[SPAIN] Oil leaders meet again after Jeddah failure

A week after failing to deflate record oil prices at a summit in Saudi Arabia, the world's biggest crude producers and consumers will get another chance to tackle the problem at a meeting this week.

More than 3,000 delegates, including leading corporate and political figures, are to meet at the 19th World Petroleum Congress (WPC) in Madrid, which runs from Monday to Thursday after an official opening reception on Sunday.

"It's the Olympics of the oil and gas industry," director of the World Petroleum Congress, Pierce Riemer, told a press conference last week.

The gathering follows a surge in oil prices Friday that took both New York light sweet crude and Brent North Sea crude to record levels beyond 142 dollars a barrel.

The president of the Organization of Petroleum Exporting Countries, the head of the International Energy Agency and ministers from Nigeria, Russia, Venezuela, India, France and the Netherlands are expected to be present.

They are to be joined by the bosses of major international oil groups ExxonMobil of the United States, CNOOC of China, Britain's BP and Shell, Rosneft of Russia and Total of France.

Saudi Arabia convened a hastily arranged meeting of consumers and producers in Jeddah last weekend to tackle the problem of record oil prices, which are forecast by Organization of Petroleum Exporting Countries,'s president to touch 150-170 in the coming months.

Most experts agreed afterwards that the only concrete result was Saudi Arabia's announcement that it would increase daily production by more than 200,000 barrels to 9.7 million -- and that it could significantly step this up if necessary.

The gathering pitted consumer nations, which are calling for an increase in production, against producers.

Most OPEC members remain firmly against any increase in their production and blame speculators and the fall in the dollar for the remarkable run up in prices, which have doubled in the last 12 months.

Jorge Segrelles, the head of the organising committee of the WPC, says the meeting is intended to be "a forum for actively finding solutions."

Given the differences in assessment of the situation between consumer and producer countries, the head of energy at consultancy Capgemini, Colette Lewiner, sees little chance of an agreement.

"There might be declarations of intent, but there will not be a consensus in the short term," she said.

The main event, which will take place in Madrid's Ifema conference centre, also faces competition from a rival meeting of environmentalists called to promote alternatives to crude oil as an energy source. The main event, which will take place in Madrid's Ifema conference centre, also faces competition from a rival meeting of environmentalists called to promote alternatives to crude oil as an energy source.

Source: Agence France Presse

[OIL PRICES] OPEC Leader Khelil Says Dollar Will Drive Oil to $170

Organization of Petroleum Exporting Countries President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar's decline and political conflicts.

``Oil prices are expected to reach $170 as demand for fuel is growing in the U.S. during the summer period and the dollar continues to weaken against the euro,'' Khelil said today in a telephone interview. The leader of the Organization of Petroleum Exporting Countries also serves as Algeria's oil minister.

Political pressure on Iran and the depreciation of the U.S. currency have caused a surge in oil prices, Khelil said. New York- traded crude has more than doubled in a year and touched a record $142.99 a barrel yesterday on the New York Mercantile Exchange.

Organization of Petroleum Exporting Countries ministers generally say that oil output is sufficient, even as Saudi Arabia, the biggest producer, pledged to pump an extra 200,000 barrels a day next month to calm the market. ``The market is completely supplied,'' Venezuelan Oil Minister Rafael Ramirez said yesterday. Libya announced possible production cuts, calling the market oversupplied.

The rising cost of crude is not linked to supply, Khelil said today. ``There is more than enough oil in the market to meet the international demand,'' added the Organization of Petroleum Exporting Countries president, who will take part June 30 in an international energy forum in Madrid.

Prices, which are up 38 percent this quarter, are heading for the biggest quarterly gain since the first three months of 1999, when oil traded between $11 and $17.

Declining Dollar

``The decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar, which pushed up oil prices,'' Khelil said.

Oil may extend gains if the European Central Bank boosts rates on July 3, further weakening the U.S. currency. The dollar has declined 15 percent against the euro in 12 months.

European Central Bank President Jean-Claude Trichet reiterated June 25 that policy makers may increase the main refinancing rate by a quarter-percentage point next month to contain inflation. The Federal Reserve left the benchmark U.S. rate at 2 percent on June 25. On Sept. 18 the Fed began cutting rates to bolster an economy already reeling from the credit crisis.

Source: Bloomberg|By Ahmed Rouaba

[ASIA] Chubais Praises TNK-BP Shareholders

OGK-1, majority owned by Unified Energy System, said Thursday that it had created a joint venture with TNK-BP, which UES chief Anatoly Chubais hailed as "a sign of a positive future" for the embattled oil firm.

"The decision on the joint venture ... shows that the TNK-BP shareholders, despite the disagreements between them, managed to work out a common position on the project, which is especially important for the Russian energy sector," Chubais said in a statement.

The venture was created to build a third unit with a capacity of 800 megawatts at OGK-1's Nizhnevartovskaya power station, which supplies TNK-BP in the Tyumen region.

The firm's start-up capital will include 100 percent of the Nizhnevartovskaya station shares from OGK-1, while TNK-BP will invest $360 million. The rest of the money needed for the unit's construction -- $800 million to $1.1 billion -- is to be borrowed as a syndicated bank loan, RIA-Novosti reported.

Source: The Moscow Times

[EUROPE] Trade powers planning to break World Trade Organisation deadlock

Trade powers will meet next month for a long-awaited attempt at a breakthrough in global trade talks which risk years of further delay if a deal cannot be hammered out soon. World Trade Organisation (WTO) director-general Pascal Lamy yesterday called for a group of ministers to meet, probably for several days, from July 21 to push the Doha round of global free trade talks toward conclusion, diplomats said.

Mexico's ambassador to the World Trade Organisation, Fernando de Mateo y Venturini, announced the date after a briefing by Lamy to ambassadors at the World Trade Organisation's Geneva headquarters.

The meeting would include 35 to 40 ministers representing a range of interests in the fractious negotiations about opening up agriculture, industry and services markets which Lamy is aiming to wrap up this year.

If those ministers can successfully broker trade-offs in farming and manufacturing trade - the most difficult areas of the talks - diplomats said the basics of a Doha accord could go to the World Trade Organisation's full membership as early as the end of July.

Services would be discussed briefly by ministers and finalised later.

"I think it is perfectly imaginable that this deal can be done, but a lot of hard work needs to be done first," said the European Union's top civil servant for trade, David O'Sullivan.

"I agree with him," added US ambassador to the WTO Peter Allgeier, who also participated in Lamy's briefing. The Doha round was launched in 2001, shortly after the September 11 attacks on the US, in the hope of giving the global economy a boost and helping poor countries export more.



Source: Gulf Daily News

[EUROPE] Iran 'to withdraw European assets'

Iran will withdraw assets from the European Union in response to the tightening of sanctions imposed over its nuclear programme, Deputy Foreign Minister Mahdi Safari said yesterday.

"We are going to withdraw the money and invest elsewhere," Safari said.

"If you withdraw more than $100 billion, then of course this will bring about a scarcity of money and have an impact on the world economy."

The 27-nation EU agreed new punitive measures on Monday targeting businesses and individuals the West says are linked to Iran's nuclear and ballistic programmes.

An Iranian monthly reported earlier this month that the Islamic Republic had withdrawn $75bn in assets from Europe to prevent their being blocked under new sanctions. But Iran's economy minister on Sunday played down the report "as yet not serious".

The new EU measures include a freeze on the assets of Iran's largest bank, Bank Melli, and visa bans on senior officials such as Revolutionary Guards head Mohammad Ali Jafari, Defence Minister Mostafa Mohammad Najjar and atomic energy chief Gholamreza Aghazadeh.

Safari said that Europeans would lose out as a result of the newly imposed measures.

"We have gas and oil resources everyone wants to buy. Now we are trading mostly with Asian countries," he said.

"Previously our main partners were in Europe - Germany, Italy, France, and also Austria. Now we have other partners."

