Recently in International Category

The Europan Union is desperately seeking to cut its dependence on Russian gas and is planning on harnessing more energy from the wind, the sun, the sea as well as identifying new sources in Africa and the Caspian, to do so.
Since energy prices have risen by around 15 percent in the EU last year, leaders are urgently searching for a permanent solution to this problem.
Pricing disputes with Russia, interruption of supplies by transit states and Russian invasion of Georgia have all contributed towards pushing the 27- nation organisation towards reducing its dependence on Russian gas.
The European Commission's Strategic Energy Review has stated that they will seek to finalize gas supply commitments from Azerbaijan and Turkmenistan and will look at creating a consortium to buy Caspian gas. However, since the EU has set a target to cut their reliance on fossil fuels to reduce EU emissions by 2020, they are hoping that their imports will considerably reduce by then.       
Information: Article by Pete Harrison for Reuters on the Gardian website. To read the complete article click here.

A top energy official of the EU will travel to Turkey and Azerbaijan to show Europe's commitment to a gas pipeline that would transport natural gas from the Caucasus westward in 2013 keeping it well away from Russia’s reach.
The EU is trying to ease its dependence on Russia which provides 40 percent of EU’s gas imports. Energy Commissioner Andris Piebalgs will make a push for the Nabucco pipeline whose existence is threatened by the deals Russia is pursuing in the region.
To read the complete article click here.

Pic courtesy Rickz from flickr.com

With a contribution of $US 4.7 million, Sweden is joining a financing facility that aims to support and promote the use of clean energy in the region. Joining Norway and Australia, Sweden is the third contributor to this organization, titled the Clean Energy Financing Partnership Facility, which is administered by the Manila- based Asian Development Bank.
Aiming to improve energy security in Asia, the fund seeks to help countries shift to low- carbon economies through investments in green technologies that reduce carbon emissions.
To read the complete article click here.

The possible revival of a Saddam-era oilfield deal between Iraq and China has given hope to top oil multinationals over the potential of getting contracts giving them access to Iraq's vast untapped resources.

The deal, like others made by Saddam Hussein was effectively frozen by international sanctions and then by his overthrow.

The news that Iraq's oil ministry is thinking of awarding China the first foreign contract to develop oil resources has given heart to western oil majors that Baghdad is opening up and looks ready to honor its contract rather than handing over the al-Ahdab field to the US, which has 142,000 troops in the country.

After the US led invasion in 2003, US firms won most of the big infrastructure deals and European firms feared that the same would happen with Iraq's oil wealth.

This deal, worth some $700 million, could be a beginning for other Chinese companies and a door opener for other development deals. Iraqi oil minister al-Shahristani is expected to visit China, Japan and Australia to discuss oil investment projects.

The oil minister favors centralized control of Iraq's oil, but a new constitution gives autonomous federal regions a role in

developing resources. There might be a political message in his overture to China signaling his centralization goal to the Kurdish regional government in the north which has struck deals with many independent oil exploration companies.

The government has given priority to the Ahdab oilfield because of its proximity to new power stations and refineries. It expects output to increase from 30,000 barrels per day to full capacity of 90,000 over two years.

Though Russia's Lukoil did not comment, analysts say that if Baghdad were to validate the West Qurna oilfield deal, Lukoil would be willing to start work again.

While multinationals will not sign multibillion dollar contracts until an investment law is in place and security improves, a western executive says that the Chinese "don't give a damn whether there's an investment law to protect them" and "don't have the same incentives on profitability as the international oil companies."

The major oil companies are confident that the fields they would like to work on will not be assigned to rival companies from India or China, as the Iraqi government is aware that it needs the technology and finance that international oil companies bring.

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A deal between Iran and Sinopec for developing a major Iranian oilfield will be finalized in the next 2 months, Iran's deputy oil minister stated.

Deputy Oil Minister Mohammad Hadi Nejad Hosseinian was quoted as saying "The talks will be finalized in less than two months and the contract will come into effect two months later."

Sinopec agreed in October 2004 to take the lead in developing the Yadavaran field and to buy 10 million tons of LNG a year for 25 years.
But the finalization of the deal, in the manner of other Iranian energy contracts with foreign firms had been subject to protracted negotiations and delays. Disagreements over pricing for the deal were behind a previous delay.

The Yadavaran oilfield is estimated to have 3 billion barrels and is expected to produce 300,000 bpd, around the same amount of crude that China currently imports from Iran.
The deal worth as much as US$100 billion if signed could draw fire from the US.

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Russian Foreign Minister Sergei Lavrov in an effort to alleviate Western concerns over Russian energy deals said that talk of revising PSA's or seeking to exclude foreigners from the sector were unfounded.

Lavrov said, "Assertions about 'revisions' of PSAs and especially about squeezing foreigners out of the Russian energy sector have absolutely no basis whatsoever".

He also added that "Carrying out checks in no way means that licenses for developing deposits within the Sakhalin-2 project will be withdrawn".

Recent threats from Russian officials to withdraw an ecological permit for the Sakhalin-2 oil and gas project led by Shell have led to fears that Russia wants to renegotiate the production sharing agreement.

Natural Resources Minister Yuri Trutnev said on Tuesday that work on the Sakhalin-2 project could continue while a full-scale ecological probe, due to start on October 25 is held.

Shell has doubled the estimated cost of the Sakhalin-2 project to $20 billion which has infuriated Russia, complicating talks on the strategic swap of assets with state controlled Gazprom.

Concerns about the suspension of oil pipeline loading for technical checks on the ExxonMobil run Sakhalin-1 PSA project abounded while ExxonMobil's arm in Russia said it was unaware of any order to suspend work and business was continuing as usual.

The head of Russia's technical standards agency said that he hoped Sakhalin-1 would be able to deal with any breaches of the rules at its De Kastri terminal before its planned launch on October 1.

ExxonMobil said that while the issue needed to be sorted out, the scheduled launch of the terminal was possible.

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Venezuela's state oil company is helping Grenada build storage tanks needed to store the fuel bought under the Petrocaribe deal.  The lack of storage has been a key issue holding up the delivery of oil to the Caribbean.

