OGJ Newsletter

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Sheikh Hisham Nazer, former oil minister of Saudi Arabia, told a London gathering of refiners that gulf region producers should recognize their economies are more vulnerable than those of western countries and act accordingly.

"Gulf countries," said Nazer, "should meet changes in the oil market by changing their own directions. The only way to reduce the current glut in the oil market is by first reducing domestic expenditure by gulf governments."

Nazer said that, once their need for oil income was reduced, there would be less need for cutthroat competition in oil production: "This should then lead to OPEC becoming an organization where technical development could be encouraged to reduce costs, and not what it is today."

Another non-U.S. company has agreed to E&D activity in a country targeted by U.S. sanctions.

Petrobras plans to sign a contract this week with Cuban state oil company Cupet to explore a deepwater block off Cuba, Jesus Rodriguez Cladellas, the trade counselor at the Cuban Embassy in Brasilia, told OGJ last week.

Brazil's Foreign Relations Minister Luiz Felipe Lampreia and Petrobras officials will make an official visit to Cuba on May 24. "The contract is to exploit Block 50 offshore Varadero in deep waters, and we feel that the Brazilian government now has the political will to go ahead with the contract after 2 years of negotiations," said Cladellas. Lampreia told the local press that, in addition to the exploration deal, the Brazilian government expects to ink accords to obtain medical and other technology from Cuba while the latter could benefit from financial credits for purchasing Brazilian food. He also said he is not worried about U.S. criticism concerning his visit to Cuba: "Brazil is an independent country and conducts its international relations according to its own criteria."

Although Washington whispers that the Clinton administration may be looking to cut a deal that would holster sanctions against oil companies looking to develop Iran's South Pars field (OGJ, May 11, 1998, Newsletter), 14 U.S. senators are urging President Clinton to impose economic sanctions against a group led by Total.

State Department officials acknowledge the administration has agonized for months over whether to impose sanctions under the Iran-Libya Sanctions Act; a decision is expected soon.

Subsidies for alternate energy sources have caused some agitation within Republican ranks in Congress.

Citing a need to balance "regional interests," House Speaker Newt Gingrich (R-Ga.) countermanded a campaign by Rep. Bill Archer (R-Tex.) to repeal the ethanol production subsidy.

Archer, ways and means committee chairman, says the subsidy is costing the federal government $600 million/year without reducing oil imports (OGJ, Mar. 24, 1997, p. 22). His committee repealed the credit in a highway funding bill, although the Senate voted to extend the tax credit through 2007.

Gingrich said he will name enough corn-belt congressmen to the House conferees to ensure Archer is outvoted.

As President Clinton launches a program to cut energy use 50% in new homes and 30% in 15 million existing homes over the next decade in order to reduce gases that contribute to global warming, the conservative Cato Institute claims last December's Kyoto protocol will have no discernible effect on global climate.

The institute says the Kyoto agreement, which calls for the U.S. to cut greenhouse gas emissions 7% below 1990 levels, "will reduce mean planetary warming by a mere 0.19° C. over the next 50 years."

Clinton hopes to sell his proposal strictly on economics, pointing out that better energy efficiency could save U.S. households $11 billion/year and reduce carbon emissions nearly 24 million tons by 2010.

More companies seek to combine efforts for cost savings and new efficiencies (see related story, p. 29).

Finland's Neste Oy and Imatran Voima Oy (IVO), respectively the state petroleum and electric power concerns, have submitted an official notification to the European Commission (EC) of a plan to merge (OGJ, Dec. 29, 1997, p. 23).

European competition laws were expected to prove an obstacle for the merged company, IVO-Neste Group Ltd., because of Neste's 50% stake in Gasum Oy, a joint venture with Russia's Gazprom to import gas to Finland (OGJ, Dec. 29, 1997, p. 23).

IVO-Neste's submission to EC proposes sale of 50% of Gasum shares to the Finnish state and to private investors outside IVO-Neste. This would reduce Neste's holding in Gasum to 25%, while Gazprom's share would remain intact.

Neste said the EC is expected to consider the proposal by the end of May. The company proposes to sell the Gasum shares within 12 months of approval of the merger by EC.

Pdvsa and YPF have signed an agreement to cooperate in the oil and petrochemicals industries.

Pdvsa says the agreement is in line with Venezuela's opening of the country's oil industry, and cooperation between the two companies is aimed at joining forces, experience, and project investments to optimize production and economic benefits. YPF already operates in Venezuela's hydrocarbon sector through its subsidiary Maxus.

The companies will select this summer projects that will be the subject of technical and economic feasibility studies. In E&P, several projects were identified, particularly in the development of heavy crudes in the Orinoco oil belt.

Both companies are seeking common ground in a competitive setting that allows natural gas commercialization through the transformation of natural gas into liquids. The agreement also includes development of petrochemical projects and the upgrading and refining of crudes from the Orinoco belt, as well as transportation and storage.

Unocal's Indo-Bangla gas project is facing difficulties forged from apparent political opposition in India and Bangladesh to the export-import of gas across the two country's borders.

Unocal's proposal to swap gas from Tripura, India, with gas from Bangladesh appears bogged down by continued civil unrest in northeastern India. The company has a 50% stake in some of the recently discovered gas fields in Bangladesh and has proposed a cross-country gas pipeline from eastern Bangladesh to eastern India.

An alternative subsea pipeline was also proposed through the Bay of Bengal to transport gas to Orissa and West Bengal.

Australia is pumping up the volume to attract industry investment there.

Australia's Minister for Industry John Moore says the government will offer investors $4 billion (Australian) in the form of incentives to help develop petrochemical facilities in the country's Pilbara region of northwest Western Australia (OGJ, Oct. 20, 1997, p. 34).

A government task force said the country's petrochemical industry is in rapid decline and is contributing to the country's growing trade deficit in plastics and petrochemicals, which stands at $5.4 billion (Australian).

The Western Australian government is short-listing a group of multinationals and local companies competing for the right to develop a petrochemical plant in Pilbara based on North West Shelf gas that includes BP, Dow/Shell, Hanhwa Chemical/Samsung, and Krupp/Orica.

LNG prospects continue to brighten around the world.

More gas has been found off Western Australia to support a second LNG export project there.

Woodside Petroleum group reported its Sunset West 1 wildcat discovered a 64 m gas column. The well is west of the Sunrise Troubador, Loxton Shoals, and Evan Shoal gas discoveries outside the Timor Gap (OGJ, May 4, 1998, Newsletter).

The find reconfirms the region has significant gas reserves to support establishment of an LNG project with an onshore treatment and liquefaction plant proposed for the Darwin area. Woodside and partners BHP and Shell Development each hold a third interest in the permit area.

BHP and Algeria's Sonatrach have agreed to consider using BHP's LNG compact technology for a proposed $100 million expansion of Algeria's Arzew LNG plant in what appears to be a joint venture project.

The project would increase the plant's capacity by 500,000 metric tons/year from the current 1.7 million metric tons/year. There is no word yet on how ownership interests would be set.

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