April 8th, 2006:

Brad Foss
Associated Press Business Writer
Oil prices appear headed back toward $70 a barrel, a level not seen since Hurricane Katrina battered the Gulf Coast, and sporadic shortages have raised gasoline prices in the United States.
While last summer’s price spike triggered outrage in Congress and hurt sport utility vehicle sales, it caused only a hiccup in motor-fuel consumption. And for now, with demand back on the rise, the economy seems capable of absorbing uncomfortably high prices.
Analysts warn, however, that consumers and businesses could be just one major supply disruption away from more serious financial consequences.
Sherry Cooper, chief economist at BMO Nesbitt Burns, said the ramifications of $70 oil and $3-a-gallon gasoline would be “more mild” the second time around “because we’re getting kind of used to it.”
But while the gas-price sticker shock may be wearing off, Nomura Securities chief economist David Resler fears a more subtle fuel-related angst settling in among consumers.
“There is the pessimistic notion that this is not going to go away and that’s going to have a more lasting impact on driving habits and behavior, I suspect, than we’ve seen so far,” Resler said.
Jolt could produce slowdown
In that context, a hypothetical supply disruption that jolts oil prices to $80 or higher and keeps them there for an extended period — say, three months — could result in “a substantial falloff in discretionary spending” that snowballs into a serious slowdown.
Perhaps the top threat for the oil market is the standoff between the United Nations and Iran, OPEC’s No. 2 producer, over Tehran’s nuclear energy ambitions. Iran’s foreign minister said March 31 his country would not use oil as an economic weapon, and that helped ease prices, but analysts say they remain concerned about supplies from Iraq, Russia, Venezuela and other places.
Unrest in Nigeria has taken more than 500,000 barrels per day of oil off the market, and more than 300,000 barrels per day of Gulf of Mexico output remains shut-in because of damage from last fall’s hurricanes.
Analyst: prices not likely to retreat
With global oil demand expected to average 85 million barrels per day in 2006, and excess production capacity limited to 2 million barrels per day, oil analyst Jamal Qureshi of PFC Energy in Washington said prices aren’t likely to retreat anytime soon.
“The market is awakening to the scope of the risks,” said Antoine Halff, director of global energy Fimat USA in New York.
Yet in spite of all the apprehension about oil supplies — or maybe because of it — U.S. inventories of crude are at a seven-year high of roughly 341 million barrels. That does not include the 685 million barrels in the country’s strategic reserve, available in an emergency.
Some analysts point to this buildup of inventories as evidence the market is divorced from reality. IFR Energy Services’ Tim Evans sees a “dangerous complacency about the downside potential for prices” — but many more say it is a reflection of unease about geopolitical uncertainties.
On March 31, light crude for May delivery settled at $66.63 a barrel, down 52 cents on the New York Mercantile Exchange. U.S. retail gasoline prices averaged $2.53 a gallon, or 37 cents higher than last year, according to Oil Price Information Service.
Gasoline could hit $3
The potential exists for $3-a-gallon gasoline at some point this summer, analysts say, but that assumes out-of-the-ordinary disruptions to refining or distribution, or both. The Energy Department, meanwhile, is forecasting an average summertime price of $2.50.
Economists and oil-market experts say industry and homeowners may not like paying more for fuel but they are adapting, in large part because energy is a tiny piece of overall spending and, thanks to more efficient technology, an even smaller piece than it was during the energy crises of the 1970s.
The burden is most severe on low-income families and fuel-intensive businesses, though truckers, chemical manufacturers and, to a lesser extent, airlines have had success in passing along these costs.
Relatively low interest rates, which have made it easy to borrow money while helping to prop up the stock and housing markets, have reduced the impact of high oil prices on the economy.
Of course, the Federal Reserve has raised short-term rates 15 times since June 2004 to cool off the housing market and keep inflation in check, and this is likely to slow growth irrespective of energy prices.
U.S. recession would likely reverberate
BMO’s Cooper said the Fed probably needs to raise interest rates again in May to slow economic growth because there are signs — rising airfares among them — that inflationary pressures are creeping up.
