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In the aftermath of US presidential elections and corporate fears of looming environmental regulations that could affect their bottom line, the Environmental Protection Agency (EPA) is under attack for conducting dangerous experiments on human beings.
Over the past decade, the EPA has apparently been paying hundreds of people $12 an hour for the privilege of exposing them to high levels of air pollutants like diesel exhaust and PM2.5 particulate matter in an operation run at the University of North Carolina’s School of Medicine.
A lawsuit has been filed in the federal court, charging the EPA with conducting illegal and potentially lethal experiments of hundreds of financially vulnerable people.
According to an EPA testimony before Congress in 2011, particulate matter—a key component of diesel exhaust fumes--causes premature death. “It doesn’t make you sick. It’s directly causal to dying sooner than you should.”
In addition: “If we could reduce particulate matter to levels that are healthy we would have an identical impact to finding a cure for cancer.”
Apparently, however, test subjects were not apprised of the exact risk involved. While the EPA has dramatized the dangers of PM2.5 exposure before Congress, with its test subjects, the message has been toned down to warn of the potential of airway irritation, coughing or shortness of breath. The courts will have to determine whether test subjects were sufficiently briefed on the risks.
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This is how the EPA gathers the research it needs to support the implementation of strict regulations. Two major new regulations that have actually been rejected by the D.C. District Circuit Appeals court are the Cross-State Air Pollution Rule and the Mercury Air Toxics Standard—both based on the dangers of PM2.5.
The EPA is now reportedly evaluating its research on human subjects, in accordance with a Congressional request.
In early October, Senator Jim Inhofe (R-Oklahoma), a ranking member of the Environmental Public Works Committee, called for a hearing to investigate the experiments.
The obvious question is: If the EPA has been doing this for a decade, why is it only now becoming an issue? That, of course, can only be answered by politics, which tends to value human life in a selectively opportunistic manner.
The story only reluctantly maneuvered itself into the mainstream media when “alternative” writer Seven Milloy of Junkscience.com dug it up and added a lawsuit to the mix after obtaining details of the experiments through the Freedom of Information Act (FOIA).
Milloy is a dubiously interesting figure. A biostatistician and securities lawyer by trade, he picks his battles—and they aren’t necessarily “human interest”, so to speak. In fact, he spent his earlier days consulting for big tobacco and working to debunk science that shows how dangerous smoking is.
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Agenda aside (it’s always good to know agendas), Milloy makes an important point. The EPA insists that its experiments are independently evaluated for safety and ethics, those independent evaluations are conducted by the University of North Carolina (UNC), which has been paid over $33 million by the EPA since 2004. The point: independence here is questionable.
Milloy is also a fellow at the American Tradition Institute (ATI), which has filed its own lawsuit against the EPA for illegal and unethical practices, comparing the experiments to Nazi undertaking and the Tuskegee experiments. This latter actually convinced Congress to pass the National Research Act of 1974 aimed at protecting human test subjects in scientific experimentation.
The ATI has filed its lawsuit on behalf of one of the experiment’s test subjects, Landon Huffman, who claims he was led to believe that the experiment would help people suffering from asthma, like him. He claims he was never informed that the experiment would potentially cause asthma attacks, among other things.
Of course, the EPA’s Clean Air Act of 1997 and subsequent moves to tighten air quality standards are quite irksome to the corporate world, which has to fork out billions of dollars to keep pace.
That the EPA is conducting creepy experiments on human beings in order to make its case for stricter regulations is not news—it’s been going on, at least in this case, since 2004 and has never been a secret. It’s being pulled out now as a trump card with the intention of derailing new regulations.
Regardless of the politics, though, no one wants to hear that an environmental “protection” agency is so Machiavellian as to use human beings as guinea pigs to determine exactly how dangerous our pollutants are—especially if they’re not being told what the real potential risk is.
By. Jen Alic of Oilprice.com
On the 14th of September 2012 the 3,500 wind turbines that exist around the UK managed to produce just over four gigawatts of power to the national grid; a record. The same day Germany also set its own production record, although its 23,000 turbines and millions of solar panels managed to create 31GW.
It is interesting to note that the two records were received very differently. Maria McCaffery, the CEO of RenewableUK, said that “the record high shows that wind energy is providing a reliable, secure supply of electricity to an ever-growing number of British homes and businesses;” whereas the Germans dismayed at their surge in electricity production.
Germany has a very advanced renewable energy sector, having invested billions over several years to try and encourage as many renewable energy installations as possible. It is a path that the UK government wants to take, and therefore they must quickly heed the warnings and note the problems that Germany is already experiencing.
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The problems generally stem from the fact that solar and wind is not a steady source of energy. This means that it is very difficult to maintain a steady supply to the grid, and as a result traditional fossil fuel plants must be kept on standby, ready to produce energy whenever the wind dies too much.
Keeping a fossil fuel plant on standby in such a way is actually very inefficient, and leads to far more emissions than if the plant were just running normally all the time.
The more Germany installs renewable energy sources, the more problems it encounters. The whole plan to generate 32% of renewables by 2020 is turning out to be a disaster, and the UK really should take note so that they can try to avoid making the same mistakes as best they could.
By. Charles Kennedy of Oilprice.com
Up here you get to a time in late November when you want winter to start. You know it’s coming. It’s dark and barren outside. The ground is frozen. Let it start. Let the snow come. Something down inside you wants to feel the sting of cold air on your face so you know that winter’s here. The sooner it starts, the sooner it’s over. But it’s not here, yet.
It’s like the old joke about the Sadist and the Masochist.
The Masochist cries out to the Sadist . .
“Beat me . . . please beat me.”
The Sadist replies . . .
“No.”
In Alberta and on the Prairies, winter started early this year. It has already made its mark with snow and cold. But here in the east, we are getting tropical storms instead. Around here, record high temperatures followed the hurricane.
You can prepare for winter. Change the tires, buy a new coat, make sure the utility bills are paid up. You do the normal things to prepare for the cold. But hurricanes on the eastern seaboard in November aren’t normal. People in New Jersey could not have expected what they got, and prepared for that.
The new normal is storm surges in Manhattan that will turn everything south of Times Square into an aquarium. The new normal is barrier islands that took thousands of years to build up being ripped apart in one day.
There is no way to prove that Hurricane Sandy was the direct result of global warming caused by greenhouse gases. There are only statistics. The sea level around New York is now a foot higher than it was 50 years ago. If the rate of ice melting in Greenland and Antarctica increases, sea levels will rise further and coastal cities around the world will face the possibility of becoming Venice. And Venice could become Atlantis.
It’s easy to dismiss global warming, if it doesn’t affect you directly. But a couple of days prior to the election, Mayor Michael Bloomberg of New York City took some time away from hurricane repair duties to endorse Barak Obama for President. It appeared that his decision to endorse was precipitated by Sandy and Irene. In his estimation it was a bit too much of a coincidence to have two late autumn hurricanes in the Northeast in consecutive years. Bloomberg stated that to deny that climate change was a serious problem was to be “on the wrong side of history.”
He felt that Mitt Romney was missing the boat on climate change.
Mayor Bloomberg isn’t the only one who sees climate change as a personal threat. Farmers watching their crops wither in the draught this past summer are worried about it. Another year or two of screwed up weather and farmers around the US and Canada will be demanding that something be done. It doesn’t matter what their politics are.
The families of firefighters who were killed fighting the record number of forest fires last summer are no doubt still grieving. They understand too well that extreme heat is dangerous.
And now they are hurting in New Jersey. The fury of Mother Nature brings everyone back to basics. The dispossessed need food and shelter. Everything else is secondary. All other problems pale in comparison.
