Oilgame

This can be described as the battle between nationalization and privatization, between national interest and transnational authority, oil supplier’s countries and the non-oil suppliers and Venezuelan pride and US hegemony. While rising oil prices is feeding the inflationary forces of the US economy, the recent announcement by Venezuela to stop selling crude to Exxon Mobil Corp. might bring more difficulties to the US economy on the verge of an impending recession. Exxon Mobil has moved a British court against the Venezuela government’s move on nationalization of one of its four heavy oil projects in the Orinoco River basin. The British court has issued an injunction temporarily freezing $12 billion worth assets of the Venezuela state run Petroleos de Venezuela SA (PDVSA). As a retaliatory measure, Venezuela has decided to stop oil supply too Exxon Mobil.

After experiencing a stiff upsurge in the oil prices and growing concern of degrading relationship with the other oil producing nations, Senate has passed an energy bill, which emphasis on the first big increase in fuel mileage requirements for passenger cars in more than two decades.

Senate pressed hard on the automakers, ordered them to develop more fuel economy engine. In its fresh ruling, Senate increase average fuel economy by 40 percent to 35 miles per gallon for cars, SUVs and pickups by 2020.

The bill shattered automakers hope, as they were expecting for a much smaller increase in fuel economy standards and is anticipated to keep fighting as the House takes up the issue. But Senate Democrats also fell short of their own goals. In a victory for the oil industry, Republican lawmakers successfully blocked a crucial component of the Democratic plan that would have raised taxes on oil companies by about $32 billion and used the money on tax breaks for wind power, solar power, ethanol and other renewable fuels.

Bill got the senate’s overwhelming support as it successfully obtained 65-27 votes. The measure now awaits action by the House, which is expected to take it up next week and then finally it will send to approval of president can take year to press as a law.

If bill presses to a law, than it will be a first increase in vehicle fuel efficiency since 1989, when it was set at 22.7 miles per gallon for cars.

Analysts estimate that by successfully implementing the proposed expectations, it would save nearly 2.5 million barrels of oil a day by 2025.

Republicans criticized the energy bill, as isn’t their any provisions for the battling oil industry and also obscure about the renewable and fuel efficiency strategy.

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Via: NYTimes

Crude oil and gasoline prices once again topped $70 a barrel after the U.S. government’s assurance that the subprime crises will not push economy in the recession.

While trading, light, sweet crude for October delivery mounts $1.26 to $71.09 a barrel on the New York Mercantile Exchange. In London, prices for the October delivery increases 76c to $70.62 a barrel on the ICE Futures exchange.

Amidst the Brent crude prices hick, gasoline prices for the September supply also augmented by 5.82c and settle at $1.9814 a gallon, heating oil prices rose 3.62c to $1.9972 a gallon.

For the last one week, US refineries are feeling extra burden. Meanwhile, Chevron’s Pascagoula, Miss., refinery is operating at about 50% due to damage from a fire last week. It expects to know next week how long it will take for its full production to come back on line.

Due to the damage Chevron has canceled a 550,000-barrel Venezuelan crude shipment, which could further add panic to the US market. Earlier this week, crude oil and gasoline prices dip amid the fear of Hurricane Dean and uncertainty persisted in the credit markets. Many investors worry that a severe credit tightening could crimp growth and, in turn, dampen energy demand.

In the past few days, market has shown a sign of improvement, Commerce Department confirmed that subprime generated volatility has loosen its grip as orders for durable goods surged 5.9% in July and new-home sales rose 2.8% that month. Amidst the improvement in the housing market, market isn’t fully liberated from the crises. Liquidity crunch still prevails in the economy; Hurricane can also damage the industries.

To end the instability, exist in the world, oil producers need immediate extra pumping of crude oil, whereas oil producing group OPEC didn’t budge from its previous stance and will decide about the further production on Sept. 11.

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Via: USA-Today

Unstable oil prices are dithering major economies as recently U.S. crude oil prices surged to record highs of $78.77 before falling to around $72.

