Wednesday, 01 October 2014 15:07
Iran will not export natural gas to Europe if Russia stops its exports, the country's President Hassan Rouhani said yesterday.
Speaking to a Russian magazine, Rouhani said: "We will not be an alternative for Russia if it stops exporting natural gas to Europe."
Meanwhile, he said that Iran is ready to export its products to Russia in order to help it resist the sanctions imposed by the West.
"We will offer all kinds of help to the Russian government and people," Rouhani said. "As soon as the needed measures are finalised [next year], the Russians will find Iranian production on the shelves of the Russian shops."
The president said that Iran and Russia have agreed to begin trading with each other's products, noting that this deal had been reached a long time before the European sanctions.
Regarding the nuclear talks with the P5+1, Rouhani said: "It is possible to reach positive results if the international group were determined to end the crisis."
As the world continues to recover from the recession of 2008-09, those who depend on their investments for income have faced a challenge. Central banks in all of the major developed nations responded to the financial crisis and the resulting economic slowdown in a fairly conventional manner: they forced interest rates lower. The exact mechanics of how they did this varied somewhat, but for income investors the results were the same; a drastic pay cut.
As a result, many people have been forced to rethink their traditional bond holdings and turn to non-traditional ways of generating income. The energy markets offer several ways of achieving that.
Master Limited Partnerships (MLPs), utility stocks, and stock in large, mature, dividend paying companies all offer a chance for those in need of income to “juice” returns from a traditional bond portfolio. What many have lost sight of in this reach for yield, however, is that yield is essentially a reward for risk. Each of the above categories represents specific risks, so simply selling some bonds and buying into one of these instruments is not a smart move.
As with all things investing, diversification is paramount. An investment split between the following four suggestions would offer a combined yield of 4.275 percent -- not spectacular, but significantly better than the 2.5 percent currently available from U.S. government’s 10-Year Notes, while spreading risk significantly.
MLP: Master Limited Partnerships are “pass through” entities. That is to say that the majority of their profit is passed through to investors rather than retained. They must, by definition, receive around 90 percent of their income from real estate, natural resources and commodities. Oil and gas MLPs own the rights to extraction and production of wells and give income distributions from the cash flow that those assets generate.
For individual companies, there is a large tax benefit from operating in this way, as profit is not taxed – rather, the distributions alone are taxable. For investors, too, this is a benefit, as it avoids double taxation, but there is a catch. Distributions are treated separately to income and require additional filing. This can be avoided by investing in an MLP ETF such as the Alerian MLP Fund (AMLP). For most regular income investors, the simplification and spread of risk that this offers is worth the additional fees paid to the fund manager, and the 5.9 percent yield that the fund offers is treated like a regular mutual fund dividend.
Utility: Local and regional power companies are a traditional source of regular income for more conservative investors, but recently, many such investors have found out that “defensive” stocks are not always safe. New Environmental Protection Agency regulations will require many companies to spend massive amounts to cut CO2 emissions over the next few years. In that environment, a utility company that has already done that, such as NextEra Energy (NEE), the holding company for Florida Power and Light, may offer the least risky way of generating utility income.
NextEra produces less than 5 percent of its energy from oil and coal, insulating it from the negative effects of the new regulations on cash flow and profits. This has resulted in significant support for the stock over the last few years, but even so, at current prices the stock offers a yield of over 3 percent.
Large Oil Companies: Both BP (BP: ADR) and Exxon Mobil (XOM) have seen their stock fall quite drastically over the last few months. BP has dropped around 16.5 percent since the beginning of July and XOM, while not quite as bad, has still lost around 10 percent since the end of that month. Both disappointed with earnings last quarter and have suffered as the price of oil has fallen. BP also has some added disadvantages. They have a significant presence in Russia, which has weighed heavily along with lingering concerns about the costs associated with the Deepwater Horizon tragedy.
For holders of the stocks, this is bad news, and it may make a recommendation seem unlikely, but the drop in price has pushed yields up to where both offer a decent return as part of a risk diversified energy income strategy. BP is currently yielding 5.2 percent and Exxon 2.9 percent and neither looks expensive at forward price to earnings ratios (P/Es) of 9.43 and 12.19 respectively.
If you are struggling to generate income from traditional bond holdings, then, and want an alternative, combining these four investments is something to consider. There is still risk, of course as reward never comes without it, but spreading that risk between different types of investments makes the energy sector a slightly more attractive place to look for yield.
By Martin Tillier of Oilprice.com
In a remote area along the Turkish-Syrian border, a line of oil trucks materializes seemingly from nowhere. Quietly, the vehicles line up to purchase oil. The drivers will pay about $18 a barrel, well below the average market price of $93.45.
Still, for the seller -- the Islamic State -- the price represents a 100 percent profit since it has no investment in the oil production.
This is a crucial part of how the group being called “the most dangerous Islamic extremist terrorist group in the world” fills its coffers and funds its brutal advance across Syria and Iraq.
U.S. intelligence officials believe that the Islamic State (IS) -- which they refer to by its former name of ISIL -- has become one of the wealthiest terror groups in history, netting somewhere between $2 million and $3 million every day.
I first wrote about the group’s profit making here several weeks ago. Also, as I previously reported, the group continues to sell oil from Syrian wells back to the regime of President Bashar Assad, with whom it is engaged in a fight to the finish.
In fact, most of the illegal trade carried out by IS is oil from fields in eastern Syria, and more recently from fields captured since June in Iraq. The terror group is creating its own economy through a series of pragmatic trades, as Turkey’s Zaman newspaper recently detailed.
The U.S. -- along with a coalition of mostly Gulf Cooperation Council states and Jordan -- has started to target some of the Syrian fields in an attempt to sever the group’s sources of revenue.
An interesting question to ponder is why did the U.S. and its allies allow IS to achieve so much economic power? The explanation is that the Islamists’ take-over of oil wells in Syria, and later Iraq, was gradual. Also, some wells were captured not by IS, but by other Islamists groups that later merged with IS.
Upon “acquiring” the wells, IS faced the immediate challenge of keeping them functioning, which requires skills that neither ISIS nor its affiliates had. ISIS solved the problem by finding local technicians who managed to keep the oil wells pumping at around 60 percent of full capacity.
Before the outbreak of civil war in 2011, Syria was producing between 385,000 and 400,000 barrels per day. An operating capacity of 60 percent still means the group reaps around 200,000 bpd and turns a massive profit, despite selling the oil well below the official market rate.
The report in Zayman quotes an unnamed Western oil executive who used to work in Syria as saying that “the Islamic State makes not less than $2 million daily.” That may sound like a lot of money -- and it is -- but IS has huge overheads. It needs to pay, feed, and house its thousands of fighters. It needs to purchase weapons and munitions, and give money to the families of fighters killed in battle. And if they are cognizant of political realities, the group is probably regularly stashing a few million dollars in secret bank accounts for later.
In the meantime, IS has managed to deprive Damascus of some serious revenue stream. The Syrian government reports that its production fell from 164,000 bpd in 2012 to an average of 28,000 bpd in 2013. Oil sales made up nearly a quarter of state revenues before the war. The government says it has lost $3.8 billion in stolen oil because of the conflict.
Syria’s pre-war production, estimated in 2001 at around 380,000 bpd, suffered heavily when Kurdish forces took control of some of the fields located in Hasaka province and IS took fields in Shadad, al Omar, Tenak and Ward operated by companies such as Royal Dutch Shell, Total, and Petro Canada.
