OGJ NEWSLETTER

China's petroleum industry remains in disarray.

Other Asian refiners and traders continue to grapple with Beijing's recent ban on imports of most crude oil and refined products and tightening the vice on petroleum prices and trading. The ban, imposed late last month (OGJ, May 30, p. 21) and effective until July 1, has slashed total petroleum imports to about 250,000 b/d from a recent peak of about 1.25 million b/d.

After July 1, Beijing will limit the number of companies allowed to import petroleum. The move comes in the wake of a flood of low cost crude and products imports into China late last year as the government implemented market reforms (OGJ, May 9, p. 33). Beijing also reimposed price ceilings on crude, gasoline, and diesel to help quell double digit inflation and bolster domestic refiners and producers undercut by imports. And it's cracking down on a new class of middlemen making a killing reselling cheap imported crude and products as old petroleum monopolies erode.

Industry officials worry about the prospects for foreign investment with Beijing apparently rolling back reforms it now sees as having spun the domestic petroleum industry out of control. While state oil firms try to reassure foreign companies the measures are only temporary, the ban threatens opportunities in what many see as the world's hottest petroleum market.

Some officials contend the moves are intended mainly to prop up state oil companies, notably CNPC and Sinopec, hurt by market reforms.

The Thais are making inroads into Asia's Communist giants.

A Sino-Thai joint venture has marked the first toehold by a nonwestern company in China's retail petroleum market with the opening of two service stations in Maoming. Giant multinationals such as Royal Dutch/Shell, Exxon, and Mobil are keen to enter China's huge retail market but are restricted by Chinese authorities to only a single outlet each. Petroasia TV, owned by Thailand's Charoen Pokphand Group (CP) 50%, Sinopec Maoming 30%, and Thai state oil company Petroleum Authority of Thailand (PTT) 20%, plans 10-20 more stations this year and 100-200 in 5 years.

PTT/CP will team with Saigon Petro for $28 million in Vietnamese downstream ventures. Petroasia (Saigon) ventures will include oil terminals and tank farms, 50 retail outlets in 5 years, and LPG distribution and trading.

Thailand and Myanmar have agreed on the route for a pipeline to transport gas from Total operated fields in the Gulf of Martaban to western Thailand, despite threats of sabotage by guerrilla forces along the Thai-Myanmar border. The line will extend 300 km offshore and 100 km onshore, with terminus at Pilok, Kanchanaburi, 200 kin northwest of Bangkok.

Total, Unocal, and the Thai government will undertake the $500-600 million project, and PTT upstream unit Pttep is negotiating a 20% stake. Yangon has promised to beef up security in the threatened area. Supporting the agreement is a decision by Thai utility EGAT to build a 2.1 million kw combined cycle power plant in Ratchaburi province fed by Martaban gas and linked to the Martahan line with a 390 km, $450 million pipeline. Martaban gas is to go on line in 1998 at 250 Mmcfd, rising later to 600 Mmcfd.

A combine of Canada's Novacorp and Malaysia's Petronas will pay $500-550 million for a 49% stake in Australia's 1,300 km Moomba-Sydney gas pipeline. Australian Gas Light will hold the remaining 51%.

Named preferred buyer by the government, the combine will complete negotiations by June 30. The line carries Cooper basin gas to Sydney.

RUSSIAN JVS PROLIFERATE

A TV of Russia's Gazprom and Germany's Ferrostahl plans to build a 680,000 metric ton/year methanol export project at Arkhangelsk, northern Russia. Metaprom TV will sell all the plant's output to Canada's Methanex for export. Ferrostahl will complete feasibility studies by September-October, and design work will be conducted by Ukrgazproject, Kiev, and Lenmornii-project, St. Petersburg. Start-up is slated for yearend 1996-early 1997. Metaprom will lease tankers from methanol buyers to ship the plant's output. The former U.S.S.R. has a methanol surplus, exporting about 1 million tons/year.

