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Iraqi oil deals headed to court
Published: Jan. 25, 2010 at 11:29 AM
Share BAGHDAD, Jan. 25 (UPI) -- A deal struck with the Iraqi government, BP and the China National Petroleum Corp. violates the terms of the Iraqi Constitution, a Shiite lawmaker said.

BP and CNPC became the first companies to land long-term oil contracts in postwar Iraq during a June auction for the 17 billion-barrel Rumalia oil field, signing off on the agreement in November.

Security kept most investors away during June auctions, but a second round in December prompted Baghdad to express optimism for its emerging oil sector.

Shatha al-Musawi, a member of the Iraqi Parliament, complains that any deal between Baghdad and foreign oil companies may be illegal without the consent of lawmakers, London's Telegraph newspaper reports.

Italian energy giant Eni and its consortium partners announced Friday they signed an agreement to redevelop the Zubair oil field in southern Iraq. Musawi's complaint filed against the Iraqi premier and the oil minister could derail all of the contracts doled out to international oil companies in 2009, including contracts with Russia's Gazprom and LUKoil as well as Exxon Mobil.

BP officials said they are "aware of the case," noting it is a matter of internal affairs, the newspaper said.

Court proceedings on the case begin Feb. 1.

Heritage shareholders back $1.5bn Uganda sale
Date: Tuesday 26 Jan 2010


Heritage Oil shareholders have approved the sale of the companys 50% stake in Blocks 1 and 3A in Uganda to either Tullow Oil or Italys Eni.

Eni agreed in November to buy Heritages Ugandan interests for $1.35bn in cash and a deferred consideration of $150m.

But Tullow Oil gatecrashed the deal last week, exercising a pre-emption right to snap up the holding for the same price.

The principal outstanding condition to the sale of the disposed assets is the formal approval by the Ugandan government who will decide, in their role as final arbiter, which of the proposed purchasers to accept, read a statement from Heritage.

The company said it will apply for formal approval as soon as possible and expects the transaction to complete in the first quarter.

These results prove the overwhelming support for this transaction and the board's strategy, said boss Tony Buckingham.

Ratification of the deal may not be clear cut though as there have been reports of concerns that Tullow is controlling too much of the countrys oil reserves.

Cairn India Net Beats Estimates on Higher Crude Oil Output By Rakteem Katakey

Jan. 28 (Bloomberg) -- Cairn India Ltd., operator of the nations biggest onshore crude oil field, reported a 23 percent increase in third-quarter profit, beating estimates, after boosting production.

Net income, including that of units, was 2.91 billion rupees ($63 million) in the three months ended Dec. 31 compared with 2.36 billion rupees a year earlier, the explorer based in Gurgaon near New Delhi said in an e-mailed statement today. The median estimate of 17 analysts surveyed by Bloomberg was a profit of 2.13 billion rupees.

Cairn Indias Rajasthan field, which started in August, is expected to account for 20 percent of Indias current output when production peaks by 2011. The explorer benefits from selling crude at near-market prices, unlike state-run rivals Oil & Natural Gas Corp. and Oil India Ltd., which give discounts to refiners to help curb inflation.

The start of production from the Rajasthan field is driving profits, said Rohit Nagraj, a Mumbai-based analyst with Prabhudas Lilladher Pvt. Crude prices have increased and that pushes up profits.

Shares of Cairn India rose 1.2 percent to 270.65 rupees in Mumbai trading. The stock has advanced 57 percent in the past year compared with a 76 percent increase in the benchmark Sensitive Index. The earnings were announced after the market closed.

Sales more than doubled to 4.95 billion rupees. The explorers production increased 48 percent to the equivalent of 24,599 barrels of oil a day in the quarter. Output at the Mangala field in Rajasthan was an average 15,430 barrels a day, according to the statement.

Rajasthan Output

Cairn India, a unit of U.K.-based Cairn Energy Plc, may produce 2.4 million metric tons of crude oil, or 48,000 barrels a day, from the field in Rajasthan in the year ending March and more than double output to 6.8 million tons the following year, the oil ministry said in November. India produced 33.5 million tons of crude oil in the year ended March 2009.

Cairn India sells oil from the Rajasthan field to Mangalore Refinery & Petrochemicals Ltd. and Reliance Industries Ltd., operator of the worlds largest refining complex.

The company sold oil and gas at $66.90 a barrel in the quarter compared with $47.10 a barrel a year earlier. The price at which Cairn Indias oil is sold represents an average 10 to 15 percent discount to Brent crude for the 12 months to December, the company said.

