Platts Article

] www.platts.com Oilgram News Volume 84 / Number 67 / Friday, April 7, 2006

NYMEX to trade contracts Lyondell-Citgo Houston refinery for sale on CME Globex platform Deal could fetch $4 billion, end troubled relationship New York—The New York Mercantile Exchange and Chicago Mercantile Exchange announced New York—Warring partners Lyondell Chemical and Venezuelan state oil giant PDVSA’s Citgo April 6 an agreement to launch electronic Petroleum said April 6 they have put their 268,000 b/d Lyondell-Citgo heavy, sour crude trading of NYMEX energy and metals futures refinery on the Houston Ship Channel up for sale. and options contracts on CME’s Globex elec- Industry consultants expect the high-complexity, high-conversion plant to fetch upward of tronic trading platform. $4 billion. Among likely interested bidders is Brazilian state oil major Petrobras, which was Terms of the agreement were not speci- reported early last year to be in talks for Lyondell’s 59% stake in the joint venture. fied. The agreement lasts through 2016, with Petrobras said April 6 it is “studying business opportunities...in several countries,” but Globex the exclusive electronic trading plat- “isn’t able to reveal details.” form for NYMEX. Last fall Petrobras agreed to pay Astra Oil $370 million for a 50% stake in its former Electronic trading of the NYMEX’s main Crown Central refinery, a close neighbor to Lyondell-Citgo, and has now said it will fund energy products—crude, heating oil, unleaded most of the $400 million needed to upgrade that 110,000 b/d plant to process 70% heavy gasoline, natural gas—will begin trading on crude, including Brazilian Marlim grade. Globex side-by-side with NYMEX floor trading Lyondell-Citgo is one of the largest “full conversion” refineries in the US and the world. in the second quarter of 2006, the exchanges It is able to run entirely on heavy, sour crude and upgrades every barrel to either high-value said in a statement. The smaller-size E-mini gasoline, distillate, lube or aromatics, or converting its “bottoms” to petroleum coke. It has contracts will also begin trading then. at least two crude stills, a large fluid cat cracker and two delayed cokers. Its Nelson com- COMEX electronic metals trading and all plexity rating is 12.2. energy contracts currently traded after-hours The sale of the plant would end the troubled relationship between Lyondell and PDVSA, on the ACCESS platform are anticipated to which in recent years has been mired in litigation centered on the plant’s “netback” launch on Globex during the third quarter. arrangement to buy heavy, sour Venezuelan crude. As part of the sale announcement, Lyon- The NYMEX and CME are aiming for a dell and PDVSA said they have agreed to end cross-litigation in Manhattan federal court, for June 1 launch, NYMEX President James New- an undisclosed “cash settlement.” some said April 6 during a conference call. NYMEX contracts will be launched on (Continued on page 5) Globex in phases, NYMEX said. The goal is to list all electronic NYMEX contracts “as Niger Delta security remains a concern despite meeting quickly as possible,” Newsome said. Open outcry contracts will then be listed as part of Paris—Nigerian industry sources April 6 wel- ment partners and donors’ thing,” NYMEX’s plan to run simultaneous side-by- comed the outcome of a meeting with Presi- A spokesman for the Delta state govern- side open outcry and electronic trading. dent Olusegun Obasanjo and Niger Delta lead- ment said he did not expect Shell, the main NYMEX expects to release the exact con- ers but were skeptical as to whether it was target of a series of militant attacks, to tracts to be listed in a matter of weeks, after enough to persuade oil companies to return resume production any time soon. the NYMEX Board of Directors has made a to abandoned fields. “I am not in their shoes but in as much final decision on which contracts to list. The Obasanjo agreed April 5 to set up a new as they want to make profit, they want to start NYMEX, however, would not comment on committee in an attempt to end the violent production immediately. They will be a bit whether the full-size contracts would be physi- unrest in the Niger Delta that has seen the skeptical, they will want to watch events cally settled, like the open outcry contracts, or country’s oil production cut by more than unfold, I would say they might want to wait for cash-settled. 20%. The president said a panel would be the inauguration proper before they make any NYMEX will clear all of its contracts that inaugurated April 18 made up of representa- decisions,” the spokesman told Platts. trade through Globex. CME will designate a tives from the nine oil-producing states, Niger A spokeswoman for Shell said the compa- certain number of market makers to build liq- Delta Development Commission, oil company welcomed the initiative but gave no time uidity in the energy contracts. These market nies, ministries of oil, works, power and steel frame on when it might resume 445,000 b/d makers will trade at NYMEX member rates. and state-owned NNPC. of its shut-in production. “[Shell] hopes that “Outsourcing the electronic trading of our “The Niger Delta needs special attention it leads to constructive dialogue that will help energy futures contracts to CME will ensure by all of us,” Obasanjo said, quoted in the address the developmental needs of the Niger that we continue to meet the needs of our Nigerian ThisDay newspaper. “It is not a feder- Delta in a holistic manner,” she said. customers while providing additional liquidity al government attention alone, not a state nor Chevron, Nigeria’s third biggest operator, to our open outcry trading platform,” said local government thing alone. It is a communi- said the oil companies had not been directly Mitchell Steinhause, chairman of NYMEX, in a ty, family, individual, oil companies, develop- involved in the meeting but a spokesman said statement.

