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Energy http://themoneytimes.com/taxonomy/term/14/all/feed en Don’t Be Fooled by Libya —This is a Failed State http://themoneytimes.com/featured/20131012/dont-be-fooled-libya-failed-state-id-1701713640.html <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Don’t Be Fooled by Libya—This is a Failed State</p> <p>Gunmen yesterday seized Libyan Prime Minister Ali Zeidan from a hotel in central Tripoli, releasing him shortly afterwards, but making it clear that post-Gaddafi Libya is a failed state and that the government is incapable of taking full control over its oilfields and export terminals.</p> </div> </div> </div> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/LBYA0001.GIF" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="121" /> </div> </div> </div> <p>While the markets have been responding lately with unfounded optimism over Libya, anyone who has been privy to the intelligence briefings and executive reports from Oil &amp; Energy Insider would know that announcements of progress emanating from the capital Tripoli are hot air. There are too many roving militias who want their piece of Libya’s fossil fuels largesse—and the government is impotent.</p> <p>Nothing demonstrates this more clearly than the seizure of Prime Minister Ali Zeidan on 10 October from the Corinthia hotel in central Tripoli.</p> <p>More to the point, the prime minister was apparently seized by militias linked to Libya’s Interior and Defense Ministries, which makes one ask whether he was kidnapped or arrested, or indeed whether it is even worth getting into the semantics.</p> <p>His arrest was not about oil, specifically, it was in retaliation for the US special forces capture of a Libyan al-Qaeda suspect in Tripoli over the weekend. Militant groups—many of whom control various branches of the impotent government—were angered at the US capture of Abu Anas al-Libi, wanted for the 1998 bombings of US embassies in Kenya and Tanzania in which more than 220 people were killed.</p> <p>Look no further than Libya’s National Congress, which was adamant that the US return the captor, which it labeled as a kidnapping and a violation of Libya’s national sovereignty.</p> <p>Upon his release, Prime Minister Zeidan took to the international media, calling on Western powers to step in—again. In an interview with BBC Newsnight, Zeidan said the country was being used as a base to export weapons across the Sahel and that “the movement of these weapons endangers neighboring countries too, so there must be international cooperation to stop it.”</p> <p>Regardless, the situation should be clear even for those Libyan enthusiasts who are under the impression that this is a functioning state. Ali Zeidan’s days are numbered without another direct Western intervention.</p> <p>This is the same reason the oil cannot flow as planned.</p> <p>At we noted in a September executive report on Libya in Oil &amp; Energy Insider, the crisis began two years ago with the overthrow of Muammar Qaddafi, but in August things took a definitive turn for the worse, with armed groups seizing major oil export terminals and demanding autonomy for the eastern region. Now the crisis has reached the west where other militant formations ominously charged with guarding the country’s pipelines and oil fields are seeking to profit on the momentum of the strikers and protesters in the east.</p> <p>The interim government cannot manage this crisis. It’s already been forced to compromise, agreeing earlier in September to a 20% wage hike across the board for civil servants, and including oil security forces in this mix. At the same time, the government has issued warrants for the arrest of strike organizers in the east.</p> <p>While the government will not be able to enforce these warrants, the blowback for this still will be severe and will result in a violent upheaval unlike anything else in the past two years. This will reverberate throughout the already volatile Sahel region, threatening security in Tunisia and Algeria most immediately. It is also leading to a tightening of world oil supplies.</p> Business Energy libya libya trouble Sat, 12 Oct 2013 04:18:43 +0000 James Stafford 1701713640 at http://themoneytimes.com Egypt for Sale http://themoneytimes.com/featured/20130924/egypt-sale.html <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Three years has seen the overturn of two government, the deaths of thousands of people and the destruction of much of the Egyptian economy. In the end, the mobs have changed nothing, except to make their own lives more miserable.</p> </div> </div> </div> <p>It was a year ago in August of 2012 that the Morsi government approached the International Monetary Fund for a 4.8 billion dollar loan. That was an increase from the 3.2 billion dollars that the interim military government had sought and that the Muslim Brotherhood members of the parliament had opposed.</p> <p>Getting the loan was critical. If Egypt could raise the funds, it would be in a better position to borrow from other sources. The IMF calculated that Egypt needed at least ten to twelve billion dollars to survive for another year.</p> <p>First, though, Egypt would have to meet certain standards before a loan could be granted. The deficit had risen to 8.7 percent of the budget and that would have to be reduced. Income tax on higher income earners and a higher consumption tax on a variety of goods would have to be imposed. Bread and energy subsidies that consume a third of the budget needed to be cut sharply.</p> <p>Mubarak had understood in 1977 that the subsidies were a drain on the national budget and tried to raise prices. He learned when the mobs when into the streets the lesson that is as true today as it was thirty-six years ago. A large portion of the Egyptian population views the subsidized items as a right. 40 percent of the population lives below the poverty level and would find their hardship turned into desperation by an increase in prices. A quarter of the population of 84 million faces some degree of malnutrition and can be brought into the streets without much encouragement.</p> <p>In December, the mobs were already in the streets to protest Morsi's usurpation of power as he pushed through his constitutional obsession that was the focus of his government when the taxes and prices were raised. Instead of abandoning the constitutional conflict in order to resolve an economic crisis, his administration chose to concentrate upon fighting a political war by abandoning the loan. It was easier for him to defuse one angry mob by canceling the tax increases and the subsidy decreases than it was to appease the mobs opposing his dictatorial rule.</p> <p>He had acquired an economy with structural flaws that would take decades to correct. Egypt was and remains a rent funded economy that puts the source of wealth beyond the control of the state. Revenue from the Suez Canal and the Sumed Pipeline, tourist spending, remittances from Egyptians working abroad, and foreign aid support the state. Before the revolution resulted in the closure of forty-five hundred enterprises and the flight of capital offshore, only 13 percent of foreign earnings came from the export of manufactured goods.</p> <p>Short of raising fees for use of the Canal or pipeline, that source of income is relatively inflexible. Tourism was discouraged by news reports of twenty-five riots or demonstrations per day somewhere across the country and a three hundred percent increase in the murder rate. The civil war in Libya sent most of one and a half million Egyptian workers home to congested cities, inflated the unemployment rate, and cost the countries desperately needed remittance payments.</p> <p>The one hope came from foreign aid. Qatar funneled 8 billion dollars to Egypt. Turkey provided another two billion and Libya added 2 billion more. Each contribution made is easier to delay settling the loan with the IMF. It avoided the humiliation of submitting to foreign dictates that threatened to ignite a civil war.</p> <p>The government was engaged throughout the period in a struggle between the availability of quality bread at an affordable price and the survival of the currency. Egypt must import fifty percent of its wheat. Between 2006 and 2011 the price of wheat and fuel rose by 300 percent. Under usual circumstances, Egypt runs a fifty percent trade deficit that must be offset by the rent sources of income. Once the disorders began inside and outside of Egypt, the collapsing economy meant that the usual circumstances no longer applied.</p> <p>Since the start of the Revolution, the Central Bank of Egypt has been engaged in a futile effort to curb the inflation by supporting the exchange rate of the currency. The Strategy has been to allow for a gradual 3 percent depreciation of the Pound by maintaining a managed float. That has drained the reserves from 36 billion to 14 billion of which only half was available for international payments.</p> <p>A million jobs had been lost since the outbreak of the Revolution in January 2011. Inflation had risen above 10 percent, and foreign reserves had dwindled to a mere two months in funds to finance imports.</p> <p>These were numbers that the government could not easily conceal from the public. What the Morsi administration was more interested in hiding was that wheat reserves were down to two months and that the people were on the edge of a famine as well as a currency collapse.</p> <p>The bulk of the imported wheat comes from Russia that produces a high gluten grain preferred for the making of unleavened pita bread that is a staple of the Egyptian diet. The Morsi regime found itself at odds with its main food supplier that was concerned about the spread of radical Islamic movements inside of Russia.</p> <p>The Russian anxiety was made worse by Morsi's support of the rebel movement in Syria where Moscow was supporting the Al-Assad regime. In spite of the looming crisis that Egypt was facing, Morsi called on June 15th for a jihad in Syria that assured Russian unwillingness to provide the desperately needed grain.</p> <p>It was not until shortly after the coup that the United Nations Food &amp; Agricultural Organization announced the social disorders and the abrupt increase in the birth rate threatened a food shortage. The emergency loans and grants of 12 billion dollars from Saudi Arabia, Kuwait, and the UAE has given Egypt the means to purchase the wheat on the open market, and the Russians have indicated their willingness to sell what wheat is available. Just in time, the new government has discovered abundant supplies of diesel fuel and butane that will enable the farmers to complete their harvest and to transport the grain to the mills. The rapidity with which the new administration located the previously scarce fuel reveals that the mismanagement by the Brotherhood of the economy and the negative natural economic forces were made worse by the manipulation by government agencies.</p> <p>The 6.8 million government employees had a vested interest in bringing down the Brotherhood backed government. The Brotherhood was advocating the privatization of the state owned industries. That was threatening the economic interests of the military that controls a third of the economy and the jobs of the government workers. Morsi was following the same policy that contributed to the mob led coup that enabled the military to remove Mubarak.</p> <p>Between 1991 and 2009, 382 state companies were sold by the Mubarak administration to private investors for a total of 9.4 billion dollars. Economic reforms to encourage foreign and domestic investment introduced in 2004 attracted foreign investment that grew the economy in 2008 at an annual rate of 7.2 percent from 4.1 percent. In spite of the impressive improvement, the overall unemployment rate remained above 9 percent and 25 percent for the youth that comprise a majority of the Egyptian population. University graduates found that their inferior education did not qualify them for employment and were forced to join the ranks of the unemployed. Neglect of the agricultural sector sent an influx of rural migrants into the crowded slums of the cities. The combined hopeless masses formed the powder in the time bomb that exploded in January of 2011.</p> <p>Removing Hosni Mubarak was the easy part of the coup that the public imagined was a revolution. Finding a replacement was the harder part especially when the only choice was the Muslim Brotherhood that had been an enemy for sixty years. It was for the military the possibility of preserving its privileges of a separate state within a state. Since Morsi was deposed, the military has separated itself still further from the political system by amending its oath of loyalty to exclude any reference to the president.</p> <p>The Brotherhood gained from the arrangement access to political power for the first time in its eighty-five year history, but assuring that they would be able to keep that power was not a part of the deal. That was made clear in January 2013. General Abdul Fattah el-Sisi, the defense minister, said in an address to military cadets, “Political, economic, social and security challenges” require united action “by all parties” to avoid “dire consequences that affect the steadiness and stability of the homeland.”</p> <p>The warning was ignored. Morsi's call on June 15th for a jihad in Syria provoked General El-Sisi to declare that the military's duty is to defend the borders of Egypt.</p> <p>The next step in dooming the Morsi Administration came on June 17th when seventeen new governors were appointed. These included eight Islamists, seven of whom belong to the president's Muslim Brotherhood party. Of all of the appointments, it was the granting of the office to Adel al-Khayat as governor of Luxor that provoked the strongest reaction.</p> <p>Al-Khayat is a member of the Building and Development party, the political arm of Gamaa Islamiya. The terrorist organization was responsible for a 1997 attack at Luxor's Hatshepsut Temple, where 58 foreign tourists and four Egyptians were murdered by six members of the group.</p> <p>While the people of Luxor protested the appointment of a terrorist to the govern ship, the military was lamenting the loss of the destination for retiring military officers. The office of governor was one of the privileges reserved for their members.</p> <p>The environment that allowed for another coup that the mobs could label the reclaiming of its revolution was set with the petition circulated by the Tamarod Movement that called for nationwide demonstrations on the anniversary of the Morsi presidency. The mob bolstered by the support of the army has become addicted to the taste of political blood with the defeat of the Hosni Mubarak regime and the real possibility that Morsi too was fall. The mob became its own Roman Circus. Screaming for the destruction of the Brotherhood had nothing to do with solving the real problems that require massive reforming of the economic and political structures. What the mobs failed to grasp while they were urging the armed forces to oust Morsi was that the military is a major source of the poverty and tyranny. The generals cannot make those changes without surrendering the deeply entrenched privileges that is a key part of their elite standing.