Under the Petrocaribe deal which was finalized in June 2005, Caribbean countries pay market price for Venezuelan fuel but need pay only part of the cost immediately. The remaining can be paid over 25 years at low interest. The governments can also pay part of the amount with services and goods such as rice and bananas, while Venezuela will provide storage tanks and docking facilities.

The tanks will hold up to 20 days worth of Grenada's fuel needs - more than the current maximum of a 10 day supply.

Grenada's Petrocaribe program has been weighed down because it lacks the infrastructure to receive and distribute oil.

While 14 countries in the region have signed the Petrocaribe deal, itis unclear whether Grenada has received any oil under the agreement.

The Petrocaribe deal is seen as a bid by anti-Us Venezuelan President Chavez to make inroads in the Caribbean, where the US is a major trading partner. His deals are an opposition to the US free trade deals.

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Russian plans to divert up to 25-45 billion cubic meters of gas from its Shtokman field to Europe and away from the US could be bad news for US companies Chevron and ConocoPhillips.

The Shtokman field has a planned output of 70bcm a year. With plans to divert up to half of it to Europe, Russia's current gas supplies to Europe get a 15 to 30 percent boost.

Previously Russian gas monopoly Gazprom had said that it wanted to grab 10 percent of the US market by 2010 by liquefying almost all of the gas for shipment to the US.

Shtokman has gas reserves of around 3.7 trillion cubic feet and is a challenging project due to its offshore, out of helicopter range, location. Gazprom has shortlisted 5 companies including Chevron, ConocoPhillips and Total to help it develop the field.

If Gazprom is planning to focus on Europe as the key market for Shtokman's gas, then the European companies on the shortlist such as Total, Statoil and Norsk Hydro would have better chance of being part of the project. ConocoPhillips and Chevron may be left out as Gazprom has said that in the final line-up it will only take 2 or 3 partners on for the $20 billion project.

Gazprom has repeatedly put off announcing its choice of partners. Russia is using the bidding process for partnership in the

Shtokman project as a bargaining chip to become part of the World Trade Organization. If Russia does not succeed in this, the chances that Shtokman will have European partners are high.

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Russia tried to ease European concerns over its business maneuvers like investment in the European aerospace consortium and the withdrawal of permits to western oil companies in Russia. France, Germany and Russia met over the weekend at a castle in the north of Paris where these issues came up.

A Russian state-controlled bank has acquired a 5.02 percent stake in EADS and the government is believed to want to increase the stake. Speculation that Russia might gain a position on the board of the European consortium was rebuffed by EADS and French Finance Minister Thierry Breton.
However at the meeting in Paris, Putin stated that the acquisition "is not at all the sign of an aggressive behavior on the part of Russian partners" and that they "will not use this stake to change in any way the institutional situation of EADS."

Concern was also evinced over the future of French oil giant Total in Russia. There have been indications that Total may lose its license for the Kharyaga oil field. Putin told reporters in Paris that these were "greatly exaggerated rumors".
French officials believe that Putin's words are solid guarantees for France's investments in Russia.

Though Putin did not address the disagreements with ExxonMobil or Shell over contracts and revoked licenses, he assured western countries that he was aware of the co-dependent nature of energy suppliers and consumers. He also indicated that some oil resources would be redirected to Europe.

Russia also signed two "Memoranda of understanding" which act as blueprints for potential contracts worth more than $10 billion.
One MOU is between French construction giant Vinci and the Russian Transportation Ministry for a highway between Moscow and St. Petersburg. The other looks at possible cooperation on railroad, transportation and infrastructure in Russia between the Russian and French transportation ministries.

Chancellor Angela Merkel of Germany insisted on the need for "reliable partners," between Europe and Russia, in energy matters.

Besides business matters, the three countries also discussed current diplomatic issues.

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Russia's nationalist oil policy that's aiming to wrest back control of the country's resources from the world's most powerful energy firms has come under international glare following events last week.

Shell and ExxonMobil's Sakhalin island project, BP's joint venture with TNK in eastern Siberia and Total's operations in the Kharyaga oil field have all been affected by threats to revoke licenses granted years ago to the companies. The Russian move was no crude step, rather a well planned effort with ambassadors overseas, Siberian officials, the natural resources ministry officials, environmental agencies all coming in with a variety of reasons - financial, time overruns, environmental - to account for the retraction of contracts.
For Shell, BP and Total, environmental concerns were cited by government officials.

While Western companies have not commented publicly, the moves have attracted international condemnation.
Japan was stinging in its reaction saying the delay in the Sakhalin-2 project would have a 'negative influence on overall Japanese-Russian relations.'

Japan is to take gas from the Sakhalin-2 project and has two leading companies, Mitsui and Mitsubishi, holding 45 per cent of the venture.

Russia's nationalized energy giant Gazprom, is believed to be the reason behind the politicking and in fact in response to Japan's statement, Russian ambassador said that a state-run company could speed along the project. He meant Gazprom, which has been trying to negotiate its entry into Sakhalin for many years now.

The asset swap that was being negotiated between Gazprom and Shell, which would give Gazprom a 25 percent stake in Sakhalin-2 has also been suspended.
Costs overrun have been touted as the reason behind the falling through of the deal. Cost increases mean that Gazprom can claim a reduction in value of the 25 per cent of Sakhalin that it is acquiring, which means recalculating the asset swap.

The Production Sharing Agreement signed a decade ago between Shell and the government, allows the government to retain ownership while the partners develop the project and take revenue in early years to pay back their investment. After this, the government receives an increasing proportion of revenues up to 70 per cent. Cost overruns and delays mean that the government will get less money, and get it later.

PSA's and cost overruns also affect ExxonMobil's Sakhalin-1 project. Costs could increase there, from $12.8bn to $17bn. The Russian government reacted angrily and said that Exxon could be stripped of its license.

Total faces the withdrawal of its license for environmental reasons and failing to reach production levels set out in its PSA.

PSA's made sense for Russia in the mid-90's when the government was financially stretched and could not invest on its own account.

But it is unpopular in today's Kremlin, when the rising oil prices have filled government coffers. Also the fact that they are internationally enforceable make them humiliating for the government in that it does not have sovereignty over its assets.

Gazprom is in talks with ONGC, India to buys out its stake, which will give the company a stake in 2 key projects on the island. Gazprom is also keen to secure the stake of three owners in the TNK-BP venture.
There have been reports that exploration licenses for the Kovykta field could be withdrawn from BP.