Source: Gulf Daily News

[SAUDI ARABIA] Asian workers rush to get Saudi oil oasis ready

Deep in the Saudi desert, 28,000 Asian workers are racing to get a giant oil processing complex ready to help King Abdullah keep a vow to meet world demand for crude.

In a year's time, the Al Khurais field will be supplying 1.2 million barrels a day of Arab light crude to thirsty global markets, under a tight schedule set by Saudi Aramco. The king, and other top Saudi officials, promised at an oil summit they hosted in Jeddah on Sunday to increase current production by 200,000 barrels a day to 9.7 million barrels and to supply any further increase in global demand.

In temperatures that seldom fall under 100 degrees Fahrenheit during the day, workers from Indonesia, Bangladesh, India, the Philippines and other nations wear hoods against the sun as they finish the hundreds of kilometres of pipelines, three 600,000 barrel storage tanks, 15,000 horsepower pumps and a bomb proof control centre that make up the $10 billion complex.

Al Khurais is city-sized but can only be reached up a seemingly endless desert road, with truck tyres and carcases of burned out cars strewn along the sides and black camels roaming in the dunes.

The company calls it "the largest industrial project in the world." Together the three fields have estimated reserves of 27bn barrels and their joint daily production of 1.2m barrels will be more than OPEC's three smallest members Indonesia, Qatar and Ecuador, according to Aramco.

World demand is growing by about 1pc a year and Saudi Arabia has vowed to invest tens of billions of dollars to take production capacity to 12.5m barrels by the end of next year and eventually 15m if the demand is there.

Aramco vice-president for production Amin Al Nasser said 500,000 barrels a day will start coming out of its Khursaniyah field in August, and by the end of the year 250,000 barrels will be coming from the Shaybah field and 100,000 barrels a day from the Nuayyim field.

The Saudi firm has embarked on a huge operation to find new fields to add to its estimated 260 billion barrels of crude oil reserves.

Aramco research chief Muhammad Saggaf said that over the next 20 years the company's overall resource base could grow to 900bn barrels from the current level of 735m.

Source: Gulf Daily News

[MIDDLE EAST] Qatar sends giant LNG cargo to United States

The world's top liquefied natural gas (LNG) exporter Qatar has sent its first shipment of LNG to be carried on giant new tankers to top energy consumer the US, Qatargas said yesterday.

The new tankers have capacity of around 216,000 cubic metres for the gas chilled to its liquid form, about 60 per cent larger than Qatargas' current fleet of vessels with capacity of around 135,000 cubic metres. The vessels are known as Q-Flex and are part of a new fleet to carry Qatar's expanding LNG exports.

Qatar loaded the first Q-Flex in December for delivery to Japan. The cargo is the second to arrive at the new US Sabine Pass LNG terminal in southwest Louisiana. The terminal is owned by Cheniere Energy and received its first cargo in April.

The terminal cost around $1.5 billion to build and will be capable of reheating and pumping around 2.6bn cubic feet of gas per day into the US gas system.

Qatar plans to more than double its LNG capacity to 77 million tonnes in 2010 from around 31m tonnes.

Source: Gulf Daily News

[NORWAY] Oseberg Back On Stream

StatoilHydro reports that production on the Oseberg field centre, Oseberg South, Oseberg East and Tune has resumed after the small fire in a switchboard room on the Field Centre on 15 June.

The field centre and the three other fields associated with the field centre's processing plant have been shut down during the cleaning and repairs of the switchboard room and the involved equipment.

The gradual start-up of the oil and gas production and the gas exports from the four fields started Tuesday morning. The fields are expected to be back on full stream in a few days.

Production at Brage, Oseberg C and Vesfrikk, which transport oil through the Oseberg field centre, was resumed on Monday 16 June and has not been affected by the repairs.

[NORWAY] Oseberg Back On Stream

Source: Scandinavian Oil & Gas

[NUCLEAR] Repair of Slovenian nuclear power plant according to law

No worker at Slovenia's nuclear power plant Krsko was exposed to excessive levels of radiation during a recent leak in the cooling system, a spokeswoman for the plant said on Monday.

"I can assure you that none of the workers that intervened in the repair of the valve in the cooling system was exposed to a level of radiation higher than those allowed by the law," the Krsko plant's spokeswoman Ida Novak told AFP.

Slovenia's sole nuclear power plant had to be shut down earlier this month after a leak in the cooling system that set off a Europe-wide alert. The plant went back on line on June 9 after a successful replacement of the valve that produced the leak.

Novak denied reports by Slovenian weekly Zurnal 24 that six workers who took part in the repair work were contaminated with radioactive isotopes Co-58 and Co-60 since they could not access the leaking valve with their full protective equipment.

Repair of Slovenian nuclear power plant according to law"The levels of radiation were within normal levels," Novak said.

The Krsko plant, 120 kilometres (75 miles) east of the capital Ljubljana, produces 20 percent of all electricity used in Slovenia and satisfies 15 percent of the power needs of neighbouring Croatia.

Source: Agence France-Presse

[NUCLEAR] Middle East nuclear renaissance?

A comprehensive and well detailed report by the International Institute for Strategic Studies, released last week, sheds a pile of information on the state of nuclear proliferation in one of the world's most volatile regions -- the Middle East.

Indeed, as John Chipman, director general and chief executive of International Institute for Strategic Studies, points out in a publication entitled "Nuclear Programs in the Middle East: in the Shadow of Iran," the worrying factor lies in the sudden awakening of several Middle Eastern countries that, now feeling threatened by Iran, see the urge to jump onto the nuclear bandwagon.

"In the span of the 11 months between February 2006 and January 2007, at least 13 countries in the Middle East announced new or revived plans to pursue or explore civilian nuclear energy," said Chipman.

As the International Institute for Strategic Studies director pointed out, this sudden interest by Middle Eastern countries in nuclear energy is "remarkable" in view of the region's abundance of traditional energy sources -- such as natural gas and crude oil.

With the exception of Israel, in the rest of the region, from Morocco in North Africa to the southern tip of the Arabian peninsula, "There is not a single nuclear power plant in operation today," said Chipman.

The other exceptions are those being built in Iran -- the Bushehr facility being built with Russian assistance. It is this facility, as well as the gas-centrifuge plant at Natanz and the heavy water reactor at Arak, against which the Bush administration and the Israelis are threatening to take military action, unless Iran complies with the international community's request that it put a stop to its nuclear program.

These sites, and others scattered throughout Iran, were kept secret by the Islamic Republic and were revealed to the world by the Iranian resistance, the People's Mujahedin of Iran.

Past attempts by Arab countries to develop nuclear power plants have been thwarted before they could reach completion. Such was the case with the Osirak nuclear power plant that Saddam Hussein was hoping to build with French assistance, until the facility and his dreams were shattered in an Israeli air raid on June 7, 1981.

A more recent effort to develop nuclear capability was an attempt by Syria, allegedly with North Korean help, and it too was destroyed by Israel last September. Syria denies it was building a nuclear facility, but a high-ranking European diplomat told this reporter "there was no doubt Syria was building a facility to develop a nuclear program."

The danger stemming from Iran's pursuit of its nuclear ambition, besides the fact it could launch a regional conflict should Israel decide to take military action, is further amplified by the risk of nuclear proliferation throughout the region.

Middle East nuclear renaissance?

The International Institute for Strategic Studies report states, "Each of the new nuclear-aspirant states announced its decision in terms of electricity needs, energy diversification and the economic benefits of nuclear power." The reality, however, may be somewhat more macabre. As Chipman points out, "Promotion of nuclear energy is one way in which Sunni states are trying to counter the rising sense of Shia empowerment following the 2006 Lebanon war."

Such is the case in Egypt, where President Hosni Mubarak, and more specifically his son Gamal, are seizing upon nuclear power as a national project upon which to promote the son's campaign to succeed his father. Again Chipman: "If Tehran's nuclear program is unchecked, there is reason for concern that it could in time prompt a regional cascade of proliferation among Iran's neighbors."

