IT’S ABOUT THE...
OIL, STUPID!
Sightings from The Catbird Seat
~ o ~
June 20, 2008
New offshore drilling not a quick fix, analysts say
Start-up delays, global market pressures cited
By Lisa Wangsness, Boston Globe Staff
President Bush and Republican presidential candidate John McCain have called this week for lifting a federal moratorium on offshore oil exploration, arguing that taking action to increase domestic oil supplies will help drive down prices.
But analysts say that renewed offshore drilling would have little impact on gas prices anytime soon.
It would take at least a decade for oil companies to obtain permits, procure equipment, and do the exploration necessary to get the oil out of the ground, most industry analysts say. And even then, they add, the amount of new oil produced would probably be too small to significantly affect world oil prices.
Some analysts point out that the wells the United States now depends on are being depleted, and that new exploration could at least help offset that decline in supply from existing wells.
Expanded offshore exploration also carries with it some environmental risks, from oil spills to destruction of habitat to vibrations that damage sea life, which environmentalists say could have catastrophic consequences that far outweigh any potential benefit from further offshore drilling. But other analysts say that improved technology means the risks are much smaller than a generation ago. In this view, a sensible compromise approach would be to make decisions on potential drilling sites on a case-by-case basis.
Americans' anger over $4-a-gallon gasoline apparently has prompted greater public support for renewed offshore drilling. A Gallup poll last month found that 57 percent of respondents favored such drilling while 41 percent were opposed. Democratic candidate Barack Obama supports the moratorium.
The debate over expanded oil exploration has always been polarizing - recall the ferocity of the fight over whether to drill in the Arctic National Wildlife Refuge - but some analysts are calling for a more moderate tone.
“Clearly, drilling is not the solution to our oil dependence, but any serious energy proposal has to be comprehensive and include more oil supply and production off the outer continental shelf," said Robbie Diamond, president and founder of Securing America's Future Energy, a nonpartisan group committed to reducing the nation's dependence on oil.
In the short term, oil prices could go down slightly if Congress lifts its moratorium on new offshore drilling, which has been in place since 1981, because the market would factor in the prospect of additional oil supplies later on. But the actual oil would not be produced for 10 to 12 years.
And in any case, increased American production from offshore drilling would not necessarily mean lower prices for American consumers because oil is a global commodity whose price is set by global supply and demand.
"Suppose the US produced all its oil domestically," said Robert Kaufmann, director of the Center for Energy and Environmental Studies at Boston University. "Do you think oil companies would sell oil to US consumers for one cent less than they could get from French consumers? No. Where oil comes from has no effect on price."
And there is not likely to be enough new American oil to make much of a difference, Kaufmann and others said. About 86 billion barrels of additional oil may lie offshore, according to the US government's Energy Information Administration. Of that amount, about 18 billion barrels are subject to the moratorium. Much of the rest lies in areas that are too expensive to exploit or that oil companies have not yet tapped for technical reasons, fueling the industry's desire for fresh territory.
"We're picking over bones," said Cathy Landry, a spokeswoman for the American Petroleum Institute. "If we had new acres, we could hypothetically make a big find. We need oil and natural gas in the future."
But in the best-case scenario, Kaufmann said, the United States could only produce an additional two to four million barrels of offshore oil a day - not enough to shift the global supply-demand balance in a world market that now consumes about 86 million barrels a day and is growing fast. About a quarter of that consumption now occurs in the United States.
Kaufmann said that by the time any additional offshore oil got to market, much of it would merely offset losses from the depletion of current oil fields. Meanwhile, oil producing nations can easily keep supply constant by limiting capacity if they know the United States is adding more.
"There's nothing on the supply side that we can really do to disrupt OPEC's ability to influence prices," he said.
Environmentalists argue that the pollution caused by drilling could compromise fragile ecosystems for very little economic benefit when the United States should be focusing on conservation - the cheapest barrel of oil, they like to say, is the one we don't have to buy - and developing better renewable energy sources.
They point to a number of environmental risks. Drilling fluids contain toxic chemicals. If oil is found, one of the waste products is briny water that also contains toxic chemicals. The noise from drilling could harm some sea animals, such as whales. And the oil would also have to be transported by pipeline or ship, creating its own environmental impacts. Then there is a risk of spills.
"Today we think offshore oil drilling could be the final straw in the unfolding collapse of New England fisheries," said Priscilla Brooks, director of the Ocean Conservation Project at the Conservation Law Foundation, which successfully fought a proposed drilling lease on Georges Bank in the late 1970s.
