Consolidating and streamlining operations in the U.S. and Canada continue to swell merger and acquisition opportunities in both nations.
A glut of properties exists in the U.S. (see story, p. 16), but M&A action continues to grow in Canada. The value of Canadian oil industry mergers and acquisitions increased 71% in the first half to $2.7 billion (Canadian), Sayer Securities Ltd. reports. A big factor was the unusually large property swap in February among Amoco, Encor, and Maligne Resources for $1 billion (OGJ, Mar. 9, p. 42). The number of transactions jumped to 739 from 478 in first half 1991, mainly on higher activity among leases valued at less than $5 million. The price paid for oil and gas reserves fell 6% to an average $4.30/BOE vs. $4.57/BOE first half last year. Sayer attributes the price drop solely to a lower value for natural gas assets. Despite the slide in prices paid for reserves, there continues to be a large part of industry for sale. Sayer identified $4.8 billion in assets and companies available for purchase from 90 sellers as of June 30, the most in 3 years, and notes the low acquisition prices are causing a growth boom for Canadian independents.
Alberta, Ottawa, and Husky agreed to cover the latest, $190 million (Canadian), cost overrun at a Saskatchewan heavy oil upgrader that is almost complete. The Saskatchewan government, fourth partner in the project, refused to pay additional costs for the 46,000 b/d unit in the Lloydminster area.
The plant began test production in July and is to be complete in November. Funds advanced to cover the overrun will he repaid out of initial production revenues. Current and previous overruns have increased project cost to $1.628 billion from an original estimate in 1987 of $1.267 billion.
Unocal may sell its Imperial Valley, Calif., geothermal energy assets as part of its restructuring program. The company has interests in Brawley, Holtville, Salton Sea, Truckhave, and Wister areas, and geothermal operations at the southern tip of Salton Sea, where its development program supports three power plants with nominal capacity of 80,000 kw.
But Unocal is pressing geothermal development in Indonesia, where electricity shortfalls have led the government to emphasize power development. Unocal plans with Pertamina to build two geothermal power plants at Mount Salak in West Java with a combined capacity of 110,000 kw to go on stream in 1994. Jakarta Post reports Unocal wants a contract to develop two more geothermal projects in Indonesia. And Amoseas is developing four geothermal fields to fuel a 26,000 kw plant at Mount Dajarat in West Java.
Amoco's Yorktown, Va., refinery is conducting the first commercial production test, 400-500 b/d, of ethyl tertiary butyl ether.
Until now, ETBE has been produced only in laboratory test units. "Our goal is to prove there are no technical roadblocks to producing ETBE," says Allen A. Kozinski, Amoco Oil vice-president of R&D. "Due to the cost difference of ethanol vs. methanol, ETBE is not currently economic. However, if the subsidy for ethanol used in ETBE were increased somewhat above the existing 54cts/gal, or ethanol prices were lower, ETBE could become economic."
Deregulation continues to change the face of the U.K. gas industry.
Amerada Hess Gas Ltd. has joined with coal and fuel oil supplier British Fuels Group Ltd. to sell gas directly to Scottish end users as the latest partnership targeting the U.K. market (OGJ, Aug. 17, p. 66). Small and medium sized industrial customers will be approached through BF's new division, British Fuels-Gas. This is the second AHGL deal bringing gas to more remote locations (OGJ, July 6, p. 37). With direct sales to more than 250 sites throughout the U.K., along with a supply deal for South Wales, AHGL wants to see how this network performs before looking for other partnerships soon. Meantime, Total Gas, which recently formed a marketing joint venture with Yorkshire Electricity, has agreed to buy 12.5 bcf during 5 years from Mobil North Sea, mainly from Beryl field.
British Gas is to open its storage facilities to third party use under the latest ruling from government regulator Ofgas. The company is writing to rival gas suppliers, giving details of available facilities. Price is in dispute as BG pushes for new rates for use of its transportation network (OGJ, Aug. 10, p. 18). Starting Oct. 1, the company will receive a 4.5% rate of return on capital from shippers, but BG wants a 6.7-10.8% return to fund investment in infrastructure. Ofgas has said it hopes to reach more permanent agreements with BG by October 1993, when the government's Monopolies and Mergers Commission will have finished its investigations.
