EUROASIA: The South Stream Project Turns toward Greece

Greece joined the Russian-Italian South Stream yesterday. An agreement was signed on the construction of a section of the pipeline across Greece with a capacity of 10 billion cu. m. of natural gas per year. Russian Ministerof Industry and Energy Viktor Khristenko and Greek Minister of Development Christos Folias signed the agreement in the presence of Russian President Vladimir Putin and Italian Prime Minister and Greek Prime Minister Kostas Karamanlis.


Gazprom was forced to promise Greece a long-term contract for gas delivery with growing volume through 2013. Athens also retained the right to diversify its supplies with gas from Algeria and Turkey. Similarly to the agreements reached with Hungary and Bulgaria, Gazprom will form a joint venture with the Greek company DEPA to participate in South Stream. The agreement foresees tax benefits until the recoupment of the investment in the pipeline.

The South Stream pipeline will stretch from Russia to Italy with a 30-billion cu. m. capacity. It is to be completed by 2013. It will run for 900 km. under the Caspian Sea and branch out in Bulgaria, with one line leading to Greece and onward to the Italian city of Brindisi, and another line running through Serbia, Hungary and Austria or Slovenia to northern Italy. Putin acknowledged yesterday that the Greek prime minister “is a strict negotiator.” Greece receives 90 percent of its natural gas and 30 percent of its oil from Russia.

Source: The Moscow Times

EUROASIA: Azerbaijan blocks Russia's cargoes to Bushehr NPP

Azerbaijan customs authorities have ceased transfer of Russian cargoes for Iranian nuclear power plant in Bushehr, Iran. The cargoes have been blocked at Astara customs area on the Azerbaijani-Iranian border. Customs officers explain the situation by the lack of necessary shipping documents.

Meanwhile, a Russian AtomStroyExport JSC is holding negotiations with the customs officers and is hoping for the fastest solution of the problem. The company representatives are surprised with the situation since all the export procedures have been passed in due order. Besides, deliveries related to the project are exempt from all sanctions of UN resolutions regarding Iran.

Source: REGNUM

GEOPOLITIC: Iran - Pakistan to finalize peace pipeline project. Mahmoud Ahmadinejad

President Mahmoud Ahmadinejad said on Monday high ranking Iranian and Pakistani officials are to finalized Peace pipeline project soon. In an exclusive interview with Pakistan's state TV channel, the Iranian president referred to fruitful talks with Pakistani officials and expressed the hope that the legal issue of gas deal between the two countries would be resolved very soon.

Given historical, religious and cultural commonalities between Iran and Pakistan, he said, "I wished to visit Pakistani people and voice sincerity of Iranian nation to them but unfortunately and due to lack of time during stop-over, I could not find the chance to do so." The Iranian president once again condoled the Pakistani people over assassination of Benazir Bhutto and wished them success and prosperity.

He voiced satisfaction over his stop-over visit to Pakistan and his meeting with the country's president.

"During our short stay in the country, we had fruitful talks on issues of mutual interest along with regional and global developments," he said.

Tehran and Islamabad agreed to further bolster economic cooperation and joint investment mainly in energy sector, he said.

Iran is ready to transfer its technological know-how in industry and commerce to Pakistan, the president said adding that Iran regards Pakistan's developments and stability as its own. Iran spares no efforts to broaden ties with Pakistan and believes that through firm determination of both sides' high ranking officials, all-out relations between the two countries can expand.

Source: Islamic Republic News Agency

TECHNOLOGY: National Aeronautics and Space Administration opens a rotary wing research project

The U.S. space agency announced it is seeking research projects associated with its subsonic rotary wing project.

The National Aeronautics and Space Administration's Aeronautics Research Mission Directorate amended its original research announcement to solicit additional proposals to advance the state-of-the-art in engine compressor technology, transmission noise modeling, low-frequency noise effects and rotorcraft icing methodology.

Officials said the challenge is to "develop validated physics-based multi-disciplinary design and analysis tools for rotorcraft, integrated with technology development, enabling rotorcraft with advanced capabilities to fly as designed for any mission."

NASA said meeting that challenge will require innovative technologies and methods, with an emphasis on integrated, multi-disciplinary, first-principle computational tools specifically applicable to the unique problems of rotary wing aircraft.

Officials said they expect educational institutions, non-profit organizations and industry engaged in foundational research to become the primary award recipients of the project. NASA said additional information is available at www.aeronautics.nasa.gov

Source: United Press International

SUSTAINABLE: Biofuels frenzy. fuels global food crisis

A "biofuels frenzy" and other misguided policies have led to the global food crisis in which prices have soared and rice consumption is outpacing production, threatening a billion people with malnutrition, experts said Tuesday.

International agriculture researchers warned that farmers will need to double global food production by 2030 to meet rising demand, and said countries should impose a moratorium on grain-based ethanol and biodiesel to rein in skyrocketing prices for corn, rice, soybeans and wheat.

"For the first time, it's been clear that we are consuming more rice than we are producing globally," said Robert Zeigler, head of the Philippines-based International Rice Research Institute.

"That is eventually unsustainable," he told reporters on a conference call. "We have demand growth that continues unabated, and demand is driven by population (and) economic growth."

Joachim von Braun, director of the US-based International Food Policy Research Institute, cited "major policy failures" at the core of the crisis, in which recent price spikes have led to food riots, threats of starvation, and United Nation calls to lift export bans.

A key blunder was the ill-conceived response to high energy prices by promoting biofuels, experts said.

"We're all familiar with the biofuels frenzy that has distorted grain markets," said Zeigler.

He and von Braun both said they support a moratorium on grain-based biofuels but not on sugar-cane based fuels.

"If a moratorium on biofuels would be issued in 2008, we could expect a price decline of maize by about 20 percent and for wheat by about 10 percent in 2009 and 2010," von Braun said.

Billions of dollars have been poured into developing ethanol and biodiesel to help wean rich economies from their addiction to carbon-belching fossil fuels, the overwhelming source of man-made global warming.

Heading the rush are the United States, Brazil and Canada, which are eagerly transforming corn, soy beans and sugar cane into cleaner-burning fuel.

Some lawmakers have soured on the policies, with US Senator Kay Bailey Hutchison urging Congress to "reform its 'food-to-fuel' policies" which have diverted huge amounts of crop yields to biofuel production.

"Nearly all our (US) domestic corn and grain supply is needed to meet this mandate, robbing the world of one of its most important sources of food," said Hutchison, a Republican from Texas, in a statement on her website. Experts said another policy failure has been the imposition of export bans.

"More and more countries have closed their borders and thereby narrowed the international markets," von Braun said, citing as an example number-two rice exporter Vietnam, which has stopped new rice export contracts until late June despite a bumper harvest.

Zeigler said the crisis could cause 100 million people to slip back into poverty, while von Braun warned that high prices could force many more to limit food consumption, leading to drastic malnutrition particularly among children.

"The nutrition situation of the bottom billion of the world population is at risk when they are not shielded from these price rises," von Braun said.

Carlos Sere, who heads the International Livestock Research Institute, said a dramatic production boost is necessary to avoid a deeper crisis.

"We need to produce twice the volume of food by 2030, plus meet the challenge of fuel," Sere said, adding that new funding in research and development of resistant, higher-yield crop strains is critical.

"The technology currently on the shelf will not do the trick," he noted. Experts said current average annual yield increases of one to two percent are far below the three to five percent needed over the next 15 to 20 years.

