OGJ Newsletter

• U.S. Industry Scoreboard 8/24 [44,210 bytes]

OPEC is paring production but still is falling short of pledged cuts.

Middle East Economic Survey estimates OPEC's total production in July averaged 27.485 million b/d. This is a significant fall from the June total of 28.257 million b/d, but adrift from the 24.387 million b/d target, excluding Iraqi production, set in June (OGJ, June 29, 1998, p. 28).

Nevertheless, MEES thinks oil producers can take a little comfort from Saudi Arabia's decision to cut September crude deliveries to term customers by 18% of contract volumes. Saudi Aramco reportedly invoked a clause in its contracts enabling supply volumes to be reduced if government policy changes because of a lack of reaction by oil markets to output cuts.

Meanwhile, the U.N. says Iraq has sold only $1.06 billion worth of crude so far for the May 30-Nov. 25 period of the latest oil-for-aid deal. Iraq was expected to sell $4 billion worth for the period under a U.N. resolution that lets it export $5.2 billion worth of oil every 6 months to buy food and medicine.

Baghdad claims it cannot meet the monetary targets because oil prices have plunged-dated Brent has rarely crept above $12/bbl in the last few weeks-and because its oil production and export facilities are in disrepair.

Kuwait's oil sector appears to be undergoing a major reorganization.

According to unconfirmed local press reports, Kuwait's Supreme Petroleum Council has approved a merger of the country's two national oil companies-Kuwait Oil Co. (KOC) and Kuwait National Petroleum Co. (KNPC). KOC controls E&P activities, and KNPC refining and marketing.

The council also approved the privatization of Kuwait Petroleum Corp. subsidiaries Petrochemicals Industries Co. and Kuwait Oil Tankers Co.

Dramatic change is also in store for Ecuador's petroleum sector.

Newly appointed Oil Minister Patricio Ribadeneira last week unveiled some key elements of the new Ecuadorian administration's oil policy that reflect a willingness to embrace reforms and improve the climate for foreign oil investment.

That was underscored when the government stepped in with police last week to resolve a dispute that had culminated in local Indian activists allegedly kidnapping three ARCO employees and three contractor employees working on the Villano oil field development in Ecuador's Oriente jungle. ARCO had warned Quito it might pull out of the $350 million project after the kidnappings led to a 20-day work suspension.

Ribadeneira cites as goals: restructuring-but not privatization-of state-owned Petroecuador; furthering studies of a pipeline for heavy crude oil by private interests, while halting efforts to expand the Transecuadorian trunk line until the studies are completed; and greater participation by private firms in new and marginal field developments.

The huge BP-Amoco merger will not go unnoticed in the U.S. Congress.

Sen. Mike DeWine (R-Ohio), chairman of the Senate judiciary committee's antitrust, business rights, and competition subcommittee, plans a hearing in September. DeWine, like another Ohio congressmen (OGJ, Aug. 17, 1998, Newsletter), is concerned about BP moving its U.S. headquarters from Cleveland to Amoco's headquarters in Chicago.

Another merger is in the works, this time between Canadian independents Talisman Energy and Arakis Energy. Talisman agreed to acquire all outstanding shares of Arakis, and Arakis agreed not to solicit or encourage any competing offers and to pay Talisman a $12 million break fee under certain circumstances. Both companies' boards have approved the plan.

The deal is valued at $196-223 million (U.S.). It will give Talisman a 25% interest in a major oil field development project in Sudan, in which net proved and probable reserves are estimated at 113 million bbl. The project includes five oil fields: Heglig, Unity, El Toor, El Nar, and Torna South. Production of 37,500 b/d (net) is expected by 2000.

Bill Richardson has been sworn in as U.S. Energy Secretary but will continue in his post as U.N. Ambassador until his likely replacement, Richard C. Holbrooke, is confirmed.

The Senate energy committee cleared Richardson of allegations that he lied to the committee during his confirmation hearing.

Committee chairman Frank Murkowski (R-Alas.) had asked President Clinton not to install Richardson at DOE until the committee could check a report that Richardson had lied about offering former White House intern Monica Lewinsky a job (OGJ, Aug. 17, 1998, Newsletter). Murkowski said "no credible evidence" was found to support the claim. "To the contrary, we found clear and convincing evidence corroborating the ambassador's testimony."