(Continued on page 5) (Continued on page 6)

The McGraw Hill Companies VOLUME 84 / NUMBER 67 / FRIDAY, APRIL 7, 2006 OILGRAM NEWS

US companies ordered to cover Congo debt Lack of rigs may delay drilling at Cepu oil block Judge seeks garnishment of royalty oil payments Jakarta—Pertamina and ExxonMobil might Houston—Oil companies with operations in But sources close to the case confirmed have to delay drilling on their jointly-held Cepu developing nations may face a new financial they consider the ruling a victory for the cred- oil block in East Java from September this challenge after a US judge ruled April 5 that itors and a defeat for the oil industry. They year to early 2007 due to a shortage of avail- creditors may use them as vehicles for collec- estimated that the debt involved may be as able rigs, a senior official of the Indonesian tion of bad debts overseas. high as $65 million and projected the value state-owned company said April 6. More specifically, US District Judge Keith of next week’s royalty lifting of 550,000 bar- “We may delay our initial drilling plan from Ellison ordered three units of Europe’s Peren- rels from the Yombo Field at $20 million to around September/October this year to early co Group to post a surety bond covering the $30 million. 2007 because of a rig shortage. We are hav- value of royalty oil to be lifted next week by ing trouble finding a rig. However, if we find a the Republic of the Congo as payment for Debt collectors rig, we will start drilling based on our initial debts owed by Congo to a group of creditors. One source from the oil industry side plan,” Pertamina Vice President Iin Arifin Those creditors and the court consider charged that the ruling threatens to force US Takhyan said. the group targets for garnishment on the oil companies to act as debt collectors for Pertamina and ExxonMobil plan to drill 10 Congo debt, seeking to seize the value of roy- so-called “vulture funds” that buy foreign development wells in the Banyu Urip discovery alty oil payments from the oil companies to debt. in Cepu in 2007, Iin said. Earlier the two satisfy the unpaid debt just as they would But sources close to the creditors said companies had said they planned to produce from the payroll checks of an employer with a they consider the oil industry’s fears exagger- oil at Banyu Urip 31 months after the Cepu worker who owed them money. ated, noting that creditors have a right to use Joint Operating Agreement was signed on But the implications for the industry as a the US court system to collect debts. March 15 this year (ON 3/16). whole have attracted the attention of other In this case, the bond would remain in Meanwhile, upstream regulator BPMigas oil companies, such as Chevron, which the court registry as a promise to pay pend- has asked Pertamina and ExxonMobil to echoed the industry viewpoint last year in a ing results of the trial, now scheduled for review the plan of development they submit- brief for the Congo case. October 30. ted earlier. “The Congo has expressed its intent, if “We are reviewing our PoD currently and Powerful incentive necessary, to take the lifting by force,” wrote plan to re-submit to BPMigas on April 21. We “Given the size of their debts, many for- Judge Ellison in his ruling. The judge ordered expect to get approval on May 21,” Iin said. eign nations will have a powerful incentive to the Perenco companies to post a bond equal ExxonMobil pegs reserves at Banyu Urip, limit or curtail their dealings with American to the oil’s value in the registry of the court the major oil discovery in Cepu, at 600 million companies in ways that will harm the compet- by May 1. barrels, and expects 170,000 b/d of peak itiveness of American companies and impair The case lists four creditors with inter- production from the discovery. It has estimat- the foreign relations of the United States,” ests in the Congo’s debt: FG Hemisphere ed $1.1 billion of spending to commercialize Chevron’s lawyers warned in their March 4, Associates, National Union Fire Insurance Banyu Urip alone and a total investment of $2 2005, legal brief on the case. Company of Pittsburgh, AF-CAP Inc and Walk- billion to develop the entire block.—Anita In addition, Chevron said the case threat- er International Holdings. Nugraha ened to inject “unnecessary friction into the Pursuing their claim against the Congo, dealings between foreign nations and Ameri- they charged in a recent motion to the court can companies.” that the oil companies “are fellow travelers Platts Internet links No one was immediately available for with the Congo in implementing a sophisticat- Email the editors at Platts Oilgram News Chevron to comment on the latest ruling, ed program of fraudulent conveyances and with your comments, questions or news at which is expected to be appealed. And none transactions designed to defraud the Congo’s [email protected] of the attorneys involved would discuss the creditors.”—Gary Taylor Visit our website at www.platts.com case for attribution.

