The tiny Irish stock on the brink of landing 'the first' post-sanction oil deal in Iraq. Ref 'Fleet Street Letter' 12-04-04..

I was actually pondering whether or not one would be better off investing in the likes of Petrofac who supply drilling equipment and the like. The analogy I draw is with the suppliers of the picks and shovels and tents etc to the gold rush prospectors to California and Yukon ..... They may not have made ther bucket-loads of the few who struck it lucky, but they sure made more than their share

Nothing wrong with that theory, Cynic - plenty of the gurus like it, and it makes a lot of sense. Being a greedy sort with a ruinous gambling streak, I like my E&P co's undiluted, but even there I seek to mitigate my risks by predominantly picking those with production on the horizon. Or something. PET is one of those that's always at the centre of speculation; right now the market is still so queasy when it comes to digesting good news that I wonder if one could possibly afford to wait for the RNS that says "We've struck oil in Saddam's back garden" and then buy in.

I don't need to wax on at great length. Didn't the last Shares mag carry a recommendation along the picks 'n' shovels line?

Cynic,

Yes a good analogy re the gold rush.
I liken it to medium blue stock type shares (the suppliers of the picks shovels etc), and the high risk, high reward lot (pet and the others prospectors).
Pet is hopefully our gold rush big winner, and I hope it does not pan out (an old Klondike saying).
A well balanced portfolio is the key as I am sure we all agree.

NICE RISE BOYS!

This does look very risky still. It is trying to do business in a country that is on the brink of civil war and is unlikely to be peaceful for many years yet. No wonder it is in a long term down trend.

brink of civil war ? it alread is civil war. dont listen to politicians..... they arent exactly going to admit civil was is happening are they ? Every definition of civil apparent in Iraq..... civil is happening.. has been for a while.

Fusebox,
Agreed. The thing is, wherever there are wars, especially civil wars, there are area's of the country that are relatively calm, either due to certain area's of no strategic importance, or as in several main oil field locations, one side or the other have total control.
If you relate Iraq to the Balkans during there ethnic cleansing (a bit like Rwanda, although according to most western governments until many thousands were ethically cleansed, it was not happening either) there were several parts of the country where life (business) went on without much interruption.
Iraq is almost a north south divide.
PET as often said being none coalition country linked, and trying it's best to employ locals whenever possible do have an advantage over many such companies.
Of course the risks are still great, but if you look at the figures for last week, there was more internal violence than over any time in the last year, but oil flow was also at it's highest level.

From The Wall Street Journal

Iraq Lifts Oil Output in South
By Chip Cummins in Basra, Iraq, and Hassan Hafidh in Amman, Jordan

Iraqi engineers have significantly lifted crude-oil output capacity in the country's southern fields, delivering a short-term shot in the arm to Baghdad's new government and underscoring its oil supply's vast geologic potential despite increasing sectarian violence and insurgency.
End of extract.

This does prove a point. The oil must flow, and the authorities will make sure it does, no matter what.

nice tick up...looking good + AGM tomorrow

AGM, statement out. Nothing of new substance, re further contracts, but the updates look very good.
We now have a fairly good time scale for present and future developments.
I would think the presentation for tomorrow will expand on the detail.

What is the poistion of PET now can any one help

It will be a few months before the Hydrocarbon law is passed, then PSAs will be ratified and another 12 to 18 months before a single barrel of oil is extracted. You are looking at 2 years minimum, possibly longer if the continuing unrest in the region destroys the infrastructure.

This is a long term play if you expect Pet to be the next Cairn. However, if the PSAs are ratified this year, then you can expect the SP to rise significantly. Highly speculative but can be very rewarding. Good luck.

Ticking up nicely on small volume.
2517

'Hi all' Did'nt quite make 435! did a nice run up to 160 back in oct 04
.
I'm up and running again after having part of my internal bits removed, the big 'C' don't you know...

Mike........

CHARTIST2004....best of luck to you.hope your feeling fine now...PET will cheer you up soon

A very interesting article re the Middle East troubles.
As Pet is not mentioned I have put the link for those who want it. It is a very frightening well written piece, which unfortunately gives (the way I read it) no hope.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060731/OPINION03/607310301/1020

BAGHDAD, Aug 2 (Reuters) - Iraq is expected to start talks with major companies in two months to develop its oilfields and some are eager to begin work even before a hydrocarbon law is in place, its oil minister said on Wednesday.

