http://localhost:4503/content/ogj/en/blogs/oil-diplomacy.html2016-07-12T15:33:34.233ZOil DiplomacyAdobe Experience ManagerIran: Ahmadinejad to propose Aliabadi as permanent oil ministernoemail@noemail.orgEric WatkinsIran&rsquo;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.<br /><br />&ldquo;As per previous practice, those ministers who are already serving on the posts will be nominated,&rdquo; said Mohammad Reza Mirtajedini, vice-president in charge of parliamentary affairs.<br /><br />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.<br /><br />Iran&rsquo;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.<br /><br />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).<br /><br />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. <br /><br />Aliabadi, who attended the fractious June 8 meeting of the Organization of the Petroleum Exporting Countries, himself is hardly a favorite candidate among parliamentarians.<br /><br />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 &ldquo;worst choice&rdquo; and that he would damage Iran's energy sector.<br /><br />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&rsquo;s oil and gas revenues.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Sudan forms oil marketing venture with Glencorenoemail@noemail.orgEric WatkinsSouth Sudan&rsquo;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.<br /><br />&ldquo;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,&rdquo; said Information Minister Barnaba Marial Benjamin.<br /><br />The new firm, called PetroNile, will market South Sudan&rsquo;s output of about 375,000 b/d of oil, which is produced mainly by China National Petroleum Corp., Malaysia&rsquo;s Petroliam Nasional Bhd. and India&rsquo;s Oil & Natural Gas Corp. <br /><br />Under the 2005 peace agreement brokered between the two states, revenues from the South&rsquo;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.<br /><br />Currently, the South&rsquo;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. <br /><br />South Sudan&rsquo;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 &ndash; a tidy figure for the new nation. But Ethiopia is land-locked and cannot provide South Sudan with an outlet to world markets.<br /><br />Kenya represents another possibility. South Sudan&rsquo;s Roads and Transport Minister Anthony Makana recently announced plans for a 200 km pipeline from Juba to Kisumu in Kenya. <br /><br />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. <br /><br />That possibility remains on the table according to South Sudan&rsquo;s Director of Energy Arkangelo Okwang, who recently confirmed that his country has been in contact &ldquo;from time to time&rdquo; with Toyota Kenya.<br /><br />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&rsquo;s Indian Ocean Port of Mombasa.<br /><br />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.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, shrugs off tax woes to invest in UK's North Seanoemail@noemail.orgEric WatkinsBP 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.<br /><br />BP&rsquo;s decision, described by one company executive as &ldquo;an important milestone&rdquo; 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. <br /><br />"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. <br /><br />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. <br /><br />&ldquo;The investment of circa £3 billion in the re-development of the fields will take production out to 2035 and possibly beyond,&rdquo; BP said.<br /><br />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. <br /><br />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. <br /><br />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.<br /><br />BP said there will also be &ldquo;a major investment&rdquo; in the upgrading and replacement of the subsea facilities to enable the full development of the reserves.<br /><br />The new facilities are scheduled to commence production in 2016.<br /><br />BP&rsquo;s investment decision came just four months after the UK&rsquo;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.<br /><br />However, Norway&rsquo;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.<br /><br />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.<br /><br />"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." <br /><br />Justine Greening, the economic secretary to the UK&rsquo;s Treasury, welcomed the &ldquo;good news for the UK,&rdquo; which she said showed that the &ldquo;North Sea basin remains an attractive area for significant levels of new investment.&rdquo;<br /><br />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%.<br /> <br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Libya&rsquo;s rebel-held oil facilities ?largely undamaged&rsquo;noemail@noemail.orgEric WatkinsWith Libya&rsquo;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.<br /><br />"We don't think the oil infrastructure has been particularly badly damaged physically,&rdquo; said a British diplomat. &ldquo;The current estimate is that in the east they can start pumping within three or four weeks.&rdquo;<br /><br />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.<br /><br />A report by Goldman Sachs Group Inc. said that Libya&rsquo;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. <br /><br />Earlier, however, the International Energy Agency said that the North African country&rsquo;s oil production faces a &ldquo;long haul&rdquo; 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.<br /><br />The British diplomat&rsquo;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.<br /><br />"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. <br /><br />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. <br /><br />Following the sale to Tesoro, the rebels scaled back their plans to export more oil after rocket attacks by Gadhafi&rsquo;s forces seriously damaged a pumping station and production facilities at southeast Messla oil field on Apr. 4. <br /><br />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). <br /><br />Rebel Oil and Finance Minister Ali Tarhouni, without specifying a timeline, has since said that the opposition National Transitional Council hoped to &ldquo;soon&rdquo; resume oil production of as much as 100,000 b/d (OGJ Online, June 9, 2011).<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Obama urges ceasefire in oil-rich southnoemail@noemail.orgEric WatkinsUS 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.<br /><br />"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.<br /><br />For several weeks, Khartoum&rsquo;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&rsquo;s independence on July 9.<br /><br />At stake in the conflict is control, or at least a share, of the country&rsquo;s oil export revenues, a point stressed by the north&rsquo;s Finance Minister Ali Mahmud. <br /><br />"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.<br /><br />Khartoum receives around 50% of the oil revenues generated by the south, which produces 75% of Sudan's 470,000 b/d crude output.<br /><br />According to the US Energy Information Administration, Sudan&rsquo;s oil exports represent over 90% of the country&rsquo;s total export revenues, but further development is &ldquo;hindered by conflicts and sanctions.&rdquo;<br /><br />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. <br /><br />"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.<br /><br />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.<br /><br />At the time, analyst BMI suggested that southern officials were concerned not to raise the ire of the northern regime.<br /><br />&ldquo;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&rdquo; (OGJ Online, July 16, 2010).<br /><br />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.<br /><br />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.<br /><br />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.&rdquo;<br /><br />But the president also warned that &ldquo;those who flout their international obligations will face more pressure and isolation and they will be held accountable for their actions."