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THE NEW YORK TIMES: Experts: Fragile Economy Hampers Big Easy

By THE ASSOCIATED PRESS
Published: March 28, 2006
Filed at 5:06 p.m. ET
NEW ORLEANS (AP) — Most of Big Oil has returned to New Orleans since Hurricane Katrina, Mardi Gras got the city back in the tourism business and the skilled construction trades can't get enough workers.
The city's population — 455,000 before Katrina and almost zero after storm evacuations — is now near 190,000 and expected to climb. But Tim and Renee Baldwin likely won't be part of any long-term recovery.
''It's hard to make a judgment about the future,'' said Tim Baldwin, a French Quarter bartender who lives in the city's Uptown section, which was largely spared from flooding. ''It's a matter of day-to-day, a question of who's staying and who's leaving. We're probably leaving.''
Meanwhile, for Ida Manheim, the owner of a French Quarter antique store that's been in her family for four decades, there's no question.
''I'm going to help rebuild New Orleans,'' Manheim said. ''It's a wonderful city.''
While economists and think tanks struggle to come up with a quantitative prediction of the city's future, there is a common theme: New Orleans will be a much smaller city with an economic growth that will be fragile for years to come. There are simply too many unknowns and no other modern disaster with which to compare Katrina, leaving residents and businesses acting largely on faith.
Shell Exploration & Production Co. surprised many by bringing its 1,000 employees back and sponsoring the New Orleans Jazz & Heritage festival, one of the city's major tourist draws. And ChevronTexaco returned 700 white-collar workers, helping to alleviate fears that Katrina had done away with New Orleans' remaining oil business.
With billions of dollars in reconstruction work facing the city and not enough skilled craftsmen to go around, the construction business will be ''like gold mining in the gold rush days,'' said Loren Scott, a retired economics professor at Louisiana State University who tracks the state's employment picture.
On the down side, the state's only Fortune 500 company, utility holding firm Entergy Corp., says its New Orleans headquarters will be scaled down. And Hibernia National Bank, acquired last year by Capital One Financial Corp., is moving 350 to 400 jobs from its 3,100 pre-storm payroll to Dallas, citing the lack of housing.
Scores of small retail businesses and restaurants aren't sure how long they can remain viable with so few workers and a housing shortage that grows worse. Baldwin said the monthly rent on his family's home will jump from $900 to $1,550 in October.
The housing crunch has created a problem — and, for some, a big expense — for businesses too. Shell spent $33 million to acquire about 120 residential units in the New Orleans and Baton Rouge areas to lease back to their workers at cost.
The suburban commute for many now reaches as far away as Baton Rouge, 65 miles northwest of New Orleans.
Jason Williams, who's self-employed, drives at least an hour and 10 minutes in each direction on a work day that starts early in the morning. ''On a bad day, it can take anywhere from two hours and up,'' he said.
Williams and his family plan to return to their rental house in New Orleans next month. They're lucky — their longtime landlord isn't hiking the rent.
Others will never return.
RAND Corp., a private think tank, projects the city's population will reach only 272,000 by September 2008, three years after Katrina. Greg Rigamer, head of GCR & Associates Inc., a New Orleans consulting firm, said RAND is too conservative. He projects a population of 250,000 to 275,000 by the end of 2006, followed by an extreme slowdown as housing fills up.
Renee Baldwin, who's home-schooling her 12-year-old daughter in addition to keeping a job in the petroleum support industry, said she believes the housing scenario could put the city's middle class in jeopardy.
''The area is going to be people with a lot of money or people without any money,'' she said. ''They're pushing the middle class out. Not everyone can afford to pay $1,500 a month for rent.''
Mike Pendley, who works in the oilfield service business in New Orleans, chose to live in Baton Rouge and commute when he transferred from Houston three years ago. He believes many New Orleans workers will decide to become permanent Baton Rouge residents.
''It will be the safety factor for the their families, the levee factor,'' Pendley said. ''They won't have to worry about flooding. The schools are better, and the area is perhaps safer.''
Scott, the retired economist, said more commuting workers bodes ill for New Orleans, which has faced a dwindling tax base since the school desegregation flight of the 1960s and 1970s, the oil price crash of the 1980s and corporate consolidation and crime fears in the 1990s.
''The tax base will shift more to where they have their residences, instead of where they work,'' Scott said. ''That's where they will pay their property taxes, buy their groceries, buy their cars.''
Scott said the recovery likely will speed up if New Orleans escapes a major storm this year — or could be stopped stone-cold by another.
''If it happens again, you're going to have people giving up on coming back, businesses giving up on coming back and taxpayers in the other 49 states questioning sending billions (of dollars) into the area,'' he said.
The uncertainty makes no difference to Manheim, who says more tourist-oriented advertising is needed to convince the rest of the country that New Orleans is ready to host them.
Indeed, the RAND study said businesses and industries that rely on their New Orleans roots — petroleum, shipbuilding and, of course, tourism — will recover the quickest.
''Without the help of tourism, it's going to take us a lot longer to get back,'' she said. ''We need everyone in the United States to come visit us.'' read more

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MarketWatch: Shell oil CEO says more offshore oil revenues for gulf states

Mar 28, 2006
CORPUS CHRISTI, Texas (MarketWatch) — U.S. states bordering the Gulf of Mexico should receive a larger share of oil and gas royalties collected from the federal offshore areas, Royal Dutch Shell PLC's (RDSB.LN) top U.S. executive said Tuesday.
“We believe Congress should enact comprehensive (Offshore Continental Shelf) budget sharing legislation to appropriately compensate states, such as Louisiana, that shoulder the burden of oil and gas development,” said John Hofmeister, president of Shell Oil Co., at a meeting of U.S. and Mexican governors.
Louisiana Gov. Kathleen Blanco has recently insisted that the U.S. Minerals Management Service, a branch of the Interior Department, hand over 50% of revenue collected from oil and gas production in offshore Louisiana.
That amount, which could reach up $2.5 billion annually, would be used to help restore the state's coastal wetlands and protect coastal communities from hurricanes.
Shell is one of the largest producers of hydrocarbons in the Gulf of Mexico. The company relocated about 1,000 employees to its New Orleans office, which had been evacuated after Hurricane Katrina struck last summer.
-Contact: 201-938-5400 read more

