ODAC News

 

Wednesday 29 Aug

 

The Oil Depletion Analysis Centre

 

 

e-mail attachments

 

ODAC received an e-mail Monday that was “returned undelivered” (Return-Path: <info@odac-info.org>), except that ODAC did not send it. I do not know how these scams work, but the e-mails are sent as though some else you know, and maybe trust, sent it. This returned e-mail had an attachment called document.zip, presumably containing a virus/Trojan or suchlike. ODAC does not send unsolicited attachments, so if you receive an e-mail with an attachment ”from ODAC” that you have not specifically requested, delete it.

 

 

Economics

1a/  US could be heading for recession    (The Telegraph, Mon 27 Aug)

1b/  Overheating sees house price downturn in Europe      (The Telegraph, Mon 27 Aug)

1c/  What’s in the Pipeline?        (CIBC World Markets, Fri 24 Aug)

1d/  Unsold homes in US rise by 5%       (Financial Times, Mon 27 Aug)

1e/  Business Comment: US housing crash reminds us [UK] we're due a correction            (The Telegraph, Wed 29 Aug)

 

Food Prices

2a/  Wheat price surge bites baguettes    (Financial Times, Sun 26 Aug)

2b/  Cost of meat 'is set to rise'   (BBC News, Tue 28 Aug)

 

Geopolitics – Kashagan Oil Field, Kazakhstan

3a/  Kashagan Faces Russia-Style Squeeze        (The Moscow Times, Mon 27 Aug)

3b/  Kazakhstan Orders Eni to Halt Work on Biggest Field (Update3)         (Bloomberg, Mon 27 Aug)

 

Iran – Oil

4/   Iranian Oil Officials Fear Second Purge As Nozari Is Lined Up For Ministerial Role         (Middle East Economic Survey, Mon 27 Aug)

 

Oil and Gas Revenues

5/   Peak Oil - less Govt revenue (Trinidad and Tobago Express, Mon 27 Aug)

 

Middle East Energy Supplies

6/  Middle East risks fuel oil crunch period, says IEA        (Business Intelligence Middle East, Sun 12 Aug)

 

Oil Prices

7/  Investec's Guinness sees oil price doubling - FEEDBACK         (Reuters, Thu 19 Jul)

 

National Petroleum Council Peak Oil report

8/  NPC Report is Hand Grenade in Bubble Wrap  (ASPO-USA, Mon 27 Aug)

 

Russia - Anna Politkovskaya

9/   Anna Politkovskaya’s assassination, and the subsequent investigation

9a/  Chechen ‘hitmen’ and FSB agents are held over journalist’s murder     (The Times, Tue 28 Aug)

9b/  Showing Progress   (Russia Profile, Tue 28 Aug)

 

USA – Natural Gas Supplies

10a/  US Natural Gas Supplies comment (Energy Intelligence, Tue 28 Aug)

10b/  Conoco's Mulva: "The World Has A Natural Gas Problem"     (Energy Intelligence [World Gas Intelligence], Wed 29 Aug)

 

USGS – East of Greenland Oil and Gas Estimates, 2000 v 2007

11a/  USGS Cuts Greenland Estimate     (Energy Intelligence [Oil Daily], Wed 29 Aug)

11b/  USGS assessment indicates vast undiscovered oil, gas in Arctic       (Platts, Tue 28 Aug)

11c/  USGS Releases New Oil and Gas Assessment of Northeastern Greenland     (USGS, Tue 28 Aug)

 

 

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1a/        US could be heading for recession      (The Telegraph, Mon 27 Aug)

 

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/27/cnusecon127.xml&DCMP=EMC-mcn_27082007

 

Article:    Former US Treasury Secretary Larry Summers warned that the United States may be heading into recession as the biggest victim to date of the sub-prime mortgage debacle was humiliatingly sold for a token sum in Germany.

 

Traders are braced for another week of turmoil after the near breakdown of America's $2,200bn (£1,100bn) market for commercial paper.

 

"It would be far too premature to judge this crisis over," Mr Summers said. "I would say the risks of recession are now greater than they've been any time since the period in the aftermath of 9/11."

 

In Germany, it emerged that the state-bank SachsenLB may have accumulated $80bn of exposure to risky assets through a set of Irish funds kept off balance sheet.

 

The regional government of Saxony agreed yesterday to sell the East German bank - the biggest victim so far of the worldwide credit rout - for a token €300m (£204m) to the Landesbank Baden-Württemberg in Stuttgart (LBBW), ending a three-week saga that has revealed the extent of German involvement in the some of the most treacherous areas of US sub-prime debt.

 

... The scale of carnage in Europe explains the series of emergency actions by ECB, which injected a further $85bn in liquidity through various mechanisms last week. IKB was the first German bank to crumble earlier this month, requiring an €8.1bn state-rescue just days after it denied any significant exposure to sub-prime debt.

