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Posts on ‘March 29th, 2006’

Guerrilla News Network: George W. Bush and Peak Oil: Beyond Incompetence

Praying for a miracle? By Richard Heinberg
Is gross mismanagement of the nation's energy policy an impeachable offense?
While it would be difficult to create an airtight legal case for impeaching George W. Bush based on his ignoring the very real threat posed by Peak Oil, nevertheless I believe that his actions—and inaction—in this regard constitute dereliction of duty on an unprecedented scale.
It is part of the job of leaders to foresee problems and either steer around them or prepare for them. A head of state is analogous to the captain of a ship, who is responsible not only for keeping his vessel on course but also for avoiding hazards such as storms and icebergs. Some problems are not foreseeable; others are. A ship’s captain who loses his vessel to a freak “perfect storm” may be blameless, but one who steers his passenger liner directly into a foggy ice field, having no sonar or radar, is worse than a fool: he is criminally negligent.
The argument I will make, in brief, is this:
Peak Oil is foreseeable. The consequences are also foreseeable and are likely to be ruinous. The Bush administration has been repeatedly warned. Actions could be taken to reduce the impact, but the longer those actions are delayed, the worse the impact will be. The administration, rather than taking steps to mitigate these looming catastrophic impacts, has instead done things that can only worsen them.
Let us go through these points one by one.
Is Peak Oil Foreseeable?
Peak Oil—the point at which the rate of global production of petroleum begins its inevitable historic decline—is a subject of growing public interest. The basic concept is derived from experience: during the past century-and-a-half all older oil wells have been observed to peak and decline in output. The same has been noted with entire oilfields, and with the collective oil endowment of whole nations. Indeed, most oil-producing nations have already seen their output enter terminal decline. Few informed observers doubt that the rate of oil production for the world in total will reach a maximum at some point and then slowly wane.
The science of Peak Oil was worked out in the 1950s by veteran geophysicist M. King Hubbert, who successfully used his method to predict the U.S. peak (1970). Declassified CIA documents show that by the late 1970s the Agency was using similar methods to forecast the Soviet Union’s oil peak.1
We do not know exactly when the global peak will occur, but it will almost certainly happen within the period between now and 2035.
Considering the importance of the peaking event, the range of uncertainty regarding its timing is disturbing. If the peak were to occur within the next five years, our national economy would be unable to adjust quickly enough to avert calamity (as we will discuss below), while a peak 30 years from now would present a much greater opportunity for adaptation.
Though there is continuing controversy over the question of when the peak will happen, there is strong evidence for concluding that it may come sooner rather than later, and that the world may already have entered the peaking period. Signs of a near-term peak include the fact that global rates of oil discovery have been falling since the early 1960s—as has been confirmed by ExxonMobil. Declining discovery rates represent a well-established trend and cannot be said to be the result merely of transient factors. In 2005, according to IHS Energy Inc., a total of 4.5 billion barrels of oil were discovered in new fields, while 30 billion barrels of oil were extracted and used worldwide. Thus, currently only about one barrel of oil is being discovered for every six extracted.2
Until now, the global oil industry has been able to replace depleted reserves on a yearly basis, mostly by re-estimating the size of existing fields. The Royal Swedish Academy of Sciences, in a recent publication, “Statements on Energy,” describes the situation this way:
In the last 10–15 years, two-thirds of the increases in reserves of conventional oil have been based on increased estimates of recovery from existing fields and only one-third on discovery of new fields. In this way, a balance has been achieved between growth in reserves and production. This can’t continue. 50% of the present oil production comes from giant fields and very few such fields have been found in recent years.3
The 100 or so giant and super-giant fields that are collectively responsible for about half of current world production were all discovered in the 1940s, ’50s, ’60s, and ’70s and most are now going into decline. These days, exploration turns up only much smaller fields that deplete relatively quickly.
Chris Skrebowski, editor of Petroleum Review and author of the study “Oil Field Megaprojects,” notes that “90% of known reserves are in production,” and that “as much as 70% of the world’s producing oil fields are now in decline” with decline rates averaging between four and six percent per year.4
Thus, while the U.S. Department of Energy predicts that world oil production will increase over the next 20 years from 85 million barrels per day (Mb/d) to 120 Mb/d in order to meet anticipated demand, a growing chorus of petroleum geologists and other energy analysts warns that such levels of production will never be seen.
