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Gold/Mining/Energy : KERM'S KORNER -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (10839)	5/21/1998 11:31:00 AM
From: Kerm Yerman	Read Replies (1) \| Respond to of 15196

MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING WED., MAY 20 1998 (2) OIL & GAS OPEC Price Rescue It By Cuts Dilemma, Iraq Doubts LONDON, May 21 - OPEC producers dismayed by fresh oil price falls are struggling to rescue glutted oil markets from profound uncertainties about output policy, analysts say. At the core of the producer club's predicament is a dilemma about the much touted prospect of fresh output cuts aimed at curbing oversupply, they say. Not for the first time, the group responsible for 40 percent of world output may have painted itself into a corner by signalling intentions it cannot fulfil. Having publicly flirted with the possibility of more reductions following cuts agreed earlier this year, OPEC ministers risk gouging prices if they now fail to make the additional sacrifice, analysts say. ''People have been talking too much,'' said a senior oilman in an OPEC-member Gulf state. ''They've almost got themselves into a trap. There will be a psychological let-down in the market if they don't follow through.'' ''The thing is, if we only hung on through this season, which is always the weakest cycle in the market, and let the agreement work itself out, prices would naturally recover. You have to stay cool.'' Ministers from the Organisation of the Petroleum Exporting Countries are expected to tackle the possibility of more cuts when they hold a scheduled ministerial meeting on June 24 in Vienna. They will try to measure progress in a March accord between 10 OPEC and a handful of non-OPEC producers to withdraw 1.5 million barrels per day (bpd) from the market for the remainder of this year. OPEC bigwig Saudi Arabia said this week it might be necessary for world producers to remove another 500,000 barrels per day from swollen supply if prices stayed low. Some Gulf oil executives privately called the statement an admission that the March pledges to withdraw almost two percent of world supply would not be completely heeded. The pact sealed in secret talks in Riyadh helped drag prices back from nine year lows touched in early March but markets now show every sign of slipping back to the levels that spurred the pact. Benchmark Brent crude was valued at $13.85 a barrel on Thursday, almost $6 down from last year's average and equivalent to tens of billions of dollars in annual revenue losses for oil-dependent OPEC producers. OPEC, excluding Iraq, went part of the way to delivering on its large 1.245 million bpd share, slicing output by 900,000 bpd. But the cuts were countered by 300,000 bpd of gains in Baghdad's U.N.-monitored output, and heavy inventories in key western markets kept a lid on the price gains. So despite the reductions, many analysts believe supplies are still too large to salvage markets drowning in unwanted crude. And neither OPEC nor its new-found allies outside the organisation show signs of agreement on the necessity for further cuts. Kuwait said this month it planned to push for more cuts. But Mexico, a non-OPEC architect of the earlier cuts, said recently the market outlook indicated more cuts would probably not be needed. Russia will go to Vienna as an observer, its first such attendance for five years, in a limited advance for OPEC's campaign to share supply management with outsiders. But analysts doubt that Russia, rebuilding its giant petroleum industry after years of disruption and decay, would be in any mood to deliver substantial extra cuts beyond a puny 61,000 bpd it offered in March. ''It remains the case that the major burden of cuts lies on OPEC,'' said Mehdi Varzi, oil analyst at Dresdner Kleinwort Benson. OPEC watchers said matters may become clearer after a scheduled meeting of Gulf Cooperation Council (GCC) oil ministers on June 16 in Riyadh. OPEC members Saudi Arabia, Kuwait, the United Arab Emirates and Qatar and non-OPEC Oman are GCC members along with Bahrain. There are further uncertainties. Chief among them are talks on U.N.-monitored Iraqi exports that could determine whether its 1.5 million bpd or so of sales continue to reach world markets. The so-called oil-for-food sales programme, under which Iraq can sell oil to buy food, medicine and other goods, is in dispute every six months when it comes up for renewal. In the past, the dispute has prompted Baghdad to stop oil sales until its distribution plan is approved. U.N. Secretary-General Kofi Annan said on Tuesday he doubted Iraq's plan would be approved before the current six month round of the programme expires on June 3, raising the prospect of an interruption to exports. ''It would be just the tonic the market needs,'' said Peter Gignoux, head of the energy desk at Salomon Smith Barney in London. But on Wednesday, a U.N. official said the gap in talks on the aid plan was narrowing. ''We are still aiming to get it out on time,'' the official said. Oil Droops As Stock Glut Tethers Prices LONDON, May 20 - World oil prices dropped below the psychologically important $14 a barrel mark for the first time in two weeks on Wednesday as a glut in petroleum inventories deepened gloom among producers. Benchmark Brent blend tumbled over 40 cents in late trading after heavy speculative selling of crude futures in New York. Brent closed 65 cents down at $13.73 a barrel, a slight recovery on the day's low of $13.65. Brent had touched a high of $14.32 mid-afternoon but soon headed lower downwards. The fresh losses occurred as weekly inventory data from the United States showed a sharp rise in crude stock levels. The American Petroleum Institute, a leading indicator of inventory patterns in the world's biggest importer, said crude stocks last week swelled by nearly nine million barrels to their highest since August 1993. The stock rise was further bad news for world oil producers who have endured a sustained price slump since late last year. Brent prices have averaged just $14.55 this year, around $5.00 lower than last year's average. Producers' revenues have been hit so hard that the Organisation of the Petroleum Exporting Countries (OPEC) and non-OPEC producers banded together in March to hammer out a pact to remove some 1.5 million barrels per day (bpd) of supply from world markets. But, after a brief rally on the news of the cuts, prices have retreated again. Crude futures markets in New York late on Tuesday plunged below $13 to their lowest for nine years, although the collapse partly reflected local trading factors. Traders are now focusing on the approaching June 24 OPEC meeting to see if further cuts will be made. Frenzied speculation that key producers Saudi Arabia, Venezuela and Mexico could meet before June 24 to hammer out a further agreement has so far come to nothing. A secret Riyadh meeting in March between the three countries, key rivals for market share in the United States, laid the foundation for the producer pact. But the prospect of further cooperation between OPEC and non-OPEC members did get a boost this week when Russia's deputy prime minister, Boris Nemtsov, announced that Russia would attend the oil cartel's Vienna meeting. Russia agreed to cut oil exports by 61,000 bpd as part of the producer pact. Traders now wonder whether key Gulf producers, Saudi Arabia, Kuwait and the United Arab Emirates, where the national economies are especially hard hit by low oil prices, will be prepared to go it alone in reducing output In recent years they have stood alone on curbing production to support prices, but have signalled that they now will act only in concert with others. NYMEX Crude Plunges New York - Crude oil futures prices Wednesday plunged a second day on the New York Mercantile Exchange after an industry group reported inventories rose more sharply last week than had been expected. July Crude oil fell $0.83 to settle at $14.18. The American Petroleum Institute reported late Tuesday that inventories across the nation had jumped to the highest level in nearly five years, leaving storage tanks brimming with oil. Some 353.1 million barrels were in storage as of May 16, up 8.8 million barrels and the highest since 353.3 million barrels on July 23, 1993. Analysts say economic troubles in Southeast Asia have dimmed demand for oil in that region. That has spurred crude producers to seek other markets for their oil, which in turn has led to more U.S. imports at favorable prices. Few observers believe producers will take any action before the 11-nation Organization of Petroleum