Cyril1963's Blog

Doomsday scenario becoming reality, North Africa steps into the Abyss?

cyril1963 — Tue, 22 Feb 2011 18:25:53 +0000

The current upheaval in North Africa has reached a new level. Libya’s current outright breach of ‘normal’ political-military practices against its own people shows that the current regimes are out of touch with its people. At least, that is what current media and geopolitical analysts are implying. The outright use of military force against protesters in Benghazi, Tripoli and other Libyan cities is being condemned by most Western leaders. The Arab voice is still diffuse, most ruling Arab regimes are afraid not to open up the gates of hell in their own countries when condemning Khadaffi’s crackdown on opposition forces. However, analysis at present is difficult, due to the fact that no real inside knowledge is available on the forces behind the opposition and protests. Some analysts even warn not to step into the fray as it is not clear who to support. Extremists, fundamentalists and democratic forces are currently fighting their own battles in the Libyan streets, leaving everywhere casualties, pro- and anti-Khadaffi alike. Simmering ethnic and tribal issues are showing their ugly faces, while religious extremism also is taking its toll. The European leaders are again left in a position of standing on the sidelines, not knowing what to do. Washington, Moscow and Beijing’s position is the same. The whole world does not have an answer, scared not to negatively affect their strategic interests in Libya and the rest of the Arab world. One analyst even put it more bluntly today. “If there would not be oil and gas in Libya, the earthquake in New Zealand would be front-page news, Khadaffi’s human rights violations would not even be making the back of the third page”.

North Africa’s position as an energy supplier to Europe and the USA again has become obvious, after years of living in a dormant phase. Russia, Qatar, Saudi Arabia en Nigeria, were making the front –page, not Algeria, Egypt or Libya. Natural gas and crude oil exports to the EU from North Africa were seen as a fact of life, nothing could threaten the latter. Civil war in Algeria or the terrorist attacks in Tunisia, Egypt or Morocco, only were local issues, not having any impact on Europe, just a nuisance. The Libyan escalation however has brought the crisis to the doorsteps of citizens in London, Amsterdam or Rome.

Main point of concern at present is that the Libyan crisis is the first in an oil exporting country in the Middle East and North Africa. The outcome of the crisis could have a domino effect on other OPEC countries, such as Saudi Arabia (already threatened by the Bahrain upheaval and shi’ite minority), Algeria or even Iran. Investors and oil and gas operators are keeping a wary eye on the Libyan situation, as it not only threatens their multibillion investments in the country but also presents a danger of higher energy prices (crude oil and gas).
The last weeks, largely caused by the turmoil in Tunisia, Egypt, Bahrain and even Iran, oil prices have soared. The Centre for Global Energy Studies even stated that for the first time since years, the past four weeks have been eventful for the oil market, to say the least. During 2009-2010, the oil price has not been affected by political developments. However, since the end of last year’s December, volatility has re-emerged again on the oil markets. Analysts and weak-hearted investors already have been screaming about a new oil crisis (1973), as all are expecting soon supply shortages. The first real threat to a possible instable market is the ongoing crisis in Libya. At present, Khadaffi’s power-play has already added several Dollars to the WTI price. No predictions can be given yet, but a downfall of the current regime and the possibility of either a civil war or fundamentalist state are raising the hairs of many.
Will this be caused by Libya on itself or is more needed?
A rational assessment of the Libyan potential for global danger is relatively low. The country is at present a major producer of oil, but it should not be overestimated with a production of less than 1.5-1.8 million bpd. Libya supplies around 2% of total world production, as it is a leading OPEC producer but only the third largest producer in Africa. However, the overall potential of the country is much higher. Vast areas in Libya have not been explored yet, while existing production capacity has been hit by decades of disinvestment and international sanctions. People also tend to forget that Libya once was a thriving gas producer, with its own LNG plants. All this potential could have been hitting the markets in the next years, as IOCs and several NOCs are setting up multibillions worth of oil and gas production and export plants. In addition, Libya sits atop large reserves of oil and gas that have yet to be developed. Libya holds around 44 billion barrels of oil reserves, which is the largest in Africa, according to the Oil and Gas Journal. When talking about the direct impact of a crumbling Khadaffi regime on oil and gas markets, it should be clear this will be minor.
However, the power vacuum left in Libya, if Khadaffi would either be killed or removed from office, would be a disaster. First of all, the whole political-military fabric of the Libyan society is based on the National-Arabic-Islamic-Socialist theory presented in Khadaffi’s Green Book. Libya’s society has been reformed and changed according to Khadaffi’s political ideas, meant only to be able to rule without competition. The power vacuum after Khadaffi is deadly for all. No real political opposition exists (as is the case in the whole MENA region, except Israel or Lebanon), while at the same time no real Libya exists. The current society will be void totally, as the real power and economic structures within the society are based on tribes, regions and financial position. Next to the traditional societal structures, an anti-society phenomenon has emerged, that of the Islamic Fundamentalist or Extremists. The latter group has already shown its ugly face in the battles that have been fought since years within Libya against Khadaffi. The last weeks, extremists have taken over part of the opposition protests and fights in Benghazi and other eastern regions. These developments could easily coincide with ongoing protests and calls for change in Algeria, Tunisia, Morocco and even back to Egypt. The Muslim Brotherhood in Egypt and Libya are linked since decades. Both are calling for the same, the establishment of an Islamic State (or even a Caliphate).
On the short term however concerns are only related to the current oil and gas production, the position of IOCs in the country and their employees. No real threats have yet been made to end the production of oil and gas, or the export of the goods. Some sites have stated that production at one oil field has already been reduced and there have been threats to shut down more of Libya’s output. According to IHS Global Insight, production has been curtailed at the Nafoora oil field due to a strike. Some regional opposition and ethic groups also are threatening attacks on the existing oil and gas infrastructure. American geopolitical risk consultancy Stratfor.com reports that Libya’s political strife has already begun to impact its energy production. The American analysts state the overall 1.8 million (potential) bpd oil production can be split in two categories. The first comes from a basin in the country’s western extreme and is exported from a single major hub just west of Tripoli. The second basin is in the country’s eastern region and is exported from a variety of facilities in eastern cities. This split also can be seen in the set up Libya’s society. Libya’s population is split in half: Khadaffi’s power base is in Tripoli in the extreme west, the opposition is concentrated in Benghazi in the east, with a 600 kilometer-wide gulf of nearly empty desert in between. The last days the apparent split in Libyan society has been shown, as the regime collapsed in the east, leaving Benghazi and other areas to the opposition forces.
A total collapse of the regime is still not imminent. In stark contrast to the events in Tunisia and Egypt, Libya does not take any notice of the worldwide condemnation of its practices. Khadaffi is fighting for his own survival; no options are not taken into consideration to quell the current unrest. A civil war is already going on, but Khadaffi is still going strong. If however, some of his staunch supporters, especially the army, would change sides, the Green Revolution will be a fact of history soon. Instability or even a total collapse of the country could be the end result, leaving only casualties.
Neighboring countries already fear the last option. A collapse of Khadaffi’s regime, in combination with Egypt’s revolution (or military coup), will bring immense pressure on Algeria’s already crumbling regime. Algiers is more important to the West than Tripoli, this should be well understood. Algerian gas supplies are of the utmost importance to Spain, Italy, South of France and increasingly even NW-Europe (LNG). A re-emergence of (post-GIA) Islamic Fundamentalism in Algeria is not an option; it is already a fact of life. A removal of the old-guard in Algeria will result in a totalitarian Islamic regime, holding the keys to vast oil and gas reserves and production. Europe’s Southern Flank will be under threat. At the same time, a coordinated approach of Islamic groups in the Maghreb, Libya and Egypt, only will bring totally disaster. Europe’s nightmare scenarios about the Southern Mediterranean Rim seem to become reality. Now it only needs a reality check in the leading political circles of Western Europe.

