Posts from ‘September, 2006’

For those who prefer not to cycle or walk, the eco answer to getting from A to B is to mix and match, says Lucy Siegle

Sunday October 1, 2006

I concede that the clean, green mobility charms of the push bike won’t seduce everyone. Unfortunately nobody has come up with such an easy, cheap and benign means of getting from A to B (other than walking), although the conundrum continues to occupy the world’s best minds.

Conversely, millions approach the topic completely mindlessly, which explains why transport accounts for 60 per cent of all CO2 emissions, and emissions from private cars in the UK are projected to reach 88.2m tonnes of CO2 (MtC) by 2010. The worst opprobrium, as ever, should be saved for those who have undone any slight fuel efficiency gains by swanning about in gas guzzlers (formalise your distaste at www.stopurban4×4s.org.uk).

Car clubs such as www.citycarclubs.co.uk are a great idea, liberating cars from being a polluting status symbol to a more sustainable service. Similarly, www.liftshare.com mitigates the eco fallout of driving solo, which causes 50 per cent more CO2 emissions than making the same journey on a bus. Hailing a taxi is becoming marginally less ethically dubious, too, thanks to stricter pollution standards. Or you can play it safe and book a greentomatocar (www.greentomatocars.com), which runs a fleet of 50 hybrid taxis.

The glaringly obvious eco answer is, of course, public transport. But which is better, bus or train? The bendy bus recently featured in London exhibition The Bad Design Amnesty. Rumoured to be prone to combustion, its length also creates congestion, negating environmental bonuses. But don’t let this eclipse the positive points of bus travel: overall, buses emit just one MtC per year, compared with 1.5 MtC emissions from trains. Trains, however, are increasingly switching to electric, substantially decreasing their carbon footprint.

But really, we’re holding out for a marriage between grotty public transport and super-glamorous cutting-edge green technology, such as the hydrogen-cell RV1 bus currently being trialled in London, or the fleet of new buses burning hydrogen in standard engines expected in Rotterdam in the near future.

Until then, it’s about mixing up travel options, including train, bus and car clubs. If you are stuck with the old internal combustion engine, you might want to bear in mind that all oil companies are not created equally. Exxon Mobil (whose UK subsidiary is Esso) spends just $10m a year on non-fossil fuel research and has been linked to the funding of organisations that undermine the scientific consensus on climate change. BP, meanwhile, spends $100m a year on non-fossil fuel research, while Shell invested $1bn between 2003 and 2005. So even if you can’t dump the pump, you can buy better gas.

lucy.siegle@observer.co.uk

Posted at 2:37pm on 01 Oct 2006

The operators of the Pohokura gas field in Taranaki say it is producing commercial quantities of gas for the first time.

Shell Exploration says gas and condensate are now flowing from three completed onshore wells through a production station at Motunui near New Plymouth.

A spokesman, Ajit Bansal, says it is a significant milestone for the companies developing the field as a joint venture, and for their customers.

The companies are: Shell, Todd and OMV. OMV is an Austrian gas and oil company.

He says commissioning of the production station will continue over the coming weeks and the offshore platform installation is underway. Six offshore wells are expected to come on stream during the coming year.

Shell Exploration says natural gas from Pohokura will be fed into the North Island gas network and the condensate will be piped to storage tanks at Omata near New Plymouth before it is shipped to refineries.

Copyright © 2006 Radio New Zealand

By Raymond J. Learsy

This April the Chavez government seized oil fields operated by two European oil giants- Italy’s ENI and France’s Total.

This, after the two companies declined to convert their contracts to joint ventures with the state. “These two multinational companies resist adjusting to our law. Our sovereignty isn’t under negotiation”, bellowed Rafael Ramirez Venezuela’s oil minister.

Chevron and Shell and fourteen other companies did agree to the terms giving Venezuela’s state oil company, PDVSA, at least a 60 percent stake. 

The Venezuelan government is continuing discussions on operating agreements with foreign stakeholders with the objective of giving Petroleos de Venezuela SA a majority stake in upstream operations, raising royalty rates and is even considering bringing criminal charges against former officials who crafted 1990’s era policies that encouraged private investment.