Brian Hicks, co-manager of US Global Investors’ Global Resources Fund, a mutual fund heavily invested in energy, said a recession in the U.S. would likely reverberate across emerging-market economies and could quickly depress daily oil demand by 2 million barrels per day.
That dire scenario is not what Hicks or most other financial professionals are anticipating. Hicks forsees oil prices trading in a range of $55 to $65 through the end of the year, with consumption tapering off anywhere above $70 and the Organization of Petroleum Exporting Countries curtailing production at around $50.
James Cordier, president of Liberty Trading in Tampa, Florida, believes oil prices will climb as long as the economies of the U.S., China and India continue to grow and that prices may need to hit $75 before there is any significant demand response.
“We are going to find out at what price level we start rationing demand,” Cordier said. “That is what we have to do.” read more

Venezuela’s foreign minister said his country’s seizure of oil fields from France’s Total SA and Italy’s Eni SPA won’t hurt relations with other international investors.
The move “doesn’t affect anything,” Foreign Minister Ali Rodriguez told The Associated Press April 4.
“Almost all of the companies, including firms as important as ChevronTexaco, as well as Repsol and many others, have created absolutely no problems about this,” said Rodriguez, who has been in Havana since early this year for treatment for a knee problem.
Venezuela’s Oil Minister Rafael Ramirez announced April 3 that state oil company Petroleos de Venezuela SA, or PDVSA, had taken control of Total’s Jusepin field and Eni’s Dacion field.
Together, they produced 115,000 barrels a day, before the two companies refused to turn operations over to state-controlled joint ventures.
ExxonMobil sold its stake
Exxon Mobil Corp. earlier sold off its stake in the 15,000-barrel-a-day Quiamare-La Ceiba field rather than submit to tightened terms.
Venezuela is the world’s fifth largest crude exporter and a major supplier of petroleum and petroleum products to the United States.
Some experts believe the new tough tactics employed on those unwilling to play by Caracas’ new rules could backfire on the government of President Hugo Chavez by scaring away partners that Venezuela needs to develop untapped reserves.
But Rodriguez said foreign petroleum companies remain “enchanted” with the potential returns on investing in Venezuela. He said the government’s measures “give much security, certainty and legal security to the firms that are signing now with Venezuela.”
Foreign energy investors in Venezuela are “backed by a law for hydrocarbons, and they are backed by a law for gas, and they are backed by the constitution,” he said.
Rodriguez, who was president of PDVSA until the end of 2004, said the contracts the oil company signed with foreign firms in the 1990s “didn’t have any legal backing … to the contrary, they were signed in violation of Venezuelan law.”
—The Associated Press read more

Norway bans E&P in 31-mile zone near coast; issues 13 new exploration licenses
Ray Tyson
For Petroleum News
Barents Sea newcomer Chevron has latched on to its first exploratory acreage in Norway’s 19th oil and gas licensing round, the first such offering since 1996 opening new frontier areas to drilling in the Arctic waters of Norway’s continental shelf.
However, while awarding Chevron and 16 other companies new Barents and Norwegian seas production licenses, Norway also set new rules prohibiting exploration and production within a 31-mile zone near Norway’s coast, including the Lofoten islands, until at least 2010.
Norway’s long-awaited offshore management plan was viewed as a compromise between pro-industry members of Parliament and a new coalition of left-leaning political parties that gained power in Norway’s September 2005 national elections.
The coalition, known as the Socialist Left Party, vowed to halt oil and gas development in environmentally sensitive offshore areas such as the Barents Sea, a major Norwegian fishery.
“Within the framework of sustainable development and ecosystem based resource management, consideration to the different industries has been balanced,” Odd Roger Enoksen, Norway’s petroleum and energy minister, declared March 31.
Chevron picks up six blocks
Meanwhile, U.S.-based Chevron, through its Norwegian subsidiary Chevron Norge AS, picked up the exploration rights to six blocks awarded in Norway’s 19th licensing round, the company announced April 5.
