OGJ NEWSLETTER

Environmental concerns in California pose fresh worries for the petroleum industry there.

Push has come to shove in California's air quality regulatory battle.

Gov. Pete Wilson has asked President Clinton to postpone for 18 months federal implementation plans (FlPs) that would bring air pollution control for three of California's most polluted areas under federal control. The FIPs, issued by EPA under court order earlier this year (OGJ, Mar. 7, Newsletter), call for severe new emission controls and take effect if local and state air quality plans don't meet federal Clean Air Act standards. Studies show FIP implementation will hit the state with $17.2 billion in lost economic output and $8.4 billion in direct costs, most of that in Los Angeles, which alone stands to lose about 156,000 jobs as a result.

Wilson's request comes as South Coast Air Quality Management District nears a vote on a long range air quality management plan that will help determine how much of the region is regulated by the FIP. That plan in turn goes to California Air Resources Board for approval and inclusion in its state implementation plan (SIP), which must be sent to EPA by mid November. That promises a crunch, because the SIP requires a 30 day public notice period.

California operators continue to grapple with underground petroleum spills. Chevron last week disclosed an underground spill of cutter stock at its El Estero marine terminal at Morro Bay, near where Unocal reported the state's biggest petroleum spill earlier this year (OGJ, Mar. 14, p. 36). The Chevron spill was found in March when workers removed a sump to replace it with an aboveground tank. Likely resulting from undetected sump overflows, the spill's extent is unknown, but Chevron believes it to be contained in a 200 ft by 300 ft area. It has reached a nonpotable aquifer, and Chevron plans a number of monitoring wells to ensure the plume doesn't reach the ocean or other aquifers.

About the same time, Unocal started work under a state order to clean up about 9,000 bbl of a kerosine diesel mix diluent under Guadalupe Beach in San Luis Obispo County. Initial work entails excavating 112,500 cu yd of beach at a cost of about $5 million. State officials believe the Guadalupe spill, which persisted for decades but did not become apparent until 1988, may be as big as 200,000 bbl. Unocal earlier pleaded no contest to criminal charges of negligence and paid a $1.5 million fine (OGJ, Mar. 21, Newsletter).

Colombia has another apparent world class natural gas/condensate discovery. Amoco and partners' 3 Opon wildcat flowed 45 MMcfd of gas and 2,000 b/d of condensate. The news came a week after BP disclosed a supergiant gas/condensate find on its Recetor block in eastern Colombia's Llanos basin (OGJ, Sept. 5, p. 44).

Taiwan has a rare significant hydrocarbon discovery. State owned Chinese Petroleum Corp. confirms a natural gas find in the Miaoli area. While the company says it is too early to estimate reserves, local sources peg recoverable gas at more than 3.5 bcf.

Total is about to sign a contract with Thailand's PTT to move Myanmar natural gas via a 700 km, 800 MMcfd design capacity pipeline from Yadana gas field in the Gulf of Martaban to Thailand. Total is operator and partner in the 5.5 tcf field with Unocal. Thailand and Myanmar agreed on the route earlier this year (OGJ, June 6, Newsletter). The pipeline would supply 525 MMcfd, or 80% of Yadana's projected output to a 2.1 million kw combined cycle power plant at Ratcha Naburi at a delivered price reported to be $2.50/MMBTU. The rest would supply a Myanmar power plant. PTT upstream unit Pttep likely will take a farmout on the Yadana block, and Myanmar state petroleum firm MOGE also has an option.

Will China be the next big LNG importer?

Wing Group, Aspen, Colo., earlier this month signed an agreement with the power industry bureau of Jiangsu province to build a $2.4 billion, 2.4 million kw combined cycle power plant fueled by regasified LNG at Rudong. Wing will provide 70% of the investment and the Chinese partner the remainder. Wing is undertaking large scale power plants in Shanghai and Henan, Heilongjiang, and Zhejiang provinces with a combined value of $10 billion that will add 7 20 million kw of electric power capacity. The Rudong terminal would be China's first LNG facility.

Soaring Chinese demand for LPG, mainly for cooking, will spur a boom in construction of storage and related infrastructure.

China's LPG demand is expected to jump 72% by 2000 to 8.13 million metric tons/year. In that same time frame, LPG imports will climb to 1.61 million tons from 655,000 tons as domestic refineries are unable to meet demand. Supply shortages are being seen today in some regions. Current LPG storage capacity is only 40,000 tons, with another 20,000 tons under construction in the southern coastal areas and another 18,330 tons of capacity planned.

Tenders will be awarded soon on a massive, $4 billion project to reclaim land from the sea around Singapore and join seven islands into a single land mass to house a huge petrochemical complex. The combined islands and reclaimed land will represent a trebling of the land mass and underpin an integrated network of upstream and downstream petrochemical plants. Work on the first stage, involving four islands, is expected to get under way by yearend and be complete by yearend 1997. Ultimately the Jurong Island project could take 15-20 years to complete. The islands currently house a number of petrochemical plants. The reclamation project has been floated since the mid 1980s, when concerns over lack of land area threatened growth of Singapore's burgeoning chemical industry.

Prospects for New Zealand's gas industry future gets an investor group's vote.

New Zealand power developer Pacific Energy Ltd., Todd Petroleum Mining Co., and Southern Electric International Ltd. have offered to buy a proposed electric power plant and its associated gas supply in a move that would break the state monopoly on electric power generation. The 400,000 kw, $240.4 million, gas fired plant at Stratford, N.Z., is planned by state owned Electricity Corp. of New Zealand, which also owns the gas dedicated to the plant. Electric power consumes a big share of New Zealand gas, and concern over looming declines in domestic gas supplies has raised the possibility of a future shift to coal (see related story, p. 23).

The World Bank has warned Nigeria not to commit more public resources to ambitious natural gas projects.

It contends added fiscal incentives for the projects are unnecessary because the economics of many of the projects using gas as a feedstock are questionable. Among the gas fed projects are the massive Bonny LNG export project, Nafcon fertilizer plant, Alcon aluminum complex, Eleme petrochemical complex, Mobil NGL extraction plant, cement plants, and a proposed pipeline for gas exports to Ghana, Togo, and Benin. "The main rationale of most of these projects is that they may help Nigeria to penetrate some promising markets despite poor or no returns in the short to intermediate term," the bank said. Part of the problem is that almost half of Nigeria's 75 tcf of gas reserves is associated gas.

The bank contends substituting associated gas for nonassociated gas could double the cost to gas users, notably the cash strapped Nigerian electric utility.

French refiners are blasting the government's plans to slash tax subsidies for unleaded gasoline in the 1995 budget.

Total Pres. Serge Tchuruk contends the move runs counter to Paris' environmental policy by pushing motorists back to diesel fueled vehicles. That in turn would further squeeze French refiners currently hamstrung by increasing diesel demand and slumping heavy fuel oil demand.

Here's an early sign Russia's long suffering oil industry may see some light at the end of the tunnel.

While the country's crude production fell 14% and crude processing fell 16% the first 7 months of 1994, Russia's leading producer reports some encouraging results. In that same period, Lukoil restored to production 622 of its idle wells, reducing the number of idle wells to 26.6% of its total 15,355 wells from 32.2%. Other Russian producers, however, face increasing shut ins. Lukoil Vice Pres. Leonid Fedun cites the strong program of well workovers undertaken by foreign companies. Since late 1992, foreign joint venturers or contractors have worked over 1,700 Lukoil wells, yielding an incremental 51.83 million bbl of crude.