Already, besides Egypt, Saudi Arabia and Turkey have voiced interest in going nuclear.

The good news, if one can be optimistic enough to find good among reports of numerous countries wanting to arm themselves with nuclear weapons, is that the danger of proliferation in the Middle East, says Chipman, "while real, is not imminent."

What appears to be playing out in the Middle East today is the positioning of the region's powers so they can, if they find the need to move ahead into the nuclear field, arrive there without additional delay. Saudi Arabia, for example, is unlikely to develop its own nuclear program but, as several reports have indicated, it would rely on a defense pact with nuclear-powered Pakistan.

Chipman predicts that over time the Islamic Republic's nuclear program could become a powerful regional proliferation driver. In other words, the result would be, on the one hand, a race between Sunni and Shia and, on the other, between the region's political powers -- that is, assuming the United States and/or Israel would refrain from intervening militarily.

Source: United Press International|by Claude Salhani

[ASIA] Hong Kong govt plans to scrap fuel tax for public transport

Hong Kong's government announced on Monday a plan to waive fuel taxes for public and commercial transport, following days of demonstrations by truck and bus drivers over surging oil prices.

The authorities hoped to get an approval from the legislature on scrapping taxes on Euro-five diesel by the end of next month, secretary for transport Eva Cheng told the city's lawmakers Monday. The environmentally friendly Euro-five is used by public transport vehicles such as buses, taxis and trucks.

"Our decision is based on the principle of fairness. At present, all fuel taxes for sea and air commercial transport have been waived," she said.

But there would be no change to the levies on the more polluting ultra-low sulphur diesel or petrol, commonly used in private cars, she said.

Prices for petrol, at about 2 US dollars a litre, were generally higher than Euro-five diesel to encourage people to use public transport, a government spokesman told AFP. Mirroring the action of their European counterparts, Hong Kong drivers staged marches and slow-drive protests earlier this month as their earnings were substantially reduced by surging oil prices.

Source: Agence France-Presse

[NUCLEAR] RWE, Electrabel file binding offers for stake in Bulgarian nuclear power plant

German power giant RWE and Belgian utility Electrabel have made binding offers to help finance and run a new nuclear plant in Bulgaria by acquiring a 49-percent stake in the operation, the Bulgarian government said Monday.

"Both companies filed their preliminary binding offers within the requested deadline that expired Monday," the economy and energy ministry said in a statement.

It added that the offers would now be reviewed and the Bulgarian state-owned National Electricity Company (NEC) would then proceed to negotiations with the two companies to pick the winning bid.

But the energy ministry did not specify when the strategic investor for the 2,000-magawatt facility in Belene on the Danube would be chosen.

RWE and Electrabel were shortlisted in March from a total of six companies interested in acquiring a minority stake in the Belene Power Company, which will finance and run the 4.0-billion-euro (6.2-billion-dollar) plant.

NEC has also selected French bank BNP Paribas as a structuring bank to lead the raising and management of funds for the long-stalled two-reactor plant, which is to be built by Russian company Atomstroyexport.

The first of the plant's 1,000-magawatt reactors is expected to be operational by January 2014 and the second a year later.

Bulgaria renewed plans to build the Belene plant in 2005 to compensate for an expected downturn in its energy exports after the closure in late 2006 of four of six operational reactors at its single nuclear power plant at Kozloduy. The country used to be one of the Balkans' main exporters of energy, supplying some 7.8 billion kilowatt-hours of electricity abroad in 2006.

But it slashed exports after agreeing to close the reactors ahead of its entry into the European Union on January 1, 2007.

Source: Agence France-Presse

[ASIA] China stresses price stability after fuel hikes

China's top economic planner has urged local authorities to ensure goods prices remain stable after the government hiked fuel prices by as much as 18 percent.

The National Development and Reform Commission said in a statement on its website that local officials should closely monitor liquefied petroleum gas and natural gas, whose prices were not increased.

Local governments should also encourage producers to cut their costs rather than pass on rising prices to consumers, according to the statement, which was posted over the weekend.

Inflation has emerged as a top policy concern in Beijing, with increases in the consumer price index near 12-year highs.

China's inflation rate was 7.7 percent in May, easing only slightly from April's 8.5 percent, according to previously released data.

Analysts have said they expect manufacturers will be able to absorb the higher fuel costs in the short term.

Public transport fares including for buses, taxis and the railway should not be raised for the time being, and more subsidies should be allocated to taxis to cover losses incurred from rising fuel costs, the statement said.

Beijing announced retail petrol and diesel price hikes on Thursday as it seeks to close the gap between state-set domestic caps and soaring world oil costs. China's oil giants saw little incentive to increase production to meet surging demand as they were said to be selling refined products at a loss, although it remains unclear if the price hikes have put them in the black.

But economists said the hikes should prevent shortages as the country prepares to host the Olympics in August.

Source: Agence France-Presse

[SUSTAINABLE] Massive East Timor Land-For-Biofuel Plan Raises Hackles

East Timor's government is under fire over an agreement to turn more than a sixth of the country's arable land over to a 100 million dollar foreign-funded ethanol project. The Fretilin opposition has branded as a "land giveaway" a memorandum of understanding between the agriculture minister and GTLeste Biotech for a 100,000 hectare (247,000 acre) sugar plantation and ethanol plant.

The agreement with the little-known Indonesian company guarantees at least 100 million dollars in investment in return for granting GTLeste a 50-year lease over a swathe of "unproductive land" with an option for 50 years more.

The government is touting the move as a major potential source of foreign cash which could generate more than 2,000 jobs.

But opposition agriculture spokesman Estanislau da Silva told AFP the plan was made with little public consultation and could threaten food production in the impoverished and overwhelmingly agrarian country.

"They say they are going to plant sugarcane on unproductive land. Where in the world can you plant sugarcane on unproductive land?" Da Silva said.

"The intention itself is very suspicious and goes against what we are doing in terms of development and increasing food production and food reliance," he said.

"Two thousand jobs means nothing to me when you give away 100,000 hectares."

"What worries us is firstly the process. For a project as big as this ... the government should consult before signing the contract," said Maximus Tahu from independent development watchdog La'o Hamutuk.

Although estimates are difficult to make, the 100,000 hectares proposed for the project comprises at least one-sixth of land that can be farmed in East Timor, including farms already in use, Tahu said. Fretilin puts the figure at one-quarter.

"We have learned from other countries that sugar cane plantations will have negative impacts on agriculture and farmers' lives. More than 80 percent of Timorese are farmers, they live on agriculture, so the land is very important for them," he said.

"Our concern is the project will contribute to the destruction of land fertility."

The government has brushed aside the criticism, saying discussions are in the early stages and no fixed site has been found for the plantation. Environment Minister Mariano Sabino said critics of the plan had been spreading "false propaganda" that the government had already agreed to give the land to GTLeste.

"Whoever wants to discuss this, sure let's discuss this. But don't carry out false campaigns and lie that the ministry has already provided the land," he said Monday.

The ethanol plan would bring much-needed investment into rural East Timor, Sabino said.

East Timor, which gained formal independence in 2002 after 24 years of often brutal Indonesian occupation, is one of the poorest countries in Asia, with roughly 50 percent unemployment. Soaring global oil prices and fears of global warming have led to a boom in the production of biofuels, which are mostly made from crops such as oil palms, sugarcane and soybeans.

However, scientists have questioned the environmental benefits of biofuels, saying production can encourage land clearing as well as divert food crops, pushing up global food prices.

Source: Agence France-Presse

[UNITED STATES] Floods give more fuel to critics of ethanol As corn prices climb, Texas governor is expected to urge EPA to amend rules

Floods give more fuel to critics of ethanol. Already under siege from many sides, the U.S. ethanol industry is facing further pressures as recent Midwest flooding pushes corn prices to new highs and federal regulators weigh calls to reduce required use of the fuel.

