March 21st, 2006:

11:44:19 EST Mar 21, 2006
CALGARY (CP) – Global oil giant Royal Dutch Shell (NYSE:RDS.A) plans to develop heavy oil properties it recently bought in Alberta for $465 million through a new company that will operate separately from Shell Canada Ltd., its major Canadian subsidiary.
Houston-based Shell Exploration & Production in the Americas, a Royal Dutch Shell unit, announced Tuesday it has created a new Canadian division, Sure Northern Energy Ltd., to evaluate and potentially develop heavy oil resources acquired from the Alberta government in a Feb. 8 oilsands land auction.
Sure Northern submitted a successful bid of $465 million Cdn for 10 parcels of land through a land agent.
“We are delighted to have secured this heavy oil acreage,” Marvin Odum, executive vice-president of Shell Exploration Americas, said in a release.
“Royal Dutch Shell has a suite of both enhanced and new heavy oil technologies that we could potentially apply to this type of resource. While not all of these technologies are commercially proven, we believe there is significant potential for us to pursue this opportunity and the first step is to further appraise this resource.”
The move by Shell builds on the global company's already major presence in the northern Alberta oilsands, where it controls the Athabasca Oil Sands Project near Fort McMurray through Calgary-based Shell Canada (TSX:SHC).
Shell Canada operates that development with a 60 per cent stake. Chevron Canada and Western Oil Sands Ltd. (TSX:WTO) each hold 20 per cent of the project, which includes the Muskeg River Mine in northern Alberta and the Scotford refinery upgrader on the outskirts of Edmonton and produces about 155,000 barrels of oil daily.
Odum said the latest energy move by Royal Dutch Shell “represents a distinct opportunity to assess new and emerging technology.”
“It complements our existing strong position in Canadian oilsands through Shell Canada,” he added.
“The establishment of Sure Northern does not change the relationship between Royal Dutch Shell and Shell Canada, and as the major shareholder in Shell Canada, Royal Dutch Shell maintains its full support for (Shell Canada's) ongoing business, and its strong commitment to SCL's future success and growth.”
Shell said appraisal wells on the new acquired properties are currently being planned for this year.
Steven Crane will be the president of Sure Northern, which will be a wholly owned subsidiary of Royal Dutch Shell plc.
Shell EP Americas is a part of the exploration and production business of the Shell Group of companies, managing oil and gas operations in North and South America.
© The Canadian Press, 2006 read more

Tue Mar 21, 2006 5:37 AM ET
By Jonathan Leff
SINGAPORE (Reuters) – Oil majors seeking new ways to build on record profits have embarked on a mission to steal a bigger slice of the billion-dollar energy risk management pie from investment banks, reshaping the oil market in the process.
Long adept at managing their own risks, giants such as BP Plc. (BP.L: Quote, Profile, Research) and Royal Dutch Shell (RDSa.L: Quote, Profile, Research) are stepping up efforts to sell their expertise to other companies like airlines or utilities who want to hedge their exposure to volatile prices.
This will amp up the competitive pressure on industry leaders Goldman Sachs (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research), who depend on customer business for the foundation of their trading operations, and could give the majors extra leverage in their core markets.
BP last year hired new risk experts such as quantitative structurers — advanced mathematicians who construct and track complicated options and derivatives deals — for its revamped risk management division, which has been around over 10 years.
Shell, which has offered oil, gas and power risk management services to U.S. customers for a decade, set up a team in London in 2004 to target Europe and Africa.
Chevron Corp. (CVX.N: Quote, Profile, Research), bred from a more conservative trading background than the European majors, is the latest entrant and hired two professionals last year to launch its risk business in the United States, industry sources say.
Total (TOTF.PA: Quote, Profile, Research) has a strong franchise in French and African markets and two decades of experience, while top earner Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) is the black sheep of the group and eschews any form of derivatives trading for itself or others.
With profits of over $100 billion last year and market capitalization above $1 trillion, they are a formidable bunch.
“I believe oil majors are a real competitive force against investment banks, as the overlap in services being offered… in the energy sector becomes smaller and smaller,” says Tom James, principal of Deloitte & Touche's Energy Markets Practice and a risk management veteran of nearly two decades.
VALUABLE SERVICE
Goldman and Morgan, the biggest paper oil traders in the world, have dominated the energy risk industry since the 1980s and make billions each year by hedging for their customers. read more

Energy giant Shell has poached one of GlaxoSmith-Kline's leading trademark lawyers, Georgina Evans. Shell made the move after promoting former trademark head Bob Carter to head of agreements. Evans will take over trademarks for Shell's European offices in The Hague and London and will report to Carter.