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Alaska state officials to revamp pipeline rules after BP oil spill EPA civil action underway, cleanup nearly completed Juneau—State of Alaska officials said April 5 approaches, examine the regulatory regime in 2005 and $50 million the year before. they will revamp new regulations covering oil- and recommend changes to reflect latest At a March 5 press conference, Murkows- field pipeline integrity and are forming a tech- technologies, and ensure the best available ki complimented BP on its cleanup work but nical task force of three state agencies and technology is being applied to Alaska’s North also said, “We need to take a good hard look the federal Office of Pipeline Safety to guide Slope pipeline system. at our North Slope pipelines and the pro- future regulatory oversight. The governor also directed DEC to work grams to protect them. The oil companies Governor Frank Murkowski ordered cre- with other agencies and industry to convene a have complied with leak detection standards, ation of the task force after returning from an conference in Alaska on pipeline integrity to they have extensive corrosion monitoring pro- inspection of spill cleanup operations from a gather information from across the globe and grams, yet we still had a very substantial 34-inch oilfield pipeline in a BP-operated Prud- to examine proven or promising technologies. leak.” hoe Bay field on the North Slope. Dietrick said his agency has been satis- Meanwhile, cleanup at the spill site is Larry Dietrick, spill prevention and fied to date with corrosion prevention pro- nearly complete, DEC spokeswoman Lynda response director in the state Department of grams of BP and ConocoPhillips Alaska, the Giguere said. BP crews are cleaning remain- Environmental Conservation (DEC), said in an other North Slope field operator. ing oil sheen from tundra and are preparing to interview his agency will soon enact new regu- Daren Beaudo, spokesman for BP, said his extract ice from frozen lakes that contains oil, lations covering pipeline integrity, but a section company has raised spending on anticorro- she said. Beudo said BP resumed partial pro- relating to single-phase pipelines like the 34- sion programs over the last three years, with duction from Gathering Center 2, which was inch pipeline that developed the recent leak $71 million for inspection and chemical treat- shut in March 1 when the leak was detect- will be delayed and reworked pending comple- ment budgeted this year, up from $58 million ed.—Tim Bradner tion of an investigation into the incident. Internal corrosion is suspected as having Hebron seen as warning for Mackenzie Gas Project created a small hole in the line. The spill was detected by a BP Exploration Alaska employee Vancouver—The decision by a Chevron-led Talks have just begun with Canada’s new March 1. partnership to shelve Newfoundland’s Hebron Conservative government on a fiscal regime US Environmental Protection Agency offi- oil project should be a reality check for those that could include C$1.2 billion in “enhance- cials in Anchorage confirmed a civil investiga- who take Canada’s Arctic natural gas project ments” to ensure the project is economically tion is underway on the accident, but the for granted, said Northwest Territories Indus- competitive. agency would not confirm reports a criminal try Minister Brendan Bell. In addition, the Deh Cho First Nations, investigation is also underway. EPA policy is to It would be “naive” to think that the whose land covers 40% of the pipeline right- neither confirm nor deny criminal investiga- Mackenzie Gas Project consortium is unwilling of-way, have yet to sign an agreement giving tions, EPA Region 10 spokesman Mark MyIn- to “pack up and go elsewhere” just because operator Imperial access to land in return for tyre told Platts from Seattle. about C$400 million ($344 million) has been jobs and business opportunities. BP will be fined $8 per gallon by the state spent on pre-engineering for the C$7.7 billion Bell said it is understandable that the for oil spilled in the pipeline break, DEC venture, he told Platts April 6 from Anchorage, Deh Cho “want to get the best possible deal, spokeswoman Lynda Giguere said. The fine Alaska. so they are going to negotiate hard.” would be based on a final calculation of oil The collapse of negotiations between But he warned that the Deh Cho face a spilled March 5. The estimate of spilled oil Hebron partners and the Newfoundland gov- June 30 deadline to join the Aboriginal ranges from 101,000 to 267,000 gallons, but ernment is a clear message that the Macken- Pipeline Group, which hopes to secure one- BP will be credited for 21,042 gallons of zie partners—Imperial Oil, ConocoPhillips third ownership of the pipeline for native com- spilled crude it recovered in the first 36 hours Canada, Shell Canada and ExxonMobil Cana- munities in the Northwest Territories, and is from the time the leak was detected March 1, da—won’t hesitate to spend their capital on seeking a federal loan guarantee to reduce its she said. That means BP could face potential other assets, Bell said (ON 4/4). borrowing costs. fines ranging from $640,000 to $1.96 million. He said there is a danger of complacency “There is only so long the Deh Cho can Dietrick said regulation of oil field now that the Mackenzie project is before regu- hold out without jeopardizing the project,” Bell pipelines is within state jurisdiction, but he lators after years of preliminary work to devel- said. His own government is also waiting for welcomes participation from the Office of op Mackenzie Delta gas and start deliveries word from Ottawa that the new government Pipeline Safety in a new Arctic Pipeline Tech- of 800,000 Mcf/d to 1.2 Bcf/d in 2011 to will uphold a promise made by the previous nology Team being created. southern Canadian and US markets. Liberal administration and create a C$500 The team would consist of the Alaska Bell warned that although the regulatory million fund to pay for some of the social and Department of Environmental Conservation, hearings are “going very well,” there are still economic impacts of a pipeline. Department of Natural Resources, the Alaska many challenges for the Mackenzie propo- Bell said he is confident that proposal will Oil and Gas Conservation Commission and nents to resolve before they are ready to give soon be put before the cabinet for ratifica- the federal Office of Pipeline Safety final corporate approval to start pipeline con- tion.—Gary Park Dietrick said the team will work with struction. industry and other government or non-govern- mental professionals with expertise in arctic Weekly EIA gas storage levels (Bcf) pipeline engineering on leak detection, corro- Estimated working gas in storage for the week ended Mar 31 sion prevention, monitoring and inspection. The team will share technical resources This week Last week Change Year ago 5-Year average and information related to pipeline integrity in Consuming Region East 846 861 -15 546 489 arctic and sub-arctic climates. It will trou- Consuming Region West 231 229 2 206 176 bleshoot design, construction, operation and Producing Region 618 615 3 495 376 maintenance problems, validate engineering Total US 1,695 1,705 -10 1,248 1,041

