DrumBeat: October 4, 2006

[Update by Leanan on 10/04/06 at 10:15 AM EDT]

CERA's Quarterly Report (PDF) sees three possible futures:

● Asian Phoenix assumes that current trends continue (no major disruptions in supply and relative economic and political stability). By 2009 overall costs will rise. The biggest increases will be in steel and engineering/project management (25 percent); smallest increases will be in equipment, bulk materials, yard capacity/fabrication, and land rigs (10 to 15 percent).

● Break Point assumes that oil supply difficulties limit production growth and that oil prices could go as high as $120 per barrel. Overall, by 2009 costs will rise even more. The biggest increases will be in offshore installation, offshore rigs, engineering/project management, and construction labor (30 to 35 percent); smallest increases will be in steel, equipment, and land rigs (10 to 15 percent).

● Global Fissures posits that widespread political backlash against free trade and globalization, combined with global trade and political disputes, lowers economic growth and weakens energy prices. Overall, costs will fall by 2009. The biggest cost decreases will be offshore rigs and offshore installation (-35 to -50 percent); the smallest decreases will be in engineering/project management, equipment, bulk materials, and land rigs (-15 to -20 percent).

Oil rises above $59, Kuwait supports

LONDON (Reuters) - Oil rose above $59 a barrel on Wednesday after Kuwait said it may join other OPEC countries in cutting output if prices continue their three-month slide.

Kuwait's announcement offset expectations for a further rise in U.S. distillate and gasoline stockpiles, which helped prices dip to an eight-month low earlier in the session.

Chavez says oil should not fall below $60 a barrel

Pickup, SUV sales bounce back

Pickup and SUV sales staged a September comeback amid falling gasoline prices and bigger incentives, automakers said Tuesday.

Qatar GTL projects face delays

General manager Lean Strauss said that Oryx’s operating costs were expected to soar between 50% to 60% due to the rise in commodity prices. Davies said other Sasol projects had also been delayed or hit by cost overruns, which was a global phenomenon.

Spokesperson Johann van Rheede said: “The phenomena of commodity price increases, and engineering and construction skill shortages, is global and not limited to South Africa or Sasol.”

Davies said that an energy company, which he declined to name, had cost overruns of between 30% and 110% on capital projects.

Shell chief: Access to resources key

“You may find it remarkable to hear someone like me say this, but prices have been pushed to what we in the industry consider to be ridiculous levels,” Hofmeister said. “Not necessarily because oil reached $60 or $70 a barrel, but because it’s driven at a psychological level rather than supply and demand.”

BP production falls in Q3 as Alaska losses bite

LONDON (Reuters) - BP Plc expects its oil and gas production to have fallen 0.6 percent in the third quarter as losses at its Alaska operations and sales of oil fields outweighed gains from new start-ups and a benign hurricane season.

US, world reserves can offset Iran oil for 18 months

U.S. and world emergency crude oil reserves could replace a complete shut-off of Iranian oil exports for 18 months, avoiding an estimated $201 billion in damage to the American economy, the Government Accountability Office said on Tuesday.

Mexico leftist threatens energy reform protests

Mexico's leftist opposition leader threatened on Tuesday to launch protests against any attempt by President-elect Felipe Calderon to privatize the country's energy industry.

"We are not going to allow the privatization of the electricity or oil industry in any form," Andres Manuel Lopez Obrador, who narrowly lost July's presidential election, told Mexican radio.

Russia's Rising Oil Star

“Japan’s overall energy approach lags behind the changes occurring in the world. The strategic importance of energy has a far greater importance than is appreciated in Japan,” the report noted. The report went on to say that the country’s very “existence as a state” could be jeopardized if it does not develop a more strategic approach to energy security.

Canada: Tories to regulate industries for CO2

Time for asking politely 'is over'

OTTAWA - The oil and gas sectors, along with other greenhouse-gas-emitting industries, are to be regulated by the Conservative government under its widely anticipated plan to fight air pollution and climate change, Environment Minister Rona Ambrose said yesterday.

Kiwis create website that pays you to save energy

New security fears after kidnapping raid in Nigeria

Militants freed around 25 kidnapped Nigerian oil workers on Wednesday but five abducted expatriates were still missing in another part of the Niger Delta after an unprecedented attack on a residential compound.

Major Hurricane Danger Over for Year, Forecasters Say

Cut emissions now or pay, UK tells climate talks

MONTERREY, Mexico - Britain told the world's worst polluting nations on Tuesday that acting now to cut emissions of heat-trapping greenhouse gases would be vastly cheaper in the long run than doing nothing.

Global warming will threaten millions say climate scientists

Extreme drought, in which agriculture is effectively impossible, will affect nearly a third of the planet, according to the study from the Met Office's Hadley Centre for Climate Prediction and Research.

