Recently in Laws Category

Speaker-Designate Dean Cannon (R-Winter Park) unveiled a bold proposal today that would lift the state's current ban on oil & gas exploration and production in the state waters off Florida's coast - a move economists say could be worth at least $1.6 billion a year in state revenues and create more than 19,000 jobs.

The measure amended to CS/CS/HB 1219, which was approved by the Policy Council of the Florida House of Representatives, would not immediately trigger energy exploration in state waters. Instead, it would empower the Governor and Cabinet to consider a process for reviewing, approving or rejecting proposals for exploration and production of oil & gas in Florida's state waters.

With Florida's coast harboring anywhere from 3 billion to 20 billion barrels of oil, approved oil & gas leases could generate billions of dollars in new annual revenues - without raising new taxes.

"Florida's families and businesses are facing unprecedented economic challenges, and the potential for significant, new public revenues from oil & gas are immense," said Barney Bishop III, President and CEO of Associated Industries of Florida. "I am confident that we can do this in a way that will protect our environment and our precious coastline, which is such a critical natural resource for our state."

As Florida has been forced to make nearly $7 billion in painful budget cuts since 2007, Texas has collected nearly $7 billion in annual oil & gas revenues - revenues that fund significant portions of the state's public K-12 and state university budgets.

"Floridians continue to suffer from devastating cuts to higher education, environmental protection, health care and vital infrastructure," said Martha Barnett, partner at Holland & Knight and past president of the American Bar Association. "For the sake of our state's future, we cannot delay discussion of this issue any longer, nor ignore the benefits that other states continue to derive from their energy resources.

Buoyed by the struggling economy and high energy prices, public opinion has swung decisively in favor of offshore energy exploration, as shown by many public opinion polls including a new survey of 625 voters conducted April 15-16 by Mason-Dixon Polling & Research.

Among the results of that survey:

• 59 percent of Floridians generally support drilling off Florida's coast,
• 79 percent support drilling if it raises money for public education, health care and environmental protection,
• 83 percent support drilling if it will produce new jobs and stimulate the economy, and
• 88 percent support drilling if it is environmentally safe.

"Recent public opinion surveys document that Floridians have come to strongly support exploration and production of oil and gas resources off the Florida coast," said Larry Harris, a principal with Mason-Dixon. "Nine in 10 voters (88 percent) support offshore production if it is done in an environmentally safe fashion and raises significant revenues, boosts the economy and creates jobs."

SOURCE Associated Industries of Florida

Voters in California approved a Reliable High Speed Passenger Train Bond Act recently enabling the government to approve $10 billion in bond money to build a modern bullet train that would link North and South California, significantly reducing air pollution in the region by taking cars off the road.
The key to tackling the menace of climate change is to make public transportation systems more efficient.
Voters approved Proposition 1A to ratify the Act but they struck down Proposition 7 and 10, which would initiate renewable energy generation initiatives, since they found them to have too many loopholes. Props 7 and 10 were opposed by environmental and consumer groups across the state and the country.
To read more about the initiative, read the complete article on the Environment News Services website here.

In a move to encourage small producers of renewable power, Britain is planning to guarantee a price premium to them from 2010. The government included these proposals in amendments tabled Wednesday to an energy bill that if approved will become law by December.
The plan would involve supporting small power generating projects such as the installation of solar panels or wind turbines to generate electricity on the property of a household. They would earn a tariff for supplying energy to the national grid.
To read the complete article click here.

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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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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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An editorial in the Chronicle last September warned of peaking global oil production in this decade followed by an inevitable decline. If that were to happen, the US needs to invest heavily in developing alternative energy sources or be prepared to endure steep increases in the price of energy.

A study conducted by the US Department of Energy concurred with the editorial's conclusions.

The study, led by Robert Hirsch, affirmed that global spending on developing alternative energy sources should be $1 trillion per year to prevent the economy from being crippled by oil shortages and the resulting chaos. Considering that the study recommends a 20-year lead time, it might already be too late to prevent a crunch.

Hirsch predicts that oil production will certainly peak by 2020, if not in the next 5 years.
In fact, oil production does not need to peak for severe shortfalls in oil supplies to occur. Natural disasters like Hurricane Katrina, wars like the Israel-Hezbollah conflict, political unrest, government intervention, deteriorating equipment like in the case of the Prudhoe Bay field pipeline, accidents or any combination could interrupt the supply of oil.

