Oil nears $61 as inventories sink

Oil nears $61 as inventories sink

When asked what consumers can do to help drive the price of gasoline down over time, A.G. Edwards' O'Grady didn't mince words. "Buy a smaller car," he said. "This isn't going to get better, and you've just got to get used to it. It is the cost of being an American."

Occidental to Resume Oil Operations in Libya

Occidental to Resume Oil Operations in Libya

From Reuters

July 30, 2005

Occidental Petroleum Corp. said Friday that it won approval from the Libyan government to resume operations there in territory the company was forced to abandon in the mid-1980s because of U.S. sanctions on the North African country.

The Westwood-based oil company said last week that it had struck a deal to resume operations in Libya but that it was awaiting governmental approval. The company was among the more aggressive of the U.S. oil producers in pursuing access to Libyan oil fields, winning stakes in exploration blocks this year.

President Reagan expanded sanctions against Libya in 1986, barring U.S. companies from doing business there and lifting exemptions for oil companies, in response to the bombing of a disco in Berlin and other terrorist acts that the government claimed were backed by Libya.

Occidental said that resumption of production in Libya, a member of the Organization of the Petroleum Exporting Countries, would add 12,000 to 15,000 barrels of oil to the company's daily output.

In the 19 years since Occidental left the country, its properties have been operated by the state oil company, but the company gained no financial benefit from their operations. The U.S. government eased economic sanctions against Libya in April 2004, opening the door for oil companies to return.

A spokesman for Occidental said it would be the first U.S. oil company to resume production in Libya on fields it controlled before the 1986 sanctions.

Those fields will be in addition to the new blocks that Occidental won in a January auction. Chevron Corp. of San Ramon, Calif., and Amerada Hess Corp. of New York also won exploration licenses in January.

Occidental shares fell 75 cents to $82.28.

US Senate passes multi-billion dollar energy bill - Sify.com

US Senate passes multi-billion dollar energy bill - Sify.com:

"'We cannot order Americans to buy smaller cars, little tiny cars, and we can't order them to stop buying cars,' said New Mexico Republican Pete Domenici.

Senator Barack Obama, a rising star in the Democratic Party, though voting for the bill, said it also represented a missed opportunity. 'I would insist that, in the next year or two, we immediately address the issue of how we can wean ourselves off Middle Eastern oil,' he said.

The energy bill provides around 14.5 billion dollars in tax breaks, most going to traditional energy companies, though some will be funnelled to alternative energy solutions such as wind farms.
It provides a tax credit for the construction of stations to make ethanol-based additives to gasoline, which could eventually save thousands of barrels or imported oil.

The nuclear power industry also looks set to benefit, with incentives which could lead to the construction of new nuclear power plants for the first time in many years.

People who buy hybrid cars can get a tax credit of up to 3,400 dollars under the legislation, and there are also incentives for people who outfit their homes with energy saving windows and insulation.

It is still possible that drilling in Alaska's Arctic National Wildlife Refuge will be inserted in other legislation later this year. "

US Govt Sponsored Peak Oil Report Draws Disturbing Conclusions

Resource Investor - Energy - US Govt Sponsored Peak Oil Report Draws Disturbing Conclusions

US Govt Sponsored Peak Oil Report Draws Disturbing Conclusions

By Michael J. DesLauriers
29 Jul 2005 at 10:46 PM EDT


TORONTO (ResourceInvestor.com) -- A 67-page report released earlier this year on the subject of Peak Oil and sponsored by the U.S. Department of Energy drew several conclusions:

World Oil Peaking is Going to Happen
Oil Peaking Could Cost the U.S. Economy Dearly
Oil Peaking Presents a Unique Challenge (“it will be abrupt and revolutionary”)
The Problem is Liquid Fuels (growth in demand mainly from transportation sector)
Mitigation Efforts Will Require Substantial Time
Both Supply and Demand Will Require Attention
It Is a Matter of Risk Management (mitigating action must come before the peak)
Government Intervention Will be Required
Economic Upheaval is Not Inevitable (“given enough lead-time, the problems are soluble with existing technologies.”)
More Information is Needed
Based on the report (Peaking of World Oil Production: Impacts, Mitigation, & Risk Management) we are probably in quite a bit of trouble if, as some analysts suggest, peak oil is already upon us. The study was led by Dr. Robert Hirsch who is a Senior Energy Program Advisor at SAIC (Science Applications International Corporation), and who has had a long career in Energy milieu in a variety of important positions.

3 Scenarios

The study envisions three scenarios for dealing with a peak oil reality: scenario one involves action not taken until peaking occurs, and scenarios two and three deal with action taken ten and twenty years prior thereto. The conclusions follow:

Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.

Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.

Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.
“The obvious conclusion from this analysis is that with adequate, timely mitigation, the costs of peaking can be minimized. If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship, as discussed earlier.”

Based on these conclusions, the global economy could stand to suffer incalculable consequences if peak oil is already upon us. Apparently, the world seems to need at least twenty years notice and a serious coordinated effort in order to truly avoid sever economic pain.

According to Hirsch, “The world has never confronted a problem like this, and the failure to act on a timely basis could have debilitating impacts on the world economy. Risk minimization requires the implementation of mitigation measures well prior to peaking. Since it is uncertain when peaking will occur, the challenge is indeed significant.”

Oil Sands

Like many of the other experts whose opinions have been aired through Resource Investor, Hirsch would appear to find the much-vaunted Canadian oil sands inadequate, though admittedly they have the potential make a positive dent in the problem.

The report states, “In addition to needing a substitute for natural gas for processing oil sands, there are a number of other major challenges facing the expansion of Canadian oil sands production, including water81 and diluent availability, financial capital, and environmental issues, such as SOX and NOX emissions, waste water cleanup, and brine, coke, and sulfur disposition. In addition, because Canada is a signatory to the Kyoto Protocol and because oil sands production results in significant CO2 emissions per barrel, there may be related constraints yet to be fully evaluated.”

“The current Canadian vision is to produce a total of about 5 MM bpd of products from oil sands by 2030. This is to include about 3 MM bpd of synthetic crude oil from which refined fuels can be produced, with the remainder being poorer quality bitumen that could be used for energy, power, and/or hydrogen and petrochemicals production. 5 MM bpd would represent a five-fold increase from current levels of production.82 Another estimate of future production states that if all proposed oil sands projects proceed on schedule, industry could produce 3.5 MM bpd by 2017, representing 2 MM bpd of synthetic crude and 1.5 MM bpd of unprocessed lower-grade bitumen."

“it is also worth noting that the bitumen yield from oil sands surface mining operations is about 0.6 barrels per ton of mined material, excluding overburden removal. This is similar to the yield from a good quality oil shale, but is less than Fisher-Tropsch liquid yields from coal, which is about 2.6 barrels per ton of coal.86”

Conclusion

Readers of Resource Investor are far more aware of the energy related challenges ahead than the average man in the street who believes that high oil and gas prices are the result of Iraq, OPEC, and some underhanded, self-serving conspiracy involving Bush, Cheney and Halliburton. Unfortunately, a sound knowledge and understanding of the situation makes us no less vulnerable.

While the specific implications of peak oil remain unclear, there can be no mistaking that any period between involving a lapse in adequate energy supply will be met with economic hardship for the global economy. If peak oil is not upon us already, the chances of minimizing future damage are fair and it is certainly encouraging to know that government authorities are taking the threat seriously. Any way you slice it however, the economy and the consumer are likely to escape unscathed through the transition period into other energy sources as the world comes to grips with a new evolving paradigm in satisfying its needs for energy consumption.

Energy bill lacks declaration of independence on foreign oil

The Seattle Times: Nation & World: Energy bill lacks declaration of independence on foreign oil

Energy bill lacks declaration of independence on foreign oil

By James F. Peltz and Richard Simon
Los Angeles Times


The energy bill nearing passage in Congress, described by the Bush administration as an important step toward making the United States less reliant on foreign oil, would do little in the short term to boost the nation's energy independence or provide relief for motorists paying record gasoline prices, analysts said.

The U.S. petroleum industry, already enjoying record profits from skyrocketing oil and natural-gas prices, lobbied aggressively for the legislation and received billions in tax breaks partly designed to encourage new drilling.

But the industry is unlikely to start sinking new wells based on those incentives alone, projects that require years of development before they add fresh oil and gas to the market, experts said.

"The energy bill is not going to make a meaningful difference in U.S. supplies," said Steve Enger, an analyst with Petrie Parkman, an energy-investment bank in Denver.

The bill, the first overhaul of national energy policy in a more than a decade, was approved by the House of Representatives yesterday; Senate approval is expected today. Bush, a former Texas oilman, has pushed for the energy bill since taking office in 2001 and is expected to sign it.

Some critics said the legislation represents a giveaway to the energy industry.

With crude trading near $60 a barrel, oil companies "don't really need much more encouragement" to launch exploration projects, said Rick Mueller, senior oil analyst at Energy Security Analysis. "Companies already are looking anywhere they can to find additional barrels."

Moreover, the energy legislation won't do much to quench U.S. thirst for oil. Rising demand in the United States — the world's biggest consumer of petroleum — as well as in China, India and elsewhere has been a major factor in keeping global oil markets tight and pump prices high.

"There's very little in the bill, really, to address that," Mueller said.

Even Energy Secretary Sam Bodman cautioned that motorists should not expect a quick decline in gasoline prices.

"There are no magic bullets in this law that will change energy prices in the next day, week or month," Bodman said. "It's going to take a number of months, if not years, to deal with energy prices."

The bill's $11.5 billion in tax breaks over 10 years are not just aimed at generating more oil and gas supplies. They also include the first-ever tax credit for nuclear-power companies and a range of measures to promote conservation and energy efficiency.

However, lawmakers rejected language — opposed by U.S. automakers — that would have required the federal government to adopt tougher fuel-economy standards for sport-utility vehicles and other gas guzzlers and to look for other ways to cut U.S. oil consumption.

