OGJ NEWSLETTER
OPEC appears to have tiptoed away from the precipice once again, but the path ahead remains treacherous.
OPEC ministers meeting in Geneva Sept. 29 pulled off a surprise agreement on production quotas, having earlier postponed the meeting to allow persuasion of maverick delegations. After agreeing Sept. 27 to a fourth quarter ceiling of 24.5 million b/d-but not individual quotas-OPEC confirmed the ceiling Sept. 29 and said the agreement would cover fourth quarter 1993 and first quarter 1994. The agreement also contained a breakdown of quotas for member countries (Table). And Kuwait was persuaded back into the fold after deciding to operate outside OPEC's July agreement (OGJ, July 12, p. 28). Prior to the meeting, Kuwait had insisted on a 2.16 million b/d quota. However, a call from Iran's President Hashemi Rafsanjani to Kuwait's emir reportedly broke the deadlock. Kuwait agreed to a 2 million b/d quota, up from 1.6 million b/d when it last committed to a quota. Saudi Arabia maintained its 8 million b/d ceiling. Iran and Nigeria, the other main contenders for increased output, settled for 3.6 million b/d and 1.865 million b/d, respectively, vs. third quarter quotas
As news of the agreement reached markets, November delivery Brent picked up 69 cts to $17.35 at Sept. 29 close.
IPE's Audra Proctor said the rise was half due to OPEC's agreement and half to continuing concern over political upheaval in Russia.
The specter of greater than expected Iraqi oil supplies reaching markets next year looms on the horizon.
Salomon Bros. casts a doleful eye on what it sees as a shift by Saddam Hussein to try to get all U.N. economic sanctions lifted, shelving the current focus on a one time $1.6 billion oil sale for largely humanitarian reasons. A senior Iraqi official confirmed this, says the analyst, and U.N. officials are not discouraging the push to lift all sanctions, including the oil embargo, after 6 months of monitoring and compliance following an agreement. That could mean an added 1.5 million b/d of Iraqi oil dumped on the market by June 1994, a seasonally weak period.
The U.S. Senate has approved a measure allowing states to opt out of the 1990 Clean Air Act amendments provision requiring oxygenated fuels in carbon monoxide nonattainment areas. Sen. Ted Stevens (R-Alas.) authored the amendment, which would allow states to develop by Oct. 1, 1994, alternative methods to cut CO levels. Opponents will try to strike it during a House-Senate conference committee. Alaskan health officials are investigating numerous claims that Anchorage and Fairbanks residents became ill from MTBE mixed with their gasoline last winter.
Owners of the Trans-Alaska Pipeline System are taking steps to police the embattled system's operations. TAPS owners and Alyeska are undertaking a comprehensive assessment of the operations, management systems, and regulatory compliance of the pipeline and the Valdez terminal.
Arthur D. Little will oversee the assessment, expected to extend through 1994 and complement Alyeska's steps toward improvement. Alyeska recently has undergone a barrage of criticism over environmental and safety problems uncovered in audits of pipeline operations (OGJ, July 26, p. 32).
Alaska Inupiat natives filed a motion to dismiss a lawsuit against the U.S. government over ARCO's seismic work in the Beaufort Sea.
The suit sought to block a federal permit that allowed ARCO's seismic surveys around the Kuvlum discovery, claiming the noise and icebreakers drive bowhead whales from their migration path. However, the suit became moot Sept. 1 because ARCO stopped its seismic work about 2 weeks ahead of schedule. Whale sightings resumed, and the Eskimos say this years whale hunt has been successful. ARCO says it will continue to cooperate with whalers, an effort that began earlier (OGJ, Sept. 13, p. 36).
Gulf of Mexico petroleum prospectivity has brightened with what may be the gulf's first commercial subsalt discovery (OGJ, July 26, p. 23).