"People felt the global food crisis was solved," Zeigler recalled, referring to technology breakthroughs that boosted yields in the 1970s and 1980s, "and it really fell off the agenda of funding agencies." "Obviously it was an extremely short-sighted view of the world."

Source: AFP

OiL PRICES: Oil Price Rise Fails to Open Tap

As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supplies would rise as producers drilled for more oil. But as prices flirt with $120 a barrel, many energy experts are becoming worried that neither seems to be happening. Higher prices have done little to suppress global demand or attract new production, and the resulting mismatch has sent oil prices ever higher.

That has translated into more pain at the pump, with gasoline setting a fresh record of $3.60 a gallon nationwide on Monday. Experts expect prices above $4 a gallon this summer, and one analyst recently predicted that gasoline could reach $7 in the next four years.

A central reason that oil supplies are not rising much is that major producers outside the Organization of the Petroleum Exporting Countries cartel, like Russia, Mexico and Norway, are showing troubling signs of sluggishness. Unlike Organization of the Petroleum Exporting Countries, whose explicit goal is to regulate the supply of oil to keep prices up, these countries are the free traders of the oil market, with every incentive to produce flat-out at a time of high prices.

But for a variety of reasons, including sharply higher drilling costs and a rise of nationalistic policies that restrict foreign investment, these countries are failing to increase their output. They seem stuck at about 50 million barrels of oil a day, or 60 percent of the world’s oil supplies, with few prospects for growth.

“According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the International Energy Agency in Paris. “They reduce demand and they induce oil supplies. Not this time.”

With global supplies tight, geopolitics continue to play a big role in pushing up oil prices. Oil futures closed at $118.75 a barrel, up 23 cents, on the New York Mercantile Exchange, after strikes by oil workers in Scotland and Nigeria that shut down nearly 1.7 percent of the world’s daily production.

Countries outside the Organization of the Petroleum Exporting Countries have been the main source of production growth in the past three decades, as new fields were discovered in Alaska, the North Sea and the Caspian region.

But analysts at Barclays Capital said last week that non-OPEC supplies were “seemingly dead in the water.” Goldman Sachs raised similar concerns last month, saying that growth in non-OPEC supplies “can no longer be taken for granted.”

At the same time, oil consumption keeps expanding. Global consumption is forecast to increase by 1.2 million barrels a day this year, to 87.2 million barrels a day, with much of the growth in demand coming from China, India and the Middle East, according to the International Energy Agency, a group that advises industrialized countries.

In the United States and through much of the developed world, the higher fuel prices have led drivers to reduce their consumption, and gasoline demand is expected to drop this year. But that drop will be more than offset by the rise in energy demand from developing countries. In the next two decades, demand is projected to jump by 35 percent, and developing countries will consume more oil than industrialized countries.

Higher oil prices mean record profits for oil companies that have, to some extent, masked the supply problems. ExxonMobil and Chevron are both expected to deliver knockout performances when reporting quarterly earnings this week, even as they struggle to increase production.

“What is disturbing here is that things seem to get worse, not better,” said David Greely, an analyst at Goldman Sachs. “These high prices are not attracting meaningful new supplies.”

The outlook for oil supplies “signals a period of unprecedented scarcity,” Jeff Rubin, an analyst at CIBC World Markets, said last week. Oil prices might exceed $200 a barrel by 2012, he said, a level that would very likely mean $7-a-gallon gasoline in the United States.

Some regions are simply running out of reserves. Norway’s production has slumped by 25 percent since its peak in 2001, and in Britain, output has dropped 43 percent in eight years. Production from the giant Prudhoe Bay field in Alaska has dropped by 65 percent from its peak two decades ago. In many other places, the problems are not below ground, as energy executives like to put it, but above ground. Higher petroleum taxes and more costly licensing agreements, a scarcity of workers and swelling costs, as well as political wrangling and violence, are making it harder to raise production.

“It’s a crunch,” said J. Robinson West, chairman of PFC Energy, an energy consulting firm in Washington. “The world is not running out of oil, but rather it’s running out of oil production capacity.”


Mexico, the second-biggest exporter to the United States, seems increasingly helpless to find new supplies to offset the collapse of its largest oil field, Cantarell. A combination of falling production and rising domestic consumption could wipe out Mexico’s exports within five years.

Foreign investment could help Mexico produce oil from deeper waters, but that is a controversial proposition in a country where oil has long been seen as part of the national patrimony.

Another country, Russia, is also a focus of analysts’ worries. Russia is not exactly running out of places to look for oil — a huge chunk of eastern Siberia remains unexplored — and the country has been the biggest contributor to the growth in energy supplies in the last decade.

But Russian energy officials warned recently that the days of stunning growth that followed the collapse of the Soviet Union were over, as the country focuses on stabilizing its output. Russia today produces about 10 million barrels of oil a day, up from a low of 6 million barrels in 1996.

The Russian government has been muscling Western companies to gain more control over its energy resources. That rise in energy nationalism could freeze new investment and slow any meaningful growth in supplies there for years.

As countries like Russia slow output, analysts say Organization of the Petroleum Exporting Countries will have to pick up the slack. The oil cartel accounts for 40 percent of the world’s oil exports and owns more than 75 percent of global reserves. But there are serious concerns that Organization of the Petroleum Exporting Countries will also find it tough to increase production.

Saudi Arabia, the world’s top oil exporter, is completing a $50 billion plan to increase capacity to 12.5 million barrels a day, but it signaled recently that it would not go beyond that. That means Saudi Arabia could fall short of the 15 million barrels a day that most experts had expected it to produce in the long run.

Organization of the Petroleum Exporting Countries’s 13 members plan to spend $150 billion to expand their capacity by five million barrels a day by 2012. But Organization of the Petroleum Exporting Countries will need to pump 60 million barrels a day by 2030, up from around 36 million barrels a day today, to meet the projected growth in demand. Analysts say that without Iran and Iraq — where nearly 30 years of wars and sanctions have crippled oil production — reaching that level will be impossible.

Not everyone is pessimistic about energy supplies. A study by the National Petroleum Council, an industry group that provides advice to the secretary of energy, concluded that the world still had plenty of petroleum resources that could be tapped.

In fact, high prices have set off a global dash for oil. Brasil, for example, has struck large offshore fields that could turn the country into one of the world’s top 10 producers. But developing new fields can take many years. To make up the shortfall, the world is also increasingly turning to fuels from unconventional sources, like biofuels or heavy oil. Canadian tar sands, for example, have attracted large investments.

But the International Energy Agency estimates that current investments will be insufficient to replace declining oil production. The energy agency said it would take $5.4 trillion by 2030 to raise global output. Otherwise, it warned that a crisis before 2015 involving “an abrupt run-up in prices” could not be ruled out.

Source: The New York Times|By JAD MOUAWAD

EUROPE: United Kingdom biggest oil companies report record profits

Royal Dutch Shell and BP, Europe's two biggest oil companies, Tuesday reported massive increases in profits during the first three months of this year, reaching a combined Pnds 7.2 billion (Dlrs 14.4 bn).

The increases by the United Kingdom 's top oil companies were higher than expected and are expected to reignite calls for a windfall tax on their excessive profits.

BP's pre-tax profits rose 48 per cent in the first quarter to Pnds 3.3 bn, while Shell increased its profits 12 per cent to a record Pnds 3.9 bn. The results come on the back of the soaring price of oil and petrol prices rising at their highest rate in three year, with unleaded petrol reaching a record average of almost Pnds 1.10 per litre. BP reported that its operations in the North Sea saw a large increase in profitability in the first quarter because of the high price of oil and despite declining United Kingdom production.