Crude oil prices in New York increased 76 percent in the past year as demand rose with economies emerging from a recession. Prices rose 12 percent in the three months ended Dec. 31 compared with a 56 percent decline a year earlier.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net.

Last Updated: January 28, 2010 05:48 EST

Oil hovers below $74 as traders eye dollar, stocks
Associated Press Writer Alex Kennedy, Associated Press Writer Fri Jan 29, 12:14 am ET
SINGAPORE Oil prices hovered near a six-week low below $74 a barrel Friday in Asia amid a strengthening U.S. dollar and a pullback in global stock markets.

Benchmark crude for March delivery was up 10 cents to $73.74 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 3 cents to settle at $73.64 on Thursday, the lowest since Dec. 14 when crude dropped to $73.46.

Oil has skidded about 12 percent since reaching $84 a barrel earlier this month as investors eye a stronger dollar and slumping equities. Traders often buy commodities such as oil as a hedge against inflation and a weaker dollar and sell them when the U.S. currency rises.

The euro fell to $1.3930 on Friday in Asia from $1.3972 on Thursday while the dollar little changed near 90 yen.

The Dow Jones industrial average fell 1.1 percent Thursday while most Asian stock markets fell in early Friday trading.

Investors are also looking at U.S. crude demand, which has so far not rebounded strongly from a slide last year.

"A clear turning point in the U.S. demand cycle is yet to be reached, still waiting for distillate demand to kick in," Barclays Capital said in a report.

In other Nymex trading in February contracts, heating oil rose 0.47 cent to $1.92 a gallon, while gasoline gained 0.90 cent to $1.93 a gallon.

In London, Brent crude for March delivery rose 11 cents to $72.24 a barrel on the ICE Futures exchange.

Energy prices fall so far in 2010

NEW YORK For the past several months, oil prices have soared on the expectation that China would soon lead a new race for natural resources.

But government data released so far this year has told a different story, and oil has tumbled nearly $10 a barrel in the first month of 2010.

Americans are burning less gasoline than they did a year ago, according to a report this week from the Energy Information Administration. The EIA says the country's appetite for petroleum products has dropped every week this month. And while China should expand petroleum consumption this year, a decision to rein in risky bank loans and cool down its economy may curb China's energy appetite.

"What's been driving oil prices is the promise of Chinese economic growth," said Phil Flynn, an analyst with PFGBest. "But its demand numbers are very suspect right now."

All of this means consumers could enjoy cheaper gasoline and lower heating bills, though it usually takes an extended turn in energy futures prices for the discount to trickle down to the retail level.

Since the start of the year, benchmark crude prices have sunk 11 percent. The contract for March delivery gave up another 75 cents Friday to settle at $72.89 a barrel on the New York Mercantile Exchange.

Other energy prices have also slumped in January. Heating oil and natural gas prices have fallen 13 percent each this year, while gasoline futures dropped 10 percent.

Prices continued falling Friday even after the Commerce Department reported a 5.7 percent annual growth rate in the fourth quarter, the fastest pace since 2003.

The expansion, which was driven by rising exports and business spending on equipment and software, may suggest that an increase in energy consumption is around the corner. But analysts said investors need to see more concrete evidence that it's going to happen.

"This could be more of a warning signal," Michael Lynch, president of Strategic Energy & Economic Research, said of the EIA report. The economic growth rate is expected to cool later this year, Lynch said, and "it's scary to think where oil demand will be then."

The dollar also strengthened for a fourth straight day as financial troubles in Greece, Spain, Portugal and Ireland pushed the euro lower. Crude, priced in U.S. currency, tends to fall as the dollar rises and makes oil barrels more expensive to buy for investors holding foreign currency.

At the pump, retail gasoline prices continued to slide as well, giving up a half penny overnight to a new national average of $2.685 a gallon, according to AAA, Wright Express and Oil Price Information Service. Gasoline has been falling for more than two weeks, but a gallon of regular unleaded is still 6.2 cents more expensive than it was a month ago and 84.2 cents higher than the same time last year.

In other Nymex trading in February contracts, heating oil fell 1.62 cents to settle at $1.9029 a gallon and gasoline lost 1.43 cents to settle at $1.9031 a gallon. The March contract for natural gas fell less than a penny to settle at $5.131 per 1,000 cubic feet.

In London, Brent crude for March delivery dropped 67 cents to settle at $71.46 a barrel on the ICE Futures exchange.

Nigerian oil militants warn ceasefire in jeopardy
Jan 29, 2010, 12:55 GMT


Nairobi/Abuja - Nigeria's main militant group on Friday said that it may end a ceasefire declared last October and resume attacks on oil facilities in the Niger Delta.