Exporting Countries meets in late June in Vienna, Austria, to discuss prices. The unexpectedly sharp increase in inventories overshadowed data implying strong demand for gasoline heading into the summer driving season. Unleaded gasoline stocks fell a steep 3.3 million barrels to 211.8 million barrels. We are unable again to gain access to NYMEX reports related to natural gas pricing. TOP STORIES World Oil Shares Slide As Crude Outlook Turns Ugly Oil shares were hit on Wednesday as crude prices tumbled after data showed crude oil stocks in the U.S., the world's largest oil importer, rose to their highest level since 1993. Analysts now say that any pickup in crude prices, which hit a nine year low March of this year, may be delayed until later this year and companies are unlikely to see a pickup in second quarter earnings from the very depressed first quarter. ''There is not likely to be a rebound in share prices and the market for oil is very sloppy,'' said Fadel Gheit, analyst at Fahenstock & Co. The two oil companies in the Dow industrials were the biggest percentage losers in the index, with Exxon Corp. (XON) down 1-5/16, or 1.8 percent, at 71, while Chevron Corp. fell 1-1/16, or 1.3 percent, to 81-1/8. in afternoon trading. ABN AMRO Inc analyst Eugene Nowak cut his earnings forecast for Chevron's second quarter to $0.70 from $0.83, compared with a First Call consensus of $0.84, and warned that even $0.70 could prove to be too optimistic. ''Crude prices are continuing to underperform and I expect analysts to start revising down their second quarter forecasts,'' Nowak said. After hitting a nine year low on March 17 of $11.96 per barrel, the international benchmark Brent blend has Brent has averaged just $14.50 so far this year, compared with $19.30 in 1997. It took another turn down this week and remained under pressure after data from the American Petroleum Institute (API) showed that U.S. crude oil stocks rose 8.788 million barrels in the week to May 15. Analysts had been expecting a drop of 2.5 million barrels, according to a Reuters poll. "There was a big build in stocks," said Nowak. Losses among oil shares were spread across the board and the S&P Oil International Index dropped 1.08 percent to 825.92, while the Dow Jones Industrial Average was up 0.5 percent to 9100 points. Another bid loser among the oil shares was Amerada Hess Corp. (AHC), which dropped 1-4/16 to 55-3/16 after reporting yesterday that a rig being transported out to one of its biggest new fields had sunk. ABN AMRO's Nowak calculated that this could cost Hess $0.80 per share in lost income next year if the 100 million barrel oilfield failed to hit peak production in 1999. Oryx Energy Co. (ORX), Amerada's 50 percent partner in the deepwater Baldpate field in the Gulf of Mexico was also hit, losing 1-3/16 to 22-1/16. Nowak calculates that delays could cost Oryx $0.75 per share at peak production. Among other major oils, Amoco Corp. (AN) lost 5/8 to 41- 7/8, Mobil Corp. (MOB) 7/8 to 80-1/2 and Texaco Inc (TX) 1/16 to 58-7/8. Fahenstock's Gheit believes that declining oil prices will force substantial changes in the industry and says that even the biggest companies may be hard put to fund their ambitious capital spending plans. ''If oil prices do not rebound, even Exxon will have to look at cutting back capital spending; the only company that is safe is Royal Dutch/Shell Group (RD.AS) (UK & Ireland: SHEL.L),'' Gheit said. He added that oil price weakness is going to mean that many of the smaller oil and natural gas producers may not be independent for very much longer. ''The weakest will go first. Those companies whose balance sheets are stretched will go, while those who have kept their powder dry will be the winners,'' he said. Spot Price For Oil Drops To Lowest Level In More Than A Decade Edmonton Journal Unrest in Indonesia and a glut in world markets are being blamed for the lowest spot prices for oil since the mid-1980s. The benchmark West Texas Intermediate crude closed Wednesday at $13.28 US a barrel. That's up slightly from Tuesday's close of $12.80 US, but still down from Monday's $14.07 US, and off about 30 per cent since the healthy levels of 1997. Crude oil futures prices also plunged Wednesday with the news that oil inventories across the United States are the highest they've been in five years. Analysts said the key factor in the drop was a growing over supply of oil. World demand in April was 73.4 million barrels per day and supply was 75.4 million barrels, according to the Canadian Energy Research Institute in Calgary. Nor will the gap between supply and demand end soon, said institute analyst Judith Dwarkin. "The rest of the year could be bumpy," she said. Other analysts suggested uncertainty caused by political unrest in Indonesia was reducing demand in Asia, already reduced by the area's economic problems. The 11-member Organization of Petroleum Exporting Countries will meet in late June to discuss prices. The Alberta oilpatch has already begun to suffer. "Certainly, heavy oil right now is basically non-economic," said Andrew Hogg of First Marathon Securities. "A number of the heavy-oil projects are not making any money and some are losing money with every barrel that's produced." Hogg says refiners start losing money on heavy oil when the price drops below $13 US a barrel. The low prices were also reflected in the first-quarter results of Canada's oilpatch giants. Revenue at Syncrude fell 33 per cent to $347 million during the first three months of 1998, compared with the same period in 1997. The synthetic oil producer is trying to cut its production costs, which averaged $17.86 a barrel over the first quarter. Imperial Oil's profits also fell sharply to $113 million in the first quarter of 1998 compared with $191 million in the same period a year ago. Suncor Energy Inc. reported falling first-quarter profits to $50 million this year from $60 million in the same period last year. Petro-Canada's first-quarter profits fell to $36 million this year from $104 million in 1997. Last February, PanCanadian Petroleum cut 200 jobs and eased its heavy oil production. Still, all of the expansion projects for Alberta's oilsands are going ahead. "The way they go forward is a very long-term viewpoint," said Hogg. "They don't look at the price on a month-to-month basis; they look where it's going to be over the next five to 10 years." Alberta Treasurer Stockwell Day said slumping oil prices won't hurt the province as much as in the past because its economy is more diversified. "All of the economic analysts say our strengths go beyond our oil industry and though we still rely on oil, our other strengths in the economy are very strong," said Day. "When you take the high price of natural gas, it makes me agree with the economic analysts who look at Alberta and say we will continue to lead economic growth in Canada for 1998." US 1997 NatGas Pipeline Capacity Record 84 Bcf/Day U.S. natural pipeline capacity reached a record 84 billion cubic feet per day in 1997, according to a new report from the U.S. Energy Information Administration. Total pipeline capacity last year increased by 15 percent from 1990 levels, the EIA said in its report that was released late on Friday. EIA said it sees domestic natural gas output increasing six to seven percent through 2000, with most of the production coming from Gulf of Mexico, the San Juan Basin and the Rocky Mountain area. ''While planned pipeline expansions appear adequate to accommodate this increase, some may bottlenecks develop in moving new offshore production beyond onshore Louisiana,'' the EIA said. However, any potential kinks in moving natural gas may be partially or completely offset by new or expanded underground storage facilities, according to the agency. If all projects currently proposed through 2000 were built, natural gas capacity would increase by as much at 14.7 billion cubic feet a day, or about 17 percent from 1996 levels, the EIA said. Separately, the the agency said the share of Canadian natural gas imports used to satisfy U.S. gas demand continues to grow, having increased every year since 1989. ''The most extensive development of new pipeline capacity during the next several years will occur along the corridors connecting Canada to the U.S. Midwest and Northeast markets to handle the ever-growing Canadian imports,'' the EIA said. These expansions could allow an additional 5.9 and 7 billion cubic feet per day of Canadian natural gas to be handled by U.S. facilities during the next three years, an increase of more than 52 percent from 1997 levels, according to the agency.