Devon and Marathon Japan, China spar over disputed field work report Q1 output data Verifying whether CNOOC has started production New York—Devon Energy said April 6 its first- quarter oil and gas production would be 4% Tokyo—Japan has been trying to verify each at Chunxiao and Tianwaitian and a cen- lower than previous forecasts due to delays whether Chinese offshore producer CNOOC tral platform at Tianwaitian. Gas would be restoring production hit by Gulf of Mexico hur- has started production at a disputed gas field exported by a 563-km pipeline to an onshore ricanes last year. in the East China Sea, Vice Economy, Trade terminal at Ningbo in eastern China’s Zhejiang Devon said it now expects first quarter pro- and Industry Minister, Hideji Sugiyama, said at province. duction will be about 50 million barrels of oil a press conference April 6. equivalent, down from a previous estimate of Sugiyama said Tokyo has taken note of a Gas output 52 million boe. The company also cut full year media report earlier this week that China Gas output from the first phase is expect- production to 215 million boe from 217 million began gas production on January 23 at the ed to reach 2.5 billion cu m/year (88 boe, while reaffirming its 2007 production fore- Chunxiao field and that its output had Bcf/year) within two years. CNOOC Ltd holds cast of 232 million to 236 million boe. reached up to 300,000 cubic meters/day a 50% interest in of the Xihu Trough project, Devon said it had some 23,000 boe/d of (about 10,600 Mcf/d), but has not deter- while Chinese oil group Sinopec has the US Gulf output suspended throughout the first mined the authenticity of the report. remaining half. quarter due to ongoing repairs to a down- “We are trying to confirm the facts soon The fifth round of talks between Japan stream third-party pipeline system. Some through diplomatic channels,” Sugiyama told and China over disputed gas fields in the East 13,000 boe/d is expected to be restored in reporters. “There is a possibility that gas pro- China Sea will likely be delayed to May from the second quarter, Devon said, with the duction could have started at another field the first half of April, a Japanese government remaining 10,000 boe/d due back over the near Chunxiao. source told Platts April 5. In the last high- next 12 months. On January 23, Yang Hua, chief financial level meeting held in Beijing March 6-7, Japan Separately, the company also said it will officer of CNOOC, said the company had fin- and China agreed to study each other’s pro- take a non-cash impairment charge of $80 mil- ished development and construction of the posals for resolving the dispute before meet- lion to $90 million in the first quarter related to Chunxiao gas field in the Xihu Trough, adding ing again. However, the content of the propos- unspecified international exploration assets. that Chunxiao was technically ready to start als was not made public. Also April 6, integrated major Marathon Oil production. However, the downstream side of Tokyo has objected to Chinese companies said its first-quarter production sold averaged the project, which involves distributing the off- exploring and developing a number of gas 365,000 to 370,000 barrels of oil equiva- shore gas to end-users, still required some fields in the East China Sea that it believes lent/day with production available for sale of “fine-tuning,” he said then, delaying the opera- could extend into its territory. Beijing does not 415,000 boe/d, topping prior guidance of tional start of the project. recognize a median line that Tokyo uses to 395,000 to 410,000 boe/d. The difference Chunxiao is an in area disputed by Japan, determine the boundary between the two between production available for sale and pro- and is one of six fields in the Xihu Trough countries’ so-called exclusive economic zones. duction sold volumes was due to underliftings CNOOC believes contain total oil and gas The two neighbors resumed informal and in Libya, Equatorial Guinea and the UK, the reserves of around 77.8 million barrels of oil sub-cabinet level talks on the East China Sea company said. equivalent. The other fields in the 59,565 sq dispute in January after negotiations col- Marathon said first quarter crude price km Xihu Trough, some 450 km (281 miles) lapsed last October on a diplomatic row realizations were “slightly higher” than levels southeast of Shanghai, are Canxue, Duan- caused by Japanese Prime Minister Junichiro in January and February, but its US gas prices qiao, Tianwaitian, Baoyunting and Wuyunting. Koizumi’s visit in October 2005 to a controver- in the first two months of the year were The first phase of CNOOC’s planned devel- sial Tokyo shrine honoring 2.5 million Japan- $1.25/Mcf below fourth-quarter realizations. opment involves building a wellhead platform ese war dead.—Takeo Kumagai The company reiterated prior expectations for exploration expense of $70 to $95 million. Its US exploration expense is seen at $35 to Bolivia declares force majeure after pipeline rupture $50 million with international outlays at $35 to $45 million. Rio de Janeiro—Force majeure has been declared on Bolivian natural gas and liquids output “Relatively strong” Midwest US refining “throughout the production chain” after ruptured pipelines in the southern Tarija region shut margins in the first quarter were ahead of a in gas and liquids output there, a well-placed Bolivian gas industry source told Platts early year-ago, Marathon said, adding it also bene- April 6. fited from favorable sweet/sour differentials. An 8-inch rupture in a Petrobras pipeline carrying about 20,000 b/d of liquids from the “The company estimates its refining and gas fields of San Antonio and Margarita has entirely stopped flow through the pipeline, the wholesale marketing margin per gallon will be source told Platts on condition of anonymity. higher than reported for the first quarter Liquids storage at the fields is limited, and once it’s full, gas production will have to be 2005,” Marathon said. fully shut in as well, the source said. Gas production, already reduced, could fully halt at Crude throughput in January and February San Antonio within a few days, the source said. averaged 842,000 b/d and should average A Petrobras spokesman in Rio de Janeiro declined comment. 895,000 b/d for the first quarter, slightly less Petrobras, which operates San Antonio, with normal production of more than 10 million than a year earlier. But total throughputs for cu m/d (350,000 Mcf/d), has already lowered its gas nominations, the source said. The the first quarter are seen higher than the source confirmed that exports to Brazil have fallen, without detailing the current export 1.094 b/d in first-quarter 2005, Marathon flow. said. Its Speedway SuperAmerica retail gaso- Another well-placed Bolivian gas industry source who spoke with Platts earlier April 6 line and distillate gross margin averaged said exports of Bolivian gas to Brazil have dropped by nearly 20%, to 21 million cu m/d, about 10 cents/gal in January and February, from 26 million cu m/d. slightly lower than a year earlier and below Bolivian natural gas exports in recent weeks had reached 33 million cu m/d, divided the 14 cents/gal realized in last year’s fourth between Brazil and Argentina. Brazil has been relying on Bolivian gas for about 60% of its quarter.—James Norman, Robert Perkins daily consumption.—Josh Schneyer

