Posts Tagged ‘Oil and Gas’

Europe’s alternative to Putin’s oil and gas

October 20, 2014


Map: Global Research

Dependence of key European nations on imports of Russian oil and gas puts the European Union in weak position in relation to Vladimir Putin.

One way to get out of that position of weakness is to end the sanctions against Iran, and import Iranian oil and gas.  In the longer run, Europe would benefit from a new gas pipeline from Iran to Europe.

The European Union has no conflict of interests with Iran.  It is following the lead of the United States.  As far as that goes, the United States has no conflict of interests with Iran.  We Americans are merely nursing old resentments and following the lead of Israel and Saudi Arabia.


Breaking Europe’s Putin addiction by Amir Handjani for Al Jazeera.

How much shale oil and gas is there, really?

October 13, 2014

Click to enlarge.

Source: Bloomberg News.

Shale drillers are a lot more optimistic about potential oil and gas when they talk to shareholders than when they report to the U.S. Securities and Exchange Commission.  Why?

Hint:  The SEC can prosecute for false statements.  Shareholders have to sue.


‘Drill, tovarich, drill’: Putin’s economic dilemma

September 4, 2014


Vladimir Putin’s Russia is a great military power with a backward economy.

Without a strong manufacturing base, Russia’s economy depends sale of oil and natural gas, which are non-renewable.   This means that, unless Russia changes direction, it is fated to become a resource colony of China or the European Union.

Economic sanctions promoted by the USA could be an opportunity for Russia to develop its domestic industries and its internal market, much as the infant USA did when it was cut off from trade with Europe prior to and during the War of 1812.  But according to this article by Mikhail Matveev for Inter-Press Service, Russia is going in the opposite direction.

The recent call from Russian Prime Minister Dmitry Medvedev for “tightening belts” has convinced even optimists that something is deeply wrong with the Russian economy.

No doubt the planned tax increases introduction of a sales tax and increases in VAT [1] and income tax will inflict severe damage on most businesses and their employees, if last year’s example of what happened when taxes were raised for individual entrepreneurs is anything to go by – 650,000 of them were forced to close their businesses.

Nevertheless, it looks like some lucky people are not only going to escape the “belt-tightening” but are also about to receive some dream tax vacations and the lucky few are not farmers, nor are they in technological, educational, scientific or professional fields – it is the Russian and international oil giants involved in oil and gas projects in the Arctic and in Eastern Siberia that stand to gain.

“In October [2013], Vladimir Putin signed a bill under which oil extraction at sea deposits will be exempt from severance tax.  Moreover, VAT will not need to be paid for the sales, transportation and utilization of the oil extracted from the sea shelf,” noted Russian newspaper Rossiiskie Nedra.


In fact, the line of thinking adopted by Russian officials responsible for tax policy is very simple. Faced with the predicament of an economy dependent on oil and gas half of the state budget comes from oil and gas revenue, while two-thirds of exports come from the fossil fuel industry, they decided to act as usual – by stimulating more drilling and charging the rest of the economy with the additional tax burden.

Matveev wrote that Russia, like other countries, suffers the bad effects of global climate change caused by fossil fuel emissions.  The Russian economy is at risk, he wrote, if the USA or European Union ever achieve their announced goals for shifting to renewable energy sources.   I don’t think the latter is as likely as Matveev seems to think.

The fact that economic sanctions cause serious problems to Russia does not mean that they are a good idea.  Weaker nations than Russia have survived U.S.-led economic sanctions, and the economic war with Russia hurts European Union countries as much or more than Russia.


China, the USA and the world’s oil and gas

July 30, 2014
us energy independence jones map

China’s oil imports. Click to enlarge.

The other day I read that China has overtaken the USA as the world’s largest oil importer.  Earlier I read that China has overtaken the USA as the world’s largest market for automobiles.  As the world uses up easy-to-get oil, there will be conflict between the USA and China to get what’s left.

