David Seaton's Energy Links®

"The Stone Age came to an end not for a lack of stones and the oil age will end, but not for a lack of oil.'' 

Sheikh Ahmed Zaki Yamani

Table of Contents
Editorial
*Officials say oil company's tax woes shouldn't affect Russian oil exports - San Diego Union-Tribune
*Oil Holds $40 as Supply Concerns Linger - Reuters
*Russia begins seizing oil giant's assets - Salt Lake City Tribune
*Big deepwater world oil reserves to be found - Reuters
*Africa Oil Boom Presents Challenges - Associated Press
*Fuelling suspicion: the coalition and Iraq's oil billions - Reuters
*Iran Number-Two Position For World Oil Reserves - Tehran Times

David Seaton's Energy Links® Editorial   Coinciding with the declaration of martial law powers by the Allawi government of Iraq, comes a death threat by a previously unknown group called the "Salvation Movement", against the terrorist leader Abu Musab al Zarqawi: this is ominous indeed.

So sadly it seems that the "Wilsonian" role of the United States of America in Iraq now consists in playing the part of a hypertrophied "Legión Cóndor" or a grotesque, "Somoza of Arabia" in this cruel civil war, which they are themselves creating in that most unfortunate country. David Seaton

Oil Holds $40 as Supply Concerns Linger - Reuters
World oil prices held firm above $40 a barrel on Friday after weekly data showed surprisingly strong demand in the United States that is soaking up extra OPEC output and leaving little leeway for supply disruptions. U.S. light crude eased 25 cents to $40.08 a barrel after jumping $1.25 on Thursday. Crude hit a 21-year peak at $42.45 in early June. London Brent slipped 32 cents to $37.45 a barrel. U.S. prices have risen from a recent low of $35.52 at the end of June because of the strength of U.S. demand and a series of supply outages in Norway, Nigeria and Iraq. U.S. demand continues to outpace most projections, despite high prices. Petroleum product consumption in the four weeks to July 2 rose 3.4 percent to 20.461 million barrels per day (bpd), the U.S. government's Energy Information Administration said on Thursday. Demand for the year to date is up 2.9 percent to 20.396 million bpd. "If you look at the EIA data, refinery utilization was very high but gasoline stocks were only marginally up, that implies strong demand," said a New York broker. "The market is worried that if there's any refinery or import disruption, we would have significant problems with supply." The EIA reported that national gasoline stocks rose by just one million barrels to slightly over 206 million barrels despite the high refinery production rate and imports of 1.3 million bpd, the second biggest weekly average on record. "Demand remains strong looking at these numbers. There isn't that much spare (crude output) capacity around. Any disruption will cut into what is already a tight market," said David Thurtell at Commonwealth Bank of Australia. With OPEC already pumping close to full capacity, there is little more the cartel can do to douse prices. Saudi Arabia continues to pump 9.1 million bpd, much more than its official OPEC quota, but higher production will not guarantee cheaper crude, Saudi Oil Minister Ali al-Naimi said in a newspaper interview. "Saudi Arabia produces 9.1 million barrels a day and can raise that up to 10.5 million," he said in an interview with French daily Liberation. "But if the market is convinced that there will be a supply problem, we can't change that." Energy risk management group Fimat echoed Naimi's comments, saying supply worries outweighed Saudi Arabia's attempts to soothe the markets. "This market is discounting the present supply reality in favor of the potential for additional supply disruptions," Fimat said in a note. OPEC president Purnomo Yusgiantoro said producers would go ahead with a 500,000 bpd increase to official production limits on August 1, following a two million bpd increase this month. "Our decision is in place, up until now we will still increase by 500,000 barrels a day from August. This decision is still valid," Purnomo said. OPEC meets on July 21 in Vienna and may discuss raising its official price target range of $22-$28 a barrel to more closely reflect prevailing prices.
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Russia begins seizing oil giant's assets - Salt Lake City Tribune
Government agents moved Wednesday to begin seizing assets of Yukos Oil Co. in a climactic confrontation that could carve up Russia's largest oil producer and has raised doubts among investors about doing business here. Court marshals raided a share registry office at the end of the business day to search for ownership documents, as Yukos failed to meet a court-ordered deadline to pay the first half of nearly $7 billion in back taxes. The raid was the first step toward confiscating assets for the state or selling them off to satisfy the tax claim. In moving so decisively on the deadline day, the government was in effect issuing a public rejection of last-ditch efforts by the company's chief shareholder, Mikhail Khodorkovsky, to trade his stake in Yukos for the firm's survival. Khodorkovsky, part of the young generation that first plunged into private enterprise in the late Soviet years, and who later became Russia's richest man, made his proposal to surrender his shares from the prison where for more than eight months he has awaited trial on fraud and tax evasion charges. "He always had the position that he would do everything to avoid bankruptcy of the company," Khodorkovsky's lawyer, Anton Drel, said after meeting with his client behind bars. The government's actions sent tremors through an investor community already uncertain about Russia's commitment to private property rights and the rule of law under President Vladimir Putin. The legal campaign against Yukos is widely seen as Kremlin retribution for Khodorkovsky's political activities. It drew rebukes Wednesday from the U.S. State Department, which expressed concern over "an appearance of lack of due process," and from the Paris-based Organization for Economic Cooperation and