<br /><br />Sudan's President Omar al-Bashir last week said his army had matters &ldquo;under control&rdquo; in South Kordofan, as clashes continued between his government&rsquo;s troops and members of the former southern rebel army, the SPLA.<br /><br />"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.<br /><br />Bashir&rsquo;s top aide Nafie Ali Nafie said the country&rsquo;s ruling National Congress Party had given a "free hand" to the armed forces to bring the situation in South Kordofan under control.<br /><br />Sudan analyst John Ashworth said that the north&rsquo;s military actions in the states of Abyei, South Kordofan and Blue Nile amounted to &ldquo;a deliberate attempt by Khartoum&rdquo; to seize control of the oil-rich regions ahead of the July 9 deadline.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,'s oil revenues exceed $34bn; minister reconsiders output plannoemail@noemail.orgEric WatkinsHigher 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&rsquo;s budgeted revenue.<br /><br />"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.<br /><br />The announcement came as the country is considering a downward revision to its earlier goal &ndash; set by Al-Shahristani &ndash; of increasing its oil production capacity by nearly 9.35 million b/d by 2017 from the current 2.65 million b/d.<br /><br />Iraq&rsquo;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.<br /><br />"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. <br /><br />"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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />In March, the International Monetary Fund also cast doubt on Iraq&rsquo;s production targets by drawing attention to the need for vast investment in port facilities, pipelines, desalination plants and storage facilities. <br /><br />However, Al-Shahristani countered by saying that his country's development plans for oil fields were proceeding "normally" and even faster than contracted.<br /><br />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.<br /><br />"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).<br /><br />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.<br /><br />"In general, the oil companies will not be hurt,&rdquo; said Luaibi, adding that &ldquo;we can increase the period to reach the plateau targets to 13-14 years.&rdquo;<br /><br />But analysts said that the contracts are production driven, and that oil companies receive fees for each barrel they produce. Reduction in the country&rsquo;s overall target could mean lower returns for oil companies, at least in the short term.<br /><br />"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.<br /><br />"Yes, potentially, it gives the same number of barrels &ndash; lower plateau but longer years &ndash; but money has time value ... It is not a very simple and straight forward calculation."<br /><br />IHS Global Insight analyst Samuel Ciszuk said that Iraq&rsquo;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.<br /><br />"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.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, government distances itself from sanctions bustersnoemail@noemail.orgEric WatkinsThe 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.<br /><br />"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.<br /><br />The Ofer Bros. Group, one of several companies to be hit with US sanctions for trade with Iran, earlier said it had &ldquo;never sold ships to Iran&rdquo; and claimed support for its position from the Israeli government. <br /><br />"It's definitely awkward to find an Israeli company blacklisted like this," said another government official familiar with the matter.<br /><br />The awkwardness was underlined by Yossi Melman, a columnist for Israel&rsquo;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.<br /><br />"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.<br /><br />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. <br /><br />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. <br /><br />Tanker Pacific issued a statement saying it considers the announcement by the US State Department to be &ldquo;a harsh assessment&rdquo; of its due diligence process.<br /><br />The firm said that the searches and enquiries it made at the time of the transaction were &ldquo;appropriate&rdquo; and that they gave &ldquo;no indication that the vessel would ultimately fall into Iranian hands.&rdquo; <br /><br />Tanker Pacific Management said it has retained counsel in Washington and is engaging with US government authorities &ldquo;with the hope of clarifying this matter quickly.&rdquo;<br /><br />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.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,'s Huhne faces sea of troublesnoemail@noemail.orgEric WatkinsThe UK&rsquo;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&rsquo;s recent decision to increase taxes on oil and gas companies operating in the North Sea.<br /><br />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&rsquo;s license. <br /> <br />As a result of the disclosures, police in the county of Essex &ndash; where the speeding violation took place &ndash; plan to interview Huhne this week &ndash; an interview that could result in criminal charges, according to press reports. <br /><br />At the very least, the allegations now being raised call into question Mr Huhne&rsquo;s tenure as energy secretary. At their worst, the allegations could lead to charges that Mr Huhne perverted the course of justice.<br /><br />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.<br /><br />Needless to say, opposition politicians are seeking to reap maximum political hay out of Mr Huhne&rsquo;s difficulties.<br /><br />Shadow Cabinet Office minister Tessa Jowell, a member of the opposition Labour Party, said that the UK&rsquo;s Prime Minister David Cameron, a Conservative, should set up an independent investigation to establish what had happened.<br /><br />"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."<br /><br />Michael Fallon, the deputy chairman of the Conservative Party, the LibDem&rsquo;s partners in the UK&rsquo;s coalition government, said Huhne&rsquo;s presence in the Cabinet while under investigation by police represented a &ldquo;problem&rdquo; for the government. <br /><br />&ldquo;He hasn&rsquo;t been charged with anything,&rdquo; Fallon said, but noted that, &ldquo;What&rsquo;s important is that we wait until any minister has been charged; when they&rsquo;re charged then obviously it&rsquo;s right that they should have to step aside.&rdquo; <br /><br />Foreign Secretary William Hague, also a Conservative, underlined that view.<br /><br />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."<br /><br />But others are less charitable.<br /><br />&ldquo;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,&rdquo; a senior Liberal Democrat Member of Parliament told The Daily Telegraph.<br /><br />Thus, the stage is set.<br /><br />"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&rsquo;s party, the Liberal Democrats.<br /><br />McGrath wants Huhne to resign. <br /><br />"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.<br /><br />As for Huhne, he says: &ldquo;I have been very clear that I deny these allegations and I stand by that absolutely.&rdquo; <br /><br />Meanwhile, about those North Sea taxes... <br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, leads US oil diplomacy efforts in Greenlandnoemail@noemail.orgEric WatkinsUS 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.<br /><br />Clinton will travel to Greenland for a meeting of the eight nations &ndash; Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the US &ndash; that lay claim to the Arctic amid growing concerns about the risks to the environment following last year&rsquo;s Macondo blowout.<br /><br />&ldquo;This will be a historic meeting,&rdquo; said Julie Reside, a spokeswoman at the State Department. &ldquo;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.