Still, the Bush administration hailed the bill as laying the groundwork for energy independence.

"For over four years, the president has called for a national energy strategy for our national and economic security," and getting Congress "to come to an agreement is definitely an achievement," said White House spokeswoman Dana Perino.

Concerns about U.S. energy security on imported oil increased last month when a Chinese oil company jumped into the bidding for Unocal.

The United States, which consumes about 20.7 million barrels of oil a day, depends on imports from Canada, the Middle East and elsewhere for about 58 percent of that oil, according to the Energy Department. That dependence on foreign oil has jumped from about 45 percent a decade ago.

About 30 percent of the 5.4 million barrels of oil produced in the United States each day comes from the waters of the outer-continental shelf. Most of that is in the Gulf of Mexico, although production off the coasts of Alaska and California is also included.

The energy bill's oil-related incentives, which include reduced royalties on oil pumped from under U.S. waters, mainly affect deepwater projects in the Gulf, where companies have stepped up exploration without the promise of additional tax breaks. Production in the Gulf is expected to surge 33 percent, to 2 million barrels a day, by the end of the decade, Mueller said.

The incentives provide "an incremental step" toward boosting exploration in the Gulf, said John Felmy, chief economist of the American Petroleum Institute, the oil industry's trade group in Washington. The measures included in the bill "could be the marginal difference between whether to do it or not," he said.

Russ Roberts, spokesman for Exxon Mobil, the largest U.S. oil company, called the bill "an important step toward providing consumers with reliable and affordable energy supplies, while addressing the need for conservation and energy efficiency."

Oil, utility and other energy companies have spent more than $314 million in the past the past 2 ½ years lobbying federal officials on energy-related legislation and other industry concerns, according to PoliticalMoneyLine, which tracks lobbying expenses.

But companies didn't get everything they wanted; at least not yet. For example, a provision that would have opened Alaska's Arctic National Wildlife Refuge to drilling was dropped from the final version. Still, when Congress returns from its August recess, it is expected to vote to open a portion of the refuge to energy exploration.

Critics complained that the oil industry is receiving tax breaks at a time they are enjoying record profits because of the surge in energy prices.

In the last three months of 2004, for instance, Exxon Mobil's profit shot up 27 percent from a year earlier to $8.4 billion, the largest quarterly profit ever for a U.S. public company. The oil giant's full-year profit was a company record $25.3 billion.

"While the energy bill does not decrease dependence on foreign oil, it does increase dependence on federal handouts," said Tom Schatz, president of the Council for Citizens Against Government Waste, a watchdog group.

A Crude Approach - Lew Rockwell.com

A Crude Approach by John M. Peters

A Crude Approach
by John M. Peters

The Bush Administration has treated with scorn, accusations that its invasion and occupation of Iraq were motivated by the drive to control Iraqi oil. Yet, the evidence – both historical and current – continues to mount in support of that theory.

Starting with World War I and the proliferation of machines fed by fossil fuels nations began to realize the dire need to capture and control sources of oil, both as a means of fueling their own war machines and as a means of denying their enemy the precious resource. The dynamics of oil supply and demand would shape entire military campaigns as well as the food chain among nations. Strategically and literally war was being fueled by oil.

Between 1914 and 1917, the U.S. share of world oil output grew from 65 to 67 percent of a much larger production. Between 1940 and 1945 it rose from 63 percent to some two thirds of a nearly doubled world output at war’s end. The Middle East by contrast, produced less than 5 percent in 1940 and not much more in 1945…By 1975 oil was becoming a critical factor to the CIA, where George H.W. Bush took over…By 1980, the United States produced under 20 percent of world petroleum output and had to import 30 percent of its needs. By 2000, the U.S. share of production had shrunk further and 50 percent of U.S. consumption had to be imported. …Leverage would continue to swing to the Middle East with Gulf producers alone expected to provide 54 to 67 percent of world oil exports in 2020….A careful listener could almost hear the war drums….Cheney and his chief of staff, Lewis Libby, had already participated in drafting a 2000 report for the project for a New American Century that called for taking over Iraq – this well before 9/11 – as part of a larger, oil-minded Pax Americana. (American Dynasty, Kevin Phillips, pp 254–255, Viking 2004)


A study of the Bush family demonstrates a multi-generational history of connections to oil, the intelligence community and the military institutions of America. This triad would see its ascendancy in the 20th century, with two world wars sending the demand for petroleum, intelligence assets and military spending soaring. The century would see a parallel rise in Bush family political and personal fortunes, the most notable of which were the father/son Presidencies.

Was it mere coincidence that both Bush Administrations made control of Middle East oil resources a priority? Under a cloak of WMD, terrorism and the need for democracy, Bush the son would exceed his father’s creeping approach with an undisguised invasion and occupation of Iraq. If you think that the invasion was not about oil, consider that as part of pre-war preparations, "The (U.S. Army’s) land forces command printed 100,000 maps of southern Iraqi oilfields, which the Marines were to secure." (New York Times, October 20, 2004.)

Operation Desert Storm was undertaken in part we were told to prevent Saddam Hussein from driving oil prices over $25.00/barrel. Today Saddam is gone and oil has topped $60.00/barrel.

The Taliban’s rejection of American overtures for the establishment of an oil pipeline through that central Asian nation is documented. Their demise through U.S. and British invasion followed shortly.

Enter China. In the battle for control of oil, there is perhaps no greater threat to neocon plans for global domination than China. As manufacturing shifts steadily away from the United States and steadily into China’s hands, more petroleum is required to drive the great Chinese machine. No industrialized nation would be complete without a major military to carry out its goals, and China is no exception. Commensurate with China’s industrial growth is a major expansion and upgrading of its military – a fact which has not escaped the attention of neocon plotters. As noted, large militaries simultaneously increase demand for, and serve as a means of securing, oil supply. China’s growth will put exponential pressure upon the world oil supply.

Consider China’s recent bid for the purchase of UNOCAL, a fully diversified American oil company. The bid sent shockwaves through the Beltway and led to concerted efforts to defeat China’s bid. Why? Acquisition of UNOCAL would not give China control of world oil markets. Its symbolism was more significant than its impact.

U.S. military forces and private mercenaries were assigned to protect the oil fields, oil companies’ investments and their employees. Determined to deny the invaders the spoils of their invasion, insurgents have routinely targeted oil facilities for destruction and have engaged in deadly attacks upon the mercenary armies hired to protect the investment. China was one of many nations which opposed the invasion and has refused to provide troops for the occupation.

Whether the motive was primarily to secure petroleum for American consumption at controlled prices or as future leverage over growing global competitor China, the role of oil in the occupation of Iraq is a crude reality.

July 26, 2005

John M. Peters [send him mail] is a practicing attorney in Michigan.

RI`OIL TO RUN OUT IN NEXT 15 YEARS: PRESIDENT YUDHOYONO SAYS

ANTARA News - RI`OIL TO RUN OUT IN NEXT 15 YEARS: PRESIDENT YUDHOYONO SAYS

Jul 28 04:43

RI`OIL TO RUN OUT IN NEXT 15 YEARS: PRESIDENT YUDHOYONO SAYS


Beijing (ANTARA News) - President Susilo Bambang Yudhoyono said that in the next 15 years the crude oil reserves in Indonesia would run out if there were no more new oil fields had been discovered.

President Yudhoyono who was paying a state visit to China on July 27 to 30, 2005, made the statement in a meeting with members of the Indonesian community here on Wednesday night.

Apart from oil, he said, the natural gas reserves in the country would also run out in the next 60 years, while the new coal deposits were still sufficient for the next 150 years.

Due to its depleting natural resources, President Yudhoyono who underlined the importance of energy conservation, has also underlined the need for energy diversification, and stop relying on natural oil, and start using coal, gas, geothermal energy and briquettes.

The Head of State further said that Indonesia in its history has never suffered from the crude oil price hike in the international market which had reached 60 US dollars per barrel.

"It has also caused an increase in the government`s fuel subsidy to Rp120 trillion, which has never occurred in any other country in the world," he added. "In Indonesia, some 25 to 30 percent of its state budget of Rp500 trillion had been used for the subsidy."

As a result, he said, Indonesia have problems in its development efforts, especially in sectors like healthcare, education and people`s welfare.

In the past, under President Soeharto, Indonesia produced 1.4 million barrels of oil per day, but in the last couple of years the country produced only 1.1 million barrels per day.

In the past, the country was able to export oil, but now it has to import the commodity at a constantly increasing price.

During his visit, the President is in the company of his wife and an entourage which included Coordinating Minister for Economic Affairs Aburizal Bakrie, Finance Minister Yusuf Anwar, Research and Technology Minister Kusmayanto Kadiman, State Enterprises Minister Sugiharto, Cabinet Secretary Sudi Silalahi and Corruption Eradication Commission (KPK) chairman Taufikurrahman Ruki.

Also in the president`s entourage were legislators, businessmen and academicians.

Later on Thursday, he was scheduled to meet Chinese Prime Minister Wen Jiabao and his counterpart, Hu Jintao.

Indonesia and China will sign a number of agreements including on economic cooperation and assistance for tsunami-hit Aceh.

Indonesian and Chinese delegations will sign a Memorandum of Understanding (MoU) on economic and technical grants; cooperation in development, study and supervision as well as general administrative quality supervision.

They will also sign a Letter of Exchange Project Using Preferential Buyers Credit worth US$100 million and an assistance to build a tsunami early warning system.

During the visit, Yudhoyono will also meet Chinese bankers including Chinese Development Bank Governor Chen Yuan and local entrepreneurs.

He was also slated to visit Shenzhen on Friday to obtain first-hand information on the industrial sector in the city.

Before returning home on Saturday, Yudhoyono will visit several companies including Hua Wei Technologies Company and Neptunus Pharmaceutical Group Company in Shenzhen.(*)

Yemen cuts fuel prices after riots

Aljazeera.Net - Yemen cuts fuel prices after riots

Yemen cuts fuel prices after riots
by
Tuesday 26 July 2005 1:59 PM GMT


More than 42% of Yemen's population lives in poverty

The Yemeni cabinet has decided to cut fuel prices, less than a week after 22 people were killed in riots sparked by price rises for petrol, diesel and kerosene.

