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Posts on ‘March 3rd, 2006’

INVESTORS CHRONICLE: THE MATTHEW VINCENT REPORT

3 Mar 2006
Investment guru Jim Slater reveals why oil and mining are his preferred sectors in conversation with Matthew Vincent at the Ritz Hotel in London.
Matthew Vincent, editor, Investors Chronicle
Well, as you can see, we're not in our normal surroundings for the Matthew Vincent Report, because we've just come down the road from the City into the West End here to the Ritz Hotel. And we're not just here for the superior coffee and croissant, compared to those in our studio, we're here because we're talking about one of the hottest investment topics of the moment with a very great supporter of the Investors Chronicle.
Jim, in your recent article for Investors Chronicle, you made a compelling argument for investing in oil and mining stocks based on the economic boom in China and India. Can you tell us a little more about that?
Jim Slater
Yes. I think the key point is that we are in a super-cycle for metals and oil. And this is usually best judged by the intensity of use. And at the moment, China's use is three times that of the US.
MV
How much longer do you think this cycle can last?
JS
The Chinese are going to move 300m people to the cities. And in doing that, all of them want cars, microwaves, refrigerators and houses, obviously. Now, every house that's being built, on average, takes about 400 pounds of copper, for example. Every car takes 50 pounds of copper. Hybrid cars, which are to save power, use 100 pounds of copper. And I'm a great bull of copper for that reason.
MV
We've already seen the prices of metals and, of course oil, rise quite substantially. And also the share prices of companies in that particular sector. What does that mean for valuations of stocks?
JS
Well, that's a good question. for example, and RTZ, which are two that I like, have risen a lot over the last few years, but their earnings have also risen. I mean, BHP's I think have gone up four times in the last five years. That sort of level. BHP is on a multiple of about 11 and so is RTZ. And both of them, with recent results, are repaying extra dividends, in the case of RTZ. They're buying back shares very substantially, and they're very cash rich.
You see, what's happened, in the mining world, the analysts and people have all been there before. They've all seen the OECD cycle – these are the short cycles, three to five years. And they think, “Well, metal prices are up a lot now, so this can't go on.” Now, in fact, if you allow for inflation – take aluminium for example, that was in 1988 £1.65, it's currently around £1.15, £1.20, £1.10, that sort of area. A pound. And allowing for inflation, though, the inflation-adjusted 1988 price would be £2.73.
So it's really just begun. And I think this will go on for a long time, with hiccups that will come. For example, in China, the planning isn't all that good. They over-produce quite often, and they end up with big stocks that have to then be cleared. And the banking system isn't very sound. It's very hard to sort of pay for things, and you know, just the things that we take as routine.
But over the years, I think you'll find that it will move forward, very significantly compared with the West.
MV
You've mentioned some of the stocks. But what other ways do you think private investors can play this boom?
JS
I used to coin the expression 'elephants don't gallop.' And the converse of that is that fleas can jump 200 times their own body height. So I like to invest in the fleas! A good example, by the way, one specific share I like, amongst the fleas, is Sterling Energy, which I think you've recommended in the Investors Chronicle. And that share has a deal with Exxon in Madagascar. But in addition to that, it's got in the Gulf of Mexico some producing wells and, most importantly, it's done a deal with the Mauritanian government. A wonderful deal. And their production is just starting – they announced it a couple of days ago. They're going to get enormous cashflow from that, because first of all, their loan to the Mauritanian government will be repaid from the cashflow, and then they're going to be left with the carried interest, which I think will be about, it's either 8 or 12 per cent, I can't quite remember. But it's big. And it will give them enormous cashflow. And they're a very able management. That's the kind of share I like.
MV
And turning to the mining stocks?
JS
You can't do much better than BHP and RTZ, in terms of quality, and easy to deal in. One of the beauties of these kind of shares, too, is that if you did by any chance change your mind at any point, you can sell them just like that.
Another one is… a very good one, I believe, but I don't know much about it, is Xstrata. I've heard good things of that, and it looks pretty good to me on the numbers. I'm personally invested in Galahad Gold, which is a relative minnow. I have 10 per cent of it. And I, for obvious reasons, like that. A very interesting thing about these shares. And I'll just tell you an interesting story about REFS. And that is, REFS has got this, what I call low-PEG tables. And a PEG, of course, is the growth rate in relation to the multiple. And years ago, I was very, very keen on the builders. And so was the Investors Chronicle, by the way, and I remember corresponding with you about it. And all the builders had suddenly started to come to the top of the tables. And I'd never really liked builders. It was a rotten business. But I suddenly thought, “Well there must be something in it.” And I started to invest in them quite heavily.
And Persimmon, for example, which is one of my favourites, was on a multiple of six and growing at a colossal rate in relation to the market as a whole. It's gone up many times since. So Bellway, and all these kind of companies. Persimmon now is still top of the PEG tables but it now in a multiple of 10.
So, you see, you get the status change, from six to 10, in addition to the growth.
Now, in the case of BHP and RTZ, they're on a multiple of 11. BHP is second now in the PEG tables. And the PEG tables are very good, because they're prescient. We do the calculations on two years' past growth, minimum of two years' past growth, and two years' future growth based on brokers' forecasts. So they're very up-to-date and they're really telling you what's likely to happen.
Now, it would not surprise me to see BHP move to having a period of profit-taking at the moment, from a multiple of 10-11 to 13-14. It certainly wouldn't surprise me. And it certainly would be justified by the growth rate.
If you compare that with the retailers in the U.K., they're on a multiple of 16, on average. Take DSG, which was originally, formerly as they say, Dixon's. That's on a multiple of 16, something like that. Or maybe 14, 15. I think it may be 15, but it's around that area. And it's had no growth for the last four years, in contrast to four times growth from BHP. And it's got no growth forecasts. Someone's mad somewhere, in my view.
MV
Well, Jim, thanks for finding both growth and reasonable prices.
JS
I've enjoyed it.
MV
I'm sure you'll agree that Jim raised a number of interesting points there and if you've got any questions about them or any comments you'd like to share, please do email me at the address appearing on the screen right now ([email protected]).
Sadly we've stayed over our check-out time at the Ritz and any minute now reception are going to phone up and ask me to leave, so sadly we'll be back at our normal studio next week we we'll have some more guests and some more discussions of hot investment topics. See you then.
Past share performance cannot be relied on as a guide to future performance read more

