Will the North American Free Trade Agreement be boon or bane for the petroleum industry?
U.S., Canadian, and Mexican teams wrapped up Nafta negotiations last week. If approved by their respective governments, it would remove most trade barriers among the three nations and create the world's largest trade zone. The treaty's wording won't he complete until September, but the best it will provide U.S. petroleum industry is better performance incentives on wells drilled for Pemex. The pact will phase down tariffs on export of oil services and supplies to Mexico, remove barriers to the sale of U.S. gas in Mexico, and limit the Mexican state monopoly on production of basic petrochemicals to ethane, propane, butane, pentane, hexane, heptane, carbon black feedstocks, and light and heavy naphtha.
The U.S. Congress is expected to consider the treaty next year in a "fast track" process that allows only an up-or-down vote with no amendments.
U.S. labor leaders have blasted Nafta, claiming huge job losses in the U.S. will result, and U.S. and Japanese automakers are squaring off over local content rules.
But chemical/energy giant Du Pont applauds Nafta, citing increased business growth and a healthier investment climate in Mexico.
And Mesa's Boone Pickens said his company is exploring opportunities in Mexico because it is the fastest growing export market for the U.S.
Mesa is discussing with Mexico's government possible export of natural gas vehicle fuel technology to help improve Mexico City's air quality.
The U.S. House energy and power subcommittee has approved a bill to prohibit refiners from charging wholesale marketers more than retail prices they charge at company owned stations.
The Senate has not passed similar legislation.
Outlooks brighten for oil and gas prices and U.S. drilling.
U.S. gas spot market prices remain buoyant. Natural Gas Clearinghouse attributes increases to overall demand strength and perceptions of a fundamental shift in supply deliverability. Sources say September spot prices so far appear to he maintaining the August level of $1.79/Mcf (OGJ, Aug. 10, Newsletter). Some August spot sales in Louisiana and Texas reached $1.90/Mcf. NGC pegs July spot prices at an average $1.42/Mcf.
Jofree Corp. says average cash prices for U.S. gas are rising slower than spot sales because of contracts signed several months ago when wellhead prices were averaging closer to $1/Mcf and the outlook for higher prices was bleak. Jofree predicts gas prices will reach about $2.10/Mcf by December and average about $1.64/Mcf in 1993 vs. $1.59/Mcf this year.
Merrill Lynch predicts oil prices are likely to strengthen further in the second half, pegging WTI at near $24/bbl by yearend as the balance between supply and demand tightens. Spot WTI averaged $21.10/bbl in second quarter this year, up more than $2/bbl from first quarter, in contrast with expectations of a sharp spring price drop.
The Baker Hughes rig count climbed 19 units to 709 the week ending Aug. 7, marking the first time since mid-January there were more than 700 rigs running in the U.S. Oklahoma added five rigs, Texas four, and Louisiana three. This time last year 796 rigs were making hole in the U.S.
The U.K. has spelled out details of exploration acreage on offer in the second stage of its 14th offshore licensing round.
Some blocks are near mature areas and others are outside the main developed areas but close to areas currently licensed. Deadline for applications is Dec. 16. Unlicensed acreage in mature areas was offered in the first stage of the round announced in March. A third announcement in November will involve frontier blocks. Because of the speculative nature of some areas in the current stage, companies can for the first time nominate areas they want offered. And in frontier areas, companies are invited to apply for blocks in groups. Blocks listed as Schedule 2 are those nearest existing developments and licenses in Moray Firth, English Channel, Irish Sea, and northern, central, and southern North Sea.
Amadeus basin producers, on request of Australia's Northern Territory government, commissioned the Center for South Australian Economic Studies (Censaes) to begin evaluating economic benefits of selling about 70 MMcfd of basin gas beginning in 1996 to customers in South Australia. Results of the study will weigh heavily on whether Northern Territory officials support plans to lay a $222 million pipeline and spend another $96 million for field development to provide South Australia with at least 384 bcf of gas during 15 years. Censaes is expected to complete the study late this month.
