Scoreboard - Due to a holiday in the U.S., data for this week`s Industry Scoreboard are not available.
The price for Brent crude oil has bumped back above the $18/bbl mark for the first time in 18 months, as market confidence grows in OPEC`s adherence to its cutbacks programs (see Editorial, p. 17).
Dated Brent closed at $18.53/bbl in London trading on July 6, while Brent crude for August delivery closed at $18.16/bbl. OPEC ministers have agreed to hold back production at least until March 2000, in a bid to keep the Brent price in the $18-20/bbl range (OGJ, Mar. 29, 1999, p. 18).
No doubt conscious of OPEC`s history of ignoring production limits, especially when prices start to rise after such an agreement, Algeria`s oil minister Youssef Yousfi, currently OPEC president, stated that there would be no increase in OPEC quotas before March 2000. "This is the consensus inside OPEC," Yousfi said. "The level of stocks is still very high. Producers still have to be very careful. I think the equilibrium will be reached by the end of this year or the beginning of next. Producers should not let recent price gains lure them into reneging on their supply pledges."
At least one independent producer is reacting to the oil price rise by returning shut-in wells to production. North Dakota-based GeoResources Inc. says essentially all of its oil wells in Williston basin have been brought back on-line. The company says it shut in about 35 wells during 1998 and the first quarter of 1999 but did not say how much those wells had been producing.
"We are encouraged that higher oil sales and higher oil prices will return us to profitability this quarter," said Pres. J.P. Vickers.
Freshly minted Franco-Belgian major TotalFina has begun to throw its new-found weight around, with a hostile bid for rival Elf (see story, p. 22). TotalFina`s bid values Elf at $41.2 billion, and if it is accepted would most likely be completed in October or November.
Wood Mackenzie Consultants reckons last year`s merger of Total and Petrofina may have gone so well that it generated more cost savings and synergies than anticipated. This, argues WoodMac, would have given TotalFina the confidence to try it again with Elf.
Also, TotalFina`s impressive stock performance was largely driven by E&P expansion, and Elf is currently undergoing its own E&P growth spurt.
"TotalFina has taken advantage of a window of opportunity that has arisen from market conditions and a shift in French government policy that has given tacit support for the bid," said WoodMac. "The remaining question is whether a foreign bidder will be prepared to test the French government and take on the challenges of the cultural issues of incorporating Elf."
Spanish firm Repsol has changed its name and is restructuring in the wake of its acquisition of Argentina`s YPF SA (OGJ, June 28, 1999, Newsletter). Now called Repsol-YPF SA, the firm has formed an integration committee to oversee the union of the firms and has made YPF`s Buenos Aires headquarters a second head office, in addition to the one in Madrid. "It has become necessary to set up a new, fully integrated corporate structure worldwideellipse," said the firm.
Former YPF Chairman Roberto Monti has been named executive vice-president for exploration and production.
Ocean Energy is looking to divest some assets in order to better integrate its holdings with those of Seagull Energy following their merger (OGJ, Dec. 28, 1998, p. 26). "Our business strategy is pretty simple," said Executive Vice-Pres. and CFO William Transier at a recent Banc of America Securities conference in Houston (see related story, p. 24): "We want to be able to (make an) operating profit in any commodity price environmentellipse"
Ocean`s goal is to drive all-inclusive finding, development, and production costs down to $10/boe by 2001 and to reduce its debt by $45 million, he said.
"(After the merger) we talked about the fact that we wanted to try to sell $100-200 million worth of properties during 1999. When we went out on the road, we realized that we had to get most of that done by the end of the first quarter." As a result, Ocean executed $143 million worth of property sales during the period. "But our estimates now have been revised, and we expect to sell about $400 million worth of properties, hopefully by the end of the third quarter," said Transier. Included in the assets to be sold is Alaskan local distribution company Enstar; the remainder are in Canada, U.S. onshore, the Gulf of Mexico, and the Arkoma basin, he said.
Directors of the International Petroleum Exchange of London have backed a plan to sell 70% of its assets to a group of five private investors, in preference to an offer to merge with the New York Mercantile Exchange.
IPE members will meet on July 30 to vote on the future of the exchange. The board has said it will regard as a vote of no confidence a rejection of its advice to sell to the five bidders (OGJ, June 7, 1999, Newsletter).
IPE said that, while the five companies had bid a total £25 million for the combined 70% stake in the exchange, the Nymex offer was not fully worked out and had many issues still to be resolved.
U.K. offshore operators have succeeded in persuading Westminster to reinstate capital gains tax rollover relief for the transfer and sale of license interests (OGJ, May 31, 1999, Newsletter).