A French report from the Economics, Industry & Finance Ministry, “The Oil Industry 2004,” took a careful look at future supply issues, forecasting a possible peak in world production as early as 2013.5
Ford Motor Company Executive Vice President Mark Fields, in his keynote address in October, 2005 at the Society of Automotive Engineers’ “Global Leadership Conference at the Greenbrier,” noted the seven most serious challenges to his industry, one of which was that “oil production is peaking.”6 Volvo motor company has for several years acknowledged in its company literature that a global oil production peak is likely by 2015.7
Legendary petroleum geologist T. Boone Pickens, who started his career in the early 1950s as a roughneck in oilfields in Oklahoma and Texas and went on to co-found Mesa Petroleum and Petroleum Exploration, told the 11th National Clean Cities conference in May, 2005 that “Global oil [production] is 84 million barrels [a day]. I don’t believe you can get it any more than 84 million barrels. . . . I think they are on decline in the biggest oil fields in the world today and I know what it’s like once you turn the corner and start declining, it’s a treadmill that you just can’t keep up with.”8
Royal Dutch Shell Chief Executive Jeroen Van Der Veer has said, “My view is that ‘easy’ oil has probably passed its peak.”9
J. Robinson West, founder and chairman of PFC Energy, one of Washington’s most influential international energy consulting firms, and a former Assistant Secretary of the Interior in the Reagan Administration, predicts that the “tipping point” when global supply of oil ceases to grow could arrive in 2015.10
Veteran petroleum geologist Henry Groppe, a Houston-based independent analyst who began his career in 1945 and who is today a consultant to global corporations as well as to nations, said in 2005 that “Total crude oil production may have peaked this year, or perhaps will peak next year.”11
Matthew Simmons, founder of Simmons & Company International energy investment bank, has been perhaps the most outspoken of oil analysts and investors regarding Peak Oil. A consultant to the Cheney Energy Policy Development Group that met in secret in 2001, he is the author if Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (Wiley, 2005). Simmons has concluded, on the basis of his study of technical papers from the Society of Petroleum Engineers, that Saudi Arabian oil production is close to its maximum, and that world oil production is also therefore close to its peak.
On March 1, 2006 The New York Times published an editorial by Robert Semple, Associate Editor of the Editorial Page for the Times since 1998, in which he wrote, “The concept of peak oil has not been widely written about. But people are talking about it now. It deserves a careful look—largely because it is almost certainly correct.”12
In short, the science behind Peak Oil is well established, and, while there is some disagreement about exactly when the global peak will arrive, there can be no excuse at this stage for ignoring the problem.
Does the Administration Know About Peak Oil?
The New York Times knows about Peak Oil, but does the president? On this point the evidence is conclusive.
First of all, agencies within the government clearly understand the problem, and therefore relevant information must be readily available to the chief executive if he wishes to have it.
Explicit warnings of Peak Oil have started to turn up in official U.S. government literature. For example, a paper prepared for the U.S. Army Corps of Engineers titled “Energy Trends and Implications for U.S. Army Installations” (Sept., 2005) includes the following tidbit:
The supply of oil will remain fairly stable in the very near term, but oil prices will steadily increase as world production approaches its peak. The doubling of oil prices in the past couple of years is not an anomaly, but a picture of the future. Peak oil is at hand. . . .13
Then there is the following from the U.S. Department of Energy, Office of Deputy Assistant Secretary for Petroleum Reserves, Office of Naval Petroleum and Oil Shale Reserves, dated March 2004:
The disparity between increasing production and declining reserves can have only one outcome: a practical supply limit will be reached and future supply to meet conventional oil demand will not be available. The question is when peak production will occur and what will be its ramifications. Whether the peak occurs sooner or later is a matter of relative urgency. . . . In spite of projections for growth of non-OPEC supply, it appears that non-OPEC and non-Former Soviet Union countries have peaked and are currently declining. The production cycle of countries . . . and the cumulative quantities produced reasonably follow Hubbert’s model. . . . The Nation must start now to respond to peaking global oil production to offset adverse economic and national security impacts.14
And then there is the 2005 Report, “Peaking of World Oil Production: Impacts, Mitigation and Risk Management,” commissioned by the U.S. Department of Energy, about which we will have more to say below.15
If none of this is specific enough (in fairness, we cannot expect George W. Bush to spend his evenings poring over obscure Army Corps of Engineers studies), we have the fact that Representative Roscoe Bartlett, Republican from Maryland’s sixth district—who has made many speeches about Peak Oil on the floor of Congress—has spent thirty minutes in private conversation with the president explaining the science of Peak Oil and seeking to convey the enormity of the problem.16
But what if Bush wasn’t able to understand what Bartlett was telling him? After all, Bartlett has a Ph.D. in physics; perhaps he was using words that were too big, or concepts too abstruse for our president to grasp.
Even if that were the case, we have evidence that Bush’s second-in-command, vice president Cheney, understands Peak Oil; given time, Cheney could surely make the concept comprehensible to his superior. In a speech in 1999 (while he was still CEO of Halliburton Corporation, the giant oil services company) to the Petroleum Institute in London, Cheney pointed out that
By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. That means by 2010 we will need on the order of an additional fifty million barrels a day.17
This is a fair statement of the depletion dilemma: 50 million barrels per day is almost five times the current output of Saudi Arabia.
Finally there is the fact that is that Bush and Cheney are themselves former oilmen: their inside knowledge of the industry should give them enhanced insight into the problem of Peak Oil. Some would say that these officials’ former ties to the petroleum industry imply a conflict of interest (they have been accused of giving perks to oil companies, even to Halliburton—perish the thought!). However, some of the most outspoken authorities on Peak Oil are retired petroleum geologists or engineers who have spent decades working for oil companies. Having former industry insiders in public office today could be good, if they used their technical knowledge to benefit the country by warning of the consequences of continued oil dependency. But, as we will see below, there is no evidence that the particular former oilmen currently occupying the highest offices in the land are doing any such thing—at least not genuinely or effectively.
In sum, while it is impossible to say whether Mr. Bush understands Peak Oil, no one could credibly argue that that he simply hasn’t heard about it.
