February 22nd, 2006:

Global Supply Concerns
Had Sent Crude Higher
By MYRA P. SAEFONG
MarketWatch
February 22, 2006 3:04 p.m.
Crude-oil futures fell Wednesday as focus shifted away from some of the world's trouble spots and toward weekly U.S. inventories data, which are expected to show the nation well supplied with oil and petroleum products.
On the New York Mercantile Exchange, crude oil for April delivery fell $1.73 to $61.01 a barrel, marking its first full day as the front-month contract. On Tuesday, the March and April contracts closed up 2%, driven higher by supply concerns relating to Nigeria, Iran and Ecuador.
The Energy Department will release reports on supplies of oil and its products and on natural gas separately Thursday, which are expected to show builds for the week. The oil data are being released a day later than usual because of the Presidents Day holiday earlier this week.
Traders “seem to have shrugged off potential threats to supply … and to have refocused on swelling supplies,” said Michael Fitzpatrick, an analyst at Fimat USA. “The governor of Nigeria doesn't think that militants are set to attack again soon — and that has apparently prompted a little profit taking in front of tomorrow's reports,” he said, but “certainly seeing a 2.4 million barrel-per-day producer threatened is not something that can be fully discounted.”
Royal Dutch Shell halted 455,000 barrels a day of production over the weekend after nine of its workers were kidnapped. The company also extended force majeure, whereby it is legally protected from not meeting contractual obligations on Nigerian crude-oil exports.
The governor of the oil delta state said Tuesday that he has been in contact with the kidnapped workers and urged Shell to resume suspended operations, according to Man Financial's Edward Meir.
Meanwhile, “the Palestinian situation is probably about to roil Middle East tensions, as the withholding of tax revenues from the Palestinian authority could result in a breakdown of control and a flaring of hostilities,” said Mr. Fitzpatrick. Also, “Iran overnight offered to finance Hamas, and that is sure to whip up anxiety, as well,” he added in a note to clients.
Elsewhere, Ecuador has stopped pumping oil after protesters invaded a station late Tuesday. The state oil company halted exports of 144,000 barrels a day because of the protests, whose organizers are demanding that more resources be provided to the poverty-stricken area.
And after failing to reach an agreement with Russian negotiators at the weekend, Iran is due to restart talks on Thursday ahead of a pivotal meeting of the U.N. “If the talks fail, Iran will most likely face a response from the Security Council, although what exactly is in store for them at this stage is no doubt the subject of intense back-room negotiations,” said Mr. Meir. “The murky geopolitical backdrop … should keep markets nervous.”
Indeed, with the “geopolitical pot somewhat higher than a low boil, a quick retest of the February lows seems out of the question,” said Mr. Fitzpatrick. “While stockpiles could continue to swell, and temperatures will eventually break higher, there doesn't appear to be and easy or quick solution to a cornucopia of woes that could potentially threaten supply.”
Write to Myra P. Saefong at [email protected] read more