Simultaneously, according to the International Herald Tribune, Venezuela recently announced that it is significantly boosting trade with Russia, establishing joint ventures ranging from oil to agriculture. A total of 23 Russian oil companies offered services and technological help in areas from drilling to processing of heavy crude deposits.

While Venezuelan/Russian cooperation accelerates, the Russians are learning and acting upon the Venezuelan example. On the pretext of environmental concerns, Russiais threatening to halt work on the $20 billion Sakhalin Island energy project run by Royal Dutch Shell by moving to revoke an environmental permit. Russia’s concern for Sakhalin salmon and the grey whale seems eminently suspect given the lack of concern for the threatened extinction of Russia’s famed sturgeon. More to the point perhaps are the complaints from Russia’s natural resources ministry that Sakhalin 2 and similar agreements signed with other major oil companies in the mid 1990’s are far too generous to the western oil companies.

The situation has become so acute that a few days ago Foreign Minister Sergey Lavrov sought to reassure Western governments, by putting forward a disclaimer that had the markings foreshadowing the the deed to come: “Statements about some sort of revision of production sharing agreements and especially about squeezing out of foreigners from the Russian fuel and energy sector are groundless”. And along with these assurances Russian prosecutors were threatening to suspend the exploration license for TNK-BP to develop the massive gas field in Eastern Siberia.

So that there is no mistaking of the direction of events President Vladimir Putin this past week urged Russian officials to punish companies that violate licensing agreements putting pressure on regulators as they probe several Western oil giants.

Can we learn anything from Chavez and Putin? For all of his grandstanding Chavez may have a point. When being taken to the cleaners by the oil conglomerates he, at least in this instance, acts in the interests of his nation. By contrast we have given away the nations wealth to the oil companies by a government seduced by the oil industry’s lavishing hundreds of millions, all for the purpose of gaining influence in our Congress and Executive branch. It has permitted the oil companies to gain access to the nation’s underlying oil and gas rights for a pittance while pushing through super generous depletion allowances, favorable tax incentives and royalty relief giveaways.

According to the Government Accountability Office, the investigative arm of Congress, the Treasury could lose upwards of $20 billion over the next 20 years. And how does our government react? The Interior Department advised Thursday a week ago that they would not try to recover the more than a billion dollars in royalties lost to date as a result of flawed oil and gas leases it signed in the late1990’s. Rep. George Miller (D. California) was moved to comment “If things keep going like this we’re going to need two sets of handcuffs; one for the oil companies and one for the bureaucrats”

In damning testimony before a House subcommittee Earl Devaney, Interior Department’s Inspector General accused top officials in his agency of fostering a culture of “managerial irresponsibility” that tolerated conflicts of interest, cronyism “short of crime, anything goes at the highest levels of the Department of the Interior”.

In my post “The Oil and Gas On Federal Lands Belong to Us!” 03/24/06 argued for a national oil trust to develop the oil and gas on national lands and ocean shelf for the benefit of all Americans. That the trust’s profits would go to funding alternative fuel programs, hybrid car credits, mass transportation and on.

Perhaps when dealing with the oil companies this is Hugo’s “he made the trains run on time” moment. And perhaps the time has come that we took a page from his timetable.

About the author of this article:
Raymond J. Learsy is the author of the book Over a Barrel: Breaking the Middle East Oil Cartel. A graduate of the Wharton School, he made his life in the fast-paced, risk-filled world of commodities trading, beginning in 1959. In 1963, he started his own firm and over twenty years expanded from the U.S. into Canada, the United Kingdom, Luxembourg, Brazil, and Pakistan, trading in an array of bulk raw materials and commodities, shipping to customers worldwide. In the 1980s, he shifted gears as a private investor, from 1982 to 1988, served as a Reagan appointee to the National Endowment for the Arts. Currently, he is a member of the Woodrow Wilson International Center for Scholars. Learsy’s richly-informed analysis of the international oil trade, OPEC, and its impact on the American and world economy has been featured in the National Review Online and the New York Times. He currently resides in Connecticut, and can be reached at triduane@aol.com.

Eleven energy ministers warned of rising political and commercial risks to Europe’s energy markets as President Vladimir Putin issued a warning to “unconscientious” investors, Agence France Presse reported on Thursday.

“The ministers note the recent developments in energy markets and the ever increasing potential risks of a political and commercial nature,” the 11 Black Sea-region ministers said.

