An alternative to Middle East oil, U.N. says
Energy experts attending a United Nations meeting in Geneva last month agreed that Caspian oil and gas could alleviate global dependence on Middle East oil.
Robert C. McFarlane, former national security advisor to President Ronald Reagan and deputy chairman of the U.N. Economic Commission Energy Security Forum, was quoted as saying that the emergence of China and India as huge energy consumers made it even more critical now to accelerate the development of sources outside the Middle East.
The Middle East currently supplies some 30 percent of all oil consumed globally, according to energy experts at the forum, but by 2020 that figure could jump to around 40 percent. Concerned about their increasing dependence on oil from the volatile Middle East, countries around the world are exploring energy sources elsewhere. Energy experts at the U.N. meeting concluded that Caspian energy resources could alleviate dependence on Middle Eastern oil.
Right now, Russia accounts for approximately 11 percent of total world production, but the output is likely to increase. Azerbaijan and Kazakhstan are also expected to emerge as major energy players. Together they have a capacity of approximately 16 trillion barrels and that figure is projected to expand.
"The Caspian region represents one of the new, major, long-term sources of energy to the world," said Igor Yusufov, a special envoy on energy matters to Russian President Vladimir Putin. "Plus you should take into consideration that the Caspian region is very close to main European oil and gas markets and also ... to Asia."
Yusufov noted that developing Caspian energy resources will be expensive and said that the region will require significant foreign investments to upgrade existing infrastructure and finance new transportation routes, pipelines and rail facilities.
Sakhalin loan still delayed as Shell, Gazprom sign deal
Europe's development bank said it will wait for release of an environmental report before deciding whether to continue to fund the Sakhalin-2 project.
The delay has not stopped Shell and Gazprom from signing a memorandum of understanding in London Thursday on a major swap deal. Under the deal, Gazprom will purchase a stake of up to 25 percent plus one share in the Sakhalin-2 project, and cede a 50 percent interest in its Zapolyarnoye-Neocomian gas field in northern Russia. "The difference in value, to be defined by the parties, will be compensated through a package of cash and other assets to be agreed by the parties," according to a Shell statement.
Still, the European Bank for Reconstruction and Development board of directors will wait to make its decision until after the environment report is completed, Constantine Demetriou, the EBRD's principal banker, declared Wednesday.
The project is under way: the pipeline's route has been changed, investment was continuing to flow in, and contracts for future oil and natural gas exports were being signed. But meanwhile, oil and gas producers are struggling with environmental issues, and financial institutions are in the midst of evaluating progress in this area, said Demetriou.
Russian authorities and project operators must ensure development of the deposit has a minimal effect on Sakhalin's unique ecosystem, and its valuable bio-resources, including gray whales in the Terpeniya Bay in the north of the island.
Shell currently owns 55 percent of the stakes on Sakhalin-2; Japan's Mitsui and Mitsubishi hold 25 percent and 20 percent, respectively. The Sakhalin-2 project is the largest in the world.
Pirates lurk in Somali waters
Somali waters has experienced a surge in piracy attacks endangering oil tankers, according to the International Chamber of Commerce's Maritime Bureau.
Because the political uncertainty in Somalia leaves its coastal waters largely unpoliced the region has seen more than five attempted hijackings since March 2005, two of which escalated into full blown acts of life-threatening piracy.
"The chamber's International Maritime Bureau has received reports of pirates armed with automatic weapons and rocket propelled grenades," said IMB Director Captain Pottengal Mukundan. "Innocent craft are approached by numerous pirate craft, arriving from different directions, firing indiscriminately at the bridge in an attempt to force the vessel to stop. In recent attacks at least one crew member was killed after pirates took control of a vessel."
Pirates are known to use distress flares as a method of luring their prey. As the target approaches, heavily armed and well-trained pirates, usually using a number of speedboats, launch their attack. In addition to stealing valuables or seizing vessels and selling the goods off to the nearest ports, pirates will also hold the crew for ransom.
"The lack of any stable or coherent government in Somalia is contributing to this lawlessness in its waters," said Mukundan. "Local warlords are interested in making money above all else, and hijacking commercial vessels has proven to be an expedient method of doing so."
Due to the frequency and violence of recent attacks, IMB recommends that unless vessels are scheduled to call at ports in the area, they remain at least 50 miles off the coast of Eastern Somalia. The effects of this recommendation and the piracy activities in the area will be regularly monitored by IMB.
Japan goes to the North Sea in search of oil
Japan's largest oil distributor, Nippon Oil Corp., said Wendesday it has began an oil development project at the Blane oil field in the North Sea.
The Blane oil field, which straddles the median line between the United Kingdom and Norway, has a capacity of 30 million to 40 million barrels, according to a statement issued by Nippon Oil. Production in the oil field is expected to last 16 years starting from late 2006, with a maximum daily output projected at 14,000 barrels a day.
The $296 million project is connected to a platform in the Ula oil field in Norway, where an oil production system has already been set up. With Nippon North Sea Oil Co. having a 14 percent interest in the oil field, the coming production should boost the Nippon Oil group's independent oil output by 2,000 barrels a day.
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Closing oil prices, July 7, 3 p.m. London
Brent crude oil: $59.38
West Texas intermediate crude oil: $60.39
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