Iran: Ahmadinejad to propose Aliabadi as permanent oil minister

    July 15, 2011 10:28 AM by Eric Watkins
    Iran’s President Mahmoud Ahmadinejad plans to nominate a new oil minister later this month, with the current caretaker minister, Mohammad Aliabadi, being put forward for the permanent post.

    “As per previous practice, those ministers who are already serving on the posts will be nominated,” said Mohammad Reza Mirtajedini, vice-president in charge of parliamentary affairs.

    In addition to the oil minister, Ahmadinejad will nominate three other ministers: Industry, Mines and Trade; Cooperatives, Labor and Social Affairs; and Sports and Youth.

    Iran’s state news agency said that parliament would debate the suitability of the ministers and vote to approve them or not within a week of their nomination, now scheduled for July 24.

    Observers said the vote will serve as a referendum on Ahmadinejad, who has angered leading figures in Iran, including the Guardian Council, a powerful body of clerics and jurists appointed by Supreme Leader Ali Khamenei and parliament (OGJ, May 20, 2011).

    Ahmadinejad will be nominating Aliabadi to a parliament that is already highly critical of his dismissal of former Oil Minister Massoud Mirkazemi in May and his further attempt to appoint himself to the position.

    Aliabadi, who attended the fractious June 8 meeting of the Organization of the Petroleum Exporting Countries, himself is hardly a favorite candidate among parliamentarians.

    The head of parliament's energy committee said that Aliabadi, who was serving as head of Iran's Olympic Committee at the time of his appointment to the oil ministry, was the “worst choice” and that he would damage Iran's energy sector.

    At the time, Ahmadinejad defended his decision, saying that he was only implementing a plan to merge the oil ministry with the energy ministry, but critics viewed his move as an effort to take control of the country’s oil and gas revenues.

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    South Sudan forms oil marketing venture with Glencore

    July 15, 2011 10:26 AM by Eric Watkins
    South Sudan’s state-owned Nilepet has formed a joint venture firm with Glencore International Plc that will begin marketing oil produced by the newly founded country.

    “This joint venture will help the Republic of South Sudan develop its national oil company through skills transfer and training, and be responsible for marketing the crude oil from July 9 onwards,” said Information Minister Barnaba Marial Benjamin.

    The new firm, called PetroNile, will market South Sudan’s output of about 375,000 b/d of oil, which is produced mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s Oil & Natural Gas Corp.

    Under the 2005 peace agreement brokered between the two states, revenues from the South’s production were formerly shared equally with the North. But that agreement expired on July 9 with the founding of the new nation, and a new one has yet to be established.

    Currently, the South’s oil is exported via two pipelines leading through northern Sudan to an export facility on the Red Sea. But Juba is considering plans to build a new export pipeline in an effort to free itself of any further control by the North.

    South Sudan’s Oil Minister Luol Deng said recently that his country is in talks about a pipeline to Ethiopia, which receives about 80% of its oil from the Sudan – a tidy figure for the new nation. But Ethiopia is land-locked and cannot provide South Sudan with an outlet to world markets.

    Kenya represents another possibility. South Sudan’s Roads and Transport Minister Anthony Makana recently announced plans for a 200 km pipeline from Juba to Kisumu in Kenya.

    Last year, Toyota Tsusho, the trading arm of the Japanese carmaker, said it was developing plans to build a $1.5 billion pipeline to run from Juba to the Kenyan island of Lamu.

    That possibility remains on the table according to South Sudan’s Director of Energy Arkangelo Okwang, who recently confirmed that his country has been in contact “from time to time” with Toyota Kenya.

    Not least, the South Sudanese also are looking into the possibility of a pipeline to the south that would join with a pipeline under consideration in Uganda that would carry oil to Kenya’s Indian Ocean Port of Mombasa.

    International oil companies have long championed the idea of such a pipeline from Uganda, but a plan for its development has yet to be agreed as Ugandan officials prefer to refine their oil and market it as products.

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    BP shrugs off tax woes to invest in UK's North Sea

    July 15, 2011 10:23 AM by Eric Watkins
    BP PLC underlined its commitment to the UK's North Sea by announcing a plan to invest £3 billion to redevelop its Schiehallion and Loyal oil fields west of the Shetland Islands.