A Yemeni official on Tuesday said the lower prices would come into effect on Wednesday. Analysts had expected the government to revise its decision to appease public anger.

Price rises caused by cuts in subsidies set off riots in Yemen in the past, often leading the government to revise its decision.

More than 300 people, including about 250 security forces and police, were injured in last week's nationwide protests against the subsidy cut, which almost doubled the price of petrol.

The riots were the worst since protests in 1998 in Yemen, a poor country of 19 million, implementing economic reforms backed by the World Bank and International Monetary Fund.

The official said the cabinet decision would decrease petrol prices to 60 rials (31 US cents) from 65 rials a litre while one litre of diesel or kerosene would cost about 35 rials instead of 45 rials.

Gas cylinders would be priced at 350 rials, instead of 400 rials.

Thirty-four people were killed in the 1998 protests, which were also set off by a government decision to reduce subsidies on fuel and food.

Declining resources

Yemen, an oil producer with declining resources, says the fuel price rises are part of the reforms launched in 1995 to prevent economic collapse.

Nationwide protests left more
than 300 people injured

Opposition parties had criticised the increase, and a leading cleric said the government should have curbed rampant corruption before raising fuel prices and further impoverishing the people.

The government had said it would offset the increase by cutting customs tariffs, raising state salaries and halving a planned general sales tax to 5%.

According to World Bank figures, more than 42% of Yemen's population lives below the poverty line, illiteracy is around 50% and unemployment is more than 20%.

The population is expected to double in 20 years.

UK increasingly reliant on oil, gas

PowerSwitch - Peak Oil, Oil Crisis and Economic crisis

Contributed by Simon Richards
Wednesday, 27 July 2005
The UK will be increasingly reliant on oil and gas to meet its primary energy needs during the next 10-15 years despite efforts to promote renewable energy sources, the UK Offshore Operators Association Ltd. (UKOOA) said.

“The UK’s reliance on oil and, in particular, gas as primary sources of energy is increasing,” said UKOOA Chief Executive Malcolm Webb. “The government’s projections show that the UK’s oil and gas needs will rise from the current 74% of primary energy to 85% in 2020.”

“If we don’t produce oil and gas ourselves, then we will have to import it,” Webb said. “If the UK had to import all its oil and gas, in 2005 alone our import bill would be around £30 billion higher-increasing the current UK trade deficit by almost 75%-and UK tax revenues from oil and gas would be about £10 billion lower because imported oil and gas pays no UK corporation tax or petroleum revenue tax.”

Current oil and gas investment is expected to hold the rate of production decline at 6-7%/year for 5 years. But challenges remain if the industry expects to slow the long-term decline rate, UKOOA said. The UK offshore oil and gas industry spent £4.7 billion in 2004 on operations and £3.7 billion on exploration and capital expenditure. During 2005, the industry expects to invest £5 billion on operations and more than £4 billion on exploration and capital developments.

During 2004, the number of new project approvals doubled from 2003 to 27 project approvals, and exploratory drilling increased 40% from the previous year with 63 wells drilled.

The report noted that 37 wells were drilled during the first half of 2005. A recent 23rd licensing round drew the highest response in 30 years, and substantial progress was made through the Fallow Initiative. Of the 532 blocks identified as dormant since 2002, 442 have either seen activity or been relinquished.

“The current pickup in activity should help to address the potential lack of new developments coming on stream for 2007 and 2008,” said Webb. Investments and new projects slumped after changes to the North Sea tax regime, he said.

In April 2002, the UK government imposed a supplemental tax for oil and gas companies with the effect of adding 10% to the 30% corporate tax all UK companies pay on profits. For fields subject to the 12.5% royalty-those that received development approval before April 1982-the supplemental tax pushed the aggregate marginal tax rate to as high as 74%. The marginal rate is the combined effect of all taxes and offsets on the next unit of earnings (OGJ Online, Feb. 17, 2003).

During 2004, the industry paid over £5 billion in direct taxes. North Sea tax revenues for 2005-06 are forecast at £7-10 billion, depending upon oil prices. Companies operating in the North Sea have paid £203 billion (2004 prices) in the last 40 years, the report said.


Production

The UK is expected to remain self-sufficient in oil until 2009-10. UK gas production meets more than 90% of demand and is forecast to fulfill 60% of demand in 2010.

The UK produced 725 million bbl of crude oil (2 million b/d) and 95 billion cu m of natural gas (259 million cu m/day) in 2004 for total production of 3.6 million boe/d. Production in 2005 is expected to be 3.4 million boe/d.

The industry has invested a total of £220 billion (2004 prices) in exploration and capital development since offshore activity began in the 1960s. Since 1999, 34 new companies have been attracted to invest and produce in the UK continental shelf.


Source Oil & Gas Journal 25th July 2005

Brazil to Achieve Oil Self-sufficiency by December

Brazil to Achieve Oil Self-sufficiency by December - Prensa Latina: "Brazil to Achieve Oil Self-sufficiency by December

Rio de Janeiro, Jul 25 (Prensa Latina) Brazil should achieve production of 1.8 million barrels of oil daily by December to achieve self-sufficiency in oil, according to estimates from state company Petrobas published Monday.
This production will allow a saving of $3 billion annually in crude oil and derivative imports, Jose Eduardo Dutra told O Globo before retiring from the presidency of the company.
To reach that production, the country will implement a platform that will produce 180,000 additional barrels of oil daily, and other 60,000 barrels from the Jubarte field.
Despite that self-sufficiency Brazil will not stop importing oil because its refineries only process light crude oil, but as compensation it will export the heavy ones it cannot refine, until a technological modification expected to be completed in 2010."

The Problem with Natural Gas

EnergyPulse Article

The Problem with Natural Gas
7.14.05 Frank Clemente, Senior Professor of Sociology and Energy Policy, Penn State University

[See original article for numerical data tables]

In 1997, Joseph Riva, senior geologist writing for the Colorado School of Mines, turned a skeptical eye toward the rapidly emerging dependence of the United States on natural gas (NG). Riva suggested that the rush to embrace NG as the primary fuel to meet incremental electricity and space heating demand was based more on sociopolitical hope than on geological reality. Noting that domestic NG production had peaked at 22.6 tcf in 1973, Riva questioned not merely whether the EIA projected production of 25.5 tcf by 2015 could be met but even whether the then current output of 19.8 tcf could be maintained. Basing his analysis on the level of known reserves and the rate of new discoveries, Riva argued that unless an unprecedented number of large fields were found soon:
“by early next century, natural gas will have become more of an energy problem than an energy solution”.


Subsequent events have provided ample support for Riva’s grim assessment: (1) domestic NG production only reached 19.7 tcf in 2004 despite an additional 461 rigs in the field—an 82 % increase over 1997; (2) NG well head prices have steadily escalated from $2.10 mcf in 1998 to $ 6.31 mcf in the first four months of 2005 – an increase of $ 4.21 ( 200 %); and (3) chief U.S. policy makers (e.g., Alan Greenspan) now readily admit the nation cannot meet its NG supply needs and will be increasingly reliant on imports from politically unstable areas – darkly paralleling our current dependence on foreign areas and the entailing socioeconomic costs.

In essence, Riva’s foretelling is coming to pass. The present paper takes his concerns as a point of departure to delineate a range of reasons as to how unless the United States begins to take the NG supply / demand situation more seriously, NG is likely to move from the role of energy boon to national liability.


THE SPECTER OF DEMAND SHOCK


Given the status of NG as the cleanest of the fossil fuels, a confluence of environmental regulations, efficiency of combustion and simple convenience has led to an unprecedented build-out of the NG demand infrastructure – particularly through massive construction programs for power plants and new single family homes. Yet, despite this increased dependence on NG to supply electricity and heat our buildings, the casual observer of business news would be hard pressed to find a systematic discussion of the commodity. The price of oil has its own ticker on television business networks but NG may or may not be mentioned in a given day. As a result of this benign neglect there is only dawning recognition that a shortfall of NG may soon reverberate throughout the socioeconomic system – harkening back to the 1970’s with the closing of schools and businesses in the dead of winter, reducing manufacturing production and leaving millions of homeowners wondering how they are going to pay their heating bill.


The stunning realization of the NG problem, however, is only a sustained heat wave, hurricane, frigid January, coal strike or nuclear shut-down away. And when that day comes the U.S. will come face to face with a series of NG demand issues looming ever larger on the horizon:


(1) Construction of NG heated homes – throughout the 1970’s and 80’s electricity was the preferred space heating source for newly constructed single family homes. In 1979, for example, 51% of new homes were heated with electricity as opposed to only 39% with NG. Over the past decade, however, NG has clearly become the fuel of choice in 70% of new homes with electricity dropping to 27%. In fact, over the period 2001-2004 over 3.3 million new homes heating with NG have come on line – over 70,000 per month. Further, the construction of new homes is hardly slowing as the most recent housing data indicate that single family homes heating with NG are growing at an annualized rate of over 1.1 million. Finally, these homes are being constructed in regions with harsher winters .The latest American Gas Association data indicate 92% of new homes in the Midwest heat with NG as opposed to only 48% in the South.