Some companies said they were ready to work before the hydrocarbon law is approved. Shahristani said fields chosen from each part of Iraq will be offered to foreign companies.

"Our plan is to begin in one important field from each part of Iraq, one in the north, south, west, central and Kurdistan," he said.
END OF EXTRACT.

For full article see link.
http://www.alertnet.org/thenews/newsdesk/GEO247098.htm

My comment.
Although not mentioned, I would think that as PET are already fairly well established in Iraq, and having a head start on many if not all of the Majors, they will either benefit directly, or indirectly by perhaps piggybacking of those said Majors.
Lets hope corruption (the majors can offer bigger bribes) does not get in the way too much.

http://news.bbc.co.uk/1/hi/uk/5240808.stm

Civil war is a more likely outcome in Iraq than democracy, Britain's outgoing ambassador in Baghdad has warned Tony Blair in a confidential memo

Civil war, although obviously bad for the Iraq people is not necessarily going to make violence around the oil fields worse.
In many areas of past civil wars (Bosnia for example) there were many areas that were relatively peaceful.
At the moment even in so called calm areas of Iraq there is unrest with localized insurgency.
A full blown civil war can bring the main body of the waring factions to areas where the main demarcation lines are drawn up.
Also the security services (not the Iraq army as they will be divided to some extent along ethnic lines) can concentrate more on the vital installations such as the oil infrastructure. The waring factions will be too busy trying to kill each other to bother with the security forces to the extent they do now.
Obviously I do not condone war of any kind if avoidable, but sometimes a civil war clears the air so to speak. Again look at Yugoslavia that was. It is a far more peaceful area now than in the couple of years proceeding their civil war.
Iraq has been at war within itself for months, just not officially.
My comments, blunt but I feel true may sound blasbut facts speak for themselves.
Obviously these are my opinions only.

This might be a long article by David Horgan but it is well worth the read.

I have lifted it from Interactive's bb with acknowledgement to "fatgreek".

It is a clinical and unemotional analysis of the Middle East situation.

David Horgan is wasted in business. He should be in politics.

We could do with rational clear thinking like that in the Middle East to replace the Bush/Blair supported gunslingers that shoot from the lip - only to apologise after killing innocent civilians. And that comment applies to both sides of the conflicts.

Now I understand why PET has developed such a powerful business position in Iraq and Jordan.

The oily one


Oil squeeze could cause recession

06 August 2006 By David Horgan
The world economy has taken $70-a-barrel oil in its stride.

The world economy has taken $70-a-barrel oil in its stride.

But with surging commodities reflected in rising interest rates, will geopolitics de-rail the boom?

The world has no genuinely surplus capacity in oil production, refining, tankers or skilled people. Any major supply interruption, from Venezuela to Arabia, will spike energy costs.

Eighty per cent of remaining oil and gas lies in a narrow axis from western Siberia to Arabia.

Policy mistakes in the Middle East could spook markets by triggering another oil supply crunch, as in 1979 when the Shah fell. Then Iran produced 15 per cent of the worlds oil.

Today it is 5 per cent, of which only 3 per cent is exported.

But now Iran is also a major gas exporter and could temporarily shut the straits of Hormuz, through which 25 per cent of traded oil flows.

The Bush administrations policy has led to delays in the construction of Iranian gas export pipelines to India, and eventually China and Europe.

This exacerbates the oil supply squeeze, since gas partially substitutes oil.

We have smoothly absorbed a tripling of the oil price since 2002 - but supply disruption would be more damaging than increased price. The danger of shortage itself creates shortages, as users and speculators inventory.

A major risk premium is nowa permanent feature of energy costs. Gold and safer investments such as bonds will rise and energy-intensive stocks will fall.

Risk perceptions will rise, as players evaluate the small chance of nuclear catastrophe and the irony that it is over-reaction to the limited terrorist threat that exacerbates instability.

There may be a temporary dollar rally as it rediscovers its safe haven status.

But the long-term drift to the euro will strengthen.

Lebanon, Israel and the Arabs have locked themselves into a negative loop: the grievances and excesses of one provoke the other.