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THE SEATTLE TIMES: Chevron buys Alberta oil leases

By Paul Elias
The Associated Press; Associated Press reporter Brad Foss in Washington, D.C., contributed to this article
SAN FRANCISCO — Chevron, the second largest U.S. oil company, said Thursday it acquired five oil leases covering 180,000 acres for an undisclosed price in northern Alberta, Canada.
The oil company said an estimated 7.5 billion barrels of oil are under the land and that two unnamed companies each have the option to purchase 20 percent of the leases. Chevron already has a 20 percent stake in the Athabasca Oil Sands Project, which is controlled by Royal Dutch Shell and based 24 miles southwest from the fields covered by the new leases.
Canada has become an energy powerhouse by separating petroleum from sand and turning it into oil. So-called oil sands are found in an area almost half the size of Colorado spread across central Alberta and produce about 1 million barrels of oil a day.
That figure is expected to reach 2.7 million by 2015, and Canada estimates its oil sands will yield as much as 175 billion barrels of oil, making it second only to Saudi Arabia in crude oil reserves and enough to satisfy U.S. demand for at least a generation.
With oil prices soaring, “people are spending money like gangbusters up there,” said Michael Lynch, president of Strategic Energy & Economic Research.
But the costs of doing business in Canada — and across the world — also are rising because the labor and drilling-equipment markets are extremely tight. Oil-sands production costs are especially inflated these days because of the high price of natural gas, the fuel that is used to produce steam, which then is injected into the ground to separate the heavy oil from the sands.
Analysts estimate that in an oil sands project it costs roughly $25 to lift each barrel from the ground. At today's costs, that means Chevron could spend some $150 billion to deplete the reserves it bought.
“It's a big financial commitment,” said Lynch, who noted that Chevron probably paid considerably more for the acreage than it would have a year or two ago.
John Felmy, chief economist of the American Petroleum Institute, a Washington-based trade group, said Chevron's announcement is proof that the industry is using its record profits to boost output. However, he said the focus on Canada also highlights the difficulty Chevron and other oil producers are having accessing land in other parts of the world where production would be cheaper.
In the United States, environmental concerns make it difficult to get permits, whereas in Russia and Venezuela, governments are becoming more protective of their natural resources and demanding a bigger share of profits from private oil companies.
“Canada is a friendly, stable government, so it's at the top of the list,” Felmy said. Exxon Mobil, ConocoPhillips, EnCana and Shell are just a few of the companies investing billions of dollars in Canada. read more

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Business Day (South Africa): Closure of Shell’s units pose long-term threat to Nigeria