To: Kerm Yerman who wrote (10839)	5/22/1998 12:54:00 PM
From: Kerm Yerman	Read Replies (1) \| Respond to of 15196

MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING THURS., MAY 21 1998 (1) MARKET FOCUS Canada Seagram Co. led Canadian stocks higher after it announced the purchase of PolyGram NV for US$10.6 billion. The Toronto Stock Exchange 300 composite index rose 22.83 points, or 0.3%, to 7718.23. Seagram was the single biggest contributor to the index, adding 13.3 points to the advance. About 106 million shares changed hands on the TSE, up from 100.2 million shares traded on Wednesday. Seagram shares (vo/tse) rose $4.75 to a record high $64.10. PolyGram is 75% owned by Royal Philips Electronics NV, Europe's biggest electronics company. In New York, Seagram stock (vo/nyse) was the S&P 500's biggest gainer, climbing US$31 1/82 to US$441 1/82. The entertainment and liquor company said it will spin off its Tropicana juice unit in an initial public offering that the company expects will generate as much as US$4 billion. Rogers Communications Inc.'s class B shares were the most active issue in Toronto, with more than 4.9 million shares changing hands, almost seven times the three-month daily average. Rogers shares (rcib/tse) rose $1.05 to a record high of $11.90. The stock was raised to "buy" from "accumulate" by analyst Glen Campbell of Merrill Lynch & Co. MetroNet Communications Corp. said Wednesday it will buy Rogers Telecom, a wholly owned subsidiary of Rogers, for cash and stock valued at $1 billion. MetroNet class B shares (mncb/tse) rose 80› to $39.80. Canada's banks also were shouldered higher. Bank of Nova Scotia (bns/tse) rose 45› to $39.15, Royal Bank of Canada (ry/tse) jumped $1.25 to $88.25 and Bank of Montreal (bmo/tse) rose 90› to $79.10. Newbridge Networks Corp. (nnc/tse) fell $1.60 to $40.60 and Northern Telecom Ltd. (ntl/tse) lost 65› to $98.20 to cap the index's advance. Early in the session, Nortel touched a record high of $100.25. BCE Inc. (bce/tse), which owns a 51.7% stake in Nortel, rose to a record intraday high of $66.30 before closing down 20› to $66. BCE and Nortel account for 11% of the TSE 300. BioChem Pharma Inc. (bch/tse) rose 80› to $39.30 after U.S. patent authorities recognized the pharmaceutical research company was the first to file a patent for AIDS drug 3TC. Yogen Fruz World-Wide Inc. class A shares (yfa/tse) climbed 70› to $13.60 after the TSE said it would be added to the TSE 300, replacing YBM Magnex International Inc. The TSE Oil & Gas Composite Index gained 0.1% or 5.55 to 6315.58, thanks to the integrated oils whose sub-index gained 0.9% or 81.37 to 8731.60. Suncor Energy led the group, gaining $0.85 to $53.15. The oil & gas producers index fell .2% or 12.07 to 5494.03. Decliners included Amber Energy $0.765 to $14.25, Baytex Energy $0.75 to $14.25, Nortrock Resources $0.55 to $18.75 and Rio Alto Exploration $0.55 to $15.45. Reversing the trend, Pinnacle Resources gained $0.75 to $13.00. The oil & gas services index fell 0.3% or 1.08 to 2925.32. Decliners included Precision Drilling, down $0.55 to $31.50 and NQL Drilling $0.50 to $10.50. Enerflex Systems gained $0.85 to $53.15. Other Canadian markets were mixed. The Montreal Exchange portfolio rose 35.6 points, or 0.9%, to 3933.22. The Vancouver Stock Exchange lost 2.99 points, or 0.5%, to 608.86. United States U.S. Stocks Off As Oil, Tech Stocks Weak; Bonds Down Late U.S. share prices ended slightly lower Thursday with weakness centered in technologies, stores, and oil shares amid worries over Federal Reserve tightening, Market News Service reported. Uncertainty over Indonesia despite the resignation of President Suharto and worries over the Asia contagion added to the market's soft tone Thursday, traders said. An afternoon selloff in U.S. Treasuries helped push stocks into negative territory, with bonds weakening in response to news that the Fed shifted its policy stance at its March 31 meeting to a bias toward raising interest rates. Market participants generally played down the day's price action in the major indexes. ''Thirty to 60 points doesn't count for much these days,'' said John Benning, a trader at BT Brokerage. Declining oil prices have hurt oil company shares, and computer companies have been hit by the rapid product cycle, associated price cuts, and heavy inventories, Benning said. Among technologies, Dell lost 4 11/16 to 87 1/16; Compaq was down 1 1/16 at 28 1/2 and Intel was down 2 7/8 to 74 1/8. In the oil sector, Exxon was down 11/16 to 70 9/16. In the retail sector, Sears fell 3/8 to 62 7/8 while Kmart fell 1/8 to 19 1/8. U.S. stocks fell, as Intel Corp. and other computer-related shares slumped on concern that profits will suffer this year amid stifling competition. Pfizer Inc. led a drop in drug stocks. The Dow Jones industrial average fell 39.11 points, or 0.4%, to 9132.37. The Standard & Poor's 500 composite index slipped 4.42 points, or 0.4%, to 1114.64. About 556.4 million shares changed hands on the Big Board, down from 591.7 million shares traded on Wednesday. The Nasdaq composite index, heavy on computer shares, dropped 10.76 points, or 0.6%, to 1820.99. Intel, Dell Computer Corp. and Compaq Computer Corp. slid amid signs that the industry overproduced personal computers and semiconductors. Intel (intc/nasdaq) lost US$2 7/8 to US$74 1/8 and is down 13% since May 13. Dell (dell/nasdaq) fell US$4 11/16 to US$87 1/16 and Compaq (cpq/nyse) slipped US$1 1/16 to US$28 7/16. Pfizer (pfe/nyse) dropped US$3 13/16 to US$109 1/8 after the drug maker said it will warn paramedics and emergency room physician not to treat patients on its impotence pill Viagra with nitrates. Viagra's label already contains a warning on nitrates, used to treat chest pain. A rally in auto and retail stocks kept losses from widening. General Motors Corp. (gm/nyse) gained US$1 1/8 to US$74 5/8, Ford Motor Co. (f/nyse) jumped US$1 15/16 to US$51 3/16 and Wal-Mart Stores Inc. (wmt/nyse) rose 7/8 to US$55 3/4. Manugistics Group Inc. (manu/nasdaq) tumbled US$8 7/8 to US$47 7/8 after BT Alex Brown analyst Christopher Mortenson warned that the manufacturing software maker may not meet analysts' expectations in its fiscal first quarter because it might have trouble closing orders. International Stocks markets rose from Sydney to Tokyo yesterday, on news of Indonesian President Suharto's resignation after 32 years in power. The departure of the 76-year-old Suharto after weeks of bloody riots marks a significant political change for Indonesia and its neighbors, but may do little to help the region's struggling economies. "What I'm going to do this week is sell," said Patrick Choo, a fund manager at Sun Hung Kai Fund Management Ltd. in Hong Kong. "You're not going to get any economic good news for a few more months at least." European stocks closed a quiet day with some comfortable gains, buoyed by receding concerns about Indonesia and an overnight rally on Wall Street. Most European bourses, including Paris and Frankfurt, kept their doors closed for national holidays. In Jakarta, where business has been at a standstill for more than a week, the stock exchange was also closed for a holiday. The rupiah was little changed at 11,000 to the US$ after wiping out a 7% decline. London: Britain's leading share index rose for a third consecutive day, lifted by the rallies across Asian markets and as weaker than expected retail sales data allayed fears of higher interest rates. The FT-SE 100 index climbed 28.2 points, or 0.5%, to 5935.6. The economic data put further pressure on the pound, which has recently come off highs against the German mark, and encouraged buying in a basket of currency sensitive engineering stocks. LucasVarity rose 11p, or 4.1%, to 277.5p, while Siebe was driven up 44p to 1,514p. Tokyo: Japanese shares finished higher as the Indonesian news calmed domestic tensions and relieved market players. The 225-share Nikkei average closed up 192.3 points, or 