It certainly seems clear that Gazprom and the government are strategically exerting pressure on foreign companies.

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Crude oil dipped to below $60 a barrel at $59.80 after Iranian President Ahmadinejad said that Iran is open to discussing "everything" if the US stops its threats against the country.

Crude oil for November delivery fell by 61 cents, or 1 percent, to $59.94 a barrel in after-hours electronic trading on the Nymex.

Hedge-fund managers and other large speculators cut their long positions, or bets prices will rise, by 39 percent in the week ended Sept. 19. Traders with long positions outnumbered short positions by 22,498 contracts on the Nymex.

BP's announcement that it expects to resume production of about 150,000 barrels a day from the eastern field in a week's time is also expected to have helped in the price drop.

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According to a report by Greenpeace and the Global Wind Energy Council, Wind has the potential to supply one third of the world’s electricity by 2050.
Ambitious or unrealistic?

Despite 9 years of government support and subsidy, wind farms in the UK, one of the windiest locations in the world, have been erected at a snail’s pace.
Roughly just 1.4 percent of total UK electricity supply comes from wind power. Though the government wants 20 per cent of electricity generation to come from renewable sources by 2020 (most of that capacity provided by wind farms), there are many hurdles.

Primarily, the problem is inadequacy of the electricity infrastructure. The second problem is nimbysism, that is though most people say they approve of wind farms, the average time it takes to get a wind farm through planning is 5 years!

Offshore wind farms were supposed to be the solution. But development has barely begun because of problems with shipping lanes, bird life, radar interference and soaring costs.
Tax breaks in the US and Germany for investors in wind farms have caused a run on turbines, and the soaring cost of steel, required to embed giant turbines 20 meters in the sea bed, make off-shore wind farms look distinctly uncompetitive.

Greater incentives to build offshore can be offset only by higher electricity prices in the long run.
All in all, wind seems good in theory, but plain old blustery in practice.

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A day after Venezuelan President Chavez called President Bush "the devil" in a speech to the UN General Assembly, he visited a Harlem church and pledged to double the amount of discounted heating oil his country ships to poor Americans.
Chavez announced that Citgo, the US-based refining arm of Venezuela's state-run oil company, plans to increase the amount of heating oil it is making available under the relief program from 40 million gallons to 100 million.
He said the oil will reach people in 18 states, including American Indians in Alaska.

Chavez started the heating oil program last winter, accusing Bush of neglecting the poor.
He called Bush "an alcoholic and a sick man" to applause from the crowd which included activists and supporters at the Mount Baptist Olive Church.
Chavez said that the American people are friends of Venezuela and he hoped that they would awaken before long and elect a better president. He called Bush's policies in Iraq criminal.

The South American country receives billions of dollars from the US as its top buyer of Venezuelan oil, which fund many of Chavez's popular social programs.
Chavez repeated warnings that if the US government tries to oust him, Venezuela would halt oil sales to the US.

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Reliance Industries from India announced that its natural gas reserves could yield as much as 50 trillion cubic feet and that it was bringing forward the start up of a new refinery it had planned by 6 months.
Additionally, Reliance's head of international operations Atul Chandra stated that one of its discoveries at a site he declined to identify could yield 1 billion barrels of oil.

Reliance made one of the world's largest gas finds at the Krishna Godavari basin, which were estimated to contain 35 tcf. Now with reserves and technical resources put together, it could exceed 50 tcf.

Chandra also said that Reliance will soon enter the coal business once the Indian government has liberalized the coal industry to allow private investment in production.
Reliance also hopes to enter Iraq "at the appropriate time" either on its own or with partners.

At a time when many international oil majors are struggling to keep projects on schedule due to a tight market for inputs and contractors, Reliance has preponed the start up date of its new Jamnagar refinery by 6 months to June 2008.
Chandra said it would be one of the most sophisticated in the world, with a complexity level of 14.4 as measured by the Nelson index, enabling it to process heavy crudes.

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Inflation and foreign exchange pressures have pushed up Exxon Mobil's expected spending on its Sakhalin oil project in Russia above the 2002 estimate of $12.8 billion.

Bob Davis, a spokesman from the company said that Exxon Mobil had seen higher oil field service costs, but that he was unable to quantify the spending amount on the Sakhalin-1 project.

He said that "the budget is essentially the same, but the $12.8 billion was in 2002 dollars."

The Sakhalin-1 started output in August and is expected to reach 250,000 barrels per day by the end of the year.
Moscow plans to auction off newly discovered deposits in the region, though Exxon Mobil says those properties are included in its existing contract. The government and the company are currently at odds over whether the oil giant will be allowed to enlarge the license territory of the Sakhalin-1 block to the nearby deposits.

Just weeks before its first shipments are set to begin, a regional environmental watchdog questioned the environmental and technical readiness of Exxon Mobil's export terminal on the Pacific Ocean.
The Russian Resources Ministry has also revoked environmental permits for Shell's Sakhalin-2 project.

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Government approval for Shell's $20 billion Sakhalin project was withdrawn and state-owned Gazprom was reported to be trying to buy half of the TNK-BP joint venture, giving impetus to doubts about the involvement of foreign companies in the Russia's oil and gas sector.

The reason for withdrawing environmental approval on the Sakhalin-2 project was supposedly to "satisfy the arguments of the prosecutor's office". The prosecutor generals office had allaged that the permission to develop the second phase of the

Sakhalin scheme had been granted illegally. Shell denied the charge and said it was continuing work on Sakhalin, but admitted that the removal of its environment permit might lead to more delays and further cost overruns.

Shell has faced lots of problems on the project with doubling costs and mounting anger from environmentalists over potential damage to the endangered whale population. In this situation state-owned Gazprom has been trying to purchase 25 percent stake in Sakhalin-2.

Some feel that Gazprom is acting as the political arm of Kremlin and the permit issue is the latest attack by the government in an attempt to wrest back control of oil and gas assets held in the private sector.
Local reports hint that ExxonMobil's Sakhlain 1 project could meet a similar fate.

Sakhalin-2 is one of 2 projects run by western energy firms under production sharing agreements signed in the 1990's when

Russia lacked the resources to develop oil and gas projects on its own. With the Russian economy now booming thanks to high oil prices, many government officials have called for a revision of the Sakhalin-2 deal to include Russian participation.

