January 9th, 2007:

EXTRACT: Even after the fall, Cairn India is worth nearly $5.5 billion. Cairn Energy bought out Royal Dutch Shell’s 50% share in the Rajasthan project for $7.25 million in 2002.

THE ARTICLE 

Wednesday 10 January 2007

Initial public offerings are generally priced around a 15% discount to fair value. So when a new issue tanks 14%, as Cairn India has, it’s hard to escape the conclusion that the seller, Cairn Energy, was simply too greedy.

True, market conditions haven’t helped. The oil price has fallen about 18% since Dec. 15, when Cairn India’s price was set. Shares in parent Cairn Energy, the bulk of whose value is tied up in its 69.5% stake, have also suffered. read more

Crude-oil futures fell, but recovered some lost ground by the end of the trading session, as U.S. weather forecasts predicted more winter-like weather in the coming days.

Here is Tuesday’s roundup of oil and energy news:

* * *
MORE RUSSIAN FALLOUT: German Chancellor Andrea Merkel blasted Russia for cutting off a key oil-supply line through Belarus, the Washington Post reports. Russia claims Belarus forced it to shut the pipeline down, the BBC reports. Russia’s decision has put Europe in a quandary, the Financial Times reports (subscription required), as European leaders have love for neither the Kremlin nor Belarus’s government. Analyst Robin Shepherd writes in the FT that Europe must make a “strong, concerted response” to the Kremlin, though he doesn’t suggest what, exactly, it should do. read more

Published: 2004/01/09 09:44:30 GMT

Giant oil group Royal Dutch Shell has said it is trimming its figures for proven oil and gas reserves by 20%. 

Stunned investors promptly began a sell-off that knocked more than 7% off the Anglo-Dutch firm’s share price in both London and Amsterdam. 

Shell said it does not expect the reassement to have any impact on its financial results, as 90% of the reserves involved remain undeveloped. But analysts were unconvinced. Shares in fellow oil firm BP also fell 2%.  read more

By Alfred Donovan 

Just a few comments about our claim against Shell which ended in a long High Court Trial…Prior to the “SMART” case, Shell had already settled several previous High Court actions in our favour paying several hundred thousand in damages, all of which was ploughed back into further litigation when new causes for action became apparent.

Every claim involved the same Shell manager who was also the subject of allegations and claims by other parties who had made the mistake of disclosing ideas to Shell in confidence. All of the ideas were funnelled to his pet agency with whom he had a special relationship. He also had an off-shore bank account. The track record of the relevant individual was not brought out in the trial which was heard by a Judge who failed to disclose all of his connections with Shell.   read more

JULIAN  EVANS, MOSCOW 
January 9, 2007            

I imagine Sergei Lavrov is feeling a little blue this New Year period. Imagine if you will – everyone else in the Cabinet is at the New Year party, popping champagne and congratulating each other for their brilliance at managing all that petro-wealth. Then their eyes fall on Seryozha, sulking in the corner and muttering about double standards and western media bias.

It really is the one black spot on the government’s year. Everything else – from the Rosneft IPO to the G8 meeting to the Davis Cup – went pretty much swimmingly for the Kremlin this year, yet still, somehow, relations with the West, and with Western media in particular, are at their lowest for years. read more

January 09, 2007
Mark Bridge
 
BP’s fourth quarter update is par for the course. Disappointing output figures and reams of explanation. We could and should be doing well, the statement says, but we’ve had such bad luck.

It is tempting to accept this. To read recovery into the slight gain on the third quarter. To buy the shares while they are down and wait for the dollars to roll in from a new, safe Prudhoe Bay. 
 
But the catalogue of disasters which have beset the firm speaks volumes about a lack of command and control and not about banana skins. Even the inevitable comparisons with a lumbering Royal Dutch Shell are damning. read more

(Associated Press: Gazprom, the Russian-controlled natural gas giant, took a majority stake in the $7.4 billion Sakhalin-2 project. The deal was negotiated after the international consortium developing the project was accused of environmental violations that carried billions of dollars in fines.)

Selective enforcement of laws targets political opponents

By DAVID HOLLEY

1/7/2007 

MOSCOW – Russia’s richest man is thrown into prison. Georgian-owned casinos in Moscow are shut down. An international oil conglomerate is accused of massive environmental violations that could lead to billions of dollars in fines. read more

Created: 09.01.2007 11:19 MSK (GMT +3), Updated: 13:18 MSK,

Azerbaijani oil supplies via Russia to Europe have been halted for more than a week in an energy price row with Russia, the Xinhua news agency reports quoting a statement by the Azerbaijan’s state-owned oil company SOCAR.