John Kaninda
Africa Editor
OIL production cuts forced by the shutting down of Royal Dutch Shell’s production units in the Niger Delta have so far had a limited effect on stability, revenue and possibly ratings of Nigeria, says a recent report published by investment bank Merrill Lynch. But failure to deal with the incidents could be “extremely negative” in the long term for the west African country, the report warns.
Attacks on Shell’s platforms by members of the Movement for the Liberation of the Niger Delta, and the kidnapping of nine overseas oil workers last week, forced the oil group to shut down its entire western region operation, delivering a “massive knock” to production, estimated at 600000-barrels a day.
Six of the kidnapped workers were released late on Wednesday, but militants held back two Americans and one UK national. Nigeria’s daily production is 2,5-million barrels a day.
Although production is not yet in dire straits, Merrill Lynch sees these developments as negative for the country’s stability and progress on governance, especially as the government has thus far “failed to put forward a solid, public attempt at addressing the incidents”.
Recent ratings of Nigeria by rating agency Fitch and Standard & Poor’s could be affected as a result of instability. Nigeria has received a BB inaugural rating by the two firms, which the Merill Lynch report says were “prematurely high”.
“Until now, the response to the violence has been opaque and we therefore remain cautious on government’s commitment to address the issue quickly and effectively,” the report says.
“We recognise that a clampdown on rebel activity may exacerbate the violence but, in the absence of official statements to countries whose citizens have been affected, or the media or investors, government has failed to even appear to be taking control of these events.”
The report also says that lower oil revenue will not affect Nigeria’s ability to repay debts.
The national budget assumes production of 2,5-million barrels a day at a prudent oil price of US$35 a barrel, compared with Merrill Lynch’s forecast of $64,2 a barrel. If production is held at the lower level of 1,9-million barrels a day throughout 2006, Merrill Lynch’s average forecast still yields $10,8bn in excess revenue.
“In fact, oil prices would have to fall to $45 a barrel at current production levels or production would need to be cut a further 25% (for instance if Shell shuts down all Nigerian operations) before we would begin to see serious risks to debt repayment.
“And we see both of these outcomes as highly unlikely,” the report says. read more

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THE WALL STREET JOURNAL: Chevron Intends to Develop Oil-Sands Project in Canada

By RUSSELL GOLD
March 3, 2006; Page A12
Chevron Corp. says it plans to develop a giant oil-sands project in northern Canada, the latest in a string of investments that is quickly turning the region around Fort McMurray, Alberta, into one of the world's fastest-growing oil-producing regions.
Chevron acquired leases for 75,000 acres from the provincial government in two separate sales. The company said there could be 7.5 billion barrels of oil in tar-like deposits there. Chevron plans to get the oil to flow into wells by using a steam-flooding technique that typically recovers between 20% and 40% of the oil, says James Bates, vice president of operations for Chevron's Canadian unit.
“It has the potential to become an impact-sized opportunity,” he says, noting that ultimately producing 100,000 barrels a day is conceivable.
While Chevron acquired the leases for about 70 million Canadian dollars, or roughly US$60 million, Mr. Bates says he expects that developing the project, called Ells River, could take a decade, at a price that runs into the billions.
Chevron will spend the next couple of years appraising the oil potential. Oil-sands operations require extensive capital investments to upgrade the viscous oil extracted from the ground into something that can be run through refineries and turned into gasoline. Operating costs, especially for energy-intensive steam-flooding, can also be quite high.
Major oil companies are clamoring to get involved in oil-sands production. While it is more costly to get crude from the oil sands than from an offshore platform, high crude prices have made oil-sands development attractive. Companies are also drawn to Canada's stable political and fiscal climate and the potential size of the resource.
“In terms of actual investments, over the next 10 years, we're looking at something on the order of $60 billion plus,” says Bill Wall, a technical specialist for the National Energy Board, the Canadian energy regulator. This investment, however, could be constrained by shortages of skilled labor, potential environmental regulations or falling oil prices. “As long as oil prices stay above $35 [a barrel] or so,” says Mr. Wall, “these projects are looking pretty good.”
Royal Dutch Shell PLC and Western Oil Sands Inc. each has the right to acquire a 20% interest in the project. Shell, Chevron and Western Oil Sands are partners on Muskeg River Mine, another oil-sands project near Fort McMurray.
Write to Russell Gold at [email protected] read more

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Daily Telegraph: Nigerian militia tells British oilmen to get out warn 'rapist' oil workers

