Newsletter

U.S. Industry Scoreboard 1/19 [44,756 bytes]

Oil demand and price forecasts are being trimmed because of the Southeast Asia economic crisis.

IEA is pegging 1998 world oil demand at 75.3 million b/d, down from a previous forecast of 75.6 million b/d. The agency also cut its Asian demand forecast for 1998, to 9.4 million b/d from 9.6 million b/d only 1 month ago.

EIA predicts that major changes in several Asian economies will slash demand growth in the region to 400,000-500,000 b/d in 1998-99-far less than the 600,000-700,000 b/d increase previously forecast. EIA expects world oil demand to rise 1.8 million b/d in 1998 and another 1.9 million b/d in 1999, for a growth rate of 2.5%/year in 1997-99 vs. 1.9%/year in 1992-96.

World oil prices should level off in 1998 at $16-17/bbl, says EIA, then reach $17-18/bbl in 1999, assuming Iraq is exporting 1 million b/d at that time.

For U.S. consumers, average retail heating oil prices in fourth quarter 1997 were about 12% lower than they were the previous year. And current and expected winter peak prices for natural gas are well below levels seen last year.

Natural gas spot and near-term futures prices have plunged by a third since mid-November. EIA expects average U.S. wellhead gas prices to fall as much as 13% in 1998 and perhaps a little more in 1999, due to increased productive capacity, greater Canadian imports, and slower economic growth.

The Asian financial crisis is creating challenges for energy companies operating in the region.

Indonesia has knocked CalEnergy's Patuha geothermal project down a notch in status to the so-called Presidential Directive No. 5 (PD-5) level (OGJ, Dec. 15, 1997, Newsletter). CalEnergy believes the PD-5 was a response to an IMF request for greater transparency in some decisions by Indonesia. Its $100 million Patuha investment is insured by OPIC against political risks.

"The economic situation in Indonesia has significantly worsened recently, and the confusion newly created over the potential presidential succession and the IMF rescue package makes the situation difficult to predict," said CalEnergy Chairman David Sokol. "We caution investors not to assume that theellipsesituation will be clarified in less than 6-12 months."

Meanwhile, two Thai refiners have agreed to consolidate their operations in a bid to cut costs and shore up their loss-ridden businesses.

Rayong Refinery Co. (RRC) and Star Petroleum Refining Co. (SPRC) signed a memorandum of understanding to jointly operate under the name Refining Co. (Refco). Refco will run RRC's 145,000 b/d refinery and SPRC's 123,500 b/d plant, both at Rayong. The shareholder structures of each partner will remain unchanged: RRC is owned by RD/Shell 64% and Petroleum Authority of Thailand (PTT) 36%; SPRC is owned by Caltex 64% and PTT 36%.

Meanwhile, PTT Gov. Pala Sookawesh said PTT wishes to sell its 24.29% interest in Bangchak Petroleum's 120,000 b/d refinery at Bangkok, but the timing doesn't seem right now because of the stock market downturn.

Despite the current financial difficulties of operating in Asia, some firms are continuing with their plans to do business there.

Seen as a major boost of confidence for the crisis-hit Thailand, Exxon has made a final decision to proceed with its plan to build a $400 million world-class aromatics plant at its 167,000 b/d Sriracha refinery.

Construction of the 770 million lb/year paraxylene plant is scheduled for completion in 1999-a near-record time, if achieved.

Phillips remains optimistic about the world LNG market despite the economic downturn, a Reuters report quoted the company as saying.

Phillips and BHP are reportedly evaluating proposals for construction of an LNG plant in the Indonesia-Australia Zone of Cooperation. Raw gas will come from the Bayu-Undan field (OGJ, Apr. 7, 1997, p. 40). Capacity may be as much as 3 million metric tons/year, with start-up slated for about 2003.

South Korea has become the world's tenth largest energy consumer, based on 1997 figures, although its economic crisis may change that.