Shell's chief executive Jeroen van der Veer, said that good operating performance, combined with increased oil and gas prices, "offset the impact of downstream conditions in the first quarter."

Source: Islamic Republic News Agency

OiL FUTURES: Whose Oil Is the Benchmark?

It was announced last week that world oil prices had set another record. They were talking about the oil types that are traditionally considered the main ones – the American WTI ($119 per barrel) and North Sea Brent ($116). Lately Arab and Russian producers have entered the fray over whose oil is the benchmark, however.



Russian citizens are used to rejoicing at the news of rising oil prices. The authorities have already forgotten about the theory of Dutch disease, according to which the growth of raw materials exports ruins the economy. On the contrary, they point out that Russia has shown only high GDP and personal income growth with the rising oil prices, as well as a budget surplus, in which money for increased social spending has been found. The public observes the influx of petrodollars into Russia with satisfaction and assumes that it will have the opportunity to use that money. Indeed, they have that opportunity now. The stores are full of imported goods and they enjoy a vigorous demand. The authorities, though, are hinting that the public's petrodollar opportunities will be even greater, if only in connection with the reform of the stabilization fund and the theoretical possibility of using the accumulated funds for pensions. In any case, they tell the public about the fantastic of growth of the Central Bank's gold and currency reserves and create the impression that, with such reserves, the ruble will not collapse. Not only that, the plentiful reserves and good shape the budget is in convince them that Russian banks, with the state's help, will withstand the world credit crisis. Meanwhile, the public gives little thought to what the world oil prices are. Some know from newspapers and the television news that the main types of oil are the America WTI and North Sea Brent. They are the ones setting records. But along with WTI and Brent Russian Urals and Siberian Light are rising to, and Russia is becoming richer.

It is not really so simple. West Texas Intermediate and North Sea Brent are so far the main crude oils in the world. That is mainly because they are in the “sweet” category, that is, the are distinguished by their low level of sulfur, less than 3 percent, and their lightness, that is, they are not thick. Therefore, it is easier to make gasoline form them. The fact that the London ICE exchange trades in future on the deliver of Brent plays a big role too. London's role as the world's main financial center and the high liquidity of Brent futures has made that oil type world financial benchmark for decades. In recent years, however, WTI has been considered the benchmark and it futures sold on the New York NYMEX. It has somewhat higher quality than Brent and is sold in the United States of America, the world's main oil consumer. The quality of WTI and the strategic location of its sales has caused WTI to sell for $1-2 more per barrel than Brent. Obviously, when records have been set in recent years, it is WTI that has drawn attention – the most expensive type of oil was the first to pass the $90, $100 and $110 levels.



ICE Futures exchange and NYMEX compete fiercely. (The situation is complicated by the fact that the London ICE Futures exchange belongs to American investors.) ICE Futures exchange started trading in light American oil as well as Brent to undermine the position of WTI. In response, NYMEX began trade in contracts on Brent.

In February of last year, due to a fire at an oil facility in Oklahoma that served as a distribution point for WTI from Texas, local reservoirs received an excess of oil, and it fell sharply in price, confusing everything forever. WTI was then $6 cheaper than Brent. The fact that WTI is sold exclusively on the American market began to be seen not as an advantage, but as a fault. Leo Drollas, chief economist at the Center for Global Energy Studies, commented that everyone has seen now that WTI is a “local crude,” incapable of being the world's benchmark. Ed Morse, energy economist at the Lehman Brothers investment bank, called WTI a “broken benchmark” and said it was caught in the American trap, cut off from the world market, which is based on waterborne crudes.

Arab exporters of oil to the U.S. especially Saudi Arabia, expressed their discontent at the beginning of last year that the fall in price of WTI brought down the price of their oil as well.

The continually falling production of that type of oil also causes exporters to doubt that WTI can remain the benchmark. The same can be said for Brent, which now is delivered to be world market in only a few tankers a week. Experts doubt its place as well. At present, the production and export are increasing for thicker sour crude oil, with a higher level of sulfur, such as is produced in the Persian Gulf, Russia and Venezuela. That type of oil already accounts for 80 percent of world production. Last year, the question arose of what should be the price benchmark for the most widely distributed oil in the world. ICE Futures exchange and NYMEX undertook it to answer that question. The New York exchange organized the Dubai Mercantile Exchange, which opened on June 1, 2007, with the support of the United Arab Emirates and Oman, since Oman oil was chosen as its benchmark for sour crude. ICE Futures exchange tried to surpass its competitor and announced in April 2007 that it would begin electronic trading using its own benchmark for sour crude, called Middle East Sour Crude. David Peniket, president of ICE Futures exchange, stated that “We have designed this contract in response to customer demand for a better tool to serve their risk-management needs within the dynamic global crude market.”

Jon O'Neill of Hess Energy Trading Co. called the opening of the Dubai market a decisive step in depriving WTI of its benchmark status. Ed Morse said that an exchange like Dubai's could replace those in New York and London and create a benchmark that has real meaning.

This Entry Continues » »

Russian authorities, who long ago stated their intentions of setting the price on Russian oil without reference to benchmarks such as Brent, have developed the Rebco brand (which NYMEX even tried trading). Now they too are engulfed in the struggle to advance new price setters for sour crude (and thus create a world benchmark). A week ago, Russia remembered its ambition. It was decided at a meeting with Russian Prime Minister Viktor Zubkov to open the International Commodities and Raw Materials Exchange in St. Petersburg. It will be opened without NYMEX's cooperation and will operate independently. It will begin with trading in petroleum products.

As the struggle for a benchmark heats up, it is becoming less and less clear what currency to set oil price in. Last week, Iranian President Mahmoud Ahmadinejad announced that Iran will trade oil in any currency, except the dollar, since the dollar is now worth nothing. It can be recalled that, when Iran organized its own oil exchange in February of this year, Iranian authorities said they were ready to trade even in rubles, just so long as they do not trade in dollars. The rest of the OPEC countries are not refusing to trade in dollars. They mention the continually falling dollar as justification for the continually rising oil prices. Maybe prices are not rising, the oil exporters say. Rather, they are compensating themselves for their losses in exchanging the dollar into other currencies, mainly the euro, as they must to finance consumer imports from Europe.

It can only be concluded that oil is trading in the world not only in dollars, but in another, mysterious currency called the “continually falling dollar.” Pricing in the latter is completely arbitrary.

Thus, a strange picture is emerging. Price records are being set by oil brands whose value is dubious, and in a currency that is no less questionable. The records themselves look suspicious. As oil price rose, the world lost any unity. Every oil producer not only wants to place oil production under the control of it authorities to the greatest extent possible, it also wants advance its oil as the benchmark for the whole world. The situation could eventually lead to full oil independence. Prices could go in opposite directions with no benchmark acknowledged. Oil will become cheaper in one country and more expensive in the next.

