OGJ NEWSLETTER

The environmental regulatory vise continues to squeeze the U.S. oil and gas industry.

Washington has followed Alaska's lead in adopting super-tough oil spill rules, with California and Oregon expected to follow suit soon (see story, p. 19). The state regs, effective Dec. 6 for owners or operators of oil handling facilities and pipelines and Jan. 1 for owners or operators of seagoing vessels, require state approved oil spill plans. Rules implementing spill prevention provisions are to be adopted in July.

California's proposed new motor fuel air quality standards will jump gasoline prices by 23 cents/gal and cause the loss of more than 80,000 jobs in the state, warns Western States Petroleum Association. The current California Air Resources Board plan would cost refineries $10 billion, and resulting higher gasoline prices would hit consumers for $3.8 billion in lost disposable income, WSPA contends. Slight changes to the proposed rule would save 35,000 California jobs and at least 12-15 cents/gal in gasoline costs, says WSPA.

CARB contends the changes would hike gasoline prices 10-16 cents/gal, a cost more than offset in health benefits from emissions cuts with the new standards to take effect in 1996.

But ARCO favors stiffer rules CARB proposed earlier.

ARCO, the first oil company to introduce a reformulated gasoline, claims it can meet the tougher specs by 1996 if "we get the construction permits and the same standards are required of everyone." Although a member of WSPA, ARCO takes issue with WSPA's claim that 90% of air quality benefits could be achieved at 70% of the cost if specs were relaxed for aromatics, olefins, and other gasoline components. ARCO says that might be true for other hydrocarbon emissions, but not for ozone.

Results from history's tightest hole may be revealed. Alaska's Supreme Court has ruled data from Chevron-BP's 1 KIC Jago River, the only well drilled on ANWR's Coastal Plain, must be turned over to the state Department of Natural Resources. If the ruling holds, DNR--now headed by former ARCO Alaska Pres. Harold Heinze--would decide whether the data remain confidential or must be released to the public. At presstime, there was no decision on a possible appeal of the ruling.

U.S. gas producers could face continued price weakness for at least 2-3 years and possibly longer, warns Jofree Corp., Houston. If the perception grows that low prices will persist well into the 1990s, warns Jofree, many U.S. producers may decide to cut their losses by selling reserves. That could lead to further cuts in wellhead prices, which the analyst contends has occurred this year. Jofree cites greater U.S. access to Canadian gas and especially coalbed methane as the culprits.

DOE's Bartlesville, Okla., project office is seeking research applications related to upgrading heavy crude oils to quality transportation fuels. DOE plans to offer financial assistance cooperative agreements for those chosen. Details are in the Nov. 13 Federal Register.

Intersectional disputes over oil and gas resources in the crumbling Soviet Union continue to grow. The Russian federation, which last month asserted control over most of the former Soviet energy resources (OGJ, Nov. 25, p. 24), has claimed title to and authority over development of Sakhalin Island oil and gas resources, reports Kyodo News Service. The rebuff to Sakhalin state leadership claims of development authority was made to a Japanese delegation visiting Moscow late last month.

Meantime, Sakhalin officials have persuaded international groups to spice up bids for the oil and gas development project with supplementary offers to invest in the island's infrastructure. European, U.S., Japanese, and Australian companies had expected bid results to be announced early in November until the push to sweeten the pot caused the delay. Bidding results are now expected to be unveiled later this month.

Continued feuding between Armenia and Azerbaijan has again halted gas deliveries from the latter to the former.

Azerbaijani officials shut down the gas pipeline into Armenia near the city of Kazakh, worsening Armenia's energy crisis. Armenia has broken off all peace talks until the line is back in service.

Azerbaijan has released oil prices from state control. Azerbaijani oil prices had been held at 34-60 rubles/ton even when lifting costs had jumped tenfold in recent years.

Soviet industry retrenchment is affecting operations in other countries. Soviet oil specialists working with India's Oil & Natural Gas Commission on a 3-D seismic survey in West Bengal won't return, bringing that project to a halt.

ONGC has no immediate plans to resume the operation, first of its kind in the Bengal basin.

Albania is pressing expansion of its oil and gas sector.

Albania's Ministry of Energy and Mineral Resources is concluding an agreement with Western Atlas to prepare and sell existing geological and geophysical data to foreign oil companies prior to a formal licensing round for onshore acreage. The ministry also is soliciting foreign expertise in EOR.

The Greek press reports Albania and Greece have reached agreement in principle to lay a 44 mile spur to Albania from a proposed pipeline to deliver Soviet natural gas from the Bulgarian border to near Athens. Albania reportedly may seek as much as 35 bcf/year of Soviet gas.

China and Viet Nam have failed to resolve their dispute over the hydrocarbon prone Spratly Islands in the South China Sea.

Despite continuing the long dispute, which has in the past boiled over into military confrontations, the two countries signed trade and border agreements at a Beijing meeting last month, the first high level contact between them in 10 years.

The Falkland Islands administration has taken the first steps toward opening its outer continental shelf to oil exploration, approving a bill to allow a comprehensive seismic survey of the continental shelf around the islands.

The move, backed by the U.K. government, brought an immediate protest from Argentina, which claims sovereignty over the islands and a 200 mile wide economic zone surrounding them.

As many as four geophysical companies will be invited to bid for the survey work. It's likely the British pattern of licensing rounds will be adopted.

Britain's Offshore Supplies Office will no longer undertake detailed monitoring of orders placed by U.K. offshore operators, once part of the process of ensuring the British content of offshore projects was kept at a maximum.

OSO will continue to promote fair commercial opportunity in all oil and gas markets, promote exports by U.K. companies, and support technological development.

Norway's minority Labor administration has approved plans by Statoil and Conoco for a 1 million metric ton/year methanol plant at Tjeldbergoden, south of Trondheim, using natural gas feedstock from Heidrun and Draugen fields (OGJ, Nov. 25, p. 37).

The approval includes a 152 mile, 20 in. gas pipeline from Heidrun. Plans by Norsk Hydro to build a gas fired power plant close to pipeline landfall have been rejected. The government decision now needs final approval from Storting in early 1992.

South Korea plans to spend $5.3 billion on LNG and related gas projects the next 15 years.

Government estimates of projected LNG demand by 2006 have more than doubled to about 14-18 million tons/year from a 1989 projection of 7 million tons. Included are construction of the country's third LNG terminal, expanding the country's gas grid to 2,182 km from 127 km, and building 17 LNG tankers.

What will OPEC do to alleviate fears of an oil supply glut next spring? Not much, as the U.S. futures market sees it. Nymex light sweet crude for next month delivery plummeted to a 4 month low, dropping $1.58/bbl on the week to close at $21.21/bbl Nov. 22. The culprit: rumors of Iraqi crude sales resuming.

The scope of Kuwait's upstream rebuilding effort is becoming clearer. According to a U.N. report, as many as 307, of Kuwait's oil wells will have to be abandoned, and the country's oil productive capacity won't be restored to its preinvasion level of 2 million b/d before 1994. About 45% of the wells will be able to resume production with only minor repairs. The report puts the wild well control campaign cost at $2 billion. Government estimates are that about 2-3% of Kuwait's 95 billion bbl of oil reserves have been lost. Meantime, some industry officials fear Kuwait might rush the job to boost near term revenues and cause serious long term damage to the oil fields. The emirate aims to boost production to 1.5-1.7 million b/d by December 1992 from its current 325,000 b/d and 140,000 b/d from the Neutral Zone.

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