Een ‘zachte coup’ door het leger om stabiliteit te bewaren, is een reële optie

cyril1963 — Sun, 06 Feb 2011 21:47:43 +0000

Op het Egyptische platteland is de steun voor Mubarak nog zeer groot
Media tappen nu voor analyses uit hetzelfde anarchistisch-islamitische vaatje

Cyril Widdershoven
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Na jaren van repressie en ondemocratisch handelen door het regime-Mubarak is het volk in opstand. Dit is wat de internationale media ons voorschotelen. Allemaal laten ze ons de desastreuze ontwikkelingen zien op en rond het Tahrir-plein in Cairo. De rol van president Hosni Mubarak lijkt uitgespeeld, zeker nu Westerse landen hun steun voor de voormalige partner in het Midden-Oosten hebben ingetrokken. Vraag is echter of sprake is van een revolutie of een opstand van de islamitisch-nationalistische minderheid. De mogelijke scenario’s voor de toekomst doen geen goeds vermoeden.

Na de toespraak van Mubarak op 1 februari, waarin hij structurele veranderingen aanbood en het einde van zijn presidentschap aankondigde, is een duidelijke verandering opgetreden in de protesten op straat, zien mijn Egyptische vrienden in Caïro en Alexandrië. Het merendeel van de oorspronkelijke groep demonstranten, de internetgeneratie, is naar huis nu het einde van het tijdperk-Mubarak nabij is, het doel van de eerste dagen van de protesten. De huidige deelnemers op straat zijn aanhangers van de Moslim Broederschap of andere splinterbewegingen.

De meerderheid van de Egyptenaren — zonder internet! — verlangt terug naar de rust op straat. Winkels raken leeg en salarissen worden niet uitbetaald. De inwoners van Heliopolis,Maadi, Giza of andere wijken in Caïro hebben weinig opmet de geweldspiraal op en rond het Tahrir-plein.

Op het Egyptische platteland is de steun voor Mubarak ook nog zeer groot. Pro-Mubarak-demonstraties worden veelvuldig gemeld in steden zoals Beni Suef, Giza, Hurghada en Damiyat. Vreemd dat de Westerse (en Arabische) media hier geen aandacht aan schenken, iedereen tapt nu voor analyses uit hetzelfde anarchistisch-islamitische vaatje.

Diverse toekomstscenario’s kunnen worden geschetst. De eerste is dat het huidige regime weer de overhand krijgt, zeker als de geweldspiraal onder controle wordt gebracht en Mubarak op een geordende wijze het veld ruimt. De posities van de nieuwe premier Ahmed Shafiq en de nieuwe vice-pesident Omar Suleiman zijn hierbij cruciaal, omdat zij het leger en de veiligheidsdiensten controleren. Een ‘zachte coup’ door het leger om stabiliteit te bewaren, is een reële optie.

De tweede is een enigszins gecontroleerde Overgangsperiode waarin de zogenaamde oppositie via nieuwe verkiezingen een regering moet vormen. De stabiliteit van deze optie is discutabel. In Egypte bestaat geen echte oppositie. Vreemd dat het Westen van de fouten met Irak in het jaar 2003 en Iran in de periode 1978/1979 niets heeft geleerd. De protestbeweging in Egypte is een samenraapsel van de oude garde: de liberale Wafd, Nasseristen en Moslimbroeders, en opportunisten onder wie Mohammed el-Baradei.

De derde en meest desastreuze optie is de implosie van het huidige regime. Aangezien de Moslimbroeders de enige goed georganiseerde oppositie-beweging vormen, is de mogelijkheid van een Egyptische variant van de Iraanse islamitische revolutie niet uitgesloten. In tegenstelling tot wat Westerse media ons voorschotelen, bestaat onder de seculiere liberale minderheid grote angst dat fundamentalistische krachten binnen de Moslimbroeders de macht willen grijpen. De komende dagen zullen een diffuus beeld geven. Steeds maar op tv beelden herhalen van onrust, geweld en interviews wekt de indruk dat alle Egyptenaren Mubarak weg willen hebben .

Niets is minder waar. Het totaal aantal demonstranten is nog steeds miniem. Veel straten in Caïro hebben meer inwoners dan het aantal deelnemers van de ‘gigantische’ protesten op het Tahrir-plein. In Egypte wonen meer dan 86 mln mensen, van wie 28 mln in Caïro. De geclaimde opkomst van 1 mln demonstranten op het plein,wat praktisch onmogelijk is, is 2 tot 3 % van de bevolking van Caïro.

Zoals een van mijn vrienden gisteren via de telefoon zei: ‘Ik wil doodgewoon dat mijn apotheek weer geopend kanworden en mijn moeder veilig in haar flat kan leven’. En hij vervolgde: ‘Mubarak heeft veel fouten gemaakt, maar de economische groei en stabiliteit waren ook zijn ideeën’.

De meeste Egyptenaren zijn allang tevreden met een sterke nieuwe leider die de huidige status quo laat voortduren. Geld en werk zijn noodzakelijk; stabiliteit en een sterke regering zijn hiervoor nodig. Vreemd dat alle Westerse regeringen en partijen nu roepen om een gedwongen democratische hervorming in de Arabische wereld. De Westerse oppositiepartijen waren immers tegen deze democratiseringspolitiek van het neoconservatisme onder president Bush.
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Cyril Widdershoven is Midden-Oosten-deskundige en energiespecialist. Hij heeft jarenlang gewerkt en gewoond in Egypte en andere landen in het Midden -Oosten. In Caïro werkte hij voor Mohammed Shafiq Gabr, een van de rijkste Egyptenaren en lid van het bestuur van het World Economic Forum.
pagina 25, 05-02-2011 © Het Financieele Dagblad

Assesment Egyptian situation published

cyril1963 — Thu, 03 Feb 2011 18:01:12 +0000

A goodbye to stability in the Middle East

http://www.europeanenergyreview.eu/index.php?id=2720

What will be the effects of the Egyptian crisis on the oil and gas market? The first indications at present are that there is no real threat to the position of Egypt’s main transit route, the Suez Canal. This could change of course if the current protests were to turn ugly. Military action is still possible and could induce opposition groups to economic sabotage. Suez, one of Egypt’s largest cities, is already known to be a breeding ground for opposition.

A blockade of the Suez Canal would have considerable consequences. The Canal last year facilitated the transport of 1 million barrels of crude (and petroleum products) per day to the Mediterranean (down from 1.6 mbpd in 2009). At the same time, 800,000 barrels per day (bpd) were being transported from the Mediterranean to the Red Sea. 10% of the transport vessels crossing the Canal are petroleum tankers (VLCC and ULCC). If the Canal is blocked, the tankers are forced to add around 6,000 miles to their travel.

