OGJ Newsletter

• U.S. Industry Scoreboard 7/15 [71655 bytes]

LNG prospects continue to brighten, especially in the Eastern Hemisphere.

Chubu Electric is nearing completion of its $6.44 billion program to construct an LNG receiving terminal at Kawagoe, Japan, and two adjacent 1.65 million kw, gas fired combined cycle power plants.

At the same time Mitsui Engineering & Shipbuilding at its Chiba yard soon will finish Al Zubara LNG carrier, a 135,000 cu m vessel, to supply Chubu's LNG terminal. The first LNG cargo bound for Kawagoe is to leave Qatar's Ras Laffan LNG complex in late December. Qatar in 1992 agreed to sell Chubu Power 4 million tons/year of LNG for 25 years beginning in 1997.

Abu Dhabi has logged record LNG output.

In May, Abu Dhabi Gas Liquefaction Co. (Adgas) produced 519,476 metric tons. Most was exported to Tokyo Electric Power under a 25 year contract signed in 1993. Also in May, Adgas produced 77,193 tons of propane and recovered 28,654 tons of sulfur, both monthly records. Adgas achieved the records after completing a $1.2 billion project to double its LNG capacity to more than 5 million tons/year, mainly to serve rising demand in Japan and Europe.

In Oman, several international companies this month are to submit bids to Petroleum Development Oman (PDO) for upstream work tied to Oman Liquefied Natural Gas' $4 billion plan to develop an integrated 6.6 million ton/year LNG project.

Contenders are to offer bids by early August, and PDO is to award the main upstream contract in October. PDO in May let the main construction contract for the project's $2 billion downstream components to a group of Chiyoda, Foster Wheeler, and local firms Suhail Bahwan Establishment and Zubair Enterprises. Major components in the $2 billion upstream program include 70-80 development wells in Saih Rawl, Saih Nihayda, and Barik fields, where Oman estimates total gas reserves at 9-25 tcf; a gas processing plant with twice the capacity of Oman's existing Yibal gas complex; and a 360 mile gas pipeline from the fields to the LNG complex. Downstream components include the liquefaction plant, a jetty, and ancillary facilities.

Oman wants upstream facilities ready well before the liquefaction plant and other downstream facilities. Construction on the latter is to begin as early as August. Oman aims to begin producing LNG in February 2000.

Oman this month is to sign contracts with South Korea covering supply of 4 million tons/year of LNG and is discussing LNG sales to Turkey, China, and India. This month, Oman agreed to sell Thailand 2 million tons/year of LNG.

Meantime, a proposed LNG storage project in the U.S. Northeast has taken a major step this month when it signed on a big Canadian customer.

Quebec LDC Gaz Metropolitain agreed in a 20 year capacity release arrangement to take half the capacity of a proposed 2 bcf LNG storage facility to be built at Wells, Me., by Granite State Gas Transmission's unit Bay State Gas, Westborough, Mass. Bay State unit Northern Utilities retains the balance of capacity. GazMet also took an option to become a 50% equity partner in the $50 million facility. The deal hinges on construction of the Portland Natural Gas Transmission System from Wells to Quebec.

The GazMet deal marks the culmination of the Wells LNG project's evolution from seasonal baseload to a peak shaving facility and prompted Granite State to refile a request with FERC seeking permission to start constructing the storage complex in time to begin service by Nov. 1, 1998. Maine's Office of Public Advocate earlier opposed the Wells LNG facility because of the possible cost to Northern Utilities of a 20 year commitment for all the project's capacity.

U.S. gas spot prices in July will average about $2.37/MMBTU, nearly $1/MMBTU more than a year earlier, according to Natural Gas Clearinghouse's survey. NGC says much of the persistent price strength of gas in the U.S. stems from efforts to rebuild storage volumes at a time of high cooling related demand.

Jofree Corp. says that at current fill rates, gas storage facilities in the eastern U.S. will be full by mid-October.

Refilling storage by winter should present no problems in the U.S. West, where winter 1995-96 demand caused a relatively lighter draw on storage than in the East and in major gas producing areas. Jofree predicts gas wellhead prices on the U.S. Gulf Coast will average $2.24/MMBTU for the year-$2.33/MMBTU in first half 1996 and $2.15/MMBTU in the second half.