By Daniel Balint-Kurti in Warri
(Filed: 03/03/2006)
A Nigerian militia group behind a wave of kidnappings and attacks on oil facilities has warned British and American oil workers to pull out of their region, saying that they will treat them “as criminals and rapists”.
Dressed in camouflage flak jackets and black balaclavas, the militia issued the warning to a group of foreign journalists in the middle of the Escravos River in the Niger delta, where most of Nigeria's crude is produced.
The recent attacks by the newly emerged Movement for the Emancipation of the Niger Delta (Mend) have threatened global oil supplies and pushed prices up since January. A fifth of Nigeria's oil remains cut off by the attacks.
After Mend issued a statement on Wednesday saying it was planning “one huge crippling blow to the Nigerian oil industry”, oil prices climbed 56 cents to $62.35 a barrel on the New York Mercantile Exchange.
Opec member Nigeria is the world's eighth largest oil exporter and the fifth largest supplier of crude to America.
Sitting in the middle of one of three boatloads of ethnic Ijaw militiamen was Macon Hawkins, an oil worker subcontracted to Shell who was kidnapped on Feb 18.
After holding an impromptu press conference, the gunmen – who would not give their names – released Mr Hawkins to the journalists, who brought him back to the nearby city of Warri.
Mr Hawkins, carrying medicine to treat his diabetes and high blood pressure in a plastic bag, kissed the dusty ground when he arrived at Warri's port. He was driven away by American embassy officials.
Five other hostages from Thailand, the Philippines and Egypt were released by militants shortly afterwards, but two more Americans and a Briton, John Hudspith, are still being held.
One of the militiamen said the remaining hostages could be freed “within the next 24 hours” if the army withdraws troops from the Niger delta, which seems improbable.
The group has also demanded the release of two Ijaw leaders: prominent militia leader Mujahid Dokubo-Asari, jailed since September on treason charges, and former southern governor Diepreye Alamieseyeigha, who was arrested in Nigeria after jumping bail in Britain where he was indicted for money laundering.

Alamieyeseigha, who reportedly escaped Britain dressed as a woman, faces possible extradition back to the UK. Underlying the violence in the delta, which is the size of Scotland, is a feeling among local communities that the oil riches flowing from their land enrich a corrupt political elite and multinationals, while they live without even basic public services.

The health system has collapsed, rivers and creeks are full of oil slicks and environmental groups say towering gas flares cause acid rain. Villagers complain that oil pollution has killed off fish and contaminated their drinking water.
Mend accuses the military of launching bombing raids on Ijaw villages. Villagers in the area support their claims, saying several people were killed.
In Ogbodubogbo village, local fisherman John Bull Sunday said he fled into the surrounding forest when two helicopters opened fire.
Four people were killed in the raid on that village, including his four-year-old daughter, he said, standing next to what residents said were craters from bombs dropped by the helicopters. Shrapnel was scattered around the scene.
The army says it bombed ships found to be stealing oil from pipelines and did not attack civilians.
The three boatloads of militiamen who released Hawkins were holding belt-fed machine guns and rocket-propelled grenade launchers.
Western diplomats say their discipline and equipment indicate they are a bigger threat to the strategic oil-producing region than any other armed group yet to emerge there.
The way they hold their rifles, with their fingers placed away from the trigger, and the use of headphones for noise-protection by some fighters, indicate they have been given professional military training, say observers. read more

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THE INDEPENDENT: Nigeria's civil war: Into the heart of darkness

