NEWS

[UNITED STATES] Lawyers say BP trial near halfway point

2008-06-22T01:45:00.000+02:00

A civil trial arising from the 2005 BP Texas City refinery explosion finished its fourth week Friday, and lawyers indicated it may just be at the halfway point. Lawyers for plaintiffs who allege they were injured in the blast that killed 15 workers said plaintiff testimony will continue until about July 4, and BP lawyers estimated they'll take two weeks after that to present the defense case.

The pace of the trial has slowed, with plaintiffs and their doctors presenting detailed testimony about their injuries and treatments.

Ten people are suing for physical and emotional suffering they claim to have endured in the explosion. BP is questioning the extent of their injuries and the amount of their damage claims, including $950 million in punitive damages.

The company has settled almost all of the 4,000 claims resulting from the blast, including all lawsuits involving the 15 fatalities. Lawyers for both sides continue to meet privately to negotiate the 79 outstanding claims.

Source: Houston Chronicle |By BRAD HEM

[EUROASIA] TNK-BP Sending Mixed Messages

2008-06-21T02:46:00.004+02:00

In a brand-new office on the 14th floor of a central Moscow high-rise, the Russian shareholders who own half of embattled oil firm TNK-BP are waging a war. On a recent afternoon, the shareholders' newly appointed press secretary stood at the office's sparkling windows, offering an expansive view of Moskva-City, the ultimate symbol of the teeming capital's oil-driven wealth.

"Why do they have to do everything all at once and so big," he said, musing about the inevitable traffic the new office complex will generate. A Russian reporter standing nearby answered, "Because who knows what tomorrow will bring?"

Despite protests by AAR and BP -- the equal shareholders in TNK-BP -- investors and analysts continue to function under the assumption that the firm is ripe for a state-run partner in the days of $140-per-barrel oil. Stan Polovets, an AAR deputy chairman who was promoted to CEO two weeks ago, insists otherwise.

"They're portraying it as being driven by politics or greed -- not as an attempt by the Russian shareholders to make sure their interests are represented in the company," he said during an interview this week, one of dozens offered to journalists as AAR looked to plead its case.

Many analysts say the complaints aired against BP by AAR -- a consortium which groups Mikhail Fridman and German Khan's Alfa Bank, Viktor Vekselberg's Renova, and Len Blavatnik's Access Industries -- are valid. With massive projects around the world, BP has little interest in seeing TNK-BP expand beyond the former Soviet Union. It does lag behind its Russian competitors in terms of refining capacity. The question, analysts say, is: Why now?

When asked why AAR chose this time, as the British-Russian venture nears its fifth anniversary, to raise these issues, Polovets first answered with a negative. It is not, he said, because a key clause in the shareholders agreement binding the owners to TNK-BP expired last year. A copy of the clause, obtained by The Moscow Times, says AAR and BP were never bound to the venture, they simply had to offer a potential stake up for sale to their partners first.

With the clause's expiration on December 31 last year, BP and AAR lost their rights of first refusal, and BP or AAR can now negotiate with whomever they choose. Both sides deny a desire to sell or dilute their stakes and insist that they are not negotiating with Rosneft or Gazprom, the state's energy champions.

A government official said earlier this month that "state companies have no place" in TNK-BP. "Talk of Gazprom buying a stake is the worst option," the official said on condition of anonymity.

The dispute has thwarted attempts to close the sale of TNK-BP's Kovykta gas field to Gazprom, Richard Spies, the head of BP Russia, said Thursday.

TNK-BP agreed to sell the enormous east Siberian field to Gazprom last summer, following months of pressure from state environmental authorities. The deal, whose price recently skyrocketed from between $700 million to $900 million to $1.2 billion, has yet to be sealed, despite the passing of several deadlines.

"BP and BP directors in TNK-BP are ready to close the agreement with Gazprom on Kovykta," Spies said. When asked what the delay was, he answered, "Ask the other shareholders."

The dispute has reached a level of acrimony that means the principal players communicate with each other chiefly through the media, in rival interviews and in briefings.

EU Trade Commissioner Peter Mandelson said Thursday that the case of TNK-BP, a 50-50 Russian-British partnership, was being watched closely to judge the foreign investment climate in Russia. "It's a test case for business partnership and business success," he said in an interview. "If this is a jealousy disagreement, as I am told it is, then governments should step back and state agencies should not involve themselves, because they risk politicizing the disagreement."

The conflict was publicly launched in March with Federal Security Service raids against BP and TNK-BP offices, the arrest of a TNK-BP employee on charges of industrial espionage, and the withdrawal of 148 BP employees from the joint venture over visa issues. The state labor inspectorate has also brought administrative charges against TNK-BP and its CEO, Robert Dudley, whose ouster AAR is seeking.

"A sudden inspection exposed a number of substantial violations of labor regulations, including the incorrect registration of recruitment contracts, inappropriate salary payment times, and others," a source in the inspectorate said Thursday, Interfax reported.

Dudley faces punishment ranging from a warning to 15 days in prison if found guilty, the report said.

"This conflict is not about a badly performing company; it's not about the chief executive; it's not about foreign employees and not about the international expansion of TNK-BP's business. It's a systematic attempt to control the company using tactics of the 1990s," Alastair Graham, BP's chief liaison with its TNK-BP board members, said at a news briefing on Thursday, repeating a claim made by BP chairman Peter Sutherland earlier this month.

BP's share price has fallen from nearly ?650 ($1,280) one month ago, to ?580.25 at the close of trading Thursday. TNK-BP accounts for one-quarter of its production. "That's why this partnership is a bit tricky -- because one is a strategic investor, an operator, an industry player that's managing the assets. The other partner is a financial investor that's looking at a different set of metrics," said Polovets of AAR.

Source: The Moscow Times|By Miriam Elder

[MIDDLE EAST] Negotiations under way for no-bid contracts. Oil majors may return to Iraq after 36 years

2008-06-19T10:40:00.003+02:00

Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein consolidated his power.