The award marked Chevron’s entry into Norway’s portion of the Barents Sea, an under-explored Arctic region that extends into Russian territorial waters and, thus far, has produced mixed drilling results.
“Our successful bid for exploration acreage reflects Chevron’s intention to pursue attractive growth opportunities in the region and furthers our strategy to achieve superior exploration success from a focused, high-impact exploration program,” said John Watson, Chevron’s president of international exploration and production.
Under terms of the license award, Chevron received a 40 percent interest in the six blocks, with Norway state-controlled Statoil serving as operator with a 40 percent interest. RWE Dea Norge AS holds the remaining 20 percent interest.
The blocks are located in the Nordkapp East basin of the Norwegian Barents Sea, about 155 miles north of the coast of Finnmark in about 800 feet of water. PL 397 license specifically includes blocks 7230/2, 3, 4, 5, 6 and 7231/4, according to Chevron.
License PL 397 was applied for jointly with Statoil under a long-term Area of Mutual Interest agreement signed between Chevron and Statoil in November 2005.
Norway issues 13 new licenses
In total, Norway issued 13 new licenses to 17 companies covering 33 whole or partial blocks located mainly in the Barents Sea. In addition to Stateoil, Chevron and RWE Dea, licenses were offered to major Norwegian operators Norsk Hydro and ConocoPhillips, Norske Shell, ENI Norway and DNO, but also to Amerada Hess, BG Group, Talisman and Total, as well as Idemitsu, Gaz de France, Revus Energy, Discover Petroleum and Noreco.
Work programs for the licenses include at least four exploration wells, one appraisal well, seven “drill or drop” decisions on allocated acreage, and the collection of a minimum of 9,860 square kilometers of 3-D seismic data.
Companies resumed drilling in the Norwegian sector of the Barents Sea in early 2005 for the first time since 2001, after the previous government ended a moratorium on drilling activity in the Arctic against protests by environmental groups.
The number of applicants in the 19th licensing round was up from 18 in the 2004 round and up from 13 in the 17th round, reflecting increased industry interest in the Barents Sea, despite the region’s harsh Arctic climate and political risks.
“It is a positive that the new government has decided to stick to the original schedule for the 19th round,” Norsk Hydro said in a statement. read more

08/04/06
The Corrib Gas Field saga is not over yet. One episode was determined in the High Court yesterday when the court decided that the Rossport Five are not to serve any more time in jail, although they are liable for Shell’s costs.
In the event, it was a welcome and popular decision and affords all the parties a chance to concentrate now on the central problem.
It would be judicious if the company did not pursue the question of costs, to which they are entitled, in the spirit of seeking a resolution of the main issue.
The men had already served 94 days in Cloverhill Prison because their opposition to Shell E&P Ireland’s laying of a gas pipeline, as part of the €900 million Corrib gas project, caused them to be in contempt of court.
But the substantive issue still remains to be resolved, and that is the mens’ concern about the safety of the gas project in relation to their homes and the fact that they want to prevent the pipeline going through their land.
They maintain their position is unchanged but after yesterday’s hearing, Shell called for direct dialogue with the principal objectors and this is a route that should be adopted.
It must be within the capability of all concerned that an equitable solution be found. read more

The president of the High Court today ordered the Rossport Five to pay the legal costs to Shell following their contempt of court over their Corrib Gas pipeline protest.
Judge Joseph Finnegan said that although the court had the right to punish the men for refusing to comply with the court order not to obstruct the construction of the pipeline across their land in County Mayo, he had decided not to impose a jail sentence.
He said he was having regarded to the time the men had spent in prison (94 days) and the disadvantages that three of them continued to suffer while they were in contempt. But Judge Finnegan said he was making an order for the costs in the case, which could run into hundreds of thousands of euros to be awarded to Shell. read more

Friday, 07 April 2006
A settlement appears to be in the offing for disgruntled farmers in Gibbons Boggs and Chancery Lane, Christ Church.
