OGJ NEWSLETTER

Amid the recent decline in oil prices, Persian Gulf producers seek to ensure that importing governments don't step into the breach with a flurry of taxes, notably a carbon tax to curb greenhouse gas emissions.

Sheikh Hamad ibn Jassim al-Thani urged Arab nations to cut imports from the European Union to retaliate for proposed EU energy taxes. Noting EU currently has a $12 billion trade surplus with Arab states, he called for reciprocal quotas and taxes on Arab imports of EU goods, U.A.E. daily al-Bayan reported. According to an Oapec study, energy taxes net the EU threefold more than OPEC nets from oil exports. Those taxes jumped to $57.75/bbl in 1992 from $39.33/bbl in 1988, compared with the OPEC basket price rising to $18.42/bbl from $14.24/bbl in the same period. A study by Arab Oil & Gas Co. found OPEC earnings have plummeted by 65% since 1980, falling in real terms to $55.3 billion in 1992 from $160.6 billion in 1980. This came when OPEC nations' population soared to 472.3 million in 1992 from 289.3 million in 1974, plunging per capita income to $117.60 from $415.70.

Iran plans to spend $1.9 billion to build a worldscale olefins complex at Isfahan in Central Iran.

Construction of the country's fifth olefins complex will be financed through buyback of products. Capacity is pegged at 120,000 tons/year. Iranian companies are expected to handle construction and about 20% of engineering, with about 25 western contractors in line for work. A tender is expected sometime in May for the project, scheduled for completion in 1998.

Iraq wants Russia to resume development of giant West Qurna oil field. An Iraqi delegation led by an adviser to Saddam Hussein earlier this month met with several Russian ministries and departments, with a view to starting work anew when U.N. sanctions are lifted. Under an April 1984 pact, the former U.S.S.R. was to develop the southern Iraq field under a contract financed by a $2 billion soft credit facility. Oil production was to rise in two phases to 600,000 b/d. The former Soviet firm Technoexport was responsible for the first, 200,000 b/d phase and had installed much of the field's surface facilities when Iraq invaded Kuwait in August 1990, and the Russian project team left. In early March Iraqi officials visited Elf and Total in Paris to discuss projects that could be pursued once Iraq returns to full exports of oil. Elf said nothing concrete came from the talks and nothing further will happen until the U.N. embargo on Iraqi exports is lifted.

Add Russian and Pakistani oil firms to the privatization target list.

Lukoil, Russia's biggest state oil company, proposes the state share its interests in the company with Russian citizens. Lukoil wants Russia to make a public offering of a 10% stake during the next 3 years. If the idea flies, Lukoil may ask that a previously frozen 16.43% tranche of stock be sold to Lukoil employees, leaving the Kremlin with 18.57% and Lukoil officers with greater control over the vertically integrated company seen as the most successful of three such Russian "majors" created a year ago.

Karachi has decided to privatize state owned Oil & Gas Development Corp., reports Pakistani daily Dawn. OGDC Chairman Gulfaraz Ahmad told the paper steps were under way to prepare for a phased public offering--first by restructuring the company's charter and balance sheets.

A group of western companies planning to take a 49% stake in the Kralupy and Litvinov refineries in the Czech Republic is puzzled over delays in government approval for the scheme.

Royal Dutch/Shell and a combine of Agip, Conoco, and Total submitted a joint bid to the Czech government in February at the government's request. Shell and the combine had submitted separate bids for the two refineries in 1992. Now it appears the government is divided over whether to bring in foreign investors under privatization or keep it in Czech hands. The Czech economic council will make a decision this month.

"Members of the consortium find it difficult to understand the reluctance of the government to come to a decision on the offer made by the western oil companies to inject more than $350 million of capital into the Czech Republic," Shell said.

Phillips continues its drilling footage record spree in the soft sand of U.K. North Sea Judy field. Santa Fe Drilling Co. (North Sea) Ltd. claims a world record of 7,255 ft in 24 hr using the Galaxy I heavy duty jack up.