Exxon Mobil, Shell, Total and BP, the original partners in the Iraq Petroleum Co., along with Chevron and a number of smaller oil companies, are in talks with Iraq's Oil Ministry for no-bid contracts to service Iraq's largest fields, according to ministry officials, oil company officials and a U.S. diplomat.

The deals, expected to be announced on June 30, lay the foundation for the first commercial work for the major companies in Iraq since the U.S. invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq's Oil Ministry.

For an industry being frozen out of new ventures in the world's dominant oil-producing countries, from Russia to Venezuela, Iraq offers a rare and prized opportunity.

While enriched by escalating prices, the oil majors are also struggling to replace their reserves as more of the world's oil patch becomes off limits.

The Iraqi government's stated goal in inviting back the major companies is to increase oil production by half a million barrels per day by attracting modern technology and expertise to oil fields now desperately short of both. The revenue would be used for reconstruction, although the Iraqi government has had trouble spending the oil revenues it now has, in part because of bureaucratic inefficiency.

The Iraqi Oil Ministry, through a spokesman, said the no-bid contracts were a stopgap measure to bring modern skills into the fields while the oil law was pending in Parliament.

Source: The New York Times|By ANDREW E. KRAMER

[INTERNATIONAL RELATIONS] Kissinger and Blair Warn of Conflict.

2008-06-18T20:37:00.004+02:00

Visiting statesmen Tony Blair and Henry Kissinger said Tuesday that countries had to form strategic alliances to face major global challenges like energy security and climate change.

Kissinger, former U.S. secretary of state, and former British Prime Minister Blair were speaking at a Renaissance Capital investment conference, where Kissinger said Russia and the United States, accounting for 90 percent of the world's nuclear arsenal between them, have to set aside their differences to solve issues that cannot be tackled unilaterally.

"None of these [issues] can be dealt with by confrontation between the U.S. and Russia," he said. "It is not in the U.S. interest to keep Russia down, and it is not in the Russian interest to look at the U.S. as an antagonist."

Relations between the Washington and Moscow have been strained as a result of U.S. plans for a missile-defense system in the Czech Republic and Poland and amid growing resentment of what Russia sees as U.S. meddling in its backyard, including its support of Georgia and Ukraine's ambitions to join NATO.

Kissinger, who received the Nobel Peace Prize in 1973, continues to retain considerable influence in foreign policy circles in Washington. He has traveled to Russia on a number of occasions over the past eight years, engaging in behind-the-scenes diplomacy in discussions of U.S.-Russian relations with senior politicians.

Kissinger met for a brief conversation Tuesday afternoon over tea with President Dmitry Medvedev and was expected to meet with Prime Minister Vladimir Putin later in the day.

Asked by a member of the conference audience where the next major international conflict might come from, Kissinger warned that the search for energy security could lead to aggression as countries scramble to secure energy supplies.

"If supply is limited and demand increases, if countries compete for access to energy on a purely national basis, we are bound to see a repetition of the colonial conflicts of 19th century," he said, cautioning that such conditions could degenerate into "intense political rivalry."

Kissinger's words struck a chord.

"This is an early warning signal, but I'm not sure it will do anything to make people move away from that kind of position. If anything, it might even hasten the grab for oil assets," said Marshall Goldman, associate director at the U.S.-based Davis Center.

"At the present time, Russia … is not in a position to worry there won't be enough for Russia. If anything, it might make Russia even more aware of the fact that they are in a very commanding position."

With one-quarter of the world's gas reserves and as the largest oil exporter outside of OPEC, Russia is favorably positioned to take advantage of any race for assets.

The price of oil has reached unprecedented highs in recent months, climbing close to $140 per barrel this week, while industry leaders have warned that it could be many years yet before alternative fuels will be in widespread use.

Kissinger's words were echoed by Blair, the Middle East envoy for the United States, Russia, the United Nations and the European Union — the so-called Quartet — who said world leaders had to respond properly to enormous challenges, through opening up and not protectionism.

"Power is shifting east, and it's shifting fast, not just to China and, in time, to India, but also to the Middle East and to Russia," Blair said. "Political and economic relationships are undergoing profound change."

To laughter from the audience, Blair admitted that Britain and Russia had had their difficulties over the last two years, but he said it was essential to have Russia on board to tackle issues of a global nature.

"We need to engage in strong strategic partnerships with [the] shift in power. Not to engage with this at a strategic level would be a … mistake of a profound nature," he said.

"Global challenges cannot be solved without the participation of countries like Russia," he added.

Relations between Russia and Britain are at a post-Soviet low, stemming back to the murder of Alexander Litvinenko, a former FSB agent, in London in late 2006.

More recently, BP has been embroiled in a battle with the Russian shareholders over the leadership of the 50-50 TNK-BP joint venture. The tie-up was hailed as a landmark in cooperation between the two countries back in 2003, when both Blair and Putin put their signatures to the deal.

Five years on, the project is unraveling and BP claims that the Russian shareholders are trying to take control of the project. TNK-BP, a wholly private company, remains an anomaly in a country that has undergone a creeping renationalization in the resource sector.

In a widely publicized address at last year's conference, Tony Hayward, just one month into his new role as chief of BP, issued an impassioned plea for Western markets to open up to Russian investment as he attempted to defuse the firm's conflict with state officials over the Kovykta gas field.

No representatives from BP attended, with the embattled CEO of TNK-BP, Robert Dudley, pulling out at the last minute.

Finance Minister Alexei Kudrin weighed in on the dispute Tuesday, telling reporters that there was still time to limit the collateral damage from the conflict.

"This is a specific case, and it hasn't affected the investment climate yet," Kudrin said. "The conflict itself isn't as important as how it ends. The conflict should be resolved in a civilized way, so it won't do any harm." he said.

The Russian shareholders, Alfa Group, Access Industries and Renova, or AAR, have called for Dudley's firing and a restructuring of the TNK-BP board.

Tim Summers, the company's chief operating officer, said the conflict, including AAR's threat to take BP to court in Stockholm over its hiring of foreign employees, could affect TNK-BP's operations.