Similarly, Gazprom is said to be in talks to buy the holding in the TNK-BP joint venture that is currently controlled by three local Russian investors.

Russia has taken repeated steps in recent years to consolidate state control over the energy sector.

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The no-show of oil giants in the recent auction of oil prospecting licenses held in India has been attributed by Director-General of Hydrocarbons VK Sibal to the strength of the country.

The absence of the oil majors like Exxon, Chevron and ConocoPhillips has been attributed to the maturity of Indian companies which refused give in to demands for large share of the production from the blocks.

BP and BG from the UK, Total of France and ENI of Italy, and companies from Malaysia, Myanmar, Australia, Ukraine, and Cyprus took part in the auction.

Though the actual investment could be much larger, the latest auction of prospecting licenses is expected to lead to investment of $8-10 billion, in a worst-case scenario.

The next round of auction blocks are expected to be bigger in scale and the data acquisition process for the blocks has begun with marketing kicking off in December.

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Update

A record 165 bids were received for 52 blocks put up for exploration by the Indian government.

Global energy giants British Gas, British Petroleum, Italy's ENI and Malaysia's Petronas are among the 66 firms that have bid for exploration acreages.

However, super majors Chevron, ExxonMobil and Conoco Philips of the US, who were expected to partner Reliance Industries, did not participate at all.

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Oil majors like BP, Shell and Exxon Mobil are among a throng of investors who are bidding for 55 exploration blocks covering 30,00 sq. km for oil and gas exploration rights on India's continental shelf.

This is the largest auction of oil and gas acreage to be held in India and interest in the licensing has been high after Cairn Energy's billion-barrel Mangala discovery.

Murli Deora, India's Petroleum and Natural Gas minister, said that he was confident that investor perception of India's oil and gas prospects was changing rapidly.

More than two third's of India's oil is imported with the oil import bill currently at $45 billion. This bill is increasing with rising demand in India and is adding to the financial burden of supporting fuel subsidies to the nation's rural poor.
Subsidies on fuel for cooking and lighting in rural India costs the government up to $15 billion.
State owned Oil and Natural Gas Corporation is in a race with Chinese oil companies in the hunt for foreign sources of fuel.

BG Group of Britain and BHP Billiton are seeking acreage in the Indian licensing round. Cairn Energy is looking to extend its Indian activity with a bid for 11 blocs.
Chevron, which is already in partnership with India's Reliance Energy has also bid.

The Indian government changed the bidding rules to give more weight to companies with “international credibility” so that it could attract big oil’s expertise and deep pockets.
Chevron, Exxon and BP are thought to have been aggressively pursuing exploration rights in the Krishna Godavary basin where substantial gas reserves have already been found.

Bidders will be judged on their technical skill, scale of proposed work program and the profit share they seek from the state. The results will be announced at the start of next year by the Indian government.

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China is getting incentive to become a global player in the nuclear power industry from Pakistan's growing nuclear energy needs and the country's determination to look to China for investment and knowledge in the field.

Though China is still in the process of seeking foreign aid to expand its nuclear sector, government officials have made it clear that an internationally competitive nuclear power industry is the ultimate goal.

During meetings in Pakistan last month, President Pervez Musharraf of Pakistan sought more Chinese input requesting new plants to help boost Pakistan's nuclear power capacity.
China has already completed a 300 megawatt nuclear power plant in Pakistan using its domestically built reactors and has started construction on another plant there.

Beijing aims to sign an agreement with Pakistan to help build 6 nuclear power plants with an installed capacity of 300MW each. Pakistan aims to have 8000MW of nuclear power capacity by 2025.

Pakistan had pledged cooperation in the global fight against terrorism and invited the US to set up nuclear power plants in the country but Washington has chosen to deal with Pakistan's arch-rival India instead.

Relations between Pakistan and the US suffered when it was revealed that the forerunner of Pakistan's nuclear weapon's program, Abdul Qadeer Khan, had helped Iran, Libya and North Korea develop their nuclear programs. He has been under house arrest since then.

This episode resulted in the US advising Pakistan to look to Iran for its energy needs. At the same time, the Us has discouraged India from sourcing Iranian gas.

The nuclear deal with India has been tailored to suit the civilian industry but could still allow India to boost its nuclear warheads using US nuclear fuel and technology. It has been passed by the US House of Representatives but still needs the Senates sanction.

China is eagerly stepping in to the breach in Pakistan, hoping to generate markets for its own burgeoning nuclear power industry.
China has revealed ambitious plans to have 4 percent of its electricity needs met by nuclear power by 2020. This would mean that China needs at least 2 reactors annually, each with a capacity of 1,000MW.

China's State Council approved a plan for the country's long-term nuclear devlopment which highlights the nuclear solution as a clean energy option and as the most practical choice for reducing dependence on Middle Eastern oil and heavily polluting coal-fired plants.

Initially, the prospect of a huge rollout of new plants had delighted foreign investors anticipating bolstered demand for their technology considering that only three of China's nuclear reactors were domestically designed and built. But the Chinese goverment has been repeartedly delaying the announcement of the bidding result for four new nuclear reactors causing foreign companies' hopes to dim.

Chen Hua, a senior official of the China National Nuclear Corp, the country's major nuclear conglomerate, argued that the purpose of foreign cooperation is to help China develop its technology so that its nuclear power industry is self sufficient and competitive. He said that in the present tendering process, only 2 reactors should be awarded to foreign companies and two should be reserved for domestic companies.

The CNNC has begun to portray the the planned increase of nuclear power generation as an oportunity for China's domestic industry to test and improve its indigenous second-generation-plus reactors. The CNNC officials claim that this would help China eventually export its home-grown technology making it a global player.

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The two largest oil consuming countries in this region, the United States and Brazil, have markedly different approaches to dealing with their addiction to oil.

While Brazil is seeking to increase its production, use and exports of alternative fuel such as sugar-based ethanol and is seeking alternatives to its dependence on Bolivia's natural gas market, the US is debating whether to open its natural reserves in Alaska for more oil exploration and is inhibiting ethanol imports from Brazil.