The trend of dropping oil prices with the end of the vacation season is extremely temporary. ExxonMobil CEO Rex Tillerson predicts that world demand for crude ol will increase by 50 percent in the next 10 years. Demands from countries like India and China and the developing world will only go up.

Perhaps the report's most sobering conclusion is that the free market and private industry alone will not be able to avoid economic catastrophe from energy shortages. A policy for managing the transition from conventional crude oil to other energy forms is required to be set in place by the government.

If oil companies disagree, they need to make good by showing where all the oil to meet excess demand is going to come from, or come up with plans to develop alternative sources.

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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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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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California Gov. Arnold Schwarzenegger and New York City Mayor Michael Bloomberg said they cannot wait for the Bush administration to take action on climate change and agreed to work together to reduce greenhouse gas emissions.

Gov. Schwarzenegger said that this partnership with Bloomberg and another made with British Prime Minister Tony Blair in July on clean energy technologies will help improve the environment and they did not need the federal government to take the lead.

His partnership with Bloomberg marks the latest environmental push from a Republican governor who has accused President Bush of failing to show leadership on climate change.

Bloomberg, also a Republican, has echoed the Governor's remarks saying "we can't wait for Washington to do something".

The actor turned politician plans to turn a landmark global warming bill into law that makes California the first U.S. state to mandate a cut in greenhouse gas emissions, equal to 25 percent by 2020.

Bloomberg, who was on a 2-day visit to California, to discuss environment and education also announced a five-point program to make New York an "environmentally sustainable city" by taking an inventory of carbon dioxide and other greenhouse gases that will help set targets for lowering emissions.

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The largest gasoline market in the world hasn't seen a new refinery open in 29 years. Though the industry enjoyed record profits last year, it isn't likely to break that streak anytime soon.

Despite dramatically improved profit margins, most refiners still don't believe that the 5 percent a year return on investment is worth plunking down $2 billion to build a new facility.

New refinery construction has been stunted for years by poor economics, changing environmental rules and vociferous community opposition.
The years long struggle to obtain the necessary air and zoning permits is another factor stymieing the building of new facilities. Instead, refiners run their facilities full-tilt and resort to upgrading and expanding them.

Currently, the US has some 149 refineries processing nearly 17 million barrels of crude a day. This is less than the 1981 figure of 325 refineries handling 18.6 million barrels a day. With demands 20 percent higher today, much of the deficit is made up by imports and also with refiners adding capacity to their existing sites.

Connecticut-based Premcor Refining Group plans to spend up to $220 million to boost capacity at its Port Arthur refinery. San Antonio-based Valero Energy Corp. will add 36,500 barrels-per-day of capacity across its refineries, while Marathon Ashland Petroleum is expanding its Detroit refinery by about 26,000 barrels a day.

Good refining years tend to encourage major expansion projects.
Refining margins, the difference between the cost of a barrel of oil and the price of products made from it, hit $16 a barrel during the second quarter of last year and averaged $10.44 for all of 2004. This is a significant increase from the average margin of $6.45 between 1999 and 2003.

Despite the lucrative margins, experts believe that refiners are not expected to expand production capacity at the same rate as in previous years.
This might be because refiners have tackled the easier expansion projects and have been busy making changes to meet new lower-sulfur regulations.
Concerns over a shifting federal regulation known as New Source Review might also have stifled investments.

During the Clinton administration, an interpretation on the law required refiners to make environmental upgrades when performing what the industry deemed routine maintenance.
Under pressure from the industry, the Bush administration has backpedaled on that provision.

Over the next several years though, we can expect new facilities.
Phoenix-based Arizona Clean Fuels plans to build a $2.5 billion, technologically advanced refinery in southwest Arizona. The company hopes to negotiate an oil supply agreement with Mexico's national oil company, Pemex, which would ship crude to the Pacific Coast using an existing pipeline.
The crude would then be loaded aboard tankers and shipped up the West Coast. The investment group would then build a pipeline from the coast to the refinery.

Considering that the Arizona Clean Fuel partners have been trying to obtain the necessary air permits since 1999, many in the industry remain dubious.

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A rare rebellion by government investigators against their own agency, has 4 auditors who monitor leases for oil and gas on federal property say that the Interior Department clamped down on their efforts to recover more than $30 million in fraudulent underpayments of royalties for oil produced in publicly owned waters in the Gulf of Mexico.

Bobby L. Maxwell, who was formerly in charge of Gulf of Mexico auditing, said that these assets belong to the American public and "the agency has lost its sense of mission, which is to protect American taxpayers."