"They are in dialogue with each other, and we hope that dialogue will be constructive and reduce some of the uncertainty for my team in terms of the operations of the company," said Summers, sitting in for Dudley, who had been scheduled to take part in the conference's energy roundtable. "I won't pretend it's been an easy time for our employees."

The fate of 150 BP employees, assigned as specialists, engineers and strategists to TNK-BP, remains uncertain, as their visas run out in July.

A court in the Tyumen region was due Wednesday to hear a lawsuit brought against TNK-BP by Tetlis, an obscure firm with a miniscule holding in the joint venture, which is challenging the legality of the foreign hires.

"The issues at stake are complex," said Summers. "The sooner it gets resolved, the better."

Summers defended the company's record, judged by reserve replacement ratio and dividend payments, following claims by Alfa Group chairman Mikhail Fridman that TNK-BP has underperformed, particularly compared with its Russian rivals.

Bob Foresman, deputy chairman of Renaissance Capital, warned that the dispute was "not helping anybody."

"It's obviously unhelpful for BP. It's very unhelpful for AAR, as it doesn't make them look good. It's unhelpful for the Russian government and administration and it is unhelpful for the market," Foresman said.

At the same time, he said talks with government officials had led him to believe that BP's presence in Russia was not under threat.

"No important decision maker in Russia wants to see BP leave Russia," Foresman said. "It's not about the authorities chasing BP out."

There has been much public speculation that AAR was looking to gain greater control of the joint venture ahead of a sale to a state-owned energy major like Gazprom or Rosenergo.

Gazprom CEO Alexei Miller, speaking at a different event Tuesday, said his firm had made no overtures toward TNK-BP, Interfax reported.

Gazprom has neither made nor received any offers for the purchase of shares in TNK-BP and is not related in any way to the conflict within the company," Miller told reporters at the opening of a new production unit at electricity utility Mosenergo. Notably absent at Tuesday's conference was scheduled speaker Igor Shuvalov, the first deputy prime minister who was publicly upbraided by Putin last week for taking time out from work on domestic issues to speak at the St. Petersburg International Economic Forum last weekend.

Source: The Moscow Times|By Miriam Elder

[UNITED STATES] Thunder Horse platform finally pumping after three-year delay

2008-06-17T06:20:00.002+02:00

BP's long-delayed Thunder Horse platform in the Gulf of Mexico is finally pumping oil and gas.

BP spokesman Ronnie Chappell said today that Thunder Horse started pumping from a single well on Saturday, launching the start of a lengthy commissioning process.

"There's still a lot of work to do. There are other wells to prepare for production and others to drill and complete. But we're on track, making good progress, and on schedule to have the field online by year-end," he said.

When the structure 150 miles southeast of New Orleans reaches its full daily capacity of 250,000 barrels of oil and 200 million cubic feet of natural gas, Thunder Horse will be the biggest producer in the Gulf.

Thunder Horse originally was slated to start producing three years ago. But system and design troubles prompted lengthy delays for repairs.

Ballast system failures left the installation listing 20 degrees after Hurricane Dennis blew through the Gulf in July 2005. About a year later a crucial piece of equipment on the seabed sprung a leak, forcing BP to haul the piece back to shore for repairs.

When running at full tilt, Thunder Horse alone will increase overall U.S. oil and gas production by 3.6 percent. Add BP's Atlantis platform that started up last year, and the boost grows to 6.4 percent.

Analysts have said that is likely the biggest production increase from just two locations that the U.S. has seen in a decade. BP owns three-fourths of Thunder Horse and Exxon Mobil Corp. holds a one-fourth interest.

Source: Houston Chronicle| By KRISTEN HAYS

[UNITED STATES] Blast victim also waited to see a doctor, BP attorneys say

2008-06-15T07:24:00.003+02:00

Donaciano Peralta said he broke his ankle trying to get off his forklift when the isomerization unit exploded at the BP Texas City refinery in 2005. But he didn't see a doctor until more than a year later and only when his lawyer told him to, according to testimony and evidence presented Friday in the latest civil trial related to the blast.

Donaciano Peralta eventually had three surgeries to repair his ankle. Evidence showed different doctors offered different opinions, with one recommending surgery and another telling Peralta he needed to use an exercise bike to strengthen the joint, according to evidence.

Attorneys for BP seized on the varying diagnoses in court Friday. Donaciano Peralta, 35, and nine other workers are suing for physical and emotional trauma they say stemmed from the explosion, which killed 15 people and injured scores more.

BP has admitted responsibility for the blast, but the company disputes the extent of plaintiffs' injuries and the $950 million they're seeking in damages. Donaciano Peralta, testifying through an interpreter, added that he became depressed after the blast and got better only with psychiatric help.

Executive deposition
Also Friday, plaintiffs' lawyers played a videotaped deposition of Ross Pillari, then-president and CEO of BP Products North America.

Pillari put the blame for the explosion on refinery managers. Ross Pillari was asked about trailers that were close to the explosion in violation of company policy and about a BP report that said the company thought trailers would simply roll over in an explosion.

Asked whether he would want to be inside a trailer while it rolled around, Ross Pillari said he wouldn't know if it was safe without seeing a study.

The trial is scheduled to resume Monday.

Source:Houston Chronicle|By BRAD HEM

[GEOPOLITIC] Russia is biggest oil producer. International Energy Agency

2008-06-11T00:56:00.003+02:00

The International Energy Agency says Russia has turned into the biggest crude oil producer, a title traditionally belonged to Saudi Arabia.

The International Energy Agency declared on Tuesday that Russia has been the biggest crude oil producer in the first quarter of 2008, extracting 9.5 million barrels per day, ahead of Saudi Arabia at 9.2 million barrels, AFP reported. The International Energy Agency ranks the United States as the third-biggest producer with 5.1 million barrels per day, followed by Iran, pumping 4 million barrels per day

China is in fifth place with output of 3.8 million barrels per day. In principle, Russia's oil bonanza could continue for years: it has the world's seventh-biggest oil reserves, at 80 billion barrels, according to BP, a British oil firm.