Israel is the regional superpower, with uncritical US backing. But demographics are in favour of Arabs: already there are slightly more Arabs than Jews in Israel/Palestine.

For a generation, Israelis can establish barriers, Bantustans and effective apartheid - justified by security needs, but as South Africa learnt, such policies are incompatible with prosperity and a free society.

Eventually, there will be a multi-ethnic, multi-religious state in the Levant. For Israel, the writing is on the wall.

Military and politicians are slow to understand longer-term trends that seem obvious to business people. Israels high command didnt want to withdraw from Lebanon in 2000 and were anxious for a rematch.

Israels assault on Lebanon is not motivated by the captured soldiers. They could easily be swapped, as so often before. The attacks are designed to degrade Hezbollah, in preparation for a US attack on Iran. The Iranians also know an attack is likely, and have prepared for reprisals with rockets in Lebanon.

But strategic bombing of infrastructure will not intimidate the Lebanese anymore than Israels 18-year occupation. Last month I was amazed to hear wealthy Beirut Christians praising Hezbollahs guts and patriotism - as surprising as Ian Paisley praising the IRA.

Hezbollah is an organic part of Lebanese society, with extensive non-military activities.

The most that can be achieved is to degrade them temporarily.

The actors cannot be defeated.

Attacks on Lebanon, Gaza and Galilee will achieve little.

We need to make the vicious circle virtuous. We need to cut a deal with the major players, especially Iran.

Sabre-rattling by either side seems irrational - but they are driven by ideology and domestic politics. Wild rhetoric is not meant to be taken seriously.

Iran is not proven to be doing anything illegal: they are entitled to develop nuclear power, as was the Shah in the 1970s. Yet, why would the country with the worlds second largest gas and oil reserves - besides solar and hydro potential - need nuclear power when it has low per capita energy consumption, exploration upside and continues to flare gas?

This question wasnt asked of the Shah when Iran was an even bigger energy player.

The western military are sensibly wary because they realise the high risk of failure.

But neocons are trying to provoke a crisis. There are no practical military options. The trouble with bombing is that you wont destroy targets unless you bomb repeatedly.

Theyll miss buried or camouflaged sites. So theyll have to target big, visible structures like infrastructure. Even if they destroy buried facilities, the attackers wouldnt know that they had.

So repeated, intensive strikes would result. The 1991 Iraqi experience wont be repeated, since Saddams Osirak operation was an advertised, vulnerable nuclear reactor - which is hard to repair because of micro-fractures.

Israel could only carry out an Osirak-style raid and not heavy, repeated attacks. Irans facilities are buried and dispersed and the critical element of surprise is absent.

A land invasion is impractical for reasons of geography and population. Iran is a large, mountainous country with 70 million people, of which 12 million live in Tehran.

Unlike Iraqis or Afghanis, they are not easily divided: 98 per cent of the population are Muslim, overwhelmingly Shia.

Most ethnic minorities have cordial relations with Tehran.

Half the people are under 15.

Their desire for international fashions and reform makes them seem open to western pressure. But young people and women voted disproportionately for the new hardline president, who plays to Persian nationalism.

The cult of martyrdom is an important part of Shia tradition.

Iranians remember the 1953 coup when the CIA toppled Irans elected president and installed the brutal Shah, as well as US sanctions and support for Saddams bloody invasion in the 1980s.

You make peace with enemies, not friends. Never humiliate an opponent nor squeeze him into a corner unless he is powerless and there is no alternative. Negotiation is a rational dance of concession and counter-concession. Trust is hard to build and easily undermined.

It is dangerous to act without thinking through the consequences, particularly when signals may be misunderstood by persons from different backgrounds.

Hostile rhetoric has the opposite effect of that intended: encouraging Iran to divert resources to defence rather than developing their economy and providing jobs. We should support positive reformers.

I have travelled extensively throughout Iran in recent years and have seen the gradual process of reform. In the sophisticated cities women probably play a greater role in the public service and middle management than they do in Ireland.

In remote villages women are clad in black and play a minimal role in business.

The stakes are high. Some of the largest oil exporters, from Saudi Arabia to Russia, are now alienated from Anglo-American policy. They must be tempted to reduce output to pressure Washington. If that were to happen, a global recession in 2007 would result.

David Horgan is managing director of Petrel and chief executive of Pan Andean Resources.