This development comes after two dozen farmers, following years of complaints, filed for a compensation package from the multi-national giant, Shell.
They claim that a leak in a fuel oil line has severely hampered production in the area, with yields dropping significantly since the problem was detected several years ago.
Lawyers for the farmers and Shell have both said they are pressing ahead for a speedy settlement in the matter.
Sources say the paying out of a multi-million dollar compensation package is expected to resolve the matter and the amount of money to be paid is now being formally negotiated.
Those negotiations started within the past few weeks with lawyer Pat Cheltenham putting the case for Shell and attorneys Ralph Thorne and Beverly Nicholls representing the farmers.
M.P for Christ Church East, Reginald Farley, has called on the oil giant Shell to settle the matter quickly.
Last Updated ( Fri, Apr 07 2006 ) read more

Saturday 8 April 2006
NIGERIA: MILITANTS STEP UP THREATS Militants whose attacks have shut a quarter of Nigerian oil output threatened to execute anyone found on previously attacked oil platforms operated by Royal Dutch Shell.
The threat came as the oil giant said it hoped to return employees to an abandoned offshore oilfield within days. The government has been putting pressure on Western multinationals, particularly Shell, to send workers back to fields abandoned after a string of attacks and kidnappings in February. (REUTERS) read more

Lorna Siggins, Marine Correspondent
Apr 08, 2006
Shell E&P Ireland and the five Co Mayo men jailed last year over opposition to the Corrib gas onshore pipeline have both welcomed yesterday's ruling by the president of the High Court, Mr Justice Finnegan.
Dr Mark Garavan, spokesman for the five men, said there was “general and genuine relief” at the High Court president's decision not to punish the five further over their contempt of court – for which they spent 94 days in jail. However, the core issues relating to the pipeline project still had to be addressed, he said, and serious safety issues remained.
Work on the 900-million Corrib gas project is currently suspended, pending a decision by Minister for the Marine Noel Dempsey in relation to a final safety report on the high-pressure pipeline. Shell E&P Ireland called yesterday on the minister to publish the findings.
Mediation between Shell and the five men has also been suspended since early February. However, it is understood that former Ictu secretary-general Peter Cassells, appointed mediator by Mr Dempsey last year, is due to meet the parties next week to clarify ground rules he released several weeks ago, in an effort to resume the negotiations.
Shell E&P Ireland's managing director, Andy Pyle, said that now the legal issues surrounding lifting of a temporary injunction on the five men had been concluded, he hoped “we can all now move forward” and that Shell “can enter into meaningful dialogue with the five objectors”.
The company is reviewing the High Court president's written ruling and “will give careful consideration” to the issue of costs, he said. It was also “fully committed” to mediation led by Mr Cassells.
However, Mr Pyle said it would be “helpful” for the Minister to “publish at the earliest possible juncture the findings of the independent safety review completed by Advantica”.
“Safety is Shell E&P Ireland's first priority and today we again reaffirm our commitment to fully implement the recommendations contained in Advantica's draft independent safety review which was published before Christmas,” he said.
The draft safety review had recommended the pipeline's pressure be limited and that Ireland adopt a formal “risk-based framework” for assessing the safety of major infrastructural projects.
However, Shell issued a statement in late December in which it did not accept all its findings, taking issue with points made by consultants. It accepted the “principle” of limiting gas pressure. read more

Apr 08, 2006
But High Court orders the pipeline protesters to pay the costs of Shell contempt action
Ann O'Loughlin and Eugene Moloney
THE Rossport Five will not be further punished as a result of their anti-pipeline protest, it emerged yesterday.
The five men from Co Mayo spent 94 days in jail last year for refusing to obey a court order not to interfere with the construction of the controversial Corrib gas pipeline near their homes. High Court President, Mr Justice Joseph Finnegan, said that as the men had already spent that time in prison he did not intend imposing a further penalty.
However, he awarded costs of the contempt proceedings against the men to Shell E and P Ireland.