Later there will be the clean-up and the rebuilding. The cost of Sandy will be enormous in money and in grief. The storm affected millions of people. At some point the insurance companies will begin to demand that something be done.
Winter will get here soon enough. We’ll have too cold weather, too much snow and ice and whiteouts. We’ll make jokes about global warming when it’s freaking cold outside. We know how to prepare for that kind of bad weather. We’re used to it.
But what’s happening these days in the atmosphere isn’t the old normal. And we are just one or two more freak-out weather events away from many more people in North America, no matter what their politics are, coming to the same conclusion.
When the majority fully realize that the cost of not doing anything to curtail global warming will be so much more expensive than the cost of wholehearted adoption of renewable energy– then something will get done.
Follow the money.
By. Dave Zgodzinski
A paper published recently by the IMF gives us some insight into how oil prices and availability might affect the global economy in the next decade. The paper, entitled Oil and the World Economy: Some Possible Futures, starts with the statistic that global oil production grew by 1.8 percent annually from 1981 to 2005, then stagnated with production remaining essentially flat thereafter. In the last seven years what is called global “growth” in “oil” production has come largely from substitutes for crude such as natural gas liquids, tar sands, and biofuels. While these substitutes do have important uses, they do not have the versatility of conventional oil and in the long run, falling supplies of normal crude can and probably are acting as a brake on economic growth.
There are other, non-liquid, substitutes for oil such as coal, natural gas and even nuclear power, but to implement these as a major source of transportation energy would be a long, expensive and in some cases an impossible task. Airplanes won’t run on coal very well without a lot of expensive preprocessing.
Global oil production has been on a plateau, at historically high prices, for so long now that it seems unlikely that it will ever resume sustained growth at the rates we saw in the decades prior to 2005. The only possible outcomes are prolonged stagnation, which some like to call the “bumpy plateau”, or decline of global production. The rate of decline, of course, will be critical to the future of the global economy and is the core of the IMF’s paper.
With the world producing and burning some 31 billion barrels of oil, or some combustible liquid we call “oil,” each year, and at a relatively cheap average price to boot, our stagnant plateau is unlikely to continue much longer. Most people who are willing to hazard informed guesses as to when global oil production will start down are saying that the decline will begin somewhere between 2015 and 2020.
There has been considerable discussion in the mainstream media recently about the growing supply of “shale” oil from North Dakota and Texas, more properly termed “tight oil,” which it is claimed will soon make America the world’s biggest oil producer – free from the tyranny of imported oil. Anyone digging into this issue will find that “tight” oil will turn out to be another bubble. Tight oil wells cost several times more to drill and frack in comparison with conventional land or shallow water wells and have an average annual depletion rate on the order of 40 percent a year in comparison with 4 or 5 percent for conventional wells.
In recent months, however, thanks to an all out drilling effort, the oil coming out of the fracked fields in North Dakota and Texas has been on the order of 950,000 b/d and has been increasing at the rate of about 350,000 barrels a day (b/d) each year. This has pushed up U.S. domestic oil production to the highest level in nearly 30 years – no wonder the press is bursting with optimism for America’s future.
The true story, however, is not as good as it seems. North Dakota currently has some 4,500 producing wells pumping out an average of only 144 barrels a day per well. A good conventional well will produce 3-5,000 b/d and those big deep water platforms are designed to produce 100-200,000 b/d from multiple well holes. To produce the 8 million additional b/d that the U.S. would need to obtain “energy independence” it would take 60,000 wells pumping out 144 b/d. These and the 6,000 or so fracked wells we already have would have to be redrilled every 3 or 4 years to maintain production. This is clearly impossible as the best prospects have already been drilled and from here on we are likely to see less productive tight (fracked) oil wells.
If the price of crude in the mid-west, currently about $85 a barrel, drops another $10 or so a barrel it will be selling for less that the marginal cost of production if it isn’t already in some cases. When the value of the produced oil gets too low, the sinking of new wells will decline rapidly as it has for shale gas drilling. A good estimate would be that the “shale oil bubble,” while adding to America’s current production, only has another year or two before it begins to fizzle.
Global oil demand has been growing at the rate of circa 800,000 to a million barrels a day in recent years all though some foresee this rate of increase declining. This is the underlying reason why would oil prices are staying high.
The IMF’s first scenario has global oil production dropping by only 1 percent a year when the decline comes. Should this occur, the IMF’s model predicts that oil prices will jump by 60 percent. As supplies continue to decline each year at this rate, the real oil price would continue to climb until demand destruction caused by unaffordable oil brings supply and demand back into balance.
Another scenario considers what might happen if the decline in world oil production increases to 3.8 percent which is about the rate that existing oil fields are depleting. In this situation, the impact is roughly four times as bad as with a 1 percent annual decline. Annual growth rates in the industrial countries would decline by one full percentage point. Oil prices would have to rise by 200 percent to bring about the demand destruction required to rebalance the oil markets.
Many of us have always thought of Peak Oil as being the point in time when global oil production began its inexorable decline to lower levels, bringing on all sorts of economic turmoil. The lesson of the last five years, however, seems to be that we can have deep and perhaps insoluble economic problems merely by the inability to grow production at satisfactory rates. The next five years should prove whether this concept is correct.
By. Tom Whipple
Source: Post Carbon
An interesting article has today been published by Forbes which investigates the possibility that Iran has set up a false insurance company, offering illegal insurance policies, in order to circumvent the EU sanctions and enable the Persian State to continue exporting its crude.
Very Large Crude Carriers are obliged by international maritime authorities to carry mandatory third-party liability insurance of a value up to $1 billion, known as Protection and Indemnity Coverage. This type of coverage is only offered by large insurance groups (P&I clubs), 90% of which are based in Europe. EU sanctions against Iran have prevented European insurers from dealing with Iranian tankers, and this has severely affected Iran’s export, as without cover, its tanker cannot deliver oil. It has lost all of its European customers, and other international customers have drastically reduced their purchases.
Suddenly, out of nowhere, an Iranian P&I club has emerged and started to offer full cover and protection to the entire National Iran Tanker Company’s (NITC) fleet of 44 ships.
The insurance group, Kish P&I, was established in 2011, and does not seem to have the financial means to provide the cover that it offers. According to the website, Kish P&I offers $500,000 coverage for accidents and says that the remaining $999.5 million would be provided by a consortium of Iranian Insurers.
That is where things start to seem a bit dodgy, and it only gets worse.
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According to Central Insurance of Iran, Kish P&I only holds 44 policies, exactly the number of tankers that NITC owns, and there is no information that suggests any other ship owners may be covered by one of these policies.
NITC claims to be a privately entity, but its shareholders are clearly state owned pension funds, which led the US to label the company as a government-owned entity. This leads to the possibility that the same pension funds that underwrite Kish’s policies, and will provide the missing $999.5 million, could well be the same funds who own NITC.
Kish could well be a mask of a company to prevent people from noticing that the owners of the tankers are, in fact, the insurers as well; which kind of defeats the object of insurance in the first place.
By. James Burgess of Oilprice.com
That Azeri President Ilham Aliyev is so ferociously lashing out at British Petroleum (BP) for declining output in Azerbaijan’s largest oilfield has very little to do with BP and everything to do with Baku’s ambitions to raise the stakes as it seeks the top spot on the Caspian oil and gas chain.
Aliyev is simply setting the stage for changes in the regulations governing Azerbaijan’s oil and gas resources. From where I’m sitting, BP can’t afford to play this game and may be pushed out to make room for other oil majors.