But not only the Suez Canal is of major importance to the West. Egypt has also built, almost alongside the Canal, a major pipeline, the Suez Mediterranean Pipeline (Sumed). This 200 miles long pipeline has a capacity of around 2.5 million bpd of crude, though throughput declined from 2.3 mbpd in 2007 to 1.1 mbpd in 2009. So total capacity of 3-4 million bpd is at risk. This is 15 to 25% of Europe’s total imports.

Still, the overall effect of a closure of both transit routes should not be exaggerated. 4 million bpd out of the market for a short period of time is manageable. Just think about the effects on the oil market of the OPEC decision to cut its own export volumes the last two years by around the same volume. No real negative repercussions have been seen, except that prices stabilized.

The Suez Canal also has become one of the main transit routes for LNG transports. Qatar’s LNG volumes, if not going to Asia, largely go through the Canal to Spain, Italy, Belgium and the UK. An extended trip for LNG vessels is an inconvenience but will not bring the market in trouble.

Tremendous effect

If the situation in Egypt stabilizes, and does not result in a new Iranian type Islamic revolution, the overall effect on the oil and gas markets will probably be minimal. On the other hand, the ripple effect of an Egyptian revolution could be much more serious. If Arab opposition groups see that a popular uprising in their own region can result in the removal of the old guard, they will be inspired to try the same at home. This could be the case in already unstable countries such as Jordan, Yemen or Algeria. But even The EU and the US have always relied on the dictatorial regimes to provide stability and security in the region
allegedly stable states in the region, such as Saudi Arabia, United Arab Emirates (UAE), Bahrain or Kuwait, could be feeling the heat. Opposition in all MENA (Middle East and North African) countries has been stifled quite brutally for a long time by all these regimes. The situation in Egypt is no different in this sense than in Saudi Arabia or Bahrain. Unemployment, lack of freedom of speech and a free press, and a desire for change exists in all these countries. A popular uprising in the Arab oil and gas producing countries could have a tremendous effect on energy markets and thereby the world economy.

The EU and the US have always relied on the dictatorial regimes to provide stability and security in the region. They have may bet on the wrong horse. A spread of the revolt to other Middle Eastern countries is a real possibility. Egypt plays a pivotal role in the whole constellation. An unstable Egypt affects all countries in the region. A more Islamic-oriented regime in Cairo will have its impact on the Arab-Israeli peace process, the situation in Lebanon, Iran and Iraq. As one analyst has said, the rulers in Tehran are currently sleeping with a smile on their face. Their largest Arab adversary, Egypt, has been brought to its knees. No action will and can be taken against a possible nuclear Iran without the support of the Egyptians.

If the Egyptian turmoil spreads, around 20 million bpd of crude oil (a quarter of global production) and most of the LNG exports of Qatar will be threatened. Taking into account that the MENA region holds around 55-60% of all oil and gas reserves and production capacity, the world should be worried.

Thing of the past

No one knows of course what will happen the coming days. A lot of attention is paid by western media to Mohamed El Baradei, the former IAEA chief. However, did we not have an El Baradei figure already in Iraq? The western (US) support for Ahmed Chalabi was massive, his popular support was nil. El Baradei is now riding the wave of the protests, but his position is very weak. Few Egyptians have ever heard of him. We may be betting on the wrong horse again, in a race that has hardly started yet.

The Muslim Brotherhood or Ikhwan Al Muslimiin are suspiciously quiet. Some lessons from the past we should have learned already. The Islamic Revolution in Iran was also not started by Khomeiny but by the left wing student movement. The well-organized Islamic theocracy took over afterwards. The same could happen in Egypt.

We in the West cannot control the outcome, however. If there are new elections, they will see the re-emergence of the old guards: El Wafd, the liberal-nationalist party (the founding fathers of the present Egyptian state), the nationalists of El Watan, the Mubarak-followers of the NDP (National Democratic Party), perhaps the Nasserists, left-wing nationalists. But none of these parties is very well organised. The Islamic Revolution in Iran was also not started by Khomeiny but by the left wing student movement
In this volatile situation, a growing number of voters is likely to turn to the Islamic groups, in particular the Muslim Brotherhood, which is the only well-organised opposition group that is in no way associated with the old regime. Have a look on the streets in Cairo, Suez and Alexandria. The people are condemning Mubarak as a friend of the Americans, Jews and Israel. This means they may feel they have no alternative than to turn the Islamic groups. This could lead to the establisment of an un-democratic, theocratic regime.

One other group is not asked for their opinion. The Coptic minority, 18 million people in Egypt, lives in fear. Even though their position was not good under Mubarak, their future looks bleaker. Any change to the current situation will probably be negative for them. A more Islamic-oriented regime will probably be more hostile to the Copts. Violence against this minority is already growing. Without the repression of Mubarak this will only become worse.

No one is able to predict the future, but one thing we do know: a stable Middle East is a thing of the past

Arab Leaders Under Threat, Change for Better or Worse?

cyril1963 — Sat, 29 Jan 2011 10:07:39 +0000

The streets of Cairo, Alexandria and Suez, are bleeding. Total disorder and unrest are forcing the Egyptian government and ruling elite to take drastic measures. However, the blood of the demonstrators does not yet seem to have the same results as the Tunisian demonstrations. The power position of President Hosni Mubarak is still not yet broken, looking at the implementation of a curfew and the military in the streets. The hope for change, in whatever form, is still there, Egyptians have for ones taken to the streets with some fire in their eyes. Nobody at present does know the outcome of the ongoing unrest but changes seem to be necessary. International media are presenting a scene of young people fighting to change not only their own situation but also to remove the sitting elite. Analysts in the West are already stating that this will be the case in the whole region, the Domino-theory of the 1960s and 1970s is reborn. However, is this the case and will it change all for the better?

Taking the example of Tunisia already shows that changing the regime is easy, to change society is a total different situation. The quick removal of Tunisia’s president Ben Ali has surprised most people, but should not become exemplary for the whole region. Ben Ali’s power position is overrated, and shown to be relying on several parties inside the ruling elite. For the rest of the region, the leading elite is more inclined to cling to the current situation. Change in Algeria, Egypt, Jordan or most of the Gulf region countries will not so easy as it looks.

The Egyptian regime is based on three pillars, a political elite, economic elite and the military. All three are intertwined, breaking them up will be extremely difficult and detrimental to the Egyptian economy. The latter should not be taken as a reason not to change, but most Egyptian will be very disappointed when change is there but their socioeconomic situation does not change or even becomes worse. Renewed unrest will be the case, bringing not only Egypt to a standstill but increasing the volatility of the whole region. Changing the political-economic and military situation in Egypt is seen by Western analysts as a very good target, for the wellbeing of the people democracy and transparency should be introduced. Democracy, the Holy Grail for most European and American politicians, could result in a short lived period of hope, ending in despair.

No real opposition in Egypt exists at present, except one movement, the Ikhwan Al Muslimiin (Muslim Brotherhood). As has been shown in other parts of the region, the introduction of democracy will bring to power the protest party, aka the Ikhwan. No other option at present exists. To remove the current political elite (pro-Western) will result in a vacuum in which only the other side can win. Is this the future the world wants for Egypt and its people? Is this the position we are forcing Egypt in, bringing instability to the country and the whole region. Don’t forget, the MENA region is only a one hour flight away from the southern parts of Europe.