&rdquo;<br /><br />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.<br /><br />&ldquo;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,&rdquo; said Buck Parker of Earthjustice, a non-profit law firm specializing on environmental issues.<br /><br />&ldquo;They have to make it look like they&rsquo;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,&rdquo; said Parker.<br /><br />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.<br /><br />Cairn has just won approval from Greenland&rsquo;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.<br /><br />That prospect sends shivers up the spines of environmentalists.<br /><br />&ldquo;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,&rdquo; said Ben Ayliffe, a senior oil campaigner at Greenpeace International.<br /><br />By contrast, Ayliffe said, Cairn last year had &ldquo;14 ships thousands of miles from anywhere, and they&rsquo;re not the sort of company than can afford to take a $40 billion hit on an oil spill.&rdquo;<br /><br />Looks like the time is right for oil diplomacy<br /><br />Contact Eric Watkins at <a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, at windmills in Scotlandnoemail@noemail.orgEric WatkinsThe 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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"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."<br /><br />But Niall Stuart, chief executive of Scottish Renewables, said less than 1% of Scotland's landmass is occupied by turbines.<br /><br />"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.<br /><br />Maybe it&rsquo;s a new breed of tourist.<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Oil & Gas wins onshore exploration license in Israelnoemail@noemail.orgEric WatkinsThe Israeli Petroleum Commissioner's Office has notified Zion Oil &amp; Gas Inc that it will be awarded a new petroleum onshore exploration license on land in the Issachar-Zebulun Permit area. The Jordan Valley License area is to the east of Zion's Joseph license area and Zion's Asher-Menashe license area and to the south of the Sea of Galilee. It traverses south along the western Jordan River Valley. &ldquo;In 2011, we intend to acquire additional seismic and other geological and geophysical data in our new license area, as we endeavor to refine our potential drilling prospects in this area,&rdquo; said Zion's Chief Executive Officer, Richard Rinberg. Drilling operations at the firm&rsquo;s Ma'anit-Joseph #3 well continue, according to Rinberg, who said Zion is aiming for its primary target in deep Permian age rock, expected at a depth of more than 5,790 m. The Ma'anit-Joseph #3 well is already one of the deepest wells ever drilled onshore Israel, Rinberg said. In addition to the new permit, Delaware-based Zion Oil &amp; Gas, which explores for oil and gas in Israel in areas located on-shore between Haifa and Tel Aviv, holds the Joseph License and the Asher-Menashe License covering 162,000 acres. Zion&rsquo;s announcement coincided with a report by the official MENA news agency that Egypt's prime minister has asked for the revision off all contracts to supply gas abroad, including to Israel. Egypt supplies an estimated 40% of Israel's gas under an agreement that has been controversial with Egyptians since its framing in 2005. MENA said that Prime Minister Essam Sharraf "has directed the revision and review of all gas contracts Egypt agreed to with all countries, including Jordan and Israel" in an effort to achieve &ldquo;the highest returns for Egypt.&rdquo; Egypt resumed shipments of gas to Israel last month after they were interrupted in a Feb 5 attack on a pipeline across the Sinai Peninsula. In December, four Israeli firms signed agreements to import gas from the Israeli-Egyptian East Mediterranean Gas (EMG) under a 20-year contract valued at $5-$10 billion, boosting imports to six billion cubic meters (bcm). The decision to review the gas deals is the latest in a year-old battle over Egypt's natural gas exports to Israel &mdash; agreements that critics say gave the Jewish state with sharply discounted gas. Under the original 2005 agreement, Cairo-based EMG agreed to sell 1.7 bcm of natural gas to Israel at a price critics say is set at $1.50 per million British thermal units, sharply down from current rates. Natural gas futures were trading at $4.15 per million BTU on the New York Mercantile Exchange on Apr. 13. Israel meanwhile has been touting its own prospects as a potential exporter of natural gas after Noble Energy Inc. reported an apparently major natural gas discovery with its Leviathan exploration prospect it operates off Israel. "This discovery has the potential to position Israel as a natural gas exporting nation," said Nobel Pres. and Chief Operating Officer David L. Stover (OGJ, Jan. 10, 2011). Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, halts North Sea oil projectsnoemail@noemail.orgEric WatkinsThe recent boost in UK taxes on oil and gas companies continues to rankle, with reports now saying that leading producers are reconsidering their activities in the North Sea. The latest report comes from the UK&rsquo;s Daily Telegraph newspaper which says that one of the world's biggest oil companies, Norway's Statoil, has halted work on two North Sea projects because of the huge tax hit. It comes after smaller companies such as Valiant Petroleum warned that they are re-evaluating new projects, since Chancellor of the Exchequer George Osborne increased tax by 12% to more than 62%. There have also been reports that oil majors have withdrawn plans to sell billions of pounds in North Sea fields nearing the end of their lives, leading to fears they will be abandoned with oil still in the ground. Statoil, the Norwegian state-run company, said on Mar. 30 that it will "pause and reflect" on the future of its Mariner and Bressay fields to the south east of Shetland. Statoil was meant to start producing from the fields from around 2017, with the two holding an estimated 640 million bbl of oil. "The proposed tax change has significant impact on the project economics of Mariner,&rdquo; Statoil said. &ldquo;We have to pause and reflect to evaluate what impact this will have and consider how to proceed after this,&rdquo; Statoil said. &ldquo;This is a project about to be developed. With this tax increase, there is a substantial impact," Statoil said. All of this comes after the head of the UK&rsquo;s Officie for Budget responsibility said that the added tax on North Sea oil and gas producers would have &ldquo;no significant effect.&rdquo; "We're assuming that there's no significant effect on the investment and production profile," Chote told members of parliament on the Treasury Committee. Graham Parker, also of the OBR, said the watchdog had concluded that the move was "very much a profits tax" and that companies would still press ahead with plans, given the high oil price. George Osborne, defending his policy to the select committee, argued that with oil prices high it is still "very profitable to invest to exploit these resources". Uh huh. Tell that to the investors. Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Aramco seeks more JV's inChinanoemail@noemail.orgEric WatkinsSaudi Aramco president and chief executive officer Khalid Al-Falih said his firm is seeking additional opportunities to invest in China to expand on its joint ventures and strengthen relations with the world&rsquo;s biggest energy consumer.<br /><br />&ldquo;We continue to pursue prospects for other future investments in China,&rdquo; said Al-Falih in a speech following his firm&rsquo;s agreement last week to jointly develop two refineries together with Chinese partners.<br /><br />&ldquo;The model of integrated investments which extend across the value chain has proven to be a success in our Fujian joint venture,&rdquo; said Al-Falih, adding that &ldquo;Saudi Aramco is looking to replicate the right ingredients for similar profitable JV opportunities in China.