</p> <p>The privileges of the military take many forms. Only 8 percent of land is registered. The remaining 92 percent cannot be counted as part of the national wealth and is not available to the average citizen. The lack of confirmed ownership means simply that investing in the property is not possible and that holds down the opportunity for people to accumulate wealth. It does not prevent state businesses or friends of the authorities from using the land that will not appear on any official records.</p> <p>Government regulations block those without the connections from acquiring within a reasonable period of time and at a reasonable cost something as simple as a telephone. It is why 9.6 million people are employed in the underground economy where they can escape the burdensome regulations and costs while only 5.9 million are employed by the private sector that is public. The businesses in the underground economy do not have access to regular sources of financing and are not available to provide tax revenue.</p> <p>None of this will change so long as the leadership has access to foreign loans and grants. How long the money will keep flowing remains to be seen. In Cairo, there is the general view among the leadership that Egypt is simply too important to be allowed to fail. It was one reason that Morsi thought that he had the advantage bargaining with the IMF and with Washington. The generals also hold the view that Egypt is entitled to the aid and will in one way or another get it from someone. Who that someone is really doesn't matter.</p> <p>The only real concern is how they will pay for the contributions. The United States demands little more than the assurance that Israel would not be attacked, but then, the American aid of 1.5 billion dollars is a minor sum that gives little demanding rights. The Saudis are offering 8 billion with additional funds of 4 billion from close allies; and that gives the Saudis considerably greater demanding rights. What they will demand is likely to take the Middle East into a new era. </p> <p>By. Felix Inmonti for Oilprice.com</p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/Central_Bank_of_Egypt.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="108" /> </div> </div> </div> <div class="field field-type-text field-field-imagecaption"> <div class="field-label">imagecaption:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>Since the start of the Revolution, the Central Bank of Egypt has been engaged in a futile effort to curb the inflation by supporting the exchange rate of the currency</p> </div> </div> </div> Business Egypt Egypt economic crisis egypt economy egypt loan Egypt news Egyptian population Energy Gamaa Islamiya Hosni Mubarak International Monetary Fund libya Middle east Morsi government Mubarak Muslim Brotherhood Qatar Top Story Turkey unemployment egyption Tue, 24 Sep 2013 04:24:45 +0000 James Stafford 1701713599 at http://themoneytimes.com Petrol turns dearer by Rs 1.63/litre! http://themoneytimes.com/featured/20130914/petrol-turns-dearer-rs-163litre-id-1701713580.html <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>A rude jolt for motorists as they face another increase in petrol prices! The rising cost of international crude oil coupled with the volatile economy over the past fortnight is driving pump prices towards a record high.</p> </div> </div> </div> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/81363245310_625x300.JPG" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="121" /> </div> </div> </div> <p>Petrol will cost Rs 1.63 more per litre, excluding state levies from midnight on Friday, announced Indian Oil Corporation (IOC), the nation’s largest oil firm.</p> <p>IOC said the average international prices of petrol have gone up to $117.40 a barrel from $114.44 a barrel while the exchange rate has deteriorated to Rs 66.02 a dollar in September from Rs 63.88 a dollar in the second half of August.</p> <p>“To give effect to these twin reasons, the Corporation is required to increase petrol prices by Rs1.63 (excluding VAT) with effect from midnight of 13-14 September,” said IOC.</p> <p><strong>Petrol prices in the Metros</strong></p> <p>The actual increase will vary from city to city, depending on local taxes.Following the hike in the commodity, petrol will cost Rs 76.06 per litre in the national capital (increase of Rs 1.96) while it will cost Rs 83.63 per litre in Mumbai as against Rs 81.57 currently (increase of Rs 2.06). </p> <p>In Kolkata, a litre of petrol will now cost Rs 83.62 (increase of Rs 2.05) and motorists in Chennai will have to shell out Rs 79.55 (increase by Rs 2.07).</p> <p>This the seventh consecutive hike in petrol prices in the last few months. Oil firms had raised petrol prices by 75 paise, excluding VAT, on 1 June and followed by a hike of Rs 2 per litre on 16 June, Rs 1.82 on 29 June, Rs 1.55 on 15 July, 70 paise on 1 August and Rs 2.35 on 1 September.</p> <p>With the latest increase, prices of petrol have become dearer by Rs 10.80 per litre since June, excluding VAT. Petrol prices saw a spike of Rs 13.06 per litre, inclusive of state tax in the national capital.</p> <p><strong>Cut in petrol prices?</strong></p> <p>A decline in global crude rates and the appreciation of the rupee in the last week may herald some good news.</p> <p>Given that the rupee was stronger and ended at 63.48 against the dollar on Friday, as opposed to a close of 65.70 on August 30 and 61.43 on August 14, things may take a better turn for motorists. The recent increase in value of rupee is likely to be reflected in the next revision in the coming fortnight, which hopefully may translate into a drop of petrol prices.</p> <p>"The movement of prices in the international oil market and rupee-dollar exchange rate are continuously under watch and developing trends reflected in future price changes," IOC said in a statement.</p> <div class="field field-type-text field-field-imagecaption"> <div class="field-items"> <div class="field-item odd"> <p>Petrol prices rose by Rs. 1.63 per litre on Friday, the seventh increase since June.</p> </div> </div> </div> 7th consecutive hike dearer by Rs 1.63/litre Energy hike India Markets Petrol price Top Story Sat, 14 Sep 2013 08:50:51 +0000 Neka Sehgal 1701713580 at http://themoneytimes.com Government Fuel conservation drive may have petrol pumps shut by 8PM http://themoneytimes.com/featured/20130902/government-fuel-conservation-drive-may-have-petrol-pumps-shut-8pm-id-1701713540.ht <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>It’s time to slash the huge oil import bill, folks, say the reports! This shocker is the latest game plan of the Indian Government; they plan to reduce the demand of fuel by limiting the fuel availability hours. The Government is pondering over a proposal and may close the petrol pumps at night.</p> </div> </div> </div> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/petrol.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="135" /> </div> </div> </div> <p><strong>Fuel conservation must</strong></p> <p>Besides searching for newer proposals, the fuel conservation drive is the new tactic by the Government, as they are gravely concerned about the exorbitant oil import bill. They are pondering over schemes of lessening petrol consumption by closing down the petrol pumps at night.</p> <p>This was confirmed by the Oil Minister M Veerappa Moily who is ready to put the fuel conservation ideas into practice. Moily told the PTI, “There are various options and ideas that have been floated. Shutting petrol pumps during night is one of them. But we have not decided. It is just a proposal.” This comment led to a lot of hue and cry in the Bhartiya Janta Party.</p> <p>It wasn’t a surprise to have the BJP spokesperson Shahnawaz Hussain, snap back tartly at this speculation, and he said, "What is petrol pump,? Government will close the country... Won't the people fill their car fuel tanks in the morning? This is a strange move by Moily". </p> <p><strong>Justification for fuel conservation techniques</strong></p> <p>It is a must to bring the huge oil import bill down if the current account deficit has to be cut down to the optimum, felt Moily. From September 16, the Government plans to save almost 2.5 billion USD in forex outgo, i.e. about Rs. 16,000 crores, by simply slashing down the demand of fuel by three percent. </p> <p>Moily covered up his stance by saying that this was just an idea in the mind of the Government, "Shutting petrol pump is an idea that has come to us. We have not adopted it. It is not my view," he diplomatically stated.</p> <p>Reacting strongly Hussain did retort volubly, “If the Manmohan Singh government has run out of ideas to tackle the economic mess, it can take suggestions from the BJP."</p> <p>Brushing off the 8PM to 8AM diesel and petrol pump closing demand, the Oil Secretary Vivek Rae said that at the moment there was no such step in the offing.</p> <p>The oil import bill of the year 2012-13 shows a total of about USD 144.293 and Moily has requested Prime Minister through a note to leave aside about USD 20 billion out of the amount.</p> <p>The note that was sent to the PMO on the August 30th gives the details of the option of cutting import bill by raising oil imports from Iran and has other details of the campaign planned for conserving the fuel consumption, but the note does not mention the closure of the petrol pumps at night, say the sources. But that much is sure that the Government is going to adopt some stricter measures to save fuel.</p> Bhartiya Janta Party closing down the petrol pumps at night Current Account Deficit Energy fuel conservation drive Fuel conservation proposal India Investments oil import bill Oil Minister M Veerappa Moily raising oil imports from Iran Shutting petrol pumps during night Top Story Mon, 02 Sep 2013 06:36:13 +0000 Minnie Mahendru 1701713540 at http://themoneytimes.com Rupee bites, petrol price dearer by Rs. 2.35, diesel 50 paise http://themoneytimes.com/featured/20130901/rupee-bites-petrol-price-dearer-rs-235-diesel-50-paise-id-1701713538.html <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>The free fall of the rupee coupled with surge in international fuel prices saw oil companies announce Rs.2.35 per litre increase in petrol prices and that of diesel by 50 paise on Saturday. </p> </div> </div> </div> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/31TH_PETROL_1568925f.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="120" /> </div> </div> </div> <p>The increase in price of petrol- sixth such hike in three months and diesel, eighth since January, are excluding local sales tax or VAT. </p> <p>The new rates will come into effect from midnight on Saturday, said State-owned Indian Oil Corporation (IOC).</p> <p>State-run oil marketing companies had increased petrol prices by 75 paise, (excluding local taxes or value-added tax) on June 1, followed by a raise of Rs. 2 on June 16, Rs. 1.82 on June 29, Rs. 1.55 on July 15 and 70 paise on August 1.</p> <p>“Consequent to the last price increase, the exchange rate has deteriorated sharply — Rs 59.49 to Rs 65.70 to a dollar in one month — necessitating this price increase. The exchange rate continues to be extremely volatile. Also the geopolitical situation in the West Asia is leading to pressure on international oil prices as well,” IOC said in a statement.</p> <p><strong>Actual hike will vary from city to city</strong><br /> The actual increase will vary from city to city, depending on local taxes.In Delhi, the price has been hiked by Rs. 2.83 to Rs. 74.10 a litre as against Rs. 68.58 currently. In Mumbai, a litre of petrol will now cost Rs. 81.57 in Mumbai and motorists in Calcutta will have to pay Rs 81.57 per litre of petrol and Rs 77.48 in Chennai.</p> <p>As per the revised prices diesel will now cost Rs 51.97 (Rs 51.40) in Delhi, Rs 56.33 (Rs 55.74) in Kolkata, Rs 58.86 (Rs 58.23) in Mumbai and Rs 55.37 (Rs 54.76) in Chennai.</p> <p><strong>Bigger hikes next month</strong><br /> A deeper shock awaits consumers. After the monsoon session of Parliament ends on September 6, the price of diesel price, which is a controlled commodity, may see a one time hike of Rs 3- 5 per litre, kerosene of Rs.2 and LPG of Rs.50 per cylinder to tackle the financial losses(recordRs.180,000 crore) of the state-owned oil firms.</p> <p>Apparently the state-owned firm said it continued to sell diesel at a loss of Rs 12.12 per litre, kerosene at Rs 36.83 per litre and domestic LPG at Rs 470 per cylinder.</p> <p>Oil minister Veerappa Moily said in letters written to Prime Minister Manmohan Singh and finance minister P. Chidambram, “Consistent rupee depreciation has a severe impact on the under-recovery of the oil marketing companies and consequently on their financial health.</p> <p>“If the present position persists, the total under-recovery would reach a level of Rs 1,80,000 crore in the current financial year compared with Rs 1,61,000 crore during the financial year 2012-13,” </p> <div class="field field-type-text field-field-imagecaption"> <div class="field-items"> <div class="field-item odd"> <p>The new rates will come into effect from midnight on Saturday, said State-owned Indian Oil Corporation (IOC).