OGJ Newsletter

U.S. Industry Scoreboard 12/23 [70260 bytes]

Last week's arctic blast that rolled across North America caused temperatures to plummet and oil and gas prices to soar.

Nymex gas for January delivery at Henry hub in Louisiana closed at a record $4.467/MMBTU Dec. 16. The intra-day trading high was $4.56/MMBTU. Nymex January gas closed slightly above $4/MMBTU Dec. 18.

Nymex January oil rose to a post Persian Gulf war high of $26.16/bbl at closing Dec. 18. Heating oil and gasoline futures also jumped.

Heating oil for January delivery was up 0.64¢/gal to close at 74.18¢/gal Dec. 18, as concerns mounted over adequate stocks. January gasoline futures rose 1.40¢/gal to close at 71.17¢/gal.

API reported distillate stocks, consisting of heating oil and diesel, rose 1 million bbl for the week ended Dec. 13.

Meantime, oil prices continue to rebound from a dip seen after the U.N. lifted the ban on Iraqi oil exports (see related story, p. 37).

U.S. gas storage levels were 73% full as winter's onset approached, reports AGA, which is predicting record 1997 gas use (see story, p. 36).

As of Dec. 13, working gas in storage totaled 2.322 tcf vs. 2.411 tcf the same time a year ago. Although working gas in storage is at a 6-year low, AGA says there's no cause for alarm over inadequate supplies this winter. Storage in the East consuming region is 82% full, and West consuming region storage is at 64%. Storage in AGA's so-called Producing region is 61% full.

Kuwait will receive a $610 million damage award to be applied to the cost of putting out oil well fires set by fleeing Iraqi soldiers during the Persian Gulf war.

The award to Kuwait Oil Co. was approved by the U.N. Compensation Commission. KOC originally sought $950 million in damages in its 1993 claim. Revenue to pay for damage claims stems from terms imposed by the U.N. in allowing limited Iraqi oil exports (OGJ, Dec. 16, p. 21).

Baghdad's oil sales are gaining momentum. Total and Elf have deals to buy Iraqi oil.

Total has contracted to buy 30,000 b/d, subject to U.N. approval, and Elf has a 3-month purchase deal but declined to comment on volumes involved.

French firms are preparing to sell wheat to beleaguered Iraq, and Iraq has tendered to buy sugar from interested countries.

Brazil's Petrobras has conducted talks recently with Iraqi officials in a deal that, although unconfirmed, could involve a sugar-for-oil arrangement leading to Brazil's purchase of 20,000-30,000 b/d of Iraqi crude.

Russia indicates it wants a share of Iraq's resumed oil exports. Recent press reports quoted Pyotr Rodionov, fuels and energy minister, as saying discussions were under way with Iraq.

Companies involved and anticipated volumes were not disclosed.

It has been reported that seven companies, including Lukoil, are negotiating to buy as much as a combined 100,000 b/d of Iraqi oil.

After years of negotiations, the $20 billion Timan-Pechora project in Russia stands to advance with word from Moscow that a protocol has been signed on terms of a production sharing agreement.

Project area is 1,100 miles northeast of Moscow above the Arctic Circle. Production could begin in 3-4 years. Contract area covers 2,847 sq miles, and potential reserves have been placed at 2.2 billion bbl.

Agreement was disclosed last week by members of Timan Pechora Co., including units of Amoco, Exxon, Texaco, and Norsk Hydro. Approvals are still required by the Russian parliament and local governments.

With more worldwide liquefied natural gas projects disclosed by project participants last week, will the last half of the 1990s be remembered as the dawn of a new era for LNG?

Coastal and Indonesia's Pertamina will team to develop LNG import projects and conduct related activities in India.

Coastal's LNG move is viewed as a major demarcation in its prevailing gas pipeline and refining/marketing strategy.

Coastal's business focus has been on gas marketing, transmission, storage, gathering, processing, and refining/marketing. It also has E&P, chemicals, and coal operations, as well as a growing power segment.

