INTERNATIONAL BITS AND PIECES
Malaysian Minister Moogie To Attend APEC Energy Meeting
Minister of Energy, Telecommunications and Posts Leo Moggie, will attend the third Asia Pacific Economic Cooperation (Apec) Energy Ministers' meeting to be held from Oct 9 to 10 in Okinawa, Japan. A ministry statement said apart from Moggie, the Malaysian delegation will include senior officers from the ministry, Petronas and Tenaga Nasional Bhd. At the meeting, Moggie will present Malaysia's current energy situation and the development of the country's energy policy, taking into account the 14 non-binding energy policy principles. Other items which will be discussed include energy outlook and policy implementations as well as the future prospects for energy infrastructure and energy efficiency. The ministers are also expected to discuss the implications of the Asian economic situation for the energy sector and the possible contribution of the energy sector to address the economic difficulties.
Malaysia will also take the opportunity to explain the rational of various adjustment policies and financial reform measures that have been taken by the government to deal with the Asian financial crisis. Moggie would also participate in a dialogue session between Apec Energy Ministers and business representatives at the "Okinawa Energy Business Forum" on Oct 8 which will be hosted by the Japan National Committee for Pacific Economic Cooperation Council (Janpec). The forum themed "Harmonisation of Energy and Environment" would discuss energy issues in the Asia Pacific region. The Pacific Economic Cooperation Council (Pecc) is a tripartite forum with representatives from business, government and academia for discussing cooperation and policy coordination in areas that would promote economic growth and development in the Pacific region. With its 22 member economies, Pecc has been playing vital role in enhancing regional cooperation in this region and has made many important recommendations and contributions to the Apec.
Yemen Walks Political Tightrope With Economic Reforms
Yemen is walking a tightrope as it presses ahead with a World Bank-backed programme of tough economic reforms aimed at paving the way for a string of infrastructure projects at the turn of the century.
Clashes and violent protests which cost dozens of lives in June after a 40 percent increase in fuel prices served as a warning for the government, bankers and foreign diplomats said. The price of wheat, gasoline and kerosene, which had all been heavily subsidised, "shot up without any advance notice. Hopefully, they have learnt their lesson," said a Western diplomat. "Dangers lurk ahead but it is not a powderkeg," another diplomat said. Prime Minister Abdel Karim al-Iriyani has delayed an increase in diesel prices, which was due in September, but last week the government imposed a freeze on public sector salaries and recruitment.
Analysts said the government would now have to balance its commitment to the reforms, for which it has won praise from the World Bank and IMF, with the needs of Yemen's largely impoverished population of 17 million. "The World Bank are the only ones who are happy. They say they have never seen a country so ready to accept and carry out their proposals," the Western diplomat said.
The economic fundamentals are good: inflation was slashed last year to 5.5 percent from more than 45 percent in 1996, the riyal has been stabilized, and GDP grew by around six percent in 1997 to 10.78 billion dollars. But due to the slump in the price of oil, Yemen's key source of revenue, the country will have to contend with negative GDP growth this year for the first time since reforms were launched in 1995. Meanwhile, living standards are falling. "People don't have money in their pockets," said Sanaa souk trader Kamal Robaih.
Abdulaziz al-Saqqaf, editor of the Yemen Times, predicted that the government would dodge the scheduled rise in diesel prices at least until the end of this year. "Everybody's scared. The standard of living is already low, and there is only so much you can push the people," he warned. The hike in diesel prices -- currently only 50 percent of the world price -- will hit farmers, a large and powerful sector, because diesel is used to pump water for their crops as well as for transporting goods. "Of course the people are suffering, but there really is no other way," a government official acknowledged.
Amat Alaleem Alsouswa, undersecretary at the information ministry, pointed out Yemen has undergone several upheavals over the last decade: unification in 1990, the Gulf conflict, and a 1994 north-south civil war. During the 1990-1991 Gulf crisis triggered by Iraq's invasion of Kuwait, when Sanaa opposed the use of military force against Baghdad, Saudi Arabia expelled 800,000 Yemeni workers.
In the public sector, Yemen still has to shed tens of thousands of jobs in the civil service during the next phase of reforms, a tough move at a time of rising unemployment and a high birth rate of 3.7 percent. Fifty-one percent of Yemenis are under 15, according to the UN Development Programme, and the World Bank estimates that unemployment is running at 19 percent. GNP per capita is below 400 dollars. The World Bank stresses that structural reforms, however painful, must be implemented to improve the investment climate. Yemen has so far "shown a remarkable commitment to the economic reforms, " said resident representative Gianni Brizzi. The future "depends on the rigour with which the government will handle fiscal policies."
