Morales to nationalize Bolivia oil, gas - Seattle Post Intelligencer
The winner of Bolivia's presidential elections has repeated his vow to nationalize oil and gas and said he will void at least some contracts held by foreign companies "looting" the poor Andean nation's natural resources. Indian coca farmer Evo Morales said he will not confiscate refineries or infrastructure owned by multinational corporations. Instead, his government would renegotiate contracts so that the companies are partners, but not owners, in developing Bolivia's resources, he said. "We will nationalize (Bolivia's) natural resources," Morales said at a news conference Tuesday in La Paz. "Many of these contracts signed by various governments are illegal and unconstitutional. It is not possible that our natural resources continue to be looted, exploited illegally, and as the lawyers say, these contracts are legally void and must be adjusted," Morales said. Bolivia's proven and potential reserves total 48.7 trillion cubic feet of natural gas, second only to Venezuela in South America, according to the U.S. Department of Energy's Energy Information Administration. Morales said his government would open talks with governments and company executives, working to strengthen relations with state oil companies. He has close relations with Venezuela President Hugo Chavez, who is also trying to change the role of foreign oil companies in his country. With 92 percent of polling stations officially counted, Morales had 54.1 percent of the vote in Sunday's election. He needs a bare majority to win outright and avoid having congress choose between him and conservative rival Jorge Quiroga in mid-January. Outgoing President Eduardo Rodriguez's administration said it was organizing a transition team in anticipation of Morales' inauguration on Jan. 22. On Monday, Morales said Brazilian oil company Petrobras must turn two refineries it owns in Bolivia back to Bolivian control. Morales announced that he had asked Brazilian President Luiz Inacio Lula da Silva to return the refineries, which Petrobras purchased in the last decade. Petrobras bought the two refineries from Bolivia's state-owned oil company in 1999 for roughly $100 million. Nationalization of hydrocarbons in Bolivia has become the key campaign issue for Morales. But he has not laid out specific plans on how he will manage the nationalization. Bolivia in May had passed a new hydrocarbons law that raised oil and gas production taxes and royalties to 50 percent, and at least on paper made the state the sole owner of production. But the interim government of President Eduardo Rodriguez never decided how to put the stipulations into practice. Morales didn't say when or under which terms his government would negotiate new contracts with the energy companies. But he said that contracts with companies found to have been smuggling oil or gas, or dodging taxes in Bolivia, will simply be annulled. The top investors in Bolivia are Petroleo Brasileiro SA, known as Petrobras, Spain's Repsol YPF, France's Total SA, British Gas and BP PLC . Foreign energy firms have invested $3.5 billion in Bolivia since 1996. But after the passage of the new hydrocarbons law in May, and amid increasing calls for an outright nationalization of the energy industry in Bolivia, they this year have mostly frozen any new investments.
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No Way Found to Cut Need for Foreign Oil - Washington Post
The Senate decision yesterday not to allow oil drilling in Alaska's Arctic National Wildlife Refuge marks the latest failure of lawmakers to form a consensus on a strategy to reduce U.S. dependence on foreign oil. Congress has been unable to agree to the two most significant steps analysts cite for addressing the issue: allowing more domestic drilling and increasing automobile mileage requirements. "The system suffers from complete paralysis because of this," said Gal Luft, co-chair of the Set America Free Coalition, a bipartisan activist group that is neutral on the refuge but advocates other ways the nation can become less oil-dependent. "We don't make any progress. The only thing that changes is the level of dependence -- it increases every year." Luft is trying to shift congressional debate to other possible solutions, including increasing the use of alternative fuels and using electricity to power automobiles. While the ANWR debate raged, government analysts predicted that higher oil prices in coming years could have a more significant impact on reducing reliance on foreign oil than opening the refuge. The United States this year has imported about 59 percent of the more than 20 million barrels of oil a day it has consumed, according to government data. The new reports, from the Energy Department's Energy Information Administration, increased the long-term forecasts for oil prices, which the agency says will lead to more domestic production, less consumption and thus fewer imports. The agency estimates oil imports will account for 60 percent of consumption in 2025, down from the previous projection of 68 percent. "It's a very significant change," said John Conti, who oversees the long-range oil forecast. Opening the Arctic refuge might have reduced U.S. oil imports