But Nancy Rabalais, executive director of the Louisiana Universities Marine Consortium and a scientist who has studied the effects of offshore oil production in the Gulf of Mexico, said that she believes expanding offshore oil exploration would not pose terrible risks to the environment because the effects are relatively contained, and the industry is well-regulated.
Henry Lee, who teaches energy policy at Harvard University's John F. Kennedy School of Government, said he believes there is a middle ground. There is no panacea, he said, for solving America's energy problems, so it may be best to lift the prohibitions on offshore drilling, and carefully consider the oil potential and possible environmental costs in different locations on a case-by-case basis.
"Each side, I think, is not being reasonable about this," he said. "I want to do the analysis and figure out what the implications are."
New offshore drilling not a quick fix, analysts say
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March 31, 2002
Simon has millions in oil stocks as California fights offshore drilling
DON THOMPSON, Associated Press
SACRAMENTO ---- As California battles the Bush administration over plans to drill for oil off the state's coast, Republican candidate for governor Bill Simon has millions of dollars invested in companies that would benefit if drilling is allowed.
If drilling starts, the companies in which Simon owns stock could gain drilling contracts, ship the oil pumped from beneath the sea and then sell that oil. As governor, Simon could end California's legal efforts to stop drilling.
A Los Angeles millionaire and former oil company vice president, Simon has said repeatedly he opposes additional drilling off California's coast, but has defended his vast investments.
"Just because you're against offshore drilling in certain areas doesn't mean you're against offshore drilling worldwide," Simon said in January.
But his extensive ties to offshore oil interests don't comfort drilling opponents.
"To have someone heavily invested in the oil industry overseeing California's coast is a little scary," said Carl Zichella, the Sierra Club's regional director. "If he waffles (on offshore drilling) at all, it will be to his political detriment."
The Bush administration wants a federal appeals court to allow drilling off San Luis Obispo, Santa Barbara and Ventura counties. Democratic Gov. Gray Davis used the courts to block attempts to build the first new oil platforms off California's coast since 1994, rejected settlement offers and has sworn he will take the case to the U.S. Supreme Court if necessary.
Simon has at least tens of thousands of dollars invested in companies with direct interests in the dispute, financial disclosure documents show, and owns millions more in companies that drill, sell and ship oil by tankers and pipelines.
For example, he owns up to $100,000 of SeaRiver Maritime Financial Holdings Inc., a subsidiary of Exxon Mobil Corp., which is one of the companies holding the 36 leases at issue in the federal drilling case. It also owns currently producing leases. A SeaRiver subsidiary, formerly Exxon Shipping Co., operated the Exxon Valdez that ran aground and spilled oil off Alaska in 1989.
Through family trusts, Simon owns up to $100,000 of stock in USX-Marathon, an Exxon Mobil partner, and Occidental Petroleum, a Shell partner. The trusts own between $4,000 and $20,000 worth of stock in Royal Dutch Petroleum/Shell Oil Co. and ChevronTexaco; both hold California offshore leases.
While Simon owns some oil stock, campaign strategist Jeff Flint said, Davis has accepted hundreds of thousands of dollars in campaign contributions from companies including ChevronTexaco and Occidental, including $176,000 last year alone.
Simon also owns hundreds of thousands of dollars of stock in Seacor Smit Inc., a Houston-based drilling and shipping company, and its former subsidiary, Chiles Offshore Inc., which specializes in offshore drilling.
U.S. Securities and Exchange Commission documents indicate that one-third of Chiles Offshore's business comes from Shell. Seacor Smit, meanwhile, established what its chairman called a "toehold" on the California coast last year when it bought a West Coast supply vessel.
SEC documents and the Simon campaign indicate that South Street Capital LLC, an investment firm controlled by the Simon family, sold about $4 million in Chiles stock last year. Simon declared no income from the stock sale in the financial disclosure report he filed with the Fair Political Practices Commission, but reported owning a maximum of $1 million invested by South Street in the company.
Campaign finance reports and Simon's disclosure forms show some offshore oil money may have gone to his campaign. He sold hundreds of thousands worth of energy stocks last year as he poured more than $4 million of his own money into his campaign. Meanwhile, Simon's siblings, who share in family trust profits, have given him at least $750,000.
Last year, Simon sold as much as $100,000 worth of stock in Diamond Offshore Drilling of Houston, which engaged in three drilling projects off California's coast in the 1980s....
