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• U.S. Industry Scoreboard 6/8 [44,457 bytes]

Hornsby believes these production cuts should help reduce second quarter inventories to more normal seasonal levels. They added that the impact of production cuts will be more evident in the second half of 1998.

"In our opinion, crude oil prices will continue to trade in the $15-18/bbl range over the course of the next 3 months," Hornsby said.

Non-OPEC oil producers are likely to capture 7 million b/d of the 8 million b/d demand growth expected over the next 5 years, predicts Mobil.

At the Asian oil and gas industry conference in Kuala Lumpur last week, Mobil Executive Vice-Pres. Lance Johnson said non-OPEC oil production would increase from just under 46 million b/d in 1997 to more than 53 million b/d in 2002 and to 54 million b/d in 2005. But, with the majority of growth demand taken by non-OPEC producers, OPEC's spare capacity would increase to about 12 million b/d by 2002 from 6 million b/d in March of this year.

Spare capacity should decline after 2002, but OPEC should see strong production growth then, assuming non-OPEC output flattens as projected.

Mobil predicted regional increases in oil production, with 1997 output shown first, in million b/d, followed by 2002 output: Latin America, 6.2 to 7.9; North Sea, 5.8 to 6.8; Africa, 2.7 to 3.7; Asia-Pacific, 5.8 to 6.3; continental Europe 0.6 to 0.9; and North America, 8.2 to 8.4.

Petroleos de Venezuela reduced its 1998 business plan by nearly $1.4 billion, says Pdvsa Pres. Luis Giusti. A lion's share of that reduction-$800 million-will come from future project investments, and operational spending will take a $600 million cut.

"We loweredellipseoil production to 3.170 million b/d and maintain exports slightly above 3 million b/d, but we currently are purchasing some 80,000 b/d on the international market to meet the demands of our clients," Giusti said.

"We continue to aim at an available production capacity between 6 and 6.3 million b/d by the year 2006," he added.

Perhaps hoping to offset the country's declining oil-based revenues, Venezuelan officials are predicting private sector investments in the country's natural gas projects will reach $1 billion. Pdvsa Gas says the expansion projects will modernize current transmission infrastructure, develop new areas, and set up gas delivery systems in the country's main cities.

Pdvsa says its NGL production capacity will "substantially" increase following completion of new plants in Santa Barbara and Jusepin-jumping to 360,000 b/d by 2006, from today's 220,000 b/d production. About 40% of that increase will be exported to international markets, officials say.

Japan's Mitsui Osk Lines says Asia will require 48 new LNG tankers by 2010, when LNG demand will reach 108 million metric tons/year.

Mitsui LNG tanker division General Manger Makoto Iwata says the company will have to raise more than $11 billion to build new carriers. Of the world's 88 LNG carriers in service, 69 are used in the Far East.

Funding will be difficult to acquire, he said, because of the added capital needed for constructing LNG plants and terminals. About 10 new LNG plants are expected to be built over the next 10 years.

Iwata suggests that existing vessels could be used for longer terms to help stabilize the shipbuilding market and reduce total transportation costs: "We could reduce new vessel orders by using existing vessels for up to 35 years," he adds. Today, LNG projects use vessels for contract terms of 20-25 years.

At least 10 oil companies operating in California are heading to court over two lawsuits alleging drinking water contamination by MTBE.

MTBE is widely criticized by environmentalists. The law firm Masry & Vititoe went to the Los Angeles County Superior Court late last week with two separate actions-one against five oil companies for water contamination in Glenville, Calif., and a larger class-action suit against 10 oil companies.

The U.S. EPA, studying the effects of MTBE, has cautioned water agencies that MTBE levels should be no more than 20-40 ppb. Some water wells used by Glenville residents were found to have 293,000 ppb or higher. The wells in the Glenville area are closed, bottled water is regularly transported to the town, and some local businesses, including a restaurant, were closed.

Exxon will form a new business unit, Exxon Upstream Development Co., to assume responsibilities for development of the Hoover/Diana project in the Gulf of Mexico and the Girassol project off Angola.

Based in Houston, the new company also will assume Exxon's responsibilities for development of new deepwater and selected other commercial resources. Deepwater discoveries off West Africa-such as Dalia, Rosa, Kissanje, Marimba, and Bonga-are expected to be assigned to the new company for development.

An estimated 350 Exxon employees will transfer to the new company this year; however, the number of employees is expected to vary, depending on the number of projects assigned to the company.

Morris E. Foster, senior vice-president and member of the Exxon Co. U.S.A. management committee, will be president of the new firm.

Western oil companies are moving quickly to reestablish offices in Iran in the wake of the U.S. actions holstering sanctions against a multinational consortium investing $2 billion to develop giant South Pars gas field (OGJ, May 25, 1998, p. 18), according to reports from Reuters news service.

BP, Elf, BHP, and Gazprom are the latest companies jostling for office space in Tehran. BP is reportedly opening an office in Tehran but will wait for normalized international relations with Iran before resuming business with the Islamic republic. BP is the largest oil producer in the U.S. and a major investor and employer there, and is potentially vulnerable to Iran-Libya Sanctions Act (ILSA).

Other firms are also closely watching whether ILSA penalties will be imposed on future deals signed with Iran. Elf is looking at a $600 million project to develop the Doroud gas field, and BHP is studying, with Iran's state oil firm, a $2.7 billion project to build a pipeline to supply gas from South Pars to Pakistan.

Some foreign oil firms have had a presence in the Iranian capital since 1979. European majors such as Royal Dutch/Shell and a number of Japanese and South Korean firms have long had offices in Iran. France's Total reopened its representative office there after agreeing to develop Sirri E and A offshore oil and gas fields in 1995. Petronas also opened an office after joining Total at Sirri and becoming part of the South Pars consortium.

Iran is expected to offer a series of oil and gas development projects worth billions of dollars at a seminar in London on July 1-3. The move is seen as another major factor in renewed interest in Iran, which has more than 93 billion bbl of proven oil reserves, or 9% of the world's total, and 21 trillion cu m of gas.

Indonesia's new government is hinting at an overhaul of state oil company Pertamina's exclusive petroleum marketing businesses. Kuntoo Mangkusubroto, Minister of Mines and Energy, says foreign companies would welcome a move that improves competition, efficiency, and transparency in the country's oil trading ventures. He says the company is "in a spirit of reform."

Indonesia's lucrative petroleum-based products distribution is relatively closed to foreign participation. Pertamina, like many Indonesian enterprises, relies heavily on affiliated companies linked to the family and close friends of former President Suharto.

Mobil Chairman Lucio Noto said that, if Indonesia creates a level playing field, it would consider participating in distribution networks there: "If the right kind of refinery capacity became available at the right price, Mobil would not close its eyes to it."

While Indonesia is a net oil exporting country, it imports 20% of its 52 million kl/year of oil, including an estimated 200,000 b/d of crude to feed its refineries, 130,000 b/d of gas oil, and 42,000 b/d of fuel oil.

Calling it an arbitrary giveaway without economic justification, Alaskan Gov. Tony Knowles vetoed legislation aimed at Cook Inlet royalty relief for producers during the current oil price slump. Knowles says the bill failed to provide sufficient economic analysis, a mechanism for adjusting royalties upward should oil prices later rise, lack of serious negotiations between the government and producers regarding royalty relief, and no public debate.

Alaska already allows royalty changes to encourage development of marginal fields, he adds. "We already have the tool to encourage development of marginal fields and protect the state's interest without arbitrarily giving away the state's resources."

Copyright 1998 Oil & Gas Journal. All Rights Reserved.