Home, to Karafuto
February 22, 2006 | More from Dan Hilton
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Dan Hilton is a freelance writer and photojournalist from Victoria, BC now living in Sapporo, Japan. He is a regular contributor to several Japanese publications and his articles about politics, culture, travel, and daily life in Japan have appeared in magazines and newspapers in Canada, Japan, and the United States.
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It's a five-hour journey that spans 60 years. Standing on the deck of the Eins Soya, a sparkling white Japanese passenger ship marked with conspicuous orange and red stripes, I listen as seventy-year old Kanari Yoshikatsu explains that this is no simple vacation. “We're coming home,” he says, gazing out over the Okhotsk Sea towards Russia's Sakhalin Island.
Sakhalin Island is a rugged Russian outpost that cuts southward towards Japan like a Samurai sword, stopping just 40 kilometres from the tip of Hokkaido. A former czarist penal colony, Sakhalin Island – known as Karafuto in Japan – might seem like an unlikely vacation spot for elderly Japanese tourists, and it is. An estimated five million Japanese visit Hokkaido each year, but only about five thousand make short trip from there to Sakhalin. But those who do aren't on vacation – they're on a journey.
Russian students returning home to Sakhalin wave goodbye to Wakkanai, Japan
Judging by the melancholy tone on board the ship, for many Japanese it's not an easy journey to make. Elderly Japanese men and women, some accompanied by their adult children, sit quietly in groups or stare out over the expanse of ocean. There is little conversation and less laughter on board, and those who speak do so in a pensive tone. The past, all six decades of it, hangs in the air.
As he recalls his family's flight from Soviet troops in August, 1945, Yoshikatsu's eyes grow misty. Over several cigarettes, he tells how thousands of Japanese were killed, disappeared, or taken to Siberian labour camps. “Many Japanese families left everything behind, and most didn't make it back to Japan,” he explains. “Our family was very lucky.”
Ownership of the narrow, 948-km-long island has been long in dispute. In 1845, Japan unilaterally declared sovereignty over Sakhalin but ceded the northern half to Russia in the Treaty of Shimoda ten years later.
Japan held the southern half of the island until the 1875 Treaty of Saint Petersburg, when it was traded back to Russia in exchange for the nearby Kurile islands. Then in 1905, with the conclusion of the Russo-Japanese war, both countries signed the Treaty of Portsmouth which saw the southern part of the island return to Japanese control, where it remained until the closing days of the Second World War.
Emboldened by Imperial Japan's impending defeat, Soviet troops disregarded a non-aggression pact signed with Japan and advanced on southern Sakhalin in 1945. After a fierce resistance, the vastly outnumbered Japanese defenders surrendered and all of Sakhalin became Russian territory once again, one hundred years after Japan first claimed the island as its own.
Many Russians view the partition of Sakhalin as a temporary and embarrassing occupation by a foreign power; Japanese, in contrast, consider it a fair division of a long-disputed territory. Today the dispute continues with many in Japan calling for the return of both the Kurile Islands and southern Sakhalin, which is unlikely.
Russia has suggested it might be willing to return half of the Kurile islands, but this falls far short of appeasing those Japanese who long to see Sakhalin reunited with Japan. “Sakhalin is much closer to Japan than Moscow, and many people in Japan are talking about this possibility to end the dispute.” explains Yoshikatsu. “But this will probably never happen. Russians are very proud of their past, and of Sakhalin.”

Today, the dispute over ownership of Sakhalin Island has less to do with pride, patriotism, than oil, fishing, and gas. Sakhalin is home to vast offshore energy reserves that are only now being exploited, and the waters surrounding Sakhalin teem with dozens of species of sea creatures, many caught by Russian fishermen and sold in Japanese ports.
Because of its growing energy-economic importance, Sakhalin has changed much in the post-Soviet period. Just over a decade ago, residents stood in long lines for meager rations handed out at poorly stocked government grocery stores, and foreign visitors weren't permitted on the island.
Today, in Sakhalin's capital city, Yuzhno-Sakhalinsk, new hotels, shopping centres, and restaurants stand alongside decrepit concrete apartment buildings and crumbling wooden cottages. Thousands of tourists visit Sakhalin every year, and the island has attracted more foreign investment than any other region in Russia.
But despite the current pace of change and the past six decades of Russian administration, Japan's history remains etched on Sakhalin Island. Japanese bunkers can still be found on remote beaches, the narrow-gauge railway built by the Japanese army is still in use today, and Japanese buildings still stand in the capital.
Much of Sakhalin's past also remains deeply etched in the memories of the Japanese who were born here and still call it home. “I come to remember the past, but also to help build something for the next generation,” says Yoshikatsu. Although his family lost everything fleeing the Red Army in 1945, he doesn't hold any historical grudges.
“Many of my friends are Russian,” he says. “In Soviet times, they were people suffering under a terrible system, and that system did terrible things. But that system is gone, and today we can focus on the future.”
He's been doing just that. In 2000, together with a partner, he established a Japanese-language school in Yuzhno for Russian students of all ages. “We're trying to build bridges, with our homeland, with Russians, and with our past. Language is the best way for us to do that,” he explains.
It's unlikely the Japanese and Russian governments will ever build a bridge between Hokkaido and Sakhalin, but in the meantime, people like Yoshikatsu are building bridges between two cultures and countries that may just last. read more