Earlier this week, Aliyev took his show on the road personally—which is significant in itself. Speaking on public TV, the Azeri president has attacked the BP-led consortium for failing to meet its projected production targets in the Azeri-Chirag-Guneshli (ACG) field, referring to the situation as “totally unacceptable”.
The simple math is this: In 2010, ACG reached production of 823,000 bpd. Production at ACG declined 12% in the first half of 2012, to 684,000 bpd. BP, which operates the field and holds a 35.8% stake in the consortium, had promised that ACG would produce more than 1 million bpd after its third phase was completed in 2008.
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According to Aliyev’s math, this BP failure has cost Baku $8.1 billion in revenues.
When BP initially made its 1 million bpd promise, it was to great fanfare and much uncorking of the champagne in Western diplomatic circles whose eyes glossed over at the prospect of access to so much non-OPEC crude oil.
But no sooner had the fizz gone out of the champagne that everyone realized that these predictions were a bit on the over-optimistic side. Azerbaijan’s reserves are limited, and from the start it was clear that production would experience a sharp increase and then a sharp decline. In fact, for 2012, Azerbaijan’s whole oil sector combined was only projected to produce just under 1 million bpd by the end of this year.
Aliyev knew this. His very public attack on BP is intended to send a message that requires some reading between the lines.
"It is absolutely unacceptable … investors who cannot stick to their obligations and contract terms must learn lessons. Serious measures must and will be taken," Aliyev said.
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The message is that contracts are about to re-negotiated and BP is being used as a guinea pig for a re-mapping of Azerbaijan’s energy players. We are not just talking about oil here, but gas, and BP is also knee-deep in Azeri gas via the Shah Dengiz II field. Baku isn’t convinced that BP is the best choice for reaching the full potential of Shah Dengiz II. So look for a “reorganization” of this as well.
Can BP pull itself up out of the Azerbaijani mire? Right now, it’s looking very promising. The company is already spending some $2 billion just to maintain its currently unacceptable production levels, and if it has any chances of ramping up production to appease Baku and make good on an impossible promise, it will have to invest billions more. Unfortunately, investment on this level will not pay out, especially since BP only has a contract until 2024.
At the same time, Baku is making it clear that the contract will not be extended beyond 2024. And BP will be lucky if it isn’t pushed out before then.
Certainly, it’s a bad time for BP, which is battling on multiple front lines. Company shares have dropped around 5% this year, even after plunging about 25% over the Macondo disaster of 2010.
By. Jen Alic of Oilprice.com
It was just 8 years ago that Canada's Bankers Petroleum (BNK-TSX) began developing one of Europe's biggest oil fields – in Albania.
The main reason for that – Albpetrol, Albania's national oil company, lacked the resources necessary to develop the country's huge oil resource.
And in those 8 years, Bankers' stock has enjoyed two big runs.
So what will happen now that Albpetrol has been sold to the highest bidder—an Albanian tycoon with deep ties to the government and the regional energy elite???
The answer is a cocktail of optimism and uncertainty, with a heavy dose of geopolitics. The sale of Albpetrol has three clear winners:
1. The Albanian economy
2. Western gas pipeline ambitions
3. A controversial Albanian tycoon??
But the outcome is less clear for Canadian energy companies that have been the backbone of Albanian oil. Other Canadian juniors operating in Albania include Stream Oil and Gas (SKO-TSXv) and Petromanas (PMI-TSXv).??
On October 3, Albanian Prime Minister Sali Berisha announced that a private, US-based consortium Vetro Energy had won the tender for Albpetrol.??
The price: €850 million—but the actual assets were only valued at one-third of that price shortly before the tender process opened on 7 September.??
What will Vetro Energy actually get for nearly $1.2 billion? Quite a lot, under the surface.??
While Albpetrol maintains only 5% of the country’s oil field shares and operates only one oilfield, Amonica, the government took steps right before the tender was opened to sweeten the deal.??
Legislation governing Albpetrol was amended, granting the new owner licenses to build a refinery and to transport and distribute natural gas. This addition to the Albpetrol dossier is worth an estimated €20 million in revenues annually.??
In total, Albpetrol’s above-ground assets, including oil and gas fields, are worth about €322 million, and Vetro Energy has won the right to explore and exploit these assets for 25 years.??
Calgary-based Bankers Petroleum was one of the six bidders for Albpetrol, but its €304 million offer was turned down. Stream Oil and Gas did not participate in the tender.??
Was Bankers Petroleum disappointed? Yes, but there is a silver lining. According to Mark Hodgson, Vice-President of Business Development for Bankers, the high price tag placed on Albpetrol raises the estimated value of Bankers’ own assets.??
"If you look at the assets of Albpetrol, a good portion of that value is future royalty payments [from Bankers Petroleum]," Hodgson told OilandGas-Investments.com in an October 9th interview, suggesting that the value attributed to Albpetrol's assets with the nearly $1.2 billion bid immediately raises the estimated value of Bankers' own assets.??
Albpetrol was on a downward spiral during the post-independence transition period of the 1990s and was in dire straits by the time Bankers Petroleum entered the market in 2004, acquiring the lion’s share of Albpetrol’s key oilfield holdings.??
Since then, Bankers Petroleum has been responsible for a massive increase in Albanian oil production—from 600bpd in 2004 to 13,000bpd in 2011. Average third-quarter 2012 production from the Patos-Marinza oilfield was 15,616 bpd.??
The company’s $450 million in investment in the Patos-Marinza field alone between 2007 and 2011 has increased proven and probable reserves, making it one of the biggest onshore fields in Europe. Probable (2P) reserves are now estimated at 227 billion barrels, compared with 100 million in 2006.??
In 2011, Bankers Petroleum acquired Albpetrol’s remaining shares in the Patos-Marinza field. That same year, it began re-development in the Kucova field, with production targets of 2,250 bpd for 2015. Exploration in Block F, next to Patos-Marinza, represents an additional $215 million investment and is scheduled to begin in the first quarter of 2013.??
Acquiring Albpetrol would have been ideal, giving Bankers control over the extraction, processing and distribution of oil and gas. It was, however, up against the formidable force of Albanian oil tycoon Rezart Taci and his US partners.??
The Chicago-based Vetro Energy consortium consists of Singapore-registered YPO Holdings, owned by Taci, and Vetro Silk Road Equity. The deal saw YPO gain a 51% share in Albpetrol, with a 49% share for Silk Road. On October 5, two days after it was announced that Vetro Energy won the bid, the consortium stepped out publicly with Taci, introducing him as the man behind the deal.??
Taci, whose main business empire hinges on the Taci Group and Taci Oil, also owns the country’s only refineries, the largest chain of gas stations and a key TV station which boasts more than 10 million viewers. He is a personal friend of Silvio Berlusconi and a member of Berisha’s inner circle.??
In 2009, Taci managed to acquire Albania’s state-owned refineries (ARMO) for €128.7 million by having a previously unknown Swiss company close the deal. Shortly afterwards, he re-registered ARMO under the Taci Group.??
So where does all of this leave companies like Bankers Petroleum and Stream Oil and Gas, who have developed Albania’s oil production capacity???
Bankers Petroleum is “not overly concerned,” said Hodgson, noting that “as a state-run entity, Albpetrol was often bureaucratic and slow, and its decisions were often politically rather than financially motivated.”??
"We're excited to be working with a new party with similar motivations, to expand Albanian oil production and increase revenues," he said.??
On the subject of Taci, there was more reservation. Hodgson said that Bankers Petroleum had a “long history” with the Albanian tycoon, and that history was not without its problems, particularly concerning the timing of payments for crude deliveries.??