1.2%, to 15,845.25. The rally in Tokyo, the region's largest market by value, was helped by record profits on Wednesday from Honda Motor Co. and Ricoh Co. Honda rose 100 yen to 4,690 yen. Singapore: The Straits Times industrials index posted its biggest gain in 14 weeks after tumbling 20% in two months as the political situation in Indonesia deteriorated. Yesterday, it rose 45.87 points, or 3.6%, to 1319.65. Wing Tai Holdings Ltd., the property developer that accounts for 1.4% of the index, rose 5.9% to S$1.08. Hong Kong: The benchmark Hang Seng index surged 2% as Suharto stepped aside, wiped out that gain, then then rallied again to close up 121.27 points, or 1.3%, at 9670.45. HSBC Holdings PLC and other banks with loans to Indonesian companies rose on hope that relative calm will return to the country and help firms repay their debts. HSBC, which controls two of Hong Kong's biggest banks, is expected to have to follow Singapore's banks in raising its provisions against losses in Indonesia, and so is sensitive to developments there. HSBC rose almost 2% to HK$201. Sydney: Indonesia helped Australian shares to a mainly firmer close, but disappointment over Suharto's successor pulled stocks off their midday highs. The all ordinaries index climbed 10.3 points, or 0.4%, to 2733.5. OIL & GAS World Oil Edges Up, Doubts Linger On Supply Cuts LONDON, May 21 - World oil prices were tentatively higher on Thursday but brimming oil storage tanks are likely to dampen gains, oil traders said. Brent crude futures recovered to end Thursday's trading 26 cents higher at $13.98 a barrel but prices have fallen more than a dollar over the past couple of weeks and tumbled 40 cents on Wednesday alone. Prices have stabilised either side of $14 in recent weeks after a recent agreement in Riyadh at which oil producers agreed to cut two percent from global supply. But confidence in tighter supply has been shaken this week by rising oil stocks in the United States, signs that Iraqi oil exports may continue unabated and fears that OPEC might struggle to agree fresh output cuts. Iraqi oil exports, under the U.N. ''oil for food'' deal, have been eroding the impact of the Riyadh pact. Supply from 10 OPEC members, excluding Iraq, was down about 900,000 bpd last month from February's benchmark for the cuts, a Reuters survey found. But Iraqi output, which was excluded from the Riyadh pact, rose some 300,000 bpd. With oil supply still plentiful and seasonal demand on the wane, oil traders have been watching for any signs of a temporary break in Iraq's oil sales. Iraqi oil exports have been delayed twice before because of hold-ups in renewing its six-monthly oil sales deal. Iraq and the United Nations have disagreed how to distribute proceeds from the fourth round of the deal, but U.N. sources said on Tuesday that the gap was narrowing. Approval by U.N. Secretary-General Kofi Annan of the distribution plan would trigger the fourth round, which calls for an increase in the oil sales limit to $5.256 billion from $2 billion every six months. But at current world oil prices, Iraq would only raise about $2.9 billion over a six-month period, assuming it was exporting at its capacity of 1.6 million bpd. In the past four weeks, Iraq's exports have averaged just over 1.4 million bpd. Earlier this year revenues among oil producers were hit so hard that the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC countries hammered out a pact to remove some 1.5 million bpd of supply from world markets. But, after a brief rally on news of the cuts, prices retreated again to some 28 percent under last year's average. OPEC producers are struggling to rescue glutted oil markets from uncertainties about output policy, analysts say. At the core of the producer club's predicament is a dilemma about the much-touted prospect of fresh output cuts aimed at curbing oversupply, they say. OPEC may have painted itself into a corner by signalling intentions it cannot fulfil. Having publicly flirted with the possibility of fresh reductions, OPEC ministers risk undermining prices if they now fail to deliver, analysts say. ''People have been talking too much,'' said a senior source in an OPEC member Gulf state. ''They've almost got themselves into a trap. There will be a psychological let-down in the market if they don't follow through.'' Traders are now focusing on the approaching June 24 OPEC meeting, but speculation that key producers Saudi Arabia, Venezuela and Mexico could meet before that date to forge a further agreement has so far come to nothing. The prospect of further cooperation between OPEC and non-OPEC members got a boost this week when Russia said it would attend the Vienna OPEC meeting. Russia agreed to cut oil exports by 61,000 bpd as part of the producer pact. Adding downward pressure to prices has been sluggish Asian demand in recent weeks and poor refinery profit margins in the West. ''The margins in Europe have fallen, which is bearish for crude,'' said Scott Carter of Tosco Petroleum. NYMEX Crude, Products Rebound On Short-Covering NEW YORK, May 21 - A short-covering spurt lifted NYMEX July crude before easing early Thursday, recovering partly from Wednesday's slide, traders said. At 1126 EDT/1526 GMT, July crude was up 36 cents at $14.53 a barrel, just off an early session high of $14.57. ''There's a bit of profit-taking going on,'' said a NYMEX floor trader in explaining the short-coverings. Another trader said the market was correcting after having been oversold on Wednesday. Refined products also rebounded. June heating oil gained 0.67 cent at 39.95 cents a gallon, after trading as high of 40.00 cents earlier. June gasoline rose 0.67 at 49.10 cents a gallon, easing after hitting an early high of 49.15 cents. Traders said that despite the early bounce, the market cold go lower as there have been very little change in fundamentals. Wednesday's slide was caused by large crude builds reported by the American Petroleum Institute and the Department of Energy that put U.S. crude stocks at their highest since the summer of 1993. The slide came on top of volatile expiration-day trading of the June crude on Tuesday, which saw the contract hitting lows not seen in 9-1/2 years. With storage at the Cushing, Okla., hub at near capacity, traders were pressured into liquidating positions rather than opt to take delivery, with the risk of not finding storage. Cushing is a key Midwest terminal where NYMEX crude is delivered. Traders say that while prices may be going up now, the situation will be short-lived because of the lingering oversupply problem. Recent OPEC talk has focused on the possibility of a further production cut of 500,000 barrels per day (bpd), but traders do not see any action by the group until it meets on June 24 in Vienna. Until then, traders see the market trading mostly on technical factors with occasional rebounds on market-moving headlines. Late U.S. Crude Oil Prices Extend Daytime Gains LOS ANGELES, May 21 - U.S. crude oil futures rose Thursday during ACCESS trade, fueled by speculators who were buying up contracts to lock in profits, traders said. By 1730 PDT, July crude oil rose eight cents a barrel to $14.71, ACCESS traders said. That extended a daytime rally in which front-month crude gained 45 cents to $14.63. ''It's short-covering ahead of the weekend,'' an ACCESS trader said. July volume was 743 lots by 1730 PDT. Overall volume stood at 1,060 lots. Traders said they did not want to be caught short, with crude prices on the rebound and the three-day U.S. Memorial weekend coming up. June gasoline on the ACCESS market traded at 49 cents a gallon, up 0.12 cent a gallon from settlement. In daytime trade, gasoline rose 0.45 cent a gallon, in line with crude gains. Roughly 37 lots changed hands for June unleaded gasoline futures on ACCESS, while 52 traded for all months by 1730 PDT. Heating oil for June rose 0.61 cent a gallon to 40.40 cents, traders said, with 179 lots traded overall.

