OGJ Newsletter

• U. S Industry Scoreborad 6/29 [44,322 bytes]

Oil industry leaders are applauding U.S. President Bill Clinton's attempts to move U.S. policy toward Iran forward instead of maintaining a status quo that has resulted in nearly 2 decades of diplomatic stalemate.

Among other measures, the administration announced expedited visa procedures and a softening of the U.S. consular travel warning with respect to Iran, following earlier efforts to suport cultural and academic exchanges.

ARCO Chairman Mike Bowlin and Conoco Pres. Archie Dunham tagged the Clinton administration's diplomatic overtures as courageous acts and urged the U.S. Congress to seriously consider a bill before the House that sets out a protocol for reestablishing government-to-government talks.

"President Clinton has demonstrated real courage in seizing an opportunity to break the 20-year-long deadlock," said Bowlin.

Conoco's Dunham added, "This is a commendable and courageous stance for the Clinton administrationellipseThe door to improved relations seems to be unlocked. It's now up to the two governments to walk through the door."

Following the U.N. Security Council's June 19 resolution authorizing Iraq to import as much as $300 million in equipment to rebuild its oil infrastructure, Russian company Zarubezhneft appears to be the first to sign a contract-this one valued at $1 million-to supply oil field equipment to the Iraqis, according to Interfax news service.

Other Russian firms are reported to have made deals to purchase 94 million bbl of oil under the oil-for-aid program brokered by the U.N.

As U.S. government leaders were posturing to ease sanctions imposed on Iran and Iraq, sanctions meant to punish India and Pakistan for detonating nuclear devices apparently are causing minor project delays in those countries.

Enron International CEO Rebecca Mark blames India's nuclear tests and consequent U.S sanctions for delays in implementing Phase 2 of the 2,184-MW power project at Dabhol, near Ratnagiri in Maharashtra.

"We are helpless in the face of the sanctions imposed by the U.S. government in the wake of the tests," said Mark. "The financial closure of the second phase of the project, which was to have been concluded by June 1998, will now be delayed by at least 3-4 months."

The U.S. sanctions have halted all U.S. ExIm Bank and other overseas lending agencies funding to India.

Mark, however, claims that Dabhol Power Corp. will not have any difficulty funding the 1,624-MW Phase 2 project, estimated to cost $1.3 billion. Phase 1 of the project is scheduled to be completed by December, 4 months ahead of schedule.

"We will tap international markets for the funds," she said. "I don't think there will be any escalation in the project cost. We are currently negotiating with the Maharashtra State Electricity Board for the power purchase agreement."

A U.S. House subcommittee has approved a bill requiring the federal government to take its oil and gas royalties in production, rather than in cash (OGJ, June 22, 1998, p. 23). The energy and minerals subcommittee amended the bill to allow the U.S. government to take cash royalties, rather than royalty in-kind, for production from low-producing, remote wells.

U.S. Sen. Kay Bailey Hutchison (R-Tex.) and a bipartisan group of senators is recommending to the Senate subcommittee on Interior appropriations that current royalty rates for deepwater oil and gas leases in the Gulf of Mexico should not be changed. "My action was necessary because the Minerals Management Service hasellipsethreatened to raise the royalty rate from 12.5% to 16.6%, a move thatellipsecould slow drilling and reverse the economic progress made since enactment of this law in 1995," added Hutchison.

Although deepwater activities in the U.S. Gulf of Mexico continue to grab headlines and Wall Street's attention, Alaska's North Slope fields continue to quietly demonstrate prolific resource potential and development in an environmentally sensitive area.

BP Alaska plans to increase oil output from its North Slope fields to 500,000 b/d from 460,000 b/d as four new fields begin producing in 2001. After that, the company expects to boost production an additional 60,000 b/d and sustain that level of production.

Meeting with analysts, BP Alaska executives note that Badami, Northstar, Liberty, and Tarn fields, as well as current infill drilling, EOR, and satellite development projects in the Prudhoe Bay area, have hiked BP Alaska's resource base to more than 7 billion bbl-of which more than 33% are proved reserves.

Increased concern for vapor emissions at crude oil and product-handling facilities, especially marine terminals, has prompted the U.S. Coast Guard to launch an update of regulations promulgated in 1990 that govern vessel loading and unloading.

At last week's annual international operating conference of the Independent Liquid Terminals Association in Houston, USCG Lt. Timothy E. Meyers, staff chemical engineer, reported that, by this fall, revisions to regulations will be incorporated in a notice of proposed rulemaking, with a view towards a final rulemaking by next summer.

Of particular concern for conference attendees are probable regulations governing pigging of loading lines to vessels. Under current regulations, such pigging is not allowed. Practice, however, said Meyers, has prompted a set of criteria that, when met, permits pigging case by case. Operators are anxious to be allowed to pig loading lines and thereby maximize product going into a vessel.

The European Union has agreed to greenhouse gas reduction targets for member countries following last year's Kyoto accord (OGJ, Dec. 15, 1997, p. 17). While EU members agreed to curb the group's emissions of six gases by 8% by 2008-12 from 1990 levels, amounts allocated to each member state vary widely.

Luxembourg's target is the highest, a 28% cut. Germany and Denmark agreed to reduce emissions by 21% and the U.K. by 12.5%.

Portugal, Spain, Greece, Ireland, and Sweden will be allowed to increase emissions-the first four as each country continues to expand its industrial base, Sweden because it plans to phase out nuclear power in favor of electricity generated from hydrocarbons.

Mitsubishi's trading arm has secured a barter deal with Indonesian state oil firm Pertamina that trades crude to the Japanese company for supplies of refined products back to Pertamina.

The deal was necessary after the Indonesian government suspended PT Permindo and PT Perta's rights to export crude and import refined products. The two firms were allegedly controlled by family members and friends of former President Suharto. Pertamina reports that the "swap measures" are being adopted to revive its idled trading network, because the state firm has no cash reserves to pay for oil products. Local newspapers report that a "product-for-oil swap" could be a prelude for cash-strapped Pertamina to enter into increased commodity barter trades.

Meanwhile, Indonesia's Mines and Energy Minister Kuntoro Mangkusubroto is trying to assuage fears in the foreign investment community after the new government announced plans to re-tender all deals with Pertamina and with other companies closely connected to the family and friends of Suharto.

The minister explained that contracts with foreign firms would be honored by the new government. But, re-tendering was needed in some cases to "weed out companies that had charged Pertamina excessively high costs."

A $46 million contract awarded to PT Catalysts Indopratama, a Suharto family firm, to procure catalysts and chemicals for the Balongan refinery in West Java will be re-tendered, reports the Jakarta Post.

The Suharto family owned or controlled 120-149 companies that do business with Pertamina. The family also dominated LNG shipping and crude oil, refined products, and natural gas pipeline systems, as well as development of some refineries in the country.

Brazil's campaign to demonopolize its oil industry and sell some of state firm Petrobras' oil field assets is still on track. The country's National Petroleum Agency (ANP) will announce in mid-July which oil fields Petrobras plans to sell to the private sector.

Such plans were stalled in April when a feud broke out between Petrobras' board of directors and ANP over government policies privatizing some of the state oil firm's properties (OGJ, Apr. 13, 1998, p. 25).

The agency will make a final determination on the fields before calling for tenders from the private sector. ANP Pres. David Zylberstajn said Petrobras will continue to extract oil from fields that produce more than 1 million b/d. First calls for the tender are expected to be published in December, but "the number of fields has not yet been decided," ANP said.

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