ARMO has had difficulties keeping current on their payments to Bankers, according to Hodgson. “We’ve had payment delays in the past and we’ve worked hard to resolve them with [Taci].”??
Albpetrol’s newfound power, however, should not be underestimated. After all, Taci is part of the prime minister’s inner circle and he has worked to secure his hold on Albania’s energy industry at an even pace.??
The acquisition of ARMO, to complement his chain of gas stations was a logical step. Another logical step would be to win back some of Albpetrol’s lost oilfields, particularly since they have now been successfully developed. While this latter ambition would be legally out of Taci’s reach as Vetro Energy will be bound to honor Albpetrol’s previous agreements, the Albanian tycoon could make things very difficult for his foreign competitors if he chose.??
Essentially, he will have the power of Albpetrol, Berisha and a key link in the future of the Trans-Adriatic pipeline behind him. And when Taci makes an acquisition, no one sees it coming. This is his modus operandi. His involvement is only revealed after the deal is done.??
What if relations with Taci went sour???
One concern for both Bankers Petroleum and Stream Oil and Gas could be how a mounting battle over non-payment of corporate income taxes plays out. Presently, the opposition Socialists are attacking the two Canadian companies for allegedly taking unfair advantage of a 1994 law that exempts them from paying corporate income tax as long as investments outpace profits.??
Bankers insists that it continues to reinvest revenues in development. Certainly that has been the case, most recently in the Kucova fields. Despite Socialist claims, audits are conducted frequently to this end. And Taci is not going to help the Socialists.??
Regardless, it remains an issue of contention that could be easily manipulated through the media.??Bankers is also dogged by recent allegations that its drilling caused a series of earthquakes in June which resulted in structural damage to (illegally built) homes in the rural area of Zharres, followed by protests and an attack on Bankers facilities. This issue could also gain momentum, particularly through the media, in which Taci owns significant stakes.??
For now, these are hypothetical situations and Bankers Petroleum does not view Taci as a threat to their future operations. As Hodgson reminds us, “[Taci’s] business is very much dependent on our own business.”??
And indeed, business is good. Bankers’ third-quarter output has risen 18% and sales agreements have been signed for most of its 2013 production. Shares were up 3% at C$3.18 on October 4 on the Toronto Stock Exchange, boosted, rather than shaken, by reports of the sale of Albpetrol.?
From a geo-political perspective, the acquisition of Albpetrol by Vetro Energy resounds all the way from Albania and Azerbaijan, to Western power corridors, eyeing an opportunity to further the plans of the Trans-Adriatic Pipeline (TAP).??
TAP will carry Azerbaijani gas across Greece and Albania to Italy. It is a key strategic element of Europe’s plans to reduce its dependence on Russian gas and the stranglehold Gazprom has on Europe’s supplies and distribution network.??
Vetro Energy will guarantee the West additional gas supplies for the TAP along with a convenient place to store those supplies to boost European energy security.??
From the perspective of the TAP, Albpetrol’s value far exceeds the estimated value of its tangible assets. There is another deal sweetener, too: The new owner of Albpetrol will also be granted the use of the country’s vast salt mines for natural gas storage. The largest of these salt domes, at Drumea, can hold up 2 billion cubic meters of natural gas, or 70.6 billion cubic feet (bcf).??
Essentially, the privatization of Albpetrol will render Albania a warehouse for TAP gas supplies, strengthen ties between Albania and the US, and help Albania—and the Balkans—keep a safer distance from Russian dependence.?
Gazprom did bid on Albpetrol, but it has fallen on hard times in the face of the US shale gas boom, and offered up a paltry $52 million.?
Even before the tender results were announced, on September 27 officials from Albania, Azerbaijan, Greece and Italy signed an intergovernmental MOU in New York on the TAP pipeline.?
By Jen Alic for the Oil & Gas Investments Bulletin
Domestic energy policy in the United States played a central theme during the first debate among presidential contenders. Both incumbent President Barack Obama and Republican challenger Mitt Romney said they favored a policy that focused on domestic energy resources. While most of the energy debate featured recycled rhetoric from much of the campaign so far, the candidates offered differing opinions on the shape an energy-independent United States will take.
Romney was able to gain some traction in the U.S. presidential contest in what has been an otherwise lackluster campaign. The former Massachusetts governor seemed to wander comfortably into centrist territory against an incumbent seemingly uncomfortable with sharing the stage. On energy, both leaders said they favored a United States that was more dependent on its own resources than on oil imports from overseas, though they differed on substance.
Obama during the initial salvo highlighted his administration's track-record on domestic oil and gas production. The Energy Department had said drilling offshore during the first six months of the year increased 50 percent when compared to the same period in 2011. Higher domestic crude oil production, meanwhile, meant the United States should rely on foreign suppliers to meet less than 40 percent of its energy needs in 2013 for the first time since 1991.
Romney, however, took issue with Obama's rhetoric on domestic production, saying the president has cut the number of permits for federal land in half. The Republican challenger added that offshore Alaska presented a lucrative opportunity for U.S. energy independence, though he ignored the fact that Shell was already working there and more leases were included in Obama's five-year lease plan.
Obama, meanwhile, referenced his "all-of-the-above" energy policy by saying "we've got to look at the energy source of the future, like wind and solar and biofuels." In his retort, Romney said the "$90 billion" in breaks given to green energy projects in one year represents "about 50 years' worth of what oil and gas receives." Federally-supported energy companies like solar panel company Solyndra have failed in the U.S. market while oil majors continue to make substantial profits despite what Romney says is a lack of federal support.
Regardless of the numbers, candidate Romney suggested some of the federal funds spent on green energy could have been spent more wisely. "I'm all in favor of green energy," he said. But most of those investments, he argued, have funded ventures that have failed, as did Solyndra.
Instead, Romney said he'd "bring that pipeline in from Canada," referencing the much-lauded Keystone XL pipeline. The project, however, has come to represent among environmental activists all that's wrong with a petroleum economy. Keystone XL is designated for so-called tar sands oil from Canada. Rival company Enbridge this week was ordered by the EPA, an agency Gov. Romney opposes, to do more work in Michigan to clean up a tar sands spill that happened more than two years ago. That spill was the costliest onshore incident in U.S. history and still needs a more thorough response. "And by the way," said Romney, "I like coal."
Both candidates touched on the same themes but from different perspectives.
"On energy, Gov. Romney and I, we both agree that we've got to boost American energy production," said Obama.
"Energy is critical, and the president pointed out correctly that production of oil and gas in the U.S. is up," said Romney.
Something left out of the debate, however, was the consequences of their decisions. Does the future of U.S. energy independence lie in a pipeline from Canada that carries a type of crude oil that raises concerns even among Canadians? Or does it lie in a green energy sector that can barely stay afloat even with the support of taxpayer dollars.
The future of U.S. energy policy, for better or worse, lies in the hands of the American voters.
By. Daniel J. Graeber of Oilprice.com
Facing public resentment, Big Oil tax breaks may soon end.The controversial bill proposed by the Democrats to end the substantial tax breaks extended to the major oil companies known as 'Big Oil' did not make it. Big Oil commonly refers to the five industry giants - Exxon, Shell, BP America, Chevron, and ConocoPhilips. It is estimated that these companies have garnered profits of about $900 billion in the past decade alone! The rise in prices of gas and crude oil has fetched them over $30 billion in the first quarter of this year. Despite this, over the years, the federal government has been providing them with various types of subsidies through tax codes.