11:39 | 22/ 02/ 2006
YUZHNO-SAKHALINSK, February 22 (RIA Novosti) – A blanket of yellowish snow has covered a town on Russia's oil-rich Far East island of Sakhalin, off the Pacific coast, local emergencies officials said Wednesday.
Samples of the snow, which has a strong odor and an oily texture, have been sent to a chemical laboratory for tests, the officials said. It may be a result of the environmental pollution caused by the island's oil and natural gas industry.

'Quasi-permanent state' of violence in oil-rich delta
By LYNN J. COOK and GREGORY KATZ
Copyright 2006 Houston Chronicle
RESOURCES
Countries ranked by net crude oil exports in 2004:
Country Million barrels per day
1. Saudi Arabia 8.73
2. Russia 6.67
3. Norway 2.91
4. Iran 2.55
5. Venezuela 2.36
6. United Arab Emirates 2.33
7. Kuwait 2.20
8. Nigeria 2.19
9. Mexico 1.80
10. Algeria 1.68
Source: Energy Information Administration
A wild card rebel group has emerged from the swampy mangrove thickets of Nigeria's oil-rich delta region.
The Movement for the Emancipation of the Niger Delta has kidnapped oil workers — most recently nine Willbros employees, including three Americans — sabotaged pipelines and hobbled the flow of crude from Africa's top exporting nation. The militants may be new, but violence in Nigeria is not.
As the oil industry attempts to get a handle on what exactly this group wants, some experts are linking the violent streak to domestic political rivalries and jockeying for power as the mid-2007 presidential elections draw closer. Others worry that the militants have given up on the government entirely.
Abby Crawford, a geopolitical analyst in Washington with Strategic Forecasting, said the same spike in violence was seen before the 2003 election in Nigeria.
“It's more of the same in that sense,” she says. “What's uncertain about this period is that this group is an unknown commodity.”
In January the rebels kidnapped four foreign oil workers, including Houston resident Patrick Landry, from a Royal Dutch Shell oil project and held them for almost three weeks before releasing him. That's not much of a track record, though and Crawford says it's tough to determine whether the militants are after “money as usual or are looking for something completely different.”
Nigerian energy consultant Dapo Odesanya has listened for decades as locals complained about corrupt government officials frittering away oil revenues and multinational energy companies wrecking the environment.
“These are old battles, but there is a disturbing element this time,” he said. “I think they're totally disillusioned with the political process. Those involved seem absolutely determined to cause violence and embarrassment to the government as the only way to bring about change.”
Worries about oil supplies were one of the factors why crude oil jumped $1.22 to close at $61.10 per barrel on the New York Mercantile Exchange in the first day the market was open after this weekend's attacks.
New threats
The rebel movement, dubbed MEND, issued new threats this weekend, ranging from shanghaiing a Shell oil tanker and killing everyone on board to assassinating Nigerian President Olusegun Obasanjo if he enters the region.
The group has also called for international mediators to intervene in the current hostage situation, calling the Nigerian “fraudulent,” according to the Associated Press.
MEND also said it would welcome entreaties from the nine captives' families, a classic move kidnappers hope will bring international attention to their cause.
So far, those American families have remained steadfastly silent.
Odesanya laments what he sees as a tremendous step back for Nigeria's oil industry.
“It's tragic. At a time when there's every opportunity for Nigeria to become more prominent in the news as one of the last frontiers for petroleum and natural gas production, this sort of thing is particularly depressing,” he said.
Six months ago Nigeria seemed like a place where companies could finally calculate the risks and begin pouring in capital, said Odesanya, who works in Beijing with Chinese oil companies looking to invest in Africa.
“What's happened in the last three, four, five weeks have set things back a hell of a long way. It's one of those situations where I can't see the benefit for anyone.”
But Robert Mabro, director of the Institute for Energy Studies at Oxford, thinks this round of rebel activity could end as abruptly as it began.