According to a Shell spokesman, Evans will “build on the existing plan to enforce trademarks and develop new trademarks”.
Shell said its biggest challenge is policing third-party agreements with fuel retailers that use the Shell trademarks under licence. “Usually the terms are pretty stringent to protect the goodwill of the trademark being damaged,” said the spokesman.
Evans will also have to provide IP training to new employees and senior members of staff.
Shell has six trademark lawyers spread across offices in The Hague, London and Houston. Evans starts her new role in April. read more

California's move on global warming has created a rift
By MARC LIFSHER
SACRAMENTO, CALIF. – Gov. Arnold Schwarzenegger's pledge to fight global warming has opened a rift as wide as the Atlantic Ocean between two groups of oil companies in California.
The governor's high-profile initiative, which sets firm targets to reduce the greenhouse gas pollution that contributes to global warming, is supported by BP, the London-based oil giant whose Arco gasoline is the state's biggest seller, and Royal Dutch Shell of The Hague, Netherlands, owner of the Shell brand.
U.S. companies such as Chevron Corp. of San Ramon, Calif., and Exxon Mobil Corp. of Irving oppose the directive. In private, the Americans, who generally bristle at state intervention in the market, snidely refer to their trans-Atlantic cousins as “the Europeans,” who have adapted to a culture back home of stiff government regulation, expensive social-welfare networks and heavy taxes.
The greenhouse gas clash, which is just beginning to build momentum, marks a rare dispute among the large petroleum companies that make millions of dollars a year in political contributions.
The row threatens to weaken the industry's legendary unity in lobbying on air quality rules, gasoline taxes and highway funding.
“Typically the oil companies have banded together,” said Bill Magavern, a legislative advocate for the Sierra Club in Sacramento. “But I think we're now seeing the beginning of a fissure that could grow larger. European companies realize that greenhouse gas is something they need to grapple with, while the American companies continue to stick their heads in the sand.”
Even Joe Sparano, president of the Western States Petroleum Association and the oil business' point man in Sacramento, concedes that global warming “is a tough issue for our industry” because “folks have different views or don't get to the same place at the same time.”
The dispute comes down to whether the actions of an individual state, even one as large as California, can make a significant dent in worldwide emissions of carbon dioxide from refineries, power plants, factories and vehicles.
The foreign-owned companies argue that state action, including mandatory reporting of emissions, could ease global warming despite the absence of meaningful national or international controls.
The American companies counter that actions in California would be futile if uncontrolled pollution continues in China, India and other quickly developing industrial powers.
Carbon dioxide, too
The split in the oil companies' ranks reflects a similar disagreement in the larger business community over Schwarzenegger's plan for cutting carbon dioxide emissions, beginning in 2010.
His long-term goal, laid out in an executive order he signed in June, would slash carbon levels in the atmosphere to 80 percent below 1990 totals in 2050.
“The governor has driven a wedge between members of the business community,” said V. John White, director of the Center for Energy Efficiency and Renewable Technology in Sacramento, adding that it's unclear if he's going to stand up to opposition.
Schwarzenegger already has begun to backpedal from recommendations in a draft report by his administration's Climate Action Team.
The draft, put out for review on Dec. 8, called for a gas tax of less than a penny a gallon to fund research into alternative fuels.
Schwarzenegger's press secretary issued a statement saying the governor would not support any gas tax increase.
The final report, which Schwarzenegger ordered completed by Jan. 1, has been bottled up at the California Environmental Protection Agency for the past 2 1/2 months.
BP and Shell's environmental records are far from pristine. BP suffered a major oil spill earlier this month at its oil fields in the North Slope of Alaska. Last month, Shell was hit with a $1.5 billion legal judgment in Nigeria for allegedly polluting the oil-rich Niger River Delta.
BP, which advertises that it is going “Beyond Petroleum” in its quest to develop renewable energy, “is putting its money where its mouth is,” said Phil Cochrane, a spokesman for BP's U.S. subsidiary. The company is committed to spending $8 billion over the next decade on alternative fuel projects, including a $1 billion hydrogen-fueled electric power plant in Carson, Calif., he said.
'Great reservations'
For their part, the U.S.-based oil companies also are involved in developing alternative energy projects. However, they “have great reservations about a state-only approach,” Chevron spokesman Jack Coffey said.
Limits on greenhouse gas here would penalize California companies that are spending millions of dollars on pollution controls and energy efficiency, he said.
