LETTER TO THE EDITOR

“Half a World From the Gulf, a Spill Scourge 5 Decades Old” (front page, June 17), reporting that spills are a major problem in the Niger Delta, misses crucial context that explains why they happen.

You make a comparison between the Exxon Valdez spill and Nigeria. The two are completely different. The Shell Petroleum Development Company of Nigeria is the largest oil producer in the Niger Delta. In terms of volume, spills due to human error or equipment failure from its facilities over the last 10 years amounted to about 5 percent of the Exxon Valdez spill volume annually.

This is not to minimize the issue. Of course, any oil spill is a serious concern, and Shell works hard to reduce those within its control. It replaces equipment and hundreds of miles of pipelines each year. It compensates people affected, and it cleans up all spills, whatever the cause, as quickly and thoroughly as possible in an environmentally friendly way.

But most of the oil spilled from its facilities is because of sabotage and large-scale theft. These two causes accounted for 98 percent of its spill volume in 2009. Real progress to stop this won’t happen without solutions to the root causes of widespread discontent in the delta. The very real security problems put our staff at risk and make it impossible to clean up spills as fast as we would like.

Mutiu Sunmonu
Managing Director, Shell Petroleum
Development Company of Nigeria
Lagos, Nigeria, June 17, 2010

A version of this letter appeared in print on June 22, 2010, on page A26 of the New York edition.

NEW YORK TIMES ARTICLE

Deepwater Horizon

Reduction in thickness of casing raises concern about well’s integrity

By TOM FOWLER and ERIC NALDER
HOUSTON CHRONICLE

June 21, 2010, 10:59PM

Kari Gooodnough Bloomberg: Seaweed covered in oil from the Macondo well sits on a public beach in Gulf Shores, Ala., earlier this month.

Australia’s second-largest oil and gas producer and its partners, including Royal Dutch Shell Plc, have opted to rely on floating liquefied natural gas technology for the development, saying that it will deliver the most revenue to both Australia and East Timor. The government of East Timor objects to any plan that doesn’t include a gas processing plant in the country.

By Tim Catts and John Detrixhe

June 22 (Bloomberg) — Royal Dutch Shell Plc was penalized by the bond market in a $2.75 billion debt offering and Anadarko Petroleum Corp. notes tumbled on concern the worst oil spill in U.S. history will depress profits across the industry.

Investors demanded an extra 110 basis points in yield over U.S. Treasuries to buy the five-year notes from Shell, compared with 89 basis points for existing debt of similar maturity from the company, which is based in The Hague. Debt of Anadarko, owner of a 25 percent stake in BP Plc’s leaking well in the Gulf of Mexico, fell the most since June 9.

Shell, with the most Gulf rigs affected by a ban on deep- water drilling, and Anadarko face higher yield spreads as investors wager that added government regulation may raise the cost of finding oil. The explosion of BP’s Deepwater Horizon oil rig two months ago is rippling across petroleum companies, said Brookfield Investment Management Inc.’s Joel Levington.

“It could delay the timing of projects or possibly eliminate them,” said Levington, managing director of corporate credit at Brookfield in New York, with $24 billion in assets under management. “It could require additional monitoring and maintenance, all of which could hurt earnings, cash flows and returns on invested capital.”

Energy bonds have lost 0.34 percent this month, compared with a gain of 0.56 percent for U.S. investment-grade bonds, according to Bank of America Merrill Lynch index data. Shell bonds have gained 0.09 percent in June.

One Bryant Park

Elsewhere in credit markets, the extra yield investors demand to own corporate bonds instead of government debt fell 2 basis points to 194 basis points, or 1.94 percentage point, the Bank of America Merrill Lynch Global Broad Market Corporate Index shows. Yields averaged 4.08 percent.

Bank of America Corp. and JPMorgan Chase & Co. plan to sell $650 million of 10-year bonds tied to debt on a midtown Manhattan office tower in the third sale of commercial mortgage- backed securities this year.