    BP’s decision, described by one company executive as “an important milestone” for the firm, comes despite the recently imposed sharp uptick in taxes levied by the British government on oil and gas production in the country.

    "This important milestone is consistent with BP's strategy to sustain a material, high quality business in the North Sea region," said Trevor Garlick, BP regional president for the North Sea.

    BP said that Schiehallion and Loyal have produced nearly 400 million bbl of oil since production started in 1998 and that an estimated 450 million bbl of resource is still available.

    “The investment of circa £3 billion in the re-development of the fields will take production out to 2035 and possibly beyond,” BP said.

    BP said it has developed a strong track record west of Shetland over the past two decades and will use the latest technology to maximize recovery from these fields.

    It said the Quad 204 project involves replacing the existing Schiehallion Floating, Production, Storage and Offloading vessel with a new FPSO which is scheduled to be installed in 2015.

    The new vessel will be 270 m long by 52 m wide and able to process and export up to 130,000 b/d of oil, and store more than 1 million bbl of oil.

    BP said there will also be “a major investment” in the upgrading and replacement of the subsea facilities to enable the full development of the reserves.

    The new facilities are scheduled to commence production in 2016.

    BP’s investment decision came just four months after the UK’s Treasury raised the supplementary tax on oil and gas sold at prices exceeding $75/bbl to 32% from 20% -- a rise that energy companies warned would jeopardize their investment plans.

    However, Norway’s state-owned Statoil has since revived its Mariner project in the North Sea while Centrica has reopened a large gas field that was deliberately left dormant after the tax increase.

    BP acknowledged that the tax change would affect the value of the project, but it said the decision was justified by the size and scale of the development.

    "Like all investments in the UK continental shelf the value in the project for the companies involved has been reduced because of the tax change," said BP. "The tax increase certainly didn't make the decision any easier, however the size and scale of this development means we are able to progress."

    Justine Greening, the economic secretary to the UK’s Treasury, welcomed the “good news for the UK,” which she said showed that the “North Sea basin remains an attractive area for significant levels of new investment.”

    BP will have a 36.3% stake in the new FPSO, along with Shell 36.3%, Hess Ltd 12.90%, Statoil (UK) Ltd 4.84%, OMV (UK) Ltd. 4.84% and Murphy Petroleum 4.84%.

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    Diplomat: Libya’s rebel-held oil facilities ?largely undamaged’

    June 27, 2011 1:04 PM by Eric Watkins
    With Libya’s oil infrastructure thought to be largely undamaged in rebel-held areas of the country, a British diplomat said that exports of oil could resume within 3-4 weeks following the fall of the embattled leader leader Moammar Gadhafi.

    "We don't think the oil infrastructure has been particularly badly damaged physically,” said a British diplomat. “The current estimate is that in the east they can start pumping within three or four weeks.”

    The statement followed other reports that have emerged in recent weeks, with some saying that output from Libya could reach 355,000 b/d from rebel-held areas and others saying it would be marginal and not up to full capacity until 2015.

    A report by Goldman Sachs Group Inc. said that Libya’s oil exports could rise by as much as 355,000 b/d from areas held by rebel forces and up to 585,000 b/d if Gadhafi is removed from power and production resumes from western fields currently held by his government.

    Earlier, however, the International Energy Agency said that the North African country’s oil production faces a “long haul” to make a full recovery in the wake of the civil war gripping the land and that it will not return to full capacity until 2015.

    The British diplomat’s remarks came as word emerged of a team of officials from the US, UK, Italy, Turkey, Denmark and other nations which has spent several weeks in eastern Libya discussing scenarios with opposition leaders.

    "We are planning carefully and comprehensively for the days, weeks and months after Gadhafi has gone," said the diplomat. The plans, due for completion next week, include a proposed timetable for resuming oil production in areas of the country now held by forces opposed to Gadhafi.

    Rebels have held the eastern part of Libya since the outbreak of hostilities in February, and they sold their first tanker full of crude to US refiner Tesoro in April.

    Following the sale to Tesoro, the rebels scaled back their plans to export more oil after rocket attacks by Gadhafi’s forces seriously damaged a pumping station and production facilities at southeast Messla oil field on Apr. 4.