Coal-Based Jet Fuel Approaches Ready Ramp

University researchers have successfully powered a helicopter jet engine with fuel derived from at least 50 percent bituminous coal, a percentage that could go half again as high.
Richard Branson interview
The British entrepreneur and Chairman of the Virgin Group Sir Richard Branson recently announced that the next ten years of profits from his transport business will be used to fight climate change. That will amount to something in the region of 3 billion US Dollars. And with his new Virgin Fuels business he hopes to improve and making new fuels such as ethanol and butanol.

The Axis of Diesel: Mercedes, GM and even Honda, are betting on a new breed of green diesels. The goal? To leave hybrids in the dust.

Business Week predicts The Future of Cars

[Update by Leanan on 10/04/06 at 11:23 AM EDT]

Summary of Weekly Petroleum Data for the Week Ending September 29, 2006: crude oil and gasoline higher than expected, distillates lower than expected.

Darwin:  To continue from yesterday, first let me say, I share much of my time with my Wife, and my fishing poles, and the garden. I must also share time at the computer station with my Wife, and she has become a little testie lately over the time I spend reading TOD.  Darwinism is more or less my religion, however all religions share differing ideas, consider the Shia and Sunni. As far as PO, I consider the slow squeeze the most likely to evolve. I have often been accused of being wrong and silly for most of my life, however many of those silly ideas are currently being used in the search for more oil. Many times I have been proven wrong, but by facts and time not opinions. I will concede one reason that the KSA may have supported Bush, they considered him the least competent and most likely to fail, however I still believe demand drove KSA production. I am also well aware of Saudi history, geology, geography, population growth, and the history concerning FDR and the American oil Co's. The leading nation in the Middle East is that nation with the greatest potential to increase oil production, increase their literacy and intellect, and acquire western arms. IMO if Bush were to succeed  in Iraq, all of the needs for Saudi relations with the US would shift to Iraq. BTW both nations have a pop. of 26 million and the literacy rate of Saudi is nearly double that of Iraq 78% vs 40%.

Shia are a minority in Saudi Arabia, probably constituting about 5 percent of the total population, their number being estimated from a low of 200,000 to as many as 1 million. Shia are concentrated primarily in the Eastern Province, where they constituted perhaps 33 percent of the population, being concentrated in the oases of Qatif and Al Ahsa. Saudi Shia belong to the sect of the Twelvers, the same sect to which the Shia of Iran and Bahrain belong. The Twelvers believe that the leadership of the Muslim community rightfully belongs to the descendants of Ali, the son-in-law of the Prophet, through Ali's son Husayn. There were twelve such rightful rulers, known as Imams, the last of whom, according to the Twelvers, did not die but went into hiding in the ninth century, to return in the fullness of time as the messiah (mahdi) to create the just and perfect Muslim society.

Dipchip, you have strange ideas as to what our the US's interest in Saudi Arabia and I simply am not going to argue with them. Yes, we are very much interested in the oil in Saudi Arabia and Iraq, along with the oil everywhere else in the world. Saudi Arabia is very stable, albeit because of the iron hand of the monarchy. The US would very much like to keep it that way.

I simply do not agree with you about Iraq. They could increase their oil production but nothing like the numbers you seem to suggest.

You wrote:

Shia are a minority in Saudi Arabia, probably constituting about 5 percent of the total population, their number being estimated from a low of 200,000 to as many as 1 million.

200,000? That is so far off it is silly. The Shiite population of Saudi Arabia is today probably around 4 million, virtually all of them in the Eastern Province where they constitute a heavy majority. I lived there for five years working for ARAMCO. Virtually all the management is Sunni and about 60 to 80 percent of the workforce is Shiite. Virtually all promotions to management go to the Sunni because of wasta.

I will not comment on this paticular thread further but I hope to have a lot more to say about Saudi Arabia in the future. The below link was written when the estimated population of Saudi Arabia was 20 million. It is now better than 25 million or more. Both links put the Shiite population at 15%. That is about right but it is about 70 percent in the Eastern Provience where all the oil is. Remember none of the very large cities are located in the Eastern Province. Therefore 3.5 million Shiites located there would constitute an overwhelming majority.

Officially, they do not exist. In reality, however, Saudi Arabia's Shiites account for 15 percent of the kingdom's population of 20 million.
And here:

Saudi Shia are only five percent of the total population, but Saudi Shia are twenty percent of the native population and eighty percent of the native population of the area with the oil.
These numbers are what has leaked out of Saudi Arabia and you should treat them with as much respect as you treat their oil reserve estimates. In truth, only the gods know the true numbers.
Sorry, I should have read farther along the post before taking up space.
For all the negative things said about Yergin and CERA, you've got to admit that this crew is great at packaging.  Their labeling of future energy scenarios as 'Asian Pheonix', Break Point', and Global Fissures' is a fine example of the sort of management consulting cuteness that CEOs can't get enough of. (I suspect they must have hired the guy in the Pentagon who dreams up the inspiring names for our various military operations: e.g., Rolling Thunder, Freedom Sword, etc.)

