OGJ NEWSLETTER

Is oil demand growth finally gathering steam?

IEA has boosted its estimate of 1992 global oil demand to 67 million b/d in 1992 vs. its earlier estimate of 66.8 million b/d and up almost 1% from 1991. Merrill Lynch sees 1992 demand as up more than 1% to 67.2 million b/d, the steepest rise since 1989. IEA put second quarter oil demand vs. a year ago at a 1. 5% rise in the OECD and 2.5% in North America--courtesy of a 6% increase in the U. S. in April.

Even at that, some contend moderation will be the watchword for oil markets in the months ahead. Purvin & Gertz thinks markets overreacted to the May OPEC meeting and flap over a purported "new" Saudi oil policy (OGJ, June 15, Newsletter)--to which the Saudis have issued disclaimers recently. So P&G sees market fundamentals reasserting themselves and WTI settling at $21-22. It also sees gasoline prices peaking soon and edging down modestly through the summer.

Lower gasoline prices are hardly good news to U.S. refiners grappling with mounting environmental costs.

Ashland, expecting disappointing results in its fiscal third quarter ended June 30, plans to sell assets worth $200-250 million to reduce debt. It cites refinery margins well below last year's levels while environmental regulations have added to costs. Possible targeted assets are its SuperAmerica retail outlets in Florida and its Arizona highway construction unit.

The U.S. processing industry has until Aug. 26 to comply with certain provisions of OSHA's process safety management rule (OGJ, June 1, p. 49). OSHA stayed effectiveness of portions of the rule covering operating procedures, contractors, mechanical integrity, and management of change and is accepting comments to determine whether more time is needed to comply with those portions.

Kuwait reportedly has expressed an interest in buying 50% of Pdvsa's stake in Citgo. The Venezuelan state oil company did not confirm the report, which followed a visit by Kuwait's emir to Caracas.

Pdvsa last year put down frequent rumors the cash strapped government was eyeing such a sale to help fund Pdvsa's ambitious capital program. Venezuelan officials also said local oil equipment suppliers were encouraged to explore prospects for sales in Kuwait.

Taiwan's state owned Chinese Petroleum Corp. is reported to be pursuing possible investment in a refinery in Viet Nam.

Taiwanese press reports cite indications that despite CPC's lack of success in obtaining exploration opportunities off Viet Nam (see story, p. 38), the company is chasing a deal with Petrovietnam to construct a refinery. CPC won't comment, and no other details are available.

Iraq has disclosed plans to build a 290,000 b/d refinery at Babylon using Iraqi engineering, technology, and construction expertise, reports OPEC News Agency. The Al Wassat refinery would produce lubricants and asphalt in addition to lighter products. Alaa Mahmoud Hussein, director general of the state establishment of industrial projects, said project first phase, including designing and building workshops, depots, electric substations, roads, pipeline pillars, and related utilities, will he complete in first half 1993. There is no timetable for project completion.

Saudi Arabia has issued an international tender for five 280,000 dwt crude tankers. Kyodo News Service says the project is worth 65-82.5 billion yen. Bidding will be invited by National Shipping Co. of Saud Arabia and is to close by the end of June.

Turkey has invited Iraqi officials to discuss fees on the 1,000 km twin pipeline from Kirkuk to the Mediterranean, Middle East News Network reports. Turkey has lost $500 million in fees from Iraq since the Persian Gulf crisis, but Baghdad says Turkey wants too high a price now, $264 million for 6 months. Anatolian News Agency reports Ankara may be willing to negotiate a lower fee.

Iran wants to move part of its crude to Europe through an Egyptian oil pipeline with a terminal on the Mediterranean Sea, according to Cairo press reports. The pipeline, owned by Egypt's state owned Arab Petroleum Transporting Co., extends from Ein El-Sokhna on the Red Sea to a recently upgraded port at Sidi Krir in Alexandria. APTC received an offer from Iran to reserve 35% of its capacity for transporting Iranian oil for storage on the Mediterranean coast.

APTC notes Saudi Arabia, Qatar, U.A.E., and Kuwait use Egyptian pipelines to transport part of their crude. Expansion of line capacity by 50% to 2.4 million b/d is under way and to be complete by late 1994.

Of 18 new exploration licenses awarded to 20 companies in the fifth landward licensing round in the U.K., 13 went to companies mainly interested in exploiting coalbed methane potential. Coalbed methane exploration licenses first were awarded in the fourth round. Eight holders of production licenses also won exploration licenses for acreage within these permits. Twenty-seven companies submitted 29 applications last November, including the eight transfers. The licenses are valid for 6 years.

BP has denied reports Colombia's government suspended its operations in the Cusiana region for environmental reasons and contends its seven rigs are operating normally there. Wire service reports said BP and partners Triton and Total were "violating rules designed to protect the environment," and that two BP operated sites had been closed down. David Harding, chief executive officer of BP Exploration Latin America, says there has been no change in the status of any of his operations since early June when he visited the area with British Prime Minister John Major and Colombian President Cesar Gaviria.

Harding said there is no widespread pollution surrounding any BP site in Colombia. Citing remarks attributed to Colombia's Minister of Health, Harding said neither the ministry nor any other agency had contacted BP with a threat to shut down drilling operations.

Cuba is offering foreign investors participation in joint oil exploration, drilling, and refining projects, says Cuban news agency Prensa.

The offer came when 130 companies from 18 countries met with Cuban officials in Mexico in early June. It marks the first time Cuba has formally opened its doors to equity investment in its petroleum sector--although several companies have landed or are negotiating E&D ventures under production sharing or risk service contracts. Foreign investment has been allowed in tourism, agriculture, textiles, pharmaceuticals, and biotechnology.

Soviet subsidized oil supplies began to dry up in 1991 and Russia ended the practice this year, squeezing Cuba's economy hard enough to force energy rationing and austerity programs.

The embarrassment of riches in Russia's oil provinces is exceeded only by that of its flagging oil production.

Russia has about 35 undeveloped oil fields each with more than 200 million bbl of reserves, says Moscow newspaper Trud. It quotes World Bank sources as saying the first step in halting Russia's oil production decline should be to tap the minimum 7 billion bbl of reserves in these fields.

Russia plans to open three prime oil fields in the Tyumen region of western Siberia to foreign development later this year. Offered for bidding will be Priobskoye field, 105 miles east of Khanti-Mansiysk, Salimskoye field, 145 miles east of the same city, and Novoportovskoye field, 484 miles northeast of Salekhard on the Yamal Peninsula. All produce from Cretaceous and Jurassic. An investment tender commission is working on terms.

Russian oil flow will plunge about 1.2 million b/d in 1992 if output the rest of the year drops at the same rate as in the first 4 months, Izvestia reports. Russian crude production from the region declined at an annualized rate of 12-13% the first 4 months of the year. Crude/condensate production fell by 146 million bbl in January-April vs. a year ago. Projected over the full year, this would put Russian oil production at 8 million b/d in 1992 compared with 9.22 million b/d in 1991 and 10.36 million b/d in 1990.

The Moscow newspaper notes a 1.2 million b/d production drop for the year would mean a minimum revenue loss of $7 billion for Russia if sold on the world market as crude. "If sold as refined products on the world market, the lost revenue would be at least twice as much," Izvestia said.

Meantime, IEA estimates crude output from the entire former U.S.S.R. in May was 9.3 million b/d, down 100,000 b/d from the previous month.