These lawsuits have surfaced as both Democrats and Republicans are questioning the Bush administration's willingness to challenge the oil and gas industry.
Two of the lawsuits claim that two senior auditors with the Minerals Management Service were ordered to drop their claim that Shell Oil had fraudulently shortchanged taxpayers out of $18 million.
Similar suits against Kerr-McGee Corporation and another 2 dozen companies were also suppressed.

Interior officials have denied these accusations, claiming that the auditors simply want a share of any money recovered through their lawsuits.
The department says that the auditors should have followed proper procedure if they believed that fraud was being committed by the companies they were auditing, instead of pursuing private lawsuits under which they could receive up to 30 percent of the monies recovered from the companies.

The auditors have sued the companies under the False Claims Act, that allows individuals to expose fraud against the government. A losing company is required to pay triple the amount of recovered money as well as back interest. In the cases brought by the auditors, this amounts to more than $120 million. People who successfully recover money for the government in such cases are entitled to a share.

While Shell said it had not seen the suits and could not comment, a spokesman from Kerr-McGee said that the case is without merit and the company is fighting it.

The lawsuits come at a time when the Interior Department is already under fire from Congress, accused of covering up ethical lapses and managerial incompetence.

Senator Ron Wyden, Democrat of Oregon, who has been investigating the accusations said, “If it was one isolated instance, you could say that’s somebody who had a bad experience and was frustrated,” Mr. Wyden said.

“But when you have three or four professional, nonpolitical, independent auditors all bringing the same message, that is too important to ignore.”

The Interior Department under President Bush has focused on increasing oil and gas production in the US. Lawyers who have specialized in lawsuits under the False Claims Act said they had never seen a group of government investigators use the law against their own agency and considering that it is 4 and not an isolated one, it forms a pattern of practice.

The agency’s own statistics indicate that revenue from auditing and enforcement plunged after President Bush took office.

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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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If Iran worries about sanctions at all, it should be concerned over those that the US is drawing up and not those than the UN is still deliberating over.

There have been hints that the US may enforce its current sanction laws against foreign companies dealing with Iran and the Congress may further tighten the noose.

Now that the EU has dropped its insistence that Iran stop the controversial nuclear work before talks, US and Eu are not on the same negotiating page. The permanent members of the UN Security Council are expected to meet to thrash out methods to put pressure on Iran but hopes for a resolution aren't high.
Maybe some coherent sanctions will come out of the contrary opinions, most likely the travel bans on the political elite, but it will be seen as the empty diplomatic gesture it is with hardly any actual effect.

US efforts on the other hand are looking tougher. Henry Paulson, the Treasury Secretary called for help in choking off funds to Iranian companies that the US suspects of trading in weapons or nuclear components.
He said that there are reports suggesting that more than 30 front companies are part of a suspected network and have duped Western banks into helping them.

For ten years the US has enforced the Iran-Libya Sanctions Act, which bars non-US oil and gas companies from investing more than $20 million a year in Iran. US companies are banned separately from any dealing with Iran by presidential directive.
With Libya's decision to give up its nuclear program, the Act has been redrafted to excise the part about Libya and will expire on September 29. But a new version, dealing with just Iran is sure to be passed.
There are signs that the US may enforce this version more aggressively, and interpret its provisions more widely than in the past. Under the US’s separate Iran Non-Proliferation Act 2000, there has been much action targeting companies from Russia, North Korea, India and Cuba for allegedly supplying banned equipment.

While some energy companies have been deterred by ILSA from investing in Iran, many have flouted it. But if the US takes a tougher approach, with the Congress producing a much more stringent piece of legislation then these companies will have to be more wary.

A much tougher sanctions package on energy companies investing in Iran, The Iran Freedom Support Act, was passed by the House of Representatives early this year. The White House objected on the grounds that the Bill could harm diplomatic relations.
The Bill languishes so far with the Senate not having passed this version. But the bitter elections could revive it, as well as collapse in diplomatic efforts or the furor created in Iran by the Pope's supposed slur on Islam.

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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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Iran is going to introduce petrol rationing to curb crippling domestic fuel consumption, if it gets parliamentary approval.

Vaziri Hamaneh, an oil minister said that the current situation will continue for a few months after which rationing will be implemented, pending the parliaments decision. But he did not say when the Bill would be submitted.