 

 

1b/        Overheating sees house price downturn in Europe            (The Telegraph, Mon 27 Aug)

 

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/27/cneuecon127.xml&DCMP=EMC-mcn_27082007

 

Comment:    The list of European countries where house prices are headed south, or about to, is impressive – Ireland, Spain, the Baltic states, Romania, Bulgaria, Croatia, Russia, France; and “Debt levels are above 100pc of GDP in Ireland, Britain, Spain, the Netherlands, and Denmark.” The UK continues to delude itself that is above all the mayhem – we’ll see.

 

Article:    House prices on the overheated fringes of Europe have begun to turn down sharply, replicating the early phase of the sub-prime property slide in the United States.

 

Irish property has fallen for the past four months in a row as higher eurozone interest rates start to bite harder, while the speculative bubble in the Baltic states has burst.

 

House prices in the greater Riga region of Latvia fell 3.5pc in June, following a 1pc fall in May. Flats in the old city became more expensive than Berlin by early this year in a speculative frenzy, much of it with euro, Swiss franc, and yen mortgages that could prove disastrous if Latvia's currency is suddenly devalued - as may well happen, given the country's current account deficit has exploded to 26pc of GDP.

 

Similar booms in Romania, Bulgaria, Croatia, and even Russia are all looking stretched to extremes. Danske Bank has warned that much of Eastern Europe has been inflated by a "monster bubble" that recalls conditions in east Asia shortly before the crisis broke in 1997.

 

In Ireland, house prices dropped 2.6pc in first six months of the year to June, with falls of 3.3pc in Dublin. The slowdown is rapidly spilling across into building. House registrations are down 34pc over the first half. Roughly 15pc of housing stock lies empty, according to the Irish census.

 

Jean-Michel Six, chief Europe economist for Standard & Poor's, said extreme levels of household debt across large parts of Europe left the region vulnerable to tightening credit conditions. Debt levels are above 100pc of GDP in Ireland, Britain, Spain, the Netherlands, and Denmark.

 

"Spain is heading south. Local real estate companies have reported price falls on a quarter-to-quarter basis in Madrid and several other provinces," he said.

 

French property prices fell 1.5pc in July - though they were still up 5pc over the year. "House price inflation could turn negative in the second half of this year," he said, adding that proposals by President Nicolas Sarkozy to allow new buyers to offset part of their interest costs against tax would help support the market.

 

"The spate of interest rate rises by central banks is exacting its toll on disposable incomes already weighed by rising household indebtedness," he said. The European Central Bank has doubled rates from 2pc in December 2005 to 4pc.

 

The recent turmoil has pushed up the effective rate of borrowing even further in some countries.

 

 

1c/        What’s in the Pipeline?     (CIBC World Markets, Fri 24 Aug)

 

http://research.cibcwm.com/economic_public/download/aug24_07.pdf

 

Comment:    CIBC World Markets explains why the worst of the US subprime fallout is till to come, and when we should expect it: “…the bottom line is that the news coming from the subprime market will get much worse before it gets better, with delinquency rates rising to well over 20% in the coming year.”

 

This article was written by Benjamin Tal at CIBC-WM. Jeff Rubin, CIBC-WM Chief Economist and Chief Strategist, is speaking on Day 1 at ASPO-6 in Cork, Ireland in September.

 

Article:    … So let’s see what’s in the pipeline. The process of mortgage rate resets — the catalyst of the subprime meltdown — is far from over. Interest rates on roughly $850 billion worth of [fixed-rate] mortgages are due to be reset during 2007 and 2008. Year-to-date only one-third have been reset. Resets will reach their peak in November this year and will start easing slowly during the course of 2008. More than three-quarters of those mortgages are securitized, and 80% of them are subprime.

 

But here we have to dig a bit deeper to really understand what’s coming. Since the vast majority of those subprime mortgages were originated with a teaser rate that is fixed for two years, the mortgages that will be reset in 2007 and 2008 are the ones that were taken in 2005 and 2006. How do these mortgages fare compared with the ones taken in 2004 (and were reset in 2006)? Not very well — for a few reasons: first many borrowers of the 2004 vintage were able to refinance their original mortgages since banks were still playing that game. This option is hardly available for mortgages being reset in 2007 and 2008 as banks are in no mood to offer that option. Second, despite the 400 basis point [4%] increase in the fed funds rate between 2004 and 2006, the average teaser rate was unchanged (at around 8% for subprime borrowers). But since subprime loans are typically originated with payment caps of 250 basis points [2.5%] each year, the full damage for 2004 borrowers was not felt in 2006. It is, however, impacting 2007 delinquencies. And third, house prices started to fall only in 2007, and every one-percent decline in national house prices leads to an estimated 70,000 of additional foreclosures—given that currently no less than one-quarter of adjusted rate mortgages originated in 2006 are in a negative equity position.