Chevron and other U.S. oil companies have been lobbying the Schwarzenegger administration against the global warming initiative as part of a coalition of business groups.
legislative advocate, Sierra Club in Sacramento read more

Sakhalin Energy, the operator of the Sakhalin-2 project, hopes that the possible inclusion of Gazprom as a shareholder will give the company access to additional gas reserves, Sakhalin Energy Executive Director Ian Craig told journalists.
Interfax quoted him as saying Gazprom, as a shareholder in the project, could ensure access to additional gas resources in the future. He said that there might also be an advantage in the sale of hydrocarbons, because in future sales markets, Gazprom’s participation might be a strategic advantage.
Craig also said that if the company decides to expand the capacity of its liquefied natural gas plant, it will need to build additional compressor stations, and Gazprom has a lot of experience of building these. Craig said if agreement is reached between Gazprom and the company’s shareholders, the Russian gas company would join the project at quite an advanced stage, when most contracts for LNG would have already been signed and construction of most production assets would have been completed. He said that he thinks that Gazprom’s interest is in acquiring the necessary experience and understanding of how such projects are implemented and LNG is marketed. He also said that a Gazprom delegation should visit in April to study the Sakhalin-2 project.
Craig also said that Sakhalin Energy wants to increase gas reserves at its license zones. After this it may decide to build a third production line at the LNG plant. Two lines are currently being built, with a capacity of 4.8 million tonnes of LNG each. He said that before a decision is reached to build a third line, there needs to be certainty about gas reserves. He also said that the capacity of the two production lines could be increased by several percent without additional investment. read more

By Leonard Doyle, Foreign Editor
Published: 21 March 2006
Across the frozen North Slope of Alaska, the region's largest oil accident on record has been sending hundreds of thousands of litres of crude pouring into the Arctic Ocean during the past week after a badly corroded BPO pipeline ruptured.
The publicity caused by the leak in the the 30-year-old pipeline could seriously damage BP's image, which has been carefully crafted to show it as a company concerned about the environment. Unlike other major oil companies, BP boasts that it is fully signed up to the dangers of global warming and it makes a conspicuous effort to flaunt its green credentials, tackling local environmental problems and erecting wind turbines above its petrol stations.
The first indication of the spill came in early March, when an oily patch was discovered near the elevated oil transmission pipeline, but the full scale of the accident is only becoming clear with time. Environmentalists who vociferously objected to the construction of the BP pipeline may now see their worst fears realised.
Clean-up crews have removed more than 190,000 litres of crude oil and melted snow off the frozen tundra but reports indicate that the leak is the second largest crude oil spill in Alaska – second only to the 1989 Exxon Valdez disaster.
The oil gushed from the pipeline at a spot where it dips to ground level to allow caribou to cross, and has led industry critics and environmental groups to question whether BP is saving money on maintaining its network of wells, pumps and pipelines crisscrossing the tundra – a complaint the company vigorously denies.
As oil is increasingly transported through environmentally sensitive areas by pipeline, the dangers posed by poorly maintained rotting pipes has become increasingly clear.
Exploration Alaska, the BP subsidiary that operates the pipeline from which more than 910,000 litres of oil has leaked, has recently been fined more than $1.2m (£635,000) for its poor environmental safety record.
The company has now been told it cannot restart pumping oil until it the entire pipeline has been inspected and repaired. Employees claim that they repeatedly warned that money-saving cutbacks in routine maintenance and inspection had dramatically increased the chances of accidents or spills.
“For years we've been warning the company about cutting back on maintenance,” Marc Kovac, a union official told the New York Times. “We know that this could have been prevented.”
In the interview, Marc Kovac, an official of the United Steelworkers union which represents workers at the BP facility, said he had seen little change in BP Exploration Alaska's approach despite the warnings.
In an e-mail to a company lawyer in June 2004, Mr Kovac forwarded a collection of his earlier complaints to management. One of these, dated 28 February 2003, concerned “corrosion monitoring staffing levels”. It began, “The corrosion monitoring crew will soon be reduced to six staff down from eight.”
It added: “With the present staff, the crew is currently one month behind. The backlog is expected to increase with a further reduction in manpower.”
Daren Beaudo, a company spokesman, said: “Whenever employees raise concerns about our operations we address them. When we inspected the line in September 2005, points of manageable corrosion were evident and all were within standards of operations integrity.