Attacks by the Movement for the Emancipation of the Niger Delta (MEND) had slashed the West African nation's oil production by around a quarter and helped drive up global oil prices when MEND responded to a government amnesty and laid down its arms.

However, MEND spokesman Jomo Gbomo said his group had become disillusioned by the government's failure to create real dialogue.

'The government has no plan to address the injustice in the Niger Delta,' Gbomo said in an email to the German Press Agency dpa. 'There is a likelihood that the ceasefire will be called off January 30.'

'We have been appraising the situation on the ground to determine the direction our future military campaign will take,' he added.

MEND says it is fighting for a share of oil revenue for Niger Delta residents, who complain that multinational oil companies have ruined their agriculture and fishing livelihoods and caused major environmental damage in the delta's creeks.

The government claimed 15,000 fighters took advantage of the amnesty to lay down their arms and sign up for training programmes, which have yet to get off the ground.

However, analysts say the ranks of supposed militants were bloated by criminals trying to escape justice and unemployed looking for a chance at work.

President Umaru Yar'Adua has been in undergoing treatment for a heart problem in a Saudi hospital since November, creating a political crisis in Nigeria and leading many opposition activists to say the country is rudderless.

Gbomo said that Yar'Adua's illness had 'negatively affected hopes of dialogue'.

'It appears President Yar'Adua did not delegate this very serious, peace-threatening issue to anyone in his absence,' he said.

Iraq heads for OPEC clash over quota
Published: Feb. 5, 2010 at 5:38 PM
BAGHDAD, Feb. 5 (UPI) -- The government seems set to clash with the Organization of Petroleum Exporting Countries after declaring it will not participate in the cartel's production quota system as Iraq drives to quadruple its output.

Falah al-Amiri, head of the State Oil Marketing Organization, said Thursday that Iraq was not interested in discussing quotas until its production has hit 4.5 million barrels per day. That's more or less double the current level.

Oil Minister Hussain al-Shahristani wants to boost output to 10 million to 12 million bpd over the next decade or so to finance national reconstruction after four decades of war, international sanctions and neglect.

Iraq, a founding member of OPEC, has not had a production quota since 1998, when it was pegged at 1.3 million bpd to allow Saddam Hussein's regime to sell oil for food during U.N. sanctions imposed in 1990.

Clearly such a quota would be out of the question now for a country that has the fourth-largest oil reserves after Saudi Arabia, Canada and Iran.

These are currently estimated at 115 billion barrels, but that could double once untapped reserves are added.

The production target of 10 million to 12 million bpd would rival the current levels of Saudi Arabia and Russia, the world top energy producers, and would necessitate an OPEC quota for Iraq -- if it chose to remain in the cartel.

According to the U.S. security consultancy Stratfor, "Oil is Iraq's primary revenue source and Baghdad has no intention of cutting itself off from any potential income for the greater good of the oil cartel.

"At the same time, OPEC member states are eager to see Iraq join the quota system because of the threat its energy potential poses to the group's ability to limit world oil supply."

Iraq's production plans have been bolstered by the recent awarding of 20-year production contracts to some of the world's largest energy companies for 10 of the country's major oil fields.

The companies were selected on the basis of the production increase targets they submitted to the Oil Ministry.

More contracts are likely to follow, although not necessarily through two auctions held in Baghdad in June and December.

These companies, including Exxon Mobil, BP, PetroChina and Royal Dutch Shell, will be investing tens of billions of dollars in rebuilding Iraq's rundown oil industry.

Russia's oil major Lukoil said Feb. 1 that it alone plans to invest $30 billion in developing the huge West Qurna Phase 2 field in southern Iraq, one of the big prizes it won with Statoil of Norway.

Overall Iraqi production is not likely to increase significantly for two or three years. But this depends to some extent on how committed the foreign companies are to making the substantial investment required if they wish to have long-term access to Iraqi oil.

This means that to a large extent the Iraqi government will have to depend on these companies to achieve its production goal.

Despite the success of the 2009 auctions, problems remain -- mounting violence in the run-up to March 7 parliamentary elections, uncertainty over their outcome, and, probably more importantly, the absence of a long-delayed oil law that will define revenue-sharing and regulation of the industry.

The revenue-sharing question will become more acute as production increases and oil earnings swell.

A collision with OPEC, headed by Saudi Arabia, seems inevitable if Iraq succeeds in significantly boosting its oil production because the cartel is not likely to tolerate an Iraq that sees untrammeled oil exports as its salvation and vital to its survival.

