Posts from ‘May, 2007’

From page A1
Wednesday 30 May 2007

“Government isn’t doing industry any favours by appearing to be so much in favour of development,” Severson-Baker said. “Government is partly to blame for industry’s poor image because they aren’t leading on those issues either.”

Rather than offer creative solutions to tough issues, Severson-Baker complained that industry captains are “very quick to threaten to leave” the country when confronted with sensitive topics.

When pressed to acknowledge one positive industry contribution, Severson-Baker pointed to Shell Canada’s efforts to reduce emissions from its oilsands operations.

But Sendall argued the petroleum industry provides skilled jobs for hundreds of thousands of people, underpinning the country’s economic prosperity.

Solutions to issues like climate change will be found through innovation and the development of new technology, she said.

According to the Canadian Association of Petroleum Producers, Canadian oil and gas companies spent about $45 billion in 2005, three times the $16 billion spent in 1998.

In that time, the oil and gas industry contributed an estimated $27 billion to government revenues in the form of royalty payments, bonus payments and income taxes.

According to the association, oil and natural gas accounted for about 81 per cent of Canada’s merchandise trade balance in 2005.

Pierre Alvarez, association president, said the rapid pace of growth over the past decade has inevitably resulted in more potential for conflict.

“It’s one of the challenges of being a big industry,” said Alvarez. “When you are as big in the economy as we are now, you can’t hide.” 

Wed May 30, 2007 11:39 AM BST

PORT HARCOURT, Nigeria (Reuters) – Villagers sabotaged a major export pipeline in Nigeria for the second time this month and halted 150,000 barrels per day (bpd) of oil production, Royal Dutch Shell said on Wednesday.

Community members stormed the Bomu pipeline complex, which is a major artery feeding the Bonny crude export terminal, prompting the partial shutdown of the Trans-Niger pipeline on Tuesday, a company spokesman said.

“Youths from the K-Dere community started to spoil the environment by opening some pressure indicator valves. Consequently, we had to shut in some of the oil production,” he said.

Shell said it had already begun to restore some of the lost production, but would not specify how much.

The same protesters, from the Ogoni area of the anarchic Niger Delta, had attacked the same pipeline hub on May 10 and occupied it for six days, forcing a 170,000 bpd closure.

“It’s the same group of boys who occupied the facility last time. They say Shell has broken the agreement it had with them and that’s why they decided to occupy it again,” said Blessing Kolzor, a community leader in K-Dere.

The protesters want a stake in the oil flowing through Ogoni, an area where Shell suspended production 14 years ago because of popular protests. There is no production in Ogoni but the area is still criss-crossed by oil pipelines.

Shell had only just resumed normal production levels at its 400,000 bpd Bonny terminal before Tuesday’s attack. Exports remained under a force majeure, a legal measure exempting Shell from its contractual export obligations.

The latest disruption brings to 845,000 bpd, or one-third of capacity, the volume of oil production shut by a wave of unrest in Nigeria, the world’s eighth largest oil exporter.

The country’s new President Umaru Yar’Adua, who took office Tuesday, said he would urgently address the crisis in the oil-producing Niger Delta.

Militants fighting for regional control over the region’s wealth have promised to release six hostages on Wednesday as a sign of their readiness to talk. About 25 foreigners are currently being held captive.

(Additional reporting by Randy Fabi in London)
 
© Reuters 2007. All rights reserved. 

 

May 30, 2007, 1:48AM
By JOE CARROLL
Bloomberg News

Pension fund angry over climate strategy The California Public Employees’ Retirement System, the largest public pension fund in the U.S., is seeking the removal of Exxon Mobil Corp. director Michael Boskin over the company’s strategy on climate change.

Calpers joined two dozen other institutional investors to oppose the reappointment of Boskin, who heads the board’s public issues committee, at Exxon Mobil’s annual meeting today in Dallas.

Boskin has refused to meet with investors to discuss Exxon Mobil’s strategy on the issue, Calpers and Ceres, a coalition of environmentalists and investors, said in a statement on Tuesday.

Exxon Mobil, the world’s largest oil company, is lagging behind competitors in addressing global warming, the statement said.