“Something happened to the corrosion rates in that line between September 2005 and the time of the spill that we don't yet fully understand.” read more

Britain is establishing a position as one of the worlds top energy producers in the sector, Martyn Wingrove
Mar 21, 2006
CENTRICA is lining up GBP750m ($1.3bn) on new offshore wind farms in Britain to ramp up its electricity generating capacity from renewable resources, writes Martyn Wingrove .
The British energy group has started its first offshore project this month off the south Cumbrian coast and has five more in the pipeline to come on line by the end of 2010.
Existing and new wind projects are pushing the country into the world's top producers of power from offshore wind resources.
London-listed Centrica is growing its energy divisions into the upstream sector of the oil and gas business and the growing renewable sector.
It is involved in two wind farm projects in the Greater Wash area off England's east coast that are going through the approval process and should be on stream by 2008.
Centrica is also poised to invest in three more wind farm projects, promoted in the second round of licensing in 2004, also in the Greater Wash area.
'We have five more projects that are approved or going through the consent process,' a Centrica spokesman said.
'Two projects should be constructed in 18 months to two years and three more were in round two and are scheduled to come on line by the end of this decade.'
Centrica's power generation from wind farms started last year when turbines on an onshore farm north of Aberdeen started turning.
This month the company's subsidiary British Gas started buying power from the Barrow Offshore Wind project, run by Danish oil company Dong in the East Irish Sea.
Centrica and Dong are investing more than GBP100m to install and commission 30 turbines on the farm with a combined capacity to generate 90 megawatts of power.
The British group's next offshore projects are likely to go ahead on the Lynn and Inner Dowsing sites by 2008.
Following these the group is looking to be involved in the Race Bank, Docking Shoal and Lincs windfarms on sites further from the coast by 2010, said a spokesman.
All five of these projects have yet to go through the consent process, although Lynn and Inner Dowsing are coming towards sanction dates.
The Barrow Offshore Wind project is the fifth offshore wind farm to come on line off the British coast.
Last year, the Kentish Flats project started off Herne Bay and the Kentish port of Whitstable.
Other farms in operation include Blyth Offshore Wind, one mile off the Northumberland coast, North Hoyle off the north Welsh coast and Scroby Sands off Norfolk.
Among the wealth of new projects waiting for government consent Powergen, Shell and Core are planning to build the world's largest offshore wind farm.
London Array, in the Thames estuary, could be fully operational by 2010 with up to 300 turbines to be installed in 2008-2010 to supply up to 1,000 MW of power to the nation's capital. read more

Native group joins boom: Oilsands development: Fort McKay, Alta., to be producer with $1B project
Mar 21, 2006
CALGARY – The hamlet of Fort McKay, Alta., is about to become the first Canadian aboriginal community to join the booming oilsands business as a producer, with plans to develop a $1-billion mining project with help from Shell Canada Ltd.
The First Nation of about 500 residents 65 kilometres northwest of the oilsands hub of Fort McMurray is forming a private, pure-play oilsands company that will be run as a division within Fort McKay Group of Companies.
That conglomerate of seven businesses, 100%-owned by the reserve, has successfully supported nearby oilsands development for the past 10 years. It generated $50-million in revenue last year through land-reclamation services, hauling of ore and overburden, transportation and camp catering.
The enterprising First Nation community, once a fur-trading and trapping hub, now wants to expand its growing oilsands interests and develop two main leases to which it acquired resource rights in a land claim settlement with Ottawa in 2003.
Details of Fort McKay's oilsands strategy will be unveiled at a community meeting on April 4 but Chief Jim Boucher said he believes the group's 8,200 acres of prime oilsands territory could hold 500 million barrels of oil.
“We're probably looking at production by the 2013-to-2015 time frame,” Mr. Boucher said in an interview. “[The 500 million barrels] is a preliminary estimate based on what we know now of the bitumen in place,” he said, adding core drilling this winter will help define the quality of the reserves and more delineation wells will be drilled next winter.
The acreage is surrounded by larger companies with larger stakes. Petro-Canada's proposed Fort Hills oilsands mine is to the west and the giant Muskeg River Mine owned by Shell Canada sits due east. Syncrude Canada Ltd.'s Aurora mine borders the southeastern edge of Fort McKay's leases.
Fort McKay has hired engineering giant SNC Lavalin Inc. to come up with a capital-cost estimate for a mining project, a number Mr. Boucher said could be about $1-billion.
“But in terms of the total value of the project — the capital going in and total potential value of the reserves at these kinds of oil prices today — I think we're looking at a project worth anywhere from $20-billion to $28-billion,” he said.