A Short Course in Oil Refining
Since oil production began in the 19th century, industrialists have been identifying the differences among the contents of oil from different fields (including sulfur content) and developing the technology for its refining. In a technical encyclopedia published in Russia in 1904, it states “The valuable characteristics of oil and its various distillates first became known in 1860, when the first large fountain of liquid petroleum was opened from a well drilled near Titusville, Pennsylvania. In the course of that year, up to 600,000 tons of oil were extracted… Refining of crude oil involves the fractional distillation at an ever growing temperature and the condensation of products of distillation in special refrigerators. The distillation apparatus consists of vats resembling those of steam boilers lined up in sequence… In the latest equipment, 10-12 vats make up a battery. Crude oil enters one vat and passes from one vat to the next to the end of the battery. The vats are heated with steam… and the temperature continually rises from the first vat to the last. The products of distillation from the first two vats of the battery are collected together and are sold under the name “gasoline.” The products of distillation from the second two vats constitute benzine. The products of distillation from all the remaining vats are collected together and that mixture is called “kerosene.” It consists of all products whose boiling point is higher than that of benzene but lower than 230 degrees Celsius (the temperature in the mixture in the last vat). Gasoline is used for lighting and as a solvent in the rubber industry for diluting tar. Benzine has the same uses and is uses for dry cleaning linens… The residues from the distillation of petroleum is sold as a good fuel for steamships and locomotives… These residues are called fuel oil, and they comprise up to 65 percent of the raw product of Baku petroleum.”


Consequently, it became known that benzine was good not only for removing stains from clothing, but as a fuel for internal combustion engines, and kerosene ceased being the most valuable petroleum product with the introduction of electric light. Cracking technology was introduced in the 1930s. It uses high temperatures, pressure and catalyzers to produce benzine and hydrocarbons used for petrochemicals. In the United States in 1920, refining one 42-gallon barrel of oil (1 gallon = 3.78 liters) produced 11 gallons of benzine. Now a barrel of oil produces 21 gallons of benzine.

Source: Kommersant| by Sergey Minaev

OIL COMPANIES: Business transparency group critical of ExxonMobil

An anti-corruption group has rated more than 40 energy companies on the transparency of their dealings, handing a low grade to ExxonMobil but praising Shell and Petrobras. The Transparency International report published today places 42 oil and gas companies into three tiers based on their level of transparency in revenue disclosure.

The group used publicly available records to measure companies' payments to host governments, their operations and contributions to corporate anti-corruption programs.

Royal Dutch Shell PLC, Brazil's Petrobras, Norway's StatoilHydro ASA and PetroCanada were among the best performing companies. Irving-based ExxonMobil Corp., Russia's OAO Lukoil and the China National Offshore Oil Corp., known as CNOOC, fell into the lowest tier.

Companies were placed in the lowest tier for disclosing information only by geographical segments and providing almost no additional information.

"Information is crucial, it's fundamental for civil societies to request information on where the revenue from energy extraction is going to and coming from," said Juanita Olaya, who manages the program that came up with the report. "They need to disclose more on payments," Olaya said of ExxonMobil. She said the company was "taking important steps" in its anti-corruption program, but needed to do more.

ExxonMobil said it was working to establish transparency agreements with governments where it had significant investments, including Chad, Azerbaijan, Kazakhstan and Nigeria. The company said in a statement that it was "committed to honest and ethical behavior" and "constructively participates in transparency and anti-corruption programs."

BP PLC, Chevron Corp., ConocoPhilips, Eni SpA and Total SA were in the middle tier of companies that disclose revenue by geographic region and which the report said could improve by giving a country-by-country breakdown.

Companies placed in the highest tier disclose payments systematically on a country-by-country basis or in a few select countries and go beyond the mandatory reporting regulations.

"These top performers, which include some of the world's largest corporations, can act as role models for the industry as a whole," the report said. "The high level of transparency demonstrated by these companies proves that secrecy is both morally and commercially indefensible."

Transparency International said the report aimed to help fight the "resource curse" — oil can generate great wealth for a country, but if poorly managed can also discourage the development other areas of the economy, spur corruption and trigger conflict. The report said that if 10 percent of the estimated $866 billion generated worldwide in oil revenues in 2006 was set aside, it would have been enough to cover the total cost of meeting the United Nations' Millennium Development Goals. The cost of meeting the set of development standards on education, health, literacy and poverty was estimated at $73 billion in 2006, the report said.

Source: Associated Press

GEOPOLITIC: India, Iran to Discuss Pipeline. Ignoring US Fears

Indian Prime Minister Manmohan Singh and visiting Iranian President Mahmoud Ahmadinejad will attempt to hammer out an agreement today on a delayed gas pipeline through Pakistan, dismissing U.S. fears the project may finance the Middle Eastern nation's nuclear program.

``There will be a proposed review that will be taking place which will discuss the price, review the price, certification and project structure,'' Manu Srivastava, director at the Ministry of Petroleum, said in a telephone interview from New Delhi yesterday. ``There are a lot of issues to be resolved.''

India and Pakistan need natural gas from Iran, with the world's second-largest reserves of the fuel, because a shortage of energy will curb economic growth. India last week rebuffed U.S. calls to push Mahmoud Ahmadinejad to end Iran's nuclear program.

``The success of the pipeline will depend on what cost the gas is made available at to the customers,'' said R. Venkatesan, head of the industry division at the New Delhi-based National Council for Applied Economic Research. ``If you take political considerations it is not worth it.''

India and Pakistan are resisting U.S. pressure to end talks on the pipeline, which they want to complete by December 2012 after a decade of delays. The Bush administration says Iran's nuclear program may be a cover for building weapons, a charge which the Islamic republic denies.

U.S. Concerns
The U.S. would ``counsel against'' the pipeline plan, State Department spokesman Sean McCormack said at a briefing in Washington yesterday.

``Given where Iran is in the international system, being under sanctions, and given its actions within the international system, is now really the time to conclude a pipeline deal with the Iranian government?'' he said.

The U.S. raises issues of international concern over Iran's behavior in areas including ``terrorism and their destabilizing actions in the Middle East,'' McCormack said.

Mahmoud Ahmadinejad is slated to meet his counterpart Pratibha Patil and Singh to discuss ``issues of mutual interest,'' the Ministry of External Affairs said in a statement posted on its Web site.

The pipeline's prospects will hinge on the pricing. India hasn't been able to agree with Iran on the price for the gas or the fees it will pay Pakistan for transporting the fuel, according to the Iranian Oil Ministry.

Gas Demand
``India is a market short of gas. The key question is how much gas at what price,'' said Nagarajan Narasimhan, head of research at Crisil Ltd., the Indian unit of Standard & Poor's. The Indian government may also seek assurances about the pipeline's safety across international borders, he said in a telephone interview from Mumbai.

Oil ministers from India and Pakistan agreed on the principles of the project, they said on April 25. The South Asian neighbors resumed talks on the 2,100-kilometer (1,300-mile) pipeline a month after a newly elected government led by Prime Minister Yousuf Raza Gillani took office in Pakistan.

Ministers discussed the transit fees, transportation costs and project structure, Srivastava said. ``There is a greater agreement on that,'' he said. ``We will be proceeding.''

The pipeline will in the first phase transport 30 million cubic meters of gas each to Pakistan and India and 45 million cubic meters each in the second stage.

India's current gas supplies of 85 million cubic meters a day, including imported liquefied natural gas, fall short of the potential demand of 170 million cubic meters, according to government estimates. Demand may quadruple to 400 million cubic meters a day by 2025 if the economy grows at the projected rate of 7 to 8 percent a year, the government says.