Italy's Agip and Russia's Lukoil have agreed to form a joint venture, Lukagip, incorporated outside Russia and intended to carry out E&P worldwide. Lukoil will bring to the JV data from its Uzbekistan and Caspian Sea projects, while Agip brings data from Middle East and Egyptian projects. An earlier agreement called for Agip to help Lukoil develop Vostochno Pridoroznoje field in western Siberia while Lukoil participates with Agip in developing Tunisia's offshore Enfida and El Haouaria fields.

A rare oil strike spotlights the Western Hemisphere's sole Communist nation. Alberta's Canada Northwest Energy Ltd. and Fortuna Petroleum Inc. and Cuba's state owned Cubapetroleo 1X-Cupey wildcat in shallow water of the Bay of Cardenas tested 3,750 b/d of 16 gravity oil through 1/2 in. choke with 1,488 flowing tubing pressure from a 135 m interval at about 2,400 m. Interests are Sherritt Inc. unit and operator Canada Northwest 60% and Talisman Energy Inc. unit Fortuna 40% in a production sharing contract covering Block 10 (see map, OGJ, Apr. 26, 1993, p. 58).

The petroleum industry's main focus the next 2 decades will be downstream. So says former Royal Dutch/Shell CEO Peter Holmes. Speaking at the close of the World Petroleum Congress in Stavanger last week (see related stories, pp. 34-36), Holmes estimated one or two world scale refineries must be added each year to meet surging products demand. Downstream will get the biggest chunk of more than $200 billion/year of industry investment in the 2010s, up from $100 billion/year in the 1990s. Shell sees oil demand rising to 85-115 million b/d by 2020 from 66 million b/d in 1990.

Norway has postponed a decision on gas allocation, overturning a majority view of Norwegian gas field interest holders.

That decision would have determined which gas fields supply which contracts until mid-Norwegian field development plans are available in 1995.

At stake are 120 bcf/year under signed contracts awaiting allocation, 140 bcf/year to be supplied to Germany's VNG starting in 1996, sales to Mobil Oil AG's gas supply arm, and a 140 bcf/year contract Gaz de France is to sign the next few weeks. Norsk Hydro, Saga, Phillips, Esso, Shell, Conoco, and Elf recommended Oseberg gas be allocated this summer to VNG. Statoil, Total, and Neste protested, saying gas did not need to be allocated this year and a decision could wait on Haltenbanken gas field proposals until 1995. Oslo also feels delay is justified by the need to know other gas supply options under the Troll sales accord. Since Troll options won't be known before July 1, 1995, an overall decision on allocation isn't likely before fall 1995. Statoil recently outlined proposals for new pipelines needed to meet future European demand for Norwegian gas (OGJ, May 9, p. 29).

Looks like the carbon tax idea is dead in Canada. Prime Minister Chretien in Calgary late last month said the tax isn't and won't be on the table, putting to rest petroleum industry fears and rumors that has sparked a name-calling spat between industry officials and Ottawa.

ARCO may decide as early as its next board meeting June 27 on across the board restructuring moves. Limited restructuring steps have been disclosed, included those in Lower 48 oil and gas operations and in the transportation company. It's expected ARCO will make major work force cuts, including the Los Angeles headquarters.

Five maritime unions have agreed to support legislation to remove the ban on exports of Alaskan North Slope crude oil.

Producers say a glut of ANS on the West Coast has depressed California and Alaska crude prices. The bill requires the exported oil to be carried in U.S. flag tankers. The Far East is the most likely market.

MMS will use negotiated rulemaking to develop royalty guidelines for natural gas produced from federal lands. About 15 regulators and industry representatives will devise a workable method, with the first meeting June 15-17 in Lakewood, Colo. MMS and the gas industry have long differed on how take or pay settlements, buydowns, and buyouts affect royalties (OGJ, May 24, 1993, p. 28). MMS is auditing more than 1,700 gas contracts. MMS said, "The rule is needed because royalty payers are not able to comply with existing regulations, particularly in the current gas market."

The panel will focus on royalties under unitization and communitization agreements, a benchmark evaluation system for nonarms length contracts, and cases in which a lessee does not sell part of its allocated production.