“It terms of a small community like Fort McKay, there's never been anything seen of this nature anywhere in Canada — in terms of ownership of the natural resource and the economic opportunities that will arise from developing this project.”
He said Fort McKay was able to move forward with its plan after royal assent was given late last November to Bill C-71, the First Nation Commercial and Industrial Development Act.
Mr. Boucher played a prominent role designing the legislation, which in part creates a regulatory framework for a large-scale First Nation-backed endeavour such as this to follow.
“Now we can attach an application for a project of this scale to a regulatory process, one that will utilize the system in place in Alberta today,” he said.
Fort McKay and Shell Canada, which is trying to grow its own oilsands production over the next 10 or so years to 500,000 barrels a day, have a “high-level” agreement in place that will give Shell some role in the Fort McKay project, said Rob Seeley, general manager of sustainable development for Calgary-based Shell Canada.
It could involve Shell becoming the primary developer and producer if Fort McKay relinquishes control and favours simply recouping a royalty from the bitumen produced on its land.
Mr. Boucher, who is also board chairman of the Fort McKay Group, suggested the community wants to be more involved than simply collecting a royalty.
“We're developing the capacity to do it and would obviously have to acquire the people, expertise and infrastructure to make it happen. We're quite confident of our ability to make it happen.”
Mr. Seeley said the possibility exists for Shell and Fort McKay to develop one of the two Fort McKay leases jointly.
Mr. Boucher played a prominent role designing the legislation, which in part creates a regulatory framework for a large-scale First Nation-backed endeavour such as this to follow. “Now we can attach an application for a project of this scale to a regulatory process, one that will utilize the system in place in Alberta today.”
Fort McKay and Shell Canada have a “high-level” agreement in place that will give Shell some role in the Fort McKay project, said Rob Seeley, Shell's general manager of sustainable development.
It could involve Shell becoming the primary developer and producer if Fort McKay relinquishes control and favours simply recouping a royalty from the bitumen produced on its land.
Mr. Boucher said the community wants to be more involved than just collecting a royalty. read more

Mar 21, 2006
Shell Canada Ltd. announced yesterday that its Athabasca oilsands project has resumed full output after repairs to a conveyor belt were completed ahead of schedule.
The conveyor belt, which carries tar-like, bitumen-laden sand from the mine to a facility where the oil is separated out, split last month. That reduced production to a third of the 178,000 barrels a day of bitumen normally produced at the site 75 kilometres north of Fort McMurray, Alta. Repairs to the belt, which Shell Canada says is the world's largest, began on March 14 and, at that time, the company said they were expected to take at least two weeks. Shell officials didn't give any reasons for the repairs being completed so quickly.
However it said in a release that it has changed operating and maintenance procedures for the belt following the tear. The mine supplies tar-like bitumen to the project's Scotford upgrading refinery near Edmonton. The upgrader converts bitumen into refinery-ready synthetic crude. The Athabasca oil sands project is 60% owned and operated by Shell Canada. Chevron Corp. and Western Oil Sands Inc. each has a 20% stake. read more

By THE ASSOCIATED PRESS
WASHINGTON (AP) — After a spurt of good fortune, the fledgling U.S. ethanol industry is anticipating some growing pains that could bring it unwanted attention this summer.
Ethanol's public profile rose significantly for the better last July when Congress passed an energy bill that mandates the doubling of biofuels output by 2012. In January, President Bush gave the industry a further boost with a strong endorsement in his State of the Union speech. And with the imminent phaseout of a petrochemical added to gasoline to reduce tailpipe emissions, more U.S. motorists will depend on the corn-derived fuel than ever before.
But there's trouble looming: The ethanol industry might not be ready to satisfy the expected summertime jump in demand. And by crimping the overall supply of motor fuel, this could contribute to a spike in gasoline pump prices at the start of the country's peak driving season.
That, at least, is the view of the Energy Department, which issued a report last month detailing the challenges midwestern ethanol producers will have in getting their fuel to key markets along the East Coast because of railroad, trucking and other distribution bottlenecks. The report also highlighted concerns about the limited output capacity of an industry still in its infancy.
The Renewable Fuels Association, a trade group representing ethanol producers such as Archer Daniels Midland Co. and Pacific Ethanol Inc., says the industry's challenges and their influence on gasoline prices are being overblown. The association sent an angry letter to the Energy Department last week, questioning the overall thoroughness of its research and accusing it of creating ''unnecessary fears in the marketplace.''