The dispute flared up after Russian state gas firm Gazprom increased the cost of its gas exports to Azerbaijan to 235 U.S. dollars per 1,000 cubic meters from last year’s price of 110 dollars.

The price hike prompted the oil-rich Caspian sea nation to stop importing Russian gas, and close down the oil supply to Europe via Russia on Jan. 1. read more

Anglo-Dutch oil major is most important charterer again despite losing ground in VLCCs, writes Tony Gray, Lloyds List

Published: Jan 09, 2007

‘You can be sure of Shell’ is one of the Anglo-Dutch oil major’s advertising slogans that the tanker market will enthusiastically endorse.

In 2006, Shell again emerged as the most important charterer of spot tankers by a comfortable margin.

But statistics issued by Poten ‘ Partners, a leading New York-based tanker broker, also show some significant changes among very large crude carrier charterers and the growing influence of oil traders in the market. read more

By Ed Crooks
Published: January 8 2007 02:00 | Last updated: January 8 2007 02:00

Sir Bill Gammell’s contention that the oil industry is “all about creativity” is nowhere better illustrated than in Cairn India’s oil fields in Rajasthan, writes Ed Crooks.

Cairn Energy bought out Royal Dutch Shell’s 50 per cent share in the acreage for $7.25m in the first half of 2002 and it has gone on to create a business worth more than $6bn (£3.1bn).

For Shell it is perhaps not quite the oil industry’s equivalent of turning down the Beatles, but certainly of missing out on the Kinks. read more

By Mark Odell
Published: January 9 2007 02:00 | Last updated: January 9 2007 02:00

Hardy Oil & Gas said it had made a discovery off eastern India, its first exploration success since listing on Aim in mid-2005.

The shares rose as much as 10 per cent on the announcement, in thin trading, before settling down to close 22p up at 318¾, a rise of 7 per cent.

The find in the company’s CY-OS/2 licence in the Cauvery Basin, off Chennai, is its first success since the Hardy name returned to the market with a listing on Aim 18 months ago. read more

By REUTERS
Published: January 9, 2007
Filed at 2:07 a.m. ET

TOKYO (Reuters) – A U.S. nuclear submarine and a Japanese tanker collided in the Gulf, but there were no injuries or oil leaks, officials of the tanker’s owner and the U.S. military said on Tuesday.

The USS Newport News submarine and the Mogamigawa Japanese cargo ship collided in the Strait of Hormuz, a major waterway for oil transportation, at 10:15 p.m. local time (1915 GMT) on Monday, the U.S. navy said.

The Mogamigawa had eight Japanese and 16 Philippine crew members. read more

Terry Macalister
Tuesday January 9, 2007

ExxonMobil has promised investors it will “soften” its public image in an attempt to rid itself of a reputation as the green campaigners’ public enemy number one.

However, the chairman and chief executive, Rex Tillerson, made clear to a select group of Wall Street fund managers and analysts that the oil company would not be changing its position on global warming, it would just try to explain it better.

The world’s biggest publicly quoted oil company has funded research that took a sceptical line on global warming and faces a long-running boycott campaign against its Esso petrol brand by environmental activists in Europe. A pugnacious personal style and uncompromising stance on warming by its former boss, Lee Raymond, left it compared unfavourably with Shell and BP, which have courted the green lobby. read more

· Supply disrupted to Germany and Poland
· European Union demands urgent explanation

Tom Parfitt in Moscow and agencies
Tuesday January 9, 2007

A bitter energy dispute jeopardised oil supplies to western Europe yesterday as Belarus struck out at neighbouring Russia by cutting off a vital transit pipeline crossing Belarusssian territory.

The closure of the 2,500-mile Druzhba pipeline (druzhba means friendship in Belarussian), one of Europe’s biggest, meant no Russian oil was being pumped along it to Germany, Poland or Ukraine. read more

January 09, 2007
Tony Halpin in Moscow, Christine Seib and Roger Boyes

Alarm at Moscow’s strong-arm tactics

Merkel tells The Times ‘we need secure energy’
 
Europe’s oil supplies from Russia were being held to ransom last night as the Kremlin fell into bitter dispute with a former Soviet satellite state. 
 