Chevron Corp. is spending more on renewable fuels, and ConocoPhillips moved ahead of Exxon Mobil earlier this year when it joined an industry group that backs mandatory U.S. limits on emissions of carbon dioxide and other gases that warm the Earth, according to critics.

“Exxon Mobil’s inaction on global warming stands in stark contrast to industry peers such as BP, Shell, Chevron and ConocoPhillips, which are all beginning to manage the risks and seize opportunities from climate change,” Mindy Lubber, the president of Boston-based Ceres, said in the statement.

Royal Dutch Shell and BP are the two biggest European oil companies, while Chevron and ConocoPhillips are the second- and third-largest U.S.-based energy producers.

Since late 2005, Boskin has refused five times to meet with investors on the climate issue, according to the statement.

Directors should be accessible to shareholders and management should be accountable to directors, Calpers Chief Investment Officer Russell Read said in the statement.

“We have a fundamental problem when directors refuse to meet with the people they’re elected to represent,” Read said. “Especially one who has a leading role on a company’s board.”

Boskin, 61, is a professor of economics at Stanford University and a former chairman of the President’s Council of Economic Advisors.

Exxon Mobil spokesman Gantt Walton said that Chairman and Chief Executive Rex Tillerson has been designated to speak on behalf of the directors on climate change issues.

“He meets with shareholder groups quite frequently,” Walton said. Investors “have a lot of access to the company and to the board’s position.”

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Published: Wednesday, 30 May, 2007, 08:26 AM Doha Time
 
TEHRAN/DUBAI: Iran expects to sign a multibillion- dollar agreement with a foreign partner next month to produce liquefied natural gas, or LNG, from the South Pars field, the world’s biggest gas reservoir.

“We’ve signed the draft contract with a foreign contractor and the main contract will be signed within the next month,” Ali Kheir-Andish, the project director, said yesterday on Shana, the oil ministry press agency, without providing the name of the foreign company.

The announcement comes amid reports that  the US is piling pressure on European banks and energy firms to avoid doing business with Iran, sending a blunt message that reputations are at stake if they do so.

Washington, leading efforts to isolate Iran over its atomic programme, has slapped sanctions on two Iranian banks. UN sanctions have targeted one.

Iran is fighting back with plans to set up an overseas investment fund in Bahrain or Dubai to help finance South Pars. Washington is working hard behind the scenes to ensure that Iran cannot raise the cash it needs.

The LNG project, called Iran LNG, will use gas from phase 12 of South Pars, he said.

In April, OMV AG, central Europe’s biggest oil company, signed a preliminary agreement to develop that phase and build an onshore gas liquefaction plant. Vienna-based OMV said then a final agreement might not be made until the second half of this year.

“This deadline is too early for us,” OMV spokesman Thomas Huemer said in a telephone interview from Vienna yesterday.

Iran, the site of the world’s second-largest oil and gas reserves, is pushing foreign companies to sign energy agreements quickly, as its international isolation grows over its nuclear programme.

Total and Royal Dutch Shell are studying similar LNG projects in Iran and both companies have delayed decisions, citing the country’s geopolitical situation.

“We’ve said ‘second half of this year,’ and we’re sticking to this deadline,” OMV’s Huemer said. It “could be” that Iran is talking to other foreign companies to develop that phase 12, the spokesman said.

Iran still hasn’t produced its first tonne of LNG. The country has signed only one sales agreement, with India, for the shipment of 5mn metric tonnes of LNG a year starting in 2009.

The field, discovered in 1966 by Shell, contains an estimated 600tn cu ft of gas, or almost a 10th of the world’s reserves.

Iran LNG is expected to yield 10mn tonne of LNG and 700,000 tonnes of liquefied petroleum gas, or LPG, a year, Shana said.

In February, as part of the Phase 12 development, Iran awarded a $500mn LNG and LPG storage-tank contract to a group that includes South Korea’s Daelim Industrial Co and the economic arm of Iran’s Islamic Revolutionary Guards Corps.

France’s Total missed a March 31 deadline set by Iran to make a final decision on developing phase 11 of South Pars. Two weeks later, Iranian Deputy Oil Minister Gholamhossein Nozari extended the deadline by “three to four months.”