Lyondell, Citgo to open data room for Houston plant Niger Delta meeting ends (continued from page one) (continued from page one) The plant will be sold free and clear of the December. For the full year, Lyondell-Citgo any decision to engage in dialogue was posi- current crude supply deal, said Lyondell processed an average of only 217,000 b/d or tive. spokesman David Harpole. A data room will 81% of its nameplate capacity. “It was a general meeting, the idea is to be set up soon and an advisory firm will be In years past, when product prices were meet in two weeks’ time and continue the ini- hired, he said. If adequate offers do not lower and heavy/sour differentials much less, tiatives based on dialogue and to look at emerge, there will be no sale, he said, but Lyondell-Citgo benefited from the netback what solutions can come out of it. I think it is “We believe it is an attractive asset for a arrangement. But to ostensibly comply with very important progress. We have always number of other companies.” its OPEC production limits PDVSA began advocated dialogue where all stakeholders Still, "We hope to maintain the supply con- restricting the volumes it supplied in 1998, come together,” he said. tract with company that acquires the refinery," forcing the refinery to buy more crude on the Chevron is making progress at restoring a PDVSA spokesman told Platts in Venezuela, spot market. 140,000 b/d shut in since March 2003 when indicating little or no chance PDVSA itself Though the Venezuelans paid some com- ethnic violence shut nearly 40% of the coun- would buy all of Lyondell-Citgo. pensation for their “force majeure” effects, try’s crude output. “We are definitely ahead At current high product prices and refinery Lyondell ended up filing suit in New York of the call. We are doing better in terms of valuations, “both parties see an opportunity against PDVSA in 2002, claiming the reduc- what we thought we were doing in terms of to maximize their value” in the plant, Harpole tions were illegal and demanding significant recovering the lost production. There was a said. He downplayed the legal battles, insist- damages. PDVSA’s claim to immunity, on time, we were up 60,000 b/d,” the Chevron ing the venture “actually has operated quite grounds the curtailments were an “act of spokesman said. well, as it was designed to.” state,” was rejected and motions for summary Leaders representing the 14 million-strong Under terms of their 1993 joint venture, judgment have been pending a decision. Ijaw ethnic group boycotted the meeting and Lyondell contributed the 700-acre former Arco Separately, PDVSA sued Lyondell-Citgo in earlier this week vowed attacks on oil facili- refinery, now with 880 employees. Citgo put the same New York court last October claim- ties would continue. “We don’t believe in that in about $1 billion to upgrade and reconfigure ing breach of contract for failing to take obli- meeting, and for all we care, it was another the plant to process heavy, sour crude. gated volumes after the hurricane shutdown. means of President Obasanjo continuing his PDVSA agreed to deliver 230,000 b/d of sour, Though Lyondell Chemical outweighs Citgo campaign for (securing) a third term in office,” API 16.6 Merey or similar crude, supplying ownership 58.75% to 41.25%, each company Joseph Evah, a spokesman for the Ijaw Youth 86% of Lyondell-Citgo’s rated throughput has three of six directors. Some issues need Congress, said April 6. capacity, starting in 1997. unanimous agreement. “The present administration has