Amiri, the marketing chief, was at pains to stress that when it comes to discussing Iraq's quota again, OPEC would have to factor in the size of Iraq's reserves -- which are widely expected to increase substantially as exploration resumes -- and its wide reconstruction requirements.

"Regardless of the pace at which its output capacity picks up, Iraq's oil fields, which are large, close to the surface and easy to develop, will ensure that the country is free to produce as much as it wants for the next few years," Stratfor observed.

"That statement from the State Oil Marketing Organization is an indication that Baghdad is bound to resist any attempts to cap its production level."

An interesting view of future Iraq..

Friday, February 05, 2010
Michael Schwartz, Will Iraq's Oil Ever Flow?

Sociologist Michael Schwartz, a sharp Iraq-watcher and author of a provocative book on the Iraq War, surveys the travails of Iraq's oil industry since the 2003 Bush-Cheney invasion and points to the continued difficulties of the Iraq petroleum industry.

My own guess is that eventually the security situation will settle down enough to allow the foreign petroleum companies now signing bids to develop specific fields to press forward. It will be a long slow haul, but Iraqi petroleum will likely come online over time. When that expansion of production happens,it will have a big impact on Iraq. There will be massive internal migration of labor to the Basra and other oil-rich areas, mixing up Sunni Arabs and Kurds with regional labor migrants from e.g. Egypt, India and Pakistan.

The Neoconservative dreams that Iraq would rival or replace Saudi Arabia as swing producer, and that it would recognize and perhaps supply petroleum to Israel, however, are both unlikely developments. Moreover, as China, India and other Asian giants begin growing more rapidly and depending on automobiles, demand for petroleum could well grow so fast over the next twenty years that any new big fields' production is just slurped up, with the world demanding more. That is, Rupert Murdoch's notion that Iraq production could plunge prices down to $14 a barrel for the long term, helping industrialized economies, was always stupid, since it did not take account of rapidly growing demand from Asia.

The emergence of Iraq as a petroleum state (or rather a bigger, wealthier petroleum state) will also further upset the geopolitical balance in the Middle East. With a Shiite majority, it will offset Saudi Arabia in the Sunni-Shiite culture wars. It seems likely to have a big, well-trained and effective army, which cannot always be depended on to be allied with the interests of Washington. A military coup down the road cannot be ruled out (there are few democratic oil states, where petroleum supplies more than a third of the national income). And, it likely will be a friendly and supportive big brother to movements like Hizbullah in Lebanon. While it won't always be on the same page as Iran, it will likely be an ally of and support for Tehran. One possibility is that a rich Iraq 20 or 25 years from now will be in a position to promote Twelver Shiism in the region, picking up some of the Alevis in Turkey, the Nusairis in Syria and the Zaidis in Yemen. With its possession of the Shiite holy cities of Najaf and Karbala, with the enormously influential chief cleric of Najaf as among its more prominent residents, Iraq's soft power among Afghan, Pakistani and Indian Shiites has the potential for being greater than that of Iran.

In the end, an oil-rich, Shiite-dominated Iraq is far more likely to be a victory for the Shiite revival kicked off in 1979 by Imam Ruhollah Khomeini than a triumph for Richard Perle, Paul Wolfowitz, Daniel Pipes and the other hard line warmongers who advocated for a revolution-by-invasion in Iraq.

But Schwartz is correct that all these developments are likely a decade or more off.

GE Oil & Gas Says Iraqi Market Wont Boom This Year

Feb. 4 (Bloomberg) -- GE Oil & Gas, the General Electric Co. unit that provides equipment to oil companies, said Iraq is a challenging market and theres no prospect of a boom for suppliers for at least a year.

Iraq is a potentially interesting market for us, Claudi Santiago, head of GE Oil & Gas, said in an interview in Florence, Italy. Its very fragile and over time we know that there are opportunities. It wont be a booming market in the next 12 months because of political and security concerns.

Iraq, holder of the worlds third-largest crude reserves, faces technical and labor challenges to raise oil output to a target of at least 11 million barrels a day in the next decade. While the worlds largest energy companies have agreed to develop fields in the country, they must first rebuild infrastructure thats been destroyed by years of war.

Explorers need time to decide what equipment they need before placing orders, Santiago said. A huge amount of equipment that GE installed in Iraq before conflict and sanctions halted investment now needs upgrading, he said.

Exxon Mobil Corp., PetroChina Co., BP Plc and Royal Dutch Shell Plc have agreed to work at fields in Iraq, which has said it needs $200 billion in investment to increase oil output from the current 2.32 million barrels a day.