“The reliability of access to energy (is) subject at this stage to challenges and threats of both a short-term and long-term nature,” they said in a statement.

The warnings after a two-day summit of the Black Sea Economic Co-operation organisation (BSEC) came shortly after Russia rattled energy investors by threatening to shut down the world’s largest private oil and gas project.

Russia last week withdrew a crucial environmental permit for the $20bn (15.8bn-euro) Sakhalin-2 project in the Russian far east, citing environmental violations by the foreign companies running the project.

Putin added a further warning yesterday, saying that the government would take action against companies that were too slow in developing their projects.

“I expect the (natural resources) ministry and the government as a whole to take such decisions, including toward companies that work unconscientiously or do not fulfill licence agreements,” he said at a meeting with the minister for natural resources in the southern Russian city of Sochi.

Russian officials also hammered foreign firms developing Sakhalin-2 at a separate energy industry conference in Sakhalin yesterday.

The warnings from the 11 energy ministers seemed to reflect conflicting interests in the Black Sea region, which Russian Energy Minister called an “indispensable” energy bridge between Europe and Asia.

The region’s clearest conflict has been between Russia and its Western neighbor Ukraine, which have had tense energy relations since Russia cut gas to Ukraine on January 1 during a price dispute.

Khristenko’s Ukrainian counterpart Yury Boiko was kept from the Sochi summit by tense talks in Moscow on a new gas supply contract.

Analysts have said that Russia’s ultimate goal is gaining control over Ukraine’s gas transport infrastructure, while Khristenko said that “achieving predictability” was Russia’s main motivation.

“The worst sort of predictability is better than the best unpredictability,” the minister said at a news conference.

The Black Sea ministers also faced conflicts over competing pipeline projects, such as Russia’s plans to expand its Blue Stream gas pipeline through Turkey to Israel and possibly Europe, which would rival the planned Nabucco pipeline.

The planned Nabucco pipeline would bring natural gas from Iran and Turkmenistan to European markets without crossing Russian territory.

Khristenko insisted that the Russian-Turkish Blue Stream gas pipeline had “proved its effectiveness both in financial terms and in terms of securing regional energy security.”

Russia and Turkey have clashed over Blue Stream since the pipeline came online in 2003, however, and delivery volumes have been growing at a slow pace amid price disputes and lower demand projections from Turkey.

The BSEC, which Russia is hosting this year, was formed in 1992 to co-ordinate the economic interests of Black Sea-region states such as Russia, Turkey and Ukraine. The group is one of several regional organisations embracing countries bordering the sea, and holds numerous annual ministerial meetings to coordinate the group’s economic policies.

Russia directs 30% of its gas exports to BSEC members.

The group’s main members are Russia, Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Serbia, Montenegro, Turkey and Ukraine.

Leading producers do battle over TransCanada plans to switch gas pipeline to oil sands; disagree over outlook for gas supplies

Gary Park
For Petroleum News

In the red corner we have, among others, EnCana, Shell Canada, Nexen and Devon Canada.

And in the blue corner, ConocoPhillips Canada, Canadian Natural Resources and Suncor Energy.

It’s one of those very rare showdowns in the Canadian oil patch.

At stake is the future of almost 500 miles of natural gas pipeline in Canada which has many of the largest oil and gas producers locked in combat and, in the process, feuding over the outlook for Western Canadian gas supplies.

The trigger is TransCanada’s plan to convert a portion of its Canadian mainline from a gas carrier to become a major link in the proposed Keystone oil sands pipeline.

In final submissions to the National Energy Board, EnCana, Shell, Nexen and Devon contend that gas supplies could be endangered if volumes exceed available capacity after the Line 1 conversion.

Backing TransCanada are ConocoPhillips, Canadian Natural and Suncor, along with the Saskatchewan government.

Hearings in October

The boards opens hearings Oct. 23 on the US$2.1 billion Keystone project, which is designed to initially carry 435,000 barrels per day of oil sands production from Hardisty, Alberta, through Saskatchewan and Manitoba and on to the Wood River and Patoka refinery areas in Illinois.

The undertaking also involves the construction of 225 miles of new pipeline in Canada and 430 miles in the United States.

TransCanada insists the portion of Line 1 (one of six forming its mainline network) it wants to convert is needed for only 4 percent of its gas export capacity out of Alberta.