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BLOOMBERG: Former U.K. Judge Says Justices Often Rule Without Expertise

March 28 (Bloomberg) — Hugh Laddie, the first London High Court judge to resign in 35 years, said he often ruled on tax or insolvency cases that he wasn't trained to hear because of the way the English legal system works. “It is neither efficient nor fair on litigants to run a system in which judges are frequently deciding cases outside their area of expertise,'' Laddie, a patent law specialist, said in an interview last week. “No system could avoid that in all circumstances, but that should be the aim. I do not believe it is the aim in the current English system.'' Laddie, 59, told law students at the University of London last month he'd have been better off using a “roulette wheel'' to decide some cases, according to the Law Gazette. He has since softened his stand. “If I said it, it was too strong,'' he said, adding that the weekly had misinterpreted him. It's an unusual retreat for Laddie, who often courted controversy as a High Court judge. In a 2002 trademark dispute involving Arsenal Football Club Plc memorabilia, he took on the European Court of Justice, saying the court had exceeded its jurisdiction by finding facts and he wouldn't follow its decision. The Court of Appeal decided otherwise, overturning Laddie's judgment and ruling Arsenal's trademark was infringed by a vendor selling knock-off merchandise. Having Fun Laddie's resignation from the bench last year also bucked convention. Saying he missed the “fun'' of working with other lawyers, Laddie joined Rouse & Co. intellectual property solicitors as a consultant. With High Court judges traditionally leaving when they retire or die, Laddie's departure made national news: “`Bored' High Court Judge Resigns,'' the Telegraph newspaper trumpeted. “I was certainly getting more miserable,'' Laddie said, happily pointing out his new office overlooking the Thames River and Canary Wharf. “I can't say I felt stimulated on those cases about landlord-tenant disputes and things I knew nothing about.'' Laddie, whose cases included one involving the makers of the BlackBerry wireless device, said he had considered resigning for three years. When pressed about what the final straw for his departure was, the soft-spoken Laddie said: “You're not going to cross-examine me.'' Laddie's passion, aside from his family and fly fishing, has always been patent law, particularly if it involves genetic engineering, which he describes as “breathtakingly beautiful science.'' Family Matters His interest stretches back to the University of Cambridge, where he studied medicine for two years before switching majors. Laddie's father, brother and sister are lawyers, as is his son who works as an employment barrister at London-based Matrix Chambers with Cherie Booth QC, Prime Minister Tony Blair's wife. Laddie, born in London, married his childhood sweetheart, raised three children and was called to the bar in 1969 where he specialized in patent law. He became a Chancery judge in 1995 and said he found complex commercial disputes “stimulating, like high-wire walking is stimulating.'' There was a perception in legal circles that Laddie and his co-judges were against patent holders, although Laddie disputes this. It didn't help when CMS Cameron McKenna LLP, a London-based law firm, published a 2002 study of the Patents Court that showed that in 23 judgments made in 2001, only eight favored the patentee. Of six of those judgments made by then-Justice Laddie, none favored the patentee. “None?'' Laddie said, when told of the study. He denies there was bias or favoritism in his judgments or those of his colleagues. “There are lies, damn lies and statistics and that is an example.'' Legal Wisdom Sir Hugh, who doesn't use the knighthood title he gained in 1995 on his business cards, prefers to be remembered as a judge who streamlined costs and court time so plaintiffs could afford to bring actions against wealthier defendants. Laddie's last substantive case before retiring was Research in Motion UK Ltd. v Inpro Licensing Sarl. Inpro brought claims against RIM, the makers of the BlackBerry, in Britain and Germany over a European patent related to the transposition of images and Internet files. RIM, which eventually won, wanted proceedings fast-tracked so they could challenge Inpro's U.K. patent and protect RIM's BlackBerry sales in Europe. Inpro objected. Laddie decided that if one party asked for a streamlined procedure, the court should proceed unless there was a convincing reason not to. Laddie's decision opened the door to streamlining complex English patent cases to allow factual and expert evidence to be given in writing, and limited the cross-examination of witnesses. The RIM case was so complicated that it took longer than Laddie had envisioned. Justice Nicholas Pumfrey, who heard the case after Laddie retired, ruled that the test for streamlining should be an objective one, based on all the material, rather than the presumptive test Laddie had wanted. Clients can still get their case streamlined though if they meet the test. Laddie, who is proud of this contribution to the legal system, said he tends to take his hits and misses in his stride. “If you think judges only speak wisdom then there would be no need for the Court of Appeal,'' he said. To contact the reporter on this story: Caroline Byrne in London at [email protected]
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Ros Business Consulting: Investment in Sakhalin-2 likely to increase

RBC, 28.03.2006, Yuzhno-Sakhalinsk.
At a meeting in Yuzhno-Sakhalinsk on April 5, 2006, the Sakhalin-2 Supervisory Board plans to consider the increase in investment in the project from $11.5bn to $20bn, the Sakhalin regional administration reported.
This meeting is also intended to approve the project's estimated expenditure for 2006 and discuss liquefied natural gas sales contracts, among other things.
Today Governor of Sakhalin Ivan Malakhov, Managing Director of Shell Russia Malcolm Brinded, and the management of the Sakhalin Energy consortium exchanged views on the project's progress and the issue of boosting investment. 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.