</p> </div> </div> </div> diesel by 50 paise; diesel price hike Energy India Indian Oil Corporation Markets oil manufacturing companies petrol hike by Rs.2.35 petrol price hike Top Story Sun, 01 Sep 2013 05:06:52 +0000 Neka Sehgal 1701713538 at http://themoneytimes.com Warren Buffett And Elon Musk To Spark A Lithium Boom http://themoneytimes.com/node/1701713914 <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>The age of electrification across the transportation sector, the solar panel revolution, and Tesla's battery gigafactory are igniting a battle for the cheapest battery. That will transform lithium into a boom-time mineral and the hottest commodity on the energy investor's radar. It has been easy to take lithium for granted. This wonder mineral is the backbone of our everyday lives, popping up in everything from the glass in our windows to our mountains of electronics. </p> </div> </div> </div> <p>And while investors have long appreciated the steady rise in demand for this preferred mineral, the number of new applications continues to multiply. Smart phones, tablets, laptops, and other consumer electronics demand more lithium. But the largest driver for future lithium use will be in electric vehicles and home batteries for solar panels. That has lithium on the verge a boom for which supply can no longer be taken for granted. </p> <p>Not since the shale boom have we seen a market transformation of such significance. Lithium has long been used for a variety of mundane purposes, and while the variety is spectacular—with applications in everything from glass, ceramics and greases to a line-up of industrial process—it has flown under the radar for most investors. </p> <p>Supply has always largely managed to keep pace with steadily rising demand for lithium, and while the mineral is slated for growth with or without the 'battery explosion', Tesla's gigafactory will spark a phenomenal spike in demand that will be no less exciting than the shale boom. </p> <p>Not only will battery gigafactories change an already attractive lithium demand picture, but the suppliers themselves will change, making way for newer entrants—with more foresight and better technology--that will provide some of the best investment opportunities in the sector. </p> <p>The lithium story cannot be told without first telling the Tesla story. Tesla Motors (NASDAQ:TSLA) is developing a cheaper line of electric cars for release later this decade, and to achieve this it is constructing a $5-billion gigafactory to build 500,000 electric cars with the objective of lowering the cost of batteries by at least 30 percent. </p> <p>Moreover, around one-quarter of the plant's capacity may be for Tesla's stationary storage business, which also sells backup batteries for homes, businesses and utilities—all fueled by lithium. </p> <p>According to Tesla's brainchild, Elon Musk, demand for stationary storage batteries has skyrocketed to the point that an expansion of the gigafactory may have to be considered before it is even built. </p> <p>Musk is eyeing a "complete transformation of the entire energy infrastructure of the world to completely sustainable zero carbon," and what he's talking about here is lithium-battery production on a mind-blowing scale. Tesla is planning to produce more lithium-ion batteries in this factory than in the entire global marketplace combined. </p> <p>Lithium—the lightest and most versatile of the metals—is the backbone of this exploding battery market. Lithium is already a key part of our everyday lives, but as batteries become the rule of the day in a new global energy picture, demand for lithium is soaring—and we are only at the beginning of this curve. </p> <p>Battery manufacturers across the board are moving to lithium because it has the highest electric output per unit weight. And nowhere will this demand soar more than with the production of hybrid, plug-in hybrid and electric vehicles used by everyone from Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (NYSE:NSANY), Renault (EPA:RNO), and Mitsubishi (NYSE:MSBHY), to Ford (NYSE:F), Chevrolet and GM (NYSE:GM). And of course Tesla Motors. Without lithium, there will be no gigafactory. In fact, this factory alone will need 15,000 tons of lithium carbonate a year just to get started. </p> <p>We are on the edge of a profound competition over batteries as Tesla drives down lithium-ion battery production costs, lowers the benchmark and increases cost competition. The response will be new entrants to this market, and competing battery gigafactories. </p> <p>Tesla's competitors will make this one of the biggest battles of the century—a battle the entirely depends on lithium supply. Tesla's biggest rival will likely be Build Your Dreams (BYD), the Chinese automaker backed by Warren Buffet. Already, BYD is building electric buses on American soil and has global gigafactory ambitions. By the end of the year, according to Reuters, BYD should have 10 GWh of battery production capacity, which it expects to increase to 34 GWh by 2020 with a new factory in Brazil—about the same capacity as Tesla's. </p> <p>Other Tesla rivals rushing to the battery production scene will be iPhone manufacturer Foxconn and LG Chem, which is already one of the top three battery makers. Samsung is also hot on the trail, having just acquired Magna's battery production division. </p> <p>According to Credit Suisse, the lithium industry is "poised for significant volume growth," which could lead to shortages of supply. As a result producers of lithium are set to enjoy significant earnings throughout the decade. </p> <p>Even before Tesla's gigafactory – and its rivals – entered the picture, global lithium consumption had doubled in the decade before 2012, driven largely by its use in lithium-ion batteries for cell phones and power tools. Then electric cars hit the scene in earnest, further boosting demand for lithium, while Tesla's gigafactory is expected to use up as much as 17 percent of the existing lithium supply, according to Fortune magazine, citing Goldman Sachs. </p> <p>For investors who are just catching on to the lithium battery revolution, the best way to play the game is to look past the traditional lithium producers. In this boom scenario, investors will be looking at companies with the lowest market caps, solid management and highly prospective deposits. </p> <p>Currently, lithium is not traded as a commodity; rather, it is managed through a kind of oligopoly situation where there are three or four major suppliers globally and they have rather successfully managed supply and demand for lithium over the past decades. Because of this, everything is priced on a contract basis. </p> <p>"The problem is that these three or four major suppliers have been responsible for supply and demand but they are not going to be able to meet new demand for lithium," Dr. Andy Robinson, a Ph.D. in Geochemistry and the COO of Pure Energy Minerals (OTMKTS:HMGLF), told Oilprice.com. </p> <p>As Robinson points out, however, not all lithium is equal. It's sold in different types for different prices. For instance, lithium carbonate sells for around $6,000 per ton and is used to make some of the materials for new battery technology. However, many of the new battery technologies—particularly those used by Tesla—use lithium hydroxide as the starting material, which trades at around $2,000 more per ton than lithium carbonate. </p> <p>And lithium found in salty water, or brines, is by far the most cost effective. According to Dr. Robinson, "brine is the best way to produce lithium because it's so cheap, as nature has done all the hard work in rendering the lithium into a form that is easy to extract from the ground. All you have to do is drill a few wells and pump the liquid brine." </p> <p>Furthermore, there are only a few places in the world where lithium is present at high enough concentrations in these salty brines and the most famous is in the Atacama Desert, in the "Lithium Triangle" of Bolivia, Argentina and Chile. Supply here is threatened by corruption and politics, making it difficult to capitalize on burgeoning demand. </p> <p>When Tesla's gigafactory comes online, everyone will be looking for cost-effective lithium sources closer to home, which brings us full circle to the state of Nevada, where Pure Energy Minerals has the only potential future brine resource in North America. The only other brine resources are located in China, are much smaller and are controlled by Chinese companies. </p> <p>Lithium is increasingly the tech of choice for battery banks across the board, and when Tesla's gigafactory is producing batteries one year from now, the winners in this emerging battery boom will be those behind the lithium, and those following the brine. </p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/tesla1.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" /> </div> </div> </div> Energy lithium Technology tesla. lethium battery The Money Times newsletter Top Story United States Wed, 29 Jul 2015 03:45:45 +0000 James Stafford 1701713914 at http://themoneytimes.com The Game-Changing Water Revolution: Interview with Stanley Weiner http://themoneytimes.com/node/1701713913 <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Globally, water demand is threatening to dangerously outpace supply, while in the US, dry states such as Texas and California are suffering from shortages and the future forebodes more suffering. For the North American shale boom, the lack of water is suffocating. Amid this doom and gloom, a water revolution emerges, led by energy industry figures who realized the endless potential of tapping into new water sources and processing them with advanced desalination technology that, for the first time ever, is economically feasible. </p> </div> </div> </div> <p>The water revolution is here, according to Stanley Weiner, CEO of STW Resources-a Texas-based company that has the exclusive North American license for Dutch-developed next generation Salttech desalination technology. </p> <p>In an interview with James Stafford Oilprice.com, Weiner discusses: </p> <p>• The new technology behind the water revolution<br /> • How communities in Texas can be spared drought<br /> • Advancements that finally make desalination commercially viable<br /> • How it's already working-and where<br /> • How we can turn toilet water into tap water<br /> • What it means for the oil and gas industry<br /> • How vital water is to energy independence<br /> • How much oil and gas companies can save with new desalination systems<br /> • The next phase of the water revolution<br /> • Why everyone can finally benefit from conservation </p> <p>James Stafford: A global study warns that by 2030 demand for water will outstrip supply by 40%. What are we facing in the US alone? </p> <p>Stanley Weiner: The situation can only be described as extremely urgent. We're looking at continual drought and predictions of a new 'mega drought' for Texas. The current drought started in 2010, and it's still in play. In the meantime, we're seeing a lot of new people moving into Texas, as well as industry, and they all need water that they don't have. </p> <p>California is running out of water. A NASA scientist has recently warned that California has only about one year's worth of water left in storage, while its groundwater is rapidly depleting. According to scientists, 40% of the state is undergoing an 'exceptional drought'-the most severe it has seen in 1,200 years. Earlier this month, California Governor Jerry Brown issued the state's first-ever mandatory water restrictions. It sounds apocalyptic because it is, even if we don't feel it immediately. </p> <p>And a dry California is a disaster for the entire US. California is our breadbasket-where more than one-third of our vegetables come from and some two-thirds of our fruits. What it means immediately is higher food prices across the US. It's not enough anymore to think that if you don't live in a dry state you won't be affected. The water crisis affects us all in many ways. Parts of Oklahoma are hard hit by drought. Drought conditions have intensified in Nevada and Utah, and Arizona is facing a similar problem to California-it's growing thirstier by the day. </p> <p>Water is behind every single sector of our economy and our way of life. It's more valuable than oil because at the end of the day, there is no oil without water. It's important that everyone understands that finding a solution for our growing water crisis is hands-down the most important endeavor of our time-from both a human and an industrial standpoint. </p> <p>James Stafford: Ok, so where do we stand today in terms of new technology that can address urgent water supply issues on a global level? </p> <p>Stanley Weiner: Until recently, new technology that could realistically address urgent issues of water supply around the world had been relegated to the realm of science fiction. Even though the technology has existed and was continually advanced, it was unfeasible on a commercial scale-until now. </p> <p>So what we're seeing today is a breakthrough that is far more significant than the technological advancements in horizontal drilling and hydraulic fracturing that ushered in the shale revolution. Today, we can provide a solution to droughts; we can provide dry communities with more drinking water than they ever could have imagined-and we can prop up the shale boom by providing drillers with more sources of water, ultimately leading to America's energy independence. We can also economically recycle the water they use in the process. </p> <p>James Stafford: What you're describing is no less than a water revolution, then? </p> <p>Stanley Weiner: Absolutely. This is a revolution, and it's only just emerging, so we can expect a lot of technological advancements along the way to make desalination even more efficient and cost-effective. But there is no turning back now. </p> <p>On the desalination front, Netherlands-based Salttech has developed breakthrough technology called Salttech DyVaR, for which STW has the exclusive license in North America. Salttech is a think tank with brilliant engineers and scientists who are always asking how they can make it better. After such a long time trying to bring feasible desalination technology to the world, this is finally the game changer. </p> <p>Everything is connected to everything else-that's the first message to be heard loud and clear from this emerging 'water revolution'. Tighter environmental regulations have expanded the market for companies that encompass not only the use of 'green' technology, but also of 'blue', or clean water technology. But there's a third color here that is just as important, and we'll call it black, which means it has to make sense economically. Until now, desalination technology has been too expensive, with projects operating in the red, rendering them economically unfeasible on a commercial scale. 