The main reason for the difference in approach is the size of the markets involved - Brazil's consumption is a tenth of that of the US.
The market volatilty and global nature of the oil business make it essential for pundits to look for ways to break the addiction to oil. Brazil has come up as a good example of ingenuity and resourcefulness.

Nearly all Brazilian cars have flex-fuel engines running on both gasoline and ethanol, and the country has cut its gasoline consumption by almost half in the past 4 years.
While this is significant, it is barely 3 percent of US gasoline consumption. So without any quick fixes for larger economies, analysts say that the region is likely to experience instability in the years to come and that political relationships will play a key role.

For instance, Venezuela which provides the US with 1.2 to 1.4 million barrels a day, has threatened to cut off supply and send more oil to China over the medium term.
The issue is deeper than supply. Venezuela is using oil to buy influence and has created an alternate trade bloc that operates outside of US influence. Chavez has begun to reassert state control over the private oil sector in Venezuela.

Other countries are following Venezuela's lead with Bolivia moving to nationalize its natural gas sector and Ecuador seeking to get control of private oil fields.

Norway has a progressive oil policy that shifts its windfalls into a tightly controlled fund that serves as a buffer when prices dive. This is in marked opposition to Venezuela which is spending all its profits on various presidential schemes and programs.

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Following charges by the Chad government against Chevron and Petronas regarding non-payment of taxes and their subsequent exclusion from the oil producing consortium in the country, Chevron Corp has agreed to pay extra tax to the government.

President Idriss Deby had ordered the two companies out of the country on charges of not having paid upto $450 million in taxes.

While Chevron has committed to paying the taxes in the coming days, no agreement has been reached with Petronas.

ExxonMobil holds a 40 percent stake in the consortium with Chevron and Petronas holding 25 and 35 percent respectively. They have financed a 657 mile pipeline from Chad to Cameroon's Atlantic port with a capacity of 225,000 barrels per day.

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Conoco Co. has decided to withdraw from Thailand after failing to break even for the last 15 years. Shell and Petronas are both interested in acquiring the Jet petrol stations operated by Conoco Co.

While Conoco has already approached several oil companies operating locally to buy its 147 petrol stations nationwide, industry executives believe that Conoco will call for public bids in the Thai operations in the near future.

Tiraphot Vajrabhaya, chairman of Shell Company of Thailand said the multinational was always exploring opportunities to expand in Asia Pacific, under its "move from West to East" strategy.

Though Shell is estimated to have invested upwards of 4 billion baht in its Thai operations, after depreciation and current market value are taken into account, the price of any acquisition is likely to be lower.

The current climate of retail oil business in Thailand is very poor and Shell is not going to expand this year. They will invest 200 million baht in general maintenance of its stations this year, much lower than normal investments of 700-800 million baht a year.

A Petronas executive also confirmed that the company plans to bid for Conoco's jet stations but is not planning to expand its network this year beyond the 117 stations it already has.

The bidding process if it goes ahead is expected to last  from 6 months to a year.

While companies are always looking for opportunities to expand, the final decision will rest with the headquarters and will depend on conditions, the market situation, potential and pricing.

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Crude oil rebounded from a 5 month low to prices above $67 a barrel as the Petroleum and Natural Gas Senior Staff Association confirmed that they will carry out a three day "warning strike" beginning Sept. 13.

Nigeria's two main oil worker unions pledged to strike unless security in the Niger Delta region improves.
If the strike carries on longer, oil supplies from Africa could be further disrupted. Nigeria is Africa's largest producer and has been suffering from various problems this year including kidnappings of employees, attacks on infrastructure and militant action which has cut output by as much as 715,000 barrels a day.

With the latest issue, crude oil for October delivery has gone up 13 cents at $67.45 on the Nymex.

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The Indonesian government might take over a huge natural gas field run by ExxonMobil Corp when its contract expires in January.
The Natuna D-alpha block contains about 70 percent carbon dioxide and is thus expensive to develop and difficult to sell. The field has around 222 trillion cubic feet of gas, of which 46 tcf is thought to be commercially recoverable.

Energy Ministers Purnomo told reporters that if ExxonMobil has no commitment to produce or sell gas, Indonesia will terminate the contract.

Indonesia amd ExxonMobil had signed an agreement in 1995 to invest $40 billion in the offshore gas project, however tapping the reserves has proved difficult. ExxonMobil said it was looking for buyers for gas from Natuna D-Alpha.

The gas in this field accounts for about 25 percent of Indonesia's total gas reserves of 182 tcf.

ExxonMobil has a 76 percent stake in D-Alpha with the remaining 24 percent with state energy firm Pertamina.

Indonesia is trying to phase out costly oil-fired power generation and uses more of its cleaner, cheaper natural gas domestically. The country is Asia Pacific's sole OPEC member with more gas than oil.

Exxon was engaged in a 5 year row with Pertamina over the operatorship of the $6.2 billion Cepu oilfield, which was recently resolved and has faced sporadic problems in the country.

A government move not to renew Exxon's contract will create uncertainties about doing business in Indonesia amongst foreign investors. Added to this are worries about Indonesia's legal system, labor and mining policies.

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China's biggest refiner, China Petroleum & Chemical as well as Nippon Oil of Japan are trying to reduce their dependence on the Middle East by importing oil from Africa and Russia.

Angola and not Saudi Arabia is China's largest supplier this year and Japanese refiners are buying crude from the Russian Far East. As the world's fastest growing automobile market, Asia finds refined oil from Africa and Russia more attractive since it yields more gasoline and diesel than Mideast supplies.

This trend will benefit companies like EXxonMobil, BP, Total and OAO Lukoil that are drilling in Africa and Russia and have been largely excluded from production in the Middle East where state-owned monopolies control the oil industry.

The Asia-Pacific Petroleum Conference in Singapore will certainly have diversifying oil supplies on its agenda. With a fifth of the world's oil consumption flowing through the Strait of Hormuz, concern over disruption of oil supplies in that region by Iran have increased.

China Petroleum, Nippon Oil, Indian Oil  and SK of South Korea are few Asian refiners that have bought new grades of crude oil for the first time this year as sour-crude from the Mideast produces less gasoline and refiners in Asia are trying to produce more transportation fuel.

