OGJ NEWSLETTER

Vice President Al Gore, sitting as president of the Senate, broke a tie vote last week, killing an amendment that would have blocked EPA from implementing an ethanol mandate for U.S. reformulated gasoline.

The 51-50 vote followed 5 hr of agitated debate and intense Clinton administration lobbying against the measure. The amendment would have denied EPA funding to implement the rule requiring renewable fuels to provide 30% of the oxygenate content of reformulated gasoline (OGJ, July 18, p. 29). The oil industry has challenged the rule in federal court.

Low oil and natural gas prices in early 1994 have reduced institutional investors' expectations for prices the remainder of the decade, NatWest Washington Analysis reports.

The consensus view of spot WTI prices points to an average of $18/bbl in 1994, $19.25/bbl in 1995, and growth of about 750/bbl/year the rest of the decade. NatWest says the view for next year is lower than all earlier surveys. Natural gas prices are expected to average $2/MMBTU in 1994, $2.10/MMBTU in 1995, with increases of 10cts/MMBTU/year thereafter.

Overall U.S. E&D spending in 1993 by companies in Arthur Andersen's latest reserves disclosures survey rose 11% to $14.5 billion, paced by a 21% increase among independents to $5.8 billion. Majors' E&D expenditures increased 5% to $8.7 billion. Independents increased U.S. exploration outlays by 18% and development spending by 26%, while majors held E&D spending increases in 1993 each to 5%. Meantime, non-U.S. E&D spending in 1993 by survey respondents fell 4% - the second consecutive yearly decline. Major company foreign E&D outlays dropped 6% to $24.9 billion, while independents' foreign E&D spending increased more than 5% to $5.8 billion.

Phillips, Anadarko, and Amoco found deeper pay in Mahogany field on Ship Shoal Block 349, 80 miles off Louisiana in the hot subsalt play of the Gulf of Mexico. The 2 Mahogany flowed at a rate of 4,366 b/d of oil and 5.314 MMcfd with no water through a 20/64 in. choke with 6,287 psi flowing tubing pressure. The discovery well, drilled last year, reached 16,500 ft and flowed at a rate of 7,256 b/d of oil and 7.3 MMcfd of gas (OGJ, July 18, p. 64). The 2 Mahogany was drilled to 19,100 ft, downdip from the discovery well to confirm sand continuity, test for deeper sand potential, and delineate water levels in the field. The zone productive in the discovery well was water hearing in 2 Mahogany. The well will be suspended for future completion, and a third well will start drilling immediately.

Nova Corp., Calgary, says earnings of $69 million (Canadian) on revenues of $867 million in second quarter this year are well below acceptable levels. It plans to reduce its 6,600-employee payroll in a restructuring program during the next 6-12 months but hopes to avoid layoffs with a voluntary departure program. The size of staff reductions will he better defined by the beginning of 1995.

The call on OPEC should hit 31.3 million b/d by yearend 1995, a U.N. report on energy E&D trends says, and 39.5 million b/d by 2000.

OPEC's share of world oil production now stands at almost 42% after increases of 500,000 h/d in 1993 and I million b/d in 1992. Saudi Arabia is still the world's largest producer with capacity of 10 million b/d. The report notes Saudi Arabia's productive capacity is not limited by geological constraints but is a function of investment in production and export facilities.

Reserves were pegged at 259 billion bbl at yearend 1993.

Kuwait is still mulling a plan to allow foreign participation in its oil sector, says Kuwait Petroleum (KPC), and a decision will not come before late 1994. KPC denies a report in the economic review Muashar, quoting Oil Minister Abdel Mohsen Midaj, that the emirate has backed down on the plan. A study on the plan will be submitted at the end of 1994, says KPC. Late last year, six firms reportedly formed a group to vie for E&D opportunities in the country (OGJ, Dec. 23, 1993, Newsletter).

London's Centre for Global Energy Studies expects North Sea output to fall 400,000 b/d in the third quarter when a number of major fields are shut down for routine maintenance. Output is expected to bounce back in the fourth quarter with an average 700,000 b/d rise from third quarter levels, with new fields coming on stream contributing 300,000 b/d.

Hungarian Teleconstruct Corp. (HTel) agreed in principle to build and own a gas pipeline system in a joint venture with Hungarian national gas company Tigaz RT, which supplies gas to about 560,000 customers.

HTel will start a $6 million pilot project in early 1995 in the Borzson-ycom region to extend the present pipeline to about 6,000 added customers.

HTel will hold 75% interest in the venture and Tigaz the remainder.

HTel's strategy includes a later extension to connect another 50,000 customers at a cost of more than $50 million, for which the company plans to explore possible joint ventures with foreign partners. HTel anticipates gas prices in Hungary will reach European Community rates within the next 12-18 months. About half of Hungary's gas supplies are from domestic production and the balance from the former Soviet Union.

Petrochemical investments are on the uptick. Iran plans to invest $4.1 billion to expand its petrochemical industry the next 5 years. New projects will mainly concentrate on exports. Oil income accounts for at least 80% of national revenue. The country's oil income took a hit last year due to low prices on the international market.

And at least three major Japanese firms are vying for a proposed petrochemical complex project northwest of Manila, Agence France Presse reports. Raul Manglapus, chairman of Philippine National Oil Co., says Mitsui, Marubeni, and Nissho Iwai are interested in the project at Limay, Bataan province. Marubeni and Manila's JG Summit are competing with Mitsui and Petrochemical Corp. of the Asia Pacific to build a polypropylene plant.

The Marubeni JG Summit combine will compete with Nissho Iwaii and Mitsui for a polyethylene plant. Nissho Iwai and Manila's Mabuhay Vinyl Corp. are interested in building a PVC plant. The complex is aimed at launching a petrochemical industry in the country. Manglapus says only one facility for each type of plant will be built because of the limited Philippine market. Efforts to build a petrochemical plant in 1979 and the late 1980s failed due to lawsuits and other controversies.

Groundbreaking for the polypropylene and PVC plants is expected next year, and operations are to start in 1997.

Meantime, Union Carbide and Italy's EniChem plan a 50-50 venture to produce and market polyethylene in Europe. The venture expects first quarter 1995 start-up. It will use Unipol process technology and own EniChem's polyethylene operations in Italy, France, and Germany. The facilities have a combined low, linear low, and high density polyethylene capacity of about 2.9 billion 1b/year. EniChem's olefins crackers at Brindisi and Dunkirk will be included in the TV. Added ethylene will come from other EniChem crackers. Initially the company plans an 880 million II)/year Unipol PE process unit at EniChem's Brindisi plant, with more being added.

South Korea's Daewoo Motor Co. has developed a compressed natural gas fueled car (see related story, p. 19).

The project took 19 months to complete and $2.6 million. Of that, $1.25 million was government supplied. The car features a multipoint gas injector for greater fuel efficiency and lower emissions, is driven by a 1,598 cc engine, can go 400 km on one fueling, and has a maximum speed of 170 km/hr. Daewoo plans to begin selling the car overseas next year.

China's petroleum industry is getting a financial boost. A group of 11 Japanese and European banks agreed to lend a total of $193 million to an oil combine in China in the first foreign loan package to a Chinese private sector group. The money will help fund a proposed 100,000 b/d refinery in Dalian in eastern China to be built by West Pacific Petrochemical Co. Estimated cost of the project is $777 million.

China National Petroleum Corp. plans to start construction this fall on a pipeline to move gas from Changqing oil field to customers in the provincial capital at Xian. Design length of the pipeline is 488 km, capacity 54 MMcfd. Groundwork for the project started in 1990. The project is to be complete by yearend 1996.