Is the stage being set for another oil price spike by 2000?
While many in industry expect long term low oil prices, one analyst says the scene is set for another oil price shock by the turn of the century.
Jean Laherrere, Petroconsultants, Geneva, says that when Middle East swing producers supply more than 30% of world oil, they Will realize their power in the market and hike prices. Those swing producers - Iran, Iraq, Kuwait, Abu Dhabi, and Saudi Arabia - provide 27% of world oil needs.
Under a new Petroconsultants oil depletion model, they will supply more than 30% by 2000. Petroconsultants says prices are now anomalously low, with oil traded in a short term market overhung by the Iraqi embargo.
The analyst expects world oil production to peak at 65.6 million b/d in 1999, then decline to 52.6 million b/d in 2010 and 17.5 million b/d in 2050.
Qatar is about to undertake one of the biggest single step capacity increases ever for an ethylene plant. Qatar Petrochemical Co. (Qapco) let a $120 million turnkey contract to Technip to expand its ethylene plant to 525,000 metric tons/year from 304,000 tons/year. Technip built the plant, which came on stream in 1980. It will use the Topkin technology package that includes progressive separation technology by Technip/TPL and hot section and cracking furnace design by Kinetics Technology International. Start-up is scheduled for May 1996. Qapco also let a $50 million turnkey contract to Technip Italian unit TPL for design and construction of utilities expansion.
The Far East petrochemicals surge continues with a contract for design of a new Singapore aromatics plant ahead of official approvals.
Exxon, Amoco, and China American Petrochemical Co. Ltd. (Capco) let contract for plant design to Foster Wheeler Energy Ltd., Reading, U.K.
Foster Wheeler said approval of the project is expected in mid-1994, with mechanical completion of the plant likely by late 1996 or early 1997.
The plant will be designed to produce 350,000 tons/year of paraxylene, 95,000 tons/year of benzene, and byproducts. It will be built next to Esso Singapore's 230,000 b/d refinery on Pulau Ayer Chawan island. Interests in the plant are Exxon 50%, Amoco 40%, and Capco 10%.
Elf's board has approved a draft agreement with eastern German privatization agency Truehandanstalt covering construction of the 180,000 b/d Leuna refinery in the former East Germany. Russian state oil companies Rosneft, Surgutneftegaz, and Magionneftegaz will take a 24% stake in the project. After the plant's built, Thyssen will assign its 33% interest in the project to eastern German chemicals company Buna GmbH. Original plans called for Thyssen to hand over its stake to Elf once the refinery was completed.
Buna in turn will be able to purchase 33% of the former Minol service station network in eastern Germany. That leaves Elf with 43% of the project vs. what once was to have been a 100% stake, but it must relinquish rights to part of the 900 Minol stations in exchange for building the refinery.
Construction will get under way this month. Elf Pres. Philippe Jaffre, who had sought a lower Elf profile on the project, now sees a profit margin of 5-8% vs. earlier projections of 15% but noted abandoning the project would hurt Elf's image in Germany and its strategic development in Europe.
Viet Nam will offer new exploration and production concessions near offshore White Tiger oil field, which accounts for all of the country's oil production. U.S. companies are likely to figure heavily in the bidding with the recent lifting of the U.S. trade embargo on Viet Nam (OGJ, Feb. 14, p. 42). Terms will involve 5 year exploration rights and 20 year production rights, and companies will be required to give 25-40% of their output to Hanoi as a royalty and 30% of the balance to Petrovietnam.
As expected, Russia has completed negotiations with a group of Marathon, Mitsui, McDermott, Mitsubishi, and Royal Dutch/Shell for a production sharing contract covering development of Piltun-Astokhskoye and Lunskoye fields off Sakhalin Island (OGJ, Mar. 28, Newsletter).
Ministry of Fuels & Energy and Sakhalin II oil and gas project group representatives signed a protocol in Moscow Mar. 22. The group next must form a joint venture company to seek Russian government approvals before the proposed contract can be signed.
BP has invited tenders from three groups for the first development project, Foinaven oil field, in the sizzling west of Shetlands play off the U.K., reports Reading & Bates, member of a group that includes Brown & Root, Single Buoy Moorings, and FMC. Tenders will come in the form of paid engineering studies for fast track development using floating production technology. The successful bidders will provide one or more floating production vessels, and project scope is to include topside process equipment, subsea equipment, and production offloading systems. BP is expected to award a pre-sanction contract to one of the groups in June for the project on Block 204, owned 80% BP and 20% Shell (OGJ, Feb. 14, Newsletter).