New Delhi Visit
Mahmoud Ahmadinejad will arrive in New Delhi at 4:30 p.m. local time from Sri Lanka's capital, Colombo, and leave for Iran at 9 p.m., the Indian External Affairs Ministry said. Mahmoud Ahmadinejad and Pakistan's President Pervez Musharraf ``resolved all issues'' related to the pipeline project when they met yesterday in Islamabad, the official Associated Press of Pakistan reported.

In Sri Lanka, Mahmoud Ahmadinejad signed six agreements with his counterpart Mahinda Rajapaksa, including one for providing financial assistance for the expansion of the Sapugaskanda oil refinery, an e-mailed release from the government said.

Source: Bloomberg|by Jay Shankar

MIDDLE EAST: Iraq boosts oil export to Turkey

Iraq is pumping 430,000 barrels of oil per day from Kirkuk to Turkey through pipelines in the north of the country, an Iraqi official says.

Iraq has been pumping this volume of oil to Turkey since March 17, the unnamed Iraqi official was quoted by Reuters as saying. Oil exports to Turkey via the line have increased since last summer. The flow of oil through the pipeline halted in 2003 after the occupation due to sabotage attacks and technical failures.

According to the official, Iraq's oil export to Turkey is currently steady and stands at nearly 18,000 barrels per hour.

Turkey now boasts oil reserves of nearly 4.5 million barrels at its Ceyhan terminal along the coast of the Mediterranean Sea, the official concluded.

Source: PressTV

OPEC: Falling dollar to push oil to $200

OPEC's President Chakib Khelil has warned the falling value of the US dollar will drive up international oil prices to $200 a barrel.

"Questioned about a possible rise which would go to $200, the minister (Chakib Khelil) did not rule out this eventuality, explaining that this rise is indexed from now on to the fall in the dollar or to the rise in the dollar," Algerian newspaper El Moudjahid wrote, Reuters reported.

"The prices are high due to the fact of the recession in the United Sates and the economic crisis which has touched several countries, a situation which has an effect on the devaluation of the dollar, and therefore each time the dollar falls one percent, the price of the barrel rises by $4, and of course vice versa," Khelil, also the Algerian Energy Minister said.

He predicted that if the dollar increases by 10 percent, the prices will fall by 40 percent.

"But I don't think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years," he concluded.

Source: PressTV

AFRICA: Hyperdynamics' new seismic confirms giant structures in West African oil and gas concession

Hyperdynamics Corporation says that as its 2-D data acquisition continues offshore Guinea, new seismic lines are already providing geophysical confirmation of the most significant play types along the West African Transform Margin play where as many as 40 discoveries have been made in the last few years. Hyperdynamics Corporation is engaged in a targeting process with its currently working 2-D seismic acquisition program offshore The Republic of Guinea, West Africa. New 2008 seismic lines are now becoming available for comparison with both the Company's 2002 and 2003 seismic data. This comparison is allowing the geo-science team to confirm and enhance critical aspects of many leads that had been initiated with the older seismic.

The Company's geoscientists continue to build a portfolio of stratigraphic-type plays within the Upper Cretaceous section of the Shelf/Slope region of its concession. The targets in the Upper Cretaceous zone consist of turbiditic slope-fans and mounds which are the type of structures in which several oil and gas operators have already made many discoveries along the West African coast. Newly acquired seismic lines have already added support for many of these previously identified targets of interest.

Additionally, with the new 2008 seismic data starting to be received, confirmation has been made of the deeper, very large structural traps being delineated within the Lower Cretaceous section, and further evidence now exists to support the immense size of these structures. Previously disclosed in the last few months, the Company had identified a structure 16 kilometers across. At this time, an adjacent structure has been delineated further that is estimated to be 17 kilometers long and approximately 8 kilometers wide.

The combined size is estimated at approximately 33 kilometers by 8 kilometers. Over the next few months many new leads are expected to be identified at the same time existing leads will be high-graded and confirmed. With the additional reconnaissance provided by the current 2008 2-D acquisition, the preliminary 3-D seismic grid, laid out this last winter, can be customized to cover the most interesting prospects that are believed to have the greatest potential for world class reserves. The Company looks to acquire the first 3-D seismic in history offshore Guinea later this year. Once this 3-D can be acquired, processed, and interpreted, the Company expects to have a significant portfolio of prime drillable prospects ready to drill.

Source: Scandinavian Oil and Gas

[ASIA] The price of Azerbaijani gas will rise significantly. Liana Dzhervalidze

"The gas tariff for individuals and legal entities will vary depending on whether Azerbaijani side will raise price up to $200 per 1000 cubic meters instead of current $120". The due announcement was made by expert on energy issue Liana Dzhervalidze at a press conference held in the Tbilisi international press center of RIA-Novosti on April 23.

"Hopes that the gas price will remain on the level of $120 are too optimistic. I think the price will rise significantly", the expert considers.

She noted that "Azerbaijan tends to enter the European market." "For this purpose, it is important for us as a transit country, considering the Baku-Tbilisi-Erzirum gas pipeline", she noted.

Liana Dzhervalidze also stressed the need to boost prospects of long-term contracts for gas consumption betwee the suppliers and large consumers, not depending on distributors.

She also called it revolting that the "state holds talks on prices and volumes of gas supplies for 2008 in April of 2008".

Malkhaz Dzidzikashvili, public defender of rights of energy consumers under the National Commission for Energy Regulation, also shared Dzhervalidze's opinion.

He sees the main problem in the absence of tariff as well as energy-saving state policy.

"We have some comments regarding the methodology as it has been worked out nearly 10 years before. Most standards have become worn out through this period. In line with current methodology, gas price depends on purchasing price", said he.

He noted that "he does not know the price of gas, supplied to Georgia from Russia".

According to Liana Dzhervalidze, Georgia currently receives up to 200,000,000 cubic meters of gas from Armenia and about 300,000,000 cubic meters in the framework of the Shah Deniz project.

She said Georgia receives gas from Armenia as well as 5% from transit from the Shah Deniz field, as a payment for gas transit to Europe. The expert reminded that SOCAR is currently the main gas supplier from Azerbaijan, while Russia accounts for nearly 60% of gas supplies to Georgia.

It should be reminded that the talks between Azerbaijan and Georgia on gas purchase will be held in Tbilisi on April 25.

Source: Today.AZ

OPEC: Organization of Petroleum Exporting Countries, Won't Boost Output Amid Record Oil. Chakib Khelil

Organization of Petroleum Exporting Countries won't consider increasing crude output before September, even amid investor concern that record oil prices may cause a global economic recession, according to the group's president, Chakib Khelil.

``OPEC will not increase crude oil output,'' Khelil, who is also the oil minister of Algeria, said in an interview today in Algiers. ``Supply is more than sufficient in the international market. Prices are not the consequence of demand and supply, they are the consequence of speculation.''

The Organization of Petroleum Exporting Countries, which controls more than 40 percent of the world's crude supply, doesn't meet again until Sept. 9 to review its production ceiling. Khelil said there was no plan to meet before then.

Crude oil rose to a record $119.90 a barrel on April 22 on the New York Mercantile Exchange, as the dollar dropped to all- time low against the euro, prompting investors to buy commodities as a hedge. The contract settled at $118.52 on the last trading day of the week yesterday.

The 13-member Organization of Petroleum Exporting Countries decided to keep output quotas unchanged at a meeting on March 5. The group produced 32.3 million barrels a day in March, according to Bloomberg estimates.

Volatile Prices
Khelil said the surge in oil prices was not responsible for slowing world economies. ``If there is an economic recession in the U.S., it is due to the subprime crisis,'' he said today.

