MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING MONDAY APRIL 27, 1998 (6)
Asia Will Beat Energy Woes, Eventually Experts
LONDON, April 27 - Asia's economic crisis has triggered short-term uncertainty and downstream consolidation for regional energy markets but steady oil and gas growth beckons further ahead, executives said on Monday.
Former Saudi Oil Minister Zaki Yamani said oil demand growth in the region would revive once Asian economies overcame their short-term difficulties, but not at the previousy-high rate which he put at 7.4 percent per year.
After the present turbulence subsides, oil demand growth in the so-called Asian tiger economies would settle to 3.6 percent per annum -- "respectable enough for Asia and positively exciting for Western countries," he told an oil conference.
"Additional consumption of 0.5 million barrels per day each year from Asia could be a source of great comfort for an organisation like OPEC, which is struggling at the moment," he told the gathering organised by the Centre for Global Energy Studies.
He said 42 percent of the Middle East's incremental oil exports between 1996 and 2010 will be heading for 10 Asian "tiger" economies.
On the outlook for refined products, industry cooperation in Asia was seen increasing as competition hots up in the face of a slowdow in regional demand because of the financial crisis.
"In the short term there remains considerable uncertainty. The timing of gas developments in particular is clouded," said Paul Griggs, vice president of strategic planning for Broken Hill Proprietary Co Ltd (BHP).
"Over the longer term, growth in Asia will be significant. In particular growth rates for gas developments will be likely be higher than for other fuel supply sources."
David Moore of Andersen Consulting told Reuters a contraction in Asia's downstream industry could gather pace.
He predicted: -- Consolidation of South Korean refineries that are to be sold off as a result of financial crisis
-- Probably some consolidation in Thailand because of surplus capacity there
-- Possible, but not necessarily likely, privatiation of Indonesian state oil company Pertamina as a result of the country's substantial economic problems "which would open up an array of opportunities."
Experts in the region have forecast Asian demand growth in 1998 for oil products at around 300,000 barrels per day (bpd), rather than nearer the 800,000 bpd that had been expected before the region's worst finacial crisis in decades struck last July.
Analysts said free market reforms planned as part of attempts to rescue the region from its economic slowdown would make economies better managed and more transparent and improve opportunities for international energy investment.
"There are some short-term obstacles to be sure. The Asian flu will not immediaely disappear, and a lot of hard work will be required to restructure the region's economy," said Atlantic Richfield Co chairman Mike Bowlin.
"However there are solid grounds for optimism, given the signs of renewed strengh in Thailand and Korea. In Indonesia the Suharto government has indicated a readiness to tackle serious reform."
Booming demand for gas driven by environmental reforms was good news for countries with substantial gas reserves like Indonesia, Australia and Malaysia.
But Caltex chairman David Law-Smith said companies would have to tackle refinery overcapacity and what he called over-investment downstream.
He said the current petroleum oversupply in the region woul persist "for some time" while the region's downstream industry went through an unprecedented wave of rationalisation, amalgamation and joint use of resources.
"While companies are eager to share refining and distribution facilities, we have not yet seen many closures of excess and inefficient capacity," he said. "The financial burden of plant closures is enormous and refiners commonly prefer to to limp into the future than absorb this impact.
Mark Moody-Stuart, a group managing director of Royal Dutch/Shell Group, said reduced Asian demand had aggravated oversupply in production and refining capacity.
He said oil demand growth in the Asia/Pacific region could slow even less than the 2.5 percent seen in 1997.
He said the slowdown had left more spare refining capacity in Asia than in western markets -- a development that would have been "unthinkable only a few years ago."
The result was net oil product flows from east to west rather than the historic pattern in the other direction -- evidence of the maturing of the Asian oil products industry.
UK March Oil Output Above 2.6 MBP/D - Newsletter
LONDON, April 27 - British oil production in March climbed above 2.6 million barrels per day (bpd) for the first time this year, the Aberdeen Petroleum report said on Monday.
The daily average output was 2,605,100 bpd, up 14,436 bpd from February's 2,590,574 bpd, the industry newsletter said.
The report said increased output from a number of larger production centres accounted for the bulk of the rise.
Shell Expro's (RD.AS)(UK & Ireland: SHEL.L) Brent, Gannet and North Cormorant showed gains, as did British Petroleum's (UK & Ireland: BP.L) Andrew/Cyrus, Bruce, Harding and Millar, Phillips Petroleum Co's (P) Judy/Joanne and Amerada Hess' (AHC) Scott/South Scott and Telford.
Output at BP's Foinaven dropped 4,300 bpd to 47,700 bpd in March and a well intervention programme at Broken Hill Proprietary Co Ltd'S (BHP.AX) Liverpool Bay facility cut output to 34,700 bpd, down 11,100 bpd from February.
Amerada Hess's Hudson platform produced no oil for the third month in a row due to pipeline repairs. The field's previous average production was around 30,000 bpd.
Record First Quarter Chinese Offshore Oil Output
BEIJING (April 27) - China pumped over 4.2 million tons of offshore crude oil and 900 million cu.m. of gas in the first three months of this year, up sharply on the figure of the same 1997 period.
"The record quarterly output was achieved with an average daily crude output topping 49,100 tons," according to a senior official with the China National Offshore Oil Corp. (CNOOC).
The official noted that the oil and gas output will rise even further during 1998, with a group of new oil-gas fields scheduled to enter operations in the South China Sea and Bohai Sea before the end of the year.
He noted that CNOOC has entered its prime period of development, with 19 operational offshore oil-gas fields maintaining high output levels.
Offshore crude oil output for this year is expected to exceed the 1997 figure of 16 million tons.
Chechnya Boosts Oil Production Minister
GROZNY, April 26 - Chechnya produced 320,000 tonnes of oil in the first quarter of 1998. In future, Chechen oilmen intend to bring monthly oil production to 125,000 tonnes. Itar-Tass learnt from Chechen Minister of Fuel and Energy Shirvani Basayev that republican oilmen recover over 4,000 tonnes of crude daily.
Turning to the question of boosting production of petroproducts, Basayev noted that Chechnya is forced to sell two-thirds of recovered oil due to absence of a secure market for sales of petrol and diesel fuel, despite the fact that republican oil refineries stand still without crude.
According to Basayev, the Chechen oil industry will earn 26.6 million roubles in April. Out of the total, the republican budget will receive 16.5 million roubles, while five million will be channelled to restore and reconstruct the oil industry.
The minister claimed that in future, Chechen oil will bring in, monthly, at least 30 million roubles to the republican budget
Colombia Increases Crude Oil Production
SANTAFE DE BOGOTA (April 25) - Colombia increased its crude oil production by more than 100,000 barrels a day in the first quarter of this year compared to the same period of 1997.
According to the Colombian Oil Company (Ecopetrol), oil exploitation in the country accelerated in March to 730,000 barrels a day, compared to 600,000 barrels in March, 1997.
A total of 595,000 barrels oil pumped out in March were from the Ecopetrol associated operations, 116,000 were direct production of the Parastatal company, and 16,500 barrels were produced by the four concessions still in force in Colombia, the state company said.
Oil companies in the country finished the drilling of 11 exploratory wells, two are producers, six are expecting the results, and the other three are dry, the Ecopetrol added.
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