His father, William E. Simon, was President Nixon's "energy czar" through the Arab oil embargo of the early 1970s before becoming treasury secretary. In 1988, Simon and his brother joined their father in William E. Simon & Sons, an investment firm with substantial holdings in the energy industry.
Corporate records from Florida, Louisiana and Mississippi show Simon was a vice president and director through the mid-1990s in Paramount Oil Co. of Baton Rouge, La., and Shore Oil Co. of Houston, oil and exploration companies that had extensive holdings in the Gulf of Mexico region.
Paramount merged into Shore, which later merged with a firm that eventually became 3TEC Energy. Simon sold up to $100,000 in 3TEC shares last year; family trusts own as much as $1 million in 3TEC stock.
Those companies drilled off the Gulf of Mexico coast, Flint said, so it's not "fair to tie Bill's investments" to California.
Oil, gas and other energy company executives have also donated thousands to Simon's campaign, state campaign finance records show.
They include $5,000 from Tesoro Petroleum, a Texas-based company active in offshore drilling, and $22,000 from people and firms connected to Alvin V. Shoemaker, former chairman of First Boston Corp. and a director of Shore Oil and Paramount. Occidental contributed $10,000.
Davis this month accused Simon of profiting from California's energy crisis through business dealings with El Paso Natural Gas, which regulators alleged helped drive up gas and electricity prices last summer.
A Simon family investment company owns between $10,000 and $100,000 in El Paso stock. Simon also sold as much as $100,000 worth of stock last year in 3TEC Energy Corp., 20 percent of which is owned by an investment arm of El Paso.
Simon is a major investor and former board member of Houston-based Hanover Compressor Co., which does business with companies such as El Paso and the bankrupt energy giant Enron.
Davis himself is defending his acceptance since 1996 of $119,500 in campaign funds from Enron.
Simon's charitable foundation also benefits from extensive oil and gas investments, primarily Hanover Compressor.
While Simon was a board member, Hampton joined Enron in a Venezuela-based partnership, SEC records show, before Enron's collapse. After Simon left the board, Hanover ran into Enron-style accounting problems this year over its involvement in the Hampton Roads gas project off the coast of Nigeria with California leaseholder Shell Oil Co.
Though the California Coastal Commission and the state attorney general also are parties to California's suit against the Bush administration, Simon if he became governor could use his legal and budgetary power to end the state's efforts.
"He could make it not just difficult ---- impossible" to continue, said Nathan Barankin, spokesman for Democratic Attorney General Bill Lockyer.
Eleven environmental groups have joined the state's suit, arguing that most Californians want to defend their world-famous coastline.
Simon agrees "there should not be any new exploration or drilling off the coast of California," Flint said. However, he said Simon has taken no position on what he would do with existing contracts such as are at stake in the California suit.
"He would have to take a look at it," Flint said.
For more, see: William Simon Says
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THE SEVEN SISTERS
The Catbird Seat - Part II: The Nests
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The Seven Sisters - From Diplomacy by Deception:. . .
Other countries had felt the lash of the petroleum industry as well. Mexico is a classic case of petroleum companies foreign policy-making ability which transcended national boundaries and cost American consumers a huge fortune. Oil, it seemed, was the foundation of a new economic order, with undisputed power in the hands of a few people hardly known outside of the petroleum industry.
The “majors” have been referred to a number of times. This is shorthand for the major oil companies that form the most successful cartel in the history of commerce.
Exxon (called Esso in Europe), Shell, BP (British Petroleum), Gulf, Texaco, Mobile and Socol-Chevron. Together they form part of a major network of interlocking, interfacing banks, insurance companies and brokerage houses controlled by the Committee of 300, which are hardly known outside their circle.
The reality of the One World Government, or New World Order upper level government, brooks no interference from anyone, no matter who it might be — even powerful national governments — the rulers of nations great and small, corporations or private people. These supranational giants have expertise and accounting methods that have flummoxed the best brains in government, out of whose reach they remain.
Through diplomacy by deception it seems the majors were able to induce governments to parcel out oil concessions to them, no matter who opposed it. John D. Rockefeller would very much have approved this closed shop, run for the last 68 years by Exxon and Shell. It is evident from the vastness and the complexity of their operations ... that the petroleum industry is one of the most powerful components that make up the economic operations of the Committee of 300.
In secret, the Seven Sisters club has plotted wars and decided amongst themselves which governments must bow to their depredations. When trouble arises ... it is only a matter of calling upon the right air force, navy, intelligence service to solve the problem and get rid of the “nuisance.” . . .