The record was set with Phillips' 30/7a-P6 well and breaks the North Sea record in Judy field of 6,290 ft in 24 hr (OGJ, Mar. 28, p. 39).

Total may have a world class gas field off Tierra del Fuego. It gauged flow rates of 17 MMcfd of gas and 265 b/d of oil in 3 Carina and 16.5 MMcfd in 4 Carina off the Argentine island territory. The earlier 1 Carina and 2 Carina wells each flowed 16 MMcfd. Total and partners Deminex and Bridas are taking their time in delineating the field because the pipeline that carries Total oil and gas from Tierra del Fuego's Hydra and Canadon-Alfa fields to Buenos Aires is at capacity.

Cambodia has its second hydrocarbon find. Enterprise and partners drilled an oil and gas discovery in March and disclosed it in mid-April, saying it is too early to tell if it is a major strike. Cambodian officials indicate the crude recovered has a low paraffin content. The find, on Block 2 in the Khmer trough, follows report this year of a small oil find, the country's first, by a Japanese group in the Khmer trough (OGJ, Feb. 21, p. 42). Meantime, Premier next month will spud the I Kaoh Tang wildcat, projected to 3,609 m on Block 4 in the Khmer trough, on a farmout from Idemitsu.

Taiwan's Formosa Plastics Group is studying a plan to spend more than $450 million to build a fleet of crude oil tankers.

FPG plans to order six to eight 200,000 dwt vessels to supply crude to the 300,000 b/d refinery to he built at FPG's Mailiao naphtha cracker complex. FPG has asked Taipei permission to expand capacity at the refinery, the first to be operated by a private company in Taiwan, to 450,000 b/d.

Taiwan's Energy Commission so far has refused the expansion because of fears the bigger capacity together with projects by Tuntex and state owned Chinese Petroleum Corp. (CPC) will cause a capacity glut.

Meantime, Taiwan is casting about for more LNG supplies. CPC will hike its purchases of LNG from Indonesia to 700,000 metric tons/year from 500,000 tons/year. And CPC is negotiating for purchase of LNG from Qatar, last month signing a letter of intent hut holding a final contract for agreement on price. CPC also is mulling exploration for gas in Qatar.

Shell Australia plans to cut annual refining and marketing operating costs by $100 million (Australian) by yearend 1995. This will involve 300 job losses in 1994 after 200 layoffs last year. "We have invested nearly $1.5 billion in refining and marketing business over the last 4 years," Shell said. "We simply must get more out of this asset base."

Another oil field has started up on Alaska's North Slope. After years of permit delays that saw the project transformed from an offshore development with gravel island and causeway, BP started up Niakuk field Apr. 12 as a slant drilled onshore project at Heald Point in the shadow of Prudoe Bay facilities. Production is 15,000 b/d of oil from five wells, expected to peak at 25,000 b/d in 1995 from 14 wells. BP cut project costs to $110 million-lopping off $20 million from projected costs just since construction began in August 1993--from an original design estimate of more than $250 million.

U.S. offshore operators got a boost last week when the Clinton administration offered its support for a deepwater royalty relief bill pending in Congress. It would give Gulf of Mexico producers a royalty holiday for new production in 200 m or more of water until they recover capital costs.

Four Corners Pipe Line will keep part of its Line 1 crude oil pipeline shut down indefinitely because of damage from the Jan. 17 earthquake in Northridge, Calif. Line 1, a 10 in., 130 mile common carrier pipeline that moves about 50,000 b/d of crude from oil fields in Kern and Ventura counties to market, will remain out of operation from Newhall to the South Bay area of Los Angeles County. Oil normally moved via Line I is being rerouted to Four Corners Line 63 until further notice.

Four Corners is studying alternatives, including operating Line 1 only from Kern County to Newhall for connection to other lines into the Los Angeles basin, which would limit shippers to 60% of prequake volumes.