OGJ NEWSLETTER
U.S. Industry Scoreboard 3/20 (71520 bytes)
A number of former Soviet Union petroleum projects involving western oil companies seem to be faring poorly compared with those involving other former eastern bloc nations.
Elf has all but given up hope of implementing its production sharing contract signed in 1992 with Moscow. Legislators have yet to approve the 1992 PSC, then touted as the first in Russia, which involves exploration of a vast area east of the Volga. The PSC consists of the 12,000 sq km Saratov area and the 7,000 sq km Volgograd area. Because of roadblocks by local authorities, Elf recently dropped efforts to explore the Saratov area. It holds faint hope for the Volgograd area, providing new Russian legislation on production sharing is forthcoming that would give Elf needed tax relief to proceed.
An Elf official said, "The Russians no doubt would much rather the money were spent on already discovered fields, of which there are plenty, rather than on new discoveries." Elf is now looking for other ways of working in Russia, such as joint ventures for field development or service contracts on producing fields.
That joins other megaproject disappointments for foreign companies in Russia, notably supergiant Tengiz development, currently producing well below expectations, and the Sakhalin Island development projects, all still in limbo.
Meanwhile, Elf's other FSU PSC, signed with Kazakhstan for the Temir field area, also has proved disappointing. Elf's first 5,000 m well there was dry after $95 million in exploration outlays. A second, shallower well with much smaller potential is planned there this summer.
The FSU was to be one of three legs of Elf's worldwide focus for boosting reserves, along with the North Sea and the Gulf of Guinea, but the French giant now is looking elsewhere, notably Iraq's Majnoun oil field near Iran's border, where it expects to sign a PSC soon after sanctions are lifted. The war torn area would require mine clearing and infrastructure development, but Elf says the field has the potential to produce 600,000 b/d after about 6-7 years.
At the same time, there is progress on Russian pipeline projects involving other countries formerly in the Soviet sphere of influence.
Preliminary work is to begin in early April on the Yamal-western Europe gas pipeline via Belarus and Poland, say Moscow press reports.
The $8-10 billion project, managed by Russia's Gazprom, will give Russia an alternative route for gas exports. In Poland, Europol Gas joint stock company will handle pipelaying under a protocol signed earlier this year (OGJ, Feb. 27, Newsletter). Poland will allocate about $350 million for construction and extend customs benefits for imports of equipment and materials. Construction in Belarus will be handled either by a Belarussian-Russian financial and industrial group or Belarus solo as compensation for its accrued gas debts to Russia.
The project is expected to halt Russia's dependence on Ukraine's virtual monopoly on Russian gas transported to Europe, with the latter accounting for 90% of Russia's gas in transit but not paying for gas it consumes.
Willbros, Tulsa, has completed a study that concludes Russia's Baltic crude oil export system taking Siberian crude via existing and new pipelines to a proposed export terminal at Primorsk on the Gulf of Finland is technically and economically viable. The project would upgrade and expand 1,900 km of existing pipeline and lay 900 km of new pipeline to move Timan-Pechora production southwest to the terminal. A number of foreign oil companies are pursuing PSCs with Komi and Arkhangelsk producing associations, and new capacity will be needed to transport the increased output. Willbros performed the study for Transneft and Morgan Grenfell. There is some overlap with a proposal Transneft and Neste are studying for a $1.3 billion crude line involving more fields and more export points (OGJ, Mar. 13, Newsletter).
Britain's gas industry has chosen an area farthest from North Sea gas terminals to test operation of domestic supplies under a liberalized market.
Southwest England is seen as the area hardest hit by higher distance related transportation charges-and hence a good test case expected under government's forthcoming gas legislation (OGJ, Feb. 6, p. 32).
About 500,000 consumers in Cornwall, Devon, and Somerset will be able to choose who supplies their gas beginning April 1996, when the British Gas monopoly on household gas supply ends in the region.
