OGJ Newsletter

• U.S. Undustry Scoreboard 5/13 [71043 bytes]

Offshore frontiers and deepwater technology have taken industry center stage with the Offshore Technology Conference in Houston last week (see related story, p. 29).

Future tension leg platforms capable of working in ultradeep waters will have to use new technology to meet the challenge-and TLPs may not always be the best development option. So says Conoco, the company that pioneered the technology. Conoco won its second OTC distinguished achievement award, again for innovation in TLP technology. This time, Conoco won for developing a concrete hull TLP for Heidrun oil and gas field development in the Norwegian Sea.

Conoco's first such OTC award was for the world's first TLP installed in the U.K. North Sea in 1984. It has built and installed half the world's TLPs.

"TLPs have to meet the changing economic, environmental, engineering, and logistical criteria of operating in 3,000 ft and deeper water depths," said David W. Branch, Conoco vice-president for E&P technology. "TLP technology was developed to overcome the unacceptable weight and costs of fixed, all steel platforms for operations in water depths greater than 1,000-1,500 ft. But TLP weights compatible with the water depths we are in today will be unacceptable in the water depths we're looking at 5-10 years down the road."

Referring to Conoco's use of lightweight materials such as aggregate concrete and titanium risers in Heidrun TLP, Branch said, "TLPs are on a diet, but even more exotic materials like carbon fibers and DuPont's Kevlar will be needed to get the weights down to acceptable levels for very deepwater applications."

He notes many companies are studying how composites could be used in TLP construction, and other weight reductions could be achieved by eliminating or reducing some materials and equipment needed for today's technology, such as riserless drilling. However, says Branch, economics will determine future deepwater utilization of TLPs, and the technology must be able to compete with new development approaches, such as phased development dominated by floating production systems and subsea completions.

Fabrication is nearly complete of the hull for the world's first offshore oil and gas production spar, to be installed in about 1,930 ft of water in Neptune field on Viosca Knoll Block 826 in the Gulf of Mexico (OGJ, Nov. 21, 1994, p. 33).

Neptune's 50-50 partners, Oryx Energy and CNG Producing, expect Rauma Offshore Contracting Oy to load out the finished hull in mid-June at the Pori, Finland, yard where Rauma is assembling the 72 ft by 705 ft cylinder.

Plans call for floating the hull to the gulf to be mated with topsides this summer. J. Ray McDermott is to transport and install Neptune spar's major components (OGJ, Feb. 20, 1995, p. 100). Oryx expects to install the system in September.

Russia's upstream petroleum future lies offshore, says Vladislav P. Chtcherbakov, first deputy chairman of the Russian Federation committee on geology and use of mineral resources and OTC keynoter. He estimates Russia's offshore has about 3.5 million sq km of prospective area containing a potential oil and gas resource of more than 100 billion metric tons of oil equivalent.

Prospects for limited Iraqi oil sales are dimming.

U.N./Iraq talks over limited oil sales to fund humanitarian aid for Iraqi civilians last week entered a fourth round with hopes of an accord fading.

While both sides officially hold out hope for an agreement, the issue of who distributes the aid is unresolved, with the U.S. and U.K. resisting Baghdad's efforts to handle distribution under Resolution 986 (OGJ, May 6, Newsletter).

Julian Lee of London's Centre for Global Energy Studies contends the talks' outcome hinges on whether the U.S. really wants limited Iraqi oil exports to go ahead. "For public consumption, the U.S. government has been saying it wants the sale to go ahead. But I wonder whether there is a different U.S. agenda behind this, to keep Iraqi oil off the market."

Lee said Saddam has gone so far toward meeting Resolution 986 and made so much political play of the fact within Iraq that he may have little option but to accept aid distribution by the U.N. If Iraq accepts U.S. conditions for U.N. aid distribution, the U.S. would be in a difficult position if it decided to scuttle Iraqi oil sales. But he thinks the U.S. might erect more hurdles for negotiators.

"Originally we were trying to guess only Iraq's internal politics," said Lee. "Now we have to watch both Iraqi and U.S. politics, particularly since this is election year in the U.S., so the outcome is impossible to predict."