Shell Seeks Contractors

We are procuring contractors who can come with us into Iraq in order to start to deliver, Shell Chief Executive Officer Peter Voser said today. It will take a few years before production growth really kicks in.

Oil majors production contracts with Iraq include targets for higher output. BP and China National Petroleum Corp. agreed in December to invest about $15 billion over 20 years to boost output at Rumaila, Iraqs largest field, to 2.85 million barrels a day from 1.07 million barrels a day.

Equipment on the ground in Iraq needs to be expanded and improved, Andy Inglis, head of exploration and production at BP, said yesterday in an interview in London. This is going to be a period of build-up; its about mobilization of our equipment, creating effective use of it. But its not an immediate ramp-up.

Oil Prices Sink

Oil-service providers suffered a drop in demand last year as the financial crisis restricted funds for production ventures and the economic slowdown sapped energy demand. Crude prices tumbled from a record $147.27 a barrel in July 2008 to a low of $32.40 a barrel in December that year, forcing producers to postpone projects.

For GE Oil & Gas, this year could be another year of single-digit growth for our business, Santiago said. It will take another nine months to confirm that the world is moving to truly healthful economic recovery, though this is going to be bumpy for a while.

GE Oil & Gas reported sales of $2.3 billion in the fourth quarter. Thats 5.6 percent of General Electrics total and 9.7 percent higher than in 2008, according to financial statements on Bloomberg.

Oil prices rebounded 78 percent last year, prompting producers such as Shell and BP to consider bringing on new capacity. Drilling and workover investment in the Middle East and North Africa may rise by almost a third to $27.9 billion by 2014, according to Douglas-Westwood Ltd., an energy consultant.

Sustained Growth

The outlook for sustained growth is largely dependent on crude prices, but several markets will be key, namely Mexico, Iraq, Russia, and the deepwater, Scott Gruber, an analyst at Sanford C. Bernstein & Co., said Jan. 29. Oil-service markets are mixed, but are broadly in the process of bottoming.

Oil-service providers and manufacturers doubled fees between 2004 and 2008. After oil prices plunged, crude producers were able to renegotiate contracts. BP chief Tony Hayward this week pledged to push the industry hard to cut costs further.

Theres still quite a lot of overcapacity in the supply chain in most sectors, he said. I would expect to see continued deflation in the supply chain.

Among projects that were delayed last year, the Sunrise oil-sands project in Canada is now set to proceed after BP and Husky Energy Inc. completed an engineering study.

Meanwhile, Shell is developing projects in Qatar and Malaysia to revive production growth. The company plans to increase output from existing reserves through 2020 by starting new projects that can pump more than 1 million barrels a day.

We see a certain flattening out on the cost side in the market, Shells Voser said. Contractors prices have come down, allowing Shell to make investment decisions on projects, he said.

12:49 GMT, Wednesday, 10 February 2010


Bank of England warns inflation will exceed 3%

Mervyn King: "The UK economy has continued to bump along the bottom"
The UK's inflation rate will rise above 3% in the coming weeks, the governor of the Bank of England, Mervyn King, has predicted.

Presenting the Bank's quarterly inflation report, Mr King said the increase in VAT and higher petrol costs would push up prices.

Crude Oil Trades Above $77, Pares Gains Before Inventory Report


Crude oil was little changed in New York, trading above $77 a barrel and paring earlier gains before a report likely to show U.S. crude inventories rose last week.

Futures retreated from their highest in two weeks, after posting their biggest gain in more than four months yesterday, when Greek Finance Minister George Papaconstantinou said his country is ahead of its deficit-reduction targets and wont require a bailout from the European Union.

Oil for March delivery traded at $77.28 a barrel, up 27 cents, in electronic trading on the New York Mercantile Exchange at 10:26 a.m. London time. The contract earlier rose as much as 81 cents, or 1.1 percent, to $77.82 a barrel, the highest since Feb. 3. Yesterday, futures rose 3.9 percent, their biggest gain since Sept. 30.

U.S. stockpiles of crude oil probably rose last week as delayed cargoes arrived at ports on the Gulf of Mexico, a Bloomberg News survey of analysts showed.

Stockpiles climbed 1.6 million barrels in the week ended Feb. 12 from 331.4 million the prior week, according to the median estimate. The U.S. Energy Department is scheduled to release its weekly inventory report at 11 a.m. tomorrow in Washington, a day later than usual because of the Presidents Day holiday.