 

Intricacies of mortgage mechanics aside, the bottom line is that the news coming from the subprime market will get much worse before it gets better, with delinquency rates rising to well over 20% in the coming year. We do not know how much of that bad news the market is already discounting—but the fact that the market rallied on the day that we learned that US banks’ bad loans are rising at the fastest pace since the 1991 recession, might suggest that a lot of gloom is already priced in.

 

 

1d/        Unsold homes in US rise by 5%            (Financial Times, Mon 27 Aug)

 

http://www.ft.com/cms/s/0/392b8b5a-54b0-11dc-890c-0000779fd2ac.html

 

Article:    The supply of unsold homes in the US rose to a 16-year high last month amid a crisis in the credit market, suggesting the worst is yet to come for the domestic housing market.

 

Inventories of houses for sale by homeowners rose 5 per cent on the previous month to the highest level since October 1991 as purchases fell to the lowest level in nearly five years, according to the National Association of Realtors.

 

Economists said the increase in supply and slowdown in demand suggested the most severe housing downturn since the early 1990s was set to worsen. Lending conditions had tightened following a crisis of confidence in credit markets after a rise in defaults on high-risk subprime ­mortgages...

 

 

1e/        Business Comment: US housing crash reminds us [UK] we're due a correction       (The Telegraph, Wed 29 Aug)

 

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=4EBEJ1YHXAO5LQFIQMFSFGGAVCBQ0IV0?xml=/money/2007/08/29/ccom129.xml

 

Comment:    From the Telegraph Deputy City editor, Richard Fletcher. After painting a bleak picture of the US housing market trends, Richard goes on to suggest that the UK might be in for something similar.

 

Article:    Think back only a few months and the analysts who study the US housing market were pretty confident things would turn out alright. It had hit the bottom, they said, and by the second half of the year sales and prices would be rising again.

 

Well here we are: the second half of 2007 is upon us and not only is the market not at the bottom, it's falling faster than ever.

 

Things are much worse than in previous slumps, too. The massive size of the US means its housing market is usually by nature a regional beast - there have been mini booms and busts in many areas over the past few decades. But this time around the bust is happening everywhere at the same time.

 

Figures yesterday revealed prices across the US fell by 3.2pc in the second quarter - the fastest decline ever recorded.

 

What's more, the market rout that occurred in August had yet to take effect, suggesting that when the third-quarter numbers are released, the picture will look even bleaker.

 

... However, this relative serenity [in the UK housing market] cannot mask the fact that a correction seems due. By almost any metric you care to use, UK houses are massively overvalued - more than in almost any other economy in the world. The only way this can be righted is either a US-style crash or an unusually long period of relatively flat house price inflation.

 

The latter looks slightly more likely. House price inflation seems almost certain to fall in the near future, although one of the UK housing market's most obvious shortcomings - the fact that not enough houses are being built - may turn out to be its saving grace, keeping prices from tumbling too far.

 

The US sub-prime disaster has demonstrated how willing millions of families were to take on massive mortgages without considering whether they would be able to keep up payments if interest rates rose. Are we really so much wiser on these shores? The next 12 months will probably present us with the answer. The coming year is likely to be a nervous one for UK homeowners and lenders.

 

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2a/        Wheat price surge bites baguettes       (Financial Times, Sun 26 Aug)

 

http://www.ft.com/cms/s/0/302bcb2c-53fd-11dc-9a6e-0000779fd2ac.html

 

Comment:    It might be the weather that is causing record high wheat prices this year, but wheat-to-ethanol in Europe and the demand for more and better food from an increasingly wealthy China would suggest  that they will not fall much in future.

 

Article:    The surge in global wheat prices is finally catching up with France. After English breadmakers and Italian pasta makers, it is now the turn of French boulangers to put up prices of the country’s staple – the baguette.

 

With international wheat prices at a 10-year high, bakeries across France are expected to raise the price of the baguette by about 5 cents in the coming weeks.

 

The move comes after Italy’s Association of Pasta Manufacturers announced last month that it would increase domestic pasta prices by 20 per cent, while Premier Foods, the UK maker of Hovis bread, said it was likely to pass on further rises in wheat prices.

 

Prices for agricultural commodities such as wheat, cocoa and coffee have risen sharply over the past year as severe droughts, rising consumption in developing countries and the increasing use of crops for biofuels lower supplies.

 

In Europe, wheat prices have nearly doubled from €130 ($177.8, £88) to €237 a tonne this year. In Chicago, wheat for December delivery surged to a record $7.54 (€5.50, £3.70) a bushel last week after Canada, the world’s second-largest wheat exporter, warned output might be almost 20 per cent below last year’s levels.

 

... Discontent over record bread prices helped spark the start of the French Revolution more than 200 years ago. The new increase is not widely seen as a cause for panic, but it has nonetheless stoked fears of further food price inflation to come.

 

In North America, corn and wheat prices are putting upward pressure on other food items, such as poultry and dairy food.

