David Seaton's Energy Links

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"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 Russia-U.S energy summit pointer to new major deals - Forbes Cheney's old firm's $3bn Iraq bonanza - The Sydney Morning Herald Bush wants more cash for Iraqi oil - Taipei Times Iran oil field deal at risk - Yomiuri Shimbun Oil And Gas Production Climbs, But Where Does the Money Go? - UN Integrated Regional Information Networks The Ascendancy of Oil Politics - Politics of the NDDC Bill - Vanguard - Lagos *Energy's Pals in High Places- Editorial - Los Angeles Times

David Seaton's Energy Links® Editorial Last week I spoke of the "tipping point", the decisive moment in confrontations. I was referring to the war in Iraq and the danger that the perception of defeat there might force Bush to begin other armed conflicts to build public support as the US presidential election draws nearer. However the tipping point may not only be located in Iraq.

One of the major reasons for the United States to start a war in Iraq was to impress on the entire world and not just the Arab and Islamic part that any form of resistance - military, political, economic - to United State's will would be futile. This is what Emmanuel Todd calls micro militarisme théâtral, the spectacular demonstration of overwhelming force against a weak enemy with great worldwide media exposure. A simple idea: a military demonstration in one part of the world will increase cooperation in all other fields in all the rest of the planet. It is evident that this show of massive destructive capability following Bush's declaring "you are either with us or against us" was clearly an effort to intimidate the world at large. Did it?

During the run-up to the war it was surprising to note that American diplomacy was unable to line up the support of desperately poor countries like Angola or even supposed "clients" such as Mexico or Chile. After the war's rapid and apparently successful conclusion the major opponents of the war, France, Germany and Russia were supposed to be "shocked and awed" into cooperation with America's designs... They weren't.

The United States has been unable to secure the cooperation of other countries in the reconstruction of Iraq or in taking over some of the military burdens there. Many have been hiding behind the lack of a United Nations resolution as an excuse not to send troops, but India with over a million men at arms has declared that even with a UN resolution it would be impossible for them to send soldiers as they are all needed in defending Kashmir. Other countries seem not to be "returning phone calls". Is failure to get the world to do what it wants in Iraq affecting America's ability to "command and control" in other areas?

Iraq/Cancún? Certainly there is no clear cause and effect between America's inability to gain international cooperation in Iraq and its failure to obtain a successful outcome at the Cancún World Trade Organization conference, however, the underlying cause could be the same. The power is not really there in the quantities advertised and its constant overt display and use is making that fact more and more embarrassingly evident.

Despite extreme pressure by American negotiators at the Cancún World Trade Organization conference they were unable to secure the desired outcome, progress on the "Singapore Agenda". In the face of that pressure the entire third world rebelled. Obviously if the US went to war in Iraq "pour encourager les outres", it hasn't worked very well as far as the third world is concerned. The third world, plus Russia and the European Union is about the whole world... Is there a clearer definition of failure possible?

Hegemony, controlling outcomes, intimidating opposition, bullying people in short, is either entirely effective or not effective at all. If the hegemon's bluff is called repeatedly the result is counterproductive. In the months to come it will be important for analysts to consider the "knock on" effect of this sensation that the "Emperor is naked". Will there be a "snowball effect"? Will resistance and not just in the "Sunni triangle" increase? Worst of all, will Bush be tempted into even greater demonstrations of micro militarisme théâtral, gambling "double or nothing" to recoup his losses?
David Seaton