Since direct grants would put the focus on the government's preferential treatment of Big Oil, they extend benefits in the form of deductions, credits or exemptions; in short, tax breaks. Now, the Democrats have come up with a proposal which suggests doing away with some of these tax loopholes for the oil companies. Known as the 'Close Big Oil Tax Loopholes Act', Democrats claim that this will help rake in up to $21 billion over a period of ten years and thus, help bring down the budget deficit.
There are suggestions that the savings will be better utilized if diverted to promotion of clean energy programs. Solar and wind are the energy options of the future and developing these is likely to be high on the priority list of the federal government for quite some time to come. Though stopping these tax benefits has been on President Obama's agenda for long, it has taken him three years to propose any action on the matter. His detractors see this as a ploy to curry favor ahead of an election year.
With gas prices touching $4 per gallon this summer, the move to eliminate tax breaks is being seen more as political rhetoric than anything else by analysts. In reality this move will not impact much on the federal deficit or even the prices at the pump. At best this move may somehwat appease consumers (as well as earn votes) and only serve as a kind of vengeful retribution and will not actually translate into any benefits for the government or public. It will also have a negligible adverse impact on profits for the oil companies.
The public views Big Oil with resentment mainly because of the clout they wield and the money that they rake in. The common man sees the price of gasoline at the pump and an increase of even 10 cents produces outrage against these oil conglomerates. Hence, any kind of action that hints at reduction of benefits to Big Oil is welcomed and appeals to the emotions of the layman.
Though the figures and analysts say otherwise, the honchos of Big Oil did not hesitate to term the proposal detrimental to the American economy, when they appeared at the Senate hearing. They claimed that doing away with the tax breaks will lead to job cuts and investors' exit from oil. This is in contradiction to earlier claims by Big Oil saying that they do not need incentives or subsidiaries from the government for oil exploration purposes. Also, Big Oil executives claimed that it was unfair to target them alone while many other industries are also sharing these tax breaks. They also urged the administration to encourage drilling if it really wanted to keep gas prices in the country down.
The PR departments of Big Oil have also been successful in propagating the myth that ending subsidies for them will lead to significant increase in taxes for the rest of the population.
Republicans are protesting against the move and claim that the measures will have no impact on existing gas prices. The matter will be voted on later this week and it seems highly unlikely that the Democrats will win the vote in the Senate and the House of Representatives.
At least two earlier attempts to scale down on tax breaks for oil companies have failed in the Senate. Even if they don't win, Republicans sure will have gained sufficient political mileage from it which will stand them in good stead in the elections next year. In an attempt to garner support for their proposal, the Democrats have embarked on an online campaign. They are planning to use grassroots-level activists to target Republican senators on their support for Big Oil.
The Republicans have also come up with a bill 'Offshore Production and Safety Act of 2011' which favors American exploration and offshore drilling ventures. This addresses matters such as lease sales in the Gulf of Mexico and in Virginia as well as setting of a timeline for reviewing pending offshore applications.
Big Oil executives have been found to be using the profits to boost their personal wealth and enriching their shareholders. Reports say that the profits have been used by executives to increase their stock holdings and to pay out generous dividends over the past five years.
Opponents of Big Oil and supporters of energy independence claim that even if the tax breaks are stopped, this will not resolve the bigger issue of price manipulation. They suggest that Wall Street oil speculators be controlled and prevented from raising the prices of oil artificially. It has also been recommended that OPEC members be stopped from manipulating prices, and tax incentives for foreign oil be stopped.
Last week brought the news that this summer the Arctic icecap shrank to an all-time low of roughly half the size it was in 1980. While this is the lowest ever seen since satellite monitoring began 33 years ago, some experts are saying that the summer of 2012 was probably the smallest the icecap has been in the last million years. The announcement triggered a spate of newspaper and magazine stories pondering the meaning of this development.
It now appears that the arctic is melting much faster than the models have been predicting: that the ice cap would stay intact during the summer for another 40 years. Some of the stories have been downright scary such as the one in the Guardian in which Professor Wadhams, Cambridge University's arctic expert, predicts the final collapse of the Arctic sea ice during the summer will come within four years. The professor terms this event as a "disaster' for the Arctic as it will result in much faster warming of the Arctic Ocean, the seabed, and the permafrost along the Arctic shoreline.
Most of the hundreds of articles commenting on the event reached the unsurprising conclusion that our global weather was going to get worse – perhaps much worse. At the extreme, some argued the case that so much methane will be released into the atmosphere as the permafrost melts that life on earth will be extinct by the end of the century. Others speak of the tipping points, that once past will set off such an avalanche of disasters that the world will take centuries or millenniums to recover.
Our interest here, however, is about what the end of the Arctic's summer ice cap will mean for oil production – in the Arctic and elsewhere. This question would seem to have two sides. The obvious one is if and how quickly oil companies can move to exploit the 90 billion barrels of oil (about three years of global consumption) and 44 billion of natural gas liquids that the U.S. Geological Survey believes is somewhere under Arctic waters. Indeed, the rush to exploit has already started with Shell receiving a permit to drill off the coast of Alaska. Although drilling did not get started this year due to a series of delays related to safety, preliminary work is being done so that Shell's drilling program should be ready to start up in 2013. ExxonMobil, ENI of Italy and Norway's Statoil are preparing to drill in Russia's Arctic waters. However, Russia's Gazprom recently announced that it was shelving it massive arctic Shtokman natural gas project due to excessive costs.
With a minimal permanent ice cap, much of the Arctic ocean may be open to shipping, and drill rigs may be free to operate during the summer months. Drilling in the Arctic, however, is not in the same league with drilling in the Gulf of Mexico where only the occasional hurricane can cause disruptions. Gulf support bases, helicopters, and numerous support ships are only hours away from the drill rigs. In the Arctic a drillship is largely on its own, for until very expensive support bases are established there is little help offshore.
Even if much of the permanent ice cap melts away in the next 5-10 years, strong winds can still blow large ice blocks around, threatening drilling operations. This August, a large storm settled in the Arctic for many days and was partly responsible for the breaking up much of the permanent ice cap. Storms over water can be far more fierce than over ice caps making the risk of drilling even higher. The CEO of French oil giant, Total, recently stated the belief that it is too dangerous to drill in the Arctic and that the risk of oil spills is not worth the reward.
Then of course we have the issue of just who owns the Arctic's seabed. The U.S., Russia, Canada, Norway and Denmark are all seeking to claim part of the continental shelf. As the US still has not signed the Law of the Sea convention and recently 34 Republican senators indicated that they are opposed, the US's position of exploiting resources beyond the 12 mile limit is in limbo. Russia, however, has moved stake claims deep into the Arctic in regions it says are extensions of its continental shelf.
Even with relatively ice free waters, the big problem may turn out to be the availability of drilling rigs and ships that are robust enough to withstand encounters with Arctic ice. The upshot of all this is that there are so many factors inhibiting the widespread drilling for oil in the deep arctic, it is doubtful that much of this will take place in the next five to ten years. During this time frame, the odds are high that global oil production will begin to start down due to depletion of the best fields, and it seems unlikely that Arctic resources can be brought into production quickly enough to offset most of this decline.
The other side of this issue is just how much climate change will a near term disappearance of the permanent Arctic ice cap cause. Here there are no shortages of informed opinions. All agree that without polar ice to reflect incoming sunlight, the average temperature of the Arctic Ocean and surrounding land masses will rise sharply. In the Arctic, snowfall will likely increase thereby forming a protective blanket on whatever ice forms, preventing it from becoming thicker. There will be more storms in the region that will tear up coastlines.
Again the bottom line is that there will likely be an increase in droughts, storms and floods that will cause great damage across the world. How this will affect economic activity or the demand for increasing amounts of oil is hard to say. For now it looks as if while it may be easier to get at Arctic oil in coming decades, the costs of doing so and the demand for the product may not be worth the price.
