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A British firm will control Libyan oil field company October 7, 2011

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British company Heritage Oil PLC said Tuesday that it has acquired a controlling interest in a Libyan company licensed to provide oil field services including offshore and land-based drilling.

Heritage said it paid $19.5 million for a 51 percent stake in Sahara Oil Services Holdings Ltd. Heritage said the acquisition will allow it to play a significant role in Libya’s oil and gas industry.

Sahara Oil Services was established in 2009 and is based in Benghazi.

Heritage established a base in Benghazi this year and has been dealing with senior members of the National Transitional Council, the company said.

Richard Griffith, analyst at Evolution Securities, said the move “could prove to be a very shrewd investment” by the company.

Heritage Oil shares, however, were down 2.9 percent at 217.8 pence in early trading on the London Stock Exchange.

The company’s CEO Tony Buckingham said they are “well placed to play a significant role in the future oil and gas industry in Libya.”

“This acquisition is consistent with Heritage’s first mover strategy of entering regions with vast hydrocarbon wealth where we have a strategic advantage,” Buckingham said.

Heritage has exploration projects in the Kurdistan Region of Iraq, the Democratic Republic of Congo, Malta, Pakistan, Tanzania and Mali, and a producing property in Russia.


ENI invests in Venezuelan oil August 14, 2011

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Italian energy company Eni said it would contribute as much as $1.5 billion to a state energy company to develop the Junin 5 block off the coast of Venezuela.

Eni Chief Executive Officer Paul Scaroni met in Caracas with Venezuela’s Energy Minister Rafael Ramirez, also president of state oil company Petroleos de Venezuela SA to discuss projects in the Orinoco belt.

Eni signed deal in Venezuelan to exploit the Junin 5 oil block in the Orinoco oil belt in the Caribbean Sea last year.

Eni had said it hopes to produce around 75,000 barrels of oil per day from the site during early production phases set for 2013. Long-term production, the company said, could reach 240,000 bpd in 2018.

Eni in a statement Friday said the “primary topic of discussion” was developing Junin 5. The company said the reserve holds 35 billion barrels of certified oil in place.

Eni in its statement said it agreed to provide up to $1.5 billion to help PDVSA develop its share of the production phase of Junin 5.

Is IEA oil release a stimulus measure for consumers? June 27, 2011

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The International Energy Agency’s planned release of oil from reserves is being used as an economic stimulus measure that will serve as a “tax cut” for consumers if it’s successful in driving down prices, according to a report today from IHS-Cambridge Energy Research Associates.

The release from emergency stockpiles of 60 million barrels of oil, or 2 million barrels a day for 30 days beginning next week, follows a disruption in supplies from Libya and could boost both consumer spending power and confidence, according to IHS-CERA’s Daniel Yergin and James Burkhard.

“Although oil prices have come down since Brent reached $126 per barrel in April, worries about the potential for another economic slowdown have grown,” the report said. “The oil release signals that IEA members are taking into account the broader macroeconomic environment to decide on using strategic reserves.”

Oil for August delivery declined 25 cents to $90.77 a barrel at 2:04 p.m. on the New York Mercantile Exchange. Prices have fallen 2.8 percent this week and gained 19 percent in the past year.

Repsol and Alliance form a Russian joint venture June 18, 2011

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How will the $800M joint venture work? Repsol will contribute cash to support growth of the joint venture and Alliance Oil will contribute producing oil assets in the Russian Federation.

Repsol and Alliance Oil Company have signed a Memorandum of Understanding to form a joint venture that will serve as a growth platform for both companies in the Russian Federation, the world’s largest oil and gas producer.

Alliance Oil will hold a 51% stake in the joint venture and contribute producing assets in the Volga-Urals Region while Repsol will own the remaining 49% and make an initial cash investment to finance future growth opportunities.

The agreement seeks to combine Alliance Oil’s knowledge and privileged access to Russian exploration and production business opportunities with Repsol’s know-how and technical capabilities to create a long-term exploration and production alliance.

In addition to the exploitation of the assets to be contributed by Alliance Oil, the agreement includes seeking opportunities for exploration and growth through producing assets in the Russian Federation.

‘This cooperation with Alliance Oil enables Repsol to increase its producing assets and obtain privileged access to assets in the country, home to some of the largest hydrocarbon resources in the world, reinforcing this growth vector of our group”, said Repsol Executive Chairman, Antonio Brufau.