The Seven Sisters became a government within a government . . .
If one would like to know American and British foreign policies for Saudi Arabia, Iran or Iraq, one need only study the policies of BP, Exxon, Gulf Oil and ARAMCO.
What is our policy in Angola? It is to protect Gulf Oil properties in that country, even though it means supporting an avowed Marxist. . . .
Is any other group so exalted, so favored with showers of tax concessions that run into billions of dollars per annum? I am often asked why it is that the American domestic petroleum industry, once so bustling and full of promise, went into a steep decline. The answer, in one word, is GREED.
For this reason, domestic production of oil had to be curtailed, in case the public should ever discover what was going on. This knowledge is much more difficult to obtain when dealing with foreign operations. What does the American public know about what goes on in the oil politics of Saudi Arabia? Even while making record profits, the petroleum industry demands and gets additional tax breaks, both open — and hidden — from public view.
Have the citizens of the United States benefitted from the huge profits made by Exxon, Texaco, Chevron and Mobile (before it was sold)? The answer is no, because most of the profit was made “up-stream” — that is, outside of the United States, which is where the profits were kept, while the U.S. consumer paid ever-rising prices for gas at the pumps. . . .
Rockefeller’s main area of concern became Saudi Arabia. The oil companies, by various stratagems, had entrenched themselves with King Ibn Saud. The king, worried that Israel would one day threaten his country and strengthen the Israeli lobby in Washington, needed something that would give him an edge. The State Department, at the urging of the Rockefellers, said it could only follow a pro-Saudi polity without upsetting Israel by using Exxon (ARAMCO) as a front. This information was given to the Senate Foreign Relations Committee. It was so sensitive that committee staffers were not even allowed to see it.
Rockefeller had in fact paid only a small fee, $500,000, to secure a major oil concession from Ibn Saud. After considerable diplomacy, a deception was worked out — a deception which cost the American taxpayers at least $50 million in its first year.
What came out of the discussions between Exxon and Ibn Saud is known as “the Golden Gimmick” in the inner sanctums of the Rockefeller board rooms. The American oil companies agreed to pay a subsidy to the Saudi ruler of not less than $50 million a year, based on the amount of Saudi oil pumped. The State Department would then allow the American companies to declare such subsidy payments as “foreign income tax,” which Rockefeller, for example, could deduct from Exxon’s U.S. taxes.
With production of cheap Saudi oil soaring, so did the subsidy payments soar. This is one of the greatest scams perpetrated upon the American public. The bottom line of the plan was that huge foreign aid payments were made annually to the Saudis under the guise of “subsidies.” When the Israeli government uncovered the scheme, it too, demanded “subsidies” which today amount to $13 billion per annum — all at the expense of the American taxpayers.
Since the American consumer actually helps pay for cheaper imported crude oil than domestic crude oil, shouldn’t we benefit from this arrangement through cheaper gasoline prices at the pumps? . . . No way. Apart from geopolitical considerations, “the majors” are also guilty of price fixing. The cheap Arab oil for instance, was fixed at the higher domestic crude oil price when imported into the United States by a subterfuge known as “phantom freight rates.”
According to hard evidence presented to the Multi-national Hearings in 1975, the major oil companies ... made 70 percent of their profits abroad, profits which could not be taxed at the time. With the bulk of their profits coming from “up stream,” the petroleum industry was not about to make a major investment in the domestic oil industry. As a consequence, the domestic oil industry began to decline. Why spend money on the exploration and exploitation of domestic oil when it was theirs for the asking in Saudi Arabia— at a cheaper price than the local product and at a far bigger profit? The unsuspecting American consumer was and is being shafted, without knowing it. . . .
The immorality of this gross deception is that, had the big oil companies ... not been so greedy, they could have produced domestic oil which would have made our gasoline prices the cheapest in the world. In my opinion, the manner in which this diplomatic deception was set up between the State Dept and Saudi Arabia, makes the State Dept a partner to a criminal enterprise. . . .
The policies of the petroleum companies cost the American taxpayer billions of dollars in additional taxation and billions of dollars in excess profits at the pumps. The petroleum industry, and, in particular, Exxon, has no fear of the U.S. government. Thanks to the control exercised by the permanent upper-level parallel secret government of the Council on Foreign Relations, Rockefeller is untouchable. That enabled ARAMCO to sell oil to the French Navy at $0.95 per barrel, while at the same time the U.S. Navy was charged $1.23 per barrel....
