www.wilmingtonstar.com NewsletterLast changed: March 19. 2003 2:03AM

The Associated Press Against a backdrop of strong commodity prices, energy companies have filed 793 bids on 561 offshore drilling tracts in the Gulf of Mexico. That's an increase from last year's showing of 697 bids on 506 tracts, according to data from the Minerals Management Service. "It's an increase, and we feel it's a very strong showing," Minerals Management Service spokeswoman Caryl Fagot said. The tracts will be auctioned off in a federal lease sale in New Orleans Tuesday. The increase in bids comes amid a stretch of abnormally high crude and natural gas prices caused by a variety of factors, including uncertainty in the Middle East, an oil-field strike in Venezuela and an unusually cold winter in the Northeast. But the current statistics pale in comparison with lease sales a few years ago. The peak from recent years came in 1997, when energy companies bid on more than 1,000 tracts. Leasing the offshore slots is the first step in oil and gas development. After the leased tracts actually begin producing, companies must pay the government royalties. Many energy companies already hold substantial acreage in the deep-water Gulf. Moreover, many of the best prospects in the Gulf of Mexico already have been leased, leading to the downturn in bidding. "It's an indication companies are struggling to find prospects," said Larry Benedetto, an analyst with Howard Weil, a New Orleans investment bank. "It's not a blockbuster sale." In some cases, energy companies still plan new investment in the Gulf, even if they aren't acquiring the acreage at the lease sale. On Tuesday, Apache Corp. of Houston announced the closing of a $509 million deal to purchase Gulf of Mexico prospects from BP. Apache spokesman Tony Lentini said the company would post only a handful of bids Wednesday. "We probably have as good or better prospects as what's coming" at the sale, Lentini said. "We're not a big participant these days at the lease sales."

www.chron.com March 19, 2003, 12:59PM By MICHAEL DAVIS Copyright 2003 Houston Chronicle

RESOURCES • Graphic: Oil prices fallOil prices plunged Tuesday as the "war premium" was stripped from prices and investors began to look ahead to Iraqi oil returning to the market under new leadership.

They began falling in earnest Monday ahead of President Bush's ultimatum to Saddam Hussein, which could lead to war by tonight.

Since oil peaked at near $40 a barrel early this month, it has slipped over the past week back toward $30 per barrel.

Light, sweet crude oil for April delivery fell $3.26, or 9.3 percent, to $31.67 a barrel on the New York Mercantile Exchange.

It was the steepest one-day decline for the near-month contract since Nov. 15, 2001, when OPEC and Russia were fighting over production cuts the cartel was using, trying to rein in Russian production.

The drop is reminiscent of the free-fall in prices at the beginning of hostilities in the Persian Gulf War in 1991. In one day, prices dropped around $10 per barrel after it became apparent that the conflict would not last long.

This time, however, prices are not expected to plunge to the $20-a-barrel level that occurred in the last war.

Historically, the market has been able to adapt to such conflicts.

When Iraq invaded Kuwait in August 1990, prices spiked up, but by the time the war began in January, the oil markets had made up for the lost output, said George Beranek, manager of market analysis for PFC Energy, a Washington energy consulting firm.

"In 1991, the rest of OPEC was able to increase production enough that the markets cooled off substantially," Beranek said.

There is not nearly the same amount of excess capacity in OPEC now compared with 12 years ago.

Most members are producing flat-out, except for Saudi Arabia, which has already offered assurances that it can make up any shortfall of Iraqi oil in the near term.

Inventories are at a bare minimum after a cold winter that pushed up fuel oil demand and a near cutoff of exports from Venezuela after a strike by oil workers.

While Venezuela is slowly rebuilding its exports, Iraq is no longer in the market. Iraq's two authorized export terminals in Turkey and the Persian Gulf are idle. All exports under the oil-for-food program have been halted, with the departure of U.N. officials.

Iraq has been producing about 2.5 million barrels per day of which about 1.8 million was until recently exported under the United Nations oil-for-food program. Iraq was smuggling out about 200,000 barrels per day as well.

This is less than during the Persian Gulf War in 1991, when about 4 million barrels of Iraqi and Kuwaiti oil came off the market for about five months.

But experts say the world oil markets have changed since then, complicating comparisons.

On the negative side, U.S. inventories have been hovering around record low levels.

A big plus now is that oil markets are more integrated and closely linked than 13 years ago, said Dennis O'Brien, director of the Institute of Energy Economics and Policy at the University of Oklahoma.

"When Iraq's and Kuwait's oil came off the market, people had to search around for other crudes, which is always a kind of irregular, worrisome process," O'Brien said.

By the time the war actually started, the 4 million barrels had been replaced, but they were replaced by grades of crude that did not always fit the needs of users.

"In 1990, we were just beginning to see an efficient globalized market and the Gulf War accelerated that process; a lot of areas that had not been linked became linked," O'Brien said. "Today's market is far more efficient, and we will not have as hard of a time finding crude to fill in."

Saudi Arabia issued a statement a few hours before President Bush's speech Monday night, saying it is undertaking "significant actions" to ensure the world's oil supply does not run short in the event of military action in Iraq.