A number of wells were shut down as foreign firms withdrew and rebels looted equipment. Few people with technical expertise remain in areas where the Islamic State has taken over.
Meanwhile in Iraq, the same script is playing out. IS-controlled oil fields produce around 80,000 bpd. Production has gone down severely as a result of military action by the U.S., its allies and Kurdish forces, but in the interim, IS continues to rake in millions every day.
By Claude Salhani of Oilprice.com
Daily Sabah and Agencies
ISTANBUL — Trade in natural gas and the planned construction of the nuclear reactor in Mersin province were discussed during Energy Minister Taner Yıldız's visit to Moscow yesterday. Yıldız met his Russian counterpart Alexander Novak, Gazprom's CEO Alexey Miller, Sergey Kiriyenko, CEO of the state-owned Russian nuclear company Rosatom and Elena Burmistrova, the head of Gazpromexport, during his visit to the Russian capital. After the meetings parties agreed on increasing the amount of natural gas flowing through the Blue Stream pipeline. As Russia's second-biggest client for its natural gas after Germany, Turkey imports 25.5 billion cubic meters (cbm) of Russian natural gas annually via the Blue Stream pipeline and West Line, which carry Russian gas via a pipeline from Ukraine to Turkey.
However, the recent crisis in Ukraine has raised concerns that Kiev could halt the gas flowing through West Line.
Yıldız announced in August that Turkey was carrying out discussions with Gazprom in order to increase the yearly capacity of Blue Stream by 3 billion cubic meters, which connects to Turkey directly from Russia. Yıldız also discussed the $20 billion (TL 45.63 billion) Akkuyu Nuclear Power Plant project, where $3.5 billion worth of construction equipment is also expected to be used, $1.8 billion of which will be spent this year alone.
Funds received from Russia are expected to be used in the building of the infrastructure required for the plant including the construction of roads, power lines, water pipelines, temporary housing and cranes. If the project license is approved, the reactor construction is estimated to begin in 2016 and become operational by 2020, with the entire plant being fully operational by 2023. Rosatom signed an agreement in 2011 to build and operate the four-reactor nuclear power plant on Turkey's Mediterranean coast with the aim of having the plant fully-operational by the Turkish Republic's 100-year anniversary in 2023.
Russian energy giant Gazprom and Turkey have agreed to increase the capacity of the Blue Stream natural gas pipeline, which carries Russian gas to Turkey via the Black Sea. Turkish government sources confirmed with Anadolu Agency on Wednesday that the agreement to increase capacity from 16 billion cubic meters (bcm) to 19 bcm had been reached during Turkish Energy Minister Taner Yıldız's visit to Moscow.
Turkey consumes 45 billion cubic meters of gas annually, with nearly 60 percent of it being imported from Russia. The agreement came as Yıldız held discussions with Russian counterpart Alexander Novak, Gazprom's CEO Alexey Miller, Sergey Kiriyenko, CEO of the state-owned Russian nuclear company Rosatom and Elena Burmistrova, the head of Gazpromexport, during his visit to the Russian capital. Gazprom also reiterated that it had agreed with Turkey to increase the capacity of the Blue Stream underwater gas pipeline to 19 billion cubic metres (bcm) from 16 bcm.
Turkish demand for gas has more than tripled since 2000 to almost 47 billion cubic metres, with further increases expected as both its economy and population grow. The country's total energy bill stands at around $60 billion annually. Turkey has asked Gazprom for gas price cuts however, it was not immediately clear if the Russian company had agreed to any concessions.
US liquefied petroleum output is set to overhaul Saudi Arabia in September or October, for the first time since 1991. In terms of crude oil production, the US is still third behind, with Russia in the lead.
US production of liquid petroleum reached 11.5 million barrels per day, on track to outpace Saudi Arabia’s 11.6 million barrels in the next few months, according to August data from the International Energy Agency, published on Sept.10.
Saudi Arabia is the second-largest petroleum exporter to the US, but as domestic production increases in America, less is needed from abroad.
The shale oil boom in the US began in 2008 and has increased US crude output by 60 percent. In 2012, the United States became a net exporter of liquefied petroleum gases for the first time.
Between January and March 2014, Saudi Arabia exported an average of 1.5 million barrels per day to the US.
Saudi Arabia is the largest exporter of petroleum liquids in the world and is home to the world’s largest proven crude oil reserves, 16 percent of the world’s total.
Even though the US is poised to become the petroleum king, Americans won’t notice a big difference at the pump. Gas prices on average in the US are $3.34 per gallon whereas in Saudi Arabia its $0.78 per gallon.
The economy of Saudi Arabia is dependent on petroleum exports, which accounted for 85 percent of export revenues in 2013, according to an OPEC study. Oil and gas represent 68 percent of Russia’s total exports.
However, in terms of crude oil production, Russia is still the world’s leader with 10.1 million barrels per day, with Saudi Arabia coming in second with 9.7 million barrels per day. The IEA said the US could catch up with Saudi Arabia and Russia in crude production by the end of the decade.
Production in Russia has fallen in recent months, and could be hit further in the wake of sanctions, which will deprive Russian companies of EU and US partners in Arctic, deep-sea, and shale projects. A quarter of Russia's total oil production depends on shale.
The sanctions will also create problems for Western companies like ExxonMobil, BP, Shell and others, who have joint ventures worth billions of dollars in Russia.
Brent oil steadied above $97 a barrel on Tuesday, supported by US and Chinese economic data, but was still set for its deepest quarterly drop in more than two years because of strong supply and a surging dollar.
Brent crude has slumped since June, when it hit this year's high of $115.71. Strong supply, a strong dollar and lackluster economic data drove prices to a 26-month trough last week. Brent for November delivery was up 32 cents at $97.52 per barrel. US crude was up 19 cents at $94.76 a barrel but was also on track for its biggest quarterly fall. since the second quarter of 2012.
[The Saudi Gazette] © Copyright 2014 The Saudi Gazette. All Rights Reserved.
By Alex Nussbaum Oct 2, 2014 6:01 AM GMT+0700
Paul Kemp moved to Louisiana in the 1970s, a young geologist fascinated by the Mississippi Delta and eager to “get some mud between my toes.”
Forty years later, he’s neck-deep in political muck, the central figure in a bayou power struggle challenging Governor Bobby Jindal and the world’s biggest energy companies.
Kemp sits on a New Orleans levee board that’s suing 90 oil and natural gas producers. The suit claims that decades of drilling and dredging helped destroy the coastal marshes that shield the region from floods. The repair bill may cost the companies billions.
The attack on the state’s largest industry triggered a swift backlash. Four of the nine board members have been replaced with people who’ve said they would drop the suit, and Kemp, 60, may be next to go. Whether he keeps his seat, which could be decided in the coming weeks, may determine how much companies including Exxon Mobil Corp. (XOM), BP Plc (BP/) and Chevron Corp. (CVX) will be required to help shoulder the costs for shoring up what’s become North America’s fastest-vanishing coastline.
“The stakes are huge,” said Oliver Houck, a professor at Tulane University Law School who supports the lawsuit. Without industry’s contribution, “we don’t have the money to keep the levees going.”
Louisiana’s vast network of levees and wetlands are critical to protecting the low-lying region from hurricanes, and the state has proposed a 50-year, $50 billion “master plan” to stabilize the coast and improve flood protection.
‘Hijacked’ Board
Jindal, a Republican, has said the levee board has been “hijacked by a group of trial lawyers,” and the state’s political leaders, backed by an industry that employs 65,000 Louisianans, say the case is jeopardizing their chances of winning private-sector support.