been in Lyondell has control over crude-buying place for about seven years and there is still Netback formula decisions. Citgo gets to buy essentially all of nothing to show in the development of the Similar crudes, such as Colombian Castil- the refinery’s fuel and lubes output, for which Niger Delta. The NDDC that was created to la Bend and Ecuadorian Napo currently trade it paid $5.7 billion last year. Lyondell’s oversee development of the region was at a discount of about $17/barrel to second- spokesman was not sure if the Citgo offtake starved of funding. The government has even month WTI. But under the undisclosed Lyon- deal would remain after a sale. withheld funds for the agency since Septem- dell-Citgo netback formula, forged in the days The plant was carrying $816 million of ber last year,” said Evah. “We still hold on to of much smaller spreads between heavy/sour long-term debt at December 31, including our earlier demands as conditions for peace and light/sweet crudes, PDVSA is believed to $229 million owed to Lyondell and $35 mil- in the Niger Delta.” be getting perhaps $10/barrel or more for lion to Citgo. Net cash last year to Lyondell Militants vow not to allow resumption of Merey than it might otherwise fetch. from the JV was $130 million, with $92 mil- oil production until the government meets a That is due to the currently rich pricing of lion to Citgo. set of demands, including release of ethnic Lyondell’s product slate, including 120,000 Citgo CEO Félix Rodríguez issued a state- Ijaw leaders Asari Dokubo and Diepreye b/d of gasoline, 95,000 b/d of diesel, ment April 6 denying PDVSA is trying to sell Alamieyeseigha and payment of $1.5 billion 25,000 b/d of jet and 4,000 b/d of lube oil, Citgo itself. “We are not selling our wholly by Royal Dutch Shell to Ijaw communities for plus valuable aromatics. The plant makes no owned refineries or other strategic assets,” environmental pollution. Evah said the asphalt or heavy fuel oil. he said in response to a media report. Exclud- detained Dokubo remained the symbol of the In year-end 2005 results disclosed last ing its 41% of Lyondell-Citgo, Citgo itself has struggle of Delta people, so “we can’t be talk- month, Lyondell revealed that since fourth- 860,000 b/d of crude capacity at three fuel ing about peace while he remains in deten- quarter 2004 the refinery has shelled out refineries and two asphalt plants.—James tion.”—Jacinta Moran much more for its crude than it would have Norman paid in the open market. As a result, the costly, sophisticated plant earned a modest What crude & natural gas markets are doing... $194 million last year on revenues of more than $6.7 billion. That was less than 40% of NYMEX crude settle, first month NYMEX natural gas settle, first month its net a year earlier, on 17% lower revenues April 6 settle: $67.94, up $0.87 April 6 settle: $6.972, down $0.097 of $5.6 billion. ($/bbl) ($/MMBtu) 68.0 7.300 Cash from operations last year fell 34% to 67.94 7.244 $439 million at a time other US refiners were 67.6 7.225 reaping record profits and cash flows. Capital 7.210 spending for “environmentally related” proj- 67.2 7.150 ects last year jumped threefold from 2004 to 67.07 66.74 7.069 $106 million and will rise further this year to 66.8 7.075 7.065 $127 million, Lyondell disclosed. 66.63 7.000 Last year’s results were also hampered by 66.4 66.23 6.972 turnarounds, hurricane outages and a cat 66.0 6.925 cracker fire which delayed full restart until 31-Mar 3-Apr 4-Apr 5-Apr 6-Apr 31-Mar 3-Apr 4-Apr 5-Apr 6-Apr

