CERA CERA Monthly Summary--November 1999

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Vince J Kaminski
12/09/99 03:33 PM
To: Vince J Kaminski/HOU/ECT@ECT
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Subject: CERA CERA Monthly Summary--November 1999 - Monthly Summary

---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 12/09/99
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webmaster@cera.com on 12/06/99 04:05:27 PM
To: Vince J Kaminski/HOU/ECT@ECT
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Subject: CERA CERA Monthly Summary--November 1999 - Monthly Summary

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CERA Monthly Summary:Mon, December 06, 1999
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Title: CERA Monthly Summary--November 1999
Author: CERA
E-Mail Category: Monthly Summary
Product Line: Monthly Summary ,
URL: http://www.cera.com/cfm/track/eprofile.cfm?u=5166&;m=1002 ,

Table of Contents

01] Western Energy Markets: Awaiting Normal Weather
02] Russian Gas to Turkey: Is Blue Stream in Trouble?
03] Will Russia Have Free and Fair Elections?
04] Who's Who in the Russian Election
05] Lukoil Buys Neftokhim: New Step in Russian Producers' Expansion into
Eastern Europe
06] European Energy Signpost--Marching to Market: The Zeebrugge Trade in Gas
07] Afloat but Adrift? Energy Markets and the Undercurrent of Change
08] Special Report: Africa's Emerging Electricity Markets
09] Comg?s (G?s Noroeste) Privatization: Oncoming Competitive Distribution
10] Argentina: Increased Water Flow Keeps Power Prices Soft
11] Brazilian Oil Markets: Finishing 1999 on an Upswing?
12] North American Natural Gas: CERA Long-term Outlook
13] North American Natural Gas Midmonth Report: The Late Start
14] A New Set of Demons? Threats to US Industrial Gas Demand
15] Rediscovering the Rockies: Challenges of a Major Gas Supply Region
16] Knocking More NOx Out of Power Generation: How Much? Who Pays?
17] Fuel Cells--A Paradigm Shift or Media Hype?
18] Refined Products Line--November 1999
19] Hints about the Tri-lateral Producer Meeting Next Week
20] World Oil Watch: Volatility with OPEC in the Driver's Seat
21] Iraq Turns the Oil Tap: The Politics of Defiance

CERA Monthly Summary: November 1999
The following message is a summary of all CERA research posted on our web
site (eprofile.cera.com) during the month of November 1999.

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CERA Alert : 11/23/1999
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Title: Western Energy Markets: Awaiting Normal Weather
Author: Zenker, Moritzburke
E-Mail Category: Alert
Product Line: California Energy
URL:
http://EPROFILE.CERA.COM/client/ce/alt/112399_18/ce_alt_112399_18_ab.html

Summary:
When the energy industry completes the chapter on 1999, two footnotes will
certainly have been made to record the two dominant weather events of the
year in the West: the abundant precipitation and the mild summer. Significant
year-over-year weather changes have always affected western energy markets,
with swings in hydroelectric generation and summer weather determining the
outputs of gas-fired, coal-fired, and even nuclear generation. The shift from
a dry year to a wet year can change annual gas use for power generation by as
much as 1 billion cubic feet per day or 36 percent of total generation
demand. Consequently, a return to normal summer weather in 2000 would
significantly boost gas flows for power generation, while also adding to coal
generation and increasing both power prices and volatility. Gas markets in
the West and across the continent in November have experienced unseasonably
low demand and--as in recent days--sudden drops in prices. CERA sees the
current weathe!
!
r effects as temporary and expects prices to rebound with the arrival of more
seasonally normal weather.

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CERA Alert : 11/15/1999
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Title: Russian Gas to Turkey: Is Blue Stream in Trouble?
Author: Gustafson
E-Mail Category: Alert
Product Line: Eurasia Energy
URL:
http://eprofile.cera.com/client/fsu/alt/111599_14/fsu_alt_111599_14_ab.html

Summary:
The momentum behind Russia's Blue Stream gas export pipeline to Turkey has
suddenly dissipated; because of delays on the key "protocol" on tax
concessions for contractors, project financing has hit a snag. Both sides
insist the delay is only "technical," but recent events suggest more serious
problems. Prime Minister Bulent Ecevit's decision not to sign the tax
protocol in Moscow last week could be a reflection of Turkish concern not to
embarrass the United States at the upcoming OSCE summit, or to endanger the
Baku-Ceyhan pipeline, which the Turks strongly favor. After the summit the
Turks could return to their own game plan--to nail down their future gas
supplies, whatever their source. But that may be too simple a reading. The
Turkish ruling coalition recently has shown signs of strain, and Blue Stream
has come under attack from several directions inside Turkey. Although once
the summit ends, the Turks and Russians could continue negotiations on Blue
Stream--but in the char!
!
ged political atmosphere in both Ankara and Moscow, nothing is certain.