    Another attack hit a pumping station halfway along the 510 km pipeline from Messla to Tobruk port, killing eight rebels serving as guards (OGJ Online, May 17, 2011).

    Rebel Oil and Finance Minister Ali Tarhouni, without specifying a timeline, has since said that the opposition National Transitional Council hoped to “soon” resume oil production of as much as 100,000 b/d (OGJ Online, June 9, 2011).

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    Sudan: Obama urges ceasefire in oil-rich south

    June 20, 2011 4:44 PM by Eric Watkins
    US President Barack Obama urged the Khartoum-based government of northern Sudan to end its military operations against southern opponents in the oil-rich border state of South Kordofan, a scene of intense fighting in recent weeks.

    "The government of Sudan must prevent a further escalation of this crisis by ceasing its military actions immediately, including aerial bombardments, forced displacements and campaigns of intimidation," said Obama, who renewed the US commitment to the peace process underway in the region.

    For several weeks, Khartoum’s military forces have been fighting southern-aligned armed groups in Southern Kordofan, the north's main oil state along the border with South Sudan, stepping up tensions ahead of the south’s independence on July 9.

    At stake in the conflict is control, or at least a share, of the country’s oil export revenues, a point stressed by the north’s Finance Minister Ali Mahmud.

    "Sudan will lose 36.5% of its income from July 9 because this is the percentage of oil revenue that the government gets from the oil produced in the south," said Mahmud.

    Khartoum receives around 50% of the oil revenues generated by the south, which produces 75% of Sudan's 470,000 b/d crude output.

    According to the US Energy Information Administration, Sudan’s oil exports represent over 90% of the country’s total export revenues, but further development is “hindered by conflicts and sanctions.”

    That view was underlined last week when Khartoum threatened to stop the southern government from using its petroleum infrastructure, which includes the 1600-km Greater Nile Oil Pipeline, several refineries, and the export terminal at Suakin on the Red Sea.

    "We have sent a letter to south Sudan, to inform them that they cannot use the pipelines or the refinery or the port after July 9 unless we reach a deal about the price of renting this infrastructure," Mahmud added.

    So far, southern officials have remained silent about plans mooted a year ago for the contraction of a new pipeline from the south through neighboring Kenya to a new export facility being planned for the island of Lamu.

    At the time, analyst BMI suggested that southern officials were concerned not to raise the ire of the northern regime.

    “Any move on the part of a future southern Sudan to assert the independence of its oil industry would likely be seen as highly provocative in Khartoum and could lead to violence” (OGJ Online, July 16, 2010).

    Khartoum is desperate to offset the looming fall in its income even as it struggles to cope with soaring inflation, a weakening currency and foreign debt of $38 billion which, together with US sanctions, has choked its sources of external financing.

    Washington has offered Khartoum a number of incentives in exchange for an orderly transition to independence for the south: gradual steps toward full normalization of diplomatic ties, the removal of Sudan from the US terrorism blacklist, and an international agreement on debt relief.

    President Obama reminded Khartoum of the stakes: "I want to speak directly to Sudanese leaders: you must know that if you fulfill your obligations and choose peace, the United States will take the steps we have pledged toward normal relations.”

    But the president also warned that “those who flout their international obligations will face more pressure and isolation and they will be held accountable for their actions."

    Sudan's President Omar al-Bashir last week said his army had matters “under control” in South Kordofan, as clashes continued between his government’s troops and members of the former southern rebel army, the SPLA.

    "The situation in South Kordofan is under the control of the Sudanese Armed Forces which are now clearing the state of the remaining rebels," Bashir said.

    Bashir’s top aide Nafie Ali Nafie said the country’s ruling National Congress Party had given a "free hand" to the armed forces to bring the situation in South Kordofan under control.

    Sudan analyst John Ashworth said that the north’s military actions in the states of Abyei, South Kordofan and Blue Nile amounted to “a deliberate attempt by Khartoum” to seize control of the oil-rich regions ahead of the July 9 deadline.

    Contact Eric Watkins at

    Iraq's oil revenues exceed $34bn; minister reconsiders output plan

    June 10, 2011 3:15 PM by Eric Watkins
    Higher oil prices helped Iraq earn $34.1 billion in oil revenue in the first five months of this year, a 34% increase over the government’s budgeted revenue.