Iran and Japan have deadlocked in negotiations to develop offshore oil fields in the Hormuz area, Agence France Presse (AFP) reports. A letter of intent signed last year covering a $1.6 billion E&D program was to lead to final agreement by March this year (OGJ, Sept. 23, 1991, p. 70). But Middle East Economic Survey says negotiations between National Iranian Petroleum Co. and Japex are stymied over investment returns. MEES reports Japex ruled out NIOC's offer of an estimated 2% return on investment, and NIOC is said to be contacting other international groups for the project.
United Arab Emirates has earmarked $500 million to boost oil productive capacity by 600.000 b/d to about 3 million b/d by 1995. About 400,000 b/d is to come from onshore fields. U.A.E. also expects to spend more than $1 billion over an undisclosed time to expand gas and refining sectors.
Negotiations on 'British Gas' proposed $300 million, 160,000 kw cogeneration plant to serve petrochemical and refining complexes on Thailand's eastern seaboard have collapsed. Thai Olefins Co. called off the talks, citing excessive prices BG quoted. TOC, building a $720 million olefins plant as the upstream phase of Thailand's second major petrochemical complex, is reconsidering a proposal by state owned utility EGAT, which offers a price of 1.50 baht/kw-hr for power and 200 baht/ton for steam vs. 2.44 baht and 444.8 baht, respectively, that BG offered. Because of state rules to promote private cogeneration investment, EGAT must seek an exemption to proceed.
The Vietnamese-Russian joint venture Vietsovpetro has increased production to about 104,000 b/d the first 7 months of 1992, AFP reports, boosted by higher yield from Bach Ho field off Viet Nam's southern coast and the addition of a second oil storage tanker in the field. In 1991 Bach Ho produced 78,000 b/d, and the target for 1992 was set at 108,000 b/d.
More aid for Russia's ailing oil and gas industry is on the way.
A Nippon Steel led group of 10 Japanese firms has reached basic agreement with state run Urengoi Gazprom on terms for exporting materials and equipment worth $700 million to help refurbish gas fields in western Siberia. Exports are to include pipeline and seamless drill pipe (OGJ, July 20, Newsletter). A final contract is to be signed in a month or two, Kyodo News Service reports. And World Bank announced its first loan to Russia, $600 million to help buy foreign goods to improve oil production, health, food supply, transportation, and private business (OGJ, Aug. 3, Newsletter).
International Monetary Fund approved Aug. 5 a $1.04 billion loan available now, to aid the country's international financing the rest of the year. Michel Camdessus, IMF managing director, said governments to which Russia and other former Soviet republics already owe about $70 billion are to meet in Paris next month to look into easing payment terms.
Moves by C.I.S. republics to boost dollar earnings have resulted in an unexpected 20% leap in oil exports. Deliveries have risen 400,000 b/d to 2.4 million b/d, despite falling production levels, leading OPEC to complain of market disruption. OPEC production rose 415,000 b/d to 24.145 million b/d for July, up almost 2% on June. MEES says this is nearly 700,000 b/d above the implied OPEC ceiling for the third quarter. If output continues at this level, a third quarter stockbuild of 550,000 b/d above IEA's estimate of a 23.6 million h/d call on OPEC oil will result. July increases were Iran 155,000 b/d, Kuwait 110,000 b/d, U.A.E. 60,000 b/d, Venezuela 50,000 b/d, and Saudi Arabia 40,000 b/d.
Intertanko says there may be a squeeze on oil supplies the next three quarters in the event of a cold winter. This assumes a stockdraw of 200,000 b/d for 1992 and 1.2 million b/d in first quarter 1993.
It forecasts third and fourth quarter 1992 and first quarter 1993 supply of 67, 67.4, and 68 million b/d, respectively. With non-OPEC supply pegged at 40.4, 40.7, and 41.1 million b/d for the same periods, OPEC crude production will need to he 24.5, 24.6, and 24.8 million h/d, respectively. OPEC's NGL production is put at 2.1 million b/d for each quarter.
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