“It makes it really hard for us to come to the table after they’ve sued us,” said Chris John, a former U.S. congressman who now leads the Louisiana Mid-Continent Oil and Gas Association. “This is all about a rogue agency with a very small number of trial lawyers that’s decided to go after the industry.”
The levee board, officially the Southeast Louisiana Flood Protection Authority-East, was created after Hurricane Katrina devastated New Orleans in 2005. It voted unanimously to sue dozens of oil, gas and pipeline operators in July 2013, saying extensive damage to the wetlands had rendered the levee system unworkable.
The lawsuit, now in U.S. District Court in New Orleans, demands companies restore the canals carved through the delta, or make restitution another way.
Second Term
Kemp has been nominated for a second term on the board, leaving the next move to Jindal. State law won’t let the governor reject the nomination, but he can ask the state Senate to do so.
Jindal opposes the lawsuit “because it’s a waste of taxpayer dollars” and exceeds the board’s authority, Shannon Bates, the governor’s spokeswoman, said in an e-mail.
The focus is now on Kemp, a former Louisiana State University researcher Jindal appointed to the board in 2011.
Kemp moved to the state from Long Island, New York, in 1975, drawn by the confluence of the Mississippi River and the Gulf Coast, where “you can watch geology happen in real time,” he said. He spent years tramping through the swamps and flying overhead, measuring sedimentation rates and cataloging the flow of nutrients through the soil. “My kids called me the Mud Doctor.”
Deteriorating Delta
Even then, the region was “in a state of deterioration,” Kemp said during a seaplane tour over the delta. “It’s only now that it’s seen as a tragedy, as something that needs to change.”
The industry “reaped a lot of benefits from its time out here,” he said. “There’s no question they’ve contributed significantly to the damage. The hope is they’d be part of the restoration.”
From the air, the decimation of the coast is clear, however one parcels out blame. Wetlands that once covered much of the state’s southern reaches -- and buffered New Orleans -- have been replaced by open seas. The remaining marshes are crisscrossed by oil and gas canals.
About 10,000 miles (16,000 kilometers) of channels have been carved through the area to haul equipment in and pipe petroleum out, said Gene Turner, an oceanographer at LSU in Baton Rouge.
Lost Land
Louisiana has lost 40 percent of its coastal area since 1956, according to figures from the U.S. Geological Survey. The region is receding at about 17 square miles a year.
Energy production isn’t the only cause. Hurricanes, rising seas and upstream levees that cut off the supply of sediment also play a role. Most researchers cite industry operations for at least a third of the loss, perhaps as much as 90 percent, said Turner.
“We’ve significantly changed the amounts of water coming in, through and around these wetlands,” he said. “If you left the hose running on your lawn and overwatered it, you’d have a dead lawn. If you didn’t water it enough, you’d have a dead lawn. And we’ve done both.”
The industry acknowledges it’s had an impact, said John, the trade group president. Still, drillers were following the environmental rules in place at the time and had government permits, he said. Retroactive punishment isn’t fair, he said.
‘Multiple Causes’
Energy companies, already contribute handsomely in Louisiana, said Greg Beuerman, a spokesman for defendants in the lawsuit. Industry taxes and fees account for almost a fifth of the state operating budget, while companies have spent “millions” on individual wetlands projects, he said.
“The problem of wetlands loss is very real, it has multiple, multiple causes and it needs to be addressed collaboratively, not by singling out one particular entity,” Beuerman said.
Exxon, Chevron and BP, all named in the suit, referred questions to Beuerman or their trade groups in the state.
The lawsuit doesn’t put a price tag on restoring “each and every” canal carved through the delta over the decades. Even more troubling for industry is the prospect that other cases will follow. Already, two Louisiana parishes have filed similar lawsuits.
State legislators from both parties, meanwhile, voted in May to block the litigation. The levee board is challenging that move as unconstitutional.
‘Very Serious Money’
Potential damages from the industry are “certainly in the billions,” said John Barry, a former levee board member who championed the litigation. He wasn’t reappointed after his term expired last year.
“If the flood authority were to win, I believe other jurisdictions in the state would have a fiduciary responsibility to do what we did. And then you get into very, very serious money.”
Kemp has experience on both sides of Louisiana’s coastal debates. He was part of a team of scientists who studied the levees’ failure post-Katrina and later testified on behalf of flood victims who sued the U.S. Army Corps of Engineers.
In 2007, he was named director of the National Audubon Society’s Gulf Coast Initiative. Three years later, he raised eyebrows by suggesting the society could allow some drilling on a nature preserve to raise funds for fighting erosion.
Now an environmental consultant for local governments and nonprofits, Kemp said his business has suffered from the lawsuit controversy. That hasn’t changed his mind.
“Even in the governor’s office, they’re quite convinced of the science behind this,” he said. “It is almost inevitable that the industry will have to pay at some point. The only question is when?”
By Daniel J. Graeber | Oct. 1, 2014 at 10:41 AM | 0 Comments (Leave a comment)
HOUSTON, Oct. 1 (UPI) -- Oil services company Baker Hughes said Wednesday it implemented its policy of fully disclosing the chemicals it uses in hydraulic fracturing.
"The policy we are implementing today is consistent with our belief that we are partners in solving industry challenges, and that we have a responsibility to provide the public with the information they want and deserve," Baker Hughes Chief Strategy Officer Derek Mathieson said in a statement.
Energy companies have been reluctant to disclose all of the chemicals used during hydraulic fracturing. The drilling practice, known also as fracking, involves the injection of large volumes of water mixed with abrasives and trace amounts of chemicals to coax oil and natural gas out of shale formations.
The company in March started the implementation process needed to reveal fracking fluid ingredients.
The disclosure is at odds with other major companies like Schlumberger and Halliburton, who argue their chemical components should be protected.
Baker said it could disclose the chemical components without detailing specific blends used in their fracking fluids. Mathieson said the aim of the release was to not only increase public trust, but also to protect the innovations needed to keep the shale boom alive in the United States.
"Introducing greater transparency about the chemicals used in the hydraulic fracturing process and protecting the ability to innovate are not conflicting goals," he said.
Baker's disclosure forms are available at FracFocus.org.
LONDON, Oct. 1 (UPI) -- Staffing levels in the northern Kurdish region of war-torn Iraq are back at normal levels, Gulf Keystone Petroleum announced Wednesday.
Militants with the group calling itself the Islamic State have taken over parts of northwestern Iraq and northeastern Syria. The rise of the group earlier this year prompted oil companies operating in the region to pull non-essential staff from Iraq as a security precaution.
Gulf Keystone, which has headquarters in London, said staffing levels in the Kurdish north of Iraq have been at normal levels since the beginning of September.
"With all personnel now back in country, we are making good progress and look forward to reaching our target of 40,000 gross barrels of oil per day," John Gerstenlauer, Gulf Keystone's chief executive officer said.
The company said production has held steady at around 28,000 bpd since August. About 70 percent of its production is sent by truck across the Iraqi border to Turkey for sales to the international market.
Around 4 million barrels of oil taken from the company's Shaikan field in the Kurdish north of Iraq have been sold on the international market since January.
The semiautonomous Kurdistan Regional Government and the central government in Baghdad are at odds over who has the right to export oil.
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WASHINGTON, Oct. 1 (UPI) -- The American Petroleum Institute said federal proposals for safer transit of oil by rail are not feasible, though its program can provide a reasonable solution.