In the lawless Niger Delta, armed militants have waged a brutal war against the oil companies who exploit the region's lucrative resources. Christian Allen Purefoy reports from Warri
Published: 03 March 2006
Deep in the gloom of the Niger Delta swamp, a motorboat carrying eight men in balaclavas, camouflaged flak jackets, and brandishing Kalashnikov assault rifles, sweeps past. Passing abandoned oil installations in the shadows of the mangroves, they chant: “We dey suffer, suffer, suffer, everyday. We are the Niger Delta security men.” They are patrolling an oily creeks in defiance of the Nigerian government that is nowhere to be seen.
After a show of strength, exploding two grenades in the river, the men return to their patrol. Far from the crooked corridors of power the explosions seem lost in the dense, swamp forest.
These are the armed militants who have committed a wave of kidnappings of oil workers and attacks over the past decade, costing 445,000 barrels of oil, a fifth of Nigeria's oil exports, in their fight for a greater share of oil wealth for the impoverished local population. Their pronouncements have shaken the world's oil markets and driven multinationals such as Shell to consider their future in Africa's most populous country.
Militias have blown up pipelines and attacked two of Shell's platforms in recent months. Despite the delta's huge energy reserves, millions of people live in extreme poverty. The militants of the Movement for the Emancipation of the Niger Delta (Mend) are still holding two Americans and a Briton who were among a group of foreigners abducted two weeks ago from a barge where they were laying a pipeline for Royal Dutch Shell. In a surprise move on Wednesday, Mend released six hostages, including and and and American, Macon Hawkins, to our party, a welcome gift to Mr Hawkins on his 69th birthday.
As we pull out of Warri port, another militia boat roars past the bow of a passing cargo ship Sardonic Pride, displaying the ease with which they can act. The Nigerian Navy has proved itself ill-equipped and unable to defend oil facilities and ships such as the Sardonic Pride against attacks in territories well known by the militias.
Villages scattered along the river's edge, are swallowed by the third-largest wetland in the world, covering an area the size of Ireland. In the heat and damp of the delta, where the oil flares burn night and day, casting a choking yellow light over the swamp forest, great wealth and poverty lie cheek by jowl.
There are 27 million people living in this black-gold region, 70 per cent of them in poverty. They survive in mud-huts and eke out a living, travelling in the swamps on dug-out canoes to reach the outside world.
In one village, a woman, her feet black and slick with oil, drank, then washed her five-year-old son in contaminated water from a hole dug four feet in the ground. At the local school, four makeshift desks are the only sign of “government development”. Mrs Makosi Orjonko says; “When we drink, it gives us pain. It worries us; it's no good. We just manage. We want better water.”
But the government's presence is not forgotten; two bomb craters and bullet holes in roofs of their homes, are testimony to the efforts the state use to keep the oil flowing. One enraged villager, Mr Farele, pointing at bullet holes in one of the village's buildings, shouted:”The military helicopter came and shot. We want hospitals and schools.”
The horizon is lit by the unnatural orange glow, the flames from massive chimneys flare off the natural gas brought up as a by-product of the region's oil. Beneath the rivers and mud, Nigeria has 35 billion barrels of oil. One-fifth of US oil imports come from the region and and 10 per cent of the UK's natural gas coming is expected to be sourced there within a few years.
But these exports are under increasing threat by resentment felt by the people of the delta against, what they see as the theft of the natural resources. The people say the oil industry has caused environmental devastation, polluting their land and fishing grounds.
Ken Saro-Wiwa, the Ogoni campaigner, was the first to launch a movement for social and ecological justice in the Niger Delta in the 1980s. He was executed amid international condemnation in 1995. His public killing drew the world's attention to the role of the oil industry in Nigeria, and forced Western oil companies to adapt their practices, making loud noises about sharing some of the profits with local communities and safeguarding the environment.
Today, the cycle of injustice, poverty and violence continues.
As the sun began to sink behind the dark canopy, three boats of heavily armed men gathered in a creek, circling warily before approaching. In one boat was Mr Hawkins, holding a small plastic bag with his medicine and toothbrush.
One of the spokesmen for the group, armed with a machine-gun, said: “Our interest lies in how to bring the attention of everyone to the issue of the Niger Delta. Let the UN come and intervene, let them set up commissions of inquiry and look into the matter of the Niger Delta, and find out a final solution to the issues.”
Five other captives, two Egyptians, two Thais and a Filipino, were also freed. Mr Hawkins stuck both thumbs in the air and grinned. “Oh God,” he said. “It was an experience I don't want to do again, but I just had to make the best of it; tried to keep my cool.”
The men in the boats waved their weapons and broke into a song; another man shouted angrily about the government. Unlike many of the regions other militias, these 50 men had an eerie, trained order to their actions, handling their weaponry expertly.
In a statement issued yesterday, they warned of more attacks on oil workers in another area of the Niger Delta. Their objective is “totally destroying the ability of the Nigerian government to export crude oil it has stolen from the Niger Delta over the past 50 years.”
The identities of the militia are unknown; as with many armed groups in Nigeria, “big men” are often at work behind the scenes. Nigeria is holding national elections next year, and in one of the most corrupt countries in the world, the country's vast oil wealth is at stake. With rumours of President Olusegun Obasanjo attempting to run for a third term, tension and attacks are likely to increase as the elections draw nearer.
John Negroponte, the US director of Intelligence has said: “Speculation that President Obasanjo will try to change the constitution so he can seek a third term is raising political tension and if proven true, threatens to unleash major turmoil and conflict. Such chaos in Nigeria could lead to disruption of oil supply, secessionist moves by regional governments, major flows and instability elsewhere in Africa.”
Militias such as Mend are often used to further the political influence of others, despite the ostensible demands for a greater share of the oil wealth to improve their lives.
The Ijaw leader, Mujahid Dokubo-Asari, who is calling for independence for the oil-rich region, has been jailed on treason charges. Mend insists it is a separate organisation from Mr Asari's Niger Delta People's Volunteer Force but is campaigning for his release.
The militia leader who had invited the world's media into the swamps to advocate all oil proceeds being kept by the region also threatened oil facilities and “all-out war” on the Nigerian government. His warnings pushed pushed oil prices above the psychological $50 per barrel level. And Mr Asari's calls for the “dismemberment of Nigeria led to the secret police putting him in jail.
There are also the gangs who commit the lucrative siphoning of oil from pipelines, which is sold on the black market and believed to fund the purchase of weapons.
After the fighters of Mend handed over the hostages, they fired a farewell volley into the air for Mr Hawkins, circled, then, opening up the two huge outboard engines on each boat, quickly disappeared into the swamp.
Mr Hawkins, with a heavy Texas drawl, said they had been treated well, eating a lot of canned foods to avoid dysentry, sardines, corned beef, and noodles. Living in “kind of a village”, the hostages had been free to roam around, and spent most of the day playing cards. But Mr Hawkins, with high blood pressure and diabetes, had been worried about his health, which may have played a large part in his release.
The American celebrated his 69th birthday in captivity with a “warm Sprite”, hours before his surprise release, and was looking forward to cleaning up with a hot shower and shampoo, deodorant and a razor. He bore his captors no ill ill. “I have no animosity toward them at all,” he said. “I've seen their little villages; they're dirt-poor, poor as field-mice.”
But Mr Farele, still angry, pointed towards the faraway comfort of Escravos oil facility. “We want our village to be like there,” he said. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