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CERA Alert : 11/15/1999
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Title: Will Russia Have Free and Fair Elections?
Author: Colton
E-Mail Category: Alert
Product Line: Eurasia Energy
URL:
http://eprofile.cera.com/client/fsu/alt/111599_17/fsu_alt_111599_17_ab.html

Summary:
Russia's 1999-2000 election cycle is being closely watched to see who wins
and, more importantly, if the elections are held freely and fairly. Despite
allegations that Yeltsin's "Family" clique will find a way to subvert
elections, Russia looks more likely to stay on track, at least in next
month's parliamentary elections. Broader public discussion of the danger of
electoral corruption and fraud has taken place, a more balanced Central
Election Commission has been established, and the interaction of regional
players in the electoral process has occurred--all positive developments on
the eve of elections. Yet, despite the implementation of positive changes,
electoral abuses are likely to occur. Only time will tell how significant
such abuses will be and what they will mean for the future composition of the
Russian government.

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CERA Alert : 11/24/1999
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Title: Who's Who in the Russian Election
Author: Colton
E-Mail Category: Alert
Product Line: Eurasia Energy
URL:
http://EPROFILE.CERA.COM/client/fsu/alt/112499_10/fsu_alt_112499_10_ab.html

Summary:
Russia's nascent party system brings with it a complicated web of old and new
players and coalitions of players all hoping to cross the 5 percent threshold
in the December 19 parliamentary elections. The formation of a multitude of
parties and quasi-parties poses a challenge to constituents struggling to
develop an understanding of who makes up these parties, where they sit on the
political spectrum, and how they will best represent their interests if
elected to office. Yet some parties in the upcoming elections do enjoy the
benefit of some level of experience, with almost a third of this year's
candidates having run in the last election. Furthermore, the consolidation of
political factions since 1995 has helped establish more lucid political
categories with which to classify parties. Although immature, Russia's party
system has made headway since the 1993 and 1995 elections and will certainly
prove to be an interesting race to watch.

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CERA Alert : 11/30/1999
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Title: Lukoil Buys Neftokhim: New Step in Russian Producers' Expansion into
Eastern Europe
Author: Tabarovsky
E-Mail Category: Alert
Product Line: Eurasia Energy
URL:
http://eprofile.cera.com/client/fsu/alt/113099_17/fsu_alt_113099_17_ab.html

Summary:
Lukoil's acquisition of a controlling stake in Bulgaria's largest oil
refinery, Neftokhim, marked a new step in Lukoil's expansion into the East
European downstream. But Lukoil is not the only contender. Yukos has proved
to be a serious competitor, expanding into the markets that have
traditionally belonged to Lukoil. Despite availability of alternative sources
of supply, East European refineries continue to rely heavily on Russian
crude, putting Russian producers in a strong negotiating position vis-.-vis
the refineries and Western competitors.

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CERA Alert : 11/29/1999
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Title: European Energy Signpost--Marching to Market: The Zeebrugge Trade in
Gas
Author: Blakey
E-Mail Category: Alert
Product Line: European Gas & Power
URL:
http://eprofile.cera.com/client/egp/alt/112399_10/egp_alt_112399_10_ab.html

Summary:
Two months into the 1999/2000 heating season in Europe it is already clear
that a new basis for pricing and trading gas in the Continental business--the
march to market--has begun. Principal-to-principal gas trade at Zeebrugge is
taking place, with an increasing number of participants. A new "standard
contract" and a so-called Hub Services Agreement were launched last week,
under the auspices of Belgium's Distrigaz. Together these agreements provide
mechanisms for day-ahead and within-the-day trading.