Inventories of distillate fuel, a category that includes heating oil and diesel, probably fell 1.5 million barrels from 156.2 million the prior week, according to the survey. Gasoline supplies probably climbed 1.5 million barrels from 230.4 million, the survey showed.

The industry-funded American Petroleum Institute publishes its inventory report today.

Brent crude for April delivery was up 17 cents at $75.85 a barrel as of 10:29 a.m. on the ICE Futures Europe exchange in London. Yesterday, the contract increased $3.17, or 4.4 percent, to $75.68.



Last Updated: February 17, 2010 05:38 EST

Falkland Islands: Oil boom or no oil boom?

By Robert Plummer
Business reporter, BBC News


Anticipation of a big oil find off the coast of the Falkland Islands is once again reaching fever pitch.


The Ocean Guardian rig will explore reserves in the Falklands
A drilling rig from the Scottish Highlands, the Ocean Guardian, is being towed by tug to the North Falkland Basin, widely considered the most promising of the four areas licensed for exploration.

In the UK, investment tipsters are lining up to recommend buying shares in the companies that own those licences.

Strangely enough, though, those shares are not enjoying any notable bounce at present - probably because of the reaction from Buenos Aires.

The Argentine government has imposed new restrictions on all ships heading to the Falklands, in a move that revives memories of the war it fought with Britain over the islands in 1982.

Argentina is clearly furious at the prospect of being excluded from an oil boom in a territory over which it still claims sovereignty.

After trying to raid the central bank's reserves to service its debts, President Cristina Fernandez de Kirchner's cash-strapped government is desperate for funding.

For their part, some of the key oil explorers are keeping tight-lipped as they wait to see what the diplomatic fallout will be.

Desire Petroleum, one of the firms that has contracted the Ocean Guardian rig, told the BBC it would be making no comment until the start of drilling next week and referred all inquiries to the British Foreign Office.

Natural gas tumbles on large supplies
By CHRIS KAHN, AP Energy Writer Chris Kahn, Ap Energy Writer 16 mins ago
NEW YORK Natural gas prices tumbled nearly 3 percent after the government said supplies are still higher than average despite a rash of snowstorms that blanketed the East Coast during the past few weeks.

Natural gas is used to both heat homes and power electric generators, and supplies generally drop in the winter as homeowners crank up the heat.

The Energy Information Administration said natural gas stores did fall last week. However the remaining supply of 2.03 trillion cubic feet is still nearly 3 percent higher than the five-year average.

With the winter more than half over, analyst Stephen Schork said natural gas prices were headed lower.

"We're at the end of the season," he said. "And there's an assumption out there that we have a lot of storage capacity, a lot of untapped wells that could easily be brought online."

The EIA is scheduled to announce its petroleum supply report later Thursday.

Benchmark crude for March delivery added 60 cents to $77.93 a barrel on the New York Mercantile Exchange. In London, Brent crude added 43 cents at $76.70 a barrel on the ICE futures exchange.

At the pump, retail gas prices increased overnight for the first time in nearly two weeks to a national average of $2.614 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is still 12.6 cents cheaper than a month ago. It's 65.7 cents more expensive than the same time last year.

In other Nymex trading in March contracts, heating oil added less than a penny to $2.0154 a gallon, and gasoline rose 2.16 cents to $2.0287 a gallon. Natural gas lost 14.5 cents to $5.241 per 1,000 cubic feet.

Rig arrives amid growing Falklands oil dispute
By Channel 4 News
Updated on 19 February 2010

Channel 4 News understands that a rig due to explore oil reserves beneath the sea near the Falkland Islands is expected to arrive today, amid an international dispute over "illegal" drilling.

http://www.channel4.com/news/articles/politics/international_politics/rig+arrives+amid+growing+falklands+oil+dispute/3550737

Argentina 'cannot rule out' Falklands oil claim
By Channel 4 News
Updated on 20 February 2010

The row over drilling for oil off the Falklands steps up as Argentina says it cannot rule out further measures to reclaim what is rightfully theirs.

The row over oil exploration near the Falkland Islands is heating up as Argentina vowed further action to stop foreign countries accessing what it claims are its natural resources.

The country's deputy foreign minister has told Channel 4 News he cannot rule out further measures to reclaim what he says rightfully belongs to Argentina, including the islands themselves.

Yesterday, the UK oil rig Ocean Guardian, which is at the centre of the feud, arrived in the South Atlantic to begin drilling within the next 24 hours.

The Argentinean foreign minister says any drilling activity in the sea surrounding the Falkland Islands is illegal; the British government rejects that.

