OGJ NEWSLETTER

There's more positive news for the U.S. petroleum industry.

Baker Hughes' tally of U.S. active rigs the week ended Oct. 16 rose 1% from a year ago to 803, the first year to year increase since the week ended Mar. 25, 1991, when crises in the Middle East and Soviet Union were driving activity.

And U.S. drilling permits in September surged by an adjusted 9.6% month to month for the 29 states Salomon Bros. tracks, increasing 4.9% vs. a year ago. Strong gains were posted in California, Michigan, and Texas. Salomon Bros. cites pending expiration of Section 29 tax credits and increased conventional gas drilling spurred by higher prices.

However, API estimates U.S. oil production dropped 5% year to year to 6,998,000 b/d in September, the first time monthly production has been below 7 million b/d in more than 20 years. U.S. oil production is down 3.6% for the first 9 months. API blames Hurricane Andrew for 50,00090,000 b/d of the 370,000 b/d decline-the largest year to year drop in more than 2 years. Also, Alaskan production fell 100,000 b/d to 1.7 million b/d in the third quarter and has dropped 17% the past 4 years. U. S. oil imports last month averaged 8,378,000 b/d, up 7% from a year ago.

Merrill Lynch expects third quarter earnings for 10 exploration oriented U.S. independent producers it tracks to be higher based on higher gas prices but notes many had losses in third quarter 1991. The analyst expects cash flow to be about 52% higher on average.

Apache posted third quarter 1992 earnings of $8.5 million vs. $1.1 million last year, when it took a one time charge of $7.1 million for relocation to Houston.

Texaco reported third quarter income of $269 million vs. $286 million last year, reflecting a charge of $28 million for damage, shut-ins, and refinery downtime caused by Hurricane Andrew.

Service vessel operator Tidewater Inc. boasted earnings of $12.1 million in fiscal second quarter ended Sept. 30, up 69% from last year. It said steady crude prices and increased gas prices boosted marine group earnings, particularly for its Gulf of Mexico fleet that services oil and gas drilling-production, which saw 80% utilization for supply vessels.

Society of Petroleum Engineers will offer career transition seminars to help members assess energy industry job opportunities and evaluate personal skills and career path alternatives.

The seminars will be held in 14 cities in the U. S. and Canada. Consulting firm Drake Beam Morin Inc. will conduct the 4 hr seminars starting in November, and SPE will underwrite the program.

Indecisiveness from OPEC's September meet has left world oil prices lower than expected, leading Purvin & Gertz to lower its crude price forecast modestly. It predicts Dubai at $18.50/bbl next quarter, with WTI and West Texas sour hovering at $22.25-22.50/bbl and $20-20.50/bbl, respectively, the rest of the year. Although the weak economy complicates the outlook for refined products, P&G takes a contrarian view, expecting gasoline price increases through yearend with Gulf Coast wholesale prices for premium unleaded just less than 65/gal.

Meantime, Gulf Coast refiner margins almost tripled the week ended Oct. 9 from the week prior, Salomon Bros. notes, reaching $1.40/bbl for Saudi light. Gulf Coast crack spreads also rose, to just less than $3/bbl.

Gasoline stations in certain areas of the U.S. will begin offering oxygenated gasoline during the winter months effective Nov. 1.

The program, in place in the Denver area, is designed to reduce urban carbon monoxide pollution. Several states have urged EPA to limit the oxygen content of gasoline, fearing that high oxygen gasoline might increase nitrogen oxide emissions, but EPA contends that's unnecessary.

Canadian heavy oil had a miserable year in 1991, but most of the negative factors affecting the market are now gone, says Wood Gundy.

Effects of the Persian Gulf war have subsided, Interprovincial Pipe Line nomination procedures have been changed, and U.S. refiners that use Canadian heavy crude are back in full operation.

In addition, new and expanded heavy oil upgrading capacity will further tighten the market, the analyst notes. Start-up of Husky's biprovincial upgrader in Lloydminster will jump demand for Canadian heavy crude by as much as 46,000 b/d, the Co-Op/New Grade upgrader in Regina was recently expanded, and Conoco's Billings refinery is nearing completion of 50,000 b/d of upgrading capacity. Canada's main market for heavy oil is the U.S. Midwest, but Wood Gundy sees the Rockies as a major growth area, with refineries in Montana, Utah, and Colorado heavily dependent on rapidly declining Wyoming heavy oil.

Cuba plans later this month to open for bidding 8-10 exploration blocks, mainly onshore, reports U.N. Development Program. Most of Cuba's oil fields produce heavy oil, but UNDP said the recent discovery of higher quality oil near Ciego de Avila gives hope for similar deposits elsewhere.

Russia's domestic refined product prices are expected to jump again before yearend after a brief period of relative stability. The Moscow business weekly Commersant reports unlicensed wholesale prices for scarce A-76 gasoline shot up in early October to 35,000 rubles/ton from 9,500 rubles/ton, "while more realistic licensed prices fluctuated between 24,000 rubles/ton and 30,000 rubles/ton." The publication says price instability for petroleum products will continue until Moscow enforces decrees on permissible profits and price levels for oil producers and refiners. Commersant also reports Tyumen oil producing associations recently defaulted on paid contracts for crude deliveries to refineries. Russian labor unions threatened widespread demonstrations in late October if the government doesn't continue regulating consumer prices for fuel, food, medicine, and other necessities.

Turkey and Turkmenistan have approved a pact to cooperate in natural gas matters the next 30 years. The two signed a tentative agreement in May (OGJ, Apr. 13, p. 31) that provides for Turkey to import Turkmen gas and permit Turkmen gas to cross its territory into other countries. Turkmenistan plans to ship about 1.4 tcf/year of gas through Turkey to Europe.

Ekofisk complex will not be shut down over safety considerations.

"There is no question about that," Phillips Pres. Wayne Allen said last week. Phillips, operator of the complex, will respond officially by Oct. 30 to the Norwegian Petroleum Directorate's warning the complex could be shut down before winter 1995-96 for safety reasons (OGJ, Oct. 19, p. 41).

Allen would not provide details on what the response will contain, but said safety "is not a confrontational issue" and all issues will he resolved. "We are pledging our cooperation," said Allen. "Ekofisk center will continue to he a transportation hub."

France's oil service/supply industry is worried that the shift of U.S. companies away from the U.S. market will exacerbate the already stiff competition in that sector. U.S. companies are offering integrated services and have concentrated on R&D, a trend the French companies have not followed.

In addition to benefiting from the dollar's slide, Gilbert Rutman, president of Coprep, the French industry's E&P research body, says the greatest threat is the option of Chapter 11 for U.S. companies, enabling them to live on reduced costs and not pay their debts.

France's oil service/supply industry is the third largest in the world, and 80% of its business is carried out abroad.

Kuwait Petroleum Corp. is targeting prewar productive capacity of 2.3 million b/d by yearend 1993, Japan Economic Newswire reports.

KPC is producing about 1.3 million b/d and hopes to hike output to 1.5 million b/d by yearend. And Sheikha S. Al-Sabah, KPC's executive assistant managing director for sales, says the company is seeking investments in Japan's downstream sector.

Saudi Arabian Basic Industries Corp. claims 4% of the world's installed petrochemical capacity and is looking for growth in methanol, ethylene, and ammonia. OPEC News Agency reports Sabic has a number of expansion projects under way designed to increase market share.

Projects at basic petrochemical and polymer complexes alone will add nearly 4 million metric tons/year of capacity. Projects in all sectors, including metals and fertilizers, will increase Sabic productive capacity to 20 million tons/year by mid-decade from the current 13 million tons/year.