&rdquo;<br /><br />Production began 18 months ago at the Fujian Integrated Refining and Ethylene Joint Venture Project, whose partners include Fujian Petrochemical Co Ltd, 50%, ExxonMobil China Petroleum and Petrochemical Co Ltd 25% and Saudi Aramco Sino Co Ltd, 25%, (OGJ Online, Nov. 11, 2009).<br /><br />Aramco Overseas Co. BV and PetroChina Co. Ltd. signed a memorandum of understanding for joint development of a 200,000-b/d grassroots refinery in Yunnan Province, which will process Arabian crude oil supplied by Aramco, and yield products including ultralow-sulfur gasoline and diesel meeting Chinese specifications (OGJ, Mar. 23, 2010).<br /><br />In addition, Saudi Aramco and China Petrochemical Corp (Sinopec) signed a Memorandum of Understanding related to the ongoing development of the Red Sea Refining Co (RSRC), a world-class, full-conversion refinery at Yanbu, on the west coast of Saudi Arabia.<br /><br />Saudi Aramco and Sinopec have agreed to initially subscribe to equity interests of 62.5% (Saudi Aramco) and 37.5% (Sinopec) in RSRC should they proceed to formally participate in a joint venture.<br /><br />Al-Falih told listeners that oil satisfies nearly 20% of China&rsquo;s energy needs, and accounts for virtually all the energy used in transportation and petrochemicals. <br /><br />&ldquo;Therefore, oil will remain a significant part of China&rsquo;s energy mix,&rdquo; said Al-Falih, who cited China&rsquo;s National Development and Reform Council that the country&rsquo;s oil demand will approach 12 million b/d by the end of 2020, up 33% from the current 9 million b/d.<br /><br />Al-Falih took exception to analysts who like to single out the impact of China&rsquo;s demand on world oil markets, saying that &ldquo;increased Chinese demand offsets declining consumption in the OECD nations.&rdquo;<br /><br />More to the point, he said that increased Chinese demand &ldquo;is essential to encouraging necessary investment in exploration as well as oil production, refining and transportation capacity, which ultimately benefits all petroleum consumers.&rdquo;<br /><br />&ldquo;Our relationship is founded on the provision of steadily growing volumes of crude oil&mdash;currently about 1 million b/d, making Saudi Aramco China&rsquo;s largest and most reliable supplier,&rdquo; said Al-Falih. <br /><br />In a passing reference to current problems in North Africa, Al-Falih noted that Saudi Arabia &ldquo;has been and will continue to be a calming influence in global oil markets&mdash;particularly in times of market turbulence, when it can tap its substantial spare capacity to make up supply shortfalls elsewhere.&rdquo; <br /><br />&ldquo;Since I come to you from Saudi Arabia, an island of calm amid the turmoil sweeping the Middle East and North Africa, I can tell you that much of that turbulence is grounded in economic factors and a lack of opportunity, especially among young people,&rdquo; Al-Falih said. <br /><br />Contact Eric Watkins at <a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,'s time to regulate the oil speculators...noemail@noemail.orgEric WatkinsOil speculators get the jab this week from John Sfakianakis, chief economist at the Banque Saudi Fransi and No&eacute; van Hulst, secretary-general of the International Energy Forum. That&rsquo;s the jab, not the job.<br /><br />Writing in the Saudi Arabia-based Arab News, Sfakianakis and van Hulst note that since political turmoil started in the region less than two months ago, oil prices have increased by more than $20/bbl.<br /><br />&ldquo;If sustained over several months,&rdquo; they say, &ldquo;this may drive up inflation and threaten global economic recovery efforts.&rdquo;<br /><br />In their view, the dominant sentiment in the oil market is &ldquo;the fear that political turmoil will spread to major oil-producing countries in the region, with the risk of substantial loss of oil supply.&rdquo;<br /><br />The two writers acknowledge that more needs to be done to improve matters in the global oil market.<br /><br />They say, for example, that there is a need for more transparency and better oversight to reduce excessive price volatility which helps much needed investment in future capacity expansion.<br /><br />But they also take issue with what they call &ldquo;the paper oil market.&rdquo;<br /><br />Regarding the paper oil market, they say, regulators like CFTC, FSA and the EC are currently developing concrete regulation to increase transparency in and oversight of trading in oil derivatives including the still opaque OTC market.<br /><br />Sfakianakis and van Hulst acknowledge that the paper oil market does play a useful role where it helps airlines, e.g., to hedge their fuel price risks.<br /><br />&ldquo;But where it is used as a channel of massive speculative momentum trading and causing violent over- and undershooting of oil prices, this should be reined in by position limits,&rdquo; they argue.<br /><br />&ldquo;Regulators should also seek ways to expose institutions that make wild price predictions while simultaneously taking market positions,&rdquo; they say, adding that &ldquo;analysts should be more self-restrained in making panic calls of ?spiking&rsquo; oil prices as self-fulfilling prophecies.&rdquo;<br /><br />Finally, it is important to ensure that current regulation under way will be internationally coordinated in order to avoid regulatory loopholes.<br /><br />&ldquo;In reality,&rdquo; they say, &ldquo;the Middle East has been a reliable supplier of oil for many decades and its future share in global oil supply is set to increase.&rdquo;<br /><br />Longer term, it will always be in the interest of the region's governments to sell oil and use the revenues to provide a young and growing population with education, jobs, and higher standards of living.<br /><br />As a final point, Sfakianakis and van Hulst say it is necessary to acknowledge significant differences within the region, drawing attention to the fact that &ldquo;Saudi Arabia's global systemic role as the largest oil producing country is now evidenced.&rdquo;<br /><br />In the view of Sfakianakis and van Hulst, speculators need to understand such differences between countries in the region.<br /><br />Instead, they say, many are taking advantage of markets&rsquo; &ldquo;ill information, lack of differentiation and broad statements that do not provide stability for the global economic recovery.&rdquo;<br /><br />Contact Eric Watkins at <a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, dines with the Devil...noemail@noemail.orgEric WatkinsIt was bound to happen sooner or later. The blame game, that is. With war now raging in the deserts of North Africa, the question arises as to who is to blame for bringing Libya&rsquo;s leader Moammar Gadhafi in from the cold.<br /><br />In this week&rsquo;s Newsweek, Christopher Dickey lays blame at the feet of current and former US, UK and Italian leaders who, he alleges, were blinded by their desire for oil, among other things, into rehabilitating the Libyan leader.<br /><br />&ldquo;The tale is a sordid one,&rdquo; says Dickey. &ldquo;But let&rsquo;s at least begin in relatively pleasant surroundings, among the leather armchairs of the Travellers Club in London.&rdquo;<br /><br />The Travellers Club, for those who don&rsquo;t know it, is located on Pall Mall right next door to the Reform Club &ndash; the setting for Jules Verne&rsquo;s wonderful fiction, Around the World in Eighty Days.<br /><br />Anyway, its there in The Travellers Club, Dickey claims, that Libya&rsquo;s &ldquo;urbane, white-haired spymaster, Musa Kusa, met with representatives of the British and American intelligence services in December 2003.&rdquo;<br /><br />According to Dickey, &ldquo;Their purpose was to hammer out a deal to bring Kusa&rsquo;s boss, Moammar Gadhafi, in from the cold.&rdquo; And, at the heart of the deal, he says, was oil.<br /><br />&ldquo;It was a deal none of them could resist,&rdquo; says Dickey. &ldquo;Libya&rsquo;s oilfields would be fully opened up to the West, and US and European banks and corporations could resume tapping the country&rsquo;s revenue stream.