If not only looking at the political situation, the economy already is in shambles. The protests and riots have resulted in the cancelations of hundreds of thousands of tourists, delivering a blow to Egypt’s thriving tourism sector. This will not be recuperated within the next years. Removing Mubarak will also force the current leading economic powers, aka the socalled Pharaonic families, to leave the country. International Egyptian conglomerates such as MobiNil will not be waiting for stability, but will leave the country. This will directly deliver a blow to the only well functioning economic sectors, IT, Communication, and Trade. At the same time, Egypt’s stability is needed for investors to keep on pumping billions of dollars in the oil and gas sectors, and its subsidiaries such as refineries or petrochemicals. A change in power will also have its debilitating effects here.

Overall, unemployment, poverty and democracy are not going to helped by changing by force the current regime, without also handing over a solution for stability. Egypt’s current situation is vital for the region. If Mubarak will be forced out of power, this will bring the rest of the regimes also to the brink. Choices are to be made, not only in the MENA region but also for the outside powers. It feels that not only the Arab regimes have been sitting back but also the rest of the world. Calling for change is ridiculous if you don’t have any solution.

The coming days or even hours can be vital. No –one knows at present. The role of the military is still unclear, but don’t forget Mubarak is an ex-general, his power is based on security and the military. Unrest, bloodshed and curfews, are the current results. Instability for the foreseeable future is already a fact.

Interview Management Scope

cyril1963 — Tue, 25 Jan 2011 20:25:01 +0000

Interview met olie- en gasexpert Cyril Widdershoven
27-08-2010
Beeld: Mark van den Brink | Tekst: Mark van Baal

Olie- en gasexpert Cyril Widdershoven over zaken doen in het Midden-Oosten, de teloorgang van de grote internationale energiebedrijven en de toekomst van de energievoorziening. ‘Houd je opties open.’

Dr. Cyril Widdershoven (47) heeft olie en gas door zijn aderen stromen en adviseerde vele Arabische en westerse energiebedrijven. Hij woonde jaren in het Midden-Oosten en spreekt Arabisch.

Carrière bij Artoc
In Egypte was Widdershoven head of investment and research van Artoc, het investeringsvehikel van multimiljardair Mohammed Shafik Gabr, één van de vijf rijkste Arabieren. ‘Mijn Egyptische vrouw – ze was assistente van Gabr – zegt dat ik meer Arabier ben geworden dan zij.’

Energiemarkt
Widdershoven heeft stevige meningen over de energiemarkt, die niet altijd in lijn zijn met de positie van TNO, het technologisch instituut waar hij nu Business Development Sales Manager is. Dit interview is dan ook op persoonlijke titel.

Pro-Israël
Widdershoven studeerde geschiedenis en Midden-Oostenstudies aan de Universiteit van Nijmegen. ‘Ik stond als student bekend als pro-Israël. In de jaren tachtig was dat tegendraads, op mijn universiteit in Nijmegen zelfs out of order.’

Consultant Midden-Oosten
Na een promotieonderzoek in Londen op de proliferatie van nucleaire en chemische wapens mocht Widdershoven zich Doctor in Philosophy (PhD) in warstudies noemen. Hij werd Midden-Oosten consultant, onder andere bij Deloitte en Capgemini, met een groot netwerk – zijn account op netwerkwebsite LinkedIn telt 1.200 connecties.

° Wat voor adviezen gaf u als olie- en gasconsultant?
‘Antwoorden op de belangrijkste vragen bij de acquisitie van een olie- of gasveld: Wat is de stabiliteit van een regime? Wat is de waarde van het olie- of gasveld en krijg ik de olie- en gas niet alleen uit het veld, maar ook richting China of de Verenigde Staten? En, wie is de key-onderhandelaar? In Irak zijn er 90.000 mensen die zeggen: “ik ben de broer van, de neef van, de aangetrouwde neef van, of het schoolvriendje van de minister van olie”.’

° Wat doet een politiek consultant nu bij een technologie-instituut?
‘TNO wil graag internationaal groeien, vooral in het Midden-Oosten. We willen technologie en consultancy verkopen. Er ligt hier heel veel technologie op de plank, die de mensen hier als oud beschouwen, maar die voor de olie- en gasindustrie het nieuwste van het nieuwste is. Ik ben binnengehaald als een soort sales manager, die deuren naar het Midden-Oosten kan openen. Er lopen bij TNO Oil & Gas vierhonderd mensen rond die enorm veel weten. Ik neem ze mee, open de deur en geef een schop onder tafel als ze even hun mond moeten houden, maar wanneer het over techniek gaat, dan houd ik mijn mond.’

° Welke technologie wil TNO verkopen?
‘Nieuwe boormethoden, nieuwe technologie om olie te winnen, technologie voor het afvangen van CO2 en het scheiden van gas met veel zwavel, het zogenoemde sour gas. Een veelbelovende de technologie is smart wells, waarmee je veel meer uit een olie- of gasput kunt halen. Met smart well-technologie kun je 60 tot 65 procent van de olie uit een bron halen. Nu is het 35 tot 42 procent. Wij kunnen advies geven. Niet alleen hoe je deze technologie moet installeren, maar vooral hoe de productieman op het boorplatform of bij de boorput de technologie moet gebruiken. Vaak zie je na installatie van smart well-technologie een productieverhoging, die na drie of vier dagen weer wegvalt. Er worden jaarlijks 64.000 olie- en gasboringen gedaan. Slechts 100 tot 150 zijn smart wells, dus daar ligt een grote markt open.’

° De internationale olie- en gasbedrijven (IOC’s), zoals Shell en BP, hebben in de jaren negentig veel technici ontslagen. Zit er nog genoeg kennis bij de IOC’s?
‘We hebben ze gewaarschuwd. Als consultants adviseerden we om hun future assets niet weg te gooien. Er zijn al te weinig olie- en gasingenieurs en de helft gaat voor 2020 met pensioen. Veel ontslagen ingenieurs zijn vertrokken naar olieservicebedrijven, zoals Schlumberger, en NOC’s, staatsoliemaatschappijen van olie- en gasrijke landen. Wanneer een IOC nu gaat onderhandelen met een NOC over een olie- of gasveld, dan zitten ze tegenover hun voormalige werknemers, die precies weten hoe het bedrijf werkt en wat het bedrijf kan. Dan staat je onderhandelingspositie onder druk.’

° Hebben de IOC’s door dat ze hun positie verliezen?
‘ExxonMobil, ConocoPhillips en Chrevron zeggen nog steeds: “We’re the best. No issue. No problem.” De toplaag en de aandeelhouders, die kijken naar productiecijfers en financiële resultaten, hebben het niet door. De managementlaag daaronder begrijpt dat er een issue is. De laag in het veld roept al jaren dat het fout gaat.’

° Wat ziet u als de belangrijkste ontwikkelingen voor de komende tien jaar?
‘Olie en gas zullen een substantiële rol blijven spelen. De vraag blijft groeien. Alternatieven als biobrandstoffen, biomassa, zonne-energie en windenergie zullen groeien, maar nog geen concurrent worden. Het omslagpunt, waarop duurzaam goedkoper wordt dan fossiel, verwacht ik tussen 2020 en 2030. Technologisch is het allemaal mogelijk.’