TransCanada Chief Executive Officer Hal Kvisle says there is enough room to move all of the gas the Western Canada Sedimentary Basin can produce and still have 10 percent unused pipeline space.

The company forecasts the excess capacity will rise over the next 5 to 10 years, reaching a peak in 2009 of 1.3 billion cubic feet per day of the available capacity of 6.47 bcf.

A study commissioned by TransCanada points to relatively flat WCSB supply in the short-term, averaging 16.9 bcf per day in 2009-10 compared with 17.1 bcf in 2006-07, with its own mainline volumes declining to 5.1 bcf per day from 5.9 bcf over the same period.

Demand in Western Canada forecast to grow

During the forecast period, demand in Western Canada is forecast to grow to 6.2 bcf per day in 2013-14 from 4.9 bcf in 2006-07 and 5.5 bcf in 2009-10, further lowering the demand on its mainline system. TransCanada said.

However, Andrew Safir, president of Recon Research of Los Angeles, said Line 1 is an economic necessity because it provides spare capacity that allows WCSB gas to meet demand surges in the North American market, with recent flows on the line frequently exceeding 85 percent of capacity.

On behalf of those opposed to the conversion, GLJ Petroleum Consultants said TransCanada’s throughput methodology is “conservative” and does not reflect the “range of realistically possible outcomes.”

GLJ challenges TransCanada’s assessment that “supply fundamentals have weakened considerably,” arguing that gas-related activity in the WCSB remains strong and total supply is in fact growing slightly, creating “excellent” prospects for net supply growth.

In his regulatory submission, Canadian Natural Senior Vice President of Marketing Real Cusson said the chances of lower gas export capacity are “very small” if the conversion is approved.

“The risks of negative impacts on gas shippers are far outweighed by the benefits of utilizing (Line 1) to provide early expansion of oil transportation capacity,” he said.

Suncor, an oil sands major, warns that if Keystone is not ready by late 2009 crude oil “will be stranded” in Canada in 2010.

EnCana, Canada’s largest gas producer as well as being an emerging oil sands major, says Canada has a major investment in gas export pipelines that should not be curtailed.

Introduction by Alfred Donovan.

Robert Aouad, a guest columnist in a U.S. College publication, recently took issue with a suggestion that Shell Oil should be included in a list of terrorist organisations: the following is an extract from his article published on 22 September 2006.
 
EXTRACT: As for Shell Oil, who you suggested should be included in a list of terrorist organizations with extremist groups like Hamas, I have trouble equating an unfortunate oil spill with a terrorist attack. Shell Oil did not set out to Nigeria with 56 million gallons of oil to intentionally spill it onto the farmland of the Ogonis. It was a very unfortunate incident indeed, but definitely not a terrorist attack. Furthermore, how do we expect Shell Oil to get into areas such as these for cleanup when the volatile Nigerian military government and the protesting Ogoni people are at each other’s throats?

Complete article: BG News: Labeling terrorists should be left to government, not colleges

The Ogoni author, Ben Wuloo Ikari, has asked us to publish his passionate views in relation to this controversial suggestion.  Although Shell management has a track record of using what can be described as terrorist tactics against perceived enemies, I do not believe that it is appropriate to categorise Shell alongside extremist groups. Shell management can fairly be described as evil, dishonest, greedy and unscrupulous. And as Ben correctly points out in his article, Shell has been closely associated with an uncover spy firm. (In this connection, Shell admitted, after being cornered as a result of a newspaper investigation, that it has used undercover activity involving deception, faked documents, infiltration and sabotage, against opponents.) But despite these facts, we do not consider that Shell senior managers are terrorist masterminds or that Shell is a terrorist organisation.

However, we do recognise that the Ogoni people see Shell from a unique perspective bearing in mind the way Ogoniland has been plundered and polluted over the decades.  Shell admitted only after an internal report was leaked, that its activities in Nigeria have fuelled corruption and violence. It is also impossible to forget the hanging of Ken Saro-Wiwa and a number of his supporters as a consequence of their peaceful campaigning activities against Shell.  Ken Saro-Wiwa was found guilty on trumped up charges by a Nigerian military regime which was in Shell’s pocket.