‘We are pleased to develop our partnership with Repsol and together create an additional important strategic upstream growth platform in Russia. I am convinced that the joint venture will create significant value for our shareholders and make a meaningful contribution to our reserves and production,’ said Eric Forss, Chairman of Alliance Oil Company ltd.

Repsol already owns a 3.47% stake in Alliance Oil resulting from the merger between Alliance Oil and West Siberian Resources in 2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which holds exploration and production licenses in the Karabashsky-1 and -2 blocks in the prolific West-Siberia basin.

The transaction is subject to negotiation of final contractual terms, due diligence of the assets to be contributed by Alliance Oil and the procurement of the relevant regulatory and corporate approvals, which is expected to be completed during 2011.

Obama accepts more domestic oil drillings May 17, 2011

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A year after the BP oil spill, Barack Obama announced new measures that will lead to expanded domestic offshore drilling.

The president has long said that domestic oil production is not a solution to the nation’s energy problems, but with a new campaign season approaching, he is bowing to Republican pressure and public opinion, which is heavily swayed by high fuel prices. 

“I believe that we should expand oil production in America — even as we increase safety and environmental standards,” Obama said in his weekly radio address.

He said he will direct the Department of Interior to conduct annual lease sales in Alaska’s National Petroleum Reserve, an area located in the northwest corner of Alaska near the Arctic National Wildlife Refuge (ANWR), that was set aside in 1923 as a fuel source for the U.S. military.

The administration said it remains firmly opposed to drilling in ANWR.

Obama also will order Interior to speed up evaluation of oil and gas resources in the mid and south Atlantic, an area the administration opened to new drilling just weeks before the BP oil spill in the Gulf last summer.

The Interior Department will also extend the lease periods for companies forced to shut down operations in the Gulf following the oil spill.

The White House also indicated that the Interior department will hold additional lease sales in the Gulf of Mexico by mid-2012. House Republicans passed legislation last week that would force Interior to do so.

And finally, Obama said he will create an inter-agency group to streamline the permitting process for drilling in Alaska.

Ending Big Oil Handouts Won’t Raise Gas Prices

The Congressional Research Service (CSR) says that withdrawing subsidies for Big Oil will not raise consumer gas prices. 

The CSR responded to a request from Senator Harry Reid (D-NV) to provide information on the extent to which proposed tax changes on the oil industry are likely to affect domestic gasoline prices.

CSR stated: “There is little reason to believe that the price of oil, or gasoline, consumers face will increase” and that “[Since] prices are well in excess of costs…a small increase in taxes would be less likely to reduce oil output, and hence increase petroleum product (gasoline) prices.”

According to the Climate Progress Blog: “Subsidy by subsidy, the memo furnishes pithy, fact-based support for the Senate’s proposed tax changes to the top five most lucrative oil companies operating in the U.S.”

The “bombshell” memo repeatedly referred to the impact on gasoline prices a “small’.

Removing Big Oil handouts from the tax code would also have a small effect on the top five firms–reducing their profits by only a nickel for every dollar.

Automakers Oppose Fuel Efficiency Targets

Meanwhile, major automakers say they are wary of aggressive mandates for increasing the fuel efficiency of vehicles sold in the U.S.

On Thursday, the lobbying group representing GM (NYSE: GM), Ford (NYSE: F), Chrysler (FIA.MI) Toyota (NYSE: TM) and European companies sent a letter to the Obama Administration stating that if they are forced to double fuel efficiency by 2025 it could hurt their sales, employment and safety. 

The administration is considering setting new fuel efficiency standards that would call for a 6% increase in efficiency each year from 2017-2025. At that rate, the average fleet efficiency would be 62 miles per gallon. 

However, that level is the top of the range being considered by the administration, and the automakers want to scale back those ambitions, which are estimated to save 45 billion gallons of oil and reduce carbon pollution by 450 million tons by 2030.

“The alliance believes it is inappropriate to be promoting any specific fuel economy/greenhouse gas at this point,” John Whatley, Chief executive of the lobbying group, said in the letter.

The group was responding to a letter sent by 18 Senators last month in support of a tough, new fuel economy standard. The Senators, led by California’s Dianne Feinstein and Olympia Snowe of Maine, said the most ambitious target was “technically feasible and cost effective for consumers.” 

Could climbing oil prices destroy economical recovery? March 5, 2011

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Libya today. Tomorrow the whole arabic peninsula? Oil trading analysts are scared of what could become a major problem for a recvoering world economy. With $200 a barrel, ain’t we doomed for a new recession?