How Serious Is the Threat?
Addressing this question requires some speculation: the peaking of global oil production is an event that has never occurred before. However, we need not speculate baselessly; for guidance we have a U.S. government-funded study that could hardly be more relevant—“The Peaking of World Oil Production: Impacts, Mitigation and Risk Management,” prepared by Science Applications International (SAIC) for the U.S. Department of Energy, released in February 2005. The project leader for the study was Robert L. Hirsch, who has had a distinguished career in formulating energy policy. The report on the study will hereinafter be referred to as “The Hirsch Report.”
The first paragraph of the Hirsch Report’s Executive Summary states:
The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.18
As the Hirsch Report explains in detail, due to our systemic dependence on oil for transportation, agriculture, and the production of plastics and chemicals, every sector of society will be impacted.
The Hirsch Report effectively undermines the standard free-market argument that oil depletion poses no serious problem, now or later, because as oil becomes scarcer the price will rise until demand is reduced commensurate with supply; meanwhile, higher prices will stimulate more exploration, the development of alternative fuels, and the more efficient use of remaining quantities. While it is true that rising prices will do all of these things, we have no assurance that the effects will be sufficient to avert severe, protracted economic, social, and political disruptions.
First, price increases may or may not stimulate more exploration, or do so sufficiently or productively. During the early 20th century, more exploration resulted in more oil being discovered. However, in recent decades, expanded exploration efforts have turned up fewer and fewer finds. It is difficult to avoid the obvious conclusion that there simply isn’t much oil left to discover.
Higher prices for oil will also no doubt spur new investment in alternative fuels. But the time required to produce substantial quantities of alternative fuels will be considerable, given the volume of our national transportation fuel consumption. Moreover the amount of investment required will be immense. And it would be unrealistic to expect most alternatives to fully or even substantially replace oil at any level of investment, and even with decades of effort, given practical, physical constraints to their development.
Higher prices will also no doubt spur efficiency measures, but the most productive of these will likewise require time and investment. For example, raising the fuel efficiency of the U.S. auto fleet would require years for industry retooling and more years for consumers to trade in their current vehicles for more-efficient replacements.
James Schlesinger, who served as CIA director in the Nixon administration, defense secretary in the Nixon and Ford administrations, and energy secretary in the Carter administration, in November, 2005 testimony before the Senate Foreign Relations Committee urged lawmakers to begin preparing for declining oil supplies and increasing prices in the coming decades. “We are faced with the possibility of a major economic shock and the political unrest that would ensue,” he said.19
Schlesinger was far from overstating the threat. In fact, it would be no exaggeration to view Peak Oil as potentially representing the economic, social, and political impact of a hundred Katrinas. And that impact will not subside in a few days’ or years’ time: once global oil production has peaked, the energy shortfalls for transportation and agriculture will be ongoing, relentless, and cumulative.
What Should the Administration Be Doing?
Responsible and competent people who have studied the problem of Peak Oil, (including Robert Hirsch and his colleagues) agree that efforts will be needed to create alternative sources of energy, to reduce demand for oil through heightened energy efficiency, and to redesign entire systems (including both cities and the rural agricultural economy) to operate with less petroleum.
The Hirsch Report’s methodology involved the examination of three scenarios:
Scenario I assumed that action is not initiated until peaking occurs.
Scenario II assumed that action is initiated 10 years before peaking.
Scenario III assumed action is initiated 20 years before peaking.
In all three scenarios, the Hirsch study assumed a “crash program” scale of effort (that is, all the resources of government and industry are marshalled to the tasks of creating supplies of alternative fuels and reducing demand through efficiency measures). The study found that, due to the time required to start efforts and the scale of mitigation required, Scenario I will result in at least 20 years of fuel shortfalls. With 10 years of preparation, a 10-year shortfall is likely. And with 20 years of advance mitigation effort, there is “the possibility” of averting fuel shortages altogether. The Report also concludes that “Early mitigation will almost certainly be less expensive than delayed mitigation.”20
In other words, if global Peak Oil is 20 years away or fewer, or we believe it might be, then we must begin immediately with a full-scale effort to address the problem.
Most Americans would understandably prefer to solve the dilemma simply by switching to alternative fuels, thus enabling them to maintain their current habits. But, as we have already noted, there are problems with that strategy.
Biofuels (ethanol, wood methanol, and biodiesel) require land area for production and are plagued by the problem of low net-energy yields. According to the calculations of Jeffrey Dukes of the University of Massachusetts, over a hundred tons of ancient plant matter are concentrated in every gallon of gasoline we use today.21 Granted, modern methods of biofuels production are more efficient than nature’s slow means of producing crude oil, but still this analysis should give us pause: trying to replace a substantial fraction of our 20 million barrels per day of national oil consumption with biofuels could potentially overwhelm an agricultural system already destroying topsoil and drawing down ancient aquifers unsustainably.
