OGJ NEWSLETTER

The give-and-take between governments and the petroleum industry today reflects continuing debate over environmental standards.

Interior Sec. Bruce Babbitt has agreed with an advisory committee proposal that Interior explore alternative insurance options for oil companies subject to a $150 million insurance requirement for offshore operations.

He further agreed operations that present a small spill risk should be exempt but contends legislation is needed. Babbitt rejected exempting coastal facilities, saying large estuaries such as Mobile Bay need protection.

National Oceanic & Atmospheric Administration has greatly revised a proposed rule to enable quick restoration of natural resources damaged by an oil spill. The rule, to he issued soon, would assess the spiller for the cost of restoring the damaged resources vs. using a compensation formula to estimate damages based on characteristics of the spill and the site.

Justice Department and EPA have developed a model consent decree to negotiate cleanup of hazardous waste sites.

The model decree drops a provision in the original 1991 model that required defendants to perform additional cleanup if the original remedy failed.

The U.S. House has approved a funding bill that would prevent the Transportation Department from imposing higher auto fuel efficiency standards.

The bill would keep the fuel standards at an average 27.5 mpg and block a study of tougher fuel economy standards for light trucks.

U.S. DOE will reconsider a proposed rule requiring motor fuel providers to use alternative fuels. DOE will consider exempting firms producing alternative fuels only as an incidental refining byproduct. The oil industry had objected to many provisions of the rule (OGJ, Apr. 24, p. 40).

The District of Columbia Circuit Court of Appeals has denied EPA's request it reconsider voiding an EPA rule requiring renewable oxygenates in reformulated gasoline. The action clears the way for the Clinton administration to appeal the case to the U.S. Supreme Court (OGJ, May 8, p. 32).

With plans to introduce CO2/energy taxes in Europe back on the table. Europe's chemical industry is up in arms. Simon de Bree, president of European Chemical Industry Council, wrote to European Commission and European Union leaders in protest, saying, "It has now become obvious that the so-called CO2/energy tax has nothing to do any more with protection of the environment and has instead become a normal additional taxation, disguised for opportunistic reasons as an environmental protection measure."

Ottawa will introduce regulations requiring the Canadian natural gas industry to install technology to capture or burn benzene.

The Canadian Association of Petroleum Producers (CAPP) says it is prepared to voluntarily reduce benzene emissions, and it is premature for Ottawa to draft regulations. CAPP contends there may be a cheaper and faster way to achieve the objective than by government regulation-noting not every gas stream has benzene-and there may be reasonable cutoff levels where controls are required. Canadian governments and industry have completed agreements where resource companies will work on a voluntary basis to reduce CO2 and other emissions to meet environmental standards.

Brimming gas storage levels are crimping demand and depressing U.S. spot gas prices. Natural Gas Clearinghouse's survey shows August spot prices averaging $1.26/MMBTU, down 120 from July and 40(t from 1994.

End users in the U.S. Southwest have applauded a FERC "share the pain" settlement order on relinquished pipeline capacity costs as a model solution. The settlement puts Transwestern Pipeline as well as its customers at risk for relinquished pipeline capacity and ties future pipeline rate increases to inflation.

Southwest Customer Coalition, a group led by Southwest gas utilities, said FERC should apply the order to future disputes over who should pay the costs of unsubscribed pipeline capacity. The settlement includes a risk sharing mechanism that puts both sides at risk for 457 MMcfd of capacity to be relinquished by SoCalGas Nov. 1, 1996. Firm customers will provide a short term subsidy through a cost sharing formula the first 5 years. Thereafter, Transwestern assumes full responsibility for all unsubscribed capacity.

Exports of Canadian natural gas to U.S. West Coast markets are setting records, says Pacific Gas Transmission. Recent throughput on PGT's line was 97% of capacity and has averaged almost 90% in 1995. PGT reports record shipment of more than 1.76 bcf of gas July 21 at its Malin, Ore., endpoint. Second quarter average was 1.61 bcfd. The PGT line runs from the British Columbia border through Idaho, Washington, and Oregon to the California border.

