Just how cozy will oil exporters and consumers get because of the latest oil supply crisis?
A U.N. sponsored meeting of OPEC and IEA, proposed by Venezuela President Perez, gets under way this week in Vienna to study ways of stabilizing oil prices. IEA in the past has expressed qualms about such meetings with the oil exporters' group (see story, p. 19). Attending are Algeria, Brazil, France, Germany, Netherlands, India, Indonesia, Iran, Japan, Mexico, Norway, Saudi Arabia, Tanzania, U.S., U.S.S.R., and Venezuela.
Pdvsa Pres. Andres Sosa Pietri goes so far as to call the U.S. OPEC's "14th member" because of its heavy presence in Saudi Arabia. Sosa feels the U.S. won't pull its military presence from Saudi territory even after the current crisis is resolved.
More evidence is emerging of Iraq's plans to devastate Kuwait's oil fields in the event of an attack by U.S. led international forces.
In comments to the Financial Times, London, a Kuwait Oil Co. senior engineer says 300 of Kuwait's 1,000 oil wells have been packed with explosives. He had been working at KOC headquarters until a mid-October escape to London via Amman. About 20 gathering centers have been badly damaged and only two are fully functional. Kuwait is probably capable of producing only about 10% of its preinvasion output of 1.7 million b/d. Oil operations in Kuwait are being run by Iraqi Administrator Said Faraj Muthanna, backed by about 100 engineers from Baghdad.
Further, KOC Chief Accountant Bader Rayab reportedly was shot by Iraqi troops in early October for refusing to hang a portrait of Saddam Hussein in his office.
Saddam has abolished the short lived experiment in rationing gasoline and lubricants and sacked his longtime Oil Minister Isam al-Chalabi, replacing him with his son-in-law Hussein Kamel. Al-Chalabi was one of the longest serving OPEC ministers and played a crucial part in negotiating Iraq back into the OPEC mainstream with production quotas at parity with Iran after a period in limbo.
World oil prices continue to fluctuate in response to market perceptions of war prospects in the Middle East. The hard line stance by countries with forces in Saudi Arabia combined with the disappointment that nothing materialized from a Soviet diplomatic initiative pushed Brent for 15 day delivery to $35.70/bbl at closing Oct. 30, up $3.20 on the week. But prices lost ground the next day with Brent at $34.35/bbl, as markets reacted to a more moderate statements from Baghdad. Product prices advanced strongly in Europe. At closing Oct. 31, Rotterdam premium gasoline jumped $35 to $365/ton, gas oil $26 to $300/ton.
More big changes are in store for France's downstream.
Shell France says-that after the drastic restructuring of the French refining sector, industry must now cope with the considerable challenge of environmental protection and product quality. Shell will spend 3.4 billion francs ($670 million) to modernize its 158,000 b/d Petit-Couronne refinery near Rouen, Normandy, the next 10 years. The investment will break out as a third for environmental mitigation, a third for improving product quality, and a third to improve refinery performance. Similar investments may be needed at Shell's 128,000 b/d Berre refinery in southeastern France, although studies aren't complete. Shell also has a stake in Cie. Rhenane de Raffinage's 80,000 b/d refinery at Reichstett on the German border, where smaller investments will be needed to meet new environmental standards.
Elf is negotiating to buy two large independent French gasoline retailers. Once deals are complete, Elf's share of the French gasoline market will jump to 20% from 14.35%. It wants to expand on its 20% stake to completely take over Bianco, the second largest independent retailer in France. Elf also is seeking an interest in the Tardy group, the largest independent with 9% of gasoline and heating oil markets. French independents have been hard hit by the growth of unleaded gasoline sales and the reluctance of domestic refiners to supply them. They also suffered from the month long price freeze imposed in August by the government in response to soaring oil prices.
Elf and Gaz de France are separately pursuing small stakes in Verbundnetz, the former East German gas transportation monopoly that is being privatized. Gaz de France would like a 10% stake and the opportunity to sell its engineering expertise in the German market. Elf is anxious to sell its equity gas from the North Sea and recently agreed to take a stake in Wintershall AG's Midal gas pipeline project in Germany.
Corpoven will spend $1.8 billion in Venezuelan natural gas projects the next 5 years. Programs will entail boosting supply of gas to domestic markets and increasing NGL production and export capacity at Corpoven's Eastern Cryogenic Complex.
Environmental opposition is building against an $11 billion plan to export Canadian arctic gas.
Several environmental groups have called on Canada's National Energy Board to withdraw conditional approval of or refer to the federal environment minister plans by Esso, Shell Canada, and Gulf Canada to export 9.2 tcf during 20 years. The companies deny claims the project would have adverse environmental and social effects and note the approvals don't involve any proposed field development or pipelines. NEB is to rule by yearend whether a full public hearing is needed on the export bid. The Canadian Environmental Law Association plans to sue if NEB grants final approval to the export plan.
There will be no federal price controls on energy in Canada, says Energy Minister Jake Epp, rebuffing consumer groups' call for them. Epp said Canada will follow IEA policy and let market forces determine prices. Canadian retail gasoline prices have increased more than 31cts (Canadian)/Imp. gal since Iraq's invasion of Kuwait Aug. 2. Epp also said reports of higher profits for a number of integrated oil companies should not be seen as evidence of price gouging. Canada's National Energy Program in the 1980s kept domestic oil prices below world levels.
Amoco warns against government "meddling" in U.S. gasoline markets, saying divorcement, open supply, and other amendments to the Petroleum Marketing Practices Act could lead to higher gasoline prices and lower quality. Amoco called on products suppliers and marketers to work out their differences without government intrusion, saying the alternative could cripple economics of branded gasoline marketing. The Petroleum Marketers Association of America's board recently voted to press divorcement.
The divorcement bill also would provide a federal standby price allocation/control program to preempt state law, which the President could implement in an energy supply crisis.
IPAA says exempting oil and gas wells from the air toxics section of the Clean Air Act bill has averted requiring controls costing $9-32 billion on 900,000 wells and 200,000 other facilities such as tank batteries and booster stations.
The exemption won't apply to wells in metropolitan areas with populations of more than 1 million people. In those areas, EPA can issue regulations if it determines the wells present a greater than negligible risk to public health.
Here's a roundup of other bills affecting industry that Congress passed in the waning hours before adjournment:
- An Interior appropriations bill continuing bans on leasing off all the U.S. except some areas off Alaska and the central and western Gulf of Mexico. The Senate accepted the House bill, which incorporated the Bush Administration's ban on leasing off California, Washington-Oregon, the mid-Atlantic, and Florida. The House bill, for the first time, also blocked leasing off the Florida Panhandle.
- A coastal zone management provision giving states more control over OCS work. It would overturn a 1984 Supreme Court ruling that OCS leasing did not have to be consistent with state onshore coastal zone management plans.
- A bill requiring pipeline companies to begin inspecting subsea pipelines and reburying any exposed by seabottom currents. It was prompted by a Gulf of Mexico accident in which a fishing boat struck an exposed gas pipeline.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.