CRUDE OIL SLICKS SPREAD IN PERSIAN GULF AREAS

Industrial plants along the Saudi Arabian coast face a renewed threat from oil spilled by Iraqi armed forces from the Mina Ahmadi sea island tanker loading point off Kuwait,

The 11 million bbl slick had been drifting clear of industrial facilities until the wind changed from southerly to northerly and started to blow the oil back toward the Saudi coastline.

Before the change of direction, the southerly wind had been breaking the slick into smaller accumulations. However, industry sources said the sheltering effect of a headland on the Saudi coast had slowed the slicks' progress.

Despite the strength of the northerly wind it was reported to have moved a little more than 1 mile in a day.

There were these other developments as Persian Gulf countries kept a close watch on the huge spill:

• Crude oil production by members of the Organization of Petroleum Exporting Countries fell to 22.9 million b/d in January from 23.7 million b/d in December, the International Energy Agency reported. The main declines were in Saudi Arabia and Iran.

• Japan's crude oil shippers agreed to a fee of 50/bbl for crude shuttled in Iranian ships from Iran's Kharg Island terminal to Lavan Island for transshipment to Japanese tankers.

• Arabian Oil Co.'s 30,000 b/d refinery at Khafji was not damaged by the fighting around the town, a Saudi source told Reuters. He said Iraqi forces never reached the southern side of the city, where the oil installations are located.

• In the U.S., the first delivery of Strategic Petroleum Reserve crude, sold as a precautionary measure following the start of the Persian Gulf war, was made Feb. 5.

• The American Petroleum Institute said U.S. imports of crude and products dropped sharply in January as companies drew down inventories.

OIL SPILL ALERT

Most at risk from the floating oil in the Persian Gulf last week was the industrial city of Jubail, where offshore defenses were on maximum alert to handle any oil that approached coastal facilities or the inlet to a canal that provides cooling water to the inshore plant at Jubail.

The spill from Ahmadi was about 100 miles long. Not all the oil came from the sea island terminal. Industry sources said a small amount of crude from two tankers that were bombed by allied aircraft in January was consolidated into the main slick.

The second large slick in the head of the gulf, formed when Iraq released oil from its Mina al Bakr terminal, was reported east of Bubiyan Island. It covered an area about 5 miles by 2 miles.

Shipping sources said very little oil is spilling into the sea from Mina al Bakr.

However, there was little firm news on the movement of the oil or the threat it poses to shorelines and installations in the area.

The two large slicks eclipsed the movements of the first oil spill in the gulf as a result of the war.

About 1 million bbl of oil was dumped into the gulf after Iraqi guns hit a storage tank at the Khafji refinery in the early days of the war.

This slick polluted a large part of the northern Saudi Arabian coastline. Oil was reported around offshore Safaniya oil field and the coastal settlement at Ras Tanajib, where oil from Saudi offshore fields moves ashore by pipeline.

Safaniya was back on production after a 2 day shutdown as a result of fighting in Khafji, just south of the Kuwaiti border.

General Technology Applications Inc., Manassas, Va., said Saudi environmental officials are testing its cleanup process on the Persian Gulf oil spill.

The firm makes a nontoxic compound called Elastol that is spread on an oil slick, causing the crude to become cohesive. That prevents dispersion or sinking of the oil, which can be recovered by standard skimmers.

And in Hondo, Tex., Medina Agriculture Products Inc. said it has been called upon to help spill cleanup operations. The company is a specialist in microbial and bioremediation technology.

Medina said it can supply 40,000 lb of hydrocarbon degrading bacteria, and that volume can be increased to 1 million lb in 30 days.

Ottawa dispatched a six man team of spill specialists to the Persian Gulf to assess the need for Canadian cleanup assistance in protecting Bahrain and Qatar from the slick.

SHUTTLE SERVICE

National Iranian Oil Co. told its Japanese customers the gulf shuttle service was being subsidized because the 500 charge does not fully cover shuttle costs.