Having worked for a very well-known management consulting firm about a 100 years ago, I think it is not too much of an exaggeration to describe them as intellectual massage parlors, a chief purpose of which is to make the client feel good about what he is already doing while at the same time giving him the illusion that he is participating in a rigorous objective analysis.  It's not easy to pull this off, and Yergin et al are world-class masters of this art.

No way.  The Pentagon ought to hire a PR guy.  Remember "Operation Infinite Justice"?  Hastily changed to "Enduring Freedom."  Which makes it sound like freedom is something burdonsome and unpleasant, which must be endured.  

They've got a bunch of tin ears there.

As for the CERA report...I actually thought it was remarkably pessimistic.  For them, I mean.


It was changed due to cultural sensitivites.  Only Allah is capable of infinite justice.  One interesting quote from this source (Naval War College Review, Autumn 2002, Vol. LV, No. 4) says,

Western public diplomacy in the Middle East also entails great care in uncharted waters. As an Oxford University social linguist, Clive Holes, has pointed out, the linguistic genius who thought up the original name for the campaign to oust the Taliban, "Operation INFINITE JUSTICE," did a major disservice to the Western goal. The expression was literally and accurately translated into Arabic as adala ghayr mutanahiya connoting an earthly power arrogating to itself the task of divine retribution. Likewise, President George W. Bush's inadvertent and unscripted use of the word crusade gave al-Qa`ida spokesmen--and many others--an opportunity to attack the intentions of Bush and the West.

On another topic, I'm reviewing a PO novel for an old friend.  You would appreciate his treatment (albeit only one  scenario among many possible) of how our very complex, JIT system might unravel when the BTU's / day drop below some critical threshold.

What is that threshold?  How severe will the positive feedback be as one broken economic connection (JIT gloabl parts delivery to a small business, e.g.) causes 2 or more new ruptures, and so on?  Will it look like a slumping process (slow) or a brittle fracturing event (rapid)?

I suppose that the answer to the last is based on one's vantage point.  Also, I'm convinced by WT that the depltion rate, as measured by net exports, will have a strong bearing on the rate of de-complexification (sheesh, what a word!).


It was changed due to cultural sensitivites.

I know.  Like I said, a bunch of tin ears.  At the very least, you'd think they'd have someone research it before rolling it out.

And remember Dubya announcing his "crusade"?  Oy.

You would appreciate his treatment (albeit only one  scenario among many possible) of how our very complex, JIT system might unravel when the BTU's / day drop below some critical threshold.

I probably would.  I do think that failure, when it comes, will be of the systemic variety.

Like Scotty said, "The more complicated the plumbing, the easier it is to stop up the drain."

oh god that is sad. I'm hopiong the next slogan they come up with translates something along the lines of "closeted queers coming to steal the oil!"
Shut the fuck up. Go have another pill.

Oh! I'm just goofin' - Pretty Boy.

Leanan -

Either I wasn't clear enough, or you take me too literally. The message I was trying to convey is that the naming of Yergin's three energy scenarios is just as BAD as the Pentagon's naming of it's various operations in Iraq and Afganistan.  For some time now, I've been quite amused (and disturbed) by how surreal these names have become.

I don't mind surreal.  But the Bush adminstration's names are just plain bad.  
RE: "you've got to admit that this crew is great at packaging"

Someone once said:

"Advertising may be described as the science of arresting the human intelligence long enough to get money from it."

RE: "Yergin et al are world-class masters of this art"

John Locke (1632-1704):

"How many men have no other ground for their tenets than the supposed honesty or learning, or number of those of the same profession?  As if honest or bookish men could not err, or truth were to be established by vote of the multitude; yet this with most men serves the turn.  If we could but see the secret motives that influenced the men of name and learning in the world, we should not always find that it was the embracing of truth for its own sake that made them espouse the doctrines they owned and maintained."

Funny...wheres that cartoon someone posted a few weeks ago about falling gas prices?  Literally people forgot that it's still going up in the next 5 years that they are locked into that payment.  Oh wait, no they did forget since the #'s don't lie.

Other than higher costs right now, what's the downfall to these new diesels?  Kind of makes me want one of these bad boys, but I know the fuel is much more xpensive right now to justify my tradeoff since I already drive a 4 banger.

Is diesel more much expensive that regular gas where you live?  For me gas is 2.37/3.47/2.57, and diesel is 2.59.  My car currently requires premium, but even if I could use regular, diesel is only 10% more expensive, and the improvement in mileage is much more than that.  Maybe the difference is that I am in a reformulated gas region, which drives up the gas cost.  