THE NEW YORK TIMES: Oil Rises for Fourth Day; Nigeria, Iran Support

By REUTERS
SINGAPORE (Reuters) – Oil prices rose for the fourth day in a row on Friday as dealers narrowed their focus to persistent geopolitical supply concerns, ignoring bloated U.S. stocks.
Fears of more violent attacks against Nigeria's oil industry and international tension over Iran's nuclear program helped lift prices to their highest level in nearly a month and discouraged traders from going short into the weekend.
U.S. light crude (CLc1) for April delivery was up 29 cents to $63.65 a barrel by 0244 GMT, taking four-day gains to more than four percent. Prices hit their highest level since February 7.
European crude benchmark Brent was up 39 cents at $64.46.
“The geopolitical situation with Iran and the meeting on Monday…is weighing heavily on the market,'' said Andrew Harrington, resources analyst at ANZ bank in Sydney.
“There is going to be a lot of volatility.''
Top EU powers will meet Iran's chief nuclear negotiator on Friday for a last stab at dialogue before the International Atomic Energy Agency's (IAEA) 35-nation board of governors convene on Monday to weigh a report saying essentially that Iran has ignored a February 4 call to re-suspend enrichment work.
Referring the issue to the UN Security Council moves Iran a step closer to possible sanctions, which oil traders fear could prompt to world's fourth largest oil exporter to cut supplies.
Although Iranian energy officials have said this will not happen, the country's president remained defiant.
“If some parties want to…impose something on my nation, experience tells me and them that the Iranian nation will make them sorry,'' President Mahmoud Ahmadinejad said in Malaysia on Friday.
The IAEA meeting comes two days before a gathering of OPEC, which is widely expected to continue pumping oil at near full throttle in view of current price strength, although hard-line price hawk Venezuela has lobbied for a cut.
OPEC's president, Nigerian Oil Minister Edmund Daukoru, said Wednesday it was too early to say what the group will decide.
Geopolitical tensions have overshadowed U.S. stock data showing high inventories, with crude oil stocks 9 percent above year-ago levels and gasoline supplies hovering at their highest level since 1999 for the third week in a row.
THREATS OF SUPPLY DISRUPTIONS REMAIN HIGH
Adding to the sense of unease, al Qaeda has advised followers to attack pipelines in Saudi Arabia and Iraq but to steer clear of oil wells because they are the lifeline of Muslim states, according to a two-year-old document recently posted on the Web.
The document sent jitters through the market as it emerged just a week after Saudi Arabia foiled an al Qaeda attack against one of the world's largest oil installations, and two days after a failed attack in non-producer Jordan.
In Nigeria, 450,000 barrels per day of Royal Dutch Shell's (RDSa.L) oil production were still shut in nearly two weeks after oil installations were attacked. The Movement for the Emancipation of the Niger Delta warned on Wednesday that it was concentrating its resources on “one huge crippling blow to the Nigerian oil industry'' with an aim of completely discontinuing exports of onshore crude oil. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

