OGJ NEWSLETTER

Can Russia's ambitious fiscal reforms help stem the slide in C.I.S. oil and gas production?

Taking a big step towards opening doors to foreign investment, Moscow will allow the ruble to be converted freely into foreign currencies this summer. Starting July 1 the ruble can be traded on international currency markets, and full convertibility will be achieved by August. Currently the ruble cannot be taken out of Russia legally, discouraging foreign companies from doing business there. Barter has been the only way to export profits.

Such reforms could help bolster flagging C.I.S. Oil production, expected to fall to 9.2-9.4 million b/d by 1995, halting oil exports under a worst case scenario, says Centre for Global Energy Studies, London. In 1991 production in the former U.S.S.R. averaged about 10.3 million b/d.

The London think tank contends production incentives, effective management, and adequate investments could reverse the trend, jumping oil production to 10.6-11 million b/d and oil exports to 2.9 million b/d with C.I.S. oil demand at 8.4-9.4 million h/d in 1995.

Turkey has offered Kazakhstan a $200 million credit line and wants to help explore for oil in the republic.

Turkish Prime Minister Suleyman Demirel told Kazakh President Nursultan Nazarbayev Turkey is willing to help construct gas fired power plants in Kazakhstan and an oil pipeline to Turkey that could be extended to the Persian Gulf. Cooperation agreements were to he signed May 1.

Meantime, Elf is closer to a deal in Kazakhstan. Elf signed a contract with the Kazakh government to explore for oil in a 20, 000 sq km area of Aktyubinsk region (OGJ, Apr. 6, p. 44). Elf will shoulder all expenses while 75% of the profit remains in Kazakhstan.

Poland's first licensing round draws a step closer.

Promotional seminars were held in London, Houston, and Calgary last year, and the Bureau of Geological Concessions says bid packages are ready. Closing date for the round will be Oct. 15, 1992.

China is pressing plans to expand its international presence.

Xinhua News Agency reports a team of Chinese geophysicists is to take part in oil exploration in Russia's Tyumen region. It marks the first time a team of Chinese geoscientists has been sent abroad for work.

The oil and mining industry in China has charted an expansion plan that will focus on supplying technology and expertise to Indonesia, Thailand, Myanmar, Viet Nam, Malaysia, and Pakistan.

Middle East postwar reconstruction surges even as a new dispute simmers.

Kuwait oil production is expected to hit I million b/d by the end of May, says Oil Minister Hamoud Al-Ruqbah.

And Iraq expects to restore production to the prewar level of 3.25 million b/d this year. Oil Minister Osama Abdul Razzak Al-Hiti says production capacity has reached two thirds of prewar capacity and 85% of the country's refining capacity has been restored.

Yemen and Saudi Arabia are still bickering over their border (OGJ, May 4, p. 33). Yemen has asked the U.S., Britain, France, and Canada to mediate the dispute.

U.S. Export-Import Bank has approved a $100 million credit guarantee to support sale of U.S. goods and services to Algeria's state oil company Sonatrach. In 1991, ExImBank approved 27 loans and guarantees totaling $110 million to finance U.S. exports for Sonatrach oil and gas operations.

Norway's striking tug and rescue boat officers went back to work Apr. 29 after negotiations yielded new pay agreements and offers (OGJ, May 4, Newsletter). Workers are to vote on a new contract May 22 and must give a 4 day notice if the offer is rejected and they decide to strike again. Crude deliveries and exports at the Mongstad refinery are to resume soon.

British Gas and the U.K. Office of Fair Trading have ironed out details of an earlier agreement to boost competition in the U.K. gas industry.

BG agreed to release gas to other gas traders within a specified timetable. BG's initial release will be 50 bcf in 1992-93, 40 bcf in 1993-94, 30 bcf in 1994-95, and 20 bcf in 1995-96 Applicants can bid for a minimum I bcf at a weighted average cost of gas to BG plus wholesale margin of 25 pence/MBTU and allowance for costs.

Pdvsa's new president warns the Venezuelan government's onerous tax take is causing the state oil company to have a negative cash flow.

Gustavo Roosen contends it is now more economic for Pdvsa to buy crude on the world market than to invest in boosting crude production capacity to 3 million b/d from 2.83 million b/d at yearend 1991. Pdvsa crude purchases on international markets in 1992 are projected at 700,000 b/d.

Noting Pdvsa debt at $3.09 billion, Roosen says Pdvsa's capacity for added borrowing to finance operations is limited.

Venezuela late last month hiked prices for heavy crudes and residual fuel oil for export $1/bbl effective Apr. 27. Venezuela currently exports 1.97 million b/d of crude and products at an average price of $13.55/bbl vs. a government budget target of $19/bbl. Citing higher prices in April, the Energy Ministry now hopes the average export price will be $15/bbl for the year.

As of May 3, Pemex workers still were pumping gasoline from the Guadalajara drainage system 11 days after a sewer explosion killed nearly 200 people (OGJ, May 4, Newsletter). As of May 2, about 900 bbl of gasoline had been recovered from the subsoil and drainage system.

Gasoline leaks led to evacuations near a Pemex gasoline station in San Cristobal de la Casas, Chiapas, and officials in Saltillo, Coahuila, issued a 3 day alert because of an alleged Pemex gasoline leak, according to press reports. The alert ended May 4.

U.S. EPA has sent an emergency response team to help Mexico investigate the sewer line explosion in Guadalajara, and one assignment is for the team to search for other potentially explosive conditions in the region.

The incidents spurred an investigation by the Mexican attorney general's office, which brought charges of negligent homicide against some Pemex and city officials.

Petro-Canada plans to cut 660 jobs from its payroll the next 2 years.

Canada's state oil company said 290 jobs will be cut in the next few months and the rest later. Including about 90 job vacancies that won't be filled, total staff of 6,200 will be reduced by 750. Cuts are related to Petro-Canada plans to close several refineries and about 1,000 service stations.

Petro-Canada also is studying upstream operations, and jobs could be cut there later. The company began privatizing in 1991 and sold about 20% of its shares to the public. It lost $598 million (Canadian) in 1991.

Plans are under way for a $40 million wildcat in the Beaufort Sea about 15 miles off the Arctic National Wildlife Refuge. ARCO Alaska is operator of the 35,582 acre Kuvlum prospect, where Union Texas recently acquired a 20% stake. An 8, 000 ft wildcat is to spud in August.

Alaska has filed a lawsuit against the U.S. government to end the export ban on North Slope crude. In seeking $2.5 billion in damages for lost revenues, Alaska alleges limiting ANS crude to U.S. markets and shippers devalues the oil's wellhead price.

"The difference in shipping costs between the Gulf Coast and the Far East, about $3.90/bbl, comes directly out of our wellhead price, the base price for all our revenues," Alaska Gov. Walter Hickel said.

About 85% of Alaska's operating budget comes from oil revenues.

Small Business Administration has issued a final rule defining U.S. refiners with capacity of 75,000 b/d or less as small businesses.

The definition previously was 50,000 b/d. The action makes those refiners eligible for SBA assistance (OGJ, Jan. 20, p. 32).

EnTrade Corp. and Shell Oil Co. have agreed for EnTrade to be a Shell branded reseller of natural gas. The alliance and branded reseller agreement between an independent marketer and a major producer is the first of its kind in the natural gas industry, they claim.

Entrade will represent Shell as a marketing organization and use Shell's name in conjunction with its own in certain areas. Shell will provide EnTrade with volumes of firm gas supplies. The program will be introduced in Alabama, South Carolina, Virginia, and Missouri.