Prior to handing down judgment in the Four Courts, Mr Justice Finnegan sought assurances from the five men – brothers Philip and Vincent McGrath, Willie Corduff, Michael O Seighin and James Brendan Philbin – that there would be no protests in the court. He said there had been a disturbance on an earlier occasion and remarked that the court was “not designed for PR stunts and protests”. The five men were released from jail at the end of last September after the Shell oil company applied to lift the temporary injunction which restrained interference with the pipeline. In his judgment Mr Justice Finnegan also warned that, if Shell obtained a further injunction against them, the court had jurisdiction to impose a further fixed-term prison sentence.
He said it was appropriate for the court to take into account the consequences of the men's actions, including losses for Shell, the loss of employment in the Rossport area and the loss to the local and national economy.
After the judge directed the men to pay the costs incurred by Shell E and P in bringing the contempt proceedings, Mr Frank Callanan SC, for some of the men, objected and said Shell E and P, which was not represented in court yesterday, had not applied for those costs. Mr Justice Finnegan said he was making the costs order in any event.
The judge further indicated that the men's continuing refusal to purge their contempt will be a factor which will influence the court's discretion in relation to making other costs orders in the forthcoming hearing of a challenge to the Corrib gas field development.
The case arose after Shell sought and secured an injunction in April 2005 restraining interference with pipeline works.
The company said that if certain works were not commenced by June 1, 2005, it would be liable for 25,000 a day in stand-by costs and, if works had to be deferred to 2006, it would incur a remobilisaton fee of 2.5m.
Speaking outside the court, the Rossport Five joked that had they been jailed in the winter time they could have faced a moral dilemma had their cells been heated with Shell oil.
For men awaiting a possible further spell in jail, before yesterday's judgment the five appeared if not in cheerful mood, at least philosophical about their fate.
Perhaps it was a case of gallows humour as they waited at the back of the court for their case to be called.
While the five themselves stood quietly to one side with their families, their supporters, many of whom had travelled up by bus from Mayo, were so great in number they filled all available seats and poured out into the body of the courtroom.
It was an unusual collision of disparate worlds and because the Rossport Five's supporters so outnumbered those who daily toil in the courts, one could not help but feel it was the pinstripes and cufflinks of the legal profession and the notebooks of the media which were out of place.
Glancing around, it looked as if the group of besuited legal types looked like they had been transported to the Willy Clancy summer school. read more

Mary Carolan
Apr 08, 2006
Five Co Mayo men will not be further punished at this stage following the High Court's finding that they were in contempt of court orders restraining interference with a Shell high-pressure pipeline near their homes in Co Mayo, the president of the High Court has decided.
Mr Justice Joseph Finnegan, said that because the men – known as the Rossport Five – had already spent 94 days in prison last year because they breached court orders restraining interference with the pipeline linked to the Corrib gas field development, he did not intend imposing a further penalty on them.
However, he awarded costs of the contempt proceedings against them to Shell E&P Ireland. He also warned that, should the men “again physically prevent Shell E&P exercising its rights” and if a further injunction was obtained against them, the court had jurisdiction to impose a penalty of a further fixed term of imprisonment of “an appropriate duration”.
He rejected arguments that the court could not of its own volition impose a term of imprisonment for contempt of its orders and found such a power to impose imprisonment or a fine was inherent in the court.
The men had made it clear they were determined to act in defiance of laws presumed constitutional, decisions of the executive and a court order, the judge said.
It would be wrong for the court “to shirk its responsibility” to the Oireachtas and executive “or to tolerate a continuing determination on the part of the contemners to persevere by the threat of violence to obstruct the development of the Rossport gas field”.
Mr Justice Finnegan said it was appropriate for the court to take into account the consequences of the men's actions, including losses for Shell, the loss of employment in the Rossport area and the loss to the local and national economy.
However, in all the circumstances, the fact the men had each spent 94 days in prison contained a sufficient punitive element and he did not propose imposing on them a further penalty.