Consequently although we do not agree with all of the views expressed by Ben, we are happy to provide him with a free speech platform.

Article by Ben Wuloo Ikari

I write to contribute to the above subject matter as follows:

I tend to understand the position of Robert Aouad, however terrorism is not limited to the activities of groups like the “Hamas” as recorded inter alia. It is not limited to plane hijacks, bombings, and other strategies used.

And, although both the Oxford Advance Learner’s and American Heritage College Dictionaries summarily defines Terrorism and a Terrorist as “The unlawful use or threatened use of force or violence to intimidate or coerce societies or governments, often for ideological or political reasons,” and “One that engages in acts or an act of terrorism,” the call to include Shell Oil (HELL) in the popular terrorist organization’s list is indeed wholesome and not out of order.

Shell is no doubt one of the most dangerous human and environmental terrorist groups in the world. It has been linked with “Hakluyt” which is an undercover spy group. The company’s overall activities in Ogoni and Niger River Delta of Nigeria, since oil discovery is nothing but terrorism. Consider when the environment which is man’s first right is despoiled, making it difficult for people to inhabit such. This Shell’s nonchalant act/attitude of environmental ruin is even worst compared to other terrorist groups that target known enemies who kept terrorizing them as well. I know that sometimes real terrorist groups which includes established governments, attack innocent civilians, but terrorism launched at the environment is far deep than not. The killer oil firm terrorized and monitored (ordered the hanging of the Ogoni leaders) Ken Saro-Wiwa of the most blessed memory until he was killed as ordered. It paid Rtd. Colonel Paul Okontimo of the dreaded Rivers State Internal Security Taskforce to intimidate, terrorize, brutalize, torture, rape, and kill innocent Ogoni peasants who protested the company’s double standards and it environmental racist policy and devastation. This happened when under Ken Saro-Wiwa’s leadership, Ogoni gained the consciousness that Shell had devastated her environment  thus forcing inhabitants and aquatic lives to extinction. A protest that exposed the company before the world, making it uncomfortable considering Shell’s over magnified reputation.

Note, that, the group also terrorized the family of Alfred Donovan, a long-term member of Shell Transport and Trading Company. Dr. John Huong, a Geologist of 30 years standing was also intimidated and terrorized; threatened with imprisonment for revealing the oil/gas reserves overbooking that was reported as the biggest 419 (scam) of the decade. There are uncountable others who have had sad tales to tell about the deadly company’s repression.

No doubt Ogoni has issues with the Federal Government of Nigeria; it also has deep problem with Shell for degrading the environment with high degree gas flares (charging it with hydrocarbon), oil spills and laying of high pressure pipelines that crisscross at close proximity of human habitation. And have refused to accept responsibility for its reckless behavior. The many blowouts since 1970 to date that occurred in Ogoni and other parts of the Delta have not been attended. Making the entire ecosystems a total biohazard. This is of course what it would not or cannot do in its home countries, Britain/Netherlands, and America.

The present oil pipe blowout/spill is causing great panic in Ogoni now as the oozing fumes spread unchecked into the atmosphere exposing the inhabitants to more health related problems and death. The issue Ogoni have with the government is immaterial to Shell’s acceptance of its responsibilities. It is not the government’s function to stop the blazing in an oil field caused by corrosive and outdated equipment, cum lack of use as is the present situation in Ogoni. The responsibility is Shell’s, so it must be held accountable no matter how long it takes. The companies only interest is the oil and not the people and where they live, or the environment. Their many clandestine efforts toward resumption of operations in Ogoni even though it is succinctly clear the firm is not wanted is a testimony to the above fact.

Whether or not Shell Oil is wanted does not absorb it from responsibilities such as oil spills and previous crimes committed against Ogoni. It should be known that the company is a quasi government in Nigeria. It flares over 89 percent gas in the country and has jettisoned the agreement to end flaring in the nation by 2008.

Shamefully too, the Nigerian government does not even know how many barrels of oil per day Shell mines; the dumb government accepts whatever number of BPD Shell gives mainly due to the fact that it does not care for the people and also do not live in the oil bearing communities, hence do not appreciate the effects and danger inherent in environmental pollution by the company. Recently, the so-called government summed up courage and tasked Shell and other foreign oil imperialists companies to account for the exact quantities of crude oil mined on daily basis and Shell, etc., have bluntly refused to cooperate because of greed.