API said proposals outlined by the U.S. Department of Transportation for safer oil transit could stifle North American crude oil production.
"We have instead proposed an aggressive yet achievable program for retrofitting the crude oil fleet to get stronger cars onto the tracks as fast as possible while limiting the most adverse economic consequences for consumers," API President Jack Gerard said in a Tuesday statement.
API said it was proposing a railcar with walls about 1/16 of an inch less than the federal guidelines for rail cars carrying crude oil.
The Department of Transportation in July called for the elimination of older rail cars designated DOT-111 for the shipment of flammable liquids like crude oil. Regulators in January warned oil from the Bakken reserve area of North Dakota, which lies at the heart of the shale boom, may be more prone to catch fire than other grades of oil.
API points to study by ICF International that finds federal proposals for rail could lead to $22.8 billion in consumer costs over ten years.
The increase in North American oil production is more than the existing network of pipelines can handle. Without Keystone XL, a pipeline designed for Canadian crude, API said consumer costs would reach $45.2 billion under federal rail proposals.
WASHINGTON, Oct. 1 (UPI) -- Retail prices for gasoline are moving lower thanks in part to the increase in production from North American shale, motor club AAA said.
AAA said in its weekly roundup of retail gasoline prices that consumers in the United States paid the lowest prices on average in September in four years, with a monthly average of $3.39 per gallon.
That's 13 cents less than September 2013 and 44 cents less than the same month two years ago.
Gasoline prices start a seasonal decline in September because the summer travel season is over and refineries start making a winter blend of gasoline, which is less expensive to produce.
Avery Ash, a spokesman for AAA, said gasoline prices should continue their decline, with the national average price for a gallon of regular unleaded expected to drop another 20 cents by the end of November.
"If everything goes smoothly, buying gas for less than $3.00 per gallon should be refreshingly common in many parts of the country this winter," he said in a statement Tuesday.
Though refinery issues play into the price at the pump, AAA said gasoline prices in general have been less expensive than in years past because of the increase in production from shale basins in North America.
"U.S. refineries have taken advantage of increased crude oil supplies to make more gasoline," the motor club said. "In addition, increased domestic production has helped insulate U.S. consumers from conflicts and instability overseas."
HOUSTON, Oct. 1 (UPI) -- The Sandpiper pipeline designed to carry oil from the Bakken reserve area in North Dakota through Minnesota is delayed, Enbridge Energy Partners said.
Enbridge Chief Executive Al Manaco said regulators in Minnesota decided to vet the planned 616-mile Sandpiper oil pipeline separately on routing and capacity.
As a result, the company said in a filing with the Securities and Exchange Commission the pipeline likely won't start delivering North Dakota crude until 2017, a year later than expected.
Sandpiper would ship up to 225,000 barrels of Bakken crude oil per day through Minnesota. It would then transfer oil to other pipelines for delivery to the U.S. and Canadian refinery markets.
Enbridge in June received backing from state legislators in North Dakota to build Sandpiper. Enbridge attorney Christina Brusven said each setback is a setback in terms of the pipeline's economic benefit.
Minnesota State Commissioner Dan Lipschultz said last month regulators need to take their time in approving a pipeline designed to carry crude oil from the Bakken reserve area in North Dakota.
State regulators in September called on Enbridge to study the environmental issues surrounding six alternative routes through the state proposed by outside groups.
BRUSSELS, Oct. 1 (UPI) -- European Commission President Jose Manuel Barroso said in a Wednesday letter to the Kremlin an interim solution to a trilateral gas crisis was mandatory.
Ukraine under an interim deal proposed during trilateral talks last week in Berlin would pay the $3.1 billion it owes Russian energy Gazprom. Ukraine, in return, would get a price discount and assurances of adequate winter natural gas supplies.
Barroso sent a letter to Russian President Vladimir Putin saying he expected a mutually acceptable deal should be reached by all parties to the negotiations.
"It is key that the resumption of energy deliveries to the citizens of Ukraine is ensured and that the fulfillment of all contractual obligations with customers in the European Union is secured," he said.
Russian Energy Minister Alexander Novak said Tuesday "it all depends on Ukraine."
Russian energy company Gazprom in 2006 and 2009 cut off gas supplies to Ukraine because of contractual disputes. With Ukraine's economy left in shambles following political upheaval in November, Gazprom switched its contract to a pre-payment scheme.
Another round of talks between Ukraine, the European Union and Russia is scheduled later this week in Berlin.
DUBAI, United Arab Emirates, Oct. 1 (UPI) -- Emirati energy company Dragon Oil and its Italian counterpart Enel said Wednesday they were awarded two contracts for oil and gas exploration in Algeria.
"This achievement represents a strategic move for Dragon Oil to establish a footprint in another North African country known to be rich in hydrocarbon resources and opportunities," Dragon Oil Chief Executive Officer Abdul Jaleel al-Khalifa said in a statement.
Algeria and Enel will work together in the Tinrhert Nord and the Msari Akabli license areas.
Dragon offered no estimate of the reserve potential in the license areas in Algeria. In a separate statement, Enel said it's the third-largest investor in the Algerian natural gas sector.
Some of Enel's legacy operations in the country could be producing 100 billion cubic feet of natural gas per day by early 2018.
Norwegian energy company Statoil and its partners at Shell said this week they were examining the shale natural gas potential in Algeria.
Algeria has the tenth-largest natural gas deposits in the world and is the third-largest gas supplier to Europe. With Europe looking to diversify an energy sector dependent on Russia, the companies said any shale from Algeria could be an important part of energy security ambitions.
MUSCAT, Oman, Oct. 1 (UPI) -- British energy company BP said Wednesday it awarded two drilling contracts to help tap into the unconventional gas potential in the sultanate of Oman.
BP Oman awarded a combined $730 million in drilling contracts to Oman's Abraj Energy Service and KCA Deutag for operations in the Khazzan project in Oman.
Khazzan entails exploitation of what BP says is one of the largest deposits of natural gas of its kind in the Middle East. Full development involves the drilling of around 300 wells over a 15-year time span. Peak production could reach 1 billion cubic feet per day, about one third of Oman's total daily domestic gas supply.
Khalid al-Kindi, deputy general manager for BP Oman, said drawing on local drilling talent was part of the subsidiary's national strategy.
"Building local content into our supply chain is a key focus area in BP's procurement strategy," he said in a statement. "BP is committed to hiring and developing talented Omanis."
Oman is the largest regional oil and gas producer that's not a member of the Organization of Petroleum Exporting Countries.
IRVING, Texas, Oct. 1 (UPI) -- Exxon Mobil told investors it was taking the steps necessary to allay the concerns about the consequences of using hydraulic fracturing in the United States.
Hydraulic fracturing involves injection of large volumes of water mixed with sand and a trace amount of chemicals to stimulate the release of oil and natural gas from shale formations that would otherwise not yield natural resources.
Environmental advocacy groups have expressed concerns ranging from the prevalence of minor tremors, to groundwater and surface contamination tied to the practice known also as fracking.
"Hydraulic fracturing has been responsibly and safely used by the oil and gas industry for more than 60 years, but the process isn't without risks," Jeffrey Woodbury, vice president of investor relations, for Exxon, said in a statement.
Exxon outlined in a 36-page report the steps it takes to mitigate risks from fracking, describing everything from the design of well casings to the surface footprint of fracking sites.