See in The Catbird Seat - Part I: Dick Cheney; George Bush; George W. Bush, Jr; John D. Rockefeller
June 7, 2008
Oil price soars as US woes mount
The price of oil has made a record jump to nearly $139 a barrel, amid reports it could reach $150 by July because of rising demand and political tension.
Crude in New York gained more than $10 - its biggest-ever one-day rise.
The spike in oil prices coincided with a dollar slump, plummeting share prices on Wall Street and US unemployment suffering its biggest rise in 20 years.
It also comes as energy officials from the world's biggest consuming nations meet in Japan to discuss fuel prices.
Officials and ministers from the Group of Eight key industrialised nations (G8), as well as China, India and South Korea, are meeting for two days in the northern city of Aomori, to plot a strategy to deal with volatility in oil, gas and coal markets.
http://news.bbc.co.uk/2/hi/business/7440536.stm
June 16, 2008
Paulson, Darling Face `Stagflation'
Risk on Oil Price
By Simon Kennedy, Bloomberg
Finance ministers from the world's richest nations face another week of inflation headlines after signaling concern that the global economy risks a dose of stagflation as commodity prices soar.
Officials from the Group of Eight ended talks in Osaka, Japan, on June 14 by saying record fuel and food costs threaten to spur inflation. They also pose a ``serious challenge'' to growth, eclipsing the credit squeeze, the ministers said...
The G-8 officials didn't propose any new policies, apart from promising to take ``appropriate actions.'' They repeated their call of the past four years for producers to pump more crude and consumers to use it more efficiently...
`Strong Dollar'
The absence of central bankers meant there was no mention of currencies in their statement, although U.S. Treasury Secretary Henry Paulson backed a ``strong dollar.''
The ministers met after the price of oil doubled in a year to an unprecedented $139.12 a barrel on June 6. Costs of foods such as wheat and rice have set records this year....
``The predominant concern is the inflationary effect that oil in particular and also food prices are having,'' U.K. Chancellor of the Exchequer Alistair Darling said. Deputy German Finance Minister Thomas Mirow said oil's rise means ``an enormous withdrawal of purchasing power.''...
Expansion Falters
At the same time, the global expansion is faltering. The World Bank last week predicted growth of 2.7 percent this year, a percentage point less than in 2007. The G-8 officials said ``downside risks persist,'' citing declines in U.S. house prices and financial-market strains. Paulson said the cost of oil ``risks prolonging the U.S. economic downturn.''...
Financial Markets
The G-8 ministers also indicated they are less worried that tight credit poses an obstacle to growth than they were when they met in April, noting conditions in financial markets have improved....
The officials disagreed on what's propelling oil and told the IMF to study the topic. Paulson and Darling blamed constrained supply and robust demand, rebuffing Italian Finance Minister Giulio Tremonti's argument that speculation is behind it.
Ministers were also split over whether the dollar's 30 percent decline in trade-weighted terms since 2002 explains the surge in commodity costs. Lagarde and Russia's Alexei Kudrin suggested investors are buying oil and food as a hedge against the weaker dollar. Paulson said oil's gain had outpaced his currency's dive....
January 25, 2008
Activists call on Vanguard Group
to divest $200M
Out of Africa
Philadelphia Business Journal - by Jeff Blumenthal Staff Writer
Jim Remsen, executive director of the Darfur Alert Coalition, believes investments in Sudan are funding genocide. (View)
While state and city governments are considering reducing their investments in companies that do business with the government of Sudan, the investment management industry has largely rejected activist calls for divestment.
Locally, Malvern-based Vanguard Group, which has roughly $200 million invested in a Chinese company known to do business with Sudan, said it is frequently asked by clients to divest from stocks for a variety of reasons -- from environmental and social issues to humanitarian and political concerns -- but it has declined, citing fiduciary duty.
"We think we should manage the funds to produce the best returns for the investors," Vanguard spokeswoman Rebecca Cohen said. "We do offer a social index fund, but beyond that we are not required to make a decision on social or political concerns."
Twenty-two states have adopted legislation to divest their public pensions, and Pennsylvania's legislature is considering a couple of bills (see story on page 30). At the end of last year President Bush signed into law the Sudan Accountability and Divestment Act, which protects states and investment firms from being sued by investors if they divest from companies with connections to the government of Sudan and also prohibits federal contracts with such companies.
Three of Vanguard's funds have investments in PetroChina, an oil company owned largely by the Chinese government which has been targeted by activists as the largest of four international oil companies doing business with the Sudanese government. The others are Sinopec of China, ONGC of India and Petronas of Malaysia.
