Oil country hot line

OPEC sustains production, will meet again

At its June 5 meeting, OPEC decided to maintain an output level of 24.2 million bopd (the amount agreed upon at its mid-March meeting). OPEC had been expected to increase production, to compensate for Iraq’s hasty decision to halt exports of its U.N.-administered crude sales, but the cartel refused to succumb to Iraqi tantrums. However, ministers plan to meet again on July 3 to review their strategy. OPEC said it is ready at any time to boost production if prices spike. Analysts estimate that the group has 3 million to 4 million bopd of excess capacity (due to earlier cutbacks) to handle any shortages that Iraq’s action may cause.

Iraq halts flow: opposes U.N. plans

A senior Iraqi Oil Ministry official, Taha Mousa, said that the country’s oil exports of 2.1 million bpd will be suspended for a one-month period. Mousa said that Iraq opposes the U.N. Security Council’s decision to extend the existing oil-for-food program for only 30 days, instead of the normal six months. The decision had been made to allow the Council more time to consider a British / American proposal for a complete overhaul of sanctions. The two countries propose lifting restrictions on civilian goods imported to Iraq, while cracking down on oil smuggled to Iraqi neighbors. The "smart" sanctions would allow Iraq to trade 150,000 bopd, with the funds going into new escrow accounts, or through a barter arrangement, or both.

Bush blames refineries for U.S. energy crisis

Refineries in the U.S. have been bearing the brunt of Bush administration criticism, for high gasoline prices. President George W. Bush has issued two executive orders – to expand facilities and to increase output – in an effort to alleviate the country’s refinery capacity constraints. One of the orders specifically tackles speeding up the permitting process for projects that will increase production, transmission or conservation of energy. This is especially helpful for upgrades and modifications needed under the EPA Tier II fuel program. The other order allows federal agencies to factor in the impact on energy supply when implementing regulations. However, refiners are not standing in line to build new refineries for it is a costly and volatile endeavor. Plus, it takes four to five years to build a refinery with enough capacity to be profitable.

Bush’s energy plan gets mixed reactions

The anticipated U.S. energy policy that finally materialized has prompted varied reviews. The plan, which emphasizes production over conservation as expected, is endorsed by many industry officials, but lambasted by environmentalists. The 163-page energy blueprint offers 105 recommendations ranging from speeding up construction of power lines to the development of clean coal technology. Sustainable Energy Coalition (SEC) coordinator Susanna Drayne complained that the "energy policies focused nearly exclusively on drilling and refining greater quantities of oil." California Independent Petroleum Association Chairman Terry Smith said, "The plan recognizes the valuable role of domestic oil and gas producers in national energy security, and the role of technology in finding new oil and gas reserves with minimum impact on the environment." OPEC said that the plan would not hurt nations that export oil to the U.S., predicting that U.S. output will be boosted, but that the country will be unable to completely satisfy its own demand.

ExxonMobil leads two Saudi gas ventures

With the hope of increasing gas utilization, economic growth and job creation, Saudi Arabia has opened its energy sector to foreign investors for the first time in nearly a quarter century. The Kingdom has selected ExxonMobil Corp. as the leader and operator for Core Venture 1 – the largest of three core ventures in the Saudi Arabian Natural Gas Initiative. The firm was also chosen to lead Core Venture 2, and it has signed preparatory agreements for both projects, which together require an estimated investment of $20 billion. ExxonMobil Corp. Chairman Lee Raymond said, "This investment opportunity strengthens our leadership position in the Kingdom." Final commercial negotiations will begin this month, with an attempt to finalize the agreements by year-end. Other firms participating in these ventures are BP, Royal Dutch / Shell, Phillips Occidental and Marathon. Leadership of Core Venture 3 was awarded to Shell, with participation by TotalFinaElf and Conoco.

Shell strikes another deepwater find

As operator of OML118 on behalf of Nigerian National Petroleum Corp. (NNPC), Shell Nigeria Exploration and Production made a second discovery 6.2 mi southwest of the main Bonga field. Bonga South-West was drilled in 4,084 ft of water to a TD of 13,645 ft³ It encountered substantial net oil sand. Initial evaluation indicates recoverable reserves could be large enough to form the basis for a new deep water development in OML118.

Kazakh oil flows again to pipeline

After an initial malfunction, oil resumed flowing through a new 990-mi pipeline that stretches from western Kazakhstan to Russia’s Black Sea port of Novorossiisk. The Caspian Pipeline Consortium link began to fill with oil in March, but flow was suspended in April to remove water from the pipes. In all, it has taken about three months to completely fill the link with oil. The first tankers were due to be loaded with oil at Novorossiisk at the end of June.

Putin installs new management at Gazprom

Following many calls to remove the current management of Russia’s gas monolith, Gazprom, President Vladimir Putin recommended that the firm’s board of directors select Alexei Miller, a trusted associate from his home town of St. Petersberg. Miller replaces the controversial Chief Executive Rem Vyakhirev, who, along with other senior managers (including former chairman and Russian Prime Minister Viktor Chernomyrdin), has been accused of stripping assets out of the company and placing them into entities controlled by family members. For more details, see International Politics.