(2) Construction of NG fired power plants. The NG shortages of the 1970’s prompted the passage of the 1978 Fuel Use Act (FUA) effectively banning NG fired electric power plants as well as the use of NG in large industrial boilers. These restrictions on NG consumption led to a substantial decline in demand and the eventual formation of a supply “bubble” – which in turn resulted in chronically low NG prices (See EIA, 2005). In 1987 much of the FUA was repealed setting off a surge in the construction of NG power plants. Indeed, NG consumption for electric generation rose from 2,636 bcf in 1988 to 5,352 bcf in 2004 (a 103 % increase). In fact, since the 1990s virtually all new power plants have been NG units in an historic departure from the traditional fuel diversification strategy of electric utilities:




In essence, in just five years we have added over 200,000 MW of NG facilities to the electric power system in the United States – the functional equivalent of 245 Calvert Cliffs Nuclear Units (825 MWe). And the NG beat goes on – in April, Florida Power and Light announced the addition of a new 1,100 MW combined cycle plant at Manatee; in May, Calpine placed a 500 MW unit in operation at Pastoria in California and this summer, utilities in Wisconsin will add almost 1,300 NG fired MW to the grid. Finally, and somewhat amazingly, the EIA projects that over the period 2005 – 2007 we will build an additional 83,000 MW of power stations – of which 73,000 (88%) will be NG fueled.


(3) Organic Demand Growth

The population of the United States increases by one person every 12 seconds – or 2.6 million per year. In April of 2005 there were about 650 thousand homes under construction which will heat with NG. Thousands of MWs of new NG fired turbines are being constructed or are in the planning stage. The OMB projects the economy of the United States will grow by over three percent each of the next five years. Each year thousands of cars, trucks and busses join the NG fleet. Stores, swimming pools, apartments, agricultural buildings and many other NG dependent facilities are constructed throughout the Country every single day.


The EIA has projected NG consumption growth along these lines:



This relentless pressure from natural increase provides a chronic dynamic of demand growth complementing the potential acute demand from weather or alternative fuel problems.


(4) Supply constraints on other fuels for electricity


The United States is the most electric intensive nation in the world. Demand for electricity has steadily increased over the past half century and that growth has accelerated over the last 15 years. In 1991, for example, the U.S consumed about 2,762 billion kilowatt hours (kwh) of electricity. By 2004 demand reached 3,550 billion or an increase of 29%. Coal provided half of this electricity, nuclear 20% and NG 17 %.


Further, the demand for electricity is projected to increase steadily for the foreseeable future. The EIA has projected that 2005-2006 will see a demand increase of 189 billion kwh. To put the magnitude of this bi-annual increase in perspective, an 825 MWe nuclear power plant such as Calvert Cliffs 1 generates about 7.5 billion kwh in a year – or about 4 % of what must be added in 2005/2006 alone – thus, necessitating the construction of the equivalent of over 25 such nuclear power plants (compared to an existing nuclear fleet of 103).


Virtually all of the recent growth in electricity demand , as well as forecasted growth , has been, and must be, met by NG. The construction of NG power plants dominates the electric power situation in the United States.



In essence then, for the entire decade, new capacity for coal, nuclear, hydro and all other fuels combined will have provided only seven percent of all new power plants – dramatically highlighting the Nation’s increasing dependence upon NG. Further, each of these alternative fuels has sufficient problems to question whether they can meet even that meager expectation.


Coal provides about half of our electricity but is faced with (a) stringent environmental regulations, (b) transportation constraints and (c) questions about expanded production. The EIA, for example, has projected that coal production would expand 53 million short tons in 2005 versus 2004 – an increase of 4.7%. Year to date output, however, reveals that production in 2005 has actually decreased sequentially by 489,000 short tons or 0.1%.


In terms of nuclear power, the 103 existing stations are already operating near maximum capacity (94%) despite their aging status (most over 25 years). The lead time to build a nuclear plant would take us well into the next decade. And in regard to hydroelectric, drought conditions in the western U.S. make each year a touch and go situation. This year, for example, the snowpack melt peaked in late May and rivers in Washington are currently running below normal. Further, not only is there environmental opposition to new hydro facilities but even the relicensing of existing units faces intense scrutiny. Finally, as of this writing, oil is over $60 per barrel. Clearly, the degrees of freedom for fuel switching away from NG to meet incremental , indeed, even existing , electricity demand are quite limited.


THE EMERGING SHORTFALL OF NG SUPPLY


In 2004 the United States consumed 22,424 bcf of NG – virtually all of which came from one of three sources – (1) domestic production [82%], (2) imports from Canada [15%], and (3) imported LNG [3%]. Further, the EIA has projected steady demand increase with consumption rising to 25,433 bcf in 2010 and 29,952 in 2020. Given the increasing demand for NG, continued – and expanded – supply from the three primary sources delineated above is essential to meet growing demand.


Unfortunately, significant and alarming problems with each of these sources threaten to substantially curtail supply and thereby contribute an emerging shortfall of NG. Consider, for instance, in 2004 only three regions accounted for 58% of the U.S. NG supplies – the Federal Gulf of Mexico (18%), Texas (24%), and Canada (16%).


(1) Declining Production in the Gulf of Mexico


In 2000 the Federal Gulf of Mexico (GOM) accounted for 24 % of NG production in the United States. Depletion and the exodus of major oil companies, however, have taken a toll:

As these data indicate, production in the GOM declined steadily over 2001-2004 by 889 bcf or 18 % and by 2004 the GOM accounted for only 20% of U.S. production. Further, data from January, 2005 indicate this decline is continuing as a further 17 bcf (5%) Ivan adjusted drop occurred relative to January, 2004. And, given the recent drilling patterns in the GOM, it is likely this decline will continue. In 2001 there were 153 rigs drilling in the GOM, by 2003 that number had decreased to 108 – and last week it had slipped to 95.


(2) Stagnation in Texas


Texas has been a mainstay of NG production in the United States and in 2004 accounted for 27% of output. But there are real indications that the relentless nature of depletion is beginning to take a toll on Texas production. Indeed, Dietert and his associates (2005) have argued that important NG fields in Texas are susceptible to significant decline rates. While EOG has pegged the overall first year decline rate for new wells at 30% , 2005 Dietert et al have argued that decline rates for particular fields --- Barnett Shale, Bossier Trend and South Texas are now in the 65-75% range. Actual production data from Texas starkly indicate the treadmill facing the NG industry:




In other words, it took three times as many wells in 2004 to produce 62% of the NG produced in Texas in 1970. These data give real meaning to the oft repeated maxims “treadmill” and “the lowest fruit has already been picked”. And the downtrend continues, preliminary data from the Texas Railroad Commission indicate that 71,440 wells as of February, 2005 could not stem a production decline of over 12% versus February, 2004.


(3) Canada has its own NG Problems


In a 2003 article I argued that Canada would be unlikely to alleviate NG supply problems in the United States. Specifically, Canada faces many of the same supply issues which plague the U.S. – namely – depletion. In terms of depletion, First Energy (2004) has estimated annual decline rates for western Canadian NG fields :



Actual production data provide strong evidence of these decline dates. In 2002, there were 9,061 NG wells drilled in Canada and production was 17.4 bcf/d. In 2004, there were 16,000 wells drilled and production was still 17.4 bcf/day. In other words, an increase of 6,939 (77%) wells from 2002 to 2004 was only able to keep production flat. The shocking implications of this pattern are obvious.


This situation is especially disturbing since Canada has been the overwhelming source of NG imports to the U.S. In 1993, for example, Canada accounted for 86% of U.S NG imports and by 2003 that figure was 87%. The Canadian safety net has been crucial as our own NG production declined and demand ramped up.


Unfortunately, based on EIA forecasts the days of increasing NG imports from Canada appear to be over:




In essence, the rise in Canadian imports in the 90s appears to have peaked and declining imports are projected with a decline of 898 bcf (26%) from 2000 to 2010.


(4) Drilling and Service at Full Utilization


In 1980, 3970 rigs were drilling for oil and NG in the United States. As the industry fell on hard times in the next two decades the number of active rigs steadily declined to reach a nadir of only 625 in 1999 – a decline of 3,345 ( 84 %) rigs in less than 20 years. Idle rigs were sold at pennies on the dollar, left in the field to rust or cannibalized for parts. The rig construction industry came to a virtual standstill as less than ten rigs were built per year. The rig service industry experienced a corresponding decline as workover and service companies simply went out of business or were merged with larger competitors. And finally, the workforce in the oilpatch steadily aged as few young people were willing to risk a career on what many considered a moribund industry.


This chronic underinvestment in our energy supply infrastructure is coming home to roost. Andrew Gould, CEO of Schlumberger, succinctly summarized the situation in the keynote presentation at the Howard Weil Energy Conference in April:


“the industry is dealing with … the lack of investment over the past 18 years … A lot of the rig fleet, and much of the equipment are old. Very little spare capacity exists … [but] the most disturbing shortage by far is the lack of [energy] professionals … skilled people have either been laid off, or have retired from the industry.”


Recent data place Gould’s concerns in bold relief. The U.S. rig count has surged to over 1,358 out of an estimated 1,470 capable rigs. When rig float (units being moved from one site to another) is considered there are apparently only several dozen capable rigs not working.


In fact, Richard Mason at Land Rig Newsletter has indicated the panic to get a rig has propelled huge increases in dayrates because land drillers are “out of rigs for all practical purposes”. Further, Mason notes that even the most optimistic estimates indicate less than 100 newbuilds or refurbishments would be available before 2007 – compared to 325 added from inventory in 2003-2004 alone.


The situation in the GOM is even more alarming --- the rig market is so tight that dayrates have leaped from $24,000 in 2003 to $62,000 or more. Attrition of older rigs and years of outmigration from the GOM have left the region with only a fraction of once available rigs.


Further, the GOM faces the specter of even further outmigration as national oil companies and operators in the Middle East, Far East and North Sea are willing to pay as much as $140,000 per day for a premium rig. And, to add insult to injury, although there are over 30 news builds on order, it appears that none will be available for the GOM. Given a world-wide bidding war, Daniel McNeese at Rowan summed up the risk to GOM production:


“rigs are going to get pulled out of here if rates don’t go up … I mean people are bidding all over the world”.


Equipment and tubular manufactures such as National Oilwell Varco (NOV) and Maverick Tube (MVK) are hard pressed to meet demand and face record backlogs. Thomas Richards at Grey Wolf Drilling recently complained that even simple rig components were taking six months on order and another drilling firm stated that NOV should “double the size of their company”. Clearly, the age of the fleet (most rigs are over 25 years old) means that continual refurbishment is exacerbating the already intense pressure on rig suppliers.