Japan's decision to allow its crude and LPG tankers to trade with Saudi Arabian terminals in the gulf has reduced the scale of the proposed Saudi shuttle from the gulf to a transshipment point in the Indian Ocean. The shuttle is likely to be used by only a small number of Saudi Aramco Oil Co.'s Third World customers.

The main customer for crude transshipped out of the Persian Gulf is India, which still forbids its flag vessels to enter the gulf.

Shipping sources said Iran has installed four storage and transshipment tankers off Lavan Island.

Each vessel has three 12 in. loading lines. The combined loading capacity of the four tankers is about 65,000 bbl/hr.

OIL SUPPLY/DEMAND

IEA figures show Saudi production fell to 8 million b/d in January from 8.3 million b/d last December, while Iranian production fell to 3 million b/d from 3.3 million b/d.

There were also declines in production in the U.S., Mexico, and the centrally planned economies that contributed to a fall in total world supply to 53.5 million b/d in January from 54.5 million b/d in December.

Consumption among member countries in the Organization for Economic Cooperation and Development fell by 1.7 million b/d, or 4.5%, in fourth quarter 1990 to 37.6 million b/d, IEA said.

Another decline is expected in first quarter 1991. Consumption is expected to average 38.3 million b/d, down 100,000 b/d from the same period of 1990.

IEA recorded only a small OECD stockdraw in January from the high levels at the start of the year. At the start of the year total stocks were 3.4 billion bbl, equal to 96 days of consumption. The stockdraw during the month averaged 700,000 b/d.

The agency estimated that floating storage and stocks in producer countries rose from 75 million bbl at the end of December to 85-90 million bbl by the end of January.

Saudi Arabia had 20 million bbl in floating storage and another 40 million bbl in onshore storage or still in transit. Iran had 30-35 million bbl in floating storage off Europe at the end of last year, although IEA believes there was a slight decline in floating inventories during January.

MEES DATA

The Middle East Economic Survey estimated January production in Saudi Arabia to be unchanged at 8.3 million b/d with total OPEC production at 23.1 million b/d, down from 23.86 million b/d in December.

MEES said Saudi Aramco's sustainable productive capacity is now close to 9 million b/d, resulting from demothballing and construction work on production and associated handling facilities. In December capacity was 8.6-8.7 million b/d.

That high level of capacity is causing second thoughts in the Saudi administration about an accelerated program to expand capacity to 10 million b/d by 1992-94, given the potential oil surplus in the medium term.

Saudi sources told MEES once the war is over the government will begin a thorough review of future productive capacity needs in light of projected oil supply/demand trends.

Second thoughts about the investment program do not necessarily mean the 10 million b/d target will be changed. But there could be a different time frame and investment levels.

Saudi planners will review future demand for crude with particular emphasis on demand for different qualities, the extent and timing of the resumed flow from Iraq and Kuwait, supply trends in the Soviet Union, and productive capacities of other OPEC members.

MEES said capacities of OPEC members was once a gray area that has become much more transparent since OPEC quota controls were lifted last August.

U.S. SPR, IMPORTS

The U.S. Department of Energy said Crown Central Petroleum Corp. took delivery of 200,000 bbl of sweet crude from the West Hackberry, La., SPR site at the Sun Terminal at Nederland, Tex.

It was the first delivery of SPR crude under nontest conditions. Other deliveries later went to several of 13 buyers (OGJ, Feb. 4, p. 14).

API reported total U.S. imports averaged 7.294 million b/d in January, down 20% from 9.123 million b/d a year earlier.

However, API said the January 1990 total was the highest monthly level in nearly 13 years, and the January 1991 drop was more the result of contrasting inventory behavior than of any marked shift in import dependence.

Product deliveries were down 1.4% in January at 16.722 million b/d. U.S. crude oil production was down 1.9% at 7.37 million b/d.

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