David Seaton's Energy Links®

Russia-U.S energy summit pointer to new major deals - Forbes
Next week's U.S.-Russia energy summit will reveal whether their year-old energy partnership is mature enough to persuade a major American oil company to pile into Russia's booming oil industry, analysts said on Friday. The focus has clearly shifted since last year's inaugural summit, held in Houston months before the U.S.-led invasion of Iraq, from oil supply security to gas supplies as demand for gas in the United States is expected to soar in the years to come. Analysts said investors were looking to the St Petersburg meeting -- followed days later by talks between Presidents Vladimir Putin and George W. Bush -- for signs that U.S. firms want to expand in the world's second largest oil exporting nation and follow BP's recent giant investment deal. Markets have been thrust into a frenzy by rumours that ExxonMobil or ChevronTexaco were trying to acquire a large stake in YUKOS , which is to take over its smaller rival Sibneft by year-end. "Investors will focus on rumours around YUKOS, Chevron and Exxon, although I don't expect any announcement at the summit," said Stephen O'Sullivan from Russia's leading brokerage UGF. "I think it's too early for such a deal given the ongoing merger between YUKOS and Sibneft and Russia's coming elections." YUKOS has been locked in a row with the Kremlin after its key shareholder was arrested on charges of theft of state property in July. Analysts say the Kremlin, concerned at the growing political activities of Mikhail Khodorkovsky, YUKOS's CEO and Russia's richest man, may not want to settle the dispute until after next March's presidential election which Putin is expected to win. But after the election the country may want to attract more high-profile deals with major foreign companies to help win a coveted investment grate rating from ratings agencies. For U.S. firms, representing the world's top oil consumer, Russia represents a rare opportunity with large oil reserves still up for sale -- and far away from the volatile Middle East. "You have to look at this in the context of U.S. energy policy and U.S. foreign policy, which are very closely tied together these days," a London banker said. With oil prices around $25 per barrel, Russia's growing cooperation with the oil cartel OPEC looks worrying for Western nations which need lower prices to ensure economic growth.
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Cheney's old firm's $3bn Iraq bonanza - The Sydney Morning Herald
The value of contracts awarded to Halliburton - formerly run by US Vice-President Dick Cheney - in Iraq has skyrocketed to $US2 billion ($A3.01 billion), prompting new calls from lawmakers to investigate the propriety of the deals. Halliburton began work in Iraq with a $US37.5 million ($A56.5 million) no-bid contract in February to put out oil fires. That deal, expanded to include pumping oil, is now worth about $US948 million ($A1.43 billion), according to Halliburton figures provided to the New York Daily News. But the oil contract alone, awarded by the Army Corps of Engineers to Halliburton subsidiary Kellogg, Brown & Root, is potentially worth up to $US7 billion ($A10.55 billion), the military said. "It stinks - that the (oil) contracting was done behind closed doors that circumvents traditional bidding procedures just stinks to high heaven," said Representative Steve Israel, a member of the US House (of Representatives) Armed Services Committee. Israel is sponsoring legislation that would make it difficult for private military contractors such as the Houston-based Halliburton to win contracts without public scrutiny. The Democrat's Hillary Clinton is backing a similar measure in the Senate. Halliburton's contracts came under renewed fire this week after it was learned that Cheney, who has insisted he has no financial interest in his former company, has received hundreds of thousands of dollars from Halliburton since taking office. Representative Henry Waxman has requested a General Accounting Office investigation into Halliburton's contracts, a spokeswoman confirmed. Besides the oil deal, a second set of Halliburton contracts -- awarded by the Army's Field Support Command -- is worth about $US1.2 billion ($A1.8 billion), said Army spokesman Dan Carlson.
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Bush wants more cash for Iraqi oil - Taipei Times