America urges OPEC to boost production to keep the tempo of oil prices stable, but Venezuela’s oil minister Rafael Ramirez commented that there is enough oil in the market and no reason for OPEC to increase production.

OPEC has already cleared its intention about the additional production that it will decide to increase production after its schedule September’s meeting, but Venezuela’s open back-up to the group will definitely add worries to the world market. America is arraigning that oil producing countries are not pumping enough oil to end the volatility, whereas oil producers group is impeaching that geo-political affairs are more responsible for the higher prices rather than short supplies.

Although OPEC decision might be correct on the forefront, yet it can put many dependent nations on the dock as oil supplies can diminish amid the winter arrival on the Northern Hemisphere. In that case, OPEC contribution will count high, while Venezuela’s further move will also be accountable.

Venezuela has nationalized its oil reserve and signed a conditional deal with western drillers. Chavez led country still looking for foreign investors to develop Orinoco River basin, but new conditional role of Chevron, BP, Total and Statoil will be the most venerable for the stability in world market.

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Via: IHT

China has added another feather to its cap of being home to emerging global giant industries with the state owned PetroChina becoming the world’s largest oil producing company on Monday. The company became the first in the world to attain a market cap of over $1 trillion dollars surpassing the Irving based Exxon Mobil Corp with a market cap of $484.5 billion.

PetroChina Co, which is a unit of the state owned China National Petroleum Corp., is China’s largest oil and gas producer. The value of its new shares listed in the Shanghai stock exchange rose to 43.96 Yuan or $5.90 on Monday; nearly triple the IPO price of 16.70 Yuan or $2.24. Its initial public offering of 4 billion shares raised a record $8.94 billion from the mainland bourse. The volume of PetroChina shares traded in the Shanghai, Hong Kong and the New York stock exchanges added to the market capitalization of over $1 trillion.

As other Yuan denominates ‘A shares’ traded in China, the shares of PetroChina issued in Shanghai for meant for domestic investors only.

PetroChina’s status as the world’s most valued oil producing company does not necessarily mean that it has outperformed its rivals in terms of better profitability or productivity. However, the company’s revenue has soared amid rising oil prices but it has been struggling to increase production from its aging domestic oil fields. It is also struggling to manage the widening gap between rising global crude prices and the state controlled prices of oil products in the domestic market.

The company will use a major part of the money raised from its Shanghai issue to finance five projects aimed at increasing its crude oil output and refining capacity. It also intends to make heavy overseas investments.

Source:dallas news
Image:Business Week

Developing economies are trying to satiate their growing demand by digging new reserves and exploring alternatives, but all seems in vain as energy watchdog, International Energy Agency stated that within five year, world will face acute shortage of supply.

In its quest for oil, mighty America is in Iraq, now desperately looking at Iran. European Union is dependent on Russia’s mercy, whereas OPEC is waywardly oscillating the prices and hurting the balance of payment of developing nation.

Prices will sore to a record level and industrialized countries’ development will depend on oil cartel OPEC.

It’s expecting that oil demand will grow at an annual rate of 2.2 per cent during the next five years, up from a previous estimate of 2 per cent, to reach 95.8million barrels a day in 2012.

In its starkest warning yet on the world’s fuel outlook, the International Energy Agency said: ‘Oil looks extremely tight in five years time and there are prospects of even tighter natural gas markets at the turn of the decade.’

The analysts at IEA calculate the supply of oil, which assume to fall faster than expected in major industry areas. Meanwhile, consumption is accelerating on strong economic growth in emerging countries.

Although, the supply from non-members of the Organization of the Petroleum Exporting Countries will increase at an annual pace of 1 per cent yet will be far less than half the rate of the demand rise.

Inefficient supply will force OPEC to sharply increase its production in the next five years, in that condition OPEC can increase its prices.

Head of the IEA’s oil market division, Lawrence Eagles, rightly stated:

If we get to the point were there is insufficient supply, the only way to balance the market will be through higher prices and a drop in demand

The IEA Medium Term Oil Market Report came as oil prices are again on the verge of previous record high at $72 a barrel. Refineries are already paying record high prices as producing countries have cut the discount at which they sell their oil relative to Brent.