“I see it as a quasi-permanent state of civil strife,” he said. “If there are … more abductions of personnel, one could reach a situation where the oil companies will have to pull out their men, but I don't know if we've reached that yet.”
For better or worse?
Whether oil is a blessing or a curse depends on the nation's population, according to Keith Myers, a fellow at London-based think tank Chatham House.
In a briefing on petroleum, poverty and security in Africa, Myers wrote: “For oil-rich countries with few people, the benefits are enormous,” pointing to rapidly modernizing Middle Eastern nations such as Qatar and the United Arab Emirates.
“For those with less oil but a huge population, such as Nigeria, it is a very different story.”
Put simply, Nigeria's oil wealth does not trickle down.
Few local jobs are created by oil projects while generating a volatile — and ultimately unsustainable — revenue stream for the government, according to Myers.
Toss in rampant smuggling and a government whose modus operandi has been corruption and it's like throwing fuel on the fire of resentment about how oil wealth is taken out of the Niger River Delta and squandered by far-flung politicians, said Manouchehr Takin, an oil analyst at the Center for Global Energy Studies in London.
“For years they had a very corrupt dictator as president, Sani Abacha, and an investigation has shown that billions of dollars were stolen. This has inflamed the situation,” he said, adding that government officials “always promise a more equal distribution of revenue, but they don't do it.”
Obasanjo is barred from seeking a third term in office, but he has hinted to the press in that country that he plans to alter the constitution and run again when the vote is held in mid-2007.
This has angered militiamen who accuse the president of rampant corruption and even raised the ire of some from within Obasanjo's own ranks — the People's Democratic Party.
Multinational energy companies, including Royal Dutch Shell, produce crude oil in Nigeria under joint ventures formed with the federal government. Experts say much of the money generated through these arrangements does, in fact, flow to government coffers, but it's not equitably distributed throughout the country.
“The Nigerian government has a 50 percent interest, and the profits come back in the form of grants to the states, and the state governors wield enormous power because they decide how to use the money,” said Dylan Hendrickson, an analyst with the International Policy Institute at King's College in London. “So many people feel excluded.”
The task of governing is made much more difficult by the incredible ethnic diversity of Nigeria, where more than 200 languages are spoken and tribal rivalries are intense.
The oil companies spend substantial amounts on “development grants” to schools, hospitals or water treatment projects in oil-producing regions, but in reality this money is paid directly to competing groups to try to keep everyone happy so that oil production can proceed, Hendrickson said.
“It's a very complicated balancing act to try to keep the different groups happy. The question is at what point does it stop being financially viable to operate there,” Hendrickson said. “Oil has been central to Nigeria's development, and some people would argue it's been a curse.
“When a poor country suddenly has all this wealth and is unable to use it effectively so that it benefits everyone, you have real problems.”
[email protected] [email protected]
Gregory Katz reported from London, while Lynn J. Cook reported from Houston. read more

