MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, JULY 06, 1998 (7)
COUNTRIES IN THE NEWS
Hanoi Promises New Climate For Oil Industry
HANOI, July 7 - Vietnamese Prime Minister Phan Van Khai on Tuesday promised disgruntled foreign oil and gas firms a fresh climate for investment and said the government would heed their complaints.
Speaking after oil executives and foreign diplomats had delivered a blunt assessment of the industry's woes at a half-day conference, Khai said he wanted energy firms to profit from their investments.
For most of the morning government policies on the sector, and particularly those of state oil monopoly Petrovietnam, came in for sustained criticism.
Participants said the industry was hobbled by red tape, unrealistic tax rates and complained of the growing difficulty foreign oil and gas firms were having in justifying current expenditure in Vietnam given poor results.
Khai, who has frequently reiterated the government's commitment to economic reform, promised action.
''We will create a new climate for you,'' Khai said in translated remarks.
''I demand the MPI (Planning and Investment Ministry), Petrovietnam and the Customs Department to study these initiatives and to work out solutions and streamline the bidding and negotiation process.''
Besides complaints and ideas raised by various speakers, some 100 pages of suggestions had been forwarded to the Planning and Investment Ministry, officials said.
Some participants said that while they were encouraged by Khai's presence at the meeting, the government needed to move quickly.
"This all must translate into reality," said one.
When communist-ruled Vietnam began to open its doors in the late 1980s, it was seen as a new energy frontier.
But by the mid-1990s oil exploration and licensing had sagged, with some foreign firms pulling out citing problems with the bureaucracy and dashed expectations.
U.S. ambassador to Vietnam Pete Peterson said the country's economic success was linked to the energy sector.
In an impromptu speech, Peterson said Hanoi faced a closing window of opportunity to keep investors in the industry happy.
''Mr Prime Minister, I hope you understand that millions of dollars have been invested and very few dollars have been made,'' Peterson said.
''My view is not industry-oriented but to the development of the economy. Vietnam's success as an economic power in Asia is linked directly to the energy sector and the key issue is how to get energy to the end user.''
Of major concern has been a stalled project between British Petroleum (UK & Ireland: BP.L) and Norway's Statoil (STAT.CN) to exploit the country's largest gas reserves.
More than four years after the reserves were found off Vietnam's southeastern coast, the BP and Statoil Alliance has been deadlocked with state oil monopoly Petrovietnam over pricing the gas.
The BP and Statoil Alliance want to tap gas reserves officially estimated at 58 billion cubic metres.
But Ho Si Thoang, chairman of the board of Petrovietnam, asked for understanding and sympathy from foreign gas firms over attempts by his company to secure lower gas pricing from investors than international norms.
Vietnam, mainly through its Russian-partnered joint venture Vietsovpetro, produced an estimated 5.56 million tonnes of crude oil in the first six months this year, up from 4.60 million tonnes in the same period in 1997.
The country plans to pump 12 million tonnes this year and has a target of 20 million tonnes of crude in the year 2000, rising to between 27 and 28 million tonnes by 2005.
Colombia Rebels Outline Deal On Oil Industry
BOGOTA, July 5 - Colombia's ''petro-guerrillas'' have offered to halt attacks on oil infrastructure if the government sets up a new industry watchdog and allows the rebels to help map out new rules on foreign involvement in the sector.
Milton Hernndez, international spokesman of the National Liberation Army (ELN), issued a call for the creation of a National Oil Council in an interview with the leading El Tiempo newspaper published on Sunday.
The Cuban-inspired ELN, Colombia's second largest guerrilla army founded in 1964, has long complained of the ''excessive'' role of foreign multinationals in this Andean nation's oil industry.
Since the mid-1980s, it has routinely targeted the oil sector and in particular staged hundreds of dynamite attacks on one of the country's largest pipelines.
''We could create the National Oil Council. If that was possible, the ELN would immediately halt its attacks on oil infrastructure,'' Hernndez told El Tiempo.
''We want to guarantee the sovereign control of our oil and make sure that multinationals invest and transfer technological know-how,'' he added.
Hernndez and at least five other ELN chieftains are due to resume talks with some 40 Colombian social, political and religious leaders in Germany next weekend.
The German-brokered meeting is aimed at laying down the ground rules for future peace negotiations with president-elect Andrs Pastrana, who takes office on August 7. Among the topics up for discussion, the issue of oil is sure to loom large.
Since late 1985, the rebels have blown up the 460-mile (740 km) pipeline that leads from Cao Limn in northeast Arauca province to the Caribbean coast lifting terminal at Covenas at least 538 times.
In that time, more than 1.7 million barrels of crude have been spilled, repair work has cost more than $238 million and the value of lost output has been put at more than $1.5 billion, according to the state-run oil company Ecopetrol.
Most of the explosions have been blamed on the ELN, although in the last month the larger Revolutionary Armed Forces of Colombia (FARC) vowed to step up its own attacks on the 250,000 barrel per day capacity pipeline.