And oilmen reckon there are 100 billion more barrels to find--"the biggest exploration prize in the world", in the words of Robert Dudley, the boss of TNK-BP, BP's Russian joint venture.

Source: PressTV

[AFRICA] Wavefield Inseis bags seismic contract from BP Libya

2008-06-08T14:37:00.004+02:00

Wavefield Inseis has received a letter of interim arrangement from BP Exploration Libya Ltd for one of the world’s biggest 3D seismic acquisition and onboard processing contracts.

The survey, which will take place in Libya's offshore Sirt basin, will be acquired with Wavefield's latest 3D vessel Geowave Endeavour and is expected to take approximately a year to complete. The contract will incorporate the industry's largest ever onboard processing project that includes SRME and full Pre-Stack Time Migration.

"This award is another confirmation that Wavefield Inseis are fully accepted as a professional supplier of high-end acquisition and onboard processing services. It is of fundamental importance as it also reinforces our strategy of improving company visibility and moving forward," said Atle Jacobsen, CEO of Wavefield Inseis.

Source: Scandinavian Oil & Gas

[ASIA] Chevron to help Kazakhstan skirt Russia with pipeline

2008-06-07T14:21:00.003+02:00

Chevron will help Kazakhstan's state oil company build a $1.5 billion pipeline from the nation's biggest producing field to the Caspian Sea, expanding export routes to world markets that bypass Russia.

The U.S. crude producer, the main shareholder in Kazakh oil venture TengizChevroil LLP, will help construct the link from Yeskene, near Atyrau, to Kuryk, near the Aktau port, Chief Executive Officer David O'Reilly said in a statement posted on President Nursultan Nazarbayev's Web site late Thursday.

The pipe will add to Chevron's export options as it ramps up production in Kazakhstan. The venture plans to boost output almost 60 percent to 540,000 barrels a day by the end of this year, or about 25 million tons a year, Ian MacDonald, regional vice president, said May 28. Of that, 13 million tons will be exported via the Chevron-led Caspian Pipeline Consortium link and 12 million tons transported in rail cars, MacDonald said.

Kazakhstan, which holds 3.3 percent of the world's oil reserves, and San Ramon, California-based Chevron have for years sought Russian approval to expand the CPC link. Russia agreed on May 7 to double the pipeline's capacity to as much as 67 million tons of oil a year by 2012.

The 750-kilometer (465-mile) Yeskene-Kuryk link will be built in two years and have an initial capacity of 23 million metric tons a year, Nazarbayev's press secretary Yerlan Baizhanov said, according to the state-run Kazinform news service.

State-run KazMunaiGaz National Co. said in January it would start sending oil across the Caspian Sea to the BP Plc-led Baku- Tbilisi-Ceyhan pipeline in 2012. The new link will carry oil from the Kashagan and Tengiz fields to Kuryk for shipment by tanker to Azerbaijan, where the BTC link to Turkey originates.

"The new pipeline will increase its capacity to 56 million tons of oil when crude production at Kashagan will start," Baizhanov said. Kazakh Energy Minister Sauat Mynbayev said May 12 that commercial output at Kashagan may not begin until 2012 or 2013.

Source: Bloomberg

[UNITED STATES] Ex-refinery boss says past death toll 'didn't shock' BP

2008-06-03T01:16:00.001+02:00

Disturbed by three deaths at BP's Texas City refinery in 2004, the head of the plant at the time launched an effort to find out how many workers had died there in the previous 30 years, only to be surprised no one else in the company was shocked.

Don Parus discovered 22 people had died in the time frame. He later discovered a 23rd.

Parus, whose employment at BP ended Jan. 1, was testifying this morning in the latest civil trial related to the 2005 explosion that killed 15 people and injured scores more at the refinery.

BP has admitted blame for the disaster, but the company questions the extent of the injuries and the $950 million claim sought by 10 workers allegedly hurt in the blast.

Parus said his investigation didn't make waves within the company.

"It didn't shock anybody like thought it would," he said. Until Jan. 1, Parus had remained on paid leave with BP since a few weeks after the blast. His findings about the deaths prompted him to launch a survey of refinery employees to gauge the safety culture at the plant. Workers ranked making money as BP's top priority and people as the last.

New to the refinery in 2004, Parus said he fought a frustrating battle with BP executives to improve the refinery. He asked for more money to make infrastructure improvements, was given a budget increase and then BP cut it back, Parus said.

"I pushed back ... on every front," he said.

Source: Houston Chronicle| By BRAD HEM

[RUSSIA] Bristish Petroleum, clash with billionaires in Russia getting personal

2008-06-01T07:43:00.001+02:00

British oil company Bristish Petroleum on Friday rejected demands from a group of Russian billionaires to fire the head of the lucrative TNK-BP natural gas venture, deepening a confrontation between shareholders as the country's biggest state-controlled oil companies seek a stake in the venture.

Tensions between Russian and foreign shareholders of TNK-BP, the largest foreign oil producer in Russia, boiled over this week after the billionaires' consortium sought the resignation of the TNK-BP chief executive, Robert Dudley.

The investors — Mikhail Fridman, Viktor Vekselberg and Len Blavatnik, a Russian-born American citizen — cited disagreements over investments and asset sales, and expressed concern that Dudley was managing the venture solely in BP's interests.

On Friday, BP said Dudley was not stepping down.

This week, Dudley, who has led the joint venture since its formation in 2003, lashed out at the Russian shareholders, telling a Russian newspaper that the company was suffering from a "breakdown" in management.

The billionaires refused to attend a meeting Thursday of the company's board in Cyprus because Dudley had not been removed. Vladimir Buyanov, BP's spokesman in Moscow, said that the three instead met in Cyprus with the chairman of BP, Tony Hayward.

Since Vladimir Putin, then president of Russia and now the prime minister, and Tony Blair, then the British prime minister, created TNK-BP with an $8 billion investment, several major oil companies operating in Russia have fallen into difficulty.