    "This means that there is a surplus in the first five months of $8.7 billion," said Deputy Prime Minister Hussain Al-Shahristani, who added that government calculations had earlier estimated $25.4 billion in revenue for the period.

    The announcement came as the country is considering a downward revision to its earlier goal – set by Al-Shahristani – of increasing its oil production capacity by nearly 9.35 million b/d by 2017 from the current 2.65 million b/d.

    Iraq’s Oil Minister Abdul-Kareem Luaibi, reversing earlier policy statements, said his country is now considering revisions to the prior goal of increasing oil production capacity to 12 million b/d.

    "We are studying several scenarios for more economic production rates, we can reduce the production and increase the period to reach the plateau targets," said Luaibi.

    "For example, instead of producing 12 million b/d for 7 years, we can produce 8 million b/d for 13 or 14 years," the minister said, reversing earlier remarks by Al-Shahristani, Iraq's deputy prime minister for energy.

    Last month, Al-Shahristani said Baghdad believes the goal of "12.5 million bpd ? is realistic and feasible, as currently there are no signs we will not be able to achieve this goal in a timely manner."

    Even as late as June 4, Al-Shahristani was quoted as saying that "export terminals and pipelines will not be the obstacle" to the country's increased exports.

    After two bidding rounds in 2009, Iraq signed a series of agreements with international oil firms in an effort to increase its production capacity to 12 million b/d by 2017 from the current 2.7 million b/d or so.

    But analysts have questioned whether Iraq can actually reach its stated target of 12 million b/d due to infrastructure constraints, suggesting that a goal of 6-7 million b/d might be more realistic.

    The US Department of Energy noted recently that Iraq faces "many challenges" in achieving the production targets it has set, largely because of the "lack of an outlet for significant increases in crude oil production."

    In March, the International Monetary Fund also cast doubt on Iraq’s production targets by drawing attention to the need for vast investment in port facilities, pipelines, desalination plants and storage facilities.

    However, Al-Shahristani countered by saying that his country's development plans for oil fields were proceeding "normally" and even faster than contracted.

    Al-Shahristani said there were no major delays in Iraq's new export facilities being built to handle the extra crude expected from a series of agreements signed with international oil companies.

    "We are comfortable that new [oil] export outlets will be ready to received extra crude according to the plans to boost oil production with the contracted oil companies," he said (OGJ May 23, 2011).

    Meanwhile, Luaibi said his ministry had not yet approached oil companies over renegotiation, but he insisted that the proposed changes would not have adverse effects on the companies.

    "In general, the oil companies will not be hurt,” said Luaibi, adding that “we can increase the period to reach the plateau targets to 13-14 years.”

    But analysts said that the contracts are production driven, and that oil companies receive fees for each barrel they produce. Reduction in the country’s overall target could mean lower returns for oil companies, at least in the short term.

    "The point about increasing the plateau period, is that sufficient to compensate the IOCs (international oil companies) for lower production? We have to wait and see," said one oil executive working in Iraq.

    "Yes, potentially, it gives the same number of barrels – lower plateau but longer years – but money has time value ... It is not a very simple and straight forward calculation."

    IHS Global Insight analyst Samuel Ciszuk said that Iraq’s open acceptance of a much lower target highlights the challenges facing the country in addition to renouncing its ambition to rival Saudi Arabia as a swing producer.

    "Few if any forecaster, even outside of the energy industry, has really planned for Iraq to come anywhere near its 12 million b/d production target, meaning that on the face of it the Iraqi target slash should have few implications on the markets," Ciszuk said.

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    Israeli government distances itself from sanctions busters

    May 31, 2011 6:43 PM by Eric Watkins
    The government of Israel has made efforts to distance itself from Ofer Bros. Group, one of the country's largest private conglomerates, after learning the firm violated US sanctions against Iran.

    "The recent American decision relates to a private company and the private company has to deal with it directly with American authorities," said Foreign Ministry spokesman Yigal Palmor.

    The Ofer Bros. Group, one of several companies to be hit with US sanctions for trade with Iran, earlier said it had “never sold ships to Iran” and claimed support for its position from the Israeli government.