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CERA Watch : 11/04/1999
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Title: Afloat but Adrift? Energy Markets and the Undercurrent of Change
Author: Global Energy Team
E-Mail Category: Watch
Product Line: Global Energy
URL:
http://EPROFILE.CERA.COM/client/ge/wch/110399_11/ge_wch_110399_11_ab.html

Summary:
Technology and geopolitics feature prominently in CERA's November 1999 Global
Energy Watch. E-commerce is growing exponentially, with the energy industry
contributing to this new revolution in information technology. A major
geopolitical shift is under way, with OPEC and participating non-OPEC
countries committed to limiting production by an additional 2.1 million
barrels per day to reduce excess oil inventories. The result--a near doubling
of oil prices in less than a year--assures that companies and oil-producing
governments will end 1999 with stronger balance sheets and budgets more in
line with societal and corporate needs. The Asia Pacific region's
recoveries--while not assured--look stronger than six months ago. China,
Japan, and Indonesia remain question marks, but Thailand, Malaysia, and India
look promising, and Korea is rebounding well. In the United States and Europe
restructuring continues in the electric power and natural gas sectors. As
corporate mergers continue!
!
to increase in number, with new announcements almost weekly, these companies
as well as smaller, independent competitors increasingly turn to
technological innovation to stay ahead of the competition.

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CERA Private Report : 11/09/1999
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Title: Special Report: Africa's Emerging Electricity Markets
Author: Mitter
E-Mail Category: Private Report
Product Line: Global Energy
URL:
http://eprofile.cera.com/client/ge/pr/110599_16/ge_pr_110599_16_ab.html

Summary:
Substantial sections of Africa are now open for business within the global
power community, and early entrants have found rewarding opportunities up and
down the power value chain. But incomplete reform processes and
often-difficult operating conditions mean that investment in Africa comes
with substantial risks. CERA argues that successful investors will draw not
just on favorable skill sets and fuel supply positions, but also on localized
understanding of emerging regional markets, augmented crucially by
on-the-ground experience.

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CERA Alert : 11/19/1999
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Title: Comg?s (G?s Noroeste) Privatization: Oncoming Competitive Distribution
Author: Durbin, Mattos, Wrobel
E-Mail Category: Alert
Product Line: Latin American Energy
URL:
http://EPROFILE.CERA.COM/client/la/alt/111999_15/la_alt_111999_15_ab.html

Summary:
The successful privatization of the northwest region of the Comg?s concession
area indicates that private investors are responding to the government's
desire to create a competitive energy market. Agip, a part of ENI of Italy,
made a winning bid of US$143 million, or US$86 million above the base price.
Agip already tried to purchase Comg?s but lost to the consortium of British
Gas and Shell by US$231 million. Agip's purchase of the concession is central
to the creation of a competitive gas distribution network in S?o Paulo. This
greenfield concession is outside the congested metropolitan area, meaning
that it will have a lower cost per mile of construction to develop its
infrastructure-potentially resulting in lower tariffs than BG/Shell's
existing Comg?s concession.

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CERA Alert : 11/19/1999
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Title: Argentina: Increased Water Flow Keeps Power Prices Soft
Author: Wrobel
E-Mail Category: Alert
Product Line: Latin American Energy
URL:
http://eprofile.cera.com/client/la/alt/111999_14/la_alt_111999_14_ab.html

Summary:
Monthly power prices in October continued down September's lower price path.
Although demand levels were similar to September's, hydro output continued to
increase its share of output, but counteracting this increase was higher
unavailability of thermal generators. This low price path appears to be the
forecast for the months to come, with fluctuations around $15 per MWh being
the result of changes in demand, thermal unavailability, and hydro output.
Dramatic price spikes have not occurred and are not expected in the near term
without some unexpected loss of low-cost capacity. The price spikes that do
occur will likely be infrequent and around $30 per MWh. Looking ahead, the
concern of the market continues to be that if new low-cost capacity is added
to the already oversupplied market, power prices have only one way to
go--flatter and down.

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CERA Alert : 11/23/1999
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Title: Brazilian Oil Markets: Finishing 1999 on an Upswing?
Author: Scott, Mattos
E-Mail Category: Alert
Product Line: Latin American Energy
URL:
http://eprofile.cera.com/client/la/alt/112399_16/la_alt_112399_16_ab.html

Summary:
Brazilian oil product demand continues to be affected by the economic slump
in addition to higher product prices. Nevertheless, CERA expects that fourth
quarter demand will improve, with a significant recovery in the first quarter
of 2000. Regional product demand highlights include the south and southeast
regions, which account for approximately 70 percent of total product demand
in Brazil.