Yesterday I read another article on the new diesels, and VW is expecting their new Jetta diesel to achieve 40 city & 60 highway.

I've got 190k miles on my '96, and hope to eek out a couple of more years to see what Honda, VW, & BMW have to offer.  A 4 door civic hatchback with a diesel-hybrid would be just about perfect.

Gas just shot up yesterday from $1.98 to 2.19/gal.  Diesel remains almost unfazed as it hovers at $2.50 and isn't budging.  So it's .50/gal difference b/c it didnt move with gas, matter of fact it hasn't been here locally.  It moves totally independent of the price of gas.  I could making all of this up, but as an astute observer of my surroundings (more so lately), I wonder where this is coming from.  I guess we've already got this ultra low diesel in the local area?  RR, do you know?
I can give you some hints, at least. You realize that European manufacturers are producing highly efficient diesel motors, often in cars too small to export to the American market, or by companies with no presence in North America at all (the French carmakers, for example).

And you may have noticed that in a few European countries, population ca. 150 million, gasoline consumption has been declining over the past year. And that gasoline and diesel are both part of the refining process (in the sense that, as I recall, though the fraction may vary, both are always produced even if you only desire one).

To put this together - Europe has been exporting excess gasoline to the United States, helping to keep the price of gasoline lower there, while keeping its diesel for the home market.

The result is that Europe is making money off American SUV drivers. Yes, those cynical Europeans have figured out how to make conservation pay - lucky Cheny and the other members of the Bush league are so generous.

Of course there are a large number of other factors, including the new sulfur requirements, but since gasoline is a fungible enough product - as was witnessed with Katrina - this seems plausible, and is possible to support factually.

I agree it's factually supported.  This is interesting and quite logical.  Thanks for the insight.
Right now, diesel price is fairly seasonal. It tends to go up in the winter when heating oil demand (#2 diesel = heating oil) rises.
Obviously, as diesel cars achieve greater market penetration the relative price of diesel will likely rise year round.
Re:US, World Reserves Can Offset Iranian Oil for 18 months

Okay, let me see: there are 688 million barrels of oil in the SPR (supposedly). We use almost 25 million barrels of oil a day in this country. By my caluclations, thanks to Excel, that's about 27 days of supply, not 18 months. Somehow I don't think other countries and the EIA would be happy to lend us their reserves, despite what this article says.

So, if we had Iranian oil supplies cut off for 18 months and wanted to make that oil last, even with our domestic oil supplies and other imports, that still spells serious rationing to me. And where is that oil going to go? Here's a hint: it ain't going to be into the gas tank of your SUV.


What they are referring to is the fact that global reserves could make up the 4 million bbd shortfall from Iran for 18 months.  Stop trying to equate 18 month supply with 0 oil imports.  Also, we use 21 million barrels a day, and produce about 7.5-8 million a day domestically.  At least get your facts right.


"that still spells serious rationing to me.

Bushe et. al. says, "How on Earth do we get the American Titbabies to accept Peak Oil and the necessity of change... hmmm, no, we cannot 'splain it to them like they are three year-olds because the population has the attention span of two year-olds..."

A Necessary War and Fuel Rationing... that's the ticket.  And regardless of the outcome, the rationing will continue indefinately.

A Necessary War and Fuel rationing... that's the ticket.  And regardless of the outcome, the rationing will continue indefinitely.

FWIW This is more possible than we think !!

Does that give a green light for the neocons to attack Iran? I still don't think they will though. The are not that mad surely?
I don't think we'll invade.  I do think air strikes are a possibility.
Still waiting on that "October Surprise"...

That has also been in the back of my conspiratorial mind.

What if the price of oil is being forced down somehow to allow room for it to spike upwards due to an attack and not be overburdening?

Turn it around.  The attack was supposed to have already happened, and there just waiting for the minimum oil price before they launch.
I too fear for this month.  This Halloween might be one to remember for the wrong reasons.  
Not that I put stock in conspiracy theories, but what if Iran was just a distraction.

What if the October surprise comes from N Korea.  Want the Dems to get in trouble real quick in the polls...  Have Kim Jung Mentally Il proceed with a live nuclear test.


Im more worried for a financial fart before the elections.  If that happens it will be in spite of engineering.  Maybe a hedge fund that is also a clearing house?  Hmmm...

The October surprise was a Democratic one. It is clearly the Foley thing. Are you not catching this?

Only Elephants pull scams, not Donkeys? Maybe I got my animals mixed up. Forgive me.

The Shark

Oh ya...I forgot about the clandenstine Democrat program entitled "Operation Pretty Page Boy" used to entice innocent little Republican Congressmen.
Not defending Foley because I think he fascination with 16 year olds is disgusting, but the timing of the release of this information is highly suspect.  Especially as its coming out that this was known by democratic operatives almost 9 months ago?