By Kevin Morrison
Published: February 22 2006 02:00 | Last updated: February 22 2006 02:00
Oil futures in London eased before closing slightly ahead after the large gains from the previous session, triggered by attacks on production facilities in Nigeria. In the US, oil rose sharply as it played catch-up with London following Monday's Presidents' Day holiday.
IPE Brent for March delivery slipped 39 cents in early trade but closed at $61.60, up 6 cents, a barrel in London trade. It had gained $1.65 in the previous session.
The March West Texas Intermediate contract on Nymex added $1.22 to settle at $61.10 a barrel in New York trade. With the March WTI contract expiring at the close of trade yesterday, there was more attention on the April WTI contract, which rose 86 cents to $62.15.
Nigeria's oil exports have fallen by about 25 per cent following militant attacks on oil production facilities and pipelines. Royal Dutch Shell has closed a total of 455,000 barrels a day of oil production in Nigeria, or about19 per cent of its output.
The fall in Nigerian oil output ahead of the March 8 meeting of oil ministers from the Organisation of the Petroleum Exporting Countries has reduced the prospect of the oil cartel cutting output at the meeting.
“Until last weekend, I would have said there was a good chance that Opec would cut output – now I am not so sure, with Nigerian oil exports falling so much,” said Adam Sieminski, global energy strategist at Deutsche Bank.
Venezuela's oil minister last week said he wanted the cartel to cut output by up to 1m b/d, following the increase in oil inventories in the US and Europe.
Gold eased more than $1 to $554.70/$555.60 a troy ounce in late London trade.
“We believe that gold is attempting to find a range with the recent extremes of $535 and $555 likely to confine the metal for a while,” John Reade, precious metals strategist at UBS said in a note.
Base metal prices extended their recovery from the large declines suffered in the past two weeks.
Copper rose for a fourth consecutive day, adding $44 to $4,945 a tonne on the London Metal Exchange. The three-month LME aluminium price gained $52 to $2,425 a tonne. The benchmark zinc price rose more than 5 per cent to $2,235 a tonne, but remains almost $200 below its record high reached two weeks ago.
US cocoa futures fell more than 3 per cent to their lowest level this year, taking their drop in the last month to almost 10 per cent. The New York Board of Trade's cocoa contract for May delivery slipped $30 to $1,455.
The fall in cocoa prices comes at a time whenconfectionery companies have warned of potential cocoa shortages due to increased Chinese chocolate consumption. read more

A number of independent TDs have issued a joint call for Natural Resources Minister Noel Dempsey to resign over his handling of the Corrib gas pipeline situation.
The five TDs have accused Mr Dempsey of interfering in mediation talks between Shell and local residents who are opposed to the pipeline project.
Mayo TD Jerry Cowley claimed today that the minister was meddling in the situation despite promising that the mediation process would be independent.
“The minister has unilaterally interfered with and changed the mediation process to include anyone who had any views to contribute,” he said.
“This clearly was against what had been agreed and has rendered mediation impractical and amounting to little more than a process of investigating diverse views.” read more

(Interfax News Agency Via Thomson Dialog NewsEdge)MOSCOW. Feb 20 (Interfax) – Dale Rollins, CEO of Salym Petroleum Development (SPD), a joint venture between the British-Dutch company Shell and Russia's NK Evikhon, has been appointed vice president of production, staff, health and the environment for Shell Russia, Shell told Interfax.
Rollins will keep his post as SPD general director. He will continue to head the project to develop the Salym group of fields in the Khanty-Mansiisk Autonomous District.
Shell said that Evikhon has been informed of the change. Chris Finlayson was appointed head of Shell Russia in Novemberoflast year. He is responsible for developing existing and new projects in Russia.

In addition to SPD, Shell is also taking part in the oil and gas project Sakhalin-2 in Russia, which is expected to build Russia's first plant to produce liquefied natural gas (LNG). read more