&rdquo; <br /><br />Dickey continues: &ldquo;Big oil prospered. The American firm Occidental wound up with more acreage than any other corporation in Libya, but the big winners were BP and the Italian national oil company ENI. Italy buys some 80% of Libya&rsquo;s petroleum.&rdquo;<br /><br />We all get Dickey&rsquo;s drift...<br /><br />All, that is, all except Peter Mandelson. A cabinet member in the UK government under Prime Minister Tony Blair, Mandelson has launched a spirited defense of that government&rsquo;s ties to Libya.<br /><br />Mandelson&rsquo;s remarks were directly largely at people like the UK&rsquo;s current Prime Minister David Cameron who recently tried to score political points by criticizing the Labour Party&rsquo;s &ldquo;dodgy deals with dictators in the desert.&rdquo;<br /><br />But Mandelson may just as well have been directing his comments towards Dickey.<br /><br />Writing in the Financial Times, Mandelson said the &ldquo;denunciation&rdquo; of those involved with Moammar Gadhafi&rsquo;s regime has been taken to &ldquo;ridiculous lengths.&rdquo;<br /><br />He went on to warn that the &ldquo;stigmatizing of every business leader, academic, politician and public servant&rdquo; linked with Libya will only serve to harm British interests.<br /><br />Mandelson said Tony Blair had been right to do business in Libya, and he added that the attacks on those who had been involved with the Gadhafi regime could backfire. <br /><br />&ldquo;If, as a result of this pressure, British businesses in future shy away from international investment for fear of risking similar opprobrium, Britain&rsquo;s relative decline in the global economy can only worsen.&rdquo;<br /><br />To be sure, Mandelson did admit that, &ldquo;There are lessons to be learnt.&rdquo;<br /><br />Those lessons, however, &ldquo;are not on the principle of bringing people like Gadhafi in from the cold, but the degree of warmth we appear to show them afterwards, before they start to reform their domestic ways and methods.&rdquo;<br /><br />Well said.<br /><br />And while we&rsquo;re at it, we might also point out that critics like Dickey and Cameron fail to understand what most oil and gas companies operating around the world have to understand as a matter of survival: that extracting oil and gas requires more than technical know-how.<br /><br />Sometimes it also means doing business with people whose ethics are, to say the least, more than a little suspect. That&rsquo;s why we have the expression, &ldquo;Who dines with the Devil must sup with a long spoon.&rdquo;<br /><br />If we don&rsquo;t want those deals done, though, we do have an alternative: we can all stop using oil and gas right now.<br /><br />Will you be first in line, Mr Dickey?<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, James adds touch of common sense to the debate over Libyanoemail@noemail.orgEric WatkinsThe violence now overtaking Libya has had repercussions throughout the world, not least on the oil and gas industry, as wonder grows over the possible outcomes in the North African country. At the same time, a certain degree of panic seems to be taking hold here and there, as mere possibilities begin to take on more weight than they deserve.<br /><br />In the midst of a growing panic, though, there are some sane voices resounding through the tumult, and Raymond James &amp; Associates has emerged as one of them. Indeed, a research note produced on Feb. 28 is a model that other analysts might want to replicate as they ponder the implications of the present turmoil in Libya -- and beyond. <br /><br />Perhaps the best point about the Raymond James analysis is the clarity of vision presented by the analyst. That&rsquo;s especially evident in the way he has viewed the Libyan crisis which &ldquo;currently presents the most serious geopolitical risk to global oil supply in recent memory.&rdquo;<br /><br />Yet the analyst is no less clear about what&rsquo;s really worrying people. &ldquo;With WTI crude prices at the $100/bbl mark for the first time since 2008, the oil market is fearful not just of continued Libyan production disruptions but the risk of them spreading to Algeria and, in an ?Armageddon scenario,&rsquo; the Arabian Peninsula.&rdquo;<br /><br />Armageddon? Well, congratulations to the Raymond James analysts for stating clearly what the fears are, while also putting them into perspective. And that perspective is down to earth: &ldquo;All in all, we wouldn't lose sleep over this extreme-case scenario, but it would seem that $100+ WTI (add ten bucks for Brent) is here to stay, courtesy of the Middle East.&rdquo;<br /><br />A good night&rsquo;s sleep. Isn&rsquo;t that what Saudi Arabia&rsquo;s oil minister urged traders to enjoy last week after saying that OPEC is in a position to cover any losses stemming from problems in Libya? Well, it seems that Raymond James analysts have taken that advice to heart. <br /><br />More to the point, members of the Raymond James team have put their thinking caps on to make some very crucial distinctions between countries in North Africa that have experienced the outbreak of violence and those in the Arabian Peninsula that have not. Indeed, it is precisely this analysis which puts Raymond James analysts head and shoulders above many others these days.<br /><br />Here&rsquo;s a taste: &ldquo;While North African countries and those on the Arabian Peninsula share a common language and some other similarities, they are extremely different societies. An obvious difference is the level of economic development...&rdquo;<br /><br />The analyst then compares Egypt&rsquo;s capita GDP of $2,800 with Saudi Arabia&rsquo;s per capita GDP of $16,600, and makes the crucial observation that in Saudi Arabia there is &ldquo;nowhere near&rdquo; the same sense of economic desperation as in North Africa, &ldquo;since the government funds a generous social safety net out of its oil proceeds.&rdquo;<br /><br />There&rsquo;s a lot to be said for common sense, and in this analysis Raymond James &amp; Associates have shown an uncommon amount of common sense for a day and age that is more characterized by thoughtless panic.<br /><br />Contact Eric Watkins at <a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>,'s blowing smoke over Libya, isn't he?noemail@noemail.orgEric WatkinsLibya&rsquo;s woes are the concern of many individuals around the world, among them Fidel Castro, who expressed concern this week that that Washington and its allies are fomenting unrest in Libya to justify an invasion to seize the oil reserves of the North African nation.<br /><br />"The government of the United States is not concerned at all about peace in Libya and it will not hesitate to give NATO the order to invade that rich country," wrote Castro, who urged protests against an allegedly planned US-led invasion aimed at controlling the country&rsquo;s oil.<br /><br />You may think that&rsquo;s the kind of nonsense we have heard before from Castro, as well as from his regional neighbor, Venezuela&rsquo;s President Hugo Chavez, who has long insisted that Washington is trying to topple his regime in order to control his country&rsquo;s vast oil resources, too.<br /><br />This time around, Chavez is not doing the talking. To be sure, the Venezuelan leader is making good use of social media, Twittering support to the Libyan leader: "Viva Libya and its independence! Gadhafi is facing a civil war."<br /><br />While Chavez did not pick up Castro&rsquo;s remarks, he did allow that privilege to fall to his Foreign Minister Nicolas Maduro, who wasted no time in chiming in with the Cuban leader that the US and its allies &ldquo;are creating conditions to justify an invasion of Libya.&rdquo;<br /><br />US officials have long scoffed at suggestions that Washington is plotting anything against Venezuela's government, and they will say exactly the same thing about Castro&rsquo;s accusations over Libya.<br /><br />Still, one can&rsquo;t deny that some people actually are thinking along the lines suggested by Castro. In fact, an oil trader in Switzerland &ndash; who need not be named &ndash; this week proposed the very scenario earlier denounced by Castro.