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Russia’s state-controlled gas monopoly has called off planned gas cuts to its former Soviet neighbor Belarus after Minsk paid a substantial part of a $456 million gas debt before a Friday morning deadline, the national gas monopoly said. However, Russian energy giant, Gazprom has reportedly extended its deadline by one week for Belarus to pay in full. Comforting European Union, Gazprom’s official spokesmen have stated that there will be no cuts of the Russian gas supplies to Belarus. Earlier, Gazprom had warned it would cut gas supplies to neighboring Belarus by almost half on Friday, in punishment for what it claims are unpaid bills. The EU had been watching nervously the gas dispute between Russia and Belarus and was in a process to call a meeting of stakeholders next week to review the natural gas supply situation due to the eventual impact on the flow of gas to the European recipient countries.

The recent gas dispute once again fueled concerns that consumers in West European countries might also be affected and further raising questions about Russia’s reliability as an energy supplier. According to the Russian energy giant the main bone of contention was Belarus’ failure to pay $460 million for gas delivered in the first half of this year. Belarus is the crucial transit route for Russian gas exports in Europe and a potential cut of gas supplies by Gazprom could affect customers in Poland, Lithuania and Germany. According to the reports, Belarus pipeline operator Beltransgaz has paid $190 million, or more than 40 percent of the bill.

Earlier, following the gas dispute between Russia and Ukraine, supplies to the EU had considerably plummeted in the initial days of 2006 as Ukraine was accused of siphoning gas from a transit pipeline after Gazprom halted direct shipments. And that raised question over the reliability of Russia as a trusted gas supplier to Europe. At present, the Russian energy giant supplies a quarter of the gas used by Europe.

However, the recent face-off stemmed out of an agreement struck in the last minutes of 2006 that required Belarus to pay $100 per 1,000 cubic meters of gas, instead of $46. The agreement had permitted Minsk to pay $55 per 1,000 cubic meters for the first half of the year, but required payment of the balance of $456 million to Gazprom by July 23. In the meanwhile, the EU had issued a statement after the dispute surfaced urging Gazprom and Belarus to ‘react in proportionate manner to disagreements and in any event not to disturb, either directly nor indirectly, the gas supply to EU member states.’

Belarussian President Alexander Lukashenko, until recently a close Kremlin ally, has been discontented over the fact that Russia had been raising prices for oil and gas supplies to Belarus at the start of the year. In response he had raised a transit duty on Russian oil going to Europe across his country by more than 30 percent.

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Kazakh national oil company KazMunaiGaz bought 75% stake in Romanian oil firm Rompetrol for $2.7bn but requires final approval from the European Union.

With the world facing some major oil crisis, now is an excellent time to produce more oil. Otherwise, the gas prices in the US as well as throughout the world is more than likely to skyrocket in coming years. Keeping this in mind, OPEC was asked to boost up gas production by the US. Recently, the Organization of Petroleum Exporting Countries (OPEC) ministers met up in order to discuss some major issues. The crucial meeting was held in order to discuss whether the oil producing countries would crank up the amount of gas produced or not.

Unexpected market condition has forced BP to rethink on its business strategy. The company has failed to make second quarter profitable amid the recent operational problems.

BP’s second quarter replacement cost profit decreases by 1 percent to $6.09 billion as oil driller faced diminishing oil and gas production problems at some of its refineries.

Production at BP fell to 3.8 million barrels but analysts were relieved that the company left its full-year production target unchanged. In refining, shutdowns have resulted in sites running at only 83pc capacity on average.

Despite increase in its income by 1.5 percent to $7.38 billion, owing to surging oil prices, BP still needs new oilfields, which seems difficult at this time.

In this loss-making spree, BP replaced its chief executive Tony Hayward over Lord Browne in May. The new chief executive admitted that the company’s current operational performance is not good enough and pledged to streamline it soon, however, declined to give a timetable for returning to growth.

BP’s results and reputation have been hit over the past two years by delays in major projects, U.S. investigations into alleged market manipulation, Alaskan oil spills and a refinery explosion in Texas City which killed 15 workers.

