OGJ NEWSLETTER

Signs abound of the North American gas industry coming of age (see related story, p. 26).

Record U.S. and Canadian gas demand in January pushed TransCanada to post a monthly and several daily delivery records. TransCanada system deliveries averaged 7.3 bcfd in January, up 17.2% from the prior year. On Jan. 18, TransCanada delivered a record system-wide 7.9 bcf, of which Canadian markets took a record 1.5 bcf. On Jan. 21, TransCanada delivered a record 3.5 bcf to U.S. markets. In eastern Canada, the pipeline delivered 126.5 bcf in January, 29.2 bcf beyond firm service obligations. Its deliveries to the U.S. last month totaled 98.9 bcf, 7.4 bcf beyond firm service obligations.

The subsequent arctic blast that rolled across Canada in early February pushed spot prices for Alberta natural gas to a record high as utilities scrambled for supplies. Marketers reported one small volume sale at more than $7 (Canadian)/Mcf, although most prices were $3.50-4/Mcf. The recently established Price Waterhouse AECO C Hub Spot Gas Price Index reported an average price for gas trades of $3.50/Mcf. The index represents an average price for gas trades at AEC's storage facility in South Alberta.

The future of the U.S. Northeast gas market through 2000 lies somewhere between the rosy predictions of recent years and the disappointed pessimism now in vogue. So concludes a multiclient study completed by Washington consultant Crossborder Services. It found that: 700 Mmcfd-1.5 bcfd of the 2.3 bcfd of capacity currently proposed would be surplus, only three of the eight major proposals to add pipeline capacity are almost certain to proceed, and most of the new capacity targets South New England and largely overlooks other promising subregional markets.

U.S. gas pipeline information systems took another step toward the future last week, when Panhandle Eastern launched Multipipeline Access (MPA), an upgrade of its Link computer based gas pipeline information system. MPA allows customers using personal computers with Windows software to transact business at the same time on any or all four Panhandle interstate pipelines, as well as view the Link electronic bulletin board.

Traditional gas industry electronic communication setups limit a user to gaining access to data on only one pipeline at a time. Panhandle could add simultaneous access to data about other interstate pipelines that opt to join its 1 Source Corp. electronic information network.

The brightening outlook for North America's gas industry is attracting more foreign investment. Norway's Statoil will acquire a 38.1% share in U.S. gas marketer/distributor Eastern Group. Eastern sells about 70 bcf/year to U.S. Northeast customers. Statoil will provide Eastern a minimum 200 bcf of gas for 5 years, giving Eastern long term security of supply needed to win contracts with electricity generators. Statoil will buy gas on the U.S. spot market or exchange it for crude oil imported from Norway via its U.S. unit. Shipping Norwegian gas to the U.S. is not a consideration. The deal will bring Statoil added revenues and a chance to study U.S. gas market trade patterns from the inside, which will help it deal with Europe's changing gas market. Among other recent similar deals, Ruhrgas acquired 20% of a Tenneco Gas unit (OGJ, Feb. 21, p. 34), and British Gas acquired Canadian LDC Consumers Gas for $943.5 million in 1990.

Oil and gas companies operating off Norway can expect no tax concessions. Tax issues weren't expected to he a consideration in an energy white paper expected to come before the Norwegian parliament late last week. Norwegian Oil Industry Association (OLF), the, Stavanger based operators' group, submitted a status report on Norway's offshore sector to Jens Stoltenberg, minister of industry and energy. It found that levies have risen since Norway's tax regime was established in 1975, while oil revenues have dropped considerably. Stoltenberg told operators he would respond to the report via the white paper but that it would not deal with tax issues. OLF also said Norway's operators will have to cut development and operating costs 50% the next 5 years to make a profit at current low oil prices. OLF said future field developments such as Norne, Njord, and Visund will need a 30% cut in capital outlays to remain viable. Possible cost cutting steps include long term supplier agreements and increased use of standardized equipment.

Announcement of the first U.K. North Sea platform to win safety case approval under recent legislation was expected at presstime last week.