The notes are backed by loan payments on One Bryant Park, which houses the main office in New York for Charlotte, North Carolina-based Bank of America, according to a person familiar with the transaction, who declined to be identified because terms aren’t public.

The offering will bring total sales of commercial mortgage- backed securities in 2010 to about $1.67 billion, according to data compiled by Bloomberg.

Wrigley Proceeds

Wm. Wrigley Jr. Co., acquired by Mars Inc. in 2008, sold $1.8 billion of bonds in a four-part offering to repay debt, a person familiar with the transaction said. The world’s largest maker of chewing gum also obtained $700 million of secured loans to refinance debt, according to Moody’s Investors Service.

Andy Pharoah, a spokesman for Chicago-based Wrigley, declined to comment in an e-mail.

A benchmark indicator of credit risk in Europe fell to the lowest in almost five weeks. The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings declined 4.1 basis points to a mid-price of 112.9 basis points, the lowest since May 18, according to Markit Group Ltd.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or speculate on creditworthiness, fell 2.2 basis points to a mid- price of 107.8, Markit prices show.

The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan advanced 3 basis points to 121 basis points as of 8:30 a.m. in Singapore, Barclays Plc prices show.

The indexes typically fall as investor confidence improves and rise as it deteriorates. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Emerging Markets

In emerging markets, the extra yield investors demand to own bonds relative to government debt declined to the lowest since May 17. Spreads fell 5 basis points to 304 basis points, according to JPMorgan’s Emerging Market BP Bond index.

International pension and sovereign wealth funds are increasing demand for local Brazilian government bonds, lured by interest rates above 10 percent and a stable economy, Deputy Treasury Secretary Paulo Valle said in an interview at Bloomberg headquarters in New York.

Foreign investors hold 8.7 percent of Brazil’s domestic debt, compared with almost zero in 2006, Valle said. Investors from European and Asian nations such as South Korea and China are showing more interest, he said.

Demand has grown since Brazil earned an investment grade rating from Moody’s in September, putting it one level above junk at all three major ratings companies, and the economy expanded an annual 9 percent in the first quarter.

‘Costly’ Moratorium

Shell has five exploratory wells among 33 in deep Gulf waters that were set to halt drilling under a moratorium from the Obama administration following the BP accident, an official of the Minerals Management Service, who asked not to be identified discussing the specific companies, said May 28.

“The offshore drilling moratorium will be costly for producers, which will need an extended period to ramp back to pre-accident levels once the ban is lifted,” Ken Austin, a Moody’s senior credit officer in New York, wrote in a report dated yesterday. “These companies also face significant questions over whether they will be able to cancel or reduce the costly commitments under their rig and service contracts.”

The spread on Shell’s $1 billion of six-year notes issued in September widened to 103.4 basis points yesterday from 89.3 basis points as of June 10, the last trade before news of the offering, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

Shell Bonds

Shell’s $1.75 billion of 3.1 percent notes due in June 2015 yield 3.115 percent, Bloomberg data show. Its $1 billion of floating-rate debt yields 35 basis points more than the three- month London interbank offered rate, a borrowing benchmark.

“The all-in yields are still pretty attractive from a treasurer’s perspective, but obviously they’re paying for their association with the oil-and-gas business,” said Jason Brady, a money manager who oversees $4 billion in fixed-income assets at Thornburg Investment Management in Santa Fe, New Mexico.

Shell spokeswoman Kirsten Smart declined to comment on the sale.

Total SA, Europe’s third-largest oil company, sold $2.5 billion of bonds on June 17 in a two-part offering. The Paris- based company’s 3 percent, five-year notes priced to yield 110 basis points more than similar-maturity Treasuries, Bloomberg data show.

Rating Cut

Bonds from Anadarko, based in The Woodlands, Texas, fell after Moody’s cut its credit rating one level to Ba1, a step below investment grade, after the close of trading on June 18.