The share of producers such as Saudi Arabia, Oman and Yemen in the world's second-largest energy market has fallen with China importing from Africa, Kazakhstan, Russia and Venezuela.
Angola shipped 15 million tons of crude oil to China, in the first 7 months of the year, 13 percent more than Saudi Arabia.

While shipments from the Persian Gulf to China rose by 5.8 percent in the first half of this year, during the same period imports from Africa rose by 22 percent.

Sinopec imported Chinguetta crude from Mauritania and Azeri light and Hamaca Blend from Venezuela. Japan which relies on the Mideast for 90 percent of its oil needs has started to import crude to the tune of 700,000 barrels from Sakhalin island in Russia.

Indian Oil bought Girassol crude from Angola and Erha from Nigeria. Hindustan Petroleum and Bharat Petroleum have purchased Azeri light and Erha.

Refiners are taking Winston Churchill's words, "energy security lies in diversity" very seriously now.

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US Secretary of State Christopher Hill, is set to visit Beijing to discuss reviving stalled negotiations on North Korea's nuclear program and has accused Pyongyang of boycotting mulitlateral talks on its nuclear ambitions.

Reports of a simulataneous visit of North Korean leader Kim Jong-il to China are uncertain.
An anonymous official said that China has decided to invite Mr. Kim amid speculation that North Korea may be planning an underground nuclear test. An armored train known to be used by Mr. Kim for long travels has been spied at the border with China prompting speculation about his visit to China.
Mr. Hill said he had "no information on Kim Jong-il's travels."

Tensions have been high since early July when North Korea conducted missile tests. They are not yet thought to have tested a nuclear bomb though have admitted to nuclear capabilities.

Christopher Hill and his Japanese counterpart have agreed to work with the other partners to revive talks with North Korea, advocating concrete action to persuade Pyongyang to abandon its nuclear program amid talks of North Korea planning more tests.

Mr. Hill maintained that the Us position has not changed. The September 2005 agreement which promised economic aid in exchange for Pyongyand scrapping its nuclear program is still on the floor. The agreement fell apart over disagreements on how to implement it.

International concerns were raised when North Korea launched 7 missiles in July, including a long-range weapon capable of hitting parts of the US.

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The tax hike from 34 percent to 50 percent on heavy oil operations imposed by the Venezuelan National Assembly has ExxonMobil worried.
The "unilateral decisions taken by the Venezuelan government to change the fiscal terms of the Cerro Negro strategic association agreement, which the National Assembly approved" is a matter of concern for the company.
The company holds a 41.7% stake in the 120,000 barrels-a-day Cerro Negro project, one of four heavy-oil Orinoco Belt joint-ventures between international oil companies and the state-owned giant Petroleos de Venezuela S.A.

The country's government is looking to hold a majority stake in the Orinoco oil projects by December. The new tax could bring in between $700 and $800 million to the government.

ExxonMobil relations with the Venezuelan government have soured in recent times as Chavez has sought to reassert the role of the state in the vital oil industry.

The four projects in the Orinoco area are jointly run by PDVSA along with ExxonMobil, Total SA (TOT), ConocoPhillips (COP), Chevron Corp. (CVX), Statoil ASA (STO) and BP PLC (BP).

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Apparently the world's largest solar electric power plant with more than 1,400 movable solar modules has started up in the southern German state of Bavaria.

The solar modules can automatically tilt and rotate during the day to face the sun at all times and harness energy for around 3,500 households, according to operators at the plant.
This technology helps the firm to generate upto 35 percent more electricity than a fixed solar array. The area around the modules is open for sheep grazing to help prevent erosion.

The company has invested $90 million in the project and it is expected to yield an output of 12 megawatts when fully operational.

A neighboring solar park in Pocking held the previous record as the world's biggest, providing 10 megawatts of electricity to 3,300 homes.

Germans who are also forerunners in wind power energy invested 3.7 billion euros in solar energy last year.

Solar energy accounts for less than 1 per cent of the country's energy needs, but is expected to grow to more than five percent by 2020.

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The controversial plan to effect ship-to-ship oil transfers may have got the go ahead from the Maritime and Coastgurad agency but environmental groups have vowed to wage a battle against it on the basis that the project would put the Fort and its two special protection areas for seabirds in serious danger.

The EU has launched an investigation to check whether the proposal to pump Russian crude oil between supertankers breaches any environmental regulations.

Mark Ruskell, a green environmentalist said that the Forth Ports situation could descend into a legal battle and that investor confidence in a less than clean PLC would suffer. He feels that the time is coming when executive ministers should use the licensing powers they hold.

Alyn Smith, the Scottish Nationalist MEP who triggered the EU investigation, said the outcome could overrule the Maritime and Coastguard agency's decision.

Forth Ports said that safety was of paramount importance and that it would await the decsion of the panel of independent experts  who  are carrying out the risk assessment of the proposal.

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Tehran ignored its second deadline for halting uranium enrichment and the foreign ministers of the European Union have agreed to give Tehran 2 more weeks to clarify its stance on the country's nuclear program.
At a meeting in Finland, Philippe Douste-Blazy spelt out the position held by the EU - if Iran suspends enrichment, the Eu will suspend the sanctions process in the UN. Javier Solana, the EU foreign policy chief will meet up with Iran's chief nuclear negotiator in a week to clarify the Iranian stance on its enrichment program as well as its offer of cooperation on nuclear energy.
On the other hand, Iran's stance has remained defiant with President Ahmadinejad reiterating that Tehran will not abandon its nuclear program since it is for a peaceful purpose.

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A recent bill enacted by the Venezuelan government hikes the income tax rate from 34 percent to 50 percent for 6 foreign oil giants working in heavy oil ventures in the Orinoco basin.

Chevron Corp. is one of the companies affected by the increase which will be effective from January. Chevron did not comment on the Venezuelan announcements and its stocks closed down by 55 cents at $65.19.

Deputy oil minister Bernard Mommer said that the government is looking at a minimum 51 percent stake in those same ventures and a decsion on that will most likely be taken before December.

President Chavez has steadily taken a larger share of the profits from the Orinoco projects, which produce as much as 600,000 barrels a day of oil. Earlier in May, the government had increased royalties on the four projects from 16.6 percent to 33.3 percent.

This move may jeopardize investments as it basically eats into the companies' share of profits while making them shoulder a greater burden of costs.