Conclusively, the brief activities of terrorism listed above is substantive evidence to label and convict this firm that kills to make profit as a terrorist group. I therefore submit that labeling should not be left to the government alone because most governments in the world, especially, British and American have been involved or are presently involved in acts of terrorism. Colleges handy with credible information about organizations, governments, and or companies such as Shell have the right to name them without fear or favor. This, if honestly and effectively carried out and the world becomes aware of their inhuman activities, would go a long way to check and balance acts of terrorism of all kinds.

Article ends

For more on Shell’s alleged terrorist acts and genocide against the Ogoni people, feel free to check out the book, Ken Saro-wiwa And Mosop: The Story And Revelation by Ben Wuloo Ikari (Paperback – Mar 14, 2006). Ben is also the author of “Inspiration: Speak Your Mind” by Ben Wuloo Ikari (Paperback – Feb 17, 2006) 

Both available on Barnes & Noble.com, Xlibris.com, Ebay.com, Amazon.com, Amazon.Co.Uk and many others:
Eg: http://www.amazon.com/s/ref=nb_ss_b/103-1833275-9130225?url=search-alias%3Dstripbooks&field-keywords=Ben+Wuloo+Ikari&Go.x=10&Go.y=16

September 30, 2006 
 
WATER is vital to the recovery of oil — it is used to force the black liquid from hard-to-reach parts. Water is also essential to the survival of the 2.5 million people living in the Thar Desert in Rajasthan, India, the world’s most populous desert.

Cairn Energy, the Scottish mining company, combined its own search for natural resources in the desert with a water supply project that has received plaudits in human rights circles. 
 
While mining its 7,000 sq km site, Cairn developed an excellent knowledge of the region’s water table, which it passed on to the Indian Government. The information is currently being used to sink wells for local people. The company also donated 600 tanks so that women do not have to carry water as far as before.

Its work in Rajasthan has been a win-win situation for Cairn. In 2004 the company made one of the biggest oil strikes of the year, and the biggest in India for 22 years, at Mangala, a mine that Royal Dutch Shell had given up on a few years before. The billion-barrel find catapulted Cairn from relative obscurity into the FTSE 100 and has seen every other mining giant rush to India.
 

By Arkady Ostrovsky
Published: September 29 2006 03:00 | Last updated: September 29 2006 03:00

What do a Soviet pop diva, small country cottage owners and one of the world’s largest oil and gas projects have in common? The answer is simple. They have all become a target for a mid-level official who has built up an image as a fearless defender of the environment against the rich and powerful.

Oleg Mitvol, deputy head of Russia’s inspectorate for the use of natural resources, with a staff of two, is a colourful figure. A former entrepreneur in chemicals and the media, he earned himself a reputation in some business circles as a corporate raider. He was a business partner of Boris Berezovskybefore turning against the former oligarch who went into self-imposed exile in London. In 2004 he surprised many when he joined the civil service as an environmental inspector.

In that role he last year picked a fight with Alla Pugacheva, the country’s most famous pop singer, for building her dacha too close to a reservoir. He supervised a violent raid by Russian commandos on a dozen far more modest country houses outside Moscow which his agency said were built illegally. Sometimes his actions yielded results, sometimes not, but invariably he received plenty of media coverage.

But his latest target has been Sakhalin-2, the $20bn oil and gas project in the far east of Russia developed by a consortium of companies led by Royal Dutch Shell. Two weeks ago he told reporters that within a few days the ministry of natural resources would cancel an environmental permit for Sakhalin-2 that would halt its development, which it did. This ignited one of the biggest international disputes over an energy project.

The prosecutor general’s office issued a statement that the environmental assessment approved in 2003 was at odds with the law.

Alarm bells rang in Tokyo, Washington and London. But so far the threats have turned out to be worse than reality. Sakhalin Energy, the operator of the project in which Shell owns 55 per cent, says it received no official notification from the ministry of natural resources. The ministry of energy, responsible for the Sakhalin production sharing agreement with Shell, remained mostly silent and the work went on as usual.