The Bush administration is calling for an additional US$2.1 billion to repair the Iraqi oil industry, a sharp increase from previous estimates that underscores how the sabotage of pipelines and the electricity grid has throttled the flow of oil for export and into domestic refineries. As late as last month, the US-led civil authorities in Baghdad and the Iraqi oil ministry said that about US$1.1 billion would be needed to make crucial fixes to the oil industry by next March. A spokesman for the White House's Office of Management and Budget, Trent Duffy, said that the request for an additional US$2.1 billion came from the office of Paul Bremer, the head of the civil administration in Iraq. The sum is part of a supplemental US$87 billion budget the Bush administration is preparing to seek from Congress to support American troops in Iraq and to finance the country's reconstruction. In a letter sent on Friday to the Office of Management and Budget, two Democratic congressmen, Henry Waxman of California and John Dingell of Michigan, called the request "a radical departure from the administration's prior estimates of the costs of oil field reconstruction. Moreover, it was apparently developed without consultation with the Army Corps of Engineers, the agency overseeing the oil field reconstruction." A spokesman for the Corps of Engineers said that it had not been contacted by the administration to develop the new estimate, but it remains unclear whether Bremer's administration spoke to the Corps of Engineers staff in Iraq. The congressmen have asked the budget office for a detailed explanation of how the estimate was derived and a list of the projects involved. Duffy said that the administration had not yet formally asked Congress for the US$87 billion, and when it does some time in the next few weeks, it will provide the explanations sought by the congressmen. The request for the additional money has highlighted how hard it has been for the occupying powers to halt the sabotage that chips away at the oil sector and limits its output.
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Iran oil field deal at risk - Yomiuri Shimbun
The Iranian government is planning to invite several major international oil companies to bid to develop the Azadegan oil field in Iran, a project a consortium of Japanese companies has been negotiating since 2000, sources said Thursday. Tehran has already invited bids from at least three oil companies in Europe and China and unofficially notified Tokyo that it will not be invited to take part in the bidding, according to the sources. A consortium of Japanese companies acquired preferential negotiating rights in 2000 to put together a project to develop the Azadegan oil field, one of the world's largest oil reserves, and have been negotiating with Iran over a detailed development program and financial terms in an effort to conclude a formal contract. However, the United States has asked Japan to delay the contract because of concern that Iran is developing nuclear weapons. Tehran intends to continue separate talks on the project with Tokyo, but to exclude Japanese companies from the bidding, according to the sources. Observers pointed out that the entry of major foreign oil companies into the bidding was likely to make it very difficult for Japan to secure what was potentially the largest supply of oil the nation has ever had access to. The sources said that the three major oil companies already intending to bid on the project are France-based Total, China's Sinopec Corp. and Royal Dutch/Shell based in Britain and the Netherlands. It is possible that other major European oil companies may join the bidding after researching the profitability of the project. The bidding is likely to be carried out several months from now. The United States is urging other countries, including Japan, to delay any deal that would be economically beneficial for Iran. However, the oil companies are expected to go ahead with the negotiations despite such requests.
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Oil And Gas Production Climbs, But Where Does the Money Go? - UN Integrated Regional Information Networks
A few years ago, Equatorial Guinea was an international pariah state, a dictatorship accused of corruption, mismanagement, repression and torture on a scale unparalleled in Africa. But the discovery of abundant offshore oil and gas over the past decade has started to change official attitudes in Washington towards this former Spanish colony of just over 500,000 people. The United States closed its embassy in the capital Malabo in 1995, when the small West African state still relied on modest exports of cocoa, coffee and timber to keep its despotic government in power. But Washington decided to reopen the diplomatic mission last year, given that three American oil giants, ExxonMobil, Amerada Hess and Marathon Oil had come to control most of Equatorial Guinea's rapidly increasing oil and gas production. Oil companies from Spain, Switzerland, South Africa, Australia and Malaysia have joined the Americans in getting a slice of the oil and gas bonanza in this densely forested country. The country consists of Bioko island and a square patch of territory on the African continent, 150 km to the southeast. Since the discovery of offshore oil near Bioko in 1995, production has shot up to 350,000 barrels per day, most of which is exported to the United States according to a new report by the US Department of Energy. http://www.eia.doe.gov/emeu/cabs/eqguinea.html According to the Bank Central African States (BEAC), which administers the country's currency, rising oil exports should