MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY JUNE 23, 1998 (6)
COUNTRIES IN THE NEWS
Japan Dependence On Mideast Crude Hits 29-Year High
Japan's dependence on Middle Eastern crude oil hit a 29-year high in May, amid a sharp decline in imports of regional as well as Mexican crude, a Trade Ministry official said on Wednesday.
Middle Eastern crude oil accounted for 89.7 percent of Japan's total crude imports in May, the highest level since January 1969, when the oil-rich region supplied Japan with 90.7 percent of its crude requirements, the official said.
Japan's oil imports from the Middle East actually declined by 3.5 percent in May from the previous month, but even sharper declines in imports of Southeast Asian and Mexican crude pushed up the share of Middle Eastern crude, he said.
Japan imported no Mexican crude oil in May, and imports from Indonesia declined by 17.7 percent from a year earlier.
Traders said the lack of Mexican imports in May could be attributed to the planned dissolution of a consortium of Japanese oil companies which has been the sole manager of Mexican crude imports into Japan.
The consortium is set to dissolve at the end of June, and trading through the consortium was largely completed earlier this year, traders said.
From July onwards, oil firms that intend to continue purchasing Mexican crude oil need to negotiate directly with Mexico, traders said.
Indonesian crude imports declined, partly due to slow demand from Japanese power utilities, which burn low sulphur crude oil from the sole Asian member of the Organisation of Petroleum Exporting Countries.
Requirements from power firms have been slow in the face of higher operating rates at hydro and nuclear power plants, the ministry official said.
Colombian Oil Pipeline Hit by Triple Bomb Attacks
Crude oil output from the Cano Limon field in northeast Colombia has shut in since Sunday following a series of rebel bomb attacks that crippled the Cano Limon-Convenas pipeline, the state oil company
Ecopetr Tuesday.
A company spokesman said the bombings by suspected National Liberation Army (ELN) rebels had ruptured the pipeline in three separate areas of Arauca province since Saturday afternoon.
Repair work on the crude export line had not yet gotten underway, as of Tuesday morning, and production from the Cano Limon field operated by Occidental Petroleum Corp was shut in due to limited field storage capacity, the Ecopetrol spokesman said.
He added that Ecopetrol had suspended liftings of two cargoes of crude at the Caribbean terminal of Covenas as a result of the emergency.
The latest attacks against the Cano Limon pipeline, which has been hit nine times this month, brought the total number of bombings that have knocked it out of action to 32 so far this year.
The attacks have forced a suspension of pumping operations along the pipeline, the second largest in Colombia, for a total of nearly 50 days so far in 1998 as the ELN steps up its long- running campaign of sabotage against the country's oil infrastructure.
Nigeria Agrees Higher Oil Budget
LAGOS, June 23 - Nigeria's new military ruler General Abdulsalam Abubakar has in principle approved a budget of $2.5 billion for oil production joint ventures, industry sources said on Tuesday.
The sources said that the approval came after a meeting with the heads of multinational joint-venture partners on Monday and could signpost a new seriousness on the part of Nigeria's military rulers towards its most crucial industry.
Abubakar's predecessor General Sani Abacha, who died suddenly on June 8, promised the joint ventures they would get $2.5 billion. But this year's monthly cash call payments have only been paid at the 1997 rate of $2.05 billion.
''We will still have to wait and see whether cash call payments now take place at the new rate,'' one source said.
''Right now we are very positive and the signs are that we will be closer to what Nigeria needs,'' another source said.
Nigeria's crude oil exports of more than two million barrels per day (bpd) account for at least 95 percent of export revenues.
But multinationals working in joint ventures with state-run Nigerian National Petroleum Corporation (NNPC) have complained for years that Abacha's government was not meeting Nigeria's investment needs to maintain and expand output.
They were generally pleased when Abacha said he had agreed the 1998 budget level given that is more than in 1997 -- even though it fell one billion dollars short of what the firms had been asking for.
When the money did not come, they warned they would have to cut back expansion plans which Nigeria says might increase crude output to three million barrels per day in the early years of next century.