Anadarko’s 5.95 percent securities due in 2016 declined 2.7 cents to 88.1 cents on the dollar to yield 8.45 percent, or 642 basis points more than similar-maturity Treasuries, Trace data show. The notes traded at 110.9 cents on April 19, the day before the oil spill.

“I think the credit markets have downgraded all of the spill companies by several notches,” said Brookfield’s Levington. “The rating agencies are trying to catch up with what the markets have already done.”

The downgrade “is very disappointing and surprising in light of Anadarko’s limited role as a non-operating investor in the Macondo well,” Robert Gwin, chief financial officer of the company, said June 18 in a statement.

–With assistance from Sarah Mulholland, Emre Peker, Craig Trudell, Katie Evans and Fabiola Moura in New York and Jeff Plungis in Washington, Ed Johnson in Sydney and Katrina Nicholas in Singapore. Editors: Alan Goldstein, Michael Weiss

To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.

SOURCE ARTICLE

• By Sanya Oni
• 22 June 2010

As the oil industry across the globe focused on the Gulf of Mexico and the remediation efforts mounted to contain the massive spill caused by the explosion of BP’s oil rig on April 20, Shell, Nigeria’s Anglo-Dutch oil operator, was back on the campaign trail to get the federal government either to water down or back off from going ahead with the Petroleum Industry Bill (PIB) currently before the National Assembly.

To demonstrate its crass insensitivity, it “dangled” a $40 billion investment carrot which its Nigerian Managing Director Mutiu Sunmonu claims stands imperilled in the event of the PIB sailing through.

That is vintage Shell – the typical pig-headedness of an international oil operator which insists on crafting municipal legislations meant to regulate its activities, in its own image and after its likeness.

One recalls that Shell’s former Regional Executive Vice President, Ann Pickard had, in a moment of mindless arrogance described the PIB as “a cumbersome document that lacks insight into the very basics of our industry”,　whose fiscal provisions are “harshest in the world”.

What the redoubtable Shell hierarch meant to say was his company would rather have a draft legislation prepared at the company’s corporate headquarters in the Netherlands!

I guess it is pointless to dwell on the continuing objections by Shell and its cohorts to the PIB which merely serves to deflect scrutiny from their activities that have turned the vast lands of the Niger Delta into massive, inhospitable wastelands.

Those sufficiently versed in oil industry operations, including no less a personality as Pedro Van Meurs, a Dutch from the home country of Shell whose industry experience is said to span over 40 years, have been quick to dismiss the charge that the proposed law that will scuttle future investment in the industry.

Meurs is on record to have stated that “there is no truth in the allegation that PIB fiscal system is the harshest in the world or that it will halt investment”.

His observation on the bill is instructive: “this is a battle whereby the oil company will try to get out of the parliament the highest possible share.　 So they make loud noise so maybe somebody out there might be listening to them. But the role of the minister is to make sure that the country’s interest is protected by insisting on a fair share. I can tell you that for every one company that is planning to leave, I know of 50 new ones that are planning to come in once the door is open.”

The above is precisely why the nation must insist on framing the issues correctly in the event that the activities of the company continue to pose immediate and latent dangers to the survival of the people of the Niger Delta.

Getting the PIB passed has become necessary and important for two simple reasons: first, the government has stated times without number that it holds the key to the reforms in the oil industry; second, only a government lacking in self respect would succumb to the cheap blackmail from Shell or any other company for that matter over a bill it considers as being in the national interest.

Although, the latest spill in the Gulf of Mexico seems to have thrown up issues wider and bigger than those contemplated by the bill, issues such as equitable procedures for the management of hazards from oil prospecting activities whether the spill occurs in the Niger Delta, Alaska or in the North Sea, it seems settled on the bottom-line of government’s responsibility to take all measures necessary to protect the welfare of the citizens at all times.

