OGJ Newsletter

U.S. Industry Scoreboard [57,628 bytes]

As world energy use increases, the petroleum industry continues to pursue ways to become increasingly competitive-including more upstream and downstream combinations.

World energy consumption grew by 3% in 1996, the highest annual growth rate since 1988 and almost double the 10-year average.

That's one of the major conclusions in BP's 1997 Statistical Review of World Energy, which covers 1996 statistics.

BP says above-trend growth in Organisation for Economic Cooperation and Development energy markets-plus a slowdown in the decline in FSU energy consumption-produced a year of strong growth in global aggregates.

Outside the FSU, BP says, energy consumption rose 3.7%.

Asia-Pacific regional growth was in line with long-run trends at 4.7%.

Among emerging Asian market economies, only Pakistan recorded double-digit energy consumption growth at 10%.

Global oil demand grew 2.4%.

China and India had above-trend oil demand growth of 7.3% and 7.9%, respectively, while Pakistan was the fastest-growing oil market at 13.6%.

Natural gas consumption growth was also above-trend at 4.7%. Growth was especially strong in Europe and South/Central America. U.K. had the largest absolute growth-overtaking Germany to become the largest gas market in Europe and third-largest in the world.

In the U.S., upstream and downstream consolidation continues.

Burlington Resources, Houston, and New Orleans-based Louisiana Land & Exploration (LL&E) have signed a definitive merger agreement to combine in a deal valued at $3 billion.

Terms call for LL&E to merge with a Burlington unit in a stock transaction. The companies have combined total gas reserves on an equivalent basis of 7.7 tcfe, and their current total combined gas production is 1.7 bcfd.

The deal is expected to close in about 3 months.

On the downstream side, Shell, Texaco, and Saudi Aramco signed a memorandum of understanding (MOU) to combine their U.S. East Coast and Gulf Coast refining and marketing businesses. This follows earlier disclosure that Shell and Texaco signed an MOU involving midwestern and western U.S. R&M and related assets (OGJ, Mar. 24, 1997, p. 24).

U.S. Sen. Barbara Boxer (D-Calif.) and four consumer groups have urged the U.S. Federal Trade Commission to reject that combination, claiming it would drive up West Coast gasoline prices.

In the latest deal, Shell, Texaco, and Star Enterprise-a 50-50 joint venture of Texaco and Saudi Aramco units-will form a limited liability company. Initial interests are Shell 35% and Texaco and Saudi Refining Inc. 321/2% each.

The deal, subject to regulatory approvals and signing of definitive agreements, will result in 823,000 b/d of total refining capacity, based on certain assets: Shell's 218,000-b/d plant at Norco, La.; and Star's 230,000-b/d plant at Convent, La., its 140,000-b/d plant at Delaware City, Del., and its 235,000-b/d plant at Port Arthur, Tex. Shell will contribute 17 products terminals; Star 33. The deal results in 14,717 Shell- and Texaco-branded outlets in 26 states.

Separately, Pennzoil unit Pennzoil Products Co. and Conoco have signed a joint-venture agreement to establish Penreco, a combination of the companies' specialty petroleum products businesses.

Meanwhile, FERC approved PG&E Corp.'s planned acquisition of Valero Energy's natural gas and liquids assets, including 7,500 miles of transmission and gathering pipeline and eight gas processing plants, primarily in South Texas. The deal, valued at about $1.5 billion, is expected to close by July 31.

EPA has acted on tougher U.S. standards on smog and soot emissions. Administrator Carol Browner signed the standards, which require states and cities to develop tougher air pollution controls (OGJ, June 30, 1997, p. 36).

The final ozone standard would allow one more "bad-air" day before an area is found to be out-of-attainment, based on the fourth-highest level exceeded instead of the third-highest level exceeded, as proposed.

In another change, the standards set the 24-hr limit for particulates at 65 micrograms/cu m, instead of 50 micrograms/cu m.

