MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING TUESDAY, MAY 12 1998 (5)
INTERNATIONAL
Companies
Mercantile International Petroleum Inc. (MTPU/CDN) and Triunion Energy Company, a company headquartered in Buenos Aires, Argentina announced an Agreement in Principle approved by their boards, to form a 50/50 joint venture to develop an independent gas power project involving gas from Mercantile's Block III, Talara, Peru. The targeted size of the power project is 240 megawatts, which may be built in separate stages, with a minimum of 80 - 100 MW in the initial phase planned to be on stream in the first quarter of 1999.
The initial phase of 80 - 100 MW of capacity to supply power would require approximately 90 - 110 BCF of gas reserves to be produced at a rate averaging approximately 19 - 24 MMcf per day.
The targeted 240 MW facility would require approximately 250 BCF of reserves produced at approximately 50 MMcf per day. The preliminary estimate of cost including hardware and installation from the wellhead through to and including the transmission lines is about U.S. $200 million, including import duties and IGV taxes. The project financing will be provided primarily from a consortium of project lenders providing non-recourse debt, with Mercantile and Triunion providing the equity to underpin the non-recourse debt. Mercantile will be the exclusive supplier of gas to the facility. Mercantile plans to recomplete ten of the 14 wells that Mercantile drilled in 1996, together with additional existing wells in Block III to supply the facility's requirements.
J. Arthur Bray, the CEO of Mercantile was quoted as saying: ''With the 3D and 2D interpretation of Block III and a review of existing well information, it has become apparent that Block III contains a very significant quantity of low cost, high quality gas, both in terms of reserves associated with the existing wells and step-out prospects. A third party appraisal of the reserves will be completed in the near term. Mercantile has examined the current and future power needs of Peru, and has concluded that an independent power project using Block III gas should be developed. Indeed, Mercantile is very strategically positioned, both with its gas and its proximity to the existing electrical grid system of Peru, to be the low cost supplier of power in Peru''.
Mercantile has been considering proposals from several potential joint venture partners who have varying degrees of experience in the power business in Latin America. Mercantile has selected Triunion due to its experience in the oil, gas and power business in Argentina and its recent development experience in Peru. Triunion owns a 21.8% interest in the Gasoducto del Pacifico, a $400 Million USD natural gas pipeline currently under construction from Neuquen, Argentina to Concepcion, Chile, as well as an interest in the Charagua natural gas exploration area in Bolivia. Capex, S.A. (Capex) is a principal shareholder in Triunion with a 38.4% interest. Capex significant gas production and power generation experience in Argentina. Capex is a publicly traded company on the Buenos Aires and Luxembourg stock exchanges. El Paso Energy International Company is a minority shareholder in Capex and in Triunion. El Paso is also a shareholder in the Aguaytia independent power project located in Peru which entered into commmercial operation in the first half of 1998.
Mercantile does not plan to issue any securities to finance its share of the joint venture equity requirements. Mercantile plans to create a Latin American focused gas subsidiary, and is in discussions with potential private equity investors who may ultimately become shareholders in such entity.
INTERNATIONAL
Countries
Sudan Oil State Favours Secession,Governor Doesn't
NAIROBI, May 12 - The governor of a key oil-producing in southern Sudan says he wants to see the country remain a unitary state even if his people would like to secede.
Governor Taban Deng said the two million people of Unity were solidly behind southern desires for secession from Khartoum-controlled Sudan.
But he wants to put pressure on Khartoum to separate religion and the state, thus making continued unity more palatable to voters.
''The people of the south are 100 percent for separation,'' Deng told Reuters in an interview last weekend.
''I wish as the governor of Unity State to convince the people that big entities are better than small. And I wish to convince the people in Khartoum to separate religion and the state,'' Deng said.
Unity straddles the Bahr el Ghazal river in Upper Nile province, one of three provinces that would be eligible to vote in a referendum on self-determination for south Sudan. The other provinces are Equatoria and Bahr el Ghazal. In Sudan, states are sub-divisions of provinces.
The Khartoum government and the rebels of the Sudan People's Liberation Army (SPLA) agreed during peace talks in the Kenyan capital last week on a referendum under international supervision.
No date has been set for the vote and a host of issues surrounding it remain unresolved.
The peace talks were aimed at finding a solution to Sudan's long civil war, which has deep roots in mistrust between the mainly African and Christian south and the largely Arab and Moslem north. An estimated 1.3 million have died in the conflict through war and famine since 1983.
Oil fields in Unity state and Heglig are being developed by an international consortium which includes a subsidiary of Canada's Arakis Energy Corp (AKSE.CD), China's National Petroleum Corp, Malaysia's state oil company Petronas (PETR.KL) and Sudan's Sudapet.
Unless conflict intervenes, Sudan's oil output is expected to reach 150,000 barrels per day (bpd) by 1999 from less than 20,000 bpd now. Sudan is also building two more refineries for a total of five.
That would be enough to satisfy domestic demand and begin modest exports, Deng said. The oil would be piped to Port Sudan and to refineries at Khartoum and al-Obeiad.
Unity state and its capital Bentiu form a sensitive area of Sudan because of its geographical location and political orientation.
It falls within the demarcation of south Sudan under the boundaries set at independence in 1956 that are accepted by the government. The SPLA disputes that boundary and wants Abeyei, Southern Kordofan and Southern Blue Nile provinces included in any vote on self-determination.
The people of Unity are 90 percent ethnic Nuer, a group that has waged war against Khartoum in the decades-old conflict.
Deng also fought with the SPLA but in the early 1990s switched sides along with Riek Machar, the main political leader of the Nuers.