To: Kerm Yerman who wrote (10839)	5/22/1998 1:05:00 PM
From: Kerm Yerman	Respond to of 15196

MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING THURS., MAY 21 1998 (2) OIL & GAS, con't NYMEX Natural Gas Ends Down Sharply On AGAs NEW YORK, May 21 - NYMEX Hub natural gas futures ended lower across the board Thursday in an active session,with June pressured first by Wednesday's bearish stock report and then by a flood of technical selling when key support was broken. June tumbled 10.2 cents to close at $2.067 per million British thermal units after trading today between $2.06 and $2.17. Selling in the spot month accelerated when $2.105 support was breached early. July settled 9.8 cents lower at $2.105. Other deferreds ended down by one-half to 9.2 cents. "Technically, this was a big (bearish) day, and I think they'll try to break it down further, but it could be difficult. It's tough to sell $2 gas when it's 100 degrees (F) in Texas," said one Midwest trader, noting some record heat in Texas and the South this week. Traders said Wednesday's bearish inventory report showing an unexpected 92 bcf weekly stock build started the early selling, then longs bailed when June broke support. And with storage 42 percent over year-ago and more seasonal weather expected in the Midwest and East for the holiday weekend, few expected much upside near-term. Cooler air is expected to move into the Midwest, Northeast and Mid-Atlantic over the weekend, dropping temperatures to normal or slightly below, but above to much-above normal temperatures are forecast for next week. The South is expected to remain five to 10 degrees F above normal through next week. A cooling trend in Texas by Monday should drop temperatures to more seasonal levels. The West Coast is expected to range from normal to several degrees below normal for the period. Chart watchers said the technical picture turned bleak today when June broke and settled below key support at $2.105. Most now expected a test of next support at the $2.05 double bottom from January and possibly a run at $2. Further support was seen at the spot continuation lows from January at $1.96-1.97. Resistance was now pegged at $2.105, then at $2.215 and at last week's $2.285 high. Further selling was expected in the $2.355-2.37 area. In the cash Thursday, Gulf Coast swing quotes slipped seven or eight cents to the $2.06-2.11 range. Midwest pipes were down more than a nickel to the low-$2s. Chicago city gate gas tumbled almost a dime to about $2.20, while New York was more than five cents lower in the mid-$2.30s. The NYMEX 12-month Henry Hub strip slid 5.8 cents to $2.323. NYMEX said an estimated 93,072 Hub contracts traded, up sharply from Wednesday's revised tally of 43,423. NYMEX will be closed Monday for the Memorial Day holiday. NYMEX June natgas futures expire on Wednesday, May 27. US Spot Gas Prices Turn Lower Ahead Of Cooler Air NEW YORK, May 21 - U.S. spot natural gas prices slumped lower Thursday as cooler weather was forecast for the Northeast and Midwest during the long holiday weekend and futures shed earlier gains, industry sources said. Physical gas at Henry Hub was mostly quoted today at $2.10-2.12 per mmBtu, off about seven cents from Wednesday. NYMEX's June contract also traded several cents lower to a session low of $2.06. In the Gulf, Sonat Inc (SNT) said repairs would likely take about three to four days to a leak on its 36-inch Sea Robin gas line near South Marsh Island Block 210, offshore Louisiana. Scheduled maintenance work is also underway on the Sea Robin line at the Vermilion Block 149 compressor station. The outage, which is expected to last through the month, is affecting about 70-75 million cubic feet per day of supply. In the Midcontinent, prices were also down seven cents to about $2.02-2.03, while Chicago city gate gas traded mostly in the low-$2.20s. In west Texas, Permian prices extended losses that began yesterday, falling another eight cents to an average range in the mid-$1.90s. San Juan prices similarly slipped to $1.80-1.89, with most business reported done in the mid-$1.80s. In the Northeast, gas at the New York city gate was quoted at $2.36-2.37 as cooler weather approached the region. However, temperatures were forecast to return to about 10-15 degrees above normal by next Tuesday and Wednesday. Canada Spot Gas Prices Follow NYMEX Lower In East NEW YORK, May 21 - Canadian spot natural gas prices moved a little higher in Alberta on Thursday but chased NYMEX lower in the East, industry sources said. Spot gas prices at the AECO storage hub were quoted in the high C$1.50s per gigajoule (GJ) today, indicating an average gain of two cents from Wednesday. NOVA Gas Transmission's field receipts dipped to 11.965 billion cubic feet per day (bcfd) Wednesday, from 12.1 bcfd on Tuesday. NOVA said that allowable interruptible transport at Empress and McNeill on Alberta's eastern border would be 26.5 percent of nominated volumes today, a cut of about 1.49 billion cubic feet per day (bcfd). This is compared with 20 percent on Wednesday. At the borders, gas prices at Sumas, Wash., were quoted at US$1.37-1.41 per million British thermal units (mmBtu), down another three cents from Wednesday. Sources attributed the softness to a weak weather related demand in the Northwest and Rockies. In the East, Niagara gas prices followed NYMEX lower to about US $2.18-2.20 per mmBtu. TOP STORIES Syncrude Revenues Dip Slightly With Oil Prices Fort McMurray Today Despite lower global oil prices, the 1997 fiscal year proved to be a milestone for Syncrude Canada. The oilsands plant rolled out its billionth barrel last month and for the second consecutive year, revenues exceeded $2 billion. "I think it was an excellent year for us overall," said Syncrude CEO Eric Newell in an interview. "Certainly we always zero in on production. We set another production record which was the 16th year out of 19 years of the operation." Last year saw 75.7 million barrels shipped at a unit cost of $13.78, the third best unit cost in Syncrude's history. The lowest unit cost the oilsands plant recorded was in 1995 at $13.69 per barrel. The fourth quarter of 1997's unit cost was $11.14 per barrel, an all-time low. The increased production was a precursor to shipping Syncrude's billionth barrel on April 16, said Newell, adding the oilsands plant made "good progress" on its cost structure and made yield improvements which bode well for the company's future. The company's1997 annual report released yesterday declared revenues for the joint venture at $2.107 billion in 1997, down slightly from the $2.137 billion recorded in '96. Syncrude's annual report said the lower revenues resulted from a four per cent reduction in average crude oil prices that more than offset the increased production. The year also saw the oilsands plant open its new North mine, receive regulatory approval of its new Aurora mine and announce its plans for a new $3-billion upgrading expansion. The annual report said 1997's average sale price for Syncrude Sweet Blend averaged $27.84 Cdn. per barrel at the plant gate. That works out to $20.61 US per barrel US West Texas Intermediate which is the oil patch's benchmark for price and quality. The price was $1.18 less than the $29.08 per barrel or $22.02 US WTI received in 1996. Syncrude is a joint venture owned by AEC Oil Sands, L.P., AEC Oil Sands Ltd. Partnership, Athabasca Oil Sands Investment Inc., Canadian Occidental Petroleum Ltd., Canadian Oil Sands Investments Inc., Gulf Canada Resources Ltd., Imperial Oil Resources, Mocal Energy Ltd., Murphy Oil Company Ltd. and Petro-Canada. Russian Partner Wants Out Of joint Venture With Black Sea The Financial Post Black Sea Energy Ltd. has been sued in a Russian court by the management of its Russian joint venture partner, the company said yesterday. The Calgary-based oil and gas junior, whose most significant shareholder