In terms of the chemicals used in fracking fluid, Exxon said Tuesday it respects the right to intellectual property, but also believes "community members have a right to full disclosure of all ingredients used in these fluids."
Exxon last month acquired 17,000 acres in the Permian shale basin in Texas. Permian production increased 58 percent from 2007 to reach 1.35 million barrels per day last year, which represents 18 percent of total U.S. crude oil production.
Europe LNG terminal capacity seen ample if Russian gas flows stop
* LNG could move quickly to undersupplied regions
* Lack of infrastructure prevents perfect LNG distribution
* LNG imports more expensive than pipeline gas
By Vera Eckert
BERLIN, Sept 30 (Reuters) - Large unused liquefied natural gas (LNG) capacity could be brought to play should the row between Russia and Ukraine disrupt flows of pipeline gas to the West this winter, European LNG terminal operators' group GLE said.
The crisis in Ukraine, an important pipeline route for Russian gas to the European Union, has triggered worries of a supply disruption in the forthcoming winter months. LNG operators, which import the gas from overseas via tankers, say they could step in if there are disruptions.
"If there were to be any supply disruptions of Russian gas in the winter - but this is still speculation - then LNG can certainly contribute to solving the problems," GLE President Wim Groenendijk said on Tuesday.
Europe potentially has enough LNG import capacity to meet over a third of its annual demand, with just 16 percent of the current regasification capacity of 207 billion cubic metres (bcm) utilised in the first eight months of this year, he said.
Over 20 regasification terminals for receiving LNG, which is condensed to a liquid and shipped on tankers, are dotted around European coasts, and another six are under construction. LNG already is beginning to reduce central Europe's reliance on Russian gas.
"A suggestion that has come up is that we could bring gas to the LNG terminals close to the markets that are most affected," Groenendijk said on the sidelines of the Platts 2014 European Gas Summit.
There are hopes for a possible agreement between Russia and Ukraine over gas after the EU brokered a deal over payments last Friday, worried about relying on Russian gas for 30 percent of its total winter supply.
But the deal still has to be implemented successfully. Russia, which sends half its EU-bound gas via Ukraine, disrupted flows on that route in earlier conflicts in 2006 and 2009.
Groenendijk said that ships carrying LNG could be chartered from underused LNG terminals in Spain or Northwest Europe to go to Italy or Greece.
There they could serve Balkan countries that rely almost entirely on Russian gas, although analysts warned that a lack of infrastructure makes it difficult to bring the LNG to the regions where it is needed most.
Additionally, European spot gas prices would have to almost double to make LNG shipments to Europe attractive enough for producers such as Qatar, which otherwise sell most of their cargoes to Asia, where customers pay more.
Lithuania will start up a floating LNG terminal later this year, and Poland plans to start its own terminal next year, both driven by Europe's political desire to break away from Russian gas dominance.
In the longer term, Europe is likely to receive more LNG because the United States is building up its export capacity, which will free up cargoes elsewhere to travel to Europe. (Additional reporting by Henning Gloystein in London; editing by Jane Baird)
South America: The World's Next Unconventional Frontier?
By Dave Forest | Wed, 01 October 2014 14:34 | 0
Important data point from Colombia last week. Where it appears the country is on the verge of some big changes in its oil and gas sector.
Specifically, the increased use of hydraulic fracturing, or fracking. Which could change the face of petroleum production here.
Colombia’s state oil firm Ecopetrol said that it plans to pursue licenses for fracking completions at its projects across the country. The firm is currently the largest petroleum producer in Colombia.
The company’s decision to pursue fracking comes after a law was introduced in March to allow for such unconventional drilling. Opening the door to the use of the technique in this already-established petroleum province.
In fact, the most recent oil and gas licensing round in Colombia saw 19 blocks singled out for the purposes of unconventional drilling. A full 20% of the total licenses allocated in the round.
This is worth watching for a few reasons.
The biggest one being that South America is one of the few places on Earth outside North America that’s made any significant progress in unconventional development. Plays like the Vaca Muerta in Argentina have seen promising results from fracking completions–which recently attracted some big attention, in the form of an up-to $9 billion farm-in deal from Malaysian major Petronas with local producer YPF.
One of the big reasons for the success here is the maturity of the existing oil field services sector in South America. With decades of conventional production having created the supply chains and expertise necessary to make unconventional drilling work at costs that approach reasonable.
Another factor is the permitting regime here. Which is turning out to be a lot more workable than places like Europe. Just this month, Colombia announced changes to its environmental policies that will expedite approval of oil and gas (and mining) development applications.
All of that–plus the capital and commitment of big players like Ecopetrol–makes Colombia a spot to keep an eye on for emerging new unconventional plays. Watch for drilling results–and any knock-on increases in permitting activity–over the coming months.
Here’s to cracking it,
Dave Forest
Kazakhstan agrees on petroleum products supplies from Azerbaijan, Russia
Kazakh state oil and gas company KazMunaiGas agreed on petroleum product supplies from Azerbaijan and Russia, Kazinform reported, referring to a Kazakh official.
"We are facing shortage of petroleum products in the country," Deputy Energy Minister Magzum Mirzagaliev said at Kioge conference in Almaty. "In order to solve the problem, KazMunaiGas has contracted large petroleum supplies from Russia and Azerbaijan."
KazMunaiGas agreed on supplies of about 180,000 metric tons of petroleum products from Russia and 10,000 metric tons from Azerbaijan, he added.
"The situation with petroleum oil and lubricants is improving," Mirzagaliev said.
He noted that after the completion of oil refineries' modernization in 2016, they will completely meet the demand of the domestic market for fuel and lubricants and Kazakhstan will not experience shortage of petroleum oil and lubricants until 2022-2023.
Three large refineries – Pavlodar refinery, Atyrau refinery and Shymkent refinery – operate in Kazakhstan and their total processing volume nears 13 million metric tons.
Around one third of the fuels and lubricants consumed in Kazakhstan is traditionally imported from Russia.
Edited by T.T.
Aramco may cut OSP differentials for crude to Asia for 4th straight month for November: trade
Singapore (Platts)--1Oct2014/322 am EDT/722 GMT
Saudi Aramco is expected to cut the official selling price differentials for November-loading crude cargoes for export to Asia for the fourth consecutive month amid persistently weak demand for Middle Eastern sour crudes, trading sources said this week.
"[OSP differentials for] Saudi crudes should be down, I think they will come down quite a bit," a trader said.
The outlook is also based on the structure of first- and third-month cash Dubai market moving into an even deeper contango during September.
The spread is a gauge of relative strength in the forward market for Middle Eastern sour crude grades and is understood to play a role in setting the OSP differential for Arab Light.
Saudi Arabia's main export grades are Arab Light and Arab Medium. Their October OSP differentials to the monthly average of Platts Oman and Dubai assessments were slashed to levels not seen since November 2010, with them set at discounts of 5 cents/barrel and $1.85/b, respectively, reflecting cuts of $1.70/b and $1.50/b for the two grades from the September OSP differentials.
In the last five working days of September, the spread between November cash Dubai and January cash Dubai averaged minus $1.15/b, against an average of minus 96 cents/b in the last five days of August, Platts data showed.
Traders said they expected cuts of 70 cents-$1/b for the Arab Light and Arab Medium OSP differentials.
"[Arab] Medium, Arab Light and Arab Heavy [are likely to be cut by] around 70-80 cents/b," a trader at a trading house said. Arab Heavy may see less of a cut than Arab Light and Arab Medium because of a stronger fuel oil crack.