One of the people calling for that is Gov. Rick Perry, who has scheduled a news conference on the subject today in Washington. Fearing the effects of high corn prices on the state's cattle and poultry industries, he has called on the federal government to suspend or reduce its mandate setting minimum levels of ethanol in the nation's fuel supply.

He is expected to urge the Environmental Protection Agency to amend the ethanol requirement this year, citing its damaging impact on Texas' economy. An EPA comment period on the proposal formally ended Monday.

Agency spokeswoman Cathy Milbourn said it's too early in the process to speculate about what action the EPA may take.

A reduced mandate could shrink the market for ethanol at a time that the rising price of corn, the main ingredient of most U.S.-produced ethanol, and other higher operating costs have made ethanol more expensive to produce.

Some producers have shut down operations or halted new projects.

The flooding in Iowa and other Farm Belt states has temporarily taken other plants out of commission.

That reduced output is starting to drive up ethanol prices. And since ethanol often is a component of motor fuel, a rise in the price of ethanol could send the price at the gasoline pump even higher for millions of U.S. drivers.

But the ethanol industry is downplaying the situation, saying that even if ethanol prices remain high, blending ethanol into the nation's gasoline supply still keeps gasoline prices lower than they would be without it.

Paying at the store

Ethanol skeptics, however, say Americans are paying in other ways. The growth of ethanol output in recent years has sent corn prices soaring, increasing the cost of livestock feed, food on store shelves and many other items, they contend.

Weighing in on that side, Perry proposed in April that the government cut by half this year's federal requirement for blending ethanol into the fuel supply.

Federal law requires that the nation use 9 billion gallons of renewable fuel this year and 11 billion gallons in 2009, most of which is expected to come from corn-based ethanol.

Today, ethanol is blended — typically at levels up to 10 percent — into more than half the gasoline sold in the United States, including in Houston and other cities struggling with the worst air-quality problems.

But the catastrophic flooding in the Midwest has spurred more debate about the wisdom of using corn to feed America's driving habit.

Early estimates suggest up to 3 million acres of the nation's corn crop could be destroyed as a result of flooding in Iowa, Illinois, Wisconsin and Missouri, according to the Renewable Fuels Association, an ethanol industry trade group.

The threat of such massive losses sent corn prices to nearly $8 a bushel last week, almost double year-ago levels. Corn futures closed at $7.24 a bushel Monday on the Chicago Board of Trade.

The ethanol industry warns special interest groups against overreacting and trying to dismantle the federal ethanol mandate.

'Knee-jerk reactions'

"Knee-jerk reactions to this unprecedented weather event would do even more harm to the nation against the backdrop of the current oil and economic crises it faces," said Bob Dinneen, president of the Renewable Fuels Association.

The Energy Department recently estimated that gasoline prices would be 20 to 35 cents higher if ethanol were not available for blending. Even if the price of ethanol rose 20 percent from current levels, it still would be lower than the wholesale price of gasoline, the Renewable Fuels Association said.

What's more, cutting the 2008 mandate in half — to 4.5 billion gallons — would have little impact on corn prices now or later and might require more foreign oil imports to meet U.S. fuel needs, Dinneen said.

The group estimates that 400 million gallons of ethanol production capacity, or about 5 percent of U.S. supply, may be temporarily shut down because of Midwest flooding.

Those still producing will likely struggle as rising corn and energy costs wreck the economics of making the fuel, said David Anderson, an economist at Texas A&M University who has done research on biofuels.

"It's a pretty tight margin for ethanol producers right now," he said.

Even so, a recent study by Anderson and several colleagues suggested the negative ripple effects of producing corn ethanol may be overstated by critics. It shows higher food and feed prices have more to do with record crude oil prices than with ethanol.

Corn in Texas

Whatever's causing the rise in the price of corn, it could have a significant impact on what Texas pays for the huge quantities of corn the state imports to feed livestock, said David Gibson, executive director of the Corn Producers Association of Texas. To make matters worse, drought conditions in Texas threaten to sharply reduce the state's own corn harvest this year, putting further pressure on prices.

Gary Obenhaus, a corn farmer in Eagle Lake, said roughly a third of his 1,400-acre corn crop should be fine, but that yields for the rest will fall to as little as 30 percent of their normal 120-bushel-per-acre range. "Some may struggle to get 25 bushels per acre," he said.

While higher corn prices will likely offset his crop losses, the rising cost is hammering industries that rely on corn.

"Until the recent flooding in the Midwest began, it might have been acceptable to have a lengthy debate over ethanol mandates," said James Herring, president and chief executive of Friona Industries, the fourth-largest cattle feeder in the world, in a conference call with reporters last week.

"But to be frank, floodwaters and high corn prices have wreaked havoc on the cattle industry, and it is time to stop talking and take action," he said.



Source: Houston Chronicle | By BRETT CLANTON

[OIL PRICES] Global Oil Summit Addresses Issues But Produces Few Solutions


The global energy summit held to discuss rising oil prices explored leaders' different agendas and opinions but offered few concrete results. A summit held June 22 in Saudi Arabia to discuss spiraling oil prices concluded in an ambiguous fashion as attendees left the meeting with largely different opinions and agendas.


Although he blamed increased oil consumption and taxes on fuel, King Abdullah of Saudi Arabia used the meeting attended by leaders and ministers from 36 nations to blast speculators, claiming the spike in oil prices can be greatly attributed to their "selfish interests." With the current price of a barrel of oil now at a high of roughly 130 US dollars, he urged the summit participants to "rule out biased rumors" and to "reach the real causes for the increase in price."


Saudi Oil Minister Ali al –Nuaimi also used the summit in the Red Sea city to quell any fears about depleted oil reserves, claiming that there is enough crude to last "many decades." With Saudi oil output currently at 9.7 million barrels a day, Abdullah vowed to increase oil production should this become necessary. Kuwait and the United Arab Emirates similarly signaled their readiness to up production in the future.


Oil producers say production hike unnecessary

Other Organization of Petroleum Exporting Countries (OPEC) members such as Algeria and Venezuela, however, rejected this idea, as did Chakib Khelil, Organization of Petroleum Exporting Countries president and Algeria's Oil Minister. Khelil insisted that increasing production is unnecessary, stating that the 13-nation Organization of Petroleum Exporting Countries would only consider a production increase at a meeting in September. "We believe that the market is in equilibrium," he said. "The price is disconnected from fundamentals. It is not a problem of supply."


Glos calls for increase in production

German Economy Minister Michael Glos was one leader who had positive feedback to offer regarding the summit. "I view this conference as sending a clear signal to the oil market, which can contribute to an easing of the recent price developments," he said.


Glos also agreed with Abdullah that an increase in production is in order, claiming it would be "a strongly needed signal to the financial markets to not gamble any more on an increasing oil price."


US Energy Secretary Samuel Bodman echoed Glos' sentiments, warning that "in the absence of additional crude supply, for every one percent increase in demand we would expect a 20 percent increase in price in order to balance the market."


Referring to the staggering oil prices as "the biggest of all three oil shocks" in recent decades, British Prime Minister Gordon Brown called for an analysis of production shortages, as well as the speculation aspect cited by King Abdullah.


Brown however disagreed with the King's assessment of the causes for rising prices, pointing to the economic scenario of "oil demand rising faster than supply" as the root of the problem. Bodman similarly dismissed Abdullah's claim that higher prices are connected to speculation, stating that "there is no evidence we can find that speculators are driving future prices."


UK's Brown advocates nuclear as alternative to oil

Brown placed an emphasis on diplomacy as he called for a "new global deal" that would enable a "greater commonality of interest" between oil consumers and producers.


He also underlined the need for more investments in nuclear and renewable energy, calling for the construction of 100 new nuclear power plants and an additional 700,000 wind turbines worldwide by the year 2050.The price of a barrel of oil ten years ago was at ten US dollars.


Source: DW News

[EUROPE] Norway and its new Minister of Petroleum and Energy. Terje Riis-Johansen

Norwegian Prime Minister Jens Stoltenberg has announced that Minister of Agriculture and Food, Terje Riis-Johansen, has been appointed Minister of Petroleum and Energy, effective 18:45 today.