South Korea's energy use reached 180 million tons of oil equivalent (toe) last year, according to Korea Energy Management. Energy consumption among the major economic sectors was: manufacturing 53%, transportation 23%, home/ commercial 22%, and public/other 2%. Demand was met by: petroleum 68%, electric power 13%, coal 12%, and city gas 6%.

Industrial sectors that use large amounts of energy-including steel, cement, and petrochemicals-represented 31% of total demand. This compares with 24% in Germany, 22% in Japan, and 19% in the U.S.

Meanwhile, South Korea's energy imports bill last year reached $27.2 billion, accounting for 18.8% of the nation's total imports.

Iraq is again hindering U.N. weapons inspections efforts. The move is halting the recent freefall of crude oil prices, if only temporarily.

On Jan. 14, Baghdad failed to provide an escort for an inspection team led by a U.S. official. This effectively prevented work that day for the team, since inspectors cannot enter Iraqi military sites without an Iraqi official in tow.

Baghdad described the inspector, Scott Ritter, as a suspected CIA official and a "hyena in the public service of American intelligence"-an accusation Ritter says is ridiculous. Ridiculous or not, the spat helped crude prices bottom out, with Brent for February delivery closing at $15.50/bbl in London trading on Jan. 14, having tumbled from more than $18/bbl since mid-December.

Meanwhile, Iraq has again started loading oil at its Mina al-Bakr terminal and at the Turkish port of Ceyhan. Tanker loads are scheduled for delivery to Elf and Repsol, among others.

Israel has taken the first step towards creating a company to build and operate a natural gas grid in the country. The country's government has charged advisers from Price Waterhouse and Wood Mackenzie with issuing tenders to select companies to form a new gas firm to design, finance, build, operate, and maintain a transmission and distribution grid. The new Israeli Gas Co. will be responsible for purchase and sale of natural gas in the country, apart from gas required for power generation by state utility Israeli Electricity Co.

Price Waterhouse said 20 companies have bought prequalification tender documents and were invited to a briefing on the plan in Tel Aviv on Jan. 14. The deadline for prequalification applications is Feb. 26.

Indonesia is reportedly talking to China about the possible sale of gas from the huge Natuna field.

Several transport routes are being discussed, including LNG via tanker and a subsea pipeline from Natuna to China's Guangdong province. Thailand has agreed to buy some of the gas from the 222 tcf field, but those purchases likely will be delayed (OGJ, Dec. 29, 1997, p. 18).

At presstime last week, Mobil was trying to contain and clean up an oil spill off Nigeria after a pipeline ruptured.

An undetermined amount of crude escaped from the pipeline that moves oil from Idoho platform to onshore facilities. Mobil immediately isolated the damaged pipeline section and diverted the oil elsewhere.

Russia has failed to reach an agreement with Turkmenistan over gas exports, according to Russian television reports.

Gazprom head Rem Byakhirev said Russian Prime Minister Victor Chernomyrdin and Turkmen President Saparmurat Niyazov agreed in principle last week that Turkmenistan would resume pipeline exports of gas through Russia, but Niyazov said the two sides were unable to agree on a price.

Vyakhirev said it will be at least a month before a contract is signed.

Albania has at last disclosed the winners of a bidding round for its onshore oil tracts (OGJ, Oct. 30, 1995, p. 22).

Two international groups won three concessions each: one comprising OMV, Enterprise Oil, and Clyde Gas and another consisting of Occidental and International Petroleum. Drilling is expected to start in midyear. Production-sharing deals are expected to be finalized by the end of January.

Merger and acquisition activity continues in the Canadian oil industry despite a forecast by analysts of a slowdown in 1998 from 1997's estimated $14.6 billion (Canadian) in deals.

Orbit Oil & Gas has accepted an increased $105 million takeover bid from Sunoma Energy. Sunoma, a private company, received financing from an unnamed company in Fort Worth for the takeover deal. Sunoma said the takeover will increase its assets to more than $200 million.

Meanwhile, Northrock Resources has made a $134 million offer for Paragon Petroleum. The deal would increase Northrock's oil and gas assets in west-central Alberta, where it recently made a deal with Gulf Canada Resources to pool undeveloped lands, with Northrock as operator.