New Europe: Gazprom, Shell mull SLF production in Russia

Gazprom and Royal Dutch Shell are looking at working together to produce synthetic liquid fuel (SLF, by gas-to-liquid (GTL) technology).
Shell, Gazprom and VNIIGAZ are carrying out joint studies on the possibility of developing the GTL business in Russia, Maxim Shub, a spokesman for Shell in Russia, told Interfax. “Talks are at a very early stage and no specific projects are being discussed,” he said.
“Gazprom and Shell are holding consultations on working together in the GTL field. It would be premature to talk about any specific agreements,” a source from Gazprom said. A source familiar with Gazprom plans, however, told Interfax there was a joint project between Gazprom and Shell to build an SLF production plant near Nadym. read more

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Houston Chronicle: Nigerian rebels act before Obasanjo and Bush meet

March 28, 2006, 1:55AM
By LYNN J. COOK and KATHERINE HOURELD
Copyright 2006 Houston Chronicle
THREE oil-field workers, including a Houston-area man, who were held for 38 days by a rebel group in Nigeria were freed early Monday, just in time for President Olusegun Obasanjo's meeting in Washington this week with President Bush.
An American official in Nigeria said the timing of the release is no coincidence.
The Nigerian leader and Bush already have a full slate of issues to confront when they meet on Wednesday, including oil supplies, genocide in Sudan and the push to bring Liberia's former president, Charles Taylor, who lives in exile in Nigeria, to justice before a United Nations-backed court in Sierra Leone.
U.S. Ambassador to Nigeria John Campbell had earlier hinted at the clouds gathering over the political powwow because of the hostage situation, which dragged on for more than five weeks.
“When my fellow countrymen are without their liberty, there are limits on what we can do,” Campbell said.
Abel Oshevire, a spokesman for the Rivers State Government, where the militant violence has been centered, said the hostage situation would have posed a problem for Obasanjo.
“Definitely, if the hostages were still in captivity, it would have been one of the knotty issues that would have confronted him,” he said.
Workers Russell Spell of Montgomery and Cody Oswalt of Jackson, Miss., along with Briton John Hudspith, were among nine Willbros employees kidnapped off a barge on Feb. 18. The oil service firm was doing work for Royal Dutch Shell.
Six other hostages, including Texan Macon Hawkins of Kosciusko, were released early this month.
The three remaining men were all winging their way home Monday, but Willbros, which runs operations out of Houston, was mum about what it took to gain their freedom. So was the U.S. Justice Department.
No ransom?
Delta State Gov. James Ibori told the Associated Press that no ransom was paid for the workers' freedom but added, “Now that they have been released, the pertinent issues raised by the youths on the Niger Delta condition will have to be addressed.”
The kidnappings by a new rebel group that has emerged in this impoverished region, dubbed the Movement for the Emancipation for the Niger Delta, or MEND, have jarred oil markets and worried energy companies working in Nigeria.
Publicly, the group has called for the release of ethnic Ijaw leaders from jail and demanded $1.5 billion in restitution from Royal Dutch Shell for years of environmental damage to the area. In February, a Nigerian court also ordered Shell, along with other oil companies, to pay up. Shell is appealing.
But the group's motivations are not so clear.
The Niger Delta has a long history of militant activism in the name of the poor who inhabit the region. Many foreign oil workers have been taken hostage in Nigeria. Most, though certainly not all, are released unharmed.
'We stand by them'
MEND appears to have a connection with an older group in the area called the Federated Niger Delta Ijaw Communities. That radical group has attacked oil installations before and kidnapped foreign workers, but some experts monitoring the situation have noted that when local subcontractors do not get paid work from companies like Shell or Chevron, the Federated group has attacked.
Kingsley Otuaro, a high-ranking official in the Federated group, said he could not speak for MEND but added: “All the things they do, we stand by them.”
Otuaro's half-brother is a subcontractor for Shell.
So far this year, MEND has kidnapped 13 foreign oil employees working on contracts for Shell, blown up an oil export terminal and sabotaged several pipelines. The attacks have shut down more than 600,000 barrels of oil production a day, about a quarter of Nigeria's output.
'A distraction to us'
In a statement to the Associated Press, MEND spokesman Jomo Gbomo said the release should not be taken as any indication that the oil industry is safe from future attacks.
“The keeping of hostages is a distraction to us,” he said in an e-mailed statement.
Shell spokeswoman Alexandra Wright said the company will not restart operations in the delta until worker safety can be guaranteed. She added that the company does want to assess environmental damage that the attacks on pipelines and the export terminal could have caused.
“We believe there should now be a period of calm and dialogue between all sides to ensure there are no future hostilities,” she said.
[email protected] Chronicle correspondent Katharine Houreld reported from Lagos, Nigeria. read more

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THE WALL STREET JOURNAL: Cnooc Profit Jumped 57% in '05

China Energy Titan
Looks to Africa, Asia
To Help Boost Output
By ARIES POON
March 27, 2006
HONG KONG — Cnooc Ltd., China's largest offshore oil producer by output, posted a 57% rise in 2005 net profit on soaring oil prices and increased production and said it will continue pursuing expansion overseas to help boost output further.
Cnooc said net profit was 25.32 billion yuan (US$3.15 billion), up from 16.14 billion yuan in 2004. Analysts surveyed by Thomson Financial had expected the company to earn 27.08 billion yuan. Revenue rose 26% to 69.46 billion yuan.
Cnooc also said it has ended talks on buying natural gas from Australia's Gorgon project, which is led by Chevron Corp. “The Gorgon thing is over,” said Cnooc's company secretary, Cao Yun Shi.
Cnooc's unlisted parent, China National Offshore Oil Corp., has represented the group in the Gorgon talks. Mr. Cao, who is also the chief legal counsel of the parent, declined to elaborate.
Donald Campbell, manager of media relations of California-based Chevron, declined to confirm whether the Gorgon gas talks had ended.
“There are no plans specifically with Cnooc on the sale now,” he said. “We are still interested in working on other opportunities with Cnooc and other companies, wherever possible; we still have some gas that could be sold from Gorgon.”
China faces an increasing shortage of natural gas in the next five years amid sharply rising demand and limited production capacity.
Chevron holds a 50% stake in the Gorgon liquefied-natural-gas venture, while Royal Dutch Shell PLC and Exxon Mobil Corp. own 25% each.
In November, Chevron said it had scrapped a tentative agreement of A$30 billion (US$21.29 billion) for Cnooc to become a foundation customer for the Gorgon gas, saying the price Cnooc was willing to pay was too low. However, Cnooc said late last year that it was still in talks to acquire gas from the Gorgon project.
Chevron late last year signed gas-supply contracts with three Japanese companies — Tokyo Gas Co. Ltd., Chubu Electric Power Co. and Osaka Gas Co. — which are seen as more willing to pay a higher price in sourcing gas abroad.
Cnooc, which bought a stake in a Nigerian oil field in mid-January, said it will focus its expansion in Africa and Southeast Asia.
Hunting for oil and gas resources overseas is a major concern for Chinese oil companies. China has been a net crude importer since 1993, and its domestic oil output is falling farther behind local demand.
Early this year, Cnooc said it was buying a 45% stake in the OML 130 offshore-oil-mining license, which mainly covers Nigeria's undeveloped Akpo field, from South Atlantic Petroleum Ltd., a company owned by a former Nigerian minister. The deal, which cost US$2.27 billion, followed the battle Cnooc lost last year to take over U.S. oil and gas producer Unocal Corp.
Mr. Cao also said Cnooc hasn't agreed on final pricing of natural-gas from the Tangguh project in Indonesia. Indonesia has been pushing since January to raise prices in the long-term Tangguh contract to supply liquefied natural gas to China's Fujian province.
BP Migas, Indonesia's upstream oil and gas regulatory agency, said Thursday that China has agreed to adjust prices from the Tangguh project, operated by a consortium led by BP PLC, which holds around 50%.
Write to Aries Poon at [email protected] read more