to about 57 percent in 2025, according to the Energy Information Administration. Supporters of the measure have argued that is significant; opponents said it is too small to matter. Lawmakers from across the political spectrum have called for measures to reduce the dependence on oil imports, saying reliance on foreign oil makes the United States vulnerable to supply disruptions and price spikes. In August, President Bush signed an energy bill that analysts said will do little to reduce U.S. oil dependence, despite statements to the contrary by members of Congress. The oil industry has pushed hard in recent months to open more areas to drilling, using recent high prices as an argument for expanding production. Some lawmakers unsuccessfully called for opening offshore areas to drilling for oil and natural gas. Environmentalists have objected, saying doing so would despoil ecologically sensitive areas. Officials in Alaska also have been seeking to open the Arctic refuge, citing economic benefits to the state, along with arguing for the need to reduce imports. Oil production in Alaska has been on the decline because the fields there are aging. State officials are worried about projections that Alaska's income from oil and natural gas production will significantly decline over the next 10 years. Alaska officials also have been feuding with large energy companies over the slow development of the state's natural gas fields, another potential source of revenue. A state port authority filed an antitrust suit this week against Exxon Mobil Corp. and BP PLC, claiming they were restricting the nation's natural gas supply in a disagreement over the proposed path of a gas pipeline.
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Recovery of oil and gas output in Gulf slowed by labor shortage - San Diego Union Tribune
There is no shortage of work these days for Bay Ltd., which specializes in repairing offshore oil and gas platforms. The trouble is, the same hurricanes that slammed the Gulf of Mexico's energy infrastructure and created this extra business also upended the company's southern Louisiana work force. "If we had more people, we could definitely get more work," said Mark Comeaux, manager of Bay's fabrication plant in Belle Chasse, La., just south of New Orleans. Comeaux, who lost half of his 80-person crew after hurricanes Katrina and Rita, said employees either moved away or they found better-paying blue-collar jobs once federal reconstruction funds began flowing to the region. Enough work, not enough workers – a familiar refrain among companies supporting the Gulf's oil and gas industry. It underscores one of several major problems the industry faces as it struggles to rebuild a complex web of platforms, pipelines and processing plants before the next hurricane season arrives. With demand outstripping supply for everything from inspection and repair crews to supply ships to power tools, the price for all of these things is going up. Also on the rise are wait times for some much-needed oilfield services and equipment as competing oil and gas producers sign longer than usual contracts in order to avoid finding themselves at the back of the line. "There's so much work down here for diving it's unbelievable," said Jeff Sikut, president of Avondale, La.-based J&J Diving, an underwater pipeline inspection and repair company that is turning away two to three potential new customers a day. Sikut said he'd love to hire an additional 50 divers and take on additional work, but the available labor pool is extremely shallow and those who would consider relocating to southern Louisiana often cannot find reasonably priced housing. Labor and housing isn't all that's scarce. Sikut said projects have been slowed by the shortage of hydraulic and pneumatic tools – a byproduct of soaring construction demand throughout the Gulf Coast – as well as a tight market for the jet pumps that are used to move sand in order to bury pipelines. Even when all the best crews and equipment are available, it is slow going. "There are boats sunk everywhere. Platforms were mangled, and the pipelines look like spaghetti," Sikut said. To be sure, oil and gas producers have made significant progress in restoring production in spite of these challenges. "The impression we're getting from our members is that it's going even better than expected," said Larry Wall, a spokesman for the Baton Rouge-based Louisiana Mid-Continent Oil and Gas Association. Still, about a quarter of the Gulf's daily oil output, and one-fifth of its natural gas output, remains offline and the pace of progress is expected to slow in the months ahead, a trend that could keep upward pressure on energy prices. The region's daily output of oil and natural gas is not anticipated to reach pre-hurricane levels until next summer. It could be at least two years before all of the damaged energy infrastructure in the Gulf of Mexico is fixed, those involved in the recovery effort say. Todd Hornbeck, chairman and founder of Covington, La.