'Blue' technologies have also until now not been 'green' enough to make sense for the environment. </p> <p>James Stafford: Ok, so first take us through what this next-generation desalination technology is capable of … </p> <p>Stanley Weiner: First off, this is largely mobile technology, so it's easy to set up in all kinds of venues and to move around, which also contributes to cost-effectiveness, but it can also be a fixed facility situation. What it does is this: It takes dirty water and turns it into potable water using vaporization. It can clean up the oil industry's frack flowback water and the dirty water produced by oilfields, and it can also desalinate ocean water. </p> <p>James Stafford: And how does it work, exactly? There has been a lot of talk lately about thermal distillation using Dynamic Vapor Recompression (DVR), but for the layman, what does this mean? </p> <p>Stanley Weiner: OK, yes, DVR is a key aspect of the Salttech desalination system. DVR is a new type of mechanical vapor recompression-which is the process of evaporating water at moderate temperatures through the use of a vacuum and then condensing it in a higher-pressure chamber. The heat of condensation is transmitted to the influent stream through a heat exchanger. All of this requires very little energy compared to conventional process that rely on “flash distillation” and large amounts of energy. Where the term “dynamic” comes into play in the DVR is in relation to the use of a cyclone during the evaporation process. This cyclone separates the crystallized salts from the brine by centrifugal force. </p> <p>James Stafford: On a 'green' level, how is this new generation technology different? What makes it actually 'green'? </p> <p>Stanley Weiner: The key aspect of this technology is what we call zero liquid discharge (ZLD). All these 'permanent' desalination plants that are being put up around the world-including nine just in Texas and one in Carlsbad, California-are harming the fragile ecosystem of our oceans and waterways. They can't process more than 35-50% of the water in the desalination process, and what they don't process into potable water is rejected back into the ocean in the form of harmful liquid discharges. Studies have found that if they are processing 50 million gallons a day, they are putting 25 million gallons of harmful liquids back into the ocean. The studies are frightening, and they will impinge on the ability of these plants to get permits to keep feeding reject liquids back into the waterways. In Israel, for instance, there are contracts to build these permanent desalination plants, but now it looks like the permits aren't going to come through. </p> <p>James Stafford: So how does the Salttech system avoid rejecting harmful liquids back into the waterways? </p> <p>Stanley Weiner: First, this new technology processes around 97% of the water, so there's much less rejected. Second, the 3% or so that it can't process, it turns into a solid, so there is zero liquid discharge. And there are no chemicals used in the process whatsoever. Let me put it this way: the 'permanent' desalination plants are discharging 50-65% of what's rejected in the process in the form of a waste stream of highly concentrated brine liquid-directly into the oceans. The new mobile technology, developed by the Dutch, discharges its 3% reject in the form of solid salts and minerals, so there is no harmful discharge into waterways and no disposal problem. Importantly, this means there is no need for deep well waste water injections, evaporation ponds and other recognized methods for disposing of concentrated brine waste from desalination activities. </p> <p>James Stafford: How do the costs compare with conventional desalination technologies? </p> <p>Stanley Weiner: Typically, the price of desalinated oilfield water projects has hovered around $4-$8 per barrel, but Salttech makes it possible at around $1.50-$2.00 per barrel. To process brackish or seawater, the cost is about $1,100-$1,350 per acre-foot of water. These prices make fresh water economically available for everyone who needs it. </p> <p>James Stafford: How important is water to the overall energy equation? </p> <p>Stanley Weiner: It's absolutely a vital part of the energy equation. Water is what enables the US to drill more oil and gas wells and to wean itself off of foreign oil and reduce vulnerability to geopolitical whims. </p> <p>James Stafford: Is there a point at which the energy industry-one of the bigger consumers of water itself-can actually contribute to the solution rather than the problem? </p> <p>Stanley Weiner: Oilfield water use represents much less than people think: It's only about 3% of total fresh water consumed. For 2005, most of the fresh-surface-water withdrawals-about 41%--were used in the thermo-electric power industry to cool electricity-generating equipment. Water used in this manner is most often returned to the water body from which it came. That is why the more significant use of surface water is for irrigation-in the agricultural sector-which uses about 31% of all fresh surface water. Ignoring thermoelectric-power withdrawals, irrigation accounted for about 63% of the US' surface-water withdrawals. Public supply and the industrial sector were the next largest users of surface water. However, the energy industry can still contribute to the solution in a significant way through water reclamation. Just like we drill for new oil and gas, we can drill for new sources of water deep underground and tap into water resources that were never before accessible for potable water. </p> <p>James Stafford: Where can we find new sources of water and how do we tap into them? </p> <p>Stanley Weiner: The new sources of water aren't really new at all-they've always been there; we just didn't have the economically viable technology to tap into them on a commercial scale. These sources include the ocean, brackish water from reservoirs deep underground and municipal wastewater, which will be tapped into using our toilet-to-tap technology. </p> <p>James Stafford: What will the next advancement in desalination technology be that will render it even more economically rewarding? </p> <p>Stanley Weiner: Now that it's already commercially viable, the next step will be to lower the energy costs even further with wholesale solar, wind and geothermal power. In fact, the first desalination plant already in operation in Mentone, Texas, is entirely run on solar power and is providing the city of Mentone with as much drinking water as it could ever want. </p> <p>James Stafford: This technology was first deployed in Mentone, Texas? </p> <p>Stanley Weiner: Yes. This is where it really all started in July last year-in this small town in the Permian Basin. This was a highly successful pilot project that is now providing residents with all the drinking water they need. And, as I mentioned before, the entire operation is run on solar power. It was this system that convinced me of the viability of licensing it and commercializing it to make water available to everyone in need of it. </p> <p>But Mentone was just the genesis of this water revolution. The desalination project in Fort Stockton-also in Texas-is much larger. Right now, in Fort Stockton's Capitan Reef Aquifer we are drilling our first production well, and will be drilling several additional wells here and in other brackish aquifers. We're drilling to new water sources about 2,000-4,500 feet under the surface, to tap into as much as 14 million acre-feet of new water-or about 5.6 trillion gallons. In the second quarter of this year we will start selling that water. The beneficiaries will be several west Texan municipalities suffering from drought. </p> <p>James Stafford: What about the oil and gas industry? Are they jumping on this water revolution bandwagon yet? </p> <p>Stanley Weiner: Our pilot project in the Permian Basin has definitely attracted the attention of oil and gas companies who are hurting for water supplies and struggling with low oil prices and thus have problems justifying costs. You have to understand that Texas is both a highly competitive playing field for oil companies-with the sleeping giant that is the Permian Basin and the prolific Eagle Ford shale-but it is also water starved. So the competition for water resources is just as competitive as the competition for oil and gas licenses. There is also a great deal of competition among industries who are heavy users of water. With the advent of hydraulic fracturing-which uses exponentially more water-this competition has grown even fiercer. Demand for water is soaring, and now we can meet that demand. Over half of the 40,000 wells Americans have drilled since 2011 have been in areas of drought, and in total these wells have used 97 billion gallons of water. </p> <p>Over the next six to nine months, we will be launching another major desalination project for an NYSE-listed oil and gas company-so the word is out. </p> <p>James Stafford: Specifically, how much money could oil companies potentially save in Texas' Permian Basin or Eagle Ford using this technology? </p> <p>Stanley Weiner: The numbers are actually fantastic: They could save approximately $150,000+ per well using this desalination technology. </p> <p>James Stafford: What is the future of water reclamation and desalination? Where do you see the technology going over the next 5-10 years? Where is there room for improvement? </p> <p>Stanley Weiner: Advancements will continue but improvements will always be about the bottom line, making it cheaper and more economical to use. It can only get cheaper and more efficient at this point. Listen, we used to think fresh water was endless, and we squandered it. Not any longer. Now we need to squeeze every drop out of brackish reservoirs and oceans desalination operations. There is no turning back the tide now. It's already the new ideal: The technology uses no chemicals or filtration and requires very little power, and at the end of the process you have clear, fresh water. The revolution has begun. </p> <p>James Stafford: So at the end of the day, from an investor's perspective, the water revolution could outshine the financial glitz of the shale revolution? </p> <p>Stanley Weiner: You know, when we initially set up shop with STW, we were simply planning on targeting frack water in the oil business. We didn't see further than that. It didn't occur to us that there were endless possibilities for actually accessing and processing water that no one would have thought could be for human consumption. Once we realized the potential here-the potential that goes so far beyond the oil and gas industry-our goals became clearer. We can provide water not only to the oil and gas industry and to every other industry, but to municipalities in dry states; to communities. There is a great deal of money to be made in what amounts to conservation at the end of the day, and for once it can be made without harming the environment. That is exactly what is revolutionary about it. Everyone benefits. </p> <p>James Stafford: What's the bigger picture here? </p> <p>Stanley Weiner: This is all about conservation, and the first chance we have seen where it is possible to actually make money on conservation. If a project can be energy efficient-such as the pilot Salttech project in Mentone, Texas, which is run entirely on solar power-and can process vastly more than it rejects, then we are talking about conservation. We are wasting our precious fresh water resources every minute of every day when we could be reusing it. Everyone needs to realize that water is our most precious commodity and it needs to be conserved in every way possible. </p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/water%20revolution.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" /> </div> </div> </div> Energy Technology The Money Times newsletter Top Story Wed, 15 Apr 2015 10:23:23 +0000 James Stafford 1701713913 at http://themoneytimes.com Who Needs Russia? Ukraine Will Destroy Itself With New Gas Tax http://themoneytimes.com/node/1701713909 <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Ukraine doesn't need Russia to take it down-Kiev is doing fine destroying itself, most recently with a new tax code that doubles taxes for private gas producers and promises to irreparably cripple new investment in the energy sector at a time when reform and outside investment were the country's only hope. </p> </div> </div> </div> <p>Ukrainian President Petro Poroshenko on August 1 signed off on a new tax code that effectively doubles the tax private gas producers in Ukraine will have to pay, calling into question any new investment, as well as commitment from key producers already operating in the country. </p> <p>The stated goal of the new tax code-a legislative package embraced by the parliament on July 31 with more than 300 votes--is to raise $1 billion, of which $791 million would go to fund the war effort in eastern Ukraine. </p> <p>According to the Kyiv Post and Ukrainian law firms, the new code will remain in force until the end of 2014 during which time gas drillers will be required to pay 55 percent of their subsoil revenue for extracting under five kilometers. This is up from 28 percent--so it's a significant hit for producers. Additionally, for any extraction beyond five kilometers, the tax will be 28 percent--up from 15 percent. </p> <p>The only saving grace here is that this wasn't the worst possible scenario: An early version of the bill called for a 70 percent tax on gas extraction. </p> <p>Ukraine may have some of the most attractive gas prices in the world-the only thing that could have possibly lured investors there-but the new tax law renders this irrelevant, especially considering that in European countries, the tax does not exceed 20 percent. </p> <p>The oil sector will also be hit with the new tax code, which increases rates to 45 percent for drilling under five kilometers-up from 39 percent. But it is the gas tax hike that will really cripple potential investment in Ukraine. </p> <p>Private gas producers lobbied energetically against the new tax laws, arguing that it will crush investment and force investors to re-think their commitment to Ukraine. They also argue that it benefits some members of the political-business elite, and has nothing at all to do with funding the war effort in the east. Instead, it is the next phase in the battle among energy oligarchs to secure their interests in the dynamic political arena shaping up after the fall of President Viktor Yanukovych. </p> <p>In an open letter sent to Parliament on July 29, a group of private producers stated: "The draft law may lead to a rapid increase in the tax burden on private gas producing companies, a significant decrease in project cost effectiveness in general (up to closing down due to unprofitability) and a general decrease in attractiveness of the Ukrainian market for foreign investors." </p> <p>Speaking to Oilprice.com from Kiev, Robert Bensh-a veteran Ukraine energy executive and partner and managing director of Pelicourt LLC, the majority shareholder in Ukraine's third-largest gas producer, Cub Energy-was highly critical of the new tax law and fearful of what it means for Ukraine's future at such a critical juncture its energy dynamics. </p> <p>"This law is dangerous to the long-term security of Ukraine. It adds little to the budget and discourages drilling and investment in the upstream oil and gas sector, as well as calls into question the ability to invest in Ukraine at all," said Bensh, who has been one of the most visible lobbying forces against the law. </p> <p>"No one will invest in a country that arbitrarily punishes investors who are creating value by increasing reserves and production, or who are paying taxes and employing hundreds of thousands of people. No one will invest in an industry with the risk that taxes will be double or triple within a few months," he said. </p> <p>Bensh called the bill "highly political" and pointed to its two key beneficiaries: energy magnates Rinat Akhmetov and Ihor Kolomoyski, who "either own oil or mining assets that were taxed immaterially and punitively taxed gas producers." </p> <p>According to OP Tactical's intelligence wing, the tax code was clearly maneuvered by Akhmetov and Kolomoyski and should serve as the first sign that key reforms of the energy sector will be challenged at every step to ensure that these interests are secured at the expense of the state. </p> <p>"The failure of Ukraine to develop gas supplies, either due to years of corruption and or failure to attract outside investment into the upstream sector, is a material factor in Ukraine's current economic crisis and issues with Russia. Ukraine has always sought the easy solution. This tax and the failure to see the strategic impact upon the country is yet again another example," Bensh said. </p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/Flag_of_Ukraine.png" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="120" /> </div> </div> </div> Energy Markets Russia The Money Times newsletter Ukraine Tue, 12 Aug 2014 09:22:07 +0000 James Stafford 1701713909 at http://themoneytimes.com The Bigger Oil Story Behind the Headlines: Interview with Michael Levi http://themoneytimes.com/node/1701713908 <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>While we fixate on sexy headlines about Chinese military threats in the South China Sea, for instance, or Washington 'lifting the ban' on crude oil exports, we miss the bigger stories—and we miss the reality. China's relentless resource quest has the greatest impact on trading prices, which may not make for headline news, but is a very important reality, while the stories about the US lifting the crude oil ban were just wrong.