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CERA Decision Brief : 11/10/1999
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Title: CERA Long-term Outlook
Author: N. American Natural Gas Team
E-Mail Category: Decision Brief
Product Line: North American Gas
URL:
http://EPROFILE.CERA.COM/client/nag/db/110999_12/nag_db_110999_12_ab.html

Summary:
The natural gas industry faces the challenge of developing adequate supply
resources and infrastructure for what could become a 30 trillion cubic foot
(Tcf) market in the United States over the next decade. CERA assesses the
long-term impact of this challenge on the North American gas market through a
series of three distinct and internally consistent scenarios.

Although all three scenarios are highly plausible, market indicators as of
the winter of 1999 point to a longer-term path more consistent with the
Gas-Favored scenario, with a near- to midterm risk that the market could be
driven up to a balance more similar to the Supply Realignment scenario. Key
uncertainties to watch over the next year as signposts to the future path of
price include the extent of the supply response, the stability of the US
economy, and penetration of gas into the power generation market.

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CERA Alert : 11/15/1999
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Title: Midmonth Report: The Late Start
Author: N. American Gas Team
E-Mail Category: Alert
Product Line: North American Gas
URL:
http://eprofile.cera.com/client/nag/alt/111599_16/nag_alt_111599_16_ab.html

Summary:
A late start to the heating season temporarily releases pressure in the gas
market, but it does not change market fundamentals. The warm weather during
the first half of November has delayed storage withdrawals. However, it has
not endured long enough to allow storage inventories to offset the supply
decline of 1.0-1.5 Bcf per day, despite added imports. In the event that warm
weather persists for a few more weeks, natural gas storage inventory levels
will be adequate for the winter season. However, it is more likely that the
return of seasonal weather will bring with it a sharp rebound in prices and a
market scenario of tight supply.

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CERA Decision Brief : 11/29/1999
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Title: A New Set of Demons? Threats to US Industrial Gas Demand
Author: Hoffman
E-Mail Category: Decision Brief
Product Line: North American Gas
URL:
http://EPROFILE.CERA.COM/client/nag/db/112699_10/nag_db_112699_10_ab.html

Summary:
Amid the enthusiasm for growing gas use in power generation, there is a
downside risk to the future of industrial gas use that has gone largely
unnoticed. Indeed, the industrial sector's use of natural gas, the largest
source of demand for natural gas in North America, is in danger of not
growing at all or even declining over the next several years. A variety of
threats is set to act on North American industrial gas demand, not the least
of which is the potential for continued high gas prices throughout North
America over the next several years.

These threats have not received wide attention because they have been
obscured by the Asian financial crisis, which forced North American
industrial demand growth to a standstill beginning in 1998. While the worst
of the global commodities surplus may have passed, there is as yet no rebound
occurring in industrial gas consumption in North America. Instead, gas
consumption in several key gas-intensive industries is now being suppressed
by a different set of threats: global industrial competition, high domestic
gas prices, ample supplies of low-cost gas outside of North America,
continuous energy efficiency improvements, and structural change.

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CERA Private Report : 11/30/1999
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Title: Rediscovering the Rockies: Challenges of a Major Gas Supply Region
Author: Eynon
E-Mail Category: Private Report
Product Line: North American Gas
URL:
http://eprofile.cera.com/client/nag/pr/112999_14/nag_pr_112999_14_ab.html

Summary:
The rush to develop new sources of gas supply in North America is on-and the
Rocky Mountains could be at the forefront of new supply development. Overall
US natural gas productive capacity has declined recently through low prices
and depressed drilling activity. However, demand pressure in North America is
intensifying-driven by a wave of new gas-fired power plants currently under
construction. The resulting higher gas prices further spotlight the need for
additional supply capability from a number of regions-especially the Gulf of
Mexico, western Canada, offshore eastern Canada, and the Rockies, the focus
of renewed interest as an area of huge resource potential capable of meeting
a substantial portion of the demand growth. The Rockies (even without the San
Juan Basin) could be capable of sustaining a production level of up to 10 Bcf
per day by 2015, with sustained high gas prices and integration of the
pipeline infrastructure. This CERA report evaluates the resource base, ex!
!
amines the region's limited growth over the past decade, and identifies the
challenges facing Rockies' producers.