Still, ethanol-related worries hang over the U.S. market, contributing to a 42-cent-per-gallon increase in unleaded gasoline futures since mid-February. There are other factors behind the recent wholesale gasoline price spike, including soaring oil prices, strong demand and persistent strains on the U.S. refining system.
The average retail price of gasoline in the United States is $2.51 a gallon — the highest level since October — and some analysts say $3 is a possibility by summer.
Wholesale prices for ethanol, meanwhile, have surged to roughly $2.75 a gallon, or about 50 cents per gallon higher than usual, according to the Oil Price Information Service of Wall, N.J. Because ethanol makes up one-tenth of every gallon of unleaded gasoline with which it is blended, this windfall for ethanol producers ends up costing motorists an extra 5 cents per gallon at the pump.
High prices will spur more ethanol production — there are 33 new plants under construction — but some minor near-term complications can be expected due to the rapid increase in demand, said Bob Dinneen, president of the Renewable Fuels Association and the author of the letter sent to the Energy Department.
Dinneen said the industry is taking steps to mitigate the problems, such as filling ethanol storage tanks on the East Coast before summer arrives and contracting barges that can ship ethanol down the Mississippi River and then up the Atlantic seaboard.
Energy analysts said it is unclear whether ethanol producers can manufacture and distribute enough supply once U.S. refiners phase out the use of a petrochemical called methyl tertiary butyl ether, or MTBE, which enables gasoline to burn more completely, and thus more cleanly, but carries some public health risks.
The refining industry says it warned Congress for years about the difficulty ethanol producers would have in offsetting the loss of MTBE, which accounts for about 10 percent of the volume of every gallon of gasoline with which it is blended.
''When it comes to ethanol, Congress is guilty of more irrational exuberance than on any other issue,'' said Bob Slaughter, president of the National Petrochemical and Refiners Association.
California, New York and Connecticut have banned MTBE in recent years, but consumers from Virginia to New Hampshire, as well as in Texas, still depend on it.
MTBE, a natural gas derivative, has been the oxygenate of choice since the mandate was established roughly 10 years ago as a byproduct of the Clean Air Act.
But MTBE also has been found to contaminate drinking water supplies and it may cause cancer, exposing the petroleum industry to lawsuits filed by water districts and municipalities on behalf of their citizens. After Congress refused to grant the industry protection from such lawsuits, refiners made clear their intention to stop using MTBE.
Valero Energy Corp., Exxon Mobil Corp. and Shell Oil Co., the U.S. subsidiary of Royal Dutch Shell Plc, all plan to cease using MTBE in gasoline by May 5, spokespersons for the companies said.
Valero, the country's largest independent refiner, estimates the country's total gasoline supply will shrink by 145,000 barrels per day, or about 1.5 percent, once MTBE is removed — a transition expected to be complete by May 5. That is when an obscure provision of the energy bill goes into effect, eliminating the need for a so-called oxygenate in gasoline.
Now it is up to ethanol producers to bridge the gap. While U.S. ethanol producers have the capacity to produce roughly 4.3 billion gallons — or 280,000 barrels per day — in 2006, the near-term crunch means more imports will be needed from Brazil, Dinneen said. The United States imported more than 150 million gallons of ethanol in 2005.
Dinneen said part of the problem for the U.S. ethanol industry right now is that it was caught off guard by the oil industry's faster-than-expected phaseout of MTBE. ''Refiners made the decision to accelerate the removal of MTBE, not ethanol producers,'' Dinneen said.
Perhaps the biggest issue is distribution.
Gasoline with or without MTBE can be shipped in large quantities through an extensive network of pipelines. But ethanol, which tends to corrode pipelines, must be transported on trucks, trains and barges in relatively small batches to storage terminals where it is then blended with gasoline.
''I suspect there will be enough ethanol, but that logistics — getting rail and truck transportation to furnish the ethanol to key markets — will be the nightmare that drives prices,'' said Tom Kloza, an analyst at Oil Price Information Service.
The trucking industry is faced with a multiyear labor shortage and railroad capacity is tight because of strong demand to ship coal, grain and steel.
''Barges are in short supply too,'' said Joanne Shore, the Energy Department analyst who co-authored the report on the ethanol industry's challenges.
www.ethanolrfa.org
www.eia.doe.gov/pub/oil–gas/petroleum/feature–articles/2006/mtbe20 read more

By THE ASSOCIATED PRESS
EABOCH, Nigeria (AP) — Sooty towers of flame spew into the air night and day as excess natural gas from the petroleum industry burns off, buffeting Nigerian villagers with jet-force heat and noise. For many living near the dozens of gas flares dotting southern Nigeria, the flames are a potent reminder that the country's oil wealth has done little to benefit its people.
