Wellhead prices during the coming year will make or break the U.S. gas industry, says analyst Jofree Corp. Gas prices must be kept in line to continue a recovery that has seen consumption increase about 25% since 1986.
If prices go too high, U.S. producers will lose market share to competing fuels, "and we'll have the gas bubble all over again," Jofree principal Carol Freedenthal says. However, Freedenthal believes the Clinton administration will be particularly progas and very supportive of the Clean Air Act and conversions of fleet vehicles to gas. As a result, Jofree predicts U.S. gas prices in 1993 will average $1.72/Mcf, up from $1.60/Mcf this year.
EIA predicts U.S. natural gas demand should grow 4.4% in 1993, as the economy rebounds and normal winter weather returns.
It says gas supplies should he adequate, but wellhead prices are expected to increase 10%. EIA also projects distillate fuel oil demand could rise 4.7% in 1993. Residential heating oil prices will be about 100/gal higher in the winter months than in 1991-92.
Increasing its reserve for environmental compliance costs forced Columbia Gas System to take a $39.2 million noncash hit to earnings for third quarter 1992.
The charge stems from a self-assessment program by its Columbia Transmission unit relating mainly to changes in costs for remediating low level PCB contamination in compressed air systems and costs it expects for identifying and assessing sites along its 19,000 mile pipeline that may have non-PCB contamination. Columbia System's management says environmental compliance costs by Columbia Transmission could be $20 million/year the next 10-20 years, most of which it expects to be able to recover through increased rates.
Columbia's third quarter charge brings its total pretax net liabilities for environmental compliance costs to $114.5 million.
Amoco and Los Alamos National Laboratory will team on R&D for a new computer program that will simulate chemical reactions in Amoco's residual oil hydrocracking unit (RHU) at its Texas City, Tex., refinery. Amoco says the program should give its engineers deeper insight into physical and chemical processes in the reactor and enable them to predict the effects of proposed reactor design changes on the refining process.
Amoco and DOE will share equally in the $4 million cost of the 3 year project, which calls for building a one quarter scale model of an RHU reactor at Amoco's Naperville, III., R&D center.
Canadian producing leases are bargains in a buyers' market, says analyst John S. Herold. Six property sales in second quarter 1992 were worth $666 million (Canadian), not including a sale by Petro-Canada of its interest in Westcoast Energy for $342 million, Herold notes. Third quarter sales fell to $94 million.
Canadian asset sales in the second quarter surpassed U.S. sales but returned to a traditional ratio in the third quarter.
Herold's Brian Lidsky says Canadian companies still have an inventory of more than $2 billion in leases on the market. North American operators are expected to continue asset sales into 1994 to reduce debt and invest in other countries.
Mexico is looking to the U.S. for proven technologies and expertise for managing petrochemical wastes, says Geoffrey Swett, senior program manager for Remediation Technologies Inc. (Retec) and one of the U.S. professionals invited to Mexico for a 2 day conference on hazardous waste issues affecting the country's growing petrochemical industry. The conference brought together for the first time Mexico's environmental regulators, industry representatives, and executives from U.S. petrochemical and environmental service firms.
U.S. participants included Retec, Amoco, Environex Corp., Earth Systems Associations, Du Pont, Shell, and Chemical Bank. Topics included atmospheric contamination, contaminated site restoration, and compliance with Mexico's General Ecology Law, which sets standards for industrial wastes.
"As a result of rapid economic development in Mexico, and in part because of the North American Free Trade Agreement, the country has become more aggressive in its environmental protection," says Swett.
Swett says strict enforcement has created opportunities for U.S. environmental firms to clean up hazardous waste sites in Mexico. "The U.S. has the proven technology and expertise to clean up existing sites. It is easier for Mexico to import that expertise than develop it from a zero base."
Environmental concerns are compounding the urgency over the state of Russia's oil industry. During a visit to Astrakhan on the Caspian Sea, President Yeltsin was greeted with complaints over health problems allegedly stemming from pollution from nearby Astrakhanskoye sour gas/condensate field and adjoining petrochemical plants. Sulfur emissions are linked to acid rain, lung and skin disorders, and shortened longevity among citizens there, and Izvestia attributes the problems to outmoded technology at the Astrakhan complex.
Since field start-up in 1986, about 15 million bbl of condensate and more than 6 million metric tons of sulfur have been produced with the gas. Russian oil workers are faring better than most of their counter-parts in other industries in that nation in coping with hyperinflation.