Åslaug Haga, now former Minister of Petroleum and Energy has been honourably discharged from her post, following her resignation Thursday.

Source: Scandinavian Oil & Gas

[INDIA] Coal Min approves Mining Plan for Sasan power plant

The government has approved the Mining Plan for the coal block that Anil Ambani Group firm Reliance Power plans to use for setting up 4,000 MW Ultra Mega Power Project at Sasan in Madhya Pradesh.

Mining Plan for Moher and Moher-Amlori Extension coal block relating to Sasan Power Ltd for Sasan Ultra Mega Power Projects was approved by the Ministry of Coal earlier this month, an official source said.

Sasan Power Ltd is a Special Purpose Vehicle (SPV) set up by Power Finance Corp for the Reliance Power's 4,000 MW Sasan Ultra Mega Power Project in Madhya Pradesh.

The coal from the Moher-Amlori coal block would be used to generate power for Sasan UMPP.

As per the conditions of the Plan, the mining company has been asked to take all precautions regarding safety of mine workers and the additional land to be acquired, which would not encroach any other coal block.

Reliance Power bagged 4,000 MW Sasan UMPP in July last year on re-invitation of bids, the company matched the tariff of Rs 1.20 per unit earlier quoted by the original winning bidder, a consortium of Singapore-based Globaleq and Lanco Infratech.

Following the cancellation of the project award to Lanco consortium, Sasan Power Ltd, had asked three other bidders RPL, NTPC and Jaiprakash Associates to submit fresh bids. While RPL submitted a revised bid, NTPC and Jaiprakash Associates did not change the prices.


Source: India Economic Times

[UNITED STATES] Lawyers say BP trial near halfway point

A civil trial arising from the 2005 BP Texas City refinery explosion finished its fourth week Friday, and lawyers indicated it may just be at the halfway point. Lawyers for plaintiffs who allege they were injured in the blast that killed 15 workers said plaintiff testimony will continue until about July 4, and BP lawyers estimated they'll take two weeks after that to present the defense case.

The pace of the trial has slowed, with plaintiffs and their doctors presenting detailed testimony about their injuries and treatments.

Ten people are suing for physical and emotional suffering they claim to have endured in the explosion. BP is questioning the extent of their injuries and the amount of their damage claims, including $950 million in punitive damages.

The company has settled almost all of the 4,000 claims resulting from the blast, including all lawsuits involving the 15 fatalities. Lawyers for both sides continue to meet privately to negotiate the 79 outstanding claims.

Source: Houston Chronicle |By BRAD HEM

[UNITED STATES] Oil Rises on Dollar's Drop, Mideast Tensions. U.S. Commodities

Crude oil rose as the weaker dollar enhanced the appeal of commodities as a currency hedge and the New York Times reported that Israel held a rehearsal for a potential bombing attack on nuclear targets in Iran.

Oil prices have almost doubled in the past year as investors sought refuge from a declining dollar, which fell again today after traders pared bets the Federal Reserve will raise interest rates on June 25. Iran, OPEC's second-biggest oil producer, would respond to an Israeli attack with a ``heavy blow,'' a senior cleric said.

``The only way to increase the value of the dollar is by increasing interest rates, which doesn't look likely,'' said Nauman Barakat, a senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The simulated attack of Iran by Israeli warplanes is certainly not going to reduce geopolitical tensions.''

In other markets, coffee jumped the most in nine months on reduced shipments from Brazil, the biggest grower. Cattle also climbed. The UBS Bloomberg Constant Maturity Commodity Index gained 18.63 to 1,655.50 after reaching a record 1,668.25.

Crude oil for July delivery rose $2.69, or 2 percent, to $134.62 a barrel on the New York Mercantile Exchange. Prices declined 24 cents this week. Futures climbed to a record $139.89 on June 16.

Coffee
In the first 19 days of June, Brazil's exports of arabica beans, the main variety traded in New York, fell 10 percent to 871,402 bags from the same period in May, according to the country's Coffee Exporters Council.

``The coffee beans haven't been flowing,'' said Boyd Cruel, an analyst with Alaron Trading in Chicago. A lack of selling is supporting prices, he said.

Coffee futures for September delivery rose 7.05 cents, or 5.1 percent, to $1.467 a pound on ICE Futures U.S., the former New York Board of Trade. The percentage gain was the biggest since Sept. 17. Earlier, the price reached $1.485, the highest for a most-active contract since March 17. Coffee gained 7.2 percent this week and 25 percent in the past year.

Cattle
Cattle rose to the highest since at least 1986 as U.S. beef prices surged and high corn costs prolong losses for feedlots, encouraging some producers to shrink their herds.

Wholesale beef prices are the highest in 13 months, and domestic shipments of select and choice cuts yesterday totaled 14.9 million pounds, the most since Jan. 24, U.S. Department of Agriculture data show. Feedlot operators cut purchases of young cattle by 12 percent in May from a year earlier, the agency said after markets closed. Analysts projected a 8.9 percent drop.

``When grain prices are this high, the cattle should be staying out in the pasture,'' said Mark Schultz, a vice president at Northstar Commodity Investments LLC in Minneapolis. Livestock producers will ``try to keep them in the pasture longer, to feed them less corn,'' he said.

Cattle futures for August delivery rose 1.4 cents, or 1.4 percent, to $1.0485 a pound on the Chicago Mercantile Exchange, after earlier reaching $1.0615, the highest for a most-active contract since at least April 1986.

Commodities settled as follows:
Precious metals: August gold down 50 cents to $903.70 an ounce July silver down 7.3 cents to $17.397 an ounce July platinum up $6.60 to $2,062.40 an ounce September palladium unchanged at $479.20 an ounce

Livestock: August live cattle up 1.4 cents to $1.0485 a pound August feeder cattle up 2.475 cents to $1.13575 a pound August lean hogs up 2.925 cents to 78.375 cents a pound July pork bellies up 0.775 cent to 72.95 cents a pound

Grains: November soybeans down 12.5 cents to $15.09 a bushel December corn down 6 cents to $7.555 a bushel September wheat down 14.5 cents to $8.8425 a bushel December oats up 3.25 cents to $4.4525 a bushel

Food and Fiber: September coffee up 7.05 cents to $1.467 a pound September cocoa up $19 to $3,125 a metric ton December cotton up 0.04 cent to 80.11 cents a pound October sugar up 0.37 cent to 13.08 cents a pound September orange juice up 2.25 cents to $1.131 a pound

Energy: July crude oil up $2.69 to $134.62 a barrel July natural gas up 13.3 cents to $12.994 per million British thermal units July heating oil up 5.82 cents to $3.7717 a gallon July gasoline up 8.66 cents to $3.4392 a gallon

Others: September copper up 5.25 cents to $3.8305 a pound September lumber down $4.40 to $263.00 per 1,000 board feet.

Source: Bloomberg|By Mark Shenk

[RUSSIA] Dutch Gasunie becomes a Nord Stream AG shareholder

On June 10, 2008, N.V. Nederlandse Gasunie was added into the Nord Stream AG shareholders register as a new shareholder.

Pursuant to the Umbrella Agreement entered into by Gazprom and Gasunie, the Dutch company obtained a 9 per cent stake in Nord Stream AG owing to a reduction in E.ON Ruhrgas and Wintershall Holding stakes by 4.5 per cent each.

The Gasunie’s entry into the Nord Stream project deal was clinched upon receipt of approvals from Nord Stream AG shareholders’ regulatory bodies and signing of a number of documents set out in the Umbrella Agreement.

As a result, Nord Stream AG shareholdings are now split in the following way: Gazprom – 51 per cent, Wintershall Holding and E.ON AG – 20 per cent each, N.V. Nederlandse Gasunie – 9 per cent.

The deal is a crucial event for deeper cooperation between Gazprom and Gasunie. The participation of a new partner in Nord Stream will raise its status of an international project aimed at ensuring reliable gas supply to European consumers and fostering energy security of the continent.