''The fish have gone from the rivers because of the noise. The fields are polluted from the oil, nothing grows,'' said Uche Onyemetu, who lives near an oil installation and four flares.
''This is supposed to be a rich village, but the whole area is poor,'' the unemployed 31-year-old said.
Oil began flowing shortly before the West African nation's 1960 independence from Britain. International oil companies operating in Nigeria have since paid untold billions of dollars to the federal government.
But most of Nigeria's 130 million people remain mired in poverty, much of the oil money stolen by leaders.
Across the south, Nigerians are clamoring for a greater share of the proceeds from the region's huge oil installations. Some have taken up arms, attacking oil installations and kidnapping foreign oil workers to press their point.
Bitterness over seeing so little benefit from the oil industry is compounded by living with the pollution it produces.
The natural gas flows along with the crude when it's pumped from the ground. While a valuable energy resource in its own right, processing and shipping the gas wasn't viewed as sufficiently profitable when much of Nigeria's oil infrastructure was built, so the gas was treated as an unwanted byproduct and burned off.
Gas flares pollute the fields and traditional fishing grounds. Villagers say their acrid black smoke sickens and blinds them and the flares' keening whine, which sounds like a jet plane, hurts their ears.
''They never end, never since before I was born,'' said 27-year-old Gift Obilor Jonah.
A Nigerian court recently ordered Shell and its joint-venture partners to pay $1.5 billion to one community to clean up the pollution, but the decision is under appeal.
The federal government, under pressure from residents of the Niger Delta, said about a decade ago that all the flares must be extinguished by 2008.
The international firms that work with Nigeria's state-owned oil company are investing billions to harness the excess gas so it can be sold, but they say a lack of major regional markets and other spending priorities are hampering the effort.
Shell, which plans to shut off its flares by 2009 — about a year later than originally planned — ''is committed to ending routine flaring of gas in its Nigerian operations,'' said a company spokeswoman, Caroline Wittgen.
''This requires the company to gather and bring to market gas from more than 1,000 wells, which is a big undertaking,'' she said by telephone from London.
At Eaboch, a town of mud huts and a one-room schoolhouse, vows to end the flaring, create jobs and develop the region are given little heed.
''They keep telling us that it will stop, but it's not stopping,'' said Onyemetu. ''The government is always saying they'll stop … But up to now, it's still continuing.''
At one of the few flares that shoot sideways a few feet off the ground, Ukpamueki Ogwhe has found a way to use the fire.
Ogwhe, 70, staggers under a woven basket balanced on her head and filled with shredded cassava. She places the cassava as close to the flames as she can tolerate.
The cassava, a staple food in Nigeria, dries faster near the flares than under the sun. Oghwe can produce the tasteless white curls faster than her competitors and sell more of them at a roadside market.
''This is good for us, it's useful for us. We can dry our cassava,'' she said as the flame roars nearby. ''But if it could be used to make lights or fuel for cooking, it would be even better.'' read more

By REUTERS
NEW YORK (Reuters) – Oil prices fell nearly 4 percent on Monday as dealers shifted their focus from shaky geopolitics to brimming U.S. stockpiles and took profits from last week's sharp gains.
U.S. light, sweet crude for April delivery settled down $2.35 to $60.42 a barrel. Prices fell 81 cents on Friday, but still ended the week up nearly $3 on concerns about potential supply interruptions.
London Brent crude was down $1.92 at $61.34.
“There is little news to perk up the market,'' said Tom Knight, a trader at Truman Arnold.
U.S. oil inventories are at their highest in about seven years, due in part to a tide of imports in recent months, giving the world's biggest energy consumer a thick buffer against supply disruptions.
Stockpiles of crude in the U.S. Gulf Coast, the heart of the nation's oil industry, are at their highest level since 1990, the U.S. Energy Information Administration said.
Oil prices remain buoyed over $60 a barrel — about twice where they were 2 years ago — as concerns remain that there is little spare global production capacity to fend off an extended supply outage.
Saudi Arabia's oil minister, Ali al-Naimi, said he was not worried that swelling U.S. crude oil inventories would trigger a collapse in prices.
“I believe, in these somewhat tense and uncertain times, it is only logical for consuming countries to build stocks,'' he said on Sunday. “In normal situations very high stocks would have a depressing effect on prices, but these are not normal times.''
Shipments from Nigeria have been hindered in recent weeks by militant attacks in the Niger Delta, a situation that worsened over the weekend after unidentified attackers blew up an oil pipeline in region.