<br /><br />&ldquo;One of the options that could be considered by the UN or the North Atlantic Treaty Organization is an imposition of a no-fly zone&rdquo; in Libya, the trader said.<br /><br />He then added that, &ldquo;It would not take great efforts for multinational troops to move in for humanitarian reasons and then set up an interim administration that would then also make sure that the oil flows (a mini-Iraq scenario).&rdquo;<br /><br />A mini-Iraq scenario? If followed, such advice would open up a conflagration throughout the region, giving unscrupulous leaders and would-be leaders every excuse to rally ordinary citizens to the banner of resource nationalism, if not the extremism of the al-Qaeda terrorist network.<br /><br />Washington and its allies are wise to keep an eye on events in Libya, but only an eye at the moment. Anything that looks like putting planes in the air or troops on the ground will only play into the hands of Castro, Chavez or worse, al-Qaeda.<br /><br />Then imagine where oil prices will be.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, taxes = bad moosnoemail@noemail.orgEric WatkinsThe idea behind a cash cow is to milk it for all it&rsquo;s worth, isn&rsquo;t it? That&rsquo;s something the oil and gas industry knows well enough, being identified the world over as everyone&rsquo;s favorite cash cow. Now, Rand Corporation has come up with new ideas to milk it.<br /><br />According to a new study by the California-based think-tank, the US government could fully fund its surface transportation infrastructure needs by levying a percentage tax on crude oil and imported refined petroleum products.<br /><br />Rand&rsquo;s researchers, who very clearly want a just system, found that by replacing taxes at the gas pump with a percentage tax on oil, the tax burden would be spread across all users of petroleum products, not just motorists and truckers.<br /><br />Those same researchers also want a tax that&rsquo;s easy to implement and compute, so they say that their proposed new oil tax would also replace several taxes on fuels with one tax, and could be adjusted automatically to fund transportation expenditures.<br /><br />&ldquo;It would account for inflation, something that has eroded the value of existing fuel taxes,&rdquo; Rand said, adding that the proposed oil tax could also help fund &ldquo;national security needs to safeguard oil sources and sea-lanes used to import oil.&rdquo;<br /><br />Rand is proposing this idea, it says, because the federal gasoline and diesel taxes that American drivers pay each year &ldquo;fall short&rdquo; of generating enough revenue to cover the costs of building new roads and maintaining the transportation system they are intended to fund.<br /><br />&ldquo;Gas and diesel taxes have not been raised since 1993,&rdquo; it said, as though the longevity of a tax is reason enough to raise it.<br /><br />&ldquo;There is strong opposition in Congress to raising any taxes right now,&rdquo; said Keith Crane, the report&rsquo;s lead author and director of Rand&rsquo;s Environment, Energy and Economic Development program.<br /><br />That&rsquo;s a good point, and Rand researchers need to understand why there is such resistance. Taxation is hardly a popular subject, but it goes without saying that added taxes will be especially ill-received during an economic downturn such as the one now being experienced across the nation.<br /><br />But Crane is undaunted by such thoughts. &ldquo;The federal gas tax has not been raised in more than 18 years. There is a clear shortfall in meeting the nation&rsquo;s surface transportation needs, and our research indicates a crude oil tax can close that gap.&rdquo;<br /><br />In Rand&rsquo;s view, the tax rate on crude oil and imported refined petroleum products would depend on the price of oil. For example: the rate would change from 10% at $120/bbl, to 17% at $72/bbl, and 34% at $40/bbl to generate the same amount of revenue.<br /><br />Do you think that sounds ok? Well, read on and find out who the tax hurts.<br /><br />The tax would be collected at refineries, and the rate could be adjusted quarterly to account for changes in the price of oil. Motorists and truckers would pay modest increases in total taxes.<br /><br />Homeowners who heat their homes with fuel oil would pay federal taxes on fuel oil where they had paid none before. Low-income earners and those in the north and northeast would likely be more affected than higher-income earners or those living in moderate climates, researchers said.<br /><br />Motorists and truckers pay more. Homeowners who need to heat their homes pay more. Low-income earners would pay more. People in the north and northeast would pay more. And &ndash; magically &ndash; those who earn more would pay less, as would people living in moderate climates.<br /><br />This is a fair tax? A just tax? Consider the worst-impacted group. Just imagine the feelings of a low-income earner in the midst of a Minnesota winter as he or she contemplates stoking up the oil-fed heater. Most people won;t warm to that idea at all. Nor should they. <br /><br />Somehow, this tax proposal ends up sounding a lot less just than it started out. The best ideas don&rsquo;t usually work that way, though, and this new idea of the Rand Corp doesn&rsquo;t sound like one its best. Cash cow or not, Rand&rsquo;s proposed new taxes are not the way forward for the oil and gas industry or its customers.<br /><br />Rand's idea is just bad moos.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Analysis: 'Arab resource nationalism on the horizon'noemail@noemail.orgEric WatkinsLondon-based Exclusive Analysis has published some tantalizing remarks following changes now taking place in the Middle East and North Africa. About energy in general and oil in particular, it has some very interesting remarks.<br /><br />Consider EA&rsquo;s observation that, &ldquo;the most likely commercial consequence is more expensive oil.&rdquo; That says little. Nor does the reasoning behind it: &ldquo;New and old regimes alike will want better terms and a better price.&rdquo;<br /><br />Everybody may want a better terms and a better price. They always do, and why not? But they won&rsquo;t necessarily get one. Price depends on many factors beyond the wishes of sellers. One of them is demand.<br /><br />When demand is up, the price is up. When demand is down, the price is down. These are the fluctuations that OPEC likes to even out, and with good reason since its members need price stability as much as anyone else does.<br /><br />There&rsquo;s no reason to think that outlook would change under any new regimes. Under OPEC, a change in regime makes no difference to the quota system. And the quota system is not going to fall apart any time soon.<br /><br />&ldquo;China, which has the money and an urgent demand, will need will do better in this contest than disparate indebted Western powers.&rdquo; This is not telling us much. China has been in this position for much of the past decade, as have the Western powers.<br /><br />&ldquo;Industrial consumer countries need alternative energy faster than the means to produce them can be built. They also need them on a scale that green alternatives cannot supply.&rdquo; EA is on the right track here, as all the numbers show these days.<br /><br />&ldquo;Thus, it is likely that governments will try to fast track nuclear energy programs (as they did in Italy) and that they will be resisted (as they were in Italy),&rdquo; EA says. This looks to be a reasonable thought, too (though possibly apart from those comments about Italy).<br /><br />A good many governments &ndash; in the West, the Middle East and East Asia &ndash; all express a need for nuclear power. But that is no reason to believe that Middle Eastern oil producers will be abandoning their central commodity any time soon.<br /><br />It&rsquo;ll be a long time before those plug-in electric cars become widespread. In China, the Jaguar Car Co. has found its third largest market &ndash; and it&rsquo;s growing. Jaguar does have a plug-in concept car, the C-X75. But it's a long way from production.