On April 21, OPEC Secretary-General Abdalla El-Badri said in a Bloomberg Television interview in Rome that prices would probably remain volatile for the next seven months, adding OPEC would not meet formally before September. ``When we look at supply, we don't see a shortage,'' he said.

Venezuela, the largest crude-oil producer in Latin America, doesn't expect the price of oil to drop below $90 a barrel any time soon, Energy and Oil Minister Rafael Ramirez said April 21 at the International Energy Forum in Rome. He also said OPEC should not change its current output levels.

Nobuo Tanaka, the head of the International Energy Agency, on April 22 said a global recession is ``a possibility.'' International Monetary Fund First Deputy Managing Director John Lipsky on April 21 said current prices would remove up to 1 percentage point from global growth.

Source: Bloomberg|By Ahmed Rouaba and Maher Chmaytelli

[ASIA] Shah Deniz gas prices to change. Azerbaijan

Prices on gas produced from Shah Deniz field in Azerbaijan will change beginning from April 15. The due announcement was made by SOCAR vice president Elshad Nasirov on Wednesday.

"Beginning from April 15 of 2008, all volumes of natural gas, supplied to Turkey from Shah Deniz gas condensate field, will be sold by new price. The talks are currently held with Turkish partners but the time of completion of talks is not known. Anyway, beginning from April 15, the price on gas will change regardless of terms of talks", the vice president noted.

"New price for Azerbaijani gas will be calculated by a new formula. He said the price limit will not be set while establishing a new price as it has been made earlier. While concluding the agreement on gas sale and purchase with Turkey, the lower limit was set in the amount of $70 per 1000 cubic meters and the upper limit $120 per 1000 cubic meters", noted he.

Source: Today.AZ

NORWAY: StatoilHydro wins royal assent for Morvin

The Norwegian goverment has approved the NOK 8.7 billion ($169-million) development of StatoilHydro, Eni and Total's Morvin field in the Norwegian Sea.

The "high-pressure, high-temperature" field will use some of the same area export pipeline as the Kristin field to the south and the Asgard field to the southeast. Two well templates on the seabed will tie back to and boost the tail-end production of the Åsgard B field. The project is operator StatoilHydro's first new development since the Statoil-Hydro merger.

Technology developed for the high-pressure Kristin field will be used at Morvin, which will produce 47 million barrrels of oil and 3.3 Bcm of associated gas, starting in 2010.

Source: Scandinavian Oil and Gas

MIDDLE EAST: Iraq. The International Oil Companies qualify for bid round

Iraq's oil ministry has qualified thirty five international oil companies (IOCs) to bid for its first post-war licensing round, which it hopes to launch in May 2008.

The list of IOCs, compiled by the oil ministry's Petroleum Contracts and Licensing Directorate and obtained by Platts, includes US and European oil and gas majors as well as Russian, Chinese, Korean and Japanese companies. More than 120 international companies submitted expressions of interest and the ministry document says some would be considered for future licensing awards.

"The Petroleum Contracts and Licensing Directorate will continue updating the process of qualifying companies, especially those that did not pass, by updating their information with the view to allowing as many as possible of the IOCs to participate in the next Licensing Rounds (following the First Round)," the document states.

The list excludes companies such as Austrian OMV and Norway's DNO, which angered Baghdad by concluding production-sharing agreements with the Kurdistan Regional Government on the basis of a hydrocarbon law approved by the Kurdish parliament without central government approval.

The Iraqi oil ministry in Baghdad decided to forge ahead with the further development of Iraq's oil fields without waiting for a federal hydrocarbon law, which has failed to win the approval of all three main sectarian groups in Iraq, the Shiites, Sunnis and Kurds.

Iraq's oil reserves, estimated at 115 billion barrels, are second only to Saudi Arabia's. But much of the country remains unexplored and its producing fields are suffering from a lack of investment as a result of decades of war and UN sanctions.

Iraq's oil production averaged 2.181 million b/d in 2007, oil ministry figures obtained by Platts showed. This is below the average 2.8 million b/d achieved in the final three months before the US-led war of 2003 and far below the country's potential.

The Iraqi oil ministry is negotiating separately with foreign oil companies on short-term technical service agreements as a stop-gap measure to boost production capacity from major producing fields.

It had hoped to sign agreements with multinationals in April but the talks appear to have stalled as the oil majors sought to link the Technical Support Contracts (TSCs) to longer-term contracts.

Source: Platts|

MIDDLE EAST: Iraq. Security environment the key element

While the lack of a settled fiscal and legal regime governing oil contracts in Iraq represents a major uncertainty, as does the ability to improve internal infrastructure, the security environment remains the key element in whether technical service agreements can be translated into real action on the ground

The negotiations for oil contracts are likely to be conducted outside of Iraq, mainly in Jordan. As there will be practically no security risks during this process for international oil companies (IOCs), the question is what will the Iraqi political and security environment be like post-2009? In December 2007, the US military warned that despite a drop in violence, there is still no place in the country that is safe from attack by extremists.

"We have made no projections of peace at hand. We realize that security is very fragile and that at any moment any attack could occur at any place in Iraq," military spokesman Rear Admiral Gregory Smith said.

With a drawdown expected in US troop levels from summer 2008 and possibly a more radical change in US policy hinging on the year's US presidential election, companies will have to consider whether the recent improvements in security represent more than just a holding operation.

The US government has been relatively upbeat in its assessment of progress in stability and security in Iraq over the course of 2007, but there can be little doubt that the country remains in a highly fragile state.

Assessing the US Department of Defense's latest report on Measuring Stability and Security in Iraq, Anthony Cordesman of the Washington based Center for Strategic and International Studies had some serious reservations about recent progress.

Cordesman argues that Iraq's stability will require years of sustained US effort, writing that "2008 cannot be a decisive year in building stable accommodation, only a beginning."

Despite some legislative progress, Cordesman says "there are no timelines, for tangible action to either legislate major progress towards accommodation or to actually implement it."

Referring to the Department of Defense's assessment of internal tensions, and highlighting the weakness of Iraq's central government, he writes, "there remains a strikingly unrealistic contrast between the regional tension . . .and the data on provincial security transition assessment.

The provinces shown as "transitioned" or "ready for transition" are all either under the de facto control of the Kurdish Pesh Merga or competing Shi'ite factions in the south, and not transitioned to real world Iraqi Security Forces (ISF) responsibility or central government control.

This highlights a critical apparent gap between the plans for accommodation and the plans for developing the ISF."

Threats to security and stability

These concerns appears to be borne out by current events. The southern city of Basra saw an outburst of renewed violence at end-March as the ISF took on local militias in an attempt to control the city.

This battle is a major test of the reconstituted Iraqi army and the central government's ability to impose control on virtually lawless areas of Iraq.

In Baghdad, clashes have been reported between Iraqi and US forces and militants of the Mehdi army, led by Shia cleric Moqtada Sadr, who has called for a campaign of civil disobedience.

This raises the question as to whether the US military surge has had anything but a temporary impact on security. A major success, according to the US Department of Defense has been the 'tribal awakening movement' or 'Concerned Local Citizen' ('CLC') program, which is proving "crucial to the counter insurgency effort."

Cordesman notes this is a critical risk area for 2008, arguing that the unplanned Sunni uprising against Al Qaeda has been the real key to improvements in security. Any cuts in US forces will increase the dependence on the success of the CLC program.