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THE WALL STREET JOURNAL: As Prices Surge, Oil Giants Turn Sludge Into Gold

New Reserves
Total Leads Push in Canada
To Process Tar-Like Sand;
Toxic Lakes and More CO2
Digging It Up, Steaming It Out
By RUSSELL GOLD
March 27, 2006; Page A1
FORT MCMURRAY, Alberta — In February, engineers from French oil giant Total SA fired up colossal drum boilers to generate steam that will be pumped to a depth of 300 feet under the frozen ground here. If all goes well, by May, the steam will marinate a tar-like mix of oil and sand until the crude begins to flow.
Nearby, Total will go after the oil-soaked sands closer to the surface, scraping away an ancient forest of spruce and poplars and shoveling the black soil into two-story dump trucks. Fully loaded, the trucks weigh as much as a Boeing 747. Total will then use industrial versions of giant washing machines to remove the oil, generating enough liquid waste to create vast toxic lakes.
Heavy-duty oil-extraction projects like these are turning Fort McMurray into the first great oil boom town of the 21st century. A Florida-size section of sandy soil beneath the boreal forest in this sparsely populated area of Northern Canada is loaded with bottom-of-the-barrel petroleum.
These deposits were once dismissed as “unconventional” oil that couldn't be recovered economically. But now, thanks to rising global oil prices and improved technology, most oil-industry experts count oil sands as recoverable reserves. That recalculation has vaulted Venezuela and Canada to first and third in global reserves rankings, although Venezuela's holdings in extra-heavy crude are a rough guess. Saudi Arabia is No. 2. Not including the oil sands, Canada would fall to No. 22. Led by Total, nearly every major Western oil company as well as their Chinese and Indian brethren are gearing up to go after the deposits here. In all, they plan to spend more than $70 billion in the next decade unlocking the oil from the sand.
The surging interest in Canadian oil sands is stark evidence that the world isn't about to run out of oil. Instead, it is running low on readily accessible light, sweet crude — oil that flows like water, has few impurities and can be easily turned into gasoline. As the good stuff gets scarce, Big Oil is turning its attention and pouring money into extra-heavy crude, such as the giant deposits near Fort McMurray and another similar one in Venezuela.
But heavy oil has big economic and environmental drawbacks. It costs more to produce and takes more energy to turn into gasoline than traditional light oil. Recovering and processing Fort McMurray's heavy crude releases up to three times as much greenhouse gas as producing conventional crude. And upgrading it into refined products, such as gasoline or diesel, will require a gigantic investment to retool global refineries.
“The light crude undiscovered today is getting scarcer and scarcer,” says Jean-Luc Guiziou, president of Total's Canadian operations. “We have to accept the reality of geoscience, which is that the next generation of oil resources will be heavier.”
Total is making the biggest bet on heavy crude of any of the half-dozen international Western oil giants. Nearly one-fifth of its commercial reserves are in heavy-oil belts, according to oil consultant Wood Mackenzie, a larger portion than any of its Western rivals. Its stockpile of heavy-oil reserves is second only to that of Exxon Mobil Corp., a company that is more than twice as large. Total has spent years developing the complex technology needed to extract oil from tar sands in the frigid environment of Northern Canada. So much heat is required to separate the oil from the tar that Total briefly floated the idea of building a nuclear-power plant there.
The rush into the oil sands also has turned a longstanding belief about fossil fuels and the environment on its head. For years, environmentalists have argued that higher gasoline prices would be good for the Earth because paying more at the pump would promote conservation. Instead, higher energy prices have unleashed a bevy of heavy-oil projects that will increase emissions of carbon dioxide, suspected of causing global warming.
“As oil prices have gone up, you get this increased desire to get out onto the new frontiers of oil,” says Marlo Raynolds, executive director of the Calgary-based Pembina Institute, an energy and environment think tank. “We're now getting into the dirtiest sources of oil anywhere.” To be sure, rising energy prices have spawned more interest in renewable fuel sources, but those investments pale in comparison to what's going on here.
Canada, which exports more oil to the U.S. than any other country, already is having trouble meeting its pledge to cut CO2 emissions largely because of its mushrooming heavy-oil production. By 2015, Canada's Fort McMurray region, population 61,000, is expected to emit more greenhouse gases than Denmark, a country of 5.4 million people.
Canada's northern forest contains at least 174 billion barrels of recoverable heavy oil, equivalent to five years' supply for the planet, according to the Alberta Energy and Utilities Board. Venezuela has perhaps even more in the Orinoco River delta. By comparison, Saudi Arabia has about 260 billion barrels of more traditional crude, or 8½ years' global supply, according to the Energy Information Administration, the statistical arm of the federal Department of Energy. Heavy oil also is being produced in the Middle East, the Caspian Sea, Brazil and even in California's San Joaquin Valley.
In northern Alberta, the oil-sands boom is remaking the landscape. The mining operations have clear-cut thousands of acres of trees and dug 200-foot-deep pits. The region is dotted with large man-made lakes filled with leftover waste from the mining operations. To chase off migratory birds, propane cannons go off at random intervals and scarecrows stand guard on floating barrels.
Alberta's energy minister, Greg Melchin, says oil-sands development creates a minimal environmental disturbance that is outweighed by the opportunities and jobs created. “It's worth it. There is a cost to it, but the benefits are substantially greater,” he said.
Environmental groups are increasingly critical of the government's reluctance to regulate the oil sands. “The pace of development is outstripping our ability to manage the environmental issue,” says Mr. Raynolds of the Pembina Institute. “Our unwritten energy policy is dig it up and sell it as fast as possible.”
The remarkable properties of Fort McMurray's oil sands have been known for centuries. Native tribes mixed the tar-like substance with tree sap to waterproof their canoes. In the 1960s, companies now known as Suncor Energy Inc. and Syncrude Canada Ltd., a consortium of oil companies, opened oil-sands mines in the area. Both operations stumbled through periods of low oil prices but are now rapidly expanding.
When oil was trading at $12 a barrel in the late 1990s, Big Oil had little interest in oil sands. But surging energy prices have made heavy-oil investments significantly more attractive. It costs about $25 a barrel to produce crude from Canada's oil sands, an acceptable cost when oil is trading for $60 a barrel. By comparison, it can cost as little as about $5 a barrel to produce crude in the Middle East and $15 in the deep waters of the Gulf of Mexico.