</p> </div> </div> </div> <p>Michael Levi, David M. Rubenstein Senior Fellow for Energy and the Environment and Director of the Maurice R. Greenberg Center for Geoeconomic Studies, navigates us through today's oil headlines, extracting reality from sensation, and discusses his new book, "By All Means Necessary," co-authored with Elizabeth C. Economy, which takes us through China's resource quest and how it will change the world. </p> <p>James Stafford: Several weeks ago American mainstream media headlines were awash with sensational news that the US had lifted the ban on crude oil exports, but in the fine print beneath the headlines this news was really just about a loophole for processed condensates. How significant is this 'loophole' for the future of US oil exports? </p> <p>Michael Levi: I don't even know that it's a loophole. There has long been a general belief that processed condensates can be exported under existing law. The wrinkle in this case is that the processing is very much minimal, and the administration confirmed that it still met the requirements for export. I mean there's a broad view in the policy community that when push comes to shove even unprocessed condensates are likely to be allowed to be exported. </p> <p>James Stafford: Is it a question more of when the ban will be lifted, rather than if? </p> <p>Michael Levi: I don't have a particular time scale on that. I don't see a lot of appetite in the administration for blocking exports on policy grounds. I think that this is politically tricky territory, but to the extent that the administration can allow a rational organization of energy markets, I don't see a lot of appetite for going out of their way to avoid that. </p> <p>By the way, the initial headlines were flat out wrong, which spurred a lot of the confusion. There also was a sense out there that this was a first step to a much broader relaxation. I actually read it in a very different way. This was not a particularly politically risky step to take... so it doesn't give much of an indication of what the administration's political appetite is for more difficult steps. To the extent the administration can take some of the pressure off the system by allowing condensate and condensate-like exports, it actually lowers the need to make more significant reforms. </p> <p>James Stafford: What would this then mean for domestic oil prices? </p> <p>Michael Levi: Because this sort of export was generally anticipated, I don't expect a significant impact on domestic oil prices as a result. If there was a full out lifting of the ban on crude oil exports I think you'd see some rise in domestic oil prices a few years out. </p> <p>You would expect a complete removal of the oil export ban to have a larger impact on domestic prices than on international prices. That's sort of a logical implication of the fact that the domestic market's smaller than the international market. </p> <p>James Stafford: At the same time as this loophole was announced to great fanfare, you noted that another, much quieter LNG deal between BP and China's CNOOC was "at least as important as the U.S. move." What is so significant about the BP-CNOOC deal, and what does it mean for the LNG market? </p> <p>Michael Levi: There's a general belief even among a lot of people who watch the LNG markets closely that China has no involvement in exports of US natural gas. It's certainly true that no Chinese company has signed a contract with an operator of a US LNG terminal. </p> <p>But, I was struck during a visit to China last month to hear people describe what they thought as upcoming exports of US natural gas to China. What they identified were situations where traders who had contracts with US LNG exporters had, in turn, other contracts to sell their gas on to CNOOC. The indicator in these situations was that the contracts they signed, first with BG and now with BP, have prices for delivered gas that are partially indexed to natural gas rather than to oil. </p> <p>Without seeing the contracts, no one knows whether this is linked to physical flows as well. But at a minimum, it means that the emergence of the United States as an LNG exporter has created an opportunity for buyers, including buyers in China, to diversify some of their price risks that are traditionally being associated with LNG imports. </p> <p>James Stafford: In terms of LNG for Europe—particularly the idea of using LNG as a weapon against Russia—what would an increase in LNG activity do to Gazprom prices in Europe? We understand that the effect would not be immediate, nor would it be drastic, but Lithuania has shown that it is a good bargaining chip. </p> <p>Michael Levi: I think you have to distinguish between the first... I have this image in my head of someone trying to use a piece of spaghetti as a sword when people talk about LNG as a weapon against Russia. It doesn't go where you want to push it. </p> <p>You can allow LNG exports from the United States. They're going to go to where the price is best. Right now, the price is best in Asia, and there's a reason to anticipate that will continue to be the case. </p> <p>If European buyers want to pay extra to get LNG from the United States rather than from Russia then maybe you'll see flows moving into Europe. I don't see a significant appetite for that yet. That's why we're not seeing European contracts, not because of US regulations. US regulations haven't gotten in the way of Asian contracts. </p> <p>What's in the way of European contracts is a lack of commercial attractiveness. What US LNG exports can do is push down the overall price of natural gas. Even if US exports go to Asia, if that displaces other gas to flow from Europe, it can push down prices that improve European competitiveness. </p> <p>It doesn't change the ability of Russia to use gas as a weapon. The ability to use gas as a weapon has to do with the ability to cut off physical flows during a crisis. It's important to distinguish that from long-term competitiveness issues. </p> <p>It's inevitable that Europeans will describe their desire for greater US exports in terms of energy security. It's much more compelling to talk to American audiences about solidarity in the face of Russian threats than it is to say, 'we want you to do this because our chemicals producers will become more competitive as a result.' But, the reality is that the main impact of US LNG exports in Europe would be on competitiveness rather than on security. </p> <p>Michael Levi: For Ukraine to be more energy secure it needs to have industry that can be profitable without subsidized Russian gas. </p> <p>That's the basic problem here, right? All Russia has to do is threaten to charge Ukraine the same as everyone else would charge Ukraine, and Ukraine is in trouble. </p> <p>Everyone worries about countries cranking up prices to above the market price. That usually corrects itself pretty quickly. </p> <p>The real risks, as Ukraine illustrates, tend to come when a country sells energy below the market price and then threatens to sell it at the same price that everyone else does. There's nowhere to run when that happens. When you're in that situation, your [energy] security is very low. </p> <p>You saw that with the Soviet Union and Cuba. You see it with Russia and some of the former Soviet states. </p> <p>James Stafford: In our last interview with you, you discussed "outsized disruptions" of the oil market focusing tightly on the Middle East. Over the past couple of months, nothing could be truer. With the Islamic State (IS) now in control of a large swathe of land bridging Syria and Iraq, fighting for control of a key Iraqi refinery for domestic consumption and arguably in control of all of Syria's relevant oilfields, how outsized do you expect the disruptions to be in the coming weeks and months, keeping in mind that so far the crisis has not begun to affect Iraqi oil exports? </p> <p>Michael Levi: To understand impacts in the coming weeks, you want to talk to an expert on Iraq and on Kurdistan. I think the big question looming over all this is the long-run impact. </p> <p>Most forecasts that foresee $100-ish oil prices definitely assume that a significant part of delivering that comes from Iraq, and if the political and security situations aren't conducive to substantially more investments that part isn't there. That's why you're seeing the more distant oil prices perk up by more than near term ones, because people are concerned about this long-term ability to deliver. </p> <p>James Stafford: Who has been benefiting the most from Iraqi oil? </p> <p>Michael Levi: Look, the big oil consumers benefit from Iraqi oil regardless of whether they actually import oil from Iraq. </p> <p>I think one of the big fallacies in people's thinking about the Iraqi oil sector has been the focus on who's making money producing the oil. The bigger impact is on consumers. It's not clear to me that the Chinese make money producing Iraqi oil, at least as producers; but as consumers--to the extent that Iraqi oil production holds world prices down--the Chinese, the United States, and also some other countries benefit. </p> <p>On a numbers basis it wouldn't surprise me if Jordan benefits enormously, not because of their economic relationship, but because Jordan spends so much money on oil imports. Anything that keeps production up and holds prices down is good for Jordan. I mean that's the way you think about it, not just in terms of who's getting the chance to make $2 a barrel producing the stuff. </p> <p>James Stafford: Back in the US, how do you perceive the EPA's new carbon emission regulations for power plants? Are the targets realistic? </p> <p>Michael Levi: There's no question that these targets can be met. The EPA has gone out of its way to propose targets that can be achieved without people needing to be particularly creative. </p> <p>The implementation will be very interesting to watch. I think a lot will depend on the decisions that individual states make about implementation. If you have a patchwork of different approaches you could see some perverse outcomes. </p> <p>As a general matter the EPA seems to be trying to have achievable targets and to have as much flexibility under existing law as can possibly be given to the states that have to comply. You still shouldn't ignore the fact that comprehensive national legislation would be more efficient than using this authority for something that it wasn't designed for. But, within the confines of the law, they're trying to create as much of that flexibility as they can. </p> <p>James Stafford: A number of analysts are suggesting that the EPA's proposed regulations could help revive nuclear energy. Do you see this happening? </p> <p>Michael Levi: The EPA regulations don't really tell you anything about which sources will benefit, because the micro-level incentives that will affect investments in operation are all going to be determined by the states. The EPA certainly uses the possibility of nuclear shutdowns in determining its baseline. </p> <p>So, there's a bit of a message there that saving nuclear power plants is one way you can achieve your goals, but it's all up to the states whether that's how they do things or not. </p> <p>James Stafford: Your new book, co-authored with Elizabeth C. Economy, "By All Means Necessary," takes us through China's resource quest and how it will change the world. What is the key takeaway message from this work? </p> <p>Michael Levi: To me there are two very large takeaways. The first is, while we fixate on the sexy headlines about how Chinese workers in Africa are changing society there or on how Chinese behavior in the South and East China Sea is creating military risks, by far the biggest consequence of China's resource quest so far has been through its simple impact on trading prices. That's had consequences for producers and consumers all over the world regardless of whether they have direct interactions with China. We often skip over that, but it's enormous. </p> <p>The second big takeaway to me is that while China's changing the world, China's engagement with the world is changing China in big ways as well. You see that in the behavior of Chinese companies on the ground in the countries where they invest. You see it in the way that China thinks about military deployments, about cooperation in securing sea lanes. </p> <p>You see that in the way that China is addressing its own demand and its own production opportunities, as it responds by itself to the high prices that it's played a critical part in creating. Its impact on China itself, as China's resource quest evolves, I think is something that's been under-appreciated but that over the long run will be very consequential. </p> <p>James Stafford: In terms of impacting climate change, how does China compare globally and what can we expect over the next 5-10 years? </p> <p>Michael Levi: What we do see is an interaction between China's efforts to deal with its local environmental problems, its efforts to provide security of supply for its energy sources, and the climate outcomes that develop. To the extent that China feels more confident, for example, in securing natural gas from a variety of sources--domestic, LNG, Russia, Turkmenistan--it becomes more willing to use natural gas to replace coal as a way of cutting local air pollution. That, in turn, has benefits for global climate change. </p> <p>I think that's how you think about the impact of China's resource quest on climate change. It's the sort of second order effect. I would've said a few years ago that extreme Chinese concerns about the security of natural gas supplies means that there won't be a substantial shift from coal in that direction, which itself has timing implications, but this changing level of confidence, together with much greater concerns about local air pollution, starts to tilt things in a different direction. </p> <p>James Stafford: How is China's resource hunger changing the face of competition globally for oil and gas plays in frontier venues in Africa and the Middle East? </p> <p>Michael Levi: Still, I think you need to distinguish between two different kinds of frontier venues. Chinese companies appear to have considerably more appetite for politically risky places. You've seen that in Sudan, for example. That's a place where they have a peculiar kind of competitive advantage over Western firms. </p> <p>Where I think the competitive advantage has been overstated, at least by casual observers, is in frontier places that are frontier because of their technical difficulties. The Chinese companies