is stock promoter Robert Friedland with 38.2%, says the suit is without merit and hopes to resolve it amicably in the next few days. "Black Sea views the proceedings as an opportunistic attack initiated by the new management of Tyumen Oil Co. in an attempt to gain advantage in the ongoing management of the ... joint venture," the company said. Black Sea is involved in two other oil and gas ventures in the region, but the partnership with Tyumen represents its principal project in Russia and is the only one yielding production. Under the agreement, Black Sea and Tyumen share equally in production, which ranges from 8,000 barrels a day to 10,000 b/d, from the Kalchinskoye oil field. In the suit, Tyumen is seeking the cancellation of the joint venture agreement and the return of its licences for the oil field and an explorations block. "There is lots of ambiguity in Russian law," said Black Sea spokesman Paul Gregus. "[It is] challenging the arrangement under which the partnership was formed." Abacan Resource's Investors Continue To Lose Faith The Financial Post A US$210-million writedown for 1997 caused investors to again dump Abacan Resource Corp. shares yesterday. The stock (ABC/TSE) fell 7% to close at 66›, down 5›. The writedown and uncertainty surrounding the possible sale of its offshore Nigerian oilfield have sliced 25% from the company's price this week. Abacan reported a loss of US$239.2 million (US$2.13 a share) on revenue of US$53.5 million in its 1997 financial results. It said there were no comparable 1996 results because it was in a pre-production phase. The company ended 1997 with a working capital deficiency of US$81 million, up from US$3.2 million at the beginning of the year. The ocean of red ink included a US$210-million reduction in the value of its petroleum properties. The provision reflected a ceiling test writedown, in which the future value of its reserves was calculated against expected prices. The cash-strapped company, with total debt of about US$107 million, took the hit as a step toward selling its Ima oilfield, located in the Niger River delta. It is in a dispute with its Nigerian partner over the sale of the shallow portion of the field, which produces 15,000 barrels of oil a day. Initial promising drilling results at Ima pushed the shares to a peak of $15.65 in 1996. But lower than expected reserves and production caused investor enthusiasm to fade in the past year. Forest Oil Buys Unocal Canada Oil Assets Forest Oil Corp. unit Canadian Forest Oil Ltd. said on Thursday it agreed to buy interests in several Canadian frontier oil and gas properties from Unocal Corp. for an undisclosed sum. The deal includes Unocal's 35-percent interest in a big Northwest Territories natural gas discovery announced recently by operator Ranger Oil Ltd. Canadian Forest was already a 15-percent interest owner in the P-66 discovery at Fort Liard, N.W.T., where recoverable gas reserves are estimated at 140 billion cubic feet. Canadian Forest said the purchase also included more than 225,000 acres of land in the territories, a Significant Discovery Licence in the far-north Beaufort Sea and two offshore permits near British Columbia's Queen Charlotte Islands. The company said the acquisition complemented its activity in the Norman Wells area of the Northwest Territories, where it drilled three exploratory wells last winter. Those were to be followed up by a seismic program and more drilling during the upcoming season. Consumers Fight Hike For Losses In Gas Hedging The Financial Post Manitoba regulators are to decide soon whether to allow Centra Gas Manitoba Inc., a unit of Vancouver based Westcoast Energy Inc., to boost its rates after losing up to $46 million in natural gas trading. Consumers are vehemently opposed to the increase, saying the losses were the result of speculative trading. "Whatever we did, we did intending it for the benefit of our customers on a reasonable basis, and if the results had been favorable to the customers, that would have flowed through to the customers," Centra Gas president and chief executive Otto Lang said yesterday. Centra is looking for a 3% increase until it recovers the losses and additional higher cost of service, Lang said. But Brian Meronek, a lawyer representing the Consumers Association of Canada, Manitoba Inc. and the Manitoba Society of Seniors, said the company, not consumers, should foot the bill because its trading program was akin to a speculative operation aiming to beat the market. "It's not something the board has endorsed and it's not something consumers are prepared to put up with," Meronek said. While other utilities are increasingly involved in hedging activities to smooth out volatility in commodity prices, Centra has been the most aggressive, he said. The Manitoba Public Utilities Board, which recently concluded hearings into the issue as part of Centra's general rate application, is expected to hand down a decision by the first week of June. Lang said the company launched its natural gas price management program three years ago. It initially produced positive results, which were passed on to customers. "We are not involved in speculative trading," he said. "We are involved in a technical, statistically guided price management program, which was set up after significant consultation." But market volatility increased dramatically last year and resulted in Centra's first trading losses on a year-over-year basis. "The volatility of the market at that particular point in time caught us all by surprise," Lang said. Some of the losses were incurred in 1997, while others are applicable to this year. The utility has since implemented a major review of its price management program and is about to finalize new guidelines. Meanwhile, it has minimized trading activities. The 3% rate increase was requested as part of a general rate application based on a preapproved rate of return on equity of 9.91%. Natural gas prices, historically stable, have recently become increasingly volatile because of deregulation, increased North American demand, supply bottlenecks between Western Canada and the U.S. because of limited pipeline capacity and unusual weather. Volatility is expected to escalate as a result of continuing uncertainty over the ability of Western Canadian natural gas companies to come up with sufficient production to fill new pipelines to the U.S. Midwest. Canadian Gas Assoc Storage Survey biz.yahoo.com Sunken Oil Tower Raised in Gulf of Mexico Amerada Hess Corp. on Thursday recovered the tower section of an oil rig, which sank earlier this week, in a stroke of good fortune that appears to have kept its plans to develop a key Gulf of Mexico oil field on track. The New York-based oil company said that the 1,320 foot tall tower had been recovered with little, if any damage. It sank 100 miles off the coast of Louisiana while being towed out to Hess' Baldpate field. "We are thrilled, it came up quite easily,'' said company spokesman Carl Tursi. ''The best guess is that the project will be on schedule, it may be delayed by a few days or a week,'' said Tursi. The Baldpate development, situated in 1,650 feet of water, will use the world's first articulated tower design. The tower is as tall New York's Empire State Building and can sway up to 10 feet in a severe storm and 25 feet in a strong hurricane. Baldpate is one of the key projects, aimed at ensuring Hess can meet its target of adding 500,000 barrels of oil equivalent to its production by the year 2000. The field is located on the Garden Banks Block 260 in the Gulf of Mexico. The field has recoverable reserves of 100 million barrels of oil equivalent, of which about 60 percent is crude oil and 40 percent natural gas. Production was scheduled to start in the third quarter of this year and peak at around 50,000 barrels of oil and 150 million cubic feet of natural gas per day in early 1999.