For Paris-based Total, the world's fifth-largest publicly traded energy company by market capitalization, the oil sands play to its strengths. Total had its roots as a refiner rather than an exploration and production company. Oil sands were easy to find but hard to process.
Total's first foray into heavy oil was in Venezuela's Orinoco belt. In 1997, the company's giant $4.2 billion Sincor project there began producing market-grade crude. Sincor, which Total owns with Norway's Statoil ASA and Petróleos de Venezuela SA, now produces 180,000 barrels of oil a day.
The same year, Total opened an office in Calgary to determine if a similar investment was warranted near Fort McMurray. It was soon clear to Total engineers brought in from Sincor that Canadian oil sands were more technically difficult than Venezuela's heavy-oil belt. The key difference: The heavy oil in Venezuela was quite warm and flowed easily, albeit slowly, while in Canada the oil-sand mixture had the look and consistency of tar-like Play-Doh. But Canada was attractive because it offered a haven from politically unstable oil hotspots.
In November 1999, Total teamed up with the financially struggling Gulf Canada Resources Ltd. on a promising project called Surmont. Gulf Canada was later acquired by Conoco Inc. and is now part of Houston-based ConocoPhillips.
For Total, sorting out the mechanics of producing this heaviest of oils fell on the shoulders of Mr. Guiziou, a French earth scientist who had worked his way into management from his first assignment studying the geology of Argentina. In 2001, when he was being considered for the Canadian job, he flew into Fort McMurray to see what the oil sands were about. Having worked in the industry for years, he was accustomed to the look and feel of oil fields. But when he visited Syncrude's mine, where giant cranes scooped up the oil-soaked earth in buckets capable of carrying 100 tons, he was flabbergasted. “It was another world,” the 44-year-old Mr. Guiziou says.
In some places near Fort McMurray, the oil sands are close to the surface and can be mined. But at Surmont, located southeast of Fort McMurray, the oil sands are 1,200 feet underground, far too deep for a mining operation. The partners in the venture needed to find a way to get the oil.
The solution was steam. In 1978, Roger Butler, an engineer with Imperial Oil Ltd., an independent company majority-owned by Exxon Mobil, hit on the idea of drilling two wells that start off vertically, then slowly bend until they are horizontal and located one on top of the other. The top well would pump steam into the reservoir while the other pumped oil out.
Surmont was to be Total's and Conoco's first venture with the technology, so in late 1997 they started small with a 1,000-barrel-a-day pilot. They pumped steam down a pipe laced with millions of tiny slits, each no wider than the thickness of a piece of paper. The initial results were encouraging but expanding into a full-scale project took several more years.
One pressing issue: Several companies, including Paramount Resources Ltd., were producing natural gas from a shallow underground zone above the oil sands. Total and its partner convinced an Alberta regulatory body that the gas project threatened the much larger oil deposit. The theory was that if the gas were allowed to be pumped out, the steam chamber would lose pressure and Surmont would have to be scrapped. In a landmark ruling, an Alberta regulatory body ordered 146 gas wells shut off in 2000.
In December 2003, Total and ConocoPhillips decided to build the first phase of Surmont. The steaming is slated to begin later this year, with production expected to grow to 27,000 barrels a day next year. Future expansions could bring it to 200,000 barrels a day — a good-size oil field but not the biggest in the area.
At Surmont, Total was merely an investor with ConocoPhillips and its predecessor companies operating the project. Last year, the French company went from being an investor to a full-fledged participant in the oil-sands boom.
In September, it bought Deer Creek Energy Ltd. for $1.6 billion, acquiring its only significant asset: a giant oil-sands project called Joslyn north of Fort McMurray. Once fully developed, Joslyn is expected to yield 200,000 barrels a day for decades. Total plans to produce oil from Joslyn by both mining and by shooting steam underground.
Becoming an operator, Mr. Guiziou needed to confront environmental problems as Total expanded its heavy-oil holdings in Canada. Mining oil sands generates enormous volumes of liquid waste that are stored in toxic lakes that have concentrations of naturally occurring naphthenic acid, an odorless liquid used to help paint dry quickly. The prospect of cleaning up these lakes is “daunting,” the Canadian National Energy Board, a federal regulatory body, noted in a 2004 report. “There is currently no demonstrated means to reclaim fluid fine tailings,” it said.
Since the lakes are likely to be around for years to come, Mr. Guiziou is working on a plan that will result in smaller lakes. He hopes to install a new technology at Joslyn that will suck out water and leave a smaller volume of waste laced with metals before it is dumped in the lakes. But he said the technology “needs to be proved at the industrial scale.” Total expects to conduct a test later this year at a neighboring facility.
Total is also trying to figure out ways to curb greenhouse-gas emissions at its Fort McMurray facilities by using pure oxygen instead of air in its combustion engines. The company is running a pilot project in Lacq, France, to capture carbon dioxide in exhaust flues more effectively. If the technology proves workable, it could be used in Fort McMurray as well.
Despite the environmental concerns, there is a strong economic incentive for Alberta's free-market-oriented government to let oil-sands development gallop ahead. Alberta added nearly 26,000 jobs in resource extraction in the past two years. That 25% jump helped drive the province's unemployment rate down to 3.1%, a 30-year low, according to the government. For the first time, every Albertan received a 400 Canadian-dollar ($340) check from the government earlier this year from an unexpected fiscal surplus.
Total and other oil companies are continuing to announce new oil-sand projects and shovel money into the region. Earlier this month, Chevron Corp. said it planned to spend “billions” to turn 75,000 acres into a 100,000-barrel-a day field. And last week, Royal Dutch Shell PLC said it had spent nearly $400 million to lease 219,000 acres west of Fort McMurray, shattering records for public-land leases.
In February, Total moved quickly to file the regulatory permit for Joslyn to move to the front of a growing queue of projects. With all the development, everything is in short supply, including steel, energy to power the projects, fresh water and skilled construction workers.
Some projects could end up being delayed for years. “It's like you've got one door frame and the Three Stooges trying to get through at the same time,” said Tom Ebbern, executive managing director of Tristone Capital, a Calgary-based investment adviser. “Without a doubt, we can become the next Saudi Arabia but it will take 10 years longer than the market thinks.”
Write to Russell Gold at [email protected]
URL for this article:
http://online.wsj.com/article/SB114342461870208721.html read more