In addition to geopolitical considerations, Iran and Total have disagreed on the price of gas from the field. Total chief executive Officer Christophe de Margerie said on April 5 the cost of developing the LNG project had more than doubled.

Total owns 30% of the LNG venture called Pars LNG, which intends to build a $2bn facility using gas from the 11th phase of development.

Similarly, Shell has postponed an decision on a $2.5bn LNG project known as Persian LNG in South Pars. The Iranian oil ministry had called for it to decide by the end last month. “The final investment decision is about a year from now,” Shell chief executive officer Jeroen van der Veer said in Davos on January 25.

Foreign energy companies are already facing reduced profit in Iran. Red tape, technical glitches, tougher contract terms and US trade sanctions all are hampering development.

US companies are barred by law from investing in Iran’s energy industry.
Iran ejected foreign oil and gas companies after the 1979 Islamic Revolution. It invited them back in the 1990s to rebuild fields damaged by eight years of war with Iraq and to explore for new sources of energy.

Despite US and UN sanctions, Iran says foreigners are keen to invest in its oil and gas reserves, the world’s second biggest. At least $100bn of foreign cash will be needed over the next decade to boost output by 1mn bpd to 5mn.  –

Bloomberg, Reuters

By Joe Carroll
Bloomberg news
Tucson, Arizona | Published: 05.30.2007

Colorado and Utah have as much oil as Saudi Arabia, Iran, Iraq, Venezuela, Nigeria, Kuwait, Libya, Angola, Algeria, Indonesia, Qatar and the United Arab Emirates combined.

That’s not science fiction. Trapped in limestone up to 200 feet thick in the two Rocky Mountain states is enough so-called shale oil to rival OPEC and supply the U.S. for a century.

Exxon Mobil Corp. and Chevron Corp., the two biggest U.S. oil companies, and Royal Dutch Shell Plc are spending $100 million a year testing methods to separate the oil from the stone for as little as $30 a barrel.

And some companies, including Raytheon Co., are working on new technologies to make oil-shale extraction more efficient and less environmentally hazardous.

A growing number of industry executives and analysts say new technology and persistently high prices make the idea feasible.

“The breakthrough is that now the oil companies have a way of getting this oil out of the ground without the massive energy and manpower costs that killed these projects in the 1970s,” said Pete Stark, an analyst at IHS Inc., an Englewood, Colo., research firm.

The U.S. imports two-thirds of its oil, spending $300 billion a year, or 40 percent of the record trade deficit. Oil prices have risen 63 percent since 2004, and higher fuel costs have slowed growth in the world’s largest economy to the lowest in four years.

Reserves’ scale “significant”

“The potential for shale is large,” said Joseph Stanislaw, senior energy adviser for Deloitte & Touche LLP who co-authored a book on the world oil economy.

“Assuming the technology proves out, the size and scale of the reserves are significant.”

In the high desert near Rifle, Colo., Shell engineers are burying hundreds of steel rods 2,000 feet underground that will heat the shale to 700 degrees Fahrenheit, a temperature at which Teflon melts.

The heat will be applied for the next four years to convert the hydrocarbons from dead plants and plankton, once part of a prehistoric lake, into high-quality crude that is equal parts jet fuel, diesel and naphtha, the main ingredient in gasoline.

Chevron, which helped build the Saudi Arabian energy industry when it struck oil in the kingdom in 1938, plans to shatter 200-foot thick layers of shale deep underground, said Robert Lestz, the company’s oil-shale technology manager.

Rather than using heat to transform the shale into crude, Chevron plans to saturate the rubble with chemicals to convert it. The method will reduce power needs and production costs, Lestz said in a May 24 interview.

Chevron scientists are working with researchers at the Los Alamos National Laboratory in New Mexico to determine which chemicals work best for converting shale to crude oil.

Shell’s heating technique amounts to “a brute-force approach,” said Lestz, who is based in Houston.

1.5 trillion barrels likely

Raytheon, which pioneered the microwave oven in the 1940s, is developing a process that includes using radio waves to heat up the oil shale.