THE NEW YORK TIMES: Chevron Gets Canadian Oil Leases

By THE ASSOCIATED PRESS
SAN FRANCISCO (AP) — Chevron Corp., the second largest U.S. oil company, said Thursday it acquired five oil leases covering 180,000 acres for an undisclosed price in northern Alberta, Canada.
The San Ramon-based oil company said an estimated 7.5 billion barrels of oil are under the land and that two unnamed companies have the option to each purchase 20 percent of the leases. Chevron already has a 20 percent stake in the Athabasca Oil Sands Project, which is controlled by Royal Dutch Shell PLC and based 24 miles southwest from the fields covered by the new leases.
Canada has become an energy powerhouse by separating petroleum from sand and turning it into oil. So-called oil sands are found in an area almost half the size of Colorado spread across central Alberta and produce about 1 million barrels of oil a day. That figure is expected to reach 2.7 million by 2015 and Canada estimates its oil sands will yield as much as 175 billion barrels of oil, making it second only to Saudi Arabia in crude oil reserves and enough to satisfy U.S. demand for at least a generation.
With oil prices soaring, ''people are spending money like gangbusters up there,'' said Michael Lynch, president of Strategic Energy & Economic Research Inc. of Amherst, Mass.
But the costs of doing business in Canada — and across the world — also are rising because the labor and drilling-equipment markets are extremely tight. Oil sands production costs are especially inflated these days because of the high price of natural gas, the fuel that is used to produce steam, which is then injected into the ground to separate the heavy oil from the sands.
Analysts estimate that in an oil sands project it costs roughly $25 to lift each barrel from the ground. At today's costs, that means Chevron could spend some $150 billion to deplete the reserves it bought.
''It's a big financial commitment,'' said Lynch, who noted that Chevron probably paid considerably more for the acreage than it would have a year or two ago.
John Felmy, chief economist of the American Petroleum Institute, a Washington-based trade group, said Chevron's announcement is proof that the industry is using its record profits to boost output. However, he said the focus on Canada also highlights the difficulty Chevron and other oil producers are having accessing land in other parts of the world where production would be cheaper.
In the United States, environmental concerns make it difficult to get permits, whereas in Russia and Venezuela, governments are becoming more protective of their natural resources and demanding a bigger share of profits from private oil companies.
''Canada is a friendly, stable government, so it's at the top of the list,'' Felmy said. Exxon Mobil Corp., ConocoPhillips, EnCana Corp. and Shell are just a few of the companies investing billions of dollars in Canada.
Chevron is in the middle of its most prosperous stretch in its 126-year history as the oil company capitalizes on high fuel prices that are squeezing consumers and ruffling politicians.
Its 2005 profit of $14.1 billion for the full year was also a record for Chevron. It now has posted record annual profits in each of the last two years, earning a combined $27.4 billion.
The company's shares fell 23 cents to close at $57.01 Thursday on the New York Stock Exchange.
AP Business Writer Brad Foss in Washington contributed to this report. read more

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Financial Times Deutschland: Shell closer to becoming market leader in Germany (Shell holt gegenuber Marktfuhrer Aral auf)

Dutch-based oil group Shell is still aiming to become the leading operator of petrol stations in Germany, overtaking the current market leader, Aral/BP. Shell says that it now has a market share of 21.5 per cent in Germany, compared with 22.5 per cent for German group Aral, and that it was the only major operator to extend its network in Germany last year, where the market is declining.
Shell also plans to open new petrol stations in Germany this year. In order to become the market leader, the company intends to introduce a petrol pump attendant service at around a third of its 2,243 stations. In particular, this service will be aimed at older drivers, female drivers and those on business trips. Customers will be expected to make a voluntary payment of 1 euro for these services.
Abstracted from Financial Times Deutschland read more

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Financial Times: We are not terrorists, insist secretive Nigerian militants

By Dino Mahtani in Warri
Published: March 3 2006 02:00 | Last updated: March 3 2006 02:00
Surrounded by mangrove forest deep in Nigeria's western delta region, masked militants in slick combat gear and carrying sub-machine guns and rocket launchers give reasons for their devastating attacks against Nigeria's oil industry.
“We are not terrorists, we are freedom fighters,” says a commanding officer as his men sit quietly on guard on open-topped boats with high powered motors, not far from several oil wells and flow stations dotted around the creeks.
The secretive, militant Movement for the Emancipation of the Niger Delta has claimed responsibility for attacks and abductions that have forced Africa's largest oil producer to cut output by a fifth so far this year. On Wednesday Mend released six of the nine oil workers they had kidnapped after an attack 12 days ago but still rattled oil markets by threatening to execute a “huge crippling blow to Nigeria's oil industry”.

The group says it is fighting for the rights of the delta's largest tribe, the Ijaw, many of whom complain of political marginalisation and of being cheated out of their oil wealth by the government and multinationals while they live among oil slicks and gas flares.