More Disruptions Expected
Amid Conflict With Rebels;
Crude Hits $61.10 a Barrel
By SPENCER SWARTZ
February 22, 2006; Page C3
LONDON — World oil markets should expect more supply disruptions in Nigeria as military forces are stretched in dealing with militants emboldened by a series of recent attacks on oil facilities.
Stability in Africa's biggest oil-producing nation hit a new low Saturday when militants abducted nine foreign oil workers and attacked a handful of oil pipelines and loading facilities, cutting Nigeria's output available to global markets by 19%.
“I think this is the most serious it's been in three years,” said Stewart Williams, Africa analyst at Wood Mackenzie, the Edinburgh, Scotland, consultancy. “There was a period when things looked like they were getting better, and clearly they are now going the other way.”
The attacks have pushed crude-oil prices higher in the past few days. Benchmark light, sweet crude-oil futures for March settled up $1.22, or 2%, to $61.10 a barrel on the New York Mercantile Exchange, marking the highest closing in a front month since Feb. 13.
Nigeria's high-quality light, low-sulfur oil, referred to as sweet, is coveted by refiners in the U.S. and Europe because of its high gasoline content and relatively cheap processing costs.
Nigeria, a member of the Organization of Petroleum Exporting Countries, is the fifth-biggest oil exporter to the U.S., which took on average about 1.1 million barrels a day of Nigerian crude in 2004.
Recent supply disruptions aren't expected to have any immediate impact on U.S. gasoline prices because demand is in a seasonal lull, with many U.S. refineries going into planned maintenance and with gasoline inventories well above year-ago levels. But any prolonged disruptions in Nigeria would likely hit U.S. consumers as the summer driving season approaches.
The militants' attacks are concentrated on facilities owned by Royal Dutch Shell PLC, which produces almost half of Nigeria's daily oil output. The company said yesterday the attacks curtailed production of 455,000 barrels a day. Some analysts believe that level of production offline could be routine in the months ahead.
“While in the past, small-scale intermittent attacks have normally curbed 5% to 10% of Nigerian crude-oil supply, escalating well-organized and sophisticated attacks against oil installations this year will likely regularly disrupt about 10% to 20% of supply,” wrote Sebastian Spio-Garbrah, an analyst at the Eurasia Group, in a research note.
The Movement for the Emancipation of the Niger Delta, or MEND, is behind most of the attacks. The militants are seeking to have two leaders of the ethnic Ijaw group, which dominate the Niger Delta, released from prison and absolved of treason and money-laundering charges.
In addition to their demands, the militants also want to wrest greater control of oil resources. While military troops have moved to control the unrest, the government faces the task of decreasing the violence and protecting oil staff and facilities.
“Obviously, the situation in Nigeria is very serious, and one hopes it doesn't get out of hand,” said Rilwanu Lukman, former secretary-general of the Organization of Petroleum Exporting Countries and former Nigerian oil minister. “But the government doesn't want to overdo things by using too much force.”
MEND said it launched attacks Saturday in response to military raids last week on militants suspected of stealing crude oil. The group has vowed to shut down 30% of Nigeria's daily oil output by the end of February.
MEND is allied with other militia groups, such as Martyrs Brigade, which thwart government efforts to track down militants.
Analysts say troops in the field often are underpaid and sometimes help militants in plundering crude oil, a lucrative business that fuels a cycle of violence in which oil is sold for weapons.
In other commodity markets:
SOYBEANS: Prices on the Chicago Board of Trade fell as rains showered Argentina's parched soy belt this week and worries grew about the spread of deadly bird flu in Europe. The diet of poultry consists of soybean products, so culling of birds in Europe lessens soy demand. March soybeans fell 13.75 cents a bushel to $5.8750.
COPPER: Futures rose on the Comex division of the Nymex. Speculative traders bought up copper when prices passed through important technical chart levels. Spot-month March gained 7.25 cents to $2.2735 per pound.
—- Sally Jones contributed to this article.
Write to Spencer Swartz at [email protected]
RELATED WALL STREET JOURNAL ARTICLE:
Nigerian Militants Resist Talks
Associated Press
February 21, 2006 2:54 p.m.
LAGOS, Nigeria — Militants holding nine foreign oil workers hostage refused to negotiate directly with the Nigerian government Tuesday, while crude oil prices climbed on worries that the country's recent pipeline attacks could disrupt global supply.
The West African nation — the fifth-largest oil supplier to the U.S. — is reeling from weekend attacks in which militants blasted oil and gas pipelines and sabotaged a key oil-loading terminal belonging to Shell Oil Co. That and an earlier attack have forced Shell to halt the flow of about 455,000 barrels a day, about one-fifth of daily output.
The Movement for the Emancipation of the Niger Delta said there have been no negotiations for the release of the hostages — three Americans, two Egyptians, two Thais, one Briton and one Filipino — who were seized Saturday. The militants called for independent negotiators. “The Nigerian government is fraudulent and we can never go into negotiations or dialogue with this fraudulent government without the involvement of a neutral third party,” the group's spokesman said in an email to the Associated Press.
The militants, who are pressing for the release of two of the region's leaders from prison and greater control of oil revenues, said they would welcome entreaties from the captives' families.
Dozens of armed militants seized the nine foreigners after storming a barge belonging to the Houston-based oil services company Willbros Group Inc., which was laying pipeline for Shell. The kidnappings came amid a rise in violence in Nigeria's oil-rich south that has cut some 20% of the country's crude production.
Nigeria, Africa's leading oil exporter, usually sends out 2.5 million barrels daily. Violence and sabotage of oil operations have been common in the oil-rich Niger Delta for the past 15 years amid demands by the region's impoverished communities for a greater share of the oil revenue flowing from their land.
The violence led to concerns about supply disruptions that helped send oil prices higher on international markets. (See related story.)
Hostage takings are a common occurrence in the volatile delta, but most captives are released unharmed. Last month, militants held four foreigners for 19 days before releasing them unscathed.
On Monday, the group attacked a pipeline and a houseboat they said housed Nigerian military, vowing to spread their campaign across the vast southern region of swamps and creeks from where most of the African oil giant's crude is pumped. A Shell spokeswoman said the houseboat was abandoned before attackers blew it up. It was unclear who owned the boat and military officials could not be reached for comment Tuesday.
The group also has threatened to kill President Olusegun Obasanjo if he enters the region. read more