Irving, Texas-based ExxonMobil plans to shoot particles of petroleum coke, a waste byproduct of oil refining, into cracks in the shale. The coke will be electrically charged to create a subterranean hot plate that will cook the shale until it turns into crude. The company declined to discuss the progress of its oil-shale tests.

“These are quite remarkable technological approaches,” said Jeremy Boak, a geologist at the Colorado School of Mines in Golden. “We know the oil is here. It’s just a matter of getting it out.”

U.S. oil-shale deposits likely hold 1.5 trillion barrels of oil, according to Jack Dyni, a geologist emeritus at the U.S. Geological Survey. All 12 OPEC countries combined have proved crude oil reserves of about 911 billion barrels, led by Saudi Arabia, with 264.2 billion barrels, according to statistics compiled by BP Plc.

Skeptics of the potential for shale oil include Cathy Kay, an organizer for the environmental group Western Colorado Congress, who said the techniques will drain water supplies, scar the landscape and require so much power the skies will be choked with smoke from coal-fed generators.
 
“They are going to do absolutely massive environmental damage,” said Kay, who has spearheaded the Grand Junction, Colo., group’s anti-shale campaign since September.

Shell to use walls of ice

Shell, based in the Hague, estimates it can extract oil from Colorado shale for $30 a barrel, less than half today’s price for benchmark New York futures.
Shell’s process includes surrounding each shale field with an underground wall of ice.

The so-called freeze walls are to prevent groundwater from swamping the heating rods and to protect the local water supply from contamination as the organic material in the rocks turns to oil, according to Terry O’Connor, the Shell vice president in charge of the company’s Colorado shale project.

In the 1970s, oil-shale efforts involved mile-wide strip mines and factory-sized cookers to boil giant limestone boulders.

This time, no company expects to bring in front-loaders, heavy-duty dump trucks or thousands of miners to haul shale from open pits.

“The old technique required them to dig the equivalent of a new Panama Canal every month,” said former Colorado Gov. Richard Lamm, whose tenure from 1975 to 1987 included the last attempt to extract oil from shale.

By Angela Macdonald-Smith

May 30 (Bloomberg) — ConocoPhillips, the second-biggest U.S. refiner, will today ship the first extra cargo from its Northern Australian liquefied natural gas venture in addition to its contracted deliveries.

The cargo, which is due to leave Darwin about 6 p.m. in the 135,000 cubic meter `LNG Pioneer’ tanker, will be delivered to the existing customers of the plant, Tokyo Electric Power Co. and Tokyo Gas Co., Dirk Faveere, operations manager at the facility, said. One cargo is shipped about every six to seven days, he said.

“At the moment all our gas is contracted to those buyers if they can take it,” George Manning, Darwin area manager at ConocoPhillips, told reporters during a visit by Asia-Pacific Economic Cooperation energy ministers to the plant. He said output at the plant was two cargoes ahead of schedule this year.

ConocoPhillips, based in Houston, started production at the 3.3 million tons-a-year Darwin plant in the first quarter last year and is seeking more gas off northern Australia to supply a potential expansion. The site at Darwin has approvals for as much as 10 million tons a year of LNG production capacity.

“ConocoPhillips is looking for further opportunities to expand the operation of this plant,” Australian Industry Minister Ian Macfarlane said. “As soon as they possibly can they will” expand the project, he said.

The Darwin LNG venture includes Eni SpA, Santos Ltd., Inpex Holdings Inc. and the two Japanese LNG customers.

Second Unit

A second LNG production unit at the site may have capacity of between 3.5 million and 6 million tons a year and may start up in 2012-2013, Adelaide-based Santos, Australia’s third-biggest oil and gas producer, said last month.

Australian LNG export earnings are estimated by the government’s commodities forecaster to jump to A$8.5 billion ($7 billion) in the year ending June 30, 2012, from an estimated A$5.4 billion this financial year, as new projects start up. Australia has more than A$50 billion of proposed LNG projects, led by companies including Woodside Petroleum Ltd., Chevron Corp. and Inpex.

Australia is aiming to become the world’s second- or third- biggest LNG producer, after Qatar, and possibly Nigeria, Macfarlane said today. Delays to the development of Australian LNG projects are “a concern” and are mostly due to the shortage of manpower and delays in environmental approvals, particularly in the case of Chevron’s proposed $10 billion-plus Gorgon project in Western Australia, he said.