James May, director general of the U.K. Offshore Operators Association, said, "Exploration and production companies will now have an incentive to rationalize their investment portfolios. This measure will help to prolong E&P activity in the U.K. North Sea by encouraging operators to trade small pockets of oil and gas that might otherwise have been considered uneconomic."
Wood Mackenzie Consultants said that, besides removing tax from licenses where developments have been sanctioned, the move will enable operators to shelter any profits from the sale of license interests, so long as the money is reinvested in buying new license interests within 3 years.
International classification society Bureau Veritas (BV) has classed "the world`s largest and deepest-operating" floating production, storage, and offloading unit. The Girassol FPSO was built for Elf Exploration Angola.
The hull of the 343,000 dwt vessel was floated out from Hyundai Heavy Industries last week. Built to enter service off Angola in 2001, the FPSO will have a "record-breaking storage capacity of 2 million bbl and a process capability in excess of 200,000 b/d," said BV.
Didier L`Hostis, BV`s project manager for the Girassol FPSO, said, "This project is a major step forward for the offshore world, working to new depths and new efficiencies of scale."
Indonesia has taken a firm step toward erasing the effects of the former Suharto government`s favoratist tendencies in the oil and gas industry. So far this year, state firm Pertamina has canceled seven oil and gas contracts held by children and associates of Suharto, says Mines and Energy Minister Kuntoro Mangkusubroto. The move has saved Pertamina an estimated 212 billion rupiah, plus $93 million in hard-currency costs.
Among the terminated contracts were one with PT Triharsa Bimanusa Tunggal for development of a fuel pipeline across Java and another with PT Ogsipiras Basya Pratama for construction of an LPG plant. In addition, PT Humpuss Patragas was ordered to sell its 51% stake in an exploration license in East Java to its Australian partner Ampolex Cepu, a unit of Mobil. And PT Humpuss Patragas was forced to sell its interest in an LNG shipping contract to its foreign partners, Mitsui OSK Line and Nippon Yusen Kabushiki Khaisa. The deal had involved shipping LNG from Indonesia to Japan in a tanker owned by Humpuss.
Pertamina also forced PT Genindo EPS, a unit of Bimantara Group, to transfer its shares in a Kalimantan oil and gas field to PT Equatorial of Canada.
A private firm has become the first foreign independent power producer (IPP) to enter South Korea`s electricity market. Sithe Asia Holdings, a unit of Sithe Energies, acquired a 250-MW cogeneration plant at Ichon, South Korea, from Hyundai Electronics Industries (HEI). The plant generates electricity and steam used in HEI`s nearby semiconductor and electronics production plant.
"We believe South Korea is fast becoming a dynamic new market for Sithe Asia, and we are thrilled to be the first foreign IPP to sign an asset purchase deal (there)," said Sithe Asia Pres. James Spencer.
The country`s government says it plans to part with two other cogen plants-at Anyang and Buchang-later this year in an effort to further privatize the state-owned utility Korea Electric Power Co.
The board of Russian natural gas giant Gazprom has appointed former Russian Prime Minister Viktor Chernomyrdin as its chairman for the second time in the company`s history. Chernomyrdin first became Gazprom Chairman in 1991 but was appointed Prime Minister by Russian President Boris Yeltsin the following year.
Chernomyrdin`s reappointment to Gazprom is the second installation of a Yeltsin ally as head of a major Russian company in the past few weeks. Presidential Chief of Staff Alexander Voloshin was named chairman of electricity firm Unified Energy Systems in late June.
The appointments are considered by many to indicate a desire on the part of the Kremlin to exert more authority over key companies. This is thought to be especially important to Yeltsin during the run-up to the December parliamentary elections and the 2000 presidential election.
Amid growing concerns about the potential pitfalls of the Year 2000 rollover, one utility has announced its confidence that it will weather the millennium change without difficulty.
BC Gas, a publicly traded company that owns regulated utilities BC Gas Utility and Trans Mountain Pipe Line Co., says all of its mission-critical systems are ready for the transition. These systems include monitoring, control, compression, and delivery systems involved in the flow of natural gas to customers throughout the Canadian province of British Columbia.
"Even with our intense inventory, assessment, and testing processes, we haven`t found any problem that would have stopped the flow of gas," said Gordon McLachlan, director of the company`s Year 2000 program. The company says its customer information systems-those that process trouble calls, dispatch work crews, and handle billing-have also been remediated.
The U.S. Department of Energy has tapped the technology units of Catalytica and McDermott International to work on the creation of a compact catalytic fuel processor to be used with fuel cells in the transportation industry. The DOE program calls for a "compact, fully integrated system capable of processing multiple fuels into a hydrogen-rich gas suitable for powering proton-exchange membrane fuel cells."
The two companies will work for 30 months on the $5.8 million project; DOE will assist the firms by providing $3.8 million toward their efforts.