still are not on the cutting edge. They still need to partner, at a minimum, with Western companies, and that constrains their ability to directly out-compete Western multinationals, because in so many cases they need the Western multinationals. </p> <p>You saw that, for example, in the more technically complicated parts of the Iranian natural gas sector. When Western companies pulled out because of sanctions, there was a fear that Chinese companies would fill in and undermine the impact of sanctions. It turned out that in a lot of cases, the Chinese companies weren't capable of operating the projects, or needed equipment from Europe or the United States that they simply couldn't get. </p> <div class="field field-type-text field-field-box"> <div class="field-items"> <div class="field-item odd"> <p>In his second exclusive interview with Oilprice.com, Levi discusses: </p> <p>- The 'wrinkle' in US oil exports<br /> - Political risk with exports …<br /> - And what it means for domestic prices<br /> - The greater significance of the BP-CNOOC LNG deal<br /> - US natural gas for China<br /> - Why LNG is to weapons what spaghetti is to swords<br /> - Why natural gas works as a weapon for Russia<br /> - Competitiveness versus security with US LNG exports to Europe<br /> - What the conflict in Iraq means for oil prices<br /> - Why the EPA's new carbon targets are realistic<br /> - But why implementation will be 'patchwork perverse'<br /> - Why the real impact of China's resource quest is on trading prices<br /> - China's resource quest and climate change<br /> - Why Chinese companies still can't out-compete Western rivals </p> </div> </div> </div> Energy Energy Technology The Money Times newsletter Tue, 05 Aug 2014 11:04:08 +0000 James Stafford 1701713908 at http://themoneytimes.com The World's Five Most Important Oil Fields http://themoneytimes.com/node/1701713907 <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Much has been made about the role that hydraulic fracturing – or fracking -- has played in revolutionizing the energy landscape, unlocking vast new reserves of oil trapped in shale rock. This "tight oil" is pouring into the global pool of oil supplies at a crucial time, preventing oil prices from spiking in an age of high demand and geopolitical turmoil. </p> </div> </div> </div> <p>But the world still relies overwhelmingly on conventional oil production from existing fields, many of which are in decline. The Middle East has dominated the world of oil for half a century and as the list below shows, it remains king. Here are the top five most important oil fields in the world. </p> <p>1. Ghawar (Saudi Arabia) The legendary Ghawar field has been churning out oil since the early 1950s, allowing Saudi Arabia to claim the mantle as the world's largest oil producer and the only country with sufficient spare capacity to act as a swing producer. Holding an estimated 70 billion barrels of remaining reserves, Ghawar alone has more oil reserves than all but seven other countries, according to the Energy Information Administration. Some oil analysts believe that Ghawar passed its peak perhaps a decade ago, but Saudi Arabia's infamous lack of transparency keeps everyone guessing. Nevertheless, it remains the world's largest oil field, both in terms of reserves and production. It continues to produce 5 million barrels per day (bpd). </p> <p>2. Burgan (Kuwait) Just behind Ghawar is another massive oil field located in the Middle East. The Burgan field was originally discovered in 1938, but production didn't begin until a decade later. The field holds an estimated 66 to 72 billion barrels of reserves, which accounts for more than half of Kuwait's total, and it produces between 1.1 and 1.3 million bpd. </p> <p>3. Safaniya (Saudi Arabia) The Safaniya field is the world's largest offshore oil field. Located in the Persian Gulf, the Safaniya field is thought to hold more than 50 billion barrels of oil. It is Saudi Arabia's second largest producing field behind Ghawar, churning out 1.5 million bpd. Like Saudi Arabia's other fields, Safaniya is very mature as it has been producing for nearly 60 years, but Saudi Aramco is working hard to extend its operating life. </p> <p>4. Rumaila (Iraq) Iraq's largest oil field is the Rumaila, which holds an estimated 17.8 billion barrels of oil. Located in southern Iraq, Rumaila was highly sought after when the Iraqi government put blocks up for bid in 2009. BP and the China National Petroleum Corporation (CNPC) are working together to develop the giant field along with Iraq's state-owned South Oil Company. The field now produces around 1.5 million bpd, but its operators have plans to boost that production to 2.85 million bpd over the next couple of years. </p> <p>5. West Qurna-2 (Iraq) Also located in southern Iraq, the West Qurna-2 field is Iraq's second largest, holding nearly 13 billion barrels of oil reserves. The West Qurna field was divided in two and auctioned off to international oil companies. Russia's Lukoil took control of West Qurna-2 and successfully began production earlier this year at an initial 120,000 bpd. Lukoil plans on lifting production to 1.2 million bpd by the end of 2017. The neighboring West Qurna-1 field – operated by a partnership of ExxonMobil, BP, Eni SpA, and PetroChina – holds 8.6 billion barrels of oil reserves. They hope to increase production from 300,000 bpd to more than 2.3 million bpd over the next half-decade. </p> <p>It's clear that the Middle East is still the center of the universe when it comes to oil. Despite their age, these supergiants remain the oil fields of tomorrow. And as the tight oil revolution in the U.S. plays out, these fields will remain, and the world will continue to depend heavily on the fortunes of a few countries in the Middle East. </p> <p>By Nick Cunningham of Oilprice.com</p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/Oil-Fields-Page-Photo.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="100" /> </div> </div> </div> Business Energy The Money Times newsletter Thu, 12 Jun 2014 11:55:29 +0000 James Stafford 1701713907 at http://themoneytimes.com Putin is Losing Eastern European Energy Gamble http://themoneytimes.com/node/1701713904 <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Russian President Vladimir Putin said he doesn't think the European community can do without the natural gas it gets from energy monopoly Gazprom. With a Russian economy starting to decline, however, it may be Gazprom that's too strongly interconnected to the European market to break free. </p> </div> </div> </div> <p>The narrative over European energy security reaches at least back to 2006 when Gazprom first cut gas supplies through Ukraine. The fallout from the latest disruption in 2009 put opposition darling and former Prime Minister Yulia Tymoshenko in prison, but now the tables have turned for a Ukraine tilting more strongly toward the European Union. </p> <p>Last week, Putin warned European leaders that gas supplies through Ukraine may be cut if Kiev didn't settle its $2.2 billion gas debt to Gazprom. With European allies mulling the best way to break Russia's grip on the region's energy sector, Putin said there are few alternatives to Russian natural gas. </p> <p>"Can they stop buying Russian gas?" he asked in a question-and-answer session this week. "In my opinion it is impossible." </p> <p>Russia sends about 15 percent of its natural gas supplies bound for the European community through the Soviet-era transit network in Ukraine. The European energy market has options in Caspian gas waiting in the wings, and potentially liquefied natural gas deliveries, though those alternatives provide little short-term relief. </p> <p>U.S. State Department spokeswoman Marie Harf warned Putin against using energy as a geopolitical tool in a crisis that's re-opened old Cold War wounds. </p> <p>"We've said very clearly that Russia should not use this as a weapon and that, actually, Russia has a lot to lose if they try to do so," she said. </p> <p>Before the situation erupted into one of the most severe Eastern European crises since the 1990s, the Kremlin had expected 2.5 percent growth in gross domestic product. Now, Economic Development Minister Alexei Ulyukayev said GDP growth should be "near zero" and the Ukrainian row may be to blame. </p> <p>Trade in oil and natural gas nets Russia about 70 percent of the estimated $515 billion in export revenue and accounts for more than half its federal budget. Though Gazprom has sought entry to a growing Asian economy, most of its natural gas heads to the European market, meaning Putin's Russia may be as strongly linked to the EU as the EU is linked to the Kremlin. </p> <p>Russian First Deputy Prime Minister Igor Shuvalov said the economic situation in the country in part depends on how the Ukrainian crisis plays out. The World Bank, he said, expects 1 percent economic growth for Russia this year. The view from the Kremlin, however, is much more pessimistic. With both Russia and the European community interconnected by natural gas, the relationship may remain intact despite the rhetoric from both sides of the lowering Iron Curtain. </p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/putin%20russia_0.png" alt="Putin is Losing Eastern European Energy Gamble " title="Putin is Losing Eastern European Energy Gamble " class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="146" /> </div> </div> </div> Energy Energy Markets Putin Russia The Money Times newsletter Fri, 25 Apr 2014 11:24:23 +0000 James Stafford 1701713904 at http://themoneytimes.com The Most Profitable Gas in the World http://themoneytimes.com/node/1701713903 <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>There is only one certainty in Ukraine: The energy sector must and will be transformed, and how long this takes will depend on who ends up in the driver's seat and how serious they are about becoming a part of Europe and reducing dependence on Russia. But by then, investors will have missed the boat.</p> </div> </div> </div> <p>The driving factor for any energy investor in Ukraine is the pricing environment. There is nowhere else in Europe—or some would even argue in the world—where you are going to get significant access to resources and potential resources for the price. Gas is selling at $13.66/Mcf, while it costs $4-$5 to produce and operate. That means producers are netting anywhere between $8 and $9/Mcf.</p> <p>Whether it likes it or not, kicking and screaming, Ukraine will have to transform its energy sector, if it hopes to see promised IMF money. Kiev will have to start selling off assets and making the industry much more transparent. Greater transparency coupled with an already-favorable gas price environment, will make Ukraine one of the best places to be over the next 5-7 years.</p> <p>While everyone is now closely watching the campaigns unfold in the run-up to 25 May presidential elections, in the end who wins the presidency—and even the energy ministry—will determine not if, but how fast the country moves to transform its energy sector.</p> <p>The crucial next step is a psychological one: Ukraine's new leaders must come to the realization that their energy assets, particularly the pipeline system, are not strategic assets, rather they are valuable commercial assets. Privatizing these assets could raise $50 billion.</p> <p>Right now, the pipeline system is nothing but a conduit for Russian gas into Europe. It could be much more. The pipeline system, and the state-run company that manages it, should be turned into a transparent public company in London, for instance. The sale of 50% of the company could generate sizable profits—half of which could be used to pay down debt to Russia, while the other half could be invested in modernization, turning a potentially valuable assets into a commercially realistic one.</p> <p>Without the right people in place in the new government, we could perhaps lose a year in getting the necessary reforms in place. And continued talk about the “strategic” nature of these assets could cause investors to lose faith in Ukraine's seriousness about reducing its dependence on Russia. Eventually, it will happen, and what elections will tell us simply is how long it will take.</p> <p>There are a lot of resources to be developed in Ukraine, and there are also quite a few companies who have assets they cannot development, primarily due to lack of funding or marginal management teams. These companies will now be seeking to transact with larger players.</p> <p>Historically, the most significant red flag for new investors in Ukraine has been working with the government. It's too early to determine whether that will change. Bureaucracy generally kills deals more than anything, and foreign companies coming in will never be able to understand how the bureaucracy works. The smart investor will employ capital through a Ukrainian private entity to maximize investment dollars. Western management teams, without help from local partners, won't be able to operate in this venue even if they are top-notch managers.</p> <p>The smart investor will also realize that there is no better time to invest in Ukraine's energy sector. Once it is transformed, the best opportunities will have been seized</p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/oil_151.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="127" /> </div> </div> </div> Energy gas fields gas resources Markets The Money Times newsletter Thu, 03 Apr 2014 04:27:50 +0000 James Stafford 1701713903 at http://themoneytimes.com How Junior Companies Survive in the Exploration Wild: Interview with Blackbird http://themoneytimes.com/featured/20140301/how-junior-companies-survive-exploration-wild-interview-blackbird.html <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Only the fittest can survive in today''''s market for junior oil and gas companies, which must demonstrate a great deal of ingenuity in the balancing of risk and reward. Nothing but the most exceptional oil and gas projects will win capital, and, in the words of one junior, this means “finding plays before they are exciting.” Being a junior in this market means being the best of the best, or being shut out entirely. The question is: Who is up to this make-or-break challenge, and who has the secret weapons to take it on?</p> </div> </div> </div> <p>In this exclusive interview with Oilprice.com, Garth Braun, CEO of Blackbird Energy, which operates assets in Canada''''s high-value Montney Resource, discusses:</p> <p>OP: How has the market changed in recent years for junior explorers now that the unconventional has become the new conventional, but the cost of unconventional drilling is often prohibitive?</p> <p>Garth Braun: For junior oil and gas companies, this is probably one of the most daunting questions of the decade. First of all, capital has become more focused on finding the best plays with the quickest—and the best—returns. Secondly, juniors have to be focused on finding exceptional projects—and this is a particular point of emphasis--that can attract both start-up capital and the majors. Thirdly, juniors have to build strong teams that understand how to de-risk projects without denuding their balance sheet. And finally, juniors have to be more vigilant in attracting capital and getting ahead of the “curve”, which means finding plays before they are exciting to others.