Development, which called it an example of Russia's "highly selective law enforcement." The situation jeopardizes a company that pumps more oil than Libya and accounts for one-fifth of Russia's oil exports. For now, the company's 100,000 workers remain on the job producing 1.7 million barrels a day, and executives have said they can continue shipping crude through the third week of July. The government's tax case against Yukos stemmed from a decision to reopen old audits and apply a more restrictive interpretation of tax-shelter law to the company's returns. Under the new audits, the state assessed the company $3.4 billion in back taxes, penalties and interest for 2000, a bill upheld by a Moscow court last week. On Monday, the government sent a nearly identical bill for 2001, and Russia's chief prosecutor suggested Tuesday that further demands for 2002 and 2003 would follow. The government may find it hard to untangle Yukos' complicated ownership structure in order to seize assets. As a holding company, according to executives, Yukos itself owns few physical assets but controls subsidiaries that own the refineries and pumping installations. Coming up with an inventory and figuring out which assets to take over could take weeks or months, analysts said.
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Big deepwater world oil reserves to be found - Reuters
The world's untapped deepwater oil reserves could more than triple existing deep offshore discoveries over the next 20-30 years at attractive profit margins, according to a study. Oil consultants Wood Mackenzie and Fugro Robertson said new finds could swell deepwater reserves by 114 billion barrels from 50 billion now. Reserves on that scale match remaining proven reserves onshore in Iraq, the world's second largest oil province after Saudi Arabia. In addition, deepwater natural gas reserves could also jump more than threefold from 28 billion barrels to 96 billion, the report said on Thursday. Deepwater exploration has grown in importance for oil majors amid worries on the world oil market about tight spare output capacity and instability in Middle East producer countries. The concerns have helped lift U.S. oil prices at times this year to $40 a barrel. Industry estimates are that proven world oil and gas reserves have risen sharply over the past two decades. BP in its annual statistical review estimates total onshore and offshore oil reserves at 1,148 billion barrels at the end of 2003, up from 723 billion barrels 20 years ago. Natural gas reserves were 1,105 billion barrels, up from 583 billion barrels at the end of 1983. Wood Mackenzie said deepwater exploration offered some of the industry's best returns and Mexico could become one of the top five deepwater sources, joining Angola, Brazil, Nigeria and the U.S. Gulf of Mexico. Mexico's deepwater reserves, defined by the study as at least 400 metres below sea level, could amount to 40 billion barrels, said Andrew Latham of Wood Mackenzie. Perhaps two-thirds of that would be oil, he said. "Most of the key deepwater plays should continue to achieve attractive returns ranging from around 12 percent to around 20 percent on a full-cycle basis," the report said. Latham said low finding costs, driven by high success rates and large discovery sizes, boosted returns, but he said it could take three decades to discover all potential new reserves. "We're seeing about 200 exploration wells a year being drilled in deep water and they're adding about five billion barrels of oil a year," Latham said. "So you can see that to get to that 100-odd billion that we're talking about, there's at least another 20 years of exploration needed." The study identified Brazil's state energy company Petrobras as the leading deepwater firm by value, closely followed by BP and Shell. "ChevronTexaco , ExxonMobil, Petrobras, BP and Shell all hold similar upside value in their deepwater acreage," Wood Mackenzie said. It said the mid-sized companies that stand out as having particularly attractive exploration acreage positions included Devon, ConocoPhillips, Kerr-McGee and Murphy.
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Africa Oil Boom Presents Challenges - Associated Press
The oil boom in Central and West Africa could result in prosperity or disaster in the region, depending on how wisely the revenues are spent, according to a study released Wednesday. The report by the Center for Strategic and International Studies said the growing oil exports of Nigeria and Angola will significantly enhance the global position of the two countries. Also, greater attention will be focused on "emergent, unstable producers" in the region - Equatorial Guinea, Chad and Sao Tome and Principe, the report said. "With proven reserves of more than 60 billion barrels, the region today provides one in four new barrels of oil coming into world markets from outside the Persian Gulf," said the report, titled "Rising U.S. Stakes in Africa." Secretary of State Colin Powell will address a Capitol Hill conference on Thursday at which the report will be discussed. The study said the region could add 2.5 million to 3 million barrels a day to world markets in the next 7 to 10 years. The rise in oil production "could bring prosperity or disaster to a fragile region and to complex and expanding U.S. interests there," the study said. The benefits, it said, will be felt throughout the region if the exporting nations achieve greater stability, invest wisely, improve governance and respect the rule of law. U.S. interests would be served as well, it said. Alternatively, the report said, if these nations "fall victim to the pattern of resource-rich developing nations, corruption will deepen, wealth will be squandered, competition for oil wealth will aggravate internal stability and cross-border violence, and the health, environmental conditions, and life chances of the region's 200 million citizens will remain stalled." The study also warned of a growing terror threat to U.S. interests in Africa. American policy will have to contend with the factors that attract terrorists: weak states, deep economic deprivation and religious fissures. The American response cannot be driven by security programs alone. "It also requires sustained attention to economic development, human rights and democratization," the report said. With a Muslim population of 300 million, the study noted that Africa provides a large pool for recruitment by Muslim extremists. The U.S. approach should emphasize constant engagement with Muslims representing the full spectrum of opinion, it added. The report also recommended that the United States increase pressure on Saudi Arabia to regulate financial flows by Saudi charities to Islamic schools in Africa. The schools are alleged to teach students to be intolerant of non-Islamic religions.