That is the overriding lesson from last week’s wresting of $20 billion compensation from BP by United States President Barack Obama. For a disaster which has endured for a little over eight weeks pouring an estimated 2.5 million gallons of oil into the Gulf of Mexico each day, it seems only the beginning with the cost to BP projected to hit the $34 billion mark in direct legal and remediation costs in the months ahead.

Coincidentally, while the American government was breathing down on the neck of BP to get it to pay compensation for the spill, its officials on the Nigeria-US Bi-National Commission were also at work wringing every possible concession for Shell and the other operators. A case of different strokes for different folks!

The justice of the oil spill matter of course demands that similar cases be treated the same equitable way. Getting BP to cough out $20 billion for the Gulf of Mexico spill seems fair enough as no amount could ever suffice to compensate the victims for the massive dislocation that the spill has caused. Where are those to insist on same standard treatment for the people of the Niger Delta, who in 50 years of oil prospecting has endured a record spill of an estimated 13 million barrels?

Shell’s environmental notoriety in Nigeria is certainly well documented. A 10-year study commissioned by Greenpeace finds that although Shell operates in more than 100 countries, 40 percent of all its oil spills are recorded in Nigeria. The report further finds some of the spills running continuous for years and several others never cleaned up despite claims by Shell to the contrary. Those facts remain incontrovertible.

That is why Shell in particular needs to be told that the legislations are matters reserved for the Sovereign. There is clearly no basis in the suggestion that the country is being done any special favour should Shell choose to put its money here; neither would the country lose anything were Shell to take its $40 billion investment to other climes where fiscal practices are more favourable.

The company should therefore spare the citizens of this country the crude tactics of blackmail on some phantom investments, which, if at all, its numerous shareholders stand to recoup many times over.

Finally, I believe there is some merit in the prescription of criminal investigation into the activities of oil majors as recommended by the Delta State governor, Emmanuel Uduaghan when he hosted the visiting President Goodluck Jonathan in Asaba, last week. Aside the imperative to determine the extent of the damage to the environment, it seems to be the only way to curb the mindless arrogance of operators like Shell.

By the way, what is stopping Governor Uduaghan and other Niger Delta Governors from taking Shell to court in the Netherlands? Apart from being a good starting point in the long road to secure justice for the people, the mood in the international community for such a cause can hardly be better than the current time.

SOURCE ARTICLE

The Associated Press  June 21, 2010, 1:57PM ET

SAfrican watchdog fines oil firms on price-fixing

JOHANNESBURG

South Africa’s anti-competition watchdog says that a number of international oil giants, including Chevron and Shell, are facing hefty fines for price collusion, a punishable offense in South Africa.

South Africa’s Competition Tribunal, which investigates companies’ competition conduct, said Monday that between 2000 and 2009 oil companies Chevron, Shell, Engen, Total, Masana, Sasol and Tosas colluded in fixing their products’ prices.

The tribunal confirmed it will impose a 10 percent penalty on some of the oil firms.

Masana has been fined 13 million rand ($1.5 million), it says. Sasol and its subsidiary, Tosas, were exempted after cooperating in the probe.

Reaction from the oil companies was not immediately available.

SOURCE ARTICLE

REUTERS

Mon Jun 21, 2010 6:17pm ED

Louisiana (Reuters) – Oil services companies went to court on Monday seeking to overturn President Barack Obama’s six-month ban on deepwater drilling in the Gulf of Mexico after the worst oil spill in U.S. history.

U.S. District Court Judge Martin Feldman said he would decide by Wednesday whether to temporarily lift the ban while the case is heard. More than a dozen companies involved in offshore drilling operations filed the lawsuit, calling the ban “arbitrary and capricious.”

“The government’s unchecked authority has shut down this entire industry,” argued lawyer Carl Rosenblum, representing the oil industry.

The lawsuit is the first seeking to reverse Obama’s May 28 moratorium, which the companies say will force job cuts in the labor force needed to service offshore oil platforms. The ban has caused the shutdown of 33 deepwater drilling rigs.