By Katherine Griffiths, City Correspondent (Filed: 22/02/2006)
Insurers representing airlines whose fuel supplies were hit by the Buncefield explosion last December are preparing to sue France's Total and Texaco of the US, the main operators at the site in Hertfordshire.
The news comes as the insurance industry braces itself for claims of up to £500m following the explosion near Hemel Hempstead on December 11. The largest blast in Europe since the Second World War miraculously caused no deaths but destroyed several local businesses and forced residents to move out of their homes.
Major airlines such as British Airways, Virgin Atlantic and BMI were severely affected with the Buncefield site being one of four main suppliers of fuel to Heathrow airport. Supplies have been dramatically cut, forcing up the price of fuel when it is already at historic highs.
Those hit by the disaster were disappointed by the first report into events surrounding the explosion, issued yesterday, as it contained nothing on who was to blame. A final report will be issued in several months' time following further investigations by the Health and Safety Executive and the Environment Agency.
Sources say several major corporate claims are being prepared. Among those considering litigation are members of Lloyd's of London which writes much aviation insurance.
BA, Virgin and BMI would not comment on whether their insurers were planning litigation. US carriers such as American Airlines, which use Heathrow as their UK base, might also take legal action because of being hit by the fuel shortages.
Total and Texaco are the main oil companies in the firing line as the owners of the joint venture Hertfordshire Oil Storage Terminal (HOSL) which took up the majority of the space at the Buncefield complex.
But BP and Shell could also be implicated as they own stakes in the British Pipeline Agency which operated storage tanks at Buncefield and was part of the consortium running the West London Pipeline supplying Heathrow.
A spokesman for HOSL said: “We have great sympathy for all those affected by the Buncefield incident, but the cause of the incident has not yet been determined so we are not yet in a position to discuss compensation claims or comment on specific legal proceedings.”
Companies involved are concerned that claims could escalate to cover a wide range of issues, from breach of contract over fuel supply to airlines to hundreds of demands for compensation from those who breathed in noxious fumes.
Several individuals and small businesses have already filed claims for compensation and people close to the situation believe that there could even be grounds for a criminal prosecution.
A row is also brewing over whether Buncefield will be rebuilt. Companies relying on fuel will want the site to be replaced, but environmental groups and local politicians are keen to fight against the rebuilding of such a potentially dangerous site. read more