It is possible to produce liquid transportation fuels from coal and natural gas. However, natural gas is itself a problematic fuel in North America (domestic production peaked in 2001), and coal—a low-quality hydrocarbon—would present a host of environmental and practical quandaries if we tried to increase mining sufficiently to replace a significant proportion of our oil budget. In the end, coal is likewise a depleting fossil fuel: while it is often said that we have hundreds of years’ worth of the stuff, that assumes current rates of consumption and ignores variable quality; assuming dramatic increases in consumption (for oil replacement) and taking into account the fact that much coal offers a low energy yield, those centuries shrink to a very few decades.22
Which brings us to the strategies of conservation, efficiency, and curtailment. These clearly present the best opportunities, though efforts along these lines will eventually require significant changes in Americans’ habits and expectations.
Our automobiles could be made much more fuel-efficient, though this will require government leadership via higher CAFE standards. But over the long term automobiles and trucks simply aren’t good options for transportation, given their inherent energy inefficiency. Thus the nation will need a much-expanded freight and passenger rail system. Our cities, most of which have been designed for the automobile, need to be made more neighborhood-oriented and walkable, and provided with light-rail transit systems. Meanwhile agricultural production must be freed, as quickly and completely as possible, from fossil-fuel inputs. All of these efforts will require substantial investment and many years of work.
If, as the Hirsch Report tells us, the market will be incapable of shifting investment incentives quickly enough away from the old oil-based, energy-guzzling energy infrastructure and toward the new alternatives-based, super-efficient one, then government will have to lead the way through a sustained commitment of effort on a wartime scale. The estimated one to three trillion dollars consumed so far in the invasions and occupations of Afghanistan and Iraq, had they been spent instead on domestic energy security, would probably have represented an appropriate level and rate of funds allocation.
What Has the Administration Done?
Before examining what Bush and Cheney have done (and not done), we should in fairness note that previous administrations are far from blameless. During the Clinton–Gore years, imports of oil increased while CAFE standards languished. However, in a court of law the incompetence or even criminality of others is seldom a viable defense for one’s own culpable actions.
That said, in light of the threat and the needed effort, what has the current president actually accomplished?
First of all, the administration effectively buried the Hirsch Report. For many months it was available only on a high school web site, then on the Project Censored site; only toward the end of 2005 did it appear on a Department of Energy site. There has been no public mention whatever of the Report by any official in the Executive Branch. Thus the administration has sought not to respond to warnings of approaching crisis, but simply to muffle the warnings.
During the past six years, funding for renewable energy programs and for energy efficiency has not increased substantially. Meanwhile the administration has consistently sought to remove subsidies for the nation’s passenger rail system, Amtrak, while continuing to support immense subsidies for highways.
To be sure, Bush has occasionally spoken about the need for an energy policy, as in a speech to the nation in April 2005:
First, we must better use technology to become better conservers of energy. And secondly, we must find innovative and environmentally sensitive ways to make the most of our existing energy resources, including oil, natural gas, coal and safe, clean nuclear power. Third, we must develop promising new sources of energy, such as hydrogen, ethanol or bio-diesel. Fourth, we must help growing energy consumers overseas, like China and India, apply new technologies to use energy more efficiently and reduce global demand of fossil fuels.23
I would disagree with a few of these suggestions, but over all this is not a bad summary of what actually needs to happen. But talk is cheap, and talk that accomplishes next to nothing is, in this situation, a criminally negligent diversion and waste of time. The words just quoted were spoken in the context of the president’s promotion of an energy bill that actually did very little except to increase tax breaks to the fossil fuel industry.
In his 2006 State of the Union address, Bush said that the U.S. is “addicted to oil,” and put forward the goal of reducing oil imports from the Middle East. The next day his staff backpedaled, saying that this goal was only an “example.”24
Five years into the Bush administration, the nation is more dependent on imported oil than ever before. It is facing an impending energy crisis that a government-funded study says will be “unprecedented” in scope and consequences. And needed preparation efforts are nowhere to be seen.
Given all this, how will impeachment help? While it would be justified as a punishment for ineptitude or criminality, impeachment will not materially assist the nation to deal with Peak Oil unless current officials are replaced with ones who understand the problem and who are prepared to implement policies that radically shift America’s priorities in terms of energy, transportation, urban infrastructure, and agriculture. Looking out over the current political landscape in Washington, it is difficult to identify who those new officials might be. Nevertheless, it would help the nation to start now with a clean slate, and with a popular mandate for the new team of leaders to move rapidly to achieve energy security.
Notes:
1. See discussion of this topic in my book Powerdown: Options and Actions for a Post Carbon World (New Society, 2004), pp. 40–41.
2. IHS discovery numbers are proprietary and costly, and so cannot be referenced directly; however this 4.5 billion-barrel figure was confirmed in personal correspondence by Chris Skrebowski, editor of Petroleum Review.