Vervolg het artikel

° Heeft u het idee dat de grote energiebedrijven zijn voorbereid op een dergelijke omslag?
‘De grootste investeerders in alternatieve energie zijn olie- en gasbedrijven. Vooral de investeringsvehikels van nationale oliemaatschappijen stoppen veel geld in groene technologiebedrijven. Die hebben alleen geen haast. Op een vat olie zit een winstmarge die geen enkele sector haalt, behalve de ICT-sector in zijn gloriedagen. Wanneer je zoals Saudi Aramco, de nationale oliemaatschappij van Saoedi-Arabië, olie produceert voor 1,5 euro per vat, terwijl de olieprijs 75 dollar per vat is, dan ligt het omslagpunt heel ver weg.’

° Zou duurzame energie een einde aan oorlogen in het Midden-Oosten kunnen betekenen?
‘Op het moment dat we olie vervangen door biomassa krijgen we geen olie- en gasoorlogen meer, maar oorlogen om landbouwareaal. Wanneer we elektriciteit gaan produceren in de Sahara en het via leidingen naar Europa transporteren, dan weet iedereen waar die leidingen liggen, inclusief Osama Bin Laden junior. Met één aanslag leg je heel Europa plat. Voor de security of supply is dat een groter gevaar dan olie of gas, waar hij elk schip zou moeten aanvallen.’

° Als Europa zou overstappen op een decentraal en lokaal energiemodel, waar energie uit zon en wind dicht bij de gebruiker wordt geproduceerd, dan bestaan die gevaren niet.
Smart grids, die de elektriciteit dan moeten verdelen over alle gebruikers, zijn theoretisch een heel goed idee, maar niet voor de komende tien jaar. We moeten heel Europa er achter krijgen en vele miljarden investeren. We moeten reëel zijn en de tijd die we hebben – er is geen gevaar dat we op korte termijn niet genoeg olie, gas of uranium voor nucleaire energie kunnen vinden – gebruiken om de meest flexibele en meest reële optie te vinden.’

° Wat zou u het Nederlandse bedrijfsleven adviseren?
‘Ik zou mijn oliegaspositie proberen te hedgen, de prijs zo ver mogelijk in de toekomst vastleggen. De prijs gaat omhoog en hij staat nu redelijk laag. Wat alternatieven betreft: houd je opties open. Er is geen enkel alternatief, behalve nucleair, dat de komende tien à vijftien jaar bedrijfseconomisch haalbaar is, zeker nu subsidieregelingen onder druk staan. Nederland zou veel meer in olie en gas moeten investeren.’

° Waarom zou Nederland nog moeten investeren in olie en gas? ‘Omdat we dat al hebben en er op een groot aantal punten leidend in zijn. Er is geen ander land met zo’n grote gasinfrastructuur en -expertise als Nederland. Op het gebied van solar en wind zijn we voorbij gelopen.

° Is het niet erg conservatief om in te zetten op de oude bronnen en dreigt Nederland dan niet de boot te missen op het gebied van duurzame energie?
‘Ik was ook niet de eerste die een mobieltje kocht. Daardoor heb ik nu het allernieuwste en het kost me vele malen minder dan degene die het jaren geleden kocht. Indien we solar willen, is het toch simpeler om te zeggen: wij halen het beste van het beste elders, voor mijn part in China of Siberië, nemen dat niveau direct over en gaan ons onderzoek vanaf dat niveau richten.’

° Als we afwachten tot nieuwe energie elders in de wereld wordt ontwikkeld, kunnen we die technologie straks alleen maar importeren?
‘Dat hebben de Japanners en de Aziaten ook gedaan en die lopen nu weer voorop. Voor elke technologie krijg je te maken met de wet van de remmende voorsprong. Het gevaar is dan dat je dan op je lauweren gaat rusten.’

° Dreigt dat dan niet te gebeuren met fossiele energie?
‘Klopt, maar wij hebben onze kennis de laatste twintig jaren niet geëxporteerd. Wij zijn leidinggevend. TNO, Gasterra, Gasunie, IHC, Heerma, noem maar op. Nergens waar ik kom op meer dan een uur vliegen kennen ze ons, maar als ik vertel wat we doen, dan weet iedereen: die lopen voorop.’

° U pleit voor één Ministerie van Energie. Wat zou de prioriteit van de Minister van Energie moeten zijn?
Nederland heeft op dit moment geen duidelijke energiestrategie. Laat één man of vrouw hier over gaan, liefst iemand zonder politieke kleur, die wordt ondersteund door een groep experts. Laat hem of haar het woord voeren in het buitenland, net als Noorwegen en de Verenigde Staten doen. De Noorse Minister van Energie gaat met een contract van de Noorse oliemaatschappij Statoil naar de staatsoliemaatschappij van Iran. Onze Minister van Energie zou op pad moeten met een koffer vol Nederlandse technologie. Wij zijn een exportland en onze olie- gassector heeft veel mogelijkheden.’

° Zou het voor de Minister van Energie prettig zijn wanneer de elektriciteitsbedrijven weer in overheidshanden kwamen? Widdershoven lacht homerisch, benadrukt nog een keer dat hij op persoonlijke titel spreekt en gaat zachter praten. ‘Ik ben van de oude stempel en denk dat energie een nutsfunctie heeft. Ik heb me verzet tegen de privatisering. Ik adviseerde de VVD in de jaren negentig, maar ze hebben niet naar me geluisterd. Voor één grote Nederlandse speler viel wel wat te zeggen. Misschien hadden we de elektriciteitsbedrijven eerst moeten laten fuseren.’

° Denkt u dat Nederland 20 procent duurzame energie in 2020 gaat halen, zoals de regering wil?
‘We zitten nu op 7 procent. Nee dus. De elektriciteitsbedrijven hebben een voortrekkersrol, maar ik begrijp volledig waarom ze een andere keuze maken. Ze zijn een commercieel bedrijf, geen filantropische instelling. Duurzaam is nog te duur.’

° Zou de Minister van Energie dwingend moeten optreden door een percentage duurzame energie verplicht te stellen?
‘Hij zou het moeten afdwingen indien de samenleving vindt dat dit moet. Op dit moment betwijfel ik of de samenleving dat wil. Er is in ieder geval geen meerderheid voor in de Tweede Kamer, gezien het huidige aandeel van rechts.’

° Wie denkt u dat de winnaars worden na de energietransitie van fossiel naar duurzaam?
De bedrijven met een heel goede verdediging, die uitgaan van de kracht die ze hebben. Indien je een olie- en gasbedrijf bent, moet je dat blijven en heel veel aandacht aan energie-efficiency geven. Daar valt nog zoveel te halen. Saudi Aramco vertelde me vorige week nog dat er 36 procent op de efficiency van automotoren kan worden bespaard. Energie-efficiency is de beste manier om CO2-emissies te reduceren. Laten we vooral daar geld in pompen. Gas en olie, die lekkere zwarte rommel, zijn de meest ideale vormen van energie. Alleen halen we er veel te weinig uit en gooien veel te veel weg.’

Bovenstaand artikel is gepubliceerd in de special Energie 2020, perspectief voor een duurzame bedrijfsvoering, in samenwerking met Nuon.

Global gas markets hit by cuts

cyril1963 — Sun, 20 Jun 2010 07:52:16 +0000

After weeks of discussions, global gas producers now are set to hit the market with an unexpected production and export cut. The world’s largest LNG producer, Qatar, is expected to idle around 66% of its export plants this year. The latter is seen as a result of the current global gas glut. Qatar follows into the steps of Russia which also has decided to curb its exports.