Sunrise Project

Woodside’s proposed Sunrise LNG project, off northern Australia, “will go ahead” once the partners reach an agreement on where the gas will be processed, Macfarlane said. The Sunrise partners, which include ConocoPhillips, Royal Dutch Shell Plc and Osaka Gas Co., have agreed to a request from the East Timor government that an independent review is carried out to assess the ability of the gas to be processed in East Timor rather than Australia, he said.

The Sunrise gas field straddles a boundary between Australian waters and an area jointly administered by East Timor and Australia. Development options include an expansion of the Darwin plant, Woodside says on its Web site.

The delay to Sunrise due to an earlier lack of agreement between East Timor and Australia on the administration of the project means the venture has “lost its place” in the queue of proposed LNG projects in Australia, which includes Woodside’s Pluto and Browse projects and Gorgon, Macfarlane said.

To contact the reporter on this story: Angela Macdonald-Smith through the Sydney newsroom at

amacdonaldsm@bloomberg.net

Last Updated: May 30, 2007 02:41 EDT

By Tony Hopfinger

May 30 (Bloomberg) — Drilling plans by Royal Dutch Shell Plc and other oil companies in Alaska are drawing complaints from activists, fishermen and Eskimos at the International Whaling Commission meeting in Anchorage, Alaska.

Shell and the government haven’t prepared for spills in the Arctic, while exploration will disturb whale habitats, Betsy Goll, a spokeswoman for Alaska Wilderness League, said in a statement. The World Wildlife Fund is opposing U.S. plans to extend the exploration to Bristol Bay in southwestern Alaska by 2011, Margaret Williams, a fund director, told reporters yesterday.

“We’re worried about the noise from seismic and the effect it would have on whales,” Williams said. Seismic exploration uses sound waves to gather clues about underground oil deposits.

Dwindling discoveries have pushed oil companies into remote and more hostile regions to benefit from record demand and prices. U.S. President George W. Bush this year lifted a moratorium on drilling in Bristol Bay to tap reserves that may reduce reliance on Middle East supplies. Shell, Europe’s largest oil company, has shown the most interest in offshore exploration in Alaska.

Shell announced earlier this year a plan to navigate a small fleet of exploration ships into the Arctic’s Beaufort Sea. The company is waiting on permits to allow as many as three exploration wells this summer, Shell spokeswoman Terzah Poe said in an e-mail.

Bowhead Whales

Eskimos living along the coastline said the noise may disturb migrating bowhead whales, walruses and seals, which they depend on for food. They also questioned whether Shell is prepared for a potential oil spill in the Beaufort Sea.

Noise shouldn’t cause any problems and the company will closely monitor sea mammals near its rigs, Poe said.

“In over 60 years of offshore oil and gas exploration and production in the U.S., there is not a single documented case of these activities resulting in serious harm to a whale,” Poe said. Shell’s fleet will include spill clean-up equipment, planes and about 16 oil-response barges, she said.

“They’ve never had a spill in Arctic waters, so how do they know they can clean it up?” Robert Thompson, 60, a whaler in the Alaska village of Kaktovik, said in a phone interview May 28.

Since 2005, Shell has spent $44 million on 84 federal oil leases in the Arctic’s Beaufort Sea, according to the Mineral Management Service, which oversees offshore oil leases in federal waters. In February, the service accepted Shell’s exploration plan.

Appealed Decision

North Slop Borough, which includes Kaktovik, Barrow and several other villages, have appealed the Mineral Management Service’s decision to allow Shell to drill this summer. If Shell’s plans are delayed, it will probably have to wait until next year because the Beaufort Sea will be starting to ice over.

Shell has also indicated it wants to explore in the Chukchi Sea, off the coast of northwest Alaska.

“Our people have never really been consulted by the government or the oil company on how we feel about what they’re doing,” said Enoch Adams Jr., vice mayor of Kivalina, an Eskimo village in northwest Alaska. “There have been no hearings. There have been no attempts to inform us specifically what they’re going to do. We have not been offered any timelines.”