Deng was elected governor of Unity state under Machar, now the president of the Khartoum backed Southern Sudan Coordinating Council (SSCC), set up after the Sudan Peace Agreement of April 1997.
That agreement was enough to warrant peace with his former enemies but Deng hinted he still mistrusted the government of President Lt-General Omar Hassan Al-Bashir.
Asked if he would ever consider returning to the SPLA, Deng said: ''Why go back? I am a governor now. I can separate the south or I can unite... (But) if the Arabs renege on the agreement I will go back to the forest.''
Protection for the oil fields was provided under the Southern Sudan Defence Forces, the SSCC's army, he said.
Aid workers say fighting in Unity state started last September after local leader Paulino Matip protested Machar's choice of governor. Machar and Deng said the fighting was now over.
Government attempts to promote its oil industry were hampered in the eighties by SPLA attacks and last November the U.S. government tightened trade sanctions against Sudan, banning investment by U.S. companies.
Taiwan Says No Immediate Taiwan Strait Oil Plans
TAIPEI, May 12 - Taiwan state monopoly Chinese Petroleum said on Tuesday it had no immediate plans to team up with mainland China firms to explore possible major oil reserves in the Taiwan strait separating them.
Taiwan's Commercial Times said on Tuesday China's Ministry of Geology and Mineral Resources had found suspected major oil reserves in the centre of the strait -- the front line in a bitter ideological rivalry dating to a 1949 civil war split.
The newspaper said the oil field may have reserves of 290 million tonnes of crude oil.
Officials of the Taiwan monopoly confirmed that the reported reserve lies approximately in waters where Chinese Petroleum and Chinese National Offshore Oil had agreed to jointly explore under a dormant 1996 agreement.
But they said Taiwan had yet to undertake any joint exploration with mainland firms.
"Chinese Petroleum has not discussed oil exploration with any mainland oil firms since we signed the joint oil exploration agreement with Chinese National Offshore Oil Co in 1996," a senior Chinese Petroleum official said.
The official said he had no knowledge of active discussions or even plans to begin such discussions.
In July 1996, Chinese Petroleum signed an agreement with Chinese National Offshore Oil, or CNOOC, to jointly explore a 15,400 square km (5,940 square mile) area running between the centre of the strait and the Pearl River delta near Hong Kong.
Amid acute cross-strait political strains, no joint activities are known to have been undertaken, although Taiwan's cabinet-level Mainland Affairs Council on March 24 issued a go-ahead for cooperation to begin.
"The deal with Chinese National Offshore Oil was not looked at by the Mainland Affairs Council until March," an executive of Chinese Petroleum said.
"Two core (Taiwan) members of the project have retired since we signed the deal," he added.
The sides have been bitter foes since the civil war put the Chinese mainland in communist control and left Taiwan as the last stronghold of the Nationalist Party's defeated Republic of China.
Taipei and Beijing have no official ties and Taipei bans most direct exchanges across the strait.
The Taiwan strait, little more than 200 km (125 miles) wide at its narrowest, is a politically sensitive zone for both sides and remains one of the world's potential military flashpoints.
Beijing held eight months of intimidating missile tests and war games in the strait ahead of Taiwan's unprecedented March 1996 presidential election in a bid to dissuade the island from pursuing independence.
The United States, Taiwan's best friend despite recognising only Beijing, responded by sending two aircraft carrier groups to the region -- underscoring the sensitivity of the strait and showing U.S. dissatisfaction with China's military pressure.
Beijing pledges to retake the island by force if Taiwan makes what it regards as steps toward independence and away from its avowed support for eventual reunion with the mainland.
SERVICE SECTOR
Syner-Seis Technologies Inc. (SYN/ASE) and its wholly-owned subsidiary, Exploration Innovations Inc. (EI) announced the signing of a business agreement with GeoQuest, a division of Schlumberger Canada Limited.
Through the provision of software products, data services, data management and information technology services, GeoQuest assists its client in optimizing the value of their oil and gas reserves. GeoQuest's products integrate geology, geophysics, petrophysics and engineering with interpretation and visualizations, reservoir modelling and simulation, full reservoir characterization, mapping and modelling and data management.
The agreement with GeoQuest will provide El's client with access to an entire geophysical and geological interpretation software suite. Specific geophysical and geological software products to be made available are IESX Kit 2D/3D, GeoFrame Geology Kit, CPS-3 Mapping Software System, GeoViz and Voxels. The addition of these applications will significantly enhance our product mix and is expected to have a positive impact on our profitability. In total, over $340,000 dollars of GeoQuest software will be available to El clients and the cost El will be in the form of license maintenance fees, user fees and participation in a co-operative advertising agreement.
Always known for its ability to provide service via Landmark(R) software programs, this agreement coupled with the previously released revenue sharing agreement with Paradigm (new release dated Feb. 23, 1998), will allow El's clientele access to unique seismic interpretation products from the world's three largest purveyors of such programs.
This business agreement is the second in a series of proposed technology transfer agreements that form the backbone of our innovative "Technology Boutique" concept.
GeoQuest is a member of the Oilfield Services Group of Schlumberger, a world-wide leader in the provision of oilfield services. Schlumberger has operations in over 100 countries and records revenues exceeding 10 billion dollars annually derived from real-time drilling, fluids engineering and pumping, seismic data acquisition, seismic processing and interpretation, data services and software.
<EARNINGS
Canadian Fracmaster Ltd. (FMA/TSE) / Serv 10 Listed
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IPEC Ltd. (IPE/ASE)
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ENERGY TRUSTS
EARNINGS
Starcor Energy Royalty Fund
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Orion Energy Trust
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