Italian oil company ENI, whose Agip unit operates the pipeline, said that 75,000 barrels per day of output had been cut by saboteurs but that production should resume by month-end.
Royal Dutch Shell has yet to set a restart date for the 555,000 bpd of Nigerian output that it and other equity holders have had shut in since attacks on February 18.
Oil prices also have been supported by concern that Iran's nuclear dispute with the West could affect its exports, and growing worries that changes to U.S. gasoline specifications may stretch the refining system as the summer driving period approaches. read more

Mar 21, 2006
KUALA LUMPUR (AFX) – Shell Refining Company (Federation of Malaya) Bhd said it will not put up its LPG business assets for sale. The announcement follows the Shell Group's decision to retain its LPG business, it said in a statement.
Royal Dutch Shell plc announced on March 17 that it had completed the review of its global LPG marketing and distribution business and had taken the decision to retain this business within its downstream portfolio.
Shell Malaysia owns a liquefied petroleum gas (LPG) bottling plant and an LPG cylinder reconditioning plant at its Port Dickson refinery.
(1 usd = 3.70 rgt)
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By Enid Tsui in Hong Kong
Published: March 21 2006 02:00 | Last updated: March 21 2006 02:00
PetroChina's net profit last year rose to be the fourth-largest among global oil and gas companies as a sharp increase in crude oil prices more than compensated for the state-owned group's less lucrative activities.
The Beijing-based group yesterday reported Rmb133.4bn ($16.6bn) in full-year net profit, a 28.4 per cent improvement from the year before on sales of Rmb552.2bn.
China's largest oil and gas company leap-frogged the profits at more established western rivals – Total and Chevron – and moved closer to third-place BP, which earned $22.3bn last year. ExxonMobil is the largest in the sector, reporting $36.1bn in profits for the year, followed by Royal Dutch Shell.
China, now the world's second-largest oil consumer behind the US, has been keen to nurture a domestic energy company with the financial clout to acquire major oil and gas assets around the world to fuel its rapid urbanisation.
PetroChina, meanwhile, plays a crucial role in developing energy infrastructure across China. Having borne the burden of financing and building the 4,200km west-east gas pipeline, which underpins the country's gradual migration to natural gas use, PetroChina will in 2006 spend about Rmb15.3bn to expand its natural gas and oil pipeline network.
“I am a little bit worried about PetroChina's investment in these pipeline projects, which normally take up to three years to complete. If the price of crude falls below $55 per barrel, the company may find it a challenge to sustain them,” said Shang Ma, director of oil and gas research at Fitch Ratings in Beijing. Total capital expenditure is projected to rise 19 per cent to Rmb149bn this year.
The company also suffered larger-than-expected operating losses at its refining segment, which stood at Rmb19.8bn last year compared with a profit of Rmb11.9bn in 2004.
David Hurd, head of oil and gas research at Deutsche Bank, said that most industry observers were betting on Beijing liberalising the pricing of refined oil products this spring. “Once that gets approved, PetroChina would at least see break-even at its refineries. And that's a substantial boost to its bottom line.”
PetroChina has set ambitious production targets and is aiming to boost annual oil and gas output by 5 per cent in the next five years. Jiang Jiemin, vice-chairman of the board of directors and president of the company, said that much of the expansion would come from overseas.
Meanwhile, Chen Geng, PetroChina's chairman, told reporters yesterday that China and Russia would sign three energy agreements today during a visit to Beijing by the Russian president, Vladmir Putin. The deals were likely to involve PetroChina's parent company, China National Petroleum Corporation, he added.
Additional reporting by Justine Lau in Hong Kong read more

Mar. 21, 2006. 01:00 AM
CALGARY—Global energy giant Royal Dutch Shell PLC has bought up to half of Centurion Energy International Inc.'s key exploration properties in the Nile Delta in Egypt in a deal that could be worth up to $260 million (U.S.).
Centurion announced yesterday it had signed an agreement with two Shell units in Egypt to farm out a 50 per cent interest in two Centurion-operated exploration properties, the West El Manzala and West El Qantara concessions, in the Nile Delta.
Shell and Centurion will also co-operate in developing liquefied natural gas opportunities if enough gas is discovered on the exploration properties.
The farm-out to Shell is subject to certain conditions, including obtaining Egyptian government approvals.
Under the deal, Shell will initially pay Centurion $15 million and half of all future exploration and development costs for as long as the British-Dutch company remains a concession owner.
Canadian Press read more