International competition will cut oil prices by as much as $2.50/bbl the next 3 years, contends Canadian Energy Research Institute (CERI) in a new study. The Calgary think tank predicts the average world oil price will drop to $15.50-17.50/bbl vs. most industry expectations of an average price of $18.
CERI says new production from the North Sea and other areas will eat into OPEC's market share in 1996-98. It expects increased production from such areas as Colombia and Iraq. CERI estimates global demand for crude will grow at a rate of 1.8%/year but expects incremental production to exceed that and soften prices. It says to avoid a price decline OPEC would have to accommodate Iraq's reentry into export markets, but CERI does not expect that to happen.
Meantime, the U.N. Security Council has again urged Baghdad to sell $2 billion worth of crude oil in 6 months to enable it to buy critical humanitarian supplies. The council authorized the sale in April--after adopting a similar resolution in 1991--as an exception to sanctions against Iraq. Baghdad has spurned all such offers as a violation of its sovereignty, because the sales would be monitored by the U.N.
Iraq and Jordan have apparently recovered from a recent cooling of their relationship and plan to build a $500 million, 140,000 b/d refinery at Aqaba. The two countries also reportedly agreed to lay a pipeline with initial capacity of 100,000 b/d of oil, expandable to 350,000 b/d. The projects were the result of an energy and oil pact signed after a visit to Iraq by Jordan's energy minister. Jordan recently distanced itself from Iraq, following defection to Jordan of one of Saddam Hussein's key political allies (OGJ, Sept. 4, p. 42).
Sluggish economic growth is dampening U.S. oil demand. API reports U.S. petroleum deliveries dropped 2.5% to 17,665,000 b/d in August from a year ago. August deliveries were the year's weakest, due partly to a bigger than expected drop in gasoline deliveries of 0.4%, or about 30,000 b/d, from a year ago. That compares with an increase averaging about 3% for the year through July. Distillate deliveries fell 3%, compared with strong gains in the prior 2 months. Deliveries of other petroleum products, such as lubes and LPG, declined 4.7% last month. Residual fuel oil deliveries were down 8.5% in August, but that was an improvement from year to year declines of more than 20% reported earlier this year. Only deliveries of kerojet rose in August, climbing 1.8%, or about 28,000 b/d, from a year ago. That stemmed from increased commercial airline use and military conversion from naphtha based jet fuel to kerojet.
U.S. refinery utilization dropped in August to 93.7% from 96.4% in 1994, a recent year record. U.S. crude and products imports in August fell 2.7% to 9,253,000 b/d as a result of weak domestic demand, a flattening of U.S. output, and more reliance on U.S. inventories. Crude oil stocks rose slightly in August to 312 million bbl, but this was still their lowest August level in nearly 20 years. Gasoline stocks of 196 million bbl at the end of August were at recent year lows, as storage was cleared to make way for seasonal oxygenated gasoline.
Are U.S. gasoline prices about to pull out of a 3 month decline (see related story, p. 33)? Although pump prices slipped more than 0.5/gal during Aug. 25-Sept. 8, a turnaround may be in sight. Trilby Lundberg, whose Lundberg Letter tracks U.S. retail gasoline prices, notes that pump prices in several cities have risen recently and others may follow in the weeks ahead. She cites a rebound in wholesale prices. That follows a drop in retail prices since peaking this year in June. Lundberg's composite average of U.S. retail gasoline prices was 120.11/gal the week ended Sept. 8, up almost 4 from a year ago.
A Senate appropriations subcommittee has rebuffed a House funding bill that blocks EPA from proceeding with a rule to require U.S. refiners to use maximum achievable control technology (MACT) to limit toxic air emissions (OGJ, Aug. 7, p. 34). The Senate bill does not block the rule and proposes a $5.7 billion budget for EPA in fiscal 1996, down $1 billion but higher than the House bill's $4.9 billion. Oil state senators will offer a floor amendment to block the MACT rule.