To haul Yemen into the 21st century, the government has drawn up a list of energy projects which will need foreign investors. With an estimated 14 trillion cubic feet in natural gas reserves, Yemen has set up a joint venture with France's Total, US oil firms Exxon and Hunt, and Yukong and Hyundai of South Korea to export 5.3 million tonnes of LNG a year.
But it still has to find an export market.
The government also plans to switch to gas-fired power generation, as well as to upgrade Aden refinery and triple the capacity of Marib refinery. The electricity sector alone needs investment of 521 million dollars up to 2025, Electricity Minister Ali Hameed Sharaf said. At present, only 30 percent of the population are connected to the grid.
In the shorter term, Yemen's economic hopes are pinned on Aden, where a container port is set to open in mid-March. A free-zone, although yet to get off the ground, is also planned for the southern port city. "Everything will take time, this is Yemen after all. But economically, Aden is the place for expansion," a banker said.
Fact-File On Azerbaijan
Azerbaijan, whose President Heydar Aliyev is standing for re-election on Sunday, is one of three republics in the Caucasus region that became independent following the collapse of the Soviet Union in December 1991.
Russia To Increase Gas Exports To Europe By 3 prc In 1998
Russia will increase gas exports to Europe by 3 percent in 1998 to 120 billion cubic metres, a high-ranking official said.
Yuri Komarov, general director of the foreign economic association Gazexport, told an international gas conference on Wednesday that Russia's gas exports to Eastern and Western Europe in 1998 reached 116.8 billion cubic metres. He explained the decrease in gas exports to Europe last year by the drop in gas consumption in European countries due to warm weather and growing gas prices, while the price of alternative energy carriers went down. Russian experts estimate that Russian gas exports to Europe will grow in 1999 to more than 123 billion cubic metres.
Kazakhstan Set To Lose 100 Million Mollars In Oil Revenue
Kazakhstan is expected to lose about 100 million dollars this year due to the fall in world oil prices, but long-term development of its oil and gas sector should stay on track, the head of the state oil concern, Kazakhoil, said Wednesday. The losses represent a 25 to 30-percent drop in revenues from the sale of oil for the Central Asian country, Nurlan Kapparov told about 500 delegates from 30 countries on the first day of the Kazakhstan International Oil and Gas Exhibition and conference here Wednesday.
Oil production also will not grow as quickly as expected this year, Kapparov said. Production is expected to increase from 25.7 million tonnes in 1997 to 28 million tonnes this year. The decline was due to a fall in production by two-thirds several weeks ago at the Karachaganak oil and gas field, he said. The field, which is located in northwestern Kazakhstan and exports to Orenburg, Russia, is run by a consortium of Western oil and gas firms, including the US oil company Texaco, British Gas, Italy's Agip and Russia's LUKoil.
In 1999, oil production, which is hampered by the absence of major export pipelines to carry oil to world markets, is expected to inch up to 30 million tonnes, Kapparov said.
But even though financial crises in Russia and Southeast Asia are taking their toll on Kazakhstan, Kapparov told journalists that the Central Asian country is still viewed as a place where investors will place their capital and current development projects will move ahead as planned. "It seems to me that those companies that made obligations to invest and produce oil will fulfill those (contracts)," he said. And new investment is still coming, Kapparov said pointing to last month's purchase of Kazakhstan's exploration blocks on the Caspian Sea by America's Phillips Petroleum and Japan's Inpex for 500 million dollars.
Western oil executives attending the conference also remained upbeat about Kazakhstan's prospects. Carl Burnett, president of Mobil Oil Kazakhstan, told delegates the Russian financial crisis has created an image problem for Kazakhstan abroad, the Southeast Asian financial crisis has led to a decrease in investment -- mostly in other sectors -- and the lack of an export pipeline remains a problem. "How does all of this affect Mobil's investment strategy relative to Kazakhstan? Very simply, not at all," Burnett said. "We firmly believe that these issues are short-term conditions."
Kazakh officials have always been optimistic about Kazakhstan's future place in the world oil market, and this conference has been no exception. Officials and oil executives are looking forward to the first drilling in Kazakhstan's sector of the Caspian Sea, which is set to take place before the end of the year.
Within a decade, Kapparov hoped that the seven billion to 17 billion tonnes of oil equivalent in the Caspian will be proven. "Sharp increases of reserves will place Kazakhstan in the top 10 countries with the strongest reserves of hydrocarbon resources," he said. Kazakhstan's "perspectives will turn it into an alternative to the countries of the Persian Gulf as a source of (oil) exports."