 

An acceleration in food prices could be politically damaging for President Nicolas Sarkozy, who has made a rise in consumer purchasing power one of his priorities.

 

French farmers and supermarket groups met last month to discuss ways of curbing an expected increase in food prices, but the meeting ended in deadlock.

 

 

2b/        Cost of meat 'is set to rise'          (BBC News, Tue 28 Aug)

 

http://www.bbc.co.uk/mediaselector/check/player/nol/newsid_6960000/newsid_6966100?redirect=6966171.stm&news=1&nbwm=1&bbram=1&nbram=1&bbwm=1&asb=1

 

Comment:   Video, UK. 1 min 53 s. Butcher says prices going up 30-40%, National Farmers Union spokesman says food has been too cheap for too long, shopper says meat too expensive. She is in for a shock then.

 

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3a/        Kashagan Faces Russia-Style Squeeze         (The Moscow Times, Mon 27 Aug)

 

http://www.moscowtimes.ru/stories/2007/08/27/001.html

 

Comment:    Couldn’t have put it better myself: “Kazakhstan appears to be taking a page from Russia's rulebook on energy nationalism”

 

Article:    Kazakhstan appears to be taking a page from Russia's rulebook on energy nationalism, threatening to withdraw the license of an international consortium led by Italy's Eni as it seeks a larger slice of profits from the giant Kashagan oil field.

 

With oil prices about $50 higher than when Kashagan's first well was drilled in 2000, Kazakhstan is no longer happy with a contract that gives it just 10 percent of the project's revenue and an 8.33 percent stake in the field through its national oil firm, KazMunaiGaz.

 

As resource nationalism spreads to Central Asia, analysts said foreign-led projects across the region could expect such pressures to grow.

 

The Eni-led consortium appears eager to avoid the drawn-out battles that have marked foreign oil majors' efforts to maintain majority stakes in their Russian projects. Both Shell and BP lost large stakes in key projects in the country after high-profile disputes with the Natural Resources Ministry.

 

Talks on changing the terms of the Kashagan deal are due to start Monday, Eni CEO Paolo Scaroni told reporters in Rimini, Italy, on Friday.

 

"There are 60 days to find an amicable agreement," he said. The announcement came less than one week after the Kazakh Environment Ministry threatened to revoke the consortium's license over purported environmental violations.

 

... Last month, Kazakh Energy Minister Baktykozha Izmukhambetov said the government hoped to change the terms of its production-sharing agreement with the Eni-led consortium so that the state would receive 40 percent of the profits from the project.

 

... Located in the Kazakh sector of the Caspian Sea, the project has faced numerous delays. Its original start-up date of 2005 has been pushed back to the second half of 2010, and costs for the first phase of the project have doubled to $19 billion.

 

The Kazakh government says projected costs over the project's 40-year lifespan have shot up drastically, from $57 billion to $136 billion.

 

... Analysts said Kazakhstan was following a trend of resource nationalism that has spread from Venezuela to Russia and beyond, benefiting national oil companies to the detriment of international majors.

 

Yet Martha Brill Olcott, a Central Asia expert at the Carnegie Endowment for International Peace in Washington, said Kazakh displeasure with the foreign companies running Kashagan was merely coming to a head.

 

"A lot of the Kazakhs' grievances predated the current Russian cycle," she said, adding that Kazakhstan was particularly hoping to control and profit from transit of the field's oil.

 

"We should expect to see all the governments across Central Asia replicating what has happened in Russia," said Chris Weafer, chief strategist at UralSib. "It's only a question of speed -- not if, only when and how."

 

... Analysts warned that BP, which lost its flagship project in Russia when TNK-BP sold its majority stake in the Kovykta gas field to Gazprom, could also face trouble in another country with Caspian energy projects, Azerbaijan. BP operates Azerbaijan's largest oil field, Azeri-Chirag-Guneshli, through a 34 percent stake in the project, and the country's largest gas field, Shah Deniz, through a 25.5 percent stake.

 

Azeri Energy Minister Natiq Aliyev said earlier this year that the state would eventually control marketing and gas sales from the field.

 

Turkmenistan, which is just beginning to open its energy reserves to foreign oil firms, will likely draw favorable terms into any development contracts it awards, analysts said.

 

 

3b/        Kazakhstan Orders Eni to Halt Work on Biggest Field (Update3)            (Bloomberg, Mon 27 Aug)

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVFKMv5v42B8&refer=home

 

Article:    Kazakhstan ordered Eni SpA to halt work at the world's biggest oil discovery in 30 years as the Central Asian country follows Russia's lead in seeking greater control over its natural resources.

 

The Eni-led Kashagan development was suspended for at least three months because of ``environmental violations,'' Environment Minister Nurlan Iskakov said on state television today. Kazakh officials also suspended construction of an Eni refinery for allegedly violating safety rules and opened a criminal probe into alleged customs violations by an Eni unit.