In the India deal, Coastal will develop receiving terminals, natural gas pipelines, and gas-fired, combined-cycle power projects.

Pertamina will develop and transport LNG from new and existing sources in Indonesia to supply fuel to the Coastal projects.

David A. Arledge, Coastal president and CEO said, "The LNG industry is entering a new era."

Arledge says future LNG projects "increasingly will have to be structured to meet the requirements of the fast-developing independent power markets in Asia."

Potentially, the value of the Coastal-Pertamina deal could be on the order of at least several billion dollars, perhaps much more.

Coastal adds that three possible opportunities have been identified in India. Discussions are under way.

In Canada, Pac-Rim LNG Inc., Calgary, plans a $1.4 billion (Canadian) liquefaction plant on the northwest coast of British Columbia.

Pac-Rim says it has completed an interim agreement with Korea Gas Corp. to sell 3.5 million metric tons/year of LNG from Canada starting in 1999.

Pac-Rim group includes Calgary firms Capital Projects Group and BAS Ventures, along with Bechtel, Phillips, Daewoo, and Korea Gas.

Pac-Rim expects to complete a formal agreement and detailed sales contract in February 1997. Plant site is near Kitimat, B.C.

Alberta Energy Minister Pat Black has opened the door a crack for a major shift in Canadian pipeline toll policy. She will allow gas producers and pipelines to decide the future of the postage stamp toll policy, which has been in place since 1980 (OGJ, Dec. 2, Newsletter).

"We are letting the market determine the pipeline requirements, keeping in mind that we encourage pipe to go in the ground," Black said.

Under the policy, shippers pay the same per-unit rate to move gas from anywhere in Alberta to export points.

In that context, Palliser Pipeline project backer PanCanadian Petroleum and NOVA Gas Transmission, both of Calgary, have agreed to a plan that might eliminate the need to construct the alternative Palliser line, a competing system that would benefit Alberta producers.

To help maintain the level of volumes transported, NOVA would establish a "load-retention" rate of 15.5¢ (Canadian)/Mcf for gas moved on NOVA's system, which will apply to shippers that had executed a precedent agreement with Palliser as of Dec. 12. Rates would increase 2%/year for a 20-year term.

NOVA plans to file a rate approval application with Alberta Energy & Utilities Board (EUB) in January. Palliser will ask National Energy Board (NEB) to suspend its pipeline application, pending EUB approval of NOVA's proposal.

Palliser's NEB application involves a 1.2 bcfd capacity, $365 million (Canadian) gas pipeline in Alberta and Saskatchewan. The project involves 149 miles of mainline and 434 miles of laterals to connect with other lines to the U.S. Midwest, Northeast, and eastern Canada. Palliser is owned 50-50 by PanCanadian and Union Energy, a unit of Vancouver's Westcoast Energy.

Canadians will have to reduce their standard of living if they are to meet international targets for cutting carbon dioxide emissions by 2000, says Canadian Association of Petroleum Producers (CAPP).

CAPP Pres. David Manning says there will have to be significant changes to lifestyles to cut emissions close to target levels.

Canada agreed at a 1992 U.N. conference to cut greenhouse gases to 1990 levels by 2000. It is now expected to fall short of that goal by 9-13%.

Manning says efforts to cut emissions to the target level could make Canada uncompetitive and increase unemployment, create higher deficits, and lead to economic disorder. Canada's oil and gas production increased 33% since 1990, and emissions rose 19% in the same period. However, emissions have dropped 10% on a per-barrel basis.

In the U.S., the Interstate Oil & Gas Compact Commission (Iogcc) is asking EPA to allow more time for comment on its proposed air quality standards for smog and soot (OGJ, Dec. 9, p. 34).

EPA wanted comments on ozone and particulates emissions standards filed by Jan. 29. But Iogcc maintains states need at least another 90 days to consider "the many unanswered questions about the particulate standard."

According to Iogcc, further research is needed to establish a sound scientific basis for the need for the new standards.