Source: The New York Times |By SOPHIA KISHKOVSKY

[UNITED STATES] ExxonMobil's Rex Tillerson under Rockefeller pressure to split roles

2008-05-20T08:53:00.001+02:00

Four British investors in ExxonMobil are combining to throw their weight behind the Rockefeller family and vote in favour of the separation of the roles of chief executive and chairman on the board of the American oil major.

F&C Asset Management, the Co-Operative Insurance Society, Morley Fund Management and the West Midlands Pension Fund have taken the unprecedented step of publicly confirming that they will back a special motion at the company's annual meeting next week in Texas to split the roles of current incumbent Rex Tillerson.

The quartet, who have not revealed their individual shareholdings in ExxonMobil, have been joined in their support by British corporate governance specialist PIRC. The campaign to divide the roles currently held by Mr Tillerson is being spear-headed by descendants of John D Rockefeller, who founded the oil business that remains at the core of ExxonMobil.

The Rockefeller family shareholders in ExxonMobil, comprising around 100 descendants and corralled by Neva Rockefeller Goodwin, argue that ExxonMobil has largely ignored calls for a shift to green energy, and believe that it will be left behind as rivals such as BP and Royal Dutch Shell continue to invest in eco-power.

By separating the roles, the Rockefeller descendants believe a non-executive chairman could provide another point of view on the board, one that would not be all controlling as is the situation currently.

Karina Litvack, director of governance and sustainable investment at F&C Asset Management, said: "Despite top-notch individual directors, the company's record over the last decade, particularly regarding climate change, demonstrates that debate has been lacking."

Source: The Telegraph |By James Quinn

[RUSSIA] Alfa Denies Ties to Firm In BP Suit

2008-05-18T03:24:00.001+02:00

The Billionaire Mikhail Fridman's Alfa Group on Thursday denied any connection with Tetlis, a little-known company that filed a lawsuit against TNK-BP in a Siberian court.

Tetlis' management has "no relation whatsoever and in no way is connected with Alfa Group," Fridman's holding company said in a statement. Fridman is among a group of Russian billionaires that owns TNK-BP with BP.

An injunction from a Tyumen court bars BP specialists from working at TNK-BP until Tetlis' suit, which objects to a 2003 employee contract, is resolved. The ban may hinder the firm in developing new fields, TNK-BP's chief operating officer, Tim Summers, said Wednesday.

In a May 13 interview, Tetlis general director and founder Alexander Tagayev confirmed information on his company's web site that in the 1990s he worked at Alfa Capital and Alfa Bank, units of Alfa Group. Alfa's statement Thursday specifically denied any connection to Tagayev and Vadim Zykov, Tetlis' executive director.

TNK-BP is already under pressure after authorities gave it an environmental warning, BP workers had visa problems and investigators raided their headquarters and charged an employee with industrial espionage. The company has yet to complete a deal to sell Gazprom its Kovykta gas project amid speculation the gas-export monopoly plans to buy out the Russian shareholders.

The company's legal troubles may, in fact, be connected with disagreements between BP and the Russian shareholders, Vedomosti reported Wednesday. Alfa denied any disagreement with BP.

BP holds 50 percent of TNK-BP International, while Alfa and companies controlled by billionaires Len Blavatnik, German Khan and Viktor Vekselberg own the other half. TNK-BP International holds about 95 percent of TNK-BP Holding. Tetlis owns about 0.13 percent of the company.

BP CEO Tony Hayward will meet with three of the Russian billionaires who control half of TNK-BP, The Wall Street Journal said, citing people close to the matter.

Source: Bloomberg|By Lucian Kim

[ASIA] China Quake May Reduce Energy Demand

2008-05-13T05:14:00.002+02:00

China's strongest earthquake in 58 years may reduce the nation's energy demand as damaged power plants and transmission lines force companies to idle some generators.

About 5.5 gigawatts, almost 1 percent of the nation's generation capacity, were idled in the provinces of Shaanxi and Sichuan after yesterday's quake, according to a report by the official Xinhua News Agency, citing data from the State Grid Corp. of China. Sichuan, where the quake was focused, lost 4 gigawatts of capacity.

``This earthquake in China may impact demand from power plants being down,'' Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago, said in a telephone interview. ``Demand for oil was already down in April.''

China's oil imports, the third-highest in the world, fell for the first time in 18 months in April as record crude prices discouraged refiners from purchasing oil to turn into fuels for sale at less than costs. Crude oil for June delivery fell $1.86, or 1.5 percent, to $124.10 a barrel at the close of floor trading on the New York Mercantile Exchange yesterday on concern that demand may fall in emerging markets including China.

Six substations were damaged in Sichuan, disconnecting power plants in the province's western regions from the national grid, while in neighboring Shaanxi two substations and three generating units were hit by the temblor, Xinhua reported.

Sichuan holds about 40 percent of China's natural gas reserves and produced about 22 percent of the nation's output in 2006, according to China National Petroleum Corp., PetroChina's parent, and BP Plc's annual energy report.

The full extent of damage to China's resource companies isn't known because disruptions in telephone networks cut off local staff from their head offices in Beijing, Shanghai and Guangzhou. The quake took out more than 2,000 China Mobile Ltd. base stations, Vice President Sha Yuejia said in a broadcast on state-run China Central Television.

Metal Production
Aluminum smelters in Sichuan reported little damage to production, said Wan Ling, an analyst with metals and mining researcher CRU International Ltd.

``The earthquake center is pretty far from Chengdu and Chongqing, and industrial facilities,'' said Wan, adding that she had been in contact with smelters in the region. The 7.9 magnitude quake struck 90 kilometers (55 miles) west-northwest of Chengdu, the provincial capital of Sichuan, and about 350 kilometers from Chongqing.

Sichuan's output of aluminum and zinc is relatively small in national terms, said Michael Widmer, London-based analyst with Lehman Brothers Holdings Inc.

The province's aluminum production is about 600,000 tons, Wan from CRU said by phone from Henan province. China, the world's largest producer, has a total aluminum capacity of more than 15 million tons.