CME and NYMEX sign new non-compete agreement as part of Globex deal (continued from page one) “CME is committed to bringing opportuni- NYMEX has been under pressure to move ing this year on its ClearPort platform. ties in energy trading to our customers to some form of electronic trading following the It is no secret the CME has some of the around the globe,” said CME Chairman Terry launch of an electronically-traded WTI crude most sophisticated trading technology of all the Duffy in a statement. contract by ICE Futures. That contract has US futures exchanges, while NYMEX has had During the conference call, Duffy said the quickly picked up volume and open interest. problems with both its electronic Access and CME has signed a non-compete agreement Before the deal with CME, NYMEX had stated ClearPort systems in recent months.—David that would prevent the CME from launching its plans to launch side-by-side electronic trad- Marino, Jeff Mower energy contracts that would compete with the NYMEX energy contracts. The agreement is separate from the existing agreement March colder in Europe, but milder in Canada and Japan between the two companies, which is due to New York—March was colder in Europe, but milder in Canada and Japan than a year ago, according expire June 17, Duffy said. However, CME to data obtained from Accu-Weather Inc and gathered by Platts. and NYMEX officials would not elaborate on A total of 19 cities geographically representative of Europe had 13.2% more heating degree days in the details of the new agreement. March than in March 2005. The total for the September-March period was 6% more degree days Source closes to the CME had told Platts than the similar period last year and 0.7% more than normal. March 20 the CME was considering the Eight cities geographically representative of Canada had 2.1% fewer degree days in March than in launch of three energy futures contracts by March 2005. The total for the September-March period was 8.3% fewer than the similar period last the end of June, including a light, sweet crude year and 9.3% fewer than normal. contract, an ultra-low sulfur diesel contract, Five cities geographically representative of Japan had 5.8% fewer degree days in March than in and an unleaded contract. However, the CME March 2005. The total for the September-March period was 6.2% more than the similar period last year and 11.8% fewer than normal. has never officially announced the launch of these contracts, and has only said it was Sep-Mar Sep-Mar Sep-Mar Mar Mar interested in getting into energies. 2005-2006 2004-2005 Normal 2006 2005 There were a “host of different alterna- EUROPE tives” in getting into energies, Duffy said: Based on 60 deg. F “CME decided this was the best choice.” London 2,852 2,593 2,991 545 416 The deal does not exclude the CME from Amsterdam 3,106 3,017 3,361 623 485 continuing to clear Chicago Board of Trade Brussels 3,353 3,096 3,434 609 465 Paris 3,107 2,914 3,008 540 431 contracts, Duffy said. “We’ll clear any contract Marseilles 2,132 2,109 1,901 267 321 that CBOT wants us to clear,” he said. “These Geneva 3,850 3,444 3,641 584 486 are not our contracts.” Vienna 4,401 3,993 4,113 674 690 NYMEX and CME have been in on-again, Klagenfurt 5,062 4,482 4,690 754 669 off-again talks for months about linking in Based on 62 deg. F some fashion, but with no agreement. In Oslo 5,515 5,101 5,892 1,161 968 December, the two sides were in talks over Helsinki 6,468 6,281 6,339 1,311 1,306 the possibility of CME besting General Stockholm 5,632 5,504 5,556 1,175 1,093 Atlantic’s then $135 million offer for a 10% Copenhagen 4,566 4,496 4,543 956 865 stake in NYMEX. No agreement was reached, Hamburg 4,512 4,165 4,604 892 732 and GA eventually boosted its offer to $160 Essen 3,860 3,721 4,117 712 536 million in a deal that was approved by NYMEX Frankfurt 4,148 3,978 4,070 717 569 Munich 5,160 4,880 4,908 837 788 shareholders March 13. Asked if GA had a say in the current deal Based on 60 deg. F with CME, “General Atlantic was 100% sup- Dublin 3,016 2,868 3,223 554 451 portive,” NYMEX Vice Chairman Richard Scha- Based on 65 deg. F effer said. “It was their first choice.” Rome 2,639 2,541 2,367 469 491 The exchange executives did not elaborate Based on 68 deg. F on financial terms of the deal. However, CME Milan 4,192 3,980 4,274 596 585 CEO Craig Donohue did say that investors TOTAL 77,571 73,163 77,032 13,976 12,347 could expect to see an average income similar CANADA to the CME’s interest-rate products, which cost Based on 65 deg. F 35-50 cents/contract. Edmonton 7,870 8,446 8,602 1,458 1,202 NYMEX officials rejected suggestions that Halifax 5,237 6,039 5,669 950 1,048 the deal came about due to any lack of confi- Montreal 6,309 7,039 7,324 1,054 1,203 dence in its ClearPort platform, pointing Regina 8,027 8,756 8,122 1,343 1,325 St. John's 5,938 6,308 6,198 1,126 1,185 instead to the wider reach of Globex. “The Toronto 5,442 6,004 6,443 948 1,109 huge distribution of the Globex system was a Vancouver 4,084 4,064 4,482 660 558 key advantage,” Newsome said. Winnipeg 8,081 8,971 9,384 1,366 1,469 NYMEX officials said metals contracts TOTAL 50,988 55,627 56,224 8,905 9,099 would be listed for electronic trade on Globex JAPAN after negotiations between NYMEX and COMEX Based on 65 deg. F over the latter’s electronic trading rights are Osaka 2,729 2,370 2,996 516 491 resolved. The 1994 merger agreement Sapporo 5,420 5,382 6,077 946 1,028 between COMEX and NYMEX did not include Tokyo 2,705 2,458 3,225 461 510 the right to list metals contracts on an elec- Nagasaki 2,388 2,255 2,711 434 472 tronic platform while the COMEX floor is open. TOTAL 13,242 12,465 15,009 2,357 2,501