Kazakh Oil Firm an Enigma, May Seek Partners
Kazakhstan's national oil company Kazakhoil remains almost as much of a mystery to the outside world as it did at its birth eighteen months ago. The firm, which recently was handed state stakes in some of the biggest oil producers in the vast, resource-rich Central Asian state, has been seen by some foreign investors as a potential threat to their projects. That fear has so far not been realised, although many executives remain wary.
Some officials at western oil companies in Kazakhstan's commercial capital of Almaty have been impressed with what they have seen of the company's head, 28-year-old Nurlan Kapparov. Despite the fact that he has little experience in the oil and gas business, he is learning fast, they say.
But in the same breath they generally adopt a cautious, wait-and-see approach to Kazakhoil. Part of the confusion appears to be the result of financial difficulties dogging Kazakhstan. What was once seen as a rising force in Kazakhstan's potentially huge oil and gas sector has had its wings clipped by the government's need to bring in revenues lost to falling metal and oil prices, its key export earners.
In June Kazakhstan said Kazakhoil would no be privatised. In September, President Nursultan Nazarbayev said the company may be partly sold off in order to raise capital. Kapparov, who said on Wednesday that Kazakhoil had worked out a strategy for the next four years, says that this could involve working with strategic partners or portfolio investors. The need for a partner or partners has become apparent to a company which, by its own estimates, is worth a modest $1.5 billion. Forming that partnership may be harder, particularly in the current oil price climate.
"Kazakhoil needs to find a big strategic partner, but it has existed for two years and no one has offered to buy it," said Akezhan Kazhegeldin, former prime minister and an economic adviser to Nazarbayev.
Kazakhoil also sold its one seventh stake in the massive Offshore Kazakhstan International Operating Company (OKIOC) last month to Phillips Petroleum of the U.S. and Japan's Inpex. The $500 million bonus was badly needed to replenish state coffers and launch a social protection fund, and some local analysts said that Kazakhoil was worried it may not be able to afford the huge costs involved in tapping the Caspian shelf.
Kapparov admitted that times are not easy for the Kazakh oil sector, which is suffering from the lack of access to world markets and from the weak world oil prices. "The budget losses this year will be around $100 million," he told reporters at an ITE oil and gas conference. "As far as exports are concerned, we have limits because of Russian pipelines," he said.
Kazakhstan's only pipeline link to hard currency markets is through Russia, which is reluctant to give it more space in a crowded transportation system. Companies also use an expensive combination of barge, boat and rail to get crude out.
Kapparov forecast total Kazakh oil and gas condensate output next year at 30 million tonnes (600,000 barrels per day), up slightly from this year's 28 million tonnes. He said he was confident that foreign companies which have committed tens of billions of dollars to expanding production and building export outlets would stick to their word. "There are problems on the market, but Kazakhstan is maintaining its investment attractiveness," he said. "I believe all the obligations assumed by companies as far as volumes of investments and output are concerned will be fulfilled."
Nigeria-Cameroon Accused Of Prospecting For Oil In Bakassi
Nigeria Tuesday accused Cameroon of prospecting for crude oil in parts of the Bakassi peninsula, whose ownership is disputed by the two countries. Defence headquarters in Lagos claimed in a statement that the Cameroon government had signed a contract with a Canadian company, Trophy Petroleum, to prospect for crude oil for four years over 2,300 square kilometres in an area known as Rio Rel Ray. "This area is totally within the disputed area of Bakassi," the statement said, adding that the action "is contrary to the injuction of the world court to the two countries not to embark on new projects within the disputed area."
"We wish to bring to the notice of the international community the deliberate act of the Cameroon authority to wilfully disregard the judgment of the International Court of Justice and provoke hostilities in the Bakassi peninsula," the statement added.
Sporadic clashes have occurred between troops of both countries since the dispute started in 1994 over ownership of the oil-rich peninsula in the Gulf of Guinea.
Cameroon reported the dispute to the United Nations and the Hague based court, which gave a preliminary ruling recently restraining both countries from actions likely to aggravate tension.
Oil companies' proposals to be studied by Russian cabinet
The proposals of Russian oil companies will be thoroughly studied and, if need be, problems of the petroleum complex will be considered at a meeting of the Russian Cabinet, Andrei Korotkov, chief of the Government Information Directorate, told a briefing on Tuesday. He commented thus on the address of 13 Russian petroleum companies to the government on Monday, requesting that the tax burden on the petroleum business not be increased and that petroleum companies be "given a respite" to amass strength and become a "locomotive" to take the country out of the financial and economic crisis.
Korotkov believes the petroleum companies' statement is an attempt to get extra insurance to avoid the burden of taxes and payments to the budget. He also assessed this as an attempt of petroleum companies to "catch attention". Korotkov said that at a time when petroleum prices in the world market began growing and the rouble rate dropped against the dollar due to the events of August 17, Russian petroleum and exporting companies do not fare worse than anybody. "They even gain from the situation," Korotkov said.