Source: Bloomberg| by Rob Delaney

[OiL FUTURES] High energy prices lift earnings for BP and Royal Dutch Shell

2008-05-11T14:11:00.005+02:00

Higher oil and natural gas prices helped Royal Dutch Shell and BP report record first-quarter profits Tuesday, beating analysts' expectations and prompting share gains across the industry.

The two biggest oil companies in Europe more than offset declining refining margins as crude oil nears $120 a barrel. A move by investors to commodities as an alternative to the shrinking dollar, combined with a spate of supply disruptions, helped to push U.S. crude futures to a record $119.93 on Monday.

Shell's net income in the first three months of the year rose 25 percent to $9.08 billion. BP reported its profit increased 63 percent to $7.62 billion. Shares of Shell and BP trading in London rose more Tuesday than they had in at least two years, leading other oil companies, like ConocoPhillips and ExxonMobil, higher.

"The results are very good because of the high oil price but also without it because we had expected the refining margins, which collapsed, to affect earnings," said Christine Tiscareno, an oil analyst at Standard & Poor's in London. "Both companies did an excellent job controlling costs."

Tiscareno and other analysts warned that while a rising oil price might for now benefit Shell and its rivals, it would at some point start to hurt demand for gasoline, as customers became unable to afford the higher prices. Peter Voser, chief financial officer at Shell, told analysts during a conference call that it was "too early" to say how and when the higher oil price would affect demand.

Despite recent disruptions at BP, oil and natural gas production was unchanged at 3.9 million barrels of oil-equivalent a day, while output at Shell remained unchanged at 3.5 million barrels of oil-equivalent a day. BP closed a pipeline system Sunday after a strike at a refinery in Scotland cut supplies. Some investors are particularly worried about supplies from Nigeria, which produces the higher quality crude needed in the United States to meet the demand that is expected to increase during the upcoming summer driving season. This month, five police officers guarding an oil terminal in Nigeria were killed by armed militants, who aim to damage exports from the oil-rich Niger Delta.

Shell said attacks in Nigeria had halted 164,000 barrels of oil-equivalent a day of production in the country. Voser said Shell planned to invest up to $27 billion to add one million barrels a day of production.

To improve earnings, Tony Hayward, who succeeded John Browne as chief executive of BP last year, is focusing on restoring production capacity and finding new projects. BP began oil production at the Deep Water Gunashli field in the in the Azerbaijan section of the Caspian Sea this month and expects its Thunder Horse production platform in the Gulf of Mexico, which cost more than $1 billion to build, to start production this year following a three-year delay. The company also completed some repairs at its plant in Whiting, Indiana, and the Texas City refinery, where an explosion killed 15 people in 2005.

Edward Westlake, an analyst at Credit Suisse in London, said that the earnings were "strong" and that the "results have captured increases in oil and gas pricing, while keeping costs increases muted."

BP and Shell are both trying to regain investor confidence damaged by delays and higher costs associated with new projects last year. In the case of BP, a lack in safety measures led to the Texas explosion. Hayward pledged to remove layers of bureaucracy to make managers more accountable for their businesses and improve efficiency.

Oil companies are also under pressure to find new projects to grow as its traditional fields age. They are also facing competition with state-run oil companies in Russia and the Middle East.

Other oil companies that profited from higher prices included ConocoPhillips, whose first-quarter profit rose 17 percent to $4.14 billion. ExxonMobil, the world's largest oil company, is set to report its figures May 1, followed the next day by Chevron.

Source: International Herald Tribune| by By Julia Werdigier

[ASIA] Baku-Supsa pipeline repair takes $53 mln

2008-05-11T04:32:00.000+02:00

The repair works at the Baku-Supsa export pipeline took BP-Azerbaijan $53 mln to implement. BP Azerbaijan vice president on land operations Rashid Javanshir said the program of repair and replacement, which lasted for almost 18 months, have completed, which will allow improving technical state of the western route export pipeline.

"This large-scale program of repair and replacement included replacement of pipeline sections in Georgia (change of route in Zestafon) and Azerbaijan (Kur river, west cross). At the same time, we have completed the profram of repair of defects, residuary from the Soviet times, which included repair of shortcomings, revealed during the inspection", he said.

Touching upon the commissioning of the pipeline, Javanshir said the full program of repeated launching tests is currently underway. "We will launch the pipeline after we are fully satisfied with its technical state", Javanshir concluded.

Source: Today.AZ

[ASIA] Shas Deniz gas extraction to reach its top in early 2009

2008-05-10T04:26:00.001+02:00

Extraction of gas from the Shah Deniz gas condensate field will reach its top in the framework of the first stage in the first half of 2009, after which the volume of extraction will stabilize on the said level. According to Day.Az, Bill Schreider, president of BP-Azerbaijan, said that within the period of stable extraction in the framework of the first stage extraction will make up 8,600,000,000 cubic meters of gas per year and nearly 45,000 barrels of condensate per day.

It should be noted that in 2008 the gas extraction from the field is predicted to be 7.7 bln and condensate extraction 1.9 mln. At the same time, in the first quarter of this year the field extracted 1.8 bln cubic meters of gas and 0.5 mln tons of condensate.

Currently, 19.8 mln cubic meters of gas and 40 mln barrels of condensate per day are produced from four advancing wells of the field.

Schreider also announced that the concept of the stage 2 implementation will be chosen this year which will be followed by a detailed engineering of the project, planned for late 2008. He said in line with initial data, received following the drilling of SDX-4 well, the volumes of gas extraction are expected on the level of 8.6 bln cubic meters per year and, perhaps, even more. in the framework of the second stage.

Source: Today.AZ

[OIL MAJORS] Big companies amid allegations of MTBE water contamination. Suit over additive settled

2008-05-09T07:28:00.004+02:00

Some of the nation's largest oil companies have agreed to pay about $423 million in cash to settle a lawsuit brought by more than a hundred public water providers, claiming water contamination from a gasoline additive. The terms of the settlement were submitted for approval in the federal court for the Southern District of New York. Under the terms, the companies also agreed to pay 70 percent of the future cleanup costs over the next 30 years.