Further, going against all expectations, BP has completely ruled out any merger plans with rival Royal Dutch Shell, and apparently have opened a new chapter for the company by promising to rebuild revenues and simplify the business.

Under new chief executive Tony Hayward, the company shows a sign of improvement as it overcame refinery disruptions at plants in Texas and Indiana. BP is counting on new output at the Rosa field in Angola and plans to start the Atlantis platform in the Gulf of Mexico to help counter declining oil and gas production.

BP’s shares, which fell from 712 to 507 pence, closed 11.5p lower at 590 pence.

Via: Telegraph

It’s assumed that constant development isn’t possible without putting environment on stake. However, oil rich country, Ecuador proved it wrong, as President Rafael Correa has come up with an unusual solution to preserve its environment.

The Latin-American country offers wealthy nations to pay it $350 million a year in exchange for leaving an estimated 1 billion barrels of oil under the ground in the pristine Yasuni rainforest.

The plan involves creating a trust fund for donations or accepting debt pardons from other countries or multilateral lenders like the International Monetary Fund. The $350 million would constitute about half what Ecuador said it could make each year from extracting oil from the field, partly located inside the Yasuni National Park.

Ecuador seeks to ease the poverty of his people, but at the same time, the country wants to ensure its commitment to preserve its lush green forest. Ecuador is a debt-ridden country, where 6 out of 10 people are poor and its idea to develop economy along with the healthy environment without creating an economic burden for a country received applaud from the environmentalists around the world.

Country’s economy depends on oil export, and pumping oil to native oil refinery will be too costly. If it has huge oil reserves, then it makes sense, but its reserve will only satiate the global crude consumption for 12 days. Nevertheless, all episodes seem passing prank on oil drillers.

Although, Ecuador’s plan, on practical ground, seems weak, yet it spreads the exemplary message to other oil rich nations that how oil can be drilled without hurting environment.

Via: IHT

American energy firms Exxon Mobil and Conoco Phillips have rejected Venezuelan government offer to work with the state-run Petroleos de Venezuela, S.A.

Venezuela has nationalized its oil industry and told international companies to either partner with PDVSA, or leave the South American country altogether.

The government is taking over majority control of operations in the country’s most important and rich oil field Orinoco Belt. As experts analyze that Orinoco Belt has a potential of 80 billion barrels that may make Venezuela the world’s largest oil producer.

Before nationalization, six oil drillers were drilling oil in the country’s oil reserve; PDVSA confirmed that only four drillers Norway’s Statoil, Britain’s BP, France’s Total and Chevron — plan to sign an accord that will keep them in the massive Orinoco oil reserve projects, whereas Conoco Phillips and Exxon Mobil may choose to leave Venezuela as they didn’t find an acceptable deal.

Venezuelan government has issued the deadline of 26th June to accept terms for the government to take a majority stake in four heavy-crude upgrading projects valued above $30 billion. They can produce 600,000 barrels per day in the Orinoco reserve.

If Conoco Phillips and Exxon Mobil don’t reconsider about the deal than US can face the shortage of oil supply to meet the growing demand of gasoline in the country. Oil prices are already firm on the $3 per gallon so it casts further doubt on how and where America will find its fuel supplies.

Chavez has pushed a nationalization drive this year, taking over U.S. companies’ assets in the telecommunications and electricity sectors as part of a self-styled socialist revolution in the fourth-largest exporter of oil to the United States.

Via: BBC

Unstable oil prices have already eaten into the many economies and big consumers like US and European countries are accusing Iran, Iraq, Russia and Venezuela for it.

If the western countries’ allegations are right than we should praise Venezuelan President Hugo Chavez effort, who wants to satiate the energy needs of his Latin America allies. Recently, Venezuela has struck the energy security treaty with Argentina and intended to sign similar treaties with Uruguay, Nicaragua, Ecuador and Bolivia.

While signing the deal, Chavez didn’t forget to launch a verbal attack on Washington and accused America as a very serious problem and its insatiable voracity for oil will claim many innocent lives.