Background:

N.V. Nederlandse Gasunie is a state owned gas infrastructure and transmission company based in the Netherlands. The company owns one of the largest gas distribution networks in Europe with a total length exceeding 12,000 km. The network annually supplies up to 100 bcm of gas, which is a significant part of the total European gas consumption.

In June 2006, the Nord Stream project partners selected Gasunie as the fourth shareholder.

In October 2006, Gazprom and N.V. Nederlandse Gasunie inked the Memorandum of Understanding to cooperate in the Nord Stream and BBL projects.

In November 2007, Gazprom and Gasunie entered into the Umbrella Agreement to partner in the Nord Stream and BBL gas pipeline projects and to utilize Gasunie’s gas transmission capacities on the territory of the Netherlands.

The Umbrella Agreement provides for Gasunie to obtain a 9 per cent stake in Nord Stream AG and for Gazprom – an option for purchasing a 9 per cent stake in BBL Company.

Dutch BBL Company (Balgzand Bacton Line) is responsible for constructing and operating the recently built BBL interconnector between the Netherlands and the United Kingdom.

Nord Stream AG (initially named as North European Gas Pipeline Company) was established in 2005 for engineering, constructing and operating the Nord Stream gas pipeline.

The gas pipeline length is 1,200 km. Nord Stream’s first line with the throughput of 27.5 bcm per year will be commissioned in 2010. Upon construction of the second line the throughput will double to 55 bcm per year. Nord Stream will be fed with gas from the Unified Gas Supply System.

Source: Information Directorate|OAO Gazprom

[EUROASIA] TNK-BP Sending Mixed Messages

In a brand-new office on the 14th floor of a central Moscow high-rise, the Russian shareholders who own half of embattled oil firm TNK-BP are waging a war. On a recent afternoon, the shareholders' newly appointed press secretary stood at the office's sparkling windows, offering an expansive view of Moskva-City, the ultimate symbol of the teeming capital's oil-driven wealth.

"Why do they have to do everything all at once and so big," he said, musing about the inevitable traffic the new office complex will generate. A Russian reporter standing nearby answered, "Because who knows what tomorrow will bring?"

Despite protests by AAR and BP -- the equal shareholders in TNK-BP -- investors and analysts continue to function under the assumption that the firm is ripe for a state-run partner in the days of $140-per-barrel oil. Stan Polovets, an AAR deputy chairman who was promoted to CEO two weeks ago, insists otherwise.

"They're portraying it as being driven by politics or greed -- not as an attempt by the Russian shareholders to make sure their interests are represented in the company," he said during an interview this week, one of dozens offered to journalists as AAR looked to plead its case.

Many analysts say the complaints aired against BP by AAR -- a consortium which groups Mikhail Fridman and German Khan's Alfa Bank, Viktor Vekselberg's Renova, and Len Blavatnik's Access Industries -- are valid. With massive projects around the world, BP has little interest in seeing TNK-BP expand beyond the former Soviet Union. It does lag behind its Russian competitors in terms of refining capacity. The question, analysts say, is: Why now?

When asked why AAR chose this time, as the British-Russian venture nears its fifth anniversary, to raise these issues, Polovets first answered with a negative. It is not, he said, because a key clause in the shareholders agreement binding the owners to TNK-BP expired last year. A copy of the clause, obtained by The Moscow Times, says AAR and BP were never bound to the venture, they simply had to offer a potential stake up for sale to their partners first.

With the clause's expiration on December 31 last year, BP and AAR lost their rights of first refusal, and BP or AAR can now negotiate with whomever they choose. Both sides deny a desire to sell or dilute their stakes and insist that they are not negotiating with Rosneft or Gazprom, the state's energy champions.

A government official said earlier this month that "state companies have no place" in TNK-BP. "Talk of Gazprom buying a stake is the worst option," the official said on condition of anonymity.

The dispute has thwarted attempts to close the sale of TNK-BP's Kovykta gas field to Gazprom, Richard Spies, the head of BP Russia, said Thursday.

TNK-BP
agreed to sell the enormous east Siberian field to Gazprom last summer, following months of pressure from state environmental authorities. The deal, whose price recently skyrocketed from between $700 million to $900 million to $1.2 billion, has yet to be sealed, despite the passing of several deadlines.

"BP and BP directors in TNK-BP are ready to close the agreement with Gazprom on Kovykta," Spies said. When asked what the delay was, he answered, "Ask the other shareholders."

The dispute has reached a level of acrimony that means the principal players communicate with each other chiefly through the media, in rival interviews and in briefings.

[EUROASIA] TNK-BP Sending Mixed MessagesEU Trade Commissioner Peter Mandelson said Thursday that the case of TNK-BP, a 50-50 Russian-British partnership, was being watched closely to judge the foreign investment climate in Russia. "It's a test case for business partnership and business success," he said in an interview. "If this is a jealousy disagreement, as I am told it is, then governments should step back and state agencies should not involve themselves, because they risk politicizing the disagreement."

The conflict was publicly launched in March with Federal Security Service raids against BP and TNK-BP offices, the arrest of a TNK-BP employee on charges of industrial espionage, and the withdrawal of 148 BP employees from the joint venture over visa issues. The state labor inspectorate has also brought administrative charges against TNK-BP and its CEO, Robert Dudley, whose ouster AAR is seeking.

"A sudden inspection exposed a number of substantial violations of labor regulations, including the incorrect registration of recruitment contracts, inappropriate salary payment times, and others," a source in the inspectorate said Thursday, Interfax reported.

Dudley faces punishment ranging from a warning to 15 days in prison if found guilty, the report said.

"This conflict is not about a badly performing company; it's not about the chief executive; it's not about foreign employees and not about the international expansion of TNK-BP's business. It's a systematic attempt to control the company using tactics of the 1990s," Alastair Graham, BP's chief liaison with its TNK-BP board members, said at a news briefing on Thursday, repeating a claim made by BP chairman Peter Sutherland earlier this month.

BP's share price has fallen from nearly ?650 ($1,280) one month ago, to ?580.25 at the close of trading Thursday. TNK-BP accounts for one-quarter of its production. "That's why this partnership is a bit tricky -- because one is a strategic investor, an operator, an industry player that's managing the assets. The other partner is a financial investor that's looking at a different set of metrics," said Polovets of AAR.

Source: The Moscow Times|By Miriam Elder

[GEOPOLITIC] Iran - Brasil give priority to energy, agricultural cooperation

Deputy Foreign Minister Ali-Reza Sheikh-Attar said on Wednesday that Iran and Brasil give priority to joint cooperation in energy and agriculture sectors. Ali-Reza Sheikh-Attar made the remark in a meeting with Brazilian Deputy Agriculture Minister Afonso Kroetz, adding that the two nations are interested in expanding relations particularly trade exchanges.

According to the Information and Press Department of the Foreign Ministry, Ali-Reza Sheikh-Attar said that the political leaders of both countries are determined to expand bilateral ties in different sectors.

He further called for improvement of bilateral trade relations by adopting innovative policies.n
Pointing to formation of a joint economic commission as a means for drawing up new strategies and paving the way for promotion of mutual cooperation, he supported the idea of joint production of ethanol in Iran.

"We believe that the production of ethanol in Iran can help decrease air pollution and increase incomes," Ali-Reza Sheikh-Attar further said.

Kroetz, for his part, outlined policies of his country in agriculture sector, saying that Brasil underlines the necessity of attracting foreign investments and increasing export of agriculture and animal animal husbandry products. He also expressed his country's readiness for production of ethanol and conduction of research on cattle breeding in Iran.

Source: Islamic Republic News Agency

[INDIA] Natural gas production to jump two-fold by 2011-2012

India's natural gas production will more than double to 170 million standard cubic meters per day by 2011-12 after fields such as Reliance Industries' eastern offshore KG-D6 reach peak output.