 

``This is an attempt to replicate Russia's success with Sakhalin-2,'' said Dmitry Loukashov, an oil and gas analyst at Alfa Bank in Moscow. Russia's environmental watchdog threatened to derail Royal Dutch Shell Plc's $22 billion Sakhalin-2 venture before the Hague-based company agreed to cede control to state- run gas exporter OAO Gazprom in December.

 

Kashagan holds 12 billion barrels of recoverable crude, enough to supply the U.S. for 19 months, according to the Kazakh Energy Ministry. Setbacks have pushed the total cost of the project to $136 billion, more than double earlier estimates, according to the government...

 

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4/         Iranian Oil Officials Fear Second Purge As Nozari Is Lined Up For Ministerial Role (2)            (Middle East Economic Survey, Mon 27 Aug)

 

http://www.mees.com/

 

Comment:   Subscription required for full article.

 

Article:    Iranian oil industry and government officials fear a damaging second major wave of changes throughout the country’s petroleum sector, now that President Mahmoud Ahmadinejad has decided to line up National Iranian Oil Company (NIOC) Managing Director Gholamhossein Nozari to take on the role of dismissed Minister of Petroleum Kazem Vaziri-Hamaneh on a permanent basis (MEES, 22 August). According to MEES soundings, senior oil industry officials believe that Mr Ahmadinejad had decided to dismiss Mr Vaziri-Hamaneh a long time ago, and they fear that the removal of the only petroleum minister since the Iranian revolution to have extensive and in-depth knowledge of the oil industry will prove costly.

 

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5/         Peak Oil - less Govt revenue       (Trinidad and Tobago Express, Mon 27 Aug)

 

http://www.trinidadexpress.com/index.pl/article_opinion?id=161195061

 

Comment:    Mary King writes semi-regularly on Peak Oil for the T&B Express, warning recently that the T&B economy could be hurt bad by a global downturn in tourists as Peak Oil starts to bite. Her messages can be applied to other economies, and this article is no exception – loss of government income as oil and gas revenues fall. Alberta, Canada apparently is in a similar situation to T&B where oil and gas revenues are concerned i.e. they are relatively low about to get lower despite the fact that there is ‘plenty’ of oil and gas to extract, or in the case of Alberta, tar sands to extract. The UK and Mexico are in a slightly different situation – oil and gas production is falling fast, therefore revenues, which used to be high, are falling fast, leading to a dire balance of payments / trade deficit at least for the UK.

 

Article:    Prime Minister Manning, supported by experts at the last petroleum conference in Port of Spain, claimed in his Budget presentation that the Ryder Scott comment that at the present production rate of natural gas we have but 12 years left of gas, is simply an industry indicator that we have to go looking for more gas. He also garnered support for this view from the fact that the same Ryder Scott gave a figure of eight years in 1974 when we were at the start of our natural gas based industry - gas then was a flared waste product and a vehicle for oil-gas lift.

 

In a producing area the proven reserves are not discovered all at the same time, will be reduced by production and increased by continuing successful exploration. Also it is an industry phenomenon that is the cheapest to explore and produce resources are the first exploited. A corollary is that as the production area matures it becomes increasingly costlier to explore and produce the petroleum resource - drilling in deeper waters and more expensive production techniques.

 

Governments like ours, that depend generally on taxes from Big Oil for their revenues to support the county's economy, then have to give more and more incentives to encourage Big Oil's exploration. Countries with the Dutch disease are caught in a Catch 22 situation since the exploitation of and returns from the natural resource are the unique drivers of the economy.

 

The revenues due to government, that reflect the new exploration and increased production costs funded by further incentives, will be consequently reduced. Peak Oil/Gas is reached then for such governments when change in revenue from taxes etc, with respect to corresponding change in production (i.e. marginal returns to government on production) is inconsequential.

 

What this means is that the remaining petroleum to be explored may be un-commercial or does not exist physically. Hence the then current proven reserves would be all we have, subject to technological or economic change.

 

... In the singular case of bpTT's [BP - Trinidad & Tobago] deep Ibis well this marginal revenue is zero and the expected marginal return at the last bid round was also zero. The requests by Big Oil for increased incentives are strong indicators that we are heading down the depletion curve of marginal revenues.

 

bpTT is telling us that to drill an exploration well is now of the order of US$50 million up from US$25 million five years ago, as for required infrastructure. Further, these companies are claiming that they do not expect to get the kind of unit size of reserves they were accustomed to, they are now going after smaller fields and the unit costs of finding and producing will be higher...

 

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6/         Middle East risks fuel oil crunch period, says IEA    (Business Intelligence Middle East, Sun 12 Aug)

 

http://www.bi-me.com/main.php?id=12371&t=1&c=33&cg=4

 

Article:    The International Energy Agency yesterday warned that the Middle East runs the risk of becoming a net importer of fuel oil at precisely the time worldwide output of the product could diminish.

