OGJ NEWSLETTER

Is OPEC's rollover of quotas an invitation to cheat?

That's the concern Centre for Global Energy Studies (CGES), London, has. It cites the sharp drop in oil prices since the group opted to keep its production ceiling at 23.582 million b/d despite Kuwait's pledge to disregard its quota. Kuwaiti Oil Minister Ali Ahmed al-Baghli turned down a 10% increase from a 1.6 million b/d second quarter quota, saying Kuwait will jump flow to 2.16 million b/d in the third quarter (OGJ, June 21, p. 35).

That works out to 1.9 million b/d in July, 2 million b/d in August, and 2.16 million b/d in September.

The key question for the market is how other OPEC members will react to Kuwait's inevitable production hike, CGES said (see editorial, p. 21). Although Kuwait's demands for special treatment tried the patience of fellow members, they won't necessarily retaliate by boosting output inordinately.

"There is certainly enough incremental demand for OPEC oil in the third quarter to allow almost all members to raise output without weakening the price," CGES said.

If OPEC raises flow to 24.9 million b/d in the third quarter, members could share another 450,000 b/d of production after Kuwait's demands are met.

Although this won't allow members to increase production in line with Kuwait, almost all would see some increase, and smaller producers would see significant hikes, CGES said.

"As long as Saudi Arabia, Iran, and Nigeria are prepared to accept these modest increases, production is unlikely to exceed the demand for OPEC crude."

Meantime, Iran's semiofficial daily Tehran Times called on OPEC states to retaliate against proposed U.S. and EC energy taxes with counter-vailing import duties on western goods. It also advises further downstream diversification should the taxes cut exports.

President Clinton keeps dancing around the question of what kind of energy tax Congress will pass in its deficit reduction package (see Watching Washington, p. 34), but Rep. Dan Rostenkowski (D-Ill.) knows what he wants: a 25cts/gal gasoline tax. Rostenkowski, to lead a House contingent on a congressional conference bill to be worked on this week, offered his choice after a talk to Harvard Business School alumni in Chicago last week.

U.S. DOE has chosen five possible sites for an expansion of Strategic Petroleum Reserve capacity to 1 billion bbl from 750 million bbl. Five salt domes under consideration are in Brazoria and Jefferson counties, Tex., Iberia and St. Mary parishes, La., and Perry County, Miss. It plans two development sites, one in Texas and the other in Louisiana or Mississippi.

Gas price instability is hurting long term industry growth, says Enron. Jeff Skilling, president of Enron Gas Services Group, notes U.S. gas prices fluctuated in 1992 at $1.10-2.60/Mcf while oil prices have been stable. Skilling told a Calgary meeting the need for greater price stability will force buyers and sellers to write more long term contracts and reduce volumes sold at spot prices, citing about 98% of U.S. gas now sold on the spot market. He said price stability is needed because a gas industry investment of about $100 billion is needed to meet projected demand growth of 3-4 tcf by 2000.

Seven of Canada's biggest oil and gas pipelines have formed Canadian Energy Pipeline Association.

Members are Alberta Natural Gas, Foothills, Interprovincial, Nova, TransCanada, Trans Mountain, and Westcoast. Initially three employees will staff CEPA's Calgary office, and CEPA will name a president this fall.

Last year CEPA members transported 4 tcf of gas and 600 million bbl of oil, accounting for more than 90% of Canadian oil and gas production. This year, CEPA members plan to spend almost $1.8 billion on pipeline expansion, improvements, and maintenance.

The new Russian-American Chamber of Commerce began U.S. operations last week at its New York headquarters.

The group's goal is to provide members with access to key Russian and U.S. officials and business leaders. It also plans to serve as a trade facilitator to ease bureaucratic delays, help member companies with negotiations, and act as a matchmaker for U.S. and Russian businesses.