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Daily Telegraph: The world is his oyster: Jeroen van der Veer


(Filed: 27/03/2006)
Jeroen van der Veer, Chief Executive Officier, Royal Dutch Shell Plc
Family: married to Mariette, he has three daughters.
Likes: golf (handicap is 16), skating the 200km Elfstedentocht ice marathon
1947: Born in Utrecht, the Netherlands.
Two degrees: from Delft university (mechanical engineering) and Rotterdam university (economics)
1971: Joined Shell, working in the Netherlands, Curacao and the UK in manufacturing and marketing
1984: Returned to Shell Netherlands as manager of corporate planning, and then of the Pernis refinery, Rotterdam
1992: Became managing director, Shell Netherlands. 1995: Moves to US as president and chief executive of Shell Chemicals
1997: Appointed group managing director
2004: Became chairman of the board of managing directors
2005: Oversees group restructuring to become group chief executive
read more

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THE NEW YORK TIMES: Riding High on a Tide of Oil

March 28, 2006
By CLIFFORD KRAUSS
FORT McMURRAY, Alberta — Canada's wild west is going corporate.
In the last big energy boom in this province, during the 1970's, the card room at the Calgary Petroleum Club was so full of Texas oilmen that seats at the poker table were rarely freed up until well into the early morning hours.
With oil prices high again, Alberta is hopping once more — but with a twist. The skyline of Calgary, the business center of the province, is about to be altered by a large real estate project, and a big new jet runway to handle the influx of oil workers is already in place. While poker is still popular, conspicuous consumption these days includes such costly indulgences as white truffles and Mercedes-Benz convertibles.
The change is reflected in the very nature of the oil business here: once built around conventional drilling, in which independents played a major role, oil is now extracted through a heavy industrial process requiring huge capital investments.
Some of the biggest international oil companies plan to sink 100 billion Canadian dollars ($85.5 billion) over the next decade into developing the gooey oil sands that are at the heart of Alberta's growing wealth and political influence. The oil sands have transformed Alberta into the epicenter of a new energy-based Canadian economy that promises to be even more crucial to the United States.
The region is also taking a page from the Texas playbook.
Stephen Harper from Calgary was elected in January as Canadian prime minister; his free-enterprise, tax-cutting political philosophy is closer to Houston's than Toronto's.
As more oil flows, economic power and population are shifting westward from the traditional manufacturing centers of Ontario and Quebec, which are lagging in comparison. The rising west is splitting the national economy, forcing industries back east to retool and reorient manufacturing to supply the growing oil economy.
Here in Alberta, every week seems to turn up an announcement of a new refinery, a pipeline project or a land bid. To a lesser extent, the same is happening in neighboring British Columbia and Saskatchewan.
“It's a seesaw effect,” said Todd Hirsch, chief economist for the Canada West Foundation, a research group based in Calgary. “What's driving Alberta, western Canada and resources up are what's driving Ontario and Quebec down: the emerging Asian strength and the strength of the Canadian dollar.”
The energy companies say their investments in oil sands fields are just the beginning. The fields hold estimated reserves equivalent to as much as 175 billion barrels of oil, or more potential energy content than the oil fields of Iran and Libya combined. Oil sands production has risen to just over one million barrels a day today, from 400,000 barrels in 1995; it is projected to rise to 2.7 million barrels in 2015.
Alberta has long been cowboy country, a cattle center in the heart of the Canadian Bible Belt. But in recent years oil has given it the fastest-growing population of any province, with people lured from elsewhere in the country and even outside Canada because salaries are growing faster than anywhere else.
“We're a big laboratory in how to absorb so much investment,” said Gwyn Morgan, executive vice chairman of EnCana, a Canadian energy company based in Calgary. “None of us could have dreamed this would happen this quickly.”
In Fort McMurray, the town closest to the oil sands, truck and bulldozer drivers come from as far away as Newfoundland and Labrador to earn six-figure salaries. They are buying up expensive pickup trucks as if they were toys.
The town's population has increased to 61,000, from 33,000 in 1996, and housing is in such short supply that the average mobile home now sells for $277,000 Canadian dollars ($237,000) and couches are renting for about 500 Canadian dollars a month ($428).
The crowding and labor shortages persuaded Canadian Natural Resources Ltd. to build a jet runway long enough to accommodate Boeing 737's to allow workers to commute to its giant new Horizon project. In Calgary, EnCana is about to build a new corporate headquarters over two square blocks that will be the biggest real estate development project in Canada in two decades.
Restaurants, wine stores, art galleries and luxury car dealers are doing frenzied business. At a benefit auction earlier this month, one bidder paid more than 13,000 Canadian dollars ($11,120) to go fly-fishing on a local river with Ron A. Brenneman, president and chief executive of Petro-Canada. “I don't see any black clouds on the horizon,” Mr. Brenneman said with a smile.
The same might be said for much of Canada. Unemployment is at a 30-year low, the Toronto stock market reached a historical high this month and real estate is booming virtually everywhere. Oilmen here are now calling the Canadian dollar, which has climbed more than 35 percent against the American dollar since early 2002, a new petrocurrency.
The high cost of extracting oil from oil sands is no longer a major impediment to production, now that oil prices are at $60 a barrel or more and most experts expect them to remain relatively high for years. There were only a dozen oil sands projects in Alberta a decade ago. Today there are about 60, and 55 more have been announced for the future.