A spokesman for Sakhalin Energy says the first official communication the company received was a letter from Mr Mitvol informing it of his visit to launch a fresh environmental investigation that would take a month to complete. This week he chartered an executive jet to fly journalists and environmentalists – unused to such luxury – to the island in order to demonstrate the project’s environmental damage, which he yesterday estimated at up to $50bn (€39bn, £26bn).

But the timing and the zealous nature of the latest investigation raises questions about why the campaign has begun only now, given that environmental concerns have dogged the Sakhalin-2 project for years. Until recently the European Bank for Reconstruction and Development deemed the project “unfit for purpose” and expressed concern for the island’s rivers.

Shell was forced to re-route its offshore pipeline to avoid a feeding ground for the world’s only population of 100 grey whales at a cost of more than $300m.

Maria Vorontsova, head of the Russian arm of the International Fund for Animal Welfare in Russia, concedes that Shell responded to pressure from environmental groups.

Ivan Blokov, campaign director for Greenpeace Russia, says Sakhalin-2 still ranks as one of the top environmental threats in Russia. For instance, the pipeline has had an impact on hundreds of rivers and forests. Shell says most problems have been rectified.

“The environmental permission which dates back to 2003 should never have been issued in the first place because it violates Russian law,” says Mr Blokov. Yet until now nobody, including the ministry of natural resources, has paid much attention. The Kremlin treated environmental groups with suspicion, seeing them as a nuisance at best and as an extension of foreign intelligence services at worst.

Shortly before becoming Russian president, Vladimir Putin, then still head of the Federal Security Service, remarked: “Unfortunately, foreign special services often use ecological and non-governmental organisations as a cover. This is why, whatever the pressure from media and NGOs, these organisations will always be under our piercing scrutiny.”

So what lies behind Russian authorities’ suddenly discovered concern for the environment?

German Gref, Russia’s minister for economic development, believes the crackdown was “detonated” by Shell doubling the project’s budget to $20bn. Because Sakhalin-2 is developed under a production-sharing agreement, any cost increase delays the moment when Russia starts profiting from the project.

“I have told Shell that we can’t simply swallow this figure and that they need to come up with some kind of solution,” Mr Gref told the FT this week. Analysts say Russia has a legitimate cause for indignation, but applying pressure on Shell through environmental concerns undermines Russia’s reputation and discredits its respect for due legal process.

Sakhalin-2 stands out among Russian oil and gas projects – and not only for its size. It is being developed by foreign companies without any Russian participation – a model the Russian government dislikes.

Gazprom, the state-controlled gas monopoly, tried to enter the project by swapping half of its gas field in Siberia for a 25 per cent stake in Sakhalin-2. But the deal went sour after the cost increase, prompting some analysts to suspect that a month-long probe into Sakhalin-2’s environmental compliance looks like a time-table for agreeing a deal with Gazprom. As a speaker at a conference put it this week, once Gazprom is in, “existing problems will be resolved automatically”.

Copyright The Financial Times Limited 2006

Saturday 30 September 2006
 
HERALD STAFF
 
The successful government pressure on Shell to suspend its new V-Power diesel pending government authorization of the product sets an alarming precedent for any market economy — would Alexander Graham Bell have felt obliged to seek government authorization before inventing the telephone or the Wright brothers to invent the aeroplane?

The government’s motivation for suppressing Shell’s new product is obviously its anxiety to tame fuel prices, suspecting this fuel innovation of being a backdoor price increase (V-power cost 15 more cents a litre on the basis of upgrading purity by 10 percent).

But if Shell insists on pricing itself out of the market by charging more, surely that is Shell’s problem — urging people to buy cheaper brands gratuitously insults the consumer’s intelligence (as President Néstor Kirchner has already done when calling for a boycott against the same company 18 months ago). Charging more for a product than competitors may be folly but why should it be a crime?

Yet Shell’s move should not be seen as either folly or a crime if understood as an attempt to circumvent the growing shortage of fuel — a shortage which has led to 1,400 service station layoffs and which threatens night buses with even more drastic consequences in the hinterland (thus ambulance services have been hit in Córdoba).

Paradoxically, the populist pricing of fuel (held to a third of world levels) as well as transport subsidies have only compounded the shortages. The upgraded fuel not only clashed with the government’s anti-inflationary strategy by raising the price but also with an ordinance progressively diluting diesel until 2008 in order to keep prices down. But if the government is so concerned about fuel prices, it could think of scaling back their huge tax component.