I think anti-American countries are right on the point that State is using its power for grabbing extra oil unfairly. In 2003 US invaded Iraq for mass destructive weapon, but ironically it found nothing, but yes its soldier killed millions of innocent Iraqi and rapped defenseless women, pity for self claimed sophisticated gentry.

One of American ally in Iraq, Australia has admitted that they support Iraq invasion for oil only, therefore it’s clear that there were no Saddam mania, but, absolutely oil altogether. Now America is vying for Iran, beware! America, it’s not Iraq where you were welcomed for research weapon, it’s Iran where your army will feel the heat of dessert and flame of heated oil.

Venezuela’s deal, definitely a political motivated step, where no amity for the neighbor in it, but a step forward to make itself secure from the oil dragon name America, I suppose, and I also feel that if America is going to ruin the countries, merely for its mean interests, than lobbing against it, will be good for the small countries and humanity as well.

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Ultimately, British oil giant BP is knees down before Russians as it has agreed to sell its stake in Kovykta field to Gazprom.

BP, which drilled oil in Siberian oil field with Russian driller TNK, will get $700 million to $900 million for its 62.89 percent stake in the Kovykta gas field. Precise price would be fixed in 90 days whereas BP had already invested about $500 million in the field. Analysts impeached that sell out money is only a fraction of what TNK-BP’s stake is worth, and that it is the latest example of the Kremlin forcing out Western energy firms.

After dejected from the lucrative pie of the Russian oil sources British company will continues to have major oil holdings here, which account for 10 percent of its global revenue and to soothe dejected oil driller, it will have an option to purchase a 25 percent stake in the field within 12 months, which might allow it to share in potentially vast profits.

In the addition of agreement, BP and Gazprom also agreed to invest at least $3 billion jointly in energy projects in Russia and around the world.

All these development occurred as Russian government start taking its shares back from the western oil drillers. Shell has already thwarted from the Russian soil, whereas BP was alleged to not producing enough oil from the Kovykta field as it produced only 2.5 billion cubic meters of gas in 2006, which was much lower than permitted nine billion cubic meters.

Russian officials pressed hard on it at confiscated its license to further drilling oil in Russia. BP drags Russian authority to court and claimed that it could not produce any more because the local region did not require additional supplies and it had been denied an export license.

After throwing two western oil giant from the Russian territory, now doubts on another oil giants ExxonMobil are gearing up. Although ExxonMobil is confident for its future in Russia, if it happens, oil driller threatens, than investment in the country would be jeopardized.

Image: Thedesignblog

Via: NYTimes

Royal Dutch Shell PLC posted 18 percent upsurge in the second quarter, apparently boosted by the asset sales and increases margins at oil refineries.

Shell’s net profit surged to $8.67 billion, which is a record for quarterly earnings in comparison to $7.32 billion of last year, wherein shell’s sales rose by 2.2 percent to $84.9 billion.

The surge was mainly due to the asset sales and strong earnings from oil refining as with asset sales and other benefits, Shell’s income surged to $660 million compared to the $232 million in the same quarter a year ago. Refining earnings jumped to $3.92 from $3.02 billion.

However, the company’s combined gas and oil production fell 17 percent to $3.30 billion, as production fell to 3.18 million barrels of oil from 3.25 million per day and Shell’s selling price per barrel dipped to $63.92 from $63.95.

The drop in gas and oil production was due to ongoing security threat in Nigeria’s oil reserves, where militants have attacked facilities and kidnapped workers thus forcing Shell to shut down operations. Civil unrest in Nigeria has left Shell without 195,000 barrels of oil.

Nevertheless, new refineries helped Shell to maintain its profit sequel as company posted 6th straight profitable quarter. Buoyant with the results, the Dutch driller is hoping to fix a deal with BP, but at this time it doesn’t seems to start.

Company is also in a fix, whether it should develop a major liquid natural gas project in Iran, owing to mounting pressure from the U.S. for not to do the business with the country as long as it goes ahead with nuclear enrichment.

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Via: Guardian