    "It's definitely awkward to find an Israeli company blacklisted like this," said another government official familiar with the matter.

    The awkwardness was underlined by Yossi Melman, a columnist for Israel’s Haaretz newspaper who said Israel's government had long failed to enforce its own laws restricting Israelis from engaging in commerce and investment with firms doing business with Iran.

    "Prime Minister Benjamin Netanyahu, who endlessly preaches the need for firm action against Iran to prevent it from acquiring nuclear arms, is not lifting a finger to stop Israeli companies and individuals indirectly trading with Iran," Melman wrote.

    US officials last week said that Singapore-based Tanker Pacific, which is owned by Ofer, sold the tanker MT Raffles Park for $8.65 million in September to a front company that then sold it to Islamic Republic of Iran Shipping Lines.

    US officials said Ofer failed to exercise due diligence and did not heed publicly available and easily obtainable information that would have indicated that they were dealing with an Iranian company.

    Tanker Pacific issued a statement saying it considers the announcement by the US State Department to be “a harsh assessment” of its due diligence process.

    The firm said that the searches and enquiries it made at the time of the transaction were “appropriate” and that they gave “no indication that the vessel would ultimately fall into Iranian hands.”

    Tanker Pacific Management said it has retained counsel in Washington and is engaging with US government authorities “with the hope of clarifying this matter quickly.”

    As a result of the US action, Ofer and Tanker Pacific are barred from securing financing from the US Export-Import Bank, from obtaining loans of more than $10 million from US financial institutions and from receiving US export licenses.

    Contact Eric Watkins at

    UK's Huhne faces sea of troubles

    May 23, 2011 1:48 PM by Eric Watkins
    The UK’s Secretary of State for Energy and Climate Change Chris Huhne is facing a sea of troubles these days, and none of it connected with the government’s recent decision to increase taxes on oil and gas companies operating in the North Sea.

    Nope. Huhne is facing an altogether different sea of troubles following disclosures by his ex-wife, Vicky Pryce, that that he persuaded her to accept speeding penalty points on his behalf in order to escape a suspended driver’s license.

    As a result of the disclosures, police in the county of Essex – where the speeding violation took place – plan to interview Huhne this week – an interview that could result in criminal charges, according to press reports.

    At the very least, the allegations now being raised call into question Mr Huhne’s tenure as energy secretary. At their worst, the allegations could lead to charges that Mr Huhne perverted the course of justice.

    Either way, even as his colleagues in government are now distancing themselves from Huhne, other observers are suggesting that he should resign his position or face being fired.

    Needless to say, opposition politicians are seeking to reap maximum political hay out of Mr Huhne’s difficulties.

    Shadow Cabinet Office minister Tessa Jowell, a member of the opposition Labour Party, said that the UK’s Prime Minister David Cameron, a Conservative, should set up an independent investigation to establish what had happened.

    "That is what the Prime Minister should be doing," she said. "He should be getting a proper investigation independently to establish what the facts were and in the light of the facts decide the best course of action."

    Michael Fallon, the deputy chairman of the Conservative Party, the LibDem’s partners in the UK’s coalition government, said Huhne’s presence in the Cabinet while under investigation by police represented a “problem” for the government.

    “He hasn’t been charged with anything,” Fallon said, but noted that, “What’s important is that we wait until any minister has been charged; when they’re charged then obviously it’s right that they should have to step aside.”

    Foreign Secretary William Hague, also a Conservative, underlined that view.

    Asked whether Huhne should resign, Hague replied: "In the media, those things are being questioned, but the police are looking into it and so what can we do? We have to let that process take place. It's his decision."

    But others are less charitable.

    “There is blood in the water and the sharks are circling. So far Huhne has failed to deny the allegations in full, he has only said that the allegations are incorrect. The story just does not stack up,” a senior Liberal Democrat Member of Parliament told The Daily Telegraph.

    Thus, the stage is set.

    "However good Huhne is as energy secretary, it will be overshadowed by the continuing coverage of his private life," said Simon McGrath, who runs a popular Facebook page for Huhne’s party, the Liberal Democrats.

    McGrath wants Huhne to resign.

    "If he chooses not to do this then Clegg should show that he will put the interests of the Party first and fire him," said McGrath, referring to the leader of Liberal Democrats, Nicholas Clegg.