And finally, the shortage of experienced personnel haunts the industry at every turn. Guardis Banister, Technical Director at Shell Energy has anecdotally commented that “while the U.S. produces 43,000 lawyers per year we graduate only 430 petroleum engineers.” Further, there are simply not enough oil field hands to meet demand, setting off intense competition for skilled workers. In a recent article, Richard Mason offered the following anecdote:


“Contractors are now beginning to cannibalize the existing labor force. A help wanted advertisement in our local Sunday newspaper was run by an Oklahoma City contractor who is moving refurbished rigs to West Texas. The Company was looking for toolpushers … a bonus, was available if toolpushers could bring crews along.”


Finally, the lack of new blood in the industry is becoming extremely apparent. Panelists at an Offshore Technology Conference session in May warned that the average age of personnel in the upstream sector is 49.


Restricted Access to Major NG Fields


Environmental and political opposition to drilling new areas greatly constrains potential NG production. Despite our haste to build a huge NG demand infrastructure we do not have the commitment to increase supply. There is a hypocrisy in place here. Recently, Representative Lois Capps (D-CA) expressed her:


“strong support for the long standing bipartisan legislative moratorium on new leasing activity … despite efforts by … the natural gas industry to open up the Outer Continental Shelf to drilling”.


Yet Capps represents a state which consumed 2,383 of NG in 2004 but produced only 320 -- an 87 % shortfall. A similar situation exists in Florida, a state which consumed 726bcf in 2004 but produced only three due to offshore moratoria on drilling. Of course, neither of these states hesitates to burn NG produced off the coast of Louisiana or Texas.


The estimated NG reserves which are off limits due to governmental restrictions and moratoria are somewhat staggering:



Despite the ready availability of these reserves, however, the Nation refuses to initiate the development of this much needed supply. As recently as May 19, the U.S. House defeated by voice vote a proposal to open sections of the OCS to NG exploration and development.

CAVEAT: DEUS EX MACHINA?


At this point most readers will be contemplating how (a) LNG imports and (b) non-conventional NG production, e.g. coalbed methane and deepwater drilling will alleviate this situation. There is no question both of these sources have great promise – but at this point the argument that they can both offset NG production declines and meet incremental demand is more hypothesis than proposition. Specifically, we are betting much of our energy future on untested assumptions. Recent comments from the energy industry highlight the problems with U.S. production : (1) Lee Raymond , CEO of Exxon, recently told reporters “Gas production has peaked in North America’’ and (2) Energy Security Analysis, Inc. noted the “ steep decline rates of aging fields in Texas, Louisiana and Oklahoma” and the fact that “domestic production will make up a significantly diminished share of U.S. supply”.


In terms of LNG, for example, Andrew Weismann (2005a, 2005b), has raised serious questions regarding LNG (a) availability, (b) price and (c) impact upon both our national and fiscal security. In regard to non-conventional sources, one should recognize that depletion, lack of equipment and environmental regulations impact these sources as well. Overall, the expectation that relatively untested (on a massive scale) sources of NG will offset the issues mentioned here is a high stake gamble. Like the Greek tragedies of old, salvation may arrive from out of the blue but submitting our energy future to a complex and fragile series of unverified assumptions is risky indeed.

MAJOR REFERENCES

Dietert, Jeff; Kessler, R and Morris, M. “Outlook for Natural Gas”, Simmons and Company International, 2005.


Energy Information Agency – various reports, forecasts and analyses at www.eia.doe.gov


Land Rig Newsletter, various issues, 2005.


Riva, Joseph, U.S. Conventional Wisdom and Natural Gas, Colorado School of Mines, July, 1997.


Weissman, Andrew, “The Critical Need to Examine More Carefully the role of Liquefied Natural Gas…” Energy Pulse, (2005a).


Weissman, Andrew, “The LNG Challenge”, Testimony presented before California Public Utility Commission, (2005b).

Jim Kunstler's Despair | Energy and Peak Oil News

EnergyBulletin.net | Jim Kunstler's Despair | Energy and Peak Oil News

Published on Thursday, July 28, 2005 by Energy Bulletin

Jim Kunstler's Despair
By Andrew Nimelman

A reading of Kunstler’s new book The Long Emergency, as well as various posts at his blog Clusterf**k Nation, convinces me that Kunstler actually buys into the basic neo-con world view, but that, unlike them, he has no faith in the possibility that the actions the neo-cons take in pursuit of those beliefs can, in fact, succeed. To make this point, I’ll focus on a recent essay Kunstler posted at his blog, entitled “Iraqi Freedom.” This brief essay is, in my view, an excellent representation of the geostrategic attitudes and beliefs that underlie The Long Emergency and other Kunstler writing.

Kunstler’s work is permeated by a blanket faith in the good intentions of the U.S. in its actions in the world. The U.S., taken as a whole, could, in his view, never engage in criminal, rapacious conduct as a matter of policy. The gulf between "us" (perhaps including our brethren in Western Europe, and, maybe even those in, say, Japan) and all of the various rogues of this world is total. THEY can and do act in a criminal and rapacious fashion. WE never do; we can't, in fact. It's against our nature.

The worst that WE can do, in Kunstler’s worldview, is to be naive, which is to say stupid. This stupidity consists of believing that we have the power to impose our (by definition) good intentions on THEM - - people who, through their criminality, depravity or backwardness - - or that of their leaders - - are manifestly unwilling or unable to conform to "civilized" norms.

Thus, Kunstler’s narrative of the Iraq war is as follows: The oil we need to fuel our (admittedly wasteful and frivolous) lifestyle just happens, in nearly all cases, to be under the ground of countries led by barbaric criminal rogues who, in addition to being criminal rogues, are for some reason united in their vehement dislike of us. The reason for this unanimity cannot possibly be the fact that U.S. elites sit at the summit of a world political/economic structure characterized by a drive to extract every last drop of every "resource" (that is to say, every bit of wealth) from everywhere in the entire world. No, for Kunstler, that would be a "conspiracy theory", to which he is “allergic,” as he seemingly never tires of reminding us.

So, the oil we need is under their ground. We'd never just go in and take it (that would be roguish and criminal, and that's impossible for us). All we want to do is to insure that a nice, rational, orderly market for oil is maintained, to which we have access like everybody else. (Oh, and, for some reason, we're also pretty insistent that this market had better price oil exclusively in U.S. Dollars, or else.) THAT'S the reason for our setting up more than a dozen military bases in Iraq. (I'm assuming that this is what Kunstler means by his statements to the effect that - - I paraphrase here - - "We're trying to put up a Fort Apache in a really tough neighborhood.")

This U.S. desire to intervene is justified, in Kunstler’s mind, by the fact that all of these guys (Saddam, Hugo Chavez, the mullahs, the Taliban, etc., etc.) just happen to be really bad, barbaric characters, who seek to place an irrational chokehold on our access to oil, as well as, in some cases, to attack and terrorize us.

So, the U.S. is just trying to bring enlightenment, justice and rationality - - in short, reasonableness - - to a crazy, violent, unjust - - unreasonable - - world. So far so neo-con.

Indeed, the extent of his commitment to the basic neo-con worldview is indicated by the following bit of discussion from Kunstler’s “Iraqi Freedom” blog posting, on the nature of the dilemma faced by ordinary Iraqis, before and after the U.S. invasion:

Under Saddam Hussein, Iraqis didn't dare voice opinions lest a gang of Baathist goons appeared at their doors in the dark of night to take them away for torture and execution. Under the current system, Iraqis don't dare cooperate with the government (or worse, their U.S. military sponsors) lest a gang of Jihadi (or Sunni or former Baathist) goons show up at their door and drag them off to execution.

So, for Kunstler, the reason Iraqis didn’t voice their (presumably overwhelmingly pro-American) opinions before was their fear of their criminal, violent leader. The reason they don’t act in a manner that is supportive of the U.S. project in Iraq now, is because of the criminal, violent, extremist element that stands against the new (by definition) reasonable and rational leadership ushered in by our invasion. Without even running this by him, I am willing to bet the farm that Richard Perle agrees with Kunstler’s assessment here one hundred percent.

Where Kunstler breaks with the neo-cons is not at the level of underlying beliefs about the U.S. role in the world. No, his beef with them is on the question of what, if anything, ought to be done in defense of these beliefs. On this level, Kunstler says to them, in effect: "Look, your motives are reasonably pure and your effort is certainly well intentioned. However what you're doing is both stupid and bound to fail."

It is stupid (in his view) primarily BECAUSE it's bound to fail, but also, because it fails to confront the appalling costs of what he calls the "cheap oil fiesta" that is, ironically, about to end anyway. This fiesta - - the "American way of life," really - - is, itself, envisioned by Kunstler as primarily (but, in fairness, not completely) a reflection of a lack of culture, of dignity even, on the part of the great mass of American “consumers.” It is most certainly not seen as in the nature of a foundational strategy, refined over decades, intended to pacify (or, "strike a bargain with," if one prefers) the "great unwashed" so that the REAL fiesta - - the extraction of wealth from the entire world to mostly benefit U.S. and allied elites - - can continue unhindered. Nope. For Kunstler, this would be BOTH a conspiracy theory AND an ascription of criminality and rapaciousness to U.S. leaders. Doubly forbidden.

This is what allows (perhaps even requires) Kunstler to say in his blog posting, of the fictional Iraqi WMD, "We had to look." For Kunstler, it is impossible that Bush and company actually KNEW from the start that Iraq had no remaining WMD, and that they simply used this issue (and their compliant mainstream media bullhorn), to create an endlessly repeated pretext for doing what they wanted to do, which was to invade Iraq. To acknowledge this (indeed, to even hint that he might suspect it), would require him to confront the possibility that our leaders intentionally invaded a sovereign country under false pretenses, shielded by a tissue of lies. Even putting aside their reason for taking this course of action, the mere fact of doing it would mean that the Bush regime acted in this instance in a criminal and rapacious fashion. But, for Kunstler, that simply can't be.