To: Kerm Yerman who wrote (10839)	5/22/1998 1:17:00 PM
From: Kerm Yerman	Read Replies (9) \| Respond to of 15196

MARKET ACTIVITY / TRADING NOTES FOR DAY ENDING THURS., MAY 21 1998 (3) Countries In The News UK Offshore Oil Licensing Likely Before Summer End LONDON, May 21 - A British offshore exploration licensing round delayed for almost a year could finally be launched before the end of the summer, a Department of Trade and Industry (DTI) spokeswoman said on Thursday. ''We are progressively moving slowly towards launching it,'' she said. ''Hopefully, it will happen before the end of the summer term,'' she said, referring to the period when parliament breaks for a summer recess towards the end of July. The round has been delayed by ''policy technicalities,'' she said, without elaborating. Last month, a DTI official said the 18th licensing round would take off ''very soon.'' A month later, the oil industry remains in the dark and is not holding its breath that the licencing will happen soon. . ''We haven't heard anything yet. We're still waiting,'' said one oil company official. The 18th licencing round, which covers mature areas in the north, central and southern North Sea and the Morecambe and Liverpool Bay areas of the Irish Sea, was held up last year by legal challenges from environmentalists. ''In one sense it's quite good it's been delayed because hopefully it will be launched after the tax consultation paper is published,'' said an official at another company. ''If we're going to be stung by additional taxes and in the current atmosphere of low oil prices, I don't think there will be a great deal of enthusiasm.'' The British government proposed in March imposing new taxes on oil and gas production in the North Sea and this appears to have dampened enthusiasm for the round until the industry pores over the fine print of the new fiscal regime. A government consultation paper which was due to be published by the end of April has overrun its deadline. The Treasury (finance ministry) said last month it would be published shortly, but has so far failed to come up with a response when it might be expected. Oilfield operators in Britain warned British Energy Minister John Battle in a letter in April that the licensing round could be a flop because of the fiscal uncertainties caused by the fiscal review. The UK Offshore Operators Association (UKOOA), the offshore oil industry's trade body, said on Thursday said Battle has responded that he is convinced fiscal uncertainties will be resolved before the 18th licensing round is launched. ''We've been waiting since April for it (consultation paper on fiscal reform). We must wait and see,'' a UKOOA spokeswoman said. The government has proposed either extra corporation tax on oil and gas fields or the imposition of Petroleum Revenue Tax on all fields approved after March 1993. A final decision should be made law in next year's Finance Bill. Consultants Wood Mackenzie have warned that the proposed tax changes could hack up to three billion pounds off the worth of assets held by companies working in the North Sea. Blue-chip oil major British Petroleum (UK & Ireland: BP.L), Royal Dutch Shell (Shell)(RD.AS) and Exxon (XON) would top a list of 10 companies most hit by the changes, it said. Azeris, Foreign Oil Firms Eye $9 Bln In New Deals Lawrence Sheets BAKU, May 19 - Azerbaijan may sign more than $9 billion in new contracts with foreign firms this year to develop its Caspian basin oil and gas reserves, an official of the state oil company SOCAR said on Tuesday. The six possible new deals, all of which cover standard 25-year periods, signal a continuation of the swift pace the former Soviet republic of eight million has set to develop the energy sector, already the mainstay of its economy. Azerbaijan has already signed nine contracts with foreign companies worth over $30 billion in long-term investment in offshore oil fields since independence in 1991. Three of the new deals under discussion with firms and consortia also involve sites in the Caspian while three more will exploit on-land sites, Rafig Abdullajev, assistant to SOCAR President Natig Aliyev, said. ''Our people are waiting for the fruits of developing our energy reserves. In 100 years there may be other sources of energy and they won't be worth anything then. We need money today,'' said Abdullajev. The largest of the new contracts is a proposed $4 billion project between SOCAR and the so-called ''Japanese Consortium'' composed of JNOC (Japan National Oil Corp), Itochu Corp's (8001.T) Itochu Oil Exploration Co Ltd, JAPEX (Japan Petroleum Exploration Co Ltd), Teikoku Oil Co Ltd (1601.T) and Indonesia's INPEX (Indonesia Petroleum Ltd). It involves the Ateshgah, Yanan-tava, and Mugan-daniz fields located in deep water in the Caspian. The fields are estimated to contain 100 million tonnes of recoverable reserves. No figures as the individual shares of the sides in the deals have been determined. SOCAR and the consortium last year signed a memorandum of understanding, precursor to a full-fledged production sharing agreement. Abdullajev said SOCAR was also in talks with Italy's Agip (AGIS.CN) (ENI.MI), Japan's Mitsui & Co Ltd (8031.T) and Turkey's Turkish Petroleum (TPAO) to reach a 2.5 billion deal on the Kurdashi block of fields in the Caspian, estimated to contain 100 million tonnes of crude. SOCAR would have a 50 percent stake in the project, Agip 25 percent, Mitsui 15 percent, and TPAO five percent. Abdullajev said other firms were now submitting proposals for the remaining five percent stake. He said SOCAR was in talks with Ramco Energy Plc (UK & Ireland: ROS.L) to develop the Muradkhanli onshore site, located about 200 km west of Baku and worth $1 billion in long-term investment. SOCAR geologists say it also holds at least 100 million tonnes of recoverable reserves. Another on-site deal involves SOCAR, Canada's Commonwealth Oil and Gas Ltd, a unit of A and B Geoscience Corp (ABG/VSE),and Canada's Commonwealth Oil, and Union Texas Petroleum Holdings Inc (UTH). It would develop the Southwest Gobustan field, 35 km (20 miles) west of Baku and estimated to contain at least 20 million tonnes of recoverable crude and 12 billion cubic metres of natural gas. ''This contract is ready for signing,'' said Abdullajev, adding that total investment is estimated at $700-800 million over the life of the project. He said another $700 million project, in which SOCAR is negotiating with Frontera Resources, aims to exploit the Kursangi-Garabakhli fields near the town of Ali-Bayramli, about 100 km (60 miles) west of Baku. Recoverable reserves there are estimated at 25 million tonnes. British Petroleum (UK & Ireland: BP.L) and Norway's Statoil (STAT.CN) are also negotiating with SOCAR on a contract to develop the Abikha block of four deep water fields, located in the central part of the Caspian Sea, near what Azerbaijan considers its sea border with Turkemenistan. No estimate was given for possible investment or reserves in the block of fields. Abdullajev added negotiations were just beginning between SOCAR and Germany's VEBA AG (VEBG.F) subsidiary Deminex to explore and possibly develop the Sallahatin field in the central Baku archipelago, off the coast of the capital. He said it was not clear if a deal would be reached this year. Iran Sets Oil Tender, Spiced By U.S. Shift By Andrew Mitchell LONDON, May 21 - Foreign firms are gearing up for mouth-watering opportunities in Iran's energy sector after Tehran on Thursday set an early July launch date for its latest openings. The tender, to be held at a London conference on 1-3 July, provides energy firms with a swift opportunity to exploit this week's watershed U.S. decision to waive sanctions against a Total SA-(TOTF.PA)-led Iranian gas project. The relaxation in Washington's stance should release oil firms' pent-up hopes of breaking into Iran's mighty energy industry, which boasts the world's second largest gas reserves and third largest oil exports. The tender is given added lustre by including the first onshore offerings in Iran's upstream sector since the 1979 Islamic revolution. ''I think Iran is on the verge of an extremely exciting phase its oil and gas development,'' said Mehdi Varzi, head of energy research at Dresdner Kleinwort Benson. ''The U.S. waiver is obviously good news, and I can see the majors coming in a big way,'' he added. Around 13 onshore projects will be offered out of nearly 30 in total, a senior official at state National Iranian Oil Company (NIOC) said on Thursday. But the list has yet to be finalised and could involve even more projects, he added. Exploration, development and enhanced oil recovery projects will all be on the table. The NIOC official confirmed that the onshore