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The oil spill from the sunken oil tanker Solar 1 off Guimaras island in the Philippines is being touted as a disaster on the scale of the Exxon Valdez catastrophe.

Though the amount of oil aboard Solar 1 is a fraction of what the Valdez disgorged when it foundered off Alaska, the fact remains that the Valdez spilled in a relatively remote area. A number of people depend on the Guimaras region for their livelihood and with the Solar 1 having leaked one-tenth of the contained oil so far, experts say a ticking time-bomb is on the ocean floor.

Nestor Yungue, a marine biologist said that the speed with which the oil reached the Guimaras coast is a concern since it does not allow for the chemical disintegration of the pollutants. The Valdez crude took time to hit the Alaskan coast contaminating 1,300 miles of coastline, killing a quarter-million sea birds, 1000's of otters and hundreds of seals.

It will be 3 to 6 months before we are able to see the damage in this instance.
Environmental economist Rodelio Subade said damage from the Solar 1 would not be limited to 'tradable goods' like fish stocks but could have an impact on generations of fishermen.

The Taclong national marine reserve took a direct hit when the tanker sank. Mangroves expert, Resurreccion Sadaba, said that coral reefs and marine organisms including fish and mollusks have started dying. He also said seedlings and saplings among 90 hectares of mangrove thickets, vital shelters for fish fry, were already “showing signs of withering”.

Mangroves are the basis of the marine food chain and with their removal the whole system will collapse.
The Taclong reserve is also a vital nursery for 2 of the country's richest fishing grounds, the Sulu Sea and the Visayan Sea. If the spill is not contained within the narrow straits on either side of Guimaras, these would be hard hit.

The tourism industry is already suffering with mass cancellations for both this year and the next.

The Coast Guard is spraying dispersants to contain the slick, pushed by currents and monsoon towards the Visayan Sea. When the winds shift in October, it will be open seas between the tanker wreck and the Sulu Sea which is the site of one of the world's most biologically diverse coral formations.

A Japanese salvage ship is on its way to try to refloat the tanker or siphon off the remaining oil.

All of the Sunshine Maritime Development's remaining tankers have been grounded since the Solar 1 sank. Company president, Clemente Cancio, defended the qualifications of Norberto Aguro, the tanker's captain saying he was an expert in manning chemical tankers which are more difficult to handle than oil tankers. But he added that Aguro might have been wrong in setting sail in those weather conditions. The tanker had passed inspection before it sail.

The Board of Marine Enquiry questioned why there were excess of 4 men on a tanker with a capacity of 16 and noted that the tanker was only carrying 19 life vests.
Cancio said that Petron Corp., the company which had chartered Solar 1 required at least 2 surveyors on board and the crewman present at the enquiry affirmed that the 2 seamen who are missing had been wearing life jackets before the tanker capsized.

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Chad backed down from an apparent threat to nataionalize part of a foreign oil consortium comprising ExxonMobil, Chevron and Petronas, saying it was ready to renegotiate a deal with the partners that would give the state a share.

Chevron and Petronas had been ordered to halt pipe-laying operations over allegations of non-payment of taxes. The two companies insist that they have complied with the tax obligations and are in talks with the government.

President Idriss Deby in a speech had said that Chad wanted to join the consortium with a 'reasonable' 60 percent stake - the exact size of the share held by Chevron and Petronas arousing speculation that Deby was proposing to seize control in an act of hardball  resource nationalism.
At present the state receives royalties and taxes.

But a government spokesman on the following day denied any such nationalization plan. He claimed that there was no connection between the government's desire to renegotiate and the tax dispute.

Dieudonne Djonabaye, deputy communications director at the presidency, said the government and ExxonMobil would together 'provisionally' run the consortium for the time being.
Contradictions have been noted between Deby's speech and Djonabaye's assertions. While Deby demanded a 60 percent national stake, Djonabaye said the exact size of the stake has not been decided. Deby also doubled the figure of alleged unpaid taxes to double the number he had previously quoted.

His government has earlier locked horns with the World Bank and has threatened the country's oil partners.
With the actual operation of the pipeline being handled by Exxon, the oil output has not been affected by the dispute.

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Substandard contruction work has caused a consortium led by Royal Dutch Shell PLC to suspend pipe-laying work at a mudslide-prone mountainous section of its giant liquefied natural gas project, called Sakhalin-2, on Russia's far eastern island of Sakhalin.

The halt on work is not expected to push back the project's completion date. About 870 miles of the final combined length of 1,000 miles of oil and gas pipelines have already been welded.

Monitoring by the company revealed "isolated examples of subcontractors not maintaining certain standards ... This is not acceptable to the company, therefore we have suspended work in certain areas within the Makarov mountain range."

Russia's Natural Resources Ministry is auditing the project and called for construction to be halted over mudslide concerns earlier in the month. The ministry's attention might be aimed at pressuring Shell to offer OAO Gazprom, a state-controlled gas monopoly, better terms as it jostles to join what will be the world's biggest LNG development.

Gazprom is asking for a 25 percent-lus one share stake in Sakhalin-2 in exchange for giving Shell access to the far northern Zapolyarnoye-Neocomian field, the world's fifth-largest gas deposit.

Last July, Shell said the expected cost of developing Sakhalin-2 had doubled to around $20 billion due to currency swings and rising prices of commodities such as steel.

Gazprom wants to reduce the assets it's offering in the swap deal as the cost increase has diminished the value of the stake it wants.

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As part of a plan to boost Venezuela's oil output, China will invest around $5 billion in energy projects in the country by 2012.

Rafael Ramirez said that the initial investment made by China is very important as it is part of the increase in oil production, which is projected at 5.8 million barrels per day by 2012.

Currently, Venezuela is providing 150,000 bpd of oil and products to China with the joint plan aiming to reach up to 500,000 bpd by 2012.
Ramirez added that the Chinese investment was inclusive of a joint venture to operate the Zumano fields in eastern Venezuela and investment by China's CNPC in the Orinoco heavy crude belt.

PDVSA, the Venezuelan state oil company, plans a total investment of $56 billion by 2012 as part of an expansion plan that includes increasing natural gas production, boosting refining capacity and launching a wide-scale development of the Orinoco heavy crude belt.