An International Whaling Commission committee prepared a report for this week’s meeting expressing concerns about oil development in Bristol Bay, particularly for the endangered North Pacific right whale. The committee has recommended to the commission that more research be done to better understand the impact of seismic exploration on whales.

Endangered Species

Bristol Bay is part of the Bering Sea, one of the world’s largest commercial fisheries. Several whale species endangered in the U.S. migrate through the sea.

In the 1980s, Shell, Exxon Mobil Corp., BP Plc and other companies drilled dozens of exploration wells off the Arctic coast, including some that showed potential for producing commercial amounts of crude. The drilling program slowed when the ExxonValdez oil tanker ran aground in Prince William Sound, Alaska, in 1989.

Before ExxonValdez, Shell helped discover a large oil deposit off the coast of the northern Alaska. BP, Europe’s second-largest oil company, subsequently developed the field and named it Northstar, the first offshore field in Alaska’s Arctic.

The World Wide Fund has previously campaigned against funding by the European Bank for Reconstruction and Development for a Shell project in Sakhalin, Russia because of alleged harm to Pacific gray whales.

The European Bank Jan. 11 canceled plans to lend about $300 million to Russia’s $22 billion Sakhalin-2 oil and gas venture after state-owned OAO Gazprom took control from Shell. The withdrawal threatened a further $7 billion in loans from other state-owned credit agencies and commercial banks, which had expected the European Bank to take the lead. Environmental clearance for the project by the bank would influence larger loans from other government and private-sector banks in Japan, the U.S. and Europe, the European Bank said last year.

To contact the reporter on this story: Tony Hopfinger in Anchorage, Alaska at thopfinger@gci.net .

Last Updated: May 30, 2007 02:21 EDT

By CHIP CUMMINS
May 30, 2007; Page A10

LONDON — BP PLC and the Libyan government of Col. Moammar Gadhafi agreed to a $900 million natural-gas exploration deal that provides a boost to the British energy company’s new chief executive as he struggles to lead BP through a series of greater challenges in the U.S. and Russia.
 
The deal could be a way to increase BP’s reserve base as it and other big energy producers scramble to gain access to oil and gas reserves around the world. It also reopens a historic exploration frontier for BP, which left Libya in 1971 after Col. Gadhafi nationalized the company’s operations there.

The deal is a personal triumph for BP CEO Tony Hayward. He pushed 18 months of difficult negotiations with Libyan officials while he was the company’s head of exploration and production. Earlier this month, he took over as CEO when longtime boss John Browne unexpectedly resigned after admitting he lied to a court to derail a newspaper story about his personal life.

Mr. Hayward and BP Chairman Peter Sutherland were in Libya yesterday for the signing ceremony, coinciding with a visit by outgoing British Prime Minister Tony Blair. One BP official said while initial investment for BP is set at about $900 million, the company is likely to put as much as $2 billion into the project during the coming years. BP said the deal was its biggest exploration commitment ever.
 
Mr. Hayward’s success in Libya contrasts with lingering problems elsewhere. In the U.S., federal authorities are investigating a big refinery explosion in March 2005, alleged improper energy-market trading and spills and corrosion at BP’s Prudhoe Bay oil field. BP says it is cooperating with all probes.

At the same time, Mr. Hayward faces tricky negotiations with Russian authorities, who have signaled that they will try to wrest control of a gas field now in the hands of a BP joint venture called TNK-BP.

The Libyan deal isn’t part of a series of oil-rights auctions that other energy companies have rushed into after U.S. and European governments eased sanctions against Col. Gadhafi’s regime in 2004.

Shortly after the thaw, BP rival Royal Dutch Shell PLC signed a similar gas-exploration deal with Libyan officials.

BP said it and Libyan partners will explore about 21,600 square miles — both onshore and offshore — an area BP said was equivalent to more than 10 of the deepwater blocks the company operates in Angola.

Write to Chip Cummins at chip.cummins@wsj.com

Wednesday 30 May 2007

From Breaking Views

Russia’s stock market looks like a bargain among emerging markets. And it should benefit from stable but high oil prices. That is the argument of Credit Suisse emerging-market strategist Alexander Redman. But if the economics are promising, the politics are frightening.

