Industry is making progress in finding and developing hydrocarbons in some of the most remote frontiers of the Far East.
Exxon and Japan's Sodeco group were to sign June 30 a $15-20 billion pact to develop oil and gas fields off Sakhalin Island. The signing was to come during economic cooperation talks between U.S. Vice President Gore and Russian Prime Minister Chernomyrdin. Sakhalin 1 got off high center after Russia's Duma, or lower house, passed the country's first production sharing legislation last month (OGJ, June 26, p. 22). Reserves are pegged at more than 2 billion bbl of oil, 241 million bbl of condensate, and almost 15 tcf of gas.
Oil shows in an eastern Siberia wildcat are the first indication of hydrocarbons in the Symskaya area, claims Equity Oil, Salt Lake City.
The 1 Lemok, drilling ahead by Symskaya Exploration Inc., a 50-50 venture Equity has with Leucadia National Corp., found oil shows at 6,890-6,985 ft in dolomite of probable Cambrian age. The well, the first on Symskaya Exploration's 1.1 million acre license in the Symskaya area of Krasnoyarsk Krai, will be tested after it bottoms at about 14,500 ft in about 150 days.
Snyder Oil. Fort Worth, is encouraged despite plugging its first wildcat in eastern Mongolia and plans to start a second well by late September.
The 19-1 Sotamo well 200 miles southwest of Hailar, China, on Block XIX established the presence of hydrocarbons in the Tamtsag basin (see map, OGJ, Dec. 26, 1994, p. 32). Both wells were programmed to 3,400 m.
Snyder said the well, about 600 miles east southeast of Ulaanbaatar, "confirmed the presence of source rocks and sealing rocks, but the main reservoir sand interval" encountered in a well drilled by the Russians in 1955 was absent. Snyder didn't disclose depths or formations. It is integrating all well information with newly acquired seismic data to select the second location.
Pdvsa's E&P profit sharing program is expected to get a green light this week at a joint session of Venezuela's congress.
The program, which earlier received approvals from Pdvsa's board and the cabinet of President Rafael Caldera, represents the first time private companies will be allowed to be equity participants in E&P in Venezuela.
It involves bidding on risk contracts to explore 10 areas of about 2,000 sq km each where Pdvsa thinks prospects are good for light/medium gravity crudes and natural gas. If a find is commercial, international firms will he allowed to invest in a development venture jointly with a Pdvsa unit.
The program faces some opposition from the left as a return to the era of oil concessions, but a congressional majority rejects that notion. Most of the multi nationals' objections to aspects of the program were resolved, but the total tax burden to private investors will be as much as 90-91% of profits.
Norway's planned NorFra gas trunk pipeline to take gas to France will follow the same route as the Zeepipe trunk line from the Norwegian North Sea to Zeebrugge, Belgium. It will traverse Danish, German, Dutch, and Belgian waters but avoid the U.K. because of a dispute Norway has with the U.K. over pipeline treaties. Statoil says the Ministry of Industry and Energy will decide on NorFra's starting point, diameter, and exact route by Aug. 1.
A second area of Britain will be opened to gas supply competition.
About 1.5 million homes in southern Britain's Avon, Dorset, Sussex, and Kent regions will be able to choose their gas supplier after 1997. In March, a pilot plan was disclosed involving 500,000 residences in Cornwall, Devon, and Somerset that will have choice of supplier after April 1996 (OGJ, Mar. 20, Newsletter).
A House appropriations committee has voted 33-20 to retain a spending moratorium that blocks offshore leasing off much of the U.S. coastline (OGJ, June 26, p. 32). Chairman Bob Livingston (R-La.) may offer an amendment in July to repeal the moratoria, which have been in place for 14 years.
The moratoria affect areas off Alaska, Washington, Oregon, California, East Coast, and Florida Gulf Coast. Antidrilling legislators began using them 14 years ago. The Clinton administration supports continuing the moratoria.
Separately MMS is canceling three sales on the current 5 year offshore leasing schedule: Eastern Gulf of Mexico Sale 151, Mid and South Atlantic Sale 164, and St. George Basin Sale 153 off Alaska.
MMS said moratoria killed the South Atlantic and Florida sales planned for 1997, and there was no industry interest in the St. George basin sale.
