OGJ NEWSLETTER

U.S Industry Scoreboard 1/23 (8191 bytes)

In 1994, for the first time in history, more than half the oil used in the U.S. in a given year was imported.

The total volume of oil imported into the U.S. also set a record, API said. It estimates the U.S. imported 8,894,000 b/d of crude oil and refined products in 1994, representing 50.4% of U.S. demand. The previous high was set a year earlier at 49.9%. The previous record volume of imports was 8,786,000 b/d in 1977, when total U.S. oil demand was almost 800,000 b/d lower than last year.

The Clinton administration will continue to fight the concept of tougher cost/benefit analysis for new regulations embodied in proposals by the new Republican majority in the U.S. Congress, says EPA Administrator Carol Browner. Browner contends EPA:s current risk assessment procedures keep rules reasonably balanced with the hazards they regulate.

She said, "Legislative proposals such as those in some of the risk assessment provisions of the (congressional Republicans') 'Contract with America' could freeze scientific progress and unnecessarily delay actions needed to protect the public health of our children and neighborhoods. We also must be mindful that science - particularly risk assessment cannot be subjected to one-size-fits-all approaches."

EPA has postponed compliance with reformulated gasoline rules (RFG) for 39 counties in New York, Pennsylvania, and Maine until July 1.

The counties had sought to opt out of the RFG program the three states had chosen to support. EPA gave no advance notice of the stay and allowed no comment from industry. The agency said it believes that "states should be given the flexibility to choose which programs best meet each state's needs for emissions reduction." Meantime, EPA will propose formal approval of the counties' requests.

Look for U.S. natural gas producers to continue to shut in wells and reevaluate 1995 gas related E&D spending plans. That's the outlook from Merrill Lynch, citing continuing deterioration of gas price expectations with U.S. gas storage levels and mild winter weather renewing belief in a U.S. gas bubble. The analyst sees average U.S. wellhead prices at $1.65/Mcf in 1995 with the possibility of recovery in the second half, depending on the degree of shut-ins, reduced drilling, and near term peaking of Canadian gas supplies.

Meantime, natural gas futures prices on Jan. 12 fell to their lowest level in almost 3 years. Nymex gas for February closed at $1.343/Mcf, down 9.40 on the day and the lowest settle since Apr. 15, 1992, when the Nymex next month contract closed at $1.34. Traders blamed unseasonably warm weather in the Midwest. Heating oil also took a tumble the week of Jan. 9, with the Nymex February contract hitting a 9 month low. However, the onset of wintry weather at midweek last week briefly bolstered natural gas and heating oil futures. February contracts for heating oil rose 1.320 on the day to close at 48.67/gal and for natural gas 4.40 to close at $1.434/MMBTU Jan. 17.

While warm winter weather has squeezed the natural gas and heating oil industries, it has created a contraseasonal surge in U.S. gasoline demand by encouraging driving. Nymex gasoline for February delivery on Jan. 16 jumped to a 9 week high - amid tight stocks and pulling up crude futures prices-closing 1.88 higher on the day at 56.88/gal. Nymex February crude jumped 41 on the day Jan. 18, closing at $18.73, up $1.21 from the Jan. 13 close and a 10 week high for the near term contract.

Despite the current doldrums in the U.S. gas industry, it has become "America's fuel of choice," claims AGA Pres. Mike Baly, citing as evidence that U.S. gas production revenues last year topped oil revenues and U.S. gas well completions surpassed those for oil, both for the second year in a row. AGA said U.S. gas producers garnered $33.7 billion in 1994 vs. $31.9 billion for oil, compared with $36.9 billion and $35.5 billion, respectively, in 1993.

Growth in U.S. demand for Canadian gas continues to surge. NOVA:s Alberta gas pipeline delivered record volumes for the eighth year in a row in 1994. NOVA Gas Transmission Ltd. (NGTL) shipped a little less than 4.1 tcf in 1994, up 8.5% from 1993. Most of the growth was at the Alberta/British Columbia border, where Alberta natural gas is collected for delivery into the Pacific Gas Transmission system to the U.S. Northwest and California. System expansions there allowed deliveries to rise 38.3% on the year. Bolstering deliverability were record programs for drilling in Alberta and pipeline construction by NGTL.