By. Tom Whippl
Oil prices are linked closely to presidential disapproval and so will decide the presidential elections' outcomeBefore jumping into the question, a recap:
In a previous article titled "Is Oil Fueling the Rise in Political Partisanship", Oil-price.net went on a search to see if rising oil prices had any influence on the behavior of American voters in the period between December 1999 and July 2010. We asked: could discontent sparked by an uptick in volatility in oil prices be one reason why American politics of late seems to have gotten so much nastier? We delved into three polls: Presidential approval ratings, the Congressional approval ratings and direct questions to the voters on whether the country was in the "right track" or the "wrong track". What we found, to state the obvious, wasn't very surprising. What was surprising, in fact, was the degree of shifts in the approval rating of the President vis-a-vis oil prices-inversely proportional. As for the question of "Congressional approval" and "Direction of the country", they showed even more impact to the volatile oil prices.
Thus, between 1999 and 2010, oil and politics moved from being indifferent partners to having a burly relationship. Oh, yes, Obama was elected on the back of all-time high oil price volatility from the late Bush era (oil went up to $160 then back down). Even otherwise, you don't need loads of grey cells to make a correlation between high oil prices and slide in the approval ratings of the decision maker. Oil and politics-think of the wars and bloodshed-is welded marriage.
So back to the present scenario. How exactly are we faring? After all, we are bang in the middle of the Presidential campaign. There is no denying the fact that oil prices are higher. As a result, it is nearly impossible to defend against it for a politician, and Republicans are milking it. As it turns out, they are already at it.
Take the captious Romney for instance. He has taken Obama to task for the increase in oil prices, calling for the resignation of, what he has drubbed as, 'gas hike trio'. The trio, Energy secretary Steven Chu, Interior secretary Ken Salazar and Environmental Protection agency Administrator Lisa Jackson are directly responsible for the increase in oil prices, he alleges. Mitt Romney has also accused the President of slowing the domestic energy production. Indeed, Romey wants more land allotted for drilling and less stringent regulation for hydraulic fracturing.
For his part, Newt Gingrich has promised gas for $2.5 a gallon. Both the candidates want more drilling in search of oil-even on pristine forest floors, while the President maintains that rising oil prices have more to do with global market indicators. And, Rick Santorum, rather unsurprisingly, has also blamed Obama for blocking energy production in the US. He also feels high oil prices led to the economic downturn in 2008.
Of course, all Americans, differing only in degrees, feel indignant about the spiralling gas prices. One only has to browse the online forums to see the palpable anger. From accusation of "Obama's wars" to 'Big oil' and 'Big money', Americans have different ideas on the root cause of the price increase. Yes, oil under Obama has had rough days: First the BP disaster which tarnished not just BP, remember? Then subsidies going to solar, away from big oil's pockets; controversy about fracking and water pollution; opposition to ANWR oil drilling. Questions have also been raised on the Keystone XL oil pipeline from Canada's tar sands. Promoted by TransCanada, the pipeline would carry oil from Canada's tar sands to the Gulf of Mexico. This pipeline needs Presidential approval as it passes the international border. Earlier this year, the President rejected the bill, though TransCanada is looking at alternate routes that do not require the state's approval. Romney has questioned promoting alternative energy- like giving a loan of $500 million to Solyndra, the solar panel manufacturer-calling the keystone decision 'bad policy'- Fact: The loan to the solar panel manufacturer was in 2009, while the key stone permit is of recent times. According to the Gallup's annual Environmental survey, 57% are in favour of the pipeline, as opposed to 29% who have other views, while the other 14% was undecided. So, there it goes.
Meanwhile the President says: "Do you think the President of the United States, going into re-election, wants higher gas prices?". Spruced by almost 17% increase in the price, so far, as reported by the AAA, gas prices are an easy way to target the incumbent President.
What's the ground situation, anyway? According to the Gallup's Annual Environmental survey, 56% of Americans believe that the President is doing a good job with regards the environment. However, only 42% had the same optimism about his handling the national energy policy. (In 2004, George W. Bush's were much lower- 41% believed that he was doing a good job of 'making America prosperous as well as protecting the environment', while for his energy policy he clocked a mere 34% support).
White House Press Secretary Jay Carney stated, "if increasing drilling were the answer in the United States to lowering prices at the pump, we would be seeing lower prices at the pump, because under President Obama we have increased significantly domestic oil and gas production. That is a fact."
Yes, there is speculation in commodity markets that nudge oil prices higher for no apparent reason. Speculations are so. But Wall Street sharks are only a small reason for the increase in the price of oil.
Increasing demand- according to the latest report from the International Energy Agency, global oil demand is forecast to climb to 89.9 mb/d in 2012, a gain of 0.8 mb/d (or 0.9%) on 2011. Demand is increasing in Asia, in particular in China. Volatile situation in oil producing countries could also lead to increased oil prices- Sudan, Iran, Libya, anyone? This February, global oil supply fell by 200,000 barrels a day, as reported by IEA. And, it's basic Economics, if supply doesn't match demand, even on the basis of imaginary fears, oil prices will move on. Blame the oil driven economy, as well.
And, to be honest here, the oil companies do make more profit than they ought to. Then again, they do need the money to invest in exploration. Wait. If not, one day, oil is going to dry up. And, whoever wants that to happen, please step forward? Further, let's not forget that these companies employ a whole lot of people with generous salaries.
To sum up, the next President will be decided on the basis of oil prices. During his term he will have to contend with increasing oil prices and worsening geopolitical volatility. His 4-year term will be too short to implement any long-term policy likely to affect either. He will also be blamed by the opposition for high oil prices like the current President and the one before him.
Lack of US refining capacity is partly to blame when gasoline prices spike.The debate is raging in full swing: the dearth of new refineries in the US. Many are surprised to see the continued increase in oil prices despite the surge in domestic oil production. Could refineries be the missing element in the equation, they wonder. 'Why not just build new refineries and scale down the price of oil,' our readers continue to ask us. Yes, it's a fact- no new refinery has been built in the US in the past three decades. The last refinery constructed in the US at Garyville, Louisiana was way back in 1976. So, the question is reiterated as the point is so obvious: new refineries. But then, there aren't any easy three reasons, nor is the dimension only four.
First though, let's take a look at the prevailing price of oil. According to a AAA fuel gauge report, the national average for a gallon of gasoline is $3.62 - more than 13 cents from the previous week and 24 cents more than a month ago. After the fall in May and June, gasoline prices have increased gradually for the last seven weeks, adding pain to the already pained consumer. Is this because of dwindling oil reserves? Well, of late domestic oil production has increased by fourteen percent in the last 12 months. According to government sources, the oil production in the country hit the highest 'quarterly level' in almost a decade (for the first three months of this year). And, US produces 55 percent of the oil consumed in the country, mainly due to production spikes in Texas and North Dakota.
Clearly there is oil, so shouldn't the oil price decrease? After all, the more the commodity, often, lesser is the prices. Put it that way, the present oil prices do sound ominous. It's not as if higher demand has hiked the oil prices. On the contrary, demand for oil has been decreasing with fuel efficient cars and ethanol blended gasoline. This July, crude oil demand in the U.S. dipped to its lowest in four years on the back of average economic growth in the country, according to the American Petroleum Institute. The demand for gasoline fell 3.8 percent this July with consumption down 1.1 percent. After the peak in 2007, demand for gasoline has been sluggish. That is, despite increase in the price of crude, demand for gasoline is at record low. So, the speculation does gain force - are lack of refineries hampering the fall in the price of oil? North Dakota produces more than 600,000 barrel/month but has only one refinery in Mandan. An element of bafflement does linger to see the country producing substantial oil and yet importing refined products.