Chinese energy company Sinopec will be part of the development of an oil block in the Gulf of Paria. Besides this China will also help Venezuela build 18 new oil tankers by 2012.

President Hugo Chavez of Venezuela just rounded off a visit to China to sign cooperation accords as part of an effort to reduce Venezuela's dependence on US energy markets.

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Two major foreign oil companies, US based ChevronTexaco and and Malaysian Petronas, had been ordered by Prseident Idriss Deby to leave Chad over alleged non-payment of taxes. The imposed 24-hour deadline has expired.
Chevron said that it has fully complied with tax demands and has received no "official notification" to leave.
Petronas has not commented.

While it is not clear how the authorities plan to enforce the expulsion order, the two companies that together account for 60 percent of Chad's production have denied the charge of non-payment.

Mahamat Bechir Okormi, Chad's minister for state control and ethics, said that Chevron and Petronas had to pay tax but arranged with a minister in order to get a tax exemption. In Chad, only the national assembly can exempt companies.

Three government ministers have been sacked and may be prosecuted and Oil Minister Mahamat Nasser Hassane has been dismissed.

With the expuslion of Chevron and Petronas, the only remaining company in the consortium which handles the country's oil production would be ExxonMobil.
Since ExxonMobil runs the pipeline and the other two companies have few staff in the country, production is unlikely to be seriously affected, especially since President Deby said that his government would take control of the remaining reserves.
The government had recently evinced its interest in joining the consortium.

Following Chad's revival of diplomatic relations with Beijing, observers feel that the firms may have been expelled to make room for Chinese oil companies. If true, this move will mark a turning point for realtions in this region.

Earlier this year, Chad threatened to stop oil production if the US led consortium did not pay up several months' worth of oil revenues.
Chad also had a run-in with the World Bank over allocation of oil revenue spending.
Rows over Chad's oil revenues have been simmering for months and the recent decision of expulsion has sent shock waves around the oil industry.

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Prseident Arroyo's Executive Order 565 revoked a contract awarded to Malaysian oil company for production in the Philippines.

Mitra Energy Ltd. had won a tender to take part in the development of oil deposits in the Camago-Malampaya field off western Palawan Island. Mitra had secured the rights in a preliminary agreement with a unit of Philippine National Oil Co. The contract was made null and void by an order that directed PNOC and other government agencies from subcontracting out work covering exploration or development in the Camago-Malampaya reservoir with no warning and no explanation, sending a shudder through the foreign investment community.

Peter Wallace, a cosultant for foreign multinational corporations with over 30 years of experience in the Philippines, said that investors were concerned about the "sanctity of contracts in this country".

Upstream, an oil exploration publication, said the move was “understood to be due to pressure from influential Filipino business interests, which do not want the potentially lucrative projects to be awarded to a foreign company.”

The unease over the order was reflected in other agencies such as PNOC and the Department of Energy which were taken by surprise and the French Chamber of Commerce which stated that "this occurence would not help the establishment of confidence in the Philippine market which we have been fighting for."

Chris Whitmee, a spokesman for Mitra, said that the company has spent upwards of a million dollars preparing for the bid and had already lined up contracts with international vendors. The sudden directive has taken them completely by surprise particularly as the objection has been based on subcontracted exploration (farm-in) and development (farm-out) contracts, which are worldwide energy sector benchmarks.

Whitmee said that Mitra was waiting for an explanation and had not given up on the project.

Others in the industry are watching to see how the government justifies its decision to revoke a contract after it has been assigned.

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Iran responded to the incentive package given by the Western powers on Tuesday and said that it had offered positive signals in its proposal to resolve the standoff over its nuclear program.

Iranian Foreign Ministry spokesman Hamid Reza Asefi said that if the Europeans paid proper attention to the positive and clear signals in Iran's response, then the nuclear standoff can be solved through negotiation and without tension.
But key UN Security Council members differed in their responses.

The US State Department agreed that Iran was sincere in its proposal but it fell short of the conditions set by the UN - the mainone being that Iran halt nuclear enrichment.
French Foreign Minister Philippe Douste-Blazy said that only if Iran suspends enrichment can negotiation continue.
German Foreign Ministry spokesman Martin Jaeger said that the UN demand for suspension of enrichment indicated that Iran has lost the confidence of the international community that its nuclear program is civilian.
On the other hand Russia's Foreign Ministry said that talk of sanctions was premature before the Aug. 31 deadline was met and that they would continue to seek a negotiated solution.

China urged United States and its allies to be patient and Iran towards "constructive measures".

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In the face of Iran's defiant stance on its nuclear program, Israel has signed a contract with Germany to buy 2 more submarines capable of firing nuclear missiles.

The one billion deal was signed last month and Germany has agreed to take up costs of upto a third of the value. The submarines will be operational shortly and add to Israel's expanding military resources.

It already has 3 Dolphin-class submarines which can fire nuclear missiles, but the newer models can stay submerged for longer.
Israeli security sources said that in the light of Iran's nuclear ambitions and an Iranian President who has called for Israel to be "wiped off the map", the submarines are needed to counter long-range threats.

Owing to Israel's small land area, its military planners have a clear preference for submarine-launched nuclear weaponry. US Defence Intelligence Agency has estimated that Israel has about 60-85 nuclear warheads. Submarine-based missiles give the country a credible nuclear deterrent.

The semi-official news agency Mehr said that Iranian authorities would announce a "very important achievement" in an area of nuclear technology.
In its response to the western incentives package, Iran has offered to address the issue of suspension while reminding the world of its "stablizing role" by offering to its influence with Hezbollah to organize an exchange of prisoners between Israel and Hezbollah.

Iran will be further encouraged in its stance by the divided responses from the international community to its proposal. While China and Russia prefer to puruse negotiations, France will have none of it till the suspension of uranium enrichment and ironically America's war on terror has "severely compromised" its attempts to curb Iranian nuclear amibitions.

With the war on terror eliminating Iran's two main regional rivals - the Taliban in Afghanistan and Saddam Hussein's regime in Iraq without replacing them with stable structures has given Iran regional supremacy. Iran's links with its neighbors need to be understood to see why "Iran feels able to resist western pressure". If the US uses military force to curb Iran's nuclear ambitions, it would open itself up to retaliatory destabilizing intervention by Iran for its forces in Iraq.

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