OGJ Newsletter

• U.S. Industry Scoreboard 12/30 [69438 bytes]

OPEC's secretariat contends that a contra-seasonal stock build of 500,000-600,000 b/d could occur in first quarter 1997, resulting in lower prices.

In contrast, a 1.2 million b/d drawdown occurred last year, stemming from production disruptions and cold weather.

Fourth quarter 1996 stocks are building at a rate of 300,000 b/d, OPEC's secretariat said. It notes oil markets would be in balance in the first quarter had Iraq not reentered the market, assuming stable OPEC output of 26 million b/d.

It forecast world oil demand in 1997 would increase 1.6 million b/d to 70.8 million b/d, with non-OPEC supply increasing 1.7 million b/d to 45.7 million b/d. It pegs the call on OPEC crude in the first quarter at 26 million b/d.

As the contracts Iraq has lined up approach the $2 billion limit imposed by the U.N. on its oil sales, the U.N. approved a contract between Russia's Zarubezhneft and Iraq's SOMO to sell 21,000 b/d of crude to Zarubezhneft for 5 months.

The U.N. also was considering contracts Lukoil and Nafta Moskva signed to buy 17,000 b/d each, but approvals of pending contracts could be delayed as the U.N. calculates how much oil Iraq has contracted to sell thus far.

As 1996 was drawing to a close, significant oil and gas news developments were unfolding in Russia.

European Bank for Reconstruction & Development (EBRD), London, has loaned Russian gas giant Gazprom $225 million to upgrade its gas transmission grid (see story, p. 27).

EBRD says the loan will be used to finance improvements in pipeline inspection and metering and to introduce mobile compressor stations and replace valves. Loan will enable Gazprom to improve reliability of gas supplies, system efficiency, and environmental performance, EBRD says.

Russia plans to cut its excise tax on oil to 55,000 rubles/metric ton from 70,000 rubles in 1997.

First Deputy Economics Minister Yakov Urinson said domestic energy companies account for 65% of Russia's budget revenues and are taxed more heavily than foreign counterparts.

Economics Minister Yevgenii Yasin maintains the Russian economy will continue to stagnate unless it adopts a new industrial policy that gives the space, nuclear, and power sectors the investments, subsidies, and export credits needed to help them compete in world markets.

Foreign joint venturers say it is becoming increasingly difficult to export their oil because Russia is giving domestic producers preference for pipeline space.

JVs accounted for 4.8% of Russian output last year, about 250,000 b/d, and more than 10% of Russia's 2 million b/d of exports.

About six joint ventures have the right to export 100% of their output until September 1997, and supposedly they have priority pipeline access.

Some JVs say pipeline capacities are full and they're being squeezed out by local producers.

However, Transneft, state-owned oil pipeline, claims it doesn't distinguish between oil produced by Russian companies and JVs.

Meantime, Moscow plans to keep its interest in many oil and gas companies until yearend 1998 and will draft rules for managing the state interest held in oil companies under the shares-for-loans program.

The recent decree did not name companies whose stock the government will continue to hold.

The shares-for-loans program involves Russia's biggest oil companies, including Lukoil, Yukos, Surgutneftegaz, Sidanko, and Sibneft.

The state has transferred its interest in those companies to investors in return for loans to the government.

The World Trade Organization's dispute settlement body has accepted a U.S.-Venezuela compromise that would phase out objectionable reformulated gasoline rules in 15 months.

Venezuela and Brazil had complained that a U.S. EPA rule discriminates against imports of their products, and the complaint was upheld by WTO.

Brazil wanted a shorter phase-out.

New oil pipeline capacity in Canada will meet demands of increased production aimed at U.S. markets, says Canadian Energy Research Institute (CERI).

A CERI study, slated for January release, estimates the U.S. Midwest will require an additional 390,000 b/d of crude, including 210,000 b/d of heavy oil.

CERI says Express Pipeline, under construction, plus expansions by Interprovincial Pipeline, will handle increased exports of oil in western Canada, especially heavy oil (OGJ, Dec. 9, p. 20).

Meanwhile, NOVA, which made a deal with one gas pipeline rival, is facing a new challenge from a second gas pipeline project. Earlier this month, NOVA disclosed a deal with PanCanadian under which the latter would shelve its proposed Palliser Pipeline project (OGJ, Dec. 23, Newsletter).

Now a group of Amoco Canada, Shell Canada, and CU Gas says it will build the $450 million (Canadian) Alberta Pipeline Project (APP) in Alberta.

APP would move 1.1-1.4 bcfd of gas at a cost well below current NOVA tolls. Proposed line would have two legs in Alberta, both connecting to export lines at Empress on the Saskatchewan border.

System also would connect with utility lines operated by CU, a major distributor, and with two gas storage facilities.

Line would involve 404 miles of 20-36-in. pipe.

APP has shipping commitments from Mobil Canada and plans an open season early in 1997. APP says it has enough gas now to move forward, with commitments from two of Canada's largest producers.

CU Gas and Shell Canada are also considering a shorter-haul pipeline from Waterton field in southern Alberta to the Alberta-British Columbia border.

On the U.S. gas front, Nymex on Jan. 3 will begin listing gas options contracts at the Henry hub in Louisiana as far as 36 months in advance.

Nymex crude oil futures will be listed as far as 7 years out.

Texaco has unveiled sweeping changes aimed at ensuring fairness and economic opportunities for minority employees and business partners, saying new policies and procedures will enhance its performance in an increasingly competitive, diverse marketplace.

Actions stem from a "rigorous review" of operations carried out after Texaco settled a racial discrimination class-action lawsuit (OGJ, Nov. 25, Newsletter).

Review "encompassed every aspect of employee recruitment, hiring, retention, and promotion," said Texaco Chairman Peter I. Bijur. Workplace environment, business partnering, and downstream marketing were also included.

In recruitment/hiring, Texaco will implement programs aimed at increasing total minority employment to a level of 29% by yearend 2000 from 23% currently.

It plans to increase African-American employment to 13% from 9% and female employment to 35% from 32%.

Texaco plans to boost purchasing activities with minority- and women-owned businesses, including professional services, to a cumulative total of more than $1 billion in 5 years vs. $135 million now.

To broaden financial relationships, Texaco will seek to increase financial activities with minority- and women-owned banks and money managers to $200 million from $32 million, and it will increase insurance coverage from minority- and women-owned insurance companies to $200 million from $25 million.

In retail marketing, goal is to double the number of minority- and women-owned wholesale marketers to 85 from 43 in 5 years and more than triple African-American retail owner and lessee operators to 117 from 35.

Owned/operated stations' goal is to maintain the current level of at least 70% of minority and women managers and seek to increase under-represented minority retail and store managers to 100 from 67.

Lubricants' goal is to double the number of minority- and women-owned distributors to 58 from 29 and double outlets to 104 from 52.

Texaco also will make available financing support for development and expansion of minority and women wholesale marketers and retailers, supporting development of owned/branded retail outlets in urban core areas.

Start-up assistance will be provided to minority entrepreneurs.

MMS, planning one environmental impact statement (EIS) for five planned Gulf of Mexico lease sales, has now identified proposals, alternatives, and mitigating measures to be analyzed.

A single, multisale EIS would cover central gulf sales in the 1997-2002 leasing program in a 30-million-acre planning area, involving Sales 169, 172, 175, 178, and 182 scheduled to be held annually beginning in March 1998.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.