Oil has been trading at more than $100 a barrel in the U.S. the past couple of days, largely because of fighting in Libya. That has gasoline prices up, too.

The Energy Information Administration says last week the average price for regular gasoline across the country jumped nearly 19.4 cents to $3.34 a gallon. That was the steepest one-week rise since Hurricane Katrina disrupted oil production in the Gulf of Mexico in 2005.

Now there are concerns higher gas prices could stall a recovering economy. You can count Joe Occhipinti of Portland, Ore., among the concerned.

“I’m getting $20 worth of gas,” Occhipinti said, standing near his white work van at an Arco station. “I can’t afford to fill it up.”

Occhipinti, a cabinetmaker, estimates he’s spending about $100 a week on gasoline. That makes it difficult to keep his costs down and his jobs profitable.

“Lumber — all that other stuff — I can factor in, but this thing happens with Libya and now all of the sudden gas prices are raised up, but I made my bid three months ago,” he said.

Occhipinti also is relearning a lesson from 2008 when gas sold for $4 a gallon: Spending more on gas means you have less to spend elsewhere.

“One of the things that I miss a lot [is] taking my wife out to dinner,” he said.

Instability in the Middle East is largely blamed for the most recent jump in oil prices. But government data show a steady increase since September. That’s because demand for oil has been going up in the U.S. after declines during the recession. Then the fighting in Libya prompted traders to worry about supply.

“If you were to remove some of that oil supply, we’d be in a situation where demand could exceed supply, and that’s just a scary moment in economics,” says Patrick DeHaan, senior petroleum analyst at GasBuddy.com.

Saudis increase their oil production to burst the bubble February 26, 2011

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SAUDI Arabia, the world’s top oil producer, has raised its production to compensate for the loss of output from Libya during political turmoil in the Middle East.

The International Energy Agency confirmed that Saudi Arabia was stepping in to cover the fact that many platforms producing high-grade oil from Libya have been shut down because of the unrest.

It is believed that the Saudi state oil company had increased its output to more than 9 million barrels per day – a rise of more than 700,000 barrels. The worsening situation in Libya has led to a loss of about 1.2 million barrels out of its 1.6 million barrels of daily output.

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European refineries have been particularly worried about a shortage of high-grade crude, of which Libya is a key supplier.

However, the news of Saudi Arabia’s intervention eased the spot price of oil, which had risen to a two-and-a-half-year high above $US119 at one point on Thursday. Yesterday, Brent crude dropped to $US111 a barrel. But it still closed up 9 per cent for the week, reflecting continuing unrest in the wider oil-producing region.

ICAP Shipping analysts said yesterday: ”In terms of pure volumes, there are ample supplies of crude that can be brought to the market if there is a

prolonged disruption of exports [from Libya]. But with the lion’s share of Libyan crude comprised of light, sweet grades, it is also not entirely clear how global trade flows will be affected.”

International Energy Agency figures show that Saudi Arabia has 3.5 million barrels a day of spare capacity, while the United Arab Emirates could add 330,000 barrels, Qatar could put on 180,000, and Kuwait 230,000. While not all of this would be likely to come on stream at once, Middle East production is still 1.7 million barrels a day lower than it was at the height of the oil price spike in mid-2008.

Is Shale gas the new black… gold? February 1, 2011

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For a few months now, energy analysts and traders have observed the emergence of a true game changer. Shale gas is to become big… really big in the coming years.

Over the past decade, a wave of drilling around the world has uncovered giant supplies of natural gas in shale rock. By some estimates, there’s 1,000 trillion cubic feet recoverable in North America alone—enough to supply the nation’s natural-gas needs for the next 45 years. Europe may have nearly 200 trillion cubic feet of its own.

We’ve always known the potential of shale; we just didn’t have the technology to get to it at a low enough cost. Now new techniques have driven down the price tag—and set the stage for shale gas to become what will be the game-changing resource of the decade.

I have been studying the energy markets for 30 years, and I am convinced that shale gas will revolutionize the industry—and change the world—in the coming decades. It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy.

To understand why, you have to consider that even before the shale discoveries, natural gas was destined to play a big role in our future. As environmental concerns have grown, nations have leaned more heavily on the fuel, which gives off just half the carbon dioxide of coal. But the rise of gas power seemed likely to doom the world’s consumers to a repeat of OPEC, with gas producers like Russia, Iran and Venezuela coming together in a cartel and dictating terms to the rest of the world.