3. “Statements on Oil” Royal Swedish Academy of Sciences Energy Committee. (17 Oct. 2005) http://www.energybulletin.net/9824.html (accessed 17 Jan., 2006)
4. Chris Skrebowski, “Prices Set Firm, Despite Massive New Capacity,” Petroleum Review, October 2005.
5. http://news.bbc.co.uk/1/hi/business/4077802.stm (accessed 13 March, 2006)
6. http://www.greencarcongress.com/2005/10/ford_exec_oil_p.html (accessed 13 March, 2006)
7. Future Fuels reportf (PDF) (accessed 13 March, 2006)
8. Michael DesLauriers, “Famed Oil Tycoon Sounds Off on Peak Oil, Resource Investor, 23 June, 2005 (accessed 13 March, 2006)
9. Jeroen Van Der Veer, “Vision for Meeting Energy Needs Beyond Oil,” Financial Times”
10. Global Energy Markets (PDF) (accessed 13 March, 2006)
11. Michael DesLauriers, “Oil Forecasting Legend Discusses Peak Oil, Share Prices,” Resource Investor, 19 October, 2005 (accessed 13 March, 2006)
12. Robert B. Semple, Jr., The End of Oil, The New York Times, 1 March, 2006 (accessed 13 March, 2006)
13. Adam Fenderson and Bart Anderson, “US Army: Peak Oil and the Army’s Future,” Energy Bulletin 13 March, 2006 (accessed 13 March, 2006)
14. “Strategic Significance of America’s Shale Oil Resource,” Vol. 1, “Assessment of Strategic Issues,” Office of Deputy Assistant Secretary for Petroleum Reserves, Office of Naval Petroleum and Oil Shale Reserves, U.S. Department of Energy, March 2004 .
15. Robert L. Hirsch, et al., “The Peaking of World Oil Produciton: Impacts, Mitigation and Risk Management,” February 2005. http://www.projectcensored.org/newsflash/the_hirsch_report.pdf (PDF) (accessed 13 March, 2006)
16. “Congressman Bartlett Discusses Peak Oil with President Bush,” staff, Energy Bulletin, 29 June, 2005 http://www.energybulletin.net/7024.html (accessed 13, March, 2006)
17. http://www.energybulletin.net/559.html (accessed 13 March, 2006)
18. Hirsch, op. cit.
19. http://www.senate.gov/~foreign/testimony/2005/SchlesingerTestimony051116.pdf (PDF) (accessed 13 March, 2006)
20. Hirsch, op. cit.
21. “Price of Gas,” ScienCentral News, 28 July, 2005, http://www.sciencentral.com/articles/view.php3?article_id=218392605&cat=all (accessed 13 March, 2006)
22. Gregson Vaux, “The Peak in US Coal Production,” From the Wilderness, 27 May, 2004 http://www.fromthewilderness.com/free/ww3/052504_coal_peak.html (accessed 13 March, 2006)
23. http://www.whitehouse.gov/news/releases/2005/04/20050428-9.html (accessed 13 March, 2006)
24. http://www.whitehouse.gov/stateoftheunion/2006/index.html (accessed 13 March, 2006)
Richard Heinberg is the author of two of the most essential books in the Peak Oil canon, The Party’s Over and Powerdown as well as a forthcoming small book to introduce the Depletion Protocol to a wide audience. This article is the April 2006 edition (#168) of Heinberg’s MuseLetter series.
For permission to republish this essay, please contact him at [email protected]
Editor’s note: This article was written as a chapter to be published in a forthcoming book by Project Censored titled The Case for Impeachment of Bush and Cheney, Seven Stories Press, Summer 2006. 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.

MarketWatch (USA): Indian official says interested in joining Sakhalin III project

Mar 29, 2006
LONDON (MarketWatch) — The Indian government is interested in participating in Russia's Sakhalin III oil and gas project through one of the country's state-run companies, a top Indian official said Tuesday.
The Sakhalin II project, controlled by Royal Dutch Shell PLC (RDSB.LN), “is closed. On Sakhalin III, we are looking for opportunities,” M.S. Srinivasan, the secretary for India's petroleum and natural gas ministry told Dow Jones Newswires during a visit to London.
He said India's petroleum and gas minister, Murli Deora was in touch with his Russian counterpart on the project, located off Russia's Far East coast.
Asked if India was seeking participation in the project through state-run companies such as Oil & Natural Gas Corp. Ltd (500312.BY), or ONGC, Srinivasan answered “yes.”
ONGC already has a 20% stake in the Exxon Mobil Corp. (XOM)-led Sakhalin I project.
However, the underdeveloped Sakhalin III acreage has long been coveted by oil companies.
Last year, Sinopec Shanghai Petrochemical Co. (SHI) agreed to buy about 25.1% in the Veninsky sector of Sakhalin III. Russian state-owned company OAO Rosneft (RNT.YY), the largest shareholder, still owns about 49.9% in Veninsky and the Sakhalin regional government about 25.1%, a Rosneft spokesman said Wednesday.
The spokesman said no talks are taking place between Rosneft and India, or Indian companies, on a possible participation in Veninsky. He added that discussions, if any, could take place with the Sakhalin government, although the latter couldn't be reached for confirmation.
Veninsky's estimated recoverable reserves stand at 114 million tons of oil and 315 billion cubic meters of gas, according to Rosneft.
However, other blocks in Sakhalin III are set to be re-awarded after a new mineral law comes into force at a yet-to-be determined date.
Rights to explore the blocks were granted in 1993 to a consortium headed by Exxon Mobil and Chevron Inc. (CVX), together with Rosneft, but were revoked in 2004. It is possible they could re-awarded to another applicant.
In its annual 2005 report, Exxon says “exploration activities on the Sakhalin III blocks are pending the award of exploration and production licenses by the Russian government.”
It is unclear whether the Sakhalin III blocks could come under a strategic list of assets which can't be controlled by foreign companies.