There is colossal gap in the realm of production and refining capacity in the country. The refineries are churning at full capacity which makes them profitable, but on the downside there is no room for mistake. They have to deal with variable demand on one hand and higher costs of inputs on the other. Recently, Sunoco Inc. announced closure of its largest refinery leading to fears of fuel shortage and higher oil prices in the US. Fortunately, a deal with the Carlyle Group saved the day for Sunoco Inc. and the oil industry. But, the problems in the refining sector are far from over. Two refineries owned by Sunoco Inc. did close in the last eight months, which means a loss of nearly half the gasoline and other refined products in the East coast.
True, new technologies have increased the domestic oil production. For once, though, the infrastructure in the US has failed to catch up with the surging domestic oil production. Barges, rails and trucks, believe it or not, still transport crude. Naturally, the oil barely reaches the refineries and this mode of transport also makes oil more expensive for the consumer. How about pipelines? We know that imported oil is expensive. Still, the Marcus Hook refinery continued to import oil at $114 a barrel in 2011, even when the West Texas Intermediate crude traded lower. Why? Lack of pipelines, again. And with this paucity in pipelines, crude produced in the country isn't reaching the refineries. Of course, the much hyped Keystone XL pipeline would connect Canada's oil with refineries in the Gulf of Mexico and Houston, but that may take years.
Staying with refineries, the need for pipelines is more pronounced in the Gulf coast. The refineries in the Gulf coast contribute about 45 percent of the refining capacity, and 30 percent total crude oil production in the US. Of late, the imports have declined in the Gulf coast, thanks to drilling in the Eagle Ford Shale in Texas and Bakken shale in ND. Unsurprisingly, import of the more expensive light sweet Nigerian crude stood at 150,000 b/d in January, the lowest since 1996. (For the corresponding period, there's decline in the import of Nigerian crude to the East coast too.) Yet, imagine the figure with more pipelines in the region. Yes, the crude from Eagle Ford from Texas has started to arrive in the Gulf coast. However, the crude is sweet light. Most of the refineries in the Gulf Coast are more sophisticated, designed to process heavy and more sour crude. As investment to refine the lighter sweet crude is expensive, the only option for the refineries is to blend the different crudes. The irony.
Meanwhile, woes of the refineries in the East coast continue. Two have already closed, and the rest of them are barely managing to scrap through. These refineries are dependent on imported crude as they don't have easier access to cheaper West Texas Intermediate crude. Hence, they continue to import the expensive Brent crude. There are plans to transport oil from North Dakota to the East coast by rail, but when?
Although a continuation of the import story, the scene is slightly different in the Midwest. The refineries here are enjoying higher profits, credit to generous supplies from Canada and domestic oil. Imports from Canada reached 1.76 million barrels a day in the first quarter of 2012, an increase of almost 22 percent from last year (Source: EIA). Unsurprisingly, Canada is the largest supplier of crude to the US followed by Saudi Arabia.
Recently the Port Arthur refinery underwent expansion to almost double its daily capacity. So, why do refineries expand rather than build new ones? It's easier because of the environmental regulations. The apparent lack of logic in not having refineries does get answered when you take the environment under consideration. Refineries gobble up water, not to mention vast tracts of land, and contribute loads of CO2 to the air, as well. So, environmental regulation tends to be hard for anyone interested in refineries. The EPA regulations are also strict on the sulfur content Light crude is easier to process, has lower sulfur content so it's easier to get the environmental nod. Heavy sour crude, on the other side, has more sulfur and is more difficult to process. Sunoco Inc. is said to have lost $ 1 billion in the last three years, attempting to upgrade in accordance with the stricter EPA regulation.
Will the picture change? Everyone wants refineries, just is someone else's backyard. The new EPA regulation for new refineries scheduled to be released this November has been deferred because of the Presidential elections. How is it going to pan out? Mitt Romney is all for more drilling. He wants to drill "virtually every part of U.S. lands and waters" but is silent on his take on refineries. For his part, Obama is for 'energy independence' but with his strict environmental laws, no refinery is going to come up anytime soon. The situation is precarious. The demand isn't expected to rise anytime soon. EIA has lowered the forecast of oil consumption in 2012 and 2013.
Any destruction due to accidents (like the recent fires), weather conditions, and maintenance would affect the supply with immediate effect. For instance, the recent fire in the Chevron refinery at Richmond, California disrupted almost 16% of the supply in the region. Abundant reserves, yet prone to import fluctuations- which country would want to continue in this position?
If the refineries aren't taken care of, the dream of cheaper crude would continue to be a dream. That would be sad with the present domestic resources.
View the original article here
While gunfire errupted in Niger's capital, traders who mistook the country for oil-rich Nigeria sent oil prices soaring What's in a name? Niger or Nigeria will be in a better position to answer this question. If not anything the confusion in the name pushed oil prices to $80 a barrel last week. How? There was a coup in Niger and traders hustled to buy oil, mistaking Niger for oil rich Nigeria.
On February 18, a coup took place in the West African country, Niger. Armed soldiers stormed the presidential palace in Niamey, the capital of the country and kidnapped the President of the country Mamadou Tandja. The coup was orchestrated by a soldier named Colonel Adamou Haroun. He was aided by another Colonel Djibril Hamidou. This is the third coup in the country since the 90's.
In dramatic style, the soldiers declared on TV, the suspension of the constitution and all the institutes associated with it. Colonel Goukoye Abdul Karimou, read a statement on behalf of a group called Supreme Council for the Restoration of Democracy (CSRD). In the statement he appealed to everyone to have faith in the group's ideas which "could turn Niger into an example of democracy and of good governance".
The coup wasn't entirely unexpected. President Tandja came to power after the election in 1999. He was supposed to step down on Dec 22. However, he chose instead to change the country's constitution last year to stay on. The move enabled him to stand for a third time in office, and with more powers without election.
The fifteen nation West African regional bloc, ECOWAS (Economic Community of West African States) reacted by suspending Niger. The US terminated non-humanitarian aids and cut off trade benefits. The US state department spokesman Philip Crowley said "President Tandja has been trying to extend his mandate in office. And obviously, that may well have been, you know, an act on his behalf that precipitated this act today". African Union chief Jean Ping condemned the military coup in Niger and said he was following developments "with concern".
The reaction from Nigeria, coincidence or not, does take pains to differentiate between the countries. According to a statement by Senior Special Assistant to the Acting President on Media and Publicity, Mr Ima Niboro, the acting President of Nigeria Dr. Goodluck Ebele Jonathan has expressed deep concern over reports of shooting in Niger's capital.
Meanwhile, Colonel Djibrilla Hima one of the leaders of the coup said that their group would hold election too. The plan, he said, is to hold elections once the situation has stabilized.
Niger has in recent years attracted billions of dollars as investment in oil. Exploration in Niger began in the 1950s. Drilling was done in the 60's by Petropar in Tamesna-Talak and Djado blocks. But the two main blocks that emerged were Djado Basin and the Agadem BasinIn the year 1992, the Djado permit was given to Hunt oil. In 1997 the Tenere permit was given to TG World Energy Inc.In 2004 the Niger government approved the joint venture arrangement between CNPC International Tenere Limited (CNPCIT) and TG World Petroleum Limited (subsidiary of TG World).In 2005, Petronas Carigali Niger Exploration & Production Ltd. (PCNEPL), announced that it had found hydrocarbons in the Agadem BlockEsso and Petronas had sole rights to the Agadem block. But in 2008, the rights were transferred to CNPC for USD$5 Billion investment. The oil reserves in the block are estimated at 325 million barrels. The company is also building a 20,000-barrel-per-day refinery in Zinder.Other oil companies in the region are Shell, ExxonMobil and ChevronThus, though Niger isn't a major player in the oil business, the markets reached on hearing news of the coup. Tom Bentz, analyst at BNP Paribas Commodities said, "Markets took off at around the same time a Reuters story came out about gunfire erupting in the Niger capital in an apparent coup bid, mistaken by many as being Nigeria".