Meanwhile, Sen. Frank Murkowski (R-Alaska), energy committee chairman, has introduced a bill to establish MMS as a permanent agency at Interior.
If enacted, the legislation would thwart Interior's proposal to spin off MMS onshore royalty collections to the states (OGJ, Apr. 3, p. 38).
Washington, D.C., courts have dealt the oil industry two setbacks.
The U.S. Supreme Court ruled the Chickasaw nation of Oklahoma can sell gasoline without collecting the state's 17/gal excise tax.
The action let stand a 10th Circuit Court decision that allows the tribe to make tax free gasoline sales from two stations on tribal land. The opinion will apply to every Indian tribe in the nation. Petroleum Marketers Association of
America said the court's opinion indicated individual states might have the authority to implement laws to restrict such sales, and it will ask the Oklahoma legislature to do so. Chickasaw officials said they would not undersell private gasoline marketers but simply collect their own 170 tax.
Meanwhile, a D.C. federal judge ruled for Interior in a lawsuit over royalties due on take or pay gas contract settlements.
A coalition of natural gas groups sued Interior in 1993 to prevent the collection, saying producers had settled the contracts for a fraction of their face values and should not have to pay the full royalties. The gas groups may appeal.
General Motors says reformulated gasoline (RFG) has no adverse affects on vehicle performance or the durability of engine and fuel system components. In a service bulletin to auto technicians, GM said RFG could slightly reduce vehicle fuel economy, but mileage is affected more by engine and vehicle type, driving habits, weather condition, and vehicle maintenance.
Canada's federal competition watchdog is investigating whether oil companies are fixing gasoline prices.
Bureau of Competition Policy official George Addy said the agency has no reason to believe prices are being fixed, but it will take steps the next few months to encourage and protect whistleblowers to effectively police industry.
A parliamentary natural resources committee is holding hearings on what Ottawa can do to increase super-vision of gasoline pricing.
There is no authority in the federal Competition Act to roll hack prices and no guidelines to indicate if prices are fair. But the act does allow action against companies that conspire to fix prices or retailers to sell at certain prices.
Light/heavy crude differentials will widen by 2000, although they may remain narrow near term as refiners continue to add conversion capacity.
That's the outlook presented by Exxon, Texaco, and Purvin & Gertz (PGI) at a heavy oil symposium in Calgary last month. The differential for Arab light vs. heavy has fallen from about $3.25/bbl in 1991 to the current 700/bbl. Mexico's Isthmus/Maya spread fell from $5.30/bbl in 1991 to $2.50/bbl now, and PGI predicts it will rise to $3.50/bbl in 2000. The current low spreads are blamed on increased conversion capacity, Saudi Arabia switching focus to light oil production, Mexico's restriction on Maya output, increased North Sea light oil production, and an exceptionally mild 1994-95 winter, among other factors.
New conversion capacity is expected to drop sharply after 1997.
Exxon reckons refinery conversion capacity additions averaged about 460,000 b/d/year of FCC equivalent during 1985-92. This increased to 580,000 b/d in 1993, 810,000 b/d in 1994, and is expected to he 790,000 b/d in 1995 and 870,000 b/d in 1996 before dropping steeply. Exxon projects that, compared with 1993, the world by 2000 will need another 8.5 million b/d of light crude productive capacity but only 2 million b/d of heavy crude productive capacity.
Brussels' European Chemical Industry Council (Cefic) says western Europe's chemical industry produced 6% more last year than in 1993 but expects the growth rate to tail off short term.
Cefic said the end of customers' stockbuilding last year will take output growth down by 4% in 1995 and 3% in 1996. Other contributory factors were cited as slowdown in U.S. growth and a weak U.S. dollar. Oil prices aren't a concern. Cefic expects them to fluctuate at $16-18/bbl this year, helping keep energy and feedstock prices under control.
A bigger concern is a European Union decision that member states can impose national carbon taxes as they see fit. "Carbon taxes will undermine our global competitive position," Cefic said. "A tax of $10/bbl would result in a cash outlay of about $20 million/cracker/year, based on a cracking capacity of I million metric tons/year. This money would then no longer be available for efficiency improvement or research and development."
