OGJ NEWSLETTER

The world's industrialized nations have agreed on a treaty aimed at reducing the threat of global warming purportedly caused by "greenhouse" gas emissions.

Deferring to U.S. objections, the treaty does not set timetables or specific levels of emissions reductions. The treaty will be signed at the U.N. "Earth Summit" in June at Rio de Janeiro.

Other nations wanted to cut carbon dioxide emissions to 1990 levels by 2000, but the Bush administration resisted, citing potential damage to a U.S. economy and transportation system heavily dependent on fossil fuels.

Thirty-two U.S. senators have protested Oklahoma and Texas' recent actions on natural gas prorationing (OGJ, May 4, p.27).

The senators urged the Senate energy committee to investigate the prorationing laws. In a letter to the committee, they said the states' actions have "the potential to raise natural gas prices artificially and undermine the competitive nature of the natural gas market."

IPAA proposes a national technology transfer organization that would help disseminate existing and new technology to U.S. independents.

IPAA is trying to establish a cooperative agreement with DOE for multiyear funding and would work with DOE's research program and universities, other R&D organizations, and state agencies to get technology to producers and provide feedback to the R&D community about producers' problems and needs. IPAA's approaches will include program planning and analysis, problem identification workshops, focused technology workshops, and regional resource centers.

Conoco and Total have scrapped a proposal to operate jointly their two adjoining refineries in the Denver area because of undisclosed "complex and restrictive" conditions imposed by the Federal Trade Commission.

Conoco made the proposal in February 1991 calling for it to operate its 50,000 b/d plant jointly with Total's 28,000 b/d plant in Commerce City.

Conoco would operate both plants, but Total would continue to purchase crude and market products on its own. Conoco has earmarked $60 million to upgrade its plant to produce low sulfur diesel fuel.

Both companies cited improved efficiencies and cost benefits and said the FTC strictures would have undermined the venture's viability.

More U.S. companies are cutting budgets and restructuring.

Phillips cut its 1992 budget by $175 million to $1.175 billion, citing cash flow from weaker than expected oil and gas prices and continued pressure on chemical and refining margins. The cuts will be divided about evenly between upstream and downstream. Phillips' previously approved budget was $710 million upstream and $581 million downstream. Some upstream projects will be delayed, and most of the downstream cuts stem from updated cost estimates for Phillips' recently completed Sweeny, Tex., olefins unit and final phase of rebuilding polyethylene facilities at its Houston complex.

Transco Energy achieved several goals in the first quarter as part of its comprehensive strategic and financial plan announced last October. The company completed management realignment, cut its work force by more than a targeted 500, cut its 1992 capital budget $27 million from the original $252 million, achieved about $35 million of the targeted $68 million reduction in working capital, and began efforts to sell certain nonessential assets.

Arkla unveiled plans to trim operating expenses by at least $40 million/year, cut capital outlays by $180 million from last year, and sell $190 million of nonstrategic assets.

Shell Chemicals is mulling a possible restructuring of its petrochemical business in Europe as part of a study under way on how to improve the operations' performance.

A likely outcome would bring all sales and marketing divisions under control of Shell Chemical International Trading Co. in London. To be affected are Shell Nederland, Shell Chimie, Deutsche Shell, and Shell U.K.

Refining outlays will account for almost half of Repsol's planned budget of $8.8 billion for 1992-95. Opening Spain's oil market to foreign competition in expectation of a unified European economy in 1993 has heightened the need to improve the country's refining/marketing system.

Of planned refining outlays to 1995 totaling $3.5-4 billion, Repsol earmarked $1.75 billion by 1995 to boost output of light products, particularly gas oil, without increasing dependency on low sulfur light crudes. Repsol also plans to spend as much as $2.4 billion on E&P.

Pemex has hired Bechtel Engineering to evaluate its oil, gas, and gasoline pipelines in the wake of the Guadalajara sewer explosions linked to a leaking gasoline line (OGJ, May 4, Newsletter). Bechtel also will review Pemex's operating, inspection, and maintenance procedures and report on the environmental effects of petroleum operations and risks posed by faulty installations. Bechtel has 90 days to file its report.

Nigeria plans to impose a 360/Mcf fine for flaring gas and has developed a gas commercialization incentive package that would boost the tax deduction allowed associated gas developers to 85% of capital invested from the current deduction of 40%, reports OPEC News Agency.

The incentive package, approved by Nigeria's president, allows more expenses to be called capital investments. Gas producers will benefit from the incentives only when they invest in gas processing plants to extract liquids and supply natural gas for downstream use, Opecna said.

ARCO signed two 10 year contracts with Sonatrach covering exploration in Algeria. Acreage involved is in the Guerrara area east of Hassi R'Mel gas field and in Hassi Bir Rekaiz area east of Hassi Messaoud oil field. ARCO reportedly will spend $65 million under what Algeria's official news agency APS described as production sharing contracts.

At presstime last week, oil markets had not had time to react to an unconfirmed report from Iran that the country's oil workers went on strike with the intent of halting Iranian crude production. A press release issued by the Flag of Freedom Organization of Iran from Paris and Hamburg said the strike took effect at noon May 10. In a statement to FFO, striking workers cited as grievances "inadequate wages and unsuitable working conditions, systematic destruction of the Iranian oil industry and reserves, and gross mismanagement of the oil industry." Demands include wage increases, purchase of appropriate equipment, and "a halt to clergy interference in Iranian oil company affairs." FFO May 13 claimed oil production had halted, tankers were stacking up at Iran's Kharg Island terminal, and emergency oil stocks held by the country's industries would be exhausted in 10 days.

That comes on the heels of Iran's proclamation it intends to boost production capacity to 4.5 million b/d.

Iran, with current production capacity of 3.7 million b/d and OPEC quota of 3.2 million b/d, said it intends to comply with OPEC quotas.

IEA estimates OPEC production at 23.5 million b/d in April, flat with the previous month, and Middle East Economic Survey puts April production at 23.27 million b/d, a 130,000 b/d drop from March.

Both are above the 22.98 million b/d ceiling OPEC set in February.

U.S. ExImBank will guarantee loans for two Russian firms to import $90 million of U.S. oil production equipment from Lufkin Industries and plans to make available credits of as much as $1 billion available to Russia's troubled oil sector. The agency in mid-April revived relations with Russia the first time since it broke ties with Moscow in 1974.

Texaco plans to sign a contract with Russia covering E&D in the Arkhangelsk area of northern European Russia and the Yamal-Nenents region of northern Siberia, reports Itar-Tass news agency, which cited a television interview with a Texaco official who reportedly said the company will begin the project by building roads, an airstrip, and other infrastructure.

Former Soviet military armaments plants could easily be converted to petroleum equipment plants with the aid of western technology, DOE Deputy Asst. Sec. George A. Helland and three Russian petroleum specialists concurred. The conversions were discussed in separate presentations at Offshore Technology Conference in Houston earlier this month.

Victor Glukhih, first deputy minister for Russian industry, said a nuclear submarine fabrication plant in Russia could easily be converted to a fabrication yard for offshore platform jackets and decks. He noted that is one of a number of facilities awaiting conversion.