News agency Bloomberg has cited a report from New York-based consultant Poten & Partners as saying Qatar’s two LNG projects, Ras Laffan and Qatar LNG, had an “unusually heavy” maintenance program during the past two months that shut six of 12 production units for several weeks. Another two units will undergo repairs this summer. The latter situation could mean that it is a change in approach from a January comment by Faisal Suwadi, then chief executive officer of QatarGas, that his company probably would not idle any LNG units for maintenance this year. The last months, Russian gas giant Gazprom (LON:GAZP), which supplies about a quarter of Europe’s gas, has already decided to cut its 2010 production goal because of reduced demand. Moscow stated that Gazprom aims to produce 519.3 billion cubic metres of gas this year, scaling back an earlier forecast of 529 Bcm. Vsevolod Cherepanov, Gazprom’s head of the gas, condensate and oil production department, stated to the press the last days that “Gazprom is now revising down figures because of a lack of demand”. Qatar’s decision to shut units even as it increases overall capacity underscores the challenge LNG producers face in balancing abundant supplies with long-term expectations of demand growth Wood Mackenzie consultant Andrew Pearson stated that it seems that there will be more shutdowns the coming months, especially LNG units. He stated that “suppliers are trying to support the market on one hand, but on the other hand, holding the gas back for future months and years when the price is more attractive.” Members of the Gas Exporting Countries Forum, which includes Russia, Iran and Qatar, failed to agree in April on an Algerian proposal to buttress prices by reducing spot sales. Qatari Minister of State for Energy Mohammed Sada said in March that his country did not plan to reduce output to support prices. The latter situation could in general result in a total new situation in global gas markets. Production cuts in Russia, combined with potential LNG export cuts in Qatar, could be especially hitting European gas markets soon. Algeria’s overall position is also unclear. Former Algerian Minister of Energy Chakib Khelil already asked at LNG 16, the major gas conference held in Oran, Algeria, in March that gas producers should decide to implement production cuts. Until now, this has not been followed up by member countries, but first signs of this new strategy now are emerging. Gas prices, hitting already the bottom in the USA, are showing major upward potential. Europe will be following suit very soon.

May I have your votes please? Copenhagen Zero Point

cyril1963 — Fri, 25 Dec 2009 11:32:19 +0000

After years of heating up, most expectations related to Copenhagen have not been met at all. The climax of the Copenhagen Climate Conference has been the political row between the USA and China, leaving most solutions in shatters. After that the two giants have not been able to come to a compromise, even that analysts are still keeping optimism alive, economic analysts are now taking their prominent place in the discussion again. At last, I would like to say, without real economics and technical solutions, all future scenarios are not relevant. One main issue that has been hit by the unwill and financial problems in the world is the issue of Carbon Capture and Storage. In stark contrast to former statements made in the press, the CCS option as one of the main solutions to global warming and CO2 removal is taken of the list of prominent issues by most climate change supporters. What nobody had expected, CCS is currently not even anymore listed on the UN lists of technologies that rich (developed) countries are embracing to tackle the percieved global warming. In Copenhagen, several high profile countries, including the EU, have taken a low profile stand regarding CCS as CO2 emission mitigator. Delegates have been discussing the CCS option in full, as this is one of the options available for CO2 removal at industrial plants. After lengthy discussions, no real solution has come forward for CCS. Analysts even expect that it is not really clear if CCS will be on the priority list of the UN next year.

For some mainstream players, such as British-Dutch Shell, which is one of the forerunners of CCS in their own project in the Netherlands, Barendrecht, this should have come as a surprise. Shell and others have been lobbying for a positive outcome on CCS in Copenhagen. Some countries even have been asking to give CCS the same role as the UN Clean Development Mechanism, which has the full support of the UN at present. The latter means that by buying CDM rights, developed countries can partly compensate their own CO2 emissions. The same could be targeted for CCS, as this is one main technology to mitigate and remove CO2 emissions without delay. However, a UN Framework Convention on Climate Change (UNFCC) report has stated that CCS will not have the same role. Some countries, as reported in the press, have still very large concerns regarding technology and risks involved in CCS. At present, the Netherlands, France, Germany and Norway are fully targeting CCS, but this now could be under extreme pressure if this Copenhagen news emerges in the press. CCS critics have always been venting their concerns regarding technology and experience with the CCS projects. For some, CCS technology has not been proven enough. The latter is according to myself a lot of cr…., as the technology is there, to be put in place in full, without real issues or risks. If not under populated areas, first major projects could be implemented in offshore gas fields, which have been storing the same kind of gasses for millions of years. If necessary, there are several other options available, but investors, politicians and NGOs need to be willing to take this step.

Some analysts have already indicated that the main anti-CCS movement policies are based on the fact that some parties believe that CCS will constrain the current international move towards electricial transportation or alternative energy sources. The latter is not based on facts but on the analysis that CCS could give ‘old sources of energy’, such as oil, gas and coal, could be reaping the rewards of a CCS strategy. For real analysis, have a look at the economics. Without most subsidies or government plans to force alternative energy sources through the throat of consumers and industries, no real changes would have been made until now. Without the fact that expensive energy production is being subsidized or mandatory, consumers would have been not interested in putting up solar panels in Holland, or windfarms. No real free market approach will ever make alternative energy sources attractive as long as there is an abundance of other energy supply available.

Secondly, consumers are kept in the dark by most alternative energy promotors. No party has come clear about the financial impact of CO2 emission reductions, CCS or other so-called Climate Change policies. As some mainstream consultancies have indicated, at a price of EUR34 per ton CO2 (ETS), a 300MW power plant will have to put in place an own investment (after using the EUR34) of between US$500 million to US$1.1 billion during the life time of the plant to have all its CO2 be put in a CCS project. The latter means that consumers will be paying the price, electricity will become very expensive. This only will be even more expensive if other issues, such as decentral generation, smart grids and other energy policies, will be put in place. Additionally, it should be understood that CO2 removal at any plant or industry will also result in a lower efficiency of the latter’s production. Just for the idea, CO2 postcombustion at a power plant reduces efficiency between 6-11%. This means, as we all want the light to be on, more electricity generation is needed for the same end result, aka more oil, gas, coal or nuclear is being used. This also will increase the total bill of a consumer even further.

It is now the time to react to the ZERO POINT of the Copenhagen road show. The world has stated that it does not like the current approach. Lets make clear to all parties that there is a need for change, but this will have a price. Take first the real possibilities to change some of the CO2 emission volumes in the developed world. There is no time for a slow down but only for a pro-active approach. This should be made clear to all parties, including the consumers/clients, as they will be paying the price. Dont always use the Ice Bear approach to change the views of people, but make it financially clear what all will cost. This not only will be necessary for the USA, EU or Japan, but also for the upcoming or emerging markets. It is a fallacy to state that we produce more CO2 per person, for the world it counts how much CO2 in total is being produced. To remove the risk, take a birds view, but also include all possible solutions available at present. CCS is one big option, NIMBY is not a valid statement. If we all want it, this also will mean below your own territory!