</p> <p>OP: How difficult is it for juniors to compete not only for the best new plays, but for the capital markets?</p> <p>Garth Braun: This has become exceptionally difficult over the past several years as flows of capital have been attracted to the best of the best in the mid-cap to large-cap stocks. These companies have access to capital, which in turn allows them to pay-up to get into the right resource plays with the best economics.</p> <p>As a result, in order to compete, juniors have to assemble very strong teams—both technically and financially—that have the wherewithal to attract capital from both conventional and unconventional sources. They also have to source the absolute best plays before the larger-cap companies have found them. A good example is our Greater Karr and Bigstone acreage—both oil- and liquids-rich resources in Canada''''s Montney play--which we got into before the majors recognized them as high-value.</p> <p>OP: What does the current Canadian oil and gas market look like and what does this tell us about access to capital?</p> <p>Garth Braun: In a capital-constrained market, money will go only to the prettiest girl in the room. The current oil and gas market is binary: quite simply, we have those who are in favor, and those who are not--in other words, those who have access to capital and those who do not. This creates the need to source projects that investors feel are the best, which means those with the best resources and the quickest and highest payout.</p> <p>OP: Are junior companies becoming stranded?</p> <p>Garth Braun: In difficult financial markets, investors scrutinize and examine companies in much greater detail before deploying capital. Junior E&amp;P companies were out of favor for a while, but now there is a renewed interest in the sector.</p> <p>Investment philosophies have always been based on the premise of risk-versus-return, and this will become more prevalent as investors consider this sector, and examine management teams, the assembled asset base and future growth potential. </p> <p>But there are definitely a substantial number of junior companies out there stranded for various reasons—from debt, which is a big issue, to not having the right project or that one extraordinary play.</p> <p>For juniors to fight in this market, they really have to work harder than the next company and have the ability to differentiate themselves through a more ingenious sourcing of technically great projects. They also need to be able to finance themselves with capital looking to be deployed in great assets.</p> <p>OP: How are juniors balancing risk with reward? What is essential here?</p> <p>Garth Braun: The trick here is to balance risk and reward with finding strong partners to farm out projects to. They must also demonstrate exceptional vigilance with using the balance sheet to fund opportunities. A junior team must be elite—and I cannot stress the significance of this enough. The risk/reward ratio is managed best by an elite team capable of guiding the company to growth.</p> <p>OP: How you can increase the value of a junior E&amp;P company without taking on extra risk?</p> <p>Garth Braun: Again, we''''re talking about an elite team—and secret weapons. The right elite team will include individuals who possess exceptional talent and uncanny ability to identify trends before they become trends.</p> <p>OP: When your acreage is surrounded by major oil companies who can afford to drill more wells, how do juniors leverage this for their own potential?</p> <p>Garth Braun: For Blackbird, this question pertains directly to our Montney real estate, which has vast potential. Here, in the Greater Karr region, we are surrounded by large-caps such as Kelt Exploration, Encana and ConocoPhillips all in close proximity. This is the indicator that we are sitting on something very valuable, and our acreage continues to grow in value as our neighbors continue to drill and make progress. Their expensive drilling directly boosts our value and the attractiveness of this exceptional project. </p> <p>OP: Have the banks grown unsympathetic to the juniors?</p> <p>Garth Braun: Not at all. Actually, the opposite is true. Banks have begun to move down markets as the capital markets have become more competitive. Big banks have particularly moved down the market, so to speak. I would say that investors are more unsympathetic than banks to the juniors.</p> <p>Banks have started to consider becoming advisors for junior E&amp;P companies, as well as examining financing opportunities. We saw this same shift happen in the mining sector a few years ago, where banks came down in market cap requirements from financing the big caps to focusing on the little guys. They are definitely playing in the junior market-cap sandbox now, along with other brokerage firms.</p> <p>OP: What should investors look at when determining whether to include a junior in their portfolio?</p> <p>Garth Braun: The number one element here is to find a junior with the best project and a team that will fight relentlessly to get it developed and de-risked. In volatile markets--or markets that seem less friendly than in days gone by--the fundamental core of the company becomes the central apex of investment consideration. How strong is management? Have they had previous success? Do they have a vision of growth? Have they assembled the right asset packages, or have a plan to do so? It has never been cheaper to get into the natural resource sector, but what is your risk-reward tolerance? </p> <p>OP: What is the biggest challenge in the Montney Resource?</p> <p>Garth Braun: The biggest challenge here is the capital-constrained environment—finding the best resource to attract drilling capital.</p> <p>OP: How much pressure is there right now on juniors to deliver something immediately or disintegrate?</p> <p>Garth Braun: Extreme pressure is always evident in the market. People''''s impatience is something of a self-fulfilling prophecy in which investors have to understand that value achievement does not happen with one or two well, rather with finding a resource that others will pay huge premiums to acquire.</p> <p>Delivering something immediately speaks to having a multi-pronged growth strategy, and management needs to think 2, 4, even 10 steps ahead of the rest. While developing strategy ‘A'''', they need to work on other items at the same time so that news flow stays prominent in the market place. You''''re in competition for the attention of investors here, staying in front of them with news, and demonstrating that management continues to work at increasing the company and shareholder value. Failure to provide news and transparency will ultimately cause the demise of the company—not from collapsing under pressure, but from loss of interest and therefore capital from the investment community.</p> <p>OP: Blackbird recently announced plans to acquire Pennant Energy Inc. in a “friendly share exchange deal”. How does this deal increase Blackbird''''s value, and what are the anticipated growth prospects?</p> <p>Garth Braun: For Pennant shareholders, this deal will provide increased value by combining the Bigstone Montney and Mantario interests, as well as the opportunity to participate in a growth-oriented emerging oil and liquids producer, which is Blackbird. For Blackbird, it allows us to advance our strategy of growth through acquisitions, with a management team that has had much success growing and selling emerging producers. The deal gives Blackbird assets in both Alberta and Saskatchewan, which we believe will provide opportunities for drilling and leveraging capital efficiencies. Blackbird intends to continue to grow through appropriate acquisitions that are accretive on a per-share basis.</p> <p>OP: What can such a merger tell us about junior E&amp;P trends and the junior struggle to grow in an increasingly competitive market?</p> <p>Garth Braun : It tells us that in order to survive, junior companies have to be creative, but also vigilant in acquiring assets at great valuations. There is a large part of the junior market that is ripe for consolidation; and all it takes is a company with the ability to navigate mergers and acquisitions and to act as a consolidator in the face of a market that is waiting for the next growth company.</p> <p>OP: What can we expect from Blackbird over the next 12 months? </p> <p>Garth Braun: Blackbird is a small cap with large cap aspirations, and right now it is an emerging oil and gas company that is poised to incur significant value achievement over the next 12 months. This is an identifiable trend within Blackbird, which over the past 18 months has built projects analogue to some great projects of other companies, such as Delphi Energy in Bigstone, among others. This has allowed Blackbird to build up a portfolio that is financeable, attractive to investors and capable of bringing on strong partners through farm-outs or joint ventures. </p> <p>What is most interesting is Delphi is currently drilling right up to Blackbird''''s property, which is validating and de-risking the resource potential of the land. There are a multitude of other parties surrounding Blackbird''''s land position as well such as Trilogy, Athabasca Oil Corp. and TAQA; It would not be surprising if any of the parties surrounding Blackbird''''s Bigstone play eventually took over it given the incredible results that are being achieved from wells in this area. Blackbird would also look to be extremely creative in monetizing the Bigstone asset which would most likely net a greater return. This is what it''''s all about for the juniors, and when you look at a junior today—you look at who is doing what right next to them. We could coin a new phrase here—“analog investing”.</p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/blackbird%20energy.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="108" /> </div> </div> </div> Business Energy The Money Times newsletter Sat, 01 Mar 2014 07:11:08 +0000 James Stafford 1701713852 at http://themoneytimes.com The Golden Age of Gas, Possibly: Interview with the IEA http://themoneytimes.com/featured/20140212/golden-age-gas-possibly-interview-iea.html <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>The potential for a golden age of gas<br /> What will the “age” means for renewables<br /> What it means for humanity<br /> The challenges of renewable investment and technology<br /> How the US shale boom is reshaping the global economy<br /> Nuclear''s contribution to energy security<br /> What is holding back Europe''s energy markets<br /> The next big shale venues beyond 2020<br /> The reality behind “fire ice”<br /> Condensate and the crude export ban<br /> The most critical energy issue facing the world today</p> </div> </div> </div> <div class="field field-type-text field-field-lead"> <div class="field-label">lead:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>The potential for a golden age of gas comes along with a big “if” regarding environmental and social impact. The International Energy Agency (IEA)—the “global energy authority”--believes that this age of gas can be golden, and that unconventional gas can be produced in an environmentally acceptable way.</p> <p>In an exclusive interview with Oilprice.com, IEA Executive Director Maria van der Hoeven, discusses:</p> </div> </div> </div> <p>Oilprice.com: In 2011, the IEA predicted what it called “the golden age of gas,” with gas production rising 50% over the next 25 years. What does this “golden age” mean for coal, oil and nuclear energy—and for renewables? What does it mean for humanity in terms of carbon emissions? Is the natural gas boom lessening the sense of urgency to work towards renewable energy solutions?</p> <p>IEA: We didn''t predict a golden age of gas in 2011, we merely asked a pertinent question: namely, are we entering a golden age of gas? And we found that the potential for such a golden age certainly exists, especially given the scale of unconventional gas resources and the advances in technology that allow their extraction. But the potential for a golden age of gas hinges on a big “if,” and we elaborated on this in 2012 in a report called “ Golden Rules for a Golden Age of Gas”. Exploiting the world''s vast resources of unconventional natural gas holds the key to golden age of gas, we said, but for that to happen, governments, industry and other stakeholders must work together to address legitimate public concerns about the associated environmental and social impacts. Fortunately, we believe that unconventional gas can be produced in an environmentally acceptable way.</p> <p>Under the central scenario of the World Energy Outlook-2013, natural gas production rises to 4.98 trillion cubic metres (tcm) in 2035, up nearly 50 percent from 3.38 tcm in 2011. But we have always said that a golden age of gas does not necessarily imply a golden age for humanity, or for our climate. An expansion of gas use alone is no panacea for climate change. While natural gas is the cleanest fossil fuel, it is still a fossil fuel. As we have seen in the United States, the drastic increase in shale gas production has caused coal''s share of electricity generation to slide. Of course, there is also the possibility that increased use of gas could muscle out low-carbon fuels, such as renewables and nuclear, from the energy mix.</p> <p>OP: When will we see “the golden age of renewables”?</p> <p>IEA: Although we have not yet predicted a “golden age” of renewables, the current, rapid growth of renewable power is a bright spot in an otherwise bleak picture of global progress towards a cleaner and more diversified energy mix. Still, the investment case for capital-intensive, low carbon power technologies carries challenges. We need to distinguish between two situations:</p> <p>In emerging economies, renewable power often provides a cost-competitive alternative to new fossil based generation and are perceived as part of the solution to questions of energy supply, diversification, and economic development. In China, for example, efforts to reduce local pollution are stimulating major investments in cleaner energy.<br /> By contrast, in stable systems with sluggish demand, no technology is competitive with marginal electricity prices, due to overcapacity. Governments are nervous about increasing investment in low-carbon options which impact on consumer prices, and this is causing policy uncertainty. But long term energy security and environmental goals need to be kept in mind.<br /> The overall outlook for renewable electricity remains positive, even as the outlook can vary strongly by market and region. However, the electricity sector comprises less than 20% of total final energy consumption. The growth of renewables in other sectors such as transport and heat has been more sluggish. For a golden age of renewables to materialise, greater progress is needed in these areas, for example, with the development of advanced biofuels and more policy frameworks for renewable heat.