The Governor of the Falkland Islands, Alan Huckle, told Channel 4 News that the Argentinean government will not stop the oil exploration work now in progress.

"I don't think there is any threat of any sort of hostility or anything like that," he said. "Nor, quite frankly, is there going to be any difficulty, at least with this first round of drilling."

But Argentina's deputy foreign minister, Victorio Taccetti, said his country is prepared to go further still.


"Faced with a unilateral act which we deem illegitimate, we will take measures to defend our sovereignty; these are always peaceful measures," he said.

Argentina exercises its sovereign rights over an "exclusive economic zone", reaching 200 miles from its shores.

But it also claims sovereignty over a much larger area - the South Atlantic Continental shelf, which includes the Falkland Islands.

Last week, the Thor Leader, a ship reportedly carrying drilling equipment, was seized in the Argentine port of Campana. The Argentinean government has also banned ships from going to and from the Falkland islands via its waters - a move that seems popular on the streets of Buenos Aires.

But Emma Edwards, the oil portfolio representative who is responsible for oil on the Islands, said: "The oil belongs to the Falkland Islanders, and the oil does belong to us first.

"We will look after our own infrastructure - ensure that we've got the roads, the hospitals, the education that we need, plus reserves so we can keep ourselves going after any oil has gone."

Oil markets explained 19/2/2010

Big movements in the oil price have significant ramifications around the world. But just what makes the price move and how do the oil markets work? BBC News takes a closer look.
Crude oil, also known as petroleum, is the world's most actively traded commodity.

The largest markets are in London, New York and Singapore but crude oil and refined products - such as gasoline (petrol) and heating oil - are bought and sold all over the world.

Crude oil comes in many varieties and qualities, depending on its specific gravity and sulphur content which depend on where it has been pumped from.

If no other information is given, an oil price appearing in UK and other European media reports will probably refer to the price of a barrel of Brent blend crude oil from the North Sea sold at London's International Petroleum Exchange (IPE).

The Big Question: Could oil exploration of the Falklands lead to a renewal of hostilities?




Tuesday, 23 February 2010


Why are we asking this now?

Argentina has claimed sovereignty over the Falkland Islands for nearly two centuries, ever since it achieved independence from Spain in 1816, even though the Islas Malvinas, as they are known in Argentina, have been in British hands since 1833, and a British claim to them dates back to 1690.

In 1982 Argentina invaded the Falklands only to be driven out by a British task force, after a two-month war in which 649 Argentinian and 255 British lives were lost. In recent years relations have eased, and transport and economic ties between the islands and Argentina have, in part, normalised. But the basic dispute over sovereignty is as far from resolution as ever, and underlying tensions have never disappeared. This month they have flared up again, over British plans to begin drilling for oil in waters off the islands.


What exactly are the British doing?

The UK oil company Desire Petroleum has towed a rig, the Ocean Guardian, to a point in the North Falklands Basin, roughly 100 miles north of the islands, and drilling operations started yesterday morning. The first results should be available in a month. The site is within the Falklands territorial waters as established by Britain, but of course also in waters claimed by Argentina itself, on the basis of its assertion of sovereignty of the islands.


Exactly how much oil is at stake?

No one knows for sure. For more than a decade, the word has been that the Falklands are sitting on fabulous energy reserves. For oil, the headline estimate is colossal: some 60 billion barrels, equivalent to almost a quarter of the proven reserves of Saudi Arabia. In reality, only a fraction of that figure might be commercially recoverable, perhaps 3.5 billion barrels, according to Desire Petroleum, which says its six licence areas contain "excellent oil source rock".

Geological surveys also point to the presence of natural gas. Oil was actually discovered off the Falklands in 1998 by Royal Dutch Shell. Back then though, an oil price of $10 a barrel made commercial development unviable. Today a barrel costs almost $80 and seems bound to rise as the world economy pulls out of recession and global demand increases. Even if conservatively calculated, a significant find would thus have huge economic implications for the Falklands and also, of course, for economically battered Argentina, if it could ever get its hands on the stuff.

Full http://www.independent.co.uk/extras/big-question/the-big-question-could-oil-exploration-of-the-falklands-lead-to-a-renewal-of-hostilities-1907412.html

Oil hovers above $80 after 3-week rally
By ALEX KENNEDY , 02.23.10, 03:23 AM EST


SINGAPORE -- Oil prices hovered above $80 a barrel Tuesday in Asia as investors mulled whether sluggish U.S. crude demand justified a 15 percent rally over the last three weeks.