The neo-con course of action is bound to fail, in Kunstler’s view, because it is naive to believe that we can impose our civilized norms on the benighted masses of the world and, especially, on their evil leaders. In this regard, I was struck by the following in his blog essay:

Why would we suppose that our notions of a civil society, based on Greco-Roman and Anglo-American tradition, would comport with one based on an even older and different Mesopotamian-Semitic culture with Mongol-Turkic-Persian overlays? After all, Iraq is the birthplace of the Code of Hamurabi, which includes such statutes as the following:

“If any one bring an accusation against a man, and the accused go to the river and leap into the river, if he sink in the river his accuser shall take possession of his house. But if the river prove that the accused is not guilty, and he escape unhurt, then he who had brought the accusation shall be put to death, while he who leaped into the river shall take possession of the house that had belonged to his accuser.”

The quote from Hamurabi’s Code (actually the accepted English spelling of the name is Hammurabi), is a nice rhetorical touch, but let’s get real here: If modern-day Iraqis are responsible for Hammurabi (died 1750 BC), are Kunstler and his fishing buddies responsible for, say, the Anglo-Saxon “trial by ordeal”? According to a Wikipedia article, this often involved such activities as the requirement that an accused walk nine paces with a red hot iron bar held in both hands. The Wiki article further states that variants of trial by ordeal continued to be employed in Western Europe right up to the Enlightenment (ca. 1750 AD). Somehow, I suspect that Kunstler’s view on this would boil down to the belief that such past unpleasantness says nothing whatever about “us”, because we are rational - - we EVOLVE. “They”, on the other hand, were, are and will always be vicious, primitive, revenge-seeking barbarians.

The neo-con project will also fail, in Kunstler’s view, because, even if global imposition of U.S. dictates WERE possible in a cheap oil world, it most certainly won't be possible post-Peak Oil, when all hell will break loose, all complex globalized systems will break down, and all hope of global projection of U.S. (or anybody else's) power will be dashed. The possibility that the neo-cons (let alone U.S. elites in general) are well aware of impending Peak Oil, and that they are acting in all sorts of ways, great and sundry, to try to secure their power and privilege in a post-Peak world, would, of course, likely be rejected out-of-hand by Kunstler as (you guessed it) a conspiracy theory.

The bottom line of all this is the following: Kunstler’s worldview is based on the false supposition that WE (here, meaning U.S. and other Western movers and shakers) are the GROWNUPS in the world, and that WE (same definition) have a right to seek to impose our will on everyone else. This imposition is seen as by nature benign, as previously discussed.

The unfortunate result of Kunstler’s determination to hold to this supposition, and to his broader worldview, come hell or high water, is that Kunstler, who sees himself as the ultimate savvy realist, is, in fact, in denial. He is in denial about the role of the U.S. in the world, about the aims of U.S. power projection; indeed, about the nature of American society itself. The consequence of this for Kunstler is that his analysis, which is so brilliant in so many areas, often seems as dim as a neo-con blog when it comes to geopolitics.

Denial, in my view, is the best explanation for Kunstler’s conspiracy theory allergy. In truth, it's not really "conspiracy theories" per se, that bug him. For example, if Kunstler were told that the mullahs in Iran are engaging in a sophisticated conspiracy to fool the world as to their intentions and activity with respect to WMD, I seriously doubt that he'd have a sneezing fit. No, this would be no problem, because, in his worldview, “they” DO engage in conspiracies.

The fact is, it's only ascriptions of premeditated criminality (or even just malign motives), to U.S. (or other Western) leaders that falls within Kunstler’s definition of "conspiracy theories." And, professing an allergy thereto is his way of waving away ANY discussion of the possibility of such criminality or bad motives, whenever any evidence of same presents itself, and, hence, the prospect of such discussion emerges.

--------------------------------------------------------------------------------
An earlier version of this essay was posted as a letter to Kunstler at his blog.

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~

In his posting to Kunstler's website, writer Nimelman concludes courteously:
Mr. Kunstler, if you taken the time to read this, I thank you for that, and for your work, which I find to be very valuable on the whole.
.
Initially I was reluctant to post this criticism of "the home team," but co-editor LJ pointed out:
...its time 'we' started looking at ourselves critically, not in divisive terms but in what-r-your-assumptions terms, what-r-u-ignoring-for-cultural/ethnic/personal-reasons, etc.
-BA

The Peak Oil crisis: MId-summer review

Falls Church News-Press

The Peak Oil Crisis: A Mid-Summer Review
By Tom Whipple
The world has never been to peak oil before so we may not immediately recognize what we are seeing. A few months back, most knowledgeable people would have said oil at $60 a barrel would have triggered an economic tsunami by now. But surprise! Here we are and it seems to be business as usual in America with company earnings doing well, the stock market setting some new highs, and thanks to great prices, SUVs and pickups are leaping off dealers' floors and onto America 's highways.
So far this summer oil prices have been jumping up and down depending on which hurricane is or isn't threatening which offshore oilfield, the weekly US oil stocks report, and a little "what is happening in China?" thrown in. The International Energy Agency (keeper of the books on the world's oil supplies and who incidentally haven't had much of a track record recently) says demand — especially from China — is not what it was supposed to be this year, so we can all relax for a while and enjoy the rest of the summer. It may not be 1914 redux after all.
Below the radar of even the most attentive newspaper readers, however, the first stirrings of peak oil reality are starting to trickle in. Not surprisingly, most of these reports come from the poorer parts of the world where $60 oil is simply too much for fragile economies.
Here are a few of the items:
• Last week the BBC reported that dozens were killed in fuel riots across Yemen when the government withdrew subsidies resulting in dramatic price increases.
• All across Indonesia people were lining up at gas stations in response to developing fuel shortages. In one city, half the public transport was inoperable due to a lack of fuel.
• In Zimbabwe , the government has moved to deregulate fuel procurement in the face of severe shortages: waits of hours for buses, gas lines that are blocks long, and a bread shortage. The black market price for gasoline is now ten times the official rate.
• Nearly all the poorer countries make their electricity using diesel generators. Nicaragua , one of the poorest countries in Central America , recently started blacking out the poorer districts between 7 and 10 p.m. , the hours of peak usage.
• Tanzania , with the highest gasoline taxes in East Africa and a chaotic oil marketing system, is seeing its plans for economic growth "suffocated" by high-priced oil. Tanzania also handles fuel for the landlocked states of Malawi , Rwanda , the Eastern Congo , Burundi and Uganda .
• And closer to home, Maxjet put off plans to offer cheap flights from Baltimore to London until spring when the company hopes fuel prices will be cheaper.
At mid-summer, the supply-demand situation remains about the same. OPEC is supposed to be increasing its daily output by some 500K barrels a day and there is evidence from increased tanker charters that this indeed may be happening. In the meantime, production in the non-OPEC countries seems to have dropped by a collective 1.2 million barrels a day below the IEA forecasts for the first half.
Thus, we have learned that $60 oil and the ensuing $2.30 gasoline is not much of deterrent to American driving habits. It is not doing much to the economy, and certainly isn’t stirring up any serious action in the Congress which continues to fuss around with a largely meaningless energy bill. With good economic growth, the US demand for oil continues to increase.
The Chinese continue to claim their economy is growing nicely, suggesting increased demand for oil in the near future.
OPEC and the Russians — the folks with some spare capacity left — seem to have at least squeezed out one last round of production increases in response to calls to stem growth-endangering higher prices. At the same time, many of the world's older non-OPEC oil fields are talking of dramatic drops in production.
If one puts all this together, it is hard to escape the conclusion we just may be very close to Hubbert's peak right now and, some day, 2005 will be declared the year of peak oil.

Big oil gets return on its investment

The Journal Standard Online

Big oil gets return on its investment

The issue: Energy bill giveaways

Our view: This legislation is about profits not alternatives to oil dependency.

In recent years, there's been a bipartisan consensus that America needs to use less oil if we are to ever stop the seemingly endless cycle of our economy and national security being threatened by everything from rogue regimes and Saudi monarchs to natural disasters and political coups that routinely disrupt the oil supply and drive up prices.

Yet in the massive energy bill moving through Congress this week, the Senate rejected a provision that required a modest reduction of oil consumption by one million barrels per day by 2015. That was a conservative goal, but an important step toward making our security and economy less vulnerable.

Meanwhile, the energy industry - flush with billions in profits from soaring gas prices - gets $1.5 billion in tax breaks plus royalty relief for certain deep-well drilling. It also includes more than $8.5 billion in tax incentives and billions of dollars more in loan guarantees and other subsidies for the electricity, coal, nuclear, natural gas and oil industries.

Call it a return on investment for well-heeled oilmen: According to Bloomberg news, big oil and utility firms such as Texas-based Exxon Mobil Corp. spent $367 million over the last two years to get the current energy bill through Congress.

"This energy bill is filled to the brim with massive giveaways for mega-rich energy companies," is how Jill Lancelot, president of Taxpayers for Common Sense, put it.

What does she mean by mega-rich? Over the past three years, the top 10 major public oil companies have sold some $1.5 trillion worth of crude, pocketing an obscene $125 billion in profit.

By contrast, efficiency and conservation programs would get a paltry $1.3 billion of the more than $14.1 billion in total tax breaks over 10 years. And about $3 billion in tax breaks would go for renewable energy sources, mostly to subsidize wind energy. With gas prices at record highs and going higher, there isn't even a half-baked attempt to encourage automakers to boost fuel efficiency

The energy policy isn't totally without merit: Thanks to a late addition by U.S. Rep. Dennis Hastert of Illinois, the bill requires oil refiners to double their use of ethanol, mostly from corn, to 7.5 billion gallons a year by 2012. That should help farmers and, in some small measure, decrease overall oil demand.

