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The Wall Street Journal: Oil News Roundup: August 31, 2006 5:46 p.m.

August 31, 2006 5:46 p.m.

Crude oil fell most of the day before bouncing in late trading amid ongoing concerns about Iran’s nuclear program, gaining 23 cents to $70.26 a barrel on the New York Mercantile Exchange. Prices fell below $70 earlier in the session on optimism that output at the troubled Prudhoe Bay oil field in Alaska may be restored earlier than expected. And prices fell more than 7% in August. Here is Thursday’s roundup of oil-related news.

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PRUDHOE POSITIVE: BP said tests on the condition of a pipeline in Prudhoe Bay were encouraging. BP is assessing corrosion in the pipeline in hopes of bringing the massive Alaskan facility back to full capacity, Bloomberg reports. The company has scanned 5% of a five-mile section of suspect pipe and is working on plans to bypass problematic areas so it can ramp up output. BP is hoping to convince federal officials that the section is suitable to reopen until it can be replaced next year.

•Bouncing Back: Despite the recent memories of Hurricanes Katrina and Rita, the oil industry is ramping up Gulf Coast expansion, the Associated Press reports. Refiners expect to grow capacity in the region by 1.9 million barrels, or 11%, by 2010.

•Picket Plans: Nigeria’s main oil-workers’ unions called a protest strike after a worker’s death after weeks of captivity by militants. The three-day strike was pegged to begin Sept. 13. Previous strikes have rarely made a large impact on production.

•Payday: Oil’s lofty prices have provided a windfall for the industry’s CEOs, Bloomberg reports, which are raking in, on average, three times more than CEOs of similarly sized businesses, according to two watchdog groups.

•Accountability: Phillipines President Gloria Macapagal-Arroyo said those responsible for the oil spill off the coasts of Guimaras Island “would pay dearly” despite claims that the impact is smaller than expected.

•Capitol Inquisition: BP America President Bob Malone will testify at a Sept. 12 Senate hearing, a week after lawmakers in the U.S. House examine the BP unit’s pipeline failure in Alaska

•Driving The Ethanol Corridor: The New York Times sent a reporter to drive the length of the “Midwest Ethanol Corridor,” an ethanol-rich stretch of highway between Chicago and St. Louis. He found the much-hyped biofuel’s chances of success are far from certain.

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Wednesday’s Roundup:

NEW DRILLING IN ALASKA: U.S. Interior Secretary Dirk Kempthorne declared oil drilling will proceed in a region of Alaska’s North Slope that has become the subject of controversy. The government will sell oil leases for drilling around Lake Teshekpuk, an area about 200 miles east of Prudhoe Bay, where oil production has been partially shut down lately due to pipeline corrosion and spills. Environmentalists say drilling could endanger the caribou and geese living near Lake Teshekpuk.

•Petronas Confirms Chad Order: Petronas confirmed that Chad had ordered it to suspend its activities in the country, but disputed Chad’s claims it hadn’t paid back taxes. Over the weekend, Chad’s government told Petronas and Chevron — partners in an oil pipeline operated by Exxon Mobil — that Chad wants to renegotiate the project’s contract. The country today formed a panel for that purpose.

•SEC Drops Case Against Ex-Shell Chief: The Securities and Exchange Commission has decided to take no action against former Royal Dutch Shell Chairman Philip Watts over the reserves-overbooking scandal.

•Kidnapping is Good Business: Nigerian militants who have been kidnapping foreign oil workers by the dozens have been motivated, at least in part, by the promise of big payoffs, the BBC reports.

•Exelon Merger in Doubt: Chicago energy utility Exelon said it will record a $35 million charge in the third quarter reflecting the chance that regulatory hurdles will keep it from completing its merger with New Jersey’s Public Service Enterprise Group.

•Asian Companies Team Up: Asian oil companies are teaming up to compete against Western oil giants such as Exxon Mobil, reports.

•Pleasant Surprise…For Now: California drivers are enjoying a surprising tumble in gasoline prices, the San Francisco Chronicle reports, but they shouldn’t get complacent.

•Clip and Save: Thousands of Filipino prisoners have shaved their heads and chests to fill giant bags of hair used to mop up a massive oil spill, MSNBC reports.

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Tuesday’s Roundup:

CNOOC COOKS: Cnooc Ltd., China’s largest offshore oil and gas producer by output, posted a record first-half net profit on soaring crude prices and increased production. The publicly traded arm of state-owned China National Offshore Oil Corp. said net profit rose 38% to 16.28 billion yuan ($2.04 billion). Cnooc also kept its output-growth target of 9% this year.

•China Building Biofuel Plant: China plans to build a biofuel plant in Hefei, capital of eastern Anhui Province, the government’s Xinhua news agency reported. The plant will be designed to produce one ton of biofuel for every two tons of crop stalks used, according to the report.