Phillips reported a hefty oil flow from pay beneath a 3,000 ft thick salt sill on Ship Shoal South Addition Block 349. Mahogany discovery well, in 370 ft of water about 80 miles off Louisiana, flowed 3,700 b/d of oil and 559 Mcfd of gas through a 14/64 in. choke with 6,800 psi flowing tubing pressure. Testing continues on the 16,500 ft wildcat while Phillips and partners reevaluate seismic. An appraisal is to spud in December. Interests are operator Phillips and Anadarko 37.5% each and Amoco 25%.
Ecuador will open its seventh licensing round Jan. 24 for nine blocks in the country's interior and three blocks on the coast. Bid deadline is Mar. 25, Energy Minister Francisco Acosta Coloma told the InterAmerican Petroleum and Gas Conference last week in Dallas. The ministry wants negotiations with selected bidders to begin in May and be finished by July so contracts can be signed in August. The country is revising its petroleum law and may adopt a participation contract that includes production sharing and profit taxes. If the law isn't passed in time, the new licensing round will use the current service contract, said Petroecuador's Federico Veintimilla.
Chinese and German firms will team to design a pipeline to transport natural gas from China's Shaanxi-Gansu-Ningxia basin in North Central China to Beijing.
China Petroleum Engineering Construction Corp. and Germany's Pipeline Engineering GmbH, Essen, will design the 900 km, 600 mm line aimed at enabling Beijing to replace coal use in the city.
Russia's oil flow continues to fall despite a Moscow news agency's assertion that 1993 output will be better than previously forecast.
Russian oil output in January-August averaged 7 million b/d, down 13% from the same period in 1992. August production slipped 1.2% from July. Official government figures discredited a RIA news agency report a few days earlier that 1993 production will average 7.1-7.14 million b/d vs. previous official forecasts of 6.8-7 million b/d. Also during the first 8 months, gas flow fell 3% to 14.6 tcf and refinery throughput plunged 15%.
Moscow is considering attractive new production sharing contract terms to lure the $50 billion it needs in foreign upstream investment by 2000 to resuscitate its oil and gas sector. Foreign firms could be allowed as much as 50% of output from projects in harsh environment frontiers, First Deputy Minister for Fuel and Energy Anatoly Fomin told the Asia Pacific Petroleum Conference in Singapore last month. Other PSC splits could be 80-20 and 70-30, depending on the region. At least 400 oil fields with potential reserves totaling 21.9 billion bbl could be developed in 1995-2000, he said.
On the downstream side, plans to upgrade 28 Russian refineries could cost $15-20 billion, with 14 projects under way to date.
Russia is especially interested in accommodating explosive growth in crude and products demand in China, Fomin said.
Russia's Sakhalin Island still commands keen interest among international explorationists. Amoco and Shell have joined forces to study acreage off Sakhalin Island in the Sea of Okhotsk. Amoco-Shell purchased data packages for the third Sakhalin offshore acreage tender, for which bids are required by mid-December. Amoco says a number of fields lie in the companies' area of interest. The partners are in the qualifying stage for bidding but have not yet committed to bid. Qualification deadline is Nov. 1.
The two companies also are said to be looking at other prospects around Sakhalin Island and other Sea of Okhotsk areas nearby.
The agreement with Amoco will not affect Shell's involvement in the 4MS group, which is working toward development of eastern offshore fields Piltun-Ashtohskoye and Lunskoye fields (OGJ, Sept. 20, Newsletter).
Meantime, Russia has agreed to resume Sodeco's long delayed oil and gas development project off Sakhalin, with negotiations to get under way this month and possibly include Exxon, report Russian and Japanese wire services. Sodeco is a group of Japanese firms led by Japan National Oil Corp. that retains development rights to Chaivo and Odoptu fields off Sakhalin.
Delayed for 10 years, the Sodeco project could include two more fields and cost 1 trillion yen ($9 billion). The Japanese side wants to sign a contract within a year and start production early next century, reports Kyodo News Service. In addition, onshore Sakhalin basins are to come under scrutiny by Intera Information Technologies of the U.K. (see p. 49).
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