Moscow abruptly halted millions of barrels of oil destined for the EU via Belarus in an increasingly hostile wrangle with its neighbour.

The move raised further questions over whether Western Europe can trust Mr Putin for its energy supply. Experts said that Russia had a deeply entrenched habit of manipulating oil and gas supplies as a substitute for diplomatic policy. read more

By Leon Aron
Monday, January 08, 2007

Moscow’s attachment to statist economic policy is undermining its bid for global energy dominance, writes LEON ARON. By re-nationalizing its energy sector, Putin’s regime is slaying its largest golden goose.

The idea that Russia is a new “energy super­power” is all the rage in Moscow, thanks in part to President Putin’s vigorous salesmanship. The coun­try holds between 6 and 10 percent of the world’s known oil reserves and exports around seven mil­lion barrels a day—second only to Saudi Arabia. Last summer, the Kremlin pushed hard to make energy security the centerpiece of the G8 summit in St. Petersburg. Lost in the crash of cymbals, however, is Russia’s uncertain ability to keep up with growing world demand—or even to maintain its current level of production, after a dazzling run from 1999 to 2004. While there are several reasons for concern, the underlying problem is sadly familiar in Russian history: a state ideology is poised to undermine the country’s progress at precisely the time when Russia seems on the verge of a breakthrough. read more

Last Update: 7:34 PM ET Jan 8, 2007
(This article was originally published Monday.)

DOW JONES NEWSWIRES

Iraq’s massive oil reserves may be thrown open for large-scale exploitation by Western oil companies – which could end up grabbing up to 75% of the beleagured nation’s oil profits – under a law seen coming before the Iraqi parliament within days, the Independent reported on its Web site Monday.

A draft of this controversial law, which the U.S. government has been helping to craft and has been seen by the Independent, would give oil giants such as BP PLC (BP), Royal Dutch Shell PLC (RDSA) and ExxonMobil Corp. (XOM) 30-year contracts to extract Iraqi crude and let these foreign oil companies undertake their first large-scale operations in the country since the industry was nationalized in 1972. read more

Crude-oil futures tried to rally in early trading, but settled lower on the New York Mercantile Exchange on worries about warm weather, ample supplies and the flight of speculators from the market.

Here is Monday’s roundup of oil and energy news:

* * *
WORRIES GROW ABOUT RUSSIA: Russia’s decision to suspend oil exports through Belarus in a dispute over fuel subsidies will exacerbate Europe’s concerns about its dependence on its huge eastern neighbor for energy supplies. Russia’s state-owned pipeline monopoly OAO Transneft said it had shut off crude exports to Belarus, which it accused of illegally siphoning oil from the main pipeline that carries Russian oil to Europe. That move led to a halt in deliveries to Germany and Poland. But the European Union’s energy commissioner said the cuts pose “no immediate risk” to energy supplies in the bloc. read more

Pressure Mounts to Fix Flawed Leases
Valued at Billions of Dollars in Future Royalties
By JOHN J. FIALKA
January 8, 2007; Page A6

WASHINGTON — With Democrats controlling Congress, the oil industry is in for a rough ride. So is the agency that collects royalties for oil and gas drilling on federal lands.

Democrats and some Republicans have complained for months that the Interior Department’s Minerals Management Service — whose motto is “securing ocean energy and economic value for America” — has mishandled the royalty program. The issue will hit the spotlight Jan. 18, when the House takes up energy legislation targeting oil-industry subsidies.
 
One goal: untangling a legal mess that could allow companies to escape paying at least $10 billion in future royalties for drilling in the Gulf of Mexico. As part of the debate, congressional critics are sure to ramp up their complaints about the service, which has said that it failed to include a clause requiring the royalties into leases issued in 1998 and 1999. read more

By: Robert Lea, Evening Standard – London: KRTBN
Published: Jan 09, 2007

Shares in beleaguered BP plunged further today after the oil giant admitted it has missed by a mile its 2006 production targets and profit margins are falling too.

Analysts immediately slashed their forecasts. Morgan Stanley, which said the news indicated BP’s worst trading quarter since the start of 2004, is cutting its 2006 fourth-quarter earnings estimates by 14 percent, or $600 million (GBP309 million), to $3.7 billion. read more