They saved this for the right time, and are trying to exploit it to the maximum.  Not that I would expect differently, it IS politics, but don't fool yourself that they are going after this man for altruistic reasons.  That goes double for the fact that boy (now a man) did not want this to be released, that somehow someone obtained these electronic messages against the will of both the boy and Foley (possible hacking and illegal computer crimes involved?).  

What will be interesting to me will be the legal snafu surrounding this.  If the age of 16 is legal in Washington and Virginia and he technically didn't break the law, well then the democrats just sold out a gay man because he didn't share their politics.  Equal rights and all that only applies when you agree with them I take it?

Sorry but while Foley and any republicans who knew about this are culpable for what they did, the Democrats have managed to sink just as low by using the exploitation of a child for political gains when it could have been handled months ago, and in a quiet and civil way so as to spare the boy(who was identified on ABC) from a situation that will likely make the rest of his life all the more difficult.

But hey... getting power back to the democrats is worth smearing the lives of not only a republican congressman, but also a few children too.

Such is the state of US politics in the modern world.  

People wasting time scheming, undercutting, BSing instead of taking care of business.

Nero fiddling....

 ...but don't fool yourself that they are going after this man for altruistic reasons.

Is anything in politics done for altruistic reasons?

...Oh, I forgot the vaunted 'spirit of bi-partisanship.'
'I'll hug your elephant if you'll kiss my...donkey.'

Hard policy decisions based on such considerations as: Do we have leaders who are bonkers or do we have leaders who are stark staring mad?
That your question needs to be asked is a guarantee this shall end badly,
  1. US imports no oil from Iran
  2. US uses almost 21MMBl's/d not 25
  3. US imports about 2.2 MMBls's/d from Persian Gulf;  SA, Kuwait, Iraq, and UAE thru straights of Hormus.
688/2.2=312 days:  If US lost PG imports, Price would go up, consumption down and the reserve would be good for about 18 months.
In regards to a shutoff of imports from the Mideast - Unless other oil importers around the world decide to voluntarily to cut back there standard of living (doubtful), the loss of MIdeast supplies will cause them to bid for the supplies US currently gets.  

If oil were an entirely sold in the free market (which it isn't), remaining supply would be allocated by price.  With US currently consuming about 25% of total world supply, the free market would allocate 25% of the production loss in the entire Mideast & Iran to the US.  I think that may be about 5 mbpd for the US.

An entirely different problem in the US is how fast SPR crude can be converted to gasoline (it's 60% sour and heavy), and how it is going to get to the parts of the US not connected by the pipeline system to the SPR.  

I have a word about what will happen in the event of energy supply cutoff from the Mideast - CHAOS.

Plus Chavez has stated that attacking Iran would result in shutting off their US oil. Whether he would is questionable but he says he would. So better figure on that supply changing as well. I'm fairly certain China would take that oil if they can get it home.
A Tale Of Two Cities: Gilbert, Arizona vs. Portland, OR
Brian Brown and his family moved to Gilbert from Orange County, Calif., two years ago.
The move did mean a 54-mile commute to his job at a Trader Joe's store in Glendale way on the other side of Phoenix. In fact, commuting in fast-growing suburbs can be a major challenge.
Has the family found a sense of community here? He pauses before answering: "Not yet. If anything, that is one of the hardest things for us. In California, everything was at our fingertips - restaurants, shops, entertainment. We really miss that a lot."

Also interesting is the comparison graphic below:

Got Peak Milk?

This is very interesting. When we do get peak oil then it is seems to me to be quite possible for all of these figures to revert back to their olden time ratios.

Except of course I would expect gas (well actually its called Petrol) to be much higher as population is higher and there are so many more cars around. So I reckon its going to be $250 barrel oil.

Yes eventually.  Keynes was right, in the long run it doesn't matter since we're all dead.
What do we infer from this?  Enuf people and all homeowners are millionaires, while gas and milk prices drop towards zero?  Or, at least gas  and stamps stay more or less flat? A breeder's dream.



Hey, what about beer?  My local hole just raised it to $5.50/pint for the good stuff.  What's that then, $22/gallon?
When you said "my local hole" - what exactly were you referring to? I'm just curious. My wife wants an establishment that's attractive to be seen in. But it has to be nearby. We both need to be in before the sun comes up.

:: Ask Your Candidates about Global Warming and Energy
October 4, 2006 07:54 AM - Jeff McIntire-Strasburg, St. Louis, MO


Mid-term congressional elections are just over a month away in the US, and much of the debate among candidates stays focused on Iraq, terrorism, and immigration. While these are important issues, one has to wonder why energy and global warming aren't also a bigger part of discussion after the blitz of media attention, and even some political debate, earlier in the year (remember "oil addiction?").