House Republican leaders have filed a bill to roll back portions of the Endangered Species Act (ESA) and no longer make it mandatory for landowners to conserve the habitats of some species. Interior Sec. Bruce Babbitt complained the bill, which has 95 cosponsors, "would effectively repeal the ESA".P API praised it, saying, "Current law imposes stifling command and control restrictions, tedious multistep compliance requirements, and the possibility of protracted and costly legal battles that unfairly burden private landowners."P U.K. Offshore Operators Association (Ukooa) has welcomed the findings of a study into environmental effects of platform decommissioning by Aberdeen University Research Industrial Services Ltd. Ukooa ordered the study, which concluded: none of the main options for decommissioning, from mothballing to total removal, will have a major effect on the environment; there is little to choose between options on a strictly environmental basis; and technical feasibility, safety, and economics will be critical in determining the best option.P Meantime, Ukooa has appointed public relations agency Charles Barker plc, London, to help publicize the issues of future platform abandonments, in the wake of the Brent spar furor. Ukooa says the agency is charged with carrying out an internal review of communications requirements to enable operators to get across the complex issue of decommissioning offshore structures.
"This is a result of lessons learned from Brent spar," said Ukooa, "where the operator found that one difficulty was in communicating semitechnical information in the face of sheer emotion and misinformation." Brent operator Shell U.K. aborted dumping of Brent spar loading buoy off Northwest Britain after Greenpeace started a protest that spread across Europe and snowballed into attacks on Shell facilities there (OGJ, June 26, Newsletter). Greenpeace later recanted some of its claims (OGJ, Sept. 11, p. 22). Shell last week said it plans to study more than 200 options for onshore disposal or reuse of the spar.
The U.K. upstream is poised for a shakeout, says Wood Mackenzie. Market forces in the U.K. E&P sector are balancing out in favor of a period of mergers and acquisitions, contends the Edinburgh analyst. Wood Mackenzie thinks the time is ripe for a replay of 1987-88, the last significant rationalization of the U.K. E&P sector. It cites as factors additions to reserves from discoveries not keeping pace with U.K. production since 1991, a lack of new developments companies have on their books following a surge of large field developments in the early 1990s, growing production combined with reduced capital outlay improving cash flow of many firms, and almost all U.K. E&P companies enjoying strong growth because of involvement in recent development work.
BP plans to invest about $250 million to establish an extensive network of modern service stations in Poland. Following the opening last month of its first Polish retail site in Gliwice, Silesia, BP is pushing ahead with another 25 filling stations to be built the next 18 months and expects to have 120 sites within 5 years. BP predicts Polish retail gasoline demand will grow 25% the next 5 years. BP also operates a lubricants business in Poland and recently set up a joint venture in Poznan with state owned Korgaz to distribute LPG--some of which will be marketed as motor fuel via the new retail network.
Taiwan's state owned Chinese Petroleum Co. still wants to proceed with building Viet Nam's first refinery--a proposed $1.2 billion, 130,000 b/d plant-despite Total's withdrawal from the project. Total pulled out because studies indicated the return on investment would be too low owing to an unfavorable location at Dung Quat in the country's remote midsection--700 km from Viet Nam's offshore oil fields and biggest oil consuming region--and difficulties in financing. Hanoi wouldn't budge on the site and even reportedly wants a second refinery sited in Central Viet Nam. Taiwan's China Investment & Development Co. and Petrovietnam are the remaining partners.
Another 20 years could pass before scientists can say with confidence that human activity is the cause of recent global climate change. So says Michael Jefferson, deputy secretary general of the World Energy Council (WEC).
At an October Tokyo conference, WEC will publish a series of reports that will focus in part on global energy demand to 2050 and beyond and transportation fuel needs to 2020. Jefferson says there is no need to use global climate change worries as a basis for energy policies because energy policies designed to deal with current local and regional issues will deal with climate issues at the same time: "We need to raise our energy efficiency, which is currently absurdly low...95% of the energy we currently produce is wasted. We need to encourage energy conservation where it is appropriate to local needs. We need cleaner fossil fuel use and decarbonization of the fuel mix. And we need accelerated development of nonfossil fuel energy use." Jefferson also warns governments to encourage development now of new energy technologies to avoid obstacles or a prohibitively costly switchover. He further contends energy firms that can't adapt to the new energy technologies won't survive. Table (38837 bytes)Copyright 1995 Oil & Gas Journal. All Rights Reserved.