Still critics, including many conservatives, maintain it's the kind of profit-motivated legislation they expected with a Texas oil man in the White House who has a former oil services company president, Dick Cheney, by his side.

Bush and Cheney could have blunted those accusations by simply asking Congress to consider the long-range consequences of gluttonous oil consumption. For an administration and Congress that likes to change the subject to terrorism and security at every opportunity, turning a blind eye toward the strategic implications of oil consumption seems, at best, wholly inconsistent and reckless.

But then again, how many millionaire Congressman worry about paying an extra $10 to fill up the gas tank, and how many of them have to worry about dying to protect oil reserves in Iraq or Iran?

Energy Bill Won't Cut Oil Imports, Critics Say

Energy Bill Won't Cut Oil Imports, Critics Say

Energy Bill Won't Cut Oil Imports, Critics Say
The measure is expected to do little in the short term to boost supplies or reduce gas prices.
By James F. Peltz and Richard Simon
Times Staff Writers

July 28, 2005

The energy bill nearing passage in Congress, promoted by the Bush administration as an important step toward making the U.S. less reliant on foreign oil, would do little in the short term to boost the nation's energy independence or provide relief for motorists paying record gasoline prices, analysts said Wednesday.

The U.S. petroleum industry, already enjoying record profits from skyrocketing oil and natural gas prices, lobbied aggressively for the legislation and received billions in tax breaks and other incentives partly designed to encourage drilling projects.

But based on those incentives alone, the industry is unlikely to start sinking new wells — projects that require years of development before they add fresh oil and gas to the market, experts said.

"The energy bill is not going to make a meaningful difference in U.S. supplies," said Steve Enger, an analyst at Petrie Parkman & Co., an energy investment bank in Denver.

The bill, the first overhaul of national energy policy in more than a decade, is expected to be approved by the House of Representatives today and the Senate on Friday. President Bush, a former Texas oilman, has pushed for the energy bill since taking office in 2001 and is expected to sign it.

Some critics say the legislation represents a giveaway to the energy industry.

With crude trading near $60 a barrel, oil companies "don't really need much more encouragement" to launch exploration projects, said Rick Mueller, senior oil analyst at Energy Security Analysis Inc. "Companies already are looking anywhere they can to find additional barrels."

Moreover, the energy legislation wouldn't do much to quench America's thirst for oil. Rising demand in the U.S. — the world's biggest consumer of petroleum — as well as in China, India and elsewhere has been a major factor in keeping global oil markets tight and pump prices high.

"There's very little in the bill, really, to address that," Mueller said.

Even Energy Secretary Samuel Bodman cautioned Wednesday that motorists should not expect a quick decline in gasoline prices.

"There are no magic bullets in this law that will change energy prices in the next day, week or month," Bodman told reporters. "It's going to take a number of months, if not years, to deal with energy prices."

The bill's $11.5 billion in tax breaks over 10 years are not just aimed at generating more oil and gas supplies. They also include the first-ever production tax credit for nuclear power companies, as well as measures to promote conservation and energy efficiency.

However, lawmakers rejected language — opposed by U.S. automakers — requiring the federal government to adopt tougher fuel economy standards for sport utility vehicles and other gas guzzlers and to look for other ways to cut U.S. oil consumption.

Still, the Bush administration hailed the bill as laying the groundwork for energy independence.

"For over four years, the president has called for a national energy strategy for our national and economic security," and getting Congress "to come to an agreement is definitely an achievement," White House spokeswoman Dana Perino said.

Concerns about U.S. energy security increased last month when a Chinese oil company jumped into the bidding for El Segundo-based Unocal Corp.

The U.S., which consumes about 20.7 million barrels of oil a day, depends on imports from sources including Canada and the Middle East for about 58% of that oil, according to the Energy Department. That dependence on foreign oil has jumped from about 45% a decade ago.

About 30% of the 5.4 million barrels of oil produced in the U.S. each day comes from the waters of the outer continental shelf. Most of that is in the Gulf of Mexico; production off the coasts of Alaska and California is also included.

The energy bill's oil-related incentives, which include reduced royalties that companies pay on oil pumped from under U.S. waters, mainly affect deep-water projects in the Gulf of Mexico, where companies have stepped up exploration activities without the promise of additional tax breaks. Production in the gulf is expected to surge 33%, to 2 million barrels a day, by the end of the decade, Mueller said.

The incentives provide "an incremental step" toward boosting exploration in the gulf, said John Felmy, chief economist for the American Petroleum Institute, the oil industry's trade group in Washington. The measures included in the bill "could be the marginal difference between whether to do it or not."

Russ Roberts, spokesman for Exxon Mobil Corp., the largest U.S. oil company, called the bill "an important step toward providing consumers with reliable and affordable energy supplies, while addressing the need for conservation and energy efficiency."

Oil, utility and other energy companies have spent more than $314 million over the last 2 1/2 years lobbying federal officials on energy-related legislation and other industry concerns, according to PoliticalMoneyLine, a website that tracks lobbying expenses.

But energy companies didn't get everything they wanted — at least not yet. For example, in the face of opposition from environmentalists, a provision that would have opened Alaska's Arctic National Wildlife Refuge to drilling does not appear in the energy bill. Still, when Congress returns from its August recess, it is expected to vote to open a portion of the refuge to energy exploration.

Critics complained that the oil industry was receiving tax breaks at a time when it was enjoying record profit because of the surge in energy prices.

In the last three months of 2004, for instance, Exxon Mobil's profit shot up 27% from a year earlier to $8.4 billion — the largest quarterly profit ever for a U.S. public company. The oil giant's full-year profit was a company record $25.3 billion.

"While the energy bill does not decrease dependence on foreign oil, it does increase dependence on federal handouts," said Tom Schatz, president of the Council for Citizens Against Government Waste, a private watchdog group.

The global oil industry is expected to spend $60 billion to $75 billion on worldwide exploration and production this year, up about 20% from 2004. Despite the companies' gusher of profits, they remain cautious about ratcheting up that spending, because their projects can take several years to bear fruit — and oil prices can change dramatically in the meantime.

"Yes, oil is at $60 a barrel today, but only six years ago it was at $11," Felmy said.

Among other things, the energy bill would reduce or eliminate the royalties that oil companies pay the federal government for production in the deep waters of the Gulf of Mexico. The petroleum institute estimates that the industry pays about $8 billion a year in royalties to the U.S. government for oil and gas production.

The cost of finding and developing an oil well in the gulf averages roughly $5 a barrel, so a field that has 100 million barrels of reserves could require spending $500 million for drilling wells, erecting a production platform and other costs, Petrie Parkman's Enger said.

More than half of the exploratory wells produce dry holes. But once a successful project starts pumping oil, Enger said, about 16 or 17 cents of every $1 of oil sold would go to Uncle Sam in royalties. Being able to save those royalties might persuade a company to drill a marginal well, "but it's typically not the most important factor" for overall exploration.

Reuters Business Channel | Reuters.com

Reuters Business Channel | Reuters.com

Exxon Mobil profit up on high oil prices

By Deepa Babington

NEW YORK (Reuters) - Exxon Mobil Corp. (XOM.N: Quote, Profile, Research), the world's largest publicly traded oil company, posted a 32 percent jump in quarterly profit on Thursday, as a relentless surge in crude oil prices and higher refining margins helped offset a hit from lower production.

Oil and gas output fell 4 percent in the second quarter, fueling Wall Street concerns that large oil companies are finding it increasingly difficult to expand production.

"If I can see anything soft in their armor, it's growing production," said Oppenheimer & Co. analyst Fadel Gheit. "We know that this is the most efficient oil company. But maintaining production, let alone increasing it, is a major challenge."

Exxon shares eased 20 cents, or less than 1 percent, at $59.40 on the New York Stock Exchange on Wednesday.

The extended bullish run in oil and gas prices, coupled with persistently strong refining and marketing margins, came to Exxon's aid, allowing the company to post the best second quarter profit in its history.

Net income totaled $7.64 billion, or $1.20 a share in the second quarter, compared with $5.79 billion, or 88 cents a share, in the year-earlier quarter.

Excluding a $200 million charge for a lawsuit provision, the company earned $1.23 a share. That was roughly in line with analysts' forecasts. Those polled by Reuters Estimates expected an average profit of $1.22 per share while the consensus estimate compiled by Thomson First Call was $1.24 a share.

The Irving, Texas company, which has maintained a large stock buyback program as its cash pile soars alongside oil prices, said it would further increase its share repurchase level to $5 billion in the third quarter.

"Fans of huge share buybacks will cheer today's announcement, those looking for progress on production growth will be less happy," Credit Suisse First Boston analysts said in a research note.

Exxon's total revenue jumped to $88.57 billion from $70.69 billion in the year-earlier quarter.

Boosted by investment at its exploration and production operations, capital spending in the quarter grew to $4.54 billion from $3.62 billion a year earlier.

PRODUCTION BLUES

Maturing oilfields and maintenance activities were largely to blame for the 4.3 percent fall in oil and gas production, offsetting a rise in crude production in West Africa and higher gas volumes in Qatar. Excluding divestments and entitlement effects, production fell by 2 percent.

Earlier on Thursday, another top oil company, Royal Dutch Shell Plc. (RDSa.L: Quote, Profile, Research), reported a 22 percent jump in quarterly profit as it, too, enjoyed the windfall from record oil prices. But its results fell short of forecasts and it disclosed a delay in starting production at a key Nigerian oil field, sending its shares down.

Exxon has previously suggested that production volumes will start improving in the second half of the year. Last month, Exxon Chief Executive Lee Raymond told the Reuters Energy Summit that production in the second quarter would not be significantly different from the first, when output fell 5 percent.

But large projects coming on line later this year will drive strong production in the second half, he said.

Scant prospects for boosting production long-term have been among the chief concerns swirling around major oil companies, which face declining production in regions like the U.S. Gulf of Mexico and limited access to regions boasting vast reserves like the Middle East and Russia.

