OGJ NEWSLETTER

A flurry of labor actions in several countries threatens to disrupt crude and products supply.

About 50,000 oil workers went on strike last week throughout Brazil following introduction of that country's new currency July 1.

The walkout affected Petrobras administration, refining, and marine terminals operations. Unions are demanding a 50% pay hike among other changes, but the government isn't likely to yield for fear of reigniting inflation-the rationale for introducing the new currency.

Nigeria's oil workers late last week continued a July 4 strike intended to pressure Nigeria's military government into releasing arrested opposition leader Moshood Abiola. Abiola, widely considered the winner of Nigeria's June 1993 presidential election, which the military junta shelved and then retained power, was arrested for treason last month after declaring himself head of state. With the strike crippling refined products distribution and causing service station lines around the country, union leaders predicted the strike would spread to crude oil production facilities.

About 1,000 oil workers went on strike in Usinsk in Russia's Komi republic June 30 over nonpayment of wages and other demands, threatening to seize and shut down operating oil field facilities. Local authorities still were negotiating at presstime last week and reportedly secured about 8 billion rubles to pay workers, but union officials claim workers are owed more than 50 billion rubles in overdue wages and other promised compensation.

Arab countries are expected to spend $100 billion through 2000 to increase crude, gas, and downstream productive capacities, says Arab Petroleum Investments Corp. Its study forecasts outlays of $55 billion to boost sustainable crude productive capacity by Arab countries to 24.7 million b/d.

Saudi Arabia is expected to see the biggest jump in capacity with a potential to increase sustainable oil production by 1 million b/d by 2000.

Kuwait, Libya, U.A.E., and possibly Yemen are thought able to each boost capacity by 500,000 b/d by 2000. The study says the region will spend about $23 billion to boost gas production and utilization and $19-22 billion to expand refinery and primary petrochemical production.

The government of Kuwait has filed claims amounting to almost $95 billion with U.N. Compensation Commission in Geneva for damages from Iraq's invasion in 1990. The claims include one relating to damage to oil reservoirs and one for loss of crude oil after Iraqi forces set Kuwait's oil fields ablaze. Further claims are expected in coming months.

India may tie its oil purchases to domestic petroleum investment by foreign oil suppliers, particularly those in the Middle East.

New Delhi, seeking about $23 billion in investment capital during 1994-96 to revitalize its petroleum industry, also wants to cut petroleum imports during fiscal 1994-95 to 480,000 b/d from 600,000 b/d in fiscal 1993-94. Of that total, about 300,000 h/d would be crude from the Persian Gulf.

Iran, Kuwait, and Oman are pursuing refinery or pipeline projects in India, but Saudi Arabia has no major investment slated there yet.

Several joint ventures could boost world refining capacity.

Turkey wants Kuwaiti help in building two domestic refineries.

It ties to a larger scheme whereby Turkey would establish itself as a major refining center taking crude from Central Asian and Middle East producers and selling products to Europe. The Turko-Kuwaiti plants would process Kuwaiti crude and give Kuwait access to Turkey's LPG market.

Philippines Energy Department has approved plans by Filipino-Indonesian joint venture Kaibigan Holdings Inc. to construct a $2.2 billion, 140,000 b/d export refinery on Mindanao's Nonoc Island.

Qatar plans a $400-500 million upgrading and expansion of its refining capacity that includes expanding the 60,000 b/d Umm Said refinery to 72,000 b/d and building a new 30,000 b/d refinery fed by condensate from Qatar's North Dome gas field. Contractors must provide their own financing and will be paid in refined products after work is complete in early 1998.

Venezuela's Pdvsa is seeking joint venture investors to participate in three proposed Orimulsion projects, each costing about $350 million and producing about 5.2 million metric tons/year-equivalent to about 100,000 b/d of oil-of the extra heavy Orinoco crude/water/surfactant emulsion boiler fuel that competes with coal in electric power plants.

Pdvsa unit Bitor pegs Orimulsion demand at 20 million tons/year by 2000 vs. current productive capacity of 5.2 million tons/year at its Morichal emulsifying plant. Each project would entail drilling about 100 producing wells and building several flow stations and an emulsifying plant.

Bitor has a green light from Pdvsa for the first project's construction to start in January and be complete by 1997. It has lined up long term supply contracts totaling 7.2 million tons/year with customers in the Far East, U.K., U.S., and Canada. Last month Bitor signed its second Far East marketing joint venture-the first was with Mitsubishi-with China North Industries Corp., targeting early 1995 deliveries to coastal Chinese power plants.

An exploration licensing round for the Falkland Islands offshore area will be unveiled soon.

That will follow a high level meeting of U.K. and Argentine government representatives in Buenos Aires this month to discuss exploitation of hydrocarbons in the disputed territory, U.K. Foreign Office said.

A license round schedule is thought to be on the agenda. British Geological Survey (BGS), Edinburgh, the last 2 months has been processing seismic data acquired recently in an Offshore Falklands survey. BGS contends the Falklands shelf is a high risk, high cost area that has significant potential for discovery of giant oil fields (OGJ, Jan. 17, p. 70). BGS hopes to brief Falklands officials in August on acreage parceling and selection.

The U.S. Gulf Of Mexico's sizzling subsalt play is getting hotter.

Phillips and Anadarko gauged a combined flow rate of 4,431 b/d of crude oil, 7.8 MMcfd of natural gas, and some water from four zones in testing the Teak subsalt prospect on South Timbalier South Addition Block 260, the play's eastern-most strike to date (see map, OGJ, June 20, p. 30). The wildcat tapped part of a three block prospect below the salt at 12,000-16,600 ft measured depth. Evaluation is under way to determine commerciality.

An industry-government committee established to set the royalty value of gas produced on U.S federal lands has decided to seek a nonbinding consensus by September (OGJ, June 6, Newsletter). Many committee members are from trade groups that could not hammer out a binding agreement. The panel scheduled more meetings July 11-13, Aug. 8-9, and Aug. 24-25, all at the Denver Federal Center in Lakewood, Colo.

The fate of a money-losing $1.6 billion heavy oil upgrader at Lloydminster, Sask., is being debated by its government and corporate owners (see related story, p. 17). The 48,000 b/d upgrader, completed in 1992 and operated by Husky Oil, has incurred cost overruns in construction and is grappling with a price differential between heavy oil it processes and light crude it produces that is $2 (Canadian) below breakeven. Interests are Husky 26.67%, Ottawa 31.67%, Alberta 24.17%, and Saskatchewan 17.5%.

Ottawa and Alberta say they have no more money to put into the project and want to sell their interests. Saskatchewan says its options would he determined at the negotiating table. Any sale must be approved by all interest owners. Ottawa has invested $530 million in the plant since 1988, and Alberta has written off $350 million to date on the project.

The trend in E&D in the former Soviet Union has swung toward production sharing contracts from joint ventures with domestic companies.

"Everybody is moving away from joint ventures because there are 43 tax knobs to be tweaked," said Helge Haldorsen, Norsk Hydro vice-president for international E&P. Hydro has great hopes for its agreement with Amoco for joint E&D in the Barents and Pechora seas off northern Russia (OGJ, June 6, p. 40). The two companies are expected to pursue any developments as PSCs the same way the 4MS group is approaching the $10 billion Sakhalin II development (OGJ, July 4, p. 32). "We are prepared to be patient," said Haldorsen. "There are 50 laws lower down the Russian legal hierarchy that conflict with recent PSC laws." Moscow appointed 15 committees to fix the conflict with the 50 existing laws, said Haldorsen.

"Everybody is more realistic now. Four major PSCs are waiting on legal problems to be fixed before any investment will be made."