OPEC STRIVES TO SECURE CAPTIVE MARKETS FOR CRUDE

OPEC STRIVES TO SECURE CAPTIVE MARKETS FOR CRUDE

Several key members of the Organization of Petroleum Exporting Countries are close to buying substantial stakes in refineries and service stations in the United States and Europe in a bid to secure captive markets for their crude oil exports.

Saudi Arabia, the world's largest oil exporter, is in the final stages of negotiations to acquire 50 percent of Texaco Inc.'s refining and marketing operations in the United States and is also keen to buy the European distribution networks of the other U.S. majors. Nigeria, too, is on a shopping spree in North America, talking with half a dozen U.S. independents about buying a stake in their refining operations. The Nigerians are also eyeing possible acquisitions in Canada. The African oil producer is also very interested in establishing itself in the European market.Meanwhile, Kuwait, which snapped up Gulf Oil's European sales network three years ago, says it intends to double its worldwide marketing capacity to at least 500,000 barrels a day by buying more foreign assets.

Venezuela also is seeking to move deeper downstream in Europe and the United States to boost its captive market to 700,000 barrels a day from about 450,000 barrels a day at present.

The quest for secure sales outlets is being pursued more vigorously now

because OPEC can't find buyers for its crude in a glutted market and is fast losing customers to rival non-OPEC producers.

OPEC oil production is running at around 18 million barrels a day at present, but at least 1.5 million barrels a day is being stored on supertankers and pumped into storage tanks in North West Europe, the Mediterranean and the Caribbean because of a lack of buyers.

Saudi Arabia is producing about 1 million barrels a day more than it can sell.

A presence in U.S. and European downstream markets would ease these problems by securing guaranteed outlets for exports. An added bonus is that refined products are not covered by OPEC's troublesome fixed price agreements that place its members at a disadvantage against their more flexible non-OPEC competitors.

The United States is the prime target for OPEC downstream investment

because its oil imports are expected to jump 50 percent, from 6 million barrels a day in 1986 to more than 9 million barrels a day by 1990. The United States will likely have to meet its needs increasingly from OPEC, especially its Persian Gulf members.

Kuwait's success in building up a powerful presence in Europe has spurred other OPEC producers to move downstream. Kuwait Petroleum Corp. owns two oil refineries and 4,500 gas stations in seven European countries, and markets under the Q-8 sign.

The tiny Persian Gulf state is now reaping the benefits of boosting its domestic refining capacity and moving into the heart of the consuming markets. Nearly 90 percent of Kuwait's oil exports consist of refined oil products and it sells 250,000 barrels a day through its own retail gasoline stations, nearly a quarter of its total crude oil production.

Venezuela too has benefited from its downstream investments. Its partly owned refining and marketing operations in the United States, West Germany and Sweden guarantee placement for over 20 percent of its crude oil production of around 1.5 million barrels a day. Eighty percent of that consists of refined products.

Saudi Arabia has paid dearly for its failure to refine more of its crude into petroleum products and move closer to the consumer. Three quarters of its oil production was marketed as crude last year and its oil revenues rose barely 1 percent despite higher prices.

In sharp contrast, Venezuela and Kuwait boosted their oil revenues by almost 25 percent.

Saudi Arabia is about to make up for lost time with its proposed deal with Texaco. According to some industry watchers it will pay around $1.5 billion for a 50 percent stake in Texaco's refining and marketing operations centered on the U.S. East Coast and Texas. Others have speculated that it intends to take a half share in the whole company.

Saudi Arabia has also been talking with Exxon, Chevron and Mobil, Texaco's partners in the Aramco consortium that runs its crude oil operations.

Exxon's European operations are said to be a prime target for Saudi Arabia. Its Europeansubsidiary Esso sold 1.6 million barrels a day of refined products in Europe last year, which would swallow up 40 percent of Saudi Arabia's 4.5 million barrels a day production.

These moves will further widen the gap between OPEC's haves and have nots. Weaker oil prices have largely dashed the hopes of the majority of OPEC's poorer members of investing in costly downstream acquisitions or joint ventures. Libya has a stake in a marketing operation in Italy. Iran and the United Arab Emirates have a few refining arrangements in consuming markets, too. But further expansion of these interests isn't likely given the financial restraints.

These producers face an uphill struggle to sell their crude in an increasingly glutted market, while the richer OPEC producers ship their refined products into assured outlets.

Kuwait is in a league of its own; it moved abroad back in 1981 with the $2.5 billion takeover of Santa Fe, the U.S. oil exploration company. State- owned KPC has joined the ranks of the oil majors boasting integrated operations from the wellhead to the gas pump. It also runs a fleet of oil tankers, 11 of which are being protected by the U.S. Navy, and is exploring for oil around the world.

The Kuwaiti Investment Office's purchase of almost 20 percent of British Petroleum has also raised the possibility of cooperation between the U.K. oil company and KPC in refining and marketing.

KPC is on the prowl for more assets around the world, especially in Europe and Asia. However, its attempt to break into the lucrative Japanese market was thwarted by fears about foreign ownership of the strategically important oil distribution business. Saudi Arabia, Nigeria and Venezuela have narrower ambitions, preferring to work through joint ventures.