Activists allege that the majority of oil revenue gained from these companies is used to fund the Sudanese government and militia's actions against non-Arab ethic groups in the Darfur region of the country, where it is estimated that as many as 400,000 people, mostly civilians, have been killed and roughly 2.5 million have fled to neighboring Chad.
Other local mutual fund companies touched by the issue are Oaks-based SEI Investments, which serves as the distributor for the iShares fund run by Barclays [Committee of 300], and Great Britain-based Aberdeen Asset Management, which has its U.S. headquarters in Center City. Both iShares and Aberdeen have significant investments in PetroChina. Several colleges, including the University of Pennsylvania, have divested.
Mutual fund companies are being targeted by divestment activists because they hold the retirement savings for millions of Americans. One of those people was Eric Cohen, who had his savings at Boston-based Fidelity Investments.
Now executive director of Investors Against Genocide in Lexington, Mass., he began to push the Massachusetts state government to divest from companies with Darfur connections in September 2006. He noticed Fidelity was the largest holder of PetroChina stock on the New York Stock Exchange.
"It raised the question of what happens with that money," he said. "It turns out that my family savings were invested in genocide."
Eric Cohen looked more broadly at the investment management industry and found that all of the major mutual fund companies were invested in PetroChina. He began engaging the companies, but found the industry's response disappointing.
"They have basically said it's their job to make money and not break laws and as long as they do that, they are not changing their position," he said.
Vanguard manages nearly $1.3 trillion in U.S. mutual fund assets, including more than $350 billion in retirement plans sponsored by employers....
Vanguard officials said they have not received many calls from clients about their connections to Darfur or wishing to move their investments to the social index fund -- which consists of investments based on social and humanitarian concerns -- or leave Vanguard all together.
"It really has been a handful proportionally," Rebecca Cohen said. "Especially when you consider how many investors we have."
For more, GO TO > > > Behind the Blinds at Fidelity Investments; The Great Nest Egg Robberies; Marsh & McLennan: The Marsh Birds; Vultures Caught in the Health Net; Vultures in The Vanguard
September 16, 2007
Alan Greenspan claims Iraq
war was really for oil
Graham Paterson, The Sunday Times
Greenspan on the 'irresponsible' Bush
AMERICA’s elder statesman of finance, Alan Greenspan, has shaken the White House by declaring that the prime motive for the war in Iraq was oil.
In his long-awaited memoir, to be published tomorrow, Greenspan, a Republican whose 18-year tenure as head of the US Federal Reserve was widely admired, will also deliver a stinging critique of President George W Bush’s economic policies.
However, it is his view on the motive for the 2003 Iraq invasion that is likely to provoke the most controversy. “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil,” he says.
Greenspan, 81, is understood to believe that Saddam Hussein posed a threat to the security of oil supplies in the Middle East.
Britain and America have always insisted the war had nothing to do with oil. Bush said the aim was to disarm Iraq of weapons of mass destruction and end Saddam’s support for terrorism.
http://www.timesonline.co.uk/tol/news/world/article2461214.ece
May 12, 2007
Billions in Oil Missing in Iraq,
U.S. Study Says
By AMES GLANZ, New York Times
Between 100,000 and 300,000 barrels a day of Iraq’s declared oil production over the past four years is unaccounted for and could have been siphoned off through corruption or smuggling, according to a draft American government report.
Using an average of $50 a barrel, the report said the discrepancy was valued at $5 million to $15 million daily.
The report does not give a final conclusion on what happened to the missing fraction of the roughly two million barrels pumped by Iraq each day, but the findings are sure to reinforce longstanding suspicions that smugglers, insurgents and corrupt officials control significant parts of the country’s oil industry.
The report also covered alternative explanations for the billions of dollars worth of discrepancies, including the possibility that Iraq has been consistently overstating its oil production.
Iraq and the State Department, which reports the numbers, have been under relentless pressure to show tangible progress in Iraq by raising production levels, which have languished well below the United States goal of three million barrels a day. Virtually the entire economy of Iraq is dependent on oil revenues.
The draft report, expected to be released within the next week, was prepared by the United States Government Accountability Office with the help of government energy analysts, and was provided to The New York Times by a separate government office that received a review copy. The accountability office declined to provide a copy or to discuss the draft.
Paul Anderson, a spokesman for the office, said only that “we don’t discuss draft reports.”