(had not seen a link to 'questions for candidates.org' and TOD is about doing something....)

It's not such a small world after all (and it's getting bigger).

Says Econbrowser, and has some stats to show it.

Chavez's cheap oil valued over politics for some Americans

QUINCY, Massachusetts (Reuters) - With a chill of autumn in the air, Bridget Durkin welcomes cheap heat for her Massachusetts home, even if it comes from a Venezuelan leader who called President Bush "the devil."

"If people are really hard up, politics will be the furthest thing from their mind," said Durkin, 71, who has relied on government subsidies to heat her home in Quincy, a suburb of Boston, since her husband died 20 years ago.

Car sales up by 9.3%, and the is government about to unveil its plans for emissions curbs. Something looks a tad out of whack. The spin of course is that these are signs of a "healthy" economy. Maybe someone should define what "healthy economy" means exactly.

Canadian September auto sales rise 9.3%

Japan-based automaker Honda has roared past a landmark in the Canadian auto industry, surging ahead of Ford and Chrysler in sales last month with a 46 per cent increase over September of last year.

Total Canadian vehicle sales were 135,764, up 9.3 per cent from September of 2005, when buyers were disheartened by startling spikes in gasoline prices and by the phase-out of employee-discounts-for-all promotions by the North American Big Three.

"A case can also be made that Ford and perhaps DaimlerChrysler are dangerously close to what might be called the slippery slope," he added, noting that positive consumer impressions of Toyota and Honda clash with a constant toll of bad news about Ford and Chrysler.

"Once you get on this slope, companies find it very slippery and thus difficult to get off."

dead picture link, i get a forbidden 403 messgae
Re "dead picture link"

Try this link from Norway
and further to

"Kveldssong for hydrokarbonar "
regards And1

Blogger/Blogspot does not allow remote linking of images.
Oh well, we have ways.

Kashagan delayed by 3 years?

Oct. 4 (Bloomberg) -- Eni SpA and partners in the Kashagan oil field in Kazakhstan, the biggest discovery in three decades, risk years of delays because of design changes and extra costs.

The $29 billion project will miss its target of pumping oil in 2008 and the development will run over budget, the venture partners and Kazakh officials said. Kazakhstan, which is among the top 10 countries in terms of oil reserves, needs to tap the field to meet its goal of almost tripling production by 2015.

``Delays and technological risks may postpone and correct the output target for two to three years,'' said Zhakyp Marabaev, a director of the exploration unit of KazMunaiGaz, the state-run Kazakh energy company, at an oil conference in Almaty, Kazakhstan's financial capital.

Oil companies are having to tackle more complicated and costly projects as older fields are depleted. Royal Dutch Shell Plc last year doubled to more than $20 billion its investment plans for an oil and gas project in Russia's Far East. BP Plc last month said its Thunder Horse production platform in the Gulf of Mexico won't start until at least the middle of 2008, more than two years behind schedule.

Companies may spend about $29.3 billion between 2006 and 2015 to tap fields in the Kazakh sector of the Caspian Sea. The nation plans to pump as much as 3.6 million barrels of crude a day in 2015, up from 1.4 million barrels a day pumped on average in the first nine months of this year, according to a Kazakh oil ministry forecast.

Meeting Safety Standards

The Kashagan project's design will have to be changed because existing plans don't meet safety standards, said Philippe Rochoux, director general of Total Exploration and Production in Kazakhstan. A decision on new designs and the timetable for starting operations will be made by year's end.

``The project is now progressing in the stage where we are reconsidering some initial project'' parameters, Umberto Carrara, a managing director at Eni's Agip KCO, which is operating the venture, told the conference in Almaty.

The Kazakh government had planned for Kashagan to start in 2008. The first oil will be pumped beyond 2009, Kazakh Energy Minister Baktykozha Izmukhambetov said today.

Hurting Profit

``It could be delayed by several years: 2008 is not possible,'' Rochoux said. ``Costs are going to be higher.''

Eni, Europe's fourth-largest oil and gas company, in March said the first phase of developing the field in Kazakhstan would cost between $4 billion and $5 billion more than forecast due to a weaker U.S. dollar and the higher cost of equipment. The company in 2004 put the total cost at $29 billion over 15 years.

Rome-based Eni leads a group of partners, which include Exxon Mobil Corp., Shell, Total and KazMunaiGaz in developing Kashagan.

Delays could hurt the earnings and share performance of the companies involved in the project, said Franco Pozzoli, who holds Eni stock as part of the $250 million of assets he helps manage at Meliorbanca SpA in Milan.

``This will prolong the time it takes to gain a return on the significant investments the companies have already made,'' said Pozzoli. ``The oil majors have to make huge investments to find new resources. These are costs that are much higher than we've seen in the past and that's likely to have a negative outlook on the bottom line. The outlook is for a significant drop in net income among the majors over the next three years.''

