1989 – COMMERCIAL DEVELOPMENTS

Abstract

The year 1989 provided the oil industry with some respite from the depressed prices of recent years. Burgeoning Asia-Pacific rim demand took OPEC output to levels not seen since the late 1970s. The price outlook is now brighter than it has been for several years.

Equity markets offered less comfort. Oil and Gas Index turnover was up marginally on year earlier levels. The market's disenchantment with the industry was not totally undeserved. High interest rates and low prices, coupled in some instances with questionable management practices, saw the demise of several small explorer'producers during the year.

Two major international developments occurred in 1989 which will impact on the commercial direction of the industry for the next decade, each summarised in a word:

Greehouse

Valdez.

Governments worldwide now seriously contemplate major new taxes on hydrocarbons to reduce world carbon dioxide emissions. Exxon spend US$2 billion cleaning up Alaska in a public relations disaster for it and the industry. Both will have commercial repercussions for years to come, but both will combine to strengthen the role of gas in domestic and international energy markets. Gas built domestic market shared in 1989 and the year heralded Australia's entry into the world LNG trade.

In Papua New Guinea, industry learned the meaning of political risk with disturbances bringing mine closures on Bougainville. Reflecting the optimism which is an essential ingredient of the industry, announcement of a go-ahead on the Kutubu oil project in PNH is imminent.