But a State Department official who works on energy issues said that there were several possible explanations for the discrepancy, including the loss of oil through sabotage of pipelines and inaccurate reporting of production in southern Iraq, where engineers may not properly account for water that is pumped along with oil in the fields there.
“It could also be theft,” the official said, with suspicion falling primarily on Shiite militias in the south. “Crude oil is not as lucrative in the region as refined products, but we’re not ruling that out either.”...
Several analysts outside the government agreed that such a large discrepancy indicated that there was either a major smuggling operation in place or that Iraq was incapable to generate accurate production figures.
“That’s a staggering amount of oil to lose every month,” said Philip K. Verleger Jr., an independent economist and oil expert. “But given everything else that’s been written about Iraq, it’s not a surprise.”
Mr. Verleger added that if the oil was being smuggled out of Iraq, there would be a ready market for it, particularly in smaller refineries not controlled by large Western companies in places like China, the Caribbean and even small European countries.
The report also contains the most comprehensive assessment yet of the billions of dollars the United States and Iraq spent on rebuilding the oil and electricity infrastructure, which is falling further and further behind its performance goals.
Adding together both civilian and military financing, the report concludes that the United States has spent $5.1 billion of the $7.4 billion in American taxpayer money set aside to rebuild the Iraqi electricity and oil sectors. The United States has also spent $3.8 billion of Iraqi money on those sectors, the report says.
Despite those enormous expenditures, the performance is far short of official goals, and in some cases seems to be declining further. The average output of Iraq’s national electricity grid in 2006, for example, was 4,300 megawatts, about equal to its value before the 2003 invasion. By February of this year, the figure had fallen still further, to 3,800 megawatts, the report says.
All of those figures are far short of the longstanding American goal for Iraq: 6,000 megawatts. Even more dispiriting for Iraqis, by February the grid provided power for an average of only 5.1 hours a day in Baghdad and 8.6 hours nationwide. Both of those figures are also down from last year.
The story is similar for the oil sector, where — even if the Iraqi numbers are correct — neither exports nor production have met American goals and have also declined since last year, the report says.
American reconstruction officials have continued to promote what they describe as successes in the rebuilding program, while saying that problems with security have prevented the program from achieving all of its goals. But federal oversight officials have frequently reported that the program has also suffered from inadequate oversight, poor contracting practices, graft, ineffective management and disastrous initial planning.
The discrepancies in the Iraqi oil figures are broadly reminiscent of the ones that turned up when some of the same energy department experts examined Iraq’s oil infrastructure in the wake of the oil-for-food scandals of the Saddam Hussein era. In a United Nations-sponsored program that was supposed to trade Iraq’s oil for food, Mr. Hussein and other smugglers were handsomely profiting from the program, investigations determined.
In reports to Congress before the 2003 invasion that ousted Mr. Hussein, the accountability office, using techniques similar to those called into play in its most recent report, determined that in early 2002, for example, 325,000 to 480,000 barrels of crude oil a day were being smuggled out of Iraq, the majority through a pipeline to Syria.
But substantial amounts also left Iraq through Jordan and Turkey, and by ship in the Persian Gulf, routes that could also be available today, said Robert Ebel, a senior adviser at the Center for Strategic and International Studies in Washington.
“Any number of adjacent countries would be glad to have it if they could make some money,” Mr. Ebel said.
Mr. Ebel said the lack of modern metering equipment, or measuring devices, at Iraq’s wellheads made it especially difficult to track smuggling there. The State Department official agreed that there were no meters at the wellheads, but said that Iraq’s Oil Ministry had signed a contract with Shell Oil to study the possibility of putting in the meters.
The official added that an American-financed project to install meters on Iraq’s main oil platform in the Persian Gulf was scheduled to be completed this month.
As sizable as a discrepancy of as much as 300,000 barrels a day would be in most parts of the world, some analysts said it could be expected in a country with such a long, ingrained history of corruption.
“It would be surprising if it was not the case,” said John Pike, director of GlobalSecurity.org, which closely follows security and economic issues in Iraq. He added, “How could the oil sector be the exception?”
April 7, 2007
Occidental CEO got more than
$400 million in 2006
CHICAGO (Reuters) - Occidental Petroleum Corp.'s chairman and chief executive took in more than $400 million in compensation last year, the company said in a filing, one of the biggest single-year payouts in U.S. corporate history.
The largest part of Ray Irani's 2006 payout was $270.2 million from the exercise of options awarded from 1997 to 2006, representing more than 7.1 million shares, according to the company's annual proxy statement, which was filed with the Securities and Exchange Commission in March.