Benchmark crude for April delivery was down 15 cents at $80.15 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added 25 cents to settle at $80.31 on Monday Oil has jumped from $69.59 a barrel on Feb. 5 on investor optimism that the global economy will rebound strongly from recession last year. Yet growing inventories of crude, gasoline and diesel fuel suggest demand in the U.S. remains weak.

Some analysts expect crude demand in the U.S. and Japan will gradually follow overall economic growth and lift prices. Goldman Sachs ( GS - news - people ) expects crude to trade between $85 and $95 for most of this year.

"Continuing growth in the two largest developed market economies suggests that the economic recovery is still on track." Goldman Sachs said in a report. "We expect that Japanese oil demand will break the trend of the past decade and grow in 2010."

In other Nymex trading in March contracts, heating oil was steady at $2.0785 a gallon while gasoline rose 0.3 cent to $2.1185 a gallon. Natural gas fell 2.1 cents to $4.874 per 1,000 cubic feet.

Oil prices tumble on economy worries
By MARK WILLIAMS, AP Energy Writer Mark Williams, Ap Energy Writer 5 mins ago
Oil prices tumbled Thursday on new signs that the economy remains weak and that demand for crude is still tepid at best.

Benchmark crude for April delivery fell $2.80 to $77.20 a barrel on the New York Mercantile Exchange. The contract rose $1.14 to settle at $80 on Wednesday.

Oil has been bouncing back and forth for months between $70 and $80 as investors watch economic data for clues about where the economy is heading following the Great Recession.

The signs Thursday were mostly negative as the government said new claims for unemployment benefits last week jumped unexpectedly while a separate report on big-ticket manufactured goods was mixed.

Crude prices rose Wednesday after Federal Reserve Chairman Ben Bernanke told Congress that he expects interest rates to stay low for a while to help boost the economy.

The economy has grown for six months but is not yet spurring hiring and unemployment remains stubbornly high. Couple that with more than ample supplies and signs that the economy still needs to be propped up by federal stimulus "means that the demand were expecting to see may not develop," said Phil Flynn of PFGBest.

Oil prices were also pushed down Thursday by a stronger dollar and a drop in the stock market.

Because crude is traded in dollars, it gets cheaper when the dollar climbs and forces investors holding other currencies such as the euro to pay more for oil. The dollar was near a nine-month high against the euro over worries about economic growth and debt problems in Europe.

Major stock averages were down nearly two percent around midday.

Despite the drop in oil prices, retail gasoline prices headed higher for the eighth straight day, rising 1.5 cents a gallon to a national average of $2.693, according to AAA, Wright Express and Oil Price Information Service.

Pump prices have climbed 7.9 cents over the past week and are nearly back to the levels of a month ago when they were at $2.70 per gallon. Prices remain 80.2 cents above year-ago levels.

In other Nymex trading in March contracts, heating oil fell 7.55 cent to $1.9666 a gallon, and gasoline lost 7.05 cents at $2.0284 a gallon. April natural gas prices were down 10.2 cents to $4.757 per 1,000 cubic feet.

In London, Brent crude gave up $2.64 at $75.45 on the ICE futures exchange.

.Oil plunges below $82 on volcano, Goldman gitters

Associated Press Writer 1 hr 37 mins ago
SINGAPORE Oil prices plunged below $82 a barrel Monday in Asia, extending big losses on expectations that disruption to air travel from the Icelandic volcano will undermine the global economic recovery and crude demand.

Benchmark crude for May delivery was down $1.38 to $81.86 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

A huge cloud of volcanic ash has shut down air traffic in most of Europe for four days, scuttling travel plans and freight services that could end up costing billions of dollars.

At the very least, traders say the volcano crisis will lower demand from airlines for jet fuel.

"The market had underestimated the impact of the volcano," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "There's still a lot of uncertainty about how much this will affect the overall economy."

Oil fell $2.27 to settle at $83.24 a barrel on Friday after the Securities and Exchange Commission said Goldman Sachs & Co. defrauded investors by failing to disclose key information about mortgage investments it sold as the housing market was collapsing in 2008.

Investors speculated that Goldman may have to liquidate some positions in crude to pay for penalties if found guilty.

"I think the whole market sentiment has switched to less optimistic," Chu said. "Things are pointing more bearish now."

All major Asian stock markets fell Monday.

Crude had jumped to an 18-month high above $87 a barrel earlier this month from $69 in early February.

In other Nymex trading in May contracts, heating oil fell 3.24 cents to $2.185 a gallon, and gasoline dropped 2.70 cents to $2.250 a gallon. Natural gas was steady at $4.044 per 1,000 cubic feet.