Is there a change in the wind regarding how OPEC will manage production in response to oil price changes?
OPEC Pres. Yousef Yousfi has proposed an OPEC summit meeting, ahead of the scheduled ministerial meeting Sept. 22 in Vienna, of a committee set up to determine policy options on how to maintain oil price gains and secure future price stability, as well as ways to accommodate potential increases in production capacity, says Middle East Economic Survey.
One proposal has already been floated by Venezuelan Energy and Mines Minister Alí Rodríguez: creating a mechanism whereby producers would adjust supply up or down whenever oil prices moved outside a chosen price band. While some OPEC players-notably heavyweights Venezuela and Saudi Arabia-support the proposal, MEES contends it is highly improbable that OPEC will agree to boost production immediately at the meeting in response to concerns that rising demand and continued OPEC adherence to output cuts will tighten markets severely this winter. The likelihood is that the cuts will hold to March, as scheduled. The question then remains whether other supply sources come to the fore to ease the looming crunch. The likeliest answer to that question is either: OPEC members unofficially easing up on compliance (what the market used to call cheating) or a continuing buildup in output by Iraq, which ignores its OPEC quota because of U.N. sanctions (see editorial, p. 25).
Meantime, Iraq plans to allow PSCs with foreign companies for developing its oil fields, once U.N. sanctions are lifted.
Baghdad plans to focus on E&D in areas close to existing oil producing areas and pipelines. Negotiations are said to be advanced with oil firms from Russia, India, and Malaysia on prospective PSCs that would have a 75-25 split in favor of the foreign operator. Iraq wants to boost its oil production to 3.5 million b/d next year from the current 2.7 million b/d.
Iran has set a Sept. 1 deadline for tenders to undertake Phases 4-8 of the supergiant South Pars gas field development. The projects are being offered under buy-back service contracts. Phases 1-3 are under way and expected to yield 2.6 bcfd of sweet gas and about 120,000 b/d of condensate.
South Pars output is expected to figure largely in Iran's plans for petrochemicals expansion and possible LNG exports (OGJ, May 24, 1999, p. 41).
Oil prices may get another lift in the next few weeks over the threat of strikes by oil workers in three key exporting countries-although the odds are against these strikes actually disrupting supplies, so the price lift is likely to be temporary.
At presstime last week, a new Venezuela oil workers union was threatening to interrupt oil exports with a strike. The fledgling union Sintraip, formed by disgruntled former members of traditional union Fedpetrol, is battling with the latter for the country's 40,000 oil workers as a new contract with state oil firm Pdvsa comes up for renewal in November. Pdvsa says there is no cause for alarm.
Sintraip, affiliated with Venezuelan President Hugo Chávez's political party, claims 14,000 members, which Pdvsa disputes.
Two of Colombia's main refineries and several key pipeline pump stations were taken over by Colombian army troops early last week to preempt a strike planned for this week, officials at Ecopetrol said. Colombian President Andres Pastrana gave the orders after two union leaders were arrested on charges of planning to sabotage the Cartagena oil refinery, Ecopetrol said. Hernando Hernandez, Ecopetrol union president, condemned the army's action, calling it "new aggression" by the government. His union will be one of many that will join a national strike planned for Aug. 31.
In Norway, oil industry workers have set Sept. 6 as the date of their own political strike in objection to the government's decision not to begin exploitation of new oil fields.
Labor representatives from several service-supply companies-Kvaerner, Aker Maritime, and Umoe Haugesund-are holding the demonstration to protest the freeze placed on several fields that stand ready for development.
Norway, which produces about 3 million b/d, pledged to cut production by 200,000 b/d last December to comply with an agreement with OPEC and some other non-OPEC producers to reduce a global oil supply glut.