Though Iran the second largest producer in OPEC, a lack of refineries make it dependent on imports for 30 million liters of petrol a day to meet the demand for subsidized petrol which is sold in Iran at a rate 2.5 times cheaper than a liter of mineral water.
Earlier Hamaneh had announced that Iran would stop importing petrol, but later changed the decision when MP's argued that the move was not feasible.

The parliament had approved annual $2.5 billion budget in February for petrol imports but the government is now seeking approval for an additional $3.5 billion budget for the remaining bit of the year to cover a daily consumption demand of 70 million liters.

Deputy Oil Minister Mohammad Reza said that the government will present the parliament with a draft bill that included raising prices and rationing by late September.

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BP PLC and Shell Oil Co. are among 10 companies that the government is in negotiations with to rework improperly prepared oil and gas leases that didn't include clauses requiring royalty payments for oil selling above $36 a barrel.

Head of Interior's Minerals Management Service, R.M Burton said that BP and Shell "are thinking about it."
Both the companies seem willing to make changes in the leases.

Besides these 2 companies, the Interior department has spoken with 20 of the 55 energy companies that have interest in the leases and has developed "proposed terms".

The leases were made at a time when the price of oil was between $10 to $20 a barrel and the idea was to encourage companied to drill in deep water by waiving the usual 12 percent royalty as long as prices remained low.
But some companies aren't paying royalties since the clause was omitted in their lease agreements.

The government says it is near agreement with the two giants to recover some of neary $10 billion in lost royalty.
Republicans and Democrats shared their outrage over the loss of billions of dollars in lost royalty over what Interior officials have called a "mistake" in lease agreements.
The House Government Reform Committee is not satisfied with the department's explanations.

Burton said that she wants to know if the error was intentional or not. While Republican Darrell Issa said that the error shows the "culture of irresponsibility, unaccountability that pervades the entire department", some Democrats called for criminal investigations saying there was an obvious element of fraud.

Rep. Edward Markey stated “We will have a solution to the Middle East before you have an agreement from Shell and BP for a $36-a-barrel threshold."

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Iraq and Iran plan to strengthen their commercial ties by jointly developing oilfields that straddle their border. The two countries have already agreed to the unitisation principles and will sign the agreement as soon as the technicians mark out the common oil fields.

The deal entails both countries defining their reserves in the cross-border field and then pumping the crude jointly. After the deal is struck, the two sides will build a pipeline to carry Iraqi crude to Iran's southern refineries.
Iran is also willing to buy about half a million barrels a day of crude at market price for their Abadan refinery from Iraq.
With future sales of Kirkuk crude and Basra light crude also marked out, the two predominantly Shia Muslim countries are really forging deeper ties giving rise to concerns among the Sunni minority, other Arab states and the US which still has 145,000 troops in Iraq.

Besides this, Iraq would also like to forge similar deals involving oilfields with Syria and Kuwait.

Iraq is also looking for partnerships with oil companies to develop its fields and is awaiting the passing of the hydrocarbon law which will set oil policy by the end of the year.
The National Oil Company will be set up as soon as the law is passed as a regulatory and supervisory holding company for setting oil policies which operating companies will implement.

Iraq's state oil marketer SOMO will hold talks with customers to discuss contracts for the first half of 2007 in November or December.

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Flawed drilling leases issued in 1998-99 are allowing oil companies to avoid federal royalty payments and the companies are now facing pressure to resolve them.

A mistake made 8 years ago omitted a provision in more than 1000 drilling leases that would have required royalty payments if the price of oil went above $36 a barrel.
Congress had set the $36 mark at that time to allow royalty breaks to spur deep-water exploration.

With the current prices being almost double the trgigger level, most of the leases would have been subject to royalty payments if the provision had not been forgotten.

Chevron Corp, which has recently announced the discovery of new oil in the Gulf of Mexico acknowledged that 2 of the 8 leases involved in the discovery were among those issued without the royalty threshold.

The new discovery made by Chevron and its partners, Statoil ASA of Norway and Devon Energy Corp is believed to contain as much as 15 billion barrels of oil.
Chevron said that the "majority of the discovered resource" including the test well is from leases subject to federal royalty payments but oil found in 2 other lease blocks could be exempt.

The company claimed that those 2 lease areas had not been drilled yet and any conjecture about royalties for those blocks is an academic exercise.
Executives from the company have also assured the Congress that they are ready to discuss reworking the royalty issue in the leases to reach a mutually satisfactory resolution.