-Contact: 201-938-5400 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 Hindu (India): Cairn, Shell, BP among others to expand operations

New Delhi, March 29 (UNI): Top energy majors including Shell, BP, BG, Respol, BHP and Cairn have expressed their interest to expand their operations in Exploration and Production (E&P), distribution and marketing of natural gas, including city gas distribution network in India.
Petroleum and Natural Gas Minister, Murli Deora, is currently in London for a road-show to showcase the latest New Exploration Licence Policy (NELP-VI) blocks.
The Minister along with senior officers in the delegation had several meetings with E&P companies and service companies. The major E&P companies that had one-on-one meetings are BP, Shell, ENI, Petrobras, BG, Repsol, BHP and Cairn.
In the meeting held with BG, Deora explained the vast opportunities arising in oil and gas sector in India particularly in the form of this offer (NELP-VI).
In addition, the Minister referred to the speech of the Prime Minister Dr Manmohan Singh last fortnight in which the Prime Minister had underlined the need for expanding CNG and PNG distribution network rapidly in all regions, cities and towns in India.
Deora also stated that the Petroleum and Natural Gas Regulatory Board (PNGRB) would be in place shortly. The company mentioned that they are already in India and are looking to expand their involvement in E&P sector and distribution and marketing of natural gas, including city gas distribution network.
They informed that ONGC and BG have already signed farm-out agreement for three deep-water blocks in Krishna Godavari basin.
The road show to promote recently launched 55 Oil and Gas Exploration Blocks under 6th round of NELP in London drew a big response from international companies.
As many as 82 international companies attended the Road Show. The major companies which participated include BP, Shell, Total, Statoil, Chevron, BG, Repsol, Cairn Energy, Woodside, Petrobras, Maersk, Devon, ENI, Burren, BHP, Ensearch, Goepetrol and Premier oil. Of the 82 participating companies, 38 prominent E&P companies from oil and gas sector were present.
Riding on the success of NELP-V, the Government announced the launch of global competitive offer of 55 exploration blocks, which include 24 deepwater blocks, 6 shallow water blocks and 25 onshore blocks.
This offer covers the highest ever acreage of 352 thousand sq km, nearly 12 per cent of the Indian sedimentary area.
In meetings with Petrobras, Deora invited the company to participate in NELP-VI. Petrobras informed that they have already signed an MoU with HPCL for participation in NELP-VI. BP in their meeting with the Indian delegation informed that they are already in India and are looking forward to expand their involvement in the E&P sector.
They are also discussing with ONGC to participate in the blocks held by ONGC, especially in deep-water area in Saurashtra Kutch.
The London Road Show spanned over two days — 27 and 28 March 2006 and comprised extensive and detailed presentations and one-on-one meetings with the companies.
The presentations, covered the geological potential of the blocks, liberal fiscal and contract terms, the experience sharing of working in Indian E&P sector by leading international and national companies (both private and public), presentations by industry associations and the merchant bankers and consultants.
The first road show was held in Delhi on March 10, while the next one would be held in Houston (US) on March 30 for NELP-VI and on March 31 for CBM-III. 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 WALL STREET JOURNAL: Oil Jumps Above $66 a Barrel As Supply Jitters Spark Rally

By MASOOD FARIVAR
March 29, 2006; Page C4
Crude futures smashed out of their recent trading range, rallying nearly $2 and closing above $66 a barrel for the first time since early February as supply worries heightened.
The May crude delivery contract on the New York Mercantile Exchange rose $1.91 a barrel, or 3%, to $66.07, the highest close since Feb. 1. Crude futures had spent much of the past two months in a range of $59 to $65.
The rally came amid a backdrop of growing worries about supplies in major oil-producing countries.
In Norway, the country's largest private-industry union, Fellesforbundet, threatened to strike Saturday if an agreement isn't reached by Friday with the Federation of Norwegian Industries over pensions and wages.
The strike wouldn't affect offshore oil and gas production. Nevertheless, traders and analysts said the threat led to a burst of buying by investors already jittery about the loss of more than a quarter of Nigeria's crude-oil production.
“Every time we got any news suggesting that there is a problem with supply, this market wants to rally,” said Peter Beutel, president of trading advisory firm Cameron Hanover in New Canaan, Conn.
Nigerian militants on Monday freed the last three of the oil workers they had been holding hostage, but said they would continue attacks on oil infrastructure. Royal Dutch Shell PLC, the largest foreign oil company operating in the country, has shut nearly half of its Nigerian production, and says it won't resume operations until the country is safe for its workers.
In other commodity markets:
SUGAR: Prices on the New York Board of Trade climbed nearly one cent per pound and touched one-month highs as the market followed gains in crude oil and purchases by speculative funds. The May contract ended up 0.69 cent at 18.17 cents a pound.
COPPER: Prices on the Comex division of the Nymex pulled back slightly from Monday's levels. However, analysts and traders say the upward trend in copper is still intact, and prices could touch $2.50 a pound soon. The March contract ended up 1.9 cents to $2.4940 a pound, while the most-active May future closed down 0.15 cent to $2.4250.