The US Department of Defense itself recognizes the importance and risks attached to the CLC program, writing in its report, "the slow pace of integrating the CLC members into Government of Iraq institutions, lack of alternative employment and fears by the Maliki government that these forces may return to violence or form new militias are of concern

. . . Shi'a extremist and criminal activities have become growing threats to security and stability as the role of insurgents and Al Qaeda in Iraq wanes. The conflicts among communal groups for political power and resources continue."

It would appear that as nearly all foreigners in Iraq are currently either military or paramilitary personnel, the US surge has engendered a false sense of security. Iraq's regional and ethnic divisions are only being held at bay.

If IOCs do start work on the ground, there will be a much larger number of less well-protected foreign targets.

It would be very difficult for long-term service contracts to be run remotely or by proxy with contracting companies. If security cannot be guaranteed then major foreign investment in Iraq's oil industry is unlikely. It is possible that IOCs will take on more risk than they might normally assume because of the size of the oil resources at stake.

In addition, they are well aware that competitors, in particular state-owned Asian oil firms, have shown a larger appetite for risk in other countries.

With a drawdown of US forces in sight, discussions on a new licensing round may prove of little significance, if Iraq's central government cannot bring the regions under its control.

IOCs will be keen to keep the door to Iraq's oil riches open, but will be unlikely to commit resources until a safe operating environment can be established. Given that the prospect of an improved security situation remains a medium to long-term prospect, this suggests there will be no rush to conclude negotiations taking place in the calm provided by Jordan.

Source: Platts|

MIDDLE EAST: Iraq. The year of transfer?

Iraqi oil minister Hussein al-Shahristani said April 23 that the recent government crackdown in the southern oil hub of Basra had been a success and had created a safer environment for the oil industry.

Shahristani, speaking to reporters on the sidelines of the International Energy Forum in Rome, said that Iraq was making progress in raising production from northern and southern oil fields and hoped to be producing 2.9 million b/d, up 400,000 b/d over current levels, by the end of the year. "That is why we are confident that we can increase our production, both in Basra and in Kirkuk beyond our current production of 2.5 million b/d. Our aim actually by the end of the year is about 2.9 million b/d..."

The Iraqi oil ministry has been negotiating with foreign oil companies on short-term technical service agreements, which accordingly to Shahristani were meant to provide a short-term fix to increase production capacity until Iraq was ready to sign longer term development contracts.

The fact that Iraq had succeeded in the interim in raising production by nearly 400,000 b/d in the last six months meant any further delay would render the Technical Support Contracts (TSCs) irrelevant.

"We are planning to increase by another 500,000 b/d by the end of the year or early next year and this is giving us what we are planing to get through the technical service agreement," he said.

"If there are going to be delays, and the delays are not due to the Iraqi side, then the relevancy of these technical support agreements will be in question," he said, explaining that the technical services agreements were meant to help Iraq raise production by 500,000 b/d in the immediate future.

"That is why we have told the IOCs, those who are interested to go ahead, that they are losing time. June itself is a bit late and whoever is not ready by then, we might not really require technical service agreements," Shahristani said, adding later that they might be dropped altogether. "We may drop them if they are not signed soon, yes," he said.

Companies negotiating technical service agreements include: Shell, Total, BHP Billiton, ExxonMobil, Vitol, Anadarko and Dome Energy.

Shahristani said the oil ministry hoped to launch an international licensing round for brownfield oil fields and a few gas fields, including the giant Akas gas field, in the summer.

"The first licensing round is going to go ahead as quickly as we can get it through the procedures and we are planning to announce a call for bids by this summer," he said.

Despite this significant advance in turning around the fortunes of Iraq's oil industry, the reality is that a totally safe operating environment in Iraq remains a distant prospect.

The US military 'surge' launched in February 2007 has met with some success, improving the security situation and facilitating a rise in Iraqi crude production (see chart on Iraqi monthly oil production), which has in turn bolstered the government's finances.

In Q1 2008, the total oil production for the country averaged 2.4 million b/d, close to 250,000 b/d higher than the 2007 average of 2.181 million b/d.

This figure is some way short of the 2.85 million b/d average achieved in the final three months before 2003's US-led invasion and still remains far below the country's potential (see chart on Iraqi oil production).

The substantial increase in the average daily production rate from Iraq's northern oilfields, including the giant Kirkuk field, climbed to a post-war high of 619,000 b/d in March, up 180,000 b/d from the previous month, Iraqi ministry of oil figures obtained by Platts showed.

But this is still substantially below the pre-war average of 870,000 b/d.

Exports from the north averaged 320,000 b/d in March 2008, 74,000 b/d lower than February, and 1.598 million b/d from southern Gulf terminals, 56,000 b/d higher than in February.

Iraq's oil ministry figures also showed that production from southern fields fell to 1.796 million b/d in March 2008 from 1.905 million b/d during February.

It is unlikely that production will increase in the southern fields from current levels of 1.9 million b/d, due to the need for incremental work of drilling and of reservoir management, which would take months to implement under present circumstances and is largely dependent on the ongoing security situation. The March 2008 figures also showed that Iraq exported 1.918 million b/d, down from 1.936 million b/d in February.

Iraq's potential too big to ignore
Investing in a factionally, ethnically and regionally riven country in which institutions and the rule of law are weak and which depends on an outside force for its stability is never going to look like a great proposition, but IOCs know that Iraq's potential is simply too big to ignore.

Iraq offers world class hydrocarbon resources that make it perhaps the last bastion of 'easy oil' on earth open to foreign investment. Proven reserves are estimated at 115 billion barrels of oil with low extraction costs.

Tariq Shafiq, director of Petrolog and Associates, and a member of the team charged with drafting Iraq's subsequently amended petroleum law, estimates the finding and development cost of Iraqi oil at just $0.5-$1.0/barrel and the operating costs at $1-$2/barrel, although costs may be inflated by security requirements and rising oil field equipment prices.

As a result, it is not surprising that a large number of companies contested to be qualified in the first post-war licensing round. Iraq represents such a big opportunity that IOCs cannot afford not to be involved.

Technical service contracts (TSCs) represent a foot in the door, with the possibility of much more lucrative exploration and production ventures in the longer term.

According to the Centre for Global Energy Studies' (CGES) recent study, Hydrocarbon exploration and field development in Iraq, new known fields in Iraq could support a plateau of 3.8 million b/d in addition to current output of about 2 million b/d, but this will not be realized soon.

Iraq's current production export facilities can handle up to 3.5 million b/d. This implies that a rise in existing output could be accommodated, but realizing the long-term potential of Iraq's reserves - output between 6-9 million b/d - would require major investment in new export infrastructure.

CGES forecasts Iraqi output of 2.146 million b/d in 2008, rising to 2.385 million b/d in 2009 and 2.692 million b/d in 2010 (see table on Oil production and export forecasts).

An important caveat is the contribution of the northern oil fields, where security issues have reduced capacity to 30-40%.

An improved security situation could result in an increase in production of 500,000 b/d, says CGES. An additional factor will be the success of service contracts negotiated with the majors. In the north, capacity is not a problem so long as the security of the Iraq-Turkish crude pipeline can be maintained. In the south, the current export system and the Gulf terminals are barely sufficient to export at current levels.

Raising export capacity here from it's present level of around 1.7 million b/d to 3.0 million b/d would require the development contracts to include the rehabilitation of Sea Lines and the Khor Al-Amaya export terminal, the installation of extra storage tanks and pumping units, as well as pipeline system development, including the upgrading and completion of the second internal strategic pipeline.