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CERA Private Report : 11/05/1999
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Title: Knocking More NOx Out of Power Generation: How Much? Who Pays?
Author: Goodman, Makovich, Robertson
E-Mail Category: Private Report
Product Line: North American Power
URL:
http://eprofile.cera.com/client/nap/pr/110399_15/nap_pr_110399_15_ab.html

Summary:
Knocking more NOx out of power generation is nothing new, but the move from
regulation to the marketplace means that the competitive impacts of
additional nitrogen oxide emissions reductions are as complex and significant
now as the environmental impacts. The potential tilt to the competitive
playing field has moved both old and new NOx regulations into the courts.
Industry restructuring also means that the market will determine who pays the
billions of dollars in NOx emission control costs. Pending court decisions
will determine how much NOx emissions are allowed in power production and
will also define one of the key attributes of the future competitive power
business landscape.

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CERA Private Report : 11/29/1999
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Title: Fuel Cells--A Paradigm Shift or Media Hype?
Author: Goodman
E-Mail Category: Private Report
Product Line: North American Power
URL:
http://eprofile.cera.com/client/nap/pr/111799_17/nap_pr_111799_17_ab.html

Summary:
Fuel cells have achieved some successes, but more in niche applications
rather than as a mass technology at this stage. Several divergent issues such
as power restructuring, technological developments, environmental issues,
power quality, and reliability are converging to give a boost to fuel cells
in commercial and possible residential applications. The technology still
suffers under economic constraints, however, and developments in the fuel
processing component of the fuel cell system will be critical to rapid
commercialization.

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CERA Alert : 11/16/1999
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Title: Refined Products Line
Author: Veno
E-Mail Category: Alert
Product Line: Refined Products
URL:
http://eprofile.cera.com/client/rp/alt/111699_16/rp_alt_111699_16_ab.html

Summary:
Differentials versus WTI for major refined products on the US Gulf Coast
increased during October3/4except for unleaded gasoline margins, which fell
for the second month in a row to reach $2.16 per barrel during October.
Responding to sharp increases in demand and declines in primary inventories,
high sulfur No. 2 fuel oil and jet kerosene margins versus WTI climbed to
$1.29 per barrel and $2.45 per barrel, respectively, during October.
Distillate apparent demand skyrocketed by 0.4 mbd to 3.88 mbd and jet fuel
apparent demand rose to 1.75 mbd during October, with the arrival of cooler
weather and the start of the home heating oil season adding strength to both
markets.

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CERA Alert : 11/10/1999
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Title: Hints about the Tri-lateral Producer Meeting Next Week
Author: World Oil Team
E-Mail Category: Alert
Product Line: World Oil
URL:
http://EPROFILE.CERA.COM/client/wo/alt/111099_17/wo_alt_111099_17_ab.html

Summary:
On November 16 and 17 the oil ministers from Saudi Arabia, Venezuela, and
Mexico are planning to meet in Riyadh to discuss the oil market and continue
the process of forging agreement on what to do about quotas once the current
production restraint agreement expires on April 1, 2000. Hints that these
ministers are considering proposing that the agreement be extended to June
are helping to support prices this week. WTI and Brent have climbed nearly
$1.50 per barrel so far this week.

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CERA Watch : 11/16/1999
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Title: Volatility with OPEC in the Driver's Seat
Author: Hittle; Stanislaw
E-Mail Category: Watch
Product Line: World Oil
URL:
http://EPROFILE.CERA.COM/client/wo/wch/111699_11/wo_wch_111699_11_ab.html

Summary:
As 1999 closes, OPEC and non-OPEC Mexico face the tricky task of determining
the next step after their success in reversing the price collapse of 1998. A
decision must be made on when and how to allow unused capacity back in the
market. The stakes are high: if they fail to bring on capacity in time, then
prices could soar upward even further and undermine much of the demand growth
that is helping the price recovery. CERA's new Autumn World Oil Watch
provides an updated price outlook for late 1999 and 2000 based on our
assessment of OPEC's possible choices. Adding upward price pressure this
quarter, we have revised our estimate of OPEC adherence to the March
production agreements to roughly 80 percent for the fourth quarter.

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CERA Alert : 11/22/1999
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Title: Iraq Turns the Oil Tap: The Politics of Defiance
Author: World Oil Team
E-Mail Category: Alert
Product Line: World Oil
URL:
http://EPROFILE.CERA.COM/client/wo/alt/112299_18/wo_alt_112299_18_ab.html

Summary:
Since mid-year, the UN Security Council--particularly its five permanent
members--has sought to reach consensus on a comprehensive resolution on Iraq.
Recently, progress toward a comprehensive resolution seemed to be being made,
until the effort unexpectedly became entangled with renewal of limited oil
exports, under resolution 986, for a seventh 180-day period upon expiration
of phase six on November 20.

**end**

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