U.S. House leaders have declined to drop a provision in the Interior Department appropriations bill that would require sale of $209 million worth of oil from the Strategic Petroleum Reserve in fiscal 1998 (OGJ, July 7, 1997, Newsletter). The Senate bill doesn't have a similar measure, so a House-Senate conference committee may decide the issue.

Meantime, Democratic leaders have urged the chairman of tax writing committees in Congress to extend the tax subsidy for ethanol production through 2007. Sen. Tom Daschle (D-S.D.), Senate Democratic leader, and Rep. Richard Gephardt (D-Mo.), House Democratic leader, say the House-passed bill would retain the 5.4¢/gal subsidy only until 2000; the Senate bill would phase it out between 2000 and 2007.

More consolidation is occurring in the offshore drilling ranks.

Houston's Reading & Bates and Falcon Drilling plan to merge in a deal valued at $5 billion and become R&B Falcon Corp.

Officials say the deal will result in the world's largest offshore drilling fleet.

Meanwhile, Amoco Canada has sold its Canadian Marine Drilling Ltd. (Canmar) fleet to a group of Cyprus-based companies.

The fleet-four drilling rigs and six support vessels-was used in the Beaufort Sea and was acquired by Amoco in a 1988 takeover of Dome Petroleum.

Canmar was sold for an undisclosed price to Livingston Marine Co. Ltd., Oakland Shipping Co. Ltd., Richfield Shipping Co. Ltd., Richland Shipping Co. Ltd., and Westland Shipping Co. Ltd.

Offshore production records continue to fall.

Shell Deepwater Production says it has broken the world's record for deepwater production in its Mensa subsea development in the Gulf of Mexico (OGJ, Apr. 28, 1997, p. 26). On July 12, Mensa began flowing gas from its first well in 5,300 ft of water.

Shell says another record toppled for tieback distance, when gas began flowing through 68 miles of flowline to a West Delta Block 143 host platform.

First of three planned wells is flowing about 108 MMcfd. Development will continue through March 1998, with the drilling and completing of two more wells.

A peak 300 MMcfd rate is expected in first quarter 1998.

Another deepwater record has been set off Brazil.

A diverless guidelineless tree (GLL) has been installed in 5,525 ft in Marlim Sul field development in the Campos basin. The ABB Vetco Gray unit was supplied to operator Petrobras for the MLS-3D well (OGJ, June 9, 1997, p. 26) in 5,554 ft of water.

Officials are completing an agreement with Petrobras for development of horizontal trees for use in 8,200 ft of water, also.

Ireland's dream of becoming an oil-producer may have come true.

On July 10, operator Statoil (U.K.) Ltd. began an extended well test in Connemara field on Block 26/28 in 375 m of water. J.W. McLean semi is producing and processing oil for delivery by flexible pipeline to Berge Hugin storage tanker moored nearby.

Emerging gas-to-liquids (GTL) technology (OGJ, June 23, 1997, p. 16) has been given a boost.

South Africa's Sasol has clinched a deal to build the world's first full-scale GTL plant. It signed a memorandum of understanding with Qatar General Petroleum Corp. (QGPC) and Phillips Petroleum to build a 20,000-b/d GTL plant at Ras Laffan, Qatar.

A feasibility study will be conducted in the next 6 months to assess economics and viability. The venture will be owned 34% by Sasol, 51% by QGPC, and 15% by Phillips.

The Sasol-led project is due to begin production in 2002.

It will convert some gas from Qatar's super-giant North field into naphtha and middle distillate fuels. Rentech Inc., Denver, is also building a small unit in India (see Watching the World, p. 36).

A precedent has been set in positive labor-management relations.

Federal Mediation and Conciliation Service (FMCS) presented its distinguished Director's Award to Amoco's 460,000 b/d Texas City, Tex., refinery-the first time it has been presented to an oil company-and only the sixth such award ever presented, FMCS officials say.

The award comes after management and members of Oil, Chemical & Atomic Workers Union Local 4-449 in 1996 began seeking to improve on a long-standing adversarial relationship and invited FMCS to take part in a program to pursue-and achieve-common goals and objectives.