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Fuelling suspicion: the coalition and Iraq's oil billions - Reuters
The US-controlled coalition in Baghdad is handing over power to an Iraqi government without having properly accounted for what it has done with some $20 billion of Iraq's own money, says a new report published by Christian Aid. • Download full report (166kb PDF) http://www.christianaid.org.uk/indepth/406iraqoilupdate/Fuelling_Suspicion.pdf • More information on downloading PDFs http://www.christianaid.org.uk/inter/download.htm An audit, reportedly critical, of the coalition’s handling of Iraqi revenues is not going to be delivered until mid-July – after the coalition has ceased to exist. Christian Aid believes this situation is in flagrant breach of the UN Security Council resolution that gave control of Iraq’s oil revenues and other Iraqi funds to the Coalition Provisional Authority (CPA). ‘For the entire year that the CPA has been in power in Iraq, it has been impossible to tell with any accuracy what the CPA has been doing with Iraq’s money,’ said Helen Collinson, head of policy at Christian Aid. Resolution 1483 of May 2003 said that Iraq’s oil revenues should be paid into the Development Fund for Iraq (DFI), that this money should be spent in the interests of the Iraqi people, and be independently audited. But it took until April 2004 to appoint an auditor – leaving only a matter of weeks to go through the books. Early reports of the audit indicate strong criticisms of the CPA’s handling of Iraq’s money. But the CPA is not going to be around to be held accountable. In the run-up to the handover, nearly $2 billion of Iraq’s money has been hastily allocated. The new Iraqi government will be committed to these spending decisions. Iraq’s oil represents huge potential wealth. With half of the population still unemployed, the Iraqi people need to be able to see that the oil revenues are being spent to alleviate poverty and to improve their lives.
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Iran Number-Two Position For World Oil Reserves - Tehran Times
Minister of Oil Bijan Namdar Zanganeh said here on Saturday that a new gas field discovered in the southwestern Khuzestan province holds 251 billion cubic meters of gas. Zanganeh told reporters that 176 billion cubic meters of gas could be recovered from this new field. He said that that new oil discoveries in the southwest of the country now meant the Islamic republic held the number-two position in world crude reserves. "Liquids and gas condensates in this field are estimated at 442 million barrels. 155 million is recoverable. More than 20 million cubic meters of gas could be also recovered from this field," he said. The minister said the new gas field was located in the proximity of the massive South Pars Gas Field. "The H2S rate of the gas field stand at 500 ppm indicating that the gas is rarely sour." "If we estimate the value of each barrel of gas condensate at 20 dollars, the field can earn the country more than seven billion dollars per British thermal unit," Zanganeh said. Regarding the newly discovered Yadavaran Oil Field, the minister said the giant field would hold more than 17 billion crude barrels and that three billion barrels were recoverable. He said the oilfield could give up to 400,000 barrels per day of crude, adding that the Ministry of Oil is centering on its development. Zanganeh said his ministry has increased to 133 from 100 billion barrels the national oil recovery in one year. “We now have the second largest oil reserves in the world, after Saudi Arabia," he told a news conference. He said the oil ministry's new figure of 132 billion barrels of proven reserves, a jump of 17 billion barrels from before, came from discoveries in the Kushk and Hosseinieh oilfields -- now classed as one single field and renamed Yadavaran -- in the southwestern province of Khuzestan. The minister said exploitable oil at Yadavaran stood at over three billion barrels, with a potential daily output of between 300,000 to 400,000 bpd. He said Saturday that current oil prices were "good" and that OPEC could consider delaying a scheduled production increase when it meets later this month. "I think that at the moment the prices are good. Many people are happy about the current prices," Zanganeh told reporters. "If at the end of this month we feel there is no need for extra oil, we can postpone the decision on the extra 500,000 barrels per day. It depends on the market situation and the prices," he said. "We can make a new decision about if we want to suspend the August increase, otherwise the 500,000 bpd increase does not need to be approved again," he added. "We have already said we want to have a balanced market situation." The minister was also asked if Iran would be asking OPEC for an increase in its daily production quota. "No, we have not made such a request," he said. "But there is general discussion going on in OPEC to work out a new quota system. These discussions will take a long time. It needs a consensus among all members." He also predicted that by the end of the current Iranian year in March 2005, Iranian production capacity would reach 4.3 million bpd. Iran's current quota is 3.744 million bpd, and its production and capacity are around 3.9 million bpd.
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