In 2007-08, domestic production at 79.40 mmscmd and 31.50 mmscmd from import LNG met some 60 per cent of the demand, according to latest projections made by the Petroleum Ministry.

State-run Oil and Natural Gas Corp (ONGC) will produce 47.06 mmscmd of gas this fiscal, almost unchanged from 47.19 mmscmd of 2007-08. This output will rise to 51.65 mmscmd by 2011-12, while Oil India Ltd will contribute 10 mmscmd.

Reliance Industries' KG-D6 will start producing this year at an initial rate of 40 mmscmd, rising to 60 mmscmd in 2009-10 and to 80 mmscmd in 2011-12. When KG-D6 hits peak, the share of fuel produced by fields operated by private sector firms would touch 102.57 mmscmd (in 2011-12).

The projections anticipate an additional 2 mmscmd output from Mahanadi basin NEC-25 field of Reliance in 2011-12 and 4.5 mmscmd from Gujarat State Petroleum Corp's Krishna Godavari basin field.

India's import of liquefied natural gas (LNG) is also slated to more than double to 23.25 million tons by 2011-12 from 9 million tons in 2007-08 after Dabhol, Kochi and Mangalore terminals become operational.

Petronet LNG's Dahej terminal will see capacity doubling to almost 12 million tons and Shell's Hazira terminal is seen operating at 2.5 million tons, unchanged from present times. Dabhol may import 5 million tons, Kochi 2.5 and Mangalore 1.25 million tons, the projections stated.

Together with 81.38 mmscmd of LNG, the country's total gas availability will touch 252.09 mmscmd in 2011-12 from 110.9 mmscmd now.

Source: India Economic Times

[OIL PRICES] Crude Oil Declines as China to Increase Fuel Prices Tomorrow

Crude oil fell more than $4 a barrel on speculation demand will decline, after China said it will raise fuel prices starting tomorrow.

China, the second-biggest fuel consumer after the U.S., will increase gasoline and diesel prices by 1,000 yuan ($145.50) a ton, the National Development and Reform Commission said. The increases represent a 17 percent gain for gasoline and 18 percent for diesel. Oil has almost doubled in the past year, partially because of growing demand from China.

``The announcement of the Chinese fuel price increase sent the market sharply lower,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``This should have a big impact on demand.''

Crude oil for July delivery fell $4.10, or 3 percent, to $132.58 a barrel at 12:15 p.m. on the New York Mercantile Exchange. Futures climbed to a record $139.89 on June 16. Prices are 94 percent higher than a year ago.

Brent crude oil for August settlement declined $3.13, or 2.3 percent, to $133.31 a barrel on London's ICE Futures Europe exchange. Prices climbed to a record $139.32 on June 16.

China will also raise jet-fuel prices by 1,500 yuan a ton, or 25 percent, tomorrow, the top policy planner said. On July 1, China will increase electricity prices by an average 0.025 yuan a kilowatt-hour, or 4.7 percent. China will impose temporary caps on thermo-coal prices until the end of this year.

The government is considering a so-called environmental tax, a new levy on auto fuels and changes to existing taxes on natural-resource use, Fu Jing, deputy director of policy and legislation at the State Administration of Taxation, said at the Energy Efficiency Asia conference in Beijing today.

Developing Countries
``The developing countries, in particular China, have been driving demand growth,'' said Eric Wittenauer, an analyst at Wachovia Securities in St. Louis. ``Subsidies and price caps insulate consumers from the full impact of higher prices. By rolling them back, some of the insulation is reduced and we can expect to see a demand response.''

Oil demand will fall 240,000 barrels to 48.71 million barrels a day among the 30-member Organization for Economic Cooperation and Development, the U.S. Energy Department said in a report on June 10. The OECD doesn't include developing countries such as China.

Chinese consumption is expected to rise 440,000 barrels to an average 8.02 million barrels a day this year, according to the report.

India, Malaysia, Indonesia and Taiwan have increased fuel prices and reduced subsidies this year, a move that may cut Asian demand and slow global oil-consumption growth.

Oil rallied for the first time in four days yesterday as U.S. President George W. Bush said he doesn't expect pledges of higher supplies to emerge from a June 22 meeting of producers and consumers in Jeddah, Saudi Arabia. Prices also rose because a government report showed that U.S. crude-oil inventories fell for a fifth week.

Source: Bloomberg|By Mark Shenk

[MIDDLE EAST] Negotiations under way for no-bid contracts. Oil majors may return to Iraq after 36 years

Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein consolidated his power.

Exxon Mobil, Shell, Total and BP, the original partners in the Iraq Petroleum Co., along with Chevron and a number of smaller oil companies, are in talks with Iraq's Oil Ministry for no-bid contracts to service Iraq's largest fields, according to ministry officials, oil company officials and a U.S. diplomat.

The deals, expected to be announced on June 30, lay the foundation for the first commercial work for the major companies in Iraq since the U.S. invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq's Oil Ministry.

For an industry being frozen out of new ventures in the world's dominant oil-producing countries, from Russia to Venezuela, Iraq offers a rare and prized opportunity.

While enriched by escalating prices, the oil majors are also struggling to replace their reserves as more of the world's oil patch becomes off limits.

The Iraqi government's stated goal in inviting back the major companies is to increase oil production by half a million barrels per day by attracting modern technology and expertise to oil fields now desperately short of both. The revenue would be used for reconstruction, although the Iraqi government has had trouble spending the oil revenues it now has, in part because of bureaucratic inefficiency.

The Iraqi Oil Ministry, through a spokesman, said the no-bid contracts were a stopgap measure to bring modern skills into the fields while the oil law was pending in Parliament.

Source: The New York Times|By ANDREW E. KRAMER

[INTERNATIONAL RELATIONS] Kissinger and Blair Warn of Conflict.

Visiting statesmen Tony Blair and Henry Kissinger said Tuesday that countries had to form strategic alliances to face major global challenges like energy security and climate change.

Kissinger, former U.S. secretary of state, and former British Prime Minister Blair were speaking at a Renaissance Capital investment conference, where Kissinger said Russia and the United States, accounting for 90 percent of the world's nuclear arsenal between them, have to set aside their differences to solve issues that cannot be tackled unilaterally.

"None of these [issues] can be dealt with by confrontation between the U.S. and Russia," he said. "It is not in the U.S. interest to keep Russia down, and it is not in the Russian interest to look at the U.S. as an antagonist."

Relations between the Washington and Moscow have been strained as a result of U.S. plans for a missile-defense system in the Czech Republic and Poland and amid growing resentment of what Russia sees as U.S. meddling in its backyard, including its support of Georgia and Ukraine's ambitions to join NATO.

Kissinger, who received the Nobel Peace Prize in 1973, continues to retain considerable influence in foreign policy circles in Washington. He has traveled to Russia on a number of occasions over the past eight years, engaging in behind-the-scenes diplomacy in discussions of U.S.-Russian relations with senior politicians.

Kissinger met for a brief conversation Tuesday afternoon over tea with President Dmitry Medvedev and was expected to meet with Prime Minister Vladimir Putin later in the day.

Asked by a member of the conference audience where the next major international conflict might come from, Kissinger warned that the search for energy security could lead to aggression as countries scramble to secure energy supplies.

"If supply is limited and demand increases, if countries compete for access to energy on a purely national basis, we are bound to see a repetition of the colonial conflicts of 19th century," he said, cautioning that such conditions could degenerate into "intense political rivalry."

Kissinger's words struck a chord.

"This is an early warning signal, but I'm not sure it will do anything to make people move away from that kind of position. If anything, it might even hasten the grab for oil assets," said Marshall Goldman, associate director at the U.S.-based Davis Center.

"At the present time, Russia … is not in a position to worry there won't be enough for Russia. If anything, it might make Russia even more aware of the fact that they are in a very commanding position."

With one-quarter of the world's gas reserves and as the largest oil exporter outside of OPEC, Russia is favorably positioned to take advantage of any race for assets.