Write to Masood Farivar at [email protected] read more

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The Guardian: Carbon cop-out

With green issues a hot political topic, environmentalists were hoping Gordon Brown's budget would tackle climate change head on. It was certainly on the agenda, but John Vidal looks at the reality behind the rhetoric
Wednesday March 29, 2006
For just a few hours last Wednesday, the broad British environmental movement toyed with the idea that Gordon Brown was transforming himself into Gordon Green. After nine years of saying the environment was important, and then doing little, the supremely confident chancellor appeared to be throwing around green money, green ideas and green initiatives.
“I want the UK's homes and businesses to be the most energy efficient in the world,” he said – and it looked as if he meant it. Micro-power was to get £50m seed money, there were to be tax reforms, drivers of gas-guzzling 4x4s were to be penalised and smaller cars rewarded, 250,000 homes were to be better insulated, biofuels and energy saving encouraged. There was to be a much-lobbied-for annual carbon budget, an ambitious national institute of energy was to be established and waste was to be addressed.
But even as environment groups, local authorities and a newly-committed businesses sector held their breath, it dawned that they had all mostly fallen for the oldest trick of the political game. The consensus slowly emerged that the chancellor had stroked them, told them they were important, handed out a few bones, but left them in the end with little.
Take the money promised – over three years, it later emerged – for micro-renewable technologies such as small-scale wind power, boilers, solar heating and electricity. The chancellor was putting up £50m, he said, “to enable 30,000 buildings in Britain [to micro-generate some of their own electricity]”.
“This is fantastic news,” gushed Gaynor Hartnell, head of renewable power at the Renewable Energy Association. “We were hoping that this would be the year when micro-renewables really took off, what with the publication of the micro-generation strategy, and the minister's obvious enthusiasm for the sector. An additional £50m for the low carbon buildings programme is a welcome sign that the government has been listening to us about the massive potential in this sector.”
Crumbling stock
By the next morning, the chancellor's real scale of ambition was better understood. Even if 30,000 buildings in Britain were converted – again, over several years – that would represent less than 0.15% of the crumbling, energy-leaking British building stock. Solar Century, an ambitious, fast-growing company with a vision to turn every roof and wall in Britain into a mini power station generating photo-voltaic (PV) electricity, was furious.
Chief executive Jeremy Leggett said: “Our competitors [in Japan, Germany and elsewhere] have support programmes for solar PV measured in billions of pounds, not millions. Divide that money by the six technologies [that the government defines as micro-generation] and you come up with less than £5m per year per technology, and that does not include energy efficiency, or the gas micro-CHP [combined heat and power] that the DTI slipped into the supposedly renewables-only programme at the eleventh hour.
“By contrast, Japan has spent an average of £100m a year for 10 years in building its PV industry. California is investing $2.9bn [£1.7bn] over 10 years. Germany pays premium prices for solar electricity, guaranteed for 20 years, financed by a tiny levy on the rates of all consumers. These programmes have the kind of scale and continuity that attract private investors.
“In the UK, we have another drip feed, for a few years. The government continues to fall far short of its rhetoric on the seriousness of climate change. Meanwhile, UK plc continues to lose out in some of the fastest-growing markets in the world, markets that hold the key to energy security and surviving global warming.”
The chancellor may have identified that the environment was one of the great issues facing the country at the moment, and that global warming was top of the agenda, but his attempts to deal with it seemed woeful, said most groups the morning after the budget.
On the plus side, the Local Authority Fund was to be given £20m to “enable 250,000 more homes to become better insulated”. But that amounts to about £87 a home – enough for a roll or two of insulation and one man's wages for an hour.
Modest assistance for householders to increase insulation, an increase in the climate change levy in line with inflation, a voluntary labelling scheme for some energy-using products, a pilot scheme to trial “smart” electricity meters, and a decision to take a proposal to the World Bank regarding a large fund for new technologies for developing countries – all were welcome in their own way, said the chastened environmental groups, but the consensus was that they added up to very little in the face of what scientists say is needed.
Catastrophic impacts
It was left to Tony Juniper, head of Friends of the Earth, to put the chancellor's measures into context: “Carbon dioxide emissions have risen under Labour. They have now reached record concentrations in the atmosphere, and if action is not taken immediately it may soon be too late to avoid catastrophic impacts arising from global warming.
“The measures set out in the budget are not enough to enable the government to achieve its target to reduce emissions of carbon dioxide by 20% compared to 1990 levels – a promise repeated in the last three Labour general election manifestos. Mr Brown needs to get more serious about climate change before it is too late”.
Caroline Lucas, Green MEP for south-east England, was even more damning: “Given that we're facing a climate catastrophe, Brown is trying to put out a forest fire with a bucket of water,” she said.
The transport reform campaigners felt the most let down. The much-hyped gas guzzler tax increases raised driving costs for some of the richest people in Britain by less than £1 a week, fuel duty was frozen again in deference to the road lobby, and aviation fuel and passenger taxes were not touched – again. While the Treasury continued to back the line that it was waiting for European consensus before it acted on aviation, its officials admitted that a freeze in air passenger duty would result in a “small” increase in carbon emissions and local air pollutants from aviation.