To be fair, other factors too contributed for the increase in oil prices-tension of Iran's nuclear program, weaker dollar and the report of EIA on heating oil supply falling by 1.4 million barrels. However, among the factors, the name confusion was the most important reason for the immediate oil price rise.
Yet, the fact remains that Niger is yet to produce oil for the world market.
Nigeria, Benin, Burkino Faso,This may sound like a fiction story but it is true! While total world resources of oil shale are conservatively estimated at 2.6 trillion barrels, US sits on close to two trillion barrels of crude. Possibly more than all the crude than was ever produced worldwide since petroleum age began.
The Green River Shale Formation encompassing the States of Colorado, Utah and Wyoming was first discovered in 1924. This famous shale formation covers tens of thousands of square miles. It is found in three different ancient lake basins. The layers of sediment in this formation stretch undisturbed for many miles.
This shale is a soft sedimentary rock that readily fractures into layers, composed of minute particles of clay, which may easily be removed. It was formed from multi layers through erosion. There are 40 million layers in one part of this formation. Deposits within these layers are fossilized plant, animal life and algae, which has turned over millions of years into kerogen. Some claims have been made that this was formed from the Great Flood of Biblical times. Geologists say that this formation was formed through countless floods perhaps through 500 to 700 millions of years.
There are two conventional approaches to oil shale processing. In one, the shale is fractured and heated to obtain gases and liquids by wells. The second is by mining, transporting, and heating the shale to about 450oC, adding hydrogen to the resulting product, and disposing of and stabilizing the waste. Both processes use considerable water. The total energy and water requirements together with environmental and monetary costs have so far made production uneconomic. During the oil crisis of the 1970's, major oil companies spent several billion dollars in various unsuccessful attempts to commercially extract shale oil.
After initial attempts proved to be too expensive and were shelved some ten years ago, a host of energy companies are revisiting technologies to successfully extract kerogen from shale and economically turn it into crude oil. Participating giant Shell Oil representative, Terry O'Cannon states, "We try to keep them from speculating too much and keep expectations low because we don't know if this technology will be successful and viable in the long term."
With the new Seaway pipeline, WTI crude oil will flow more freely from Cushing to the cost refineries.WTI vs Brent- which is the better benchmark? Or, perhaps what is WTI and what is Brent? Primarily, there are two types of crude oil traded in the international markets (three really, but two majors): WTI (West Texas Intermediate) and Brent.
WTI used as a benchmark in determining oil prices, is crude oil of high quality. The spot price is fixed at Cushing, Oklahoma. WTI is lighter than Brent crude, has lower sulfur content- comparatively-and produces more oil during the refining process. With lesser sulfur, easier is the refining, and lesser the environmental effects on the planet (WTI has .24 % sulfur, while the sulfur content of heavy crude oil, like the one from Venezuela's Orinoco Belt, is as high as 4.5 %. A reason why many people love this benchmark.) To be noted, though: WTI is more important in- and is-limited to the US, probably because WTI is produced and refined within the US.
Brent is the real international benchmark. Two-third of the oil consumed in the US is Brent, and two-third of international crude is priced to it. (Brent crude is sourced from fifteen oil fields in the North Sea.) Still the media and market persist in quoting WTI, rather. This is a US singularity, like the non-adoption of the metric system.
First, to a bit of history: In April 2007, with the shutdown of Valero Energy Corp.'s McKee refinery, Sunray, Texas, the oil inventories surged to 27 million barrels. The huge stock pile brought down the price of WTI crude-an artificial scenario, as it was more of a technical glitch. Consequently, a report released by Lehman Brothers Inc. (now defunct) stated that the WTI could no longer be used to gauge the international oil market. Though useful for future oil pricing, the benchmark had 'lost its utility' for near-term pricing, the report said. By 2009 Saudi Arabia, the second largest oil exporter in the world, had stopped using WTI as a price benchmark for their oil.
Back to the present, and to answer the question: Yes, the oil price of Brent and WTI exist in parallel universe, with WTI lagging behind Brent. Why? Oversupply of crude in the Midwest. With Canadian imports, and increased oil production in North Dakota, the Midwest gets more oil, which stagnates. In other words, there is a huge bottleneck in moving oil of Cushing. The physical delivery point for New York Mercantile Exchange (NYMEX) futures contracts, Cushing has the largest storage capacity in the US. In 2009 Cushing had shell capacity of 16.3 mmb and working capacity of 37 mmb. According to the US Department of Energy, the shell crude storage by the end of March 2011 was put at 57.9 mmb, while the working storage capacity stood at 48.0 mmb. So, fewer pipelines out of Cushing mean more storage, which in turn, translates to lower oil prices, with excess oil (when compared to Brent).
Lately, though, WTI has been catching up on Brent, here's why: a new Seaway pipeline, moving oil from Cushing to the Gulf coast. Come April 2012, more of WTI crude oil would arrive in the Gulf coast. Initial estimate indicate 150,000 barrels of crude arriving in the Gulf coast every day (after regulatory approval), increasing to over 400,000 barrels per day by 2013. With the given evidence, looks like WTI is closing in on Brent
With Enbridge Holdings, LLC, the subsidiary of the Canadian company Enbridge, Inc., buying fifty percent of ConocoPhillips' interest in the Seaway Crude Pipeline Company (SCPC), things are moving fast. According to Patrick Daniel, President and CEO of Enbridge, Inc., "A Seaway reversal will provide capacity to move secure, reliable supply to Texas Gulf Coast refineries, offsetting supplies of imported crude."
With the Seaway pipeline reversal, there's renewed interest among investors. Already, JP Morgan has increased the WTI forecast to $110/bbl in 2012 from $97.50 forecast in October, and to $118 in 2013 from the initial forecast of $114.25. At oil-price.net, our 2013 forecast stands at $117. Further, the Brent-WTI spread is expected to narrow to $5 per barrel in 2012 and $3 per barrel in 2013. (On September 22, the WTI-Brent spread had reached $29.50). (Earlier this year, Bernstein and Barclays' estimated the Brent-WTI spread at $5 in advantage of Brent). Meanwhile RBC Capital revised its WTI outlook, from $90 per barrel to $100 in 2012 to and $160 in 2013 (from $100 per barrel )- while keeping the forecast for Brent prices the same. Also even if more oil arrives from Canada and North Dakota, the excess oil can be shipped through trucks and rails or with added pipelines.
These pipelines, though, may not be enough if the Keystone XL pipeline is brought into the equation. Shale oil production is increasing in Canada, and the Keystone XL pipeline would give the Canadian oil more access to the refineries in the gulf coast. But considering the opposition from environmental groups, and delay in government approval for the pipeline itself, the excess crude is still far away in the future.
For now: If huge speculation has kept Brent prices artificially higher, the focus has shifted. Indeed, the logistics seems clear, but then oil prices depend on other ground factors and market fundamentals as well. Yet, looks like WTI is closing in, and it would be interesting to observe the WTI-Brent spread in the coming days.
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