But behind the group's rhetorical mask lies a tangled web of dealings involving militant activists, local community leaders and ambitious political figures.
While state officials in the western delta have been given the task of brokering the release of the remaining three hostages, they are having to use former militants to act as intermediaries with Mend, underlining the complex nature of the talks.
Such former militants were given official state appointments in exchange for bringing their footmen under control, after an earlier campaign of insurgency ahead of the 2003 elections.
“All of us are in this together. We know everybody. We know who is who and we know what is what,” James Ibori, a western delta governor from Nigeria's ruling party who has been given the job of leading the negotiations with Mend, told journalists earlier this week.
But many of the former militants acting as intermediaries remain critical of the authorities for, they claim, breaking promises to em-power more Ijaw leaders in local governmental authorities that would be responsible for handling cash payments. “Until there is fair play, there will be more trouble,” says one former militant called “Duty Calls”.
Mend may have strong connections to the now fragmented group responsible for the 2003 uprising, but security analysts say its level of operational mobility, co-ordination and discipline is recognisably better than the other armed militia and criminal gangs in the Delta. “The way they hold their guns, with the finger outside the trigger, is just one sign that they are well trained,” says one diplomatic source referring to the weapons Mend uses, which include American M-16 rifles.
Industry officials say that many armed groups in the Niger Delta have built up sophisticated arsenals from the illegal trade in stolen crude oil, and that such groups often operate protection rackets with oil companies and work in cahoots with powerful military and political figures. Many such groups were originally sponsored by political figures to fight turf battles in the run-up to elections in 2003.
Mend hotly denies it is part of any oil theft cartel, saying it is a grassroots movement. It has called for the release of Mujahid Dokubo-Asari, a prominent militant from the eastern delta, who has been arrested and charged with treason.
Some security analysts doubt that Mend can reach out to militant groups in the east, who are acting out their own localised strategies. But many Mend commanders talk of an impending attack in the eastern delta, where Royal Dutch Shell, Nigeria's largest oil producer, has already withdrawn some workers from remote oil facilities.
The ease with which the militants move in their own territory is obvious. “We want development!” screams one militant on a boat as it speeds past a large tanker heading towards oil export terminals, while close by nervous soldiers guard oil facility jetties.
Impoverished local communities nearby, where oil slicks wash on to fishing nets, say they are bearing the brunt of increasing military forays against the militants. In Ogbodubogbo, a small community, villagers complain of attacks from helicopter gunships. Other villagers elsewhere are keen to get the most publicity from the hostage crisis.
“I plead to white men to talk to the federal government to talk to the white men who have been in charge of [oil companies] Chevron and Shell,” says Pius Iyadongha, a 23-year-student, as an orange gas flare burns in the distance. read more

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Financial Times: PetroChina signs exploration deal with Total

By Carola Hoyos in London
Published: March 3 2006 01:32 | Last updated: March 3 2006 01:32
China on Thursday further opened the doors to its large natural gas industry when PetroChina, the country’s biggest oil company by production, signed an exploration deal with Total, the French energy group.
The deal to tap the Sulige field in north-west China is the second such agreement after last year’s pact by PetroChina and Anglo/Dutch Royal Dutch Shell to explore for gas in the Changbei natural gas field, which is in the same basin as Sulige.
Jiang Jiemin, PetroChina’s vice-chairman, said: “This is a very significant project because the field in three to five years’ time could produce 5 per cent of China’s total gas production. Gas demand is very, very strong, but our natural resources are limited.”
Christophe de Margerie, Total’s head of exploration and production, said during the signing ceremony in Beijing that the two companies were also exploring the development of a gas field in Iran, though he gave no details.
In China, Total and PetroChina intend to spend 30 months and $20m drilling in Sulige, said Denis de Besset, Total’s general manager for China.
Full production is ex-pected to reach 400m cubic feet a day, with the gas intended to supply Beijing via pipeline for 20-30 years.
The two companies have also agreed on the sales side of the deal, making it less likely that the project will fail in a similar way to the vast west-east gas pipeline deal.
That project saw international oil companies pull out one by one because they could not be certain the end sales price would make the project profitable.
China’s energy consumption has surged in recent years. Oil demand grew by an unexpected 16 per cent from 2003 to 2004, partly because of power capacity problems that forced the country to use oil for electricity generation.
Meanwhile, the country’s big cities have become increasingly polluted, lar-gely because of China’s reliance on coal, and Beijing has accelerated its campaign to find alternative and cleaner sources of fuel such as gas. It wants gas to supply 8 per cent of the country’s energy by 2010, up from 3 per cent today.
Recognising China’s huge potential, oil companies such as BP of the UK, ExxonMobil of the US and Saudi Aramco have lined up to work with the Chinese companies.
The National Bureau of Statistics estimates China’s gas production rose more than 20 per cent last year.
Additional reporting by Richard McGregor and Bloomberg in Beijing read more

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