MMS is reconvening a government-industry negotiated rulemaking committee June 12-14 in Denver to reconsider a proposed rule for valuing federal natural gas royalties. The reg-neg committee had proposed a rule that valued federal gas using an index of spot market prices. But small producers want to retain the current system of valuing gas on proceeds from long term contracts.

Ingaa says natural gas has a good chance of capturing much of the future U.S. distributed power generation market.

Distributed power generation is small scale-500-25,000 kw-technology that provides electric power at a site closer to customers than central generating stations can. It has the potential to account for about 20% of new generating capacity in the U.S. the next 20 years.

Gasoline can still spark furor over its environmental and price aspects.

Opposition is mounting to proposed federal legislation in Canada to ban the gasoline additive MMT.

Ottawa recently reintroduced Bill C-29, which died in parliament's last session. Environment Minister Sergio Marchi says MMT may be harmful to health, disrupts diagnostic equipment on new autos, and worsens emission control. The legislation is supported by environmentalists and automakers.

The petroleum industry and several Canadian provinces oppose the bill, saying an MMT ban would worsen pollution, cost refiners another $80 million/year, and increase the price of gasoline by as much as 4 (Canadian)/gal vs. Ottawa's claim of 1. Ethyl Canada says there is no scientific evidence MMT interferes with auto diagnostic systems.

ARCO has pledged to immediately cut its total U.S. gasoline price at company operated stations by the same 4.3 federal gasoline excise tax rollback being debated in Congress (see related story, p. 36).

In an interview on ABC's Nightline broadcast May 7-apparently responding to queries about the tax cut being passed through to the pump-ARCO Chairman Mike Bowlin said he had "simply been cautioning that ARCO is not able to accurately predict industry behavior, cannot legally control its dealers' pricing, and that other factors may influence changes in overall market price. All other things being equal, we would expect the price of gasoline to fall 4.3/gal."

The U.S. has lost its appeal challenging a World Trade Organization finding that EPA's reformulated gasoline regulations discriminate against imports from Venezuela and Brazil. The full WTO body is expected to endorse that view in a few weeks, and the U.S. has not decided how to respond.

Brazil's Energy Minister Raimundo Brito says a draft bill to regulate the petroleum sector will go to Congress this month.

Last November, Brazil's congress amended the constitution to end Petrobras' 42 year monopoly. Within 10 months after the bill is passed, the government will be able to issue tenders granting exploration rights to private domestic and foreign companies. Brito expects the bill to be approved by yearend, which means concessions are likely to be granted in second half 1997. Petrobras officials at OTC predicted passage by August (see related story, p. 29). Petrobras will have to compete with private firms for these concessions but may form joint ventures with them. The state oil company will retain the rights to fields it now operates for 3 years after the bill is passed, but the draft bill requires that after 6 months the exact demarcation of field boundaries be submitted to a new government agency set up to grant E&P licenses. In 1995, Petrobras' proved crude oil reserves grew by 17% to 4.8 billion bbl, or a 19 year life at current production.

European Commission energy ministers have advanced plans to open Europe's electricity market to competition but effectively put similar plans for gas on the back burner. Ahead of a meeting in Brussels last week, there was concern that disparity among EC members' approaches to gas distribution and supply is so great any agreement would be impossible. An EC official told OGJ there is a good chance ministers will reach agreement over electricity plans at another meeting in 4-5 weeks, ahead of a European Council meeting in June.

Asian petrochemical capacity expansion shows no sign of letting up.

Petronas and Union Carbide plan a world scale petrochemical complex at Kertih/Tok Arun area in eastern peninsular Malaysia to serve Southeast Asia, the world's fastest growing petrochemical market. It would be complete in 2000 and include initially an ethane/propane cracker to make ethylene and propylene and units for oxo alcohols and oxo derivatives such as butyl acetate, butyl acrylate, glycol ethers, and 2-ethylhexyl acrylate, as well as ethylene oxide and its derivatives, including ethylene glycol, ethanolamines, ethoxylates, and alkyl alkanolamines. The site is near where Petronas is building a world scale gas processing plant that could provide feedstock for the petrochemical complex.

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