Newsletter

• U.S. Industry Scoreboard 8/18 [57,306 bytes]

London Brent for September closed at $18.99/bbl Aug. 13, up 41¢/bbl in 2 days. It fell below $18.50/bbl after word that Iraq soon would resume exports.

The U.N. disclosed last week it had approved 12 contracts for purchase of 69.22 million bbl of Iraqi oil under the U.N.-supervised oil-for-aid program.

Iraqi officials said tankers were queuing up at the Turkish port of Ceyhan and at Iraq's Mina al-Bakr terminal. Iraq's oil minister says tankers would load 30 million bbl by the end of August, averaging about 2 million b/d.

U.N. officials approved contracts to U.S., Russian, Turkish, French, Dutch, Italian, Swiss, and Spanish companies. However, Iraq reportedly has dropped oil sales to companies in Britain, Netherlands, and Japan.

The second, 6-month, oil-for-aid accord was renewed earlier by the U.N. and was to begin June 8. But Iraq delayed resumption to protest alleged delays by the U.N. in approving its food and medicine distribution programs and filed a new plan. Meanwhile, the export clock continued to tick.

The oil-for-aid program, split into two 90-day phases, calls for sale of $1 billion of oil in each 90-day period. That leaves Iraq less than 1 month to sell half its total export allocation in phase one.

Iraq says it has capacity to export 1.8 million b/d, but some estimates place capacity at 1.3-1.6 million b/d.

Iraq may be able to pull it off, however. Crude has been stored at Ceyhan, and the pipeline linking Iraq with Ceyhan is reported to be full.

U.S. State Department says it will consider levying sanctions on non-U.S. companies that invest as little as $20 million in Iran's oil and gas sector, half the previous threshold.

The higher level was set after 1996 passage of the Iran and Libya Sanctions Act. But the threshold for Libyan investments remains $40 million.

A U.S. federal judge has declined to expand to all producers a ruling that Interior cannot collect royalties on gas contract settlements that involved no exchange of gas.

IPAA says that will force hundreds of companies to file individual lawsuits against Interior.

IPAA and other industry groups won the suit, but Judge Royce Lamberth of the District of Columbia federal court declined to apply it to all producers.

Meanwhile, MMS says it met its 1-year commitment to complete audits and billing of major companies for alleged underpayment of royalties from California properties.

The agency has billed 19 companies for a total of $345.5 million in alleged royalty underpayments dating to 1980 (OGJ, July 14, 1997, p. 17).

The bills, reduced from $435.6 million after adjustments and corrections, all are being appealed.

A National Research Council panel says the U.S. may have to consider global warming policies (see editorial, p. 13) to discourage driving and develop autos that use cleaner fuels or less gasoline.

It says U.S. cars and trucks account for 5% of all CO2 emissions from human activity, which some scientists believe will be a major contributor to possible catastrophic climate change. "No other energy use sector in the U.S. or elsewhere in the world accounts for a significantly larger portion of global CO2 emissions," it said.

The panel warns that the U.S. government needs to educate the public about the risks of climate change and the effects of pollution from cars and trucks if it decides to pursue policies such as raising fuel taxes.

Texas has become the first state in the U.S. to adopt a code of conduct for the transportation of natural gas (OGJ, May 5, 1997, p. 46).

Texas Railroad Commission officials said the code, when combined with the TRC's informal complaint process, gives producers "the tools necessary to protect themselves against illegal, discriminatory practices by monopolies in the gas transportation business."

New regulations focus on reporting and billing. A controversial proposal that would have required pipelines to disclose what they charge for moving gas was not included in the plan, approved by a 3-0 commission vote.

Mexico's Pemex is advancing plans for a major enhanced oil recovery project in Campeche Sound.

The project will serve the Cantarell oil complex.

Bids close Aug. 29 for construction and operation of a nitrogen plant to be built at a cost of about $1 billion at Atasta, Campeche. The plant is slated to start up by April 2000 and reach 1.2 bcfd of nitrogen capacity by April 2001.

Pemex plans to invest $5 billion in 5 years in the nitrogen-injection project to boost output from the Cantarell complex.

India is looking for more revenues to offset mounting government red ink (see Watching Government, p. 21).

Natural gas price concessions long enjoyed by India's industries may soon be a thing of the past, and refined product prices could be on the way up as well.

The United Front government plans to hike the price of natural gas to yield $70 million in additional revenue during the next 3 years.

Currently, prices of natural gas to Indian industries are 50-60% lower than international prices. That has drawn fire from communist parties and the Left Front, which are pressing for petroleum sector reforms.

Gas is heavily subsidized because it's the basic feedstock of the fertilizer industry. For the past 7 years, prices have been kept static at $69.20/1,000 cu m, while the alternative fuel, liquefied petroleum gas, at $663/metric ton costs nearly 10 times as much.

Given the price advantage, industries have preferred using natural gas.

But the burden has been borne by government, which has been losing money on imports.

More than 40% of the gas is used by industries in non-core and non-priority categories, the Left Front alleges. Except for the power and fertilizer industries, all gas users in other sectors are classified as non-core.

The Sankar Committee, appointed by the government to examine revising gas prices, recommends any increase should be phased in gradually with regard to the non-core sectors.

India, selling petroleum products at below-market prices to support internal subsidies, may soon raise product prices.

Some government observers say they do not believe the United Front government will come up with a solution to the mounting deficit anytime soon.

Estimates of increases have ranged from as low as single-digit increases for gasoline, diesel, kerosine, and naphtha to as much as 15-25% for fuel oil.

Some analysts believe India will opt for a hike of less than 10%, coupled with a mix of other measures to raise revenue, including possibly lowering imported crude and product tariffs.

Exxon will develop an integrated refining/petrochemical project in China.

Exxon China Inc.'s joint-venture project with Fujian Petrochemical Co. Ltd. focuses on Fujian's refinery at Xiaocuo, Fujian province.

Fujian Petrochemical is a JV of Sinopec and Fujian province.

The project involves expansion of an existing 80,000 b/d refinery to 240,000 b/d and construction of a new, 600,000-ton/year ethylene steam cracker, as well as chemical derivatives manufacturing units and related distribution/marketing infrastructure.

Privatization is advancing in Asia, but some plans by Peru are not.

China Development Corp. (CDC)-advising Taiwan on privatization of state-run Chinese Petroleum Corp. (CPC)-recommends CPC be privatized before June 1999 as a single entity, instead of breaking it into two or more parts prior to privatization.

CDC recommends sale of at least 51%, or 5.6 billion shares, of CPC's total outstanding shares.

The Petroleum Authority of Thailand (PTT) is nearing completion of a plan to sell $2.5 billion worth of PTT to public and strategic investors.

Officials say privatization, originally scheduled for next year, is speeding up.

Copri, Peru's privatization commission, has placed on the back burner privatization of the rest of Petroperu's assets.

Concessions or operating contracts to oil terminals, slated for sale this month, will be sold in the fourth quarter. But pending sales of stakes in Petroperu's Talara oil refinery, concessions to the North Peruvian Pipeline, and the Conchan and Iquitos refineries "will continue," officials said.

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