In September, the average wage of oil production personnel was 22,320 rubles/month and the high 29,000 rubles/month in some regions. Average pay for all Russian industrial workers in September was 8,140 rubles/month - equal to a little more than $20 at the current exchange rate.
The pace of Russia's oil production decline is accelerating. Interfax news agency reports crude/condensate flow during the first 25 days of October plunged 16% vs. the year ago period, considerably worse than the 13.7% drop during the first 8 months of 1992 vs. the same period in 1991.
Interfax said Russian output of "products of primary oil refining" during the first 25 days of October fell 7-20% vs. the comparable 1991 level.
But Russian natural gas flow in the October period was down only 0.4% vs. the first 25 days of October 1991.
Russia-Cuba oil trade may be back on line.
The two nations have signed an economic and trade pact tentatively providing for 1993 delivery of about 66,000 b/d of Russian crude and refined products in exchange for 1.5 million tons of Cuban sugar. Moscow plans to disclose final details of the pact in mid-December following assessment of its oil export capability and action on the domestic budget. The urgent matter of Cuba's $20 billion debt to Russia wasn't settled during the trade talks, reports the Moscow press.
U.A.E.'s oil production has not increased in recent years at a rate in line with the very large increase in oil reserves it declared in the late 1980s, Centre for Global Energy Studies (CGES) says.
Current projections of 3.5 million b/d of sustainable productive capacity by 2000 are likely to prove overly optimistic. CGES says unless the emirates invest $5 billion on top of the $8 billion needed to boost capacity to a 2.6 million b/d target, U.A.E will not reach its 3.5 million b/d goal.
CGES expects some increase in the sustainable oil productive capacity of Abu Dhabi but sees a decline in Dubai's capacity as inevitable.
U.A.E. is expected to show a modest increase through 2000 given present indications of field activity and declared investment intentions, but without sufficient investment capacity could decline to 1.8 million b/d by then.
Saudi Arabia has seized Iraqi oil assets from a Red Sea terminal, in line with a U.N. Security Council resolution, Middle East Economic Survey (MEES) reports. Riyadh moved 8 million bbl of Iraqi crude from storage at Muajjiz terminal to domestic refineries for processing. Muajjiz is the loading terminal for the Iraqi export pipeline through Saudi Arabia to the Red Sea, but Saudi officials closed the line after Iraq invaded Kuwait in August 1990.
MEES says the Saudis left 2 million bbl in the storage tanks, and there are about 8 million bbl of Iraqi crude left in the pipeline. It isn't clear what Riyadh plans to do with proceeds of its Iraqi oil sales, but the Saudi government says it is owed $324 million by Baghdad for running the pipeline.
Under the Security Council's early October resolution, Baghdad's oil assets abroad were to be seized and turned over to a U.N. escrow account by Nov. 20 to finance humanitarian relief to Iraq and dismantling weapons of mass destruction.
Iraq says it has $300 million in assets abroad. To date, Riyadh has paid in to the U.N. fund $30 million, the U.S. $50 million, and Kuwait $20 million from seized Iraqi assets.
Pressure builds in Washington for an oil embargo against Libya.
Ten senators have urged the Bush administration to ask the U.N. Security Council to impose an oil embargo against Libya in reprisal for the November 1991 terrorist bombing of Pan Am Flight 103 over Lockerbie, Scotland. Families of the victims have urged President-elect Bill Clinton to make good on a Sept. 17 campaign pledge to seek an embargo against export of Libyan oil.
India has decided to establish a southern gas grid to alleviate chronic energy shortfalls there. Plans call for transporting natural gas via pipeline from India's western offshore, where a project to end flaring of associated gas is under way, to the southern states.
Indian Petroleum Minister B. Shankaranand hints also of the possibility of an LNG terminal at or near landfall of the proposed pipeline.
Meantime, India has had a major setback in trying to line up crude supplies from Russia. Moscow says it can supply only 20,000 b/d vs. 80,000 h/d previously committed under a trade protocol signed earlier this year.
New Delhi now must turn to the more costly spot market, which now will account for almost 220,000 b/d of its total imports of 532,000 b/d of crude and 200,000 b/d of products. India did manage, however, to secure its first supply of term contract crude from Qatar. Qatar is to supply 10,000 bbl/month for 1 year, a move considered a goodwill gesture on its part, considering most of its crude exports are tied up in long term contracts with other customers.
India approached Qatar in April after uncertainties over Russian supplies began to emerge.
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