UPI Energy Watch

NEW YORK, Dec. 31 (UPI) -- Exxon holds firm on standoff with Venezuela

ExxonMobil is the only major oil company not to concede to Venezuela's terms that all foreign investors must accept "mixed company" arrangements by Dec. 31 under a 2001 law.

Other firms reluctantly signed off on Venezuela's contractual terms to state-dominated oil production agreements, or signed letters of intent, so they could continue holding a stake in the country.

With many oil majors struggling to make new oil finds because of dwindling reserves, they fiercely hold onto untapped energy resources in volatile areas of the globe.

As the world's largest oil company, Exxon holds relatively higher reserves than most, and remains determined that its current with Venezuela is legally binding and any forced change could be perceived as a breach of contract.

Venezuelan Energy Minister Rafael Ramirez said if Exxon does not agree at least to sign a letter of intent, the company could possibly lose billions of dollars in future deals, such as its plans for a $3 billion petrochemical plant.

Venezuelan officials suggested the government could takeover Exxon's existing operations.

Exxon has $354 billion in revenue, which is three times the size of Venezuela's economy, and Exxon officials suggested to UPI contractual sanctity is a matter of principle.

Iraqi oil crisis produces new oil minister

Iraqi Deputy Prime Minister Ahmad Chalabi replaced Friday Ibrahim Bahr al-Uloum as oil minister after popular protests on government-imposed fuel price hikes got out of hand, according to local television and newspaper reports.

Widespread panic surrounding possible fuel shortage after the government announced earlier this month the tripling of fuel prices in an effort to reduce, if not eliminate, fuel smuggling, whereby smugglers purchased cheap Iraqi gasoline at subsidized prices to re-export it for profit.

Iraqis were enjoying extremely generous fuel subsidies, which the government hoped to keep but rampant smuggling killed the endeavor that drained the Iraqi economy of billions of dollars.

After improving his relations with Washington following a falling out with the Bush administration, Chalabi's takeover coincided with long lines forming at gas stations in Baghdad, as rumors spread over a possible shutdown of one of Iraq's largest oil refinery and a skyrocketing fuel shortage ensued.

By cutting the fuel subsidies program, Iraq hopes to earn $500 million through the price increase, local reports said earlier this week.

Gazprom agrees Turkmenistan gas terms

Russian gas giant Gazprom secured a contract with Turkmenistan agreeing to pay according to terms of Turkmenistan gas supplies to Russia in 2006, Gazprom's press service reported.

Visiting Gazprom CEO Alexei Miller held talks with Turkmen President Saparmurat Niyazov Friday to discuss long-term bilateral cooperation in the natural gas industry.

The two sides discussed increases in prices for energy, and materials and equipment for the oil and gas sector, and agreed to correct the price of Turkmen gas supplies to Gazprom.

Under the agreement, Russia will import Turkmenistan gas at a price of $65 per 1,000 cubic meters in 2006, and Turkmenistan agreed to increase gas exports to Russia to 30 billion cubic meters next year, of which 15 billion cubic meters will be supplied in the first quarter.

Gazprom and Turkmenistan will hold further talks to discuss cooperation for 2007 and future years in the second half of 2006, as agreed under contractual terms.

Earlier this year, Niyazov was reluctant to sell Turkmen gas to Russia's Gazprom and Ukraine's Naftogaz since the companies were going to re-sell Turkmen gas to Europe at a price three to four times higher.

Russia, Ukraine may end the year in gas dispute

Just before the close of the year, Russian gas giant Gazprom finally managed to secure a gas deal with Turkmenistan and negotiated a deal Belarus as it seeks to tighten its control over the regional gas network to supply European gas markets, but Ukraine holds firm to its terms.

Ukraine remains determined it has a right to take 15 percent of the natural gas Russia exports via Ukraine to European markets.

If Russia and Ukraine fail to reach an agreement, Gazprom said it would stop delivering gas to Ukraine at 10:00 a.m. on January 1.

Gazprom already began with plans to more than quadruple the price it charges Ukraine for gas at the onset of 2006.

But this is a power struggle that goes beyond natural gas.

"If Ukraine holds out and manages to strike a compromise with Russia, then Russia's ambitions to restore its influence in this part of the former Soviet empire could be finished," Bruce Jackson, president of Project on Transitional Democracies, a U.S. group that has supported former Communist countries' joining the NATO alliance, was quoted as saying by the International Herald Tribune. "This is Russia's last chance to influence Ukraine."

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Closing oil prices, December 30, 3 p.m. London

Brent crude oil: $58.16

West Texas intermediate crude oil: $60.50

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(Please send comments to AMihailescu@upi.com)