OGJ Newsletter

• U.S. Industry Scoreboard 6/16 [70630 bytes]

That was the conclusion of the International Gas Union's gas transmission committee meeting at the World Gas Conference in Copenhagen last week.

The committee, noting that deregulation of gas markets began in 1986 in Canada and spread to the U.S., says European gas markets are not likely to be faced with the same kind of sweeping deregulation that occurred in North America, due to long-term supply contracts and a relatively small number of producers and suppliers.

But, the committee said, "The trend to freer gas markets and greater competition is established.

"Once the Interconnector (pipeline) between Britain and Zeebrugge is completed...Zeebrugge will then be connected to pipelines supplying gas from Britain and Norway...and may well become the first hub in Europe."

On the environmental front, Gazprom and Ruhrgas are cooperating to reduce the environmental effects of gas transmission by optimizing gas grid operations on Russia's 150,000-km pipeline system.

In a committee presentation, Gazprom official Yevgeny Leontjev says energy required for transportation of gas can be significantly reduced.

Gazprom unit Volgotransgaz will employ Ruhrgas' Simone flow optimization system on its 5,000-km grid subsystem later this year.

Plans call for Simone to be employed on all of Gazprom's system by 2000. Ruhrgas has used the system since 1989.

"The aim is to optimize compressor unit use," said Leontjev. "Calculations have shown that, on average, a total of 5%, or 150 million cu m/year, of fuel gas can be saved under optimized conditions compared with non-optimized operation."

The Netherlands, presiding over the European Union until July 1, was reported to be considering calling an extraordinary council meeting of energy ministers June 24 to seek agreement on an EU gas directive.

But news reports quoting a spokesman for EU's Energy commissioner say a meeting has been shelved because too many differences need to be worked out.

Speaking on the eve of the World Gas Conference, Svend Auken, Denmark's environment and energy minister, said a compromise over outstanding issues is "within reach," although France is thought to be still resisting the directive.

EU members have already adopted an electricity directive, leading to liberalization of electric markets. But the gas directive is stalled over the issue of third-party access to pipelines.

"On the crucial issue of market opening," Auken said, "it seems likely that the situation will be one that operates with a band, bound by upper and lower limits for market opening."

EU ministers may also be close to a solution on take-or-pay gas contracts, commonplace in Europe.

"Member states will have the authority to grant access to third parties irrespective of the existing contract," Auken said. "On future take-or-pay contracts, the commission will have the authority to break these contracts, since the commission must be notified of each contract."

Meanwhile, Nederlandse Gasunie, which stands to lose market share from the gas directive, envisions a gas pipeline from Den Helder, Netherlands, to England's Bacton terminal to provide additional supplies to the U.K. in peak winter months.

Gasunie believes the U.K. may at some point become a net importer of gas, and it's studying project feasibility.

Greenpeace, which last week occupied the remote Atlantic island of Rockall off Scotland, will sue the U.K. government if its Atlantic waters are opened to oil and gas exploration.

It has given the government 10 days to respond and wants the 17th bid round-involving mostly West of Shetland acreage-awards suspended.

Greenpeace sent a letter to Department of Trade and Industry Minister Margaret Beckett protesting the government's alleged failure to apply European law in the Atlantic frontier north of Scotland.

Greenpeace claims the government failed to apply the European habitats directive relating cold water coral and the environmental impact assessment directive.

Kazakhstan has signed a memorandum of cooperation with Azerbaijan to lay a 1,560-mile, $2.5 billion pipeline across the Caspian Sea.

Initial capacity of the onshore-offshore line would be 200,000 b/d. Construction is to begin before 2000, with completion slated by 2003.

Officials say the onshore route will extend from western Kazakhstan to the Turkmenistan port city of Turkmenbashi on the Caspian coast. From there, the offshore segment will be laid across the Caspian to Azerbaijan.

Another onshore segment will cross Georgia and Turkey before terminating at a point that would allow oil to be shipped to markets via either a Mediterranean or Black Sea port.

Kazakhstan and China's CNPC recently said they will lay an oil pipeline from Kazakhstan to China (OGJ, June 9, 1997, Newsletter).

Soaring oil demand will require China to establish a strategic oil reserve to serve as a buffer as the gap widens between China's domestic production and expected oil demand.

Economic growth will propel oil import growth to 1 million b/d by 2000 from 440,000 b/d in 1996, says Zhu Yu, president of China Petrochemical Consulting Corp., a Sinopec think tank.

He says Beijing plans to float domestic prices to international market levels in several years. To ensure a stable supply of oil, China also will need to upgrade its port facilities, expand tanker fleets, and cement long-term relations with Middle East producing countries.

Aramco supplies about 30,000 b/d to China, and reports indicate it will ramp up exports in the second half based on China's needs. Iran will increase exports to 100,000 b/d in 1998 and to 200,000 b/d in 2000 from 70,000 b/d currently. CNPC recently disclosed it will develop Iraq's Ahdab oil field, and it's making inroads into oil development in Venezuela (see story, p. 27).

Venezuela's Congress has approved proposed terms and conditions of the Hamaca region extra-heavy oil project (OGJ, Dec. 9, 1996, Newsletter).

Partners Phillips Petroleum Venezuela, Venezuela's Corpoven, ARCO, and Texaco will invest about $110 million during 18 months, conduct detailed design, and arrange financing for possible full development.

Production, scheduled to begin in 1999, could average 200,000 b/d by 2006 under a full development scheme.

A hole may be growing in the dike recently erected by U.S. interests opposing imposition of unilateral economic sanctions by the Clinton administration.

Texaco, which last month said it might consider selling or trading its Myanmar interests as part of an asset review (OGJ, May 19, 1997, Newsletter), has gained the interest of at least one company.

Officials of Malaysia's Petronas confirm they're studying possible purchase of Texaco's interest in Yetagun field, slated to come on stream in 1999 (OGJ, May 5, 1997, p. 38). Petronas says it was approached by an investment banker retained by Texaco to seek buyers.

Current interests in the production-sharing agreement covering Yetagun field and Blocks M-12, M-13, and M-14 off Myanmar are operator Texaco Exploration Myanmar 42.9166%, Premier Petroleum Myanmar 25.75%, Thailand's PTT Exploration & Production 14.1667%, and Nippon Oil Exploration Myanmar 17.1667%.

"There are a number of interested parties that are looking at project data that we've circulated," Texaco said. A data room has been opened.

A sale or swap could precipitate Texaco's withdrawal from Myanmar and weaken the lobbying position of USA*Engage (OGJ, June 9, 1997, Newsletter). Texaco is a member of the Washington-based coalition, formed in April by U.S. companies involved in manufacturing/exporting capital goods and services, consumer products, agricultural products, and financial services. Created to oppose U.S. unilateral economic sanctions, its ranks include oil and gas and service/supply companies.

Newly confirmed DOE Deputy Sec. Elizabeth Moler "faces huge challenges at the department," says Sen. Frank Murkowski (R-Alas.), chair of the U.S. Senate energy and natural resources committee. He added that he thinks Moler is up to the task.

Moler won full Senate confirmation June 5 after receiving affirmation by Murkowski's panel (OGJ, May 12, 1997, Newsletter).

Copyright 1997 Oil & Gas Journal. All Rights Reserved.