El problema energético - Libertad Digital

Rub�n Osuna - El problema energético - Libertad Digital

Rubén Osuna, 27 de Julio 2005

Hace unos días se temía que la OPEP no pudiera hacer frente a la demanda de petróleo a corto plazo. Los precios han saltado a niveles nunca vistos y todo hace pensar que mantendrán el tipo aunque la capacidad productiva se esfuerce por adaptarse poco a poco a las nuevas circunstancias. Éstas vienen determinadas fundamentalmente por el acelerado crecimiento de los gigantes asiáticos. La dependencia energética de España rebasa los límites de lo razonable, y la principal fuente importada es el petróleo. Hasta el momento hemos salvado el cuello gracias al ventajoso tipo de cambio euro-dólar, pero eso no durará siempre, y el impacto de un pequeño cambio de esa variable en una economía con problemas de competitividad puede ser brutal. La alternativa de abastecimiento exterior es el gas natural, que nos hace dependientes de nuestros suministradores del norte de África, y cuyos precios están ligados a los del petróleo. Nuestra capacidad de producción interior se limita fundamentalmente a la energía hidroeléctrica, que no puede desarrollarse ilimitadamente, y a la nuclear, que nos hemos negado. Los juguetitos solares, eólicos y demás no pueden suponer más que un parche subvencionado, en el mejor de los casos. Los reactores de fusión tardarán aún décadas en estar operativos.

Las amenazas, como se ve, son muy serias. A corto plazo tenemos una energía cara, y nos hablan de incrementos de precios adicionales como medio para reducir el consumo, si bien éste no responde sustancialmente a dichos cambios. En un alarde de coherencia, el Gobierno pretende solventar los problemas hídricos del país con una buena dosis de desaladoras, y para rematar, hace como que se toma en serio del absurdo protocolo de Kioto, que introduce costes y restricciones adicionales a la producción energética, que afectarán muy especialmente a la que emplea combustibles fósiles (petróleo, carbón), de la que tanto dependemos. Unan a la valoración general del problema las consecuencias de todo tipo que tendría actualmente una crisis económica en nuestro país y tendrán ante sí un panorama realmente preocupante. En esto, como en tantas otras cosas, uno sólo percibe en el Gobierno una despreocupada frivolidad.

Repsol YPF logra los mejores resultados semestrales de su historia al alcanzar los 1.650 millones de euros de beneficios - Libertad Digital

Repsol YPF logra los mejores resultados semestrales de su historia al alcanzar los 1.650 millones de euros de beneficios:

L D (EFE) El importe neto de la cifra de negocio del grupo creció un 19,73 por ciento, hasta los 22.822 millones de euros, mientras que el resultado operativo antes de gastos financieros alcanzó los 2.923 millones de euros, con un alza del 31,7 por ciento. Este volumen de ingresos ha permitido a Repsol YPF elevar la caja generada neta (cash flow) el 67,3 por ciento, hasta alcanzar los 3.022 millones de euros. La deuda al cierre del primer semestre de 2005 se situó en 5.108 millones de euros, lo que supone una reducción del 12,9 por ciento respecto a igual periodo de 2004 por el alto volumen de caja generada que, además, ha servido para financiar las inversiones del periodo y contrarrestar el impacto de la revalorización del dólar frente al euro.

El ratio de deuda sobre capitalización a 30 de junio pasado era del 21,5 por ciento. Las inversiones de la petrolera hispano-argentina entre enero y junio pasado fueron de 1.363 millones de euros, un 10,3 por ciento más que en igual periodo del año pasado, y se destinaron a las actividades de upstream (555 millones de euros) y de refino y marketing (downstream), que recibió un total de 459 millones. Por áreas de negocio, Exploración y Producción registró un resultado operativo de 1.374 millones de euros, un 7,1 por ciento más, debido al aumento del precio de los principales crudos y del gas en Trinidad y Tobago y Argentina.

El precio medio de los líquidos producidos por Repsol YPF pasó de los 28,88 dólares por barril registrados entre enero y junio de 2004 a los 33,26 dólares del pasado semestre, y el del gas se situó en 1,46 dólares por cada mil pies cúbicos, un 23,7 por ciento más. La producción de hidrocarburos creció el 0,3 por ciento, hasta 1,15 millones de barriles equivalentes de petróleo (bep) diarios, y la de gas alcanzó los 613.800 bep al día, el 6,9 por cieno más, por el aumento de extracción en Bolivia, Trinidad y Tobago y Venezuela.

En Refino y Marketing, la empresa presidida por Antoni Brufau creció el 77,5 por ciento, hasta alcanzar un beneficio operativo de 1.354 millones de euros. El principal responsable de la mejora ha sido el margen de refino, que creció el 76,4 por ciento respecto al primer semestre del pasado año, ya que los márgenes comerciales de España y Argentina fueron inferiores a los de 2004.

Las ventas totales de productos petrolíferos se incrementaron el 7,5 por ciento y alcanzaron las 28,4 millones de toneladas, de las que el 94 por ciento se destinaron al mercado español y el resto al área Argentina, Brasil y Bolivia (ABB) y otros países. En cuanto a los gases licuados de petróleo (GLP), las ventas cayeron en España por las altas temperaturas y la competencia de otras fuentes energéticas y crecieron en Latinoamérica. En total la petrolera colocó en el mercado 1.739 millones de toneladas de GLP. El resultado de las operaciones del área Química mejoró un 151 por ciento, hasta situarse en 241 millones de euros, debido a los mayores márgenes de la cartera de productos de la petrolera y a la aportación del complejo petroquímico Borealis de Sines (Portugal), adquirido en octubre de 2004.

Las ventas totales de productos petroquímicos fueron de 2,1 millones de toneladas, un 12 por ciento más que en el primer semestre del año pasado. Por último, Gas y Electricidad aumentó su beneficio operativo el 32,5 por ciento más, hasta 196 millones de euros, fundamentalmente por las plusvalías generadas por la venta de acciones de Enagás y la mejora de los resultados de Gas Natural (compañía participada en un 30 por ciento por Repsol YPF).

Shell profits soar on high oil

Reuters Business Channel | Reuters.com

"Thu Jul 28, 2005 4:06 AM ET"

By Tom Bergin

LONDON (Reuters) - Royal Dutch Shell Plc, the world's third-largest oil company by market value, fell short of analysts' forecasts with a 22 percent jump in underlying second-quarter profit on the back of high oil prices.

Shell said on Thursday its second-quarter current cost of supply (CCS) net profit, which strips out gains from the rising value of fuel inventories, was $4,626 million, up from $3,663 million for the same period last year.

Excluding a non-operating charge of $545 million, the "clean" CCS result, the measure most watched by investors, was $5,171 million.

A Reuters poll of 10 analysts gave an average forecast for second-quarter clean CCS net profit of $5,443 million, up from $4,254 million for the April-June quarter last year.

Shell's shares opened lower following the results. Its A shares were down 1.1 percent at 1,715 pence at 0742 GMT, while its B shares fell 0.95 percent to 1,773p. The DJ Stoxx European oil and gas index was down just 0.34 percent.

The main driver of the profit increase was the upstream oil and gas exploration and production division, where profits rose sharply on higher oil prices. Crude oil reached a record $60 a barrel in the second quarter.

However, this unit, Shell's largest, was also the main source of underperformance, as analysts had expected Shell to reap even more benefit from the high price environment.

"We were surprised by the result of oil products, which is higher than expected. But we were disappointed with the exploration and production results and especially gas and power," Margarita Shevtsova, analyst at Bank Oyens & van Eeghen said.

"The CCS figure is worse than expected. Generally we're disappointed with the result," she added.

This undershooting of upstream forecasts was despite higher than expected oil and gas production, which averaged 3.526 million barrels of oil equivalent per day (boepd) in the second quarter. Analysts had forecast output of 3.49 million boepd.

STICKS TO CAPEX PLANS

Shell said it was increasing its exploration spend for 2005 and 2006 to $1.8 billion annually, from $1.5 billion. It said it was increasing exploration activity but the rise could also be due to rampant inflation in the oil services sector.

However, investors will be reassured that Shell stuck to its previous guidance on capital expenditure for 2005 of $15 billion, despite doubling the expected cost of its flagship Sakhalin-2 project off Russia's east coast to $20 billion.

The results were the first since Shell became a unified company this month. Previously the group was co-owned by Dutch and British holding firms which appointed executives to a joint management board.

The ownership structure was changed in response to investors' demands following a damaging reserves overbooking scandal last year that was partly blamed on the complicated management system.

Oil and gas firms are recording fat earnings on the back of high oil prices but Shell's result lags the rise of almost 50 percent in profits that analysts had expected for the sector this quarter.

Rival BP Plc reported record underlying quarterly profits on Tuesday, up over 40 percent on the year.

Scientist calls for urban planning changes as oil prices increase

Scientist calls for urban planning changes as oil prices increase. 28/07/2005. ABC News Online

Last Update: Thursday, July 28, 2005. 7:24am (AEST)

Scientist calls for urban planning changes as oil prices increase
Governments and industry have been urged to plan for the possibility of substantial increases in world oil prices.

Sustainable Transport Coalition scientist Bruce Robinson says residents of Australia's outer suburbs who rely heavily on cars for transport are likely to be severely affected by high fuel costs.

Mr Robinson has addressed seminars in Brisbane, where he has said urban planning should help create communities less reliant on road transport.

"The community would be wealthier and happier and healthier if we all use cars less, if kids were able to walk to school as they used to in the past, rather than being taken captive and strapped into a beast four-wheel-drive," he said.

He has called for greater forward planning by government and industry to prepare for severe hikes in global oil prices.

Mr Robinson says while there is no need to panic, steps should be taken now to plan for urban development less reliant on road transport.

"The $3 or $10 a litre petrol scenario or rationing in a five or 10, or 20 year timeframe would be well worth considering," he said.

"If petrol is rationed, then people in the outer suburbs may well be at a substantial disadvantage and the houses in the outer suburbs may not be worth what people owe on their mortgages."