Nevertheless, he said that the oil companies' proposals will be "closely studied" and their problems "will be decided in a working order". According to Korotkov, the Cabinet will hold meetings with the oil companies' chiefs. Deputy premiers have already conducted the first such trial meetings. "If the Cabinet decision is needed on problems with which the oil complex is concerned, the matter will be put on the agenda and discussed by a cabinet meeting," Korotkov said.
Venezuela Under Pressure To Ditch Oil Cut
Venezuela, facing severe financial difficulties ahead of elections at the end of the year, is coming under increasing domestic pressure to reverse oil production cuts it helped spearhead earlier this year. Analysts, politicians, unions and even some top executives of the state oil company argue it may now be time to abandon the policy designed to stave a collapse in world oil markets, and instead follow a policy aimed at rescuing government finances in the run-in to December's presidential election.
"Public opinion is beginning to call on the administration to reverse itself and restore the cuts. It is becoming clear that the cuts were not a good idea," said Robert Bottome, editor of leading economic weekly Veneconomy.
State oil company Petroleos de Venezuela (PDVSA) has been most severely squeezed by the crisis, having to come up with an increasing amount of revenue for the government amid lower world oil prices, while also sticking to agreements with other oil producers to cut production by more than 500,000 barrels per day (bpd). Venezuela, a member of the Organisation of Petroleum Exporting Countries, is Latin America's largest oil producer and the world's second-largest oil exporter. Oil provides about half of the country's government revenues.
PDVSA only last Friday succumbed to pressure from leading world oil producer Saudi Arabia to agree to push within OPEC for an extension of the current production-restraint agreement, if needed, through to the end of 1999.
At the same time, PDVSA was forced in the last week or so to, yet again, come up with more money for the government, this time another $980 million. Lower revenue and the government's demands-- even before the latest squeeze-- had forced PDVSA to cut in half its 1998 capital spending budget from an original $7 billion.
Leonardo Montiel Ortega, a deputy with the government Convergence party and president of the congressional planning committee, added his name to the growing list of those calling for change last week. "We are asking Congress to recommend an immediate increase of 250,000 barrels per day to stop the current crisis reaching the point of total economic collapse," he told journalists at a press conference last week. "The solution to the oil-price fall should have been to increase production, because higher production, even at lower prices, is compensated by more jobs and investments," he added.
Among others pushing for a policy reversal are Luis Giusti, president of state oil company Petroleos de Venezuela (PDVSA); Fedepetrol, the country's biggest oil union; the oil industry chamber of commerce and some of the leading candidates for December's presidential elections. "Personally, speaking on behalf of Venezuela but without being the official spokesman, I would say Venezuela has no reason to be withdrawing large volumes (of oil) from the market," PDVSA's Giusti told a local radio station last month.
The policy also runs in direct opposition to PDVSA's long-term strategy of gaining market share with low-cost production and encouraging foreign investment in order to ramp up output quickly.
"Although it seems paradoxical...high prices have done us a lot of harm," Giusti added.
Rafael Quijano, an independent oil industry consultant in Washington, expects Venezuela to lift output slowly for the next three months as demand rises ahead of the northern hemisphere's winter. And he sees the new government abandoning the cuts completely when it takes office in February next year. "The cuts happened because this government is leaving office in a few months and they have a very short-term horizon. Whoever takes the presidency in February will have to live with the consequences and that is where the pressure to abandon the cuts will come from," he said.
Officially, Energy and Mines Minister Erwin Arrieta has proposed extending the cuts to the end of 1999, but he will be out of a job in a few months. The official positions of the leading presidential candidates are still foggy on the issue. Hugo Chavez, the populist currently topping the opinion polls, has said he supports the cuts in favour of higher prices, but he also backs PDVSA's expansion plan.
Second-placed Henrique Salas, who is rising strongly in the polls, has said he would revise the policy of cuts and could reverse it if he found it to be against the national interest.
Some saw PDVSA's recent decision to increase output at the Boscan field, operated by U.S. oil company Chevron Corp. (CHV.N), as possible evidence of a policy reversal. But the people in the know are unlikely to reveal the strategy, if it exists, for fear of denting a rally that has added a third to the price of a barrel of crude since June. From a low of $11.69 per barrel on June 15, West Texas Intermediate crude oil stood at $15.30 on Wednesday. Sources familiar with PDVSA's operations say the country's production is still running between 100,000 bpd and 150,000 bpd above the 2.845-million-bpd official OPEC quota. |