Notice this is just OPEC oil, not total oil importsChina needs access to the world’s oil and gas if it is to raise the material standard of living of its people.  But the USA needs access to the world’s oil and gas if it is to maintain what we call the American standard of living.

What this means is that, unlike with the situation between the USA and Russia, there is a real conflict of interest between the Chinese people and the American people.  The world may not have enough fossil fuels to satisfy the desires of both.

China has one of the world’s largest reserves of coal and one of the world’s largest coal industries.  It is a leader in developing solar energy technology, although this as yet serves only a tiny fraction of its energy needs.  China has extended pipelines into central Asia, and recently signed an agreement to build a new oil and gas pipeline into Russia.

0912ChinaSeaTerritory2The quest for energy explains China’s disputes with Japan, the Philippines, Vietnam, Malaysia and other countries over control of islands in the East China Sea and South China Sea.  Control of these islands not only gives China control over offshore oil and gas.  It enables China to protect its shipping from the Persian Gulf.

Access to oil is a vital interest of the USA.  The Carter Doctrine, back in 1980, said that access to the Persian Gulf was a vital interest of the United States, meaning the U.S. would go to war if necessary to protect it.  The first President Bush said in 1991 was the Gulf War was about “jobs, jobs, jobs,” which meant “oil, oil, oil.”

In recent years, the United States has increased domestic energy production, with fracking and offshore oil drilling (both of which President Obama strongly supports).   But this doesn’t mean the USA doesn’t need imports.  Seeming inconsistencies in current U.S. policy in the Middle East make sense if you think of U.S. policy as a quest for oil rather than a quest for democracy.

The world’s easy-to-get oil and gas have been used up and competition for the rest of the world’s oil is bound to become more intense.  The European Union, in its need for oil and gas, may find itself in conflict with both the USA and China.

I don’t see any obvious way to resolve this.  It would be good if the world’s energy-importing countries could reach an agreement based on compromise.  It would be good if the world could switch to renewable energy.  But I don’t see either one happening anytime soon, and to the extent that either compromise or renewables are feasible, it might entail a more frugal way of life than most North Americans (myself included) would be willing to accept.


 Whose Oil Will Quench China’s Thirst? by Chris Dalby for Oil Price and Naked Capitalism.

What Putin has to say to Americans about Syria

September 12, 2013

If I were a Russian, I don’t think I would be a supporter of President Vladimir Putin.  Russia is a country where opponents of the regime die mysteriously, a tightly-knit group of self-described oligarchs control finance and industry and holdovers from the old Soviet Union are entrenched in government.  But I think Putin made a lot of sense his New York Times article about Syria yesterday.

The potential strike by the United States against Syria, despite strong opposition from many countries and major political and religious leaders, including the pope, will result in more innocent victims and escalation, potentially spreading the conflict far beyond Syria’s borders.  A strike would increase violence and unleash a new wave of terrorism. It could undermine multilateral efforts to resolve the Iranian nuclear problem and the Israeli-Palestinian conflict and further destabilize the Middle East and North Africa.  It could throw the entire system of international law and order out of balance.

Vladimir Putin

Vladimir Putin

Syria is not witnessing a battle for democracy, but an armed conflict between government and opposition in a multi-religious country.  There are few champions of democracy in Syria.  But there are more than enough Qaeda fighters and extremists of all stripes battling the government.  The United States State Department has designated Al Nusra Front and the Islamic State of Iraq and the Levant, fighting with the opposition, as terrorist organizations.  This internal conflict, fueled by foreign weapons supplied to the opposition, is one of the bloodiest in the world.

Mercenaries from Arab countries fighting there, and hundreds of militants from Western countries and even Russia, are an issue of our deep concern. Might they not return to our countries with experience acquired in Syria?  After all, after fighting in Libya, extremists moved on to Mali.  This threatens us all.

He also stated:

It is alarming that military intervention in internal conflicts in foreign countries has become commonplace for the United States. Is it in America’s long-term interest?  I doubt it.  Millions around the world increasingly see America not as a model of democracy but as relying solely on brute force, cobbling coalitions together under the slogan “you’re either with us or against us.”