But Canada also has some losers amid the boom. Eastern manufacturers have had to retool, consolidate and shed 180,000 jobs in the last two years, as cheaper products enabled China to replace Canada as the top exporter of nonenergy products to the American market. Capital investment among manufacturers has decreased since 2000, although now it is recovering.
“There's no doubt we have a mild case of Dutch disease running in Canada,” said Don Drummond, senior vice president and chief economist at TD Bank, referring to the deindustrialization of the Netherlands after the discovery of North Sea gas in the 1970's.
Particularly hurt have been companies manufacturing household appliances, electrical equipment, plastic and rubber products, textiles and paper.
At Edson Packaging Machinery Ltd. of Hamilton, Ontario, one-third of the 85 workers were laid off in 2003. By switching to American suppliers, changing its product mix and putting more emphasis on service, Edson has rebounded somewhat and increased its payroll again.
“It's a tale of two economies,” said Robert Hattin, Edson's president. “The resource-based economy is hot and manufacturing right now is facing challenges we haven't seen before.”
Alberta has 10 percent of the population, but directly produces 15 percent of Canada's gross domestic product. Both numbers are likely to rise in the coming years, economists say.
“This is pretty close to the hub of Canada right now,” said Kevin Ellsworth, a 42-year-old Shell truck operator from eastern Canada who moved here nearly four years ago. “Every time you turn around there's another plant project coming to town.”
Mr. Ellsworth's enthusiasm is typical of many workers here and fits neatly with the dimensions of his job. His dump truck carries 400 tons of oil sands and reaches seven stories high when its box is lifted on its hydraulic cylinder. With overtime, he can make more than 100,000 Canadian dollars a year.
Shell's oil sands venture contains enough pipe to stretch from Calgary to San Francisco and its mile-long conveyor belt has the largest capacity in the world. But the venture is only going to become bigger.
After several stalled oil sands efforts, Shell was faced in 1996 with the prospect of losing a lease on land north of Fort McMurray that it now believes holds more than five billion barrels of oil. With a barrel of oil worth under $20 a barrel at the time, development of the oil sands did not seem worth the investment.
But Shell brought in Chevron and another partner and went ahead with a project three years later, just as the price of oil was poised to climb. In less than four years and with an investment of 5.7 billion Canadian dollars ($4.9 billion) its project is already producing 155,000 barrels a day.
That was only the beginning. New land acquisitions and at least two more mines are planned over the next decade. A 7.3 billion-Canadian-dollar ($6.2 billion) expansion will add another 100,000 barrels a day by 2009. Shell hopes to reach 500,000 barrels a day by 2015, equivalent to half the current daily production in all of Texas.
“It's the 'holy cow,' ” said Craig Simpson, a Shell mining engineer. “What people don't realize is how big this is.” read more

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THE NEW YORK TIMES: Editorial: Big Oil's Big Windfall

Published: March 28, 2006
A public already groaning under huge deficits does not need more red ink. An oil industry already rolling in record profits does not need more tax breaks. But both are sure to happen unless some way can be found to claw back from a decade's worth of Congressional and administrative blunders, aggressive lobbying and industry greed.
According to a detailed account in Monday's Times by Edmund L. Andrews, oil companies stand to gain a minimum of $7 billion and as much as $28 billion over the next five years under an obscure provision in last year's giant energy bill that allows companies to avoid paying royalties on oil and gas produced in the Gulf of Mexico.
The provision received almost no Congressional debate, in part because Congress was lazy and in part because the provision was misleadingly advertised as cost-free. The giveaway also seemed a natural sequel to a measure passed in 1995 to provide royalty relief. But that measure came at a time when oil prices, and new investment in oil and gas exploration, had declined. It also included an important safety valve: in any year when oil prices exceeded a threshold, about $34 a barrel, companies would have to resume paying royalties.
However, in what appears to have been a bureaucratic blunder, the Clinton administration omitted that crucial escape clause in all offshore leases signed between the government and the oil companies in 1998 and 1999. It seemed a harmless mistake at a time when oil prices were still below $20 a barrel. But times changed. Prices have been above the cutoff point since 2002, and an estimated one-sixth of the production in the Gulf of Mexico is still exempt from royalties for no good reason whatsoever.
That blunder was compounded, again and again. First, a court decision in 2003 effectively doubled the amount of oil and gas exempted from royalties. Then the Bush administration offered special exemptions for “deep gas” producers, drilling more than 15,000 feet below the sea bottom. Then came the 2005 energy bill, which essentially locked in the old incentives for five more years.
At least one oil company has the grace to be embarrassed by all this. “Under the current environment,” one Shell official told Mr. Andrews, “we don't need royalty relief.”
But some companies seem to want more. A lawsuit filed by Kerr-McGee Exploration and Production would greatly expand the royalty relief. If the suit succeeds, the lost revenue may rise to as much as $28 billion.
Edward Markey, a Democratic member of the House from Massachusetts, has proposed a bill that would keep any new contracts from granting relief when oil and gas prices were high, and would instruct the interior secretary to try to renegotiate existing contracts. That is a fair and overdue remedy. read more