Royal Dutch Shell suspended almost half of its Nigerian output after a series of attacks over the weekend.
The Anglo-Dutch oil giant said production is down by 455,000 barrels a day, out of a total of around a million.
The price of a barrel of oil rose as much as $1.74 to $61.63 in London trading as news of the violence in the West African country emerged.
Rebels kidnapped nine foreign oil workers on Saturday, and a fire broke out at an export terminal.
Militants are threatening to escalate their attacks on foreign producers as they call for more local control over oil revenues.
The violence is sparking concerns that both Nigeria and Shell will find it hard to meet their production targets this year, pushing global oil prices higher. The setback comes as Shell struggles to replace reserves and boost production, even after reporting record profits. read more

Feb 22, 2006
Crude oil prices were flat Wednesday after climbing earlier in the week on concerns that militant attacks on pipelines in Nigeria would disrupt supply.
Light sweet crude for March delivery was unchanged at US$61.10 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, it gained US$1.22.
Nymex gasoline futures slid by 0.16 cents to US$1.4741 per gallon, while heating oil futures dipped US$1.6650 a gallon. Natural gas futures rose 54.9 cents to end at US$7.750 per 1,000 cubic feet.
Nigeria is Africa's leading oil exporter and the United States' fifth-largest supplier, usually exporting 2.5 million barrels daily.
The militants, who are pressing for the release of two of the region's leaders from prison and greater control of oil revenues, have threatened to fire rockets at any ships transporting crude oil from Nigeria.
Militants attacked a Royal Dutch Shell Plc-operated pipeline switching station on Monday and a boat they claimed housed Nigerian military personnel, vowing to spread their campaign across the south _ the area from which most of the country's crude is pumped. That, and an earlier attack, has forced Shell to halt the flow of about 455,000 barrels a day _ about one-fifth of the country's daily output, or less than 1 percent of total global demand.
The violence Monday didn't cause further production cuts, but sent prices higher. Shell said Tuesday it was extending its force majeure that protects the company from meeting its contractual obligation on Nigerian oil exports.
The fact that light, sweet Nigerian crude is in high demand, especially in the U.S., makes the latest supply disruptions all the more important, traders said.
Insurgent violence in Iraq also has increased over the past few days, with sabotage to northern Iraqi oil installations halting exports of 400,000 barrels a day. The country produces about 2 million barrels a day, down by about 800,000 barrels from before the U.S.-led invasion. read more

Martyn Wingrove
Feb 22, 2006
DESIGN and engineering work is under way on the Olokola liquefied natural gas project in Nigeria after three oil companies signed a project development agreement with the government.
Four LNG trains with a combined production capacity of 22m tonnes per annum are in the plans of Royal Dutch Shell, Chevron and British firm BG Group.
Front-end engineering and design studies can begin now the agreement is signed with Nigerian National Petroleum Corp and the partners expect the technical work will be completed by the end of this year.
The joint venture group expects to make the final investment decision early in 2007 and to have the first two trains on-stream in 2010.
'The Olokola LNG project creates new LNG infrastructure from which Shell can enhance its leadership in LNG,' said Shell's gas and power executive vice-president Catherine Tanna.
'Olokola will supply much needed energy to the rapidly growing LNG markets of Europe and North America.'
Four trains of 5.5m tpa capacity each are planned, plus a processing plant to produce natural gas liquids as a by-product.
The complex will be built in the Olokola free trade zone on the Nigerian southwest coast and will take gas from the West Niger Delta onshore and offshore fields.
Shell and Chevron are well established upstream in Nigeria. BG Group entered this section in last year's licensing round. read more