OGJ NEWSLETTER

Continuing concern over the ability of markets to handle peak winter demand has again pushed up North Sea crude prices. Attention now centers on likely volumes of Soviet crude and products available the rest of the year. Brent rose 45 to $22.45/bbl at closing Oct. 16. BP Chairman Robert Horton predicts prices will stabilize at $21-23/bbl the first 3-4 months of 1992, probably at the upper end of that range. Horton also warns European industry will suffer if the European Community presses
Oct. 21, 1991
7 min read

Continuing concern over the ability of markets to handle peak winter demand has again pushed up North Sea crude prices.

Attention now centers on likely volumes of Soviet crude and products available the rest of the year. Brent rose 45 to $22.45/bbl at closing Oct. 16. BP Chairman Robert Horton predicts prices will stabilize at $21-23/bbl the first 3-4 months of 1992, probably at the upper end of that range.

Horton also warns European industry will suffer if the European Community presses plans for a carbon tax without reciprocal action by the U.S.

The EC would impose a carbon tax equivalent to $3/bbl of oil beginning in 1993 and rising in phases to $10/bbl by 2000.

Horton sees a long battle over the tax proposal. OPEC is opposed and claims the EC wants to extract funds from OPEC's oil revenues. "There will be a lot of blood on the carpet before this is over," Horton said.

The looming EC-OPEC tiff aside, prospects improve for a continuing producer-consumer dialogue. IEA's board approved a meeting of experts from energy consuming and producing countries in Paris for 3 days at the end of February 1992.

All IEA members will be represented, and OPEC will be invited. On the agenda will be energy information exchanges, examination of market mechanisms, industrial cooperation, regimes and energy, and efficiency and the environment.

France has rejected a call from the EC commission to end the import/export monopoly held by Gaz de France and Electricite de France, arguing that although the Treaty of Rome requires the end of commercial monopolies, this does not apply to services such as gas and electricity. Separately, the commission decided against pushing through four draft directives related to opening gas and electricity markets after the creation of a single European market in 1993, opting instead to negotiate opening these markets in stages with various member governments.

Conoco has opened offices in Prague and Warsaw in its drive to expand in downstream markets of central and eastern Europe. Conoco wants to have a fully integrated refining/marketing operation in the region.

Lasmo has launched a 1.167 billion bid for Ultramar with a one for one share exchange offer. Lasmo plans to sell Ultramar's downstream assets to produce a combination ranking among the world's top E&P companies. Ultramar has rejected the bid.

The loss of the Sleipner A platform concrete gravity structure in a deep fjord off Stavanger (OGJ, Sept. 2, p. 30) was caused by design errors leading to cracks in one of the concrete shafts, Statoil says. It cites errors in strength calculations and in preparing construction plans. Statoil plans to install a replacement structure in summer 1993 to meet an Oct. 1, 1993, supply contract deadline. To meet the deadline, Statoil will have to resort to subsea completions in Sleipner for early platform hookup and expand drilling in Loke satellite field, being developed with a subsea production system.

A long gas price dispute between VNG and Wintershall has resulted in a big cut in supplies since Oct. 1. VNG claims fourth quarter supplies are down by 14.12 bcf and the cuts contradict Wintershall's claim Soviet gas deliveries would be maintained despite the price dispute. Under its agreement with Gazprom, Wintershall now controls Soviet gas supplies to eastern Germany. VNG says the new Wintershall price is 20% more than the price of Soviet gas delivered to western Germany at Waidhaus on the Czech border. Wintershall wants its price schedule confirmed by the courts, and its Berlin suit has been transferred to Leipzig, VNG's home. Meanwhile, VNG concedes "outstanding accounts" on Soviet gas deliveries of 100 million deutschmarks.

West African E&D spending now totals about $4 billion/year, says U.K. Energy Minister Colin Moynihan. He notes offshore production costs there, even in deeper waters now attracting attention, compare favorably with other regions.

Petroleum Industry Training Service, Calgary, is researching Soviet oil industry training needs. A nonprofit training organization, PITS has sent representatives to the U.S.S.R. for an assessment and has discussed needs with Canadian companies operating there. It hasn't decided whether to train only Soviet workers employed by Canadian firms or offer a general training program. PITS also is working as a program consultant with Viet Nam, plans a horizontal drilling training program in China, and is discussing training programs in Iran.

Petroleum Services Association of Canada says National Oilwell Service's decision to close its Red Deer, Alta., plant Mar. 1 could be a symptom of a major shakeout to come in the industry. PSAC expects consolidations, noting drilling activity below forecasts and a serious overcapacity in the industry.

National, which manufactures and markets downhole pumps and wellhead repair parts for the North American market, cites a severe drop in demand for drilling equipment.

ARCO has chosen New Iberia, La., as the site to fabricate 20 utility, production, and gas handling modules for North Slope producers' $1.5 billion, second phase gas handling expansion project in Prudhoe Bay field. GHX-2 will jump Prudhoe flow by 100,000 b/d in 1995 and add 330-450 million bbl to field recovery by boosting gas handling to 7.5 bcfd from 5.2 bcfd.

Fabrication is to begin in April 1992 and be complete in mid-1994, with modules sealifted to Alaska in 1993-94 summers.

Winter's approach is brightening the U.S. gas industry's near term outlook. Natural gas futures for next month delivery have topped $2/Mcf the first time this year.

However, the day to day increase was only 0.015 to $2.001. That compares with a 55 day to day jump when next month gas futures broke the $2 barrier the first time in 1990.

Jofree Corp., Houston, expects U.S. gas wellhead prices of $1.75/MMBTU in December and $1.80/MMBTU in January. Gas delivered to Henry Hub will fetch $2.09/MMBTU in December and $2.11/MMBTU in January. The analyst notes composite wellhead prices jumped 27 to $1.57/MMBTU in September. With U.S. gas storage capacity about 69% full, Jofree sees spot prices settling at about $1.55/MMBTU the next several weeks.

Gas futures markets have tugged cash market prices up, Jofree notes, with prices for January delivery topping $2.20 in recent weeks.

U.S. propane stocks remain disturbingly low, EIA warns.

With little time left to build inventories before winter, stocks in late September were 51.8 million bbl, the lowest end of September level since 1970 (OGJ, Sept. 23, p. 70).

Severe weather early in the heating season could spell temporary spot shortages, supply dislocations, and higher prices for propane, EIA says.

API says U.S. refiners should be able to meet domestic heating oil demand even if the weather is much colder this winter. API pegs demand at 3.2-3.4 million b/d, up 10% from last winter but a return to typical winter demand.

It warns a drop in Soviet distillate exports to Europe could marginally affect the volume of U.S. distillate imports.

Office of Technology Assessment says the government shouldn't increase the Corporate Average Fuel Economy standard to more than 30 mpg before 1996 from the current 27.5 mpg.

OTA contends automakers will need that much time for R&D but notes new car fleet averages of 35 mpg are possible by 2001 and 45 mpg or higher by 2010 with new technologies.

The Senate is to consider higher CAFE standards when it begins floor debate on an omnibus energy policy bill.

Copyright 1991 Oil & Gas Journal. All Rights Reserved.

Sign up for Oil & Gas Journal Newsletters