Last year, the pipeline was blown up a record 66 times. So far this year, the guerrillas have bombed it at least 35 times, most recently last Wednesday.
The pipeline, the second largest in the country, began pumping crude again early Sunday after engineers fixed the break caused by last week's blast.
In the face of repeated rebel attacks, U.S. oil giant Occidental Petroleum Corp (OXY) was forced to declare force majeure on output in the 155,00 barrel per day field -- an emergency measure that allows it to temporarily default on contractual obligations -- 13 days ago. The measure was not lifted on Sunday.
In his interview with El Tiempo, Hernndez suggested a National Oil Council could be set up for an initial period of four months, and include the Mines and Energy and Environment ministers, leaders of the fiercely nationalistic and Communist-led USO oil workers' union, and ELN chiefs.
The ELN have in the past called for Ecopetrol to take a greater role in oil exploration and production and to limit the involvement of multinationals in the industry to those cases where it is ''strictly necessary''.
Ecopetrol chiefs have, however, said the company does not have the financial muscle to go it alone in the Colombian oil industry.
Sources among some of the multinationals have dismissed the ELN's so-called oil policy as ''wholly unrealistic'' and say Colombia has neither the money nor the technical ability to go it alone in oil.
Oil is Colombia's largest export earner and has proved a huge draw for foreign investment despite continuing security concerns at rebel sabotage efforts.
Russia, Kazakhstan Sign Caspian Sea Accord
MOSCOW, July 6 - Russia and Kazakhstan signed an agreement on Monday dividing the northern sector of the Caspian Sea, the first such deal to clarify borders between states surrounding the oil- and gas-rich body of water.
The Caspian contains reserves of oil and gas estimated at up 15 billion tonnes of oil equivalent, and has been touted as the world's next great oil province.
But development of its hydrocarbon resources has been held up by the absence of any legal clarity over the status of the water in which the reserves are located.
The accord, signed by President Boris Yeltsin and Kazakh leader Nursultan Nazarbayev, could pave the way for delineating the sea between all neighbouring republics, allowing further energy development, analysts said.
The document maps out a frontier beneath the Caspian, running along the seabed, but leaving the water itself in common hands.
The agreement allows each side to regard subsea resources on either side of the frontier as the property of the state in whose sector they fall, therefore providing legal protection to allow extraction of oil and gas to go ahead at last.
It marks a growing trend towards reaching agreement on the thorny issue which has been building for some months.
''More countries will start to sign up, the momentum will be built and ultimately there will be an overall agreement between the bordering countries,'' said analyst Jim Henderson of MFK Renaissance in Moscow.
There are strong economic reasons for other countries to follow suit, he added. ''The international investment community will clearly direct its funds towards those areas where the risks are least.''
Reaching agreement has proved one of the most intractable diplomatic legacies left behind when the Soviet Union broke up.
The Caspian is surrounded by five sovereign states, Russia, Kazakhstan, Turkmenistan, Iran and Azerbaijan. Until 1991, there were only two littoral states - Iran and the Soviet Union.
But the collapse of the Soviet Union meant three new republics, Turkmenistan, Azerbaijan and Kazakhstan, all wanted a share of the water they enclose.
For all these newly-created countries, the potential oil and gas wealth under the water represented their best chance of getting rich quickly. The obstacle was that no decision could be reached on how, or even if, the sea should be carved up.
Both Russia and Iran took the view that the Caspian was legally a lake, not a sea, and so any resources should be the joint property of all the states surrounding it.
The newly independent states took the line that it was a sea and should be carved up with national borders clearly dividing it into different areas, to be considered as integral parts of the territory of the states in question.
Iran is still holding out for a condominium involving joint ownership of the resources, but analysts say a softening of its position may soon be seen.
''Iran is keen that at least some of the Caspian oil should go south through its territory to the (Middle East) Gulf,'' said Julian Lee, senior energy analyst at the Centre for Global Energy Studies in London.
''There could be room for negotiation between Kazakhstan and Iran, and between Turkmenistan and Iran, that in return for supporting the division of the Caspian, then pipelines will be built,'' he said.
''Russia has come to the conclusion that with its other interests in the Caspian, it serves its purposes better to agree on a sectoral division of at least the sub-surface resources,'' said Lee.
''It will hope to preserve its economic and political interests through the involvement of companies like LUKoil (LKOH.RTS) and through pipelines from the Caspian running through Russia,'' he added.
Henderson noted that Iran was already moving closer to the interests of western oil companies, citing the country's offering of major onshore blocks to foreign investors in London last week.
''They're the least willing at the moment but ultimately they'll come round,'' he said.
Turkmen leader Saparmurat Niyazov began a visit to Iran on Monday and the Iranian news agency IRNA said the division of the Caspian was on the agenda.
IRNA quoted Niyazov as calling for ''a wise and just division of the Caspian resources so that none of the littoral states incur losses.''
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