give Equatorial Guinea a per capita national income of US $4,472 this year, one of the highest in Africa. That compares with just $210 per capita for Guinea-Bissau, a former Portuguese colony of similar size further round the coast of West Africa, which has no oil or gas. Equatorial Guinea's economy grew by a massive 16.5 percent last year thanks to rising oil revenues which now account for 90 percent of all wealth generated in the country. The BEAC expects Equatorial Guinea to register further strong growth of 14.1 percent in 2003. But within the country itself, very little has changed. President Teodoro Obiang Nguema, who overthrew his uncle in 1979, remains head of state at the head of a government dominated by his own family. And very little of the country's new found oil wealth has found its way into the pockets of ordinary people.
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The Ascendancy of Oil Politics - Politics of the NDDC Bill - Vanguard - Lagos
(...)The story of oil politics in Nigeria is a tragic saga of how the country became subservient to the profit motive of the major oil companies. When Shell, the Shell-BP, started oil exploration in the country, Nigeria was still a colony of Britain. The exploration licence granted to the country in 1938 covered all of Nigeria. When oil was discovered in Oloibiri, now in Bayelsa State in 1956, the country was still a colony. Neither Nigeria nor the communities where oil was found had a say in the laws governing the industry. Unfortunately, forty-seven years after, this is largely the situation today. Pressurized by OPEC, Nigeria made moves to step up its share of the business in the 1970s. And so the Nigerian National Petroleum Corporation (NNPC) was born in 1977. In theory, the NNPC is supposed to be the regulator of the industry. In practice, it is not. Unlike Norway, for instance, that has developed a technology based for its oil industry, Nigeria is dependent almost entirely on technical know-how imported from the home base of the major companies. Not surprisingly although there is a joint venture arrangement which gives the NNPC about 55 per cent of shareholding, the NNPC is practically a junior partner in the enterprise. The exploration arm of the NNPC, the Nigerian Petroleum Development Company, established in the 1980s has suffered a stunted growth, unlike similar bodies in Libya and Algeria. Even the oil wells and fields the company developed in the late 1980s have been turned over to some major foreign firms and local operators owned by powerful military officers and their cronies. Regrettably, therefore, after nearly 50 years of oil business in the country, Nigerians do not control up to 1% of aggregate assets. Clearly, if Nigeria does not exercise control over this key energy resource, it cannot enact laws to safeguard the environment where the business is carried out.
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Energy's Pals in High Places- Editorial - Los Angeles Times
The energy industry's multibillion-dollar wish list survives intact in the national energy act being hashed out in a congressional conference committee. The legislation remains the product of closed-door meetings two years ago between energy industry executives and Vice President Dick Cheney, a former oilman. Though the Senate in July managed to pass a slightly more moderate bill that Democrats had backed, bipartisan activity ended the moment Sen. Pete V. Domenici (R-N.M.) and Rep. W.J. "Billy" Tauzin (R-La.) loaded their House-Senate conference committee with friends of the energy industry. Domenici and Tauzin shamelessly link oil drilling in the Alaskan wilderness to such things as keeping the lights on in New York, even though the blackout was a result of a neglected transmission system, not lack of power. They and their allies continue to push for subsidies to oil states, coal states and farm states that grow corn used to produce the gasoline additive ethanol. Conspicuously absent is any mention of tougher automobile fuel efficiency standards that would dramatically reduce energy consumption. Domenici also would give utilities loan guarantees to help them build nuclear plants, even though the industry hasn't figured out how to dispose of aging, outdated power reactors and their radioactive waste. Congress, if it had any intestinal fortitude, would drop this giveaway package and do the regulatory tightening that would prevent more blackouts and increase energy independence. Start by granting real regulatory power to the North American Electric Reliability Council. The little-known organization now relies on voluntary compliance to keep electricity flowing on the overloaded system. The council is not much of a club in an industry where ever-larger power producers, transmission line operators and energy traders constantly battle for a competitive edge. Congress also must create regional organizations to deal with the increasingly interstate nature of electric transmission.
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