Export Route

Paris-based Total is developing plans to export crude from Kashagan to the Mediterranean via a BP-led pipeline that links the Azeri capital of Baku to the Turkish port of Ceyhan. A decision on the $4 billion investment to allow oil to be shipped from Kashagan to Baku and onward will be made by the end of 2007, Rochoux said today.

``As Kashagan will be delayed, there is less urgency now,'' Rochoux said. Total is interested in expanding in Kazakhstan and is examining everything ``on the market,'' Rochoux said.

The French company still wants to acquire a stake in the Caspian Sea's Kurmangazy field, which is being developed by KazMunaiGaz and OAO Rosneft, the Russian state-owned oil company. There are no negotiations at the moment, after the first well drilled at the field came up dry.

``Of course it raises some question marks,'' Rochoux said. ``We're trying to understand whether there are still some hopes to find some oil.''

Yeah, I saw this. Interesting. Kazakhstan is one of my favorites.

Cohen has scored me big seats at the premier in Boston. It helps being one of the early supporters of Borat. You guys should have listened to me back then. If you did, now you would be having the warm Camels. Some of them are pretty good looking.

Sorry, All for Borat.

Fort Hills oilsands project delayed

Petrocan delays oil sands project decision

00:00 EDT Wednesday, October 04, 2006

CALGARY -- Petro-Canada is pushing back the decision to proceed with its oil sands mining project, which could cost as much as $19-billion, based on industry trends.

Ron Brenneman, Petrocan's chief executive officer, told investors and financial analysts at a company presentation in Calgary yesterday that the firm will decide in 2008 whether to build the Fort Hills project, in which it is the lead partner with junior UTS Energy Corp. and miner Teck Cominco Ltd.

Petrocan had planned to make its decision by the end of 2007. It still hopes to have first oil production in 2011, though that could also be delayed, the company said.

"The important thing is to get it right," Neil Camarta, Petrocan's senior vice-president of oil sands, told reporters after he spoke at the event.

Petrocan is the latest company to concede that the extreme pressures in the Fort McMurray region of Alberta, including shortages of construction workers and steel, are having an impact on project start-up goals. In August, Total SA of France said its project won't produce oil until 2013, three years later than its previous goal.

Calgary-based Petrocan began its presentation to investors with the results of an "investor perception study." Mr. Brenneman, a former Exxon Mobil Corp. executive and onetime president of its Canadian arm, Imperial Oil Ltd., said the company was trying to be more responsive.

"We seem to have been overpromising and underdelivering," Mr. Brenneman said.

One issue the study noted was to "increase CEO exposure."

Mr. Brenneman did not speak with reporters after his presentation.

During his talk, he said Petrocan wants to double its proved and probable reserves in the next five years, repeating its performance of the past five years.

"There's lots of growth for this company in the hopper," Mr. Brenneman said.

The company's oil sands mining project, located north of Fort McMurray, is currently forecast to produce 170,000 barrels of raw bitumen a day, which is expected to be upgraded into as much as 145,000 barrels of synthetic crude oil at a facility to be built near Edmonton.

The company does not have a preliminary cost estimate yet. Yesterday, it presented a general cost range -- of between $13-billion and $19-billion -- based on recent announcements made by competitors, including Shell Canada Ltd. The company's goal is to have a preliminary estimate by the end of the year, but Mr. Camarta said it might be early next year.

Petrocan presented a reasonable view on costs and timing, given that Fort Hills is in the early stages, said Ari Levy, a vice-president at TD Asset Management Inc., one of Petrocan's five largest shareholders. "They're responsibly putting out a wide range," Mr. Levy said.

On the potential for a delay in the Fort Hills' startup, Mr. Levy said it was "not an unimportant factor," but noted that the long-term price of oil and the need to build a robust facility were also important issues.

One slide shown to investors indicated that in five of six scenarios, Fort Hills might only make a single-digit return. Mr. Camarta said the company was trying to design the project so it could produce a return of 10 per cent or more.

Beyond the mining project, Petrocan is also developing oil sands properties that require steam injection to draw bitumen to the surface. The company said it plans to focus on several main properties and might sell some fringe assets. It also owns an eighth of Syncrude Canada Ltd., one of three operating oil sands mines.

The cost to improve Petrocan's Edmonton refinery so it can handle oil sands output has risen to $2-billion from $1.6-billion, partly because of design changes, the company said.

Stock of Petrocan fell $2.70 or 6.1 per cent to $41.91 on the Toronto Stock Exchange yesterday as the energy index fell 5.2 per cent. The price of oil fell below $60 (U.S.) a barrel and some investors rushed to sell their energy holdings.