BP PLC and Shell oil Co. have also agreed to make changes in the leases held by them. But the companies have argued that the leases are contractual agreements and care should be taken while tampering with them.

Congress is applying pressur eon the companies to reach a compromise with a provision being added in an Interior spending bill that would prohibit any company that refused to rework the leases from bidding on new oil leases. The spending bill has not received final approval.

The Government Reform Subcommittee is set to hold another hearing into the royalty relief controversy hoping to ferret out how the mistake was made in the 1990's and why it was not quickly corrected.
The mistake could cost the government $10 billion in lost royalties, even if the new Chevron discovery is not taken into account.

But getting to the bottom of the blunder "is especialy important in light of Chevron's recently announced new discovery."

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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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Sir Richard Branson has joined hands with venture capitalists Vinod Khosla and Ron Burkle and invested more than $60 million in Cilion, a company that will make bio-ethanol from corn in an effort to satisfy California's need for environmentally friendly fuels. California already uses bioethanol to fuel cars, but most of it is imported from the American Midwest.

Gov. Schwarznegger issued a directive, earlier this year, calling for the state to make 20 percent of the fuel itself by 2010.

Cilion, a joint venture between Western Milling and Khosla Ventures, plans to build enough refining capacity to meet the target itself.
Cilion plans to start work on the first of seven bioethanol plants within a few weeks. It will bring corn from the Midwest and process it with technology that makes it competitive with petrol at oil prices as low as $40 a barrel.

Branson's Virgin empire plans to move into environmental businesses of which this project is a starting move.
Virgin Fuels, a subsidiary will alone invest $400 million in several biofuel schemes. The company is also working with the government on a plan to make it economical for train companies to use biodiesel.
Besides this Branson is said to be considering big investments in other technologies including wind power, hydro-electric and even nuclear stations. The company is open to investing in any kind of alternative-energy.

Branson who attended the recent environmental summit in California said that he feels that global warming is the biggest crisis facing mankind and that every company chairman should be thinking about devoting a percentage of his earnings to it.

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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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The former head of pipeline-corrosion monitoring for BP in Alaska pleaded the Fifth amendment and refused to testify as lawmakers questioned company officials over the cause of the massive oil spill in March this year.

Lawmakers said that the company's lapses were particularly unacceptable given the record profits in the industry and the relatively inexpensive measures that might have prevented the oil spill.
BP exceutive apologized and promised to fix operational lapses.

With Congress aiming to wrap up its session by the end of the month, the hearing was not expected to result in any specific legislative action. It afforded lawmakers an opportunity to talk tough ahead of November elections.

Robert A. Malone, head of BP PLC's US operations said that they had falled short of the standadrds they held for themselves and vowed to manage Prudhoe Bay in "a safe, efficient and environmentally sensitive way", while conceding that the company's reputation had suffered.

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Shell Oil Co. President, John Hofmeister, touted the importance of a "culture of conservation" and investment in alternative fuels.

He said that with fuel prices at the current highs can be used by policy makers to force market changes. World oil prices as low as $10 a barrel in 1998 made investment in alternative fuels not ecenomical but under present circumstances, solar, wind and other alternative energy projects are doable.

Hofmeister said that conventional oil and gas resources are no longer enough for the country's energy security. Fuel derived from oil shales, gasified coal; ethanol and other biofuels; hydrogen fuel and wind and solar energy will play a major role in energy futures.

The US represents 8 percent of the world's population consuming 25 percent of the energy supply. "It's not a sustainable formula," he said, noting that the rest of the world wants its "fair share," too.

Conservation in the US needs to be stepped up. Different designs of homes, factories and vehicles are needed above and beyond adjusting thermostats and driving slower.

In June, Shell announced plans to build a wind farm worth $200 million on the island of Maui to help meet Hawaii's renewable energy goals and do away with the need for a coal-generating plant.
Shell and GM operate 5 hydrogen fuel cell passenger vans in Washington and Shell provides a refueling station near the Capitol.
The company is also investing in producing ethanol with various partners.

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ExxonMobil has been asked to pay up $92.2 million as environmental damages from the 1989 Exxon valdez disaster.

The Alaska Department of Law and the U.S. Department of Justice made the demand not covered in the previous $900 million settlement with Exxon.

The settlement made in 1991 allowed the state and federal government to seek additional damages not foreseen at the time of the settlement.

Alaska and federal officials said in May they would seek additional damages and had until Friday to make their demand of Exxon's successor company, ExxonMobil.