The defendants that agreed to the settlement included BP, Royal Dutch Shell, ConocoPhillips, Chevron, Marathon Oil, Valero Energy, Citgo and Sunoco. Six other companies named in the lawsuit, including Exxon Mobil, did not agree to the deal, said Scott Summy, a lawyer at Baron & Budd and a counsel for the plaintiffs.

In the lawsuit, the plaintiffs, which include 153 public water systems in New York, California and 15 other states, claimed that the additive, a chemical called methyl tertiary butyl ether, or MTBE, was a defective product that led to widespread contamination of groundwater. The suit contended that the chemical was used by oil companies, even though they knew of the environmental and health risks that it posed.

Low levels of MTBE can make drinking water supplies unpalatable because of its "offensive taste and odor," according to the U.S. Environmental Protection Agency.

The agency has also found that the compound caused cancer in laboratory rats that were exposed to high doses.

Since the mid-1990s, hundreds of lawsuits have been brought against oil companies for their use of the chemical. This deal, if approved, would be the largest settlement to date. MTBE has been used since 1979 to increase octane levels in gasoline but its use became more widespread after the 1990 Clean Air Act mandated the use of an oxygenate in certain cities to reduce smog and other pollutants.

When mixed with gasoline, the additive ensured that the fuel burned more thoroughly, thereby reducing air pollution.

But after being widely adopted, it was found to corrupt groundwater. Even in small amounts, the additive makes water smell and taste like turpentine.

In 2005, some 130,000 barrels a day of MTBE were produced, involving about 1 percent of the nation's gasoline. Oil companies stopped using it in 2006.

The oil industry has fought hard to avoid penalties related to its use of the additive, arguing that it should not be forced to pay for the cleanup of a product that it was mandated to use. Estimates of the cost of a total cleanup of MTBE have run to the tens of billions of dollars.

"No court has ruled that gasoline with MTBE is a defective product," said Rick Wallace, a lawyer at Wallace King Domike & Reiskin in Washington, who represents Chevron and Shell. "This settlement does not concede the point. Quite the contrary, the settling companies are prepared to vigorously defend the product."

The risk has prompted the oil industry to stop using it and look for another additive. That eventually led to the development and use of ethanol.

Source: The New York Times| By JAD MOUAWAD

[UNITED KINGDOM] North Sea oil's ebbing tide

2008-05-08T05:47:00.004+02:00

According to the pessimists, the rigs off Britain's coast could cease pumping in a decade's time.

The sight of a convoy of giant tankers last week carrying emergency petrol supplies to the UK is a glimpse into the future. Last weekend's strike at the Ineos refinery at Grangemouth, which helped push up oil prices to a new record of $120 a barrel, reminded us how dependent we have become on North Sea oil - and how we will have to cope in the not-too-distant future when it's all gone.

When the refinery closed, BP also had to shut down the Forties pipeline that supplies it with oil. This pipeline carries about 700,000 barrels of oil - or almost half of the UK's daily production - from the North Sea. The strike has ended but oil production from the North Sea, which now barely meets UK demand, is declining much more quickly than predicted.

By 2020, oil and gas production could be one-sixth of today's level, according to the most pessimistic forecasts - enough to meet only 8 per cent of UK demand. Despite the soaring oil price, companies are drilling fewer exploration wells in the North Sea and investment levels have also started to fall.

Malcolm Webb, chief executive of the trade association Oil & Gas UK, warns that unless these trends are reversed, some nine billion barrels of oil and gas - about nine years' worth of production at today's levels - could be left at the bottom of the sea forever. This would cost the cash-strapped Treasury billions in lost tax revenue - and more importantly would hasten Britain's total dependence on countries such as Russia and the OPEC members for its oil and gas.

Oil was discovered in the North Sea in the late 1960s, with production peaking in 1999 at about 4.5 million barrels per day. The oil fields have yielded 36 billion barrels to date. Since then, production has declined every year. Currently it stands at about 3 million barrels per day and is forecast to decline about 10 per cent by the end of the decade.

The decline has long been forecast. But what no one knows is how steep it will be - nor when the oil will finally run out. The government estimates that there are still between 16.5 and 25.5 billion barrels of oil to be recovered in the North Sea. Based on current production levels, that equates to 16 to 25 years of production left. But these figures include oil yet to be discovered, so are unreliable. Using companies' plans, fewer than 10 billion barrels would be delivered. That would see the North Sea run dry within a decade. It seems the government has finally woken up to the fact that the industry itself will determine how much longer the North Sea lasts.

The UK Prime Minister, Gordon Brown pleaded with BP and Shell last week to spend some of their combined £7bn record first-quarter earnings on pumping more crude out of the sea bed off Britain's eastern coast. 'I hope that these profits are going to be invested in getting more oil out of the North Sea,' he said.

It's likely his pleas fell on deaf ears. BP has already sold its Forties field - one of the largest in the North Sea. Shell, too, has been selling off its fields there so it can concentrate on bigger, higher-growth projects like its oil-sands projects in Canada.

The oil majors have been replaced by smaller pure exploration and production companies, which have a greater incentive to squeeze the remaining oil out of mature North Sea fields. One such company is Tullow Oil, which spent £200m in 2005 buying two fields from Shell and Exxon Mobil.

John Caskie, Tullow Oil's asset manager for the Caister-Murdoch System area of the North Sea, says: 'Places like West Africa offer high-impact exploration and potential company-changing discoveries. The North Sea, on the other hand, is where we look for steady production within a relatively well known commercial and fiscal environment. The North Sea, if you like, pays the mortgage for guys to explore in places like Africa.'

In other words, companies use the North Sea as a cash cow to fund exploration elsewhere. But companies are spending less time and money looking for new fields in the North Sea itself. They drilled 15 per cent fewer development wells last year compared with 2006. You can't blame them: Oil & Gas UK estimates 96 per cent of future discoveries will be smaller than 50 million barrels. As Global Insight points out, they pale into insignificance compared with giants like the Forties field, which produced over 2.5 billion barrels.