</p> <p>OP: How is the shale boom reshaping the global financial and economic system? Who are the winners and losers in this emerging scenario?</p> <p>IEA: One of the key messages of our World Energy Outlook-2013 is that lower energy prices in the United States mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden.</p> <p>Natural gas prices have fallen sharply in the United States – mainly as a result of the shale gas boom – and today they are about three times lower than in Europe and five times lower than in Japan. Electricity price differentials are also large, with Japanese and European industrial consumers paying on average more than twice as much for electricity as their counterparts in the United States, and even Chinese industry paying almost double the US level.</p> <p>Looking to the future, the WEO found that the United States sees its share of global exports of energy-intensive goods slightly increase to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the European Union and Japan see their share of global exports decline – a combined loss of around one-third of their current share.</p> <p>OP: The IEA has noted that the US is no longer so dependent on Canadian oil and gas. What could this mean for pending approval of TransCanada''s Keystone XL pipeline? How important is Keystone XL to the US as opposed to its importance for Canada?</p> <p>IEA: The decision on the Keystone matter is one that must be taken by the United States Government. I am afraid it is not for the IEA to comment.</p> <p>OP: With the nuclear issue taking center stage in Japan''s election atmosphere, is Japan ready to pull the plug entirely on nuclear, or is it too soon for that?</p> <p>IEA: This year''s World Energy Outlook, which we will release in November 2014, will carry a special focus on nuclear energy, so please stay tuned. While I won''t discuss what Japan should do, I will say that every country has a sovereign right to decide on the role of nuclear power in its energy mix. Nevertheless, nuclear is one of the world''s largest sources of low-carbon energy, and as such, it has made and should continue to make an important contribution to energy security and sustainability.</p> <p>A country''s decision to cut the share of nuclear in its energy mix could open up new opportunities for renewables, particularly as some phase-out plans envision the replacement of nuclear capacity largely with renewable energy sources. However, such a decision would also likely lead to higher demand for gas and coal, higher electricity prices, increased import dependency on fossil fuels and electricity, and a more difficult path towards decarbonisation. Such a scenario would therefore make it much more difficult for the world to meet the 2°C climate stabilisation goal, and have potentially negative impacts on energy security.</p> <p>OP: What is the key factor holding back European energy markets?</p> <p>IEA: Europe has quite a few advantages but also many hurdles to overcome. If I had to pick one key factor that is holding back European energy markets, I would say it is the lack of cross-border interconnections. Let me explain what I mean. As we showed in WEO 2013, Europe''s competitiveness is under pressure, as energy price differences grow between Europe and its major trading partners – the US, China and Russia. High oil and gas import prices combined with low gas and electricity demand, following the recession, are impacting European economies.</p> <p>Europe should accelerate the use of its indigenous potential and reap the social and economic benefits from energy efficiency, renewable energies and unconventional oil and gas. In open economies, there are significant advantages to be gained from free trade and a large energy market. One example: Today, we cannot make use of competitive electricity prices across the EU, as physical trade barriers exist and markets remain national. Europe is failing to achieve its potential. The electricity grid and system integration is very low, which also serves as a barrier to the full and efficient exploitation of renewable energy potentials. This is why addressing the issue of cross-border interconnections is so important.</p> <p>OP: Where do you foresee the next “shale boom”?</p> <p>IEA: According to WEO projections, there will be little non-North American shale development before 2020 due to the much earlier stage of exploration and the time needed to build up the oil field service value chain. Beyond 2020, we project large-scale shale gas production in China, Argentina, Australia as well as significant light tight oil production in Russia. The current reform proposals in Mexico have the potential to put Mexico on the top of that list as well, but they need to be properly implemented.</p> <p>OP: What is the realistic future of methane hydrates, or “fire ice”?</p> <p>IEA: Methane hydrates may offer a means of further increasing the supply of natural gas. However, producing gas from methane hydrates poses huge technological challenges, and the relevant extraction technology is in its infancy. Both in Canada and Japan the first test drillings have taken place, and the Japanese government is aiming to achieve commercial production in 10 to 15 years.</p> <p>One thing I always mention when I am asked about methane hydrates is this: It may seem far off and uncertain, but keep in mind that shale gas was in the same position 10 to 15 years ago. So we cannot rule out that new energy revolutions may take place through technological developments and price incentives.</p> <p>OP: Have we hit the “crude wall” in the US, the point at which oil production growth may end up slowing due to infrastructure and regulatory constraints?</p> <p>IEA: In January 2013, the IEA''s Oil Market Report examined the possibility that as surging production continues to move the US closer to becoming a net oil exporter, there may come a time when various regulations, particularly the US ban on exports of crude oil to countries other than Canada, could have an adverse impact on continued investment in LTO – and thus continued growth in production. We called this point the “crude wall”.</p> <p>A year later, in our January 2014 Oil Market Report, we noted that with US crude oil production exceeding even the boldest of expectations in 2013 by a wide margin, the crude wall now seems to be looming larger than ever. Having said that, challenges to US production growth are not imminent. Potential US growth in 2014 seems a given, even against the backdrop of resurgent non-OPEC supply growth outside North America.</p> <p>OP: How is this shaping the crude export debate and where do you foresee this debate leading by the end of this year?</p> <p>IEA: You are better off asking my friends and colleagues in Washington! This is obviously a sensitive topic. Different people feel differently about it, often very strongly. Oil policy always is the product of multiple, sometimes-competing considerations.</p> <p>OP: What would lifting the ban on crude exports mean for US refiners, and for the US economy?</p> <p>IEA: Many refiners and other major oil consumers have said they support keeping the ban amid worries that allowing exports would result in higher feedstock costs and erode their competitive advantage, or shift value-added industry abroad. On the other hand, oil producers have in general come out in favour of lifting the ban, arguing that the “crude wall” may become so large that it cannot be overcome; they see the possibility of a glut causing prices to slump and thereby choking off production. We have not produced any detailed analysis on the economic impact of lifting the ban, so I cannot comment on that part of your question.</p> <p>OP: Are there any other ways around the “crude wall” aside from lifting the export ban?</p> <p>IEA: As we wrote in our January 2014 Oil Market Report, much of the LTO is produced in the form of lease condensate, which is most optimally processed in a condensate splitter. There is currently only one such facility in the United States, although at least five others are in various stages of planning and construction.</p> <p>I mention this issue because one could imagine a scenario under which lease condensate is excluded from the crude export restriction. The US Department of Commerce, which enforces the export ban, includes lease condensates in the definition of crude oil. However, this definition could be changed, or the Commerce Department could simply issue lease condensate export licenses at the behest of the President.</p> <p>OP: How will the six-month agreement to ease sanctions on Iran affect Iranian oil production? And if international sanctions are indeed lifted after this “trial period”, how long will it take Iran to affect a real increase in production?</p> <p>IEA: The deal between P5+1 and Iran doesn''t change the oil sanctions themselves. The oil sanctions remain fully in place though the P5+1 agreed not to tighten them further. Relaxing insurance sanctions doesn''t mean more oil in the market.</p> <p>As for the second part of your question, I am afraid I can''t answer hypotheticals and what-ifs.</p> <p>OP: What is the single most critical energy issue in the US this year?</p> <p>IEA: I think that if you take the view that the energy-policy decisions you make now have ramifications for many decades to come, and if you believe what scientists tell us about the climate consequences of our energy consumption, then the single most critical energy issue in the US is the same issue for every country: what are you going to do with your energy policy to mitigate the risk of climate change? Energy is responsible for two-thirds of greenhouse-gas emissions, and right now these emissions are on track to cause global temperatures to rise between 3.6 degrees C and 5.3 degrees C. If we stay on our present emissions pathway, we are not going to come close to achieving the globally agreed target of limiting the rise in temperatures to 2 degrees C; we are instead going to have a catastrophe. So energy clearly has to be part of the climate solution – both in the short- and long-term.</p> <p>OP: What is the IEA''s role in shaping critical energy issues globally and how can its influence be described, politically and intellectually?</p> <p>IEA: Founded in response to the 1973/4 oil crisis, the IEA was initially meant to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets.</p> <p>While this continues to be a key aspect of our work, the IEA has evolved and expanded over the last 40 years. I like to think of the IEA today as the global energy authority. We are at the heart of global dialogue on energy, providing authoritative statistics, analysis and recommendations. This applies both to our member countries as well as to the key emerging economies that are driving most of the growth in energy demand – and with whom we cooperate on an increasingly active basis. </p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/IEA%20Executive%20Director%20Maria%20van%20der%20Hoeven.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="121" /> </div> </div> </div> Business Energy Wed, 12 Feb 2014 06:15:33 +0000 James Stafford 1701713827 at http://themoneytimes.com Iraqi Government Threatens Action Against Kurds as Oil Exports Set to Begin http://themoneytimes.com/featured/20140201/iraqi-government-threatens-action-against-kurds-oil-exports-set-begin.html <div class="field field-type-text field-field-teaser"> <div class="field-items"> <div class="field-item odd"> <p>Iraq's Deputy Prime Minister for Energy Affairs firmly stated the central government will take action, "including fiscal measures," if Kurdistan begins exporting oil without coming to an agreement with Baghdad. The remarks came as Minister Hussain al-Shahristani spoke at a conference in London on January 28. The Kurdish Regional Government (KRG) announced in mid-January that oil had begun to flow through a pipeline towards Turkey and that exports would officially start by the end of the month.</p> </div> </div> </div> <p>Shahristani argues that Kurdish oil must be exported through the State Oil Marketing Organization (SOMO), a government-owned entity responsible for marketing Iraq's oil. He reiterated that oil extracted from any region of Iraq, including Kurdistan, is the "property of the Iraqi people," meaning that it is owned by the central government.</p> <p>The tough statement follows similar threats from other Iraqi government officials in recent weeks as the Kurds prepare to export oil to Turkey. On January 17 Iraqi Oil Minister Abdul Kareem Luaibi said Iraq will take legal steps to punish Turkey, Kurdistan, and the international oil companies involved in exporting oil. And on January 12 Iraqi Prime Minister Nuri al-Maliki promised to cut KRG's share of the national budget if it begins exports without approval from the central government.</p> <p>The conflict escalated when Baghdad followed through on Maliki's threat. It released a draft national budget on January 15 that completely cut off funding for Kurdistan, a move meant to put pressure on the KRG to heed the central government's demands. Kurdish ministers walked out of the cabinet session when the budget was released.</p> <p>The central government has been angling to prevent Kurdistan from unilaterally exporting oil to Turkey, but that does not mean Baghdad doesn't want Kurdish oil to flow. Indeed, according to the budget, the central government is requiring 400,000 barrels of oil from Kurdistan to be exported, and any shortfall will be made up by deducting from Kurdistan's share of national revenues. Kurdistan is entitled to a 17% share of revenues collected as part of Iraq's revenue sharing arrangement. The KRG argues that those funds are often not delivered.</p> <p>Yet it also appears that Kurdistan is pushing for much more than merely to export oil on its own terms. Ali Balu, a former head of Iraqi parliament's oil and gas committee recently stated that within a few years "Kurdistan is going to be rid of its status as a region within Iraq," according to an article in Rudaw, a Kurdish news web site. Balu went on, "a plan is underway for Kurdistan to be an independent state in the near future."</p> <p>Exporting oil from Kurdistan is a key step in the KRG's plan to eventually declare independence from Iraq. Clearly, Baghdad is not oblivious to this fact, seeing which way the winds are blowing. This is why the central government is so adamant about centralizing the oil export process. Both sides may be unwilling to give in, but the situation appears to be coming to a head, as Kurdistan expects to initiate exports within days.</p> <p>By. Nick Cunningham of Oilprice.com</p> <div class="field field-type-filefield field-field-image"> <div class="field-items"> <div class="field-item odd"> <img src="http://themoneytimes.com/files/imagecache/picturethumb/kurds%20oil.jpg" alt="" title="" class="imagecache imagecache-picturethumb imagecache-default imagecache-picturethumb_default" width="180" height="135" /> </div> </div> </div> Business Energy Markets oil exports Sat, 01 Feb 2014 05:15:43 +0000 James Stafford 1701713813 at http://themoneytimes.com