After the judge directed the men to pay the costs incurred by Shell E&P in bringing the contempt proceedings, Frank Callanan SC, for some of the men, objected and said Shell E&P, which was not represented yesterday, had not applied for those costs. Mr Justice Finnegan said he was making the costs order in any event.
He further indicated that the men's continuing refusal to purge their contempt would be a factor which would influence the court's discretion in relation to making other costs orders in the forthcoming hearing of a challenge to the Corrib gas field development.
Mr Justice Finnegan was delivering a reserved judgment, in a courtroom packed with supporters of the five men, on the issue of whether they should be further punished arising from the contempt proceedings. The men's lawyers had argued against any further punishment.
Before handing down his judgment, the judge sought assurances from the five men – brothers Philip and Vincent McGrath, Willie Corduff, Micheal O Seighin and James Brendan Philbin – that there would be no protests in the court building. The court building was “not designed for PR stunts and protests”.
The case arose after Shell secured an injunction in April 2005 restraining interference with pipeline works. The company said that if certain works were not under way by June 1st, 2005, it would be liable for 25,000 a day in standby costs and, if works had to be deferred to 2006, it would incur a remobilisation fee of 2.5 million.
In June 2005, Shell issued a motion for attachment and committal of the five for contempt of the April 4th court order. On June 29th, 2005, the five men were jailed until they purged their contempt. The men refused to do so but they were released from prison in September 2005 after Shell applied to have the April injunction discharged.
ShellNews.net: LATEST NEWS ON DR JOHN HUONG: We understand that EIGHT Royal Dutch Shell group companies are pressing ahead with contempt proceedings against Shell whistleblower Dr John Huong asking for him to be imprisoned of fined because of postings made on ShellNews.net by Alfred Donovan and/or his son John Donovan. read more

By Vanessa Houlder
Published: April 8 2006 03:00 | Last updated: April 8 2006 03:00
Large companies considering leaving the UK for lower tax jurisdictions face a new obstacle as the result of the closure of a tax-avoidance loophole in yesterday's finance bill, writes Vanessa Houlder.
Advisers said the move was a pre-emptive strike that would make it harder for companies to retain the benefits of being incorporated in the UK after they have emigrated. Anneli Collins, a partner of KPMG, the professional services group, said: “What the Revenue wants is to stop major UK plcs from getting out of the UK.” The move was viewed as a response to a growing restlessness on the part of some large companies that believe the UK is losing its competitive edge. They argue that the UK's appeal is being eroded by the growing complexity and uncertainty of the tax regime, the clampdown on tax avoidance and a lowering of tax rates in other parts of Europe.
The measure appears to be aimed at companies that are incorporated in the UK but are based elsewhere for tax purposes. This unusual corporate structure has been adopted by a small number of international companies, including Shell, the oil group, in order to ensure eligibility for membership of the FTSE 100, which is assumed to require UK incorporation.
The new rules will stop companies with this unusual structure from escaping the impact of anti-avoidance laws known as the controlled foreign company rules, which impose tax on income earned in tax havens and low-tax countries. Until now, companies have been able to get round the CFC rules by acquiring “shell” companies that were exempt from the rules.
The details of the finance bill are likely to have come as a relief for this group because it made clear that the clampdown was unlikely to be retrospective. The Budget announcement of the new provisions had contained no details about the circumstances in which they would come into force, leading to speculation that Shell and others could face additional tax bills of hundreds of millions of pounds.
The measures appear designed to stop any more companies from going down the route of acquiring CFC-exempt companies without causing damage to companies that have already done so. Advisers said that imposing a retrospective penalty on companies that had already used this route would have been viewed as draconian because, for various reasons, they were not avoiding tax that they had paid before their UK incorporation. But advisers raised concerns that the exact wording of the measures would lead to uncertainty for these companies. read more

By Carl Mortished
Christophe de Margerie, head of exploration at the French oil giant, talks to our correspondent about going beyond the old petroleum practices
SMALL enough to be a prayer rug, the Iraqi carpet occupies a special position in front of Christophe de Margerie’s large and cluttered desk. It’s a crudely woven piece of tourist tat, strangely out of place in the office of such a powerful man, but Total’s head of exploration is a little bit mischievous. He likes to point it out to visitors. “You can buy it for a dollar in the Baghdad market. It’s the famous goddess of Babylon,” he says.