Confusing stuff:  I just ran a spreadsheet on weekly Mogas for the year, current 39 weeks of data per EIA.
Finished (gasoline + imports) - demand is averaging 5.5MMBrl's per week in excess of demand. So far this year that adds up to 202 million barrels surplus plus the more than 200 million barrels on hand at the beginning of 2006.
Question: Are part of the imports included in finished gasoline production due to blending?
Pension crises looming all over

United Airlines flight attendants pose in a 2005 calendar titled "Stewardess Stripped," protesting the fact that United Airlines had defaulted on its pension plan. At a cost of US$6.6-billion, it was the largest pension default in U.S. history

A weakened investment environment in recent years, caused principally by sustained low interest rates, has resulted in a host of company pension plans falling into a deficit position -- in which there are insufficient assets in the fund to cover the anticipated withdrawals by existing and future pensioners.

The big high-profile funding failures have been in the United States at car manufacturers such as Ford Motor Co. and General Motors Corp., as well as major airlines such as United.

In Canada, too, there have been headline-making company pension issues at, for instance, Air Canada, Stelco Inc., and Nortel Networks Corp. In fact, the aggregate pension funding deficit of the TSX 60 in 2005 was $20.5-billion -- a figure that has risen after three years of relative stability near the $15-billion mark, according to a recent report by UBS Investment Research.

In addition, many companies have switched from defined benefit pension plans to defined contribution plans to ease the burden. But in fact all that may have done is shift the burden from employers to employees.

Meanwhile, record numbers of ageing boomers are set to have a longer retirement period than ever before, straining the limited resources of pension funds that will be paid for by fewer productive workers -- even waves of younger immigrants can do little to alleviate Canada's looming old-age dependency problems over the next 50 years, said a recent paper released by the C.D. Howe Institute.

When those girls fart, it must smell like flowers. I'm sure you have some point, I just didn't catch it. Try again. Just with no strippers, this time.
Jeez OC...it's really easy to tell when you've just finished your Highball for the evening.  Why don't you wait until morning to spew your crap...then perhaps, you won't.
Time for meds
Maybe they'd do me more good? Hehehe. Do you just chop 'em and snort them, or do you still swallow them with water? No, I'm serious. I'm just curious. Someday I'm gonna hafta make that choice.
hehehe  ahhh sigh.   That was some nice tears to my eyes laughter.
The Kirkuk region holds 40% of Iraq's oil and 70% of its natural gas. It's time to start wondering how much it will actually produce in the near future.

Fight over Kirkuk intensifies

The security situation in the northern oil-rich city of Kirkuk has further deteriorated over the past few weeks after the Iraqi government formed a committee assigned to "normalise the situation".

The creation of that committee under a constitutional provision has led to a rise in ethnic tensions between Kirkuk's Kurdish, Arab and Turkomen populations. Violence has risen with the tensions.

September has been one of the bloodiest months for Kirkuk, with an unprecedented number of attacks.

Seen as a microcosm of Iraq for its mix of several ethnicities, Kirkuk awaits an uncertain future as disagreements about the future of the province increase. A victim of its oil wealth, Kirkuk has for long been a divisive issue in Iraq's politics.

Many Kurds say Kirkuk is really a Kurdish province, and that large numbers of ethnic Arabs were settled there by the Saddam regime - a move that Article 140 could undo. They also see the Turkomens, a people of Turkish descent, as outsiders. But each of Kirkuk's ethnic groups claims historical ownership over the city.

Turkomens claim that Kirkuk has been historically a Turkomen-dominated city. Arab leaders say they were legally settled in the province and have a right to stay there. Kurds say that before the start of the Saddam-led ethnic-cleansing policies, Kurds constituted the majority of the population in the province.

Turkey claims it acts to protect the Turkomen community in Kirkuk, but not all Turkomens welcome its intervention. Turkomen leader Irfan Kirkuli says Turkomens will be better off joining a Kurdish autonomous area. He also warned against interference by outside powers, saying "they aim to create turmoil and tension in Kirkuk."

Turkey has been exercising diplomatic and local pressure in support of the Turkomens. Several commentators say Turkey wants to block creation of an autonomous Kurd region in order to limit the aspirations of its own Kurdish population.

Yeah Patrick Cockburn had a nice piece about this regarding Mosul. He also has an excellent new book called, "The Occupation."
More news on Kashagan delay.
CERA is going to come out with new outlook. We are going to be drowning in oil about ayear later. oops.
I'd highly recommend today's global warming article posted by Leanan.  The predictions coming out of this supercomputer model are truly frightening.  By 2100 (or within decades, it says), 30 percent of the earth will be classified as uninhabitable for agriculture, along with predictions of die-offs in developing nations, and mass migrations of hundreds of millions of people to regions more habitable, along with the conflict that would involve.  It sounds like this study will be followed up with maps and further predictions.  

Slate magazine on merits of gasoline price manipulation for electoral benefits theory