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Venezuela: turning off the taps to U.S.

Dr. Joe Duarte, Rigzone
Venezuela’s President Hugo Chavez is taking decisive steps to turn off the oil taps to the U.S.

Venezuela’s state owned oil company PDVSA has inked a key deal with India, taking the first key step away from the U.S. as its major oil buyer.

At the same time, PDVSA has announced that it will no longer reveal oil statistics to the SEC after paying off its debts.

The India deal and the refusal to disclose information are not just strategic, but also send a message to the U.S. about Venezuela’s future plans with regard to supplying the U.S. with oil.

According to the BBC: “Venezuela’s state oil firm has said it will no longer disclose information to US financial regulators after paying off debts in the US. PDVSA said it was no longer obliged to be regulated by the Securities and Exchange Commission (SEC) after buying up $83m in US-traded bonds.”

At the same time Venezuela has begun to ship two million barrels of oil to India per month, making use of India’s heavy crude refineries, for which Venezuela’s sulfur laden oil is no problem.
(18 April 2006)

The axis of oil: China and Venezuela

Ben Schiller, via Global Envision
The Chinese are coming. In no part of the world is this more evident than Latin America, where a series of trade agreements, infrastructural investments and bilateral visits over the past two years has begun to reshape the economic landscape. But economics is also politics. China seeks to present its new relationship with Latin America as part of its much-vaunted “peaceful rise”, but how is it seen in Latin America itself – and in the United States?

… Chávez’s rhetoric might have concerned Chinese officials who are keen for their country to keep a low profile in its international ventures – no more so in what the US still considers its “own backyard”. In the wake of Chinese oil firm CNOOC’s doomed $18.5 billion attempt to buy US-based Unocal in 2005, China’s commerce ministry recommended its companies adopt a “softly-softly” approach when buying abroad, lest they stir up “anti-Chinese feeling” and have to pay a “a China premium”.

For its part, Venezuela continues to rely heavily on US oil revenues – 60% of its crude goes to the US, through its “downstream” subsidiary Citgo. Despite Chávez’s escalating anti-Americanism, he needs the US to fund the country’s extensive welfare programmes – not to mention his wider ambitions on the continent.

Still, cooperation between Venezuela and China is increasingly apace.

…What would really raise US hackles would be if Venezuela decided to sell China its US subsidiary Citgo. Such a move would allow Chinese oil companies to ship Venezuelan crude to refineries on the US’s western seaboard, and from there on to ships across the Pacific. Observers say Chávez has discussed a potential deal with the Chinese, but he shares with China a desire not to make relations with the US any more complicated than they are already.

One major obstacle to increased energy cooperation between China and the region is the sheer distances involved, and the lack of straightforward shipping routes. As well working on the Panama Canal, China is also interested in funding a pipeline through Columbia, which would take Venezuelan crude to the Pacific.

Ben Schiller, a freelance journalist based in London. He specialises in United States politics, eastern Europe and corporate responsibility issues. His work has appeared in the magazine Ethical Corporation.
(28 March 2006)

Rebel attack threatens Deby’s government in Chad

Power and Interest News Report (PINR)
In April 13, some 600 rebels stormed the capital of Chad, threatening the unstable government of President Idriss Deby. Deby’s government in N’djamena managed to repel the coalition of rebel forces — now united in the United Front for Change (F.U.C.) — although there is concern that N’djamena may not be able to withstand future attacks….

The latest rebel attack comes just weeks before the upcoming May 3 presidential election, in which Deby is hoping to be reelected as president. Deby has been in power for 16 years…

What is at stake in Chad is the country’s newly discovered oil wealth. Any faction that takes control of N’djamena will be able to benefit from the kickbacks inherent in crony governments that control energy resources. An international consortium that includes ExxonMobil, ChevronTexaco and Petronas are developing the newly-discovered oil fields. The risk to the oil consortium is small if Deby is able to regain control of the country and successfully repels the rebel movement permanently, or if a new government takes control and effectively limits violent opposition.

However, as long as Deby’s government is insecure, he will remain prone to aggressive actions such as following through on his threat to suspend oil production. If Deby is overthrown, on the other hand, and the empowered rebels turn on each other, the country could move down the path of instability, possibly threatening the interests of the oil consortium.
(20 April 2006)

UK protectionism threatens European gas supplies (Gazprom)

Jerome a Paris, European Tribune
Gazprom has reacted badly to the revelation by the Financial Times that the UK government had gone through all sorts of contorsions to be ready to block, against the law, the mooted take-over of Centrica by Gazprom (discussed in this earlier story), and is now threatening to stop supplying gas to Europe in the future…

…I think that this whole notion that Gazprom’s reserves and production are flat and that any supplies to China would decrease supplies to Europe is totally stupid. Gazprom is not increasing production because it has not market at “real” prices (it would always deliver more domestically, but that’s at low regulated prices). Once the markets open, the production will be there, and that threat is thus mostly moot.

What is true is that they can only concentrate on so many mega-projects at a time, and each new pipeline/gas export infrastructure is a multi-billion multi-year endeavor which needs to be negotiated, financed and managed and few company can do several of these at the same time. So they could choose to focus on their LNG projects rather than on a new pipeline to Europe – but f the market is there in Europe, they’ll take it.

But I find it irresistible to see Blair’s mindless panic at suddenly finding the country dependent on imports (as if nobody could have predicted it), and his profound hypocrisy exposed.
(19 April 2006)
Previous stories by Jerome on the same subject:
A European government caught being protectionist
European energy liberalisation forbids gas deliveries to the UK!

Germany says threats won’t help Russia’s Gazprom (Reuters)
Gazprom Warning Has EU Worried (Moscow Times)
After Gazprom’s tirade, security of supply as much as global warming drives us to nuclear (The Independent)