The Russian market sells at 10.6 times expected 2007 earnings, 22% below the average of all emerging markets, although above the nine-year Russian average of 8.2 times. When oil was less expensive, Russia looked a loss less promising.

Russia also doesn’t look like a bargain in comparison with South Korea, which is selling at 12.5 times expected earnings. The main political risk there is a positive one — that a pro-business candidate wins December’s presidential elections.

Russian earnings may be attractive, but it is far from certain how much foreign investors will get their hand on. Property rights in Russia are subject to political control. So while the overall cost of oil extraction may be below $20 per barrel in remote Siberia — a steal at today’s oil prices — Moscow is happier to receive foreign investment than to respect foreign property claims. That is what Shell learned in its Sakhalin II project — and BP is finding in its joint venture with TNK.

Russia’s political aggressiveness may be an even worse problem. As Venezuela’s Hugo Chávez showed, a combination of anti-Western ideology and economic independence through oil can tempt leaders to expropriate Western companies. Investors in Caracas telephone company CANTV are unlikely to get full value for their expropriated investment; shareholders in Russian companies run the same risk, especially if Vladimir Putin’s successor is more nationalistic.

These dire political possibilities seem weighty enough to justify Russia’s discount to the emerging-market average.

–Edward Hadas, Una Galani, Martin Hutchinson

Refineries shut and three quit spot market, writes Jamie Dale, Lloyds List
Published: May 30, 2007

DURBAN’S bunker market has been left dry with refinery shutdowns and all three local suppliers withdrawing from the spot market.

Shell, BP and Engen have stopped supplying the spot market as Durban prepares for the next round of refinery maintenance, with Engen due to shut down from June 4 to July 6.

The market has been aware of Engen’s intention to stop supplying ahead of its downtime, with the facility not expected to resume spot supply until mid-July.

But the withdrawal of the Sapref refinery, a Shell and BP joint venture, has come as more of a surprise that locals see as a move to stockpile ahead of Engen’s closure.

‘Sapref is basically stockpiling for June ready for the Engen shutdown to keep the market wet and for contracts, so there have been no avails for May,’ said South African agents GAC Bunker Fuels.

Reports have also suggested that the problem has been linked to a pipeline which joins the largest refinery in South Africa to a nearby storage facility.

With demand quite high in Durban at the moment, local brokers appear to be taking a more positive view regarding the refinery shutdowns that continue to cause problems every year.

‘Owners are somehow getting used to it,’ added GAC Bunker Fuels. ‘The perception is that South African bunkering is just unreliable at times.

‘The refineries need to shut down for maintenance or the problem would be a lot worse in the long run.’

Last year, participants in South Africa were not so positive after the Cape Town and Durban refineries shut simultaneously causing severe product shortages in the regional bunkering market.

One local operator said at the time that these problems were frustrating owners and local suppliers who had not been given sufficient notice, just one week, prior to the Caltex refinery shutdown in Cape Town.

Caltex was not due to shut for at least another month but the early closure over lapped with the Sapref shutdown.

‘That was a one-off thing last year,’ said GAC Bunker Fuels.

‘All the refineries needed to get the maintenance completed before new regulations came into force on January 1 this year.’

With no commitment from the refineries, local suppliers were left with the difficult task of rebuilding relationships with its clients and the reputation for the ports’ reliability.

The market is still being challenged following a series of disruptions already seen this year, with severe weather conditions closing the Durban and Richards Bay ports.

But of more concern for the port operations is the rise in price of fuel oil and the restrictions of gasoil supply caused by the April closure of the Caltex refinery that is still not back to full capacity.

‘There has been no gasoil for one and a half months from Chevron,’ said GAC Bunker Fuels. ‘We are not getting the volume that we are used to and prices have skyrocketed.’

The refinery, faced with problems since the restart, has focused its fuel production mainly towards the domestic rather than the marine fuels market, restricting the volumes made available to suppliers in Cape Town.

This has added to the problems affecting fuel oil supply and price in Cape Town, with the earliest supply date given as June 6-8 while no gasoil prices are being offered.

Fuel oil prices in Cape Town are trading at around $388-390 per metric tonne and in Richards Bay at $390.