Obama imposed the ban after an explosion aboard an oil rig in the Gulf of Mexico on April 20 killed 11 workers and ruptured a well owned by BP Plc, unleashing millions of gallons of crude into the ocean.

The Obama administration argues that the moratorium is necessary to prevent further accidents while a presidential commission investigates the cause of the BP spill.

Louisiana Governor Bobby Jindal, a Republican critic of the Obama administration’s handling of the spill, has sided with the companies in the case.

The lawsuit is another example of the administration’s strained relations with big business, which was on display last week when BP bowed to pressure from Obama and agreed to set up a $20 billion oil spill damages fund.

The spill, now in its 63rd day, has soiled the coastline of four U.S. states, threatening tourism and fishing industries; seeped into ecologically sensitive wetlands and marshes; battered BP’s image; and tested Obama, who has come under fire over his handling of the crisis.

If spill spreads, BP could face challenges beyond the Gulf Coast. Attorneys general from 11 states on the U.S. East Coast warned they would hold the company responsible for injury to wildlife that could affect their coastline.

SAFETY PROBE

An independent federal agency that investigates chemical accidents — the U.S. Chemical Safety Board — is launching a probe into the root causes of the spill. The case will be handled by the investigators who examined BP’s safety practices after a deadly 2005 refinery explosion in Texas.

BP said it has spent $2 billion so far on clean-up.

Fueling investor concern about BP’s final bill for the spill, a Democratic U.S. lawmaker on Sunday released an internal company document that said, in a worst-case scenario, up to 100,000 barrels (4.2 million gallons/15.9 million liters) of oil a day could gush from its ruptured deep-sea well.

The British energy company dismissed it, saying the figure was being taken out of context. But investors, apparently worried it could mean higher fines and clean-up costs for BP, drove its shares down 4.5 percent in New York trading.

BP plans to raise cash from banks to ensure it has enough money on hand to pay for the clean-up but does not plan a bond offering, sources familiar with the company’s thinking told Reuters on Monday. Banking sources said last week that BP was seeking some $7 billion from banks.

BP has considered several ways to raise more money, such as selling assets. But for now, it is confident its cash resources can cover the bulk of the clean-up costs, one source said.

Seeking to keep the focus on the ecological disaster, New Orleans Mayor Mitch Landrieu hosted mayors from 17 U.S. cities on a visit to the Mississippi Delta, where oil has coated fragile marshlands, tarred wildlife and decimated fisheries.

During the mayors’ visit to marshes in Louisiana’s Barataria Bay, the stench of coagulating oil hung in the air as miles of boom encircled oil-stained marshes and scores of boats skimmed oil from the bay’s waters.

BP continued to siphon more oil from the blown-out deep-sea well. It said it collected or burned off 23,290 barrels (978,180 gallons/3.7 million liters) of crude on Sunday, still well below the 35,000-60,000 barrels a day that government scientists estimate are gushing from the well.

Both BP and the U.S. government are placing their hopes on two relief wells that are being drilled to permanently cap the leak. Those wells are expected to be finished in August.

BP Managing Director Bob Dudley is in day-to-day charge of the company’s response to the spill after Chief Executive Tony Hayward returned to Britain last week, the company said.

(Additional reporting by Kristin Hays in Houston and Tom Bergin, Sarah Young and Victoria Bryan in London; Writing by Ross Colvin; editing by Chris Wilson)

REUTERS ARTICLE

It was the last line of defense, the final barrier between the rushing volcanic fury of oil and gas and one of the worst environmental disasters in United States history.Its very name — the blind shear ram — suggested its blunt purpose. When all else failed, if the crew of the Deepwater Horizon oil rig lost control of a well, if a dreaded blowout came, the blind shear ram’s two tough blades were poised to slice through the drill pipe, seal the well and save the day. Everything else could go wrong, just so long as “the pinchers” went right. All it took was one mighty stroke. On the night of April 20, minutes after an enormous blowout ripped through the Deepwater Horizon, the rig’s desperate crew pinned all hope on this last line of defense. But the line did not hold.