Irani also received $93.3 million in stock and dividends from a deferred stock program when the company closed the plan in October due to increases in liability and expenses for the program, the company said.
Irani's salary in 2006 was $1.3 million and his cash bonus was $1.4 million, according to the filing. But stock and option awards and other benefits lifted his 2006 compensation to $55.6 million, the proxy said.
In the proxy, the company said that from December 1990 -- when Irani succeeded Armand Hammer as chief executive -- through 2005, the company's stock rose to about $40 a share from $9 and its total shareholder return was 699 percent.
"When you look at this, this is solid pay for performance," said Richard Kline, an Occidental spokesman. "It serves the best interest of the corporation and the best interest of the shareholder."
Occidental shares closed on Thursday at $49.95 on the New York Stock Exchange.
According to the Wall Street Journal, only a few CEOs have ever made more money in one year. In 2001, Oracle Corp. CEO Larry Ellison received $706 million from exercising stock options and in 1998, former Walt Disney Co. CEO Michael Eisner received $570 million, according to the newspaper.
December 15, 2006
Iraqi Unions Attack
Oil Privatization
United Press International is reporting: "Five Iraqi trade union federations have condemned federal oil law negotiations for being too corporation-friendly."
The wire service quoted Hasan Jum'a, president of the Federation of Oil Unions, as saying: "This law has a lot of problems. It was prepared without consulting Iraqi experts, Iraqi civil society or trade unions."
http://www.washingtontimes.com/upi/20061214-042209-6267r.htm
Dow Jones reports: "Iraqi trade unionists criticized the major role for foreign companies in the draft law, which specifies that up to two-thirds of Iraq's known reserves would be developed by multinationals, under contracts lasting 15 to 20 years. The negotiations for a new Iraq hydrocarbon law continued this week with the circulation of a draft law that recommends the government sign production sharing agreements and other service and buyback contracts."
info@platformlondon.org, http://www.carbonweb.org/iraq
Muttitt met with Iraqi union leaders while in Amman this week and has just returned to London. He is lead researcher at the British group Platform and primary author of the report "Crude Designs: The Rip-Off of Iraq's Oil Wealth," which outlines the structure of production sharing agreements.
Muttitt said today: "The opposition by Iraq's powerful trade unions will dismay the U.S. government, which is keen to see the law in place by the end of the year. Since the summer, U.S. officials have been calling for an oil law to encourage foreign investment in Iraq's oil -- a call reiterated by the Baker-Hamilton Iraq Study Group in its report last week. ...
"In a joint statement, the trade unions rejected 'the handing of control over oil to foreign companies, whose aim is to make big profits at the expense of the Iraqi people, and to rob the national wealth, according to long-term, unfair contracts that undermine the sovereignty of the state and the dignity of the Iraqi people.' The statement added that this was a 'red line' they would not allow to be crossed."
SAMEER DOSSANI, sameer@50years.org, http://50years.org Director of 50 Years Is Enough,
Dossani said today: "In announcing its agenda for the privatization of Iraqi oil, the Baker-Hamilton report leaves no doubts as to what the U.S. must achieve in order to call its mission successful. It is an agenda laid out by U.S. corporate interests, by what will benefit their bottom line in a world of shrinking oil reserves.
“By these terms, what President Bush and others are calling a U.S. victory would be a defeat for the Iraqi people who have struggled for decades to control their own fates, their own destinies and their own resources."
"The institutions that the report suggests should enforce these policies are the same institutions that are in charge of ensuring that corporate profits take priority over public need in the rest of the world, namely, the International Monetary Fund and the World Bank."
For background see "Iraq War and Oil," Institute for Public Accuracy news release, at: http://accuracy.org/newsrelease.php?articleId=1406
December 14, 2006
5 oil and gas companies
to pay royalties
By H. Josef Hebert, Associated Press Writer
WASHINGTON --Five oil and gas companies, including Shell, ConocoPhillips and BP, have agreed to pay royalties on future production under flawed drilling leases in the Gulf of Mexico, the government said Thursday.
The companies are among 59 energy producers that hold the leases at issue from 1998 and 1999. Because of a government mistake, the leaseholders have avoided royalty payments on oil and gas taken from federal waters. The leases omitted language requiring royalties when prices reached a certain level.
The agreements with the five companies are "a step in the right direction" and may lead others to find a way to rework the flawed leases, said the Interior Department's assistant secretary, Stephen Allred.