Czechoslovakia may replace a 279 mile natural gas pipeline in the Slovak republic. The Brotherhood pipeline, built in the mid-1960s by the Soviets, extends from the Ukraine border across the Slovak republic, supplying gas throughout Czechoslovakia as well as Austria and France.
Fluor Daniel's Tulsa office is performing a conceptual feasibility study on the project, which includes considering potential supply and demand, size of the replacement line, cost estimates, and schedule development. U.S. Trade and Development Program is funding the project.
Lithuania's parliament leader says Russia has halted crude shipments to the 240,000 b/d Mazheikiai refinery, the nation's only one. He says the oil quota Russia allocated to Lithuania has been used up and sees no reason to believe Moscow will authorize additional deliveries.
Meantime, the former Soviet republic of Moldova is prepared to buy oil and gas from Iran, says President Mircha Snegur. Moldova has no commercial hydrocarbon production. Russia and Ukraine have stopped pipeline deliveries of natural gas to western sectors of Moldova controlled by ethnic Romanian dissidents. Payment will be in hard currency or by barter, and first deliveries are slated by yearend. Moldova also will participate in construction of the Iran-Azerbaijan-Ukraine gas pipeline project.
Talks by Elf, Total, and Baghdad about E&D in Iraq have entered a "very advanced" stage, reports Agence France Presse.
Iraqi Deputy Oil Minister Faez Abdallah Shaheen told AFP Iraq is ready to sign contracts soon. Elf and Total confirmed in March they were discussing possible production sharing agreements covering Najnun and Nahr Umar oil fields in southern Iraq (OGJ, Mar. 9, Newsletter).
Continued weak demand for petrochemicals is forcing Japan to keep the lid on ethylene and resin production. The economic slowdown there forced cuts in May (OGJ, May 4, Newsletter), and Mitsubishi has reined output of polyethylene for August and September to 60% of capacity at some plants. Mitsubishi has delayed resuming production at its Yamaguchi ethylene plant and has cut overall ethylene output to 80% of capacity.
And export prospects for resins are dimming after a first half surge. Strong demand from export markets pushed Japan's ethylene production to a record first half of 3.12 million tons. But demand for resins in China, Japan's main export market, is leveling off.
Soaring LNG demand in Japan has spurred Japan's Transport Ministry to call on Japan Development Bank to boost financing for construction of LNG carriers. The ministry, expecting increased demand for LNG carriers and a squeeze in carriers of Japanese registry, wants JDB to hike its financing of 60% of LNG carrier construction to 70% in the next fiscal year.
Japan, now consuming 70% of world LNG supplies, is renegotiating LNG purchase contracts with Brunei and has asked Malaysia to step up deliveries. Japanese gas demand, fed more than 95% by LNG imports, is expected to jump to 2.33 tcf in 2000 and 2.87 tcf in 2010 from 1.65 tcf in 1988.
Taiwan and China are laying plans to cooperate in exploring for oil and coal in a step toward ending more than 40 years of hostility.
Taiwan's Chinese Petroleum Corp. will commission private entities to evaluate prospects onshore and in the South China and Bohai seas. Eventually, cooperation could extend to refining and marketing Chinese petroleum products in Taiwan as relations continue to thaw. Meantime, CPC has budgeted $75.2 million for foreign oil exploration in fiscal 1993. Projects planned in 15 countries are expected to add 9.58 million bbl to CPC reserves.
There's more progress on ending territorial disputes over hydrocarbon prone offshore areas of Southeast Asia (OGJ, July 13, p. 20).
Petronas says Malaysia has virtually cleared up its differences with Viet Nam over a disputed block in the Gulf of Thailand and soon may sign a profit sharing agreement with Petrovietnam. A Hamilton Bros. group had suspended drilling on Petronas-awarded Block PM-3 after the dispute aired but resumed work after the two nations signed a memorandum of understanding agreeing to exploration on the block.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