The advent of abundant, low-cost gas will throw all that out the window—so long as the recent drilling catastrophe doesn’t curtail offshore oil and gas activity and push up the price of oil and eventually other forms of energy. Not only will the shale discoveries prevent a cartel from forming, but the petro-states will lose lots of the muscle they now have in world affairs, as customers over time cut them loose and turn to cheap fuel produced closer to home.

The shale boom also is likely to upend the economics of renewable energy. It may be a lot harder to persuade people to adopt green power that needs heavy subsidies when there’s a cheap, plentiful fuel out there that’s a lot cleaner than coal, even if gas isn’t as politically popular as wind or solar.

But that’s not the end of the story: I also believe this offers a tremendous new longer-term opportunity for alternative fuels. Since there’s no longer an urgent need to make them competitive immediately through subsidies, since we can use natural gas now, we can pour that money into R&D—so renewables will be ready to compete without lots of help when shale supplies run low, decades from now.

To be sure, plenty of people (including Russian Prime Minister Vladimir Putin and many Wall Street energy analysts) aren’t convinced that shale gas has the potential to be such a game changer. Their arguments revolve around two main points: that shale-gas exploration is too expensive and that it carries environmental risks.

I’d argue they are wrong on both counts.

Take costs first. Over the past decade, new techniques have been developed that drastically cut the price tag of production. The Haynesville shale, which extends from Texas into Louisiana, is seeing costs as low as $3 per million British thermal units, down from $5 or more in the Barnett shale in the 1990s. And more cost-cutting developments are likely on the way as major oil companies get into the game. If they need to do shale for $2, I am willing to bet they can, in the next five years.

When it comes to environmental risks, critics do have a point: They say drilling for shale gas runs a risk to ground water, even though shale is generally found thousands of feet below the water table. If a well casing fails, they argue, drilling fluids can seep into aquifers.

They’re overplaying the danger of such a failure. For drilling on land, where most shale-gas deposits are, the casings have been around for decades with a good track record. But water pollution can occur if drilling fluids are disposed of improperly. So, regulations and enforcement must be tightened to ensure safety. More rules will raise costs—but, given the abundance of supply, producers can likely absorb the hit. Already, some are moving to nontoxic drilling fluids, even without imposed bans.

Wikileaks reveals BP Russian problems… January 19, 2011

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The oil spill was not enough for BP. A new cable published by WikiLeaks shows the big challenges BP faces in its new Arctic exploration joint venture, and also sheds some light on the Russian government’s motivation for allowing the unprecedented deal with state-controlled oil company Rosneft in the first place.

The cable, which quotes Tim Summers, the former acting Chief Executive of BP’s Russian joint venture TNK-BP, shows how Russia’s oil industry has operated far below international technical standards, but struggled to improve its efficiency because of government interference in the sector. It reveals why Rosneft so badly needs BP expertise to tap oil and gas reserves in Arctic waters, but also raises questions over whether BP will be able to deliver on its ambitious plans in the sclerotic Russian operating environment.

TNK-BP declined to comment on the cable. A representative of Summers declined to comment.

In a September 11 2009 meeting with the U.S. Ambassador to Moscow, Summers is said to have talked at length about problems in the Russian oil industry.

The cable said:

“The inefficiencies in the system ‘are so huge’, according to Summers, that it would take a very long time to modernize the Russian oil and gas sector.  Summers pointed out that a well that would take 10 days to drill in Canada would take 20 days to drill in Russia. He said moving a drilling rig from one site to another, a process that might take 7 or 8 hours in Canada, takes 28 days in Russia.

“Multiply that by hundreds or thousands [of rigs] and you can start to imagine the costs.”

Rosneft executives admitted earlier this month that one of the main motivations for the BP deal was access to better technology. “Acquiring new knowledge…is of the greatest importance,” said Igor Sechin, Russia’s Deputy Prime Minister and Chairman of Rosneft.

It appears that a joint venture with a company like BP may be the only way to achieve this. Many state-run oil companies in other regions, notably the Middle East, have been able to lead development complicated oil and gas projects in close collaboration with Western oil service companies. However, Summers said these companies were reluctant to enter Russia because of worries about intellectual property theft or negative headlines about the business environment.

“Russia continues to be seen as too risky by many service companies,” he is quoted in the cable.

Summers also outlined how direct government interference hampered the work of oil companies.