For Total, Iraq is more than just another oil-rich and desperate country. In its former guise as Compagnie Française des Petroles, Total was one of the founding shareholders of Iraq Petroleum Company, which discovered oil at Kirkuk in 1927. And de Margerie, 54, has not given up on Majnoon and Bin Umahr, the two massive oilfields over which Total was negotiating a production contract — never signed — until embargo and war intervened.
“If we do not do it (develop the Iraqi fields) it will be considered a mistake, more than that, a mismanagement.”
Nothing is happening on the ground because of security problems. He will not put the lives of his employees at risk, but he reckons that investors will ask questions if Total loses its position. “It is giving us additional pressure,” he says.
The pressure is mounting on de Margerie, not only in the struggle to acquire reserves and boost oil and gas output, but internally in the company. He admits after a long, circuitous conversation that he is the choice of Thierry Desmarest, Total’s chairman and CEO, for the top job in France’s biggest and most prestigious enterprise. “The date is up to Thierry to announce,” he says. “We have a big chance to have a man like him at the head of the company. I hope the next one does as well.”
They are like chalk and cheese. Shy and a bit severe, the current chairman is a reluctant speaker, hesitant in English, while his apparent successor talks a blue streak, cracking jokes and puns in an American accent.
Total is as big a national champion as they come, but its prospective chief is unimpressed by the current political fashion in Paris for business that wraps itself in a Tricolour. He jokes that he is worried about delivering a speech in English at a Paris oil conference for fear of causing half of the audience to leave the room.
English is sometimes used in the Total boardroom, he says, adding mischievously: “If I am talking to Desmarest, I will certainly not speak in English unless we want to facilitate the work of MI5 or CIA.”
The French press baits de Margerie, calling him a bit posh (he has links to the Taittinger champagne family) while suggesting he struggled initially at Total, lacking the laurel leaf of a diploma from Ecole des Mines, France’s finishing school for would-be oil barons.
He dismisses this as “just a Franco-French thing, like going to Oxford and Cambridge”. Instead he is proud of being “un homme du terrain” working in the trenches in the company’s stamping ground in the Middle East.
If de Margerie seems to some people an odd fellow, he is also distinctively Total. There is an old chestnut that sums up the oil majors: Exxon is about systems, BP is about deals and Total is about relationships. For de Margerie, the world’s current energy plight has a lot to do with the failure of relationships.
The oil price has become a monster, he says, feeding on its own entrails. If we want to produce more oil, we need to stop lecturing and take the trouble to persuade producing countries that it is in their interests to do so and let the oil majors through the door.
Why should sovereign nations build more capacity to use up more of their oil reserves just to benefit us when they don’t need the money, he asks.
“Definitely, nationalism and the price of oil are linked. At $17 per barrel, nationalism was not there. They were asking us for help and it was easy to explain they needed foreigners because they needed money. Today it is difficult for them to say they need the help of foreign oil companies.”
Offering technology is not enough, de Margerie says,because few countries will admit they lack skills. “Can you imagine a politician in France saying I need help from the UK because they have expertise?” In a thinly veiled reference to the shrill cries in Washington against the regime in Caracas, de Margerie says the harangue against Opec producers can only make matters worse. “Everybody is criticising Chavez. I would criticise some others. How can you order them to produce more. They have the right to do what they want. They have their own people, their own interests. They cannot just take into account the concerns of the West.”
It’s a sensitive matter for Total which has a big position in Sincor, the Venezuelan heavy crude oil project, a long-term and high-cost investment in producing fuel from vast deposits of bitumen-like oil that is hugely difficult to extract. In a campaign to get better terms from Western oil companies, Venezuela confiscated Jusepin, a minor Total oilfield.