The price of oil has reached unprecedented highs in recent months, climbing close to $140 per barrel this week, while industry leaders have warned that it could be many years yet before alternative fuels will be in widespread use.

Kissinger's words were echoed by Blair, the Middle East envoy for the United States, Russia, the United Nations and the European Union — the so-called Quartet — who said world leaders had to respond properly to enormous challenges, through opening up and not protectionism.

"Power is shifting east, and it's shifting fast, not just to China and, in time, to India, but also to the Middle East and to Russia," Blair said. "Political and economic relationships are undergoing profound change."

To laughter from the audience, Blair admitted that Britain and Russia had had their difficulties over the last two years, but he said it was essential to have Russia on board to tackle issues of a global nature.

"We need to engage in strong strategic partnerships with [the] shift in power. Not to engage with this at a strategic level would be a … mistake of a profound nature," he said.

"Global challenges cannot be solved without the participation of countries like Russia," he added.

Relations between Russia and Britain are at a post-Soviet low, stemming back to the murder of Alexander Litvinenko, a former FSB agent, in London in late 2006.

More recently, BP has been embroiled in a battle with the Russian shareholders over the leadership of the 50-50 TNK-BP joint venture. The tie-up was hailed as a landmark in cooperation between the two countries back in 2003, when both Blair and Putin put their signatures to the deal.

Five years on, the project is unraveling and BP claims that the Russian shareholders are trying to take control of the project. TNK-BP, a wholly private company, remains an anomaly in a country that has undergone a creeping renationalization in the resource sector.

In a widely publicized address at last year's conference, Tony Hayward, just one month into his new role as chief of BP, issued an impassioned plea for Western markets to open up to Russian investment as he attempted to defuse the firm's conflict with state officials over the Kovykta gas field.

No representatives from BP attended, with the embattled CEO of TNK-BP, Robert Dudley, pulling out at the last minute.

Finance Minister Alexei Kudrin weighed in on the dispute Tuesday, telling reporters that there was still time to limit the collateral damage from the conflict.

"This is a specific case, and it hasn't affected the investment climate yet," Kudrin said. "The conflict itself isn't as important as how it ends. The conflict should be resolved in a civilized way, so it won't do any harm." he said.

The Russian shareholders, Alfa Group, Access Industries and Renova, or AAR, have called for Dudley's firing and a restructuring of the TNK-BP board.

Tim Summers, the company's chief operating officer, said the conflict, including AAR's threat to take BP to court in Stockholm over its hiring of foreign employees, could affect TNK-BP's operations.

"They are in dialogue with each other, and we hope that dialogue will be constructive and reduce some of the uncertainty for my team in terms of the operations of the company," said Summers, sitting in for Dudley, who had been scheduled to take part in the conference's energy roundtable. "I won't pretend it's been an easy time for our employees."

The fate of 150 BP employees, assigned as specialists, engineers and strategists to TNK-BP, remains uncertain, as their visas run out in July.

A court in the Tyumen region was due Wednesday to hear a lawsuit brought against TNK-BP by Tetlis, an obscure firm with a miniscule holding in the joint venture, which is challenging the legality of the foreign hires.

"The issues at stake are complex," said Summers. "The sooner it gets resolved, the better."

Summers defended the company's record, judged by reserve replacement ratio and dividend payments, following claims by Alfa Group chairman Mikhail Fridman that TNK-BP has underperformed, particularly compared with its Russian rivals.

Bob Foresman, deputy chairman of Renaissance Capital, warned that the dispute was "not helping anybody."

"It's obviously unhelpful for BP. It's very unhelpful for AAR, as it doesn't make them look good. It's unhelpful for the Russian government and administration and it is unhelpful for the market," Foresman said.

At the same time, he said talks with government officials had led him to believe that BP's presence in Russia was not under threat.

"No important decision maker in Russia wants to see BP leave Russia," Foresman said. "It's not about the authorities chasing BP out."

There has been much public speculation that AAR was looking to gain greater control of the joint venture ahead of a sale to a state-owned energy major like Gazprom or Rosenergo.

Gazprom CEO Alexei Miller, speaking at a different event Tuesday, said his firm had made no overtures toward TNK-BP, Interfax reported.

Gazprom has neither made nor received any offers for the purchase of shares in TNK-BP and is not related in any way to the conflict within the company," Miller told reporters at the opening of a new production unit at electricity utility Mosenergo. Notably absent at Tuesday's conference was scheduled speaker Igor Shuvalov, the first deputy prime minister who was publicly upbraided by Putin last week for taking time out from work on domestic issues to speak at the St. Petersburg International Economic Forum last weekend.

[INTERNATIONAL RELATIONS] Kissinger and Blair Warn of Conflict.

Source: The Moscow Times|By Miriam Elder

[INDIA] Nuclear power ventures may get overseas funding

Indian companies planning to set up nuclear power or renewable energy ventures can now look forward to offshore financing. The US, along with other G8 countries, is poised to create a $10-billion corpus for promoting clean energy in developing countries like India and China. The US, UK and Japan have committed $5 billion between themselves to this end, while the other G8 countries are likely to participate in the fund. Nuclear power and renewable energy is believed to be the answer to climate change.

“The US and other developed countries have proposed a new clean energy technology fund over the next three years to counter climate change worldwide. The US has already committed $2 billion for this cause.

The fund will be given as seed money to private sector players for setting up clean projects,” White House Council of Environment Quality chairman James L Connaughton said on Tuesday, at an event organised by Indian Chamber of Commerce (ICC).

Mr Connaughton further said: “The UK and Japan have collectively contributed $3 billion. Other G8 countries are likely to participate.” The fund is aimed at encouraging deployment of all forms of cleaner and more efficient technologies in developing countries. This would help leverage local private sector capital by making clean energy projects more commercially attractive.

The White House confidante said the US has proposed to remove all tariff and non-tariff barriers to promote clean energy. The US government has also proposed $42-43 billion as long term guarantee for nuclear power projects. It plans to offer another $5 billion for research in carbon capture and carbon storage technologies, over the next five years.

India, which is a huge user of coal, will be a top beneficiary. “Three top energy companies — Coal India, NTPC and ONGC — were looking to initiate research on this. Now, we’ve learnt that the US has expanded the scope of the fund. So, there will be some modifications,” Coal India chairman Partha Bhattacharyya said. ICC senior vice-president Sanjay Budhiaa observed: “Collective action is needed now and will be critical in driving an effective and efficient response.”


Source: India Economic Times

[OIL PRICES] Markets ignore Saudi oil concession

Saudi Arabia's offer of a further increase in production to halt the oil price spiral failed to have any impact yesterday on markets more preoccupied with the shutdown of a North Sea oil and gas field, the weakness of the dollar and the renewed surge in product prices.

Futures contracts in New York hit a new intra-day peak of $139.89 a barrel at one stage, before closing down 25 cents at $134.61, while North Sea Brent jumped more than $2.40 to $137.52 in London, on the back of the Statoil decision to cut output from the Oseberg field by 150,000 barrels a day follow

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Sterling jumped to its highest level for two weeks on a trade weighted basis in anticipation that the Bank of England's Monetary Policy Committee will be pressured into increasing interest rates because of inflation worries, while the dollar continued to lose ground against the euro.

Figures out today are expected to show consumer price inflation in Britain is running at an annual rate of 3.1pc, well above the 2pc target level agreed with government. Mervyn King, Governor of the Bank, will have to write what analysts feel will be first of a series of letters to the Chancellor explaining why the target has been missed.

Saudi Arabia's decision to increase production by another 500,000 barrels a day followed a meeting with Ban Ki-moon, the United Nations secretary-general, in Jeddah. The increase, the second in a month, will push Saudi output to 9.7m daily barrels and comes as Saudi prepares for a meeting of oil producers and consumer governments in Jeddah to try to put a brake on rising prices.

Malcolm Wicks, energy minister, welcomed the Saudi decision but failed to get the United Arab Emirates to follow suit.


Source: The Telegraph|By Roland Gribben