Saudi Oil Minister Ali al-Naimi stated, "We will make sure there is enough oil in the market. We have plenty of spare capacity."

Saudi Arabia has taken actions to increase production and store oil supplies. In the event of any market disruptions, al-Naimi said, "we are confident that OPEC in general and Saudi Arabia in particular will deliver."

U.S. Energy Secretary Spencer Abraham has pledged to tap the 600-million barrel Strategic Petroleum Reserve, holding enough oil to cover about 272 days of U.S. imports, if a war begins. The administration during the Gulf War offered to allow refiners to tap into the nation's stockpile of oil reserves, but it was not necessary to do so.

As traders sold off oil Tuesday, analysts began hashing out what challenges a post-Saddam Iraq oil industry will face.

"There are going to be technical obstacles, such as deciding which facilities need to be repaired and who is going to pay for those repairs," said Amy Jaffe, senior policy analyst with Rice University's James A. Baker III Institute for Public Policy.

There is also the matter of contracts that have been struck with Iraq under Saddam and whether those would be enforceable under a new administration.

Estimates are that Iraq could boost its production to 6 million barrels per day, but historically, oil production has not risen in countries after such a change, Jaffe said.

Still, Iraq has huge reserves, second only to Saudi Arabia, and it has only exploited a few of its large discoveries. The Kirkuk Field, discovered in 1927, is still one of its most prolific.

"Iraq has the capacity to reach 6 million barrels per day -- but not until 2012," said Martin Purvis with consultants Wood Mackenzie. "Twenty years of war and sanctions have severely limited its export capacity as well."

Tuesday's decline in oil prices also drove down wholesale prices for gasoline and heating oil. Heating oil for April delivery fell 5.79 cents to close at 85.78 cents a barrel, while gasoline futures dropped 6.52 cents to close at 96.19 cents a gallon. Natural gas fell 16.8 cents to $5.339 per thousand cubic feet.

On London's International Petroleum Exchange, Brent crude from the North Sea closed at $27.75 per barrel, down $2.23.

www.etaiwannews.com 2003-03-19 / Taiwan News, Staff Reporter / By Darcy Pan

Premier Yu Shyi-kun yesterday stressed that the government has made full preparations to cope with the possible impact on Taiwan should a war on Iraq break out.

Also at yesterday's routine press conference, Foreign Ministry Spokesman Richard Shih, echoing U.S. President George W. Bush's call, urged Iraqi President Saddam Hussein and his sons to leave Iraq as soon as possible so as to avoid any conflict. Shih added that the foreign ministry will issue an official statement once a war breaks out.

Fielding questions at a Legislative Yuan plenary session, Yu stressed that the Cabinet has prepared measures to ensure stable supplies of oil, key materials and stability of domestic stock markets.

After U.S. President George W. Bush gave Iraqi leader Saddam Hussein an ultimatum Monday night to leave Iraq or face a war, many opposition legislators voiced concerns about Taiwan's measures to cope with the situation.

The premier indicated that the task force on economic and financial measures headed by Vice Premier Lin Hsin-i has convened six meetings since February 6 this year in preparation for the continuously changing situation in Iraq.

The task force will conduct meetings as soon as the war on Iraq breaks out so as to cope with the possible impact on Taiwan's economy, said Executive Yuan Spokesman Lin Chia-lung yesterday.

Yu further added that other responsible ministries have also prepared measures to deal with the supplies of oil and food while plans on evacuating overseas Taiwanese people have been drafted as well.

According to Yu, the current domestic storage of oil can last for 113 days while a seven-month supply of rice and a two-to-three month supply of soybeans, corn and wheat are also secured. The Cabinet has also made preparations for evacuating overseas Taiwan nationals to ensure their safety, Yu said.

The premier predicted that the war would generate more positive impact on Taiwan's economy if it should end in a short period of time. But if the war lasts longer than six weeks, negative influence in the domestic economy may be expected, he noted.

Meanwhile, the state-run Chinese Petroleum Corporation also indicated yesterday that if the war lasts for too long, the corporation would import crude oil from Venezuela and Ecuador if necessary.

Speculations have been made that Iraqi President Saddam Hussein may bomb the oil fields in the northern part of Iraq once the war breaks out.

According to the CPC, about 60 percent or 70 percent of Taiwan's crude oil is imported from the Middle East.

Also, in response to the impending conflict in Iraq, some domestic airline companies have prepared contingency route plans to avoid the war zone.

China Airlines Spokesman Roger Han said that it remains unknown as to how big the battlefield would be, but as soon as the war starts, the CAL will accept the suggestion by the International Civil Aviation Organization and change the flight routes to avoid the war zone.

The routes will be moved either south or north, Han added.

Eva Air also indicated that all flight routes from Taiwan to Europe would be affected if the war starts, so the company has planned 20 alternative routes to cope with the impending conflict, adding that the prepared routes are subject to change.

As for the impending war's impact on marine transportation, Evergreen Marine Corporation indicated that if the war zone is restricted to Iraq, transportation would not be too greatly influenced. But if the war zone extends to Kuwait or Saudi Arabia, Evergreen would change its port of call to Dubai.