<br /><br />Changes now taking place in the Middle East and North Africa will not alter the fact that demand for oil is rising in the Far East, with much of the anticipated growth coming from increased consumer demand for automobiles. Muscle cars, actually.<br /><br />That's a market (and an income stream) that no oil producer would wish to miss out on nor, for that matter, would any resource nationalist.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Dutch tilt at windmillsnoemail@noemail.orgEric WatkinsRegardless of the form of energy, there&rsquo;s bound to be someone standing in opposition to it. Take the latest news from Holland, where a dispute over windmills threatens to go the nation&rsquo;s highest court.<br /><br />The problem is set in the town of Urk, where a new development of windmills is due to take place. The 86 turbines are to be erected in three rows, 38 on land and 48 off shore.<br /><br />According to recent press reports, though, these mills are giants, standing some 200 meters tall. And that&rsquo;s just where the opposition comes in.<br /><br />"They are the highest buildings in Holland," says Leen van Loosen, Urk's undertaker who is campaigning to stop the project. "It's just crazy."<br /><br />With 430 megawatts of capacity, the wind park near Urk, population 18,000, would provide enough electricity for 400,000 homes and rank among Europe's largest.<br /><br />The Urk Park would help the Netherlands as it races to catch up with the stiff target set by the European Union to generate 20% of its energy from renewable sources by 2020.<br /><br />The Dutch now have a capacity of 2,237 megawatts from wind. But that&rsquo;s a far cry from the 12,000 megawatt national target set for 2020.<br /><br />But local residents are not happy at the prospect and they cite a long litany of dangers from the wind park. Fishing and tourism will suffer, they say.<br /><br />And they cite more problems, too.<br /><br />The tranquil panorama of the local lake will be disrupted, the town will tremble with the constant rumbling noise of blades, birds will be traumatized, and the whole project could undermine a dike slated to host turbines.<br /><br />"We are all for green energy," says Van Loosen, "but this is out of proportion."<br /><br />Strangely enough, doesn&rsquo;t that sound a little like Not In My Backyard?<br /><br />Contact Eric Watkins at <a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, underwrites operational costs for Grameen Americanoemail@noemail.orgEric WatkinsLast week, we wrote of efforts by ExxonMobil to improve life in Africa, especially in Nigeria&rsquo;s Niger Delta.<br /><br />This week, attention comes back to the US where Chevron Corp has committed $1 million to Grameen America, an innovative microfinance organization founded by Nobel Peace Prize laureate Muhammad Yunus.<br /><br />Grameen America provides small loans, known as &ldquo;microloans&rdquo; and other financial services to individuals living below the US poverty line who want to start or grow a small business.<br /><br />Grameen America relies on the Grameen lending model developed over 30 years by Grameen Bank in Bangladesh.<br /><br />Grameen America has been successfully working in the US since 2008, so far funding 5,000 borrowers and lending out more than $13 million in microloans, averaging $1,500 each.<br /><br />Chevron said its donation will support the launch of Grameen America's first West Coast branch in the San Francisco Bay Area by funding Grameen America's operational costs.<br /><br />Microlending meets a unique need in the Bay Area, where unemployment numbers made the second largest year-over-year increase in the nation. The Bay Area unemployment rate hovers at approximately 10%.<br /><br />Grameen America anticipates helping as many as 250 local borrowers and distributing more than $300,000 in microloans the first year of operation through its Bay Area branch.<br /><br />"The economic slowdown has made it especially difficult to secure funding for Bay Area small businesses and entrepreneurs, often a catalyst for job creation and economic growth for the state," said Stephen Vogel, CEO of Grameen America.<br /><br />"Chevron's support will help hundreds of entrepreneurs realize their dreams of starting their own businesses," said Vogel.<br /><br />"The success of our company is tied directly to the economic health of our community," said Rhonda Zygocki, vice president of policy, government and public affairs for Chevron. "We believe Grameen will help create economic opportunities for people that wouldn't exist otherwise."<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, fights malaria in Africanoemail@noemail.orgEric WatkinsRecent headlines have underscored efforts of the militant Movement for the Emancipation of the Niger Delta (MEND), determined to end what it sees as the exploitation of the region&rsquo;s resources by international oil companies operating together with the government.<br /><br />But little has been said about the good going on there, too, especially the part played by IOCs.<br /><br />Recently, though, ExxonMobil Corp was heralded for its efforts to fight malaria in Nigeria, as well as other parts of Africa. The word came from Africare President Darius Mans who announced new investments from ExxonMobil to extend their partnership in its fight against malaria.<br /><br />ExxonMobil, which has long been a supporter of Africare, will fund three key malaria prevention and intervention programs in Africa.<br /><br />&ldquo;ExxonMobil has been an invaluable partner to bettering the lives of those living in Africa,&rdquo; said Mans. &ldquo;The company's contributions &ndash; including not just funds, but their efforts to provide on-the-ground support, lend business expertise and increase the world&rsquo;s awareness of the scourge of malaria &ndash; have saved countless lives on the continent.&rdquo;<br /><br />The new grants, which total $1,425,000, will enable thousands of additional children and families in Africa to receive the necessary care for managing malaria.<br /><br />* The new pilot Malaria Prevention Promotion in Nigeria will reach more than 75,000 local contractors and suppliers and their families in the Delta region of the country with a package of malaria prevention, treatment and vector control services. The program also includes a media campaign to educate thousands more people in the same area about malaria prevention.<br /><br />* Through a network of more than 2,000 community volunteers working with the Caconda Community-Based Malaria Intervention program, approximately 35,000 families in Angola will receive training and assistance to manage malaria in their homes, including educational materials, bed nets and access to medical treatment.<br /><br />* An additional 600 volunteers &ndash; to a total of 2,640 &ndash; will be selected and trained to reach families with health education through the Angola Community Malaria Program. Volunteers are expected to reach 550,000 children under the age of five and women of child-bearing age via 51,000 house visits, health talks, plays and drama shows, and visits to traditional healers and community leaders.<br /><br />&ldquo;Africare is one of our long standing partners in the fight against malaria. As one of the largest private foreign investors in Africa, we know first-hand the health and economic impacts that malaria can have on the workforce, their families and the communities where they operate,&rdquo; said ExxonMobil Chairman and CEO Rex Tillerson. &ldquo;We want to ensure that families have access to the proper prevention and care, especially in the most vulnerable communities.&rdquo;<br /><br />MEND? ExxonMobil is clearly doing more to mend the situation in Nigeria than the militants.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, impasse delays production in Ugandanoemail@noemail.orgEric WatkinsWhat&rsquo;s going on in Uganda these days? For months, we heard nothing but exciting news about the country&rsquo;s oil prospects. Then, suddenly, everything came to a screeching halt when Heritage Oil decided to sell its stakes in two blocks.