The discount of FOB Singapore 180 CST high sulfur fuel oil for one month forward against Dubai crude oil narrowed to an average of $7.12/b in September, compared with $8.94/b in August.
The Arab Heavy OSP for September was set at a discount of $4.30/b to the average of Platts Oman and Dubai assessments, down $1.20/b from September.
As for Arab Extra Light, traders expected the November OSP differential to fall, but at a slower rate than that of Arab Light and Arab Medium, as the gasoil crack has been relatively steady through September.
The differential for Arab Extra Light for October was set at a premium of $1.40/b to the average of Platts Oman and Dubai assessments, sliding $2/b from September.
Month on month, the gasoil crack swap to Dubai fell 5 cents/b to average $14.91/b in September. In addition, it remains significantly lower than the average of $16.97/b seen in the first half of the year.
European fuel oil cracks hit 17-month high on weaker Brent prices: data
London (Platts)--1Oct2014/847 am EDT/1247 GMT
European fuel oil cracks hit 17-month highs Tuesday on weaker Brent prices.
The HSFO physical crack was assessed at minus $9.96/b Tuesday. It was last higher on May 2, 2013, when it was minus $9.19/b, Platts data shows.
The LSFO crack climbed in tandem, nearing four-month highs at minus $8.19/b. It had not been this high since June 5, when it was minus $8.18/b.
The North Sea physical crude benchmark Dated Brent reached its lowest level in over two years on September 24 at $94.585/b, since then hovering around this level and assessed at $94.800/b Tuesday.
Fuel oil lacks the same momentum as the crude oil market and will trade at an increasingly larger discount to crude when the price of crude oil falls.
But traders said fuel oil cracks were unlikely to continue to perform as well due to more supplies seen in the near-term as refiners have been shifting away from sweet crude slates to capitalize on sour crude refining margins.
According to traders, Urals margins were steadily improving at the beginning of September. "We are seeing much more Urals processed in the last two weeks, which means higher output of HSFO " one trader said.
Russian gas to Turkey a record in 2014; Blue Steam capacity to grow
Moscow (Platts)--1Oct2014/837 am EDT/1237 GMT
Russia's Gazprom is to boost pipeline gas deliveries to Turkey to a record 30 billion cubic meters in 2014, up 12.8% from 26.6 Bcm last year, the gas giant said Wednesday following talks in Moscow between Gazprom CEO Alexei Miller and Turkish energy minister Taner Yildiz.
"An agreement is reached that the Blue Stream pipeline [which runs across the Black Sea from Russia to Turkey] will be loaded at its maximum capacity in the near future, in order to secure growing demand by Turkey's consumers," Gazprom said in a statement.
The increase in deliveries is to help offset expected shortages in gas supply during the peak demand winter season.
Yildiz said in mid-September that while Turkey was not experiencing any gas shortage currently, domestic gas demand in December and January could exceed supply.
The partners also agreed to increase Blue Stream's capacity to 19 Bcm/year from 16 Bcm/year and carry out the work necessary to hit that target, Gazprom said, further commenting on Wednesday's meeting.
In particular, the Beregovaya pumping station in Russia and a receiving terminal in Turkey will be modernized, it said.
The partners agreed "in principle" on the expansion of the route in April, with Yildiz saying in mid-September that Istanbul hoped the work would be completed in early 2016, citing plans by the Russian side.
Turkey has previously said it was seeking a possible price cut, but Gazprom did not say if the partners discuss the issue during the visit.
Turkey is Gazprom's second-biggest customer after Germany.
Russia sends gas to Turkey via two routes. In addition to the direct route across the Black Sea, Russia is also sending up to 14 Bcm/year of gas through the Transbalkan pipeline via Ukraine. These deliveries potentially face disruption due to the conflict in east Ukraine.
IEA Sees New ’Zombie’ Oil Refineries as Trading Grows
U.S. refineries reduced their crude use last week by the most in eight months as plants started seasonal maintenance.
Refineries processed 16 million barrels a day of crude and other liquids, down 3.8 percent from the previous week, the Energy Information Administration said today. Plants typically schedule maintenance in September and October when units move from maximizing gasoline output to producing winter fuels. The amount processed has fallen in 16 of the past 17 Septembers.
“This is the time when you bring refineries down for maintenance,” James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, said by phone. “We are entering a low-demand period. By the time winter arrives, runs will be back up again.”
Gross crude input dropped 349,000 barrels a day to 8.29 million in the Gulf Coast region, known as PADD 3, according to the EIA, the Energy Department’s statistical unit.
U.S. refineries operated at 89.8 percent of capacity of 17.8 million barrels a day last week, down from 93.4 percent the previous week. It’s the first time the rate fell below 90 percent since June.
Maintenance has begun at Total SA (FP)’s 225,500-barrel-a-day Port Arthur, Texas, refinery, which started repairs at the biggest crude unit, a person familiar with operations said on Sept. 22.
Motiva Enterprises LLC’s Norco, Louisiana, refinery began planned work this week, according to the company. Phillips 66’s Lake Charles refinery is conducting planned maintenance, a company spokesman said on Sept. 26.
U.S. crude stockpiles dropped in the week ended Sept. 26, down 1.36 million barrels to 356.6 million. Inventories at Cushing, Oklahoma, the delivery point for West Texas Intermediate futures, rose 315,000 barrels to 20.5 million.
WTI crude for November delivery rose $1.65, or 1.8 percent, to $92.81 a barrel on the New York Mercantile Exchange.
By Grant Smith Oct 1, 2014 10:57 PM GMT+0700
West Texas Intermediate crude may be nearing a price floor because a move below $90 a barrel would prompt some U.S. producers to reduce drilling, according to Goldman Sachs Group Inc.
WTI futures traded near $92 a barrel today after plunging 13 percent in the three months ended yesterday, the U.S. benchmark’s biggest quarterly drop in more than two years. Prices are close to a level that would make production unprofitable for some companies in higher-cost places such as North Dakota, Goldman’s head of commodities research, Jeff Currie, said in London today.
“U.S. producers may lay down rigs and slow production if WTI keeps falling below $90,” Currie said in an interview during the World Commodities Week conference. The potential for oil prices to fall further is also “limited” because of threats to supply, particularly in Libya, Currie said.
Goldman Sachs estimates that WTI will trade at about $90 a barrel in three months, while Brent, the European benchmark, rebounds to $100. Brent traded at about $95 a barrel on the ICE Futures Europe exchange today in London.
“The downside is limited, unless the economic situation outside the U.S. deteriorates further,” Currie said.
Disappointing economic growth in China would mean that Brent might miss the target, Currie said. Concern that China is slowing, coupled with the strengthening U.S. dollar, sparked a selloff across commodities yesterday that pulled oil lower, he said. WTI fell 3.6 percent yesterday to $91.16 a barrel, the biggest drop since November 2012, according to New York Mercantile Exchange data.
More Bearish
“The picture’s a tad more bearish,” Currie said. “Our baseline view is an acceleration in demand into 2015 and slightly lower production. My conviction in our baseline view is waning with recent macro data.”
China’s manufacturing remained subdued last month as the world’s second-largest economy was weighed down by a property slump. The government’s Purchasing Managers’ Index (CPMINDX) was at 51.1 in September, the same as August’s reading.
A pullback in manufacturing, declining industrial profits, and factory-output growth at a five-year low point to a deepening economic slowdown. Economists surveyed by Bloomberg predict China will expand 7 percent in 2015, the slowest pace since 1990.