 

Fuel oil demand in the region, which sits on nearly three-quarters of the world’s proven reserves of crude oil, has reportedly spiked on the back of hefty power generation requirements as gas supplies become insufficient to meet electricity demand, the IEA said.

 

The region’s rapid economic expansion coupled with the start of Summer has led to power shortages in Kuwait, where a power-rationing programme during peak hours is in place, and in the United Arab Emirates, where industrial users are reportedly turning to coal and rolling blackouts have occurred in the emirates of Abu Dhabi and Sharjah, the IEA added.

 

For some countries, such as Kuwait, Saudi Arabia or Iran, turning to fuel oil for power generation may make economic sense, especially where power plants are close to refineries.

 

Rather than upgrading refineries or processing lighter crude oil to reduce fuel oil output – whose value has sharply diminished as export markets have shrunk, notably in Europe – local refiners can process their readily available reserves of heavy crude to produce large volumes of fuel oil, which in turn can replace direct crude burning for power generation. This excess, more valuable, crude can then be exported.

 

Nevertheless, if fuel oil demand sharply increases, the region will arguably be obliged to become a net importer, just when the worldwide supply of fuel oil is expected to diminish as a large amount of upgrading capacity comes on stream by the end of the decade, the agency said.

 

Demand for oil products in the Middle East remains high on the back of low retail prices, solid economic growth and young and growing populations, the International Energy Agency said in its monthly oil market report, released yesterday.

 

Middle East oil demand, unchanged in the new report against expectations in June, is seen reaching 6.6mn bpd this year, up 4.5% on the year, and almost 7 million bpd next year.

 

This forecast remains contingent on several factors that may influence demand, most notably the potential reduction of fuel subsidies.

 

The report stresses that its forecast figures for the region don’t incorporate the effects of a gasoline rationing scheme in Iran launched in June following a 25% hike in retail prices.

 

“Given the lack of detailed data, we believe it is premature to make an adjustment to the country’s gasoline demand outlook for 2007 and the years ahead. Nevertheless, we will adjust our figures as new information becomes available,” the agency said.

 

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7/         Investec's Guinness sees oil price doubling – FEEDBACK           (Reuters, Thu 19 Jul)

 

http://investing.reuters.co.uk/news/articleinvesting.aspx?type=managerMoves&storyID=2007-07-19T080732Z_01_NOA929107_RTRUKOC_0_CITYWIRE-INVESTEC-GUINNESS.xml&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2

 

Comment:    This article was posted in an end of July newsletter. In it Ian Henderson, a fund manager, is quoted:

 

<<AA-rated Ian Henderson, manager of the JPM Natural Resources fund, said the oil price could double in five years.

 

He also warned there could be an oil shortage before this date due to lack of investment in the industry.

 

"The issue is about money and access. Not enough money is being invested in the industry and so the access to the oil reserves is not as good as it should be," said Henderson.>>

 

 

 An ODAC News subscriber writes:

 

Feedback:    Just thought I take a second to comment on the Oil Price story below. Henderson states that the shortage is due to a lack of investment. I know you know the reason for this but many reading this report may not understand why not. Surely with record oil prices and profits, conventional economic wisdom dictates that the oil companies should be falling over themselves to invest more money in their infrastructure? Not, of course, if you know that there isnt going to be enough material to put through that investment within a short period of your having made it. This contradiction is glaringly obvious but has no really plausible alternative explanations other than peak oil awareness by the oil majors.

 

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8/         NPC Report is Hand Grenade in Bubble Wrap          (ASPO-USA, Mon 27 Aug)

 

http://www.aspo-usa.com/index.php?option=com_content&task=view&id=201&Itemid=91

 

Comment:    The National Petroleum Council of the USA recently published its findings of what was supposed to be a Peak Oil investigation. The main report is about 400 pages long, and while it contains some hints of problems ahead, you have to dig deep to find them. The Executive Summary, 40 pages long, avoids any clear statement on the oil supply problems that the International Energy Agency is now forecasting lie ahead as we approach 2012. The reports can be found at the NPC website.

 

The author of the article below is Randy Udall, a founder member of ASPO-USA. He, and ODAC, were involved in the Peak Oil tele-conferencing part of the NPC study, along with about 14 other Peak Oil groups / individuals. One of the individuals was Jean Laherrere, whose feedback included pointing out that some of the data used in the NPC reports is out of date, by years.

 

Article:    The working draft of the National Petroleum Council’s forecast of global oil and gas trends runs to nearly 500 pages. Weighing as much as the chunk of foam that brought down the Space Shuttle Columbia, this curious document reads like a hand grenade encased in Bubble Wrap.

 

Since its release, the report (and a more digestible 40-page executive summary) has received 750,000 hits at www.npc.org.

 

Facing the Hard Truths About Energy is perplexing, even schizophrenic. In maddening fashion, it blends numerous cautions about the “accumulating risks” to global oil and gas production with repeated, rosy reassurances that we “aren’t running out,” as if anyone said we were.