Far from the Gulf of Mexico, campaigners are accusing energy companies of destroying land and livelihoods in the search for increasingly scarce resources

A woman hurries away from the heat of a gas flare near a flow station belonging to Shell in Warri, Nigeria. Photograph: George Osodi/AP

Richard Wachman and John Stibbs Sunday 20 June 2010

The eyes of the world are on BP after the disaster that left oil spewing into the Gulf of Mexico at the rate of 50,000 gallons a day. But campaigners accuse Big Oil of an appalling track record elsewhere in the world, saying it leaves a trail of devastation in its wake.

From Nigeria to Kazakhstan in Central Asia, and Colombia and Ecuador in South America, the oil majors stand accused of a blatant disregard for local communities and the environments in which they operate.

With demand for energy expected to surge as industrialisation accelerates in China, India and Brazil, critics say oil companies are taking ever-increasing risks to cash in on yet another bonanza.

Two other factors ensure the dash for oil continues apace. One is growing concern in the developed world that, at some point in the next 30 years, demand could outstrip supply. That means governments are under pressure to make it easier for firms to look for oil in inhospitable areas, whether in deep water off the US or in the tar sands of Canada.

Secondly, western governments want to reduce their dependence on unstable regimes in the Middle East, which partly explains the recent US move to lift restrictions on drilling in Alaska.

All this could change if the world made a determined attempt to invest more heavily in renewable energy sources, but international initiatives take time. In the interim, the oil majors face a barrage of criticism from environmental and human rights campaigners in places thousands of miles away from BP’s sunken Deepwater Horizon rig.

Nigeria is a case in point. People who live in the Niger delta have had to withstand huge oil spills for decades. Farmers allege that spills from Shell pipelines have contaminated their land and fishing ponds, and have destroyed their livelihood. They want Shell to clean up the mess and compensate them for lost earnings. Shell argues that the ruptures to its supply lines are, in the main, the result of sabotage, and that any damages claims should be heard in the Nigerian courts.

The Anglo-Dutch oil giant is by far the biggest oil firm operating in the delta – where, in March 2008, it was estimated that at least 2,000 sites required treatment because of oil pollution. Independent oil and environmental experts estimate that between 9m and 13m barrels of oil have been spilt in the delta area during the past 50 years – equivalent to an Exxon Valdez disaster every 12 months.

Kate Allen of Amnesty International says: “The result of oil exploration, extraction and spills is that many people in the Niger Delta have to drink, cook with, and wash in polluted water; they have to eat contaminated fish – if they are lucky enough to still be able to find fish – and farm on spoiled land.”

She adds: “After oil spills, the air reeks of pollutants. Many [people] have been driven into poverty, and because they can’t make Shell accountable for its actions, there is enormous distrust between the group and local people.”

A spokesman for Greenpeace says: “Shell operates in 100 countries, but about 40% of spills are in Nigeria, which is quite incredible. There is evidence of sloppy management.” Shell rejects these charges.

The actions of the Nigerian government are a critical part of this story. Oil is estimated to have earned Nigeria more than $600bn since the 1960s, and the oil and gas sector represents about 80% of government revenues; the government’s reluctance to take a hard line with oil companies is not difficult to understand. The most that local people often ever see of the state are armed soldiers visiting the region to protect oil companies’ assets.

A similar story is unravelling in Colombia, where BP has a presence in the Casanare region. Strikers recently blockaded a plant, 125 miles from the capital Bogotá, for a fortnight, prompting BP officials to say they felt like hostages. The dispute has been rolling on since February over issues including labour, the environment and human rights. Most of these have now been resolved.

Cinep, a Colombian NGO that investigates oil companies, says the strike was not marked by the extremes seen in previous BP disputes. Its representative Fernando Rodríguez says: “Disputes involving BP are characterised by a heavy hand and shows of government force.”