    As for Huhne, he says: “I have been very clear that I deny these allegations and I stand by that absolutely.”

    Meanwhile, about those North Sea taxes...

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    Clinton leads US oil diplomacy efforts in Greenland

    May 10, 2011 7:03 PM by Eric Watkins
    US Secretary of State Hillary Clinton plans to push for an Arctic oil spill response taskforce this week even as Cairn Energy PLC prepares for its busiest drilling season ever off the coast of Greenland.

    Clinton will travel to Greenland for a meeting of the eight nations – Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the US – that lay claim to the Arctic amid growing concerns about the risks to the environment following last year’s Macondo blowout.

    “This will be a historic meeting,” said Julie Reside, a spokeswoman at the State Department. “For the coming two years, Secretary Clinton and the other ministers will set in motion negotiations on a new instrument to control potential oil spills in the Arctic.”

    Interior Secretary Ken Salazar is expected to join Clinton on May 12 for the seventh meeting of the Arctic Council ministers, who will sign a search-and-rescue treaty and hear a report on how climate change is affecting the Arctic.

    “The Arctic Council is in an odd transition place now: it has been decided that they need to make it a more formal institution and give it real authority,” said Buck Parker of Earthjustice, a non-profit law firm specializing on environmental issues.

    “They have to make it look like they’re doing something, or other countries that particularly have an interest in how the Arctic is managed with respect to global warming are going to want some say,” said Parker.

    Meanwhile, Edinburgh, Scotland-based Cairn plans to invest an extra $500 million to drill up to four wells offshore Greenland this year, one more than in 2010. The company failed to make a commercial discovery there last year.

    Cairn has just won approval from Greenland’s government for its 2011 campaign, and it plans to drill up to three wells in the Atammik and Lady Franklin blocks, and one in the Eqqua or Napariaq blocks farther north in Baffin Bay.

    That prospect sends shivers up the spines of environmentalists.

    “It took BP months to stop Macondo, with a fleet of 6,500 ships, with 50,000 people and a bill of about $40 billion,” said Ben Ayliffe, a senior oil campaigner at Greenpeace International.

    By contrast, Ayliffe said, Cairn last year had “14 ships thousands of miles from anywhere, and they’re not the sort of company than can afford to take a $40 billion hit on an oil spill.”

    Looks like the time is right for oil diplomacy

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    Tilting at windmills in Scotland

    April 29, 2011 1:18 PM by Eric Watkins
    The Scotsman newspaper reports that opposition to the Scottish government's pledge to produce 100% of the country's electricity from renewable sources by 2020 is growing.

    Mountain walker and broadcaster Cameron McNeish is the latest name to be added to the growing list of experts who believe the plans to create more green energy are unsustainable - and could ruin Scotland's much-loved landscape.

    To meet the new target, Scotland would need to create hundreds more wind turbines and also bring wave and tidal energy technology to commercialization - a feat which some engineers believe is impossible within the next decade.

    McNeish told the paper that the creation of more wind farms would "erode the bonnie aspect of Bonnie Scotland" and could devastate the tourism industry, which is heavily reliant on visitors drawn to Scotland's remote mountains and lochs.

    Scottish Engineering chief executive Peter Hughes has claimed that the target is unattainable - while conservation group the John Muir Trust has also hit out at plans for more onshore wind developments on Scottish wild land.

    McNeish warned that the development of onshore wind farms would blight the Scottish landscape and urged voters to select members of the Scottish Parliament focused on channeling money into wave, tidal and offshore wind developments.

    "I support the quest for renewable energy. But what really concerns me is the proliferation of these giant turbines on our hills and wild places. I know the number of people who come to Scotland to enjoy these wild places and I have a great fear that they will stop coming as we lose more and more of these areas to this form of industrialization."

    But Niall Stuart, chief executive of Scottish Renewables, said less than 1% of Scotland's landmass is occupied by turbines.

    "Onshore wind is the most readily deployed, cost efficient and effective form of renewable energy in Scotland, which is already providing more than 10% of our electricity needs," he said, adding that Whitelee windfarm is one of Scotland's most popular visitor attractions.

    Maybe it’s a new breed of tourist.
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