Health & Safety Executive expects to award about half a dozen safety cases to operators soon but will not reveal details.

Hungary's MOL and Austria's OMV have signed contracts to lay the first gas pipeline linking Hungary with western Europe's gas grid.

The Hungary-Austria-Gasleitung (HAG) pipeline will extend 120 km from Baumgarten, Austria, to Gyor, Hungary. HAG, at 28 in. and nominal pressure of 1,040 psi, will carry as much as 431 MMcfd in either direction. Start-up is slated for fall 1996. Ruhrgas also recently signed an initial agreement for supplies of gas to MOL (OGJ, Feb. 2 1, p. 34).

Argentina is seeking outside investment for a $1.75 billion, NGL based petrochemical complex planned for western Neuquen province.

Plans call for building a gas fractionation plant and satellite petrochemical units fed by its ethane, butane, and propane output. The Neuquen government has contacted several U.S. majors and E&C companies seeking sponsors for the project. Bechtel conducted a feasibility study for the project, funded by the U.S. Trade Development Agency. There are concerns over a possible shortfall of natural gas supplies for the project because of growing domestic demand and growing exports to Chile.

Bangladesh has awarded a rare offshore production sharing contract in the Bay of Bengal to Cairn Energy plc, Edinburgh, and Holland Sea Search Holding NV, The Hague, covering oil and gas exploration on the 8,621 sq km Block 19 (see map, OGJ, Nov. 1, 1993, p. 3 1).

The block includes the 242 sq km Kutubdia gas field area, where some appraisal and development drilling has occurred. Initial exploration term covers 7 years, development/production 25 years. Plans call for new gravity and seismic surveys and reprocessing and interpreting old seismic data and drilling at least two exploratory wells at a cost of $25 million.

Thailand is shaping up as the next candidate for LNG imports, part of plans to meet its 10%/year growth in demand for electric power.

Petroleum Authority of Thailand is negotiating with LNG suppliers in Australia, Brunei, Indonesia, and Malaysia for contracts to supply a multibillion dollar, 4 million kw electric power plant fed.by LNG imports. Contracts with one or more suppliers are expected to be signed by midyear. For the Thais, generating electricity with LNG is expected to cost $700/kw vs. $1,100/kw for coal with desulfurization and emission control equipment (OGJ, Feb. 21, p. 34). The power plant probably will require a joint venture of Electricity Generating Authority of Thailand and private sector interests.

Italian firms are making further inroads in joint ventures with Russian companies. Agip will help Lukoil further develop Vostochno Pridoroznoye field in western Siberia while Lukoil participates in Agip's development of Tunisia's Enfida and El Haouaria offshore fields. The Tunisian venture is the first outside the former Soviet Union for Lukoil, Russia's biggest oil company with production of 1.06 million b/d. Vostochno Pridoroznoye, currently on stream, is expected to export 100 million bbl of crude the next 20 years, with Agip's share 35 million bbl. Meantime, Italy's SACE, the state company for export financing, will provide loan guarantees for upgrade of Russian gas pipelines. ENI's Nuovo Pignone and Snamprogetti are negotiating sale of $2 billion in equipment to Russia for the pipeline work and had been awaiting the guarantees to proceed with the sale.

With timely approval by Moscow, Marathon and partners could begin work in Piltun-Astokhskoye and Lunskoye fields off Sakhalin Island by midyear, Marathon Pres. Victor Beghini said. He noted Russian and Sakhalin group officials have concluded negotiations on commercial aspects of a production sharing agreement (PSA). Still needed before work can begin is issuance of a PSA, approval by Russia's parliament, and passage of stabilization hills to guarantee the project's tax legal, and financial treatment.

"I don't think any government can guarantee there won't he new taxes for 40 years," Beghini said. "But we want them to understand that we do not want a plethora of new taxes forced on the project after a major capital investment."

Despite Sakhalin Island's brief weather window, prompt Russian approvals would allow the Marathon group to collect 3D seismic data over the fields and drill a wildcat soon, Beghini said.