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• U.S. INDUSTRY SCOREBOARD 5/4 [44,311 bytes]

Asia is fundamental to Shell businesses, Mark Moody-Stuart told the Centre for Global Energy Studies conference in London last week (see related story, p. 45). He said that about a fifth of Shell's investment, production, and product sales is in Asia-about $16 billion invested since 1990.

Moody-Stuart emphasized that Shell recognizes Asia's current problems but takes the long view and will continue to invest to help meet the region's growing energy needs.

By 2000, he predicts, there will be 100 Shell service stations in China alone.

Moody-Stuart says that Shell's longer-term scenarios suggest that, by 2020, Asia-Pacific oil consumption could more than double and that gas demand could rise nearly fourfold. Asia/Pacific oil demand may not grow as rapidly in the short term, "but it is still growing," he said.

As Asian economies continue to wrestle with currency problems and slower industrial growth, oil and petrochemical sectors are also suffering.

Indonesia's lagging economy will reduce the country's oil imports by as much as 50%, says Pertamina. Predictions that a recovery could take as long as 2 years will continue to drag domestic consumption, which stands at 3.5 million bbl/month, Pertamina said.

Asia's petrochemical industry is faring no better. Added delays of projects aimed at bolstering the region's need for construction materials, automotive parts, and equipment is further dragging economic revitalization.

Thailand's National Petrochemical plc (NPC) apparently will postpone a planned $240 million investment in two projects to produce raw materials for its recession-hit auto and construction industries.

Affected are $120 million joint ventures, one with Phillips for a high density polyethylene plant and one with Mitsubishi to manufacture oxo-alcohol.

Instead, NPC may ask Phillips and Mitsubishi to join it in projects to produce acetic acid and acrylonitrile, both used for making textiles. NPC hopes to bring the replacement projects on line in 2000. Optimum capacities are put at 150,000 metric tons/year of acetic acid and 150,000 tons/year of acrylonitrile.

Estimated project costs are $100 million and $200 million, respectively.

Asia's economic woes may be spurring some internecine competition. Plagued by an apparent dwindling of foreign investment capital, South China Sea neighbors Malaysia and Thailand are facing some tough choices to bolster each's national interest in light of their recent joint venture to develop the Trans-Thailand/Malaysia gas pipeline.

A Thai parliamentary committee has urged its government to review the project's investment scenario and infrastructure development, claiming Malaysia will benefit more from investment in a gas separation plant and from the pipeline's route from the two countries' Joint Development Area in the South China Sea to both countries' shores.

The committee notes that the pipeline will cross Malaysia's industrial zone, providing Malaysia access to less-expensive gas and with an unfair competitive advantage over Thailand for foreign investors looking to establish or expand industrial production in the region.

Prospects brighten for still more Australian LNG projects.

Shell and a recently listed Australian newcomer, Timor Sea Petroleum, have confirmed Evans Shoal gas field in the Timor Sea as a substantial find with success in the Evans Shoal 2 appraisal well last week.

Reports indicate a 216 m gross gas column. The discovery well was drilled by BHP in 1988, at a time when gas was not a viable commercial option.

Since then, Shell has pushed for another LNG export project in northern Australia (with Woodside Petroleum) by trying to establish a $10 billion (Australian), 7.5 million ton/year LNG plant at Darwin. At least 10 tcf of gas reserves would be needed in the region to support such a project.

Results appear positive that those reserve goals will be met from Evans Shoal, which could contain as much as 6.5 tcf of gas, and with another 5.5 tcf from the Sunrise-Troubadour-Sunset-Loxton Shoal fields about 120 km north of Evans Shoal. Shell has an 85% interest, and Timor Sea Petroleum has 15%.

The Central Asian states of the former Soviet Union may not be the international energy "ace in the hole" that some analysts paint it as-namely, as an oil supply "hedge" against the oil-rich but trouble-plagued Middle East.

That's the conclusion of a study by the James A. Baker III Institute of Public Policy at Rice University.

By 2010, Caspian oil production will likely reach little more than 3.5 million b/d-at best 3-4% of global oil use vs. Venezuela's projected 7-8% and the Middle East's 25%, the study concludes.

Further, the institute argues, the expected level of Caspian exports and consequent economies of scale may warrant only one export pipeline rather than the several that some geopolitical strategists think are the way to go.

It prefers proposals for a pipeline through Turkish Thrace, bypassing the Bosporus Straits, for economic as well as environmental reasons.

The institute also urges the major foreign powers to reassess their policies toward the region, especially advising the U.S. to not undermine Russian stability and to rethink sanctions against Iran.

Are further OPEC cuts in the offing in order to bolster oil prices? Venezuelan Mines and Energy Minister Erwin Arrieta has called for another cut in global oil production of 500,000 b/d-of which Venezuela would contribute 10%-if oil prices don't respond to recently announced cuts by OPEC and non-OPEC exporters.

Venezuela, in a deal with Mexico and Saudi Arabia in March, was a prime mover in the subsequent historic OPEC/non-OPEC accord to cut production by as much as 2 million b/d to rescue oil prices from the cellar. That followed months of bickering, mainly between the Saudis and Venezuelans, over, respectively, claims of quotabreaking and counterclaims of outmoded quota systems.

While markets greeted the earlier announcement of cuts with skepticism, a proposal to cut global output still further by a country widely seen before as the biggest quotabreaker is likely to be warmly received.

In light of that historic accord that Mexico brokered with OPEC stalwarts Saudi Arabia and Venezuela, Mexico and Venezuela now are formalizing OPEC-like ties.

"For the first time, as Latin American brothers, and in a serious fashion, we have turned to dialogue and to building bridges for a more adequate outcome in the oil market," Mexico's President Ernesto Zedillo said in Caracas last week.

The bilateral accord calls for concrete cooperation between the two countries on hydrocarbons, electricity, non-conventional energy sources, and exchange of information leading to serious analysis of the evolution and behavior of international energy markets. An annual working plan to accomplish these goals is expected in 90 days, with formal approvals to follow.

While the power of OPEC as a group to affect oil markets may have dwindled, Iraq's has not.

The U.N. Security Council last week voted to maintain full sanctions against Iraq, after the first review in more than a year, and the news bucked oil prices immediately: Brent crude oil for prompt delivery rose 30? in trading on Apr. 28 to close at $13.96/bbl, while June Brent rose 28? to $14.41/bbl.

Baghdad claims all banned weapons were destroyed. U.N. inspectors said they have found artillery shells filled with mustard gas.

Conversely, Russia, France, and China-all with massive oil field developments lined up in Iraq for when sanctions are lifted-have all cited progress by the Iraqis in dismantling nuclear weapons.

The U.S. and U.K-which don't have Iraqi projects lined up-maintain there is still insufficient progress in destroying chemical and biological weapons. Washington and London may become increasingly isolated from their U.N. brethren over Iraq, with many members seeking to remove sanctions to prevent further suffering of Iraqi civilians.

Volatility in North American natural gas prices will continue for the foreseeable future, and the already complicated natural gas market will become even more so, says William T. Wilson, president of Unocal Global Trade.

Wilson, speaking at Ziff Energy Group's North American gas strategies conference in Houston last week, predicted that, of the current 15 top natural gas producing-marketing companies, all but four will have dropped their marketing functions within the next 5 years.

Who will the survivors be? Wilson believes only Unocal and Shell will be left standing.

Separately, Stephen J. Letwin, president of TransCanada Energy USA Inc. but soon to be chief financial officer of newly merged TransCanada and NOVA, says that, after the merger, the new company will be prowling among U.S. natural gas transportation companies for merger-acquisition targets.

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