Nigeria's second biggest producer, Mobil Corp (MOB - news), was forced to release a drilling rig. Chevron (CHV) said it might have to follow suit.
The biggest joint venture operator, Royal Dutch/Shell (RD.AS) (quote from Yahoo! (SHEL.L) said it had no plans to curtail development but has long warned that Nigeria's production would fall if investment was not adequate.
Nigeria's ability to pay cash calls and other government expenses has been hard hit this year by the fall in oil prices which has seen them average at least three dollars below the $17 per barrel price on which the 1998 budget was based.
Nigeria's agreement to trim production in line with other oil producers, to help world prices, encouraged some government officials to ask why they should invest in increasing output when there was spare capacity already.
''That is a very short-sighted attitude,'' a senior executive with one of the multinationals said.
Nigeria's hopes of major future production expansion also lie on potentially huge reserves in deep offshore waters, where companies are assigned terms under production sharing rather than joint venture contracts.
But the oil industry says deep offshore development has also been slowed by a lack of seriousness on the part of Abacha's team to finalise terms and incentives for the huge investments required.
Science, Technology Boosts China's Oil Development
China has developed an important theory of continental petroleum geology and a series of updated technologies through 40 years of research and experiments, which has effectively boosted the country's oil exploration and production, a top oil official has said.
Using the theory and technologies, China has located 27 large oil fields, each with deposits above 100 million tons, including the well-known ones at Daqing in the northeast and Renqiu in north China, according to Li Tianxiang, chairman of the Science and Technology Committee of the China National Petroleum Corp. (CNPC).
The official said that with exploration and practice China has finally developed the technologies of layer-by-layer oil-extraction, stabilizing oil reserves with injected water, and using the polymer-drive extraction method, which are all comparable to advanced methods used around the world.
Other major Chinese oil fields in the Bohai Bay area -- Shengli, Liaohe, Huabei (North China) and Dagang -- have developed the rolling exploration technology which has increased oil exploration in the area.
So far, the Bohai Bay area has been found to have proven oil deposits of 7.28 billion tons and it produces 61 million tons of crude a year, making it the second largest oil and gas production base after Daqing, he said.
In the exploration of complex oil layers, China has come up with a range of thermodynamic technologies to explore thick oil, mainly by the use of steam.
Currently, the country produces 12 million tons of thick oil a year, the fourth largest in the world.
A leading official with CNPC said China has set an explicit target of proving 2.5-to-3 billion tons of oil reserves by the turn of the century, and having an annual oil and gas output of 150 million tons and 25 billion cubic meters, respectively, by 2000.
To meet the goal, the official said China is launching eight huge petroleum science-and-technology projects, and 32 technological developments nationwide.
China Gives Priority To Natural Gas Development
China is giving priority to gas development as one of its energy development strategies, and plans to double its annual gas production capacity to 30 billion cu m by the year 2005.
According to a senior official with the China National Petroleum Corp (CNPC), China is expected to verify additional onshore gas reserves of one trillion cu m by the end of the century, with the accumulative total hitting two trillion cu m.
By 2000, the country's gas production capacity will rise by another 10 billion cu m, with the total topping 25 billion cu m.
The CNPC official said that through further exploration, major breakthroughs are expected to be made in the expansion of proven gas reserves and production capacity in the Shaanxi-Gansu-Ningxia region and Tarim Basin in northwest China, and Sichuan province in southwest China.
The CNPC official noted that enormous potential exists for the country's gas production. Following years of vigorous development, three large-scale gas production areas have taken shape in the country.
In the central part of the Shaanxi-Gansu-Ningxia region, gas reserves totali 230 billion cu m have been verified. Total gas reserves of 200 billion cu m have been proven in the eastern part of Sichuan. In the Xinjiang Uygur Autonomous Region, total gas reserves of 160 billion cu m have been verified, in addition to the discovery of a group of new gas-bearing structures.
Moreover, in the Sebei area of northwest China's Qinghai province, a gas field with proven reserves of 50 billion cu m has been found.
By 2005, gas pipeline networks running across the country will have been set up, which will better serve industrial and civilian use in many large and medium-sized cities.
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