Wellhead prices in the region in 1997 should average about $2.02/MMBTU, but could slide to $1.70/MMBTU for the year-including a low of $1.50/MMBTU by next spring-in the event of a winter as warm as winter 1994-95.

Jofree says increased gas drilling in the U.S. and low cost gas from the western U.S. and Canada could depress gas prices in U.S. Midwest and East markets.

Providing upward pressure on gas prices is high utilization of productive capacity. Natural Gas Supply Association reports utilization of U.S. gas productive capacity rose to 92.4% in 1995, up 1.3% from a year earlier and near the maximum feasible utilization rate of 94.6%. This "indicates that a gas production surplus exists on an annual basis but that the surplus is small," NGSA said. Its survey covers gas suppliers representing 53% of Lower 48 output.

News is mixed for advocates of natural gas vehicles in the U.S.

After selling only 696 NGVs in 1995, Chrysler is losing money on NGVs and will cease their production after the 1997 model year. However, Chrysler says it could begin making NGVs again when the market improves. Natural Gas Vehicle Coalition, Arlington, Va., calls Chrysler's decision "disappointing." NGVC estimates about 35 vehicle and engine manufacturers produce more than 80 models of NGVs, engines, and chassis in light, medium, and heavy duty markets.

At the same time, the Los Angeles Metropolitan Transportation Authority has approved a $90 million plan to put 250 compressed natural gas buses on L.A. streets beginning late in 1998. The CNG buses will replace 15 year old diesel buses no longer cost effective to operate or maintain. Neoplan U.S.A. Corp. is to manufacture the buses for MTA at a unit cost of $327,545.

Nigeria's petroleum ministry says about 3,000 employees-including more than 600 directors and other top officials of Nigerian National Petroleum Corp.-have been sacked "in the public interest and to enhance efficiency and effectiveness."

NNPC reportedly has slashed its 1996 budget to $3 billion from $4.4 billion, an action that threatens work in the country's onshore oil production joint ventures, in which NNPC has a 57% working interest. Shell Nigeria warns that oil field rehabilitation and community ventures will be affected if the state firm does not pay its share toward development work. Shell is keen to put onshore Nigerian operations back in order after riots and sabotage disrupted production. But international protest has grown over Shell's involvement in Nigeria, with critics claiming ties to the military junta ruling the country (OGJ, Apr. 22, p. 32).

Protests are likely to be sparked anew with reports of a major oil spill involving a Shell pipeline in Nigeria. An earlier press report from Nigeria said it is unclear why the government is cutting spending, since NNPC has earned about $1 billion more than expected in the current budget by continuing to produce almost 10% more than its OPEC quota (OGJ, June 17, p. 19).

The U.N. Climate Change Convention has been urged to tighten CO2 emissions allowances for fossil fuels purported to contribute to postulated global warming. Members of 150 nations are meeting in Geneva to debate recommendations of an intergovernmental climate change panel that warns failure to limit greenhouse gas emissions could bring more severe droughts and floods.

But the European Academy for Environmental Affairs in Leipzig challenges that report, contending temperature observations do not agree with computer models of the atmosphere.

In the U.S., Global Climate Coalition, a group sponsored by coal and oil companies, has urged Washington to oppose tighter emissions controls. The group says recommendations at the U.N. meeting could cut U.S. GDP 3-4%, eliminate more than 1 million jobs, and raise the price of heating oil and gasoline.

A new technology that promises to slash airborne hydrogen fluoride emissions in an accidental release soon will get its first commercial application.

Phillips will install the proprietary technology, Reduced Volatility Alkylation Process (Revap), it developed with Mobil at Phillips' Wood Cross, Utah, refinery.

Phillips claims the process cuts airborne HF emissions 60-90%. Revap will be installed on an existing HF alkylation unit, with completion expected late in the fourth quarter. Dresser Engineering, Tulsa, is handling design, procurement, and construction of the skid-mounted, drop-in unit. Phillips will license the technology, which features a principal additive that is nonvolatile, odorless, and low in toxicity. Concerns about possible accidental releases of cloud-forming HF near residential areas have triggered regulatory intervention in California, in turn spurring worry for refiners about the future of this key alkylation process.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.