He ended the article with these words:

My working and personal relationship with President Obama is marked by growing trust.  I appreciate this.  I carefully studied his address to the nation on Tuesday. And I would rather disagree with a case he made on American exceptionalism, stating that the United States’ policy is “what makes America different. It’s what makes us exceptional.”

It is extremely dangerous to encourage people to see themselves as exceptional, whatever the motivation.  There are big countries and small countries, rich and poor, those with long democratic traditions and those still finding their way to democracy.  Their policies differ, too.  We are all different, but when we ask for the Lord’s blessings, we must not forget that God created us equal.


President Putin, it is true, has his own reasons for not wanting the Syrian government to be overthrown.  Syria has been a Russian client state since the days of the old Soviet Union.  It provides the Russian Federation with its only naval base on the Mediterranean.   It is a potential outlet for a natural gas pipeline from the Caspian Sea region of Russia and Central Asia.

And while the Russian government’s proposal for a turnover of Syrian chemical weapons to an international authority sounds good, it would be impossible to implement while the country is in the middle of a civil war.  After all, the United States promised in 1990 to get rid of our chemical weapons stockpiles by 2012, and has not managed to do so.

But the governments of the United States, France, Turkey, Saudi Arabia and Qatar have reasons for supporting the rebels which have more to do with pipeline routes, geopolitical advantage and Sunni-Shiite struggles than with humanitarism.  There is nothing at stake in Syria’s civil war that justifies a U.S. attack on Syria.


U.S. to be top oil and gas producer?

November 13, 2012

A couple of years ago, I thought the goal of U.S. energy independence was a pipe dream.  But a report yesterday by the International Energy Agency predicts that the United States will become the world’s largest oil and gas producer in the next five years, and a net oil and gas exporter in less than 20 years.

And how is this to come about?  By hydraulic fracturing and horizontal drilling for shale oil and gas, otherwise known as hydrofracking.


The IEA report forecasts a decline in nuclear power’s share of world energy, and an increase in renewable energy’s share, based on increased government subsidies.  Energy conservation efforts will be stepped up.  But 20 years from now the world still will be dependent on fossil fuels, and demand for energy will be one third higher than it is now.

Rising oil and gas prices will be a burden on the world economy, but less so in the United States than elsewhere.  Natural gas prices in Europe will be five times as high as in the United States in 2030, and gas prices in eastern Asia will be eight times as high.

Although the United States is predicted to be the largest oil and gas producer, Saudi Arabia will continue to be the largest oil exporter, but with Iraq replacing Russia as the No. 2 exporter.  Most of the oil of the Middle East will go to the growing economies of China, India and other Asian countries.

The IEA says carbon dioxide emissions will be at record levels, and 1.3 billion people will be without electricity.

I don’t like the idea of a United States economy dependent on hydrofracking, which is what “unconventional” oil and gas is based on.  Hydrofracking at best is destructive to land and at worst a threat to water supplies.  But in the absence of alternatives, we Americans may not be able to afford to do without it.

Forecasts can be wrong, of course.  I don’t have expert knowledge that would enable me to evaluate the IEA’s report, but it seems plausible.  I think it would be a big mistake to regard a resurgence of the domestic U.S. oil and gas industry as the answer to U.S. economic problems.  We need manufacturing and high technology, not just extractive industries.  If the United States depends on oil and gas alone, this country could wind up as an economic as well as political facsimile of Vladimir Putin’s Russian petro-state.

The New Policies Scenario is based on the assumption that governments will carry out policies they have announced for reducing greenhouse gas emissions and phasing out subsidies of fossil fuels.

Click on North America leads in shift in global energy balance for the IEA press release on its latest World Energy Outlook report.

Click on Report Sees U.S. as Top Oil Producer, Overtaking Saudi Arabia, in 5 Years for a New York Times report.

Navigating a warming Arctic Ocean

June 4, 2012

The Arctic ice cap is shrinking under the influence of global warming.  The map compares the extent of the Arctic ice cap on Sept. 10, 1011, with the September average for 2002 through 2006.