If foreign operating companies ever are allowed to participate directly in Mexico's upstream sector, there is some vast oil and gas potential remaining to be tapped. The recently disclosed discovery of what Pemex claims is a 1.4 billion bbl oil field, Sihil, in the Bay of Campeche marks just the first of what Houston analyst George Baker says is just one of four undiscovered Campeche fields with more than 1 billion bbl remaining to be found. Baker's firm, Energia.com, is building a database of 750 Mexican oil fields to analyze field-size distribution by basin that he contends will help operators interested in upstream collaboration with Pemex as well as those preparing for Gulf of Mexico OCS sales (see related story, p. 37). Baker, an authority on Latin America's petroleum sector and former adviser to Pemex, said, "While Mexican energy policy currently does not entail auctions of production blocks, leases, or production-sharing agreements, policy could change after the presidential elections of July 2000. Production companies interested in Mexico need to be reasonably prepared for the possibility of future block auctions."
A pipeline decision by Paramount Resources and Berkley Petroleum, two Calgary-based producers with strong natural gas prospects in the southern Northwest Territories, could have long-term implications for mainline operators TransCanada PipeLines and Westcoast Energy.
Paramount and Berkley intend to build their own pipeline to mainline connections rather than, as in the past, asking TransCanada and Westcoast to build lateral connections to new fields. Paramount said it could not reach an acceptable deal with the two major pipelines.
Paramount and Berkley are majority owners of Shiha Energy Transmission, which has applied to Canada's National Energy Board to build a 15-mile, 106 MMcfd pipeline from wells in the Fort Liard region. The gas would be treated at a plant proposed by Paramount and shipped through a new 102-mile pipeline to connect near Fort Nelson, B.C., with a mainline operated by Westcoast Transmission. The project, including the $16.9 million (Canadian) Fort Liard line, would cost about $90 million. Paramount would operate both the new plant and pipelines. The partners plan to bring the Fort Liard wells on stream in April 2000.
In a move to broaden its international petrochemical operations, Canada's Nova Chemical is bidding for a number of polystyrene plants operated in several countries by Royal Dutch/Shell.
The properties include plants in France, the Netherlands, and the U.K., and several smaller operations in China and Chile. Nova estimates the value of the properties at $200-250 million (U.S.). Nova Chemical is focusing its operations on polystyrene and polyethylene. The Shell plants have a combined production capacity of more than 300,000 metric tons/year of polystyrene.
Nova is also involved in a $750 million (Canadian) expansion program at its petrochemical plants in Alberta.
There are reports of merger talks between German integrated petroleum firm Veba and the country's largest electric utility, Viag.
The German state of Bavaria, Viag's largest shareholder with 25.1%, says the firm is participating in talks with numerous companies about merger opportunities but describes the report as speculation. Veba, on the other hand, was swift to refute the rumors, saying it "is not holding talks on the acquisition of a stake in Viag."
Regardless who the buyer turns out to be, Bavaria plans to part with its entire stake in Viag by yearend, reports German business weekly Wirtschafts- woche.
Will Asia's reviving LNG prospects fall victim to international geopolitics? Escalating tensions between mainland China and Taiwan have cast a cloud over Australian LNG developers' efforts to boost LNG exports.
Australia's government last week disputed local press reports claiming Canberra is stalling efforts by Taiwan to buy large volumes of LNG in order not to offend Beijing. China's President Jiang Zemin is slated to make his first state visit to Australia next month. Canberra disputes claims that Taiwan has offered to buy $50 billion (Australian) of LNG from a proposed expansion of the North West Shelf project over 20 years, noting that no tender has been announced.
Most Australian LNG exporters have joined a joint marketing venture, with an eye to selling not only LNG to Taiwan but to a proposed LNG terminal and power project in China's Guangdong province. Australian officials contend there is scope to capture both markets, but it is likely that Beijing will try to win contractual advantages over its sensitivity to sales of Australian LNG to Taipei-perhaps even to scuttle such a deal. As with most other nations, Australia hews to a "one China" policy that does not recognize the Taiwan government.