Russia believes its far eastern Jewish Autonomous Republic may have substantial oil resources. Seismic surveys indicate potential for at least 700 million bbl of crude in the area, according to a report from the republic's capital, Birobidzhan. Large deposits are postulated on trend with structures in China's neighboring Heilongjiang province, home to supergiant Daqing oil field. Although Russia claims no commercial discoveries in the republic, Ekonomika i Zhizn says U.S. firms are prepared to carry out detailed exploration there. The Moscow business weekly says the Birobidzhan Institute for Analysis of Regional Problems is negotiating with U.S. petroleum interests for a joint venture to fund the work.

Amoco and Venezuela's Lagoven will jointly study hydrocarbon potential of the 7,000 sq mile Plataforma Deltana area off Venezuela and Trinidad. The two signed a joint study agreement this month for the area in mostly Venezuelan waters off East Venezuela and South Trinidad.

Lagoven drilled several exploratory wells in the Venezuelan portion of the study area in the 1970s and early 1980s. Amoco Trinidad has extensive production interests next to and extending into the study area. Work is to be done mainly in Houston and Caracas and be complete in mid-1994.

Central African Republic is seeking bids for E&P rights covering all of the country's sedimentary basins. They will describe investment terms, petroleum laws, and geology during presentations in meetings scheduled in Paris July 12-13, London July 14-16, and Houston and Dallas July 19-23.

Western Geophysical is handling inquiries and making geophysical data available for review in Houston.

Morocco insists the Maghreb-Europe gas pipeline is still on track to go on stream as scheduled in October 1995.

At a Franco-Arab gas symposium in Paris last week, Othmane Khettouch, secretary general of Morocco's ministry of energy and mines, gave this schedule for the Moroccan and Gibraltar Straits sections: Onshore, detailed engineering November 1992-June 1993, construction engineering April-October 1993, pipe delivery July 1993-November 1994, order and delivery of other components July 1993-October 1994, pipelaying January 1994-July 1995, component installation April 1994-July 1995, and start-up tests June-October 1995; offshore, detailed engineering February 1993-February 1994, pipe order/delivery October 1993-February 1994/February 1993-June 1994, pipelaying February 1994, and start-up tests June-October 1995.

World energy demand grew by only 0.2% in 1992, dampened by a 7.7% fall in non-OECD Europe. That's according to BP's 40th statistical review of world energy. Outside the region, the world logged sturdy energy demand growth, especially in developing countries but also in the OECD. Within these sectors, oil and gas were the fastest growing fuels in 1992.

Steep plunges in the C.I.S. reined world oil demand growth to only 0.5% in 1992, while world oil production rose by almost 500,000 b/d. World gas demand growth slowed to 0.4% in 1992, again with a 5% drop in non-OECD Europe applying the brakes. Noteworthy was a 3.5% jump in U.S. gas demand.

Neste Oy and Statoil have agreed to merge their petrochemicals and polyolefins units, creating Europe's largest and the world's fifth biggest polyolefins producer with production capacities of 1.5 million tons/year of polyethylene and 650,000 tons/year of polypropylene. Combined yearly revenue of the 50-50 Finno-Norwegian owned company is projected at about $2.5 billion. Neste and Statoil hope to close the deal in time for the new company to start operations early next year. Because it is contributing more assets to the merger, Neste is to receive a substantial cash payment.

U.K. petroleum revenue tax reforms are likely to be approved by the end of July. A parliamentary committee approved PRT concessions allowing companies to claim as much as 10 million each on drilling programs affected by the U.K. Treasury plan to abolish exploration and appraisal drilling clawbacks (OGJ, Mar. 22, p. 31). Drilling allowances can be claimed until yearend 1994, and PRT will he trimmed to 50% from 75% on existing fields.

The committee rejected moves to phase in the cut in drilling allowances in 3 years. After a third reading of the bill in parliament, the bill will be debated in the House of Lords.

Copyright 1993 Oil & Gas Journal. All Rights Reserved.