Another marine transportation company, Yangming Marine Transport Corporation, said it does not have ports of call in the Middle East but if the war lasts for any substantial period, the corporation would not rule out the possibility of raising premiums.

www.bangkokpost.com Post reporters

Oil prices in the international market will not decline as quickly as they did during the 1991 Gulf war, according to energy expert Piyasvasti Amranand.

The government has also confirmed that its current legal oil reserve requirement was adequate to cope with the current situation.

Crude prices in London and New York fell by 10% yesterday after President George W. Bush's ultimatum to Saddam Hussein appeared to end uncertainty about a strike on Iraq.

Dr Piyasvasti said world oil prices were likely to decline no matter how long the war lasted, as long as the battle was confined only to Iraq. Still, prices would not drop considerably and swiftly as in 1991, he added.

The recent increase in oil prices was due partly to a falloff in production in Venezuela due to political strife and constraints on the Organisation of Petroleum Exporting Countries (Opec) in increasing production to offset the two million barrels per day previously supplied by Iraq, said Dr Piyasvasti, chairman of the Energy for Environment Foundation.

In 1991, Opec raised its production to substitute for oil supplied by Iraq and Kuwait. At the time, fuel consumption had also fallen just before the start of the war. Oil prices fall sharply once hostilities broke out.

Dr Piyasvasti cautioned that if the current conflict escalated, oil prices would rocket.

``Crude oil prices could soar to as high as $60 per barrel, if the war dragged on and spilled over to Iran, Kuwait and Saudi Arabia,'' he said.

Such a case would put local retail petrol prices to as high as 30 baht per litre, or nearly double current prices.

Dr Piyasvasti said oil prices could drop to $25 per barrel if the situation in Venezuela returned to normal and other Opec members were able to raise production to substitute for the shortage of oil supplied by Iraq.

Crude oil prices currently range from $30-35 a barrel, premium petrol is $40-43 a barrel, diesel is $40 and fuel oil $30.

While petrol market prices is 19-20 baht a litre, the government has capped prices at 16.99 baht for premium petrol.

Dr Piyasvasti said current oil prices would be reflected in power bills in the next eight months.

``If the fuel oil price increases 100% to $35 a barrel, natural gas prices at power plants will raise by 33% to 200 baht per million BTU (British thermal units) from 150 baht, resulting in a 12% increase in power bills,'' he said.

However, Energy Minister Prommin Lertsuridej said world oil prices were now under control on expectations that a US-Iraq war would not last long.

He said the country's oil reserve was confirmed as adequate at 60 days. ``We have not found it necessary yet to raise the legal requirement of oil reserves.''

A source at PTT Plc said the company had oil supply agreements with producers outside of the Middle East. In addition, the company had ordered 65 million litres of diesel to add to its commercial reserve, and was reviewing its procurement plans twice a week.

According to the Bank of Thailand, each increase of $1 a barrel in Dubai oil prices would raise the country's import bill by $62.5 million per quarter.

But analysts expect the overall impact to be short-lived, noting oil prices yesterday dropped after the 48-hour deadline was announced.

news.ft.com By Kevin Morrison in London and agencies Published: March 18 2003 23:06 | Last Updated: March 18 2003 23:06

Oil prices extended their slide on Tuesday, falling more than $2, and have now dropped more than 10 per cent in the past four days.

Traders said they could fall by the same margin before the weekend and have turned from fearing about prices exceeding $40 due to a war in Iraq and supply shortages to concern about oversupply as demand eases and Saudi Arabia and other Opec members boost production.

Reports that oil supplies from Venezuela were coming back stronger than expected following the almost crippling three-month strike that began late last year also eased supply concern.

Nymex light sweet crude settled $3.26 to $31.67 by the close in New York , having traded as low as $31.40, lowest since January 13, and it peaked at $33.40.

The front month Nymex contract has fallen 13 per cent in the last four trading sessions and traders expect the price could fall by the same margin during the rest of the week.

In London, IPE Brent or May delivery fell almost $3 to its lowest in three months before partly recovering to $27.25 a barrel, a drop of $2.23 by the close. The front month Brent contract has dropped 20 per cent since hitting a post Gulf War peak of $34.55 nine days ago.

"Technically, we have broken any bullish trend in the oil price, we have now entered a bear market and we are not going to find any support until the price falls to the low $20s," said one London-based trader. "Nobody wants to catch a falling knife, otherwise we would have seen a lot of people with missing fingers."

The swiftness of the market turnround has caught many investors by surprise, with several traders holding long positions.

"We have seen a massive unwinding of long positions over the last few days with some investors taking big hits," he said.

Spot gold gained about $3 to $339.50/$340.25 an ounce from $336.75/$337.50 at Monday's New York close as the precious metal gained as the US dollar slipped from its strong gains on Monday.

Base metals traded in a narrow range as concerns switched from the uncertainty about a Middle East conflict to the bearish outlook for the global economy.

Three-month copper was up about $5 to $1,686 a tonne in London Metal Exchange trading, while aluminium slipped by $4 to $1,383 a tonne and nickel added $100 to $8,210. Traders said that nickel's outperformance was due to concern about low stockpiles.