Revitalization of Alaska's petroleum sector (see related stories, pp. 20-26) may be bolstered by the materialization of a long-touted LNG export project, but plans for two other major LNG projects have been hobbled.

An official sponsor group has been formed for the proposed Alaskan megaproject, aimed at liquefying North Slope gas for export to Asia (OGJ, Aug. 17, 1998, Newsletter). The group consists of: ARCO 37%, Marubeni 17%, Phillips 12%, CSX unit Yukon Pacific 12%, and Foothills Pipe Lines-a joint venture (JV) of TransCanada PipeLines and Westcoast Energy-22%.

The agreement calls for significant engineering, permitting, and commercial work during the next 4 years, with LNG deliveries to start in 2005-07. Alaska Gov. Tony Knowles, long a backer of the project, said, "With this new authority, we can sit down with the sponsor group and negotiate a state fiscal regime that will enhance the project's profitability and ensure a fair return to the state."

Exxon, BP, Mitsui, and Mitsubishi were among the firms that had been considering the project, but they did not sign the sponsor agreement.

Asian economic turmoil has caused Australia's Woodside Petroleum and partners to postpone the expected start-up of its North West Shelf LNG expansion project to yearend 2003 from early 2003 (see related story, p. 30). The delay is largely due to uncertainty among Japanese LNG customers about signing long-term supply contracts, said Woodside.

Woodside is moving forward with a $600 million (Australian) plan to increase condensate and LPG processing capacity and plans to seek approval from its North West Shelf partners by yearend.

A proposed LNG JV between Total and Indian state firm Hindustan Petroleum has run aground. Total and HPCL agreed late in 1995 to set up an LNG terminal and power plant, each at a cost of $500 million, at Andhra Pradesh. The firms later renewed their pact for 18 months, but it has now been terminated.

The partners differed over the site of the LNG terminal-Total preferred Visakhapatnam because of a favorable feasibility report on the port and infrastructure, but HPCL wanted Kakinada because of its proximity to prospective buyers (power generators and fertilizer manufacturers). They also could not agree on the size of India's LNG market (OGJ, Aug. 17, 1998, p. 42).

Mobil has signed a letter of intent to help the newly formed national petroleum company of the African republic of Sao Tome and Principe explore its offshore territory.

Mobil entered into a technical assistance agreement with Sao Tome & Principe National Petroleum Co. (STPetro) to evaluate 22 blocks comprising about 12 million acres in the republic's economic development zone (see map, OGJ, June 29, 1998, p. 88). Mobil will have an exclusive option to acquire a production-sharing contract on the acreage, which was previously scheduled to be offered in an open bid round.

STPetro is owned 51% by the government of Sao Tome and 49% by Louisiana firm Environmental Remediation Holding Corp.

The race to develop hydrogen-fueled cars speeded a little more with news that Royal Dutch/Shell has forged a research agreement with the DBB Fuel Cell Engines unit of Daimler Benz. DBB is working to develop a fuel cell fed by hydrogen, while Shell sees a niche for its Catalytic Partial Oxidation technology for converting liquid fuels into hydrogen-rich gas.

Ferdinand Panik, head of the fuel cell project group at Daimler Benz, said, "Our strategic alliance with Ballard Power Systems Inc. and Ford Motor Co. will pave the way to make fuel cell-powered cars available in 2004. Our latest success is to make the technology small enough to implement it in a new Mercedes A-class car. We are happy that Shell now joins us to investigate novel ways to supply the necessary hydrogen gas."

After 5 years of wrangling, Florida has finally refused to allow utility Florida Power & Light (FPL) to import the Venezuelan boiler fuel Orimulsion to fuel its 1,600-MW Manatee power plant (OGJ, Sept. 15, 1997, Newsletter).

FPL says that, despite its confidence in Orimulsion's environmental and economic benefits, it doubts it will ever receive regulatory approval to use the fuel and therefore will not appeal Florida's decision.

Copyright 1998 Oil & Gas Journal. All Rights Reserved.