Exxon Mobil is expected to contest the demand since it has said that there are no lingering environmental damages not covered in the 1991 settlement.

If Exxon Mobil does fight the additional damages, the U.S. District Court for Alaska will hear the case.

The Exxon Valdez supertanker grounded on a reef in 1989, spilling about 11 million gallons of crude oil that reached over 1,200 coastline miles making it one ofr the worst environmental disasters in U.S. history.

In addition to the 1991 settlement, Exxon and its successor Exxon Mobil have paid more than $2 billion in cleanup costs, as well as $300 million in claims to affected fishermen.

But it continues to contest a punitive damages verdict of $5 billion issued by a U.S. District Court jury in 1994 in the class-action case brought by fishermen, Alaska Natives and others.

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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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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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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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US Senator Richard Lugar challenged America's automakers and citizens to decrease dependency on foreign oil at a Summit on Energy Security.

The day long summit held at the West Lafayette campus focused on foreign oil dependence and alternative fuels. Besides Lugar, Gov. Mitch Daniels and Purdue President Martin Jischke also spoke to a 1000 strong audience. Panel discussions included representative from BP Inc and Ford Motors.

Lugar proposed a series of measures to contain problems including mandates for more flexible-fuel vehicles, boosted ethanol production and usage, and the implementation of stricter vehicle mileage standards and convincing the federal government to enhance alternative fuel production through a progressive loan program.

He said that failure on the part of the nation to bring about a change in the energy policy despite repeated warnings would be more unconscionable given that success would not only contribute towards a better geopolitical climate but also provide restorative economic benefits to farmers, automakers and others.

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Citing lawyers and traders close to the case, The Wall Street Journal claimed that federal investigators are examining whether BP PLC manipulated crude oil and unleaded gasoline markets.

BP is already facing a civil complaint filed by federal commodities regulators for allegedly manipulating much of the US propane market. Besides this, BP has been summoned before the Congress over the corrosion problems at its Alaska pipelines.

The separate investigations on crude oil and gasoline will intensify pressure on BP as their markets are bigger and directly affect most American households.

The Federal investigation indicates a rise in regulatory scrutiny of BP.

The oil company was not available for comment.

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A semiannual survey of 195 economists conducted by the National Association for Business Economics said that the US economy would go into recession only if oil prices hit $100 a barrel but predicted that oil would not ultimately move that high.

The median forecast for next summer's oil price is similar to the present rate at about $75 a barrel. Terrorism continued to be the paramount short-term problem facing the US economy according to 34 percent of the respondents with energy and inflation following owing to the small prospects of other technologies substituting oil in the next decade.

Only 35 percent of respondents believed that the war in the Middle East would spread and most agreed that violence in that region would not result in major disruptions in oil supply to the US.

Earlier this month, Federal Reserve policy-makers decided to keep the interest rates unchanged at 5.25 percent after more than 2 years of a successive rate increases intended to curb inflation.

The percentage of respondents who expect the Fed will tighten further has dropped from 89 percent to 57 percent.
And while the majority of respondents at 71 percent say the current monetary policy is about right, the panel is spilt on where it should go with 29 percent wanting further rate hikes, 17 percent wanting cuts and 53 percent opting to leave rates at the current level.

The survey was taken in the first fortnight of August.

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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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ExxonMobil CEO, Rex Tillerson, urged the government to "provide timely access to resources" for energy exploration to boost supplies and meet the rising world demand.

With crude oil prices having more than doubled over the past 3 years owing to surging demand for petroleum-based fuels, Tillerson feels that the government should enable energy companies to exploit the full extent of their technology and know-how to bear to new supply opportunities.

"Most energy technologies are developed with specific resources in mind. If these resources are made off-limits, the incentive for R&D is reduced."
Some international oil producers can lay claim to more expertise than state-owned entities that control some of the world's largest oilfields. This expertise is sorely needed to fully develop aging or difficult-to-reach reserves.

Tillerson said that developing nations spending a higher proportion of their GDP on energy are making themselves vulnerable and that current crude prices are harmful to world econominies.

At the press conference, Tillerson also said that he hopes the company's differences with Venezuela over oil contracts can be resolved with negotiations; He was unable to provide the financial impact of a slowdown in production due to the Prudhoe Bay Field shutdown; He would like to expand ExxonMobil's oil business in Russia and that while rivals are shutting wells in Nigeria, ExxonMobil would like to increase production there.

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