<br /><br />The sale initially was made to Eni SPA, but Tullow Oil &ndash; Heritage&rsquo;s erstwhile partner in the two blocks &ndash; exercised its right of pre-emption and decided to pick up the stakes. Its plan was to farm them out to Total SA and CNOOC.<br /><br />But the plans of mice and men often do go awry, as the poet said, and in this case Tullow&rsquo;s plans went right off-track when the government of Uganda decided to block them. The problem? Money.<br /><br />Kampala insisted that it was owed a substantial amount of money in the form of capital gains tax &ndash; a tax that Heritage did not -- and does not -- feel responsible for paying. As a result, there&rsquo;s been a stand-off, with less news emerging about oil and more about lawsuits and arbitration in foreign courts. <br /><br />Now, we learn that another problem has crept up to impede development in Uganda &ndash; the lack of infrastructure. That view emerged earlier this week at an investors&rsquo; conference held by Tullow&rsquo;s Uganda manager Brian Glover.<br /><br />Glover was quite clear in announcing that Tullow Oil&rsquo;s exploration efforts have been &ldquo;phenomenally successful.&rdquo; But he was no less clear in saying that poor infrastructure in the region meant a delay in producing the country&rsquo;s oil.<br /><br />For infrastructure, we really should substitute the word ?pipeline&rsquo; for that has been a sticking point between the two sides for a long time now. In the view of Tullow, Uganda would do well to construct a pipeline through Kenya to transport its crude oil to markets.<br /><br />But that&rsquo;s not the view of Uganda&rsquo;s government which sees more potential upside for the country in constructing an oil refinery that would process the country&rsquo;s newly found oil into products for the region.<br /><br />Yet, something else has to be remembered.<br /><br />Prior to Tullow&rsquo;s exploration success, efforts were underway to develop a pipeline between Kenya and Uganda. That pipeline was to have carried oil products from Kenya to Uganda.<br /><br />But Tullow&rsquo;s success has put paid to that idea. With an estimated 2.5 billion bbl of recoverable oil, Uganda now has no need of a pipeline coming into the country with products.<br /><br />Still, Kenya and the earlier pipeline project cannot simply be dismissed out of hand. After all, if Uganda wants to move its oil to market &ndash; whether in the form of crude or products &ndash; it most likely will require transit rights all the way through Kenya, right down to the Port of Mombasa.<br /><br />That&rsquo;s clearly a job for regional oil diplomacy, as Tullow&rsquo;s Glover pointed out in his investors&rsquo; conference. "This is not just a Ugandan project. This is an east African project," Glover said, adding that &ldquo;without the supply chain in place, we are not going to be able to get this done.&rdquo;<br /><br />For supply chain, read pipeline.<br /><br />Contact Eric Watkins at <a href=""></a><div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, Brazil really going to auction the pre-salt region?noemail@noemail.orgEric WatkinsBrazil continues to titillate potential buyers with its slow release of news about upcoming auctions &ndash; especially for the highly touted pre-salt region. But will the pre-salt region ever come under the hammer? <br /><br />Brazil&rsquo;s Minister of Energy and Mines Edison Lobao said his country will hold its first auction of pre-salt oil and gas blocks this year under the new production-sharing regime approved recently by congress.<br /><br />Lobao, who has been reappointed minister in the new government of President Dilma Rousseff, also said that Brazil will hold an 11th round auction of concessions for non pre-salt oil blocks &ndash; the first auction to be held in Brazil since 2008.<br /><br />But was Lobao saying more than he was authorized to say?<br /><br />Apparently, final approval for the auctions is still required from the country's Conselho Nacional de Política Energ&eacute;tica (CNPE), according to a spokesman for the Agencia Nacional do Petroleo (ANP).<br /><br />Still, even the ANP spokesman nudged the news along, saying that the first pre-salt auction is expected to include some of the reserves discovered in the Libra field, which the ANP recently estimated as holding recoverable reserves of 3.7- 15 billion boe.<br /><br />That&rsquo;s an unusually broad range, and especially so given the fact that the estimate was based on a single, partially-drilled well.<br /><br />Meanwhile, in the run-up to any auction, Brazil continues to tout the successes achieved in the pre-salt region.<br /><br />Brazil&rsquo;s state-run Petroleo Brazileiro SA (Petrobras) submitted a declaration of commerciality for the Tupi and Iracema areas to the ANP, saying that the total recoverable volume is 8.3 billion boe for the two fields: 6.5 billion boe for Tupi and 1.8 billion boe for Iracema.<br /><br />&ldquo;The exploratory success achieved in the area represents the high potential of pre-salt, which is already contributing to the growth of the company's production curve and of its oil and gas reserves,&rdquo; Petrobras said.<br /><br />Does that sound like an advertisement for the coming pre-salt auction? You can be sure of that as Brazil wants the maximum buck for any rights it sells to develop what claims is the slam-dunk potential of the pre-salt region. <br /><br />After all, it is not just going to give the stuff away! What would that tell the country&rsquo;s long-suffering poor &ndash; and their representatives in Congress &ndash; who are expecting new regulations to bring them unparalleled benefits?<br /><br />Still, not everyone is onboard with Brazil&rsquo;s figures &ndash; a point underlined by Petrobras itself which recently criticized partner BG for announcing estimated reserves considerably lower than those of the state-run firm (OGJ Online, Dec. 20, 2010).<br /><br />There&rsquo;s a fly in every ointment.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, to veto oil royalty law changenoemail@noemail.orgEric WatkinsAs expected Brazil&rsquo;s President Luiz Inacio Lula da Silva announced his intention of vetoing a change in the distribution of the country's oil-exploration royalties.<br /><br />In a speech in Rio de Janeiro, Lula expressed his agreement with the governors of oil-producing states Sao Paulo, Rio de Janeiro and Espirito Santo to veto the law change.<br /><br />The proposed change in the distribution of royalties was part of a broader change proposed by legislators aiming to give all states and municipalities an equal share of revenues.<br /><br />Under the current system, which Lula supports in a qualified version, the oil-producing areas receive a greater share of the revenues.<br /><br />Lula said he would submit another bill to Brazil&rsquo;s Congress to ensure a more equitable change in the distribution of oil revenues in the country.<br /><br />Under the bill, the oil royalties would be divided among all states in the country, while the oil-producing states would not suffer a loss of income.<br /><br />Lula said that the country has enough resources to ensure its oil-producing states do not suffer losses, even as other states get a larger share.<br /><br />While Lula has expressed concern over the royalty issue, he has given whole-hearted approval to the remainder of the oil-related legislation recently approved by Congress.<br /><br />Congress passed three other measures that Lula already signed into law &ndash; all aimed at giving Brazil greater control over the revenues expected from the reserves of the pre-salt region.<br /><br />The deepwater region is estimated to hold between 50-100 billion bbl of oil, considered more than enough to turn Brazil into one of the world's top five producers of oil.<br /><br />Contact Eric Watkins at<div class="blogger-post-footer"><img width='1' height='1' src='' alt='' /></div>, 500

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