This lack of price freedom goes far towards explaining why Argentina has fallen from 54th to 69th place over the last year in the World Economic Forum’s league of competitive nations, which was published earlier this week. Argentina’s competitive shortcomings do not so much arise from the somewhat abstract sphere of institutional quality, as stated in the Forum’s report, as from the simple inability to price freely — low costs are scant benefit for businessmen if the government forces prices down even lower.

Instead of populist prices accelerating the depletion of a product in short supply, the government should start producing some serious energy conservation policies.

Saturday 30 September 2006
Yoshikuni Sugiyama

The government compiled in May an energy policy outline titled “New National Energy Strategy,” with the aim of increasing its ratio of independent oil development. However, its plan has already taken a battering thanks to a unilateral Russian ruling.

The Russian Natural Resources Ministry has decided to cancel the permit for the Sakhalin-2 natural gas development project off the coast of Sakhalin Island, citing problems with environmental conservation.

The project’s investors are Royal Dutch Shell PLC, Mitsui & Co., and Mitsubishi Corp. It is the only scheme fully funded by foreign capital among major resource development programs in Russia.

However, there has been growing discontent in Russia over Sakhalin-2, with some saying it is based on an “unequal treaty” that bars Russian companies from taking part, and which severely restricts the country’s share of the profits.

The ministry’s decision to cancel the undertaking is being seen as a move by Russia to strengthen its position, and increase its role in the project.

Russian President Vladimir Putin’s administration has been promoting a strategy to place energy under national control. Major oil company Yukos–which was hostile to the government–was charged with tax evasion and forced to dissolve.

Russian government-run gas company OAO Gazprom had been seeking to join the Sakhalin-2 project: Negotiations were already under way calling for Dutch Shell to transfer 25 percentage points of its stakes in Sakhalin-2 to Gazprom, in return for rights and interests in oil fields in West Siberia. There were also plans in effect for Mitsui and Mitsubishi to provide a combined total of 5 percentage points of of their stakes to the Russian company.

According to Japanese energy industry sources, Gazprom was dissatisfied with the negotiations, as it had reportedly hoped to gain more than 50 percent of the shares in an attempt to seize complete control of the scheme.

A dark shadow would be cast over Japanese energy supplies if the Sakhalin-2 project were to be suspended. The project is expected to turn out 9.6 million tons of liquefied natural gas a year from 2008. Eight Japanese companies, including Tokyo Electric Power Co., Tokyo Gas Co. and Chubu Electric Power Co., have agreed to purchase 4.73 million tons per year–equivalent to 8 percent of Japan’s gas imports.

The initial impact of a delay in imports from the project might be limited. However, it would be a different story if there were a prolonged suspension. Japan will shortly be renewing its long-term LNG import contracts. However, whether it will be able to secure the same volume it has been importing up until now is uncertain, as countries with large energy demands such as China and India are increasing their imports of LNG.

TEPCO President Tsunehisa Katsumata, who is also president of the Federation of Electric Power Companies, said at a press conference on Sept. 22 “it would be a hard story as a whole” if Japan could not procure LNG from Sakhalin-2.

How should Japan cope with the situation hereafter?

Firstly, it is important for the government not to get flustered. Russia’s objective is to maneuver itself into an advantageous position vis-a-vis its participation in the project, rather than postponing the construction work. The project itself will not get going unless Japan is assured of procuring LNG from Sakhalin-2.

Japan should draw international attention to Russia’s coercive approach to the project. In a statement issued on Sept. 19, European Commission Energy Commissioner Andris Piebalgs strongly denounced Russia for canceling the permit for the Sakhalin-2 project, saying the country needs to improve its environment for investment, so that safe and predictable transactions can be conducted.

Japan should work in close conjunction with the EU in seeking Russia’s reconsideration.

In response to a strong request from the Putin administration, Toyota Motor Corp. and Nissan Motor Co. have decided to construct auto assembly plants in St. Petersburg. Russia is trying to boost employment through the introduction of foreign capital while aiming at steady economic growth.

However, foreign companies will avoid investing in Russia if it keeps taking unilateral steps. Japan should strongly warn Russia of this possibility.

Sugiyama is economic news editor of The Yomiuri Shimbun.

(Sep. 30, 2006)