Darkhovin field, which contains an enormous 18 billion barrels of recoverable oil, will be among the offerings. Italy's ENI (ENI.MI), which has already carried out appraisal work at Darkhovin, is considered to be in pole position there. Projects at the big North Pars and South Pars gas fields will be on offer too, the official said, confirming preliminary indications given at a Dubai conference in March. But Iran has now dropped plans to offer out projects in the Caspian region, the official said. These are now being organised into a separate tender. All eyes have been on the launch of the new tender since U.S. President Bill Clinton's Monday announcement that Total, Russia's Gazprom (quote from Yahoo! UK & Ireland: GAZPq.l) and Petronas of Malaysia (PETR.KL) would not be penalised for their contract to develop part of South Pars. Many believe the decision in effect shelved the 1996 U.S. Iran and Libya Sanctions Act (ILSA) which threatened to punish energy investment in the two countries, and was aimed specifically at strangling Iran's ''buy-back'' plans. Washington also promised more waivers for European Union companies so long as the EU co-operated with Washington on Iran policy. Yet some oil executives have cautioned that any future waivers would be tied to specific projects, in effect giving Washington a veto on their business plans. And the approach of U.S. Congressional elections could encourage the Clinton administration to restore a tough line on ILSA, executives say. July's conference will be attended by 50 officials from state National Iranian Oil Company. The full list of projects will be unveiled on 2 July. A presentation will also be held in Tehran two or three weeks after the London launch, the NIOC official said. The projects will be offered under the buy-back model under which firms finance projects for repayment in production. It is Iran's chosen technique for getting around constitutional opposition to foreign energy participation. Iran has been forced to court foreign investment as it seeks access to Western technology to stem a slide in production from ageing fields. The issue has become even more pressing this year as revenues were slashed by sickly oil prices. And while foreign oil executives had expressed fears that conservatives in Iran's parliament could oppose foreign entry to onshore upstream projects, NIOC says it has now got all necessary parliamentary approval. Iran's energy riches seem likely to guarantee an enthusiastic turnout for the tender. But this week's U.S. announcement contained no promises that Russia or other countries would receive similar treatment to EU firms. The limited size of some projects and middling returns has deterred some international firms from previous buy-back offerings. Unilateral U.S. trade sanctions exclude American companies from Iranian business. Analysts also warn that the scale of the tender means Iran must prioritise its projects carefully. ''I don't think Iran can go to international financial markets and get loans for all these projects at the same time,'' said Dresdner Kleinwort Benson's Varzi. Iran's initial tender, launched in 1995, only succeeded in clinching two foreign groups to new projects -- Total at South Pars, and Canada's Bow Valley at the Balal field (BVX.TSE). Two of Bow Valley's planned partners have already pulled out, jeopardising its plans. Elf Aquitaine (ELFP.PA) and Agip SpA (AGIS.CN) are understood to be in advanced talks for buy-back development of the $600 million offshore Doroud field. Oil Strike, Poll Violence Unhinges Colombia BOGOTA, May 21 - Colombia showed growing signs of becoming unhinged ahead of the May 31 presidential elections as an oil workers' strike threatened to cut fuel supplies to Bogota and politically-motivated violence surged across the country. In comments, National Planning chief Cecilia Lopez conceded the country was in political turmoil as gunmen of the left and right staged pre-election attacks on government security forces and defenseless civilians. Meanwhile, Joaquin Gomez, head of state-run oil company Ecopetrol's largest refinery, estimated the on-going strike by the powerful USO oil union had left Bogota with just three days supply of jet fuel and nine days gasoline stocks. Local media reported fast dwindling fuel supplies in many smaller provincial towns in western Colombia. ''Colombia is living through a political problem of terrible instability. We are seeing terrible (political) cannibalism,'' Lopez told Reuters after a meeting in Bogota. In the last month, right-wing death squads have massacred more than 50 civilians in attacks across the country. The most recent, over the weekend, left 11 people dead and more than 40 others missing in Colombia's main oil production center of Barrancabermeja, in northeast Santander province. It was that attack that prompted the Communist-led USO union to join grassroots movements in Barrancabermeja in a citywide strike from Monday. The stoppage was intended to last 48 hours but has been extended indefinitely, USO leaders said Thursday. Top government officials met with union and social leaders throughout the day but all sides were still huddled in talks by early evening. Gomez, head of refining operations in Barrancabermeja, said 90,000 barrels per day of gasoline output had been paralyzed by the USO strike. The union had also halted pumping on oil and fuel pipelines leading from the refineries to Bogota and the west of the country. Mines and Energy Minister Orlando Cabrales issued a call to motorists not to begin panic buying of gasoline. Civil Aviation authorities, meanwhile, said the fuel situation was being carefully monitored but so far airlines had not grounded any flights. The oil strike also paralyzed Colombia's largest oil pipeline for the first time since it came into operation in the second half of last year. The Ocensa pipeline serves the 320,000 barrel per day Cusiana-Cupiagua field in eastern Colombia, operated by British Petroleum Co Plc (UK & Ireland: BP.L). A BP spokesman said the company had limited on-site crude storage capacity and would begin ramping down production at the field Thursday night if the oil strike was not resolved. The growing disorder coincided with a statement by Moody's Investors' Service that it was downwardly revising its ratings outlook on Colombia. The agency assigned a negative outlook to Colombia's Baa3 foreign currency ceiling for bonds and notes and to the Ba1 foreign currency ceiling for bank deposits. It blamed the move on growing concerns related to continued fiscal deterioration, current account inbalances and ''last but not least to the destabilizing consequences of guerrilla activity''. At least 19 people, including soldiers, policemen and Marxist guerrillas, were killed in fighting across Colombia Thursday. The authorities have predicted violence will in the final days before the May 31 presidential elections. More On Columbia Pumping operations along Colombia's Ocensa pipeline, the largest in the country, have been paralyzed as a result of an indefinite strike by the main oil workers' union USO, British Petroleum Co Plc (UK & Ireland: BP.L) said Thursday. The pipeline serves the giant Cusiana-Cupiagua oil field in eastern Colombia. Field operator BP said production at the 320,000 barrels per day field would have to be ramped down from ''late Thursday'' or early Friday if the strike continued. ''The Ocensa pipeline was shut down as of last night around 9 p.m. (2100 local time/0600 GMT) as a result of the USO strike,'' a BP spokesman told Reuters. ''We have limited on-site storage capacity for about a day and by tomorrow morning or even this evening we would be forced to start ramping down production if the strike continues,'' he added. The USO launched a strike in the main oil refining center of Barrancabermeja late Monday after a right-wing death squad killed at least 11 people and abducted more than 40 others over the weekend. The union has now voted to continue the stoppage indefinitely and has vowed to halt all crude pumping operations. The BP spokesman said Ocensa pipeline operators had been barred from entering pumping stations by USO demonstrators but explained that BP had enough crude in storage at the Caribbean coast lifting terminal at Covenas to meet export commitments until June 1. This is the first time the Ocensa pipeline has been forced to halt crude pumping since it came into full operation in the latter half of last year. It was, however, bombed by leftist rebels on one occasion last year shortly after all the pipework was completed. Colombia's second largest pipeline, the Cano Limon-Covenas, was operating normally Thursday morning, U.S. oil giant Occidental Petroleum Corp (OXY) said. END - END - END