PGT surveyed Canadian producers during Apr. 27 June 9 on support for increased expansion on its system. Results have not been released. The company won't expand its system unless there is market support to underwrite it.

Meanwhile, Statistics Canada says ballooning oil and gas exports to U.S. markets were a major factor in a 7% increase in Canadian primary energy production in 1994, the largest increase in 6 years. The federal agency said there were three factors supporting the increase: Declining U.S. crude oil production, high refinery demand for Canadian heavy crude, and rising gas sales to the U.S.

StatsCan said Canadian energy exports have jumped 131% the past decade, helping increase primary energy production by 54% in the same period.

Suncor plans an experimental heavy oil project near Cold Lake. Alta., that could lead to a major new oilsands project. The proposed Burnt Lake project is planned for a 1996 start on leases held by Suncor in the Cold Lake area 217 miles northeast of Edmonton. Suncor will use a combination of horizontal drilling and steam assisted gravity drainage that could recover 60-80% of an estimated I billion bbl of oil in place. Suncor earlier tried to use primary production to recover oil at Burnt Lake, but that project was suspended in 1993.

Mexico's energy industry will face radical changes in government policy when the government's Comision Reguladora: de Energia (CRE) issues final rules in September outlining the framework of private participation, including foreign direct investment, in Mexico's natural gas sector.

"It is a high pressure, politically charged process right now," said Michelle Michot Foss, director of the new Energy Institute at the University of Houston College of Business Administration. "There are many complex issues to be resolved between the government and Pemex, and it is not clear what the final shape of these rules will be." Mexico recently disclosed a hid tender for participation in its natural gas transportation sector and plans to revise heavily criticized private investment rules for electricity that have stalled several key gas fired power projects. The institute is leading an advisory group helping CRE formulate regulatory frameworks. "Mexican officials now know that to get some of these projects off the ground, their regulations will have to be consistent, offer the right incentives, and the process is going to have to be transparent," Foss said.

U.K. and Argentine governments will hold talks in Buenos Aires in mid-August to discuss cooperation in exploration for hydrocarbons off the Falkland Islands. The Falklands government plans to offer exploration tracts under a licensing round this October. Argentina claims it is entitled to share in any government revenues from oil and gas production in the disputed territory.

Will last week's surprise shakeup in Saudi Arabia's cabinet mean increased opportunities for foreign petroleum companies participating in joint ventures in the kingdom? While the sacking of long time Oil Minister Hisham Nazer is not expected to have an immediate effect on Saudi oil policy - King Fahd still calls the shots - his replacement, former Aramco CEO and Pres. Ali bin Ibrahim al-Nuami is highly regarded by western oil companies.

Fahd also replaced Finance Minister Sheikh Mohammed Ali Abal-Khail with Suleiman Bin Abdul-Aziz al Suleim, a move Saudi sources say bodes well for privatization and foreign investment in Saudi Arabia. Saudi Arabia's budget woes are spurring a larger role for the private sector in the kingdom.

National Iranian Oil Co. (NIOC) has issued invitations to foreign oil companies to tender for 10 petroleum projects. soon after Total won a $600 million project to develop two offshore oil arid gas fields (OGJ, July 24, p. 67).

Projects open to tender are second phase development of South Pars offshore gas field, development of Khuff ads reservoir in Salman field, redevelopment of offshore Soroosh oil field, development of Balal offshore oil field, construction of Amax gas gathering and processing system in South Iran, a 300 MMcfd gas sweetening/NGL plant at Cachsaran, a plant in Siyuh Makan district to process 170 MMcfd of rich gas and 2,500 h/d of condensate, a 70,000 b/d condensate refinery to be built alongside Bandar Abbas refinery, a 350 metric ton/day LPG recovery unit at Lavan Island, and expansion of Shiraz refinery by 20,000 b/d.

Interested companies are asked to contact NIOC in Tehran by Sept. 8 to obtain a prequalification questionnaire. Project details will be given at a 4 day seminal in Tehran starting Nov 11.

U.S. Industry Scoreboard 8/7 table (38639 bytes)