Supply Threats
“The political situation in Libya is one of the most tenuous we’ve seen since unrest first erupted,” Currie said.
The holder of Africa’s biggest oil reserves remains divided politically even as its production has tripled to 780,000 barrels a day last month from 250,000 a day in May, according to data compiled by Bloomberg. Its internationally recognized government shifted to the eastern city of al-Bayda and a different administration allied with Islamist militias has seized control of the capital, Tripoli.
The nation’s production, currently at about 900,000 barrels a day, was disrupted last month by protests at the Gialo field and a rocket attack that damaged the Zawiya refinery, according to Mohamed Elharari, a spokesman at National Oil Corp.
“You lose some of Libya, China shows an acceleration, you get a slight reduction in Saudi Arabian production, and the market would be back up to $100,” Currie said.
By Dan Murtaugh Oct 2, 2014 3:21 AM GMT+0700
Saudi Aramco dropped its official selling price to Asia to the lowest level since 2008 as it aims to gain market share in the fastest-growing region for petroleum demand.
The state-owned Saudi Arabian Oil Co., known as Aramco, dropped OSPs for all grades and to all regions for November sales. It lowered the OSP for Arab Light to Asia by $1 a barrel to minus $1.05, the lowest level since December 2008. OSPs are regional adjustments Aramco makes to price formulas to compete against oil from other countries.
Saudi Arabia is fighting for market share in Asia with other Middle Eastern countries as well as new entrants from South America and West Africa as China has surpassed the U.S. as the world’s largest importer of oil and refined products. Brent crude dropped to the lowest level in more than two years after the cuts.
“Asia is the main focus of the cuts. The main reason is to deal with Iraq and Iran’s aggressive marketing strategies,” said Amrita Sen, chief oil economist for London-based Energy Aspects Ltd. “That’s what it’s heading to -- who blinks first?”
Brent for November settlement fell as much as 1.9 percent in intraday trading after Aramco published the OSPs. The contract settled down 51 cents, or 0.5 percent, on the day to $94.16 a barrel on the London-based ICE Futures Europe exchange. It touched $93.78, the lowest intraday level since June 29, 2012.
Asia Demand
Aramco lowered OSPs to Asia by 60 cents to $1.20 a barrel, depending on the grade. OSPs fell to the Mediterranean by 80 cents to $1, to Northwest Europe by 20 to 40 cents, and to the U.S. by 20 to 40 cents.
Iran has dropped its OSP to Asia for Iranian Light to 18 cents a barrel in October, down from $3.96 in January and the lowest since November 2010. Iraq’s October OSP to Asia is minus-$2.50, the lowest level since January 2009.
South American countries including Venezuela, Colombia and Ecuador have been exporting more crude to Asia as their traditional market, the U.S., becomes saturated with booming oil production from shale wells and Canadian oil sands.
Demand for liquid fuels in Asia is expected to grow 44 percent through 2035, while North American demand shrinks, according to BP Plc. (BP/)
BP Plc, facing as much as $2.5 billion in claims by U.S. shareholders for lost stock value connected to the 2010 Gulf of Mexico oil spill, must fight suits by foreign investors seeking millions of dollars more, a judge ruled.
U.S. District Judge Keith Ellison in Houston said U.S. securities law doesn’t bar foreign investors who bought BP common shares on exchanges overseas from pursuing their claims under English law in his court. Ellison earlier allowed U.S. pension funds holding London shares the right to sue under British law.
Ellison’s ruling is “very significant because it means foreign investors who purchased foreign-traded securities and are pursuing English-law claims can do so in U.S. federal court,” Matthew Tuccillo, one of the lead investors’ lawyers, said in a telephone interview. Ellison said that securities law cited by BP in its request for dismissal “simply does not -- on its face -- preclude foreign law claims.”
Pension funds in the U.K., Germany and other countries that bought shares on the London exchange sued BP in Houston federal court, claiming the company pumped up the value of its stock by downplaying the size of the spill.
London-based BP said the foreign funds weren’t allowed to sue in the U.S. and were attempting to avoid the harsher British court system, where plaintiffs would have to pay both sides’ costs if they lost. BP said the funds were trying to get around U.S. law limiting securities litigation.
Geoff Morrell, a BP spokesman, didn’t immediately respond to a call and e-mail seeking response to Ellison’s ruling.
U.S. Investors
Other investor claims against BP are pending in the Houston court, including the class action by holders of American depositary receipts who allege $2.5 billion in lost stock value, according to a company filing. A trial on these claims is scheduled for May.
The April 2010 Macondo oil well blowout and explosion killed 11 workers and caused the worst offshore oil spill in U.S. history. The accident spurred thousands of lawsuits against BP and contractors Transocean Ltd., the owner of the drilling rig, and Halliburton Co., which provided cementing services for the project.
BP Fell
Investors claimed the company misled them before and after the spill. BP shares fell about 40 percent in the weeks after the explosion, eliminating billions of dollars in the company’s market value, shareholders said in court papers.
Ellison in 2012 limited the case to investors who held American depositary receipts in the U.S., finding that American laws blocked claims on shares purchased on foreign exchanges. He said the class could only pursue claims tied to BP statements after the spill.
Today’s ruling doesn’t allow foreign investors to join the class action. Instead, it aggregates them with dozens of individual lawsuits brought by U.S. pension funds that also bought BP ordinary shares on the London exchange.
Ellison rejected BP’s warning that foreign investors might view U.S. courts as a “Shangri-La” where they could recover losses on shares purchased on overseas exchanges, if the Houston judge let the foreign funds go ahead.
The case is In Re BP Plc (BP/) Securities Litigation, 4:10-md-2185, U.S. District Court, Southern District of Texas (Houston).
By Selcan Hacaoglu Oct 2, 2014 4:45 AM GMT+0700
Islamic State forces are closing in on the Syrian town of Kobani, a key Kurdish stronghold near the border with Turkey, as Turkish lawmakers prepare to authorize the army to send troops to the neighboring country.
Militants driving tanks and firing mortars captured the final village on the outskirts of Kobani and were one kilometer from the town’s entrance, according to Ibrahim Ayhan, a lawmaker from the pro-Kurdish People’s Democracy Party. Airstrikes yesterday failed to slow their advance, he said by phone. The U.S military said there were three strikes near Kobani, which destroyed an armed vehicle, artillery piece, and tank.
The militants have besieged Kobani for more than two weeks, forcing an exodus of northern Syria’s ethnic Kurdish population into Turkey. The Turkish military has sent tanks and troops to the border in response, and is urging the creation of a buffer zone inside Syria.
Turkey is seeking parliamentary approval for possible military action in Syria and Iraq that would allow its own forces to target Islamic State and permit foreign troops to use Turkish soil. A bill authorizing such measures is due for debate today, though its passage won’t necessarily mean that Turkey will take action.
Al-Qaeda's Heirs
Islamic State fighters now control 325 villages and towns around Kobani, said the U.K.-based Syrian Observatory for Human Rights, which documents the Syrian war through a network of witnesses.
Kobani was rocked by explosions yesterday, with black smoke billowing across the town’s white stone buildings, CNN-Turk television showed. As Ayhan spoke on the phone, another explosion ripped through the area.
‘Superior Firepower’
Syrian Kurdish militias known as the People’s Protection Units, or YPG, are resisting with AK-47 Kalashnikov automatic rifles and heavy machine guns against the “superior firepower” of Islamic State, said Ayhan. He said he saw YPG fighters fortifying their positions in the town with sandbags as they prepared for house-to-house combat.