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AP Worldstream: Oil prices rise further above US$64 amid strong demand and geopolitical uncertainty

Mar 28, 2006
Crude oil futures rose on Tuesday in early Asian trading amid strong demand and nagging worries about supply from Iran and Nigeria.
Light, sweet crude for May delivery gained 9 cents to US$64.25 a barrel on the New York Mercantile Exchange. The contract on Monday fell 10 cents to settle at US$64.16 a barrel.
Gasoline increased 0.42 cents to US$1.8330 a gallon (3.8 liters) early Tuesday, while heating oil rose marginally to US$1.7830 a gallon. Natural gas rose less than one cent to US$7.075 per 1,000 cubic feet.
With the Northern Hemisphere's summer driving season approaching, gasoline at the pump in the United States averaged US$2.50 a gallon (3.8 liters), and government data showed that consumption was up 1.6 percent over the past four weeks compared with the same period a year ago.
That said, the U.S. Energy Department predicted last week that gasoline prices may not run up much higher for the time being. Still, concern about supplies from Nigeria and Iran, and growing anxiety about the next hurricane season in the Gulf of Mexico, were expected to limit any price decline. Some analysts believe gasoline prices could climb as high as US$3 a gallon this summer, though that assumes some significant disruptions at refineries, or difficulty in getting fuel to markets.
On Monday, militants in Nigeria's oil-rich southern delta released their last remaining foreign hostages _ two Americans and one Briton _ more than five weeks after the oil-industry workers were kidnapped.
The militants took nine foreign oil workers hostage Feb. 18 from a barge owned by Houston-based oil services company Willbros Group Inc., which was laying pipeline in the delta for Royal Dutch Shell PLC. The group released six of the captives after 12 days in captivity.
The militants are behind a spate of attacks that have cut Nigeria's oil exports by more than 20 percent. On Saturday, they said they killed three soldiers in fresh clashes near a key natural gas plant run by Shell. Shell said there was no impact on the gas plant.
Iran, the No. 2 oil producer in OPEC, also remains a potential source of concern. It has been referred to the U.N. Security Council over fears it may want to misuse its nuclear program to make weapons, but the council has been at loggerheads over U.S.-led efforts to ratchet up the pressure on Tehran.
Copyright 2006 Associated Press read more

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Reuters: Oil holds at $64 as Nigeria attack worries remain

Tue Mar 28, 2006 8:39 AM GMT
By Neil Chatterjee
SINGAPORE (Reuters) – Oil prices steadied on Tuesday, weighed down by swollen U.S. crude stockpiles but held above $64 on threats of further attacks on facilities in Nigeria.
U.S. light crude for May delivery traded six cents down at $64.10 a barrel by 0320 GMT, after slipping 10 cents on Monday. London Brent crude edged 8 cents down at $63.53 a barrel.
Hopes of an end in Nigeria to three months of sabotage and kidnapping were raised by the release on Monday of three oil company hostages, but militants said their fighters would now focus on crippling oil supplies from the OPEC member.
About 26 percent of output from the world's eighth-largest exporter, or about 630,000 barrels per day, has been cut, mainly due to militant attacks.
“Looking ahead, the market shows signs of an upward bias, and will have to juggle between supply disruptions in Nigeria and a spike in (U.S.) refinery demand after the end of a spring turnaround season,” said JPMorgan.
A spokesman for Royal Dutch Shell, the biggest oil operator in Nigeria and the company most affected by the violence, declined to say when production would resume.
Prices have held between $60 and $65 for more than a month as traders balance geopolitical risks such as tension over Iran's nuclear programme with bumper U.S. fuel supplies.
U.N. Security Council powers held out on Monday for agreement this week on a statement to rein in Iran's nuclear ambitions, but a deal appeared elusive before a forthcoming ministerial meeting. Traders fear Tehran could retaliate to any potential sanctions by choking off oil supplies.
However, analysts expect U.S. crude stocks to have risen further last week, predicting a 1.8 million barrel gain in government data due on Wednesday. Analysts expect distillate and gasoline stocks to have each dropped 1.7 million barrels
High gasoline inventories will help cushion the impact of oil refineries switching away from fuel additive MTBE to ethanol, but supply disruptions are still possible this summer, according to the U.S. Energy Information Administration.
China, whose thirst has been a key driver behind surging oil prices, recorded a 4.4 percent increase in oil demand in February compared with a year earlier. That was the biggest leap since October as buyers stocked up ahead of retail fuel price hikes. read more

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The Guardian: Nigerian rebels free Briton but vow to fight on

XAN RICE NAIROBI
Mar 28, 2006
Militants in the Niger delta released three kidnapped foreign oil workers yesterday – including a British security expert, John Hudspith – but gave warning of more attacks on multinational oil companies.
Mr Hudspith and two Americans, Cody Oswald and Russell Spell, were handed over to government officials in Warri, southern Nigeria. They were the last of nine foreign hostages taken on February 18 from a barge laying pipes for Royal Dutch Shell. The others were freed after 12 days.
A spokesman for Delta state said the men were in “good health”. In a statement, the Movement for the Emancipation of the Niger Delta (Mend) said it freed them following requests from local communities, who were no longer being attacked by the military for siphoning oil from pipelines.
However, Mend said its demands for the release of two Ijaw tribal leaders and payment by Shell of $1.5bn (pounds 858m) for environmental damage had not been met. It vowed to continue operations.
The militants accuse the big oil firms of colluding with corrupt government officials, and are fighting for greater control of the nation's oil wealth. Delta residents are among the poorest in Nigeria.
Mend's attacks have forced Shell to close two of its oilfields and a loading terminal. Nigeria, Africa's largest oil exporter, has seen its normal daily production of 2.5m barrels cut by more than a fifth. read more

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