•South Korea, China in Pact: South Korea and China agreed Tuesday to pursue joint projects in the energy sector to cope with rising global oil prices.

•Ivanhoe Cancels China Merger: Canada’s Ivanhoe Energy said it was canceling a planned, $100 million merger of its Chinese oil and gas subsidiary, Sunwing Energy Ltd., with China Mineral Acquisition Corp.

•Chevron Employees Leave Chad: Three Chevron employees have left Chad, [subscription to required], the Financial Times reported, a day after Chad ordered the oil giant to leave the country over government claiming it has failed to pay taxes.

•Iraqi Pipeline Explodes: A pipeline carrying oil byproducts exploded near the southern Iraqi city of Diwaniyah, killing at least five people. Several people had been siphoning fuel from the pipeline when the explosion occurred, according to police.

•Bolivian Oil Official Leaves: the chief of Bolivia’s state energy company stepped down, the latest blow to President Evo Morales’s plan to nationalize the country’s gas sector, the Financial Times reports [subscription to required].

•Duke Energy Debates Coal Plant: Duke Energy is considering building North Carolina’s first new coal-fired power plants in some 30 years, but faces opposition from groups worried about the environmental impact, the Charlotte Observer reports.

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Monday’s Roundup:

CHAVEZ TOUR CONTINUES: China will invest about $5 billion in energy projects in Venezuela by 2012 as part of a plan to boost Venezuela’s oil output, the nations’ energy minister told state television. Venezuelan President Hugo Chávez recently completed a visit to China to sign cooperation accords as part of an effort to reduce Venezuela’s dependence on U.S. energy markets. Mr. Chavez is now in Malaysia exploring closer cooperation with that nation in oil and gas industries.

KINDER BUYOUT: Houston energy-transportation and -storage company Kinder Morgan Inc. said it had agreed to be bought by a group of investors including its CEO for $15 billion plus the assumption of about $7 billion of debt. The management-led buyout had been proposed in May. Kinder shares jumped 2.5% on the news. The deal was the third-biggest leveraged buyout in history.

•Woodside Steps In: Woodside Petroleum Ltd. said it has launched an $883.2 million takeover bid for Energy Partners Ltd., a New Orleans independent petroleum producer that agreed in June to acquire Stone Energy Corp. for $1.4 billion.

•Sinopec Shines: China Petroleum & Chemical Corp., also known as Sinopec, Asia’s largest refiner by capacity, said its first-half net profit rose 8.9% from a year ago, as high crude prices offset losses in its refining division.

•Japan Protests China Move: Japan protested China’s opening of a new gas exploration site near disputed waters in the East China Sea.

•Kazakhstan Wants to Help Japan: Kazakhstan aims to dramatically increase uranium exports to Japan in the coming years, providing up to a quarter of the country’s needs, the Associated Press reports.

•A Hydrogen First: A $250,000 demonstration project that produces hydrogen energy to provide backup lighting and warmth at a Maine environmental-education center was hailed at its unveiling as the first of its kind in the nation.

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Friday’s Roundup:

STILL BATTLING SPILLS: Officials continued to fight two major oil spills a world apart. In the Philippines, President Gloria Arroyo called a spill caused when a tanker sunk two weeks ago “a national calamity.” She also urged Filipinos to contribute feathers and human hair to help slow the slick’s advance. Meanwhile in Lebanon, an environmentalist group said a spill caused by Israel’s bombing of a coastal power plant last month, while dire, may not be as harmful to wildlife as some had feared.

•Preparations in the Gulf: Oil companies considered evacuating facilities in the Gulf of Mexico, as Tropical Depression Five gathered steam in the Caribbean, Reuters reported. The depression, which will be called Ernesto if it becomes a tropical storm and/or a hurricane, was on track to enter the Gulf early next week.

•Nigeria Catches Suspected Vandals: The Nigerian navy captured two men suspected of vandalizing the country’s oil pipelines and stealing oil. The government has recently been cracking down on militants and vandals who have shut down more than 20% of the nation’s oil production. But the turmoil has continued: Italy’s Foreign Ministry said an Italian and two other foreign workers had disappeared.

•Peak Oil Soon: Two experts told a conference in Australia that a peak in the world’s oil production was coming soon, after which would come a dramatic change in oil availability and standards of living. More sanguine was the governor of Australia’s Reserve Bank, who told the Financial Times the global economy could easily handle higher prices (FT subscription required).

•EU Criticizes Spain: The European Commission said it believes Spain broke antitrust laws by attaching conditions to a bid by Germany’s E.On AG to take over Spanish utility Endesa.

•Unintended Biofuel Consequences: Though biofuels offer the promise of cheaper fuel for driving and a cleaner environment, they could have the opposite effect, warn oil companies — and some environmentalists, Reuters reports:

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