A Northern Sea Route across the top of Russia and a Northwest Passage across the top of Canada soon will be open.  Someday it may be possible to cross the Arctic Ocean via the North Pole.

The warming of the Arctic will open its vast oil, mineral and fisheries resources for development, and create an arena for economic rivalry, political conflict and perhaps military confrontation.  Below is a map showing the Arctic ports in relation to oil and gas fields and the projected shrinking of the Arctic ice caps over the next few decades.


The resurgence of U.S. oil and gas production

April 20, 2012

Source: New York Times

Last year, for the first time since 1949, the United States became a net exporter of liquid fuels — gasoline, kerosine, aviation fuel and diesel fuel— meaning that we now export more of these products than we import.  During the past few years, refined petroleum products have become the most valuable U.S. export.

In 1949, the United States exported 86 million barrels of liquid fuels and imported only 82 million barrels.  From 1950 through 2010, we imported more than we exported.  But for the first 11 months of 2011, we exported 848 million barrels of liquid fuels and imported only 750 million barrels.

We still are a net importer of crude oil, but that situation also is improving.  The United States now gets only 45 percent of its crude oil from imports, down from 60 percent about three-and-a-half years ago, thanks to increased U.S. production in the past few years.   Natural gas, which was in short supply a few years ago, is now in surplus.  As the New York Times reported:

Across the country, the oil and gas industry is vastly increasing production, reversing two decades of decline. Using new technology and spurred by rising oil prices since the mid-2000s, the industry is extracting millions of barrels more a week, from the deepest waters of the Gulf of Mexico to the prairies of North Dakota.

At the same time, Americans are pumping significantly less gasoline.  While that is partly a result of the recession and higher gasoline prices, people are also driving fewer miles and replacing older cars with more fuel-efficient vehicles at a greater clip, federal data show. … …

Not only has the United States reduced oil imports from members of the Organization of the Petroleum Exporting Countries by more than 20 percent in the last three years, it has become a net exporter of refined petroleum products like gasoline for the first time since the Truman presidency.  The natural gas industry, which less than a decade ago feared running out of domestic gas, is suddenly dealing with a glut so vast that import facilities are applying for licenses to export gas to Europe and Asia.

National oil production, which declined steadily to 4.95 million barrels a day in 2008 from 9.6 million in 1970, has risen over the last four years to nearly 5.7 million barrels a day. The Energy Department projects that daily output could reach nearly seven million barrels by 2020. Some experts think it could eventually hit 10 million barrels — which would put the United States in the same league as Saudi Arabia.


If everything is going so well, why is gasoline above $4 a gallon and rising?  It is because the price of petroleum products is set in a world market, which Americans do not control.  The world market includes China, which now puts more cars on the road each year than the United States.  In fact, rising prices were a factor in the U.S. export success.   That is the free market in operation.  As the price of gasoline increases, we have an incentive both to use less and to produce more.

This turn toward energy independence happened during the Obama administration, but there is a certain paradox here.  President Obama ran on a promise to work to replace fossil fuels with renewable energy, and to limit energy consumption by means of a cap-and-trade scheme.  While these efforts may someday bear fruit, the current turnaround is based on fossil fuels.

As the New York Times article noted, President Obama has largely continued the policies of the George W. Bush administration—tax breaks for oil and gas companies, opening up federal lands for energy production and loose regulation of controversial practices such as hydraulic fracturing for oil and gas.  But the President is being attacked, and defended, as if he were the environmentalist he claimed to be.

The problem with all this is that the faster we burn through our oil and gas resources, the less there will be in the future.  If it were up to me, I would go slow.  Maybe, in time, there will be alternatives to destructive and risky processes such as deep water ocean drilling and hydraulic fracturing.  The oil and gas isn’t going to go away if we don’t use it right away.

Click on Inching Toward Energy Independence in America for the New York Times report.

Click on Gas, other fuels are top U.S. export for an Associated Press report.