Rodríguez alleges that in a 1995 dispute with BP contractor Servipetrol, the army shot at the civilian population. He claims paramilitaries then persecuted and assassinated community leaders.

BP strongly denies any paramilitary connections. Poly Martinez, a media spokesman for the company, says: “BP has no relation whatsoever with illegal armed groups, irrespective of their motives or inclinations.” BP did acknowledge it had had to deal with officials in elected positions who had turned out to have paramilitary links.

In Kazakhstan, Friends of the Earth is worried about the environmental, social and health effects caused by the development of the Kashagan oilfield. The consortium behind the project includes companies such as ExxonMobil, Shell and Italy’s ENI. Friends of the Earth said thousands of people have already been relocated in the region because of sulphur emissions and other highly poisonous chemicals such as mercaptans, which are present at high levels in northern Caspian oil. All the companies deny they have behaved irresponsibly.

In Ecuador, the Amazon Defense Coalition claims Chevron holds the record for the world’s largest oil-related contamination in the populated Amazon rainforest – an even more sensitive ecosystem than the marshes of Louisiana. The allegations are at the root of a class action lawsuit in Ecuador where the oil giant faces more than $27bn in damages for poisoning an area the size of Rhode Island with 18.5bn gallons of toxic “produced water” – water that emerges from drilling activities. That is more than 474 times the amount of contamination estimated to have been spilled in the Gulf of Mexico, according to claims by representatives of the plaintiffs.

A bigger campaign is building behind the involvement of the oil majors in Canada’s tar sands. The sands are naturally occurring mixtures of sand or clay, water and a dense form of petroleum called bitumen. They are found in large quantities in Canada and Venezuela. Making liquid fuels from oil sands requires energy for steam injection and refining. This process generates two to four times the amount of greenhouse gases per barrel of final product as conventional oil.

A spokesman for FairPensions, the shareholder activist group, says: “Every day the extraction process uses enough natural gas to heat 3.2m Canadian homes for a day. Tar sands are a significant factor in Canada’s failure to meet its Kyoto protocol targets.”

It is also claimed that tar sands development affects the health and human rights of people over wide areas. According to FairPensions, about 11m litres of contaminated water leaks into surrounding rivers and groundwater each day, containing arsenic, mercury and various carcinogens that have been linked to elevated rates of cancer in downstream communities.

Investors have raised the issue at Shell and BP shareholder meetings; some shareholders are worried about the long-term profitability of tar sands, pointing to the very high operating costs.

But the oil companies are “as likely to curtail their hunt for new sources of energy as turkeys voting for Christmas”, says Friends of the Earth. It points out that only last week, Cairn Energy won clearance to drill off Greenland this summer. Greenland is viewed as one of the last great frontier areas in the oil and gas business, and the US Geological Survey estimates that the territory could hold 50bn barrels of oil and gas.

But campaigners point out that the region is under “constant threat of ice floes”, while in Canada, MPs complain that Cairn has had no history of drilling in the Arctic. The company says it has “prepared for every eventuality”.

According to Canadian energy economist Peter Tertzakian: “We are going to the ends of the earth to find the next barrel.” But at what cost? Environmental pressure group Platform says the drive for “frontier oil” comes out of “a political environment whereby concerns over energy security are routinely top of the agenda”. To illustrate its point, Platform points out there has been a quickening in the race for rights to territory in the Arctic, with the Russians two years ago symbolically planting a flag under the North Pole during a submarine expedition.

But the last frontier is perhaps Antarctica. Signatories to the Antarctic Treaty officially refrain from any territorial claims on the continent, but some countries, including Britain, Australia and Russia, have made unofficial claims and produce stamps with maps of Antarctica showing territory purportedly belonging to them.

The worldwide dash for the black stuff underscores Tertzakian’s argument that though we may not soon run out of oil, “new supplies will be increasingly dirty, insecure, expensive and indiscreet”.

SOURCE ARTICLE