By Patrick Crow, Energy Policies Editor, Oil & Gas Journal
January 11, 1999
Higher prices seen
The U.S. Energy Information Administration has predicted the price of imported crude will rise from about $9.25 last December to about $13/bbl by year end. In its latest short term energy outlook, EIA said world oil supply is expected to increase only 600,000 b/d this year, while demand is expected to grow at a faster rate than in 1998, indicating an end to the build-up in world oil stocks seen since 1995. It said U.S. demnd alone should increase 500,000 b/d, or 2.9%, in 1999, assuming a return to normal winter weather patterns.
BP-Amoco complete merger
The U.S. Federal Trade Commission has allowed British Petroleum Co. plc and Amoco Corp. to merge if they sell 134 gasoline stations and nine terminals, and allow more than 1,600 independent gasoline stations to switch suppliers. On Dec. 31, 1998, BP and Amoco completed the $53 billion merger, which was announced Aug. 11, 1998. The commission determined BP's and Amoco's operations do not overlap significantly in oil and gas production or petrochemical manufacturing. But it had concerns about the wholesale sale of gasoline in 30 cities or metropolitan areas in the eastern U.S. and the terminaling of gasoline and other light products in nine markets. FTC said entry into the wholesale gasoline market is difficult.
Gas pipeline boom
The U.S. Energy Information Administration said planned gas pipeline development and expansions could add as much as 16 billion cfgd of capacity to the national transmission network over the next 2 years (1999-2000) at a cost of about $9.5 billion. EIA said while all of the proposed projects may not be built because of changes in market conditions, total expenditures are expected to far exceed the $5.1 billion invested during the last major period of new pipeline development in 1992-1993.
Relief Package
Energy Sec. Bill Richardson is considering steps the U.S. could take to help independent producers through the current oil price slump. A DOE task force has recommended several options, including buying oil for the Strategic Petroleum Reserve, emergency loans for independents, and tax incentives to maintain marginal production. Richardson plans to propose a relief package in early January. He told a meeting of oilmen in Washington, D.C., "I know the industry is hurting. We are DOE are on your side. I hope it translates into something tangible. Give us some time to develop a policy." Separately, Richardson said he would visit Saudi Arabia in February to encourage the kingdom to allow western oil companies to invest in exploration and production projects there.
Oil Price at Low
The American Petroleum Institute reports November U.S. wellhead prices averaged less than $10/bbl, the lowest level in more than 50 years when adjusted for inflation. API said, "November's wellhead prices were more than 40% lower than a year earlier. These low prices have resulted in widespread oil company budget cuts, especially in the exploration and development of petroleum in the U.S." API's monthly statistical report said U.S. oil output was 6.252 million b/d, down 3.2% from November 1997. It said consequently, only 190 rigs were active in November, the lowest number on record and a 50% plunge since November last year, according to the latest Baker-Hughes Inc. rig count. "By contrast, there were usually 300 to 400 rigs drilling for oil in the U.S. between 1992 and last year, and even during the late 1980s oil bust rigs drilling for oil exceeded 750 at times," API said.
1999 Gas Use
The American Gas Association projects that U.S. gas consumption will reach a record 23.2 quadrillion BTUs (quads) in 1999. It said an anticipated return to normal weather patterns should put the industry back in line with the growth pattern of the past decade. AGA said U.S. gas consumption fell 2% in 1998 because, based on the first 10 months of the year, it was the second warmest year since 1895. Most of the growth in 1999 will occur in the residential market, where AGA expects a 13% increase to 5.3 quads. "More than two of every three new homes built in the U.S. in the past few years feature natural gas heat. With this high growth rate, gas utilities are projected to reach 56 million homes by the end of 1999, up from 55 million in 1997."
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