May 9–10, 2006 • Marriott City Center • Pittsburgh, PA

Visit www.events.platts.com to register today!

Attend Platts 2nd Annual IGCC Symposium to examine technology risk, implementation costs, financing strategies, environmental/waste management performance, and polygeneration/ cogeneration approaches.

Hear from More Than 30 Experts From: NRG, We Energies, JEA, FirstEnergy, Cinergy, CME Energy, Xcel Energy, Peabody Energy, Drummond Coal Sales, Encana Oil & Gas., WMPI PTY, Basin Electric Power Coop., West Hawk Development, EIA, EPA, NETL, DOE, CAER, Gasification Technologies Council, Siemens Power Generation, ConocoPhillips, Rentech, Eastman Gasification Services Company, Burns & Roe, Argonne National Laboratory, Indiana Utility Regulatory Commission, S&P, Pace Global, Excelsior Energy...

About Industry Trends and Factors Driving Commercialization:

• Gasification Drivers: Gas/Oil Prices, Rich Coal Reserves, Need for Substitute Natural Gas • Long-Term Gas and Oil Price Forecasts: When Will the Bubble Explode? • The Emergence of Coal-to-Liquids Markets

• Petcoke: Will CAIR SO2 Scrubbers and the Alberta Oil Sands Boom Suck Up Supply? • Understand EPAct 2005/Tax/Finance Advantages to Reduce Implementation Costs • Polygeneration: Hydrogen, Methane, Naphtha, and Clean Fuel Production • Gasification for Power: IGCC Compared to PC, CFB, and Supercritical Technology • Gasification Environmental/Waste Management Performance: IGCC as BACT, EIV/Permitting Proposals, NSR Issues, and Managing Wastewater, Spent Solvents, and Halides

• Leveraging CO2: Enhanced Oil Recovery

You cannot afford to miss this event—seats are limited, so reserve yours today!

For a complete agenda or to register, please visit us online at www.events.platts.com or call us at 866-355-2930 (toll-free in the US) or 781-860-6100 (direct). Discounts are available for groups of 4 or more. Ask for details when you call. Sponsorship and exhibit opportunities are still available. For more information, please contact Lorne Grout, Business Development Manager, at 781-860-6112 or e-mail him at [email protected].

Registration Code: PC619NLI