China takes lead Caspian gas future, Nabucco’s prospects waning?

cyril1963 — Fri, 18 Dec 2009 08:10:57 +0000

The prospects of Europe’s strategy to access Caspian gas supplies via its own high profile project Nabucco seem again to be hit by more aggressive policies of third parties. The opening of the Turkmen – Chinese gaspipeline project the last days shows that competition for Caspian gas reserves is high, with Europe lagging behind as always. Even that the new gas pipeline between Turkmenistan and China is relatively small, bringing 40 bcm of gas by 2012 to China, the latter means another slap in the face of European politicians hoping to bring Nabucco onstream soon. Turkmenistan already is transporting up to 70 bcm to Russia, bringing Turkmenistan’s export potential up to 110 bcm. Main concerns for other parties should now be the impact of political-economic cloud of Russia and China in the region and the overall production capabilities of Turkmenistan as a whole. China and Turkmenistan are already discussing the option of increasing their trade by another 10 bcm in the next years. Russian energy giant Gazprom is contracted to purchase between 50 to 65 bcm annually from Turkmenistan, accounting for about 90% of the Central Asian country’s gas exports. Russian Turkmen cooperation has been historically large but have come slightly under pressure due to an explosion in April of this year, which has blocked the total export to Russia. Turkmenistan is officially seeking addition export avenues, courting the European Union but without real factual results. The latter should become more active not to be left behind totally in the current Chinese-Russian battle for prominence. When the Turkmen exports to Russia resume, Gazprom, the main recipient of the gas, will have seen its share of Turkmen gas to have fallen to just above50% of total. Not only China and Russia are involved in the energy battle in Turkmenistan, Iran, the world’s second largest gas reserves holder, also expects to launch a new gaspipeline to Turkmenistan. The latter will transport 8 bcm to Iran, while plans exist to expand capacity even by another 4 bcm. Iran’s overall Turkmen gas imports will than have grown to 20 bcm in total

Analysts are not only concernced about the Chinese role in Turkmenistan, but also in other countries in the region. The new pipeline will also be transporting some gas from Uzbekistan and Kazakhstan to China. Uzbekistan has already said it is contracted to provide 10 bcm to the project. A second section of the pipeline that will extend through Kazakhstan from north of the Aral Sea to China , which is called the Beyneu-Bozoy-Kzylorda-Shymkent pipeline, is slated to provide 10 bcm of Kazakh gas. China already has stated that it wants to increase its current energy (economic, political and even military) cooperation with the region in full.

China’s overall energy strategy has changed the last months. Based on its economic growth expectations, showing still a potential of 6-9% per year growth, China wants to gasify its economy. In former years, China’s growth was largely supported by a coal-based energy production scenario. Beijing now is looking to diversify its coal dependency to gas. China’s current energy mix only has less than 10% gas use. This will change dramatically, leaving Beijing with only one solution, to bring in as much gas as possible. Since years, China has been the main client for additional LNG expansion projects in the world, but this now seems to have changed. Main gas pipeline projects (easy to access and control) from different regions, such as Central Asia and Iran, are featuring in Beijing’s new strategy. Beijing’s statements just before the Climate Conference in Copenhagen, that it wants to control its overall emissions, only bodes well for gas exports to China, as it is until now the only easy road for using more clean energy. If China, and possibly other Asian giants, are taking this road, Central Asia is the main supplier of choice, with as second option Iran.

European gas dreams could be facing an increased uphill battle. Caspian/Central Asian suppliers are more than willing to consider increased exports to Asia, first of all due to the fact that Asian economies are willing to pay a higher price than other consumers, but also due to shorter gas transportation routes. The European Nabucco pipeline route is going to be twice as long as the Turkmen-China pipeline. Increased Asian supplies also will diminish the Central Asia’s capabilities on the mid- to longterm to supply the necessary volumes to Europe. Nabucco is slated to have a transportation capacity of 31 bcm per year. No supply contracts also have been signed between any Central Asian countries and European parties. Some analysts are still optimistic. German utility giant RWE’s upstream subsidiary RWE Dea has signed in the summer a contract to explore Turkmenistan’s offshore gas fields in the Caspian Sea. In October, the company opened a representative office in the Turkmen capital, Ashgabat. This is seen by some as a sign that gas could start heading to Europe. They also see the current Chinese pipeline successes in the region as a sign that Russian prominence in the region in waning, as non-Russian gas pipelines are feasible. Still, it also could be seen as more a dream than reality. Chinese prominence in Central Asia, Russian and Iranian influences, will not have a positive result for any European gas import dreams from countries such as Turkmenistan, Uzbekistan or Kazakhstan. Brussels will need to speed up its foreign energy policies, not only present dreams that never become reality. If Central Asia will become a no-go area for imports, Brussels will have to reconsider its overall stand towards other suppliers, mainly Iran. Brussels and Tehran will be forced to work together, even if current geopolitical issues are not allowing this to be more fruitfull. Nabucco without Iran is not possible anymore. Washington knows this, Tehran also. Europe’s energy future depends on future realistic approaches, not dreaming while increasing their Russian dependency even more.

Nigerian Petroleum Bill changes threatening IOCs

cyril1963 — Tue, 08 Dec 2009 16:08:17 +0000

The ongoing discussion regarding the Nigerian Petroleum Industry Bill seems to be heading towards a new showdown. This time, International Oil Companies seem to be bearing the full brunt. Nigerian government’s interagency technical team on the Petroleum Industry Bill, according to Nigerian news sites, is currently racing to produce yet another draft of the bill barely three weeks after a new version was completed by the Nigerian National Petroleum Corporation (NNPC)-led group. A new draft has become necessary after that Nigerian oil officials discovered that certain clauses inserted in the bill by Tim Okon, NNPC’s Group General Manger on Strategy, seem unworkable and might require some amendments. The changes are not clear yet, but the fact that the new interagency team, which is led by Okon, the NNPC’s chief strategist, comprises the Ministries of Petroleum Resources, Finance and Justice, as well as the Department of Petroleum Resources, the Federal Inland Revenue Service, the Revenue Mobilisation Allocation and Fiscal Commission and the Nigeria Extractive Industries Transparency Initiative, could be changing part of its stature is causing some fear under analysts. Changes have become necessary due to increased opposition from the Nigerian Senate Committee on Upstream Petroleum, led by Lee Maeba, rejected all provisions put forward by Okon. The NPPC strategist had included the removal of the National Petroleum Management Agency, replacing it with the National Midstream Regulatory Agency. The changes will again delay the Bill until further notice.

Some analysts however have become very cautious about the latter developments. Okon, who is also a former senior executive of ExxonMobil, is known for his nationalistic views on the petroleum sector reforms. IOCs have several times indicated that they are very uncomfortable with the position that Okon currently holds as chairman of the PIB workgroup. Some expect that Okon, supported by Mohammed Barkindo, NNPC’s managing director, will be leading a much more nationalistic NNPC agenda that will only try to maximise NNPC’s control over the proposed Incorported Joint Ventures (IJVs), the replacement of the JVs in place, while at the same time removing most of the influence of the IOCs. Okon has already refused several times to guarantee IOCs that they will be able to retain the same percentage of equity they are holding at present under the existing joint venture agreements. The ongoing delays and internal struggle within the Nigerian government, Senate and NNPC departments, shows that this definitely could become a fact of life.

IOCs have already criticised the Bill, which is anchored on five major goals which include the creation of new regulatory institutions, transformation of contractual agreements, introducing new Fiscal Regime, Deregulation of the Downstream Sector, government participation in the Industry and finally, introducing transparency in contractual agreements.Two main aspects of the Bill, the transformation of contractual agreement and the introduction of new fiscal regime, has led IOCs to state that the bill will affect project economics in the industry and ultimately affect its investment prospect, hence, hindering the growth of gas investment in the country.