Spanish petroleum companies step up capital spending. Repsol plans a 4 year, $6.7 billion budget that compares with outlays of $1.3 billion in 1993 and $1.56 billion in 1992. It calls for $1.9 billion for E&P, including purchase of low risk reserves and development in Spain, Latin America, North Sea, North Africa, and Far East, $1.42 billion for refinery revamps, and $328.5 million for completing pipeline upgrading. Plans to spend $1.13 billion in its natural gas sector targets boosting gas generated profits beyond the current 25% of profits. Of this, $620 million is earmarked for the 45% Repsol owned Gas Natural and $511 million for Repsol's entry into Portuguese and French butane/propane markets. Its Petronor and Tarragona refineries will supply France, and its La Coruna refinery Portugal.
Cepsa plans to spend $219 million the next 2 years to comply with European Union environmental rules. That covers mainly installation of treating units to cut gasoline sulfur levels to 0.05 wt % by October 1996 from the current 0.2%. The new units are to be fully on line by yearend 1996.
Canadian oil companies must improve and defend their environmental practices to avoid the kind of damaging attacks aimed at the forest industry, says Canada's natural resources minister.
Anne McLellan, noting misrepresentations and half truths are threatening Canadian forest products markets in Europe, said energy companies must ensure their markets are not threatened in the same way. McLellan said companies must find more environmentally sustainable approaches to economic development. The minister told Canadian Association of Petroleum Producers she won't implement solutions without fully consulting industry.
McLellan said the government wants to find a proper balance between environmental objectives and cost competitiveness, adding her doubt that a carbon tax is a cost effective way to cut CO2 emissions.
Rep. John Dingell (D-Mich.), chairman of the U.S. House energy committee, plans to investigate EPA's compromise with Venezuela on imports of reformulated gasoline (OGJ, Mar. 28, Newsletter).
Dingell said, "It appears the State Department and EPA have entered into an agreement with Venezuela that cannot be changed, even slightly, regardless of what is said by the public as part of the rulemaking. That makes a mockery of the rulemaking process."
A 1990 law protecting the Great Lakes could require Amoco to spend $190 million at its Whiting, Ind., refinery.
Timothy Scruggs, refinery manager, told a congressional committee EPA may mandate tougher water discharge limits and a cooling system that no longer uses Lake Michigan water, both of which "will not result in any measurable environmental benefit." He said EPA should "first evaluate the contribution of all pollutant sources to the Great Lakes and prioritized control measures based on their environmental benefits and cost effectiveness."
California Air Resources Board has approved a fifth alternative diesel formula, developed by Tosco.
CARB's rule for a cleaner burning diesel allows California refiners to develop alternative formulas that meet CARB requirements to reduce particulate emissions 25% and NO, emissions 7%. Like other state refiners, Tosco started producing reduced sulfur diesel in October 1993. However, independent refiners were allowed more time to cut aromatics content, and CARB granted Tosco a variance to exceed its sales limit on non-spec diesel after diesel shortages swept the state and spiked prices there last fall.
As part of the approval, Tosco agreed to give up its variance and
meet standards set for majors. The variance had brought protests and lawsuits from some of the majors (OGJ, Mar. 14, Newsletter).
Meantime, a California consultant claims to have found the smoking gun - in the controversy over widespread reports of engine damage tied to CARB spec diesel. Senyak Consulting, Santa Rosa, claims the state is mandating a diesel fuel that causes O-ring and seal failure and subsequent engine damage. He cites a CARB staff report that clearly demonstrates that higher aromatic content of the new spec fuel caused fuel system leaks in southern California. Senyak concluded, "There is plenty of data to suggest California diesel fuel needs a Department of Transportation warning label."
Apparent culprit is formation of peroxides possibly related to hydrotreating needed to produce the new fuel. "At a minimum," Senyak said, "California ... was premature in implementing a regulation without adequate knowledge of its effect."
California Gov. Pete Wilson has urged President Clinton to support an effort to lift the congressional ban on exports of Alaskan North Slope crude (see related story, p. 82). California Independent Petroleum Association, which says a surplus of ANS oil on the West Coast is depressing prices, obtained Wilson's support. Also, 40 California legislators have signed a letter to Clinton asking for an end to the ban.
Companies pursuing subsalt prospects dominated a barnburner Central Gulf of Mexico OCS lease sale last week in New Orleans.
Anadarko, Phillips, and Amoco figured in apparent high bids accounting for nearly half the sale's $277 million total, compared with c[ 1993 central gulf sale total of about $69 million. Anadarko led with apparent high solo bids of more than $74.5 million, besting eight other bidders for Ship Shoal South Addition Block 337 with an apparent high bid of $40,044 457, the sale's top bid. Anadarko/Phillips apparently won another nine bids totaling $46,053,576. Amoco in 11 solo offers bid a total of $14,710,828.