 

A call for maximum sustained improvements in automobile efficiency—a welcome first for Big Oil—is paired with a cheery statement about our “vast” global endowment of petroleum and natural gas. Peak oil may be near—but then again we might have 10 times more oil left than we have already used. Carbon emissions are a concern—but coal-to-liquids seems promising.

 

News coverage reflects the report’s confusing duality. Some headlines called it “alarming.” Other reporters found it a snooze.

 

One prominent chart suggests that the world will be lavished with an additional 16 million barrels/day of Mideast oil by 2030, which seems a fantasia. Another chart says the world will enjoy 20 million b/d from enhanced oil recovery by 2030, although today’s production is about 1.8 million b/d. (Despite $70 oil, U.S. EOR is 650,000 b/day and falling.) This same image promises another 20 million b/d from oil we haven’t found yet—even as it shows depletion robbing 60 million b/d from the existing production base.

 

What’s a reader to believe?

 

Early in their research, the NPC solicited the views of ASPO-USA and other peak oil concernists here and in Europe. In a pair of conference calls last week with ASPO-USA’s Steve Andrews and Randy Udall and others, the NPC’s authors communicated their own concern about the resource nationalism, access limits, manpower constraints, guerrilla insurgencies, the machinations of Putin and Chavez, and all the other accumulating risks that plague an orderly expansion of global oil and gas.

 

In this discussion, it soon became clear to us that the report’s rosy patina is largely due to a reliance on forecasts from the U.S. Energy Information Administration. (The NPC deliberately did not develop any forecasts of its own.) Unfortunately, the EIA relies on an outdated computer model that simply forecasts how big the economy will be, then supplies the necessary energy, without consulting the Saudis. The EIA’s influence is most noticeable in the study’s Supply Chapter, which reads as if it were co-authored by the Wizard of Oz.

 

After the conference call, Udall sent the NPC’s authors an email, excerpted below: …

 

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9/         Anna Politkovskaya’s assassination, and the subsequent investigation

 

Comment:    Anna Politkovskaya, formerly Russia’s leading investigative journalist, was murdered about a year ago by the usual method – bullets at close range/point blank, and some of the conclusions from the subsequent investigation have been widely reported in the media. Item 9a is The Times coverage. It looks as though the Russians have done a good job in their investigations. But for a more thorough interpretation, read item 9b. It is written by Shaun Walker, a British national based in Moscow, who writes regularly for Russia Profile. You might also like to read Anna’s Putin’s Russia, which gives the impression of a country where organised crime plays a major role and courts that do as they are told.

 

 

9a/        Chechen ‘hitmen’ and FSB agents are held over journalist’s murder     (The Times, Tue 28 Aug)

 

http://www.timesonline.co.uk/tol/news/world/europe/article2337406.ece

 

Article:    Members of the Russian security services were involved in a conspiracy with organised crime to assassinate Anna Politkovskaya, the investigative journalist, the country’s chief prosecutor announced yesterday.

 

Yuri Chaika said that ten people had been arrested for the murder, five of whom were officers of the Federal Security Service (FSB), the successor to the KGB, and the Ministry of Internal Affairs (MVD).

 

They had tracked Ms Politkovskaya and passed information about her movements to a gang of Chechen hit men who had carried out the killing. She was shot in the lift of her apartment building on October 7, President Putin’s 54th birthday.

 

“The group was headed by the leader of a Moscow criminal group of Chechen origin,” Mr Chaika, the Prosecutor-General, said. Those arrested included “the organisers, accomplices and hitmen”.

 

The arrest of security service officers brings the inquiry uncomfortably close to the authorities, whom Ms Politkovskaya had accused repeatedly of collaborating with criminals to eliminate opponents of the Kremlin.

 

Mr Chaika insisted that the FSB and MVD played no role in the assassination of one of Mr Putin’s most vehement critics. He described the arrested men as “black sheep” in the organisations.

 

... Mr Chaika blamed her death on an exiled Russian determined to destabilise the regime. He declined to identify the suspect but said that the victim had “known him and met him”, and that an extradition request would be prepared. In what appeared to be an oblique reference to Boris Berezovsky, the billionaire businessman who has called for the overthrow of Mr Putin’s regime, Mr Chaika said: “Our investigation has led us to conclude that only people living abroad could be interested in killing Politkovskaya. Forces interested in destabilising the country, changing its constitutional order, in stoking crisis, in a return to the old system where money and oligarchs ruled, in discrediting national leadership, provoking external pressure on the country, could be interested in this crime.”

 

Novaya Gazeta, the newspaper where Ms Politkovskaya worked, welcomed the arrests but said that it was too early to consider the case solved. In a statement it said: “The people who carried this out, their helpers and the real people who ordered this, must be identified and convicted.” Mr Chaika said the same gang could also have been involved in the murder in 2004 of Paul Klebnikov, an American journalist, and of Andrei Kozlov, the deputy head of the Russian Central Bank, who was shot in September...