The fiscal regime is a key factor in any investment decision making process of IOCs at present. Investors want to have a rate of return commensurate to the risks. This encompasses the bookable reserve, cost recovery and the price of Oil in-situ. The bookable reserve is the amount of Oil in barrels that a company is expected to take in form of profits after production . Royalty can either be advalorem meaning based on Volume of production or on a sliding scale rate. Average global oil royalty rates for oil are generally set in a range from 5% to 25% but most are nearer 10% to 15% of production. Gas is slightly receiving a lower rate than oil. Royalties also affect the bookable reserve which multinationals love due to its effect on global reserve accounting. Royalty especially higher ones tend to make investors quickly abandon ongoing projects due to foreseen negativity in project profitability. However, the prevailing royalty rate for onshore prospects in Nigeria is 20% and 18.5% for prospects in the swamp/shallow waters (1-100m). The rate for Shallow offshore (100-200m) projects is 16.6%, deep offshore rate is tied to water depth (200-500:12%; 500-800:8 %;> 800-1000: 4%; >1000:0%). The PIB in its fiscal change review stipulates that royalty would be based on a sliding scale rate especially to adjust for increase in Oil price. The new indicators in the PIB show that there will be a royalty rate that could be as high as 25% or even more depending on the price of oil. Most analysts now view the proposed regime as being fiscally grieving. The Nigerian government seems to be heading towards a full target of generating early and more revenues. At the same time, Nigeria proposes in the Bill a 30% income tax on all petroleum companies. At the same time, no specifications have been given for the oil price level on which all adjustments will have to be made in future.

For most future investments in new or existing projects, these changes dont bode well for IOCs. Investment requirements still are increasing, deepwater projects or instability all lead to higher project costs. This, in combination with the fact that IOCs are being threatened by NNPC (or its successor) that their overall equity stakes in projects will be changed, only will lead to a reduction of interest. IOCs will be looking for new opportunities elsewhere, while existing projects will not be quickly receiving the hard-needed additional cash to revamp or increase production rates. Further threats, which have been put in place by NGOs and Niger Delta politicians, that IOCs will have to bear the brunt of paying for economical and social reconstruction of their regions, does not give any room anymore for positivism. Nationalism (or Resource Nationalism) is a fact of life in Nigeria, politicians however dont understand it seems that times are changing. The current economic climate does not leave much room for IOCs to keep up paying the bill for local political heroes to fullfil their dreams. If Nigeria continues to keep on going this way, others will be prospering. As we say in Holland, you only can spent a Euro once, better to do this where you get a reward, not much more pain.

US-EU benchmarks threatened by energy price policy switch Gulf region

cyril1963 — Sun, 06 Dec 2009 13:31:49 +0000

The historic position held by the West Texas Price Benchmark of Arab crude oil exports seems to be eroding quickly. Saudi Aramco, the largest oil company in the world, and Kuwait have indicated that they are considering to drop its long-standing US pricing benchmark. Aramco has, after years of being frustrated by the price it is receiving for its crude, has ditched already the WTI benchmark last October. Saudi Arabia is not happy with the current pricing schemes, which are not taking into account the fact that the country holds the largest crude oil reserves in the world. Kuwait’s state owned oil company Kuwait Petroleum Corporation has now also indicated to be following the same line of Aramco. KPC has indicated that it could be switching to a less volatile benchmark than WTI to make its oil revenues more predictable. Discussions already have been held with Argus oil pricing group officials at the end of last month. The discussion was focusing on another option to price KPC’s crude. Sources have stated to the press that “KPC is still evaluating the two pricing benchmarks, but there is certainly a strong logic to following Aramco.” A potential ditch of WTI as its benchmark is expected before the end of December. Aramco already has surprised the world market when it ditched WTI on October 28. Aramco now has as its new benchmark: the Argus Sour Crude Index.

The global oil market now seems to be heading towards a general reorientation of pricing, from a US-EU based approach to an Asian-Middle East centred pricing focus. Main reason for the current switch is the fact that a growing amount of Middle Eastern producers feel that the formula used before (WTI-based) had litte relation to the oil sold. WTI is a light and sweet crude oil, while Saudi Arabia produces sulphur-heavy oil, which is far more expensive to refine. American customers have been feeling the same, complaining that the price set by Aramco did not relate to global market prices for the crude quality sold. At the same time, WTI is very volatilie, sometimes at odds with the market situation in general. The WTI volatility was high in 2009, continously trading in a range of US$1-2 above or below Brent price (European benchmark). In January, however, WTI even was US$12 per barrel below Brent. Several months later, WTI however was trading at a premium with regards to Brent. For traders and other customers, this volatility only increases the insecurity of the market, as it makes planning very difficult. Saudi Arabia does not anymore want to be hold prisoner in this equation. The world’s largest producer wants to have its own benchmarks, showing much more stability for its customers. Analysts also stated that WTI is failing to represent the demand-supply situation of the market the last years. The WTI, based on the specifics of a very small partion of the US market space, representing only a storage capacity of 48 million barrels of crude oil, seems to be not representative anymore. When the market hit an US$147 per barrel record, Saudi Aramco complained that it could not find customers for its volumes. WTI at that time showed a shortage in the market (based on its own market place). In place of WTI, Aramco decided in October to adopt the Argus Sour Crude Index, with effect from January 2010. This price index is based on a weighted average of prices paid for three crudes from the Gulf of Mexico. The latter represents a much more stable market environment to base price settings on. The latter feelings now also are forming the oil price policies of Kuwait, some even expect Iran to follow the same path very soon. Kuwaiti officials have indicated that Kuwait could be having another benchmark in 2010.

In how far this will shake up overall prices in the region and worldwide is still unclear. Most of Gulf based oil production is being sold to Asian buyers. The latter have been watching the current developments with immense attention. Asian buyers in particular are paying close attention to speculation that there may be a shake-up in the way global oil pricing benchmarks are used. Asian clients are already paying a higher price, with a large premium, due to Aramco’s historical price arrangements for Asian markets. Since 1986, Aramco has priced its Asian sales through a combination of the prices charged for two Middle East crudes: Dubai and Oman. Asian consumers are currently paying around US$2 per barrel more than American and European customers of Gulf crude. Some analysts expect that Aramco could adopt the Dubai Mercantile Exchange’s (DME’s) fledgling Oman crude oil futures contract as an alternative benchmark for its Asian customers. This still is unclear, as only a tiny amount of all crude to Asia (12 million bpd) is being priced via the DME. Aramco has already stated last year that it wants to set up pricing and trading mechanism based on a Gulf hub system, maybe based on DME. For Arab producers, it will be also valuable to take a look at the Russian position. Russia (FSU) is becoming a major player in the Asian markets the coming years. A possible Asian pricing index should take Russia into account. The latter is due to start exports to Japan, China and South Korea through its new East Siberia-Pacific Ocean (Espo) pipeline in 2010.

Largely forgotten in the whole constellation is the fact that some Arab and OPEC producers still are discussing ditching the US dollar as crude oil currency of choice. Since the OPEC Summit in Riyadh in 2007, Iran, Venuzuela, Angola, Algeria and others are still hinting to price their exports in Euros or even Yen. If this also will become a feature, the market is heading towards immense changes, volatility is again the major price maker in the end. For traders and investors it seems that changes in all sectors of the crude oil market will have to be assessed very soon and kept in their minds. The stability (relative) of the 1970-2000s is over, changes will be made but results are not always to be very positive.