-based Hornbeck Offshore Inc., believes that if current weather patterns persist and more oil and natural-gas drilling occurs in the Gulf – a region he called "hurricane alley" – the industry may find itself in a "perpetual repair cycle." However, Hornbeck said the current labor crunch shouldn't come as a surprise. It is partly a reflection of the industry's history of boom and bust cycles, whereby employees laid off during periods of low energy prices move on to other skilled professions and do not return. About 110 of the Gulf's roughly 4,000 production platforms were destroyed by Katrina and Rita and some may never be rebuilt, industry and government officials said. "There were a fair number of those platforms that were destroyed that were very low producers, so if they do not come online it doesn't mean we cannot get back to a pre-hurricane level," said Gary Strasburg, a spokesman at the Minerals Management Service. Yet even the platforms that are eventually rebuilt will not all be in place by the middle of next year. Instead, in order to get back to pre-hurricane levels by then, the industry is relying on the addition of one major platform that was under construction prior to Katrina and Rita – BP's Thunder Horse. Once up-and-running in the second half of 2006, Thunder Horse will have the capacity to produce as much as 250,000 barrels per day of oil and 200 million cubic feet a day of natural gas. It is equivalent to more than half of the region's daily oil production still offline, and almost 10 percent of the daily natural-gas production offline. Another very important platform for the region is Royal Dutch Shell Group's Mars platform, which was producing 130,000 barrels per day of oil and 150 million cubic feet a day of natural gas pre-Katrina. Mars, which suffered extensive damage, is expected to resume operations in the second half of 2006. Restoring oil and natural-gas production to pre-hurricane levels isn't simply a matter of repairing and rebuilding platforms. About 150 pipelines that gather and transport oil and natural gas from offshore wells were damaged by the back-to-back storms, according to federal statistics. That is 50 percent more pipeline damage than Hurricane Ivan caused in the summer of 2004. London-based BP says its daily output was down by 135,000 barrels of oil equivalent per day in the third quarter and it expects to be down 160,000 in the fourth quarter, in large part because of problems with pipelines. Another key bottleneck exists onshore, in the form of damaged natural-gas processing plants. Dominion Resources had been pumping 435 million cubic feet of natural gas per day before Katrina and is now producing slightly more than that, but still 15 percent short of its goal of 525 million cubic feet by now, due to the processing shortfall, said spokesman Dan Donovan. Gas Daily, a trade publication, reported late last month that nine plants with 5.7 billion cubic feet of processing capacity remained shut down because of storm damage. The Minerals Management Service, a division of the Interior Department that regularly gathers such information from the industry, is expected to release a comprehensive update on the region's recovery before the end of the year, a spokesman said.
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Analyst sticks to his forecast of oil at $105 a barrel - International Herald Tribune
Arjun Murti, the Goldman Sachs Group analyst who roiled oil markets in March by saying crude could reach $105 a barrel, now says that forecast might be conservative if the "peak oil" theory is right and world supplies are running out. The theory, which postulates that the world's oil supply is close to an irreversible drop, is no longer "on the fringes" of the market, according to a research report by the New York-based Murti, who forecasts oil prices of between $50 and $105 a barrel until 2009. The UBS analyst James Hubbard, a former oil engineer at Schlumberger, has said an inevitable decline in supply will start sooner and be worse than expected unless investment is increased for many years. A jump above $105 a barrel "is possible if we don't invest the right amount of money," Hubbard said in an interview in London. "There will be a peak in production earlier than expected, and that post-peak decline will be more dramatic than currently assumed unless there is a sustained increase in investment in oil and gas production, greater consumer efficiency and alternative energy sources." The Saudi Arabian oil minister, Ali al-Naimi, and the president of Exxon Mobil, Rex Tillerson, have both said oil supplies will last for decades. But energy traders are increasingly debating the amount of available crude after rising demand from China surprised suppliers, who had failed to spend on new pipelines, rigs and refineries. Tillerson in September told the World Petroleum Congress in Johannesburg that a U.S. Geological Survey estimate of two trillion barrels of conventional oil reserves still to be recovered is conservative, with the range of possibility as high as seven trillion barrels. Less than a trillion barrels has been pumped in the world so far. Investors who back the peak oil theory, like Boone Pickens, a Dallas-based hedge fund manager and former oil executive, have fueled the price rally of the past two years, when oil almost doubled in price to reach a record $70.85 in August. Prices ended last week at $58.06 a barrel in New York.
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