So, what should Total be saying to Venezuela? De Margerie admits the conversation is not going well. “I am not saying it is easy, but it is what we have to do.”
De Margerie’s answer is that the oil companies must sell more than the business of pumping barrels of crude, and should provide refining, marketing and petrochemical skills. But these are hardly novel ideas. What else do they have to offer? De Margerie cannot resist another dig. “We need to go beyond old petroleum practices, which is different to beyond petroleum.” What he means is participating more actively in a country’s development, using the project management skills of oil companies in other areas for the benefit of host countries. He admits that it is non-core to the business and potentially very expensive. Beyond old petroleum means coping with the new price of oil, which is not just so many dollars per barrel but complex geopolitics in which small communities, such as in Nigeria, where Total has a large position, can bring operations to a standstill and move global markets.
People are failing to deal with the reality of the price, which has nothing to do with speculators or even any lack of reserves, which are ample. “It is a problem of capacities and of timing,” de Margerie says. “This is the real problem of peak oil.”
The oil is there, he says, but the amount you can deliver today depends on how many wells you can drill and how fast you can deplete an oilfield, not to mention gaining the co- operation of governments, which guard access to the precious resource jealously. There is no prospect of reaching the lofty peaks that economists at the International Energy Agency, predict will be needed to satisfy world demand for oil.
There are not enough engineers, rigs, pipelines and drillers to increase current world output of 85 million barrels per day to 120 million, he says.
It would be possible only in a world without politics, he says. “If there were no Americans, no Iranians, no English, no French and no Italians. Not a world I know.”
Swallowing an ELF to make a giant
Total is France’s largest enterprise and the world’s fourth-largest oil and gas company after ExxonMobil, BP and Royal Dutch Shell.
Valued at €136 billion, Total produces 2.6 million barrels per day and has 11 billion in reserve with a substantial presence in the Middle East, Venezuela, Africa and in the UK North Sea where it operates Elgin Franklin, a UK gasfield.
Once ranking second to Elf, Total’s scandal-ridden French rival, the company gained ground under Thierry Desmarest, the current chairman who extended its reach downstream with the acquisition of Fina, the Belgian company in 1999 and a year later, he launched a hostile bid for Elf.
Though fiercely resisted the bid was successful and brought Elf’s substantial Nigerian and Angolan oil and gas reserves into Total’s portfolio. read more

By Carl Mortished, International Business Editor
THE world lacks the means to produce enough oil to meet rising projections of demand for fuel over the next decade, according to Christophe de Margerie, head of exploration for Total and heir presumptive to the leadership of the French energy multinational.
The world is mistakenly focusing on oil reserves when the problem is capacity to produce oil, M de Margerie said in an interview with The Times. Forecasters, such as the International Energy Agency (IEA), have failed to consider the speed at which new resources can be brought into production, he believes.
“Numbers like 120 million barrels per day will never be reached, never,” he said.
The IEA predicted in its World Energy Outlook that global demand for crude oil would reach 121 million barrels per day by 2030, of which more than half would be supplied by Opec. The agency predicted that more than $3 trillion (£1.72 trillion) of investment in wells, pipelines and refineries would be needed to raise output to such levels.
However, Total’s exploration chief reckons the output rise is impossible, given available resources and geopolitical constraints on gaining access to reserves in Opec countries.
M de Margerie argued that the resources were simply not available. He said: “Take Qatar. How many projects can you have at the same time? You have more than 100,000 people working on sites. It’s a big city of contractors. Now they have the problem of having to build a new power plant to supply a city of contractors.”
The IEA was mistaken in using recovery factors that failed to consider the timing of new resources coming on stream. M De Margerie said. The world was confusing the issue of reserves with the scale of the problem in producing those reserves. He said: “The oil reserves are there, that is the good news, but what we can bring on today to meet demand is limited by factors other than what scientists see in a lab or think-tanks.”
The Total exploration chief said he was the likely successor to Thierry Desmarest, the current chairman and has been nominated to join the company’s supervisory board. read more