Source: Platts|

INDIA: Start a disciplined investment plan early

Once, a king, extremely pleased with his wise and able minister, said: “What would you like as a reward? Ask and it shall be granted.” The minister knew he couldn’t sound greedy but at the same time, in his 15 years at the royal court, the old king had never been so generous. The minister replied humbly: “Your Highness, it has indeed been an honour to serve you at your court for all these years. That itself is my reward.”

The king was pleased with his humble servant. But he insisted. The minister, after much hesitation, replied softly: “Your Highness, I request you to give me a grain of rice.” The king said: “Minister, now you are wasting my time. I insist you ask for your reward, else I’ll have you thrown in the dungeons.” The minister replied humbly: “Your Highness, if you insist, then I shall accept the rice every day for the next two months. Starting with one grain of rice tomorrow, the quantity can be doubled each day over the previous day for the next two months.”

The king was amused but he decided to play along. At the same time, he was impressed with his minister’s selfless bend of mind. He mentally patted himself for being able to cultivate such loyal selfless employees. Hence, from the next day onwards, the supervisor of the royal granary had one grain of rice delivered to the minister’s house. On Day 2, two grains of rice were delivered. On Day 3, when the supervisor delivered three grains of rice, the minister corrected him and said that he was given one grain short; the double of the previous day (Day 2, two grains of rice) was four and not three. The supervisor smiled and noted the error. “Anyway, what difference does it make to this man or the royal granary,” he thought to himself.

On Day 21, the granary supervisor paid a visit to the king. He had come to warn the king of a possible food shortage in the kingdom in coming month or so. “Why will that happen,” the king wanted to know. The last he heard was that the granaries were full and would last through any eventuality. The supervisor, with his eyes downcast, said: “It’s the reward you bestowed on the minister, Your Highness!” The king had almost forgotten about that ‘joke’.

The supervisor explained: “Sir, the average weight of a grain of rice is 0.30 grams. As per your orders, today, the minister had to be given, 10, 48,576 grains of rice which works out to 315 kg by weight. At the end of two months (60th day), we would have to give the minister 865,435,910,144 metric tonne of rice, keeping in mind his wish of getting double the amount of rice from the previous day! Our godowns don’t hold that much foodgrain.”Shocked, the king realised that he had been brought to the brink of bankruptcy by his wise minister and that too at his own insistence.

For those seeking a lesson out of this chapter on geometric progression, its an oft-given advice by your financial planner. Start investing regularly and start now.

The point that needs to be driven home is not the size of your regular investment, but its commencement. So many of us have put off starting out on an investment plan just because we thought the amount we could spare towards our savings after meeting all expenses would not be worth the effort. The bottomline is: probably years have gone by without making a start. (Showing you the difference made to your corpus at the age of 60, if you had started investing at the age of 25 or 30, is not something we will waste your time with.)

In the above story, the king had been subjected to the compounding effect of a mathematical geometric progression. In the case of investments, though we wouldn’t be that lucky so as to have our money doubled every day, nonetheless one can see the benefits of compounding over a longer term, say over the years.

A sum of Rs 10,000 invested for 35 years growing at 15% pa compounded yearly will grow to more than Rs 13 lakh. A sum of Rs 10,000 invested every year for 35 years grows to more than Rs 1 crore in nominal rupees at the same rate. So, start your disciplined investment plan with your grain of rice today.

Source: The Indian Economic Times

WESTERN HEMISPHERE: Canada would dig in heels over NAFTA, Harper warns

Prime Minister Stephen Harper issued a warning yesterday to future U.S. leaders wanting to renegotiate the North American free-trade agreement, saying Canada would drive a tougher bargain because of its position as America's biggest energy supplier.

Mr. Harper made the comments at the end of a meeting with U.S. President George W. Bush and Mexican President Felipe Calderon, where the three leaders defended NAFTA against attacks from Senators Hillary Clinton and Barack Obama as they seek to become the presidential candidate for the Democratic party.

Asked whether it might not be a bad idea to rethink certain aspects of the deal, Mr. Harper said he was ready for any eventuality, but warned that Canada was in a stronger position than when the Canada-U.S. free-trade agreement was negotiated during the 1980s.

“We are a secure, stable [energy] supplier. That is of critical importance to the future of the United States,” Mr. Harper told reporters at the end of the North American leaders' summit known as the Three Amigos. “If we have to look at this kind of an option, I think, quite frankly, we'd be in an even stronger position now than we were 20 years ago, and we'll be in a stronger position in the future.”

Mr. Harper said he did not want to reopen NAFTA, but he is not the first Canadian politician to link opening the free-trade deal and energy. International Trade Minister David Emerson did so in February after Mr. Obama and Ms. Clinton criticized NAFTA. The agreement prohibits Canada from cutting oil exports to the United States during worldwide shortages unless supplies are also cut in Canada.

The future of NAFTA became a topic of significant discussion in Canada after both Mr. Obama and Ms. Clinton broached the idea of reopening the deal during the Democratic primaries.

Ms. Clinton's position on the matter is credited with helping her win the Ohio primary last month and giving her campaign a badly needed boost.

Earlier, Mr. Harper and Mr. Calderon were asked whether they have begun to think about how to deal with the new administration that will follow the U.S. presidential election in November.

Mr. Harper said he foresees no difficulties and that any incoming president will quickly realize the importance of the trading relationship between the two countries.

“I anticipate that Canada will have a very productive relationship with the next administration, because I'm confident that, when the facts are looked at, any president – just as any prime minister of Canada – will quickly conclude how critically important NAFTA and our North American, Canadian-American trade relationship are to jobs and prosperity.”

Mr. Calderon said Mexico will have a respectful relationship with whoever leads the U.S.

Answering an unrelated question on rocketing oil prices, Mr. Bush reminded reporters that Canada and Mexico are the greatest suppliers to the United States and that America is grateful for it. He said that the United States is paying the price for not stepping up exploration.

“There's not a lot of excess capacity in the world.”

Mr. Bush also gave a spirited defence of NAFTA, noting that the deal has brought increased wealth to areas such as the U.S.-Texas border. Downgrading NAFTA would cost Mexicans jobs, he said.

“When you're able to export in your neighbourhood, it helps to create jobs,” he said. Consumers also have more options to buy under free trade, he said.

“People who say let's get rid of NAFTA as a throwaway political line must understand this has been good for America.”

Mr. Calderon said amending the deal could increase the thirst for Mexicans to migrate to the United States.

Meanwhile, a political critic of Canada's trade policy with the United States said Mr. Harper appears to have opened the door to a new deal.

“We welcome the fact that he's kicking off the debate,” said Peter Julian, the NDP's critic for international trade. But Mr. Julian said that if the deal is opened, Canadians will want more sovereignty over energy, something Mr. Harper may not accept.

Mr. Bush also took time to upbraid the Democratic-controlled Congress for stalling efforts to sign a free-trade deal with Columbia. Canada is also in the process of trying to ink such a deal. While the three leaders spent much time on free trade, they did not announce any major initiatives on hemispheric co-operation. They have now met four times in efforts to find new ways to streamline areas such as the movement of goods and services across the border and other areas of economic harmonization.

The meetings are coming under increasing criticism from some influential Canadians, who say Canada should shift gears with the next U.S. administration and put the focus on direct Canada-U.S. relations.

Source: Globeandmail|by BRIAN LAGHI