“Oil company Slavneft (on whose board Summers sits), had been ordered to cancel an order for foreign equipment in favor of a domestic supplier, even though the foreign equipment was clearly superior,” the cable said. “Sechin (who is in charge of the energy sector) told Summers directly that he should be using Russian gas turbines instead of the preferable General Electric models TNK-BP was buying.”

Whether BP’s Arctic venture with Rosneft will face similar interference is debatable. Summers was talking about onshore oil drilling, for which Russia has an established industry with significant vested interests. In contrast, Russia currently has no offshore oil industry to speak of, so the pressure to patronize local companies may be lower.

These comments show the particular challenges of operating in Russia, but they also show how things have changed. That Sechin has gone from quibbling about turbine suppliers in 2009 to approving a multi-billion dollar exploration agreement in 2011, suggests a more accommodating stance to foreign involvement in Russian oil and gas.

Can legislators reform oil industry’s safety culture? January 7, 2011

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The Deepwater Horizon disaster was the result of mistakes that call into question the entire oil industry’s safety culture and demand better regulation.

So concludes the final report from the National Commission on the BP Deepwater Horizon Oil Spill released yesterday. The nonpartisan commission found that the initial explosion on the rig — which killed 11 workers and resulted in the uncontrolled release of millions of gallons of toxic crude into the Gulf of Mexico — could have been prevented.

“The immediate causes of Macondo well blowout can be traced to a series of identifiable mistakes made by BP, Halliburton, and Transocean that reveal such systematic failures in risk management that they place in doubt the safety culture of the entire industry,” the report found.

One of the world’s largest drilling contractors, Swiss-based Transocean was the owner and operator of the rig, which was drilling for BP. Halliburton, an international company with headquarters in Dubai and Houston, was the contractor in charge of cementing the well closed.

The nonpartisan commission also faulted an ineffective regulatory system. To fix that, the report calls on the U.S. Interior Department to create an independent safety agency to oversee offshore drilling and recommends increased funding for agencies responsible for responding to spills.

“Federal government oversight utterly failed to provide an acceptable level of protection for those on the rig and for the Americans who call the Gulf their home,” said commission co-chair and former U.S. Sen. Bob Graham (D-Fla.). “Our regulators were over-matched.”

The report recommends increasing the $75 million liability cap for damages related to offshore drilling accidents, and for dedicating 80 percent of fines and penalties from the BP spill to restoring the Gulf, where oil continues to wash ashore.

Environmental advocates echoed the commission’s call for improved regulation.

“After evading adequate oversight for years, the oil industry must re-adjust to being a regulated industry,” said Catherine Wannamaker, senior attorney at the Southern Environmental Law Center. “Sidestepping environmental review of risky deep water drilling can no longer be an option with an oil industry that lacks the ability to prevent and stop disaster. The damage and risk borne by coastal life and health shouldn’t be dismissed by rushing back to business-as-usual.”

But Big Oil did not exactly rush to endorse the commission’s findings, suggesting that the recommended reforms won’t come easy. Erik Milito of the American Petroleum Institute, the oil industry’s trade group, said that casting doubt on the entire industry based on a study of a single incident does a “disservice” to those who work in the industry and are committed to safety.

The commission was critical of API. Noting that the group has played a “dominant role” in developing safety standards for the industry, the report said the group’s ability to serve as a reliable standard-setter is compromised by its role as the industry’s principal lobbyist and public policy advocate. API spent more than $4.8 million lobbying federally in 2010 alone, according to the Center for Responsive Politics.

Further complicating reform efforts is the fact that Big Oil has invested heavily in congressional campaigns to ensure its concerns are heard in Washington. In 2010 alone, the industry contributed more than $9.1 million to congressional candidates with 71 percent of that going to Republicans.

One of those Republicans — Sen. David Vitter of Louisiana, who received more than $486,000 from the oil and gas industry over the past five years — was also skeptical of the commission’s report, complaining that claims of systemic safety problems in the industry were “overstated.”

While Vitter’s colleague Sen. Mary Landrieu (D-La.) was generally supportive of the commission’s findings, she objected to extending the window for reviewing drilling applications from 30 to 90 days. She also expressed concern about the impact that raising the liability cap would have on small companies. Instead, Landrieu and other senators are working on a mutual insurance system to spread the risk among offshore operators.

The oil and gas industry was the fourth-largest contributor to Landrieu’s campaign over the past five years, contributing more than $373,000.