978. Mexico ratified it in 1979, but the Senate never voted on the measure.

Multinational oil firms continue to face opposition to E&D in South American rain forests.

At the Colombian government's request, the Organization of American States has issued a report on the activity of Oxy and Shell on Colombia's Samore block (OGJ, Apr. 21, 1997, p. 37).

The report recommends that Oxy and Shell suspend exploration on Samore until an agreement can be reached with the U'wa Indians, who, according to press reports, have threatened to commit mass suicide if exploration proceeds on their land.

Robert Wasserstrom, president of Terra Group, which is consulting for Oxy in the region, said, "As far as we understand it, the U'wa are divided into at least three groups. The leader of one group has made that claim. We're taking it seriously, but we don't believe that's the general consensus of opinion among the U'wa." In fact, says Wasserstrom, there is no consensus among the U'wa.

Oxy will not make a unilateral decision regarding the OAS recommendation but will discuss the matter with Shell. Wasserstrom says Oxy is awaiting official responses from the U'wa, ONIC (the national Indian organization of Colombia), and the Colombian government before proceeding.

The U.K. High Court has told the U.K. government, petroleum companies, and Greenpeace they must wait until this week for a ruling on whether Atlantic Frontier licensing policies must be reviewed.

The court originally convened on Sept. 23, supposedly for 2 days, to debate whether the government's licensing regime flouts European Union conditions (OGJ, Aug. 4, 1997, p. 30).

A U.K. Offshore Operators Association (Ukooa) official said just before presstime Oct. 1, "We are expecting the judge to make a ruling today." But, by mid-afternoon the same day, he had heard there would be a further delay and that the ruling would not be handed down until the following week, as the judge had not had time to complete his report.

If the court finds in favor of Greenpeace and supports a judicial review of Atlantic Margin licensing, the parties will be back in court for the review beginning Nov. 17.

Three thousand Shell refining and marketing staff in Europe face the ax in the next 2-3 years under a drastic shake-up intended to cut costs and make operations more "customer-focused."

Shell's European products businesses will be folded into a new entity, Shell Europe Oil Products, on Jan. 1. A main goal is "delayering management."

Phil Turberville, director for Shell oil products in Europe, said: "We will avoid duplication across countries and harness the benefits of common and best practices to develop competitive advantage across the business in Europe. Although costs are clearly a factor, the change is focused on long-term growth in an increasingly competitive business environment. We are already the leading player across Europe, but we need to improve our position in all markets where we choose to operate."

Shell sells 1.7 million b/d of oil products across Europe, representing sales of $20 billion/year. The company employs 19,000 European staff-15% of which may be cut-and operates 16 refineries and 13,000 retail sites.

India has devised an oil industry reform package that includes deregulating crude imports and refining and establishing an oil regulation commission.

The reform committee includes Petroleum and Natural Gas Sec. Vijay Kelkar, representatives from the Oil Coordination Committee and Tata Energy Research Institute (TERI), and senior executives of Indian Oil Corp., Bharat Petroleum, and Mangalore Refineries.

Also present at committee meetings were executives of private multinational oil companies such as Caltex, Mobil, and Conoco; merchant bankers from Goldman Sachs, J.P. Morgan, and Hong Kong & Shanghai Banking Corp.; and a World Bank representative.

An interim report based on the proposed measures will be prepared under the supervision of S. Pachauri of TERI and submitted to the petroleum ministry by mid-month. The ministry will respond by the end of October.

The reform package contains six key steps: deregulate crude imports, allow free import and export of products, grant refining companies rights to transportation links, allow independent refineries to build pipelines, gradually free marketing dealers' commissions, and liberate retail sales of products.

Some measures contain contingencies for government intervention under certain circumstances.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.