Joining the coalition assembled by the U.S. to fight Islamic State would mark a change of course for Turkey, which earlier showed reluctance to get involved in the conflict. Turkey “can’t stay out” of the campaign, Turkish President Recep Tayyip Erdogan said on Sept. 28.
School Bombing
Erdogan has called for a “secure zone” along the Syrian border to shelter refugees and against threats emanating from Syria. Kurds in Turkey have voiced suspicions that Erdogan wants to create a militarized buffer zone in order to smother the autonomous Kurdish region in Syria.
The Syrian conflict, which began in March 2011, has left more than 190,000 people dead as it escalated from peaceful protests into a war fought mostly across the country’s sectarian divisions.
Two blasts near a school in the central province of Homs yesterday left 39 people dead, including 30 children who were mostly under the age of 12, the Syrian Observatory said. The area where the attack took place is dominated by Alawites, the Shiite offshoot sect to which President Bashar al-Assad belongs.
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net Jack Fairweather, Ben Hollan
By Alex Nussbaum Oct 2, 2014 6:01 AM GMT+0700
Paul Kemp moved to Louisiana in the 1970s, a young geologist fascinated by the Mississippi Delta and eager to “get some mud between my toes.”
Forty years later, he’s neck-deep in political muck, the central figure in a bayou power struggle challenging Governor Bobby Jindal and the world’s biggest energy companies.
Kemp sits on a New Orleans levee board that’s suing 90 oil and natural gas producers. The suit claims that decades of drilling and dredging helped destroy the coastal marshes that shield the region from floods. The repair bill may cost the companies billions.
The attack on the state’s largest industry triggered a swift backlash. Four of the nine board members have been replaced with people who’ve said they would drop the suit, and Kemp, 60, may be next to go. Whether he keeps his seat, which could be decided in the coming weeks, may determine how much companies including Exxon Mobil Corp. (XOM), BP Plc (BP/) and Chevron Corp. (CVX) will be required to help shoulder the costs for shoring up what’s become North America’s fastest-vanishing coastline.
“The stakes are huge,” said Oliver Houck, a professor at Tulane University Law School who supports the lawsuit. Without industry’s contribution, “we don’t have the money to keep the levees going.”
Louisiana’s vast network of levees and wetlands are critical to protecting the low-lying region from hurricanes, and the state has proposed a 50-year, $50 billion “master plan” to stabilize the coast and improve flood protection.
‘Hijacked’ Board
Jindal, a Republican, has said the levee board has been “hijacked by a group of trial lawyers,” and the state’s political leaders, backed by an industry that employs 65,000 Louisianans, say the case is jeopardizing their chances of winning private-sector support.
“It makes it really hard for us to come to the table after they’ve sued us,” said Chris John, a former U.S. congressman who now leads the Louisiana Mid-Continent Oil and Gas Association. “This is all about a rogue agency with a very small number of trial lawyers that’s decided to go after the industry.”
The levee board, officially the Southeast Louisiana Flood Protection Authority-East, was created after Hurricane Katrina devastated New Orleans in 2005. It voted unanimously to sue dozens of oil, gas and pipeline operators in July 2013, saying extensive damage to the wetlands had rendered the levee system unworkable.
The lawsuit, now in U.S. District Court in New Orleans, demands companies restore the canals carved through the delta, or make restitution another way.
Second Term
Kemp has been nominated for a second term on the board, leaving the next move to Jindal. State law won’t let the governor reject the nomination, but he can ask the state Senate to do so.
Jindal opposes the lawsuit “because it’s a waste of taxpayer dollars” and exceeds the board’s authority, Shannon Bates, the governor’s spokeswoman, said in an e-mail.
The focus is now on Kemp, a former Louisiana State University researcher Jindal appointed to the board in 2011.
Kemp moved to the state from Long Island, New York, in 1975, drawn by the confluence of the Mississippi River and the Gulf Coast, where “you can watch geology happen in real time,” he said. He spent years tramping through the swamps and flying overhead, measuring sedimentation rates and cataloging the flow of nutrients through the soil. “My kids called me the Mud Doctor.”
Deteriorating Delta
Even then, the region was “in a state of deterioration,” Kemp said during a seaplane tour over the delta. “It’s only now that it’s seen as a tragedy, as something that needs to change.”
The industry “reaped a lot of benefits from its time out here,” he said. “There’s no question they’ve contributed significantly to the damage. The hope is they’d be part of the restoration.”
From the air, the decimation of the coast is clear, however one parcels out blame. Wetlands that once covered much of the state’s southern reaches -- and buffered New Orleans -- have been replaced by open seas. The remaining marshes are crisscrossed by oil and gas canals.
About 10,000 miles (16,000 kilometers) of channels have been carved through the area to haul equipment in and pipe petroleum out, said Gene Turner, an oceanographer at LSU in Baton Rouge.
Lost Land
Louisiana has lost 40 percent of its coastal area since 1956, according to figures from the U.S. Geological Survey. The region is receding at about 17 square miles a year.
Energy production isn’t the only cause. Hurricanes, rising seas and upstream levees that cut off the supply of sediment also play a role. Most researchers cite industry operations for at least a third of the loss, perhaps as much as 90 percent, said Turner.
“We’ve significantly changed the amounts of water coming in, through and around these wetlands,” he said. “If you left the hose running on your lawn and overwatered it, you’d have a dead lawn. If you didn’t water it enough, you’d have a dead lawn. And we’ve done both.”
The industry acknowledges it’s had an impact, said John, the trade group president. Still, drillers were following the environmental rules in place at the time and had government permits, he said. Retroactive punishment isn’t fair, he said.
‘Multiple Causes’
Energy companies, already contribute handsomely in Louisiana, said Greg Beuerman, a spokesman for defendants in the lawsuit. Industry taxes and fees account for almost a fifth of the state operating budget, while companies have spent “millions” on individual wetlands projects, he said.
“The problem of wetlands loss is very real, it has multiple, multiple causes and it needs to be addressed collaboratively, not by singling out one particular entity,” Beuerman said.
Exxon, Chevron and BP, all named in the suit, referred questions to Beuerman or their trade groups in the state.
The lawsuit doesn’t put a price tag on restoring “each and every” canal carved through the delta over the decades. Even more troubling for industry is the prospect that other cases will follow. Already, two Louisiana parishes have filed similar lawsuits.
State legislators from both parties, meanwhile, voted in May to block the litigation. The levee board is challenging that move as unconstitutional.
‘Very Serious Money’
Potential damages from the industry are “certainly in the billions,” said John Barry, a former levee board member who championed the litigation. He wasn’t reappointed after his term expired last year.
“If the flood authority were to win, I believe other jurisdictions in the state would have a fiduciary responsibility to do what we did. And then you get into very, very serious money.”
Kemp has experience on both sides of Louisiana’s coastal debates. He was part of a team of scientists who studied the levees’ failure post-Katrina and later testified on behalf of flood victims who sued the U.S. Army Corps of Engineers.
In 2007, he was named director of the National Audubon Society’s Gulf Coast Initiative. Three years later, he raised eyebrows by suggesting the society could allow some drilling on a nature preserve to raise funds for fighting erosion.
Now an environmental consultant for local governments and nonprofits, Kemp said his business has suffered from the lawsuit controversy. That hasn’t changed his mind.
“Even in the governor’s office, they’re quite convinced of the science behind this,” he said. “It is almost inevitable that the industry will have to pay at some point. The only question is when?”