In fact, say many working at the coalface of the British environment, the budget could be defined by what was not in it. There was very little to help people, businesses or councils to waste less or recycle more; barely anything for councils trying to get people out of their cars on to footpaths or cycle tracks; nothing to encourage people to save water in a year of inevitable drought; little to protect landscapes or increase biodiversity; not much for air quality or noise; no encouragement to tighten planning, to force electricity companies to waste less.
As a postscript to the budget, environment secretary Margaret Beckett yesterday announced long-awaited plans to meet climate change targets. But for all the drastic action that Blair has urged other world leaders to take to avoid catstrophe, it was very much business as usual, with the emphasis on real changes being made later. A case, perhaps, of the buck being passed back to Brown.
The energy element
Labour's love of public-private partnerships took on a green tint last week when Gordon Brown announced a new scheme to develop more environmentally friendly sources of energy. David King, the government's chief scientist, hailed the new National Institute for Energy Technologies as “the biggest leap forward for energy research in the UK for the last 20 years”. The partnership aims to raise £1bn of funds, and energy giants BP, Shell and EDF have already said they will be involved.
Details of the new institute are sketchy. The Treasury said it will tackle specific 10-year goals, but didn't explain what those might be – only that they would be “in relation to energy sources and technologies that reduce carbon emissions and contribute to the security of energy supply”. It said public money would be found to match private investment, up to a set limit.
The new institute builds on a broader – but equally vague – initiative called the Energy Research Partnership, which was announced in last year's budget and officially launched in January. Run by the Department of Trade and Industry, the partnership is also intended to “identify approaches and technologies to accelerate carbon reduction while maintaining security of supply”. According to its website, its mission “is to work together towards shared goals and act as a sounding board for, and generator of, ideas”. The DTI has no more details about this scheme either, but says the remit and scope of the new institute will be hammered out “very soon”.
Environmental campaigners are worried that the new arrangement might be a way to leverage more public funds into restarting the UK's nuclear power programme – a government decision on which is expected in the summer. EDF Energy, one of the early backers of the chancellor's new public-private institute, and the company that runs the French atomic power stations, has already said it wants to build up to 10 new nuclear stations in Britain. Sue Ion, director of technology at British Nuclear Fuels is a member of the Energy Research Partnership, but the DTI says it is too early to say what types of energy it will work on. read more

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THE NEW YORK TIMES: Oil Prices Settle at $66 Per Barrel

By THE ASSOCIATED PRESS
Published: March 28, 2006
Filed at 5:12 p.m. ET
WASHINGTON (AP) — Crude-oil futures leapt by almost $2 a barrel Tuesday, testing the upper-end of a recent trading range amid strong demand and worries about supply from Iran and Nigeria.
The reported possibility of a labor strike in Norway, a major oil producer, contributed to the market's jitters. There was also some technical buying, brokers said, whereby traders who had anticipated lower prices had to cover their bets by purchasing crude.
Light sweet crude for May delivery rose $1.91 to settle at $66.07 a barrel on the New York Mercantile Exchange, where oil futures are 22 percent higher than a year ago. May Brent crude on London's ICE Futures exchange rose 74 cents to $64.35 a barrel.
Gasoline futures rose 5.57 cents to $1.8845 a gallon, while heating oil futures rose 4.66 cents to $1.8277 a gallon. Natural gas futures rose 14.7 cents to $7.214 per 1,000 cubic feet.
''It's a demand driven market. It's what the market is willing to bear,'' said James Cordier, president of Liberty Trading in Tampa, Fla., noting that U.S. oil supplies are at multiyear highs.
The market is also gripped by concerns about supplies from Nigeria and Iran, and growing anxiety about the next hurricane season in the Gulf of Mexico. Some analysts believe gasoline prices could climb as high as $3 a gallon this summer, though that assumes some significant disruptions at refineries or difficulty in getting fuel to markets. The average nationwide pump price is currently $2.50.
Dow Jones Newswires reported Tuesday that Norway's largest private industry union, Fellesforbundet, threatened to strike on Saturday if there is no settlement with the Federation of Norwegian Industries over pensions and wages.
The strike would affect 38,000 members in the manufacturing industry, including Norway's shipyards, engineering industry and manufacturing for offshore oil and gas projects. The strike would not affect offshore oil and gas production, Dow Jones said.
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 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. read more

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Asia Pulse: SHOWA SHELL, MITSUI OIL TO SUPPLY PETROLEUM TO JAPAN ENERGY

Mar 29, 2006
TOKYO, March 29 Asia Pulse – Japan Energy Corp. has inked agreements with Showa Shell Sekiyu KK (TSE:5002) and Mitsui Oil Co. to procure 500,000 kiloliters of petroleum products annually from each beginning in April.
Through fiscal 2005, Japan Energy purchased about 4.5 million kiloliters of petroleum products annually from Fuji Oil Co.'s (TSE:2607) Sodegaura refinery in Chiba Prefecture. But having dissolved its capital relationship with AOC Holdings Inc. (TSE:5017), for which Fuji Oil was the refinery unit, the decision was made to reduce procurement to around 1.5 million kiloliters a year starting in fiscal 2006.
Japan Energy plans to make up half of this 3-million-kiloliter shortfall by boosting capacity utilization at two of its affiliated refineries. The remainder will be offset by the new supply agreements with the two wholesalers as well as short-term contracts with a number of trading firms.
(Nikkei) read more

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