The fewer new discoveries coming on stream in the North Sea to replenish the rapidly maturing fields means the decline in production will increase even more quickly. As one executive of an oil company admits: 'The reality is that these fields are in decline as soon as production begins. Everyone is running just to stand still.'

The way the government taxes oil companies is also coming under the spotlight. The tax rate is 50 to 75 per cent, depending on the age of the field. It is hard to compare this with tax regimes around the world. In Norway, the government levies a slightly higher tax rate of 78 per cent. But, crucially, it allows companies to offset the entire cost of exploration as tax relief, even if that exploration does not yield any oil. In the UK, companies can only claim tax relief against exploration if the newly explored field starts generating revenue.

Costs for every aspect of exploration and production are also soaring. While this is the case across the world, higher costs - combined with high taxes - discourage companies from sinking huge amounts of money in the North Sea for relatively small rewards. As Caskie says: 'The UK is competing against places where the potential to make big discoveries is much higher compared with the North Sea. When costs and the tax take are so high, exploration drilling often makes more sense elsewhere.'

Webb says much of the extra 9 billion barrels of oil that could be extracted from the North Sea lies in fields next to those coming to the end of their lives. Unless companies have stronger incentives to start tapping these new fields, they will soon start decommissioning their platforms - leaving those 9 billion barrels out of reach. 'Current investment behaviour will materially affect whether all those extra barrels are recovered,' he warns. 'Unless there is a steady flow of new projects to make use of the existing infrastructure then companies will have to start decommissioning it.'

Last week, Frank Chapman, the chief executive of BG, one of the biggest producers in the North Sea, called on the government to provide greater incentives to develop more fields. Requests for government help may jar with the public when energy companies like BG are enjoying record profits on the back of soaring oil and gas prices. But the reality is that oil companies - even British ones - have no obligation to stay in the North Sea if richer pickings can be had elsewhere.

Source: The Observer| by Tim Webb

[GLOBAL WARMING] Dawn of an energy famine. Just as the need for renewables becomes critical, the oil giants signal an alarming retreat

2008-05-07T19:48:00.004+02:00

The world needs renewable energy fast, but as BP and Shell announced record profits, they also demonstrated that they are in essence retreating from renewables, perhaps with the exception of biofuels. They intend to focus their record billions on expanding production of what remains of traditional oil and gas, plus tar sands and liquid fuels from coal - ruinous in their effect on the climate.

The oil giants are recarbonising, wilfully choosing to forget both global warming imperatives and the need for renewables in national security terms. Shell pulled out of the biggest offshore UK windfarm yesterday and BP is losing interest in solar and investing in the tar sands - having once refused to do so on ethical grounds because of the greenhouse gas emitted in processing.

The European oil giants are behaving in this way in part because ExxonMobil became the most profitable of the big players while turning its back on the climate issue and pouring scorn on renewables investment. BP and Shell can no longer resist the calls of investors who demand short-term Exxon-type performance, whatever the final cost.

Others think differently. In New York, members of the Rockefeller clan - descendants of Exxon's founder - called yesterday for radical reform of the company because they can no longer stomach its irresponsible attitude towards the climate. They want a board that will invest in renewables. Meanwhile, in London, a big asset management house took out newspaper ads spoofing a death announcement for fossil fuels and one for the birth of renewables, in which its alternative energy fund will invest.

This fund, and others like it, are investing in renewables because they enjoy some of the fastest growing markets in the world. This growth is driven in large measure by feed-in tariffs - to encourage the use of renewables. Thirty-three Labour MPs rebelled this week against the government's energy bill because it ignores the feed-in mechanism. The UK government persists with its discredited renewables obligation, a measure that has seen the renewables mix in UK primary energy sit for several years now at just 2%.

Meanwhile, North Sea oil and gas are depleting rapidly. BP and Shell know there are no more rich oilfields to be discovered there. They are being forced to invest much further afield in the search for the huge fields they so badly need.

As domestic oil and gas production collapses, the UK will be forced to look increasingly to imports. Britain imports only 5% of its energy now, but that is likely to rise to 50% in five years, much of it gas. The government appears to think this is fine, pointing to the growth of domestic infrastructure for liquefied natural gas and pipelines from Norway and the Netherlands. But this week we learned that the UK is the last priority for Norwegian exports. As the Grangemouth strikers wonder what to do next, we smell in that drama just how fragile the whole energy edifice is.

Those who hoped OPEC would come to the rescue also received a blow this week. The cartel said it wouldn't lift production, even if oil rises to $200 a barrel. Meanwhile, fuelled by $120 oil, the economies of the producers are booming, sucking up ever more of the oil and gas we will need. As for nuclear, it cannot produce a single unit of electricity for at least 10 years - far too late to help with a gas shortfall and largely irrelevant to oil, anyway.

We need renewables today like we needed tanks and planes in 1929. Those who ignore this may soon face accusations of betrayal from a population staring energy famine in the face.

Source: The Guardian| by Jeremy Leggett

[ASIA] BP, SOCAR arguing about expansion of Baku-Tbilisi-Ceyhan capacity expansion. Azerbaijan

2008-05-06T02:48:00.001+02:00

BP and SOCAR have not yet reached an agreement on expansion of the Baku-Tbilisi-Ceyhan pipeline capacity. According to APA, E.Nasirov also added that the issue of share depends on the share of Azerbijani oil to be pumped by BTC.

"If the pipeline is expanded, it means the BTC will pump different volumes of oil. We don't want the expansion to occur without attraction of Azerbaijani oil", said Nasirov.

The due announcement was made by SOCAR vice president Elshad Nasirov.

BP insists on expansion of the BTC pipeline capacity. It should be noted that the current capacity of the pipeline, makes up 1,000,000 barrels per day and it is planned to raise the capacity by the end of this year.

Nasirov noted that the sides have differences and "there is a need to come to an agreement, adhering to the interests of the sides".

He said the differences is connected with the issue of the property after it is re-compensated. The BTC is proposed to be re-compensated in 2020. According to Nasirov, the subject of talks is the possible expansion of the BTC capacity up to 1,2;1,6 and 2 million barrels.

Source: Today.AZ