Almost half of the unconnected potential gas supplies-representing 2,514 pools - in Central Alberta should not be considered recoverable reserves, mainly for technical reasons. Another 25% of the potential supplies in the largest unconnected pools - 59 with 17.5 bcf of initial marketable reserves - should not be considered as recoverable reserves because of economic reasons. Those are findings of a Canadian National Energy Board report.

Natural gas, mainly imported LNG, will dominate growth in Japan's energy sector through 2010. A new MITI study, providing the first long term energy outlook in 4 years, projects slower growth for energy overall but accelerated growth in natural gas demand. Under a base case, natural gas use will grow by 3.4%/year during 1992-2000 and 0.9%/year during 2000-2010. During 1992-2010, oil's share of Japan's energy mix will fall to 50.1% from 58.2% and coal's to 15.3% from 16.1% while the natural gas share rises to 12.7% from 10.6%.

A U.K. independent's plans to drill a wildcat on the grounds of Windsor Castle, sometime residence of Britain's royal family, have received final approval from local officials. Canuk Exploration Ltd., Gerard's Cross, U.K., will spud the well in August, with drilling to take less than 14 days to target a structure at 300 m (OGJ, Dec. 12, 1994, Newsletter). Opposition from local residents and environmentalists apparently was held in check by reassurances that the license covered only exploration. The antioil lobby may he more vocal if Canuk finds oil and applies for a development license.

Statoil at yearend 1994 made what may prove to be its most promising hydrocarbon find of the year. Its 6204/11-1 wildcat, drilled in the southernmost Norwegian Sea, found Cretaceous oil and Jurassic oil and gas. Tor Fjaeran, Statoil vice-president for Offshore Norway E&D, said, "We don't think we hit both targets at their optimum positions, so we will drill another well there this year." Although testing is not complete, Fjaeran reckons the strike may he the second biggest on the Norwegian Shelf in 1994. Largest was Statoil's 34/11-1 discovery near Gullfaks field-finding an estimated 0.875-2.45 tcf of gas and "lots of condensate" in a complex reservoir-that has been given a low priority because of many gas prospects in the area. Fjaeran says the 6204/11-1 might prove more valuable than 34/11-1 in terms of net present value, although he would not disclose its potential reserves estimate because of competitive reasons.

Partners in the Caspian Pipeline Consortium (CPC) have agreed to start laying the first leg of the pipeline project to export crude from Russia and Kazakhstan. Oman, Russia, and Kazakhstan signed a protocol Jan. 11 in Almaty calling for a 155 mile, 40 in. leg to extend from Kropotkin, Russia, to a marine terminal to be built north of Novorossiisk on the Black Sea coast. It will carry crude from western Kazakhstan, Samara, Russia, and Lisichansk, Ukraine, transshipped via an existing 28 in. line from Kropotkin to Tikhoretsk, Russia. The $300 million first phase of the CPC project will allow export of 300,000 b/d of Russian and Kazakh crude. Pipelaying is to begin in January 1996 and be on stream 1 year later. Ten contractors have been shortlisted for the first phase project contract, expected to be awarded in third quarter 1995. A second phase would add capacity of 1.24-1.5 million b/d and move crude from supergiant Tengiz and other oil fields in western Kazakhstan as well as fields in Azerbaijan.

Is Iran enlisting more foreign investment in its quest to bolster its petroleum sector? Royal Dutch/Shell is negotiating with Iran to develop the 100 tcf South Pars gas field in the Persian Gulf, according to industry sources attending a conference in Oman last week. If confirmed, that would represent a policy shift for Iran, which hitherto has insisted on local companies undertaking development of South Pars, owned jointly by Iran and Qatar. Last September, Tehran assigned the project to a new state owned firm, Petroleum Development & Engineering Co., under a $900 million contract. Iranian officials say the project would add about 847 MMcfd to Iran's productive gas capacity of about 5.75 bcfd.

Meantime, Iran's Oil Ministry says the next 5 year development plan calls for adding about 1 billion bbl to Iran's crude oil reserves. Separately, Iranian television reported last week that the government plans to privatize some parts of its oil and petrochemical industries. It quoted oil ministry officials, who said petroleum sectors not barred from privatization by Iran's constitution would be handed over to the private sector but did not specify what they were.