 

 

9b/        Showing Progress (Russia Profile, Tue 28 Aug)

 

http://www.russiaprofile.org/page.php?pageid=Politics&articleid=a1188309135

 

Article:    Russian Prosecutor General Yury Chaika yesterday announced progress in the Anna Politkovskaya case, telling President Vladimir Putin that the murder of the journalist last October has been solved. At a press conference in Moscow, he told journalists that 10 people had been arrested for the murder of the Novaya Gazeta journalist, including employees of the Interior Ministry and the FSB.

 

The announcement came three days before what would have been Politkovskaya’s 49th birthday, and almost a year after the journalist and prominent Kremlin critic was assassinated in her Moscow apartment building.

 

The person who ordered the crime, said Chaika, was living outside Russia and wanted to “destabilize the situation in the country… and return to the previous ruling system, when money and oligarchs decided everything.” This would suggest either the London-based Boris Berezovsky, or former YUKOS CEO Leonid Nevzlin, currently living in Israel. The Kremlin and Russian authorities have long suggested that Berezovsky is behind the murders of both Politkovskaya and Alexander Litvinenko.

 

Experts and former colleagues of the assassinated journalist expressed satisfaction that arrests had been made, but skepticism at Chaika’s conclusions.

 

“It’s good that there has been progress in the case,” said Igor Yakovenko, secretary general of the Russian Union of Journalists. “If we believe everything that Chaika says then this is the end of the sad tradition of the murders of journalists in Russia going unsolved.” But, he said, there were several doubts about the allegations. “It’s worrying that even before the investigation has been officially completed, they are pointing the finger at people abroad,” he said.

 

Dmitry Muratov, the editor of Novaya Gazeta, the opposition newspaper where Politkovskaya published her hard-hitting reportage on Russian politics and the conflict in Chechnya, expressed similar doubts. “We have known about this for a while. We’ve worked together with their investigation and we trust their professionalism,” said Muratov. “But we’re absolutely amazed that they have openly stated that they know who ordered the crime before the investigation has even been completed.”

 

… He [Chaika] refused to name the mastermind, but separately stated that Russia’s long-standing efforts to have Boris Berezovsky brought before a Russian court could bear fruit soon, if the former oligarch is extradited from the UK to Brazil, where he is wanted on charges of financial irregularity, and from there to Russia.

 

If all Chaika’s claims are to be believed, it would mean that current members of Russia’s security services are under the command of Boris Berezovsky.

 

... But others expressed heavy scepticism at the Berezovsky link. “We have no guarantees that the names of those who really ordered the killing and the names of those who will be accused of it will be the same,” said a statement from Novaya Gazeta’s editorial team posted on the newspaper’s website. “We have no complaints about the investigative team. We’re working together… But we want to be certain that nothing ‘expedient,’ with no actual relation to the crime, influences this joint work.”

 

Indeed, many might wonder if it’s a little too convenient that Chaika’s statement neatly confirms what have been the Kremlin’s allegations from the start. “It makes you wonder if we are dealing not only with an ‘ordered’ killing but with an ‘ordered’ investigation too,” said Yakovenko of the Russian Union of Journalists.

 

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10a/      US Natural Gas Supplies comment       (Energy Intelligence, Tue 28 Aug)

 

No link. From newsletter.

 

Comment:    From the commentary section, ‘World Watch -- Comment & Interpretation on Today's News’, of the daily newsletter.

 

The comment below refers to a “warning of serious future shortages” of natural gas from ConocoPhillips CEO Jim Mulva. Natural gas prices in the USA have been falling over the past few months due to plenty of gas in storage and a mild summer. As the commentary below states, what the USA has at the moment is a ‘current glut’ that could disappear rather swiftly with the onset of winter, especially if it is a particularly lengthy, cold one. The USA and UK may find themselves bidding for the same spot LNG cargoes.

 

Article:    US natural gas futures prices hit fresh lows for the year on Monday at $5.38 per million Btu. And as markets look toward autumn, there are few signs of support. The tropics are quiet once again, with no new hurricane warnings yet and only a month or so left in the peak season. Meanwhile, gas inventories are at record highs and likely to prematurely reach the usual pre-winter level 3 trillion cubic feet this week, with another 6-8 weeks of inventory building still to go. Meanwhile, LNG imports have continued to flood into US receiving terminals all summer. Nevertheless, the longer term outlook for North American gas markets is not nearly as flush as the current glut indicates. ConocoPhillips CEO Jim Mulva is warning of serious future shortages and calling for fast action on mega projects such as the Alaska gas pipeline to keep up with expected demand and declines in mature areas. Tom Wallin, New York

 

 

10b/      Conoco's Mulva: "The World Has A Natural Gas Problem"           (Energy Intelligence [World Gas Intelligence], Wed 29 Aug)

 

No link. From newsletter.

 

Comment: &