Government's new gas bill, which introduces competition into the domestic gas market, was published early this month and given a second reading by parliament Mar. 13. Prospective gas suppliers must wait until parliament passes the bill, perhaps by summer recess, before they can apply to industry regulator Office of Gas Supply for gas supply licenses.
After the initial test, another 1.5 million homes are to be offered choice of suppliers in 1997, with competition across the U.K. due in 1998.
The West of Shetland area has drawn the most interest among nominations for the U.K.'s 17th licensing round scheduled this year (see related story, p. 31). While the government has promoted the round mostly as a frontier offering, acreage in the southwestern and lower Central North Sea also has drawn interest. Nineteen companies nominated 691 blocks covering a total 170,000 sq km. Block offerings are to be disclosed in late summer, with award of licenses likely late this year or early 1996. Applications for the 16th round, which included 60 West of Shetland blocks out of a total 164, are due Mar. 22.
Despite recently wobbly oil prices, OPEC continues to produce a bit over quota. Middle East Economic Survey estimates the group's production of 25.1 million b/d in February topped January by 210,000 b/d and quota by 500,000 b/d, with Iran alone boosting production by 240,000 b/d.
Mobil continues to press expansion into international independent power projects (OGJ, Feb. 27, Newsletter). Mobil and Wing Group, Houston, have formed an alliance to develop IPPs. Mobil has the right to acquire a 30% interest in Wing's current and future LNG and LPG projects in China, and the alliance will pursue IPPs in other countries. Wing is developing three LNG fueled power projects with a combined 7.2 million kw capacity in Jiangsu, Shanghai, and Zhejiang provinces and a 650,000 kw LPG fueled power plant near the city of Shanghai.
Caltex Australia's proposed merger with Ampol Australia has gained clearance from antitrust regulators, Australian Financial Review reports.
Australia's Trades Practices Commission rejected the deal in early February, saying it would damage competition in the industry. The commission's latest decision, expected soon, follows weeks of negotiations.
The proposed merger, the largest in Australian history, would create a company with revenues of about $6 billion (Australian)/year (OGJ, Jan. 2, p. 21).
India plans to invest $12 billion to double its refining capacity by 2000, exclusive of plans by foreign joint ventures to set up refineries there.
Capacity is projected to jump by another 1.08 million b/d from the current 1.068 million b/d. Indian demand for refined products has grown by about 6%/year in recent years, outstripping domestic supply. Imports accounted for almost 20% of India's refined product supply in fiscal 1993-94.
More refining capacity is going into turnaround to take advantage of depressed margins.
Coastal has begun a program of comprehensive maintenance and inspections at its 180,000 b/d Aruba refinery, suspending processing operations.
Extensive maintenance will be performed on the refinery's visbreaker, with inspection and minor repairs made to most other units, and preparations will get under way to integrate a $100 million coker unit to go on line this year.
The U.S. Senate energy committee has reported out a bill to permit export of Alaskan North Slope (ANS) crude oil with a 13-2 vote. Committee Chairman Sen. Frank Murkowski (R-Alas.) says ANS exports would help Alaskan revenues and boost oil production there and in California (OGJ, Mar. 6, p. 21).
House Republicans have drafted a tax cut package that includes reforms to the alternative minimum tax (AMT), but it faces a tough fight in the Senate.
The bill would phase out the AMT by 2001, but changes before then would negate its effect on businesses.
Senate Majority Leader Robert Dole has targeted the Department of Energy for extinction along with Departments of Education, Commerce, and Housing and Urban Development. Dole voted to create DOE in 1977 but said it has lost its focus, spending twice as much on defense and environmental programs as on energy. In DOE's defense, AGA pointed out to Dole that DOE administers programs under several laws.
It said, "If DOE were dismantled, these programs with their legitimate and required objectives would be dispersed to any number of government agencies, none of which would have the concentrated expertise or focus to determine how they relate in terms of their impacts on the nation's energy well being."
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